Tech’s Moment of Truth

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Hello Peter Anthony Hovis,

Tech’s Moment of Truth

The trading week opened against a backdrop of extremes of both meteorological and financial.

While a punishing winter storm froze infrastructure from Texas to Maine, taking 12% of U.S. natural gas production offline and sending fuel prices soaring nearly 30%, the financial markets were staging their own dramatic shifts.

In a historic move that stunned commodities traders, gold shattered the psychological barrier of $5,000 per ounce, while the U.S. dollar crumbled to its lowest level since 2022.

(Photo: Getty Images)

Yet, despite the volatility ripping through currencies and commodities, the equity markets displayed a surprising resilience. The S&P 500 extended its January advance, rising 0.5%, while bond markets remained quiet with the 10-year Treasury yield slipping just a single basis point to 4.21%.

Beneath the calm surface of the headline indices, a significant rotation is underway.

The narrative of 2026 has quickly shifted from a tech-exclusive rally to broader market participation. While the S&P 500 is up about 1.5% this year, its equal-weighted counterpart, where Dollar Tree matters just as much as Apple, has jumped nearly 4%.

Goldman Sachs strategist Ben Snider views this as a classic economic acceleration play, noting that history offers three paths for such trends, with the current setup pointing to a “catch-up” increase in valuations across the board.

“Our forecast for economic acceleration in early 2026 points to [this] scenario as the most likely near-term outcome,” Snider explained. “The ultimate degree of equity market broadening will depend on the degree of earnings broadening.”

Goldman Sachs strategist Ben Snider (Photo: CNBC)

Despite the rotation into cyclicals and small caps, the gravitational pull of Big Tech remains undeniable as we head into the most critical week of earnings season.

Investors are piling back into tech shares ahead of reports from four of the “Magnificent Seven,” but they will demand proof that the massive capital expenditures on artificial intelligence are yielding returns.

Jose Torres at Interactive Brokers observed the tension building before these releases. “Analysts patiently await further details on AI initiatives, the pace of investment, and expected profits to better gauge whether the theme can continue to carry this bull market,” Torres noted.

If the tech giants fail to impress, Torres warns that investors are fully prepared to rotate further into reacceleration trades that benefit from rate cuts and growth.

Looming over this week’s earnings week is the Federal Reserve.

Officials are widely expected to hold rates steady this Wednesday after three straight cuts in late 2025. With political tensions high regarding President Trump’s upcoming nomination for a new Fed Chair, current Chair Jerome Powell is expected to walk a fine line.

Chris Larkin at E*Trade from Morgan Stanley highlighted the nuance of the upcoming press conference: “Even though the Fed isn’t expected to cut interest rates, Powell’s press conference may be as much about Fed independence as it is policy.”

Yesterday’s session didn’t end without drama.

After the closing bell, major insurers including UnitedHealth, CVS Health, and Humana tumbled following reports that the U.S. plans to hold payments to private Medicare plans flat next year—a stark reminder of regulatory risks.

From Shophouse to Superpower

Today’s Stock Pick: Sea Limited (SE)

Starting at a small, nondescript shophouse on Maxwell Road in Singapore, 2009, a young entrepreneur named Forrest Li was trying to build a digital connection for Southeast Asia. He names his venture Garena, a portmanteau of “global arena.”

This isn’t just a gaming company; it is the first chapter of what will become Southeast Asia’s largest consumer internet company, now known as Sea Limited.

Chapter 1: The Cash Cow (Garena)

The story begins with gaming. Forrest Li realized early on that in a fragmented region like Southeast Asia, digital entertainment was the universal language.

Garena started by publishing games for others, but the plot twisted when they began developing their own titles. Their masterpiece, Free Fire, became a global phenomenon, particularly in emerging markets like Brazil and India. It wasn’t just a game; it was a financial engine.

For years, the massive profits from Garena acted as the company’s heartbeat, pumping the necessary cash flow to fund ambitious new ventures that skeptics thought were crazy.

Chapter 2: The E-Commerce Gamble (Shopee)

By 2015, Li saw a new opportunity.

While giants like Alibaba and Amazon were dominating elsewhere, Southeast Asia lacked a mobile-first shopping experience tailored to its unique, chaotic geography.

Enter Shopee.

Critics initially dismissed Shopee as late to the party, but Sea Limited used a “late mover” advantage to design an app specifically for the smartphone generation. They gamified shopping—literally bringing their gaming DNA into retail—allowing users to play games to win coupons.

It worked.

(Photo: REUTERS)

Shopee overtook established rivals to become the dominant e-commerce platform in the region. This part of the story is about scale; it is the massive net that captures millions of consumers daily, selling everything from lipstick to electronics.

Chapter 3: The Digital Wallet (SeaMoney)

With millions of people playing games and buying goods, a new problem emerged: how to pay for it all in a region where credit cards were rare.

This set the stage for the third character in our story: SeaMoney.

Originally built just to smooth out transactions for Garena and Shopee, SeaMoney evolved into a financial powerhouse in its own right. It creates a “flywheel” effect—gamers use it to buy skins, shoppers use it to buy goods, and small businesses use it for loans.

Recent chapters of the investor story show SeaMoney becoming a major profit driver, offering loans and digital banking services that traditional banks couldn’t provide to the underbanked population of the region.

The Current Plot: The Pivot to Profit

The most dramatic recent plot twist occurred around 2022-2023. For over a decade, Sea Limited was the classic “growth at all costs” protagonist, burning cash to conquer markets. But as global interest rates rose, the mood changed. Forrest Li made the hard decision to freeze salaries and cut costs aggressively.

The result was a stunning pivot to profitability.

Today, Sea Limited isn’t just growing; it is proving it can make money from all three of its pillars simultaneously. It stands as a unique ecosystem where a gamer in Jakarta, a shopper in Bangkok, and a borrower in Manila are all connected through the same digital infrastructure.

Sales growth has been strong.

It posted a 38% year-over-year revenue gain — the fastest growth rate since 64% in the first quarter of 2022.

Sea’s revenue growth (Source: MacroTrends)

Moreover, after years of negative EPS, it has turned positive in the last few quarters:

Sea’s EPS growth (Source: MacroTrends)

Bottom line: Sea Limited is more than just investing in a “Singaporean Amazon” or a “gaming publisher.” Rather, it is a synergistic ecosystem where the profits from one arm (gaming) historically subsidized the growth of another (e-commerce), which in turn built the user base for the third (fintech). This company has a bright future.

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