Finimize - 🚘 A new Japanese giant

What’s going on here?

Honda and Nissan are reportedly in talks about a potential merger – one that would create a new Japanese auto behemoth to rival Toyota.

What does this mean?

Nissan and Honda already share some strategic ties: they’ve been working together on EV battery development and software since March. And the idea of a marriage between the two isn’t exactly new – the Japanese government even floated the concept back in 2020 as a potential counter to growing competition from Chinese EV makers. If they decide to tie the knot, the combined company would be the world’s third-biggest carmaker by sales volumes, trailing only Toyota and Volkswagen. There’s talk of Mitsubishi being part of the tie-up too, since Nissan owns 26% of it. And that would effectively consolidate Japan’s car industry into two powerful players: Toyota, and this newly merged giant.

Why should I care?

For markets: Restoration work.

A deal could be just what Nissan needs to find the gas pedal again. The company’s been struggling to put its wheels in motion, with weak sales in the US and China fueling a huge profit slump this year. Things got so bad that management was forced to cut jobs, trim factory capacity by a fifth, and slash 2024’s earnings forecast by 70%. So, not surprisingly, the merger news sent Nissan’s shares up 24% on Wednesday – their biggest one-day jump in over 50 years. Mitsubishi got a turbo boost too, rising 20%.

The bigger picture: Made in the USA.

The potential merger might seem like a defensive move among the Japanese auto industry’s weaker players, but there could be another motive at play: minimizing the impact of proposed US tariff plans. The combined entity would gain a bigger manufacturing footprint in the US, which could allow it to sidestep the proposed 25% tax on imports from Mexico – where many firms produce cars to sell to the American market.

What’s going on here?

AI firm Databricks has just pulled off the biggest venture capital (VC) deal of the year, raising $10 billion in new funds and putting its value at $62 billion.

What does this mean?

That’s a huge amount of money, even by VC standards, and it shows how private markets are rewriting the financial world’s playbook. Investors have been diving in, while companies have delayed stock market debuts. That’s left VCs to focus on bigger, more established firms like Databricks – an 11-year-old AI and analytics company that’s set to hit $3 billion in revenue next year. It’s a win-win: VCs get the strong growth of early-stage startups but with less risk, and companies keep greater control over their strategies. On top of that, the funding allows employees to cash out stock options early, which helps firms like Databricks attract and retain top talent against huge rivals like Google and Meta.

Why should I care?

For markets: If you’re not first, you’re last.

The AI market has been splitting in two, with big-scale firms like Databricks going one way, and specialized, niche players going the other. It’s a winner-takes-most market, so Databricks is going all-in – expanding globally, acquiring top talent and tech, and building out its AI and data analytics platform. But competition is fierce, with Snowflake battling the firm for data dominance – and giants Microsoft, Google, and Amazon pushing bundled AI and data services.

The bigger picture: AI’s a needy beast.

AI’s rapid growth is gobbling up resources. Data centers are pushing power grids to their limits, draining water systems to stay cool, and sparking intense competition for real estate that suits their energy and connectivity needs. But as industries race to keep up with these challenges, opportunities are emerging – in areas like small modular reactors for clean energy and water-saving technologies for efficient cooling.