Zed Francis on AI Chip "Volatility Smash" & Using "Boom Bust" to Your Advantage

• Semiconductor volatility saw a 'boom-bust' cycle driven by leveraged ETFs and hedge fund total return swaps.
• Banks' hedging of these leveraged positions initially increased volatility, while their subsequent unwinding caused a rapid decline.
• Current volatility in semiconductors and the broader S&P 500 is considered 'light' or potentially undervalued.
• The market is expected to be driven more by fundamental data, with volatility now a more effective tool for expressing opinions.

The discussion centers on the recent 'volatility smash' in the semiconductor market, attributing it to leveraged ETFs and hedge fund positioning via total return swaps. Banks' hedging activities initially inflated volatility, which then sharply declined as these positions were unwound. The market is now seen as cleansed of this technical pressure, with volatility potentially too low.