Goldman Sachs thinks the Big Tech golden era is over. 

On Wednesday, an executive from the influential investment bank told Bloomberg that its asset management unit is largely quitting tech while it’s ahead, taking the gains it earned from tech’s bumper profits and repurposing them for new investments — primarily in energy and firms listed in Japan. The news comes just as the Magnificent 7 begins to splinter and stagnate.

Heads Up, Seven Up

The good times, they never last. While the Mag 7 — that’d be Microsoft, Meta, Nvidia, Alphabet, Amazon, Apple, and Tesla — almost single-handedly rocketed the broader S&P 500 to all-time highs last year, 2024 has been less kind. Apple, down nearly 10% year-to-date, and Tesla, down over 30% year-to-date, have been the obvious losers of the bunch, but momentum is beginning to slow for the hottest of the cohort as well. On Tuesday, shares of Nvidia briefly teetered into “correction territory,” after falling more than 10% below a recent all-time high.

The skid comes as the AI hype bubble may be growing a bit too big. One recent study from researchers at Cambridge, Oxford, Google Deepmind, and the University of Tübingen found that as AI models grow, they require exponential amounts of data to achieve just linear downstream performance results — possibly limiting how many deep learning techniques can scale. Meanwhile, many AI firms seem to think the internet is simply too small for their plans, and research institute Epoch warns the industry could run out of high-quality training data on the web by 2026. Last week, The New York Times reported that OpenAI, Meta, and Google have pursued creative, and possibly illegal, strategies for digging up fresh training data, like using YouTube video transcripts or tapping publicly available Google Docs files.

All of which may explain why Goldman sees the present as the perfect time to bow out — at least for now:

• Goldman’s Asset Management arm is now overweight on Japanese equities, which it sees as currently undervalued, and on energy companies, which it sees as a hedge against inflation. The firm remains cautious on rate-sensitive small-cap firms and REITs. 
• S&P 500 oil and gas companies are up some 16% through the year, while tech companies are up just 11%. Trading the Mag 7 as a bloc has been effectively net-neutral so far in 2024.

Dice Roll: Tech’s “risk-reward profile is skewed to the downside,” Alexandra Wilson-Elizondo, Goldman’s co-chief investment officer of multi-asset solutions, told Bloomberg. “While we still believe in being long equities and having them in the portfolio, we think that there are some more attractive opportunities to access.”

Diamonds can be forever, but if the EPA has its druthers, chemicals won’t be.

The Environmental Protection Agency announced Wednesday its first-ever standard for regulating “forever chemicals” in US water supplies. More scientifically known as perfluoroalkyl and polyfluoroalkyl substances (PFAS), these include thousands of different chemicals, but none of them know when to leave the party. 

Bonded For Life

Eminent TV chemist Walter White called his field the “study of change,” but PFAS is sort of the opposite. PFAS chemicals all contain carbon-fluorine bonds, incredibly resilient chemical bonds that make them popular in various industries — including the ever-expanding semiconductor sector. The trouble with those resilient bonds is, well, they’re resilient. The chemicals don’t break down, and when they make their way into groundwater they can find their way into people’s bodies, where they then accumulate. A US geological survey published in July 2023 found that as much as 45% of US drinking water could contain PFAS. 

The exact health impact of the chemicals is still mostly unknown, especially since they encompass a wide variety of chemicals. However, the EPA’s current stance is that exposure to PFAS may lead to some adverse health effects including decreased fertility, increased risk of some cancers, and higher cholesterol levels. Some US states already got the ball rolling by banning PFAS in certain products, and now the EPA is getting in on the action:

• The new rules place limits on five specific PFAS, also known as the “GenX Chemicals.” In the European Union, those five have been designated as chemicals of “very high concern” by the European Chemicals Agency since 2019.
• EPA also plans to inject an extra $1 billion in funding into helping states filter out PFAS in their drinking water.

Some chemical companies are already paying the price for PFAS incontinence. Minnesota-based chemical manufacturer 3M settled with multiple drinking water systems last week over PFAS contamination in various products. The settlement, paid out over the next 12 years, will range from $10.5 billion to $12.5 billion, AP reported.

Strawberry Fields Forever (and Ever): The US isn’t the only nation trying to stay ahead of PFAS pollution. A recent report from the UK’s Environment Department found the chemicals in over half of the food samples it tested, although they were within legal levels. The worst offender, per Sky News, was strawberries, with PFAS present in 95% of 150 samples tested.

Your anime champions simulator will begin after a word from our sponsor. 

Roblox, the wildly popular video game, plans to introduce in-game programmatic video ads, The Wall Street Journal reported Wednesday. The gaming industry, like every other sector including banking and rideshare apps, is enmeshing itself even deeper into advertising.

Kidding Around

Roblox isn’t one game — it’s a platform that lets players build their own virtual worlds and create games inside those worlds. Roblox attracts some 200 million monthly players, which means 400 million eyeballs every month, and it wants to find new ways to monetize those peepers. 

Roblox launched static in-game billboard ads last year, and now the WSJ reports that Roblox has partnered with digital advertising firm PubMatic to display video ads in-game. As advertisers move deeper into the Roblox jungle, however, there could be some risk attached:

• Roblox is hugely popular with children, and a children’s advertising watchdog said last year the company had served ads to under-13s in the form of worlds created by brands like Nike and Kellogg. Roblox pushed back, saying those worlds didn’t count as ads.
• Now, with more ads to come, Roblox’s policing of who sees them will be under intense scrutiny. The platform is already under some scrutiny over how its child users interact with “microtransactions,” the gaming industry’s term for small purchases made in-game.

Creator’s Market: As well as potentially spending money in Roblox, kids can also make money off it. Roblox lets players profit from games they create, paying them in a bespoke currency called “Robux.” However, that system has led to some intense criticism because Roblox takes a big cut of developers’ earnings, which gets dicey when kids under 18 are making the games. In an interview published by Eurogamer just last week, Roblox Studio head Stefano Corazza pushed back against accusations that the platform profits off child labor. “You can say, ‘Okay, we are exploiting, you know, child labor,’ right? Or, you can say: we are offering people anywhere in the world the capability to get a job, and even like an income,” Corazza said. Somewhere a PR advisor is crying.