Good morning from London. Andrew here. The anxiety around A.I. and the soaring stock market is hardly confined to the U.S. But from here, it feels even more acute. In meetings and conversations with business leaders across London, I’ve been struck by a recurring question: How does this end? There is skepticism about the durability of the A.I. boom, concern about over-exuberant markets and growing unease about America’s relationship with the rest of the world. Add in the turmoil in the Middle East, and the mood here feels noticeably less euphoric than headlines about markets suggest. Below, we look at the latest market shocks — and at Senator Elizabeth Warren’s new attempt to delay the SpaceX I.P.O., which is still expected to go ahead Friday despite her efforts. (Was this newsletter forwarded to you? Sign up here.)
Inflation jittersFor weeks, investors have looked past a fragile cease-fire in the Middle East and pushed stocks to new highs. That confidence was jolted by Friday’s red-hot jobs report, and could be tested again today with the release of new inflation data. Economists expect this morning’s Consumer Price Index report, due out at 8:30 a.m. Eastern, to show headline inflation hitting 4.2 percent, fueled by rising energy costs. That would be the highest reading in more than three years. That prospect has chilled global markets, especially as the U.S. and Iran traded strikes yesterday. Just in: Trump expressed his frustration with deadlocked peace talks, writing on social media, “They’ve taken too long to negotiate a deal that would have been great for them, now they will have to pay the price!!!” The latest:
Investors are taking it out on mega-cap stocks tied to artificial intelligence, obscuring the outlook for SpaceX’s anticipated trading debut on Friday. Bank of America advised investors this week to consider selling stocks amid “bear-market signposts” in the markets. Hot inflation readings could create volatility, even as stocks continue to rise. “An upside surprise” on C.P.I. “could cause trouble given how febrile markets have been recently,” Jim Reid, a strategist at Deutsche Bank, wrote to investors today. The Producer Price Index, which measures wholesale inflation, is scheduled for release tomorrow. What would a surprise mean for the Fed? Rising inflation is likely to put pressure on the central bank to consider raising interest rates. That could put its new chair, Kevin Warsh, in a direct confrontation with President Trump, who pre-emptively criticized such a move over the weekend. Markets are antsy. Futures traders this morning raised the odds of an interest-rate increase this fall, possibly by September — a message echoed by bond traders. The prospect of higher borrowing costs could have widespread consequences, analysts warn, given the amount of debt-fueled spending that is propelling the A.I. buildout, and how much investors are borrowing to buy stocks. Consumers are feeling it, too. Households are gloomy about their finances, as they fret about the economic consequences of the war with Iran. “If inflation were to be higher for longer, this sort of trend of wages keeping up with inflation could be at some risk,” Marianne Lake, the C.E.O. of JPMorgan Chase’s consumer and community banking division, said at a conference yesterday.
A key Social Security trust fund could run out of money in 2032. The outlook for the retiree benefit plan worsened this year, according to a report from its trustees. It would have to cut benefits in roughly six years — three months earlier than expected — unless Congress intervenes with a funding plan. If it does not, incoming revenue is expected to only cover 78 percent of benefits. The Trump administration’s crackdown on immigration could exacerbate the shortfall, experts say, as this group usually pays into the fund via payroll taxes. Anthropic releases a “safe” version of its powerful Mythos model. The new artificial intelligence system, called Claude Fable 5, is designed to prevent hackers from using it to exploit cybersecurity weaknesses. (A reminder: Anthropic initially limited access of Mythos over security fears.) But questions remain about whether it’s effective to build in guardrails, an issue that Anthropic researchers told The Times they are working on. Kalshi plans to make some users identify their employers. Bettors in markets where material nonpublic information is available will be required to disclose where they work, Kalshi told The Wall Street Journal, an effort to prevent insider trading and market manipulation. Wagers involving company performance or military campaigns are expected to be included. Also, the sector’s federal regulator, the Commodity Futures Trading Commission, is reportedly set to unveil new proposals today aimed at cracking down on such abuses, according to The Journal.
Warren vs. MuskMarkets are bracing for SpaceX to begin trading publicly on Friday, as Wall Street expects Elon Musk’s rocket-and-artificial-intelligence giant to raise more than $74 billion from eager stock investors. But Senator Elizabeth Warren of Massachusetts, a Democrat, is the latest skeptic of the I.P.O., citing its potential dangers to retail investors, Lauren Hirsch is first to report. Warren wants the S.E.C. to delay SpaceX’s offering, she wrote in a letter yesterday to Paul Atkins, the regulator’s chair. The I.P.O. “appears to present significant risks to ordinary investors and their retirement savings,” she wrote. A spokesperson for the S.E.C. declined to comment. The senator is worried about Wall Street’s enthusiastic embrace of the offering, which includes moves by Nasdaq and FTSE Russell to accelerate SpaceX’s entry into their indexes. That would force index funds to buy SpaceX shares, thrusting the company into millions of Americans’ investment portfolios at a stroke. The letter is unlikely to achieve her goal, but it raises several concerns. Among them:
Warren was especially skeptical about SpaceX’s valuation, which was based on the company’s acquisition of xAI, Musk’s A.I. lab — putting the billionaire on both sides of the transaction. “In normal circumstances, an S.E.C. would demand far more rigorous proof of those numbers, where they came from and how they are validated by outside evidence,” Warren told DealBook. “The idea of having Elon negotiate with Elon and decide that the value of this company is some astronomical number makes market analysts laugh — or maybe cry.” Others who share Warren’s concerns include Randi Weingarten, the president of the American Federation of Teachers, and Mark Levine, the New York City comptroller who oversees $300 billion in pension fund assets.
NUMBER OF THE DAY $216 millionTom Steyer has been officially knocked out of the race for governor of California. The billionaire Democrat sunk roughly $216 million of his own money into the campaign, including more than $201 million on advertisements. That spending spree helped him to a third-place finish with 22.5 percent of the vote, behind Xavier Becerra, a former Biden administration official, and Steve Hilton, a former Fox News commentator who ran as a Republican. Steyer, a hedge fund mogul with a fortune of about $5.1 billion, according to Bloomberg, has been here before. He dropped out of the 2020 race for president after financing his campaign with $342 million in contributions and loans.
An A.I. cybersecurity start-up hits a $12 billion valuationThe artificial intelligence race is quickly reshaping cybersecurity — and driving big money into the sector. The latest example is Cyera, a start-up focused on protecting companies’ data from A.I.-based threats using A.I. It’s expected to announce today that it has raised $600 million at a $12 billion valuation, Niko Gallogly is the first to report. It’s now among the most valuable cybersecurity start-ups. And its valuation has climbed quickly: Just six months ago, investors appraised it at $9 billion in a $400 million fund-raising round. How Cyera works: The company identifies a company’s “crown-jewel” data, such as customer information, and makes sure it is safely stored, Yotam Segev, a founder and the C.E.O. of the start-up, told DealBook. If an employee or an A.I. agent shares that data, Cyera will autonomously restrict access to it or delete it. Cyera’s fortunes have skyrocketed amid worries about A.I.-based threats. The company was founded in 2021 by Segev, Tamar Bar-Ilan and Yonatan Itai, who met in the Israeli Defense Forces’ Talpiot program for academically promising recruits. The following year, OpenAI released ChatGPT, and “data security went from being very important to existential,” said Lior Simon, a partner at Cyberstarts, an Israeli venture capital firm that participated in the new fund-raising round. How fast Cyera has grown:
About the round: It was led by Evolution Equity Partners, and included Cyberstarts and Temasek, the Singaporean investment giant. The new funding will be used to accelerate Cyera’s A.I. offerings, Segev told DealBook, including through internal research and development, and potentially through acquisitions. Earlier this year, the company acquired two cybersecurity start-ups, Ryft and Genie Security. But the company faces plenty of competition. That includes start-ups like Sentra and Symmetry Systems that also rely on A.I. to autonomously manage data risks; incumbents including Palo Alto Networks and CrowdStrike; and Anthropic and OpenAI, which are developing cybersecurity capabilities for their models. Worries about cybersecurity aren’t going away, as government and corporate hand-wringing over Anthropic’s powerful Mythos model has shown. “Only machines will be able to protect machines,” Segev said. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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