The artificial intelligence trade underwent a violent reset in July 2026 as extreme leverage unwound, triggering forced selling across AI-related stocks. South Korean regulators had approved 2x leveraged ETFs tracking top tech giants in May, and retail investors piled roughly $10 billion into these products, while former OpenAI employee Leopold Aschenbrenner's AI-focused hedge fund Situational Awareness surged more than 400% early in the year on leveraged bets. The sell-off was sparked by Beijing-based start-up Moonshot AI releasing its efficient Kimi K3 model, which raised fears that hyperscaler infrastructure spending by companies like Meta Platforms and Alphabet would be wasted. Goldman Sachs reported that over 1.2 million leveraged retail trading accounts in South Korea triggered margin calls, and Aschenbrenner unwound all positions due to severe losses. Stocks such as Micron and Nebius Group rebounded sharply on Thursday, suggesting that forced liquidations and capitulation may have cleared the way for a healthier accumulation phase.
Alphabet Inc Class C
Nebius Group N.V.
Meta Platforms Inc.
