Why Korean Retail Investors Are Betting On America’s Worst Stocks

South Korean retail traders have nearly doubled their U.S. stock holdings to a record $170 billion by October 2025, a surge so dramatic that industry observers started calling it the “Squid Game market” in reference to the Netflix series where desperate contestants bet everything on survival.

The comparison isn’t just clever wordplay. Korean retail investors have become known for extreme risk tolerance, herd behavior that moves markets, and aggressive leverage use that would make even seasoned Wall Street traders nervous.

Right now, they own 31% of certain quantum computing stocks and 40% of specific leveraged single-stock ETFs, concentrations that boggle the mind.

This “ant colony” of 14 million Korean retail investors has become a significant force in Wall Street’s most volatile and speculative corners, the kind of stocks that professionals usually avoid or actively short.

What’s driving this isn’t confidence in fundamentals but rather a desperate hunt for returns, limited opportunities in stagnant domestic markets, and access to leveraged products that are actually illegal to trade back home in Korea.

The result is Asian retail capital flooding into fundamentally weak U.S. equities at precisely the moment when valuations look stretched and professionals are quietly heading for the exits.

Why Korean Retail Traders Are Targeting Speculative US Stocks

The exodus from domestic markets tells you everything about what’s pushing this flow. The Korean Kospi has gone nowhere while U.S. markets soared, creating a massive performance gap that drove $170 billion to Wall Street in search of returns that simply weren’t available at home.

When your domestic market treads water year after year while American indices keep hitting new highs, the temptation to chase what’s working becomes overwhelming, particularly for younger investors who feel like they’re falling behind.

At the same time, access to prohibited products has become a major draw, as roughly 12% of Korean retail U.S. holdings sit in leveraged ETFs and single-stock products that are outright illegal to trade in South Korea, meaning investors are specifically seeking out the riskiest instruments they can’t access domestically.

Margin lending has tripled over the past five years, with many retail traders treating the U.S. market as a substitute for banned casinos and restricted gambling. The psychology here matters because when people approach stock markets with a gambling mentality rather than investment discipline, they make very different choices about position sizing, holding periods, and risk management. Or more accurately, they abandon risk management entirely in favor of all-or-nothing bets.

Social climbing motivation adds fuel to the fire. Young Koreans view aggressive U.S. stock bets as a way to “climb the social ladder” in a country where traditional paths to wealth and status have narrowed considerably. When your domestic economy offers limited class mobility and housing prices have made homeownership nearly impossible, speculative trading starts looking less like recklessness and more like the only realistic shot at changing your circumstances.

Lastly, the absence of daily limits creates appeal that’s hard to overstate. Korean stocks are capped at 30% daily moves, but in America “the sky’s the limit,” attracting risk-seeking traders who want exposure to the kind of volatility that simply can’t happen in their regulated domestic market.

The problem is that unlimited upside also means unlimited downside, and leverage amplifies both directions in ways that can vaporize accounts before investors have time to react.

Which Low-Quality US Stocks Asian Retail Investors Are Buying

So where exactly is this $170 billion going? The answer reveals just how speculative these bets have become.

Quantum computing has emerged as an obsession despite the fact that business models remain completely unproven. Korean retail now owns 31% of one prominent quantum stock and 17% of another. These are companies posting massive losses with no clear path to profitability, yet billions in Korean capital keep flowing in.

The technology might eventually revolutionize computing, but that’s a very different question from whether current stock prices make any sense.

Even more concerning than the quantum bets is the leveraged ETF addiction that’s taken hold. These 2X and 3X single-stock ETFs where Koreans own 40% or more of outstanding shares were designed for day trading. You’re supposed to hold them for hours, maybe a day at most, before time decay and compounding effects start destroying value.

Yet Korean retail is holding them for weeks or months, apparently either not understanding or not caring that these products are mathematically designed to lose money over time even if the underlying stock goes sideways.

The AI theme has pulled in equally large positions, with 19% ownership stakes in firms tied to small modular reactors and other speculative technology that doesn’t have actual revenue yet. These aren’t established businesses with proven products but rather concept stocks trading on narratives and themes.

The fact that Korean retail has accumulated such massive positions reveals an appetite for pure speculation that’s completely disconnected from traditional investment analysis.

Crypto represents yet another channel for this capital, with heavy positioning in bitcoin-pivot companies and crypto leveraged products. Altcoins make up 80% of Korean crypto exchange volume, showing a preference for the most volatile, speculative corners of an already volatile asset class. This pattern of consistently choosing the highest-risk expression of every theme suggests risk tolerance that’s moved beyond aggressive into something closer to reckless.

What should really worry observers is what’s happening on the other side of these trades. Professionals are shorting these exact names. Wall Street firms are launching new leveraged products specifically designed to capture Korean demand.

In some cases, CEOs are pivoting entire companies to bitcoin explicitly to attract Korean retail buying. When Wall Street starts creating products and pivoting businesses just to capture flows from one retail cohort, that cohort has become the target rather than the customer.

Historically, targets don’t fare well when the music stops.

The Risks Asian Retail Investors Face in Low-Quality US Stocks

The music is already showing signs of stopping for some investors. A 2X leveraged ETF popular with Korean traders has fallen over 80% since November 2024, and among the casualties was a 25-year-old who invested his parents’ retirement savings chasing returns that evaporated before he could get out.

These aren’t abstract risks or hypothetical scenarios but real money vanishing from real families, often people who could least afford the losses and didn’t fully understand the products they were buying.

The damage is starting to show up beyond individual accounts. Korean banks lost $28.1 billion in deposits over just six weeks as money flooded out of savings accounts into speculative trading accounts overseas.

That kind of rapid capital flight threatens financial stability when it happens at this scale, particularly if losses eventually force sudden withdrawals that create liquidity pressures banks weren’t prepared for.

What began as individual investment decisions has evolved into a systemic risk that Korean regulators are now watching nervously.

The Squid Game comparison that gave this whole phenomenon its nickname cuts deeper than it first appears. In the show, the piggy bank fills up during early rounds as players win initial games, creating the illusion that most people will survive.

But most contestants are dead by the finale, with only the earliest and luckiest players making it out alive. Korean retail won through much of 2024, booking gains that felt validating and sustainable. But analysts at Acadian Asset Management are warning people to “stay tuned” for what comes next, and the implication couldn’t be clearer. Early winners are setting up late entrants for catastrophic losses when sentiment inevitably shifts.

The mechanics of how that shift will play out make the situation even more precarious. Currency movements and timing will amplify everything once the turn happens. If the dollar strengthens or market conditions change, you’ll see coordinated exits from leveraged positions that magnify losses exponentially.

Leverage cuts both ways, and when 40% of an ETF is held by one group with similar psychology and risk tolerance, the exit won’t be orderly. It will be a stampede, with everyone trying to squeeze through the same door simultaneously.

Look at who’s actually profiting here and the picture becomes clearer and more disturbing. Wall Street institutions are exiting positions into Korean buying, offloading stocks near peaks to retail investors just discovering them. ETF issuers are collecting management fees on products that decay by design. CEOs are using retail hype to pump failing companies and exit their own positions at inflated prices.

Korean retail has become the “target customer” for some of the market’s worst products, which means they’re providing exit liquidity for smarter money that’s been patiently waiting for exactly this kind of enthusiasm.