TheChek News Flow

Separately, Greg Brockman, a co-founder and company president, posted on X that he would take a sabbatical for the rest of the year

OpenAI co-founder John Schulman is leaving the company to join rival firm Anthropic, an artificial-intelligence startup backed by Amazon.

Schulman said in a post late Monday on social-media platform X that he wanted to focus more on AI alignment. The term refers to the development of safety systems to ensure employees can control the technology they create, in line with a set of human values, even if the tech exceeds human capabilities.

Schulman said he wanted to “start a new chapter of my career where I can return to hands-on technical work.” He said the move wasn’t related to a lack of support for the alignment research being done by OpenAI.

Separately, Greg Brockman, a co-founder and company president, posted on X that he would take a sabbatical for the rest of the year, saying it would be his “first time to relax” since starting up the company nine years ago.

“The mission is far from complete,” Brockman added. “We still have a safe AGI to build.”

Schulman is the latest member of OpenAI’s leadership team to leave in recent months.

Co-founder Ilya Sutskever, who was the startup’s chief scientist, and Jan Leike, another machine-learning researcher who worked closely with Sutskever on managing AI risks, both left in May. Sutskever said he was working on a new project while Leike joined Anthropic.

News Corp, owner of The Wall Street Journal and Dow Jones Newswires, has a content-licensing partnership with OpenAI.

Liquidators began court proceedings in Hong Kong in March to recover dividends and remuneration totaling about $6 billion

China Evergrande EGRNF 0.00%increase; green up pointing triangle Group is seeking to recover $6 billion from its founder and others amid the former property giant’s continuing liquidation.

The heavily indebted Chinese developer said late Monday that it is seeking to claw back the money from seven individuals, including founder Hui Ka Yan, his ex-wife, a former chief executive and a former chief financial officer.

Evergrande said liquidators had begun court proceedings in Hong Kong in March to recover dividends and remuneration totaling about $6 billion “paid by the company on the basis of allegedly misstated financial statements” for the years 2017 to 2020.

It said that since late June, it had obtained injunctions against Hui, his ex-wife and the former CEO that limit the trio from disposing of or otherwise diminishing their global assets.

The injunctions were initially granted in late June under confidentiality orders, which were lifted on Aug. 2.

Attempts to reach Hui for comment were unsuccessful.

Evergrande, once one of China’s largest property developers, in January was ordered by a Hong Kong court to liquidate after a series of debt defaults and failure to secure restructuring terms with creditors.

Evergrande defaulted on dollar bonds in 2021 after running up more than $300 billion in liabilities, playing a role in sparking a broader property crisis in China.

The company said trading in its shares will remain suspended until further notice.

Picking through the rubble 

The timeline goes like this. The manufacturing ISM report last Thursday and the employment report on Friday together cast the shadow of recession over the US economy, which up until then had been, in the eyes of the market, gliding to a perfect soft landing. Stocks fell hard, Treasuries rose sharply. Over the weekend came the news that Berkshire Hathaway had sold much of its immense stake in Apple. On Monday, Japanese markets sold off in historic fashion, and much of Asia followed. The US, which you might have thought was done freaking out on Friday, freaked out again yesterday. 

Here are the most important US price moves from what is now a two-day rout. 

It feels, from the tenor of the media coverage, that stocks should be down in the double digits. Yet the S&P is down just 5 per cent through Friday and Monday. Here is the performance by sector:

There is a tricky overlay here. On the one hand, classic defensive sectors and those that benefit from lower rates performed the best (staples, healthcare, utilities and real estate), just as you might expect if what we were seeing was pure fear of recession. But the sectors that did worst were those dominated by the Big Tech stocks (info tech and consumer discretionary). Would economically sensitive industrials be outperforming the index if this was all a declining growth story? 

Here is the performance of the seven stocks formerly known as magnificent: 

Three of the seven are doing very badly: Amazon, Tesla and Nvidia. Amazon reported so-so earnings on Thursday. Tesla is a massively speculative stock. Nvidia has no particular excuse, other than the fact that it is the mascot of the AI trade, which people want out of all of a sudden. 

What is interesting is that the Vix index, a measure of how much it costs to place a short-term hedge on the S&P 500, rose mildly on Friday and then very sharply on Monday (before subsiding somewhat). This is odd on its face: not much changed for the S&P over the weekend, other than the discovery that Warren Buffett likes cash right now and that Asian stocks are having a major unwind. It looks a little like fear of fear itself — concern that losses will start feeding on themselves as position limits and margin calls are triggered. 

Another interesting point: even as the stock sell-off accelerated on Monday, the move into US government bonds did not. Treasury yields ended the day flat, including the rate sensitive 2-year. We’re not sure exactly what that means, but it is not consistent with the emergency rate cut that some were calling for at the start of the day.

The situation with corporate bonds was somewhat different. High-yield spreads widened another 21 basis points on Monday, after widening 37 basis points on Friday: 

Note that corporate bond yields, unlike stock prices, are directly attached to the real economy. If the cost of raising debt keeps rising, that has repercussions for growth, and the Fed will have no choice but to take notice. But spreads were equally high as recently as December, as the chart shows. Spreads had been driven to historic lows by the wild demand for fixed income driven by the rapid rise in rates. Now they are returning to reality, though perhaps a little too quickly for comfort. 

What does the market think the Fed is going to do? Since Thursday, the futures market has priced in another one or two cuts of 25 basis points apiece by year end. Again, on its surface that’s a sharp change — but one that puts interest rate expectations in the middle of the range we have seen in the past year, not in panic territory:

Markets are under no obligation to make sense, especially over a span of just a few days. After a shock, finding the new equilibrium takes time. That said, with the data we have before us, we might ask: how much of the rout has been driven by:

Recession worries are clearly a contributor, but perhaps not a huge one. The move in the Treasuries, corporate bond spreads and rate expectations would have to be larger before we concluded that recession fears are the biggest driver here and, as we argued yesterday, the economic data is mixed rather than bad.

The unwinding of the yen carry trade could well have contributed to the wider sell-off, as investors were forced to sell off assets they had bought with borrowed yen. It makes sense that this would be happening, but it is difficult to prove the scale of effect — we have not seen hard data on the trade. But there is reason to believe the carry trade unwinding was a bigger deal than previously thought. The Mexican peso and the Brazilian real, two higher-yielding currencies commonly bought with borrowed yen, fell to multiyear lows yesterday despite maintaining high interest rate differentials with the US. Might equities have been swept up as well? Of course, it is possible that the direction of causality went the other way: that it was the sell-off in equities that turned the carry trade upside down, by erasing gains earned on assets paid for with an increasingly expensive yen loans. 

As we have seen with the suppressed Vix of recent years, structured products and quantitative investment styles have changed the ways that markets work. James Athey of Marlborough Group sees that at work in the last few days:

We’re just not sure about this. The long bull market has not provided a very rich sample of wild momentum events. There may be more soon, though. 

That leaves the Big Tech sell-off. It has been violent and the value changes are immense, at least in dollar terms. It has echoed in Asia in the form of sell-offs of big semiconductor companies, as our colleagues at Lex have pointed out. This was a trade that funds hoping to beat the index had little choice but to join. And those funds had big profits this year they would have been keen to lock in. If you must point to a single perpetrator, point at Big Tech. 

There were some signs of stabilisation in the market yesterday. The services ISM index released yesterday still showed service companies in expansion mode, if barely, and its employment subcomponent was firm. Earnings reports on Monday contained no nasty surprises and one or two positive ones (Tyson Foods, Palantir). The stock market did not close at its low yesterday. The Vix cooled somewhat. The stability in the bond market helps. Finally, as of late Monday evening New York time, Japanese and other Asian stocks are staging a comeback.

But an expensive market in a slowing economy does not need any particular reason to fall, just as a cheap one in an accelerating economy needs no special reason to rise. Even if the wild spasm is over, it would not be surprising to see more risk come off the table. 

Mondo Duplantis has made a habit of breaking his own world record, one centimeter at a time. That’s because he collects a bonus every time he does it.

PARIS—There has never been anyone better at flinging himself astonishingly high in the air with the help of nothing more than a bendy pole than Mondo Duplantis.

The greatest pole-vaulter of all time is the reigning Olympic champion and basically a lock to win another gold medal on Monday night at the track. Duplantis has single-handedly lifted the world record from 6.17 meters to 6.24. And the only thing more remarkable than how much he’s raised the bar is how many times he’s done it.

Duplantis, who has now broken his own world record seven times, jumps higher than any human who has ever walked the earth. A lot higher. So much higher, in fact, that his only serious rivals are himself and the earth’s gravitational pull.

“He’s like the Usain Bolt of pole vault,” says American pole vaulter Chris Nilsen.

Forget about trying to beat him. Duplantis floats nearly a whole foot higher than any of his opponents. So the question when he competes isn’t whether he’ll win. It’s whether he’ll do something that nobody has ever done before—for the eighth time.

“People just want to see a world record,” he says. “People don’t care at all how much higher it is. Every time I step on the track, that’s the only thing people want.”

Even a team with LeBron James and Stephen Curry isn’t nearly as much of a lock to win gold as a 24-year-old Swedish guy who launches himself over two basketball hoops with a few inches to spare.

If you bet $10 before the Olympics on Team USA winning gold in men’s basketball, the reward would be $2.13. Duplantis is such an overwhelming favorite that the same $10 bet on him would pay out 42 cents.

But there’s one person who does stand to make a killing if Mondo Duplantis wins and sets a new world record. His name is Mondo Duplantis.

That’s because major track meets offer bonuses to athletes if they break a world record. In other words, Duplantis has a powerful incentive to keep bumping the bar to unprecedented altitude—but only by a single centimeter each time. The man who can fly more than 20 feet high is always trying to catapult himself just 0.4 inches higher.

At a pre-Olympic meet last month, Duplantis attempted to break his record by jumping 6.25 meters and just barely missed. It cost him $50,000.

He’ll likely try again on Monday night. But even if he manages to clear the bar at 6.25, it would make no sense for him to shoot for 6.26. In fact, it would be a terrible financial decision. The more often he breaks his own record, the more he gets paid.

Duplantis doesn’t rewrite history for free. He thinks about that bonus every time he challenges the boundaries of human flight.

“I’d be lying if I said it didn’t,” he said.

He’s able to improve by precisely one-centimeter increments because unlike the long jump, which measures the exact length of each jump, the pole vault’s world record is simply a matter of how high Duplantis sets the bar. If he boosts it to 6.25 meters and clears it by a few centimeters, the world record is still 6.25 meters.

In training, he jumps about 20 centimeters lower, which means not even he knows what to expect at meets, much less the Olympics. Sometimes, he soars over the bar with daylight to spare. “And sometimes,” he says, “I couldn’t go a quarter of a centimeter higher.”

The son of an American pole-vaulter and Swedish heptathlete, Duplantis is a dual citizen who grew up in Lafayette, La. For most of his life, the world record in the pole vault belonged to Olympic legend Sergey Bubka, who pushed it from 5.85 meters to a previously unthinkable 6.14 meters between 1984 and 1994.

That’s where it would remain for the next 20 years.

French pole vaulter Renaud Lavillenie hit 6.15 meters in 2014, and it took until 2020 for Duplantis to pass him by one centimeter. But it didn’t take long for Duplantis to beat himself. One week later, he broke the world record again.

Since then, he’s done it so many times that even Lavillenie doesn’t compare himself to Duplantis these days.

“He’s clearly on another planet,” he said.

Perhaps more than anyone on this planet, Lavillenie understands exactly what it takes every time Duplantis signals he’s ready to fly higher. And he knows that the real action in the Stade de France might just start when the competition is over.

“That opportunity to go for a record,” he says, “it’s such an exquisite moment.”

Storm expected to bring heavy rain and catastrophic flooding to southeast

Hurricane Debby made landfall in Florida as a Category 1 storm, where it is expected to bring dangerous flooding to the southeast Atlantic coast.

The storm arrived early Monday in the Big Bend region of Florida, near Steinhatchee with maximum winds estimated at around 80 miles an hour, according to the National Hurricane Center.

Heavy rain and powerful winds could create storm surges topping 6 to 10 feet in areas north of Tampa Bay and into the Panhandle region, the National Hurricane Center in Miami said Sunday.

Coastal Georgia and South Carolina could see as much as 30 inches of rain beginning Tuesday, as the storm slows and moves eastward over Florida. It is expected to hover over the southeast Atlantic coast and may produce record-setting rainfall, Michael Brennan, director of the National Hurricane Center in Miami, said at a briefing Sunday.

“We are very confident we are going to have a slow-moving system that’s going to result in multiple days of very, very heavy rainfall,” Brennan said. Tropical storm conditions are possible along the Georgia and South Carolina coasts through Thursday, according to the forecast.

Catastrophic flooding may occur midweek, said the center, which issued its highest level alert for flash flooding along the low-lying coastal areas between Myrtle Beach, S.C., and Savannah, Ga. Flooding impacts could last through Friday.

Florida Gov. Ron DeSantis urged residents on the state’s west coast to prepare for hurricane-like conditions as the storm moved over the Gulf of Mexico on Sunday.

“It’s going to drop a lot of rain across the northern part of the state. You are going to be at risk of flooding,” the governor said. “There will be power outages.”

About 205,000 customers in Florida were without power as of Monday morning, according to data from PowerOutage.us.

Mandatory evacuation orders were issued in some Gulf Coast counties while others called for voluntary evacuations ahead of what meteorologists said could be “life threatening storm-surge inundation” in places.

There is also potential for isolated tornadoes across the western and northern parts of Florida through Monday, forecasters said.

Debby is the fourth named storm this hurricane season and the second hurricane following Beryl, which reached Category 5 status early last month.

Company raises $640mn from investors including BlackRock and brings in Meta AI scientist Yann LeCun as adviser

Semiconductor start-up Groq has raised $640mn from investors including BlackRock as it aims to challenge Nvidia’s dominance of the booming market for artificial intelligence chips. 

The funding round, led by BlackRock Private Equity Partners alongside strategic investors including Cisco and Samsung Catalyst Fund, values Groq at $2.8bn, more than double its last valuation of $1.1bn in 2021. 

Yann LeCun, chief AI scientist at Meta, the social media giant that owns Facebook and Instagram, will also become a technical adviser to the company. 

Silicon Valley-based Groq is one of a number of chipmakers that have benefited from a surge in usage of artificial intelligence models. High-powered chips are the essential hardware used to train and run chatbots such as OpenAI’s ChatGPT or Google’s Gemini. 

By far the largest player in the sector is Nvidia, whose flagship graphics processing units, or GPUs, are used to train cutting-edge AI models. Last month SoftBank acquired Graphcore, another UK-based AI chipmaker, in a $600mn deal. Several big tech companies, including Microsoft, Google, Amazon and Meta, are also developing their own AI accelerator chips.

While Nvidia’s chips, such as its latest H100 processor, can be used to both build and run large AI models, Groq’s technology focuses on deployment, by accelerating the speed with which chatbots can respond.

Groq’s language processing unit, or LPU, is designed only for AI “inference” — the process in which a model uses the data on which it was trained, to provide answers to queries.

The start-up, founded in 2016, claims its LPUs are faster and more power efficient than chips from rivals, including Nvidia.

The new funding will go towards boosting the company’s capacity for computational resources required to run AI systems, said Groq chief executive Jonathan Ross, a former Google engineer who was a founding member of the team behind its own in-house AI chips. 

Groq will roll out more than 108,000 LPUs by the end of March 2025, Ross said, adding that his aspiration was to handle half the world’s inference by the end of next year.

“We aim for a full dollar returned for every dollar we spend on hardware. We don’t intend to lose money,” said Ross. 

BlackRock will play a key role, he said: “We were looking for [an investor] we could partner with for a long time. BlackRock can do public and private . . . There are things we want to do beyond a pure equity raise.”

Groq had been seeking to raise new funding and held discussions with investors over several months, according to people familiar with the matter. The company has yet to generate significant revenue, making the investment decision effectively a bet on the company’s technology, they added.

During the fundraise, Groq board member Jay Zaveri was abruptly sacked from Chamath Palihapitiya’s venture capital firm Social Capital. The situation at Social Capital — an early investor in the company — “didn’t really factor in” to the fundraising, said Ross. Zaveri has been replaced on Groq’s board by Social Capital partner Steve Trieu.

Groq has partnered with a number of companies, including Meta and Samsung, and sovereign nations including Saudi Arabia to manufacture and roll out its chips. Earlier this year Groq struck deals with Aramco Digital, a subsidiary of state-owned oil company Saudi Aramco, and Norwegian sustainable energy company Earth Wind & Power, to build out compute capacity and provide access to its chips. 

Deals between US AI companies and Middle Eastern partners have come under scrutiny from the US government, but Ross said Groq “hasn’t found any issues with Aramco. We’ve worked very closely with the Commerce Department and others.”