Snow Business

By Matthew Gutierrez and Shawn O'Malley · October 27, 2023

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The company behind ChatGPT keeps soaring to new heights.

OpenAI’s valuation is apparently about $86 billion, making it one of the most valuable tech startups worldwide behind only TikTok owner ByteDance and SpaceX.

Put another way, OpenAI is as valuable as 12 big consumer brands in America combined. It’s reportedly earning ~$100 million in revenue every single month, which comes out to more than $3 million per day??

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the three biggest stories in markets:

• What warmer weather means for the snow business
• Behind Amazon’s earnings beat
• What happens to sanctioned oligarch’s assets?

All this, and more, in just 5 minutes to read.

POP QUIZ

What are the world’s five most valuable companies by market cap? (Read to the bottom to find out!)

CHART OF THE DAY

IN THE NEWS

?? The Snow Business Grapples With Warming Winters

Warming weather globally wouldn’t exactly make you bullish on ski resorts, would it?

Snow-dependent communities are being impacted by climate change, specifically warmer winters that feature less snow and freezing temperatures.

• Ski areas and ski towns must grapple with the new reality as winter feels like a cold fall in many parts of the world. And as winter fast approaches, snow businesses contemplate a world in which they have little or no business at all.

It’s a scary thought that has kept some ski resort owners up at night, whether in Vermont or northern Italy’s ski region (which hosts the 2026 Winter Olympics).

Baby, it’s warm outside: We just had the world’s hottest summer on record, per NASA research. Winters aren’t spared: Average daily temperatures from December through February have been 34.5 degrees Fahrenheit (1.39 degrees Celsius) over the past decade, two degrees warmer than the average in the last half of the 1900s.

Frosts are later. Snowfall has declined. Thus, smaller ski areas have faced a steep economic toll.

• More than 600 ski resorts in New England have closed in the past 25 years alone, per a Wall Street Journal report, partly due to rising costs, competition with big resorts, and changing vacation habits.
• But chief among the reasons is warming winters. “The seasons are getting shorter and more variable with tremendous ups and downs,” says one New England meteorologist.

Business leaders adapt: Some ski resorts are scrambling to install new snowmaking technology to make snow at warmer temperatures. The question remains, though, whether that will drive enough interest to pay for the costs of running them.

Why it matters:

The drop-off in snow not only hurts ski resorts but other businesses, such as nearby shops, restaurants, and hotels. The same holds true across the winter or snow market, from snowmobiles to ice fishing to snow-removal companies that pave roads and ensure they are safe to drive on.

• Even local hardware stores could feel the effects of snow shovels and ice melt sitting on their shelves, collecting dust.

So unpredictable: America’s $50 billion ski industry faces a big test ahead.

• Said one ski operator: "It's so unpredictable now, we don't know if March is going to be the snowiest month. We don't know if it's going to snow at all in March anymore."
• Added another: "I've always been concerned that warming would end the ski industry.”

Read more

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?? Amazon Revenue Jumps 13%, Share Price Pops

Things are going pretty, pretty well at Amazon these days.

The latest tech giant to report said profit tripled to nearly $10 billion last quarter thanks to stellar sales in cloud-computing, advertising, and retail.

A good problem to have: CEO Andy Jassy said Amazon will keep making tens of billions of dollars in revenue over the next few years as customers rely on their AI services within their cloud business, aka Amazon Web Services (AWS).

• “There’s so much more to provide,” he said. “It’s going to be a long time before we run out of services.”
• Revenue increased 13% to $143.1 billion last quarter and profit rose $9.9 billion, driving its shares up about 8% on Friday. Amazon (ticker: AMZN) stock is up 51% this year after shares were cut in half last year.

Amazon has cut 27,000 corporate jobs and streamlined its operations after Jassy embarked on an aggressive cost-cutting strategy. It also overhauled delivery operations.

Amazon’s CFO said there’s been an uptick in deal-driven spending by consumers online, and AWS customers (mostly businesses) have held steady, saying: “We’re very pleased with the momentum we have.”

Elsewhere in earnings:

Most tech earnings this week came in strong, including Meta, which reported its largest quarterly revenue since going public.

Microsoft and Google-parent Alphabet also posted growth and improvement in their core businesses, but Google’s cloud revenue grew slower than expected. Its shares (-10%) suffered, though Microsoft's cloud unit demand surged, and its stock ended the week in the green.

Away from tech — yes, apparently there are companies outside of the magnificent 7! — notable reports went as follows:

• In energy, Exxon and Chevron reported profits that had fallen from a year ago but were up from the previous quarter. Both Big Oil firms are closing on megadeals.
• Intel is enjoying a PC recovery, progress toward $3 billion in cost savings, and a boost from AI despite slowing sales, driving its stock about 10% higher on Friday.
• UPS set a fairly cautious tone after trimming its sales outlook thanks to a global slowdown in shipping demand. People are still spending money, but it’s not on shipping.
• Meanwhile, Hasbro and Mattel cut sales outlooks as the toy industry has declined this year. Their forecasts reflect “near-term cautiousness into the holiday season and the broader industry weakness.”
• General Electric raised its financial outlook, while General Motors registered a nice profit but limited its EV plans, citing a slowing market for EVs. For also posted a profit but raised concerns about EV consumer demand.

It was a busy week of earnings, but there’s plenty more to come next week, including Apple and McDonald’s. We’ll be here every day with analysis.

Read more

MORE HEADLINES

?? Taylor Swift is now a billionaire at 33 years old

?? How some corporations dodge paying taxes

?? Deodorant sales surge amid ‘return to office’ rebound

?? Fox Sports will use drones in World Series coverage for first time

?? JPMorgan’s CEO is selling $140 million worth of the company’s stock

?? What Happens to Sanctioned Oligarch’s Financial Assets?

You’ve probably heard that Russian leaders and businessmen are under heavy sanctions. But what happens when, say, a Russian oligarch bought bonds providing financing to a German industrial company in 2019 (before sanctions), and then the time comes to repay those bonds?

After Russia’s invasion of Ukraine, sanctions have ensured that no one in the European Union (EU) can do business with the oligarch, leaving the bonds they own trapped in a restricted brokerage account.

• But when the German firm goes to pay back its debt, who gets the money owed to the Russian oligarch?

The financial writer Matt Levine imagines a few scenarios:

1. The oligarch might still get paid because this is a “pre-existing debt” based on transactions before Russia’s invasion, and the money transfer is allowed to go through.
2. The German company gets to keep the money — it’s a windfall. If it’s illegal to pay back the debt to a sanctioned oligarch, then the company doesn’t have to pay back that money.
3. The EU gets the sanctioned money and allocates it toward defense spending or aid to Ukraine or something similar.

Why it matters:

In reality, the answer is entirely different: Euroclear — a securities depository that acts like a pipeline facilitating transactions, has been the beneficiary.

• (For example, if you buy a stock, Euroclear ‘clears’ the transaction and confirms you actually receive ownership of the stock from the seller — they help keep Europe’s financial system functioning and ensure everyone gets what they were promised in a transaction).
• But sanctions have blocked up the financial pipeline, leaving Euroclear sitting on $197 billion worth of Russian assets, of which $180 billion belong to Russia’s central bank.

It pays to be the plumber: While Euroclear doesn’t necessarily get to keep sanctioned funds forever, it does get to hold them until someone figures out what to do with them.

• In the meantime, it collects interest from the sanctioned assets, which hasn’t been trivial. The company has earned over $3.17 billion in interest from sanctioned Russian assets.

Read more

QUICK POLL

How closely do you pay attention to earnings season?

• Very closely; I monitor most major reports
• Somewhat; I pay attention here and there
• Not much
• Rarely or never

Yesterday, we asked: What time of day do you most often read this newsletter?

—Reading this email in the evening was the most popular answer overall (36%), but almost as many said mornings (35%). The rest either read in the afternoons or a mix of times.

— One reader commented, “I am a student, so by default, I get to read it when I am done with my lectures, mostly in the afternoon. Frankly, I enjoy it better then.”

— Regardless of when you read, we’re thankful to have you spend a few minutes out of your busy day with us.

TRIVIA ANSWER

The world’s most valuable companies are Apple ($2.6 trillion), Microsoft ($2.4 trillion), Saudi Aramco ($2.1 trillion), Alphabet ($1.5 trillion), and Amazon ($1.2 trillion). Nvidia has surged this year to just under $1 trillion.

SEE YOU NEXT TIME!

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