Updated: 26.12.2025 | 10:14 a.m. ET
Wall Street’s AI trade is wrapping up 2025 with a familiar blend of momentum and scrutiny. Mega-cap technology stocks continue to serve as a primary engine for index gains, yet investors are increasingly seeking evidence that significant investments in artificial intelligence (AI) will convert into sustainable margins and earnings growth. In light post-Christmas trading on Friday, U.S. stocks hovered near all-time highs, with the S&P 500 touching an intraday record and advancing toward the 7,000 milestone. Nvidia emerged as a focal point following its licensing deal related to a pivotal development in AI computing: the rise of inference.
In early trading on Friday, major indexes were modestly higher, reflecting a late-December rebound that followed earlier volatility. As reported by Reuters at 9:39 a.m. ET, the Dow was up approximately 0.02%, the S&P 500 up about 0.14%, and the Nasdaq up 0.17%. The S&P 500’s record performance is particularly significant for AI stocks, as 2025’s rally has been largely propelled by mega-cap technology firms. Investors have been in a cycle of rotating in and out of the “AI winners,” driven by confidence in the return on AI capital expenditures. Stocks have rebounded recently after months of intermittent sell-offs linked to concerns surrounding AI valuations and the profitability impacts of substantial AI spending.
Seasonal trends are also influencing market dynamics. The “Santa Claus rally,” traditionally defined as the last five trading days of the year plus the first two in January, began on Wednesday and extends through January 5. This period often sees increased market activity, benefiting AI stocks.
Nvidia’s Strategic Move in AI Inference
The most significant catalyst in today’s trading is Nvidia’s agreement involving Groq, a startup recognized for its chips optimized for AI inference. This phase is crucial as it allows trained models to respond to user requests in real time. Nvidia has secured a non-exclusive license for Groq’s inference technology and is bringing Groq’s founder, Jonathan Ross, along with President Sunny Madra and several engineering team members into its fold. While CNBC reported a valuation of roughly $20 billion for the transaction, neither Nvidia nor Groq confirmed this figure.
Groq’s announcement deemed the deal a non-exclusive licensing agreement aimed at accelerating AI inference at a global scale. The company will continue operating independently under CEO Simon Edwards, with its GroqCloud business remaining intact. This structure is crucial for investors as it appears more like an “acqui-hire plus IP license” rather than a traditional acquisition, reflecting a growing trend among major tech firms as they pursue talent and capabilities amid regulatory scrutiny.
The competitive landscape surrounding AI inference is noteworthy. While Nvidia has established dominance in model training, it faces increasing competition in inference from companies like AMD and specialized startups such as Groq and Cerebras. Investors are particularly focused on memory solutions; Groq’s strategy includes avoiding dependence on external high-bandwidth memory by utilizing on-chip SRAM approaches, which can expedite interactions for AI models while also limiting the model size that can be served.
The deal has broader implications for market dynamics. Bernstein analyst Stacy Rasgon highlighted antitrust risks, suggesting that the non-exclusive arrangement may help maintain a facade of competition as key talent transitions to Nvidia. Investors are now turning their attention to unit economics, deployment scale, and competitive moats in the AI serving layer, where hyperscalers and custom silicon are becoming increasingly dominant.
As of mid-morning trading, Nvidia’s stock was priced at $191.88, reflecting a rise of 1.7%. Other notable AI stocks included AMD at $216.44 (+0.7%) and Broadcom at $352.28 (+0.6%). Meanwhile, Palantir and Microsoft saw slight declines in their stock prices.
Looking ahead, 2026 is poised to be a pivotal year for AI companies. As the S&P 500 flirts with the 7,000 mark, analysts, including Brian Jacobsen from Annex Wealth Management, emphasize that this year will demand “tangible productivity and margin gains” from AI investments. The expectation for S&P 500 profits is a rise of 15.5% in 2026, compared to 13.2% forecasted growth for 2025.
Macroeconomic catalysts that could influence high-multiple AI names include forthcoming Federal Reserve minutes, which may provide insights on policymakers’ outlooks. The Fed has already cut rates by 75 basis points over its last three meetings of 2025, keeping the benchmark rate between 3.50%–3.75%. As the market remains sensitive to potential future cuts, the rotation among sectors suggests a more selective investment climate.
Complicating this landscape are developments in U.S.-China relations regarding export licensing, particularly for AI chips. Nvidia has aimed to initiate shipments of its H200 chips to China in advance of the Lunar New Year, contingent on U.S. approvals, while AMD has also indicated readiness to ship certain models under a licensing agreement that includes a tax to the U.S. government.
The underlying lesson for AI investors is clear: securing infrastructure capabilities, such as power and data center capacity, is becoming as critical as the quality of AI models themselves. Alphabet’s recent $4.75 billion acquisition of Intersect highlights Big Tech’s commitment to enhancing energy and infrastructure capabilities essential for AI expansion.
As 2025 draws to a close, investors are advised to focus on the next set of fundamentals beyond the prevailing AI narrative. Key metrics to monitor include inference economics, AI margin signals, capital expenditure discipline, and infrastructure developments. Each of these factors will play a crucial role in shaping the future landscape of AI investments.
See also
Stanford’s New 3D Chip Design Cuts AI Data Delays, Promises 12x Performance Boost
Mistral AI Launches Codestral: 22B Parameter Model Achieves 81.1% HumanEval Score
China’s DeepSeek R1 Disrupts U.S. AI Strategy, Sparks Techno-Nationalism and Global Backlash
Nvidia’s $20B Licensing Deal with Groq Reinforces AI Dominance Amid Growing Competition
Vitalik Buterin Endorses Grok’s Role in Enhancing Truth Discovery on X Amid AI Bias Concerns
