Friday Chatter (20250321)

Friday Chatter features anonymous conversations between two or three people discussing industry rumors and providing both forward- and backward-looking insights into the market.

Recap

J: We're back after two weeks. Let's discuss the market crash over the past two weeks.

I: What? A market crash? It’s more like identifying a short‐term bottom, I think.

J: I suspect the market might again be delayed for April 2nd. So, I think…

I: Think about it—April 2nd could go either way. It might spark a rally or trigger another downturn. It’s a 50-50 situation. My point is that if the policy becomes clear, businesses can finally analyze and plan, which would remove uncertainty and potentially fuel a rally. On the other hand, if we see more flip-flops and poor communication, it could lead to further declines. Essentially, this is a pure variance event with no inherent directional bias.

J: So, do you believe the tariff will be fully carried out?

I: It depends on who you ask. Some are optimistic, others aren’t. Overall, I’d say that both net and risk exposures are extremely low—everyone I know is fully hedged and holding plenty of cash right now.

J: Right, and I believe that by April 2nd everyone—including importers and exporters—will be better prepared than they were at the beginning of February. Just as we discussed, I think the short-term and long-term impacts of tariffs aren’t as black and white as everyone assumes. We no longer have “tariff experts”; our expertise now lies in importing, exporting, and international marketing. Thus, the real impact of tariffs on global market adjustments isn’t entirely clear. We’ve already had two months to prepare for this adjustment, so the initial short-term impact of tariffs won’t be as terrifying as people imagine.

J: That’s why I believe it’s clear—they’re definitely adding tariffs, targeting the top 15 trading partners of the United States. The aim is to balance trade and boost government revenue, paving the way for tax cuts later this year.

I: Exactly—but once the policy details are released, businesses can start planning. Right now, everyone’s in freeze mode, which isn’t ideal. That’s why I believe that April 2nd could trigger a rally just as easily as it could spark another downturn.

J: I think the Fed provided quite dovish guidance on rates for this year.

I: Well, yeah, but honestly, I wouldn’t call it particularly dovish. It’s more of a calm tone—especially compared to the chaos on the government side—not exactly eager to act. One friend put it best: if any government official or federal agency doesn’t give a damn about what Trump says, it is the Fed.

J: Well, the Federal Reserve isn’t a government agency, but its chair’s term ends in May 2026, and his successor will likely be very loyal to the current administration. I don’t think market factored that in yet. The current administration seems determined to undermine the US dollar’s global reserve status—and even the Federal Reserve itself—because even with a chairman appointed by them, the Fed isn’t closely aligned with the executive branch. Clearly, they want to exert more influence over the Fed and the dollar’s reserve status. It’s fascinating to watch. So, who do you think will be the new Fed Chairman?

I: I’m not going that far yet. I wouldn’t claim with certainty that they want to abolish the dollar’s reserve status. Look, my take on Scott Bessent is that he’s taken a free fall over the past three months, but he’s not that stupid. He talks about using stablecoins to bolster the US dollar’s reserve status—that’s just nonsense. And I think they already have someone in mind: Kevin Warsh, the former Morgan Stanley banker who married into the Estée Lauder family. He’s emerging as the front-runner for Fed Chairman. He’s been a consistent critic of previous Fed policies—a real hawk aligned with both Scott Bessent and this administration. I’m curious to see how it plays out—after all, if you’re a hawkish leader, you’d typically strengthen the dollar, but Scott seems to want it to weaken. We’ll just have to wait and see.

J: I think the policy aims to bring manufacturing back to the US—essentially turning the US into a pure export country like China. But then ask yourself: if you export goods, you end up importing other currencies. Do you really want China holding a pile of US dollars to buy US treasuries? And do we want to hold Chinese Yuan bonds and treasuries? It doesn’t add up. That’s why there’s talk of returning to gold as the reserve currency for international trade. And if that fails, Bitcoin is on the table as an option. But again…

I: Oh my God, don’t even get me started on Bitcoin. The whole concept is utterly ridiculous to anyone with even a basic understanding of finance. You seriously want to trade the US dollar’s reserve status for something you have zero control over?

J: The US and China are the two main governmental Bitcoin holders, with China holding roughly 1% more Bitcoin than the US. Both governments can sell their Bitcoin without restrictions. That makes Bitcoin interesting—if your biggest adversary also holds a significant amount, international trade and markets could get messy. Bitcoin—like Tether—has proven its longevity over the past decade despite the scams that often plague financial products. Longevity is the ultimate credential in finance (remember, Madoff operated for 30 years). In a way, this administration is also trying to prove itself. I’m cautiously optimistic about Bitcoin’s potential as a reserve currency if the current administration truly commits, despite their other priorities.

GTC

J: Alright, let’s change the subject to GTC. One interesting point is that GTC is taking place in the Bay Area—and so is GDC—even though the mainstream media completely overlooks GDC. Instead, they focus on NVIDIA’s GTC, which, although small a few years ago, now seems to overshadow everything. And Jensen—he did an impressive job in that two-hour presentation. For an internal presentation, it was excellent: no teleprompter needed, and he even called out all the names of external partners. I’m most impressed by that. While this works well internally at NVIDIA, as a public presentation it invites comparisons with legendary salesmanship—think Jobs or even the more colorful Steve Ballmer. Nowadays, presentations by Elon, Lisa Su, Zuckerberg, and Jensen just don’t capture that same spark, and it seems many founders have lost that essential sales skill.

I: It’s not so much about skill—it’s about charm.

J: Of course, Jensen isn’t like most founders. He’s been in this game for 20—no, three decades now. I even said 10 years ago that he’s the best CEO, not just because he’s the founder and leader of the most valuable company in the US, but also because, think about it: when you compare him to Zuckerberg—would Zuck wakes up every day: “I’m going to make tons of ads and targeting vulnerable people and making money from those people, by letting them making wrong purchase choices, that's make me so pumped”—and Bezos: “I’m going to reply 100 emails with emojis every morning so that those employees get on their toes, and I feel so empowered and pumped to work”—Jensen, on the other hand, wakes up every day ready to create the best, most powerful computer chips. He’s truly living his dream. NVIDIA is far ahead of the competition and, evidently, making a lot of money, which clearly makes him very happy.

I: Well, the market seems to disagree.

J: I think they’re in a tough spot. We’ve mentioned that the beating won’t stop until the moral improves. And he even provided a roadmap—initially two years’ worth—which is…

I: Never heard of that, okay? Really, never heard of it.

J: It’s extremely rare.

I: He didn’t give a two-year roadmap—he gave a four-year roadmap.

J: There are many things he might not even know how to execute properly, but the roadmap is undeniably long. Usually, at conferences, they outline a two-year plan, so it’s rare to hear a CEO publicly discuss a four-year roadmap. That’s intriguing. I don’t think the market will buy it—the sell-off might continue until expectations are met quarter by quarter or until a major event occurs (such as a relaxation of export restrictions to China). I do believe Nvidia chips will face tariffs between 10% and 25% by April 2nd, meaning everyone will pay a bit more for gaming cards or GB200 series products. How this will affect data centers—say, whether Lambda Lab might set up more in Japan rather than the US—remains to be seen. But the government has been clear: expect 10% to 25% tariffs on chips, especially on imports from Taiwan.

I: Yes, but on the other hand, it seems there’s some give and take—they’re not fully enforcing the chip diffusion rule.

J: Right. So, two forces are at work here. On the plus side, I actually believe export controls on China will be relaxed.

I: Why? What’s the evidence?

J: No evidence.

I: Then why? I’m trying to figure out whether this is an educated guess or just wishful thinking—because hope doesn’t drive investments; facts do.

J: Well, this administration is vindictive. The export control on NVIDIA chips is a Biden-era policy, and basically, anything from that era—good or bad—will be rolled back before any new measures are introduced. That’s the angle I’m playing. I don’t think people like Marc Anderson or any VCs really have a say here; it’s all about the vindictive nature of the current administration and Biden’s policies.

I: Who—almost—are the policy advisors? Who drafted these policies, and who are the technical advisors behind them?

J: I’m not sure—I’d guess it’s the usual big-name suspects.

I: Interesting. It would be huge if they ended up not implementing the chip AI diffusion rule—or even if they relaxed export controls on China.

J: Yeah, and as we discussed, the only worry about this administration is whether they might be racist—but their actions suggest they’re not. Take the TikTok rules, for example: they’re basically saying that TikTok just needs to implement the proposed Project Texas from two years ago without having to sell to Oracle. They only need to maintain a stake and let an intermediary handle part of the data center. That’s Project Texas in a nutshell. If they’re so lenient with TikTok—a Chinese-owned company—it essentially signals a rollback of Biden-era policies. That’s a positive sign for me; it shows they aren’t prejudiced against Chinese or Asian businessmen.

I: But don’t you realize your view is highly non-consensus? Every sell-side analyst I speak with is pricing an 80% chance that export controls will tighten—not loosen.

J: And that’s not the only issue. I think next year ASML will also export EUV machines to China.

I: Just because the US has pissed off Europeans as much as China?

J: Not only that—these restrictions don’t make sense because China will soon have its own EUV machines. Besides, the US lacks the appetite to buy ASML’s most profitable EUV systems. Intel is struggling and isn’t purchasing new equipment anytime soon, although TSMC is planning some for US expansion.

I: They’re in the midst of a capex contraction.

J: Exactly. ASML will need to find alternative buyers for its equipment, and China is an obvious candidate—it’s expected to have domestic EUV production by the end of next year. They need to sell while they can, and if ASML starts selling early next year, it might at least slow China’s progress with EUV. That’s good for ASML and helps maintain its technical edge over China.

I: I’m not as optimistic. I think the US could simply say, “If you sell, we’ll impose sanctions and kick you out of our payment system.”

J: I don’t think it’s a big deal for the US government. Their focus is on domestic manufacturing—not on controlling every business transaction. US government actions are pretty straightforward these days; if they’re unhappy, they tend to use direct force (as seen with the Houthis in Lebanon recently). It’s highly unlikely that ASML’s actions would trigger such a response since it won’t affect US manufacturing, which is their main concern. And if anything, remember—the Chinese are exceptionally good at bribery. That’s another positive from this perspective. If the voting base isn’t fully aware of the nuances of third-party business dealings, they can be placated. That’s how I see the current administration’s actions.

I: Following the same logic, I can see a scenario where the export ban on Nvidia chips to China might be relaxed—or even lifted.

J: Exactly. It’s not going to affect Chinese or American jobs. Moreover, if Nvidia ramps up domestic chip manufacturing—as Jensen promised at GTC—and ends up exporting chips to China, that could even benefit the US. It all comes down to the “vibe” policy making. Now, let’s talk about Tesla.

TSLA

I: Yeah, I don’t even know what to say about this stock—it’s pretty pathetic right now.

J: I think the headline here is that you never see a company go bankrupt solely because of a boycott.

I: Yeah, for sure. Think about it—Toyota was boycotted heavily in China in the early 2000s. I still remember news reports of people trashing cars and even burning them in front of the Japanese embassy. And yet, Toyota ended up selling extremely well in China, capturing a large market share until domestic EVs emerged. Have you ever heard of any company being boycotted to death? I don’t think so.

J: A company only goes bankrupt by mismanaging its finances—spending too much, failing to generate or raise funds, and enduring prolonged negative cash flow until it dries up. It’s never a boycott; it’s all about the numbers. The crux is that Elon can raise money for nearly anything and is a master of financial manipulation who never pays the price for it. It’s unwise to bet against him right now.

I: So you’re saying you’d bet against him? I don’t want to do that—remember SolarCity, Funding Secured, and those Saudi investors lining up, begging Elon for money even before he was connected with the sitting US president. You’re right; Elon never has trouble raising funds or shuffling his assets. That’s the bottom line: Tesla might not go bankrupt, but does that mean the stock will skyrocket?

J: I don’t think so either. It’s a tricky situation. SolarCity never really benefited common shareholders, and if Tesla takes that route, Elon might profit as a trader while common shareholders could get wiped out. Tesla is essentially a meme stock—hard to bet for or against because you never know when sentiment will shift. There are plenty of Tesla fanboys, but their numbers seem to be shrinking; I’ve even seen regular investors divest from Tesla. I doubt any major Tesla breakthrough will occur in the next two years, which is concerning given that this administration will be around for another four years. One thing’s clear: Tesla’s Robotaxi and humanoid projects won’t materialize in two years—maybe five at best. Technology advances rapidly, especially in robotics. Look at companies like Boston Dynamics and Unitree. Unitree might be early winners, but they still haven’t crossed the “early adopter valley”—that deep gap between initial enthusiasts and mainstream acceptance. I’ve owned Unitree’s first product, the Go1 quadruped, and even their G1 Humanoid still shows early hardware quirks. It’s notably shorter—around five feet—making its dynamics simpler than Tesla’s Optimus or Boston Dynamics’ Atlas (which are closer to a normal adult male height of about six feet). While being shorter helps with movement, it also limits utility for factory or household tasks. Unitree still needs to cross that valley. I remain cautiously optimistic about Unitree, especially if Korean investors continue to back them. Never underestimate the Koreans—Samsung may not always have a blockbuster hit, yet they’re still number two globally.

I: Let’s get back to Tesla. I want the stock to work—it was our closest bet to become the next Apple. I don’t own it anymore (except for a few souvenir shares), but I want to see it succeed. In my view, Tesla is a stock that overshoots sentiment on the upside and undershoots on the downside, making it a potentially very profitable trading play. The problem is, I can’t seem to find a catalyst on a reasonable horizon. For example, at last night’s all-hands meeting, Elon showed numbers of 5,000 robots this year and 50,000 next year. The energy was there, but anyone with half a brain knows that the humanoid is still a product searching for a market.

J: I think it’s not that the product isn’t promising—it just takes time to grow the market. Like any product, it needs time, and not just two years, since no product will hit the market in two years. The first sale might occur as early as next year (which is the most optimistic scenario), but then the market will take time to develop. Remember, it took nearly a decade for the first Tesla Roadster to lead to the mass-market success of the Model 3 and Y. Even the iPhone, which was relatively simple, took about four years from launch to runaway success. Unlike Nvidia—where the catalyst is clear (lifting export controls on China could spark a rally)—it’s hard to pinpoint what will drive a Tesla rally. Even if their robotaxi service launches in Austin this year and expands twice as fast as Waymo, covering 20 cities by next year would require an extra 100,000 vehicles, which is just a fraction of Tesla's manufacturing capacity. Still, these business lines remain in an incubation phase, and it’s unclear when they’ll truly take off.

I: Also, it’s going to be a cash drain on their income statement and balance sheet. They’re not just selling cars and booking revenue—they’re stuck with global taxes and hefty SG&A expenses. And if they don’t partner with companies like Uber or Lyft, they’re on their own, which means significant investment.

J: But that could actually be a silver lining. First, Elon is never short on capital—he can always raise money. Second, although these robotaxis are on the balance sheet, they’re also assets that can be “managed” to show higher value. As Elon mentioned, it’s all about FSD. With FSD, these assets might appreciate rather than depreciate, giving him room to inflate their value. Granted, the numbers might not be huge compared to their current holdings of roughly 100,000 vehicles (the leasing program on a similar scale), but consider that the more expensive Model Ys might book 30,000–35,000 in value after two years, while the cheaper Model 2 vehicles might only value about 20,000—numbers they won’t show because Elon insists it doesn’t make sense to sell them. So, the hope is that these vehicles, thanks to FSD, will become appreciating assets and boost the balance sheet.

I: Ultimately, no one invests in Tesla purely based on the numbers—the metrics never really made sense (except maybe briefly between late 2019 and early 2020). It seems that the negative news flow needs to subside, or at least the stock shouldn’t overreact to it, so that it can begin to respond to positive developments. In any case, it’s just something I’m keeping on my watch list.

META & GOOG

J: So, you want to talk about Facebook and Google? What’s the reason?

I: I mean, if you look at the charts shared by both retail and institutional investors, they suggest that U.S. big tech valuations aren’t as outrageous as some claim.

J: Right.

I: Especially after that 20% drop, people started saying that the best picks among the so-called “Meta 7” are Amazon, Meta, and even Google—at least according to some. In my view, however, the consensus leans toward Amazon and Meta (roughly 5 out of 6), while others like Apple seem to be considered as having negligible growth. Tesla—well, we just talked about it—and Nvidia are seen as purely cyclical plays peaking at the top of their cycle. As for Google, I’d put it in the same category; investors are actively buying Amazon, Meta, and Google on the dip. I’ve even heard that after the rally in Chinese ADRs and Hong Kong stocks, some Chinese funds are selling off stocks like Baba and Tencent to reallocate into Meta, Amazon, and Google. Honestly, I’ve mulled over all three, but it’s tough for me to commit to any at this point.

J: Yeah, we’ve talked at length about Amazon’s leadership issues. For Meta, there’s also the question of their direction with the Llama model—nobody really knows what to make of it, which only adds to the stock’s visibility problems, even though it’s been climbing steadily. As for Google, it’s the most intriguing of the three. It’s been a money-printing machine for ages, but now it’s facing the classic innovator’s dilemma. Google set out to organize the world’s information, and now, with large language models emerging as the most competent organizers, they’re trying to catch up to the innovators. Internally, they’re banking on the “Google Gemini” answer feature—when you search, it gives you a direct answer instead of a list of links, which they believe will boost revenue by increasing click-throughs. I’m not sold on that narrative, but that’s the hill they’re willing to die on; they’re not backing down and are determined to win the battle for organizing the world’s information.

I: To wrap up for me, my personal use of Google has probably dropped by about 90%. Nowadays, whenever I have a question, I simply open ChatGPT—whether it’s the mobile app or the web version—and type in my query, because it gives me clear, well-formatted answers. Even when I do use Google out of habit, I rarely click beyond the top “Gemini answer” and ignore the usual 10 blue links. Granted, I’m not your average consumer—I’m more of an early adopter—but if, say, 10% of the population cut their Google usage by 50%, that would roughly translate into a 5% revenue deceleration for them.

J: That drop probably hasn’t shown up on their earnings report yet—and you might never actually see it reflected there. They have plenty of ways to ensure that revenue doesn’t fall, such as emphasizing sponsored links over organic clicks. They manage this carefully because it’s one of the strategies to overcome the innovator’s dilemma. With their “money printing” machine, they’re statistically positioned to be outliers, giving them the flexibility to navigate these challenges.

I: Do you think that information aggregators that heavily depend on Google for lead generation—say, Reddit—will have their traffic secured?

J: No, I don’t think so. I believe you’re not really talking about Reddit but rather about a company like Pinterest that relies heavily on Google for its traffic. Pinterest—earning most of its revenue through that channel—is the most vulnerable. However, companies like Airbnb and Reddit aren’t as dependent.

I: The reason I mentioned Reddit is that they noted this week that a recent change in Google’s algorithm has affected their revenue, so they’re adapting accordingly.

J: An algorithm change is bound to affect the revenues of companies like Stack Overflow, Reddit, Pinterest, and hundreds of others that rely on SEO for traffic—Reddit included.

I: I know. I’m just trying to figure out if this is a structural issue or merely a temporary blip. If it’s just a blip, then it’s not a big deal.

J: I think these companies will have to adapt to a world where SEO isn’t as valuable as it is today. In my view, Reddit isn’t the most vulnerable—Pinterest is. You rarely see people visiting Pinterest directly; they usually get there through Google’s SEO magic. Meanwhile, companies like Airbnb seem to be in a stronger position. Even if they suffer from reduced SEO traffic, their strong brand recognition will cushion the blow. Ultimately, companies that fail are the ones that mismanage their finances. If you can anticipate the drop and manage your finances well, strong brands like Airbnb should fare better than competitors like Vrbo.

I: Well, Booking.com also has strong brand recognition. I get what you’re saying—this is a reconfiguration, and there will be winners and losers. Some companies are better positioned to come out on top, while others aren’t. Understood.