The Sword Over AI Bull Market: U.S. Margin Debt Hits Record $1.4T, Korea Circuit Breaker Signals Deleveraging Risk
Behind the euphoria of the global AI bull market, leverage risks are building. New data reveals that U.S. margin debt has surged to a record $1.4 trillion, while leveraged ETF assets have doubled to $220 billion in just two months. Meanwhile, South Korea's KOSPI index experienced sharp volatility and triggered a circuit breaker, attributed to high leverage and concentrated positions—a stark warning for investors.
Major investment banks including Barclays and Morgan Stanley have issued alerts, cautioning that the elevated leverage in derivatives could set off a negative deleveraging spiral. If the market turns, it would amplify losses dramatically. Although AI themes continue to drive the rally, the fragility introduced by excessive leverage cannot be ignored. The circuit breaker in Korea demonstrates how extreme leverage and concentrated bets can instantly ignite systemic risk. Investors should closely monitor trends in U.S. margin debt and leveraged ETFs, and prepare for potential deleveraging pressure that could spill over into broader asset classes.