South Korea's Stock Market Crash: AI Frenzy Turns into a 'Margin Call' Nightmare, Leaving Millions of Retail Investors Physically and Mentally Exhausted

Bank employee Yongjoon Kim lost 20 million South Korean won ($14,000; 87,400 RMB; 453,000 TWD) in the South Korean stock market last month. Kim, who plans to marry later this year, had intended to use the money to buy a home. However, his tech stock investments dropped around 25% in July. "It hurts, and I'll have to work extremely hard to make up for the losses. But for those who took on greater risks, they will feel real pain," he said. He added that many of his friends are in worse situations, now in a state of "desperation" after putting their life savings "all-in" on the market. While many investors have flooded into the tech stock market, extreme volatility means bets don't always pay off, with share prices often swinging on every major news headline. This instability is particularly evident in the Korea Composite Stock Price Index (KOSPI), which is dominated by tech stocks and widely regarded as one of the most volatile stock indices globally. The global AI hype has driven massive fluctuations in the market capitalizations of South Korea's major chipmakers. Wee Khoon Chong of financial services firm BNY said the KOSPI experienced one of its "most severe corrections in history" between June and August, with declines comparable to those seen during the COVID-19 pandemic and the 1997 Asian financial crisis. The index more than doubled in value since the start of the year, surpassing 9,000 points in mid-June, but plunged to 5,500 points within weeks. It has since recovered some ground, rising back to around 6,800 points. Chong added that a key reason for the recent sell-off is market concern over massive investments in the AI sector. The stock market decline has significantly impacted many local retail investors who bought tech stocks over the past year. For Woongsa Kim, checking his stock trading app always painfully reminds him of gains he once made in the South Korean market—and then lost. At the beginning of the year, he invested about half of his work bonus into shares of tech giant SK Hynix. The stock's price had surged fourfold, but most of those gains were wiped out, leaving his 300 million won investment worth only about half its peak value. Kim told the BBC: "I cry whenever I think about it." Investment analyst Tobias Reger said that before this sell-off, tech stocks had surged for months, creating "extreme optimism" that prompted some individual investors to even borrow money to enter the market. This situation has hit those using leverage the hardest. Leverage is a way of borrowing in financial markets. It allows investors to control more shares than their own capital would normally allow, enabling larger profits when prices rise. However, if share prices fall below a pre-agreed level, it can trigger a so-called "margin call," where brokers demand repayment of the debt. By the end of July, an estimated 1.2 million South Korean individual investor accounts faced margin calls—equivalent to one in every 30 working-age people in the country. Frank Benzimra, head of Asian equity strategy at Societe Generale, said leveraged trading is becoming a growing trend among individual investors and is becoming increasingly common in markets like Taiwan and the United States. He added that this increases the risk for AI-related stocks. "Heart-wrenching" Plunge Marketing professional Chanyong Park said that after his U.S.-listed Nvidia shares rose over 1,000%, he invested most of his profits into SK Hynix stock. However, this bet failed, and the value of his holdings has dropped by about $10,000. "This was the money I had saved to quit my job and start a business around October. But now I'm really starting to doubt whether I'll have enough funds." Although recent market volatility has made him reluctant to invest further, Park plans to continue holding SK Hynix shares, hoping for a rebound. "Sometimes market movements don't seem driven by rational factors—it still feels like gambling," he said. Another investor, Youngji Park, said he "went all-in," putting most of his cash into Samsung Electronics stock, with his investment peaking at 45 million won. But Park said this investment has suffered a "heart-wrenching" plunge. He also plans to hold onto the stock, hoping prices will rise again. "I feel like a fool for believing in the South Korean stock market. Now it's a long-term battle. I can only wait," he said. University student Soomin Yi said that due to fear of missing out (FOMO), she and her friends pooled money to invest in SK Hynix. But she now regrets not selling in June when the stock price reached 3 million won per share, believing market speculation that it would rise to 5 million won. "We didn't actually have anyone around us with investment experience, and we didn't seriously research investing before buying stocks," she said. What This Means for the Rest of the World The extreme volatility in the South Korean stock market is also raising concerns about other global markets. Benzimra said Japan's tech-heavy Nikkei 225 index appears to be moving in sync with KOSPI's wild swings. However, he added that most global stock markets are unlikely to experience such extreme volatility because they encompass more diversified company compositions. "I don't think large, diversified markets like TOPIX or the U.S. stock market will see the same degree of volatility," he said. Meanwhile, traders who diversified their portfolios said this helped mitigate the impact of the stock market crash. Kim, who also holds overseas market stocks, said: "I think the whole thing is a warning for South Korean investors, especially young ones, not to put all their eggs in one basket and hope for the best." He added that he should have taken a more cautious approach to his tech stock investments. His fiancée, Gaeon Lee, remains optimistic, believing that despite the loss of part of their savings set aside for a new home, the market will eventually recover. But she worries about Kim, saying the stress of constantly monitoring investment performance has left him physically and mentally exhausted. "Seeing our home-buying savings damaged in the stock market has undoubtedly been a wake-up call for us," she said. Additional reporting by BBC Korean journalists Sangmi Han, Suhnwook Lee, and Yijin Sim. This article was originally written in English. We used artificial intelligence to assist with translation, which was reviewed by BBC journalists before publication. Learn more about how we use AI.