Finimize - 🦾 OpenAI's big target

What’s going on here?

ChatGPT parent OpenAI is setting its sights on attaining one billion users in the coming year, and it’s got some big plans to get it there.

What does this mean?

Two years ago, OpenAI introduced ChatGPT to the world. And, at the time, startup insiders predicted that the AI chatbot would attract a few hundred thousand users. Turns out they were way off: ChatGPT went to the moon, becoming the fastest-growing app in history and now boasting around 250 million weekly active users. Fast-forward to this week, and OpenAI has laid out an ambitious goal: reaching one billion users in the next year. To get there, it’s releasing some new AI products, including its own search engine and “agents” – chatbot-like assistants that can help get stuff done on the web. It’s also recently partnered with Apple, which will integrate ChatGPT across its billions of devices. And with all that happening, perhaps its goal of quadrupling its customer base isn’t so farfetched after all.

Why should I care?

For markets: Winners and… winners.

OpenAI has seen its valuation skyrocket to $157 billion – the highest ever for a Silicon Valley startup and five times the $29 billion it fetched back in April 2023. Mind you, the biggest winners from the AI boom that its chatbot almost singlehandedly launched are a handful of US tech firms. In fact, the six heftiest – Nvidia, Microsoft, Apple, Amazon, Meta, and Alphabet – have seen their combined market value grow by more than $8 trillion since ChatGPT’s debut.

The bigger picture: No growing pains here.

It’s not hard to understand investors’ enthusiasm for all things AI, especially considering the massive growth that’s expected for it. Consider this: the market for AI-related services and hardware hit $185 billion last year. That’s not small potatoes, but consultancy firm Bain expects it to expand by 40% to 55% every year until 2027, potentially reaching $1 trillion.

What’s going on here?

China’s gigantic manufacturing sector saw a nice boost of activity in November, helped by a surge of new orders and some government stimulus.

What does this mean?

The Caixin manufacturing purchasing managers index rose to a surprisingly strong 51.5, compared to 50.3 the month before. It was the factory sector’s second straight showing above the critical 50 mark that separates an expansion in activity from a contraction. The monthly survey of smaller firms in China showed orders were pouring in at their fastest pace in over three years, as exports bounced back. Meanwhile, the official manufacturing activity index – the one driven by bigger state-owned firms – also marched higher, suggesting this long-awaited improvement may actually have legs.

Why should I care?

For markets: Help before hindrance.

But there’s a catch here. The threat of new US tariffs may have caused some American companies to panic buy – pulling future demand forward. After all, the president-elect’s proposed 60% tax hike on goods shipped in from China could hit companies pretty hard: think-tank CF40 estimates that it would squeeze Chinese exports by 6.5%. So while these latest factory numbers might offer hope for the country’s recovery, they come with a side order of caution, because trade tensions and a weak property market are still clouding the outlook.

For you personally: Hard times for the high-end.

It’s not just manufacturing that’s been taking it on the chin: luxury goods have hit a rough patch too. Chinese consumers have been keeping their hands in their pockets, and that’s caused stock price stumbles for posh giants LVMH, L’Oréal, Estée Lauder, and Shiseido. And there could be a dazzling investing opportunity there. China is the world’s second-biggest luxury market, and recent government policies such as tax cuts, subsidies, and incentives could get its affluent shoppers spending again. So the latest dip in those shares could mark an attractive point for grabbing some luxury for less.