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In today’s edition,
- Amazon challenges Nvidia
- HongShan’s $3.6B expansion
- India’s GDP slows
- Google’s Search struggles
- Telegram’s crypto-driven gains
Market Snapshot
U.S. stocks finished the week strong. The S&P 500 and Dow Jones hit record highs. The Dow crossed 45,000 briefly, then closed at 44,910.65, a 2.37% weekly rise. The S&P 500 climbed 1.48% to 6,032.38. The Nasdaq increased 1.33% to 19,218.17.
Black Friday sparked interest in retail stocks and boosted market confidence. Despite a quiet week for data and earnings, investors stayed optimistic. They looked forward to December’s reports on unemployment, manufacturing, and factory orders.
The market’s rise reflected faith in steady growth and strong corporate performance, creating a positive outlook for the year-end.
Stock market closing data for the week of Nov 25th to Nov 29th, 2024
News Summaries
Amazon is speeding up its efforts to compete with Nvidia in the AI chip market. It aims to reduce dependence on Nvidia’s costly GPUs with its new Trainium2 chips, which offer better price and performance. These chips are part of Amazon’s plan to develop AI tools for itself and its AWS customers. Though experienced in making chips like Graviton, Amazon faces challenges in breaking into Nvidia’s market. It needs to solve software issues and make integration easier for customers. The company is using its partnerships, including a $4 billion deal with Anthropic, to improve its chips and draw more users. The success of Trainium2 will be key. If it works well, it could free up Nvidia’s GPUs for other tasks and boost Amazon’s position in the AI market.
HongShan, Sequoia Capital’s former China unit, is now boosting global investments. It’s trying to tackle the challenges posed by China’s slowing market and stricter U.S. tech investment rules. With limited options at home, HongShan is targeting Western brands, such as Kylie Jenner’s Spritz and the French fashion label Destree. Additionally, it’s investing in Europe and North Asia, focusing on battery materials and AI. So far, only 10-20% of its $3.6 billion late-stage fund has been invested. This is much slower than its seed and venture funds. The slowdown is due to regulatory pressures and a weak domestic economy. These factors have limited its options. To counter this, HongShan is expanding globally, opening a London office and considering Tokyo. This move aligns with limited partners’ (LP) demands for more diversification and quicker fund deployment to boost growth.
India’s economy grew by 5.4% from July to September. This was a drop from 6.7% in the previous quarter and below the Reserve Bank of India’s (RBI) and experts’ forecast of 6.4%. It was the slowest growth since late 2022. Key sectors showed weakness: manufacturing grew by only 2.2% (down from 7.0%), and private consumption fell to 6.0% (from 7.4%). There was also a contraction in mining. However, agriculture thrived, reaching a five-quarter high, indicating stronger rural demand. With GDP slowing and inflation rising, analysts are split on whether the RBI will cut rates in its December 6 meeting. The central bank faces a tough choice: support growth or keep inflation in check. Its fiscal year growth target of 7.2% is now under scrutiny.
Google is losing its search market edge. More users are turning to Amazon and TikTok for specific searches. AI “answer engines” are also changing the game. By 2025, Google’s share of the U.S. search ad market might drop below 50%. The rise of AI content is making search quality tougher to manage and is reducing ad clicks. This, in turn, hits revenue. Google’s AI search summaries could further cut web traffic to publishers. This might harm the internet ecosystem it relies on. The Justice Department’s antitrust case adds more pressure. However, analysts believe shifts in competition are a bigger threat to Google’s business model than regulation.
From the World of Crypto
Telegram has reported significant financial growth despite the legal troubles of its founder, Pavel Durov, who was detained in France on charges related to content moderation failures. According to unaudited financial statements, Telegram’s digital asset holdings surged in value to $1.3 billion by mid-2024, compared to $400 million at the end of 2023. Proceeds from cryptocurrency sales, including $348 million from Toncoin transactions after June, have helped bolster its financial position.
The messaging platform posted $525 million in revenue in the first half of 2024, a 190% increase year-over-year. A significant portion—$225 million—came from a one-time exclusivity deal with an unnamed party allowing Toncoin as the sole payment method for small business ads. However, this agreement was terminated in October, leaving questions about future revenue stability. Telegram also achieved a post-tax profit of $335 million during the period, a sharp reversal from a $173 million loss in 2023.
Advertising and premium subscriptions have been critical drivers of growth. Advertising revenue doubled to $120 million in the first half of 2024, while premium subscriptions generated $119 million, up from $32 million in the same period last year. The company has emphasized that these areas, rather than cryptocurrency gains, form the backbone of its long-term monetization strategy.
Telegram’s legal and reputational challenges remain significant. Allegations linking the platform to illegal content could affect future advertising revenues. While the company is expanding its content moderation efforts, it remains under scrutiny. Its bonds, which initially plunged after Durov’s detainment, have partially recovered, trading at 95 cents on the dollar as of late 2024.
Despite its challenges, Telegram is preparing for stability. It plans to increase revenue with ads and subscriptions, aiming for an IPO in 2026. However, it needs to tackle regulatory issues and keep user trust to maintain growth.
