Korea's Kospi falls 3.7% as AI cloud firm Elice sinks 32% in its market debut

South Korea's Kospi fell 3.73% on Tuesday, Oct. 20, wiping out a two-day rebound as chipmakers sold off again, and Elice Group, an AI cloud company planning to build data centers, closed its first day of trading 32% below its IPO price.

A two-day rebound, gone in one session

South Korean stocks fell sharply on Tuesday, Oct. 20, erasing a brief recovery from this month's AI-driven rout. The benchmark Kospi closed down 215.27 points, or 3.73%, at 5,552.74, after sinking as low as 5,493.24 during the session. That loss was slightly larger than the 213.79 points the index had gained over the previous two sessions combined.

The bounce had followed a steep slide. The Kospi fell about 21% over seven trading sessions from Oct. 6 through Oct. 15, on worries about how much money is being poured into artificial intelligence and whether it will pay off. The index opened 0.6% lower on Tuesday and losses deepened through the day, with escalating protests in France adding to the pressure on risky assets, Yonhap reported.

The selling was broad. The tech-heavy Kosdaq fell 3.33% to 781.97. Samsung Electronics dropped 2.98% to 211,500 won, and SK Hynix, the other big memory-chip maker, fell 4.23% to about 1.22 million won. SK Square lost 5%, and Hyundai Motor and LG Energy Solution each fell more than 4%.

Foreign investors sold a net 530 billion won of Kospi shares and domestic institutions a net 1.0048 trillion won, according to exchange flow figures reported by News1. Individual investors were net buyers of 898.1 billion won.

Seoul did not follow Wall Street

The drop came a day after U.S. chip stocks rallied. On Monday, the Philadelphia Semiconductor Index rose 1.6%, ending an eight-session losing streak that was its longest since 2008, Investing.com reported. Asian markets did not carry that rebound forward. The MSCI Asia Pacific index was down 0.8% in early trading, as renewed concern about how the AI boom will be financed weighed on technology shares.

Japan also fell, though less sharply. The Nikkei 225 closed down 1.3%, at about 64,075. SoftBank Group, a heavy investor in AI, fell 6.01% to 4,554 yen, and memory-chip maker Kioxia fell 3.38% to 13,140 yen, according to closing figures compiled by TradingKey.

An AI listing that broke on day one

The day's sharpest single verdict on the AI trade came from a new listing. Elice Group, a Seoul company that sells AI cloud services and AI-based education and business software, closed its first day on the Kosdaq at 61,500 won. That was 32.04% below its initial public offering price of 90,500 won. The stock opened at 75,700 won and fell as low as 56,500 won.

The offering had drawn heavy demand before it reached the market. Elice raised 201.1 billion won, about $150 million, and institutional orders came to 388.84 times the shares on offer, according to a regulatory filing. The company plans to spend most of the money on portable modular data centers and related infrastructure. It has said first-half revenue tripled to 34 billion won and that it swung to an operating profit of 10 billion won from a 3.5 billion won loss a year earlier.

Analysts noted that the deal was priced on Oct. 6, before the selloff in AI-related stocks began. "Elice's debut shows the AI infrastructure trade has moved from 'build at any cost' to 'who is paying and for how long'," Ke Yan, head of research at Singapore-based Shenton Research, told CNBC.

Elice is not the only data-center business to run into that question this month. Australia's Firmus, which is backed by Nvidia, has shelved its IPO plans; Blackstone-backed AirTrunk postponed a Singapore real estate investment trust listing; and SoftBank's SB Energy, which had filed paperwork for a U.S. IPO, has also shelved its plans, CNBC reported.

What comes next

For Korea's market, the immediate test is whether foreign selling of chip shares eases after two volatile weeks. Investors are also waiting for upcoming results from SpaceX, Tesla and Meta, whose spending plans for AI infrastructure could help decide whether the trade steadies.