WWD : In Luxury, Megabrands Still Have the Upper Hand: Bernstein Analyst Luca So

In Luxury, Megabrands Still Have the Upper Hand: Bernstein
Analyst Luca Solca argues that scale still matters, though the challenge remains "second-generation luxury consumers."

Luxury’s biggest players would be wise to focus on recruiting young consumers in the current stagnant market.

In a research report issued Monday, Bernstein analyst Luca Solca argued that “the risk that children will want to define their identity differently from their parents — and therefore they may want to use different brands — is more material” than the risk of existing consumers ditching the luxury megabrands they currently favor.

Solca was responding to a recent report by Bernstein’s general consumer analysts suggesting that billion-dollar brands are dying.

“Across consumer categories, the biggest brands are losing share to more nimble, niche challengers, who leverage the lower barriers to entry and take advantage of the changed consumer preferences, brought about by three decades of globalization and digitalization,” they wrote. “The very source of these megabrands’ growth [globalization and digital] is now the source of their downfall by lowering costs, disrupting traditional distribution and marketing channels, and accelerating product cycles and commoditizing innovation.”

According to their calculations, over the last 10 years brands with sales of more than $2.5 billion have lost share around the world due to brand fatigue, stagnating growth avenues and increased competition.

“As global brands scaled, they lost their meaning through overproduction: Nike, Gillette and Ford are no longer the symbols of identity they once were,” the general consumer report said, noting that in the luxury space, smaller niche brands like Miu Miu and Brunello Cucinelli have been outpacing their bigger peers.

In his report, Solca noted that soft luxury brands focusing on the rich — including Loro Piana and Zegna — have run faster than megabrands. Meanwhile, accessible luxury players including Coach, Polo Ralph Lauren and Burberry have benefited from “an ocean of middle-class consumers trading down.”

“Mega-brands like Louis Vuitton resisting trading down and choosing instead different approaches to reignite growth — mass recruiting through sport sponsorships and launch of lower absolute price categories like beauty — have been successful to a point, despite flawless execution.”

Meanwhile, jewelry has retained strong appeal with affluent and middle-class consumers alike because “jewelry has become a lot cheaper relative to handbags and dresses. Jewelry brands were more prudent with their price increases during the post-COVID-19 boom years,” whereas many leather goods players increased prices well above historic averages, Solca wrote.

Adding to the bad situation for megabrands, “young global consumers have been under pressure — the Chinese have suffered slower macroeconomic growth, while Western consumers have endured faster cost of living inflation.” What’s more, “streetwear has almost disappeared overnight.”

Still, in his view, luxury megabrands are more insulated than ones in fast-moving consumer goods and the mass market because they have deeper meaning for consumers and engender greater loyalty: “Consumers identify themselves with the values brands communicate and incarnate.”

What’s more, Europe’s luxury giants benefit from a tighter grip on distribution, higher price discipline and have learned to “avoid the trap of over-exposure and perceived ubiquity.”

“We have seen many smaller brands temporarily rise to fame and then meteorically disappear over the horizon. We have yet to see a megabrand fall off and disappear forever, at least since Pierre Cardin did,” Solca concluded.

FT : UK examines economic hit from loss of access to frontier AI models Urgent a

UK examines economic hit from loss of access to frontier AI models
Urgent assessment comes after Donald Trump blocked foreign national access to Anthropic’s Fable 5

The UK government is urgently assessing the economic and security impacts of consumers losing access to the latest frontier AI models, amid growing concerns about the impact of the threat on growth.

The Cabinet Office has asked the Department for Business, Innovation, Science and Trade to examine the hit to the UK economy if Britons were blocked from new versions of AI models launched by companies such as Anthropic and OpenAI, according to people familiar with the matter. The work is expected to be completed within weeks.

US President Donald Trump’s directive in June that demanded foreign national access to Anthropic’s Fable 5 model be rescinded had fuelled alarm within Britain’s National Security Secretariat about future access, the people said.

While Anthropic relaunched the model globally after temporarily rescinding it, the episode has heightened concerns in Whitehall about the prospect of Britons being denied access to a cutting-edge model available in other locations in future.

Economic security officials want to explore the potential hit to the economy if UK companies could not exploit the latest innovations, as well as the security implications if cyber vulnerabilities in British companies could be exploited by foreign users of cutting-edge AI models before being patched.

The assessment comes as the Home Office has also been reviewing the prevalence of AI in criminal methods, according to government figures.

One government figure said: “When a new AI model is launched, all businesses are immediately looking at how to best use and exploit it. For the UK to be left behind by not having access — even for a couple of weeks — would cause a hit to the economy.”

US Big Tech companies are betting hundreds of billions of dollars that AI will yield huge productivity gains, with the latest systems already able to automate many aspects of white-collar work from software development to routine legal and accounting tasks.

But even though the impact of AI on economic growth is unclear, the cyber security capabilities demonstrated by the latest models from OpenAI and Anthropic have triggered alarm among defence and security experts.

Dame Chi Onwurah, Labour chair of the House of Commons science, technology and innovation committee, said: “It is good that the new government is assessing the impact of being cut off but we also need to see a plan to address unacceptable levels of dependency, and indeed how an acceptable level of dependency is defined.”

Her committee had “repeatedly emphasised that the government needs a realistic plan to achieve sovereign capabilities in critical areas or risk having its access cut off at the whim of its partners”, Onwurah added.

However, Ciaran Martin, former chief executive of the National Cyber Security Centre, said he found the export control experience regarding Fable 5 “reassuring” in some respects.

“What was the consequence? Anthropic took the whole thing off the market, as it couldn’t meaningfully distinguish between nationals and foreigners,” he said.

Martin, who is now a professor at Oxford university, added that he considered it “slightly implausible that an American AI model would be restricted from foreigners”.

But he warned: “The US’s ability to manipulate and leverage the whole AI stack – to try and force countries to bend to its will – could be significant.”

Officials said the UK government was investing to strengthen Britain’s AI capabilities via its £1.1bn AI hardware plan and £500mn sovereign AI fund.

The government said the state took “national and economic security seriously and considers and plans for a whole range of scenarios” and that AI was “at the heart” of its agenda.

“We now have an AI minister at the cabinet table, leading the new AI task force at the centre of government. We’re also building the computing power needed to develop and use advanced AI in Britain, and backing UK companies developing the next generation of AI technologies.”

WSJ : How Wall Street Sussed Out That Situational Awareness Was On the Ropes Fro

How Wall Street Sussed Out That Situational Awareness Was On the Ropes
From whispers of an Anthropic stake sale to strange options moves, traders sensed trouble and swung into action

  • Leopold Aschenbrenner’s hedge fund, Situational Awareness, faced steep losses from tumbling AI stocks and margin calls from lenders in late July.
  • The fund lost about 67% in July, which amounted to roughly $30 billion, after its concentrated long and short stock bets moved against it.
  • To raise cash, Situational Awareness sold the bulk of its leveraged stock portfolio to Citadel at a discount of about 10% to public market prices.

David Mann was in a taxi heading to LaGuardia Airport when he heard the news: Wall Street’s AI wunderkind was in trouble.

It was the afternoon of Wednesday, July 29, and Mann got a call from someone working on behalf of Leopold Aschenbrenner’s hedge fund, Situational Awareness, asking if he wanted to buy a piece of the fund’s stake in Anthropic, the AI powerhouse. A deal needed to be done overnight, Mann was told.

Mann realized what was happening—nobody sells pre-IPO shares in a company valued at nearly $1 trillion unless they are on the ropes.

“Aschenbrenner was being forced to sell,” said Mann, chief executive of the Mannsion Group, a family office that owns stakes in Anthropic and other private companies. “He needed the money and was sounding people out.”

For two years, Aschenbrenner, a 20-something former OpenAI employee, was on a roll. At his peak, his fund controlled some $100 billion in assets, including the enormous sums he was borrowing from banks to supersize his AI stock bets, from semiconductors to software. Buzz that he was an AI Nostradamus helped the effort.

By late July, the chatter had changed—Aschenbrenner was facing steep losses from tumbling AI stocks, and he was desperate for a way out of his investments, according to people familiar with the situation. Banks were issuing margin calls, or demands for more collateral to back their lending. Elite investors including Steve Cohen and Daniel Loeb heard of the Anthropic sale. Short sellers were targeting Aschenbrenner’s favorite stocks.

“It felt like he was being hunted,” says John Pfeffer, co-founder of Pfeffer Capital, a family office that has invested in Situational since its inception.

The swift unwind of Situational shows how quickly information can spread across Wall Street when a trader is in trouble—and how fast it can lead to an avalanche of selling. It is a brutal lesson, too, in the risks of leverage, or investment bets fueled by borrowing, several years after Archegos Capital’s implosion.

Aschenbrenner built his firm on his reputation as an AI soothsayer. Others pointed to lengthy investing track records when launching hedge funds or venture-capital funds; Aschenbrenner’s stature stemmed from a 165-page essay in 2024, “Situational Awareness: The Decade Ahead,” that foresaw the path of AI’s development.

From the beginning, his firm promised to make concentrated bets on stocks that would benefit from AI’s broad adoption, from chip makers to infrastructure providers, while betting against stocks that would be disrupted by AI, including software makers.

“It wasn’t for conservative pension funds and retired teachers,” Pfeffer said. “It was going to be an aggressive bet on AI, we all knew there was going to be volatility.”

Aschenbrenner got a helping hand from Wall Street. Lending to hedge funds is giving bank earnings a boost, and a number of banks were eager to back a new manager trading the market’s hottest theme.

Goldman Sachs financed Situational’s trades from the outset while featuring the fund at its emerging-manager conference at the Orlando Ritz-Carlton in March 2025.

Aschenbrenner didn’t have the pedigree of some other managers. Still, Goldman executives prized Situational, they told clients, though the bank monitored the fund because its portfolio was so concentrated and levered, according to a person familiar with the matter.

Aschenbrenner made the rounds of other banks alongside David Geffen, a former financing executive at BlackRock and Amaranth Advisors who ran a hedge-fund advisory firm, people familiar with the situation said. JPMorgan, Bank of America and Citigroup also lent money to Situational. Morgan Stanley was in talks to add him as a client in the coming months.

Some banks had concerns, though. While investors often hedge risk by holding “long” positions that certain stocks will rise as well as “short” positions that others will fall, Situational’s longs and shorts amplified a bet on a single theme. That is sometimes called a “Texas hedge.”

Banks including Jefferies and Barclays passed on the fund. One prime brokerage executive who declined to take it on as a client after meeting with Aschenbrenner said his unshakable confidence was a red flag.

As it grew from about $1.5 billion in assets under management last summer to over $45 billion at the start of July, Situational borrowed about $3 for each $1 of capital it held, and sometimes even more, people familiar with the matter said, above the leverage used by funds trading such volatile kinds of shares.

Situational also purchased “flex options,” a customized derivative, to amplify its AI trade.

For a while, it relied on a shoestring team that included two analysts, an economist, a director of research and a risk manager. In recent months, the fund hired more experienced executives to run areas such as compliance, investor relations and finance, including Sven Khatri, a former treasury researcher at Citadel.

Investors flocked to the fund, thanks to its outsize returns. By the middle of July, though, investor sentiment around the AI trade had shifted, as advances in cheaper, open-source Chinese models spooked traders. Situational’s lenders began examining their exposure to the firm and its swings in performance. Rival traders said they paid attention to what Aschenbrenner owned, so when those stocks took a dive they surmised that he was in trouble.

Situational had discussed a “crash put” program inspired by Jane Street’s similar program meant to protect against a violent market decline, one person briefed on the program said. One way to achieve that could be to purchase a high volume of puts against a semiconductor index, giving the fund the right to sell at a set price, said market participants.

But stocks that Situational owned as of its most recent filings, including fuel-cell maker Bloom Energy, memory chip maker Sandisk and AI cloud company Nebius, dropped throughout July, then went into free fall starting on Friday, July 24. Software stocks that Situational had bet against, including Adobe, AppLovin and Figma, started to rally, exacerbating losses, people familiar with the situation said. Traders noticed unusually high volumes of put options related to companies meant to protect against the fund’s declines.

That day, Situational sent a second-quarter update to clients telling them it had suffered losses in July but that it was a good time to invest new money in the fund. Rumors spread that the fund was under severe stress, prompting nervous clients to call its office with urgent questions. One investor was told by a fund executive that it was reducing its risk.

As the week of July 27 began, Situational was selling shares to raise cash to meet margin calls from lenders, said people familiar with the matter. Nebius, Bloom Energy, Sandisk and Core Scientific fell between 9% and 24% between Friday, July 24 and Tuesday, July 28.

By Wednesday, July 29, it was an open secret on Wall Street that at least one major fund was “degrossing,” or selling a massive amount of shares to reduce leverage and risk. Each day, prime brokers share reports with their customers with the aggregate details of the portfolios of their hedge-fund customers. That month, the reports pointed to a decrease in leverage in the tech sector, tipping traders off that someone focused on those stocks was likely in trouble.

Scrambling for cash, Aschenbrenner and his team began emergency talks to sell at least part of its $5 billion Anthropic stake. But Situational was constricted: Anthropic had the right to approve of any transfer of its privately held shares, so the fund could only pitch those with existing stakes in Anthropic.

That same Wednesday, Situational approached firms including Sequoia, Greenoaks, Michael Dell’s family office DFO Management, and New York investment firm XN about buying its Anthropic stake, people familiar with the talks said. Situational offered a 20% discount and gave a 12-hour deadline.

The Greenoaks group worked through the night to get the deal done. It was scheduled to close at 8 a.m. the next morning. Anthropic signed off on a sale of the stake.

The investors bidding on the Anthropic stake didn’t realize it, but Situational simultaneously was negotiating a very different deal with hedge funds Citadel and Millennium Management: the sale of the bulk of its stock portfolio.

A Citadel executive reached out to Khatri at Situational on July 28. Talks between the two firms the following day progressed from Citadel purchasing the entirety of Situational’s liquid stock portfolio for cash to the firm only buying Situational’s positions that were financed with leverage, according to people familiar with the discussions.

Ken Griffin joined the conversations from London. Aschenbrenner, sensing there could be upside after his crisis subsided, wanted to keep as much of his stock portfolio as possible.

Citadel won that deal in the early hours of Thursday, July 30, paying a 10% or so discount to public market prices at the time.

That morning, Aschenbrenner reached out to investors who had been expecting to close shortly on the Anthropic stake, saying he had reached a better deal with Citadel, people familiar with those conversations said. Some investors were angry.

Situational and Citadel finished signing documents and trade confirmations around 9:10 a.m., leaving only about 20 minutes before U.S. markets opened.

Situational gave its investors the bad news: The fund lost about 67% so far that month—roughly $30 billion—though it remained up 80% for the year. Its investors are tallying their own losses. Jane Street, the powerhouse Wall Street trading firm that is one of Situational’s investors, lost about $15 billion in July, much of it due to Situational’s troubles.

That weekend, Aschenbrenner wed Avital Balwit, chief of staff to Anthropic founder Dario Amodei, in a seaside ceremony in Carmel, Calif. One reference in a toast, made half in jest, was to Griffin and Citadel for making the day possible, according to an attendee.

Aschenbrenner and his leadership team are in the process of meeting clients to explain how the fund lost so much, so quickly, people familiar with the matter said. The executives said they were doing a postmortem on what had happened, and that the fund was reassessing how much risk it would embrace in the future.

Aschenbrenner’s fund—now managing about $15 billion—is also rebuilding its portfolio. Situational recently invested $400 million in startup Source Foundry and has been buying shares of SharonAI.

FT : Chris Hohn’s hedge fund TCI bets on Italian luxury hotels Billionaire stock

Chris Hohn’s hedge fund TCI bets on Italian luxury hotels
Billionaire stockpicker has stakes in loans to landmark properties in Venice, Capri, Lake Como and Milan

Sir Christopher Hohn’s hedge fund has invested $636mn in loans to ultra-luxury hotels in Italy, betting that room rates will continue to surge as wealthy tourists clamour for stays at a scarce group of prime locations.

Billionaire stockpicker Hohn, one of the world’s most profitable hedge fund managers, is best known for his large bets on companies including Alphabet, jet engine manufacturer GE Aerospace and French infrastructure company Vinci through The Children’s Investment Fund (TCI).

But a little-known slice of the master fund’s $77bn portfolio is dedicated to investing in real estate loans, according to a letter to investors seen by the FT, with the vast majority allocated to luxury Italian hotels.

The investments give Hohn’s fund exposure to Italy’s booming luxury hotel market, which is being fuelled by surging demand from wealthy international travellers and fierce competition among investors for a scarce pool of trophy properties.

TCI’s biggest position in the sector is a $392mn stake in a loan to the landmark hotel Danieli in Venice, a gothic construction overlooking the lagoon which was built in the late 1400s for an elite Venetian family. It has undergone a major renovation after its operator switched from Marriott to the Four Seasons in 2022, with work set to be completed next year.


TCI also has a stake in a $132mn loan to the Hotel Caesar Augustus on the island of Capri, $74mn lent to the Six Senses hotel on Lake Como and $38mn lent to the Mandarin Oriental in Milan, the letter showed. Outside Italy, it has exposure to $62mn in borrowing by the Six Senses hotel in Ibiza. All the hotels are owned by Italian real estate company Gruppo Statuto.

TCI’s master fund does not make the loans directly, instead taking pieces of loans originated by a private credit firm led by investor Martin Frass-Ehrfeld, which manages external money. TCI has a stake in the firm and Hohn is on its investment committee.

Hohn is almost singularly focused on pricing power in his investments, focusing on high-quality companies that can push through inflation-beating price rises and weather competition. He is particularly interested in companies that have monopolies or duopolies.

This philosophy also applies to TCI’s real estate debt portfolio. Revenue per available room — a key metric in the hotel industry — climbed 53 per cent between 2019 and the end of 2025 in Italy, faster than any other country in Europe, according to figures collated by real estate firm Cushman & Wakefield.

That growth was led by the luxury market, as five-star hotels continued to draw in wealthy tourists even as room rates climbed rapidly.


Investors are competing for unique assets, from historic palazzi and former convents to landmark buildings in Rome, Milan and Venice and properties in destinations such as Lake Como and the Amalfi Coast. Tight planning rules and a scarcity of suitable sites have further constrained supply, prompting owners to pour money into converting and upgrading existing properties.

But prices could come under pressure as major hotel groups expand rapidly in the country to meet the surging demand. Major openings last year included Rocco Forte’s The Carlton in Milan and Orient Express La Minerva in Rome, while the new Corinthia Rome opened this February. Venice’s historic Bauer Hotel, which closed in 2022, is preparing to reopen under the ultra-luxury brand Rosewood.

The fund was up 3.5 per cent for the year as of June 30, recovering from losses earlier in the year in aerospace companies and payment services. Hohn’s portfolio of infrastructure, aerospace, payment services and technology stocks remained largely unchanged, the letter showed.

FT : Big pharma warns Germany’s attempts to curb drug prices will backfire Gover

Big pharma warns Germany’s attempts to curb drug prices will backfire
Government says higher mandatory discounts for insurers will save €12bn by 2030

Europe’s biggest drugmakers have warned that Germany’s attempts to curb healthcare costs will undermine one of the country’s few remaining globally competitive industries and cede further ground to the US and China.

The comments from executives at groups such as Merck KGaA and Boehringer Ingelheim come after lawmakers approved plans to save billions of euros through measures including hiking compulsory discounts on some drugs for the statutory health insurance system that serves most of the nation’s workers.

The German groups, together with peers across Europe, say the plans will deter investment in the country, the world’s top exporter of pharmaceutical products, just as a global race to attract research, manufacturing is accelerating.

Chancellor Friedrich Merz’s desire to cut mounting deficits in Germany’s health insurance system could hurt drugmakers at a time when the Trump administration is seeking to ensure prices charged in the US are comparable with those in other developed nations.

The industry is “increasingly viewed primarily as a cost factor within the healthcare system”, said Kai Beckmann, chief executive of Merck, which has invested €2.5bn at its Darmstadt headquarters over the past decade. “Given the deteriorating framework conditions, it is becoming increasingly difficult to justify such investments over the long term.”

The health ministry argues the cuts are necessary to close a projected financing gap of €19bn next year while avoiding a sharp increase in health insurance contributions. Alongside higher rebates, the government wants to limit growth in hospital costs, raise patient co-payments and restrict services covered by insurance.

Germany’s health ministry has estimated that doubling the mandatory manufacturer rebate on patented medicines from 7 per cent to 15.5 per cent will save health insurers about €12bn by 2030.

But drugmakers say any savings from the measures will be modest and come at the cost of weaker investment and innovation, threatening a sector that is home to some of the world’s largest pharmaceutical companies including Bayer, Stada and BioNTech.

The warnings come as Germany’s traditional industrial strengths are already under pressure. Its carmakers and chemical groups are cutting tens of thousands of jobs as they contend with high domestic costs, weak global demand and intensifying competition from Chinese rivals.

Germany’s pharmaceutical exports reached a record €116.4bn last year, accounting for 7.4 per cent of the nation’s sales abroad and generating a trade surplus of almost €43bn, about one-fifth of Germany’s total.

While groups including Sanofi, Roche, Daiichi Sankyo and Vetter Pharma announced plans to invest more than €4bn in Germany in the past three years, some indicators suggest the country’s competitive position is weakening.

Private companies conducted and funded 568 trials in Germany last year, down from 641 a decade ago, according to industry body the Verband Forschender Arzneimittelhersteller (VFA). Once the world’s largest location for such trials after the US, Germany has slipped to fifth position behind China, Spain and Australia.


Companies are also promoting fewer products in Europe’s largest economy, suggesting a lack of confidence that they will command high enough prices to justify the costs of development.

Consultancy Charles River Associates said 175, or a third, of 526 new medicines approved by the US Food and Drug Administration between 2016 and 2025 were not marketed in Germany.

VFA president Han Steutel said government policies were “weakening Germany’s competitiveness” just as investment decisions were being made “in direct competition with the US, China and other European locations”.

Washington’s proposed “most favoured nation” pricing policy, introduced last year to lower US prescription drug prices, could discourage companies from launching drugs in markets such as Germany where medication is cheaper.

US prices were on average three times higher than Germany’s in 2022, while healthcare spending accounted for 17.6 per cent of US GDP last year, compared with 12.7 per cent in Germany.

Médard Schoenmaeckers, Germany head of Boehringer Ingelheim, said the company had been “surprised” by the legislation and would cancel some planned investments. The decision also reflected broader uncertainty over Europe’s policy direction, he said.

Boehringer said in June, ahead of the legislation, it was cancelling about €900mn in planned investments for Germany through 2030. Schoenmaeckers said the decision reflected “the absence of long-term framework conditions”.


“We need to invest more in the US and into China where we see a rapid development of innovation,” he said. “We need to see innovation valued, or we don’t see those investments coming back to Germany or Europe.”

In June, US-based Eli Lilly said it was halving a planned €2.3bn investment in a new weight-loss and diabetes drug manufacturing site in Alzey.

Swiss group Roche, which says it has created 1,800 jobs in Germany and invested approximately €3.8bn since 2020, said it was placing “all future investment decisions” in Germany on hold.

The company told the FT that the new law “imposes a substantial burden on Germany’s research-based pharmaceutical industry and sends a negative signal to companies seeking to invest”.

Benoit Creveau, managing director of Daiichi Sankyo Germany, said while the Japanese drugmaker would press ahead with plans to invest €1bn in its Pfaffenhofen production and development, it was questionable if it would make the same decision under Germany’s “current framework”.

BioNTech, one of Germany’s biggest biotechnology success stories, said extending proposed savings for insurers to preventive medicines and vaccines sent “a signal that prevention, including vaccines, is becoming less important”.

Like many of its peers, BioNTech chose to list on the Nasdaq in 2019 rather than Frankfurt because of the deeper pool of specialist investors.

It relies on US dealmaking to fund growth — BioNTech’s landmark 2025 collaboration with Bristol Myers Squibb is worth up to $11.1bn — while increasingly turning to China for new medicines. It plans to close three out of four German sites that were used to supply Covid-19 vaccines outside the US.

BioNTech’s founders, physicians Uğur Şahin and Özlem Türeci, are planning to leave the company this year and establish an independent business developing the next generation of mRNA technologies. They have not decided if their new venture will be based in Germany.

The country “is not competitive as a production hub any more,” said Peter Goldschmidt, chief executive of generic drugmaker Stada. “You can’t have the lowest tenders and the highest costs.”

FT : Airlines in ‘stand-off’ over price cuts as jet fuel costs ease Carriers are

Airlines in ‘stand-off’ over price cuts as jet fuel costs ease
Carriers are keen to protect the fare increases they brought in after start of Iran conflict

Airlines are locked in a “stand-off” over whether to cut ticket prices as jet fuel costs that soared during the Iran war begin to ease.

With the industry looking to maximise profitability amid a chaotic year, “they’re all hoping nobody blinks first and lowers prices, creating an aggressive fare war in late summer bookings”, said Rick Lewis at BCG. “It’s a stand-off.”

Air fares remain high, buoyed by fuel surcharges introduced after the start of the conflict. If one carrier cuts, others will be forced to follow to remain competitive, and airlines stung by higher fuel costs are watching rivals closely.

“We’re a low-margin business,” said Ben Smith, head of Air France-KLM, pointing to the carrier’s single-digit operating margin. “Where we have an opportunity to maintain [pricing], we would like to maintain that as best we can,” he told the FT. 

The north-west European jet fuel benchmark hit $1,900 a tonne after the Iran conflict began in February, but has remained volatile and is trading at about $1,300, according to pricing agency Argus Media. Brent crude is trading just below $90 a barrel after topping at $114 in March.

European airlines have been partly protected by hedging, unlike their US rivals, which do not hedge their fuel purchases. But all carriers have been hit by the sharp rise in fuel, their largest cost, with higher fares and other cuts offsetting only part of the increase.

Historically passengers, especially those in economy, have been incredibly price sensitive, making it hard for airlines to increase ticket prices. But travel demand has remained high after the Covid pandemic, and this year there has not been a discernible drop in demand despite fares ratcheting up, said executives. 


Ben Minicucci at Alaska Airlines, which this year opened its first route to London’s Heathrow, estimated passengers were “maybe paying 10 to 20 per cent more” than a year ago. “We’re very sensitive and attuned to whether we hit a tipping point with the customer,” he said.  

Part of this is that air fares have been kept low relative to inflation. “If some of these [ticket]prices stick to where we are, and fuel goes back to where it is . . . it could be very good for the airline industry that you’ve got some price stickiness,” Minicucci added. 

Even low-cost carriers saw the same trend. Malaysia’s AirAsia — which does not hedge jet fuel — raised prices by around a third, but “demand only dropped about 10 per cent, which was very encouraging”, chief executive Tony Fernandes said.

Despite the relatively resilient demand and falling jet fuel prices, some airlines are still cutting capacity in a year that the industry’s profitability is expected to halve because of the crisis, according to estimates from the International Air Transport Association. 

Luis Gallego, head of British Airways owner IAG, said: “Pricing is not only linked to fuel price, it’s also about capacity, about demand. We are reducing capacity this year.”

IAG — which also owns Iberia, Vueling and Aer Lingus — is considering its capacity levels for the final months of the year. “Others are doing the same, so at the end, the pricing is going to be related to the capacity that we have in the market,” he added. 

Some airlines that compete directly with Gulf carriers — which are notoriously aggressive on pricing — are using their direct routing as an edge to maximise ticket prices.

For example, European passengers were still willing to pay a premium to fly directly to Australia — albeit often with a fuel stop — compared with flying more cheaply and changing planes in the Gulf, said Qantas chief Vanessa Hudson.

Some in the low-cost market believe price cutting could be a chance to scoop up customers: Malaysia’s AirAsia plans to cut prices back to 5 per cent above its prewar levels. “We want to go back to where they were,” said Fernandes.

In order to recover some of the losses from the jump in fuel prices, the carrier will need to keep fares elevated for a while, but “we’re going to be heading down towards those kind of lower [prewar] fares”, he said. 

Ultimately, much of the airlines’ decisions on fares will be driven by competitors, from traditional peers that raised prices, to Gulf rivals such as Emirates and Qatar Airways that are cutting fares to win back customers.

The Gulf airlines were “extremely aggressive,” said Smith at Air France-KLM.

Their need to attract visitors to the region rather than make a profit meant they did not “always act rationally,” he added, complicating the sector’s efforts in balancing the books during a turbulent year. “We have to deal with those as well”.

FT : Short sellers reap $2bn profit as modular nuclear reactor stocks tumble Unp

Short sellers reap $2bn profit as modular nuclear reactor stocks tumble
Unproven technology won investment from power-hungry AI hyperscalers but has yet to deliver consistent revenues

Short sellers have reaped large profits from betting against small modular nuclear reactor companies, as the collapse of the “hype cycle” that had sent their share prices soaring wipes billions off their market value.

Funds made an estimated $2.1bn shorting three stocks — US-listed NuScale Power, Nano Nuclear and Sam Altman-backed Oklo — over the past year, according to data provider S3 Partners.

The three companies, which are lossmaking and have little or no revenue, surged last year as investors raced to capitalise on growing interest in nuclear energy among AI hyperscalers looking for new sources of power. Regulatory changes and funding announcements from the Trump administration also helped the sector.

But a total of $30.3bn has been wiped off their collective market value since their peak in October last year amid growing concerns over the lack of immediate revenue and the long build-out timelines for the technology.

“The stocks were overinflated in price, based on speculation,” said Adam Stein, director of nuclear energy innovation at the Breakthrough Institute, a climate and energy think-tank.

The sector went through a “textbook hype cycle” last year, he added. “[It is] very typical of a company that is in this early pre-consistent revenue phase.”

Small modular nuclear reactors are assembled from modules built in factories to save time and money, and produce around 300MW or less, compared with more than 1,000MW for traditional reactors.

Only two commercial SMRs are currently operable — in Russia and China, with more than 80 designs in various stages of development.

A key test of investor appetite towards the nuclear sector is expected in the coming weeks, when Holtec International and Westinghouse, two US-based companies with SMR divisions, are expected to list.


Short sellers have piled into bets against the companies based on a view that their shares rose to unsustainable levels, driven by a limited supply of publicly traded stocks and a focus on the potential demand from AI, rather than the time and capital expenditure required to commercialise the technology.

“On the one hand there was some support from the government, and no one wants to bet against Trump, and on the other there was this whole AI [demand] story which everyone was really bullish about [last year],” said Christian Putz, founder and chief executive of investment firm ARR Investment Partners, who has previously shorted Oklo but has since unwound that position.

Around 18 per cent of Oklo and NuScale’s outstanding shares remain out on loan — a proxy for short selling — while almost 30 per cent of Nano’s are on loan, according to S&P Global Market Intelligence.

Meanwhile, X-energy has shed $5.8bn in market value since the surge that followed its initial public offering in April. Short sellers have earned an estimated $67mn from bets against the company since mid-May, according to S3 Partners. The company, which is backed by Amazon and Ken Griffin and has yet to receive full regulatory approval to build its helium-cooled reactor, has 9 per cent of its shares out on loan.

“The sentiment has changed this year, people are far more critical,” said Putz. These companies “have almost zero revenue for the foreseeable future and, on top of that, there are very high capex [capital expenditure] requirements”.


Demand for energy in the US is set to soar over the coming decade, in part due to the rapid development of power-hungry data centres by AI hyperscalers. According to data from BloombergNEF, US data centre power demand is set to climb from 34.7 gigawatts in 2024 to 106GW by 2035.

Big Tech is increasingly turning to the emergent SMR technology to meet its future power needs. In January, Meta struck a deal with Oklo and Bill Gates-backed TerraPower, in which it agreed to make an upfront cash injection to support development of the reactor technology.

The Trump administration vocally backed the nuclear sector last year, pledging to cut red tape and invest tens of billions of dollars to build new reactors and reopen old ones to generate the energy needed to “win” the global AI race. In June, the Department of Energy announced $17.5bn of loans to help rebuild the US nuclear supply chain.

However, timelines for delivery of the unproven reactors remain uncertain. Analysts at BNP Paribas have expressed concerns over shortages of high-assay low-enriched uranium, a special type of nuclear fuel vital for SMRs. The earliest some will come online is mid-to-late 2028, if manufacturers are able to speed up delivery while also satisfying regulators, although the majority will arrive during the 2030s, said Stein at the Breakthrough Institute. 


NuScale, which reported a $96.7mn loss in the first half of 2026, faces a shareholder class-action lawsuit alleging it misled investors, to which it must respond by September 8. It is building a modular light-water reactor based on a more conventional pressurised-water design.

Nano Nuclear — whose microreactors are in the development stage — has never generated any revenue and posted a $14mn operating loss in the first quarter of the year. 

Oklo hopes to deliver commercial power to customers from its liquid sodium rather than water-cooled Aurora reactors. US energy secretary Chris Wright was previously a board member. It has yet to secure a full licence from the US nuclear regulator to build and operate its reactor.

“What we have seen in 2025 seems to me like an industry bubble that is already deflating,” said Siegfried Eggert, chief executive of activist short seller Grizzly Research, who has no short positions against the companies.

“I believe most knowledgeable investors understood for a while that the valuations seemed rather extended given the timeline of this industry,” he added. 

Nano Nuclear said the rise or fall in the share price of companies said little about the success of the underlying business and disputed the “hype cycle” characterisation. Oklo said the company had made “tangible progress” over the past year and expected commercial operation of its Aurora reactor to begin in 2028.

NuScale declined to comment. X-energy did not respond to a request for comment.

WSJ : Iran-Backed Houthis Threaten Coast Along Red Sea Chokepoint The rebels hav

Iran-Backed Houthis Threaten Coast Along Red Sea Chokepoint
The rebels have stepped up attacks near the Bab al-Mandeb Strait and shut down operations at a strategic seaport in recent days

Yemen’s Houthi rebels are escalating attacks along the Red Sea coast, shutting down the strategic port of Mokha.
A missile and drone attacks on the port killed 16 people, wounded 22 and forced more than 1,500 workers off the job.
The shutdown of the port of Mokha makes it harder for anti-Houthi forces to resupply and resist Houthi attacks.

Yemen’s Iranian-allied Houthi rebels are escalating attacks along the country’s Red Sea coast, shutting down operations at a strategic seaport and pushing closer to the Bab al-Mandeb Strait, an important global shipping chokepoint.

The militant group’s recent missile and drone attacks forced the closure of the port of Mokha, a key logistics hub for civilian shipping and for anti-Houthi forces operating along the coast, Yemeni authorities said.

The escalating fighting in Yemen, the worst in the country in years, shows how the war in Iran is fueling instability throughout the Middle East and heightening the risk of further disruption to global energy flows after months in which Iran’s closure of the Strait of Hormuz caused the worst oil supply disruption in recent history.

“This is the most significant escalation in quite a few years, maybe since 2020,” said Adam Baron, a Yemen expert and fellow with New America, a policy institute in Washington.


Baron called the port of Mokha the key logistics hub for anti-Houthi forces on the Red Sea. The Houthis control mountainous terrain inland from the Bab al-Mandeb but not the coast along the crucial waterway, which is held by opposing forces.

Shutting down the port makes it harder for the anti-Houthi forces to resupply and resist Houthi attacks.

The port’s general director, Abdulmalik Al-Sharabi, told Yemeni state media that Houthi attacks hit commercial and service facilities, workshops, equipment and the port’s pier, killing 16 people and wounding 22. More than 1,500 workers are off the job as a result of the shutdown, he said.

A Houthi attack last week killed four workers on a cargo ship in the Bab al-Mandeb, which links the Red Sea with the Indian Ocean and is an important alternative route for Saudi oil exports that would otherwise be stranded behind the Iranian chokehold on the Strait of Hormuz.

Houthi attacks on shipping in the Bab al-Mandeb threaten to intensify Iran’s strategy of disrupting global energy supplies to put economic pressure on the U.S. and its allies to end the war.

Yemen’s internationally recognized government, which is supported by Saudi Arabia, says it is fighting back. Deputy Defense Minister Samir al-Sabri said Sunday that a large number of Houthi fighters had been killed along the front lines in the regions of Marib and Taiz.

“New fronts will open in areas within the Houthis’ own sphere of influence,” he said.

The Houthis are part of an array of militia groups throughout the Middle East that receive weapons and training from Iran and its Islamic Revolutionary Guard Corps as a part of Tehran’s strategy to project power in the region. The group has grown closer with Iran in recent years but is seen as having more independence from Tehran than other militant groups like Lebanon’s Hezbollah.

The Houthis had remained largely on the sidelines of the current war between the U.S. and Iran until a ceasefire in Yemen unraveled in July. Fighting escalated in the country after warplanes from the Saudi alliance bombed the international airport in the Yemeni capital to stop a plane carrying a delegation of Houthi officials returning from Iran from landing.

Yemen fell into a civil war after the Houthis, a militia based in the country’s north, seized control of the capital San’a in 2014, a few years after a popular uprising that ejected a longtime autocrat from power during the 2011 Arab Spring.

The group advanced into the major port city Aden just outside the Bab al-Mandeb in 2015 but was pushed back by opposing forces with the support of Saudi Arabia and the United Arab Emirates.

Saudi Arabia and a coalition of other Arab countries carried out a campaign of airstrikes on Yemen, further destabilizing the country but failing to dislodge the Houthis from power. The group today remains in control of the capital along with a swath of the rest of the country stretching along the Red Sea coast.

Last month, the Houthis declared a blockade of Saudi Arabia’s nearby ports and began a series of attacks on shipping in the Bab al-Mandeb.

The attacks have further stressed global supply chains while Iranian threats have cut into Persian Gulf oil and gas exports and the escalating conflict resulting from the Russian invasion of Ukraine is disrupting key shipping lanes for energy and food in the Black Sea.

Shipping industry analysts said traffic through the Bab al-Mandeb continues despite the attack.

From Aug. 10 to 16 there were 254 confirmed transits through Bab al-Mandeb, up slightly from the previous week when there were 238, according to data from the global energy analytics company Kpler.

“It’s an extremely complex situation,” said Naveen Das, a senior analyst at Kpler. “Despite the risks, it still seems, I would say, a fairly resilient picture in the Red Sea.”

FT : BHP’s copper profits outstrip iron ore for first time Annual earnings surge

BHP’s copper profits outstrip iron ore for first time
Annual earnings surge to $33bn, driven by booming demand for data centres and energy networks

BHP, the world’s largest mining company, reported booming growth for the year to June as copper overtook iron ore as its primary profit driver for the first time on an annual basis.

The Australian group said that profits generated from its copper mines rose by 48 per cent to $18bn. That accounted for 54 per cent of its total underlying earnings before interest, taxation, depreciation and amortisation of $33bn, up 27 per cent over the previous 12-month period.

BHP raised its dividend for the year to $1.72 — a 56 per cent increase and the highest for four years. Net profit increased 9 per cent to $9.8bn while revenue was 15 per cent higher at $58.8bn.

“Copper is the engine that is driving BHP’s growth,” said chief executive Brandon Craig, who was presenting his first annual results after being promoted earlier this year to take over from Mike Henry. 

BHP shares opened almost 4 per cent higher in Sydney on Tuesday, bringing the rise this year to about 40 per cent and valuing the company at $232bn.

Glyn Lawcock, an analyst with Barrenjoey, said that copper earnings growth had exceeded expectations and offset a slightly weaker iron ore and coal performance.


Demand for copper has been driven by increased investment in data centres and energy networks. BHP expects that annual copper demand will increase to 50mn tonnes by 2050 from the current 34mn tonnes. 

BHP, which mines copper in South America and South Australia, has also benefited from the byproducts mined alongside the red metal, with revenue generated from gold, silver and uranium up 45 per cent to $4.5bn for the year. 

The miner described copper as its “biggest growth opportunity” and said that the cash generated by its existing operations meant it could fund growth projects. “The copper growth is entirely self-funding over the next five years,” finance chief Vandita Pant said on a media call.

BHP failed to take over Anglo American under Henry and was this week linked to interest in Canadian uranium miner NexGen Energy.

The company already supplies 5 per cent of the world’s uranium but Craig said it remained a byproduct. Although he did not comment on takeover speculation, the chief executive said BHP was “pretty happy” with its four core commodities of copper, iron ore, potash and metallurgical coal.

Moreover, Craig said that the return on organic projects remained superior to mergers and acquisitions. The cost per tonne of BHP’s existing projects ranged from $16,000 to $30,000 compared with about $100,000 to acquire a pure-play copper producer, he said. “That’s almost talking a 5-to-1 factor building it compared to buying it.”

The company said its outlook remained positive despite cost pressures across the mining sector following the Iran war and industrial disputes at some of its Australian sites. Craig said that he did not expect the industrial action to have a negative effect on its performance.

“Demand for what we mine is building,” Craig said, referring to copper and iron ore needed for Chinese steel production — the lifeblood of BHP’s growth for two decades. China is expected to produce about 1bn tonnes of steel a year as the world’s second-largest economy continues to invest in its power grid. 

BHP’s outlook pointed to weaker Chinese economic growth in recent months compared with a “strong start” to 2026, but expects that growth will remain broadly consistent with the official 4.5 to 5 per cent target range for the year due to increased fiscal support from the government.

The company said that property and domestic demand remained soft, but had been offset by stronger export activity.

BHP also expected growth in India to moderate due to high energy costs and weather-related disruptions.

The Information : Arm CFO Eyes Deals as Chip Building Bring New Challenges

Arm CFO Eyes Deals as Chip Building Bring New Challenges

The Takeaway
  • Arm’s soaring share price provides firepower for acquisitions.
  • Selling AI server chips introduces new capital and supply chain challenges.
  • Demand for Arm’s AI chips exceeds expectations, but supply is constrained.

Arm shares have more than doubled this year as the U.K. company has benefited from demand for the central processing units it designs and a new AI chip it is selling. And that soaring share price has given the SoftBank-controlled company, now worth $300 billion, more firepower to do acquisitions.

In the past, Arm has mostly made small purchases, such as last year’s $265 million deal for networking startup DreamBig. It’s likely to stick to this kind of acquisition in the future, Arm Chief Financial Officer Jason Child said in an interview. But he indicated the company hasn’t ruled out bigger ones. That’s especially the case as its decision to sell its own chips, not just license its designs to companies like Nvidia and Apple, forces it to grapple with new growth and the challenges that come with it.

“Delivering silicon is definitely more complicated” than licensing designs, he said.

Arm announced in March that it would start selling CPUs for AI and had lined up Meta Platforms and OpenAI as customers. The company, which generated $4.9 billion in revenue in its last fiscal year, has said it expects more than $2 billion in customer demand for the new chips across fiscal 2027 and 2028. It’s one of many new entrants to developing AI chips, including Microsoft, Meta, OpenAI and Anthropic.

Child said the company’s timing to launch a specialized CPU for AI was fortuitous. The popularity of OpenClaw, open-source software for creating AI agents, has helped set off a frenzy for the personal assistants. These require cloud providers to draw on more Arm-designed CPUs, which use software tools to perform tasks over extended periods. These workloads rely heavily on memory and system orchestration of CPUs. Arm-designed CPUs also sit next to Nvidia’s graphics processing units in servers that developers use to train AI models.

The spike in CPU demand has boosted the fortunes of Intel, AMD, Nvidia and other CPU sellers but put further strains on underlying chip components, such as memory. And as a newcomer to selling chips, Arm can only command a relatively small amount of chipmaking capacity from factories like those run by Taiwan Semiconductor Manufacturing Co.

When it comes to selling its own AI chips, “the opportunity has gotten much larger than what we’d even planned when we started it,” he said. “The challenging part is now you’re seeing all the constraints.”

Child, a former Amazon executive who has been at Arm since 2022, also spoke about the semiconductor supply chain shortage, whether Arm could follow Intel in selling new equity to investors, and the relationship between the company and its parent, SoftBank.

This interview has been edited for length and clarity.

Arm is traditionally a capital-light business model, and the margins are very high, and now you’re selling finished chips. So where do you see new financial risks that Arm may need to take on?

When you’re trying to build chips, you have to kind of get in line. And the way they generally allocate capacity is, what did you get last year, and then I’m going to give you some increase as I increase my capacity.

And so if you’re starting from zero, that means you have a pretty small amount of capacity. And so it’s going to take a couple years to ramp up your capacity. It’s gonna take a couple years to get our share of the fabrication capacity, the memory capacity, and so on. That’s one of the things that has been a challenge.

The other part that’s been a challenge is because of how quickly prices have increased: Demand is so far exceeding supply. That basically means it’s really hard to be in this business unless you have significant amounts of capital. If you look at who is putting all the money into everything right now, it’s mostly the hyperscalers. They fund it with free cash flow because they all have incredible business models.

What that means is, if you’re a smaller company and you’re trying to go and enter in this market, it’s really hard, and [that’s] why a company like Groq sold to Nvidia.

You still have to come up with a lot of capital and a lot of borrowing capacity to go build out all of the capex necessary to build out the chip volume necessary. That’s why we set the financial expectations somewhat conservative, and basically gave ourselves a couple years to grow into it.

What are your views on the CPU crunch?

The need for compute keeps growing. The challenges probably are mostly around how much power can all the different folks who are investing all the money in capex [secure]. A chip is just one piece. You need to have a full system. You need to have a data center to house all those systems, and of course you need power to then produce the tokens.

As far as I can tell, the demand on compute is for the most part insatiable. It’s about having to figure out: I want to buy the chip, but then I also have to figure out how to get memory, which is highly constrained. I have to figure out how to make sure that these chips can be produced and fabricated, and so then I’ve got to go make sure there’s fabrication capacity through mostly TSMC today, and then I also, of course, then have to figure out if I have power.

So we’re just one of those pieces, but as far as I can tell, there’s no slowdown at all.

Where do you feel like the most important supply bottleneck is today, and what can Arm do about it?

Memory is high on the list. That said, TSMC has also talked about wafer capacity and throughput capacity because they only have so many fabs that are actually up and running and producing at the nanometer size that companies need.

You hear some of the model companies or some of the hyperscalers talking about trying to stand up 1 to 5 gigawatts [of data centers.] Those are pretty significant amounts of power. And then you get into the questions about these data centers: Where are they going to be? Can you get power to support them? Everyone sees it being highly constrained in the next couple years.

How do you expect Arm’s investment priorities to change? The company now takes more responsibility for the chip development process as it moves from just licensing IPs.

When I think about all the stuff we’re trying to build, you first think about what can we build from within and then what do we actually have to go acquire.

So on M&A, I then would break it down between what is going to help us expand our total addressable market, and then second, what is the capability to increase our ability to do more on our own, which will actually help us improve margins.

In the semiconductor space, it’s famous that no one builds anything completely end to end on their own—no one. Nvidia is relatively close, and maybe Apple’s relatively [close]. And so that’s how folks like Broadcom or even Nvidia or Apple have been able to have such high margins in their business because they own so much of the stack.

That said, I would say we’re still pretty early in our journey, and so as a result, a lot of the M&A we’ve done thus far has been mostly more about TAM [total addressable market] expansion. The most recent company we bought was DreamBig. That’s a networking business. We don’t really have any real deep capabilities in networking, so that’s really just helping us to be able to expand our TAM.

For the most part, we’ve focused on smaller companies—ones that are probably private. The company’s acquired about 20 companies over the past 15, 20 years, and it’s mostly been through that type of approach. It’s worked pretty well for us. We haven’t done much large-scale public company M&A.

Of course, we will keep our ears and eyes open and look at stuff.

It was reported that you made an eleventh-hour bid for Cerebras and considered a huge merger with Marvell Technology last year. What would you consider for future acquisitions?

Certainly we will evaluate everything. Sometimes there’s things that come to us, sometimes there’s things that we want to just kind of go look at. For the most part, we’re going to look at everything.

When I look at the things out there, large M&A is certainly [a] capability. We are 87% owned by SoftBank. Masa [Masayoshi Son, SoftBank CEO ] is our chairman, and if you look at what he’s done, he’s acquired Graphcore: When SoftBank purchased Graphcore, they were one of the many companies focused on an XPU [specialized processor unit], as they called it, and there was Graphcore, there was SambaNova, there was Cerebras, there was Groq, and I know all those companies were evaluated.

Arm always has this close relationship with SoftBank, and now Arm CEO Rene Haas is also CEO of SoftBank International. How do you coordinate those with the SoftBank universe of companies that could complement Arm’s work?

It made sense for Rene to take a role as CEO of SoftBank Group International. It’s an operating group that basically owns the assets within Masa’s organization that is focused on delivering ASI [artificial superintelligence], which is his grand vision. Everything Rene is in charge of is mostly as it relates to helping develop chips and systems to be able to fulfill some of the demand Masa announced for Stargate.

Masa has the ultimate vision, and he’s the one that really is in charge of how capital should be allocated, the strategy and the plans for the company. Rene is in charge of the execution.

It’s been really helpful. It just helps us move a little faster because then you know when you have someone at SoftBank who’s in charge of these efforts, instead of going through multiple layers of approval, he can talk with Masa.

As you’ve probably noticed, the world of AI moves at a speed that seems to be beyond anything we’ve ever seen before, which is exciting but puts stress on the system. And so you really have to come up with unique operating structures.

Even the most profitable kind of hyperscalers have to take advantage of their growing stock prices to issue equities. Do you feel like we should expect something like this from other chipmakers or even Arm?

Nothing to announce today. But if you step back, when the markets are really pulling back, that’s typically when you see people do buybacks. And when stocks are at all-time highs—or relatively high valuations—that’s typically the time that you see folks issue more equity. I would say those are certainly things to consider.

Because of our relationship with SoftBank, they probably are a little more experienced and more advanced when it comes to some of the financial and capital aspects, and so for the most part, we’ve partnered with them on a number of more riskier or really capital-intensive projects by basically selling them a license and providing design services for them and building something for them.

They’re now a really big customer for some AI-oriented products that they’ll be talking about sometime down the road, and so that’s one way that’s prevented us from having to go out and issue a bunch of debt. It’d be really hard to do without a partnership with someone like SoftBank.

There are so many financing partnerships that chipmakers strike with Wall Street firms, and that entails more interesting structures that otherwise we may not see. And it’s getting more creative. What are your overall observations from this?

There’s a level of capital being deployed like we’ve never seen. I was at Amazon in ’99, 2000, 2001, and we went through that whole kind of crazy build-out. At that point, it was fascinating because there was the promise of e-commerce, but the actual experience of e-commerce was still pretty crappy. It took you a week or two to get your product. You had all these companies that were getting funded, but they weren’t using much of the capacity. It took 15 or 20 years to utilize all of the hardware and all of the capex that was built out.

This one’s very interesting because it’s all getting deployed immediately. It’s really more about what are the evolving business models and what’s the ROI [return on investment] going to look like for all the different businesses.

For the most part, if you look at where all the capital is really being put, it’s mostly being supported by businesses that have very significant cash flows—whether it’s Amazon or Meta or Google or Microsoft. Even if everything fell apart, they would still in the worst-case scenario [to] take a big write-off, and the businesses would still be fine.