Hi All,
Welcome to our brief overview of portfolio news from the past few days.
Amazon’s Big Trial
The biggest story impacting our portfolio this week involves Amazon. The company is now on trial in Seattle, facing claims from the US Federal Trade Commission that it deceived millions of customers into signing up for Prime and used complicated methods to prevent them from canceling. The stock fell over 3% on the news, and the potential financial risk is the key reason why.
To understand the significance, let’s look at the numbers. The theoretical maximum penalty is astronomical: if 10% of the roughly 180 million US Prime members were affected, and the fine reached the maximum of $53,000 per violation, the penalty could be an incredible $954 billion. Even in a more conservative scenario where only 2% of members are affected and the fine is just 25% of the maximum, the penalty could still be around $48 billion.
While we expect Amazon to appeal any decision, this level of uncertainty and the scale of the potential financial hit have created a significant drag on the stock price. On another note, Amazon also announced a strategic pivot in the UK, closing 14 Amazon Fresh stores and converting 5 to Whole Foods Market to enhance its focus on online grocery delivery options (expanding collaborations with Morrisons, Co-op, and Iceland).
Meta Platforms
First, Meta has formed a bipartisan Super PAC with “tens of millions” in funding to support pro-AI political candidates and fight back against state-level tech regulation.
At the same time, Meta, along with Google and TikTok, lost a legal bid to bar expert testimony in upcoming trials over the alleged harm social media causes young users.
On a positive note, the U.S. government is partnering with Meta to expand the use of its open-source Llama AI models across all federal agencies, a major win for its AI ecosystem.
The AI Arms Race Heats Up
Nvidia announced a landmark letter of intent to invest up to $100 billion in OpenAI, cementing itself as the preferred partner for the world’s leading AI company. This move significantly strengthens Nvidia’s competitive moat. For our holding AMD, this makes it much harder to win share at the highest end of the AI market, as Nvidia is locking in the biggest players with long-term, deeply integrated partnerships.
Alphabet
Gemini AI is now being integrated into TCL TVs, with more devices to follow. This demonstrates Google’s huge competitive advantage: its vast distribution network.
By integrating Gemini directly inside the TV, they are making sure their AI is a part of every screen we use, not just our phones.
Other Updates
PayPal received a letter from a House Select Committee seeking assurances on its anti-money laundering compliance for its integration with Tencent’s Weixin Pay in China.
Crocs was downgraded by Piper Sandler to Neutral from Overweight, with the price target cut to $75 from $95.
That’s a wrap. See you soon.
