The AI trade's next evolution after AMD, Nvidia's CES announcements, plus 2026 energy outlook

Key Concepts

• Bull Market: A financial market characterized by rising prices.
• Dow Jones Industrial Average (Dow): A price-weighted measure of 30 large, publicly owned companies based in the United States.
• NASDAQ Composite: A market capitalization-weighted index of over 3,000 stocks listed on the Nasdaq stock exchange.
• S&P 500: A market capitalization-weighted index of the 500 largest publicly traded companies in the United States.
• S&P 500 Equal Weighted Index: An index where each stock has the same weight, regardless of market capitalization.
• Russell 2000: A market capitalization-weighted index of the 2,000 smallest companies in the Russell 3000 Index.
• Dow Transports: An index of transportation companies, often used in conjunction with the Dow Jones Industrial Average to confirm market trends (Dow Theory).
• Basis Point: One hundredth of a percentage point (0.01%).
• MAG 7: A group of seven large-cap technology stocks (Meta, Apple, Microsoft, Nvidia, Alphabet, Amazon, and Tesla).
• Semiconductors (Chip Stocks): Companies involved in the design and manufacturing of integrated circuits.
• CES (Consumer Electronics Show): An annual trade show showcasing new technologies and consumer electronics.
• AI (Artificial Intelligence): The simulation of human intelligence processes by computer systems.
• Capex: Capital expenditure – funds used by a company to acquire, upgrade, and maintain physical assets.
• Heavy Crude: A type of crude oil that is thick, viscous, and has a high sulfur content.
• WTI (West Texas Intermediate): A grade of crude oil used as a benchmark in oil pricing.
• Brent Crude: Another benchmark crude oil, sourced from the North Sea.

Market Overview & Rally Details

The market closed higher with significant gains across major indices. The Dow Jones Industrial Average rose 500 points, or approximately 1%, reaching intraday highs. The NASDAQ Composite was up 6/10 of a percent, also near its daily high. The S&P 500 notched its first intraday record high of the year at 4,945, with the S&P 500 Equal Weighted Index also achieving a record. The Russell 2000 outperformed, gaining over 1%. Notably, the Dow Transports also hit a record high, up 1.6%, reinforcing the Dow Theory which suggests agreement between industrial production and shipping.

Bond yields saw a slight increase: the 10-year Treasury yield rose by one basis point to 4.18%, and the 30-year yield also increased by one basis point to 4.87%.

Sector Performance

The majority of sectors experienced gains. Energy and Communication Services were the only sectors in the red, with Energy down 2.5%. Materials led the gains, up over 2%, followed by Healthcare, Industrials, Tech, Real Estate, and Consumer Discretionary. This broad-based rally included both defensive and cyclical stocks.

Within the NASDAQ 100, mega-cap stocks showed mixed performance. Tesla was down 4%, Nvidia and Alphabet were slightly in the red, while Amazon had its best day in months, up 3.4%. Chip stocks generally performed well, with Micron up 9% and Western Digital up 17%.

AI & Tech at CES

The Consumer Electronics Show (CES) in Las Vegas was a major focus, with Nvidia dominating the conversation. Nvidia showcased its new server racks, the Vera Rubin and Blackwell Ultra. AMD also presented its Helios rack scale system, designed to compete with Nvidia, and provided details on its next-generation MI500 series GPU. Intel announced its next-generation Panther Lake chip (Core Ultra Series 3).

A key theme at CES was the rapid integration of AI into consumer hardware and the focus on innovation and spending in the tech sector. Robotics was a prominent display, with companies like Hyundai and Boston Dynamics showcasing robots for industrial applications, with mass production anticipated by 2028. While consumer-level robots are still some time away, industrial applications are gaining traction.

AI Trade Outlook & Investment Strategies

David Stubs of Alpha Core Wealth Advisory believes the AI boom can continue, citing the ongoing capital expenditure (capex) cycle in data centers and energy markets. He also emphasized the importance of identifying companies that successfully deploy AI to drive margin growth, pointing to the recent strength in the financial sector.

Stubs suggested several investment strategies:

• Focus on relative value in fixed income: Avoiding excessive interest rate risk due to uncertainty around Fed rate cuts.
• Target companies with low revenue per employee: Identifying potential for growth through automation.
• Invest in energy: Highlighting the energy sector as undervalued, particularly in private markets (infrastructure funds).
• Diversify internationally: Emphasizing opportunities in Europe and Japan due to valuation gaps and structural reforms.

Venezuela & Oil Markets

Brian Kessins of Tortois Capital Advisors discussed the impact of the political situation in Venezuela on global oil markets. While Venezuela currently produces around 1 million barrels per day (approximately 1% of global supply), its potential to significantly increase production is hampered by infrastructure challenges and political risk.

Kessins estimated that rebuilding Venezuela’s oil industry to its former capacity would require at least $100 billion over 5-10 years. He noted that Venezuela’s crude is “heavy,” requiring specialized refining capabilities and is cheaper than light sweet crude. He doesn’t anticipate US oil majors aggressively re-entering Venezuela without clear political stability and favorable economic conditions (oil prices between $55-$60/barrel). He forecasts WTI prices to be in the $60-$70 range by the end of 2026.

Stock Picks

• Williams Companies (WB): Benefiting from increased natural gas exports and the growing demand for power from data centers.
• Energy Transfer (ET): Undervalued due to recent stock performance, with strong asset footprint and potential for growth in the natural gas infrastructure sector.

Synthesis/Conclusion

The market is currently experiencing a strong bull run, driven by broad-based gains across sectors. AI remains a key theme, with significant developments at CES highlighting its increasing integration into various industries. While geopolitical events like the situation in Venezuela are being monitored, their near-term impact on oil markets is expected to be limited. Investment strategies should focus on identifying companies that can capitalize on the AI boom, diversifying internationally, and considering undervalued sectors like energy. The overall outlook remains positive, but investors should remain vigilant and adapt to evolving market conditions.