Good morning investors,
December stumbled out of the gate with the S&P falling 0.5% as Bitcoin crashed 6% in one of its worst days this year. Yet beneath Monday's weakness, Nvidia announced a $2 billion strategic investment in Synopsys while Marvell reportedly nears a $5 billion acquisition of Celestial AI. The short sellers are having their moment with Burry calling Tesla "ridiculously overvalued" and Chanos flagging Nvidia's circular debt dynamics, but strong seasonality and 88% December rate cut odds suggest this weakness creates opportunity rather than concern.
Opening Bell: Recovery Attempt
Dow ($DIA ( ▲ 1.36% )) futures rise 63 points with S&P ($SPY ( ▲ 0.23% )) and Nasdaq ($QQQ ( ▼ 0.32% )) futures up 0.2% and 0.4% respectively. The bounce follows Monday's five day winning streak snap as risk-off sentiment spread from crypto carnage. Synopsys surges on Nvidia's $2 billion investment at $414.79 per share.
Marvell's reported Celestial AI acquisition for potentially $5 billion shows consolidation accelerating in photonics technology. Using light instead of electrical signals for chip to memory links represents the next frontier in AI computing speed. Intel CEO Lip-Bu Tan's board presence adds credibility to the startup's technology.
Bitcoin's Strategy Problem
Monday's 6% Bitcoin plunge, its worst day since March, stems partly from Strategy concerns about holding USD to meet debt obligations while increasing yield, typically a sign of capital attraction struggles. This mechanical deleveraging explains the violence but doesn't negate the structural bullish case for Bitcoin.
I expect Bitcoin to recover $90K quickly and push toward my $100K target. The macro foundation remains solid with Fed easing and Trump's pro crypto stance unchanged. Coinbase down 22% monthly creates compelling entry as Bank of America endorses 1-4% crypto allocation for risk tolerant clients, marking institutional legitimization.
Short Sellers Circling
Michael Burry calling Tesla "ridiculously overvalued" due to "tragic algebra" of dilution joins Jim Chanos flagging Nvidia's circular debt dynamics. Cloud companies borrowing against GPU chips to buy more GPUs creates $20 billion in questionable collateral. When legendary short sellers emerge simultaneously, markets typically approach inflection points.
Yet Tesla has consistently steamrolled shorts while Nvidia's actual earnings justify valuations better than Burry's circularity concerns suggest. Short sellers provide valuable skepticism but timing matters more than thesis. Their emergence often marks sentiment bottoms rather than tops.
Just remember, Burry has successfully call 25 of the last 2 recessions.
Nvidia Synopsys Partnership Deepens
Nvidia's $2 billion Synopsys investment revolutionizes design and engineering computing. CEO Jensen Huang calls it "a huge deal" for accelerating compute intensive applications. Synopsys can now reduce weeks long workloads to hours using Nvidia's GPUs, exemplifying real AI productivity gains beyond hype.
This partnership, while non-exclusive, shows Nvidia expanding beyond chip sales into software and services. The strategic investment model allows participation in customer success rather than just hardware provision. Watch for similar deals as Nvidia deploys its massive cash generation strategically.
Earnings Preview
Tonight's Crowdstrike report becomes crucial for cybersecurity sentiment. The sector remains a core AI beneficiary as attack sophistication requires automated defense. Expected EPS of $0.94 should easily beat given strong enterprise spending on security infrastructure.
Marvell also reports, representing an underappreciated chip play lacking peers' frothy valuations. The Celestial AI deal, if confirmed, positions them perfectly for photonics revolution. Both names offer second derivative AI exposure without Magnificent Seven multiples.
December's Historical Strength
Despite Monday's weakness, December averages over 1% gains since 1950, making it the third best month annually. Technical and fundamental tailwinds remain strong: improving breadth, steady fund flows, S&P above 50-day moving average, yet sentiment historically weak.
Bears rely solely on AI sustainability concerns and valuations at this time while ignoring powerful seasonal and technical dynamics. The fear that hit the market worked in their favor, but it peaked the weak before Thanksgiving. The setup favors bulls willing to look past short-term noise toward year-end positioning realities.
Meta and AMD Opportunities
Meta ($META ( ▲ 0.4% )) has been my most recent highest conviction large cap call, mentioning the name below $600. The stock's November 13% decline on capex concerns created irrational pessimism. At current valuations with massive cash generation, Meta offers AI exposure at value prices. I think Meta will recover the $680 level.
I also see AMD ($AMD ( ▲ 0.01% )) pushing back toward $230 provides diversified chip exposure beyond Nvidia concentration. The company's data center growth and AI accelerator adoption create multiple expansion potential as markets broaden beyond single stock leadership. The company was drawn down with Nvidia but the bounce back continues.
Final Thought
December's weak start feels worse than reality. Yes, Bitcoin crashed 6% triggering broader risk-off sentiment. Yes, short sellers emerged attacking market leaders. Yes, five-day winning streaks ended. But zoom out: the S&P sits 1% from records, Fed cut odds approach 90%, and Trump's dovish Fed chair announcement looms.
The short sellers provide valuable caution but their emergence often marks bottoms, not tops. Burry and Chanos raising concerns simultaneously suggests sentiment exhaustion approaching. Their skepticism creates the wall of worry bulls climb.
Tonight's Crowdstrike and Marvell earnings offer catalysts for overlooked AI beneficiaries. Cybersecurity and networking semiconductors provide exposure without Magnificent Seven valuations. Look for beats to spark rotation into laggards.
My conviction remains unchanged: Fed cuts next week, Trump announces dovish Fed chair, markets broaden beyond tech concentration. Small and mid caps offer asymmetric upside alongside oversold tech and crypto names. The ingredients for year-end rally remain intact despite Monday's stumble.
As always, feel free to reach out with questions about navigating December's opportunities.
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.