The selloff that began with an earnings call in Santa Clara ended three days later with a circuit breaker in Seoul. Monday morning, the Korea Composite Stock Price Index opened down more than 8 percent and trading was halted within minutes, the sharpest expression yet of a rout that has spread from chip stocks to the broad market in under a week.
The trigger came Friday from Broadcom. The chip maker’s quarterly report beat on the headline numbers but did not raise its long-term guidance, and investors who had piled into AI names on the promise of accelerating growth read that as a sign the cycle was maturing. A stronger-than-expected U.S. nonfarm payrolls report the same morning complicated the picture further, reinforcing bets that the Federal Reserve will be raising rates rather than cutting them.
Interest-rate swaps now fully price one rate increase this year, with about 60 percent odds assigned to October, according to traders. That repricing took the air out of the market’s most extended corner: the Nasdaq Composite fell 4.18 percent Friday, its worst single-day drop since April 2025, and the Philadelphia Semiconductor Index erased more than $1 trillion in market value in a single session.
The damage carried into Asia on Monday. Beyond Seoul’s circuit breaker, Samsung Electronics fell 5 percent and SK Hynix dropped 2 percent, while the broader Korean market absorbed heavy selling. The declines were concentrated exactly where the gains had been: in the companies that supply the computing power behind the AI boom.
Bridgewater Associates founder Ray Dalio called Friday’s drop “an important signal” and said the AI investment boom has begun to show the characteristics of a classic bubble. His list of warning signs, laid out in interviews after the close, reads like a checklist of the market’s own excesses: valuations stretched beyond cash flows, a handful of companies carrying an outsized share of index gains, and investor positioning crowded into the same trades.
The mechanics of Monday’s selling showed how crowded those trades had become. Hedge funds that had borrowed against AI winners unwound positions in a hurry, and the coming wave of giant initial public offerings, including the SpaceX listing expected this week, is absorbing liquidity that would otherwise cushion the fall, traders said. When everyone is in the same boat, the boat empties faster.
What made the rout uncomfortable for investors was the behavior of the traditional havens. Bonds and gold were sold alongside stocks Monday, a pattern that breaks the usual flight-to-safety reflex and points to a broader unwinding of positions rather than a simple rotation out of tech. The synchronized selling left portfolio managers with fewer places to hide, and the message from the tape was that the market’s fragility ran deeper than any single sector.
The rate picture explains part of it. With swaps pricing a hike this year, fixed-income investors are marking down the value of their holdings at the same time equity investors are marking down growth stocks, and gold, which had been bid up as an inflation hedge, followed the crowd out the door. The result was a day when every asset class lost money at once, a configuration that typically appears at moments of forced selling.
For the AI trade specifically, the question is whether Friday was the start of a sustained correction or a shakeout in an uptrend that resumes. Dalio’s “important signal” framing suggests he leans toward the former, and the bubble checklist he published includes the same items the bears have been citing for months: concentration in the top ten stocks, valuation ratios near historical extremes and an investment boom financed by expectations of earnings that have not arrived.
The week ahead offers little relief on the calendar. The SpaceX listing, expected to begin trading Friday, will test investor appetite at a moment when the market is questioning exactly the kind of growth stories it used to reward. And the rate path depends on data that has been coming in on the hot side, which keeps the hike trade alive.
South Korea’s market structure amplified the move. The KOSPI’s circuit breaker is triggered by an 8 percent decline, a threshold that sounds distant until the index is dominated by two companies whose fortunes move with the price of memory chips. When Samsung Electronics and SK Hynix fall together, the benchmark falls far enough to trip the market’s safety systems.
Elsewhere in Asia the losses were more orderly but still broad, with technology shares leading declines in markets from Taiwan to Tokyo. The pattern was the same everywhere: the deeper a market’s exposure to AI hardware, the harder it fell, and the harder it is likely to fall again if the trade resumes its slide.
What Monday proved, traders said, is that the AI trade is no longer immune to the rest of the market. The circuit breaker in Seoul was the loudest version of a message that had been building since Broadcom’s call: valuations that moved up on expectation can move down just as fast when the expectation wobbles.
