Speculators are adding leverage against the trend, and the scale of leveraged funds is approaching close to one billion US dollars.

Retail investors have not been scared off by the recent Wall Street panic over artificial intelligence and cryptocurrencies. They are still boldly investing in leveraged funds, pushing their size to nearly a trillion dollars, while bets on bearish markets are showing weakness. Speculators are buying into exchange-traded funds (ETFs) at lows using strategies that were once hot stocks. These ETFs are designed to amplify asset returns by two or even three times leverage. Last week, after the semiconductor sector experienced its largest single-day drop in nearly five years, bottom-fishing funds flowed into leveraged products aimed at magnifying semiconductor returns. Meanwhile, an Ethereum double leverage ETF, which suffered its largest decline in nearly four years due to tariff concerns, set a record for weekly fund inflows. To analyze to what extent "fear of missing out (FOMO)" is driving speculative desires, one method is to compare the trading activity and asset size between bullish and bearish stock products. Data compiled by Bloomberg Intelligence shows that as of mid-last week, the asset size of products leveraging derivatives for long positions climbed to a record level of around $95 billion. In contrast, assets for inverse stock ETFs strategies that gain leveraged returns by shorting individual stocks or indices (including the S&P 500 and Nasdaq 100) total only about $9 billion. The asset size gap between the two is the largest ever. ETF analyst Athanasios Psarofagis of Bloomberg Intelligence stated in a recent report, "ETF investors' nearly manic excitement, seemingly foolproof buying low strategy, and record number of leverage products have created an excellent atmosphere for 'degen traders'." He added that these traders pursue "high-risk and leveraged investments." On Monday, the US stock market edged higher driven by tech stocks, temporarily putting tariff concerns aside. Day traders who call themselves "degen" those who boast high-risk operations on social media are having their day. The resilience of bullish sentiment bodes well for Wall Street issuers introducing new products aimed at profiting from popular indices and stocks. ETFs tracking Microsoft Corporation (MSFT.US) for double long positions (MSFU) and the semiconductor sector for triple long positions (SOXL) have seen inflows for two consecutive weeks. Tesla, Inc.'s double long ETF (TSLL) has seen inflows for nine consecutive weeks, the longest since 2023, with inflows hitting a historic high last week. The Ethereum double long ETF (ETHU) has attracted inflows for five consecutive weeks, hitting a new high in weekly inflows last week. However, it is worth noting that the NVIDIA Corporation 2 times ETF (NVDL) saw outflows last week, contrasting with the record $1.6 billion in inflows over the previous five days. This optimism largely ignores the market anxiety caused by DeepSeek. The Chinese artificial intelligence (AI) startup has developed high-performance AI models at costs far below their American counterparts, raising doubts about the billions of dollars in research and development investments by tech giants and shaking the AI frenzy that has supported the long bull market in US stocks. However, Raphael Thuin, Capital Market Strategy Director at Tikehau Capital, said, "This is still a market worth investing in. What's important is the companies' profitability, monetary policy, and growth prospects." In the leveraged ETF frenzy, industry observers are concerned that investors may not have carefully studied the terms, which means they may face risks of sharp rises followed by sharp declines. These products are typically for day trading only, and long-term holding may deviate from the tracking target. Hedge fund mogul Jim Chanos said last Wednesday, "The speculation wave is coming back." "Not as much as in 2021 that was the most frenzied market I've ever seen but we are getting there." He specifically mentioned the resurgence of meme coins, implying that speculative sentiment in the market is heating up.