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Finance

After months of gains, chipmakers face big losses

Chip makers flew off the AI induced tsunami and fell into stagnant waters. After the possibility of even more severe restrictions on business with China, Wall Street’s semiconductor index lost over $500 billion last Wednesday, its worst day since 2020.

Chipmaking has become one of the most influential and lucrative businesses in the world, due to the massive demand for semiconductor chips. International sales of the technology hit almost $530 billion last year, but the possibility of more sanctions could threaten industry even further.

What does China have to do with American chips?

According to Bloomberg, the Biden administration is thinking about enacting the foreign direct product rule (FDPR), an export restriction, to pressure China's chip industry more than it already has.

• The rule would basically enable the US to restrict exports on foreign-made products, as long as they incorporate even a tiny amount of American technology.

  • For better or worse, many of the biggest names in the chip industry partake in the same practice.

During the Trump administration, the US-China trade war was lit, and the flame has turned into a potential conflagration under the current White House.

Chipmakers felt the consequences

The world’s largest supplier of chipmaking equipment, ASML, fell 13% after the US asked them to curb business in China if it doesn’t up restrictions. Nearly half of all of ASML’s business (49%) took place in China in Q2.

• Nvidia fell 6.6%, and is currently down ~7.3% since the news broke. About 22% of its total revenue was generated in China in Q1 of last year, which is now down to under 10%.

• The world’s largest chipmakers, Taiwan Semiconductor Manufacturing Co. (TSMC), has shot down 12.6% as of writing.

• Other US chipmakers were affected too: Currently, Qualcomm is down ~12.9%, Micron is sitting at an 12.5% loss, and Broadcom fell 8.9%.

All in all: This isn’t the first time Biden has borrowed plays from the previous administration, as he has limited China’s access to chips before.

But the White House should tread carefully, as American chipmakers have lost over $130 billion in market cap because of US export restrictions, per Fed statistics.

Technology

Meta might be getting in the eyewear game… again

Meta is still wagering that people want to use sunglasses as an iPhone alternative… we’ll see how that works. Meta is in talks to buy stake in the eyewear giant EssilorLuxottica, which owns Ray-Ban and was also Meta’s partner for the 2021 smart glasses under the same name.

Based on current market value, the ~5% stake in EssilorLuxottica, which is the largest eyewear company in the world, would be worth around $4.7 billion. Meta’s market cap is around $1.2 trillion so the investment would essentially be a drop in the bucket.

What is EssilorLuxottica? If you don’t recognize the name (you now know they own Ray-Ban), you’ll certainly know some of the businesses it owns. EssilorLuxottica is the parent company big-name brands like Prada, Vogue Eyewear, Lenscrafters, Sunglass Hut, Oakley, and Supreme since a 2017 mega-deal.

Dynamic Duo

The potential deal would pave the way for Meta to continue its augmented and virtual reality pursuits, where its Oculus Quest 2 and Meta Quest 3 VR headsets have seen success already, as well as its collaboration with Ray-Ban.

• Meta first partnered with Ray-Ban in 2021, releasing smart glasses which had mixed reviews across the board (and privacy concerns).

• The companies then released a newer version in October 2023 (unbeknownst to me), called the Ray-Ban Meta Smart Glasses.

  • According to EssilorLuxottica’s CEO, Francesco Milleri, in a matter of months, the new model sold more pairs than the original did in a span of two years.

What about the glasses?

The newest version of the AR smart glasses were generally liked by consumers, but what do they include?

• Ranging from $300-$380, the smart glasses come in different styles and prices based on what you want included.

• The glasses feature an HD camera, capture button, speakers, touchpad, powerswitch, and a charging case.

This could give Meta a leg up: Meta may be able to outperform rivals like Apple in the wearable technology market even with a minority share in the eyewear company. US antitrust officials have already given Meta approval, though the deal is not yet final, according to Bloomberg.

Apple may soon release a foldable iPhone

We’ve officially come full circle. A report from The Information revealed Apple is moving forward with its foldable iPhone concept, which could release as soon as 2026.

While it was reported in February Apple was testing different prototypes which focused on foldable iPhones, I don’t think any of us thought the things might actually come to life.

Welcome back

While speculation and rumors have amassed about a potential foldable Apple phone, especially after other brands released their own, there just might be a solid foundation for its release:

• Per The Information, Apple has reached out to Asian suppliers regarding the production of parts for an iPhone that can be folded.

• This month, the company reportedly received a patent for the foldable screen and assigned the new gadget an official code name.

While projects can certainly be scrapped (see list of unreleased Apple products), if they decide to go forward, Apple will have to figure out how to make the iPhone thinner and support a crease in the middle of the screen.

Foldable phones aren't new, either: Samsung, Google, and Motorola have been selling them for years. Apple also is known for stealing using inspiration from other companies, so it wouldn't be the biggest shocker.

Bring us back: In case you missed the days where you could hang up by simply slamming your phone shut (or you simply weren’t born to see it), here’s a brief history of the flip phone.

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Grab Bag

Michelob might become the top beer in the US

A low-calorie buzz always feels less regrettable in the morning (according to consumers). According to recent consumer research, Michelob Ultra has surpassed Bud Light to claim the title of second-best-selling in the beer in America, while Modelo retains the top spot.

Why the switch up?

Typically, the year's victors (and victims) in the beer business are determined during a critical window between Memorial Day and July Fourth, which is when the switch up occurred.

During that window, according to NielsenIQ statistics, Bud Light had 6.5% of all beer sold in stores , followed by Michelob Ultra with 7.3% and Modelo with 9.7%.

While you might think the change-up in the rankings might hurt Bud Light, its really not a huge deal: Anheuser-Busch InBev, Bud Light’s parent company, actually owns Michelob. The company also announced it was increasing its marketing budget to combat the decline in sales.

Modelo time: Modelo overtook Bud Light as the number one beer in America in 2023, after Bud Light partnered with a transgender influencer, which sparked a mass boycott.

Now, as consumers are more health-conscious than ever (even beer drinkers) Michelob’s 0g of carbs and 95 calories have been rather appealing as of late. The brand also secured the honor of being the exclusive beer sponsor of the Olympics, which kick off today in Paris.

Does universal basic income work?

That’s a question an OpenAI founder asked, but did he get a concrete answer? Sam Altman, CEO of OpenAI, conducted a $60 million universal basic income (UBI) study, the largest in the US to date, and the results are in.

Seeing as he thinks AI will destroy traditional jobs, Altman has said he’s a proponent of UBI for years. So he decided to put his belief to the test.

How did it work?

Over 3,000 residents of Texas and Illinois (with yearly incomes less than $28,000) were given a monthly allowance for three years, from November 2020 to October 2023.

• 33% (1,000) of the residents received $1,000 a month.

• 2,000 received $50 a month as a control group.

What are the results?

Those who received $1,000 a month, on average, increased their monthly spending by $310. But this mainly went to basic needs like food, transportation, and rent.

• Generally, they worked less and went to hospitals, doctors, and dentists more often.

• The financial position of the participants stayed the same in the long-term.

Food insecurity and stress decreased in the first year, but then climbed back to the same level through the second and third year. There was also no concrete proof of better physical or mental wellbeing, according to researchers.

All in all, the study found UBI isn’t an end-all-be-all solution for poverty. While it may offer some financial freedom, states have still pushed back against the idea in the past, so more positive outcomes would need to be determined in order to implement it on a wide scale.

Fast Facts

Whale Wonder: The world’s rarest whale, a spade-toothed whale, washed up on a New Zealand beach, according to scientists. It would be the first of its kind to be dissected in history.

Net[flex]: Netflix had another great quarter, adding over 8 million subscribers, much more than Wall Street anticipated.

Losing Leaders: This will be the first presidential election since 1976 (when the first Star Wars was being filmed) without a Bush, Clinton, or Biden on the ballot. But now we have great candidates… right? Someone say right.

Vanilla Volume: Last summer from June to August, vanilla ice cream was found in 29% of all (yes, all) Instacart orders, yet again showing it is the most popular flavor in North America.

Mac Meal: About 93% of McDonald’s locations voted to extend its $5 Meal Deal promotion after customers flocked to the golden arches in search of cheap fast food.