🎙️ Bigger Than the Internet

The days of ESG might be over.

During the pandemic, billions of dollars flowed into “sustainable” investments, but a record number of environmental, social, and governance funds have shut down in 2023. Investors have pulled ~$14 billion from them this year.

The “greenwashing,” increased scrutiny, and high-interest rates have crushed clean energy sectors. Maybe we can say goodbye to another corporate buzzword.

💭 And one last thing: Happy Thanksgiving, everyone! We’ll be celebrating the holiday, too, so today’s edition is slightly shorter, and we’ll be back in your inbox on Saturday.

While some families debate politics around the dinner table, we’ll be trying to explain how Sam Altman is now (once again) CEO of OpenAI.

— Matthew & Shawn

Here’s the year-to-date rundown:

Today, we'll discuss the two biggest stories in markets:

• Behind Nvidia’s latest earnings beat amid AI boom

• Binance’s founder to plead guilty and pay a massive fine

All this, and more, in just 4 minutes to read.

CHART OF THE DAY

IN THE NEWS

💻 Nvidia’s Sales Surge, With No End in Sight for AI Boom

Nvidia strikes again, delivering another blowout quarter in a year defined by them. The chipmaker tripled its revenue year-over-year to $18.1 billion, while profit surged about 14x to $9.2 billion.

Surprise, surprise: Demand for Nvidia’s graphics processing units has again outpaced supply.

• Nvidia has continued to prove it’s reaping the biggest financial benefits (so far) of the AI trend.
  

• The stock didn’t move much on earnings because of forward guidance that included a negative impact from export restrictions on sales to China, with investors’ extremely optimistic expectations around AI setting a high bar, too.
  

• Still, data center revenue rose to $14.51 billion, up 279% year-over-year. Gaming rose 81% to $2.86 billion.

Heightened demand: There’s competition as AMD and other chipmakers have gained ground, but Nvidia still dominates the market with about 85% market share for generative AI chips next year.

• Nvidia stock is up 242% this year after hitting an all-time high Monday. It’s up 1,250% over the past five years with a market cap of around $1.2 trillion. But the company’s shares fell over 3% on Wednesday.
  

• Things could be bright again in 2024: “We have significantly increased supply every quarter this year to meet strong demand, and expect to continue to do so next year,” Nvidia’s CFO said Tuesday.

Nvidia’s decades-old partnership with Microsoft remains strong. What’s more, CEO Jensen Huang said the company is still scratching the surface innovation-wise.

“Generative A.I. is the single most significant platform transition in the history of computing. It’s bigger than the PC. It’s bigger than mobile. It’s going to be bigger than the internet.”

Why it matters:

Nvidia started in the 1990s as a computer graphics chip company. Then, it became a leader in designing hardware that made video games look crisper. 

In recent years, Huang has led the company into cryptocurrency and AI, which could be lucrative areas over the next decade. 

• Microsoft and Amazon have made huge investments in AI, which benefits Nvidia because it supplies the chips that underpin so much of AI.

Huang said the growth reflects a transition into a new era of computing and a surge in generative AI — systems like OpenAI’s ChatGPT can create convincing language and images with minimal prompting.

The bottom line: AI has been a hot topic this year. But Nvidia is one of the few concrete examples of a company making serious money from the trend.

Read more

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😵‍💫 Binance’s CEO Steps Down, Faces Money Laundering Charges

If you’re thinking of starting an international crypto exchange, going by your initials, and stealing customer funds or laundering money for terrorist groups, don’t.

It’s a lesson SBF and CZ have learned the hard way.

“CZ,” as in Changpeng Zhao, CEO of the world’s largest crypto exchange Binance, is stepping down and pleading guilty to money laundering while forfeiting $2.5 billion worth of funds and paying a $1.8 billion fine to the Department of Justice for a combined $4.3 billion.

Times change: In 2020, these two were seemingly on top of the world, riding a surge in the popularity of digital assets. When SBF’s FTX imploded, it appeared that CZ and Binance would win the battle for crypto. In fact, CZ precipitated a run on FTX with his tweets about dumping FTX tokens.

• Perhaps it’s a reflexive response to FTX’s demise, but Binance users aren’t idly twiddling their thumbs to see how this all plays out. Instead, CNBC reports that customers have pulled out $1 billion worth of digital assets in the past 24 hours.
  

• But there hasn’t been a “mass exodus,” at least not yet.

What happens next: For CZ, he has accepted a plea deal and faces prison time in the U.S. for crimes committed while running Binance.

• CZ has been charged with violating the Bank Secrecy Act for failing to implement appropriate anti-money-laundering programs that enabled violations of U.S. sanctions by groups like ISIS and Al-Qaeda.
  

• For Binance, losing out on over $4 billion is painful, but most expect it to survive the ordeal. A law professor at Vanderbilt told CNBC that “this fine doesn’t appear aimed at dealing a fatal blow to the exchange.”

Why it matters:

Many in crypto see this as a positive development. It allows Binance and the industry more broadly to reset with a clean slate after more than a few scandals in the past year that contributed to a $2 trillion+ wipeout in crypto market value.

As one analyst commented, “This, combined with the likely imminent approval of a (bitcoin) ETF…could positively impact the crypto market in the long term.”

• And in cracking down on Binance, regulators proudly announced that it’s “one of the largest penalties we’ve ever obtained.”
  

• Attorney General Merrick Garland added, “Binance prioritized its profits over the safety of the American people.”

Read more

MORE HEADLINES

⛽ Average national gas prices hit $3.31 a gallon, down 10% year-over-year

🏈 How watching football became a Thanksgiving tradition

🏠 U.S. home sales fall to 13-year low in October, down 14.6% since 2022

🚙 How much Uber drivers make from canceling rides

🇦🇷 Argentina’s new President doubles down on “economic shock therapy”

QUICK POLL

Yesterday, we asked: Do you think AI poses existential risks for humanity?

—One respondent added, “The printing press, radio, television, the internet have all posed risks and frightened humanity. People don't like to be threatened, there will be risk and fear, but not to the existential level.”

—Folks were divided, though. On one hand, “It is a useful tool, but in the wrong hands, it will become a reason for the end of humanity.”

—On the other hand, “There are many unknowns, but this is not a science fiction book. Humans will still control robots and AI for many years to come. People are scared of the unknown. No need to worry!”

— Another reader said, “The AI we have today is just enhanced machine learning using large models. General AI is decades away.”

See you next time!

That's it for today on We Study Markets!

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