The AI Trade Is Coming Apart

Pressure Is Building Across Tech

The technical picture across the AI complex continues to deteriorate. Nasdaq is testing key support, semiconductors have confirmed a bearish moving average crossover, relative tech volatility remains elevated, and Korea continues to flash warning signs.

NDX futures are trading just below the key 28,500 support as of writing. The bearish 21-day/50-day moving average crossover remains firmly in place, reinforcing the weakening short-term technical picture. After reversing from the upper end of its longer-term channel, the index is now testing the mid-channel trendline. A decisive break below the range that has held since early May would leave the 200-day moving average near 27,000 as the next major downside target. For now, however, the early-May range lows could still hold. Today's session should provide an important test.

The bearish 21-day/50-day moving average crossover is now firmly in place for the SOX Index. Meanwhile, prices continue to respect the downward-sloping channel that has guided the pullback since the all-time highs. The first meaningful support sits just above the 100-day moving average near 11,200. The 200-day moving average remains well below current levels, leaving scope for a deeper pullback before longer- term technical support becomes a more important factor.

The gap between the VXN and the VIX continues to stay wide. Investors chased upside technology volatility during the AI melt-up. Now they're paying up for downside protection in Nasdaq, leaving relative tech volatility elevated, as the sector trades well offered.

It's not just the charts pointing in the same direction. Korean exports are beginning to echo the weaker technical picture. Per-workday exports fell 2.3% m/m SA, with non-chip tech exports down 11.2%. Exports to the US and Taiwan dropped 10.4% and 28.4%, respectively, accounting for roughly two- thirds of the decline.

KOSPI remains at the heart of the global AI trade. Its latest persistent underperformance versus the SOX suggests risk appetite is continuing to deteriorate, making it a useful leading indicator for the broader AI complex.

We've written extensively about the KOSPI VIX. During the AI melt-up, higher spot prices and aggressive upside option demand sent implied volatility soaring. As we've argued in recent weeks, the reverse works just as powerfully. As KOSPI has rolled over, investors have increasingly sold expensive Korean theta, pushing the KOSPI VIX sharply lower. At first glance this appears inconsistent with a rising VIX, but the two indices reflect very different dynamics. The VIX is rising on growing downside hedging demand, while the KOSPI VIX is falling as elevated volatility premiums normalize through option selling.