The semiconductor trade has been one of Wall Street's hottest stories of the decade. The relentless demand for artificial intelligence infrastructure pushed valuations to unprecedented highs, with the Invesco PHLX Semiconductor ETF (SOXQ) up 82.98% year to date.

But beneath the record highs, one market indicator is flashing an uncomfortably familiar warning. The Philadelphia Semiconductor Index (SOX) has recorded nine single-day gains of 5% or more over the last 60 trading sessions.

That kind of volatility is exceptionally rare. In fact, historical data shows this exact pattern has only been exceeded during the collapse of the dot-com bubble in the early 2000s.

Clusters of one-day rallies are more typical of bear markets, when brief squeezes rip prices higher in the short term. What makes today's environment different is that semiconductor stocks are still trading near record highs.

That divergence leaves investors facing the question: is this strength a sign of a lasting technological transformation (this time is different!?) or is it a warning that expectations are extreme?

An Earnings Test

The next major test arrives with Micron Technology, Inc. (MU) earnings report later today.

Micron is the focal point of the AI infrastructure buildout, owing to its exposure to high-bandwidth memory (HBM), a critical part of advanced AI systems. However, expectations are enormous. Analysts are forecasting a nearly tenfold increase in earnings per share compared with the same quarter a year ago.

The report may matter far beyond Micron itself.

“If MU confirms tomorrow that DRAM, NAND and HBM tightness can last into 2027 or 2028, then memory companies have more reason to keep spending on capacity and advanced manufacturing tools,” Futurum Equities Chief Market Strategist Shay Boloor noted ahead of the release.

That spending would ripple through the supply chain, benefiting equipment makers such as ASML (ASML), whose lithography systems are essential for producing advanced chips.

Yet, even if Micron delivers, it doesn't guarantee a good stock performance. The company has beaten earnings and revenue expectations in each of its last eight quarters.

Despite that streak, its stock has frequently fallen immediately after reporting. Investors have repeatedly demanded more than strong results—they seek guidance that exceeds already lofty expectations.

The Unexpected Hedge

Expectations are becoming a driving force behind the market. When valuations stretch, hope still tends to run in front of them.

According to data highlighted by Acquirers Funds founder Tobias Carlisle, analysts currently expect S&P 500 earnings to grow roughly 24% annually over the next five years. That is about double the historical norm and even higher than projections from the dot-com era.

Carlisle views those forecasts less as realistic estimates and more as a measure of investor optimism.

“It's a sentiment indicator, not a forecast you should trust,” he said. “Analysts are notoriously bad at five-year earnings projections, and the estimates tend to be most wrong precisely when they're most extreme.”

If those expectations prove unrealistic, the consequences could be significant for technology stocks that have led the market higher.

Still, history suggests the fallout may not be evenly distributed. BCA Research Chief Economist Peter Berezin revisited the surprising dynamics of the late 1990s.

“In the initial phase of the dotcom bust, tech stocks crashed while the rest of the market went up. We may be entering a similar phase now. Ironically, this means that a good hedge for stocks may be… other stocks.”

MU Price Action: Micron Technology shares were up 3.65% at $1090.15 during premarket trading on Wednesday, according to market data.