The markets: U.S. stocks had a calm day yesterday with the S&P 500 closing up a smidge at 5,836.22. Context: That’s still 1.5% down YTD. Futures were up 0.5% this morning at 5,905.25, pre-open. Stocks are in a “going nowhere” pattern because of the drama in the global bond markets where prices are falling, yields are rising, and equity holders prepare for a world in which the Fed moves slower for longer on interest rates.
Today: Los Angeles cannot catch a break. With the fires still out of control, high winds are expected in the forecast. The National Weather Service warned of a “particularly dangerous situation” with dry air moving at speeds of up to 70 mph.
CEO Daily insight: The $5.6 billion Google AI spinoff that invents new products
Since the 2022 release of ChatGPT and its subsequent iterations, there has been a lot of focus on the impact of large language models (LLMs) that generate summaries and insights from text data. But startups like SandboxAQ, an Alphabet spinoff now valued at $5.6 billion, rely on large quantitative models trained on numerical data and models that generate insights and predictions about the quantitative relationships in a system. It offers enterprise quantitative AI as a platform.
I asked SandboxAQ CEO Jack Hidary to explain why leaders should care. While LLMs can spawn a digital workforce of AI agents that can handle copy-editing, market research, customer service and other communication-based work, Hidary says his technology is more likely to accelerate research and create products. “The CEO of Lockheed Martin is not interested in creating a video that integrates tigers running around the streets, nor are the CEOs of 99% of the Fortune 500,” says Hidary. (James Taiclet, please reach out if you disagree.)
Using AI to create targeted messages to doctors is the work of LLMs; using it to create new drugs is the work of LQMs, or what Insilico Medicine’s Alex Zhavoronkov describes as multimodal generative AI — “models trained on time-series biological and chemical data.” He’s using AI to create new drugs and identify therapeutic paths to promote longevity. “We deliver drugs and sell them,” says Zhavaronkov. “So far, 22 preclinical candidates and 10 clinical programs with Phase IIa complete, (and) we published 54 papers last year.”
SandboxAQ’s technology includes AI models for drug discovery, alloy development, cryptography management, and an “unjammable” navigation system. “If you're an airline CEO, a defense contractor, in the trucking business, you care about GPS,” says Hidary, explaining that his system can deliver navigation with no GPS. “This is AI for biopharma, for chemistry, for materials, for engines, for space, this is a whole new realm of demand curve that is bigger than the chat bot.”
“Starting inside Alphabet was an incredible experience. It gave us a lot of lift and focus and access to scale rapidly. We always knew, though, that we'd have to spin out to be on multiple clouds using multiple chips and sectors,” he said.
Also on the radar:
China considered selling the U.S. division of TikTok to Elon Musk, in order to obey a new U.S. law with a January 19 deadline that would force the sale of the video platform to a non-Chinese owner. Bloomberg has few other details.
There might be an imminent peace deal between Israel and Hamas. The two sides are at least talking.
Trump would have been convicted for his attempts to fraudulently overturn the 2020 election if a prosecution had gone ahead, according to Special Counsel Jack Smith’s final report. Read it here. In response, President-elect Trump called Smith a “lamebrain.”
JP Morgan Chase disabled an internal bulletin board that employees were using to criticize the company’s return to work policy.
From the analysts:
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Goldman Sachs has published its 2025 US equity outlook and predicts that the S&P 500 will rise by 12% to 6500 by year-end, per a note seen by Fortune.
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Goldman Sachs also says the Fed will slow the rate of interest rate cuts this year. “We pushed back the final three rate cuts in our Fed forecast on Friday morning in response to the strong December employment report, which alleviated some of the lingering concerns about recent labor market softening. We now expect two cuts this year in June and December and one more in 2026 (vs. three this year previously) to an unchanged terminal rate of 3.5-3.75%,” Jan Hatzius and his team wrote in a note seen by Fortune.
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Wedbush on TikTok: “Beijing would take this ban [on TikTok in the US] as a slap in the face and could then look to retaliate towards US companies in China (Apple, Tesla) while also heading into the important tariff negotiations with the US in the coming months,” Daniel Ives told clients in a note seen by Fortune.
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Apollo’s Torsten Sløk on the S&P 500: “The narrative in markets is that the outlook for the US is great, and the outlook for Europe, UK, and China is not good. For markets, the problem with this narrative is that 41% of revenues in the S&P 500 come from abroad. If we have a recession in Europe and a continued slowdown in China, it will have a significant negative impact on earnings for S&P 500 companies,” he wrote recently.
- JP Morgan on the US economy: “The elephant enters the room. The biggest uncertainty is the unresolved macroeconomic tension around the path of US policy. The incoming administration is signaling a desire to reduce taxes and regulatory burden on US firms, while planning to tax consumers and raise business costs through higher tariffs and reduced immigration. Our baseline forecast incorporates a mix of initiatives that avoids extremes—in the form of large universal tariff increases or deficit increases. Recent political rhetoric highlights the tangible risk of more extreme actions,” per a note from Bruce Kasman and team.
More news below.
Diane Brady
diane.brady@fortune.com
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