🤝 xAI and Tesla Team Up

MARKET UPDATE

Good Morning Investor! On Monday, shares of British drug maker AstraZeneca ($AZN) plunged 5% after its lung cancer drug trial failed to significantly improve patient survival rates. FDA approval remains likely.

Meanwhile, shares of Assassins Creed maker Ubisoft ($UBSFY) plunged over 8% after AJ Investments published a letter urging the publisher to go private and change management. Banking stocks also suffered big losses with JP Morgan ($JPM) dropping 7% — its largest single-day decline since 2020. The culprit? Concerning balance sheet developments. Ally Financial ($ALLY) tumbled 18% after revealing some worrying consumer credit trends with delinquencies soaring.

TODAY’S BIG HEADLINES

China’s Deflationary Nightmare

xAI and Tesla Team Up For Tech Support

Office Tracking is Here, and It’s Unsettling

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MACROECONOMICS

China’s Deflationary Nightmare🐲

More Fizzle Than Sizzle: China's consumer sector just got its report card, and let's just say it's not getting a gold star. A bank analyst report released Monday painted a picture so grim, it makes a Grimm's fairy tale look like a rom-com. Thanks to Mother Nature throwing a hissy fit, food costs shot up, causing China's consumer price index to inch up by 0.6% last month, up a smidge from 0.5% in July.

• That was a tenth of a percentage point short of forecasts, and If you strip out those pesky food prices — which rose 2.8% year-over-year, as unchanging as your grandpa's political views, unchanged from July — non-food inflation was a mere 0.2%, down from 0.7% in July.

Cloudy with a Chance of Deflation: The latter figure highlights just how much China’s persistent housing downturn, chronic joblessness, and rising debt have dragged on the world’s second-largest economy, once an engine of growth. Bloomberg Economics, playing the role of Debbie Downer, predicts that a measure of prices across the economy - the fancy-pants "gross domestic product deflator", which has dropped for five straight quarters will keep falling into 2025, making for the longest run of deflation in China since data tracking began in 1993.

Barclays Drops the Mic: Meanwhile, Barclays analysts, fresh from a two-week Chinese trip, came back with a report that reads like a breakup text to foreign companies. Their verdict? They stated that China’s economy looks like it will be “weaker for longer” after they returned from a visit to malls, retailers, investors, and experts. They also stated that “There is now a clear view that the Chinese weakness is structural,”.

• Barclays downgraded Adidas, Burberry, and Gucci owner Kering as a result of the trip, noting they're now expecting luxury goods sales to rise by a paltry 4% in 2025, down from an earlier estimate of 7%. The bank flagged the pop of China’s finance and property bubbles and the end of high GDP growth as reasons to be more cautious of consumer spending there.

• Chinese officials have been treating the word "deflation" like it's a curse word at a children's party. But prominent policymakers have begun to break ranks with the senior command, uttering the forbidden 'D' word. It's as if the economic equivalent of He-Who-Must-Not-Be-Named has finally been named, and everyone's waiting to see if the sky falls.

ARTIFICIAL INTELLIGENCE

xAI and Tesla Team Up For Tech Support🤝

The Musk-eteers Assemble: Elon Musk, the Tony Stark of our times (minus the cool suit, plus a few more companies), has cooked up a plan that's more incestuous than a Game of Thrones plotline. He's suggesting that Tesla, his electric car baby, could team up with xAI, his AI startup that just birthed the world's largest Nvidia GPU supercomputer in Memphis. They've dubbed it "Colossus," because apparently, "Big Ol' Number Cruncher" didn't have the same ring to it.

Bound by Silicon: The head honcho of both companies has reportedly pitched a plan to investors, suggesting that Tesla could license xAI's AI models for self-driving software and a Siri-style voice assistant. In return, xAI would get a slice of the pie. But this isn’t a partnership just for friendship’s sake, obviously. As the creator of chatbot Grok, xAI is now worth $24 billion, making it the second-biggest AI company after OpenAI. So, as the great Tywin Lannister might have advised over a cup of wildfire, he may as well keep it in the family.

China’s Cold Shoulder: Poor Tesla hasn't launched a new model in China since 2019, which in tech years is about as current as a flip phone. Meanwhile, Chinese drivers have been swapping their gas-guzzlers for EVs faster than you can say "trade war." The result? Tesla's market share in China has shrunk to 6.5%, down from 9% last year. Musk, ever the optimist (or megalomaniac, depending on who you ask), is determined to win over shoppers worldwide with smarter gizmos and gadgets. Tesla's set to unveil robotaxis in the US on October 10th, with Musk declaring that without self-driving tech, Tesla would be "basically zero." No pressure on the engineering team or anything.

Nothing New Under the Musk Sun: If you think this corporate cross-pollination is new, think again. Musk's been shuffling talent and hardware between his companies like a three-card Monte dealer on speed. He even funneled thousands of rare Nvidia chips from Tesla to xAI last year, in a move that screamed "what's mine is mine, and what's yours is also mine." X (or Twitter, if you’re holding on to the past) is in the fold, too: the social media platform feeds live information to the Grok chatbot. The fly in the ointment? Investors are getting antsy about potential conflicts of interest, worried that Musk's latest shiny toy (xAI) might get all the attention while his other companies are left feeling like Jan Brady.

CORPORATE WORKPLACES

Office Tracking is Here, and It’s Unsettling👀

The Great Office Roundup: Looks like the corporate world is done playing nice in the sandbox of hybrid work. While most firms have been dangling carrots and waving sticks for the past few years, PwC UK is finally strapping on its spurs and getting ready to lasso its wandering workforce. Perhaps this is karma biting back at all those TikTok influencers "working" from Bali beaches, cocktail in one hand, laptop precariously balanced on their sun-kissed knees.

Big Brother: Accountant Edition: PwC UK, not content with just counting beans, now wants to count bodies too. They’ve had a 3-day-in-office (or with client) mandate for quite some time, for its roughly 26,000 UK-based employees. But enforcing it has been about as effective as herding cats with a feather duster. Turns out, most of its consultants and accountants have been treating this mandate like a polite suggestion - you know, like those "Please keep off the grass" signs everyone ignores.

• So, starting on January 1st, PwC will track and share location data with its employees and managers, in a similar manner to how the big four accounting firm tracks how many “chargable hours” they work. The firm says they’re giving its employees ample time to adjust to the rules. Some employees may have moved far from the office, so PwC is giving them a few months to straighten it out. It will be curious to see how many of them manage to outsmart the tracking system or perfect their "my GPS must be broken" excuses.

The Domino Effect of Doom: It’s not the first time a major firm has cracked down on remote work. Jamie Dimon has complained about the flaws of his bankers at JPMorgan working from home, and Goldman Sachs and Morgan Stanley have been vocal proponents of return-to-office as well. But PwC might be the first to go full stalker mode with location tracking.

Across the Pond, But Not Out of the Woods: Now, our American cousins might be thinking they're safe from this corporate surveillance state. After all, the land of the free wouldn't stand for such intrusion, right? Well, don't count your freedoms before they're hatched. While U.S. firms might not be shouting from the rooftops about tracking your every move (yet), who knows what the future holds? We might be only a few software updates away from "Find My Co-worker" becoming the hottest new app in the corporate world.

MORE NEWS

Additional market-moving events🌎

SpaceX Launches Private Spacewalk: SpaceX has launched the Polaris Dawn mission, which will travel the furthest distance from Earth since the Apollo missions and includes the first spacewalk by non-professional astronauts. (CNN)

Amazon's Grocery Brand: Amazon ($AMZN) is launching a budget-friendly grocery line called "Amazon Saver," with most items priced under $5. Competing with discount brands from Aldi, Walmart ($WMT), and Target ($TGT), it offers additional discounts for Prime members. (CNN)

Bank of America Raises Wages: Bank of America ($BAC) will raise its minimum hourly wage to $24 in October, affecting thousands of tellers and call center workers. The bank plans to reach $25 per hour by 2025 amid industry-wide labor shortages. (NPR)

TrueLayer Issues European Warning: Stripe-backed fintech TrueLayer has issued a cautionary statement about Europe's dependence on US payment systems, highlighting the risks associated with the upcoming US presidential election. The company is pushing for more resilient European payment infrastructures. (Linqto)

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On Monday the 11th of March, we released our “superperformers” stock pick which we believe will provide significant outperformance compared to the S&P 500. Then on the 14th of June we released our next stock selection. Lastly, on August 6th, we initiated a position in Celsius holdings.

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