My Investing Muse (27Jan2025) - layoffs, DeepSeek, Interest Rate

My Investing Muse (27Jan2025)

Layoffs & Closure news

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Amazon is shutting its operations in Quebec, with 1,800 losing their jobs

• The list of major companies laying off staff in the new year, including Meta, Microsoft, BlackRock, and BP - Business Insider

• Biogen research team hit by layoffs as company shifts resources to external opportunities - Fierce Biotech

• Stripe laid off 300 people on Monday, mostly product, engineering, and operations workers. - Business Insider

• This week on Nation's Restaurant News the top story was Starbucks CEO Brian Niccol foreshadows possible layoffs. (Not finalized) - NRN

• CNN plans to lay off hundreds of employees, cut costs; NBC plots firings - NY Post

The above are some snippets of news about layoffs, and closures in the past week.

China’s AI threat - DeepSeek

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DeepSeek seems to have created a panic moment within the biggest companies and it should alarm investors. Costs: •2,048 Nvidia H800 GPUs: $40-50million •Training: $5million If all it takes to beat OpenAI is a maximum of $55million, the industry is becoming commoditized way faster than previously expected. US-based AI companies alone will have to generate about $600 billion a year in revenue to pay for their AI hardware, according to Sequoia. The capex and R&D will likely be accepted to remain competitive given the risks of not being involved in the space, however it is getting harder by the day to envision a profitable venture in the field. Great moment for the consumer but very bad news for the companies competing in the field. - X user The Short Bear

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China’s DeepSeek could represent the biggest threat to US equity markets as the company seems to have built a groundbreaking AI model at an extremely low price and w/o having access to cutting-edge chips, calling into question the utility of the hundreds of billions worth of capex being poured into this industry. Source: CNBC article (via knowledge_vital)

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Source: http://teamblind.com

Deepseek fundamentally broke the AI CAPEX narrative: Soon management of AI hype companies need to explain why there are Chinese competitors doing the same stuff at 1/10th the cost. And why we’ve spent Billions in a fast depreciating asset that may not immediately return profits - X user Marcel Munch

This would demand a review of all AI investments, applications and infrastructure. What is the level of returns, utilization and optimization? Will the investors demand more from their AI investments? Will the investors cut back on their investments in AI? This is something that could play out in the coming weeks.

My final thoughts

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For the first time in history, interest rates rose by 100 basis points while the Fed cut by 100 basis points. Now, the market sees less rate cuts, the Fed will pause, and President Trump is "demanding" rate cuts "immediately." Who will win? - X user The Kobeissi Letter

The market is not responding “accordingly” to the interest rate cuts by the Federal Reserve. Is this due to stubborn inflation, credit availability and credit risks?

We can expect some volatility that comes from the earnings. The LA fire has the means to add to the economic challenges, affecting sectors like banking, insurance, construction and supply chain. As the market continues to surge, let us not ignore some of the warnings for us to hedge.

@TigerStars

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