It was a very quiet & shortened holiday week. Next week will also be slow, but I plan to include updated free cash flow comp sheets and my 2026 outlook. I hope you're all having a happy and healthy end to your year.

Groq:

Nvidia announced a very interesting transaction this week. They were quick to say it’s not an acquisition, which it isn’t. At the same time, it’s similar. They’re spending $20B to add “non-exclusive licensing rights” for Groq’s (not Grok) semiconductors. As part of the deal, the founder/CEO, president and engineering teams will move to Nvidia. Groq will continue on as a separate company, while Nvidia will work to integrate Groq’s language processing units (LPUs) into the Vera Rubin system. LPUs are a type of custom accelerator like the chips that both Alphabet and Amazon make. They’re considered inference specialists with a memory design that is embedded right into their chip. That differs from Nvidia’s current approach that uses external high bandwidth memory (HBM) to provide storage and other services. Groq’s architecture cuts memory transferring costs and latency while augmenting energy efficiency. All of these traits will make Nvidia’s systems ever better. I think this is a great decision for them. I also think this represents Nvidia’s acknowledgement that Application-Specific Integrated Circuit (ASICs) have an important role to play in the world of AI. I think this is Nvidia respecting that other product designs can work better in some cases, which is something I’ve been arguing on the TPU side for a while.

Relationships:

Nvidia is also backing away from head-to-head public cloud competition with the public cloud giants. I found the timing of this news to be pretty encouraging. It comes as Amazon pushes hard to sell their custom chips externally, just like Alphabet is. Clearly Nvidia isn’t seeing this competition as a reason to try and threaten the core businesses of these giant firms. That’s encouraging.

We got potentially very good news from Coupang this week. The company came out with a statement saying that the recent data breach only impacted 3K accounts. Not 33 million as originally feared. Furthermore, none of the data was externally transferred.  This information comes from a Yonhap News article (they’re huge in Korea) that cited Coupang employees. And finally, all of the stolen data has now been recovered.

This is undeniably great to hear. We may be moving from “their entire customer base had their data stolen and that data is freely moving” to “some customers were impacted and no stolen data was shared elsewhere.” Coupang still messed up. They still must beef up security protocols. But this makes the issue far more manageable and will likely make the government reaction less sharp.

There is, however, an important caveat. These are the results of Coupang’s investigation. The results have not yet been confirmed by the appropriate government agencies. There is zero reason to believe this team is being anything but truthful – especially with them currently existing under a microscope. Still, the final exhales will come when these claims are confirmed and when the government penalty is announced.  Q4 is still likely going to be weak based on the Yipit data I shared last week (should get more in the coming weeks). But this bodes well for this issue being ephemeral rather than durable.

Finally, there was a class action lawsuit filed against Coupang this week. That part of the story is noise to me. Investors need to stay laser-focused on incoming GMV data from vendors like Yipit to gauge how long-lasting the data breach effects will be and also the government response. Those are the things that matter the most (by far).

The Powerball Jackpot finally got a $1.8B winner. Any time the Powerball creeps over $1B, DKNG's Jackpocket enjoys a considerable new customer tailwind that drives overall company growth. The benefit for Q4 results will be mostly temporary -- similar to good sport outcome luck. At the same time, the new customers that enter the ecosystem because of this will likely keep delivering some level of lifetime value that DKNG otherwise wouldn't have enjoyed. Good news.

Google is buying Intersect for $4.75B. They were already a shareholder and a partner. Intersect provides data center and clean energy infrastructure that will "enable more data center and generation capacity to come online, faster, while accelerating energy development and innovation." Google gets their team and "multiple gigawatts of energy and data center projects in development." As part of Google, Intersect will also get more aggressive with investing in new technologies (thank you Alphabet balance sheet). This will remain a separate company under the Google umbrella. I expect this to deliver a material uplift in Google Cloud growth over the coming quarters. Just like Azure and AWS, GCP is capacity constrained. Capacity constrained means leaving revenue opportunities on the table. This will help alleviate that bottleneck.

In other Alphabet news, the power outage that impacted Waymo service in San Francisco will lead to Alphabet beefing up collaboration with grids and infrastructure partners to make sure this doesn't recur. Service is now up and running again in that city. Service also paused briefly there due to flood concerns.

Snowflake may be purchasing an application monitoring firm called Observe for $1B. This could push SNOW more deeply beyond core data warehousing and analytics into active monitoring and optimization of apps and AI assets. Observe was also natively built for the Snowflake ecosystem, which would make integration very easy.

As previously rumored, ServiceNow will buy Armis for $7.75B.

Uber is deepening its partnership with Baidu to offer autonomous taxis in London. That is one of Uber's most important markets. Baidu is also working with Lyft, but I'm optimistic that Uber's dominant market share and consumer interest will make it a better long-term partner.

Output Data:

Per the current reading, Q3 GDP rose by 4.3% vs. 3.3% expected and 3.8% last quarter. This was excellent and is surely bolstered by the enormous demand for AI. 

Consumer/Employment Data:

Good combination of strong GDP and good jobs numbers this week. More of this, please. It makes the probable 2026 fiscal/monetary accommodation more bullish, as we want that accommodation to be driven by cooling inflation (at least for now) and accompanied by resilient growth and employment data. I’ll share more about my 2026 outlook in next week’s article.