Volatility in technology stocks has climbed to its highest level since 2002 relative to the S&P 500, as traders worry that a stretched Nasdaq 100 rally is turning turbulent. The addition of SpaceX to the index on Tuesday could widen the gap further.
The cost of hedging technology stocks has climbed to its highest level relative to the S&P 500 since the dot-com era, a sign that traders expect the market's best-performing corner to keep swinging wildly. The Cboe NDX Volatility Index, tied to the Nasdaq 100, now sits near 27 — its highest level since 2002 against the Cboe VIX, which tracks expected swings in the broader S&P 500.
The anxiety sits beneath a calm surface. Worries are growing that positioning in the Nasdaq 100 has become excessive after a 30% rally from late March. According to Advisor Perspectives, Maxwell Grinacoff, head of US equity derivatives research at UBS Group AG, described the elevated swings as "pretty astounding".
Tech swings outpace the broader market
The divergence was on display on Tuesday, when Nasdaq 100 futures traded down 1.1% while contracts on the S&P 500 fell 0.2%. The gap follows a stretch of outsized daily moves.
The Nasdaq 100 gained 1.3% on Monday, its sixth straight session with a move exceeding 1% in either direction — the longest such run since August 2024. That pushed the index's realized 30-day volatility to 29.7, the highest since the aftermath of Donald Trump's tariff rollout a year ago.
SpaceX joins the index
More swings could be coming. Space Exploration Technologies Corp. joins the 100-member index on Tuesday, potentially widening the divergence between top technology stocks and the S&P 500. Amy Wu Silverman of RBC Capital Markets wrote that IPOs are inherently more volatile, and that the spread between the two indexes would likely stay wide until SpaceX also enters the S&P 500.
One investor appeared to play that inclusion trade directly last week, spending $2 million for the right to buy 1 million shares at $330. Gyrations in AI and semiconductor stocks have also been amplified by levered exchange-traded funds in the US and Asia.
Grinacoff sees the crowding as a sign. He notes that active managers — including traditional mutual funds chasing their benchmarks — have grown more committed to stocks, which could leave less institutional cash to buy a future dip if conviction in the AI trade fades.
Source: Advisor Perspectives (Bloomberg News)
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