Well, so where Korea goes, AI goes. TME with more.
Cracks in memory
It’s getting harder to dismiss technical glitches in the AI memory complex as stock-specific. From SK Hynix and SanDisk to Micron, Kioxia and Samsung, momentum is losing momentum at the same time, with several leaders breaking key trends and short-term support. Whether it’s just a healthy reset or the beginning of a broader relaxation, the synergistic nature of vulnerability deserves attention.
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SNDK
SNDK is down about 22% from the all-time high it hit just a few sessions ago. The stock is now moving below both the uptrend and the 21-day moving average. The next major support comes around the very low 50-day moving average near $1,600.
Momentum has deteriorated sharply, with the RSI now at its highest oversold level since late March.
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Source: LSEG Workspace
KIOXIA
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The momentum was broken overnight. The stock decisively broke below both the steep trendline and the 21-day moving average. The 50-day moving average remains well below current prices, while the RSI has reached oversold levels in just a matter of sessions.
Source: LSEG Workspace
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MU
MU has broken below the tight trendline and 21-day moving average. The RSI has been oversold almost overnight, although the next major technical reference, the 50-day moving average, is still quite low.
MU has never reached the heights of euphoria seen in SNDK or Kioxia, today’s breakdown is notable despite the stock entering it from a much smaller starting point.
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Source: LSEG Workspace
SK Hanks
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Momentum has quickly soured for the poster child of Asian AI mania. The stock has broken below both the trendline and the 21-day moving average, while the RSI is oversold. The next meaningful technical support is the very low 50-day moving average.
Source: LSEG Workspace
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Samsung
The stock broke below the 21-day moving average yesterday and followed it today by taking out both the short-term trend line and the 50-day moving average. Unlike many of its AI peers, it never truly went parabolic, but the speed has clearly deteriorated. The RSI is now at its highest oversold level in months.
When laggards start to break even, it’s becoming harder to argue that weakness is stock-specific.
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Source: LSEG Workspace
Memory
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For some perspective: the above name and performance YTD (in %).
Source: LSEG Workspace
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China’s memorable moment
Apple is reportedly considering Chinese memory suppliers for products sold locally. The immediate benefit is clear: lower costs and greater supply flexibility. The big story is what the clue is all about. If Apple accepts Chinese memory suppliers, it does more than lower costs. It validates domestic rivals and could gradually reshape competitive dynamics in the world’s largest electronics market.
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All bubbles are feedback loops, and this one is no different.
The king of leverage
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Goldman highlighted one of the clearest signs of AI excitement last month: The 2x leveraged SK Hynix ETF has become the world’s largest single-stock leveraged ETF by a considerable margin. When one of the market’s most crowded trades is also one of its most leveraged, volatility has a habit of feeding on itself.
Source: GS
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Learning leverage lessons
The biggest casualties were not necessarily SK Hynix shareholders, but retail investors who chased the move through 2x leveraged ETFs. Despite stocks holding above their June lows, the combination of leverage and extreme volatility has wreaked havoc.
Investors who bought near the peak now only need to get north of 70% to get back to the flat. It’s brutal leverage math, and a painful reminder that parabolic trading rarely goes smoothly.
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Source: LSEG Workspace
Slippery trap
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Slippage comes from daily rebalancing. Leveraged ETFs target multiple daily returns, not long-term returns. As a result, price volatility gradually erodes performance through compounding effects, meaning a leveraged ETF can remain below its highs even when the underlying index fully recovers. Very few people understand this.
Source: TME
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Leverage on underlining
Korea’s technical stars stand out for outside leveraged ETFs in terms of daily trading volume, increasing the ETF’s flow capacity to amplify movements in the underlying stock.
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Source: Bloomberg
Buyer of last resort
Every bubble eventually reaches a point where retail has to keep buying because everyone else already has. BCA’s Budaghyan says Korea may be approaching that stage. Foreign capital is also leaving as the Kospi pushes to new highs, leaving the market increasingly reliant on optimism from domestic retail investors.
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Source: BCA/Authors
Theta bites.
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The KOSPI has spent months in extremely spot-up, volume-up regime, but these conditions rarely last forever. With the KOSPI VIX flirting with 100 a few days ago, exposure to the upside became unusually expensive. Once the market stops going straight up, theta takes over. Eliminating premiums, late call buyers move to exits and subsequently eliminate risks directly back to the underlying market through dealer hedging and broader de-risking.
Source: LSEG Workspace
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A combination of leverage, expensive options and retail dominance helped fuel one of Asia’s most spectacular AI rallies. If those forces now start to reverse and reinforce each other, the momentum of rest can be just as powerful as that of progress.
With Touch Meta pulling the pin on capex, the Korean break-up, Palantir’s battle with partners over business models and overcharging, and Warsh tests in the background, there’s suddenly a lot going wrong. Bubbles don’t die of old age.
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That said, if the DXY reverses, expect another leg up.
