[Good Morning Stock Market] AI Stock Wobbles Fuel Volatility... Construction and Defense in Focus as Foreign Investors Buy

On Aug. 25, as Samsung Electronics and SK hynix plunged in tandem following a decline in New York-listed semiconductor stocks, employees monitor stock markets and exchange rates in the dealing room at Hana Bank's headquarters in Jung-gu, Seoul. The KOSPI fell below 6,500 during the session. It opened at 6,535.93, down 161.03 points (2.40%) from the previous trading day. Aug. 25, 2026. Photo by Cho Yongjun

As volatility has increased in U.S. equities, particularly among artificial intelligence (AI)-related stocks, defensive investment strategies are becoming more important in the South Korean market as well. However, analysts say construction and defense stocks, which have recently suffered steep declines, warrant attention as short-term alternatives, as foreign investors continue to make net purchases of these shares.

On Oct. 29 (local time), U.S. stocks came under pressure from weakness in AI-related shares, even as the 10-year Treasury yield fell after September personal consumption expenditures (PCE) inflation matched market expectations. The Dow Jones Industrial Average fell 0.3%, and the S&P 500 declined 0.3%, while the Nasdaq and the Philadelphia Semiconductor Index each dropped 1.4%.

Alphabet plunged 12.6% on concerns about deteriorating free cash flow, dampening investor sentiment toward AI stocks broadly. Amazon and SanDisk also fell 4.3% and 5.3%, respectively, amid concerns about their earnings.

"We have confirmed that demand for AI servers remains robust, but concerns have also emerged about investment returns and slowing downstream demand from B2C customers," said Han Ji-young, a researcher at Kiwoom Securities. "As the market weighs positive and negative factors, investors need to prepare for increased volatility."

Amazon's cloud business grew 39% year over year, its fastest growth rate in five years, but its total revenue and earnings per share came in slightly below market forecasts. In particular, free cash flow deteriorated sharply to -$42.4 billion from -$7.6 billion in the previous quarter. Intel's data center revenue also rose 78% year over year, but the company fell short of market expectations due to weakness in its PC business, and its revenue guidance for the next quarter was also below consensus.

Volatility is also rising in the South Korean market. On Oct. 29, the KOSPI fell 1.2% and the KOSDAQ dropped 2.3%. Since the start of October, the KOSPI has fallen 13.2%, while the Dow Jones Industrial Average has gained 2.8% and the S&P 500 has risen 0.9% in the United States. The Nasdaq has declined 2.5%, and the Philadelphia Semiconductor Index has fallen 9.8%, reflecting a relatively sharp correction centered on AI stocks.

South Korean stocks were expected to open lower on Oct. 30, with some of the impact of Alphabet's plunge already priced in and further pressure stemming from sharp after-hours declines in Amazon and Intel. However, analysts expected individual stocks to diverge during the session depending on company-specific earnings, including those of Hyundai Engineering & Construction, Kia and APR.

Samsung Electronics' share price is another factor to watch. The stock plunged by more than 6% at one point during trading on Oct. 29. The company said it would include share buybacks and cancellations totaling an amount equivalent to the 55 trillion to 75 trillion won remaining for shareholder returns this year. However, investors were disappointed when it postponed details on the amount and execution plan until the end of January 2027.

However, Han said there were positive aspects to Samsung Electronics' business outlook. He said the company, like SK hynix, had eased concerns that the memory market was nearing a peak by pointing to the possibility of a memory supply shortage continuing through 2028 and to the expansion of long-term supply agreements. "Given that these concerns have already been priced in and the stock has plunged several times, it is reasonable to consider the possibility of a test of the previous low to be limited at this point," he said.

This content was produced with the assistance of AI translation services.