In Seoul, the KOSPI fell 3.8 percent to close at 3,853.26, while the junior KOSDAQ slumped 3.1 percent to 863.95.
In large-cap stocks, Samsung Electronics plunged 5.8 percent to 94,800 Koren won ($64), and SK hynix dropped 8.8 percent to 521,000 won. Among the top 10 market-cap companies, only Kia gained 0.5 percent, while Samsung Biologics remained suspended from trading. The rest closed lower from the previous session.
Foreign investors offloaded a net 2.82 trillion won ($1.9 billion) worth of shares, marking their largest single-day selloff of this year.
Market sentiment soured following renewed talk of an artificial intelligence (AI)-driven market bubble. Although Nvidia posted stronger-than-expected earnings overnight, U.S. stocks reversed early gains, with the Philadelphia Semiconductor Index tumbling 4.8 percent.
Comments from a senior Federal Reserve official referencing the possibility of an AI bubble further unsettled investors.
Japan's Nikkei 225 also fell 2.4 percent to close at 48,625.88.
In China, the Shanghai Composite Index fell 2.5 percent to 3,834.89.
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