š¤š«£ Buzzfeed's AI Resurgence (up 100%+)
Happy Sunday all,
Iām writing to you from a hotel room in cloudy & rainy Oahu, Hawaii. Itās funny how that works out - you leave your home to go somewhere tropical and sunny but then mother nature has other ideas :)
I wanted to talk about the hype that is AI. Itās seemingly everywhere these days and while I do love ChatGPT and AI, what weāre seeing now is that more and more companies are trying to take advantage of the buzz. Look no further than Buzzfeedās stock price, which after they announced they would use AI to make content - jumped 150%+.
Thereās no doubt AI is important moving forward, but when we get frothy prices like these - it reminds me all too well of a similar industry in 2021ā¦ crypto, anyone?
Use this to your advantage in the short term, but be wary of companies trying to over-leverage AI. Will AI fundamentally change Buzzfeedās business moving forward? Intuitively, Iām in the ānoā camp, but who knows - maybe listicle articles are better written by bots.
Enjoy this weekās Sunday Primer!
ā Humphrey, Tim & Rickie
Market Report
Economic Growth Looking Good!
The U.S. economy had a solid quarter in the last months of 2022, growing at a 2.9% annual rate. Although it's not as high as the previous quarter's 3.2%, consumers kept things moving by spending money. Unfortunately, the housing market took a hit and businesses cut back on buying equipment.
Even though the economy had a good quarter, looking at the whole year told a different story. Growth was at 1% in the fourth quarter of 2022 compared to the previous year, which is a big drop from the 5.7% growth in 2021. This slowdown was partly due to things returning to normal after the pandemic and businesses reopening.
Despite a slowdown in the economy, the job market is still going strong. Layoffs are still low and workers received large wage increases at the end of last year. This helped consumer spending grow at a 2.1% annual pace. However, there are signs that consumers and businesses are starting to struggle. Retail sales fell last month and surveys of U.S. purchasing managers found that high-interest rates and inflation are affecting demand in the manufacturing and service sectors.
The Federal Reserve will be meeting this week to discuss if they should continue to raise interest rates or not, as they try to balance inflation and economic growth.
Tesla to the moon!
Tesla had a rough year in 2022, with lockdowns in China, higher borrowing costs, and logistical issues all taking a toll on the company. However, Tesla's fourth-quarter earnings report gave investors a glimmer of hope that the worst may be over for the electric vehicle maker. The company reported adjusted earnings of $1.19 a share, which exceeded the average analyst estimate of $1.12 a share. They also reported fourth-quarter revenue of $24.3 billion, which narrowly beat expectations.
Because of better-than-expected earnings, Tesla's stock has soared 33% this week, the most since a 41% surge in May 2013. The shares closed at the highest since December 9th, marking a 65% rise from the January 3rd closing low of $108.10.
Microsoft Signals Slowdown?
Microsoft recently reported its earnings and although the company's cloud business showed signs of resilience, the overall market for software and technology products is weaker. This has caused Microsoft to issue a downbeat forecast and lay off 10,000 workers. The company's revenue growth in the second quarter was the slowest it's been in six years.
Despite this, Microsoft's Azure business, the company's cloud computing service, saw an increase in revenue of 38% for the full quarter. This has been the company's most closely watched business for years and has been a major contributor to the company's revenue growth since 2014. The company's CEO, Satya Nadella, has acknowledged that the industry is currently going through a period of deceleration, but that Microsoft will continue to invest in long-term opportunities, such as artificial intelligence.
As part of this focus on artificial intelligence, Microsoft announced that it would be increasing its stake in OpenAI, a leading artificial intelligence research lab, with a new investment of $10 billion over multiple years.
Forecast Ahead
Now, more Americans areĀ falling behind on their car payments than during the financial crisis. In December, the percentage of subprime auto borrowers who were at least 60 days late on their bills rose to 5.67%, up from a seven-year low of 2.58% in April 2021, according to Fitch Ratings. That compares to 5.04% in January 2009, the peak during the Great Recessionā¦