Technological Breakthrough by Dark Side of the Moon Triggers Global AI Stock Sell-off

On July 19, Chinese AI startup Dark Side of the Moon achieved a technological breakthrough, leading to a significant decline in global AI and semiconductor stocks. The semiconductor benchmark index has fallen approximately 20% from its June peak, entering a bear market; the triple-leveraged semiconductor ETF SOXL has seen a decline of over 50% during the same period. The sell-off indicates that rapid advancements in AI technology are altering market perceptions of winners and losers, with leveraged ETFs, options, single-stock funds, and crypto-related products potentially facing simultaneous liquidation. According to Bloomberg Industry Research, leveraged ETFs account for about 13% of ETF trading volume in the U.S., but only represent 1.2% of industry assets. These products are heavily concentrated in AI chips, volatile stocks, and newly listed companies, and when leverage, concentration, and volatility rise simultaneously, the daily rebalancing of funds may amplify market movements. The South Korean market recently provided a clear example, where retail investors heavily bought leveraged products linked to Samsung Electronics and SK Hynix. After market sentiment weakened, related funds were forced to sell billions of dollars in SK Hynix holdings.

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