Investors Pour Billions Into Leveraged Chip ETFs Amid Rout

South Korea’s AI-driven rally in Samsung Electronics and SK hynix spawned a boom in leveraged exchange-traded funds that target a single stock and typically seek twice its daily move. Retail investors held about 92% of exposure to leveraged products linked to the two chipmakers, according to the Financial Supervisory Service. Because the funds reset daily and offer no diversification, losses can compound rapidly during volatile sell-offs, making dip-buying a high-risk “falling knife” trade.

LSEG data showed more than $10 billion flowed into South Korean leveraged equity funds in the week through Aug. 7. Samsung Asset Management’s KODEX Leverage Derivatives ETF drew $4.3 billion, while two leveraged SK hynix products attracted $3.45 billion and the two largest Samsung Electronics funds took in nearly $2 billion. The rush persisted despite the chip rout and tighter rules: from July 31, regulators tripled the minimum cash requirement for trading single-stock leveraged ETFs to 30 million won and froze new listings.