BigTech Triumph

WEEKLY UPDATE

The week started with a mixed ZEW survey, which is a questionnaire among Germany's largest institutional investors and economists who provide their assessment of Germany's economic situation. In the survey results, we saw initial signs of weakness in the German economy, which will likely be reflected in the IFO survey on Monday, where 9,000 German companies are asked about their view on the economy. IFO is more "hands-on" than ZEW, as it comes more directly from everyday business activities, rather than analysts, investors, and economists.

Inflation figures from the UK landed at the Bank of England's target of 2% compared to the same month last year, but core inflation, and especially service inflation, rose slightly to 3.5% and 5.7%, respectively. This led the Bank of England to drop rate cuts for now and keep rates unchanged.

Overall, there was not much fuel on the key figures front, and instead, the past week was marked by Big Tech, where the largest technology stocks swept the board and collectively rose by 5.5%. This boosted US stocks, which year-to-date have risen by 15.1% and are closing in on Japanese stocks, which have risen by 16.7%. In comparison, the broad Nasdaq index has risen by 19.8% this year. At the other end of the scale, we still have the French CAC40 index, which has only risen by 1.3% this year.

Among Big Tech, it was once again NVIDIA that stood out, and on Wednesday, it could take the throne as the world's most valuable company. NVIDIA has thus risen by a staggering 61,051% over the past 20 years, corresponding to 37.8% annually. By comparison, the S&P500 has risen by 10.2% annually over the same period. The next day, another mega-cap, Microsoft, climbed back to the throne as the world's most valuable company, closely followed by Apple in third place. It is, of course, nice that there have been good returns for investors in the largest tech stocks and thus also for all passive index investors, as these three stocks alone account for 20% of the entire S&P500 index (!). The 10 largest stocks in the US, which are primarily Big Tech, now make up 35% of the S&P500, which is the highest concentration in 50 years.

This large concentration in a few companies will most likely mean both greater fluctuations and lower returns in these stocks in the future. We believe we are approaching a turning point in the markets where active stock selection and stocks outside the mega-caps will be the place for alpha in the future.

NDI-FUTURETECH

NDI FutureTech is up 9% this year.

Small and mediumCap tech has been very weak for some time, and some of our positions are trading near 52-week lows. This gives optimism because our companies are all very good tech companies with solid risk-reward and great potential, benefiting from the digital transformation and the AI revolution.

Time for Reflection

The purpose of this weekly letter is to report relevant news. This week, there hasn't been much important news for us as tech investors, so we will keep it brief.

However, there are plenty of small company-specific news items. One of them is that Apple has dropped plans to create its own Buy-Now-Pay-Later service and is now using Affirm instead. Big Tech, including Apple, suddenly has a good and lucrative investment opportunity in digital infrastructure. It's also fortunate for the world that Big Tech has the financial muscle to do so. Here are some loose examples of how Big Tech becomes important for countries:

Amazon CEO Andy Jassy has met with German Chancellor Olaf Scholz and agreed on an additional 10 billion investment in digital infrastructure in Germany. This is surely welcome in Germany, which has very poor digital infrastructure that needs upgrading.

In an interview about space technology, we learned that SpaceX has been responsible for launching 90% of the satellites sent up this year to date. The remaining 10% are all other companies, as well as the USA, China, Japan, India, and the EU combined!

NVIDIA's CEO Jensen Huang talks about 'Sovereign AI.' By this, he means that nations will become customers and buy his AI factories.

THE COMING WEEK

As mentioned previously, the important German IFO survey (survey among 9,000 companies in Germany) for June is published on Monday. Due to this week's negative surprise in the ZEW survey, there may be a risk of disappointment.

US consumer confidence is published on Tuesday, with estimates at 100.0 versus 102.0 in May, supporting recent indicators on the US economy that show economic activity has softened a bit in June. The health of the US consumer is extremely important for the development of stock markets, particularly within cyclical consumption.

On Wednesday evening, inflation figures from Japan will be released. For the past 35 years, Japan has struggled to CREATE inflation rather than the persistent deflation. Deflation means that consumers would rather wait to buy goods until they are cheaper tomorrow, which can be a dangerous negative spiral. Estimates suggest a slight increase from 1.9% to 2.0% since last May.

On the earnings front, we are closely watching Micron Technology, which will release fresh figures for the second quarter on Wednesday. In the last report, they significantly exceeded market expectations, and the stock has also risen nicely by 63.51% this year. Micron supplies memory chips for various electronic products worldwide. Micron's customers are OEMs, and their buying interest gives Micron a very good insight into where we are in the demand cycle for different industries. We will listen carefully to that.

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