The world's hottest major index dived almost 11% as fears about cheap Chinese chip competition bled into international markets after ravaging U.S. tech stocks.

South Korea's Kospi index is a slave to its two largest constituents -- memory-chip giants SK Hynix and Samsung, which fell 14.7% and 13.3%, respectively, on Tuesday. That dragged the bourse down 10.8%, although it remains up 49.4% for the year after riding the AI boom.

The drop came after a report said that a Chinese state-backed company was mass-producing chip-manufacturing machines.

That sparked a chip-stocks selloff in the U.S. with the tech-heavy Nasdaq Composite index ending Monday's session in the red and futures tied to it falling again early Tuesday.

This came after a huge IPO from ChangXin Memory Technologies on Monday, which gave the memory chip maker a market capitalization of $484 billion and made it the most valuable company listed in mainland China.

Investors fear CXMT's rapid capital expansion could directly challenge South Korean dominant position in the memory sector alongside U.S. market darling Micron, which fell 2.2% on Monday and was down 4.7% at $858.76 in premarket trading Tuesday.

"Renewed worries over AI investment spending, and competition from cheaper Chinese companies, have triggered another selloff in global semiconductor stocks," Deutsche Bank analyst Jim Reid said.