Weekly Recap | April - W2
Inflation, U.S. Deficit, Trade Deals, Google's CAPEX, Waymo & Uber, Nvidia H20 & Weekly Planning.
If you guys want an explanation on what is happening in the stock & bonds market at the moment & what could happen in the next weeks, I made a specific write up for it on Friday.
You’ll have everything you need, so I’ll ignore that part today & talk about the rest.
Macro.
Inflation.
We had the inflation numbers this week & once again, it is slightly coming down, with core CPI at 2.4% compared to expectations of 2.5%. The data is getting better, we can’t deny it. But it doesn’t really matter as everything is fucked up with the trade & market war. The macro data is kinda pointless in those conditions. By now, my concern is about the potential & inevitable recession - to my opinion.
U.S. Deficit.
There also are a lot of talks about the U.S. deficit which grew to $1.3T this quarter, which seems to surprise lots of people but should not. We talked about fiscal dominance & its consequences many times. Notably here, months ago.
“The reason is simple: Interest rates. As the Fed raises them to fight inflation, it raises the interest the U.S. government pays on its own debt. The government is already indebted for paying for things with money it didn't have so raising its interest payments requires more money, which it still doesn't have. Its only way not to default on its debt is to emit more of it to pay for it…
The vicious cycle starts here as emitting more debt requires money creation - also called inflation, which the FED is trying to fight by raising interest rates… Which forces the government to create more debt to pay for its actual debt, etc, etc…
This is the single most important concept to understand in the actual U.S. economy.”
A big part of the deficit growth came from the interest on debt. As the government emits more debt, it has more interest to pay so the snowball snowballs & the deficit keeps growing. This will force the government to emit even more debt to pay for it, etc, etc.. Deficit will grow as long as the 10Y doesn’t crash.
Which makes me come back to the write up I shared on Friday: The U.S. government has to cave with their tariffs policy & China because they need the 10Y to go down. It isn’t a caprice, it is a need for them not to default. And for that to happen, they very probably need a recession.
I know I say the same things regularly, but it’s important.
The Rest of The World.
We do not have any certainties yet, but while the market war keeps going on between the U.S and China, the rest of the world is moving, not really in the direction that many expected though…
We have a lot of noise of deals between China & other countries - Europe with de escalation of actual tariffs, Australia to buy LNG, a bit of everything with Spain & more… The White House is also talking about the phone ringing non stop to make deals but nothing was shared so far…
Point being, the world keeps moving & as the U.S. went all in on everyone, everyone is working on finding alternatives. This certainly wasn’t expected by the U.S. government but we're also at the beginning, so nothing is settled yet.
Watched Stocks and Portfolio.
Sadly, nothing much happens business wise as most companies are focused on how tariffs & the actual political instability is going to affect them - or already is.
So we're kinda bored from a fundamental investing point of view.
Nvidia H20.
One important piece of new though is the U.S. administration coming back on its wish to restrict exportations of the H20 GPUs. To put context, those chips are tailored to respect the tech export control from the government - which forbids Nvidia to sell their most powerful hardware to China.
The demand for those chips exploded those last months as Alibaba, Tencent & other Chinese tech company realised that they couldn’t find better alternatives. We're talking about $17B of revenues for Nvidia at the moment, growing rapidly.
A big deal.
Google's CapEx.
More AI news as Google confirmed its $75B CapEx expectation for the year during its cloud keynotes this week, with most of that amount to be spent in infrastructures.
"We are making big investments now & for the future. In 2025, we plan to invest $75B in total CapEx, this investment will be directed towards our servers and data center, which include our AI compute & cloud business."
Always more, which justifies my reasons to accumulate Nvidia, TSM & Arista Network.
Uber & Waymo.
Since the launch half a year ago of Waymo in Austin, exclusively on Uber, around 20% of all rides taken on the app were with Waymo’s autonomous vehicles.
This confirms first that users aren’t that afraid of AVs, which could have been an issue short term. And that it is important to use Uber’s network effect, confirming to me that the app will certainly take the lion’s share when it comes to customer relations. Something Tesla should look at as I am not sure Waymo would have had such great results by itself.
Weekly Planning.
I still have a lot in my back, starting by two investment case I am writting on Duolingo & AST Mobile, and another one ready about stablecoins & their importance for the U.S. treasury market. Will need some time to finish those, but you can expect them during the next months.
Priority will be given to the earning season which started on Friday with banks. Three companies to deal with this week.
Probably a write up for both ASML & TSM on Thursday morning & a detailed review of Netflix on Friday!
Hopefully, fundamentals will be interesting again and we will leave all this macro mess behind soon enough. I sure hope so.
Google straight up telling us what they're investing in this year makes for easy nvda, tsm buys 🤣