Mission 50.24 Target

The Briefing Room: Macro Minute

Inflation Update

• Core Inflation: 2.7% YoY

• Headline Inflation (Including Food & Housing): 3.3%

Inflationary pressures remain evident, with both core and headline numbers indicating persistence, albeit at a slower pace than earlier peaks.

Labor Market Insights

• Non-Farm Payrolls: +227,000 jobs including upward revisions (+57,000) from prior months

• Sector Growth: Professional services and hospitality/leisure drove gains, while holiday retail hiring lagged expectations.

• Long-Term Unemployment: A sharp increase in those unemployed for 27 weeks or more raises concerns about cracks in the labor market’s resilience. (Shown in the white line in the graph below)

FOMC Countdown

The Federal Reserve’s final meeting of the year is set for December 18th, with markets anticipating at least a 25-basis-point rate hike.

• Market Reactions:

• Futures: S&P 500 down just 0.05% (5 basis points).

• U.S. Dollar: Losing steam post-election rally, with Morgan Stanley noting the “Trump Effect” may now be fully priced in.

• Gold: Stabilizing after China’s return to gold buying following a five-month hiatus.

Gold’s Breather or Breakout?

Gold’s unusual stability signals a potential pause before resuming its upward climb. With momentum building and macro uncertainties looming, a rally toward $3,000/oz may be on the horizon—a critical level that could attract renewed investor attention.

The final pieces of 2024’s macro puzzle are falling into place. The FOMC decision, paired with evolving labor and inflation dynamics, sets the stage for a compelling close to the year.

Revisiting Past Intel — China’s Rebound Growth and Strategic Exposure

As we revisit the long-term thesis on China’s economic rebound, it’s clear that the groundwork for significant growth remains intact, bolstered by a combination of supportive monetary policy, corporate initiatives, and smart capital flows. While September’s analysis provided a strong foundation, recent developments demand an updated perspective, particularly regarding $BABA, the broader AI landscape, and equities tied to China’s resurgence.

1. China’s Strategic Position and Monetary Policy

The People’s Bank of China (PBOC) has reinforced its commitment to growth with the following measures:

• Supportive Monetary Policy in 2025: PBOC Governor Pan outlined plans to enhance counter-cyclical measures and lower financing costs for businesses and households.

• Economic Tailwinds: These policies are designed to stimulate growth in key industries, ensuring a smoother path for businesses like Alibaba and other sectors dependent on domestic and global demand.

This accommodative stance signals that China is leaning heavily into fiscal and monetary levers to reignite its economy—creating fertile ground for strategic investments.

2. $BABA: A Titan in Transition

• Aggressive Share Buybacks: Alibaba continues to consolidate value with large-scale ADR buybacks.

• Just last week, $BABA repurchased 711,000 shares, representing 5.5% of its total float.

• These buybacks indicate confidence in long-term growth and work to stabilize share prices amid macroeconomic uncertainty.

AI and Compute Challenges:

• U.S. restrictions on Nvidia chips have limited China’s ability to compete in the AI race.

• Nvidia’s Blackwell chip, expected to reshape the compute landscape, remains inaccessible to China.

• In response, China has launched an anti-monopoly investigation into Nvidia, signaling its urgency to address this disadvantage.

While $BABA’s compute/AI product growth is impressive, the U.S. restrictions create a significant obstacle, further emphasizing the importance of innovation and self-reliance in China’s AI ambitions.

3. Broader Equity Plays in the Chinese Rebound

Several other equities and instruments tied to China’s economy have gained attention:

• $LVMUY (LVMH):

• Insider buying activity has surged, with the CEO making significant acquisitions during this period of relative price depression.

• LVMH’s exposure to China’s luxury goods market positions it well for a rebound in discretionary spending as consumer sentiment improves.

• Leveraged ETF Activity:

• Options Flow Surge: Both $YINN (leveraged China large-cap ETF) and $CHAU (leveraged China A-share ETF) have seen increased activity in recent weeks.

• This trend reflects growing institutional and retail confidence in a long-term rebound for Chinese equities.

4. Capital Flows and Strategic Implications

• Options Insights: The surge in smart options flow into Chinese leveraged ETFs like $YINN and $CHAU signals significant bullish sentiment. These flows are a microcosm of a broader theme—investors are targeting high-conviction, long-term plays in a concentrated manner.

• Insider Confidence: The actions of companies like $LVMUY and $BABA demonstrate confidence in their ability to capitalize on a recovering Chinese economy, further supported by fiscal tailwinds.

5. Risks and Challenges

While opportunities abound, challenges remain:

• AI and Compute Limitations: Without access to cutting-edge Nvidia chips, China’s AI sector could face a prolonged innovation gap.

• Geopolitical Risks: Increased scrutiny from the U.S. and retaliatory actions from China (e.g., Nvidia investigation) could create volatility.

Looking Forward

China’s rebound story remains compelling, driven by aggressive corporate actions, smart capital flows, and supportive monetary policy. Companies like $BABA are navigating geopolitical headwinds while positioning themselves for long-term growth. Meanwhile, the resurgence of leveraged ETF bets underscores growing market optimism in China’s economic recovery.

As we monitor this theme, smart options flow, insider buying, and policy developments will serve as critical indicators for timing and sizing exposure. The long-term thesis is intact, with equities like $BABA, $LVMUY, and leveraged ETFs like $YINN and $CHAU offering unique opportunities to capitalize on China’s evolving narrative.

Novum Cognitio: Google ($GOOG/$GOOGL) and Equinix ($EQIX) – The Infrastructure Powerhouses of AI’s Expansion

The AI narrative continues to evolve, but we are far from transitioning away from the infrastructure phase. Despite the headlines being dominated by breakthroughs in AI software, the reality is clear: there’s still a massive amount left to build, maintain, and scale. Two names—Google ($GOOG/$GOOGL) and Equinix ($EQIX)—stand out as critical players in this infrastructure-driven growth story.

AI’s Physical Backbone: Equinix ($EQIX)

For quite some time, I’ve been exploring how the AI story goes beyond “hardware” and extends to names providing the physical and computational backbone of AI. Last week, Salesforce ($CRM) earnings reinforced this concept. Salesforce sees GenAI and AI agents as transformative forces, enabling businesses to scale productivity without corresponding workforce expansion—reshaping GDP growth patterns. While the software layer often takes the spotlight, the brains of AI sit within Equinix’s data centers.

A particularly intriguing development: Elon Musk’s xAI company recently achieved the coherence of 100,000 GPUs in a single cluster—a feat previously thought impossible, as other tech giants capped out around 30,000-35,000 GPUs per cluster. Speculatively, this could place the largest AI supercomputer in Memphis, possibly in one of Equinix’s commercial properties. While unconfirmed, the role of EQIX as the warehouse and enabler of AI clusters positions it as a central player in AI’s next phase of growth. As more compute power is demanded, Equinix stands to benefit.

The Undervalued Giant: Google ($GOOG/$GOOGL)

Google, often overshadowed by flashier names, remains a cornerstone of AI infrastructure and innovation. Its Google Cloud Platform (GCP) was recently named the “most strategic AI vendor” by Chief Information Officers (CIOs), demonstrating its pivotal role in enterprise AI adoption. Salesforce’s reliance on GCP reinforces Google’s positioning as a critical enabler of AI deployment at scale.

Moreover, Google’s Quantum Chip Willow marks a revolutionary leap in computing. This chip solves a decades-old challenge by exponentially reducing errors as qubits scale up. It recently completed a computation in under five minutes that would take the universe’s age (over 10^25 years) to solve on a traditional supercomputer. This innovation underscores Google’s ability to redefine computing power, placing it at the forefront of AI’s future infrastructure.

The Value Proposition

From a valuation standpoint, Google is highly attractive. With a P/E ratio of approximately 19x 2025 earnings, it is one of the cheapest names in the “Magnificent Seven,” sitting alongside Amazon. Historically, some of the best buying opportunities emerge when quality names are out of favor, and Google fits this mold. Concerns about antitrust cases—while overhanging—have created a window of opportunity for long-term investors to capitalize on its growth potential.

The Medium of AI Growth

Both Google and Equinix highlight the middle layer of AI growth—where infrastructure and computational power meet scalable software. Equinix facilitates the physical and computational demands of AI, while Google integrates the infrastructure with the software layer. Together, these companies are positioned to lead the next phase of AI’s growth cycle, as enterprises scale adoption and the world builds out the infrastructure to support this transformative technology.

In the early innings of the AI revolution, names like $EQIX and $GOOG will remain indispensable, ensuring the growth of both the numerator (revenue and productivity) and the denominator (infrastructure and compute capacity). For investors looking to capitalize on the continued evolution of AI, these two companies offer a compelling mix of growth potential and critical necessity.

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Thank you for your time

Nedrick H.M

EquityAgent ∫︎