To The Moon

Big-Tech’s Performance

Weekly macro storyline: Recession’s back?

1. Market volatility due to tariffs in effect has been no less than the 2020 period, in addition to the stock market's Monday plunge, identified by Trump as a "short-term sacrifice", the volatility of U.S. debt may be more concerned about the market (elevated risk of recession)?

2. At present, after the first three days of this week's fermentation and "withdrawal", the short-term risk of tariffs has basically been cleared, and how the end of the future, basically in the current market has been Price-in the range, so it will not be too sensitive.But overall, the risk of the medium-term still can not be ignored, even if the final landing is 10% tariffs, the economic growth rate may slow down from Q2, embodied in the corporate earnings report may be in the Q3

3. The Fed will also because of the "reflation" risk and will not quickly cut interest rates, but this week they also held an emergency meeting, the probability is to discuss the lack of liquidity and systemic risk in the event of extreme risk events.

4. Overall, U.S. stocks are still not cheap, with the S&P 500's Forward PE at around 17.8x, although it has pulled back more from the 22x it was at before April, it is still a long way from the average of the past 20 years of around 16x.The safe-haven nature of U.S. debt has been greatly diminished given its current special position in the U.S.-China game.

Big tech companies have also seen valuations fall further after this week's pullback, with different companies facing different tariff impacts, but clearly trading less concentrated than before.

Through the close of trading on April 10, most of the Big Tech companies have rallied over the past week.Among them $Apple(AAPL)$ -6.28%， $NVIDIA(NVDA)$ +5.67%， $Microsoft(MSFT)$ +2.20%， $Amazon.com(AMZN)$ +1.58%， $Alphabet(GOOG)$ +1.39%， $Meta Platforms, Inc.(META)$ +2.75%， $Tesla Motors(TSLA)$ -5.56%。

Big-Tech’s Key Strategy

What is the "extent of injury" to Magnificent Seven?

Uncertainty over Trump's tariff policy has gradually cleared after a week of fermentation, and although there had been a short-term rally fueled by rumors, the long and short forces were largely equal, and market sentiment was generally cautious.

50% of profits come from overseas, well above the S&P 500 average.While most of the big tech companies have stronger pricing power and more stable long-term revenues, the gaming from performance pressures will weigh on investor confidence for some time afterward.

Among them, Apple, Amazon, and Tesla are more vulnerable to changes in global supply chain costs.

iPhones

• Global Supply Chain: The iPhone relies on a complex global supply chain, with components coming from different countries and final assembly mainly in China, where electronics are manufactured with great finesse.Manufacturing in the U.S. would face higher labor costs.Assembly labor costs could be $30 per phone in China, compared to nearly $300 in the US.

• Increased costs due to tariffs: the 256GB iPhone 16 Pro costs about $550 for hardware and $580 for assembly and testing.If you add the 145% tariff, the cost rises to $1,347.50.Ultimately, these increased costs could be passed on to consumers, driving up the price of the iPhone significantly above the current price of the iPhone 16 Pro 256G in the US.

• AAPL's decline this week was also the biggest among the Mag7, reflecting the market's concern about its outlook, and even more so in the statement "Even if the tariffs ultimately land at only 10%, it would still significantly modify AAPL's income statement".

Cloud

• The direct impact is small, because its main business and customers signed long-term contracts, revenue stability; and data centers, if the rising cost of equipment as a reason to postpone the big loss of touching the capital expenditure, investors may not be interpreted as a "negative"!

• Of course, this will also be indirectly affected by the lagging effect of corporate clients to cut spending.

Advertising

The advertising business is more indirectly affected by the overall economy, although META has a relatively higher proportion of e-commerce advertising and may receive a more pronounced impact in the short term, although overseas e-commerce advertisements may be filled in by some of the advertisements for domestic business;

E-commerce

• Facing a triple whammy of cost-supply chain-consumer power.

  • Cost of goods up 15-20%, small parcel duty-free eliminated.

  • Profits may be reduced by up to $10 billion, accounting for up to nearly 17% of 2024 profits.

  • High risk of consumer downgrade, customers may spend $2,600-3,900 more per year.

  • Although AMZN can supply chain renegotiation, commodity structure optimization, but it is difficult to fundamentally resolve.

Chips

• NVDA's pricing power is high and most of its products are manufactured in the U.S. Only the source of its supply chain may receive some impact.

• Here we need to consider the practicality of tariffs, as well as the determination of origin.According to the U.S. standard, the source of technology is the biggest focus, containing U.S. technology more than 10% or the design belongs to the U.S. enterprise is regarded as the U.S. origin, and the principle of assembled products has been shifted from the traditional "assembled place of priority" to the double penetration of the "source of materials + technology control".Management.IC products are often manufactured in multiple countries, and under U.S. standards, most of NVDA's raw materials are likely to be recognized as "U.S. products" and therefore exempt.

• In addition, TSMC's U.S. facilities help diversify risk, but the short-term benefits are limited.

Big Tech Options Strategy

This week we focus on: Massive Sell PUT by DUAN

The VIX spiked to 60 on April 7, not quite the heights of March '20, although it was a new high for several months.Yet the decline was not insignificant, suggesting that some degree of short sentiment was also Price-in advance. from the big swing of the following two days, the VIX, while likely to remain high above 30, will limit the direction of decay in the direction of the change in stock prices, which will provide more opportunities for sellers of options trades.

For example, Duan Yongping in April 7, 2025 through the sale of put options (Sell Put) bottoming U.S. technology stocks, although a lot of the proportion are or close to the parity options (ATM), but as the seller of the bottoming of the day of the big drop, the core strategy for the "Panic Premium Harvesting":

1. Operation logic: the use of the market due to tariffs panic caused by the volatility spike, mainly sell Apple (AAPL), Nvidia (NVDA), TSMC (TSM), Google (GOOG) and other technology giants of the put options, the premium income of $ 21 million, if it is not exercised, then the net gain, if the exercise of the right to preset a low price (eg, Apple 175 U.S. dollars, Nvidia 94 U.S. dollars) to take over, to achieve the "down discount".Realize the asymmetric income of "buying at a discount if it goes down and collecting rent for nothing if it goes up".

2. Subject layout: focus on AI computing power (Nvidia, $Taiwan Semiconductor Manufacturing(TSM)$ ) and cash flow king (Apple, Google), combining short-term game (April expiry contract) and long-term margin of safety (2026 expiry contract), at the same time buy Nvidia shares to form the "option + bottom position" double insurance, showing the depth of recognition of the core asset moat.

Although this requires hundreds of millions of dollars level of operation, the ordinary investor is difficult to copy, but the current stage as a seller, the essence of the "option to carve a margin of safety", in fact, is also in the volatility of the market to reduce the cost of their own positions, this strategy can be used as a reference.

Big Tech Portfolio

The Magnificent Seven form a portfolio (the "TANMAMG" portfolio) that is equally weighted and reweighted quarterly.The backtesting results are far outperforming the $S&P 500(.SPX)$ since 2015, with a total return of 2,157.49%, while the $SPDR S&P 500 ETF Trust(SPY)$ returned 229.67% over the same period, an excess return of 1,927.82%.

Big tech stocks have pulled back so far this year, returning -11.81%, less than the SPY's -2.95%;

The portfolio's Sharpe Ratio over the past year has retreated to 0.92, the SPY is 0.43 and the portfolio's Information Ratio is 1.04.