To The Moon

Big-Tech’s Performance Big-tech’s earning week doesn’t seem nice to investors, though their earnings mostly beats, inline with strong Q3 US GDP. The positive news has been overshadowed by uncertainty, particularly with concerns that the economy may worsen in the first half of next year due to a high-interest-rate environment, led by high-yield US bonds. As of close of trading on October 26th, big-techs plunged a lot during past five trading days. The smallest decline was seen in $Microsoft(MSFT)$ , which had a gain after its financial report, with a drop of 1.04%, followed by $NVIDIA Corp(NVDA)$ which did not release its financial report, with a decline of 4.22%, and $Apple(AAPL)$ with a decline of 4.88%. $Tesla Motors(TSLA)$ fell 6.52%, $Amazon.com(AMZN)$ fell 6.88%, $Meta Platforms, Inc.(META)$ fell 7.82%, and $Alphabet(GOOGL)$ and $Alphabet(GOOG)$ fell by 11.23%. Big-Tech’s Top Newsfeed - Apple will hold an unexpected product launch event on October 30th, with the market expecting the focus to be on the MacBook Pro equipped with the M3 series processor. - Apple has raised the price of its TV+ service from $6.99 to $9.99 per month. - According to Counterpoint, iPhone sales in the Chinese market in Q3 fell by 10% year-on-year, with a market share of 14.2%. - The US International Trade Commission has ruled that the importation of Apple Watch Series 6-9 into the US market is prohibited due to infringement of $Masimo(MASI)$ blood oxygen detection technology patent. - $Qualcomm(QCOM)$ claims that the performance of its newly released Snapdragon X chip can exceed that of Intel and Apple's similar chips. - Microsoft has acquired 13 game franchise rights through its acquisition of Activision Blizzard, worth more than $1 billion. - The Japan Fair Trade Commission plans to investigate Google for suspected violations of antitrust laws. - Guo Mingchi believes that Apple will spend $4.75 billion next year to purchase 20,000 AI servers, mainly Nvidia HGX H100 8-GPU for training and inference generation AI. - Nvidia has started designing personal computer chips based on $Arm Holdings(ARM)$ architecture for Windows systems. - Amazon expects that the opportunities brought by generative AI will bring "billions of dollars" in revenue to Amazon's AWS cloud services in the coming years. - Amazon plans to hire 250,000 seasonal workers in the United States. - Tesla has raised the price of the Model Y Long Range version. - $LENOVO GROUP(00992)$ is expanding its cooperation with Nvidia in the field of hybrid artificial intelligence solutions. Big-Tech’s Key insights Microsoft, Google, Meta, and Amazon released their financial reports this week. Microsoft's revenue increased by over 10% for the first time in four quarters, with a 27% YoY increase in profits. The highlight was the unexpected 29% surge in Azure cloud revenue. Google's revenue returned to double-digit growth at 11%, with positive developments in advertising, but capital expenditures and operating profit margins fell short of expectations, and cloud revenue growth slowed to 22% YoY. Meta's revenue growth of 23% was double that of Q2, with explosive advertising performance, extreme cost reduction and efficiency improvement leading to a three-year high in profit margins, but Q4 guidance was more conservative. Amazon's revenue remained stable with a YoY increase of 13%, with significant cost reduction and efficiency improvements resulting in profit margins exceeding expectations. However, cloud business growth remained stable but lagged behind MSFT and GOOG. Have big tech companies hit bottom yet? The overall performance of big tech companies in Q3 exceeded expectations, which is consistent with the optimistic economic data for Q3. However, most of them performed poorly after-hours or initially rose then fell. The main reasons include: 1) optimistic expectations for Q3 were already priced in during previous trading; 2) poor expectations for Q4 and the pre-rate cut next year were factored in early as risk factors; 3) liquidity risks caused by rising US bond yields affected market pricing. Currently, the $S&P 500(.SPX)$ 's risk premium is -1.27%, and short positions have made enough profits to cover November's rate hike. The $NASDAQ 100(NDX)$ index will soon approach the 200-day moving average, providing strong support. Therefore, short-term rebound is possible, but long-term trends still depend on clearer economic data and relevant monetary policies. In addition, after November, adjustments to monetary policies in China and Japan may also alleviate the problem of insufficient US bond buyers. Can Apple's product launch offset weak performance expectations? Apple has been hit by a series of misfortunes, with iPhone 15 sales in China falling YoY and Apple Watch being found to infringe on patents. The bearish sentiment in the secondary market is growing, with extremely low expectations for Q4. In response, Apple unexpectedly held a new product launch on October 30th, with the focus on the MacBook Pro equipped with M3 series processors. Apple hopes to alleviate the weak sales of the MacBook with M2 chips. However, we believe that hardware cycles are not entirely dependent on companies but also match economic cycles. Currently, China's weak consumption and expectations of weak US consumption are not friendly to Apple's lackluster new products in recent years. What is more important for Apple now is to catch up with the AI trend. It is reported that Apple will invest $1 billion annually in developing generative AI. It has already established its own large-scale language model framework Ajax and the rumored chatbot Apple GPT, but they have not yet been integrated into its products. If these products are integrated into Siri, Messages, Apple TV, Apple Music, etc., it will open up another opportunity for a new business cycle. The Big-Tech Portfolio "We combine the seven companies with the highest weights into an investment portfolio called the 'TANMAM' portfolio. By equally weighting and adjusting the weights every quarter, the performance of this portfolio since 2015 has far exceeded that of the $SPDR S&P 500 ETF Trust(SPY)$ with a total return of 1218%, compared to SPY's return of 135% during the same period. Since the beginning of this year, the total return of this portfolio is 74%, with a Sharpe ratio of 3.6, while SPY's total return has fallen to 9.08%, with a Sharpe ratio of 0.5%. This week, there was a significant drawdown, with the TANMAM portfolio experiencing a 6% drawdown and a Sharpe ratio of -2.9, while SPY experienced a 3.3% drawdown and a Sharpe ratio of -5.8."