Nasdaq hits new highs again. Who is truly driving this rally?

Author: 137Labs

Recently, the U.S. technology stock market represented by the NASDAQ Composite Index has once again refreshed its intraday all-time high. At the same time, cryptocurrency concept stocks have surged significantly. From the market’s surface, this looks like a typical tech-driven rally. However, when broken down through the lens of the weight structure, volatility indicators, and sector rotation rhythm, it becomes clear that this round of gains is actually the result of a three-pronged mechanism: “concentrated weights + reinforced earnings expectations + a release of risk appetite.”

From Panic to Recovery: A Quantitative Sentiment Path Based on VIX

Over the past month, the most core change in the market was not the price itself, but the reconfiguration of the risk-pricing mechanism. Sentiment indicators represented by the CBOE Volatility Index (VIX) provide the most direct quantitative evidence.

According to data from the St. Louis Federal Reserve Bank (FRED database):

· Late March 2026: VIX around 31 (stage high point)

· Mid-April 2026: VIX falls back to 18.3

· Single-month decline: about -12.7 points (about -41%)

Historically, this magnitude of change is typical of a “rapid de-risking premium phase.” Generally, when VIX is above 30, the market is in a clearly risk-averse range; when it falls back below 20, it means capital is re-entering the risk asset allocation cycle.

In terms of time structure, this process can be divided into three stages:

First, during the high-volatility phase at the end of March, risk premiums rise rapidly, capital withdraws from high-valuation assets, and the NASDAQ index enters a correction range. Second, during the early-April consolidation phase, although VIX remains above 25, the technology sector has already shown clear resilience, closely tied to its higher earnings certainty. Finally, after mid-April, as VIX drops below 20, the market officially enters a risk-on expansion phase—capital flows back into growth assets and pushes the index to new highs.

A Quantitative Breakdown of Weight Structure: Why the Index Can Keep Making New Highs

To understand why the NASDAQ can recover quickly in the short term and continue to make new highs, you have to go back to its index composition mechanism. According to the index compilation data published by Nasdaq, both the NASDAQ Composite Index and the NASDAQ 100 use a market-cap weighted mechanism. This means that changes in weight are determined directly by each company’s market capitalization.

The latest structural data shows:

· Technology sector weight: about 55%–60%

· Communication services: about 12%–15%

· Consumer discretionary: about 12%–14%

· The top 10 constituent stocks’ weight: close to 45%–50%

This structure indicates that the rise of the index is not essentially a “broad-based rally,” but rather driven by a small number of mega-cap companies. From a mathematical perspective, the index return can be expressed as:

Index return ≈ Σ (stock weight × stock return)

Within this framework, as long as high-weight sectors (especially the technology sector) maintain high returns, the index can keep moving higher even if other sectors perform only modestly.

Layering of “Growth Contributions” in Sector Evolution

Combining earnings expectations and market performance, the current sectors can be divided into three tiers:

First Tier: Core Tech and AI Assets (the Main Engine)

Based on consensus market expectation data, the projected 2026 earnings growth rate for the S&P 500 technology sector is expected to be in the range of 15%–20%, significantly higher than the overall market average (about 8%–10%). This gap allows the technology sector to continue to command a valuation premium within the valuation framework.

At the same time, capital expenditure (CapEx) related to artificial intelligence continues to expand. According to statistics from multiple investment banks, global AI-related infrastructure investment growth in 2026 is expected to exceed 25%, directly supporting long-term growth expectations for cloud computing and software companies.

Second Tier: Semiconductors (the Accelerator)

The changes in the semiconductor sector can be further validated using industry data. According to data released by the Semiconductor Industry Association (SIA):

· Early 2026: global semiconductor sales grew year over year by about 13%

· Demand for high-performance computing chips related to AI is growing even faster

This structural shift in demand significantly increases the earnings upside elasticity of semiconductor companies. Their stock price increases generally outperform the broader market, thereby continuously raising their weights within the market-cap weighted system.

Third Tier: Crypto Concept Stocks (High-Beta Amplifier)

Although crypto concept stocks account for less than 2% of the index weight, their volatility is far higher than that of traditional sectors. Crypto assets represented by Bitcoin saw a clear rally in mid-April, which in turn amplified the stock prices of related listed companies in sync.

Historically, this phenomenon typically appears during periods of higher risk appetite. At its core, it reflects capital shifting from “certainty-yield returns” to “high-elasticity returns.”

The Corresponding Relationship Between VIX and Sector Rotation: The Transmission Chain of Risk Preference

By mapping changes in VIX to sector performance, a clear risk transmission model can be constructed:

· When VIX > 30: funds concentrate in defensive assets

· When VIX declines to 25–20: funds flow back into tech leaders

· When VIX < 20: funds spread into semiconductors and high-beta assets

This logic has been fully validated over the past month. As VIX fell from 31 to 18, the market experienced the entire cycle—from defense to offense to dispersion. The sector rotation order was: AI leaders → semiconductors → crypto concept stocks.

Stage Positioning: Characteristics of the Mid-to-Late Stage Dispersion Rally

Combining the weight structure, earnings data, and volatility indicators, the current market can be clearly positioned as a “mid-to-late stage dispersion phase.” This stage typically has the following characteristics:

First, the index keeps making new highs, but the gains are concentrated in a small number of high-weight stocks. Second, the pace of sector rotation accelerates, and high-beta assets begin to become active. Third, volatility stays low, but potential volatility risk is accumulating.

From historical experience, when VIX stays below 20 for a long time and the index continues to hit new highs, the market often enters an “emotion-driven range,” where price sensitivity to expectations increases significantly.

Potential Risks and Forward-Looking Judgments

Despite the market’s strong performance, from a data perspective, several key variables still require attention. First is the valuation level: with high-growth expectations already pricing in elevated valuations for the technology sector, if earnings fall short of expectations, it could trigger a weight correction. Second is volatility: if VIX rises again above 22, it usually means risk appetite starts to contract. Finally is the sector structure: if semiconductors or core AI companies show a sustained weakening trend, it will directly affect the index’s performance.

Conclusion

Overall, this round of NASDAQ hitting new highs is a typical structural rally. Its core drivers are the expansion of technology sector weights and earnings growth, supported by a continued rebound in risk appetite. From VIX’s rapid decline to the relay rally in semiconductors and the crypto sector, the market has completed a full round of risk-pricing reconfiguration. In this context, understanding the dynamic relationship among “weights—earnings—sentiment” will be key to judging the direction of the future market.