Mad Hedge Technology Letter
March 7, 2025
Fiat Lux
Featured Trade:
(APPLE LOOKING TO FIND ITS MOJO)
(AAPL), (SAMSUNG), (CHINA)
Posts
Not only is Apple losing its edge, but they are failing miserably against the Chinese.
China, with its state-supported behemoths, is the bully on the playground, and Apple can’t too diddlysquat.
Apple has been selling the same product for the past 13 years, and the last iterations have been underwhelming, to say the least.
People don’t want to upgrade, forcing to elongate of the refresh cycle.
It’s now so bad that Apple even ceded 5% market share in the final quarter last year to Chinese competition.
Apple is also very late in integrating AI features, signaling that Apple’s software game is behind the times and mediocre at best.
Apple risks falling behind quickly, and the Chinese have really nailed the consumer tech and muscled into this industry.
They are poised to dominate EVs, smartphones, and other value-added tech in the upcoming years.
They plan to seize the moment and squeeze American companies out of the way for good.
Samsung also has been going through a disastrous down cycle after their Android flagship phone peaked a few years ago.
This new trajectory is a slippery slope, and if Apple goes on the cost-cutting path, there will be little talent left to innovate out of this problem.
The iPhone slipped a point to 18% worldwide market share in 2024.
Apple marked a 2% sales decline for the full year at a time that the wider market grew 4% globally.
China’s smartphone makers are all developing their own in-house AI tools and agents, including services that can perform tasks on a user’s behalf.
Samsung also gave up share to faster-growing Android device makers from China, led by Xiaomi and Vivo. Apple marked a 2% sales decline for the full year.
The situation paints a picture of the non-Chinese smartphone markets in a world of hurt.
I believe that Apple and Samsung have nobody to blame but themselves, as those years of forced technological know-how transfer are coming back to bite them where it hurts.
My friends’ kids have these new Chinese smartphones, and I can tell you that I was surprised about how good they perform.
They are run on Android, which is very different from IoS, but they were premium.
German car companies are also feeling this bitter pill as Chinese companies have taken their own technology and implemented it in a more affordable way.
In aggregate, this latest news is a bad omen for Apple’s earnings season.
They are barely jumping over a lower bar, and that will keep happening until something major is revamped in the product lineup.
I believe any steep sell-off would be a nice opportunity to execute a short-term trade to the upside, but those years of buying and holding Apple until eternity is gone.
Readers must really nitpick what this company is doing because management presides over a dull model, and their China business is falling apart as we speak, all while they helped the local Chinese competition over many years take market share with forced technological transfers.
Surprisingly, the stock has done well during the tariff rhetoric and has trudged along sideways while other stocks have really felt the full brunt of the trade escalation.
If we get a smooth patch, I would advocate for a tactical trade to the upside in AAPL.
Mad Hedge Technology Letter
January 27, 2025
Fiat Lux
Featured Trade:
(DEEPSEEK PUTS A SCARE INTO TECH STOCKS)
(CHINA), (NVDA)
The narrative that China is a decade behind in cutting-edge technology compared to Silicon Valley is total B.S. at this point.
It couldn’t be further from the truth.
First, it was the smartphone where Apple built an insurmountable lead for the Chinese.
Second, it was the EV and no Chinese company would ever surpass Tesla.
China is now leading in both EVs and smartphones at this point.
This narrative has been debunked and today is the final nail in the coffin.
Now…enter the wrath of artificial intelligence where reports indicate China has produced that aha moment in which China has managed to output the same quality of AI without Nvidia supercomputers and without a $100 million data centers.
Imagine the sigh of relief from American households that won’t have to deliver an electricity wealth transfer to Silicon Valley.
If this holds true, the Chinese have played the CEO of ChatGPT Sam Altman like a fiddle.
It’s extremely worrisome that Altman has irked Elon Musk so badly that it is widely known that Altman is Musk’s arch-enemy.
For everyone who doesn’t know, the app is called DeepSeek and it is now #1 in the Appstore.
Chinese artificial intelligence startup DeepSeek’s latest AI model sparked a multi-trillion rout in US and European technology stocks.
DeepSeek is a visible challenge to costlier models like OpenAI and raising suspicious if Sam Altman is just taking Silicon Valley on a ride for his gargantuan bank account.
Nvidia tanked 17% by mid-day and clearly would be one of the companies hurt by the Chinese.
DeepSeek shows that it is possible to develop powerful AI models that cost less and can potentially derail the investment case for the entire AI supply chain, which is driven by high spending from a small handful of hyperscalers.
The AI model from DeepSeek — founded by quant fund chief Liang Wenfeng — is widely seen as better than ChatGPT and will no doubt be a better value.
The DeepSeek product is deeply problematic for the thesis that the significant capital expenditure and operating expenses that Silicon Valley has incurred are the most appropriate way to approach the AI trend.
The DeepSeek release raises new doubts, challenging the notion that China’s AI technology is a decade behind US counterparts. Washington’s trade restrictions had kept the most cutting-edge chips out of China’s hands, but DeepSeek’s model was built using open-source technology that is easy to access.
The biggest and most important takeaway from this chaos is that Nvidia is now canceled as the best buy and holds long-term tech stock.
The newfound competition instills pricing issues for Nvidia and raises questions about the very model they support.
Many asset classes have become overly expensive and the narrow reason for the pricing to stay higher is the lack of competition.
So what now?
Although I don’t expect Nvidia’s stock to experience a straight move lower, this puts a hard ceiling on any meaningful stock appreciation for the rest of 2025.
This new development also puts hard ceilings on other AI chip stocks looking to benefit from those higher premiums.
Then the question of what is the next big thing to come from Silicon Valley is again thrust to the fore.
Innovation has been behind in California and Altman is looking less credible by the day.
Mad Hedge Technology Letter
January 15, 2025
Fiat Lux
Featured Trade:
(TIKTOK COULD GET BANNED)
(CHINA), (TSLA)
Mad Hedge Technology Letter
January 15, 2025
Fiat Lux
Featured Trade:
(TIKTOK COULD GET BANNED)
(CHINA), (TSLA)
I must admit that in 2025, the velocity of change to technology, human communication, business, politics, and society has gone from breakneck speed to lightning speed.
The type of speed is unsettling to many who aren’t willing to bend their lives and every twist and turn. That type of adaptability and awareness is hard to find in many people.
What is this about?
The Chinese are suddenly considering selling social media app TikTok to Elon Musk and the app is also facing a Sunday blanket ban in the United States.
Yes, the very Elon Musk who has successfully sold at least 2 or 4 Teslas to every coastal Democrat then only to become their arch-enemy number 1 after those purchases.
If Musk gets his grubby little fingers on TikTok, he will possess a de-facto media monopoly on the whole world.
X.com is the biggest source of information in the United States, Japan, and many other countries rich or poor.
This acquisition would also madly accelerate the death of legacy media which lost half their audience last year, because of the decrease in content quality.
TikTok is the app that consumers under 30 use, meaning that Musk would now be able to spread his influence even deeper to the younger crowd. None of this cohort even knows what cable TV is or what is on it.
Imagine how many job losses to digital shops on TikTok – perhaps in the 100s of thousands alone if the app gets banned. They are mostly mom-and-pop shops selling small goods and their audience will go to 0 if the app is removed. Think about a college kid selling bouncy balls on this platform - many shops are entirely run on TikTok. This would be another win for the billionaires and a crushing blow to America’s youth.
The Supreme Court could shortly ban TikTok in the United States and the Chinese are debating on whether the least bad option is to sell it to Musk.
Musk already owns and operates the Shanghai Gigafactory.
TikTok’s US operations could be valued at around $80 billion.
Musk paid $44 billion for Twitter in 2022 and is still paying off sizable loans, but in hindsight, the $44 billion price is a huge bargain in 2025 valuation terms.
On a practical level, spinning off TikTok’s US business would be highly complex, affecting shareholders in China as well as the US.
In one of the greatest trades of all time, Musk turned a $250 million investment into the Trump Campaign and applied his leverage on X.com to catapult Tesla’s stock from $600 billion of market cap to $1.3 trillion today.
The almost $700 billion increase in market cap shows no signs of slowing down and if Musk is able to grab TikTok, then watch out, I believe Tesla will be a $2 trillion stock by the summer of 2026.
The German American Venture Capitalist Peter Theil famously said to never bet against Musk no matter what, and those words couldn’t ring truer today.
Buy the dip in any meaningful Tesla weakness and as X.com starts to build clout, I believe Musk will also take his social media platforms public reaping another massive payday in the many billions. Musk owning TikTok would supercharge the asset appreciation in his digital media empire.
Mad Hedge Technology Letter
January 13, 2025
Fiat Lux
Featured Trade:
(APPLE DROPS THE BALL)
(AAPL), (SAMSUNG), (CHINA)
Not only is Apple losing its edge, but they are failing miserably against the Chinese.
China, with its state-supported behemoths, is the bully on the playground and Apple can’t too diddlysquat.
Apple has been selling the same product for the past 13 years and the last iterations have been underwhelming, to say the least.
People don’t want to upgrade forcing them to elongate the refresh cycle.
It’s now so bad that Apple even ceded a 5% market share in the final quarter last year to Chinese competition.
Apple is also very late in integrating AI features signaling that Apple’s software game is behind the times and mediocre at best.
Apple risks falling behind quickly and the Chinese have really nailed the consumer tech and muscled into this industry.
They are poised to dominate EVs and smartphones and other value-added tech in the upcoming years.
They plan to seize the moment and squeeze American companies out of the way for good.
Samsung also has been going through a disastrous downcycle after their Android flagship phone peaked a few years ago.
This new trajectory is a slippery slope and if Apple goes on the cost-cutting path, there will be little talent left to innovate out of this problem.
The iPhone slipped a point to 18% worldwide market share in 2024.
Apple marked a 2% sales decline for the full year, at a time when the wider market grew 4% globally.
China’s smartphone makers are all developing their own in-house AI tools and agents, including services that can perform tasks on a user’s behalf.
Samsung also gave up its share to faster-growing Android device makers from China, led by Xiaomi and Vivo. Apple marked a 2% sales decline for the full year.
The situation paints a picture of the non-Chinese smartphone markets in a world of hurt.
I believe that Apple and Samsung have nobody to blame, but themselves as those years of forced technological know-how transfer are coming back to bite them where it hurts.
My friends’ kids have these new Chinese smartphones and I can tell you that I was surprised about how good they perform.
They are run on Android, which is very different from IoS, but they are premium.
German car companies are also feeling this bitter pill as Chinese companies have taken their own technology and implemented it in a more affordable way.
In aggregate, this latest news is a bad omen for Apple’s earnings season.
They are barely jumping over a lower bar and that will keep happening until something major is revamped in the product lineup.
I believe any steep sell-off would be a nice opportunity to execute a short-term trade, but those years of buying and holding Apple until eternity are gone.
Readers must really nitpick what this company is doing because management presides over a dull model and their China business is falling apart as we speak all while they helped the local Chinese competition over many years take market share with forced technological transfers.
Not a good look and things could get worse as we move deeper into the year.
Mad Hedge Technology Letter
December 20, 2023
Fiat Lux
Featured Trade:
(FUTURE OF AI PATENTS AND LAW)
(CHINA), (NEURALINK)
