TheChek News Flow

Max intra-year drawdown, S&P 500:

1974 Ford: ≈ -37%
1978 Carter: ≈ -14%
1982 Reagan: ≈ -17%
1986 Reagan: ≈ -9%
1990 Bush: ≈ -20%
1994 Clinton: ≈ -9%
1998 Clinton: ≈ -19%
2002 Bush: ≈ -34%
2006 Bush: ≈ -8%
2010 Obama: ≈ -16%
2014 Obama: ≈ -7%
2018 Trump: ≈ -20%
2022 Biden: ≈ -25%

2026 Warsh: ???

Thirteen mid-term years. Every one had a pullback — but so does almost every calendar year; the average intra-year drop in any year is about -14%. The real signal is depth: mid-term years average roughly -18%, and nine of these thirteen deepened into a true correction of -10% or worse. That's the edge — not that a dip happens, but that it tends to run harder and cluster in the third and fourth quarters.

There's a second cycle in play. A new Fed chair, Kevin Warsh, sworn in late May and about eight weeks into the job. Markets tend to test a new chair early — they price a probability distribution, not a person, and probe until he reveals himself. It's a softer tendency than the mid-term pattern, not an iron law (there have been roughly ten chairs since the 1930s, and "an early wobble" is common for almost any starting date). But the sharpest example is the one that rhymes with now.

2018 : Powell takes the chair, Volmageddon hits within days, and after "a long way from neutral" the S&P falls ~20% into Christmas Eve. Then Powell blinked. 2019 returned over 30%. New chair, mid-term year, autumn washout, capitulation low, melt-up. That's the template worth watching

Even fear has a calendar. The VIX tends to trough in early summer and crest in September–October, and in mid-term years the crest runs higher. It sat around 15 in early July, right at the seasonal low. Last week it spiked above 18 intraday. The market has started paying attention. It hasn't yet paid the full toll.

And the shock absorbers look thin: retail cash allocations near the lows last seen in 1998, 2000, 2018 and 2021; put/call skew unusually low, meaning little hedging; heavy IPO supply draining liquidity. (Positioning reads are worth watching but move fast — treat them as color, not confirmation.)

Here's the flip side, and it's the more reliable half of the pattern. The stretch after the mid-term low is historically one of the strongest in the entire four-year cycle — the six months from November through April have averaged roughly +14%, and the market has gone on to make new highs in the large majority of cases. Bull markets rarely die of a drawdown; they die of exhaustion. The mid-term correction tends to be maintenance, not the end.

The playbook isn't heroic. Hold your quality. Keep dry powder with a shopping list attached — decided at VIX 18, executed at VIX 28. Buy fear in tranches.

None of this is a schedule. It's a pattern with a sample size in the low teens: elevated odds of an autumn air-pocket and a strong rebound behind it, not a guarantee. The tripwires that would break it: the Fed staying hawkish into a slowdown, credit spreads blowing out, earnings rolling over, or the VIX term structure inverting and staying inverted.

Greed is obvious. Fear is the edge — but so is honest math.

Chief executive of subsidiary Alexion says rare disease medicine is a largely untapped area

The field of rare disease medicine remains a largely untapped area open for pharmaceutical and biotech companies to develop new treatments for thousands of diseases that lack approved therapies, the head of one of the world’s largest rare disease drugmakers has said.

Marc Dunoyer, chief executive of Alexion, the US-based rare disease subsidiary of AstraZeneca, said patients living with about “95 per cent” of the “10,000 identified, specific rare diseases” do not have medicines available to them.

“[The] rare disease world is an immense field of new opportunities,” said Dunoyer, who has led Alexion since it was acquired by AstraZeneca for $39bn in 2021.

“There are about 500 rare diseases covered by modern medicines. But about 95 per cent of them are not covered . . . [S]cience these days is making enormous leaps and progress in different avenues that five, 10 years ago were not available to us,” he told the FT in an interview.

Rare diseases are illnesses, disorders or conditions that affect a small number of people, usually about one in 2,000 individuals or fewer in the general population, according to the World Health Organization.

Alexion has become a pivotal component of AstraZeneca since its acquisition by the UK’s largest pharmaceutical group. Rare disease medicine sales accounted for 16 per cent of AstraZeneca’s $58.7bn revenue last year, making it one of the company’s biggest divisions.

The field is also regarded as a growth area as AstraZeneca sets its sights on a revenue target of $80bn by 2030 and launching 20 new medicines by the same year. AstraZeneca is halfway through meeting this new drugs pledge, and two of its new offerings are rare disease medicines.

Dunoyer, who was previously AstraZeneca’s finance chief before taking the top job at Alexion, said the Boston-headquartered division has leveraged its parent company’s global reach to expand to 80 countries from the 20 it was present in during its time as an independent company.

Alexion has announced a set of positive clinical trial data in recent weeks, including that of efzimfotase alfa, a drug to treat children with hypophosphatasia (HPP), a condition that affects bone development.

Rare disease medicine sales can be contentious given how expensive treatments can be. But Dunoyer said pricing was not necessarily the biggest concern for Alexion, although he admitted it “takes time” to agree pricing with healthcare systems.

“It takes time because these are expensive medicines for very small number of patients usually . . . it takes time for the various pricing regulators to agree and accept this financial burden,” he said, but added that many do understand the merits and savings in terms of healthcare costs and managing the burden of diseases for individuals.

Beijing’s export controls cut off a route for Russian flows, adding to pressures after disruption to Qatari production

Europe is facing an even tighter squeeze on helium supplies as China cuts off exports of the industrial gas that is vital for manufacturing microchips and the functioning of medical devices including MRI scanners.

Beijing earlier this month announced export controls on the natural gas byproduct, which has been in scarcer supply since the conflict in the Middle East cut off exports from the Gulf.

While China is not itself a major producer of helium, Russian supplies of the gas had been flowing through the country to Europe, according to analysts.

Russia accounts for almost 10 per cent of global helium production, while Qatar was responsible for a third of the world’s supplies before the outbreak of the Iran war.

Beijing acted last week since it imports most of the helium used by its industry and hospitals.

“China isn’t a source; it’s a conduit”, meaning the halt “pinches a re-export valve Europe had been leaning on”, said Seokjoon Kwon, a professor at Sungkyunkwan University in Seoul. The ban, which was announced as the fragile ceasefire between the US and Iran came under pressure, was an indicator that China was preparing for “renewed scarcity”, he added. 

The price of the gas being bought for immediate delivery has roughly doubled since the start of the conflict, while prices in long-term contracts have also been rising, analysts said. That has come as major producing facilities, including QatarEnergy’s Ras Laffan complex, the world’s largest liquefied natural gas facility, have been forced to halt production.

The EU banned direct imports of Russian helium in 2024. But some gas has been flowing to Europe via China, experts said. 

Chinese re-exports to Europe have been rising over the past 18 months, and remained elevated even after the outbreak of the Iran war, according to estimates by consultancy AKAP Energy.

Although the helium market is opaque, AKAP estimated that China was still re-exporting about 16 per cent of its helium imports, on average, between March and May this year, after the war started. 

Russia itself imposed export restrictions on helium in April, but not an outright ban. The Chinese ban came soon after a Ukrainian attack in June on the Orenburg gas processing and helium plant in western Russia, near the border with Kazakhstan.

Cliff Cain, commercial manager at London-listed Pulsar Helium, said the market situation had worsened over the past several months, with shortages affecting users such as aerospace and welding companies. Pulsar was “getting a lot of queries” and speaking to public and private sector buyers, including those in the US and Japan, he said. 

With pre-Iran war inventories of the gas running low, “the coming weeks will reveal whether diversification away from Qatari supply happened quickly enough to avoid production impacts”, said Nick Lawson, executive chair of Ocean Wall, a merchant bank.

Sabina Ciofu, international policy and strategy lead at trade association techUK, said its members had been sourcing supplies from alternative channels, but that “prolonged constraints could have wider implications across global technology supply chains”.

Ajit Manocha, president of industry body SEMI, said: “The market has clearly tightened, and semiconductor companies are managing higher prices, tighter allocations and more complex sourcing.”

The semiconductor supply chain may be more able to absorb cost increases than sectors such as healthcare, analysts said. Available supplies are being prioritised for strategic sectors, including certain technology, healthcare and government contracts, with others such as consumer electronics likely to lose out, they said.

US users may be more cushioned, since the country produces substantial volumes of helium domestically. Premier Inc, which sources helium supplies on behalf of hospitals in the US, said medical-grade helium remains prioritised and “members are not reporting disruptions affecting MRI operations or mixed-gas products”.

TAIPEI, July 20 (Reuters) - TSMC (2330.TW), opens new tab is seeing strong, multi-year demand for its AI chips as it invests a further $100 billion to expand its Arizona facilities, ​but it needs to address several challenges, such as a shortage of construction workers there, a top executive said.

Speaking after blockbuster second-quarter results on Thursday, ‌Chief Financial Officer Wendell Huang said the company is "very happy" with progress in Arizona, which is why it decided to ramp up investment to $265 billion.

"We will continue to invest," he said in an interview, adding that the company was very grateful for U.S. government support.

"We continue to see customers' strong demand — multi-year structural demand."

The world's main producer of advanced AI chips and a major Nvidia (NVDA.O), opens new tab ​supplier, TSMC's aggressive capital spending and soaring profit margins have made it a barometer of demand in the global semiconductor industry.

The pledge to expand in ​Arizona is a win for U.S. President Donald Trump, who has pushed for more chipmaking at home.

Trump has repeatedly accused Taiwan of ⁠stealing American semiconductor business. He has said that by the time he leaves office, the U.S. will have 50% of the world's semiconductor manufacturing capacity.

ARIZONA FABS

TSMC's first ​Arizona fabrication plant — or fab — is operational and achieving yields "as good as" the flagship fab in Taiwan, Huang said.

The second fab will shortly begin moving in equipment, while construction ​of a third fab is under way and preparatory work has started on a fourth fab and the site's first advanced packaging facility, Huang said.

In total, current and planned projects will bring TSMC's Arizona footprint to 12 fabrication and advanced packaging facilities plus an R&D centre. He did not provide a timeline for the latest investment.

However, "there are physical constraints — the number of construction workers available, the ​infrastructures available," Huang said. "We'll work closely with the government to solve these issues."

At the same time, TSMC continues to invest at home, where it is building 13 leading-edge ​and advanced packaging fabs over the next several years.

"Land is a scarce resource in Taiwan," Huang said. "Therefore, whenever there are available lands, we will use them for the most leading-edge technologies."

"When ‌you ramp ⁠the most leading-edge technologies, you need very close collaboration between the R&D and operation functions," he added. "It has to be in Taiwan. And after it stabilizes, then we can consider transferring overseas."

BOND ISSUANCE

Asked if the company would consider raising money by selling new shares in the U.S., Huang said it would "not rule out issuing new bonds" if market conditions are favourable.

Despite its aggressive expansion plans, TSMC faces headwinds from geopolitical tensions between Washington and Beijing, with the U.S. seeking to control advanced chip exports to China.

Reuters reported ​last year that TSMC could face a ​penalty of $1 billion or more to ⁠settle a U.S. export control investigation over a chip it made that ended up inside a Huawei AI processor.

Huang referred questions about the status of the case and any potential penalty to the U.S. government, but said TSMC's internal export control system was ​constantly being reviewed.

"I have to say there is (only) so much we can do in terms of complying with all the ​rules and regulations, but ⁠when the customers sell to customers, they sell to customers," he said.

"At some point in time, you lose the visibility. That's the reality."

Investors worries about the sustainability of the AI boom amid massive infrastructure spending has re-emerged recently.

TSMC's Taipei-listed shares fell 7.3% on Friday despite the company's record results. Even so, its shares remain up nearly 50% this year.

While TSMC ⁠has long ​been by far the market leader in making the world's most advanced chips, competitors are seeking to ​narrow the gap, including Samsung Electronics (005930.KS), opens new tab, which has benefited from a recovery in the memory chip market, and Intel (INTC.O), opens new tab, which enjoys backing by the U.S. government.

Huang said the company remains confident in its business model.

"We ​do not intend to leave anything on the table," he said. "Our competitors are good, but we are even better."

Nvidia’s chief Jensen Huang spent two days — July 15 and 16 — in Tokyo, courting Japan’s industrial and chip-supply elite, weeks after a keynote in Taiwan, and months after a visit to South Korea. He left with deals spanning Japan’s entire tech ecosystem: a national AI factory, partnerships with the country’s leading robotics companies, and agreements with the chip-material suppliers powering Nvidia’s next generation of AI chips. His message was clear. Nvidia is targeting Japan’s factory floor, and many of the country’s biggest manufacturers are joining in. AI’s next chapter, Huang said, belongs to factory floors, robots, and machines, and he wants Japan to build it.

Thirty years ago, a $5 million Sega investment helped keep a near-bankrupt Nvidia afloat; today, Nvidia and Japan’s industrial giants need each other again — this time to build the physical-AI era, starting with these three projects:

Noetra — Japan’s sovereign-AI play. The country doesn’t want to run its factories and robots on American or Chinese AI. So, the government pulled together roughly 44 domestic firms, with SoftBank, Sony, NEC and Honda at the core, to build its own AI for robots, vehicles and factory floors. Tokyo is committing up to 1 trillion yen ($6.2 billion) over five years, a bet on homegrown “physical AI”, foundation models built to run machines. Japan wants to own the software brain. The hardware to build it, though, still comes from Nvidia. The U.S chip giant is building “a Vera Rubin AI factory”, a massive data center packed with its next-generation chips, expected to launch in 2028, with 13,750 Vera CPUs and 27,500 Rubin GPUs, delivering 140 megawatts. Noetra will oversee the effort, with plans to build the data center. Noetra’s plan runs in three stages: a reasoning model heavy on Japanese-language skills starting in fiscal 2026; an omni-modal version handling text, images, video, and audio by 2028; and “Real-world Native AI” built to run robots by 2030, released to outside Noetra developers in phases.

The robotics coalition — Japan’s industrial giants line up behind Cosmos. Nvidia is targeting Japan’s factory floor, and many of the country’s top robotics and manufacturing players are signing on. Fanuc, Yaskawa, Kawasaki Heavy, Fujitsu, Hitachi, NEC, Sony, SoftBank, Kubota and robotics group AIRoA say they plan to build on Nvidia’s Cosmos models, an open-model effort Nvidia started in May with a handful of global AI labs. In Tokyo, Nvidia gave them a reason to commit, unveiling Cosmos 3 Edge, a version of the model that runs on its Jetson Thor chips inside the machines themselves. Some are already testing a shared control system; others, like Honda R&D and Omron, are building on the tools now. “The next frontier of AI is in the physical world, and this is a once-in-a-generation opportunity for Japan,” Huang said in the company’s statement. “Japan invented modern manufacturing. Now, it has the opportunity to reinvent it for the age of intelligent industries.”

Toyota — cars and physical AI. Toyota uses Nvidia chips across much of its stack. It committed its next-generation vehicles to Nvidia’s Drive platform at CES in January 2025; the newer work extends Nvidia into its manufacturing, where simulations are used to design production lines, into the software that runs its vehicles, and into systems that read road traffic. Toyota’s cars will run advanced driver assistance, which steers and brakes but still requires a driver, a more conservative approach than Waymo and Tesla, which are developing systems that rely less on a human driver.

Huang’s visit put physical AI at the center of Japan’s industrial strategy, and Tokyo is spending to back it. Facing a shrinking workforce, Japan wants 10 million AI-equipped robots across 18 sectors by 2040, backed by $65 billion in public and private physical-AI investment.

The longer game is bigger. Japan’s AI Robotics Strategy, released in March, aims to capture more than 30% of the global AI robotics market by 2040, a market Tokyo values at roughly ¥20 trillion, or about $133 billion. METI is funding a domestic foundation model to run the machines, and Noetra’s Nvidia-powered factory is where models of that scale, into the trillions of parameters, would be trained. The wager is that Japan’s factory-floor data and manufacturing base can do for physical AI

Underneath the industrial case is a sovereign one. As the U.S. and China pull ahead in large-scale AI, Tokyo wants its own data, its own compute, and less dependence on infrastructure it doesn’t control. Huang appeared on July 16 alongside trade minister Ryosei Akazawa at the government’s physical-AI launch, with Prime Minister Sanae Takaichi joining by video. The Takaichi administration has made AI and semiconductors the centerpiece of a growth plan chasing ¥370 trillion ($2.3 trillion) in public and private investment by 2040. Noetra’s factory — which Nvidia bills as “the world’s first national AI infrastructure” — is the clearest bet yet. Japan’s push for independence, at least for now, rests on American chips.ndence runs on American silicon.

In two days, Huang sat across from nearly every name that matters in Japanese tech — the CEOs of Toyota, Fanuc, Yaskawa, Fujitsu and Kawasaki over lunch, and dozens of supply-chain chiefs over skewers and whisky in a Kanda izakaya.

It’s the same playbook he ran weeks earlier — a homecoming keynote in Taiwan, fried chicken, and a 50,000-GPU deal in Seoul last fall. This time, it was Tokyo’s turn, with the robots, the supply chain, and the chips underneath.

The British runner smashed the world record, achieving the feat in 3:42.66.

Another major running world record has been smashed in London, and Brooks is at the center of the major moment. Josh Kerr ran the fastest men’s mile ever on Saturday, finishing in 3.42.66 at the IAAF Diamond League athletics competition.

The Scottish-born Kerr wore a custom spike and speed suit, created in collaboration with Brooks. The brand said the athlete’s Hyperion 222 shoe was designed for Kerr’s biomechanics, “including his unique foot strike, asymmetrical push-off and demand for an ultra-aggressive ride.”

The style’s name is derived from “Project 222,” the joint campaign between Brooks and the athlete in their quest to break the men’s record for the outdoor mile. (222 is the number of seconds that it took to beat the prior world record of 3:43.13, set by Morocco’s Hicham El Guerrouj in 1999.)

The shoe was developed using Brooks’ Run Research Lab and Finite Element Analysis (FEA) data.

Kerr, 28, also sported a speed suit that was “crafted to enhance aerodynamics and breathability, with laser cut perforations that release heat and humidity while enhancing mobility.”

Brooks continues to be one of the running market’s most dominant brands. It began 2026 with double-digit growth in the first quarter as demand remained strong across regions and channels. The company said it delivered its strongest quarter in brand history after a record-breaking 2025.

Kerr’s record came less than three months after Adidas athlete Sebastian Sawe broke the marathon world record in London, finishing the race in under 2 hours.

While the mile run isn’t included in Olympics competitions, it has been a major focus for many brands in the past few years. Kenyan runner Faith Kipyegon, 31, almost made history in Paris last summer in her attempt to run a mile in under 4 minutes. The Nike athlete barely missed the feat, though she broke her own world record, finishing in 4:06:91.

• 1914 – Founded in Philadelphia by John Brooks Goldenberg.
• 1981 – Acquired by Wolverine World Wide after bankruptcy.
• 2004 – Acquired by Russell Corporation.
• 2006 – Russell was acquired by Fruit of the Loom, itself owned by Berkshire Hathaway, bringing Brooks into Berkshire's portfolio.
• 2011–2012 – Brooks became a direct standalone subsidiary of Berkshire Hathaway, rather than being managed through Fruit of the Loom.

Apple recently filed a trade secrets lawsuit against OpenAI, accusing the AI company of a pattern of misconduct aimed at getting current and former Apple employees to share confidential information. (In response, OpenAI said it is “not aware of any evidence that this complaint has merit.”)

On the latest episode of TechCrunch’s Equity podcast, Kirsten Korosec, Sean O’Kane, and I debated whether this lawsuit will cast a shadow over OpenAI’s much-discussed plans to get into the hardware business (starting with a mobile smart speaker) and go public.

“Even setting aside whether or not the court grants any kind of injunctive relief or any kind of restraining order over what OpenAI is doing, it just naturally can lead to that sort of situation where it’s going to cause some delays in what OpenAI is working on,” Sean suggested. “Which I’m sure was probably part of the reasoning behind Apple doing this. They don’t do this stuff willy nilly.”

With all those plans on the line, will OpenAI try to settle this as quickly as possible, or did it learn from its recent courtroom victory against Elon Musk that it can endure the cost and embarrassment of a trial? Kirsten, at least, predicts the latter.

Keep reading for a preview of our conversation, edited for length and clarity.

Kirsten Korosec: Sean, how do you feel about Sam Altman listening to you with a little device maybe in your pocket?

Sean O’Kane: I’m good. Maybe that’s predictable, but I’m good. No thanks.

We’ll get into it, I’m sure, but this is allegedly the first product that OpenAI has been working on in its hardware division with Jony Ive and company. They’ve been really coy ever since that weird video they put out last year of them sitting at that coffee shop or bar in San Francisco and sort of talking very vaguely about hardware and legacy devices, meaning laptops and phones. And so if this is the direction they’re headed in, all power to people who want to have somebody like that always listening to them. This is not going to be for me.

Anthony Ha: Part of what we have to remember about those kinds of devices is also that, depending on how mobile it is, it’s not just listening to you, it’s listening to the people around you. I might be fine with it — I’m not fine with it, but let’s say I was — but then if we met up in-person at Disrupt, then suddenly it might be listening to all of us.

There’s all kinds of social norms that are going to have to be renegotiated if these things become widespread. I think we should make fun of and criticize people who record other people without consent.

Kirsten: Well, I bring up the device that has been speculated about for a really long time, and we’ll see what it really ends up being once it’s officially introduced, but it’s important in the context of this lawsuit that Apple filed last Friday.

It was the biggest news of the week, certainly, and this is a trade secret lawsuit. It has some pretty wild allegations and we should very much emphasize these are allegations that have been filed in a complaint by Apple. But what it is accusing OpenAI of is a pattern of misconduct at the highest levels, specifically directed towards OpenAI employees who used to work at Apple. And in fact they’ve named the chief hardware officer Tang Tan in this lawsuit.

This is all important because Apple is accusing OpenAI of essentially stealing their trade secrets, but in the context of that, this could be then used for a competing hardware product. I’m wondering if maybe we don’t get into whether this lawsuit has merits, because we haven’t gone through full discovery, but what are your initial impressions of the lawsuit aside from the fact that wow, this is going to be entertaining?

Sean: Two things. One, this is a pretty big risk potentially to whatever it is OpenAI is working on. Even setting aside whether or not the court grants any kind of injunctive relief or any kind of restraining order over what OpenAI is doing, it just naturally can lead to that sort of situation where it’s going to cause some delays in what OpenAI is working on, which I’m sure was probably part of the reasoning behind Apple doing this. They don’t do this stuff willy nilly.

The other is that we think that OpenAI is — we know that they’ve filed confidentially for an IPO. We think it might happen as early as the end of this year, or early next year, if you believe Sam Altman’s cautious language around the IPO. And this just raises a whole bunch of questions around that because, on the one hand, we think their business right now is probably overwhelmingly the software; they’re not really factoring in any hardware business into that picture at the moment.

They’re about to go to the markets and they’re going to be pitching bankers and investors on where they think their addressable market should be, and if they have a big amount of that pegged to a potential hardware division and hardware products, this could be a huge risk to that and changes a lot of the calculus of sort of how the IPO gets priced. So that’s where my head’s at.

Anthony: One [allegation] that I assume that Apple must have pretty solid like numbers on is, they said more than 400 Apple employees now work at OpenAI. Granted, both of them are very large companies with many thousands or tens of thousands of employees. So as a percentage, it’s not necessarily huge. But that seems like a lot of people and a pretty serious talent drain.

And the other thing I’m wondering is related to Sean’s point. With the context of the potential IPO, how much damage did OpenAI ultimately take from a marketing and brand perspective from the trial it already went through? That it seemed to basically win, but there was a lot of not-terrible-but-kind-of-embarrassing dirty laundry that came out in the testimony. To what extent are they just like, “We do not want to go through that again”? Or did they take the lesson of, “Hey, we went through it and we survived and we’ll be okay if we have to do another trial with Apple”?

Kirsten: I fully predict the latter, by the way.

The agency is using a surging budget to avoid choosing between defense-tech startups and old-school contractors

Since taking the top job at the Pentagon, Defense Secretary Pete Hegseth has rewritten rules and upended traditions that had for decades steered how the U.S. military buys weapons. More than a year into his tenure, he is keeping his promise to shower money on high-tech defense startups—while also unloading ever-larger sums of cash on the traditional vendors he has publicly disparaged as slow and bloated.

Venture capitalists and startup founders have been salivating at what they hope is a true defense reformation that hands power—and billions of dollars—to defense-tech startups that have been excluded from the inner circle of weapons procurement.

Investor exuberance in the sector has sent valuations soaring. Anduril, one of the fastest-growing defense startups, doubled its valuation from $30.5 billion a year ago to $61 billion in May.

But many are anxious that Congress is preparing to slow the fire hose to a relative trickle amid growing scrutiny of Hegseth’s spending and disapproval of the Iran war, a move that could puncture the bubble around defense tech.

Pentagon contract spending on the 15 highest-valued defense-tech startups in the last fiscal year tripled from 2022. Yet they accounted for less than 1% of total dollars for all defense contractors, a rate that has held consistent for years, according to a data analysis from the Ronald Reagan Presidential Foundation & Institute’s National Security Innovation Base Report Card.

For many startups, even the scraps from the department’s trillion-dollar budget would spell success.

“We’ve got a shot to disrupt this thing,” said Philong Duong, chief executive officer of startup NODA AI, which has a military contract selling software for autonomous weapons.

Roughly 10,000 new defense companies have entered the market in the past two years, according to an analysis by the Center for Strategic and International Studies. So-called nontraditional companies, which include venture-backed startups and also small businesses and commercial tech companies, received over $122 billion in the prior fiscal year, double the amount from a decade prior. But during that same period, the Pentagon also doubled its spending on traditional primes, as the top-tier mega defense contractors are known, to $372 billion, the CSIS analysis shows.

U.S. military spending has climbed in the past few years amid concern over a potential conflict with China over Taiwan and the fragility of overseas supply chains exposed by the Covid pandemic. The battlefield efficacy in Ukraine of drones powered by software and AI has more recently helped trigger a spending spree by a U.S. military still largely reliant on the weapons of yesterday’s wars.

“Warfare is evolving faster than our acquisition system,” said Paige Craig, a defense-tech investor at Outlander VC. He calls the dawning moment the “PC era of war,” meaning “it’s affordable and everyone is going to have fairly equal access to the fundamental means of warfare.”

Reforming the acquisition bureaucracy of the Pentagon is a herculean effort that has been tried time and again, without much success, since 1960. The war with Iran showcases the persistent challenge. The U.S. has brought to bear few weapons systems that are less than 15 years old. The new systems include attack drones re-engineered from the Iranian Shahed drone and drone boats from startup Saronic. Most others are decades old and expensive—the opposite of what Hegseth has said he wants—and Iran’s smaller and lower-cost arsenal has denied the U.S. military total victory.

Many of Hegseth’s reforms are new and must filter through an agency that employs millions. Among his biggest shake-ups: eliminating a requirements process for weapons purchases that was slow and cumbersome; suspending costly and rigorous cybersecurity requirements; and giving lower-ranked officers more power to buy the weapons they want. He also stood up programs catering to startups, and sped up and added flexibility to contracting.

“We’ve been waging a war of attrition against the Pentagon bureaucracy to open up the aperture and make sure competition, speed, innovation and commercial options all have a seat at the table,” Hegseth said in a statement to The Wall Street Journal.

Michael Brown, a venture capitalist and an early leader of the Pentagon’s Silicon Valley branch, the Defense Innovation Unit, gives the department an “incomplete” grade on its transformation efforts. He said the real test now lies with Congress to pass budgets that will benefit startups, such as the department’s $54.6 billion request for an autonomous warfare unit that would largely be allocated to companies building drones and AI weapons.

Venture-capital investment in defense and aerospace startups reached $16.8 billion for the first half of this year, exceeding any prior full-year investment, according to PitchBook. Some investors are calling a bubble, pointing to soaring valuations. “I am very uncomfortable. I am not enjoying this moment at all,” Trae Stephens, co-founder of weapons maker Anduril Industries and a partner at Founders Fund, said recently on the podcast “Uncapped.” He added, “Prices are untethered from reality.”

The venture-capital flood has propped up more than 400 drone companies in the U.S. “In five years, you’re going to have 10 or 15, and that’s fine. That’s national consolidation,” said William Treseder, co-founder of a startup, Arkenstone, which helps defense companies sell to the government.

An analysis by Howe Wang at Frontier Optic, a market intelligence firm, tracked a cohort of 568 startups, a group meant to reflect the universe of independent, commercial, venture-backed defense companies with contracts. The group received $4 billion in Pentagon contract spending last fiscal year, up from $1 billion in 2022, the analysis showed. That is out of around $506 billion for all defense contract spending.

“Spending on this group has grown very quickly, but the traditional primes are still capturing most of the additional dollars, and growth within the newer cohort is increasingly concentrated among a few large winners,” Wang said.

According to Wang’s analysis, Anduril and Saronic accounted for about a quarter of all Pentagon contract spending to the startup cohort last year. The phenomenon of a select few deep-pocketed defense-tech companies gaining bigger contracts has prompted lawsuits and protests by other startups accusing the military of playing favorites, according to documents viewed by the Journal.

But the Pentagon doesn’t get to buy without budget approval from Congress, and elected officials have shown mounting resistance to Hegseth’s request for a staggering $1.5 trillion budget. Officials from both political parties have also demanded scrutiny of the Pentagon’s spending on many loans and equity stakes in startups, many backed by venture capitalists including Donald Trump Jr.

A lot of startup technology isn’t ready for military sales, and even the most established defense-tech company, Anduril, has struggled with dangerous and costly weapons setbacks, the Journal has reported.

“At the end of the day if you are selling something really bleeding edge, you’re going to be told ‘No’ most of the time,” said Mack Ohlinger, chief executive of Dunedain Systems, an AI tool to help with military mission decision-making.

Ohlinger, however, got to yes. His year-old startup is finalizing a nearly $5 million contract with the Army.

“There is a path now, albeit an extremely tortuous one,” he said.

Boeing says it will be ready to fund new plane programme by 2030

US group expects to have firepower to start work on 737 Max successor but warns that demand may be more of a constraint

Boeing expects to have the financial firepower to launch a programme to replace its bestselling 737 Max by the end of the decade, chief executive Kelly Ortberg said, even as he warned that airlines were more focused on fixing problems in existing fleets than pressing for a new aircraft.

Ortberg said the US group was getting its “financial house in order”, which would take “another couple of years”, and would have more resources to devote to a next-generation aircraft once it secures certification for the final 737 Max variants and the delayed long-range 777X.

Speaking on the eve of the Farnborough Airshow, he said Boeing was “spending time and money preparing ourselves to be ready when the market’s ready”, adding: “I don’t see that our readiness is . . . a constraint”.

Ortberg’s comments are the clearest indication yet that the aerospace and defence group is readying itself to launch a new aircraft to take on arch-rival Airbus in the lucrative narrow-body segment of the market.

The European planemaker has said it plans to launch a new narrow-body programme in 2030, with the aim of having a successor for its best-selling A321 family of jets in service in the second half of the next decade. 

Launching a new model would cost billions of dollars. Ortberg, who took the helm at Boeing almost two years ago with a mandate to rehabilitate the company after a series of safety and manufacturing crises, has made financial stability one of its priorities before launching a new model.

Boeing, which reports second-quarter earnings this month, has said it expects to be cash flow positive in the second half of the year as it continues to expand output of the 737 Max. 

Ortberg declined to comment on Boeing’s financials ahead of earnings but said the company would have “more resources available” for a next-generation programme once it secures certification for the latest two 737 Max models as well as the delayed long-range, wide-body 777X. 

Bringing the new models to market is key to generating cash for the group and repairing its balance sheet.

Boeing is in the latter stages of securing certification from regulators for the 737 Max 7, the smallest of the Max models, while the largest, the 737 Max 10, is expected to be certified by the end of the year. It is also still forecasting deliveries of the 777-9, which is in the midst of flight testing and seven years behind the company’s original schedule, to start next year.

“We’ve had a lot of resources applied to those programmes and finishing those up will allow us to transfer resources on to the new aeroplane development work,” said Ortberg. 

The industry veteran, who came out of retirement to take on the Boeing job, last year identified three things that needed to fall into place before the company could launch a new plane: financial stability, market demand and technology. Despite progress on Boeing’s recovery, Ortberg said the market was probably “less ready today than it was a year ago”. 

Airlines, he added, were focused on ensuring that today’s line-up of planes was performing. Carriers have become increasingly frustrated over the durability of aircraft and some of the newest engines, which have led to costly repairs and a shortage of spares, forcing some to ground aircraft.

“I’m not going to jump to something new until we’re sure that we’ve got a mature technology,” said Ortberg. 

The CEO refused to be drawn on what a new plane might look like. However, its current “baseline” scenario was focused on using a traditional, enclosed engine rather than the more radical “open fan” engine developed by CFM International that Airbus is testing.

Ortberg said he was more focused on ensuring Boeing was ready than “the exact timing of the competitor”. 

“This is a long play . . . so whether they start one year or we start one year, I don’t think it’s as important as making sure that we’ve got the right aeroplane for the customer.”

The company, he added, still had “more work yet to do” to regain the trust of stakeholders but he said he was “pretty pleased” with its progress. 

Ortberg pointed to last week’s decision by the US aviation regulator to allow Boeing to issue its own airworthiness certificates for all 737 Max and wide-body 787s — the first time it will be trusted to do so since 2019, after the second fatal crash of a 737 Max.

Ortberg said the company’s immediate focus was on delivering on its backlog of orders. The company delivered 171 aircraft in the second quarter, up 12 per cent on the previous year. It also received 121 gross orders in June, compared with 116 a year earlier. 

“Orders are not our challenge,” he said. “Our challenge is getting these orders delivered”.

Boeing this month officially opened a new production line for its flagship narrow-body 737 Max programme that is critical for Ortberg’s hopes of increasing 737 production from 42 jets a month to 52 and beyond.

Ken Herbert, an analyst at RBC, stressed that with a backlog of almost 7,000 unfulfilled orders, “the primary focus for investors will remain on the state of the supply chain and delivery schedules”.

Ortberg acknowledged that Boeing, which is also one of the world’s biggest defence companies, would have to align with the changing defence climate in Europe, where governments have put more emphasis on bolstering indigenous capabilities.

The company, he said, would “probably move from selling directly to selling through partnerships and aligning with in-country suppliers”, including potentially setting up co-production facilities.

The company has teamed up with Britain’s BAE Systems and Sweden’s Saab to mount a joint bid for the Royal Air Force’s next fast-trainer jet. It also has a joint venture with Germany’s Rheinmetall to offer the MQ-28 Ghost Bat uncrewed combat aircraft to the German Bundeswehr.

Asked about Boeing’s relationship with President Donald Trump, who has used plane orders as leverage in trade deals and called himself the greatest salesman in the history of the group, Ortberg said “he’s been very helpful to the industry . . . He is an aeroplane fanatic. He knows a lot about aeroplanes.”