The global AI bull market harbors significant leverage risks. U.S. stock market margin debt has reached an all-time high of $1.4 trillion, while leveraged ETF assets under management have doubled to $220 billion in the past two months. South Korea's KOSPI index experienced sharp volatility 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 declines.
Alarming Leverage Data in U.S. Equities
Behind the global AI bull market lies a massive buildup of leverage. U.S. stock market margin debt has surged to an all-time high of $1.4 trillion, indicating investors are participating at record borrowing levels. Meanwhile, assets under management of leveraged ETFs have doubled to $220 billion in just two months. In South Korea, the KOSPI index saw violent swings and triggered a circuit breaker due to high leverage and concentrated holdings, highlighting the fragility of derivatives markets.
Institutional Warnings
Both Barclays and Morgan Stanley have warned that highly leveraged derivatives could trigger a negative deleveraging spiral — price declines force leveraged positions to unwind, pushing prices lower and creating a vicious cycle that amplifies overall market losses. Investors should remain vigilant against this potential systemic risk.
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