AI narrative is switching from "infinite imagination" to "calculated returns," and Micron's earnings report will be the ultimate judge of whether this crash is a technical sell-off or a turning point in the bull market.

Written by: The Meaning Beyond Research

Source: Wall Street Watch

June 23, Seoul, South Korea.

At 2 PM, the Korean Exchange triggered a circuit breaker. After the KOSPI index plunged 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 depict the severity of this sell-off—

Samsung Electronics fell 12.31%, SK Hynix dropped 12.47%. These two companies alone contributed approximately 71% of KOSPI's daily decline. The Nikkei 225 fell 3.55%, losing the 70000 points mark. Nasdaq 100 futures fell 3.01%, and the Philadelphia Semiconductor Index closed down 7.7%. TSMC dropped over 5% before the market opened, 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: the three-times long Korea ETF plummeted 32% in a single day, and the three-times long semiconductor ETF dropped 17%.

The KOSPI's single-day drop ranks among the top five in the history of the Korean stock market. The last similar decline occurred in October 2008.

However, 2008 was marked by a clearly visible great recession. In 2026, the global economy is growing, the AI revolution is in full swing, and the KOSPI has remained among the top gainers of major global indices until this crash.

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

Trigger Point: The Resonance of Three Signals

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

The first: SK Hynix slows down HBM4 capacity expansion.

On the morning of June 23, South Korean media reported that SK Hynix was slowing down HBM4 capacity expansion and shifting its focus to general DRAM. HBM (High Bandwidth Memory) is a core component for AI chips, and SK Hynix and Samsung are the only two mass production suppliers in the world. The market consensus on HBM4's supply-demand relationship was nearly overwhelmingly pointing to "short supply."

HBM4 is one of the most definite bottlenecks in the global AI infrastructure race. Anytime the market begins to doubt the tightness of this bottleneck, the result is often a repricing of faith.

The second: profit-taking prior to Micron's earnings report.

Micron Technology is set to announce its quarterly earnings report on Wednesday (June 25). Following prior news of Micron's full-stack collaboration with Anthropic, its stock price had reached a historical high, with a cumulative increase of over 300% for the year. Goldman Sachs' trading department pointed out, "Investor expectations have been pulled to extremely high levels, creating conditions for pre-emptive profit-taking before the earnings report."

In a market driven by "expectations," position adjustments before the earnings report can be more devastating than the report itself.

The third: Korean regulators issued warnings regarding leveraged ETFs.

On June 22 (one day before the crash), the chairman of the Financial Supervisory Service of Korea, Lee Chan-jin, publicly expressed his "regret" for not preventing the issuance of a single leveraged ETF tracking Samsung Electronics and SK Hynix, stating that it "has almost no other effect besides allowing brokerages to profit at the expense of retail investors."

This timing was almost cruelly precise. When regulators publicly acknowledge structural issues in the market, it directly triggers panic selling.

Amplifier: The "Three Leverage" of the Korean Market

The reason for the destructive power of these three combined forces is that it strikes at a market structure that has already been deeply bound by leverage.

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

Amplifier one: Retail investor financing reaches historical highs.

Korean retail investors have long been known for their "daring bets." However, the current round of leverage has reached unprecedented heights. The financing balance of Korean retail investors had continuously climbed to record levels before the crash. Goldman Sachs' analysis report after the crash candidly stated, "The rise of the Korean stock market increasingly relies on retail investors as marginal buyers."

In a leverage cycle where the more it rises, the more it buys, once marginal buyers turn away, it triggers a reverse selling trend of "the more it falls, the more it sells."

Amplifier two: Single leveraged ETFs balloon to $30 billion.

This is a unique problem in the Korean market. Sixteen domestic single leveraged ETFs have asset sizes totaling about $9.1 billion, while CSOP has issued a double long SK Hynix and Samsung ETF on the Hong Kong Stock Exchange with a combined size of about $21 billion—totaling over $30 billion. In the domestic products, 92% of the holdings come from retail investors.

Single leveraged ETFs have a fatal structural feature: they require daily rebalancing. When the price of the underlying stocks falls, the ETFs need to sell more stocks to maintain the leverage ratio, which creates self-reinforcing selling pressure during a downturn. When regulators hint at possible restrictions on such products, the first to be sold off is precisely these products themselves—and their underlying assets.

The Financial Supervisory Service of Korea estimates that the trading commission scale for single leveraged products is between $3 billion and $6.4 billion. The measures being considered include: increasing retail investor thresholds, strengthening trader education tests, implementing a scale cap for single ETFs, restricting new product issuance, and strengthening the pause mechanism when prices deviate from net values.

Regardless of whether these measures are implemented, the signals they convey are already clear enough: the regulatory body believes that a considerable part of this round of rise has deviated from rational pricing based on fundamentals.

Amplifier three: The National Pension unexpectedly becomes a seller.

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

The NPS's operations are essentially rebalancing: the sustained rise of KOSPI had pushed domestic stock positions above 30%, exceeding the approximate 28.8% cap.

However, the key point is that, in a market that has been highly dependent on marginal funds from retail investors, the NPS, which was originally a core stabilizing buyer, suddenly turned from a buyer into a seller, meaning there was no one left in the market to "catch" the sell orders.

In the words of Goldman Sachs analysts: "The so-called theoretical constraints have turned into observable liquid realities."

Bubble Debate: When it Comes, How Deep Will it Fall

Following the crash, a debate regarding the "AI bubble" naturally emerged.

Chris Cha, head of high-touch trading at Goldman Sachs Korea, provided a clear qualitative assessment in a client report on the day of the crash—liquidity exhaustion: "I still maintain a constructive view on the storage cycle and continue to believe that KOSPI is undervalued. However, this round of rise increasingly relies on technically sensitive buyers, making it more susceptible to interruptions in liquidity momentum."

In other words: the mid-to-long-term logic hasn’t changed, but the short-term market structure has weakened to a critical point.

Bank of America’s quantitative signal: Nasdaq is approaching the bubble range.

In the days leading up to the crash, Bank of America’s strategist team released a report indicating that its bubble risk indicator showed the Nasdaq 100 index nearing 0.8, a level that "usually indicates an increase in short-term tail risks." Tech stocks and semiconductor stocks have already "shown extreme bubble-like price trends."

However, Bank of America also provided an interesting judgment: "The AI bubble may take years to fully form. History suggests that this indicator can signal periodic pullbacks rather than ending a trend."

Li Bei's warning: Trigger conditions have emerged.

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 AI bubble's collapse have emerged."

Three voices point to three time dimensions: Li Bei speaks of "now," Goldman Sachs advises "not to panic," and Bank of America indicates "there’s more to rise but first it must fall."

It is noteworthy that in a market deeply bound by leveraged ETFs, retail investor financing, and momentum trading, a "periodic pullback" and a "bubble collapse" may be difficult to distinguish in price performance. A 10% daily drop has already triggered a circuit breaker. What would happen if there’s another 10% drop?

Mirror Image: SpaceX Telling the Same Story

If you shift your gaze from Seoul to New York, a mirror image appears.

SpaceX's stock price plunged consecutively for three days post-IPO—falling over 16% on June 19, dropping another 5% on June 22, and continuing to decline on June 23—resulting in a market value evaporation of about $600 billion, falling below the opening price of $150, around $147.

What’s more intriguing is that alongside the stock price crash, SpaceX announced its first bond issuance—raising $20 billion for AI infrastructure construction. Typically, a company issues bonds when it faces financial difficulties. However, SpaceX's situation is the opposite: its AI capital expenditure story requires a continuous influx of ammunition, while the falling stock price is shutting the door on equity financing—the debt is its last option to maintain the narrative.

The resonance between SpaceX and the Korean semiconductor sector reveals a common issue: the capital market narrative surrounding AI is shifting from the stage of "infinite imagination" to "calculated returns."

When investors begin to crunch numbers—how much has the HBM4 expansion slowed? By how much have GPU leasing prices dropped? When will AI revenues cover capital expenditures?—the pricing logic in the market changes.

Aftermath: Micron's Judgment

After the crash, all eyes turned to one date: June 25.

The Micron earnings report—this is the most direct "judgment" facing tech stocks after this round of crash.

Bloomberg quoted comments from Pepperstone strategist Dilin Wu: "Micron's earnings report this week is the real test. A strong performance would directly convey favorable signals for Samsung and Hynix—this number will tell you whether the underlying logic of AI hardware trading still holds."

Logically, there are two possibilities:

Scenario one: Micron exceeds expectations. If Micron delivers a strong earnings report and provides an optimistic forecast, the current round of sell-off may be quickly corrected—as positions exited due to uncertainty will be replenished when certainty materializes.

Scenario two: Micron falls short of expectations. If Micron's forecast disappoints, the current round of sell-off will obtain validation on a fundamental level—the qualitative liquidity issue will be overturned, converting to a collapse on the faith level.

In scenario one, the KOSPI circuit breaker will be marked 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 of the Asian markets on Thursday morning.

Conclusion

The crash on June 23 can be technically explained as the result of a single announcement regarding SK Hynix's HBM4 + the structural fragility of leveraged ETFs + the unexpected selling from the NPS's rebalancing + the risk-averse behavior prior to Micron's earnings report, a combination of four factors resonating within 24 hours.

However, this is only the technical explanation.

The deeper issue is that when the AI bull market reaches such a position—valuations at historical extremes, the driving force of the rise shifting from institutions to retail, and the trading structure heavily bound by leveraged products—while inflation and interest rate hike expectations are raising the risk-free rate—then a structural break is almost a matter of time.

The KOSPI circuit breaker is a mirror.

The mirror reflects that when all market participants are leveraging bets on the same narrative, the reverse correction of that narrative—no matter how fast or deep—should not be viewed as an accident.

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"?