A June selloff triggered by single-stock leveraged ETFs wiped nearly 10% off South Korea's Kospi in a single session and sent Nasdaq futures tumbling, offering the clearest preview yet of how dangerously concentrated the global AI chip rally has become.
The numbers from 2026 look extraordinary until you ask what's underneath them. South Korea's Kospi is up roughly 90% year-to-date, Taiwan's TAIEX has cleared 47,000 for the first time, crossing 40,000 just in May, and in both cases the explanation is essentially the same two or three stocks. Samsung Electronics and SK Hynix together account for a record 42.2% of the Kospi. TSMC alone makes up more than 40% of Taiwan's benchmark. These aren't diversified equity markets riding a broad economic expansion. They're chipmaker proxies wearing an index badge.
That distinction matters a lot more than it might seem. When SK Hynix surged 250% from January through late May, hitting a $1 trillion market cap along the way, the gains were real and the underlying demand was real: AI data centers cannot get enough high-bandwidth memory. But the structure built on top of those gains is a different story entirely.
South Korea's financial regulator approved sixteen single-stock leveraged and inverse ETFs on May 27, targeting 2x the daily moves of Samsung and SK Hynix. They pulled in $3 billion on launch day. By June 23 they held more than $9 billion, with retail investors accounting for roughly 92% of holders. Relative to the size of Korea's local market, Goldman Sachs estimated, the SK Hynix leveraged ETF was the equivalent of a $750 billion leveraged product on a single U.S. stock. The leveraged ETFs were also accounting for about 31% of Samsung's daily trading volume and 38% of SK Hynix's, according to reporting by KED Global.
On June 23, the regulator expressed public regret about having approved them. That statement alone was enough to set off a chain reaction. Samsung fell 12.31% and SK Hynix dropped 12.47% in Seoul. When both stocks fell close to 13% on the session, the ETFs had to reset their leverage ratios, which meant selling into the decline: roughly $6 billion in shares dumped in a single rebalancing event, as reported by Bloomberg. The Kospi plunged nearly 10% from its recent record, triggering a market-wide circuit breaker. Nasdaq 100 futures fell more than 2% ahead of the U.S. open, putting the index on pace to lose more than $1 trillion in paper value. Micron dropped 13% in U.S. trading. A regulatory statement in Seoul became a global chip rout by Tuesday morning.
This is what a leverage feedback loop looks like in practice. The ETFs don't just amplify gains on the way up; they mechanically amplify selling on the way down, at exactly the wrong moment, in exactly the wrong size. The Korea Financial Supervisory Service's head estimated brokerage commissions from these products at somewhere between $3 billion and $6.4 billion, which tells you who actually benefited. It wasn't the retail investors who piled in near the top.
Taiwan is running a version of the same experiment
Taiwan's setup is less acute but structurally similar. Margin debt has surged more than $13 billion to levels not seen since September 2000, according to data cited by Bloomberg, and the TAIEX hit 47,741 on June 23, the same session the Korean market was imploding. Taiwan's regulators recently relaxed limits on how much domestic funds can allocate to a single stock, a change widely expected to channel an additional $30 billion to $40 billion into TSMC. That might sound like a vote of confidence. It's also a bet that TSMC's guidance never disappoints.
The Taipei Times has noted the growing detachment between the index and the broader domestic economy. Traditional industries are lagging as the AI names absorb almost all the capital. The wealth from the stock surge isn't spreading. Taiwan's central bank has flagged what it calls societal wealth divergence, and that concern isn't abstract: a market where TSMC is more than 40% of the benchmark and margin debt is at dot-com era levels is one where a guidance miss or a demand revision from Nvidia can erase years of retirement savings for ordinary investors who bought in late.
Frankly, that's the real risk here, and it's not the one most coverage focuses on. The debate tends to center on whether the AI chip cycle is genuine, and it is: HBM demand is real, TSMC's capacity constraints are real, and SK Hynix's 250% gain didn't come from nowhere. The problem isn't the fundamentals. It's the structure sitting on top of them. When 92% of a $9 billion leveraged-product complex is held by retail investors, when a regulator's press release can trigger $6 billion in forced selling, and when two tickers account for nearly half a national index, the market has stopped pricing the underlying business and started pricing the flow.
South Korea is now weighing measures to curb leveraged single-stock ETF risks, and regulators have postponed planned single-stock options. Those are useful steps after the fact. The harder question, the one Taiwan's central bank is also quietly asking, is what happens when Nvidia softens its demand signals or TSMC issues cautious guidance on the next earnings call. Neither country's index is built to absorb that cleanly. The leverage feedback loop the world just watched play out in Seoul on June 23 was a preview, not an anomaly.
Also read: Former DeepMind researchers who beat professional poker players raise a $500 million Series A to trade stocks and crypto • Nearly 1,700 UK investors are suing Binance and CZ for £150 million over unauthorized derivatives sold to retail customers • Bending Spoons prices its Nasdaq IPO above range as Wall Street bets on AI-powered software roll-ups
