South Korean Retail Investors Face Steep Losses on Leveraged AI Bets

South Korean retail investors who piled into leveraged bets on the country's AI champions are nursing steep losses after a sharp reversal, exposing the risks of the speculative trading boom that helped fuel one of the world's hottest equity markets.

The pain has been especially acute for holders of single-stock leveraged exchange-traded funds tied to chip giants Samsung Electronics and SK Hynix, which had surged alongside the AI-driven semiconductor rally, and have now tumbled.

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 them, compared with roughly 2 trillion won by foreign investors, according to KB Financial Group.

As of now, that isn't working out so well for them. The KODEX SK Hynix Single Stock Leverage ETF — a product designed to deliver twice the daily move in SK Hynix shares — has fallen about 70% from its record high reached in June and is down roughly 50% from its debut, according to LSEG data.

South Korean online trading forums were full of lament, especially after SK Hynix's record one-day plunge last week.

"I want to go back to before I started investing in stocks. Give me my money back," one investor wrote.

"You're determined to kill me," another said.

The losses underscore how South Korea's retail investing culture has amplified swings in the country's technology heavyweights, even as analysts argue the long-term outlook for memory-chip makers remains intact.

"The investors bearing the losses are overwhelmingly domestic retail investors," said Jung In Yun, founder of Fibonacci Asset Management.

Leveraged ETFs have also grown rapidly as a share of Korea-focused funds, with assets in the 25 largest leveraged Korea ETFs rising to a roughly 30% share by June, up from about 15% at the start of 2026, according to Oxford Economics data.

The economics advisory firm downgraded South Korea equities to neutral at the end of June, warning that leveraged positioning had grown significantly and that securities firms may become increasingly reluctant to extend credit to retail investors.

The buyers, Jung said, are not simply novice traders chasing online hype. Many are investors in their 40s and 50s who have grown increasingly comfortable with leverage and concentrated technology bets.

South Korea's central bank warned in a report released last month that leveraged stock investment by retail investors had climbed to a record high, driven primarily by margin borrowing and increasingly concentrated semiconductor positions.

While the BoK said the build-up was unlikely to pose a systemic threat to the financial system, it cautioned that leverage could magnify volatility during market corrections, particularly if fear of missing out encourages investors to chase rallies with borrowed money.

Regulators have also taken notice. South Korea on Thursday unveiled tougher rules for single-stock leveraged exchange-traded funds, seeking to curb speculative retail trading after sharp swings in Samsung Electronics and SK Hynix. Under the new measures, investors will need to post a minimum 30 million won in cash to trade the products, up from an effective minimum of 3 million won previously.

Peter Kim, head of global investment strategy at KB Financial Group, said the losses highlight how single-stock leveraged ETFs have become a vehicle for speculative trading rather than long-term investing.

"There are no signs of massive bailout of the market by the Korean retail investors, but if the overhang over the ETFs and should the slump and volatility persist, it could lead to a prolonged slump," Kim told CNBC via email.

Some market veterans, however, say the unwinding could still have further to run.

Memory-chip stocks have become the market's most crowded trade for both institutional and retail, said Thomas J. Hayes, chairman and managing member of Great Hill Capital.

"Semis and memory is the most crowded global trade by institutional and retail positioning. It's over," Hayes said. One or more hyperscalers apart from Meta should "moderate their capex commitments in Q2 earnings guidance. You will see crowding our of semis and memory just as aggressively as 'crowding in' in coming months."