Wall Street’s 60/40 formula was born in 1952 — the same year as the first credit card. A lot has changed since.
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Table of Contents
🔥 Here’s What’s Happening Now
Pretty ugly day again in the market, but everything held where it needed to. QQQ pulled an undercut and rally at the 50 day moving average…
After the close we got the Google anti trust ruling that they don’t have to divest Chrome. Google and Apple are both up big on the news, so QQQ is pretty green this morning.
SPY did close below the 10 day moving average and the 20 day EMA, but it looked like it wanted to test the 50 and never made it…..
IWM, which the whole investing world is gushing about, had an undercut and rally at the 10 day…
Still think the Russell 2000 is a crap index, and if you want small caps you need to pick them individually.
Watch rates, they spiked yesterday and are up a bit pre market….
Looks like 4.2% is a floor on the 10 year.
Of course one day doesn’t mean anything, but this shows you one of the big problems of things like the 60/40 portfolio, or any idea that uses bonds as a hedge. These days you often have market selloffs on higher rates, so bonds not only don’t help you, they hurt you.
This is funny…..
Of course they won’t vote to not be able to trade on inside information. FYI GRFT comes out beginning of October. One big piece of the ETF will be finding unusual congressional trades. Basically we are either looking for something out of character, for example a congress person who only trades ETFs then suddenly buys a biotech stock, or someone on a committee that buys a stock regulated by that committee. Stay tuned.
🧠 China’s AI Strategy: Bubble Hedge or Missed Moonshot?
I’ve been talking a bit about China the past couple of days as I think the China tech stocks look interesting here. Of course, the best time to buy Chinese stocks is when nobody wants them, but from a relative standpoint I do like the fact that something like KWEB (Chinese internet stocks) is nowhere near all time highs while all of our markets are.
Winners, Losers, and the Investment Playbook
The Strategic Divide
U.S. Vision: Build Artificial General Intelligence (AGI) at all costs. Billions poured into GPUs, datacenters, and talent. Goal: transformative breakthroughs in science, defense, and economics.
China’s Vision: Focus on practical, low-cost applications—grading exams, dispatching police, forecasting weather, optimizing crops, “dark factories.” Xi Jinping: “AI strongly oriented toward applications.”
Why it matters: If AGI is realized near-term, the U.S. wins big. If AGI proves elusive or ROI is muted, China’s pragmatic “fast-follower + mass deployment” approach could dominate.
Winners vs. Losers
✅ Winners (China’s Pragmatic Path)
Domestic AI Application Leaders (China)
DeepSeek (private) – powering weather forecasts, police dispatch, agriculture models.
Alibaba (BABA) – straddling AGI ambitions but monetizing practical AI across cloud + commerce.
iFlytek (SZSE: 002230) – speech-to-text, translation, and education; real-world utility.
Tencent (TCEHY) – embedding AI in gaming, payments, and enterprise tools.
Rating: 8/10 → Scale, government backing, global expansion via open-source.
Global Infrastructure & Hardware Providers
Huawei – filling gaps created by U.S. chip bans; optimized for “good-enough” inference hardware.
Asian cloud/data center REITs – smaller, modular DCs built for inference, not giant training farms.
Rating: 7/10 → Capture spend as Beijing funds distributed deployment.
Western “Applied AI” Firms
ServiceNow (NOW), Salesforce (CRM), Workday (WDAY) – embedding AI copilots to boost enterprise workflows (mirroring China’s pragmatic playbook).
Rating: 7/10 → Their model aligns more with Beijing than Silicon Valley’s moonshot bets.
❌ Losers (If AGI Bubble Deflates)
U.S. AGI-First Players
OpenAI (MSFT-backed), Anthropic, xAI – sky-high burn chasing superintelligence. ROI unclear, GPT-5 underwhelmed.
Meta (META) – pouring billions into Llama scale-ups with uncertain monetization.
Rating: 5/10 → Brilliant research, but commercial returns lag. If AGI stalls, margins collapse.
GPU / AI Energy “Arms Race” Plays
NVIDIA (NVDA) – still must-own, but risk is multiple compression if demand shifts from training → lower-cost inference.
High-cost U.S. datacenter REITs – built for hyperscale AGI workloads, less useful if demand splinters into smaller inference nodes.
Rating: 6/10 → Winners today, but exposed to capex bubble unwind.
Chinese AGI Aspirants
Baidu (BIDU) – investing in ERNIE bot as AGI flagship; vulnerable if Beijing deprioritizes moonshots.
Rating: 5/10 → Faces policy headwinds and U.S. chip restrictions.
Who Wins if U.S. Mining/Refining vs. Software/Chips Path Diverges?
Mining/Refining of AI “fuel” (chips, power): U.S. players (NVDA, AMD, cloud hyperscalers) need constant capital; volatility high.
Applied AI software/services: China wins if ROI favors many smaller, distributed use cases. Western workflow AI (NOW, CRM, WDAY) also in this camp.
Policy-enabled edge: Beijing’s $8.4B AI fund and local “AI+” campaigns ensure capital flows into application companies regardless of profitability—accelerating adoption.
Investment Grades (1–10)
Alibaba (BABA): 8/10 → Dual path (AGI + applied), state support, monetizable immediately.
DeepSeek (private): 9/10 → Core application champion, aligned with Beijing’s “AI+” plan.
Tencent (TCEHY): 7/10 → AI woven into existing ecosystems (payments, games, cloud).
iFlytek (002230.SZ): 7/10 → Speech, education, applied AI vertical leader.
NVIDIA (NVDA): 7/10 → Must-own near-term; long-term risk if AGI bubble bursts.
ServiceNow (NOW), Salesforce (CRM): 7/10 → Align with China-style applied AI, durable.
Meta (META): 5/10 → Overexposed to AGI scaling costs, monetization lag.
Baidu (BIDU): 5/10 → AGI bets under policy pressure, chip access risk.
AI is splitting into two races:
The U.S. moonshot (AGI at all costs) vs. the China pragmatists (applied AI everywhere, cheap and fast).
If AGI is real and near-term, the U.S. has the edge. If not, China’s “fast-follower, mass deployment” model may prove smarter.
For investors, the asymmetry is clear: Own the application winners (Alibaba, Tencent, DeepSeek if public, iFlytek, ServiceNow) while hedging exposure to high-burn AGI moonshots.
📊 AI Strategy Scenarios: Who Wins, Who Loses
Scenario | Winners | Losers | Investor Take |
|---|---|---|---|
AGI Breakthrough (near-term, 2027ish) | U.S. hyperscalers: $MSFT (OpenAI stake), $GOOGL (DeepMind/Gemini), $AMZN (AWS/Anthropic). | Applied AI plays (BABA, Tencent, iFlytek) risk lagging if AGI dominates. | Lean into U.S. moonshots (NVDA, MSFT, AMZN). Accept bubble risk, but if AGI arrives, returns are asymmetrically high. |
AGI Stall-Out (bubble, long delay) | China’s applied AI champions: BABA, Tencent, iFlytek, DeepSeek. | High-burn AGI moonshots: OpenAI (MSFT exposure), Anthropic, xAI. | Rotate to applied AI & infrastructure. Own BABA/Tencent + U.S. workflow SaaS. Fade the AGI “arms race” pure plays. |
Hybrid (slow AGI progress + massive applied AI adoption) | Balanced basket: $MSFT (hedged exposure via OpenAI + Office AI), $ADBE (creative AI), $NOW/$CRM (workflow copilots), BABA (dual track), Tencent. | Single-track AGI-only startups w/out monetization. | Diversified barbell: keep core NVDA/MSFT, pair with applied AI winners (BABA, NOW, CRM). |
🔑 Key Takeaways
If AGI arrives fast → U.S. moonshot plays dominate; NVDA & MSFT remain core.
If AGI stalls out → China’s pragmatic model + U.S. workflow SaaS are the asymmetry.
Most likely: Hybrid outcome → a slow grind toward AGI, with applied AI monetized globally. Best bet: barbell portfolio (NVDA/MSFT + applied AI leaders in both U.S. and China).
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📈 Stock Corner
Today’s stock is Lululemon (LULU)….
They have earnings tomorrow and I would never buy a stock ahead of earnings, I do already own it though. FWIW here’s what Stifel had to say yesterday….
Big picture, we believe the athleisure space to be a secular growth market, for which LULU’s leadership position, long runway for international growth, profitable model, and strong capitalization are underappreciated in current valuation. We reaffirm our positive view on shares and our $324 TP reflects 20.2x P/E on our FY26E adj. EPS of $16.03
📬 In Case You Missed It
Great conversation with Vik Mittal about SPACs……
Vik and I both believe pre merger SPACs as an asset class are way better than bonds.
🤝 Before You Go Some Ways I Can Help
ETFs: The Antidote to Wall Street
Inside HEAT: Our Monthly Live Call on What Wall Street Doesn’t Want You To Know
Financial HEAT Podcast https://www.youtube.com/@TuttleCap Freedom from the Wall Street Hypocrisy
Tuttle Wealth Management: Your Wealth Unshackled
Advanced HEAT Insights: Matt’s Inner Circle, Your Financial Edge
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