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Together with Public Alpha
Happy Sunday, everyone.
This week in the markets was pure mayhem.
Between the DeepSeek drama, Big Tech earnings reports, Fed interest rate meeting, critical economic data, and tariffs causing market panic to end the week… this has been wild!
We wrote a full breakdown of tariff takeaways below that all of you should read closely.
Before we dive into everything, we want to share our prayers with the victims of the Washington D.C. and Philadelphia plane crashes. No matter what’s going on with the businesses we analyze or in the economy — there’s nothing more important than news of this nature.
It’s easy to obsess over achievements and money in this world. This serves as yet another example that those achievements and that money completely pale in comparison to the most important things in your life. Life is very fragile — and we’re striving to do a better job of being thankful for each day.
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President Trump Begins Tariffs on Canada, China, and Mexico
Before we jump into the Portfolio Updates, let’s touch on what all of you need to hear about… THE TARIFFS.
Especially considering this newsletter reaches 250K+ subscribers across both the United States and Canada — let’s dive right in.
Source: Lenin Nolly
President Trump has officially imposed 25% tariffs on imports from Canada and Mexico and a 10% levy on Chinese products, triggering retaliatory measures.
Canada announced 25% counter-tariffs on $106 billion worth of U.S. goods, while Mexico pledged similar action. China vowed to initiate WTO proceedings but has not yet announced counter-tariffs.
Economists predict the tariffs will raise U.S. inflation and cut GDP growth by -1.2%, with potentially severe effects on global supply chains. Trump invoked emergency economic powers to justify the move, citing national security concerns over immigration and drug trafficking.
The tariffs could lead to prolonged trade tensions, with potential impacts on industries like automotive, energy, and consumer goods.
See some of Trump’s comments below:
“The “Tariff Lobby,” headed by the Globalist, and always wrong, Wall Street Journal, is working hard to justify Countries like Canada, Mexico, China, and too many others to name, continue the decades long RIPOFF OF AMERICA, both with regard to TRADE, CRIME, AND POISONOUS DRUGS that are allowed to so freely flow into AMERICA. THOSE DAYS ARE OVER!
The USA has major deficits with Canada, Mexico, and China (and almost all countries!), owes 36 Trillion Dollars, and we’re not going to be the “Stupid Country” any longer. MAKE YOUR PRODUCT IN THE USA AND THERE ARE NO TARIFFS! Why should the United States lose TRILLIONS OF DOLLARS IN SUBSIDIZING OTHER COUNTRIES, and why should these other countries pay a small fraction of the cost of what USA citizens pay for Drugs and Pharmaceuticals, as an example?
THIS WILL BE THE GOLDEN AGE OF AMERICA! WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!). BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID. WE ARE A COUNTRY THAT IS NOW BEING RUN WITH COMMON SENSE — AND THE RESULTS WILL BE SPECTACULAR!!!”
You may have noticed that he talked about “SOME PAIN” above. The most obvious (and immediate) example of this pain is that financial markets are currently bracing for substantial volatility.
The U.S. dollar is rallying and North American currencies are weakening. Crypto has been getting wrecked this weekend and stock market futures are pointing to an UGLY Monday opening bell.
Source: Bloomberg
“Dang… did President Trump just screw over my portfolio? Am I going to lose my job? I knew tariffs were coming, but this is scary! I don’t want a trade war!”
If that’s your sentiment, then your feelings are very valid — but please read our thoughts below…
There isn’t much to update about China yet, so let’s focus mostly on Canada and Mexico.
You must remember that Trump was famous for “The Art of the Deal” and his business tactics long before politics. Nearly 80% of both Canada’s and Mexico’s exports go to the United States. On the other hand, ~17% of U.S. exports go to Canada and ~16% go to Mexico.
Canada and Mexico simply cannot sustain this financially — both are extremely dependent on the United States to keep their economies rolling. Unemployment could double within months, and they will have no choice but to negotiate.
Regardless of your opinions on if America should be doing this or not, Canada and Mexico must make a deal. It’s brutal to “bend the knee” — but the math doesn’t check out well for any other outcome.
When it comes to the public markets — Goldman Sachs has already revealed that they think the panic will fade quickly. Markets tend to overreact.
At a macro scale, the real impact of these tariffs to the United States will likely be overstated in the stock market. GDP could certainly be impacted, inflation could absolutely rise, but Trump knew all of that when he made the moves. He views it as short-term sacrifices for massive, long-term positioning power.
During Trump’s first presidency, he would often counter moves that negatively impacted the stock market with moves that would be viewed as bullish. Right now, tariffs (which were promised) are completely rocking the market. However, we believe that tax cuts and massive deregulations for the largest, cash-printing companies in the world (which were also promised) will come as well.
We have been screaming from the top of our lungs that this year will be filled with VOLATILITY.
The market doesn’t like when change produces uncertainty, and we are guaranteed to see a lot of changes in 2025. However, that doesn’t mean that the end result will be bad for the United States or the public markets.
We don’t have a crystal ball and this situation is very fluid, but if Trump continues to follow through with his campaign promises — then it’s hard to believe that investing in the U.S. stock market or crypto would be a bad decision over the long-term. Building wealth is an extremely bumpy ride, and the volatility is a part of the journey.
If massive earnings reports this week — including Amazon, AMD, Cloudlfare, Disney, Google, Pepsi, PayPal, Spotify, and many more — turn out well, then it may just be a short-term dip.
If they don’t deliver — and CEOs speak negatively about how tariffs will impact their companies’ balance sheets — then we could experience some pretty serious downside.
All we know is that in this moment, the market could very well be overreacting to something that was already promised to be coming.
So what’s next?
We’re not economic experts, but it would make sense if the Canadian tariffs are much “more negotiable” than the Mexican ones. The issues at the southern border have ravaged the United States and led to tens of thousands of deaths due to drugs flowing in from Mexico — so it’s hard to imagine that President Trump would go easy in his dealings with them.
Canada, on the other hand, seems like a bit more of a power grab and frustration that the United States doesn’t get more out of its relationship with its northern neighbor. We’re going to find out a lot about the resilience of the Canadian economy and if Trump truly desires for Canada to be the “51st State.”
A new phase of trade wars has begun, and this is a VERY big deal. We’ll be keeping a close watch on all of this and will continue to ride the volatility.
The United States will likely be able to work through all of this and be stronger than ever (over time). Canada, Mexico, and China could see some serious consequences if “the pill isn’t swallowed” and deals aren’t made.
“We pay hundreds of Billions of Dollars to SUBSIDIZE Canada. Why? There is no reason. We don’t need anything they have. We have unlimited Energy, should make our own Cars, and have more Lumber than we can ever use. Without this massive subsidy, Canada ceases to exist as a viable Country. Harsh but true! Therefore, Canada should become our Cherished 51st State. Much lower taxes, and far better military protection for the people of Canada — AND NO TARIFFS!”
Since exports to the U.S. account for around 20% of their GDP, todays tariffs could plunge both the Canadian and Mexican economies into recession later this year.”
Portfolio Updates (YTD Performance):
This week’s reaction to the DeepSeek news caused everyone’s portfolios to jump around — but I’m grateful I’ve built such a resilient portfolio whose construction doesn’t just include high-octan AI-related companies, but also the dividend-paying giants.
Additionally, we’ve been saying for several months now that 2023 and 2024 were the years of “AI 1.0” defined as “hardware,” whereas 2025 and 2026 will be the years of “AI 2.0” defined as “software applications.”
We saw names like GitLab, Cloudflare, and TempusAI experience healthy double-digit swings to the upside as the market identified them as the biggest benefactors from more efficient AI.
Week in Review Recap (Other Than Tariffs):
Elon believes Optimus will generate $10 trillion in revenue, Meta Platforms is realizing business efficiencies from their AI investments, Microsoft’s AI-specific ARR eclipsed $13B, Apple is losing market share in China, Updates on payment giants like Visa & Mastercard, IBM’s surge back to relevance, the Fed held interest rates steady and Core PCE Inflation showed a decelerating trend.
Key Earnings Announcements:
Elon believes Optimus will generate $10 trillion in revenue, Meta Platforms is realizing business efficiencies from their AI investments, Microsoft’s AI-specific ARR eclipsed $13B, and Apple is losing market share in China.
Tesla (TSLA)
Key Metrics
Revenue: $25.7 billion, an increase of +2% YoY
Operating Income: $1.6 billion, compared to $2.1 billion last year
Profits: $2.3 billion, compared to $7.9 billion last year
Earnings Release Callout
“Q4 was a record quarter for both vehicle deliveries and energy storage deployments. We expect Model Y to once again be the best-selling vehicle, of any kind, globally for the full year 2024, and we have made it even better, with the New Model Y now launched in all markets. In 2024, we made significant investments in infrastructure that will spur the next wave of growth for the company, including vehicle manufacturing capabilities for new models, AI training compute and energy storage manufacturing capacity.”
My Takeaway
Tesla reported rather disappointing results against both the top and bottom lines — with profits down substantially year-over-year. However, management made near-term promises on paid driverless rides starting in Q2 of this year and humanoid production also beginning this year.
Given Elon’s spotty track record of delivering upon promises made in the past, Wall Street isn’t buying the hype. Elon stated during the earnings call that Optimus (Tesla’s humanoid robot) has the opportunity to generate $10 trillion of revenue for the company, as well as the very real chance that Tesla will become a $15 trillion company in market cap ($5,000 per share) over the next decade.
The reality is, until Tesla begins to deliver real revenue and earnings against these claims … Wall Street doesn’t care.
In my opinion, this is a massive opportunity. I continue to be heavily invested into both Tesla and other humanoid robot companies around the USA because if autonomous generalized robotics is achieved in the coming years — this can very well be the largest investment opportunities of our lifetimes.
What has a larger total addressable market than global human labor?
In summary, 2025 is a transition year for the company. Margins should begin to expand during the second half of the year as their factories retool for the new Model Y, and their Semitruck facility building remains ongoing, with production beginning by year-end.
Tesla is a robot company — and I’m long-term bullish on robots, especially the autonomous kind. Holding shares.
Meta Platforms (META)
Key Metrics
Revenue: $48.4 billion, an increase of +21% YoY
Operating Income: $23.4 billion, an increase of +43% YoY
Profits: $20.8 billion, an increase of +49% YoY
Earnings Release Callout
“We expect full year 2025 total expenses to be in the range of $114-119 billion. We expect the single largest driver of expense growth in 2025 to be infrastructure costs, driven by higher operating expenses and depreciation. We expect employee compensation to be the second-largest factor as we add technical talent in the priority areas of infrastructure, monetization, Reality Labs, generative artificial intelligence (AI), as well as regulation and compliance.”
My Takeaway
Meta shares climbed this week as Wall Street was encouraged by the company’s progress with AI — specifically the beginning development of AI agents that can code and problem-solve like “a good mid-level engineer,” according to Mark Zuckerberg. Given higher-end AI engineering capacity additions this year and expected R&D deleverage, potential efficiencies that could float down to the bottom line are expected by year-end.
While the DeepSeek news remains “too soon to conclude” an outcome for a company like Meta and their future capital investments into AI infrastructure, it does point to diminishing long-term capital intensity — a good thing for their free cash flow and therefore stock price.
The company, as shown above, guided to $114-119B in expenses for 2025, above Wall Street’s $111B expectations — with growing infrastructure and technical talent driving that figure higher. It’s clear that AI investment is already delivering business results (Advantage+ Shopping is already at a $20B annual run rate, up +70% YoY), so it makes sense that Meta is continually investing into this technology.
Long Meta.
Microsoft (MSFT)
Key Metrics
Revenue: $69.6 billion, an increase of +12% YoY
Operating Income: $31.6 billion, an increase of +17% YoY
Profits: $24.1 billion, an increase of +10% YoY
Earnings Release Callout
“Already, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year-over-year. This quarter Microsoft Cloud revenue was $40.9 billion, up 21% year-over-year. We remain committed to balancing operational discipline with continued investments in our cloud and AI infrastructure.”
My Takeaway
Microsoft delivered healthy headline results ahead of Wall Street’s expectations with Azure revenues up +31% — in-line with estimates, however, at the lower-end of the company’s +31-32% guidance.
With that being said, the AI story of the Microsoft business remains robust with their AI-specific annual recurring revenue coming in +$1B higher than expectations at $13B. Non-AI Azure revenue was a bit choppy and the culprit seemed to be weird timing between new Q3 and Q4 contracts closing.
Commercial bookings growth will be the focus for bullish investors, having grown +75% YoY — a massive acceleration from last quarter and speaks volume to overall AI strategy being ran over at Microsoft. Operating margins were also ahead of Wall Street’s expectations, sitting at 45.5% — unreal!
Personally, I’m laser-focused on the AI piece of the story. Remember, two years ago this $13B in annual recurring revenue didn’t exist for the company — now it makes up over 5% of their total annual revenue and will continue to climb higher.
Holding shares.
Apple (AAPL)
Key Metrics
Revenue: $124.3 billion, an increase of +4% YoY
Operating Income: $42.6 billion, an increase of +6% YoY
Profits: $36.3 billion, an increase of +7% YoY
Earnings Release Callout
“Today Apple is reporting our best quarter ever, with revenue of $124.3 billion, up 4 percent from a year ago. Our record revenue and strong operating margins drove EPS to a new all-time record with double-digit growth and allowed us to return over $30 billion to shareholders.”
My Takeaway
Shares of Apple traded higher this week not just because of their earnings report, but because the company has yet to invest hundreds of billions into AI infrastructure — of which, could be seen as a mistake assuming DeepSeek is able to prove insane upticks in AI efficiency not yet understood before this week’s drama.
Revenue declined by -11% in China, with more than half of the decline being driven by a reduced channel inventory due to higher-than-expected sales toward the end of the quarter. Management noted they’ve not yet rolled Apple Intelligence out in China, contributing to the share loss.
Management also praised any innovation (DeepSeek) that drives efficiency with AI, and believes their tight integration of silicon and software positions the company well. Tim Cook specifically highlighted during the earnings call that markets with Apple Intelligence turned on materially outperformed those that had it turned off.
Apple is on track to introduce Apple Intelligence in more languages, including simplified Chinese, in April. Their Services business grew by +14%, with Paid Accounts and Paid Subscriptions growing by double-digits again YoY. Their install base has eclipsed 2.35B devices. Mac and iPad were up by +16% and +15% driven by stronger-than-expected upgrade cycles.
Management also shared that iPhone 16 is outperforming the iPhone 15 since launch, and it performed better in markets with Apple Intelligence turned on.
Holding shares.
Investor Events / Global Affairs:
Updates on payment giants like Visa & Mastercard, and IBM’s surge back to relevance.
Payments Giants Visa & Mastercard Shined During Earnings Reports
Source: Getsby
Visa (V) posted better-than-expected first-quarter earnings, driven by a robust holiday shopping season. Deep retail discounts and strong online sales pushed payments volume up +9%, while revenue rose +10% to $9.5 billion. International travel demand also boosted Visa’s performance, with cross-border volume jumping +16%. The company reported an adjusted profit of $2.75 per share, surpassing analyst expectations of $2.66. Despite concerns over high interest rates, consumer spending remains strong, bolstered by wage growth and a resilient labor market.
Visa (V) Stock Performance, 5-Year Chart, Seeking Alpha
Mastercard (MA) also exceeded earnings expectations, reporting an adjusted net income of $3.5 billion, or $3.82 per share, above forecasts of $3.69. Global purchase volume reached $2.11 trillion, in line with projections. Mastercard’s expansion into cybersecurity and data services played a key role, with net revenue up +16% to $7.5 billion. A recent $2.65 billion acquisition of cyber-defense firm Recorded Future highlights its push into fraud prevention. The company also sees growth opportunities in global remittances, cryptocurrency, and expansion in China. Shares rose +4.2% following the report.
Mastercard (MA) Stock Performance, 5-Year Chart, Seeking Alpha
Both Visa and Mastercard continue to benefit from resilient consumer spending and expanding service offerings. I don’t see much stopping them, especially as they become more willing to grow with the crypto world.
“We had a strong start to our fiscal year with $9.5 billion in net revenue, up +10% year over year, and EPS up 14%. Our key business drivers improved from the fourth quarter. In constant dollars, overall payments volume grew +9% year over year. U.S. payments volume grew +7% and international payments volume grew +11%. Cross-border volume, excluding intra-Europe, rose +16% in constant dollars, and processed transactions grew 11% year over year. Our strategy across consumer payments, new flows, and value-added services continues to resonate with our clients and is reflected in our business results.”
“Today, there's over $11 trillion and 1.5 trillion transactions and cash and check around the world. We are capitalizing on the significant secular opportunity by expanding acceptance, reimagining checkout, opening closed-loop systems and enabling new verticals. First up, we're positioned to be the most accepted payments network in the world with around 150 million acceptance locations globally today. Second, we are reimagining checkout.”
IBM Surged From Strong Sales and AI Bookings
IBM shares surged as the company projected strong revenue growth and AI-related bookings. The company expects $13.5 billion in free cash flow for 2025, surpassing Wall Street’s estimate of $12.9 billion. AI consulting and software bookings have exceeded $5 billion since mid-2023, with 80% coming from consulting. IBM's software unit grew 10%, fueled by a 16% increase in Red Hat revenue.
While total sales rose +1% to $17.6 billion, consulting revenue declined for the fourth consecutive quarter as clients shifted spending to AI projects. IBM continues its transformation into a software-driven company, supported by acquisitions like HashiCorp and Apptio.
Internet Business Machines (IBM) Stock Performance, 5-Year Chart, Seeking Alpha
“Three years ago, we laid out a vision for a faster-growing, more-profitable IBM. I’m proud of the work the IBM team has done to meet or exceed our commitments.”
Major Economic Events:
The Fed held interest rates steady and Core PCE Inflation showed a decelerating trend.
FOMC Interest Rate Decision
Source: Jose Luis Magana
Federal Reserve Chair Jerome Powell stated that the Fed is in no rush to cut interest rates, opting to wait for further inflation progress after last year’s reductions. The Fed kept its benchmark rate steady at 4.25%-4.5%, citing strong economic growth and a solid labor market as reasons to hold off on further adjustments. Powell also mentioned that the Fed is monitoring potential economic impacts from President Trump’s policies on tariffs, taxes, and immigration.
Treasury yields initially rose following the Fed’s decision but later retreated during Powell’s press conference. While policymakers expect just two rate cuts in 2025, uncertainty remains around inflation trends and the potential effects of Trump’s trade policies.
Also for the crypto folks — Powell said that “banks are perfectly able to serve crypto customers as long as they understand and can manage the risks.”
“Over the course of our three previous meetings, we lowered our policy rate by a full percentage point from its peak. That recalibration of our policy stance was appropriate in light of the progress on inflation and the rebalancing in the labor market. With our policy stance significantly less restrictive than it had been, and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance.”
Personal Consumption Expenditures (PCE) Index
The Federal Reserve’s preferred inflation gauge, the core PCE price index, rose +0.2% in December and +2.8% from a year earlier, aligning with expectations. Real disposable income barely increased for a second month, pushing the saving rate down to +3.8%, its lowest in two years.
A three-month annualized measure of core PCE showed a slower +2.2% increase, easing concerns about inflation rebounding. Consumer spending remained strong, growing +0.4% in December, partly driven by demand for durable goods. Fed officials remain cautious, wanting more progress toward their 2% inflation target before cutting rates further. Meanwhile, economic strength, especially in the labor market, supports the Fed’s decision to keep rates steady.
“Consumer spending was robust through year-end, accelerating in December on the back of strong demand for durable goods. We suspect consumers are trying to get ahead of price increases they fear could follow from President Donald Trump’s proposed tariffs.”
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