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Pro: Korean stock sell-off
South Korea's stock market, led by memory chip stocks tied to AI infrastructure, may signal a turnaround for its U.S. counterpart as analysts see the recent pullback nearing an end. The Kospi index dropped around 20% in July—its worst monthly loss since 2008—after a 60% gain in 2026 and a 75% advance in 2025. Retail investors in single-stock leveraged ETFs suffered steep losses during the volatility. However, JPMorgan's trading desk said in a Tuesday note it remains overweight on Korea, estimating that the leveraged ETF unwind is roughly 75% complete. TS Lombard described the drop as deleveraging from semiconductor stocks rather than a broader bust, with prices already discounting an approximate 45% normalization of memory earnings next year. Bank of America strategists noted selling pressure may be "losing momentum," as the broader market saw bigger losses than its largest stocks for the first time since March—a pattern that previously marked a local bottom. Investors view South Korea as a harbinger for U.S. equities due to its heavy exposure to volatile memory chip names, which have been key beneficiaries of the artificial intelligence infrastructure buildout. The Kospi's March crash of over 12% in one session underscored the market's turbulence, but current analyst sentiment points to a stabilization. The combination of deleveraging completion, discounted earnings normalization, and diminished selling pressure suggests the Asian market could be turning around, with implications for global semiconductor and AI-related stocks.