TMTB Weekly: Tech Sentiment/Positioning Round-up
Happy Sunday - good to be back. Hope everyone had a good break. To start the year, we’ll spend most of the time today on sentiment/positioning round-up.
But first, a few quick thoughts:
No big change to our macro view - we continue to expect an upwards trending, but somewhat choppy market. We still think the macro narrative favors the bulls despite Fed shifting slightly more hawkish: growth is fine, market still pricing in 40bps worth of fed cuts in 2025 (other global central banks also easing), China stimulating, de-regulation friendly admin, an AI supercycle still in play. Sentiment around how onerous tariffs will be has turned slightly more positive. Charts look fine and recent semi bid should help support the QQQs. Large cap tech earnings should be good. We think investors will want to take advantage of an easier macro backdrop the first two months of the year before the Fed stops easing and budget resolution/debt ceiling headwinds in March. However, rising yields and uptick in oil are things to watch.
In our last post of the year, we mentioned how in Jan 2017 following Trump’s victory, Trump losers outperformed Trump winners by 7% over the full month.
What this says is the best 20 performing stocks from the election through the EOY in 2016 underperformed the worst 20 performing stocks in that same time period in January 2017 by 7% (3% vs 10%)
So far in the first two days of the year, Trump laggards outperformed Trump winners by ~1.4%.
Let’s see if this trend continues…
MSFT had a blog post out Friday calling out $80B in capex:
In FY 2025, Microsoft is on track to invest approximately $80 billion to build out AI-enabled datacenters to train AI models and deploy AI and cloud-based applications around the world. More than half of this total investment will be in the United States, reflecting our commitment to this country and our confidence in the American economy.
Lot of discussion this weekend on what that $80B number exactly means. Without any more detail, it’s tough to say whether that $80B is gross or cash paid. Gross capex last q was $20B, and $80B would imply flat capex for next 3 quarters, which would obviously not be a great # (guide for Dec q was up q/q so would imply down in q3/q4). But in that $20B gross capex #, $5.1B is fin leases and $14.9B PP&E. Could Gross $20B stay flat and % of PP&E tick up (wouldn’t be as bad)? Were they just talking about PP&E when they said $80B? In that case, it would imply a massive step function up to reach $80B by Jun ‘25 (something like ~$25B vs street at $17B).
What’s our view? We think the simplest answer is usually the right one: MSFT said “on-track” which means they were just likely annualizing the $20B number they already gave out in Q1 and not trying to give out future guidance. “On-track” is very different from “planning to spend.” Sophisticated companies like MSFT use language very specifically (and also usually don’t give out new guidance in a blog post). Non-event in our view.
This week we have CES starting - Jensen has the main keynote on Monday at 9:30pm est.(link) Sell-siders will be hosting meetings with most semi companies (First one - JPM has fireside chat with MRVL CEO a 9am est. and NVDA CFO at 11am est on Tuesday) NVDA Investor Q&A with Jensen at 3:30est on Tuesday. Also have SNAP’s CEO Evan Spiegel at 7:05est on Tuesday. Investors also expecting to hear some sort of ad-tier MAU update at CES from NFLX this week (last was 70M in Nov 24 up from 40M in May). 90M would be a good number. Waymo Co-Co keynote on Wednesday evening (watch UBER/LYFT)
Also get several sell-side software bus tours: JPM, BAML, Jefferies, ISI which should give us some color on how Dec finished up.