If you think headlines coming out of the Middle East are the only thing driving market swings, you’d better look again.
New developments in the war with Iran are happening fast, especially as attacks escalate against key energy infrastructure targets. New strikes have hit Iran’s South Pars gas field. Iran retaliated by striking Qatar’s Ras Laffan complex, which is the world’s largest liquefied natural gas facility.
Chaos in the energy markets is causing the Federal Reserve to up its inflation forecasts, leading investors to question the interest rate outlook.
But amid all the noise, stocks leveraged to artificial intelligence (AI) are still powering wild swings.
And with the right approach, you can turn that into a steady profit stream…
Developments in AI remain a key driver of volatility.
That’s because AI stocks continue dominating the major indexes like the S&P 500, where the top 10 stocks still make up 39% of the index. That’s not far from the record level of 42% hit late last year.
Many key stocks leveraged to the AI trade peaked in late 2025 and have been struggling ever since. That includes many Magnificent 7 stocks, all of which are driven by AI trends in some way.
Here’s the Roundhill Magnificent Seven ETF (MAGS) chart that tracks the group:
Mag 7 stocks collectively saw a peak in late October at point “1.” MAGS drifted sideways before sustaining a move below the 50-day moving average (MA – blue line) at “2.” That brought MAGS down to the $60 level, which it tested several times, as shown with the dashed line.
MAGS is now breaking that support level at the arrow, which puts the fund down about 15% from the peak in October.
The uptick in volatility across the AI trade is showing up in the S&P 500 as well. Since late October, the S&P has also struggled for traction, with volatility steadily rising since the end of last year.
So the AI trade remains firmly entrenched in driving the market’s daily gyrations, which have been growing larger since the start of the year. While that may cause anxiety among ordinary investors, the increase in volatility spells income opportunities to anyone following my system…
Nearly every market-moving headline influences the AI trade.
For example, the threat of inflation from events in the Middle East impacts interest rate expectations… which ripples out to hit AI valuations. And a poor February payrolls report has investors wondering if AI is displacing white-collar jobs.
Then there’s the usual market-moving events, like Nvidia’s recent developer conference, where CEO Jensen Huang predicted $1 trillion in AI chip revenue through 2027. Micron’s earnings report last week sent the stock lower by as much as 8%. Meanwhile, scrutiny also grows over capex announcements by AI hyperscalers.
After years of easy gains, there’s growing uncertainty around the outlook for AI stocks, and that’s driving a broad uptick in volatility.
The CBOE Volatility Index (VIX) measures implied volatility in the stock market. VIX levels have been steadily rising since late last year.
The good news is, this is the type of dream environment that active traders can thrive on.
In one of my trading advisories, for instance, we’ve profited on 27 of the 29 trades recommended to my subscribers since the end of November last year.
And I don’t think this situation is going away anytime soon. I see the same catalysts coming together again to drive a burst of volatility as the AI trade grows ever more chaotic.
That’s why I’m hosting a special AI Chaos to Cash event on March 26 at 2 p.m. ET to pull back the curtain on how you can turn rising volatility into a steady profit stream.
If you’d like to attend, simply click here to automatically add your name to the guest list.
You’ll also have the chance to sign up as a VIP and get my AI forecast for the year ahead, along with two specific recommendations… one to buy and one to avoid.
Happy Trading,
Larry Benedict
Editor, Trading With Larry Benedict
Reading Trading With Larry Benedict will allow you to take a look into the mind of one of the market’s greatest traders. You’ll be able to recognize and take advantage of trends in the market in no time.
