What I Read This Week…

The Magnificent 7 are no longer driving S&P 500 gains, OpenAI is raising another round at a valuation exceeding $100 billion, and PFAS are being detected at high levels on farmlands across the U.S.

Chamath Palihapitiya

Sep 01, 2024

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Caught My Eye…

The S&P 500 index is nearing its record high, with the Magnificent 7 no longer driving its gains. What is going on? Throughout 2023 and early 2024, the S&P 500 was propelled by the AI-fueled rally of the Magnificent 7 stocks, with Nvidia alone accounting for over 30% of the S&P 500's growth in 2024. However, since mid-July, these same companies have become drags on the index. Investors are now wary of the lofty projections driven by investment in AI, despite otherwise strong earnings reports from the Magnificent 7 companies. Within the S&P 500, real estate, utilities, and financials now contribute more to index growth, as these sectors are particularly sensitive to interest rates, and investors are expecting Jerome Powell to begin a rate-cutting cycle at the next FOMC meeting later this month.
OpenAI is in the process of raising another round at a valuation exceeding $100 billion, with Apple and Nvidia joining Microsoft as investors. If this round closes, it will make OpenAI one of the most valuable startups in Silicon Valley history, surpassing the $95 billion valuation achieved by Stripe in 2021. What is driving this valuation? The valuation is partly driven by OpenAI's market penetration and growth. Despite intense competition from rival AI companies, the company has doubled its weekly active users to 200 million in just 10 months. Moreover, OpenAI's products are now utilized by 92% of Fortune 500 firms, demonstrating its dominant position in the enterprise AI market.
PFAS are being detected at high levels on farmlands across the United States, including in Texas, Maine, Michigan, New York, and Tennessee. In some cases, PFAS are suspected of killing livestock and contaminating produce. What are PFAS, and how are they entering our food supply? PFAS are a group of chemicals widely used in consumer and industrial products, including grease-resistant paper, nonstick cookware, and personal care products. They are associated with elevated risks of certain cancers, birth defects, and developmental delays in children. For years, the EPA encouraged farmers to use treated municipal sewage as fertilizer, touting it as a nutrient-rich alternative to chemical fertilizers. However, recent research has revealed that this sewage often contains high levels of PFAS, which then contaminates the soil, produce, and livestock when it is used as a fertilizer.