The bull market is back, and the market's speculative nature has returned! As the semiconductor sector launches a counteroffensive and restarts the main upward trend of the stock market, FOMO may trigger significant volatility.

Since August, amidst a significant rebound in technology stocks predominantly driven by the semiconductor sector and the broader theme of AI computing infrastructure, the recent severe volatility in global stock markets has quickly abated. However, statistics on options positioning in the U.S. stock market indicate how swiftly investor sentiment can switch between extremes of extreme fear and greed-driven FOMO (Fear of Missing Out) bullishness. It has been observed that the volatility curve of the benchmark U.S. stock indexthe S&P 500shows that as earnings season approaches its end and the schedule of key events diminishes, traders exhibit overall optimism towards future risk factors. Current market pricing indicates that the daily fluctuation of the S&P 500 index will significantly be below 0.8% for the remainder of this month, with key market events including the earnings report of NVIDIA Corporation (NVDA.US), the global central banking symposium in Jackson Hole, becoming the focal points. Meanwhile, the Cboe Global Markets Inc. Volatility Index (VIX), also referred to as the fear index, closed last Friday at its lowest level of the year. As illustrated in the chart above, the S&P 500 might experience greater volatility during the NVIDIA Corporation earnings and the Jackson Hole central banking symposium. Note: The implied volatility is calculated based on traded S&P 500 index options. It is important to note that a low VIX does not equate to low market risk; the extreme sentiment associated with Short Gamma and Call FOMOwhere market positioning flips quicklymeans that the stronger the bull market, the more sensitive the short-term volatility amplifiers become. Some cautious Wall Street strategists believe that behind these very pronounced bullish indicators lurks the possibility of increased market instability in the short term. However, for leading hedge funds on Wall Street and most veteran strategists, the fundamentally driven medium-term outlook remains bullish, although the short-term trading structure may indeed shift to a neutral, cautious stance. The VIX has fallen to a yearly low, and market pricing for daily fluctuations for the remainder of this month is below 0.8%, suggesting that investors remain relatively calm regarding macroeconomic and earnings risks. Furthermore, the strong earnings in the stock market, along with robust fundamentals in the AI computing supply chain, continue to fuel strong AI investment demand, underpinned by an "buying on dip" inertia that supports risk assets. What truly deserves caution is that the market has rapidly shifted from "buying puts to protect against a crash" at the end of July to "snapping up calls to avoid missing out" in August, while market makers have transitioned from long Gamma to Short Gamma territory. Under this structure, forced buying during upswings and forced selling during downswings will amplify bidirectional volatility. Rising volatility does not mean the end of the bull market; rather, it warns that the upward trend continues, yet the market has shifted from a "stable bull market" to a phase characterized by "high momentum, high emotional sensitivity, and high tail risk." As Wall Street giants like Morgan Stanley and JPMorgan recently raised their year-end target points for the S&P 500 above 8000, coupled with the dramatic de-leveraging within the crowded AI technology theme in July, which has not destroyed the main logic behind the global stock market's bull run but rather reset positions and volatility, a technology/AI-led bull market trajectory has been firmly reestablished. However, this is no longer an early bull market characterized by "low risk and low crowding." In other words, the bullish tone led by technology stocks has indeed returned, bolstered by AI earnings, semiconductor fundamentals, corporate buybacks, and renewed leverage funds that are creating a rare resonance; yet, the investment phase has shifted from "buying AI amid panic" to "managing AI investment portfolios amid extreme FOMO euphoria"the trend remains bullish, but risks have transitioned from fundamentals to positioning, Gamma risk, long bond yields, and valuation expansion tolerances. The most dangerous situation may well be "looking too calm"! Beneath the seemingly peaceful exterior of U.S. stocks lies the potential for a "volatility bomb." Recently, the FOMO-driven demand for upside calls has led to a sharp collapse in short-term options volatility skew, while prior to that, in late July, the market had widely bought index volatility and skew as traders were aggressively purchasing puts for hedging. This sudden reversal underscores the current fragility of the market: it is increasingly swayed by investor sentiment, which is rapidly shifting from "fear of market decline" to "fear of missing out on the upswing." Trend-following bullish strategies can still be maintained, but investors should not misinterpret a low VIX as low risk; the current critical threat is that if any major catalysts, such as the NVIDIA Corporation earnings report or Jackson Hole meeting, disrupt the momentum, the Short Gamma mechanism could rapidly amplify what would otherwise be an ordinary pullback. The current market is starting to exhibit "superficial low volatility, underlying high fragility," as investors were purchasing index volatility and put protection at the end of July, only to aggressively buy calls a few days later due to FOMO, which resulted in a rapid reversal in short-term skew; meanwhile, rebalancing of leveraged ETFs, positions of Short Gamma market makers, reductions in supplies of daily expiration options (0DTE) iron condor strategies, and summer's low liquidity collectively reduced the market's volatility "shock absorber" effect. Additionally, the S&P 500 call/put ratio has risen to one of the most bullish levels in at least four years, with short-dated call skew reaching a two-year high, and occurrences of the index rising alongside a simultaneous increase in the VIX signal classic FOMO options squeeze. Steve Sosnick, chief market strategist at Interactive Brokers Group Inc., stated, "What we are witnessing now is a result of momentum strategies attracting such a vast amount of investor capital and such intense market attention. We have become extremely sensitive to changes in momentum." Some technical factors may also make the market more susceptible to sudden shifts in investor sentiment. This includes the current state of market makers in Short Gamma, driven by trading in S&P 500 index options and rebalancing activities of leveraged ETFs. In a negative Gamma environment, when stocks rise quickly, market makers must buy stocks for hedging; conversely, when stocks fall, they must sell, further amplifying market volatility. As shown in the chart above, the S&P 500 index volatility skew is evident. Meanwhile, strategists at UBS Group AG in a recent report noted that the so-called short-dated iron condor strategies, which were widespread earlier this year and greatly helped lower intraday price volatility, have now made a small-scale reappearance, potentially opening up the space for larger price fluctuations. The relatively tepid market trading activity during the summer might also further amplify market moves. Kieran Diamond, a derivatives strategist at UBS Group AG, commented, "Since early August, the positioning pattern of S&P 500 options has undergone quite a dramatic reversal. At that time, the index rose from a long Gamma area for market makers to a Short Gamma risk management area." He added, "The record levels of call option buys have further intensified this change, and as the market began to show signs of a squeeze, one of the most significant providers of upward options also started to withdraw." He refers here to the previously popular and increasingly focused iron condor strategies for daily-expiring S&P 500 options. Christopher Jacobson, co-head of derivatives strategy at Susquehanna International Group LLP, believes the recent trends and directional changes in call option skew are "notably consistent," and noted that current options volatility metrics appear "very, very cheap." However, Ritik Katte, co-founder and CIO of London-based hedge fund MCD Capital, remarked that strategies capitalizing on the swift shifts in investor sentiment are becoming increasingly popular, while intraday momentum trading, aimed at profiting from more intense market volatility, is also gaining favor. He mentioned that his firm is positioning itself accordingly to "benefit if any side of the skew unexpectedly trends." According to Tanvir Sandhu, chief global derivatives strategist at Bloomberg Intelligence, "On the surface, the global stock market appears exceptionally calm. However, beneath the surface, the market is anything but stagnant: skew, Gamma, and options positioning are rapidly flipping." "The bull market is back, and so is the risk appetite"! With AI earnings, trillion-dollar buybacks, and the FOMO trifecta, the semiconductor cleanout in July is evolving into a new leg of the global technology rally. Morgan Stanley previously raised its year-end target for the S&P 500 to 8,000 points for the end of 2026, and 8,300 points for mid-2027, primarily based on positive operating leverage, the adoption of leading AI technologies by more global companies, pricing power, and the ongoing expansion of AI capital expenditure cycles. Goldman Sachs Group, Inc. is also projecting 8,000 points, while JPMorgan raised its forecast from 7,800 to 8,000 points on August 10, with projected EPS for 2026/2027 increased to $365/$420. Citigroup expects a target of 8,100 points. JPMorgan particularly emphasizes the accelerated growth of AI-related cloud businesses among cloud computing giants like Alphabet Inc. Class C parent Alphabet, Amazon.com, Inc., and Microsoft Corporation, as well as order backlogs and cash flow visibility in cloud businesses, demonstrating that AI CapEx is beginning to convert into actual revenue, signifying that the market is transitioning from "believing the AI story" to validating AI investment returns (ROIC). The most compelling confirmation signals come from the semiconductor market, which suffered the most severe liquidation in July: the hardest-hit AI computing hardware Beta has, ironically, become the vanguard of the recovery. The Philadelphia Semiconductor Index (SOX) plummeted nearly 29% from its record high on June 22 to its low on July 29, but as of August 13, it had rebounded approximately 20% from the low, nearing the end of its technical bear market in just about 19 trading days. The Korean benchmark index KOSPI, which has a significant weighting from SK Hynix and Samsung, has swiftly risen over 20% from its July 30 low, surging another 11.5% in the week of August 14 to reach 6,977.94 points, re-entering a technical bull market. The Korean drop in July was strongly influenced by leveraged ETFs and forced unwinding factors, with levered products' sizes dropping from about $50 billion to $17 billion; however, the fundamentals of AI Memory (super bull market for AI-driven memory chips) have not collapsed in sync, and the industry continues to discuss supply shortages for DRAM/HBM and a demand gap in 2027. Thus, this AI-led bull market increasingly aligns with the positive feedback loop of "de-leveragingmarket position resetrisk reassumedFOMO sentiment intensifying," rather than a dead-cat bounce following the peak of an AI earnings cycle. Further evidence of capital flow provided by another Wall Street giant, Citadel, indicates that this rebound has progressed from "fundamental repair" into a phase of "self-reinforcing buying." Its official August report shows that S&P 500 EPS growth for Q2 was around 33%, and the path for earnings upgrades is one of the steepest since at least 2000; meanwhile, although the index reached a record high, the 12-month forward P/E ratio has dropped from approximately 23.1 times last October to 20.1 times, indicating that primarily earnings expansionnot multiple expansionhas been driving the index higher. More importantly, Citadel's calculations reveal that systemic de-leveraging has matured, with retail investors becoming net buyers again, net inflows into ETFs this year amounting to about $1.6 trillion, and over $1 trillion in corporate buyback authorizations returning to execution windows. Over 70% of S&P components are above their 200-day moving averages, while low volatility is beginning to release risk budgets for systematic strategies such as CTAs and risk parity. This indeed forms a classic bull market positive feedback loop: earnings upgradesstock price increasesvolatility decreasessystematic funds increase positionspassive funds and buybacks absorb supplylow allocation funds chase higher, complementing the aforementioned deleveraging bull market positive feedback. However, as the above options data suggests a "superficial low volatility, underlying high fragility" in the U.S. stock market, the microstructural fragility of the bull market itself merits investor attention. The VIX has fallen to a yearly low, with market pricing for daily fluctuations of the S&P 500 for the remainder of this month insufficiently below 0.8%; yet, on August 4, SPX call volumes reached a historic record, nearly double the past year's daily average, and nearly 35% of S&P constituents experienced a 3-month call skew inversion. Meanwhile, as market makers moved from long Gamma territory into Short Gamma territory, they will be forced to buy during price rises and sell during declines, making FOMO capable of creating melt-ups while also magnifying the next negative catalyst. The technology-led bull market has indeed returned, but the investment phase has shifted from "buying AI amid panic" to "managing AI investment positions amid FOMO euphoria," which aligns highly with Morgan Stanley's recent suggestion of a "shift from early-cycle beta diffusion to mid-cycle quality rotation." Moving forward, those that can sustainably outperform will not merely be the ones that "rise with AI," but rather, those companies that can translate AI growth into profitability, free cash flow, and ROIC.