The AI-driven super bull market sweeping global equities appears to be transitioning from a 'fundamentals-driven expansion trade' into a systemic stress-test phase characterized by macro-fx pressures on currencies linked to AI computing supply chains—such as the Japanese yen and Korean won—alongside leveraged market structures and record-high positioning crowding.
Zhitong Finance APP learned that South Korea’s Vice Minister of Finance stated on Thursday that Seoul is maintaining close communication with Japan and other key allies regarding the persistent and sharp depreciation of the Korean won in foreign exchange markets, warning that the won has significantly deviated from underlying economic fundamentals.
The South Korean market has witnessed a stock rally driven by AI semiconductors, with the benchmark KOSPI Composite Index surging violently by over 100% year-to-date, led by two memory chip giants that together account for 50% of the index’s super-weight—$SK hynix (SKHY.US)$and$Samsung Electronics (005930.KR)$Bullish positions have become increasingly crowded and leveraged strategies ever more expansive; meanwhile, the Korean won has depreciated 7.4% against the U.S. dollar year-to-date, hovering near its lowest level in nearly 17 years. The current extreme scenario—in which both the won and the yen are depreciating sharply, with the won approaching a 17-year low and the yen hitting a 40-year trough—is fostering growing pessimism regarding the long-term outlook for Japanese and South Korean equities.
Moreover, fresh market reports indicating that Meta Platforms Inc., parent company of Facebook, is preparing to lease or sell idle AI computing infrastructure have sparked concerns about oversupply in AI compute capacity, severely undermining the AI infrastructure investment theme. The global AI-driven equity bull market appears to be transitioning from a 'fundamental expansion trade' into a phase of systemic stress testing characterized by currency-related macro pressures on AI compute supply chains (particularly in Japan and Korea), highly leveraged market structures, and record-high position crowding.
In Japan, the yen and the won have effectively become 'AI compute-chain currencies,' both exhibiting an extreme 'equity-foreign exchange divergence.' While the Nikkei 225 has surged 40% year-to-date, repeatedly setting new all-time highs, the yen has slumped to its weakest level since 1986. Japanese equities, government bond markets, and the yen have thus become 'completely decoupled'—foreign capital continues to pour in aggressively, fueling record-breaking gains in Japanese stocks, while JGBs and the yen remain under severe pressure.$Kioxia Holdings (285A.JP)$, SoftBank, $Socionext (6526.JP)$、$Advantest (6857.JP)$Tokyo Electron,$Lasertec (6920.JP)$, DISCO, Murata, $Taiyo Yuden (6976.JP)$and other heavily weighted constituents of the Nikkei 225—companies specializing in AI chips and semiconductor equipment closely tied to AI compute infrastructure—have become the central narrative driving sustained, large-scale foreign inflows into Japanese equities and represent the primary contributors to the Nikkei 225’s robust, record-setting performance.
Undoubtedly, demand for AI infrastructure—including DRAM/NAND/HBM memory chips, 2.5D/3D advanced packaging, data center optical interconnects, data center CPUs, high-performance Ethernet infrastructure, and data center power infrastructure—remains genuine and continues to expand. However, from a macro and trader perspective, accelerating depreciation of the Korean won and Japanese yen signals that Asia’s AI export chain is under pressure from U.S. dollar liquidity tightening and imported inflation, while the rapid expansion of leveraged ETFs indicates that marginal buying is increasingly reliant on high leverage, intraday rebalancing, and trend-following strategies.
The increasing leverage and crowded positioning in AI semiconductor trades, coupled with mounting pricing pressures faced by consumer electronics leaders like Apple, have contributed to heightened volatility. The Philadelphia Semiconductor Index一度 plunged 7.9% in a single day and experienced multiple intramonth swings exceeding 5%, highlighting that the AI computing supply chain linked to semiconductors has entered a phase characterized by high volatility, excessive leverage, extremely crowded bullish positions, and intense pressure to meet lofty expectations. This explains why institutional investors have recently begun emphasizing overly bearish narratives such as 'the AI semiconductor trade has peaked' or 'the AI bubble is bursting.'
The global AI-driven equity bull market is likely entering a phase where 'fundamental demand for compute capacity remains robust, but financial structures grow more crowded, currency defenses along the AI compute supply chain become more fragile, and volatility transmits faster.' At this juncture, market outcomes may hinge not only on upward revisions to chip earnings but also on whether the U.S. dollar continues to strengthen, whether Asian central banks intervene in currency markets, and whether leveraged AI investment products trigger passive selling feedback loops.
Parallel depreciation of the Korean won and Japanese yen! Asia’s currency defense lines face renewed stress as the won approaches a 17-year low, prompting coordinated communication between South Korea and Japan on foreign exchange markets.
“We have been working closely with Japan and other relevant countries and exchanging information very intensively,” Huh Chang said at a press briefing when asked whether Seoul might participate in any joint policy actions with Tokyo to stabilize currency markets. Huh Chang, one of South Korea’s two vice ministers of finance, oversees all matters related to foreign exchange. “Compared with economic fundamentals, the Korean won is currently misaligned.”
Just days before the historic shift to 24-hour trading for the USD/KRW pair takes effect next Monday, Huh declined to elaborate further on any potential foreign exchange intervention measures by the Korean government but added that authorities stand ready to deploy aggressive measures to stabilize the USD/KRW market if localized liquidity shortages cause excessive price volatility.
Huh’s warning on the won comes as the currency hovers near a 17-year low against the U.S. dollar. This follows recent media reports indicating that officials at Japan’s Ministry of Finance are shifting toward non-targeted and increasingly aggressive tactics to squeeze institutional speculators heavily shorting the battered yen. The yen is currently trading near its lowest level in nearly 40 years.
The persistent weakening of the Korean won has become a chronic headache for Seoul; the won has depreciated 7.4% against the U.S. dollar year-to-date, sharply diverging from Korea’s domestically driven stock market rally since 2025. The benchmark KOSPI index has surged approximately 85% this year, at one point exceeding a 100% gain during its peak.
Moon Ji-sung, Vice Minister of Finance, who also attended the press conference, stated that the administration led by President Lee Jae-myung has maintained close communication channels with Tokyo and Washington on foreign exchange matters.
Moon added that with the extension of onshore trading hours, the government expects foreign exchange trading volume in the offshore non-deliverable forward (NDF) market to shift toward the onshore spot market. “We are studying measures to encourage this significant shift,” Moon said in a recent interview.
The joint depreciation of the Korean won and Japanese yen, coupled with the runaway expansion of leveraged ETFs in Korea, is subjecting the AI super bull market to a major stress test.
The recent synchronized, sharp depreciation of the Korean won and Japanese yen—despite their respective equity markets soaring—combined with record-high crowded long positions and rapidly growing leverage in Korean equities, collectively signal a pivotal shift in the overarching narrative: the AI super bull market is transitioning from an 'industry fundamentals-driven upcycle' into a critical stress-testing phase characterized by extreme currency volatility and fragility, unprecedented leverage in funding structures, and overcrowded trades centered on a single AI mega-cap leader.
The Vice Minister of Finance has explicitly stated that the Korean won is 'misaligned' relative to economic fundamentals and emphasized ongoing coordination with key allies such as Japan and the United States on foreign exchange issues. The won has fallen 7.4% against the dollar year-to-date, hovering near a 17-year low, while starkly contrasting with the KOSPI’s roughly 85% surge. Meanwhile, the yen has hit its lowest level since 1986. These developments clearly illustrate that although Asia’s AI export chain continues to benefit from capital expenditure tailwinds related to AI data center infrastructure—including AI GPUs/AI ASICs/TPUs, HBM/DRAM/NAND memory, advanced packaging, semiconductor materials and equipment, and data center CPUs—it faces unprecedented pressure on the currency front due to a strong dollar, expectations of Federal Reserve rate hikes, high energy import costs, and capital outflows into U.S. AI assets.
When certain data sources indicate that trading volume of the '2x SK Hynix ETF' can account for two-thirds of total share turnover on highly volatile days—and given that global leveraged ETF assets now amount to $270 billion—the core implication is clear: the AI compute trade has evolved from 'buying earnings upgrades' to 'buying momentum, leverage, and rebalancing flows.' Should prices reverse, mechanical deleveraging would rapidly transmit sell-offs from individual stocks to the KOSPI, the broader Asian AI semiconductor supply chain, Nasdaq, and global tech equities at large.$SK Hynix (000660.KR)$total share turnover
More dangerously, AI core assets like SK Hynix are no longer just 'fundamental equities' but have been transformed into amplifiers of global AI risk appetite through leveraged ETFs, swaps, options, market-maker hedging activities, and index weighting effects. The CSOP SK Hynix Daily 2x product aims to deliver twice the daily performance of SK Hynix shares. Its official documentation states that it may allocate up to 49% of net assets to options to achieve leveraged exposure, with swap and options costs estimated at 15%–40% of the fund’s net asset value annually. Media reports previously indicated that the fund’s assets under management once exceeded USD 16.8 billion, making it one of Hong Kong’s largest ETFs—a clear sign of extreme market enthusiasm for leveraged bets on AI semiconductors.
For the AI super bull market sweeping across the globe, this is not a failure of industrial logic but rather a warning signal of market structural fragility. From the perspective of actual AI data center engineering and AI compute industry fundamentals, demand for storage components like HBM, AI server clusters, optical interconnects, advanced packaging, cloud-based AI inference resources, and data center power remains robust and continues to grow. However, from a macro-trading standpoint, Korea’s planned move toward 24-hour USD/KRW trading—while enhancing market openness—could exacerbate liquidity gaps during thin-trading hours and amplify currency volatility. Meanwhile, leveraged retail investing in Korea and the surge in single-stock, chip-related leveraged ETFs have repeatedly drawn scrutiny from both regulators and the market.
The decisive factor in the next phase of the AI super bull market is not merely$NVIDIA (NVDA.US)$, SK Hynix,$Taiwan Semiconductor (TSM.US)$Whether it can continue to deliver upward revisions to its earnings outlook will depend on whether the USD/KRW and USD/JPY exchange rates trigger large-scale policy intervention, whether leveraged ETF rebalancing shifts from tailwind-driven buying to headwind-driven selling, and whether capital flows rotate from trades based on 'AI fundamentals' toward trades predicated on 'AI leverage and a bursting bubble of record-high crowded positions.'
Editor/Deng