—— Google AI Misstep Triggers Stock Plunge; Five Takeaways From Powell–Rubenstein Interview; CVS to Acquire Oak Street for $10 Billion; U.S. Used-Car Prices Unexpectedly Rise; Gen Z No Longer Fears Being Fired; Credit Suisse Plans $380M Bonus Payout; Microsoft–Activision Deal Blocked
1. Google AI Misstep Triggers Stock Plunge
Recently, OpenAI’s ChatGPT has gone viral, prompting speculation that it could be the future of search engines. However, Bard—Google’s competing AI chatbot—has failed to impress investors.
On Wednesday, Google unveiled Bard at a press conference in Paris, aiming to showcase its progress in AI development. During the event, Bard answered several test questions.
When asked about the James Webb Space Telescope, Bard incorrectly claimed that it was the first telescope to photograph a planet outside our solar system. NASA stated that another telescope made that discovery.
Because Bard’s factual accuracy remains questionable, investors were deeply disappointed. Google’s stock plunged as much as 8.9% today.
Bloomberg analyst Mandeep Singh noted that Google likely felt pressured by OpenAI’s momentum and rushed to demonstrate Bard before it was ready.
Search is Google’s core business, so Bard’s underwhelming debut was a serious blow to investor confidence.
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2. Five Takeaways From Powell–Rubenstein Interview
On Tuesday, Federal Reserve Chair Jerome Powell sat down for a one-on-one interview with David Rubenstein.
The five key takeaways from the conversation were:
- Powell stated that if the labor market remains overly strong or inflation ticks higher in the coming months, the Fed may be forced to raise its target interest rate further.
- Powell reiterated that his primary concern is core services inflation excluding housing, adding that the process of taming inflation won’t be smooth.
- Powell expects overall inflation to decline significantly this year, but believes it likely won’t return to 2% until at least next year.
- Powell largely repeated the views he shared at last week’s FOMC meeting, adding little new information. The Fed will have February’s jobs and CPI data before its March meeting.
- During the live interview, U.S. stocks rose to their daily highs, encouraged by Powell’s relatively dovish tone.
David Rubenstein is co-founder and chairman of The Carlyle Group and is considered highly influential in political circles.
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3. CVS to Acquire Oak Street for $10 Billion
Today, pharmacy chain giant CVS announced it will acquire Oak Street Health in an all-cash deal at $39 per share—marking its second major healthcare acquisition in recent years.
The transaction values Oak Street’s equity at $9.47 billion and its enterprise value at $10.6 billion. CVS will fund the deal using existing capital and financing options.
Last year, CVS also acquired Signify Health, with that deal expected to close in the first half of this year. CVS aims to make healthcare more affordable and accessible.
Evercore ISI analyst Elizabeth Anderson estimated that there’s an 80% chance both of CVS’s healthcare acquisitions will gain regulatory approval.
Oak Street primarily serves low-income and chronically ill patients. Although it is not yet profitable, it went public in 2020 and operated 169 clinics with 159,000 patients by the end of last year.
In a highly competitive pharmacy sector, CVS is turning to healthcare acquisitions to vertically integrate treatment and prescriptions.
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4. U.S. Used-Car Prices Unexpectedly Rise
According to the latest data from Manheim, U.S. used-car prices rose 2.5% in January from the prior month—disappointing buyers and heightening inflation concerns at the Federal Reserve.
Prices rose in both auction and retail markets. Combined with strong jobs data, the Fed may be prompted to tighten policy further.
Omair Sharif, founder of Inflation Insights, said markets assumed inflation had peaked, but that’s not the case. The used-car market is moving in the wrong direction.
Used-car prices account for 4.5% of core CPI. For every 1% increase in average used-car prices, CPI rises by approximately 0.05%.
The rebound in used-car prices may be due to reduced market volatility and more buyers returning.
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5. Gen Z No Longer Fears Being Fired
Being fired is traditionally considered one of the worst experiences for employees. But today, more workers are even welcoming the possibility.
Bobin Singh, 26, said he felt happier after being laid off from a Los Angeles-based e-sports company, as it gave him time to pursue his passions, like making TikTok videos. He also received three months of severance.
A Bloomberg survey last month found that nearly 20% of Gen Z employees said they would be happy to be fired. They no longer view layoffs as catastrophic, believing they’ll have time to enjoy hobbies and eventually find better jobs.
Today, U.S. unemployment is at a historic low. The ratio of job openings to unemployed workers stands at a record 1.9, making it easier for laid-off employees to find new work.
Many Gen Z workers—born in the mid-to-late 1990s—see being fired not as a setback, but as a fresh opportunity.
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6. Credit Suisse Plans $380M Bonus Payout
Credit Suisse Group AG plans to award $380 million in bonuses to its top 1% of executives—though the payout is contingent on the success of the bank’s restructuring efforts, according to sources.
Recently, Credit Suisse cut its overall bonus pool by 50%. The bank has struggled in recent years, relying on fundraising to stay afloat while restructuring. It has also been spending heavily to retain its top talent.
According to the Financial Times, the “transformation” bonus must be approved by shareholders at the annual meeting in April.
The bonus will be distributed to the top 500 executives only if the bank successfully completes its restructuring.
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7. Microsoft–Activision Deal Blocked
Today, the UK’s Competition and Markets Authority (CMA) said Microsoft’s $75 billion acquisition of Activision Blizzard could severely harm the UK market. It warned of higher prices, fewer choices, and reduced innovation for consumers. The merger could also undermine healthy competition between Sony PlayStation and Microsoft Xbox.
CMA stated that halting the deal is the best option. The only alternative would be for Microsoft to divest the Call of Duty franchise, which has generated over $30 billion in revenue for Activision Blizzard.
CMA argued that Microsoft has an incentive to make Call of Duty exclusive to Xbox, potentially hurting PlayStation console sales—a strategy Microsoft has used before.
The CMA fears that after the deal, PlayStation users may no longer be able to play Call of Duty.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.