Is There More Pain Ahead—or the Setup for a Monster Recovery?

The 🔥H.E.A.T.🔥 Formula : AI Driven Insights to Spark Your Portfolio

Author

Matthew Tuttle
April 22, 2025

In Today’s Issue:

  • Trump v. Powell continues

  • Is There More Pain Ahead—or the Setup for a Monster Recovery?

  • Huawei’s 910C AI Chip Could Reshape the Global Chip War

  • and more……..

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News & Noise

🧠 News:

Trump warns of economic slowdown unless Fed cuts rates, triggering selloff

The U.S. economy could slow unless interest rates are lowered immediately, President Donald Trump said on Monday, repeating his criticism of Federal Reserve Chair Jerome Powell, who says rates should not be lowered until it is clearer Trump's tariff plans won't lead to a persistent surge in inflation.

www.reuters.com/business/trump-warns-economic-slowdown-unless-fed-cuts-rates-2025-04-21

China Is In Economic Dire Straits And They're No Longer Able To Hide It | ZeroHedge

ZeroHedge - On a long enough timeline, the survival rate for everyone drops to zero

www.zerohedge.com/geopolitical/china-economic-dire-straits-and-theyre-no-longer-able-hide-it

❌ Noise:

Gold Is Beating Everything. How to Get a Piece of the Action.

Gold is on a historic run, fueled by uncertainty and buying by central banks and individuals. How it fits in a portfolio.

www.barrons.com/articles/buy-gold-price-investing-portfolio-9f97260c?mod=hp_SP_A_1_1

I love Gold and the miners, but where was Barron’s In January, or even the start of April. Now it’s the most crowded trade on Wall Street

What Wall Street Is Saying

Mohit Kumar, Jefferies….

Our view is that Trump will try to score some easy wins with trade deals with India, Japan and the UK, but a trade deal with Europe and China will be tricky. With Europe, because non tariff policies are also on the agenda, and they will take time to negotiate. With China, our view remains that this is battle that Trump cannot win and eventually will need to back down.

From a market perspective our view remains to be underweight US in favour of Europe and Asia. Rallies in the US should be used to reduce exposure while sell offs in Europe and Asia should be used to add to positions. Within Europe, we continue to favour defense and financials. In Asia, India remains our favourite. We remain long gold as a core position in the portfolio.

Jefferies Daily Macro…..

However, if the risks of slowdown are combined with the recent erosion of the global confidence in the US regime /hegemony, it could be argued that there is more pain ahead.

TD Cowen….

Core CPI has now reverted to its pre-COVID trend on a NSA m/m basis; however, our Strategy Team sees the roughly 25pp increase in effective tariff rate to drive inflation 1.5pp higher vs pre-tariff forecasts. We now forecast core CPI inflation peaking at 4.0% y/y in 3Q and ending the year at 3.8%.

Tariff headlines have injected a high degree of risk into the market and our Strategy Team expects a drag on the U.S. economy, with the chance of a recession around 50%. We believe the Fed will cut meaningfully this year and forecast the year-end 2025 10y Treasury yields to 3% down from 3.8%.

Mike O’Rourke, Jones Trading…

We are on the cusp of an artificial and unnecessary crisis. Whether one likes Chairman Powell or not, he has been operating in this role for seven years; it is not worth a crisis to remove him. Nonetheless, as we see with most lame ducks, he has little to lose and therefore does not need to play nice. The “Powell Put” is his forte, so it should be expected he would ease policy as needed as circumstances warrant it. Nonetheless, don’t expect him to throw the President any lifelines until policy intervention is deemed appropriate.

Is There More Pain Ahead—or the Setup for a Monster Recovery?

Another ugly day yesterday. The best news for the bulls was that we closed way off the lows and the market is green so far this morning. SPY tried to move below the 4/10 low and then snapped back above. I continue to believe that the 4/7 lows are probably THE low, but it would be normal to get a retest of that. If we do break below, then expect another leg down. If we don’t, I would not be expecting a smooth ride back to the highs.

This continues to present a tough dilemma for investors. I will reiterate my advice here:

  1. If you missed the decline like I did then don’t do anything stupid here to ruin anything. The odds of success are not in your favor. You can have selected longs, mine are mostly gold miners and Bitcoin related, plus some nibbling on other commodity stocks, but keep exposure light and hedges on. Wait for a fat pitch

  2. If you didn’t miss the decline, learn from your mistakes so you don’t repeat them. I wouldn’t be selling everything here, as I lay out below there are scenarios where we rip back higher as we saw the a few days ago. You can use rallies to reduce exposure and/or hedge. If we break the lows then it’s a different story.

The media likes to compare down moves to each other, but this one is largely self inflicted. I say largely, because it is important to remember that this started with the DeepSeek news, which I think was extremely important. Do not ignore the news story I posted above about AMZN and the analysis below about NVDA. Things could happen that are in our control that help usher in a big recovery. Other things in, and not in our control could cause another leg down. Below I lay out some scenarios…..

🔥 COMPLACENCY COULD BE COSTLY

🏛️ Tariff-Driven Growth Risk Is Real

  • U.S. GDP projections slashed: Bloomberg now sees 2025 growth at 1.3%, down from 2.1%. Atlanta Fed GDPNow Model showing negative 2.2%.

  • Tariffs = stealth tax: Even "partial" trade deals leave the U.S. with an effective 10–20% tariff load vs 2% pre-Liberation Day.

  • Front-loaded consumer demand is fading: April Philly Fed index tanked to -26.4, lowest since April 2020.

🤦🏻 Bond Market Vigilantes Are Back

  • DOGE fails to deliver: $150B in real cuts vs $2T promised. Fiscal credibility in shambles.

  • SLR easing hints at trouble: Treasury pre-positioning for pain?

  • Massive rollover risk: 30% of Treasuries mature in 2025. Rates volatility = systemic risk.

🇨🇳 China’s Response Is Sophisticated

  • China wooing Europe with access to tech, manufacturing and consumers.

  • EU + China talks accelerating: Europe may be harder to keep aligned with U.S. policy.

  • Consumers are buying direct: Chinese e-commerce apps surging in France and Germany.

🌿 Constitutional Chaos?

  • Fed independence under threat: Trump has openly discussed firing Powell.

  • Article V convention whispers: Third-term talk is heating up. Even if bluster, it's rattling.

  • Insurrection Act chatter + contempt rulings: Rule of law premium under question.

📊 Technical Pain Points

  • U.S. household equity exposure near ATHs

  • Buffett Indicator (market cap / GDP) still too high: A 50% correction still within statistical range of historical precedent

  • Foreign ownership unwind risk: $19T in equities, $7T Treasuries, $5T corp bonds held abroad. Slow leak could become flood.

🌌 BUT RELIEF COULD BE SWIFT

🤝 Trump Can Flip the Script

  • Meetings with major retailers could lead to headline-driven tariff relief

  • Deregulation blitz remains a wildcard upside catalyst

💸 Earnings Season > Expected?

  • Market's set up bearishly. Even small upside surprises (TSLA, GOOGL, IBM) could lead to fast rallies.

📊 Positioning Is Extreme

  • AAII: 8 straight weeks of >50% bears

  • BofA FMS: record planned equity exposure reduction

  • USD: most bearish since 2017

  • Gold: most crowded long

  • Long Europe vs U.S. most imbalanced since COVID

🔧 Takeaway: Prepare for Both Tail Ends

The worst thing you can do right now is anchor to a static outcome.

  • If Trump walks back tariffs, Powell folds, or earnings surprise — you could see a fast 10–15% rally.

  • But if this spirals into a true fiscal credibility crisis — More downside is still on the table. If the lows are taken out the next real support for SPY is $450.

🔋 Positioning Strategy:

  • Keep core long exposure light but flexible.

  • Hedge with ARKK puts, VIX calls, or structured bear spreads. Use strength the hedge preferably.

  • Gold + Bitcoin = structural macro hedges I would be very careful buying Gold up here, would use dips.

This isn’t a V-shaped bounce setup. This is a market built for traders who understand probabilities and politicians who can flip headlines in 240 characters.

This seems like a big deal so I had GPT take a deep dive….

Huawei’s 910C AI Chip Could Reshape the Global Chip War

🚨 What’s Happening?

Huawei is set to launch its Ascend 910C AI chip in May, alongside an enhanced 910B stack—reportedly comparable in performance to Nvidia’s H100.

This comes amid:

  • Escalating U.S. export restrictions on Nvidia’s AI chips (H100, A100, and now H20)

  • A surging domestic push in China to build a sovereign semiconductor ecosystem

  • Intensifying U.S.–China tech bifurcation, especially in AI infrastructure

🔍 Strategic Context: Why This Matters

Huawei’s move is not just about chips. It’s about:

  • Decoupling from Nvidia after years of AI chip dependency

  • Replacing banned H100s with a homegrown equivalent

  • Reclaiming control over compute infrastructure as the AI arms race heats up

This could signal a tipping point in China’s semiconductor ambitions—especially if the 910C proves viable for training and inference of large language models (LLMs).

🔬 Technical Takeaways

  • Huawei Ascend 910C: 7nm-class AI accelerator likely fabbed by SMIC, China's top foundry

  • Performance: Benchmarked as close to or rivaling Nvidia’s H100, according to early leaks

  • Software stack: Integrated into MindSpore, Huawei’s AI framework (an alternative to PyTorch/TensorFlow)

If Huawei can deploy this at scale, China may no longer need black-market H100s—or soft-banned Nvidia H20s.

💥 U.S. Implications: Who Gets Hit?

❌ Losers (Ranked 1–10: 10 = worst impact)

Company

Score

Why

Nvidia (NVDA)

9.5

Primary loser. Huawei chip directly competes with banned H100/H20 in China. ~$5B+ in rev at risk.

AMD (AMD)

7.5

MI300/MI308 China ambitions likely squashed if Huawei chips are “good enough” and locally favored.

Broadcom (AVGO)

6.5

Supplier of interconnects and networking ASICs. Huawei self-sourcing could reduce U.S. dependence.

Marvell (MRVL)

6.0

Exposed via AI networking and Chinese hyperscaler partnerships.

TSMC (TSM)

5.0

Long-term China AI volume loss possible. But makes up ground via U.S./Taiwan AI demand.

Micron (MU)

4.5

Not directly affected by 910C, but could lose Chinese DRAM sales as SMIC ecosystem grows.

ARM (ARM)

4.0

Huawei likely to use domestic IP or open-source architectures to avoid licensing constraints.

🟢 Possible Winners

Company

Score

Why

Huawei / HiSilicon

10.0

Reclaims AI sovereignty. If chip performs as advertised, they leapfrog local rivals.

SMIC (0981.HK)

9.0

Proves its 7nm node can handle high-end AI silicon. Gains major domestic credibility.

Birense / Moore Threads / Hygon

7.5

Chinese GPU players get validation + competition. May collaborate or build on Huawei’s platform.

Local hyperscalers (Baidu, Tencent, Alibaba)

7.0

Can resume AI expansion plans with 910C in place of Nvidia chips. No export risk.

AI compute ETFs in China (KSTR, CQQQ)

6.5

Long-term positive if China AI stack becomes self-sufficient.

U.S. defense-related AI firms (PLTR, Anduril, C3.ai)

6.0

This may push the U.S. government to further boost domestic AI infrastructure buildouts.

📉 Market & Policy Implications

1. De-dollarization of Compute

  • China is building an AI stack independent from U.S. hardware and software.

  • That means less reliance on U.S.-licensed chip IP, toolchains, and even code libraries.

2. Tech Nationalism Gets Stronger

  • Expect additional U.S. restrictions (EDA tools, diffusion limits, export control expansion to software or memory)

  • Watch for retaliatory bans or pressure on U.S. chipmakers operating in China

3. China Accelerates AI Sovereignty

  • MindSpore + 910C = Huawei’s answer to the U.S. LLM ecosystem

  • Expect major compute deployments in China in state-sponsored projects, bypassing Nvidia entirely

🧭 Strategic Takeaways

📉 What to Avoid (or Hedge):

  • NVDA short term: Regulatory overhang + China sales risk + valuation

  • AMD exposure to China AI

  • Broadcom / Marvell in Asia-facing hyperscale buildouts

📈 Where to Lean In:

  • U.S. AI infra names with domestic exposure (SMCI, PLTR, AVGO on U.S. cloud buildouts)

  • Uranium, natural gas, copper: All fuel the hardware + power needs of decentralized AI expansion

  • China AI ETFs (careful—tactical only; geopolitical risk is high)

  • VIX or tail hedges: The policy response to this may be chaotic and drive volatility

🧨 Final Word: We’re in the AI Chip Cold War

Huawei’s 910C is a potential Sputnik moment in the U.S.–China AI rivalry. If it truly rivals the H100 and ships at scale, we could witness:

  • The end of U.S. monopoly over advanced AI compute

  • Massive revenue compression for Nvidia and AMD in China

  • Policy escalation from Washington

  • A world where AI development bifurcates between two incompatible tech stacks

And if that happens—expect capital to rotate from growth stocks to hard assets, defense, and domestic infrastructure.

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