WSJ : Why Microsoft Has Lower Borrowing Costs Than the U.S.

Why Microsoft Has Lower Borrowing Costs Than the U.S.
There are several theories for why anyone would pay more for a bond from Microsoft or Johnson & Johnson than for a Treasury

Usually, when investors are willing to lend to companies at a lower yield than the government, it’s because the country faces financial armageddon and the government default risk is rising. Two pristine-rated bonds from Microsoft MSFT 0.87%increase; green up pointing triangle that trade at lower yields than equivalent Treasurys tell us something different, though: Demand for corporate bonds is running superhot.

Among U.S. corporate bonds rated AAA, two in the main index currently trade a little below the equivalent yield on Treasurys, known as a negative spread. This is extremely unusual, both because companies are in principle much more likely to default than the government that can tax them, and because the corporate bonds are harder to trade, so should yield a little more to compensate buyers for the difficulty in selling them quickly.

Yet, demand for high-quality corporate bonds has been so great that it’s driven the ICE BofA AAA U.S. Corporate index to a spread of only 0.3 percentage point over Treasurys, a tiny reward for the additional risks of holding company debt and far below the 2-plus points reached in the past two recessions. It’s small enough that some of the best bonds get pushed to yield less than the government. It makes no sense.

“You’re getting a lower yield for something that’s less liquid too,” says Mike Riddell, a bond fund manager at Fidelity International. He thinks Microsoft and other top-rated bonds should offer a yield 0.15 to 0.2 points above Treasurys purely for being harder to trade, without even considering the tiny risk of default.

There are several theories for why anyone would pay more for a bond from Microsoft or, early last week, Johnson & Johnson, than for a Treasury.

Start, though, with a theory no one believes: They’re safer. All these bonds are rated AAA, while the U.S. has lost its top rating from all of the major credit-rating firms. Microsoft is sitting on $95 billion of cash and has only $40 billion of long-term debt. It is immensely profitable and popular with investors for its nascent artificial-intelligence business.

By contrast, the government owes the public $30 trillion and has spent more than it receives every year since 2001.

But if the government ever ran into trouble raising money, it could in principle use the power of taxation to take money off Microsoft and other companies. The threat of tax and other policies being used against them already shows up in the AAA-rated bonds from charitable foundations and top universities, which issue almost half the bonds in the AAA index and offer a yield pickup over equivalent Treasurys ranging from 0.2 to 0.9 points.

However, the bloated federal budget deficit means massive issuance of Treasurys. At the same time, corporate profitability has suppressed the need for the highest-quality companies to borrow. The combination of more Treasurys and fewer top-grade corporate bonds has naturally squeezed the gap between their yields.

“The supply-demand imbalance in [corporate] credit is very unpleasant—there’s just so little supply and so much money on the sidelines trying to chase it,” said Christian Mueller-Glissmann, head of asset allocation research at Goldman Sachs.

Get the spread tight enough, and it’s much easier for the addition of a few oddities to push some bonds to trade with negative spreads.

Three theories are plausible: indexing, a focus on yield and the power of pension funds.

ndex buyers. A lot of money has flowed to passive bond funds, following the earlier success of index tracking in equities. Because they buy whatever’s available in the index, a corporate-bond fund might buy some bonds offering less than equivalent Treasurys, because it doesn’t have the choice to switch to better-value government bonds.

Yield has been much more in focus than spread as interest rates have risen, one reason spreads overall have compressed so much. What’s not to like about a yield of 3.67% locked in until June 2027, from a company as rock solid as Microsoft? Who cares if you could get 3.69% on a recently issued Treasury maturing a month later, or slightly more still on an old Treasury bond maturing a month earlier? Professional bond investors might huff about the risk of the spread rising—a genuine risk—but if you plan to hold to maturity, maybe you don’t care that much.

Pension funds and insurers increasingly look at a different measure than the spread of a bond yield compared with Treasurys, too: They care more about the spread over comparable interest-rate swaps, which they use to hedge out some of the exposure to rate changes. Focus on what’s known as the swap spread, and the fact that Treasurys offer both better yield and better liquidity than some of these bonds might be less visible.

We don’t need to worry about a U.S. default soon, despite the fiscal quagmire the politicians love to wade about in. But anyone buying high-quality corporate bonds should be concerned about the lack of reward for taking on the extra risks.

FT : Trump authorises ‘full force’ as he orders troops to ‘war-ravaged’ Portland

Trump authorises ‘full force’ as he orders troops to ‘war-ravaged’ Portland
Move to protect immigration enforcement facilities is fourth deployment in Democrat-controlled US cities

Donald Trump has ordered that troops be sent to Portland, Oregon, authorising them to use “full force” as he expands the deployment of the US military in American cities.

The US president said on Saturday that he was directing defence secretary Pete Hegseth “to provide all necessary Troops to protect War ravaged Portland” and combat what he described as domestic terrorism.

Portland will become the fourth US city where Trump has deployed the military. It comes as the president intensifies efforts to target political opponents and “leftist” political groups following the assassination of conservative activist Charlie Kirk.

The deployment, which was requested by homeland security secretary Kristi Noem, is also intended to protect Immigration and Customs Enforcement facilities, which the president claimed were “under siege from attack by Antifa, and other domestic terrorists”.

“I am also authorising Full Force, if necessary,” Trump wrote in a social media post.

The administration did not provide a timeline for the deployment, or indicate which specific troops would be ordered into Portland.

“We stand ready to mobilise US military personnel in support of DHS operations in Portland at the President’s direction,” chief Pentagon spokesperson Sean Parnell said in a statement.

Speaking on Thursday, Trump said that “professional agitators and anarchists” who are “wild” and “crazy people” are “trying to burn down buildings, including federal buildings” in Portland, but he offered no evidence.

“These are bad people, and they’re paid a lot of money by rich people, some of whom we know.”

“I hear names of some pretty rich people that are radical left people,” he said, naming billionaire progressive donor George Soros and LinkedIn co-found Reid Hoffman. “If they are funding these things, they’re going to have some problems.” Last month the president called for Soros to be charged for allegedly supporting “violent protests” across the country.

There have been steady protests at a Portland ICE facility since the start of the summer which have led to some clashes between demonstrators and law enforcement. But Oregon officials have disputed the Trump administration’s depiction of a city out of control.

Oregon governor Tina Kotek said on Saturday: “There is no national security threat in Portland. Our communities are safe and calm.”

Kotek said Trump told her “there are elements [in Portland] that create an insurrection”, and she asked him not to send troops.

Portland mayor Keith Wilson said: “The number of necessary troops is zero, in Portland and any other American city. Our nation has a long memory for acts of oppression, and the president will not find lawlessness or violence here unless he plans to perpetrate it.”

A White House official said on Saturday that “protesters have been congregating outside of ICE’s field office in South Portland since early June. As of September 8, the US attorney’s office had brought federal charges against 26 people for crimes including arson, assaulting a police officer and resisting arrest.”

On Monday, Trump designated “Antifa” — a decentralised activist movement whose name is derived from “anti-fascist” — a domestic terrorist organisation. The president and his allies have claimed that Antifa was responsible for violent protests in US cities.

The Portland troop order was announced three days after a shooting at an ICE office in Dallas that the FBI described as an act of targeted political violence after investigators said they found bullet casings containing anti-ICE messages near the gunman. One detainee was killed and two others were injured.

Trump has already ordered National Guard troops to Los Angeles, Washington, DC and Memphis, all cities that, like Portland, are led by Democratic mayors. However, the deployment to Memphis, which is in deeply Republican Tennessee, is shaping up to look rather different than the Los Angeles and Washington operations.

The defence department sent about 4,000 National Guard members to Los Angeles, along with 700 Marines, to quell unrest following the federal government’s immigration crackdown. It also deployed about 2,000 National Guard troops to Washington as part of the president’s law enforcement efforts to combat crime in the nation’s capital.

Memphis, however, is expecting just 150 troops, Tennessee’s Republican governor has told local media.

Trump has also threatened to send troops into New York City and Chicago.

FT : Private equity’s rush to raise money prompts fears of European sector shake

Private equity’s rush to raise money prompts fears of European sector shake-out
Lofty targets for 2026 may force investors to choose between buyout firms, leaving some short of new funds to invest

Big private equity groups want to raise three times as much cash in Europe next year as they are likely to secure in 2025, setting up a shake-out for the sector at a time when many investors have been starved of returns.

This year, the six funds aiming to raise €3bn or more are expected to manage combined commitments of about €34bn, according to advisory firm Campbell Lutyens. Next year, however, 10 big private equity funds are likely to hit the market, aiming to raise more than €110bn, the firm said.

The lofty fundraising targets may force investors to choose between buyout firms, leaving some short of new funds to invest.

It will be a “tale of haves and have-nots”, said Sunaina Sinha Haldea, global head of private capital advisory at Raymond James. “Undoubtedly, [it] will be a very tough year for European fundraisings next year when almost all the major houses will have their flagship strategy out.”

The expected rush of firms trying to tap investors comes at a time when fundraising is already taking longer than in the sector’s heyday. These processes often “take twice as long as they used to”, said Ali Floyd, co-head of European private equity fundraising at Campbell Lutyens.

Buyout firms have also been “putting off their fundraisings because everybody knows it is tough to raise money in the current environment . . . Often investors will say, ‘Yes I’m happy to support your fundraising but I want my money back first’,” he added.

Advisers to the private equity industry say that a difficult market for initial public offerings has had a disproportionate impact on the ability of the biggest firms to return cash to their backers. The largest funds tend to buy bigger businesses, which are more suited to a listing when groups want to exit their investment.

The chair of London-listed Petershill Partners, which owns minority stakes in private equity firms, this week blamed investor concerns about the sector’s struggles to exit portfolio companies for its own share price weakness. On Thursday the group said it planned to delist and return more than $900mn to investors.

“All the noise around the difficulty of realising positions has made investors cautious,” Naguib Kheraj, who chairs Petershill, told the Financial Times.

Among the €3bn-plus buyout funds that have closed or are expected to close fundraisings this year are vehicles managed by Hg, Ardian and Oakley, according to people familiar with the matter.

Other groups which launched big fundraisings this year will also still be in the market in 2026, including a Permira vehicle aiming for €17bn.

Nordic Capital’s fundraising, which launched this year targeting €10bn, will continue into next year, people familiar with the matter said. Advent, which launched its fund targeting $26bn in February, originally aimed for a final close this year, the people added, but the process is expected to roll into 2026. The fund recently hit $20bn, one person added.

Other firms set to come to the market with new funds next year include Cinven and PAI.

The prospect of a congested market is likely to prompt big investors to be more selective in their relationships, said Floyd.

The competitive environment would shine a “very, very bright light” on comparative performance, he said, adding that institutional investors being tapped by so many large managers might well have less cash available to deploy with the hundreds of smaller funds in the European market.

Hg, Ardian, Oakley, Advent, Nordic Capital, Permira, Cinven and PAI declined to comment.

FT : German AI start-up in funding talks at $4bn valuation

German AI start-up in funding talks at $4bn valuation
Black Forest Labs explores raising between $200mn and $300mn

A secretive, one-year-old German artificial intelligence start-up is in talks to raise new funding at around a $4bn valuation, underscoring the fervour among investors to back promising technology in the sector.

Black Forest Labs, which focuses on using AI for image generation, is exploring raising between $200mn and $300mn, according to three people familiar with the matter.

The German start-up has previously raised undisclosed funding at around a $1bn valuation, securing backing from investors including Andreessen Horowitz.

Its new investment discussions were still at an early stage and could change, the people added.

Black Forest, which launched in August 2024, is one of the few companies in Europe developing its own AI models, alongside Paris-based Mistral.

It is led by the team that previously developed the technology for image generation at Stability AI, known as Stable Diffusion, which it has described as a “ChatGPT moment” for the machine learning technique known as diffusion.

Like Mistral, with whom Black Forest has partnered to provide image creation tools in its Le Chat app, the German start-up makes some of its AI systems available under “open source” licences, meaning they can be used and modified freely for certain applications.

Its Flux models conjure rich, realistic images from a few lines of written text. They can also generate new images based on adapting an existing picture upload, and allow the resulting creation to be edited.

Demand for image-editing AI systems has exploded in the wake of Google’s release of its “Nano Banana” model last month, which helped propel the search giant’s Gemini app to the top of the iPhone App Store charts in several markets.

Investors in Black Forest believe it has the most capable rival to Google’s visual AI systems, though the market is developing rapidly. It also competes with media creation start-ups, including US-based Runway and Midjourney, as well as OpenAI.

Adobe’s Photoshop and a new Meta AI app feature called Vibes are both incorporating Black Forest’s models. Meta’s AI chief Alexandr Wang said on X on Thursday that the social media group was still “developing our own models behind the scenes”, suggesting Black Forest’s tech may be replaced at some point.

Black Forest’s flagship Flux models launched on Microsoft’s cloud platform Azure last month, targeting corporate customers looking to use its image-generation tools for marketing materials or prototyping. It has previously worked with Elon Musk’s xAI to integrate its tools into the company’s Grok chatbot.

Based in the small German university city of Freiburg, Black Forest is led by Robin Rombach and has fewer than 50 employees, according to LinkedIn. It is also expanding in San Francisco and London.

“We’re at the frontier of the GenAI race, competing with household names and in most instances we’re winning,” the company claims in its job ads.

Its Flux models can also create new images based on adapting an existing picture upload, and allow the resulting creation to be edited.

At the time of its launch last year, Black Forest announced it had raised $31mn led by Andreessen Horowitz, with participation from individuals including former Hollywood agent and Disney president Michael Ovitz, who is on the group’s advisory board. General Catalyst has also backed the group.

Black Forest declined to comment.

FT : Brussels told to prove digital rules do not ‘punish’ US tech or fix them

Brussels told to prove digital rules do not ‘punish’ US tech or fix them
Donald Trump’s ambassador to EU says no US president can ‘allow these kinds of infringements’ on American companies

The EU must either prove that its digital rules do not punish US tech companies and infringe on freedom of speech or change them, Donald Trump’s ambassador to the bloc has said, to ensure “a good relationship going forward”.

Andrew Puzder told the Financial Times that the US would make formal submissions to the European Commission under an ongoing review of its digital legislation, “to have some discussions about where the real points of disagreement are and how they can be addressed”.

“The Europeans believe that [the rules] are less restrictive and less targeted than the US believes, and I think we’re going to need to sit down and go through these acts with some care,” Puzder said, to ensure they did not “punish” US interests.

The US president has threatened to retaliate against countries that “discriminate” against American companies. Washington has long railed against the EU’s digital rule book, including the Digital Markets Act (DMA), which aims to curb the power of Big Tech companies, and the Digital Services Act (DSA), which polices content online.

The tension over the EU’s implementation of its tech rules threatens to undermine bilateral ties that have been bolstered by a recent trade deal, a promise by European capitals to spend more on defence and Trump’s decision to restart support to Ukraine.

Puzder, who took up his post this month, said no US president, regardless of party, “can sit back and allow these kinds of infringements on Americans’ fundamental rights or, in fact, on American companies”, adding: “So we’re going to have to either determine that that’s not what’s happening, or we’ll have to make some changes so that it isn’t what’s happening.”

The commission has opened a public consultation on how best to simplify some of its digital legislation. There is some uncertainty about how broad the scope will be, with civil society and some members of the European parliament worried the exercise could weaken some of the rules. The consultation closes on October 14.

Puzder’s comments come amid a renewed lobbying push from Big Tech against the DMA, which entered into force in 2022 and aims to level the playing field for smaller rivals. Companies that do not comply face fines of up to 10 per cent of global revenue.

Apple last week demanded Brussels scrap the legislation altogether. Meta chief executive Mark Zuckerberg has personally lobbied Trump against it. Google has said it causes “significant and unintended harm to European users”.

The commission has said it is not considering any repeal of the DMA. It also stresses that the legislation does not take into account where companies are based, but only whether they comply.

The EU’s digital rules “take up a fair amount of [my] brain space”, Puzder said. “It seems from my meetings here in the EU, there is a very distinct disagreement as to what the [DMA and DSA] do, what their effect is.”

“Europe has every right to legislate as it chooses. But I think it would be good if we could have an understanding of each side’s points on this before we get too far along.

“While the legislation may look facially neutral, I think that if the intent is to inflict economic pain on competitors outside of Europe to help European companies, that’s something that the United States would object to vehemently,” he added. “Obviously, if we’re going to have a good relationship going forward, you can’t have legislation that punishes companies from . . . your ally.”

At the same time, Puzder praised the commission and its president Ursula von der Leyen for agreeing a broad trade deal with Trump in July that averted a transatlantic trade war. The agreement was proof of how both could benefit if they worked together to find solution, he said.

“In my opinion, the EU got a good deal,” said Puzder. “There’s a lot of politics about the deal. I think it could be more aggressively defended in Europe.”

Puzder pointed to the US decision to implement a 15 per cent tariff on cars, before the deal was fully agreed, as a sign the US “wants to work” with the EU.

“It was an effort to show that, you know, we are going to act in good faith on this, and we expect you [the EU] to do the same,” he said.

>>> Barron’s Weekend Summary

Cover:
-Healthcare in the USA is experiencing significant disruption due to the Trump administration's policies, which include reduced research funding, altered vaccine protocols, and Medicaid cuts. Recently, President Trump threatened to impose a 100% tariff on imported pharmaceuticals unless manufacturers build US plants, causing investor apprehension toward healthcare stocks despite advancements in medicine and increasing care demand. These topics were central at the Barron’s 2025 Healthcare Roundtable, featuring panelists specializing in various market segments, discussing the impact of these policies on the healthcare landscape. Currently, many healthcare stocks are attractively priced, suggesting potential value in undervalued pharma and biotech pipelines, as well as health insurers and medical device companies.
Interview:
-This week Barron’s features an interview with Alan Greenspan. The former Fed Chairman expresses concern over the US economy, citing issues like the growing deficit and rising entitlement costs, and emphasizes the need for urgent reforms amid inflation, populism, and China's economic rise. Reflecting on his tenure as Federal Reserve chairman from 1987 to 2006, he notes the shift in perception following the financial crisis, especially regarding low interest rates and market self-regulation. In his co-authored book, "Capitalism in America," Greenspan examines US economic history and highlights the decline in “creative destruction,” with reduced mobility and new company formation. He warns of stagnant productivity growth and discusses emerging economic threats, drawing insights that could help revitalize the American economy.
Tech Trader:
-Nvidia, a leader in artificial intelligence, generated $112B in free cash flow over the past six quarters, prompting questions on how to utilize this surplus. While similar to Apple, which opted for stock buybacks and business reinvestment, Nvidia is focusing on supporting the AI investment boom, positioning it as a major player in the sector. In the past six quarters alone, Nvidia has repurchased $58B of its shares and recently authorized an additional $60B for buybacks. Despite these expenditures, the company's cash and short-term investments have consistently increased for 11 quarters, now totaling $57B. Unlike in the past, where mergers and acquisitions were common, the current regulatory landscape limits such activities, highlighted by Nvidia’s unsuccessful bid for Arm Holdings between 2020 and 2022.
The Trader:
-O’Reilly Automotive remains a leading retailer in the automotive sector, with potential for further stock growth despite an impressive 30% increase this year to $103.47 per share. Bryan Lee, chief investment officer at Blue Zone Wealth Advisors, advocates for the stock's continued purchase, highlighting O’Reilly's ability to capture market share from competitors like AutoZone and Advance Auto Parts, especially with a rising trend of consumers opting for DIY vehicle repairs. While Advance Auto Parts anticipates a 6% sales decline this year, Genuine Parts predicts only modest sales increases, O’Reilly is projected to see over 6% annual sales growth for the next two years. CEO Brad Beckham noted the steady demand in their market is driven by the aging vehicle fleet and increased miles driven.
-Tech stocks are experiencing a notable decline, particularly among companies tied to artificial intelligence, but this may be a typical market pullback rather than a cause for alarm. The Dow Jones Industrial Average and S&P 500 indexes have fallen by 0.8% and 0.9% respectively, while the NASDAQ Composite decreased by 1.1%. Despite these drops, the overall indexes are still near their record high levels. However, fine-grained analysis reveals greater losses among specific stocks, particularly in the Roundhill Magnificent Seven ETF, which is down around 1.5%. Major companies like Amazon.com, Alphabet, and Meta Platforms have also faced significant declines. Stocks of more speculative AI companies, such as Oklo, have dropped dramatically, with Oklo experiencing over a 10% decrease this week. Oracle's stock has fallen by 5% following an initial surge after a deal with OpenAI, and Micron Technology's stock is down by 4%. Analysts suggest that the current pullback highlights the need for investors to diversify their portfolios instead of focusing solely on highly speculative AI investments, as indicated by Katy Kaminski, chief research strategist at AlphaSimplex, who noted concerns regarding stock market hype.
Features:
-The ongoing conflict in Ukraine has reached a stalemate, with peace negotiations yielding few results. In a strategic move to weaken Russia's economy, Ukraine has begun targeting Russian oil refineries with drone strikes, significantly impacting global oil markets. While crude oil prices have shown a modest decrease of about 8% this year, the prices for oil products, particularly gasoline and diesel, have escalated beyond analysts' expectations. This situation has favored refining companies like Valero Energy and Marathon Petroleum, as the price differential between crude oil and refined fuels allows them to profit. Over the past month, Valero's stock has surged by 17%, Marathon Petroleum by 13%, and PBF Energy has seen a remarkable increase of 27%. Analysts suggest that the trend for refining stocks could continue positively. This development coincides with changing political dynamics; earlier this year, former President Donald Trump had expressed a commitment to ending the conflict in Ukraine. However, he recently shifted his stance, asserting on Truth Social that Ukraine has the potential to reclaim its territory and suggesting that Russia is facing significant economic difficulties. Trump indicated that now is an opportune moment for Ukraine to take decisive action against Russia.
-Last autumn, Alibaba Group Holding experienced a significant rally, driven by Chinese stimulus plans, and has since gained around 77% in share value since its recommendation by Barron’s. Currently, the stock is benefiting from the company's advancements in artificial intelligence (AI). Analysts remain optimistic about Alibaba's future, recognizing its potential for further gains as the stock remains competitively priced. A key element supporting this outlook is China's ambition to establish a robust AI landscape comparable to that of the United States, positioning Alibaba as a leader in the nation’s AI and cloud market. Recently, Alibaba announced substantial updates, including a robust increase in AI investments, the launch of new data centers across various continents, and the introduction of Qwen3-Max, its largest AI language model with more than a trillion parameters. Furthermore, Alibaba is collaborating with Nvidia to enhance its offerings in robotics and autonomous vehicle technology.
Europe:
-On Thursday, Tesla's stock experienced a significant decline of 4.4%, closing at $423.39, in contrast to modest gains in the broader market, with the S&P 500 up 0.59% and the Dow Jones Industrial Average up 0.65%. This drop was prompted by disappointing sales data released by the European Automobile Manufacturers’ Association (ACEA) for August, which revealed that Tesla sold only 8,220 vehicles in the European Union, marking a 37% year-over-year decrease. In comparison, BYD saw its sales surge to 9,130 vehicles, an impressive 201% increase year-over-year, for the second consecutive month surpassing Tesla in sales.
When considering sales data that includes the United Kingdom, Norway, and other countries in the European Free Trade Association (EFTA), Tesla sold a total of 14,831 vehicles, outperforming BYD, which sold 11,455 units; however, this still represented a 22% decrease for Tesla (and 216% growth for BYD). Overall in the EFTA region, Tesla's sales cumulative for the year reached 133,857 cars, down 33% year-over-year, while BYD's sales soared to 95,940 vehicles, reflecting a 280% increase.
Emerging Markets:
-A potential US bailout may not definitively resolve Argentina’s ongoing currency crisis, but it might serve political purposes for President Donald Trump and Treasury Secretary Scott Bessent, particularly in supporting their ally, President Javier Milei, ahead of the upcoming elections. Trump and Milei met during the United Nations General Assembly in New York, with discussions suggesting imminent US support for Argentina's economy, though specific details remain undisclosed; this aid may involve direct currency purchases through the Treasury's Exchange Stabilization Fund, which has $219.5 billion at its disposal.
In a social media post, Trump characterized Milei's economic situation as a result of previous mismanagement under a "Radical Left President" and expressed his commitment to working closely with Milei. Trump stated, “We’re gonna help them but I don’t think they need a bailout. He’s doing a fantastic job.” Following this meeting, a White House spokesperson indicated that there would be further announcements regarding Argentina’s financial situation.
Commodities:
-The conflict in Ukraine remains stagnant, with peace negotiations yielding little progress. However, Ukraine has adopted a new tactic to disrupt the Russian economy by targeting its oil refineries through drone strikes. This strategy is significantly influencing global oil markets, particularly affecting prices for oil products like gasoline and diesel, which have risen more than analysts anticipated, despite crude oil prices declining by around 8% this year. Major refiners such as Valero Energy and Marathon Petroleum are seeing positive impacts from these market dynamics, with Valero's stock climbing 17% and Marathon Petroleum rising by 13% over the past month. Smaller refiners like PBF Energy have experienced even greater increases, with a 27% rise in their stock prices. Analysts suggest that the trend in refining stocks may continue to increase. Meanwhile, former President Donald Trump, who had previously advocated for ending the conflict, has recently shifted his stance. On Truth Social, he expressed confidence that Ukraine could reclaim its territory, asserting that Russia is facing severe economic difficulties and highlighting the urgency for Ukraine to capitalize on the situation.
Streetwise:
-Hard-drive stocks have experienced a surge in popularity due to overwhelming demand from artificial-intelligence (AI) customers, leading to significant wait times of nearly a year for high-capacity drives from major manufacturers like Seagate and Western Digital, as reported by Benchmark Equity Research. This spike in demand has prompted both companies to increase their prices in light of remarkable gains in profits and stock values. Reflecting back to 2018, hard drives were not regarded as highly valuable investment components. At that time, Western Digital was trading at a mere 6X projected earnings, and predictions suggested that an increase in demand from cloud computing could enhance its stock performance. However, those expectations did not materialize, as a combination of centralization in data storage and advancements that maximized the utility of existing drives resulted in an oversupply of inexpensive terabytes.. Since the debut of ChatGPT in late 2022, AI companies have been responsible for the bulk of the S&P 500’s market gains. Projections indicate that capital investments by hyperscalers could grow at a staggering rate of 30% annually, reaching a total of $500 billion by 2027.

>>> Weekend Papers Summary

FINANCIAL TIMES
-The euro is experiencing its strongest rally since 2017, with predictions from Wall Street banks suggesting that it could rise further, potentially surpassing $1.20. The euro has already appreciated over 12% against the US dollar this year, driven by growing optimism regarding Eurozone economic growth and concerns about US President Donald Trump’s policies. This bullish sentiment has been termed a “global euro moment” by European Central Bank president Christine Lagarde, as the euro recently peaked at a four-year high above $1.19 before settling back to $1.17. Major investment banks like Goldman Sachs, JPMorgan, and UBS anticipate that the euro will cross the $1.20 benchmark in the near future as ongoing interest rate cuts by the US Federal Reserve diminish the appeal of dollar-denominated assets.
-Benjamin Netanyahu addressed the UN General Assembly, asserting Israel's commitment to opposing the establishment of a Palestinian state and concluding military actions against Hamas, amidst renewed US efforts to resolve the ongoing Gaza conflict. Speaking to a largely empty assembly at the UN headquarters, he acknowledged a forthcoming meeting with President Donald Trump, whom he praised as a strong ally. Netanyahu's remarks were an attempt to mitigate any potential pressure from Trump to cease hostilities in Gaza. He restated Israel's firm demand for Hamas to disarm and to release the 48 hostages it currently holds, expressing assurance that approximately 20 of these individuals are still alive. Netanyahu declared that Hamas would face severe consequences if they failed to comply: “If you do, you will live. If you don’t, Israel will hunt you down.” He also claimed to have utilized loudspeakers and technology to broadcast his message into Gaza, a claim veiled in controversy due to local disputes. "Israel must finish the job," he emphasized, signifying an unwavering stance moving forward in the conflict.
-President Donald Trump has indicated that his administration will pursue further prosecutions against political adversaries, shortly after the Justice Department brought criminal charges against former FBI Director James Comey. In an interaction on Friday morning, Trump mentioned that while he does not have a specific list of individuals to target, he warned that "there will be others" facing scrutiny from federal prosecutors, suggesting a potential campaign against critics and opponents. He characterized those involved as "corrupt, radical-left Democrats" while preparing to attend the Ryder Cup in New York. Emphasizing his perspective, Trump remarked, “It’s about justice.
-German lawmakers are expressing strong opposition to government initiatives aimed at awarding substantial arms contracts, amounting to hundreds of millions of euros, without the competitive process of public tenders. The budget committee of the Bundestag has indicated to the Financial Times their refusal to endorse plans for the military procurement agency to directly award a contract to Rohde & Schwarz, a Munich-based electronics firm, for the development of a mobile reconnaissance system. Committee member Andreas Mattfeldt, representing the ruling Christian Democrats, emphasized the importance of transparency and value for taxpayers, asserting their right to ensure that procurement processes yield the best products at the most competitive prices.
-US Defence Secretary Pete Hegseth's decision to convene hundreds of generals and admirals next week in Virginia has raised significant alarm among defence experts and military officers. The meeting, which is unprecedented and shrouded in secrecy, has left invitees uncertain about the agenda, fueling concerns about the potential impact on active operations and the military's capacity to respond to any crises during this time. According to a US defence official, hundreds of general and flag officers, which include admirals and officers holding one to four stars, are to assemble, along with their senior enlisted advisers. As of June, there were 838 active duty general and flag officers, with 446 in the higher ranks of two, three, and four stars, although the precise number summoned for Hegseth's meeting remains unclear. Chief Pentagon spokesperson Sean Parnell confirmed that Hegseth will be addressing these senior military leaders early next week, although further details regarding the meeting have not been disclosed, as first reported by the Washington Post.
-Overseas sales of US soyabeans, the country's top agricultural export, have significantly decreased due to China’s refusal to purchase American soyabeans, marking a "devastating" impact on US farmers. As the new export season commences, data reveals that there have been no sales or shipments to China, a drastic change from the previous year when 6.5 million tons had been exported. The current harvest season in the US has led to piling inventories, exacerbated by the fall harvest's arrival, contributing to lower prices. Historically, more than half of US soyabeans were exported to China, the largest global buyer; however, stalled trade negotiations between Washington and Beijing have resulted in no deliveries this season, forcing farmers to confront the challenges of overly stocked bins and falling market prices, while China turns to record amounts of soyabeans from Brazil instead.
-The European Union (EU) is set to develop plans for constructing and financing a network of interlinked drone defenses throughout its borders and critical infrastructures. This initiative, announced by the EU's defense commissioner Andrius Kubilius, comes in response to a series of recent airspace violations by Russian aircraft, both manned and unmanned. In a swift reaction, EU defense ministers convened an emergency meeting to address the issue, where it was highlighted that the current capability to detect drones falls significantly short of the necessary standards.
-China's industrial profits saw a notable recovery in August, demonstrating a growth of 20.4% compared to the same month the previous year. This growth comes as a response to President Xi Jinping's intensified pressure on businesses, aimed at addressing aggressive price competition that has arisen due to industrial overcapacity. In contrast, profits had experienced a decline of 1.5% in July.
-Video game developer Electronic Arts is on the verge of finalizing a deal valued at approximately $50B to transition into private ownership, backed by a consortium that includes notable investors such as Silver Lake and Affinity Partners, led by Jared Kushner, the son-in-law of former President Donald Trump. This potential transaction represents one of the largest leveraged buyouts in history. According to sources familiar with the negotiations, an official announcement regarding the deal could be made as soon as the upcoming Monday, pending the resolution of any unexpected obstacles. The consortium also boasts involvement from Saudi Arabia’s Public Investment Fund, highlighting the significant financial backing and interest in EA's privatization.
-In an interview, Marc Winterhoff, the interim chief executive of Lucid Motors, stated that the US electric vehicle manufacturer is expected to raise additional equity next year despite recent developments indicating a possible path to profitability. The company expanded its partnership with Uber, which has become its second-largest shareholder with a $300M investment, and secured an order for 20,000 new Gravity SUV models intended for a self-driving taxi fleet set to launch in a US city next year. However, Winterhoff cautioned that while the current funding should last until the second half of 2026, further capital will be necessary before the company can attain profitability or break-even independently. Compounding these challenges, a setback occurred when the Trump administration's spending bill abolished a significant $7,500 EV tax incentive, alongside the termination of emissions trading programs that had benefited not only Lucid but also competitors like Tesla and Rivian. This legislative change has impacted Lucid’s financial outlook and profitability strategy.
NEW YORK TIMES
-The Department of Justice (DOJ) has issued a subpoena for records concerning the travel history of Fani T. Willis, the Georgia district attorney who charged President Trump regarding election interference. The subpoena relates to activities around the time of the previous year's election, although the specific reasons for this investigation remain unclear. It is uncertain whether Willis is the direct target of this inquiry or if she will face any charges, given the secretive nature of grand jury proceedings. The investigation appears to be a continuation of actions taken by the DOJ under President Trump, who has recently indicted former FBI director James B. Comey, despite pushback from career prosecutors who believed there was insufficient evidence for the charges. This situation raises questions about the ongoing tensions and legal battles involving Trump and his adversaries.
-Judge Michael S. Nachmanoff, a Biden appointee, will preside over the high-profile case against former FBI Director James B. Comey in the Eastern District of Virginia. Nachmanoff's extensive background in the courthouse includes roles as a law clerk, public defender, and now a federal jurist, providing him with a seasoned perspective on politically sensitive cases. He was confirmed in 2021 with bipartisan support, including from Republican Senator Lindsey Graham, who notably led the congressional hearing that is central to the two-count indictment facing Comey. This trial is poised to attract significant national attention, as it unfolds in the same jurisdiction where Comey once served as a prosecutor.
-The Supreme Court's ruling on Friday permits the Trump administration to withhold $4B in foreign aid that Congress had appropriated, marking a significant preliminary examination of President Trump's attempts to assert greater control over fiscal decisions. The court's conservative majority justified the decision by prioritizing the president's authority in foreign affairs over potential negative impacts on aid recipients. However, the justices emphasized that this ruling is provisional and does not signify a conclusive resolution on the underlying issues. In dissent, the three liberal justices highlighted the gravity of the matter regarding the distribution of power between the executive branch and Congress, asserting that it deserved more comprehensive judicial scrutiny. Justice Elena Kagan articulated the critical nature of the issue, joined by Justices Sonia Sotomayor and Ketanji Brown Jackson, underscoring the implications for governmental funding processes.
-Texas Tech University has become the first major public higher education institution in the United States to limit academic discussions to two genders, in compliance with an executive order from President Trump. A letter issued to faculty mandated adherence to this order, which recognizes only male and female genders, raising concerns among professors and advocates for academic freedom throughout Texas. This decision indicates a possible expansion of efforts to restrict discussions surrounding transgender issues from K-12 education into higher education, despite no existing ban at the collegiate level. Other public universities and community colleges in Texas are reportedly considering similar actions, although none have formalized guidance like Texas Tech has. This movement follows a recent law enacted in Mississippi that prohibits the promotion of diversity, equity, and inclusion, along with the discouragement of "transgender ideology" in educational institutions, although its implementation is currently restrained by a federal court ruling.
-On September 26, 2025, the Trump administration formally petitioned the Supreme Court to enforce President Trump’s executive order that seeks to terminate the principle of birthright citizenship in the United States. Birthright citizenship traditionally grants automatic citizenship to children born on American soil, a practice that has been a fundamental aspect of American immigration law. The executive order, which was signed immediately upon Trump's inauguration, has faced legal challenges and been obstructed by lower courts since its inception.
-Alex Soros, son of billionaire George Soros, expressed his determination to resist pressures from the Trump administration in light of potential investigations into the Open Society Foundations (OSF), which he leads. Speaking during a panel in Manhattan, Alex stated emphatically that the organization would not retreat from its human rights initiatives, declaring that it would only do so "over my dead body." This comment was made following a report that indicated a senior Justice Department official had instructed multiple U.S. attorney's offices to prepare for investigations into the OSF. Alex Soros' confrontational stance towards President Trump highlights his belief that the nation is approaching a critical juncture, prompting him to engage actively in defense of the foundations' work and mission.
-Several US military officers, including hundreds of generals and admirals, have been called to attend an unprecedented meeting at a military base in Virginia, organized by Defense Secretary Pete Hegseth. Scheduled for next week, the meeting is aimed at delivering a “rally the troops” message to instill a war-fighter culture within the Pentagon, a priority for Hegseth’s administration. Senior Trump administration officials have highlighted that one of the key objectives is to invigorate service members regarding the department’s new direction. The event is considered both disruptive and costly, raising concerns among military leadership, particularly in light of recent firings of several high-ranking officers by Hegseth, which has led to anxiety within the ranks. During the meeting, Hegseth is expected to outline his vision for the Department of Defense, including new military fitness standards and other important topics relevant to senior service members, as correspondence to Congress indicates. This engagement represents a significant moment for the D.O.D. as it seeks to motivate its leaders and reshape its operational strategies.
-On September 26, 2025, Ian Roberts, superintendent of Des Moines Public Schools, was detained by federal immigration officials who accused him of living and working illegally in the United States. Originally from Guyana, Roberts entered the U.S. in 1999 on a student visa. However, he received a deportation order from an immigration judge in May 2024 and had reportedly been evading authorities since then. Prior to his arrest, Roberts had no work authorization and had faced weapon possession charges in the past.
His detention sparked an impromptu protest in downtown Des Moines, reflecting a widespread concern among residents and school leaders about both the legitimacy of ICE's claims and the vetting process of the school district.
-President Trump expressed optimism about a potential peace deal in Gaza, stating, "it’s looking like we have a deal," and suggesting that his administration may appoint former British Prime Minister Tony Blair to oversee Gaza post-conflict. He emphasized his commitment to preventing Israel from annexing the West Bank, indicating a significant pushback against right-wing factions in Israel advocating for such actions. The crux of whether Trump can effectively conclude the nearly two-year conflict hinges on his ability to influence Israeli Prime Minister Benjamin Netanyahu, who has remained resolute in his military approach even as several Western nations recognized a Palestinian state. According to Ned Lazarus, an international affairs expert, Trump may be one of the few individuals capable of steering Netanyahu away from his current trajectory, highlighting the delicate balance of power and diplomacy involved in the ongoing situation.
-Prime Minister Benjamin Netanyahu delivered a combative speech at the United Nations, unequivocally rejecting calls for Palestinian statehood, which he described as “national suicide” for Israel. Speaking to a largely empty hall—a reflection of Israel's increasing diplomatic isolation—Netanyahu condemned the recognition of Palestine by over 150 countries as “disgraceful.” This statement comes amid heightened criticism of Israel’s military actions in Gaza, particularly from Western nations like Britain, France, and Canada, which have recently shifted their positions to recognize Palestine. Netanyahu declared that Israel will not accept what he termed a "terror state" being forced upon it, viewing such acceptance as a shameful act for those countries that support it.
-As Steve Witkoff, serving as President Trump’s envoy to the Middle East, engaged in sensitive cease-fire negotiations between Israel and Hamas, his son, Alex Witkoff, was simultaneously pursuing significant financial investments from Gulf states. In a strategic move, Alex sought to raise billions for a planned investment fund that would target commercial real estate projects within the United States, leveraging relationships with the same governments involved in his father's discussions. Key among these countries was Qatar, known for its mediation role in the Gaza negotiations and as a crucial ally of the USA in the region. Alex reportedly pitched his fund to Qatari officials, emphasizing prior commitments he had secured from government-affiliated investment funds in Qatar, the United Arab Emirates, and Kuwait. This dual engagement showcases the intricate web of diplomacy and business interests at play in the Middle East, with familial connections intertwining diplomatic efforts with private investment opportunities.
-Russia's recent military provocations in Europe have escalated significantly, coinciding with a perceived reduction in US support under President Trump. In just three weeks, Russian actions have included the deployment of drones into Poland and Romania, the incursion of fighter jets into Estonian airspace, and provocations involving a German Navy frigate in the Baltic Sea. Additionally, Moscow is reportedly backing a covert operation aimed at influencing the upcoming elections in Moldova (sic). These aggressive maneuvers have raised alarms among European officials, who fear that Russia is intensifying its antagonism toward Europe amidst a shifting geopolitical landscape.
-President Trump's recent tariffs have initiated a legal examination by the Supreme Court, particularly regarding tariffs imposed on countries such as Switzerland and India. However, in anticipation of potential judicial setbacks, the Trump administration is establishing an alternative tariff framework that operates beyond the reach of current legal challenges. This new system of tariffs, which is grounded in national security laws under Section 232, encompasses over a third of all US imports. The products affected by these tariffs are vital for American businesses and consumers, covering sectors such as automotive, machinery, medical devices, and semiconductors. As this situation unfolds, the administration's strategic use of national security provisions aims to reinforce its tariff policies despite ongoing judicial proceedings.
NEW YORK POST
-On September 27, 2025, the U.S. State Department announced its decision to revoke Colombian President Gustavo Petro's visa following his controversial remarks urging U.S. troops to "disobey" President Trump. This incident occurred during a protest outside the United Nations headquarters in New York City, where Petro addressed a crowd through a megaphone while attending the UN General Assembly. He called for U.S. soldiers to refuse orders and avoid violence, stating, “Disobey the orders of Trump. Obey the orders of humanity!” Petro's actions were perceived as reckless and incendiary, prompting the State Department to declare that such behavior warranted visa revocation. This protest featured Petro alongside Roger Waters, the co-founder of Pink Floyd, both of whom emphasized anti-Israel sentiment while standing beside a large Palestinian flag.
-The FBI has dismissed several agents who were photographed kneeling in a show of solidarity during a racial justice protest in Washington, which occurred following the 2020 death of George Floyd at the hands of Minneapolis police officers. This decision was confirmed by three sources familiar with the situation, who requested anonymity while discussing personnel matters with The Associated Press. Initially, the agents were reassigned last spring, but they have since been fired. Although the exact number of terminated employees is unclear, it is reported that approximately 20 agents were let go. The controversial photographs depicted these agents participating in a demonstration that arose from the national outrage over Floyd's death, which significantly heightened awareness and conversations around policing practices and racial injustice across the United States after the widely circulated video of the incident.

The Information : Ex-OpenAI Trio in Funding Talks at $500 Million Valuation

Ex-OpenAI Trio in Funding Talks at $500 Million Valuation

The Takeaway
  • Applied Compute in talks to raise funding at $500 million valuation
  • Startup founded by ex-OpenAI staff developing reinforcement learning services
  • Valuation would represent a fivefold surge from three months ago

As artificial intelligence developers increasingly rely on reinforcement learning to improve their models, investors are funding startups that focus on helping businesses utilize the technique to automate more tasks.

In the latest example, Applied Compute, founded in May by three former OpenAI staffers, is in talks to raise new funding at a $500 million valuation just three months after a round that valued it at $100 million, according to people involved in talks.

Lux Capital, an investor in other AI firms such as coding startup Cognition, open-source model hub Hugging Face and video AI firm Runway, is in talks to lead the round, one of these people said. The San Francisco-based company previously raised $20 million in funding from investors including Benchmark, Conviction and Sequoia Capital. The terms of the pending deal could change.

Former OpenAI researchers Rhythm Garg, Yash Patil and Linden Li founded Applied Compute to help software developers and businesses use RL to customize AI for specific fields, such as law or finance, one of the people involved in the round said.

The founders studied at Stanford University before joining OpenAI in 2023 and 2024 to develop its reasoning models, coding AI and deep research tool for ChatGPT. Applied Compute hasn’t discussed its work publicly.

Other companies such as Thinking Machines Lab, co-founded by former OpenAI Chief Technology Officer Mira Murati, have also said privately that they aim to offer reinforcement learning services to businesses. Such services could make it much cheaper for businesses to build AI-powered apps that can complete tasks more reliably in their specific industry, like correcting a legal contract or analyzing financial documents.

Murati’s firm recently raised $2 billion at a $10 billion valuation, not including the capital, after hiring numerous ex-OpenAI staffers.

RL techniques help OpenAI, Anthropic, xAI and other AI developers to improve their models by rewarding the AI for accomplishing certain goals and penalizing it for other behaviors. Such methods have become crucial for the AI labs as researchers last year began finding it harder to improve their models using data scraped from the internet.

RL could make it easier to build models that can automate away jobs in certain fields. One senior executive at OpenAI privately said this year that they expect the “entire economy” to become an “RL machine” of sorts, implying that AI might someday train on recordings of professionals handling day-to-day work on their devices.

A spokesperson from Lux Capital declined to comment. Applied Compute did not immediately respond to a request for comment.