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The Michelin-starred chef has opened his latest restaurant at One Madison Avenue in the Flatiron District.

Michelin-starred chef Daniel Boulud, known for French fine dining, has always wanted to open a steakhouse. With La Tête d’Or, the newest restaurant under the chef’s Dinex Group, Boulud is offering his take on the classic American culinary genre.

“I always joke that five years ago I became American, and so that made it even more legitimate for me to do [a steakhouse],” he says. “But it’s still with the French touch. It’s an American French steakhouse.”

The restaurant is named for a park in Boulud’s hometown of Lyon, France, and the menu features classic steakhouse dishes filtered through Boulud’s refined approach.

“I really wanted to have the foundation of a classic steakhouse, with a celebration of seafood,” says Boulud of his approach to the menu, which features extensive raw bar options. The main draw at La Tête d’Or though is the beef, offered in various breeds — Angus, several styles of Wagyu — and cuts, from Porterhouse to French-style Côte de boeuf and filet mignon. Meat is cooked using wood and charcoal-fire grills, and finished with sauces and butters that are selected by guests. There are also several side options and seven options for potatoes, from pommes frites to pomme purée and a baked potato with truffle. “We leave the freedom to the guests to choose what they like,” says Boulud.

The restaurant works with farmers and ranches across North America. “The sourcing of our ingredients is the most important thing, relying on suppliers that have high-quality meat that are raised responsibly,” says Boulud, listing off several of the purveyors. The restaurant also features a Wagyu counter, a 10-seat chef counter that will offer a tasting menu of the premium beef, sourced from different parts of the world.

The menu also features a prime rib trolley option, where American wagyu rib eye is sliced and served tableside. “I grew up in Europe, but I lived in Denmark and I was working in a restaurant called the Baron of Beef in Copenhagen at the Hotel Plaza,” says Boulud, adding that the restaurant was known for its roast beef. “Every night I had to cook that beautiful roast for the carving trolley,” he says, adding that he hopes to introduce the trolley once the restaurant gets lunch service up and running in a few weeks. The restaurant is well positioned for lunch and after-work gatherings, located on the ground floor of the One Madison building in the Flatiron District, just below Madison Square Park.

La Tête d’Or marks a continuation of the chef’s relationship with SL Green, a commercial real estate group that includes One Vanderbilt, home to Dinex Group restaurants Le Pavillon, Épicerie Boulud and Joji. Interior design in the space was led by the Rockwell Group, and the warm dining room features wooden accents and velvet banquette seating situated underneath cathedral-style seating.

“I think people appreciate the fact that it’s classic, but with a personal touch to a lot of things,” says Boulud of early response to the restaurant. “What I love about the steakhouse is it’s classic, timeless and simple, but yet it’s complex and it gives a lot of pleasure to people,” adds Boulud. “I love that the steakhouse is also a place where larger groups gather.”

And on the topic of gathering: The restaurant also features a private room that can accommodate up to 40 people, just in time for holiday and end-of-year celebrations.

OpenAI is funding academic research into algorithms that can predict humans’ moral judgements.

In a filing with the IRS, OpenAI Inc., OpenAI’s nonprofit org, disclosed that it awarded a grant to Duke University researchers for a project titled “Research AI Morality.” Contacted for comment, an OpenAI spokesperson pointed to a press release indicating the award is part of a larger, three-year, $1 million grant to Duke professors studying “making moral AI.”

Little is public about this “morality” research OpenAI is funding, other than the fact that the grant ends in 2025. The study’s principal investigator, Walter Sinnott-Armstrong, a practical ethics professor at Duke, told TechCrunch via email that he “will not be able to talk” about the work.

Sinnott-Armstrong and the project’s co-investigator, Jana Borg, have produced several studies — and a book — about AI’s potential to serve as a “moral GPS” to help humans make better judgements. As part of larger teams, they’ve created a “morally-aligned” algorithm to help decide who receives kidney donations, and studied in which scenarios people would prefer that AI make moral decisions.

According to the press release, the goal of the OpenAI-funded work is to train algorithms to “predict human moral judgements” in scenarios involving conflicts “among morally relevant features in medicine, law, and business.”

But it’s far from clear that a concept as nuanced as morality is within reach of today’s tech.

In 2021, the nonprofit Allen Institute for AI built a tool called Ask Delphi that was meant to give ethically sound recommendations. It judged basic moral dilemmas well enough — the bot “knew” that cheating on an exam was wrong, for example. But slightly rephrasing and rewording questions was enough to get Delphi to approve of pretty much anything, including smothering infants.

The reason has to do with how modern AI systems work.

Machine learning models are statistical machines. Trained on a lot of examples from all over the web, they learn the patterns in those examples to make predictions, like that the phrase “to whom” often precedes “it may concern.”

AI doesn’t have an appreciation for ethical concepts, nor a grasp on the reasoning and emotion that play into moral decision-making. That’s why AI tends to parrot the values of Western, educated, and industrialized nations — the web, and thus AI’s training data, is dominated by articles endorsing those viewpoints.

Unsurprisingly, many people’s values aren’t expressed in the answers AI gives, particularly if those people aren’t contributing to the AI’s training sets by posting online. And AI internalizes a range of biases beyond a Western bent. Delphi said that being straight is more “morally acceptable” than being gay.

The challenge before OpenAI — and the researchers it’s backing — is made all the more intractable by the inherent subjectivity of morality. Philosophers have been debating the merits of various ethical theories for thousands of years, and there’s no universally applicable framework in sight.

Claude favors Kantianism (i.e. focusing on absolute moral rules), while ChatGPT leans every-so-slightly utilitarian (prioritizing the greatest good for the greatest number of people). Is one superior to the other? It depends on who you ask.

An algorithm to predict humans’ moral judgements will have to take all this into account. That’s a very high bar to clear — assuming such an algorithm is possible in the first place.

Just as the holiday season begins, a sleighful of companies unveiled large funding rounds. Of course, it was led by two well-known AI startups — including xAI, which had its second massive haul of cash in just six months.

1. xAI, $5B, artificial intelligence: Generative AI startup xAI raised $5 billion in a funding round valuing it at $50 billion, The Wall Street Journal reported. The new round includes investment from the Qatar Investment Authority, Valor Equity Partners, Andreessen Horowitz and Sequoia Capital. It was just in May Elon Musk’s startup officially announced its long-awaited fundraise — making it the second-most-valuable generative AI company in the world behind only competitor OpenAI. The $6 billion round valued the company at $24 billion post money.

2. Anthropic, $4B, artificial intelligence: Amazon has agreed to invest another $4 billion in AI startup Anthropic — a ChatGPT rival with its AI assistant Claude. Last fall Amazon agreed to invest up to $4 billion in Anthropic — giving the Seattle-based e-commerce and cloud titan a minority stake in Anthropic. The immediate investment was $1.25 billion, with the remaining $2.75 billion in funding coming earlier this year. That deal included Anthropic naming Amazon Web Services its primary cloud provider, as well as using AWS Trainium and Inferentia chips to build, train and deploy its models. This new investment means Amazon will have invested $8 billion into Antropic, retaining its minority stake in the startup, per an Anthropic blog.

3. LogicMonitor, $800M, IT management: LogicMonitor, which provides IT observability and monitoring, took in $800 million in new equity and debt from an investor consortium that includes PSG Equity, Golub Capital and others. The deal is part of Vista Equity Partners selling a minority stake in the company, which is now valued at about $2.4 billion. The IT infrastructure company will use the fresh cash for M&A activities and entering new markets globally. Vista bought LogicMonitor in May 2018 for about $415 million.

4. Cyera, $300M, cybersecurity: After raising a $300 million Series C led by Coatue at a $1.4 billion valuation in April, data security startup Cyera closed another $300 million windfall at more than twice its previous valuation. The New York-based company announced a $300 million Series D led by Accel and Sapphire Ventures at a $3 billion valuation. While a cybersecurity company, Cyera is certainly riding the AI wave. The startup has an AI-powered data security platform that helps security teams at companies understand what data they have and how it’s used, as well as how to secure it across a complex digital landscape. Of course, the reliance on data has only become stronger as companies drive AI initiatives. Founded in 2021, Cyera has raised $760 million to date, per the company.

5. Kong, $175M, enterprise software: Kong, a developer of cloud API technologies, closed $175 million in an up-round Series E led by Tiger Global and Balderton Capital that valued the company at $2 billion. The round was a mix of primary and secondary transactions, with no exact amount given for the primary investment. The funding comes as companies are being overwhelmed with more APIs as AI business applications grow. Founded in 2009, Kong has raised $345 million, per the San Francisco-based company.

6. Enveda Biosciences, $130M, biotech: It was just in June that Enveda Biosciences first landed on this list, after raising a $55 million round that included Microsoft as an investor. The Boulder, Colorado-based startup is back this week after raising a $130 million Series C funding round led by FPV Ventures and Kinnevik. The company uses AI-powered tools to identify a wide range of molecules produced by living organisms to create medicines. Founded in 2019, Enveda has raised $360 million, per Crunchbase.

7. Cresta, $125M, customer service: AI for contact centers is big right now and Palo Alto, California-based Cresta is the latest startup to raise massive money. The company locked up a $125 million Series D led by new investors Qatar Investment Authority and World Innovation Lab. The Cresta platform gives customers real-time insights and behavioral best practices to help human agents, while also automating mundane tasks using virtual agents. Founded in 2017, Cresta says it has raised more than $270 million.

8. Enfabrica, $115M, semiconductor: AI networking chip startup Enfabrica raised a $115 million Series C led by Spark Capital as it inches closer to its newest chip release early next year. The round comes just about 14 months after the Mountain View, California-based firm closed a $125 million Series B led by Atreides Management that also included investment from Nvidia. The new Series C investors include some of the biggest names in the chip world: Arm Holdings and Cisco Investments. Enfabrica also announced its new “groundbreaking” ACF SuperNIC chip. The startup’s networking infrastructure helps tie AI chips together — allowing for the consistent flow of data needed for modern AI workloads.

9. League One Volleyball, $100M, sports: Los Angeles-based League One Volleyball, which is set to start a pro volleyball league early next year, raised $100 million in a deal led by Atwater Capital. Founded in 2019, the company has raised $160 million, per Crunchbase.

10. Spectro Cloud, $75M, enterprise software: San Jose, California-based Spectro Cloud, which allows customers to deploy and manage Kubernetes in production, completed a $75 million Series C funding led by the growth equity arm at Goldman Sachs Alternatives. Founded in 2019, the company has raised $143 million, per Crunchbase.

The biggest round outside the states came from across the pond.

7-Eleven, the Slurpee and a $47 Billion Takeover Battle

The convenience chain is at the center of a bidding war between would-be buyers on two continents. Here’s why they’re hungry for it.

At 7-Eleven, it all comes back to the Slurpee.

The rainbow-hued blend of high-fructose corn syrup, flavoring and carbonated water—not exactly liquid, not exactly solid—is quintessential convenience-store fare. Quick, sweet, colorful and cheap, around $1 to $2 each.

Slurpees are big business, too. 7-Eleven, home of the Slurpee, sold 153 million of them in 2023—a brain-freezing cornerstone in an $80 billion empire of convenience. The sheer reach of 7-Eleven’s corporate parent, Tokyo-based Seven & i 3382 0.02%increase; green up pointing triangle, spanning 85,000 stores dotted across 19 countries, is rivaled only by the range of goods stocked under its stores’ 24-hour fluorescent lighting. Potato chips. Bleach. Cigarettes. Sunglasses. Power-steering fluid.

7-Eleven’s drink dispensers and glistening roller-dogs have made it a cultural icon name-checked by Bruce Springsteen and Green Day, lampooned in “The Simpsons” and portrayed in the “Grand Theft Auto” videogame series. In the 2013 movie “Escape from Planet Earth,” a Slurpee is given to an alien as a peace offering.

Now the chain is the object of a multibillion-dollar bidding war between would-be buyers on two continents. Quebec-based Alimentation Couche-Tard ATD -0.13%decrease; red down pointing triangle, which owns the Circle K convenience store chain, has offered $47 billion to buy it.

Seven & i rebuffed the Canadian firm’s initial offer, which would have augmented Couche-Tard’s existing stable of chain-store brands and powered international growth. This month, a son of the executive who founded 7-Eleven’s current owner submitted a higher bid, which would keep the brand in Japanese hands and prevent foreigners from meddling with the chain’s beloved rice balls and other local favorites.

7-Eleven was born in the U.S. a century ago. In the 1990s, it was acquired by a Japanese company that built it into the world’s largest convenience retailer on a diet of cutting-edge inventory management and logistics. Its green-and-orange branding is ubiquitous, but at the heart of its success are stores that are charmingly, assertively local: rice balls in Japan, Old Bay chicken sandwiches in the mid-Atlantic.

The 3,000-odd square feet of a typical 7-Eleven might look jam-packed and jumbled, but its roughly 3,000 different products are picked using detailed data that lets each store tailor its mix to local habits and tastes. One location should stock more bags of pretzels and another craft beer.

Thanks in part to the experience of its Japanese owner, which sells lots of fresh food from its stores, the chain is also mastering a distinctly American and surprisingly lucrative spot in food retail: “dashboard dining.” The term refers to inexpensive food that can be eaten with one hand—boneless chicken wings, a Taco Cheese Taquito or a hot dog—and is suited for customers on the go. All that could be retail gold, its would-be buyers think.

But inflation has pinched the low- to middle-income shoppers who are the convenience-store industry’s mainstays, and 7-Eleven hasn’t been immune. (The majority of its sales are outside Japan.) Shares of the parent company were down 13% in the 12 months before Couche-Tard’s initial offer in August. In October, the company slashed its profit forecast for its current fiscal year by more than 40% to about $1.09 billion, citing sluggish demand caused by inflation.

That has given Couche-Tard an opening: A deal would give the combined companies the scale to cut costs by increasing their leverage over suppliers and consolidating deliveries to stores.

Before it was 7-Eleven, it was known as Southland Ice Co. Founded in Dallas in 1927 by Joe C. Thompson and several partners, the company started out marketing ice, but soon expanded, thanks to the suggestion of one employee, to groceries, cigarettes, gas and other products, a one-stop shopping concept that helped spread locations throughout the U.S. via franchising agreements. After expanding its hours of operation from 7 a.m. to 11 p.m., the chain decided in 1946 to change its name to 7-Eleven.

Another landmark came in 1959, when Kansas inventor Omar Knedlik and his business partner, Dean Sperry, collaborated with a Dallas manufacturer to perfect a frozen-beverage machine. Six years later, 7-Eleven bought three of the “Icee” machines and in the late 1960s renamed the beverage the Slurpee. The Icee, now produced by another company, is still popular at movie theaters and rival convenience chains.

After an Austin, Texas, store’s successful experiment with staying open 24 hours a day to tempt college students with late-night Slurpees, 7-Eleven had its formula.

“7-Eleven really represents in many ways the American dream,” said James Keyes, who served as chief executive of 7-Eleven in the early 2000s.

The chain helped pioneer pairing retail with gas pumps, and spread automated teller machines that enabled basic banking within arm’s reach of beef jerky and granola bars. 7-Eleven’s franchisee program, Keyes said, is the first step for many immigrants looking to run a business in America.

In 1968, 7-Eleven parent Southland went public to help finance its expansion, which reached 8,200 stores by the late 1980s. It wasn’t immune to that decade’s financial turbulence, however. Seeking to avoid a takeover, the founding Thompson family in 1987 took Southland private in a leveraged buyout. It began selling assets to pay off its debts.

The chain filed for bankruptcy in 1990, and shortly afterward received a boost from across the Pacific.

In 1974, a little-known Japanese retailer opened a 7-Eleven outpost in Tokyo. The store, which still operates on the same site today, was the starting point for an unlikely role reversal: The Japanese 7-Eleven chain within two decades grew big enough to take over its older U.S. sibling.

In the early 1970s, Toshifumi Suzuki was a midlevel executive at a company called Ito-Yokado, which ran a chain of Walmart-like general retailers in Japan. On visits to the U.S., Suzuki became intrigued with 7-Eleven stores, and how they made a much smaller format work.

Suzuki negotiated a licensing deal with Southland. Soon after opening the Tokyo location, his Japanese 7-Elevens rapidly multiplied, initially selling hamburgers and sandwiches. While U.S. 7-Eleven stores bet big on the Slurpee, the Japanese locations introduced rice balls and a traditional Japanese hot-pot dish called oden.

Like Southland, Suzuki tinkered with operations. At first, deliveries from as many as 70 trucks a day would cause traffic jams in front of Japan’s 7-Eleven stores. Starting in 1976, the company developed a new system that centralized delivery of products from various brands and suppliers, allowing the chain to replenish a store’s inventory with fewer than a dozen trucks today.

In 1982, 7-Eleven in Japan introduced item-by-item inventory management, using a computer system that helped stores order only what was needed based on real-time sales data, minimizing waste.

Suzuki stressed product freshness, frequent restocking, and a diverse lineup including ready-to-eat dishes matched to local tastes, and the chain thrived in Japan. When Southland filed for bankruptcy, he was ready to act, and in 1991 his Japanese company acquired a 70% stake in 7-Eleven’s parent. It bought the rest of the company in 2005.

When Suzuki started restructuring the chain’s U.S. operations, he was shocked by some stores’ condition—dimly lighted, dirty, with beer and cigarettes and soda cartons piled in the aisles. He wrote in an autobiography that he wondered: “Is this a warehouse?”

His determination to build everything from scratch, which he wrote earned him the nickname “Hurricane Suzuki,” turned around the company in three years.

Part of the chain’s strength in the U.S. has come from an operational structure that grants individual store managers autonomy to decide on their product mix and delivery schedules. For example, stores on a college campus could carry more beer and chips; an interstate off-ramp location might keep a broader range of auto supplies and sunglasses.

7-Eleven stores monitor daily sales, and collect demographic information on which loyalty members are buying what. The stores also use a distribution system in which franchises place orders every day based on company recommendations of what’s selling well nationally and regionally.

The company has spent years trying to enhance its food offerings. It now uses more than a dozen so-called commissaries that make and supply food to its U.S. locations. Each individual commissary can tailor its products to what’s popular for the stores in its region. A new Virginia commissary makes an Old Bay chicken sandwich and a jalapeño steak sandwich. The company says some of its top-selling products include hot food: wings, pizza and taquitos.

Keyes, the former 7-Eleven CEO, said this model keeps 7-Eleven flexible compared with competitors that are beholden to centralized ordering systems. The company has been drawing on sales data as it stocks a wider range of food, adding more fresh fruit and prepackaged sandwiches, Keyes said. 7-Eleven these days commands nearly 2% of grocery sales in the U.S.—more than Trader Joe’s or Whole Foods, according to industry tracker Numerator.

7-Eleven’s strategy has been especially successful in Asia. In Thailand, which has the second-largest number of locations behind Japan, stores feature a range of traditional Thai food, including chicken Thai curry.

Across the Pacific, a rival has had its eye on 7-Eleven for almost 20 years.

Canada’s Alimentation Couche-Tard started as a single convenience store outside Montreal in 1980, since then growing to include 16,800 stores spread across 31 countries, including Canada, Scandinavia, Germany, Hong Kong and the U.S.

Alain Bouchard, the company’s founder and executive chairman, built the company through a string of deals that included Total Energies retail assets in Europe and ConocoPhillips’s Circle K convenience stores in the U.S.

Bouchard approached executives at Seven & i, 7-Eleven’s parent, informally in the early 2000s to gauge whether there was any interest in a deal, but he was rebuffed, according to the authorized 2016 biography of Bouchard by Canadian journalist Guy Gendron.

Couche-Tard has been trying to diversify away from fuel and cigarette sales and sell more fresh food, which makes up 12% of its sales, according to a research report by Stifel. Fresh food represents about a third of 7-Eleven’s Japanese sales.

“We continue to see a strong opportunity to grow together and enhance our offerings and service to millions of customers across the globe,” a Couche-Tard spokesman said. “We also remain confident in our ability to finance and complete this combination.”

The U.S. is Couche-Tard’s largest market, where it has more than 7,100 stores operating under the Circle-K brand, second only to 7-Eleven’s nearly 13,000 stores.

Couche-Tard made its opening bid for Seven & i this summer, when it sent a proposal to buy the Japanese conglomerate for $39 billion. Seven & i—whose stock-market valuation in Tokyo was equivalent to about $30 billion the Friday before Couche-Tard publicly confirmed its offer—rejected the deal, saying the offer “grossly undervalues” the company.

Couche-Tard later raised its offer to roughly $47 billion. Seven & i is resisting. Alex Miller, Couche-Tard’s CEO, and Bouchard, the founder, visited Tokyo in October but couldn’t get a meeting with Seven & i executives.

Last month, Seven & i CEO Ryuichi Isaka said that the company had “potential for significant growth globally” and aimed to nearly double its revenue to about $200 billion by 2030. He also announced a restructuring plan including spinning off noncore businesses, including supermarkets.

Last week, Junro Ito, a Seven & i executive who is a son of late founder Masatoshi Ito, offered a proposal to take the company private. Steven Hayes Dacus, head of the Seven & i special board committee considering the proposals, said the committee was “committed to an objective review of all alternatives before us.”

Pressure is growing on Seven & i to decide its future. 7-Eleven executives said in October they plan to close nearly 450 North American locations to cut costs as the company struggles to keep inflation-weary shoppers coming in. Cigarette sales are down 26% since 2019, an 80-year low, the company said.

Over the past year, 7-Eleven has been trying to improve some of its store-branded food offerings and sell more specialty beverages such as cappuccinos and lattes, which could help diversify the chain further from gas and tobacco sales.

Hidenori Yoshikawa, a consultant at Daiwa Institute of Research in Tokyo, said the cultural differences in the deal weren’t just about rice balls versus Slurpees, but also about the consequences of a big, disruptive transaction.

In the U.S., Yoshikawa said, “directors feel it’s their duty to sell to the highest bidder even if they offer one yen more.” At Japanese companies, “more so than shareholder profit, the first point people turn their attention to is what the proper shape of their community should be.”

Leveraged hedge funds magnified August market sell-off, Fed says

US central bank report pins blame for trading volatility partly on investors that had taken on too much debt

The sell-off in US equities in early August showed that highly leveraged hedge funds operating in a low-liquidity environment could magnify market shocks, the Federal Reserve said on Friday.

Financial markets fell sharply in the first week of August in what was seen then as a reflection of concerns over the US economy and rising interest rates in Japan, which turned against investors who had borrowed cheaply in yen in a popular trade known as the yen carry. 

In a report, the Fed blamed August’s sudden jump in market volatility in part on “highly leveraged hedge funds” quickly selling down their positions to meet internal volatility targets — not margin calls from bank lenders.

“During this event, liquidity in the Treasury market, as well as in other markets, deteriorated markedly, but market conditions improved rapidly following favourable data releases the following week,” the Fed wrote in its twice-yearly financial stability report. “Nevertheless, this episode showed once again how high leverage can amplify adverse shocks.”

The Fed said measures of leverage averaged across hedge funds in the first quarter of 2024 were at or near the highest level since 2013, when it began tracking the volume of debt used by the funds.

The central bank said sparse market liquidity, especially during times of stress, could also amplify volatility and exacerbate the fallout.

Despite its warnings about indebted hedge funds, the Fed was sanguine about overall risks in the financial system, saying that in general banks “remained sound and resilient”.

Most domestic banks, the Fed’s report said, had high levels of liquid assets, and their reliance on uninsured deposits, a trigger for the regional banking turmoil last year, had decreased.

The Fed’s report, which reflected data and information available through November 4, showed that its contacts on Wall Street were concerned about the sustainability of the US debt burden, especially if the Treasury department had to keep issuing more government bonds to pay for it.

The Fed warned that this dynamic could put “upward pressure on long-term interest rates that could further damp growth and strain sovereign and private-sector borrowers”.

Fears about inflation and in turn higher for longer interest rates were also supplanted by concerns stemming from amplified geopolitical tensions, which the Fed said could lead to a “sudden pullback from risk-taking”. 

“These developments could lead to declines in asset prices and losses for exposed businesses and investors, including those in the US,” the Fed added.

The delusions behind a bitcoin strategic reserve

It is a resilience strategy for the ‘hodlers’, not the US state

In July, Cynthia Lummis, a US senator from Wyoming, introduced a bill to establish what she called a “strategic bitcoin reserve”, a programme instructing the Treasury and the Federal Reserve to buy a million bitcoins over the next five years to then hold them for at least 20 more years.

Donald Trump made vague noises in support of bitcoin and crypto during his campaign. With his election, the hope behind Lummis’s bill has started to gather weight, particularly among the people with private bitcoin holdings of their own. This stands to reason. If you held a portfolio of Andy Warhol paintings and someone in Washington proposed a strategic Warhol reserve, you’d be excited too.

The bill lays out a mechanism for paying for the reserve. Any surplus the Federal Reserve returns to the Treasury would be spent instead on bitcoin. The Fed doesn’t currently return any money to the Treasury. No matter. The bill also proposes that Fed banks mark all their gold certificates to the current market price of gold, then remit the difference to the Treasury to buy bitcoin. This is all plausible, but the bill doesn’t answer the most important question facing any piece of legislation: how will this change anything at all, for anyone?

A reserve would present both a consummation and an irony for bitcoin’s hardcore supporters — the hodlers. The state would recognise what hodlers call freedom money, but also prop that up with a state programme. The preamble to Lummis’s bill argues that in return, a million bitcoin would diversify America’s assets, improving financial and monetary resilience. Unlike a traditional banking reserve, however, they would be held by the Treasury and couldn’t start to be sold until 2045. An asset you cannot sell does not give you resilience. It gives you storage costs.

A bitcoin reserve would probably appreciate in value. This is the core of the hodlers’ argument: after two decades America would remain astride the global financial system, in control of roughly one in 20 of the world’s most valuable assets. In this sense, what the bill calls a strategic reserve is just a sovereign wealth fund, leaving the Treasury with the power to, say, pay down America’s sovereign debt. The challenge there is to lay out the case for why bitcoin’s rise must inevitably continue.

It is long past time to say that bitcoin can’t serve as money. It can and does. Analysis of the bitcoin public ledger published in September in the Journal of Empirical Finance shows that holdings serve as a way to move money offshore through the Seychelles, for example. Activity increased in Brazil during inflation and in Venezuela after sanctions, but dropped in China after a ban on bitcoin mining and trading. It does seem to serve a purpose beyond speculation, though not so far in countries with functional banking systems.

The additional spike in price after Trump’s election offers a circular argument. Bitcoin is even more valuable because Trump will embrace it. Trump must embrace it because it is becoming more valuable. But the dollar has been on a tear for 50 years already, and the way Americans and foreigners use bank dollars has nothing to do with the gold that the Treasury holds at Fort Knox in Kentucky. It would likewise have nothing to do with any bitcoin the Treasury secured with a Fed surplus.

The dollar is not suspended in the air by nothing. It has always been held up by Federal Deposit Insurance, imperfect but adequate bank regulation and handshake agreements among central banks to support offshore dollars in a panic. The global dollar system is untransparent and unfair. It’s terrible for American consumers. But bitcoin hodlers have made the classic engineer’s mistake of thinking that a social system riddled with inefficiency must, like a bridge, eventually collapse.

Perhaps in a collapse an asset like bitcoin could prove valuable. Historically, however, bank money has re-emerged from the rubble of every catastrophe. We rely on dollars not because we’re stupid, but because a bank is literally a licence to print money, and a state has not yet been founded that can prevent powerful people from getting that licence. A long-term bet on bitcoin is bullish on the permanent collapse of all institutions, everywhere. It’s a nuclear put.

A bitcoin reserve would serve exactly one strategy. A Treasury with a million bitcoin would be trapped by its own portfolio. Congress could never exercise monetary sovereignty by limiting bitcoin mining or trading, because the price of the Treasury’s own assets would immediately collapse. The strategic bitcoin reserve is not a resilience strategy for the US. It’s a resilience strategy for the hodlers.

Hedge fund manager will be responsible for implementing president-elect’s pledges to cut taxes and raise tariffs

Donald Trump has picked Scott Bessent to be his US Treasury secretary, nominating one of his biggest financial backers as the top economic official of his second administration.

Bessent will be responsible for overseeing the president-elect’s most prominent economic pledges, including sweeping tax cuts, while maintaining the stability of the world’s largest economy, its most important bond market as well as the dollar.

The hedge fund manager’s economic philosophy seeks to bridge traditional free-market conservatism with Trump’s populism. He has defended the president-elect’s repeated threat of raising tariffs against accusations that they would upend relations with US allies and raise consumer prices, saying they are a trade negotiating tool and a way to raise government revenue.

In a statement on Friday, Trump described Bessent as “one of the world’s foremost international investors and geopolitical and economic strategists”, who was “widely respected”.

“He will help me usher in a new golden age for the United States, as we fortify our position as the world’s leading economy, centre of innovation and entrepreneurialism, destination for capital, while always, and without question, maintaining the US dollar as the reserve currency of the world.”

Trump added that with Bessent at the helm, his administration “will reinvigorate the private sector, and help curb the unsustainable path of federal debt”.

Bessent will also be responsible for steering the administration’s sanctions policy, including on Russia over its full-scale invasion of Ukraine, as well as the rules that govern Wall Street. His appointment will need to be confirmed by the US Senate, which will be controlled 53-47 by Republicans next year.

Trump on Friday evening also selected Russell Vought to once again lead the Office of Management and Budget. “Russ knows exactly how to dismantle the Deep State and end Weaponized Government, and he will help us return Self Governance to the People,” Trump wrote. The president-elect also picked Lori Chavez-DeRemer, a Republican Congresswoman from Oregon, to be his labour secretary.

Wall Street bankers across the political spectrum were digesting the news of Bessent’s appointment. They pointed out that a lot would depend on how much independence he would have to manage the economy. 

A dealmaker at a large bank said Bessent had a strong pedigree managing complex financial situations but was concerned that he would be a “puppet” of Trump.

“Bessent is a very skilled investor, he has a great track record over decades but I fear he won’t have much autonomy,” the dealmaker said.

The 62-year-old Bessent is a Wall Street veteran who has been among Trump’s most vocal advocates and closest economic advisers in recent months.

It will be his first government position. He currently runs the hedge fund Key Square Capital Management. Bessent previously worked closely with billionaires George Soros and Stanley Druckenmiller.

Trump also went with a Treasury secretary who had Wall Street experience during his first term, when former Goldman Sachs banker Steven Mnuchin held the post.

“There’s nobody with a better understanding of markets [than Bessent] to manage $36tn in debt, who’s a vocal advocate of the president-elect’s economic agenda, and has the stature around the world to navigate the global economic challenges we need to confront,” said Michael Faulkender, a finance professor at the University of Maryland’s Smith School of Business and chief economist at the Trump-aligned America First Policy Institute.

A top corporate lawyer and longtime Democratic donor said that Trump’s decision was encouraging. “[It is a] sensible choice that will reassure the financial community. The Treasury functioned well under Mnuchin and I would expect Bessent to provide similar stability,” the lawyer said.

Apollo Global Management chief executive Marc Rowan and former Federal Reserve governor Kevin Warsh were candidates for the Treasury role, travelling to Mar-a-Lago this week for interviews with Trump. So was Howard Lutnick, Cantor Fitzgerald’s chief executive, who is also co-chair of the Trump transition team. John Paulson, another billionaire hedge fund manager, had also been in the running before dropping out.

In a statement on Friday, Paulson called Bessent an “outstanding pick”.

“He has the market experience and financial acumen to successfully implement President Trump’s economic agenda.”

The nomination of Bessent, who is seen as a pragmatic pick, follows a number of controversial appointments, including Fox News host Pete Hegseth for defence and vaccine-sceptic Robert F Kennedy Jr as health secretary. The president-elect had also nominated former Florida congressman Matt Gaetz to run the justice department, but he withdrew his name from consideration for the role.

Bessent, a Yale University graduate who grew up in South Carolina, will take the helm of a US economy that is on solid footing. After the worst cost of living crisis in decades, inflation has steadily declined following a period of high interest rates. Unemployment remains historically low at 4.1 per cent, keeping consumer spending strong.

Many economists have warned that Trump’s protectionist economic plans, and his pledge to deport millions of immigrants and slash taxes, could reignite inflation and dent growth — criticism that Bessent has strongly rejected.

In an interview with the Financial Times in October, Bessent framed tariffs as a “maximalist” threat that could be pared back during talks with trading partners. He also denied that the Trump administration would devalue the dollar.

“My general view is that at the end of the day, he’s a free trader,” Bessent told the FT, referring to Trump. “It’s escalate to de-escalate.”

But Bessent has floated more unorthodox ideas, including taking steps that would infringe on the long-standing independence of the Fed.

Speaking to rightwing ideologue and Trump ally Steve Bannon recently, he also floated cutting government spending by $1tn over the next decade.

Trump’s transition team also announced a series of health nominees: Johns Hopkins surgeon Marty Makary, who rose to prominence for opposing vaccine mandates during the pandemic, was named as its choice as head of the Food and Drug Administration. Fox News contributor Janette Nesheiwat was nominated as surgeon general and doctor and former GOP congressman Dave Weldon was picked to be head of the Centers for Disease Control and Prevention.

Stocks of anti-obesity drugmakers Eli Lilly, Novo Nordisk, and Amgen have gotten hit as the market frets over what a Robert F. Kennedy Jr.-run Department of Health and Human Services would mean for the group. The worries are overblown, and investors should use the selloff to scoop the stocks up on the cheap.

It’s been a difficult second half of the year for Amgen, Lilly, and Novo Nordisk, which have tumbled since peaking during the summer. The selling started as run-of-the-mill profit-taking, as investors locked in gains from these names. It picked up steam after the Federal Reserve cut interest rates and the election approached. When President-elect Donald Trump appointed RFK Jr. to lead the agency, panic selling set in—and no wonder.

Kennedy isn’t a fan of Novo Nordisk’s weight-loss treatment Ozempic, which costs the government too much money to insure. Investors are concerned that he may push for less insurance coverage of the drugs or even lower GLP-1 prices. Amgen stock has dropped 9% in November, while Lilly has fallen 17% and Novo Nordisk has declined 10%.

Don’t expect much to come of the fears. For starters, the agency, for all its responsibilities, doesn’t have unilateral power to change the landscape of drug coverage and pricing. It would take an act of Congress to allow Medicare to pay for anti-obesity drugs.

BMO Capital Markets analyst Evan Seigerman reiterated his Outperform ratings on Lilly, Amgen, and Novo Nordisk on Monday. “Continued selloffs of obesity names within our coverage…reflect more fear than real fundamental downside risk,” he wrote.

There’s still plenty of room for growth in the obesity space. A little over a billion people now suffer from the condition globally, according to the World Health Organization, and with the treatments selling for hundreds and sometimes thousands of dollars, the long-term sales opportunity could be huge. Patients are only starting to adopt the treatments, which means drugmakers could experience a massive boost to profits in the years to come.

That should mean supercharged growth for Lilly. Sales of Zepbound and Mounjaro are expected to hit about $18 billion by 2026, according to FactSet’s analyst consensus forecast, up from projections of just over $8 billion for this year. Its total revenue is expected to hit $69 billion in 2026, up from $45.7 billion in 2024, while earnings surge to almost $30 a share, from $13.26. What’s more, at $753, Lilly stock fetches 35 times 12-month forward earnings, down from a July peak of 57.2 times—a far less demanding valuation for a stock that is still producing double-digit growth.

Novo is in a similar situation. Sales of Ozempic and Wegovy are expected to rise from $26 billion this year to about $41 billion by 2026. While its other medications are growing at a slower pace, the obesity drugs should still drive double-digit cumulative revenue and earnings growth over the next two years. The Swedish company’s American depositary receipts trade at a more compelling 26 times 12-month forward earnings, down from a July peak of 38.9 times.

Amgen stock never enjoyed the same boost as Lilly and Novo, partially because its obesity drug has yet to hit the market. The company, however, said on its third-quarter earnings call that an obesity candidate, currently known as AMG 513, has begun Phase One testing. Eventual approval of the product could result in billions of dollars of additional sales, boosting earnings. Amgen needs any boost it can get. Its sales are expected to grow to $34.9 billion by 2026, up just 11% from 2024’s $31.1 billion, as some of its popular drugs go off patent and it loses market share. But at just 13.8 times 12-month forward earnings, down from its July peak of 16.7 times, those worries—and RFK Jr.—seem priced in.

Never let a healthy selloff go to waste.

Is there anything Elon Musk can’t do? After defying skeptics who said he couldn’t sell two million Teslas, or launch and retrieve rockets from space, slashing $2 trillion a year from the federal budget should be easy-peasy, according to his legions of fans.

Musk and Vivek Ramaswamy, who have been tasked with heading DOGE, the newly hatched Department of Government Efficiency, are aiming to cut a cool $2 trillion in federal spending. Trouble is, of the $6.1 trillion in annual federal outlays, only $1.7 trillion is discretionary. And the bigger problem is that non-discretionary spending, especially interest on the debt, is soaring, and there is nothing this dynamic duo can do about that.

“The reality is that the cuts [they] can make will be far less substantial than those required to make any meaningful dent in our runaway finances,” writes Stephanie Pomboy, the mistress of MacroMavens. “As for Elon’s hatchet to bureaucracy, total government wages and salaries are a little over $800 billion annually.”

That isn’t enough to matter, at least to the bond market, as has been highlighted ad nauseam in this space for the past year and a half. All those notes and bonds issued at never-before-seen and never-to-be-repeated interest coupons of 1% and less that are coming due will be replaced by debt with more normal yields in the 4% range. And so Uncle Sam’s interest tab has climbed from $628 billion in 2023 to just under $900 billion in 2024, and currently is running at $1.2 trillion annually, Pomboy says.

“Barring cuts to entitlements (which no one is talking about), rates are going to be higher for longer despite the efforts of Elon...and [Federal Reserve Chair] Jay Powell,” she concludes.

Far from the $2 trillion expense-cut fantasy, the incoming Trump administration’s top economic priority is to extend the Tax Cut and Jobs Act, the signature measure of his first term, which expires at the end of 2025. That will cost $4 trillion over the next decade, 2½ times as much as the original $1.6 trillion, according to the Peter G. Peterson Foundation.

That doesn’t mean there are no cuts to be made. The Committee for a Responsible Federal Budget listed this past week “$700 Billion of Easy Deficit Reduction” for the next decade. Among the savings, some $50 billion would come from closing the electric-vehicle credit-leasing loophole, which gets around restrictions on the $7,500 federal tax credit for EV purchases, depending on their origin and the buyer’s income.

Musk also has voiced his opposition to the EV tax credit, stating it mainly helps competitors of Tesla, where he’s CEO, such as General Motors and Ford Motor. And he is apt to champion the use of artificial intelligence to boost government efficiency. Macquarie strategists Thierry Wizman and Gareth Berry cite one estimate that automating routine administrative tasks could boost U.S. government productivity by $519 billion annually, for $5.2 trillion in savings over 10 years.

AI also could reduce the deficit by detecting tax evasion and improving the selection of tax returns for audit, they add. Improved compliance could boost revenue by $4.8 trillion over 10 years without boosting tax rates, they note.

Wizman and Berry further point to “static” analysis that estimates that tariffs favored by President-elect Trump of 10% to 20% could bring in between $2 trillion to $3.3 trillion over 10 years. But tariffs are a risky way to raise government revenue, they add, given the possibility of retaliation by trade partners. They note a Tax Foundation analysis that negative economic impacts could actually result in lower overall fiscal revenues.

None of these measures comes close to the $2 trillion annual savings that Musk and Ramaswamy seek. Meanwhile, if Trump’s promise to extend the TCJA, plus enact campaign pledges to exempt Social Security and tips from taxes, boost the cap on state and local tax deductions, and reduce the corporate tax rate to 15% from 21% for manufacturing firms all come to pass, the already huge federal deficit at 6.5% of gross domestic product would widen further, writes Olivier Blanchard, former chief economist at the International Monetary Fund, for the Peterson Institute for International Economics.

“If Trump enacted all the measures he has suggested, a question would be how many years it will take for investors to question the risk-free status of U.S. Treasuries,” he writes. “Leaving aside this risk issue, what is likely, however, is that a further fiscal expansion, starting from an economy close to full employment, will lead to inflation and, by implication, higher Fed policy rates and a strong dollar. Once again, this scenario will trigger a potential conflict with the Fed.”

If the Fed sticks to its mandate, Blanchard says, it will stand in the way of some of Trump’s policy goals and have to increase rates to limit economic overheating, leading to dollar appreciation. As I wrote a week ago, the risk is that the U.S. central bank instead underwrites higher inflation so the economy expands briskly enough to keep pace with the debt. That’s what the recent rise in bond yields suggests.

The company is facing pressure on two fronts—the government and a host of new AI-powered search rivals. It has the capacity to meet both challenges and continue to prosper.

Google is under attack. Alphabet stock will still emerge a winner.

Alphabet shareholders have every right to be worried. This past week, the U.S. government hit Google— and hit it hard —when it put forward remedies to break Google’s hold on search, which included selling its Chrome browser and monitoring data, causing the stock to fall 4.7%, to $167.63, on Thursday. The action comes as investors were already fretting about the rise of generative artificial intelligence —computers capable of answering complex questions in, mostly, plain language—which have created an opening for competitors like ChatGPT, Perplexity, and Microsoft in a way that Yahoo! and DuckDuckGo never could. Not only can they siphon users away from Google, but the search for answers instead of links also could be devastating for its advertising business. Without search and the ad dollars it produces, the mighty Alphabet collapses—and so does its stock.

Alphabet, however, is more than up to the task of defending itself. Since going public in 2004 —at a split-adjusted $2.13 a share—Google has navigated the shifting terrain of the internet, including the transition from desktops to mobile phones, with relative ease. While the future will be more complicated, generative AI has the potential to add revenue, as Gemini, Google’s AI tool, ramps up and becomes more powerful. While the government’s attempt to break Alphabet apart could be an overhang, it appears to be reflected in the stock, which is the cheapest of the Magnificent Seven and even cheaper than the S&P 500 index. Even as that future unfolds, the company’s search business remains dominant—and cash-generating—and that is unlikely to change, even as the way people find information does.

“I don’t see betting against Google,” says Jason Browne, president of Texas-based investment advisory firm Alexis Investment Partners.

For two decades now, Alphabet has been a winner. Its advertising business generates more than $250 billion annually, while Android has become the world’s most popular mobile operating system, easily surpassing Apple’s iPhone in users. Following the lead of Amazon.com and Microsoft, Alphabet moved into the cloud, which is expected to generate $58 billion in revenue for the company next year. At the same time, though less talked about than TikTok, YouTube has become the planet’s No. 1 content delivery platform, with viewers watching more than a billion hours daily.

The rivers of cash generated from all of its units—some $435 billion over the past decade—have allowed Google to indulge in what it calls its “other bets,” including Waymo’s self-driving car initiatives and Google Fiber broadband internet, money-losing businesses that investors simply ignore. And it’s all tied together by Google’s search engine, creating an aura of invincibility and inevitability.

Then, ChatGPT launched in November 2022. Generative AI, with the ability to scrub the net and provide easy, if sometimes dubious, answers, opens up a new possibility for accessing data—and a new threat to Alphabet’s dominance. Users no longer have to type questions into Google’s search bar and scroll through links. Now they can type in a question and get an answer. ChatGPT was mind-blowing when it arrived—and an immediate success. “It was the fastest [growing], most exciting app that has ever hit the market,” says Futurum Group CEO and technology researcher Daniel Newman, who noted that it reached 100 million active users just two months after its launch.

Perplexity, launched a month after ChatGPT, has grown to 15 million monthly active users and recently launched a shopping assistant, allowing users to type in a question, get an answer, and execute a transaction. Dmitry Shevelenko, Perplexity’s chief business officer, calls the company’s tool an “answer machine,” one that gives users the information they need versus just giving them links. Perplexity answered about 425 million questions over the past 30 days, up from 500 million in all of 2023. Ultimately, the company hopes to create an all-in-one app, where users can act on what they have learned and never have to leave.

These changes seem ominous for Google. Follow them to their logical conclusion and it isn’t hard to imagine traditional search fading away and the market fragmenting, with consumers one day communicating with their devices via an AI-generated custom interface. In February, technology research firm Gartner projected that total search engine volume would drop 25% by 2026. There’s only one problem with those dire predictions—the data don’t back them up. Microsoft was the first mover, putting ChatGPT into Bing, while boldly claiming that taking 1% of search market share would translate to $2 billion in incremental revenue. “Microsoft took no share,” says Futurum’s Newman.

What’s more, Alphabet’s October earnings report showed no signs of a search slowdown. It easily topped earnings and sales forecasts, while revenue from its cloud business gained 35%. But it was search that was perhaps the most surprising. Anyone who visited Google recently noticed that the service often provides an AI-generated summary of the findings, as well as a list of links. Investors had worried that would mean fewer links and ads, but management appeared optimistic about its ability to make money from those searches.

“We still have no idea how they’ll really monetize AI or other innovations, but the perceived ‘threats’ (OpenAI, Meta AI, Perplexity, and upcoming Meta and OpenAI search) will have to wait, as Google Search growth of 12% beat estimates modestly,” writes Melius analyst Ben Reitzes.

Alphabet has something going for it that OpenAI, which has a partnership with News Corp, the owner of Barron’s parent Dow Jones, and Perplexity don’t—it’s a moneymaking business. The two start-ups are still in the early stages of their business development and aren’t profitable. How they ultimately monetize their businesses—and whether they can successfully do it—remains to be seen. Perplexity is also being sued for not paying for the content it feeds into its large-language models, or LLMs, something that could ultimately force it to change how it operates. (Dow Jones is one of the companies suing Perplexity.)

While the upstarts try to figure things out, search should keep growing. Media investment and data-services provider GroupM projects that search advertising revenue will grow more than 6% in 2025, up from about 5% in 2024, with about 5% average annual growth through the decade’s end. It isn’t that people like to click through a list of links produced from a query, but that AI-assisted search will produce better results, leading to more questions and further searches. Rather than being a paradigm shift like the switch from desktop to mobile, AI search may be a new format for answers, says New Street Research analyst Dan Salmon. “[It’s] more akin to the integration of images, maps, and other forms of content beyond the original text links,” he explains. Salmon rates Alphabet stock a Buy with a $213 price target.

The advent of AI is also likely to create new types of search and novel ways to earn money from sifting through information. There is the traditional ad-supported version—now with AI summaries—that Google dominates, and premium tools are available by subscription. There are even tools being created for individual companies, such as GE Aerospace’s ChatGPT-powered Wingmate, which uses LLMs to provide relevant answers to the questions from the company’s engineers based on design and operating manuals. Now, imagine every company in the S&P 500 doing the same thing. “Search behavior already moved to a dual revenue stream: subscriptions and ads,” Salmon says.

Alphabet is playing in both pools. Google One has over 100 million subscribers, and its premium version includes Alphabet’s highest-level AI functionality for $20 a month. ChatGPT’s premium product has about 10 million subscribers, Salmon estimates. Alphabet also has the advantage of experience, including years of work with its Google Brain and DeepMind AI projects and its internally developed Tensor AI hardware. And it recently purchased character.ai for $2.7 billion to help with these efforts. It has the advantage of $154 billion in operating cash it is expected to earn in 2025 as it gets ready to spend $59 billion on its AI future, similar to what Microsoft spends a year.

That spending should pay off. Salmon estimates that generative AI overviews and subscriptions keep Alphabet’s Google business growing at about 10% a year on average through 2027. “New AI features in search are resulting in better engagement and higher levels of user satisfaction,” says Wedbush Securities analyst Dan Ives, adding that structural risks to Google’s search dominance are overblown. Wedbush rates Alphabet shares a Buy and has a $210 price target.

AI might not be able to slow Google down, but the antitrust risk is real, as this past week’s decline demonstrates. In August, U.S. District Judge Amit Mehta ruled in favor of the Department of Justice, saying that Google illegally monopolized search. This past week, the DOJ proposed a list of remedies that include selling the Chrome browser, prohibiting the ownership and control of anything that creates a preference for Google, and “restoring competition through syndication and data access”—essentially requiring the company to provide its core search index to anyone who wants it to label as their own free of cost.

“We view many of the DOJ’s recommendations to restrict Google Search (and other products) as unlikely to be approved by the court, or to survive an appeals process,” writes Baird analyst Colin Sebastian, who rates the stock a Buy with a $205 price target. “Beyond the reasonable ask to prohibit search distribution agreements, the DOJ remedies are, in our view, a wish-list of restrictions on Google that stray well beyond the court’s ruling.”

Alphabet is fighting the ruling, but other cases loom, including one the U.S. has brought against the company over its advertising business. Appeals are likely to delay any action until 2027 at the earliest. In October, President-elect Donald Trump came out against a Google breakup in favor of making it more fair.

Some changes will be offset. An end to Alphabet paying companies like Apple to make Google the default search engine could mean a loss of market share. But the company spends billions annually on search acquisition costs, including some $20 billion to Apple in 2022, according to court filings. The impact of lower revenue and expenses could, in theory, result in a near-negligible hit to earnings per share, according to Wolfe Research analyst Shweta Khajuria.

Alphabet stock appears to reflect these antitrust concerns. It trades for 19.4 times earnings, below the S&P 500’s 22 times and Meta Platforms’ 22.9 times. “The stock is already reflecting that risk,” says Putnam Investments’ Ellen Hazen, who comments that her firm would consider adding to its existing position if it falls back to about $170.

Oakmarket Select portfolio manager Bill Nygren goes even further. He argues that Alphabet, with a market value of $2.1 trillion including cash and debt, is worth more than the sum of its parts. “Forcing investors to recognize the value of each [business] would probably make the stock go up,” he says.

An analysis of those individual parts bears that out. Alphabet’s cloud business, which could generate roughly $20 billion in 2025 earnings before interest, taxes, depreciation, and amortization, or Ebitda, would be worth $325 billion at a 16 times multiple, similar to what Amazon and Microsoft fetch. YouTube would be worth up to $800 billion if it traded at 22 times Ebitda, the average of what Meta and Netflix change hands for.

Waymo is a little harder to value. Uber Technologies is valued at $150 billion, while Wall Street valuations for Tesla’s self-driving business range from $100 billion to trillions, even though the company has yet to complete a single fully autonomous ride. Alphabet’s Waymo completes 150,000 self-driving cab rides each week, making it a real self-driving player. It is reasonable to value it at about $300 billion, though some bulls think it’s worth far more than that: Deepwater Asset Management’s Gene Munster put Waymo’s valuation at $350 billion to $850 billion by 2030 and expects a spinoff in the next two to four years.

That leaves Alphabet’s search business worth roughly $550 billion, adjusted for its $117 billion in net cash and investments, or about five times Ebitda. Nygren, who doesn’t include Waymo, calculates that Google Search trades at about 11 times earnings. That is enough of a margin of safety for him, given what Alphabet is facing.

As for upside, it’s easy to justify a $260 stock price for the company based on the sum of its parts, up 55% from Thursday’s close. Or Alphabet could be recognized as one of the world’s dominant tech companies. Getting back to its historical premium relative to the market implies that Alphabet shares would trade for about 26 times earnings and be worth about $234 a share, up 40%. “We think of it as a high-multiple tech stock that isn’t [priced] like one,” says Nygren.

For Alphabet, AI isn’t the end of the line—it’s the next step to a brighter future.