[Good Morning Market] "Sharp Decline in U.S. AI Tech Stocks... KOSPI Expected to Open Lower"

Tech-Heavy Nasdaq Drops 2.04%
KOSPI Faces Pressure from AI Stock Slump and Stronger Dollar
"Oversold Stocks Like Semiconductors Expected to Partially Recover Losses During the Session"

As all three major U.S. stock indices closed lower, Korean securities firms forecast that the KOSPI will also open lower on November 5, citing factors such as a sharp decline in U.S. artificial intelligence (AI) technology stocks and the strengthening of the U.S. dollar. However, they expect that the KOSPI will partially recover its losses during the session, led by oversold stocks such as semiconductors.

On November 4 (local time) in the New York stock market, the Dow Jones Industrial Average, which focuses on blue-chip stocks, closed at 47,085.24, down 251.44 points (0.53%) from the previous session. The S&P 500 Index, which tracks large-cap stocks, fell by 80.42 points (1.17%) to 6,771.54, while the tech-heavy Nasdaq Index dropped 486.087 points (2.04%) to close at 23,348.637.

A trader is working at the New York Stock Exchange in the United States. Photo by Reuters Yonhap News Agency

Investor sentiment was dampened by concerns over the overvaluation of AI-related stocks. Additional factors contributing to the decline included the increased likelihood of a prolonged U.S. federal government shutdown (temporary suspension of government work) and a partial weakening of expectations for a year-end Federal Reserve rate cut.

By stock, Palantir plunged 7.95% despite reporting better-than-expected earnings the previous day, as the company did not provide full-year guidance for next year. Oracle fell 3.75%, and Nvidia weakened by 3.96%.

Han Ji-young, a researcher at Kiwoom Securities, said, "Typically, the mood and public opinion in the stock market follow the price trend, so for the time being, the market is likely to focus on 'high valuations in the stock market' and 'concerns about the profitability of AI stocks.' In the short term, market volatility is expected to rise, but it is appropriate to respond with gradual buying, focusing on sectors with solid earnings and profitability, such as semiconductors, AI hardware, and hyperscalers (large-scale data center operators)."

Regarding the Korean stock market, Han Ji-young commented, "The KOSPI plunged by more than 2% the previous day. Today, the market is expected to open lower again due to the sharp decline in the U.S. Nasdaq and the burden of a stronger U.S. dollar, but during the session, it will likely recover part of its losses, led by oversold stocks such as semiconductors."

He added, "The net foreign selling of about 2.2 trillion won the previous day exceeded the largest net selling amount since April 7 this year, when the Trump administration's reciprocal tariff imposition triggered a sharp market decline. This could be interpreted as a signal that foreign investors are starting to bet against the Korean stock market," but also noted, "It is more appropriate to understand this as profit-taking following the surge in large-cap stocks such as semiconductors since last month."

However, a full-scale "Sell Korea" trend is not expected to materialize. Han said, "Of course, in the short term, macroeconomic uncertainties and volatility in U.S. AI stocks could trigger additional foreign net selling, especially in semiconductors, which have seen significant gains. However, it is important to remember that foreign investor flows are heavily influenced by KOSPI earnings forecasts. Currently, the market consensus for KOSPI operating profit this year and next year has been revised up by 3% and 15%, respectively, compared to early last month. Therefore, a full-scale 'Sell Korea' scenario is unlikely."