Christmas may be over, but the Pentagon’s wishlist is getting quite pricey.

Today, President Trump called for raising US’s already hefty military budget to $1.5 trillion in 2027, a nearly 50% jump from this year’s $901 billion budget.

“This will allow us to build the ‘Dream Military’ that we have long been entitled to, and, more importantly, that will keep us SAFE and SECURE, regardless of foe,” he wrote on Truth Social yesterday.

Defense contractors popped on the news: Northrop Grumman surged 2.39%, Lockheed Martin rose 4.39%, RTX gained 0.78%, while General Dynamics rose 1.68%. Drone companies ascended, too, with AeroVironment rising 8.31% and Kratos Defense jumping 13.78%.

European defense names like Renk and Leonard rose, too, as did Asian defense firms Mitsubishi Heavy and Bharat Electronics, as the trend of increased military spending continues to surge abroad.

Uno reverse: ​​Yesterday, many of the very same defense stocks tumbled after the president signed an executive order saying they can’t issue dividends or conduct share buybacks without his approval, blaming them for not producing enough.

“We see a record defense budget increase as the ‘carrot’ for Primes and capital return limit as the ‘stick,’” Morgan Stanley equity analyst Kristine Liwag wrote. “We view this budget development positively for Defense, outweighing possible headwinds from capital return restrictions.” Liwag maintained an ‘attractive’ view on the defense sector.

A reality check

If we learned anything from tariffs, more tariffs, and tariffs again, it’s that market moves based on a Truth Social post are fickle at best, and misleading at worst. Analysts noted that an increase in the military budget of the size that the president proposed would be unprecedented in recent political memory, and would require approval from the Senate to pass.

But even if the US doesn’t reach Trump’s $1.5 trillion goal, rising defense spending will still be a tailwind to the sector. Geopolitical instability has been the biggest story of the year so far—and one that isn’t going away anytime soon.—LB

🟢 What’s up

• Costco jumped 3.71% after posting stronger-than-expected December sales.
• Aerospace company Karman rose 10.49% on a $220 million deal to acquire maritime defense tech firms Seemann Composites and Materials Sciences.
• Infrastructure company Applied Digital gained 8.05% following a strong fiscal second quarter.
• Bloom Energy surged 12.81% on a $2.65 billion fuel-cell supply agreement with American Electric Power.
• Food safety company Neogen jumped 31.44% on better-than-expected quarterly results and a higher outlook.
• Gap climbed 6.8% thanks to a UBS upgrade to Buy, driven by growth prospects in its beauty business, handbags, and Athleta.
• Revolution Medicines originally sank on news that AbbVie has no plans to acquire the cancer drugmaker, only to surge 4.56% on reports that Merck has swooped in.

What’s down

• SanDisk sank 5.38% and Seagate Technology lost 7.72% as investors took profits following a sharp rally in memory-storage stocks.
• Aluminum producer Alcoa declined 2.63% on a JPMorgan downgrade, with analysts favoring copper over aluminum in the months ahead.
• Petrochemical company Shell fell 1.72% after flagging weaker fourth-quarter oil-trading performance.
• Jefferies Financial slid 5.31% after a charge tied to its exposure to bankrupt First Brands overshadowed stronger fourth-quarter revenue.
• Soho House is trying to go private, but it turns out that one of the lead investors on the deal doesn’t have the money. Shares tumbled 9.59%.

It’s the beginning of the new year, so everyone’s got a list of their top 10 stocks to buy these days—but finding one from reputable sources that have a history of success is easier said than done. Thankfully, there’s always the trustworthy investors over at r/WallStreetBets.

OK, so the Reddit forum may not be home to the most responsible traders on the planet. But credit where it’s due, they had a pretty good 2025: The r/WallStreetBet’s top 10 stock picks from the end of 2024 crushed the market last year, posting an average 12-month return of about 72%, compared to the S&P 500’s 16.39% gain.

The picks included familiar tech titans like Alphabet (up 65% in 2025) and AMD (up 78%), as well as retail trader favorites like Robinhood (up 210%) and Palantir (a 139% gain). The only negative stock on the list was Strategy, which posted a 46% loss last year.

So, what are those degenerates investing in this year? The top picks for 2026 include several repeats such as Alphabet, Tesla, Palantir, and of course, Reddit. Rocket Lab is a repeat as well, but AST SpaceMobile is a new space-based addition. AI is still a big theme, with Micron Technology, plus infrastructure play Nebius Group and data center provider Iren Limited. Finally, big tech remains a favorite, with the addition of Amazon.

You can scoff at the investing acumen of Redditors all you want, but the growing presence of retail traders in today’s market means that amateurs are becoming investing heavyweights. Maybe this year it will once again pay to follow the crowd.—MR

China’s AI is moving from training runs to trading floors.

Zhipu AI made a strong market debut in Hong Kong early this morning, becoming the first major Chinese LLM developer to go public. Backed by state-linked funds, Zhipu surged about 15% after its IPO and ended the trading session valued at roughly $7.3 billion. Management said 70% of the proceeds will go toward research and development for its general-purpose AI models.

Zhipu is the largest of China's so-called "AI Tigers," a group of six prominent AI startups, and the first to go public—but it won't be the last. Rival MiniMax is expected to launch its own offering tomorrow, even as US industry leaders such as OpenAI and Anthropic remain privately held and further from an IPO.

The AI playing field

These IPOs serve as an early test of whether public markets believe China’s nascent AI sector can compete globally.

For now, scale still favors US leaders. Zhipu reported $44.7 million in revenue in 2024, versus OpenAI’s roughly $13 billion in annualized revenue last year. Valuations aren’t comparable, either: Zhipu is dwarfed by OpenAI’s reported $500 billion private valuation. They’re not on the same playing field—yet.

Still, size isn’t everything: Despite being placed on the US Commerce Department’s blacklist over suspected ties to China’s military and facing limited access to cutting-edge chips, Zhipu has continued to improve its LLM capabilities, highlighting China’s ability to build its independent AI capabilities without relying on best-in-class US hardware.

China gets its chips

That hardware constraint may be starting to loosen.

In December, the Trump administration approved Nvidia’s H200 chip sales to China in exchange for 25% of the revenue. Now, China is expected to approve some commercial H200 imports as soon as this quarter, with Alibaba Group Holding and ByteDance each expressing interest in ordering over 200,000 units apiece.

For Nvidia, renewed access to China would reopen a major growth market after months of zero market share. For Zhipu, access to more powerful chips could accelerate training and close part of the performance gap, turning its IPO from a symbolic milestone into a potential catalyst for faster model iteration.

The competitive balance won’t shift overnight, but easing compute constraints could make China’s AI race far more credible.—SY

• World Liberty Financial, the Trump family’s crypto venture, is seeking a US banking license.
• Seeing green: Samsung expects its Q4 operating profit to triple to a new record, thanks to the semiconductor shortage and—of course—AI demand.
• Shares of stocks connected to Greenland surged after Trump’s repeated threats to take over the Danish territory.
• The US trade gap narrowed to its smallest since 2009.
• President Trump will make a decision about an IPO for Fannie Mae and Freddie Mac within the next month or two.
• Last year was a blockbuster one for retail traders—and their degeneracy is far from over.

While there’s no earnings announcements of note today, that’s alright: All eyes will be on the labor market, with the Bureau of Labor Statistics unveiling its latest monthly jobs report. Economists anticipate a 55,000 increase in nonfarm payrolls in December, down from a gain of 64,000 in November. They also foresee the unemployment rate inching lower from 4.6% to 4.5%.

As if that wasn’t enough, we’ll hear from the University of Michigan with its first Consumer Sentiment Index for January. Consensus estimate is for a 53.5 reading, a hair higher than in December, though that’s more due to seasonality than any major changes in consumer outlook.

And don’t forget that the Supreme Court is issuing its rulings on a wide range of issues tomorrow—chief among them the legality of President Trump’s tariffs.