The Markets Today: Bezos Readies Massive Amazon Share Disposal

Key Points

• Bezos to sell 50 million Amazon shares, estimated at $8.4 billion.
• Oil stocks undervalued despite strong cash flow, VanEck CEO asserts.
• Musk ordered to testify in SEC’s Twitter acquisition investigation.
• SMIC aims for 5nm chip production using older technology.
• Germany’s economy faces recession risk amid declining industrial output and exports.

Jeff Bezos Plans Sale of 50 Million Amazon Shares Worth $8.4 Billion

Jeff Bezos, the founder of Amazon and former CEO, has proposed selling approximately 50 million Amazon shares, as per a recent SEC filing. The sale, estimated to be around $8.4 billion, was listed for around February 7. Since stepping down as CEO in 2021, Bezos has focused on other ventures, including Blue Origin and philanthropy. While his stock filings indicate a Seattle address, reports suggest Bezos has moved to Miami. (NPR)

VanEck CEO Highlights Oil Stocks’ Undervalued Status Despite Strong Cash Flows

VanEck CEO Jan van Eck suggests investors consider oil stocks, comparing them favorably to semiconductors for their impressive cash flow yields, yet notes their lack of popularity in the market. Despite their potential, oil stocks, including the VanEck Oil Services ETF’s major holdings like Schlumberger, Halliburton, and Baker Hughes, have underperformed, with the ETF down about 7% this year. Strategas’ Todd Sohn sees a turnaround opportunity, as oil stocks remain unloved despite WTI crude’s recent 6% climb to $76.84 a barrel, marking its best weekly performance since September. (CNBC)

Elon Musk Compelled to Testify Again in SEC Probe Over Twitter Acquisition

Elon Musk has been ordered by a California federal court to testify again in an SEC investigation into his 2022 acquisition of Twitter, now renamed X. The Tesla and SpaceX CEO previously refused a September interview, prompting the SEC to file a lawsuit in October. The investigation focuses on whether Musk complied with legal requirements during his $44bn purchase and if his statements about the acquisition were accurate. Musk’s legal team has criticized the investigation as baseless, arguing that it stems from a minor clerical error and accusing the SEC of leaking information. Despite these claims, Judge Laurel Beeler mandated Musk’s testimony, instructing both parties to agree on a date and location. The dispute originates from a 2018 tweet by Musk about Tesla, which led to an ongoing legal battle over his free speech rights and government oversight. (The Guardian)

SMIC Strives for 5nm Chip Production Using Older Equipment Amid High Costs

SMIC, China’s semiconductor giant, is reportedly progressing towards manufacturing 5 nanometer (nm) chips using existing U.S. and Dutch-made equipment, an advancement from its 7nm technology. This approach, however, presents significant challenges: higher production costs and lower yield rates. The Financial Times revealed that SMIC’s prices for 5nm and 7nm chips are 40-50% higher than those of TSMC, the leading chipmaker. Despite these obstacles, experts like Paul Triolo and Pranay Kotasthane highlight SMIC’s collaboration with domestic and external partners, including Huawei, to enhance yields. However, without access to advanced EUV machines, costs will likely escalate with each generation of chips, potentially requiring substantial investment, possibly even government-backed, to sustain progress. (CNBC)

German Economy Faces Recession Threat Amid Declining Industrial Output and Exports

Germany’s economy continues to struggle, as recent 2023 data points to a gloomy outlook. Industrial production dropped by 1.6% in December and 1.5% annually, while exports fell 4.6% in December and 1.4% over the year. Factory orders, despite a deceptive 8.9% rise in December, actually reached a post-pandemic low when excluding large-scale orders. Experts like Holger Schmieding and Erik-Jan van Harn anticipate a modest contraction in early 2024, with little hope for immediate recovery. The German economy, grappling with global rate hikes, high energy costs, and weakened exports, is predicted by Commerzbank to shrink by 0.3% in 2024, matching its 2023 performance. Political factors, including budget crises and changing voter sentiments, further complicate the outlook. (CNBC)