Tariffs and Tech Earnings on Repeat
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WEEKLY UPDATE
Market Turbulence from Tariff Announcements
It almost feels like we could copy and paste last week’s update - another volatile start followed by a gradual recovery. Monday saw steep declines, only for the market to rebound through the week and end slightly higher than the previous Friday. The sell-off was triggered by Trump’s announcement of additional tariffs on imports from Canada, Mexico, and China. As we noted in last week’s newsletter, this move was far from unexpected, given his long-standing threats. Nevertheless, markets reacted with surprise, sending stocks down by a couple of percentage points.
Trade War on Pause
China responded swiftly with its own tariffs on U.S. goods. However, by Tuesday, the planned tariffs on Mexico and Canada were postponed—likely due to both nations conceding to some of Trump’s border control demands. Diplomatic channels were undoubtedly busy, and the situation resembled a form of economic coercion targeting nations deeply reliant on U.S. trade. Regardless of whether this was negotiation, pressure, or something in between, the move had its intended effect. European markets, in particular, breathed a sigh of relief, as investors reassessed the likelihood of a full-blown trade war between the U.S. and Europe.
Mixed Tech Earnings
Once fears of a major trade war subsided, markets stabilized, as investors digested earnings reports from key tech players. The season has been solid so far, signaling budding optimism. Among the biggest winners were Palantir, which surged 23% (more on this later), and Infineon, which climbed 10%.
Expectations were also high for Alphabet, but the company disappointed, dropping around 7% as investors questioned Google’s resilience against emerging AI competitors like Perplexity and ChatGPT.
Later in the week, Amazon’s earnings exceeded analyst expectations in terms of both revenue and profit.
However, concerns about slowing growth, foreign exchange headwinds, and capacity constraints in its AI and cloud infrastructure sent the stock down about 4% in after-hours trading.
BigTech’s massive AI investments continue to divide investors, which is why we have included a broader analysis of their strategies later in this newsletter.
Employment Data: A Slight Disappointment
Friday brought the U.S. employment report, widely regarded as a key market indicator. The focus was on January’s job creation numbers and the overall unemployment rate. Markets expected an increase of 170,000 jobs following December’s strong 256,000 gain, but actual numbers fell short at 143,000. Despite this, markets remained steady, as the unemployment rate ticked down from 4.1% to 4.0%. The takeaway? The U.S. job market remains robust, supporting overall economic momentum.
NDI-FUTURETECH
NDI-FutureTech had another good week relative to the market and the Year-to-date performance is now 12,3%
Once again, the market started the week with a dip, this time due to Trump’s tariff announcements. Uncertainty always triggers sell-offs, and Monday was no exception. Unlike last week, we were only cautious buyers, as trade tariffs are a macroeconomic event where, unlike Deepseek, we do not believe we have an edge. We remain active managers only in thematic areas where we see a clear advantage.
A closer look at Palantir
One of the standout earnings of this week was Palantir, whose earnings reinforced our long-term bullish stance. Palantir’s key advantage lies in ontology, the science of defining entities and relationships within a system. If a computer is to analyze a company, it needs a structured model of that company. Historically, humans have translated real-world events into spreadsheet values, but Palantir’s software allows for direct integration of real-world data into digital twins of enterprises.
领英推荐
This has several major implications:
Will Big Tech’s AI Investments Pay Off?
Big Tech earnings have left investors puzzled. Take Amazon’s $100 billion AI infrastructure investment, it seems like an obvious long-term win. Amazon’s AI assets can be monetized across AWS, e-commerce, and Prime. So why isn’t the market celebrating? The issue lies in timing. These are long-term investments with delayed returns, meaning investors must trust that growth will accelerate in the future while accepting lower margins today.
The stock market tends to favor immediate results over future projections. While some tech investors are comfortable with long-term plays, many generalist investors in Google, Meta, Microsoft, and Amazon may struggle with the hefty capital expenditures. The real test will come if these stocks decline while growth remains muted.
The Big Take: The Future is Closer Than Ever
A key observation from recent market discussions is that investors are increasingly focused on the future rather than the present. This shift suggests a broader paradigm change, one where we recognize that the next five years will look vastly different from today. In 2020, such a notion was less pronounced.
For investors, this means re-evaluating portfolios to ensure they are positioned for a future that is arriving faster than anticipated.
THE WEEK AHEAD
Inflation in Focus
The coming week will revolve around inflation data. The key event is Wednesday’s U.S. CPI report. Last month’s U.S. inflation rate was 2.9%, though core inflation remained above 3%.
A crucial question is whether Trump’s tariffs will drive inflation higher, leading to further rate hikes. While it may still be early in his term for significant inflationary effects, any surprise increase could send markets lower.
On Friday, we’ll also get U.S. retail sales data, offering insight into consumer sentiment.
While most major tech companies have reported, we’re looking forward to AppLovin from the portfolio next week.
Stay ahead of the curve, and see you next week!