Epic-level alert! Nasdaq risk premium surges to a 24-year high, AI bubble crazier than the internet? Retail investors buy or flee?

Have you ever felt the suffocating sensation before the burst of the 2000 internet bubble? Now, data tells me history is replaying.

Bloomberg statistics show that the Cboe NDX Volatility Index, which measures the cost of Nasdaq 100 options, relative to the VIX for the S&P 500, has surged to its highest since 2002. What does that mean? The risk premium investors are paying for tech stocks has hit a new record since the dot-com bubble burst.

The Nasdaq 100 has risen nearly 30% since the end of March, but volatility hasn’t dropped—it has risen instead. On Tuesday before the market open, Nasdaq 100 futures fell 1.1%, while S&P 500 futures only dropped 0.2%. Tech stocks are clearly dragging behind. On the same day, SpaceX was officially added to the Nasdaq 100, and the market widely believes this will push tech stock volatility even higher.

UBS’s model for predicting VIX movements has risen to a 10-month high, approaching a key threshold that signals further volatility increases. Institutions are hedging aggressively.

How crowded is the AI trade? The Cboe NDX Volatility Index is now around 27, while the 30-day realized volatility for the Nasdaq 100 has spiked to 29.7, the highest since the Trump tariff shock last year. Even more extreme, the ratio of the NDX Volatility Index to the VIX has reached its highest in 24 years. In other words, compared to the broader market, you are willing to pay a higher options premium to hedge risks on tech stocks like $AAPL and $MSFT.

Maxwell Grinacoff, head of U.S. equity derivatives research at UBS, calls this phenomenon “quite striking.” At the end of last year, he predicted that Nasdaq 100 volatility would persistently exceed the S&P 500’s, and that logic is still playing out. Additionally, leveraged ETFs in the U.S. and Asian markets continue to amplify volatility in AI and semiconductor stocks, with price swings becoming increasingly disconnected from fundamentals.

SpaceX’s index inclusion is a catalyst. RBC Capital Markets’ Amy Wu Silverman points out that newly listed companies are inherently volatile. Given SpaceX’s size and influence, the volatility gap between the Nasdaq 100 and the S&P 500 is likely to remain elevated until its inclusion in the S&P 500. Some investors have already made early moves—last week, someone spent about $2 million on option contracts to buy 1 million shares of SpaceX at a strike price of $330, betting on further gains.

How crowded are positions? Bloomberg data shows that over the past month, the realized correlation among Nasdaq 100 constituents has been higher than that of the S&P 500, meaning capital is increasingly concentrated in a few AI and tech leaders, and market structure has become severely homogenized. Grinacoff says many types of institutions—hedge funds, systematic strategy funds, and traditional mutual funds—are chasing AI. Traditional mutual funds must do so to outperform their benchmarks. But the problem is that once the AI trade falters, institutions have very limited room left to take over, and the market may have to rely on retail investors to hold it up.

Finally, UBS’s model for predicting VIX has risen to a 10-month high, just a hair away from entering the zone that signals further VIX increases. Institutions’ expectations for future volatility are rapidly ramping up.

The most expensive thing in the world is the phrase “this time is different.” When everyone is crowding onto one track, don’t forget how narrow the exit is.

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