Three Things (5/8)

Private equity Peloton

A number of private equity firms have been considering a buyout of Peloton, sending shares of the connected fitness company soaring. Waning demand for its stationary bikes and treadmills despite price cuts has led to a dramatic decline in the business’ fair value, making it a prime target for an investor to come in and take the company private. The reports come at a time when the CEO stepped down and the company announced broad sweeping job cuts to reduce costs.

The early-pandemic favorite is off more than 96% from the all-time high it touched in 2021, meaning if you invested $1,000 in Peloton at its peak, your stake would be worth about $40 today. Peloton’s business fundamentals are not pretty and life in the private markets might not be so bad for the fitness company – they can approach new projects over years as opposed to quarters and they won’t be beholden to constant scrutiny from public investors. Going private should allow them to get fit and push the status quo, a decent outcome for the struggling company.

Apple’s new chip

Apple has been working on a chip designed to run artificial-intelligence software in data-center servers, a move that has the potential to give the company an advantage in the AI arms race. Apple has been closely working with its chip-making partner Taiwan Semiconductor Manufacturing. The chip will likely be focused on running AI models—what is known as inference—rather than on training AI models, where chipmaker Nvidia will likely continue to dominate.

Apple investors have grown impatient over the company’s perceived lack of progress when it comes to AI. With that said, Apple’s existing chip prowess might be one avenue where the company can find a critical advantage over other tech giants in AI – among its rivals, Apple has had the longest history and most success in designing custom silicon which may prove to be critical moving forward.

TikTok takes action

TikTok sued the US government over a new law that will force the parent company ByteDance to divest or face a ban. “For the first time in history, Congress has enacted a law that subjects a single, named speech platform to a permanent, nationwide ban, and bars every American from participating in a unique online community with more than 1 billion people worldwide,” the company said in a Tuesday filing. TikTok has argued that a ban would devastate 7 million businesses and shutter a platform that contributes $24 billion annually to the US economy.

Given the D.C. circuit judges aren’t national security experts, they’re likely to defer to Congress’ judgment unless there’s reason to believe the First Amendment has been violated. This is likely the first inning of a long legal battle that should last for many months moving forward.

Disclosures:

As of the date of publishing, AAPL and NVDA are holdings in Titan's Flagship strategy.

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