Cost to insure AI debt reaches record high amid Asian semiconductor tumble
Korean equities suffered a second day of heavy losses, with circuit breakers halting trading again. The KOSPI has fallen nearly 17% across two sessions, erasing about $620 billion in market value and prompting an emergency government meeting. The sell-off began after SK Hynix missed Q2 earnings expectations; the stock fell again after a 15% plunge on Tuesday, and weakness spread across major semiconductor names. The decline has hit leveraged retail traders, especially younger investors who had recently piled into AI and chip stocks through single-stock leveraged ETFs approved in May. Regulators are now facing criticism over allowing these products, after assets under management topped $50 billion in July. The slump also reflects broader doubts about the AI trade. Credit risk is rising for major US hyperscalers, with CDS spreads at record highs and the market implying a 12% five-year default probability for the group. Massive AI-related capex and weakening free cash flow are adding to investor concern.
