Daily Newsletter 11/19/25

This morning, U.S. financial markets appear to be stabilizing for now after several days of declines. Futures for the major indexes show modest gains, reflecting cautious optimism ahead of key earnings, particularly from Nvidia. Despite recent market weakness, investors remain watchful as tech stocks and broader economic concerns weigh on sentiment. Markets are navigating a complex landscape of corrections in both cryptocurrency and tech valuations, along with evolving investor sentiment shaped by macroeconomic forces and shifting policy expectations.

NVDA and AI

Nvidia’s earnings are crucial for the market because the company acts as a bellwether for the AI-driven tech sector and broader market sentiment. As a dominant player in AI hardware and data center processors, Nvidia’s revenue growth and profitability provide insight into whether demand for AI technology remains robust. A strong earnings beat and optimistic guidance could fuel a rally across AI-related stocks and lift the major U.S. indices, boosting investor confidence in the tech sector and risk assets overall. Conversely, a disappointing report or cautious outlook could prompt a sharp sell-off in Nvidia shares and trigger a rotation away from growth stocks toward safer, defensive sectors.

The stakes are unusually high due to Nvidia’s enormous market capitalization and its outsized weighting in major indexes, meaning its performance can directly influence overall market direction. Expectations for Nvidia’s revenue and earnings growth are very elevated, so even a solid but less-than-stellar result may disappoint traders and cause volatility. Investors closely watch Nvidia’s guidance on future product demand, supply chain conditions, and margins as clues to the health of the AI boom. Simply put, Nvidia’s earnings report serves as a barometer for the strength and sustainability of the AI investment surge and thus the broader tech market’s trajectory.

The circular financing model promoted by some AI projects is a significant concern. The biggest issue in the AI world is the reliance on schemes where continuous inflows of investment are used to sustain valuations or fund incentives, creating a potential bubble. Sam Altman’s ambitious projects, including Worldcoin’s global biometric and crypto ambitions, illustrate this circular financing challenge, which raises questions about long-term viability and regulatory risks.

Together, Nvidia’s earnings and the structural challenges in AI financing reflect the balance between technology-driven optimism and deeper market risks that investors must navigate today.

AI remains in its early stages, but several significant challenges are already evident. Companies are reportedly not depreciating their investments in chips and data centers quickly enough, which impacts how these substantial costs are managed financially. Major cloud providers, or hyperscalers, are increasingly relying on credit financing rather than solely on internal cash flows to fund their AI infrastructure expansion. While they currently have considerable capacity, there remains uncertainty as to whether large language models (LLMs) represent the ultimate solution for AI development. This use of credit shifts some financial risk onto lenders and other parties. A vast number of new data centers are either in planning or under construction, raising serious questions about the sources of the immense electrical power required to operate them. Recently, nuclear power valuations soared despite no new plants being built for years, and the U.S. has yet to deploy small modular reactors (SMRs) that could offer scalable energy solutions. Looking forward, there is an expectation that future generations of chips will be more efficient, consuming less power and thereby reducing electricity demands. These intertwined factors underscore the complexity of scaling AI infrastructure sustainably amid substantial financial, technical, and energy challenges.

Sam Altman’s endorsement and planned circular investment strategy, which aims for a $1 trillion valuation, remain under debate as investors weigh the sustainability of such ambitions. Bubbly stocks have been rolling over, with a notable turning point when Palantir Technologies sold off sharply despite strong earnings. This event shook market confidence and accelerated the correction of overvalued stocks. Thiel Macro’s sale of Nvidia shares amidst these trends illustrates the caution prevailing among major investors.

SoftBank sold its entire stake in Nvidia in October 2025, offloading about 32.1 million shares valued at approximately $5.83 billion. This sale was part of SoftBank’s strategy to reallocate capital towards artificial intelligence ventures, including deeper investments in OpenAI and other AI infrastructure projects. Despite selling its Nvidia shares, SoftBank continues to collaborate on AI-related initiatives but no longer holds direct equity in Nvidia.

Crypto

Meanwhile, Bitcoin is undergoing a rollover phase, reflecting ongoing market corrections. Here is how we interpret the decline in Bitcoin: the diminishing likelihood of interest rate cuts in December has made U.S. Treasuries more attractive, holding liquidity that might otherwise have flowed into Bitcoin and other speculative assets. This shift in liquidity is likely a key factor behind the bursting of the speculative tech stock bubble as well. Although the AI frenzy is not over, it has long been overdue to admit that stock valuations in this sector had been excessively high for a prolonged period.

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