Mad Hedge Technology Letter
March 21, 2025
Fiat Lux
Featured Trade:
(TECH BURNS DOWN ON TV)
(TSLA), (ROBO-TAXI)
It is a bad look for Tesla (TSLA) when every time you look at a TV and you see Tesla products either getting slyly keyed or engulfed in flames.
That is the type of figure Elon Musk to American society.
Through one lens – he could be considered one of the greatest technologists of all time.
Through another lens – he could be considered a man preventing the flow of Democratic party funding to its NGOs and other party apparatus entities.
Either way – this guy is going to be controversial and his stock has suffered immensely in the short-term.
That being said, one of the richest venture capitalists in the world Peter Thiel who is a remarkable man himself said to never bet against Elon. He might even dislike Musk as well.
Those words are hard to forget as Musk held an impromptu company all-hands meeting on Thursday night, giving an update on the progress of a number of products while also attempting to assuage fears that the CEO is ignoring his post.
Tesla stock has been in free fall since the start of the year, with sales slipping in key regions like Europe and China and even in the US. The changeover to the new Model Y SUV has been seen as a drag on sales.
Overall, Musk maintained that the news was "good" for Tesla and urged employees and others to hold onto their Tesla stock because, in his eyes, the future is bright.
The bet on robo-taxis and autonomous driving is one of the key catalysts for Tesla's future growth, and Musk again laid out his audacious vision.
Key to the company's autonomous vision is the Cybercab robo-taxi, slated for production in 2026. Musk said the factory was already beginning preparations for production using its "unboxed" assembly technique, which would resemble a "high-speed consumer electronics line," rather than an automotive production line.
Speaking of future product production, Musk said Tesla built the "first Optimus at the Optimus production line in Fremont," adding that the humanoid robot would be available for sale in 2026, initially to Tesla employees, after internal company use.
Turning back to the here and now, Musk predicted the Tesla Model Y — the company's most important current product — would once again be the top-selling car in the world following its new update.
To me, it is clear that Musk went the political route because he sensed his robo-taxi and Optimus robot projects were about to be drowned out by bureaucracy.
He probably understands more than anyone that America has become overregulated and it is hard to get stuff done, even if it is a lot more efficient than a place like Europe.
Being in agreement with the current administration has to boost his humanoid robot and robo-taxi project by at least 75% and I wouldn’t be surprised he is attempting to get as much regulatory approval in the next 4 years.
These two projects are what will quadruple the stock in the next 5 or 10 years. He knows that investors know that, and he is doing everything in his power to force the impossible to become possible.
Perhaps Peter Thiel will say that is something Elon Musk would and can achieve.
Mad Hedge Technology Letter
March 19, 2025
Fiat Lux
Featured Trade:
(ONE TO KEEP AN EYE OUT FOR)
(ORCL), (TIKTOK)
The U.S. administration has kicked around the idea of Oracle (ORCL) chairman Larry Ellison as a possible buyer to one of the hottest social media assets TikTok.
Oracle isn’t intending to outright acquire a majority stake, but their involvement shows that Oracle is at the seat with the big boys in tech and that seat carries a great deal of clout today.
Remember that Oracle’s stock was dead as a doornail a few years ago.
But the AI revolution seemingly revived a slumbering stock jolting it to higher highs.
Before that AI boom, Oracle was known as the company with outdated database cloud software and even today, most people don’t know what they even do.
Oh, how do just a few years change everything?
Realistically, Oracle likely doesn’t have the cash to buy into the asset.
The company is spending much of its cash on building new AI data centers and has over $90 billion in debt, partly due to a prior acquisition. Plus, the infrastructure-focused company has little experience running a consumer-oriented app.
The likelier scenario, and the one that’s under consideration with Trump administration officials, would involve Oracle reprising its role in providing a security backstop for US users’ data backstop would guarantee that TikTok’s US operations under new ownership would not contain a back door that China’s government could exploit.
Under a prior arrangement, the cloud giant would have taken a minority ownership stake in TikTok’s global business and provided technology and data storage services for the app to protect US user data.
But the arrangement hit a snag when officials in Washington and Beijing disagreed over whether ByteDance would maintain any involvement in the new TikTok entity.
The second challenge is more technical. Chinese authorities are unlikely to approve a deal that involves selling the new buyer TikTok’s valuable content algorithm, which determines the posts that users see in their feeds.
We are still trying to analyze where the dust will settle because it is not clear to the outside lens.
As it stands, Oracle pouring capital into AI data centers is a strategic move that has benefited the stock price and there is a high chance that shareholders start to bid up the stock after the macro contagion passes.
If somehow Oracle can even finagle a massive contract to managing TikTok’s data, I do believe the stock will be up 12-15% on that news. That development isn’t in the price yet and investors haven’t been sniffing it out yet.
In short, there is a great deal of upside potential in Oracle’s share price and outsiders shouldn’t minimize or water down the possibility for a short-term short squeeze of monumental proportions.
At the very minimum, it is hard to bet against Oracle even if the stock is down YTD by 8% and investors should expect some sort of appreciation when the broader landscape settles down.
“I think it is possible for ordinary people to choose to be extraordinary.” – Said Elon Musk
Mad Hedge Technology Letter
March 17, 2025
Fiat Lux
Featured Trade:
(WE HAVE CROSSED THE RUBICON IN THE SHORT-TERM)
(META), ($COMPQ), (NVDA)
The pain trade for tech stocks just recently was up and that has now been broken.
It has been a tough fall and the Nasdaq ($COMPQ) has gone from up handsomely for the year to down 8%.
The tough point in this was that it was hard to go bearish until we finally crossed the Rubicon.
That moment is here and I think we are in a clear “sell the tech rally” mode for the short-term.
I don’t believe that investors are willing to bid up tech stocks in the short-term considering there is nothing coming down the pipeline from the business models that suggest we are in for some outsized growth.
I do believe that surprises will be to the downsides with many tech companies rerating their stocks negatively.
Then there is the issue that the American consumer is tapped out, and the ex-America rich countries are doing even worse.
For right now, I don’t believe traders should aggressively buy the dips.
My META (META) trade went horribly wrong and that shows that even the best of class got clobbered by the market.
Our bellwether barometer Nvidia (NVDA) is also demonstrably down from its highs of $150 per share and I don’t believe it will reach that level for the rest of the foreseeable future.
Don’t get me wrong, I do believe we can stage a bear market rally just from the very fact that we are in extremely oversold conditions.
It’s also clear that the problem in American politics is now rearing its ugly head and stocks will need to stomach a lot of headline risk in the short-term.
When countries’ politics devolve into 3rd world level type of politics then markets will tell investors to get ready to bear risk and America is no exception.
In response, investors have retreated from risk assets and taken profits on their holdings of the tech giants, which have been the biggest winners, by far, during the bull market in US stocks that began in October 2022.
Over the past decade, investors have been taught time and time again that it pays off handsomely to buy Big Tech stocks when they are down. Even prolonged slumps like the one that sent the Nasdaq 100 down 33% in 2022 proved to be a great buying opportunity as beaten-down stocks like Meta soared to new heights in the two years that followed.
There’s the near-universal belief that tech giants are still the highest quality companies in the world, thanks to their market dominance, immense profitability, and balance sheets loaded with cash. The question is whether these advantages are already baked into the share prices, and may now be under threat if the economy slows and big bets on artificial intelligence don’t pay off as expected.
Since closing at a record high 17 trading sessions ago, the Nasdaq 100 has bounced back on six days. But so far, none of the advances have lasted long.
Instead of catching a falling knife, traders should wait to get confirmation that we have support.
It is easier said than done, but the headline risk has shot to the forefront as the biggest risk to tech stocks when we wake up.
It is also clear that the federal government wants the market to digest as much political risk as possible at the beginning of the new term to smoothen its policy targets for the rest of the 4 years.
Whether it will work is up to debate and I don’t believe tech stocks are able to just shrug off these imminent risks as of yet.
It could be until the summer or fall when tech stocks start to become immune to belligerent politics and until then, we will most likely to see lower lows.
The market has rolled over and we have to shake and bake with it.
“Innovation distinguishes between a leader and a follower.” – Said Apple Co-Founder Steve Jobs
Mad Hedge Technology Letter
March 14, 2025
Fiat Lux
Featured Trade:
(TECH SECTOR HEADING TO A NEW SPACE)
(DBX), (MCHP), (META), (MSFT)
Anyone out there who has children in high school or college, the best piece of advice to give them to prepare for a highly lucrative career in technology is that their path will most likely start outside of the United States.
Why?
In one fell swoop, Big Tech and other smaller tech firms have decided that American salaries are not worth the money and have accelerated a full-on position migration to the rest of the world.
The salary arbitrage is something that gets missed in corporate America but is also a reason why these American tech companies keep beating earnings results.
Everyone knows the biggest expensive line item to a tech firm isn’t the software, but the salaries.
Every executive I talk to has widespread plans to cut jobs, whether it be in Seattle, Washington, or Los Angeles, California, and install them in places like India, Moldova, or even notorious Ukraine.
This is happening quietly, but the trend has picked up pace in 2025.
The early numbers in the United States are portending poorly for US employment and many good tech jobs will be reinstalled in cheaper countries and paid 5X lower than what it once was.
Since 2017, the United States has created 0 jobs for native born Americans, and this is part of the reason why.
Compounding the situation, in a global survey, some 61% of tech companies worldwide said they expected to reduce their workforces over the next five years because of the rise of artificial intelligence.
Tech firms such as Dropbox and IBM have previously announced job cuts related to AI. Tech jobs in big data, fintech, and AI are meanwhile expected to double by 2030.
The digital-financial-services company Ally is firing roughly 500 employees, or 7% of staff.
Ally made a similar level of cuts in October 2023, the Charlotte Observer reported.
Jeff Bezos's rocket company, Blue Origin, is sacking about 10% of its workforce, a move that could affect more than 1,000 employees.
Meta CEO Mark Zuckerberg told staff he "decided to raise the bar on performance management" and will act quickly to "move out low-performers." On just recently, the company had laid off more than 21,000 workers since 2022.
Microchip Technology is cutting its head count across the company by around 2,000 employees, the semiconductor company said a few days ago.
Last year, Microchip announced it was closing its Tempe, Arizona facility because of slower-than-anticipated orders. The closure begins in May 2025 and is expected to affect 500 jobs.
Microsoft cut an unspecified number of jobs in January based on employees' performance.
If anyone thinks this is a blip on the radar, then check your head again.
Once the WFH (work from home) movement started during 2020, there was no going back from there.
Tech companies don’t need warm bodies in offices anymore, so physical location doesn’t matter for lower-level employees.
95% of Silicon Valley will now be outsourced, and all “entry-level” jobs will originate in low-cost-of-living countries.
This is the new American tech sector. Ownership will still be mostly American, but workers will be offshore.
What is the result of this?
Tech stocks will stay higher for longer because of the massive cost savings in wages, which will allow management to beat earnings quarter after quarter.
It gives the balance sheet a reprieve allowing tech to hire more workers elsewhere for less money even if they aren’t an equal replacement.
It also opens the opportunities to deliver more value back to shareholder in the form of dividends or stock splits.
Tech firms won’t die off, but balance sheets will be financially engineered to the max to the benefit of executive management and to the chagrin of the American tech worker.
Once the macroeconomic backdrop calms, it will be time again to jump into tech stocks.
