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Architect and designer Aline Asmar d'Amman, Cosimo Gherardini of Sant Ambroeus, and Silvio Vettorello, general manager of both Lake Como's Grand Hotel Tremezzo and Passalacqua Lake Como, tackled topics like where hospitality and fashion merge, creating a human connection.

Whether it’s for a luxury train crossing the Saudi Arabian desert or a historic pastry shop, encouraging people to slow down and enjoy the details is key.

This was the heart of conversation during a panel discussion at the Fashion Loves Food Gala, hosted by WWD, The Style Gate and Galateo & Friends.

Paris-based, Lebanese architect and designer Aline Asmar d’Amman; Cosimo Gherardini, director of operations of SA Group, which controls Sant Ambroeus; and Silvio Vettorello, general manager of both Lake Como’s Grand Hotel Tremezzo and Passalacqua Lake Como, tackled topics like where hospitality and fashion merge, sparking joy and creating a human connection.

“I really believe that hospitality and luxury seek timeless experiences that are founded and grounded in the transmission of hand gestures, and whether they be of the artisan or the architect, we are all connected with this magic thread,” Asmar d’Amman said during a panel discussion titled “The Human Touch: How Joy and Passion are Key to Success,” which was moderated by Fairchild Media Group’s and WWD’s chief content officer Jim Fallon.

Asmar d’Amman is the Lebanese architect and interior designer who founded Culture in Architecture and designed Saudi Arabia’s Dream of the Desert, a luxury train that will make its maiden voyage in 2026. Asmar d’Amman is also famous for her work on the Orient Express Palazzo Donà Giovannelli, which will open in April. During her career, she developed a working relationship with Karl Lagerfeld. Before his death, she led the artistic direction of the renovation of Paris’ Hôtel de Crillon, working with Lagerfeld to elevate it to its modern, regal glory.

No matter the project, capturing the culture around it is a priority, she explained.

“I really believe that by capturing the essence of a culture, and this is the privilege that we have… the Venice Orient Express… captures the essence of what it feels to be a Venetian inside a 15th century palazzo,” she said.

For Vettorello, luxury on the edges of Lake Como is about living life at one’s own pace. In his everyday role as general manager and through his interaction with hotel guests from around the world, luxury is defined by understanding guests on an individual level.

“You know, when they enter in one of our properties, [the guests are] not numbered, they’re not the room number… They are people that we really love. Even if it’s only for 24 hours, 48 hours, they become part of our family and they need to feel it,” he said.

The new luxury hotel Passalacqua, which opened its doors on Lake Como, was formerly a private villa and stands above the village of Moltrasio. The historic estate was recently restored and turned into a 24-suite retreat by Italy’s De Santis family. In the 1970s, the De Santis family also purchased the Grand Hotel Tremezzo and transformed it into one of the most sought-after destinations in the area.

For Gherardini, luxury is defined by consistency and thoughtful surprises.

“It’s about creating a home away from home, and genuinely creating genuine human relationships, which I think today in general, but in luxury is extremely valued,” he said. The SA Hospitality group acquired Sant Ambroeus, a Milanese café and pastry shop, in 2021. Today it boasts locations in Milan, Southampton, Manhattan and Palm Beach.

“As we grow, fundamentally it comes down to the people that work for this group and the passion and pride and understanding of the brand values that we have,” he concluded.

The Ellison family will have plenty to talk about when they convene for Thanksgiving this week (assuming they do!). The price of Oracle has plummeted in the past six weeks, for one thing, reflecting AI bubble jitters centering on Oracle. In the same period of time, Larry Ellison and his son David have been—by all accounts—busy plotting the roughly $90 billion takeover of Warner Bros. Discovery. Their interest—conveyed through the company they now control, Paramount Skydance—sparked a bidding war that is now coming to a head. Bids were reportedly due last Thursday, with both Netflix and Comcast said to be in the mix, which means we could see some developments this week.

Could the Ellisons’ eagerness to buy WBD be affected by the diminishing value of Larry Ellison’s 41% stake in Oracle? It’s not crazy to imagine that at the very least, the Ellisons may be less willing to overpay than they might have been. A recent securities filing showed that as of mid-September, Ellison had pledged about 30% of his Oracle stake—or 346 million shares, worth about $69 billion currently—as collateral for personal loans taken out “to fund outside personal business ventures.” That’s up from the 277 million shares he had pledged a year earlier. As Ellison backed his son‘s purchase of Paramount this past summer, he may well have done so by borrowing against his Oracle shares. Even if he didn’t, the loans suggest Ellison would be sensitive to swings in Oracle’s stock price. And it certainly has been volatile.

You might recall that word of the Ellison family’s interest in WBD emerged a day or so after Oracle shares had rocketed 36% to as high as $327 in the wake of the company’s disclosure that its cloud unit had signed hundreds of billions of dollars’ worth of business extending over the next few years, mostly with OpenAI. That translated to an increase in the value of Ellison’s stake of about $100 billion, enough to pay for WBD. But Oracle shares have fallen 39% from the high to just below $200 on Friday—costing Ellison about $149 billion.

Now, there’s no guarantee the Ellisons’ Paramount will win the bidding for WBD. It’s a good bet WBD CEO David Zaslav would prefer not to sell to Paramount, which wants the whole company. After all, most public company CEOs don’t want to give up their job. Selling part of WBD to Netflix or Comcast, or sticking with previously announced plans to split WBD’s studio and streaming operations from its slowly shrinking TV channel business, would likely keep Zaslav employed. But the WBD board has to consider the interests of all shareholders, which means a sale of the entire company to Paramount can’t be ruled out. It also could make a difference to the board that the Ellisons—thanks to Larry’s closeness to President Donald Trump—will have the edge when it comes to getting regulatory approval for any deal.

No one could blame either father or son if they chose to pull back a little. After all, few other companies would buy all of WBD for the simple reason that half of the business is slowly evaporating. The risk that the Ellisons will be taking on in buying it, so shortly after acquiring Paramount, is not insignificant. It doesn’t help that Oracle is taking on enormous risk with the cloud expansion. At some point, maybe Larry Ellison will stop to wonder what on earth he’s doing.

Stepped-up spending, higher interest rates, and fresh innovation are putting the continent back on investors’ maps.

Non-U.S. stocks are enjoying the strongest rally in 30 years, attracting even those U.S. investors who usually have little interest in overseas markets. The good news: It isn’t too late to get on board, especially in Europe, where stocks are responding to slow but meaningful policy shifts that should boost corporate earnings next year.

The MSCI Europe index is up 27% year to date in U.S. dollar terms, beating a 12% gain in the S&P 500 and ending a long period of underperformance. European stocks averaged a total annual return of 6.8% in the past 15 years, less than half the return of the S&P 500.

Barron’s recently convened a group of Europe-focused investment experts to size up the outlook for European markets after this year’s historic run. These pros see more gains in 2026, fueled by the normalization of interest rates, which will help financials; increased spending, especially on defense; and homegrown artificial-intelligence innovation, which is spurring demand for semiconductors and electricity to power the Continent’s data centers. What’s more, they highlight 12 stocks that stand to benefit from these trends.

Our panel, which met at Barron’s offices in New York, includes Matt Burdett, director of equities at Thornburg Investment Management and manager of the Thornburg International Equity and Thornburg Investment Income Builder funds; Osman Ali, manager of the Goldman Sachs International Equity Insights fund and global co-head of quantitative investment strategies for Goldman Sachs Asset Management; Julian McManus, who manages the Janus Henderson Global Select and Janus Henderson Overseas funds; and Davide Oneglia, senior economist at GlobalData TS Lombard.

Davide Oneglia: For a long time, Europe has been stuck in a lull. The economy had a shallow recovery from the double-dip recession of 2008- 09, followed by the European debt crisis. Monetary policy was very loose and couldn’t revive the economy—and fiscal policy was stuck in austerity [mode].

Now, we are emerging into a different environment: The monetary and fiscal policy mix is much more normal. Germany is pledging to spend seriously, providing a tailwind for investment. There is also a recovery in consumption because wage growth is much higher than prepandemic levels and labor markets are tighter. Finally, we have emerged from a period of extremely low interest rates, letting investors get decent returns. Equity valuations haven’t adjusted to this shift yet.

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Osman Ali: The European market hasn’t performed as well as the U.S. market [in the past decade] in part because of portfolio construction: The European market is 25% financials. Sixty percent is some combination of financials, healthcare, and industrials. About 35% of the U.S market is tech, compared with 8% of the European market.

With the tech renaissance in the past 10 years, it has been easy to look at the U.S. market and say it is a great place to invest. But if you take the Magnificent Seven stocks [Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla] out of the S&P 500, the S&P has gained less than Europe over the past five years. There have always been ways to make money in Europe, and that is particularly true now as the sectors that make up the majority of the European market are well positioned.

Why are they well positioned for gains?

Matt Burdett: Europe had negative interest rates after the financial crisis, which crushed earnings for financials, the largest sector in the index. Now, the rate environment is much more normal, as discussed.

European banks are seeing some of the best earnings revisions. People forgot that when you have normal policy rates, you can make money on deposits and in lending. There is a valuation argument [for the market], but also an earnings argument.

Julian McManus: If Europe is to grow and be self-sufficient, the banking system must be part of the solution to accommodate the changes needed in Germany—and across Europe.

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Capital has been built up as a result of overregulation. After the financial crisis, the European Central Bank not only stipulated higher capital requirements for banks but also required them to pay 10% of their earnings every year into a rainy-day fund. Tier 1 capital ratios now are sitting around 15%, higher than they need to be.

It is estimated that for every 1% cut to capital requirements, there could be 100 billion euros [$116 billion] of credit growth in Europe. This is going to be powerful for the broader economy, but also for European banks. There is still a lot of earnings acceleration ahead. It has been only partly reflected in bank shares.

What is driving Europe’s push toward greater self-reliance?

Oneglia: A more adversarial U.S. administration has left European policymakers with a sense that they are alone to fend for themselves. Also, China is rising as a major industrial rival to the core of [Europe’s] manufacturing sector, where Germany dominated and is now trying to play catch-up. Add the overlay of the Russian invasion of Ukraine, which is wreaking havoc with the European energy-supply balance, and there has been a realization that Europe is punching below its weight.

The European economy is big, but it needs to be integrated further to leverage its size. For example, there is a lot of research and development in Europe, and smart entrepreneurs. But to get the funding and scale to prove a concept, they need to come to the U.S., which is a single market, instead of 20 different governmental authorities. [European] politicians are addressing these issues, including finding a simplified way for companies to incorporate. There is a bigger push toward integrated capital markets.

Which banks could benefit from these shifts?

McManus: Banco Bilbao Vizcaya Argentaria, or BBVA, in Spain and Austria-based Erste Group Bank, which is exposed to Central and Eastern Europe, are both seeing robust loan growth. If their capital requirements are reduced, loan growth can accelerate further.

These banks are trading at single-digit price-to-earnings multiples and just above book value. That’s higher than not so long ago. But pre-financial crisis, they were generating a 15% to 20% return on equity and trading at two times book. With earnings acceleration, more capital generation, and still-depressed valuations, there is a long way to go.

Burdett: BNP Paribas is more of a value play. There has been some news around litigation risks in the U.S. [related to services the bank provided in Sudan through its Swiss subsidiary. The Swiss government has said the claims have no legal basis.] That forced a recent selloff in the stock.

But BNP is a big, incumbent European bank with operations across Europe. If you think about Europe’s push for self-reliance in the coming years, deeper capital markets are going to be a part of that. BNP should be able to take advantage of that, and it isn’t reflected in earnings [estimates].

How far along is the push to lower banks’ capital requirements?

McManus: It is being discussed at policymaking levels right now. But it isn’t just capital requirements that could be relaxed. Merger and acquisition activity is on the rise across European banks and banking unions, and regulation could be eased on several fronts to spur growth.

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Oneglia: Having deeper capital markets with a more developed pension sector can help finance some of Europe’s policy priorities, such as infrastructure, without impairing national budgets. The problem: Europe is slow. Until you see it happening materially, it is hard for the market to price it. But my conviction is high because there is no alternative, including politically.

Defense companies have done well amid this self-reliance push. Is there more upside in European defense stocks?

McManus: We are still constructive on BAE Systems, formerly British Aerospace. The platforms they are on and the programs they are involved in aren’t just short term, or related to helping Ukraine. These are programs that will be growing for 20 to 25 years. Historically, investors viewed BAE as a 2% grower. Now it is growing by more like high single digits, with improving margins, and the stock still doesn’t fully reflect that.

Ali: We have been overweight aerospace and defense for three-plus years, leading up to the Russian invasion of Ukraine. We were at a conviction level of three or four out of 10, playing that through Kongsberg Gruppen in Norway, Thales in France, and Rheinmetall in Germany. That is one of the things about Europe: Each country has its own play on a theme, providing a diversified set of stocks so you don’t have to bet on just one or two.

Our conviction level rose to a six or seven last year because of chatter [signals] in our quantitative investment models, and data from supply chains that indicated more demand for defense products from the U.S., even before Europe’s stepped-up armament plans. We bought shares of Safran, the French aerospace and defense company, Leonardo in Italy, and picks-and-shovels companies that supply the industry.

Our conviction has since come down to a five, given valuations and how much the stocks ran up, but we don’t see this theme as something to step back from.

What do valuations look like in the aerospace and defense sector?

Burdett: We are sellers rather than buyers at this point. We have owned Rheinmetall but reduced that stake over time. A lot of the [increased spending by Germany] has been reflected in the valuation.

Ali: The entire sector is trading at a premium to its own history, and the stocks are up 40% to 50% this year. But in Europe, we put a 20% weight on relative valuation and a 60% weight on whether a stock is exposed to some underlying theme.

The tendency for valuations to pull you back in Europe [via a selloff in the shares] is far less than in Japan, where you have to be a lot more careful about valuations. The culture is different, with more of a collective mind-set in Japan, and things there tend to revert to the mean. In the U.S., it’s the opposite: No one seems to care about valuations. Europe is somewhere in the middle. Themes are more important in Europe.

How significant is Europe’s planned shift in spending?

Oneglia: Just the physical and green infrastructure planned by the German government is a bit more than 1% of gross domestic product over the next 12 years. The Marshall Plan, by comparison, was 1% of gross domestic product a year. And this doesn’t include the money that could go toward defense, theoretically about 3% of GDP a year. It’s a lot of money.

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The real question for markets is the timing of this stimulus. Everyone has bought into the idea that this is going to happen. [German Chancellor] Friedrich Merz’s career essentially depends on this plan. Germany has changed the rules for its own fiscal debt brake, a big step.

Would I have hoped to see faster improvements? Yes, but we are still in the phase of a reasonable delay. Our expectation is to see more movement in the first quarter of 2026. The German government just approved a list of measures to cut red tape that should hasten deployment.

While Germany may be spending more, Chinese consumers are spending less as their economy struggles and China’s property downturn lingers. What does that mean for the European luxury companies that cater to Chinese shoppers?

Ali: There is a time to be overweight and a time to be underweight luxury companies such as LVMH Moët Hennessy Louis Vuitton and Richemont, usually with a six- to nine-month cadence. We time our positions in and out based on data beyond the themes or sentiment we pick up from our quant models. Right now, some of our signals indicate that sentiment improved since June but remains at a level lower than what we have seen as necessary for financial results to follow.

There are news reports that LVMH and Richemont are noticing increased demand but we aren’t seeing it yet, so we aren’t leaning into it too heavily. Rather, we are opting to reduce risk to these types of companies.

McManus: While Chinese luxury sales are still slightly down for the year, they are down much less than the declines seen earlier in the year. That improvement is being reflected in stocks such as LVMH, which we own. You also have to keep an eye on the property market, which is a big store of wealth. While prices are still declining, they are declining less than before.

Burdett: During the Covid-19 pandemic, China went through lockdowns on a scale that most people here wouldn’t comprehend. Also, the trade war has been ramping up. The Chinese Communist Party has tried to boost consumption to a larger share of the economy, but animal spirits are in a box. There are signs things are becoming incrementally less bad. There is a lot of pent-up demand among Chinese consumers, and European luxury brands are still sought after.

Chinese companies are increasingly going global. What does that mean for European multinationals?

McManus: There are going to be Chinese champions you want to own or keep an eye on—like CATL [Contemporary Amperex Technology] and BYD. German auto makers have a problem on their hands from Chinese competition.

Burdett: The Chinese innovation engine has been dramatic in a historical sense. In autos and electric vehicles they are a leader, even though we can’t buy Chinese cars here. That is a problem for the established auto makers [in Europe].

But think about biotechs. I used to be a chemist, and half the people in my lab 20 years ago were from China. There is a lot of innovation coming out of China. The drug industry has done a better job of embracing and integrating the Chinese research-and-development engine with collaborations. There aren’t only victims of Chinese innovation—there are also beneficiaries. Developing new drugs is hard; you need lots of shots on goal.

Do any European pharma companies benefit specifically from collaborations with Chinese companies?

Burdett: Not specifically, but I like Roche Holding. There was some excitement about the stock when the company bought some diabetes and obesity assets. It has since burned out. Now Roche is trading for less than 13 times next year’s forward earnings.

Roche is unique among pharma companies in that it has a diagnostics business, which can inform the drug side of its business. It recently came out with a blood test for Alzheimer’s and has an Alzheimer’s drug, trontinemab, in Phase III trials, with data expected in 2028. Alzheimer’s used to be the gold mine of the drug industry before obesity treatments. You aren’t paying for the Alzheimer’s opportunity in the stock at this kind of valuation.

McManus: European pharma has a lot of value, and underappreciated drug pipelines. What is keeping people on the sidelines is policy uncertainty. The Trump administration has taken an unconventional approach in using tariff threats and other measures to try to cut the Gordian knot of high drug prices and excessive healthcare expenses. Companies are striking deals one-on-one with the U.S. As that provides clarity, [the opportunities] become more interesting.

The U.S. market has become synonymous with Big Tech. What AI-related opportunities do you see in Europe?

Ali: Lithography is an important part of creating semiconductors, and there is only one company, Netherland-based ASML Holding, that does it. In Germany, we own a collection of companies that contribute to the semi ecosystem, such as Infineon Technologies.

Tech has been the most volatile theme in Europe amid the questions about the amount of capital spending going into sought-after chips. The concerns were most elevated earlier this year and still exist, but the AI theme is almost becoming too big to fail. The amount of effort and energy going into standing up data centers has given the AI theme a life of its own.

McManus: All roads lead through semiconductors and the companies that do things no one else can do, which isn’t reflected in the valuations of companies such as ASML.

One thing China can’t do is advanced lithography. That is what ASML provides. We value ASML using a combination of price/earnings multiple and discounted-cash-flow analysis, based on earnings per share for 2027 and beyond, because that is when the semiconductor industry will move to process nodes that will become increasingly lithography-intensive. That is a plus for ASML, whose EUV [extreme ultraviolet] lithography tools are highly profitable. One way to think about upside is that a price/earnings ratio of 30 times on 2027 earnings per share of €34 would yield a price of €1,020, or 15% higher than today—and growth is likely to accelerate further over the next decade.

It will be interesting to see if restrictions [on U.S. technology exports to China] get relaxed because China has the upper hand in trade negotiations and leverage with [its dominance of critical minerals] and rare earths. No matter what Treasury Secretary Scott Bessent says, it is going to take longer than one or two years [for the U.S. and allies] to build out a rare earths supply chain.

The U.S. has restricted the sale of certain ASML technology to China. How has that affected the company?

McManus: Last year, ASML had to cut its outlook for Chinese orders in half [because of the restrictions].

What non-tech beneficiaries of the AI theme look interesting to you?

Burdett: The hyperscalers are going to spend $550 billion to $600 billion a year on the data-center buildout, compared with $100 billion two or three years ago. McKinsey estimates that the incremental power needed for data centers over the next five years will be 126 gigawatts. By comparison, French utility EDF [Electricité de France] has 56 nuclear reactors that power about 75% to 80% of all French power, or 62 gigawatts—less than half that needed for AI and non-AI data centers.

This gets at the demand for power at a time when Europe has already been on an energy transition [toward renewables]. Utilities are our second-largest overweight. The energy transition results in more volatility in power prices. An integrated utility can make money from volatility because it has customers, generation assets, and distribution to move the power to where it’s needed.

We own Italy’s Enel, which trades for less than 13 times earnings. U.S. utilities trade for about 22 times. Enel has been trying to be more efficient and is buying back shares, while most U.S. utilities issue shares to fund operations.

Ali: Shareholder yield in Europe is 5%, much higher than in other markets. The aggregate demand for power over the next 10 years from all the data-center contracts on which hyperscalers are bidding is almost equivalent to the current power demand in all of the European Union.

Some of that has to be discounted, since everyone is bidding for multiple contracts and all of them won’t be approved. But European power demand is rising after having fallen for the past few years, and that’s a positive for utilities. Plus, because of climate change, there is more demand for air conditioning in Europe. And that’s a positive for utilities.

Burdett: We also own French telecom Orange, which trades at about six times enterprise value to Ebitda [earnings before interest, taxes, depreciation, and amortization]. The fourth telecom operator in the industry is struggling, so the other three—including Orange—have made an offer to buy the assets. We could get a quasi-consolidation in the market, which would help the competitive dynamic and lead to a better revenue pool.

Telecoms have been a graveyard for many years, mainly because of regulatory pressure. But as you think about self-reliance, digitalization, and the AI push, you need good networks to monetize all of that. Plus, Orange is going to buy out its Spanish joint venture, consolidating its Spanish business, which is also improving. You’re going to get a growing cash-flow stream over time in a market that is getting better.

What other positive catalysts are there for the broader European market?

Ali: European investors don’t own European equities as much as U.S. investors own U.S. equities. Less than 60% of European equities are owned locally, compared with more than 80% in the U.S. When we talk about European markets rising on the back of investment flows, it is largely foreign flows.

There is a conversation with asset managers in Europe and an effort to convince them to move clients’ capital out of bonds. The culture is one of risk aversion. Imagine the catalyst for European equities if Europeans adopt home bias.

Oneglia: There have been reports that the Germans, who tend to be risk-averse, are coming to the German stock market in greater numbers than previously.

One of the drivers [for foreign stocks] in the first part of the year was the view that erratic policy and some self-inflicted [tariff] damage in the U.S. could result in dollar weakness. The dollar sold off at the same time as the stock market as people tried to hedge themselves against the dollar risk they had piled up. There is a sense that the breakdown in correlation—declines in both the market and the dollar—was a one-off event.

We see a growing chance that people are interested in hedging against dollar risk. Because of the erosion of market institutions in the U.S., erratic policy, and the potential for inflation, we may see the dollar go lower, from a historically high level, over the next couple of years. That is another reason for diversification. This isn’t to say that people should divest from the U.S., but rather, where are you going to allocate the marginal dollar? We are skeptical of the view there are no alternatives to the U.S.

Thanks, all.

Prices of newly issued bonds have slid, adding to investors’ anxieties about stock valuations

Wall Street is straining to absorb a flood of new bonds from tech companies funding their artificial intelligence investments, adding to the recent pressure in markets.

Since the start of September, so-called AI hyperscalers Amazon AMZN 1.63%increase; green up pointing triangle.com, Alphabet GOOGL 3.53%increase; green up pointing triangle, Meta Platforms META 0.87%increase; green up pointing triangle and Oracle ORCL -5.66%decrease; red down pointing triangle have issued nearly $90 billion of investment-grade bonds, according to Dealogic, more than they had sold over the previous 40 months.

AI data-center developers like TeraWulf WULF -2.34%decrease; red down pointing triangle and Cipher Mining CIFR -2.82%decrease; red down pointing triangle, both started as bitcoin miners, also have stormed the speculative-grade market, issuing more than $7 billion of those lower-rated bonds.

Companies were able to complete their sales. But some had to pay unexpectedly high interest rates. Prices of bonds from the companies have also been sliding—a sign that investors were caught off guard by the sheer quantity of bonds entering the market and of growing concern about the worsening credit metrics of the businesses.

Stock investors, already nervous about the sky-high valuations of AI businesses, have taken note of the weakness in the bond market. Meanwhile, the cost of insuring those bonds using credit-default swaps also has climbed, with negative sentiments from different groups of investors feeding into each other.

“The markets are very interconnected now,” said John Lloyd, global head of multisector credit at Janus Henderson Investors. “It will be hard for the credit markets to do well if AI stocks are selling off, and vice versa.”

Investor enthusiasm about AI has been a powerful tailwind for markets in recent years. But the past few weeks have been tough, with the tech-heavy Nasdaq composite down 6.1% on the month.

If companies betting big on AI can make big profits, that would be good for their bonds. Still, the most that investors can get is regular interest payments, plus their principal back at maturity. That makes bond investors especially attuned to the risk that outsize AI investments won’t live up to their hype; even a ratings downgrade can hurt returns, let alone a default.

Recent pressure on tech company bonds hasn’t been evenly applied across the sector. Alphabet, Amazon and Microsoft MSFT -1.32%decrease; red down pointing triangle have been spared the worst, thanks to their ability to fund most of their AI expenditures with the huge amounts of cash that they generate each quarter.

Meta, another tech behemoth, has a slightly less massive cash hoard and is seen as likely needing more debt to realize Chief Executive Mark Zuckerberg’s large ambitions. When the social-media company issued $30 billion of bonds at the end of October, it had to lure investors with yields comfortably above those of its existing debt.

Prices of some of those bonds then edged lower in the secondary market, pushing the yields higher. Despite carrying double-A ratings, they now yield roughly the same as International Business Machines bonds, which are rated single-A by the major ratings firms.

Oracle is in a more difficult position. It already is burning cash, with plans to burn tens of billions more over the next several years as it tries to transform itself from a leading software company into an AI cloud-computing giant—leasing out the vast clusters of advanced computer chips needed to power applications like OpenAI’s ChatGPT.

Rated two notches above speculative-grade territory, Oracle’s bonds now carry yields that are higher than those of almost any of its investment-grade tech peers.

Jordan Chalfin, a senior analyst at the research firm CreditSights, said that Oracle could issue around $65 billion more bonds over the next three years. A modest increase in its cost of debt shouldn’t make a big difference to the company, given that its interest expense would still be dwarfed by its capital expenditures.

But Oracle, he said, needs to maintain investment-grade ratings, because the amount of funding available to lower-rated companies simply isn’t enough to support its needs.

Other companies already are operating in that smaller debt market. Those include CoreWeave, the lone major AI cloud provider with subinvestment grade bonds. Its bonds due in 2031 that were issued in July recently traded at 92 cents on the dollar. That translated to a roughly 11% yield, about the same as the average triple-C rated bond—at the bottom of the ratings spectrum.

CoreWeave faces similar demands as its larger competitors but doesn’t have their legacy businesses, giving it less of a cushion, investors said. News that it faced data center construction delays helped drive its shares down 46% this month, though they remain up 79% since the company’s initial public offering in March.

Most investors don’t think that even a sustained bond selloff alone would do much to slow the AI build-out, given that money is no object for the big companies doing most of the spending. Many, though, see the feedback loop between stocks and bonds continuing, noting how the rising cost of insuring against an Oracle default has gotten widespread attention on Wall Street.

In recent weeks, there has been an uptick in trading of Oracle credit-default swaps—an instrument sometimes associated with the 2008-09 financial crisis. Though bond investors generally saw nothing surprising in the activity, focus on the topic nonetheless helped weigh on Oracle shares, which have dropped 24% this month.

Some also said that rising debt costs could eventually affect investment decisions on the margin for the speculative-grade tech companies like the data-center developers. If costs keep climbing, bond issuance from such businesses next year could come in at the low end of Wall Street estimates ranging from around $20 billion to $60 billion, they said.

“The fact that investors broadly are demanding more of a premium just means you probably are going to see less of a straight line of growth here,” said Will Smith, director of credit at AllianceBernstein. “People are really going to demand that only really sensible projects—that are structured in a way that works for debt markets, with the right cost of capital—actually get built.”

Franco-German group The Exploration Company is planning a significantly larger capital raise than its $160mn round last year

One of Europe’s most ambitious space start-ups is preparing a new funding round as it pushes for expansion in a race to build a European rival to Elon Musk’s SpaceX.

The Exploration Company, which is competing to develop Europe’s first reusable capsule to transport cargo to the International Space Station, is planning a significantly larger capital raise than its $160mn round last year, said Hélène Huby, the Franco-German group’s founder and chief executive.

Huby’s ambitions for the company she founded in 2021 are driven by a desire to enhance Europe’s independence in space. “We want to master the whole chain of space transportation,” she told the Financial Times. “We will start with the cargo capsule, but we want to do crew one day and then we have the Moon.” TEC is working on a lunar lander with the United Arab Emirates, aiming to land on the Moon before 2035.

Cargo capsules are used to bring supplies and equipment to astronauts on the ISS. Launched on a rocket, they are released into orbit, where they use thrusters to manoeuvre over to their destination.

In 2023 the European Space Agency launched a challenge for companies to develop capsules able to offer cargo services to low Earth orbit by 2029, and capable of evolving later to carry crew. In that competition, TEC is up against Thales Alenia Space, the legacy space company jointly owned by France’s Thales and Italy’s Leonardo.

Space agency ministers this week will decide on funding to take at least one company’s capsule to a full-scale demonstration mission — expected to be a €250mn. However, after a recent deal with the US’s Nasa to exchange cargo services for European astronaut flights to the ISS, there may be some funds for the second, one person close to the discussions said.

But, given budget constraints, many countries may be reluctant to give more than the bare minimum, said another person involved.

Some in the industry believe TEC has the edge. As a start-up, it is viewed as more agile than legacy rivals and has advanced from concept to a small scale demonstrator in just four years.

While last year’s capital raising was for the capsule, the group now wants to invest in a reusable high-thrust rocket engine project. The round, planned for next year, was to “combine private and public funding to really accelerate on this big engine”, she said.

In an environment where European space sector start-ups struggle to raise capital, investors in the company are open to a bigger round. “There is money trying to get in as we speak,” said one. “The capital we raise will be about expanding the business to be more aggressive.”

Rising defence interest in space has helped attract capital to TEC, which was valued at about $500mn, according to data firm PitchBook.

“It became clear that a capsule has much more depth and capability than pure [space] transport,” said Khaled Helioui, partner at venture capital group Plural, which invested in TEC last year. For instance, the technology that allows a capsule to dock at a space station travelling at 28,000 kilometres an hour without crashing could one day be used to inspect or disable enemy satellites.

First, however, TEC must prove it can deliver on the ESA challenge. Earlier this year it flew a demonstrator one-third the size of its planned Nyx capsule, meeting 50 per cent of the mission’s targets.

TEC plans to invest about $450mn to develop its cargo capsule, at least 40 per cent from its own funds with the balance expected from public financing, Huby said.

There is also hope that the company, which began funding its capsule ambitions with private investment, could catalyse change in Europe’s approach to space. “TEC started working on a cargo vehicle before Europe decided to fully embrace investment in cargo,” said Matija Renčelj of the European Space Policy Institute. “They have their own vision and are not waiting for governments.”

One European official said: “They are building up a huge capability that could be a new prime in Europe — a European SpaceX that operates with a different mindset.”

But Thales Alenia Space argues that its design will be lower risk. Its capsule will benefit from the company’s decades of experience building pressurised modules, including 50 per cent of those used on the ISS and all those used by Northrop Grumman on the Cygnus cargo transporter, executives say. “We are flight-proven,” said Roberto Angelini, the company’s director of exploration. “We can really bring added value in knowing the environment.”

TEC and Thales Alenia are counting on the European Space Agency to provide anchor contracts for cargo services while they pursue commercial customers. TEC says it can conduct missions for about $150mn each once it has expanded production, and would need just one contract a year to be profitable. Thales Alenia is less open on pricing but insists its capsule will be cheaper and more capable.

Yet, even with ESA support, questions remain over the size of the commercial transport market the companies are targeting. TEC estimates the current accessible market for “exploration transportation” at $10bn, rising to $35bn over the next decade.

A significant share of this increase hangs on demand from the new commercial space stations that Nasa hopes will replace the ISS by decade’s end. But some analysts warn this may fall short.

“Nasa is shrinking its requirement and its ambition,” said Maxime Puteaux of consultancy Novaspace. “The business model of the space stations doesn’t [work] without Nasa.”

Europe’s desire for sovereign capability might not be enough to guarantee success, said Renčelj of ESPI. “You are dependent on the business case of the destination. If the destination folds, you don’t have a customer any longer.”

Meanwhile SpaceX’s giant Starship rocket is also mooted as an eventual space station, and Musk’s company will not need anyone else’s cargo services.

Given the uncertainties, projections of a rapid rise in the space transport market are too optimistic, said Laura Forczyk, founder of consultancy Astralytical. “The market will grow — just not as fast as many believe. It will be decades-long, unpredictable growth.”

Big technological challenges must also still be overcome before either capsule proves successful. “The first step is reliable and effective transport,” said Helioui.

TEC and Thales Alenia say they will continue regardless of ESA’s choice. And with the scale of Huby’s ambition, next year’s fundraising is unlikely to be the last. An initial public offering is almost certainly on the cards — but only after TEC has delivered cargo to a space station.

“We want to build TEC as a global company,” Huby said. “If Europe wants to stay a space leader, it must bet on companies with the potential to become the European SpaceX. There is no other way.”

Executives brace for more challenging period ahead as interest rates fall

European banks are dangling sweeteners for investors, helping boost their share prices even as a lengthy sector-wide rally loses steam.

French banks BNP Paribas and Société Générale last week accelerated share buyback programmes, handing a combined €2.15bn to investors earlier than anticipated, while BNP also outlined a more robust capital target.

Deutsche Bank also unveiled new targets last week as part of a capital markets day, pledging to deliver higher returns and payouts to shareholders, as well as faster growth and lower costs, by 2028.

The flurry of announcements comes as a rally in European bank stocks over the past two years has shown signs of fading, with some investors starting to sour on the sector.

The Euro Stoxx Banks index, which tracks the biggest lenders in the Eurozone, is flat over the past three months, having climbed by more than 60 per cent between January and mid-August.

Investors and executives have warned that Europe’s banking industry is facing a more difficult period as falling interest rates put pressure on their net interest margins — a crucial measure of lending profitability, which has been boosted in recent years by higher rates.

Ian Horn, portfolio manager at Muzinich & Co, said credit spreads in the banking sector were particularly attractive in 2023 and 2024, but added: “Fast forward to today and a lot of that value has disappeared, particularly in Europe. Valuations are no longer as attractive [and] US banks are starting to look better value than Europe.”

After struggling for years to persuade investors their shares should be priced as richly as one times the book value of their assets, lenders including Banco Santander, Intesa Sanpaolo and UniCredit are now valued at between 1.3 and 1.5 times book, according to data from S&P Global. Spanish group BBVA’s shares are priced as high as 1.8 times book.

Andrea Orcel, chief executive of Italy’s UniCredit, who has pledged to distribute at least €9.5bn to investors through share buybacks and dividends for its 2025 financial year, has also cautioned that the market has potentially become overly optimistic about the prospects for European lenders.

“As we go into 2026, it is going to be tougher for European Union banks,” Orcel said. “I think net interest income will be more brutal than people expect.”

Frank Wedekind, global equity research analyst at William Blair Investment Management, added that he had become more “selective” on European lenders.

“I had been overweight [European banks] for five years or so. Now, I’m more selective depending on the stocks,” he said. “After what they’ve done in terms of performance, I think the air’s getting a bit thinner. And because the air’s getting a bit thinner, you want to be selective.”

However, analysts largely remain bullish about the outlook for the industry. Andrew Stimpson, an analyst at Keefe, Bruyette & Woods, said banks “are all looking out the next few years at pretty good conditions”.

“Loan growth is back, 2 per cent ECB rates are within the ‘Goldilocks zone’ and there is an upward-sloping yield curve,” he added. “It also seems unlikely that we will have a big problem on asset quality in the banks as loan growth has been weak for many years.”

Meanwhile, BNP Paribas’s decision to bring its buyback forward, as well as pledging to lift its common equity tier one ratio — an important measure of capital strength — to 13 per cent a year ahead of schedule, surprised analysts and wooed investors, with shares climbing 6 per cent on Thursday.

But BNP has been one of the worst-performing large European bank stocks this year amid legal woes related to Sudanese refugees and domestic political turmoil.

The French lender went from being the Eurozone’s most valuable bank by market capitalisation as recently as June last year to falling significantly behind Spain’s Banco Santander and BBVA, as well as UniCredit and Intesa Sanpaolo.

Joseph Dickerson, an analyst at Jefferies, said BNP’s new capital target and buyback were a statement of strength, adding that it should be a significant turning point for investor perceptions.

Deutsche Bank’s updated targets failed to impress investors, with shares falling more than 3 per cent on the day they were announced and more than 7 per cent across last week. However, the German lender has gained 75 per cent this year.