Silicon Valley is suiting up for battle—literally. Palantir and Anduril, two heavyweight US defense tech companies, are rallying a squad of cutting-edge players, including SpaceX, OpenAI, Scale AI, and autonomous shipbuilder Saronic, to form a defense-tech "Avengers" aimed at disrupting the national defense industry. Their mission? To
grab a bigger slice of the US gov. $850bn defense budget from the old guard of "prime" contractors like Lockheed Martin, Raytheon, and Boeing.

The consortium¹, set to launch in January, aims to outpace traditional contractors by delivering faster, cheaper, and smarter solutions. And fast they are, Palantir’s “AI Platform” is already integrated with Anduril’s “Lattice” software for AI-powered national security tools, while OpenAI’s advanced models are teaming up with Anduril’s counter-drone systems to tackle “aerial threats”.

Why now? Global tensions are fueling demand for advanced defense tech, and Silicon Valley is stepping up.

In 2024, everyone and their grandmother (hopefully) learned about Nvidia and their GPUs. However, talk is quieter about its industry cousin—Broadcom—which has been making some serious noise. Broadcom, known for its role in consumer tech² (and hitting a $1 trillion market valuation in early December), is now seriously challenging Nvidia in the AI accelerator market.

Unlike Nvidia’s versatile GPUs, Broadcom specializes in custom AI chips³ (ASICs) built for one thing: getting the job done faster and more efficiently. They’ve grabbed about 60% of the custom AI chip³ market, many thanks to its rumored partnerships with Google, Meta, and ByteDance. These “hyperscalars⁴” are expected to crank up demand for custom chips by 70% annually over the next few years, sending Broadcom’s revenue soaring from $12.2 billion to a high-end projection of $90 billion by 2027.

Better yet, Broadcom’s CEO in a Q4 earnings call revealed that they’ve linked up two MORE hyperscalers⁴ that are likely to be revenue-generating customers by 2027. So, buckle up—custom AI chip demand might grow even faster than the projections.

The Santa Claus Rally is a phenomenon of rising stock prices during the final five trading days of December and the first two trading days of January. The rally has historically shown a 1.3% net gain in the S&P 500 since 1950, with the rally occurring ~79% of the time. Interestingly, when the rally does not occur, such as in 1999 and 2007, these declines were followed by major market crashes.

Coined by Yale Hirsch in 1972, the phenomenon is attributed to seasonal optimism, holiday shopping, and reduced institutional trading as many investors take time off during the holidays.

As for 2024, Santa is hitting a bit of a speed bump this year. The S&P 500 rose a moderate 1.1% on December 26, but then slipped 0.04% on December 28. Superstition aside, the Santa Claus Rally remains a fun end-of-year phenomenon to watch out for—and for all of our sake, lets hope Santa picks up the pace.

US companies are defaulting on junk loans⁵ at the fastest pace in four years, with defaults hitting 7.2% in the 12 months to October—the highest rate since 2020. The issue? Companies that loaded up on cheap debt during the pandemic are now struggling to repay it as high interest rates squeeze their finances. Most of these loans have floating rates⁶, so as rates rise, the cost of repayment jumps.

What's interesting is that the default spike is much higher in the leveraged loan⁷ market than the bond market, showing that riskier companies are increasingly relying on loans for financing in the US.

To avoid bankruptcy, many indebted companies are restructuring their debts through "distressed loan exchanges," where loans are extended but investors get less back—these exchanges now account for over 50% of the defaults this year, a record. Many hope that default rates fall as interest rates fall but analysts worry the surge in defaults reflects deeper issues, including loose loan documentation and a market that’s been growing too fast without proper safeguards.

DOGE co-lead Vivek Ramaswamy has joined with Elon Musk to "delete" the CFPB, claiming the recent rule limiting bank overdraft fees is an “un-American” overreach, following up with Musk's label of the CFPB as one of the “redundant federal agencies”.

Despite being the agency that puts money back into people’s pockets, with $19 billion returned to Americans scammed by financial instiutions and a further expected $5 billion of savings following the cap on bank overdraft fees, it has fallen straight into the firing line of Elon Musk in his newfound role as government efficiency guru.

Why? According to Ramaswamy the CFPB’s recent rule is an example of law-making power being taken from the hands of congress by unelected bureaucrats and he’s not alone in this, venture capitalist Marc Andreessen claimed they are “terrorizing” tech firms on a Joe Rogan pod.

• FDIC and Vanguard agree to strengthen rules around passive investment, in response to public concerns over concentrated ownership in the financial sector with firms such as Vanguard and Blackrock at the top of the list.

• A rift has emerged between MAGA and Trump’s tech friends around H-1B visa caps. With arguments of a skilled labour shortage coming against the “America First agenda”.

• New research reveals the Stonehenge was used as a symbol of unification for ancient Britain, with its massive stones transported from far-flung regions.

• Azerbaijiani officials suggest that Azerbaijian Airlines crash was caused by Russian military

• South Korea’s parliament voted to impeach acting President Han Duck-soo just two weeks after his predeccesor, Yoon Suk Yeol was impeached, compounding Korea’s political crisis

• Biden’s New Crypto Rule: The IRS and Treasury have introduced new rules requiring brokers, including DeFi platforms (which operate w/o intermediaries to prioritize user privacy and autonomy), to track and report all digital asset transactions starting 2027. Critics argue the rules contradict DeFi’s core philosophy by forcing platforms to collect user data and comply with centralized reporting (essentially turning them into traditional brokers).

•  Memecoin saves cancer patient: Siqi Chen, whose daughter Mira was diagnosed with a rare brain tumor, was pleasantly surprised when, on Christmas, a memecoin created for her cause soared to a market cap of over $80 million, with Chen receiving a share worth $18 million. Chen has pledged that all proceeds, after taxes, will go directly to funding rare disease research.

1. Consortium: A collaboration of multiple entities that come together to pool resources, expertise, or efforts to achieve a common objective or project while remaining independent.

2. Consumer Tech: Electronic devices, software, and technology products designed primarily for personal use by individuals.

3. Custom AI Chips (ASICs): A custom-built chip designed specifically for a particular application or task, such as AI computations, offering maximum efficiency, performance, and energy savings for that specific purpose.

4. Hyperscalars: Companies that operate massive, globally distributed data centers.

5. Junk Loans: Otherwise known as high yield loans, these loans have been rated as more likely to default and as such, provide a higher interest rate to compensate investors for the additional risk.

6. Floating Rates: On a loan, an interest rate that changes up or down to reflect economic conditions, often tied to the federal funds rate/cash rate

7. Leveraged Loan: Similar to Junk Loans but provided to firms that either already hold a significant amount of debt or have poor credit history

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