Millions of South Koreans bought into the country's biggest stock rally in history. Many of them borrowed money to do it.
The KOSPI index doubled in the first six months of 2026, driven almost entirely by surging demand for memory chips from Samsung Electronics and SK Hynix, which together account for more than half the index's weight. The index cleared 5,000 points in January, 8,000 in May, and peaked above 9,385 on June 19.
By July 30, most of those gains were gone. This week alone, the index dropped nearly 6% on Wednesday after a 1.55% decline the day before.
A Rally Built on Two Stocks
The math here is stark. An index where two chipmakers control more than half the weight isn't really tracking a diversified economy, it's tracking two companies' exposure to AI chip demand.
That concentration cuts both ways. It made the rally faster and bigger than a broader market could have produced. It also meant a slowdown in AI-driven chip demand, or even just a cooling in investor enthusiasm around it, could take down the entire index at once.
How Leverage Made It Worse
Retail investors didn't just buy shares. They borrowed to buy more of them.
Margin loans funding stock purchases hit 38.6 trillion won, about $27.6 billion, at their June peak. By the end of July, that figure had fallen to 28.9 trillion won as brokerages forcibly liquidated the holdings of investors who couldn't cover their losses.
Regulators made leverage easier to access right as the market was topping out. Eighteen exchange-traded funds tracking double the daily movement of Samsung and SK Hynix shares listed on May 27, just three weeks before the KOSPI's peak. Authorities didn't tighten cash requirements for trading them until July 31, after most of the damage was done.
The Political Fallout
President Lee Jae Myung campaigned on lifting the KOSPI to 5,000 points and encouraging ordinary citizens to invest. His approval rating has now fallen for five straight weeks, hitting 43% in mid-August, the lowest of his presidency.
"Young people who invested trusting the government's intent were caught in a leverage trap the government itself laid," said Cho Kuk, a former justice minister who now leads a rival political party.
Not Everyone Agrees Who's to Blame
Bora Kim, head of Asia at Leverage Shares, pushed back on the idea that naive retail investors got swept up in an unfamiliar AI frenzy.
"Korean investors in their 30s and 50s, already running concentrated U.S. tech bets, have long been the core buyers in this market," Kim said. What changed, she argued, was that a leveraged product built around stocks already sitting in nearly every Korean portfolio felt familiar enough to obscure how much risk investors were actually taking on.
Eun-bi, a civil servant who put much of her savings into SK Hynix shares and a U.S. semiconductor fund to help pay for her wedding, lost enough that she's now reconsidering the ceremony. She doesn't blame the government for her losses. She does plan to diversify going forward, and convert everything back to cash before she needs it.
What This Means for Miami
The KOSPI's crash is a real-world preview of the concentration risk J.P. Morgan's Bill Eigen has been warning American investors about in AI infrastructure bets. An index, a portfolio, or a regional economy that leans too heavily on a handful of AI-adjacent stocks can post extraordinary gains right up until it doesn't.
Miami's retail investors chasing AI exposure through leveraged single-stock products domestically are running a smaller-scale version of exactly what just happened in Seoul. The lesson isn't that AI demand is fake. It's that borrowing money to bet on a narrow slice of it turns an ordinary correction into a forced liquidation.