The logo of SK hynix is seen on its product during the 26th Semiconductor Exhibition in Seoul, Oct. 23, 2024. Reuters-Yonhap

Korean stocks ended lower Friday after a weeklong holiday as tech shares sharply slid in the aftermath of a recent shock from the emergence of Chinese artificial intelligence (AI) startup DeepSeek. The Korean won was trading sharply lower against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) dropped 19.43 points, or 0.77 percent, to close at 2,517.37. The KOSPI was closed from Monday to Thursday due to the Lunar New Year holiday.

Trade volume was moderate at 443 million shares worth 13.3 trillion won ($9.14 billion), with losers outnumbering winners 560 to 333.

Foreigners dumped 1.2 trillion won worth of local shares, while retail investors and institutions purchased a combined 1.16 trillion won.

"The KOSPI saw volatility in its shares related to semiconductors and electronics due to the DeepSeek shock that hit the global stock markets during the Lunar New Year holiday," Lee Kyoung-min, an analyst at Daishin Securities, said.

"DeepSeek's AI model, which is cheaper and more efficient than ChatGPT and other AI models from U.S. tech giants, has raised concerns investment will slow down into advanced chips, data centers and electric facilities," he added.

Earlier this week, the cost-efficient AI models from China's DeepSeek rattled global stock markets, with some experts arguing the Chinese AI model can compete against those from U.S. tech giants at lower costs.

Major U.S. indexes, however, gained ground overnight as investors moved to buy up tech shares following a slide sparked by DeepSeek and data indicating the world's largest economy is still strong.

In Seoul, market behemoth Samsung Electronics dipped 2.42 percent to 52,400 won, and its chipmaking rival SK hynix shot down 9.86 percent to 199,200 won.

Major bio firm Samsung Biologics declined 0.55 percent to 1.08 million won, and aerospace and defense firm Hanwha Aerospace plunged 2.79 percent to 400,000 won.

Hana Bank's dealing room in Seoul / Yonhap

But IT and software shares were bullish as the recent DeepSeek shock indicated developing advanced AI models may not require massive computational resources, such as AI chips.

Internet portal operator Naver jumped 6.13 percent to 216,500 won, and Kakao, the operator of the country's top mobile messenger, soared 7.27 percent to 38,350 won.

Financial shares also gained ground, with KB Financial up 3.15 percent to 91,700 won, Shinhan Financial up 2.2 percent to 51,100 won and Meritz Financial climbing 4.48 percent to 114,200 won.

Construction and trading firm Samsung C&T also surged 4.26 percent to 119,900 won, and Samsung Fire & Marine Insurance shot up 11.71 percent to 381,500 won.

Krafton, the operator of the globally popular game PUBG: Battlegrounds, soared 6.12 percent to 364,000 won.

The local currency was trading at 1,452.7 won against the greenback at 3:30 p.m., sharply down 21.4 won from the previous session, the lowest since Jan. 17.

Bond prices, which move inversely to yields, closed mixed. The yield on three-year Treasurys rose 0.3 basis point to 2.573 percent, and the return on the benchmark five-year government bonds dropped 0.3 basis point to 2.701 percent. (Yonhap)