TheChek News Flow

Work is evaporating, businesses are closing, longtime residents are leaving, and the city’s creative middle class is hanging on by a thread

LOS ANGELES—Brian Mainolfi has been drawing since he came to this city in 1994. The Baltimore native started as an assistant to legendary Looney Tunes animator Chuck Jones, worked on Disney’s “The Hunchback of Notre Dame” and “Mulan,” and spent a decade on the animated sitcom “American Dad.”

The appeal of the work was simple. “People love cartoons,” he said. “And I love making cartoons.”

Since his last show was canceled in 2024, Mainolfi’s artistic output has been limited to dinosaurs and monsters in his sketchbook. Like thousands of people who work in the entertainment industry, he has become collateral damage of a precipitous slowdown in production. The only work he’s found is teaching an animation class at a Cal State campus three hours away, for $350 a week.

Mainolfi’s family of four never lived extravagantly on his salary of around $100,000, but now they’re using retirement and college savings and scrimping to survive in their three-bedroom ranch house in suburban Burbank. With his union healthcare set to disappear at the end of the year for lack of work, the 54-year-old is trying to figure out for the first time in his life what he could do to make money besides draw.

“By the end of the year if I don’t have something, I’m going to have to apply to a big-box store or a grocery store or something,” he said.

Los Angeles is full of transplants who moved here to pursue dreams of working in movies and TV. Few earned millions as stars or A-list directors. They build the sets, operate the cameras, manage the schedules and make sure everything looks and sounds perfect. The work isn’t steady, because film shoots end and TV shows get canceled. But established professionals had rarely gone more than a few months between gigs—until now.

The entertainment industry is in a downward spiral that began when the dual strikes by actors and writers ended in 2023. Work is evaporating, businesses are closing, longtime residents are leaving, and the heart of L.A.’s creative middle class is hanging on by a thread.

“This is the first year since 1989 that I haven’t had a show to work on,” said Pixie Wespiser, a 62-year-old production manager and producer who has worked on 36 TV series, including the original “Night Court” and its recent revival. “I look around and I see so many people who are seriously suffering.”

At the end of 2024, some 100,000 people were employed in the motion picture industry in Los Angeles County, according to the Bureau of Labor Statistics. Two years earlier, there were 142,000.

The primary reason is that Hollywood is making less stuff. The film business has yet to rebound from the shutdown of theaters during the pandemic. TV production was booming in the 2010s and early 2020s as companies tried to jump-start streaming services, but in 2022, investors saw streaming growth was slowing and decided what actually matters is profitability. Entertainment companies, which plan productions many months in advance, cut spending dramatically when the strikes ended the following year.

Nearly 30% fewer movies and TV shows with budgets of at least $40 million began shooting in the U.S. in 2024 than in 2022, according to data firm ProdPro. The first three-quarters of this year were down another 13%.

The situation is particularly dire in Los Angeles. Because of the region’s high costs and a state production tax credit that, until recently, lagged behind what competitors like Georgia and British Columbia were offering, studios make most of their content far from their corporate offices. Last year, there was less production activity in the Los Angeles area than at any time since at least 1995, save for the pandemic, according to the nonprofit group FilmLA.

The industry’s slump is contributing to L.A.’s broader economic challenges. The region’s recent employment growth has been anemic compared with other major metropolitan areas and the nation overall. Its 5.7% unemployment rate is higher than California’s 5.5% and the nation’s 4.3%. And L.A. is still struggling to recover from the winter’s devastating fires in Altadena and the Pacific Palisades, where many entertainment workers lived. That disaster exacerbated the city’s already severe housing crunch.

Hollywood has endured downturns before, but rarely this sudden and severe. Some industry analysts believe consumers might be pivoting permanently from professionally made content to the endless buffet of YouTube and social media.

Any rebound in production activity would take at least a few years, and possibly many more. And a full recovery might never happen if generative artificial intelligence makes animation and visual-effects jobs obsolete, as many workers fear.

Meanwhile, thousands of dreams built around working in the movie and TV business are evaporating.

Missing purpose

Thomas Curley won an Oscar recording the sound on 2014’s “Whiplash” and had more job offers than he knew what to do with as recently as 2022. The 49-year-old hasn’t worked since April of last year, save for one week on a movie that was made in Europe but needed to shoot exteriors in San Francisco.

The hardest part isn’t watching his savings wither while he does home improvement projects and hunts for jobs, Curley said. It’s missing the creative camaraderie he has enjoyed for most of his adult life on movie and TV sets.

“Feeling like you’re part of a team that’s making something that can provide joy for millions of people around the world is what drew me here in the first place,” said the native of upstate New York. “That level of purpose is a really hard thing to let go of.”

Entertainment industry workers got through last year with a mantra: “Survive ‘til 25.” But jobs are even more scarce this year. L.A. and New York-based members of the health and pension fund that covers most behind-the-scenes craftspeople worked 18% fewer hours this year through mid-August than in the year-earlier period.

“It felt like the floor fell out,” television writer Matt Walsh said of the evaporation of job prospects. After moving to L.A. from Orange County, he spent a decade hustling as an assistant on sets and in writers’ rooms before finally getting his first scriptwriting assignment in 2023, on the TBS series “Miracle Workers.”

Since the strikes ended, the 34-year-old hasn’t been able to find work as a writer. He’s back to working as a production assistant, the first job he ever had in entertainment.

Hollywood’s downturn has rippled through the region’s economy. Fewer productions mean fewer orders for props, costumes and catering from local businesses, and less spending by unemployed or anxious workers on everything.

Courtney Cowan’s Milk Jar Cookies shop made deliveries to movie sets and agents’ offices, but most of its business was regular people. She was expecting 2023 to be a banner year with the opening of her second location and a franchise program. Instead, the strikes began and sales immediately dropped 30%.

Cowan stopped drawing a salary, laid off some workers and tapped personal savings to keep paying the rest. She was thrilled when the strikes ended that November, but it turned out to be the worst holiday season in her business’s 10-year history. Milk Jar got only one order from an entertainment company, compared with dozens in prior years.

Milk Jar shut its doors in January 2024 and Cowan declared personal bankruptcy. After 11 months of unemployment, she found work as a buyer at the culinary supply shop where Milk Jar used to buy equipment.

“It’s not dramatic to say that the result has been personal financial ruin,” she said while wiping away tears on a sunny Los Angeles morning.

Federal assistance?

At a former furniture showroom in August, something unusual was happening: A movie was shooting in Los Angeles. On the set of “The Last Firefighter,” camera operators set up tracks for dolly shots while technicians used flickering red lights to suggest far-off flames. Few among the cast and crew could remember the last time they had worked on a set and gone to sleep in their own bed.

Shooting the low-budget film in L.A. costs at least one-third more than doing it overseas, according to its financiers. But producer Steven Paul said he wants to prove a point: “If we’re going to say we want to bring production back to America, I can’t be the one filming everywhere in the world.”

Paul’s longtime collaborator Jon Voight, whom President Trump named a “special ambassador” to Hollywood, called earlier this year for the federal government to implement a tax credit for all movies and TV shows produced in the U.S. The Motion Picture Association of America, which represents the major studios and streamers, and the industry’s leading unions signed on to the proposal. Backers say a federal tax credit of at least 15%, when combined with state tax ones, would make the U.S. competitive with most foreign jurisdictions.

“We’ve looked at the numbers, and you will reach and exceed the capacity of all our major production hubs if there’s a good federal incentive,” said Scott Karol, who runs several of Paul’s companies.

Trump hasn’t taken a stance on tax incentives, but he said in a social-media post on Monday that filmmaking “has been stolen from the United States of America, by other Countries, just like stealing ‘candy from a baby.’” In April and again this week, he said he would impose a 100% tariff on movies shot overseas. It isn’t clear how such a tariff would work given that movies aren’t physical products imported into the U.S.

California Gov. Gavin Newsom signed a law this year to more than double the state’s film and TV tax credit to $750 million annually, after a coalition of unions and studios urged legislators to salvage what’s left of the industry here. But producers say it is unlikely to attract big productions to the state because it doesn’t apply to “above the line” costs such as star salaries, and recipients of the limited funding are chosen through a competitive application process.

Georgia has no such restrictions and until recently was luring many productions from L.A. Now that state, too, is suffering as rising costs across the U.S. have led studios to make nearly all big budget movies and event series overseas. The “Fantastic Four” saved New York City in a film shot outside London. “KPop Demon Hunters” was animated in Canada. The newest frontier is Eastern Europe, where Amazon’s “The Terminal List: Dark Wolf” is taking advantage of inexpensive crews and scenic locales in Hungary and Croatia.

People still come to L.A. with dreams of making it in Hollywood. Getting started is easier than ever. Filmmaking tools are cheap and online distribution is free. Elite YouTube creators sometimes employ up to 100 or more production workers in L.A.

But those jobs typically pay less than union work for Netflix or Warner Bros., and there aren’t nearly enough of them to make up for the lost movie and TV production jobs.

As a result, some entertainment workers are leaving Los Angeles. The county’s population has dropped by nearly a quarter million since 2020.

After starting as a production assistant on “Dead Poets Society,” Susan Hellman became an assistant director—the person who keeps everything running on chaotic sets. Her work on shows like “Entourage” allowed her to buy a house in the beach neighborhood of Venice and a horse she rode in her limited time off.

But when the strikes ended, she couldn’t find another job. Isolated, depressed and blowing through her savings, she sold her house for $1.7 million and used the profit to pay cash for a home in Ocala, Fla.

The 60-year-old finds early retirement with her horse to be boring compared with her old life with her “TV family.” L.A. acquaintances still reach out to ask if she knows of any available jobs. “It’s like, guess you didn’t hear, but I was forced to sell my house and leave town,” she said.

Animator Rachel Long worked steadily for more than a decade on shows like “BoJack Horseman.” When her last series ended in 2024, she found herself competing with hundreds of other experienced artists for a handful of available jobs. And with AI starting to make impressive videos, she was losing confidence in the future of her profession.

So the 39-year-old retrained to be a phlebotomist, figuring it was the easiest alternate way to make a decent living. She jokes with patients and co-workers that she “went from drawing blood to drawing blood,” but struggles to stay positive now that she makes about one-third of her prior $120,000 salary for work that is less fulfilling.

“I hope we can get back to some semblance of how it used to be, so I can work with my friends and collaborators doing something creative that others can enjoy,” she said. “But I have to face the really real fact that it might not happen.”

Some European officials worry lifting sanctions would bolster Russian retaliation against western companies

The EU is preparing to lift sanctions on assets linked to Russian oligarch Oleg Deripaska in order to compensate Austria’s Raiffeisen Bank International for damages it had to pay in Russia, according to European officials.

Provisions to unfreeze shares worth about €2bn in Strabag, an Austrian construction company once part-owned by Deripaska, are included in the latest draft of the EU’s Russia sanction proposal, according to seven people familiar with the matter.

The assets would fall to Raiffeisen and compensate the bank for a €2bn fine it had to pay following a Russian court ruling in favour of a business linked to Deripaska, the officials said.

The sanctions were originally imposed because of Deripaska allegedly providing material support to “Russia’s military and industrial complex” in the full-scale invasion of Ukraine.

However, some European officials worry the move would legitimise oligarchs’ efforts to circumvent the EU’s sanctions against Russia, and bolster Russian courts that are retaliating against the sanctions by ordering the confiscation of western assets.

Ambassadors of several EU member states are expected to object to the move, which was initially proposed by Austria, at a meeting on Friday to discuss the new sanctions package, five of the officials added.

Raiffeisen is the western bank with the largest remaining presence in Russia following President Vladimir Putin’s full-scale invasion in 2022. But it has come under pressure from regulators and foreign governments to leave Russia like many other western businesses have done.

RBI has been trying to wind down operations in Russia. But Russian regulators are unwilling to let Raiffeisen leave because it is one of the country’s few remaining access points to the Swift international interbank payment system, according to people familiar with the matter.

A potential sale would probably lead to western sanctions against the bank and its owner, cutting it off from global markets.

The Austrian bank and Deripaska previously tried, and failed, to arrange a complex asset swap to unfreeze Deripaska’s 24 per cent stake in Strabag, held through his company Rasperia.

The deal ultimately fell apart over concerns that it would circumvent EU sanctions. The EU and the US later sanctioned another oligarch, Dmitry Beloglazov, and several entities that were involved. Deripaska had sold Rasperia, including the frozen Strabag shares, to Beloglazov.

Rasperia has since taken Raiffeisen to court in Russia, where the Austrian lender was forced to pay €2bn in damages. The court also ordered the transfer of the Strabag shares to Raiffeisen.

Raiffeisen said in January that the verdict had “no binding effect in Austria and the transfer of shares is therefore not enforceable”. It also noted that “Rasperia’s STRABAG SE shares are subject to an asset freeze under EU sanctions which also currently prevents their transfer.”

The proposal under discussion in Brussels would now allow Raiffeisen to take ownership of the sanctioned shares, in effect enforcing the Russian court’s decision.

Officials argue that this legitimises Russian courts clawing back sanctioned assets through confiscation, and could encourage other oligarchs to pursue the same approach.

“It may set a convenient precedent for Russian entities to indirectly recover their frozen funds through the confiscation of the assets of subsidiaries of EU companies still operating in Russia,” one diplomat said.

Another said that this would “pay for Raiffeisen’s own risk [taking]” by deciding to continue operating in Russia.

Proponents of the measure argue that it would prevent the sanctioned entity from receiving its money twice — via the court-ordered compensation, and when the assets are unfrozen once sanctions are lifted.

Raiffeisen declined to comment. The Austrian foreign ministry did not respond to a request for comment.

A spokesperson for Deripaska did not respond to a request for comment. Rasperia did not respond to a request for comment.

The rapid building of excess capacity both extends bubbles and ultimately bursts them

The AI “bubble” looks to be approaching its endgame. The dramatic rise in AI capital expenditure by so-called hyperscalers of the technology and the stock concentration in US equities are classic peak bubble signals. But history shows that a bust triggered by this over-investment may hold the key to the positive long-run potential of AI.

AI stocks have exhibited bubble characteristics for a while. Share prices have skyrocketed, driving excessive index concentration. AI companies are doing deals between themselves, helping inflate their valuations. And they are buying each other’s products and using vendor financing to sustain growth.

Until recently, the missing ingredient was the rapid build-out of physical capital. This is now firmly in place, echoing the capex boom seen in the late-1990s bubble in telecommunications, media and technology stocks. That scaling of the internet and mobile telephony was central to sustaining “blue sky” earnings expectations and extreme valuations, but it also led to the TMT bust.

This followed the similar patterns from the introduction of nearly all general-purpose technologies — from railways, electricity, radio, semiconductors, to the internet. These bubbles didn’t end because the dream about the new technologies fell short; rather, the bubbles burst either due to regulation, increased competition, or the buyers of the products being unwilling, or unable, to sustain the demand. While the technology theme may be structural, all too often the end users are cyclical, putting the returns on investment in this excess capacity at risk from weakness in end-user cash flow.

Today’s AI hyperscalers are seeing these vulnerabilities emerge. Europe is leading the way on regulation, with the European AI Act. Competing models Deep Seek from China and K2 from the United Arab Emirates use less computing power. More importantly, tech cash-flows are beginning to be squeezed. If the end buyers of AI suffer an exogenous cash flow shock, the merry-go-round will slow rapidly as sales collapse faster than capex can be reined in, resulting in faltering earnings and accelerated cash burn. Tech buybacks would also likely be cut, undermining both share prices and market valuations.

So the message for today’s investors is “buyer beware”. The TMT bust shows why. Today we are living the digital dream envisioned in the TMT bubble: a hyperconnected world, with seamless digital communication and where the internet of things is a reality. Yet this did not stop today’s digital winners from the TMT era falling heavily in the tech bust — Microsoft (65 per cent), Apple (80 per cent), Oracle (88 per cent), and Amazon (94 per cent). These companies took 16, five, 14 and seven years respectively to regain their 2000 peaks.

My perspective on technology bubbles has been shaped by five themes that emerged from William Janeway’s book Doing Capitalism in the Innovation Economy. First, periods of bubble behaviour — and especially excess capex — are central to the adoption of new technologies. The hype around them drives down the cost of capital, allowing the rapid build-out of the new technology.

Second, when the bubble bursts, the excess capacity does not just disappear. It can be acquired at low prices by new players. The waste in the creative destruction identified by economist Joseph Schumpeter is inherent to bubbles, giving access to the new technology capacity at a lower price than if the boom persisted. This cheap capacity helps embed the technology in society.

Third, late equity investors funding this excess capex are likely to lose a big slice of their investment. You need to have been invested in hyperscalers since 2019-2020 to survive a 70 to 80 per cent bust without a portfolio loss.

Finally, tech busts have more negative economic impact when this capex is funded by debt rather than equity. Given this AI capex is largely equity funded, the fallout may be more similar to the TMT bust. Policy should respond to any bust using the 1987 or 1998 playbooks, rather than zero rates and quantitative easing after the Great Financial Crisis.

The good news is that the aggressive AI capex build-out almost guarantees AI’s future ubiquity. The bad news is that this will probably only come after a period of Schumpeterian creative destruction. So, despite our positive view on the structural narrative for AI, investors should be wary of paying for AI stocks on valuations equivalent to 30 times earnings, or 8 times sales. Unless of course, they want to altruistically fund this rapid AI capacity build-out as their way of contributing to society’s longer-term gain.

Down-to-the wire team negotiations capped a long dance between Trump and CEO Bourla

Pfizer reached a deal with the Trump administration to avoid tariffs and address drug pricing, leading to a 14% surge in its shares.

The agreement includes most-favored-nation pricing for Medicaid and discounted drugs on a new direct-to-consumer platform, TrumpRx.

Other pharmaceutical CEOs expressed anger and felt blindsided by Pfizer’s deal, which was negotiated individually with the administration.

Over a weekend in late September, the team of Pfizer PFE -0.48%decrease; red down pointing triangle officials working with the Trump administration on drug prices got a message: Clear your schedules.

Negotiations were reaching a tipping point. CEO Albert Bourla and Chris Klomp, head of Medicare, who was leading negotiations for the administration, had met in Washington and reached a handshake agreement on the contours of a drug price deal. A deadline to avoid tariffs was looming, and there were still a few things to iron out.

All the major pharmaceutical companies had been told they needed to come up with a plan to lower prices and manufacture in the U.S., or face consequences including tariffs. Pfizer wanted to make sure that if the company agreed to a deal, it would secure a reprieve on levies and its manufacturing investments could focus on younger and future products rather than infrastructure for drugs about to go generic, according to people familiar with the matter.

Talks intensified in the week of Sept. 20. The final deal came together in the wee hours of the morning before a deadline President Trump had set for imposing tariffs. It was signed by Bourla and Health Secretary Robert F. Kennedy Jr. just ahead of the announcement on Tuesday, according to people familiar with the deal.

What was revealed that day in the Oval Office, as Bourla stood near Trump, Kennedy and others while giving each other smiling glances, was a win for both parties. Trump got to announce a deal cutting drug prices and a start on a new direct-to-consumer platform dubbed TrumpRx. And Pfizer avoided tariffs with a strategy that would be a minimal hit to its bottom line.

The deal was built not just on the team negotiations, but on the longstanding relationship between Bourla and Trump, cultivated over dinners at Mar-a-Lago and regular catch-ups over the phone between the president and chief executive. Bourla recently suggested that Trump’s Operation Warp Speed, which was launched to quickly develop Covid-19 vaccines, was the kind of accomplishment that “would typically be worthy of the Nobel Peace Prize.” At Tuesday’s announcement, Bourla thanked Trump for his friendship and hugged Centers for Medicare and Medicaid Services Administrator Mehmet Oz.

It was a moment of triumph for Bourla that has brought on ire from other executives. During a 90-minute call on Wednesday with executive members of PhRMA, the trade group representing the pharmaceutical industry, some other CEOs were angry and felt blindsided, according to people familiar with the meeting. Genentech’s CEO Ashley Magargee discussed whether Bourla should be removed as chair, one person said.

A Genentech spokesman declined to comment.

Bourla pushed back, telling the executives that Trump made clear he wanted better pricing for the American public and that the deal showed how companies could avert tariff threats and have certainty to invest in their businesses.

“We are in constant dialogue with the U.S. government and have been working with the administration on a number of issues where we share the president’s commitment to addressing devastating disease and making medicines more affordable,” a Pfizer spokesman said.

White House officials said the goal was to preserve innovation while also getting lower drug prices for Americans.

The deal has lifted beleaguered drug stocks by pointing a way for companies to remove the threat of tariffs and deal with U.S. pricing pressures. Shares of Pfizer have surged 14% since the deal was announced. Shares of other big drugmakers including Eli Lilly and AstraZeneca also have risen sharply, on the expectation that other companies might strike similar deals that spare them more onerous outcomes.

Trump’s goal of reshaping how drugs are priced in the U.S. started in his first presidential term, but it wasn’t until his second term that he gained momentum. His proposals for pharmaceutical tariffs and a May executive order calling for “most favored nation” pricing—whereby the U.S. government pays the same as the lowest prices for drugs that other wealthy countries pay—eventually brought pharmaceutical companies to the negotiating table like never before.

Several drugmakers, including Eli Lilly and Johnson & Johnson, announced plans to spend tens of billions of dollars on U.S. manufacturing and research in the coming years as a show of cooperation. Pfizer took a different approach—waiting to secure a deal before committing to spending billions of dollars more in the U.S.

Drugmakers opposed most-favored-nation pricing, arguing that it would deprive them of funding needed to develop future medicines and that it could jeopardize the billions in the recently announced planned investments. At the time, some industry leaders didn’t put much stock in an executive order signed by Trump because it seemed the government didn’t have the authority to impose the terms. And details from the administration were sparse.

Still, the most-favored-nation proposal kicked off a series of meetings between administration officials and drugmakers, including Pfizer, to hash out the details. Health Secretary Kennedy and CMS Administrator Oz delegated the negotiations to a small team led by Klomp.

The initial meetings were cordial, but they hadn’t yet dug into substantive issues, and Pfizer had made no commitments, Bourla told an investor conference in June.

That month, Pfizer held several meetings with CMS officials, according to people familiar with the matter. The company’s takeaway: The Trump administration wanted to negotiate with companies individually, rather than with a powerful trade group like PhRMA. That meant Pfizer and other companies wouldn’t be able to discuss their talks with each other to avoid antitrust violations.

Some companies started to take small steps toward fulfilling some of the goals outlined by Trump. In July, Pfizer and Bristol-Myers Squibb, which co-market the widely used blood thinner Eliquis, announced they would sell the drug at a discounted cash price through a direct online purchasing service.

But Pfizer and other drugmakers weren’t budging on broader price cuts. By summer, there was little progress in the negotiations. “We stalled,” Oz said at a White House press conference Tuesday.

Trump turned up the pressure. In late July he sent letters to the CEOs of 17 drugmakers, including Pfizer, demanding action within two months. He outlined four main goals, including extending most-favored-nation pricing to Medicaid and to newly launched drugs. He demanded that drugmakers return increased revenue from abroad if higher prices could be negotiated in other countries, and that companies participate in direct-to-patient sales of high-volume drugs at lower prices.

The letters were notable because they didn’t propose applying MFN prices across the board to include commercial insurance or Medicare. This was more limited in scope than what had seemed to be on the table in May.

In the letter to Pfizer, Trump crossed out “Dr. Bourla” in the salutation and wrote “Albert” with a marker, a sign of their familiarity. He did the same for his letter to Eli Lilly CEO David Ricks.

The letter “asks a lot of us,” Bourla told analysts on an earnings call in early August. He said he was having active discussions with Trump, Kennedy and Oz about the letter.

“You know that the president is impatient, so he wants the results quickly,” Bourla said.

The week before Trump’s Sept. 29 deadline, he posted that he would implement 100% tariffs on pharmaceuticals on Oct. 1, but that companies that were actively building new U.S. manufacturing capacity would be exempt.

The threat of tariffs motivated behaviors and “clearly motivated ours,” Bourla said at the White House press conference announcing the deal.

On the morning of the day the deal was announced, Bourla called Steve Ubl, the head of PhRMA, to notify him, according to people familiar with the matter.

Pfizer agreed to provide most-favored-nation pricing for its drugs to the federal and state Medicaid program for lower-income people. The prices would be tied to prices charged in several other wealthy countries. Pfizer also said it would launch future drugs at prices that are equal to those in other wealthy countries. And it would offer some discounted drugs on the new TrumpRx direct-to-consumer site launching in 2026.

“I was honored to have Albert be the first,” Trump said at the press conference. “He’s done a fantastic job with the Covid. Pfizer is right at the top.” Trump said more deals with other drugmakers would follow.

In exchange, Pfizer got a commitment that its drugs manufactured overseas wouldn’t face tariffs for three years.

The deal might not put the industry completely in the clear. But for now, the price cuts don’t apply to patients with Medicare and commercial insurance, which makes up most of Pfizer’s U.S. business. Medicaid is less than 5% of Pfizer’s U.S. revenue, said Leerink Partners analyst David Risinger. And the most-favored-nation prices that will be applied to Medicaid might not be much lower than discounts Pfizer and other drugmakers already provide to Medicaid.

The discounts Pfizer provides in the direct-purchasing platform also aren’t likely to dent its sales, analysts said. They’ll likely be in line with discounts that Pfizer already provides to health insurers and employers. And most insured patients will have lower out-of-pocket costs by getting the drugs through their insurance rather than the direct-purchasing service.

“It will be for a really tiny fraction of the market,” said Sean Sullivan, a professor at the University of Washington School of Pharmacy who researches drug pricing.

The multibillion-dollar deal was announced in May, but the commerce secretary has since pushed the U.A.E. for certain U.S. investments first

WASHINGTON—A multibillion-dollar deal to send Nvidia’s artificial-intelligence chips to the United Arab Emirates is stuck in neutral nearly five months after it was signed, frustrating Chief Executive Jensen Huang and some senior administration officials.

The delays are a setback to Huang and White House AI Czar David Sacks, who hoped to see the deal advance quickly to highlight a new U.S. tech strategy focused on exports, according to people familiar with the matter. They see agreements like the U.A.E. deal as key to the U.S. staying ahead of China in the AI race.

Under the deal, which was announced in May, the U.A.E. promised to invest in the U.S. in exchange for up to several hundred thousand Nvidia chips a year. But the investment hasn’t materialized after months of talks, baffling some administration officials who don’t know the reason for the delay, the people said.

The future of the agreement is largely in the hands of Commerce Secretary Howard Lutnick, who initially championed the deal. The Commerce Department’s approval is critical to getting the deal done because the agency has to give Nvidia and others involved permission to send the chips to the U.A.E.

The commerce secretary has pressed the Emiratis to finalize their U.S. investments before his department authorizes the delivery of the chips, some of the people said. Those prolonged conversations have slowed the deal, they said.

This summer, Lutnick and some administration officials also worried about national-security risks because the U.A.E. is close to China. That relationship fueled fears that the chips could benefit China’s AI industry, and held up the deal.

The negotiations have high stakes for Lutnick, who has come under fire for the rollout of tariffs and a new $100,000 fee for applicants seeking H-1B visas popular among tech companies. Tension with Nvidia, the world’s biggest company with a nearly $4.6 trillion market value, could be a major test between the White House and the company.

Huang and various Nvidia executives have complained privately about Lutnick’s tactics and the slow progress to other administration officials, some of the people said. Sacks and others in the administration are also annoyed, they said. One senior administration official said Lutnick hasn’t held up the deal, but other administration officials contended he had slowed the process down.

The U.A.E. is progressing ahead with its agreement using a 1:1 ratio of the nation’s investment in the U.S. in exchange for billions of dollars worth of Nvidia’s chips, the senior administration official said. At least $1 billion will be sent from the U.A.E. to the U.S. in exchange for at least $1 billion worth of Nvidia chips by the end of the year, according to the official. The U.A.E. would have to pay separately for the chips, some other people said.

A senior Nvidia executive said Huang and others haven’t complained and said the company isn’t concerned with how the deal has been handled. White House spokesman Kush Desai said in a statement that “Sacks and Secretary Lutnick are integral to the President’s AI agenda and are working diligently to get deals done on behalf of the American people.” A spokeswoman for Sacks declined to comment. The U.A.E. Ministry of Foreign Affairs didn’t respond to a request for comment.

Huang has praised Lutnick publicly, saying recently that the commerce secretary is the person he talks to most in the administration. The Nvidia CEO is walking a tightrope between the U.S. and China, trying to keep both countries hooked on chips without getting caught in their trade spat.

Trump praised the U.A.E. chip deal during the first overseas trip of his second term in May, which highlighted U.S. AI technology and hopes other countries would adopt it instead of China’s. The White House at the time said Trump secured over $200 billion in U.S.-U.A.E. deals, including an agreement between both nations to help develop U.S. technology and manufacturing.

The U.A.E committed to investing, building or financing U.S. data centers for training AI models, the White House said at the time. The U.A.E. has also done deals with the Trump family’s crypto venture and is part of the investor group taking control of TikTok’s U.S. operations.

The administration’s discussions with the U.A.E. are the latest example of the president’s team pressing corporations and countries to invest in the U.S.

Lutnick recently negotiated a deal with Japan in which the country agreed to invest $550 billion in the U.S., putting the money into a fund overseen by the commerce secretary. Trump and Lutnick recently used nearly $9 billion in federal grants to take an equity stake in Intel.

Nvidia is also working with Lutnick to get the licenses it needs to send chips to China. Trump and Lutnick asked the company to give the government 15% of the chip sales to China for a chip called the H20 in August, a move that some lawyers say amounts to an illegal export tax.

Under the terms of the U.A.E. agreement, most of the chips would go to U.S. companies operating in the Middle East nation.

Some administration officials have raised issues with the involvement of G42, an Abu Dhabi-based AI firm that is supposed to be part of the agreement, the Journal previously reported. They worry that chips sent directly to G42 could end up being diverted to China. The Commerce Department currently doesn’t plan to approve chips going directly to G42, but it may in the future.

Australia rolls out ‘ghost bats and sharks’ in historic defence spending spree

Canberra undertakes most ambitious military overhaul since the second world war to meet China threat

Australia has embarked on a A$25bn defence spending frenzy, ordering fleets of autonomous aircraft and submarines, Japanese-designed frigates and transforming a key shipyard in what amounts to the country’s biggest military overhaul since the second world war.

The country’s greatest advantage in defence has long been its distance from potential adversaries. But Chinese live-fire naval exercises a few hundred nautical miles off its eastern coast this year made clear it needed to be better prepared.

“Australia faces the most complex, in some ways, the most threatening strategic landscape that we have had since the end of the second world war,” defence minister Richard Marles said in August.

US President Donald Trump has also been putting pressure on global allies, including Australia, to rapidly raise defence spending. Prime Minister Anthony Albanese is set to meet Trump on October 20, when the two are expected to discuss defence spending and security in the Indo-Pacific region.

The Australian spending surge follows a landmark review that found the emergence of “major power strategic competition” in the Pacific, marked by an increasingly “ambitious” China, had fundamentally changed the country’s defence needs. It also called for Australia to reduce reliance on its allies for protection.

“The urgencies are clear,” Kurt Campbell, the former US deputy secretary of state, told the National Press Club in Canberra.

Australia has named Japan’s Mitsubishi Heavy Industries as preferred bidder on a A$10bn contract to build up to 11 Mogami frigates, part of a A$55bn investment in overhauling the country’s surface fleet that also includes a contract with the UK’s BAE Systems to build Hunter Class frigates in Adelaide.

Last month, it also committed A$12bn to the initial phase of an upgrade to the Henderson shipyard south of Perth to revamp a facility that previously made superyachts to turn out the Japanese-designed frigates and service nuclear-powered submarines.

In the skies, Australia is testing MQ-28A “Ghost Bat” drones, developed under a A$1bn contract with Boeing. The “loyal wingman” drones, which will accompany crewed aircraft, are the first military aircraft designed in the country in more than 50 years, and are part of a A$4.3bn investment in aerial drone capabilities.

Canberra has also locked in a A$1.7bn contract with US defence tech group Anduril to produce a fleet of autonomous underwater vessels, known as “Ghost Sharks”, which will be made in Sydney.

Marles said the vessels could be harnessed for intelligence, surveillance, reconnaissance and strike missions. “This is a lethal capability,” he said. “This is the world’s leading capability in terms of a long-range, uncrewed autonomous underwater system.”

Leidos, another US defence company, was last month awarded a A$46mn deal to provide operations systems to a A$1.3bn, decade-long anti-drone programme.

Luke Yeaman, chief economist at Commonwealth Bank, said defence spending would rise to 2.25 per cent of GDP by 2028, from around 2 per cent currently. He forecast that figure would rise to 3 per cent within a decade as the trilateral Aukus security pact with the US and UK and other expenditures came online. 

The sheer scale of Aukus — under which Australia will acquire nuclear-powered submarines for the first time — has cast a pall over the defence budget. Yeaman estimated the cost of the deal at between A$268bn and A$368bn by 2050. Albanese has said his government will increase defence expenditure by A$70bn in the coming years.

But some say Canberra is still not spending enough.

“Defence spending is still lax,” said Steve Baxter, founder of defence investment fund Beaten Zone Venture Partners, who said Australia packed the “sense of urgency” of US defence planning. “The strategy is right but it’s not been funded,” he added.

While the bulk of the committed spending has been on submarines and frigates that are vulnerable in modern warfare, Sam Roggeveen, director of the Lowy Institute’s International Security Program, said the government should be focused on shoring up the country’s north.

The defence build-up also highlights Australia’s complicated relationship with China, which is the country’s largest trading partner. Restoring economic ties with Beijing was one of the biggest accomplishments of Albanese’s first term.

“The government is torn between different political goals — the relationship with China but also deterring China,” said Andrew Carr, senior lecturer in the Strategic and Defence Studies Centre at The Australian National University.

More broadly, Carr said, the government has failed to explain to the public what the new “national defence” posture would mean.

Unlike Japan and Taiwan, Australia was not accustomed to the idea of hostilities close to its shores, he said.

“There’s no discussion on trade-offs between guns and butter or public support for the costs to society if war breaks out,” he said.

Watchmaker’s superbike collaboration shifts diversification drive into higher gear

Richard Mille and Brough Superior show off rare case of a €200,000 luxury motorcycle produced with the input of a watch brand

Luxury watchmakers have long experimented with motorcycle tie-ins, but most have stopped short at limited collaborations or branded one-offs. Partnerships such as the ones by now-defunct watchmaker JeanRichard with MV Agusta,

Jaeger-LeCoultre with racer Valentino Rossi and, more recently, Bvlgari with motorbike brand Ducati, have produced attention-grabbing watches but with little lasting impact.

A more ambitious move has been made by Brough Superior, the boutique motorcycle manufacturer, which has teamed up with Richard Mille to launch the RMB01 — a €200,000, track-only superbike designed in collaboration with the watchmaker. Unlike past branding exercises, this is a full production run of 150 motorcycles, with a third already spoken for.

The RMB01 represents a rare case of a motorcycle designed with the engineering philosophy and signature styling of a specific watchmaker. With its carbon fibre exoskeleton, aerospace-grade components, and design cues echoing Richard Mille’s six- and seven-figure timepieces, the project shows how luxury brands are extending their influence beyond accessories into high-value, high-performance engineering.

With its sci-fi movie styling, the RMB01 is a far cry from the Brough Superior that some will know as the prewar machine on which TE Lawrence (“Lawrence of Arabia”) lost his life 90 years ago after crashing in a Dorset lane.

Engineer George Brough built his first powered two-wheeler in 1919 and soon established a reputation for making “the Rolls-Royce of motorcycles” with his SS80 and SS100 models, both now highly sought-after collector items. A 1929 SS100 fetched £315,100 at auction in 2014.

Brough Superior remained mothballed after the second world war until 2008 when British businessman Mark Upham acquired the rights and partnered with Thierry Henriette, owner of Toulouse-based engineering company Boxer Design, to develop a unique V-twin engine for the revived bikes. Henriette took over the reborn brand in 2013 and has continued to expand the line-up by adding one new model per year.

It was at the Rétromobile classic car show in Paris in 2019 that Richard Mille, the man behind the eponymous watchmaker, got into contact with Brough Superior. “We were exhibiting there and I saw someone come to our stand who began looking at one of our bikes in incredible detail,” recalls Brough Superior executive director Albert Castaigne.

“He spent a really long time examining every visible part and taking in all the design elements, and then someone told me it was Richard Mille. He introduced himself and said he was very interested in seeing how we worked, so we organised a factory visit,” says Castaigne.

After the visit Mille, who owns an exceptional collection of classic grand prix cars and describes the watches that carry his name as “racing machines on the wrist”, expressed an interest in collaborating. But it was another four years before the plan came to fruition.

“He gave us a direction to design something that drew parallels with Richard Mille watches, but emphasised that features should only be included if they had a purpose, not just for the sake of adding them,” says Castaigne.

An initial dozen design ideas were refined down to a machine that, while futuristic, harked back to America’s pared-down board track racers of the 1920s. Earlier this year the final renderings of the RMB01 were revealed. Last week, Brough Superior invited the FT to a specially organised test day at Spain’s Calafat race circuit, 100km south-west of Barcelona.

The multi-piece wheels have been designed to resemble a tourbillon cage, while the angled, hollowed-out shapes of the front forks and rear swingarm refer directly to the lightweight cases of Richard Mille watches. The chassis, meanwhile, takes the form of a carbon fibre exoskeleton from which the 997cc, V-twin engine and integrated six-speed gearbox are suspended, akin to skeletonised movements in the watches.

Other similarities include a clutch cover that resembles one of Richard Mille’s distinctive winding crowns and an instrument binnacle that mimics the view into an RM watch movement — complete with interconnected gears that oscillate when the ignition is switched on, activating the needles for the rev counter and speedo. The graphics are based on those on a typical Richard Mille dial, while the binnacle is bordered by a carbon fibre and titanium bezel featuring top-loading screws similar to those of the watches.

“We did suggest using exactly the same design of screws that make Richard Mille watches so distinctive, but he [Mille] said it was too obvious, so we went for something different,” says Castaigne.

Based in Toulouse — Europe’s aerospace manufacturing capital — Brough Superior has called on multiple small-scale manufacturers to supply aviation-grade components such as wheels and brake calipers, meaning that at least 50 per cent of the bike’s parts are made close to the Brough factory.

In reality, few RMB01 owners are likely to make extensive use of these bikes for the purpose for which they are intended. “It’s a mechanical work of art that’s sufficiently functional dynamically to be impressive when you ride it,” says motorcycle journalist and multiple race winner Alan Cathcart. “But it’s not street legal in any civilised country and I doubt many wealthy owners will want to grapple with it on the track on a regular basis. Thierry Henriette deserves credit for creating what I consider to be the most beautiful Brough Superior of the modern era, and for succeeding in the difficult task of designing the two-wheeled equivalent of a Richard Mille watch.”

Country’s biggest lender will have to share benefits of Berlin’s ambitious spending plans with other European banks

A Deutsche Bank board member once admitted that the lender used to get cheaper funding because investors mistook it for Germany’s central bank. Now, as investors seek winners from Chancellor Friedrich Merz’s ambitious spending plans, Deutsche is benefiting from a similar effect.

Shares in Germany’s biggest bank are up almost 80 per cent so far this year, making it one of the biggest beneficiaries of the Dax index’s recent rally. The long-troubled lender is on the brink of eliminating its discount to book value for the first time since 2008.

Things could get better still, chief executive Christian Sewing believes, thanks to Merz’s so-called “fiscal bazooka”. The logic, persuasive enough, is that this could lift customer deposits while increasing demand for loans and capital markets services. Germany’s GDP could be 2.5 per cent higher by 2035 because of extra infrastructure spending, the European Commission thinks; bank profit ought to expand by multiples of that.

The trouble is, those benefits will also be shared with companies that don’t have “Deutsche” in their names. Others in line for Germany’s fiscal buffet include Italy’s UniCredit and Dutch lender ING. As well as their direct exposure to German companies, UniCredit chief Andrea Orcel recently told investors that any expansion should “have a very strong carry-over on other markets”.

Banks such as Erste and KBC serve companies in central and eastern Europe that are key to supply chains, while capital markets activity from larger corporations would help continental players such as BNP Paribas and Santander.

Enthusiasm has carried Deutsche’s stock so far that it looks expensive compared with rivals. Sewing’s bank now trades at a premium to peers with similarly large deals and securities businesses such as Barclays and BNP, despite a narrower focus on fixed income trading and weaker profitability. 

Even on the important metric of return on tangible equity, which Sewing has rebuilt admirably since taking charge in 2018, rivals are doing better. Deutsche is expected to make a 12 per cent return by 2029, according to Visible Alpha, versus 9.6 per cent this year — but that is still lower than the equivalent forecasts for Barclays and BNP.

That makes it hard to see how Deutsche’s valuation can go much higher. Only about a third of analysts tracked by Bloomberg give Deutsche’s stock a buy recommendation, the lowest proportion since 2022 and the weakest among the 10 largest banks in the Stoxx Europe Banks index. German neighbour Commerzbank, which has been on a similar rollicking rally, is one of the only large banks even less popular with analysts.

Sewing has a chance to convince sceptics at a strategy update next month. His lender would need to lift earnings by a third over the next four years just to keep up with consensus expectations — doable, assuming stimulus efforts really get off the ground.

He may find an extra lift comes from the resurgence of animal spirits around Europe. The bloc’s investment banking fees fell in the first half of the year — and Deutsche only claimed about 4 per cent of them, according to LSEG. But if Merz’s bazooka stokes a risk-taking revival among executives, Sewing has a chance to fight for a bigger share of a growing fee pool, assuming his own aim is up to the task.

Giorgia Meloni’s administration would hit EU target a year earlier than anticipated due to bumper tax revenues

Prime Minister Giorgia Meloni’s government expects Italy’s public deficit to fall to 3 per cent of GDP this year due to stronger than expected tax revenues, potentially allowing Rome to exit the EU’s excessive deficit procedure a year earlier than anticipated.

While finance minister Giancarlo Giorgetti had expressed hopes of such a performance in recent public comments, Rome has now officially estimated that its 2025 deficit will drop to 3 per cent, compared to the 3.3 per cent of GDP it had originally forecast. 

The latest projection was included in a public finance planning document that was submitted to the Italian parliament on Thursday night, as part of preparations for hammering out the details of next year’s budget.

Italy’s tax revenues between January and July rose 5 per cent compared to the same period last year, bringing an additional €16bn into state coffers, a jump that economists say reflected robust job growth and inflationary pressures.

However, the European Commission will not assess whether Italy remained within the EU’s 3 per cent deficit threshold until spring 2026, once actual full-year data is available. 

Italy entered the procedure in 2024, which carries an economic stigma and could eventually result in financial sanctions from the EU.

If it does exit the excessive deficit procedure, the finance ministry said it would begin to draw on European funds — of up to €12bn by 2028 — for investment in defence.

While the declining deficit is seen as cause for cheer, economic growth remains muted, despite the massive injection of European funds from the EU’s Covid-19 recovery programme, of which Italy is the largest single recipient.

In its projections on Thursday, Meloni’s government estimated that the Italian economy will grow just 0.5 per cent this year, as exporters wrestle with the impact of US President Donald Trump’s tariff blitz. 

Economic momentum is expected to pick up slightly over the next few years, however, with the government projecting an expansion of GDP growth of 0.7 per cent in 2026, 0.8 per cent in 2027 and 0.9 per cent in 2028.

Though Italy was once seen as Europe’s byword for fiscal profligacy, Meloni’s government has been lauded for its efforts at fiscal discipline, which has helped to sharply lower the spread between Italian and German debt — and eased Rome’s borrowing costs.

However, Francesco Giavazzi, who served as economic adviser to former prime minister Mario Draghi, said Italy’s improved public finances had been enabled by inflationary pressures and came at the cost of the purchasing power of many households.

Inflation, he said, had led to many Italians obtaining pay rises that in turn pushed them into higher tax brackets, resulting in what he called “tax bracket creep”. 

“The people are paying for this because they are paying more taxes,” Giavazzi said. “It’s a fiscal correction equivalent to one implemented by raising taxes, but it’s a hidden one because the people don’t see it. It’s not a law passed in parliament — inflation does the job for you.”

With their higher nominal pay, many Italians have also lost access to various subsidies and benefits for the poor, further relieving pressure on the public coffers, but weighing on household incomes. 

“An increase in taxes doesn’t help growth so it’s not surprising that the growth is 0.5,” he said.

In the upcoming budget, Meloni’s coalition government is expected to cut the tax rate for people on middle incomes who earn between €28,000 and €50,000 from the current rate of 35 per cent to 33 per cent.

“We aim to increase families’ spending capacities, in order to bring more serenity to households and boost domestic consumption,” Marco Osnato, who belongs to Meloni’s Brothers of Italy party and chairs the parliament’s finance committee, told the Financial Times.