WSJ : Activist Engine Capital Urges Government Contractor KBR to Explore a Sale

Activist Engine Capital Urges Government Contractor KBR to Explore a Sale
KBR is in the midst of splitting its businesses; Engine thinks that is unnecessary

  • Activist investor Engine Capital, with a roughly 2% stake, is urging government contractor KBR to explore a sale.
  • KBR’s stock price has fallen over 25% since it announced plans last September to separate its businesses into two companies.
  • Engine Capital believes a full-company sale could fetch from $48 to $55 a share, mitigating risks of KBR’s planned separation.

Activist investor Engine Capital has a roughly 2% stake in KBR KBR 0.64%increase; green up pointing triangle and is urging the government contractor to explore a sale because it believes the company’s businesses are being undervalued in the public market, according to a letter viewed by The Wall Street Journal.

The details
KBR has a market value of roughly $4.5 billion, with its stock price down more than 25% since it announced plans last September to separate its businesses.

KBR, run by Chief Executive Stuart Bradie, is an engineering, consulting, logistics and training company.

It is in the process of dividing into two, with one firm focused on so-called mission technology solutions, serving military and other government agencies, and another firm (being called New KBR) focused on sustainable technology, centered on energy transition and emissions reduction.

KBR said the split would let investors value their underlying businesses better.

Engine argues that the planned separation would be costly and create new risks and tax difficulties, according to the letter that was delivered to KBR’s board of directors on Monday.

Instead, Engine believes KBR could attract both private-equity and strategic buyers for the company and could fetch from $48 to $55 a share in a transaction. KBR shares closed Wednesday at $36.02.

“A full-company sale would offer shareholders a clear and immediate realization of value,” Engine Managing Member Arnaud Ajdler wrote in the letter. “It would also mitigate execution risk, eliminate incremental standalone costs and allow an acquirer to optimize the business under its own management and operating structure.”

The context
Another activist investor previously supported plans for KBR to separate its segments. Irenic Capital Management built a stake in KBR in late 2024 and pushed the company to spin off the private-sector part of its business, the Journal previously reported.

Engine, founded in 2013 by Ajdler, has roughly $1.5 billion under management. Earlier this year, Engine successfully pushed for the sale of uniform supplier UniFirst to Cintas.

WSJ : AI Has Made Memory Chips One of the World’s Most Profitable Products

AI Has Made Memory Chips One of the World’s Most Profitable Products
Samsung is expected to outearn Apple, Microsoft and Alphabet, while two other memory giants are projected to enter the top-10 profit list this year


SEOUL—At the end of last year, the world’s investments in artificial intelligence had already pushed the memory-chip industry into a “super boom cycle.” Profits smashed records. Prices in the opening three months of 2026 were expected to jump another 50% from the prior quarter.

But things didn’t go that way. They got better—a lot better.

On Thursday, Samsung 005930 -2.43%decrease; red down pointing triangle Electronics reported first-quarter net profit equivalent to more than $30 billion. That not only blew away its prior quarterly record, but also nearly topped the South Korean company’s high for full-year profit.

Around 94% of Samsung’s first-quarter operating profit came from its semiconductor business.

Samsung’s chief memory rivals—SK Hynix of South Korea and U.S.-based Micron Technology MU 2.81%increase; green up pointing triangle—recently delivered similarly dizzying results. Those three firms dominate the market for memory, which gets used alongside Nvidia’s processor chips for AI computing.


While fears grow over whether AI services will eventually reap big profits, an epic windfall is flowing to the companies involved in the build-out of related infrastructure.

The historic run doesn’t look likely to end soon. Based on Samsung’s prebooked orders, the supply crunch is expected to grow worse next year, said Jaejune Kim, the company’s executive vice president for memory. “The available supply is far short of customer demand,” he said on a Thursday earnings call.

Since the start of this year, shares of Samsung have risen by 72%. SK Hynix’s shares are up 90% and Micron has gained 65%.

Memory prices in the first three months of 2026 grew nearly 100% from the prior quarter, roughly double the initially projected growth, according to Trendforce, a tech-market researcher.

In recent years, memory makers had given priority to production of specialized memory needed for AI—called high-bandwidth memory or HBM—which in turn constrained the supply of more conventional memory chips used in smartphones, personal computers and general servers. Training large-language models typically requires the pairing of Nvidia’s graphics processing units with HBM.

More recently, demand has risen for inference, the type of computing that allows trained AI models to respond to user queries. That sparked more demand for general servers, which use conventional memory, and elevated the earnings of Samsung, SK Hynix and Micron into a new echelon.

The three companies are collectively expected to generate net profit of roughly $350 billion for 2026, according to FactSet estimates. Each is projected to rank among the 10 most profitable listed companies in the world—with Samsung vaulting past Alphabet GOOGL 0.05%increase; green up pointing triangle, Microsoft and Apple to the No. 2 spot. A year ago, none of the memory makers cracked the top 10.


A single chip-making factory, or fab, can cost upward of $20 billion and take years to build. Samsung, SK Hynix and Micron are building new facilities, but production won’t likely hit full levels until late 2027 or 2028, industry analysts say. Many production lines are allocated to HBM, which takes up more capacity compared with conventional memory.

Memory comes in two major types: DRAM, which provides temporary storage for faster data-processing in servers, PCs and other electronics, and NAND flash, which provides long-term data storage, such as storing photos on a phone.

HBM is made by stacking DRAM chips on top of one another, which is later packaged alongside processors made by the likes of Nvidia to speed up AI computing. Nvidia works closely with Samsung, SK Hynix and Micron.

Operating profit margins for both types have roughly doubled from usual levels, hitting around 80% for DRAM and up to 60% for NAND flash, said MS Hwang, a semiconductor research analyst at Counterpoint.


Many big companies in the server, PC and smartphone businesses are paying premiums to buy up bigger volumes of memory and constrain supply for rivals, Hwang added. “It’s the idea that whoever dominates memory supply can dominate AI,” he said.

“What we’re seeing today is the most severe memory shortage that the market has ever seen,” said Marcus Chen, executive vice president at FusionWorldwide, a global distributor of electronic components. Most of the customers Chen supports are getting only 30% to 50% of the memory chips they need. “Some even less,” he said.

Customers and memory-chip makers long relied on handshake deals for long-term supply, but are now moving to binding contracts in some cases. Some contracts go as long as five years and call on customers to prepay some 30% of the cost or share in the investment costs for new memory-chip factories, said Peter Lee, a semiconductor analyst at Citi.

“We’re seeing customers go this far,” Lee said.

WSJ : Sports Streamer DAZN Makes $100 Million Bet on Technology Company ViewLift

Sports Streamer DAZN Makes $100 Million Bet on Technology Company ViewLift
DAZN is seeking to expand its reach within the U.S.

DAZN agreed to acquire technology company ViewLift for approximately $100 million to expand its U.S. sports market presence.
ViewLift provides streaming technology for 15 U.S. professional sports teams and five regional sports networks.
DAZN says it sees opportunities in the U.S. regional sports market.

Sports media company DAZN has agreed to buy technology company ViewLift for roughly $100 million, according to people close to the deal.

London-based DAZN, which streams sports including soccer, boxing and basketball and is available in more than 200 countries and territories, is seeking to establish itself as a leader in the U.S. sports market. DAZN also provides access abroad to National Football League games through NFL Game Pass.

ViewLift provides technology for streaming services for 15 professional U.S. sports teams, five regional sports networks, and clients in news and entertainment. DAZN is betting that the acquisition will help it expand its footprint in the U.S.

ViewLift was founded more than a decade ago, initially focusing on streaming films, before pivoting to other content, including sports.

Regional sports networks have come under financial pressure in recent years as consumers cut the cord on their cable TV packages. Main Street Sports Group, which operates channels branded as FanDuel Sports Network, has struggled to make payments to sports franchises. In February, Main Street told teams that it would wind down operations unless it reaches a strategic transaction. DAZN had been in talks to acquire a majority stake in Main Street.

“We think there is a great opportunity for DAZN to play a big role there and be part of the solution,” Shay Segev, DAZN’s chief executive, said in reference to the business challenges facing regional sports.

>>> Europe : Brokers Upgrades & Downgrades - 30th of April 2026

>>> Up
* Bilia Raised to Neutral at SB1 Markets; PT 135 kronor
* Brenntag Raised to Neutral at UBS; PT 60 euros
* Etsy PT Raised to $72 from $56 at Evercore ISI
* Hexatronic Raised to Buy at SEB Equities; PT 38 kronor
* Kone Raised to Overweight at JPMorgan; PT 70 euros
* Lloyds Raised to Buy at UBS; PT 115 pence
* OKEA Raised to Buy at Arctic Securities; PT 43 kroner
* Qualcomm Raised to Buy at Summit Insights
* Sotkamo Silver Raised to Reduce at Inderes; PT 3.70 kronor
* Thyssenkrupp Raised to Buy at Deutsche Bank; PT 14.50 euros
* Tieto Oyj Raised to Buy at SEB Equities; PT 21 euros
* Zealand Pharma Raised to Buy at SEB Equities; PT 475 kroner

>>> Down
* DCC Cut to Sector Perform at RBC; PT 6,500 pence
* Epiroc Cut to Hold at Pareto Securities; PT 275 kronor
* Fortum Cut to Reduce at Inderes; PT 21 euros
* Kempower Cut to Reduce at Inderes; PT 15 euros
* Kone Cut to Hold at ABG; PT 58 euros
* Matvareexpressen Cut to Hold at Norne Securities; PT 220 kroner
* Orron Energy Cut to Hold at SEB Equities; PT 9.70 kronor
* Solteq Cut to Sell at Inderes; PT 21 euro cents

>>> Initiation
* Prosus ADRs Rated New Overweight at Morgan Stanley; PT $12

>>> Call
* JPMorgan’s Bob Michele Sees Economy Absorbing Some Inflation

>>> What to look at today - 30th of April 2026

 Oil surged to the highest level in almost four years with little sign of progress toward ending the Middle-East conflict, weighing on risk sentiment despite a boost from megacap tech earnings. Brent climbed as much as 7.1% to $126.41 a barrel, heading for a ninth day of gains that would be the longest winning streak since May 2022. The commodity has surged more than 105% this year. Thursday’s gains extended after Axios reported President Donald Trump was slated to receive a briefing on new plans for potential military action in Iran.  Futures contracts for the Nasdaq 100 erased gains of as much as 1.1%, after earlier being boosted by robust earnings of megacap companies such as Alphabet Inc. and Amazon.com Inc. MSCI’s Asia Pacific share index fell 1.3% and European equities were primed to drop at the open. Bonds slid as the surge in oil and a hawkish hold by the Federal Reserve sapped demand for fixed-income assets. Treasury 10-year futures dropped for a fourth day, while cash 10-year yields held near the highest since July. Yields on Japan’s 10-year notes rose to the highest since 1997. From surging oil prices driven by the Iran war to a divided Fed holding rates steady and megacap tech earnings, traders are grappling with a barrage of whipsawing headlines. With oil climbing to four-year highs and bond yields rising, the backdrop tests a global equity rally that has erased war-related losses and pushed US markets to new highs, driven by strong tech earnings. There’s more for traders to parse Thursday, with the European Central Bank and the Bank of England set to announce policy decisions, followed by US economic data. Apple Inc. is the marquee earnings event on Thursday after a frenzied Wednesday offered a glimpse at how some of the world’s biggest tech companies are doing in artificial intelligence. The upshot is that Alphabet’s Google is seeing a clear payoff from its AI spending, while Meta is lagging behind. Alphabet rose 7% in post-market trading, while Meta Platforms Inc. dropped 7%. Amazon.com Inc. shares climbed 2.7%, while Microsoft Corp. edged up 0.3%. Elsewhere, Anthropic PBC began weighing a fresh funding round that would value the AI developer at more than $900 billion, according to people familiar with the matter, potentially leapfrogging its longtime rival OpenAI as the world’s most valuable AI startup. In Asia too, the AI-fueled rally is masking signs of strain, with gains in tech names overshadowing the impact of the US-Iran war on the broader market. The Kospi Index in South Korea was set for its best month since 1998 and the Taiex in Taiwan the best since 2001. Elsewhere, the yen was steady on Thursday after the currency extended its slide beyond 160 per dollar to its weakest level this year, fueling risk that Japanese officials may step into the market to offer support. Gold edged up 0.5% to $4,570 an ounce, while Bitcoin advanced to about $75,750. Earlier, the Fed left rates unchanged Wednesday, but revealed a deepening division over the outlook for policy. Traders have all but abandoned wagers on a rate cut this year and began pricing in the chances of a hike in 2027. Jerome Powell’s press conference was his last at the helm of the central bank after the Justice Department dropped a controversial criminal investigation into the Fed, clearing the way for the Senate confirmation of Kevin Warsh as the next chair. Powell said he’ll remain at the central bank as a governor. The latest gathering revealed a deepening division. Cleveland Fed President Beth Hammack alongside Minneapolis’ Neel Kashkari and Dallas’ Lorie Logan “supported maintaining the target range for the federal funds rate but did not support inclusion of an easing bias in the statement at this time.” Governor Stephen Miran dissented in favor of a cut. US After Hours GOOG +6.7%, AMZN +4.6%, MSFT +1.4% higher on earnings; META -5.6% lower on earnings; VIAV +19.3%, QCOM +14.9%, GKOS +10.3% also higher on earnings; TDOC -13.1%, NCSM -11.4%, KLAC -9.3% lower on earnings.

Nikkei -1.54% Hang Seng -1.23% CSI -0.01% Shanghai +0.09% Shenzen +0.11%

Eur$ CNH CNY JPY GBP CHF RUB TRY WTI$ Gold BTC ETH

S&P -0.16% Nasdaq -0.10% EuroStoxx -1% FTSE -0.19% Dax -1% SMI

Macro :
- BoE in Stand-Off With FCA Over Trading Firms’ Capital: FT
- US Seeks Forfeiture of Seized Oil Tankers Tied to Iran

Keep an eye on :
- APAM NA : Aperam 1Q Adjusted Ebitda Beats Estimates
- MT NA : ArcelorMittal 1Q Ebitda Beats Estimates
- AEF IM : Italian Luxury Company Aeffe’s CFO Rocco Bennici Resigns
- AMZN US : Amazon Slips as Analysts Debate Pace of AWS Growth: Street Wrap
- AAPL US : Apple Plans a Siri Camera Mode and Upgraded Visual AI in iOS 27
- BAS GY : BASF 1Q Adjusted Ebitda Beats Estimates
- BBVA SM :BBVA 1Q Net Income Beats Estimates
- BYW6 GY : T&G Global Plans Divestments as BayWa Eyes Sale of 74% Stake
- BNP FP : BNP Agrees to Sell Entire Stake in Moroccan Bank BMCI to HFC
- BP/ LN : Venezuela Signs Gas Exploration, Production MOU With BP
- CABK SM : CaixaBank 1Q Net Income Beats Estimates
- CVNA US : Carvana Shares Rise as 1Q Revenue Beats Estimates (1)
- CO FP : Casino 1Q Net Sales EU1.95B Vs. EU2.18B Q/Q
- CLNX SM : Cellnex 1Q Revenue Beats Estimates
- EDP PL : EDP Bets Big on Australia in $1 Billion Renewables Push in Asia
- EL FP : Estée Lauder Takes Minority Stake in Skincare Brand 111SKIN
- F US : Ford Raises Profit Outlook Despite Rising Commodity Costs
- GOOGL US : Alphabet Climbs After ‘Outstanding’ Results, US Seeks to Deploy Hypersonic for the First Time Against Iran
- NK FP : Imerys 1Q Adjusted Ebitda Beats Estimates
- KGX GY : Kion 1Q Adjusted Ebit Misses Estimates
- LAND SW : Landis+Gyr Sells Rhebo to Everfield
- LAZ US : Lazard Buys $575 Million Firm to Bolster Private Markets Banking
- META US : Meta Falls as Spending Plans Offset Results: Street Wrap
- ML FP : Michelin 1Q Revenue Beats Estimates
- MSFT US : Microsoft Down as Results Suggest Lower AI Traction: Street Wrap
- NOVOB DC : Novo-Backed Drugmaker Avalyn Raises $300 Million in Upsized IPO
- PSH LN : Bill Ackman’s IPO Ties His $9 Billion Fortune to Public Markets
- PHM SM : Pharma Mar 1Q Net Income Misses Estimates
- P911 GY : Porsche 1Q Operating Profit Meets Estimates
- PAH3 GY : Porsche Weathers US Tariffs, China Slump With Robust Margin
- PRY IM : Prysmian 1Q Adjusted Ebitda Meets Estimates
- PUIG SM : Estée Lauder Mulls Bid for Puig at €18-19/Share: Expansion
- RR/ LN : Rolls-Royce Wins Latam Order for Struggling Engine on Boeing 787
- SCYR SM : Sacyr 1Q Net Income EU37.5M Vs. EU26.8M Y/y
- 9984 JP : SoftBank’s $40 Billion Loan for OpenAI Stake Draws More Banks
- 9984 JP : SoftBank to Create and List AI Firm Roze in the US, FT Says (1)
- GLE FP : SocGen 1Q Net Income Beats Estimates
- Space X IPO : SpaceX Starlink Revenue Per User Fell 18% 2023-2025: Information
- STAN LN : StanChart Profit Beats Street as Lender Downplays Gulf Conflict
- TLX GY : Talanx 1Q Prelim Consolidated Result EU774m
- UMG NA : UMG 1Q Ebitda Misses Estimates, UMG 1Q Revenue in Constant Currency Beats Estimates
- VKTX US : Viking Therapeutics 1Q Revenue Matches Estimates

>>> US After Hours Summary: GOOG +6.7%, AMZN +4.6%, MSFT +1.4% higher on earning

After Hours Summary: GOOG +6.7%, AMZN +4.6%, MSFT +1.4% higher on earnings; META -5.6% lower on earnings; VIAV +19.3%, QCOM +14.9%, GKOS +10.3% also higher on earnings; TDOC -13.1%, NCSM -11.4%, KLAC -9.3% lower on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: VIAV +19.3%, TTMI +16.4%, PI +15.1%, QCOM +14.9% (also authorizes new $20 bln stock repurchase program), FORM +14%, PRCT +12.4%, BHE +11.1%, MRAM +11.1%, GKOS +10.3%, CVNA +8.8%, FMC +8.5%, GOOG +6.7% (also increases dividend; raises CapEx guidance) ASIC +6.3%, SFM +6%, BNL +5.4%, CWH +5.2%, LXU +4.9%, AMZN +4.6%, CAKE +4.6%, CMG +4.2%, ORLY +4.2%, GFL +4%, ETD +3.8%, CBZ +3.4%, CUZ +3.4% (also increases share repurchase authorization by $250 mln), TTEK +2.8%, THG +2.5%, MYRG +2.3%, BHC +2.3%, CHRW +1.6%, MSFT +1.4%, FTAI +1.4%, AR +1.2%, MAT +1.1%, WH +1.1%, ALGN +0.9%, CP +0.7%, AWK +0.7%, MGM +0.6%, VICI +0.5%, MEOH +0.3%, EBAY +0.2% (also Depop acquisition to close in Q3), PLPC +0.2%, TYL +0.1%

Companies trading higher in after hours in reaction to news: PUMP +4.5% (unit enters strategic framework agreement with CAT), SLNH +3.9% (stock offering by selling shareholders), VSAT +2.9% (successful launch and initial signal acquisition of the ViaSat-3 Flight 3 satellite), SPXC +2% (launch of the Marley OlympusMAX Fluid Cooler), POOL +1.3% (increases dividend and buyback program), SMR +1.2% (opens new office), EVO +1% (concludes cooperation agreement with MAK Capital), RMBS +0.7% (names new CFO), SWMR +0.5% (memorandum of understanding with HIMERA), ASRT +0.3% (co and Garda Therapeutics extend deadline on tender offer), ALEC +0.2% (discontinues Phase 2 PROGRESS-AD trial of nivisnebart), DRS +0.1% (awarded $150 mln modification to Army contract)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: TDOC -13.1%, NCSM -11.4%, KLAC -9.3% (also increases dividend and buyback program), FLS -9.2%, MDXG -8.3%, BBT -7.5%, TENB -7.1%, ACHC -6.6%, WAY -6.3%, EQIX -5.7%, META -5.6% (also increases CapEx guidance), AMRZ -5.1%, AMRZ -5.1%, WFG -3.3%, PPC -3.2%, SBAC -3.1%, UDR -3.1%, CVI -2.9%, ALKT -2.6% (also authorizes $100 mln stock repurchase program), MAX -2.5%, NFG -2.4%, INVH -2.1%, GRBK -2%, MORN -2%, MC -1.9%, AFG -1.9%, ALL -1.8%, F -1.6%, VKTX -1.5%, JOE -1.5%, QTWO -1.3%, SBRA -0.7%, AFL -0.4%, WWD -0.3%, PLXS -0.3% (also CEO to reitre; names new CFO), AGI -0.1%

Companies trading lower in after hours in reaction to news: SHMD -2.1% (to delay 20-F filing), GRBK -2% (audit committee concludes residential unit revenue was incorrectly reported in prior periods), AUTL -1.4% (strategic initiative to improve operational efficiency), PYPL -1.1% (confirms strategic reorganization), XWIN -0.5% (files for $1 bln mixed shelf offering), NVO -0.3% (NEJM published 26-week results from the phase 3 FRONTIER2 trial evaluating the efficacy and safety of once-monthly and once-weekly denecimig (Mim8), LMT -0.3% (awarded $1.13 bln US Army contract), EL -0.1% (minority investment in 111SKIN)

WSJ : Sergey Brin-Backed California Measures Have Signatures to Reach Ballot, Ba

Sergey Brin-Backed California Measures Have Signatures to Reach Ballot, Backers Say
Two ballot initiatives funded in part by the Google co-founder that take aim at portions of a proposed wealth tax are on track to qualify

Two California ballot initiatives funded in part by Google co-founder Sergey Brin are on track to qualify for the November ballot, according to their backers, setting up a possible clash with a proposed billionaire wealth tax.

The countermeasures are underwritten by a political organization called Building a Better California, which has received $57 million from Brin as well as $36 million from other California billionaires and business leaders.

The battling ballot initiatives represent a fight between some of California’s wealthiest residents who oppose the first-of-its-kind tax proposal and leaders of a powerful healthcare union seeking more tax income to offset looming cuts to Medicaid.

One of the Building a Better California-backed initiatives would bar new taxes on personal property, including retirement accounts, intellectual property and financial assets, excluding real estate. The measure would also bar retroactive taxes on those assets.

The campaign said that the measure collected 1.4 million signatures, which “far surpassed” the needed number, and that it started submitting signatures to county election officials Tuesday.

The other initiative would require more audits of new taxes and contains a provision about how tax revenue can be spent that directly conflicts with the wealth tax. The campaign said it collected about 1.5 million signatures and would start submitting them Wednesday.

That provision could override the wealth tax; if California voters approve competing ballot measures on the same subject, the one with more “yes” votes takes effect.

The initiatives take aim at portions of the wealth tax, which would impose a one-time, 5% tax on many assets of California billionaires. The wealth tax would apply to billionaires who were residents of California as of Jan. 1, 2026, and would apply to a broad category of assets, including stocks, bonds, business interests and intellectual property.

The healthcare union sponsoring the billionaire tax has collected more than 1.5 million signatures and expects the measure to qualify.

Representatives for both Brin-backed campaigns said the measures are designed to apply to other ballot initiatives and legislative efforts, too.

Brin didn’t respond to a request for comment.

The initiatives needed about 875,000 valid signatures to make the ballot. If elections officials certify that the measures have cleared that hurdle, the campaigns have until late June to decide whether the measures will appear on the November ballot.

Both Building a Better California-backed campaigns worked on tight timelines to collect the needed signatures. In addition to paying petition circulators in public places, the campaigns mailed petitions directly to voters, along with instructions on how to fill them out, envelopes to return them and text messages to remind them to do so.

A third measure with funding from Building a Better California is still collecting signatures, but is now aiming for the 2028 ballot, a campaign spokesman said.

FT : Elon Musk says he was ‘a fool’ to fund the launch of OpenAI

Elon Musk says he was ‘a fool’ to fund the launch of OpenAI
Billionaire says Sam Altman wanted ‘halo effect’ of a non-profit while enriching himself in second day of his testimony

Elon Musk told a jury on Wednesday that he was “a fool” to provide initial funding for OpenAI, claiming he believed the $850bn ChatGPT maker would remain a non-profit organisation.

The billionaire was testifying in federal court in Oakland, California, as the first witness in his lawsuit against Sam Altman, OpenAI and its largest shareholder, Microsoft.

“I actually was a fool who [gave] free funding for them to create a start-up,” Musk said. “I gave them $38mn of essentially free funding, which they used to create a . . . for-profit company.”

Musk brought the case claiming he was deceived by a “bait and switch” after OpenAI was created as a non-profit with the billionaire’s support and then launched a for-profit entity, which has since become one of the most valuable start-ups in the world.

His attorneys on Wednesday showed the jury emails between Musk, OpenAI’s chief executive Altman and president Greg Brockman, who were both in court.

The messages from 2017 included early discussions about creating a for-profit, and a proposed ownership breakdown under which Musk would have owned slightly more than half of the company.

After opposition from OpenAI employees, Musk ended the conversation. “Guys I’ve had enough . . . Either go do something on your own or continue with OpenAI as a non-profit,” he wrote in September 2017, adding that it was not an “ultimatum” and the proposed structure was “off the table”.

Altman replied: “I remain enthusiastic about the non-profit structure!”

Musk said in his testimony that he meant that OpenAI’s founders could not “have their cake and eat it too”. They could not have “the positive halo effect of being a non-profit charity and enrich themselves”, he added.

After Musk resigned from the board in 2018, OpenAI received a $1bn investment from Microsoft in 2019, with a capped-profit arrangement. Musk said “there was no basis for me to file a lawsuit at that time because they hadn’t violated the non-profit” principles.

OpenAI has claimed Musk waited too long to bring his case, exhausting the statute of limitations on his claims.

The jury then saw text messages between Musk and Altman where Musk said he was “disturbed to see OpenAI with a $20bn valuation” in late 2022. Microsoft’s investment was formally announced in January 2023.

Altman justified the Microsoft investment, saying there was “no way” to compete “without many billions of dollars”.

“A non-profit doesn’t have a valuation,” Musk told the court. “OpenAI had become for all intents and purposes a for-profit company with a $20bn valuation.”

OpenAI and Microsoft will also get the opportunity to grill Musk on Wednesday. Microsoft is accused of “aiding and abetting” by encouraging OpenAI to prioritise profit and products over its charitable mission.

Musk also referred to a provision in the Microsoft and OpenAI agreement that the for-profit would be dissolved if artificial general intelligence — AI that is akin to or surpasses human intelligence — were achieved.

This clause was scrapped in an amendment to their partnership agreement on Monday.

“With all respect to Microsoft, do you really want Microsoft controlling digital superintelligence?” Musk asked the jury.

The Information : The Hidden Risks in AI Funding

The Hidden Risks in AI Funding

Bankers and investors, especially when they are sitting in front of an audience, are not shy about offering their opinions. Yet when I asked a panel of money types at our Financing the AI Revolution conference on Monday about risks in the current market, I got near silence.

We had been discussing the billions of investment dollars pouring into AI. The question was: “Anytime there’s a boom, there are risks built up in the system and it may not be a systemic risk, but it may be specific risks. And so, what should we all be watching? What are things that you look at and you have doubts?”

After an uncomfortable pause, Temasek’s Martin Fichtner raised the question of whether booming demand would continue to accelerate. Fichtner, who invests in the technology and consumer sectors from San Francisco for the Singaporean investment fund, said he is watching the “second derivative” of growth in demand. In other words, he’s watching whether the growth in demand will continue to accelerate or whether it will slow.

“Second derivative” is a term out of calculus best described as the rate of change of the rate of change. It is a favorite metric for growth investors, especially when expectations are high. When the second derivative declines, the growth can still be accelerating, but the rate of that acceleration is slowing. That’s enough to get people nervous. “[Acceleration] doesn’t need to decrease—just if it flattens out a little bit,” he said.

Fichtner, who is broadly positive on the AI boom, wasn’t the only speaker at our conference who was willing to at least address the risks. Fellow panelist Jim Prusko, a senior portfolio manager at investment firm Magnetar, cited the risk of regulations on AI and political pressure against data centers, seeing both as a threat to the U.S. AI build-out. “I think there’s a risk that there’s some sort of backlash against data centers and we lose the ability to deploy the compute we need in America,” Prusko said. Magnetar is a big backer of data center developer CoreWeave.

There have long been doubts about the spending on AI. But surging demand for models such as Anthropic’s Claude, especially from businesses, has wiped most of those doubts away. Lenders have lined up to fund data center developers, while investors have poured tens of billions of dollars into AI model makers such as Anthropic and OpenAI. The market is buzzing about likely initial public offerings for these companies and for SpaceX, which is almost on the launchpad.

This all makes sense: The models have improved dramatically, and the potential scale of AI is hard to grasp. Still, investors have a way of getting ahead of reality. That doesn’t mean AI is a bubble, just that there will be ups and downs as cash pours in and the technology rolls out.

CoreWeave, for example, can’t raise cash fast enough to keep up with demand, said Nick Robbins, the company’s vice president for corporate development. “So the way we think about it is there’s always gonna be a timing mismatch,” he said.

Right now the mismatch is that demand exceeds supply. At some point for some company, supply will exceed demand, and that company will scramble to find customers. If it is borrowing as CoreWeave and its competitors have been, then the mismatch could be dangerous for the company and its lenders.

How can that happen? We’re seeing one scenario play out right now. Facing high demand and soaring costs for computing power, Anthropic raised prices to such an extent that customers’ costs could double or triple, according to one estimate. Higher costs are hitting many companies before they see measurable gains from AI, potentially reducing their appetite for big spending plans.

Here’s another current scenario—this one at OpenAI. The Information has been reporting about the company’s missed targets, C-suite dysfunction and lagging growth for some time. A story this week that added even more issues knocked down shares of Oracle and CoreWeave, which have placed big bets on OpenAI’s success. Sam Altman, in a race for computing power, has committed the company to paying hundreds of billions of dollars for computing power in the coming years.

OpenAI is not the only cash-burning company to commit to paying billions of dollars for computing power. True, it just raised $122 billion in its last funding round, its models are getting better and demand is still strong. But all of that is baked into expectations already.

What else can go wrong? Panelists at our event raised two other risk factors. The coming SpaceX IPO will be the first to provide detailed financials for a major private AI developer. XAI’s numbers won’t be pretty, and its deal for Cursor can be read both as a smart catch-up play and as an admission that things are going badly at xAI.

The second is more nebulous. Katherine Kaminsky, U.S. chief commercial officer for PwC, advises companies on adopting AI. She said compared to other recent strategy shifts, such as moving computing power to the cloud or outsourcing back-office functions, AI is far more complex and requires a rethinking of nearly everything a company does. That won’t happen overnight: After an early surge in AI adoption, companies may move at a more measured pace.

Investing is all about expectations, and they are staggeringly high right now.

The Information : CrowdStrike and Palo Alto Networks Are Underappreciamers Quadr

CrowdStrike and Palo Alto Networks Are Underappreciated AI Cybersecurity Bets

The Takeaway
  • Cybersecurity spending to increase significantly due to AI model risks.
  • CrowdStrike and Palo Alto Networks valuations remain underappreciated.
  • Established firms hold advantage with installed sensors and proprietary data.

If there was ever a time to be buying cybersecurity stocks such as CrowdStrike and Palo Alto Networks, this would be it.

A spate of hacks has hit high-flying startups this month, including data-labeling firm Mercor and software development company Vercel. Also this month, Anthropic announced it had developed an AI model, Mythos, that it deemed “too powerful” for a full public release. Mythos identified thousands of previously unknown cybersecurity risks across widely used operating systems and browsers.

CrowdStrike and Palo Alto Networks, along with another cybersecurity firm, ZScaler, are among the 50 or so companies that got early access to Mythos so they can beef up their own cyberdefenses. For the security firms, that positions them to benefit from any surge in demand arising out of a wider release of Mythos, sparked either by attacks or worries about attacks.

CrowdStrike’s and Palo Alto Networks’ stocks have each risen 20% or so in the past month, beating the 10% appreciation in BlackRock’s IGV index, which tracks the software sector broadly. Even after that rally, though, they’re trading at the same valuation multiples they were a year ago, when we last recommended the stocks. CrowdStrike is at nearly 19 times next year’s estimated sales and Palo Alto Networks is at 11 times.

That suggests investors are still underappreciating cybersecurity firms’ unique promise, given their potential for outsize growth, which has become clearer in the past few weeks.

Businesses are going to increase their spending on cybersecurity “as a direct result of the risk that Mythos presents,” said Eric Heath, an equity analyst at KeyBanc Capital Markets who covers cybersecurity and has been routinely polling chief information security officers at various companies to gauge their spending appetite. “We think the security spending environment is going to be much healthier than it has been.”

That’s a change from the last two years, during which companies’ spending on cybersecurity was relatively lackluster, Heath said. Indeed, CrowdStrike’s revenue growth slowed to 21.7% in the year to January from 29.4% the year before. Palo Alto Networks—which is nearly twice CrowdStrike’s size by revenue—has grown at around 15% for the past two fiscal years, which end in July

Analysts expect Palo Alto Networks’ revenue growth to accelerate to 22.5% growth this year, partly as a result of its recent acquisitions, including AI security startup Koi, according to Koyfin. CrowdStrike’s growth rate is also expected to pick up a bit.

They’re “the blue chips in cyber. So if the security environment is healthy, it should benefit both of them,” Heath said.

CrowdStrike and Palo Alto Networks both sell a variety of different security products, including solutions for securing networks, preventing hackers from using stolen usernames and passwords and AI-powered agents ot help companies find and address cyber threats.

ZScaler, which is about two-thirds the size of CrowdStrike, is growing at a 20%-plus clip, but it trades at the lowest valuation multiple of the three, in large part because it is the least diversified and therefore the most vulnerable to competition.

And competition is a key issue for the sector. What is likely holding back investors from pushing up CrowdStrike’s and Palo Alto Networks’ valuations further is the worry that both could be undercut by AI firms developing their own cybersecurity products.

Competition With AI Model Makers

Rustam Kanga, an analyst at Citizens Bank who is bullish on the cybersecurity stocks, thinks they have advantages over the AI model makers. For one thing, they have already established widespread trust among chief information security officers.

“Anthropic has now had several public security failures,” Kanga said, citing the company’s accidental leak of its AI coding tool’s source code in March as well as recent reporting from Bloomberg stating that unauthorized groups may have accessed the Mythos model. Those incidents won’t inspire confidence among senior information security executives at companies, he said.

In their current form, Anthropic’s and OpenAI’s cybersecurity-focused models are “not comprehensive enough,” according to Kanga, because they can only help identify, not address, cyberthreats.

That probably won’t change, Kanga argues, because of the two other key advantages the established providers enjoy relative to the AI model builders: the sensor software they have already installed on corporate devices they are responsible for securing, and the troves of proprietary data they have collected using that software.

That sensor software is “relatively easy to build,” said Tomasz Tunguz, general partner at investment firm Theory Ventures. But, he continued, “it’s a total pain to replace. Imagine you have a 100,000-person organization.…All those people have to come into IT, and it has to go and delete the CrowdStrike agent and then put on the Anthropic agent. What a pain. I’m not going to go through and spend six months of my security team’s time replacing this bit of software, especially if the gain is nothing. So that’s why I think there’s some defensibility. It’s just inertia.”

Another reason it’s unlikely companies will axe their existing cybersecurity providers is that the sensor software is what enables a vendor to help its customer identify and address a threat in real time rather than reviewing data periodically in batches.

The model makers’ cybersecurity businesses already seem to be growing fast enough on the heels of their recent launches. Said Tunguz, “Why complicate things?”