To The Moon

Hello, Tigers!

As a reminder for traders, Wednesday, December 25, 2024, is Christmas Day in the U.S., and the U.S. stock market will be closed. Major overseas markets will also observe a holiday, including Canada, the UK, Germany, France, Italy, Spain, Australia, and New Zealand.

Two weeks ago, I wrote an article titled: 【Weekly Wealth Trends】The Dow’s 9-Day Losing Streak: Is It Time to Buy the Dip?

Looking back, the market's performance has largely aligned with expectations. As Christmas wraps up, new opportunities for 2025 are coming into focus. Here are two key areas to watch:

1. AI-Related Semiconductors

The semiconductor sector has performed well this year. The VanEck Semiconductor ETF (SMH) is up 44% year-to-date, outperforming the S&P 500's 26% and the Nasdaq's 33% gains. However, the real story lies in individual stocks: only TSM, MRVL, AVGO, and NVDA have outpaced the indices.

• TSM: +101% YTD

• MRVL: +93% YTD

• AVGO: +117% YTD

• NVDA: +182% YTD

These AI chip giants have shown exceptional strength, reinforcing the strategy of investing in market leaders. For instance:

• NVDA contributed 40.36% to SMH's growth.

• AVGO contributed 11.93%.

• TSM contributed 13.97%. Together, these three accounted for 66.26% of SMH's gains, while the rest of the sector collectively dragged down the index by 22%.

2025 Outlook: According to Bank of America, two trends will dominate AI hardware markets:

1. First Half of 2025: AI semiconductor growth will be driven by U.S. cloud clients and NVIDIA's Blackwell deployment.

2. Second Half of 2025: Investor focus may shift to automotive and industrial semiconductor manufacturers as global economic recovery spurs inventory restocking and car production rebounds.

Risk Warning: Renowned strategist Hao Hong notes that U.S. semiconductors may be entering a bubble, with a potential correction expected within 3–6 months.

Technical Analysis: Watch for SMH to break out of its current consolidation triangle. A successful breakout could signal a year-end rally for chip stocks. Additionally, NVIDIA CEO Jensen Huang will deliver a keynote at CES 2025 on January 7, 2025 (10:30 AM Beijing Time), which could spark a short-term rally.

Key Note: While AI chips remain strong, other semiconductor segments like consumer electronics and automotive are in a downturn. Only AI chips are consistently growing.

2. Financial Stocks

Banking stocks have maintained steady performance and offer a different investment style compared to big tech.

Key Strategy: Hold financial stocks through the upcoming earnings season, as a pre-earnings rally could yield solid returns. Moreover, banking stocks can act as a hedge against the volatility in tech stocks.

Macro Perspective: The Fed’s 2025 policy is expected to be hawkish, with only two rate cuts planned for next year. While slower rate cuts might temper economic growth and value stock returns, these risks seem to be priced in already.

Valuation Insight:

• Invesco S&P 500 Pure Value ETF (RPV): 12-month forward P/E = 10.1x

• S&P 500 Index: 21.6x

• Guggenheim S&P 500 Pure Growth ETF (RPG): 23.8x

This presents an opportunity for value stocks to "catch up." Jason Goepfert of SentimenTrader highlights that the performance gap between value and growth stocks is near a 20-year low. A similar setup in the early 2000s led to years of value stocks outperforming growth stocks.

Sector Rotation: Goldman Sachs notes that defensive sectors like utilities, healthcare, and financials could gain traction as markets recalibrate expectations. Value stocks could provide downside protection amid optimism about AI’s long-term productivity gains.

3. Weekly Focus

A. AI Semiconductor Sector

B. Financial Sector

I will share weekly trading trends based on market highlights. Interested users can check the “Wealth” tab under “Featured” or “Weekly Wealth Trends” for more information!

Disclaimer: The listed tradeable assets are data-based summaries and do not constitute investment advice.