South Korean retail investors have incurred significant losses after a sharp selloff in AI chip stocks, particularly Samsung Electronics and SK Hynix, following a period of speculative trading that had previously fueled a strong equity market rally [1]. The downturn has been especially severe for holders of single-stock leveraged exchange-traded funds (ETFs) tied to these chip giants. The KODEX SK Hynix Single Stock Leverage ETF, which aims to deliver twice the daily move in SK Hynix shares, has plummeted about 70% from its record high in June and is down roughly 50% from its debut, according to LSEG data [1].
Since the launch of single-stock leveraged ETFs on May 27, Korean retail investors have purchased a net 14 trillion won ($9.4 billion) of these products, compared to about 2 trillion won by foreign investors, as reported by KB Financial Group [1]. The losses have sparked widespread frustration among retail investors, as evidenced by lamentations on online trading forums following SK Hynix's record one-day plunge last week [1].
The rapid growth of leveraged ETFs has amplified market swings, with assets in the 25 largest leveraged Korea ETFs rising to a 30% share by June, up from 15% at the start of 2026, according to Oxford Economics [1]. The firm downgraded South Korea equities to neutral at the end of June, citing concerns over increased leveraged positioning and the potential reluctance of securities firms to extend further credit to retail investors [1].
South Korea's central bank warned last month that leveraged stock investment by retail investors had reached a record high, driven mainly by margin borrowing and concentrated bets on semiconductor stocks. While the Bank of Korea does not see this as a systemic threat, it cautioned that leverage could magnify volatility during market corrections, especially if fear of missing out continues to drive retail participation with borrowed funds [1].
CONCLUSION
The sharp reversal in AI chip stocks has exposed the risks of South Korea's leveraged retail trading boom, resulting in heavy losses for domestic investors. With leveraged ETF assets and margin borrowing at record highs, analysts and regulators warn that volatility could intensify if current trends persist.