Good morning. Andrew here. Save the date: We’re thrilled to announce that the DealBook Summit will take place on Nov. 18 in New York City. We are celebrating DealBook’s 25th anniversary and will be interviewing some of the world’s most consequential leaders. Speakers will be announced soon. You can apply to join us here — and we encourage you to do so early, because we expect overwhelming demand. Today, we’re delving into the debate surrounding A.I. models, as Silicon Valley grapples with Chinese open-weight offerings and whether they could disrupt bleeding-edge closed ones from Anthropic and OpenAI. And we’re watching oil prices as the war in the Middle East continues, even as S&P 500 futures are up. (Was this newsletter forwarded to you? Sign up here.)
Another reckoning for A.I. spendingThe artificial intelligence trade that has driven a global market rally for years has hit serious turbulence in recent weeks. This week, it faces yet another big test. Alphabet, Google’s parent company, will report earnings on Wednesday, giving it a chance to weigh in on the progress of rivals based in China and offering investors a checkup on tech giants’ enormous A.I. spending plans. Advances in Chinese A.I. models remain the big focus. News that Moonshot AI’s latest model, Kimi K3, nearly bested Anthropic’s Fable model in some benchmarks — and is freely available as open-source software — has continued to rattle Silicon Valley executives. (Kimi K3 was so popular that it was unavailable for much of the weekend, and Moonshot announced changes to subscription plans for it.) And Alibaba yesterday announced a preview version of its newest Qwen model that also performed comparably to Fable, and would also be made open source. Alibaba’s Hong Kong-traded stock was up nearly 4 percent on the news. That’s continuing to reverberate around the global A.I. industry.
Do gigantic A.I. spending plans still make sense? Much of the investment that hyperscalers like Alphabet and Meta have announced — and which benefited both Nvidia and memory chip makers like SK Hynix and Micron — was built on the idea that it was needed to keep pace in the A.I. race. Increasingly capable open-weight Chinese models undercut that thesis, potentially leaving much of the A.I. industry looking more indebted than it can justify. Watch whether Alphabet modifies its capital expenditure forecast for the year, which the company last set at $180 billion to $190 billion.
What about the prospects for Anthropic and OpenAI? They’re expected to go public over the next year or so, but rapidly advancing (and vastly cheaper) Chinese rivals may weigh on those offerings. (Speaking of which: Moonshot is preparing to go public in Hong Kong, perhaps within six months, according to The Information.) One thing to watch for, according to Dean Ball, a former Trump administration adviser turned OpenAI executive: whether Washington imposes more regulation to stymie the growth of open-source Chinese models.
Federal immigration officials reportedly seek to reassure the business community. Officials from the Department of Homeland Security met this month with the Essential Worker Immigration Coalition, a group representing the U.S. Chamber of Commerce and associations of companies that rely on immigrant labor, according to The Washington Post. The meeting marked a change in approach by D.H.S. under Markwayne Mullin from his predecessor, Kristi Noem, under whom immigrant arrests surged. The Justice Department prosecutes fewer companies for employees’ wrongdoing. Federal prosecutors recently haven’t charged companies, including Alibaba and Abbott Laboratories, even when they suspected executives of participating in misdeeds, The Wall Street Journal notes. The acting attorney general, Todd Blanche, has emphasized punishing individuals over companies, though a department representative said the pullback in corporate prosecutions wasn’t because of a change in policy. France bans Polymarket. The gaming authorities there cited concerns including the possibility that some bets on the prediction market’s platform were being manipulated. Concerns about such betting sites continue to abound in the U.S. as well: White House lawyers have worried about how pervasive betting on prediction markets has become among those with knowledge of forthcoming government plans, according to The Journal.
‘Diplomacy also knows its duties well’Oil prices remain elevated amid widening escalations between the U.S. and Iran that included the death of American service members. Yet investors are hoping that signals from Washington and Tehran over potential new negotiations will pull the region back from the brink. The latest:
The Strait of Hormuz remains a major flashpoint. Iran’s Islamic Revolutionary Guards Corps said today that two oil tankers had “exploded and were forced to cease movement” as they tried to pass through the strait using a route that Tehran has warned ships not to use. (The Revolutionary Guards did not directly claim responsibility.) A seemingly open door for diplomacy: Esmail Baghaei, a spokesman for Iran’s Foreign Ministry, said at a news conference that Tehran had received proposals from mediators who were “trying to prevent an escalation of tensions,” and that even amid exchanges of attacks, “diplomacy also knows its duties well and spares no efforts.” Secretary of State Marco Rubio said that Washington was still willing to pursue diplomacy and that Iran had signaled directly and through mediators that it wanted to negotiate. “We’ve tried multiple times with Iran, and we’ll continue to try,” Rubio said.
The World Cup’s other winnersSpain’s extra-time 1-0 victory over Argentina in the World Cup was a study in elegant teamwork and near technical perfection. It also capped a huge economic bonanza. The latest: As the tournament was ending, FIFA’s president, Gianni Infantino, said the organization expected $15 billion in revenue from this World Cup, well above earlier projections of $11 billion. There were other big winners:
The huge revenues may have altered the tournament forever. Many fans complained about changes at this World Cup, including dynamic pricing for tickets and hydration breaks that opened up more TV advertising spots. But given the revenue boost, the modifications appear set to stay. Hosts want FIFA to pay more. Gov. Mikie Sherrill of New Jersey, whose state hosted the final, complained that the organization didn’t contribute to necessary infrastructure. “They’re making $11 billion and now they’re trying to sell grass,” she told Politico, “and they’re trying not to pay their bills.”
An ancient epic storms the box officeChristopher Nolan’s “The Odyssey” has more than lived up to the hype. The long-awaited cinematic retelling of Homer’s nearly 3,000-year-old tale dominated the weekend box office in North America, on track to earn an estimated $124.5 million in ticket sales in the U.S. and Canada. That easily topped prerelease estimates of $90 million to $100 million — and may bolster the fortunes of the entertainment industry more broadly. The stats:
The success of “The Odyssey” may be good for a number of players, including:
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