This week's severe volatility in global stock markets is not rooted in macroeconomic anxieties stemming from the Federal Reserve chair transition, but rather in a structural rebalancing within the AI investment frenzy. The cyclical nature of the memory cycle, extreme position crowding by hedge funds, and shifting market perceptions of winners and losers in the AI supply chain are the true drivers of this turbulence.

Goldman Sachs sales and trading partner Mark Wilson, in a recent report, explicitly stated that while macro signals like a sharp drop in breakeven inflation, higher real rates, and a strong dollar breakout have emerged since new Fed Chair Kevin Warsh took office, he does not believe these are the root cause of this week's stock market swings. He maintains his consistent view: "It is still the stock market driving the macro, not the macro driving the stock market."

The market turmoil was vividly illustrated this week: South Korea's Kospi index triggered circuit breakers twice, Microsoft hit a 52-week low, and Amazon broke below its 200-day moving average. The "Magnificent 7" tech stocks are down over 5% year-to-date, with Apple and Dell each falling more than 5% in a single day. Meanwhile, Micron reported record gross margins. The divergence between beneficiaries and those under pressure in the AI supply chain is being presented to the market with unprecedented clarity.

Wilson's core conclusion is that this volatility is not a signal of the end of the AI investment cycle—"We are still in the midst of a historic investment boom"—but rather a deep-seated reassessment by the market of the net winners and losers within this boom.

South Korea as the Epicenter: Leveraged Structures Amplify AI Theme Fragility

The South Korean market became the most concentrated flashpoint for global AI trade volatility this week. The Kospi index, up nearly 100% at its peak this year, triggered downside circuit breakers twice this week. According to Wilson's statistics, half of all circuit breaker days in the South Korean market this century have occurred in 2026, with this week alone accounting for 20% of them.

This extreme volatility has structural roots: roughly 60% of the Kospi's weight is concentrated in just two stocks, and there are tens of billions of dollars in leveraged ETF replication products behind them, meaning any significant move in either direction is amplified manifold. More critically, the latest capacity expansion plans from Samsung and SK Hynix have made the market realize that the memory industry's current historically high profit margins will eventually face pressure from new supply.

Wilson notes that this is a net positive for the overall supply chain, but it constitutes direct downward pressure for the currently most-crowded memory stock beneficiaries.

Winners and Losers: The Structural Repricing of the AI Supply Chain

The market's divergence logic this week was particularly stark: companies making large capital investments or facing cost squeezes were punished, while supply chain beneficiaries continued to be favored.

Microsoft not only hit a 52-week low but its stock price is now below its 2021 peak, implying zero returns over the past five years; Amazon broke below its 200-day moving average. The Magnificent 7 are down over 5% year-to-date.

On the other end, end-product manufacturers like Apple and Dell, forced by rising memory prices to announce widespread price hikes, are passing the costs corresponding to Micron's record margins directly to consumers. Wilson summarizes this logic: "Those investing in AI (with uncertain returns) and those facing margin compression are being punished; those benefiting from capital expenditure and price increases continue to see their stock prices appreciate."

The Memory Cycle: Reversal Risks Behind Record Margins

Wilson believes the evolution of Micron's margins could become a classic business school case study in the future, but the underlying cyclical risks should not be underestimated.

Following the global financial crisis, accelerated consolidation in the memory industry has systematically raised profit margins at the trough of each downcycle. This evolution is well-documented, strategically supported, and forms a clear, investable logic.

However, against the backdrop of Micron's gross margins hitting a historical high and SK Hynix's expansion plans being announced, Wilson cautions investors: this industry remains fundamentally cyclical. As the new capacity expansions from Samsung and SK Hynix gradually come online, current supply bottlenecks will ease—a positive signal for the overall supply chain, but for memory stocks that have already benefited immensely and are in extremely crowded positions, it implies tangible valuation pressure.

Hedge Funds: High Leverage Meets Extreme Crowding, Risk Builds to a Tipping Point

The latest positioning analysis from Goldman Sachs' Prime Brokerage strategy team reveals another layer of deep-seated risk behind this week's market moves.

The data shows multiple extreme signals occurring simultaneously: hedge fund gross leverage has risen to a record high; year-to-date, hedge funds have been significant net sellers of US assets while massively increasing exposure to Asia (primarily Japan and South Korea); within AI theme holdings, the growth rate of net long positions in memory stocks is twice that of semiconductor or power-related sectors.

From a performance structure perspective, fundamental, systematic, and multi-strategy hedge funds have generally delivered strong year-to-date returns between 14% and 18%, but divergence is also prominent. The excess returns for systematic and multi-strategy funds primarily came from non-AI holdings, while the returns of fundamental funds are almost entirely dependent on the AI theme, with non-AI holdings contributing almost no alpha. The performance correlation between US and Asian AI positions has now risen to the historical 99th percentile, an extreme level. Europe has been largely absent from this rally.

Wilson emphasizes that crowded positioning alone is not sufficient reason for a contrarian short, but once fundamentals change, extremely crowded positions can amplify downside risks manifold—the violent swings in the South Korean market this week are a direct manifestation of this mechanism in action.

AI Boom Not Over, But Landscape Quietly Reshaping

Wilson explicitly opposes interpreting this week's volatility as an inflection point in the AI investment cycle. He believes the increased volatility is sending a potentially profound signal to the market: the landscape of net winners and losers within the AI investment boom is undergoing a deep-seated shift.

He also points out that political pressure on the AI narrative is rising. As the US midterm elections approach, the impact of AI on employment will receive more attention. Related data shows that the share of US tech sector employment has been trending down for over five years, with AI-attributed job losses accelerating, and the industry has so far failed to form a convincing positive narrative to address it.

For investors, the core message from the current shakeout is that one can no longer generalize about "AI beneficiaries." There is a need to more finely distinguish the structural differences between capital spenders, those facing margin pressure, and supply chain beneficiaries—this will be a key variable for investment decisions in the second half of the year.