🎙️ Sam Altman's $7 Trillion Plan

The S&P 500 is sitting pretty, above 5,000 for the first time. That’s after a ~20% rally since October 🥂

It’s been quite the run-up to 5k, with stocks now up 14 of the past 15 weeks — something that hasn’t happened since 1972.

“This is the year of the bucking bull,” noted one investment strategist.

— Matthew & Shawn

Here’s today’s rundown:

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

• Sam Altman’s big plans to raise $7 trillion

• Super Bowl economics

• Behind Japan’s booming stock market

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

Chart of the Day

In The News

🧐 Sam Altman’s Big Plan to Reshape the Semiconductor Industry

Sam Altman, CEO of the company that created ChatGPT, has probably never been criticized for a lack of ambition. His latest endeavor is, to say the least, quite ambitious.

Altman aims to raise $5-7 trillion — yes, trillion (bigger than the entire existing semiconductor industry) — to revamp global computer chip production, expanding capacity to power the AI revolution.

Who can help fund this undertaking? Oil money, of course. That is, the United Arab Emirates government, which is leading talks to invest in Altman’s project.

Altman is also meeting with officials from the U.S. government, namely Commerce Secretary Gina Raimando.

• Given the considerable computing power underpinning AI technology, which consumes significant electricity, Altman’s fundraising efforts would also include plans to expand energy infrastructure.
  

• Said an OpenAI spokesperson, “OpenAI has had productive discussions about increasing global infrastructure and supply chains for chips, energy and data centers—which are crucial for AI and other industries that rely on them.”

Why it matters:

For Altman to scale OpenAI’s business to reach its goals, it must overcome a shortage of pricey AI computer chips necessary for training large language models.

Not only would Altman’s proposed fundraising be 10x bigger than the global computer chip industry (which did $527 billion in sales last year), it would be “outlandishly large” by corporate fundraising standards, as the WSJ points out.

• It would also be larger than some major economies’ total national debt…
  

• And it would also be considerably more than the combined $1.44 trillion raised by all U.S. companies in 2023 from debt issuance.

Nevertheless, Altman hopes to fund new chip foundries run by existing computer chip makers like TSMC, guaranteeing OpenAI as a customer for the new output.

Read more

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🏈 Super Bowl Economics: Americans Expected to Spend Record

Where will you be on Sunday night? The Super Bowl is one of the biggest events on the U.S. calendar, with more than 200 million Americans expected to tune in.

The game, which airs on CBS at 6:30 p.m. Eastern time, is a cultural moment in America. 

For starters, the U.S. Chamber of Commerce expects Americans to spend a record $17.3 billion — roughly $86 per person for everything from food and drinks to apparel. 

• Want to highlight your company in a 30-second ad? That will cost you about $7 million, or $233,000 per second.

In Las Vegas alone — where the San Francisco 49ers will face off against the Kansas City Chiefs — about 150,00 visitors are expected to be in the city, spending over $215 million on food, hotels, and game-related tickets and merch. Heck, even one in four Americans (68 million!) plan to bet on the game.

Why it matters:

As the game’s popularity grew, so did the ad budgets. In 1984, Apple cemented the game as a commercial haven when it ran an ad featuring a young female athlete shattering an image of Big Brother. 

• “The iconic ad helped transform the big game into the epitome of consumerism,” The Wall Street Journal reported.
  

• But it should be noted that introducing the Macintosh was a flop financially, and Steve Jobs was fired the following September. Apple shares lost half their value. 

The point: Don’t put too much stock into Super Bowl ads. If anything, they’re a contrarian signal for investors. 

Look at financial services firms, spending much less than years ago. That includes bitcoin-related ads. (Remember Larry David’s FTX commercial two years ago?)

• DraftKings and Carvana dropped ads last year after running them in 2022, around the height of the last bull market. Meanwhile, auto companies, food, and beer and wine companies have picked up their ad spend.
  

• “The Super Bowl is one of those moments when you get to see what resonates with the crowd immediately—and, as importantly, what doesn’t,” one marketing professor commented. 

Read more

More Headlines

📲 Australia passes bill supporting workers’ right to disconnect and ignore work messages after official work hours

🎰 Sports betting is coming to X

👉 Inflation in December was lower than first reported

👀 Bitcoin breaks above $47,000 for first time since early 2022

💬 Most Americans feel they pay too much in taxes

💪 Japan’s Booming Stock Market

Hear that in the distance? It’s the sound of Japanese investors celebrating their return to glory.

After undergoing an epic multi-decade stagnation, Japan’s stock market is so back. Its flagship Nikkei 225 stock index, the nation’s equivalent to the S&P 500, surged to levels not seen in 34 years on Friday.

• The country’s financial markets peaked in 1989 after investors’ euphoria crescendoed, crashing back to earth when it became clear that Japan wouldn’t succeed the U.S. as the world’s largest economy, something many predicted at the time.
  

• Instead, crippling debt levels and one of the world’s oldest demographics stunted growth for three decades.

But now, everything has changed. Foreign investors are piling into Japanese markets, purchasing over $19 billion worth of stock since the year began.

Why it matters:

While Japan’s stock indexes have moved higher, it’s done so on shaky ground. On some big days that have powered its markets higher this year, more stocks declined than went up.

Still, in aggregate, Japanese stocks are up 11.65% in 2024, led higher by big companies like Softbank and Tokyo Electron, which both have heavy weightings in stock indexes and are up over 20%.

Currency exchange: Attracting foreign investors, in part, has been weakness in the Japanese yen. In late 2020, the U.S. dollar could be exchanged for ~104 yen.

• Today, a single dollar buys over 149 yen, marking a sharp decline in the yen’s exchange value.
  

• Acquiring more yen for the same dollars effectively discounts Japan’s financial assets to foreign investors, helping explain the increased interest from abroad in recent years.

Read more

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Quick Poll

Yesterday, we asked: What's your preferred method of transport while away from home?

— Commented a reader, “Rental car of course. The only time I would consider one of the other options would be in densely populated cities like the Northeast and upper Midwest.”

— Wrote an Uber voter, “Most convenient way of moving around a city. Great app with a seamless interface.”

— Said another, “Riding a bus is inexpensive, easy, and environmentally friendly.”

— And one more, “A good metro system is such a benefit to any large urban center and attached suburbs/exurbs. They provide good, usually inexpensive transportation for both locals and visitors. It is a shame our system in the US is so vastly underdeveloped.”

See you next time!

That's it for today on We Study Markets!

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