Semiconductors up 39% in a month! Goldman Sachs hedge fund head: Hasn't happened since the dot-com bubble, I won't chase this market.

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Global technology stocks have experienced a parabolic surge this month. Tony Pasquariello, head of Goldman Sachs' hedge fund business, issued a cautious warning: some markets face "blow-off top" risks, but the main trend of the bull market remains unchanged.

As an important market window approaches, Pasquariello released a brief market assessment on Monday. He pointed out a reality baffling many investors: while wars have not ended, the stock market is soaring. Over the past month, global tech stocks saw a parabolic rise. The Philadelphia Semiconductor Index (SOX) has not declined in a single day since the ceasefire, with a monthly increase of 39%. Its Relative Strength Index (RSI) is at 85.

More notably, SOX's current trading price is nearly 50% above its 200-day moving average—a deviation not seen since the peak of the internet bubble. Meanwhile, Goldman Sachs' US equity sentiment indicator is now at 1.5 standard deviations, its highest level since December 2024. Historical data shows when this indicator is between 1.5 and 2, the S&P 500's average return over the next two weeks and one month is -0.2% and -0.4%, respectively.

Pasquariello said, considering these factors, his core judgment remains: this is a bull market with an upward main trend; but he clearly stated, "I will not chase this market, nor will I short it," and he prefers to cope with the current situation by holding a "long Delta/long volatility" portfolio.

Semiconductor Surge Sets Record Since Internet Bubble, "Blow-off Top" Risks Emerge

Pasquariello used the US semiconductor sector as the core case of this tech stock frenzy. The SOX index’s 39% monthly increase took its deviation from the 200-day average close to 50%, a level last seen during the peak of the internet bubble in 2000.

Looking at monthly returns in historical sequence, SOX's performance this month is the strongest single month in this rally, and the closest historical reference is February 2000—just weeks before the bubble burst.

Pasquariello pointed out, given the "temperature" of these moves, investors must seriously consider "blow-off top" risks in specific sectors. He listed this as one of the two most noteworthy risks in the market right now.

Iran Situation Presents Tail Risk for Energy Supply, Oil Price Target Raised

The second major risk comes from geopolitics. Pasquariello noted that Iran’s situation and its continued impact on global energy supply may have its "most acute point" still ahead. At present, finished oil prices continue to rise, and the overall distributions for crude oil, rates, and forward volatility have climbed to higher platforms compared to before the war.

Against this backdrop, Goldman Sachs has raised its Brent crude Q4 target price from $80 to $90 per barrel. According to Goldman Sachs’ latest assumptions, normalization of Persian Gulf exports is postponed from the previously expected mid-May to the end of June, with a slower pace of output recovery. This makes scenarios of longer-lasting supply shocks and greater upside risk for oil prices more probable.

Pasquariello also quoted a passage from the US Marine Corps operations manual to illustrate the uncertainty of the current situation: "The nature of war makes certainty impossible. All actions in war are based on incomplete, inaccurate, and even contradictory information. War is inherently unpredictable."

Sentiment Indicator Elevated, Historical Data Hint at Short-term Return Pressure

Pasquariello cited research from Goldman Sachs strategist Ben Snider, noting that the US equity sentiment indicator is more reliable when readings are low, but historically high readings typically herald below-average returns in the coming weeks.

Specifically, when the indicator’s reading is between 1.5 and 2, the S&P 500’s average return over the next two weeks is -0.2%, and the average return over the next month is -0.4%. In the past five years, the indicator has exceeded 1.5 three times: end of 2024 (when the market came under pressure in early 2025 due to DeepSeek and tariff shocks), March 2024 (the market saw a small retracement in April), and July 2023 (the market dropped about 10% in the following months).

Snider noted each retracement was fundamentally driven, but high positioning amplifies the impact of fundamentals on the market.

Active Capital Markets, Small-caps’ AI Exposure Expands

Besides the above risks, Pasquariello also outlined several noteworthy structural changes in the markets.

In the small-cap space, stocks highly related to AI now account for 17% of the Russell 2000 index (RTY), showing the AI theme has deeply penetrated the small-cap market.

In capital markets, Goldman Sachs now expects 100 IPOs this year with a total fundraising scale of $160 billion—a figure likely to break historic records.

Long Delta/Long Volatility: No Chasing, No Shorting

Based on the above judgments, Pasquariello gave clear trading advice: don’t chase, don’t short, maintain a "long Delta/long volatility" position structure.

Specifically, he recommends focusing on S&P 500 three-month expiry, 25 Delta call options, with current implied volatility at around 13%. He believes, as prices rise, the market makers’ Gamma exposure will tend to shorten, making this strategy a reasonable way to keep market participation while reducing overall risk exposure.

In his view, the essence of the current US stock market is seeking balance between left-tail geopolitical risks and right-tail opportunities in the tech sector, with investors showing their choices through actions—even if those choices have accumulated considerable fragility.

Risk Warning and DisclaimerThe market carries risks; investment requires caution. This article does not constitute personal investment advice and does not take into account any individual user’s specific investment goals, financial situation, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article suit their particular circumstances. All investments made accordingly are at your own risk. ```