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Cost to insure AI debt hits record high amid Korea semiconductor sell-off

South Korea’s KOSPI has fallen nearly 17% over two days, and single-stock leveraged ETFs for retail trading now face calls for a renewed ban after losses.

Reported · Written up by our desk · Market Structure

Cointelegraph reports that the cost to insure AI-linked debt has reached a record high as South Korea’s semiconductor sell-off widens, with widening hyperscaler credit spreads pointing to increasing pressure on highly leveraged AI and semiconductor positions.

In Seoul, market-wide circuit breakers halted trading again on Wednesday, following Tuesday’s collapse, leaving the KOSPI down nearly 17% and erasing about $620 billion in market capitalization, according to Cointelegraph. The initial trigger was a quarterly earnings miss from SK Hynix, with the stock down an additional 4% on Wednesday after a 15% drop on Tuesday.

The downturn has been tied to heavy weight in the index from companies including SK Hynix and Samsung Electronics, which together account for nearly half of the Korean benchmark, the outlet said. Cointelegraph also cited a shift among retail investors toward leveraged instruments following the May approval and launch of single-stock leveraged exchange-traded funds, with assets under management for these products crossing $50 billion in July.

After “hefty losses,” South Korea’s policymakers have apologized for the decision and called for a renewed ban on retail trading in these leveraged ETFs, Cointelegraph added. It also noted that while SK Hynix posted record operating profit of 60.54 trillion won, up 557% year over year, the figure missed analyst consensus of 64 trillion won.

Latest closeKospi 6,755.75 ▲1.0%

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