WEEK OF AUGUST 21, 2023
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Important Prices
What’s Moving The Markets?
Putin Recruiting Iran
Russian President Vladimir Putin conversed with Iran’s President about the possibility of Iran joining the BRICS alliance ahead of the summit, suggesting potential expansion, as Iran has been a likely candidate for inclusion in the bloc’s growth efforts.
Oil Transaction In Rupees
In preparation for the upcoming BRICS summit, India has paid its first crude oil installment to the UAE in rupees, reflecting a shift towards local currency settlement instead of the US dollar, a move in line with both nations’ trade agreements.
Apple’s "Batterygate”
Apple is set to pay out $310 million to $500 million in a settlement to around 3 million pre-2018 iPhone users who filed claims against the company in 2020 for the “batterygate” issue, where the tech giant intentionally slowed down older models to encourage upgrades.
1 Billion Crypto Liquidation
The crypto market experienced a severe crash, with Bitcoin and Ethereum hitting lows around $25,100 and $1,550, respectively, causing the aggregate crypto market cap to drop below $1 trillion, leading to over $1 billion worth of trades being liquidated within 30 minutes.
SEC Appeals XRP Decision
The SEC has filed an appeal in the Ripple XRP case, contesting the court ruling that XRP is not a security, aiming to avoid prolonged remedies in litigation, with Ripple Labs to file opposition papers by September 1, followed by the SEC’s reply, and a jury trial is scheduled for Q2 2024.
Europe’s First Bitcoin ETF
Europe’s first spot Bitcoin ETF, The Jacobi FT Wilshere Bitcoin ETF, has been launched, trading under the “BCOIN” ticker, marking a significant moment for the industry on the continent.
S&P Outlook
Bull Case:Heavy amount of supply created in the past week that bulls will need to clear with first supply at 4420.50 then 4453.25. Above this, a heavy daily supply at 4485 which also includes the important 4490 – 4500 pivot that bulls will need to break above and hold.
Bear Case: Bears will want to keep price below 4490 – 4500. Plenty of supply above that will favor bears which starts at 4420.50, then 4453. The main one to watch is 4485 which also contains important 4490 pivot. If price breaks below 4306.25, not much demand until 4256.50.
EARNINGS RELEASE CALENDAR
FOR WEEK OF AUGUST 21st
Expert Insights & Predictions
ChatGPT and LLMs have commoditized the complement of data: software.
The original pairing for this was vastly in favor of software scarcity. As storage/memory became progressively cheaper, we defaulted to saving everything. The world became awash in data. Software is a complement to data because it’s the tool you use to manage data. Data is a useless blob without software, and software has no real use without data.
A data surfeit means it’s commoditized vs software. SaaS investors are aware of what this has meant for software valuations and the giga unicorns created over this last decade. Enter LLMs. LLMs are the lovechild of data and software. And they’re really good at making more software. That means the value of data will increase relative to software. Software will become more plentiful and commoditized. So what’s the complement to them both that gets scarce in this relationship?
The scarcity play so far has been hardware, namely GPUs. Everyone knows about $NVDA. GPUs as a pick-and-shovel play isn’t a new insight. But there are more to GPUs than Nvidia. And there’s more to AI’s needs than GPUs. Semiconductor co’s will collectively benefit as computer needs skyrocket.
What are the critical components of these AI engines that will soon accrue most of the value? Read here for a breakdown on the GPU creation process and supply chain. Side note: just because it’s a good company doesn’t mean it’s a good stock. Ex. Nvidia is obviously an amazing company, but its stock is up substantially and could underperform others in this list over the next 1-5 years.
Here are some curated financial metrics for major semiconductor/GPU co’s as of Aug 17th 2023
The most-critical semiconductor plays on the planet are $TSM and $ASML. The heartbeat of technology emanates for The Netherlands and Taiwan. $AMAT and $LRCX are both semi equipment/packaging co’s I’ve owned before that are reasonably valued and haven’t made major moves yet.
I’d like to own $INTC, especially as a western counterweight to $TSM. $AMD is a Nvidia-style play that hasn’t made a $NVDA-style move. You can see from its margins why it doesn’t get a NVDA valuation. Also, they should probably lever themselves more heading into this secular giga explosion of computers. It has very low LT Debt/Equity.
Broadcom $AVGO caught my eye too. And, unlike AMD, they certainly aren’t afraid of leverage and they seem to competently invest it. They have the highest revenue per employee and the highest gross and operating margins. I prefer high margin co’s because it’s often an indicator of someone who captures value in a supply chain. Low gross margin companies suggest commodity-like products (fungible) that usually have their margins competed away; they’re not price setters, they’re price takers. This is an imperfect heuristic, but it feels right here.
As of now I’m interested in: ASML TSM AMD LRCX MU INTC NVDA AMAT. I want to learn more about AVGO. To me, Samsung is too much of a conglomerate to own as a semiconductor play. The semi business is ~30% of revenue, and I’m not keen on investing in electronics. — @BackTheBunny
Economic Data Calendar
