To The Moon

Big-Tech’s Performance

In the past week, NVIDIA, as a leader in the AI domain, once again released impressive financial reports, elevating investor sentiment. However, the continuous rise in US Treasury yields and concerns over Jackson Hole central bank symposium led by Jerome Powell's Federal Reserve caused considerable market volatility.

As of the closing on August 17th, the standout performers of the week were $NVIDIA Corp(NVDA)$ surging by +7.26%, and $Tesla Motors(TSLA)$ , experiencing a modest rebound of 1.76%.

The rest experienced declines, including $Alphabet(GOOG)$ with a slight dip of -0.02%, $Microsoft(MSFT)$ down by -0.18%, $Apple(AAPL)$ with a decline of -0.43%, $Meta Platforms, Inc.(META)$ dropping by -2.15%, and $Amazon.com(AMZN)$ sliding by -2.67%.

Big-Tech’s Top Newsfeed

- Apple's iPhone 15 is expected to be unveiled in September, potentially featuring a USB Type-C charging port due to new EU regulations mandating Type-C interfaces on all new smartphones by 2024.

- Microsoft's acquisition of $Activision Blizzard(ATVI)$ has regained hope with approval from UK regulatory authorities.

- Amazon is in discussions with $Walt Disney(DIS)$ regarding ESPN streaming services.

- Analysts project an upward trend in capital expenditures for the top four North American cloud providers (Amazon, Microsoft, Google, Meta) in 2024, with an anticipated growth rate exceeding double digits.

- Meta Platforms introduced AI programming software, entering competition with ChatGPT for developing conversational AI tools.

- Tesla investors involved in class-action lawsuits are set to receive compensation of approximately $12,000 each.

- Vietnam's $VinFast Auto(VFS)$ continues to achieve new highs since going public.

- Tesla's German factory lowered its production targets to 4,350 vehicles per week in July and August, with further reductions planned.

- $XPeng Inc.(XPEV)$ 's head of autonomous driving, Wu Xin Zhou, confirmed his departure to join NVIDIA as the head of autonomous driving products.

- NVIDIA reported impressive Q2 results with doubled revenue and profits, surpassing expectations and announcing a $25 billion buyback plan.

- $ARM Holdings Ltd(ARM)$ Ltd filed for a $10 billion US IPO.

Big-Tech’s Key insights

NVDA beat again?

NVIDIA's Q2 financial report surprised investors, leading institutions to consider it a favorable buying opportunity amid the recent "Sell Off," as the unique supply-demand imbalance is expected to persist for several quarters.

Last week, several institutions released reports stating that the recent "Sell Off" correction presents a "favorable buying opportunity" for NVIDIA, as a "quite unique supply-demand imbalance is expected to persist over the next few quarters, and the upcoming Q2 performance might exceed expectations." Therefore, NVIDIA's stock price has not dropped below 400.

This Wednesday's release of NVIDIA's Q3 financial report once again amazed investors. Not only did both revenue and earnings per share (EPS) double, surpassing Wall Street's "already adjusted" expectations by more than 22% and 29%, respectively, but they also far exceeded the company's Q1 guidance range. The core business of NVIDIA, including AI graphics cards, contributed significantly to the impressive results.

More importantly, the company significantly raised its Q3 guidance again, projecting a 170% year-over-year revenue increase, surpassing market expectations by 28%, with an adjusted gross margin between 72% and 73%.

As stated by Jensen Huang, NVIDIA's production capacity still hasn't caught up with market demand.

However, despite reaching a historic post-Q3 earnings high of $515, NVIDIA's stock price didn't surpass $500 at Thursday's opening. It followed the broader market in a downturn, closing with a modest 0.1% increase, unlike the previous quarter when it led the entire industry's surge.

Why is Google the best performer?

This week, all seven major tech companies announced their Q2 financial reports. We analyzed their performance since the report's release (starting from the day before the report) and the performance the day after. It's evident that Google has demonstrated the strongest performance in this round of the earnings cycle, while Tesla has shown the weakest performance.

Why?

1. Unexpected positive surprises. Big tech companies are often thoroughly analyzed by analysts before their financial reports, leaving few secrets. Even for companies like NVIDIA, which exceeded expectations and guidance by a large margin in the previous quarter, investors had already formed expectations. However, Google's robust financial report revealed unexpected strength that the market hadn't anticipated.

2. Catching up. Due to concerns about high inflation, the market had lower expectations for ad growth, leading to lower valuation for Google. With YouTube benefiting from the market share vacated by TikTok and the ad market not performing as poorly as anticipated, the market naturally compensated.

Tesla took the hardest hit in the recent market dip, but truth be told, it's not all that bad. There's still a sense of rivalry within the electric vehicle industry, given that it has moved past its prime growth phase. The forthcoming surprises in the industry will undoubtedly require Tesla to explore new avenues.

About Institutional Holdings

Last week, we examined the disclosed holdings of major tech companies in their 13F filings. This week, we continue our analysis. Nearly all the major tech firms garnered increased attention from institutional investors, with the exception of Google (GOOG), which experienced a decline in institutional holdings compared to the previous period. This indicates that institutions found Google undervalued in Q2, leading to a post-earnings rebound.

The number of institutions entering the top 10 holdings has risen, reflecting an overall increase. In terms of hedge fund positions, NVDA, AAPL, and META take the top three spots for the highest increases in holdings.

The Big-Tech Portfolio

We've combined the seven companies with the highest weights into an investment portfolio known as the "TANMAM" portfolio.

By equally weighting and adjusting the weights quarterly, we conducted backtesting on this portfolio. The performance since 2015 has far exceeded the S&P 500, with a total return of 1298.48%. In comparison, the S&P 500 ETF (SPY) achieved a return of 148.12% during the same period.

Year-to-date, the total return of this portfolio stands at 84.76%, with a Sharpe ratio of 5.79, while the concurrent total return for SPY is 15.11%.

Over the past week, thanks to outstanding performances from companies like NVIDIA and Google, the portfolio delivered a return of 2.16%, compared to SPY's 0.14%.