The South Korean stock market has long been highly concentrated on leading semiconductor companies. After a significant rise in the KOSPI driven by AI-related trends in the first half of 2026, a rapid correction followed. Historical patterns indicate that its volatility is often amplified by a few heavyweight stocks and leveraged products, with previous records for sidecars and circuit breakers concentrated in years of systemic crises.

Capital is shifting from unidirectional buying of semiconductors to managing extreme volatility, motivated by the gap between AI chip demand expectations and actual profit realizations. This is manifested in leveraged ETFs amplifying intraday fluctuations and triggering chain reactions of forced liquidations, leading to a frequency of trading interruptions that surpasses that of 2008.

Similar cases can be observed in other emerging markets when technology weights are excessively high. Currently, the South Korean stock market is in a deleveraging phase following AI theme-driven trends, with control shifting towards institutions and regulatory tools that can provide liquidity and risk management.

This fundamentally represents a shift in technological substitution and capital pathways: the AI narrative has heightened concentration, while leveraged tools have escalated volatility from normal adjustments to structural shocks. The mechanism involves a few stocks dominating the index and high-leverage products creating positive feedback, amplifying rather than reflecting changes in fundamentals.

ABAB News · Law of Cognition

The higher the concentration, the more volatility resembles a crisis.
Leverage turns thematic trends into roller coasters.
The frequency of trading interruptions is a better indicator of risk than the magnitude of declines.