South Korea's AI-driven stock market boom is turning into a cautionary tale: what will happen when leverage becomes a stronger market force than fundamentals. SK Hynix plummeted by a record 15% on Monday, forcing leveraged product managers linked to South Korean chipmakers to sell off multi-billion dollar stocks, which evolved from an initial global re-evaluation of AI valuations into a sharp market crash. This wave of sell-off boosted Korea's Kospi Index by 25% in just three weeks, revealing how margin loans, single leveraged exchange-traded funds, and concentrated index weights influence each other, amplifying two-way market fluctuations. Outside of Seoul, other regions around the world are also increasingly watching these developments. Korea is at the center of the AI hardware supply chain, and SK Hynix and Samsung Electronics account for more than half of the KOSPI index. SK Hynix can now be traded in the US market through American Depositary Receipts. Investors say that market sentiment may fluctuate around the clock between Wall Street and Asia, which increases the risk that market fluctuations caused by South Korea's leverage will spread globally. On Wednesday, this feedback cycle unfolded again, and the Kospi Index rose more than 7%, driven by a rebound in SK Hynix's stock price, after which the company's ADR rose 27%.

Disclaimer:Webull uses external vendor Google Translation Service for news translations where we endeavour to ensure these are correct, however, we recommend that you please double-check this information accordingly. Webull is not responsible for translation errors or issues.