Okay, Computer. Podcast

From 7/10-7/16, $IWM +10.4%, $QQQ -1.3%, Mag7 -3.9% following the favorable CPI print and increased chances for Fed rate cuts. $ASML (AI semiconductor tool provider) was down 13% yesterday. Was this due to them just reiterating yearly guidance despite beating expectations for the quarter or due to comments from both President Biden (on foreign technology sales to China) & former President Trump (on defending Taiwan)? Therefore, the stock action in $TSM today (the Taiwanese AI driven foundry for $NVDA $AMD $AAPL) is important. Right now TSMC’s stock is down ~3% after being down 8% yesterday despite beating expectations for the quarter and raising their yearly guidance. Other hardware centric AI names such as $NVDA, $ARM, $SMCI, $MU and $DELL are also acting poorly after being down 4-8% from 7/10-7/16. Given my continued concerns over a short-term AI spending digestion phase given the small amount of revenue being generated, I continue to look outside of big tech for ideas through year-end. In addition, rhetoric on greater tariffs broadly, and in on China in particular, is only likely to increase leading up to the US presidential election. Therefore, areas outside of big tech & small caps in particular remain my preferred area on a pullback. A greater percentage of Russell 2K revenue is domestic versus the larger names in the S&P500. And even with the most recent rally, the Russell 2K is up ~10% year-to-date as I write this intra-day versus the S&P up ~16%, Nasdaq up ~19% and Magnificent7 up ~36%. Among the larger technology names, $AAPL remains my favorite. Revenues should be able to accelerate and grow double digits year-over-year on an AI driven iPhone upgrade cycle after being up only 1% from March of 2021 to March of 2024. While Apple’s revenue exposure to China (19% of FY23) is certainly a risk for political retaliation, the importance of the Apple supply chain to Chinese employment (~1.5 million people) given the growth issues China is having, mitigates some of that risk. I would also note that Apple had a solid relationship with the prior Trump administration even during prior China tariffs during which they received favorable treatment.