High-risk trading surrounding artificial intelligence is rapidly gaining momentum. Goldman Sachs, citing EPFR data, reports a significant increase in leveraged ETF assets related to AI and technology themes in the US, South Korea, and Taiwan over the past two months, indicating that investors are using more aggressive tools to amplify their bets on the AI sector.
The US market size has risen to $84 billion.
As of the end of May, total net assets of U.S. leveraged equity ETFs rose to $84 billion, up from $39 billion in April. Goldman Sachs' statistics cover 573 U.S. leveraged equity ETFs.
Related products in the South Korean and Taiwan markets also expanded simultaneously. Combined leveraged equity ETF assets in the two markets increased from US$17 billion to US$43.1 billion, encompassing 52 South Korean ETFs and 11 Taiwan ETFs.
Funds concentrated in AI heavyweight stocks
This round of expansion is directly related to the continued surge in AI transactions. Outside the United States, key AI supply chain stocks in South Korea and Taiwan have also become areas where funds are concentrated.
In the South Korean market, SK Hynix and Samsung Electronics have a relatively high weighting in the Korea Composite Stock Price Index (KOSPI). In the Taiwan market, TSMC has a weighting of over 40% in the weighted index. Continued rises in these heavyweight stocks will further amplify the capital-attracting effect of leveraged products.
Volatility may be more pronounced during pullbacks.
Leveraged ETFs primarily amplify daily returns through derivatives, with some products capable of achieving two or even three times the intraday gains or losses of the underlying index or individual stocks. When market conditions are favorable, these products are more likely to attract short-term capital; however, once the market declines, losses are also magnified.
Adam Crisafulli, founder of Vital Knowledge, stated that it's not uncommon for investors to chase leverage during bull markets, but current AI trading shows signs of overheating. While AI is indeed driving revenue growth for many companies, the companies that are truly converting that revenue into profits and cash flow are still primarily concentrated in a few chip and memory companies.
Meanwhile, major tech companies continue to ramp up their AI infrastructure spending. Alphabet, Microsoft, Meta, and Amazon are projected to spend over $700 billion in capital expenditures this year. Wall Street analysts predict that AI-related spending will exceed $1 trillion by 2027.
