To The Moon

Previously I talked about rare metals and China’s dominance on rare earth metals. Ones that are particularly crucial to manufacturing of core technologies that drive the chip industry or to be used in chips themselves. Now, many have been telling me, if that were really true, why are US tech stocks looking more attractive than ever. This begs the question, is software detached enough from hardware that these so called “Magnificent 7” can run independent of the hardware?

Well, I am not going to directly answer this question of technology stocks now, I will over the next few posts. What I want to talk about is positions in the US in general, and it is linked to tech stocks (and unfortunately AI). As much as I love AI, hearing the word AI everywhere I go to is pretty annoying, all I want to do is be an AI (accredited investor) myself. If you haven’t heard this term before, go google it haha. Jokes aside, I want to focus on the board US market and something I have been tracking for a bit now.

Let’s talk S&P with a market capitalisation of US$ 56 trillion. Up 14% since last year, or 30% over if you bought at April low (reasons why I really hate April). People out there will tell you if you do a start up with less than 10% YOY return just invest in S&P as a better alternative. Well, some even preach, “just buy the index”. Let’s break down what the “index” really is. 33% in Information Technology, 10% in communication. The index that people sing praises about it driven by mainly these tech giants. Nvidia 1200% gain since 2023, Microsoft 100%, Meta 600% in the same period. Let’s put it this way, in simple terms, these tech giants that hold 30% constitution in the index is what is driving your 10% growth. While your other stocks in the index look really much like the slope I cycle down NTU, downward and steep enough that I don’t even need to pedal to get a decent speed. 7/500 companies about 1% of the companies in US hold so much power over the index…

Think I am cherry picking the big 500 companies of US? Let’s turn to NASDAQ. Oh, its 57% Technology stocks weightage as of April 2025. That mind you is without the 5% in telecommunications which is also very much closely tied to tech. Similarly, about 34% gain right now if you bought on low this year. About a 120% gain if you bought the index in 2023. Very, I would say extremely impressive gains for an index.

Now that I think I have made a case on the weightage of tech stocks, so what? Well, if you limit the hardware and software continues to run wild, just how much further can the software run? The big reason why Nvidia is pumped up now is due to their dominance in GPU and their CUDA software that makes it easy to start working on parallel processing. And at the moment, the tech giants are playing a game of circular investing with each other to drive revenue and delaying profitability of AI down the road. It truly is kicking the can down the road…

Just how far can you delay the promises of AI? 1 quarter? 2 quarters? The market has been extremely rewarding and punishing this year, as we have seen, companies are massively rewarded with meagre profits, while those that are performing slightly off mark are trashed. When this house of cards collapse, it could spell more than a 20% correction, a lot worse than what we saw in April. (Yes I really hate April, my birthday present this year was a big fat red loss).

Trade wisely… live luckily…

$S&P 500(.SPX)$ $NASDAQ(.IXIC)$ $Dow Jones(.DJI)$