To The Moon

Big-Tech’s Performance

This week was not very choppy for the Christmas holiday.The broader U.S. stock market is slowly recovering from last week's selloff and the Dow is on a 5-gain streak.As the vote on the government's debt ceiling was also finalized, there were no bigger surprises.But while we can't talk about risk sentiment at the moment, there's an overall sense that money doesn't want to fold, and is piling up where there's more certainty.

Big tech, many investors chose to stack in the most secure AAPL, the expectation of next month's presidential transition may have to wait until after the new year to perform.

Through the close of trading on Dec. 26, Big Tech as a whole has surged over the past week.

Among them $Apple(AAPL)$ +4.42%, $NVIDIA(NVDA)$ +8.55%, $Microsoft(MSFT)$ +0.16%, $Amazon.com(AMZN)$ +2.96%, $Alphabet(GOOG)$ $Alphabet(GOOGL)$ +3.82%, $Meta Platforms, Inc.(META)$ +1.03%, $Tesla Motors(TSLA)$ +3.18%.

Big-Tech’s Key Strategy

Year of Elon Musk, and Tesla’s 2025

Tesla has been on an upward trajectory since Trump's victory, with many investors seeing the increased correlation of TSLA stock to cryptocurrencies and the stock's outsized volatility as an amplified market narrative.While Tesla's options trading, the most popular options underlier in U.S. equities, continues to play a huge role in this rally, more importantly, ELon Musk's premium to Tesla has increased.

2024 Musk Year in Review

Keywords

Market Cap: With Tesla's market capitalization exceeding $1.3 trillion and SpaceX valued at $350 billion, Elon has once again become the world's richest man, while his political influence has also reached a peak, helping Trump to be elected president.

Politics Elon is deeply involved in politics, playing an important role in the political arena through his companies and personal influence, such as the role of Starlink satellites in the war in Ukraine, funding and supporting Trump's campaign, etc., which is closely tied to geopolitics.

Elon's timeline of events in 2024

January:

• Judge rejects $56 billion pay package, Musk says he'll move Tesla HQ to Texas; Neuralink announces successful computer chip implant in a patient's brain

• Meanwhile, Tesla underperforms, Cybertruck sales don't do well, and profit margins fall.

February.

• SpaceX HQ also moves to Texas; Musk denies selling Starlink services to Russia.

March.

• Elon says he won't support any US presidential candidate, but met with Trump at Mar-a-Lago.

• Elon sues OpenAI over plans to transform itself into a for-profit company

• SpaceX Conducts Third Starship Rocket Test Flight, Successful Until Final Stage Burns Up on Re-Entry

April.

• Reports say Trump and Musk talk a couple times a month.

• Tesla experienced its biggest revenue decline since 2012.And continues to cut prices to counter competition from Chinese EV giant BYD, Musk makes surprise visit to China.

May.

• Neuralink's first implant partially detaches from a patient's brain, ringing microcomputer operations.

• Elon raises $6 billion in funding for his AI startup xAI to compete with OpenAI.

• Trump considers giving Musk White House post, report says.

June.

• Tesla shareholders vote to reinstate Musk's compensation package; SpaceX successfully launches next-generation Starship rocket.

• Tesla recalls most sold Cybertrucks, the company's fourth recall.

July.

• Trump almost suffers an assassination, Musk publicly expresses his full support for Trump and plans to give $45 million a month to Trump's campaign (he will eventually donate about $243 million to Trump).

• A $500 million lawsuit against Twitter for layoffs was dismissed.

• Elon attends U.S. Congress as a guest of Israeli Prime Minister Benjamin Netanyahu.

August

• Elon posts on social media that "civil war is inevitable" after violent riots erupt in the UK over immigration and race.He called Labor leader Keir Starmer a "two-tiered Keir" and shared inaccurate information about the conflict, prompting Starmer to object strongly.

• Elon had a live conversation with Trump, but there was a technical glitch.

• Neuralink announces the successful implantation of a second computer chip in another patient's brain.

September.

• SpaceX's Polaris Dawn program passenger completes first privately funded spacewalk.

• Elon calls Australian government officials "fascists" over proposed regulation of online disinformation.

October

• Elon tweets that "no one is trying to assassinate Biden/Harris", prompting criticism from the Biden White House.Also not invited to the UK Tech Summit for his comments about violent race riots in the UK and says he should not travel to the UK.

• Elon appeared at a Trump rally and warned that if Trump doesn't win, it will be the "last election" in the United States.

• Tesla's third-quarter vehicle deliveries missed expectations and the company's market value fell.

November.

• Trump Wins Election, Elon Excitedly Tweets, "Morning Sun Again in America."

• Trump announced that Elon and entrepreneur Vivek Ramasuwamy would lead a non-federal government consulting organization tasked with cutting the federal workforce, promising to fire tens of thousands of federal employees.Elon made an unexpected appearance on Trump's conference call with Ukrainian President Zelensky.

• Tesla's market capitalization reaches $1 trillion.

December

• Trump nominates as NASA leader a man close to Musk who has commanded SpaceX missions.

• British politician Nigel Farage and Reform Britain Chancellor of the Exchequer Nick Candy met Musk at Mar-a-Lago to discuss a partnership, sparking speculation that Musk could fund Reform Britain parties.

• The Delaware judge who rejected Elon's pay package ruled the same way again.

• Elon is strongly opposed to a last-minute spending bill proposed by the U.S. Congress and supports Germany's far-right, anti-immigrant party Alternative for Germany, tweeting, "Only AfD can save Germany".

Tesla's expectations for 2025 (based on information from an investor day in early December)

New models and sales growth

• "Model Q": expected to launch in the first half of 2025, with a subsidized price tag of less than $30,000 ($37,499 if the U.S. electric vehicle tax credit is eliminated).

• Other new models: to be released in the second half of 2025, such as a long-wheelbase, three-row Model Y variant for the Chinese market, with all new models built on existing production lines.

• Sales Growth: Management expects 20 - 30% sales growth in 2025, key to achieving growth is maximizing the use of existing capacity, with rapid scale-up expected in the China supply chain, but possible challenges in North America.Mexico plant plans impacted by geopolitics and tariff policy.

Profitability Impact

• Product Launch Impact: 2025 is a product launch year, with higher initial production costs that will impact profitability, partially offset by lower cost products.

• ASP vs. volume: Profitability in 2025 also depends on the average selling price (ASP) vs. the demand curve, with the company aiming to increase volume and total profit and break even on free cash flow, with the automotive business funding future projects.

Robotaxi Operations

• Service Launch: expects to launch Robotaxi service in California and Texas next year using existing vehicles (Model 3 / Y), controlling the "value chain" through an internally developed ride-hailing app.

• Safety and Regulation: Initially, remote operators may be needed to ensure safety, and regulation is the biggest obstacle to large-scale deployment; the company hopes to make adjustments at the federal level through NHTSA rule updates.

• Operating Model: Initially, the company will use its own fleet of vehicles, and then dynamically adjust supply based on demand and traffic patterns.

Mass Production of Cybertruck

• Manufacturing Costs: using a non-traditional manufacturing process, each vehicle will cost approximately $20,000-$30,000 at mass production, with Cybertrucks beginning production in 2026 being the first to be deployed, and are expected to cost less than $30,000 at mass production.

• Supporting Facility Investments: When the Cyber Truck launches in 2026, the company will invest in service, cleaning, and charging equipment, such as the installation of wireless charging facilities, with Texas and California likely to be the first to deploy due to their proximity to production facilities and headquarters.

FSD Progress

• Version update: V13 has been rolled out to early adopters and will be widely rolled out in 2-3 weeks if no issues, with a 3-5x improvement in critical intervention mileage compared to V12.5 (once every ~10,000 miles).

• Targeted release: management still plans to launch an unsupervised version of FSD in Q2-Q3 of next year, synchronized with a robotic cab service, depending on progress, and Tesla can take the risk of rolling it out if human safety thresholds are not exceeded.

• Training compute power increase: FSD performance improvements over the past year have been driven by an increase in training compute power, with GPUs increasing from 20k to ~90k in 10 months, allowing for rapid iterative improvements.

• FSD gybacking: North American piggybacking increased (>20%) after the V12 release, further increased after the 10/10 campaign, and will continue to increase as marketing adjusts to offer more free trials.

Options Observer - Big Tech Options Strategy

This week we focus on: a period of consolidation for NVDA

Nvidia's returns this year are way ahead of the big tech companies, and at this stage the market is starting to shift its focus to look for more AI targets that can be invested in, so NVDA is not gaining enough momentum to the upside, with a fair amount of CALL accumulating in the 140-150 range, and a current PUT/CALL ratio of 0.76%.

At the same time, many investors who have not gotten on board are waiting for a downside opportunity, and PUTs around 130 out-of-the-money are also relatively high.So from the current sideways situation, the next to mid-January the overall volatility may not be much, above 150 as well as below 125 are difficult to touch.

Big-Tech Portfolio

The Magnificent Seven form a portfolio (the "TANMAMG" portfolio) that is equally weighted and reweighted quarterly.

The backtest results are far outperforming $.SPX(.SPX)$ since 2015, with a total return of 2,582.63%, while $SPDR S&P 500 ETF Trust(SPY)$ has returned 248.54% over the same period, for an excess return of2334.09%.

Big Tech had a pullback this week but still had to 69.59% year-to-date return, outperforming the SPY of 28.14% and exceeding the SPY by a new high of 41.45%.

The portfolio's Sharpe Ratio over the past year has rebounded to 2.83, the SPY is 1.91 and the portfolio's Information Ratio is 2.33.