NVDA and MSFT put volumes exploded on Tuesday, a clear sign AI‑focused investors are bracing for a tech correction.
By 10:15 a.m. ET, the CBOE reported a 312% jump in NVDA put contracts versus a five‑day average, while MSFT puts rose 278%. The surge follows a report that AI‑related earnings could miss estimates next week. I checked the charts — the volatility index spiked to 22.5, its highest level since March.
“We anticipate a 15% pullback in the Nasdaq‑100 over the next quarter,” said Dan Ives of Wedbush, echoing a Wall Street memo that warned AI hype may be overinflated. A brutal day for tech. Not what the bulls wanted. Because sentiment shifted, many hedge funds are buying protective puts on AMD (AMD) and Alphabet (GOOGL) as well.
And the ripple effect reached AI‑themed ETFs. The Global X AI & Technology ETF (AIQ) saw $2.1 billion flow out in the last 24 hours, while the iShares Exponential Technologies ETF (XT) logged a 7% decline in assets under management. Even law‑enforcement tech is getting attention — see how detectives use AI in Arizona here.
So what does this mean for the broader market? The S&P 500 slipped 0.4% as investors rotated into defensive sectors, and the Nasdaq fell 0.7%. The put‑buying frenzy could pressure the tech‑heavy Nasdaq‑100 into a short‑term dip — a signal that the AI rally may be losing steam.
“The market is pricing in a near‑term correction; the aggressive put buying is the clearest evidence,” Ives added.
But the story isn’t all doom. Some analysts argue the pullback will prune overvalued names, setting the stage for a healthier rebound. That’s a strong buy signal for value‑oriented investors who keep cash ready.
Because the hedge is cheap — at‑the‑money NVDA puts trade for $12.50, a 30% premium over a month ago — traders can limit downside while staying exposed to upside if AI earnings surprise.
The Bottom Line
- NVDA put volume up 312% YoY
- MSFT puts up 278% in a single day
- AIQ outflows $2.1 billion
- NASDAQ‑100 down 0.7% on the day
For more context, see the Reuters analysis of the trend.
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