When the Semi Trade Turns Explosive, the Next Move Is Often Volatility

"It's not easy to "reject greed" if you're sitting on huge semi gains. It's easier said than done to "reject greed" and go for relative value, though. With the semi trade plunging just over 4% to cap off a great week for broad markets, the terrain could be about to stay rockier for a whole while longer."

Semiconductor stocks are rising again as AI enthusiasm returns, with Cerebras debuting and renewed questions about whether market excitement is excessive. Software faces weakness and uncertainty about which companies can monetize AI versus those that mainly wrap existing large language models. Hardware is viewed as the preferred exposure, but crowded positioning raises concerns about when gains peak and how severe any drawdown could be. Semis have become riskier over the past year, while software appears less risky after valuation resets. Parabolic group moves increase the need to consider volatility and the difficulty of rejecting greed after large gains.

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