Mission 2.25 Target

Agent Report: The Briefing Room

It’s been a while, so let me catch you up on the recent madness. Tons of volatility! That’s what we’ve been getting—between the chaos surrounding DeepSeek and the on-again, off-again tariffs, it’s been looking like Y = cos(x) out there when you pull up an index chart.

Unemployment recently came in at 4%, just below expectations, hinting at some underlying economic resilience. But what’s catching my eye is how the Department of Government Efficiencies (DOGE) is shaking things up with layoff packages for government officials. Could this signal a shift in policy strategy, or is it just another headline that gets lost in the noise?

DeepSeek: The AI Disruption That Has Silicon Valley Shook

Back in late January, during the World Economic Forum in Davos, Switzerland, this story landed on my radar. After digging through several sources, I’ve pieced together a picture that highlights just how serious this situation is.

A division of a Chinese hedge fund developed an AI large language model called DeepSeek-R1. Here’s why that’s game-changing:

• Ultra-efficient codebase: They built this model with just $5.57M, compared to the estimated $500M+ spent on training Meta’s Llama-3.1.

• Superior performance: Based on benchmark testing, DeepSeek-R1 outperforms OpenAI, xAI, and Meta AI in key areas, especially in reasoning and fact-checking.

• Built on restricted hardware: It was reportedly trained using NVIDIA H800 GPUs—a lower-tier version designed to comply with U.S. export restrictions meant to keep China “behind” in the AI race.

Then came the plot twist during Davos: DeepSeek allegedly has over 50,000 H100 GPUs, which are top-tier AI chips—half the size of xAI’s massive 100K H100 cluster. This raises serious questions:

• Did they bypass export restrictions? Elon Musk and Alexandr Wang have hinted at potential loopholes or misinterpretations in the numbers.

• Could they have unlocked more power via a software patch? NVIDIA modified its H100 into H800 to comply with regulations, but did DeepSeek find a workaround?

I’m not a hardware expert, so if you have thoughts on this, drop them my way.

Gregory Allen from the Wadwani AI Center brought up an interesting perspective via Jevons Paradox: as something becomes cheaper, demand for it skyrockets. Compute costs have fallen by a 20-trillion-fold since computers were invented—just think about how unthinkable it is to buy a laptop today with less than 8GB of RAM.

So here’s the million-dollar (or trillion-dollar) question:

Does this pop the AI bubble in U.S. equity markets?

Billions have been pumped into MAG 7 names and AI-related infrastructure. If DeepSeek proves that AI breakthroughs don’t require hundreds of billions in CAPEX, does this cause a major correction?

We’ve already seen AI-driven stocks like $NVDA and $SMCI rally to stratospheric valuations—what happens if the market realizes you don’t need to spend 500x the budget to build cutting-edge AI?

Even more interesting, within $GOOGL’s latest earnings report, they explicitly stated that they are increasing CAPEX spending—a clear indication that big tech is still pouring billions into AI infrastructure. But is this just another example of over-engineering and overspending, when DeepSeek has seemingly achieved more with a fraction of the cost?

Is this another overreaction—just like we’ve seen in previous tech cycles—or is this the early warning sign of a broader reckoning in AI valuations?

Volatility: A Stock Picker’s Market

If nothing else, this market volatility has been playing to my advantage. My strategy isn’t about trading indexes; it’s about finding great businesses at discounted levels and riding the narrative shifts.

“Single Stocks collectively saw the largest (Hedge fund) notional net buying in more than 3 years driven by long buys significantly outpacing short sales nearly 10 to 1 - Info Tech was by far the most notionally net bought sector and saw the largest net buying since Dec ’21” — GS Prime Book

That’s exactly what we saw with $TWLO, $AFRM, $PLTR, and others that I’ve covered in past Agent Reports. The plan remains the same: stick to high-conviction plays, filter out the noise, and capitalize on mispriced opportunities.

There’s more to break down in the coming reports, but for now—stay sharp, stay ahead, and let’s keep executing.

Revisiting Past Intel – China’s Sentiment Shift in Motion

Some of my earlier writings highlighted how Western markets underestimated the shifts brewing in China. The assumption that “we must be number one regardless” often clouded a more nuanced view of China’s resilience. Now, the landscape is changing—both structurally and sentimentally.

Recent moves, like Chongqing lifting housing sales restrictions, signal potential recovery from the real estate slump. Meanwhile, China’s countermeasures to new U.S. tariffs, including plans for 10-15% tariffs on American energy and vehicles, reflect the escalating trade chess match. This continuous back-and-forth tariff onslaught is also impacting industries beyond tech—U.S. Steel shares surged 14.3% premarket as Nippon Steel considers a ‘bold’ revision to its buyout approach, while Trump signals plans to raise tariffs on steel imports.

At the same time, China’s fast fashion sector is reportedly shifting some of its manufacturing efforts to Vietnam. In the short term, this may help China sidestep trade restrictions, but in the long run, it could significantly benefit Vietnam by providing deeper exposure to China’s manufacturing expertise. However, this also increases Vietnam’s vulnerability—47% of its capital goods exports already flow to the U.S., and now, its intermediate goods sector will see greater exposure as well.

Market optimism is emerging, too. The Hang Seng Tech Index is hitting highs not seen since October, with Chinese internet stocks surging—Alibaba up 6%, Meituan up 5%, Ali Health over 9%, and more. Deepseek’s momentum is reviving interest in the sector.

China’s strategic gold accumulation continues to align with the yuan’s depreciation, reinforcing the rally toward $3,000/oz. As global investors digest these moves, the fundamental shift in China’s market dynamics is becoming harder to ignore.

Novum Cognitio – Earnings Frenzy & Market Shifts

Earnings season has been absolutely wild. Some of the biggest names—Amazon ($AMZN) and Google ($GOOGL)—known for their relentless cash flow, were surprisingly punished rather than rewarded. Meanwhile, an onslaught of major tech earnings is set to hit this week, including Marriott ($MAR), Shopify ($SHOP), Upstart ($UPST), Robinhood ($HOOD), Applovin ($APP), Datadog ($DDOG), Palo Alto Networks ($PANW), Generac ($GNRC), and many more. It’s shaping up to be a hectic week, running straight into Valentine’s Day.

I’ve been tracking Applovin ($APP) since the start of the year, with a $400 price target, and it’s rapidly approaching that level. Closing at $375.72 on Friday, its earnings could be the final catalyst needed to push it further. If it beats expectations, we could be looking at a move beyond 162% YoY growth, making a run toward $460 a real possibility.

Last week’s earnings from Affirm ($AFRM) brought a 250% earnings surprise to the upside, causing a 20% surge in Friday’s session. The alternative lending space appears to be thriving off Q4’s lower interest rates. I first discussed this in Mission 47 back in November, tying it to my broader Spend Narrative Thesis. With that in mind, Upstart ($UPST) could follow a similar trajectory this week.

UPST, after trading in the $80s, has pulled back but now sits at $68.85 (Friday close), opening the door for a move toward $100. A major factor at play here is short float—currently at 24.5%.

What is Short Float & Why It Matters?

Short float represents the percentage of a stock’s outstanding shares that have been sold short but not yet covered. A high short float (typically above 20%) signals a crowded short trade, which can lead to a short squeeze—a rapid price increase as short sellers rush to buy shares to cover their positions. If UPST delivers strong earnings, this high short interest could amplify the upside move. (See Mission 51 for my past breakdown on potential price action here.)

With so many earnings reports packed into this week, key trends will start to emerge—not just in individual stocks but across entire sectors. Market sentiment is shifting rapidly, and there’s a lot of hidden value to be expressed in the moves ahead.

Target Acquisitions

The Field Report

“Acquire empirical knowledge & apply it with integral focus”

“To my love—thank you for always believing in me, pushing me to greater heights. Your support fuels my passion, and your love is the best investment I’ve ever made. Happy Valentine’s Day, my permabull” ❤️📈

Thank you for your time

Nedrick H.M

EquityAgent ∫︎