(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Mike Dolan

LONDON, June 3 (Reuters) - Wild daily swings in

individual stocks might suggest a frothy market in the final

throes of a speculative frenzy. But Wall Street's "fear gauge"

is snoozing. And it may take good news to wake it up.

It's hard not to get dizzy watching the huge individual

daily price gains in large-cap stocks lately, as the AI boom

appears to heat up, accelerate and draw in more chip and tech

equipment names far and wide.

In just the past few trading sessions, 20% to 30% one-day

surges have become routine, even for companies with market caps

of $200 billion or more. Dell soared 32% on Friday

after its blowout results. Hewlett Packard Enterprise ( HPE )

leapt 28% on Tuesday on its own earnings update. Marvell

Technology ( MRVL ) gained 25% on just one favorable nod from

Nvidia ( NVDA ) boss Jensen Huang.

These are the latest in a long list of wild moves, driven

mostly by the AI capital expenditure explosion, but playing out

bang in the middle of a geopolitical oil shockand a year of

existential angst for some sectors.Software stocks suffered

withering selloffsbefore staging equally eye-popping rallies

over the past month.

So the overall volatility gauges must be flashing red,

right?

Not a bit of it.

The benchmark Cboe Volatility Index, long known as

the "fear gauge" on Wall Street, is snoozing well below historic

averages and near its lowest level of the year.

But that calm is deceptive.

LPL Financial strategist Adam Turnquist contrasts the sleepy

VIX with the Cboe's VIXEQ, which measures implied

volatility across individual S&P 500 constituent stocks.

The VIXEQ is back near its highest level since the

tariff-related storm of April last year.

Indeed, the gap between the two indexes is almost three

times the average of the past decade.

"The divergence has been driven largely by historically low

correlations among S&P 500 stocks," Turnquist said. "Significant

earnings-related reactions both up and down, widening

performance gaps between AI beneficiaries and laggards and other

more idiosyncratic catalysts have contributed to elevated

dispersion across the index."

What's more, speculative buying of call options in

individual technology stocks, rather than the index itself, is

stoking individual stock volatility too.

"However, the current backdrop could become vulnerable if

correlations begin to rise," Turnquist warned. That could

pressure "dispersion trades" that profit from selling index

volatility and buying single-stock equivalents.

RE-CORRELATE

Paradoxically, that re-correlation could be triggered not by

a new shock but by a confluence of good news, including positive

economic and political developments.

On one level, the dispersion makes sense given the

concentration of the AI theme in a narrow cluster of red-hot

stocks, with clear winners and losers, just as the Iran war

jolts sectors exposed to energy prices and interest rates.

But what if the war ends, oil prices ebb and the AI boom

fans out more broadly across the economy, even to the labor

market, despite all the angst about robot displacement?

Already, the dramatic recovery of software stocks suggests

fears about AI losers may have been overblown. The jobs market

still shows few signs of major disruption.

But could a wave of relatively positive economic news

mechanically reduce that dispersion, nudging the VIX higher in

the process? That is not the usual script: calmer geopolitics,

lower oil prices or broader AI gains could also suppress both

dispersion and index volatility.

Interest-rate markets would also have a say, particularly if

the net effect stoked more inflation.

But a rising VIX could act as a brake of sorts on the

overall equity rally. That matters because its current serenity

underpins a benign backdrop for three giant IPOs planned this

summer: SpaceX, Anthropic and, likely, OpenAI.

There's already trepidation about the market impact of

public listings that could raise up to $200 billion in new

shares from three companies targeting a combined valuation of

around $3.75 trillion.

Many of the deep dives into how the market will absorb this

new equity splurge, including Alphabet's $80 billion

in equity financing announced this week, are relatively

sanguine. They focus on index inclusions, demand from passive

funds and some rejig of weightings as lock-up periods eventually

expire.

But successful debuts and target valuations set the tone.

They also rely partly on a low-volatility environment that

reduces the risk of damaging pricing missteps.

If the herd suddenly charges in one direction, a

re-awakening of the fear gauge could make for a very bumpy

summer.

(The opinions expressed here are those of Mike Dolan, a

columnist for Reuters.)

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