Stellantis and LGES are the latest companies to bear the brunt of stagnating demand for EVs under the Trump administration, which last year scrapped a consumer tax credit for EV purchases

International News via Reuters:

South Korea’s LG Energy Solution on Friday said it plans to buy the 49% stake held by Stellantis in their battery joint venture in Canada for the nominal amount of $100.

Stellantis also said on Friday it would book charges of around 22.2 billion euros ($26.5 billion) in the second half of last year as the Franco-Italian automaker scales down electric-vehicle development plans and launches a “strategic shift.”

Stellantis and LGES are the latest companies to bear the brunt of stagnating demand for EVs under the Trump administration, which last year scrapped a consumer tax credit for EV purchases.

Stellantis and LG had unveiled a major investment in a joint venture in Ontario, Canada, in 2022, part of the carmaker’s ambitious electrification strategy. More than C$5 billion ($3.65 billion) has been invested in the facility to date, LG said in a statement.

LG Energy Solution said the factory, called NextStar Energy, will focus on batteries for energy storage systems, adding that it will supply electric vehicle batteries to Stellantis and other North American customers.

“Full ownership of NextStar Energy will enable us to respond swiftly to the growing demand from the ESS market,” said David Kim, chief executive officer of LG Energy Solution, in a statement.

LG Energy Solution launched a series of battery joint ventures with major automakers in North America during the administration of former President Joe Biden, which promoted EV adoption. But last year, LG Energy Solution agreed with General Motors to buy the latter’s stake in their joint venture battery plant in Lansing, Michigan.

The South Korean battery company is grappling with the fallout from the cancellation of major battery contracts including a multi-billion dollar deal with Ford.

($1 = 1.3688 Canadian dollars)

Reporting by Heejin Kim in Seoul and Giulio Piovaccari; Writing by Hyunjoo Jin; Editing by Ed Davies and Thomas Derpinghaus

When ChatGPT launched in November 2022, anything linked to the artificial intelligence theme surged – from chipmakers and software firms to raw-materials suppliers and even companies most exposed to AI disruption

International News via Reuters:

The global AI trade is starting to fracture as soaring capex, rising debt loads and doubts over who will profit from the technology force investors to draw sharper lines. Markets are now splitting across stocks, sectors and even regions.

When ChatGPT launched in November 2022, anything linked to the artificial intelligence theme surged – from chipmakers and software firms to raw-materials suppliers and even companies most exposed to AI disruption.

That lifted equity and debt markets to levels that have drawn bubble warnings from regulators and investors, even as the likes of Microsoft, Amazon, Alphabet and Meta mapped out hundreds of billions of dollars in spending.

This week’s market turmoil suggests the trade is hitting a turning point as investors weigh the promised AI payoff against its rapidly rising cost.

Here are four charts that show how the AI trade is mutating. 

1) PICKS ‘N SHOVELS OUTPERFORM

This week’s rout in software stocks has widened the gap between AI “picks ‘n shovels” – hardware makers powering the AI data centre build-out – and firms further down the supply chain.

In the U.S., ServiceNow and Salesforce have dropped 12% and 9% respectively this week. In Europe, data and analytics firms RELX and London Stock Exchange Group are down 16.4% and 6.3%.

The reversal is stark. Software, data and analytics groups were initially seen as AI beneficiaries, with hopes generative AI would bolster products and profits.

Semiconductor and data-centre-exposed shares have also fallen this week, but far less, extending a gap already widening between enablers and potential casualties of AI.

“This divergence is not a vote against AI. It is a signal that investors are differentiating between who enables AI and who may be disrupted by it,” Charu Chanana, chief investment strategist at Saxo, wrote in a note.

Barclays equity strategists said on Wednesday the same pattern was showing up across Europe, calling dispersion in the region’s AI trade “extreme”.

2) MAGNIFICENT 7 NO LONGER MOVING AS ONE

The once-unified Magnificent 7 group of most valuable U.S. stocks is also diverging, as investors move from rewarding big capex announcements to scrutinising the return on that spending.

Portfolio managers at Goldman Sachs Asset Management flagged in January that diverging AI and cloud strategies were breaking apart the Magnificent 7 narrative.

That has come into sharp focus. Microsoft and Meta both reported higher capex, yet Microsoft shares fell 10.4% on January 29 while Meta rose 10%.

Google parent Alphabet posted a huge jump in capex on Thursday, sending its shares down as much as 8% before they closed flat. Amazon’s shares were down 8.5% on Friday after announcing a more than 50% increase in this year’s capex. 

“There’s going to be huge divergence … as a group they could well be market underperformers this year,” Mark Hawtin, head of global equities at Liontrust, said of the seven stocks.

“You need to see a clear cause and effect. If they’re spending the money, are they getting a return for it? The market is no longer tolerating spending for spending’s sake.”

The Roundhill Magnificent Seven exchange-traded fund is down 5% in the last week, versus a 2% fall in the S&P 500. 

3) SOUTH KOREA SURGES ON AI ‘MEMORY’ MANIA

While the winners and losers among AI adopters are not yet clear, investors are betting on chipmakers – especially those exposed to AI-driven demand for memory.

South Korea, home to some of the world’s biggest memory producers, has become the standout market. The main KOSPI index is up 20.8% year to date, versus a 0.5% drop in the S&P 500 and a 4% gain in Europe’s STOXX 600.

“From Q3 onwards – but it’s really only captured people’s attention in the last month – it (the AI capex trade) has now shifted really heavily to memory, which is a Korea trade,” said Gerry Fowler, head of European equity strategy and global derivatives strategy at UBS.

South Korean chipmakers Samsung Electronics and SK Hynix are up 32% and 29% respectively this year. 

Morningstar Direct data shows flows into U.S.-listed Korean equity funds rose 20% in January, making them among the most popular picks last month.

Reporting by Lucy Raitano. Editing by Amanda Cooper and Mark Potter

The EU watchdog’s charges focus on TikTok’s addictive design which includes features such as infinite scroll, autoplay, push notifications, and its highly personalised recommender system

International News via Reuters:

TikTok was charged on Friday with breaching EU online content rules over what the bloc’s regulator said were its addictive features and was told to change the design of its app or risk a fine of as much as 6% of owner ByteDance’s global turnover.

The EU watchdog’s charges focus on TikTok’s addictive design which includes features such as infinite scroll, autoplay, push notifications, and its highly personalised recommender system.

TikTok, whose algorithm is driven by the understanding of a user’s interest and has been key to the social media app’s global success, criticised the European Commission charges.

The regulatory move underscores the European Union’s crackdown on Big Tech which has drawn criticism from the U.S. government over censorship and led to threats of tariffs.

The Commission set out its charges after a year-long investigation under the Digital Services Act (DSA) which requires large online platforms to do more to tackle illegal and harmful content.

“The Commission’s preliminary findings present a categorically false and entirely meritless depiction of our platform, and we will take whatever steps are necessary to challenge these findings,” a TikTok spokesperson said.

The Commission, which acts as the EU tech enforcer, cited the platform’s generation of new content to constantly reward users which fuels the urge to keep scrolling and shift users’ brains into autopilot mode as an example of an addictive feature.

The EU regulator said TikTok did not adequately assess how these features could harm the physical and mental wellbeing of its users, including children and vulnerable adults.

It accused TikTok of disregarding important indicators of compulsive use of the app, such as the time that minors spend on it at night and the frequency with which users open the app.

The EU watchdog said TikTok seems to fail to implement reasonable, proportionate and effective measures such as screentime  management tools and parental control tools to mitigate risks and it needs to change the basic design.

“So now we are expecting after that … TikTok has to take actions and they have to change the design of their service in Europe to protect our minors,” EU tech chief Henna Virkkunen told reporters.

She said investigations into other online platforms were advancing well and that decisions are expected in the next weeks and months, without naming any company.

Meta Platforms’ Facebook and Instagram were charged with DSA breaches in October last year over their so-called dark patterns or deceptive interface designs among others.

EU regulators also asked Snapchat, YouTube, Apple and Google for information on their age verification systems and how they prevent minors from accessing illegal products and harmful material.

EU lawmaker Alexandra Geese praised the EU move on TikTok.

“Many social media platforms ruthlessly exploit these (addictive) mechanisms to boost advertising revenue at the expense of the health of children and teenagers. This must come to an end,” she said in a statement.

TikTok can ask to see the Commission’s documents and provide a written response before the watchdog issues a decision.

The company last year settled charges of infringing a DSA requirement to publish an advertisement repository allowing researchers and users to detect scam advertisements. 

Reporting by Foo Yun Chee;Editing by Sudip Kar-Gupta and Alexander Smith