SK Hynix leveraged ETFs tumble as chip selloff hits AI bets
SK Hynix-linked bullish funds fell nearly 19% Tuesday as memory-chip shares sank, FactSet data cited by MarketWatch show.
By Frankie Delgado · News Reporter
3 min read
SK Hynix leveraged ETFs took a sharp hit Tuesday as the selloff in semiconductor stocks deepened and investors pulled back from some of the year’s hottest AI-linked trades, according to MarketWatch.
The pain was sharpest in funds built for bullish traders seeking amplified one-day moves tied to SK Hynix’s U.S.-listed American depositary receipts. FactSet data cited by MarketWatch showed the GraniteShares 2x Long SK Hynix Daily ETF down 18.1% on Tuesday at last check, leaving it off 30.2% for the week.
The ProShares Ultra SK Hynix ETF, another fund targeting two times the daily performance of the company’s ADRs, fell 18.6% Tuesday and was down almost 29% for the week, according to the same FactSet data.
Why are SK Hynix leveraged ETFs falling?
MarketWatch reported that memory-chip shares have been caught in a broader semiconductor selloff, after earlier gains tied to demand for products used in AI infrastructure. Leveraged ETFs magnify daily moves, so a bad day for the underlying stock can turn into a much larger drop for the fund.
SK Hynix and Samsung Electronics are major forces in South Korea’s stock market, and both had climbed earlier in the year as enthusiasm around AI infrastructure boosted memory-chip makers, MarketWatch reported. SK Hynix listed its shares in the U.S. this month during that wave of AI interest.
That backdrop has shifted fast. SK Hynix’s U.S.-traded shares were down 8.98%, while its South Korean shares were down 14.65%, according to market data shown by MarketWatch. Samsung Electronics was down 13.39%.
Memory-chip selling spread beyond SK Hynix
The rout was not limited to South Korea. MarketWatch reported that U.S. memory names were also under pressure, with Micron Technology down 8.85% and Sandisk off 14.25%.
The leveraged damage was even bigger in Sandisk-linked products. The Tradr 2X Long SNDK Daily ETF dropped 28.5% Tuesday, according to FactSet data cited by MarketWatch.
South Korea-focused funds were dragged lower as memory shares weakened. The iShares MSCI South Korea ETF fell a little more than 6% Tuesday, while the Direxion Daily MSCI South Korea Bull 3X ETF dropped 17.8%, FactSet data cited by MarketWatch showed.
What is a leveraged ETF?
A leveraged ETF is designed to deliver a multiple of an asset’s daily move, such as two or three times the performance of a stock, index or other target. These funds are built for daily exposure, and volatility can make losses pile up quickly when the trade moves the wrong way.
MarketWatch noted that the market for leveraged ETFs tied to single stocks, indexes and other assets has grown over the past couple of years. The same report said severe volatility can create large losses and, in rarer cases, may raise the risk of an unplanned delisting.
Competition is another pressure point. With several firms offering leveraged products tied to the same single stocks, some funds may struggle to gather enough assets and face the risk of closing, according to MarketWatch.
The broader U.S. market held up better than chip shares. The S&P 500 rose 0.2% Tuesday, the Nasdaq Composite fell 0.2%, and the Dow Jones Industrial Average gained 1%, according to MarketWatch.
Semiconductors remained the sore spot. The S&P 500 tech sector fell 1.17%, and the iShares Semiconductor ETF dropped 4.8% Tuesday, bringing its July loss to 23.3%, FactSet data cited by MarketWatch showed.
This story draws on original reporting from MarketWatch.