Trading was temporarily halted as the Kospi dropped to its lowest level since April after shares in chipmakers Samsung Electronics and SK Hynix fell sharply.
The Kospi was down 10.5% at 6,051.19 in overnight trading. Samsung's shares tumbled 12%, while SK Hynix's shares were down 12.7%.
A big factor driving the selling of AI-related shares, analysts said, is the expectation that competition from Chinese AI start-ups and chipmakers might undermine gains for global companies whose shares have skyrocketed due to the AI frenzy.
A 466% jump in the price of Chinese chipmaker CXMT on its trading debut Monday has underscored such concerns. CXMT raised at least $8.6 billion (around €7.6bn) in its initial public offering on Shanghai’s tech-oriented STAR exchange.
RelatedMost other Asian markets also fell, with Tokyo’s Nikkei 225 down 4% at 62,350.18. The Taiex in Taiwan skidded 3.9%. Hong Kong's Hang Seng edged 0.1% lower, to 25,178.21, while the Shanghai Composite index lost 1% to 3,820.52.
In Australia, the S&P/ASX 200 bucked the regional trend, gaining 0.6% to 8,944.40.
Elsewhere, oil prices extended their declines as US and Iran refrained from attacks for a third straight day.
Officials in the Middle East said mediators had made progress in getting the two sides back to negotiations.
Brent crude, the international standard, fell 0.8% to $85.16 a barrel. US benchmark crude oil lost 0.9% to $81.86 a barrel.
Stocks on Wall Street drifted to a mixed close Monday. The S&P 500 gained less than 0.1% and the Dow Jones Industrial Average rose 0.5%. The Nasdaq composite fell 0.2% for its fourth straight loss.
