December 2024 Archive - Mad Hedge Fund Trader

BIG FISH, LITTLE FISH

(MSFT), (NVDA), (UBER), (AMD), (INTC), (QCOM), (TSM), (GOOGL)

I have always been a sucker for the small fish that big sharks circle around, especially when those sharks have names like NVIDIA (NVDA) and Uber (UBER). Believe me, after all these decades swimming in the turbulent waters of the hedge fund world, you learn to pay attention to who sidles up to whom.

So when NVIDIA, which controls roughly 80% of the AI chip market and has sent record revenue zinging through its data center division, and Uber, the swaggering king of ride-sharing with a solid 76% market share, both take a shine to a tiny AI startup, I start sniffing around. And I mean really sniffing around.

It’s like looking at a painting’s back corners instead of just the center – that’s where you find the real brushstrokes and hidden signatures. Remember, NVIDIA and Uber aren’t the sort of outfits that drop their change in a random tip jar.

They’re placing bets on a startup that’s fiddling with real-time edge computing. Think rapid-fire data processing right where the action is, no waiting for some distant server to give a nod.

They’re doing it now, quietly, and if that doesn’t catch your attention, nothing will.

Look, I can almost hear you muttering: “Why care about the kid in the corner when you’ve got NVIDIA’s big top show dominating the AI scene?” Remember, Microsoft (MSFT) purchased a staggering 485,000 of NVIDIA’s Hopper AI chips in 2024 alone.

That’s more than double what other US and Chinese competitors managed to grab. If that doesn’t underline NVIDIA’s chokehold on supply, what does?

Uber, which has pumped over $1 billion since 2015 into making cars steer themselves and optimize logistics, clearly plans for a future when autonomous everything is as common as a traffic jam in Manhattan. Linking up with this under-the-radar AI whiz kid might give Uber more finely tuned algorithms, more efficient fleets, and a fatter bottom line.

Still, there’s a lot of chatter right now. Everyone’s yapping about AI as if it’s the cure for every market hangover.

So let’s sink our teeth into something more satisfying: the numbers. The AI chip market, valued at about $53.7 billion in 2023, is expected to top $71 billion in 2024.

Meanwhile, the global autonomous vehicle market, already a hulking $1,500.3 billion in 2022, is forecast to explode to $13,632.4 billion by 2030. That’s a compound annual growth rate of 32.3%.

The direction is screamingly obvious. Everyone, including NVIDIA and Uber, wants a piece.

Their quiet investment in this tiny startup is a subtle tip-off that something big is percolating just beneath the surface.

I’m no stranger to turning over stones others ignore. Over the years, I’ve watched AMD (AMD) and Intel (INTC) spar behind the scenes.

AMD holds an 11% share of the data center AI chip market—tiny next to NVIDIA, yet not negligible. Intel, with a 22% chunk, tries to catch a train that’s already leaving the station.

Qualcomm (QCOM) works the edges with mobile processors and real-time capabilities but doesn’t challenge NVIDIA’s core dominance. TSMC (TSM) quietly churns out the silicon that keeps everyone’s ambitions alive.

Alphabet (GOOGL) and Microsoft, meanwhile, drive demand through software and R&D, pushing everyone toward more powerful chips. All that said, none of these players truly compare to NVIDIA’s entrenched position.

That’s what makes this move with Uber so telling. No one said the race would be tidy.

Companies bump elbows and occasionally whisper sweet nothings into a promising startup’s ear. NVIDIA wouldn’t bother unless it foresaw future profits.

Uber wouldn’t team up unless it sensed this tech could improve its bottom line.

I’ve seen this before. Early believers in a small disruptor can reap big rewards while skeptics mutter into their coffee.

This could be another one of those moments. For those who like to keep their fingers on the pulse, NVIDIA's position is so dominant that I'd still call it a buy.

AMD is worth picking up too, considering it's stubbornly carving out territory. Intel might need to show us more before getting a seat at the table.

TSMC is the machine that keeps the AI train rolling, making it a buy for anyone with a penchant for stable back-end players. Alphabet and Microsoft, both deeply committed to AI research and application, look like buys as well.

Uber, for all its ambition, stays at hold. I love the swagger, but let's see if it can turn these investments into real profits.

I’ve seen this story before. Early believers in small disruptors can reap big rewards while skeptics mutter into their coffee.

Sometimes the tastiest morsels come from watching which small fish the giants eye for dinner. And this little AI startup? It just might be the plankton that feeds the whales.

December 20, 2024

Tech Letter

Mad Hedge Technology Letter
December 20, 2024
Fiat Lux

Featured Trade:

(BUYER BEWARE)
(TIKTOK)

Buyer Beware

Tech Letter

Sometimes, the best way to become successful at investing in technology stocks is to avoid the black swan or the big disaster.

I hate to say it, but investment risk has never been higher as we migrate our lives to the internet to extract what we need from personal to business affairs.

One question that keeps getting rehashed that I thought I might take time to address is the rise of the TikTok influencer-adviser.

According to a brief Google search, TikTok, known in China as Douyin, is a video-sharing social networking service owned by Chinese company ByteDance.

The social media platform is used to make a variety of short-form videos from genres like dance, comedy, and education that have a duration from three seconds to one minute.

Unfortunately, for serious retail investors lately, content has migrated into high-stakes themes like financial education and financial advising, giving rise to content that is produced by video creators to get a piece of the financial industry.

Naturally, this has brought down the quality of the financial content on the internet to historic lows simply because most of the content is marginal at best.

These promulgators often preach about their status as “trading gurus” and often leverage the hype of digital currencies to claim they are fully invested in “crypto assets” and urge anyone reading to become one of their new “cult followers.”

They are also usually paid to market a “bulletproof” financial app or certain crypto asset to avid followers without properly disclosing that they are being paid for the advertisement.

This behavior is being encouraged by the TikTok algorithms, who order this type of misleading content at the top of searches simply because it gets more hits being a click-bait type of content.

The more outlandish the videos become, gloating about get-rich-quick schemes and 1,000% daily returns, the higher up in the search queries they usually populate when filtered through TikTok algorithms.

These accounts are known as financial “influencers” and post 100s of such videos every month featuring fraudulent success or minimizing the difficulty of profiting through trading and a mix or mash of everything in between.

Even some proclaim to have unlocked the holy grail of trading and “guarantee” 100% returns or your money back.

Another speaking point they like to touch on is how video watchers can “also” afford wealthy lifestyles without having to work, at least in the traditional way.

To dumb down the travails of investing and trading to something easier than pouring a glass of water is a lie.

Many of these novice investors are duped into paying for exorbitant services that are nothing more than promotional buzz offering hyped-up marketing language as specific trading advice.

Unfortunately, US regulators have turned a blind eye to what is happening on this nefarious Chinese platform, and imitators are spawned daily and are certainly incentivized to do so.

While I must admit that regulating this type of behavior on TikTok is incredibly messy, to leave this unchecked will result in massive fraud for the little guy that I try to help.

I will say the main reason for ignoring these TikTok “influencers” is because there is even worse cybercrime taking place out there, and the content these influencers are peddling is straddling the gray areas of the law.

The digital migration during Covid has created a tsunami of fresh cybercrime that is really making the TikTok gurus look like choir boys.

Here are some statistics to stew over, according to Gartner research.

88% of organizations worldwide experienced spear-phishing attempts in 2023.
68% of business leaders feel their cybersecurity risks are increasing in 2023.
On average, only 5% of companies’ folders are properly protected in 2023.
Data breaches exposed 36 billion records in the first half of 2023.
86% of breaches were financially motivated, and 10% were motivated by espionage in 2023.
45% of breaches featured hacking, 17% involved malware, and 22% involved phishing in 2023.

When digital professionals went remote, this also increased the risk of cybercriminals wreaking havoc by isolating their targets.

In the grand scheme of the internet, the TikTok trading “gurus” are small fish to fry when hackers are attempting to topple state of federal governments and Fortune 500 companies, yet that doesn’t make it okay.

The Financial Conduct Authority (FCA) is already looking into trading scams and considering ramping up its capacity to monitor those TikTok creators and others who are flogging trading signals, managed investment services, or other fraudulent services.

But it’s not enough, and readers need to understand the heightened risks of diving feet-first into these TikTok polar vortexes where you just get whipped around unknowingly.

Pre-emptively protect your portfolio by avoiding these TikTok trading gurus is the order of the day.

Stay vigilant and happy trading, and just know there is no holy grail of trading.

It’s hard work earning your crust of bread.

BUYER BEWARE

Tech Alert - (NFLX) December 20, 2024 - EXPIRATION AT MAX PROFIT

Tech Alert

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more

Trade Alert - (META) December 20, 2024 - EXPIRATION AT MAX PROFIT

Tech Alert

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more

Trade Alert - (NVDA) December 20, 2024 - EXPIRATION AT MAX PROFIT

Tech Alert

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more

December 20, 2024

Jacque's Post

(WHAT’S THE MARKET’S NEXT MOVE?)

December 20, 2024

Hello everyone

This will be my final Post for the year. I am taking a well-deserved break and will return in around mid-January. I will keep one eye on the markets, and if I see anything that is worth acting on, I will send out an email. But, for the most part, I will be taking a break from screens and market research.

I want to wish you all a very happy festive season and all the good things for 2025.

The Fed meeting certainly has set the mood for the markets. Investors were disappointed with what Powell said about rate cuts in 2025, that there would probably be fewer than first thought. The markets turned up their nose and smacked every sector – basically throwing a hissy fit because they didn’t get what they wanted. But really, this was a good washout – what you would call a very healthy correction. It had been building for a while. I pointed out in Monday’s Post that the technicals were very bearish, and risk was rising.

So now what?

We can now argue that further downside is possible. You should not be trying to catch a falling knife at this stage. We could see another few weeks of consolidation, sort of like a topping action. Nearby resistance is seen at 5935/45 and 5980/90 (both a 50% retracement from the Dec 6^th high at 6100 and the broken bull t-line from August.)

So, what’s possible: eventual downside to that bull t-line from October 2023 (5595/20) but some scope for a few weeks of consolidating as year-end approaches first.

Strategy: too late to sell now. Instead, sell on a close below 5845 (just below support). Stop should be above 5885.

Long-term outlook: further downside is probable to the base of the rising wedge (5595 or so). Rising wedges are viewed as reversal patterns, with a break/close below the base arguing a downside resolution and more major top (for at least a year). We have had an extremely overbought market after the last few years of sharp gains. So, it is important to understand that the potential now for a downside move is increased.

And one more thing in relation to the overbought market. We could see a sub $5000 S&P500 in 2025. It is possible. I have been saying for quite a while now that we would get a correction in 2025. It just started earlier than I had anticipated.

Strategy/position: We could see one more rally to just above $6100. That is where you want to be selling calls on the SPY and/or buying the SDS. (Make sure you have stops in place.) Also, if you want to scale out of any stocks, that is the time you would do it. The market will rest for several months to a year but will come roaring back eventually.

I have already recommended that you sell calls on the precious metals sector. It is possible all sectors will follow the bearish path because the run-up has been so strong over the last couple of years.

After the 2025 year of strong correction, we are likely to begin another rally on to new highs.

Bottom Line: 2025 could be a volatile year.

Cheers

Jacquie

Trade Alert - (VST) December 20, 2024 - EXPIRATION AT MAX PROFITS

Trade Alert

When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline. Read more