Global stock markets rallying, with tech stocks leading the way to new all-time highs—can this rally continue?

The past week has seen global capital markets show a divergence but an overall upward trend. U.S. stocks fluctuated, but underlying this was a strong momentum driven by technology stocks; European stocks rose across the board, with the UK FTSE 100 breaking the 10,000-point threshold for the first time, marking a historic milestone. What is actually driving this market performance?

Who Are the Winners Behind the Divergence in U.S. Stocks

The three major U.S. stock indices showed mixed performance. The S&P 500 rose slightly by 0.72%, the Dow Jones increased by 0.66%, but the tech-heavy Nasdaq fell by 0.03%, indicating that market gains are mainly concentrated in non-tech stocks.

But this conclusion is not comprehensive enough. Looking at individual stocks makes it clear: Micron Technology surged by 10.51%, reaching $315.42 and hitting a new all-time high, with a trading volume of $13.031 billion. Brokerage Bernstein even raised its target price from $270 to $330, citing robust demand driven by AI, which ensures the company’s high-bandwidth memory products have long-term revenue certainty, as the company is experiencing a significant leap in profitability.

The logic behind this is straightforward: although the Nasdaq as a whole declined, leading tech stocks still shine. Especially those directly related to AI, such as chip and storage companies, have become targets for capital chasing. In contrast, Tesla has fallen for the seventh consecutive trading day, down 2.6%, indicating increasing stock-specific divergence.

Chinese concept stocks performed strongly, with the Golden Dragon Index soaring 4.38% to 7,859 points. Among them, Baidu’s American Depositary Receipts (ADRs) skyrocketed 15% to $147.52. The company also announced plans to spin off Kunlun Chip for listing in Hong Kong, with Kunlun Chip having submitted a listing application to HKEX on January 1, 2026, through joint sponsors.

TSMC’s ADR also jumped 5.2%, hitting a new closing high, reflecting strong global demand expectations for semiconductors.

European Stocks Hit New Highs, Global Risk Appetite Rises

The Stoxx 600 index in Europe reached a new all-time closing high, with major national indices rising across the board. The UK FTSE 100 index broke the 10,000-point mark for the first time, rising as much as 1.16% to a high of 10,046; France’s CAC 40 increased by 0.56%; Germany’s DAX 30 rose by 0.2%.

This reflects an increasing risk appetite among global investors, with funds shifting from defensive assets to offensive assets, especially supported by optimistic expectations for economic growth.

US Dollar Rises for Three Consecutive Days, Bond Yields Climb

In the forex market, the US dollar index rose 0.16% to 98.43, marking the third consecutive day of gains. Notably, last year the dollar index fell sharply by over 9%, the largest annual decline in eight years, but recently it has stabilized above 98.0, with four days of gains in the past five trading sessions, indicating a rebound strength.

USD/JPY increased by 0.1%, while EUR/USD fell by 0.22%, showing the dollar’s relative strength is regaining.

In the bond market, the US 10-year benchmark Treasury yield is around 4.19%, up 3 basis points from the previous trading day, rising for the third consecutive day. What is behind this rise in yields? On one hand, expectations for US economic growth have increased; on the other hand, markets anticipate the Federal Reserve will cut interest rates two to three times by the end of 2026, each by 25 basis points. This contrasts sharply with the European Central Bank’s stance of maintaining or even raising borrowing costs, intensifying global monetary policy divergence.

Gold Slightly Rises, Commodities Remain Strong

Gold increased by 0.32%, to $4,331.5 per ounce, maintaining a relatively high level. WTI crude oil fell by 0.14%, to $57.33 per barrel, but this did not alter the overall strong momentum of crude oil.

Notably, aluminum prices hit a three-year high. Driven by tightening supply prospects and long-term demand expectations, aluminum prices broke above $3,000 per ton for the first time in over three years, joining the ranks of recently milestone-setting base metals. China’s smelting capacity limits and Europe’s production restrictions due to rising electricity prices continue to deplete global inventories, while demand from construction and renewable energy sectors remains robust. Aluminum futures rose 17% last year, marking the largest increase since 2021.

Copper prices also regained upward momentum, having experienced the largest annual increase since 2009 due to supply tightness. Nickel prices surged as PT Vale Indonesia suspended mining operations, pushing prices higher.

Cryptocurrency Continues to Rebound, BTC Breaks $90,000

The cryptocurrency market continues its upward trend. Bitcoin rose 0.39% in 24 hours, currently trading at $90,299. Although the increase is modest, it has stabilized above $90,000. According to the latest data, Bitcoin is quoted at 96.65K, with a 24-hour change of +1.64%.

Ethereum performed even better, rising 4.16% in 24 hours to $3,125.2. Latest figures show Ethereum at 3.35K, with a 24-hour change of +1.63%.

Is the AI Boom a Bubble or Real Gold? Goldman Sachs Offers an Interesting Perspective

Debates about whether AI investment is repeating the internet bubble of the 1990s have persisted. Goldman Sachs’s view is quite interesting: the current AI investment boom is not as frantic as the internet bubble of the 1990s, and speculative activity has noticeably cooled.

Ben Snider, who is about to become head of US equities at Goldman Sachs, pointed out that investors’ attitudes toward AI now focus less on distant future productivity imaginings and more on immediate, quantifiable profit performance. This contrasts sharply with the internet bubble era, when markets tried to pre-emptively estimate the long-term impact of the internet on economic growth and productivity, leading to overinflated valuations. Today, investors have learned their lessons.

Goldman Sachs’s “Speculative Trading Indicator,” established months ago, shows that current market speculation levels are far below those of 25 years ago, and even below the 2021 market boom. This environment might be the least frenzied in modern history, often described as a “bubble,” yet it is quite different.

However, Goldman Sachs Chief Economist Hazeress also issued a warning: despite large tech stocks soaring due to AI themes, the actual contribution of AI to US GDP growth last year was “almost zero,” because AI-related equipment and goods are mostly imported, and semiconductors are classified as intermediate inputs in the national accounts, not final investments. In other words, the real impact of AI on economic growth might be overestimated.

Manufacturing Sentiment Slightly Declines, but Employment Remains Strong

The December Purchasing Managers’ Index (PMI) released by S&P Global shows that US manufacturing conditions continue to improve, albeit at a slower pace. The seasonally adjusted US manufacturing PMI for December was 51.8, in line with the preliminary estimate, down from 52.2 in November, marking the weakest expansion in manufacturing activity in five months.

Specifically, production growth slowed, new orders contracted again—its first decline in a year. International sales continued to decline, partly due to tariffs. However, despite remaining at historically high levels, the growth rate of input and output prices was the slowest in 11 months, indicating easing inflationary pressures.

Notably, companies reported that employment growth will continue into 2025, with new job creation reaching the most significant level since August, showing that the labor market remains resilient.

Chip Industry Developments Frequent, SMIC Gains Major Fund Holdings

SMIC (Semiconductor Manufacturing International Corporation) received substantial increased holdings from the National Integrated Circuit Industry Investment Fund, known as the “National Big Fund.” According to Hong Kong Stock Exchange disclosures, on December 29, the fund increased its holdings by over 357 million shares at an average price of 74.2 RMB per share, involving approximately 26.515 billion RMB. The fund’s stake in SMIC rose from 4.79% to 9.25%, surpassing the 5% disclosure threshold. SMIC closed today at 75.1 RMB, up 5.1%, with a trading volume exceeding 3 billion RMB.

On the other end of the chip ecosystem, OpenAI is reportedly taking measures to optimize its audio AI models, preparing for future AI-driven personal devices. Currently, ChatGPT can respond via voice, but its speech version uses a different underlying model from the text version. Internal researchers believe that current speech models lag behind text models in accuracy and response speed, and the group plans to launch consumer-grade devices supporting voice commands, targeted for release in the first quarter of 2026.

OpenAI plans to gradually release a series of devices, including glasses and voice-activated smart speakers, rather than a single product, which will be a key focus of the tech industry in 2026.

Market Insights: Opportunities in Divergence

Overall, this week’s market performance features several key characteristics: first, rising global risk appetite, with European stocks reaching new highs and U.S. leading stocks performing strongly; second, the dollar rebounded and bond yields increased, reflecting optimism about the US economy; third, commodities remain strong, especially base metals reaching new highs; fourth, cryptocurrencies steadily rose, with Bitcoin and Ethereum both strengthening; fifth, despite high enthusiasm for AI investments, speculative elements have cooled, and markets are paying more attention to tangible profits.

In such an environment, real opportunities often lie hidden in data and trends. For investors, it is important to recognize the opportunities brought by rising global risk appetite, remain cautious of increasing stock-specific divergence, and consider which aspects of the AI boom are driven by genuine demand and which might be overestimated.