South Korean retail investors who loaded up on leveraged bets on SK Hynix and Samsung Electronics are nursing steep losses after last week's rout of the country's AI-linked chipmakers, exposing the depth of speculative positioning that helped fuel one of the world's hottest equity markets.
The unwind arrives days after Chinese startup Moonshot AI released its Kimi K3 model on Friday, a launch that triggered a global selloff in semiconductor names and briefly cost Nvidia its title as the world's most valuable company. Regulators in Seoul on Thursday tightened rules for the leveraged products that magnified the retail pain, while Alibaba over the weekend previewed a second Chinese frontier model, signals that pressure on the American AI trade is building rather than easing.
The retail unwind
Since the launch of single-stock leveraged exchange-traded funds on May 27, Korean retail investors have purchased a net 14 trillion won ($9.4 billion) of the products, compared with roughly 2 trillion won by foreign investors, according to KB Financial Group. The KODEX SK Hynix Single Stock Leverage ETF, designed to deliver twice the daily move in SK Hynix shares, has fallen about 70 percent from a record high reached in June and about 50 percent from its debut, according to LSEG data.
South Korean online trading forums have filled with lament. "I want to go back to before I started investing in stocks. Give me my money back," one investor wrote in a forum post cited by CNBC. "You're determined to kill me," said another.
"The investors bearing the losses are overwhelmingly domestic retail investors," said Jung In Yun, founder of Fibonacci Asset Management. Many of the buyers, Jung told CNBC, are in their 40s and 50s and have grown comfortable with leverage and concentrated technology bets.
South Korean regulators on Thursday raised the minimum cash deposit for trading single-stock leveraged ETFs to 30 million won from an effective 3 million won, part of a wider effort to curb speculative retail trading after sharp swings in Samsung and SK Hynix. Assets in the 25 largest leveraged Korea ETFs reached roughly a 30 percent share of Korea-focused funds by June, up from about 15 percent at the start of 2026, according to Oxford Economics data. The advisory firm downgraded South Korea equities to neutral at the end of June.
The Chinese pressure
The Seoul rout followed Moonshot's Friday release of Kimi K3, a 2.8-trillion-parameter system the Beijing-based startup described as the world's largest open-source AI model. Moonshot said it will publish the full model weights on July 27. Over the weekend, Alibaba previewed Qwen3.8, a 2.4-trillion-parameter model it said is "second only to Fable 5," Anthropic's flagship system, and is "going open-weight soon." The Journal's Friday edition reported that Moonshot's release sent Chinese AI rivals Z.ai down 28 percent and MiniMax down 16 percent in a reaction some traders likened to last year's DeepSeek panic.
Split on the Street
Wall Street is divided on how much further the unwind runs. Peter Kim, head of global investment strategy at KB Financial Group, told CNBC there are "no signs of massive bailout of the market by the Korean retail investors," while cautioning that the slump could grow prolonged if volatility persists. Thomas J. Hayes, chairman of Great Hill Capital, was blunter: "Semis and memory is the most crowded global trade by institutional and retail positioning. It's over."
Moonshot and Alibaba have not publicly addressed the market reaction to their releases, and no Beijing official had commented on the pair of launches as of Monday morning in Asia.
Moonshot's July 27 weights release will give outside researchers their first chance to benchmark Kimi K3 independently, setting the next test for a chip trade already struggling to find its footing.