Fortune : Bob Iger schooled him on Disney’s grand theory of IP. Now Gerry Cardin

Bob Iger schooled him on Disney’s grand theory of IP. Now Gerry Cardinale is backing Skydance Media’s $8 billion bid for

In Hollywood, the Marvel Cinematic Universe isn’t just an obsession of teenage fandom. Disney’s conversion of a collection of decades-old comic book characters into an $30 billion box office juggernaut is the quintessential playbook for building a staggeringly lucrative intellectual property empire.

That IP playbook is what Bob Iger—the former and current Disney CEO—found himself explaining to the eager financier known mainly in the world of sports who was sitting across from him at breakfast at the Beverly Hills Peninsula Hotel in 2021.

Gerry Cardinale of RedBird Capital Partners peppered Iger with “a lot of questions” about how Disney thinks about its IP, which also includes Star Wars, Pixar, and a cast of cartoon characters and princesses from the Magic Kingdom. “We hit it off right away,” Iger tells Fortune. “I was enamored with his curiosity—and with what he already seemed to know.”

“He gets the fact that great IP is the equivalent of beachfront property,” Iger says. “He knows that the world is in need of entertainment, and regardless of the means in which they get it, or how it’s monetized, there’s real value to it, and it’s long-term.”

The two men became friends, and when Iger was between his two CEO stints at Disney, in 2022, RedBird gave him office space to work out of. (Iger never accepted a formal role at RedBird, but he has advised the firm and refers to himself as a “friend of the court.”)

Meanwhile, Cardinale’s thesis about the enduring value of intellectual property—which had been evolving since long before he met Iger at the Peninsula—has formed the basis of RedBird’s IP investment portfolio, which has expanded far beyond sports, to entertainment and media. And now, RedBird is backing an $8 billion bid to acquire one of Disney’s major competitors: Paramount Global.

RedBird’s portfolio company Skydance Media, the movie studio run by David Ellison (son of Oracle cofounder Larry Ellison), has been negotiating a deal to buy chairwoman Shari Redstone’s controlling shares of Paramount. Also in the Skydance and RedBird camp is the private equity firm KKR. Redstone’s stake in Paramount is owned by National Amusements, the company founded in the 1930s by her grandfather Michael Redstone and that her father Sumner turned into a sprawling media conglomerate that owns CBS, Nickelodeon, MTV, and the storied movie studio Paramount. As currently conceived, the deal would see Skydance acquire National Amusements and then merge with Paramount, creating a single company. At that point RedBird, KKR, and Skydance would add roughly $1.5 billion to Paramount’s balance sheet to help pay down some of its debt. Representatives from RedBird declined to comment on the record about the ongoing negotiations.

Redstone is also mulling a $26 billion offer from the private equity giant Apollo and Sony to buy Paramount outright. The competing offers have made for no small amount of corporate intrigue and breathless media coverage. Last week, according to Puck, the special committee evaluating the sale on behalf of Paramount’s board blessed the complex Skydance/RedBird bid after the Skydance group upped its offer to shareholders, but since then the negotiations have hit a snag.

Should Skydance succeed in its bid, RedBird would become a part owner of a Hollywood studio, making Cardinale a kind of peer to Iger, if not a media mogul in his own right. (Iger declined to comment on the proposed deal, saying he and Cardinale hadn’t discussed it.)

Cardinale, 56, rejects the notion of himself as a mogul, preferring the label “investor.” He certainly talks about sports and entertainment like someone hardwired to think analytically: Good private equity deals are hard to come by lately because “the supply-demand imbalance pretty much drives you to levered beta.” The Italian soccer team AC Milan he bought for $1.2 billion wins games by maximizing “ROI on goal efficiency.”

But this jargon-heavy lingo belies an investor uniquely attuned to the subtleties of the so-called culture industries—sports, entertainment, and media—in which Cardinale specializes. They are industries that require more than just SWOT analyses, accurate cash-flow projections, and a balanced budget. The business of culture is really about selling intellectual property, and for IP to have any value, it has to make people feel something.

An IP monetization engine
Cardinale, 56, may not have the stature, name recognition, or notoriety of other media-world tycoons, such as David Zaslav or Iger, but your favorite celebrity’s agent has probably heard of him. And those who have watched his ascension over the years aren’t surprised to see him emerge into the spotlight. Cardinale, a former Rhodes scholar, who has steered RedBird’s $10 billion in assets under management with an eye for value honed over two decades at Goldman Sachs, is building a media portfolio for today’s attention economy.

“I think he’s focused on world domination,” jokes Fenway Sports Group CEO Sam Kennedy. “He is driven. I mean, he really, really is.”

As the cable giants and movie studios lose ground to tech behemoths such as Netflix and Amazon, Cardinale is betting big on his belief that it’s in the IP, not the distribution channels, where great opportunities lie for an investor like himself—one who styles himself after the likes of Rupert Murdoch and “Cable Cowboy” John Malone, domineering media barons of a more swashbuckling era.

RedBird already holds an impressive portfolio of media assets, but in 2024 it’s one that looks different from the media conglomerates of yore. RedBird has built its business by prizing intellectual property of all kinds—going beyond cable channels, publications, and movie studios to sports teams, Formula One racing, video gaming, political ads, and a multiplatform content company based on children’s books. In this universe, anything can be IP—so long as it comes with a ready-made audience.

“We’re an IP monetization engine,” Cardinale says, summing up his investment strategy, in an interview with Fortune. “That’s what we do.”

It’s a principle that has informed RedBird’s investments in sports and sports-adjacent businesses, from its stake in a Formula One team to its $1.2 billion bet on Italian soccer: In 2022, RedBird bought AC Milan, a 125-year-old team that Cardinale says has around 500 million fans globally. Before that, in 2021, RedBird bought an 11% stake in Fenway Sports Group, the holding company that owns the Boston Red Sox, English soccer team Liverpool FC, and the regional sports channel New England Sports Network. Later that year, alongside FSG, RedBird would invest in NBA star LeBron James’s entertainment company SpringHill, in a deal that valued it at $725 million. Cardinale tells Fortune that RedBird, Fenway, and the basketball star are working on possibly acquiring an NBA expansion team, should one become available.

In the entertainment world, in addition to Skydance, RedBird has backed Ben Affleck and Matt Damon’s film production company, Artists Equity. It recently acquired the production company behind the critically acclaimed British television show Fleabag and the reality game show Squid Game: The Challenge. And it had tried to break into the news business by acquiring the U.K. publications the Telegraph and the Spectator alongside co-investors from the United Arab Emirates, in a deal shepherded by former CNN head Jeff Zucker. (Ultimately, RedBird abandoned that deal when it became clear British regulators would block it.) RedBird even has an eye on the next generation of content consumers, starting a company with the children’s book author Mo Willems to make kids shows based on his popular animal characters, including Elephant, Piggie, and a pigeon that’s very eager to drive a bus.

Each move is a “derivative of the same play,” Cardinale explains. “It’s all a portfolio construction around core, premium intellectual property.”

Creative output—the work of humans, not AI—may seem an ephemeral commodity to invest in, but Cardinale is aligned with Iger’s view of the imperishable value of the “beachfront property” that is IP. “If you start with the best intellectual property,” Cardinale says, “it intrinsically rejuvenates itself.”

A ‘seat at the economic table’ for the Jordans and Afflecks of the world
The first movie released by Affleck and Damon’s creator-led film studio, Artist Equity, was Air, the story of how Nike signed its endorsement deal with Michael Jordan, whose mother convinced the shoe and athletic wear company to give the budding basketball star a cut of the profits for the industry-shifting sneaker that bore his name. That move, which inextricably linked Jordan and Nike and made Air Jordans a perennial symbol of coolness, arguably kicked off the current era of the celebrity as IP.

For Affleck, who has said his production company aims to allow creatives to “take ownership of their creative power” via profit-sharing arrangements with the cast and crew, this story choice was no coincidence. “Air so closely paralleled thematically so many of the things we were doing with the company,” Affleck tells Fortune. “It kind of speaks precisely to the company’s values.”

For his part, Cardinale frames his many celebrity collaborations as, simply, shrewd investing: He wants to be in business with the Michael Jordans and the Ben Afflecks of the world, the sort of talent that has earned “a seat at the economic table,” as he puts it. And the movie Air offers a kind of proof of concept: A budding basketball star shares the profits from his shoe endorsement, which becomes a $6.6 billion brand, while making him a billionaire.

Of course it’s not a given that creative types or professional athletes will easily connect with a “suit” like Cardinale. One of the reasons they do, Cardinale says, is that he treats them as partners in the enterprise that is their career. Cardinale has convinced a slew of A-listers, including Dwayne “The Rock” Johnson (the two bought the XFL together) and Ryan Reynolds (Cardinale’s co-investor in a Formula 1 team), that he’s the man to make their business wishes come true.

“They appreciate my desire to add value to them,” Cardinale says of his celebrity partners. “I kind of look at them all as legitimate IP in and of themselves—and I can help them do more with their career than they could if I wasn’t in their life.”

Affleck has known Cardinale since 2000, when he and his childhood friend Matt Damon were making the rounds of investment banks seeking funding for LivePlanet, a since-shuttered production company that had the then-kooky idea to put TV shows and movies on the internet. Cardinale, then a 32-year-old vice president at Goldman Sachs, made an impression because he “didn’t fit the caricature of either private equity or bankers, as being ruthless and mercenary,” Affleck says.

The two kept in touch sporadically. And when Affleck decided to start Artists Equity with Damon, he went straight to Cardinale’s RedBird for funding. Cardinale, now no longer the “junior guy on the desk at Goldman,” according to Affleck, was attuned enough to the nuances of the entertainment industry to understand Artists Equity’s ambitions to shake up the business model of movies—and RedBird agreed to a nine-figure investment.

Affleck tells Fortune that Cardinale is hardly the traditional tight-fisted financier—quite the opposite. “I found myself a little bit more conservative than he is,” Affleck said. “I’m like, this is my only business, Gerry, you know what I mean? It’s not a portfolio. I gotta make sure this works. So I actually find myself more risk-averse than he is.”

Opportunities in a ‘discombobulated’ industry
Great entertainment is a risk worth taking, Cardinale maintains. Viacom founder Sumner Redstone, Shari’s father and one of the defining media barons of the 20th century, is said to have coined the phrase “content is king.” That’s even more true, Cardinale says, now that technology has rebuilt the media landscape and its distribution systems. “IP is such a good business because it is insulated from technological disintermediation,” Cardinale says, slipping into finance speak. “Right now, technology and the way content is distributed has everybody discombobulated.”

It was amid that industry-wide turmoil, and perhaps because of it, that Cardinale sought out Iger’s advice. “The genius of Bob is that he understands the delicate interplay between the financial complexities of the rapidly changing media business and the importance of talent and great story tellers,” Cardinale said. “This has always distinguished him but never has this been more important than today with all the challenges facing Hollywood and the need for hands-on transformational thinking.”

The challenges Cardinale is referring to are the shattering of the culture industry’s old business models. Streaming has splintered the cable bundle, smartphones obliterated our attention spans, and social media gave us an algorithmically personalized boob tube right in our pockets. Audiences have access to infinite content across countless platforms. All this while cable, movie theaters, and even print magazines, are still around—diminished but still making up a large portion of revenue (including the two-thirds of Paramount’s top line that comes from cable and network television).

In such a world, Cardinale says, content is not just the king; it’s all you can rely upon. “If you have the right intellectual property, you can absorb the transitional changes from one distribution model to another,” he says.

It remains to be seen, of course, how this thesis will play out if Skydance, RedBird, and KKR manage to pull off the Paramount deal. In doing so, Skydance would merge with a company that owns, in addition to its treasure trove of a content library, some big distribution pipes: television channels that include CBS, BET, and MTV, and the streaming service Paramount Plus, which lost $490 million in 2023.

Shari Redstone has indicated she would prefer to sell to a buyer that will keep the company intact—and the plans from from Sony and Apollo to break up the portfolio are said to have been a sticking point to their competing bid. But even if the empire the Redstones built remains intact, RedBird and Skydance are likely to cut costs to the bone at Paramount’s cable channels and milk them for cash, as the cable industry slowly, inevitably dies. Paramount’s leadership—which consists of a triumvirate of executives that make up the “office of the CEO”—announced a $500 million cost-cutting plan of their own at the company’s annual shareholder meeting this week. Paramount declined to comment for this article.

Skydance, the studio behind Top Gun: Maverick (produced alongside Paramount), has won over several high-profile backers of its bid, including the director James Cameron, whose beloved hit Titanic is a piece of Paramount IP, and Ari Emanuel, the super-agent CEO of Endeavor.

An IP approach forged in the world of sports
Cardinale was full of questions about Disney’s approach to IP when he met Iger in 2021, but he was hardly a novice. “There are people in the banking world and the investment community that you have to teach,” Iger says. “He comes to the table having already learned it.”

Cardinale learned much of what he did about the sports and entertainment business during his time in Goldman’s private equity arm. There he did major deals with the New York Yankees and the Dallas Cowboys, and even worked on the 2005 deal that never came to fruition between Goldman and Michael Jackson’s estate to buy part of the King of Pop’s music catalog.

Over the years working with the likes of Yankees owner George Steinbrenner and Cowboys owner Jerry Jones, Cardinale started to become more and more intrigued by the media business that’s so crucial for ginning up the excitement that surrounds sports. In 2001, with Steinbrenner and the Yankees, Cardinale, who was still at Goldman, helped secure the financing for the Yankee Entertainment Sports Network, a cable channel dedicated to the baseball team. That experience taught Cardinale to look for connections between sports and media—and to start seeing sports as IP.

That’s a big part of his approach with AC Milan. Cardinale wants to replace the beloved Italian soccer team’s iconic but creaky San Siro stadium with a gargantuan Yankee Stadium–style temple to commerce, filled with VIP boxes, restaurants, and merch shops. “I’m able to look at the sports industry, and the media and entertainment industry, as ecosystems,” Cardinale explains. “And then what I do is I look for dislocations. I look for areas where there’s a need for improvement, evolution, and professionalization.”

It’s a theory Cardinale was testing during his crash course with Iger, according to the Disney chief. There’s an “enduring quality of sports,” said Iger, who oversees the Disney-owned sports channel ESPN. “It’s not new, but yet it still thrives, which I think says a lot.”

Once considered a trophy asset, the sports market, which is valued around $626 billion according to the market research firm Circana, is now one of the most lucrative asset classes in the world. Sports attracts professional investors like RedBird, has its own equity research desks, and is the subject of global investment conferences—where Cardinale is often up on stage. NFL Commissioner Roger Goodell told Fortune that Cardinale, who he has known for 15 years, is the rare private equity investor who sees the long-game. “He’s a builder,” Goodell said.

Cardinale chalks some of his success up to being in the right place at the right time. “Look, I’m not a genius,” Cardinale says. “I mean, I just got lucky in my career that Steinbrenner came calling in 2001. Sports wasn’t an asset class back then. Next thing you know the world caught up to me, and I just kept going with sports, not knowing that it was going to become what it became.”

An outsider with a simple mandate: Make great stuff
Despite having worked in sports, movies, and media for virtually his whole career in finance, Cardinale doesn’t see himself as entirely part of this world.

He still comes across as the finance wonk amid the athletes and celebrities. He rowed crew at Harvard and didn’t demur when the New York Post pointed out in 2009, while he was helping put together to deal to build Yankee Stadium, that he’s not a “baseball man.” And you’ll rarely catch him on the red carpet at glitzy Hollywood events. But that doesn’t bother Cardinale, he says, because he thinks it helps him see the opportunities others miss.

“I really think being from outside that ecosystem—or at least one foot in, one foot out—is a huge competitive advantage,” he says. “I don’t get caught up in the headlines. I don’t get caught up in the emotionalism. I’m not running to go to the Oscars.”

It all comes down, Iger says, to a fundamental thesis that he and Cardinale share: “Make great stuff,” he says. “People flock to it and they don’t complain. It’s all about quality.”

It may sound risky, but Iger points out that an IP-forward strategy has already paid off richly at Disney. “He was drawn to me, in part, because that was my thesis,” Iger said. “Which seems to have worked.”

TechCrunch : Apple needs to focus on making AI useful, not flashy

Apple needs to focus on making AI useful, not flashy

Google and Microsoft have made their developer conferences a showcase of their generative AI chops, and now all eyes are on next week’s Worldwide Developers Conference, which is expected to mark the debut of Apple Intelligence.

The Cupertino-based company is facing a lot of pressure. Apple has fallen behind its peers in the AI race, and it probably feels like it needs to pull out all the stops to impress fans and shareholders. But that shouldn’t mean overpromising on features.

Reliability first
Apple makes some of the most popular devices on the planet, and its AI features should serve to make them more useful. A lot of AI-powered features rely on going back to the cloud to get answers or inputs back. However, if Apple manages to run some useful features locally on-device, users might ditch the cloud-based tools in favor of always available AI. Offline transcriptions in the Voice Memo and Notes apps could fit the bill.

Apple will likely reveal summaries of notifications and web pages, basic text generation and photo editing. However, tons of browsers, note-taking apps, and photo-editing apps already have those. Apple needs to make its implementation as smooth and seamless as possible to make it stand out.

Privacy first
Apple is likely to bolster its privacy-first approach, so it might not give Siri or AI-powered features free rein to take control of all apps. According to a Bloomberg report, only the iPhone 15 Pro and iPads or Macs with M1 or later chips will get AI features, and they will be opt-in. If this is true, despite lagging the AI feature adoption curve, Apple is still cautious and doesn’t want to be caught in the user backlash.

The company was recently criticized for its iPad “Crush” ad, which showed creative instruments being destroyed under a hydraulic press. This was seen as Apple undervaluing creators, their tools, and the effort it takes to make art by packaging it into a slim capitalist package. With AI already having a bad rep among creators, Apple might not want to irk them again. So it will likely take a non-controversial approach.

Improving Siri
The biggest change expected is for Apple to revamp Siri to understand users’ queries better and deliver more accurate results. Currently, Siri can’t multitask. If you ask the assistant to set a 10-minute timer and a 5-minute timer, it will set one for 15 minutes instead. These things might not need generative AI’s help to solve, but Siri’s revamp should at least have them.

Business Of Fashion : How Will Chanel Pick a New Designer?

How Will Chanel Pick a New Designer?
Following the departure of artistic director Virginie Viard, the French couture and beauty giant will need a new creative leader — or leaders — to bring fresh energy to its cross-category pyramid of products.

Late Wednesday, BoF broke the news that Virginie Viard had exited Chanel.

A force for continuity who carried on Karl Lagerfeld’s legacy after his 2019 death, while bringing a lighter, more youthful touch to Chanel’s runway collections, Viard sat atop a storied fashion empire. The second-biggest luxury brand with revenues of nearly $20 billion last year, Chanel stages six fashion shows per year across ready-to-wear, haute couture and its annual “Métiers d’Art” craftsmanship showcase, not to mention its near-unparalleled brand prestige.

While some fashion fans bristled at Viard’s increased focus on ultra-wearable silhouettes, her more approachable, contemporary take on flagship products like tweed jackets helped to fuel surging sales as the Covid-19 pandemic pushed luxury consumers toward blue-chip brands. During her tenure, sales of ready-to-wear increased by a factor of 2.5, Chanel recently reported. That’s to say, her successor will have big shoes to fill.

At the same time, Chanel is currently in such a strong position that the house won’t need to rush Viard’s succession. The brand grew by 16 percent in 2023, outpacing key rivals, and has such clear codes and sufficient clout with consumers to weather a season or two without a creative director. (Chanel will rely on its studio team to designer its June couture outing).

Yet even if Chanel can afford to take its time, the fashion world is breathlessly awaiting news on who will take up the industry’s most coveted position. Speculation as to who will succeed Viard went into overdrive as soon as her exit was reported, with names circulating on social media ranging from more long-rumoured contenders like Hedi Slimane to outliers like ex-Moschino creative director Jeremy Scott.

Much will depend on how Chanel and its owners, the Wertheimer brothers, see the creative director role going forward. Do they want a transformational figure like Lagerfeld, who could revamp the brand’s image and serve as the face of the house for decades? Or another deft merchandiser like Viard who will get the most commercial mileage out of its craftspeople and codes? New configurations are also possible, with Chanel eventually choosing to employ multiple creative directors like Hermès or Louis Vuitton.

The Big One
Rumours have swirled that Hedi Slimane was being lined up to join Chanel, and launch menswear, since his 2016 departure from Saint Laurent. Now, after a 5-year turn at Celine that saw the house grow into a €2.5 billion per year megabrand, sources say the designer has been engaged in a lengthy, difficult negotiation with parent company LVMH that could lead to his departure. And Chanel speculation has gone into overdrive again.

In some ways, Slimane seems like the perfect fit for Chanel. A branding genius and impeccable stylist, his penchant for black-and-white, bold-face branding and practice of shooting campaigns himself are heavily inspired by Karl Lagerfeld’s Chanel. And while Lagerfeld rarely shied away from doling out brutal criticism, he habitually made glowing remarks about Slimane, as well as adopting the designer’s ultra-slim menswear silhouette.

But bringing on the exacting (and reclusive) Slimane would come with challenges: The designer is known for demanding total control over branding, campaigns, store concepts and more. While that approach helps to curate an ultra-coherent universe for devotees of his vision, giving that much power to one individual would be risky for a company at Chanel’s scale. It also feels out of step with new CEO Leena Nair’s mission to evolve Chanel’s internal culture, professionalise processes and reinforce teams and structures in a bid to future-proof the luxury giant.

Then there’s Slimane’s approach to design: composing the latest versions of his trademark slim silhouette by reinterpreting vintage references, or demanding that teams bring him myriad fully-realised samples to “shop” from (and cancelling the rest). This would be out of step with Chanel’s couture culture, where designers work closely with the atelier and suppliers to bring collections to life.

Slimane also doesn’t engage with the press or do public appearances. Neither did Viard, for that matter. But predecessor Lagerfeld’s charismatic public persona was an asset as he built up Chanel’s aura of high-flying fabulosity over more than 30 years.

Free Agents
Then, there’s the handful of major design talents who currently don’t have a brand.

Sarah Burton exited Alexander McQueen last fall 13 years after taking the reins following founder Lee McQueen’s death. She managed to synthesise McQueen’s founding notions like Britishness, naturalia and punk in collections that were more romantic and approachable and less dark (albeit also less exciting). She’s known to be a collaborative, inclusive designer who has made perpetuating savoir-faire a priority at McQueen — in terms of culture, she’s a fit for the company Chanel says it wants to be. Lagerfeld was a fan, too: “She is fantastic and what she’s doing at McQueen is truly haute couture,” he said in 2016.

Pierpaolo Piccioli is another free agent, having left Valentino in March. The bombastic romance of Piccioli’s haute couture for Valentino wasn’t every fashion critic’s cup of tea, but his shows featured authority, confidence and calculated risk in a way that’s been missing from Chanel’s runway under Viard. In ready-to-wear, shoes and bags, however, Piccioli’s ideas were less easily translated to hit products.

Wild Cards
A collision of Phoebe Philo’s intellectual, design-forward aesthetic with Chanel’s codes is a long-shot possibility some fashion fans are clamouring to see. But there’s an enormous gap between the scale and complexity of her previous roles and Chanel (Celine topped out at around €1 billion during her tenure, and did not yet include menswear or beauty).

Chanel may be a $20 billion per-year powerhouse, but it starts every year at zero like everyone else. In order to keep powering a business at this scale, a designer with a proven commercial track record like Dior’s Maria Grazia Chiuri would be a serious contender.

Chiuri’s approach to fashion — which involves animating digestible design ideas with varied collaborations and storytelling focused on craftsmanship — has fuelled rapid growth at Dior, and her way of working would certainly be applicable at principal rival Chanel.

New Configurations
Chanel could also opt for a new configuration that makes room for multiple designers, like at Louis Vuitton, Hermès and Dior. Bringing on Slimane wouldn’t be the only option if the company decided to push into menswear: the brand might seek out an adaptable menswear star like Dior’s Kim Jones to head up the expansion, while hiring another designer to handle women’s.

As the brand increasingly seeks to position itself as a house of “absolute luxury” — a purveyor of timeless investment pieces à la Hermès — it could also look to bring on a womenswear designer (or designers) who have managed to thrive under a more collaborative structure with multiple voices. Hermès’ creative director for women’s ready-to-wear Nadège Vanhee-Cybulski is one name the internet hasn’t yet thought up.

Such a setup would allow for additional perspectives and storytelling opportunities, while also ensuring that no one person is ever bigger than the brand.

WWD : Vacheron Constantin Debuts Multisensory VR Experience at Harrods

Vacheron Constantin Debuts Multisensory VR Experience at Harrods
It will be the first project to be revealed at the brand-new 4D Immersive Cinema at Harrods, powered by London’s Xydrobe.

LONDON — Swiss watchmaker Vacheron Constantin will be the first brand to unveil a multisensory virtual reality experience at the brand-new 4D cinema, powered by Xydrobe, at Harrods this month, as part of a wider year-long partnership with the luxury department store celebrating its 175th anniversary.

Opening to the public on June 19, the experience titled “The Exceptional Voyage” — available for booking via Xydrobe’s website — will take the viewers into a dream-like adventure, exploring the rich history of Harrods through the lens of the Richemont-owned fine watchmaker.

Iona Judd, creative director for the Vacheron Constantin experience, teased that the narrative begins in a black cab on a predictably wet summer’s evening.

“Driven by an emotive, pacy score, our protagonists are invited to discover a series of increasingly surreal landscapes from the unchartered depths of the Harrods Vaults to limitless Dali-esque desert plains. Each mesmerizing scene is matched with real-world scents and sensations to create an unforgettable experience that is not only visual but highly sensory,” added Judd.


To commemorate the anniversary, the brand is also offering a single-piece edition Les Cabinotiers — Armillary Tourbillon platinum timepiece exclusive to Harrods, alongside 14 Hans Crescent window displays with its range of watch collections, and an exhibition highlighting key historical timepieces inside Harrods.

Located on the fifth floor of the Knightsbridge store, the “xydrobe VR Cinema” concept was first unveiled by WWD in April.

Billed as “the next frontier of media” by Xydrobe, it aims to create deeper, more meaningful connections between brands and customers in addition to driving sales.

The cinema can seat up to 20 guests at a time and plans to use the highest-grade VR headsets to conjure tactile sensations of wind, temperature, immersive surround sound and a variety of scents, the company said.

The cinema space was designed by Sybarite, the London architectural firm and a longtime partner of Xydrobe.

Sybarite cofounder Simon Mitchell called the project “a unique and masterful opportunity in creativity and retail strategy terms.”

“Xydrobe presented an opportunity to change the course of immersive experience in terms of luxury storytelling in a very personalized manner which was attractive and played to our strengths. We then worked together to think of how this could manifest itself within the context of a department store — a space we are very familiar with. To bring a greater audience. To utilize certain areas within the department itself. Our interest lay in how the Xydrobe experience could be scaled and co-exist within the department store world ecosystem successfully,” he added.

Isabella Gallucci, chief of brand at Xydrobe, said following the Vacheron Constantin debut at the “xydrobe VR Cinema,” more brands in the lineup will be revealed in due course.

“Each virtual world is meticulously crafted, allowing brands to weave captivating stories. These must-see experiences offer unparalleled journeys into the heart of innovation and creativity,” added Gallucci.

As reported, Xydrobe has produced visual effects content and immersive virtual reality experiences for brands including JW Anderson, Manolo Blahnik, Givenchy and, most recently, Dr. Barbara Sturm.

The Harrods project follows the opening of the Xydrobe Mayfair flagship on Carlos Place last October.

The Mayfair site offers luxury brands the chance to take over and activate VR experiences using one-person “xydrobe Pods.”

Eventually, Xydrobe wants to build a platform that will provide brands access to its 4D cinema network in various regions.

FT : High-Flyer Capital Management: the Chinese quant fund-turned-AI pioneer

High-Flyer Capital Management: the Chinese quant fund-turned-AI pioneer
Group’s DeepSeek-V2 ranks among China’s top large language models

One of the pack of Chinese AI hopefuls trying to take on the likes of OpenAI comes from an unusual source: a quant fund dominating the country’s financial sector.

High-Flyer Capital Management, a Chinese quantitative hedge fund, has grown into a roughly Rmb60bn ($8bn) asset manager since its launch in 2015, partly using AI and algorithms to identify patterns or variables that could affect stock prices.

Now it has parlayed that knowledge and infrastructure into a powerful AI model that has been released and that experts say is on a par with leading western efforts. DeepSeek-V2 can answer questions, write code and reason.

DeepSeek costs significantly less than rivals, about Rmb2 for every million output tokens — or words returned per query — sparking a price war among Chinese artificial intelligence providers.

A week after its launch in May, technology giant ByteDance cut prices to as low as Rmb0.60 per million output tokens. Rival Alibaba then cut usage prices for some of its models by as much as 97 per cent and Baidu made two of its Ernie models free.

The rollout of the new model, which has quickly attracted thousands of Chinese developers, highlights how even with early leads in generative AI, tech giants such as Baidu and Alibaba face fierce competition from more nimble upstarts. It has also put the spotlight on China’s highly competitive generative AI race.

“The gap between the US and China isn’t as big as everyone thinks,” Liu Qingfeng, founder of Chinese AI group iFlytek, told a recent tech gathering in Macau. “In a lot of verticals our [models] are better than theirs.”

DeepSeek’s development is fuelled with funding from its sister hedge fund High-Flyer. Its funds have returned 151 per cent, or 13 per cent annualised, since 2017, and were achieved in China’s battered domestic stock market. The country’s benchmark CSI 300 index, which tracks China’s top 300 stocks, has risen 8 per cent over the same time period, according to research provider Simu Paipai.


In February, Beijing cracked down on quant funds, blaming a stock market sell-off at the start of the year on their high-speed algorithmic trading. Since then, High-Flyer’s funds have trailed the CSI 300 by four percentage points.

High-Flyer and DeepSeek did not respond to requests for comment.

The quant fund got its start in a Chengdu apartment, where founder Liang Wenfeng, a computer science graduate of Zhejiang University, experimented with automated stock trading, according to local media reports. His profile in China’s asset management association registry says he was a freelancer until 2013, when he incorporated his first investment firm.

By 2021, all of High-Flyer’s strategies were using AI, according to manager Cai Liyu, employing strategies similar to those pioneered by hugely profitable hedge fund Renaissance Technologies. “AI helps to extract valuable data from massive data sets which can be useful for predicting stock prices and making investment decisions,” he said during a roadshow that streamed online that year.

Cai said the company’s first computing cluster had cost nearly Rmb200mn and that High Flyer was investing about Rmb1bn to build a second supercomputing cluster, which would stretch across a roughly football pitch-sized area. Most of their profits went back into their AI infrastructure, he added.

The second cluster, now complete, connects more than 10,000 of Nvidia’s cutting-edge processors with servers and storage, giving DeepSeek the computing power to train a large model, according to archived versions of the company’s website. The group acquired the Nvidia A100 chips before Washington restricted their delivery to China in mid-2022.

“We always wanted to carry out larger-scale experiments, so we’ve always aimed to deploy as much computational power as possible,” founder Liang told Chinese tech site 36Kr last year. “We wanted to find a paradigm that can fully describe the entire financial market.”

The company is one of six Chinese groups with more than 10,000 A100 processors, commonly believed to be a computational threshold for self-training large models, according to Guosheng Securities. The other five are all Chinese tech giants, though their collective computing power pales in comparison to US companies. Meta has said it will have computing power equal to nearly 600,000 of Nvidia’s more advanced H100 chips by the end of the year.

Tests run by research groups rank DeepSeek-V2 among the top LLMs in the world. Researchers at the University of Waterloo in Canada scored it among the top 10 models behind OpenAI’s GPT-4, Anthropic’s Claude and Chinese rival 01.AI. 


DeepSeek’s model is also open source, allowing AI researchers to inspect its structure and copy it.

“The model’s architecture is very unique,” said Andrew Carr, chief scientist at Cartwheel, an AI animation start-up based in the US. “DeepSeek has taken this idea called mixture of experts, where you split up a model into smaller chunks, to the extreme, with hundreds of small experts.”

Carr said the model came close to matching Meta’s latest Llama 3 model but with lower pricing. Its price is about 100th the cost of OpenAI’s GPT-4 and a fifth of Anthropic’s Claude 3 Haiku.

Tiezhen Wang, an engineer at New York-based AI research hub Hugging Face, said DeepSeek’s team had reduced what the model needed to remember while allowing it to “handle more tasks at the same time without slowing down”.

Inside China, the pricing strategy has helped sign up developers. Wang Zixu, a programmer based in northern China, said he had switched from using OpenAI’s GPT-4 for coding help to DeepSeek because of the lower prices.

Even with the cost advantage, some industry experts said DeepSeek could be losing money at its low price point. Its computing power may also fall further behind rivals as Nvidia releases new chips banned from export to China.

Still, High-Flyer’s AI offshoot is aiming to be the first to achieve artificial general intelligence, the point at which machines have greater cognitive capabilities than humans.

“We believe AGI is the violent beauty of model x data x computing power,” said one job recruitment advertisement for DeepSeek. “Embark on a ‘deep quest’ with us on the journey towards AGI!”

FT : The graphite fight: US tariffs trigger race to build non-Chinese supply cha

The graphite fight: US tariffs trigger race to build non-Chinese supply chain
Key material for electric vehicle batteries has been neglected by industry to date, giving China almost 100% of market

Graphite has become the latest resource to cause trade tensions between the US and China, with Washington putting pressure on EV and battery makers to build a new non-Chinese supply chain for graphite anodes, a crucial component in electric vehicle batteries.

The United States Trade Representative has announced that 25 per cent tariffs on natural and synthetic graphite anodes from China will be applied from this month, despite Chinese production accounting for 97 per cent of global anode output after years of under-investment in the material by the west.

The move follows the announcement in May of US tariffs of 25 per cent, due to kick in from 2026, on natural graphite — a form of carbon — processed in China.

That came soon after US officials granted a two-year waiver from January 2025 allowing vehicles with batteries containing Chinese graphite to continue to qualify for generous federal subsidies under the Inflation Reduction Act (IRA), President Joe Biden’s flagship climate legislation, following warnings that the subsidy regime could collapse without an exemption.

“Graphite has emerged as Washington’s ‘Achilles heel’ in its trade confrontation with Beijing,” said Georgi Georgiev, battery raw materials analyst at consultancy Fastmarkets.

“The US government was forced to acknowledge that battery makers need Chinese graphite in the short term if any vehicles are to qualify for the IRA tax credits,” he added. “But it is firmly determined to close that loophole as soon as possible, giving companies just a few years to construct a brand new supply chain almost from scratch.”

Powdered anodes, which store the charge in lithium-ion batteries, are most commonly made from a blend of mined natural graphite and synthetic graphite, which is produced by heating needle coke, a petroleum product, to temperatures of up to 3,000°C.


While natural graphite — a form of carbon — is relatively abundant, almost all natural graphite processing and 98 per cent of synthetic graphite production for battery-grade anodes is presently conducted in China.


Ross Gregory, a Seoul-based partner of consultancy New Electric Partners, noted that anodes made up approximately 50 per cent of a battery cell’s volume but only 10 per cent of the cost, meaning that companies seeking to build an IRA-compliant battery supply chain have focused instead on procuring higher-value minerals such as lithium, nickel and cobalt used in battery cathodes.

“Graphite anodes are a necessary component for all lithium-ion batteries, but there has been a perception that they are too cheap, too dirty, and too easy to secure from China to justify making the necessary investments,” said Gregory.

“As a result, the job of securing alternative sources was almost completely neglected by non-Chinese EV manufacturers, battery makers and battery material producers even after the IRA was passed in 2022,” he added. “Now Washington is trying to force their hand with the tariffs and the threat of the graphite waiver expiring in a couple of years.”

Analysts note the US is a net exporter to China of the needle coke used to make synthetic graphite and its industry should be able to convert existing facilities to produce battery-grade anode powders within three to four years. Optimists also note that natural graphite can be found across the world, with large deposits in Canada and Mozambique.

But very few analysts believe non-Chinese companies will come close to replicating China’s graphite anode capacity by the time the US government’s IRA graphite waiver is due to expire at the end of 2027, meaning that either the waiver will have to be extended or few vehicles will qualify for the credits, further hampering the country’s EV transition.


Fastmarkets projects that even by 2030, just 40 per cent of US anode demand will be met by IRA-compliant projects.

“Two years is not enough,” said Sam Adham, a battery supply chain expert at analysis firm CRU Group.

“Non-Chinese producers have a high barrier to entry: issues around financing, long lead times, the need to secure environmental permits, energy costs, and a lack of specialist knowhow when compared with their Chinese competitors,” he added, noting that they will be expected to supply customers in Europe, South Korea and Japan as well as the US.

Tim Bush, a Seoul-based battery analyst for UBS, noted that non-Chinese EV manufacturers, battery makers and materials producers now faced the prospect of being forced to make huge investments in a new graphite anode supply chain just when they were trying to cut costs due to the lower than expected take-up of electric vehicles in the US and Europe.

“US automakers are making losses on EVs, while Korean battery companies and materials companies are cutting or considering cutting capacity,” said Bush, noting that Posco Future M, the only Korean anode producer, received all of its processed graphite from China and recently halved its natural graphite expansion plan.

Eduardo Gonzalez, chief financial officer at Urbix, a US graphite refiner, said the reluctance of companies to invest in non-Chinese graphite had been “difficult to understand”, but that “market dynamics will lead to an eventual scramble for these products”.

Gregory added that in the meantime, Beijing had the ability to restrict graphite or anode exports in retaliation for US measures, or conversely to increase supply to bring down prices further, threatening the viability of non-Chinese projects. China fired a warning shot in October last year by introducing a requirement for special export permits for three grades of graphite.

“Building a non-China, IRA-compliant anode supply chain needs to be done, and it will be done eventually,” said Gregory. “But it will be done slowly and at a tremendous cost.”

FT : Energy boss calls for urgent reforms to hit UK green targets

Energy boss calls for urgent reforms to hit UK green targets
Scottish Power chief executive warns planning delays and skills shortages are holding back green transition

The boss of one of Britain’s biggest energy companies has urged whoever wins the general election to “tackle head-on” the practical and bureaucratic problems holding back the UK’s green transition. 

Keith Anderson, chief executive of Scottish Power, said ministers needed to get to grips with issues ranging from skills shortages to lengthy planning and procurement processes that are slowing down the development of projects such as hydrogen plants and electricity cables. 

“We’ve had lots of reviews . . . lots of conversations,” he said in an interview with the Financial Times. “In reality what has changed? Nothing.  

“We are still using the same processes, we’re still having all the same conversations. Nothing has changed. Nothing’s got faster and nothing is any different.”

Scottish Power, part of Spanish energy giant Iberdrola, owns and invests in wind turbines, electricity grids and solar panels around the country, and also supplies energy to about 4.6mn households.

Anderson, who is a member of Prime Minister Rishi Sunak’s council of business advisers, said the UK had a “colossal” opportunity in clean energy but needed to “get on the front foot”. 

“My frustration is, there are easy answers out there which do not cost money,” he added, highlighting reforms such as to the planning system as one area that could make a big difference. 

“Fundamentally the process doesn’t work properly — you’re looking at these huge, big infrastructure projects; we need to move faster [ . . .] short circuit the process and get everybody in the room.” 

Skills shortages were another area of concern, he said. “We need to get moving on it before it becomes a massive constraint.”

His comments reflect wider concern in the energy sector that the UK is not set up to deliver its ambitious decarbonisation goals. 

The UK is legally committed to cutting its emissions to net zero by 2050, with Sunak’s government setting an interim goal of decarbonising the electricity system by 2035. 

The opposition Labour party, which is ahead in the polls ahead of the general election on July 4, wants to do so by 2030. Both require a rapid increase in renewable power generation, with Labour aiming to quadruple offshore wind, triple solar power, and double onshore wind capacity.

Aurora Energy Research said in a report published in March that the UK was “well off course” for both the 2030 and 2035 targets, and power system decarbonisation would not be achieved until 2051 without a “major change of policy and market interventions”. 

The 2035 target required “significant new interventions”, the consultancy added, while doing so sooner was “likely to be infeasible”. 

If elected, Labour has pledged to set up a new state-owned energy company, Great British Energy, to help boost renewables by co-investing alongside the private sector. 

Anderson urged it to focus on less mature technologies and areas where “the government can have the biggest difference”, adding: “If all you are is another bank, I don’t need another bank. It’s not going to change the planning process.”

He stressed that parent company Iberdrola was “incredibly supportive” of the UK, but noted the country faces competition from around the world. 

“If Spain or America moves faster, then money will flow there faster,” he said. “That doesn’t mean we’re not going to spend the money in the UK. 

“But I would rather spend this year, next year and the year after, than have to wait five years to get something through the planning system.”

A Conservative party spokesman said the Conservatives had taken “bold action to deliver a 500 per cent increase in renewables connected to the grid since 2010” and are “backing £100bn of investment into the energy industry”.

Labour said it was confident its plan to decarbonise the electricity grid by 2030 could be delivered, pointing to the target’s endorsement by Sir Patrick Vallance, former chief scientific adviser. Its plans would “cut bills and make our country energy independent” a spokesman added.

FT : Giorgia Meloni puts brakes on Italy’s solar energy rollout

Giorgia Meloni puts brakes on Italy’s solar energy rollout
Prime minister says photovoltaics are threatening nation’s ‘food security’, but farmers disagree

Italian Prime Minister Giorgia Meloni has always insisted she is not a climate change denier and that her rightwing government is committed to greener sources of energy.

But her coalition is putting the brakes on the rollout of solar panels on farmland, which Meloni has described as a “threat to our food sovereignty” — a claim refuted by some farmers and solar energy experts.

The government last month issued an emergency decree banning ground-mounted solar panels from land zoned for agriculture. Instead, Rome will require more costly installations of at least 2.1 metres above ground, to allow cultivation underneath.

Meloni described the decree as a “pragmatic measure that corrects . . . the ideological eco-follies of which Italy and its farmers have been victims”.

But green power advocates say the restrictions, which must still be approved by parliament, raise serious doubts about Rome’s ability to fulfil its international commitment to reach 80GW of solar capacity by 2030. 

“It’s a paradox: the cheapest energy source right now is solar,” said Paolo Rocco Viscontini, president of Italia Solare, an industry group. “Rather than being happy to say ‘hey, we have the solution. Let’s work together to spread this energy source over the country,’ new problems are created.”

Renewable energy experts point out that the elevated “agri-voltaic” panels will be 20 to 40 per cent more expensive to install than traditional ones, undermining the sector’s competitiveness. The decree also bars farmers from leasing their land to solar developers and instead requires them to invest directly in the renewable energy projects on their properties.

Patrizio Donati, co-founder and managing director of Rome-based solar power start-up Terrawatt, said: “If we create these conditions that make investment unappealing, we’re not going to be able to do this energy transition in time.”

The latest initiative was championed by agriculture minister Francesco Lollobrigida, Meloni’s brother-in-law, over objections from Italy’s energy minister. It follows a national frenzy whipped up by rightwing television commentators claiming that iconic Italian products — from Prosecco to speciality tomatoes — were threatened by rapacious photovoltaic companies.

Many farmers scoff at such claims, pointing out that not all land zoned for agriculture is viable for crops, particularly in places where there is no irrigation.

In the southern region of Basilicata, 61-year old Emanuele Bocchicchio said that at present he left about half of his land fallow because of increasingly hot weather, drought and rising cultivation costs.

Last year, Bocchicchio agreed to lease out 44 hectares of his unused land to Terrawatt, which plans to build two 10MW solar plants for which he would receive annual rental income of €3,000 per hectare once the project is approved.

“Photovoltaics are a salvation for us — a gift from the heavens,” Bocchicchio said. “We should ask [Lollobrigida] why he has this hatred for solar panels. What obscure mechanism is behind this? It’s inexplicable.”

He also said farmers should be given more leeway to figure out how to use unirrigated land. “No one is obliged to give their land for solar panels — it’s a free choice,” he said. “In marginal areas like this, it’s vital. But there is no freedom here.”    

Though Italy has 16mn hectares of designated farmland, almost a quarter is lying fallow because of poor quality soil, lack of irrigation, fragmented land holdings, labour shortages or lack of interest by urban landowners in investing in agriculture.

“This government has to look at the reality of the farmers: every year the climate conditions are a little bit worse,” said Camillo Rossi, a lawyer who has leased about half of his family’s 200 hectares of unirrigated farmland to a company now generating 50MW of solar power on the site.

An usually hot, dry spring destroyed most of his fledgling crops this year, he said. Renting his land for solar panels was helping to offset these losses. 

“This land is beautiful to see, but it’s poor and, unfortunately, we don't have the potential to irrigate,” he said. “That’s what determined the choice of solar panels.”

Italia Solare estimates that the country needs just 1 per cent of fallow farmland to fulfil its 2030 solar commitments — but warns the new rules will impede the rollout. “We have such a nice solar power potential but the political class has never been capable of managing it,” said Viscontini.

Italy’s influential agribusiness lobby Coldiretti has hailed the ban and says the government must invest in irrigation rather than allow private developers to use marginal drylands for solar parks.

“We cannot accept the shortcut of photovoltaics,” said Luigi Pio Scordamaglia, Coldiretti’s director of international policies. “We don't want to accept the inertia of an administration that decided not to invest and improve irrigation. We want to again realise the full productive potential of that land.” 

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Wall Street has become increasingly involved in the world of sports

Cover:
-Wall Street has become increasingly involved in the world of sports, with private-equity executives becoming go-to buyers of marquee sports teams. Investment firms are acquiring stakes in teams, leagues, and global competitions, including women's soccer, professional bull riding, lacrosse, and sailing. Professional investors are also creating tertiary sports businesses, leveraging broadcast, digital, and scripted series rights, as well as bespoke stadium concessions. The influx of Wall Street money into sports is becoming more global, with wealthy individuals controlling or owning significant slices of half of Britain's 20 Premier League teams, including those with ties to investment firms. The influx of money is easy to see, as private-equity firms and their honchos have mountains of money, which teams in newer leagues or women's sports covet.

Interview:
-Evan Greenberg, the CEO of Chubb, has a strong connection to Warren Buffett, the CEO of Berkshire Hathaway. Berkshire Hathaway recently disclosed that it had acquired a 6% stake in Chubb, one of the world's largest insurance companies, at the end of 2023. Chubb's stock has returned about 40% in the past year, besting the S&P 500's 25% total return and earning the company a market capitalization of $110B. The insurer's superior financial performance is attributed to its sober underwriting practices and conservative management of its $140B investment portfolio. Greenberg, the son of former AIG CEO Maurice "Hank" Greenberg, served on various nonprofit boards focused on international affairs and Asia. Chubb is the No. 1 provider of commercial lines in the U.S. and is known for its high-end Masterpiece homeowners insurance. Greenberg serves on various nonprofit boards focused on international affairs and Asia.

Tech Trader:
-Nvidia recently surpassed Apple as the world's second-most valuable company, with Nvidia's shares rallying 144% this year and its revenue growing 262% year over year in its most recent quarter. Apple's latest quarterly revenue was down 4%, and sales nearly quadrupled over five quarters. This highlights the importance of CEO Tim Cook's keynote address at Apple's 2024 Worldwide Developers Conference, which will focus on AI. Apple has been including neural processing capability in iPhone and Mac chips since 2017, using AI for facial recognition, fingerprint scanning on Macs, and improving iPhone photos. Apple has published papers on large language models and made vague promises of AI magic to come.
Apple seems unlikely to directly take on OpenAI, Microsoft, Meta Platforms, Alphabet's Google, or Anthropic in large language models. Instead, Apple is likely to partner with an LLM provider, similar to its longstanding search relationship with Google. The smart speculation is that Apple will join forces with OpenAI and its cloud computing partner Microsoft. However, the exact nature of this relationship remains murky.

The Trader:
-In 2023, the S&P 500 will be remembered as the year of the Magnificent Seven, consisting of Google parent Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. These stocks collectively powered the rally that carried the S&P 500 to a 24% gain. However, the worry about the Big Three has been overblown as these stocks rarely moved in lockstep, resulting in less concentration risk in the market. The performance of the Mag 7 has diverged, with Tesla deep in the red this year and Apple lagging behind the S&P 500. Instead, the top three stocks in the S&P 500—Microsoft, Nvidia, and Apple—have accounted for 20% of the index for six days in the past two weeks. This is the first time on record that the S&P 500's top three stocks were worth more than 20% since at least 2000. Bear Traps Report founder Larry McDonald argues that the index's largest three stocks have never accounted for a fifth of the S&P 500 before in its history, and in the past 40 years, the top 10 components' weight has tended to hover around the 20% mark.
-Energy demand has been weak in recent weeks, leading to concerns of a coming oversupply of crude oil. This has resulted in big losses for oil and energy stocks, which have lagged this year. Brent crude had its worst day since December, and the Energy Select Sector SPDR exchange-traded fund had its worst daily performance since April. However, oil's action is not indicative of a recession, as an economic slowdown is usually preceded by a big spike in oil prices. Falling oil prices have a twofold benefit by giving consumers more money to spend, taking pressure off inflation, and making a Federal Reserve interest-rate cut this year more likely. Despite the cold comfort for energy investors, it is possible for the sector to make a comeback, particularly since there might be more wiggle room than initially apparent in OPEC's announcement. RBC Capital Markets Head of Global Commodity Strategy Helima Croft believes that the only thing "set in stone" is the UAE's increase next year.

Features:
-Saudi Aramco sold $11.2B worth of shares, providing the government with cash and broadening its investor base to include more European shareholders. However, recent oil market dynamics show that Saudi Arabia's role as the most powerful member of OPEC may conflict with its role as a maximizer of shareholder value. The Aramco offering was priced at 27.25 Saudi riyals (about $7.20), the lower end of the expected price range. The Saudi government owns the majority of Aramco shares. OPEC is struggling to take back control of the oil market from companies ramping up production. OPEC and its allies, including Saudi Arabia, plan to bring back some production this October, eventually adding 2.2M barrels over the coming year.
-Americans are becoming increasingly concerned about the economy, with retail sales in April remaining flat compared to March. This has led to a decline in consumer stocks, with the Consumer Staples Select Sector SPDR ETF up 9% this year but still trailing the broader market. However, Costco and Walmart have seen significant increases, up nearly 30% this year, beating the broader market and trading at record highs. These retail giants are classified as staples companies, selling everyday household goods and groceries. Concerns about high inflation may be impacting some big consumer goods firms, while concerns about the rising popularity of weight-loss drugs may not benefit food and beverage companies. However, consumers are still looking for bargains at Walmart and Costco, which fuels their sales and profits. Walmart Chief Financial Officer John David Rainey stated that many consumers are spending more of their paychecks on non-discretionary categories and less on general merchandise. Costco Chief Financial Officer Gary Millerchip added that the company is intentionally creating incremental value for its members by delivering lower prices wherever possible.

Europe:
-The European Central Bank (ECB) has announced its first cut since the Covid-19 pandemic, moving ahead of the Federal Reserve. The move, which had been anticipated for months, brings the ECB deposit rate to 3.75%. The move is not the first by a central bank, with Canada, Switzerland, and Sweden also making similar cuts earlier this year. The Federal Reserve has not yet lowered rates in this cycle due to stronger inflation in the US and stronger economic growth in Europe. However, ECB President Christine Lagarde stated that the ECB is not committing to any future interest rate path. The STOXX Europe 600 briefly touched an intraday high as the ECB announced the cut, but the euro rose against the dollar, reflecting shifting views on when the ECB might cut again. This leaves the question of where the ECB will go from here.

Emerging Markets:
-TJX, an off-price retailer, has announced plans to expand its global footprint through a joint venture in Mexico. The deal, which would own 51% and 49% of Grupo Axo, is expected to close later this year. TJX has taken a stake in Axo's bricks-and-mortar business, which includes over 200 stores under the Promoda, Reduced, and Urban Store banners. CEO and President Ernie Herrman said that TJX sees "excellent potential to grow in another region and deliver our value proposition to a growing population of fashion- and value-conscious consumers in Mexico." TJX shares are up 1.3% in Friday afternoon trading and have gained 5% this week, on pace for their best week since November 2022. The company's first-quarter earnings showed lower-than-expected same-store sales of a 3% gain year over year, beating Wall Street's 88 cents estimate. TJX believes the deal will not impact its current fiscal year and has over 4,900 stores across nine countries.

Commodities:
-Cleveland-Cliffs, an American steel maker, experienced a rare double downgrade on Thursday, with analyst Gordon Johnson cutting his rating to Sell from Buy and slashing his price target to $10.13 from $27.20. Johnson is concerned about a slowing US economy, more steel capacity, and mismatched Wall Street expectations. The slowing economy could hurt steel demand, and Johnson sees US steel capacity expanding by about six million tons soon. The Wall Street consensus compiled by FactSet is $363 million. Cleveland-Cliffs shares were down about 20% over the past three months, leaving them down about 21% year to date. The average analyst price target for Cleveland-Cliffs stock is about $21 a share, while the Sell-rated analyst average price target is lower, averaging about $13. The stock is now up 0.7% at $16.23 in midday trading, while the S&P 500 and Dow Jones Industrial Average were flat and up 0.1%, respectively.

Streetwise:
-Nvidia has surpassed Apple's market value by over $3T, causing investor attention to shift to other chip stocks. Broadcom, a California-based company, has also risen to the No. 10 spot in the S&P 500 index by market value. Broadcom's growth is attributed to its growing free cash flow and dividend yield of over 4%. The company's 2018 purchase of Computer Associates was viewed as straying too far from its core expertise in chips. Broadcom has since bought Symantec in 2019 for cybersecurity and VMware last year for cloud computing. Broadcom is now up 900%, 700 points more than the S&P 500, and is now the No. 2 chip maker behind Nvidia. However, the stock-picking expert suggests forgetting Broadcom and selling everything but a toothbrush and change of clothes, and letting it ride on Nvidia, which has seen a 7,000% increase over the same stretch. Broadcom's recent gains have little to do with the attributes mentioned and much to do with artificial intelligence.