Trade Wars, Intel's Breakup, Amazon's Quantum Chip, and Nvidia's Earnings

Tariff Wars Send Markets Reeling

Just when investors thought they had a handle on Trump's trade strategy, the President has thrown global markets into turmoil with a sweeping expansion of his tariff plans.

What Happened

In a cabinet meeting on Wednesday, President Trump announced plans for 25% tariffs on European Union imports, describing the EU as "formed in order to screw the United States." The market reaction was swift and severe - the S&P 500 erased over $500 billion in market capitalization within minutes of his comments, while Bitcoin broke below $84,000 for the first time since November.

Adding to the confusion, Trump provided contradictory signals about the timing of previously announced tariffs on Mexico and Canada. While he mentioned an April 2nd implementation date, a White House official later clarified that the March 4th deadline remains in effect "as of this moment."

Despite the market panic, historical patterns suggest these announcements could be negotiating tactics rather than final policy decisions. Trump's first-term playbook was to create market volatility as a form of pressure, then reach deals that could be framed as victories. The difference this time is the scale and simultaneity of the tariff threats.

The Expanding Trade War

The global tariff landscape now appears to include:

• 25% tariffs on Canadian imports

• 25% tariffs on Mexican imports (with special carve-outs for certain energy products)

• 25% tariffs on European Union imports, specifically mentioning automobiles

• 10% additional tariffs on Chinese imports, on top of existing duties

This aggressive trade stance would push U.S. tariff rates to their highest levels since 1969, with some analysts suggesting we could approach rates not seen since the 1940s when factoring in all announced measures.

Market Implications

The market's reaction reveals growing concern about inflation and supply chain disruptions. The automotive sector faces particularly acute challenges - analysts estimate these tariffs could add approximately $3,000 to the price of vehicles sold in the U.S., affecting roughly 16 million annual car sales.

Tesla, already struggling in European markets with a 45.2% drop in new registrations this January compared to last year, are facing some of the strongest headwinds with these tariffs. With Tesla's U.S. share price already down nearly 28% year-to-date and its market cap recently falling below $1 trillion, these tariffs couldn't come at a worse time for the company. Other vehicle manufacturers are being affected too, with Ford and General Motors both down over 10% in the last month.

The VIX volatility index tells an especially compelling story. Despite the S&P 500 trading near all-time highs this month, the VIX has climbed more than 30% since February 14th, suggesting smart money has been hedging against precisely this kind of turbulence. It seems that volatility will likely remain elevated for a large portion of 2025 and hedge funds have been betting that way.

US Stocks Lag as Global Peers Race Ahead

US equity markets continued to lose momentum this week, with the S&P 500 falling for a second consecutive week and four of the past five. The benchmark has now nearly erased all gains since Trump's election, closing Friday at 5,954.50 – still well off the 6,144.15 high from last week.

Investor sentiment has turned decidedly bearish, with the spread between bullish and bearish expectations reaching its most negative level since 2022, according to the American Association of Individual Investors. This growing pessimism stems from mounting concerns about economic slowdown, the impact of Trump's tariff policies, and geopolitical tensions.

Perhaps most telling is the divergence between US and global markets. While the S&P 500 is up just 1.2% in 2025, indexes tracking Chinese ADRs and European equities have gained roughly 10% or more. Even the Canadian stock market is doubling the S&P 500's performance, despite facing potential tariffs itself.

The semiconductor sector – long a bellwether for broader tech performance – has been particularly hard hit. The VanEck Semiconductor ETF (SMH), which holds chip giants like Nvidia, Applied Materials, and AMD, has plunged 17% from its July peak, approaching bear market territory.

The fund recently broke through its 200-day moving average near $240 and is now heading toward the psychologically important $200 level. While the semiconductor sector is undoubtedly valuable, time will tell if these company valuations were overly optimistic.

Markets will continue to react negatively until the economic risk related to tariffs is behind us.

Semiconductor Reshuffling

Intel, once the undisputed leader of the semiconductor world, is now facing the most dramatic moment in its 56-year history: a potential breakup of the company that defined the modern computing era.

Dismantling a Giant

Reports from Bloomberg and The Wall Street Journal have sent Intel's stock soaring on speculation that the iconic chipmaker could be carved up and sold to multiple buyers. The most compelling scenario involves Taiwan Semiconductor Manufacturing Company (TSMC) taking over Intel's manufacturing operations, while Broadcom acquires its chip design business.

These developments have fueled Intel's biggest stock rally since March 2020, with shares climbing 16% in a single day this week to $27.39 before cooling off a bit.

Revenue has fallen $26 billion from its 2021 peak of $79 billion, and the company posted a staggering $19 billion net loss last year — despite still commanding approximately 70% of the PC processor market.

The chipmaker's difficulties stem from multiple strategic missteps:

1. Missing the mobile computing revolution and ceding that market to ARM-based designs

2. Falling behind TSMC and Samsung in manufacturing technology

3. Shifting strategies repeatedly under three different CEOs over the past decade

4. Failing to capitalize on the AI boom while Nvidia GPUs became the essential component for modern computing

Regulatory Hurdles and Strategic Questions

Any deal involving Intel's breakup would face intense regulatory scrutiny. The White House has already signaled skepticism about foreign entities operating Intel's factories, with representatives suggesting President Trump would be unlikely to support such an arrangement.

TSMC, which already controls nearly 65% of the global foundry market, would likely face antitrust challenges in acquiring Intel's manufacturing operations. Investors might also question the wisdom of inheriting Intel's aging manufacturing facilities when TSMC already dominates with superior technology.

Similarly, AMD holds a multi-decade cross-licensing deal with Intel that grants it veto power over any sale of Intel's x86 design business.

Broadcom's interest in Intel's chip design business presents its own strategic questions. Such an acquisition would contradict Broadcom's recent focus on expanding its infrastructure software business to reduce exposure to cyclical semiconductor markets. However, it would allow Broadcom to develop its own x86 CPUs and discrete GPUs, complementing its growing presence in AI-oriented data center chips.

Investment Implications

For investors, Intel's potential breakup presents both opportunities and risks. The company's share price already reflects significant optimism about a potential deal, making further short-term gains less likely without concrete announcements.

TSMC and Broadcom remain strong stand-alone investments regardless of whether these deals materialize. TSMC continues to dominate advanced chip manufacturing, while Broadcom's diversified business model provides exposure to multiple growth markets. And AMD would face a different competitive environment, potentially competing against a better-capitalized Broadcom rather than a struggling Intel.

As we await further developments, one thing is clear: the potential breakup of Intel marks the end of an era for this American company in any way that we recognize it today.

Amazon Unveils Ocelot Chip

Just a week after Microsoft's quantum computing breakthrough, Amazon has entered the hardware race with its own chip, intensifying the battle for quantum supremacy among cloud giants.

The New Contender

Today, Amazon Web Services announced "Ocelot," its first quantum computing chip designed to tackle quantum computing's most persistent challenge: error correction. Built with the California Institute of Technology, the chip could reduce quantum error correction costs by up to 90% compared to current methods.

The architecture uses "cat qubits" (named after Schrödinger's famous thought experiment) that intrinsically suppress certain errors, dramatically reducing resources required for error correction.

The Intensifying Competition

Amazon's entry follows Microsoft's unveiling of its Majorana 1 chip last week and Google's December launch of "Willow." This flurry of announcements signals quantum computing is approaching an inflection point with major implications for cloud providers.

Quantum computers are notoriously fragile, with even minimal environmental interference causing errors that can render calculations useless. Amazon's approach could represent a significant acceleration in the timeline to practical quantum computing if it delivers on its promise to reduce error correction requirements by 90%.

Market Implications

While functional quantum computers remain years away, quantum computing stocks have seen significant volatility, with companies like Rigetti, D-Wave, and IonQ experiencing large price swings after these announcements.

We know one thing for certain — when tech giants like Google, Microsoft, and Amazon are pouring billions into quantum computing research, it's not a speculative bet but rather a critical imperative to their future competitiveness.

Nvidia Reassures Markets with Solid Earnings and Blackwell Ramp

In a highly anticipated earnings report, Nvidia delivered results that settled investor nerves about the AI chip leader's growth trajectory.

Nvidia reported Q4 revenue of $22.1 billion, up 22% sequentially and 265% year-on-year, exceeding their guidance of $20 billion. Data center revenue reached $18.4 billion, up 27% sequentially and a staggering 409% year-over-year. For the full fiscal year 2024, Nvidia achieved total revenue of $60.9 billion, up 126% from the prior year.

For the full deep dive on Nvidia’s dominance in the AI industry, check out the following deep dive:

The critical moment in the earnings call came when Nvidia disclosed $11 billion of revenue from Blackwell in the fourth quarter, describing it as the "fastest product ramp" in company history. This revelation effectively dismissed concerns about production delays that had weighed on the stock in recent weeks.

The company noted that approximately 40% of their data center revenue now comes from inference applications - evidence that companies are actively deploying AI models at scale rather than just training them. We should expect to see continued acceleration and competition in hardware that is built specifically for inference time computing power — while Nvidia holds it’s moat for now, there is a target on their back.

Nvidia guided Q1 revenue to $24 billion, slightly above consensus expectations. Management emphasized that demand remains very strong, particularly for Hopper architecture products, and they expect their next-generation products to be supply-constrained.

Nvidia's results provided much-needed reassurance for the AI narrative after weeks of market uncertainty, suggesting that AI infrastructure investment isn't slowing significantly in the near term.

Earnings Beats and Misses

Snowflake delivered solid Q4 results with revenue of $738 million (+33% YoY), but shares tumbled on weaker guidance of just 22% growth for the coming year. Despite strong bookings with RPO growing 41% to $5.2 billion, the company expects headwinds from product efficiency and customer adoption of Iceberg Tables. In a surprise move, Sridhar Ramaswamy will become CEO as Frank Slootman retires to Chairman. "This is a once-in-a-generation company that will revolutionize the world with its cloud data platform," Ramaswamy said.

Salesforce reported Q4 revenue of $9.29 billion (+11% YoY) and announced its first-ever dividend. For the full year, Salesforce delivered $34.9 billion in revenue with margins expanding 800 basis points to 30.5%. CEO Marc Benioff highlighted Data Cloud as the company's "fastest-growing product ever," positioning it as critical for enterprise AI applications. "The gold is the data," Benioff emphasized, "and that's why we're so excited about Salesforce."

Autodesk posted strong fiscal Q4 results with EPS of $2.29, beating expectations by 5%, and revenue growing 11.6% to $1.64 billion. The design software giant projected fiscal 2026 EPS of $9.34-9.67, comfortably above consensus estimates of $8.92, indicating confidence in its transition to cloud-based subscription services and the integration of AI features across its product portfolio.

General Motors posted record 2024 results with EBIT-adjusted of $14.9 billion and EPS up 38% to $10.60. The company's EV portfolio achieved variable profit positive status in Q4, a significant milestone in their electrification strategy. For 2025, GM forecasts EBIT of $13.7-15.7 billion but noted the guidance excludes potential policy changes from the Trump administration. CEO Mary Barra stressed adaptability: "Whatever happens, we have a very broad portfolio of ICE vehicles and EVs that are both growing market share, and we'll be agile."

Other notable results include:

• Monster Beverage: Missed with EPS of $0.38, -2.6% below expectations

• fuboTV: Beat expectations with smaller loss of $0.05 vs -$0.16 expected

• Duolingo: Missed with EPS of $0.31 vs $0.50 expected despite 38.8% revenue growth

• Sunrun: Surprised with massive earnings beat of $1.41 vs -$0.27 expected

• Elastic N.V.: Beat with EPS of $0.63, +23.5% above consensus

That's all for this edition of Forward Thesis, where we cut through the noise to analyze the tech trends and market shifts that matter.

See a trend we should cover? Let us know.

Until next time.