Artificial intelligence has transformed semiconductor stocks into one of the world’s most popular investment themes. In South Korea, many retail investors believed the recent decline in the country’s leading chipmakers presented a chance to buy into the AI boom at a discount. Instead, those bets have produced losses exceeding 40% for investors who used leveraged exchange-traded funds to amplify potential gains.
The losses center on Samsung Electronics, the South Korean technology company and the world’s largest memory-chip manufacturer, and SK hynix, South Korea’s second-largest chipmaker and one of the world’s leading suppliers of high-bandwidth memory chips used in Nvidia’s AI platforms. As both companies’ shares extended their declines throughout July, retail investors increasingly viewed the weakness as a temporary correction rather than a shift in the industry’s long-term outlook.
Rather than buying only the shares, many investors turned to single-stock leveraged ETFs, products designed to deliver twice the daily performance of an individual stock. The funds have become a popular way to capitalize on short-term rebounds, but they also magnify losses when markets continue moving lower because their leverage is reset every trading day.
According to the Korea Exchange (KRX), retail investors spent much of July buying Samsung Electronics, SK hynix and leveraged ETFs tied to both companies. They also accumulated leveraged funds tracking South Korea’s benchmark stock indexes, betting that the semiconductor sector would soon recover.
The strategy has backfired. Retail investors are now showing unrealized losses across each of the ten securities they purchased most aggressively during the month. Based on average purchase prices and current market values, the group’s average unrealized loss has reached 28.51%.
The steepest losses have come from leveraged ETFs. Samsung Electronics has fallen about 20% from the average retail purchase price, while SK hynix has declined roughly 24%. The leveraged funds linked to those companies have dropped far more sharply. Retail investors are estimated to be down about 41% on the KODEX Samsung Electronics Single Stock Leverage ETF and more than 45% on leveraged SK hynix products, erasing nearly half of their invested capital in less than a month.
The selloff has been fueled by broader concerns surrounding the semiconductor industry. Investors have grown increasingly cautious as China’s semiconductor industry continues to advance, raising expectations of stronger long-term competition for South Korean chipmakers. At the same time, uncertainty over the semiconductor cycle and the durability of AI-related investment has weighed on technology stocks across the market.
Despite the recent losses, many investors continue to view the long-term outlook for AI-driven semiconductor demand as intact. Attention is now turning to SK hynix’s earnings report, along with quarterly results from Microsoft, Meta and Amazon, for signs that spending on AI infrastructure remains strong enough to stabilize semiconductor stocks after the recent selloff.
