To The Moon

I. Performance of Global Equity Indices (in US Dollar)

Source: Bloomberg, Tiger Brokers

Key Highlights

◼ Last week, U.S. equities exhibited pronounced sectoral dispersion: traditional sectors and small-/mid-cap stocks outperformed, while mega-cap technology and growth segments saw a notable pullback. The December FOMC delivered an on-schedule rate cut and brought forward balance-sheet expansion; however, upward revisions to growth expectations and a more restrained easing path pushed long-end yields higher, emerging as the key macro risk for U.S. equities into next year. The Al complex has entered a "zone of skepticism," with valuations pressured by elevated rates and renewed scrutiny over heavy capital expenditures-Oracle and Broadcom both sold off sharply following their earnings releases. That said, from an industry perspective, model iteration is accelerating, productivity gains are improving, and commercialization is progressing more quickly, suggesting the medium- to long-term Al narrative is far from over.

◼In Greater China, Hong Kong and A-share markets traded relatively steadily last week. While the Central Economic Work Conference continued to emphasize "new quality productive forces," it placed greater weight on a domestic-demand-led approach, seeking to underpin demand through a more actionable policy mix— income growth, supply-side optimization, and real-estate inventory reduction. On the macro front, retail sales data continued to soften, indicating that consumption remains subdued. However, supportive rhetoric from senior policymakers on the same day reinforced the priority of demand-side measures. From a flow perspective, a temporary pullback in Southbound inflows could weigh on Hong Kong equities in the near term, but it may also create opportunities to add exposure at valuations better aligned with fundamentals.

◼ Key events to watch this week include U.S. November nonfarm payrolls and the unemployment rate, as well as November CPI and other major macro releases.

II. Key Market Themes

Small Caps Rally, Tech Pulls Back—Does Al Still Have a Future?

Last week, U.S. equities showed clear structural divergence, with major indices moving in opposite directions. The Dow and Russell 2000 continued to grind higher-driven by traditional sectors and small-/mid-cap stocks-and both hit new highs. In contrast, the Nasdaq and S&P 500, which are more heavily weighted toward mega-cap technology, saw a more pronounced pullback as the market underwent a near-term style rotation. That said, market breadth improved rather than deteriorated, suggesting capital has not exited risk assets in a systemic way; instead, flows rotated from mega-cap tech into cyclicals and smaller-cap segments.

On the macro front, the December FOMC delivered a widely expected 25 bps rate cut and, more surprisingly, brought forward balance-sheet expansion by announcing purchases of short-dated Treasuries. Overall, the Fed's stance remains dovish, and Chair Powell repeatedly highlighted concerns about potential weakness in the labor market during the press conference. However, the market focused more on two key signals: (1) the Fed revised up its growth outlook, and (2) the statement introduced language implying that future rate cuts will depend on both timing and magnitude. As a result, rates markets repriced quickly— expected cuts through end-2026 were compressed to 1-2 moves, and the 10-year U.S.Treasury yield was pushed up to around 4.2%. In our view, current rate expectations and growth expectations are difficult to reconcile. If financial conditions remain tight, it will be hard for the U.S. economy to sustain mid-cycle growth above 1.5%, which implies that at some point next year the Fed may still need to take policy rates below neutral. This tension is, in our assessment, the largest macro risk for U.S. equities next year.

At the industry level, the Al complex was notably volatile last week. Oracle and Broadcom both sold off sharply after earnings, delivering a clear hit to sentiment. Fundamentally, however, progress in their Al-related businesses was not weak: Oracle's cloud infrastructure revenue rose 68% year over year, and its remaining performance obligations increased 15% to USD 68 billion; Broadcom also guided to Al revenue growth of over 100% year over year in FY2026 Q1. Yet against the backdrop of higher rates and heavy capex, the market is more sensitive to questions around order sustainability and return visibility, which has translated into near-term valuation pressure. We believe skepticism is an inevitable part of the Al investment cycle past, present, and very likely future. Importantly, recent advances in large models are beginning to accelerate productivity gains; on-device applications are gradually approaching an inflection point; and Al assistants may achieve meaningful commercialization as early as next year. In that sense, near-term doubts can help squeeze out excess froth, improving the industry's risk-reward profile and increasing the certainty and upside asymmetry for longer-term investors.

Source: Bloomberg, Tiger Brokers

Rising Priority of Domestic Demand-Where Is Greater China's Medium-Term Narrative?

Last week, Greater China assets were relatively stable, with both Hong Kong equities and A-shares posting only modest moves. The Central Economic Work Conference (CEWC) came in stronger than expected: it reaffirmed the strategic direction of developing "new quality productive forces," while also underscoring the importance of shoring up domestic demand. More notably, it emphasized a policy mix centered on "domestic-demand-led growth and a strong domestic market," as well as "investment in goods + investment in people." The readout laid out a more actionable agenda, including: launching a special campaign to boost consumption; formulating and implementing an income growth plan for urban and rural residents; expanding the supply of high-quality goods and services; optimizing the rollout of the "Two New" policy framework; and removing unreasonable restrictions in consumption-related areas to unlock the potential of services consumption-aiming to make households willing, able, and confident to spend. On the property front, it also called for stabilizing the real estate market through city-specific measures to control new supply, reduce inventory, and optimize supply structure, while encouraging the acquisition of existing commercial housing for use as affordable rental housing. Overall, the policy language around supporting domestic demand was more concrete than before.

On the data side, November retail sales grew only 1.3% year over year-marking the weakest print in nearly three years. On the same day, Qiushi published President Xi's important article, "Expanding Domestic Demand Is a Strategic Move," which further strengthened market expectations that demand-side stimulus will move up the policy agenda in the period ahead. Flows reflected a "two-track" structure in which Hong Kong equities faced more pressure. Active foreign outflows accelerated, while passive flows continued to allocate to both A-shares and Hong Kong equities with a degree of inertia. However, it is worth noting that Southbound flows turned net negative for Hong Kong stocks. Combined with year-end mutual fund performance assessments and rebalancing needs, this could translate into short-term selling pressure on Hong Kong equities. Historically, though, such mechanically driven de risking often creates a better "right-tail" entry window-particularly for segment leaders with clearer fundamentals and more attractive valuations.

Source: National Bureau of Statistics of China,Bloomberg, Tiger Brokers

Along the industry chain, China-side developments around potential supply of NVIDIA'S H200 GPUs have not fully materialized, but even at the expectation level they help ease near-term concerns over "restricted access to high-end compute." Market chatter also suggests that major Chinese Al players such as Alibaba and ByteDance are actively engaging with relevant counterparties. Against the backdrop of a temporary cooling in U.S.-China tariff frictions, any incremental relaxation in high-end GPU supply would act as an "accelerator" for domestic large-model training and inference efficiency, and for Al application rollout among major internet/platform leaders. At the same time, it would intensify competitive pressure on the domestic compute ecosystem to iterate faster-ultimately helping Al applications transition from concept to commercialization and, eventually, earnings delivery.

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