The Leverage Inside Korea’s Memory Trade

1) The Leverage Inside Korea’s Memory Trade

South Korea’s KOSPI, its benchmark stock market index, has triggered consecutive circuit-breaker sessions this week. At the low, the index had erased almost 40% of its value from the record above 9,380 it set little more than a month earlier. As much as $2.18T in Seoul market value had disappeared.

Korea had listed single-stock leveraged ETFs nine weeks earlier, on May 27. These funds promise twice the daily move of one company’s shares, and retail money crowded into the two tracking Samsung and SK Hynix.

Both were hit hard on July 29: SK Hynix fell nearly 20% before closing down 9.6%, while Samsung dropped as much as 14% before ending 5.2% lower. Because the two make up more than half of the KOSPI, their losses drove the index sharply lower. To maintain twice the daily exposure, these funds generally add exposure after gains and cut it after losses, creating further volatility and cascading risk.

In addition to the broader reassessment of the AI trade this month, CXMT, China’s largest DRAM producer, rose 466% in its July 27 Shanghai debut. It became the mainland’s most valuable listed company. Although CXMT still trails Korean producers in scale and advanced memory technology, the listing raised concerns that rising Chinese capacity could pressure conventional memory prices. Zooming back out, the KOSPI is still up over 50% YTD, the strongest performance among major markets.

On July 31st, the Minister of Finance and Economy, Koo Yun-Cheol, announced South Korea’s plan to launch a new sovereign wealth fund next year, specifically for long-term investments in strategic domestic industries, including AI, chips, robotics, defense, and biotechnology. Seoul will put 20 trillion won (~$14 billion) into the fund, with 16 trillion won in capital from shares it holds in state-run financial institutions and 4 trillion won from inheritance and gift taxes.

2) Inside the Fight for AI Governance

On July 27, Nvidia and dozens of partners launched the Open Secure AI Alliance, six days after OpenAI disclosed that an internal cyber-evaluation agent escaped containment and breached Hugging Face.

Closed AI tools blocked parts of Hugging Face’s forensic work, while a self-hosted open-weight model, GLM 5.2, reviewed more than 17,000 actions and helped contain the intrusion. Open weights make a model’s trained parameters publicly available, allowing organizations to run and inspect them on their own infrastructure. Hugging Face joined the alliance while leading closed frontier labs OpenAI, Anthropic, and Google did not.

Three other documents set out competing positions within the same timeframe. Nvidia’s July 24 letter, Open Weights and American AI Leadership, began with 25 signatories and soon climbed to over 230. Anthropic remains absent and, on July 27, responded that it opposes a categorical ban on open weights but supports controls on advanced chips, limits on industrial-scale model copying, and mandatory safety testing for sufficiently capable models.

On July 28, more than 1,100 industry employees signed a letter titled Pacing the Frontier, asking Washington to build international mechanisms to slow the development of automated AI. Anthropic CEO Dario Amodei and OpenAI chief scientist Jakub Pachocki signed the statement, and both companies endorsed it.

These documents focus on how capable models should be governed and deployed, with a recent emphasis on open-weight models. Beginning in August, a June 2 executive order directs Treasury, the Department of War through NSA, and DHS through CISA to develop a classified benchmarking process and a voluntary pre-release framework for covered frontier models.

3) Citadel Steps In as Situational Awareness Face Fire Sale

Leopold Aschenbrenner launched Situational Awareness in late 2024 with several hundred million dollars of seed capital. He named it after his essay on artificial general intelligence and ran it as a concentrated long bet on AI equities.

The fund returned 439% after fees in the first half of 2026, while reported assets peaked at $45B. The fund reportedly carried gross exposure of up to four times its capital. At that level, $100 of investor equity supports $400 of positions. A 10% move against the portfolio would erase about $40, or 40% of the fund’s capital. As losses reduce that cushion, prime brokers can demand more collateral or force positions to be cut.

After this month’s AI sell-off, on July 30th, Leopold sold most of its public-equity portfolio to Citadel. Situational Awareness still holds around $10B worth of assets, and the largest of them remain in private companies like Anthropic.

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