South Korea's stock market experienced a sharp decline of over 5% on Monday, falling to its lowest point in nearly two months.

This drop was driven by a wave of selling in chip stocks, led by SK Hynix Inc, as concerns intensified over whether the artificial intelligence-fueled rally can be sustained.

The benchmark Korea Composite Stock Price Index (KOSPI) fell 5.14% to close at 7,091.57 points.

During the session, the index plunged as much as 6.13%, hitting its lowest level since May 20th.

This steep decline triggered the market's sidecar circuit breaker mechanism, which temporarily halted program trading.

Shares of SK Hynix Inc tumbled 10.32% as investors took profits following the 12.8% surge in its American Depositary Receipts (ADRs) on their Nasdaq debut this past Friday.

Samsung Electronics Co Ltd shares also dropped significantly, falling 6.14%.

An analyst from Kiwoom Securities noted that despite the successful U.S. listing of SK Hynix, market worries about the memory chip cycle reaching its peak have not subsided.

Among other major index components, battery maker LG Energy Solution Ltd rose 2.61%.

Automakers Hyundai Motor Co and Kia Corp saw modest gains of 0.11% and 0.20%, respectively.

Steel producer POSCO Holdings Inc advanced 1.59%, while pharmaceutical firm Samsung Biologics Co Ltd increased 2.44%.

Of the 912 traded stocks on the main board, 346 advanced while 543 declined.

Foreign investors were net sellers on the KOSPI, offloading 1.04 trillion won, equivalent to approximately $690.73 million.