To The Moon

Big-Tech’s Performance

FOMC September meeting’s done, another skip in rate hike was in line with expectations, but the hawks alive. Consensus of delay in rate cut in Q3 2024 has led market risk aversion, resulting in sell-off in U.S. stocks, with tech companies, which have seen significant gains this year, taking the biggest shit.

As of the close on September 21st, all major tech companies have seen declines over the past five trading days.

The smallest decline and the strongest performance came from $Apple(AAPL)$ at -0.04% following its significant drop the previous week. Others include $Meta Platforms, Inc.(META)$ -3.59%, $Alphabet(GOOG)$ at -5.2%, $Tesla Motors(TSLA)$ at -5.76%, $Microsoft(MSFT)$ at -5.78%, $NVIDIA Corp(NVDA)$ at -10.74%, and $Amazon.com(AMZN)$ at -10.86%.

Big-Tech’s Top Newsfeed

Apple iPhone 15 series is now available, with strong pre-sales for the Pro and Pro Max models, surpassing market expectations that were previously adjusted downward.

Employees at Apple's French retail stores plan to strike on the day the new phones are released.

Microsoft's AI Copilot will be rolled out on the Windows system on September 26 and will run on multiple apps and devices.

The UK has established AI regulatory principles and is seeking input from companies like Microsoft, Google, OpenAI, and others.

OpenAI has launched the image AI tool DALL·E 3, currently in research preview, and it will be available to ChatGPT Plus and enterprise customers in October.

The UK Competition and Markets Authority has stated that Microsoft's new deal with $Activision Blizzard(ATVI)$ aves the way for regulatory approval.

There are reports that Google is considering ending its partnership with $Broadcom(AVGO)$ as an AI chip supplier, but Google states that its chip collaboration with Broadcom will not change.

Amazon held its most significant product launch event of the year, enhancing the Alexa voice assistant with generative AI capabilities.

Amazon is hiring an additional 250,000 workers to cope with the holiday sales season and is raising hourly wages.

Goldman Sachs predicts that the price war involving Tesla will continue and has lowered its EPS forecasts for 2023 and 2024.

Erdogan has invited Musk to build a Tesla factory in Turkey, with the $iShares MSCI Turkey ETF(TUR)$

Tesla has made advancements in its integrated casting technology, potentially reducing new car development time to as little as a year and a half.

Tesla is considering building a battery factory in India, in line with Prime Minister Modi's desire for Tesla to establish a presence in India.

WhatsApp, under Meta, denies considering placing ads within the application.

NVIDIA is looking to strengthen its cooperation with Vietnam in the semiconductor and AI fields, possibly considering building a factory in Vietnam.

Big-Tech’s Key insights

Apple’s strong? Why is the Pro Max version of the new Apple product in such short supply?

The pre-orders for the iPhone 15 series in its first week are similar to last year's iPhone 14, maintaining the expected shipment target of approximately 80 million units for the iPhone 15 this year. Previously, Ming-Chi Kuo had indicated that pre-orders were better than market expectations, which had been adjusted downward.

At the same time, it is evident that the demand for the iPhone 15 Pro Max is strong, as expected, and even exceeds that of last year's iPhone 14 Pro Max. On the launch day, scalpers raised prices by 700 yuan, and now orders are not expected to be delivered until mid-November. The waiting time for the iPhone 15 Pro Max is significantly longer than other models, not only because of strong demand but also due to a later production schedule. The biggest supply bottleneck is the LGIT-exclusive supply of the quadruple-reflection prism camera module. To improve the production yield of the module, Apple has urgently increased the specifications of the quadruple-reflection prism lens exclusively supplied by Largan Precision, thereby addressing yield issues caused by assembly tolerances.

In the era of short videos, the demand and use of high-end models may exceed expectations, so Apple may lean towards these more tool-oriented high-end models in the replenishment process.

At the same time, due to increased demand for the Max model, there may be a certain degree of user migration from the smaller Pro models.

Why has the market become conservative about Amazon?

Amazon saw a significant drop of over 10% this week, which is not common in its history. The market believes that the recent substantial increase in employee benefits may have an impact on next quarter's performance. Also, after the CPI was announced, the market's sales expectations for this year's shopping season may not be very strong.

Amazon plans to hire 250,000 seasonal workers for the holiday shopping season, a 66% increase from a year ago, and has also announced wage increases. The company plans to invest $1.3 billion this year to raise compensation for customer fulfillment and transportation employees, increasing the average hourly wage to over $20.50, a more than 50% increase over the past five years.

The recent strikes could have a significant impact. Amazon's truck drivers were involved in the "strike wave," and its "last-mile delivery" is very important in the current logistics competition. The strikes reflect both the increasing consumer pressure brought about by inflation and the company's rising expenses.

But on September 20th, Amazon also announced new products, including Echo speakers, computers, glasses, televisions, and more. The most anticipated feature is the addition of generative AI functionality that enables ChatGPT-like conversation with the Alexa voice assistant, bringing the AI competition into the realm of Internet of Things devices.

In the short term, consumer-level pressures will continue to constrain Amazon investors' sentiment, but its advantages in the cloud market and AI strategy can still provide it with sufficient competitive advantages.

The Big-Tech Portfolio

We have synthesized a portfolio of the seven companies with the highest weight, referred to as the "TANMAM" portfolio.

When 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 1295%, while SPY during the same period yielded 146%.

Since the beginning of the year, the total return of this portfolio is 84.3%, with a Sharpe ratio of 4.9, while SPY during the same period had a total return of 14.7%.

In the past week, a retreat led by large tech companies has caused the standard deviation of the portfolio to rise to 17.6%, while that of the S&P 500 is 11.4%.