Korean Retail Investors Betting on a Life-Changing Win in the U.S. Stock Market

Lately, something unusual has been happening in the U.S. stock market. Money is pouring into cult-like stocks that move like a religious sect, crypto-related names, single-stock leveraged ETFs, and crypto ETFs, and in December 2024 quantum computing stocks saw an absurd surge. What on earth is going on?

There is one hypothesis. Some of these phenomena can be interpreted as the result of a massive inflow of capital from Korean retail investors into the U.S. stock market. Last year I wrote that “the U.S. market is Koreafying”, by which I simply meant that retail-driven trading was increasing in the U.S. as well. But I hadn’t realized that actual “Korean individuals” were helping to drive that process.

If I had to give it a name, I’d probably call it the “Squid Game”.

The core setup of the Netflix series Squid Game goes roughly like this:

These elements are now showing up almost as-is in the U.S. stock market:

Around the world, retail investors tend to lose money on average. Barber, Huang, Odean, and Schwarz (2020) showed that stocks heavily bought by Robinhood users are more likely to fall afterward, and de Silva, Smith, and So (2023) identified three behavioral patterns through which retail investors consistently lose money in the options market. Are Korean retail investors any different? No. These are phenomena that arise precisely because they are retail.

Today’s Korean retail investors look a lot like the Robinhood crowd of 2021. In terms of the overall market they are small, but in certain sectors they are taking on risks that verge on self-harm, and they may even be serving as a short-term contrarian signal for the market.

Koreans can invest in U.S. stocks through several channels: by opening an account directly, or via ETFs listed on Korean or U.S. exchanges. This flow has continued to grow since the pandemic and carried on into 2024 as well: [1]

Relative to the total U.S. equity market capitalization of $62 trillion, that’s just 0.2%—a tiny number. But the story changes when you zoom in on specific names.

As of the end of February 2025, Korean retail investors own 31% of Company A, a quantum computing play, and 17% of Company B; they also hold 19% of an AI company tied to small modular reactors (SMRs). [2] In leveraged ETFs, ownership stakes above 20% are common. Among the top 50 U.S. securities held by Koreans, there are eight leveraged ETFs, and in one of them they own as much as 40% of the shares.

In Korea, single-stock leveraged ETFs are outright illegal. Most non-financial forms of gambling, including casinos, are also tightly restricted. So if you’re a Korean investor looking for one big score, the U.S. market becomes an attractive casino-like arena for speculation.

According to research by Kim Hansu in 2025, about 12% of the investment assets Koreans hold in the U.S. are products that are legally banned in Korea. In Korea, a stock cannot rise more than 30% in a single day, but in the U.S. there is no such limit.

Just as the contestants in Squid Game enter the competition without really understanding the rules, Koreans buying 3x leveraged semiconductor ETFs are doing something very similar. [3]

Another retail investor put it this way:

In November 2024, after a Wall Street Journal report that a 25-year-old in California had gone all-in on a 2x leveraged single-stock ETF using his parents’ retirement savings, there were signs that Korean retail investors were also net buyers of the same ETF.

That ETF has since fallen by more than 80%.

When money floods into small caps all at once, strange price distortions emerge. Quantum computing theme stocks in December 2024 were a textbook case.

One stock had a market cap of 12 million dollars as of November 2024, but in December alone Korean retail investors were net buyers of 111 million dollars. The result? A 1,400% spike.

At that point, calling it market impact is no exaggeration. There were some fundamental positives, but it’s hard to deny that Korean retail money lit the match.

On top of that, they react to non-fundamental events as well. For example, after Nvidia’s stock split[4], Korean retail investors piled in as net buyers.[5] Similar cases include:

It’s hard to say Korean retail investors were the main actors in these episodes, but it’s clear they were not the ones stabilizing the market either.

Across the world, individual investors tend to lose money over the long run. That has been true in Korean equities, and it’s unlikely that the U.S. market is an exception.

The table below shows major blowups in U.S. market history and whether Korean retail investors were net buyers of those names in the month before and the month of the event:

This isn’t rigorous evidence of forecasting skill, but at the very least it can serve as a signal that the timing was off. And if you ran the same exercise for U.S. or Australian retail investors, you might see similar results. The point isn’t “Korea”; it’s “retail”.

In 2024, Korean retail investors actually did reasonably well. The market went up, and the high-risk names they favored went up even more. So should we now say they have the Midas touch?

Not so fast. In the early episodes of Squid Game, it looks like the contestants are winning the games, but by the end most of them are dead. The final episode hasn’t aired yet.

Everyone gives the same answer: Korean retail investors.

The themes they have been buying heavily in 2025 are as follows:

Every era has had its emblematic group of individual investors. In 1929, it was New York’s leveraged investment trusts; in 1989, Japanese salarymen; in 1999, growth mutual funds; in 2021, Robinhood day traders. In 2025, that name may well be Korean retail investors.

What I want to say to global retail investors is simple:
Buy boring ETFs. Don’t even step into the Squid Game.

[1] Song Jung-a, “South Korean investors pile into US equities as domestic stock market languishes,” The Financial Times, January 1, 2025.

[2] SEIBro portal of the Korea Securities Depositary.

[3] Youkyung Lee and Vildana Hajric, “Korea’s Retail-Trading Army Is Going All-In on US Leveraged ETFs.” Bloomberg, December 3, 2023.

[4] The companies mentioned in the main text are not intended as recommendations to buy or sell, and Acadian or the author may hold positions in these securities.

[5] “Koreans' net purchase of US shares up 42-fold over past week on Nvidia stock split.” The Korea Times, June 9, 2024.

Barber, Brad M., Xing Huang, Terrance Odean, and Christopher Schwarz. "Attention‐induced trading and returns: Evidence from Robinhood users." The Journal of Finance 77, no. 6 (2022): 3141-3190.

Kim, Hansoo. “Retail Investors’ Foreign Equity Investment: Characteristics and Implications.” Korea Capital Markets Institute, February 2025.

Kim, Joon-Seok . “Behavioral Biases of Retail Investors in the Stock Market.” Korea Capital Markets Institute, September 2021.

de Silva, Tim, Kevin Smith, and Eric C. So. "Losing is optional: Retail option trading and expected announcement volatility." Available at SSRN 4050165 (2023).