Smart Money Hoards $40 Billion in Cash Awaiting the Tide to Turn, Retail Investors Pile $2.6 Trillion into Call Options: The AI Narrative in US Stocks Hits a Tipping Point

Original Author: Deep Tide TechFlow

A highly unusual divergence is unfolding in the U.S. stock market: While the S&P 500 continues to hit new highs, the financial sector has fallen 6% year-to-date, underperforming the broader market even more severely than during the 2008 financial crisis and the COVID-19 shock. Meanwhile, the notional daily trading volume of S&P 500 call options has surged past $2.6 trillion, setting an all-time record, and the RSI for the Philadelphia Semiconductor Index has climbed to its highest level since 1999. In the primary market, SoftBank's financing plan, secured by OpenAI equity, has been forced to cut its target size from $10 billion to $6 billion. On the institutional side, Apollo has amassed approximately $40 billion in cash reserves within its insurance business. Smart money is retreating, while retail investors are chasing.

The narrative centered on the scarcity of AI computing power continues to drive acceleration in U.S. tech stocks, but fund flows, sentiment, technical indicators, and institutional behavior are sending inconsistent signals. This divergence itself warrants closer scrutiny than any single data point.

Lenders Question OpenAI Valuation, SoftBank Slashes Funding Target by 40%

According to Bloomberg, citing sources familiar with the matter, SoftBank has reduced its target size for the margin loan secured by OpenAI equity from $10 billion to at least $6 billion, a 40% reduction. The core obstacle lies in valuation. Some investors approached for the deal have doubts about how to determine a reasonable value for OpenAI, a private company. Potential lenders involved in the discussions include private credit institutions, financial firms, and hedge funds, with related consultations starting as early as mid-March.

OpenAI's own fundamentals are also under pressure. The company missed its monthly sales targets multiple times in early 2026. Competitor Anthropic continues to erode its market share in programming and enterprise sectors, and an internal target of reaching 1 billion weekly active users on ChatGPT by the end of last year was not met. OpenAI CFO Sarah Friar pushed back against these reports, stating that the company is hitting its goals and seeing "vertical growth" in product demand.

SoftBank's own financial leverage is also at historic highs. The group recently committed an additional $30 billion to OpenAI, having already invested over $30 billion previously. A $40 billion loan completed in March set a record for its largest-ever dollar-denominated loan, with part of the funds used to support its latest follow-on investment in OpenAI.

Opinion in the capital markets regarding SoftBank has clearly diverged. SoftBank's stock has risen 39% year-to-date, significantly outperforming the Japanese benchmark Topix index's 12.3% gain. However, its credit default swap spread has widened by about 61 basis points this year. In March, S&P Global Ratings revised SoftBank's credit outlook from "stable" to "negative," citing the potential for the OpenAI investment to harm the company's liquidity and asset credit quality.

The pricing disagreement on top-tier AI assets in the primary market is manifesting itself in the most direct way possible: lenders are willing to lend 40% less than what SoftBank wants to borrow.

$2.6 Trillion in Options in a Single Day, Goldman Sachs Partner Calls It "Semi-Irrational"

The secondary market presents a different picture. On Thursday, the notional volume of S&P 500 (SPX) call options exceeded $2.6 trillion, setting an all-time high. Nearly 60% of all SPX options traded that day were calls. Rich Privorotsky, head of Goldman Sachs' One-Delta trading desk, characterized the current U.S. market as a "chase mode where spot rises and volatility rises."

The weekly RSI for the Philadelphia Semiconductor Index (SOX) has risen to its highest level since 1999. A Goldman Sachs partner stated bluntly, "It feels like we are in a semi-irrational chasing mode." Privorotsky cited 1999 as a more apt historical analogy, noting that the flood of orders for telecom equipment providers back then supported the rally with a "physical bottleneck narrative," highly similar to the current logic centered on computing power scarcity and AI infrastructure deployment.

The implied volatility of QQQ has surged sharply alongside the market rise, widening the volatility spread between QQQ and SPX to over 6 volatility points. Goldman Sachs' volatility trading desk described the day as "one of the wildest trading sessions in the past few weeks." Notably, the number of S&P 500 constituent stocks experiencing a 3-standard deviation or greater move in a single day reached 35, the highest level since February 3 of this year.

Bank of America's global equity derivatives research team also pointed out that the S&P 500's latest record-breaking rally is reminiscent of the late 1920s and the 1990s internet bubble, but the pricing of "tail options" remains below levels implied by realized volatility. In simpler terms, the market is chasing highs but is unwilling to pay for downside risk.

Goldman Sachs warns that the "rising spot, rising volatility" dynamic has limited the capacity for systematic strategies to increase positions further. Commodity trading advisors (CTAs) are largely back to full long positions, and with realized volatility on the upside increasing, the marginal demand from volatility control strategies is also waning. In other words, programmatic buying from institutions is near its limit, and subsequent upward momentum will rely more heavily on retail and sentiment-driven capital.

XLF at Weakest Relative to S&P 500 Since 1998, Financial Stocks Flash a Warning

If the options market represents an extreme reading of sentiment, then the relative performance of the financial sector serves as a technical warning signal.

The U.S. financial sector has fallen about 6% year-to-date, while the S&P 500 index has gained 7% over the same period and closed at all-time highs 14 times in the last 17 trading sessions.

Related data was analyzed in the article "Cracks Behind the S&P 500's New Highs: Financial Sector Down 6% YTD, $2 Trillion Private Credit Undercurrents Spreading."

The financial sector is considered a leading indicator due to its core role as a provider of economic liquidity. Concerns in the private credit market are believed to be a significant factor pressuring the sector. Melissa Brown, Global Head of Investment Decision Research at SimCorp, noted the high degree of interconnectedness in the financial system, stating that related risks "could potentially spread more broadly than currently anticipated." She suggested that investors might consider gradually "reducing holdings in chip stocks" rather than continuing to chase gains, and cautioned against injecting new capital into the market.

Apollo Hoards $40 Billion Cash, Rowan Estimates 35% Probability of Exogenous Shock

Defensive moves have begun on the institutional side. Marc Rowan, CEO of Apollo Global Management, stated during the company's quarterly earnings release that he estimates the probability of an exogenous shock occurring at between 30% and 35%, significantly higher than normal levels.

Rowan attributed this risk to a confluence of three forces: a comprehensive geopolitical reset, inflationary pressures driven by trade tariffs and immigration policies, and the profound restructuring of the economy by AI. He characterized the current AI wave as "unquestionably the biggest technology cycle" in his career, specifically highlighting government fiscal vulnerability—noting that government balance sheets are under strain compared to corporations and consumers.

Apollo has implemented a series of defensive measures: shifting its fixed-income portfolio towards higher credit quality, reducing exposure to high-risk sectors like software, and reserving approximately $40 billion in cash within its insurance business. "This means we are investing with a view to protecting capital, ensuring we can navigate the cycle, and if there is a correction, which we frankly expect, we are prepared," Rowan said.

Rowan reserved his sharpest criticism for competitors. He warned that not all insurance companies are operating their businesses as they should, with some relying on what he called "outrageous" practices, including Cayman Islands offshore structures, complex mortgage arrangements, and aggressive credit assumptions, making some balance sheets appear stronger than they actually are. "We do worry about contagion effects," he said.

Notably, Apollo's quarterly results were strong, with assets under management surpassing $1 trillion and fee-related earnings reaching record highs. Choosing to enact the most significant defensive posture at the point when its own business is performing best is itself a telling judgment.

Consumer-Side Extremes Underscore Macro Divergence

Consumer data provides micro-level evidence for the above macro judgment. Whirlpool (WHR) tumbled 16% in after-hours trading on Thursday, with management describing the current environment as a "sharp deterioration in macroeconomic conditions" and announcing "decisive measures" such as price increases and accelerated cost-cutting to restore profitability. The chill in the housing and big-ticket consumer goods sectors stands in stark contrast to the fervor in the semiconductor sector.

In contrast, DoorDash, which reported a "good start" to the second quarter with demand remaining "quite strong," saw its stock rise about 10%.

This divergence reflects a deep-seated logic in current consumer behavior: large expenditures (e.g., home renovation, appliances) feel like a recession, while small, immediate consumption (e.g., food delivery) is largely unaffected. Consumers haven't disappeared, but have become highly discerning. This aligns closely with the conclusion on the corporate side: AI infrastructure investment is accelerating, while traditional durable goods consumption is contracting.

Place these four sets of signals on the same chart: lenders unwilling to price OpenAI at $10 billion, $2.6 trillion in options betting on a rally in a single day, the financial sector hitting its weakest relative level since 1998, and Apollo hoarding $40 billion in cash. This does not constitute a "crash imminent" judgment. As several analysts have noted, warning signals can sometimes persist for a long time before being absorbed by the market, or may not even ultimately materialize. However, when the primary market, secondary market, leading sectors, and top-tier institutions simultaneously deliver inconsistent readings, it at least suggests that the risk premium priced into current levels has been compressed to a point worthy of caution.