🤖 Amazon's buddy

What’s going on here?

Amazon is investing another $4 billion in Anthropic – double its current stake – as it seeks a bestie in the AI race.

What does this mean?

The two firms were already close: Anthropic uses Amazon Web Services (AWS) as its essential cloud provider and AI model training partner. That’s helping it develop Claude, the humanlike AI assistant that competes with OpenAI’s ChatGPT. And now, the startup says AWS will become its primary cloud provider and provide it with the chips it needs to train future models. So if Amazon’s investment in Anthropic is repaid through chip sales, that's part of the plan: it's trying to get developers to switch away from Nvidia's industry-leading chips.

Why should I care?

For markets: Nvidia wins again.

Nvidia is the undisputed market champ when it comes to the advanced chips that are needed to run generative AI. And its biggest customers are AWS, Microsoft, and Alphabet. But these Big Tech companies hate to pay big bucks for someone else’s technology when they can build stuff in-house. That’s why the three are each working to develop their own chips. But don’t go shedding any tears for Nvidia: the behemoth’s advanced semiconductors are still well ahead of everyone.

The bigger picture: Under the spotlight.

US antitrust regulators are casting an eye over the AI industry – and that includes Microsoft, OpenAI, Amazon, Anthropic, and Alphabet. The feds are worried that these goliaths might just be too dominant. In fact, only last week, the Department of Justice recommended that Google be forced to sell off its search business. Whether that happens is still unclear, but it shows the level of scrutiny that the giants of tech might soon be under.

What’s going on here?

The US president-elect announced a mainstream nominee for the Treasury’s top spot.

What does this mean?

The secretary of the US Treasury Department does a lot more than just leave a signature on every greenback – though that is part of the gig. It’s the top job across a sprawling department that issues debt to fund the government’s spending and sets financial and tax policies that affect Americans and the country’s trading partners. And investors appear content with the latest pick. Not surprisingly: Scott Bessent is a Wall Street insider – a billionaire hedge fund manager who founded Key Square Capital Management. Investors are hopeful that he’ll put new policies into action – think lower taxes and fresh tariffs – in a calm, structured way. And they generally like the sound of his “3-3-3” policy: cutting the budget deficit to 3% of economic output by 2028, helping economic growth reach 3% through looser regulations, and pumping out three million more barrels of oil a day.

Why should I care?

For markets: Greenback glides back.

The US dollar has been flexing higher since the election, and emerging market currencies have been largely sliding on fears of a potential all-out trade war. Not for nothing: the president-elect has threatened to impose 10% tariffs on all goods imported into the country – 60% for goods coming from China. The Treasury pick has now eased some of those worries, however, allowing the greenback to ease off its highs, falling about 1% against a basket of other currencies.

The bigger picture: A wrecking ball.

Higher-for-longer US interest rates make it pricier for emerging market countries to borrow, since they tend to take on US dollar debt. And increased tariffs would only add to that financial pressure, with demand for their exports likely to fall. JPMorgan has run the numbers: nearly $20 billion has exited emerging market bonds so far this year, following withdrawals of $31 billion last year, and $90 billion in 2022.