Holiday Strength and Growing Power Demands

1. Last Week Recap. It was an active holiday week with plenty of data, bringing several themes into focus. U.S. equities posted a powerful rebound last week, with the S&P 500 finishing up 3.73% as the index moves closer to its all-time highs. The Nasdaq 100 gained 4.93%, its strongest weekly performance since May.¹ The Mag 7 collectively advanced 5.4% despite NVIDIA’s relative underperformance, marking their largest weekly increase since August. Strength was not limited to mega-caps: small caps also surged, with the Russell 2000 rising 5.47%, its biggest weekly move since November 2024.² Seasonality remains a supportive factor as well. December has historically been a constructive month for equities, with the S&P 500 averaging a +0.82% return over the past five years.

2. Holiday Spending Trends. The retail sector saw a notable surge last week, with the State Street PDR S&P Retail ETF (XRT) climbing +5.5% last week. The move reflects robust consumer activity across key holiday shopping events. Black Friday generated $11.8 billion in online spending, up 9.1% from last year, while Thanksgiving Day saw a record $6.4 billion spent online. Looking ahead, Cyber Monday is expected to be the largest online shopping day of 2025, with projected spending of $14.2 billion, a 6.3% year-over-year increase.³

3. AI Executive Order. The Genesis Mission, launched on November 24, 2025, is a federal initiative designed to create a unified, AI-enabled national research platform. Backed by the White House and the Department of Energy, the effort brings together the country’s leading supercomputers, vast government data sets, advanced AI capabilities, and researchers across national labs, universities, and industry. Its goal is to accelerate breakthroughs in science, energy innovation, biotech, quantum and broader technological development.

4. Next Step in Artificial Intelligence. AI is now entering a defining transition from traditional text-based Large Language Models (LLMs) to far more advanced Visual Language Models (VLMs) and ultimately Vision-Language-Action (VLA) systems. While LLMs learn from text alone, VLMs are trained on both imagery and language, allowing them to interpret the world visually and semantically at the same time. This shift unlocks the next stage of capability VLA models, which pair perception with physical action inside robots, autonomous systems, and edge hardware.

VLMs function much like LLMs in the cloud, but VLAs move intelligence directly into machines, enabling real-time decision-making and autonomous movement. These systems are dramatically more compute-intensive than the resources of today’s LLM workloads as training expands beyond text into images, video, spatial data, and fully multimodal embeddings.

The move from LLMs to VLMs is effectively the bridge to real autonomy. As computing demand accelerates, new winners will emerge across GPUs, accelerators, edge devices, and robotics platforms. This is the next chapter of AI, and it will reshape everything from robotics to drug discovery to industrial automation.

5. Power Generation. Amazon’s plan to build new AI data centers is moving forward at such a large scale that it now requires one of the biggest power-generation proposals Indiana has ever considered. Indiana Michigan Power has submitted a $7 billion plan to state regulators to construct and purchase new power plants to support upcoming Amazon and Google data centers.⁴ The proposal makes clear that the existing U.S. electric grid cannot meet the level of demand created by the growth in artificial intelligence and the data-center construction that comes with it. The utility is also seeking approval to expand natural-gas facilities that would supply about 85% of the electricity for these projects, at a time when multiple data centers are already being planned across the state. Although consumer groups have raised concerns about potential cost impacts, the bigger message for investors is strongly positive: the rise of artificial intelligence is creating meaningful opportunities not only for large technology companies, but also for the companies that build generation assets, strengthen the electric grid, and produce the power needed to support this next stage of growth.

6. Fixed Income. U.S. Treasury yields declined across the curve last week as market expectations for a December rate cut increased. Expectations were driven by dovish commentary from Fed officials and reports indicating that Kevin Hassett, Director of the National Economic Council, emerging as the leading candidate to assume the role of the next FOMC Chair. By week’s end, the 2-, 10-, and 30-year yields had fallen by 2, 5, and 5 basis points, respectively.⁵ The market-implied probability of a 25-basis point rate cut climbed to 99%, a sharp increase from 41% just two weeks prior.

Corporate credit spreads tightened across both investment-grade and high-yield indices last week amid falling rates and a risk-on environment. Investment-grade spreads fell 6 basis points to +114, while high-yield spreads narrowed 15 basis points to +347. Concurrently, U.S. credit quality improved last week, with the main rating agencies reporting 31 upgrades compared to 27 downgrades. The Financial sector led with the most upgrades, while the Consumer Discretionary sector has the most downgrades.

Tax-exempt yields followed Treasuries, falling 1-2 basis points across the curve. Municipal investors will be receiving roughly $30 billion of principal and interest this week with issuers set to sell $16 billion of new bonds.

Stephanie Link’s TV Schedule:

Return for Selected Indices⁶

Sources:

[1] Bloomberg: As of November 2025

[2] Bloomberg: As of December 1, 2025

[3] Reuters: As of November 29, 2025

[4] Fox 59: As of November 20, 2025

[5] Bloomberg: As of December 1, 2025

[6] Bloomberg: As of December 1, 2025

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