Vested Shorts: Trump’s impact on tech business, Buffett’s $325B cash pile, Apple’s margin warning, Musk’s influence, crypto as reserve asset and BITCOIN Act

In today’s edition,

• Tech shifts under Trump
• Buffett’s cash move
• Apple’s margin challenges
• Musk’s policy influence
• BITCOIN Act and Trump administration

Market Snapshot

Wall Street ended a strong week with the S&P 500 closing at 5,995.54, up 4.72%, boosted by election results and a 25-basis-point Fed rate cut. The Dow rose 4.72% to 43,988.99, and the Nasdaq led with a 5.85% gain to 19,286.78. Falling Treasury yields, easing volatility, and lower oil prices contributed to the rally, with all 11 S&P sectors posting gains.

Consumer sentiment hit a seven-month high, supporting market optimism. The Fed’s rate cut set the target range at 4.5%-4.75%, with officials signaling potential future cuts. Upcoming U.S. data releases include the October CPI on Wednesday and the PPI on Thursday, with forecasts showing a 0.2% rise in headline CPI and a 0.3% increase in core CPI. Retail sales data is also expected next Friday. In China, stocks dipped Friday after a budget meeting ended without major stimulus, despite posting weekly gains.

Stock market closing data for the week of Nov 4th to Nov 8th, 2024

Special Coverage: Tech Shifts Under Trump

Tech leaders are repositioning themselves after Donald Trump’s decisive return to the presidency, expecting a different approach from the last administration’s tighter regulations. CEOs from Amazon, Apple, Google, Meta, and Microsoft didn’t hold back this time; their public congratulations signal a strategic shift. Why? Because Trump’s administration may offer more breathing room for business, contrasting with Joe Biden’s focus on holding Big Tech in check.

Deals Back on the Table

One of the biggest expectations is a green light for deals. 

For years, heightened regulatory scrutiny and high interest rates stifled mergers and acquisitions. Companies like Microsoft and Amazon got creative—hiring founders or licensing tech instead of outright buying AI startups—to sidestep antitrust concerns. This workaround wasn’t by choice; it was necessity. The FTC, under Lina Khan, and DOJ’s Jonathan Kanter weren’t exactly fans of Big Tech getting bigger.

With Trump back, the industry sees a chance to break free from these constraints. Insiders are already buzzing that boardroom conversations are picking up. Why? The assumption is clear: when it’s time for approvals, Khan won’t be around to say no.

Antitrust Heat Cools Down

The Biden administration’s antitrust efforts were not just talk; they filed a landmark case against Google and scrutinized giants like Apple and Meta. 

This had many tech execs bracing for what felt like an ongoing battle. But with Trump, there’s a sense that this heat might subside. Some analysts even predict the DOJ’s case against Apple could be dropped. That’s a big deal when you think about the EU, which has also been tough on US companies, handing out fines like the €1.8 billion to Apple.

Tech leaders are hopeful that Trump might push back against Europe’s actions. Why? There’s a chance he’ll align with their view: US companies shouldn’t be punished by overseas regulators when they’re already navigating tough domestic waters.

Social Media Companies Tread Carefully

Social media platforms are tiptoeing around Trump’s return. Remember, he’s accused them of silencing conservative voices and being biased. In 2022, he even proposed banning federal agencies from working with companies involved in censorship. This time, tech leaders like Mark Zuckerberg are playing it safer. He called Trump’s victory “decisive,” which is a pivot from the past when platforms were accused of being at odds with the administration.

The AI Debate: What’s Next?

AI is a hot topic with Trump back in office. 

The last time he was president, Trump wanted to keep regulations light to ensure American innovation didn’t fall behind. This time around, there’s more at stake. Elon Musk, who has become a vocal Trump supporter and invested heavily in AI, aligns with this vision. Musk has raised billions for his own startup, xAI, and wants to make sure US AI development stays ahead of China’s efforts.

However, the balancing act is clear: innovation without safety concerns. Trump’s stance is expected to be more “let’s get ahead,” while pulling back on some of the more cautious policies Biden had put in place, like executive orders focused on AI security standards.

News Summaries

Warren Buffett has raised Berkshire Hathaway’s cash to $325 billion by selling Apple and other stocks. This move has sparked speculation about his plans. The cash now makes up 28% of Berkshire’s assets, marking the company’s largest cash reserve since 1990. It reflects Buffett’s value investing approach, especially given Apple’s soaring valuation. Some think he’s paving the way for successor Greg Abel, while others believe he’s preparing for market opportunities or a downturn. This year, Berkshire bought only $5.8 billion worth of stocks, but sold $133 billion. This shows Buffett’s caution in a high-valuation market. He might clarify his plans in the upcoming annual letter. For now, the large cash reserve suggests a careful, forward-looking strategy as he anticipates future market conditions.

Apple has warned investors that future products might not be as profitable as the iPhone. This is especially true as it moves into AI and VR markets. The warning came in its latest annual report. It mentioned that new projects, like the Vision Pro headset and AI services, might incur higher costs and offer lower profits. Additionally, Apple faces regulatory challenges, especially regarding the App Store and its dependence on Google for search revenue. Recently, Apple’s gross margin reached a record 46.2%. However, analysts are sceptical about maintaining this level with new products. Hardware margins sit around 36%, while services exceed 70%. As Apple shifts towards AI and services, it’s lowering expectations. This reflects both new opportunities and the challenges of moving away from its traditional business model.

Elon Musk significantly backed Donald Trump’s presidential campaign. This support can earn him a key role in the U.S. government. Also, he can head the new Department of Government Efficiency. His goal? To cut down federal red tape and reduce regulations. This aligns with his interests in AI, space, and electric cars. His companies, Tesla, SpaceX, and xAI, lead in these fields. After an assassination attempt, Musk shifted politically and backed Trump. He used the platform X to promote Trump and claim voter fraud. Critics say this spreads misinformation. However, Trump’s team and tech allies see Musk’s role as vital. His influence boosted Tesla’s stock by nearly 12%. Looking ahead, Musk plans to impact midterm elections and streamline government. He aims for necessary regulations without excessive control.

From the World of Crypto

Donald Trump’s administration could significantly reshape the U.S. cryptocurrency landscape, with one standout proposal being the adoption of the Bitcoin Act. 

CoinShares, a digital asset manager, highlighted in a research blog that the act would establish bitcoin as a strategic reserve asset. If enacted, the U.S. government could acquire up to 5% of bitcoin’s total supply, echoing gold’s role in national reserves and enhancing bitcoin’s legitimacy and potential value.

Sen. Cynthia Lummis introduced the BITCOIN Act earlier this year, aimed at reducing national debt through bitcoin purchases. Trump’s campaign had already signaled an interest in forming such a reserve, a plan Lummis reiterated after his election victory. The proposal could attract institutional and government-level interest, driving adoption and boosting bitcoin’s market valuation.

Beyond legislative measures, Trump’s stance on the Securities and Exchange Commission (SEC) could shift the regulatory environment for crypto. He has criticized current SEC chair Gary Gensler’s strict approach, and a new administration could lead to the appointment of crypto-friendly figures like Hester Peirce. Such changes may promote clearer, more supportive regulations, which brokers like Canaccord believe would benefit the broader digital asset industry, including firms like Coinbase and Galaxy Digital.

If these changes are realized, they could create a more open regulatory climate and accelerate mainstream financial adoption of cryptocurrencies, paving the way for expanded growth across the sector.