On June 23, the global AI trading sector experienced a concentrated risk-off event. The sell-off started in the Korean market, with AI storage leaders such as Samsung Electronics and SK Hynix plunging, causing the KOSPI to nearly drop 10%. Subsequently, the pressure spread to the U.S. stock market, with the Nasdaq 100 index falling 3.29%, the Philadelphia Semiconductor Index dropping nearly 8%, and the S&P 500 index declining 1.44%.

From the perspective of institutions, this decline was not easily attributable to a single negative catalyst. It appeared more like several pressure points colliding simultaneously: local leverage and MSCI disappointment in the Korean market, overcrowded U.S. semiconductor trades, AI model discounting and the rise of open-source alternatives challenging closed-source model pricing power, and investors reassessing the ROI on AI capital expenditure.

The explanation provided by Goldman Sachs US Trading Desk was more tilted towards the trading aspect. Ariana Contessa and Mike Washington from Goldman Sachs & Co. LLC FICC & Equities wrote in the June 24 MarketFeed that the overnight roughly 10% drop in the KOSPI transmitted to the U.S. session, with the semiconductor and storage sectors becoming major selling pressures in the U.S. stock market. Foreign investors in the Korean market sold over $2.5 billion worth of stocks, SK Hynix traded volume reached around $26 billion, setting a historical high in nominal turnover; a 2x leveraged Hynix product traded about $3.5 billion, closing down 24%.

This indicates that the market was not just reacting to fundamental changes but also de-risking leveraged products. Goldman Sachs also outlined several additional pressures, including recent financing and potential dilution concerns, the funding source issue for mega-cap tech stocks, individual company events, pre-Micron earnings hedging, and the end-of-month rebalancing pressure from U.S. pensions potentially selling about $40 billion in U.S. stocks. However, the Goldman Sachs trading desk believed this was not a panic-driven sell-off. Asset management and hedge fund flows showed clear selling bias, focusing on tech and macro products, but the selling pressure was not overwhelming, with ETF trading volume spiking to 36% at the open before retreating, overall still considered "orderly."

The pressure from the Korean market itself cannot be ignored. Chris Cha and colleagues from the Goldman Sachs Seoul Branch FICC & Equities commented on the Korean market opening, stating that MSCI did not include Korea on the watchlist for developed markets, causing previous bets on Korea's upgrade and passive fund inflows to fall through. Reasons given by MSCI included the lack of a fully deliverable offshore Korean won market and operational friction in short selling settlement.

Meanwhile, Korean regulators are considering protective measures for leveraged ETFs, including raising minimum margins, enhancing investor education, increasing trading costs, and even temporarily restricting trading to rein in excessive concentration and volatility. Retail investors "borrowing to invest" have also become a potential pressure point.

Goldman Sachs stated that non-mortgage loans, such as credit loans, of the five major commercial banks in South Korea have exceeded regulatory targets. As of May, the balance of such loans increased by 1.1583 trillion Korean won, while the banks were originally supposed to reduce it by 125.3 billion Korean won compared to the end of last year as agreed with the regulatory authorities. As a result, the market expects that banks may tighten loan standards in the second half of the year. In other words, the sharp decline of the KOSPI is not only due to AI sentiment weakening but also the result of dashed upgrade expectations, foreign institutional automatic selling, leveraged ETF cooling, and retail investor financing tightening.