Making sense of TPUs, Debasement and Takaichi
End of Year Mega Breakout by Philo - #Issue 18
Issue #17 here
Issue #18
Why Breakout by Philo?
First, don’t be this guy 👇
Breakout by Philo gives readers an unbiased and unemotional look into markets from a technical perspective.
I have found this approach 1) incredibly fruitful 2) and the source of a persistent and consistent edge in markets, partially because it’s very hard to do.
I have been doing this for ~20 years in one form or another. Consider this the highly developed version of blending technical analysis, macro and themes into understanding markets and generating actionable intelligence.
Sometimes there’s nothing much to say, sometimes there’s a lot. But you have to be here for the turns, or else you miss them. And even if you’re not actively trading right now — you need to follow markets and what’s going on.
Opportunities come out of nowhere — 50% of life is showing up.
The Backdrop & Our Focus
“I’m the reserve currency now” — Precious Metals filling in for the Dollar
Tech/AI leading the indices all by themselves — now starting to turn
AI Supremacy via Trump 2.0
Global Macro things
Risk: Is the process is turning into Bust?
Risk: The ASIC/TPU threat
Catalyst: Trump 2.0 redeeming himself with The Brink and Back trade
Brazil trying to turn but its politics getting in the way
German/Merz and the EU losing the narrative
The Takaichi Trade amidst uncertainty and chaos
Past trades and trades that are setting up
The Fed Cutting Cycle
Gold Miners
The Nuclear Thematic and Power Demands
And going low level in some of the themes.
Markets Undercurrents & Notables 📝
The Google VS Open AI chart
This chart has been doing the rounds showing how the Google Complex has been over performing while the Open AI complex has been under performing since Google came out with their TPU chip and Gemini 3.
Not only doubts on Open AI’s future have been creeping up for some time — but Google has managed to flip the narrative to their favour. We warned and discussed this previously on Philoinvestor in a number of posts.
I revised this and touched on the ongoing TPU story here — as we ramp up to send out a bigger piece on the theme.
Chatbot Competizione and the AI Tech Stack
Amazon, Spotify and Uber racked up billions in losses before turning a profit — but Chatbots are dwarfing those losses with Anthropic losing almost $20billion while Open AI touching a staggering $160bln in expected cumulative losses for the period 2024 up to 2029..
Refer to the relevant time periods, both historical and expected, in the chart above.
Now, large is fragile and small is beautiful. One turn of the narrative, one fork in the road and Open AI could fail in raising its next funding round — especially after parting ways with its willing suitor, Microsoft Inc.
Some thoughts and facts on Chatbots on my X here.
The narrative now seems to be that Google is winning the war because people are turning from Chat GPT to Gemini. I have yet to use Gemini and only use Chat GPT and Claude currently, I am especially pleased with the latter and mostly use Chat GPT to generate images for the courses in Philo’s Academy.
But the point is this: the Chatbot Race will not stop for years and they will all end up being very close in terms of performance and capabilities.
And therefore, the “ultimate differentiator” in this race (marathon rather) will be financial. That is to say, who can endure the most before going bankrupt and being forced to sellout to someone else or leave the race.
The race is one of scale, finances and of keeping up with the required R&D to fund technological advancements in the form of training better models.
We expanded on each layer in the stack below and outlines the problem that both Nvidia and Chatbot makers would run into.
The Brazilian Bull hits a wall 🇧🇷🐂
From prison, right-wing Jair Bolsonaro backed his son to run for president in next year’s elections. Flavio Bolsonaro is a senator, is 44 years old and is the easiest opponent for left-wing incumbent Lula.
We wrote in Bom Dia, Philo! that Jair Bolsonaro was being pressured to name a successor to his political career as he serves a 27-year sentence in Brazil for plotting a coup.
The implication here is that markets want Tarcisio de Freitas and not any Bolsonarista to become president next year — and they especially don’t want Lula to remain.
The “Brazilian ETF” also known as iShares MSCI Brazil ETF (Ticker: EWZ) dropped 6% on the day. The Real dropped 2.5% against the Dollar.
It seems, markets did not want Flavio and preferred Jair to give Freitas his blessing — apparently that’s not the way it’s going down.
Is Takaichi = Harakiri? 🗡️🇯🇵
Japanese markets revolting against the Takaichi Trade as yields on JGBs make new multi-decade highs and the Yen crashes down.
We analyse this setup and offer more context in the second part of the piece.
If you’re not familiar with the Philochat or our trades on the Yen, these two short promo pieces should solve that!
Ok let’s finally begin part deux…