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Amazon ramps up AI investment

23rd March 2024 – 29th March 2024 | Another week in the markets

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Source: MarketWatch 

Hello Saturday,

This week, FTX founder Sam Bankman-Fried is sentenced to 25 years in prison, Oyo eyes ₹100 crore net profit in Q4 and electric 2-wheeler registrations zoom past the 100K figure this month.

  • FTX founder Sam Bankman-Fried was sentenced to 25 years in prison bringing the story of the meteoric rise and fall of the crypto-king to a categorical halt.
  • Amazon funnels in an additional $2.75 billion in AI startup Anthropic.
  • S&P 500 rises by 10% in the first quarter of 2024, marking the best year since 2019.
  • Ritesh Agarwal-led Oyo is eyeing net profits of ₹100 crore in Q4, 20% surge in revenue for FY24. 
  • Electric vehicle registrations cross the 100K threshold in March. 

Taking stock | Sam gets canned | Amazon ramps up AI investment | S&P 500 soars! | Oyo’s overdrive | EVs in the fast lane | Invest wisely | Another week in the markets

Taking stock

The glorious run of the three major indices in the US continues. The S&P 500 and the Dow rose by 0.1%, while the Nasdaq contracted by 0.1%. On Friday, the Federal Reserve favoured gauge, the private consumption expenditure data was released. Core PCE data ticked up by 0.3% in February, lower than the previous month, and lower than the economicsts’ expectations of 0.4%.  

Sam gets canned

The curly-haired wunderkind of the crypto world, Sam Bankman Fried, was sentenced to 25 years in prison by US District Judge Lewis Kaplan for stealing billions from FTX customers and defrauding investors of his crypto investment firm Alameda research.

Judge Kaplan said that Bankman-Fried owes $11 billion in financial penalties, and directed the government to seize his assets and properties to compensate victims of his financial crime. 

It has been a wild riches-to-rags story for Bankman-Fried, who, less than two years ago was hobnobbing with the political who’s who while soaking up the Caribbean sun from his $30 million penthouse. 

Prosecutors in the case had argued for a sterner 40-50 years imprisonment for Bankman-Fried contesting that he recklessly used other people’s money to finance a lavish lifestyle for himself, green-flagged risky investments and pursued his political agendas.

Bankman-Fried’s downfall prodded politicians in Washington to take a hard-hearted stance against cryptocurrencies and lit the fuse for a long-drawn-out slump in digital currencies.

Bankman-Fried’s lawyers pleaded with Judge Kaplan that a prison sentence not spanning more than 6 years would be appropriate given his long list of charitable works, his remorse over what had transpired and his autism. However, Assistant US Attorney Nicolas Roos argued before the court that Bankman-Fried had said he made mistakes, but never acknowledged committing a crime.

“What we did not hear is accepting responsibility for lying, for stealing and for fraud,” Ross said, reportedly.

The now-disgraced FTX founder did not find any sympathy from the judge either, who pointedly said: “A thief who takes his loot to Las Vegas and successfully bets the stolen money is not entitled to a discount on the sentence,”

Amazon ramps up AI investment

US E-commerce giant Amazon ramped up its investment in AI startup Anthropic, in a bid to strengthen its offering in the heated AI arms race, where Amazon is competing against the likes of Google, Microsoft and other tech players.

The new tranche takes Amazon’s total investment in Anthropic to $4 billion. Last September, the E-commerce company had invested $1.25 billion. Amazon currently holds a minority ownership position in the company.

Anthropic seems to be in the good books of the large tech players. Last October, Google agreed to invest up to $2 billion in Anthropic. Apparently, the $4 billion investment is the largest that Amazon has made in the last 30 years since its inception.

Amazon’s time comes at a time when Generative AI seems to be the buzzword in Silicon Valley. As per research firm Pitchbook, north of $29 million was invested in AI startups in 2023. Over the years, in multiple rounds, Microsoft has channelled over $13 billion in OpenAI for a 49% stake in its for-profit arm.

As far as Amazon is concerned, the investment makes a lot of business sense considering that AI startups need to access cloud-computing services to come through on their AI offerings. Last year, Anthropic said that it would be spending $4 billion on Amazon’s cloud computing services over the next five years.

A few months before Google’s $2 billion investment, Anthropic also committed to spending $3 billion on Google Cloud. Meanwhile, OpenAI is shelling out billions to access Microsoft’s cloud.

In January, the Federal Trade Commission announced that it was investigating investments and partnerships entered into by big tech companies, and how they were adversely affecting the competition in the AI playing field.


Source: Google Finance

S&P 500 soars!

A combination of market-driving factors has clinched the best quarterly opening for the S&P 500 since 2019. The index has delivered 10% since the beginning of the year, and till now, weakness has not outlasted a few sessions, while more and more investors have been aggressively buying the dip.

It is not just the Magnificent Seven that has been driving the S&P 500 upwards. Ten out of 11 sectors of the index have jumped. The Russell 2000, an index of small-cap stocks, has also jumped up by 4%. 

Markets are being driven to record-breaking heights thanks to three unique factors coming together: resurging corporate profitability, market enthusiasm over AI developments and the Federal Reserve’s recent optimistic commentary that notwithstanding the statistical bumps, inflation is on track to come down in the US.

In fact, since the market lows recorded in October last year, the market capitalisation of the companies in the S&P 500 has leapfrogged by a massive $9 trillion. The dramatic rise in the S&P 500 has also encouraged a lot of risk-takers. Recently, social media platform Reddit launched its IPO, which surged by a whopping 48% on the first day of its debut. Additionally, the launch of Bitcoin ETFs also triggered a rally in the cryptocurrency space with Bitcoin rising by 61% since January.

As per a monthly Bank of America survey, bullish sentiment seems to be ruling the roost amongst fund managers. The survey found that stock allocations and risk tolerance were at the highest levels since the start of 2022.

Oyo’s overdrive

Oyo is looking to hit it out of the park in FY24. The IPO-bound company is eyeing a handsome ₹100 crore net profit for the fourth quarter of the FY, and a 20% rise in the topline for the year.

Oravel Stays, the company at the heart of the travel tech firm, turned profitable in the second quarter of this FY and has been recording strong net profit growth every passing quarter.

In the second quarter of FY24, the company clocked in its first net profit standing at ₹16 crore. In the next quarter, it managed to almost double the bottom line to ₹30 crore.

The company recently received a ₹2,000 crore credit line from the likes of JP Morgan to accelerate the Oyo Accelerator Programme. The initiative, which first took off in March 2023, empowers 700 hotels and 85 small hotels to expand their business and achieve profitability.

Oyo’s profitability was also derived from its strong push towards spiritual tourism. It recently opened 65 new properties in Ayodhya and announced that it will launch another 50 homestays in Puri, Odisha. For 2024, Oyo is targeting a launch of over 400 properties in spiritual destinations strewn across India.

EVs in the fast lane

EVs are on a roll.

For March, electric two-wheeler registrations have crossed the 1 lakh mark in a month. This is only the second time that such a feat has been achieved since the launch of EVs in India.

Companies are pushing ahead with aggressive discounts and desperately targeting liquidation of their inventory given that a failure to sell-off inventory would lead to them bearing the subsidy burden under the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME 2). In the new financial year, the scheme will be replaced by a new Electric Mobility Promotion Scheme, which will be applicable for only four months, will cut in half the subsidies and drastically reduce the cap.

As of March 27, total EV registration has scaled past the 1,00,031 mark, which is an increase of 25% over the previous month. The last time such high sales were witnessed was in May last year, when the tally of total EVs registered climbed to 1,01,372. 

Even then, the government had laid the groundwork for a steep reduction in subsidies starting from June 1, 2023. This forced the companies to ratchet up sales by pushing out heavy discounts. However, with the implementation of the reduced subsidies, companies had to raise their prices. Consequently, sales for June contracted by 56% and took months to recover.

Under the EMPS scheme, the government has allocated a subsidy of ₹500 crore. As per the scheme, subsidy has been cut to half to ₹5,000 per 1 kilowatt-hour with an upper cap of ₹10,000. The capping earlier stood at ₹22,500.

Invest wisely 

To ensure that your investments create wealth, one must be possessed of oodles and oodles of patience. In the same manner that a sapling won’t grow into a tree overnight, your investments will also not yield fruits in a matter of days. To attain the best outcome for your investments, one must exhaustively research the original hypothesis and stick to it with conviction, irrespective of market volatility and macroeconomic events. With the Appreciate app guiding you on your wealth creation journey, it is easier than ever before to build long-term wealth and prosperity. 

Warm regards,
Another week
in the markets

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