1. Even soaring yields fail to dent AI stock optimism.

It's not just that the two sides (tech and non-tech) are moving apart - they're moving apart more aggressively than at any point since this bull market began.
Some of the biggest names in the S&P 500 have managed to avoid the increase in Treasury yields reducing their valuations, as one would usually expect. That may be because equity traders know something that bond traders don’t and they’re expecting yields to come back down. Or it may be because there’s been new information about the longevity of the AI boom that justifies even more optimistic expectations about the eventual payoffs.
Microsoft was up 33% in the three months. The only way for that to make sense is if you think its free cash flow in the years after that will be much higher.

2. Improving mood around autos.

Passenger car sales across the five major European countries were up 11% y/y.

3. “There will be a significant electricity shortfall next year”, says Musk.

“US data center developers face a >30% power shortfall through 2028”, says morgan Stanley.
The urgency to secure power being expressed by AI players is much greater than appreciated.
Yesterday, Google and Constellation Energy signed a 20-year power agreement that will fund $4.3B of upgrades across 11 existing nuclear units in Illinois, Pennsylvania, and New Jersey. The work will add 890 megawatts to the grid, roughly the output of one new reactor, with the first increase expected in 2028.

4. New growth era for European utilities.

The 22-yr PPA announced between Google and Fortum this month to life-extend a nuclear asset in Finland to 2050, at a similar c60% premium to forwards, is not to be ignored. While the scramble for energy to enable U.S. Data Centers (DC) is now well underway, it is likely just getting started in the EU, which is underappreciated by the market.
France and the Nordics’ relatively strong power position could become increasingly valuable as DC demand accelerates. According to Eurostat, France recorded c94 TWh of net electricity exports in 2025 (~21% of domestic demand). Europe’s announced DC pipeline stood at 66.1 GW as of Dec-25 vs. 10.8 GW of live capacity.
Yet we have observed since April a divergence in sector & stock performance relative to fundamentals given perceived political & policy risk along with the bond yield environment. We consider much of this overhang, especially on policy risk, as both overblown, priced in and likely temporarily. Furthermore, we note that Utilities with real rates of return, inflation linkage and/or a high proportion of fixed cost debt are less impacted from rising bond yields than the market perceives.
We are buyers of SSE, Orsted and Engie.

5. Interest rate-sensitive sectors are now the most oversold they have been in five years.

The spike in bond yields, the key headwind for stocks, might be getting stretched since several additional hikes are already priced in the market.

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