Mad Hedge Technology Alerts!
Dr. Doom Nouriel Roubini needs to lay off the fear porn – I’m not taking the bait this time. Sorry Roubs!
Roubini is sounding the alarm bells on humanoid robots, but I think it is more of a case of fear-mongering than anything else.
After all, like most economists, Roubini isn’t a trader, he is an academic who sits behind the scenes and goes after those juicy sound bites that the media need to publish stories.
He wasn’t taking profits in great tech trades like when I captured profits on Netflix just the other day.
His idea goes like this…
He thinks the big breakthrough right now is the evolution of humanoid robots that essentially follow individual workers on the factory floor, on a construction site, even a chef in a restaurant, or a housekeeper. It's terrifying, but it's happening in the next literally year or two.
For this level of transformation in one year, I believe the percentage chance of this coming to fruition is less than 2%.
My understanding of the humanoids is that the software will take 10 years to figure out the nuances.
Roubini — known as Dr. Doom for his bleak economic forecasts — said human jobs will be lost to humanoids.
Instead, an LLM (large language model) learns about everything in the world, the entire internet follows your job or my job or anybody else's job in a few months, then learns everything that a construction worker, factory worker, or any other service worker can do, and then can replace them. And I think that it's going to be a revolution — it's going to affect blue-collar jobs like we've never, ever seen before.
The humanoid robot market could reach $7 trillion by 2050, Citi research recently found. Those robots — such as Tesla's (TSLA) Optimus — may be able to do everything from clean your home to fold your laundry. The robots could create job loss as routine tasks get automated.
There is a higher likelihood that this humanoid from Tesla will be used as staging to convince investors to buy more tech stocks.
Tech companies have a huge problem on their hands and there hasn’t been a lot of great brain activity to find a real solution.
Venture capitalists have been lamenting the lack of real innovation in tech products like Mark Andreesen and Peter Thiel.
The humanoid is here to get investors to buy more tech stocks in companies that aren’t innovating.
Tech companies are cutting staff to beat earnings and that isn’t a sign for top notch growth.
Investors need to separate the fluff from reality.
The reality is that big tech companies still make enormous amounts of profit, but have failed miserably in finding something new.
Apple CEO Tim Cook is still figuring out what to do next after selling iPhones to Chinese people.
The humanoid operating on AI software might give tech stocks an extra 6-month cushion before investors pull the rug.
Enjoy the bull market while it lasts. I executed a bullish trade in Dell which is part of the AI story.
AI stocks will go higher and humanoid stocks will too – not because they will make money, but because investors still buy the hype.
Mad Hedge Technology Letter
April 28, 2025
Fiat Lux
Featured Trade:
(GOOGLE GIVES US SOME GOOD NEWS)
(GOOGL), (NVDA)
I am not saying that Google’s (GOOGL) earnings report will save the market; the market isn’t just GOOGL.
However, the company demonstrated there is still some positive performance out there in the tech sector when many out there are having a hard time.
It is clear that we are about to embark on a journey where big tech actively pulls the levers of shareholder returns to get over the low bar of expectations.
It is true that Google has not innovated for years and is still relying on its cash cow called the Google search engine, to drive ad revenue.
At some point, there will be competition as proprietary technology becomes beatable.
Competition is prompting the company and its rivals to spend heavily on infrastructure, research, and talent. While Google benefits from AI startups spending on its cloud and business tools, it’s also racing to present an answer to popular conversational AI chatbots, which consumers are beginning to think of as an alternative to using Google Search.
Google’s beginning of the answer to that threat — its “AI Overviews” and “AI Mode” in search, in which summarized responses are drafted by generative AI and highlighted ahead of Google’s web links — have seen mixed success. Meanwhile, Google’s AI changes to search have decimated traffic to independent websites across the open web.
Google Cloud brought in an operating profit of $2.18 billion, indicating that Google may be nudging out more profits from Cloud even as sales slow.
The cloud unit is so far the clearest indicator of how the AI boom is contributing to the company’s sales, as startups that require more computing power for their work become customers. Though Google Cloud still lags in third place behind Amazon and Microsoft offerings, it’s one of Alphabet’s most important growth areas.
Alphabet’s board authorized a $70 billion share buyback and boosted its dividend by 5%, to 21 cents a share.
With Google’s search business still holding up at a tough time in global business, I must conclude that Google is doing better than expected.
I believe that we will see a consolidated trend in 2025 of big tech dipping into their huge cash reserves to give back returns to shareholders. Google increasing its dividend by 5% is just the beginning, and we expect bigger returns as we move to the latter part of the year.
There is nowhere to invest in innovation right now in technology, which is why management is quick to buy back stock.
If there is some great project out there, management is keeping it close to its vest.
The long-term problem is that when you fire all the Americans with high wages who secured the company’s success to this point, replacing Americans with cost-cutting employees from India won’t deliver the same amount of innovation as the past in a mature environment.
American tech is supposed to set the bar in innovation, and now they are no,t which is why China is rapidly catching up to Americans on all cutting-edge technology, whether it be EVs or chip manufacturing.
Google is no longer a growth company, and that hurts the stock price.
We could experience a bear market rally that could propel Google along, but that depends on the whims of global politics, which Google has no control over.
If you look at the risk/reward scenario, Google is worth a bullish trade after the wild pullback.
