Mad Hedge Technology Alerts!
Tech workers are slowly losing their leverage in the job market that has largely been unforgiving to the average tech worker.
Part of that is due to inching closer to the much-awaited recession that everyone has been waiting for so investors can finally take advantage of 0% interest rates again.
The number breakdown shows that around 330,000 tech workers have been fired by 1,600 tech firms.
In the first month of 2023, 167,000 of those cuts occurred representing an acceleration of tech firings lately.
Some of the noteworthy cuts have been 27,000 jobs at Amazon, 12,000 at Google, and 10,000 at Meta.
Sure, the top 10% are untouchable and can work from a nuclear submarine if desired, but the average joe schmoe is living on borrowed time in the tech sector.
News of Google removing free snacks and artisanal brewed coffee from the offices in Mountain View, California struck fear into the hearts of the ultra-pampered tech worker that has never known a staff reduction in their career.
Now many tech workers who gave the middle finger to their middle manager before the lockdowns are now romanticizing how good things were before 2020.
Many tech workers now regret moving on to van life or moving to the beach of Cancun to sell donkey rides to digital nomads.
They want their old job back and specifically, they want their old pay level back.
Empirical evidence suggests that the so-called Great Resignation is now morphing into the Great Regret.
Thousands of workers began quitting their jobs in early 2021 because they didn’t “feel” empowered or appreciated by their boss. Feelings were hurt. Tears were shed.
These workers who felt jilted jumped at the chance to increase their salary during the arbitrary lockdowns because of a tight labor market.
Now, as life returns to normal, many of the perks they signed up for are being rescinded and the cost-of-living crisis is dumping fuel on the bonfire.
A third of office workers said the cost-of-living crisis had changed how they feel about their current job.
Just under a quarter said they were tired of hybrid working, mostly because they have minimal access to the higher ups they need to connect with for specific promotions.
Lack of access equates to lower positions and the obvious knock on of lower pay, lower benefits, and lower team morale.
Many are also moonlighting secretly while working full time jobs which have resulted in a big reduction in efficiency.
The once game changing pay rises now pale in comparison to the rising cost of living.
More than four in five workers admitted to keeping in touch with their former managers, with almost a third stating that this was for the primary purpose of keeping the door open for future job opportunities
Painful rounds of deep lay-offs in the tech sector and warnings of a looming recession appear to have smashed the lingering leverage workers still thought they had to crowbar a nice wage increase.
As much as 330,000 tech layoffs jump out on paper, tech firms need to fire over 1 million employees.
The fat hasn’t been trimmed to the bone yet.
The recession will approach in 2023 and this will be the optimal chance to set the record straight for employers to grab back negotiating leverage from the renegade employees while shrinking down to a leaner operation.
Tech is in great position to weather the recession and will be the first industry to over perform after the recession ends.
Mad Hedge Technology Letter
April 3, 2023
Fiat Lux
Featured Trade:
(BULL CASE FOR NVIDIA)
(NVDA), (AI), (GPU)
Investors looking at taking their investing futures by the scruff of the neck need to look no further than pouring capital into chip stock and a company that will be integral in building generative artificial intelligence technology Nvidia (NVDA).
The stock has muscled itself higher in 2023 doing a double in about 4 months.
Shares were languishing around $140 at the turn of the year, but have gone ballistic on its way to almost $280.
What was the trigger to such a short-term bull run?
Investors have bought into the hype around generative artificial intelligence (AI) applications such as chatbots, which could trigger the need for thousands of graphics processing units (GPUs) - a market that's dominated by the chipmaker.
But the stock's extraordinary rally has made it quite expensive from a valuation perspective.
Sadly, PC shipment forecast is grim as well for 2023. PC shipments this year expect to come in at 260.8 million units, which would be a 10.7% decline over last year.
Nvidia sells graphics cards that go into personal computers and workstations.
The PC market's woeful performance in 2022 - when shipments declined a startling16.5% from 2021 - led to a collapse in Nvidia's gaming and professional visualization segments. Gaming revenue was down 27% in fiscal 2023 to $9 billion as sales of graphics processing units (GPUs) used by gamers dried up. Professional visualization revenue also declined 27% to $1.54 billion.
Nvidia's channel partners were left with excess graphics card inventory on account of weak demand.
Revenue is expected to increase by almost 10% to $29.6 billion, but a gloomy forecast indicates that the restocking of graphics card inventory may not happen soon.
The headwinds in a sizable chunk of Nvidia's businesses, when combined with its rich valuation, strengthen the case against investing in the company.
New catalysts such as generative AI applications could give the data center business a turbocharge effect.
For instance, market research firm TrendForce estimates that ChatGPT may eventually require more than 30,000 GPUs from Nvidia to cater to the huge demand. Given that each Nvidia data center GPU can cost between $10,000 and $15,000, the company could generate substantial revenue from supplying its graphics cards for powering chatbots such as ChatGPT.
Also, as many tech giants are now in a race to develop chatbots, Nvidia could turn out to be the biggest winner related to this industry.
That's because Nvidia leads the data center GPU market, with a share of over 90%. That puts it in pole position to take advantage of the chatbot market, which is expected to register annual growth of 30% over the next five years.
The bottom line is that the AI opportunity could send Nvidia stock higher in the long-term.
They continue to be one of the leading lights of the tech industry intersecting across a number of leading and meaningful sub-sectors.
However, I would wait for a small dip to dollar cost average into shares because the price action has gone a little too fast and too furious in the short-term.
