Direxion Daily Semiconductors Bull 3x Shares (SOXL) tumbled 5% in pre-market trading Monday, as a regulatory shockwave from South Korea's emergency plan to lower leverage product multipliers sent semiconductor-focused ETFs into a tailspin.

The sell-off was triggered by South Korea's Financial Services Commission tightening restrictions on retail investors' access to single-stock leveraged ETFs, a move that sparked massive swings in Korean stock ETFs. The KOSPI index plunged over 5%, with Samsung Electronics and SK Hynix each falling more than 7%. This de-leveraging cascaded across global markets, hammering semiconductor ETFs in both Hong Kong and China, and spilling over into U.S. pre-market trading.

The broader backdrop remains challenging for chip stocks. The Philadelphia Semiconductor Index tumbled 21% in July—its worst monthly performance since October 2008—as investors grow increasingly skeptical about the sustainability of artificial intelligence spending. With major tech firms facing tougher scrutiny over capital expenditure plans and intensifying competition from open-source AI models, the once-dominant semiconductor rally has crumbled. The combined pressure from regulatory tightening in Korea and the ongoing global tech hardware de-leveraging has put leveraged semiconductor products like SOXL under acute stress.