DeepSeek Craze Tanks Tech Stocks & New Look Starbucks is Here

0:00This episode is brought to you by State Farm. Checking off the boxes on your to-do list is a great feeling. And when it comes to checking off coverage, a State Farm agent can help you choose an option that's right for you. Whether you prefer talking in person, on the phone, or using the award-winning app, it's nice knowing you have help finding coverage that best fits your needs. Like a good neighbor, State Farm is there.

0:28Good Morning Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, everything you need to know for the start of tax season. Then stocks had themselves a no-good, very lousy day as the market processed what cheap Chinese chatbots means for Silicon Valley. It's Tuesday, January 28th. Let's ride.

0:49You see what's going on at Vanderbilt? The students keep storming the court after big wins, and it's getting ultra expensive for the school. The SEC fined Vanderbilt$500 ,000 after fans stormed the court after the Commodores men's basketball team knocked off number nine Kentucky on Saturday. And the reason the storming is so pricey is because this isn't the first time it's happened recently. It's the third. Under new SEC court storming rules, Vanderbilt got fined$100 ,000 last fall when the football team beat number one Alabama and students stormed the field. and it was fined$250 ,000 after a basketball court storming 10 days ago after beating number six Tennessee.

1:29Toby, they say when you beat a good team, you should act like you've been there before. Vanderbilt students have not got the memo, and it's cost them nearly$1 million so far. I think the funniest part about this whole saga is that Vanderbilt's athletic director, Candace Lee, was seen as the Kentucky game winded down saying, please, pleading with the student section, Do not storm the court because she knew that the fine was coming. She was overheard saying, we could use this money for NIL. Just stay in your seats. And then the fans obviously did not take heed. They did storm the court. And the worst part of this is Vanderbilt has to pay$500 ,000 to Kentucky.

2:08They're one of their main rivals, one of the richest teams in the SEC. So that money is going straight into the pocket of your chief rival there. Act like you've been there before. Vanderbilt, though, congrats, 16-4. Pretty good season they're putting together. Now, a word from our sponsor, Yahoo Finance. Neil, it was a red day in the market yesterday. I prefer to think about it as the indexes were blushing because they couldn't keep up with the AI advancements coming out of China. Interesting way to cope with the sell-off. But if you don't just want to cope and instead want to educate yourself, check out Yahoo Finance.

2:39One quick scan of their homepage, and you can see the news driving the market's lousy day. And if you want to go deeper, that's where its research tab comes into play. You can use its stock comparison tool to weigh a company's fundamentals or pay for Yahoo Finance's premiums here to get expert investment ideas and research reports. It's all there and it's all waiting for you at Yahoo Finance. Does it ever feel like you're a marketing professional just speaking into the void? But with LinkedIn ads, you can know you're reaching the right decision makers, a network of 130 million of them. In fact, you can even target buyers by job title, industry, company, seniority, skills, and did I say job title?

3:16See how you can avoid the void and reach the right buyers with LinkedIn ads. Spend$250 on your first campaign and get a free$250 credit for the next one. Get started at LinkedIn.com slash campaign. Terms and conditions apply. In the biggest route we've seen since the Commanders played the Eagles, NVIDIA and other US AI companies got obliterated yesterday to the tune of$1 trillion in losses. as the market digested the implications of DeepSeek's free and open-source R1 model. NVIDIA shares lost as much as 18%, which was its biggest drop since the pandemic. Obviously, NVIDIA is a much larger company now than in 2020, so that drop corresponded to nearly$600 billion in market cap wipeout, which was the biggest single-day drop in U.S.

4:04stock market history. Due to NVIDIA's oversized weight in many indexes, its meltdown rippled through the rest of the market as well. The S &P 500 was down as much as 2.3%, while the NASDAQ 100 fell by 3.6 % before making some gains later in the afternoon. The drop was spurred by fears that U.S. companies may have gotten ahead of their skis when it comes to plowing resources into training their AI models. DeepSeek claims its R1 model costs only$6 million to build, as little as 3 % of the estimated training price of OpenAI's top model. Neil, it was pretty wild that a single chatbot release turned into a macro event.

4:44I mean, this was affecting 10-year treasury yields as investors rotated into safe haven assets. A chatbot, Neil. Nightmare on Wall Street yesterday because DeepSeek has raised an uncomfortable question. And that question is, what if companies don't need to spend nearly as much as they expected to to develop AI models? And a metaphor you often hear with these gold rush types. What if prospectors don't need to buy as many picks and shovels in order to find their treasure? What if they found a way to access it with fewer tools and with older tools? That's what DeepSeek showed it could do. And so you saw companies that make the picks and the shovels to this AI gold rush, the NVIDIA.

5:26and every other company that goes into the data center economy from power systems to chip makers to cooling systems. Those were the companies that were hit the hardest yesterday. Yeah, I'll run down through some of the names that did fall the most. Obviously, NVIDIA was down 17%. Microsoft was down 2%. Palantir sunk 4%. So those are some of the big AI names that you associate with this AI rush. But also companies that provide the energy and the infrastructure were the ones that really felt a deep pain. Constellation Energy, which was up to this point one of the best performing stocks in the S &P 500, they fell 20%.

6:03Oklo, which also does nuclear energy, dropped 25%. And then Vertiv, which does cooling systems for data centers, they were down almost 30%. So you saw it wasn't just the actual companies developing AI models. It was all the companies that helped support their development of AI models that really felt the pain the most. Let's take a step back. What does this all mean? Is this a Sputnik moment, as venture capitalist Mark Andreessen said, referring to the fact that the Soviets beat the U.S. in terms of putting a satellite in space? Is this a alarm bell? Is this a wake up call for U.S. companies? Or is this mostly overblown?

6:42blown. That was the question that everyone was talking about yesterday. What is the true impact of DeepSeek's model? And for people I trust, I was reading hours and hours and hours of thought pieces that came out yesterday. People I trust said that, look, this is a pretty big deal. It is not the end of the world for AI companies. That's why you saw a bunch of American tech companies actually up on the stock market yesterday. Apple was up. Meta was up. So they're not saying this is a cataclysmic event, but it is a big deal for a number of reasons. And here's some key takeaways. The first one is the cost breakthrough.

7:19DeepSeek was able to create a rival to ChatGPT that was 10 % of the cost. And that will lead to industry disruption because in previous hypotheses, our theory was that only a few of these firms can compete. There's only a couple of names like Meta, Amazon, Google, OpenAI that can spend tens of billions of dollars to build AI. And those were the only people that could ever play in the AI sandbox. The fact that DeepSeek could do it on the cheap and much more efficiently opens the doors up to a whole new host of competitors. So these companies will be disrupted. And the third big takeaway is it's going to be a huge accelerant for AI development.

8:00We're going to get much faster advances because DeepSeek's model, first of all, was open source. So now anyone in the world can build on that model and it'll lead to faster development, faster adoption of AI. So those are some three big takeaways. While maybe it's not the end of the world and we're seeing the stock market rebound a little bit this morning already, it is a big deal in that it will lead to much more competitors in the AI space and we will see faster development. And then finally, just a few more newsy things that happened to DeepSeek yesterday. It actually, DeepSeek ended up limiting user registrations because it said that there was a large-scale malicious attack on its servers, on its services.

8:41It also reached the top of Apple's app stores, averaging around 300 ,000 downloads a day. And then finally, they also dropped an AI model called Janus Pro that is an image generator that it says actually is better than OpenAI's Dal-ly as well. So just a few more things. They're just still releasing, still shipping products, still challenging, you know, the top tier of U.S. AI companies. I don't think this is the last we're going to hear of Deep Seek. In an effort to move forward, Starbucks is looking back. Yesterday, the world's largest coffee chain began to roll out new old policies across the 11 ,000 stores that operates in North America as part of new CEO Brian Nichols' plan to rejuvenate struggling sales.

9:26If you went into a Starbucks yesterday, you might have noticed the changes. Free cups of water are out. Free coffee refills, if you ordered them to stay, are in. Making a grand return is the Fixin's Bar, allowing customers to style their own drinks with various creamers and sweeteners. And if you didn't buy anything, don't expect to be handed the keys to the restroom. Starbucks' new policy, which only allows customers to use the bathroom, which was around until 2018, also kicked back in yesterday. Many of those tweaks are supposed to remind you of the Starbucks of old when you'd order a coffee, find a comfortable chair to sit in and chill for a while with your friends or your laptop.

10:04Conjuring that indie coffee shop vibe is Keaton Nichols' strategy to spark a rebound, which he's dubbed Back to Starbucks. Toby, we've seen nostalgia work in movies, toys, and fashion, but will it work with coffee? Yeah, I mean, the idea is to remind consumers of the, quote, old Starbucks. All these changes are very vibe-based. They're not efficiency based. The idea is to create shorter lines, you know, that cozier feel, a more thoughtful service environment, because a lot of what Nichols is doing is undoing previous Starbucks's CEOs kind of focus on efficiency. the CEO who predated nickel was from a consulting background a lot of what they were doing was looking at oh wait our condiments bar this is a choke point it's not good for people let's have the baristas do this have the baristas customize drinks and while it might make sense in in terms of a dollars and cents in efficiency perspective there are certain things when it comes to getting a coffee that go beyond just efficiency there are vibes that are very important so you saw in some of the marketing materials that Starbucks has unrolled over the last week.

11:11They showed a video of their baristas writing people's names and Sharpies on cups. So it is very much a return to that old feel and that old kind of nostalgic coffee house aura that Starbucks is trying to recreate. Meanwhile, Starbucks is going to report its fourth quarter earnings today. Sales have declined for three straight quarters and they're expected to continue to decline this quarter, perhaps not as much. And the spotlight certainly will be on this guy, Brian Nickel, who came over from Chipotle. He's considered the messy of retail, and he's turned around Chipotle, he's turned around Taco Bell, and he's trying to turn around Starbucks as well.

11:50And he's getting paid very, very handsomely for it. He has already been awarded about$96 million in compensation. That's compared to his predecessor, who got$22 million, and the person before that got$62 million. So this is a ton of money that Starbucks is throwing at him. A lot of that is to make up for the shares of Chipotle that he voided by coming over. So this guy is one of the highest paid CEOs around. And we'll see what he has to say later this afternoon about his strategy for rejuvenating Starbucks. OK, I can't withhold this news any longer. Tax season started yesterday and runs through April 15th.

12:28Can I get a whoop, whoop, whoop, whoop? Exciting, exciting times. not to sound like a parent, but hey, the earlier you file, the earlier you can get your refund. And taxpayers who file electronically and choose direct deposit should get their payments within 21 business days, the IRS said. It's not a small chunk of change either. Last year, tax refunds averaged more than$3 ,100. That's a pretty good ROI for the 13 hours and$290 it takes the average taxpayer to prepare and file. But if$290 still sounds like a lot, It could be free thanks to the expansion of the IRS's Direct File service this year, one of a few new developments you should know about.

13:07Piloted last year and used by 140 ,000 Americans, this free government service is more than doubling to encompass 25 states this time around and make more than 30 million Americans eligible. Those 25 states are Alaska, Connecticut, Idaho, Illinois. Just kidding. I'm not going to read them all. But definitely look into Direct File to see if it can handle your taxes. It earned rave reviews during its debut last year, and it should be available to most people in those states who earn a W-2 income and have relatively simple taxes. Toby, what's on your mind this tax season? I mean, direct file is a big deal because 25 states, I mean, we're getting close to, you know, half the country.

13:44We might be at half the country. We actually are exactly at half the country. You're right. It was very well received. 90 % of users rated their experience as excellent or above average. And that was over a 15 ,000 person customer service survey. So people do like it. It's also kind of beefing up some of its functions. It was pretty bare bones when it rolled out last year. You can actually import your W-2 information straight to the software. It can handle just a larger variety of different tax circumstances you might encounter, as well as process some of those tax credits that you'll be available for.

14:18Because remember, a lot of tax credits were rolled out under the Biden administration. There were that EV tax credit that a lot of people took advantage of,$7 ,500. So I do think that direct file will probably be the biggest story this tax season because there weren't too many drastic changes to the IRS tax code this year. No, the only one that I think people should know about, and this is directed at people who have a side hustle or freelance or basically people who get a lot of business income coming in on apps like Venmo, Cash App, PayPal, eBay, Etsy, maybe you have a really pretty lucrative Etsy store.

14:55If you sold more than$5 ,000 worth of goods on any one of those apps, then you are going to be sent a 1099K form for the first time this year. This is the IRS cracking down on some tax dodging from side hustles because previously the threshold was$20 ,000 to receive this form. And that is a lot of money from a side hustle. So not many people were sent this form. They weren't reporting these taxes, but there's this change going into effect that if you make more than$600 on any of these apps through business means, I mean, you can pay me for dinner up to$600, and it's not going to be a big deal.

15:36But if I actually am providing a business service to you and I make more than$5 ,000 this year, then I will have to fill out this 1099K. the IRS instituted this new measure a few years ago. They're saying we're going to go from the threshold of$20 ,000 down to$600. And that was kind of through these apps for a loop. They're like, we haven't really been able to get our tux in order to distinguish between a personal payment and a business payment. So give us some time. So this has been a staggered rollout. It's going from$20 ,000 to$5 ,000 this year. And then in two years, it will go down to the$600 level.

16:14That reminds me, Neil, I actually do owe you for dinner yesterday, but it will not be taxed. And then the final thing I should say about April 15th due date, there are some exceptions to that. The 10 million taxpayers who live in Los Angeles County do have an extension until October 15th. That is due to the recent wildfires. There are some 2024 disaster areas that you can have disaster relief on your 2024 returns, or you can amend your 2023 returns. So those are some of the exceptions to that April 15th deadline. Up next, I'm going to tell you about a trend that has recently caught my eye. Eczema isn't always obvious, but it's real.

16:55And so is the relief from EBCLIS. After an initial dosing phase, about 4 in 10 people taking EBCLIS achieved itch relief and clear or almost clear skin at 16 weeks. And most of those people maintain skin that's still more clear at one year with monthly dosing. EbGliss, Librikizumab, LBKZ, a 250 milligram per two milliliter injection is a prescription medicine used to treat adults and children 12 years of age and older who weigh at least 88 pounds or 40 kilograms with moderate to severe eczema. Also called atopic dermatitis that is not well controlled with prescription therapies used on the skin or topicals or who cannot use topical therapies.

17:28EbGliss can be used with or without topical corticosteroids. Don't use if you're allergic to EbGliss. Allergic reactions can occur that can be severe. Eye problems can occur. Tell your doctor if you have new or worsening eye problems. You should not receive a live vaccine when treated with Epglis. Before starting Epglis, tell your doctor if you have a parasitic infection. Searching for real relief? Ask your doctor about Epglis and visit epglis.lily.com or call 1-800-LILY-RX or 1-800-545-5979. Tuesday on NBC, Jimmy Fallon and Bozema St. John host the highly anticipated new competition show. I hired 10 creatives from all walks of life.

18:02They will be battling it out to see who can impress the world's biggest brands. This is a huge opportunity. This is the battle for the next big idea. This is not play play. We're spending millions of dollars. I'm so excited to embark on this adventure with all of you. Make the best idea win! On brand with Jimmy Fallon. Series premiere Tuesday on NBC. I tell you what, Neil. I feel bad for all the roses out there because no one is stopping to smell them. Pedestrians in big cities are walking way faster and socializing way less. and I want to talk about our constant need to be in a rush on today's edition of Toby's Trends.

18:37A recent study out of the National Bureau of Economic Research compared the walking habits of pedestrians in New York, Boston, and Philadelphia from 1980 to 2010. And turns out, we're all walking like our hair is on fire. Video footage shows that people moved an average of 15 % faster in 2010 than 30 years prior. People are also less prone to just hanging out as lingering and loitering in public spaces was down by about half over that same period. So why are we zooming around all the time? Cell phones have a lot to do with it. 80 % of American adults had a cell phone by 2010, contributing to a lack of sidewalk small talk.

19:19Plus, people in the observed area saw their average incomes rise, So rising opportunity costs of strolling and chatting may deter people from slowing their role. Neil, I will be the first to admit I am fully part of the fast walking epidemic, but it looks like I am not alone. No, is that not the most economist thing ever by saying that, oh, over from 1980 to 2010, average incomes rose. So people are understanding that their opportunity cost of just leisurely walking through the streets means that they're giving up more money than they used to. I mean, I don't know if I think about that, but maybe subconsciously I'm like, yeah, got to go, got to go back to my desk because I'm making more money now and I can't just be lingering around now.

20:05Urbanists, people who care about city life and you know, these social interactions are raising some alarm bells around this. They say this is concerning. Cities are supposed to be an area of random encounters of dynamism, and that's what leads to economic productivity and fulfilling cultural life. The fact that we're just going to bump into a random person on the street, have a chat, and maybe think of a new business idea adventure, or otherwise just make our lives better. So the fact that we're lingering 50 % less than 30 years before and we're walking faster, they say is perhaps a negative development that leads to more private life and less public one.

20:46And then what is the antidote to this? Some urbanists were kind of putting forth some ideas of how you can get people to slow down. Making street spaces that are inviting to walkers is one of the easiest things you can do. That means probably more green space, more shade, more seating. Also, potentially, New York just rolled out these anti-congestion or these congestion laws that tax cars for entering the city. If you constrain automobiles coming around, that might make streets a more, you know, lovely place to walk. But even if you do slow or eliminate vehicular traffic, it only does so much.

21:24They actually looked at Boston's downtown crossing. That's been car-free since 1978, which predates this study. But they found that social engagements are still down there from 1980 to 2010. One of the things they pointed out is they took away a lot of benches, so maybe less people are lingering there. But there is some implications to the fact that, you know, sidewalks are becoming just thoroughfares and not places to bump into people and hang out. So let this be a lesson to you. Maybe if you're listening to this, take the headphone out. Say hello to your fellow neighbor. Maybe stop and chat a little bit.

21:56We're beating a breath in the bush here. This is all about cell phones. Yeah. This is all about cell phones because in the past you would have to say, hey, I'm going to hang out. let's meet at this particular statue right or at this corner because you couldn't arrange ahead of time as soon as cell phones become a thing they say i can meet you at this exact time in this exact place and then we'll meet at the same time there's no lingering involved so to me cell phones are 80 of the story economic opportunity cost five percent i also hate walking slowly like i just want to get i'm actually known for running around the city too because if i can get there in three minutes instead of eight minutes i'm gonna do that so i am part of the problem one of the A few times, just a quick story.

22:36The first time, one of the first times I met Toby, he ran from the East Village to Yankee Stadium so he could go to a Yankee game. He literally ran there. Okay, let's sprint to the finish with some final headlines. The White House dropped a spending bombshell late last night, ordering a pause in grants, loans, and other federal financial assistance that has sparked loads of confusion and alarm. The federal government sends billions of dollars across the economy through grants and loans for things like disaster relief, transportation funding, and loans to small businesses. The two-page memo from the Trump White House was extremely vague, leaving experts unclear how to interpret it.

23:12According to the order, programs affected are, quote, including but not limited to financial assistance for foreign aid, non-governmental organizations, DEI, woke gender ideology, and the Green New Deal. One of the reasons that's confusing is because the Green New Deal, for example, was a policy that was never put in place. The White House did carve out an exception for, quote, assistance received directly by individuals as well as Medicare and Social Security benefits. But as of now, there are tons more questions than answers. Yeah, I think what is kind of confusing people is just the sheer scope of the order.

23:45Grants affect so many different people and so many different industries across the government. I mean, they go out to universities for education, universities for research purposes, also to nonprofits for healthcare and doing other studies, thousands of other purposes. So that's what has people kind of scratching their heads. Technically, this is just a pause, just a re, they want to look at where all this money is going with the kind of under the guise of reducing federal spending. But it does leave a lot of question marks because just the sheer amount of people that it affects. Whole Foods workers in Philadelphia made history yesterday by voting to form the first union in the Amazon owned grocery chains history.

24:24The employees are looking for improved wages, benefits, and working conditions, specifically calling out dissatisfaction tide all the way back to Amazon's acquisition of Whole Foods in 2017. The workers leading the union push hinted at inspiring similar movements across other Whole Foods locations and Amazon subsidiaries. And Neil, there is union pressure forming all over Amazon now, including Staten Island workers who voted in 2022 to form Amazon's first union in the U.S., as well as third-party delivery drivers who are trying to mount a campaign with the Teamsters as well. So a lot of union pressure coming at Amazon.

25:01If you want a good parallel for maybe what's going on at Whole Foods right now, it's to look at Starbucks. The first Starbucks store unionized in 2021 in Buffalo. That's now spread to 500 stores. And it's similar workplace, a coffee shop and a grocery store where the employees are in close contact. They can form solidarity networks. They talk a lot and they are able to share grievances with their employer. So the Starbucks one absolutely proliferated, and that's been a huge source of contention between labor and the company for Starbucks. And it looks like this could be the same for Amazon, Whole Foods, and its employees if this spreads from Philadelphia to, I mean, Whole Foods has 500 stores around the country.