Mad Hedge Technology Alerts!
In prior years, big social media companies were the class of the tech industry.
It’s not so much like that today but they still have highly profitable models and a lot of juice left in the tank.
I do believe big social media companies will still do well in 2024 because they have proved themselves through the test of time.
However, now that media has fragmented, smaller social media stocks that are tailored to a certain niche are due to overperform in 2024.
This is happening at a time when cord-cutting is accelerating and the lowering of interest rates next year could serve as a catalyst to higher share prices for the likes of Snap and Pinterest.
Then there is the wider trend of potential beneficiaries from a recovery in the digital advertising market.
As marketing clients look to redeploy their dollars following post-pandemic cutbacks, stocks such as Snap and Pinterest could be next in line for a payday.
For Pinterest, I have been highly bullish on them ever since Elliot Management scooped them up and revamped management.
Snap is in the sweet spot catering to a growing demographic who are seeing their earning power rise as they come of age.
Still, the industry faces risks given an uncertain economic backdrop.
I anticipate higher ad sales of online retail platforms that will jump 20% versus last year. Moreover, online ad growth should accelerate meaningfully in 2024.
I believe the media will obtain about $17 billion in political ads next year when many U.S. campaigns will be in full swing.
It’s hard not to see social media stocks winning out in a presidential election year in one of the most polarizing contests in recent memory.
More and more consumers spend most of their days online and most of those funds likely will be spent on digital platforms where these consumers station eyeballs.
And worldwide, ad spending is expected to jump 8.2% next year, a sharp acceleration from the 4.4% gain anticipated this year.
Marketers spend money on platforms in direct proportion to the number of users that they attract.
Digital platforms, which include search, social, commerce, retail media, and digital video platforms, will account for about 64% of all advertising in 2023.
Digital platform-focused companies are expected to collectively grow 11%, led in large part by retail media, which will account for about $42 billion in advertising revenue in 2023, up 20% over 2022.
Traditional television, both national and local, will experience declines over the year.
The setup is boding nicely for these smaller social media stocks and that is not to say stocks like Meta and Google will perform poorly.
Realistically, the Nasdaq can’t move higher without the Magnificent 7, but based on pure percentage gains, I do believe Snap and Pinterest have a good chance to beat out the heavyweights next year.
There is a high likelihood that tech will lead this next bull market because they are the largest winner from the lowering of interest rates.
Not only will tech IPOs be back in vogue, but the prototypical tech zombie firms that burn cash will pop up again showing that investors reserve large amounts of capital for potential tech growth companies.
Part of the capital allocation will be to Snap and Pins which are solid companies with a great brand image.
I believe 2024 will be a year where investors pile into these 2 stocks much like how investors piled into Uber in 2023.
Mad Hedge Technology Letter
December 8, 2023
Fiat Lux
Featured Trade:
(SOUTH ASIA PARTNERS)
(NVDA), (AAPL)
Big developments happening in the tech sector abroad and investors should take notice.
The CEO of technology giant Nvidia Jensen Huang said he believes that Malaysia will become a potential hub for artificial intelligence “manufacturing.”
This is big news for South Asia and this is the first stage of Silicon Valley looking to harness the power of South Asia to progress its narrative and developmental footprint.
It’s essential they find some low-cost countries to partner with because it’s not always sensible to manufacture in the United States because of cost restrictions.
Take AI, the need for large-scale servers is intense, and opting for a better cost-efficient place is a good strategy.
Huang mentioned that Malaysian conglomerate YTL Corp. could play an important role in setting up AI data centers.
Malaysia “is a very important hub for SEA’s computing infrastructure. It requires access to land, facilities, power, which is extraordinarily important,” he said. “I think YTL could play a great role in that.”
Malaysia’s expertise in packaging, assembly, and other aspects of manufacturing makes it well-suited for the manufacturing of artificial intelligence.
Nvidia is working with 80 AI startups in the country.
In Malaysia, the data center infrastructure layer of computing, which is one of the most important parts of the AI and the cloud, is very successful.
Southeast Asia will likely be a hub for AI computing because countries need their own AI data centers to refine and transform data into valuable information. Old data processing centers were designed to hold data files and run applications. AI requires the use of each place's culture, language, values, literature, and common sense.
The prospects of Southeast Asia are highly positive as it attempts to turn into an important technology hub. It’s already experienced in packaging, assembly, and battery manufacturing. It has rounded out to perform well throughout the entire technological supply chain.
The smart move here is to decouple from China as geopolitics threaten to spin out of control.
Also, consider that Chinese demographics are one of the grimmest in the world.
China simply isn’t producing young workers anymore and wages have skyrocketed.
It doesn’t make sense to build factories there anymore.
India will have a big role to play in the advancement of Silicon Valley production in the next generation.
Apple will shift a quarter of its iPhone production to India in the next two to three years.
The decision will translate into more than 50 million iPhones a year being built in India.
The iPhone production in India lagged seriously behind China but that changed with the iPhone 14, which began manufacturing in the same month as in China.
In 2023, Apple built more iPhone 15 units in India than any other model and it marked the first time it managed to release a model made in India on launch day.
Foxconn is currently building a plant in Karnataka state that should open for business in April 2024.
As Silicon Valley marches on, they will have an interest in partnering in other parts of the world to fine-tune their business models.
Expect a heavy dose of South Asia for the next generation because that is where the low-hanging fruit is.
India will come into its own in the next few years, and Malaysia certainly is a good value player.
The most important takeaway is the accretive effect they will have on American technology companies.
In the short term, I believe NVDA is a better stock player than Apple, although Apple is a great long-term investment.
