>>> Barton’s Summary

Cover:
-Healthcare stocks have seen a surge in interest this year, with investors likely to remain invested in the sector due to the slowing economy and falling interest rates. The sector's lackluster performance in 2022 and '23, along with a bear market in biotech, has left many pharmaceutical, biotech, and life-sciences companies' shares alarmingly cheap. However, advances in diagnostics, drug development, and delivery are turning some once-fatal diseases into chronic conditions, offering fresh hope to millions of patients and their clinicians. The regulatory environment is also causing concern due to the introduction of Medicare drug-price negotiations, but regulators are likely to be less skeptical of mergers and acquisitions in the next administration. Lower interest rates will make financing more affordable, especially for young companies that desperately need funding. This year's Roundtable featured four healthcare investment experts, who made the case for 21 healthcare companies and their shares.

Interview:
-No update

Tech Trader:
-Intel has regained its position as the chip king for most of semiconductor history, with its latest chips for servers and mobile PCs receiving universal praise from tech experts. Intel's latest Xeon processors now appear to be market leading for the first time this decade, marking the first time in about 86 months that Intel has a leadership server x86 CPU again. The bigger story is Intel's new mobile chip called Lunar Lake, which looks like a home run in the thin-and-light laptop category. The chip enables fantastic battery life and strong computing and graphics performance. Intel's Lunar Lake should help fend off Qualcomm's recent attempts to take share in the laptop market. However, Lunar Lake also demonstrates a continued area of weakness: the chip is designed by Intel but not manufactured by the company. Intel has outsourced production for the processor to Taiwan Semiconductor Manufacturing, which is a temporary solution. Intel needs its nascent chip-making business called Intel Foundry to succeed, and it cannot build Intel's own best chips if it can't build Intel's own best chips.

The Trader:
-General Motors has seen a strong year, with its stock up nearly 30% in 2024. This is due to a share-repurchase program that has lifted investor sentiment. However, as the Big Three and other global auto makers report their September sales, concerns are growing that GM's stock may soon stall along with its peers. Industry research firm Cox Automotive expects September auto sales to tumble 16% from August and 11% from a year ago. Bernstein analyst Daniel Roeska downgraded GM to a Hold from a Buy, while Morgan Stanley analyst Adam Jonas slashed price targets on GM, Ford, and electric-vehicle maker Rivian Automotive, arguing that inventories are on an upward slope and the prices of new vehicles are still out of reach for many households.
-The market has been generally bullish in September, the worst month for stocks, with the Federal Reserve's rate cut and the promise of more easing reinforcing hopes for a soft landing for the US economy. The Dow Jones Industrial Average and the S&P 500 index are at record highs, while the Nasdaq Composite is near one. New stimulus from China has also contributed to a rebound for many top Chinese tech stocks. However, October is another volatile month with a slew of jobs numbers due out, including the Job Openings and Labor Turnover Survey, ADP's report on private-sector jobs growth, weekly jobless claims, and the September nonfarm payrolls jobs report.

Features:
-The Federal Reserve has cut its interest rate by half a point, easing the burden on consumers and particularly benefiting younger Americans. The move is part of the central bank's shift from battling high inflation to maintaining a healthy job market. Although the rate cut doesn't mean a low interest rate environment, it does mean a lower rate environment, making it easier for younger households to make large purchases like houses, cars, and education. Liz Gillette, founder and senior financial advisor with Curio Wealth, believes that most people in their 20s and 30s will be happy with the reduction in rates. Lower interest rates also help first-time home buyers, who have struggled with mortgage rates reaching their highest levels in over two decades in 2023.
-Berkshire Hathaway has reduced its stake in Bank of America by more than 20%, selling 11.7M shares for $460M. The company now holds 802.7M shares of Bank of America, worth around $31.6B. Berkshire has sold nearly $9.5B of Bank of America stock since mid-July, with 230M shares sold. CEO Warren Buffett is aiming to reduce the stake to less than 10%, allowing Berkshire to file for changes in its holding within two business days. The 10% threshold is roughly 776M shares, which Berkshire has sold on each of the past nine trading sessions. The stock has fallen about 10% since the sales began on July 17.
-Car makers are facing a decline in sales growth due to tighter consumer spending. Volkswagen has cut its full-year financial guidance, predicting 2024 sales of around EUR 320B ($356B), down from EUR 322.3B in 2023. The company expects nine million vehicles and 6% profit margins, down from 7% in 2023. This guidance falls below Wall Street estimates compiled by FactSet. The shares of VW and Mercedes-Benz have been affected by the guidance cuts. Mercedes-Benz cited a weakening Chinese market, with total new car sales down roughly 5% year over year. European car sales also dropped almost 17% year over year in August, with Volkswagen's sales dropping 13% and Mercedes sales falling 10%. However, US car sales held up better in August, rising about 7.6% year over year. The relative strength of the U.S. market is better news for Ford Motor than General Motors, as it has the potential to be dragged down by both its Chinese and European businesses.

European Trader:
-Google has filed a formal antitrust complaint with the European Union's top regulator over Microsoft's commercial practices in the cloud-computing industry. The complaint alleges anticompetitive practices that lock customers into Microsoft's Azure cloud platform. Google is the third-largest player in the cloud-computing market, behind Microsoft and Amazon's Web Services. The complaint claims that customers using Windows Server products who want to switch to the cloud are unfairly penalized if they want to use competing cloud services due to Microsoft's licensing conditions. Microsoft has already settled a separate complaint from a trade group representing European cloud-services providers over similar issues, agreeing to change some of its licensing practices.

Emerging Markets:
-No update

Commodities:
-Costco Wholesale, a discount chain known for its jumbo packs of paper towels and salmon, has seen a surge in gold sales, despite the ongoing bull market for gold. The company started selling 1-ounce gold bars last fall, coinciding with a bull market for gold. Wall Street analysts estimated Costco was hawking up to $200M a month worth of gold. Costco's gold sales were up "double digits" in the quarter, along with other categories like jewelry, toys, and housewares. The 24-karat gold bars are sold exclusively to Costco members and only through its website. The price varies based on market conditions, with the bars being priced at $2,699.99 on the retailer's website, although they were listed as out of stock. Gold has been one of the market's best-performing assets in 2024, returning nearly 30%, compared to about 21% for the S&P 500.

Streetwise:
-Sallie Mae, a US government-backed lender, has been attracting attention due to the student loan crisis. The company has been impacted by delinquencies, forbearance, and blocked attempts at forgiveness, as well as rival lenders fleeing the market. Over the past five years, Sallie Mae's stock has returned 164%, compared to 108% for the S&P 500 index. BofA Securities predicts a 24% price gain over the coming year, with a dividend yield of 2%. The government began making student loans in the 1950s to boost the supply of scientific brains during the Cold War. The government then expanded eligibility and began subsidizing and guaranteeing loans made by private companies. In the '90s, the government returned to direct lending to reduce costs, and by 2010, it switched entirely to direct loans. Sallie Mae controls just over half of the market for private loans, which make up 98% of its balance sheet. The average FICO score at approval was 752, and 80% of loans were co-signed.

>>> Week-ends Papers Summary

FINANCIAL TIMES
-Israel's military has killed Hezbollah’s leader Hassan Nasrallah in a massive strike on Beirut, marking the latest in a series of devastating blows to the Lebanese militant group. The strike, along with Ali Karki, the commander of Hezbollah’s southern front, and additional Hezbollah commanders, capped a dramatic escalation by Israel, which has taken a heavy toll on Hezbollah’s capabilities and stoked fears of an all-out war.
-Israel's military hit Hezbollah’s "main command center" in Beirut's southern suburbs, targeting Hassan Nasrallah, the group's leader. The strike came after Prime Minister Benjamin Netanyahu stated that Israel must defeat the Lebanese militant group despite international pressure for a ceasefire. The Israeli army claimed to have struck Hezbollah’s headquarters under residential buildings. There is no official confirmation from Hezbollah about Nasrallah's survival or presence in Beirut. On Saturday, Israel and Hezbollah exchanged rocket fire and Israeli warplanes struck the Beirut neighborhood of Dahiyeh. Senior Iranian politicians have stated that Israel's killing of senior leaders and commanders of Hezbollah will not weaken the group.
-St Louis Fed president Alberto Musalem has suggested that the US central bank should gradually reduce interest rates after a larger than usual half-point reduction earlier this month. Musalem believes that the US economy could react vigorously to looser financial conditions, stoking demand and prolonging the central bank's mission to beat inflation back to 2%. He believes that policy should gradually become less restrictive and that the US economy could react "very vigorously" to looser financial conditions. Musalem's comments came less than two weeks after the Fed lopped half a percentage point from rates, forgoing a more traditional quarter-point cut to kick off its first easing cycle since the onset of Covid-19 in early 2020. The Fed's preferred inflation gauge fell more than expected to an annual rate of 2.2% in August.
-Kamala Harris has pledged to intensify efforts to curb illegal immigration at the US-Mexico border, aiming to present a tougher stance on border security as the presidential race enters its final stretch. Harris pledged to move beyond measures imposed by the Biden administration, promising "further action" to prevent illegal crossings, tighter asylum measures, and more severe criminal charges for illegal entrants. The tougher rhetoric comes as Harris seeks to shake perceptions of a lax approach to migration and narrow the polling gap with Donald Trump on a crucial electoral issue. Despite polls placing Harris in a tie with Trump, the former president consistently leads her on border security, with a recent NBC News poll giving Trump a 21-point advantage among voters.
-Donald Trump has expressed confidence that the war in Ukraine will be resolved quickly if he wins the US election, as he met with Ukrainian leader Volodymyr Zelensky. Trump praised his "very good relationship" with both Zelensky and Putin, stating that if he wins, the conflict will be resolved quickly. The meeting was a sign of their search for a common understanding of how relations between Washington and Kyiv might change in a second Trump presidency. However, Trump has also renewed his push for peace talks with Russia, which Ukrainian and western officials have rejected as premature. Trump said they have a "very good relationship" with Putin and that if they win, they will have "more good" relations with him compared to Putin.
-OpenAI, a leading AI research company, has announced the departure of its high-profile chief technology officer, Mira Murati, along with Bob McGrew and Barret Zoph. This move is seen as a new direction for the company, which has transitioned from a poor AI research organization to a commercial behemoth. Altman, who was only notified in the morning, has surrounded himself with allies as the fast-growing start-up pushes ahead with plans to restructure as a for-profit company. It has also emerged that Altman has discussed taking an equity stake with the board, as the San Francisco-based company seeks to raise more than $6B at a $150B valuation. Altman, who is already a billionaire from his previous tech ventures and investments, had previously chosen not to take any equity in OpenAI to remain neutral.
-Hurricane Helene, which caused over 40 deaths and left millions without power, has been downgraded from a category four hurricane to a post-tropical cyclone in Florida's Gulf coast. The storm surges, high winds, and torrential rain left over 4M homes and businesses in Florida, Georgia, and the Carolinas without electricity. Insurance sector specialist rating agency AM Best estimated insured losses from Helene to be around $5B or more, with primary insurers suffering in particular. The hurricane made landfall in Florida's north-west Big Bend region, passing through the state's Panhandle region and into Georgia at around 1am on Friday. The storm could also be a key financial test for Florida property-catastrophe specialist writers, some of which are thinly capitalized.
-Anura Kumara Dissanayake, the left-wing populist leader of Sri Lanka, has pledged to lead the country's first-ever uprising to form a government through the ballot. His victory over two long-ruling political parties has placed him at the top of the island's politics. However, the historic role of Dissanayake's People's Liberation Front (JVP) in violent uprisings against the state has left Sri Lanka's establishment and foreign diplomatic and economic partners uneasy. The National People's Power alliance, led by Dissanayake, has demanded changes in the country's IMF-backed debt restructuring and economic recovery plan. Dissanayake has already dissolved parliament, setting the stage for elections in mid-November. He promised to create a "law-abiding nation" while ensuring the social security of all citizens.
-Bank of America has placed two bankers in India on administrative leave as part of an investigation into allegations of wrongdoing in its Asian investment bank. The internal investigation, launched earlier this year following a whistleblower complaint, is probing whether BofA and bankers in its Asian operations had tipped off certain investors of upcoming secondary offerings, allowing them to "front run" stock sales and profit from nonpublic information. BofA has confirmed the existence of the internal probe but has found no evidence of misconduct. Neither banker has been fired and could be reinstated following the investigation. The investigation, for which it has hired outside law firms, is examining whether bankers in its Asian operations sent messages or held meetings with hedge funds and others in advance of large secondary stock offerings on behalf of its corporate clients.

NEW YORK TIMES
-Israel has confirmed the death of Hassan Nasrallah, the longtime leader of Hezbollah, in an airstrike on the organization's underground headquarters near Beirut. This would be a significant escalation in Israel's campaign against the Iran-backed group, which has threatened to escalate into a regional war. Israel's intelligence agencies preliminarily determined that Nasrallah was killed based on the number and size of the bombs used and information gathered from inside the group. Israeli forces launched a series of new airstrikes in the Hezbollah-dominated area known as the Dahiya, aiming to destroy Hezbollah weapons caches. Lebanon's health ministry reported at least six people killed and over 90 injured by the Israeli strikes, with the toll expected to rise. Emergency workers were still searching through the rubble as Israel struck again. Lebanon's health ministry advised hospitals in Beirut's southern suburbs to evacuate due to the danger posed by continuing strikes.
-Israeli strikes on southern Beirut have destroyed at least four large apartment buildings, targeting Hezbollah's leader, Hassan Nasrallah. The New York Times has analyzed verified videos, photos, and satellite imagery to show that nearby buildings were damaged in the attacks. Three of the buildings were completely flattened, while another collapsed with the upper floors partly intact. All four of the destroyed structures were residential buildings along the same street. Two neighboring apartment buildings that were at least seven stories tall were hit, and two neighboring buildings also at least seven stories were also hit. The blasts tore the facades off the lower floors and blew out many of the windows. The strikes destroyed nearby vehicles and left craters in the streets about 700 feet away. A video filmed during the strikes and posted on the social media app Telegram showed several distinct smoke plumes, including an enormous cloud of smoke from the area of the four destroyed buildings and one large plume from areas slightly to the east of the buildings.
-On September 27, 2024, the Bekaa Valley in eastern Lebanon is amidst a devastating Israeli airstrike campaign. The road is mostly quiet, with shops shuttered and sidewalks empty. The road is littered with remnants of the airstrikes, including piles of cinder blocks, metal, and glass. The area is covered in dust and power lines dangle over the road. The bombardments are part of over 1,000 airstrikes launched by Israel since Monday to weaken Hezbollah, the Iran-backed Lebanese military group. The campaign is considered one of the most intense in contemporary warfare and has led to the deadliest day in Lebanon in decades. As of now, around 700 people have been killed and over 100,000 others have been forced to flee their homes. The campaign has left over 100,000 people homeless and displaced.
-Hassan Nasrallah, the secretary general of Hezbollah, has avoided public appearances for nearly two decades due to fear of assassination. His 32 years in charge have seen the group become a potent force, holding sway in Lebanon and an army equipped with ballistic missiles that can threaten Tel Aviv. Nasrallah is the leader of the strongest militant group that Iran has helped create in the region, and his fighters have helped shoring up President Bashar al-Assad's government in Syria. Hezbollah has also trained Hamas fighters and militias in Iraq and Yemen. Nasrallah is known as Abu Hadi or father of Hadi, after his eldest son, who died in 1997 in a firefight with the Israelis. His status remains unclear.
-During his visit to the United Nations General Assembly in New York City, Israeli Prime Minister Benjamin Netanyahu was met with a scathing critique of Israel's actions. He publicly rebutted a Biden administration plan to pause the fighting between Israel and Hezbollah, raising tensions between the two governments. However, Netanyahu bulldozed through his visit, criticizing Israel's critics and the United Nations, offering no diplomatic concessions, and ordering an airstrike in Beirut that may have killed Israel's long-hailed archenemy, Hezbollah leader Hassan Nasrallah.
-The Tennessee Dam, located in eastern Tennessee, is nearing failure due to heavy rainfall from Helene, causing water levels to rise to record levels. Authorities are urging residents of communities downstream to evacuate immediately, as the dam is on the brink of failure. The National Weather Service office in Morristown, Tennessee, has issued a flash flood warning for parts of Cocke, Greene, and Hamblen counties, which are home to nearly 6,000 people and include two schools. The warning urges residents to move to higher ground immediately if they are in low-lying areas below the dam. The area under warning is home to nearly 6,000 people and includes two schools.
-Israel's new campaign against Hezbollah began with a daring attack on a secret weapons lab in Syria. The area is only about 30 miles from the Lebanese border, which is why Israeli and American officials say Hezbollah manufactures weapons there instead of in Iran. The commandos came in helicopters on a nearly moonless night, after the guards outside the secret weapons lab had already been killed in a short series of airstrikes. Israeli officials believed that Iran and the Lebanese militia Hezbollah planned to manufacture a new generation of precision missiles there. However, this was a different kind of operation. The helicopters flew low, without lights, and dozens of camouflage-clad commandos were rappelling down cables and rushing into the complex, which in places was more than 200 feet underground, according to US, European, and Israeli officials.
-On September 27, 2024, Vice President Kamala Harris delivered one of her party's toughest speeches on immigration and border policy as the Democratic presidential nominee. Harris vowed to carry on President Biden's crackdown on asylum and to impose order on the southern border, demonstrating how much the politics of immigration have shifted for Democrats. Just one presidential cycle ago, Harris and most other candidates in the party's primary race had promised to decriminalize illegal border crossings.
-Former President Donald J. Trump has fueled a heated immigration debate in Charleroi, Pennsylvania, where many Haitians have settled in recent years. The town, along the Monongahela River, was once a hub of glassmaking, but manufacturing work has declined. Amos Vougar, who arrived in Charleroi three years ago, felt he had found everything he needed. However, the rapid influx of immigrants, many fleeing violence in Haiti, has led to discord in towns across the country that were relatively untouched by immigration. Trump has fueled the flames by claiming that immigrants brought "massive crime" to Charleroi and asking, "Has your beautiful town changed?" Vougar believes that the sudden flood of gripes, fears, and rumors from longtime residents has threatened the serene life he thought he had found in the green hills of Charleroi.
-In the final weeks of competitive congressional races, male Republicans are using their wives to soften their image and appeal to female voters concerned about their records on reproductive rights. These ads often feature women in softly lit living rooms and pristine kitchens vouching for their husbands' characters. Some women are driving S.U.Vs with young children in the back seat, talking about how their husbands are champions for their families and can be champions for yours. Other times, candidates film footage of a wholesome family gathering around the dining room table. In at least one case, such a gathering includes a candidate at the dinner table in a family-like tableau with a woman and children who are not related.
-Mayor Eric Adams has pleaded not guilty to criminal charges including bribery and fraud, a charge that threatens to topple his administration. Adams, who is in a dark suit and maroon tie, appeared in back-to-back appearances inside a federal courthouse in Manhattan and outside its granite facade on Friday. He said, "I am not guilty, your honor," at his midday arraignment before Magistrate Judge Katharine Parker in a 26th-floor courtroom in Lower Manhattan. The indictment against Adams, which includes a 57-page description of free or heavily discounted overseas trips and illegal campaign contributions from Turkey in return for political favors, has upended New York City's political landscape. The will-he-or-won't-he questions about whether Adams would resign seemed to overshadow even the upcoming presidential election as a tumultuous week in the city drew to a close.
-OpenAI, the San Francisco start-up behind ChatGPT, has reported a 1,700% increase in monthly revenue to $300M in August, and expects $3.7B in annual sales this year. The company estimates its revenue to reach $11.6B next year. However, it is expected to lose around $5B this year due to expenses like running services, employee salaries, and office rent. These numbers do not include equity-based compensation to employees. OpenAI is circulating documents with potential investors for an investment round that could bring in $7B and value the company at $150B, among the highest ever for a private tech company. The round could close as early as next week, as OpenAI is experiencing rapid growth but has lost several key executives and researchers in recent months.

NEW YORK POST
-The Democratic presidential nominee, Kamala Harris, the made her first visit to the US-Mexico border to announce measures to mitigate the ongoing border crisis fewer than 40 days before election day. Despite having been the White House border "czar" for over three-and-a-half years, Harris took the responsibility of setting rules at the border and enforcing them seriously. If elected, she would improve on an executive order announced by President Biden in June that barred migrants from applying for asylum when they cross the border illegally. Harris pledged to take further action to secure the border and reduce illegal crossings, pledging to apprehend and remove those who cross the border unlawfully and barred from re-entering for five years. She also pledged to pursue more severe criminal charges against repeat violators and barred asylum seekers from crossing the border unlawfully if they did not make an asylum request at a legal point of entry.
-Former President Donald Trump has blamed Vice President Kamala Harris for the high number of illegal immigrants in the US who have been convicted or accused of homicide. Trump called the federal data showing over 15,000 immigrants charged with or convicted of homicide the "worst numbers I think I've ever heard" during a town hall event in Warren, Michigan. He criticized Harris for being incompetent as the border czar. The data provided by US Immigration and Customs Enforcement shows that there were 662,566 noncitizens with criminal histories in ICE's national docket as of July 21, including 13,099 convicted of homicide and 1,845 with pending homicide cases. ICE is currently detaining 277 migrants convicted of homicide and 51 facing such charges, indicating that those individuals likely face deportation.
-Former President Donald Trump has threatened to prosecute Google if he wins in November, claiming the company's search engine only promotes "bad stories" about him. Trump made the threat on his Truth Social account after a damning study found Google was burying results for his campaign website below those of Democratic rival Kamala Harris' official site and spitting out articles that favor the Vice President. Trump claims Google has illegally used a system of only revealing and displaying bad stories about Trump while spitting out good stories about Harris.

TechCrunch : OpenAI might raise the price of ChatGPT to $44 by 2029

OpenAI might raise the price of ChatGPT to $44 by 2029

ChatGPT could get more expensive to use in coming years.

The New York Times, citing internal OpenAI docs, reports that OpenAI is planning to raise the price of individual ChatGPT subscriptions from $20 per month to $22 per month by the end of the year. A steeper increase will come over the next five years; by 2029, OpenAI expects it’ll charge $44 per month for ChatGPT Plus.

The aggressive moves reflect pressure on OpenAI from investors to narrow its losses. While the company’s monthly revenue reached $300 million in August, according to the New York Times, OpenAI expects to lose roughly $5 billion this year. Expenditures like staffing, office rent, and AI training infrastructure are to blame. ChatGPT alone was at one point reportedly costing OpenAI $700,000 per day.

OpenAI could face a blowback if it increases prices too quickly. While ChatGPT has roughly 10 million paying users today, surveys suggest that many believe the current $20-per-month price is too high.

WSJ : AI Data Center Boom Spurs Race to Find Power

AI Data Center Boom Spurs Race to Find Power
Across the nation, utilities are worried about expanding the overburdened power grid, citing high costs and concerns about commitment from data center projects

Tech companies scouring the country for electricity to power artificial intelligence are increasingly finding there is a waiting list.

In many places the nation’s high-voltage electric wires are running out of room, their connection points locked up by data centers for AI, new factories or charging infrastructure for electric vehicles.

A mad dash to lock up available power has ensued.

The tech industry is pinballing from one market to the next looking for places with the capacity to connect campuses that would consume up to a gigawatt of power—about as much as San Francisco uses. Some requests are as much as four to five times as large as that.

But wires are getting so crowded that some prospective data center customers—which request far more power than other users—are being told they may have to wait until the next decade to get the power they are seeking. Others are receiving less power than they expected.

In Salt Lake City, there is a moratorium on larger power requests. The data center industry considers it closed for business.

In Santa Clara, Calif., one of the tech industry’s hometown utilities, Silicon Valley Power, has stopped taking requests for electric service for additional data centers. SVP said it faces transmission and power generation constraints that it can’t solve until the early 2030s.

In Virginia—the world’s largest data center market—Dominion Energy said it is temporarily rationing power to some new data centers until new transmission lines can be finished, even as the utility adds around 15 data centers a year.

The growing pains are also sparking fights over how to pay for potentially billions of dollars in upgrades to the grid.

In central Ohio, the biggest power line in the Midwest will run out of transmission capacity in 2028. American Electric Power, which owns the line, has proposed a new, higher electricity rate for data centers and cryptocurrency miners that would lock them in as customers for a decade. The companies are balking.

“The amount of infrastructure required to deliver on that is immense,” said Marc Reitter, president and chief operating officer of AEP Ohio. “We need certainty.”

Thirst for power
AI is a fast-growing source of spending by tech companies that say they are on the cusp of the biggest boom since the internet, with implications for national security and the economy. But a search on a generative AI platform such as ChatGPT can use at least 10 times the amount of energy as a google search. Data centers could use as much as 9% of U.S. electricity by 2030, according to the Electric Power Research Institute.

AI arrives in tandem with other new strains on the grid: manufacturing plants spurred by tax policies under the Inflation Reduction Act, and a push in some states for more electric power for transportation, heat and heavy industry. It is the first meaningful demand growth this century for the electricity industry.

For example, Phoenix has become a key data center market and is in the midst of a manufacturing boom. Utility Arizona Public Service proposes building 800 miles of new transmission lines or upgrades in the next decade because its existing transmission capacity will be “consumed” before 2030.

Transmission constraints are the first pinch point that many utilities are flagging as those kinds of upgrades can take several years. But there are calls for added power generation. Goldman Sachs estimates around 47 gigawatts of new power generation capacity will be required to support U.S. data center power demand growth through 2030.

Analysts at Fitch Ratings say utilities also risk overestimating the demand from data centers and overbuilding, given the inconsistent ways that the industry tallies future demand.

Power for three New Yorks
In the heart of Ohio, American Electric Power’s 765-kilovolt bulk transmission system provides a backbone of reliable power that has vacuumed in new data centers. The amount of electricity used in the region will roughly double by 2028, which AEP can accommodate.

After 2028, AEP says it has three New York Cities worth of data centers asking to connect to the grid, but no way to discern which are serious customers or just looky-loos shopping multiple markets. It halted new service requests from data centers more than a year ago.

AEP’s Reitter said long-term contracts and higher rates would protect customers such as homeowners and other businesses in case the tech companies leave later.

Companies of all kinds are fighting the idea.

The Ohio Manufacturers’ Association wants a study on transmission constraints and opposes the AEP request because it would avoid the usual rate-making process, including studies that delve into the cost to provide new service.

Google argued in regulatory filings that it has invested $6.7 billion in data centers across central Ohio and wants state regulators to investigate the best ways to manage growth, handling any changes to rates in a formal rate case. The Data Center Coalition trade group, of which Google and other tech companies are members, suggested an eight-year minimum commitment, short of AEP’s decadelong request.

The Ohio Consumers’ Counsel, meanwhile, has argued that residential customers “should not be forced to subsidize utility investment to accommodate data centers operated by multibillion and trillion-dollar companies.”

Akshat Kasliwal at PA Consulting Group, who advises tech and power companies, said AEP’s conundrum is that it needs to invest in transmission to add more data centers. But if it charges higher rates to cover that cost, data centers might go elsewhere after the money has been spent, leaving other customers holding the bag.

Take-or-pay contracts
Other utilities are also looking at ways to shield customers from costly grid investments that data centers later decide they don’t need.

Xcel Energy has a peak demand of around 22 gigawatts across its multistate system but around 6.7 gigawatts of new data center requests, largely in Colorado and Minnesota. Executives say the system will need transmission upgrades and new power generation, as well as a way to be fair to all customers.

Chief Financial Officer Brian Van Abel said in an August earnings call the company would consider things such as “take-or-pay” contracts that require data centers to pay for a minimum amount of power no matter how much is used.

Arizona Public Service tests a project’s seriousness by telling new large customers it puts minimum thresholds on bills to cover the cost of needed investments.

“Some customers may shy away from those commitments,” said Ted Geisler, president of APS, “and that’s a good indicator to us that maybe they’re not as committed yet as others.”

Andy Cvengros, managing director with real-estate services firm JLL, said utilities are getting wise in the face of speculative requests for power from everyone, whether from farmers with land along a transmission line or private-equity investors. Requests don’t always have solid projects with tenants behind them.

“We have companies that didn’t exist 24 months ago now asking for 100 megawatts of power,” Cvengros said. “What’s the real demand?”

FT : Vitol-owned UK power group enjoys profit surge on market disruption

Vitol-owned UK power group enjoys profit surge on market disruption
VPI profits soar as company owned by world’s largest commodity trader continues to benefit from 2022 energy crisis

Trading group Vitol’s UK electricity generation company made profits of more than £600mn last year as it continued to enjoy the benefits from higher prices during the energy crisis.

VPI has reported adjusted annual pre-tax profits of £639.8mn, more than 250 per cent higher than the £177mn made in 2021, before the surge in commodity prices following the war in Ukraine.

It is also up on £555.5mn made in 2022, according to accounts for VPI Holding seen by the Financial Times, illustrating how Vitol has benefited from market disruption since Russia invaded Ukraine two years ago. 

Parent company Vitol, the world’s largest commodity trader, made $13bn of net profits in 2023, which were revealed by the FT in April, far ahead of rivals, underlining the group’s powerful position in global energy markets.

Jorge Pikunic, VPI chief executive, said while prices had fallen in 2023, much of the power generated in the year had been sold in advance in 2022, when prices were high due to shortages and concern about gas supplies.

“The operational performance was very, very strong,” he added. “Reliability metrics were even stronger than in 2022 due to the investment we have put into our assets over the past three years.”

But he added that the market had changed “quite significantly” during 2023, with prices falling due to factors including higher output from France’s nuclear power fleet, high levels of wind power and lower demand.

“The high prices resulted in demand reducing and that demand hasn’t come [back] up,” he said. “All that has translated into lower prices. It has also resulted in lower volatility.”

He added: “The years of stable profits for power generation are way behind us. This is an incredibly volatile market [for earnings].”

The adjusted profits exclude the value of contracts VPI buys in advance to hedge supply commitments. When those are included, the company made pre-tax profits of £196.8mn in 2023, down from £1.3bn in 2022.

VPI owns four rapid-cycle gas-fired power stations bought from the UK’s Drax in 2020 as well as a gas-fired heat and power plant in Immingham, North Lincolnshire, which supplies steam to next-door oil refineries.

The rapid-cycle gas-fired power stations respond quickly to fluctuations in supply and demand, giving them an important role in the electricity system as they can step in to fill any looming gaps.

That role is likely to become more important as intermittent wind and solar power play a larger role in the electricity system.

Power generators’ profits have come under scrutiny in recent years as high wholesale gas prices feed into consumer bills. UK household energy bills are set to rise 10 per cent on Tuesday due to higher wholesale prices.

VPI has invested £225mn during 2023 to maintain its fleet and build new gas-fired power plants in the UK and Ireland. It also spent £90.2mn buying battery and solar systems in Ireland.

In addition, it is developing plans to attach carbon capture technology to its Immingham plant and stash the emissions under the North Sea, one of several projects that are in line for government support to try to get the nascent technology off the ground.

The company said it is planning to invest up to €450mn in German battery projects over the next three to five years.

VPI was founded in 2013 when Vitol bought the Immingham power station from Phillips 66.

FT : Who’s left at OpenAI? Sam Altman consolidates power after failed coup

Who’s left at OpenAI? Sam Altman consolidates power after failed coup
Departure of chief technology officer Mira Murati ensures ChatGPT-maker’s chief executive is now surrounded by allies

“OpenAI is nothing without its people.” That was the sentence echoed by dozens of employees on social media in November to pressure the board that had fired chief executive Sam Altman and convince them to reinstate him.

Those words were repeated again on Wednesday as its high-profile chief technology officer, Mira Murati, announced her departure, along with two others: Bob McGrew, chief research officer, and Barret Zoph, vice-president of research.

Murati’s decision shocked staff and pointed to a new direction for the nine-year-old company that has pivoted from a scrappy AI research organisation to a commercial behemoth. Altman was only notified in the morning, just hours before Murati sent a message company-wide.

Altman said on X that he “won’t pretend it’s natural for this . . . to be so abrupt”, as the exits made it apparent that the company had not healed from the fractures caused by the failed autumn coup.

In the months after the bruising board battle, Altman has surrounded himself with allies as the fast-growing start-up pushes ahead with plans to restructure as a for-profit company.

It also emerged this week that Altman had discussed taking an equity stake with the board, at a time the San Francisco-based company has sought to raise more than $6bn at a $150bn valuation.

Those talks come after Altman, who is already a billionaire from his previous tech ventures and investments, had previously said he had chosen not to take any equity in OpenAI to remain neutral in the company.

This account of how Altman consolidated his power and loyalties at the ChatGPT maker is based on conversations with seven former and current employees, as well as advisers and executives close to the company’s leadership.

They said that OpenAI planned to rely on existing technical talent and recent hires to take on Murati’s responsibilities and use her exit to “flatten” the organisation. Altman is to have greater technical involvement as the company looks to retain its lead over Google and other rivals.

Despite its dramas, OpenAI is still a leading player in AI, with the start-up revealing the o1 model earlier this month, which it said was capable of reasoning — a feat that its rivals Meta and Anthropic are also grappling with.

“Mira is focused on a successful transition with her teams before turning her full energy and attention to what comes next,” said a person familiar with her thinking.

With Murati’s departure, Altman promoted Mark Chen to head up research with Jakub Pachocki, who took over from Ilya Sutskever as chief scientist in May.

In an interview with the Financial Times earlier this month, where Murati introduced Chen as the primary lead on the o1 project, he said the ability of AI systems to reason would “improve our offerings [and] help power improvements across all of our programs”.

There will probably be further changes in the coming days as Altman interrupts a trip to Europe this week to return to the company’s headquarters in San Francisco.

Executives who remain at OpenAI include Brad Lightcap, the company’s chief operating officer who leads on its enterprise deals, and Jason Kwon, chief strategy officer, both of whom are longtime allies of Altman and worked at start-up incubator Y Combinator under Altman.

In June, Altman hired Kevin Weil, chief product officer, who previously worked at Twitter, Instagram and Facebook, and Sarah Friar, chief financial officer, the former chief executive of Nextdoor, a neighbourhood-based social network. Both come from consumer tech companies, focusing on product and user growth rather than science or engineering.

Their jobs are new for OpenAI, but familiar to most Silicon Valley start-ups, marking the move by the company to become a more traditional tech group focused on building products that appeal to consumers and generate revenue. OpenAI said these efforts are not at odds with ensuring AI benefits everyone.

“As we’ve evolved from a research lab into a global company delivering advanced AI research to hundreds of millions, we’ve stayed true to our mission and are proud to release the most capable and safest models in the industry to help people solve hard problems,” an OpenAI spokesperson said.

Friar sought to boost morale this week, telling staff that the $6bn funding round, which was expected to close by next week, was oversubscribed, arguing its high value was a testament to their hard work.

Another prominent newcomer is Chris Lehane, a former aide to then-US president Bill Clinton and Airbnb vice-president, who worked for Altman as an adviser during the coup and joined the company earlier this year. He recently took over as vice-president of global affairs from Anna Makanju, OpenAI’s first policy hire, who has moved into a newly created role as vice-president of global impact.

With the latest departures, Altman has said goodbye to two of the senior executives who had raised concerns about him to the board last October — Sutskever and Murati, who said she was approached by the board and perplexed by the decision to oust him.

Concerns included Altman’s leadership style of undermining and pitting people against one another, creating a toxic environment, multiple people with knowledge of the decision to fire him said.

Within a day, as investors and employees backed Altman, Murati and Sutskever joined calls for his return and remained at the company, wishing to steady the ship and keep it sailing towards the mission: building artificial general intelligence — systems that could rival or surpass human intelligence — to benefit humanity.

This was the mantra under which OpenAI was founded in 2015 by Elon Musk, Altman and nine others. It was initially a non-profit, then transitioned to a capped-profit entity in 2019.

Now, as it seeks to close its latest multibillion-dollar funding round, the company is rethinking its corporate structure in order to attract investors and generate greater returns. Only two co-founders, Altman and Wojciech Zaremba, remain at the company. President Greg Brockman is on sabbatical until the end of the year.

For many of OpenAI’s staff there is a desire to work on AGI and reach that goal before competitors such as Meta or Musk’s xAI. They buy into the so-called cult of Sam and believe he will lead them to this breakthrough. Yet, several staff have expressed concern about reaching this goal, suggesting the creation of products being prioritised over safety.

Daniel Kokotajlo, a former AI governance researcher, said that when he left the company in March, the closest OpenAI had come to a plan for how to keep AGI safe was the final appendix on a December paper written by Jan Leike, a safety researcher, alongside Sutskever.

“You might expect a company of more than 1,000 people building this to have a comprehensive written plan for how to ensure AGI is safe, which would be published so it could be critiqued and iterated,” he said. “OpenAI knows any such detail would not stand up to scrutiny, but this is the bare minimum that is acceptable for an institution building the most powerful and dangerous technology ever.”

OpenAI pointed to its preparedness framework as an example of its transparency and planning, adding that the technology could also bring many positives.

“OpenAI continues to invest significantly in safety research, security measures, and third-party collaborations, and we will continue to oversee and assess their efforts,” said Zico Kolter and Paul Nakasone, members of the independent board’s Safety and Security oversight committee.

FT : Andrea Orcel, the ambitious UniCredit chief eyeing his next deal

Andrea Orcel, the ambitious UniCredit chief eyeing his next deal
The controversial move on Commerzbank would be the first big cross-border deal in Europe since the financial crisis

Back in the 1980s, Andrea Orcel’s university thesis was about hostile takeovers. Almost four decades later, the ambitious UniCredit chief finds himself at the heart of the biggest European banking drama in years — taking on the German government in what could be the first big cross-border banking deal in Europe since the financial crisis.

This week the Milanese lender raised its stake in rival Commerzbank to 21 per cent, pending approval from the European Central Bank. This would make UniCredit the largest shareholder, overtaking the German government. German Chancellor Olaf Scholz has called the stake-building “unfriendly” and “hostile” but Orcel has said he had no plan to engage in a fist fight with Berlin.

“Andrea isn’t naive, he’s a tactician and I think he’s well aware of what he’s doing . . . he knows exactly how he plans to reach his end goal . . . we may not know exactly, but he does,” says Alessandro Profumo, the former CEO of UniCredit.

Berlin’s refusal to negotiate has reportedly frustrated Orcel, who does not usually take no for an answer. Rising before dawn for his daily sports session, he has been working nonstop with bankers at Barclays and Bank of America to find a way through.

His devotion to the job, coupled with his ability to advise CEOs on near impossible deals, have built Orcel, 61, a reputation as both smart and ruthless. “Andrea is pragmatic and articulate . . . because he’s very demanding, people can feel he’s too demanding . . . but what he asks from others he asks from himself,” says Andrew Gazitua, the former chief operating officer of investment banking at Merrill Lynch, where Orcel cut his teeth. He can also be down to earth — he goes by his first name in a country where many CEOs demand more formality.

Raised in Rome where his mother worked for the UN and his Sicilian father ran a small leasing company, Orcel went to the prestigious Lycée Français Chateaubriand, home to the children of aristocrats and diplomats. While on holiday from Rome’s La Sapienza university, he decided he wanted to become a banker instead.

After stints at Goldman Sachs and Boston Consulting Group, Orcel joined Merrill Lynch in 1992, where — after a 20-year streak of successful M&A deals including the €21bn merger of Italy’s Credito Italiano with UniCredito to create UniCredit — he was dubbed “the Cristiano Ronaldo of bankers”.

“He was extremely knowledgeable and always available, plus he built a network of personal relations that facilitated access to the decision makers,” says Profumo who helmed Credito Italiano at the time.

Along the way, Orcel, who was president of UBS from 2014 to 2018, struck up friendships with the likes of late Santander chair Emilio Botín — whom he advised on acquisitions that transformed the lender into a global banking group. But he also racked up enemies.

His relationship with the Botíns soured in 2018 when Santander withdrew its offer to make him CEO over pay. When Orcel launched a multimillion-euro lawsuit, the world of high finance thought he was crazy. But the courts ultimately awarded him €43.5mn. “He just does what he thinks is right even if it makes him look like an arse but he’ll always be accountable for his actions . . . I hate to say it but most of the time he’s right,” says a senior banker in London.

One time he may have been wrong was when he advised on the disastrous acquisition of ABN Amro by RBS in 2007. He once told the FT that “with the benefit of hindsight we should have done things differently. I cannot help but feel responsibility for my role.”

His transformation of UniCredit, with the share price climbing almost 400 per cent since he joined in 2021, is his most important one yet. Securing the Commerzbank deal would earn him a lasting place in Europe’s financial firmament. Yet, German finance minister Christian Lindner told lawmakers this week that “in terms of their style and their communication, UniCredit’s actions didn’t contribute to strengthening the trust of the government”.

It is not the first time Orcel, who has little time for diplomacy, has locked horns with public institutions. In 2021, Mario Draghi’s government in Italy had hoped to sell Monte dei Paschi di Siena to UniCredit. The parties failed to clinch a deal and Orcel walked away. Since Vladimir Putin’s invasion of Ukraine in 2022, Orcel has also been at odds with the ECB on how to deal with UniCredit’s ongoing Russian presence. “Andrea is no politician, he’s a no bullshit guy,” says Davide Serra, founder of asset management firm Algebris, friend and longtime UniCredit investor. “Moral suasion doesn’t work with him . . . which is why those who don’t like him say he has a bad character.”

Commerzbank may well be worth the latest fight. Orcel’s preferred option, say insiders, would be to merge it with UniCredit’s existing German subsidiary HVB. At the right price, it would be hard for the Germans to refuse. This time, the Italian government also has his back.

Orcel may be divisive — “he’s a bit like Marmite: either you hate him or you love him,” says Amir Hoveyda, who worked with him at Merrill Lynch and UBS. But he has once again managed to leave his counterparty’s weaknesses exposed. A master of game theory, his latest move will force a reckoning among regulators that have pushed for greater EU banking integration for years. As for those rivals who have long wondered if an Italian bank — even an enlarged one — will ultimately be enough for such an extraordinarily ambitious executive, they may not stop looking over their shoulders just yet.

Fortune : OpenAI reportedly wants to build 5-gigawatt data centers, and nobody k

OpenAI reportedly wants to build 5-gigawatt data centers, and nobody knows who could supply that much power

To support its ambitions to develop AI systems that would be as intelligent as people, OpenAI wants the U.S. government to help streamline the construction of massive data centers that would suck up as much power as major American cities. But experts are skeptical that anyone is in a position to meet those kind of energy demands.

Two weeks ago, Altman and an assortment of other top AI players had a meeting about infrastructure at the White House. The Biden administration subsequently announced a coordinated push across government to speed up the build-out of new AI data centers “in line with economic, national security, and environmental goals.”

But in the past couple of days, reports from Bloomberg and the New York Times have provided more details about what OpenAI in particular is trying to get from the government: support in its quest to build data centers with power requirements of five gigawatts each.

Five gigawatts is an astonishingly large amount of power. It’s the output of around five nuclear reactors—the kind of power you need for a whole major city like Miami. It’s as much as 100 times the requirement of a standard large data center. The Times reported that OpenAI’s 5GW proposal drew laughter from a Japanese official.

Constellation Energy CEO Joe Dominguez told Bloomberg that he had heard Altman wanted five to seven such data centers. According to Alex de Vries, the founder of tech energy research company Digiconomist, seven 5GW units would have “twice the power consumption of New York State combined.”

“It’s an extreme amount and, from a global electricity perspective, at that point you’re talking about more than 1% of global electricity consumption for just those data centers alone,” he said.

It’s not hard to see why Altman—who this week published a blog post outlining a glorious AI-powered future for humanity—is making this push now. (OpenAI did not respond to multiple requests for comment on the reports.)

OpenAI is currently the leader in generative AI, but—barring some major shift in how the technology works—maintaining that position will require an ever-increasing amount of computing power. Per the Times, each of these futuristic data centers would cost around $100 billion and contain 2 million AI chips, which is where those 5GW of power become necessary.

The $100 billion and 5GW figures strongly suggest that the facilities being pitched here are intended to house the “Stargate” supercomputing clusters that Microsoft and OpenAI have reportedly been planning for OpenAI’s future models. To give some sense of the scale of capital outlay here, Alphabet on Thursday announced that it will spend $3.3 billion building two cutting-edge data centers in South Carolina.

Power companies may have spare capacity in their grids to manage peaks in demand, but data centers need to run continuously, noted de Vries, who focused on the energy demands of the cryptocurrency sector before turning his attention to AI. “How many grids have an entire Miami in spare capacity, all the time?” he asked.

Although OpenAI’s power demand is the biggest that any tech company has so far expressed, some other AI players are also anticipating the need for larger, more power-hungry data centers. In March, Amazon Web Services bought a data center in Pennsylvania that is co-located with the Susquehanna nuclear power station; the plant produces 2.5 gigawatts and the data center’s seller, Talen Energy, said AWS would use up to 960 megawatts. And a week ago, Microsoft struck a deal with Constellation that will see the restart of a Three Mile Island reactor, providing 835 megawatts of carbon-free energy for Microsoft’s data centers from 2028.

Constellation’s Dominguez said at the time that nuclear plants are “the only energy sources that can consistently deliver” on the promise of carbon-free power for the hyperscalers’ new demands.

But regarding OpenAI’s five-gigawatt proposal, he told Bloomberg this week: “Whatever we’re talking about is not only something that’s never been done, but I don’t believe it’s feasible as an engineer, as somebody who grew up in this. It’s certainly not possible under a time frame that’s going to address national security and timing.”

This push for more bigger data centers is also taking place at a time of increasing resistance from local and national governments around the world, who are worried about the impact on their power grids and water supplies—the equipment in data centers needs to be constantly cooled using either air or liquid, with the latter being better suited to cooling modern, high-performance equipment.

In the U.S., new laws and tax rises have recently been used to stymie data-center developments in Virginia, Georgia, Arizona, Arkansas, and Illinois. The White House said last week that retired coal plants would provide useful brownfield sites for data center development—crucially, they already have connections to the grid in place—but for now, space remains scarce.

“One of the reasons [tech companies are] pushing for this is they’re facing increasing difficulties in expanding,” said de Vries. The researcher pointed to recent experiences in Scandinavia that suggest data centers do not create the significant amounts of jobs that their developers claim will come, adding: “The data center industry is getting found out that it’s not delivering as much as is promised for everything that they’re taking.”

It is worth remembering that Altman isn’t shy about coming up with big numbers that end up proving unfeasible. Back in February, the Wall Street Journal reported that he was looking for as much as $7 trillion in funding for new AI chips and for the power needed to run them. This week’s Times article maintains, based on fresh sourcing, that Altman did float that figure, though OpenAI denies that multitrillion-dollar projects were ever on the table.

The $7 trillion figure was widely scoffed at, and the Times reported this week that Altman had “since scaled his ambition down to hundreds of billions of dollars.”