South Korea’s KOSPI Composite Index has gained or lost between 2% and 10% in 25 of its last 37 trading sessions, whipsawed by index concentration and retail money in leveraged ETFs. The Motley Fool argues the S&P 500 and Nasdaq Composite carry the same two risk factors, with an added tilt toward AI.
Two forces are whipsawing South Korea’s stock market, and both sit inside Wall Street’s major indexes: concentration and leveraged exchange-traded funds. From the beginning of June through early trading on July 23, the KOSPI Composite Index gained or lost between 2% and 10% in 25 of 37 trading sessions.
Samsung Electronics and SK Hynix drive most of that movement. The two companies account for more than 50% of the KOSPI’s market-cap-weighted index, dwarfing its more than 800 other components. Their shares have skyrocketed 248% and 613% over the trailing year respectively, driven by demand for high-bandwidth memory, which is stacked with graphics processing units in AI-accelerated data centers.
Retail positioning amplifies the swings. Analysts at JPMorgan Chase note that net assets of Korean leveraged ETFs reached approximately $50 billion at the end of June, or four times that of the U.S. relative to market size. Several deleveraging events in recent weeks have contributed to daily swings of 4% or greater in the index.
The S&P 500 and Nasdaq-100 concentrate the same way
American benchmarks are less diversified than their breadth suggests. The 14 largest S&P 500 components account for almost 45% of the index’s weighting. The weighting is even more extreme in the 101-company Nasdaq-100, where the top 10 companies by market cap make up over 67%.
That weighting also concentrates in a single trend. All 10 of the largest Nasdaq-100 companies are heavily reliant on AI for future growth, and in the S&P 500 the nine largest companies, and 10 of the top 14, have made AI foundational to their operations.
Leveraged and inverse funds were 31% of U.S. ETF launches
Riskier vehicles are spreading among U.S. investors as well. Leveraged and inverse ETFs made up 31% of all U.S.-listed ETF launches in the first half of 2026, up from 22% through all of 2025, according to Morningstar. Leveraged ETFs hold about $200 billion in assets under management, providing an estimated $500 billion in notional exposure at 2.5 times leverage.
Options desks show the same shift. Data from Citadel Securities show zero-day-to-expiration options now account for 48% of retail investors’ options volume, more than three times the level observed in early 2022.
According to The Motley Fool, the puzzle pieces for an AI bubble-bursting event are very much in place, and what is happening in the KOSPI may foreshadow what comes next in Wall Street’s major stock indexes.
Source: The Motley Fool
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