Mad Hedge Technology Letter
March 24, 2025
Fiat Lux
Featured Trade:
(23ANDME GETS DUMPED)
(ME)
Tech is full of ideas swept into the dustbin of history, and 23andMe is just another blatant example of it.
Mr. Market decides the fate of these public companies and nobody else.
Remember they went public when there was more money than common sense.
Interest rates were low and half-baked tech ideas were getting funded left and right.
That was back when things like Hollywood used to be relevant.
Fast forward to today and 23andMe is done and dusted.
They filed for bankruptcy protection in the US to help sell itself.
Many of these mediocre tech companies are falling like dead flies as the thirst to prove profitable has really hit tech as small firms deal with the 1000-pound gorilla in the room.
The company has never flipped a profit.
They could solve the problem of extracting recurring revenue and many customers fled the company after doing their DNA test.
The San Francisco-based company said its chief executive and co-founder Anne Wojcicki was stepping down. She has been pushing for a buyout since April last year but was rebuffed by 23andMe’s board.
The company is still reeling from a huge data breach in 2023 that affected the data of nearly 7 million people, about half of its customers. Revenues have fallen as many of its 15 million customers scramble to delete their DNA data from the company’s archives.
This is a company that can solely exist with some level of trust, and that trust was extinguished in one fell swoops as hackers made out with everything important to the company.
At a time when other tech overlords are headed into the health business, the proverbial goalposts could never be narrower than they are today.
That is bad news for shareholders and bad news for the possibility of a quick turnaround.
Fighting for survival, 23andMe has cut the jobs of 200 people, amounting to 40% of its workforce, and stopped the development of all its therapies in November. Wojcicki’s ambition has been to turn the company into a drug developer.
The CEO will be replaced by its chief financial officer, Joe Selsavage, until a permanent replacement is found but she is staying on the 23andMe board.
It has never been harder to make a profit in Silicon Valley and even though data leaks aren’t a big deal for big tech giants, they are a death sentence for an upstart.
A company like 23andMe never found a way to monetize its business model.
I remember the fad of getting your genes tested to see where you are from, but that spark was met with a big thud.
The truth is, how do you come back from a data leak when that is the sole value of your firm?
The answer is you don’t.
23andMe won’t be able to do much of anything to expand their revenue projections while they are mired in over 30 lawsuits.
Everything they will do will be like walking on a tightrope.
Better to just shut down the company and restart a new one.
It’s hard to believe that in 2021, the company had a stock price of over $320.
Fast forward to today and the stock is trading under $1.
American capitalism is for no faint of heart and 23andMe’s story is a bruising anecdote to what happens when tech firms don’t safeguard their secret sauce.
That sauce has now gone rotten.
Mad Hedge Technology Letter
March 21, 2025
Fiat Lux
Featured Trade:
(TECH BURNS DOWN ON TV)
(TSLA), (ROBO-TAXI)
Mad Hedge Technology Letter
March 21, 2025
Fiat Lux
Featured Trade:
(TECH BURNS DOWN ON TV)
(TSLA), (ROBO-TAXI)
It is a bad look for Tesla (TSLA) when every time you look at a TV and you see Tesla products either getting slyly keyed or engulfed in flames.
That is the type of figure Elon Musk to American society.
Through one lens – he could be considered one of the greatest technologists of all time.
Through another lens – he could be considered a man preventing the flow of Democratic party funding to its NGOs and other party apparatus entities.
Either way – this guy is going to be controversial and his stock has suffered immensely in the short-term.
That being said, one of the richest venture capitalists in the world Peter Thiel who is a remarkable man himself said to never bet against Elon. He might even dislike Musk as well.
Those words are hard to forget as Musk held an impromptu company all-hands meeting on Thursday night, giving an update on the progress of a number of products while also attempting to assuage fears that the CEO is ignoring his post.
Tesla stock has been in free fall since the start of the year, with sales slipping in key regions like Europe and China and even in the US. The changeover to the new Model Y SUV has been seen as a drag on sales.
Overall, Musk maintained that the news was "good" for Tesla and urged employees and others to hold onto their Tesla stock because, in his eyes, the future is bright.
The bet on robo-taxis and autonomous driving is one of the key catalysts for Tesla's future growth, and Musk again laid out his audacious vision.
Key to the company's autonomous vision is the Cybercab robo-taxi, slated for production in 2026. Musk said the factory was already beginning preparations for production using its "unboxed" assembly technique, which would resemble a "high-speed consumer electronics line," rather than an automotive production line.
Speaking of future product production, Musk said Tesla built the "first Optimus at the Optimus production line in Fremont," adding that the humanoid robot would be available for sale in 2026, initially to Tesla employees, after internal company use.
Turning back to the here and now, Musk predicted the Tesla Model Y — the company's most important current product — would once again be the top-selling car in the world following its new update.
To me, it is clear that Musk went the political route because he sensed his robo-taxi and Optimus robot projects were about to be drowned out by bureaucracy.
He probably understands more than anyone that America has become overregulated and it is hard to get stuff done, even if it is a lot more efficient than a place like Europe.
Being in agreement with the current administration has to boost his humanoid robot and robo-taxi project by at least 75% and I wouldn’t be surprised he is attempting to get as much regulatory approval in the next 4 years.
These two projects are what will quadruple the stock in the next 5 or 10 years. He knows that investors know that, and he is doing everything in his power to force the impossible to become possible.
Perhaps Peter Thiel will say that is something Elon Musk would and can achieve.
Mad Hedge Technology Letter
March 19, 2025
Fiat Lux
Featured Trade:
(ONE TO KEEP AN EYE OUT FOR)
(ORCL), (TIKTOK)
The U.S. administration has kicked around the idea of Oracle (ORCL) chairman Larry Ellison as a possible buyer to one of the hottest social media assets TikTok.
Oracle isn’t intending to outright acquire a majority stake, but their involvement shows that Oracle is at the seat with the big boys in tech and that seat carries a great deal of clout today.
Remember that Oracle’s stock was dead as a doornail a few years ago.
But the AI revolution seemingly revived a slumbering stock jolting it to higher highs.
Before that AI boom, Oracle was known as the company with outdated database cloud software and even today, most people don’t know what they even do.
Oh, how do just a few years change everything?
Realistically, Oracle likely doesn’t have the cash to buy into the asset.
The company is spending much of its cash on building new AI data centers and has over $90 billion in debt, partly due to a prior acquisition. Plus, the infrastructure-focused company has little experience running a consumer-oriented app.
The likelier scenario, and the one that’s under consideration with Trump administration officials, would involve Oracle reprising its role in providing a security backstop for US users’ data backstop would guarantee that TikTok’s US operations under new ownership would not contain a back door that China’s government could exploit.
Under a prior arrangement, the cloud giant would have taken a minority ownership stake in TikTok’s global business and provided technology and data storage services for the app to protect US user data.
But the arrangement hit a snag when officials in Washington and Beijing disagreed over whether ByteDance would maintain any involvement in the new TikTok entity.
The second challenge is more technical. Chinese authorities are unlikely to approve a deal that involves selling the new buyer TikTok’s valuable content algorithm, which determines the posts that users see in their feeds.
We are still trying to analyze where the dust will settle because it is not clear to the outside lens.
As it stands, Oracle pouring capital into AI data centers is a strategic move that has benefited the stock price and there is a high chance that shareholders start to bid up the stock after the macro contagion passes.
If somehow Oracle can even finagle a massive contract to managing TikTok’s data, I do believe the stock will be up 12-15% on that news. That development isn’t in the price yet and investors haven’t been sniffing it out yet.
In short, there is a great deal of upside potential in Oracle’s share price and outsiders shouldn’t minimize or water down the possibility for a short-term short squeeze of monumental proportions.
At the very minimum, it is hard to bet against Oracle even if the stock is down YTD by 8% and investors should expect some sort of appreciation when the broader landscape settles down.
“I think it is possible for ordinary people to choose to be extraordinary.” – Said Elon Musk
Mad Hedge Technology Letter
March 17, 2025
Fiat Lux
Featured Trade:
(WE HAVE CROSSED THE RUBICON IN THE SHORT-TERM)
(META), ($COMPQ), (NVDA)
The pain trade for tech stocks just recently was up and that has now been broken.
It has been a tough fall and the Nasdaq ($COMPQ) has gone from up handsomely for the year to down 8%.
The tough point in this was that it was hard to go bearish until we finally crossed the Rubicon.
That moment is here and I think we are in a clear “sell the tech rally” mode for the short-term.
I don’t believe that investors are willing to bid up tech stocks in the short-term considering there is nothing coming down the pipeline from the business models that suggest we are in for some outsized growth.
I do believe that surprises will be to the downsides with many tech companies rerating their stocks negatively.
Then there is the issue that the American consumer is tapped out, and the ex-America rich countries are doing even worse.
For right now, I don’t believe traders should aggressively buy the dips.
My META (META) trade went horribly wrong and that shows that even the best of class got clobbered by the market.
Our bellwether barometer Nvidia (NVDA) is also demonstrably down from its highs of $150 per share and I don’t believe it will reach that level for the rest of the foreseeable future.
Don’t get me wrong, I do believe we can stage a bear market rally just from the very fact that we are in extremely oversold conditions.
It’s also clear that the problem in American politics is now rearing its ugly head and stocks will need to stomach a lot of headline risk in the short-term.
When countries’ politics devolve into 3rd world level type of politics then markets will tell investors to get ready to bear risk and America is no exception.
In response, investors have retreated from risk assets and taken profits on their holdings of the tech giants, which have been the biggest winners, by far, during the bull market in US stocks that began in October 2022.
Over the past decade, investors have been taught time and time again that it pays off handsomely to buy Big Tech stocks when they are down. Even prolonged slumps like the one that sent the Nasdaq 100 down 33% in 2022 proved to be a great buying opportunity as beaten-down stocks like Meta soared to new heights in the two years that followed.
There’s the near-universal belief that tech giants are still the highest quality companies in the world, thanks to their market dominance, immense profitability, and balance sheets loaded with cash. The question is whether these advantages are already baked into the share prices, and may now be under threat if the economy slows and big bets on artificial intelligence don’t pay off as expected.
Since closing at a record high 17 trading sessions ago, the Nasdaq 100 has bounced back on six days. But so far, none of the advances have lasted long.
Instead of catching a falling knife, traders should wait to get confirmation that we have support.
It is easier said than done, but the headline risk has shot to the forefront as the biggest risk to tech stocks when we wake up.
It is also clear that the federal government wants the market to digest as much political risk as possible at the beginning of the new term to smoothen its policy targets for the rest of the 4 years.
Whether it will work is up to debate and I don’t believe tech stocks are able to just shrug off these imminent risks as of yet.
It could be until the summer or fall when tech stocks start to become immune to belligerent politics and until then, we will most likely to see lower lows.
The market has rolled over and we have to shake and bake with it.
