TheChek News Flow

Musk warned that Trump wouldn’t bless OpenAI data-center project unless his xAI company was added

OpenAI led a group of American technology giants that won a deal last week to build one of the world’s largest artificial-intelligence data centers in Abu Dhabi. Behind the scenes, Elon Musk worked hard to try to derail the deal if it didn’t include his own AI startup, according to people familiar with the matter.

On a call with officials at G42, an AI firm controlled by the brother of the United Arab Emirates’ president, Musk had a warning for those assembled: Their plan had no chance of President Trump signing off on it unless his company xAI was included in the deal, according to some of the people.

Musk had learned just before Trump’s mid-May tour of three Gulf countries that OpenAI Chief Executive Sam Altman was going to be on the trip and that a deal in the U.A.E. was in the works, and grew angry about it, according to White House officials. He then said he would also join the trip, and appeared alongside the president in Saudi Arabia.

After Musk’s complaints, Trump and U.S. officials reviewed the deal terms and decided to move forward. The White House officials said Musk didn’t want a deal that seemed to benefit Altman. Aides discussed how to best calm Musk down, one of the officials said, because Trump and David Sacks, the president’s AI and crypto adviser, wanted to announce the deal before the end of the president’s trip to the Middle East.

Musk didn’t immediately respond to a request for comment.

White House press secretary Karoline Leavitt said, “This was another great deal for the American people, thanks to President Trump and his exceptional team.”

A senior White House official said Musk raised concerns about the deal and “relayed his concerns about fairness for all AI companies.”

Over the past year, Musk has emerged as one of the most powerful donors in Republican politics. The entrepreneur spent some $300 million to re-elect Trump to the White House and became a close adviser. Musk recently stepped down from his role at the Department of Government Efficiency task force to spend more time working on the five companies he runs, including Tesla.

Altman and Musk co-founded OpenAI in 2015, but Musk left the company in 2018 after a power struggle. He has since publicly turned on his former co-founder, suing him for allegedly betraying OpenAI’s nonprofit mission, accusing him of being “not trustworthy,” and giving him the monikers “Swindly Sam” and “Scam Altman.” Musk responded to the launch of OpenAI’s hit product ChatGPT by launching his own rival startup, xAI. But xAI hasn’t had nearly the traction or commercial success that OpenAI’s chatbot has received.

In the months leading up to Trump’s May visit to the Gulf, Sheikh Tahnoon bin Zayed al Nahyan, the U.A.E. national-security adviser and brother of the president, and other officials from the U.A.E. launched a lobbying effort for a national priority: They wanted AI chips—lots of them—and they were willing to spend heavily to get them.

The tiny petrostate sees AI as a crucial way to diversify its economy. So after the Biden administration had restricted the U.A.E. and most other countries from freely buying the latest products from Nvidia and other chip makers, the U.A.E. leaned on the Trump administration. The U.A.E. pledged giant investments in the U.S., lobbied influential CEOs and bolstered a Trump-family business—to win a change to the chip export rules.

A key prong in the strategy was to bring American AI companies to Abu Dhabi. Officials readied a site that could ultimately hold a five-gigawatt cluster of AI data centers—a project far larger than any single site in the U.S.—that would house servers of various U.S. companies.

After a March visit to the White House by Tahnoon, the Trump administration gave the green light to strike a deal with the U.A.E. that would allow the country to buy far more chips, and include a new data center for a U.S. AI company, people familiar with the negotiations said.

While Tahnoon had invested in several major U.S. AI startups—including Musk’s—his G42 zeroed in on OpenAI for the inaugural data center, and worked with the ChatGPT maker and other companies—Oracle, Nvidia, Cisco and SoftBank—to hash out an agreement.

To win over the U.S. officials and companies, G42 would pay the cost of the buildings’ construction, and then would have to fund a similar-size project in the U.S., people familiar with the arrangement said. The deal was ultimately announced on May 22—a week later than initially hoped—though some details have yet to be completed. It was called Stargate U.A.E., after a similar deal Trump struck in the U.S. soon after he returned to the White House.

Musk’s blowup resembled his reaction in January to Trump’s U.S. Stargate deal with OpenAI, Oracle and SoftBank. Musk was in the White House complex and blindsided when Altman and Trump touted the $500 billion investment, The Wall Street Journal reported. Musk complained to aides about the project, claiming Stargate’s backers didn’t have the money they needed. He even took to his social-media platform, X, to criticize the January deal.

The U.A.E. has built ties with Musk, particularly since he tethered himself to Trump. Tahnoon’s MGX fund was a large investor in a $6 billion fundraise by xAI announced in December, and in February, Dubai struck a deal with Musk’s Boring Company to build an 11-mile network of tunnels, announced at a conference where Musk spoke by video with the U.A.E.’s AI minister.

Musk’s xAI has also been seen as a likely candidate for future sites at the giant data-center cluster. Under the framework agreement between the U.S. and U.A.E., xAI is on a shortlist of U.S. companies that are conditionally approved to buy most of the 500,000 chips permitted annually, the people familiar with the deal said.

Novo Nordisk underestimated demand for its weight-loss drug, and shortages let rivals in the door

Key Points

In 2023, Novo Nordisk NVO -2.61%decrease; red down pointing triangle was the most valuable company in Europe, surpassing LVMH on the back of soaring demand for Ozempic and Wegovy.

Today, the Danish company has lost its grip on the anti-obesity market it carved out.

The company has lost market share amid production missteps and a bungled rollout of Wegovy that led to shortages. Its U.S. rival Eli Lilly LLY -0.80%decrease; red down pointing triangle—initially in the rearview mirror—has been proven to have the more effective weight-loss drug and a more promising pipeline of next-generation treatments. Novo Nordisk’s research-and-development machine has disappointed, and a key marketing strategy was slow to get off the ground.

Novo Nordisk’s ability to stay atop a market that analysts see growing to $150 billion in annual sales is now in doubt. Its controlling shareholder this month forced a surprise ouster of the company’s chief executive, Lars Fruergaard Jørgensen. And while it is still generating multibillion-dollar sales for Ozempic and Wegovy, shares have tumbled more than 50% over the past year.

If Novo Nordisk doesn’t turn things around, it could join a long list of companies that blew a first-mover advantage, from Sunshine Biscuits—whose Hydrox cookies were overtaken by now-iconic Oreos—to the MySpace social network.

“Everyone wants to be the first footprints on the empty beach,” said Americus Reed, marketing professor at the Wharton School of the University of Pennsylvania. “But it depends on how you land on that first move. The second mover is watching them make mistakes. You’re able to identify those and not make those mistakes.”

A Novo Nordisk spokeswoman said the company remains the global-volume market leader in GLP-1 drugs, serving nearly two-thirds of patients taking them for diabetes and obesity.

Some investors and industry watchers say Novo Nordisk’s troubles stem from a cautious, reactive approach starting when the market first burst onto the scene, in contrast with a faster, more aggressive tack in production and marketing by Lilly.

“Novo is always a step behind,” said Yuri Khodjamirian, chief investment officer at Tema ETFs, which owns Novo Nordisk shares.

Novo Nordisk thought Wegovy might run into the same market constraints as Saxenda, so the company planned modest production levels, using a combination of in-house and contract manufacturing capacity.

One of Novo Nordisk’s early stumbles was underestimating the demand for Wegovy—the weight-loss version of semaglutide, the same compound as diabetes drug Ozempic—ahead of its 2021 launch. The company’s planning was informed by its experience generating modest sales for an earlier weight-loss drug, Saxenda. Doctors were skeptical of it, and many health-insurance plans in the U.S. didn’t cover weight-loss drugs.

It wasn’t enough. It took only five weeks for the prescription rate of Wegovy to exceed the level that Saxenda had taken five years to reach. Jørgensen recalled later, in an interview in 2024, that he initially thought: “ ‘That’s patients who’ve been lined up, there’s pent-up demand, it will normalize.’ It didn’t. It just kept growing.”

The company responded by limiting demand—the last thing a drugmaker wants to do with a new product. Sales representatives asked doctors not to start new patients. The company resorted to rationing by withholding the lower, starter doses for new patients, to conserve supplies for existing patients taking the higher doses.

The shortages opened the door for competition. They made it legal for special pharmacies in the U.S. to make compounded, copycat versions of semaglutide that sold for much less than list prices for Ozempic and Wegovy. Telehealth firms capitalized on the new, lower-cost supply by hawking the compounded versions, taking away market share from Novo Nordisk.

The shortages gave rival Eli Lilly time to catch up. Lilly introduced Mounjaro for diabetes in 2022, followed by Zepbound, a weight-loss version of the same drug, in 2023. Zepbound has been shown in studies to induce greater weight loss than Wegovy, more than 20% of body weight.

Although Lilly also encountered shortages due to high demand, it was able to resolve them more quickly than Novo Nordisk. Now, weekly U.S. prescriptions for Lilly’s Zepbound have surpassed Wegovy’s. Mounjaro still trails Ozempic but is closing the gap.

Novo Nordisk has spent billions of dollars trying to expand manufacturing capacity, including an unusual deal last year for its controlling foundation to acquire the contract manufacturer Catalent for $16 billion.

The R&D race for future weight-loss drugs also has tilted in Eli Lilly’s direction. Lilly has reported favorable clinical-trial data for two closely watched experimental drugs, including a pill version that analysts think could be appealing to people who don’t want injections.

Novo Nordisk, meanwhile, has had some R&D disappointments, including studies of an experimental combination weight-loss drug dubbed CagriSema. The less-than-expected results of one study sent Novo Nordisk shares plunging more than 20% in one day in December, wiping out nearly $100 billion in stock-market capitalization for the company. Some analysts have cut their sales forecasts for the drug.

Lilly has gained an edge on the marketing front as well. The company beat Novo Nordisk to the punch in launching a direct-to-consumer, online service selling weight-loss drugs at discounted cash prices, aimed at people who don’t have insurance coverage. And it was first to strike a deal with a big telehealth firm, Ro, to sell a discounted weight-loss drug. Novo Nordisk eventually made similar moves, but months after Lilly.

“They seem to be missing a lot of these kinds of strategic endeavors to help sell into a market that is different from a lot of pharma markets,” said BMO Capital Markets analyst Evan David Seigerman.

The Novo Nordisk spokeswoman said the company resolved its shortages before announcing its direct-to-patient service and striking telehealth deals.

Novo Nordisk isn’t out of the race. The company can still turn things around by leaning into CagriSema, which generated solid weight-loss data even if it missed expectations, and by developing other new drugs that target various segments of the growing market, Seigerman said.

More recently, Novo Nordisk has shown signs of being more aggressive. It signed a deal with CVS to make Wegovy the preferred weight-loss drug for members of its drug-benefit plans.

Author Hanne Sindbæk, who has written two books about Novo Nordisk, says there has been an eternal tug of war inside the company between those who are guided by values—the idea that the company works for the common good rather than simply to make a profit—and those who run the business. If Novo Nordisk wants to stay in the game, it may have to lean toward the latter in choosing its next CEO.

Jørgensen, the outgoing CEO, is still in his role while the company searches for a new chief. His predecessor as CEO, Lars Rebien Sørensen, who is chairman of the foundation that has voting control of the drugmaker’s shares, will join the Novo Nordisk board of directors.

“Now they need somebody more business-driven,” Sindbæk said.

The company has been diversifying its businesses, growing its footprint in areas like AI servers and electric vehicles

Key Points

Foxconn 2317 2.63%increase; green up pointing triangle Technology Group, the world’s largest contract electronics maker, said its revenue this year would beat last year’s, boosting shareholders’ confidence after it downgraded its outlook earlier this month.

Foxconn Chairman Young Liu said at the company’s annual shareholders conference on Thursday that 2025 revenue is expected to be over 7 trillion New Taiwan dollars, equivalent to $234 billion, as robust AI server demand continues to support its growth. In comparison, revenue in 2024 was NT$6.86 trillion.

Foxconn lowered its 2025 outlook to earlier this month, when it said it now had a more conservative outlook compared with its expectations in March. It cited fast-changing U.S. tariff policies, their disruptive effects on global supply chains, and foreign-exchange headwinds.

Foxconn, best known for assembling Apple’s iPhones, has been diversifying its businesses, growing its footprint in areas like artificial-intelligence servers and electric vehicles in recent years.

The Taiwan-based company now plays an increasingly important role in building AI servers for U.S. tech giants such as Amazon and Nvidia. Cloud and networking products—including AI servers—accounted for 34% of first-quarter revenue, making them Foxconn’s second-largest business segment after smart consumer electronics at 40%.

Nvidia reported another set of robust results on Wednesday, beating market expectations despite restrictions on chip exports to China.

“This is a very important print and guide for the broader tech world and it shows the AI Revolution is heading into its next gear of growth despite the Trump tariff war playing out,” Wedbush analysts said in a research note.

Turning to its EV business, Liu said Foxconn will soon unveil a partnership with another Japanese automaker, after announcing its collaboration with Mitsubishi Motors earlier this month.

Mitsubishi plans to sell an electric vehicle developed by a Foxconn unit in the second half of 2026.

The company has expressed interest in teaming up with Nissan Motor after the Japanese automaker ended talks to merge with Honda Motor earlier this year.

Foxconn’s shares ended 2.6% higher in Taiwan, outpacing the benchmark Taiex’s 0.2% gain.

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“They support founders, they want to help push the founders' vision and get behind them,” Bieber said of the deal with E.l.f. in an interview with WWD.

Beauty has a new billion-dollar baby: Hailey Bieber.

E.l.f. Beauty has reached an agreement to acquire Bieber’s beauty brand Rhode in a deal valuing it at $1 billion, the companies jointly revealed Wednesday.

The news comes just a month after WWD reported that Rhode had hired JP Morgan and Moelis to explore deal options.

“They support founders, they want to help push the founders’ vision and get behind them,” Bieber said of the deal with E.l.f. in an interview with WWD. “That’s where we are with Rhode, and I’m ready to get to the next place.”

That will include international expansion — or, as Bieber put it, “more places, more faces.”

It’s not E.l.f.’s first rodeo with founder-led brands: The company acquired Naturium in 2023 and incubated in-house Alicia Keys’ Keys Soulcare, a fact that was attractive to Bieber.

“This is my baby, and to find a home for it is really not an easy process — it’s very scary,” Bieber said. “When I met the E.l.f. team, we had a lot of similarities when it came to the importance of community and team building.”

Biggest Deal to Date

The deal marks E.l.f.’s biggest to date, and consists of $800 million in cash and stock payable at closing, and an additional potential earnout consideration of $200 million based on the future growth of the brand over a three-year timeframe. To fund the deal, E.l.f. secured $600 million in debt financing.

It also comes at a time when E.l.f., which was one of the top-performing companies on the New York Stock Exchange in the first half of last year and surpassed the significant $1 billion milestone in net sales, has faced headwinds recently. These are namely in the form of tariffs, with 75 percent of its products manufactured in China. As a result, the company’s share price is down by around 25 percent in the year to date.

In an interview, E.l.f. chairman and chief executive officer Tarang Amin revealed that he had been in discussions with Rhode since October.

“E.l.f. Beauty is on fire, and it was a desire to fuel that fire with the acquisition of Rhode,” he said. “In less than three years, going from zero to $212 million of net sales, direct-to-consumer only, with just 10 products — I would never believe that if somebody told me,” he said. “The momentum and everything that Hailey has fits our ethos as a company, of wanting to invite her into our family and her entire team and be able to transform the beauty industry.”

Building on Bieber’s popular glazed doughnut skin content on Instagram, Rhode launched in 2022 with a tightly edited stock keeping unit count on its website. By the end of 2024, it was the top skin care brand by earned media value, having grown 367 percent from the year prior.

Since its launch, Rhode has expanded beyond the initial lip balms, serum and moisturizer to entail color cosmetics, phone cases and a recently confirmed partnership with Sephora in North America, which will kick off later in 2025. The brand’s net sales reached $212 million in the 12 months ended March 31.

The acquisition gives E.l.f. more than just a fast-growing buzzy brand: It will also mark E.l.f.’s entrée into Sephora U.S. “Going to every single U.S. and Canadian store this fall, followed by the U.K. by the end of the year, shows the confidence [Sephora] has,” Amin said of the launch. “They are great purveyors, and every beauty brand wants to go to Sephora.”

When Rhode initially hired bankers, sources were skeptical the $1 billion valuation could be met, citing broader factors in the M&A landscape as well as the brand’s hefty marketing spend. Indeed, a raft of other brands — including Selena Gomez’s Rare Beauty, Makeup by Mario, Kosas, Merit, Jane Iredale and more — have gone to market and have yet to find buyers.

But Rhode bucked the trend, with one source noting it’s the fastest majority deal of $1 billion or more in beauty.

Bieber Stays On

As part of the deal, Bieber will serve as Rhode’s chief creative officer and head of innovation, overseeing creative, product innovation and marketing. She will also act as a strategic adviser to the combined companies.

“I want to continue to push innovation — innovative products, innovative marketing, and I know they’ll be able to continue helping us,” Bieber said.

Cofounders Michael D. Ratner and Lauren Ratner and CEO Nick Vlahos will continue to lead the brand out of its Los Angeles office.

Amin also noted that every brand in the E.l.f. Beauty stable saw growth last year, with Naturium and Keys Soulcare sales reaching all-time highs.

As for whether E.l.f. plans any more M&A, Amin stressed that his primary focus is the organic growth of its existing brand portfolio.

“A billion-dollar deal is the biggest we’ve ever done in our history, which talks about our excitement and our confidence, but also gives a big responsibility to make sure we’re living up to everything Hailey wants and so I’d say that’s going to be the focus for us right now. How much can we grow our brand portfolio? How much can we just continue to disrupt the beauty industry?” he said.

In August 2023, E.l.f. acquired masstige skin care brand Naturium from The Center for $333 million as a broader strategy to give the company cachet in skin.

With that acquisition, it doubled its penetration within skin care to 20 percent and wasted no time in expanding Naturium’s footprint into Ulta Beauty in the U.S. and Shopper’s Drug Mart in Canada.

In an interview with WWD last summer, Amin said: “One of the things we get with acquisition is greater scale right away. What we get with something like a Naturium is they went from zero to over $90 million in sales in three years. We liked the fact that it already had a good sales basis and a fully developed team that we could continue to build. We’ve been investing in the brand, we’ve been investing in the team, and we continue to see incredible results from it.”

The acquisition news comes as E.l.f.’s net sales increased 4 percent to $332.6 million in its fourth quarter ended March 31. This beat Wall Street’s expectations of $327 million. Adjusted net income was $45.2 million. Adjusted diluted earnings per share were 78 cents, above estimates of 72 cents.

Due to the wide range of potential outcomes related to tariffs, the company is not providing a fiscal 2026 financial outlook at this time.

Amin noted that around 75 percent of E.l.f.’s goods are manufactured in China, while Rhode is primarily manufactured in Italy and South Korea.

“Just like every company, tariffs are impacting us, but we have a mitigation strategy,” he said. “Last week, we announced to our community that we’re going to take all E.l.f. prices up $1 and what we told them is it’s a fraction of what the tariffs actually cost, but we really care about preserving great consumer value. We had 99 percent positive sentiment.”

As for when the company is likely to release a full-year forecast, he said: “As soon as we have resolution on where tariffs are going to head out, and we don’t want to put up guidance, and then have something change.”

Minutes showed officials worried about ‘long-lasting’ effect of market turmoil after President Trump launched trade war

Federal Reserve officials have warned that the loss of the US’s safe-haven status triggered by President Donald Trump’s global trade war could have “long-lasting” effects on the country’s economy.

Minutes from the Federal Open Market Committee’s early May vote, published on Wednesday, indicated that some rate-setters focused on the fall in prices for US government debt, equities and the dollar in the weeks after the president announced sweeping tariffs on trading partners.

“These participants noted that a durable shift in such correlations or a diminution of the perceived safe-haven status of US assets could have long-lasting implications for the economy,” the minutes said.

The early May FOMC meeting was the first after the turmoil that followed Donald Trump’s “liberation day” tariff announcements on April 2.

The falls in stocks and treasuries, combined with the dollar’s depreciation, broke with historical trends and sparked concern that Trump’s policies were leading global investors to ditch the dollar and US assets.

Global investors have historically flocked to — not away from — US assets in times of market volatility.

The FOMC minutes did not speculate on what the implications for the US economy could be if it lost its status as a perceived safe haven.

Phillip Swagel, director of the non-partisan Congressional Budget Office, told the Financial Times this month that a shift in capital flows away from the US would dent growth, hit jobs and raise government borrowing costs.

The minutes also showed that Fed officials thought Trump’s trade war had raised the chances that inflation would remain above the central bank’s 2 per cent goal.

“Almost all participants commented on the risk that inflation could prove to be more persistent than expected,” the minutes said.

The meeting, which saw the FOMC hold its benchmark target at between 4.25 and 4.5 per cent, took place before Trump lowered tariffs on China from 145 per cent to 30 per cent. The détente between the world’s two largest economies lifted the prices of stocks, government debt and the dollar.

The FOMC next meets in mid-June.

Rate-setters continue to signal that they will not resume rate cuts until they are confident that the tariffs will not have an enduring impact on US prices.