Headed For A Bankless Future?

When crypto and fintech enthusiasts talked about a bankless future, we don’t think this is what they meant… 🤔

Yesterday Silvergate Capital plunged after hours because it told investors it would shut down its operations and liquidate the bank. This comes just a week after the company filed a notice that it would delay its annual report filing due to business and regulatory challenges. 📰

The crypto-focused bank experienced a meteoric rise during the bull market but saw billions of deposits leave amid falling confidence in the industry’s prospects. $SI shares had already fallen more than 95% from their 2021 highs but continued their decline today to fresh all-time lows. 📉

As if that wasn’t enough to spook the market, Silicon Valley Bank added to the market’s hysteria. As its name suggests, its institution services early-stage businesses, serving as the banking partner for nearly half of U.S. venture-backed tech and healthcare companies that went public in 2022. 🤖

With that said, the sharp reversal in private and public market valuations over the last two years has put tremendous pressure on its clients. That reduced the number of deposits the bank had on hand and left it struggling to keep up as other institutions raised interest rates to attract and retain capital. It also left the bank on the hook with debt and other investments that have plummeted in value.

Apparently, its troubles were worse than investors initially realized. Today, the company announced that it’s selling $1.75 billion in shares and liquidated a $21 billion portion of its “available for sale” investments at a $1.8 billion after-tax loss to shore up its balance sheet. 💰

The news sent $SIVB shares down 60% in the regular session and another 20% lower after hours. 🔻

Overall, confidence is the name of the game in the banking industry. If depositors, investors, and other stakeholders lose confidence in a bank’s ability to stay solvent/liquid, a bank run could ensue. And given how interconnected today’s financial institutions are, fears over the entire industry’s health are spreading. 😱

Whether those fears are warranted or not is up for debate. But when it comes to people’s money, they tend to act first and ask questions later. “Better safe than sorry” becomes a form of due diligence…and understandably so. 💸

Financial stocks and ETFs tracking the sector experienced sizable declines today. $XLF fell 4%, $KRE declined 8% on its highest volume ever, and on and on. The overall impact of these events on the market remains to be seen. But what’s clear is that with the sector accounting for ~11% of the S&P 500’s weighting, this news will likely weigh on sentiment in the short term.

We’ll cover this more as the story develops and the market implications become clearer. 🤷

AI’s Copyright Crisis Begins

We all knew copyright law would be a key issue at the heart of the artificial intelligence (AI) revolution, but we didn’t know when. Well, the time has come. ⌛

Today, The New York Times filed a lawsuit against Microsoft and OpenAI, accusing them of infringing copyright and abusing the newspaper’s intellectual property. In its court filing, the publisher said it looks to hold the two companies accountable for the “unlawful copying and use of The Times’s uniquely valuable works,” claiming billions in statutory and actual damages.

Read It

Apple Drains EV Resources For AI

After ten years of research and development, Tim Apple is finally pulling the plug on Apple’s electric vehicle (EV) project. Because as we all know, EVs have lost their luster and given way to the business world’s new savior…artificial intelligence (AI). 😇

Bloomberg broke the news today, saying the tech giant disclosed the strategy shift internally and surprised the nearly 2,000 employees working on the project. Executives told staffers the project would begin winding down and that many of the car team’s employees would be shifted to its artificial intelligence division, focused on generative AI. 

Read It

Musk Threatens Tesla’s AI Ambitions

The primary bull case for Tesla is that it’s not an automobile company but a technology one. Part of the reason it’s able to command such a high valuation relative to its peers is because of that technology’s potential business impact way down the line, especially as it introduces newer developments like artificial intelligence (AI).

However, that bull case is facing an unlikely opposition…from Elon Musk himself. 🤦

Read It

Nio & Nikola’s Never-Ending Story

No matter the day, there seems to be an endless stream of electric vehicle (EV) industry news. Let’s get into today’s headlines. 📰

First up is China’s Nio, which just received an additional $2.2 billion investment from Abu Dhabi’s CYVN Holdings, which raised its stake to 20.1%. The fund had last invested in Nio during July, with a $1 billion investment. 

Read It