WSJ : How a $901 Billion Plan Changes U.S. Military Policy

How a $901 Billion Plan Changes U.S. Military Policy
Congress’s National Defense Authorization Act proposal weighs in on boat strikes, drones, DEI, foreign investment and fights overseas

The $901 billion defense-policy bill passed by the House would codify more than a dozen of President Trump’s executive orders, authorizing major weapons programs, troop deployments and international-security assistance. The Senate is expected to take it up in the week ahead.

The 3,086-page National Defense Authorization Act authorizes $8 billion more than what Trump requested in May and contains a 3.8% pay increase for troops. While the bill authorizes spending levels in defense accounts, actual appropriations must be passed separately by Congress.

Here is what is in the bill:

Boat strikes
The legislation would withhold some Pentagon funds until Defense Secretary Pete Hegseth turns over unedited video footage of military strikes on suspected drug-smuggling boats in the Caribbean and eastern Pacific. The move reflects growing bipartisan frustration with how little the administration has disclosed about its expanding campaign of boat strikes.

Support for Ukraine
The bill sets a floor for U.S. force levels in Europe of 76,000 troops and bars the Pentagon from cutting forces, closing facilities or moving equipment without consulting NATO allies and certifying that such moves are in the national interest. It extends through 2029 the Ukraine Security Assistance Initiative, authorizing $400 million annually to buy weapons from U.S. defense companies. Congress would have to be informed if U.S. intelligence provided to Ukraine is paused or scaled back.

Military presence in Asia
The bill extends the Pacific Deterrence Initiative, which highlights military spending in Asia, and orders a military exercise testing the Pentagon’s readiness to effect a surge in troops and supplies in the event of a crisis with China. It calls for a review of how well the military can move and keep forces supplied across all branches in a major conflict or emergency, and requires the Air Force to integrate new tasks into exercises with Japan, Australia, South Korea, the U.K. and others.

Iraq war authorizations
The legislation scraps the decades-old authorizations for the use of military force that provided the legal basis for the 1991 Gulf War and the 2003 invasion of Iraq. Presidents from both parties have relied on these authorizations for military operations long after major combat ended.

Partnership with Israel
The bill boosts U.S.-Israeli cooperation on defense technology, provides $80 million for joint research into countering adversaries in underground tunnels and $70 million for counterdrone programs.

Repeal of Syria sanctions
The bill repeals the Caesar Syria Civilian Protection Act of 2019, which imposed sanctions on Syria’s government and other entities related to the country’s civil war.

D.C.-area airspace
The bill rolls back some safety rules for military helicopters in the busy Washington, D.C., area airspace that were put in place after a midair collision in January 2025 in which 67 people died. The chair of the National Transportation Safety Board, along with the bipartisan Senate committee that oversees aviation, warned that this change would make the airspace less safe.

Restrictions on outbound investment
The legislation empowers the president to block Americans from buying significant equity or debt in some foreign companies, particularly those that are based in China, Hong Kong or Macau, operating in defense or surveillance sectors or controlled by state actors or Chinese Communist Party officials. The bill requires U.S. companies to report “national security-sensitive” transactions.

Diversity, equity and inclusion
The bill broadly prohibits Pentagon programs promoting diversity, equity and inclusion, though it preserves existing Equal Employment Opportunity offices and those focused on the Americans with Disabilities Act. It extends merit-based decision-making to command selection in addition to accession and promotion.

Shipbuilding authorization
Lawmakers authorized up to five Columbia-class submarines and two Ford-class aircraft carriers, and multiyear procurement of munitions including SM-3 and SM-6 missiles, Tomahawks and both air-to-air and standoff missile systems.

The legislation directs the Army to produce critical materials currently sourced solely from China, such as propellants and some precursor chemicals.

Prohibition on foreign components
The bill restricts purchases of critical materials and components from “foreign entities of concern,” including China, Russia, Iran and North Korea. New acquisition programs starting in 2028 can’t use advanced batteries linked to these countries.

It calls for eliminating the purchase of optical systems, computer displays and other equipment by 2030 from foreign adversaries. Seafood for military dining facilities may not be sourced from these countries.

Drones defense
The bill creates a task force to approve and oversee technology that can detect and stop small drones, as well as measures to protect bases and other sites from them. The legislation calls for tighter rules and research on protecting nuclear facilities from unmanned systems.

What didn’t make it in
Several proposals were removed during negotiations, including expansion of military coverage of in vitro fertilization, collective-bargaining protections for Defense Department civilian employees, military-housing changes and language governing a potential central-bank digital currency.

The bill refers to the Pentagon chief as the secretary of defense rather than Trump’s preferred title for the role, secretary of war.

WSJ : OpenAI Ends ‘Vesting Cliff’ for New Employees in Compensation-Policy Chang

OpenAI Ends ‘Vesting Cliff’ for New Employees in Compensation-Policy Change
Maker of ChatGPT and its competitor xAI have relaxed restrictions meant to keep new hires from leaving in the midst of a fierce talent war

  • OpenAI informed staff that it was ending a compensation policy that required employees to work at the company for at least six months before their equity vests.
  • The decision to loosen or do away with restrictions meant to ensure new hires stick around reflects the frenzied competition for top-tier technical talent.
  • Tech investors have privately complained about the ballooning stock-based compensation associated with fast-growing AI startups.

OpenAI told staff this past week that it was ending a compensation policy that required employees to work at the company for at least six months before their equity vests.

The change to the “vesting cliff,” announced by applications chief Fidji Simo, is designed to encourage new employees to take risks without fear of being let go before accessing their first chunk of equity, according to people familiar with the matter.

OpenAI shortened its vesting period for new employees to six months from the industry standard of 12 months in April. Elon Musk’s xAI, an OpenAI competitor, made a similar change in the late summer, people familiar with the change said.

XAI didn’t respond to a request for comment.

The decision to loosen or do away with restrictions meant to ensure new hires stick around reflects the frenzied competition for top-tier technical talent within the AI industry. Tech companies typically have a one-year vesting cliff for new employees, preventing them from having to give away stock to hires who leave quickly or don’t work out.

But with AI companies including Meta Platforms, Google and Anthropic wooing top researchers with pay packages that can be worth $100 million or more, researchers and engineers have been able to hold out for the most-attractive terms, and in many cases have been quick to leave jobs they have found not to their liking.

OpenAI is already doling out far more stock-based compensation than other tech companies, owing to an intense talent war it is waging with its competitors. The company expects to spend $6 billion this year on such costs—almost half of its projected revenue—according to financial documents sent to investors over the summer and viewed by The Wall Street Journal.

Tech investors have privately complained about the ballooning stock-based compensation associated with fast-growing AI startups, arguing that it eats into shareholder returns.

“Companies that are needing to be more competitive are dropping the traditional first-year vesting cliff,” said Zaheer Mohiuddin, co-founder of Levels.fyi, a platform that gathers data on compensation in tech careers.

In August, after Meta Chief Executive Mark Zuckerberg launched a full-scale raid of OpenAI’s staff and offered giant pay packages, OpenAI gave some of its top researchers and engineers a one-time bonus, with some employees receiving millions of dollars, the Journal previously reported.

At xAI earlier this year, hiring managers were having to work harder to persuade potential recruits to be interviewed, according to people involved in hiring decisions at the time. Already facing a rash of departures and reputation issues, xAI quietly made the decision in the third quarter to shorten the vesting period for new hires, according to people familiar with the change.

Musk, who has said he works “every waking hour,” is known for expecting long, grueling hours of his employees and burning through executives who struggle to keep up with his demands. Since the summer, xAI has lost leaders in charge of X, legal, finance and engineering. One legal executive announced his departure on LinkedIn with a meme of a man in a suit shoveling coal.

In late 2024 and early 2025, Musk’s close political alliance with Donald Trump and his outspokenness on right-wing culture-war issues increasingly posed a challenge for his companies, with many Tesla buyers souring on the brand and at least two engineers publicly saying they left jobs at the company over Musk’s political activities.

At xAI, some product decisions created an additional image problem that came up in recruiting, the people involved in hiring said. In July, the company’s Grok chatbot published a series of antisemitic posts. Also that month, the company launched Ani, a racy animated chatbot with blond pigtails and revealing outfits. While some job applicants expressed interest in working on Ani, other prospects were deterred, some of the people said.

The rate at which recruits have been accepting xAI’s offers has increased since the startup implemented the shorter period, they said.

WSJ : The Chinese Billionaires Having Dozens of U.S.-Born Babies Via Surrogate

The Chinese Billionaires Having Dozens of U.S.-Born Babies Via Surrogate
Videogame executive Xu Bo, said to have more than 100 children, and other elites build mega-families, testing citizenship laws and drawing on nannies, IVF and legal firms set up to help them

  • Wealthy Chinese elites are using U.S. surrogacy to have large numbers of children, exploiting legal and regulatory gaps.
  • A prominent case involved a Chinese billionaire denied parental rights by a U.S. judge after pursuing multiple surrogate births.
  • The trend is triggering legal, ethical, and political scrutiny around surrogacy and birthright citizenship.

Inside a closed Los Angeles courtroom, something wasn’t right.

Clerks working for family court Judge Amy Pellman were reviewing routine surrogacy petitions when they spotted an unusual pattern: the same name, again and again.

A Chinese billionaire was seeking parental rights to at least four unborn children, and the court’s additional research showed that he had already fathered or was in the process of fathering at least eight more—all through surrogates.

When Pellman called Xu Bo in for a confidential hearing in the summer of 2023, he never entered the courtroom, according to people who attended the hearing. The maker of fantasy videogames lived in China and appeared via video, speaking through an interpreter. He said he hoped to have 20 or so U.S.-born children through surrogacy—boys, because they’re superior to girls—to one day take over his business.

Several of his kids were being raised by nannies in nearby Irvine as they awaited paperwork to travel to China. He hadn’t yet met them, he told the judge, because work had been busy.

Pellman was alarmed, according to the people who attended the hearing. Surrogacy was a tool to help people build families, but what Xu was describing didn’t seem like parenting, the people said.

The judge denied his request for parentage—normally quickly approved for the intended parents of a baby born through surrogacy, experts say. The decision left the children he’d paid for to be born in legal limbo.

The court declined to comment on Xu’s case.

Xu, an online megaposter but real-life recluse, has rarely spoken with reporters and hasn’t been photographed in public for nearly a decade.

A representative of Xu’s company, Duoyi Network, didn’t respond to specific questions about the hearing or Xu’s use of surrogacy. “The boss does not accept interview requests from anyone for any purpose,” the representative said in an email to The Wall Street Journal, adding that “much of what you described is untrue.” The representative, who didn’t provide a name, didn’t respond to repeated requests to clarify what was inaccurate.

Pellman’s decision in the confidential case, which has never been reported, was a rare rebuke to a little-known trend in the largely unregulated U.S. surrogacy industry: Chinese elites and billionaires who are going outside of China, where domestic surrogacy is illegal, to quietly have large numbers of U.S.-born babies.

Since U.S. court proceedings for surrogacies are usually private, often taking place without even a mention on the court’s public docket, oversight is limited.

Some Chinese parents, inspired by Elon Musk’s 14 known children, pay millions in surrogacy fees to hire women in the U.S. to help them build families of jaw-dropping size. Xu calls himself “China’s first father” and is known in China as a vocal critic of feminism. On social media, his company said he has more than 100 children born through surrogacy in the U.S.

Another wealthy Chinese executive, Wang Huiwu, hired U.S. models and others as egg donors to have 10 girls, with the aim of one day marrying them off to powerful men, according to people close to the executive’s education company.

Other Chinese clients, usually seeking more typical numbers of babies, are high-powered executives lacking the time and inclination to bear their own children, older parents or same-sex couples, according to people who arrange surrogacy deals and work in surrogacy law. All have the wealth to go outside China while maintaining the privacy needed to manage potential logistical, publicity and legal issues back home. Some have the political clout to avoid censure.

The market has grown so sophisticated, experts say, that at times Chinese parents have had U.S.-born children without stepping foot in the country. A thriving mini-industry of American surrogacy agencies, law firms, clinics, delivery agencies and nanny services—even to pick up the newborns from hospitals—has risen to accommodate the demand, permitting parents to ship their genetic material abroad and get a baby delivered back, at a cost of up to $200,000 per child.

The growing Asian market for international fertility services has drawn the attention of American investors, including Peter Thiel, whose family office has backed a chain of IVF clinics across Southeast Asia and a recently opened branch in Los Angeles.

Most U.S. states don’t bar international parents from working with American surrogates. Chinese law doesn’t strictly prohibit its citizens from going overseas for surrogacy, but officials have criticized it. Stories of Chinese celebrities or government officials working with overseas surrogates have sometimes caused scandal among the public at home, which tends to view surrogacy as ethically dubious and exploitative.

The babies born in the U.S. are U.S. citizens by virtue of the 14th Amendment. The idea of foreign nationals using the Constitution’s guarantee of citizenship has long been a political flashpoint.

In 2020, the State Department moved to curb so-called birth tourism, tightening visa rules for women suspected of visiting the U.S. to give birth. In January, Donald Trump issued an executive order denying citizenship to children born in the U.S. unless one of their parents was a citizen or permanent legal resident, which is being reviewed by the Supreme Court. It’s unclear if either regulation would apply to foreigners working with surrogates who are Americans.

Last month, Sen. Rick Scott, the Florida Republican, introduced a bill in the Senate to ban the use of surrogacy in the U.S. by people from some foreign countries, including China. He cited an ongoing federal human trafficking investigation into a Chinese-American couple in Los Angeles who have more than two dozen children, nearly all born through surrogacy within the past four years, as reported by the Journal.

Law enforcement is more broadly looking at some Chinese parents working with American surrogates. Investigators with the FBI and Department of Homeland Security have interviewed some surrogates who have worked with Chinese parents, according to the surrogates, though the purpose of those investigations is unclear. The FBI declined to comment, and DHS didn’t respond to a request for comment.

‘We’re not Costco’
Nathan Zhang, the founder and CEO of IVF USA, a network of fertility clinics in the U.S. and Mexico that cater to wealthy Chinese and partner with surrogacy agencies, said his clientele in the past were largely parents trying to bypass China’s one-child policy. Babies brought back to China, as U.S. citizens instead of Chinese citizens, fell outside the country’s penalty system. The one-child policy was abolished in 2015.

More recently, a new clientele has emerged. “Elon Musk is becoming a role model now,” said Zhang. An increasing number of “crazy rich” clients are commissioning dozens, or even hundreds, of U.S.-born babies with the goal of “forging an unstoppable family dynasty,” he said.

One wealthy businessman in China, who like Wang is also in the education business, wanted more than 200 children at once using surrogates, envisioning a family enterprise, Zhang said. “I asked him directly, ‘How do you plan to raise all these children?’ He was speechless,” said Zhang, who said he refused him as a client.

Other surrogacy professionals described similarly head-spinning numbers. The owner of one agency in California said he had helped fill an order for a Chinese parent seeking 100 children in the past few years, a request spread over several agencies.

A Los Angeles surrogacy attorney said he had helped his client, a Chinese billionaire, have 20 children through surrogacy in recent years.

Amanda Troxler, a Los Angeles-based surrogacy lawyer, said her firm consulted with a hopeful Chinese parent who said she wanted eight or 10 surrogacies and asked for a discount. “I was like, ‘No, we’re not Costco,’” said Troxler, who didn’t take the client because she rejects those looking for more than two surrogacies at once.

Oversight of the industry is so scant that it’s almost impossible to figure out whether parents are working with multiple surrogates, across different agencies and law firms, people in the industry said.

California surrogacy agency owner Joy Millan said she was approached by a single father in China seeking to hire four surrogates. She agreed to connect the father with one, only to learn later that he had gone to another agency to find more.

“When we contacted him saying this is your due date, the baby is on the way, he panicked and was like, ‘We’re already taking care of two babies!’” Millan said. “It’s not like you can’t have four kids, there are families that have four or five, but if you regret, there’s no way back.”

Industry groups recommend that agencies and IVF clinics not work with parents seeking more than two simultaneous surrogacies, because of the logistical and emotional challenges, and the risk that it will increase the perception that surrogacy commodifies pregnancy. But Millan said the suggestion lacks teeth. The harshest penalty for failing to follow the groups’ recommendations is to be removed as a member.

Lisa Stark Hughes, a surrogacy agency owner and board member of the Society for Ethics for Egg Donation and Surrogacy, acknowledged the difficulty of ensuring those recommendations are followed. The group has been discussing ways to more proactively detect when parents are pursuing multiple simultaneous surrogacies across different agencies without violating patient privacy laws, she said.

Some agencies don’t hesitate. Hu Yihan, the CEO of New York IVF clinic Global Fertility & Genetics, who helps connect Chinese parents with surrogacy agencies, said that when one of her clients wants three or four simultaneous surrogacies, the reaction is often enthusiastic. “I’m getting positive feedback from the surrogacy agencies, they’re like, ‘This is a big one! I want to do this!’” she said.

Agencies typically receive $40,000 to $50,000 per surrogacy, separately from payments made to the surrogate carriers.

Girls for future world leaders
The Chinese government usually turns a blind eye to citizens who pursue surrogacy abroad, even allowing foreign agencies to quietly market their services at home. Still, Chinese parents who work with surrogates sometimes face blowback.

Liu Pengyu, the spokesman for the Chinese Embassy in the U.S., said in a statement to the Journal that the government’s health authorities believe surrogacy can lead to a number of negative outcomes, including “serious family and social ethical crisis.”

Wang, who fathered the 10 girls through U.S. surrogacies, purchased dozens of eggs from models, a finance Ph.D. and a musician—at a cost of between $6,000 and $7,500 each, according to the people close to his company. He is the president and CEO of Sichuan-based education group XJ International Holdings, formerly known as Hope Education Group, which owns and operates universities and technical colleges.

Wang preferred girls, the people said, and hoped they would grow up to marry world leaders.

Screenshots purporting to be of messages from a person claiming to share a nanny with Wang, discussing Wang’s use of surrogacy in the U.S., went viral on social media in 2021.

Chinese media criticized the executive, saying that commercial surrogacy exploits women and violates Chinese public order and morals. Shares at Wang’s company plunged around this time.

XJ International Holdings, which previously dismissed the claims as rumors, didn’t respond to requests for comment.

Around the start of 2019, Zheng Shuang, an actress and model who briefly signed with Prada, hired two U.S. surrogates with her boyfriend, Zhang Heng.

Before the children were born, the couple’s relationship began to deteriorate, and Zheng had second thoughts, according to documents in a Colorado custody suit over the two children after their births.

Zheng allegedly considered asking one of the surrogates to terminate the pregnancy, but the baby was too far along, according to email correspondence with the surrogacy agency included in the court documents.

Ultimately, Zhang, the father, flew to the U.S. to attend births in Colorado and Nevada, and stayed in the country to care for the two babies. After he posted on the Chinese social-media site Weibo that Zheng had contemplated seeking abortions, the Chinese Communist Party released a statement criticizing them.

“For Chinese citizens to exploit legal loopholes and flee to the United States simply because surrogacy is prohibited in China is by no means abiding by the law,” the statement from the party’s Central Political and Legal Affairs Commission said.

Zheng was dropped by fashion labels. The couple were investigated for tax evasion; she was ordered to pay a nearly $46 million fine and he was fined $5 million in the tax case. Zhang, the boyfriend, eventually received sole parenting responsibility for the children, according to court documents, and went on to co-found a California surrogacy agency focused on Chinese parents.

Even some Chinese government officials have turned to the U.S. for surrogacy, industry lawyers and agencies say.

Surrogacy was a key component in the scandal surrounding the 2023 disappearance of Chinese Foreign Minister Qin Gang. Qin, once a trusted aide to Chinese leader Xi Jinping, fell from grace after a Communist Party investigation found that he had been having an affair with prominent newscaster Fu Xiaotian.

Fu had a child in the U.S. via surrogacy in late 2022. While the Chinese government never disclosed the child’s paternity, the incident fueled speculation that Qin was the father and prompted wider scrutiny within the party regarding whether other top officials had used surrogates to have children overseas, according to officials briefed on the matter. Both Qin and Fu vanished from public view when the scandal erupted.

Meanwhile, some older Chinese parents, who were restricted in their younger years by the one-child policy, are looking to surrogacy to expand their families beyond typical child-raising years.

“Any household that’s middle-upper income, any guy who’s 60 years old, they’re having one-child policy revenge,” said Hu, the New York fertility CEO. “They’re trying to make up for something that they wanted when they were young but it was severely restricted, there was no way out, the tech was not there, the market was not there.”

Regulatory arbitrage
Researchers at Emory University found that international parents’ use of U.S. surrogacy quadrupled from 2014 to 2019, when IVF clinics started 3,240 cycles for surrogate carriers working with international parents, making up almost 40% of the U.S. total. The number dipped during the pandemic amid global travel restrictions. Of international parents between 2014 through 2020, 41% were from China.

Some investors are betting those numbers will continue to rise. In 2018, Jinxin Fertility Group, based in Sichuan and publicly traded in Hong Kong, purchased HRC Fertility, a chain of fertility clinics in Southern California whose doctors already had a substantial Chinese client base.

Jinxin partnered with a U.S. surrogacy consultant in 2020, according to a corporate filing. Wang Bin, Jinxin’s chairman between 2018 and 2021, had previously been a high-ranking official at Chinese state-owned enterprises, and the company’s investors have included state-owned banks.

Jinxin didn’t respond to a request for comment.

The family office of Thiel, who voiced concerns about falling birthrates on Joe Rogan’s podcast last year, has participated in two fundraising rounds totaling $30 million for Rhea Fertility to open a chain of international fertility centers in Thailand, Malaysia, Singapore and the Philippines focused on Asian parents. Rhea CEO Margaret Wang said Rhea, which opened an IVF clinic in Los Angeles late last year, targets parents interested in what she called “regulatory arbitrage” to access fertility and surrogacy services that may be illegal in their home countries.

“The U.S. remains the destination for people who have the resources and need to go down that path,” Wang said. A representative of Thiel Capital didn’t respond to a request for comment.

‘50 high-quality sons’
Xu, the Chinese online gaming billionaire, has for years broadcast his ambitions to build a sprawling dynasty of children.

On Weibo, accounts linked to Xu have written that “Having more children can solve all problems” and fantasized about Xu’s children marrying Elon Musk’s children.

Another, earlier Weibo account verified as being operated by Xu wrote in 2023 that he hoped to have “50 high-quality sons.”

That same year, Judge Pellman denied Xu’s parentage petition in Los Angeles. But a later post on one of the Weibo accounts linked to him said he successfully appealed.

“Xu Bo had several children (all of mixed Chinese and Jewish descent) who were taken away in the United States due to sabotage by feminists and malicious rulings by a female judge,” the account posted in April 2024, seeming to refer to the confidential hearing that Xu had attended the year before. “Later, appeals were filed, and all the cases that went to trial were won. I heard that another case was won today, and one child was awarded to Xu Bo; he has already received the child.”

The user has denied being Xu, but a Journal analysis linked this and another Weibo account to him. Xu’s company’s Weibo account has reposted one of them, and the accounts shared details of the confidential U.S. court hearing attended by Xu, a cropped photo of Xu’s passport, photos and videos of Xu’s children and other personal documents. The children are shown in the company of nannies or in daycare-like settings eating meals, playing or reciting homework assignments.

The Journal couldn’t find any public records of Xu appealing the judge’s decision. Such an appeal would normally be public in Los Angeles.

Surrogacy attorneys say it is possible that if Xu were denied parental rights in Los Angeles courts, he could have tried filing the same paperwork in a different jurisdiction—choosing from among the locations of the surrogate, the IVF treatment or the baby’s birth. Courts in different jurisdictions don’t necessarily have visibility into parentage applications filed elsewhere.

Last month, Xu’s ex-girlfriend, Tang Jing, alleged in a post on Weibo that he had 300 children, living across numerous properties in multiple countries. Xu has previously accused Tang of theft and the two have ongoing lawsuits. Tang didn’t respond to requests for comment.

In a statement on Weibo at the time, Duoyi Network said the 300 figure was wrong but confirmed a stunning fact: “After many years of effort” through surrogacy in the U.S., Xu has “only a little over 100” children.

Later in November, the user linked to Xu posted a video of more than a dozen toddler or early grade-school-age children playing on an outdoor patio in an unknown location. “What the truth is, everyone can see for themselves,” the user posted.

As the camera panned around the patio, the children—who appeared to be mostly boys—began running toward it. “Daddy!” they yelled. “Daddy!”

FT : Swiss dealmaking surges to record highs despite strong franc

Swiss dealmaking surges to record highs despite strong franc
Swiss groups are involved in deals across sectors, defying currency moves and US tariffs

Switzerland is heading for a record year for mergers and acquisitions, with deals spanning industries despite a surging franc that has made its companies some of the most expensive targets in Europe.

New data shows that Swiss groups have been involved in M&A activity worth more than $163bn so far in 2025. Deals targeting Swiss companies also hit their highest level since 2018.

“It was a very good year, and with some significant deals being announced,” said Olof Engelbrekts, head of investment banking for Switzerland at Bank of America.

The flurry of deals has continued despite currency moves, with the Swiss franc up 14 per cent against the dollar since January and slightly stronger against the euro.


The most high-profile transaction was Swedish-Swiss engineering giant ABB, which agreed to sell a majority stake in its $15bn-plus robotics division to SoftBank. This was one of the largest transactions in Europe this year and a significant step in ABB’s long-running simplification strategy.

In insurance, Helvetia’s merger with Baloise created a significant new force in the Swiss market, combining two of the country’s biggest insurers.

Building materials group Holcim continued its acquisition streak, completing a string of bolt-on deals in construction, aggregates and materials recycling companies, including its €1.85bn deal to buy Xella, another building materials company.

Bankers said the steady stream of deals had made Holcim one of the busiest Swiss companies of the year as it reshaped its portfolio ahead of a planned US listing.

There were also infrastructure transactions, including Mediterranean Shipping Company pursuing a major expansion of its port and terminal network through a deal with Hong Kong-based conglomerate CK Hutchison.


Drugmakers Roche and Novartis targeted biotech assets. Roche struck early stage deals, including an agreement to acquire Poseida Therapeutics to bolster its oncology and immunology pipeline. Novartis continued to add to its pipeline through bolt-on acquisitions and licensing deals in selected growth areas such as immunology. 

“The IPO market had been more challenging,” said Thorsten Pauli, country chief executive of Switzerland at Bank of America. “So there were more M&A exits and large pharmas buying companies that might otherwise have gone public or raised private capital.”

The record year is striking given worries about the potential dampening effect of Donald Trump’s “liberation day” tariffs in April.

“There was the liberation day, and people were very inwardly focused . . . and we all thought it was going to be quite a tough and weak year in terms of M&A announcements. But then come May, it really picked up,” Engelbrekts said.

The Trump administration then slapped a 39 per cent tariff rate on Switzerland. But the country’s status as an investment haven, coupled with overall stability, still attracted deals. The US has since agreed to lower the rate to 15 per cent.

At the same time, bankers said the strong franc, rather than deterring activity, has given Swiss corporates more purchasing power and boosted confidence.

“We have the Swiss franc at all-time highs, financing is very much available, valuations are continuing to go up,” Pauli said. “We’ve got everything playing in your favour to do more M&A.”

FT : VW gears up for first production closure in Germany in its 88-year history

VW gears up for first production closure in Germany in its 88-year history
Ending manufacturing at Dresden site comes as Europe’s largest auto producer battles weak demand in its key markets

Volkswagen will stop manufacturing vehicles at its site in Dresden after Tuesday, marking the first time in the carmaker’s 88-year history that it will close production in Germany.

The closure of the plant’s production line comes as Europe’s largest auto manufacturer is under cash flow pressure as a result of weak China sales and demand in Europe as well as US tariffs weighing on sales in America.

Volkswagen has been wrestling with the allocation its investment budget of approximately €160bn over the coming five years, with a longer lifespan expected for petrol-engine cars. The rolling budget which is updated annually, has been slashed over the recent years. For the period from 2023 to 2027 the equivalent figure was €180bn.

The automaker’s CFO Arno Antlitz suggested in October that its net cash flow for 2025, which had previously been forecast to be close to zero, could be slightly positive. However, analysts said the carmaker would continue to see further pressure.

“There’s certainly pressure on the cash flow in 2026,” said Bernstein analyst Stephen Reitman. He noted that the auto group was looking for ways to reduce spending and boost operating profits.

Volkswagen was facing “widespread” challenges, with the expected longer lifetime for fossil fuel-burning engines requiring new investment, Reitman said. “You have to look at new generations of gasoline technologies,” he added.

Moritz Kronenberger, Union Investment portfolio manager, said some projects would need to be axed from Volkswagen’s spending plans. For Volkswagen to meet its investment target, “other ideas and projects must be removed from the plan,” he said.

Dresden has produced fewer than 200,000 vehicles since production started in 2002, or less than half the annual output of VW’s central factory in Wolfsburg.

The move brings Volkswagen a small step forward in its plans to reduce capacity in Germany. The changes are part of a deal agreed with unions last year that will also lead to 35,000 job cuts at the VW brand in Germany.

VW brand chief Thomas Schäfer said this month the decision to close production had not been taken “lightly”, but that “from an economic perspective it was essential”.

The plant was intended as a showcase for Volkswagen’s engineering prowess and was first tasked with the assembly of the high-end VW Phaeton. After the Phaeton was discontinued in 2016, the Dresden site became a symbol of Volkswagen’s electrification efforts, most recently producing the battery-powered ID.3.

The site will be rented out to the Technical University of Dresden to establish a research campus for the development of artificial intelligence, robotics and chips

Volkswagen together with the university, have pledged to invest €50mn over the next seven years into the project, while the auto giant has said it will continue to use the facility to deliver cars to customers and as a tourist attraction.

>>> Barron’s Weekend Summary

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-President Donald Trump has reportedly narrowed his choice for chair of the Federal Reserve to Kevin Hassett, currently the director of the National Economic Council. Hassett, who has strong academic credentials and a background in public policy, was previously confirmed as chair of the Council of Economic Advisers with significant bipartisan support. His involvement in the 2017 tax cuts reflects his supply-side economics. However, Hassett's loyalty to Trump raises concerns about his ability to remain independent as Fed chair, particularly in light of Trump's previous criticisms of current chair Jerome Powell and his demands for lower interest rates. Trump's recent remarks suggest he wants the next Fed chair to prioritize rate cuts, which could potentially compromise Hassett's credibility with fellow Fed officials. While some colleagues support Hassett, others worry that his allegiance to Trump may hinder his independence and influence how he approaches policy decisions. Even if Hassett advocates for lower rates based on economic rationale, the perception that he is acting in accordance with Trump’s wishes may persist, impacting his effectiveness as chair.

Interview:
-No update
Tech Trader:
-Oracle's second-quarter earnings report illustrates the precarious nature of the AI industry in the latter half of 2025, highlighting how a single negative development can significantly impact investor sentiment across the sector. Investor behavior is characterized by a heightened sensitivity to news, as they scrutinize information through the lens of potential market bubbles, often leading to premature exit strategies. Instead of pondering whether a bubble exists, investors should focus on its current phase and potential triggers for collapse. Historical context indicates that bubbles are ongoing processes rather than abrupt events, as evidenced by the prolonged Dutch tulip craze and the British railway mania. The late stages of a bubble often offer substantial returns; for instance, from the time Alan Greenspan highlighted "irrational exuberance" until the dot-com bubble burst, the NASDAQ Composite surged 288%. Despite the eventual downfalls of once-prominent companies like Cisco Systems, their substantial rebounds years later serve as a reminder of the uncertainties in investing, urging caution over immediate reactions to market fluctuations.
The Trader:
-Whether the stock market continues to rise may hinge on significant mid-December economic reports due to a government shutdown affecting their typical release schedule. Key reports include the November jobs report, arriving on December 16, and the consumer price index on December 18, both of which will incorporate some October data due to prior cancellations. A mild slowdown in job growth or a slight rise in unemployment, along with stable inflation data, could favor cyclical stocks, potentially leading to a strong market start in 2026, as noted by Nicholas Brooks from ICG, who anticipates further interest rate cuts. Small-cap stocks, particularly the Russell 2000, may benefit as they remain comparatively inexpensive. The market’s direction largely relies on technology stocks, influenced by developments in AI, although recent earnings reports from companies like Oracle and Broadcom have caused considerable losses and spurred investor unease described as “Fear of Bubble” by Mike Treacy from Apex Fintech Solutions.
-Housing stocks are stagnating due to high mortgage rates, rising construction costs, and elevated home prices, causing top housing ETFs to lag behind this year's market rally. Despite this, optimism is growing for 2026, particularly after the Federal Reserve's recent interest rate cuts and declining mortgage rates from 7% to 6.2%. Economists at Redfin anticipate a "Great Housing Reset" leading to increased home sales and normalized prices. Upcoming earnings reports from builders Lennar and KB Home are expected to reflect a cautiously optimistic outlook, despite current economic uncertainties and mixed results from other builders like Hovnanian and Toll Brothers, whose CEOs noted signs of demand but urged caution in projections.

Features:
-Lululemon Athletica stock surged 9.6% on Friday, marking its best performance in months, following the announcement of CEO Calvin McDonald's resignation. Investors hope this change will help Lululemon recover from two years of underperformance. The board has not named a permanent successor, and interim leadership will be provided by CFO Meghan Frank and CCO André Maestrini. Rick Patel, an analyst at Raymond James, noted that establishing a new strategy will take time, creating uncertainty around a significant turnaround timeline. Under McDonald, who joined in 2018, Lululemon's shares peaked during the pandemic due to increased demand for athleisure but have since returned to pre-pandemic levels. The brand's growth stagnated as competition increased and fashion trends shifted away from activewear. According to Randal Konik of Jefferies, Lululemon's struggles stemmed from a lack of innovative product offerings and inconsistent design, which alienated loyal customers and led to declining sales amid heightened competitive pressures.
-In 2023, the US is experiencing the worst measles outbreaks in decades, with 1,912 cases reported, the highest since 1992. The decline in vaccination rates due to the COVID-19 pandemic has contributed to this resurgence. The outbreak initially surged in Texas and is now spreading in South Carolina, particularly in an under-vaccinated community in Spartanburg, which has reported 126 confirmed cases. Of these, 15 new cases were identified recently, primarily stemming from a church exposure, leading to the quarantine of 267 individuals. Though vaccination coverage among South Carolina kindergartners is 91.2%, below the national average, local officials note that vaccination rates have increased by 35% in Spartanburg County. The effective prevention rate of the recommended two-dose MMR vaccine stands at 97%, yet vaccination rates have been declining in 78% of U.S. counties since the pandemic, raising concerns about ongoing outbreaks across the country, including cases reported in states such as Utah, Arizona, and New Mexico.
Europe:
-The divergence in monetary policies between the Federal Reserve (Fed) and the European Central Bank (ECB) is becoming increasingly pronounced, influencing the broader economic landscape. The Fed is implementing cuts to interest rates while the ECB opts for stability, refraining from further easing after its recent cut. The euro appreciates against a declining US dollar, making past parity seem unlikely as the banks' strategies for managing inflation differ significantly.
The ECB displays a cautious outlook, predicting modest growth in the euro zone at around 1.2% and inflation around its target of 2%. In contrast, the US economy exhibits volatility, with growth forecasts varying from 3% to 1.7% for the year, compounded by persistent inflation rates hovering near 3%. Both central banks emphasize formal independence from political influence; however, the Fed faces increasing political pressures, particularly evident in President Trump’s appointment of Stephen Miran, an economist linked to the administration, signaling a potential shift in Fed objectives to stimulate the US economy.
Emerging Markets:
-no update
Commodities:
-US stocks and gold have experienced pronounced growth in a rare alignment not seen in 50 years, according to research from the Bank for International Settlements (BIS). The S&P 500 has increased by over 13% in the last six months, while gold prices have surged nearly 26%, both nearing record highs. This rapid rise has prompted concerns among researchers and investors about the potential for an asset bubble, characterized by a rapid increase in prices followed by a sharp correction. Currently, the focus on bubble risks has predominantly been on technology stocks linked to artificial intelligence rather than the broader market or gold. The BIS researchers stressed that bubbles are challenging to identify and predict, noting that statistical methods indicate both the S&P 500 and gold are in "explosive territory," a situation that has not occurred simultaneously in the past half-century. They caution that after this explosive growth phase, a bubble is likely to "burst" with a significant correction. Additionally, the presence of retail investors pursuing trends amid media hype and fear of missing out is often a telling signal of bubble conditions.
Streetwise:
-Originally formed through the merger of Thomas Edison's electric firm and a lighting company in Schenectady by financier J.P. Morgan, General Electric enjoyed over a century of expansive business diversification, which later led to significant divestments as market conditions changed. As of November 8, 2021, long-term investors in GE had seen 38% losses, contrasting sharply with the S&P 500's 524% gains. Following an announcement of a three-way company split, those who invested at that point exceeded S&P 500 returns, achieving over 600% gains across spinoffs. However, GE HealthCare Technologies, intended to be the fastest-growing division, has underperformed since its early 2023 spinoff, facing challenges such as trade tensions with China and cautious hospital spending, resulting in returns at only 42% compared to the S&P 500.
Next, the April 2024 spinoff created GE Vernova for energy businesses, leaving the core of GE's operations in aviation, which has now been renamed GE Aerospace. This sector has seen stronger-than-expected sales growth and profit margins, driven by a healthy global air traffic demand and a substantial backlog in jumbo jet orders. Analysts predict a prosperous 2026 for U.S. airlines, a claim met with skepticism, historically suggesting favorable outcomes might ensue.

>>> Weekend Papers Summary

FINANCIAL TIMES
-On Friday, the European Union (EU) took a significant step by freezing €210 billion of Russian sovereign assets indefinitely, a move aimed at bolstering Ukraine's defense amidst ongoing US-facilitated peace negotiations. This action is intended to facilitate a loan that can be backed by these frozen assets. However, during an upcoming summit, EU leaders face considerable resistance from Belgium, which holds the majority of these assets. Both Belgium and Italy have expressed concerns, with Italy joining Belgium, Bulgaria, and Malta in advocating for the exploration of alternative financial solutions that would reduce risks, such as establishing an EU loan facility to address Ukraine’s financial requirements. In response to these developments, Moscow has initiated legal proceedings against Euroclear, the Brussels-based firm that manages most of the frozen assets, in an effort that could enable Russia to reclaim certain assets within its jurisdiction.
-In the U.S., there is a profound obsession with AI, driven by both commercial ambitions and the pursuit of Artificial General Intelligence and "the singularity." This enthusiasm is paired with a belief in unchecked exponential progress, creating a landscape where tech investments are heavily concentrated, leading to conceivable risks such as groupthink. The "accelerationists" view the attainment of AI as a transformative goal for humanity, yet the uncertainty surrounding AI's payoff suggests a need for diversification in investment strategies. Whereas current AI funding reflects a singular vision of the future, it may either be seen as a visionary leap or an overestimation of AI's practical applications. Central to this discourse is the question of whether AI indeed represents the most viable path to prosperity, a premise that remains a point of contention among stakeholders in Silicon Valley.
-Major US tech companies have invested over $350B in AI infrastructure in the past year, with projections exceeding $400B by 2026, significantly outpacing China's estimated $100B investment. While this suggests a strong position for the West in an AI "spending contest," there are concerns that an overemphasis on AI may undermine broader economic dominance. China, while committed to AI as a “national strategic priority,” is diversifying its investments into sectors like electric vehicles and advanced manufacturing, which may provide more stable returns. The outcome hinges on whether the US's heavy bet on AI pays off.
-Chinese intelligence continues a significant cyber campaign, known as “Salt Typhoon,” which allows access to the communications of nearly all Americans, according to Senator Mark Warner. He believes hackers remain inside US telecom networks despite conflicting FBI assessments suggesting the networks are “pretty clean.” Warner criticized the government's inadequate response, expressing concern that the severity of the situation is underestimated and may only be acknowledged following a catastrophic event. The campaign has persisted for at least two years, with Chinese hackers working under the Ministry of State Security, capable of intercepting unencrypted phone communications in the US.
-Democratic lawmakers have published 19 photos from Jeffrey Epstein's estate, including images featuring Donald Trump and other high-profile figures like Bill Clinton, Lawrence Summers, Bill Gates, and Steve Bannon. This release contributes to ongoing scrutiny of the Epstein case, which has generated political pressure on President Trump, who acknowledges past friendship with Epstein but denies any wrongdoing. The photos were part of an investigation that revealed 95,000 images from Epstein's estate, following his death in 2019 while awaiting trial for sex trafficking charges.
-US prosecutors are investigating representations made by First Brands and investment bank Jefferies concerning the company's rushed debt refinancing prior to its bankruptcy. Subpoenas have been issued to various parties linked to First Brands to gather evidence on potential violations of securities and fraud laws, particularly related to communications with lenders about the company's financial state. The investigation, led by the Manhattan US attorney's office, aims to understand the circumstances surrounding the company's collapse, which involved nearly $12B in debt and off-balance sheet financing. The subpoenas are not indicative of wrongdoing by the recipients, but reflect a broader effort to ascertain the events leading to First Brands' failure.
-The chair of the US House China committee, John Moolenaar, has questioned the White House's rationale for permitting Nvidia to export advanced chips to China. He expressed skepticism toward claims that China's top chips from Huawei can compete with Nvidia's offerings. Despite US security concerns about potential advancements in Chinese military AI, President Trump supported Nvidia's sale of the H200 chip to China. Nvidia's CEO, Jensen Huang, countered that Huawei's chip development no longer warrants restrictions on US competition. However, critics argue Nvidia exaggerates Huawei's advancements, claiming the company attempts to circumvent US technology controls by combining less advanced chips to match Nvidia's performance.
-Australians have turned to lesser-known apps following a social media ban that restricts under-16s from platforms like TikTok, Instagram, and Snap. The most downloaded lifestyle app this week was Lemon8, owned by TikTok's parent company ByteDance, followed by Yope and Coverstar. Additionally, WhatsApp has seen increased usage among young users. This ban, the first of its kind globally, aims to protect children from online harm, with technology companies required to verify users' ages. Professor Tama Leaver predicts an increase in user numbers on alternative platforms as a result.
-Iran has recently increased petrol prices as US sanctions compel the country to import refined fuel. In response to economic strain and an energy crisis despite its substantial oil and gas reserves, Tehran is reducing fuel subsidies. President Masoud Pezeshkian highlighted that low-income groups do not benefit from these subsidies. Petrol, among the cheapest globally due to generous subsidies, faces import needs of $6B annually due to limited refining capacity. The new pricing structure mandates a charge of 50,000 rials ($0.04) per litre for amounts over a monthly quota of 160 liters. Motorists can purchase up to 60 liters at 15,000 rials ($0.012) and an additional 100 liters at 30,000 rials ($0.024). Owners of new cars will not receive the lower quota, burdening them with higher costs, whereas multiple vehicle owners will get quotas for only one car.
-Kyriakos Pierrakakis's election as president of the Eurogroup marks a significant milestone for Greece, having emerged from a history of Eurozone difficulties. This group, which oversees euro area policy, previously dealt with Greece during its precarious financial crisis. Pierrakakis's position symbolizes Greece's transformation from a perceived economic weak link to a leadership role in discussions that once considered its expulsion from the euro. According to Thomas Wieser, a key figure during the crisis, this election highlights Greece's progress and the increasing fragmentation of the political landscape in Europe.
NEW YORK TIMES
-The oil tanker Skipper, recently seized by the United States near Venezuela, is linked to the Venezuelan government's campaign to aid Cuba, as indicated by internal documents and industry insiders from Venezuela’s state oil company PDVSA. The tanker departed from Venezuela on December 4, carrying nearly two million barrels of heavy crude oil, intended for the Cuban port of Matanzas. Shortly after leaving port, Skipper transferred approximately 50,000 barrels of oil to another vessel, Neptune 6, which continued its journey towards Cuba. Subsequently, Skipper redirected its course towards Asia while still carrying the majority of its cargo. This incident underscores the long-standing practice of Venezuelan leaders, including President Nicolas Maduro and his predecessor Hugo Chávez, to supply Cuba with oil at heavily subsidized prices, providing essential resources to the economically challenged nation.
-Maria Corina Machado, a Venezuelan opposition leader, aimed to accept the Nobel Peace Prize in person in Oslo, necessitating a dangerous escape from her hiding to avoid military checkpoints and potential threats. Despite her effort, she arrived too late for the ceremony, yet her journey from Venezuela highlighted her significance amid the escalating tensions between Caracas and Washington. Details of her evacuation reveal the operations of Grey Bull Rescue, a firm led by combat veteran Bryan Stern, which specializes in such rescues, marking Machado's case as their 800th operation. This situation presented unique challenges, emphasizing the complexities involved in extracting prominent political figures from hostile environments.
-A pre-dawn phone call alerted President Trump to urgent news regarding Venezuela, where protests were escalating and soldiers were defecting, signaling potential upheaval against autocratic leader Nicolas Maduro, who had been taken to a military compound. This moment was brief, as Maduro's position was fortified with assistance from Cuba, leading to the failure of the revolt, which disappointed Trump and his aides, as well as Senator Marco Rubio, a key advocate for Maduro's ousting. Seven years later, Maduro remains in power while Rubio, now serving as Trump's secretary of state and interim national security adviser, has become a main architect of intensified military pressure on Venezuela. The aim to remove Maduro aligns with Rubio's long-standing objective of undermining Cuba, thus fulfilling dual strategic interests in U.S. foreign policy.
-A federal judge, Colleen Kollar-Kotelly, ordered the Justice Department to discard crucial evidence used in September to charge James Comey, the former FBI director, citing unlawful acquisition of the materials. This ruling complicates the department's plans to pursue new charges against Comey after a previous judge dismissed the original case, deeming the prosecutor appointed by Trump as illegitimate. The ruling underscores procedural errors made by the Justice Department during the investigations into Comey under both Trump administrations, implying that such missteps hindered the president's attempts to leverage the criminal justice system against his perceived adversaries.
-For Canadians looking to enjoy American liquor, particularly Tennessee whiskey and Kentucky bourbon, the situation has changed as four provinces—Manitoba, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador—have resumed selling stockpiles of American spirits that were previously removed due to tariffs imposed by President Trump. Despite the resumption of sales, officials have indicated they do not plan to restock after the current supply is sold out. This decision has sparked a significant rush among consumers, prompting long lines at government-run liquor stores in Manitoba, as reported by Premier Wab Kinew, who noted the overwhelming interest as a "real phenomenon." The liquor sales resumed recently, on Wednesday, leading to a notable increase in customer activity.
-Former President Joseph R. Biden Jr.'s foundation has secured only a minimal portion of the funds required for his presidential library, raising questions regarding the construction timeline and feasibility of the project. According to Internal Revenue Service filings, the foundation has not received any new donations in 2024, relying solely on a $4M surplus from his 2021 inauguration. The foundation has not disclosed its fundraising progress for 2025 but noted that Mr. Biden is just beginning his active fundraising efforts, hosting an event for potential donors in Washington’s Georgetown neighborhood. The foundation projected a total of $11.3M in contributions by the end of 2027, significantly trailing the fundraising pace of recent presidents and falling short of the $200M target indicated by Mr. Biden's aides.
-Fusion combines atoms to release vast energy, presenting a clean alternative to fossil fuels without the risks of meltdowns or long-lasting radioactive waste. Historically contemplated for over a century, recent advancements have improved lab reproductions using magnets and lasers, though it remains more challenging than nuclear fission. A fusion reactor requires hydrogen to be heated to extreme temperatures, forming plasma, which must be contained long enough for fusion to occur and release energy. As China and the US compete for energy dominance, China's leadership in clean energy technology contrasts with the US's focus on fossil fuel production.
-SpaceX, led by Elon Musk, announced plans to buy $2.56B in insider shares at $421 each, potentially valuing the company at $800B and positioning it for an initial public offering (IPO) next year. CFO Bret Johnsen indicated that while a public offering's timing and valuation remain uncertain, it could generate significant capital. This move, if successful, would make SpaceX the most valuable private company, surpassing OpenAI, currently valued at $500B, and would represent a major financial windfall for shareholders.
NY POST
-Disney Entertainment co-chair Dana Walden stated that the White House did not contact Disney during the suspension of “Jimmy Kimmel Live!” in September. This suspension followed backlash from President Donald Trump and conservatives after Kimmel implied a connection between the alleged killer of Charlie Kirk and Trump supporters, although police indicated the suspect had left-leaning views. Walden, speaking on Bloomberg’s “The Circuit,” clarified that despite Trump's critical comments about Kimmel, there was no communication from the White House. The suspension also fueled criticism from liberals who alleged that Federal Communications Commission Chair Brendan Carr influenced ABC's decision. During Kimmel's off-air period, Trump claimed that Kimmel's suspension was due to poor ratings rather than external pressure, stating he should have been fired for lack of talent. Walden provided further context on the decision-making behind the show's suspension.
-Cannabis stocks experienced significant gains on Friday following reports that President Trump is set to reclassify marijuana under federal law, a potential change that investors believe could ease restrictions and revitalize the struggling industry. Traders reacted positively to expectations that cannabis would be moved from Schedule I to Schedule III under the Controlled Substances Act, suggesting a recognition of its medical use and a reduction in perceived danger. This rally represented one of the largest single-day increases in cannabis stocks in years, marking an end to a prolonged downturn that had left many investments significantly lower than their 2021 peaks. Notably, Tilray Brands surged over 40%, trading at $11.85 but still below its 52-week high of $23.20. Canopy Growth saw a 50% increase to approximately $1.70 per share, while Curaleaf rose 38% to $3.71 per share, and Aurora Cannabis jumped nearly 18% to about $5.35 per share. The AdvisorShares Pure US Cannabis ETF also rose more than 50%, reaching approximately $5.71, nearing its 52-week high, after having hovered around $2 earlier in the year. Currently, federal law classifies marijuana as a Schedule I drug, which places it in a restrictive category alongside heroin and LSD.

Fortune : Oracle’s collapsing stock shows the AI boom is running into two hard l

Oracle’s collapsing stock shows the AI boom is running into two hard limits: physics and debt markets

Oracle’s rapid descent from market darling to market warning sign is revealing something deeper about the AI boom, experts say: no matter how euphoric investors became over the last two years, the industry can’t outrun the laws of physics—or the realities of debt financing.

Shares of Oracle have plunged 45% from their September high and lost 14% this week after a messy earnings report revealed it spent $12 billion in quarterly capital expenditures, higher than the $8.25 billion expected by analysts.

Earnings guidance was also weak, and the company raised its forecast for fiscal 2026 capex by another $15 billion. The bulk of that is going into data centers dedicated to OpenAI, Oracle’s $300 billion partner in the AI cycle.

“We have ambitious achievable goals for capacity delivery worldwide,” Oracle co-CEO Clay Magouyrk said on an earnings call this week.

Investors worry how Oracle will pay for these massive outlays as its underlying revenue streams, cloud revenue and cloud-infrastructure sales, also fell short of Wall Street’s expectations. Analysts have described its AI buildout as debt-fueled, even though the company does not explicitly link specific debt to specific capital projects in its filings.

And by Friday, even the crown jewel of Oracle’s AI strategy—its OpenAI data centers—was showing cracks. Bloomberg disclosed that Oracle has pushed back completion of some U.S. data centers for OpenAI from 2027 to 2028 because of “labor and material shortages.”

“It’s perfectly plausible that they’re seeing labor and materials shortages,” said data-center researcher Jonathan Koomey, who has advised utilities and hyperscalers including IBM and AMD. In his view, the AI boom is running directly into the difference between digital speed and physical speed. “The world of bits moves fast. The world of atoms doesn’t. And data centers are where those two worlds collide.”

Although Bloomberg didn’t identify which specific facilities were being delayed, Koomer said one likely candidate is Project Jupiter, Oracle’s gargantuan data-center complex proposed for a remote stretch of New Mexico. Local reporting has described Jupiter as a $160 billion-plus mega-campus, one of the most ambitious AI infrastructure projects ever attempted and a core piece of Oracle’s commitment to provide compute to OpenAI.

Koomey describes an industry where capital can be deployed instantly, but the equipment that capital must buy cannot. The timelines for turbines, transformers, specialized cooling systems, and high-voltage gear have stretched into years, he explained. Large transformers can take four to five years to arrive. Industrial gas turbines, which companies increasingly rely on for building microgrids, can take six or seven.

Even if a company is willing to pay a premium, the factories that produce these components cannot magically expand overnight, and the manufacturing industry trained to install them is already stretched thin. AI companies may want to move at the pace of model releases, but the construction and utility sectors operate on a fundamentally different timeline.

Koomey made it clear that the physical constraints he describes apply to all hyperscalers, but Oracle worries investors in particular because it’s getting into the AI infrastructure game late and tying much of its capex to one customer, OpenAI.

“This happens every time there’s a massive shift in investment,” he said. “Eventually manufacturers catch up, but not right away. Reality intervenes.”

That friction becomes ever clearer once the financial limit enters the picture. While Oracle’s stock slide is dramatic, the bond-market reaction may be more important. Oracle’s bond yields blew out, with some newer notes that were once investment grade now trading like junk, as its credit-risk gauge hit the highest level since 2009. It signals that investors who lend to companies, historically the most sober observers of tech cycles, are beginning to reassess the risk of lending into the AI buildout.

For the past few decades, the norm for tech companies was to pay for growth with earnings. Now many of them, including Oracle, are turning to credit markets to fund their sprawling expansions. According to a Bank of Americaanalysis, the five biggest AI hyperscalers—Google, Meta, Amazon, Microsoft and Oracle—have collectively issued roughly $121 billion in bonds this year to fund AI data-center buildouts, a level of issuance far above historical averages and one that signals a major shift toward debt financing for infrastructure.

Oracle, however, has made some of the biggest deals out of the five, like its $18 billion September bond sale. Its total stack of debt is roughly $100 billion. The other four are also in stronger cash positions and have higher credit ratings (AA/A vs Oracle in BBB area), and are able to generate large positive free cash flow. So while Oracle isn’t the only tech giant tapping the debt markets for its AI outlays, its size, cash generation, and credit ratings make it one of the most leveraged.

Debt investors do not necessarily need blowout returns; they just need certainty that they will get their money back, with interest. If confidence wavers even a little, yields rise.

“This feels like the 1998 moment,” Anuj Kapur, CEO of CloudBees and a former tech executive during the dot-com era, told Axios. There’s enormous promise, but also enormous uncertainty about how quickly the returns show up.

Koomer saw a simple throughline.

“You have a disconnect between the tech people who have lots of money and are used to moving super fast, and the people who make the equipment and build the facilities, who need years to scale up their manufacturing,” he said.