The Nasdaq is now ticking back toward the late October record highs.

This, after a 10% technical correction (peak-to-trough in the Nasdaq futures), accommodated by a story that conveniently fit the price.

After a flurry of deals between Nvidia, the hyperscalers and OpenAI, it became obvious that Nvidia was making meaningful investments into the ecosystem that would ultimately drive more demand (more revenue) for Nvidia GPUs.

Was it a shell game, moving money from one pocket to another? The signs of hubris we’ve seen in past bubbles?”

As I said in my November 3rd note (here):  In this case, it looks more like a feature of the AI infrastructure boom, not a bug.

It’s coordination across big tech, which accelerates the infrastructure build.  And that only widens the competitive moats.

For OpenAI, which is inherently at risk of losing ground to model commoditization, these deals give them the competitive advantage to widen the lead in scaling global AI usage — plus the cloud companies now have an incentive to see OpenAI stay relevant.

With that in mind, the past two months have shown that the competitive edge in AI is shifting from “who has the best model” to “who has the capital to lock down computing capacity.”

That’s why the IPO discussion is heating up.  There were reports today that Anthropic and OpenAI are looking to go public in 2026.

When the “price of staying relevant” becomes tens of billions of dollars — to hire and retain talent, secure GPU supply, reserve data center capacity, and fund power build-outs — the private market eventually hands the baton to the public market.

If we look at the parallels between the current environment and the late 90s technology revolution, we should expect a boom in IPOs.

Here’s a look at the volume of IPOs in the late 90s.  Importantly, the biggest surge came early, in 1996.  The frenzied return chasing came late, in 1999.

And let’s revisit how the late 90s IPO boom influenced the Wall Street kings of underwriting.

Here’s JP Morgan …

And let’s revisit how the late 90s IPO boom influenced the Wall Street kings of underwriting. 

Here’s JP Morgan … 

Citibank …

Morgan Stanley …

And no one was responsible for more IPO underwriting volume in that era than Goldman Sachs.  And they went public in 1999, in the height of the frenzy.  The stock went up 60% in 10 months, before the stock market topped in March of 2000. 

We went into the Thanksgiving holiday with the U.S. 10-year yield testing the important 4% level.

In our last note, we discussed a clean break below 4% as a potential tailwind for financial conditions — and a catalyst for the long-awaited narrowing of the performance gap between mega-cap tech and the rest of the market.

Historically, small caps tend to do better as policy moves from tight to easier. 

But despite the Fed’s current policy direction, the gap is still wide: the Nasdaq is up about 21% YTD versus 12% for the Russell 2000 (and only 9% for the equal-weight S&P).

That brings us to this week.  Yields are bouncing, not breaking lower.  And it’s not just the U.S. The move UP is global, and it’s being led by Japan.

Overnight, Bank of Japan Governor (Ueda) signaled the BOJ may resume rate hikes at the December 19 meeting.  With Japan still at near-zero rates, even small tightening matters, because Japan has been the world’s last major source of ultra-cheap money.

As that liquidity backstop fades, global yields can rise.  

On the policy path note, over the next three weeks we’ll hear from every major central bank.

As you can see below, most of the developed world is still in an easing posture — Japan remains the outlier, moving in the opposite direction.

Add to all of this, today also marks the official end of the Fed’s quantitative tightening (QT) campaign.  That means the Fed will now be watching liquidity conditions closely for the cue to pivot back toward balance sheet expansion again.  And if we listen to FOMC Vice Chair, John Williams, it will be “soon.”

So, bottom line: Despite the pop in global yields today, the Fed is set to deliver the fuel for stocks — another rate cut on December 10th plus balance sheet expansion coming “soon.”

Let’s talk about Nvidia earnings …

As we’ve discussed for much of the past two years, data center revenue has been telling a very clear story:  There has been a manufacturing capacity issue.

We’ve looked at this drumbeat of about $4 billion in revenue growth, quarter-by-quarter, for much of the past two years (the red line) …

This quarterly growth ceiling led to a trend of decelerating year-over-year growth, which called into question valuation.

Is Nvidia worth 50+ times earnings if growth continues to slide?

Then there was Q2.

In the August report, not only was that $4 billion drumbeat disrupted — cut in half, to $2 billion — the “compute” component of data center revenue (which has been the growth story for Nvidia) actually contracted.

Certainly it’s not worth 50x earnings after that, right?

However, we went into today’s earnings with that premium valuation proving very durable.

And today, it was validated.

As we suspected, based on some very clear clues left by Jensen a few weeks ago, growth is back in data center.

They did $51 billion in data center revenue in Q3.  It was the hottest quarter-over-quarter growth in seven quarters.  And it was led by compute — the compute component grew by $10 billion, up 27% on the quarter.

So, the market should like the validation from this report.  Growth in GPU deliveries/compute has returned.

And the focus now turns to the other big number that was revealed by Jensen a few weeks ago. In the earnings call today, management affirmed $500 billion of revenue “visibility” through the end of calendar year 2026.

That’s half a trillion dollars of Nvidia’s most advanced chips/systems to fulfill over the next five quarters– or $100 billion a quarter.

Can they fulfill it?

They say the parts are lined up, Blackwell is already shipping in volume, new U.S. wafer production is running, and partners are ready to build.  So, they believe they can deliver.

As we discussed in my last note, with the government now reopened, markets are back to trading economic data. And the risks are skewed toward negative surprises, given that the White House has said it expects the shutdown to shave 100 to 150 basis points from GDP.

We’ll get the September jobs report on Thursday morning. It will reflect conditions from two months ago, but should show a continuation of the four-month trend of very weak job growth.

On that note, we heard from the Fed’s Chris Waller today on his view of labor market conditions. Remember, Waller is one of three on the list to become the next Fed Chair. He gave a prepared speech today titled “The Case for Continuing Rate Cuts.”

Waller sees “underlying” inflation (excluding estimated one-off tariff effects) as near the Fed’s 2% target. That means the Fed funds rate is 75 to 100 basis points too restrictive, given where they see the neutral rate now (3%, from the most recent Summary of Economic Projections).

With that, he says he’s worried that “restrictive monetary policy is weighing on the economy.”

He sees a slower economy in the second half, even before accounting for the government shutdown. And he thinks the labor market has swung from a supply problem to a demand problem (i.e. weaker demand for labor).

So Waller makes the case for another quarter-point cut in December.

Meanwhile, as we discussed last week, the interest-rate market has been pricing out the probability of a December cut.

That weighs on stocks, and is providing fuel for the setup we flagged in late October for a technical correction.

Here’s the latest chart on the S&P …

Remember, as we’ve discussed over the past few weeks, the October 29 peak in the S&P forward P/E was 23. The last time we saw that valuation was September 2, 2020, which was followed by a 10% price correction.

This time around, the technicals are also lined up for a price correction.

From the chart above, we have a bearish technical reversal signal (circled), and a breakdown of the trend from the tariff-shock lows. Add to this: the VIX (the cost of downside stock-market insurance) is back above 20 — a level that tends to come with lower stock prices.

A 10% correction in the S&P (from October highs) would take us back to the August levels of ~6,250.

Another chart to watch is Bitcoin, particularly given that it now sits on corporate balance sheets and is being used as collateral …

As the overlay above shows, Bitcoin and S&P futures have traded in a tight relationship in this cycle. And Bitcoin has already had a sharp and deep drawdown. 

It matters for stocks because Bitcoin is no longer just retail speculation, corporates and financial firms hold it on balance sheet, and it is increasingly pledged against credit lines, structured products and derivatives.

So, when the price falls this quickly, lenders call for more collateral, the easiest thing to sell to raise cash is liquid equities.