AI profit tax idea sparks $3.8bn selloff in South Korea

South Korea's benchmark Kospi index retreated Tuesday after briefly approaching the 8,000-point mark, closing at 7,643.15 points, down 2.29 percent from the previous session. The decline was triggered by remarks from Kim Yong-beom, the presidential chief of staff for policy, who proposed distributing a "citizen dividend" funded by taxes on profits generated by AI chip giants such as Samsung Electronics and SK hynix. Although the index climbed as high as 7,999.67 points shortly after opening, it quickly reversed course and plunged as much as 5.1 percent to 7,421.71 points as investors reacted to the proposal. The selloff was led by foreign investors, who unloaded 5.6 trillion won ($3.8 billion) worth of shares on the main board in a wave of profit-taking, joined by institutional investors' net selling of 1.21 trillion won. Kim's Facebook post stated that "the gains from the AI era are not the result of a few specific companies, but were built on an industrial foundation that the entire nation has collectively developed over the past half-century," arguing that a portion of those gains should be structurally returned to citizens. Shares of Samsung Electronics and SK hynix closed down 2.28 percent and 2.39 percent respectively. Kim later clarified that he was referring to using excess tax revenue from the AI boom rather than introducing a new windfall tax, which helped the index partly recover to the 7,600 range. The presidential office subsequently distanced itself from the remarks, stating they represent only "an individual opinion unrelated to internal discussions or reviews within the presidential office." The market volatility reflects growing public calls in South Korea for tech companies to share AI boom profits with citizens, amid ongoing labor tensions including a strike at Samsung Electronics.