Q2 2025 Investment Strategy Report: AI, Stablecoins, and Navigating Risk

 The first half of 2025 has concluded, and my portfolio delivered a return of 39.45%, bringing its cumulative performance since 2020 to 334.97%. At the beginning of the first quarter, observing the shifting tides in U.S. policy and the broader realignment of the global order, I made a decisive move to liquidate all existing equity positions. Subsequently, I rebalanced the portfolio with a concentrated focus on three core holdings: cash, Tesla, and Palantir.

In retrospect, this strategy proved effective. The more critical question, however, is whether it will remain viable going forward. In this report, I will break down the foundational logic behind that decision by examining America's capital policies, its strategies for enhancing labor productivity, and the specific sectors and companies that continue to command my attention.

Portfolio Review

As we close the books on the first half of 2025, my portfolio has registered a year-to-date (YTD) return of 39.45%. This performance was driven by a strategic rebalancing executed at the end of the first quarter, based on the thesis I outlined at that time.

In Q1 of this year, I made a pivotal decision. My portfolio, which had consistently held between 10 to 15 different stocks, was decisively consolidated into a highly concentrated selection of just two core equities. This conviction was rooted in my analysis of several macro themes: the fundamental realignment of global supply chains, the prolonged strategic rivalry between the U.S. and China, and the exponential advancements in artificial intelligence. Based on this thesis, I liquidated all other positions and rebalanced the portfolio with a sharp focus on Cash, Palantir (PLTR), and Tesla (TSLA).

Ultimately, this high-conviction strategy was precisely aligned with the market dynamics of the second quarter of 2025. Both Palantir and Tesla delivered returns that significantly outpaced the broader market averages.

3-Month Price Return (PLTR, TSLA, QQQM, SPY), Source: Seeking Alpha

Palantir, in particular, served as a primary driver of performance, surging by approximately 61% and substantially bolstering the portfolio's overall return.

From a medium to long-term perspective, my portfolio continues to significantly outperform major market indices. The cumulative return from the start of 2020 through the end of Q2 2025 stands at 334.97%. This is roughly double the performance of the NASDAQ 100 index over the same period.

The focus now shifts to the next phase: determining how to sustain this strategy while diligently managing the inherent risks of such a concentrated portfolio. I will share my current holdings in detail below.

The Capital Conundrum: Navigating the Limits of Debt

Even for the United States, capital cannot be created infinitely. While the dollar's reserve currency status provides extraordinary latitude, the supply of capital ultimately operates within the framework of credit—a framework that is now visibly strained.

Consider the current landscape in 2025:

• The U.S fiscal deficit is trending above 7% of GDP.
• The pace of Treasury issuance is now steeper than it was even during the pandemic's peak.

This environment is rapidly eroding the capacity of traditional channels to absorb the sheer volume of new government debt. Compounding this challenge is a clear decline in demand from key foreign buyers like China and Japan. Faced with this reality, the U.S. is in urgent need of cultivating new, reliable sources of demand for its sovereign debt.

A Digital-Age Solution: The Strategic Role of Stablecoins

As I have discussed in previous posts, the United States appears to be strategically fostering the stablecoin industry to generate this much-needed demand for Treasuries. It is no coincidence that U.S.-based stablecoins such as USDC and PYUSD are increasingly being redesigned to function as quasi-sovereign debt assets.

This represents an implicit strategy to expand the foundational demand base for U.S. debt. In the long term, this can be interpreted as a foundational step toward maintaining intrinsic demand through a future digital dollar system. In essence, this is not a simple case of "money printing." Rather, it is a sophisticated attempt to engineer a new capital expansion structure fit for the digital age, which I see as the core of America's current fiscal policy.

The Productivity Imperative: Beyond Traditional Labor

The second engine of American economic growth has always been productivity. However, traditional sources of labor are approaching a hard ceiling, constrained by an aging population, restrictions on immigration, and persistent educational gaps. In response, the United States is staking its national future on Artificial Intelligence (AI) and automation technologies.

The revised "One Big Beuatiful Bill Act" (OBBBA) is far more than a simple stimulus package. The provisions that warrant the closest attention involve a fundamental change in the tax treatment of productivity-enhancing technologies like AI, cloud computing, and semiconductors. The law now permits companies investing in AI infrastructure to opt for immediate expensing rather than the conventional multi-year depreciation schedule. This change allows them to make critical technology investments while preserving their pre-tax profits.

This accounting adjustment provides a powerful incentive, perfectly aligned with the short-term earnings focus of the U.S. public markets. It effectively creates an environment where corporations can "invest in AI while simultaneously defending their stock price." The U.S. government's strategy is not merely to replace labor with AI, but to leverage AI to supplement the limitations of the existing workforce. This represents a structural approach that has the potential to expand into a nationwide framework of AI-driven economic infrastructure, reformed educational systems, and widespread automation for small and medium-sized enterprises.

Sectors and Stocks to Watch

As established in our macro analysis, the United States is pursuing a dual-pronged strategy to sustain its growth engine: expanding its capital base through digital debt demand and enhancing its labor potential through AI-driven productivity. Given this strategic direction, which sectors and companies stand to benefit the most?

1. Palantir (PLTR) – Redesigning Defense, Public AI, and Traditional Industries

Palantir is an AI-driven analytics platform with deep, established roots within the U.S. government and its defense apparatus. In 2025, the U.S. is moving beyond mere digitization and is now aggressively embedding AI into its core public and defense infrastructure.

A particularly noteworthy catalyst is the recent agreement among NATO member states to increase their defense spending. The U.S. has expanded its own defense budget this year, and key European allies are actively seeking to procure advanced American defense technology. In this landscape, Palantir is uniquely positioned as a key supplier, providing its AI-powered ISR (Intelligence, Surveillance, Reconnaissance) and decision-support platforms to both NATO and the U.S. Department of Defense. This positioning makes the company a likely beneficiary of sustained, structural tailwinds.

Concurrently, Palantir is systematically expanding its influence in the private sector. It is making significant inroads into industries such as manufacturing, energy, healthcare, and transportation—sectors that have historically hit a wall of efficiency. By providing solutions for data-driven decision-making, supply chain optimization, and predictive risk analysis, Palantir directly contributes to enhancing corporate labor productivity. This aligns perfectly with the U.S. government's policy of incentivizing AI investments that augment, rather than simply replace, the workforce. Palantir's platform is engineered to lower the barriers to technology adoption and deliver immediate operational efficiencies, making it one of the most practical choices for enterprises navigating their AI transition.

2. Tesla (TSLA) – A Force in Labor Productivity via Physical AI

To view Tesla as a mere electric vehicle (EV) manufacturer is to miss the bigger picture. The company is pioneering the field of Physical AI, built upon the three pillars of Autonomous Driving (AI), Robotics (Optimus), and Energy Storage. This trajectory is deeply intertwined with America's long-term policy goal of expanding labor productivity.

As political momentum to deport undocumented workers accelerates within the U.S., the supply of low-wage manual labor is likely to contract. While this could cause short-term productivity dips in low-value-added sectors, it will conversely accelerate the imperative for autonomous transportation systems. With its Full Self-Driving (FSD) technology, Tesla possesses the most advanced capabilities to automate labor-intensive industries like logistics, delivery, and last-mile transport.

Furthermore, while still in its nascent stages, Tesla's humanoid robot, Optimus, represents a "Physical AI" platform with the potential to replace repetitive manual labor in warehouses, assembly lines, agriculture, and service industries. As Optimus reaches commercial viability and its costs decrease, it could offer a fundamental solution to the challenges of rising labor costs and workforce shortages. In this paradigm shift, Tesla is poised to become the standard platform provider.

3. Circle – The Linchpin of the Digital Capital Ecosystem

Circle, the U.S.-based issuer of the USDC stablecoin, is leading the charge in building a regulated digital dollar ecosystem in coordination with the U.S. Treasury. If America's strategy to absorb Treasury demand via the stablecoin ecosystem materializes, Circle is positioned to become a central node in this new framework, potentially acting as a digital Treasury intermediary or a core component of the issuance structure.

4. Nvidia (NVDA) – A New Demand Cycle Forged by Policy

The new accounting flexibility for AI infrastructure investment directly translates into a reduced financial burden for acquiring Nvidia's GPUs. While I have previously expressed skepticism regarding Nvidia's valuation, the passage of the revised BBB legislation would undoubtedly act as a significant positive catalyst.

From a corporate perspective, when AI infrastructure investment can be treated as an immediate expense, the purchase of a high-cost Nvidia GPU transforms into a strategic investment choice—a choice to acquire productive assets rather than remit cash as taxes. This incentive structure does more than just "increase" AI demand; it positions Nvidia as one of the most fiscally efficient destinations for corporate capital. As the needs for AI training, inference, and edge computing expand in unison, Nvidia's demand cycle could be poised for another significant upswing.

Current Portfolio and Go-Forward Strategy

My current portfolio is structured according to the convictions detailed in this report.

The core holdings consist of Palantir, Tesla, and Circle, and I maintain a positive outlook on Nvidia as well. As previously examined, my thesis is that these companies are positioned directly on the primary axes of America's capital and labor productivity expansion policies. Consequently, I believe they are poised to enjoy structural tailwinds for years to come.

Therefore, my plan is to maintain a portfolio centered on these key names while employing a flexible approach to my cash position and individual weightings based on evolving market conditions. Specifically, I am bracing for the possibility of a short-term market correction during the July-August period. This caution is rooted in two primary macro risks:

• U.S. Treasury Issuance: The Treasury's aggressive efforts to replenish its TGA (Treasury General Account) balance could act as a temporary drain on market liquidity.

• Mutual Tariff Negotiations: Ongoing discussions regarding tariff frameworks carry the risk of potential shocks to the equity markets, depending on any significant alteration to the current regime.

These macroeconomic variables have the potential to introduce significant short-term market volatility. In this context, I believe it is rational to bolster our defensive posture by increasing our cash allocation.