04 Aug 4th August 2025
Index Movement Last Week
| S&P500 | -2.3% |
| Nasdaq | -2.2% |
| Aussie ASX200 | -0.0% |
All good things come to an end. After 13 straight days of gains, a combination of weaker than expected economic data and Trump tariffs saw some selling to kick off the month of August.
August and September are traditionally the two weakest months of the year and the first day of the month certainly went with this trend.
US employment numbers came out weaker than normal, which in itself is nothing as this monthly number does swing around a fair bit. But the prior two months were revised down by 258,000 showing maybe the economy isn’t as strong as prior numbers would have us believe.
Trump responded by firing the head of the Bureau of Labour Statistics because he didn’t like the numbers. Recall he has threatened to remove Powell from the Fed because he doesn’t like the interest rate policy also. This story feels more like a news item from China than the US. But these are the times we live in.
Friday also saw the announcement of tariff rates across the world to all countries who have not reached an agreement with the US. They average out at about 20%. It is all laughable really. I wonder what will be said about this in 3 years time. How will people look back at a president who imposed a non-sensical tax on his own residents and claim it will be paid by foreign nations?
I have a feeling other countries don’t care too much about his tariffs. Both Japan and the EU have agreed to invest hundreds of billions into the US, but neither has any intention of actually doing so. I suspect Trump know this but likes the news headline of today to boost his popularity.
The markets see through all this and are ignoring tariff rubbish. Weaker employment numbers are a different story as flat employment for a few months has often preceeded Recession. But we are a far cry from that so traders have no real concerns.
Macro-economic numbers are less important than company earnings. And they have been strong
META
Revenue was up 22% year-on-year, Daily Active Users was up 6%, Average price per Ad up 9%. It was growth all round, leading to profits being 38% higher than the same quarter last year.
If you want a growth stock – it doesn’t come much better than this. Go out and buy it today.
Microsoft
Well, maybe a growth stock can get better than META. Microsoft announced revenue growth of 18% and profit growth of 22%. Gross margin is running at a massive 69%. The big driver was the Azure cloud business which is growing at 39% year-on-year.
Microsoft is a $4trillion company growing profits at 22% per year. Just think about that for a second. It is truly phenonomal.
Amazon
Profits were up 33% on last year. Nothing else really needs to be said. But you might like this statement:
“Our conviction that AI will change every customer experience is starting to play out as we’ve expanded Alexa+ to millions of customers, continue to see our shopping agent used by many millions of customers, launched AI models like DeepFleet that optimize productivity paths for our 1M+ robots, made it much easier for software developers to write code with Kiro (our new agentic IDE), launched Strands to make it easier to build AI agents, and released Bedrock AgentCore to enable agents to be operated securely and scalably,” said Andy Jassy, President and CEO, Amazon. “Our AI progress across the board continues to improve our customer experiences, speed of innovation, operational efficiency, and business growth, and I’m excited for what lies ahead.”
When you see numbers like this from the biggest name in the index, it is easy to understand why that Index is at all time highs.
How it works
Semiconductors is a fancy name for computer chips. When I was in school I learnt about an electronic component called a transistor. It looked like a little red mushroom with three wire legs. The thing about transistors is you can set them to on or off. Basically they are the building blocks of computers. The ones and zeros.
As technology improved they discovered you could do the same thing with certain metals. The semiconductors. In the beginning they used Germanium but then discovered Silicon does it just as well. And there is plenty of silicon lying around – being sand.
This next step is like something from a science fiction movie. They somehow use light to etch the silicon to make transistors.
The problem is light has a wavelength of about 360nanometres. But chips have been so small they are now making 3nanometre chips.
They could get down to about 11nanometre chips by using lenses to focus the light but to get down to 3nanometres you need to call in Mr Spock from Star Trek
There are only a handful of people in the world that know how to do this. A company called ASML makes the machines. No one else can. They can only make about 50 machines a year and they send them to a customer in 4 jumbo jets with a staff to build it on site for the customer.
The machine superheats tin into molten tin and then they fire a laser at the molten tin with a level of precision that takes the same number of mathematical calculations as it did to land a spaceship on the moon. Except you have to do these calculations 50,000 times a second.
Get this right and you create Ultra-Violet light which enables the 3nanometre semiconductor creation.
As I explained, ASML is the only company that can make these machines and Taiwan Semiconductor is the only company that knows how to use these machines to make 3nanometre chips.
Everything that happens in the future will need these super powerful chips. Computers, cars, planes, your fridge….everything.
Consider the importance of being able to manufacture these chips. At present it just happens in Taiwan. This is why the US is trying to bring production back to the US. It is of national importance. What is more important for national defence – making a fighter plane or making your own semiconductors?
But, I digress. The point here is only a handful of people in the entire world know how to make these semiconductors and they all work at Taiwan Semiconductor (TSM).
Taiwan Semi makes the chips for NVidia, Intel, Qualcomm, ARM….basically everyone.
When you are the only company in the world that makes the one thing every other company wants…..you can charge what you like.
The level of alchemy involved in making these chips is so complex it is almost impossible for anyone else to compete with you. Even if they knew how, they would need to buy the machines from AMSL and Taiwan Semi has purchased their entire next two years worth of production. No one can come in and compete with Taiwan Semi
Making them a very compelling buy story. Add them to your portfolio now.
Warning
Stock values can go down as well as up. It is possible to lose 100% of your investment in a stock. Any advice given by Capital 19 is general advice only and does not take your personal circumstances into account and might not be suitable for you.