South Korea's Kospi tripped circuit breakers on Thursday before rising 2.05% on Friday, when foreign investors turned modest buyers. The demand data on AI hardware stayed strong all week, which points to a scare about rates and financing at least as much as about demand.
Asia's AI trade spent the week sending two messages at once. Prices said panic. The numbers said demand.
On Thursday, South Korea's Kospi index fell 7.57% to 5,554.22, after being down as much as 9.29% during the session. Trading was halted under the exchange's dual circuit breakers for the first time since July 29. Samsung Electronics fell 9.48% and SK Hynix 11.06%. Foreign investors were net sellers of about 3.62 trillion won of Korean stocks, and the smaller Kosdaq index fell 7.65%. It was the seventh straight decline for the Kospi, which now sits 39% below its record close of June 22.
On Friday the index rose 2.05% to 5,668.05, while the Kosdaq gained 4.46% and triggered a sidecar mechanism that pauses program buying. Japan's Nikkei rose about 1.4%. The rebound recovered about a quarter of Thursday's loss. Foreign investors turned modest net buyers by the close, for the first time in nine sessions, though their purchases were a small fraction of Thursday's selling.
The demand data
Against that backdrop, the fundamental news on AI hardware was strong. Taiwan Semiconductor Manufacturing reported third-quarter revenue of NT$1.49 trillion, up 50.9% from a year earlier, and net income up 68.7%, with a gross margin of 66.4%. It guided fourth-quarter revenue to $52.3 billion to $54.3 billion.
Singapore's non-oil domestic exports rose 68.4% in September from a year earlier, far above economists' forecasts. Enterprise Singapore said the headline gain was driven by lumpy shipments of ship structures, while electronics exports more than doubled, up 107.6%, with integrated circuits up 74.7%.
Neither set of figures suggests that orders for AI chips are slowing.
Rates and financing
Two other things changed. The first was the rate outlook: hotter-than-expected U.S. inflation data revived fears of another Fed increase, which weighed on richly valued technology shares across the region.
The second was the cost of funding the buildout. Default-swap prices on CoreWeave, the AI cloud provider whose debt has become a barometer for the sector, rose above 1,140 basis points during Thursday's session and later stood near 1,038, levels associated with distressed borrowers. Analysts at a Korean brokerage said positive comments from Nvidia Chief Executive Jensen Huang about CoreWeave's financial health helped ease the worry going into Friday.
The distinction matters for Korean chipmakers. Memory demand depends on how much AI infrastructure gets built, and that depends on whether the companies building it can keep borrowing, and at what rate. A rates and credit scare can hit chip stocks even when chip orders are rising.
In the U.S., the scare faded at the index level. The Nasdaq recovered a 1.4% intraday loss to close slightly higher on Thursday.
Market implications
One reading is that this was a contained repricing. Stocks rebounded in Seoul and New York, foreign investors returned as buyers on Friday, TSMC's results and Singapore's electronics shipments show demand intact, and the credit stress is confined to a handful of highly leveraged infrastructure borrowers.
A second reading is that the pressure has not lifted. Credit protection on CoreWeave remains near distressed levels, Friday's foreign buying was a fraction of Thursday's selling, and the Kospi recovered only about a quarter of its loss. If lenders keep pulling back, or if the Fed tightens again, the effect on AI capital spending would arrive with a lag, after the strong numbers already reported.
Fed officials have described AI investment as a driver of demand, so a financing pullback would also bear on the U.S. growth and inflation outlook.
What to watch
Whether Friday's foreign buying in Seoul extends next week, CoreWeave default-swap levels, and the next round of AI capital-spending guidance from U.S. technology companies later this month. A Kospi close back below Thursday's 5,554 would suggest the rebound was relief rather than a bottom.