The AI-driven super-bull market that has swept across global equities appears to be transitioning from a phase driven by fundamental expansion into a critical stage of systemic stress testing. This new phase is characterized by a confluence of factors: macroeconomic currency pressures related to the AI supply chain in countries like Japan and South Korea, a highly leveraged market structure, and record levels of crowded positioning.
In South Korea, the Deputy Minister of Finance stated on Thursday that Seoul is maintaining close communication with Japan and other key allies regarding the continued and severe depreciation of the Korean won in the foreign exchange market. He warned that the won has become significantly misaligned relative to the country's economic fundamentals. This warning comes as the Korean market presents a stark dichotomy: a stock market rally fueled by AI semiconductors, with the benchmark KOSPI index having surged dramatically this year, at one point gaining over 100%. Meanwhile, the Korean won has depreciated by 7.4% against the U.S. dollar this year, hovering near a 17-year low. This extreme state of simultaneous, sharp depreciation for both the won and the Japanese yen, with the yen at a near 40-year low, is casting an increasingly pessimistic shadow over the long-term outlook for Japanese and Korean stock markets.
Compounding these concerns, recent market reports that Meta Platforms, Inc. (NASDAQ: META) is preparing to lease or sell idle AI computing infrastructure have sparked fears of an AI computing power oversupply. This has dealt a blow to the AI infrastructure investment theme, further signaling that the global AI bull market is entering a precarious phase. In Japan, a similar extreme "divergence between stocks and currency" is evident. While the Nikkei 225 index has soared approximately 40% this year, repeatedly setting new all-time highs, the yen has plunged to its weakest level since 1986. The Japanese stock market has become "completely disconnected" from the government bond market and the yen exchange rate, with sustained large-scale foreign capital inflows powering the stock rally while bonds and the currency languish.
Semiconductor and AI infrastructure-related stocks with significant weight in the Nikkei 225, such as Kioxia, SoftBank, Socionext, Advantest, Tokyo Electron, Lasertec, Disco, Murata, and Taiyo Yuden, have been the primary narrative driving this foreign investment and a core contributor to the index's record-breaking gains. There is no doubt that the demand for AI computing infrastructure—spanning DRAM, NAND, HBM memory chips, 2.5D/3D advanced packaging, data center optical interconnects, data center CPUs, and high-performance Ethernet and power infrastructure—remains robust and continues to expand.
However, from a macroeconomic and trader's perspective, the accelerating depreciation of the Korean won and Japanese yen indicates that Asia's AI export supply chain is under pressure from dollar liquidity and imported inflation. The massive expansion of leveraged ETFs suggests that marginal buying is increasingly reliant on high leverage, daily rebalancing, and trend-following strategies. The AI semiconductor trade theme has become more leveraged and crowded. Concurrently, rising pricing pressures from consumer electronics leaders like Apple, coupled with the Philadelphia Semiconductor Index's sharp intraday declines and repeated monthly volatility exceeding 5%, highlight that the AI computing supply chain has entered a phase of high volatility, extreme leverage, crowded bullish positioning, and intense pressure to meet lofty expectations. This environment is why some institutional investors have recently begun to emphasize bearish narratives, suggesting the AI semiconductor trading frenzy has peaked or that an AI bubble is gradually deflating.
The global AI super-bull market is likely accelerating into a stage where, despite strong underlying demand for computing power, financial market structures are more fragile, currency defenses for the AI supply chain are more vulnerable, and volatility transmission is faster. From this point forward, the key to market success may not depend solely on upward revisions to chip company earnings. It will also hinge on whether the U.S. dollar continues to strengthen, whether Asian central banks intervene in currency markets, and whether leveraged AI investment products trigger feedback loops of passive selling.
The Korean won and Japanese yen are depreciating in tandem, testing Asia's currency defenses once more. With the won near a 17-year low, South Korea is coordinating with Japan on foreign exchange matters. Huh Chang, one of South Korea's two Vice Ministers of Finance responsible for all foreign exchange-related affairs, stated at a press conference that Seoul is working very closely with Japan and other relevant nations, exchanging information intensively. He described the won as being in a "misaligned state" compared to economic fundamentals. Just days before the historic shift to a 24-hour trading cycle for the USD/KRW pair starting next Monday, Huh declined to elaborate on potential government intervention but added that authorities are prepared to deploy aggressive measures to stabilize the market if insufficient liquidity leads to excessive price swings.
Huh's warning coincides with the yen trading near a 40-year low, amid reports that Japanese finance ministry officials are adopting increasingly aggressive, non-targeted strategies to squeeze institutional speculators heavily shorting the battered currency. The persistent weakness of the won is a major headache for Seoul, with its 7.4% decline against the dollar this year standing in stark contrast to the local stock market's roughly 85% surge. Moon Ji-sung, another Vice Minister of Finance who also attended the press conference, noted that the government under President Lee has maintained close communication channels with Tokyo and Washington on forex matters. Moon added that with the extension of onshore trading hours, the government expects foreign exchange trading volume from the offshore NDF market to shift to the onshore spot market, and measures are being studied to encourage this significant shift.
The synchronized depreciation of the won and yen, coupled with the runaway expansion of leveraged ETFs in South Korea, signifies that the AI super-bull market is facing a major stress test. These three converging trends—extreme currency depreciation, a historic divergence between stock indexes and exchange rates, and record levels of crowded, highly leveraged bullish positioning in Korean equities—collectively narrate a macro story. The AI bull run is transitioning from an industry fundamentals-driven upcycle into a critical phase where extreme currency volatility and vulnerability, a record-high leveraged capital structure, and overly concentrated trading in a single AI super-leader collectively amplify market swings.
While Asia's AI export chain benefits from capital expenditure on AI infrastructure—including AI GPUs/ASICs/TPUs, HBM/DRAM/NAND memory, advanced packaging, semiconductor materials and equipment, and data center CPUs—the currency side is under unprecedented pressure. This pressure stems from a strong U.S. dollar, expectations of Federal Reserve rate hikes, energy import costs, and capital flows toward U.S. AI assets.
The core implication of statistics showing that a "2x SK Hynix ETF" can account for up to two-thirds of Samsung Electronics Co., Ltd.'s (KRX: SSNLF) total stock trading volume on volatile days, alongside a global leveraged ETF market worth $270 billion, is clear. The AI computing trade theme has evolved from "buying earnings revisions" to "buying momentum, leverage, and rebalancing flows." Should prices reverse, mechanical deleveraging could rapidly transmit a single stock's decline to the KOSPI, the broader Asian AI semiconductor supply chain, the Nasdaq, and global tech stocks. More dangerously, core AI assets like SK Hynix are no longer just "fundamental stocks." They have been transformed by leveraged ETFs, swaps, options, market maker hedging, and index weightings into amplifiers of global AI risk appetite.
For instance, the CSOP SK Hynix Daily 2x product aims to deliver twice the daily performance of SK Hynix. Its official documents indicate it may use up to 49% of its net asset value in options to gain leveraged exposure, with swap and option costs potentially reaching 15% to 40% of NAV annually. Media reports have shown this product's assets under management once exceeded $16.8 billion, making it one of Hong Kong's largest ETFs and highlighting the extreme fervor for leveraged bets on AI semiconductors. For the global AI super-bull market, this is not a signal of broken industrial logic, but an alarm bell for fragile market structures.
From the perspective of actual AI data center engineering and the AI computing industry, demand for components like HBM, AI server clusters, data center optical interconnects, advanced packaging, cloud AI inference resources, and data center power remains very real and growing. However, from a macro trading perspective, South Korea's upcoming move to 24-hour USD/KRW trading, while enhancing market openness, could also amplify exchange rate volatility by exposing liquidity gaps during weaker trading sessions. The frenzy for leveraged retail investments and single-stock chip-related leveraged ETFs in Korea has already drawn repeated attention from regulators and the market.
The decisive factors for the next phase of the AI super-bull market will extend beyond whether companies like NVIDIA (NASDAQ: NVDA), SK Hynix, and Taiwan Semiconductor Manufacturing (NYSE: TSM) can continue to raise their earnings outlooks. The outcome will also depend on whether USD/KRW and USD/JPY exchange rates trigger large-scale policy intervention, whether leveraged ETF rebalancing shifts from being a tailwind of buying to a headwind of selling, and whether capital flows transition from trading "AI fundamentals" to trading the potential bursting of an "AI leverage and record-crowded positioning bubble."
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