### M&A Outlook and Semiconductor Industry Trends Post-Election

M&A activity is expected to surge under the next administration, benefiting the market significantly.

### M&A Outlook and Semiconductor Industry Dynamics Under New Administration
* 📈 M&A activity is expected to increase with the incoming administration in 2025, as merger guidelines enacted by **President Biden in 2023** are likely to be rolled back under **President-elect Trump**, creating a **more favorable regulatory environment**.
* 💼 The anticipated changes are expected to boost **"animal spirits,"** leading to a rise in both **M&A and IPOs** during 2025, which is seen as a **positive development for the market**.
* 💻 Concerns have been raised about the effectiveness of the CHIPS Act, especially after Intel's recent layoffs of **15% of its workforce**, questioning if the U.S. is backing the **right players** in the semiconductor sector.
* 🔍 Nvidia, which has not received CHIPS Act funding, continues to thrive by leveraging partnerships with TSMC and other chip manufacturers to **maintain its position in the industry**.
* 🛠 The potential for tariffs on TSMC under Trump's administration could incentivize **domestic production**, but Nvidia may respond by **raising prices** due to **high demand and substantial gross margins**.
* 🚀 Despite increasing competition from companies like Amazon and AMD, Nvidia is expected to perform well, projecting a **70% revenue increase** in the next quarter, indicating **strong market demand**.
* 📊 Investors are advised to **diversify their portfolios beyond the "Magnificent Seven" tech stocks**, which are trading at **high forward earnings multiples**, as mid-cap stocks present a more attractive opportunity with **lower valuations and potential growth**.
* ⚖ As the market shifts towards 2025, a focus on sectors outside of tech, particularly **mid-cap stocks**, may provide a **better risk-reward balance** as earnings in major tech companies are expected to **decelerate**.

Just dig in on, for example, M&A hopes
around this new administration coming in 2025 and deals getting done.
Chips being supported or not supported as a sector.
What do you make of it? Well, let's start with M&A first.
And we do think that M&A will increase.

You know, you have pretty rigorous
merger guidelines passed by President Biden in 2023.
We reckon those will be undone under President-elect Trump.
And remember, they had lowered the guidance threshold at a company being
seen as anti-competitive.

So we do think it's going to be a
friendlier environment for regulation, a friendlier environment for M&A, and
expect that animal spirits, M&A and IPOs will pick up in 2025.
So we think this is one of the positives

coming from Trump.
Just quickly on the CHIPS Act and Intel, are we back on the wrong horse there?
I mean, this is supposed to create jobs. They just laid off 15% of the workforce.
And I kind of look at and think, Nvidia

didn't get any money from the CHIPS Act
and it's actually doing a pretty darn good job of actually supplying the chips
industry. So I think this is a program is hard to
change and removes these legislative programs.
It's not a program that President-elect

Trump favors very much.
I think he called it a really bad program.
So stay tuned on Nvidia, though. They basically get TSMC and other chip
makers to produce. This is all about on shoring and making
sure that chips can be made in the

United States.
When you're looking at a video and indeed its exposure, whether it be
selling into China or indeed depending on a supply chain that is in many ways
related to Taiwan. How does that factor into an investment
thesis?

Well, as you know, Trump has said
tariffs, the most beautiful word in the English language.
So, you know, maybe Trump just use some tariffs here on TSMC because that would
encourage them to think about it in

part, by the way, they were part of the
CHIPS Act as well. So they did receive some subsidies
there. But, you know, that might encourage them
to accelerate production in the United States.
Now, how will Nvidia respond?

I don't know which 74% gross margins and
it seems like insane demand and Jensen Huang's words it seems like they're just
going to raise prices. So you know if we get some tariffs on
TSMC which I wouldn't be surprised, I

just think Infineon will end up passing
that on to its demand hungry customers. It feels like you've got some nuance
about which horses you should back, but more broadly, the winners are likely to
continue winning into the next

administration.
Is that what you're articulating? Is it still good to be long, big tech
here? I mean, let's just talk about a little
bit of the winners in semiconductor. You know, at the end of the day,
Nvidia's clearly in pole position,

monopoly position, I mean, more demand
and supply, but competition is coming. Remember, 40% of their datacenter
customers are also trying to compete with them.
Amazon's coming pretty close here in developing a chip.
Now I understand it's 40% cheaper.

Not really sure.
The performance benchmarks with respect to training and inference, they haven't
been published and it's not clear it's in production mode, so to speak.
So let's see what happens. And of course, to a certain extent, AMD
and Intel are fast trying to be

competitors as well.
So competition is on the way and we should expect to see more of that.
You know, people are looking at the price of video chips.
The fact that they can't get access and are trying to diversify their supply
sources.

And that makes sense, right?
So we do expect competition to come as we look forward now.
I don't say this is a key one. I think in video should have another
blockbuster quarter. Certainly they were pretty clear about
it.

They expect revenues to be up 70% in the
next quarter and they normally beat that number.
So let's see where that comes out. Customers look at the price of the
chips. Investors look at the price of the stock
with Nvidia trading at 46 times

future earnings.
Many have been perhaps taking bit of profit when you're looking at Tesla
that's trading at 141 times future earnings.
What do you make about the optimism baked into that stock post-election?
Well, Tesla is clearly a special child at the
moment, given the relationship between

Elon Musk and Trump.
And, you know, and these stocks, these Magnificent Seven, you know, on average
they're at about 35 times forward earnings at the moment.
And that means makes them very vulnerable to disappointment.
Right.

So one of the themes that we've had on
this year is, you know, tech is fine. We believe in China.
You need to diversify beyond just those Magnificent Seven technology shares that
have fueled the market's advance.

And we think midcap in particular,
trading at about 13, 14 times earnings up close to 10% already this month is an
excellent beneficiary of larger potentially corporate tax rate cuts,
manufacturing renaissance and a better

outlook for growth in the United States.
So there are other things you can do and diversify away from tech, by the way,
where earnings are expected to decelerate in the so-called Magnificent
Seven as we head into 2025, where

they're supposed to accelerate in the
rest of the market. And so I think that's a really nice
way to still look to return, participate, but protect some of that
valuation. Potential downside risk in tech.

M&A Will Increase Under Trump: AlTi Tiedemann's Curtin

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Bloomberg Technology

M&A activity and regulatory changes under the new administration

Increased M&A activity is anticipated due to expected changes in merger guidelines.

President Biden's rigorous merger guidelines are expected to be reversed.

A friendlier regulatory environment is foreseen, leading to increased M&A and IPO activity.

Concerns raised about the CHIPS Act's effectiveness, citing Intel layoffs.

Nvidia's success despite not receiving CHIPS Act funding is highlighted.

President-elect Trump's negative view of the CHIPS Act is mentioned.

Discussion on the impact of the CHIPS Act on onshoring and supply chain related to Taiwan.

Potential use of tariffs and its impact on the semiconductor industry

Trump's potential use of tariffs on TSMC to encourage US production is discussed.

TSMC's participation in the CHIPS Act and potential impact of tariffs on Nvidia's response are considered.

Infineon's potential reaction to tariffs is analyzed.

Analysis of winners in the semiconductor industry and the outlook for big tech

The expectation that current winners in the semiconductor industry will continue to succeed.

Nvidia's dominant position and potential competition from Amazon and others are discussed.

AMD and Intel's efforts to compete with Nvidia are mentioned.

The impact of diversification of supply sources by customers is considered.

Nvidia's future performance and stock valuation

Nvidia's expected revenue growth and its high stock valuation are discussed.

Comparison of Nvidia's and Tesla's valuations is made.

Investment strategy and diversification beyond big tech

Concerns about the high valuations of the Magnificent Seven tech stocks are expressed.

Recommendation to diversify beyond the Magnificent Seven.

Mid-cap stocks are suggested as a potential alternative investment.

Expected deceleration of earnings in the Magnificent Seven compared to the rest of the market is noted.