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April 11, 2025
The Lithography Inflection Point - How Two Different Approaches to EUV Could Reshape the Semiconductor Industry
By
Kristal Investment Desk
This week has been a whirlwind of tech earnings, strategic pivots, and macroeconomic data releases.
Europe's economy might be crawling, but its markets are sprinting. The continent closed 2024 with a mere 0.1% GDP growth, earning the dubious honor of global laggard. Yet European equities are enjoying their strongest start to a year in recent memory. This apparent paradox has a simple explanation: banks.
European financial institutions, commanding a hefty slice of major indices, have undergone a remarkable revaluation. With dividend yields hovering between 7-8%, these previously unloved stocks have found new admirers as rate cut expectations reduce sector risks. The combination of high yields and diminishing concerns has proven irresistible to yield-starved investors.
But banks aren't the only story. Materials stocks have bounced back from peak pessimism, while luxury goods makers have shrugged off China concerns. Meanwhile, the region's modest but growing software sector has caught the AI euphoria that has propelled U.S. tech stocks to new heights.
The rotation from expensive U.S. equities to Europe's relative bargains has added momentum. Now, whispers of a Ukraine peace plan offer a tantalizing catalyst. Peace dividends would extend beyond immediate corporate beneficiaries to broader consumer confidence and GDP growth.
The wild card? Brussels' regulatory stance. Even baby steps toward deregulation could accelerate the rally. For now, investors seem content betting that in Europe's case, things are so bad, they're good.
Meanwhile, emerging markets paint a contrasting picture. Chinese equities consolidated gains, buoyed by improved domestic data and softening U.S. trade rhetoric. India's market, however, has lost its shine, continued decline as earnings disappoint and economic uncertainties mount.
January's inflation data presents a complex picture for monetary policy. The hotter-than-expected CPI print (0.5% vs 0.3% expected) suggests persistent inflationary pressures, particularly in food and transportation services. However, cooling shelter inflation and declining oil prices (-10% over 30 days) provide some relief.
The sharp retail sales contraction (-0.9% vs -0.2% expected) warrants attention, potentially signaling consumer fatigue. Meanwhile, robust industrial production (0.5% vs 0.3% expected) indicates resilient manufacturing activity.
The divergence between strong industrial metrics and weakening consumer data suggests potential economic rebalancing. This mixed picture could complicate the Federal Reserve's rate decision timeline, though market expectations for rate cuts remain intact for 2025.
In a quarter where tech spending remains under scrutiny, Datadog proved its observability platform is becoming indispensable. Revenue surged 3.1% above estimates while billings outperformed by 6%, suggesting strengthening enterprise demand. The company's aggressive push into AI monitoring, with 3,500 customers now using its AI integrations, positions it well for the next wave of enterprise tech adoption. At 67x forward earnings, the premium valuation reflects its unique position at the intersection of cloud, security, and AI observability. Key Takeaway: Strong execution amid tech scrutiny, but premium valuation demands continued flawless performance.
Shopify's transformation from a simple e-commerce tool to a global commerce operating system is bearing fruit. Revenue surged past expectations with a 2.9% beat, while EBITDA outperformed by 5%. The real story lies in its platformization strategy - offline revenue grew 26% year-over-year, while B2B revenue maintained triple-digit growth for the sixth consecutive quarter. The company's decision to slow margin expansion in favor of growth investments signals confidence, though at 75x forward FCF, the premium valuation demands flawless execution. Key Takeaway: Bold platform expansion succeeding, but growth-over-margins strategy raises stakes at current valuation.
Despite missing revenue estimates by 0.7%, Chipotle's focus on operational excellence is paying off with improved throughput and lower GM turnover. The company's investment in automated solutions and international expansion signals confidence in its long-term trajectory. Restaurant-level margins remain under pressure from California wage laws and food costs. Key Takeaway: Short-term headwinds mask compelling operational improvements and global growth potential.
SoFi continues its march toward becoming a comprehensive financial platform. The technology platform integration shows promise despite initial delays. Personal loan business momentum remains strong, while the company maintains confidence in achieving 2026 earnings targets. Key Takeaway: Strong execution in core lending, but tech platform success crucial for long-term value creation.
The Trade Desk's first revenue miss in eight years (-2.4% vs estimates) marks a rare execution misstep. Leadership's prioritization of product quality over short-term numbers demonstrates long-term thinking, though organizational restructuring caused near-term disruption. Key Takeaway: Temporary execution hiccup in an otherwise stellar growth story; platform improvements could accelerate growth.
Capitalizing on favorable market conditions, Robinhood delivered strong growth across all revenue streams. The Robinhood Gold subscription reached 3 million users with 30% adoption rates in new cohorts. However, the cyclical nature of the business remains a concern. Key Takeaway: Excellent execution in bull market conditions, but business model remains highly sensitive to market cycles.
Airbnb's $225 million investment in "Experiences" relaunch could redefine its growth trajectory. While Q4 showed resilience with revenue beating estimates by 2.5%, the success of this diversification effort is crucial. The tech stack overhaul completion enables faster product iteration. Key Takeaway: Core business solid, but Experiences relaunch critical for maintaining growth momentum.
Despite historically poor sports book outcome luck, DraftKings showed resilience. The structural hold rate improvements and Jackpocket acquisition integration demonstrate strategic evolution. Market share gains continue despite promotional spending optimization. Key Takeaway: Strong execution despite headwinds; structural improvements could drive sustained profitability.
Palo Alto's platform-first approach shows momentum with two-platform customers up 50% YoY. The integration of Cortex Cloud signals deepening competitive moats. Confidence in maintaining FCF margins despite shift to deferred revenue models suggests operational strength. Key Takeaway: Platform strategy driving larger deals and stickier relationships; transition costs worth long-term benefits.
Monday.com's impressive 32% revenue growth and improving net retention rate demonstrate platform stickiness. Enterprise customer success with 39% growth in $50k+ accounts validates upmarket strategy. At 86x forward earnings, valuation reflects high expectations. Key Takeaway: Exceptional execution and enterprise traction justify premium valuation.
Despite volume growth miss, Adyen's higher take rate and wallet share gains demonstrate pricing power. Single-platform approach continues resonating with enterprise clients. At 45x EBITDA, valuation prices in continued execution. Key Takeaway: Strong competitive position and customer satisfaction offset near-term volume concerns.
Xi Jinping's planned symposium with China's tech titans marks a striking shift in Beijing's stance toward its entrepreneur class. When Jack Ma, Alibaba's co-founder, disappeared from public view in 2020 after criticizing regulators, it signaled winter for China's tech sector. Now, his expected attendance alongside Tencent's Pony Ma and rising stars like DeepSeek's Liang Wenfeng suggests spring may finally be arriving.
The timing is hardly coincidental. As US chip restrictions bite and DeepSeek disrupts the AI landscape, Beijing needs its tech sector more than ever. The market's reaction – sending Xiaomi to record highs and lifting Alibaba and Tencent shares by 6-7% – suggests investors believe this olive branch is more than mere theatre.
But reconciliation comes with strings attached. Xi's vision of "common prosperity" and calls for "patriotic" enterprises remain the framework. For tech leaders, the price of peace may be closer alignment with national strategic goals, particularly in AI and semiconductor self-sufficiency. In China's tech sector, it seems, the invisible hand now wears a velvet glove.
Meta's planned investment in humanoid robots marks a significant pivot in its AI strategy. Beyond the metaverse, this move signals an ambitious bet on physical world automation. The investment could provide valuable differentiation in the AI arms race, though execution risks remain substantial.
PayPal's integration with Norwegian Cruise Line for U.S. reservations represents a strategic win in the travel sector. This partnership could pave the way for similar deals, though competitive pressure from Apple Pay and other digital wallets continues to intensify.
This newsletter is for informational purposes only and should not be considered as investment advice.
By
Kristal Advisors
February 15, 2025
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April 11, 2025
By
Kristal Investment Desk
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We are licensed in Singapore, Hong Kong and India. Kristal Advisors (SG) Pte. Ltd. presently operates under the CMS license by the Monetary Authority of Singapore (MAS). Kristal Advisors (HK) Ltd is licensed and regulated by the Securities and Futures Commission (SFC) to carry out Type 4 and Type 9 regulated activities and is not involved in the discretionary management of any collective investment scheme. Kristal Advisors Private Ltd. presently operates as a Registered Investment Advisor under the jurisdiction of the Securities and Exchange Board of India (SEBI).
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Copyright © 2023 Kristal Advisors (SG) Pte. Ltd. UEN: 201711235E
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