Korean stock volatility comes to America. Can Wall Street take the heat?

The use of leveraged ETFs has exploded in the U.S. in recent years too. These products use futures or swaps to replicate bets with borrowed money, multiplying returns by typically two, three or even five times. But they magnify losses as well. U.S. assets under management in these ETFs have reached a record $218 billion, up 60% since the end of March alone, according to Scott Rubner at Citadel Securities.

Leverage tied to technology ETFs has grown a whopping 136% over the same period, while leverage linked to semiconductor exposure has nearly tripled. Combined, tech and semis now account for 67% of all leveraged ETF assets under management.

Until recently, this was a boon for U.S. markets, which have benefitted hugely from the outperformance of chips, AI and tech. As Rubner notes, some 19 cents of every dollar allocated to the S&P 500 is directed toward semiconductor companies, with 33 cents going to the "Magnificent 7" megacaps and nearly 40 cents to the index’s ten largest holdings, most of which are tech firms.