It seemed to come out of nowhere, but by the time the damage was done last Sunday, a trillion dollars had been wiped off the value of the Nasdaq, and at least $600 million of that came off of one company’s market cap: Sky-high chipmaker Nvidia, whose chips are at the core of what is now yesterday’s race for AI supremacy.

Nvidia’s share price had risen eightfold in two and a half years, and it had reaped profits of $68 billion in the last four quarters. Then a little-known Chinese AI company, DeepSeek, announced it had developed a cheaper and far less chip- and energy-intensive AI model. Nvidia’s shares plunged 17% on Monday, although they have recovered slightly since.

DeepSeek’s founder is Liang Wenfang, a young Chinese-born engineer who wrote his doctoral dissertation on algorithms to aid China’s ubiquitous facial recognition technology and later harnessed AI for a speculative investment fund. When that business fell from favor in China, Liang says he took second-rank chips and far less power to build his AI model, which in the last week has withstood tests that show it equal to anything OpenAI has built.

The announcement of this low-cost end run could upend the industry. Gone is the need to wait years and pay high prices for AI chips from Nvidia and a handful of other firms. Gone, too, is the need for massive data centers and dedicated power plants, including reactivated nuclear reactors. But also gone may be the positions of the AI traditionalists: OpenAI, Musk’s xAI, and Google, Microsoft and Facebook.

Still, Nvidia cast the DeepSeek jolt in a positive light. In a statement Monday, it called DeepSeek’s advance an excellent illustration of new ways of operating AI models, but said those models would still need to use large numbers of Nvidia chips.

Watch Big Business This Week on Cheddar—and YouTube!The Usual Suspects

• The almost-final Frontier: That on-again, off-again wedding between Spirit Airlines and rival budget carrier Frontier Airlines could finally happen, but it’s all about the price. You may recall that in 2022, Frontier offered $2.9 billion for the troubled fleet of yellow planes and its route map. Spirit rejected Frontier at the time and tried to hook up with Jet Blue, but that deal fell apart last year when the Justice Department successfully blocked the merger, saying it would over-consolidate the airline industry. But things have not been looking up for Spirit, which is struggling under some $800 million in debt and filed for bankruptcy protection in November. Spirit’s CEO suggested the Frontier offer was too low, and in any event, current creditors were not going to put another $350 million into the venture, a condition laid down by Frontier. If new talks do lead to a merger, the combined carrier would be the fourth-largest in the U.S. with 8.5% of air travel, behind United’s 15.9%.
• The Zuck-up continues: Mark Zuckerberg is house hunting in Washington as his bromance with Donald Trump blossoms, The Financial Times reports. Beyond donating $1 million to Trump’s inauguration gala, Zuck replaced his chief lobbyist, British former deputy prime minister Nick Clegg, with GOP stalwart Joel Kaplan and added Trump buddy and MMA boss Dana White to Meta’s board. Zuck even settled a longstanding lawsuit with Trump, paying the president $25 million. But it’s unclear what Zuck has bought. Despite a pledge to spend $60 billion to $65 billion to become the world’s AI leader, Zuck was left out in the cold last week when Trump announced OpenAI, Softbank, and Oracle would be partners in that $500 billion AI venture, dubbed Stargate.
• Rates stay low: A jittery Fed, concerned about the inflationary impact of Donald Trump’s economic agenda, hit the pause button, keeping interest rates steady at 4.25% to 4.5%. Inflation has remained stuck closer to 3% than 2%, the Fed’s target. Fed chair Jerome Powell said the U.S. economy was “in quite a good place,” citing growing GDP, solid job gains, and a low unemployment rate, as well as signs that inflationary pressures are easing. “We don’t need to be in a hurry to adjust our policy stance,” he added.
• GM’s tariff woes: America’s biggest car maker says it is concerned about the dangers to its business from Trump’s plan to slap Canada and Mexico with 25% tariffs, as parts of many of its vehicles—and most of its pickups—are made across all three countries. Some production could be yanked back to U.S. plants, but the company is short of cash to invest after taking a $4 billion charge in the quarter to restructure and reduce its struggling China operation. Apart from those and other one-offs, GM saw a 21% rise in profits to $14.9 billion last year, but the threat of tariff-based disruption sent its shares down 9% after Tuesday’s earnings announcement.
• The TikTok dilemma: While the online world waits for Donald Trump to decide the fate of TikTok within the 75-day cooling-off period he ordered on January 20, the tech world is split. Some giants, like Apple and Google, have removed the app from their stores, while Amazon Web Services has stopped hosting it on their servers, to avoid hundreds of billions of dollars in potential fines. Others, banking on Trump’s pledge not to punish anyone who keeps the app alive, are still working with it: Oracle is hosting TikTok on its servers, and Akamai and Fastly, which speed processing time for the videos, are also still working with the app and its Chinese owner ByteDance. Not that any of that could be related to a last-minute decision by TikTok CEO Shou Chew to visit Mar-a-Lago or throw a $50,000 inaugural ball for influencers who helped elect Trump. The dilemma for tech firms is real, Capstone analyst Neil Suri told The New York Times: “On one hand, you have this massive theoretical liability of up to $850 billion, and on the other side, you have the potential benefits of complying with Trump’s wishes and being in his good graces.”
• Boeing’s blues: Wrapping up an annus horribilus, Boeing said it ended 2024 with a loss of $11.8 billion, including $3.8 billion in Q4. That’s a total of $39 billion in losses since 2019, when two crashes of the Boeing 737 Max killed a combined 346 people. The year also included a fuselage panel falling off another 737 (no one died that time), a strike by the company’s 30,000 machinists that halted production of the cash-cow 737, as well as the 767 and 777 jets, the removal of CEO Dave Calhoun, and the reluctant reacquisition of fuselage maker Spirit Aerospace, whose Wichita, Kansas, factory makes 737 parts. And then there’s the failed Starliner spaceship program, which has left astronauts Suni Williams and Butch Wilmore stuck at the International Space Station since June, where they initially arrived for an 8-day stay. Boeing’s share price is down 45% in the past five years.
• Cold coffee: Not much is brewing in the way of improvements at Starbucks after the much-ballyhooed hiring in August of a new CEO. In the first fiscal quarter, net income dropped almost 23% to $780 million from $1 billion a year earlier. CEO Brian Niccol blamed the drop in part on raising wages and boosting benefits for store employees, and a decision to stop charging more for oat milk. But the real problem may simply be that consumers no longer want to shell out an hour’s wage for coffee and a slice of lemon cake. Same-store sales fell 4% in the U.S. and 6% in China. “We’re on track to turn the business around. We’re where we want to be one quarter in, but much of our work is just beginning,” Niccol promised investors on an earnings call this week. Niccol said he wants to double the number of stores but gave no timeline. Starbucks has halted the construction of dozens of new stores, and also ended its practice of having its restrooms open to the public.

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Elon’s World

Elon Musk is taking the shareholder vote against his $56 billion or so pay package personally. Sometime after Norway’s $1.7 trillion sovereign oil wealth fund voted against the pay hike, the fund’s CEO, Nicolai Tangen, invited Musk to dinner with the heads of Ferrari, Novo Nordisk, Nestle, DoorDash, and Adidas. Musk made it clear where Tangen could stuff his meal: “When I ask you for a favor which I very rarely do, and you decline, then you should not ask me for one until you’ve done something above nothing to make amends,” Musk texted. “Friends are as friends do,” he added. The messages were released under a freedom of information request and first reported by Norwegian newspaper E24. • Tesla is recalling 1.2 million cars made or operating in China over potential malfunctions of the rear-view camera and unspecified steering issues. A software patch is expected to do the trick. A year ago, Tesla recalled 1.6 million cars from its China factories over a flaw in its driver-assistance features. Tesla’s having a tough time in China, where it’s fallen from third place to fifth in Chinese EV sales. • Just two days before Holocaust Rememberance Day, Musk appeared via video link at a meeting of Germany’s far-right Alternative for Germany (AdF) Party, telling Germans to shrug off any lingering guilt over World War II and the deaths of 6 million Jews and millions more Gypsies, socialists, homosexuals and others in German-built concentration camps. His comments came just a week after Musk twice made the Nazi salute at a Trump inauguration event. Trump’'s comments were “far too familiar and far too ominous,” said Polish Prime Minister Donald Tusk. Musk tried humor (or his version of it) to deflect criticism, posting a series of Nazi-themed puns on X. “Don’t say Hess to Nazi accusations!” and “Bet you did nazi that coming 😂” he posted. • Musk said he’ll heed Trump’s request to rescue the two Boeing astronauts stuck at the international Space Station, but NASA says they don’t need rescuing and will be shipping out this Spring after completing a revised mission. • An email from the Office of Personnel Management warning government employees that they are coming to a “fork in the road” and encouraging them to take a buyout for eight months’ pay apparently came from Musk’s DOGE team. (It echoes a message he sent to Twitter employees when he took over the social media platform.) But he bypassed the OPM itself, which will have to manage any mass layoff, installing three top lieutenants in the office and building a new email system to send out the message. • A new accounting rule, ordering companies to value cryptocurrency holdings at their full value every quarter, instead of only reporting a gain when they are sold, added $600 million to Tesla’s balance sheet for the fourth quarter. That was about 9% of Tesla’s $7.1 billion in profits for 2024.

Don’t say Hess to Nazi accusations!

Some people will Goebbels anything down!

Stop Gőring your enemies!

His pronouns would’ve been He/Himmler!

Bet you did nazi that coming 😂

— Elon Musk (@elonmusk) January 23, 2025

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The Short Stack

• Steel there? U.S. Steel really, really, really wants the Trump administration to reverse Joe Biden’s veto on its plans to sell itself to Japan’s Nippon Steel for $14 billion. Nippon’s high price ($55 a share over the current $40ish) and promises to keep union jobs have both workers and management enthused. But citing national security reasons, Biden said no. Rival steelmaker Cleveland-Cliffs is only offering $35 a share (it may have to sweeten that), and this week, it got a boost from Ancora, an activist investor that wants to place nine new directors on the Pittsburgh-based mill’s board, to oust U.S. Steel CEO David Burritt and replace him with Alan Kestenbaum. Here’s where the plot thickens: Kestenbaum was recently CEO of Stelco, which was itself recently purchased by Cleveland-Cliffs. U.S. Steel is a prize: the Biden infrastructure projects—many of which are already funded, despite Trump’s edicts—promise boom times for steelmakers.
• Starwood redux? Hotel and private equity tycoon Barry Sternlicht says he wants to recreate the famed hotel brand he started decades ago, which was eventually sold to Marriott. By then, it had 1,300 hotels and resorts in 100 countries under the Westin, St. Regis, W, and Sheraton brands. Sternlicht, who’s kept his hand in the hotel game, now owns a measly 14 lodgings in five countries, but he is itching for a career comeback. “I’m kind of like a singer having one song,” he told The Wall Street Journal. “I want to have two songs.”

Trumplandia

• Tariffmania: What were they smoking? Or snorting? In a kerfuffle that lasted barely half a day, Trump threatened to slap 50% tariffs on imports from Colombia after the country’s leftist president turned back a flight full of deportees from the U.S., saying Washington had better treat Colombians with “dignity.” President Gustavo Petro changed his tune within hours, and Trump is now reaping the fruits: Audi and Porsche were reportedly so impressed, they’ve begun looking into building assembly plants in America. Or maybe they just liked Trump’s promise of a flat 15% corporate tax rate for foreigners who invest in the U.S. and create blue-collar jobs. Meanwhile, Canada and Mexico are bracing for those 25% tariffs on all their exports to the U.S. Those new duties could be in place next week.
• Making a buck: President Trump is showing no sign of distancing himself from private profit-making while he’s in the White House. On Wednesday, his Trump Media and Technology Group, the specu-bubble that owns the underwhelming Truth Social platform, said its board had approved the company’s expansion into financial services and fintech under a new brand, Truth.Fi. TMTG said it will invest $250 million into the platform and Charles Schwab will provide custody of the money. TMTG began trading March 25 under the symbol DJT, following a reverse merger. Since then, it’s fallen by about a fourth to $30.90 from $40. Trump’s $TRUMP memecoin crashed from its $75 peak two weeks ago, to a little more than $27 on Thursday, which is still well above its initial price of about $7, just days before Trump’s inauguration.
• Stepping on the gas: Citing high energy costs that he said are “devastating American consumers,” Trump declared a “national energy emergency” this week, and promised to let America’s underground (and undersea) oil and gas reserves flow. But economists say there’s not much evidence that there’s an energy shortage, or that adding to capacity will lower prices. The U.S. is already the world’s largest oil and gas producer, and the price of oil, at $76 a barrel, is well below the all-time high of $147 in 2008 (that would be about $214 in today’s dollars). Even worse, with prices so low, oil producers don’t want to drill, baby or no baby. That would just increase the oversupply and lower prices. The International Energy Agency says global production this year is expected to be about 1 million barrels a day above demand. For oil majors right now, the task is to boost consumption, not supply, so they can extend their immense profits for the next several decades—assuming we haven’t warmed the planet out of existence.