Disney Pauses Superheroes

Plus: Forget FAANG, it’s all about MAAAN now. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

July 14, 2023

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TOGETHER WITH

Good morning and Happy Friday.

Technically, AI didn’t replace them. A human did.

Suumit Shah, the 31-year-old founder and CEO of Dukaan — an Indian startup that helps small businesses get placed on online marketplaces — fired 90% of his customer support team this week and replaced them with chatbots. His reasoning, via Twitter: “Tough? Yes. Necessary? Absolutely.” He claimed that resolution time for customers’ questions dropped to 3 minutes from nearly 2 hours and cut costs by 85%. Isaac Asimov said a robot must never hurt a human being. The truth is, they don’t have to, because humans do an outstanding job of doing just that to one another on a daily basis.

Morning Brief

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Can AI run with the bulls?

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A boiling point for crypto lender Celsius.

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Even Disney’s sick of superheroes.

Stock Market

The Stock Market is Recovering From 2022’s Woes. So Far.

And now, the starting lineup for yooouuuur stock market bulls: tech, tech, tech, tech, and more tech — so long as it’s tangentially related to artificial intelligence.

With inflation winding down and investors juicing on the AI-driven hype-cycle, the stock market is starting to look more like 2021’s rollicking run than 2022’s depressing downturn. And now the S&P 500 may even sniff an all-time high.

What’s up, MAAAN?

After peaking at nearly 9% last summer, inflation is now in a comparative freefall. The consumer price index rose just 3% year-over-year in June, according to government data released earlier this week. That’s good for the lowest inflation rate since March 2021, back when rising prices were hardly a pressing issue and stocks were roaring after a brief pandemic panic. So far this year, the Nasdaq composite is up 33%, while the S&P 500 is up nearly 17% — and sits just 7% away from a new all-time high, an achievement that some onlookers would consider as the official marking point of a new bull market (others would say we’re already in a bull market, given the more-than-20% rally from an October 2022 low point).

What’s responsible for the upswing? A sort of new-fangled FAANG group at the top of the S&P 500 that we’ll dub MAAAN — that’s Microsoft, Apple, Amazon, Google-parent Alphabet, and hot-rising chipmaker Nvidia. (Sorry, Zuckerberg, Meta-née-Facebook, with its sub-trillion dollar market cap, is no longer in the big boy’s club). The group, and the AI mania they’re stoking, are almost exclusively responsible for the broader market’s rise:

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Profits across the MAAAN companies are projected to rise 16% in the quarter that ended in June, before accelerating in the following two quarters to cap off the year, according to a recent Bloomberg Intelligence analysis. Meanwhile, profits for all other companies in the index are projected to fall by about 9% on average, Bloomberg found.

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The rise of artificial intelligence is also fueling the feeding frenzy. “Q1 earnings growth was flat to slightly negative, Refinitiv and FactSet data show,” analysts at Blackrock wrote in a recent note. “That masks significant divergence: We see a common denominator between what’s driving market performance this year and earnings – the artificial intelligence (AI) buzz.”

Bubble Babble: Recent history tells us hot bull market runs can quickly be followed by a protracted bear market hibernation. The tech industry’s 2021 success quickly crashed and burned in 2022 in the face of the Fed’s interest rate-hiking campaign — causing Wall Street to rethink its growth-vs-profit mindset, and triggering many investors’ PTSD from the late 1990s dot-com bubble. But this year may be different. “These companies are not trading at 150 times peak earnings,” Nancy Tengler, chief investment officer of Laffer Tengler Investments, told Bloomberg. “I was managing money through [the dot-com bubble], and it was ugly, and it deflated very quickly. This is not that.”

– Brian Boyle

Crypto

Celsius CEO Gets Arrested and Sued 3 Times, All in One Day

Hey, it’s another crypto-mogul going up in flames!

Authorities on Thursday arrested Alex Mashinksy, former CEO of the now-bankrupt lender Celsius, while three federal agencies charged him and the company with defrauding investors.

Major Coin to Chump Change

The crypto market was beyond volatile in 2022, with the downfall of big names such as Three Arrows, BlockFi, and, of course, FTX. Many investors lost confidence in the market and started pulling their crypto from platforms like Celsius, which marketed itself as a modern-day bank for digital assets and had explicitly touted a higher rate of return. After freezing accounts and firing roughly a quarter of its staff last summer, Celsius was hit hard with a lawsuit from crypto asset manager KeyFi, which alleged that Celsius was a Ponzi scheme.

A few days later, Celsius filed for Chapter 11. And now the SEC, the FTC, and the CFTC have all started cases against the lender, which once managed tens of billions of dollars in digital assets:

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The SEC alleges Celsius told its investors that all was well in the crypto market and the company despite one executive calling the business a “sinking ship.” That same executive said “there is no hope…there is no plan,” and that Celsius’ business model is “fundamentally broken.” In the CFTC lawsuit, it alleges Celsius promised investors high-interest yields in a safe environment but tried to meet those returns on increasingly risky bets.

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Celsius has agreed to a $4.7 billion settlement with the FTC, making it one of the largest in the agency’s history after a $5 billion fine against Meta in 2019. That’s the same amount it owes to investors and creditors as part of its bankruptcy.

Token CEO: In addition to allegedly lying about the safety of the business, Mashinsky reportedly inflated the stock of Celsius’ own CEL token, saying he had raised $50 million by selling all 325 million available tokens. But actually, Celsius allegedly sold less than a third of the coins and raised only $32 million. Mashinksy and his alleged partner-in-crime, Roni Cohen-Pavon, could face decades in jail.

– Griffin Kelly

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Entertainment

Disney Pumps the Brakes on Marvel and Star Wars

(Photo by Anna Nekrashevich via Pexels)

Avengers, disperse!

Disney’s boomerang CEO Bob Iger said Thursday that the company will lessen its laser-beam-like focus on creating content from two huge franchises it absorbed: Marvel comics and Star Wars. We’re guessing that as he said it, he gave an ominous click of his fingers…

No Capes

Iger re-assumed the CEO throne in November and went on a $5.5 billion cost-cutting mission, laying off 7,000 staffers in the process. Unfortunately for Iger, recent underwhelming film releases like Pixar’s Elemental haven’t helped line Mr. Mouse’s big red pockets. Disney’s Q2 media and entertainment earnings report showed a 42% drop in non-parks operating income (and their parks aren’t doing too hot either).

Part of Iger’s reasoning for scaling back spending on the Marvel and Star Wars franchises specifically is that there’s simply too much of them spread across both film and straight-to-streaming TV series:

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Iger told CNBC that Marvel “had not been in the television business at any significant level, and not only did they increase their movie output, but they ended up making a number of TV series,” adding: “Frankly, it diluted focus and attention.” It also made it impossible for viewers to keep up with an MCU expanding at roughly the speed of light.

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Marvel’s most recent film, Guardians of the Galaxy Vol. 3 was a hit even relative to other Marvel films, but February’s Ant-Man and the Wasp: Quantumania fell short of expectations.

Sticking Around: Iger is technically interim CEO and was slated to depart in 2024, but news broke Wednesday that his contract has been extended through 2026 — so he can keep a watchful eye on any Jedi rebels who want to start filming again, alongside any striking actors and writers.

– Isobel Asher Hamilton

Extra Upside

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Mr. Avocado: Chipotle tests guacamole-making robot.

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This is fine: Intense heat and frequent fires could be the new normal for Canadian wilderness.

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Just For Fun

Chain reaction.

Slinky show-offs.

Have a great weekend!

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