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 AI rally and its most volatile component. Micron fell 9% in a single session this week, 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.
A LOOK AT THE MARKETS
The week’s key themes:
- Tech weakness continues to set the tone in equity markets
- Soft US inflation data reduces pressure for imminent rate hikes
- Oil climbs over 10% in the week as conflict between the US and Iran escalates
- Dollar retreats but remains in robust terrain
Equities
Technology weakness set the tone in the US this week, where futures remained under pressure after Thursday’s sell-off. Semiconductor names bore the brunt of the move as investors questioned elevated AI valuations: Micron and AMD lost more than 5%, Broadcom was down about 5%, SanDisk fell over 12% and SK Hynix ADRs dropped more than 13%. The Nasdaq declined 1.4%, while the S&P 500 slipped 0.51% and the Dow eased 0.2%. Entertainment streaming company, Netflix, also weighed on sentiment, falling nearly 9% after results disappointed.
In the United Kingdom (UK), industrials helped the FTSE 100 recover from early weakness and finish around 0.5% higher at 10,572 on Thursday, even as miners and technology shares lagged. Manufacturer of intelligent flow solutions, Rotork, was the standout, rising more than 60% after accepting global electrification and automation company, ABB’s £4.1 billion takeover offer, which also supported engineering peers, Weir, IMI, Spirax and Smiths. Distribution business, Diploma, gained over 6% after lifting its margin outlook. By contrast, technology and logistics company, Ocado, information services company, Experian, digital review platform, Trustpilot, and property business, Frasers, ended weaker, while the latest UK gross domestic product (GDP) print showed modest growth of only 0.1% in May.
Across Europe, equity indices finished little changed as company-specific strength was balanced by renewed inflation concerns from higher energy prices. The Euro STOXX 50 closed at 6,268 and the STOXX Europe 600 at 643. Luxury shares continued to benefit from Richemont’s strong update, with LVMH and Hermès each gaining 1.5%, while Publicis rose 3% after upgrading guidance. Pressure was more evident in utilities and AI infrastructure counters such as Enel, Schneider and Siemens Electric. Energy giant, TotalEnergies, fell 1.5%, despite firmer oil prices, as weaker LNG earnings are expected to weigh on second-quarter profits.
South African equities traded in a narrow range, with the JSE All Share Index ending Thursday at 110,337, just 0.02% below the previous Friday’s close. The muted weekly move reflected a cautious market backdrop rather than a decisive change in direction. Year on year, the index remains 13.34% higher, but the 4.90% decline over the past month shows that the pullback from earlier record levels is still unfolding.
Bonds
US Treasuries were little changed, with the 10-year yield near 4.56%. Softer June inflation data reduced pressure for an immediate US Federal Reserve (Fed) move, as Consumer Price Index (CPI) inflation numbers undershot expectations and producer prices unexpectedly fell. Even so, oil-driven inflation risks resurfaced after US strikes on Iran and retaliatory attacks on US bases. A July hike is unlikely, but September moves remain uncertain.
UK gilts remained under pressure, with the 10-year yield around 4.97%, close to a two-month high. Stronger activity data and higher oil prices supported expectations of further Bank of England (BoE) tightening. UK GDP rose 0.1% in May after April’s contraction, while three-month growth of 0.7% beat forecasts. Markets now expect BoE hikes in November and by March 2027, despite BoE Deputy Governor, Sarah Breeden’s more cautious tone.
In Europe, Germany’s 10-year bund yield rose above 3.1%, its highest level since 20 May. Higher oil prices and Middle East supply concerns, including risks around Iranian shipping and the Strait of Hormuz, lifted the inflation premium. After June’s European Central Bank (ECB) hike, markets fully price another increase in September and one more by next spring, although policymakers signal a July hike is unlikely.
South African bonds weakened, with the 10-year yield near 8.60%, its highest level since 11 June. Global risk dominated as US-Iran tensions pushed oil higher and reinforced expectations of restrictive policy. Locally, the 23 July South African Reserve Bank (SARB) decision remains finely balanced: lower post-ceasefire oil prices support a hold, but rising June inflation and Governor Lesetja Kganyago’s tightening bias keeps hike risk alive.
Commodities
Oil markets moved sharply higher, with Brent crude trading above $85/barrel and on course for a weekly gain of roughly 11%. The move was driven by fears that the escalating US-Iran conflict could disrupt key Middle East supply routes. US strikes reportedly reached an oil tanker near Iran’s main export terminal, while Washington warned that infrastructure could be targeted if diplomacy fails. Tehran also signalled possible pressure on the Red Sea’s Bab el-Mandeb Strait by Yemen’s Houthi rebels, and traffic through the Strait of Hormuz has already fallen sharply.
Gold weakened despite the geopolitical backdrop, holding below $4,000/ounce and heading for a weekly loss of more than 3%. Higher oil prices are keeping inflation and rate expectations in focus, limiting demand for the non-yielding metal. Softer US inflation data reduced the likelihood of a July Fed hike, but uncertainty around a September hike remains. Iran’s retaliation against US bases added to regional risk, yet markets remained more focused on the potential inflationary impact of prolonged energy disruption.
Currencies
The US Dollar Index is holding near 100.7 but is set for a weekly decline as softer US inflation reduced expectations of an imminent Fed hike. June CPI was below forecast, producer prices unexpectedly fell, and US jobless claims dropped to 208,000. However, Geopolitical risk has limited dollar weakness as US-Iran strikes have pushed oil higher and kept inflation concerns alive. A July hike is now largely priced out, while a September hike remains uncertain.
The euro moved above $1.145/€, close to its strongest level since 19 June, helped by dollar softness and expectations of further ECB tightening. Markets fully price a September hike and another increase by spring 2027 after the ECB’s June hike, the first in three years. Still, policymakers have signalled caution, making July tightening unlikely.
Sterling is trading above $1.35/£, its strongest level since mid-May, supported by the UK’s May GDP growth of 0.1% and reduced fiscal uncertainty. Reports that the UK Secretary of State, Shabana Mahmood, could replace Rachel Reeves as the Chancellor of the Exchequer reassured investors, easing concerns over a more expansionary Treasury appointment. Higher oil prices also reinforced expectations for BoE hikes in November and by March 2027.
The rand remains rangebound, but is 1% lower week on week, holding its ground despite spillover from Middle East tensions and Strait of Hormuz uncertainty. Support came from improved domestic fundamentals, including SARB credibility, better fiscal metrics and reform momentum. SARB Governor, Lesetja Kganyago’s hawkish stance keeps further tightening possible if inflation pressure persists.
*Please note that all information is at the time of writing.
Key indicators:
USD/ZAR: 16.49
EUR/ZAR: 18.87
GBP/ZAR: 22.17
BRENT CRUDE: $85.34
GOLD: $3,995.75
Sources: Bloomberg, Cboe Global Markets, CNBC, Investing.com, Korea JoongAng Daily, Seoul Economic Daily and Trading Economics.
Written by: Citadel Advisory Partner and Citadel Global Managing Director, Bianca Botes.