Trump Trade Strategy Shifts

Good morning. It's July 22nd, and today we look at the impact of President Biden’s withdrawal on the “Trump trade” and how slowing EV sales might have impacted GM and Ford’s results due this week.

Previous Close 📈

All three indices were in the red after a marked rotation out of megacap stocks all of last week.

Futures

Stock futures tied to the three key market indexes are up slightly today.

What to watch

Watch out for Verizon’s quarterly report during pre-market trade. NXP Semiconductors will also release its earnings after the close.

Markets

Biden's Withdrawal May Alter Investors' ‘Trump Trade’ Strategies Ahead of 2024 Election

Investors are reassessing their strategies after President Joe Biden announced his withdrawal from the 2024 election race, endorsing Vice President Kamala Harris.

This development has prompted a reevaluation of the "Trump trade," which includes investments seen as benefiting from Donald Trump's policies like looser fiscal regulation, higher trade tariffs, and a weaker dollar.

In recent weeks, investors had been adjusting their portfolios in anticipation of a potential Trump return, including reducing long-term U.S. bonds and investing in Bitcoin.

With the latest political shift, there's a reconsideration of these moves. The dollar saw a slight decline, while the Mexican peso fluctuated, reflecting ongoing market adjustments.

Popular investment strategies under a potential Trump presidency have included betting on higher U.S. bond yields; gains in financial, health, and energy stocks; and cryptocurrency.

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Automobiles

Cyberattack and Cooling EV Sales to Impact GM and Ford's Quarterly Profits

General Motors and Ford are expected to report reduced profits this week due to a decline in electric vehicle (EV) demand and a cyberattack that disrupted sales at numerous dealerships.

According to LSEG data, GM's second-quarter net income is projected to drop by 7.7%, while Ford's profit is expected to fall by 10%. GM will announce its results on Tuesday, followed by Ford on Wednesday.

The cyberattack on CDK Global, a key software provider for over 15,000 U.S. car dealerships, led to significant disruptions in June, a crucial sales month. Consultancy firm Anderson Economic Group estimates that dealers collectively lost around $1 billion due to the outage.

Additionally, the slower growth in EV sales is making it difficult for automakers like GM and Ford to achieve the necessary volumes to reduce costs and reach profitability. Both automakers are also grappling with intense competition from Chinese EV manufacturers and Tesla, which has sparked a global price war.

GM recently refrained from reaffirming its goal of achieving one million units of EV production capacity in North America by 2025. Ford has also delayed the launch of new EV models and shifted production plans to larger gasoline-powered vehicles.

Technology

Nvidia Plans to Launch China-Specific AI Chip to Comply with US Export Rules

Nvidia is creating a version of its latest flagship AI chip for the Chinese market that aligns with current U.S. export restrictions. This new chip, part of the "Blackwell" series unveiled in March, will be produced later this year. The B200 model in this series is 30 times faster than its predecessor for specific tasks, such as chatbot responses.

The chip, tentatively named "B20," will be launched and distributed in collaboration with Inspur, a major Nvidia distributor in China. Shipments are expected to begin in the second quarter of 2025, as per one source. Nvidia has not yet publicly announced these plans, and its spokesperson declined to comment, as did Inspur.

This move is part of Nvidia's strategy to counter competition from Chinese firms like Huawei and Tencent-backed Enflame, which have gained ground in the AI processor market. China contributed around 17% to Nvidia's revenue in the fiscal year ending January, down from 26% two years earlier due to U.S. sanctions.

As the U.S. maintains pressure on semiconductor export controls, expectations remain high for continued restrictions. The Biden administration is also considering measures to regulate the most advanced AI models, impacting global chip stocks.

Tellurian Inc. [TELL] - Last Close: $0.571

Tellurian stock skyrocketed in pre-market trading after news that Woodside Energy Group Ltd. was acquiring the firm for approximately $900 million.

The deal includes Tellurian’s proposed Driftwood LNG project on the U.S. Gulf Coast. Woodside will gain full control by paying about $1 per share in cash.

The stock is trading at about 65% higher than its previous close.

Castellum Inc. [CTM] - Last Close $0.2080

Castellum Inc. is up by nearly 40% this morning.

The rally began after the firm announced its new strategic alliance with Krilla Kaleiwahea, LLC (K2).

The alliance also enables set-aside Department of Defense (DOD) work of up to $100 million.

It will allow both firms to jointly pursue a wide array of government contracts across the DOD and civilian federal government.

Richtech Robotics [RR] - Last Close: $1.47

Richtech Robotics, a provider of AI-driven service robots, is again rallying in pre-market after it grew 22.50% on Friday.

The stock is flying high on the news of Richtech’s announcement regarding the installation of its advanced robotic beverage system, ADAM, at Ghost Kitchens International Inc. in Dawsonville, GA.

This is the first of a 240-location rollout across the U.S. The stock was up by nearly 27% in pre-market trade.

Everything Else

• Morgan Stanley predicts a surplus oil market next year.

• Where will the $96 million Biden campaign fund go?

• Korean Air is likely to order nearly 20 Boeing 777X jets.

• Ryanair reports a 46% fall in profits and warns of lower summer fares.

• China’s central bank cuts rates unexpectedly.

• Atos Landlords’ is in trouble over its mortgage-backed debt.

• Kamala Harris raises nearly $50 million as Democrats come out in her support.

That’s all for today. Thank you for reading. If you have any feedback, please reply to this email.

Best Regards,

— Adam Garcia
Elite Trade Club

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