The frenzy surrounding technology stocks and the semiconductor sector is pushing the US stock market to extremes.
Goldman Sachs trader Brian Garrett issued a warning.The market has entered a "semi-irrational chasing-the-rise mode" (referring to the current market conditions).The word "semi" is a double entendre, alluding to the frenzy driven by semiconductor stocks.The notional trading volume of S&P 500 call options exceeded $2.6 trillion yesterday, setting a new record; the weekly relative strength index (RSI) for the semiconductor sector hit its highest level since 1999, prompting market comparisons to the dot-com bubble era.
Specifically, nearly 60% of S&P 500 index options yesterday were call options. Rich Privorotsky, head of Goldman Sachs' One-Delta division, stated...The US stock market has now "fully entered a territory of rising spot prices, increased volatility, and chasing rallies."Systematic investment funds (CTAs) have largely returned to a fully long position.
Furthermore, QQQ volatility surged, widening its spread with S&P 500 volatility to over 6 basis points. Among S&P 500 constituents, 35 stocks experienced daily volatility exceeding 3 standard deviations, the highest number since February 3rd of this year. SoftBank's 18% surge during the Japanese market holiday rally further fueled the bullish sentiment in the technology sector.
Semiconductor momentum is approaching its 1999 peak, prompting cautionary tales of a bubble.
The upward momentum in the semiconductor sector is particularly noteworthy. Goldman Sachs warns that the semiconductor sector's breakout "is actually parabolic," and the market can continue to assign increasingly larger valuations to the entire ecosystem until supply normalizes.But "obvious risks are accumulating."
The weekly RSI of the SOX index has risen to its highest level since 1999. Market analysts cite a historical analogy from 1999—when many telecom equipment suppliers had full order books, providing a "tangible bottleneck narrative" for the rally at that time, which is highly similar to the current logic of the scarcity of artificial intelligence computing power.
Bank of America pointed out that,The current S&P 500 rally is reminiscent of the late 1920s and the dot-com bubble, but the market is still underpricing tail risk options, showing a clear divergence from actual volatility.
The AI infrastructure narrative continues to expand, with strong demand signals.
The core narrative driving this round of market activity remains the large-scale deployment of artificial intelligence infrastructure.
The latest collaboration between xAI and Anthropic is one of the most noteworthy developments recently. There are two possible interpretations: First, the demand for high-end computing power remains exceptionally strong, with companies continuously optimizing computing power utilization and capacity acquisition, leading to increasingly interconnected ecosystems. Second, the number of participants in the AI infrastructure and inference market is expanding, with more large-scale new players emerging in addition to hyperscale cloud service providers.
Goldman Sachs stated that investors continued to increase their holdings across the board in AI-related sectors, and the buying sentiment in the US market remained positive.
Consumer spending is increasingly polarized, with large-scale spending and small-scale consumption experiencing starkly contrasting trends.
Beyond the tech stock frenzy, structural divergence in the consumer sector is deepening.
Whirlpool (WHR) shares plunged 16% in after-hours trading yesterday after management described the current environment as "rapidly deteriorating macroeconomic conditions" and announced "decisive action" to restore profitability, including price increases and accelerated cost reductions. In stark contrast, DoorDash reported a "good start" to the second quarter with "continued strong" demand, and its shares rose approximately 10%.
Goldman Sachs traders summarized this as follows:In the areas of large expenditures and housing-related consumption, the market feels as if it is in recession; while in the areas of food delivery and small consumption, it seems as if nothing is happening."Consumers haven't disappeared, they've just become highly selective—they might not renovate, but they'll still order takeout without hesitation."
