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  • 💸 Amazon To Spend $100 Billion...

💸 Amazon To Spend $100 Billion...

+ Honeywell to Break Up After Pressure From Activist Elliott

February 06, 2025

Good afternoon! Google just pulled a disappearing act on one of its core AI principles. The tech giant quietly removed its pledge not to use AI for weapons or surveillance, a promise that had been in place since 2018. With AI regulation still playing catch-up, Google’s move signals a shift toward more flexible—and potentially controversial—applications of its technology.

The company insists it’s adapting to evolving global AI policies, but the change raises eyebrows given its past reluctance to work with the Pentagon. In 2018, Google ditched a $10 billion military contract after employee backlash over AI-driven warfare. Now, with AI becoming a geopolitical battleground, the company seems more willing to play ball.

MARKETS

  • Markets played tug-of-war on Thursday, with the S&P 500 and Nasdaq inching higher while the Dow stayed in the red. The culprit? Honeywell, which tumbled over 5% after announcing a corporate split into three independent companies. Meanwhile, strong earnings reports helped keep the broader market afloat, pushing the S&P and Nasdaq closer to record territory.

  • Investors are keeping a close eye on earnings season as companies continue to report mixed results. The Nasdaq gained 0.5%, the S&P 500 added 0.4%, and the Dow slipped 0.3%. AI demand remains a focal point, with traders analyzing tech earnings for signs of momentum. And with fresh jobs data on the horizon, Wall Street isn’t ready to pick a definitive direction just yet.

STOCKS
Winners & Losers

What’s up 📈

  • Tapestry climbed 12.02% to an all-time high after beating fiscal second-quarter earnings and revenue estimates and raising its full-year outlook. ($TPR)

  • Coherent jumped 11.50% after the semiconductor company topped fiscal second-quarter earnings and revenue expectations. ($COHR)

  • Philip Morris International rose 10.95% after reporting strong fourth-quarter results, driven by demand for its Zyn nicotine pouches. ($PM)

  • Ralph Lauren gained 9.69%, hitting a new all-time high, after strong holiday sales pushed third-quarter earnings and revenue above estimates. ($RL)

  • Yum! Brands popped 9.72% after better-than-expected earnings and revenue, fueled by higher sales at Taco Bell. ($YUM)

  • ArcelorMittal added 11.1% after raising its dividend and forecasting higher demand in 2025. ($MT)

  • Peloton rallied 12.01% after beating revenue estimates in its latest quarter and raising its full-year earnings outlook. ($PTON)

  • Lyft rose 4.84% after announcing a partnership with Alphabet-backed Anthropic to integrate AI into its ride-sharing experience. ($LYFT)

  • Eli Lilly advanced 3.35% as strong demand for its weight-loss drugs Zepbound and Mounjaro outweighed concerns over lower realized prices. ($LLY)

What’s down 📉

  • Huntington Ingalls plunged 18.32% after missing fourth-quarter earnings and revenue estimates, citing supply chain delays affecting aircraft carrier production. ($HII)

  • Skyworks Solutions plummeted 24.67% after announcing that its CEO is stepping down and warning that weak iPhone sales would hurt its revenue. ($SWKS)

  • Roblox slid 11.06% after missing fourth-quarter revenue and daily active user expectations. ($RBLX)

  • Molina Healthcare dropped 10.1% after posting mixed fourth-quarter results, with revenue topping estimates but earnings falling short. ($MOH)

  • Canada Goose declined 7.89% after fiscal third-quarter earnings and revenue missed expectations. ($GOOS)

  • Ford sank 7.49%, reaching a four-year low, after issuing soft 2025 guidance despite beating fourth-quarter estimates. ($F)

  • Honeywell International declined 5.64% after announcing plans to split into three independent companies and providing weaker-than-expected 2025 earnings guidance. ($HON)

  • Bristol Myers Squibb dropped 3.84% after issuing full-year revenue guidance below analyst expectations. ($BMY)

EARNINGS
Amazon Plans To Spend $100 Billion This Year To Capture ‘Once In A Lifetime Opportunity’ In AI

Amazon is pouring a record $100 billion into AI this year, but even that might not be enough to keep up. CEO Andy Jassy warned that AWS—the company’s crown jewel—could grow faster if not for delays in data center construction and chip supply shortages. This mirrors Microsoft’s recent admission that it also lacks the infrastructure to fully capitalize on AI demand. Jassy says these issues should ease by late 2025, but for now, Amazon’s AI ambitions are hitting a supply-side speed bump.

AWS Growth: Solid, But Stuck

AWS revenue climbed 19% last quarter to $28.8 billion, marking the third straight quarter of identical growth. While that’s impressive, Wall Street wanted to see acceleration, not a plateau. Investors were expecting AI demand to supercharge AWS, but instead, supply constraints are keeping a lid on expansion. The stock fell 4% in after-hours trading as Amazon’s Q1 revenue guidance came in below expectations, even though total sales rose 10% to $187.8 billion. Meanwhile, Amazon’s e-commerce unit continues to fend off Walmart, Temu, and Shein, with a little help from new U.S. trade rules that crack down on Chinese discount retailers.

The AI Arms Race Just Got Pricier

Amazon isn’t alone in its spending spree—Alphabet is set to drop $75 billion on AI infrastructure this year, Microsoft is earmarking $80 billion, and Meta is throwing in $65 billion. But the biggest shock came from China’s DeepSeek, an AI startup that claims to have built a ChatGPT rival in just two months on a shoestring budget. That revelation spooked investors, wiping $800 billion off the market caps of Nvidia and Broadcom last week. It also raises questions about whether Amazon and its Big Tech peers are spending wisely—or just throwing cash at the AI hype cycle.

Amazon’s Long Game

Jassy insists that AI is a “once-in-a-lifetime” opportunity and that Amazon’s massive spending will pay off in the long run. But with growth bottlenecks, rising competition, and investors starting to scrutinize AI budgets more closely, the pressure is on. For now, Amazon remains one of the biggest players in the AI race—but unless it can solve its supply issues, it might not be the fastest.

NEWS
Market Movements

  • 📌 Pinterest Surges on Strong Q4 Earnings and User Growth: Pinterest shares jumped as much as 20% after the company posted fourth-quarter revenue of $1.15 billion, surpassing Wall Street’s expectations. Adjusted EBITDA came in at $470.9 million, also beating projections. Monthly active users grew 11% year over year to 553 million, exceeding estimates. The company’s outlook for Q1 sales also topped analyst forecasts, reinforcing CEO Bill Ready’s statement that Pinterest’s strategy is paying off ($PINS).

  • 🏥 Doximity Soars 25% on Revenue Beat and Upgraded Guidance: Shares of Doximity surged 25% in after-hours trading after reporting third-quarter revenue of $168.6 million, up 25% year over year and beating analyst expectations. The company raised its full-year revenue guidance to $564.6 million–$565.6 million, well above prior estimates. CEO Jeff Tangney highlighted record engagement, with AI tool usage growing 60% last quarter and more than one million providers engaging with its newsfeed ($DOCS)..

  • 🚗 Automakers Brace for Chinese Tariffs: Ford and GM face new challenges after President Trump imposed a 10% tariff on Chinese imports, hitting models like the Lincoln Nautilus and Buick Envision, which accounted for 95% of U.S. imports from China in 2024. Tariffs on $15B-$20B in auto parts could further increase car prices ($F, $GM).

  • 💰 Banks Offload Musk's X Debt: A group of banks led by Morgan Stanley sold $5.5B of the $13B in debt tied to Elon Musk’s acquisition of Twitter (now X) at $0.97 on the dollar. The debt sale, delayed due to X’s financial struggles, gained momentum as Musk’s political ties boosted investor confidence ($MS).

  • 📦 Temu Adjusts U.S. Shipping Strategy: In response to the closure of a key trade loophole, Temu is prioritizing shipments from U.S. warehouses to reduce dependence on direct imports from China. The shift aims to minimize tariff costs as it competes with Amazon and Shein ($PDD).

  • ✈️ Boeing Sees Aircraft Boom in Asia: Boeing forecasts that Indian and South Asian airlines will add 2,835 new aircraft over the next two decades, driven by middle-class expansion and rising air travel demand, which is expected to grow over 7% annually through 2043 ($BA).

  • 📉 Google Drops Diversity Hiring Goals: Google is eliminating its diversity hiring targets following President Trump’s executive order restricting DEI initiatives for federal contractors. The decision marks a shift in corporate hiring policies under the new administration ($GOOGL).

INDUSTRY
Honeywell to Break Up After Pressure From Activist Elliott

Being a sprawling industrial conglomerate isn’t as cool as it used to be. Honeywell is officially breaking itself up into three independent companies: aerospace, automation, and advanced materials. The decision comes after activist investor Elliott Investment Management took a $5 billion stake last year and called for a split, arguing that Honeywell’s complex structure was holding back its stock price. Investors initially cheered the move, but reality hit fast—shares fell 6% after Honeywell’s 2025 forecast came in weaker than expected.

What’s Staying and What’s Going

Honeywell’s aerospace division, which supplies aircraft parts and systems, will become one of the largest public aerospace companies post-split. It brought in $15 billion in revenue last year and will finally get to stand alone. The automation unit, which sells warehouse robotics and smart energy systems, is the company’s largest segment with $18 billion in revenue. The smallest of the three, advanced materials, had $4 billion in sales and was already in the process of being spun off before Elliott pushed for a broader split. The breakup is expected to be completed by the second half of 2026.

The End of the Conglomerate Era

Honeywell’s move is part of a broader trend—big industrial giants are ditching the all-in-one business model. General Electric pulled off a similar split, spinning off its energy and healthcare units and unlocking more than four times its pre-breakup value. Investors have been pushing for leaner, more specialized companies, and Honeywell is just the latest to cave to that pressure. A breakup could boost Honeywell’s enterprise value by as much as $32 billion, according to Bloomberg Intelligence, though history shows that not all spin-offs are immediate winners.

What’s Next? While Elliott is celebrating, the real test is whether these three new companies can deliver better returns than Honeywell did as a single entity. CEO Vimal Kapur acknowledged that aerospace, in particular, has been "diverging more and more" from the rest of the business, making the split logical. But with a softer-than-expected outlook for 2025 and concerns about entering “deal purgatory” until the split is finalized, investors might need patience before seeing the full payoff.

Calendar
On The Horizon

Tomorrow

Tomorrow’s main event? The monthly US jobs report—the most comprehensive snapshot of the labor market. This survey of over 141,000 nonfarm employers breaks down job growth, layoffs, and wage trends, making it a key factor in shaping economic expectations.

A hotter-than-expected report could keep the Fed cautious, while a softer reading might boost hopes for a rate cut in March. Economists anticipate another solid month after December’s 256,000 job gain and steady 4.1% unemployment. On the earnings front, CBOE Global Markets, Fortive, and Flowers Foods will round out the week with their latest results.

NEWS
The Daily Rundown

  • 📦 USPS Halts, Then Restarts Packages from China and Hong Kong: The U.S. Postal Service briefly stopped accepting parcels from China and Hong Kong after Trump revoked a trade exemption, only to resume hours later. The exemption had allowed duty-free shipments of goods under $800, a key advantage for platforms like Temu and Shein.

  • 📉 Federal Workers Reject Buyout, Layoffs Loom: Despite a deadline for 2.3 million federal workers to accept resignation deals from the Trump administration, only 20,000 have taken the offer. The White House aimed to cut 5-10% of the workforce, but legal challenges and union lawsuits may delay the effort. Questions remain about the legality of the buyout, especially given budget constraints and federal administrative leave limits.

  • 🚙 Nissan Rejects Honda Merger Proposal: Nissan has turned down Honda’s initial terms for a merger, though negotiations are ongoing. The proposed deal would have consolidated two of Japan’s largest automakers to better compete in the global EV market.

  • 🌍 World Leaders Condemn Trump’s Gaza Takeover Plan: Trump’s proposal to turn Gaza into "the Riviera of the Middle East" has sparked rare global unity, with China, Russia, the UK, Germany, and Saudi Arabia all opposing the plan. Critics argue the proposal violates international law, while the U.S. maintains it aligns with broader Middle East policy goals.

  • ⚖️ Trump Bans Trans Women from Women’s Sports: A new executive order bars trans women from competing in women’s sports, citing Title IX protections. The move builds on previous administration efforts to define sex as strictly male or female in federal policies. Supporters claim it ensures fairness in sports, while opponents argue it violates civil rights.

  • 📱 Apple Targets Partiful with New ‘Invites’ App: Apple launched "Apple Invites," an event-planning app requiring an iCloud+ subscription to send invitations. While Android users can RSVP, additional steps make it less seamless. The move challenges Partiful, which Apple previously recognized in its Cultural Impact awards, drawing criticism for copying third-party innovations.

  • 🏈 NFL Swaps 'End Racism' for 'Choose Love' on Super Bowl Field: This year’s Super Bowl will mark the first time since 2021 that “End Racism” is absent from the end zones, replaced with “Choose Love.” The NFL cited recent tragedies, including the New Orleans attack and DC plane collision, as motivation. Commissioner Roger Goodell reaffirmed the league’s commitment to DEI amid broader corporate pullbacks.

  • 📉 Comedies Decline as TV Shrinks: Hollywood’s "Peak TV" era is over, with 2024 seeing a 7% drop in new shows and a 20% decline in episodes. Comedy took the hardest hit, down 39% since 2019, as streaming services pivot to reality shows and short-form content, leaving sitcoms increasingly rare.

  • 🚗 Tesla Sales Plummet in Germany: Tesla’s sales dropped sharply in Germany last month, following declines across Europe. CEO Elon Musk’s growing political involvement has been cited as a factor, with consumers in key markets turning away from the brand.

  • 🏫 West Point Shuts Down Clubs for Women and Minorities: Following Trump’s executive order targeting DEI programs, West Point is disbanding clubs focused on women and minority groups. The move has drawn criticism from alumni and advocacy groups, who argue it undermines inclusivity efforts at the academy.

  • 🌉 Maryland Unveils Plan to Replace Baltimore’s Key Bridge: Governor Wes Moore released designs for a replacement for the Francis Scott Key Bridge, which was destroyed in a container ship collision last year. The new structure will incorporate modern safety measures to prevent similar disasters.

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