Market Trends
In late November, we warned our readers that December could be a volatile month. The recent bounce in January also provided some warning signs, which we used to get defensive.
Now that the market has pulled back, some expect a quick bottom to resume the uptrend. However, based on what various markets are telling us, we think that this pullback has the potential to continue into February.
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As we stated before, as long as the Dow holds its October 13th low, we view any additional weakness to be a tremendous buying opportunity as we setup for a push towards 4400 SPX later in the year.
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Nvidia just posted one of its most impressive quarters in recent memory, but many investors likely missed the report’s critical implications for the company’s key software partner, Palantir. Sovereign AI and regional neocloud businesses were among Nvidia’s fastest growth vectors, rising 35% QoQ, 2.7X faster than hyperscalers, and more than tripling YoY. Notably, amid this dramatic growth, sovereign AI is the exact arena where Nvidia has just announced a strategic partnership with Palantir.
Palantir recently took shots at OpenAI and Anthropic’s business models, implying that they are a part of the “token industrial complex”. As token processing counts soar, OpenAI and Anthropic’s ARR figures are no doubt climbing rapidly. However, Palantir’s model of maximizing value per token, rather than needing to push customers to consume as many tokens as possible, is translating into high quality growth. And, as R&D labs struggle to sniff profitability, Palantir is putting up among the strongest margins in the tech sector.
This evening, Nvidia effectively pulled a rabbit out of a hat by showing the GPU juggernaut may not need hyperscalers to the degree the market thinks. According to management, “There is sovereign AI, there are regional AIs, there are NeoClouds, there are AI startups at enterprises [...] which represents about half of our business, and that is growing 100% a year.” This helped lead to an even bigger surprise than the current quarter’s beat, which is that Nvidia broke their typical guidance cadence by providing a guide for FY28, stating they will report 70% growth, or about $691 billion, compared to analyst estimates for $570 billion. Below, we discuss the main takeaway from Nvidia’s earnings report, which is that the AI infrastructure buildout is finally broadening beyond Big Tech.
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