1. Reasoning models = More NVIDIA, not less!

Against persistent worries around the possible impact of "DeepSeek", NVIDIA delivered another earnings and revenue beat paired with strong guidance. The company’s revenue in the quarter rose 78%, and full year revenue for Nvidia rose 114% to $130.5 billion, and all this with a 56% net profit margin.

Perhaps the most important debate in AI infrastructure taking place today is: what are the impacts to AI infrastructure from model innovations like distillation, reasoning models, and post-training scaling become more prevalent.

Unsurprisingly, management emphasized that the recent optimizations of DeepSeek on Blackwell deliver 25x more revenue at 20x lower cost as compared to H100 for customers—a significant performance uplift that speaks to Blackwell's flexibility to deploy as either a training or inference platform.

In fact, NVIDIA identified that some of the first Blackwell rigs were being deployed as inference-first systems, unlike past generations in which the initial shipments of a generation have primarily gone to training.

As for DeepSeek AI and the risks of more efficient models reducing the need for chips, CFO Colette Kress said, “Long-thinking, reasoning AI can require 100 times more compute per task compared to one shot inferences…” Additionally, management is optimistic about automotive and robotics being significant growth categories.”

2. Bank of America sees US stock gains broadening beyond tech.

US stock gains are likely to continue broadening beyond the technology sector, Savita Subramanian, head of US equity and quantitative strategy at Bank of America, says in an interview with Bloomberg Television.

“There are a lot of attractive opportunities within the S&P 500 that may not be the Magnificent Seven”

The bulk of S&P 500 companies are penciling in pretty-positive accelerating growth trends, and that was not the case last year or year before. “The theme is not necessarily ‘rest of world over US,’ but broadening trends outside of just mega cap tech”

“What’s happening is actually quite bullish for the broader US economy” in terms of key themes that are taking place “The hyperscalers are accelerating in their capex spend.

The fact that cost curve has been bent a bit lower by DeepSeek is actually bullish in terms of unit volume demand”

The idea that “we’re at a complete halt” because of DeepSeek and this competitive threat is not the right interpretation.

Here is the S&P500 heatmap year-to-date!

3. A bounce-back in the US stock market would not be surprising given the extreme fear levels.

4. For investors doubting how much further Europe’s equity rally can go, safer parts of the market are starting to look more appealing.

The so-called defensive sectors — such as utilities, real estate and consumer staples — have underperformed so far this year, as most funds have preferred riskier bets on an improving economic outlook. Optimism around fiscal reform in Germany also turned the mood risk-on.

But with the Stoxx 600 scaling record highs, some market participants are turning more cautious as the potential for a trade war with the US ramps up. A peace deal in Ukraine also remains ambiguous, prompting investors to question whether the rally has run too hot.

The answer, they say, isn’t ditching European equities, but looking for stocks considered safer at a time of rising uncertainty. “We like defensives as a diversification play given low positioning and likely higher volatility in the coming weeks,” says Ulrich Urbahn, head of multi-asset strategy and research at Berenberg. Bullish bets on economy-linked cyclicals are now the consensus, “which is vulnerable should we see a risk-off environment,” he adds.

“We have started to warm up to European equities from a valuation standpoint, but we’re taking a very selective sector approach rather than taking on broad indexes,” says Laura Cooper, global investment strategist at Nuveen. “We’ve been trading more defensive.”

Bank of America strategists also say European stocks are pricing in an outlook that’s “too rosy.” They predict a 15% underperformance for cyclicals relative to defensives, saying the scope for slowing global growth, higher risk premia and lower bond yields is conducive to a rotation into sectors such as food and beverages, pharma and utilities.

5. “Alibaba’s cloud revenue could double in 3 years.”

MS analysts are bullish on Alibaba as the largest Chinese hyperscaler with superior technology and highly ranked open-sourced LLM. BABA is well positioned to capture significant share in the accelerating AI cloud opportunity, and they forecast BABA’s cloud revenue will double in three years.

They estimate AliCloud is worth US$60/share in their Base case and US$100/share in their Bull Case. Driven largely by the greater Cloud opportunity (with the core eCommerce business remaining stable), they have raised their total BABA price target to US$200 (base case) and US$300 in a blue sky scenario (bull case).

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