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* Cover Story:

-Chip stocks, once seen as a gritty sector akin to cyclical commodities, have transformed dramatically due to artificial intelligence, becoming central to technology and market dynamics. The PHLX Semiconductor Sector Index soared 80% since late March, raising concerns of a potential market bubble reminiscent of the dot-com era. Notably, while Nvidia increased by 30%, companies like On Semiconductor and STMicroelectronics surged by 122%. The variance in price/earnings ratios across the sector suggests a misalignment, creating investment opportunities in quality firms like Advanced Micro Devices, Broadcom, and Taiwan Semiconductor Manufacturing. As demand for AI computing escalates, particularly among major tech players like Microsoft and Google, understanding the shift from model training to inference—driven by AI agents—is crucial for investors. These agents are predicted to greatly increase computing demands, highlighting the evolving landscape of semiconductors.

* CEO Interview:

Ryan Cohen, after his initial offer to purchase eBay was rejected, indicated a willingness to present GameStop’s offer directly to eBay shareholders. In an interview, Cohen emphasized that GameStop's proposal is credible and beneficial for shareholders, showcasing the company's latest profitable quarter as evidence of its transformation into a leading seller of collectibles. He argues that both companies share successful product categories and that synergies exist between GameStop’s offline success and eBay’s online business. Furthermore, Cohen expresses a long-term interest in owning eBay, criticizing its management. He acknowledges his expertise in e-commerce, contrasting it with his learning experience in physical retail at GameStop.

* Tech Trader:

-Apple is at a pivotal moment as CEO Tim Cook prepares for what may be his final keynote at the Worldwide Developers Conference (WWDC). The company aims to revive interest in its artificial intelligence (AI) efforts, following a disappointing rollout in 2024 that failed to deliver anticipated upgrades, particularly with Siri. Expectations for the upcoming keynote include showcasing a revamped Siri that can analyze personal data and provide an independent app interface. Despite past AI setbacks, Apple’s stock is rebounding as investors give the company another chance. Cook's departure in September adds emotional weight to the event, with analysts noting the necessity for Apple to convey that it is not lagging in AI innovation. His tenure has seen remarkable revenue growth and a transformed services business, making this WWDC a critical opportunity for a strong exit as he prepares to hand leadership to John Ternus amid shifting public sentiment on AI technology.

* The Trader:

-The market is increasingly confronting volatility, evidenced by a recent downturn wherein the S&P 500 fell 1.6%, marking its worst performance since March, while the Nasdaq Composite dropped 3.3%. The only gain was seen in the Dow Jones Industrial Average, which rose 0.4%. This volatility was partly triggered by a robust jobs report indicating 175,000 hires in May, prompting expectations for an interest rate hike by the Federal Reserve. Additionally, individual stocks displayed heightened volatility, as seen in Broadcom's sharp 13% decline despite record sales, and significant price movements in companies like Marvell Technology and Victoria's Secret, highlighting the market's larger risk appetite and responsiveness to earnings reports.-Concerns about Accenture's future due to artificial intelligence (AI) may be misplaced, as the consulting company could actually benefit from AI implementation. Accenture's shares have dropped 33% this year amid fears of AI displacing business services. However, while AI disrupts some operations, it cannot fully replace established services like cybersecurity, where stocks have rebounded. Accenture boasts a significant workforce of 800,000 employees, far outpacing OpenAI's 150 engineers. Analyst Kevin McVeigh argues that OpenAI lacks the delivery capacity and global footprint required for complex AI programs, further positioning Accenture as a leader. The company is witnessing an increase in demand for its AI services, which analysts expect to drive annual sales growth to $94.3B by 2029, bolstered by higher-priced AI offerings.

* Features:

-Goldman Sachs has seen its stock surge over 80% in the past year due to its leading role in the AI and tech sectors, currently valued at $1,092. However, the stock is perceived as expensive, trading at three times book value and 18 times projected 2026 earnings, surpassing competitors like JPMorgan and Bank of America. While Goldman executives remain optimistic about future earnings, volatility in the market or a disappointing IPO for SpaceX might affect investor sentiment. Despite the overall bullish outlook, key metrics indicate that the stock is already reflecting solid fundamental prospects, leading analysts to express caution regarding its current valuation compared to its earnings potential.

-Alfred Thayer Mahan, who argued that naval supremacy is crucial for national power, would likely view Donald Trump's plan for a new fleet of battleships with approval. However, the evolution of naval warfare, from battleships to aircraft carriers to drones, has changed this paradigm, especially evident in the ongoing tensions in the Strait of Hormuz, where Iran's enforced closure has impacted global oil prices and economic forecasts. The U.S.'s ability to maintain freedom of the seas is challenged as threats to maritime security grow, ranging from piracy to China's military expansion. Mahan emphasized that secure ports and military protection were vital for economic stability and free trade, fundamental to the power of empires throughout history. The U.S. has historically relied on its naval capabilities to protect commerce, starting with its formation post-Revolutionary War to confront threats and maintain trading routes.

* Europe:

-European defense start-ups are quickly entering the IPO market, exemplified by recent announcements from UK's Doncasters and Finland's Savox. This follows Czechoslovak Group's record €3.8B IPO. Established companies like KNDS Group are also planning IPOs. According to investment strategist Ruben Dalfovo, defense is evolving from a panic reaction to a long-term industrial trend. The Ukraine conflict and rising military budgets in the EU, up 11% last year, highlight this shift. Furthermore, European defense is increasingly integrating with innovative start-ups. However, current market sentiment is mixed, as the Select Stoxx Europe Aerospace & Defense fund has dropped 15% since the Iran war. Despite this, analysts suggest long-term growth potential remains, as Europe seeks strategic autonomy in military spending.

* Emerging Markets:

Sean Taylor, chief investment officer at Matthews Asia, believes that South Korean stocks will continue to rise despite a 100% increase in the Kospi Composite index. He finds Korean chip companies, trading at low price-to-earnings ratios, particularly attractive, suggesting that gains may be cyclical rather than structural. Taylor also sees potential in South Korean industrials, given the anticipated increase in military spending and reduced purchases from China. Additionally, he notes that changes in Korea’s national pension policy are shifting investments towards local assets. In contrast, he expresses disinterest in Chinese stocks due to regulatory concerns and market lagging, signaling uncertainty about China's future appeal to investors.

* Commodities:

-Gold stocks have decreased significantly, with the VanEck Gold Miners ETF down 24% from its February high. This decline correlates with a 13% drop in gold prices, which are now around $4,500 per ounce. Analysts suggest that gold has a strong chance of rebounding, bolstered by central bank purchases increasing 17% annually. J.P. Morgan projects gold could reach $5,245 an ounce by 2027, indicating potential above 15% returns for gold stocks, which tend to respond more drastically to gold price shifts. Notable mining companies such as AngloGold Ashanti, Kinross Gold, and Equinox Gold have seen substantial gains recently, outperforming broader gold ETFs. Orla Mining is also significant due to its upcoming merger with Equinox, aligning their stock performances. Investors are encouraged to consider these gold mining opportunities.

* Streetwise:

-Rocks have become crucial in the construction of data centers, highlighting a growing sector driven by artificial intelligence (AI). CRH, a major infrastructure company, recently announced delivering 1.2M tons of aggregate to a Michigan data center. J.P. Morgan indicates rising rock prices, which remain unaccounted for in current earnings projections. Conversely, healthcare stocks lag despite the burgeoning demand for AI-driven innovations that enhance efficiency and therapeutic advancements. Portfolio manager Shivani Vohra lists key firms such as Eli Lilly, which stands to gain from GLP-1 drug developments; Intuitive Surgical, known for its da Vinci surgical platform; and Natera, which specializes in advanced blood tests. Other notable mentions include Edwards Lifesciences, expanding its heart valve solutions, and Medline, a healthcare supplier that has seen favorable stock movement.

OpenAI has proposed a sovereign-wealth-style fund to ease public anxiety about the impact of artificial intelligence

Donald Trump caught much of the AI industry by surprise this week when he threw his weight behind a radical proposal for companies such as OpenAI to hand equity stakes to the American people.

Elements of the idea, which started as a fringe argument on the progressive left, have recently drawn support from an unlikely cast of characters: Trump cabinet members, democratic socialists such as Bernie Sanders and Maga populists such as Steve Bannon.

But the concept suddenly gained more traction in the White House after OpenAI chief executive Sam Altman visited Capitol Hill this week.

The plan proposed by his company, alongside others, would involve setting up a sovereign-wealth-style fund into which AI companies would contribute equity so the American public can share in the lossmaking sector’s soaring valuations, according to people familiar with the matter. 

This would be distinct from the $9bn stake the Trump administration took in chipmaker Intel last year, as the public would own shares individually, rather than the US government directly owning equity, according to a person with knowledge of OpenAI’s plans.

Here is what else we know about the discussions to date.

What are the proposals?

In response to a question about equity stakes on Air Force One on Friday, Trump suggested “pieces [of AI companies] could be given to the American public” in an effort to quell the growing alarm around the rapid rollout of the technology.

Industry sources told the FT that a voluntary contribution of small amounts of equity — led by OpenAI — was the most likely outcome. This would be used to build a fund that is distributed to Americans, similar to the scheme Alaska has for redistributing oil revenues.

Brad Gerstner, a large investor in Anthropic and OpenAI, said on Friday he was “encouraging founders/companies to donate shares for the direct benefit of all citizens” and that this could filter through to Americans via a previously established plan for the Trump administration to put $1,000 in an investment account for every child born between 2025 and 2028.

The White House declined to elaborate on the plans, directing the FT to Trump’s comments.

OpenAI, which has a philanthropic arm sitting on more than $200bn in largely undisbursed funds, has floated the idea of giving the government a stake in the company with administration officials in recent months, according to people with knowledge of the matter.

In a paper published in April, OpenAI proposed that policymakers and AI companies work together to seed a “Public Wealth Fund that provides every citizen — including those not invested in financial markets — with a stake in AI-driven economic growth”. Treasury secretary Scott Bessent has shown interest in similar proposals, according to a person familiar with the matter.

However, some White House officials and OpenAI rivals, including Anthropic, were caught by surprise by Trump’s Friday announcement. Altman had no plans to be in Washington next week, according to a person close to the discussions, despite Trump announcing a White House meeting with AI bosses for the coming week.

A person close to Anthropic, which the US government has designated as a “supply-chain risk”, said the company was not having conversations with the administration about providing equity to the government.

The idea of public ownership of AI companies had been gaining traction on the progressive left for some weeks and was supercharged by an intervention from Sanders, the Vermont senator, in the past few days. Sanders proposed a one-off 50 per cent tax raid on AI labs.

His proposal has won qualified support from some on the populist right, including Bannon, Trump’s former chief of staff, who has long railed against the power of AI companies. Strategists from the Democratic and Republican parties are simultaneously grappling with how to appease voters increasingly worried about the threat AI poses to jobs ahead of November’s elections.

OpenAI’s Altman was in Washington this week, where he met Sanders and other lawmakers from both political parties. He did not discuss these proposals with Trump this week. His company, valued at close to $1tn, is likely to go public soon, while Anthropic and Elon Musk’s SpaceX, which owns xAI, are also racing to the public markets.

The Trump administration has broken with economic orthodoxy by aggressively pursuing equity stakes in key sectors as part of an America First industrial strategy. Last year, it spent $9bn taking a 10 per cent stake in Intel and has invested billions of dollars in rare-earths and quantum computing start-ups in exchange for stock.

There is no precedent, however, for the government taking a stake in lossmaking AI labs collectively worth trillions of dollars. Additionally, the Intel equity was bought using funds already appropriated by the Biden-era Chips Act. Buying a stake in leading AI companies, rather than accepting a donation, would be expensive and probably require approval from Congress.

The initial response from pro-business Republicans and AI investors has been muted. In a post before Trump’s comments, billionaire Silicon Valley investor and White House adviser David Sacks warned against the government assuming “direct ownership and control” of AI companies — a post that was endorsed by Republican senator Ted Cruz.

If the Trump administration did go for equity stakes in leading labs, the backlash could be more widespread, said Samuel Hammond, director of AI policy at the pro-tech Foundation for American Innovation, with protests from investors and companies that were not cut in on the deal.

“Even if taking partial ownership of frontier AI companies can make sense on paper, in practice it’s a recipe for political favouritism and corruption,” he added. 

Sacks, who was previously Trump’s AI tsar and was one of the most accelerationist voices in the administration, left his role this year. His lieutenant Sriram Krishnan announced on Saturday that he would be leaving the Trump administration at the end of this month.

Bid from group including Orange and Free-Iliad faces showdown with antitrust regulators in Paris and Brussels

A consortium led by Bouygues Telecom has agreed a memorandum of understanding to acquire billionaire Patrick Drahi’s French telecoms business SFR for €20.35bn, in a landmark deal to consolidate the French telecoms market and test European regulators’ appetite for mergers. 

Bouygues, Orange and Xavier Niel-owned Free-Iliad submitted a joint offer on Saturday night to carve up SFR’s mobile, broadband and business operations between them.

The deal ends a saga which began last summer, when the bidders began work on the bid to acquire SFR and reduce the French mobile market from four players to three. 

The final bid is the same as the €20.4bn offered in April and up from the €17bn proposal first made by the consortium in October, as the bidders worked to convince Drahi to sell the business he acquired in 2014.

The proposal — which is subject to regulatory approval — is likely to lead to a showdown with antitrust regulators in Paris and Brussels, who have historically been wary of “four to three” telecoms mergers, believing they may lead to higher prices for consumers due to less market competition.

However, regulators in Paris are thought to be more open to a deal than they have been historically, while European watchdogs announced the biggest relaxation of corporate merger rules in decades earlier this year. 

For Drahi, the sale is the latest in a series of moves to cut the $60bn debt pile he amassed building his telecoms and media empire over the past two decades. Last year, he finalised a deal to reduce the debt of Altice France — of which SFR is a part — to about €15.5bn from €24bn

The proposed structure of the takeover would involve Bouygues, Iliad and Orange splitting SFR’s consumer mobile and broadband unit and its customers between them, while Bouygues would have the business that serves corporate clients.

The consortium said the signing of the definitive legal documents was expected in the second half of 2026 while the completion of the transaction could occur in the second half of 2027.

Group has banned dealers from bundling Luce sales and access to exclusive models as it seeks new clients

For many loyal Ferrari collectors, the big question is not whether to splash out for its controversial new electric sports car — but whether doing so might put them in the pole position to buy more exclusive petrol-burning models later on. 

The streamlined Luce, the brainchild of former Apple designer Jony Ive, triggered an uproar on social media and was rebuked by Italian politicians and former executives.

But the reaction was more neutral among the 1,600 enthusiasts and potential buyers at last week’s two-day launch event in Rome. Some Ferrari owners have bought lower-range models in the past as a way to gain better access to more exclusive supercars later on. Now the question is whether buying the Luce will elevate them in the carmaker’s highly secretive client ranking.

Ferrari has issued strict orders, both verbal and written, to prevent dealers from suggesting that buying the €550,000 Luce would give customers a stronger position on its loyalty list. But many potential buyers in various locations still believe that to be the case.

One Ferrari dealer in western China said he thought buying a Luce would bring significant benefits in the future. 

“We’ve heard that Luce will come with very attractive credit rewards, much higher than those for petrol cars,” he said. “That would make it easier to qualify for the purchase of certain limited edition models.”

Clients may still assume that “buying a Luce is a very good way of signalling to Ferrari . . . that you believe in the mission”, said Bernstein analyst Stephen Reitman.

The luxury car group is aiming to sell about 2,500 Luce vehicles by 2030 — a target equal to roughly 5 per cent of its sales each year, which is seen as an achievable target by most analysts.

Ferrari declined to comment on the target figure, but people close to the company said it was focusing sales of the EV on new customers in places such as Silicon Valley and China instead of its traditional collectors.

“Ferrari doesn’t want us to sell it to clients who think that buying this will give them the upper hand with other internal combustion engine models,” said one dealer in Europe. The carmaker wanted “people to buy for no other reason than that you love it and want to drive it”, the dealer added. 

While Ferrari does not disclose details of its client ranking or allocation policy, owners of its sports cars and analysts said it closely tracked customer data, including the number of cars purchased over the years, how long those models were kept and how they are maintained. The participation rate in Ferrari-organised events and how much the cars were driven after being purchased were also taken into account, they said.

“When selecting clients for highly sought-after models, such as limited editions, we prioritise those with whom we have established long-term, strong relationships,” the company said. “We value every interaction a client has with Ferrari.”

The collectors’ ranking on the loyalty list is crucial when qualifying to purchase cars in the much sought-after “special series” such as the Icona and the XX Programme, say owners and analysts.

Ferrari limited sales of its latest €3.6mn F80 supercar to 799 and a special edition model it added to its 599-run Daytona SP3 sold for a record $26mn at a charity event in California last year. Increasing desirability by limiting volumes is a signature Ferrari policy that has bolstered the carmaker’s industry-beating margins.

Despite Ferrari’s stern warning of linking the Luce to new model access, the message may not have reached some dealers in different countries.

One Ferrari owner in China said he was told by his dealer that purchasing the Luce would contribute to boosting his loyalty ranking and give him better access to future releases of limited edition models.

But a UK collector, who wants to test drive the Luce before deciding to buy it, said his decision is likely to have “zero effect” on whether he gets better access to Ferrari’s next limited model.

“For people like me who like to get hold of the limited edition cars, we sometimes get preferred to buy some of the more common cars . . . but there’s been zero pressure on that for this car,” he added.

Ferrari said the company has made it clear to its dealers that the Luce “must not be bundled together with other models or special editions”. 

Since the launch, Ferrari’s chief executive Benedetto Vigna has expressed his confidence that demand for the Luce would be strong. “Look at the people writing to us, the people placing orders,” he said at a recent event in Modena. “Some are existing clients and others are new.”  

The carmaker’s share price, which fell 8.5 per cent in Milan a day after the Luce launch, has recouped some of its losses, while shares in New York are back to prelaunch levels.

Still, some Ferrari owners have expressed disappointment not only with the Luce’s design but also with the technical features of its first five-seater sports car with a range of 530km. The vehicle is able to hit 100 kilometres per hour in about 2.5 seconds, slower than 1.7 seconds for Rimac’s electric Nevera model.

Vigna has shaken off criticism from sports car fans, underplaying vehicle performance such as acceleration speed on its own as “trivial.” Instead, he said the challenge was “aligning performance with [human] perception” for an emotional driving experience.

Graham Royle, a UK customer who owns several Ferraris as well as other luxury cars, said he was not interested in EVs in general and did not attend the launch. However, he still found the Luce’s range and acceleration underwhelming.

“I expected a pure electric Ferrari to still look utterly gorgeous and I expected it would be sensationally fast,” Royle said. “For me, the Luce is a major disappointment in all departments.”

Italy has proved it is a ‘reliable partner at the darkest of times’, say analysts

Italian defence and engineering companies have emerged among the winners from strengthening ties between the Gulf countries and Giorgia Meloni’s government, signing deals for weapons systems and munitions amid heightening geopolitical uncertainty.

State-controlled Leonardo received a €320mn naval combat systems order from Kuwait and has also announced it will provide four of its C-27J maritime patrol aircraft to Saudi Arabia for €200mn. Riyadh will also purchase lightweight torpedoes from Italian shipbuilder Fincantieri in a €200mn deal announced earlier this year.

Meanwhile, Abu Dhabi’s defence contractor Edge is buying a controlling stake in Italy’s family-owned engineering company CMD, whose high-performance engines for luxury cars can be used to build low-cost surveillance and interceptor drones.

Italy had “proved it’s a reliable partner at the darkest of times” said Mohammed Baharoon, head of the Dubai Public Policy Research Centre, referring to the Italian prime minister’s visit to the region after the US and Israel launched their war against Iran.

Before the war, Meloni had already been promoting ties with Gulf countries. In December, she attended the annual Gulf Cooperation Council summit as the guest of honour, a rare invitation extended to only a handful of foreign leaders.

Iran retaliated to the US-Israel attacks by launching barrages of missiles and drones at the US Gulf allies, and her trip to the region in April, days before the ceasefire between the US and Iran, also impressed her counterparts and generated goodwill.

The recent defence deals come as Gulf governments turn to Europe and Asia looking to bolster air defences and develop their own defence industries. The governments have also signed deals with South Korea and Ukraine. Analysts said Gulf nations had also questioned the political reliability of the US under President Donald Trump.

They expect further deals on the horizon. The UAE last year said it would invest €40bn in Italy in a range of sectors, while Gulf countries are in talks over possible equipment purchases from Italy. Qatar and Fincantieri are discussing the development of new mobile counter-drone systems and an underwater system. Saudi Arabia has been in discussions with a clutch of small high-tech Italian firms over space co-operation.

“Gulf authorities were left feeling highly exposed after the US faced problems in providing countries with enough missiles and ammunition” for air defence systems, said Alessandro Marrone, the head of defence and security programme at Rome’s Institute of International Affairs.

“There was no plan B for a prolonged campaign. The Gulf countries took note of that . . . They learned if they diversify their partners, they will be better prepared in case of another conflict,” he said.

The UAE has borne the brunt of Iran’s retaliation against the US and Iran, with nearly 3,000 missiles and drones launched against it since the start of the war, forcing authorities to utilise expensive US and Israeli-made air-defence systems to protect against swarms of cheap Iranian drones.

Rodrigo Torres, chief financial officer of Edge, said his company’s talks with Italy’s CMD began in March as Gulf authorities rushed to find partners to help them rapidly expand production of low-cost surveillance and interceptor drones.

“With Europe, and especially Italy, we have a very tight relationship,” he said, noting that the UAE needed “quantity” and “sophistication”.

Edge’s deal for CMD involves the transfer of crucial technology to the Gulf, at a time when governments had been trying to diversify away from energy to boost their “knowledge-based economies”, said Baharoon.

Established in 2019 through the merger of two dozen legacy companies, Edge has signed agreements with other European groups. Days before the US attack on Iran, it signed a deal with Spain’s EM&E group to explore setting up a UAE-based joint venture to develop $1.5bn worth of remote weapons stations. It also agreed to create a shipbuilding joint venture with France’s CMN Naval to produce nearly €7bn worth of small and medium-sized naval vessels.  

Morten Wierod calls for urgent deregulation as energy shock from Iran war dents EU competitiveness

Europe must deregulate to boost competitiveness in the face of the Iran war energy shock or risk a “mass unemployment” crisis, the head of one of the bloc’s largest engineering groups has warned.

Morten Wierod, ABB chief executive, told the FT that European lawmakers have displayed “no sense of urgency” in pursuing deregulation even as rising gas prices in Europe dent the bloc’s competitiveness compared to the US.

He noted that the blueprint for reform commissioned by the European Commission and written by former Italian prime minister Mario Draghi was published almost two years ago but that little had been done about it.

Morten Wierod says the EU should remove legislation to drive more of a single market © ABB

“I hope that we don’t need to see a much bigger crisis that means mass unemployment. That should not be necessary to get that right sense of urgency,” said Wierod in an interview in New York.

“The single market or EU needs to remove more legislation and not just to simplify but to eliminate and to drive more of a single market, that will drive economic growth.”

ABB, which is based in Zurich, Switzerland, is one of Europe’s largest industrial engineering and technology companies with a market capitalisation of almost $200bn. It employs 52,400 people in Europe — almost double the number of staff that it employs in the US, which is the top revenue-generating region for the group.

Wierod said the plan announced by Brussels this week to introduce rules to reduce dependence on foreign technology could have “unintended consequences” and raise costs.

“We are in favour of open trade . . . we see that when you build this legislation around some of the ‘Made in Europe’ discussions going on now — there are always side effects.”

Wierod is the latest top business leader to urge Europe to slash red tape and implement reforms to boost the bloc’s competitiveness.

In October, the chief executives of TotalEnergies and Siemens wrote an open letter to French President Emmanuel Macron and German Chancellor Friedrich Merz, urging EU states to abolish a primary corporate sustainability law. EU lawmakers agreed reforms to scale back the law in March.

The Commission has launched a “simplification” drive to reduce red tape that it claims has already produced €15bn in annual savings for businesses and national authorities.

But progress on implementing the 2024 Draghi report, which highlighted a widening productivity gap between the US and Europe, has been slow. Just 10 per cent of his 383 proposals have been enacted, according to an online tracker.

Wierod said Europe had some great assets: its workforce, access to high-quality education and crisis-management experience.

“If you saw how Europe was able to deal with and change the dependency on Russian gas — that happened quickly, from 35 per cent to 10 per cent within a year. So, crisis management is there.”

But he said competitive pressures are rising in Europe due to the gas price inflation caused by disruption to supplies from the Middle East from the Iran war.

“I’m not worried that Europe will have gas. They will. But it will come at a higher price and that was what we saw in 2022 — and we know these [higher] gas prices will remain for 2026 and 2027,” Wierod said.

“So this, of course, will have an impact more again on European competitiveness than the United States, because you have your own gas.”

Up to 1.3mn jobs in the EU could be lost as a result of the higher prices, Roxana Mînzatu, European commissioner for jobs, said on Wednesday.

ABB is lobbying EU policymakers to accelerate electrification, industrial efficiency and decarbonisation, saying it is the fastest way to make the bloc more competitive.

OpenAI plots biggest ChatGPT overhaul since launch

$850bn start-up to recast hit chatbot as a route to higher-margin products before a potential IPO

OpenAI is preparing the biggest overhaul of ChatGPT since its launch kicked off the AI boom, as the $850bn group hunts for new engines of growth ahead of a planned listing this year.

The company intends to transform the chatbot into a “superapp” that combines coding tools and AI agents, adding products that executives believe will generate more revenue.

The changes are part of a broader reorganisation at OpenAI as the San Francisco-based company shifts resources into trying to win lucrative business customers and compete more fiercely with rival Anthropic, according to more than a dozen current and former employees.

OpenAI faces growing pressure to drive revenues higher and forge a path to profitability, as it prepares for an initial public offering.

The strategy marks a departure for a company, led by chief executive Sam Altman, that became the face of the AI boom and took the technology mainstream when it unveiled ChatGPT in 2022.

The changes, which will give greater prominence and resources to OpenAI’s coding product Codex, reflect a growing conviction within the company that the future of AI lies not in chatbots that answer questions but in agents that perform tasks for users.

“Chat is dead,” said one senior OpenAI employee.

OpenAI executives increasingly view ChatGPT, which has attracted nearly 1bn users since its launch, as a gateway to introduce users to higher-value products. The majority of consumers use the chatbot for free.

The company is embarking on the changes amid a belief that the advent of AI agents, which can perform multiple tasks for users from booking travel to organising calendars, will be a more valuable product than the chatbot.

At the same time, products such as Codex are able to write code and create software based on simple instructions from users.

The overhaul, which is set to begin rolling out in coming weeks, will initially appear as changes to ChatGPT’s website and mobile apps, encouraging customers towards using coding, image-generation and apps from external partners.

The changes underline how OpenAI’s strategy is moving closer to that of Anthropic, whose focus on developing products for businesses has stoked its blistering growth, and will be at the heart of its pitch to investors in an IPO this year. 

Outlining the changes, Thibault Sottiaux, who previously ran Codex and now leads all of OpenAI’s core product and platform, told the FT: “It will transcend the actual surface . . . what we’re building towards is where you have your own personal agent that is capable of helping you . . . across everything in your life, be it personally or at work.” 

He added: “You can connect through it on your mobile, desktop or web. When you’re in the car, you can talk to it.”

The majority of Codex users pay for the service, according to people familiar with the matter, while the 2mn businesses that use OpenAI’s products account for roughly 40 per cent of its revenue.

The company anticipates this will rise to 50 per cent by the end of the year.

OpenAI’s Codex product has increased its user base sixfold to more than 5mn weekly active users since the launch of a desktop application in February.

Its launch has intensified competition with Anthropic, whose Claude Code product has emerged as one of the start-up’s fastest-growing businesses.

“Approximately a year ago, OpenAI’s strategy was swing for the fences, whereas Anthropic’s strategy is make money first,” said Jenny Xiao, partner at Leonis Capital and former researcher at OpenAI.

“Now the two are converging, because both of them are trying to aim for an IPO and investors care more about money than dreams.”

To encourage users to adopt those services, OpenAI is redesigning ChatGPT’s interface, adding new prompts and features that direct users towards coding tools, image generation and applications built by partners such as Canva and Booking.com, according to people familiar with the plans.

Over time, OpenAI intends to ditch the prompts and features, betting that its models will be able to automatically understand users’ intentions when they are on the app or site.

This year, the company has brought ChatGPT, Codex and other product teams under a single leadership group led by Sottiaux, while several senior executives, including former product head Kevin Weil, have departed.

In a sign of OpenAI’s push to win more business customers, some consumer-focused initiatives have been sidelined, including a checkout feature that allowed purchases within ChatGPT. It also shut down Sora, its video-generation product, less than a year since its launch.

Executives believe users will increasingly interact with a single AI assistant rather than a collection of separate applications. As agents become more capable, OpenAI expects the distinction between chatbots, coding tools, search products and other software categories to blur.

“When we have [artificial general intelligence], I don’t think there will be a large number of distinct brands,” said Alex Embiricos, OpenAI’s head of enterprise product. “Probably there will be a single entity that I can talk to that can do whatever I need.”

Sean Doyle’s warning comes as jet fuel prices have doubled since Iran war began in February

The chief executive of British Airways has warned that fares will have to rise further if fuel prices stay high.

“There’s no getting away from if fuel goes up, fares have to go up,” Sean Doyle said in an interview on the sidelines of the International Air Transport Association’s annual meeting in Rio de Janeiro. 

Jet fuel prices have doubled since the war in Iran began in February. Despite ceasefire talks, the Strait of Hormuz remains closed. The passage accounts for about 40 per cent of Europe’s jet fuel.

Airlines across the world have already increased prices to try to recoup higher costs. BA’s rival Virgin Atlantic brought in surcharges of £50 to economy tickets, £180 to premium and £360 to higher classes.

BA warned last month it would raise prices, especially in business class, to offset higher fuel costs. But Doyle said prices would rise further if fuel costs remained stubbornly high.

The airline will raise fares more on long-haul services than short-haul, a more competitive market segment.

“When people’s purpose to travel is business and doing deals . . . those price increases are kind of peripheral to the reason they’re travelling,” said Doyle. 

“A brand like BA, which has got a lot of long-haul, a lot of corporate, a lot of premium, we’d expect maybe to have more pass-through of prices than maybe a carrier who’s solely competing for leisure short-haul.”

Despite recent climbs, airfares had failed to keep pace with inflation, he said, meaning many prices were the same today as in the 1990s. 

“We had fares in 1995 of Barcelona for £60 one way. You can go on BA.com and probably get Barcelona for not too much more than that off peak,” said Doyle. “If you think about air fares as a percentage of the overall amount people spend on a holiday, it’s still a small percentage.”

The airline has used planes that no longer fly to the Gulf to add capacity on other routes such as those to Bengaluru. It is planning to resume services to the Gulf in the coming months.

BA plans to restart flights to the region in the coming months but will not relaunch Dubai until October, which marks the start of the airline’s “winter” season that runs until April.

“Dubai was always our biggest winter destination,” said Doyle. “It will come back . . . whether it takes a year or two.”

He also called on the UK to cut taxes on tourists to help boost the UK’s economy, warning that the country had fallen behind Japan and other nations that prioritise tourism.

“If you look at France and Spain, they’ve absolutely shot past us, and there’s a number of things in that, but a big part of it is cost,” he said.

If the country wants to hit its target of attracting 50mn tourists annually, up from about 40mn, “and want the economic benefit of that, I think we’re going to have to change the affordability proposition to tourists”.

The government has raised the air passenger duty, a charge paid by airlines that feed through to ticket prices.

“For a family of five coming into the country and travelling, it’s a huge penalty that they have to pay compared to what you pay in Europe,” said Doyle.

The artificial intelligence giant said a “brake pedal” was needed to protect humanity from self-improving models. The proposal could have big consequences.

Andrew here. In 2023, Elon Musk signed an open letter, along with over 30,000 other signatories, seeking a pause on artificial intelligence. Now, Anthropic is suggesting a similar break, arguing the risks could outweigh the rewards. All of this as it plans to go public.

Also: The company behind the S&P 500 has declined to change its rules to quickly add SpaceX to its index after the I.P.O., unlike Nasdaq. (A reminder: Nasdaq won the SpaceX listing on its exchange.) We go into all that below.

Artificial intelligence giants like Anthropic and OpenAI are racing toward blockbuster I.P.O.s that could value them at more than $1 trillion each, on the promise of their rapidly advancing products.

Yet Anthropic’s new suggestion that A.I. labs should weigh pausing work on their bleeding-edge technology — in the name of safety — raises questions about the risks of investing in these companies. (That could have big repercussions if the federal government takes stakes in them, as the news outlet NOTUS reports.)

From a blog post on Anthropic’s website on Thursday:

We believe it would be good for the world to have the option to slow or temporarily pause frontier AI development to enable societal structures and alignment research to keep up with the advance of the technology.

Jack Clark, an Anthropic founder, told BBC News, “Right now, it’s like the A.I. industry has a gas pedal, but it doesn’t have a brake pedal.”

The reason: “recursive self-improvement.” That refers to how A.I. models could soon be able to improve themselves without human intervention. Increasingly capable models and the rise of agents that can run autonomously would make that possible.

As of last month, Anthropic noted, 80 percent of the code added to the company’s code base was written by its Claude model.

Anthropic is proposing the A.I. equivalent of a nuclear nonproliferation treaty:

A meaningful slowdown or pause would require multiple well-resourced labs at or near the frontier, in multiple countries, agreeing to stop under the same conditions. It would also require that each can verify that the others have actually stopped.

The company added that its Anthropic Institute, an in-house research arm, would work on ways to create such a system.

A.I. oversight is an increasingly important concern. Polls suggest that Americans worry more about building guardrails around the technology than about speeding up its development. Even the Trump administration has become more open to actively regulating A.I. companies.

But pausing A.I. development could have serious consequences:

Anthropic and OpenAI have attained astronomical valuations thanks to their rapid growth. (Remember that Anthropic was recently valued at $900 billion.) Disrupting that could crater their stocks and hammer investors.

The system Anthropic outlined would require effective policing of labs and international cooperation among rival nations like the U.S. and China.

Anthropic’s call drew skepticism, including from David Sacks, the administration’s former A.I. czar who has long criticized the company. “In other words, you want the government to save us from… you,” he wrote on X.

Several critics have argued that Anthropic has made fear-mongering a marketing strategy, though industry experts have told DealBook that company executives appear genuinely concerned.