TMTB EOD Wrap

QQQs +6bps shaking off a CPI print which looked hotter on the surface, but underneath the hood supercore continues to decel MoM, temporary items likely were a tailwind this month and shelter component wasn’t bad. Fed expects shifted in a hawkish direction with the market now pricing in just 1 cut this year as yields jumped 8-10bps Despite the QQQs being range bound for the last two months, underneath the surface we think price action has been very constructive for good longs, especially for consumer facing and SMID names that investors want exposure to. Just check out CFLT +25% today on a solid, but non blow out print. Or DASH +4% despite a weaker Q1 guide - stock was already at ATHs going into the print. And of course there’s META - up 18 straight days, SPOT +40%+ YTD, or NFLX doing its thing grinding to new highs. We think part of this is scarcity value coming into play as investors pile into a smaller and smaller set of names that are doing well, as well as investors becoming more discriminate in what they own. 2025 has started out as a year where idiosyncratic is taking a front seat.

China Tech is officially back - sentiment here has done a 180 since the beginning of the year and I hear increasing amounts of conversations of investors wanting to get exposure here. So where to go from here? The sentiment turn has been led by tech and began with Deepseek release and BABA’s release of their new Qwen model accelerated things. We think unlike other false starts, this sentiment turn is here to stay for a couple of reasons: 1) Top down, chinese gov’t is bent on stimulating the economy and early signs its working with an improvement in consumer #s over the past month (smartphones, appliances, etc.). 2) The sentiment has been led by tech names; in particular excitement over AI. The Chinese gov’t and their tech industry have never been on the best terms, but given AI has increasingly become a national security issue, we think interests are now aligned with improvement in AI capabilities the most important thing for both BABA and the country 3) we like the price action over the last several weeks as China has rallied through all the tariff noise.

We like BABA and Tencent as the two large cap names likely to benefit the most. Yes a name like BABA is +40% YTD, but still trades at 10x FCF and chart hasn’t really broken out of the range it has been in for the past 3 years. Stock right at resistance so maybe some digestion needed first, but this feels like could finally break higher at some point:

Here’s a list of other China names with potential AI benefit (h/t MS for idea):