Long before Free Fire — developed by Garena, the gaming arm of Sea — was awarded Best Shooter Game at the Sensor Tower APAC Awards and became the most downloaded mobile game worldwide in 2023, some of us will remember Doom 30 years ago.
The original Doom was considered one of the first pioneering first-person shooter games for IBM-compatible computers. It introduced features such as 3D graphics, networked multiplayer gameplay and support for player-created modifications. With millions of copies sold, the game spawned numerous sequels, novels, comics and film adaptations. Gamers now eagerly await Doom: The Dark Ages, which is expected to be launched in 2025.
Twists and turns aplenty
The launch of Doom will come after the US election in November, which until recently looked like a reincarnation of Donald Trump and his vice-presidential candidate JD Vance, who once called Trump “Adolf Hitler”. Vance’s ability to flip-flop and be elastic with the truth makes him a younger copy of Trump and the true inheritor of Maga, some say.
In the latest twist, President Joe Biden has bowed out of the election race, with vice-president Kamala Harris poised to become the Democrats’ nominee. A Reuters/Ipsos poll conducted over July 23–24 found Harris had lost no time in opening up a marginal two-percentage-point lead over Trump. That compares with a marginal two-point deficit Biden faced against Trump in a poll a week before his July 21 exit from the race. Given anything can happen between now and polling day, the bid for the White House remains too close to call.
If Trump wins, abandoning Ukraine and continuing the trade war with China are likely outcomes, US businesses, including those from Silicon Valley, have started to switch sides. Previously, Vance was supported by Peter Thiel, one of Silicon Valley’s top venture capitalists (VCs) and conservative contrarian, who had backed him for the Senate. Beyond the mercurial Elon Musk, who is planning to throw US$45 million ($60.5 million) a month to support Maga’s bid for the presidency, according to The Wall Street Journal, the list of legendary Silicon Valley VCs who support Maga now includes Marc Andreessen and Ben Horowitz, with what The Economist calls “sorry mum” pretend sheepishness.
See also: Trump demands 'commitment' from BRICS nations on using dollar
Traditional Californian Democratic supporters were dismayed by the Biden administration’s policies of supporting Big Tech against “Little Tech” with the SEC’s (Security Exchange Commission) crypto and blockchain innovation regulations as a start. Another point of contention is Biden’s latest budget proposal, including a 25% tax on unrealised capital gains for the wealthy with over $100 million, which could kill the VC industry. In contrast, Trump wants more tax cuts. Ultimately, the realignment in the Valley was borne out of economic self-interest. Even Mark Zuckerberg has moved to the centre, praising Trump as a “badass”, refusing to endorse either candidate and reactivating Trump’s accounts, which were suspended after the Capitol insurrection.
The third issue concerns regulations for AI (artificial intelligence), which Chew On This was in favour of last year. Although European regulators have started to rein in AI, the matter is getting scant attention from US regulators. It is the belief of Little Tech that overregulation and Biden’s executive order requiring powerful AI models to be reported to the government for safety reasons, work against them in favour of Big Tech which has more resources. However, what is clear is that both the left and right in the West agree on what to say about Singapore’s Protection from Online Falsehoods and Manipulation Act (Pofma), which narrowly deals with fake news when the pressing issue society faces with AI is more about lack of ethics about how it could be used. Imagine an insurance industry that no longer pools and shares risks but only insures those whose health data it is satisfied with — up to the point when its predictive models say you are about to fall sick.
As the prospect of political reorder gets closer, businesses which generally prefer certainty over creative destruction on the policy front get nervous. Would Tesla, this year’s laggard of last year’s Magnificent Seven and the AI boom, be the sole survivor of a potential Trump presidency? After all, Trump is reputed to neither forgive nor forget.
See also: BOK surprises with rate cut as Trump win boosts trade risks
A Y2K Apocalypse moment
The power of a globalised tech world order concentrated in the hands of a few mostly American tech giants has long been one to marvel at since the dotcom bubble around the year 2000. Investors who stuck it out with Microsoft, Alphabet and Nvidia versus Yahoo and pets.com are now reaping the bonanzas. Last week, though, the global risks of concentration and how extensive US tech plumbing globally came to the fore.
The rollout of CrowdStrike Holdings Inc’s faulty Falcon upgrade for Microsoft Windows exposed the fragility of tech infrastructure used by airlines and airports from the US to Mumbai, the London Stock Exchange’s data feeds and order routing systems for brokers, as well as car parks in Singapore, where operators were kind enough to leave the barriers raised during the outage. Blue screens lit up everywhere as Microsoft’s early estimates by the weekend suggested that 8.5 million computers and servers using Windows were impacted, requiring up to several reboots even after the software patch was installed upstream. CrowdStrike closed 11% lower on June 19, while Microsoft took a sideswipe of less than 2%.
There were even a few blue screens in China, but these mainly belonged to the Windows operating system on the computers of foreign companies. Trending on Weibo were messages thanking Microsoft for giving some office workers a day off. However, in China, no critical infrastructure like power or transportation was affected, thanks to China’s tech decoupling from the US, which had stemmed from a desire to achieve self-sufficiency, caution about US tech bugs of a more sinister kind, and America’s industrial policy that started with targeting Huawei initially. Meanwhile, Russian missiles continued to pound Ukraine even as it was business as usual in a good part of the world, which is not dependent on US tech.
For the rest of the world, this was the Y2K Apocalypse we had braced ourselves for back in 2000 but did not happen as images of long queues in airports popped up on news feeds worldwide. Users vented their frustrations about being unable to access cloud services while Google searches for local or home storage devices surged. To put it into perspective, the WannaCry and NotPetya cyberattacks in 2017 hit roughly 300,000 computers in 150 countries. While those attacks were costly, they also led to a bonanza for companies providing cyber and tech defence tools, of which CrowdStrike was a beneficiary.
Before CrowdStrike’s fall, its stock had doubled in the last 12 months to US$83 billion at a paltry P/E multiple of 630 times as spending on tech security multiplied fourfold from US$50 billion in 2011 to a forecast of $200 billion this year. CrowdStrike’s concentration of users has also increased. CrowdStrike, together with Microsoft and one other software company, controls a 50% share of the modern endpoint security (MES) business for laptops, PCs and other devices. A friend of mine messaged me on July 19 before the US markets opened when the pre-market was down as much as 20%, suggesting that this was an opportune time to buy the stock, but readers of this column will not be surprised that I demurred. Even if Crowdstrike is down 90%, a stock with a P/E multiple of 63 times is still not a bargain in my book.
The last time the US tech markets were this frothy was in 2021 and during the dotcom era of the 2000s. “This time is different” is always the mantra of the market. For the last couple of years, they have been involved in all things “ABC”, namely AI, big data and cyber security. While these market bubbles and mania will always be around, one should assess the desire for a punt and leap of faith into every downdraft and correction. Although it has been rewarding since 2H2023, Cassandras, of which I am one, remain sceptical and would instead focus on actual earnings and valuations, lest we catch the knives that are just beginning to fall.
Sink your teeth into in-depth insights from our contributors, and dive into financial and economic trends
Let the reordering begin
US markets were illuminating from mid-July, spurred by some focus on real earnings that came through bottom-up and falling inflation signals, which suggested that the Fed is now more than ever ready to cut interest rates in case markets and US politics become messy. The small-cap Russell 2000 Index shot up 7% while the S&P 500, which returned 14% in 1H2024 — driven by a few mega caps but without Tesla — corrected 3%. According to Deutsche Bank, this was one of only nine of the last 37 weeks this year.
Passive funds, index trackers and momentum traders may have profited from the US rally since 2023. However, many have pointed out how narrow this rally has been. Some active fund managers have been underperforming as they avoided holding concentrations of a few stocks in case of a CrowdStrike-like setback.
The broadening of the S&P stocks that led the rally with a shift in sector leaders, which Chew On This pointed out from March to May, was healthy as market leadership changed. The megacaps bounced back after Nvidia’s results from June. However, in July, the Straits Times Index rose inexplicably. The increase was puzzling because the index is dominated by three banks with over 40% of an index in a current falling forward rate environment. Last week, over 1,500 US stocks of the Russell 2000 Index rose. In addition, the number crunchers at The Financial Times calculated that an equal-weighted version of the S&P 500 has outperformed the market-cap-weighted version, rising 3% against the latter, which fell 1.5%.
Investors appear to be voting with their pockets, moving away from extreme valuations and hopes of future growth to cyclical companies and earnings that can be purchased on the cheap. While not yet in free fall, Nvidia’s retreat to $117.93 from $135.83 on July 10 takes it below the June 24 neckline of $118.11. If it falls through, then together with the June 18 level of $135.58, a bearish double-top is formed.
Only time will tell if the Oct 21 peak we called for tech stocks and crypto is correct. Those of us long in the market’s teeth will know that the crowds that blow the bubbles up eventually go on strike, and the doom that follows can go a long way before the next patch or fix is released. Stay safe.
Chew Sutat retired from Singapore Exchange S68 S68 after 14 years as a member of its executive management team. During his watch, the exchange transformed from an Asian gateway into a global multi-asset exchange, and he was awarded FOW’s Lifetime Achievement Award. He serves as chairman of the Community Chest Singapore.
