Headlines this week - Nov 20, 2022
Twitter culture wars. Big Tech's midlife crisis. Amazon layoffs (and maybe Google next). The FTX collapse and its multiple implications. Walmart results. TSMC hot again. Second Cold War
IN SUMMARY - TOP 15 THEMES THIS WEEK
(1) Twitter maintains its position as the top show in internet business
Like other tech companies, Twitter is being criticized on the way they’ve reduced 50% headcount. This week Musk fired people publicly after they attacked him (in public, too) (BusinessWeek)(FT)(Bloomberg)
A cultural battle has started. Musk’s demands of “hardcore” work intensity have triggered more departures. Many people think operations are not sustainable now (WSJ)(FT)(FT2)(RoW)
Content moderators have left, and advertisers are leaving, maybe forever. Then, alternative revenue engines (like subscription-based IDs) are still very uncertain (WSJ)(Bloomberg)(WSJ)(WSJ2)
The good news are that usage is growing, because chaos is apparently interesting to watch. All this in spite of some high-profile departures to Mastodon and other apps (FT)
(2) Amazon confirms 10,000 layoffs, within a companywide cost-cutting program
Job cuts have apparently started this week, and will be focused on specific units: devices, retail and human resources (WSJ)(NYTimes)(FT)
(3) The conversation about a structural change in the Tech industry, signaled by all these job cuts (Twitter, Amazon, Meta), continues
Big Tech firms are losing weight in the stock market (at the expense of e.g. energy companies). Analysts talk about a “midlife crisis”, and a “culture reset” (Bloomberg)(Vox)(TheAtlantic)
Some people see job cuts as a sign that Tech CEOs working as “benevolent dictators” are not really benevolent. Others talk about a “return to reality” for spoiled tech workers (FT)(Protocol)
Mike Solana, VP at Peter Thiel’s Founders Fund, is specially hard with the (previous) Big Tech working culture, and even questions how innovative Twitter or Meta have been (PirateWires)
(4) Google could be next. An activist fund says the company would work better with less people, and asks managers for job cuts
TCI, a hedge fund, says Alphabet would be more efficient with fewer employees. They’re asking for job cuts, justified by the deceleration of the advertising market (WSJ)(WSJ2)(FT)
Meanwhile, the company keeps exploring alternative sources of growth. This week we learned about an e-commerce initiative for YouTube (FT)
(5) The Big Tech storm is expanding to China. Even if government pressures are decreasing, Tencent is in a process of contraction, and Alibaba is also suffering
Tencent presented results this week, with revenues down and missing analysts’ forecasts. They announced a new round of layoffs (Reuters)
Tencent is also reducing stakes in other companies, including a $22bn one in Meituan (a food delivery company). They will use the cash for buybacks, to support the share price (WSJ)(FT)
These announcements have triggered a selloff on Chinese internet stocks (Bloomberg)
Meanwhile, Tencent’s rival Alibaba also presented results this week. Revenue growth was also very weak, and margins were saved by the efficiency program under way (WSJ)(WSJ2)
(6) Startups are not immune to the crisis, and the Venture Capital industry is also expecting hard times ahead
Geopolitical tensions and a reduction of available capital suggest an “industry reset”, according to VC executives (Bloomberg)(CNBC)
(7) Amid all these pressures, Amazon reiterated its bet for the cloud, the segment that is currently saving the day for the company
AWS’s annual event (re:Invent) will happen later this month. Before that, AWS’s CEO shared his high expectations on the opportunities to keep growing, even in the current context (Protocol)
In the current atmosphere, it’s nice to know about plans for a Big Tech company to invest and create (lots of) jobs. E.g.: AWS in Spain ($2.6bn in 10 years, and 1,300 jobs) (Reuters)
(8) Together with Twitter and the Big Tech crisis, the fall of the crypto platform FTX was the other key theme of the week. It was a mess…
There has been an explosion of analysis discussing what’s happened. It seems clear that there were (very) questionable ethical behaviors, and the losers are retail investors (WSJ)(TheGuardian)(Bloomberg)
Founder Bankman-Fried (SBF) is reported to be trying to revitalize the company. He’s been very talkative in Twitter this week, but also revealing previous lies, in the process (WSJ)(Bloomberg)
This exchange of Twitter’s Direct Messages with a Vox journalist is particularly worrying… (Vox)
SBF was also involved in the “Effective Altruism” / “Longtermism” scene, which was partially funded by him. Now a big question mark is flying over all these initiatives (Vox)
(9) Both FTX and Binance (its rival and trigger of the current crisis) are centralized marketplaces. But the crisis is now expanding to decentralized crypto markets, too
The “crypto universe” fell this week down to a value of approx. 1% of global equities. Investors are pessimistic about crypto’s opportunities to become mainstream (Bloomberg)(Bloomberg2)
The expectations is that whatever happens now, it could also (negatively) affect decentralized crypto markets. That’s why prices of Bitcoin futures remain low (WSJ)(Bloomberg)
Crypto exchanges are (desperately) trying to reassure clients that they’re safe
(FT)
(10) The consensus is that, after this mess, crypto will finally be regulated
The FTX crisis is being explained as due to lack of “basic security controls” (FT)
Lack of regulation may be creating incentives for market manipulation (FT)
Even “CZ” (Changpeng Zhao), the leader of Binance, is now calling for more regulation (FT)
According to Matt Levine, the celebrity analyst at Bloomberg, what’s happened is similar to a bank run, so a “Crypto Central Bank” could have helped (MattLevine)
However, there are still many challenges. It is not yet clear what kind of regulation would be good, as some rules could even backfire (Protocol) (WSJ)
European regulators are openly recognizing these challenges (FT)
(11) Walmart presents nice quarterly results. They reveal difficult times for consumers, but also a long-term opportunity for the company
Walmart presented better than expected earnings and raised their revenue outlook (WSJ)
This seems linked to consumers moving to buy more “essential goods”, in a pattern that’s typical of economic crisis (Bloomberg)(Bloomberg2)
However, at the same time the company claims to be growing in the segment of households earning $100K / yr or more. This is key for Walmart’s long-term (diversification) strategy (WSJ)
(12) Warren Buffet announces a $4.1bn stake in TSMC, and the Taiwanese chip company is hot again (for now)
For investors, the announcement was a signal of confidence on TSMC’s long term opportunities. This comes after some headwinds due to perceptions of long term risks (FT)(Bloomberg)
As discussed in this FT piece, if there is an “existential risk” for TSMC linked to China and Taiwan, this should affect all stocks, and the company shouldn’t have a “special discount” (FT)
Warren Buffett’s reputation as a financial analyst is also helping people believe (FT)
(13) Second Cold War news from the chips battlefield. Companies across the value chain keep re-positioning after Biden’s strict ban on exports to China
The US is looking for its allies to support the ban. The Netherlands and Japan, in particular, are key because they’re also big exporters of chip-making tools (FT)
It looks like the ban is really having a serious impact on China, where local vendors can’t offset the pressure from not being able to import Western tools (FT)
European chip vendors are caught between a rock (the US) and a hard place (China as a key market for their products) (FT)
Meanwhile, Taiwan is seeing how many countries look to create local supply chains, and is trying to retain international investment, using tax incentives (Bloomberg)
(14) Amid the current Tech storm, regulators don’t stop: antitrust, online safety, privacy
Republican control of the US House of Representatives might accelerate regulatory initiatives against Apple, Google and TikTok (Protocol)
Epic Games is appealing against the antitrust ruling that favored Apple about its App Store payment business (Reuters)
Google will have to pay almost $400m because they were tracking location of consumers that had previously disabled location history settings (WSJ)(FT)
Regulators all over the world are looking at the Twitter’s content safety issues that everybody talks about (FT)(FT)
Ofcom, the UK regulator, continues to focus on digital safety issues. They’re now considering forcing social media apps to reveal their news feed algorithms (FT)
(15) Investment themes for the future - What was in the news this week
Replicating human abilities with AI to create social media content remains controversial. Meta had to close an advanced AI “language model” just 3 days after launch (MITTechReview)
Apple’s next major product is expected to be a mixed-reality headset. Job listings indicate plans for 3D content services to support it (Bloomberg)
Maybe counterintuitively, electric motorcycles, mopeds and scooters could be the first types of electric vehicles reaching the mass market (Protocol)
Glamorous EV startups like Lucid and Lordstown are struggling to catch up with Tesla, which enjoys plenty of first-mover advantages (WSJ)
More revelations about risks of lithium-ion batteries increase the pressure to develop new battery architectures (NYTimes)
Autonomous Vehicles keep getting further into the future. This week Volkswagen put their self-driving car plans under review (WSJ)
NASA moves ahead with its Artemis mission to the Moon. Given the poor economics of the current Boeing rockets, this looks like a good opportunity for SpaceX (WSJ)(FT)
Hermeus, a startup, is working on a hypersonic commercial aircraft. They’ve announced that their engine has been able to shift from turbojet to ramjet power (a critical technical milestone) (DefenseOne)
New controversies on current “green energy technologies”: Solar panel manufacturing (in China) may have human rights issues; other technologies are not improving fast enough (BreakthroughInstitute)(FT)
Urgency for finding and developing new antibiotics is increasing, partly because of COVID (Wired)(SciAm)
A quest for longevity, pushed with large funding from ultra-rich investors, is under way. Some startups are already commercializing kits to check your “biological age” (MITTechReview)(MITTechReview2)
For the first time, the US food regulator FDA has approved lab-grown meat for mass market consumption (Vox)