Heavy is the head that wears the AI crown... The market's two big assumptions... Recapping the State of the Union... Who pays for AI's electricity?... A $56 billion backstop to the stock market... The 'relentless bid' could get bigger...
The trouble with high expectations...
Chipmaker Nvidia (NVDA) reported earnings after yesterday's close. On their own, the numbers were sensational.
The company beat Wall Street revenue estimates for a 14th straight quarter... reported a 20% rise in revenue from the previous quarter and 73% year-over-year growth... and forecast accelerating growth of around $78 billion for the quarter ahead, well above analysts' consensus expectation for $73 billion.
But the stock finished today down more than 5%. What gives? Well, heavy is the head that wears the crown.
After Nvidia's release of its quarterly earnings report, the stock immediately shot 5% higher in after-hours trading yesterday. But the market didn't love the company's Q&A session that followed with Wall Street analysts.
Dan Runkevicius, author of the Meanwhile in Markets newsletter, observed two big drops in Nvidia's share price during the Q&A. As he shared on X...
Nvidia CFO Colette Kress said that their Chinese competitors are "making progress," especially smaller ones that recently IPO'd.
She acknowledged that China's progress is significant enough to potentially disrupt the global AI market and "impact Nvidia's ability to compete around the world."
And second...
When Bank of America analysts asked Huang whether he believes hyperscalers can sustain multi-hundred-billion-dollar spending now that their cash flows are under the microscope.
Huang pushed back in a raised voice saying he's confident their cash flows will grow.
The market took this as lip service to Wall Street rather than actual conviction. After his comments, Nvidia erased all the gains it initially posted following the release.
Whether this price action was correlation or causation, or mostly brainless trading algorithms making decisions in after-hours trading based on words and phrases mentioned, it's hard to say with certainty.
Whichever the cause, the market remains concerned with the trend of "hyperscaler" spending tapering off – and also AI competition from China...
This sets up an interesting next few weeks for the stock (and the market in general)...
Rather quietly, Nvidia has traded sideways since August of last year... It last made a new high in October.
That's bad news, good news.
On the one hand, Nvidia's price-to-earnings multiple has become less outlandish. As Stansberry's Investment Advisory lead editor Whitney Tilson wrote today in his daily e-letter...
With the stock around $185 this morning, it's trading at about 21 times current-year earnings and 18 times next year's.
That appears to be awfully cheap for a company this dominant, profitable, and fast-growing. If Nvidia keeps growing anywhere near the rate it has been the past few years, its stock could double in the next year or two.
But that's a big "if"...
There are plenty of competitors emerging. And even if Nvidia maintains its market share and margins, it's hard to see how AI spending can be maintained at current levels, much less increased.
Is Nvidia's next sustained move up or down? Will the company be able to meet expectations? Or will the pockets of AI-related fear we've seen in the market lately spill over into the AI-infrastructure leaders?
Given Nvidia's outsized influence on the U.S. benchmark S&P 500 Index and its status as an AI bellwether, we'll watch this stock closely. (Our Ten Stock Trader editor Greg Diamond will, too... He updated his subscribers on today's action in Nvidia and a pair of other semiconductor stocks.)
Switching gears, the State of the Union made news for investors the other night...
Among other topics, President Donald Trump reiterated a call to ban private-equity firms from buying homes, which we covered in the January 8 Digest here. Elsewhere on the housing front, Trump also said he wants to see lower interest rates to make mortgage payments more affordable for young people.
But today, we're going to focus mostly on two other points that Trump made during his speech on Tuesday...
First, he introduced the idea that the hyperscalers – Microsoft (MSFT), Amazon (AMZN), and the like – could pay their own way for energy for their data centers.
We've covered data centers' power usage for months. And the trend is only growing. As we wrote in the February 18 Digest...
At the end of 2024, the Department of Energy projected that data centers could make up anywhere from 6.7% to 12% of total power demand by 2028.
Here we are, only about a year after that projection, and data centers in the U.S. are already in that range – two years sooner than expected. And those are just the headline numbers.
AI's power grab is hitting certain parts of the country especially hard. And with more and more power demand loading onto the grid, many folks are feeling the impact on their energy bills.
A recent study from Carnegie Mellon University showed that electricity bills could rise 8% by 2030 because of data centers. And in data-center hotbeds like Northern Virginia, bills could jump 25%. Some areas have already seen dramatic increases this winter.
In his address, Trump said that he had secured a pledge from the hyperscalers to provide their own power. That would be either through their own power-purchase agreements or by building power plants at their data centers.
Representatives from Amazon, Alphabet (GOOGL), Meta Platforms (META), Microsoft, and Oracle (ORCL) will reportedly travel to the White House next week to sign this pledge.
We'll have to wait until then to get the details of the agreement. Some of these companies have already made deals with utility companies to buy power and limit their power demand during times of stress for the grid.
We wrote about a spate of deals made last year between tech firms investing in nuclear power to supply data centers and support the energy grid... nuclear-powered data centers in particular. Last summer, Meta reached a deal in Illinois, as we wrote in our June 3, 2025 edition...
Forward-thinking businesses aren't sitting around waiting to see what's going to happen in Washington next. Another area we've been keeping an eye on is developments in nuclear energy, as it relates to artificial intelligence and the growing demand for electricity...
This morning, utility giant Constellation Energy (CEG) and Meta Platforms (META) announced a 20-year partnership for 1.1 gigawatts of nuclear power. For context, that's roughly enough energy to power about 750,000 homes per year.
The agreement with Meta keeps Constellation's Clinton Clean Energy Center in Illinois open and operating. The power plant was originally set to close in 2027.
And with the plant's future secured, Constellation is now looking into providing even more nuclear power through small modular reactors at the site. The agreement will provide power to the grid, rather than directly to Meta. But that doesn't mean Meta isn't benefiting...
In 2020, Meta broke ground on its DeKalb, Illinois data center. And in total, the social media giant has invested more than $1 billion in data centers in the state. Terms of the deal weren't released, but this partnership will ensure that all these data centers can keep running.
That announcement followed a string of deals that we wrote about in November 2024...
These include Amazon's $650 million deal for a nuclear-powered data center... Microsoft securing 20 years of electricity from the nuclear power plant at Three Mile Island to power data centers... and Alphabet's plans to develop and construct several reactors that will generate 500 megawatts of power.
Perhaps the new "pledge" will go much further than what companies are already doing... significantly changing and increasing the spending that the mega-cap tech businesses have in place. Or maybe it's just repackaging what has already happened. We'll have to see.
And second, here comes the government to prop up the stock market...
Trump said that he would establish a 401(k) retirement plan for workers who don't get their contributions "matched" by their employers. Trump said in his speech...
We will match your contribution with up to $1,000 each year as we ensure that all Americans can profit from a rising stock market.
According to financial nonprofit Pew Charitable Trusts, about 56 million private-sector workers don't have employer-sponsored retirement funds. That's roughly half of the private workforce.
If all those folks end up with government-matched 401(k)s, $56 billion per year could flow into stocks.
This will only continue the "relentless bid" on the stock market... and belief in some parts that... Stocks. Must. Rise.
As Extreme Value editor Dan Ferris explained in a Stansberry Investor Hour interview with Stansberry Research senior analyst Bryan Beach last year...
Bryan, for our listeners, I just want them to know the relentless bid refers to the constant buying that we associate with so-called passive investing. So, people are relentlessly buying stocks for their 401(k) and bidding them up. And we seem to be in an endless bull market that can't be wrecked.
And they're not just plowing money into any stocks. It's going to the biggest ones, which then get bigger. As Bryan replied during the podcast...
401(k)s and mixed funds in general, particularly the S&P 500 Index, is not an equally weighted index. You buy more of the bigger stocks. Every time you put $100 in the S&P 500 Index I think Apple gets $7 and the Magnificent Seven get $35. So, when you talk about people passively investing through their 401(k), most of those dollars are going into S&P 500-linked indexes. And 35% of that is just going into seven stocks.
When does it end?...
Now, this isn't to say stocks will never go down. We've seen plenty of pullbacks amid the rise of passive investing over several decades. But the point is, with millions of folks putting money into their retirement accounts every two weeks, stocks already have a constant buyer.
In a private note this morning, Bryan wrote to us that if anything like Trump's plan comes to fruition, it will only "amplify" the relentless bid trend. He also offered an idea on when the relentless bid would disappear. More from the podcast...
At some point people are going to start withdrawing from their 401(k)s, when they start retiring. And when it reaches equilibrium, the inflows and outflows will kind of offset.
That's still years away, though it's getting closer as Baby Boomers exit the workforce and enjoy retirement. If that's what you're after, hopefully you're one of them.
In the meantime, passive investments like 401(k) plans will continue to provide a floor for the market – for better or worse. As Dan wrote in the June 13, 2025 Digest...
The constant flow of investment dollars regardless of any fundamental financial or economic analysis is a major force – perhaps even the defining force – of the U.S. stock market today. Depending on who you ask, passive investing overtook active investing at some point in the past two years.
So now more money is going into passive investments every week, month, and year than into actively sourced stocks.
The "relentless bid" of constant index fund buying in weekly 401(k) contributions is an important reason why the market seems so unstoppable, even as stocks have become more and more expensive to buy. As Dan also wrote last year...
And we can't predict when – or if – the relentless bid will reverse, fade, or change in a major way. So we're not using it as a justification to be bullish or bearish, though being bearish certainly has its risks with the zombie-buying millions of folks do week in and week out.
And, now more than ever, the White House seems intent on keeping the trend going. Whether it "works" remains to be seen, and this idea is only a proposal at this point. It would have to pass through legislation. But even without this extra juice, the relentless bid remains intact.
You don't have to invest this way...
Many Americans are automatically putting their retirement savings into index funds. But as a Stansberry Research subscriber, you can follow along with our expert analysts.
We pay them to find superior opportunities to the rest of the market... stocks and other investments with greater upside or less risk than the S&P 500. Across our roughly two dozen paid newsletters and other services, they're providing advice on the right investments to make – and, no less important, when to sell them.
You don't have to settle for average returns. And you can avoid getting caught up in a wave of broad-based selling in the next inevitable downturn while creating a portfolio designed uniquely for your goals.
Thinking for yourself has its advantages.
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In today's mailbag, feedback on a piece of yesterday's mail about tariffs blaming inflation on President Joe Biden... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"This comment fails to account for the global effects of the Covid-19 pandemic/shutdown that required the government, with bipartisan backing, to 'keep the lights on' which if not done would have created an implosion of the U.S. economy." – Subscriber Tommy H.
"To Mike M., The printing of dollars is in response to the geometrically growing deficit, which relates to time not a single administration..." – Subscriber Neil B.
"To follow up on a comment from yesterday, about rising gold prices and 'The impact of 'printing dollars' is not immediate. A very large part of the inflation problem began following the monetary/fiscal policies of his predecessor...' I agree but feel there is some recency bias. I would argue the roots of this could be traced back to the Quantitative Easing Fed policies enacted during the financial crisis that were left in place far too long after the crises subsided." – Subscriber David C.
Corey McLaughlin comment: Good points, but as I've said before, I'd go back even further for the origins of our debt and inflation ills...
I like to keep in mind at least two key moments in the "printing money" timeline...
One is "the day the dollar died" on August 15, 1971 when President Richard Nixon took the U.S. off the gold standard for good. The other is in the 10th century, when Chinese merchants are thought to have first invented the idea of fiat currency.
Back then, high demand for coins exceeded the supply of precious metals. Someone had the bright idea to create credit notes ‒ paper money ‒ to enable transactions without making new coins. Enough people trusted the system that a new way of doing business was born.
Inflation has been a thing... and "stable currency" has faced stiff challenges in the thousand-plus years since.
All the best,
Corey McLaughlin with Nick Koziol
Baltimore, Maryland
February 26, 2026
