One of the main reasons behind the recent volatility is tomorrow’s $MU (+5,48%) earnings report. At this point, the market is treating Micron earnings almost like $NVDA earnings back in 2023 and 2024. Expectations are extremely high, and any surprise could have a significant impact on the entire AI sector.
At the same time, South Korea’s stock market experienced a sharp selloff after reports that lawmakers are discussing a tax on unrealized stock gains. The situation is amplified by the fact that leverage in the Korean market is at record highs, with margin loans exceeding $26 billion.
In addition, leveraged ETF trading in the US is also near record levels. When leverage becomes this widespread, market moves tend to be much more aggressive in both directions.
This helps explain why we are seeing large intraday swings and why the S&P 500 was able to recover sharply from its session lows within just a few hours.
Personally, I don’t see any change in the long-term AI narrative. If anything, demand for computing power and data centers continues to strengthen. After such a strong rally, increased volatility is completely normal.
As I often say, volatility is not necessarily the enemy of investors. In many cases, it is what creates the best opportunities.