AI's easy money is drying up just as tech volatility hits 23-year highs — short
Thesis
The AI boom has been fueled by cheap debt, but global regulators are moving to shut off the tap. At the exact same time, volatility in tech stocks has hit a 23-year extreme, an event that often precedes major market tops. Adding to the risk, Michael Burry is actively shorting Nvidia even as the company releases new tech. When you combine tightening financial conditions, extreme price swings, and bearish positioning in the leader of the rally, it creates a high probability of a sharp pullback in semiconductor stocks.
Strategy approach
Build a rule-based mean-reversion short strategy on SMH that triggers entry when the ETF rallies >2% in a single D1 session and the 20-day ATR is above its 1-year rolling maximum. Enter short at the close. Exit when price closes above its 10-day high or after 15 trading days, whichever comes first.