🎙️ Force Multiplier

Stock market bulls are salivating. There’s roughly $8.8 trillion in money-market funds and CDs, much earning around 5%.

💭 Bulls are optimistic that with rates poised to drop, investors will allocate chunks of that money to the stock market in pursuit of higher returns, driving market indexes’ next move higher.

— Matthew & Shawn

Here’s today’s rundown:

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

• Companies can’t get enough clean-energy tax credits

• The world’s biggest computer chipmaker reports earnings

• How global health spending could halt climate change

All this, and more, in just 5 minutes to read.

Chart of the Day

In The News

☀️ The Booming Market For Clean-Energy Tax Credits

A program meant to accelerate the transition from fossil fuels is helping put cash in renewable energy companies’ pockets by selling tax breaks to corporate giants like JPMorgan.

Some $9 billion worth of these deals have already transpired, with many more to come in 2024.

• In 2022, Congress signed off on a new tax credit transfer program, allowing roughly 100 companies undergoing over 1,000 clean-energy projects to sell their tax credits.
  

• By making the new credits tradeable, lawmakers hoped to encourage fresh money to implicitly fund clean energy efforts.

How it happens: These renewable-energy firms usually don’t make enough profit to fully utilize the tax credits they generate, selling the leftovers to other companies at a slight discount (someone might pay, say, $96 for a credit that reduces their tax bill by $100.)

• It’s a hidden form of subsidization for companies directly tilting America’s energy grid away from carbon-heavy sources.
  

• Writes the WSJ, “Transferring tax credits directly to corporate buyers offers a faster, simpler way for clean-energy companies to fund projects than existing tax-credit marketplaces.”
  

• Clean energy companies often raise funds for projects from external investors and/or lenders, and the extra cash from selling tax credits enables them to borrow even more to fund projects (or invest more of their own capital.)

Why it matters:

More companies are reportedly entering the market for these tax credits. One big example recently was the fintech giant Fiserv, which is paying $700 million for tax credits from the solar panel producer First Solar.

In December, the Treasury Department unveiled an online registration tool to make it easier for more companies to participate in the program.

• One Deputy Treasury Secretary said, “Increased access to clean energy credits is acting as a force multiplier so that more clean energy projects are built quickly and affordably.”

Read more

Together With The Bay Area Times

💻 What We Can Learn From World’s Most Valuable Chipmaker

Taiwan Semiconductor Manufacturing Co. (aka “TSMC”), the world’s most valuable computer chipmaker, reported earnings this week, offering a glimpse into demand for smartphones and PCs.

As the main chipmaker for Apple and Nvidia, which both design high-end chips but don’t manufacture them at scale, TSMC is the backbone of the digital economy. And it takes a lot to do that. In 2023, the company spent $30 billion on capital expenditures.

• It’s also expanding its operations globally, moving forward with new plants in Japan, Arizona, and Germany.

The 2024 outlook? Let’s just say it’s nice to be the dominant leader in an industry underpinning modern technology. TSMC raked in over $7.5 billion in profits last quarter and expects revenue growth to bounce back to at least 20% this year, with the boom in AI development spurring a surge in demand for computing power.

• Similar to how it enabled smartphones to take over the world, TSMC hopes to play a similar role in helping AI tech go mainstream.
  

• While slumping demand for PCs due to an inventory glut has weighed on TSMC in recent years, its CEO told investors, “Our business has bottomed out on a year-over-year basis, and we expect 2024 to be a healthy growth year.”

Why it matters:

Despite TSMC’s optimistic revenue outlook, caution abounds elsewhere in the industry. Chipmaking peer Samsung has endured six straight quarters of falling operating profit.

While another rival, Micron Technology, delivered better-than-expected results in December, Samsung’s 35% drop in operating income reflects continued soft demand for advanced electronics worldwide and, specifically, weak demand for the memory chips that power devices.

• Whether the post-pandemic plunge in demand for smartphones and laptops is finally over remains to be seen, but if you take TSMC’s leadership at its word, the industry may finally be turning a corner.

Read more

More Headlines

🍾 Reddit seeks to launch IPO in March

🫠 Davos survey says 25% of CEOs plan to replace human workers with AI this year

👉 What to expect from the Magnificent Seven’s earnings

✌️ Sheryl Sandberg is leaving Meta’s board

💊 Where anti-obesity drugs are taking off the most

🏥 Could Global Health Spending Halt Climate Change?

Could healthcare spending be key to our efforts to combat climate change? Bill Gates thinks so. 

Off the radar: The Microsoft co-founder said this week at the World Economic Forum that improving health care in developing countries could help the cause. Gates, the billionaire philanthropist, has dumped plenty of money into such areas, but he worries other mega-wealthy people and governments aren’t doing enough. 

• “Global health is a little bit off the radar right now,” he said Tuesday in Davos. “For the next 10 years, where money is going to be so limited, if you want to care about climate impact, the health spending should go up, not down.”

Context: Gates is putting his money where his mouth is: On Monday, the Bill & Melinda Gates Foundation said it would spend $8.6 billion on healthcare tech and programs this year, the largest budget ever for the nonprofit. 

• Donations include developing new vaccines and inexpensive supplies to reduce malaria, polio, and maternal deaths.
  

• Gates called for countries to donate 0.7% of their gross domestic product to aid.
  

• Gates noted that health spending has “not only humanitarian benefits” but translates to economic and environmental gains. “As we make the world healthy, that’s where you get population growth gets to a steady state.”

Why it matters:

Climate change has impacted every continent, and billionaires have slowly turned their attention (and dollars) to fight it, including heavy hitters like Gates, Amazon founder Jeff Bezos, Oracle co-founder Larry Ellison, and Google co-founder Sergey Brin. 

• Gates has also backed climate tech companies through one of his funds, Breakthrough Energy Ventures. He added this week that he’s “optimistic” about climate funding overall, a field he says will be “supercharged” by artificial intelligence.
  

• “Companies can help with the visibility, with the innovation. There’s a lot they can do,” Gates said.
  

• “But the $130 billion of aid money that’s given, we’re not going to get the private sector or even philanthropy to make up the numbers there. The numbers don’t work.”

The bottom line: Gates says, “We can’t talk about the future of humanity without talking about the future of health,” adding that mothers and babies dying simply because of where they live “keeps me up at night.”

Read more

Quick Poll

Yesterday, we asked: What is your favorite airline?

— Said one former member of team Delta: “Delta had been my favorite, far and away, but then they changed their Sky Club and Status requirements. They don’t want flyers like me…8-12 domestic coach flights a year. I’m worthless to them. I’m flying American from now on.”

— Voting Other, “All the above are lousy and treat customers badly. To truly experience great airlines - see Asia. The good ones are: Singapore Airlines, Emirates, Ethihad, Qatar Airways.”

— We can certainly relate to this one: “Sometimes Alaska Airlines gives me a free beer. Can't get better than that.”

See you next time!

That's it for today on We Study Markets!

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