Thank you for reading this week’s edition of Closelook@Hypergrowth, dated April 23, 2026 👋. The next edition will be published on April 29, 2026.

This edition is thematic: a deep read on where capital is moving inside the AI hardware supply chain and inside agentic software — two places, one signal. For the schedule of our other publications, please check the publishing schedule at the end.

Table of Contents

1. This Week’s Action

2. Overview: The Semi Map

3. The State — Broadening, Not Rotation

4. The Outlook — Where the Wave Runs Next

5. What May Lie Ahead: Macro Setup

6. What May Lie Ahead: Technical Setup

7. The Hypergrowth Portfolio: What We Did

8. The Hypergrowth Portfolio: What We Plan To Do

9. Knowledge Corner: Broadening vs. Rotation

10. Upcoming Transactions: Be Informed

11. What May Go Wrong: Risk & Change Triggers

12. Final Words

(1) This Week’s Action

The easy read this week is that NVIDIA compounded again, and semis kept running. The accurate read is different: Power Semiconductors just took the one-week lead within our Rubin 100 index, AW25 Agentic completed a synchronized V-shape recovery across six of seven sub-sectors (potentially a mean-reversion type only), and hyperscalers never actually participated in the agentic crash.

Rubin sector indices — week at a glance

Chart 1 — Rubin Sector Indices Across Three Timeframes

None of the earlier leaders are handing over. New ones are joining on top. That is broadening, not rotation — and it has a specific shape.

Rubin 100 sector indices compared across YTD, 1-month and 1-week views

Chart 2 — AW25 Composite Index · 21-Day V-Shape

This Week’s Signals

Two OBV divergences in AW25 basket: OKTA and PTC — both in the coldest quintile (basket temperature 47–48). Divergences in cold names are early-turn candidates, not confirmations. Flagged for watch, not position.

What Happened (as of 21 April 2026)

Two things happened in parallel that we think are the same thing.

Inside the Rubin 100 universe, the sector ranking reordered itself. On a year-to-date basis, High-Speed Interconnects still leads at +124%. On a one-month basis, Interconnects keeps running at +71%, but Power Semiconductors has moved to fourth place at +37%. On a one-week basis, Power Semiconductors is first at +13.53%, and Interconnects has dropped to sixth at +7.95%. Every earlier leader is still positive on every timeframe. A new leader has joined on top. Nothing rotated out. One more layer rotated in.

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Inside AW25 — our 25-name agentic software sensor array — the picture is different in shape but identical in meaning. The composite index dropped from 1,005 on March 31 to 905 on April 10, a 10% drawdown in eight trading days. It has now recovered to 1,036, above the starting point. Six of the seven sub-sectors traced the same V-shape. The MAG7 Gateway sub-sector did not participate in the crash at all — it is up 12.65% over the 60-day window without interruption. Zero of the 25 names in the basket are currently classified as “cooling.” Nineteen sit neutral, six are heating.

Both stories have the same signature: the old leadership did not hand over. New leadership joined above and around it. The semis rally is broadening from Early Ramp into Mid-Ramp. The agentic recovery is broadening from hyperscalers outward into the rest of the stack. §3 makes the case that this is the structurally stronger setup, not the weaker one — and §4 names what comes next.

(2) Overview: The Semi Map

Sorted by 1W % descending · All returns in USD · Close of April 17, 2026. This is a thematic edition on the semiconductor supply chain; the standard Hypergrowth portfolio map returns next week.

Rubin 100 sector indices — three-timeframe view (YTD · 1M · 1W)

Rubin 100 Sector Indices (as of 22 April 2026)

The broadening is only visible when you put the three timeframes side by side. YTD shows the history. 1M shows the acceleration. 1W shows who is leading right now. Read them as a sequence.

Power Semiconductors went from Rank 7 YTD to Rank 3 on the month to Rank 1 on the week. That progression is the acceleration. And the old leaders did not fall off the board — High-Speed Interconnects is still #1 on the monthly timeframe. This is broadening.

Power Semiconductors — six constituents driving the cohort

Power Semiconductors — The Six Constituents

Why Power is running now: The GB200 and Rubin rack architectures pull 120–140 kW per rack, a step-change from Hopper’s 35–40 kW. That is not a GPU story — it is a full power-delivery redesign. SiC and GaN components, high-voltage DC distribution, on-board converters per accelerator. Jensen Huang called power the next bottleneck on the GTC stage. ON, STM and MPWR sit directly in that bill of materials. The 1W move is the market pricing that bill in real time.

Thermal Management — Lagging, But for Structural Reasons

Thermal Management sits lowly on the 1W list (+2.22%) and on the 1M list (+20.32%). That looks like a contradiction of the broadening thesis. It is not.

Thermal Management had its leg. Vertiv — the dominant name in the cohort — ran 2023–2026 and is now digesting that move at a high base (despite another earnings beat yesterday). No new leader has emerged in the sector to replace it. Compare this with Power Semi, where ON, STM and MPWR are all posting 30%+ months simultaneously. Thermal is not the next joining layer. Power is.

The ordering of the broadening matters. Thermal first (2023–2025), now consolidating. Power second (now). The next layer is not Thermal re-accelerating — it is something further down the dependency chain.

Thermal management — consolidation at a high base

(3) The State — Broadening, Not Rotation

This is the core read of this edition. Everything else in the newsletter supports this one thesis.

The Thesis

The rally is broadening in two domains simultaneously. Inside Rubin, Early Ramp leaders keep compounding while Mid-Ramp layers — Power Semiconductors first — take the one-week lead. Inside AW25, six of seven agentic sub-sectors completed a synchronized V-shape recovery in twenty-one days, while MAG7 Gateway never participated in the crash. Nothing handed over. Everything added. That is the signature of a rally getting wider, not thinner — and two sub-sectors (Platform −1.03%, Vertical −2.88% over 60 days) tell us it still has runway.

1. Inside the semis, the broadening is sequential. Our Rubin 100 index moved through its first phase cleanly. Memory, Packaging, Substrates, Interconnects led from January through March. Power Semiconductors is the new one-week leader. That does not mean Memory stopped — Memory is still up on the week and on the month. It means capital kept buying Memory and also started buying Power. The three screenshots of the same sector map at YTD, 1M and 1W show the same fourteen names in the top half of the table. Only the ordering changes.

b) The Mid-Ramp layer has started, but Thermal did not go with it. Power Semiconductors is running. Thermal Management is not. Vertiv — the dominant thermal name — had its run in 2023–2025 and is consolidating at a high base. No new leader has emerged in the cohort. That is the disciplined read: broadening is not indiscriminate. Power joined because the GB200/Rubin rack architecture redefined its bill of materials. Thermal did not join because no analogous catalyst has landed.

c) The AW25 V-shape is the cleanest regime chart we have seen in 2026. The composite index went from 1,005 on March 31 to 905 on April 10 to 1,036 on April 20. Eight trading days down, eight trading days up. Every sub-sector traced the same shape with two exceptions: MAG7 Gateway (which never dropped, +12.65% on 60 days) and Vertical (which has recovered but still sits −2.88% on 60 days). The basket temperature reads 55 — neutral regime with warming bias. Six names heating, nineteen neutral, zero cooling. Zero. That is the number that tells you this is not a bounce, it is a regime shift.

d) Hyperscalers never participated in the agentic crash. MAG7 Gateway in AW25 is up 12.65% over the same 60-day window that saw the rest of the basket crash and recover. GOOGL is the hottest name in that sub-sector at 62. The hyperscaler cohort was a quiet safe haven inside agentic — the opposite of how most commentators framed the drawdown as “tech crashing.” Tech did not crash. Everything in AW25 except hyperscalers crashed, and then recovered. Hyperscalers kept compounding through it.

e) The first agentic winners turning are names that were left for dead. The hottest constituents in AW25 right now are DigitalOcean at a basket score of 75, Twilio at 68, Fastly at 68. These are not the obvious growth names. DigitalOcean is a neocloud pure-play that got written off when hyperscalers captured the infrastructure narrative in 2024. Twilio is the developer-API bellwether that has been in a three-year drawdown. Fastly is edge compute, which most analysts consider structurally challenged. All three sit in sub-sectors — Neocloud/Edge (+0.42% 60D) and Commerce+Orch (+6.75% 60D) — that have just completed their V-shape. These are signals of where capital is moving, not position recommendations. We do not hold them.

f) Two sub-sectors still lag. That is the runway. Platform (S2) sits at −1.03% over 60 days. Vertical (S6) sits at −2.88%. Both have traced the V-shape; neither has closed above the starting line. The coldest AW25 constituents — INTU at 46, WDAY at 47, PTC at 47, ESTC at 47 — concentrate in exactly these two sub-sectors. If the broadening thesis holds, these are the names that turn next. If the thesis breaks, these are where it breaks first. The watchlist in §4 makes this operational.

Regime Verdict — 🟢 Broadening Bull

Score 4 of 5 is a strong signal. The one neutral pillar is the structural tell: Platform and Vertical sub-sectors still below baseline means the broadening has not completed. That is bullish, not bearish — it says the rally has names left to rotate into before the signature exhausts.

The Dispersion Behind the Composite

The composite number hides the dispersion. Here is the 21-day cohort spread that actually matters:

Spread between hottest and coolest cohort in the Rubin/AW25 combined universe: +46 points. Wide spread means active rotation; broad participation means nothing cooling. Both at once is the broadening signature.

(4) The Outlook — Where the Wave Runs Next

§3 describes the state. §4 names what comes next — and what would invalidate the read.

Forward Reads — Three Waves to Watch

Wave 1 — Power Semi acceleration continues. ON, STM and MPWR all posted 30%+ monthly gains. The catalyst is structural — power-delivery redesign for GB200/Rubin racks — and the buying is only one week old as the new #1. Infineon just entered. Renesas is a pending-data name but structurally belongs to the cohort. Watch for the cohort to hold the 1W lead for a second consecutive week. If it does, Power Semi transitions from “joining” to “established Mid-Ramp leader.” If it fades, the one-week print was a spike, not a trend.

Wave 2 — AW25 Platform and Vertical sub-sectors close the gap. These are the two sub-sectors still below the March 31 baseline. The basket’s coldest names — INTU, WDAY, PTC, ESTC — concentrate here. A single week where Platform and Vertical both close above the baseline would complete the V-shape across all seven sub-sectors. That is the operational definition of “broadening completed” inside agentic.

Wave 3 — OBV divergences fire on OKTA and PTC. Both names sit in the coldest quintile with active technical divergences in the AW25 scanner. OBV divergences in cold names are early-turn candidates. If either name prints above its 20-day moving average on volume, it signals the coldest quintile is starting to turn — which historically leads the full-basket recovery by two to three weeks.

Watchlist — What Would Flip the Read

· Power Semiconductors drops out of the top three 1W sectors next Friday: Mid-Ramp joining thesis weakens. Semi broadening reduces to “Early Ramp continuation only.”

· AW25 basket temperature prints any “Cooling” name: 0 of 25 cooling is the broadest signal we have. A single cooling transition is not a reversal, but it is the first datapoint that would matter.

· Platform + Vertical fail to close above baseline for two more weeks: V-shape completion stalls at 5 of 7 sub-sectors. Broadening thesis holds but has a visible ceiling.

· MAG7 Gateway sub-sector rolls over: The safe-haven-through-the-crash story was the structural anchor. A rollover there would flip the entire read from broadening to narrowing.

(5) What May Lie Ahead: Macro Setup

Macro is the tide. Broadening-bull regimes need liquidity to persist.

Money Temperature

Money Temperature dashboard — 8-instrument macro regime scoring

Full dashboard: closelook.net/lab/temperature/

Central Bank Pulse

Fed: Hold at 4.25–4.50% keeps the long-duration discount rate steady — which is why AI-native software names could recover on multiple expansion alone. One cut priced by September, second at ~70% by December. For broadening specifically, the Fed is neutral: the regime does not need cuts to continue, but cuts would accelerate the Platform and Vertical catch-up.

ECB: At 2.25% and still cutting. The April move was executed; June at 25bp is priced near 80%. European Power Semi names (STM, Infineon) benefit from the ECB path twice — once through domestic liquidity, once through the general global risk-on backdrop that broadening regimes thrive in.

BoJ: Holding at 0.50% against services inflation above 3.0% is the unresolved policy error. A faster-than-expected hike re-prices yen carry and hits long-duration growth first. That means the coldest AW25 names — INTU, WDAY, PTC — are the most yen-sensitive in the basket, which is the second reason they are lagging.

PBoC: Managed easing. RRR at 9.5%, LPR at 3.10%. Broadening-regime relevance: Chinese liquidity is mostly a second-order signal for US hypergrowth, but any surprise acceleration would land hardest on picks-and-shovels semis — ANET, AVGO, MRVL. Watch the mid-May RRR decision.

Macro Commentary (Ed Yardeni, April 2026)

· “As far as the stock market is concerned, the war is over until further notice,” Yardeni said, suggesting that the market has factored in a resolution to the Iran conflict.

· “I think the market is right that Trump intends to end it sooner rather than later, and that the world economy, which has been remarkably resilient over the past few years, will remain so,” Yardeni stated regarding the ongoing geopolitical situation.

· “I don’t think the market will retest the low point reached on March 30th. There is too much money on the sidelines ready to come in during a pullback,” he noted regarding market volatility.

(6) What May Lie Ahead: Technical Setup

Seasonally, we have entered the best 4-months stretch of a calendar year (April to July).

Seasonal pattern — April through July is historically the strongest 4-month stretch

Earnings prints to date have been considerably better than predicted.

While the Saas sell off may have come to a temporary end, the bull in semis seems to have legs and more to run.

SaaS vs. Semis — the bull in semis has more to run

(7) The Hypergrowth Portfolio: What We Did

Coming Soon — Live Transaction Feed

The new closelook-portfolio-engine is in build. Once it ships, this section becomes a live read from the transaction ledger — every buy, sell, and covered-call write appears here with the reason attached.

C+ subscribers get real-time push notifications on every move before it reaches this section. Waitlist: closelook.net/c-plus.

(8) The Hypergrowth Portfolio: What We Plan To Do

Forward Plan — Candidates With Triggers

The new closelook-portfolio-engine is in build. Once it ships, this section becomes a live read from the transaction ledger — every planned buy, sell, and covered-call write appears here with the reason attached.

C+ subscribers see the candidate list before execution.

(9) Knowledge Corner: Broadening vs. Rotation

Why these two words mean different things — and why the difference is the edition’s whole point.

Rotation and broadening look similar on a one-week tape. Both show new names in the leadership table. Both show capital moving. The difference is what happens to the old leaders.

In a rotation, the old leaders hand over. Capital leaves Name A and enters Name B. The leadership changes hands, not size. The index can hold steady while internal composition churns. Rotation is zero-sum at the cohort level — what Name B gains, Name A gives up.

In a broadening, the old leaders keep compounding and new leaders join above them. Capital does not leave Name A; it arrives in addition at Name B. The index gains altitude, the leadership widens, and the spread between best and worst sector stays high even as the bottom of the distribution also lifts. Broadening is additive.

Three diagnostic questions separate the two:

Question 1: Are the old leaders still positive on every timeframe? In our Rubin 100 data this week, High-Speed Interconnects moved from #1 YTD to #6 on the 1W tape. If Interconnects had gone negative, that would be rotation. It is up 7.95% on the week. That is broadening.

Question 2: Is the dispersion staying high, or compressing? The Rubin sector spread on YTD is 120 percentage points. On the 1M view, the top-to-bottom spread is also wide (+71% to −20% for Wafer Processing). On 1W, the spread is +13.53% to −0.56%, still wide. Dispersion staying high means active rotation inside a rising tide — the broadening signature. Dispersion compressing toward zero means everything moving together without leadership — the late-cycle signature that precedes exhaustion.

Question 3: Are the laggards starting to turn, or giving up further? In AW25 this week, Platform and Vertical sub-sectors are still below baseline but have traced the same V-shape as the recovered sub-sectors. The coldest names — INTU, PTC, WDAY — have OBV divergences firing. Laggards turning is the confirmation of broadening. Laggards accelerating downward is the early sign of rotation-into-defense.

Why the distinction matters operationally. In a rotation, you trim the old leaders and add to the new. In a broadening, you hold the old leaders and scale into the new. The portfolio action is opposite.

A historical caveat. The broadening regimes of 1999 and 2020 both exhausted via a narrowing event — a single week where dispersion collapsed into the prior leaders as participation died. That pattern is the failure mode we watch for in §4 watchlist items three and four. Broadening is bullish. It is not permanent.

The full framework — dispersion math, sub-sector velocity scoring, and the three historical case studies — is at closelook.net/101/broadening-vs-rotation.

(10) Upcoming Transactions: Be Informed

Two ways to stay close to Closelook’s portfolio moves — one free, one premium.

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(11) What May Go Wrong: Risk & Change Triggers

The falsification test: what would invalidate the broadening thesis — and how we’d know.

Framework Shift Triggers — Broadening Specific

· Any AW25 constituent transitions to “Cooling”: 0 of 25 is the broadest signal we have. First cooling name is the first crack.

· Rubin sector spread compresses to below 60 percentage points on YTD: Indicates leadership consolidating, not broadening.

· MAG7 Gateway sub-sector drops below baseline: The structural anchor of the agentic recovery. A break there reframes the entire AW25 read.

· Power Semi falls out of the top five 1W sectors for two consecutive weeks: Mid-Ramp joining was a spike, not a trend.

The thesis holds until one of these triggers fires. When they do, the next edition updates the read.

(12) Final Words

Broadening is the kind of regime that rewards patience and punishes impatience equally.

“The obvious trade is already priced. The disciplined trade is to watch the map and wait for the layers to name themselves. Power Semi named itself this week. Platform and Vertical have not named themselves yet. The watchlist is the patience.”

— Closelook, this week

Thank you for reading. See you next week.

Annex — Further Reading at Closelook

Suggested navigation across Closelook’s own work. Not external — everything below lives at closelook.net.

Indices & Frameworks — Data Behind This Edition

· Rubin Build-Out 100 — 100 stocks, 18 sectors, the map in §2 (closelook.net/indices/rubin)

· Agentic Winners 25 — 25-name sensor array, the basket in §3 (closelook.net/indices/aw25)

· HALO Growth 100 — AI-neutral breadth check (closelook.net/indices/halo)

· Generation Rotation Framework — Why we were watching Power Semi to name itself (closelook.net/101/generation-rotation)

· Broadening vs. Rotation — This edition’s Knowledge Corner, full framework (closelook.net/101/broadening-vs-rotation)

· ABR Framework — Agent Beneficiary Ratio scorecard (closelook.net/research/abr-framework)

· Money Temperature — 8-instrument macro regime scoring (closelook.net/lab/temperature)

Portfolios

· Hypergrowth — 16 AI-native names + covered-calls layer ← this newsletter

· AI Build-Out — Rubin-aligned single-stock portfolio

· Global Tech 50 — Non-US tech, long-horizon

· Global ETFs — Allocation portfolio tracked in @US newsletter

· Derivatives — Covered calls, cash-secured puts overlay

Editorial

· Closelook@US Stock Markets — Sunday longform (closelook.net/us)

· Closelook@Global Stock Markets — Saturday longform (closelook.net/global)

· Weekly Signal — 9-dimensional market regime scorecard (closelook.net/weekly)

· Closelook 101 — Concepts and frameworks (closelook.net/101)

Publishing Schedule

NVIDIA is not riding a cycle. It is becoming a utility — the first technology company on a credible path to one trillion dollars in annual revenue. Not because demand stays hot, but because NVIDIA is transitioning from selling hardware to operating the base layer of global compute. Every inference call, every agent transaction, every digital twin simulation, every robot brain update runs on NVIDIA's stack. That is not a product cycle. That is a tax on intelligence itself.

The market prices NVIDIA like a semiconductor company with unusually high margins. The correct framing is a technology utility with structural lock-in, recurring software revenue, and sovereign-grade demand. The gap between those two valuations is where the alpha lives.

What The Market Sees vs. What's Actually Happening

The Perception: NVIDIA sells GPUs into a hot market for AI training. Demand is cyclical. When hyperscaler CapEx normalizes, margins compress, and revenue declines. This is a chip cycle, and chip cycles end.

The Reality: NVIDIA is building the infrastructure layer that every AI workload — training, inference, agentic, physical — must run through. The CUDA ecosystem, NVLink fabric, and software stack (NIMs, Omniverse, AI OS) create a lock-in that deepens with every generation. Customers don't buy chips anymore. They buy sovereign AI factories.

Revenue 2025E: ~$130B → Revenue 2030E: $900B–$1T

Gross Margin: ~74% → ~75% (stable)

Software ARR: ~$5B → $120–140B (28x growth)

Net Margin: ~45% → ~55% (expansion through software mix)

The margin story is the key that most analysts miss. Software ARR scaling from $5B to $140B acts as a high-margin buffer against any hardware commoditization. NVIDIA's blended margin improves as it sells more software, not less hardware.

The Historical Pattern

Every major computing era produced one dominant platform layer.

Microsoft established a monopoly in the operating system market for personal computing. Apple built the consumer platform that owns the interface between humans and devices. AWS created the global cloud utility that commoditized infrastructure. NVIDIA is building the next layer: the global intelligence utility that powers training, inference, agents, and physical AI across every industry and sovereign boundary.

The pattern is consistent. Each layer captured a disproportionate share of the value created in its era because it was the chokepoint — the one piece of infrastructure that everything else depended on. Windows took a cut of every PC sold. iOS took a cut of every app purchased. AWS takes a cut of every workload hosted. NVIDIA is positioning to take a cut of every computation that involves intelligence.

By 2030, NVIDIA will operate the base layer of compute, the OS for autonomous agents, the network fabric for planetary-scale inference, and the sovereign infrastructure stack for nation-states. That is not a chip company. That is the operating system of civilization.

The Structural Moat

Three interlocking mechanisms make NVIDIA's position far more durable than a typical hardware lead.

Forced Upgrade Cycles

NVIDIA has compressed its architecture cadence to roughly 12 months: Blackwell (current) to Rubin (2026) to Feynman (2028). Each generation delivers performance improvements so large that the previous generation becomes economically unviable within 24 months. This is not Moore's Law — it is Moore's Law on steroids.

The secondary market for AI accelerators collapses because no rational buyer purchases hardware that will be 3–4x less efficient within a year. The result is permanent demand scarcity and continuous pricing power. Every customer must upgrade. There is no "good enough."

The Software Tax

NVIDIA's software stack — CUDA, NIMs, Omniverse, and the emerging AI OS layer — creates a 90% margin annuity that sits atop the hardware base. Every inference call is a taxable event. Every agent transaction is a taxable event. Every digital twin simulation is a taxable event.

Software ARR is projected to grow from approximately $5B today to $120–140B by 2030. That is a 28x expansion in recurring, high-margin revenue that transforms the financial profile from hardware cyclical to utility compounder.

Complexity as Margin Shield

NVIDIA no longer sells chips at transparent per-unit pricing. It sells racks at $4M, clusters at $1B, and sovereign cloud deployments at $10B. Each package bundles compute, networking (Spectrum-X, NVLink), cooling infrastructure, security, and software into a single deal. The complexity of these packages makes margin extraction invisible to buyers and analysts alike.

You cannot reverse-engineer the GPU margin from a billion-dollar sovereign AI factory contract. That opacity is structural and intentional.

"NVIDIA no longer sells chips. It sells national AI factories."

The sovereign angle adds a dimension that pure enterprise demand cannot. As trust in US hyperscalers erodes geopolitically, governments become the new whale customers. National AI clouds, defense-grade infrastructure, autonomous city platforms, and data sovereignty requirements all funnel through NVIDIA as the neutral geopolitical utility. This is infrastructure spending that is politically durable and not subject to corporate CapEx cycles.

Technical Setup

Trend: 🟢 Bullish

Structure: Trading above rising 20W and 50W EMAs. Held breakout above prior all-time high after January consolidation. Higher lows intact since October 2023.

Key Levels: Support $180 / $160 — Resistance $195 / $215 zone

Volume: Confirming on breakout candles, declining on pullbacks — healthy accumulation pattern.

Signal: The weekly structure supports the fundamental repricing thesis. The market is gradually shifting NVIDIA from semiconductor multiples toward platform/utility multiples, and the chart reflects that in the persistent bid under every consolidation.

What's Below The Surface

The thesis and the moat are clear. But the real questions for investors are: what exactly does $1T in revenue look like, segment by segment; what breaks the thesis; and how do you size the position?

In the C+ Premium section on Substack, we go deeper:

→ Full revenue waterfall: $550B data center + $180B networking + $130B software + $120B robotics + $70B auto/edge

→ Bear ($5.7T) / Base ($13.1T) / Bull ($15.8T) valuation with implied share prices

→ Three macro waves: Data Center Replacement, the Agentic Economy, and the Robotics Economy

→ The Canary Risk Framework: Custom ASICs, Rubin yield issues, sovereign regulation, Taiwan geopolitics, and power grid constraints

→ Portfolio: NVIDIA is a core position in the Closelook Hypergrowth Portfolio. Live tracking coming soon for C+ Exclusive subscribers.

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Salve, cari subscripti!

Thank you for reading this week's edition of Closelook@Hypergrowth, dated November 14, 2024 👋. The next edition will be published on 20 November 2024.

A Closelook At This Edition

1. This Week's Action: Trump Winners and Losers

2. Macro Insights: Sticky Inflation Landing Ahead

3. Higher For Longer: Initial Macro Forecast For 2025

4. The Hypergrowth Portfolio: Rebalancing After Earnings And Election

5. This Week's Stock Spotlight: Zeta Global - Fraudulent Financials?

6. Knowledge Corner: Why 2024/25 is different from 2016/17

7. Upcoming Transactions: More Rebalancing After the Election

8. Final Words: It’s The Bond Market, Stupid!

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(1) This Week's Action: Trump Winners and Losers

Stocks have been on a tear since Donald Trump claimed victory in the United States election last week. The S&P 500 posted its best week in a year, gaining 4.7 percent and crossing the symbolic threshold of 6,000 for the first time.

The Nasdaq and the Nasdaq 100 finally made new ATHs, breaking above the summer 2024 highs.

The best-performing Nasdaq 100 stock in the past month has been Tesla - up more than 50 percent. Animal spirits have returned.

The table below shows the Nasdaq 100 one-month individual stocks performance ranking.

Quite a few semiconductor stocks are at the bottom of the table, while software has finally outperformed the hardware/infrastructure-related AI sectors.

Super Micro, Moderna, and PDD have been the worst performers - all for different reasons.

In contrast to the two NASDAQ indices, the performance of the SP 500 Info Tech sector has been more muted (which is a warning signal to me).

I see the sector in the midst of completing wave 9. This may indicate a forthcoming top as the minimum requirements for a 5-leg impulse wave setting with extension have been satisfied.

While we are entering the seasonally best 10 weeks of the year (mid-November until the end of January), I am worried about the bond market's performance.

The 30-year fixed mortgage rate yields have risen to 7.38 % from around 6 percent at the time of the initial Fed cut.

The TTL ETF has cratered. It is trading below 90 USD and heading toward the central support zone around 87.50 USD.

It may well have completed an A-B-C consolidation pattern, followed by (the early stages of) another impulse leg down. In a more bullish scenario, yields should stop rising around the current level and move back to the 100 USD level (see A-B-C-D-E pattern above).

In a bearish scenario, yields will soon cross the 4.50 percent level and move closer to the 4.75 to 5.00 percent level.

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(2) Macro Insights: Sticky Inflation Landing Ahead

Trump vs. Bond - the real battle will not be between the Democratic Party Leaders and Big D; the newly elected president will face a more challenging opponent.

The name is Bond - Treasury Bond! The real battle will be between the bond vigilantes and Donald Trump. And bond vigilantes are tough adversaries. They cannot be scared away by social media, (false) claims, or any other measures from the political campaign playbook. They like to make a deal, lock in a profit and disappear.

Yesterday's CPI report indicated inflation might become sticky above the Fed's 2.0% target. Headline and core CPI inflation rates increased to 2.6% and 3.3% year-over-year in October.

While goods prices continue to deflate, supercore inflation, rent inflation, and wage growth all saw increases last month, suggesting they are stabilizing at relatively high levels.

This, combined with strong economic growth, lends further evidence that the Fed may not ease monetary policy a lot further in the months ahead. This view is further reinforced by rising bond yields, which question the wisdom of the Fed's recent rate cuts.

One and done! One rate cut in 2025 and no more is my preferred scenario.

Ed Yardeni is not concerned about a second wave of inflation, as he believes that increasing productivity is already enhancing real GDP while containing unit labor costs inflation.

Recent upward revisions in productivity support this perspective. However, Yardeni suggests that the Fed may need to allow more time for consumer price inflation to become less sticky before considering additional rate cuts.

Ed Yardeni lifted his SP 500 targets to 6,100 for this year, 7,000 for 2025, and 8,000 for 2026. While I still align with this bullish view, I have raised the probability that we will see a much worse stock market performance in 2025.

One reason is that the bull market will be entering its third year in 2025 - this often marks the end of a bull cycle. The second reason is that while earnings have risen and are projected to continue increasing in 2025, valuations in anticipation of lower interest rates have risen even more.

Multiple expansion has contributed to more than fifty percent of the SP 500 advance in 2024.

This has been based on projecting much lower rates in 2025, as the Fed Dot Plot outlined numerous rate cuts ahead.

Assuming this will not happen, we may see multiple compression in 2025 offsetting any positive effects from rising earnings.

I think it will all depend on the bond market, where we may see the “higher for longer” views re-emerge as soon as December 2024.

(3) Higher For Longer: Initial Macro Forecast For 2025

In the U.S., several factors contribute to the concern about a potential uptick in inflation in 2025, particularly when compared to 2024 numbers.

Sticky Inflation

• Inflation, especially in the service sector, is showing signs of becoming sticky. This means that despite overall inflation rates slowing down, specific components of inflation are not decreasing as quickly as expected. Services inflation, in particular, is stubborn and continues to be a concern.

Supercore Inflation

• The supercore inflation measure, which isolates components of core inflation that are highly sensitive to economic conditions, has been rising. This indicates that demand-driven inflationary pressures are persistent.

High Rents and Housing Costs

• Shelter inflation, which includes rents and owners' equivalent rents, remains elevated. Although there was a slight deceleration in shelter costs in some months, they have not cooled as quickly as anticipated. Housing insurance costs are also increasing due to more frequent and expensive natural disasters, contributing to the stickiness in housing-related inflation.

Structural Changes in the Economy

• Structural changes, such as labor shortages, especially in industries requiring in-person work, and the aging of the U.S. population, are driving up costs for health care services, health insurance, and other services. These factors resist the Federal Reserve's efforts to drive inflation back to the 2% target quickly.

Comparison to 2024 Numbers

• The year-over-year comparison of inflation rates in 2025 will be influenced by the inflation rates experienced in 2024. The base effect could make the year-over-year inflation rates in 2025 appear higher.

Federal Reserve's Stance

• The Federal Reserve may turn more cautious about cutting interest rates due to the persistent inflation, particularly in the service sector. While there are forecasts for potential rate cuts in late 2024 and 2025, the Fed may wait for further cooling in inflation before making any significant moves.

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The path to achieving the Fed's 2% inflation target may be slower and more challenging than anticipated, leading to concerns about an uptick in inflation in 2025.

The reflationary policies anticipated under a second Trump administration could significantly impact the economic landscape, particularly in the context of adding to inflation concerns.

Inflationary Pressures

• Trump's policies, including tax cuts, increased infrastructure spending, and protectionist measures such as tariffs, are expected to drive inflation. Tariffs, in particular, can lead to higher consumer prices as the costs of imported goods increase.

• Reducing the labor pool due to stricter immigration policies could also contribute to inflation by reducing the supply of workers, potentially leading to higher wages and prices.

Fiscal Policy and Debt

• The Trump administration's plans for tax cuts, such as extending the Tax Cuts and Jobs Act of 2017, will likely increase economic growth and lead to higher fiscal deficits and national debt. This could exacerbate inflationary pressures and create uncertainty in the markets.

Monetary Policy

• The Federal Reserve may need to adjust its monetary policy in response to these reflationary measures. Higher inflation expectations could lead to higher interest rates to control inflation, which would impact bond markets and the overall cost of borrowing.

Market Reactions

• The anticipation of these policies has already led to market reactions, such as higher yields on 10-year Treasury notes and a stronger US dollar in the short term. However, long-term uncertainty around trade policy, fiscal deficits, and inflation could further challenge bond markets.

Labor Market and Immigration

• The impact of stricter immigration policies on the labor market could be significant. While some analysts argue that the reduction in the labor pool might not immediately lead to wage pressures due to existing slack in the unskilled labor market, others warn that mass deportations could disrupt the social and business fabric and lead to higher costs and inflation.

Reflationary Trades

Reflationary policies of the Trump administration are expected to:

• Increase inflation due to tax cuts, tariffs, and labor market adjustments.

• Lead to higher fiscal deficits and national debt.

• Influence monetary policy, potentially resulting in higher interest rates.

• Impact various market sectors differently, with equities likely benefiting and bond markets facing challenges.

• Create uncertainty and volatility in financial markets due to trade policy and immigration changes.

Investors are already positioning themselves for a reflationary environment, with markets pricing in higher inflation and interest rates.

(4) The Hypergrowth Portfolio: Rebalancing After Earnings And Election

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated November 06, 2024 👋. The next edition will be published on 13 November 2024.

A Closelook At This Edition

1. This Week's Action: The Election and the Stock Market

2. A New Market Leadership: Hypergrowth Reflation Trades?

3. Did You Know? Hypergrowth in the Russel 2000 Index

4. The Hypergrowth Portfolio: Rebalancing Before the Election

5. This Week's Stock Spotlight: Astera Labs Inc - Semiconductor-Based Connectivity for Cloud and AI Infrastructure

6. Knowledge Corner: The Fed, Trumponomics, and the FOMC Meeting

7. Upcoming Transactions: Rebalancing After the Election

8. Final Words: What Can Possibly Go Wrong? A lot!

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(1) This Week's Action: The Election and the Stock Market

The newly elected Trump administration can impose higher tariffs (raising inflation risks) and lower taxes (ballooning the federal deficits). That could push the 10-year yield up to 4.75%-5.00%.

A Republican-controlled presidency and Congress will mean less regulation and a more dovish stance on mergers and acquisitions, which benefits financial stocks and some mega-cap names.

As advocated by Donald Trump, extreme tariffs may interrupt the path of disinflation and lead to higher interest rates and inflation.

Universal tariffs under the Trump administration might impair companies that heavily source their goods from overseas markets and increase the sourcing costs of those American companies dependent on imports.

Trump has made universal tariffs a core part of his economic agenda, suggesting a 20% tariff on all goods from all countries and a 60% rate on Chinese imports.

Trump has described universal tariffs as drawing a “ring around the country” and denied they would be inflationary.

Universal tariffs will produce a lot of revenue, which can be used to cut corporate and individual taxes, significantly boost growth, and pro-capital and investment.

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Given this, the SP 500 could climb to around 7,000 next year. Nasdaq and Nasdaq 100 may pose similar gains. The R2K index may outperform all three indices by quite a margin.

(2) A New Market Leadership: Small-Cap Hypergrowth Reflation Trades?

Stocks inside the Russell 2000 Growth Index, which fall under the reflation trade category and are not negatively affected by higher rates, may provide the best return in 2025 as the market leadership may change substantially under the Trump administration.

The table below shows the largest stocks by market capitalization in the index. Sprouts Farmers Market is part of the hypergrowth portfolio.

The index has exhibited a stellar performance in the past 52 weeks - up close to 100 %.

It has outperformed the R2K index and the R2K value Index by a considerable margin.

(3) Did You Know? Hypergrowth in the Russel 2000 Index

Small-cap are potential winners under a second Trump presidency, as investors expect it would ease regulations on businesses weighing more heavily on smaller businesses. Tailwinds and catalysts for sustained outperformance for small caps entail:

1. Trump’s domestic-focused agenda,

2. deregulation policy increases small business confidence,

3. higher M&A/sponsor activity with weaker DOJ/FTC

4. extension of individual/pass-through tax cuts,

5. a larger fiscal package passed by Congress in 2025, removing the downside to U.S. growth.

Headwinds include higher interest rates due to the inflationary tariffs and growth agenda. This may affect small-cap stocks negatively due to increased borrowing costs.

Valuation and Market Dynamics

• Valuation Discounts: Small-cap stocks in the Russell 2000 are currently trading at historically wide discounts relative to large-cap stocks. This valuation gap presents an opportunity to capitalize on potentially undervalued growth companies

• Rotation from Mega-Caps: As money may be reallocated out of highly concentrated mega-cap stocks, it may flow into more attractively valued small-cap stocks.

Attractive ways to play the Trump small-cap stock trade at the ETF level entail the Russel 2000 Growth Ishares ETF, the Russel 2000 Ishares ETF, and the Small-cap ETF Vanguard.

The table below shows the fifty largest Russel 2000 companies by market capitalization.

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The table below shows the fifty best-performing Russel 2000 companies year-to-date (06 November 2024).

Growth areas inside the R2K include healthcare, consumer discretionary, infotech, communication services, and industrials.

Zeta Global and Sprout Farmers Market are among the top 15 and are part of the hypergrowth portfolio.

(4) The Hypergrowth Portfolio: Rebalancing Before the Election

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated October 23, 2024 👋. The next edition will be published on 30 October 2024.

A Closelook At This Edition

1. This Week's Action: Nasdaq 100 And Its Subsectors Look More Toppy

2. Valuation: The Buffett Indicator Screams A Very Loud Sell Signal

3. Did You Know? Goldman Sachs Just Predicted A Miserable Decade For US Stocks Ahead

4. The Hypergrowth Portfolio: Anticipating a Year-End Rally, But Less Than Usual

5. This Week's Stock Spotlight: Sprouts Farmers Market

6. Knowledge Corner: What Is A Minsky Moment?

7. Upcoming Transactions: Waiting For A Dip

8. Final Words: What Can Possibly Go Wrong? A lot!

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This Week's Action: Nasdaq 100 And Its Subsectors Look More Toppy

The Nasdaq 100 may still be in the process of forming a double top. It has closed all three gaps from the July high to the August low and has moved sideways since.

The price action looks increasingly “wedgy” to me, which is always alarming. A wedge is a topping formation with potentially more long-term trend-reversing implications.

The Nasdaq 100 Equal Weight Index has failed to push through and confirm the ATHs.

Given that we have entered the final week of mutual fund tax selling, are in the middle of the earnings season, and only a few days away from the US elections, elevated volatility can be expected into November. The key message from last week still holds.

The wedge-type move-up we have seen since mid-September may also indicate a short-term top. I expect election uncertainty and tax selling by mutual funds (until October 28) to put pressure on the stock market in the two weeks ahead.

The same applies to the other key messages from last week’s edition:

Geopolitical tensions may also rise as the winter war period approaches in Ukraine, and the Israeli counterstrike against Iran is due shortly. Any slight earnings or guidance misses will lead to wild downturns in hypergrowth stocks, as the ASML example from last week shows.

I would also like to repeat this statement from last week: Contrary to its regular seasonal pattern, the US stock market has increased in the past six weeks. I believe a more significant dip is overdue for a year-end rally to start in November.

The Nasdaq 100 Technology Index has failed to move close to its old highs.

The Nasdaq 100 Ex Tech Index reached a new ATH but has displayed significant weakness this week. The Nasdaq 100 Ex Top 30 Index has also lost steam.

The broadening theme inside the Nasdaq 100 has ended, and I have started to favor the Mag-7 stocks over the smaller ones for the rest of the year.

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Higher yields usually do not bode well for the smaller Nasdaq 100 stocks. And the yield on the 10-year Treasury has moved above the crucial 4.2 % level. And I expect it to stay above 4 % until the end of 2024.

Valuation: The Buffett Indicator Screams A Very Loud Sell Signal

The US stock market has just hit its most overvalued level since the peak of the Dot Com Bubble. The SP 500 Forward price-to-sales ratio has exceeded its post-Covid peak and has reached its 2000/2001 level.

With the Buffett Ratio (i.e., forward P/S) reaching a record high of 2.9 and the S&P 500 forward P/E elevated at 22.0 times, valuations are stretched to the extreme compared to historical standards.

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The forward P/E ratio, on the other hand, is relatively low compared to the forward P/S ratio because the S&P 500 forward profit margin has been climbing to record highs and is expected to continue increasing in a soft landing scenario.

Did You Know? Goldman Sachs Just Predicted A Miserable Decade For US Stocks Ahead

Goldman Sachs just forecasted that the S&P 500 would yield annualized returns of just 3% (before adjusting for inflation) over the next decade.

They estimate that the potential outcomes range from -1% at the low end to +7% nominal returns at the high end. This is a significant decrease from the 13% average annual return observed over the past ten years. This forecast is also notably lower than the long-term average return of 11% and the broader market expectation of around 6%.

Several factors contributed to this subdued outlook. One reason is the current high level of market concentration, with the ten largest mega-cap technology firms, such as Apple, Microsoft, and Amazon, accounting for about 36% of the index. This concentration makes the index's performance heavily reliant on these companies' earnings growth.

Additionally, Goldman Sachs anticipates a slight contraction in GDP over the next decade, further impacting potential returns. This refers to a reduction in economic growth or output from current levels rather than an outright decline into negative territory.

This slowdown could manifest as lower GDP growth rates, reduced consumer spending, or less business investment, but not necessarily a full recession where economic activity declines for consecutive quarters.

Goldman Sachs also highlighted a 72% chance that the S&P 500 would underperform compared to Treasury Bonds over this period, with a 33% likelihood that stock returns will fall below inflation levels.

The analysts suggest that investors should prepare for lower equity returns relative to historical performance and consider diversification strategies, such as equal-weighted index exposure, to achieve better returns potentially.

Paul Tudor Jones and the Minsky Moment

Billionaire hedge fund manager Paul Tudor Jones has expressed concerns about the U.S. government's current fiscal deficit and the increased spending promised by both presidential candidates, warning that the bond market may compel the government to address these issues post-election.

"We will quickly face financial difficulties unless we seriously tackle our spending problems," Jones stated in an interview with CNBC's Andrew Ross Sorkin on 22 October 2024.

As the founder and chief investment officer of Tudor Investment, Jones is worried that excessive government spending could trigger a significant bond market sell-off, leading to rising interest rates.

In contrast to Goldman Sachs, he plans to avoid owning fixed income and intends to bet against the longer-dated segment of the bond market, focusing on holding Bitcoin and gold.

Jones questioned whether a "Minsky moment"—a sudden dramatic drop in asset prices—could occur in the U.S. debt markets after the election, suggesting a potential realization that proposed fiscal policies are unsustainable.

The federal deficit for fiscal year 2024 has surpassed $1.8 trillion, an 8% increase from 2023, according to the Treasury Department. The government addresses this deficit by selling Treasury bonds, and Wall Street traders closely monitor the timing and profile of these sales. Over the past three years, rising interest rates have also raised concerns among economists and traders due to the government's increased annual debt cost.

In his interview, Jones noted that budget deficits grew under former President Donald Trump and President Joe Biden's administrations, and he criticized Trump and Vice President Kamala Harris as being "least suited for the job ahead" regarding budget management. He remains concerned about inflation, especially if Trump wins.

Jones suggested several ways for the government to align its spending better, which might require significant changes like allowing Trump's first-term tax cuts to expire or significantly reducing the federal workforce.

Jones founded his hedge fund four decades ago and gained prominence by accurately predicting the 1987 stock market crash.

Tudor Jones is part of a growing crowd of elderly billionaires that has become skeptical - towards life, the stock market, the US and to mostly anything. :-))))

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated October 16, 2024 👋.

A Closelook into This Edition

1. This Week's Action: Is a Double Top Forming in the Nasdaq 100 Index?

2. Hypergrowth: Are Enterprise Software and Cloud Stocks Experiencing a Dead Cat Bounce or the Beginning of a New Bull Market?

3. Did You Know? Nas…

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated October 09, 2024 👋.

A Closelook into This Edition

1. This Week's Action: Fading China Stimulus, Missing October Volatility and a…

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated October 03, 2024 👋.

A Closelook into This Edition

1. This Week's Action: Geopolitics, China Stimulus, and October Volatility

2. Hypergrowth: Another beating for the Nasdaq 100 and the Info Tech Sector?

3. The AI Play: Semis, Infrastructure, Derivative Pla…

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated September 25, 2024 👋.

Stay sharp on the markets with Closelook!

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Thank you for reading this week's edition of Closelook@Hypergrowth, dated September 19, 2024 👋.

📅 The next update will be published on Wednesday, September 26, at 7:00 AM ET.

📅 The next edition of the Closelook@Global Stock Markets newsletter will be published on Saturday, September 21, at 7:00 AM ET.

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