The global AI bull market hides escalating leverage risks: US margin debt reaches $1.4 trillion (all-time high), leveraged ETF assets double to $220 billion in two months; South Korea's KOSPI triggered a circuit breaker due to high leverage and concentrated holdings. Barclays and Morgan Stanley warn that leveraged derivatives could cause a negative spiral deleveraging, amplifying market declines.
Behind the global AI bull run, an ever-growing pile of leverage has become a sword of Damocles. US margin debt has surged to an all-time high of $1.4 trillion, while assets under management in AI-themed leveraged ETFs have doubled to $220 billion in just two months — a rapid buildup that is amplifying fragility beneath the surface.
South Korea's KOSPI index has already flashed a warning. Driven by high leverage and concentrated positions, the index experienced a violent swing that triggered its circuit breaker, exposing the risk of cascading liquidations under extreme conditions. Analysts at Barclays and Morgan Stanley cautioned that if AI bellwethers suffer a correction, the massive leveraged derivatives could spark a negative feedback loop of deleveraging, magnifying overall market losses — echoing the Archegos family office blow-up in 2021.
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