Investors may still be pouring money into artificial intelligence, but one closely watched market indicator suggests they're demanding a historically large premium to own Big Tech.
The spread between the Nasdaq-100 Volatility Index (VXN) and the CBOE Volatility Index (VIX) has widened to 12 points, the largest gap in at least 23 years, according to Bloomberg data highlighted by The Kobeissi Letter. The divergence has more than tripled since the start of May as technology-stock volatility has accelerated far faster than volatility across the broader market.
The move suggests investors are pricing significantly more uncertainty into AI-heavy technology stocks than into the S&P 500, tracked by the SPDR S&P 500 ETF Trust (SPY), and the broader market benchmark reflected in the Invesco QQQ Trust (QQQ).
Tech Volatility Is Surging
Since the beginning of May, the VXN has climbed roughly 43%, or about nine points, while the VIX has risen just 9%, or approximately two points.
That widening gap is notable because previous market shocks — including the 2008 financial crisis and the COVID-19 pandemic — produced peak spreads of roughly 7 and 11 points, respectively. The current 12-point spread now exceeds both.
Rather than signaling broad market panic, however, the divergence suggests investors are assigning a much larger risk premium specifically to technology stocks, particularly those concentrated in QQQ relative to the broader SPY benchmark.
AI Leaders Face: Opportunity and Uncertainty
The Nasdaq-100, tracked by QQQ, is heavily weighted toward artificial intelligence beneficiaries, including NVIDIA Corp. (NVDA), Microsoft Corp. (MSFT), Apple Inc. (AAPL), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL), Alphabet Inc. (GOOG), Meta Platforms Inc. (META) and Broadcom Inc. (AVGO).
Those companies have led the market higher over the past two years, helping lift both QQQ and, to a lesser extent, SPY, fueled by hundreds of billions of dollars in AI infrastructure spending. At the same time, investors continue to debate when those investments will translate into meaningful revenue growth, leaving valuations increasingly sensitive to earnings, guidance and AI adoption trends.
That uncertainty appears to be showing up in options markets, where traders are demanding significantly higher premiums to hedge technology exposure than the broader market represented by SPY.
Elevated Volatility Isn't Necessarily Bearish
Historically, rising implied volatility has often been associated with investor caution. But elevated volatility can also accompany periods of strong market leadership, particularly when expectations are high and investors anticipate larger price swings around earnings, product launches or macroeconomic developments.
For long-term investors, the record VXN-VIX spread may therefore say less about the direction of the market and more about the concentration of expectations surrounding Big Tech and its outsized influence on QQQ versus SPY.
The message from options markets is clear: Wall Street still believes technology will drive the market — but it also expects the ride to be considerably bumpier than it has for the broader S&P 500.
