FT : The threats to ‘Swiss Made’ For decades the country’s exporters focused on

The threats to ‘Swiss Made’
For decades the country’s exporters focused on adding value, but US tariffs and the strong franc are now hitting them harder

When US President Donald Trump hit Switzerland with punitive tariffs last year, Nabil Francis’s first reaction was shock.

“It was a wake-up call,” says Francis, the chief executive of Felco, a company known for its high-quality garden tools. “You understood that the world was changing when Switzerland was treated differently to the EU.”

For generations, Felco had been making its signature red-handled secateurs at its base among the green hills of the French-speaking canton of Neuchâtel. Around 95 per cent of production is exported to more than 120 countries, with the family-owned group counting King Charles of the UK and US former first lady Michelle Obama among its customers.

Suddenly, it faced a tariff of 39 per cent on shipments to its single biggest market, compared with a 15 per cent levy applied to EU-based rivals. But Francis’s response was not to start moving manufacturing to cheaper countries, nor to make Felco’s shears cheaper.

Instead, it was to make them more expensive and more desirable, adding options such as leather-wrapped handles, gold-coated blades and laser-engraved personalisation that pushed the price above SFr100 ($125).

Felco’s strategy of doubling down on quality and reputation is typical of Switzerland, where manufacturing still accounts for almost 19 per cent of GDP, twice the contribution from its celebrated financial services industry. The white cross on a red background, emblazoned on products from Heule precision tools to Caran D’Ache pencils, is both a guarantee of quality that is understood worldwide, and a valuable marketing device for Swiss manufacturers.

But it is becoming more difficult to execute as the franc appreciates, hurting the exports that generate half of Switzerland’s economic output, and major trading partners turn to protectionism and tariffs. Moves to increase flexibility by introducing additional definitions of Swissness besides “Swiss Made” have provoked a backlash from some lawmakers and manufacturers.


Switzerland this year slipped from first to third in a ranking of global competitiveness by IMD, the business school, while its economic performance ranking plunged from 13th to 37th, largely because of a deterioration in investment flows and weaker employment.

“The Swiss model is hardly sustainable in a world that is more fragmented and more protectionist,” says Arturo Bris, professor of finance at IMD.

Swissmem, the country’s largest industrial association, described 2025 as a “lost year” in which sales stagnated and 6,600 tech-industry jobs disappeared. A tentative but uneven recovery is now under way, with SME sales falling 3.8 per cent in the first half of 2026 even as high-tech manufacturing overall grew 2.5 per cent.

Back in Neuchâtel, Francis acknowledges there is “a limit to everything” in terms of premiumisation. But Felco has not yet reached it; a new range, set for launch in September, swaps the famous red for anodised aluminium in bold colours such as Electric Blue, Power Green, Pink Passion and Tangerine Blaze.

He wants to turn the humble pruning shear into a “lifestyle object” similar to Le Creuset, whose brightly coloured cookware has become a kitchen style statement.

The focus will remain resolutely upmarket. “If you are an industrial company producing in Switzerland and exporting, you’re not going to shoot at the mass market,” says Francis.

“At that game, you will always lose.”

The industrial outlier
A landlocked country of 9mn people, with few natural resources and some of the world’s highest wages, is not an obvious starting point for a manufacturing success story.

But the Swiss made it work. Companies responded to high wages and an appreciating currency by becoming more productive, more specialised, more sophisticated and more expensive, while focusing on global markets rather than their small pool of domestic consumers.

“Swiss Made” became shorthand for the result: watches, machinery and precision tools good enough that customers around the world would pay extra for them. One of the results is an economy unusually rich in relatively small companies that dominate particular niches.

A study published this summer identified 100 such Swiss businesses, together generating more than SFr40bn in annual revenues. They range from VAT, a maker of vacuum valves used in semiconductor production, to Burckhardt Compression and specialist manufacturers such as Rondo, whose machines shape dough into pastries in bakeries around the world. 

The resilience of such hidden champions has helped the Alpine country to resist much of the deindustrialisation that has swept through the rest of western Europe. Switzerland has the highest proportion of high-tech manufacturing of any of the OECD’s 38 member countries.


That strength is underpinned by an unusually deep apprenticeship system. About two-thirds of young Swiss pursue vocational education and training, most learning partly inside companies — supplying manufacturers with generations of machinists, technicians and other skilled workers.

Bern pushed its commitment to open markets still further in January 2024 when it unilaterally abolished all tariffs on imports of industrial goods. The government argued that such protection had become counter-productive: cheaper imported components would reduce costs for Swiss factories embedded in global supply chains. 

But its vision of a liberal, export-driven success story is increasingly at odds with a more protectionist world. US tariffs are encouraging companies to manufacture closer to American customers, while China has long supported industries deemed strategic. Europe has responded with subsidies and industrial policies that favour production inside the EU.

The franc remains a persistent handicap for Switzerland’s exporters. Its status as a haven currency means it tends to strengthen in periods of uncertainty — with the result that the financial crisis, the Covid-19 pandemic and the conflicts in Ukraine and the Middle East have all served to make Swiss products more expensive abroad.


“If you look back a couple of years at where the franc exchange rate was and where it is now, it is a wonder Swiss companies still exist,” says Urs Furrer, director of the Swiss SME Association, which represents some 230 trade and cantonal associations.

Former Swiss National Bank chair Thomas Jordan argues that the franc’s real exchange rate has been “remarkably stable” in recent years. But he acknowledges adjustment after sharp appreciation is never automatic and requires significant effort from companies — particularly in a difficult global economic environment.

Swiss manufacturers responded through productivity, automation and by moving further into niches where customers were less sensitive to price.

But like Francis, the Felco boss, Furrer does not believe Switzerland can preserve every kind of manufacturing. “Mass production of cheap, low-quality goods is not the future,” he says.

How much Swiss?
Inside Felco’s factory, housed in an old watch-dial works, automated precision machines now hum and whirr where horologists once worked.

Francis says it has made no redundancies directly because of automation, which has instead allowed it to raise productivity and keep production in Switzerland while workers move into new roles.

Every pruning shear is still assembled by hand, meaning Felco complies with strengthened “Swissness” legislation that came into force in 2017 following years of political debate. This sets out that for most industrial products, at least 60 per cent of manufacturing costs must generally be incurred in Switzerland and an essential manufacturing step must take place there for the product to qualify as “Swiss Made”. 

But at Bernina, a 133-year-old maker of sewing machines, serial production has this year moved from Steckborn in eastern Switzerland to its existing factory in Thailand. The company blamed the strong franc and difficult conditions in the US, which accounts for almost three-quarters of its sales.

Bernina will retain more than 300 employees in Steckborn, along with development, prototype construction, testing and quality management. “The DNA of Bernina is and remains Swiss,” says chief executive Kai Hillebrandt, even if Swiss production could “no longer be economically justified” and its sewing machines can no longer be described as “Swiss Made”.

Companies can now use alternative descriptions involving the famous white-on-red cross, such as “Swiss Engineering” or “Swiss Research”, subject to certain conditions, after the Swiss Federal Institute of Intellectual Property (IPI) loosened its interpretation of the closely guarded Swissness rules in March, citing the strong franc and US tariffs.

The change to the rules followed a long-running dispute involving On, the Zurich-based maker of sports shoes backed by former tennis star Roger Federer, which had been putting a Swiss cross on shoes made in Asia.

On said it manufactures abroad because the supply chain for large-scale production does not exist in Europe. But it argues that much of the value in its products — design, engineering, technology and intellectual property — is created in Switzerland, and that it should be able to highlight this.

But Swissness Enforcement, a public-private entity created to combat misuse of Swiss indications, argued that doing so breached the rules, because the shoes themselves were not Swiss-made.

“Why do you want to use the Swiss trademark?” says David Stärkle, the organisation’s managing director. “You want to profit from the value of the reputation.”

Swiss business newspaper NZZ am Sonntag has reported that On put pressure on the IPI, including threatening a state-liability lawsuit if the authority’s actions caused it losses in China. On has “strongly rejected” the suggestion and said its correspondence was part of a normal process of seeking legal clarity.

Since the IPI’s change, politicians have filed motions seeking to tighten the rules again. “The Swiss cross must not be put on products manufactured abroad — full stop,” centre-right lawmaker Daniela Schneeberger has said.

Industrial organisations representing Swiss companies have also expressed dismay. Nicola Tettamanti, president of Swissmechanic, which represents more than 1,000 SMEs, says his members remain strongly attached to “Swiss Made”.

He expects production that survives in Switzerland to become increasingly specialised and technologically demanding as robotics and AI compensate for high costs. “We have a chance in Switzerland,” he said, if companies remain above average in technology, quality and speed.

Other Swiss companies have taken different approaches. Victorinox still makes its famous Swiss Army knives in Switzerland but its luggage is designed in Switzerland and manufactured in Asia, bearing a white cross on a black, coat-of-arms-style emblem instead of the traditional white-on-red logo that adorns the knives. 

When Toblerone’s US owner Mondelez shifted some production of the chocolate from Bern to Slovakia, Swissness rules meant it could no longer use the image of the Matterhorn and other indications of Swiss provenance on its packaging. But replacing the famous mountain with a more generic peak and changing the wording has not obviously dented sales.

La Prairie, the luxury skincare brand owned by Germany’s Beiersdorf, has deepened its Swiss roots, moving its global marketing team back from New York and in 2022 taking full control of the St Gallen company that manufactures most of its skincare collections.

“Swissness is more than our country of origin, it is part of who we are,” says Estelle Létang, La Prairie’s chief executive. “Our Swiss heritage continues to shape how we innovate.”

Even after last year’s US tariff shock, Beiersdorf said La Prairie would remain “Made in Switzerland” — although the economics are helped by extraordinary price tags: 50ml of its Skin Caviar Luxe Cream sells for about SFr650.

‘The business of surviving’
Switzerland is far from alone in confronting these pressures, though governments across Europe and the US are increasingly resorting to tariffs, subsidies and procurement rules to secure domestic manufacturing.

But there are reasons for Swiss industry to be confident. It retains one of the most sophisticated, diverse industrial bases in the world, while automation is reducing the importance of labour costs in some sectors.

The manufacturing that remains may simply become still more specialised, automated and concentrated in areas where Swiss precision and knowhow still justify the cost.

Stefan Brupbacher, director of Swissmem, argues that there is little alternative to this approach. “Swiss industry is too diverse to choose a handful of sectors or companies to subsidise,” he says.

The longstanding bargain is that companies accept international competition while the government provides the framework in which they can compete: access to markets and skilled workers, strong education and research, sound public finances and limited regulation.

Swiss Enforcement’s Stärkle is adamant Swiss manufacturing will weather the latest upheaval as it has previous currency shocks and changes in global trade. “There is something in the pride of Swiss industry to do it here, no matter what,” he says.

Even as global trade fragments, Bern recently concluded negotiations to upgrade its free trade agreement with China. The revised deal would allow 99.8 per cent of current Swiss exports to enter China duty free, up from about half today.

Brupbacher questions how sustainable the subsidy race elsewhere will prove. “Let’s see down the road in 10 years who is succeeding,” he says. “Who has the money to continue to subsidise?”

For Swiss manufacturers, his answer is to remain indispensable: make products and components that customers cannot easily source elsewhere. The pandemic underscored his point. Early on in the crisis, Germany and France held up shipments of protective masks destined for Switzerland, sparking domestic outrage.

But Europe was dependent in the other direction too. Switzerland was a crucial supplier of specialised respiratory equipment and for Brupbacher, the episode illustrated the protection available to a small country that remains difficult to replace.

“For now, we are still indispensable,” he says. “And we are in the business of surviving.”

Reuters : Iran vows to retaliate after US widens sanctions

Iran vows to retaliate after US widens sanctions

  • Enemies should wait for attack,' economy minister says
  • US threatens Iran's trading partners, gives them time to cut ties
  • Bessent says no nation is above reach of US sanctions
  • China says sanctions do not help, vows to protect its interests

CAIRO/WASHINGTON, Aug 25 (Reuters) - Iran promised to retaliate against expanded U.S. economic sanctions that the Americans said would cut off Iran's economic ​lifeline, with Tehran expressing confidence that major trading partners would resist Washington's pressure campaign.

U.S. Treasury Secretary Scott Bessent unveiled the measures on Monday but stopped short of the ‌most punishing sanctions, saying countries that continued trading with Iran risked being forced out of the dollar-based financial system.

Bessent declined to identify the countries that would be targeted or reveal when those penalties would take effect, saying he would instead provide them time to comply with the new directive. The Treasury Department did announce new sanctions on 60 individuals, entities and vessels, but the list did not include any of the Chinese financial institutions ​suspected of facilitating Iran's oil trade.

Before the announcement, Iran threatened both a possible military response and further reduction in oil exports from the Gulf in response to any U.S. ​economic measures. Afterward, Iranian Economy Minister Ali Madanizadeh said, "We are fully prepared for the U.S. sanctions."

"Naturally, the enemies intend to launch an economic terrorist ⁠attack on us, but we also have our own tools and know how to play the game. Our defense is no longer so defensive; the enemies should wait for an attack," ​Madanizadeh told state television.

He also said neither China nor Russia had "accepted" the U.S. measures, and predicted other countries would resist them.

Brigadier General Hossein Mohebbi, a spokesperson for Iran's Islamic Revolutionary Guard Corps, vowed ​heavy blows to U.S. vital interests and energy chokepoints if Iran's infrastructure is threatened, Press TV reported.

Struggling to resolve an unpopular war that has pushed energy prices higher, the administration of President Donald Trump appears to be counting on further economic pressure even though Iran has spent decades under layers of U.S. and international sanctions that have battered its economy but have not deterred its leadership.

Though neither side has launched major strikes in ​weeks, the war shows little sign of reaching a diplomatic solution. In the meantime the U.S. is seeking new ways to end Iranian attacks on ships in the Gulf and, more recently via ​its allies, in the Red Sea.

Almost six months have passed since the U.S. and Israel launched strikes on Iran.

While the war has degraded much of Iran's conventional military capacity, inflicted economic pain and killed then-Supreme Leader ‌Ayatollah Ali ⁠Khamenei, Iran has preserved enough missile and drone capability to attack its Gulf neighbors and threaten oil tankers in the Strait of Hormuz. The exact state of Iran's nuclear program, which the Americans and Israelis aim to wipe out, remains unknown.

Thousands of people have died, most of them in Iran and Lebanon.

Despite Monday's announcement, oil prices fell more than $2 a barrel on Monday, though investors braced for the prospect of further supply disruptions from the Middle East.

CHINESE OIL TRADE
Asked why he stopped short of actually imposing penalties on Iran and declined to identify the countries that would be targeted, ​Bessent responded, "Why would I want to blow up ​the global financial system?"

He said he wanted ⁠to give countries and companies time to sever ties.

Bessent previously urged cooperation from China, the biggest buyer of Iranian oil for several years, although the U.S. blockade of Iran's ports, renewed in mid-July, has already cut Iranian oil flows to China.

Experts say Washington is wary of Chinese retaliation for ​any sanctions on its banks ahead of expected talks next month between U.S. President Donald Trump and Chinese President Xi Jinping, with ​any curbs on China's exports ⁠of critical minerals especially sensitive.

Asked about Chinese banks on Monday, Bessent said, "We want to make clear here today that no one is above the reach of U.S. sanctions."

The Chinese Foreign Ministry said sanctions and pressure tactics do not help and Beijing would do what was necessary to protect China's interests.

Amid the saber-rattling, Pakistani army chief Asim Munir visited Iranian President Masoud Pezeshkian in Tehran on Monday in a ⁠peace mission that ​came after Munir spoke with Trump last week, according to three Pakistani sources. Trump initiated the conversation, two sources said.

"The ​United States must correct its tone and approach in interacting with Iran, because relying on coercion and bullying will only complicate the processes," Iranian state media quoted Pezshkian as telling Munir.

Pakistan's earlier mediation efforts between the U.S. and Iran ​resulted in an interim peace agreement signed in June, but the Islamabad Memorandum quickly faltered.

Reuters : Trump administration moves to impose more than $100,000 fee for H-1B w

Trump administration moves to impose more than $100,000 fee for H-1B worker visas

  • Proposed rule would extend fee imposed by Trump last year
  • Fee to be set at $103,265, Federal Register notice says
  • Administration appealing judge's ruling that fee is unlawful
  • Part of broader crackdown on immigration, work visas

Aug 24 (Reuters) - President Donald Trump's administration on Monday released a proposed regulation ​to codify an unprecedented fee of more than $100,000 on new H-1B visas for highly skilled foreign workers that has been blocked ‌by the courts.

The fee, first temporarily imposed by Trump last year,, opens new tabdramatically raises the cost of visas that are heavily relied on in the tech, education and research sectors.

A federal judge in June ruled that the fee was illegal and blocked the Trump administration from collecting it. A Boston-based appeals court is reviewing that decision while a different court considers whether a judge properly ​rejected a challenge to the fee by a major business group.

Trump's temporary fee increase expires in September, one year after it was issued. ​The proposed rule by the U.S. Department of Homeland Security, posted in the Federal Register on Monday, would make a ⁠fee of $103,265 permanent. It could be finalized by the end of the year.

The H-1B program allows U.S. employers to hire foreign workers with training in specialty ​fields and offers 65,000 visas annually, with another 20,000 for workers with advanced degrees, approved for three to six years. Those visas typically came with fees between $2,000 ​and $5,000 before Trump's order.

The fee would not apply to visas granted to foreign citizens already in the United States on student visas, who make up a large share of new H-1B recipients, or to renewals of current visas.

DEBATE OVER VISA PROGRAM
Trump, a Republican, and other critics of the H-1B program say it is abused by many companies who replace ​American workers with cheaper foreign labor. But business groups and many individual companies have said the visa program is needed to address a lack of ​qualified American workers for some jobs and to allow U.S. businesses to recruit top talent.

About 70 employers had paid the $100,000 fee on a total of 85 visa applications as ‌of late ⁠February, according to court filings.

In imposing the fee, Trump invoked the president's power under immigration law to restrict the entry of certain foreign nationals who would be detrimental to U.S. interests.

The fee is being challenged by the U.S. Chamber of Commerce, the largest U.S. business lobbying group, Democratic-led states and a coalition of unions and employers. Those lawsuits could be amended to challenge the rule proposed this week once it is finalized.

LEGAL CHALLENGES MOUNT
The lawsuits claim that Trump's power to ​restrict entry does not allow him ​to override the law that created ⁠the H-1B visa program. The states and groups that sued also say that the Homeland Security Department cannot impose fees, taxes or other means to generate revenue for the United States without permission from Congress.

The Trump administration has ​maintained that the fee is not a traditional tax and that courts have little power to question the president's ​authority to restrict ⁠entry into the country.

Amid Trump's broader immigration crackdown, employers last year registered for about 344,000 H-1B visas, down more than 25% from 2024 and fewer than half of the 794,000 visas sought in 2023, according to data, opens new tab from U.S. Citizenship and Immigration Services.

The Trump administration has also ordered enhanced vetting of H-1B applicants and proposed a new ⁠visa selection ​process that would favor higher-skilled and better-paid workers. Earlier in August, the Department of Homeland ​Security in a separate rule added fees of up to $4,500, opens new tab to applications to extend the stay of H-1B workers or to transfer employees based in other countries to the United States.

Reporting by Daniel ​Wiessner in Albany, New York; Additional reporting by Daphne Psaledakis and Susan Heavey in Washington; Editing by Andy Sullivan, Alexia Garamfalvi, Matthew Lewis and Chizu Nomiyama

Reuters : Iran vows to retaliate after US widens sanctions

Iran vows to retaliate after US widens sanctions

Enemies should wait for attack,' economy minister says
US threatens Iran's trading partners, gives them time to cut ties
Bessent says no nation is above reach of US sanctions
China says sanctions do not help, vows to protect its interests

CAIRO/WASHINGTON, Aug 25 (Reuters) - Iran promised to retaliate against expanded U.S. economic sanctions that the Americans said would cut off Iran's economic ​lifeline, with Tehran expressing confidence that major trading partners would resist Washington's pressure campaign.

U.S. Treasury Secretary Scott Bessent unveiled the measures on Monday but stopped short of the ‌most punishing sanctions, saying countries that continued trading with Iran risked being forced out of the dollar-based financial system.

Bessent declined to identify the countries that would be targeted or reveal when those penalties would take effect, saying he would instead provide them time to comply with the new directive. The Treasury Department did announce new sanctions on 60 individuals, entities and vessels, but the list did not include any of the Chinese financial institutions ​suspected of facilitating Iran's oil trade.

Before the announcement, Iran threatened both a possible military response and further reduction in oil exports from the Gulf in response to any U.S. ​economic measures. Afterward, Iranian Economy Minister Ali Madanizadeh said, "We are fully prepared for the U.S. sanctions."

"Naturally, the enemies intend to launch an economic terrorist ⁠attack on us, but we also have our own tools and know how to play the game. Our defense is no longer so defensive; the enemies should wait for an attack," ​Madanizadeh told state television.

He also said neither China nor Russia had "accepted" the U.S. measures, and predicted other countries would resist them.

Brigadier General Hossein Mohebbi, a spokesperson for Iran's Islamic Revolutionary Guard Corps, vowed ​heavy blows to U.S. vital interests and energy chokepoints if Iran's infrastructure is threatened, Press TV reported.

Struggling to resolve an unpopular war that has pushed energy prices higher, the administration of President Donald Trump appears to be counting on further economic pressure even though Iran has spent decades under layers of U.S. and international sanctions that have battered its economy but have not deterred its leadership.

Though neither side has launched major strikes in ​weeks, the war shows little sign of reaching a diplomatic solution. In the meantime the U.S. is seeking new ways to end Iranian attacks on ships in the Gulf and, more recently via ​its allies, in the Red Sea.

Almost six months have passed since the U.S. and Israel launched strikes on Iran.

While the war has degraded much of Iran's conventional military capacity, inflicted economic pain and killed then-Supreme Leader ‌Ayatollah Ali ⁠Khamenei, Iran has preserved enough missile and drone capability to attack its Gulf neighbors and threaten oil tankers in the Strait of Hormuz. The exact state of Iran's nuclear program, which the Americans and Israelis aim to wipe out, remains unknown.

Thousands of people have died, most of them in Iran and Lebanon.

Despite Monday's announcement, oil prices fell more than $2 a barrel on Monday, though investors braced for the prospect of further supply disruptions from the Middle East.

CHINESE OIL TRADE
Asked why he stopped short of actually imposing penalties on Iran and declined to identify the countries that would be targeted, ​Bessent responded, "Why would I want to blow up ​the global financial system?"

He said he wanted ⁠to give countries and companies time to sever ties.

Bessent previously urged cooperation from China, the biggest buyer of Iranian oil for several years, although the U.S. blockade of Iran's ports, renewed in mid-July, has already cut Iranian oil flows to China.

Experts say Washington is wary of Chinese retaliation for ​any sanctions on its banks ahead of expected talks next month between U.S. President Donald Trump and Chinese President Xi Jinping, with ​any curbs on China's exports ⁠of critical minerals especially sensitive.

Asked about Chinese banks on Monday, Bessent said, "We want to make clear here today that no one is above the reach of U.S. sanctions."

The Chinese Foreign Ministry said sanctions and pressure tactics do not help and Beijing would do what was necessary to protect China's interests.

Amid the saber-rattling, Pakistani army chief Asim Munir visited Iranian President Masoud Pezeshkian in Tehran on Monday in a ⁠peace mission that ​came after Munir spoke with Trump last week, according to three Pakistani sources. Trump initiated the conversation, two sources said.

"The ​United States must correct its tone and approach in interacting with Iran, because relying on coercion and bullying will only complicate the processes," Iranian state media quoted Pezshkian as telling Munir.

Pakistan's earlier mediation efforts between the U.S. and Iran ​resulted in an interim peace agreement signed in June, but the Islamabad Memorandum quickly faltered.

NYT : S.E.C. Investigating Near-Implosion of A.I. Hedge Fund Regulators sent sub

S.E.C. Investigating Near-Implosion of A.I. Hedge Fund
Regulators sent subpoenas to major Wall Street banks seeking information about the trading of Situational Awareness, three people briefed on the outreach said.

Situational Awareness, a once hot A.I.-focused hedge fund led by a 24-year-old, became the talk of Wall Street when it nearly imploded late last month.

Now it is attracting attention from securities regulators, too.

The Securities and Exchange Commission recently sent subpoenas to banks that handled the hedge fund’s calamitous trading and that fed it borrowed money to supersize its bets, according to three people briefed on the outreach who were not permitted to discuss it publicly.

The subpoenas asked for details on the timing of Situational Awareness’s trades and for its communications with lenders about the money it was borrowing, also known as “leverage,” two of those people said. The subpoenas additionally warned the banks to preserve any information regarding the San Francisco hedge fund.

The S.E.C. oversees financial markets with an eye toward protecting small investors, and has brought civil cases regularly against investment firms that produced large losses. Any investigation into Situational Awareness would be at its earliest stages, and it’s no guarantee that it would lead to fines or other punishment. The hedge fund has not been accused of wrongdoing.

“It is to be expected that regulators would closely examine any funds that are high profile, produce significant returns or have particularly dramatic drawdowns,” a Situational Awareness spokesman said in a statement. “We are a highly regulated business and will cooperate to the fullest extent with any regulatory request.”

The S.E.C. declined to comment.

At its peak, Situational Awareness managed more than $30 billion, and borrowed tens of billions more. It was a major client of firms including Bank of America, Citi, Goldman Sachs and JPMorgan Chase, according to a regulatory filing.

Spokespeople for Bank of America, Citi, Goldman Sachs and JPMorgan declined to comment.

Situational Awareness had a fast rise and an even quicker retreat. Founded just two years ago by Leopold Aschenbrenner, a former researcher at OpenAI, it rode the A.I. boom to soaring investment returns.

To achieve those results, however, the fund relied on heavy borrowing, as well as complicated and expensive financial instruments that magnify gains — and losses. The latter piled up quickly last month when the stock prices of publicly traded, high-flying A.I. companies dipped. At the same time, shares in more traditional technology companies — which the hedge fund had been betting against — rose, compounding the problem.

Situational Awareness was forced into a fire sale. It wound up selling most of its stock portfolio to a rival, Citadel, at a discount.

(A Citadel spokesman declined to comment when asked whether the firm had received a subpoena.)

Situational Awareness still has some hope. The fund held on to a stake in the A.I. company Anthropic, which has plans to go public at a valuation that could be as high as $2 trillion. Mr. Aschenbrenner’s wife is the chief of staff to Anthropic’s chief executive, Dario Amodei.

>>> US After Hours Summary: GRRR -9.2% lower on earnings/guidance; REAX +10% aft

After Hours Summary: GRRR -9.2% lower on earnings/guidance; REAX +10% after closing merger and authorizing repurchase program; KURA +4.6% and HRI +1.8% higher on insider purchases

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: None

Companies trading higher in after hours in reaction to news: REAX +10% (completes RE/MAX Holdings merger; also authorizes up to $450 mln share repurchase), KURA +4.6% (President and CEO bought 100,000 shares at $12.39 worth ~$1.2 mln), SVRA +3.4% (to present Phase 3 IMPALA-2 molgramostim data at ERS Congress), PH +2.9% (files mixed securities shelf offering), HRI +1.8% (Director bought 3,085 shares at $163 worth ~$503K), VST +0.9% (CEO bought 2000 shares), RSG +0.6% (10% Owner Cascade Investment bought 400,286 shares at $219.5873-221.775 worth ~$88.18 mln), AMR +0.5% (Director bought 15,000 shares at $209.03-211.09 worth ~$3.15 mln), NBIS +0.4% (closes $5.75 bln private convertible notes offering), BA +0.3% (awarded a $131.2 bln ceiling IDIQ Air Force contract), RBA +0.2% (launches redesigned mobile app with native bidding), ORKA +0.1% (names new CCO), EFC +0.1% (reports estimated July 31 book value at $13.63/share)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: GRRR -9.2%

Companies trading lower in after hours in reaction to news: LOPE -4.1% (places CFO Daniel Bachus on administrative leave), AMRZ -2.1% (names new CFO), NUTX -1.4% (discloses unauthorized network access with suspected data exfiltration), TTD -1.2% (files mixed securities shelf offering), TMCR -0.2% (closes additional 1% Mesabi Royalty and $165 mln financing), WSFS -0.2% (files mixed securities shelf offering)

WSJ : FDA Approves Alzheimer’s Blood Test Developed by Roche and Eli Lilly The E

FDA Approves Alzheimer’s Blood Test Developed by Roche and Eli Lilly
The Elecsys Phospho-Tau Plasma test identifies amyloid pathology associated with Alzheimer’s

  • The FDA cleared a blood test developed by Roche and Eli Lilly to identify Alzheimer’s disease symptoms.
  • The Elecsys Phospho-Tau Plasma test identifies amyloid pathology associated with Alzheimer’s in people 55 years or older.
  • Quest Diagnostics and Labcorp both announced plans to start offering the new blood test.

The Food and Drug Administration cleared a blood test for identifying Alzheimer’s disease symptoms, which was developed by Roche and Eli Lilly.

The Elecsys Phospho-Tau Plasma test identifies amyloid pathology associated with Alzheimer’s in people 55 years or older.

It provides positive, intermediate and negative result categories to support doctors assessing the likelihood of amyloid pathology. Results are interpreted in conjunction with clinical information and other relevant findings as part of an Alzheimer’s diagnosis.

The blood test is meant to address the gap in diagnoses, as an estimated 75% of people living with dementia are undiagnosed, Roche said.

Quest Diagnostics and Labcorp both said they plan to start offering the blood test.

Labcorp, a lab services company, said the test is an important tool for clinicians to rule in or rule out amyloid pathology in people showing signs of cognitive decline. For Quest, the test will be part of its menu of blood-based Alzheimer’s biomarker tests under the AD-Detect brand name.

GroundBreaker : The Teaser Period: Why the AI Boom Is Built to Break Trillions i

The Teaser Period: Why the AI Boom Is Built to Break - https://www.groundbrkr.com/p/the-teaser-period-why-the-ai-boom
Trillions in compute commitments come due in 2027–2028. The hidden mechanics reveal how the AI boom breaks, and when.

Nothing looked wrong in the summer of 2006. Home prices had risen for the better part of a decade. Delinquencies were near historic lows. Credit spreads were tight, the ratings held, and the securitization machine hummed. If you had asked a hundred people on a trading desk whether the American mortgage market was months from seizing, most would have laughed.

Millions of subprime borrowers were, at that moment, paying the low introductory rate on a two-year adjustable rate mortgage - the 2/28 ARM. A low fixed-rate for two years, then the rate reset to a payment 30% to 50% higher. During those first two years the loan performed beautifully: the borrower paid, the servicer collected, and the bond paid its coupon. Nothing looked wrong because the whole complex - housing, mortgages, securitization - was sitting inside the teaser period.

Every ARM reset was known, dated, and contractually inevitable from the moment of origination. Aggregate those reset schedules and you get the most damning exhibit of the era: the reset wall. Roughly a trillion dollars of adjustable-rate mortgages were contractually set to reset across 2007 and 2008 - thirty to forty billion dollars a month at the peak. Credit Suisse published the chart in March 2007. The IMF reprinted it. It circulated on every trading floor in New York and London.


Few understood it. Paulson & Co. laid out the arithmetic that same month in a comment letter to the FDIC: Over 80% of recent subprime originations, it observed, were two- or three-year adjustable-rate products. The average subprime borrower’s mortgage payments already consumed roughly 40% of their gross income at the teaser rate. Almost none of them could service the reset rate out of income.

The crisis, in other words, was written in advance by the instruments themselves. The market looked at the reset wall and kept buying, because every participant believed the exit would arrive before the reset: home prices would keep appreciating and the borrower would refinance into a fresh teaser before the old one expired.

We have spent the last eighteen years describing the financial crisis as a shock - a black swan, a hundred-year flood, a tail event. It was none of those things. Every reset on that chart was contractually inevitable from the moment of origination. The defaults were not primarily caused by an exogenous macro shock, a spike in unemployment, or a recession that arrived first. They were the scheduled mathematical consequence of loans that assumed perpetual appreciation. The mortgages were built to break.

The AI boom has rebuilt this exact structure, and the market is once again underwriting the teaser.

It has a reset wall of its own - a schedule of dated, contractual, non-negotiable payment shocks - hiding inside the trillions of dollars of compute contracts signed by OpenAI and other frontier labs since 2024.

The take-or-pay compute contract - the instrument at the center of the AI build-out - has a structural feature that almost no one prices: its payments do not begin at signing. They begin at delivery. A lab signs a multi-year capacity commitment today, but the payments do not start until the data center is energized, the capacity is accepted, and the contractual ramp schedule commences - an interval set not by finance, but by construction: siting, powering, and filling a gigawatt-scale campus takes 24-to-36 months from signature - mirroring the two-to-three-year teaser of a subprime ARM.

More than $2.3 trillion of compute contracts now sit on the books of the four largest American cloud providers as remaining performance obligations and contracted backlog - signed, celebrated, capitalized into equity prices, and, critically, not yet billing.

During the teaser period, everyone wins. The seller reports backlog growth that compounds at rates no operating business has ever sustained - Oracle’s RPO grew 363% in a single fiscal year. The buyer - a frontier lab burning cash at historic rates - books no expense because the capacity does not yet exist. The market capitalizes the booked number as if it were revenue and ignores the billed number as if it were a technicality. And then, on a schedule fixed at signing, booked compute becomes billed compute. The take-or-pay clock starts. From that day forward, the frontier labs and the hyperscalers incur those costs regardless of utilization. The invoice is a function of the contract, not of demand. That is the reset.

The parallel to 2006 is exact and it explains the single most-cited absurdity of this cycle: How does OpenAI, a company with some $40 billion of run-rate revenue, sign $1.4 trillion of compute commitments? The same way a household with $60,000 of income signed a $600,000 mortgage: because the terms at signing do not require the payment yet, and because everyone at the table - borrower, lender, and the market - believes the growth will arrive before the payment does.

The 2/28 borrower’s defense was always the same: by the time the reset arrives, my house will be worth more and I will refinance. The frontier lab’s defense is structurally identical: by the time the capacity commences, my revenue will have grown into the obligation.

The compute commencement wall can be made visible in exactly the way the reset wall was visible in 2007 - from disclosed contracts and delivery schedules. The only question is whether the market listens this time


II. The Anatomy of a Teaser
To see why the structure behaves the way it does, I’ll break down a single contract and walk the lifecycle. The terms below are hypothetical; the architecture is the standard one visible across the disclosed OpenAI–Oracle, Anthropic–Google, Meta–CoreWeave, and OpenAI–CoreWeave arrangements.

A frontier lab signs a $12 billion, ten-year capacity commitment with a compute provider. The contract is take-or-pay, meaning the lab commits to payments once the capacity is delivered, and delivery requires a campus that does not yet exist: two years of construction, procurement, and power work stand between signature and completion.

Now look at what each party’s financial statements show during the two-year teaser.

The seller - a hyperscaler or neocloud - books the arrangement into RPO or contracted backlog on day one - the full $12 billion, disclosed, quoted, and celebrated. The market values it as contractual future revenue. Meanwhile the seller’s cash flow statement hemorrhages: the campus is being built, so capex runs far ahead of receipts. Booked backlog rises; reported earnings feel none of the buildout; financing frequently sits off-balance sheet.

The buyer - a frontier lab like OpenAI or Anthropic - announces access to the compute it needs to pursue its scaling roadmap, and its private valuation reprices on the announcement. The commitment is a future obligation, disclosed - if at all - deep in a contractual-obligations footnote or, for the private labs, nowhere public. No expense hits the P&L because no service is being received. A lab that has committed tens of billions across multiple providers carries a cost structure that reflects only its commenced capacity.

The market sees a seller with explosive backlog and a buyer with secured compute capacity, and prices both as growth stories. Nobody is lying. Every number is GAAP-clean. The structure simply guarantees that during the teaser period, the system’s reported economics and its committed economics diverge by the full value of everything signed and not yet commenced.

Every optical incentive points toward signing more.

Then comes commencement, and the two clocks converge violently. The buyer’s cash obligation steps from approximately zero to the full contractual rate, arriving not gradually but as a step function, tranche by tranche as capacity goes live. The seller begins recognizing revenue, which the market applauds, while backlog begins draining. And here is the asymmetry on which the entire thesis turns: the buyer’s obligation steps up on the construction schedule, regardless of the revenue or utilization that shows up.


The parallel is now clear: the 2/28’s teaser is the construction phase, its reset date is commencement, its fully-indexed payment is the full take-or-pay rate, and its refinance-or-sell assumption is the belief that model revenue will have grown into the obligation by the time it bills - or that another round of fundraising will cover it.


The take-or-pay compute contract is the financing innovation of this cycle the way the 2/28 was the financing innovation of the last one, and it emerged for the same reason: an asset too expensive for its natural buyer had to be made buyable. A frontier lab cannot fund a gigawatt campus out of revenue, just as a subprime borrower could not fund a house at the fully-indexed rate. In both cases the solution was an instrument that splits time in two - a cheap phase that gets the deal signed, and an expensive phase scheduled far enough out that the market ignores it.

In residential credit, the interval between origination boom and reset wall was twenty-four months, because that was the teaser’s term. In compute, the interval is the construction timeline - twenty-four to thirty-six months. The 2025–26 signing boom therefore mathematically guarantees a 2027–28 commencement boom, exactly as 2005–06 originations guaranteed 2007–08 resets.


This is what it means to say we are in the teaser period. The booked figure is enormous; the billed figure is a fraction of it and only beginning to turn up. Everything about the present looks like strength. The obligations that will govern 2027 and 2028 are already signed, already dated, and already sitting in RPO. What has not happened yet is the conversion - the moment booked becomes billed and the take-or-pay clock starts running regardless of the revenue and the counterparty’s ability to pay.

III. Take-or-Pay is Debt
The common objection to the 2008 comparison is simple: this is not 2008 because the leverage is not there.

The leverage is there. It’s simply not booked as leverage.

A take-or-pay contract is, in economic substance, a lease. And a lease is a financing. The defining feature of debt is a fixed payment on a schedule, owed regardless of the borrower’s circumstances. That is exactly what a take-or-pay commitment is. The payment does not flex with utilization. It does not wait for the customer’s revenue. It is owed on the commencement date and every period thereafter, for the term.

This is not a new concept. Rating agencies have treated take-or-pay obligations as imputed debt for more than thirty years - pipeline throughput agreements, ship-or-pay contracts in shipping and rail, long-term power purchase agreements, all routinely capitalized into leverage metrics by Moody’s and S&P. The convention simply has not been applied to compute.

Reported gross debt across the AI complex - the frontier labs, the hyperscalers, and the listed neoclouds - comes to roughly $470bn. The present value of disclosed non-cancellable compute and capacity commitments across the same set comes to roughly $1.66 trillion. The economic obligation is $2.1 trillion. For scale, subprime mortgages outstanding in March 2007 totaled roughly $1.3 trillion.

Three mechanisms keep these contracts off the reported balance sheet.

The first is disclosure asymmetry: remaining performance obligations are a seller-side disclosure under the revenue-recognition standard - the vendor tells you what it has been promised - and there is no symmetric requirement for the buyer to tell you what it has promised.

The second is that the largest buyers are private: OpenAI and Anthropic file no periodic reports, and their obligations enter the public record only when a counterparty announces a deal or books the corresponding receivable.

The third is that the contracts are generally structured as service agreements rather than leases - precisely the maneuver that kept operating leases off balance sheets before the standard changed.

The leverage objection, then, depends entirely on where you look. Look at the line marked debt, and there is relatively little of it. Look at the contractual claims on future cash, and there is more than the entire subprime mortgage market carried at its peak.

So the leverage exists. The question that follows is who owes it and whether they can pay it.

As of the second quarter of 2026, the four largest U.S. cloud providers carry roughly $2.3 trillion in contracted revenue backlog. Roughly $1.0 trillion of that total traces to two counterparties - OpenAI and Anthropic.

Both of those counterparties run deeply negative free cash flow and fund themselves through equity raises and vendor-adjacent financing from the same ecosystem whose capacity they are contracting. The single most important credit fact in the global economy right now fits in one sentence: the largest capital cycle in the history of technology is underwritten, to the tune of roughly one trillion dollars, by two private companies that do not make money.

Now contrast this with the cloud build-out of the previous decade. In the 2010s, bookings and billings tracked each other closely. Capacity was added a step ahead of demand that was already visible. Today backlog-to-revenue multiples across the complex now sit at five to six times the pre-AI software norm - with the vast majority of contracts being take-or-pay contracts signed in 2025-2026 and commencing in 2027-2028.

The multi-year commitments dominating these backlogs are underwritten not by observed demand but by a forecast of demand - a belief about how large and how soon the AI economy comes. RPO has quietly been recast from a risk disclosure into the bull case: “look at all that contracted revenue.” But a backlog is not revenue. It is a promise to pay, and it is worth exactly what the party on the other side can actually pay when the promise converts from booked to billed.

So, as the cloud era transitioned to the AI compute era:

1. Consumption on existing capacity became commitment on unbuilt capacity. The revenue-recognition lag went from one to two quarters to two to three years.

2. Variable service agreements became fixed and contractual. Pay-as-you-go, a flexible operating expense of the cloud era, became take-or-pay, a non-cancellable lease structure that the market has not fully priced as debt.

3. A diversified book became a concentrated one. The cloud-era backlog was tens of thousands of enterprise customers. Today more than half comes from two unprofitable companies.

And, 4. The collateral changed. This one will look obvious in hindsight. In the cloud era, backlog was underwritten to the customer’s operating business. A Fortune 500 firm signing a three-year cloud commitment was going to pay it out of an existing profit stream. In the compute era, backlog is underwritten to the customer’s future funding. It is not credit against cash flow. It is credit against the capital markets staying open - which is exactly the expectation of the 2/28.

“But the hyperscalers have 30%+ ROI!”

The ROI the market is capitalizing is not paid by the hyperscalers’ own operations in any self-sustaining sense. It is paid by the counterparties - by OpenAI and Anthropic and the other labs whose take-or-pay commitments are the revenue line under every one of these returns. The hyperscaler’s return on invested capital is only as real as the labs’ ability to make the payments that constitute it.

When commencement arrives, the payment that pays the ROI becomes a payment the counterparty owes regardless of its own demand. If that counterparty’s revenue has grown into the obligation, the return persists and the bulls were right. If it has not, the return does not gently compress - it inverts, because the same take-or-pay contract that was the hyperscaler’s asset is now a claim on a borrower who cannot cover it. It’s credit risk that looks like an operating return.

IV. The Signing Spree
OpenAI carries the largest compute commitments in the system against a revenue base that is a fraction of those commitments, with no parental balance sheet standing behind the obligation. It signed the most, owes the most, and burns the most, and its exit assumption - raise the next round before commencement, the way the subprime borrower’s was refinance before the reset - depends on a revenue curve inflecting on a schedule that has never been demonstrated at this scale.

Between June and December of 2025, OpenAI executed what may be the most concentrated origination spree in the history of corporate credit.

In less than twelve months, the company signed something close to $1.2 trillion in compute commitments. There was a stretch in October 2025, about three weeks, during which the company announced deals whose combined notional value exceeded the market capitalization of ninety-five percent of the companies in the S&P 500.

Signing was cheap and the re-rating was instantaneous. On the days the largest of these deals were announced, Oracle, Nvidia, AMD and Broadcom added a combined $636 billion of market capitalization.

Every dollar of that $1.2 trillion was signed during the steepest part of OpenAI’s revenue curve and underwritten to its continuation. And almost every one of these deals commences in 2027-2028. The signing spree should be read as an obligation event, not a sign of insatiable demand for compute.

V. Building the Reset Wall
Let us build the reset wall and let us build it the way Credit Suisse built the mortgage wall - in two views:

The first is a cash question: how much does the company owe, per year, as these contracts commence? This is the equivalent of Paulson & Co’s arithmetic - which was used to compare the mortgage payments to the borrower’s income.

The second is a concentration question: what is the total compute contract amount that resets from teaser to full pay in a single year? This is the equivalent of Credit Suisse’s 2007 reset wall - which showed the principal amounts of adjustable-rate mortgages resetting in a given year.

The 2007 reset wall was drawn in notional rather than annual payments - in other words, the unpaid principal balance transitioning from teaser to fully indexed. The compute equivalent is contract notional payable from the commencement date forward.

Credit Suisse could build the 2007 reset wall because securitization documents disclosed every loan’s reset date. Compute contracts are private, so the wall must be modeled - but the inputs are unusually good, because the counterparties keep announcing them publicly.

And, much like 2008, synchronized originations produces synchronized resets. Mortgage origination peaked across 2005 and 2006; the teaser was twenty-four months; the wall peaked across 2007 and 2008. Compute signing peaked across 2025 and 2026; the construction interval is twenty-four to thirty-six months; the wall peaks across 2027 and 2028. Same arithmetic, different collateral.


Now, replicate the way Paulson & Co. measured the 2/28 borrower: compare the annual cash payment to income and determine the counterparty’s ability to meet these resets. OpenAI has no income, so in this case the comparison is against revenue. Apply four revenue paths, each anchored to the latest reported figures and to what the company itself has told investors.

Run every scenario management or the forecasters will offer - re-acceleration, the management plan, the forecaster median, a slow burn - and set each against the committed compute cost. The bottom panel is the coverage ratio: compute commitments as a share of revenue, before wages, research, sales, or tax.

Even under management’s own plan, compute alone consumes more than 200% of revenue at the 2027 peak. There is no scenario on the chart in which the frontier lab covers its compute bill out of revenue in the year the wall lands. The best case is that it grows back under the line by the end of the decade, and the best case requires the refinancing channel to stay open the entire way.

So, OpenAI’s plan for the reset is to refinance at the reset. Raise the next mega-round, at a higher valuation, to cover the obligations as they commence - exactly as the subprime borrower planned to refinance into the next loan when the teaser expired. This works while two things hold: the capital markets stay open, and the narrative stays intact.

And look at what this implies about OpenAI’s valuation as it moves toward an IPO:

OpenAI’s equity - valued north of $850 billion - is functionally the junior tranche of a capital structure whose senior claims, the take-or-pay compute obligations, exceed any revenue path management itself has articulated.

On those numbers, the equity is effectively underwater, and the market has not priced it that way because it still treats those obligations as service agreements rather than what they are economically: debt.

Even if OpenAI can meet those obligations, OpenAI’s unaudited financial statements - as of March 31, 2026 - disclose $665 billion in non-cancellable compute commitments (management’s more recent plan runs to $750 billion). These commitments are take-or-pay in structure - which, as established above, is debt.

Carry the present value of those obligations as senior debt - roughly $450–500 billion - and a company the market prices as debt-free carries a senior claim worth more than half its entire equity value.

The market is pricing the residual equity as if it were the whole stack.

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VI. What the Wall Demands
The labs' answer is the 2/28 borrower's answer: revenue is compounding at triple digits, and by commencement it will cover the payment. It might. The credit point is narrower: the revenue coverage claim is a projection, while the obligation is a certainty.

The claim is not that commencement causes a lab to fail. It is that commencement is the date on which a pre-existing mismatch - fixed obligation against assumed revenue - becomes cash-due, and that, as in 2008, the mismatch is visible in the fundamentals well before the date makes it unavoidable. You do not need demand to fall. You need it only to decelerate below the rate the booked compute was underwritten to.

The compute contracts commencing in 2025 and early 2026 cleared, or very nearly cleared, the required growth rate. This is the crucial point, and it is the reason there is no alarm anywhere in the system: the early vintages worked.

They worked the way the 2005 and 2006 subprime resets worked. The collateral appreciated fast enough. The refinancing happened. Everyone who signed was vindicated, and vindication is the input to the next round of underwriting. Success in the early vintages is the mechanism that manufactures the late ones.


For committed compute merely to equal revenue in 2027 - not to be comfortably covered, simply to reach parity, before a single dollar is spent on wages, research, sales, or tax - revenue would have to compound at 217% annually off the 2025 base. The dashed line at 100% represents revenue doubling every single year and sustaining it, which no company at this scale of revenue has ever done for a multi-year stretch. The obligation is accelerating at more than double the rate of the best case for the cash flow meant to cover it.

The obligation curve is contractually fixed and steep - it ramps according to a defined construction timeline. The revenue curve is a growth rate. If the growth rate rolls over - the two curves cross. That is the reckoning: not a demand collapse, but a demand deceleration meeting a cost schedule that was set in a more optimistic year.

Deceleration alone is survivable if your cost base is variable. If demand growth slows from a 120% to 40%, a company with variable costs simply spends less, earns less, and adjusts. But a take-or-pay obligation is not variable. It is a fixed dollar amount that arrives on a fixed date regardless of what the demand curve did in the interim.

None of this means the company fails. It means the company must raise. Take the base case: roughly $375 billion of cumulative uncovered compute cost across 2026 to 2030, before research and development, before compensation, before every other operating cost of running a frontier laboratory. Round the all-in external funding requirement to the four-to-five-hundred-billion-dollar range across five years, and the exit assumption becomes explicit and testable:

The thesis for OpenAI requires capital markets to fund roughly half a trillion dollars of cumulative operating deficit at a single pre-profit counterparty, at non-punitive terms, through a window in which that counterparty’s compute costs are contractually rising faster than any plausible revenue path.

That may happen. But it should be named for what it is: a refinancing assumption rather than an operating plan, and one that depends on the collateral - the valuation - exactly in the period in which the true cash cost of the build becomes visible for the first time.

Construction timeline slippage can move the obligation - the 2027 peak flattens slightly, the 2028 peak rises, and total obligation is unchanged. The revenue that was supposed to grow into the 2027 obligation now has to grow into a larger 2028 one. This is exactly what happened when servicers pushed resets in 2007. Deferral was a repricing of when, not a cure.

OpenAI has been built as if the AI boom were a venture-backed, technology cycle; when in fact, it has the mechanics of a credit-driven real-estate cycle (as I outlined in The Second Derivative). Every decision executives have made seems to be based on maximizing a single outcome: the next round. While compute commitments are in the teaser period, they are assets - secured compute capacity signaled strength and raised the next round. OpenAI is facing a day of reckoning when those commitments are delivered and, on a schedule indifferent to their revenue or next round of funding, booked compute becomes billed compute.

And time is running out - Bridgewater’s analysis shows OpenAI is burning through their latest fundraise at an extreme pace.



VII. Anthropic and the Whole Stack
The comparison to Anthropic is useful as a controlled experiment. On the same measure, Anthropic’s compute commitments peak at close to 60% of revenue in 2027 then falls - fully covered by revenue with room left to pay operating costs. Undoubtedly stressed in the reset window, but structurally solvent and improving from the peak rather than grinding against it. Two labs, the same instrument, the same commencement window, and coverage ratios that differ by more than a factor of three at the peak.

While in a substantially better position, Anthropic is similarly the equity tranche of a capital structure heavily indebted by take-or-pay compute commitments, which the market has also failed to appropriately recognize as debt.

For sake of clarity, the revenue figures used in this analysis are annual revenue figures not a run rate.


VII. Anthropic and the Whole Stack
The comparison to Anthropic is useful as a controlled experiment. On the same measure, Anthropic’s compute commitments peak at close to 60% of revenue in 2027 then falls - fully covered by revenue with room left to pay operating costs. Undoubtedly stressed in the reset window, but structurally solvent and improving from the peak rather than grinding against it. Two labs, the same instrument, the same commencement window, and coverage ratios that differ by more than a factor of three at the peak.

While in a substantially better position, Anthropic is similarly the equity tranche of a capital structure heavily indebted by take-or-pay compute commitments, which the market has also failed to appropriately recognize as debt.

For sake of clarity, the revenue figures used in this analysis are annual revenue figures not a run rate.


Now, place the full stack side by side with the mortgage reset wall.


It is worth being clear about what these charts imply:

It is not a default forecast. The reset wall did not “predict” defaults in 2008 either. It only revealed the date on which the question would be asked.

It is a statement about synchronization and about arithmetic. It says: on a schedule fixed by contracts already signed, a very large volume of fixed obligations transitions from deferred to due, in a narrow window, for a set of counterparties whose ability to pay the reset depends on a revenue number that does not yet exist - it’s a projection - and whose cash flow today is reliant upon external funding.

That is exactly what the Credit Suisse chart said in 2007. It was right, and it was ignored, and it was ignored for a reason that will be entirely familiar: at the moment it was published, every loan on it was still performing.

When skeptics raised the reset schedule in 2007, the rebuttal was performance data: delinquencies are at record lows. So they were - the vintages were two years old, home prices had risen by double-digits, and the payment being performed was the teaser payment. Today’s rebuttal has the same rationale: AI revenue is compounding at triple digits; utilization is effectively full; every GPU is oversubscribed. All true. All measured during the ramp, while capacity trails demand by construction lag and the billed payments run at a fraction of the booked compute.

VIII. The Second Teaser: Hyperscalers
The frontier labs have a contractual teaser: an obligation that is signed and not billed. The hyperscalers have an accounting one: an asset that is paid for and not expensed.

Under U.S. GAAP, capital under construction sits in “construction in progress.” Depreciation does not begin at expenditure. It begins at placement in service - when the asset is available for its intended use - regardless of whether it is being used. Construction-period interest is capitalized into the asset’s cost and expensed only after placement, through depreciation, over the asset’s life.

Then the tranche goes live, and GAAP flips the switch. Depreciation commences on the full capitalized cost - including the capitalized interest now embedded in the basis. The asset moves, in one accounting instant, from an inert balance-sheet entry to a recurring income-statement charge. In-service to the owner is what commencement is to OpenAI: a reset whose date was fixed by the construction schedule, utterly indifferent to whether demand showed up.

As tranches go live through 2027–28, depreciation inflects upward mechanically and the hyperscalers’ operating margins begin absorbing the fully indexed rate. If utilization and pricing hold, revenues rise in tandem and absorb the scheduled depreciation. If they do not, the industry will discover that depreciation is take-or-pay with the income statement as the counterparty: a fixed charge, contractually scheduled, indifferent to demand, and impossible to renegotiate.

Consider what a live datacenter owes each month whether it runs at 90% utilization or 30%. It owes depreciation, power, interest, staff, cooling, and maintenance. In a representative cost stack for a leveraged cluster, roughly 80% of the monthly cost is fixed the day the meter turns on.

This is operating leverage - a wonderful thing on the way up and a merciless one on the way down. When utilization holds, margins are spectacular, which is exactly the story the teaser period tells. But the same fixed base, spread across revenue that arrives below the underwritten level, produces negative operating leverage. There is a break-even utilization built into every one of these assets - the point below which fixed costs are not covered - and below it, the asset bleeds.

If OpenAI cannot pay, the hyperscalers do not just miss revenue - they absorb a fixed-cost shortfall that their own operating leverage magnifies. A 30% utilization drop does not mean 30% less profit. It can mean the entire facility turns unprofitable.

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IX. The Options
When billing commences, unused capacity transforms overnight from strategic optionality to cash burn. A CFO staring at that line item finds ways to mitigate it.

You cannot cancel: take-or-pay is take-or-pay, senior in practice to everything. You can try to grow into the capacity, but demand is largely outside your control. Three mitigants remain: raise capital, renegotiate, or sublease.

Renegotiation is the most likely path. OpenAI’s negotiating leverage is proportional to its systemic importance - perhaps why it proposed handing a 5% equity stake to the federal government. It is too interconnected to fail; every balance sheet in the chain needs the fiction maintained. The renegotiations, when they come, will not be shown as distress. They will look like partnership: volume deferrals framed as capacity rephasing, rate cuts as efficiency-linked pricing.

But the moment one anchor lease is amended, every RPO dollar in the complex carries a demonstrated amendment probability. “Contracted” ceases to be a synonym for “certain” anywhere in the system. The $2.3 trillion only needs quiet contract negotiations to be re-rated as an asset class.

Sublease is the alternative. A tenant subleasing capacity it cannot use will take nearly any rate above zero, because every dollar recovered directly reduces cash burn. The bull case points to premium rates on today’s short-term subleases. But look at the terms: xAI’s arrangements carry ninety-day termination rights; Google frames its leases as bridge agreements; Anthropic takes spot capacity while aggressively contracting bespoke capacity elsewhere. This is bridge demand by construction. It exists only until the 2027–2028 multi-gigawatt deliveries land, at which point it hands the space back - flooding the market with shadow vacancy just as the rest of the $2.3 trillion commitments convert from booked to billed.

Compute does not need to default to break the market. It only takes a wave of quiet contract renegotiations and shadow-vacancy subleases to re-rate the asset class from a scarce strategic commodity to an oversupplied utility.

X. The Index is the Trade
When that re-rating happens, the equity of the entire complex absorbs the loss - and that equity is concentrated in the handful of names that dominate the market-capitalization-weighted indices most of the developed world owns through its retirement accounts. The ultimate holder of the risk is a household that has never heard of a take-or-pay contract.

AI-exposed names now account for roughly 45% of S&P 500 market capitalization. The ten largest companies in the index - themselves overwhelmingly AI names - sit near 40%, against about 27% for the top ten at the dot-com peak. It is the most concentrated the index has been in its modern history


Semiconductors carry roughly 19% of the index and supply roughly 45% of its total earnings growth, the largest share of any sector. That contribution is a function of the order book, and the order book is largely a function of new originations. When the reset lands and the labs spend every marginal dollar servicing commitments already commenced rather than signing new contracts, the next wave of chip orders thins. The vendors are a pure second-derivative play - they book the boom first and feel the deceleration first.

Hyperscalers are roughly another 20% of the index - and the two frontier labs are nearly half of their $2.3 trillion backlog. When the commencement wall hits, depreciation and fixed costs kick in on a schedule indifferent to whether those counterparties can pay, and the hyperscaler’s P&L becomes the backstop for any capacity the labs overbought and cannot cover. Hyperscaler ROI is fundamentally frontier lab credit risk - and the equity market hasn’t even begun to price that in.

Neoclouds are the most levered expression of the wall. CoreWeave and its peers financed gigawatt campuses on debt raised against the take-or-pay contracts themselves - backlogs many multiples of revenue, thin equity beneath, and the bulk of it commencing in 2027–28. Their model rests entirely on booked converting cleanly to billed; the capital structure has no room for a deferred or renegotiated anchor lease. They carry no index weight, but cracks in the take-or-pay complex expose them.

A passive retirement account holding an S&P 500 index fund owns a levered, concentrated bet on the conversion of contracted compute backlog into billed revenue - and on two cash-burning frontier labs’ ability to pay for it Nobody chose that allocation, and almost no one holding knows it.

XI. Living Inside the Teaser Period
The hardest thing to convey about 2006 to anyone who did not trade through it is how good the data was. Record origination, record homeownership, delinquencies scraping decade lows, homebuilder earnings at all-time highs, and every incoming statistic confirming the strength of the American consumer.

What almost no one priced was that every one of them was a teaser-phase measurement: an observation of a system whose payment test had not yet begun, generated by an instrument that mechanically guaranteed the data would look exactly this way until the schedule said otherwise.

An economy of teasers cannot produce bad credit data until the calendar turns, which means the strength of the present data carried no information about the question that mattered. The signals everyone watched were structurally incapable of carrying the signals everyone needed.

Now read the compute cycle’s tape with that in mind. Record RPO backlog, celebrated the way 2005 celebrated origination volume. Capacity sold out, demand insatiable: a construction-phase statement, necessarily true while contracted delivery lags contracted demand. Vendor revenue beating estimates, the way homebuilder earnings were the sound of the mortgage machine consuming its own vendor inputs.

This is the epistemic signature of a teaser period, and it explains the otherwise baffling social dynamics of standing inside one. The bear who cites the future reset wall is answered with the current data. A teaser period does not merely hide the reset wall. It manufactures the exact evidence used to dismiss it.

XII. This Time is Different
Reinhart and Rogoff titled their history of eight centuries of financial folly with the words that recur before every crisis: “this time is different”. And the maddening truth is that the specifics genuinely are different every time.

This is not precisely 2008. GPUs are not houses; take-or-pay contracts are not mortgage-backed securities; OpenAI is not a subprime borrower in Stockton, and artificial intelligence may well be the most consequential technology of the century, which is more than anyone could ever say for a McMansion in the Inland Empire.

All of that is true, and none of it is the point. What repeats is never the surface. What repeats is the structure:

a scarcity thesis that justifies enormous fixed obligations; a teaser period during which those obligations feel costless; a set of commencement dates, fixed at signing, on which the teaser expires and the fully-indexed bill begins; and a bet that the income will have grown to meet the bill by the time it arrives.

The reason many AI skeptics will be right in substance and wrong in the mechanism is that they are often making a valuation argument, and valuation arguments have no clock. What this piece has tried to show is that buried inside the compute contracts is something a valuation argument never has: a reset.

The bull case wins if - and it is a real if - demand scales into the committed supply before the reset wall lands, and the counterparties stay funded through any air pocket in between. The bear case in this piece is not that artificial intelligence will fail, or that the demand is fake, or that the technology disappoints. It is narrower: that the financing structure can break before the demand arrives, because the obligations are fixed and front-loaded in commencement while the revenue is variable and back-loaded in adoption - and a fixed obligation meeting a lagging revenue stream is a solvency problem regardless of how transformative the underlying technology turns out to be.

The industry will spend the next eighteen months debating whether artificial intelligence is a bubble, which is the wrong question, asked at the wrong layer. The technology is real; so were the houses. The question is narrower: what happens when instruments underwritten at the teaser meet their reset schedule, and who is holding the paper when the obligations cannot be met as written. The reset wall is published above and the AI boom sits in a period of fiction.nano fp

FT : Hedge fund Saba takes on Baillie Gifford in new board battle Boaz Weinstein

Hedge fund Saba takes on Baillie Gifford in new board battle
Boaz Weinstein’s activist fund has been waging a campaign against UK investment trusts

Boaz Weinstein’s activist hedge fund Saba is seeking to install its own candidates on the board of a Baillie Gifford investment trust, as the US billionaire renews his onslaught on the sector.

The hedge fund on Monday put forward three candidates for the board of Baillie Gifford’s US Growth Trust to be voted on at the investment trust’s annual general meeting later this year, having twice been rebuffed in attempts to influence the board over the past 18 months.

The US Growth Trust invests in public or private companies which it believes will grow rapidly and holds stakes in companies including Nvidia, Anthropic and Amazon.

But while the £906mn investment trust was an early investor in SpaceX alongside other Baillie Gifford trusts, it has made virtually no gains over the past five years after sustaining heavy losses in 2022. It has spent much of the time since then recovering losses, with the value of its holdings up 240 per cent since launch in 2018.

Filings from December last year showed that Saba has a 28 per cent shareholding in the US Growth Trust, with a further 1 per cent in derivatives that gave it economic exposure to the shares.

Saba’s candidates include Sir James Waterlow, a managing director at the hedge fund, and two other candidates whom Saba has previously nominated in other board battles.

Saba has not commented on its latest board proposals, but it previously complained about performance and the discount the shares had traded at relative to the assets they manage.

Such discounts affect many investment trusts because, unlike many other fund structures, there is no easy way to redeem shares for the underlying net asset value.

The trust is trading at an 8 per cent discount to its net asset value, tighter than the 11 per cent five-year average.

Saba has been running a campaign against several UK investment trusts since 2024, with mixed results. Saba has mixed up its tactics throughout its campaigns, variously calling for share buybacks to close discounts, changes in investment strategy, or even to wind up trusts.

In April, it took control of the board of another Baillie Gifford trust, Edinburgh Worldwide, on its third attempt. But its attempt to change the board at real estate investment trust Workspace failed in July.

FT : US plans nuclear-powered merchant fleet to challenge China’s shipbuilding d

US plans nuclear-powered merchant fleet to challenge China’s shipbuilding dominance
British company Core Power plans its first vessel in 2028 following partnership deal with Trump administration

Donald Trump’s administration is teaming up with a British company to help it build a fleet of nuclear-powered merchant vessels to challenge China’s growing dominance of commercial shipbuilding, a top US official has said.

Stephen Carmel, administrator of the US Maritime Administration at the transport department, told the FT that Washington would sign a public-private partnership agreement on Monday with Core Power, which would help accelerate development of nuclear propulsion for shipping.

“We are not going to beat China by being a cheaper version of China. They have mastered the art of being cheap,” said Carmel in an interview.

“The way we win in all this is to change the terms of the competition to something that is more favourable to us. So, we don’t compete on trying to be cheap. We compete on technology . . . and nuclear technology is something we are really good at.”

The first-of-a-kind agreement aims to fast-track construction of a US-flagged nuclear-powered fleet by designing a regulatory framework that enables speedy licensing, availability of insurance, port access and high standards of safety.

Core Power, which is headquartered in London and has a relationship with the Port of Corpus Christi in Texas, plans to start building its first nuclear-powered vessel in 2028. The company says it has raised about $200mn in funding from investors including Japanese conglomerates Mitsui, Mitsubishi and Sumitomo. The agreement does not include any guarantee of federal funding.

Nuclear propulsion is a technology that has been used for decades in military submarines because it provides unlimited underwater endurance, eliminates the need for oxygen, and delivers high sustained speeds. But until recently it has struggled to attract interest from the commercial sector because of high building costs, port bans and complex international liability laws.


Russia is currently the nation with the largest nuclear-powered fleet thanks to the use of the technology to propel icebreakers in the Arctic.

The US is pushing the technology as a way to reinvigorate its shipbuilding industry, which has been decimated by low-cost Chinese competition, and redeploy its nuclear expertise.

In June, the American Bureau of Shipping approved the design of a nuclear-propelled vessel by the Maritime Consortium of the Massachusetts Institute of Technology. Next week senior US officials will hold talks with counterparts from the UK, France, Japan, South Korea and other nations about advancing nuclear maritime technology at an International Atomic Energy Agency event in Washington.

Mikal Bøe, chief executive of Core Power, said there is a strategic imperative for Washington and other allied nations to push ahead with nuclear-powered commercial vessels because China was moving in that direction. Nuclear propulsion could be competitive with the current fossil fuels-based systems because vessels could move between 50 per cent and 75 per cent faster, carry more cargo and would not be exposed to environmental taxes, he said.

“There are 8,200 vessels that are suited to nuclear propulsion that need to be replaced over the next 25 years . . . I think we can meet 10 to 20 per cent over this period.”

Core Power has estimated that over its lifetime, nuclear-powered ships will be comparable with traditional shipping fuels at a cost of about $500 to $600 per tonne.

While many of the technical hurdles to nuclear-propelled shipping have been overcome, shipowners remain sceptical about liability issues should there be an accident and the expense of the ships.

“Nothing is going to happen if there’s no insurance. Because again, if something goes wrong, someone will need to pay,” said Themistoklis Sapsis, professor of mechanical and ocean engineering at the MIT consortium.

He said advances in reactor design had improved safety, which was important to win public support for nuclear-powered ships that would need a common regulatory framework to enable them to travel from country to country.

Nuclear-fuelled ships would also involve an entirely different economic model for the industry, executives point out. At present, it is usually the entity chartering the ship that pays the fuel cost for the voyage. But in a nuclear ship where the fuel is bought when the ship is built and lasts more than 20 years, there would have to be an alternative way of dividing the costs.

Peter Jameson, managing director at Boston Consulting Group, said: “This could create new opportunities for investment funds to invest in the capex itself rather than hitting the owner-operator who can’t pay for a multimillion-dollar nuclear reactor out of their balance sheet.”

There are also concerns about finding enough nuclear engineers to crew commercial vessels or resources to train existing seafarers, as well as the public acceptance of having nuclear-powered ships in port. Most executives do not expect nuclear-powered ships to hit the water until the 2030s at the earliest.