TLDR: News of Chinese e-commerce giant Alibaba developing its own advanced artificial intelligence (AI) semiconductor has sent shockwaves through global markets, particularly impacting South Korea’s KOSPI and KOSDAQ indices, which both fell over 1% on September 1, 2025. The development, aimed at reducing China’s reliance on U.S. suppliers amidst export restrictions, led to a collective drop in major semiconductor stocks and a significant sell-off by foreign investors and institutions. Nvidia’s shares also experienced a notable decline following the announcement.
South Korea’s stock market experienced a sharp downturn on September 1, 2025, as news of Alibaba’s latest advancements in AI chip technology rattled investor confidence. Both the benchmark KOSPI and the tech-heavy KOSDAQ indices closed down by more than 1%, with the KOSPI falling 43.08 points (1.35%) to 3142.93, marking its first close below the 3140 mark in seven trading days. The KOSDAQ index also saw a decline of 11.91 points (1.49%), closing at 785.00.
The catalyst for this market instability was the announcement that Alibaba, China’s largest e-commerce company, has developed its own next-generation AI semiconductor. This move is widely seen as a strategic effort by Beijing to build a self-sufficient AI supply chain and reduce its dependence on U.S. suppliers, especially in the face of ongoing U.S. export restrictions that have limited the sale of advanced chips to China.
Alibaba’s new AI chip is reportedly more versatile than its predecessors, designed to support a broader range of AI inference tasks and maintain compatibility with Nvidia’s software ecosystem. This development is particularly significant as Alibaba was previously one of Nvidia’s largest Chinese customers.
The impact was not confined to South Korea. Global technology stocks, including U.S. giants, also felt the pressure. Nvidia’s shares, a bellwether for the AI chip market, slipped by 1.7% following the reports, and further declined by 3.32% on Friday, continuing into after-hours trading. Other Chinese firms, such as Huawei and Cambricon, are also intensifying their domestic chip offerings, signaling a broader trend towards technological self-reliance within China.
On the KOSPI, major semiconductor stocks experienced collective drops, with Samsung Electronics falling 1.86% and SK Hynix down 2.04%. Other significant declines included LG Energy Solution (-1.33%), Samsung Biologics (-1.08%), POSCO Holdings (-1.77%), Naver (-1.55%), and Kakao (-1.41%). In the KOSDAQ market, Rainbow Robotics (-2.01%), Ecopro (-1.38%), ABL Bio (-1.20%), and ECOPRO BM (-1.07%) also saw decreases.
Investor sentiment was clearly negative, with foreign investors and institutions selling a net 272.1 billion won and 193.7 billion won worth of stocks on the KOSPI, respectively. Foreign investors have maintained a ‘selling trend’ for five consecutive trading days, accumulating a net sell-off of 1.55 trillion won during this period. Only individual investors showed net acquisitions, buying 346.7 billion won worth of stocks. Similarly, on the KOSDAQ, foreign investors sold a net 55.9 billion won, while individuals and institutions were net buyers.
Lee Jae-won, a researcher at Shinhan Investment Corporation, commented on the situation, stating, “In the absence of clear bullish signals in the stock market, the impact of Alibaba has increased downward pressure on large semiconductor stocks.” He added that “KOSDAQ also saw weakness in semiconductor materials, components, and equipment.”
Also Read:
- AI Semiconductor Landscape: Marvell and Alibaba Chart Divergent Paths Amidst Geopolitical Shifts and Surging Demand
- Alibaba Shares Jump on Strong AI-Driven Cloud Performance
Despite the market’s reaction, some skepticism exists regarding China’s immediate ability to fully rival leading U.S. chip manufacturers. Prominent investor Ross Gerber reportedly criticized Alibaba’s chip development as ‘laughable,’ suggesting it might be a negotiating tactic and emphasizing that China still lacks the necessary technology for independently producing high-quality chips. Nevertheless, Alibaba has committed a substantial $53 billion over three years to AI and cloud investments, underscoring its long-term ambitions in the sector.
