Behind the global AI rally, leverage risks are mounting. U.S. margin debt has reached a historic $1.4 trillion, and leveraged ETF assets have doubled to $220 billion in two months. South Korea's KOSPI experienced violent swings and triggered a circuit breaker due to high leverage and concentrated positions. Barclays and Morgan Stanley warn that leveraged derivatives could trigger a negative deleveraging spiral, amplifying market downturns.
The global AI bull market is surging, but leverage risks are building beneath the surface. In the U.S., margin debt has hit a record $1.4 trillion, while leveraged ETF AUM doubled to $220 billion in just two months. Meanwhile, South Korea's KOSPI index saw extreme volatility and a circuit breaker triggered by high leverage and concentrated holdings, exposing the fragility of leveraged capital.
Barclays and Morgan Stanley have issued warnings that the current scale of leveraged derivatives could spark a negative deleveraging spiral if the market turns, potentially amplifying losses. Investors should remain vigilant about the hidden financial risks behind the AI rally.
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