Many venture capitalists, especially those in newer firms, have openly acknowledged that 2024 has presented significant difficulties in raising fresh capital. Dimension Capital, a relatively young venture outfit that is just two years old, had a distinct experience when it came to raising its second fund. Zavian Dar, one of the firm's three founders and managing partners, stated that every investor from their first fund returned very promptly. Additionally, they managed to bring in a small number of new investors. However, they ended up having to turn away the vast majority of limited partners (LPs) who expressed interest. Surprisingly, within less than two years after closing their initial $350 million fund, Dimension announced the successful raising of an oversubscribed $500 million fund, surpassing their initial target of $400 million.

Dimension Capital's Unique Focus and Appeal

The key to Dimension Capital's success lies in its unique focus on investing at the intersection of life sciences and technology. This area has witnessed a surge in popularity in recent years as the potential of drug discovery with artificial intelligence becomes increasingly tangible. In fact, Dar claims that Dimension is the first venture capital firm dedicated solely to bridging the gap between biology and computer science. Since its establishment in 2022 by Dar, who previously served as a general partner at Lux Capital, along with Adam Goulburn (pictured on the right) and Nan Li (pictured on the left), Dimension has made investments in approximately 20 companies. Approximately half of these startups are still in stealth mode.Among the firm's known portfolio companies is Chai Discovery, a startup that is developing an open-sourced AI foundational model for drug discovery. In September, Chai raised $30 million in seed funding, with Thrive Capital and OpenAI leading the round and Dimension participating. The firm has also backed Enveda Biosciences, a biotech that utilizes AI to develop medicines from natural compounds. Last month, Enveda Biosciences raised a $130 million Series C.When the firm first launched, the partners initially focused primarily on early-stage investing. However, their focus has since expanded to encompass all stages of development, ranging from the initial stages to public companies. Dimension has invested in Monte Rosa, a publicly-traded biotech that employs AI tools for drug development.The stage-agnostic approach adopted by Dimension allows them to write checks ranging from as low as a million dollars to as much as $30 million or more. Just like their first fund, their second fund is likely to have around 20 portfolio companies.Dimension's current portfolio is roughly divided between drug discovery companies and software and infrastructure companies that support biopharma. For instance, there is a still-stealth startup that is building robots to automate lab experiments.Dimension Capital has declined to disclose the names of their LPs but has stated that the list includes endowments, hospitals, and research institutions, among others.Unlike many traditional life sciences VCs, Dimension will only invest in biotech startups if "25%, 30%, even 40% of the team are computational biologists." Goulburn emphasized that these are machine learning practitioners, AI engineers, and hardware roboticists who work in harmony with chemists and biologists to drive drug discovery.Dar expressed his admiration for the founders who have chosen to establish businesses in this sector. He noted that one of the remarkable aspects of this current era is the caliber of entrepreneurs. These highly ambitious, technically proficient, and scientifically literate individuals are all entering this competitive arena.

The stock market witnessed a mixed week with various indices showing different trends. Dow Jones futures were flat on Monday morning, while S&P 500 and Nasdaq futures fell slightly. This week's stock market rally had its ups and downs, but all major indexes hit fresh highs at some point, driven by strong tech earnings. Treasury yields fell due to tame economic data, boosting expectations of another Fed rate cut on Dec. 18.

Unraveling the Dynamics of the Stock Market

Overview of Dow Jones Futures

Dow Jones futures were just above fair value. S&P 500 futures lost about 0.1%, and Nasdaq 100 futures declined 0.2%. The 10-year Treasury yield rose to 4.18%, and crude oil futures increased by more than 1%. Bitcoin fell to above $98,000 after reaching the $100,000 level last week. In Hong Kong, the Hang Seng jumped 2.8% as China pledged more proactive fiscal and moderately easier monetary policies to boost consumption. Copper prices also rose on the China stimulus pledge. It's important to note that overnight Dow futures action doesn't necessarily translate to actual trading in the next regular session.

The Nasdaq led the way, with the 20,000 level acting as a magnet. However, the tech-heavy composite is starting to look extended, and market sentiment is becoming frothy. Nvidia (NVDA), Apple (AAPL), Meta Platforms (META), and Microsoft (MSFT) are all showing buy signs. However, Nvidia stock fell on Monday morning due to a China probe on anti-monopoly grounds. Nvidia and Meta stocks are on the IBD Leaderboard, and Meta is also on SwingTrader. Microsoft stock is on IBD Long-Term Leaders, and Nvidia stock is on the IBD 50.

Stock Market Rally and Its Impact

The stock market rally had a mixed week. The Dow Jones Industrial Average fell 0.6%, but hit a fresh all-time peak on Wednesday. The S&P 500 index rose nearly 1%, and the Nasdaq composite jumped 3.3%, setting records on Friday. The small-cap Russell 2000 declined 1.1%. The 10-year Treasury yield declined four basis points to 4.15%, reaching the lowest levels since late October. U.S. crude oil futures fell 1.2% to $67.20 per barrel.

The Nasdaq is within 1% of the 20,000 level, one month after topping 19,000 for the first time. While it's not yet overly extended, when it gets 5%-6% above the 50-day line, the risks of a pullback start to rise. The S&P 500 is not as extended, only 3.7% above its 50-day. Sentiment indicators are also raising concerns. The Investors Intelligence Bulls vs. Bears survey shows 62.9% of investment newsletters bullish, which is a sign of excessive bullishness. The CBOE Volatility Index hit its lowest reading since July 19.

ETF Performance and Market Trends

Among growth ETFs, the Innovator IBD 50 ETF (FFTY) rose 1.55% last week. The iShares Expanded Tech-Software Sector ETF (IGV) leaped 5%, with Microsoft as a major holding. The VanEck Vectors Semiconductor ETF (SMH) gained 2.7%, with Nvidia stock as the dominant component. ARK Innovation ETF (ARKK) soared 8.5% last week, and ARK Genomics ETF (ARKG) climbed 1.85%. SPDR S&P Metals & Mining ETF (XME) plunged 4.8%, U.S. Global Jets ETF (JETS) ascended 4.1%, SPDR S&P Homebuilders ETF (XHB) gave up 3.1%, the Energy Select SPDR ETF (XLE) tumbled 4.7%, and the Health Care Select Sector SPDR Fund (XLV) declined 2.1%. The Industrial Select Sector SPDR Fund (XLI) retreated 2.4%, and the Financial Select SPDR ETF (XLF) shed 1.8%.

These ETF movements reflect the overall market trends and sector performances. It shows how different sectors and stocks are responding to various market conditions. Investors need to closely monitor these ETFs to understand the market dynamics and make informed investment decisions.

Key Stocks and Their Movements

Nvidia stock fell about 2% to under 140 early Monday, back below the 140.76 buy point and the 21-day line but still above the 50-day moving average. It rose 3% to 142.44 last week, rebounding from the 50-day to move back into buy range. China has launched a probe into Nvidia on suspicion of anti-monopoly breaches.

Apple stock climbed 2.3% to 242.84 for the week, moving above a 237.49 buy point from a flat base next to another consolidation. Meta stock jumped 8.6% to 623.77, clearing a 602.95 flat-base buy point. The Facebook and Instagram parent rose 2.4% on Friday as a federal court upheld a looming U.S. ban of TikTok. Meta also launched its latest large language model, Llama 3.3. Microsoft stock gained 4.75% to 443.57, rebounding from all its moving averages and later topping short-term highs.

What to Do in the Current Market

The stock market rally is performing well, with tech and other growth plays leading the way. Some buying opportunities still exist. If fully invested, one might need to cut something to take a new position or add to a holding. The market, especially the Nasdaq, is starting to look stretched. While it's not the time for proactive selling alone, it's a factor to consider when deciding whether to take profits in extended stocks.

Earnings season is past its peak, but there are quality stocks among the limited quantity. Toll Brothers (TOL), Broadcom (AVGO), Oracle (ORCL), Costco (COST), Ollie's Bargain Outlet (OLLI), and Adobe (ADBE) are key earnings reports this week, along with Nvidia chipmaker Taiwan Semiconductor (TSM) reporting monthly sales. All but Costco stock, which is extended, are trading near buy points or early entries.