Artificial intelligence remains one of the market’s strongest investment themes, driving record spending on chips, data centers, and computing infrastructure. Semiconductor companies have become the picks-and-shovels providers of this digital gold rush, and investors have poured billions into funds designed to amplify those gains. But while the AI story remains intact, another trend is emerging: investors are becoming more cautious about how much risk they are taking.
According to Goldman Sachs data, a major leverage unwind is underway in semiconductor ETFs. Investors are not abandoning AI — they are reducing the amount of borrowed risk they are using to chase the opportunity.
The next phase of the AI trade may depend less on whether the technology succeeds and more on whether investors are positioned to withstand the volatility that comes with it.
Leveraged ETFs became one of Wall Street’s fastest-growing corners as investors searched for ways to multiply their exposure to the semiconductor boom. These funds use derivatives to deliver returns that are typically two or three times the daily performance of an underlying index.
When semiconductor stocks rise, the gains can be attractive. But the same structure works in reverse, turning normal market declines into amplified losses.
The appeal was straightforward. Semiconductor companies have been among the biggest beneficiaries of AI spending, and investors looking for additional upside turned to leveraged ETFs instead of simply buying more shares.
The risk is that leverage works best in a steadily rising market. During sharp declines, daily resets can create losses that compound faster than many investors expect.
Goldman Sachs data shows investors have started reversing those aggressive positions. Assets under management in U.S. leveraged semiconductor ETFs have fallen $63 billion from their June peak, declining to $100 billion. That represents a 39% drawdown and the lowest level since late April.
It is also the largest decline since April 2025, when assets in these funds fell by more than half from their previous August high.
The semiconductor unwind accounts for most of the broader decline across leveraged ETFs: