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Max Knoblauch7h

Netflix sinks on report that buying Warner Bros. wouldn’t drastically boost its market share since most subscribers already have HBO Max

Investors appear to have a bit more faith in Netflix’s ability to win the bidding war for Warner Bros. Discovery — they’re just not sure if they like the idea.

Netflix shares fell 6% on Wednesday morning following a Reuters report citing sources familiar with acquisition discussions. According to the report, Netflix (which is said to be targeting WBD’s streaming assets and studio business, but not its networks) would bundle Netflix and HBO Max, reducing costs for consumers. Sources noted that most Netflix subscribers already subscribe to HBO Max, so the merger isn’t expected to dramatically boost the streamer’s market share.

If you’re lowering costs for customers and not getting many more of them, it’s not clear how such an acquisition would add much value.

The other two primary bidders in the WBD auction, Paramount Skydance and Comcast, have also reportedly freshened up their pitches. Paramount is said to have upped its offer with help from Middle Eastern sovereign wealth funds, while Comcast wants to combine the TV and film departments of NBCUniversal with HBO and Warner — marrying Peacock with HBO Max.

Analysts believe the bidding war could propel Warner Bros. Discovery’s value to around $70 billion, significantly above its valuation before the acquisition talks began.

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Tasha Matsumoto

Stocks continue to climb as surprise drop in private payrolls solidifies rate cut expectations

Despite a lackluster performance in many megacap tech names, all major US indexes climbed higher Wednesday.

CHICAGO, IL - MARCH 05: Benny, the mascot for the Chicago Bulls entertains during a break between the Bulls and the Boston Celtics at the United Center on March 5, 2018 in Chicago, Illinois.

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Matt Phillips5h

Seagate, Western Digital stumble amid reports of customer resistance to AI

Hard disk drive makers Seagate Technology Holdings and Western Digital slumped Wednesday following a report from The Information that Microsoft is facing pushback from software clients who don’t want to pay more for AI-optimized products.

Microsoft contested the report, issuing a statement saying it hadn’t lowered sales quotas or targets. But the story hit squarely on the core issue facing the market right now: whether AI will ever produce enough revenue to pay for the massive investments hyperscalers are making.

As the tumble for hard disk makers shows, this is a market-wide issue. Share prices of hard disk makers have boomed amid expectations that the soaring demand for data storage related to AI investment will juice sales of these cheap storage devices for the foreseeable future.

Seagate and Western Digital are still the second- and third-best-performing stocks in the S&P 500 this year, with gains of roughly 200% and 250%, respectively.

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Micron announces exit from consumer business to focus on AI demand

With a lot of AI mouths to feed amid a supply crunch for memory chips, Micron has made the decision to exit its consumer chip business (which goes by the brand name “Crucial”).

“The AI-driven growth in the data center has led to a surge in demand for memory and storage. Micron has made the difficult decision to exit the Crucial consumer business in order to improve supply and support for our larger, strategic customers in faster-growing segments,” said Sumit Sadana, EVP and chief business officer.

Memory chip prices have been surging thanks to demand from the AI boom, with South Korean memory giant SK Hynix saying that it’s already sold out all of next year’s production.

Per the press release, Micron will cease shipments of Crucial-branded items at the end of February 2026.

The product line has been a bit of a misnomer for the memory chip specialist as of late. Sales of Crucial-branded products fall under its mobile and client business unit, and the brand enjoyed a 25% jump in revenues year on year as of its most recent quarter. While impressive growth, that pales in comparison to the more than 200% surge in revenues for its cloud memory business unit, which focuses on high-bandwidth memory chip sales to hyperscalers.

Operating margins in the mobile and client business unit were 29% in its most recent quarter, compared to 48% for the cloud-centric division.

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Max Knoblauch5h

Boeing falls as FTC requires it to divest Spirit AeroSystems assets to complete its $8.3 billion merger

The FTC said on Wednesday that the $8.3 billion merger between Boeing and its key supplier, Spirit AeroSystems, cannot proceed unless Boeing significantly divests Spirit assets.

Boeing shares fell more than 2% on the FTC’s proposed order, which said that Boeing should divest Spirit businesses that supply aerostructures (wings, doors, etc.) to rival Airbus. The assets, including personnel, will be divested to Airbus, the FTC statement said.

The moves would resolve antitrust allegations that Boeing’s acquisition of Spirit — which was spun out of Boeing in 2005 — would allow the plane maker to raise costs on Airbus or degrade its access to certain necessary parts. Boeing, the FTC alleged, could also have the ability to see sensitive information about its competitors.

The public now has 30 days to submit comments on the proposed order.

FTC Requires Boeing to Divest Several Spirit Assets to Proceed with Merger

The moves would resolve antitrust allegations that Boeing’s acquisition of Spirit — which was spun out of Boeing in 2005 — would allow the plane maker to raise costs on Airbus or degrade its access to certain necessary parts. Boeing, the FTC alleged, could also have the ability to see sensitive information about its competitors.

The public now has 30 days to submit comments on the proposed order.

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D-Wave Quantum rises as Evercore ISI initiates with “outperform” rating, calling it a “leading play” in industry

D-Wave Quantum is up big on Wednesday after Evercore ISI initiated coverage on the annealing quantum specialist with an “outperform” rating and price target of $44, implying upside of nearly 96% from where the stock closed on Tuesday.

Analyst Mark Lipacis called it a “leading play as the computing industry sees its next Tectonic Shift to a Quantum Computing Era,” highlighting three key things the firm offers to investors:

First quantum company with commercial revenues;
It’s a full-stack play, with services, software, and hardware;
And the ample cash hoard to develop its technology and potentially pursue M&A opportunities.

After its Q3 earnings report, CEO Dr. Alan Baratz told us that bolstering the firm’s gate model system (as opposed to its annealing system, which is its strength) was a priority.

“With the roughly $830 million in the bank, we have the resources to be able to invest more in that program, both internal investment and through acquisition,” he said. “We have one customer who has said, when you have a gate model system, I want it. So it expands our TAM [total addressable market], and it allows us to further grow our revenue.”

While commercial opportunities for publicly traded quantum computing companies have been relatively limited to date, particularly outside of D-Wave, Evercore’s Lipacis argues it’s not too early to invest in the industry.

“Each successive Tectonic Shift in Computing surprised investors with new workloads, and created stock performance of 100x-to-1,000x for full-stack ecosystem leaders,” he wrote. “To be clear, with over 40 quantum companies competing and no clear-cut leaders, we expect a shakeout, but to capture full-alpha, history shows you need to get in 10-years before the Tectonic Shift actually happens.”

He thinks that D-Wave will capture 12% of a quantum computing market that BCG estimates will be between $15 billion to $30 billion by 2035.

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