By Jihoon Lee

South Korean shares fell 8% on Tuesday, led by chipmakers, as investors questioned whether record earnings tied to AI could hold up.

The benchmark KOSPI KRX:KOSPI was down 646.85 points, or 8.03%, at 7,404.48, as of 0453 GMT. It triggered circuit breakers at 0451 GMT, halting trading for 20 minutes.

It was the sixth time circuit breakers were activated on the index this year during heightened volatility in semiconductor stocks, and the 12th time in history.

Shares of Samsung Electronics KRX:005930 dropped 9.75% even after the chipmaker forecast a 19-fold jump in second-quarter operating profit from a year earlier, underscoring concern that strong results may already be priced in after a sharp rally in memory-chip stocks.

"It is good news but can't be interpreted entirely as good news, as market expectations have grown too high to be raised further, fanning worries that high earnings will not be sustained," said Seo Sang-young, an analyst at Mirae Asset Securities.

Peer chipmaker SK Hynix KRX:000660 dropped 10.58%, while chip stocks in neighbouring Japan also fell sharply, with memory chip maker Kioxia TSE:285A down more than 10%.

"Although there is no issue when it comes to the chip sector's fundamentals, such as earnings, there remains demand for profit-taking, while noises regarding AI and the chip sector are being raised again and again, raising market volatility," said Han Ji-young, an analyst at Kiwoom Securities.

Samsung Electronics and SK Hynix have led the KOSPI's rally this year rising more than 130% and 220%, respectively. Despite Tuesday's losses, the KOSPI is still up 76% year-to-date.

Among other index heavyweights, LG Energy Solution KRX:373220 slid 8.74%, after the battery maker said it expected its April-June operating profit to fall 77% as sluggish electric-vehicle demand weighed on battery sales.

Hanwha Ocean KRX:042660 plunged 24.29% after Canada selected German submarines over South Korean competitors in a contract battle.

Of the total 912 traded issues, 192 shares advanced, while 698 declined. Foreigners were net sellers of shares worth 3.3 trillion won ($2.16 billion).

The won was quoted at 1,523.5 per dollar on the onshore settlement platform FX_IDC:USDKRW, 0.43% higher than its previous close at 1,530.0.

($1 = 1,525.8000 won)