Goldman Sachs managing director Shawn Tuteja warned that excessive leverage in leveraged ETFs could ignite sharp volatility across artificial‑intelligence and semiconductor stocks.
Executive Warning
Tuteja, who oversees ETF and custom‑basket volatility trading, said the market is overlooking the risk of two‑way price swings. He highlighted that many new leveraged products offer 2× or 3× exposure to semiconductor indexes, amplifying price movements.
Leverage Mechanics
These leveraged ETFs function as short‑gamma instruments, forcing managers to purchase additional shares when the underlying index rises and to sell heavily when it falls. Consequently, a modest 3% decline in a semiconductor stock could cascade into a 10% drop as the system deleverages.
Potential Market Reaction
Tuteja expects heightened volatility but does not view the situation as a bubble forming. He cautions investors that the combination of high leverage and rapid rebalancing could accelerate both upward and downward price swings in AI‑related equities.