Original source: Wall Street Watch

June 23, Seoul, South Korea.

At 2 PM, the Korea Exchange triggered a circuit breaker. After the KOSPI index plummeted 8%, trading was paused for 20 minutes, and upon resumption, it continued to decline, ultimately closing down 9.99% at 8203.84 points.

Several numbers outline the intensity of this sell-off—

Samsung Electronics fell 12.31%, and SK Hynix fell 12.47%. These two companies alone contributed to approximately 71% of KOSPI's decline that day. The Nikkei 225 fell 3.55%, breaking below 70000 points. Nasdaq 100 futures fell 3.01%, and the Philadelphia Semiconductor Index closed down 7.7%. TSMC dropped more than 5% pre-market, Micron Technology fell over 8%, and AMD, Intel, Applied Materials, ARM, and ASML all dropped over 7%.

The collapse of leveraged ETFs was even more shocking: a three times long Korean ETF fell 32% in a single day, and a three times long semiconductor ETF plummeted 17%.

The KOSPI's one-day decline ranks in the top five in the history of the South Korean stock market. The last time a similar magnitude of decline occurred was in October 2008.

But 2008 was marked by a clearly visible major recession. In 2026, the global economy is growing, the AI revolution is in full swing, and the KOSPI has remained among the top global stock indices in terms of gains year to date—until this crash.

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

Trigger Point: Resonance of Three Signals

Looking back at the timeline, the immediate trigger of the crash was the resonance of three signals within 24 hours.

First Signal: SK Hynix slows down HBM4 expansion.

On the morning of June 23, South Korean media reported that SK Hynix is slowing down the expansion of HBM4 production and shifting focus to general DRAM. HBM (high bandwidth memory) is a core component for AI chips, with SK Hynix and Samsung being the only two mass production suppliers globally; market consensus on HBM4's supply and demand almost overwhelmingly points to a "supply shortage."

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

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

Micron Technology is scheduled to announce its quarterly earnings on Wednesday (June 25). Following news of the Micron-Anthropic full-stack collaboration, Micron's stock price had reached an all-time high, with a cumulative gain of over 300% for the year. Goldman Sachs's trading department noted that "investor expectations have been raised to an extreme, creating conditions for early profit-taking ahead of the earnings report."

In a market driven by "expectations," position adjustments before earnings often prove to be more damaging than the earnings report itself.

Third Signal: Korean regulators issue warnings on leveraged ETFs.

On June 22 (the day before the crash), the head of the Financial Supervisory Service of Korea, Lee Chan-jin, publicly stated: he "regrets" not stopping the issuance of individual leveraged ETFs tracking Samsung Electronics and SK Hynix, calling them "almost devoid of purpose other than allowing brokerages to profit at the expense of retail investors."

The timing of this statement was strikingly cruel. When regulators openly acknowledge structural issues in the market, it directly triggers panic selling.

Amplifiers: "Three Levers" in the Korean Market

The killing power of the aforementioned three forces is immense because it struck a market structure that had been deeply bound by leverage.

This round of AI bull market in Korea has three amplifiers operating simultaneously.

Amplifier One: Retail investor financing reaches historic highs.

South Korean retail investors are known for their "daring bets." However, the current leverage rate has reached unprecedented levels. The financing balance of South Korean retail investors rose to record levels before the crash, and Goldman Sachs’s post-crash analysis report bluntly stated: "The rise of the Korean stock market increasingly relies on retail investors as marginal buyers."

In a leveraged cycle where buying increases as prices rise, once marginal buyers turn, it triggers a reverse selling pressure.

Amplifier Two: Individual leveraged ETFs swell to $30 billion.

This is a unique issue in the Korean market. Sixteen individual onshore leveraged ETFs have an asset size of approximately $9.1 billion, while the two times long SK Hynix and Samsung ETFs issued by CSOP on the Hong Kong Stock Exchange have a total size of about $21 billion—together exceeding $30 billion. Moreover, among the onshore products, 92% of the holdings come from retail investors.

Individual leveraged ETFs have a fatal structural characteristic: they require daily rebalancing. When the underlying stock price falls, the ETFs must sell more stocks to maintain their leverage ratio, creating self-reinforcing selling pressure during declines. Also, when regulators hint at potential restrictions on such products, the first to be sold off are these products themselves—and their underlying assets.

The Financial Supervisory Service of Korea estimates that the trading commission scale for individual leveraged products is between $3 billion and $6.4 billion. Possible measures they are considering include: raising the threshold for retail investor participation, strengthening trader education testing, implementing a scale limit for individual ETFs, restricting new product issuance, and reinforcing halting mechanisms during price-NAV deviations.

Whether or not these measures materialize, the signal they convey is already crystal clear: regulators believe that a significant portion of this rally has diverged from rational pricing based on fundamentals.

Amplifier Three: National Pension unexpectedly becomes a seller.

The National Pension Service of Korea (NPS)—Korea's largest pension fund—net sold approximately $1 billion of KOSPI stocks within six days prior to the crash, with a total net sell of $1.5 billion in June, marking the largest monthly net sell since April 2021.

NPS's operation is essentially one of rebalancing: the continuous rise of KOSPI had pushed domestic stock positions above 30%, exceeding the approximately 28.8% cap.

However, the key is that, in a market already heavily reliant on retail marginal funds, the NPS, which was originally a core stable buyer, suddenly turned from a buyer into a seller, meaning there was no one in the market to "catch" the sell-off.

As Goldman Sachs analysts put it: "The so-called theoretical constraints have become observable liquidity realities."

Bubble Debate: When It Comes and How Deep It Falls

After the crash, a debate about the "AI bubble" naturally surfaced.

Goldman Sachs' South Korea high-contact trading head Chris Cha provided a clear qualitative insight in a client report on the day of the crash—liquidity exhaustion: "I still hold a constructive view on the storage cycle and continue to believe that the KOSPI is undervalued. However, this rally increasingly relies on technically sensitive buyers and is thus more vulnerable to interruptions in liquidity momentum."

In other words: the medium to long-term logic remains unchanged, but the short-term market structure has become fragile to a critical point.

BofA's quantitative signal: Nasdaq is nearing bubble territory.

A few days prior to the crash, BofA's strategist team released a report noting that its bubble risk indicator showed the Nasdaq 100 index was close to 0.8, a level that "usually implies increased tail risk at both ends in the short term." Tech stocks and semiconductor stocks have already "shown extreme bubble-like price movements."

However, BofA also offered an interesting judgment: "The AI bubble may take years to fully form. History shows that this indicator helps signal phase corrections rather than the end of a trend."

Li Bei's warning: triggering conditions have appeared.

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

Three voices point to three time dimensions: Li Bei speaks of "now," Goldman Sachs warns "not to panic," and BofA suggests "more increases but first a drop."

It is worth noting that in a market deeply bound by leveraged ETFs, retail financing, and momentum trading, a "phase correction" and a "bubble burst" may be difficult to distinguish in performance. A 10% daily decline has already triggered a circuit breaker. What will happen if another 10% follows?

Mirror: SpaceX Telling the Same Story

If you shift your focus from Seoul to New York, you will see a reflection.

SpaceX's stock plummeted for three consecutive days after its listing—falling over 16% on June 19, dropping about 5% again on June 22, and continuing to decline on June 23—resulting in a market cap evaporation of approximately $600 billion within three days, dipping below the opening price of $150 to about $147.

What is more intriguing is that while the stock price was crashing, SpaceX announced its first bond issuance—seeking to raise $20 billion for AI infrastructure construction. Typically, a company facing financial difficulties would issue bonds. But SpaceX's situation is quite the opposite: its AI capital expenditure narrative requires a continuous stream of ammunition, and the drop in stock price is closing the window for equity financing—debt is its last option to maintain the narrative uninterrupted.

The resonance between SpaceX and South Korean semiconductors reveals a common issue: the capital market narrative around AI themes is shifting from "infinite imagination" to a phase of "computational returns."

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

Aftermath: The Judgment of Micron

After the crash, everyone's attention turned to one date: June 25.

Micron's earnings report—this is the most direct "trial" facing tech stocks in the wake of the crash.

Bloomberg quoted comments from Pepperstone strategist Dilin Wu: "Micron's earnings report this week is the real test. A strong performance will have a positive rippling effect on Samsung and Hynix—this number will tell you whether the underlying logic of AI hardware deals still holds."

There are two logical possibilities:

Scenario One: Micron exceeds expectations. If Micron delivers a strong earnings report and provides an optimistic outlook, the current sell-off may be quickly corrected—positions that exited due to uncertainty will replenish once certainty is established.

Scenario Two: Micron falls short of expectations. If Micron's guidance disappoints, the current sell-off will gain validation from a fundamental perspective—the qualitative issue of liquidity will be dismissed, giving way to a collapse of faith.

In Scenario One, the KOSPI circuit breaker will be labeled as "a technical sell-off." In Scenario Two, it will be marked as "the turning point of the AI bull market."

The answer the market provides on Wednesday night will determine the opening direction for Asian markets on Thursday morning.

Conclusion

The crash on June 23 can be technically explained as: the single news of SK Hynix's HBM4 + the structural fragility of leveraged ETFs + the unexpected selling from NPS's rebalancing + the hedging operations ahead of Micron's earnings report, resulting from the resonance of these four factors within 24 hours.

But this is only a technical-level explanation.

The deeper question is: when the AI bull market has reached such a position—valuations at historical extremes, the upward momentum shifting from institutions to retail, trading structures deeply bound by leveraged products, while inflation and interest rate hike expectations are raising risk-free rates—then a structural break is merely a matter of time.

The KOSPI circuit breaker is a mirror.

The mirror reflects: when all market participants are leveraging bets on the same narrative, the reverse correction of that narrative—whether fast or deep—should not be seen as unexpected.

For investors, after Micron's earnings report, there is only one question: how much of a drawdown are you willing to accept to answer "hold on"?

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