South Korea's KOSPI index closed down roughly 2.3% Wednesday after a senior policy aide floated the idea of taxing AI-sector profits and redistributing the proceeds to citizens via a so-called 'citizen dividend.'
At one point, the index plunged more than 5%, hitting an intraday low of 7,421.71, before buyers stepped in to pare losses.
The catalyst was a proposal from Kim Yong-beom, who argued that returns generated by the AI industry-built on South Korea's national industrial base-should be partially shared with the public. Investors interpreted that as a direct threat to the country's most valuable companies and sold aggressively.
Samsung Electronics and SK Hynix, which together account for nearly half of the KOSPI's total market capitalization, bore the brunt of the sell-off. Both stocks drove the index lower as traders priced in the worst-case scenario: targeted taxation on the very companies that have turned South Korea into a global semiconductor powerhouse.
After the initial panic, officials walked back the most alarming interpretation, clarifying that the dividend would be funded by additional tax revenue generated from AI-driven economic growth, not by directly tapping corporate earnings. However, the partial recovery from the intraday low to a 2.3% closing loss suggests some investors bought the clarification-but plenty of others did not.
The timing is notable: JPMorgan had recently raised its KOSPI target, signaling growing institutional confidence in South Korean equities. That optimism evaporated in a single session, replaced by a reminder that policy risk can overwhelm fundamentals overnight.