TheChek News Flow

Nuclear fuel prices surge as west rues shortage of conversion facilities

Bottlenecks have built up in uranium supply chain since Russian invasion of Ukraine

The price of fuel for nuclear reactors has surged much faster than that of raw uranium since the start of 2022, in a sign of the bottlenecks that have built up in the west following Russia’s invasion of Ukraine.

Enriched uranium has more than tripled in price to $176 per separative work unit — the standard measure of the effort required to separate isotopes of uranium — since the start of 2022, according to UxC, a data provider.

Demand for uranium has been driven by a revival in atomic power. However, Russia plays a significant role in the multi-stage process of turning mined uranium into the fuel for a nuclear reactor. This includes converting yellowcake — uranium concentrate — into uranium hexafluoride gas, enriching it to increase the concentration of the type of uranium used for fission, and then turning the enriched uranium into pellets that go into reactors.

Uranium hexafluoride has jumped fourfold in price to $68 per kg in the same period, indicating that conversion is the biggest bottleneck in the nuclear fuel supply chain, analysts said. In contrast, uranium ore has only doubled in price.

“The conversion and enrichment prices are reflecting a much bigger supply squeeze due to the Russia-Ukraine war and other factors,” said Jonathan Hinze, chief executive of UxC.

“Uranium alone does not tell the whole story when it comes to price impacts in the nuclear fuel supply chain.”

Russia controls 22 per cent of global uranium conversion capacity and 44 per cent of enrichment capacity. Those services are out of bounds for some western utilities following a US ban on Russian uranium, although waivers are allowed until the end of 2027.

Nuclear fuel companies such as France’s Orano and British-Dutch-German owned Urenco have committed to boosting enrichment capacity, but so far no one has committed to building new conversion capacity in the west.

Nicolas Maes, chief executive of Orano, said at an industry conference this month that investments needed in conversion and enrichment were “massive” compared with the size of the relevant companies.

He compared Orano’s annual revenues of almost €5bn to the €1.7bn needed to expand its enrichment capacity in southern France by more than 30 per cent.

Johnathan Chavers, director of nuclear fuel and analysis at Southern Nuclear, which operates eight nuclear plants in the US, said at the same conference that utilities and the nuclear fuel suppliers were unwilling to make “big bets” due to a “chicken and egg problem”.

Power plant operators are reluctant to sign long-term supply agreements unless the facilities are being built, giving certainty over expected delivery times for nuclear fuel, yet suppliers balk at making big investments without such deals to underwrite them, he said.

Death toll among leaders of the elite Radwan force rises as Israel takes aim at Lebanese group’s warfighters

BEIRUT—Israel’s airstrike on a building in southern Beirut didn’t just kill a top Hezbollah commander—it took out an entire class of senior leaders of the militant group’s most elite fighting force, as the two foes lurch closer to all-out war.

Hezbollah on Saturday raised the death toll among its fighters from Friday’s airstrike to 16, including top military commander Ibrahim Aqil and many of the senior commanders of the elite Radwan force. The strike on top leadership followed a pair of broad attacks on the group’s rank and file, when thousands of pagers and walkie-talkies that had been rigged with explosives blew up roughly simultaneously across the country.

According to the group’s own death announcements, the week’s attacks accounted for about 10% of the 500 Hezbollah fighters to have been killed since the group started firing rockets across the border shortly after the Hamas-led Oct. 7 attacks on Israel that sparked the war in the Gaza Strip.

Matthew Levitt, a senior fellow at the Washington Institute think tank, said Israel’s string of attacks is aimed at killing the militants who underpin Hezbollah’s ability to fight a war.

“They’re looking to take out people who matter,” he said. “So this is calculated.”

The week has taken an enormous toll. Lebanon’s minister of health said Saturday that doctors had performed more than 2,000 surgeries on people injured in the attacks, primarily from the explosions of pagers and walkie-talkies used by Hezbollah members. Friday’s airstrike left 37 dead, including seven women and three children, he said. The total includes the fighters. More than a dozen people were still missing Saturday morning, municipal official Ali al-Haraka said at the blast site.

The attacks have also sharpened the already high levels of concern that Israel and Hezbollah were spiraling toward a wider war. Top U.S. military officials are increasingly worried that Israel could launch a major offensive in Lebanon.

U.S. Defense Secretary Lloyd Austin canceled plans for a trip beginning this weekend to Israel, Qatar and Saudi Arabia, and the Pentagon announced Friday that the aircraft carrier USS Harry S. Truman would head to the eastern Mediterranean on Monday amid the rising tensions. The USS Abraham Lincoln carrier group is already in the region.

Many of Washington’s closest Arab allies and partners in the Middle East fear a possible Israeli invasion of Lebanon, according to Arab officials, who said it could trigger unrest across the region and an opportunity for extremist groups to harness that anger and regroup.

“We don’t want war,” Lebanon’s health minister said at the site of Friday’s strike. “But if the war was imposed on us, then we have no choice.”

Israel has been linked to several strikes on high-profile militants in Beirut. In late July, Israel killed top Hezbollah commander Fuad Shukr in an airstrike on a building in a southern neighborhood of the city. Earlier in the year, Saleh al-Arouri, a founding member of Hamas, was killed in a suspected Israeli strike in the same area.

The Radwan force has trained for infiltration operations and gives Hezbollah additional offensive capabilities, making it a major target for Israel.

Nicholas Blanford, a senior fellow at the Atlantic Council’s Middle East Programs, said Aqil was one of the early military founders of Hezbollah with roots in other militant groups allegedly responsible for suicide bombings and attacks dating back four decades. The U.S. has linked him to the 1983 bombing of the U.S. Marines barracks in Beirut and the kidnapping of Americans in the 1980s.

About 25 years ago, Aqil survived an Israeli helicopter attack on his car as he drove through southern Lebanon. This time, Israel attacked Aqil and the other senior commanders with four blasts, one of which destroyed a neighboring nine-story apartment building while the other three came in at angles and hit the basement where the group was meeting, municipal official al-Haraka said.

The street where the attack occurred is lined with low-rise residential buildings and home to businesses including a money-transfer service, a chicken restaurant, a pharmacy and a barber shop. The area had been cordoned off by Hezbollah and Lebanon’s army, and emergency responders were pulling limbs out of the rubble and repairing downed electrical lines.

Ali Daher, 55, who works in a real-estate office 100 yards away, said he went to the site after hearing a loud blast and found injured people and burned-out motorcycles scattered on the ground. The strike was much bigger than the one that killed Hezbollah commander Shukr over the summer.

“We have grown accustomed,” he said, expecting more attacks. “The fear is gone from me.”

Hezbollah is now struggling to recover from a week of heavy blows and plug deep security breaches, while restoring morale and order among its cadres. It also faces the prospect of further strikes as Israel steps up its military pressure and shifts its focus from Gaza to the north.

Israeli Minister of Defense Yoav Gallant warned late Thursday that “the sequence of military actions will continue.”

Deal for Intel would be massive and come as chip maker is sputtering

Chip giant Qualcomm made a takeover approach to rival Intel INTC 3.31%increase; green up pointing triangle in recent days, according to people familiar with the matter, in what would be one of the largest and most consequential deals in recent years.

A deal for Intel, which has a market value of roughly $90 billion, would come as the chip maker has been suffering through one of the most significant crises in its five-decade history.

A deal is far from certain, the people cautioned. Even if Intel is receptive, a deal of that size is all but certain to attract antitrust scrutiny, though it is also possible it could be seen as an opportunity to strengthen the U.S.’s competitive edge in chips. To get the deal done, Qualcomm could intend to sell assets or parts of Intel to other buyers.

Intel—once the world’s most valuable chip company—had seen its shares drop roughly 60% so far this year before The Wall Street Journal reported on the approach. As recently as 2020, the company had a market value above $290 billion. The stock closed up over 3% Friday after the Journal’s report.

Shares in Qualcomm, which has a market value of around $185 billion, closed down around 3%. Its shares had been up around 17% so far this year prior to Friday.

Qualcomm is a leading supplier of chips for smartphones, including ones that manage communications between phones and cell towers. It is one of the most critical suppliers for Apple’s iPhones, among a range of other devices.

A deal would significantly broaden Qualcomm’s horizons, complementing its mobile-phone chip business with chips from Intel that are ubiquitous in personal computers and servers.

Qualcomm and Intel have also sought to profit from the artificial-intelligence boom with the advent of AI features in phones and computers, although both have been overshadowed by AI chip giant Nvidia.

Both Intel and Qualcomm have become U.S. national champions of sorts as chip-making gets increasingly politicized. Intel is in line to get up to $8.5 billion of potential grants for factories in the U.S. as Chief Executive Pat Gelsinger tries to build up a business making chips on contract for outsiders.

Qualcomm, led by Chief Executive Cristiano Amon, had engaged with Intel to potentially make its chips in Intel’s factories. But Qualcomm halted the effort amid technical missteps, the Journal reported last year.

Qualcomm’s approach follows a more than three-year turnaround effort at Intel under Gelsinger that has yet to bear significant fruit.

For years, Intel was the biggest semiconductor company in the world by market value, but it now lags behind rivals including Qualcomm, Broadcom, Texas Instruments and AMD.

In August, following a dismal quarterly report, Intel said it planned to lay off thousands of employees and pause dividend payments as part of a broad cost-saving drive.

Gelsinger last month laid out a roadmap to slash costs by more than $10 billion in 2025, as the company reported a loss of $1.6 billion for the second quarter, compared with a $1.5 billion profit a year earlier.

Then, director Lip-Bu Tan abruptly stepped down from Intel’s board in late August. His departure was a shock to many who saw him as an eventual leader of part of Intel’s business, should it be split up.

Just earlier this week, Intel said it would further separate its chip-manufacturing and design operations, pause factory projects in Germany and Poland for two years and put a manufacturing project in Malaysia on hold until demand picks back up, along with a number of other measures.

The moves—including reaching a multibillion-dollar agreement in which Amazon.com’s cloud-computing arm would manufacture chips at Intel factories—came after a board meeting earlier in September to discuss strategy.

Intel earlier this year began to report separate financial results of its manufacturing operations, which many on Wall Street saw as a prelude to a possible split of the company.

Some analysts have argued Intel should be split into two, mirroring a shift in the industry toward specializing in either chip design or chip manufacturing. Splitting up immediately might not be possible, however, Bernstein Research analyst Stacy Rasgon said in a recent note. Intel’s manufacturing arm is money-losing and hasn’t gained strong traction with customers other than Intel itself since Gelsinger opened the factories to outside chip designers three years ago.

Gelsinger has been doubling down on the company’s factory ambitions, outlining spending of hundreds of billions of dollars building new plants in the U.S., Europe and Israel in recent years.

Given Intel’s market value, a successful takeover of the entire company would rank as the all-time largest technology M&A deal, topping Microsoft’s $69 billion acquisition of Activision Blizzard.

Starboard Submits Proposal for News Corp Stockholder Vote on Ending Dual-Class Structure

Starboard proposes each outstanding share of the News Corp’s common stock be equivalent to one vote

Starboard Value is seeking to eliminate News Corp’s NWSA -0.75%decrease; red down pointing triangle dual-class capital structure so that each outstanding share of the company’s common stock is equivalent to one vote.

The activist investor has submitted a non-binding business proposal for consideration to News Corp stockholders that are entitled to vote at the company’s upcoming 2024 annual stockholders meeting, according to a filing on Friday with the Securities and Exchange Commission.

“We believe eliminating the dual-class share structure will promote shareholder value, improve governance, and increase News Corp’s accountability to investors,” Starboard’s Jeffrey Smith said in the filing. He added that Starboard has had constructive discussions with News Corp in the past year.

News Corp didn’t immediately respond to a request for comment.

The company’s board earlier this month said it believes the dual-class capital structure promotes stability and has facilitated the successful implementation of News Corp’s transformational strategy, as well as the long-term outperformance for all of its stockholders.

Starboard, with Opportunity Master Fund and their affiliates, said it owns an aggregated 8,732,000 shares of News Corp’s Class B Common Stock, and 13,979,000 shares of the company’s Class A Common Stock, making it one of the company’s largest stockholders.

News Corp is the parent company of Dow Jones & Co., publisher of The Wall Street Journal and Dow Jones Newswires.

The mystery of Masayoshi Son, SoftBank’s great disrupter

He has won and lost fortunes with his bets on technology. So is the investor a visionary — or a gambler who got lucky?

Late one afternoon in October 2023, as the sun slipped down over Tokyo Bay, Masayoshi Son was sitting in his private office at SoftBank headquarters, at the head of a wooden table almost as long as Vladimir Putin’s in the Kremlin. A diminutive, balding figure dressed casually in a jacket and slacks, Son was recounting to me the low point of his career, a year earlier, when he announced he was disappearing from public view.

“What a shitty life!” he exclaimed, with a trace of self-pity. “You know on my Zoom call, I see my face often on the video screen and I hate looking at my face. What an ugly face. I’m just getting old . . . What have I achieved? . . . I have done nothing that I can be proud of.”

At face value, it was an astonishing admission. Son, then 66, ranked among the world’s most renowned investors. He invested in ecommerce giants Yahoo and Alibaba before they became household names. At the height of the dotcom bubble in early 2000, he was briefly the richest man in the world. When it burst, he lost 97 per cent of his fortune, around $70bn. 

But he bounced back, launching a successful broadband and mobile phone business in Japan, propelled by an exclusive deal to distribute Apple’s iPhone. Then he disrupted Silicon Valley with the $100bn SoftBank Vision Fund, and ended up making the biggest swing and miss in the history of investing. (Hence his temporary vanishing act.)

As editor of the Financial Times, I’d met Son twice and he intrigued me as a subject for a biography. A compulsive risk taker, his story was a classic entrepreneur’s tale of survival and perpetual reinvention. But was Son a tech visionary or simply an inveterate gambler who got lucky? Why was SoftBank, the company he founded in 1981 as a pioneering software distribution business in Japan, so often described as a house of cards?

Answering those questions proved more difficult than I anticipated. Twice I flew to Tokyo, only to be informed that the boss was too busy to see me. When I complained that my subject was more elusive than a Bengal tiger, an ex-SoftBank executive, Indian by birth, replied: “In that case, I suggest you bring a goat.”

In western media Son often comes across as a cartoon character. He has compared himself to Yoda in Star Wars; Napoleon (of which more later); and Jesus Christ (who was equally misunderstood, apparently). Obsessed by longevity, he has told friends that he hopes to live past 120, and that SoftBank should be built to last 300 years.

After four sit-downs with Son, as well as interviewing more than 150 people who know or have worked with him, I have concluded there’s a lot more to this restless character than meets the eye. While Son did not invent, control or own a breakthrough technology, he is the archetypal middleman. He has ridden the technological wave which has created untold wealth and penetrated every corner of our society. 

His is a story of our times.

Masayoshi Son is a quintessential outsider. This may explain his bottomless risk appetite and his desire to prove himself, over and over again. He was born in 1957 to poverty-stricken second-generation Korean immigrants on the island of Kyushu in the western Japanese archipelago. The family home was the equivalent of a cowshed, one of dozens of makeshift dwellings on a plot of unregistered land near the railway station.

Years later, Son confessed to a friend that he suffered from a recurring dream, waking up to the stench of pig faeces in his nostrils. His friend told him it wasn’t a nightmare but a childhood memory. “We started at the bottom of society,” Son told me. “I didn’t even know what nationality I was.”

As Korean-Japanese, the Son family followed tradition and lived under a Japanese name, Yasumoto. (Son later persuaded the authorities to let him combine his Japanese first name and Korean surname — a notable breakthrough.) His father Mitsunori was a bootlegger at the age of 14, later diversifying into pig breeding, loan sharking and pachinko, a form of low-stakes gambling that offered a livelihood to Koreans shut out of the Japanese economy. 

In April 2023, Mitsunori, 87, sitting in the family home adorned with photographs of his favoured second son, described how he rearranged the pins on his pachinko slot machines so that everybody in town thought they were a winner. His upfront losses were eye-watering. Then he moved the pins back into place — and started making serious money. 

Watching his father, Son learnt how to hustle. But the boy’s ambitions went way beyond pachinko gambling. He wanted to escape Japan and a lifetime of discrimination. Aged 16, he announced he wanted to learn English and study in the US. His family were dismayed, but soon relented. 

Son’s six years in California, which included three years as a student at the University of California at Berkeley, were a life-changing experience. He saw first-hand the PC revolution. He read about Microsoft’s Bill Gates and Apple’s Steve Jobs. He also made his first fortune, developing a pocket speech synthesiser with the help of a team of UC Berkeley engineers led by Professor Forrest Mozer, a nuclear particle physicist.

I tracked down Professor Mozer, then aged 92, during a visit to Berkeley in October 2021. He described Son as a modest student with little technical background but a businessman with a capital B. “That guy is going to own Japan one day,” he told his wife. 

Later Mozer claimed that Son had gone behind his back and contracted with Japanese companies to sell American microchips (for the speech translator) that did not exist and for prices that he’d invented. He said he was not told Son was due to earn almost $1mn in fees. “I was his first business partner,” Mozer told me, “and on his first business deal he lied and cheated me.”

When questioned, Son rejected that, and insisted he had wrongly assumed he had permission to do what he did. (Mozer himself concedes there was no written contract between the two, just a gentleman’s agreement.) Son unravelled the Japanese deals and vowed to take more care in future. Perhaps the episode marks Son’s “original sin”, a short-cut on the way to the top that many entrepreneurs would recognise.

After his sojourn in California, Son returned home. In 1980, Japan seemed destined to be the world’s number-one economic power. Son was perfectly placed to act as a gateway for US tech businesses seeking to penetrate the Japanese market.

Bill Gates describes Son as a cultural interpreter as much as a commercial middleman. “Whenever you’ve been three or four days in Japan, and have had nothing but polite things to say to each other, invariably through an interpreter. . . then there’s this guy who speaks perfect English. It was such a relief. Masa was easy to talk to. He was an insider but an outsider too.”

After software distribution, Son pivoted to investing in internet-related business, placing two spectacular bets: on Yahoo, which earned him a six-fold return ($3.5bn), and on Alibaba, which gave a 1,310-fold return ($97bn). While he built a successful Japanese affiliate, Yahoo Japan, he never took his eye off the US market. 

In the mid-1990s, he acquired Las Vegas-based Comdex, then the number-one tech trade fair, the Ziff Davis computer publishing empire and a host of dotcom properties. In 2013, he went one better and bought Sprint, the lossmaking US telecoms operator, finally pulling off a merger with T-Mobile that created a “third force” alongside Verizon and AT&T.

Throughout, SoftBank took advantage of the almost three decades of near zero interest rates in Japan. Son borrowed cheaply to pay generous prices for US assets, raising billions on the corporate bond market. “You don’t understand,” he once told a fretting colleague, “in Japan, money is free.”

In assessing Son’s track record, it is important to distinguish between SoftBank Corp, the listed company responsible for the operating companies, and SoftBank Group, the publicly quoted group holding company and major investor.

Businesses such as Yahoo Japan and SoftBank Mobile have proved highly successful and profitable. The Sprint acquisition, initially a dud, proved a winner after the T-Mobile merger. But Son has always cared more about growth than profits. SoftBank Group has long been highly leveraged, meaning it has a lot of debt in its capital structure. At times, it has ranked as one of the world’s top 10 indebted companies — not a comfortable position when inflation roared back in 2021. 

Son is a major shareholder and a major borrower, using his SoftBank shares as collateral. Risk is built in. Suppose SoftBank shares fall sharply, lowering the value of the collateral, as has occurred many times during Son’s wild ride. Then panicky banks might demand the loans be repaid, destabilising the entire corporate structure. 

Son bristles when challenged, emphasising that as a co-investor he has “skin in the game” and therefore an incentive to invest responsibly. Nevertheless, some associates believe SoftBank’s founder is “addicted” to leverage. They told me he became hooked after the $20bn bid in 2006 to buy Vodafone Japan, the largest leveraged buyout in Asia at the time. He succeeded thanks to a financial magician by the name of Rajeev Misra, a former Deutsche Bank debt trader whose reward was to be put in charge of the $100bn SoftBank Vision Fund in 2017.

Misra was one of several talented executives trained as mathematicians, who applied their engineering skills to finance rather than academia. Over time, they lent a mercenary streak to SoftBank, stoking their boss’s appetite for dealmaking. 

To some degree, the cultural shift was inevitable as SoftBank evolved from a Japanese technology conglomerate to a global investment group. But it was also a recipe for infighting at the top, latterly between Misra and Marcelo Claure, a 6ft 6in Bolivian-American who led the Sprint turnaround. Often the spats played out in the media. “They leaked like septic tanks,” says a SoftBank colleague.

Although Son adopts an abstemious public profile, his private consumption is more extravagant (albeit drawing on his own money rather than the company’s). He pays for his private plane and his favourite red wine (from Domaine de la Romanée-Conti, at a minimum $6,000 a bottle). He has extensive properties around the world, including three conjoining houses in central Tokyo likened by one visitor to Wayne Manor, fictional home of Batman. 

The basement features an artificial golf course where Son and guests can play in all-weather conditions on any course in the world. One portion of the house is decorated in the Empire style, the period between 1800 and 1815 when Napoleon modernised France and redrew the map of Europe. I discovered Son has a fascination with the Corsican Little Corporal, a fellow outsider.

In early 2020, a team from Elliott Management, the New York activist investor, paid a visit to Japan. Having bought a 3 per cent stake in SoftBank, their goal was to persuade Son to improve corporate governance, thereby boosting the share price. When an Elliott executive invoked the example of Mark Zuckerberg, Facebook’s founder, or Bill Gates of Microsoft, Son erupted in frustration.

“These are one-business guys. I am involved in 100 businesses and I control the entire [tech] ecosystem,” he remonstrated. “The right comparison for me is Napoleon, Genghis Khan or Emperor Qin [who built the Great Wall]. I am not a CEO. I am building an empire.”

Delusional? Not if you believe that Son is bent on “Making Japan Great Again”. After the collapse of the bubble economy in 1989-90, Japan entered a “lost decade” characterised by deflation and tepid growth. Son, the outlier, remains an object of suspicion among the Japanese business establishment. He counters by playing the patriot, claiming he wants to revive the country’s animal spirits. But his vision of a resurgent Japan contains a megalomaniacal streak. 

When Son launched the $100bn SoftBank Vision Fund, an arms race in the world of venture capital ensued, leading to wholesale value destruction. Doling out sums of between $100mn and $200mn would have meant Son meeting hundreds of individual founders to check their credentials. Even with his legendary stamina, working 20-hour days, often flying on his private jet through multiple time zones, that was a physical impossibility. 

Crucially, much larger sums — $500mn or more — were required to move the needle in a giant fund like the Vision Fund. The target companies couldn’t be start-ups as such; they were “later-stage” companies, turbocharged for growth by the injection of SoftBank capital. One of these companies was WeWork, founded by Adam Neumann, a tall Israeli with a planet-sized ego.

Son was utterly sold on Neumann, a fellow dreamer who spoke about world domination. When WeWork’s losses piled up, colleagues pleaded with Son to stop. The boss refused to budge.  

“As you all object, I am becoming more and more interested in this company,” he said. “I am looking at Alibaba and only he [Neumann] looks like Alibaba today.”

The initial Alibaba investment in 2000 — two bets of $20mn and $80mn — turns out to have been a curse as much as a blessing. Eager to prove his success wasn’t a one-off, Son talked about creating 10 SoftBank Vision Funds with a total war chest of $1tn dollars. These were castles in the air — the stuff of hubris. 

Those who know Son say he is a brilliant operator (when he focuses), an average investor and a terrible trader. Between 2019-21, as markets turned down, Son suffered heavy losses on Vision Funds 1 and 2. He tried to recover by speculating wildly on options trading, using an in-house hedge fund called Northstar. SoftBank was left nursing multibillion-dollar losses. 

For 18 months, he withdrew from public view, ostensibly serving penance but in reality plotting a comeback. Today, he is betting the house on artificial intelligence in order to reclaim his position as one of the world’s leading entrepreneur futurists.

To date, his record is fitful at best. Between 2017 and 2022, he mentioned “AI” more than 500 times in quarterly and annual results presentations. Yet when it came to OpenAI and its breakthrough product ChatGPT, the lead investor was Microsoft. Son never got a look in.

Part of the problem was timing. In the Vision Fund years, AI businesses were either small scale, early in development or out of the public eye. During the Covid pandemic, Son was grounded in Tokyo. In early 2022, when travel restrictions were finally lifted, with the exception of China, SoftBank was sandbagged by record losses. 

Had Son conserved his firepower rather than splurging money on more than 500 separate companies in the Vision Funds, he would have been perfectly placed. With company valuations beaten down by higher interest rates, Son could have acquired stakes in promising AI-related businesses at bargain prices. In hindsight, he admits, “Timing-wise maybe we were a little too early.”

It’s a familiar story: right instincts, wrong timing. (If he’d held on to his 5 per cent stake in advanced chipmaker Nvidia in 2019, he could have made another fortune.) Yet one of Son’s AI bets has paid off handsomely. UK chip designer Arm — acquired in 2016 — is at the centre of yet another super-vision: a $64bn plan to transform SoftBank Group into a sprawling AI powerhouse, including a foray into the development of artificial-intelligence chips, announced in May. The goal is to build a prototype by 2025, with each chip being able to process vast volumes of data. This hugely ambitious venture aims to create SoftBank Group’s own vertically integrated AI ecosystem, from manufacturing chips and operating data centres to industrial robots and power generation.

True, SoftBank cannot touch the likes of Amazon, Google and Microsoft, but Son is a customer and supplier to the hyperscalers. His new chipmaking venture involves billions of dollars of investment. Once a mass-production system is established, the AI chip business could be spun off, realising billions of dollars of value to its parent SoftBank. 

How does this movie end? Those betting on a financial apocalypse have been disappointed. Call Son lucky, call SoftBank too big to fail. After four years studying the world’s greatest disrupter, my message is unequivocal. 

Don’t ever count him out. 

A year after Meta Platforms introduced its artificial intelligence assistant, a picture is emerging of how people are using it—and how that differs from usage of OpenAI’s ChatGPT, the leading conversational AI.

Most people who use Meta AI daily do so through WhatsApp, according to a person who has seen recent internal data; the second biggest group arrives from Facebook. Few Instagram users are tapping Meta AI. Among monthly users, Facebook has a slight edge over WhatsApp, the person said.

Most WhatsApp users are outside the U.S. and the vast majority of Meta AI’s users are outside the U.S., this person said. Such users are typically far less valuable to Meta in terms of advertising revenue than those in the U.S.

The AI assistant is available in eight languages and 22 countries on Meta’s social media apps, and in English in the U.S. and Canada on its Ray-Ban smart glasses.

Meta AI currently does not have a standalone app. Meta plans to change that by converting its Meta View smartphone app, used to control its smart glasses, into an app for Meta AI, according to an internal memo seen by The Information.

Meta hopes the app will increase awareness of Meta AI and show how the company is innovating in AI, according to the internal post. Meta is spending tens of billions of dollars to keep up with its rivals on generative AI, but it doesn’t now have a lot of ways to make money from it.

The most popular uses of Meta AI are for research and information retrieval, as well as writing and editing, entertainment and creating content, said another person familiar with the situation. In a July interview with Bloomberg, Meta CEO Mark Zuckerberg said many people use the assistant for “role-playing difficult social interactions,” adding that Meta AI offered “no judgment” on what people ask it.

Those uses are a big contrast to ChatGPT, which has become popular with software engineers as a coding assistant. Coding is not among the top uses of Meta AI, likely reflecting its distribution on Meta’s social media apps and on its smart glasses.

Meta declined to comment.

Jordan McGarry is a rug maker in Portland, Ore., who has used Meta AI in the Facebook app several times. For example, he asked the chatbot to suggest itineraries, including restaurants and sightseeing spots, when he was planning a trip to Spain. He eventually switched to ChatGPT because he found it provided clearer results. Another time, McGarry consulted Meta AI about a legal question, but he still had to follow up with Google searches to get “human lawyer advice.”

Zuckerberg has said he wants Meta AI to be the world’s “most used AI assistant” by the end of this year, surpassing ChatGPT. On some metrics, Meta AI isn’t far behind.

Late last month, Zuckerberg revealed that the chatbot had about 185 million weekly users, not far behind the 200 million weekly users claimed by OpenAI. Around the same time, The Information reported that, as of early August, Meta AI had about 40 million daily active users and about 10 times as many people who used it at least every month.

One handicap: Meta AI is not available in the EU. Zuckerberg has said he is concerned about the region’s data privacy rules, which restrict how companies collect and use people’s online data.

OpenAI has been upgrading ChatGPT—including a new feature capable of reasoning through complex problems, which could increase its lead. Meta plans to announce upgrades to Meta AI’s capabilities at its Connect developer conference next week, primarily to bring the version of the chatbot on its social media apps into line with the version on its smart glasses.

One of those planned upgrades would allow people to speak with the AI assistant on Meta’s apps by pressing an icon in the search bar, according to the person who has seen internal data. Meta has been testing the feature on WhatsApp, according to WABetaInfo. ChatGPT offers a similar capability.

Meta also plans to announce that its Llama 3 large language model, which powers its AI assistant, will soon be able to recognize images—a capability that OpenAI and Google have long offered in their chatbot services—according to the person who has seen internal data. The person cautioned that the plans may change. The Ray-Ban smart glasses’ AI assistant has a basic image-recognition capability.

Llama 3 lags rival models from OpenAI, Google and Anthropic in terms of quality, according to Lmsys, which lets developers perform head-to-head comparisons between competing models, but Llama has scored better on evaluations of how it answers some types of complex questions.

A rather odd week in venture, as the biggest rounds were raised by greentech, business travel and charity startups. Of course, biotech and fintech were in there too.

1. (tied) Serán Bioscience, $200M, biotech: The big biotech raise this week went to Serán Bioscience. The Bend, Oregon-based startup, which provides development and manufacturing services to pharmaceutical and biotechnology companies, raised a $200 million-plus round led by Bain Capital Life Sciences. The startup plans to use the new funding to help build out its new commercial-scale manufacturing facility for drug delivery and other services. Founded in 2016, this is the company’s first round with a disclosed amount, per Crunchbase.

1. (tied) Twelve, $200M, greentech: Carbon transformation startup Twelve locked up a lot of cash this week, including a $200 million Series C led by Capricorn Investment Group, Pulse Fund and TPG. However, that wasn’t the only money the Berkeley, California-based company saw, as it also raised $400 million in project equity led by TPG Rise Climate Fund and $45 million in credit facilities. The cash will be used to help complete AirPlant One, the company’s first sustainable aviation fuel plant. Founded in 2015, the company has raised nearly $890 million, per Crunchbase.

3. Engine, $140M, business travel: Engine, formerly Hotel Engine, booked a $140 million Series C led by a fund advised by private equity firm Permira that values the Denver-based startup at $2.1 billion. The new valuation represents a 62% jump from its previous $1.3 billion value after a $65 million Series B in late 2021. That increase is no small feat considering many startups are still raising money in flat or even down rounds from their sky-high valuations during the record venture market of 2020 and 2021. It also shows the continued bounce back of business travel — one of the sectors most greatly affected by the COVID pandemic and one that has taken time to eventually return. Engine is profitable and is growing its revenue 70% year over year. The company will use the fresh capital to support product development, including the launch of flight and rental car bookings to its platform. The company also announced it will rebrand to “Engine.” Founded in 2015, Engine has raised $221 million, per Crunchbase.

4. AtoB, $130M, fintech: AtoB, providing payment solutions for the transportation industry, raised a $130 million Series C led by General Catalyst and Bloomberg Beta. The round was a mix of equity and debt funding. The San Francisco-based company provides drivers and fleet operators with financial products such as fleet cards, instant direct-deposit payroll, and access to bank accounts and savings tools. Founded in 2019, the company has raised $312 million, per Crunchbase.

5. Virtuous Software, $100M, charity: Phoenix-based Virtuous, a fundraising software company for nonprofits, raised a $100 million round led by Susquehanna Growth Equity. The company’s platform gives users tools specifically designed to build more personal relationships with donors — thus raising more money. Founded in 2014, the company has raised nearly $156 million, per Crunchbase.

6. Vero Networks, $80M, internet: Boulder, Colorado-based Vero Networks, a fiber infrastructure operator and broadband internet provider, completed an $80 million preferred equity financing led by Delta-v Capital and funds managed by Hamilton Lane. Founded in 2017, the company has raised $207 million, per Crunchbase.

7. Air Company, $69M, greentech: New York-based Air Company, a carbon conversion technology company, raised a $69 million Series B led by Avfuel. Founded in 2016, the company has raised $108 million, per Crunchbase.

8. Nura Bio, $68M, biotech: South San Francisco, California-based Nura Bio, a biopharmaceutical company developing therapies for the treatment of debilitating neurological diseases, raised an additional $68 million for a Series A totaling more than $140 million. The new cash infusion was led by The Column Group. Founded in 2018, this is the company’s only disclosed round, per Crunchbase.

9. GC Therapeutics, $65M, biotech: Cambridge, Massachusetts-based GC Therapeutics, developing cell therapy-based medicines, completed a $65 million Series A led by Cormorant Asset Management. Founded in 2019, GC Therapeutics has raised $75 million, per the company.

10. Picus Security, $45M, cybersecurity: San Francisco-based Picus Security, a security risk startup, closed a $45 million growth investment round led by Riverwood Capital. Founded in 2013, Picus has raised $80 million, per the company.

The biggest deal of the week came from Asia.

A barbarian is at the gate of European banking, which remains locked within national borders despite the European Union’s supposed common market. The gate is stoutly defended, though.

Andrea Orcel, CEO of Italy’s second-largest bank, UniCredit, lately revealed a 9% stake in German No. 2 Commerzbank, setting the stage for a pathbreaking cross-border takeover. Maybe. “If this goes through, it could be a game changer for the whole sector,” says Jennifer Cook, European bank analyst at T. Rowe Price.

Adding Commerzbank to its existing HypoVereinsbank subsidiary would also make Milan-based UniCredit Germany’s top financial dog, surpassing iconic Deutsche Bank.

Investors love the idea, bidding up Commerzbank’s shares by a quarter since Orcel’s Sept. 10 announcement, and with good reason. UniCredit’s stock has nearly quadrupled over the past two years under Orcel’s stewardship. Commerzbank has merely doubled.

Other targets could follow across the continent if Orcel’s campaign succeeds, including France’s Société Générale and ABN AMRO in the Netherlands, says J.P. Morgan analyst Kian Abouhossein.

It’s a big “if.” Commerzbank’s unions are resisting a tie-up, reasonably fearing cost cuts. That alone could kill the deal with Social Democratic Chancellor Olaf Scholz, presiding over a deeply unpopular coalition government, says Eoin Drea, senior researcher at the Wilfried Martens Centre for European Studies. “The chancellor needs to shore up whatever is left of his trade union support,” he says.

Less parochial concerns are also at play. Commerzbank is a mainstay in financing Germany’s critical “mittelstand” of midsize, privately owned companies, says Johann Scholtz, European bank analyst at Morningstar. “Commerzbank plays a very specialized role in the German economy,” he says.

A structural obstacle to banking mergers across the EU is lack of a unified deposit insurance scheme. “This has been under discussion for at least 10 years, with very little movement,” Drea says. That leaves national treasuries on the hook to bail out savers, and inclined to oversee banks on their own turf.

European bank stocks could be worth buying anyway, even as the interest-rate hikes that drove the recent rerating reverse, says Andrew Stimpson, head of European bank research at Keefe, Bruyette & Woods. Banks’ “Goldilocks range” for rates could go as low as 2%, he argues; the European Central Bank recently cut its deposit rate by 0.25%, to 3.5%. Rumors of a European recession that would tarnish asset quality are proving exaggerated.

“Customer debt-to-GDP [gross domestic product] is in many cases substantially lower than 10 years ago,” Stimpson says. His picks in the sector, aside from UniCredit, include Spain’s CaixaBank and Allied Irish Banks.

European banks still trade much more cheaply than U.S. peers, at about seven times earnings on average, T. Rowe’s Cook adds. Orcel and his competitors are lavishing cash on shareholders. Dividends plus share buybacks are yielding double-digit percentages of share value. “Compared with U.S. banks, your starting point is much cheaper and you’re getting a much more attractive yield,” she concludes.

Morningstar’s Scholtz isn’t so sure. Valuations are structurally constrained by the “quasinationalized state of European banks,” he argues. “Stocks are starting to look fairly valued,” he says.

One exception is BNP Paribas, which Scholtz sees as unfairly punished by France’s political stalemate. Shares are flat year to date, while peers have kept surging.

Orcel may just still win in Germany, too. Either way, European banks have woken up.

Shares of Burberry, LVMH, and others have had a tough 2024. But there’s no need to worry about an economic slowdown.

To steal a line from Coco Chanel, there are people who have money and people who are rich. Right now, it seems, both types have lost ardor for luxury goods such as her namesake handbags—and that is creating major problems.

By all indications, luxury-goods makers should be living the high life. The economy is growing, the stock market is hitting record highs, and the rich are richer than ever. Luxury stocks, though, are suffering. The Roundhill S&P Global Luxury exchange-traded fund has dropped 7.2%, dragged down by companies such as LVMH Moët Hennessy Louis Vuitton, Gucci-owner Kering, and cold-weather clothing maker Moncler. The sector’s sales growth is slowing, and Wall Street worries that the sluggishness won’t let up. The wealthy, it would appear, have gone AWOL.

Except it isn’t that simple. Yes, moneyed shoppers are definitely laying low in China, beset by a serious economic malaise. But that’s only part of the problem. To a large degree, the brands have shot themselves in their alligator-clad feet.

It all goes back to the early days of the pandemic in 2020, when government stimulus suddenly made many folks feel wealthy. Legions of new luxury shoppers swarmed into the market. The resulting sales boom wasn’t only unsustainable, but also raised fears that the brands’ carefully cultivated auras of exclusivity would take hits. So, one company after another began jacking up prices. Result: A number of prized luxury products now cost 50% to 100% more than in 2019.

That hyperinflation has, by design, shut out many aspirational shoppers—probably more than intended. Worse, it also turned off core customers, the truly rich.

“There has been some fallout from people who have decided, ‘I’m just not going to buy anymore because this is getting ridiculous,’ ” says Gabriella Santaniello, founder and CEO of retail consulting firm A Line Partners. “You can’t say the price is higher due to the artistry of the product when it has nearly doubled in a few years.”

There is some good news in all this. First, a handful of companies are navigating the environment better than others, and their stocks look attractive. More broadly, since a good chunk of the problem is both self-inflicted and fixable, the industry’s weak performance probably isn’t sign of things to come for the U.S. economy.

Yes, consumer spending does merit attention: It makes up about two-thirds of U.S. gross domestic product and is typically the last thing to go before a recession. The lowest earners, who are particularly susceptible to rising prices for food and other staples, have already capitulated, with the strain hurting sales at dollar-store chains like Dollar Tree and Dollar General and fast-food joints such as McDonald’s. Middle-income consumers haven’t been immune to the pressure, leading many to budget carefully and even start shopping at Walmart.

Wealthier shoppers, however, are still going at it. Some 49% of high-income earners plan to splurge over the next three months, according to a recent McKinsey survey, the highest of any group—despite the industry’s stumble. The fact is, spending near the top of America’s income ladder generally declines only during major economic shocks. The last time it happened was during the financial crisis of 2008-09.

And one look at Ferrari suggests the rich are doing just fine. The auto maker’s sales climbed more than 19% and 17%, respectively, in each of the past two years; they’re expected to notch another 11% gain in 2024. The stock, meanwhile, has gained 40% in 2024, while Dollar General has dropped 37%.

“Ferrari and Dollar General stock prices have diverged materially, as the higher-income consumer is still willing to spend on luxury goods while the lower-income consumer faces a more dire reality,” writes Brendan Boken, an investment analyst at Penn Mutual Asset Management. “Higher-income consumers continue to be less impacted by elevated interest rates, and their personal balance sheets remain healthy.”

That much is clear simply from perusing the websites of Louis Vuitton, where the LV Checker Ranger Boot fetches $1,530; Prada, where brushed-leather slippers go for $1,070; or Hermès, where a pair of “bouncing sneakers” costs $920.

The industry’s sales continue to grow: HSBC analyst Aurélie Husson-Dumoutier expects organic sales growth to come in at 2.8% this year, though that’s down from her prior estimate of 5.5%. If she’s correct, 2024 would be the sixth-worst year for sales growth over the past two decades. But there is still growth to be had, if you know where to look— Prada, Husson-Dumoutier’s longtime favorite, is expected to report top- and bottom-line growth of 14% and 22%, respectively, this year.

The most obvious problem is China. According to McKinsey, China delivered more than half the global growth in luxury spending from 2012 to 2018. In 2018, Chinese consumers accounted for about a third of total worldwide luxury spending. After China lifted its most onerous pandemic restrictions in 2022, that growth was supposed to come roaring back, similar to what happened in the U.S. in the post-Covid years. Instead, economic softness has prevailed, leaving millions of consumers with little appetite for high-price goods. China’s total retail sales have increased by less than 1% since the start of 2024.

The issues in China, however, could have been overcome if not for other missteps. With shoppers flush with stimulus checks and the temporarily expanded child tax credit, many consumers could afford to buy some luxury goods. Global sales soared 33% in 2021 to some $285 billion, above the previous record set in 2019. But that kind of sales growth proved to be a curse, because it was never going to be sustainable, and chipped away at the brands’ exclusivity. It was particularly problematic for top-tier luxury players, who still court the crème de la crème and would prefer not to cater to customers with fluctuating purchasing power.

To maintain their prestige, luxury brands raised prices to keep many items out of reach, often by multiples of the inflation rate. A small Cartier Trinity ring would set you back 1,540 euros ($1,719), up 64% from 2019, according to HSBC data, while a large Chanel flap bag now costs €11,000, up 91%. Other products that have seen massive leaps include a €3,800 Prada Galleria Saffiano leather bag, a €1,600 Louis Vuitton Speedy Bandouliere 30 Damier Ebene, and a €1,795 Canada Goose Shelburne parka. That priced out even some shoppers the brands would have loved to keep.

“As prices get higher, brands need to generate more and more excitement to get people to spend,” says Joseph Ghio, equity research analyst at Williams Jones Wealth Management. “Even if it’s a brand you love, people start getting priced out.”

That has particularly been a problem for brands that have courted aspirational shoppers—those with just enough cash to indulge in occasional splurges. Many luxury brands, including Versace and Dior, sell items such as keychains and sunglasses, which have relatively small price tags but big emotional components that create lifelong connections. But with prices high and cheap fakes available, many luxury brands missed out on attracting new shoppers who would have proven valuable in their later, higher-income years.

Other companies tried to attract wealthier shoppers than their regular customers, with disastrous results. Burberry, always a step below the ultrahigh luxury names given its lower price points and outlet stores, tried to move up, raising prices on items like handbags more than 50%. That turned off its core shoppers without successfully attracting more-affluent ones. Sales slipped more than 4% in the latest fiscal year, and are projected to fall 15% in this one. “As the current problems at Burberry show, it’s the companies that skew more toward the aspirational clientele that are having the most problems right now,” Ghio says.

Luxury does make for fertile investing ground, if only because of the idiosyncratic forces at play in the industry. While this earnings season was littered with disappointments—not just from Burberry but also from Kering, Hugo Boss, and even powerhouse LVMH—recent declines make some luxury stocks look attractive. That is, if you can navigate still-cautious consumers, foreign-exchange headwinds, the cost of investing in brand cachet, and other factors.

It’s especially hard to bargain hunt among companies that also have internal problems. That includes some lower-end brands that need aspirational shoppers; Burberry’s push has backfired, leaving it reeling and hoping for a takeover. Even at 25 times 12-month forward earnings, the stock doesn’t look like a bargain. Shares of U.S. equivalents—Coach owner Tapestry and Michael Kors parent Capri Holdings —are also struggling as the two companies try to merge, despite Federal Trade Commission opposition. Tapestry, which trades at a modest 9.4 times forward earnings despite the surprising resilience of Coach sales, looks like a decent bet, though the trial over the deal in federal court remains an overhang.

Further up the food chain, Kering also looks to be in a tough spot. The fashion aesthetics at Gucci diverged from customer preferences and it launched fewer new products than rivals, ceding market share. It is taking steps to right the ship at Gucci, both publicly—a new handbag line launched this month—and behind the scenes, with supply-chain optimization and a revamping of its store network. But a turnaround is always tricky, and even harder when the backdrop is so challenging. In all, near-term sales catalysts are in short supply, and the stock trades at more than 14 times forward earnings, which is hard to square with what’s expected to be yet another year of double-digit earnings per share contraction in 2024.

Some luxury players sport multiples that are simply too rich despite the companies’ success. For example, Hermès, the maker of the ultraexpensive, impossible-to-get Birkin bag, has growing sales and expanding margins but trades at 40 times earnings. That’s too expensive, even for the pinnacle of luxury.

LVMH might be a good compromise. After a recent selloff, the shares change hands for less than 20 times forward earnings, even as it maintains a diverse portfolio of popular brands such as Bulgari, Givenchy, and Dom Pérignon. Ghio notes LVMH has used its huge war chest of capital to foster fashion and operational overlap between its brands and excitement around its elaborate fashion shows in a way that sets it apart from the competition. Those advantages make the company’s recent lackluster results —revenue edged up just 1% year over year to a lower-than-expected €21 billion—less worrisome than those of peers, while the stock trades at 19 times 12-month forward earnings, its lowest since late 2023.

Richemont also looks attractive, says Vontobel portfolio manager Markus Hansen, who calls it his favorite luxury name. The reason: Richemont’s Cartier brand is more immune to fashion whims and cheap duplicates. Jewelry is, he says, “timeless, with the main Cartier line offerings…all multidecade, even 100 years old. Timeless is a powerful product marketing.” Richemont stock has inched up less than 3% this year and trades at 18 times 12-month forward earnings.

Ultimately, while luxury stocks aren’t as far above the fray as the world they cater to, they will ultimately regain their shine. Coco Chanel wouldn’t have it any other way.