Bloomberg said Kimi’s unexpected technological breakthrough sparked a sharp selloff in global AI and semiconductor stocks on Friday, bringing the market’s attention back to the “DeepSeek moment” of 2025.

The semiconductor benchmark index has fallen about 20% from its June peak, entering a bear market; the triple-leveraged semiconductor ETF SOXL has dropped more than 50% over the same period.
When rapid AI technical progress shifts market judgments about winners and losers, leveraged ETFs, options, single-stock funds, and crypto-related products could all face simultaneous forced liquidation.
Bloomberg industry research data shows that leveraged ETFs account for about 13% of U.S. ETF trading volume, but only 1.2% of industry assets; after factoring in embedded leverage, their share of the U.S. equities market still remains under 1%.
Although these products are limited in overall scale, their holdings are concentrated in AI chips, more volatile stocks, and newly listed companies. When leverage, concentration, and volatility all rise together, a fund’s daily rebalancing could turn it into an active buy/sell force, further amplifying existing market trends.
South Korea’s market recently provided a clear example. Local retail investors bought large volumes of leveraged products tied to Samsung Electronics and SK Hynix; after market sentiment weakened, the related funds were forced to sell an estimated worth of several billion dollars of SK Hynix holdings.