Good morning, Guru Daily Show. I'm Neil Fryman. And I'm Toby Howell. Today, everything you need to know for the start of tech season. Then, stocks have themselves a no-good, very lousy day as the market processed with cheap Chinese chatbots means for Silicon Valley. It's Tuesday, January 28th. Let's ride.
You see what's going on at Vanderbilt. The students keep storming the court after big wins and it's getting ultra expensive for the school. The SEC find Vanderbilt $500,000 after fans storm the court after the Commodores men's basketball team knocked off number nine Kentucky on Saturday. And the reason the storming is so pricey is because this isn't the first time it's happened recently. It's the third under new SEC court storming rules Vanderbilt got fined
$100,000 last fall when the football team beat number one Alabama in students storm the field. And it was fined $250,000 after a basketball court storming 10 days ago after beating number six, Tennessee. Toby, they say when you beat a good team, you should act like you've been there before. Vanderbilt students have not got the memo and it's cost them nearly $1 million so far.
I think the funniest part about this whole saga is that Vanderbilt's athletic director Candice Lee was seen as the Kentucky game winded down saying please pleading with the student section do not storm the court because she knew that the fine was coming
Cheek was overheard saying, we could use this money for NIL. Just stay in your seats. And then the fans obviously did not take heed. They did storm the court. And the worst part of this is Vanderbilt has to pay $500,000 to Kentucky. They're one of their main rivals, one of the richest teams in the SEC. So that money is going straight into the pocket of your chief rival there. Act like you've been there before. Vanderbilt though, congrats 16 and four. Pretty good season. They're putting together.
Now, a word from our sponsor Yahoo Finance. Neil, it was a red day in the market yesterday. I prefer to think about it as the indexes were blushing because they couldn't keep up with the AI advancements coming out of China. Interesting way to cope with the sell-off, but if you don't just want to cope and instead want to educate yourself, check out Yahoo Finance. One quick scan of their homepage and you can see the news driving the markets lousy day.
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In the biggest rat we've seen since the commanders played the Eagles, Nvidia and other U.S. AI companies got obliterated yesterday to the tune of $1 trillion in losses as the market digested the implications of deep-seeks free and open-source R1 model. Nvidia shares loss as much as 18%
which was its biggest drop since the pandemic. Obviously, Nvidia is a much larger company now than in 2020, so that drop corresponded to nearly $600 billion in market cap wipeout, which was the biggest single-day drop in US stock market history.
Due to Nvidia's oversized weight in many indexes, its meltdown rippled through the rest of the market as well. The S&P 500 was down as much as 2.3% while the Nasdaq 100 fell by 3.6% before making some gains later in the afternoon. The drop was spurred by fears that US companies may have gotten ahead of their skis when it comes to plowing resources into training their AI models. Deep-seat claims its R1 model cost only $6 million to build.
as little as 3% of the estimated trading price of OpenAI's top model. It was pretty wild that a single chatbot release turned into a macro event. I mean, this was affecting 10-year treasury yields as investors rotated into safe haven assets. A chatbot, Neil.
Nightmare on Wall Street yesterday because deep sea has raised an uncomfortable question. That question is, what if companies don't need to spend nearly as much as they expected to develop AI models? And a metaphor you often hear with these gold rush types
What if prospectors don't need to buy as many picks and shovels in order to find their treasure? What if they found a way to access it with fewer tools and with older tools? That's what DeepSeek showed it could do. And so you saw companies that make the picks and the shovels to this AI Gold Rush, the NVIDIA and every other company that goes into the data center economy from power systems to chip makers to cooling systems. Those were the companies that were hit the hardest yesterday.
Yeah, I'll run down through some of the names that did fall the most. Obviously, NVIDIA was down 17%. Microsoft was down 2%. Palantir sunk 4%. So those are some of the big AI names that you associate with this AI rush, but also companies that provide the energy and the infrastructure were the ones that really felt a deep pain, constellation energy, which was up to this point, one of the best performing stocks in the SP500.
They felt 20% Oklo, which also does nuclear energy drop 25% and then Vertiv, which does cooling systems for data centers. They were down almost 30%. So you saw it wasn't just the actual companies developing AI models. It was all the companies that helped support their development of AI models that really felt the pain the most.
Let's take a step back. What does this all mean? Is this a Sputnik moment as venture capitalist Mark Andreessen said, referring to the fact that the Soviets beat the U.S. in terms of putting a satellite in space? Is this a alarm bell? Is this a wake-up call for U.S. companies? Or is this mostly overblown? That was the question that everyone was talking about yesterday. What is the true impact of deep-seeks model? And for people I trust, I was reading
hours and hours and hours of thought pieces that came out yesterday. People I trust said that, look, this is a pretty big deal. It is not the end of the world for AI companies. That's why you saw a bunch of American tech companies actually up on the stock market yesterday. Apple was up, meadow was up. So they're not saying this is a cataclysmic event, but it is a big deal for a number of reasons. And here's some key takeaways. The first one is the cost breakthrough. Deepseek was able to create
a rival to chat GPT that it was 10% of the cost. And that will lead to industry disruption because in previous hypotheses, our theory was that only a few of these firms can compete. There's only a couple of names like Meta, Amazon,
Google, open AI that can spend tens of billions of dollars to build AI. And those were the only people that could ever play in the AI sandbox, the fact that Deepsea could do it on the cheap and much more efficiently opens the doors up to a whole new host of competitors. So these companies will be disrupted and
The third big takeaway is it's going to be a huge accelerant for AI development. We're going to get much faster advances because DeepSeek's model, first of all, was open source, so now anyone in the world can build on that model and it'll lead to faster development, faster adoption of AI. So those are some three big takeaways. Well, maybe it's not the end of the world and we saw we're seeing the stock market rebound a little bit this morning already. It is a big deal in that it will lead to much more competitors in the AI space and we will see faster development.
And then finally, just a few more newsy things that happened to DeepSeek yesterday. DeepSeek ended up limiting user registrations because it said that there was a large-scale malicious attack on its servers, on its services. It also reached the top of Apple's app stores averaging around 300,000 downloads a day. And then finally, they also dropped a
AI model called Janis Pro that is an image generator that it says actually is better than opening eyes doll Lee as well. So just a few more things. They're just still releasing still shipping products, still challenging, you know, the the top tier of us AI companies. I don't think this is the last we're going to hear of deep seek.
In an effort to move forward, Starbucks is looking back. Yesterday, the world's largest coffee chain began to roll out new old policies across the 11,000 stores it operates in North America as part of New CEO Brian Nichols' plan to rejuvenate struggling sales. If you went into a Starbucks yesterday, you might have noticed the changes free cups of water are out, free coffee refills if you ordered them to stay are in.
Making a grand return is the fixings bar, allowing customers to style their own drinks with various creamers and sweeteners. And if you didn't buy anything, don't expect to be handed the keys to the restroom. Starbucks' new policy, which only allows customers to use the bathroom, which was around until 2018, also kicked back in yesterday.
Many of those tweaks are supposed to remind you of the Starbucks of old when you'd order a coffee, find a comfortable chair to sit in and chill for a while with your friends or your laptop. Conjuring that indie coffee shop vibe is key to nickel strategy to spark a rebound, which is dubbed back to Starbucks. Toby, we've seen nostalgia work in movies, toys and fashion, but will it work with coffee?
Yeah, I mean, the ideas are designed to remind consumers of the quote, old Starbucks. All these changes are very vibe based. They're not efficiency based. The idea is to create shorter lines, you know, that cozier feel a more thoughtful service environment because
A lot of what Nickles is doing is undoing previous Starbucks's CEOs, kind of focus on efficiency. The CEO who predated Nickle was from a consulting background. A lot of what they were doing was looking at, oh, wait, our condiments bar. This is a choke point. It's not good for people. Let's have the baristas do this, have the baristas customized drinks. And while it might make sense in terms of a dollars and cents in a efficiency perspective, there are certain things when it comes to getting a coffee
that go beyond just efficiency. There are vibes that are very important. So you saw in some of the marketing materials that Starbucks has unrolled over the last week. They showed a video of their baristas driving people's names and Sharpies on cuffs. So it is very much a return to that old feel and that old kind of nostalgic coffee house aura that Starbucks is trying to recreate.
Meanwhile, Starbucks is going to report its fourth quarter earnings today. Sales have declined for three straight quarters and they're expected to continue to decline this quarter, perhaps not as much. And the spotlight certainly will be on this guy. Brian Nickel came over from Chipotle. He's considered the messy of retail and he's turned around Chipotle. He's turned around Taco Bell and he's trying to turn around Starbucks as well. And he's getting paid very, very handsomely.
For it, he has already been awarded about $96 million in compensation that's compared to his predecessor who got $22 million and the person before that got $62 million. So this is a ton of money that Starbucks is throwing at him. A lot of that is to make up for the shares of Chipotle that he voided by coming over. So this guy is one of the highest paid CEOs around and we'll see what he has to say later this afternoon about his strategy for rejuvenating Starbucks.
Okay, I can't withhold this news any longer. Tax seasons started yesterday and runs through April 15th. Can I get a woo woo woo? Exciting, exciting times. Not to sound like a parent, but hey, the earlier you file, the earlier you can get your refund. And taxpayers who file electronically and choose direct deposit should get their payments within 21 business days, the IRS said. It's not a small chunk of change either last year. Tax refunds average more than $3,100.
That's a pretty good ROI for the 13 hours and $290. It takes the average taxpayer to prepare and file. But if $290 still sounds like a lot, it could be free thanks to the expansion of the IRS's direct file service this year, one of a few new developments you should know about.
piloted last year and used by 140,000 Americans. This free government service is more than doubling to encompass 25 states this time around and make more than 30 million Americans eligible. Those 25 states are Alaska, Connecticut, Idaho, Illinois, just kidding. I'm not going to read them all.
But definitely look into direct file to see if it can handle your taxes. It earned rave reviews during its debut last year, and it should be available to most people in those states who earn a W-2 income and have relatively simple taxes. Toby, what's on your mind this tax season?
We actually are exactly at half the country. You're right. It was very well received 90% of users rated their experience as excellent or above average. And that was over a 15,000 person customer service survey. So people do like it. It's also kind of beefing up some of its functions. It was pretty bare bones when it rolled out last year. You can actually
Import your W2 information straight to the software. It can handle just a larger variety of different tax circumstances you might encounter as well as process some of those tax credits that you'll be available for. Because remember, a lot of tax credits were rolled out under the Biden administration. There were that EV tax credit that a lot of people took advantage of $7,500. So I do think that direct file will probably be the biggest story this tax season because there weren't
Too many drastic changes to the IRS tax code this year. No, the only one that I think people should know about, and this is directed at people who have a side hustle or freelance or basically people who get a lot of business income coming in on apps like Venmo, Cash App Paypal.
eBay, Etsy, maybe you have a really a pretty lucrative Etsy store. If you sold more than $5,000 worth of goods on any one of those apps, then you are going to be sent a 1099 K for K form for the first time this year. This is the IRS.
cracking down on some tax dodging from side hustles because previously the threshold was $20,000 to receive this form and that is a lot of money from a side hustle. So not many people were sent this form. They weren't reporting this, these taxes, but there's this change going into effect that if you make more than $600 on any of these apps through business means, I mean,
you can pay me for dinner up to $600 and it's not going to be a big deal. But if I actually am providing a business service to you and I make more than $5,000 this year, then I will have to fill out this 1099K. The IRS instituted this new measure a few years ago. They're saying we're going to go from the threshold of $20,000 down to $600. And that was kind of through these apps for a loop. They're like, we haven't really been able to get our talks in order to distinguish between
a personal payment and a business payment. So give us some time. So there, this has been a staggered rollout. It's going from $20,000 to $5,000 this year. And then in two years, it will go down to the 600 level.
or yesterday, but it will not be taxed. And then the final thing I should say about April 15th due date, there are some exceptions to that. The 10 million taxpayers who live in Los Angeles County do have an extension until October 15th, that is due to the recent wildfires. There are some 2024 disaster areas that you can have disaster relief on your 2024 returns, or you can amend your 2023 returns. So those are some of the exceptions to that April 15th deadline.
Up next, I'm gonna tell you about a trend that has recently caught my eye.
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I tell you what Neil, I feel bad for all the roses out there because no one is stopping to smell them. Pedestrians in big cities are walking way faster and socializing way less, and I want to talk about our constant need to be in a rush on today's edition of Toby's Trends. A recent study out of the National Bureau of Economic Research compared the walking habits of pedestrians in New York, Boston, and Philadelphia from 1980 to 2010
It turns out we're all walking like our hair is on fire. Video footage shows that people moved an average of 15% faster in 2010 than 30 years prior. People are also less prone to just hanging out as lingering and loitering and public spaces was down by about half over that same period. So why are we zooming around all the time? Cell phones have a lot to do with it.
80% of American adults had a cell phone by 2010, contributing to a lack of sidewalk, small talk. Plus, people in the observed areas saw their average incomes rise, so rising opportunity costs of strolling and chatting may deter people from slowing their role. Neil, I will be the first to admit, I am fully part of the fast-walking epidemic, but it looks like I am not alone.
No, is that not the most economist thing ever by saying that, oh, over from 1980 to 2010, average incomes rose. So people are understanding that their opportunity cost of just leisurely walking through the streets means that they're giving up more money than they used to. I mean, I don't know if I think about that, but maybe subconsciously, I'm like, yeah.
got to go, got to go back to my desk because I'm making more money now. And I can't just be lingering around now. Urbanist people care about city life and, you know, these social interactions are raising some alarm bells around this. They say this is concerning. Cities are supposed to be an area of random encounters of dynamism. And that's what what leads to
economic productivity and fulfilling cultural life, the fact that we're just going to bump into a random person on the street, have a chat and maybe think of a new business idea adventure or otherwise just make our lives better. So the fact that we're lingering 50% less than 30 years before and we're walking faster, they say is perhaps a negative development that leads to more private life and less public one.
and then what is the antidote to this some urbanist were kind of putting for some ideas of how you can get people to slow down making street spaces that are inviting to walkers is one of the easiest things you can do that means probably more green space more shade more seating
Also, potentially, the New York just rolled out these anti congestion, or these congestion laws that tax cars for entering this city. If you constrain automobiles coming around that make streets a more lovely place to walk. But even if you do slow or eliminate vehicular traffic,
It only does so much. They actually looked at Boston's downtown crossing. That's been car-free since 1978, which predates this study, but they found that social engagements are still down there from 1980 to 2010. One of the things they pointed out is they took away a lot of benches and maybe less people are lingering there, but there is some implications to the fact that
You know, sidewalks are becoming just thoroughfares and not places to bump into people and hang out. So let this be a lesson to you. Maybe if you're listening to this, take the headphone out. Say hello to your fellow neighbor. Maybe stop and chat a little bit. We're beating around the bush here. This is all about cell phones.
Yeah, it was like, this is all about cell phones because in the past, you would have to say, hey, I'm going to hang out. Let's meet at this particular statue, right? Or at this corner because you couldn't arrange ahead of time. As soon as cell phones become a thing, they say, I can meet you at this exact time in this exact place. And then we'll meet at the same time. There's no lingering involved. So to me, cell phones are 80% of the story. Economic opportunity cost 5%.
I also hate walking slowly. Like I just want to get, I'm actually known for running around the city too because if I can get there in three minutes instead of eight minutes, I'm gonna do that so I am part of the problem. One of the few times, just a quick story of the first time, one of the first times I met Toby, he ran from the East Village.
to Yankee Stadium so we could go to a Yankee game. He literally ran there. Okay, let's sprint to the finish with some final headlines. The White House dropped a spending bombshell late last night ordering a pause and grants loans and other federal financial assistance that has sparked loads of confusion and alarm
The federal government sends billions of dollars across the economy through grants and loans for things like disaster relief, transportation funding, and loans to small businesses. The two-page memo from the Trump White House was extremely vague, leaving experts unclear how to interpret it. According to the order, programs affected are, quote, including but not limited to, financial assistance for foreign aid, non-governmental organizations, DEI, Woke Gender Ideology, and the Green New Deal,
One of the reasons that's confusing is because the Green New Deal, for example, was a policy that was never put in place. The White House did carve out an exception for, quote, assistance received directly by individuals as well as Medicare and Social Security benefits. But as of now, there are tons more questions than answers.
Yeah, I think what is kind of confusing people is just the sheer scope of the order. Grants affect so many different people and so many different industries across the government. I mean, they go out to universities for education, universities for research purposes, also to nonprofits for
health care and doing other studies, thousands of other purposes. So that's what has people kind of scratching their heads. Technically, this is just a pause, just a re, they want to look at where all this money is going with the kind of under the guise of reducing federal spending. But it does leave a lot of question marks because just the sheer amount of people that it affects.
Whole Foods workers in Philadelphia made history yesterday by voting to form the first union in the Amazon-owned grocery chain's history. The employees are looking for improved wages, benefits, and working conditions, specifically calling out dissatisfaction tied all the way back to Amazon's acquisition of Whole Foods in 2017. The workers leading the union push hinted at inspiring similar movements across other Whole Foods locations and Amazon subsidiaries, and Neil, there is union pressure forming
All over Amazon now, including Staten Island workers who voted in 2022 to form Amazon's first union in the US, as well as third party delivery drivers who are trying to mount a campaign with the Teamsters as well. So a lot of union pressure coming at Amazon.
If you want a good parallel for maybe what's going on at Whole Foods right now, it's to look at Starbucks. The first Starbucks store unionized in 2021 in Buffalo, that's now spread to 500 stores and it's similar workplace, a coffee shop and a grocery store where the employees aren't in close contact, they can form solidarity networks, they talk a lot and they are able to share grievances with their employer. So the Starbucks one absolutely proliferated and that's been
a huge source of contention between labor and the company for Starbucks and it looks like this could be the same for Amazon Whole Foods and its employees if this spreads from Philadelphia to, I mean Whole Foods has 500 stores around the countries.
Uh, the one thing that I should mention though is that winning a union vote doesn't necessarily end or doesn't necessarily mean that you will have a contract talk that will progress because go back to those Amazon workers in Staten Island, that unionized in 2022. They still do not have a contract. Amazon has challenged the election outcome in court. They've refused to recognize or even bargain with the union. So even though that this is a win for, you know, a labor in this specific story,
It doesn't necessarily mean that Amazon will come to the table and negotiate with them. If you still have a job that lets you work remotely, New Zealand wants you to come frolic amongst its sheep and hobbits in between Zoom calls. Yesterday, the country relaxed its visa requirements for remote workers as it looked to court the digital Nomad class of workers who post up anywhere there's an internet connection. Previously, it was forbidden for a foreigner to work
We're taping this at 6 30 a.m. Eastern time in New York. It is 12 30 a.m. on Wednesday tomorrow in New Zealand. So I don't know if that works with our schedule. I would you rather do the podcast really early or really late the next day, either way, New Zealand is a beautiful country. They are going through some economic tough times. Right now they entered a recession, a few
quarters ago when they're looking for these digital nomads to come in, stay up to 90 days, not work for a Kiwi employer. That's key. They want to work for a foreign employer because they wanted to stress that they didn't want foreigners coming in and taking New Zealand people's jobs. But I do want to get there at some point. It's just a little far away.
I know my sister just did her honeymoon there and it looked ideal. Her big takeaway was they really, they, uh, a lot of the places sell fruit flavored ice cream, but they use real fruit to actually flavor this soft serve and it did look like changing there. So again, if you are a remote worker, uh, New Zealand is saying, we want to welcome you with open arms down. We're changing our visa policy. Come try our ice cream. Come check out the places where Lord of the rings were filmed. It is a beautiful country.
The hours seem a lot to manage. OK, that is all the time we have. Thanks so much for starting your morning with us and have a wonderful Tuesday. For any questions, comments, or feedback, send an email to morningbrewdaily at morningbrew.com. And if you find yourself enjoying the show, learning a lot about deep-seek and other business news, share with your network who may be less informed on such matters. Don't spend any brain effort thinking about who you might share with. Toby has instructions.
I want you to share the podcast with the walker in your life. We all have one, maybe it's your mom, your cousin, anyone who loves lacing up their shoes and going for a stroll. MBD just so happens to pair perfectly with some ambling, so send this episode a walker's way.
Let's roll the credits. Emily Milliron is our executive producer. Raven Liu is our producer. Olivia Graham is our associate producer. Yuchenoa Ogu is our technical director. Garopek is on audio. Hair and makeup is always a standard deduction from our show. Devin Emery is our chief content officer and the show is a production of Morning Brew. Great show today, Neil. Let's run it back tomorrow.