Good morning investors,
Nvidia CEO Jensen Huang's CES announcement that next-gen Rubin chips are in "full production" with 5x AI computing power sent tech stocks surging, validating continued infrastructure spending despite bubble concerns. Memory chip makers lead semiconductors with Samsung up 15.9% YTD and SK Hynix gaining 11.5% as DRAM prices are expected to rise another 40% through Q2 2026 on insatiable AI demand.
Morgan Stanley becomes the first major U.S. bank seeking SEC approval for bitcoin and solana ETFs, marking Wall Street's full embrace of digital assets.
Opening Bell: Tech Rotation Accelerates
Futures mixed with S&P ($SPY ( ▼ 0.26% )) flat, Nasdaq ($QQQ ( ▼ 0.46% )) up 0.1%, and Dow ($DIA ( ▲ 0.14% )) futures down 74 points as markets digest Monday's 1.2% Dow record on Venezuela energy optimism. Chevron and Exxon continue climbing, up 0.8% and 0.5% respectively, while SLB surges 2.2% on infrastructure rebuild expectations.
Nvidia edges higher premarket after unveiling Vera Rubin superchip combining CPU and dual GPUs for "agentic AI" applications. The annual release cadence makes catching Nvidia nearly impossible for competitors despite AMD's Helios systems and hyperscaler custom chips.
Memory Chip Supercycle
The semiconductor rally's real story isn't Nvidia, it's memory. Samsung expecting 140% Q4 operating profit jump while Micron's EPS could surge 400% year over year demonstrates pricing power from severe supply constraints. With AI models requiring massive DRAM capacity, Counterpoint Research projects 40% price increases through Q2.
There is a very strong demand from AI workloads and relatively constrained supply, particularly in high bandwidth memory. This isn't temporary - SK Hynix's "HBM supercycle" comments suggest structural shift lasting years. ASML benefits enormously with Bernstein raising target from €800 to €1,300 on memory capacity expansion needs.
Nvidia's Rubin Revolution
Huang's announcement that Rubin delivers 4x fewer GPUs needed for training and 10x reduction in inference token costs transforms AI economics. The NVL72 server combining 72 GPUs into single systems enables hyperscalers to dramatically improve efficiency while cutting energy consumption.
Yet Nvidia ($NVDA ( ▼ 0.79% )) shares remain 9.1% below October's $5 trillion peak as circular financing concerns persist. The company contributing 16% of S&P 500's gains since October 2022 versus Apple's 7% shows outsized influence, any stumble reverberates broadly. Still, 76 of 82 analysts maintain buy ratings with average targets implying 37% upside.
Morgan Stanley's Crypto Pivot
Morgan Stanley ($MS ( ▼ 2.45% )) is seeking bitcoin and solana ETF approval represents watershed moment for institutional crypto adoption. This follows Trump's regulatory clarity encouraging mainstream finance embrace of digital assets previously considered speculative. Bitcoin breaking back above $93,000 and reclaiming its 50-day moving average validates momentum shifting.
My Coinbase $300 target looks increasingly achievable as traditional finance validates crypto infrastructure. The convergence of TradFi and DeFi accelerates with every major bank announcement.
Venezuela's Energy Timeline
Trump's meetings with oil executives this week will clarify Venezuela rebuild timeline. The country's 303 billion barrels, 17% of global reserves - currently contributes less than 1% of supply due to infrastructure decay. Analysts estimate $100 billion and years needed for meaningful production increases.
China's muted response despite being Venezuela's largest oil buyer suggests acceptance of new reality. Capital Economics notes "Venezuela had become China's strongest ally in Latin America - if things go according to plan, that will be over." The geopolitical realignment favors U.S. energy dominance.
Robotaxi Reality Check
Nvidia partnering with Uber, Lucid, and others for Level 4 robotaxis by 2027 adds another growth vector beyond AI infrastructure. The Drive AGX Thor chip at $3,500 enables automakers to accelerate development while cutting R&D costs. Mercedes-Benz's 2026 models featuring Nvidia technology validates adoption timeline.
Equity Growth Strategy Update
My systematic Factor Based Quality Growth framework has a 3.36% YTD return. I use a quantitative approach to identify "Compounding Elite" businesses. By prioritizing Return on Invested Capital and Net Profit Margins, the portfolio captures companies with sustainable moats generating high internal returns.
The sector agnostic methodology naturally pivots toward highest capital efficiency opportunities, currently technology and healthcare platforms. Coinbase and TSMC have been some of the bigger winners so far in 2026. Operating leverage and forward PEG ratios ensure growth remains scalable and reasonably priced.
If you have any interest hearing more, please feel free to reach out.
Final Thought
The memory chip supercycle represents the kind of structural supply-demand imbalance that creates multi-year investment opportunities. While markets obsess over Nvidia's dominance and AI bubble risks, Samsung and SK Hynix quietly print money from DRAM shortages with visibility extending years ahead.
Huang's Rubin announcement transforms not just performance but economics, with 4x efficiency gains and 10x cost reductions make AI adoption inevitable rather than speculative. Companies resisting implementation will find themselves competitively disadvantaged as early adopters compound productivity advantages.
Morgan Stanley's crypto ETF filing signals institutional FOMO beginning. The bank that wouldn't touch bitcoin five years ago now seeks regulatory approval for products tracking it. This legitimization cascade continues as each announcement validates the next participant.
Venezuela remains the wildcard offering asymmetric upside for energy names. Even if production takes years to meaningfully increase, the prospect of accessing 303 billion barrels transforms valuations. Chevron and Exxon's existing Venezuelan expertise positions them perfectly for this opportunity.
As always, feel free to reach out with questions about positioning strategies.
Best regards,
Dan Sheehan
This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.