KOSPI Crash, SpaceX Sell-Off Unwinding of AI-Driven Market Exuberance

 Chennai: The suspension of South Korean exchange trading and the $400 billion sell-off in SpaceX shares in the past few days could be indicative of an unwinding of AI-driven market exuberance, reminiscent of the dot.com boom and bust of the 2000s.

The KOSPI heavyweights and AI-linked semiconductor stocks, Samsung Electronics and SK Hynix, had seen their shares surging earlier this year on expectations of explosive AI demand for high-bandwidth memory (HBM) chips used in AI servers. When investors started questioning whether AI spending could keep growing at the same pace, the shares fell.

The SpaceX shares also kept falling on Tuesday after a massive 16 per cent plunge on Monday. After falling for three straight sessions, SpaceX has shed more than $600 billion in value. Monday alone erased about $400 billion, marking the second-largest one-day loss on record after Nvidia Corp.’s roughly $590 billion plunge last year.

According to reports, SpaceX is a visible sign of a market struggling to value technology companies and their expensive race into an AI-powered future. Artificial intelligence (AI) and tech-related stocks have been under pressure off late.

Several experts have been warning that the AI-led euphoria in the stock markets has already peaked.

“We have to be mindful of the valuations as the allocations have been significantly large and there is concern about the future of investments. It is difficult to say whether it is in the bubble zone, but the AI-lead euphoria in the market seems to have peaked,” said Dhananjay Sinha, CEO and Co-Head Institutional Equities, Systematix Group.

Whether the markets are closer to a dot com bust type situation is difficult to assess now.

“Predictions indicate that the capital is significant. It is possible that there is euphoria. It could be an irrational exuberance,” said Thillai Rajan, Professor of Finance, IIT Madras.

Like the dot.com bust there might be significant instances of several AI-based companies collapsing.

“As in the case of search engines, the market may not be able to support so many companies, but a couple of them. But the impact will be realized in some other form. For example, people who are involved in developing these technologies may be able to create some spin-offs that may result in benefits of a different kind. So technically, there could be some of the investments failing, but the benefits can actually occur in a different form through some other ventures,” he added. END