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AI Trade Collapse, KOSPI Drops 10%, Crowded Bubble Trade Begins Unwind

Channel: Verified Investing Published: 2026-06-23 08:28
Verified Investing

Gareth Soloway argues that the AI trade is beginning to unwind after a sharp overnight selloff in Korea, Japan, and U.S. tech, and he warns this could turn into a larger tech correction over the next 3–6 months. He backs the call with chart-based evidence: negative RSI divergences, lower highs, crowded positioning, and a growing belief that cheaper Chinese AI models could commoditize margins.

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Detailed summary

Gareth Soloway frames the session as the start of a potentially bigger unwind in AI and mega-cap tech after a violent overnight selloff. He says South Korea’s KOSPI dropped 10% because two AI-chip makers make up more than half the index, Japan’s Nikkei fell over 5%, and the Nasdaq was down as much as 3% premarket. His core thesis is that the AI trade has become too concentrated and too narrative-driven, and that the first signs of a larger correction are now visible on the charts and in the news flow. He repeatedly returns to technical analysis as the anchor for his view. On the S&P 500 and Nasdaq, he points to lower highs, lower lows, and a possible break in trend that would confirm downside continuation. …

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Main takeaways

  1. The immediate story is a violent selloff in AI-linked equities across Korea, Japan, and the U.S.
  2. He sees technical confirmation building through lower highs, lower lows, and RSI divergences.
  3. Cheaper Chinese AI models are presented as a fundamental threat to AI pricing power and margins.
  4. He believes policy or headline support can slow declines but not prevent a genuine unwind.
  5. He prefers selective bounces in beaten-down names rather than chasing the most crowded AI leaders.
  6. Gold and silver are treated as near-term bearish, while Bitcoin is framed as vulnerable if 60,000 breaks.

Market read by horizon

Short term

Immediate setup is fragile: if tech cannot reclaim the opening weakness, the current move looks like the first leg of a crowded AI unwind. A bounce is possible, but failure near the lows would keep the downside pressure in place.

  • Watch whether the Nasdaq and S&P stabilize intraday or close near the lows; he says that distinction matters for today’s tape.
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  • KOSPI’s 10% hit and Nikkei’s >5% drop are the key shock events behind the current risk-off move.
  • Micron earnings tomorrow after the bell are a major near-term catalyst; he expects good numbers but warns that expectations may be too high.
Mid term

Over the next few weeks, the market likely rotates from crowded AI leaders into beaten-down large caps only if earnings and index breadth stabilize. If cheaper AI alternatives keep gaining traction and the leaders keep breaking support, this becomes a broader tech correction rather than a one-day shock.

  • Over the next several weeks or months, he thinks the market needs to prove whether the recent weakness is a normal dip or the start of a broader tech correction.
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  • His base case is that the AI complex remains vulnerable because it is highly concentrated and crowded, especially if lower-cost AI alternatives keep gaining adoption globally.
  • Micron’s reaction to earnings could matter more than the print itself: a strong report may still fail to prevent a sell-the-news decline if sentiment is already stretched.
Long term

Structurally, he is arguing that AI is moving from scarcity and pricing power toward commoditization, which would compress margins and reduce the durability of the current hype cycle. The longer-term regime implication is that the most crowded beneficiaries may underperform even if AI adoption continues.

  • He argues the AI trade is becoming commoditized, which would compress margins and change the economics of the entire sector.
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  • He frames the current setup as more concentrated than the dot-com era, implying the unwind could be structurally important even if the technology itself remains transformative.
  • If cheaper global AI models keep scaling, the long-run implication is that model access and inference may become lower-margin utilities rather than premium growth engines.
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Key claims (6)

18:30
BEARISH AI concentration risk

The AI trade is more concentrated than the dot-com bubble and an unwind is inevitable — when hedge funds all pull the rip cord, retail usually gets stuck.

Speaker compares concentration in AI stocks to dot-com bubble as a historical analogy, warning that hedge fund positioning will unwind eventually, leaving retail holding the bag.

2:30
BEARISH AI commoditization

AI models from China are so much cheaper to run than US models that many companies globally are switching away from ChatGPT, Claude, and Gemini, which will commoditize AI and crush the margins of hyperscalers.

Speaker argues that cheaper Chinese AI models (DeepSeek, Quen, Kimmy) are gaining adoption outside the US, which will commoditize AI, compress margins for hyperscalers who spent billions on data centers, and trigger a crash in tech stocks.

7:45
BEARISH NVDA

Nvidia is forming a bear flag pattern plus a double-top head-and-shoulders pattern, and a breakdown would confirm further downside.

Speaker points to a sequence of lower highs and lower lows on Nvidia's chart forming a bear flag, alongside a double top/head and shoulders pattern with a neckline that if broken would signal more downside.

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Assets discussed (10)

KOSPI
BEARISH index

He says it dropped 10% after AI-chip maker weakness and circuit breakers were triggered.

Nikkei 225
BEARISH index

He says the Nikkei was down over 5% and calls it a bloodbath.

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Where this transcript pushes against consensus

  • He implies AI commoditization will rapidly translate into a sector crash, but the causal chain is asserted more than proven.
  • The claim that policymakers or administrations are actively propping up markets is presented as interpretation and analogy, not direct evidence.
  • He assumes lower-cost Chinese AI models will matter globally, but gives no adoption data or revenue evidence.
  • His bearishness on gold and silver is technically grounded, but he offers limited fundamental justification beyond price action.
  • The SpaceX discussion is speculative and relies on retail/FOMO logic rather than transparent valuation or liquidity data.

Topics

AI trade unwindKOSPI selloffNikkei weaknessNasdaq correctionNvidia chart breakdownMicron earningsChinese AI modelsgold and silverBitcoin supportmarket concentration

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