Driven by surging AI storage demand, the CSOP 2x Long SK Hynix ETF listed in Hong Kong has gained a staggering 1,061.92% year-to-date as of June 22, 2026. Its net asset value has exploded from approximately HK$24 million (US$3 million) at its October 2025 launch to US$14.418 billion, a 22-fold increase from the end of last year. However, industry insiders caution that leveraged ETFs amplify losses in both directions, and retail investors should exercise extreme caution.
Storage Chip Rally Fuels Leveraged ETF Surge
The global semiconductor rally shows no signs of slowing. South Korean memory chip giant SK Hynix’s stock price has been climbing steadily. On June 22, its intraday market cap briefly surpassed that of Samsung Electronics, taking the top spot in the Korean stock market. Earlier, SK Hynix announced it had sent 12-layer HBM4E samples to a core customer. The new-generation high-performance DRAM tailored for AI workloads boasts a maximum pin speed of 16 Gbps and more than 20% improvement in energy efficiency. Zhou Jingxiang, fund manager at Noah Research Preferred, told Shanghai Securities News that the core driver of this memory upcycle is the explosion in SSD storage demand from AI inference computing power, and industry sentiment is expected to remain upbeat throughout the year.
Leveraged ETFs tracking major chip players such as SK Hynix and Samsung Electronics have been on an epic run. The CSOP 2x Long SK Hynix ETF jumped 16.55% in a single day on June 22, bringing its year-to-date return to over 1,000%. Its asset size swelled from US$636 million at the end of 2025 to US$14.418 billion as of June 18, a 21.7-fold increase. The CSOP 2x Long Samsung Electronics ETF also saw hefty inflows, reaching US$4.4 billion in size after a 215.96% surge in May and another more than 50% growth in June.
Retail Dominance, Institutional Absence
A closer look at the fund flows reveals a highly retail-dominated market, with institutions largely missing. A veteran foreign fund manager commented that the vast majority of institutions do not allocate to leveraged ETFs; only a handful of hedge funds use them as short-term swing trading tools. Pension funds and other long-term allocators seek stable, long-term returns that are incompatible with the high volatility and risk of leveraged products. Individual investors are the core buyer base.
Caution Against Latent Volatility Risks
Leveraged ETFs are classic “double-edged swords” that amplify both gains and losses. As the global semiconductor sector faces increasing bull-bear divergence amid a tangle of geopolitical, industrial, and valuation uncertainties, risks are escalating. The Korean Financial Supervisory Service reported on June 18 that during the period from May 27 to June 12, Samsung Electronics' underlying stock experienced a maximum drawdown of 18.0%, while its 2x leveraged ETF suffered a maximum drawdown of 35.9%. Similarly, SK Hynix saw a 19.1% correction in the underlying stock, while its 2x leveraged ETF shed 38%. Individual stocks in Korea are subject to ±30% daily price limits, implying a maximum one-day theoretical loss of 60% for a 2x leveraged product.
Under extreme conditions, leveraged ETFs can even decouple completely from their underlying assets. In early June, a 2x leveraged ETF tracking SK Hynix showed a bizarre two-day divergence: on June 8, when SK Hynix's stock fell nearly 8%, the ETF surged almost 50%; the next day, as the underlying rose over 13%, the ETF crashed 40% intraday. The product manager, Korea Investment Management, explained that the anomaly stemmed from market-making liquidity shortages. During the closing call auction, market makers have no obligation to quote, and a flood of market orders pushed the fund price into a large premium. When liquidity normalized the next day, the price snapped back to fair value, inflicting heavy losses on those who bought at the inflated levels.
A Shanghai-based fund analyst systematically outlined multiple risks of leveraged ETFs: First, because the product uses a daily reset of leverage, high volatility can cause decay over time. Even if the underlying stock returns to its previous high, the fund’s net asset value may still suffer permanent losses. Second, the leverage magnifies both gains and losses. The semiconductor sector is currently trading at historically high valuations. Should a collective pullback occur, leveraged products would experience far deeper drawdowns than the underlying. If the product size continues to balloon and then faces concentrated redemptions, a liquidity spiral could further amplify price declines. Third, the trading volume of leveraged products in the Korean market has already approached that of the underlying chip giants. Massive retail one-way bets create a positive feedback loop, driving up buying in rallies and accelerating sell-offs when stops are triggered, significantly increasing market fragility.
Uncertainties at the industry chain level also amplify the volatility risks of leveraged products. Sheng Jin, Investment Portfolio Director at Value Partners, analyzed that the semiconductor supply chain is long and globally interdependent, with a complex mix of valuation drivers. Any single variable – such as a quarterly earnings miss or a shift in global industrial policy – can quickly break the existing valuation logic and trigger violent sector swings, with high-leverage products amplifying the shocks.
Analysts remind that with semiconductor valuations near historical highs and bull-bear divergence widening, individual investors should approach leveraged products with the utmost caution and avoid chasing rallies blindly.