Sonic the Hedgehog may be able to run faster than the speed of light, but his film franchise nearly came to a screaming halt in 2019.

A less-than-three-minute trailer released early that year to tease the film’s release, which was just six months away, was widely panned by fans who took to social media to rail against Paramount’s character design. Dubbed “Ugly Sonic,” the blue creature that appeared on film was a far cry from the iconic video game speedster.

Cinematic Sonic, version 1, had more realistic facial features, including human-like teeth, and his body proportions were deemed inconsistent with the character fans grew up with in the ’90s.

“The trailer goes out, and I think it became the most viewed trailer in the history of Paramount Pictures. Which is amazing,” said Toby Ascher, who acquired the rights to Sonic and produced the film franchise. “The only problem was that 90% of people hated the trailer because of the design of Sonic.”

“All of a sudden we went from trying really, really hard to make a really, really faithful video game adaptation to being next in line of the people who had ruined video games for everyone. It just was a disaster of epic proportions,” Ascher added.

The studio pivoted, opting to redesign the title character and push the film’s release back three months to February 2020. The fix cost Paramount around $5 million but resulted in a franchise that has generated nearly $1.2 billion at the global box office. The studio hopes to build on that momentum with a fourth installment in the film franchise, set to debut in 2027.

“The Sonic franchise owes its box office success and longevity to a monumental decision early in the development of the first films’ marketing campaign,” said Paul Dergarabedian, senior media analyst at Comscore. “A re-design of a main character is no small thing. … These decisions can make or break what is every studio’s dream of having a single film turn into a long-term revenue generating franchise. The return on investment by turning an ‘ugly’ Sonic into a beautiful revenue generating franchise is undeniable.”

Ascher first acquired the rights to Sonic the Hedgehog in 2013, a time in Hollywood when video game-inspired films had failed to resonate with audiences.

“When we first started working on Sonic, making a video game adaptation was, like, a really bad idea,” he told CNBC.

No film based on a video game property had, to that point, managed to earn a positive rating from review aggregator Rotten Tomatoes. It wasn’t until 2019 that a video game-based film generated a “fresh” rating on the site, indicating more than 60% positive reviews.

“I don’t think anyone in town really thought making a Sonic movie was a good idea,” Ascher said. “But, I think our strategy was that we had grown up with these games. We’ve grown up with these characters, and we wanted to treat them like any other character. We wanted to give them real emotional arcs, and real emotional stories where you could relate to them.”

Ascher noted that previous video game adaptations typically focused on worldbuilding rather than character development.

“What we’ve been able to do is inject into the franchise heart, and I think that that’s what’s made it different,” said Neal Moritz, Ascher’s producing partner and producer of franchises like “The Fast and the Furious” and “21 Jump Street.”

Both Ascher and Moritz noted that while the filmmaking team behind the first “Sonic the Hedgehog” film overhauled the main character’s design, the story remained pretty much the same.

The filmmaking team was blindsided by audiences’ reactions to the first trailer, but were resolute in trying to resolve the issue rather than shelve the film or release it in its current form.

Moritz said he made an “impassioned speech” to the heads of Paramount and Sega to allow the filmmakers to fix the mistake.

As Moritz recalls, he told executives: “We really screwed up here, but there’s an incredible amount of interest and what we need to do is fix it … We need some more money and we need some more time. If you give that to us, I think we could turn this thing around.”

“I give both Paramount and Sega a lot of credit,” Moritz said. “They said ‘OK.’”

In the redesign, the team brought back Sonic’s iconic white gloves and classic red shoes. They reinfused the character with some of his cartoon roots, and six months after the first trailer, Paramount released a new iteration.

“The fans saw that we were trying to be really genuine in our love for this franchise,” Ascher said, noting that in the wake of the first trailer the team began engaging more with fans and focus groups to drum up feedback and inspiration.

The new trailer was well-received by fans, and three months later “Sonic the Hedgehog” opened to $58 million at the box office. The feature went on to collect $146 million domestically before the pandemic shuttered theaters. Globally, it pulled in $302 million.

The Sonic franchise has continued to thrive in the following years, with each follow-up feature outperforming the last.

“Sonic the Hedgehog 2” snared $190 million domestically and $403 million globally, while “Sonic the Hedgehog 3″ tallied $235 million stateside and $485 million worldwide.

“That’s a big jump,” said Marc Weinstock, Paramount’s president of worldwide marketing and distribution. “I get excited that every new movie does better than the last one, which is rare.”

Following the success of the second “Sonic” film, the studio’s then-president and CEO of Paramount Pictures, Brian Robbins, greenlit a “Knuckles” series based on the franchise for the company’s streaming service, Paramount+, as well as a third Sonic film.

Sonic was becoming multi-platform, much like Robbins and Paramount had done for franchises like “Teenage Mutant Ninja Turtles,” “A Quiet Place,” “Spongebob Squarepants” and “Paw Patrol.”

The “Knuckles” show generated more than 11 million global viewing hours in its first 28 days on Parmount+.

The theatrical success also rocketed Sonic from a $70 million licensing business to one that generates more than $1 billion in retail revenue annually, according to Ivo Gerscovich, Sega’s senior vice president and chief business and brand officer of Sonic the Hedgehog.

“The great thing about Sonic — and the success of Sonic from the very beginning — is that we basically have listened to the fans from day one,” Robbins, now co-CEO of Paramount, said. “The fans are fanatical about this franchise and love this franchise and know this franchise. Because of that, they’ve become really key in shaping the franchise … They evangelize it.”

Fans inspired the casting of Keanu Reeves as Shadow, an archrival of Sonic, in the third Sonic film. And the filmmaking team says it continues to look to fans to inspire which characters it will add to the films and series next.

Ascher and Moritz both teased that the fourth Sonic film with again feature a new fan-favorite character, but said the team will continue to expand the franchise’s universe at a slow pace.

“If all of a sudden we bring every character, they are not going to get the time that the audience needs to understand them and relate to them and really fall in love with them,” Ascher said. “So, as we bring characters in, whether it’s film or it’s TV, the most important thing is that they have a good story that really showcases the character in an incredible way.”

Disclosure: Comcast is the parent company of NBCUniversal and CNBC. NBCUniversal owns Rotten Tomatoes and is the distributor of “The Fast and the Furious” films.

Domino’s Pizza is finally releasing its own version of stuffed crust on Monday, aiming to win over the customers who are willing to spend more on the pricey pizza customization. 

Thirty years ago, Yum Brands’ Pizza Hut debuted the cheesy stuffed crust, marketing the launch with a television commercial starring Donald Trump. As years passed, rivals Papa John’s and Little Caesars eventually followed with their own takes. Trump went from hawking pizza to sitting in the Oval Office.

Generations of consumers have grown up with stuffed crust, including the increasingly important Gen Z diners, who are entering the workforce and buying their own pizzas now. The addition is critical for Domino’s, the top U.S. pizza chain, to compete with rivals Pizza Hut and Papa John’s, which have ceded market share to Domino’s in recent quarters but still steal the pizza chain’s customers.

“Nearly 13 million Domino’s customers each year are buying stuffed crust from our competitors, and these are our customers who have to leave our brand because we’re the only national pizza brand that doesn’t offer it,” Domino’s Chief Marketing Officer Kate Trumbull told CNBC.

Domino’s has taken so long to release stuffed crust that a survey of its customers found that 73% already believed that the chain offered it on the menu, according to Trumbull.

That all changes on Monday, when Domino’s launches its Parmesan Stuffed Crust. The menu item is included in the pizza chain’s $9.99 carryout deal.

When Pizza Hut originally launched stuffed crust, Domino’s viewed the menu item as gimmicky, according to Trumbull. Plus, the company heard that stuffed crust caused bottlenecks and slowed down service, leading to unhappy customers and workers.

But Domino’s perspective changed after more national competitors followed Pizza Hut’s lead. The chain committed to launching its own version in 2022, when its sales were faltering in the wake of the Covid-19 pandemic pizza boom.

“It has been one of the longest development efforts in the company’s history,” Trumbull said.

The process began with extensive market research. Findings included that stuffed crust customers tend to buy pizza more frequently and often spend more per transaction.

Eight potential iterations followed before Domino’s landed on the right recipe for its Parmesan Stuffed Crust, made with mozzarella and topped with garlic seasoning and a sprinkle of Parmesan cheese.

At the same time, Domino’s was improving its restaurants’ overall operations, retraining its employees across the system on making its crust and rolling out a custom dough spinner to restaurants. If the pizza chain hadn’t made its kitchens more efficient, it wouldn’t have been able to launch stuffed crust, according to Trumbull.

Ahead of the launch of Parmesan Stuffed Crust, the pizza chain spent 12 weeks training franchisees and 7,000 stores on how to make it properly.

“We’re not going to leave anything to chance after taking three years,” Trumbull said.

The U.S. Department of the Treasury on Sunday announced it won’t enforce the penalties or fines associated with the Biden-era “beneficial ownership information,” or BOI, reporting requirements for millions of domestic businesses. 

Enacted via the Corporate Transparency Act in 2021 to fight illicit finance and shell company formation, BOI reporting requires small businesses to identify who directly or indirectly owns or controls the company to the Treasury’s Financial Crimes Enforcement Network, known as FinCEN.

After previous court delays, the Treasury in late February set a March 21 deadline to comply or risk civil penalties of up to $591 a day, adjusted for inflation, or criminal fines of up to $10,000 and up to two years in prison. The reporting requirements could apply to roughly 32.6 million businesses, according to federal estimates.     

The rule was enacted to “make it harder for bad actors to hide or benefit from their ill-gotten gains through shell companies or other opaque ownership structures,” according to FinCEN.

In addition to not enforcing BOI penalties and fines, the Treasury said it would issue a proposed regulation to apply the rule to foreign reporting companies only. 

President Donald Trump praised the news in a Truth Social post on Sunday night, describing the reporting rule as “outrageous and invasive” and “an absolute disaster” for small businesses.

Other experts say the Treasury’s decision could have ramifications for national security.

“This decision threatens to make the United States a magnet for foreign criminals, from drug cartels to fraudsters to terrorist organizations,” Scott Greytak, director of advocacy for the anticorruption organization Transparency International U.S., said in a statement.

— Greg Iacurci contributed to this article.

When the Los Angeles wildfires swept through Southern California in January, Barbara Shay lost much more than the building housing the cafe she owned.

Gone were the ingredients for menu items like grits or pancakes. Gone were the photos of icons ranging from former President Barack Obama to actor Richard Pryor that had lined the walls. Gone, too, were the decades of labor from Shay’s family.

“I am still in shock,” Shay said in an interview with CNBC. “It’s an emotional roller coaster — not just for me, but just for everyone.”

Shay is part of the diverse fabric of small business owners in Altadena, a town about 15 miles outside downtown L.A that was hard hit by last month’s blaze. As the community starts the yearslong rebuilding process, entrepreneurs like Shay are starting to chart their paths forward.

She plans to rebuild the 70-year-old Little Red Hen Coffee Shop and is evaluating the finances for opening up a temporary storefront or popups. The business spans generations: After following in the footsteps of her mother and brother in owning the business, she now works alongside her daughter and grandson.

But while many in Altadena’s entrepreneurial community remain optimistic about a recovery, multiple business owners described lengthy and difficult roads ahead.

Some businesses were burned entirely to the ground like Shay’s, while others face long-term displacement due to damage or smoke. For those fortunate enough to have brick-and-mortar properties still standing, they’re surrounded by what some have described in interviews as “ground zero.”

“It’s kind of unfathomable,” said Henri Wood, who owned a cannabis business called The Flourish Group that was burned down. “What was once just a vibrant, lively community is just completely gone.”

Altadena’s diversity cannot be understated. Census data shows that more than half of the population is people of color, with Latinos making up 27% of residents and Black people accounting for 18%.

Altadena has historically been known as a hub for Black families and businesses after being one of the only Los Angeles County areas exempt from redlining during the Civil Rights movement. The Associated Press found that the home ownership rate for Black people in Altadena now sits above 80%, which is nearly double the national average.

But Altadena’s business owners — many of whom also grew up and now raise families there — are worried the fires will leave that diversity in the rubble. Emeka Chukwurah, founder of community culture center Rhythms of the Village, said he’s concerned that the fires will expedite gentrification that was already taking place in the neighborhood.Black residents accounted for more than 40% of the town’s population in 1980, according to Altadena Heritage. That proportion has been more than halved since then. Chukwurah has sold Altadena-branded merchandise to keep the community and its diversity from being forgotten by broader society.

“I’m hoping that we can keep the developers and those kind of people at bay so that we can hold on to what’s been built over generations,” Chukwurah said. “I’m hoping that this one will be in the history books as a resilient community, and that a large amount of us — or, if not, all of us — can stay to tell the story.”

Insurance agent Maricela Viramontes has seen how homeowners in the town at the foothills of the San Gabriel mountains are responding firsthand. Many are accustomed to fires due to its geographic location, she said, but they did not expect the destruction seen in January. The deadly fires caused more than $250 billion in damage and economic loss, according to an AccuWeather estimate.

Viramontes, who has lived in Altadena for nearly 25 years, woke up the morning after the fires in a shelter, as it was the only place her family could find to evacuate to. By early that morning, she began receiving calls while still at the shelter from clients looking for guidance on filing claims for lost property.

It’s the same paperwork that she, too, is filling out. Shortly after that day taking calls in the shelter, Viramontes learned that her home and car were both destroyed. Her office needs months of repairs for smoke damage.

“Everyone asks, ’What can I do?, ‘How can I help you?,‘” said Viramontes, who now lives and works out of her parents’ home nearby. “It’s so hard to answer that question when you don’t know.”

As businesses begin draft plans to clear their land and build new structures, they’re making plans for how to make ends meet in the short term.

Wood’s cannabis shop, for instance, has been connecting customers directly with providers while it figures out a long-term strategy. He called donations and mutual aid a “lifeline” for the business, which he said is excluded from several government aid programs because marijuana is not legalized federally.

Multiple entrepreneurs interviewed by CNBC said they are considering short-term rentals. They’re also considering business loans, though there’s concern about owing money with the financial outlook for their ventures so uncertain.

Through it all, these owners haven’t forgotten they are part of a community that’s stepping up to meet the moment.

Steve Salinas, who’s owned a namesake bike shop in Altadena for nearly four decades, has been repairing donated bicycles and re-homing them with community members. He’s gotten parts donated from other shops and monetary support through GoFundMe.

“Everybody sort of pitches in to help where they can,” said Salinas, who is looking for a short-term rental space after his store burned down. “People that have lost everything are donating their time and their resources and, most importantly, their connections to help other people in the community heal.”

In the same vein, Rhythms of the Village’s Chukwurah opened a free boutique with clothing and other necessities at his family home. It’s the temporary headquarters for the business, which has previously offered drum lessons and classes on Nigerian language and African history, after their storefront burned down.

Chukwurah said he’s committed to keeping the business in the Altadena area. As he scouts out a new location for the center, he’s planning to purchase this time around instead of rent.

“The structures are down,” he said, “but the community spirit is up.”

— NBC News contributed to this report.

The U.S. Treasury Department announced it will not enforce a Biden-era small business rule intended to curb money laundering and shell company formation.

In a Sunday evening announcement, Treasury said in a news release that it will not impose penalties now or in the future if companies fail to register for the agency’s beneficial ownership information database that was created during the Biden administration.

Despite efforts by small businesses to undo the rule in the courts, it remains in effect.

On Sunday, President Donald Trump on his Truth Social media site praised the suspension of enforcement of the rule and said the database is “outrageous and invasive.”

“This Biden rule has been an absolute disaster for Small Businesses Nationwide,” he said. “The economic menace of BOI reporting will soon be no more.”

In September 2022, the Treasury Department started rulemaking to create a database that would contain personal information on the owners of at least 32 million U.S. businesses as part of an effort to combat shell company formations and illicit finance.

The rule required most American businesses with fewer than 20 employees to register their business owners with the government as of Jan. 1, 2024. Small businesses are targeted because shell companies, often used to hide illegally obtained assets, tend to have few employees.

Treasury officials, including former Treasury Secretary Janet Yellen, said the regulatory burden would be small, costing about $85 per business, but would offer benefits to law enforcement officials seeking to track down money launderers and other criminals. She said in January 2024 that more than 100,000 businesses had filed beneficial ownership information with Treasury.

The rule and its legislative authority — the Corporate Transparency Act, an anti-money laundering statue passed in 2021 — have been mired in litigation. In 2022, a small business lobbying group sued to block the Treasury Department’s requirement that tens of millions of small businesses register with the government. On Feb. 27, Treasury’s Financial Crimes and Enforcement Network said it would not take enforcement actions against companies that do not file beneficial ownership data with the agency.

Business leaders cite privacy and security concerns about the database and say it is duplicitous to other government agencies that maintain corporate databases.

“This is a victory for common sense,” said U.S. Secretary of the Treasury Scott Bessent on Sunday. “Today’s action is part of President Trump’s bold agenda to unleash American prosperity by reining in burdensome regulations, in particular for small businesses that are the backbone of the American economy.”

Kroger Chairman and CEO Rodney McMullen has resigned after an internal investigation into his personal conduct.

Kroger, the nation’s largest grocery chain, said Monday that the investigation into McMullen’s personal conduct was unrelated to the business, but was found to be inconsistent with its business ethics policy.

Board member Ronald Sargent will serve as chairman and interim CEO, effective immediately.

Sargent has been on Kroger’s board since 2006 and has served as the lead director of the company since 2017. He’s worked in several roles at the grocery chain across stores, sales, marketing, manufacturing and strategy. Sargent is also the former chairman and CEO of Staples.

McMullen, 64, began his career with Kroger in 1978 as a part-time stock clerk and bagger at a store in Lexington, Kentucky. He worked his way up through the company, becoming chief financial officer in 1995 and chief operating officer in 2009. McMullen was named Kroger’s CEO in 2014 and became the company’s chairman the following year.

Cincinnati-based Kroger said its board was made aware of the situation on Feb. 21 and immediately hired an outside independent counsel to conduct an investigation, overseen by a special board committee.

The company said that McMullen’s conduct is not related to its financial performance, operations or reporting, and did not involve any Kroger associates.

Kroger will conduct a search for its next CEO, with Sargent agreeing to remain as interim CEO until someone is appointed to the role permanently.

Kroger shares fell more than 3.5% ahead of the opening bell Monday.

McMullen’s departure comes as Kroger is regrouping from its failed effort to merger with Albertsons. The two companies proposed what would have been the largest supermarket merger in U.S. history in 2022, saying they needed to combine forces to better compete with rivals like Walmart.

But two judges halted the $24.6 billion deal in December, saying it was likely to lessen competition and raise prices. Albertsons later sued Kroger, saying it had failed to make every effort to ensure that the merger would win regulatory approval.

The Consumer Financial Protection Bureau’s Trump-appointed leadership plans to fire nearly all its 1,700 employees while “winding down” the agency, according to testimony from employees.

In a trove of statements released late Thursday, federal employees said that the mass layoff was discussed in meetings they attended this month with senior CFPB leaders and members of Elon Musk’s Department of Government Efficiency.

“My team was directed to assist with terminating the vast majority of CFPB employees as quickly as possible,” said an employee identified as Alex Doe, a pseudonym used out of fear of retaliation.

Doe said the plan from CFPB leaders and DOGE was to cut the bureau’s workforce in three phases. It would first eliminate probationary and term employees, then carry out a wave of about 1,200 layoffs, leaving a skeleton crew of a few hundred workers.

“Finally, the Bureau would ‘reduce altogether’ within 60-90 days by terminating most of its remaining staff,” Doe said.

The workers’ testimony comes at a crucial time for the CFPB, the agency created to protect consumers after the 2008 financial crisis was caused, in part, by irresponsible lending. Since DOGE operatives first arrived at the CFPB this month, the bureau has closed its Washington headquarters, initiated the first round of layoffs, and told those who remain to stop nearly all work.

The filings were made in the case started by a CFPB union that suspended acting Director Russell Vought’s moves to shutter the bureau. After the CFPB fired about 200 probationary and term employees, the agency’s actions were put on hold until a hearing scheduled for Monday.

The documents show an apparent disconnect between some of the external messaging from Vought and the behind-the-scenes activity at the bureau.

“CFPB leadership has also been apparently lying to us that it will allow us to follow the law and our statutory obligations to protect consumers,’ said a current CFPB employee who spoke on the condition of anonymity because they feared repercussions. ‘Those of us employed at the CFPB will not stop fighting for our right to get back to the work of protecting consumers that Congress has required of us.”

In a motion filed Monday, Vought pushed back against the idea that he planned to eliminate the CFPB.

“The predicate to running a ‘more streamlined and efficient bureau’ is that there will continue to be a CFPB,” he wrote.

But the Trump administration’s plan was to take the CFPB down to the barest minimum staffing required under law: Just five CFPB employees would remain, either in a standalone office or folded into another regulatory body, the workers testified.

In meetings from Feb. 18 to Feb. 25, “staff were told by Senior Executives that the CFPB would be eliminated except for the five statutorily mandated positions,” said another current CFPB employee, this one identified as Drew Doe.

“One Senior Executive said that CFPB will become a ‘room at Treasury, White House, or Federal Reserve with five men and a phone in it,’” Doe said.

The employees said that, if directed to by the court, they would provide their names and titles under seal.

Elon Musk said Thursday that he’s sending his Starlink satellite internet terminals to the Federal Aviation Administration while saying, without providing evidence, that current technology poses a risk to air travel safety.

The billionaire and top advisor to President Donald Trump, who has been tasked with cutting costs throughout the federal government, posted the claims on his social media platform, X.

Executives at major airlines told CNBC on Thursday that they do not see risks to air travel safety because of the FAA’s technology.

The FAA, which regulates Musk’s company SpaceX, didn’t immediately comment but earlier this week said it has been testing Starlink technology in Atlantic City, New Jersey, and in Alaska. The White House referred a request for comment to the FAA.

The FAA “has been considering the use of Starlink since the prior administration to increase reliability at remote sites, including in Alaska,” the agency said Monday. “This week, the FAA is testing one terminal at its facility in Atlantic City and two terminals at non-safety critical sites in Alaska.”

The Washington Post reported on Wednesday that the FAA is close to canceling a contract with Verizon for new communication technology for air traffic control and giving it instead to Musk’s Starlink.

Musk said Thursday on X: a “Verizon communication system to air traffic control is breaking down very rapidly.” Verizon said in a statement that “the FAA systems currently in place are run by L3Harris and not Verizon.” He later corrected himself and said that L3Harris is responsible for the “rapidly declining” system.

L3Harris didn’t immediately return request for comment.

Verizon said it is working on replacing older air traffic control technology.

“Our Company is working on building the next generation system for the FAA which will support the Agency’s mission for safe and secure air travel,” Verizon said in its statement. “We are at the beginning of a multi-year contract to replace antiquated, legacy systems. Our teams have been working with the FAA’s technology teams and our solution stands ready to be deployed. We continue to partner with the FAA on achieving its modernization objectives.”

Musk didn’t immediately respond to a request for comment.

Some Democrat lawmakers have raised concerns about Musk’s role in the Trump administration while also potentially working to provide technology to one of his regulators.

“While I support efforts to modernize our air traffic control system and improve aviation safety, this decision raises conflicts-of-interest concerns, given Elon Musk’s dual position as Chief Executive Officer of SpaceX and wide-ranging role in the Trump administration,” wrote Sen. Ed Markey, D-Mass., to Chris Rocheleau, acting head of the FAA, on Wednesday.

Others have raised alarms after the Trump administration laid off hundreds of FAA employees, though they do not include air traffic controllers.

“At a minimum, we need to know why this sudden reduction was necessary, what type of work these employees were doing, and what kind of analysis FAA conducted — if any — to ensure this would not adversely impact safety, increase flight delays or harm FAA operations,” Sen. Tammy Duckworth, D-Ill., wrote to Rocheleau on Feb. 19.

The FAA has said it has retained staff “who perform safety critical functions. The FAA does not comment on ongoing certification work.”

Airlines for years have pushed for air traffic modernization. Carriers have long complained about how older systems have not kept up with the industry’s needs, leading to flight delays that cost both passengers and carriers. Air travel demand hit records after the pandemic.

“Carriers have made remarkable changes and significant investments in technologies, operations, product and people,” Airlines for America, which represents major U.S. carriers, said Thursday. “The government needs to do the same in an organized and timely way.”

Musk’s comments on air safety failures, which didn’t include evidence, come after last month’s fatal collision between an American Airlines regional jet and an Army Black Hawk helicopter, killing all 67 people on board the two aircraft. It ended an unprecedented period of air travel safety in the U.S., marking the first fatal passenger airline crash in the country since 2009 and the deadliest since 2001.

Last week, more than a dozen aviation industry groups and labor unions, urged lawmakers to approve “emergency funding” for air traffic control modernization and staffing.

The egg aisle is anything but cheaper by the dozen these days — and that’s becoming a big problem ahead of the Easter holiday.

The makers of Easter egg dye kits are bracing for the potential fallout if the egg shortage doesn’t begin to clear up before the April 20 holiday. For many companies that specialize in these activity sets, egg dye kits and related products make up a significant share of annual revenue. Diminished sales could have a major impact on their bottom lines.

“I think sales will be down,” said Ashley Phelps, founder and CEO of Color Kitchen, a plant-based baking decoration company. “That remains to be seen, but I think it probably will be.”

Wholesale egg prices have eclipsed record levels, reaching a high of $8.58 per dozen amid a domestic bird flu outbreak, according to global commodity data firm Expana. More than 52 million egg-laying birds have died, leaving the national flock at just 280 million, a critically low level, said Ryan Hojnowski, a market reporter at Expana.

He noted that rising prices have slowed consumer demand as retail egg prices average around $6 per dozen or higher. Additionally, many stores have implemented purchasing limits, restricting the number of cartons that customers can buy at one time.

The combination of inflated price and limited availability could curtail sales of eggs for the Easter holiday, ultimately affecting the demand for egg dye kits.

Natural Earth Paint, a company that manufactures natural art supplies and craft kits for kids, typically sells between 40,000 and 50,000 egg dye kits around the Easter holiday, according to founder Leah Fanning. So far this year, the company’s retail partners have ordered only 7,000 kits.

“It’s definitely a huge drop,” Fanning said, noting that most buyers have cited the egg shortage for the smaller orders.

Fanning told CNBC that the egg dye kits have been Natural Earth Paint’s bestselling product for 13 years and kept the company in business for its first eight years. Of the company’s more than 40 products, the egg dye kit remains its “absolute bestseller.”

She noted that while the majority of Natural Earth Paint’s sales come from retail locations, online sales typically pick up around three weeks before Easter. That leaves the chance that direct-to-consumer sales could get a boost in mid-March.

Color Kitchen said its Easter items represent 20% of the company’s total stock of items and outpace sales of all other items, including its Christmas icing kits.

Phelps noted that most retailers order these egg kits months ahead of the holiday to ensure they are in stock immediately after Valentine’s Day. She said retailers “took a little less product this year” given sensitivity to the inflationary environment.

“The other concern is that, some of the grocery stories, if they don’t sell through, then we get charged back for product that goes discounted to try and move it out of the store,” Phelps said. “So, that’s where we’ll get hit if the stuff that’s already been shipped out to grocery stores does not sell. That could potentially be very bad.”

Phelps said 75% of Color Kitchen sales are from the shelf. The remaining 25% is from direct-to-consumer sales on its website and on sites such as Amazon.

There are some companies that still expect to see solid business this Easter. The holiday takes place in late April, giving companies three more weeks of sales compared with last year.

Hey Buddy Hey Pal, a company that makes the Eggmazing Egg Decorator, a crafting tool that spins eggs so kids can use markers to color them, generates between 85% and 90% of its annual revenue from its Easter product. Last year, the company generated $14 million in sales, a 22% bump from the year prior.

Curtis McGill, co-founder of Hey Buddy Hey Pal, said retailers have ordered fewer of its products this year. Still, the company said it expects another jump of 18% in annual revenue as it’s set to sell between 600,000 and 700,000 egg decorators this year.

Even as egg prices boil over, some dye kit makers see egg decorating as an essential tradition that few families will opt to skip, even if they reduce the number of eggs they use.

Paas, the leader in the egg dye kit space, expects that some families will decorate fewer eggs this year, but said many will still participate in the tradition.

“It’s just such a sticky tradition,” said Joe Ens, CEO of Signature Brands, which owns the 140-year-old iconic Paas brand.

The company recently completed a survey of 120 consumers and found that 94% of them still plan on decorating eggs this holiday.

“And the reason for that, other than the tradition being so important to consumers, is if you really break down the cost of the tradition, it is arguably the most affordable family tradition during any holiday,” he said.

Paas expects to sell more than 10 million kits this year, one of the company’s strongest sell-ins ever, he said.

Arts and crafts store chain Michaels said it’s already seeing shoppers opt for egg-inspired products. The company told CNBC that 43% of its total Easter sales so far this year have been for plaster, plastic and craft eggs.

Michaels said a particular craft egg kit designed to “mimic the traditional egg-decorating experience” is selling nearly three times faster than the company had anticipated.

Similarly, Hey Buddy Hey Pal expects some families may opt to purchase wooden eggs instead of real ones. Though the alternatives are typically more expensive than real eggs, they’re an opportunity to keep the creations around long after the holiday is over.

“A lot could happen between now and then, we can continue to see an outbreak of avian flu and some different egg farms that hadn’t been affected,” said McGill. “It could get worse before it gets better. That’s not the projections, but at this point … I’m just gonna hold my breath until we get to April the 20th.”

Nvidia CEO Jensen Huang said next-generation AI will need 100 times more compute than older models as a result of new reasoning approaches that think “about how best to answer” questions step by step.

“The amount of computation necessary to do that reasoning process is 100 times more than what we used to do,” Huang told CNBC’s Jon Fortt in an interview on Wednesday following the chipmaker’s fiscal fourth-quarter earnings report.

He cited models including DeepSeek’s R1, OpenAI’s GPT-4 and xAI’s Grok 3 as models that use a reasoning process.

Nvidia reported results that topped analysts’ estimates across the board, with revenue jumping 78% from a year earlier to $39.33 billion. Data center revenue, which includes Nvidia’s market-leading graphics processing units, or GPUs, for artificial intelligence workloads, soared 93% to $35.6 billion, now accounting for more than 90% of total revenue.

The company’s stock still hasn’t recovered after losing 17% of its value on Jan. 27, its worst drop since 2020. That plunge came due to concerns sparked by Chinese AI lab DeepSeek that companies could potentially get greater performance in AI on far lower infrastructure costs.

Huang pushed back on that idea in the interview on Wednesday, saying DeepSeek popularized reasoning models that will need more chips.

“DeepSeek was fantastic,” Huang said. “It was fantastic because it open sourced a reasoning model that’s absolutely world class.”

Nvidia has been restricted from doing business in China due to export controls that were increased at the end of the Biden administration.

Huang said that the company’s percentage of revenue in China has fallen by about half due to the export restrictions, adding that there are other competitive pressures in the country, including from Huawei.

Developers will likely search for ways around export controls through software, whether it be for a supercomputer, a personal computer, a phone or a game console, Huang said.

“Ultimately, software finds a way,” he said. “You ultimately make that software work on whatever system that you’re targeting, and you create great software.”

Huang said that Nvidia’s GB200, which is sold in the United States, can generate AI content 60 times faster than the versions of the company’s chips that it sells to China under export controls.

Nvidia counts on billions of dollars of infrastructure spend annually from the largest tech companies in the world for an outsized amount of its revenue. The company has been the biggest beneficiary of the AI boom, with revenue more than doubling in five straight quarters through mid-2024 before growth decelerated slightly.