Inflation, The Fed, & a Market on the Edge

WHAT’S INSIDE

• Tech In The News: Top news in tech, markets, finance and policy

• Companies to watch: Some of the top companies to watch this week

• Feature: Inflation, The Fed, & a Market on the Edge

• Buzzy Tools: Latest Buzzy tech, AI and financial tools

• Deep Tech: The latest in deep tech, biotech, futurism and more

• Space Tech: Latest news in the space race and aerospace tech

• Crypto: Blockchain and crypto policy and startups or protocols to watch

TECH IN THE NEWS

CPI Shakeup — Fed Chair Powell stated more work is needed as CPI came in hotter than expected, dashing hopes of two rate cuts this year, shaking markets.

Trump-dates — Announces reciprocal tariffs globally to reshape trade. Trump-Putin had a phone call on ending Ukraine war, Zelensky offers mineral resources to US in exchange for military support.

Appointments — Brian Quintenz of Andreesen Horowitz nominated as CFTC chair with strong VC backing, and Jonathan McKernan to lead CFPB. RFK Jr. confirmed as head of HHS.

DOGE— 100+ federal workers sue DOGE agency and Musk over unauthorized access to personnel records. 17 CISA Staff focusing on foreign influence ops placed on leave. Musk accuses Reuters of USAID funded social deception program.

Takeover Bid — Musk led a $97B hostile takeover bid of rival OpenAI, offered to withdraw if the board opts to maintain its non-profit mission.

AI Legal Battles — Thomson Reuters wins landmark copyright case vs Ross Intelligence; 14 publishers sue Cohere over training data.

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COMPANIES TO WATCH

Anduril — The defense AI tech startup takes over Microsoft's $22B VR military headset program and raises a $2.5B Series G at $28B led by Founder's Fund.

Safe Superintelligence — OpenAI co-founder Ilya Sutskever's startup is raising funds at a $20B valuation with no revenue or product.

OpenAI — The ChatGPT owner is near to securing a $40B investment led by SoftBank, valuing the company at $300B.

DataVolt — Saudi Arabia’s $5B AI data center project to be built by the sustainable data center operator in the Neom smart city, aiming to become a digital hub.

HOTTEST THING IN TECH
Inflation, The Fed, & a Market on the Edge 

This week, the financial markets absorbed another jolt of reality as a hotter-than-expected Consumer Price Index (CPI) reading landed, casting a shadow over hopes for imminent Federal Reserve rate cuts and a soft landing. While the market initially seemed to shrug off the bad news, a closer look reveals a complex picture of conflicting signals, mounting risks such as the Repo market, and some renowned experts preparing for a potential downturn or crash-landing.

Hot CPI and Powell's Response

CPI rose more than forecast in January. Core CPI, which excludes volatile food and energy costs, climbed 0.4%, the largest monthly increase since April 2023. This data point has significantly impacted market expectations about the Fed's next moves. Initially, traders had anticipated two rate cuts in 2025, but now are pricing in only one, and that not until the latter half of the year.

Federal Reserve Chair Jerome Powell's comments this week have received a mixed reception. On one hand, he acknowledged that the central bank has more work to do on inflation, stating, "I would say we're close, but not there on inflation". He emphasized that the Fed is not in a hurry to adjust its policy stance, suggesting that interest rates will remain elevated for the foreseeable future. On the other hand, he cautioned against overreacting to one or two bad readings.

Market's Shrug and Underlying Risks

Despite the concerning inflation data and Powell's cautionary tone, the market's reaction has been somewhat muted. Bitcoin has led a pretty steep decline with a 7% drop to $95,000 showing traders may be going into risk-on mode. But markets haven’t interpreted it as a death knell. This resilience is partly due to the fact that the Fed has left interest rates unchanged. However, some observers are warning that this shrug might be a sign of a market ignoring a harsh reality. A growing concern on Wall Street is that something has to break in the system to bring rates down while also combating inflation, meaning the Feds “mission accomplished message” may be a tad premature, and the soft-landing dream, just that… a dream.

Systemic Risk

This raises the issue of systemic risk, and several sources highlight potential vulnerabilities. One such area is the repo market, which some experts are warning could be the next flashpoint, as in 2018. The repo market, where financial institutions borrow and lend cash overnight using securities as collateral, is a crucial component of the financial system. Disruptions here can ripple through the entire economy.

Geopolitical and Economic Instability

Adding to these domestic concerns, the interconnected global economy is fraught with uncertainty. Trump's proposed tariffs on nations globally are causing concern and could reshape the entire world trade system. Ford CEO Jim Farley warned that such tariffs could "blow a hole in the U.S. industry that we've never seen". These tariffs create uncertainty for companies that rely on sourcing parts from other countries. Moving fast and breaking stuff like Trump is doing is all well and good, but policy outcomes never happen exactly as anticipated, so one thing that could break is the economy.

Tariffs could hit China’s economy where it hurts too, and China’s Real Estate markets crisis just got worse this week as authorities were forced into a first mainland rescue and iconic Hong Kong developer New World’s bonds sunk into distress. The property crisis that hobbled China’s economy and created a nearly $160 billion pile of distressed debt — the world’s largest — is getting worse. Bad news.

S&P Warning 

Adding to the unease, S&P Global warned of an "unprecedented" risk of a U.S. withdrawal from the World Bank as Trump has suggested, which could damage its triple-A credit ratings. This development highlights the fragility of international financial institutions and the potential impact of political decisions on global markets. 

Expert Responses

In the face of these uncertainties, some prominent figures are taking action to prepare for a potential downturn. Robert Kiyosaki is predicting a significant stock market meltdown. Warren Buffett is acting bearishly. Berkshire Hathaway has been a net seller of stocks for eight consecutive quarters and has amassed a record cash stockpile of over $325 billion. Buffett's actions reflect his belief that preparation is more crucial than prediction. The Buffett Indicator, which measures the ratio of total US market capitalization to GDP, is at its highest level ever, suggesting that the market may be overvalued.

In Uncertain Times

The market continues to defy gravity for the time being. While it has so far shrugged off the hot CPI reading, the underlying vulnerabilities and expert warnings can’t be ignored forever. The potential for a financial crisis, coupled with geopolitical instability, may well call for a cautious and prepared approach in H1 this year.

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BUZZY TOOLS 
Buzzy Tech Tools To Watch & Use

Google — 1. NotebookLM launches paid version with 5x free usage. | 2. YouTube adds AI auto-dubbing, age detection, expands TV presence.

Anthropic — Hybrid language + reasoning model for enterprise application, API.

Adobe Firefly — Subscription service for IP-friendly AI image/video generation.

Workday — Free platform to manage enterprise AI agents with role-based expertise.

Glean — Enterprise platform for building custom AI assistants with company/internet data access.

Zyphra — Open-source Zonos-v0.1 beta launches with real-time voice cloning.

DEEP TECH
The Latest Technology & Trends To Watch

Optical Chip — Light-based connections boost AI computing with $2M NSF grant.

10X Faster Than Nvidia — 10x Nvidia performance domestic chips for flood sims.

Waste Heat Power — Penn State's 40W generator converts vehicle exhaust.

Biomimetic Skin — New artificial skin enables better testing of health wearables.

Brain Model — Math model reveals neural decision-making mechanisms.

BYD Autopilot — EV maker adds self-driving to models incl. new $10K Hatchback.

SPACE_RACE

—MIT 3D Engine_First fully 3D-printed electrospray thruster for CubeSats.

—Record Neutrino_KM3NeT telescope detects highest-energy neutrino ever.

—SpaceX Pandora_exoplanet study satellite on Falcon 9 to observe 20+ planets.

—Long March 8A_New Chinese rocket makes maiden flight w/ internet satellites.

CRYPTO WATCH

[Open Round] G-Agents AI — Web3-focused AI agent marketplace launching $GTY token on TrustSwap Launchpad at 5:00 PM UTC on February 17th.

US Crypto Regulation — OCC and CFPB's new leadership signals crypto-friendly shift in banking regulations, following SEC's removal of restrictive accounting policies for digital assets.

Unichain — Uniswap L2 Superchain launches with v2, v3, and v4, offering 1-sec blocks, 95% lower gas fees than Eth, customizable liquidity features including NYSE trading hours and lottery pools.

Coinbase — Full-Year Revenue Doubled in 2024. The crypto exchange reported Q4 revenue of $2.3B - another blockbuster quarter.

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