Nvidia's $5T Rally Sets Stage for Big Tech Earnings

Good morning investors,

Nvidia stunned markets Tuesday with a barrage of announcements at its GTC conference that sent shares surging 5% toward the first ever $5 trillion market cap. Speaking with a Bloomberg reporter last week, I expected reaffirmation of previously announced partnerships and no real fireworks, I was wrong. Jensen Huang delivered a masterclass in ecosystem building, announcing $500 billion in GPU sales through 2026 while embedding Nvidia across every critical technology vertical from pharmaceuticals to quantum computing.

Nvidia ($NVDA ( ▲ 1.18% )) shares rise another 3% premarket, putting the company on track to cross $5 trillion after Tuesday's explosive rally. Microsoft ($MSFT ( ▼ 1.11% )), Alphabet ($GOOGL ( ▼ 1.21% )), and Meta ($META ( ▼ 0.08% )) all report after today's close with capital expenditure guidance arguably more important than earnings as markets gauge AI spending sustainability. Boeing shares trade lower despite returning to cash positive territory for the first time in nearly two years, as a massive 777X charge overshadows operational improvements.

The S&P 500 ($SPY ( ▲ 0.16% )) nearly touched 6,900 Tuesday before closing at 6,890, while major indices continue setting records ahead of the Fed's virtually certain rate cut at 2 PM ET. Markets assign nearly 100% probability to a quarter-point reduction, with focus shifting to Powell's press conference for December guidance amid the data vacuum from the ongoing shutdown.

Jensen Huang's GTC announcements validated Nvidia's position as more than a chip company, it's becoming infrastructure for the entire AI revolution. The headline $500 billion in GPU sales through 2026 reflects contracts already being signed, not aspirational targets. For context, Nvidia generated over $100 billion in revenue just in 2025's first half.

The strategic depth extends far beyond chips. Nvidia announced seven new Department of Energy supercomputers including one using 10,000 Blackwell GPUs, a partnership with Uber for self-driving fleets, 1,000 GPUs to Eli Lilly for drug discovery, and quantum computing architecture with Rigetti and IonQ. The company is embedding itself across AI infrastructure, quantum computing, 6G networks, autonomous vehicles, and pharmaceutical research.

The $1 billion Nokia stake for 6G development follows similar investments in Intel ($5 billion), OpenAI ($100 billion commitment), Wayve ($500 million), and Nscale ($667 million). Huang isn't just selling GPUs, he's buying influence across the entire AI stack from silicon to software to networking to deployment.

Microsoft crossed $4 trillion market cap Tuesday after restructuring its OpenAI relationship valued at $135 billion, nearly a 10x return on approximately $14 billion invested. The new structure gives Microsoft 27% equity, locks in $250 billion in future Azure purchases, and retains IP rights through 2032 including post-AGI technology.

The strategic brilliance extends beyond financial returns. Microsoft keeps research access until AGI is achieved or 2030, whichever comes first, while gaining freedom to pursue AGI development independently with certain computational restrictions. CEO Satya Nadella turned a multi-billion bet into a $135 billion stake while securing a quarter-trillion in contracted cloud revenue.

Eli Lilly and Nvidia are building pharma's most powerful supercomputer, powered by 1,000+ Blackwell Ultra GPUs going live in January. The Chief AI Officer called it "a novel scientific instrument, like an enormous microscope for biologists." If successful, drugs saving lives in 2030 are being designed right now by AI models that didn't exist six months ago.

Lilly launched TuneLab, giving biotech startups access to models trained on $1 billion of proprietary research in exchange for their data contributions. This creates a network effect where smaller companies get years of head start they couldn't afford while Lilly aggregates industry wide insights. Drug development timelines could shrink from a decade to five years as precision medicine tailored to individual genetics becomes feasible at scale.

Visa's Q4 earnings beat expectations with adjusted EPS of $2.98 versus $2.97 expected and revenue of $10.72 billion versus $10.61 billion expected, up 12% year-over-year. Global payments volume grew 9% with cross-border volume surging 12%, demonstrating consumer resilience despite economic headwinds.

The acceleration from 8% to 9% payments volume quarter-over-quarter suggests momentum building rather than fading. With 67.7 billion transactions processed in a single quarter, Visa's scale creates powerful network effects difficult for competitors to match. Cross-border strength signals healthy international travel and commerce continuing to recover.

Today's 2 PM rate decision represents the easy part, markets assign near certainty to a quarter-point cut bringing rates to 3.75-4.00%. The challenge comes in Powell navigating genuine disagreement between governors wanting aggressive cuts and those counseling patience. Governor Stephen Miran likely dissents again for a larger cut as he did in September's 11-1 vote.

Operating without September jobs data due to the shutdown, policymakers rely on state unemployment claims and private surveys suggesting the labor market is "at best holding steady and at worst slightly deteriorating." Markets also await signals on ending quantitative tightening as the Fed's overnight funding facility nears depletion, with officials likely to indicate QT is in final stages.

Nvidia's GTC conference delivered the kind of transformative announcements that justify extreme valuations. The $500 billion GPU pipeline through 2026, strategic equity stakes across the AI ecosystem, and partnerships spanning every major computing transformation validate Huang's vision of Nvidia as foundational infrastructure, not just a chip supplier.

Microsoft's 10x return on OpenAI and Eli Lilly's pharmaceutical supercomputer demonstrate how quickly AI is moving from promise to production. These aren't speculative investments anymore, they're generating real returns and solving actual problems at unprecedented speed.

Yet today's Big Tech earnings carry extraordinary weight. With Nvidia approaching $5 trillion and markets at records, Microsoft, Alphabet, and Meta must prove AI spending translates to sustainable growth. Capital expenditure guidance matters more than quarterly beats as investors gauge whether this transformation continues accelerating or begins moderating.

The Fed faces its own challenges navigating without complete data while managing internal disagreements about the pace of easing. Powell must thread the needle between labor market concerns and inflation still running hot at 3%, all while signaling the end of balance sheet reduction without disrupting markets.

As always, feel free to reach out with questions about positioning for these evolving market dynamics.

Best regards,

Dan Sheehan

[email protected]

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.