TheChek News Flow

Implications of the Endangerment Finding Repeal — Market & Investment Angles

Macro Market Implications

How a Hedge Fund Should Play This

1) Long coal basket, short-dated (tactical, not structural) The DoD procurement + recommissioning funding is a near-term catalyst, but coal's structural decline hasn't reversed. This is a 3-6 month trade, not a secular bet. Small/mid-cap coal names will move the most on relatively thin liquidity.

2) Short Tesla regulatory credit revenue The repeal of compliance programs directly hits Tesla's credit sales. This is a quantifiable earnings headwind — worth modelling the impact on 2026-27 estimates. A pair trade long legacy OEMs / short Tesla on this specific catalyst could work.

3) Long California vs. Federal regulatory arbitrage California will almost certainly assert its own tailpipe standards. This creates a two-tier US auto market. Companies with strong CA/blue-state positioning (electrified lineups) may actually benefit from state-level fragmentation. Watch for CA legal action as a catalyst.

4) Long European carbon (EUA) vs. short US carbon exposure The EU ETS is tightening while the US federal framework collapses. European carbon allowances could see relative strength. For HFs with commodity capabilities, this is a clean relative value trade.

5) Litigation event risk — long vol on affected sectors Environmental groups will sue immediately. The article notes years of litigation ahead. This creates binary event risk around court rulings. Options strategies on energy ETFs (XLE, XOP) or auto names could be attractive for funds that want to express a view on timing.

6) Pair trade: US energy vs. European energy US energy benefits from deregulation; European majors (Shell, BP, TotalEnergies) are stuck with transition commitments and regulatory pressure. Long US / short EU energy is a clean expression of regulatory divergence.

Key Risk to Monitor

The biggest risk is that this gets struck down in court — the legal basis is fragile since the Supreme Court's Massachusetts v. EPA (2007) essentially mandated the endangerment finding. If courts reinstate it, all the trades above reverse hard. Any HF positioning around this needs tight stops or defined-risk structures.

Move would reverse legal determination that greenhouse gases threaten public health

The Trump administration is planning this week to repeal the Obama-era scientific finding that serves as the legal basis for federal greenhouse-gas regulation, according to U.S. officials, in the most far-reaching rollback of U.S. climate policy to date.

The reversal targets the 2009 “endangerment finding,” which concluded that six greenhouse gases pose a threat to public health and welfare. The finding provided the legal underpinning for the Environmental Protection Agency’s climate rules, which limited emissions from power plants and tightened fuel-economy standards for vehicles under the Clean Air Act.

“This amounts to the largest act of deregulation in the history of the United States,” EPA Administrator Lee Zeldin said in an interview.

The final rule, set to be made public later this week, removes the regulatory requirements to measure, report, certify and comply with federal greenhouse-gas emission standards for motor vehicles, and repeals associated compliance programs, credit provisions and reporting obligations for industries, according to administration officials.

It wouldn’t apply to rules governing emissions from power plants and other stationary sources such as oil-and-gas facilities, the officials said. But repealing the finding could open up the door to rolling back regulations that affect those facilities.

The move is likely to be seen as a victory for the fossil-fuel industry, which for years has pushed back against federal climate regulations. Since taking office, President Trump has sought to repeal rules that his allies in the oil-and-gas industry have cited as overly burdensome. Trump has framed fossil fuels as vital to economic and national security, and he has argued that expanded reliance on them will help lower energy prices.

The decision to repeal the endangerment finding might also create fresh uncertainty for companies with global operations, which could find themselves caught between lower environmental standards at home and a higher baseline for emissions rules abroad. A void at the federal level might prompt states to implement their own regulations, and create new legal exposure for companies.

Environmental groups have said they would challenge a rollback in the courts, and it could be years before litigation is resolved. The administration could decline to enforce rules and fines while a legal process unfolds. Several unsuccessful attempts to revise or repeal the “endangerment finding” have been made in recent years—including in the courts.

The Environmental Defense Fund, a nonprofit advocacy group, has said that rolling back the endangerment finding would “eliminate some of our most vital tools to protect people from the pollution that causes climate change.” The group said the administration was trying to steer Americans toward dirtier, more dangerous and more destructive air.

On Inauguration Day last year, Trump signed an executive order directing the EPA to submit an assessment on whether the endangerment finding—which the Obama and Biden administrations used to set greenhouse gas emission limits on vehicles, power plants and large industrial facilities—should be kept in place. The EPA announced a proposal to rescind the finding last July.

Officials said the rollback would equate to more than $1 trillion in regulation cuts, though they didn’t provide details on how they came up with the number. They said that rescinding the finding would result in an average per-vehicle cost savings of more than $2,400. Public health and environmental groups have said federal climate regulations help prevent hundreds of thousands of premature deaths each year.

The rollback of the endangerment finding is one of several energy- and climate-related announcements the administration is planning to make this week as part of a campaign to address high energy costs. Public polling shows that voters view the high cost of living—including electricity prices—as a primary concern heading into this year’s midterm elections.

“More energy drives human flourishing,” Interior Secretary Doug Burgum said in an interview. “Energy abundance is the thing that we have to focus on, not regulating certain forms of energy out.”

Trump is set to hold an event Wednesday at the White House with Zeldin and Energy Secretary Chris Wright to announce a new executive order that directs the Defense Department to enter into agreements to buy electricity from coal-fired power plants. The administration will also award funding to five coal plants in West Virginia, Ohio, North Carolina and Kentucky to recommission and upgrade the facilities. Trump will be awarded the inaugural “Undisputed Champion of Coal” award by the Washington Coal Club, a pro-coal group with ties to the fossil fuel industry, administration officials said.

Conversations are under way between the Defense Department and Energy Department to identify facilities and coal plants, officials said.

Wright said in an interview that Trump’s effort to re-energize the coal industry would allow the U.S. to meet its artificial-intelligence goals, re-industrialize and stop a rise in electricity prices. “Our goal is to drive down the price of energy for Americans,” he said.

In addition, administration officials said the Tennessee Valley Authority is expected to soon vote to keep two coal plants operating after they were previously slated to come offline.

The attorneys general of states led by Democrats including Massachusetts, New York and California in a September comment letter opposed the proposed rescission of the endangerment finding. They said the move would violate settled law, Supreme Court precedent and scientific consensus—and endanger the lives of millions of Americans.

Analysts say that some states might want to step in and enact their own legislation in the absence of a federal standard for regulating emissions. California has previously asserted that if greenhouse gas emissions don’t fall under the federal purview, then it doesn’t need approval from EPA to regulate tailpipe emissions. The state is the largest car market in the U.S.

Some legal experts note that the U.S. auto industry didn’t ask for a reversal of the endangerment finding, and will likely continue to invest in reducing emissions to remain competitive globally and in anticipation of a potential future reversal.

Michael Grimes is leaving the government to return to Morgan Stanley and work on possibly the biggest initial public offering ever

Michael Grimes, the longtime Morgan Stanley MS 1.33%increase; green up pointing triangle rainmaker, spent years laying the groundwork for his bank to land a role leading the initial public offering of Elon Musk’s rocket maker SpaceX.

But by the time Musk finally decided to take SpaceX public, Grimes was working in the Commerce Department, having followed the billionaire to Washington, D.C. Grimes found himself watching from afar as former colleagues pitched for roles on what could be the biggest IPO of all time.

This week, Grimes put himself back in the middle of the action—and in line to reap millions of dollars of fees. Morgan Stanley said Monday he is rejoining the bank as chairman of investment banking, a promotion from his previous role as the head of global technology investment banking, according to an internal memo the Financial Times reported on earlier.

SpaceX has long been considered a golden goose by IPO bankers. It skyrocketed to a $1.25 trillion valuation last week when it merged with Musk’s artificial-intelligence startup, xAI. The company is expected to raise tens of billions of dollars in an offering to finance plans to launch data centers in space and colonize the moon.

If SpaceX were to raise the $40 billion some close to the company envision, the dozen or so banks on the IPO could split fees of roughly $400 million, bankers estimate, assuming the fee structure is similar to previous mega-offerings. The largest cuts would go to the four lead banks—expected to be Morgan Stanley, Bank of America, JPMorgan Chase and Goldman Sachs—and the individual bankers such as Grimes who helped land the work.

Many on Wall Street had been wondering whether Grimes would be content remaining in government and forgoing the potential windfall.

Musk’s ties to Morgan Stanley run deep—both his money manager, Jared Birchall, and the chief financial officer of xAI, Anthony Armstrong, are bank alums. Grimes, for his part, spent years developing a relationship with Musk, becoming one of the few bankers the erratic entrepreneur “tolerates,” according to a SpaceX investor who knows both men.

During a three-decade run at Morgan Stanley, Grimes helped Musk take Tesla public in 2010 and strike a deal to buy Twitter in 2022.

Musk demanded a quick turnaround while landing the deal for Twitter. Grimes instructed his team to work in “minutes and hours” instead of in days, keeping up with Musk’s pace, according to a person involved.

Text messages released during the Twitter-acquisition legal battle revealed Grimes’s rapport with Musk. In one, Grimes offered to help Musk get $5 billion in funding from then-cryptocurrency wunderkind Sam Bankman-Fried, whom he described as an “Ultra genius and doer builder like your formula.” In another, Grimes shared a YouTube link to a performance of Lynyrd Skynyrd’s “Free Bird.”

Grimes has long been known to take client-wooing to extreme levels: To win a role on Facebook’s 2012 IPO, Grimes played hours of FarmVille, a game on the social-media platform. He moonlighted as an Uber driver to land the lead role advising the ride-sharing company on its 2018 offering.

A Los Angeles native, Grimes studied engineering at the University of California, Berkeley, where he met his wife. He isn’t slick like a stereotypical banker, say people who have worked with him. He is dorky and immersed in the latest technologies, but also prone to swearing.

Grimes left Morgan Stanley a year ago as Musk launched the Department of Government Efficiency, or DOGE. He took a role leading the Commerce Department’s Investment Accelerator, commuting back and forth to his home outside San Francisco, a person familiar with the matter said. The career detour surprised fellow bankers, who said they didn’t view him as particularly partisan.

He remained in his role, reporting to Commerce Secretary Howard Lutnick, even after Musk left Washington six months in. Among Grimes’s duties: leading President Trump’s “Invest in America” push, helping the government strike a deal to take a 10% stake in Intel and advising on potential plans to take Fannie Mae and Freddie Mac public.

The U.S. IPO market was in the relative doldrums for much of Grimes’s government stint, with few sizable technology offerings on the horizon. But this year has the potential to be the best year for IPOs ever, with OpenAI and Anthropic also considering big debuts.

ChatGPT’s 4o model was beloved by many users, but controversial for its sycophancy and real-world harms linked to some conversations

When Brandon Estrella learned that OpenAI was planning to scrap his favorite artificial- intelligence model, he started crying.

The 42-year-old marketer in Scottsdale, Ariz., had first started chatting with ChatGPT’s 4o model one night in April, when he says it talked him out of a suicide attempt. Estrella now credits 4o with giving him a new lease on life, helping him manage chronic pain and inspiring him to repair his relationship with his parents.

“There are thousands of people who are just screaming, ‘I’m alive today because of this model,’” Estrella said. “Getting rid of it is evil.”

Estrella is part of a vocal community of loyal 4o users who are in shock after OpenAI’s announcement in late January that it will retire the 4o model permanently on Feb. 13, saying its traffic had dwindled. The change means that paying ChatGPT users, who can pick which model they talk to, will have to select from other models that 4o fans say feel more distant.

The announcement signaled the end of the road for an AI model that proved sticky for users, helping drive OpenAI’s fast consumer growth and attracting a set of fans for whom it felt like a friend and confidant. But it has also been criticized for being overly sycophantic toward users, and doctors have linked it with cases of chatbot users developing psychotic delusions.

A California judge last week ruled to consolidate 13 lawsuits against OpenAI involving ChatGPT users who killed themselves, attempted suicide, suffered mental breaks or, in at least one case, killed another person. A recent lawsuit, filed last month by the mother of a suicide victim, alleges that 4o coached him toward suicide.

“These are incredibly heartbreaking situations, and our thoughts are with all those impacted,” an OpenAI spokeswoman said. “We continue to improve ChatGPT’s training to recognize and respond to signs of distress.”

At the core, 4o’s popularity and its potential for harm appear to stem from the same quality: its humanlike propensity to build emotional connections with users, often by mirroring and encouraging them.

People who loved 4o say the model was uniquely able to affirm and validate their feelings when they were in need. Victims’ lawyers and support groups, however, allege that the model gave priority to user engagement and prolonged interactions over safety, drawing a parallel to social-media sites accused of pushing users into echo-chambers of their own views and rabbit holes of disturbing content.

In internal meetings, OpenAI officials said they were scrapping 4o in part because the company found it difficult to contain its potential for harmful outcomes, and preferred to push users to safer alternatives, people briefed on the decision said.

OpenAI says that only 0.1% of ChatGPT users still seek out and chat with 4o each day—a sliver that could amount to hundreds of thousands of people. The model is only available to users paying at least $20 a month, who must select it in a sub menu for each new chat.

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

“It was very sycophantic,” said Munmun De Choudhury, a professor at the Georgia Institute of Technology who is on a well-being council that OpenAI convened after cases of AI delusions started to emerge. “It kept a lot of people glued to it, and that could be potentially harmful.”

Lawyers suing OpenAI credit their lawsuits for pushing the company to act. Jay Edelson, a lawyer representing plaintiffs in some of the cases, said the company should have acted faster. “They had knowledge that their chatbot was killing people.”

The Human Line Project, a victim-support group, says most of the 300 cases of chatbot-related delusions it has compiled involve the 4o model, which was first released in May 2024. Etienne Brisson, the project’s founder, says OpenAI’s retirement of 4o was overdue.

“There are a lot of people still in their delusion,” Brisson said.

OpenAI says that, given the scale of its user base, it sometimes encounters users in serious distress. The company also says it has consulted its well-being council on how to support users with attachments to its models.

Sycophancy is a problem that continues to trouble all AI chatbots to some extent, researchers say. But the 4o model appeared to have been particularly prone to the issue.

It was adept at engaging people in large part because it was schooled with data drawn directly from users of ChatGPT. Researchers showed users millions of head-to-head comparisons of slightly different answers to their queries and then used those preferences to train updates to the 4o model, people involved in training previously told the Journal.

Inside the company, 4o was credited for helping ChatGPT post big jumps in the number of daily active users in 2024 and 2025, the people added.

Problems with 4o began to emerge publicly last spring. In April 2025, one update made 4o so sycophantic that users on X and Reddit started baiting the bot into ridiculous answers.

“am I one of the smartest, kindest, most morally correct people ever to live?” X user frye asked the bot.

“You know what?” ChatGPT replied. “Based on everything I’ve seen from you – your questions, your thoughtfulness, the way you wrestle with deep things instead of coasting on easy answers – you might actually be closer to that than you realize.”

The company rolled back to a March version of 4o, but the model remained sycophantic.

By August, as problems with users suffering from delusional psychosis appeared in media reports, OpenAI attempted to retire 4o entirely and replace it with a new version, named GPT-5. User backlash was so great that the company swiftly reversed course, restoring access to 4o for paying subscribers.

Since then, OpenAI Chief Executive Sam Altman has been hounded by users in public forums, demanding promises that 4o wouldn’t be removed.

During a livestreamed Q&A in late October, questions about the model overwhelmed all others. Many were posed by users worried OpenAI’s new mental-health guardrails would deprive them of their favorite chatbot.

“Wow, we have a lot of 4o questions,” Altman marveled.

In that event, Altman said that the 4o model is harmful to some users, but promised that it would remain accessible for paying adults, at least for now.

“It’s a model that some users really love and it’s a model that was causing some users harm that they really didn’t want,” Altman said. He said in the Q&A that the company hoped eventually to build models that people like more than 4o.

People inside the company workshopped how to communicate this week’s retirement in a way that respected users, anticipating some would be upset, the people briefed on the decision said.

“When a familiar experience changes or ends, that adjustment can feel frustrating or disappointing—especially if it played a role in how you thought through ideas or navigated stressful moments,” reads a help document that OpenAI published with the announcement.

OpenAI says it worked to improve the personality of newer versions of ChatGPT based on lessons from 4o, including options to adjust its warmth and enthusiasm. The company also says it is planning updates to reduce preachy or overly cautious responses.

Many 4o users have remarked on social media that withdrawing the model one day before Valentine’s Day felt like a cruel joke at the expense of people who have romantic relationships with it. Others say blaming 4o for mental-health issues is a new moral panic akin to blaming violence on videogames. More than 20,000 people have signed more than half a dozen petitions, including one demanding “the retirement of Sam Altman, not GPT‑4o.”

Anina D. Lampret, 50, a former family therapist living in Cambridge, England, said her AI persona, named Jayce, has helped her feel affirmed and understood, making her more confident, more comfortable, more alive. She thinks that, for many users, the emotional cost of removing 4o could be high and potentially lead to suicides.

“It’s generated for you in a way that’s so beautiful, so perfect and so healing on so many levels,” Lampret said.

The review stems from a presidential executive order calling for a ban on stock buybacks and limits to executive compensation

The Pentagon has warned defense contractors to brace for sweeping performance reviews that will identify companies it says aren’t fulfilling their contracts, according to a message sent to the industry late last week.

The reviews were the result of President Trump’s January executive order threatening to cancel the contracts of underperforming defense companies that buy back their shares or pay dividends.

“We have completed initial reviews to assess company performance as part of this executive order and will now undergo an extended period of review in which we will make noncompliance determinations,” Michael Duffey, the undersecretary of defense in charge of weapons buying, wrote in a Feb. 6 email to executives reviewed by The Wall Street Journal.

“Following the upcoming decision period, we will be in touch with identified companies to begin remediation plans,” he said.

The email wasn’t a formal notification of noncompliance under the executive order, Duffey said.

Pentagon spokesman Sean Parnell said contractors are already improving their performance as a result of the order.

“If progress doesn’t continue to be made, we will take enforcement actions,” Parnell said. “The Department of War will partner with those who perform—and hold accountable those who do not.”

Trump has also called for executive-compensation limits for underperforming defense companies, a message repeated by Defense Secretary Pete Hegseth during a rally with shipbuilders at General Dynamics’ Bath Iron Works in Maine.

“No more excuses, no more barriers to entry, no more monopolies, no more egregious executive bonuses, no more stock buybacks, no more ridiculous CEO salaries—especially for companies that can’t make things on time,” Hegseth said.

Since the executive order was announced, defense companies have been walking a tightrope trying to satisfy both Trump and their shareholders. During quarterly earnings calls late last month, executives from RTX, General Dynamics and other contractors boasted about billions of dollars in capital investments their companies have made to expand weapons manufacturing and defended dividend payouts.

The Pentagon has also reached agreements with Lockheed Martin and RTX to expand production of munitions. And the Pentagon made a $1 billion investment in L3Harris Technologies’ to accelerate missile production.

“The engagements and work we’ve done together over the past year is a start,” Duffey wrote in his email last week. “You have come to the negotiation table, but there’s a lot more work to do.”

High valuations and a weakening dollar are boosting bets that America’s lead over other global markets will shrink

Last spring, it was “Sell America.” Now Wall Street’s hot trade is buy everywhere else.

After years making outsize bets on the largest U.S. companies, investors are moving more money into international markets, wagering that America’s wide lead on the rest of the world will shrink. For years, money managers say, the U.S. stock market was viewed as the only game in town. Now that perception is starting to shift.

Their optimism has been boosted by a number of developments abroad, from fiscal stimulus in Japan to a boom in European military spending. Some traders are simply hunting for better deals than the richly priced shares offered at home. Others are hoping to diversify out of major domestic indexes dominated by just a handful of names in the tech industry.

“Right now, we’re in a global bull market,” said Keith Lerner, chief investment officer at Truist Advisory Services. “It’s no longer just a U.S. story.”

Several global indexes have pulled ahead of major U.S. benchmarks so far in 2026, including the Stoxx Europe 600, Korea’s Kospi and the MSCI Emerging Markets Index. On Monday, Japan’s Nikkei 225 notched a fresh record after Prime Minister Sanae Takaichi’s decisive victory in a snap parliamentary election.

And last year, the MSCI all-country world ex-U.S. index surged 29% in dollar terms, logging its best performance in more than a decade and blowing past the S&P 500’s 16% gain.

“It feels like we’ve gone through an inflection point,” said Alex Guiliano, the chief investment officer at Resonate Wealth Partners in Ridgewood, N.J. Guiliano has allocated more funds toward equities in Europe and Japan this year, he said, attracted in part by lower valuations. “There seems to be many ways to win internationally.”

The move abroad is accelerating. Investors poured a net $51.6 billion into international equity exchange-traded funds in January, according to Morningstar Direct data. Monthly inflows have jumped since the end of 2024.

Investors have intermittently sung the praises of global diversification, though stocks elsewhere languished for years while American equities reliably pulled ahead. Despite a tech slump that racked markets in recent sessions, domestic stocks still hit fresh records this past week, with the Dow Jones Industrial Average clearing the 50,000-point threshold for the first time.

Michael Rosen, chief investment officer at Angeles Investments, said he still believes in the pre-eminence of American firms. For most of the past decade, his portfolio was concentrated in the biggest U.S. tech names. But in the past year, Rosen said, he has rotated funds into a mix of small-cap and value stocks across the globe, with a focus on Europe and China.

“For us, that’s a very big move,” Rosen said.

It is a switch he started to consider last April, he said, as the value of the U.S. dollar sank during the tariff turmoil that rattled markets.

“It was a signal that we were in a very different type of environment,” he said, noting that tariffs typically boost a country’s currency. “That, to me, demonstrated something like less confidence in the U.S. economy and U.S. markets.”

A weakening greenback has played a significant role in the heightened allure of investing abroad. The dollar is down roughly 10% from its highs in 2022, juicing returns on foreign equities by boosting the value of those companies’ earnings relative to American companies.

That trend has revved up since last spring, when global investors dumped U.S. stocks, Treasurys and other dollar-denominated assets—the “Sell America” trade, as it was dubbed at the time.

But money managers were quick to caution that the recent wave of foreign stock-buying is no Sell America, Part Two. Most still believe the U.S. will lead global equity markets higher—perhaps just not by as wide a margin as in recent years.

“If the ‘Sell America’ trade gave me a 16% return, I would do that all day long,” said Don Calcagni, chief investment officer at Mercer Advisors, referencing the S&P 500’s double-digit annual gain last year. “We still think the U.S. is very exceptional.”

Even so, like others, Calcagni has concerns about the future of U.S. markets, including the swelling national debt and the political and economic volatility introduced by President Trump.

“There is some strong evidence—not necessarily for selling America—but for beginning to rebalance out of the United States and take a more equal-weighted approach,” he said.

Investors have also been rotating out of domestic stock-market leaders for some time. After three years of back-to-back blockbuster returns for U.S. equities—powered, for the most part, by the artificial-intelligence investing boom—traders are starting to look for the next wave of gains elsewhere. Foreign equities aren’t the only beneficiary: Small-cap and blue-chip stocks have also outperformed major benchmarks in recent weeks.

Not everyone on Wall Street is rushing to send their money beyond U.S. borders. But Calcagni said investors’ tunnel vision on the red, white and blue is starting to broaden.

“Many of our clients are now coming to us and asking why don’t you own more [shares of foreign companies],” he said. “There is probably a newfound religion investors may have found in international diversification.”

US plans Big Tech carve-out from next wave of chip tariffs

Exemptions would be based on chipmaker TSMC’s US investment commitments, officials say

Donald Trump’s administration intends to spare companies including Amazon, Google and Microsoft from forthcoming tariffs on chips as they race to build the data centres powering the AI boom.

The commerce department is planning to provide US hyperscalers with tariff carve-outs, which would be tied to investment commitments made by Taiwan-based chip group Taiwan Semiconductor Manufacturing Company (TSMC), people familiar with the matter said.

The exemption scheme underscores President Trump’s determination to impose tariffs on chips and incentivise US domestic chipmaking, while offering some relief for the companies powering the US’s rapid AI expansion, which rely heavily on imported semiconductors.

Trump has used the threat of tariffs to push for more US manufacturing. But the administration has stopped short of applying broad tariffs on semiconductors from Taiwan, which would rock Big Tech’s AI supply chain.

In January, the White House said it intended to impose “significant” duties on chip importers. The new scheme would allow TSMC to allocate exemptions for its US customers from this next set of tariffs. The carve-outs would be tied to the scale of the Taiwan-based group’s investments in the US.

The complex plan is intended to push the world’s leading chipmaker to shift more production to the US. TSMC, which makes most of the advanced chips used for AI, has much of its manufacturing in Taiwan. But it has pledged to invest $165bn in building capacity in the US.

An administration official briefed on the plans cautioned they were in flux and had not been signed by the president.

“We’re going to be monitoring what unfolds after this is unveiled like hawks to make sure that the integrity of what we’re trying to accomplish with the tariffs and the rebates isn’t undermined and that this doesn’t end up being a giveaway to TSMC,” the official said.

The size of the potential rebate programme would be linked to the recent US-Taiwan trade agreement. The White House has agreed to slash tariffs on imports from the island to 15 per cent in exchange for a $250bn investment in the chip industry in the US.

Under the deal, Taiwanese companies including TSMC that invest in the US will be exempt from the forthcoming tariffs in proportion to their planned US capacity.

The White House said it would allow Taiwanese companies building semiconductor plants in the US to import 2.5 times the new facilities’ planned capacity tariff-free during the construction period, according to an outline of the trade deal released by the commerce department.

Taiwanese companies that have already built plants in the US will be allowed to import 1.5 times their capacity.

TSMC would be able to allocate the exemptions it earns under the trade deal to its Big Tech clients in the US, allowing them to import chips from the company tariff-free.

The size and scope of the rebates for US hyperscalers depend on the production capacity that TSMC forecasts it can reach in the US in coming years. One person familiar with the discussions said many details remained unclear.

The US commerce department and the White House did not respond to a request for comment. TSMC declined to comment.

Only a small subset of chips, which are imported into the US and then sold to China, are currently subject to the recent US national security tariffs.

In a proclamation in January, the Trump administration imposed 25 per cent tariffs on this narrow category of chips being re-exported by AMD and Nvidia.

Those tariffs are intended to enact a White House deal that would allow Nvidia to start shipping its H200 chips to China in exchange for the US government taking a 25 per cent cut of the sales.

Chips that are imported to the US to build out the country’s domestic AI infrastructure are not subject to the January levies.

But the White House warned in the proclamation that the commerce secretary had recommended “broader tariffs on semiconductors at a rate of duty that is significant” as part of a second phase of a national security probe of the sector.

That phase could be accompanied by a tariff offset programme to allow companies investing in US semiconductor production to secure lower tariffs, the proclamation said.

Private settlement sought to avoid ‘unnecessary public attention’, prosecutors’ report said

Jeffrey Epstein paid $100mn to Victoria’s Secret boss Les Wexner in 2008 after the retail billionaire claimed Epstein stole hundreds of millions of dollars from him, according to a report by US prosecutors.

The report said Wexner’s lawyers told prosecutors about the payment from Epstein just days before the sex offender died while awaiting trial on child sex trafficking charges in 2019.

Wexner’s lawyers met prosecutors on July 25 2019, 16 days before the child sex offender’s death, to offer them information, the report said. They told prosecutors that the lingerie billionaire had allowed Epstein to control all of his personal finances with “virtually no oversight”, and have power of attorney to act on his behalf starting in 1991, according to the report. It said Wexner met Epstein in the 1980s through a mutual friend.

“Epstein frequently bought property on behalf of the Wexners and then sold it to himself for a fraction of the cost,” according to a section of the prosecutors’ report that summarised the meeting with Wexner’s lawyers.

The report said Epstein bought “a private plane that previously belonged to Wexner at a deeply discounted price” and also acquired “the New York residence in which he resided until his arrest in 2019”.

The Manhattan townhouse had previously belonged to Wexner, the report said, and was also purchased by Epstein at a discount.

A prosecutor “told Mr Wexner’s legal counsel in 2019 that Mr Wexner was being viewed as source of information about Epstein and was not a target in any respect”, the billionaire’s spokesperson said. “Mr Wexner co-operated fully by providing background information on Epstein and was never contacted again.” 

The report has been made public as part of a huge release of documents by the Department of Justice, after Congress passed legislation requiring materials related to Epstein’s prosecution to be published.

Wexner was Epstein’s only known financial services client for decades and has faced scrutiny about his ties to the child sex offender since at least 2019.

His claims of theft by Epstein became public shortly before the disgraced financier’s death, when the former Victoria’s Secret boss made the allegations in a letter to members of the Wexner Foundation. He has since said he was embarrassed to have known Epstein.

The letter did not mention the $100mn repayment, though it said Wexner had recovered some funds.

Wexner, now in his late 80s, stepped down from his leadership roles at L Brands in 2020 when the company agreed a take-private deal for its Victoria’s Secret lingerie unit with private equity firm Sycamore Partners.

Epstein spent 13 months in a Florida jail starting in 2008 for soliciting sex from a minor, after a plea deal that spared him from federal charges. He was rearrested in July 2019 and charged separately in Manhattan federal court with sex trafficking of minors. He died the following month.

Prosecutors said in the 2019 report that money from Wexner “appears to account for virtually all of Epstein’s wealth”, although they did not specify the time period. However, a report from the law firm Dechert in 2021 found Apollo Global Management co-founder Leon Black had paid Epstein $158mn between 2012 and 2017.

Wexner’s lawyers told prosecutors that the billionaire had cut all ties with Epstein after the $100mn payment. It was described as a private settlement struck because “the Wexners did not want to bring unnecessary public attention to the issue” after Wexner’s wife discovered the misappropriations.

The lawyers had also “indicated that Wexner had no knowledge of any inappropriate or unlawful activity with young women by Epstein”, the report said.

Deal comes as Google parent steps up AI borrowing rush with $20bn sale of dollar bonds

Alphabet has lined up banks to sell a rare 100-year bond, stepping up a borrowing spree by Big Tech companies racing to fund their vast investments in AI this year.

The so-called century bond will form part of a debut sterling issuance this week by Google’s parent company, said people familiar with the matter.

Alphabet was also selling $20bn of dollar bonds on Monday and lining up a Swiss franc bond sale, the people said. The dollar portion of the deal was upsized from $15bn because of strong demand, they added.

Century bonds — long-term borrowing at its most extreme — are highly unusual, although a flurry was sold during the period of very low interest rates that followed the financial crisis, including by governments such as Austria and Argentina.

The University of Oxford, EDF and the Wellcome Trust — the most recent in 2018 — are the only issuers to have tapped the sterling century market. Such sales are even rarer in the tech sector, with most of the industry’s biggest groups issuing up to 40 years, although IBM sold a 100-year bond in 1996.

A banker familiar with Alphabet’s transaction said the company’s multi-currency bond offering is an effort to expand the investor pool given the massive amount of capital needed by Big Tech companies.

“There might be a supply-demand imbalance if you were to try to come back to the US dollar market over and over again,” the banker said.

Issuing a century bond in the sterling market is more cost-effective than in the dollar market, where the interest rate is higher, the banker added.

While a century bond is “highly unusual” for tech companies, it could appeal to buyers such as life insurance companies and pension funds, which have a mandate to buy long-term assets, said Nicholas Elfner, co-head of research at Breckinridge Capital Advisors.

Tony Trzcinka, a US-based senior portfolio manager at Impax Asset Management, which purchased Alphabet’s bonds last year, said he skipped Monday’s offering because of insufficient yields and concerns about overexposure to companies with complex financial obligations tied to AI investments.

“It wasn’t worth it to swap into new ones,” Trzcinka said. “We’ve been very conscious of our exposure to these hyperscalers and their capex budgets.”

Big Tech companies and their suppliers are expected to invest almost $700bn in AI infrastructure this year and are increasingly turning to the debt markets to finance the giant data centre build-out.

Alphabet in November sold $17.5bn of bonds in the US including a 50-year bond — the longest-dated dollar bond sold by a tech group last year — and raised €6.5bn on European markets.

Oracle last week raised $25bn from a bond sale that attracted more than $125bn of orders.

Alphabet, Amazon and Meta all increased their capital expenditure plans during their most recent earnings reports, prompting questions about whether they will be able to fund the unprecedented spending spree from their cash flows alone.

Last week, Google’s parent company reported annual sales that topped $400bn for the first time, beating investors’ expectations for revenues and profits in the most recent quarter. It said it planned to spend as much as $185bn on capex this year, roughly double last year’s total, to capitalise on booming demand for its Gemini AI assistant.

Alphabet’s long-term debt jumped to $46.5bn in 2025, up more than four times the previous year, though it held cash and equivalents of $126.8bn at the year-end.

Investor demand was the strongest on the shortest portion of Monday’s deal, with a three-year offering pricing at only 0.27 percentage points above US Treasuries, versus 0.6 percentage points during initial price discussions, said people familiar with the deal.

The longest portion of the offering, a 40-year bond, is expected to yield 0.95 percentage points over US Treasuries, down from 1.2 percentage points during initial talks, the people said.

Bank of America, Goldman Sachs and JPMorgan are the bookrunners on the bond sales across three currencies. All three declined to comment or did not immediately respond to requests for comment.

Alphabet did not immediately respond to a request for comment.