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With the Federal Reserve signaling a pause on further rate cuts, investors eye economic data and sector rotation amid concerns over AI valuations as we close out 2025.
U.S. stock futures pointed to a modestly higher open on Monday, December 15, 2025, as markets entered the final full trading week of the year. Major indices remain close to all-time highs achieved earlier in the month, supported by seasonal tailwinds and recent Federal Reserve actions, though technology shares—particularly those tied to artificial intelligence—continue to face pressure following a sharp selloff last week.
The S&P 500 closed Friday just below its record level, while the Dow Jones Industrial Average and Nasdaq Composite also hovered near peaks. Reports indicate a ongoing rotation out of high-growth tech names into value sectors like financials, industrials, and materials, as investors reassess valuations in the AI space amid rising concerns about sustainability of rapid spending growth.
This week brings a heavy economic calendar, including delayed reports on nonfarm payrolls, retail sales, and consumer price index data, which could influence expectations for monetary policy in 2026. The Federal Reserve’s recent 25-basis-point cut on December 10 brought the federal funds rate to 3.50%-3.75%, but projections suggest limited further easing ahead, with many officials forecasting only one additional reduction next year.
Market rotation reflects growing caution around AI-driven gains, even as broader indices hold near records.
Stock traders at the Nasdaq Stock Exchange monitor markets amid sector shifts.
CNBC highlighted key morning themes, including ongoing market rotation away from tech leaders, as investors digest the latest Federal Reserve signals and prepare for a busy economic data week.
Market rotation, the Fed’s Kevins, Netflix’s ‘Star Wars’ moment and more in Morning Squawk https://www.cnbc.com/2025/12/15/5-things-to-know-before-the-stock-market-opens.html
— CNBC (@CNBC) December 15, 2025
Additionally, CNBC noted premarket movers amid the broader context of sector shifts.
Stocks making the biggest moves premarket: iRobot, Las Vegas Sands, Tilray & more https://www.cnbc.com/2025/12/15/stocks-making-the-biggest-moves-premarket-irbt-lvs-tlry.html
— CNBC (@CNBC) December 15, 2025
Table of Contents
The Federal Reserve’s Latest Move and 2026 Implications
The Federal Reserve’s December decision marked its third rate cut of 2025, lowering the benchmark rate by another quarter point amid a split committee. While the move aimed to support the labor market, updated economic projections showed officials anticipating slower growth and persistently elevated inflation, leading to a more cautious stance on future easing.
Chair Jerome Powell emphasized the need to monitor incoming data closely, noting elevated uncertainty. The “dot plot” revealed divisions, with the median forecast pointing to just one cut in 2026. This hawkish tilt contributed to renewed focus on economic resilience outside of technology.
Delayed data releases this week—nonfarm payrolls on Tuesday and CPI on Thursday—will provide critical updates on employment and inflation trends. Strong readings could reinforce the Fed’s patient approach, while softer figures might revive hopes for additional support.
AI Sector Pullback: Signs of Exhaustion?
The artificial intelligence trade, a primary driver of market gains throughout 2025, showed signs of fatigue in recent sessions. Heavyweight names faced selling pressure after reports highlighted massive capital expenditures and questions over near-term returns on AI investments.
Three bellwether AI stocks illustrate the mixed performance and ongoing trends:
NVIDIA (NVDA), the dominant provider of AI accelerators, has delivered extraordinary growth, with revenue surging over 60% in recent quarters driven by data center demand. Shares remain elevated but experienced volatility amid broader tech weakness, reflecting concerns that explosive growth may moderate as infrastructure buildouts mature.
Palantir Technologies (PLTR), known for its AI-powered data analytics platforms, reported strong commercial expansion, with U.S. commercial revenue growing over 100% in some periods. The stock has been a standout performer in 2025, though high valuations have drawn scrutiny during sector rotations.
Super Micro Computer (SMCI), a key supplier of AI-optimized servers, benefited from hyperscaler demand but faced sharper pullbacks tied to execution risks and competition. Recent quarters showed robust sales, yet margin pressures and inventory dynamics contributed to uneven momentum.
Over the past few weeks, these names retreated alongside peers, as investors rotated toward undervalued areas. Morningstar and other analysts noted indications of buyer exhaustion in AI-tied stocks, with small-cap and value segments outperforming in November and early December.
Chart showing Nasdaq 100 near record highs while tech sector lags. (Image via CNBC charts; https://www.cnbc.com/)
Broader Market Rotation and Year-End Dynamics
Despite AI headwinds, broader indices benefited from rotation into cyclicals and rate-sensitive groups. The Dow and equal-weight S&P 500 hit fresh highs, underscoring diversification beyond mega-cap tech.
Seasonal factors, including potential Santa Claus rally and portfolio rebalancing, traditionally support gains in December. Historical patterns favor upside, though thin holiday liquidity can amplify moves.
Looking ahead, the AI trade’s trajectory hinges on sustained enterprise adoption and infrastructure spending. While near-term pauses are possible as valuations reset, long-term demand for computing power remains intact, driven by expanding applications across industries.
Markets appear positioned for cautious optimism, with economic data this week likely to shape sentiment into year-end and beyond.
Disclaimer: The information provided in this article is for informational purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any securities. Investing in stocks involves risks, including the potential loss of principal. Past performance is not indicative of future results, and there are no guarantees regarding market outcomes or individual stock performance. Readers should conduct their own research and consult with qualified financial professionals before making investment decisions.
Additionally, the publishers, editors and Master Influencer Magazine Finance Staff may own positions in some of the stocks mentioned in this article.
Stock Market Outlook December 2025, AI Stocks Performance, NVIDIA NVDA, Palantir PLTR, Super Micro SMCI, Federal Reserve Rate Decision, S&P 500 Near Record Highs, Sector Rotation
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