“My job is to find 10 problems for every three that exist,” said Jeffrey Gundlach of DoubleLine Capital.
(MSFT), (GOOGL)
You know what's more complicated than explaining blockchain to your grandmother? Keeping up with OpenAI's corporate structure.
Just when I thought I had a handle on their business model (scribbled on the back of a cocktail napkin during a particularly illuminating earnings call), Sam Altman and his crew decided to reshuffle the deck.
OpenAI just pulled off what I'm calling the "nonprofit boomerang" – tossing aside plans to become fully for-profit and instead embracing a hybrid structure where their nonprofit entity remains in charge. At $300 billion valuation, that's one expensive boomerang!
This new hybrid structure creates a fascinating tension. It’s pretty much like trying to drive a Ferrari while simultaneously pledging to use it primarily for charity work.
For those of us with skin in the AI game (and if you're reading this, I assume you're not still investing exclusively in rotary phone manufacturers), this forces a fundamental question: are we betting on companies that can quickly maximize quarterly returns, or those positioned for sustainable leadership in what might be humanity's most transformative technology since fire? (Okay, maybe the wheel too, but you get my point.)
Let's talk about the elephant (or should I say, window?) in the room: Microsoft (MSFT).
With billions invested in OpenAI, Redmond execs must be having interesting conversations about how this governance shift affects their investment.
Back in 2019, I actually relocated my portfolio to give Microsoft a heftier allocation precisely because of their OpenAI partnership – a decision that paid handsome dividends as their stock climbed.
The market's relatively muted reaction to OpenAI's latest twist suggests investors are taking a "wait and see" approach, which in investor-speak means "panicking quietly while maintaining a neutral facial expression."
My take? Microsoft's diverse portfolio provides insulation from OpenAI governance surprises, while still giving them prime access to cutting-edge AI.
They're essentially wearing a safety harness while rock climbing alongside a partner who might suddenly decide halfway up the cliff that they're now spiritually opposed to carabiners.
This governance seesaw creates ripple effects across the entire AI ecosystem so profound that even my normally tech-oblivious neighbor asked me about it between complaints about my unmowed lawn.
And last week at a dinner party, I watched several tech VCs nearly come to blows over OpenAI's structure.
"It's brilliant camouflage," one argued between bites of overpriced sushi. "They get to look responsible while still chasing unicorn valuations."
Another countered that the structure genuinely changes incentives, potentially slowing development but creating more sustainable long-term value than a well-diversified retirement portfolio.
Both perspectives directly influence where smart money flows in the AI sector – and where my own investment dollars are headed next quarter.
The timeline question becomes more critical for your investment approach than deciding when to leave for the airport (hint: earlier than you think).
Short-term players looking 1-2 years out should focus on companies monetizing existing AI capabilities – those turning the current generation of models into revenue streams faster than politicians turn scandals into fundraising opportunities.
For long-haul investors with 5+ year horizons, OpenAI's move suggests prioritizing companies with both substantial R&D investments and ethical frameworks for deployment more robust than my New Year's resolutions.
The days of "move fast and break things" may be yielding to "move thoughtfully and build lasting value" – at least in this corner of the tech universe, which frankly is refreshing in an era where most things are designed to last about as long as unrefrigerated seafood.
OpenAI's conversion to a public benefit corporation rather than remaining an LLC adds another fascinating wrinkle.
I recently shared an elevator with a corporate governance expert who called benefit corporations "the mullets of business structures – profit in the front, social responsibility in the back." But watching a $300 billion company embrace this model suggests we're witnessing a genuine shift.
For our portfolio, this means evaluating not just quarterly performance but the alignment between profit motives and ethical considerations.
My investment approach has evolved accordingly. I've built an AI portfolio resembling a well-balanced meal rather than just loading up on sugar.
The protein comes from established tech giants with significant AI investments – your Microsofts and Alphabets (GOOGL).
The complex carbs are specialized AI implementers actually generating revenue today, like Salesforce (CRM) and Nvidia (NVDA).
The vegetables (yes, eat your vegetables) are emerging innovators with strong ethical frameworks like C3.ai (AI), which has built responsible principles into its foundation, or LivePerson (LPSN) with its ethical approach to customer service AI.
And for dessert? A small slice of speculative moonshots like BigBear.ai (BBAI) or SoundHound AI (SOUN) because sometimes revolutionary returns come from unexpected places.
Last month, this philosophy led me to trim a position in a high-flying but ethically questionable AI startup that had tripled my initial investment.
Was walking away from potential gains painful? Like giving up the last slice of pizza.
But in the AI sector, today's ethical shortcuts often become tomorrow's regulatory nightmares or reputational disasters – a lesson I learned the hard way after an ill-advised investment in a facial recognition company that shall remain nameless (though their legal team certainly knows my name).
Mad Hedge Technology Letter
May 9, 2025
Fiat Lux
Featured Trade:
(THE FIGHT FOR AI SUPREMACY)
(GOOGL), (AAPL)
We are getting to the part of the cycle where tech could potentially be cannibalizing each other.
The fact is that the overall pie is not growing fast enough, and competition is.
Search is a massive market, and participants are all vying for ad dollars.
Once what was thought of as a duopoly is no longer that and Facebook and Google will need to fight that much harder to command the growth rates they were accustomed to.
The US consumer is gradually becoming weaker and allocating a bigger part of their budget to essentials.
An Apple testimony by one of its executives has now revealed that search operations on Google via Apple's Safari browser decreased for the first time in April 2025, attributing this decline to users increasingly opting for AI-powered tools instead of traditional search engines.
Google’s parent stock Alphabet, was crushed in trading.
This time of development is really damaging for Google, and it puts doubt on their ability to negotiate higher ad rates moving forward.
The executive blamed AI platforms like OpenAI, Perplexity, and Anthropic as alternatives that are becoming more appealing to consumers, signaling a future where AI could play a central role in search functionalities on Apple devices.
The implications of Cue's testimony are profound, especially considering that Apple reportedly receives over $20 billion annually from Google to maintain its status as the default search engine on iPhones and iPads. This lucrative arrangement lies at the heart of the antitrust case brought by the U.S. Department of Justice against Google, raising questions about the competitive landscape of the search engine market.
The market believes that AI will disrupt Google's dominance in search. The decline in stock prices reflects investor anxiety about whether AI could significantly erode Google's market share, which currently stands at approximately 90% of the global search engine market, including a commanding 94% on mobile devices and 79% on desktops.
As the landscape of search technology evolves, the competition between traditional search engines like Google and emerging AI platforms will likely intensify.
As the antitrust case against Google unfolds, the stakes are high not only for the company but also for the broader tech ecosystem. The outcome could have lasting implications for how search engines operate and how consumers access information in the digital age.
Technology is barreling straight into a hairy situation in which the winner will take all in the AI race.
There won’t be enough profits to share around, and the company with the best product will win with consumers.
Search is just one place where AI is being fought.
I do believe we will see the fall of big tech companies, and the ones who are one-trick ponies will run the risk of becoming irrelevant quickly.
Is it fair?
No, but the market will tell us how good each tech companies does AI.
This is bad news for both Apple and Google, and it is not news that these two are lagging far behind in the AI arms race.
However, I do believe this is a good short-term buy-the-dip moment for Google for a trade.
With us moving deeper into 2025, investors are chomping at the bit to hear the commentary about AI developments.
There will be some big disappointments, are those companies unable to recover will be a sell the rallies type of stock.
“Any product that needs a manual to work is broken.” – Said CEO of Twitter Elon Musk
(AMERICAN TRADE POLICY HANDS AUSTRALIAN BEEF A TOP SLOT)
May 9, 2025
Hello everyone
The Fed left rates unchanged, as expected, citing inflation concerns and continued uncertainty across the economic landscape.
Australia scores big thanks to Trump
President Trump has just gifted Australia near monopoly status in China’s almost $5 billion premium beef market.
Chinese officials have effectively blocked American beef from entering the country, leaving Australia with the top of the market almost to itself. America sold $2.4 billion (US$1.6 billion) to China in 2024.
America’s missteps with China have put Australia in a very fortunate position, where they should benefit handsomely.
Beef is Australia’s biggest agricultural export to China, worth more than the wine and lobster trade combined. Australian farmers sold $2.2 billion worth of beef to China in 2024, making it Australia’s second biggest beef market after America (which bought $4.4 billion worth of Australian beef to the chagrin of the Trump administration).
With billions of premium beef sales potentially up for grabs, a herd of Australian beef exporters will fly into Shanghai within a fortnight for SIAL China, an important trade event for the food and beverage industry in the world’s second biggest economy.
Since securing a second term as Prime Minister of Australia last weekend, Anthony Albanese has been enjoying praise from Beijing, and Chinese media highlighting the prospects of future trade ties between Australia and China.
Australian wine exporters, along with exporters of cotton, timber, wheat, and lobsters, are also experiencing a role reversal, as these former victims of Beijing’s trade restrictions now find themselves benefiting from Chinese trade imposts on America and Canada.
Favourable bilateral politics – and a desire to find non-American supplies – also helped Australian gas giant Woodside recently snare a 15-year-long supply agreement with a Chinese state-owned giant.
Beijing’s first strike on the US herd came in March, as Chinese officials refused to renew trading licenses for American beef companies. Even if it lands at the port, they are turning it away.
In April, Mr Xi responded to Mr Trump’s 145 per cent tariffs on China with a 125 per cent tariff imposed on American imports. Even if American beef could get into China, those tariffs would decimate the trade.
Kevin Wang, A Beijing based sales manager of high-end beef importer Tenderplus, said “People are looking for Australian partners to import beef. Some have already flown to Australia to talk with trade partners.”
Menus have already been reprinted at premium restaurants around China. Even the most patriotically American places are looking increasingly Australian.
Americans digesting tariffs on Australian beef.
The Shanghai and Beijing branches of New York institution Wolfgang’s Steakhouse are now selling Australian porterhouse, striploin, rib eye, and filet mignon as its supplies of American beef are two weeks away from extinction.
In the centre of Beijing, we find Morton’s, which is owned by Houston billionaire Tilman Fertitta. Here, the restaurant has swapped its house red from an American drop to a Clare Valley Shiraz, a very good match with its Australian porterhouse from Rangers Valley in NSW’s northern tablelands.
China’s biggest sources of beef are Brazil and Argentina, but they sell at the cheaper end of the market.
Restrictions on other high-end sellers in Japan and Canada effectively shut them out of China’s market.
The results of Beijing’s “safeguards” investigation, due in the second half of the year, could see it increase tariffs on foreign suppliers. High-volume, low-cost sellers look to be most at risk, but it could shrink the size of China’s market considerably – including the premium end.
Australian Shadow Trade Minister, Kevin Hogan, looks beyond trade negotiations and considers the macro landscape.
Watch this space.
Move over MicroStrategy, Strive is offering a new product
A new NASDAQ listed firm – Strive - has just announced its merger with Asset Entities, creating the first publicly traded Bitcoin treasury company.
The firm will oversee $2 billion of assets.
The agreement will allow the merged company to carry out aggressive purchases of Bitcoin through new financial products, like BlackRock and Greyscale.
Strive Enterprises was co-founded in 2022 by Vivek Ramaswamy and Anson Frericks. The new firm will be led by Strive CEO Matt Cole, who previously managed a $70 billion fixed income portfolio.
Several strategies will be available under Cole’s leadership.
One strategy will be a Bitcoin for equity tax-free exchange, which will be structured under Section 351 of the IRS tax code.
Strive Enterprises will own 94.2% of the newly combined public company, while shareholders of Asset Entities will receive a 5.8% share.
It appears Strive is executing a similar playbook to Strategy and Metaplanet in terms of centralizing ownership, utilizing equity and debt financing to accumulate Bitcoin, and treating it as a treasury reserve asset.
Although it could also dilute its equity, it is taking risks to maximize long-term value by aggressively deploying capital in BTC. However, Strive’s section 351 tax-free exchange of Bitcoins for equity is different from both Metaplanet and Strategy. If successful, Strive could persuade Bitcoin holders to trade their Bitcoin for equity without having to pay a tax.
This article is only an item of interest, not a recommendation to buy any products marketed by Strive.
Cheers
Jacquie
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
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
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
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