🥷🏻 Deepseek Emerges From The Shadow

Good afternoon! Stripe had an egg-on-face moment this week, laying off 300 employees (3.5% of its workforce) while accidentally including a cartoon duck in some termination emails (thats ducked up). If that wasn’t awkward enough, a few emails also listed incorrect termination dates, leaving affected employees scratching their heads.

The layoffs are part of an annual workforce review, with Stripe targeting to employ 10,000 by year-end despite this latest cutback. The payment giant, one of the most valuable private startups in the U.S., previously trimmed 14% of its team in 2022 amid the tech industry’s broader belt-tightening.

MARKETS

• Tech stocks took a beating Monday as China’s DeepSeek AI debuted a model that rivals U.S. counterparts at a fraction of the cost, sending shockwaves through the Nasdaq, which dropped over 3%. Nvidia led the sell-off, plunging 17% and erasing $589 billion in market value, as fears mounted over the sustainability of U.S. dominance in AI. Meanwhile, the S&P 500 slid 1.5%, weighed down by Big Tech’s struggles.

• Not all was doom and gloom—the Dow Jones eked out a 0.7% gain, due to its limited tech exposure and a rotation into defensive stocks. As investors scrambled for stability, the market’s broader performance showed resilience, even as AI-related names bore the brunt of the fallout.

STOCKS
Winners & Losers

What’s up 📈

• Akero Therapeutics soared 97.52% after Phase 2 trials of its liver disease treatment efruxifermin showed positive results. ($AKRO)

• Titan Machinery surged 10.41% following a Baird upgrade to outperform, citing shrinking inventories as a key catalyst. ($TITN)

• AT&T climbed 6.25% on the back of a robust fourth-quarter earnings report that exceeded Wall Street expectations, with a 70% increase in net income. ($T)

• D.R. Horton added 3.04% despite a downgrade from Bank of America, as the homebuilder navigates a challenging housing market backdrop. ($DHI)

• Travel + Leisure rose just over 2.13% after Bank of America upgraded the company to buy, expecting double-digit EPS growth amid resilient leisure travel trends. ($TNL)

• Apple advanced 3.18%, standing out among big tech names as it sidestepped the broader AI selloff. Investors cited the company’s minimal AI exposure as a stabilizing factor. ($AAPL)

What’s down 📉

• Core Scientific plummeted 29.41% amid the crypto rout, fueled by declines in Bitcoin prices and waning optimism for AI infrastructure spending. ($CORZ)

• Vertiv Holdings sank 29.88% as the DeepSeek AI developments cast doubt on future AI infrastructure spending, which could hurt datacenter services demand. ($VRT)

• TeraWulf fell 29.85%, joining other crypto miners in a sharp decline tied to weakness in digital currencies and AI-related concerns. ($WULF)

• Iren dropped 24.25%, aligning with the broader selloff in Bitcoin mining stocks as crypto-related assets faced steep declines. ($IREN)

• Nvidia tumbled 16.97%, experiencing its worst day since 2020, as the performance of DeepSeek's AI model raised concerns about the future value of high-performance chips. ($NVDA)

• Broadcom fell 17.40%, dragged down alongside Nvidia, as semiconductor names faced scrutiny over their role in AI infrastructure. ($AVGO)

• SoFi Technologies dropped 10.27% despite better-than-expected earnings, as weak fiscal guidance disappointed investors. ($SOFI)

• Walgreens Boots Alliance fell 4.51% following reports that an acquisition by Sycamore Partners may no longer proceed. ($WBA)

AI
DeepSeek Just Pulled a Fast One on Silicon Valley

What happens when a scrappy startup from China pulls off a David-vs.-Goliath upset? U.S. tech stocks lose a cool $1 trillion, and Nvidia logs the biggest single-day market cap wipeout in history. Enter DeepSeek, the new kid on the AI block, proving you don’t need billion-dollar budgets or cutting-edge chips to shake up the industry.

AI’s New MVP

DeepSeek’s latest AI model, R1, developed in just two months for under $6 million, is outperforming its American counterparts in benchmarks. Even more jaw-dropping? The startup used Nvidia’s less-powerful H800 chips—ones deemed “safe” by U.S. export controls. Their secret? An open-source strategy and efficient training methods that make Meta, OpenAI, and Google look like big spenders at an overhyped auction.

The Fallout

Nvidia plummeted 17%, losing $589 billion in market cap. Microsoft, Meta, and other tech darlings also tumbled. The Nasdaq 100 sank 3%—its worst drop in six weeks—while energy and infrastructure stocks tied to AI, like Constellation Energy, saw double-digit losses. But some, like Salesforce, could benefit if DeepSeek’s approach makes AI cheaper for end users.

The Bigger Question

DeepSeek isn’t just a shock to valuations; it’s a wake-up call for Silicon Valley. With China proving it can play the AI game on a shoestring budget, the days of unquestioned U.S. dominance may be numbered. Nvidia, Meta, and others might want to rethink their big-spending strategies, especially as investors start asking whether the AI boom has gone a little too... bubbly.

What’s Next? DeepSeek’s success could rewire the AI race, challenging the notion that throwing money at problems equals better results. But don’t count U.S. tech out yet—earnings reports from Nvidia, Microsoft, and others this week will reveal whether they’ve got what it takes to weather the storm. For now, though, DeepSeek has reminded the giants that every disruptor starts somewhere.

NEWS
Market Movements

• 📉 Nvidia loses nearly $600B in market cap, biggest drop in U.S. history: Nvidia shares plummeted 17%, erasing close to $600 billion in market value, driven by competition concerns from Chinese AI lab DeepSeek. Data center companies including Dell, Oracle, and Super Micro Computer also saw significant declines. ($NVDA, $DELL, $ORCL)

• 📱 Trump Administration Negotiates TikTok Deal for Oracle and U.S. Investors: The Trump administration is negotiating a deal for Oracle and U.S. investors to take control of TikTok’s global operations. Another proposal from Perplexity AI suggests merging TikTok's U.S. operations with a new entity, offering the U.S. government up to 50% ownership after a $300B IPO. ($ORCL)

• 📲 Apple enables AI by default in latest update: Apple Intelligence, the company’s generative AI suite, is now activated by default for supported iPhones, iPads, and Macs, marking a major step in its rollout. The update also disables AI news summaries due to inaccuracies. ($AAPL)

  ⚙️ DeepSeek limits registrations after cyberattack: The Chinese AI startup, which recently overtook OpenAI’s ChatGPT as the top free app on Apple’s App Store, reported large-scale malicious attacks on its services. Existing users can still log in. ($AAPL)

• 📶 AT&T Adds 482,000 Wireless Subscribers in Q4, Beating Expectations: AT&T reported subscriber growth above forecasts, driven by strong demand for 5G and fiber bundles. Revenue rose 1% to $32.3B, and shares gained 2% premarket. ($T)

• ⚖️ Citigroup can force arbitration in military rate case: A federal appeals court ruled Citigroup can require military members to arbitrate claims over high-interest credit card rates, reversing a prior decision and directing further review of related federal protections. ($C)

• 💰 SEC Revokes Bitcoin Banking Rule SAB 121, Bitcoin Surges Past $100K: The SEC removed an accounting rule that required banks to classify crypto assets like Bitcoin as liabilities, easing barriers for Wall Street adoption and driving Bitcoin above $100,000. ($BTC)

• 🎶 Universal Music and Spotify Sign Multi-Year Licensing Deal: Universal Music Group and Spotify agreed to a licensing deal aimed at enhancing subscriptions by bundling music with non-music content and improving the audio-visual catalog. ($SPOT)

• 🏗 Activist Investor Pressures U.S. Steel to Drop $14B Merger With Nippon Steel: Ancora is calling for U.S. Steel to cancel its $14B merger, oust its CEO, and focus on a turnaround strategy. ($X)

• 🚗 Tesla Joins EV Makers in Challenging E.U. Tariffs on China-Made EVs: Tesla joined BMW and Chinese EV manufacturers in contesting the E.U.'s 7.8% tariff on EVs imported from China. ($TSLA)

FEDERAL RESERVE
Fed Faces 2025 with Rates on Lock

The Federal Reserve kicks off its first meeting of 2025 this week, and despite Trump’s not-so-subtle nudging, don’t hold your breath for any rate cuts. Jerome Powell and his crew are expected to keep the key rate at 4.3%, marking a cautious pause after last year’s three consecutive reductions.

Why the Pause?

Inflation is cooling—but not enough. Prices are hovering at 2.4%, just above the Fed’s 2% sweet spot, and the job market remains stubbornly strong, with unemployment at a low 4.1%. For Powell, the challenge is threading the needle: holding rates high enough to keep inflation in check without tipping the economy into a recession. With Trump’s proposed tariffs lurking in the background, inflation risks aren’t exactly taking a back seat.

Trump vs. The Fed: The Rematch

Trump has made it clear he’s not a fan of waiting. Last week at Davos, he said he’d “demand” lower rates, calling out Powell by name (again) and claiming he knows interest rates “better than they do.” For now, Powell isn’t taking the bait, but the tension between 1600 Pennsylvania Ave. and the Marriner S. Eccles Building is palpable.

The Stakes

Fed officials are divided. Some, like Chicago Fed President Austan Goolsbee, think inflation will keep easing, justifying future cuts. Others, like Cleveland’s Beth Hammack, argue that the Fed needs to keep rates elevated to fight stubborn price pressures. Add Trump’s tariffs and potential labor market disruptions into the mix, and it’s a recipe for uncertainty.

What’s Next? The Fed is signaling a cautious approach, with a “wait and see” stance likely to dominate this week. But don’t expect Trump to stay quiet—he’s already hinted at future clashes with Powell, whose term runs until 2026. Whether rates hold, drop, or—brace yourself—rise, the stage is set for a high-stakes game of monetary policy tug-of-war.

Calendar
On The Horizon

Tomorrow

Tomorrow’s lineup is stacked with economic updates: the consumer confidence index, the S&P Case-Shiller home price index, and durable goods orders are all on deck. Plus, the Federal Reserve kicks off its two-day FOMC meeting. While we’ll have to wait until Wednesday for any rate decision, expect plenty of chatter about what Jerome Powell and team are cooking up.

Earnings season stays busy with names like Boeing ($BA), Lockheed Martin ($LMT), General Motors ($GM), Royal Caribbean ($RCL), Kimberly-Clark ($KMB), and Chubb ($CB) taking the stage. JetBlue Airways ($JBLU) will test the airline sector’s hot streak, while Starbucks ($SBUX) looks to reverse three straight quarters of declining sales under its new CEO. Shareholders in both will be watching closely to see if they can deliver—or disappoint.

Before Market Open:

• JetBlue Airways ($JBLU) is flying into turbulence ahead of its earnings report. Despite a banner earnings season for airlines, analysts aren’t feeling optimistic—six say “hold” and four say “sell.” The skepticism centers on JetBlue’s towering debt-to-equity ratio, dwindling cash flow, and mounting operating losses. Investors are crossing their fingers that robust consumer demand and the broader industry’s momentum can carry the airline higher. Expectations are set at -$0.31 EPS on $2.26 billion in revenue.

After Market Close:

• Starbucks ($SBUX) is brewing more than coffee—it’s trying to find its identity under CEO Brian Niccol. With three consecutive quarters of declining sales and sliding customer transactions, shareholders are banking on Niccol to deliver a turnaround. The chain is grappling with balancing its corporate behemoth status with its neighborhood-friendly vibe. Anything short of a rebound could send the stock steeply lower. Analysts are eyeing $0.68 EPS on $9.32 billion in revenue.

NEWS
The Daily Rundown

• 🇨🇴 Colombia Backs Down After Trump Threatens Emergency Tariffs: A brief crisis erupted when President Trump threatened a 25% tariff on Colombian exports after President Gustavo Petro blocked U.S. military planes carrying deported migrants. By the end of the day, Colombia agreed to accept the migrants, avoiding a trade war that could have devastated its economy, which relies heavily on U.S. trade.

• 📱 Rumored TikTok Deal Includes Oracle and ByteDance Holding Minority Stake: Sources revealed a potential agreement where Oracle would lead a U.S. investor group and oversee TikTok’s operations to block Chinese access to data. ByteDance would retain a minority stake. President Trump denied Oracle’s involvement but confirmed discussions are ongoing.

• 🚶 Study Finds Americans Are Walking Faster but Socializing Less: A study found that pedestrians in major U.S. cities walk 15% faster than they did 30 years ago, while lingering in public spaces and group interactions have halved. Researchers attribute the trend to digital communication and an increase in third spaces like coffee shops.

• 🌧 Southern California Prepares for Mudslides as Heavy Rain Arrives: Southern California braces for its first significant rainfall in months, raising concerns about mudslides and toxic runoff in wildfire-scarred areas. Flood watches are in place, with emergency crews on standby.

• 📍 The Gulf of Mexico Renamed the Gulf of America: Hours after his inauguration, President Trump signed an executive order renaming the Gulf of Mexico to the Gulf of America. While the change applies only to U.S. maps, other countries are not obligated to follow suit. Trump also reverted Denali’s name to Mount McKinley, sparking criticism from Native Alaskans.

• 🏛 RFK Jr. Faces Contentious Senate Hearings for HHS Role: Robert F. Kennedy Jr., President Trump’s pick for Secretary of Health and Human Services, will face Senate hearings this week. Key topics include his controversial vaccine claims, weight loss drugs, and additives in food. His nomination has drawn sharp criticism from public health advocates.

• 📉  U.S. Foreign Aid Freezed for 90 Days: The State Department announced a 90-day freeze on foreign aid following an executive order by President Trump. The pause impacts development and military assistance programs, drawing criticism from international groups warning of humanitarian consequences.

• 🛠 Kia Recalls 80,000 Vehicles Due to Airbag Malfunction Risk: Kia America is recalling Niro vehicles from model years 2023–2025 over a wiring defect that could disable airbags or cause unintentional side curtain airbag deployment. Repairs will begin in March at no cost to owners.

• 🎾 Madison Keys Wins First Grand Slam Title at Australian Open: Madison Keys defeated Aryna Sabalenka to claim her first Grand Slam title at the Australian Open. At 29, she becomes the second-oldest woman to win the tournament. On the men’s side, Jannik Sinner successfully defended his title.

RESOURCES
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