Global tech stocks plummet: Another stress test for the AI bull market

Original Source: Wall Street CN

June 23rd, Seoul, South Korea.

At 2:00 PM, the Korea Exchange triggered a circuit breaker. The KOSPI index plunged 8%, halting trading for 20 minutes. After resuming, it continued its decline, ultimately closing down 9.99% at 8,203.84 points.

A few numbers outline the intensity of this sell-off —

Samsung Electronics fell 12.31%, SK Hynix fell 12.47%. These two companies alone contributed approximately 71% of the KOSPI's decline that day. The Nikkei 225 fell 3.55%, dropping below the 70,000-point mark. Nasdaq 100 futures fell 3.01%, and the Philadelphia Semiconductor Index closed down 7.7%. TSMC dropped over 5% in pre-market trading, Micron Technology fell over 8%, while AMD, Intel, Applied Materials, ARM, and ASML all fell over 7%.

The collapse of leveraged ETFs was even more startling: the 3x Bull Korea ETF plummeted 32% in a single day, and the 3x Bull Semiconductor ETF suffered a heavy 17% loss.

The KOSPI's single-day decline ranks among the top five worst in South Korean stock market history. A crash of similar magnitude last occurred in October 2008.

But 2008 was a clearly visible Great Recession. In 2026, the global economy is growing, the AI revolution is in full swing, and the KOSPI was still among the top-performing major global indices year-to-date — until this crash.

So the real question is: what happened, and why.

Trigger Point: A Confluence of Three Signals

Looking back at the timeline, the direct trigger for the crash was the confluence of three signals within a 24-hour period.

First: SK Hynix slows down HBM4 expansion.

On the morning of June 23rd, South Korean media reported that SK Hynix was slowing its HBM4 capacity expansion, shifting focus towards general DRAM. HBM (High Bandwidth Memory) is a core component for AI chips, and with SK Hynix and Samsung being the world's only two mass-producing suppliers, market consensus on HBM4 supply-demand was nearly one-sided towards a "supply shortage."

HBM4 is one of the most certain bottlenecks in the global AI infrastructure race. Any time the market begins to question the tightness of this bottleneck, the result is often a repricing of faith.

Second: Profit-taking ahead of Micron's earnings.

Micron Technology was scheduled to report quarterly earnings on Wednesday (June 25th). Propelled by earlier news of a full-stack collaboration with Anthropic, Micron's stock price had hit an all-time high, with a year-to-date gain of over 300%. Goldman Sachs' trading desk noted, "Investor expectations have been stretched extremely high, creating conditions for pre-earnings position reductions."

In a market driven by "expectations," pre-earnings position adjustments can be more devastating than the earnings themselves.

Third: South Korean regulators warn against leveraged ETFs.

On June 22nd (the day before the crash), Lee Chul-yeon, head of South Korea's Financial Supervisory Service, made a public statement: he "regretted" not having prevented the issuance of single-stock leveraged ETFs tracking Samsung Electronics and SK Hynix, calling them "serving little purpose other than allowing brokerages to profit at the expense of retail investors."

The timing was precise, almost cruel. When a regulator publicly acknowledges structural issues in the market, it directly triggers a panicked stampede.

Amplifiers: The 'Three Levers' of the Korean Market

The destructive power of the above three forces was so immense because it struck a market structure already deeply entangled with leverage.

Three amplifiers were operating simultaneously during South Korea's AI bull run.

Amplifier One: Retail margin debt hits an all-time high.

South Korean retail investors have long been known for their risk appetite. But this cycle's leverage reached unprecedented levels. Retail margin balance in South Korea was climbing to record highs before the crash. In its post-crash analysis report, Goldman Sachs bluntly stated: "The rise in the Korean stock market was increasingly dependent on retail investors as marginal buyers."

In a leverage cycle where buying begets more buying, once marginal buyers turn, it triggers a reverse cycle of selling begetting more selling.

Amplifier Two: Single-stock leveraged ETFs ballooned to $30 billion.

This is the most unique problem in the Korean market. The 16 onshore single-stock leveraged ETFs had assets under management of about $9.1 billion, while the 2x Bull SK Hynix and Samsung ETFs issued by CSOP on the Hong Kong Stock Exchange totaled about $21 billion — combined over $30 billion. Furthermore, 92% of holdings in onshore products came from retail investors.

Single-stock leveraged ETFs have a fatal structural characteristic: they require daily rebalancing. When the underlying stock price falls, the ETF needs to sell more shares to maintain its leverage multiple, creating a self-reinforcing selling pressure during declines. And when regulators hint at possibly restricting these products, the first things to be sold off happen to be these products themselves — and their underlying assets.

The Financial Supervisory Service estimates the commission income from single-leverage products is between $3 billion and $6.4 billion. Measures it is considering include: raising investment门槛 for retail investors, strengthening trader education tests, imposing size limits on single-stock ETFs, restricting new issuances, and reinforcing suspension mechanisms when price-to-NAV deviations occur.

Whether or not these measures are implemented, the signal they've sent is already clear: the regulatory authorities believe that a significant portion of this rally detached from fundamentally rational pricing.

Amplifier Three: The National Pension Service unexpectedly becomes a seller.

In the six days leading up to the crash, South Korea's National Pension Service (NPS) — the country's largest pension fund — net sold about $1 billion in KOSPI stocks. Cumulatively for June so far, it has net sold $1.5 billion, the largest monthly net selling record since April 2021.

NPS's operation was essentially rebalancing: the sustained rise in the KOSPI had pushed domestic stock positions above 30%, exceeding the upper limit of approximately 28.8%.

But the key point is that in a market highly dependent on marginal funds from retail investors, the NPS, which had been a core stable buyer, suddenly turned from buyer to seller. This meant there was no longer anyone in the market capable of "catching" the sell orders.

In the words of a Goldman Sachs analyst: "The so-called theoretical constraint has become an observable liquidity reality."

The Bubble Debate: When Will It Come, How Deep Will It Fall?

Naturally, a debate about an "AI bubble" has surfaced following the crash.

In his client report on the day of the crash, Chris Cha, Head of High-Touch Sales for Korea at Goldman Sachs, provided a clear diagnosis — liquidity exhaustion: "I remain constructive on the memory cycle and continue to believe the KOSPI is undervalued. However, this rally is increasingly dependent on technically sensitive buyers, making it more susceptible to disruptions in liquidity momentum."

In other words: the medium-to-long-term logic hasn't changed, but the short-term market structure has become fragile to a breaking point.

Bank of America's quantitative signal: The Nasdaq is approaching bubble territory.

A few days before the crash, a team of BofA strategists released a report noting that their bubble risk indicator showed the Nasdaq 100 index was nearing the 0.8 level, "which typically signals elevated short-term tail risks on both sides." Tech stocks and semiconductor stocks have already "shown extreme bubble-like price action."

However, BofA also offered an interesting judgment: "It could take years for the AI bubble to fully inflate. History suggests this indicator is more helpful in signaling interim corrections rather than trend reversals."

Li Bei's Warning: Trigger conditions have already appeared.

Private equity heavyweight Li Bei also expressed caution about the AI sector in a letter to investors. In his view, the "trigger conditions for the AI bubble to burst have already appeared."

These three voices point to three different time dimensions: Li Bei talks about 'now,' Goldman Sachs says 'don't panic,' and BofA says 'it will rise further but needs to fall first.'

It's worth noting: In a market deeply tied together by leveraged ETFs, retail margin debt, and momentum trading, an 'interim correction' and a 'bubble burst' may be indistinguishable in terms of price action. A 10% daily decline already triggered a circuit breaker. What would happen if another 10% came?

Mirror Image: SpaceX Tells the Same Story

If you shift your gaze from Seoul to New York, you'll see a mirror image.

SpaceX has plummeted for three consecutive days since its listing — down over 16% on June 19th, another ~5% on June 22nd, and continued falling on June 23rd — its market capitalization has evaporated by about $600 billion in three days, falling below its first-day IPO opening price of $150 to around $147.

What is more intriguing is that amidst this stock price plunge, SpaceX announced its debut bond issuance — raising $20 billion for AI infrastructure construction. Typically, a company turns to debt issuance when facing financial difficulties. But SpaceX's situation is the opposite: its AI capex story requires continuous ammunition, and falling stock prices are closing the window for equity financing. Debt is its last option to maintain the narrative without interruption.

The resonance between SpaceX and Korean semiconductors reveals a common problem: the capital market narrative surrounding the AI theme is transitioning from "infinite imagination" to a stage of "calculating returns."

When investors start doing the math — how much slower is HBM4 expansion? How much have GPU lease prices dropped? When will AI revenue cover capital expenditures? — the market's pricing logic changes.

What Comes Next: The Micron Verdict

After the crash, all eyes turned to one date: June 25th.

Micron's earnings report — this is the most direct "trial" facing tech stocks after this sell-off.

Quoting Dilin Wu, a strategist at Pepperstone, Bloomberg reported: "Micron's earnings this week are the real test. A strong performance would have a positive transmission effect directly on Samsung and Hynix — that number will tell you whether the underlying logic of the AI hardware trade still holds."

Logically, there are two possibilities:

Scenario One: Micron beats expectations. If Micron delivers a strong earnings report and provides optimistic guidance, the current sell-off could be quickly corrected. Positions that exited due to uncertainty would likely be re-entered once certainty is confirmed.

Scenario Two: Micron misses expectations. If Micron's guidance is disappointing, the current sell-off will receive fundamental confirmation. The diagnosis of liquidity problem would be overturned, replaced by a collapse of conviction.

In Scenario One, the KOSPI circuit breaker will be marked as "a technical stampede." In Scenario Two, it will be marked as a "turning point for the AI bull market."

The answer provided by the market on Wednesday evening will determine the opening direction for Asian markets on Thursday morning.

Conclusion

The crash on June 23rd can be technically explained as the result of four factors resonating within 24 hours: the single news of SK Hynix's HBM4 slowdown + the structural fragility of leveraged ETFs + the unexpected selling from NPS rebalancing + pre-earnings hedging for Micron.

But that is only the technical explanation.

The deeper question is: When an AI bull run has reached a point where valuations are at historical extremes, the driving force has shifted from institutions to retail investors, the trading structure is deeply tied to leveraged products, and simultaneously rising inflation and rate hike expectations are pushing up risk-free rates — then a structural fracture is almost inevitable, sooner or later.

The KOSPI circuit breaker is a mirror.

What the mirror reveals is this: When all market participants are betting on the same narrative using leverage, the reverse correction of that narrative — no matter how fast or how deep — should not be considered surprising.

For investors, after Micron's earnings, there is only one question: How much drawdown are you willing to endure to answer 'continue holding'?