Three Things (12/20)

Goldman predicts M&A boom

Deals for days … Goldman Sachs (GS) is predicting that global M&A activity will accelerate in 2025, building on a 10% uptick seen in 2024. They say lower interest rates, private equity activity nearing historical norms, and strategic repositioning among corporations are paving the way for increased dealmaking.

Key drivers include the easing of market uncertainty, especially in Europe and the U.S., and the re-emergence of IPOs as a viable exit strategy for private equity sponsors. Goldman notes that the rate of capital deployment by private equity firms is now ahead of schedule, with significant interest in sectors like digital infrastructure and healthcare.

Globally, M&A activity reached $3.45 trillion in 2024, up 15% from the previous year, with expectations of surpassing $4 trillion in 2025. Analysts attribute this optimism to reduced regulatory barriers and pro-business policies under the incoming administration, fueling confidence among CEOs and boards.

For investors, the environment could suggest stronger opportunities in sectors prioritizing scale and diversification, such as energy, healthcare, and technology. The bottom line: Dealmakers anticipate a “more predictable” market overall and are ready to make moves.

1-800-CHATGPT

Hotline bling … OpenAI has expanded how users can interact with ChatGPT, unveiling the ability to call or text the AI chatbot. Announced during a livestream, the feature lets U.S. users dial 1-800-CHATGPT for 15 minutes of free interaction per month. Globally, users can text the same number through WhatsApp. OpenAI emphasizes that this service is ideal for those without internet access, such as during road trips. Notably, the company has clarified that data from these calls will not train its AI models.

The chatbot’s voice and video capabilities, powered by GPT-4o mini and advanced APIs, aim to simplify AI usage for newcomers. OpenAI sees this as a stepping stone for broader adoption of generative AI, a market estimated to surpass $1 trillion in revenue within a decade.

Generative AI tools are already widely embraced. A recent survey revealed that 32% of Americans used GenAI in the past week, leveraging platforms like ChatGPT and Google’s Gemini for automation and creativity. According to Salesforce research, 75% of people who use GenAI are doing so to automate work-related tasks.

Several players are competing for the consumer GenAI market. OpenAI, valued at $157 billion, leads with over $10 billion in funding from Microsoft (MSFT). Amazon-backed (AMZN) Anthropic has raised more than $8 billion. Other players include Jeff Bezos-backed Perplexity (valued at $9 billion), Mistral AI (valued at $6 billion), and Cohere (valued at $5.5 billion).

Teamsters take on Amazon

Holiday heat …Amazon (AMZN) workers across seven facilities, including delivery hubs in California, New York, Georgia, and Illinois, walked off the job Thursday. Organized by the International Brotherhood of Teamsters, the strike aims to pressure Amazon into negotiating a labor agreement. Representing nearly 10,000 Amazon workers, the Teamsters have called this the largest strike in the company’s history, happening just days before Christmas.

The workers’ demands center on better wages, benefits, and recognition of unionized employees, including delivery drivers who Amazon claims work for third-party contractors. The union counters that Amazon controls these workers’ operations and should engage directly with them. Despite these claims, Amazon has increased wages for drivers and warehouse employees, which now average $22 per hour. The company insists operations will remain unaffected during the strike.

Beyond warehouses, Amazon’s corporate workforce faces its own struggles. A recent survey revealed that nearly half of Amazon’s office employees are actively seeking new jobs due to stringent return-to-office policies. Starting January, all corporate staff will be required to work on-site five days a week—a move critics say disproportionately affects caregivers and disabled workers while eroding trust in leadership.

As of November 2024, the U.S. had approximately 161.1 million employed individuals. With Amazon employing about 1.1 million workers in the U.S. alone, this represents approximately 0.68% of the total U.S. workforce.

One more thing: On Wednesday, the Fed cut interest rates by 0.25%, bringing them back to where they were in late 2022, but signaled it’s tapping the brakes on further reductions. With inflation steady and the economy holding strong, officials hinted at only two more cuts in 2025, keeping things measured for now.

Disclosures:

As of writing, AMZN, MSFT, and GOOG are holdings in Titan's Flagship strategy. OpenAI is a 5.07% holding, Anthropic is a 4.15% holding, and Perplexity is a 2.72% holding in the ARK Venture fund.

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