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Before we get into today’s news, check out a string of scoops from my colleague Sri on the rivalry between OpenAI and Anthropic. OpenAI, she reported last night, is talking to Nvidia, Amazon, Microsoft about raising up to $60 billion to fill out its $100 billion fundraising, which would widen its funding lead over rival Anthropic. But Anthropic is narrowing the gap when it comes to another important metric—revenue. Sri has the lowdown on Anthropic projections through 2029, including the new date it starts generating cash (and presumably would need less investor money!)

Now, onto the latest endeavor of the world’s richest man.

Ever since I broke the news in December that SpaceX was planning an initial public offering this year, it has remained a top news story, with every little half-thought about the company’s upcoming public debut generating headlines.

But today’s latest development is actually significant. Reuters reported what many people have speculated might happen: that SpaceX is in talks to merge with xAI before the IPO.

This is both surprising and unsurprising. It’s surprising in the sense that it is a particularly large acquisition for SpaceX to make just months before it goes public (xAI was recently valued at $230 billion in a fundraising). As my colleague Cory Weinberg noted, that’s a lot of last-minute paperwork.

And yet it has often been predicted because it’s exactly the kind of thing Musk likes to do. Last year he merged X (formerly Twitter) with xAI.

Why does Musk combine his companies? It’s not because he wants one fewer company to manage. It’s because it can be beneficial to his shareholders. Musk likes to reward people who are loyal to him, and he doesn’t want them to lose money.

Investors including Sequoia Capital, Andreessen Horowitz and Valor Equity Partners collectively poured billions into Musk’s leveraged buyout of Twitter at a $44 billion valuation. For a while, as Twitter’s ad revenue tanked, some large investors (and Musk himself) slashed the paper valuation of the company. But investors were made whole, at least on paper, when they received xAI shares at a valuation on par with X’s take-private price of $44 billion.

Now xAI investors will get shares in SpaceX, a valuable and rapidly growing company. Plus there are synergies. Musk has recently been positioning SpaceX as AI related, as he and others talk up the benefits of putting data centers in space, because of the free, uninterrupted solar power and cooling that environment would provide. And it’s a way to take a capital-intensive business like xAI public and get that stock market cash.

Will it slow down the IPO prep? It’s certainly possible. While we’re hearing that Musk is aiming to take the company public this summer, a $200 billion–plus acquisition doesn’t happen overnight.

But the world’s richest man can use his financial clout to make things happen faster than what’s typical, especially given SpaceX’s recent $800 billion valuation. There will certainly be no shortage of lawyers, bankers and consultants preparing for what could be the biggest IPO in history.

Bike lanes vs narcos: French mayors step up fight against drug gangs

Growing problem sparks concern that far right could take advantage in local elections

Montpellier mayor Michaël Delafosse has come up with a novel way to combat narco-traffickers: tear down shops suspected of laundering drug money and replace them with a cycle lane.

On a drizzly December morning in the southern French city, excavators were demolishing a row of barber shops and 24-hour convenience stores to make way for a bike path.

“Ten of these were fronts for narco-laundering,” Delafosse said at the demolition site. The Socialist mayor said he had been forced to find a solution, even as the city spent months reclaiming sites and evicting owners.

The narco problem is growing across cities in France, from deadly gang feuds in the port city of Marseille to violence in smaller towns, where score-settling among dealers and traffickers was once unheard of. French officials are increasingly worried about growing trafficking networks, fuelled by soaring cocaine consumption. 

The issue has surged to the fore ahead of local elections across the country in March, an electoral test before 2027’s presidential ballot. Opinion polls show that security issues are the largest concern for voters, ahead of housing and healthcare — a theme that traditionally has benefited conservative candidates and could be a driver for Marine Le Pen’s far-right Rassemblement National.

The French government has defended its record. On the same morning in December, President Emmanuel Macron made the latest of several high-profile visits to Marseille to try to spearhead a drugs crackdown. His trip came weeks after the murder last year of 19-year-old Mehdi Kessaci, the brother of anti-gang violence activist Amine Kessaci, in a suspected act of intimidation that shocked the country. 

Macron announced new fines of €500, up from €200, for anyone caught taking drugs nationwide, in what he called a “war” on traffickers. He has highlighted efforts to pour €5bn into Marseille since 2021 to try to transform the city through better transport and schools, but also with reinforced security and police.  

The problems are far from confined to France. From Spain to Belgium, warnings over the power and wealth wielded by cartels are also picking up.

But French mayors have said they have insufficient resources to tackle the threat.

In Montpellier, a series of arson attacks on suspect convenience stores included a deadly one in November, in what police have investigated as a possible retaliation between gangs.  

Along the coast from Marseille in Sète, known for its sandy beaches, police are concerned about warfare between dealers. Tranquil cities such as Nantes in western France and Clermont-Ferrand near Lyon have warned of a major pick-up in trafficking, while Grenoble and Nice have more entrenched problems of drug-related violence.  

“There are no areas sheltered from this anymore,” said Ludovic Friat, who heads a magistrates’ union. Usage of drugs had become more widespread and been made more easily available, he said. “It used to be the case that you’d talk about the big cities, and the provinces were not affected.”

Delafosse said mayors had been forced to use “DIY” methods to combat gangs and called for a “much more powerful judicial arsenal”, despite an “anti-narcos” law passed in the French parliament last June. France set up a dedicated prosecutor’s office looking into drug-related offences and networks, which started working in January.

Delafosse said Montpellier’s city hall had spent €800,000 buying up 14 shops and pseudo-businesses, conceiving the bike lane plan and removing asbestos from the sites and other related work.

“It’s expensive for an environmental project,” Delafosse quipped. “On the other hand it means recovering some peace for thousands of inhabitants and making the local lycée attractive again. I’m doing what I can with the means the law has given me.”

He has hired unarmed private security agents to evict people convicted of drug offences from social housing and has called for mayors to have a veto on business openings.

The recently destroyed stores in a row of former garages were among dozens that have sprouted up across Montpellier and its palm tree-lined medieval town centre. A proliferation of barber shops suspected of laundering money are also attracting attention.

“They’re open all day Sunday without a soul,” said Yves Martinot, a local pensioner who called for more action. “There aren’t many hair-dos being done there.”

The French government says the new anti-drugs bill will allow it to temporarily close stores for six months on suspicion of laundering money, as it steps up tax inspections.

This might not shut them for ever but was an effective harassment tactic, said François-Xavier Lauch, the outgoing préfet, or state representative, named by Macron for the Hérault region around Montpellier.

“It’s a key answer to the problem, along with dislodging dealership points,” Lauch said. “One of the things that’s the most disruptive to citizens from narco-trafficking is seeing their town centres rotted by these types of businesses.”

Activists such as Kessaci and even police have warned that gangs simply return to dealership spots or store operations after a clearout.  

In Marseille, drug trafficking is one of the issues that may help attract more voters to the far right. RN candidate Franck Allisio, who has called for a state of emergency to tackle the problem, is closely trailing the leftwing incumbent mayor Benoît Payan in polls.

In Montpellier, the RN is far behind other rivals in the city but very dominant in the surrounding region.

Delafosse, a former high school teacher, said he had also chosen to tackle the narco fallout so as not to allow the far right to take advantage of the problem.  

“I don’t want to leave these issues to be instrumentalised by populists,” Delafosse said. “We need to show people that we have answers.”

Correlation with equity benchmarks hits highest in at least five years, raising concerns over performance during downturns

Hedge funds closely tracked moves in equity markets last year, raising concerns among some commentators that the industry may not be positioned to protect investors if there is a sharp market sell-off.

According to research by BNP Paribas, the correlation between hedge fund returns and the MSCI World, a broad global equity market index, was the highest in at least five years.

The research comes amid a roaring three-year bull market in global stocks that helped hedge funds make 12.5 per cent in 2025, their best year since 2009, according to data provider HFR. However, the research also adds to long-standing fears that these high-fee portfolios could struggle to protect investors during a market downturn, traditionally one of their strongest selling points.

“It’s a little scary especially when you look at the times that this has happened before,” said Jon Caplis, founder of hedge fund research firm PivotalPath, referring to previous occasions when a high correlation between equities and hedge funds has exacerbated big market sell-offs.

“Investors need to at least be aware and understand how much equity exposure they have in their overall portfolio and make sure that’s what they want at this time,” he added.

Investors poured money into hedge funds last year as their appetite for private equity waned, with inflows at their highest level since 2007.

Hedge funds demand premium fees from investors, traditionally a management fee of about 2 per cent plus performance fees of 20 per cent, although this has come down over time. In theory, the fees reward them for delivering high returns with low volatility that lessens the impact of market crashes on investors’ portfolios.

Equity long-short hedge funds, which bet on and against stocks, had a correlation of 0.98 with market returns last year, the highest annual level since the survey began tracking this data in 2019, according to BNP. This compared with a three-year historical average correlation of 0.92 and a five-year average of 0.86. A correlation of 1 implies two variables move in lockstep, whereas a reading of zero implies they have no relationship.

Meanwhile, the industry as a whole last year had a 0.92 correlation with the index, while the five-year average was 0.76. PivotalPath’s own recent research has shown a similar rise in correlations between hedge funds and the S&P 500 index.

The US stock market has been on a historic run over the past few years, with the S&P 500 touching a fresh record high above 7,000 points on Wednesday. However, some commentators have raised concerns over valuations in the AI sector, which has driven much of the rally.

“Allocators have to consider if their portfolio is being protected by their mix of hedge fund managers if there is suddenly an equity market drawdown,” said Marlin Naidoo, global head of capital introduction at BNP.

“That being said, while correlation with equity indices is rising, equity hedge funds have managed the volatility of their returns quite well.”

Investors have previously suffered due to high levels of correlation between hedge funds and the index during market downturns in 2022 and in 2011.

BNP Paribas’s data was based on a survey of 246 hedge fund investors in December and January, who in total invested in or advised on $1.1tn in hedge fund assets. The correlations to the MSCI World were calculated by taking an average of hedge fund returns within their segments each month of the year, with increased weighting to larger hedge funds, and comparing this to the index.

The data also showed that discretionary macro funds, which bet on key economic indicators, had a relatively low correlation of 0.3.

PivotalPath’s own research found that the last time multi-strategy hedge funds were this correlated to the S&P 500 index was in September 2011, when the Eurozone debt crisis gripped markets globally, contributing to a sell-off in stocks. “These unwinds can be quick and vicious,” said Caplis.

Rivals are competing to be the first major generative-AI startup to tap public markets

OpenAI is laying the groundwork for a public listing in the fourth quarter of this year, people familiar with the matter said, accelerating its plans as competition with rival Anthropic intensifies.

The $500 billion startup is holding informal talks with Wall Street banks about a potential initial public offering, people familiar with the matter said, and is growing its finance team. That includes the hire of a new chief accounting officer, Ajmere Dale, and a new corporate business finance officer, Cynthia Gaylor, who will oversee investor relations.

It is expected to be a blockbuster year for stock-market debuts after a recent drought, and some on Wall Street are speculating that 2026 could be the biggest year ever for IPOs. OpenAI, rival Anthropic and SpaceX are among the most closely watched tech darlings that could go public, though listing activity also has picked up for smaller companies.

Pulling off a successful public listing by year’s end is likely to be difficult for the ChatGPT maker, which is still confronting the challenges of a fast-growing startup. The company recently has made changes to leadership ranks and is contending with fierce competition to its core consumer business from Google, prompting it to declare a weekslong code red effort to improve the quality of ChatGPT. OpenAI is also headed to trial in a case brought by co-founder Elon Musk, who is seeking up to $134 billion in damages.

An IPO could help the AI startup shore up market confidence in its finances after investors questioned how it would pay for AI infrastructure and chips deals that total hundreds of billions of dollars in the coming years.

“Am I excited to be a public company CEO? 0%. Am I excited for OpenAI to be a public company? In some ways, I am, and in some ways I think it’d be really annoying,” Chief Executive Sam Altman said on the Big Technology podcast in December. As OpenAI goes public, he is expected to delegate some responsibilities to former Instacart CEO Fidji Simo, who leads OpenAI’s product and business teams as its CEO of Applications.

OpenAI executives have privately expressed concerns about Anthropic beating the company to an IPO, people familiar with the matter said. Anthropic, founded by former OpenAI leaders, has told financial partners that it is open to listing by the end of this year. The startup’s sales are soaring, thanks largely to the popularity of its viral coding agent Claude Code, and it is in the process of raising a funding round that will likely exceed an initial $10 billion target, people familiar with the matter said.

Whichever company lists first probably would benefit from a large group of public-market investors—including individual investors—who want exposure to the new wave of generative-AI companies. OpenAI and Anthropic are also competing against Musk’s SpaceX, which is aiming to do a IPO as early as the summer and is hoping to raise more than $1 trillion, people familiar with the matter said.

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

Anthropic has held talks with banks interested in helping with the company’s IPO, people familiar with the matter said. It has made a string of finance hires to potentially help take the company public. They include Andrew Zloto, who leads capital markets, and Blackstone investor Kevin Chang, people familiar with the matter said. Chang’s hire hasn’t been previously reported.

OpenAI and Anthropic are both losing billions of dollars every year as they work to build new AI models and power their existing products. Anthropic expects to break even for the first time in 2028, according to projections shared with investors last year. That is two years earlier than OpenAI, the Journal previously reported.

OpenAI is in the throes of a fundraising campaign that could take place for much of this year, in what could be a pre-IPO round. It is seeking to pull together more than $100 billion in a deal that would value the startup at $830 billion.

SoftBank is discussing investing about $30 billion, the Journal reported, and OpenAI has had discussions with Amazon.com for an investment of as much as $50 billion. Andy Jassy, the tech giant’s chief executive, is personally leading negotiations with OpenAI’s Sam Altman, the Journal reported Thursday.

The company, which had already forecast big December quarter sales, is now contending with rising component prices

Apple AAPL 0.72%increase; green up pointing triangle reported blowout iPhone sales and profits in the December quarter, but shares stayed flat after-hours because of investor concerns about rising costs.

Revenue from iPhones rose 23% to $85.3 billion compared with the prior year as customers, excited by the new iPhone 17 lineup, upgraded their devices faster than usual. That powered Apple to record quarterly sales of nearly $144 billion, results that exceeded Wall Street expectations.

Sales were particularly strong in China, where Apple’s results have been uneven in recent years.

“The demand for iPhone was simply staggering,” said Apple Chief Financial Officer Kevan Parekh, who added that Apple surpassed 2.5 billion active devices, up from 2.35 billion a year ago.

Investors who have knocked the stock off its record high are monitoring Apple’s projections for costs this year. New demand for artificial-intelligence data centers has pushed prices up sharply in recent months for materials that go into Apple devices.

The increases have been acute for memory components that make iPhones faster and for storage where people keep their ever-expanding libraries of photos and video. The chips that power devices are also growing more expensive, say analysts.

Apple shares rose about 1% in after-hours trading following the release of the financial results.

Chief Executive Tim Cook hinted at higher costs possibly affecting Apple’s future financial results. On the company’s earnings conference call, he said Apple is seeing “constraints” due to the availability of advanced chips that power Apple’s devices. He said memory prices are “increasing significantly,” prompting the company to look at a “range of options.”

AI companies are gobbling up capacity at suppliers where Apple has long been the biggest buyer. That gives the suppliers leverage to raise prices—even on their best customer.

Higher costs are expected to affect Apple later in the year as suppliers push through the price increases.

Apple is expected to eat the cost increases, according to a report from Ming-Chi Kuo, a supply-chain analyst with TF International Securities. Kuo projects that Apple won’t raise iPhone prices for next year’s iPhone 18 lineup, instead taking the hit in lower gross-profit margins.

In an offset on some of the margin pressure, the Trump administration in November halved a tariff on imports from China. Apple expected tariff costs would amount to $1.4 billion in the December quarter.

Another benefit to Apple’s profit margins: iPhone customers are upgrading to premium-priced Pro and Pro Max models at higher rates than in the past. The devices accounted for 52% of iPhone sales in the U.S. in the December quarter, estimated Consumer Intelligence Research Partners, compared with 39% for the iPhone 16 Pro and Pro Max in the same quarter last year.

One blemish for the iPhone 17 lineup has been the iPhone Air. The new model, which was a hit with some critics for its thin and light profile, hasn’t sold well. The Air costs $200 more than a base model iPhone 17, though the latter comes with a better camera and battery.

Apple hopes to entice more consumers to upgrade with Siri updates coming this year to make it more competitive with rival AI chatbots. Apple and Alphabet’s Google said this month that Apple would use Google’s Gemini to help power a more personalized Siri and other forthcoming AI features.

Apple said Thursday that it acquired Israeli startup Q.ai, which has technology that enables “whisper speech,” which could allow people to communicate quietly or non-verbally with futuristic devices such as smartglasses.

Apple projected revenue would rise 13% to 16% in the March quarter, ahead of Wall Street analysts’ consensus expectation of 10%.

The Wallenberg Succession: Analysis & Trade Ideas

Quick Summary

Sweden's most powerful business family (controlling ~40% of Stockholm exchange through dual-class shares) is transferring power from the 5th to 6th generation.

Actionable Trade Ideas for Hedge Fund PM/Trader

TRADE #1: Short Investor AB - Succession Overhang

Thesis: Untested leadership + mean reversion after exceptional run + recent weakness

Ticker: INVE-B.ST (Stockholm, SEK-denominated)

Setup:

Hedge: Long ^OMX (OMX Stockholm 30 Index) to isolate alpha

Timeline: 3-6 months (through AGM season)

TRADE #2: New Tech vs Old Guard Pair Trade

Thesis: Capital flows shifting from old-money industrials to Swedish tech unicorns

Long Leg (equal-weighted or 50/50 SEK exposure):

Short Leg (choose one):

Structure:

TRADE #3: Governance Activism - Ericsson Short

Thesis: Dual-class structure under attack + sector weakness + job cuts = governance catalyst

Ticker: ERIC-B.ST (Stockholm)

Catalysts:

Setup:

Timeline: Q1-Q2 2025 (through AGM)

TRADE #4: EQT - Nepotism Discount

Thesis: Jacob Wallenberg Jr (33, minimal experience) on board = governance concerns + PE fee compression

Ticker: EQT.ST (Stockholm)

Risk Factors:

Setup:

Alternative: Out-of-money puts (3-6 month) if implied vol is cheap

TRADE #5: SEB Banking Transition Risk

Thesis: Family governance transition + Nordic banking headwinds = relative underperformance

Ticker: SEB-A.ST (Stockholm)

Relative Value Trade:

Setup:

Alternatively: Outright short if conviction is high

Risk Management & Key Dates

Critical Dates to Watch:

Key Risks:

Position Sizing Guidance:

The Bottom Line

The Wallenberg succession is real and measurable, but the timing and magnitude of impact are uncertain. The family has survived world wars, financial crises, and multiple generational transitions.

Most asymmetric opportunity: Long KLAR (post-IPO momentum, new Sweden) vs Short INVE-B.ST (succession overhang, old Sweden)

Safest approach: Wait for Q1 earnings and AGM catalysts before sizing aggressively. The governance debate will intensify in Spring 2025.

Caveat: If 6th generation shows exceptional competence early, all bearish trades should be exited immediately. Track Investor AB's quarterly performance metrics religiously.