Retail investors in South Korea, who heavily leveraged bets on domestic tech giants during the AI chip boom, are now facing severe losses as the cost of this gamble becomes apparent.

The heaviest losses are being felt by holders of single-stock leveraged ETFs tied to SK hynix and Samsung Electronics. According to LSEG data, the KODEX SK hynix single-stock leveraged ETF has fallen approximately 70% from its June peak and is down about 50% since its first day of trading. Following a record single-day plunge in SK hynix shares last week, online investment forums in South Korea were filled with despair. One investor posted, "I want to go back to before I started trading stocks and get my money back." Another wrote, "You are determined to kill me."

These losses highlight how South Korea's retail speculative culture amplifies volatility in major tech stocks. Regulators have moved swiftly, with authorities announcing tighter rules for single-stock leveraged ETF trading this past Thursday. The minimum cash deposit requirement for investors has been raised significantly from an effective level of around 30,000 won to 300,000 won. Concurrently, some market veterans warn that this deleveraging process may not be over.

Retail-Driven Buying Concentrates Losses on Domestic Investors

Data from KB Financial Group shows that since single-stock leveraged ETFs began trading in South Korea on May 27, retail investors have been net buyers to the tune of 14 trillion won (approximately $9.4 billion), while foreign investors' net buying was only about 2 trillion won. This stark disparity means the losses from this decline are almost entirely borne by domestic individual investors.

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

It is noteworthy that these buyers are not simply novice traders. Jung In Yun pointed out that many are middle-aged investors in their 40s and 50s who have become increasingly accustomed to using leverage and making concentrated bets on tech stocks, not merely newcomers chasing online trends.

Some seasoned market participants hold a more pessimistic outlook for the future. Thomas J. Hayes, Chairman and Managing Partner of Great Hill Capital, noted that memory chip stocks have become one of the most crowded trades for both institutions and retail.

"Semiconductors and memory have been the most crowded trade globally among institutions and retail, and that's over," Hayes stated.

He anticipates that, aside from Meta, one or more hyperscale cloud companies will lower their capital expenditure commitments in their Q2 guidance. When that happens, the pace of money exiting the semiconductor and memory sectors could be as aggressive as when it "piled in."

Analysts generally believe the long-term fundamentals for memory chip makers remain intact. However, the continued unwinding of leveraged positions is expected to keep pressure on South Korean tech stocks in the near term.

Rapid Expansion of Leveraged ETFs Draws Central Bank Warning

The rapid expansion of leveraged ETFs in the South Korean market is also raising alarms. According to Oxford Economics data, the share of assets held by the 25 largest Korean leveraged ETFs within the country's thematic fund sector has doubled in six months, rising from about 15% in early 2026 to roughly 30% by June.

Last month, the Bank of Korea issued a report warning that retail margin trading has reached a historically high level, primarily driven by credit borrowing, with positions highly concentrated in the semiconductor sector.

The central bank stated that while this risk accumulation is unlikely to pose a systemic threat to the financial system at present, it warned that leverage would significantly amplify volatility if the market corrects—particularly when "fear of missing out" (FOMO) drives investors to borrow money to chase rallies.

Oxford Economics, for its part, downgraded its rating on the South Korean stock market to neutral at the end of June, citing the substantial build-up of leveraged positions and the likelihood that brokerages are becoming increasingly reluctant to extend credit to retail investors.

In response to the market's sharp swings, South Korean regulators have taken action. Authorities have announced stricter rules for single-stock leveraged ETFs.

Investors trading these products must now post a minimum cash deposit of 300,000 won, a tenfold increase from the previous effective threshold of around 30,000 won. This measure aims to curb speculative retail trading and prevent severe volatility in stocks like Samsung Electronics and SK hynix from further transmitting into leveraged products.

Peter Kim, Head of Global Investment Strategy at KB Financial Group, said these losses underscore how single-stock leveraged ETFs have become speculative tools rather than long-term investment vehicles.

"There is no sign yet that Korean retail investors are exiting the market en masse, but if ETF pressure continues, with declines and volatility persisting, it could lead the market into a prolonged slump," he noted.