🌮How to sell tacos for $5 Billion

Good afternoon! Today we will be covering a $30 Billion Gamble by Nvidia, the $5 Billion Taco sale, a major restructuring at Cisco and the revised CPI for December.
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STOCK MARKET
🤖Nvidia’s $30 Billion Gamble

Nvidia is aggressively entering the custom chip arena with a new business unit, aiming to design specialized chips for cloud computing, AI, and beyond. Despite controlling 80% of the high-end AI chip market, Nvidia faces growing competition from companies developing in-house solutions.

The move is strategic, offering assistance to firms, including Meta and Microsoft, in creating tailor-made AI chips to enhance efficiency and reduce costs. Nvidia officials have held talks with major players like Amazon, Meta, and Microsoft for potential collaborations.

The custom chip market, valued at $30 billion in 2023, is expected to double by 2025. Nvidia's entry poses a challenge to industry leaders Broadcom and Marvell. Beyond AI, Nvidia eyes telecom, collaborating with Ericsson, and plans to impact the automotive and video game sectors.

M&A
🌮Flynn Group exploring $5 Billion Sale

Flynn Group, the world's leading franchise operator with brands like Applebee's and Taco Bell, is contemplating a majority stake sale, potentially exceeding $5 billion, as reported on Reuters by insider sources .

Bank of America is reportedly assisting in the sale process. Flynn Group, based in San Francisco, boasts an annual EBITDA exceeding $450 million. Interested suitors, including private equity firms and sovereign wealth funds, are exploring this lucrative opportunity.

Existing investors like Ontario Teachers' Pension Plan and Main Post Partners might divest part of their stakes but remain invested. Founded in 1999, Flynn Group operates over 2,600 establishments in the U.S. and Australia, generating $4.5 billion in annual sales.

STOCK MARKET
🌐Major restructuring at Cisco

Cisco, the networking giant based in San Jose, is set to embark on a major business restructuring involving substantial layoffs, aiming to concentrate efforts on high-growth areas, as reported by informed sources.

With a current workforce of 84,900 employees, the company is yet to finalize the exact number affected. An official announcement is anticipated next week, coinciding with the upcoming earnings call on February 14.

This strategic move follows Cisco's November 2022 restructuring, impacting about 5% of its workforce and incurring $600 million in charges. The decision aligns with a broader trend in the tech industry, where companies like Amazon, Alphabet, and Microsoft have also implemented layoffs recently.

Cisco's recent challenges include supply chain issues and a post-pandemic slowdown, prompting a shift toward software offerings such as cybersecurity.

ECONOMY
💸CPI Revisions Unveil Mild U.S. Inflation

Recent revisions to the U.S. Consumer Price Index (CPI) show a modest 0.2% rise in December, down from the initially reported 0.3%. The Labor Department's annual adjustments revealed a slight increase in October and November CPI, impacting overall inflation expectations.

Excluding volatile factors, the core CPI remained steady at 0.3% for the last quarter. These revisions, driven by recalculations of seasonal factors, didn't sway the year-on-year data. Despite Federal Reserve Governor Christopher Waller's anticipation, the changes are considered inconsequential.

Financial markets still expect interest rate cuts in H1 2023, aligning with the Fed's approach. The CPI adjustments accompany updated spending weights, elevating housing's importance and reducing transportation's share.

Analysts project a minimal impact on the core Personal Consumption Expenditures (PCE) data. As economists foresee a subdued inflation trajectory, these revisions maintain the Fed's measured stance amid ongoing economic assessments.

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