Weekly Brief #63
The Stargate Project, explained... Plus, Netflix crushes Q4 2024 earnings, Rolls-Royce wins $11 billion UK contract, Amazon closes Quebec warehouses, Stellantis recalls over 63,000 cars, and more.
Good morning investor 👋,
Welcome back to the 63rd Weekly Brief.
This week’s performance:
S&P 500: +2.60% | Nasdaq: +2.45% | Dow Jones: +2.94% | TSX: +2.02% | Gold: +1.40% | Bitcoin: -1.90% | The Quality Fund: +2.04%1.
Donald Trump was officially inaugurated as president this week, signing a record number of executive orders (many of which will probably be litigated) and announcing over a trillion dollars in secured U.S. investment within the first three days in office. One of these announcements totalled $500 billion and dominated tech and stock market news more than anything else this week. This was: The Stargate Project. Today’s a short one.
Let’s get into it. (8 min read)
In this issue:
🤖 The Stargate Project, explained
🏭 Amazon closes Quebec warehouses
🇸🇦 Saudi Arabia to invest $600 billion in U.S.
FEATURED STORY
🤖 The Stargate Project, explained
Back in April of last year—Weekly Brief #21—I talked about a recent announcement between Microsoft and OpenAI called Project Stargate, a $100 billion supercomputer data centre based on the movie Stargate (you can probably guess the connection). Fast forward to today, and we have that same project being announced under President Trump, now with a revised price tag of $500 billion.
(Also, it’s not called Project Stargate anymore. That’s so last year’s news. How about The Stargate Project?)
What is this, and why is it substantial?
Announced this week, the Stargate Project is a company founded by SoftBank, OpenAI, Oracle, and MGX (an Emirati technology company), with plans to invest $500 billion over the next four years to build new AI infrastructure for OpenAI in the United States. The company is beginning with investments of $100 billion as soon as possible, and according to both Trump and OpenAI, this infrastructure will “secure American leadership in AI” and create hundreds of thousands of American jobs. SoftBank and OpenAI are the lead partners for Stargate and will have financial and operational responsibility, respectively.
OpenAI will rely less on Microsoft’s data centres for this venture, although it will still increase its (training) consumption of Azure and continue partnering with Microsoft. There weren’t many details released on this new company, but the essence of the announcement is clear: more data centres, a richer and more prosperous AI environment, and a faster path toward AGI, is on America’s mind. (Something to note is that most of the $500 billion investment will go toward GPUs for the data centres, which need to be replaced fairly frequently and account for most of the cost.)
Given the limited details I have to write on about this project so far, I do apologize for the vagueness. However, this is a huge win for OpenAI and a massive victory for all businesses crucial to the new AI landscape. Amazon, Google, Microsoft—these companies are now even more well-positioned to be major beneficiaries of the Trump presidency (Oracle too, of course).
The good: It’s only been three days since Trump took office (as I write this), and he’s already making major announcements that benefit the markets. As I’ve said before, we are entering an era of pro-market policy—pro-energy, pro-technology, and pro-deregulation. If you’re reading this newsletter, you’re invested in the stock market. If you’re invested in the stock market, these next four years will be incredible. Happy investing.
FINANCE
a. 📺 Netflix crushes Q4 2024 earnings
Netflix released its Q4 2024 earnings this week, starting big tech earnings season off with a bang, crushing expectations and surpassing subscriber projections in the last report where the subscriber count will be mentioned. Here are those results, summarized alongside analyst expectations:
Revenue: $10.25 billion vs. $10.11 billion expected (beat), 16% growth YoY2.
Earnings per share: $4.27 vs. $4.20 expected (beat), 102% growth YoY.
Net income: $1.87 billion vs. $1.83 billion (beat), 99% growth YoY.
Total subscribers: 301.63 million vs. 290.9 million expected (added a monstrous 19 million subscribers this quarter) (beat), 16% growth YoY.
These results included the largest single quarter of Netflix’s subscriber growth, with over 18 million new subscribers in Q4, fuelled mostly by the Jake Paul-Mike Tyson fight and the new releases like Squid Game 2, which ended up being the most popular streaming show of 2024.
Related articles:
b. 🛩️ Rolls-Royce wins $11 billion UK contract
The UK awarded Rolls-Royce (the aerospace company, not the luxury car company) an $11 billion contract on Friday to design, manufacture, and support nuclear reactors for its submarine fleet. It’s an eight-year deal aimed at strengthening the Royal Navy’s “continuous at-sea deterrent” and will help strengthen the AUKUS defence pact with the US and Australia.
British Defence Secretary John Healey said the deal would “boost British businesses,” creating 1,000 new jobs and protecting 4,000 others. Fun fact: In 1971, Rolls-Royce was nationalized by the British government and sold cars and aerospace parts. In 1998, it sold its car division to BMW, which now owns Rolls-Royce Motor Cars. The remaining aerospace and defence division, Rolls-Royce Holdings, still operates today under the same car logo, but separately.
BUSINESS
c. 🏭 Amazon closes Quebec warehouses
Amazon is closing all warehouse and logistics operations in Quebec, laying off about 1,700 employees following its first Canadian unionization at a warehouse in Laval, which Amazon challenged and lost in court. Amazon has long opposed unions for its workers and felt that, economically, it was best to revert to third-party carriers for its Quebec operations—the model it used before 2020.
Quebec has the highest unionization rate in Canada, which is a large challenge for retailers like Amazon. Now, while I’m not in favour of people losing their jobs, it seems the union (the Confédération des Syndicats Nationaux in this case) brought this upon themselves. Workers wages started at $20 per hour and maxed out at $22 per hour after three years, and the union wanted to change that to $26 maxing out at $30 after three years. That’s a 30% increase. Amazon is offering laid-off workers up to 14 weeks of pay.
Related articles:
d. 🚗 Stellantis recalls over 63,000 cars
Stellantis (parent company of Chrysler and Fiat) is recalling over 63,000 Jeep Cherokees (2017–2019) due to a defect that can cause power loss and parking failure, according to the NHTSA. The issue stems from a faulty input shaft ring that may damage the power transfer unit, leading to transmission disengagement (meaning the connection between the engine and the wheels is lost, preventing the vehicle from delivering power to the wheels). Owners will receive notification letters on February 13, 2025.
The J. Nicholas Vroomsday Counter is now at 8.275 million.
What is the vroomsday counter? Vroomsday is doomsday but for cars. The vroomsday counter is the total of all cars mentioned in recalls since the inception of The J. Nicholas newsletter.
POLITICS
e. 🇸🇦 Saudi Arabia to invest $600 billion in U.S.
In a state-owned media announcement, Saudi Arabia revealed details of a phone call with Donald Trump this week, stating that it plans to invest $600 billion in the U.S. over the next four years and is willing to increase that “if opportunities arise.” Trump says he will be asking Crown Prince Mohammed bin Salman to round it out to $1 trillion.
On his inauguration day, Trump mentioned that his first foreign trip could be to Saudi Arabia, just like in 2017, when the Saudis committed to a major purchase of U.S. goods. Trump has maintained a warm relationship with the Crown Prince, and whether it be with Saudi Arabia or Japan, he has continued to secure major funding and investments from foreign countries just days into office.
Related articles:
📚 Book of the Week
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My full bookshelf: Here.
The Little Book of Valuation - Aswath Damodaran
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Thanks for reading. Feel free to reply to this email or comment on the web if you need anything—I always reply. If you enjoyed today’s issue, feel free to share it with friends and family.
All the best,
Jacob
All my links here.
Year-to-date return: +2.92%.
YoY: Year-over-year.
Love the vroomsday counter! Scary.
Netflix is just amazing. And we'll have to see exactly what Stargate will be and if said $500 billion investments will actually pay off