How Nvidia's Alpamayo stacks up against Waymo and Tesla, investing opportunities outside the US

Key Concepts

• Basis Points: A unit equal to one-hundredth of one percent, used in finance to describe percentage changes in interest rates or yields.
• S&P 500 Equal Weighted Index: An index where each company in the S&P 500 has the same weight, unlike the traditional market-cap weighted index.
• Russell 2000: A stock market index representing approximately 2000 small-cap U.S. companies.
• MAG 7: Refers to the seven largest publicly traded companies in the US stock market (typically Apple, Microsoft, Alphabet, Amazon, Nvidia, Tesla, and Meta).
• Return on Equity (ROE): A measure of a company's profitability relative to shareholders' equity.
• Cross-Shareholdings: A situation where companies own shares in each other, often used in Japan.
• Corporate Governance Reform: Changes made to improve the way a company is directed and controlled.
• End-to-End Neural Network: A type of artificial intelligence system where all components are trained together as a single unit.
• LLM (Large Language Model): A type of artificial intelligence model capable of understanding and generating human-like text.
• Oligopoly: A market structure dominated by a few large firms.
• Sum of the Parts Valuation: A method of valuing a company by adding up the individual values of its different business units.

Market Overview & Stock Movements (December 9th)

The market closed mixed on December 9th. The Dow Jones Industrial Average rose by approximately 55 basis points (0.5%), gaining 269.54 points and trading near its daily high. The S&P 500 was barely positive, considered largely unchanged. However, the S&P 500 Equal Weighted Index outperformed, increasing by 88 basis points. Notably, the Russell 2000 small-cap index reached a record high, closing up 1% at 2026, and micro-caps also saw gains of around 0.75%. The NASDAQ Composite, conversely, finished down approximately 0.5%.

Sector Performance: Energy led gains, up 3%, marking its best day since April 9th, 2025, following a post-Liberation Day selloff recovery. Staples, materials, and consumer discretionary sectors also rose by over 1.5%. Technology lagged, down 1.5%, and healthcare decreased by 86 basis points.

Specific Stock Movements:

• NASDAQ 100: Alphabet, Amazon, and Tesla each increased by over 1%. Broadcom, Micron, Applied Materials, Intel, and Western Digital all fell by more than 3%, with Western Digital dropping over 6%. In software, Snowflake declined 4%, CrowdStrike fell 3%, and DataDog and Atlassian each lost 7%. IBM was a notable gainer, up 2%.
• Dow Jones: Home Depot, Honeywell, and Sherwin Williams each rose by around 3%. American Express gained 1%, Chevron Energy increased 2.8%, and Proctor & Gamble rose 0.5%.

International Market Outlook & Investment Strategy

Portfolio manager Ken Ryan of Parnassis International Equity Fund discussed the potential of international markets in 2026 and beyond. He highlighted that international markets outperformed the S&P 500 in the previous year, rising over 30%. Key drivers included a weakening US dollar and lower valuations internationally. Ryan emphasized the importance of diversifying beyond US-centric investments, particularly the "MAG 7" stocks, to capitalize on global opportunities.

Risks in International Markets: Ryan acknowledged geopolitical tensions, tariffs, and interest rates as potential risks, advocating for active management to navigate these challenges.

European Opportunities: He expressed excitement about infrastructure development in Europe, particularly Germany’s planned €1 trillion investment over the next decade in energy transition and electricity infrastructure. This presents opportunities in utilities, industrials, and materials sectors. He noted that European banks have outperformed the MAG 7 in recent years due to a reversal of previous negative conditions (low rates, high regulation) and improving return on equity (ROE).

Japanese Market: Ryan identified Japan as a potential turning point, citing corporate governance reforms leading to a greater focus on ROE and shareholder value. He suggested focusing on companies demonstrating tangible improvements in ROE and unwinding cross-shareholdings.

Specific Stock Mention: Seaman’s Energy was highlighted as a buy due to its competitive advantage, fully booked capacity through 2030, and margin expansion potential.

Defense Sector Analysis & Trump's Impact

The discussion shifted to the defense sector, focusing on President Trump’s recent comments regarding increased defense spending coupled with restrictions on buybacks, dividends, and executive compensation.

Investor Perspective: Tony Brooft of Gabelli Funds viewed Trump’s statements as a long-term positive demand signal, despite potential short-term volatility. He noted the need for defense primes to accelerate program execution and address inventory restocking due to global conflicts.

Industry Challenges: Brooft acknowledged the inherent challenges in the defense industry, including long lead times, complex supply chains, stringent security clearance requirements, and the oligopolistic nature of the market with a single major customer (the US government).

Albany International: Brooft recommended Albany International as a buy, citing a "sum of the parts" valuation. The company consists of a stable, high-margin machine clothing business and a growing aerospace business supplying fan blades for aircraft engines (Boeing 737 Max and Airbus 320). The stock is currently undervalued due to market perception of the two separate businesses.

Upcoming Economic Data & Events (December 10th)

Several key economic data releases and events are scheduled for December 10th:

• Supreme Court Ruling on Tariffs: A ruling is expected regarding President Trump’s use of emergency powers to impose tariffs. Prediction markets estimate a 25% chance of a ruling in Trump’s favor.
• December Jobs Report: Economists forecast 70,000 jobs added and an unemployment rate of 4.5%, with hourly wages increasing by 0.3%.
• Federal Reserve Commentary: Fed Presidents Neil Kashkari and Tom Barkin will provide commentary, following Governor Steven Moran’s statement that the central bank will likely cut interest rates by more than 1% in 2026.
• Consumer Sentiment: The January consumer sentiment index is expected to rise to 53.5, indicating increased consumer optimism.

Synthesis/Conclusion

The market demonstrated mixed performance on December 9th, with the Dow rising and the Nasdaq declining. International markets present significant opportunities for investors, particularly in Europe and Japan, driven by infrastructure development and corporate governance reforms. The defense sector faces potential volatility due to President Trump’s policy proposals, but long-term demand remains strong. Upcoming economic data releases will provide further insights into the health of the US economy and potential monetary policy adjustments. Active management and a diversified portfolio are crucial for navigating the current market landscape.