Elon Keeps Trucking

Plus: Big Tech’s boom isn’t making life any easier for startups. ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

July 17, 2023

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TOGETHER WITH

Good morning and happy Monday.

Discarding an Apple product a day keeps the US intelligence community away. At least, that’s what the Russians seem to think. Starting Monday, authorities in Moscow are banning thousands of government officials and state employees from using iPhones and other Apple devices over fears that the California-based company is in cahoots with America’s espionage apparatus.

If Russia has evidence of covert cooperation, it didn’t share. We suspect it’s more akin to US government fears that Beijing can snoop on Americans via TikTok – you know, patriotism meets X-Files.

Morning Brief

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Ark ETF investors look for a lifeboat.

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The first Cybertrucks are built.

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Charities receive less amid UK inflation.

Tech

Nobody Wants to Invest in Small Tech

Big Tech may be powering a bull market, but Silicon Valley startups aren’t enjoying any trickle-down effects.

Venture capitalists are pulling back on megafunds, depriving startups of much-needed cash on the long road to an IPO. Meanwhile, investors are rapidly deboarding Cathie Wood’s ARK Innovation ETF — a fund still mostly dominated by pandemic-era tech firms like Roku and Zoom, whose impact can better be described as minor disturbances than outright disruption. We’ll call them Mid Tech.

Jumping Ship

Wall Street has once again embraced companies that make money, with bonus points awarded to anything that can also stir up AI hype. It’s why the highly profitable and AI-curious mega-cap MAAAN stocks (that’s Microsoft, Apple, Amazon, Google-parent Alphabet, and chipmaker Nvidia) are nearly single-handedly driving a new bull market. But both Wall Street and venture capitalism are losing patience waiting to see which startup or Mid Tech firm will start reaping big profits and wiggle its way to the adult table.

You know why: The Fed’s rate-hiking campaign has shuttered the cheap-cash gusher for growth-focused tech firms, both public and private. Meanwhile, large institutional investors like pension funds and university endowments are much stingier in light of economic uncertainty. That’s put venture funds and one of the industry’s marquee ETFs in a serious bind:

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Only seven VC funds totaling $1 billion or more have been raised by venture firms so far in 2023, according to Pitchbook, well off the pace from recent years. Y Combinator shuttered its long-running growth investment fund, Tiger Global and Sequoia Capital each significantly scaled back ambitions, and Andreessen Horowitz is mulling a right-sizing of its future venture funds, sources told The Wall Street Journal.

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Despite rallying 50% so far this year, ARK shares are still trading 70% below their peak while assets under management currently total just $9 billion, well down from a $30 billion peak, thanks mostly to investment losses. Investors have pulled a net $717 million from the ETF in the past year, according to FactSet.

“You have a whole group of people who got in somewhere near the top and are sitting on horrific losses,” Matthew Tuttle, CEO of the inverse-ARK ETF operator Tuttle Capital Management, told the WSJ. “I think some of those people have said, ‘I’m never getting back to even; this is probably the best I’m going to do, and it’s time to get out.’”

Oopsies: Of ARK’s top five stakes — Tesla, Roku, Zoom, Coinbase, and Block — only Tesla and Zoom turned profits last year. But the fund has made its share of head-scratching bets, too, like selling off its stake in Nvidia in January, ahead of the company’s rocketship run to a trillion-dollar market cap. So much for letting AI-supercomputing microchips fall where they may.

– Brian Boyle

Automotive

Tesla Has Finally Started Building Cybertrucks in a Slowing EV Market

(Photo Credit: LovelyMotors/Flickr)

After years of delays, the first Cybertruck came off the assembly line at Tesla’s giga-factory in Texas last weekend.

But with EV sales slowing, it might be a while before the $40,000 vehicle becomes a ubiquitous presence on the road.

Get Out of My Dreams and Into My Truck

Tesla CEO Elon Musk unveiled the prototype Cybertruck way back in 2019, and despite a blunder when the apparent bulletproof windows were shattered by a lightly thrown metal ball, drivers were still intrigued. While most carmakers have designed EVs to look like their gas-powered counterparts, the aptly named Cybertruck, with its angular build and reflective stainless steel finish, is reminiscent of Blade Runner (only incapable of flight).

An unofficial, crowdsourced tally from Electrek found that nearly 2 million drivers have made a $100 refundable deposit to order the Cybertruck. Most major car makers are winding down combustion-engine vehicle production in the next decade in favor of EVs. But besides needing a supply of lithium for batteries and a national charging infrastructure, carmakers are facing another problem — absconding buyers:

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Market researcher Motor Intelligence found that EV sales grew by roughly 50% in the first half of 2023, far below the 71% growth rate last year. And Cox Automotive found that EV days’ supply — the time it takes a dealer to sell a new batch of inventory — went over 100 days, more than double the days’ supply for all models.

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Obviously, EV interest is still there, but it might not be the quick, seismic shift some automakers were hoping for. Just last month, Lordstown Motor, an EV truck maker accused of inflating pre-order numbers of its vehicles, filed for bankruptcy. A Cox survey found that only 31% of dealers and 53% of buyers see EVs as the next big thing.

“EV growth will continue to outpace overall industry growth, but the days of 75% year-over-year growth are in the rearview mirror,” Cox’s research said, adding, “The hard-growth days are ahead.”

Life in the Slow Lane: Despite the initial hype, the Cybertruck doesn’t seem high on Musk’s list of future Tesla concerns. In an April earnings call, Musk wanted investors to remain realistic about the car, saying, “The start of production is always very slow, so I wouldn’t put too much stock in start of production. It’s kind of: ‘when does volume production actually happen,’ and that’s next year.” Musk knows that demand will be tricky going forward; that’s why he’s slashed the prices of Tesla’s Model 3 and Model Y vehicles six times already this year.

– Griffin Kelly

Sponsored by Ryse

The Window to Invest Is Closing

The pioneer in smart-doorbell technology, RING, pitched their business on the hit show Shark Tank at a valuation of just $7 million. The sharks shut them down.

5 years later, the company sold to Amazon for more than $1 billion, turning the 10% stake initially offered to the sharks from $700K to $100M!

A similar story is brewing up in the smart shades industry, with a company called RYSE pitching on the Canadian version of Shark Tank, Dragon’s Den.

The difference? They received two offers and have an addressable market that could be significantly larger than RING’s.

The hallmark of all successful smart home products is their ability to launch into retail, and RYSE’s recent recent deal with Best Buy has put them miles ahead of the competition.

This is your last chance to invest before the window closes on July 26th.

Inflation

UK’s Top Companies Are Scaling Back Charitable Gifts

They can’t spare a dime… and would just as soon keep it even if they could.

Companies listed on the UK’s FTSE 100 index have seen profits collectively triple over the last six years, but their charitable donations haven’t kept pace amid rampant inflation, the Financial Times reported.

Donation Basket Feels Light

In 2022, the top 100 companies donated £1.85 billion ($2.4 billion) to charity. That’s roughly the same amount as in 2016, but the total accounted for only 0.8% of pre-tax profits, down from 2.4% in 2016. Charities Aid Foundation CEO Neil Heslop told the FT that if the percentage held up, the total would have checked in at £5.59 billion in 2022.

The downward slide comes as many UK citizens struggle with a cost-of-living crisis:

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Historically, inflation has hit the UK harder than fellow G7 economies, and it remains the case. A Reuters poll of London economists expects the UK’s inflation rate for June will fall but still remain above 8%, compared to much lower rates than Germany or France. Food inflation has been particularly sharp in the UK, peaking at more than 19% over the past year, which according to the FT is a direct effect of the country’s status as the world’s third-largest net importer of food and drink, behind China and Japan.

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It’s not just corporations either. A CAF report found that fewer individuals are volunteering in charitable activities and are likely to donate less than before the pandemic with roughly 70% saying they would need to make cuts to their spending to help manage bills, including 17% who said they would be likely to cut their charitable donations.

Thank Goodness for Big Pharma: Despite the less-than-ideal donations, some companies, especially those in the medical sector, stood out as exceptionally generous. The FT reported that “healthcare companies gave more to charity than any other relative to their earnings, contributing 2.95 per cent of pre-tax profits. GSK’s contributions amounted to 5.47 per cent of pre-tax profits, a higher proportion than any other company.”

– Griffin Kelly

Extra Upside

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Not-so sweet treats: US ice cream sales have been melting since the 1980s.

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G’day, mate: UK gets accepted into Asia-Pacific trade bloc.

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Just For Fun

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