The Zhitong Finance App learned that Korean retail investors previously heavily leveraged their bets on leading AI stocks in the country, but now the market has reversed drastically and lost a lot, revealing the huge risks hidden in this speculative trading boom boosting one of the hottest stock markets in the world. The most hurt were investors holding single-stock leveraged ETFs from Samsung Electronics and SK Hynix. This type of product previously soared along with the AI-driven semiconductor bull market, but now it has taken a U-turn.
According to KB Financial Group data, since the single-stock leveraged ETF was listed in Korea on May 27, the net purchase scale of Korean retail investors reached 14 trillion won (about 9.4 billion US dollars), while foreign investors only made net purchases of about 2 trillion won during the same period.
As of now, the deal has not been positive for retail investors. According to Lufter data, the KODEX SK Hynix single-stock leveraged ETF (a product designed to track SK Hynix's daily increase of 2 times) has retreated about 70% from the historical high set in June, and is down about 50% from the first day of listing.
Complaints abound on online trading forums in South Korea, especially after SK Hynix recorded its biggest one-day decline in history last week. An investor wrote, “I really want to go back to the days before stock trading and give me back my money.” Another said, “You're putting me to death.”
This loss highlights how South Korea's retail investment culture has amplified fluctuations in major technology stocks in the country, even though analysts believe that the long-term outlook for the memory chip industry has not changed.
The burden of losses is almost entirely borne by retail investors
Jung In Yun, founder of Fibonacci Asset Management, said, “Investors that bear losses are overwhelmingly retail investors in Korea.”
The share of leveraged ETFs in Korea-themed funds has also risen rapidly. According to data from the Oxford Institute of Economics, as of June, the 25 largest leveraged ETF assets in South Korea had risen to about 30% of all Korean-themed ETFs, compared to only about 15% at the beginning of 2026.
The economic consulting agency downgraded the Korean stock market to “neutral” at the end of June, warning that leveraged positions have accumulated significantly and that brokerage firms may be increasingly reluctant to provide credit financing to retail investors.
Jung In Yun pointed out that these buyers are not simply new to chasing internet popularity; many are investors aged 40 to 50. They have become more and more accustomed to leveraging and concentrating on technology stocks.
The Bank of Korea warned in a report released last month that retail investors' leveraged stock investment has climbed to a record high, and their holdings are increasingly concentrated in the semiconductor sector, driven by securities financing.
Although the central bank said that this accumulation is unlikely to pose a systemic threat to the financial system, it cautions that leverage may increase fluctuations in the market recovery period, especially when “fear of running out” drives investors to borrow money to chase up the rise.
Supervisory authorities take action
Regulators have also taken action. South Korea announced stricter regulations on single-stock leveraged ETFs last Thursday (July 16), aimed at curbing speculative trading by retail investors after sharp fluctuations between Samsung Electronics and SK Hynix. The new regulations require investors to deposit a cash deposit of at least 30 million won when trading such products; previously, the actual threshold was only 3 million won.
Kim Peter, head of global investment strategy at KB Financial Group, said in an email that these losses highlight that single-stock leveraged ETFs have become a tool for speculative trading rather than a long-term investment vehicle. “There is currently no sign that Korean retail investors have left the market on a large scale to bail out the market, but if the ETF backlog continues, and the decline and volatility continue, it may lead to a long-term downturn in the market.”
However, some market veterans believe that the deleveraging process may be far from over.
Thomas Hayes, chairman and managing member of Great Hill Capital, said that memory chip stocks have become the most crowded transactions between institutions and retail investors. “Semiconductors and storage are the most crowded global deals in institutional and retail holdings, and now they have come to an end.”
Hayes said that in addition to Meta, at least one or two hyperscale technology companies should lower their capital expenditure commitments in the Q2 earnings guidelines. “Over the next few months, you'll see capital leaving the semiconductor and storage sector as fast as it was during the previous influx.”