Chip stocks are more volatile relative to the broader market than at any point in more than 30 years. This week's chart compares how much semiconductor stocks, represented by the Philadelphia Semiconductor index (Sox), move day to day with moves in the S&P 500. The ratio shows how much larger the semiconductor stocks' swings have been than those of the broader market.

A ratio of one means relative volatility in the semiconductor sector is broadly in line with volatility in the S&P 500. But at 4.9 today, semiconductor stocks are almost five times more volatile than the broader index. The closest parallel is after the dotcom bubble popped, when the ratio peaked at 4.2 in 2000 as investors repriced the entire sector.

At the other extreme, the ratio dropped to around one during the global financial crisis in 2007-08. Semiconductors are a very cyclical sector, but this year's extreme volatility is related to the exuberance associated with the AI trade. Even after a sharp pullback this month, the Philadelphia Semiconductor index is up 67 per cent year to date, driven by insatiable demand for exposure to the "picks and shovels" of the AI boom. With valuations stretched, even small pieces of news can trigger outsized market reactions.