Asian tech stocks have continued to decline over the past few weeks, triggering a wave of deleveraging from retail to institutional investors. Margin loan balances in markets such as South Korea have significantly decreased, and some funds heavily invested in the AI supply chain are facing margin call pressures due to losses, with semiconductor and software stocks at the center of this volatility.
South Korea's margin financing has significantly contracted.
Bloomberg compilation data shows that since late June, margin financing balances in Asian markets such as South Korea have declined by more than 10%. Previously, this leveraged capital had been a key driver of local stock market gains, particularly concentrated in the semiconductor sector.
According to Bloomberg Intelligence data, the assets under management of leveraged ETFs tracking Samsung Electronics and SK Hynix listed in South Korea have declined from over $11 billion on June 25 to $4.1 billion as of Thursday. Over the past two weeks, flows into these products have also turned net negative.
AI fund reportedly makes significant liquidations
More notably, the hedge fund Situational Awareness, founded by former OpenAI researcher Leopold Aschenbrenner, is reportedly liquidating nearly all of its public market positions to raise cash to meet margin requirements, according to people familiar with the matter.
The report stated that the fund's prime brokers include Bank of America, Goldman Sachs, and JPMorgan Chase. According to knowledgeable sources, Citadel has reached an agreement to acquire the fund's publicly traded assets. The extent of the fund's losses and its specific funding needs have not yet been confirmed.
Positions are concentrated in AI infrastructure.
The fund reportedly grew to $45 billion in early July, but subsequently suffered significant losses due to declines in its holdings related to AI infrastructure and failed short bets on software stocks.
According to regulatory filings, its major holdings at the end of the first quarter included Nebius Group, SanDisk, Micron, and CoreWeave, all of which declined more than 35% this month. Meanwhile, assets such as SK Hynix overlap with popular stocks heavily traded by Asian retail investors using leverage, and simultaneous deleveraging by institutions and retail investors further intensified selling pressure.
Additional information: The report also mentioned that the fund had previously negotiated the sale of its Anthropic shares, but it remains unclear whether the transaction was completed; a fund spokesperson denied claims that it was actively marketing Anthropic shares.