AI stocks are holding the market together, while macroeconomic signals are turning bearish across the board – the next wave of market activity may be coming with great momentum.

US tech stocks are currently in a rare state of "torn apart": AI fundamentals continue to strengthen, but the appreciation of the yen, rising interest rates and widening credit spreads are constantly releasing macroeconomic pressures, while the Nasdaq 100 index has consistently refused to break down.

The real risk for tech stocks right now is not in the demand for AI, but in the possibility of a rapid repricing in the market should the macro environment and systemic leverage suddenly shift.

Rich Privorotsky, head of trading at Goldman Sachs, pointed out that cutting-edge AI models continue to push the boundaries of their capabilities, demand for Google Cloud and AI servers remains strong, and Broadcom even believes that actual demand has exceeded its fiscal year 2027 forecast of $115 billion. However, at the same time, a stronger yen, widening CDS spreads for tech stocks, and rising US Treasury yields all point to tightening financial conditions.

When fundamentals continue to improve, macroeconomic signals weaken, and prices refuse to confirm either side, the market is often brewing for a more dramatic directional move. The volatility market is also sending similar signals: the S&P 500's six-month correlation has fallen to 11, and SPX straddle option prices are near their yearly lows, indicating that the market is still underpricing significant future volatility.

The bullish logic for AI remains unchanged; the real risk comes from the macro environment.

The fundamentals of AI continue to strengthen. Privorotsky points out that cutting-edge models are breaking through previously intractable mathematical and scientific problems , including the solution to the Navier-Stokes equations proposed by OpenAI. The new generation model Astra has been trained on more than 100,000 GPUs, with peak power consumption reaching 70 to 100 megawatts, and its capabilities significantly surpass those of its predecessor .

Demand has not cooled significantly either. Google Cloud's AI orders exceeding $100 million have more than doubled both month-on-month and year-on-year; the payback period for AI server investments has been compressed to less than two years, and even shortened to about one year after adopting self-developed chips.

Broadcom stated that actual AI demand has already exceeded its fiscal year 2027 forecast of $115 billion. Currently, the factors constraining industry expansion are shifting from insufficient demand to power supply, data center site selection, and supply chain capacity.

Therefore, if tech stocks turn down from their current levels, the most worrying factor is not a sudden collapse in AI demand, but rather the simultaneous pressure from interest rates, the yen, and leverage.

A stronger yen poses a hidden risk to carry trades.

The appreciation of the yen is becoming one of the most noteworthy macroeconomic variables in the market.

The yen has continued to strengthen as markets continue to trade on the Bank of Japan's further tightening of policy and the repatriation of Japanese capital. US Treasury Secretary Bessant recently made a strong statement, saying, "I am the house now...you can bet on me however you want." However, this has not changed the yen's appreciation trend.

What we really need to be wary of is carry trade in yen-funded assets. Once Japanese capital flows back to Japan at an accelerated pace, Japanese bonds and stocks could absorb even more funds, while simultaneously forcing the US market to deleverage.

Historically, a stronger yen has often corresponded to decreased risk appetite and increased volatility. However, the Nasdaq 100 index has shown greater resilience to the yen's appreciation in this round. Whether this indicates that tech stocks are sufficiently resilient or that macroeconomic pressures have not yet been fully transmitted remains to be seen and requires market confirmation.

CDS spreads widened, but the stock market refused to acknowledge it.

The credit market has issued clearer warnings.

Since mid-August, CDS spreads for technology stocks have continued to widen. When CDS spreads widened rapidly in July, the Nasdaq 100 index experienced a significant pullback; however, this time, with the credit spreads widening again, the stock market has barely reacted.

The credit market is issuing warnings, but the stock market refuses to confirm them.

Similar signals are emerging in the interest rate market. The continued rise in US Treasury yields should have further suppressed highly valued tech stocks, but large-cap tech stocks have remained resilient. In the short term, this reflects the market's strong absorption capacity; however, if yields continue to climb, the pressure currently absorbed by prices may be released in a concentrated manner.

Volatility is extremely compressed; the next breakout may be even more powerful.

Rather than judging the direction, what the market should pay more attention to right now is: to what extent has volatility been compressed?

The six-month realized correlation of the S&P 500 has fallen to 11. In the past 25 years, only February 2007 and January 2018 have seen similar levels, the latter followed by "Volmageddon" (the "volatility apocalypse"). Analyst Garrett points out that such extremely low correlation has rarely been sustained in history, and is often accompanied by a rapid return to normal index volatility and convexity.

Meanwhile, SPX straddle option prices remain near their year-to-date lows, suggesting that the market is still underpricing significant future volatility.

The current market presents a rare combination: AI fundamentals are strengthening, macroeconomic and credit markets are issuing warnings, the Nasdaq 100 index is refusing to choose a direction, and volatility is suppressed at low levels. Once prices finally break out, the market may see a rapid rebound in volatility, resulting in a sharp, one-sided trend.

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