February 8, 2023

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0. Data and calendar

All values as of 3 AM PT / 6 AM ET, other than S&P500 close (1 PM PT / 4 PM ET).

All times are ET.

1. Microsoft announces AI-powered New Bing

Screenshot of a New Bing search for a 3-course menu.

  • Normal Bing + ChatGPT with sources. The New Bing mixes the normal search engine on the left with a ChatGPT-like AI chat on the right, with the main benefit of being able to link back to the original sources. - The Verge, interview with CEO Nadella

  • Get on the waitlist. The New Bing will be released "globally" but "slowly." As of today, just a few search examples are available to the public. Microsoft wants you to get on the waitlist, download their browser Edge (which is also being updated to integrate AI features), - Bing waitlist

  • Not a guarantee to beat Google.

    • AI Chat only improves some queries, like those requesting a newly generated text (e.g. write me a poem, help me with coding).

    • Google is likely launching something similar: they already pre-announced Bard, and should have more details on their event today.

  • Bad news for publishers? With snippets that directly answer your search and now AI chat, the trend is clearly of more zero-click searchers, potentially hurting online publishers. That's one reason we love email, as we can build a direct connection with our readers, without relying on search or social media. - Nieman Lab

Both MSFT and GOOG stock rose 4%

  • They moved so close to each other, suggesting markets are not particularly bullish that the New Bing will be a threat to Google, but rather that AI chats will help both companies. Below, MSFT in yellow and GOOG in blue.

2. Cloud spending grew 21% to $61B in Q4

Nothing can stop SaaS. Business software as a whole continues to grow by double-digits, even as we're seeing GDP contraction. This data comes from Synergy Research, focusing on business cloud spending:

Amazon's lead stagnate while Microsoft and Google grow

AI should help continue this trend. Microsoft has been integrating OpenAI into its Azure cloud, and Google Cloud is trying to follow suit — we'll hear more about that today. The question remaining is: what will Amazon do in response?

3. Biden proposes new taxes in SOTU; GOP doesn't want entitlement cuts

  • GOP doesn't want to cut Social Security or Medicare. When Biden brought up the subject, there was a strong boo from Republicans, including a "liar" from Rep. Marjorie Taylor-Greene (R-Ga.). Meaning that no significant entitlement cuts are coming, as usual in Washington. - Huff Post

  • Biden proposes new taxes: quadrupling the 1% stock buyback tax and new taxes on billionaires, including an unrealized capital gains tax. - WSJ

  • "We're going to need oil for another decade": a very timid support for the oil industry, which is unlikely to change the industry's reluctance in making long-term investments, given the anti-oil stance of most of the world's governments.

  • Anti-Big Tech. "Pass bipartisan legislation to strengthen antitrust enforcement and prevent big online platforms from giving their own products an unfair advantage." - The Verge

4. Powell says nothing new in interview

Popular meme portraying Fed Chair Jerome Powell.

  • Surprised by 517K jobs report: "certainly strong—stronger than anyone I know expected." - WSJ

  • Nothing new in terms of rate hikes: in our view, Powell suggested that the futures curve correctly price in 2 additional 25 bps hikes. As usual, Powell said that if conditions continue to come in stronger, "we would certainly raise rates more."

Markets still price in two 25 bps hikes

If Powell changes his mind, he will let the market know. As he always does: through his speeches, WSJ leaks, etc.

5. U.S. imports reach $4.0T in 2022, exports $3.0T

  • Fully recovered since Covid: both exports and imports are at record highs. - Census.gov

  • Trade deficits can be good: Most of the media focus on the large trade deficit as necessarily a bad thing. However, it is essential to note that these deficits also mean that the U.S. is consuming $1.0T more from other countries than what it exports to them. Economics is about maximizing consumption/utility, after all.

6. Zoom to lay off 15% of staff, 1,300 employees

  • In line with other tech companies: in today's Bay Area, 15% is a healthy trim that likely won't require additional ones, given Zoom is already a profitable company. - WSJ

  • Big Tech layoffs continue, while broad jobs remain strong: the zoomed-out story remains the same: the broad job market remains strong (517K new jobs in January), while large software companies have been trimming down since May 2022, as the graph below shows.

Tech layoffs remain high trend started in May 2022

7. Meta is asking managers to become builders

  • "Flattening" process: Meta is transitioning many of its managers and directors to go back to being individual contributors focused on tasks such as coding, design, and research. - WSJ

  • Not clear how many will be affected, but we estimate the number impact to be minor, around 1K employees, as per the graph below.

  • Still struggling with AI. The first mistake was betting big on VR, rather than AI or even waiting for AR. Meta still has a lot of AI talent, but so far no real new product -- its Galactica scientific research bot was a flop, being taken offline after 3 days. - NYT

8 Kids increase their addiction to TikTok, Snap, Roblox

  • 4.5 hours per day on social media: that's according to new research published by Qustodio, done with kids aged 10-13 in 2022. And that's up from 3.9 hours in 2021.

  • 5.2 hours per day on gaming: these numbers are so way that it's hard to believe, especially the 180 minutes per day on Roblox.

  • Now these apps need to get to adults, as there's where the money is. TikTok's valuation already prices in universal usage: it raised money at $460B in 2021 from Tiger Global, but was trading closer to $250B more recently. - Bloomberg

9. Other headlines

  • Softbank posts $5.9B loss, new investments down 98% to $300M.

  • Softbank's Masa owes company $5.1B; leverage could again risk his empire.

  • Apple's Buy Now Pay Later service being tested by retail employees.

  • Elon Musk announces Master Plan 3 event on March 1.

  • Bed Bath & Beyond getting $1B in new discounted equity; stock falls 48%.

  • Chipotle's revenue increases 11% to $2.2B.

  • Pipe has a new CEO, months after 3 co-founders stepped down.

  • SDNY asks SEC and CTFC to postpone their cases against Sam Bankman-Fried.

  • SBF appeals Judge's decision to reveal 2 names of his $250M bond's backers.

  • China balloon part of vast surveillance program, U.S. officials say.

  • China has more ICBMs than the U.S.: military report.

  • Mitt Romney tells George Santos "you don't belong here."

  • Santos' $199.99 anonymous expenditures are in the spotlight.

  • Trump reposts photo of a young DeSantis allegedly partying with young girls.

  • Tom Cotton defends helping Ukraine, views its as a proxy war.

  • House GOP is focused on deep state expo, not free markets policy.

  • Lebron James breaks NBA scoring record: 38,388 points.

  • The Athletic is looking at ticketing, merchandise, and betting as potential revenue.

  • Network State podcast is launched by Balaji Srinivasan.

  • ChatGPT can be trick-prompted to ignore its own safety biases.

10. Other memes and images

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