Bianca Botes, Director at Citadel Global
This has been a year for the books. Despite massive geopolitical uncertainty, tech stocks surged over 80% in the first half of 2026. For the past few weeks, however, the sector has been moving violently between positive and negative territory with no clear direction.
Tech volatility is not noise
As an illustration, the United States’ (US’) tech-heavy Nasdaq 100 has recorded a daily move of 1% or more in 18 of the past 26 trading days. The Chicago Board Options Exchange (CBOE) Nasdaq 100 Volatility Index (VXN) is hovering around 27.3 – elevated, though below the peaks above 33 reached during the March 2026 sell-off – while the S&P 500 CBOE Volatility Index (VIX) has been markedly lower, showing that the S&P 500, spanning 11 major economic sectors, has been comparatively stable throughout the year.
The VXN-VIX spread has widened significantly. This volatility gap is not noise; the tech sector is carrying risks specific to its own positioning, narrative and valuation structure. It is not simply absorbing any macro uncertainty that the rest of the market is feeling. The last time tech volatility diverged from broad market volatility by this margin, the dot-com bubble was unwinding.
The Nasdaq 100 rallied 30% from late March to early July. That move was concentrated, momentum-driven and built on crowded long positioning within a handful of names. When positioning becomes this one-sided, the reversal trigger does not need to be significant. A rate comment, an ambiguous data point, or a geopolitical headline can start a cascade. The intraday swings of the past three weeks have not been driven by earnings misses or revenue warnings, but rather by positioning that had nowhere to go but sideways or down.
Semiconductor stocks shine the light on uncertainty
Semiconductor stocks have been both the engine of the US artificial intelligence (AI) rally and its most volatile component. Micron fell 9% in a single session this week, Advanced Micro Devices, Inc. (AMD) dropped by 3.5% and Lam Research by 3%. The immediate catalyst was a report about Nvidia server delays jolting Asian markets, but the structural problem runs deeper. Chip stocks are priced for a demand trajectory that requires hyperscaler (massive cloud computing companies) Capex to keep compounding at its current rate, which is running at 77% year-on-year. That rate, however, cannot be sustained indefinitely without hitting a revenue justification problem. The market is not saying the cycle has ended but rather that uncertainty is expensive when you are sitting on gains of 200% to 300% since 2024.
The KOSPI – An AI casino
Korea is where the speculative excess has found its limit most visibly. The tech-heavy KOSPI hit a record high of 9,114 on 22 June. By 14 July it had fallen to 6,800 – a 25% decline in three weeks. Semiconductor producers, Samsung and SK Hynix, which together account for roughly 55% of the index’s market capitalisation, drove most of that move. SK Hynix fell 11.5% yesterday, alone. The KOSPI has triggered 37 circuit breaker sidecars (automated safety mechanisms, which prevent mass dumping or mass buying of stocks when stock prices swing wildly) so far in 2026, against six total in the prior 25 years. On July 13 the index posted its seventh-largest single-day decline on record – a session that ranked alongside the Lehman collapse in percentage terms.
This is not simply AI sentiment. It is leverage, structurally embedded through a product created with official encouragement and since described by a South Korean lawmaker as turning the KOSPI into a casino. In late May, 16 single-stock leveraged exchange traded funds (ETFs) tied exclusively to Samsung and SK Hynix were launched. Retail investors poured approximately 13.8 trillion South Korean won (₩) – roughly $9.2 billion – into these products. At their peak they accounted for more than 70% of the KOSPI’s daily trading value. The daily rebalancing mechanics of a short-gamma structure force fund managers to buy more as prices rise and sell more as prices fall – mechanically amplifying every move. When SK Hynix dropped on an earnings downgrade and geopolitical concerns, the rebalancing selling deepened the decline, which triggered more rebalancing selling, which triggered circuit breakers, which accelerated forced liquidations from retail margin accounts. The loop fed itself.
Korea clamps down on ETFs
South Korea’s Financial Services Commission announced on Thursday morning it will halt new listings of single-stock leveraged ETFs with immediate effect and raise the minimum deposit requirement for leveraged ETF trading from ₩10 million to ₩30 million ($20,300), effective from 5 August. The Financial Supervisory Service governor has acknowledged he wishes the products had never been launched. The government that encouraged their creation is now trying to contain what they produced.
Samsung and SK Hynix are not peripheral names – they are core suppliers to the global AI infrastructure buildout. When their stocks move 10% to 15% in a single session driven by ETF rebalancing mechanics rather than fundamental news, the price signal is noise, but the noise travels. Nasdaq 100 futures dropped more than 2% on the worst KOSPI session. Micron, Lam Research and AMD all followed. The semiconductor sector does not have clean borders. What Korea has demonstrated in compressed form is what happens when a speculative cycle, built on a genuine structural theme, attracts enough retail leverage to detach price action from fundamentals.
Investing or speculation?
The AI demand story is real. The pricing of that story, in both South Korea and the US, has run well ahead of the earnings evidence. Warren Buffett said this week that markets are increasingly driven by speculation rather than investing. Korea just showed what that looks like when the leverage is large enough and concentrated enough to trip the circuit breakers.
ENDS
