VIDEO: How the Outcome of Trump’s Conversation With Xi Will Impact Our Holdings

In today’s Daily Rundown video, Chris Versace recaps the latest on President Trump’s tariffs and why we’re awaiting the outcome of Trump’s conversation with China's President Xi Jinping. 

The outcome of that conversation could either inject some renewed volatility into the market or lead us to lighten up on our recently-added inverse ETF positions. 

Chris also touches on quarterly results from NXP Semiconductor NXPI, tying earnings call comments to two Portfolio chip holdings. Finally, Chris previews Alphabet’s GOOGL earnings due after Tuesday's market close, sharing what he expects to hear and what he wants to hear more about.

Transcript

CHRIS VERSACE: Hey, everyone. Chris Versace here, Tuesday, February 4. Stocks are generally moving higher today. But we are waiting for the outcome of President Trump's expected conversation with China's President Xi. The topic, as you can imagine, is going to be about tariffs.

In our opening comments this morning, we discussed China's retaliatory tariffs, ones that were in response to the new ones that President Trump instilled over the weekend and went into effect today. Now, our thinking is that if the outcome between the Trump/Xi conversation is similar to the one that we saw yesterday with Mexico and Canada, and by that I mean those tariffs being pushed off for 30 days, well, the market would welcome that. And it would be a reason for us to contemplate lining up on the inverse ETF positions that we added to the portfolio to protect it yesterday.

However, if the conversation between Trump and Xi is not-- let's call it-- not constructive, not productive, and Trump responds with a step up in tariffs on China, our thinking is that is going to bring back some uncertainty and volatility in the market. And it also sets the stage for Trump when he turns his tariff sights on the European Union.

Now, when we added SH and PSQ inverse ETFs yesterday, we shared that we would be following the news cycle very closely and we'd look to remove the positions when the time is right. Well, we're going to have to continue to watch the news cycle and make an "announcement by announcement" decision on this.

The bottom line is that as long as Trump continues to inject trade and tariff uncertainty into the marketplace, continues to flex on those tariffs, the prudent thing could be to hang on to these inverse ETFs. But remember, this is a tactical position. We do not expect to have it long term. And we will continue to evaluate the position of those two ETFs in the portfolio on a day-by-day basis as we get more information.

So while we wait to see what happens between Trump and Xi, let's turn and talk a little bit about NXP Semiconductor. They reported last night. And we really focus in on two segments when it comes to NXP-- mobile and their communications infrastructure.

So when they talk about the forward view for the current quarter on the mobile business, well, their guidance kind of matches what we've been hearing so far. That's down single digits on a year-over-year basis. We heard this from Qorvo. We heard something similar from Apple and others. And all of this sets the stage for Qualcomm's earnings, which come after the close on Thursday.

But as important with the mobile business inside of Qualcomm, we really want to see good progress and see the outlook for further progress on the AIPC ramp. Remember, this is one of the key programs inside of Qualcomm as it looks to diversify itself away from Apple. So we do want to see really good progress on that. We'll also pay close attention to, obviously, what it says about the smartphone business and other connected devices for 2025.

Now, turning back to NXP Semiconductor, communications infrastructure-- now, this was the comment inside of NXP that was a little surprising at first blush. And what they said is that they see the business down mid-20% range compared to the year-ago March quarter and down in the upper-20% range compared to the December quarter.

Now, I have to say that is a very different outlook compared to what we've heard from other companies that have reported thus far. So far, the overwhelming comment and comments that we've collected have been about the rebound in communications infrastructure and enterprise networking starting to take hold. We've been very, very focused on this because those are two businesses that Marvell participates in outside of AI and data center.

So, again, comparing and contrasting various comments, this sounds much more like NXP is losing market share. They wouldn't be the first company in the chip space to lose market share to the likes of Marvell and others. But we're not going to assume this.

We are going to continue to mine comments from other chip companies as they report ahead of Marvell's upcoming earnings report. Our suspicion is that, yes, this is more NXP losing market share. But again, let's make sure, and we'll go from there.

OK, so with that, I also would just want to talk quickly about Alphabet. The quarterly results come out after the close. As we shared in our opening comments this morning, the market consensus is EPS of $2.13 on revenue of $96.67 billion.

Candidly, we do expect to see strong performance from digital advertising across Google search and YouTube, really benefiting from the shift of analog to digital advertising but also greater efforts to monetize YouTube with digital advertising. And remember, the December quarter included the 2024 presidential election cycle. So it should be some very good prints for those respective businesses.

Two other things that we're going to be looking for, one is going to be Cloud. We want to see continued solid growth at least along with its peers, Microsoft, Meta so far. But we also want to pay really close attention to the margin line. That business has becoming increasingly profitable, not as profitable as the search- and advertising-related businesses but incrementally more profitable. So we will want to pay attention to the 2025 margin outlook for Google Cloud.

One or two other things as I think about it regarding Alphabet that we want to pay close attention to, one is, do they say anything about their proprietary AI chip business? Remember, when Meta reported last week, they didn't really say anything about that. But we will be listening closely for those type of comments. Why? Well, because of our position in Marvell. And they are a named partner for that effort inside of Alphabet.

And then, finally, we will be paying close attention to capital spending comments from Alphabet as it relates to 2025. The Street consensus is 59 to 60 billion or so. That's up from about 51 to 52 billion in 2024. If we see a stronger than expected figure, yeah, that will be another positive data point for our positions in Nvidia and Marvell but also for Eaton as it relates to data center construction.

And remember, Eaton had some very, very nice comments about that multiyear outlook last Friday. If you missed that alert, please be sure to take a look at it. Or you can catch the recap in Friday's January monthly roundup.

That's the bulk of our video today. But I will share that coming up this afternoon, we will have some thoughts and comments based on what Cummins [INAUDIBLE]-- Cummins, excuse me, had to say during its earnings call. What we'll be focusing in on, two things-- you probably know-- data center and any other insights for non-residential construction.

So please be sure to continue checking your emails, your Alerts. We want to make sure you're getting our latest thoughts. And if we happen to make any moves with the portfolio, we want to make sure that you are right there with us. Thanks for watching.

At the time of publication, TheStreet Pro Portfolio was long GOOGL.