Moonshot's AI breakthrough triggers sell-off in AI and semiconductor stocks

Huo Xing Finance reports that on July 19, according to Bloomberg, China’s AI startup Moonshot AI achieved an unexpected technological breakthrough, triggering sharp declines in global AI and semiconductor stocks on Friday and reigniting market memories of the “DeepSeek moment” in 2025. The semiconductor benchmark index has fallen approximately 20% from its June high, entering bear market territory; the triple-leveraged semiconductor ETF SOXL has dropped more than 50% over the same period. This sell-off demonstrates that when rapid AI advancements rapidly shift market perceptions of winners and losers, leveraged ETFs, options, single-stock funds, and crypto-related products may simultaneously unwind positions. 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; even after accounting for embedded leverage, they represent less than 1% of the U.S. stock market. Although these products are relatively small in overall scale, their holdings are concentrated in AI chips, highly volatile stocks, and newly listed companies. When leverage, concentration, and volatility rise simultaneously, daily fund rebalancing can turn these products into active buying or selling forces that amplify existing market trends. The Korean market recently provided a clear example: retail investors heavily purchased leveraged products tied to Samsung Electronics and SK Hynix; as market sentiment weakened, these funds were forced to sell an estimated billions of dollars’ worth of SK Hynix positions.