Carbonwolf Alpha

Headwinds or Tailwinds ("HoT") Weekly Market Updates 2025
Fund Performance and Recent Trades
Happy Tuesday!
04 FEB 25
Headwinds or Tailwinds Update (HoT Weeklies): 25w06**: Fund Updates + Market Outlook + Question of the Week:
CWA Managed Funds:
Carbonwolf Alpha, Fund Alpha Performance
2023 | 2024 | 2025 YTD |
+167% | +102% | +20.42% |
Major Indices:
2025 YTD Performance:
Managed FUND or Benchmark | YTD Performance |
Carbonwolf Alpha, Fund Alpha Prime | +20.42% |
Amarok II Fund | +3.23% |
The Talisman Fund | +0.00% |
|
|
$DJI (Dow Jones) | +4.73% |
SPX (S&P 500) | +2.66% |
COMP (Nasdaq Composite) | +1.78% |
GDOW (Global Dow) | +4.39% |
/CL (Crude Oil Futures) | $72.57 |
QALM = Quantitative Algorithmic Leveraged Momentum
Winners and Losers Random ~3 QALM Trades
| #1 | #2 | #3 |
Date Opened | 250128 | 250128 | 250128 |
Market | SPX | SPX | /NQ |
Trade Direction | Long | Long | Long |
Win / Loss | WIN | Open | Open |
P/L% | +90% | ~+100% | ~+0.22% |
Open / Closed | Closed | Open | Open |
Trading Day(s) | +7TD | +7TD | +7TD |
Curr. Win Probability % | 100% | 100% | ~54% |

Market Observations
Chart1

Observations:
Tailwinds:
+Opensource AI vs. Proprietary AI. Chinese Quant Hedge Fund created AI company DeepSeek gains don't threaten new-term spend or U.S. leadership. It does appear competitive, but its major distinction is that it was developed with fewer resources -as a direct result of the U.S. limiting chip sales to China.
The Megatechs may need to adjust their proprietary strategies and CapEx to remain competitive. See Chart1. Consumers are prioritizing more open and cost-effective AI solutions over traditional, closed systems. Additionally, Project Stargate represents a U.S. strategic push to accelerate semiconductor manufacturing and secure access.
Total Raised to Date (Leading U.S. AI Companies)
Company | Total Venture Capital Raised to Date |
OpenAI | ~$23.9 Billion**** |
Anthropic | ~$15.7 Billion |
xAI | ~$12.1 Billion |
****At the time of this writing, OpenAI is in talks to raise an additional $40 Billion venture capital funding round -that would value the company at ~$340 Billion.
New York University Professor, Gary Marcus: "Advances will be more incremental than before and quickly matched… GPT-5 or similar model, perhaps led by OpenAI, a Chinese company, or a competitor like Google will get there first… Models will continue to get more efficient and less expensive."
JP Morgan House View: "…it is too early to abandon Mag7/AI theme especially with earnings [last week]. That said, I do think this accelerates the timing on when the market will want to see an ROI on AI investments."
Meta Chief AI Scientist, Yann LeCun: "To people who see the performance of DeepSeek and think: 'China is surpassing the U.S. in AI.' You are reading this wrong. The correct reading is: 'Open source models are surpassing proprietary ones.'"
Blackrock-backed AI inference tech company, Groq Co-Founder and CEO, Sunny Madras: "Open source innovation is great for entire industry, techniques will be used by other AI researchers… Seeing a faster shift to accelerated compute -AI spend can go further as a result."
+Fed Outlook. The Federal Reserve left the Fed Funds Rate unchanged at 4.25% to 4.5% at last Wednesday's FOMC meeting. Chief Powell reiterated, "inflation has moved much closer to 2% longer-run goal, but remains somewhat elevated" and that the Fed, "remain squarely focused on achieving maximum employment and stable prices."
The U.S. economy retains significant momentum. Threats to Fed independence "seem overblown" -for now. Term premium in the Treasury curve now a significant driver of long-term yields. And, corporate debt issuance markets is robust.
Key Points of Fed Outlook:
Direction of rates still down
Confidence inflation headed to 2%
Powell/Trump fiscal policy dance
Potential Macro Headwinds to the Fed Achieving their Mandates:
Tariffs
Tax Cuts
Deportations
Potential decline in government spending
Deregulation
Federal workers looking for jobs
Doubline Capital Founder, Jeffrey Gundlach: "I wouldn't be looking for rate cuts at the next meeting… Maximum of two interest rate cuts possible in 2025; one would be the base case."
Headwinds:
-Blog Sparks $600 Billion NVIDA Loss. Jeffrey Emanuel, former Quant Investor and Pastel Network Founder, published a ~12,000 word blog post making the case to short the most influential U.S. stock of the last few years: NVDA. That post not only went viral it was a major catalyst in NVDA losing approximately ~$600 Billion in market cap -the largest single-session loss of market cap in market history. Forcing the Nvidia stock below its 200-DMA for the first time in 2 years.
NVDA $600 Billion Market Value Drop (by comparison)
Company | Total Size |
UnitedHealth Group | ~$501 Billion |
Exxon | ~$479 Billion |
Oracle | ~$475 Billion |
Netflix | ~$413 Billion |
The post was published Friday night (25 JAN 25). The next morning 35 people were reading it, by Saturday evening ~1,500 people were viewing his anti-NVDA manifesto. Then, Venture Capitalist Chamath Palihapitiya re-posted it to his 1.8 million X followers. Next, early-stage investor Naval Ravikant shared it with his 2.6 million followers. Morgan Brown, a VP of Product and Growth at Dropbox, pointed to it in a thread that was viewed over ~13 million times. Emanuel's own website crashed for a period of time because of the sheer traffic.
Emanuel studied math at Reed College and worked at several investment funds, including as an analyst at Millenium Management and Balyasny Asset Management, two large multimanager Hedge Funds. Emanuel noted, "Every single bank has a super-bullish buy rating on Nvidia. It's like the blind leading the blind -they have absolutely no idea what they're talking about… All of their arguments have become totally divorced from reality… They try to defend their arguments by saying, 'Well, we talk to industry experts.' But that's like asking the barber if you need a haircut."
Some of Emanuel's Key Arguments:
Given: Some of the most influential tech companies determined that deep learning and AI are the biggest tech advances since the dawn of the internet. In order to remain competitive, companies must build and train their AI -which takes gargantuan amounts of data and compute resources. NVDA sells precisely this key hardware and makes monstrous margins on its most advanced chips.
Emanuel Argument1: "AI companies have been using scaling laws that essentially say the more data that is used to train an AI model, the better it gets… the industry may be running low on quality data to train that AI -that is , a potential 'data wall' is looming that could slow down AI scaling and reduce some of that need for training resources.
Emanuel Argument2: "GPUs are constantly getting exponentially better, so after a few years, companies might not want to use old hardware anymore. This puts them on a cycle where they're always spending more to get the best hardware. But eventually, those companies are going to want to see a return on their hefty investment(s)."
Emanuel Argument3: [DeepSeek tie-in] "On top of that, some new AI models are proving to be much more resource-efficient." See Chart2.
This is where all the drama with DeepSeek comes in. DeepSeek launched its own AI that's on par with the likes of OpenAI's ChatGPT, but the real kicker was that it said it trained its AI in less time -using fewer chips.
Emanuel Argument4: "It was when I realized that every one of [Nvidia's] big hyperscaler customers [are] literally making their own competitive silicon, all made by [Taiwan Semiconductor] TSM, and that was already coming out and was imminently going to hit the market. I was thinking, 'Do people realize this?' Because I don't think they do… If you know that a company will only earn supersized returns for a couple of years, you don't apply a multiple. You certainly don't put a 30-times multiple."
His core contention, that sparked a massive blow to Nvidia and the broader Markets, is that if training and integrating AI becomes significantly cheaper, why would these large tech companies keep spending obscenely large sums of money? See Chart1.
At the time of this writing, Wall Street firms have been flooding Emanuel with consultant requests at a $1,000 hourly rate, showing that at least some firms were taking his ideas seriously. Further, he alleges that he never held a short position on Nvidia.
-Trump Tariff Trials. President Trump imposes a series of Tariffs on various U.S. trading partners, including: Canada, Columbia, Mexico and China. The moves spark initial Market-wide slides. See Chart3.
Trump will impose 25% tariffs on Canada and Mexico beginning in roughly 30 days. As a result, the Canadian dollar and Mexican peso immediately weakened against the U.S. dollar, while U.S. Treasury bond yields rose and stocks ended the day lower -after climbing most of the Friday session, prior to the news.
Expected Tariff Retaliation from Canada:
Increase in prices of aluminum, lumber, motor vehicles, oil, etc. to the U.S.
Expected Tariff Retaliation from Mexico:
Increase in prices of fruits, vegetables, beer, electronics, motor vehicles, etc. to the U.S.
Minneapolis Fed President, Neil Kashkari: "The challenge becomes, if there's a tit for tat and it's one country imposing tariffs and then responses and it's escalating. That's where it becomes more concerning, and, frankly, a lot more uncertain."
St. Louis Fed President, Musalem: "Will it be a 'one-and-done' or will it be two years of a sequence of tariffs in many different sectors of the economy? If it's over two years, incrementally, every month or every two months, it gets harder to parse out."
According to Reuters, "Trump's move is expected to draw retaliatory tariffs, potentially disrupting more than $2.1 trillion in annual two-way U.S. trade with the three trading partners [Canada, Mexico, China]."
Canadian Chamber of Commerce Public Policy Chief, Matthew Holmes, "President Trump's tariffs will tax America first… From higher costs at the pumps, grocery stores and online checkout, tariffs cascade through the economy and end up hurting consumers and businesses on both sides of the border."
Canada has a broader list of targets, slated for immediate tariff retaliation, that could reach $105 Billion USD worth of U.S. imports, but would hold public consultations before acting.
China "firmly opposes" Trump's new duties, a spokesperson for Beijing's embassy in Washington said, adding, "There is no winner in a trade war or tariff war, which serves the interests of neither side nor the world." China has been more circumspect about its retaliation plans, but has vowed to respond.
Sentiment. Investor Sentiment ending 29 JAN 25:
Bullish: | 41.0% |
Neutral: | 25.0% |
Bearish: | 34.0% |
iCapital Managing Director and Chief Investment Strategist, Anastasia Amoroso: "[Last week's] earnings provided a major reassurance to the AI infrastructure complex… Strengthened our conviction the pullback we saw across AI, semis and power is a buying opportunity."
Microsoft Vice Chair and President, Brad Smith: "Golden opportunity for American AI… In FY 2025, Microsoft is on track to invest approximately $80 Billion to build out AI-enabled datacenters… More than half of this total investment will be in the U.S…."
SPX Technicals.
SPX Close: | 6,037.88 |
VIX: | +17.21 = “Neutral” |
Fear/Greed Index: | 39, "FEAR" |
Key Long support AREA to hold above this week: | ~5,960 |
Macro Data
Metric | Actual | Estimated |
Pending Home Sales (DEC) | -5.5% | +0.3% |
Atlanta Fed GDP Now | 2.3% | 3.2% |
December PCE | +0.3% | +0.3% |
After recovering from the DeepSeek/Nvidia rout on Monday, the market was poised for reclaiming all-time highs prior to the finalization of the Tariffs against Canada, Mexico and China on the Nasdaq-100's 40th birthday -last Friday. The SPX needs to continue to hold above the ~6,000 handle. If it does not, many of the proposed tariffs from all U.S. major trading partners are not likely baked-in to the current Market Level. IF that happens, the market will likely reprice to the downside.
Chart2

Chart3

Chart4

Question of the Week:
Question of the Week:
Will Trump's Tariffs be enforced for greater or less than 6 months?
Disciplined Alpha,
MFA
**All of the above Funds are CLOSED to the public. These proprietary Hedge Fund Updates are for informational purposes only. Complex Derivatives, Futures, Algorithmic Trading can involve significant risks. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.
**These two CLOSED proprietary Hedge Fund Updates are for informational purposes only. Our past performance does not guarantee your future results. Always do your own due diligence, research and suitability before investing or trading.
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