Santa’s Rally on Wall Street: Between AI Hope and Reality

Jakarta, Pintu News – As the year 2025 draws to a close, Wall Street is caught between two major forces: the growing doubts over AI trading that have fueled this year’s market gains and the seasonal patterns that have historically lifted markets in December for nearly a century. This tension has investors divided between joining the rally or preparing for a possible market pullback.

Doubts on Seasonal Patterns

The Santa Claus rally, which includes the last five trading days in December and the first two days in January, has delivered gains 79% of the time since 1929, with an average return of 1.6%. However, in the last eight years, the decline has only occurred once.

Nonetheless, some skeptical investors argue that this pattern has become too widely recognized. “Seasonal patterns work until everyone believes in them – this is the most obvious trade of the year, and that’s the problem,” wrote an investor on X.

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Moment of Truth for AI

More fundamental concerns lie with the AI sector that has driven the S&P 500’s rise to $30 trillion over the past three years. According to Bloomberg, signs of skepticism are starting to emerge, from Nvidia’s stock selling to Oracle’s decline after reporting higher-than-expected AI spending.

“We’re in the phase of the cycle where real trials are happening,” said Jim Morrow, CEO of Callodine Capital Management. The costs involved are huge, with Alphabet, Microsoft, Amazon, and Meta expected to spend more than $400 billion on data centers in the next 12 months.

Optimism in the Midst of Doubt

However, comparisons with the dot-com crash may be overblown. Currently, the Nasdaq 100 is trading at 26 times projected profits, well below the 80-plus multiple seen at the peak of the 2000 bubble. Nvidia, Alphabet, and Microsoft all trade below 30 times profits.

History also favors the optimists. According to financial newsletter The Kobeissi Letter, the last two weeks of December have been the best weeks for stocks over the past 75 years, with the S&P 500 potentially reaching 7,000 by the end of the year.

Conclusion

In the short term, seasonal forces and FOMO may continue to favor the market. However, going into 2026, whether AI investments will provide real returns will be the key variable determining the market’s direction.

Also Read: Bitcoin Stuck Below $94,000: When Will Price Recovery Happen?

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FAQ

Q1: What is the Santa Claus Rally?

A1: A Santa Claus rally is a market phenomenon where stocks tend to rise on the last five trading days of December and the first two trading days of January.

Q2: Why are there doubts about AI trade in 2025?

A2: Such doubts have arisen due to the stock sales of major companies such as Nvidia and Oracle, as well as reports that less than half of current AI projects generate returns greater than their costs.

Q3: How much do Alphabet, Microsoft, Amazon, and Meta expect to spend on data centers in the next 12 months?

A3: The four companies are expected to spend more than $400 billion on data centers in the next 12 months.

Q4: How has the Nasdaq 100 performed compared to the dot-com bubble period?

A4: The Nasdaq 100 is currently trading at 26 times projected profits, which is much lower compared to the 80-plus multiple at the peak of the dot-com bubble in 2000.

Q5: What will determine the direction of the market going into 2026?

A5: The key determinant of market direction in 2026 will be whether investments in AI technology will provide real returns.

Reference

• BeInCrypto. Santa Rally Hopes Meet AI Reality Check. Accessed on December 15, 2025