The Week Ahead

These will be some quiet weeks, with any luck!

Our reports last week on contract manufacturer Jabil (JBL: NYSE) and memory maker Micron (MU:NYSE) are available to clients, with video summaries on YouTube and, of course our popular summaries of the summaries (that what we call a second derivative) on Instagram and Tiktok (speaking of Tiktok, as the TikTok ban simmers, I’ll be publishing more on that and I’m available to comment).

As always, I’m focused on three things:
1) Technology-driven change;
2) the latest in innovation and startup trends, and;
3) stock fraud.

In This Note:

• AmazonPrime: Beast Money Ever Spent

• The Son Also Rises in MAGA Land

• Epistrophy In The News

• My Plans This Week

When Micron Technology (MU: NYSE) reported its fiscal Q1 2025 results, you might have expected widespread recognition of a fundamental industry shift. The company posted a 400% year-over-year increase in data center revenue. Data center sales now constitute over 50% of total revenue. But the stock tanked, down 12% last week?

I think the results overlooked the transformation at Micron, driven by high-bandwidth memory (HBM), the specialized chips that power artificial intelligence systems. Micron's rapid advancement in HBM technology has reshaped its business model and market position.

Five years ago, Micron produced zero HBM3 chips. 

Today NVidia (NVDA: Nasdaq) graphic processor chips are surrounded by golden Micron HBM3es, as are the GPUs from Advanced Micro Devices (AMD: Nasdaq), and other major AI hardware makers. Micron projects the HBM market will reach $30 billion in 2025.

HBM represents a technological leap beyond traditional memory. These chips stack multiple memory dies vertically, connected by thousands of mind-blowing “through-silicon vias” – microscopic wires that pass through the silicon, wired with atomic-level precision.

Micron's HBM3E products set new standards for performance and efficiency. The company developed manufacturing processes that scale from current 8-high stacks to future 12-high versions. This technical achievement separates Micron from competitors.

The economics stand out. Traditional DRAM chips sell for single-digit dollars. HBM commands hundreds of dollars per unit. Cloud providers and AI companies now place long-term orders with fixed pricing agreements – NVidia has bought out this years supply. This stability breaks from memory's typical volatility.

The shift to AI infrastructure has changed Micron's revenue mix. Data center products, led by HBM, now drive growth. This reduces exposure to consumer electronics cycles that plagued memory makers for decades.

AI systems demand ever-increasing memory bandwidth. Each new language model or vision system requires more HBM. Micron's early investment in this technology has secured its position as AI computing expands.

This represents more than a cycle in commodity memory. Micron has transformed into a critical AI infrastructure supplier. The market hasn’t figured that out yet, but the AI probably has. 

AmazonPrime: Beast Money Ever Spent

Game shows once served as cheap filler on network TV. Now Amazon (AMZN: NASDAQ) has made them streaming's premium content.

The tech giant's reported $100 million deal with YouTube creator MrBeast for "Beast Games" marks a shift in how platforms value entertainment. The show includes 1,000 contestants competing for a $5 million prize - reportedly the largest in reality television history.

Traditional game shows relied on basic sets and eager contestants seeking their 15 minutes of fame. Beast Games spent $14 million building a competition city for contestants. The first episode's prize pool reached $2 million, setting a new benchmark for streaming reality shows.

Amazon's strategy extends beyond viewership metrics. The platform offered complete creative control to Donaldson, a level of autonomy Netflix (NFLX: NASDAQ) declined to match. His 240 million YouTube subscribers represent potential Prime members in the coveted 18-34 demographic.

The technical foundation reveals Amazon's infrastructure advantage. Amazon Web Services provides the computing power to deliver high-quality streams to millions of concurrent viewers. This capability proves essential for live events and competition shows where lag time can impact viewer experience.

The investment follows a pattern of massive content spending by streaming platforms:

• Amazon committed $10 billion over 10 years for NFL Thursday Night Football rights

• Amazon reportedly will pay $1.8 billion annually for NBA games starting in 2025

• Amazon invested $715 million in "Lord of the Rings: The Rings of Power"

• Apple secured Major League Soccer rights for $2.5 billion

• Warner Bros. Discovery (WBD: NASDAQ) pays $2.6 billion annually for NBA rights through 2025

• Alphabet (GOOGL: NASDAQ) struck a $2 billion deal with the NFL for Sunday Ticket

Beast Games elevates this spending strategy through integrated commerce elements. The show partnered with fintech company MoneyLion for a $4.2 million viewer sweepstakes, promoted through QR codes during episodes. Interactive features enable real-time purchases. This combination of content and commerce gives Amazon unique advantages over streaming rivals.

The model combines multiple revenue streams:

- Prime subscription growth

- Advertising from commercials and sponsorships

- E-commerce sales through show-related merchandise

- Data collection on viewing and purchase patterns

- International licensing opportunities

The preliminary rounds in Las Vegas demonstrated the production's scope. Each challenge incorporated elements designed to generate social media engagement. The format allows for natural integration of sponsorships and product placement without disrupting entertainment value.

Results from other Amazon streaming initiatives suggest potential success. NFL Thursday Night Football streams averaged 14.17 million viewers through the first four games this season, up 20% year-over-year. The company aims to convert Beast Games viewers into long-term Prime members at $14.99 per month.

Beast Games represents a new hybrid of television production and digital storytelling. The format merges entertainment with commerce capabilities. This convergence of content, technology, and shopping marks a departure from traditional streaming models.

The success of Beast Games could reshape how platforms develop and monetize content. Amazon's willingness to invest in creator-driven content while leveraging its technical and commercial infrastructure offers a template for sustainable streaming economics.

The experiment tests whether high-budget reality programming can deliver multiple revenue streams beyond traditional subscription and advertising models. For a platform with Amazon's scale and technical capabilities, the answer could determine the next phase of streaming evolution.

The Son Also Rises in MAGA Land

SoftBank Group CEO Masayoshi Son joined President-elect Donald Trump at Mar-a-Lago on Monday to announce SoftBank's intention to invest $00 billion in US projects over the next four years. The Japanese conglomerate estimates the investments will create 00,000 jobs focused on artificial intelligence and related infrastructure.

If the numbers seem almost fantastic, it’s because they seem to have lost all meaning. During the event, Trump urged Son to increase SoftBank's previous $50 billion US investment pledge from 2016. Would you make it $200 billion? Trump asked. Son paused and said, I will try to make it happen. Trump took him at his word. Alright, 200, the president-elect said. Son, laughing, quipped, He's a great negotiator.

Softbank doesn’t have $200 billion. It doesn’t have $100 billion It doesn’t have $50 billion. The company had roughly $30 billion of cash on hand as of its latest report. SoftBank's $100 billion Vision Fund, the largest tech investment vehicle ever created, has struggled in recent years with major losses on sketchy investments. 

Investor Jim Chanos has referred to this as The Golden Age of Fraud. And one way you get fraud is announcing a plan to spend a lot without knowing what you want to spend it on. Softbank’s billions have inflated a notorious string of frauds. 

The Vision Fund's high-profile flops include Greensill Capital, a UK-based supply chain finance company that collapsed in March 2021 amid allegations of fraud and misuse of funds. Another costly bet was on construction startup Katerra, which burned through $3 billion before shutting down in 2021.

Perhaps most infamously, the Vision Fund poured over $8.5 billion into WeWork, the office-sharing startup that saw its valuation plummet from $47 billion to less than $8 billion after a failed IPO attempt in 209. WeWork founder Adam Neumann stepped down amid revelations of self-dealing and erratic management. SoftBank was forced to bail out the company in October 2019.

The Wirecard fraud, which culminated in the German payment processor's June 2020 insolvency, has been likened to the Enron scandal in its scale and audacity. Wirecard executives allegedly laundered money for pornography sites and online casinos, while using accounting tricks to hide losses and inflate revenues. The deception drew in SoftBank, which put $1 billion into Wirecard in 2019 as part of a digital payments tie-up. When the full extent of the fraud was exposed, billions in shareholder value vanished practically overnight, leaving SoftBank with yet another high-profile flop.

Oh, that’s not all. Other disappointing investments for SoftBank include used car trading platform Auto Group (AG: Xetra), which has seen its stock price fall over 80% since its 2021 IPO, and ghost kitchen company Reef Technology, which halted expansion plans amid regulatory scrutiny of its unlicensed mobile food trailers. 

The string of high-profile busts led some analysts to question whether Son's strategy of making huge bets on unproven startups was fundamentally flawed.

To be sure, with all those big swings, there have been successes. Son's early $20 million investment in Chinese e-commerce giant Alibaba (BABA: NYSE) in 2000 became one of the most successful venture bets in history, growing in value to over $50 billion by the time SoftBank sold a significant portion of its stake in 2016. SoftBank's Vision Fund holds a stake in ByteDance, the Chinese parent company of TikTok – creating a serious conflict of interest should the US government shut down the popular video app in five weeks.

Where could Softbank come up with this money? The company holds a 90% stake in Arm Ltd (ARM: NYSE), the British semiconductor and software design firm known for its ubiquitous mobile device chips that power everything from cars to iPhones. Softbanks stake is worth some $39 billion today, but it can hardly liquidate its stake without causing that stock to crumble. SoftBank has struggled to attract outside investors for a successor to its $100 billion Vision Fund.

And yet this Mar-a-Lago investment announcement fits into a trend. It’s just the latest overture from a major international CEO to the incoming Trump administration. Amazon.com  founder Jeff Bezos and Meta Platforms (META: Nasdaq) CEO Mark Zuckerberg have both recently met with Trump at Mar-a-Lago, with their companies each pledging $1 million to Trump's inauguration festivities. Other tech leaders like OpenAI CEO Sam Altman and Oracle (ORCL: NYSE) co-founder Larry Ellison have also lined up to support Trump after largely opposing him in the wake of the Jan. 6 Capitol riot.

For markets and industries focused on emerging technologies, SoftBank's planned investment could provide a significant boost if it materializes. However, given the company's mixed track record and the vague nature of the announcement, some skepticism is warranted. As more details emerge, technology investors should watch closely to see if this represents a substantive shift in SoftBank's strategy or more of a symbolic pledge to gain political goodwill with the new administration. In either case, it's a telling sign of how quickly corporate America has moved to re-embrace Trump as he prepares to retake power.

Epistrophy In The News

Radio! Had great fun going on BBC Radio this week to talk about the importance of the Mr. Beast franchise and what the money means to Amazon Prime. 

Thankfully it went without an appearance on the terrifying Beast Games.

My Plans This Week

I'll be in San Francisco through the end of the year, gearing up for a big 2025. I’m available, but I’ll give this note a rest for a week and resume publishing January 5, 2025. 

Thank you loyal readers! I appreciate your thoughts and feedback and I wish you and your family happiness, joy and a safe holiday season.