Trading Observations

Yesterday might end up being one of the most interesting trading days of 2025

• NVDA dumped a record amount of market cap on a news story that was out in December, but recycled and gained traction over the weekend, crushing the hopes and dreams of all those invested in AI Capex at the valuation of “whatever”.

• What NVDA has done may never be repeated at scale (2023 Net Income $6.4B, 2026 expected net income $111B). Those who think the NVDA’s 56% net income margins are sustainable must think the semi industry isn’t competitive, or must think the AI build is akin to the industrial revolution.

• Yesterday we got news it will be more competitive than we thought with China. Add a lot of options trading, triple levered NVDA ETFs, and leverage in the system, and you get a massive unwind of growth into value.

• Today and the rest of the week will be interesting as to how long this lasts. We would point to earnings Wednesday night in META and MSFT and PCE Friday as the next true catalysts.

Futures

DOW -34

S&P +11

Nasdaq +51

The top 19 options contracts in equities traded yesterday were all NVDA. Citadel and the other market makers would like to informally thank you all for the profits.

Financials / Retail / Healthcare

Restaurant survey data from Baird looks weak but it’s not a trend until the weather concerns are through.

Baird trimming shopping center REIT estimates on known bankruptcies at Jo-Ann and Pary City.

Nothing to report in financials as they are at all time highs and through earnings for the most part –

Technology

NVDA – Retail investors bought $562MM in NVDA stock yesterday – Canda Research

MSFT – JPM saying large partners are 3% above plan in terms of Azure spend.

AMD, NVDA – Baird and a host of other brokers defending the names after yesterday. Baird took NVDA numbers down slightly.

AAPL – Defended at Baird on GenAI wins without the billions in spending on LLMs or infrastructure.

CHKP – Earnings preview at Baird points out the very difficult comp in front of it.

MBLY – Baird saying MBLY should have traded higher on Deepseek announcement and strangely didn’t.

CSCO – Upgraded to outperform at BNP.

ALAB – Upgraded at Northland (may prove timely).

Industrials 

JPM out defending the energy sector that got trounced yesterday, overweight PRIM, MTZ, neutral PWR, underweight CTRI.

PWR was trading at ~2.3x revenue compared to ~1x historical, and you can see how hard its legs got chopped out yesterday.

BA – Stock is unchanged on actual earnings after so many pre-announcements made this a non-event. Analysts want to know production levels. BA has all the orders it can handle but can’t produce them.

RTX – Down 1.5% on earnings. They are here for Trump’s “Iron Dome” if we need them, per them. Quarter and guidance exactly in-line outside of a FCF miss of $492M vs $693M estimated.

GM – Up 1% on a solid EPS beat and guidance of profitability ahead of consensus.

JBLU – Down 12% on a rough quarter. A merger with SAVE would have helped. Nice work DOJ.