🤖 OpenAI Reaches $100 Billion Valuation

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TODAY’S BIG HEADLINES

OpenAI Reaches $100 Billion Valuation

How Abercrombie & Fitch Got “Hot” Again

Lego Thrives Despite Toy Market Slowdown

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ARTIFICIAL INTELLIGENCE

OpenAI Reaches $100 Billion Valuation🤖

Everyone Still Wants a Bite: Everyone's favorite AI unicorn, OpenAI, is back for seconds (or is it thirds?) at the funding buffet. And let me tell you, despite Wall Street developing a bit of indigestion from all the "AI" hype, there's still plenty of appetite for the startups cooking up the models themselves. OpenAI recently raised additional capital in a private funding round that valued the startup at a whopping $100 billion — a $14 billion increase from just 8 months ago. That's more inflation than a balloon factory.

• Venture capital firm Thrive Capital led the funding, planning to inject around $1 billion. And Microsoft, not wanting to miss out on the AI party, is also looking to get a piece of the pie. This cash injection would be the biggest since Microsoft's last $10 billion investment in January 2023.

Mo' Money, Mo' Problems: Why does OpenAI need more dough, you ask? Well, imagine if your computer had the appetite of a competitive eater at a hot dog contest. This is tech that guzzles data, fired up by supercomputers with really hefty chips – and all of that costs serious money. OpenAI dropped over $100 million on GPT-4, its most powerful model so far, and the next one looks like it'll make that seem like pocket change.

• It was just recently announced earlier this week infact, that the unicorn startup is planning on launching a new model in the Fall, branding a new name — “Strawberry”.

• This model is set to be the most sophisticated model on the market and will be able to solve math problems it has never encountered; perform high-level tasks like developing market strategies and solving complex word puzzles; and perform “deep research,”.

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CONSUMER DISCRETIONARIES

How Abercrombie & Fitch Got “Hot” Again🛍️

From Retail Pariah to Wall Street's Prom King: Abercrombie & Fitch ($ANF), the comeback kid of the apparel world, has been serving up a turnaround so spectacular it's making heads spin faster than a clearance rack on Black Friday. This once-troubled brand, now the darling of millennials and Gen-Zs alike, has been rewarding shareholders with a 55% return this year alone. That's enough to make your portfolio look buffer than an Abercrombie model circa 2005! However, after releasing its quarterly earnings earlier this week, the stock shot down over 18% on Wednesday.

When Good News Isn't Good Enough: Abercrombie & Fitch delivered yet another strong quarter with growth across all its brands, geographies and channels with Profitability soaring higher than the waistbands on their mom jeans. We're talking a triple beat that would make even Olympic gymnasts jealous, starting with net income of $133.2 million for the quarter, up from from $56.9 million in the equivalent quarter a year prior, While operating income was up at $176 million, compared with $90 million last year.

• So why did the stock sell off faster than last season's crop tops? CEO Fran Horowitz dropped a truth bomb during the earnings call, admitting the company is facing an increasingly uncertain environment. Apparently, even raising guidance wasn't enough to satisfy Wall Street's insatiable appetite.

• And the company’s performance was strong outside the U.S. too. Its Europe, Middle East and Africa division also saw sales grow 16% and the Americas region had net sales growth of 23%, with comparable sales up 18%. All of this, amidst a fashion retail market that is basically flat.

From Zero to Retail Hero: Less than a decade ago CNN called out Abercrombie as “America’s most hated retailer,” Ouch! So what changed? Did they start handing out free puppies with every purchase? Not quite. Horowitz modestly credits the success to good retail practices, but in reality, she helped the Abercrombie brand grow up as its original Millennial target customer matured. This as helped the brand appeal to a much broader audience of different ages. While Hollister remains the company’s teen brand, Horowitz has elevated the look and feel of Abercrombie offerings, all at readily accessible price points.

• Horowitz literally turned the lights back on in Abercrombie stores, transforming them from moody, intimidating caves into pleasant shopping spaces.

• That took some maneuvering as it streamlined its 2017 footprint from 355 stores, including 311 in the US, to 224 in 2022 and down to 173 US locations.

• The brand has since began to expand once again, with smaller footprint stores in prime locations to support the brand’s strong online presence.

CONSUMER DISCRETIONARIES

Lego Thrives Despite Toy Market Slowdown🧸

Brick by Brick: Despite slowing demand in the toy industry which has seen competitors Hasbro ($HAS), Mattel ($MAT) and Roblox ($RBLX) stumbling like a barefoot parent on a carpet of loose bricks, coupled with extra costs tied to Lego’s mission to go fossil-free (because apparently, even plastic bricks need to save the planet), the Danish tiny-brick maker reported generating $4.65 billion in revenue for the first half of 2024, up 13% from a year earlier, proving that everything is, indeed, awesome in Lego land!

From Playroom to Boardroom: Legos transcend age easier than most Hollywood actors with good plastic surgeons. While little kids might be building superhero-themed fortresses, adults are finding zen in more sophisticated designs that require more time to assemble than it takes to assemble IKEA furniture. Along with this broad appeal, Lego has positioned itself as the Meryl Streep of toys, collaborating with an ever-growing range of brands and intellectual properties. We're talking Batman, Star Wars, Bugatti, Adidas, and most recently, Nike ($NIKE). At this rate, we're expecting a Supreme x Lego brick any day now!

• Lego's empire extends beyond the brick. They've got 10 theme parks (eat your heart out, Disney), a handful of successful theatrical releases (move over, Marvel), and they recently partnered with Epic Games' "Fortnite" - the most-played video game across all platforms in 2023.

When Life Gives You Bricks, Make Castles: Lego's direct-to-consumer sales increased 14% in the first half, while the rest of the toy industry is about as tepid as lukewarm bathwater. US toy sales declined 1% in the first four months of the year, and both Barbie maker Mattel and Play-Doh pioneer Hasbro reported lower sales in the first half of 2024 year-over-year.

• Even Lego’s push towards net zero hasn’t hindered its growth, with the company introducing renewable and recycled materials to its bricks instead of relying on oil and other fossil fuels for its manufacturing, Sure, it's 40 to 50 to 60% more expensive in material terms, but when you're Lego, you can afford to build a greener future, brick by eco-friendly brick.

MORE NEWS

Additional market-moving events🌎

The OpenAI Valuation: OpenAI is negotiating a funding round that could value the company at $100B, up $20B from 8 months ago. Led by Thrive Capital, the deal may also involve Microsoft ($MSFT). (Quartz)

Yelp Sues Google: Yelp ($YELP) has filed an antitrust lawsuit against Google ($GOOG), accusing the company of maintaining a monopoly in local search services by promoting its own services over competitors. (TheVerge)

SpaceX Grounded: The FAA has grounded SpaceX's Falcon 9 rockets after a booster rocket failed during landing yesterday. The incident marks the first such failure in years. (AP)

Nokia’s $130 Barbie Phone: Nokia phone maker launches Barbie handset for $130 — with no internet. The phone will be available in the UK at launch this week, with a US launch planned “soon”. (CNBC)

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