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Chart of the Week:
Japan Hikes Rates Again, Policy Rate Hits a 30-Year High
At this month’s meeting, the BOJ raised rates by another 25 bps, following a January hike, lifting the policy rate to 0.75% and decisively breaking the near-30-year “0.5% ceiling.” Since the revised BOJ Act took effect in 1998, policy tightening has occurred in only five years; this year’s cumulative 50 bps increase is the largest since 1998.
Market Recap 1:
Tech Earnings Outlook Fuels AI Profitability Concerns; Tech Stocks Dip Then Rebound This Week
Market Recap 2:
Tech Earnings Outlook Fuels AI Profitability Concerns; Tech Stocks Dip Then Rebound This Week
From Oracle’s weak backlog-to-revenue conversion to Broadcom’s softer margins, tech earnings reignited concerns over AI profitability, leading tech stocks to drive consecutive declines in U.S. equities over the past week. The selloff eased after Micron’s results beat expectations, with an outsized outlook for next quarter: EPS guidance of about USD 8.4 versus consensus of USD 4.7–4.8—nearly doubling. HBM capacity serving AI data centers is fully utilized, with 2026 capacity almost fully booked, helping to alleviate AI profit concerns. Combined with inflation data that came in below expectations, the four major U.S. indices stabilized, though losses were not fully recovered. The SOX underperformed for the week, down over 7%.
Market Recap 2:
U.S. November Inflation Cools Sharply Below Expectations; Bonds Rally
U.S. headline CPI slowed to 2.7% YoY in November from 3.0% in September, below the 3.1% consensus, mainly due to falling energy prices. Core CPI eased to 2.6% YoY from 3.0%, also below expectations, with shelter inflation decelerating from 3.6% to 3.0% as the key driver. Cooling inflation reduces the Fed’s concern, shifting policy focus more toward labor-market conditions, where the downturn is accelerating. We expect scope for two 25 bps cuts in 1H26 and one additional cut in 2H26. Bond markets welcomed the softer inflation print and prospects of deeper easing, pushing yields lower, with long-dated Treasuries leading the move.
What’s Trending:
SpaceX Reportedly Targets 2026 IPO, Opening a New Era in Space Development
Bloomberg reports that SpaceX is targeting a 2026 IPO, seeking to raise over USD 30bn. Post-listing valuation is estimated at USD 800bn–USD 1.5tn, potentially making it the largest IPO on record. As SpaceX remains private, ownership details are undisclosed; market estimates suggest Elon Musk holds over 40% as the largest shareholder. Notably, Alphabet ranks among the top three institutional investors, offering public-market exposure alongside private vehicles such as ARK and Fidelity funds.
In Focus 1:
AI Remains the Core Growth Theme into 2026, with Net Margins Outperforming Non-AI Peers
Despite lingering concerns over an AI bubble, we believe three key indicators support a durable long-term AI growth story. First, AI-related companies continue to ramp capex. JPMorgan estimates that the 30 most representative AI companies in the S&P 500 will see mid-2026 capex exceed USD 550bn—nearly double versus end-2024. Second, capacity expansion (e.g., TSMC’s CoWoS) remains insufficient to meet demand, with corporate capex consistently exceeding plans, underscoring urgent compute needs. Third, CSPs are accelerating in-house ASIC development, shifting AI investment from general-purpose hardware to customized optimization, while R&D spending at leading AI firms continues to rise steadily.
In Focus 2:
Tech Buybacks Remain Robust; Retail Flows Also Rotating into the AI 30
Beyond long-term fundamentals, strong profitability has driven a sharp rise in tech-sector share buybacks since 2023. While financials saw a notable pickup this year, AI-led technology companies have exceeded USD 300bn in buybacks for two consecutive years starting in 2024. Buybacks enhance ROE and provide valuation support.
