Mad Hedge Technology Alerts!
At this pace, nobody knows what the government policies will look like, and if this doesn’t change, the uncertainty will bleed into lower tech stocks ($COMPQ).
Tech has had a hard short-term run, and the unstable backdrop will lead to investors pausing on big tech stock purchases.
Tech businesses are also reigning in their investment spend, waiting to see what happens.
Microsoft (MSFT) has already made announcements on pausing its AI database build out and that has really chilled momentum in the wider AI trade.
If this electronics exemption announced Friday night is true, it represents an important temporary win for Apple (AAPL) and other China-dependent technology giants.
News reports that producing the iPhone in America could cause the price of a new iPhone to double send shockwaves throughout the investment community.
The federal government might have to pull back their aggressive policies when factoring in surging yield in interest rates and a short-term collapse of the dollar.
The president said these products are simply moving to a different tariff "bucket," telling reporters that a separate rate for semiconductor tariffs will be announced over this week.
Trump added that his goal is to "uncomplicate" things by moving production to the US but that companies will have a say.
Either way, the fact remains that Trump has offered at least a temporary boost to companies with close links to China, and investors are responding by sending stocks of directly impacted companies like Apple and Dell (DELL) higher this morning.
These technology companies' goods are still subject to 20% blanket tariffs on China over fentanyl and likely face legacy sector-specific tariffs from Trump 1.0 and the Biden era, but they are now able to sidestep the lion's share of the 145% rate that is now in place for other goods.
The move is also a significant walk back of Trump's overall tariff plans, with electronics representing the top exports from China to the US.
This weekend's move means the overall effective tariff rate on US imports is now 22% — down from 27% just last week.
The smaller the tech company is, the bigger they are impacted with this whipsawing strategy of threatening all your trading partners.
Larger companies certainly have more options than small businesses to dodge the tariffs due to their worldwide networks and political relationships.
Apple, as one example, also gained attention in recent days for reportedly chartering cargo flights to move as many as 1.5 million iPhones to the United States from India quickly to get ahead of tariffs there.
Tech shares are pricing in nothing positive emerging in the short-term.
Management doesn’t want to get burned by moving in one direction, only to see a product get wiped out due to high costs.
It is hard to change the issue of how the U.S. relocated the supply chain to cheaper foreign countries.
The consensus of higher prices comes after Americans have been dealing with uncontrollable inflation since 2020.
The extra price increase preceding Trump’s tariff crusade has consumers in a hole.
Even compared to 2024, I don’t see where the incremental dollar comes into the tech sector when margins are being squeezed in real time.
At best, we could experience a bear market or choppy sideways price action to reflect a tougher environment for doing tech businesses, whether it is streaming, software, hardware of EVs.
Mad Hedge Technology Letter
April 11, 2025
Fiat Lux
Featured Trade:
(WALMART IS THE NEW TECH UNICORN)
(WMT), (AMZN)
Walmart’s (WMT) shares are up year to date and that is quite an achievement in the stock trading environment we are in.
This company is pretty much an e-commerce company in 2025, and its future is bright.
Walmart isn’t a traditional tech company, but it is turning into the closest competitor to Amazon.com (AMZN).
The company from Arkansas has pivoted hard to the e-commerce side of business pumping billions into developing its infrastructure.
Like many CEOs, management has understood for quite some time that the future is e-commerce and the delivery of products to people’s homes.
Walmart’s management saw this trend early and pounced on it and at one point during this year during the Trump rally, shares of WMT were up 60%.
That meant it was on track to have its best year since 1999 because the market came crashing down to reality. Back then, the retailer was building a bunch of superstores and making a bigger name for itself in Canada and Mexico.
Roughly 60% of Walmart’s business is groceries and consumers have relied on WMT to deliver competitive pricing during a high inflation environment. It’s improved its delivery and curbside pickup services, and that’s made it an attractive option.
WMT quickly has evolved into a digital package of services that is a worthy rival to Amazon.
The website, the app, and the annual membership have brought in new customers.
WMT has attracted the $100,000 per year household which they never did before and they will continue to deliver earnings to WMT as inflation and interest rates stay sky high.
Walmart has created an artificial intelligence (AI) agent for its merchants called Wally to help “get to the root cause of issues related to things like out of stocks or overstocks with more accuracy and speed.”
Walmart expanded its store-fulfilled delivery to reach 93% of U.S. households with same-day delivery, its chief financial officer said.
Sam’s Club ecommerce sales grew 24%, including triple-digit growth in club-fulfilled delivery.
Walmart Inc. announced 16% growth in its global online sales for its fiscal Q4 2025, which ended Jan. 31, 2025.
That’s about four times faster than the retailer’s overall Q4 revenue growth rate. Meanwhile, although Walmart didn’t specify its year-over-year ecommerce growth for the full 12-month period, Walmart said it grew revenue in that time frame.
Walmart’s fiscal 2025 marked the 10th consecutive year in which it grew its total annual revenue. Moreover, it has only had one year-over-year annual decrease — in 2016 — since at least its fiscal 2009.
Although, the recent short-term price action has been brutal to say the least, once all the bad news is priced into the stock, I do see the stock rallying to the upside.
Meanwhile, WMT becomes more and more like a tech company and pushes competitors like Amazon to raise its level of services to customers.
In the crush of higher inflation, WMT has delivered value to a higher income bracket in the United States and I believe that will continue as we me further into 2025 and 2026.
In the next few years, we will also see $200,000 per year salaried consumers grace the aisles and digital services of WMT to the benefits of the underlying stock.
