From 6,000 points to two "circuit breakers": South Korean semiconductor legend paused by a missile from the Middle East

Author: David, Deep Tide TechFlow

The ongoing conflict between Iran and Israel has caused panic in global capital markets, with the Korean stock market performing particularly badly.

On March 3, the KOSPI fell 7.24%, triggering trading limits. Samsung Electronics dropped nearly 10%, SK Hynix fell 11.5%.

Today, March 4, the KOSPI plunged over 8 intraday, once again hitting the circuit breaker and pausing trading for 20 minutes. It closed down about 6%, at 5,440 points. Samsung fell another 5.1%, Hynix dropped 3.9%.

In two trading days, with two circuit breakers, the Korean stock market declined from 6,244 to 5,440, nearly a 13% drop. This is the worst consecutive plunge since 2008.

Just a week ago, on February 25, the KOSPI broke through 6,000 points, with Korea’s total market capitalization reaching $3.76 trillion, more than France’s, ranking ninth globally; Samsung and Hynix remained the most favored stocks among various investment bloggers.

While conflicts in the Middle East cause global declines, why has Korea fallen the hardest?

Buy Korean stocks, buy storage chips

The bullish market in Korea over the past year is essentially a story about two companies.

Global AI training requires GPUs, which need a high-bandwidth memory called HBM. Production barriers for HBM are extremely high; only three companies worldwide can mass-produce it: SK Hynix, Samsung, and Micron.

Among them, SK Hynix holds over half of the market share, Samsung about 30%. Together, these two Korean companies control over 80% of the global HBM capacity.

NVIDIA is their biggest customer. Every H100 and B200 shipment relies on Korean memory. In 2025, NVIDIA’s quarterly revenue reached $68.1 billion, a significant portion of which ultimately flows into SK Hynix and Samsung.

Reflected in stock prices, SK Hynix surged 274% in 2025, Samsung rose 125%. The entire KOSPI index increased by 75.6%, nearly half of that gain contributed by these two stocks.

Buying the Korean market essentially means buying storage chips.

This year, the growth has been even more intense. In the first 20 days of February, Korea’s chip exports surged 134% year-over-year to $15.1 billion, accounting for over a third of total exports. Goldman Sachs predicts Korea’s stock market profits will grow 120% in 2026, with 88 percentage points coming from tech hardware.

In other words, removing chips from the equation, Korea’s stock market growth is minimal.

From 5,000 to 6,000 points, the KOSPI took 34 days. During this period, Nomura set a target price of 8,000, JPMorgan 7,500, and Goldman Sachs adjusted to 6,400. Behind each figure is the same assumption:

AI’s computing power demand has no ceiling, so Korea’s chip industry has no ceiling.

Strait blockade, where does the power come from?

But making chips requires electricity.

Where does Korea get its electricity? About 27% from natural gas, 27% from coal, and 30% from nuclear power. Natural gas and coal are imported—Korea does not produce them domestically. Korea is the third-largest importer of liquefied natural gas (LNG), after China and Japan.

On February 28, the US and Israel launched a joint airstrike on Iran. With the death of Qasem Soleimani confirmed, Iran announced the closure of the Strait of Hormuz.

This strait is only 33 km wide at its narrowest point, through which about one-fifth of the world’s oil and a large amount of LNG pass. Qatar, one of the world’s largest LNG exporters and a major gas supplier to Korea, ships through this strait.

A blockade here causes oil prices to spike, natural gas prices to follow; the global energy market is always interconnected.

Public data shows European natural gas prices rose nearly 50%, Asian natural gas prices increased nearly 40%. After Qatar Energy’s LNG facilities were attacked, the company suspended LNG production.

Map: Ship tracking data shows a significant decrease in vessels passing through the Strait of Hormuz on March 1 local time｜Source: Search Ship

Korean chip companies like Samsung and Hynix are not producing chips out of thin air. Each HBM chip, from wafer to packaging, involves thousands of steps, each consuming power. Semiconductor manufacturing is one of the most energy-intensive industries worldwide.

Theoretically, the supply chain works like this:

NVIDIA places an order, SK Hynix starts production, factories need electricity, which requires natural gas, which must pass through the Strait of Hormuz, now closed.

Korea’s markets closed on March 1, coinciding with their Samilje holiday. While other markets panicked over the weekend, Korean investors could only watch.

When markets reopened on Tuesday, three days of panic formed a long bearish candle. Samsung fell nearly 10%, Hynix dropped 11.5%. Rising energy prices push up electricity costs, squeezing chip margins and reducing factory utilization.

Wednesday was even worse. Iran’s actions turned from threats to actual interference, causing Brent crude to break above $82, natural gas prices soared. Samsung declined nearly 15% over two days, Hynix fell 15%.

Meanwhile, Hanwha Aerospace rose nearly 20% on March 3, LIG Nex1 surged 30% to hit the daily limit.

These two companies: the former makes fighter jets and missile engines, the latter produces air defense systems and precision-guided weapons. As Middle East conflicts escalate, the world rushes to replenish inventories.

On one side, chip makers are falling; on the other, missile manufacturers are rising.

Has Korea’s discount disappeared?

Korea’s stock market nickname is “Korean Discount.”

It means that the same company listed in Korea is cheaper than in the US or Japan. TSMC and Samsung are both chip giants with similar profitability, but TSMC’s price-to-book ratio has long been two to three times higher than Samsung’s.

You can think of it as the same dish, cheaper in Seoul than in New York.

Why? Because most large Korean conglomerates are controlled by family-controlled chaebols. Samsung, Hyundai, SK, LG—founding families use pyramid-style cross-shareholdings, controlling the entire group with minimal equity.

They don’t pay dividends when they make profits, don’t cancel treasury shares, and their boards are filled with insiders who haven’t opposed anything in five years. Foreign investors see this and think investing is just working for others.

How long has this discount lasted? Over the past decade, the S&P 500 rose 179%, Nikkei 155%, India 255%, Brazil 167%.

KOSPI only increased by 35%.

In 2025, new President Lee Jae-myung took office, reformed commercial laws, pushed for dividends, and mandated cancellation of treasury shares, personally telling Wall Street at the NYSE that Korea’s discount would turn into a premium.

At the same time, AI completely rewrote the valuation logic for Samsung and Hynix. The two events collided, foreign capital flooded in, and KOSPI surged 75.6% in one year, ranking first globally.

What seemed like a 20-year discount was seemingly wiped out in a year.

But the two-day plunge revealed another issue: the previous discount was due to poor corporate governance, which is indeed improving.

Yet, there’s another layer of discount hidden deeper.

In Korea, two stocks account for half of the market’s gains, power generation relies on imported natural gas and coal, and the entire market is heavily dependent on a single industry.

When something goes wrong outside this industry, circuit breakers happen repeatedly. The fragility embedded in Korea’s geography and industrial structure cannot be fixed just by changing commercial laws.

Foreign capital withdraws, retail investors buy the dip

On February 27, foreign investors net sold 6.8 trillion won (~$5.8 billion), setting a single-day record. On March 3, they sold another 5.1 trillion won (~$4.3 billion). In just two days, nearly 12 trillion won (~$10 billion), half of six weeks’ inflow, vanished in less than two days.

Foreign investors’ sentiment toward emerging markets is always conditional. When conditions are good, they call you a core part of the global AI supply chain; when conditions change, you become the most liquid and easiest to sell.

Korea’s stock market is highly active with large trading volumes, precisely because it’s easy to sell. So, who is buying the dip?

On March 3, retail investors net bought 5.8 trillion won (~$4.9 billion). With foreign investors fleeing, Korean retail investors stepped in. Someone at Seoul Forum said Samsung’s price drop was a once-in-a-decade event.

The next day, it fell another 6%, hitting an 8% intraday decline and triggering a circuit breaker. Those who bought in on March 3 lost a chunk within 24 hours. On March 4, retail investors continued to buy the dip, but couldn’t withstand the selling pressure from foreigners.

The last time Korean retail investors heavily bought the dip was during the yen carry trade collapse in August 2024. They got it right then, with a one-month recovery. Whether they can do so again depends on an uncontrollable variable:

When will the Strait of Hormuz reopen?

Emotions matter more than facts

It took 34 days for the KOSPI to rise from 5,000 to 6,000. It took only two days to fall back from 6,000 to 5,440.

Two days, two circuit breakers.

The energy supply chain is real—natural gas must pass through the Strait of Hormuz, chips depend on electricity generated from natural gas.

But a 13% drop in two days is beyond just pricing natural gas. When 75% of the market’s gains are driven by two stocks, everyone moves in the same direction, and exports are limited.

Having risen too much earlier, during panic, the fastest to sell is the first to survive.

SK Hynix is likely to rebound. The demand for AI computing power is real, the HBM shortage is real, and NVIDIA’s next quarter orders won’t disappear just because of Middle East conflicts.

But these two days have shown everyone one thing: a rebound depends on fundamentals, a fall depends on sentiment. Fundamentals move slowly; sentiment moves fast. The 34-day rally can be wiped out in just two days.

Everyone buying Korean stocks believes they are riding the AI chip boom.

But for Korea, chips are built on an economy that relies on imported natural gas for power, selling to customers who could impose tariffs at any time, with a nuclear-armed neighbor nearby.

All reports will tell you how much a stock is worth.

No report will tell you what might happen in the world while you hold it.