To The Moon

Big-Tech’s Performance

Macro level, the unexpectedly high August CPI released this week may serve as a guide for the next month. Meanwhile, Apple's product launch was unimpressive, but market risk appetite is gradually increasing, primarily due to the slowly emerging advantages of certain tech stocks in the AI era.

As of the closing on September 14th, all big techs record positive return over the past week. The strongest performers was $Tesla Motors(TSLA)$ with +12.64%, followed by $Meta Platforms, Inc.(META)$ with +4.6%, $Alphabet(GOOG)$ $Alphabet(GOOGL)$ with +3.38%, $Microsoft(MSFT)$ with +2.24%, $Amazon.com(AMZN)$ with +2.07%, $Apple(AAPL)$ with +0.32%, and $NVIDIA Corp(NVDA)$ with +0.12%.

TSLA experienced significant volatility, while META and GOOGL have shown strength in the past two weeks. AAPL and NVDA, on the other hand, have exhibited weakness.

Big-Tech’s Top Newsfeed

- Apple held its product launch event, which was largely in line with previous expectations: they unveiled the iPhone 15 series with features like the Dynamic Island, USB-C interface, high-end chips, and periscope lenses. They also announced the iWatch9 and Ultra 2.

- UBS lowered the shipment estimate for Apple's iPhone 15 series from 80-90 million units to 78 million units.

- France claimed that the electromagnetic radiation from Apple's iPhone 12 exceeded EU standards and demanded its removal from shelves. Germany may follow suit. Apple has not commented on this issue and has instructed its employees not to comment.

- The Senate AI summit brought together closed-door policy discussions on AI regulation, attended by companies including Microsoft, Google, Meta, and Tesla.

- The European Commission is investigating Microsoft's attempts to gain approval for its acquisition of Activision Blizzard.

- Samsung Electronics Co., Ltd. is collaborating with Microsoft to develop chatbots.

- After a driver strike incident, Amazon plans to raise wages for contract delivery drivers.

- Amazon and Occidental Petroleum (OXY) announced a 10-year carbon reduction credit purchase agreement.

- Google is nearing the release of Gemini AI to compete with OpenAI.

- Tesla plans to purchase automotive components worth up to $1.9 billion from India this year.

- $Morgan Stanley(MS)$ released a research report stating that thanks to the Dojo supercomputer, Tesla's stock price will soar (target price of $400);

- Meta is developing a new and more powerful AI system and plans to launch a new AI model next year;

- Eight companies, including Nvidia, voluntarily commit to managing AI risks, including conducting security tests and adding digital watermarks;

- $Arm Holdings(ARM)$ is priced at $51 per share, with a 20% increase on the first day of trading, and a higher trailing twelve-month P/E ratio than Nvidia;

- $Samsung Electronics Co., Ltd.(SSNLF)$ has raised the prices of mobile phone storage chips, DRAM, and NAND, by 10%-20%;

Big-Tech’s Key insights

Apple's new products: Too difficult to surprise?

Apple's long-awaited product launch finally took place, but the usual "sell the facts" approach led to a decline in Apple's stock price after the event. The reason behind this is a lack of creativity, and the market had already anticipated the changes.

We believe:

1. The price increase of the iPhone 15 series is estimated to be the biggest boost to performance, especially in North America, while the Greater China region, despite strong growth, appears to have a smaller increase. Considering the differences in inflation and interest rates between the two countries, Apple still wants to maintain a competitive advantage in terms of sales volume in the Greater China region, and competitors are putting pressure on it.

2. Updating the entire range of charging cables is another way to increase accessory profits. Combined with the recent growth in service revenue over the past few years, products like Apple Care have become important revenue drivers. From this perspective, there is little room for negotiation for the "Apple tax" in the short term.

3. The demand for upgrades from users is likely driven by the need for storage capacity. With software continuously upgrading, more and more users of iPhone 11-13 are looking to upgrade to models with larger storage capacities.

In recent years, Apple's product launches have been seen as "ordinary and lacking innovation," resulting in stock prices falling in the short term after the "sell the facts" approach. However, sales during the shopping season in previous years have been strong, so after the Q4 shopping season (Singles' Day, Black Friday, etc.), observing sales trends in the first three months may provide greater guidance for Apple's stock price in the next six months.

We don't know if one day iPhone devices slow down in the Chinese market, whether Cook will turn ruthless like Meta's Mark Zuckerberg.

Did Morgan Stanley hire the EV team from Ark Invest's Cathie Wood?

Morgan Stanley rarely updates its reports on Tesla, but this time it's a major update. They have collaborated with analysts from multiple teams, raising the target price from $250 to $400, and the key factor here is the Dojo supercomputer. This is a significant development:

The Dojo supercomputer is designed to handle vast amounts of data for training autonomous driving systems. It could provide Tesla with an "asymmetric advantage" in this potentially trillion-dollar autonomous driving market.

While the report clearly outlines the sources of the increased target valuation - because Dojo does not generate revenue directly but is more important for boosting hardware product sales or charging service fees for cash flow, it is based on the market size in 2030 and the market share gained, much like Cathie Wood's "Wood Sister" prediction of a $3,000 target price (pre-Tesla stock split, equivalent to the current $750 target price).

We should note several risks, as 2030 is still quite far off, and technological advancements are happening rapidly.

1. The legality of autonomous driving. Given the efficiency of the United States, congressional debates could go on for three years without a clear result, especially given the various interests at play and differing state laws. Additionally, Europe is known for being tough on large corporations, so Tesla may face regulatory challenges there.

2. The development capabilities of other manufacturers, including China's new energy players, should not be underestimated. Tesla's goal is to sell to other automakers, and they will have their own research and development efforts.

3. Data security. Opening up autonomous driving means sharing road data with the country, which from a national security perspective, may not be acceptable.

Of course, in the short term, reports like this, which are heavy, somewhat mystical but well-founded, can have a significant impact on actively traded stocks. This could be Tesla's best opportunity to reach $300.

Opportunity for Google?

While falling behind in the race with OpenAI's large models, Google is about to release the most powerful human-like model jointly developed by Google Brain and DeepMind, called Gemini

Gemini directly competes with OpenAI's GPT-4 and is the result of the merger of Google's two strongest artificial intelligence teams. In addition to the functions that regular AI chatbots have (summarizing text, writing emails, etc.), Gemini may also support image generation and may see significant improvements in coding capabilities.

From the performance in the secondary market, Google has been stable and strong since the Q2 earnings report. The reasons include, but are not limited to:

1. Expectations for the advertising business could increase further. Recently, Netflix's CFO stated that more users are opting for ad-free plans, which could slow down ad revenue growth. Google's performance has been consistently strong, and after integrating GPT and Gemini in the future, its advertising monetization capabilities may be even stronger.

2. Priorly viewed as bearish in the market (indeed, Bard performed poorly), AI robots have a significant chance of making a comeback. Moreover, Chrome's user base is already substantial, making it easier to cultivate user habits. In addition, Google's cloud services can provide more opportunities.

The Big-Tech Portfolio

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

By backtesting this portfolio with equal weights and quarterly weight adjustments, its performance has far exceeded that of the $SPDR S&P 500 ETF Trust(SPY)$ since 2015, with a total return of 1391.97%, while SPY's return during the same period was 155.77%.

Since the beginning of the year, the total return of this portfolio is 97.1%, with a Sharpe ratio of 6.0, compared to SPY's total return of 18.7% during the same period.