Weekend Update #229
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Equity markets continued to be driven by developing trade and fiscal policy measures this week, with the S&P 500 ending above its level prior to President Trump’s April 2nd Liberation Day tariff measures. On Monday, the U.S. and China reached an agreement to reduce tariff levels significantly while implementing a 90-day period for trade discussions.
U.S. tariffs on China are now 30%, compared to the peak level of 145% reached on April 9th and the pre-Liberation Day level of 20%
China’s tariffs on the U.S. are now 10%, compared to the 125% peak reached on April 11th and back at the same level prior to Liberation Day
Progress was made during President Trump’s 4-day trip to the Middle East with $600 billion in investment commitments from Saudi Arabia, Qatar’s $1.2 trillion economic exchange with the U.S., and the UAE’s $1.4 trillion 10-year investment pledge focused on AI, semiconductors, manufacturing, and energy. Nvidia announced it will initially deliver 18,000 Blackwell chips to Humain, Saudi Arabia’s new state-sponsored AI company. In addition, AMD signed a $10 billion collaboration with Saudi Arabia and Qualcomm signed initial agreements.
Another key policy measure announced Monday was the “most-favored-nation” pricing to be implemented on prescription drugs and biologics. This measure outlines that the U.S. government will only pay the lowest price for pharmaceutical products that other countries do. Aimed at sharing R&D costs most equally with foreign nations, the Trump administration will use tariff pressures to negotiate higher drug prices to be implemented in foreign nations while using regulatory pressures to ensure U.S. pharmaceutical companies lower prices domestically.
In economic data for the week, NFIB’s Small Business Optimism slightly surpassed economists’ estimates but fell in April as businesses struggled with inflation and shoring up labor quality. CPI for April rose by less than economists had projected, even after President Trump’s Liberation Day announcements rose uncertainty and inflation expectations. Year-over-year CPI rose 2.4%, which was the coolest pace since February 2021. Retail Sales in April missed economists’ estimates excluding automobiles and gas as consumers tightened their spending during the period of uncertainty. PPI in April showed significant deflation, falling 0.5% month-over-month and signalling that producers are taking on inflation pressures rather tahn passing on those costs to customers. Initial Jobless Claims were in line with expectations at 229,000 for the week ended May 10th. The University of Michigan’s Consumer Sentiment Index showed consumer expectations continued to deteriorate, with year-ahead inflation expectations reaching 7.3% — a new high since 1981 — and 83% of consumers reporting cuts to their usual spending plans.
Friday’s Close (Weekly Performance)
S&P 500 5,958.38 (+5.27%)
Nasdaq 19,211.10 (+7.15%)
Dow Jones 42,654.74 (+3.41%)
Thank you Blue Room Senior Analyst JARED FENLEY.
Not long after the Cabinet Meeting of the First 100 Days (1), President Trump traveled to Saudi Arabia, in what would have been his first foreign visit in his second term, had it not been for a trip to the Vatican in remembrance of Pope Francis.
At the Forum, the President delivered a masterful address serving both as a progress report on the State of the Union in America, as well as an emerging foreign policy framework for renewed American preponderance with Saudi Arabia taking center stage as a key military and economic ally.
Saudi ‒ U.S. Investment Forum 2025 Ridaydh, Saudi Arabia May 13, 2025
American Businesses Positively Mentioned: NVIDIA, Amazon, AMD and Oracle
Notable Entourage: Elon Musk, Jensen Huang, Alex Karp, Larry Fink, Steve Schwarzman, Sam Altman, Reid Hoffman, and many more
Dear Investor:
The U.S. economy continues to show resiliency. Nonfarm payrolls continue to grow, and initial jobless claims data remains benign. Consumers are spending despite concerns evidenced in plunging soft data. Today’s University of Michigan Consumer Sentiment score of 50.8 registered among the lowest levels in 50 years.
This data covers the period from April 22 to May 13, so the positive impact of progress in trade negotiations with China and the recent foreign policy visit to Saudi Arabia would not be factored into the survey responses.
The market has bounced definitively off the peak fear point following Liberation Day, and is poised to push higher with increased momentum in the Administration's agenda. Currently, the Big Beautiful Bill is receiving push back, but a deal here could boost sentiment and economic vitality in the midst of tariff driven price increases on consumer goods which will start to be felt this summer. With the President returning from Saudi Arabia, it is possible that we have progress on the tax bill soon.
Although I am worried about China's follow through on progressing trade negotiations, it is impossible to calculate how the Chinese Communist Party will assess their optimal long term stance to strategic equilibrium with the United States. In his speech, President Trump said he would open the Chinese markets to U.S. companies, which would imply allowing U.S. technology companies to operate in China.
However, as the Grand Strategy of Xi Jinping and the CCP is to fracture from the United States economic system, the spectre of technology assimilation seems exactly opposite of their goals, and such a move would echo the Opium Wars of the 19th century style. But it would be massively positive for Big Tech, and set the stage for stock market averages to power new records.
Taiwan, I believe, has already been flatly refused by President Trump as a bargaining chip. We are going to stand firm, without inciting separation anxiety, at least until TSMC is able to onshore production here, which will be a ten year process.
As the Trump Administration executes its broad agenda, I continue to gain conviction that we are invested in the companies which can exploit the growing demand for products and services in advanced computation, intelligence, and life sciences innovation.
COMPANY PROFILE
Palantir Technologies Inc. is a U.S.-based software and data analytics company specializing in artificial intelligence (AI), machine learning, and big data solutions. Founded in 2003, the company provides advanced data integration and analysis platforms primarily for government agencies, defense organizations, and commercial enterprises. Its core products include Palantir Gotham, designed for intelligence and defense applications; Palantir Foundry, which helps businesses integrate and analyze complex data sets; and Palantir Apollo, a continuous delivery platform for AI and software deployment. Palantir is known for its deep ties to the U.S. government, particularly in national security, defense, and law enforcement, but has expanded its commercial business significantly in recent years. The company has positioned itself as a leader in enterprise AI, emphasizing its ontology framework, which enables organizations to operationalize large language models (LLMs) effectively. With a strong focus on data security, transparency, and operational efficiency, Palantir continues to grow in both the government and private sectors, aiming to be a cornerstone of AI-driven decision-making.
EARNINGS SUMMARY
Palantir reported strong first quarter results, with revenue growth accelerating to 39% year-over-year, driven by surging AI demand, particularly in the U.S. The U.S. commercial business grew 70% year-over-year, up from 63% year-over-year in Q4, and the U.S. government segment grew 40%, similar to Q4. Profitability improved, with a 44% adjusted operating margin, leading to a record Rule of 40 score of 83, while free cash flow grew 139% year-over-year to $304 million. The company ended the quarter with $5.97 billion in total remaining deal value, an increase of 45% year-over-year and 10% sequentially, along with a solid balance sheet with $5.4 billion in cash.
PLTR is well-positioned for continued growth as enterprises shift from AI experimentation to scaled deployment. At the same time, the U.S. government’s drive for modernization and efficiency, along with rising global defense spending (particularly among NATO allies) provides strong tailwinds for long-term contract growth and international expansion.
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