Nasdaq rally driven by AI chip stocks faces risk from negative hyperscaler cash flow and geopolitical tensions.

The Nasdaq has surged about 27% since March, mainly due to semiconductor stocks boosted by AI earnings momentum. However, a potential market correction could arise as hyperscaler companies report deeply negative free cash flow, signaling financial strain. The author hedges downside risk with SOXX options, believing the AI trend remains strong but current valuations are stretched. Additionally, geopolitical risks like disruptions in the Strait of Hormuz could spark energy shocks and inflation, adding further uncertainty to the market outlook.