2023 brought quite a few game-changing moments in tech, artificial intelligence (AI), and finance. From the unexpected collapse of major players like Silicon Valley Bank and Signature Bank to the unprecedented growth of electric vehicles to the rise of ChatGPT, the year saw several developments that had a major impact on the global economy.
Here’s a quick recap of the stories that defined the year.
Taming Inflation with Rising Interest Rates
To address the challenge of rising inflation, the Federal Reserve raised its benchmark interest rate to a range of 5.25% to 5.5%, the highest since 2001. This is the 11th increase since March 2022, aimed at bringing inflation to the Fed’s target rate of 2%.
While there’s been some stabilization, the Fed hasn’t ruled out the potential for more rate hikes in the next few months, especially as the prospect of further tightening remains on the horizon.
The Rise of Social Media Investing
The role of social media platforms, particularly Reddit, in influencing retail investors became more prominent this year. Investors turned to these platforms to discover small-cap growth stocks, moving beyond mature blue-chip options like Alphabet, Apple, Amazon, Nvidia, and Tesla.
The influence of social media in investing was notably highlighted during the first half of 2023, affecting major corporations and stock market dynamics.
Growing Investments in Defense Stocks
Geopolitical tensions, particularly the recent conflict between Israel and Hamas, as well as the Russia/Ukraine war, led to increased investor interest in defense stocks. Key defense stocks such as AeroVironment, Kratos Defense, Lockheed Martin, and Northrop Grumman gained attention. For instance, the iShares U.S. Aerospace & Defense ETF saw a 7% jump in a short period.
Similarly, other prominent firms like TransDigm Group Inc. (TDG) and Parsons Corp. (PSN) have also shown major growth. TDG stock price rose by about 15% in six months, while PSN experienced an increase of around 36% in the same period. Furthermore, Howmet Aerospace (HWM) reported a 16% rise in EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) this year.
At the same time, Curtiss-Wright Corp (CW) and Woodward Inc. (WWD) saw their stock prices climb by 20% and 18%, respectively, over the past six months.
BlackRock’s ETF Application
In December, BlackRock revised and re-submitted its proposal for a Bitcoin ETF, making a key change by adding the option for cash redemptions. This adjustment is seen as increasing the likelihood of approval by the U.S. Securities and Exchange Commission (SEC) in the first half of January 2024.
Analysts and market pundits believe that if BlackRock, the world’s largest asset manager, gets approval for a Bitcoin ETF, it could bring a major change in how the financial industry views cryptocurrencies. For starters, the approval can allow broader investor access to Bitcoin, marking a notable evolution in the landscape of digital asset investments.
ChatGPT and AI-Related Developments
The release of ChatGPT4 and Whisper APIs by OpenAI in 2023 represented a significant advancement in artificial intelligence. These tools have already been widely adopted across various industries, demonstrating AI’s growing influence and versatility in practical applications.
ChatGPT, known for its conversational abilities, has been integrated into numerous programs and applications, enhancing user interaction and automating responses. On the other hand, Whisper has contributed significantly to developing voice recognition and language translation systems.
Broadcom Makes Largest Tech Purchase Ever
Broadcom’s acquisition of VMware for $69 billion underscored the strategic importance of cloud computing and virtualization technologies in the tech industry. The acquisition, among the largest in the tech sector’s history, represents a significant shift in Broadcom’s business strategy, further diversifying its portfolio beyond semiconductors into software solutions.
Impact of Crime on Major Retailers
Major retailers like Walmart, Target, and Home Depot reported significant losses due to physical theft from their stores over the past year. The companies reported cumulative losses estimated to be $112 billion, with organized theft accounting for a substantial portion.
Changpeng Zhao’s Legal Troubles
Changpeng Zhao, the founder of Binance, faced major legal troubles in 2023 after he pleaded guilty to violating the Bank Secrecy Act. His plea was accepted by a federal judge, but the decision on whether he can return to the UAE before his February 2024 sentencing is still pending. Moreover, Zhao was slapped with a $50 million fine as part of the deal.
In addition to CZ’s legal issues, Binance also pleaded guilty to related charges. The company agreed to a substantial settlement, paying $4.3 billion in fines and restitution. The case highlighted the legal risks and intense scrutiny faced by prominent figures in the crypto industry.
Collapse of Regional Banks
Two of the US’ most prominent regional banks, namely the Silicon Valley Bank and Signature Bank, collapsed during the year’s first half. The crisis began with an emergency stock sale by SVB and escalated with customers trying to withdraw $42 billion. As a result, regulators had to step in and close down both SVB and Signature Bank. This became one of the biggest financial events of the year.
Electric Vehicles Dominate the Vehicle Market
2023 marked a turning point for EVs, with batteries becoming more affordable and stricter emissions rules pushing major automakers towards all-electric lineups. In 2022, the market was valued at $384.65 billion, growing to approximately $500.48 billion by Q4 2023. This growth represented a substantial year-over-year increase while also reflecting the rising demand for electric vehicles globally.
Growing Focus on Environmental Sustainability
Companies increasingly prioritized their environmental, social, and governance (ESG) initiatives this year to foster resilience and ensure long-term sustainability. Amid various global challenges, businesses accelerated their ESG strategies by integrating third-party solutions to ensure regulatory compliance and curtail carbon emissions.
The focus was on mitigating supply chain risks and enhancing data management. Artificial intelligence (AI) emerged as a key tool for better ESG analysis, particularly in terms of tracking greenhouse gas emissions and report analysis. Companies are now intertwining ESG commitments with financial performance, recognizing the economic risks of non-compliance with ESG standards.
Magnificent Seven’s Continued Market Dominance
The year saw Apple, Alphabet, Microsoft, Amazon, Meta, Tesla, and Nvidia — dubbed the ‘Magnificent Seven’ — continue to influence the stock market’s trajectory. They comprised 29% of the S&P 500’s market cap, the largest portion ever dominated by just seven stocks.
This dominance is illustrated by their 71% gain compared to just 6% for the other 493 stocks in the S&P 500. Goldman Sachs noted that this outperformance is a defining feature of the equity market in 2023, with these companies expected to grow at a compound annual growth rate of 11% from 2023 to 2025, compared to 3% for the rest of the S&P 500.