Nasdaq closes out its first four-quarter slump since dot-com crash

The once high flying tech sector has endured a heavy selloff this year amid concerns that the sector’s growth could be curtailed by rising interest rates. The tech-heavy Nasdaq Composite is down more than 14%.

Chris Hondros | Newsmakers | Getty Images

A lot has changed in technology since the dot-com boom and bust.

The internet went mobile. The data center went to the cloud. Cars are now driving themselves. Chatbots have gotten pretty smart.

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But one thing has remained. When the economy turns, investors rush for the exits. Despite a furious rally on Thursday, the tech-laden Nasdaq finished in the red for a fourth straight quarter, marking the longest such streak since the dot-bomb period of 2000 to 2001. The only other negative four-quarter stretch in the Nasdaq’s five-decade history was in 1983-84, when the video game market crashed.

This year marks the first time the Nasdaq has ever fallen all four quarters. It dropped 9.1% in the first three months of the year, followed by a second-quarter plunge of 22% and a third-quarter decline of 4.1%. It fell 1% in the fourth quarter because of an 8.7% drop in December.

For the full year, the Nasdaq slid 33%, its steepest decline since 2008 and the third-worst year on record. The drop 14 years ago came during the financial meltdown caused by the housing crisis.

“It’s really hard to be positive on tech right now,” Gene Munster, managing partner of Loup Ventures, told CNBC’s Brian Sullivan on Wednesday. “You feel like you’re missing something. You feel like you’re not getting the joke.”

Tech has been like a horror show this year, says Wedbush's Dan Ives

Other than 2008, the only other year worse for the Nasdaq was 2000, when the dot-com bubble burst and the index sank 39%. Early dreams of the internet taking over the world were vaporized. Pets.com, infamous for the sock puppet, went public in February of that year and shut down nine months later. EToys, which held its IPO in 1999 and saw its market cap grow to almost $8 billion, sank in 2000, losing almost all its value before going bankrupt early the next year. Delivery company Kozmo.com never got its IPO off the ground, filing in March 2000 and withdrawing its offering in August.

Amazon had its worst year ever in 2000, dropping 80%. Cisco fell 29% and then another 53% the next year. Microsoft plummeted by more than 60% and Apple by over 70%.

The parallels to today are quite stark.

In 2022, the company formerly known as Facebook lost roughly two-thirds of its value as investors balked at a future in the metaverse. Tesla fell by a similar amount, as the carmaker long valued like a tech company crashed into reality. Amazon dropped by half.

The IPO market this year was non-existent, but many of the companies that went public last year at astronomical valuations lost 80% or more of their value.

Perhaps the closest analogy to 2000 was the crypto market this year. Digital currencies Bitcoin and ether plunged by more than 60%. Over $2 trillion in value was wiped out as speculators fled crypto. Numerous companies went bankrupt, most notably crypto exchange FTX, which collapsed after reaching a $32 billion valuation earlier in the year. Founder Sam Bankman-Fried now faces criminal fraud charges.

The only major crypto company traded on the Nasdaq is Coinbase, which went public last year. In 2022, its shares fell 86%, eliminating more than $45 billion in market cap. In total, Nasdaq companies have shed close to $9 trillion in value this year, according to FactSet.

At its peak in 2000, Nasdaq companies were worth about $6.6 trillion in total, and proceeded to lose about $5 trillion of that by the time the market bottomed in October 2002.

Don’t fight the fed

The 'tech is dead' narrative will only last short term into 2023, says SVB's Shannon Saccocia

The tunnel she’s describing is the continuing rate increases by the Fed, which may only end if the economy enters a recession. Either scenario is troubling for much of technology, which tends to thrive when the economy is in growth mode.

In mid-December, the Fed raised its benchmark interest rate to the highest in 15 years, lifting it to a target range of 4.25% to 4.5%. The rate was anchored near zero through the pandemic as well as in the years that followed the financial crisis.

Tech investor Chamath Palihapitiya told CNBC in late October that more than a decade of zero interest rates “perverted the market” and “allowed manias and asset bubbles to build in every single part of the economy.”

Palihapitiya took as much advantage as anyone of the cheap money available, pioneering investments in special purpose acquisition companies (SPACs), blank-check entities that hunt for companies to take public through a reverse merger.

With no yield available in fixed income and with tech attracting stratospheric valuations, SPACs took off, raising more than $160 billion on U.S. exchanges in 2021, nearly double the prior year, according to data from SPAC Research. That number sank to $13.4 billion this year. CNBC’s Post-SPAC index, comprised of the largest companies that have debuted via SPACs in the last two years, lost two-thirds of its value in 2022.

SPACs slumped in 2022

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‘Bargain basement’ shopping

The IPO market is as bad as it was in 2001, and quick improvement is unlikely, says Bullpen's Davidson

Retailers brace for tougher times and more frugal customers in 2023

A shopper goes through shirts in the kids section at Old Navy in Denver, Colorado.

Brent Lewis | Denver Post | Getty Images

January is typically an overlooked month for retailers.

Shoppers make returns and exchanges. They come to stores with gift cards in hand. And they may spring for workout clothes or other items to follow through on New Year’s resolutions.

But this year, January carries higher stakes. The next few weeks, which close out many retailers’ fiscal year, could help determine whether the holiday quarter is a win or a bust. It’s an important time for helping stores clear out excess inventory, too. January could also set the tone for 2023 — when some economists and retail industry watchers anticipate the U.S. will tip into a recession.

So far, early holiday results have been better than some economists and retailers feared. Sales from Nov. 1 to Dec. 24 rose 7.6%, according to data from MasterCard SpendingPulse, which measures in-store and online retail sales across all forms of payment. The figure includes restaurants and is not adjusted for inflation, which rose 7.1% year over year in November.

Yet there are signs that shoppers may be running out of gas. Credit card balances have ticked up. Personal saving rates have fallen. And sales of big-ticket items like jewelry and electronics have weakened.

Plus, Americans’ spending spree during the earlier years of the pandemic, fueled by stimulus money, boredom and socked-away savings, have made for tough comparisons.

A pivotal January

Retailers enter 2023 reckoning with the fact that store traffic already lagged during peak weeks of the holiday season.

Across six retailers — Walmart, Target, Best Buy, Nordstrom, Kohl’s and Macy’s — foot traffic dropped by an average of 3.22% year over year for the weeks from Black Friday through the week of Christmas, according to data from Placer.ai, an analytics firm that uses anonymized data from mobile devices to estimate overall visits to locations. It also declined by nearly 5% when compared to pre-pandemic patterns.

Now retailers are more on edge.

“It seems like a lot of the brands are anticipating a bigger thud in January,” said Stacey Widlitz, president of SW Retail Advisors, a consulting firm.

She has noticed more retailers are dangling gift cards to drum up sales. For instance, Urban Outfitters-owned retail chain Anthropologie on Friday offered $50 toward a future purchase for online shoppers who spend $200 or more. But that bonus cash must be used by Jan. 31, when the company’s quarter ends.

Widlitz said those offers are focused on nudging shoppers to make purchases during a time when there’s often a post-holiday lull. It is also retailers’ last chance to sell through excess inventory and start the new fiscal year in a cleaner position.

“It just looks like they’re trying to push people to get into stores after the new year,” she said.

But for some, a more budget-sensitive consumer could be an opportunity.

On an earnings call last month, Walmart CEO Doug McMillon said he anticipates a boost in sales as consumers feel stretched from holiday spending. Like many other retailers, Walmart’s holiday quarter includes January.

“Sometimes these quarters work out where the very end of December and January end up being stronger when people are particularly price sensitive,” he said. “So that’s kind of what I’m expecting.”

Already, the discounter has attracted wealthier shoppers with its lower-priced groceries and household staples. For the past two quarters, about 75% of its market share gains in food came from households that make more than $100,000 a year.

Yet like competitors Target and Costco, it has had a harder time selling discretionary merchandise that tends to drive higher profits than selling milk or paper towels.

What will the new year bring?

Economists are closely watching consumer indicators as the year begins.

On the positive side, said Michael Zdinak, an economist at S&P Global Market Intelligence, unemployment is low and the jobs market is still very tight. There are signs that inflation has cooled, with prices rising less than expected in November, the most recent month of available federal data.

On the other hand, he said food prices are still high, retail demand is weakening and savings aren’t looking as robust.

Personal saving rates have declined significantly. The percentage of disposable income that people save was 2.4% in November, according to the U.S. Bureau of Economic Analysis. That’s down from an average of 6.3% pre-pandemic, according to S&P Global Market Intelligence, which crunched the numbers from 1991 to 2019.

Zdinak said that low rate is unsustainable, especially as consumers have been spending money they put in their savings accounts during the earlier months and years of the pandemic.

Economists at the market data firm anticipate a recession to begin in the first quarter of 2023 and to last two quarters.

Zdinak said the downturn will be fueled by slashed orders and less manufacturing as many retailers clear through unwanted inventory after consumer preferences changed abruptly in 2022.

Then there are headwinds for consumers. Reality may soon hit families who have blown the budget on gifts or holiday travel, said Widlitz of SW Retail Advisors.

“Everyone gets through the holidays in denial and Feb. 1, when you get your [credit card] statement, or Jan. 15, whenever it comes, it’s like, ‘Oh!'” she said.

Caitlyn Freda contributed to this report.

Pivotal January for retailers looking to rebound from awful year

Tesla TSLA Q4 2022 vehicle delivery and production numbers

Tesla just published its fourth-quarter vehicle production and delivery report for 2022.

Here are the key numbers.

Total deliveries Q4 2022: 405,278
Total production Q4 2022: 439,701
Total annual deliveries 2022: 1.31 million
Total annual production 2022: 1.37 million

Deliveries are the closest approximation of sales disclosed by Tesla. These numbers represented a new record for the Elon Musk-led automaker and growth of 40% in deliveries year-over-year.

However, the fourth quarter numbers fell shy of analysts’ expectations.

According to a consensus of analysts’ estimates compiled by FactSet, as of Dec. 31, 2022 Wall Street was expecting Tesla to report deliveries around 427,000 for the final quarter of the year. Estimates updated in December, and included in the FactSet consensus, ranged from 409,000 to 433,000.

Those more recent estimates were in line with a company-compiled consensus distributed by Tesla investor relations Vice President Martin Viecha. That consensus, published by electric vehicle industry researcher @TroyTeslike, said that 24 sell-side analysts expected Tesla deliveries of about 417,957 on average for the quarter (and about 1.33 million deliveries for the full year).

Tesla started production at two new factories this year — in Austin, Texas and Brandenburg, Germany — and ramped up production in Fremont, California and in Shanghai, but it does not disclose production and delivery numbers by region.

In the fourth quarter of 2022, Tesla said deliveries of its entry level Model 3 sedan and Model Y crossover amounted to 388,131, while deliveries of its higher end Model S sedan and Model X SUV amounted to 17,147.

In its third-quarter shareholder presentation, Tesla wrote: “Over a multi-year horizon we expect to achieve 50% average annual growth in vehicle deliveries. The rate of growth will depend on our equipment capacity, factory uptime, operational efficiency and the capacity and stability of the supply chain.”

The period ending Dec. 31, 2022 was marked by challenges for Tesla, including Covid outbreaks in China, which caused the company to temporarily suspend and reduce production at its Shanghai factory.

During the fourth quarter, Tesla also offered steep price cuts and other promotions in the U.S., China and elsewhere in order to spur demand, even though doing so could put pressure on its margins.

In a recent e-mail to Tesla staff, Elon Musk asked employees to “volunteer” to deliver as many cars to customers as possible before the end of 2022. In his e-mail, Musk also encouraged employees not to be “bothered” by what he characterized as “stock market craziness.”

Shares of Tesla plunged by more than 45% over the last six months.

In December, several analysts expressed concern about weakening demand for Tesla electric vehicles, which are relatively expensive compared with an increasing number of hybrid and fully electric products from competitors.

Along with competitors ranging from industry veterans Ford and GM to upstart Rivian, Tesla is poised to reap the benefits of Biden’s Inflation Reduction Act this year, which includes incentives for domestic production and purchases of fully electric cars.

Retail shareholders and analysts alike attributed some of Tesla’s falling share price in 2022 to a so-called “Twitter overhang.”

Musk sold billions of dollars worth of his Tesla holdings last year to finance a leveraged buyout of the social media business Twitter. That deal closed in late October. Musk appointed himself CEO of Twitter and has stirred controversy by making sweeping changes to the company and its social media platform.

Shares of Tesla started to rise again in the final days of December 2022, in anticipation of record fourth-quarter and full-year deliveries.

Correction: This story has been updated to reflect the correct numbers for Model 3 and Y, and Model S and X vehicle deliveries for the fourth quarter of 2022.

Hannah Williams quit her job to launch viral TikTok, earns 6 figures

In May, Hannah Williams made a leap a lot of people only dream about: She quit her day job as a data analyst to become a content creator full time.

At the time, she’d had a few months of success through her personal TikTok, where she shared experiences about job-hopping and negotiating her salary, which inspired her to launch Salary Transparent Street, a TikTok series asking strangers a question you’re not supposed to: How much money do you make?

The series went viral, and Williams saw a once-in-a-lifetime opportunity.

“I knew that you don’t just have an account that is that successful that quickly, without it being monetizable in some way,” she says. “I was ready to figure it out.”

Within months, Williams and her fiance, James Daniels, both quit their jobs to focus on turning Salary Transparent Street from a few TikTok videos to a full-fledged business. They’ve crisscrossed 10 states, interviewed hundreds of people and landed six-figure brand deals. So far, Salary Transparent Street has brought in nearly $600,000, and the couple live off a $200,000 per year salary.

CNBC Make It caught up with Williams, 26, on how she prepared for the big quit, the highs and lows of being your own boss and advice to workers who want to chase their own dreams in 2023.

How she quit her job: ‘Failure wasn’t the worst thing’

While Williams finally put in her notice around May, she says she was mentally ready to quit long before. The biggest thing holding her back? In order to build out Salary Transparent Street the way she wanted to, Williams would need Daniels (the series’ cameraman) to also quit his office job in government contracting.

It was a big risk to lose steady income and bet on something new. But Williams, a data analyst by training, crunched the numbers and saw that the leap could be profitable.

“I knew that there were brand deals there that were very niche and perfect fits for us that might take a couple of months to figure out, but they were possibilities,” Williams says. Plus, since the couple didn’t have kids or a mortgage, the timing couldn’t be better to be a little risky.

As Williams sees it, “failure wasn’t the worst thing.” She could always go back to her old job or find a similar one if the series didn’t take off. The worst thing, really, would be to not try it at all.

So, with $10,000 in savings, Williams and Daniels put in their notice.

Within two weeks, Williams connected with two agents who provided $24,000 in seed money for Salary Transparent Street’s first two months. Williams and Daniels used the money to pay their bills, pay for basic living costs and travel to film.

Salary Transparent Street continued to gain momentum, reaching millions of viewers. Williams landed partnerships with brands like Fiverr, The Knot and Cleo, a budgeting app. Then, in September, a big account came through: Williams signed a six-month deal with Indeed, the job-search platform, for nearly half a million dollars.

The downsides of being your own boss

Building your own social media brand doesn’t come without challenges. Just like with any job, Williams says, being your own boss also has some downsides, the biggest one being that the internet never stops.

“So you can throw holidays out the window, you can throw a weekend out the window. It’s incredibly difficult when your work is kind of your life, and that work-life balance you had before completely disappears,” she says.

With that said, she’d much rather put in that effort on something she built, rather than working a weekend for a company she’s not as invested in.

Another side effect: burnout. “It’s been a really interesting lesson to learn that working all the time is definitely not the answer to getting stuff done,” she says. “Eventually, your brain just can’t handle anymore.”

To deal with burnout, Williams says it’s been crucial for her to understand when she’s most productive, and when she can give herself a breather. For example, she likes to steal away time to work on administrative tasks in the morning before other people are awake and asking things of her.

Then, to keep from getting overwhelmed, she schedules out her work by the hour, including when she should take a break to go for a walk or read. “If it’s on my calendar, I’m going to follow it,” she says. Scheduling breaks builds in accountability. “It’s been difficult to realize that I need to take a break and just chill for a little bit, and then get back to it. And that’s going to help me be more productive rather than going at full-speed all the time.”

Finally, another big downside to being an internet entrepreneur is moderating comments on her video and social media posts. Not only can it be a time suck, but sometimes comments can be hateful, which Williams says weighs on her mental health. Now that she’s scaled the work, she’s also hired an executive assistant who helps with content moderation, who’ll earn $80,000 per year with health benefits and PTO when she becomes a full-time employee in January.

Advice to job-seekers in 2023

Making an impact

How this 26-year-old earns and spends $25,000 a year just outside NYC

Middle class income in major U.S. cities

The middle class has been shrinking throughout the last five decades as more Americans have entered either the upper or lower income brackets, according to Pew Research Center. 

The latest data from 2021 shows the share of the population in the middle class continues to hover around 50%, around where it has been since 2011. Prior to that year, the share of middle class Americans had been consistently shrinking since a peak of 61% in 1971.

Pew defines “middle class” as those earning between two-thirds and twice the median American household income, which in 2021 was $70,784, according to the United States Census Bureau. That means American households earning as little as $47,189 and up to $141,568 are technically in the middle class.

But other factors like family size and location can change what middle class looks like for you. Here are the income thresholds for the middle class in the 20 most populous U.S. metros:

Remember, this is based on just one definition of middle class. There are other statistical-based definitions of middle class and an even broader list of more anecdotal definitions.

Generally speaking, anyone who isn’t living “paycheck-to-paycheck” but couldn’t necessarily stop working tomorrow and be financially secure for the long-term might consider themselves middle class.

At least half of the U.S. adult population has consistently identified as middle or upper-middle class since 2002, according to Gallup polling. The poll does not define middle class for respondents, but simply asks if they identify as upper, upper-middle, middle, working or lower class.

Though the share of upper-middle and middle-class-identifying adults was larger — around 63% of adults in 2003 — before the Great Recession, it never fell below 50%, and still hasn’t even through the brief, but sharp, recession caused by the Covid-19 pandemic.

As of April 2022, 52% of adults consider themselves middle or upper-middle class. And statistically speaking, they could all be correct. But given different life situations and perceptions of wealth, there’s a good chance not everyone who feels middle class actually is, and vice-versa.

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Don’t miss: How much money Americans say they need to make to feel rich 

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There’s still time to get health insurance through the public exchange

FatCamera | E+ | Getty Images

Anyone without health insurance has about two weeks left to get 2023 coverage through the public marketplace — and subsidies could make it affordable.

Open enrollment for the federal health care exchange runs through Jan. 15, with coverage taking effect Feb. 1. (If your state has its own exchange, the last day to enroll may be different.) After the sign-up window closes, you’d generally need to experience a qualifying life event — i.e., birth of a child or marriage — to be given a special enrollment period.

Most marketplace enrollees — 13 million of 14.5 million in 2022 — qualify for federal subsidies (technically tax credits) to help pay premiums. Four out of 5 customers will be able to find 2023 plans for $10 or less per month after accounting for those tax credits, according to the Centers for Medicare & Medicaid Services.

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Some people may also be eligible for help with cost sharing, such as deductibles and copays on certain plans, depending on their income.

For the most part, people who get insurance through the federal (or their state’s) exchange are self-employed or don’t have access to workplace insurance, or they don’t qualify for Medicare or Medicaid.

As of Dec. 15, nearly 11.5 million people had selected a plan through the marketplace, according to CMS.

The tax credits are more generous now

How this 26-year-old earns and spends $25,000 a year just outside NYC

For the income part of the determination, you’ll need to estimate it for 2023 during the sign-up process.

Giving a good estimate matters

Be aware that it’s important to give a good estimate.

If you end up having annual income that’s higher than what you reported when you enrolled, it could mean you’re not entitled to as much aid as you’re receiving. And any overage would need to be accounted for at tax time in 2024 — which would reduce your refund or increase the amount of tax you owe.

“You don’t want a nasty surprise when you do your taxes the next year,” said Cynthia Cox, director for the Kaiser Family Foundation’s Affordable Care Act program.

Likewise, if you are entitled to more than you received, the difference would either increase your refund or lower the amount of tax you owe.

Either way at any point during the year you can adjust your income estimate or note any pertinent life changes (for example, a birth of a child, marriage, etc.) that could affect the amount of subsidies you’re entitled to.

Falling behind on premiums can mean getting dropped

Be aware that if you don’t pay your premiums (or your share of them), you face coverage being canceled and claims going unpaid.

For enrollees who get subsidies, coverage is generally dropped after three months if premiums are not caught up. For those who pay the full premiums because they don’t qualify for subsidies, there’s only a grace period of about a month before cancellation, depending on the state. 

If you end up without insurance, you can’t re-enroll through the marketplace unless you qualify for a special enrollment period.

The boldest bitcoin price predictions for 2023

A worsening macroeconomic climate and the collapse of industry giants like FTX and Terra have weighed on bitcoin’s price this year.

STR | Nurphoto via Getty Images

2022 was a rough year for crypto. More than $1.3 trillion was wiped off the value of the market. And bitcoin, the world’s largest digital coin, saw its price slump more than 60%.

Investors were caught off guard by a wave of collapses in the industry from stablecoin project terraUSD to crypto exchange FTX, as well as a worsening macroeconomic climate. Those who made predictions about bitcoin’s price in the past year really missed the mark.

But with 2023 almost upon us, some market players have stuck their neck out with price calls for what could be another volatile year.

Interest rates around the world are on the rise, and that’s weighing on risk assets like stocks and bitcoin. Investors are also watching how the FTX saga, which resulted in the arrest of the company’s founder Sam Bankman-Fried in the Bahamas, will develop.

CNBC rounds up some of the boldest price calls for bitcoin in 2023.

Tim Draper: $250,000

Bitcoin bull Tim Draper had one of the most optimistic calls on bitcoin of 2022, predicting the token would be worth $250,000 by the end of the year.

In November, the billionaire venture capitalist said he’s extending the timeline for that prediction until mid-2023. Even after the collapse of FTX, he’s convinced the coin will hit the quarter-of-a-million milestone.

“My assumption is that since women control 80% of retail spending, and only 1 in 7 bitcoin wallets are currently held by women that the dam is about to break,” Draper told CNBC via email.

Bitcoin would need to rally 1,400% in order for it to trade at that level.

Despite the depressed prices and trading volumes drying up, there could be reason to suspect the market has found a bottom, according to Draper.

“I suspect that the halvening in 2024 will have a positive run,” he said.

FTX's collapse is shaking crypto to its core. The pain may not be over

The halvening, or halving, is an event that happens every four years in which bitcoin rewards to miners are cut in half. This is viewed by some investors as positive for bitcoin’s price, as it squeezes supply. The next halving is slated to happen sometime in 2024.

Bitcoin miners, who use power-intensive machines to verify transactions and mint new tokens, are being squeezed by the slump in prices and rising energy costs.

These actors accumulate massive piles of digital currency, making them some of the biggest sellers in the market. With miners offloading their holdings to pay off debts, that should remove most of the remaining selling pressure on bitcoin.

That’s historically a good sign for bitcoin, said Vijay Ayyar, vice president of corporate development at crypto exchange Luno.

“In prior down markets, miner capitulation has usually indicated major bottoms,” Ayyar told CNBC. “Their cost to produce becomes greater than the value of bitcoin, hence you have a number of miners either switching off their machines … or they need to sell more bitcoin to keep their business afloat.”

“If the market reaches a point where it’s absorbing this miner sell pressure sufficiently, one can assume that we’re seeing a bottoming period.”

Standard Chartered: $5,000

Mark Mobius: $10,000

Veteran investor Mark Mobius had a relatively successful 2022 in terms of his price call. In May, he forecast bitcoin would drop to $20,000 when it was trading above $28,000.

Carol Alexander: $50,000

Carol Alexander, professor of finance at Sussex University, wasn’t far off the mark with her prediction that bitcoin would slip to $10,000 in 2022.

Now, she thinks the cryptocurrency could be set for gains — but not for reasons you might expect.

The catalyst would be more dominos from the FTX fallout tipping over, Alexander said. If this happens, she expects the price of bitcoin will top $30,000 in the first quarter, and then $50,000 by quarters three or four.

“There will be a managed bull market in 2023, not a bubble — so we won’t see the price overshooting as before,” she told CNBC.

“We’ll see a month or two of stable trending prices interspersed with range-bounded periods and probably a couple of short-lived crashes.”

Alexander’s reasoning is that, with trading volumes evaporating with traders on edge, large holders known as “whales” will likely step in to prop up the market. The wealthiest 97 bitcoin wallet addresses account for 14.15% of the total supply, according to fintech firm River Financial.

FTX's collapse was a punch in the face for crypto, but not a knockout blow, analyst says

Companies can ‘hire’ a virtual person for about $14k a year in China

Virtual singer Luo Tianyi performing with world renowned pianist Lang Lang in 2019 at the Mercedes-Benz Arena in Shanghai, China. Launched in 2012, Luo Tianyi has nearly 3 million fans and even performed at the Winter Olympics opening ceremony in Beijing this year.

Visual China Group | Getty Images

BEIJING — From customer service to the entertainment industry, businesses in China are paying big bucks for virtual employees.

Tech company Baidu said the number of virtual people projects it’s worked on for clients has doubled since last year, with a wide price range of as little as $2,800 to a whopping $14,300 per year.

Virtual people are a combination of animation, sound tech and machine learning that create digitized human beings who can sing and even interact on a livestream. While these digital beings have appeared on the fringes of the U.S. internet, they’ve been popping up more and more in China’s cyberspace.

Some buyers of virtual people include financial services companies, local tourism boards and state media, said Li Shiyan, who heads Baidu’s virtual people and robotics business.

As the tech improves, costs have dropped by about 80% since last year, he said. It costs about 100,000 yuan ($14,300) a year for a three-dimensional virtual person, and 20,000 yuan for a two-dimensional one.

Li expects the virtual person industry overall will keep growing by 50% annually through 2025.

What is the metaverse and why are billions of dollars being spent on it?

Searching for scandal-free icons

From a business perspective, much of the focus is on how virtual people can generate content.

Brands in China are looking for alternative spokespeople after many celebrities recently ran into negative press about tax evasion or personal scandals, said Sirius Wang, chief product officer and head of marketplace Greater China at Kantar.

Dancers perform with virtual digital people at the Future Life Festival 2022 in Hangzhou, China, on Nov. 4, 2022.

Future Publishing | Future Publishing | Getty Images

At least 36% of consumers had watched a virtual influencer or digital celebrity perform in the last year, according to a survey published by Kantar this fall. Twenty-one percent had watched a virtual person host an event or broadcast the news, the report said.

Looking ahead to next year, 45% of advertisers said they might sponsor a virtual influencer’s performance or invite a virtual person to join a brand’s event, according to the Kantar report.

Growing development of virtual people

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Launched in 2012, Luo Tianyi has nearly 3 million fans and even performed at the Winter Olympics opening ceremony in Beijing this year.

Bilibili also hosts many so-called virtual anchors, which are the direct avatars of people using special technology to reach their audience. The company said 230,000 virtual anchors started broadcasting on its platform since 2019, and the virtual anchors’ broadcasting time this year surged by about 200% from last year.

Tencent said in its latest earnings call that Tencent Cloud AI Digital Humans provide chatbots to sectors such as financial services and tourism for automated customer support. The company’s Next Studios also developed a virtual singer and virtual sign language interpreter.

Far smaller companies are also getting into the industry.

Startup Well-Link Technologies — whose cloud rendering tech support for Chinese video game developer miHoYo brought it success in the gaming industry — announced this year it has developed yet another model of a virtual person in a joint venture with Haixi Media.