To The Moon

Hello, Tigers!

On Tuesday evening, NVIDIA’s stock plunged 6%, catching many investors off guard. After the CES conference, the market sentiment appears to have shifted, with increased division between bulls and bears, making future investment paths more uncertain. How should we position ourselves this week?

1. Why Did NVIDIA Crash After CES?

After delivering an exciting keynote at CES, NVIDIA experienced a rollercoaster trading day, opening at a historic high before closing down more than 6%.

Market speculation points to two primary reasons:

1. Weakening Rate-Cut Expectations

Strong employment data and better-than-expected ISM non-manufacturing PMI have dampened hopes for rate cuts in 2025. Market expectations for rate cuts have dropped to 37 basis points, signaling less than two potential rate cuts. This has pushed the 10-year Treasury yield closer to 4.7%, putting pressure on U.S. stocks overall.

2. Classic "Sell the News"

Some analysts believe that while NVIDIA's announcements at CES were optimistic for the company’s long-term prospects, the short-term upside failed to meet some investors’ expectations. Stifel Financial Corp. noted that NVIDIA's updates were significant for the future but did not deliver immediate gains.

Additionally, analysts highlighted that Jensen Huang’s CES keynote provided limited details on the company’s most profitable products, such as AI training chips like the Blackwell AI processors, which are reportedly now in production. Investors were also hoping for updates on NVIDIA’s next-gen GPU platform, Rubin, which were absent. The lack of short-term catalysts led to the sell-off.

2.Renewed Concerns Over Tech Stock Valuations

How big is the current U.S. stock market bubble? Even Federal Reserve officials are issuing warnings. Fed Governor Lisa Cook recently made rare, direct remarks about stock market risks.

Cook stated: "Valuations across several asset classes, including equities and corporate bonds, are high. Risk premia are near historical lows, suggesting markets may have priced in perfection. This could lead to significant downside risks if economic conditions worsen or investor sentiment shifts."

For those holding quantum computing or Tesla stocks, brace yourselves for potential increased volatility in the short term.

At CES, NVIDIA’s CEO commented that quantum computing might take 15 years to become market-ready, causing concern among quantum computing stockholders. Small-cap quantum stocks have already soared to unsustainable levels, making this sector risky for short-term investors.

Meanwhile, Tesla’s technical chart shows a downward trend, with additional bearish signals emerging.

Tesla (NASDAQ: TSLA) recently announced disappointing delivery numbers for the 2024 fiscal year, marking the first year-over-year decline in the company’s history. Initially, this triggered an 8% sell-off, but the loss was quickly erased the following day due to overall market recovery.

Tesla reported 1.789 million vehicle deliveries for FY2024, down 1.1% year-over-year and missing analysts’ expectations of flat growth. With rising competition in the EV space, achieving Elon Musk’s ambitious multi-year 50% growth target seems increasingly unlikely.

While Tesla may still provide positive returns in a sentiment-driven market, its stock price is increasingly disconnected from fundamentals. Historically, such bubbles often end poorly. Considering Tesla’s disappointing annual delivery numbers, analysts maintain a “sell” rating due to weakening demand.

Based on the analysis above, you might think it’s time to steer clear of tech stocks.

Short-term risks do exist, especially with analysts predicting increased market volatility around the January 20th inauguration date.

However, for long-term investors, tech stocks remain a key focus for 2025. Take a look at the Nasdaq’s performance over the past 40 years.

In 40 years, the Nasdaq had only six negative years. Investing at the beginning of the year in the Nasdaq had an 85% success rate, with an average annualized return of 14%.

The key is to extend your investment horizon. Be patient, and let time work in your favor to achieve solid returns.

Investment Strategy for the Week：

Short-Term

The “good news is bad news” logic persists as Fed and inflation concerns weigh on the market. However, in the long run, economic and market fundamentals remain intact.

Recent data, including the ISM Services Index and JOLTS Job Openings, have stoked hawkish fears. Labor market indicators, such as the quits rate (1.9%, the lowest since early 2020) and hiring rates, suggest cooling demand. These developments reduce the likelihood of excessive Fed tightening.

Long-Term

Economic fundamentals and investment logic remain positive. Market concerns might be overstated. Although tech stocks face short-term corrections of 5%-10%, these dips could present excellent buying opportunities.

3.This Week’s Allocation Focus