Good morning. Andrew here. There’s a nugget in Eli Tan’s article today about Meta’s A.I. efforts that is worth thinking about: The tech giant, he reports, is considering temporarily licensing Google’s Gemini model because its own efforts are moving more slowly than planned. More below. Also, Bernhard Warner explores how rising oil prices put Kevin Warsh, President Trump’s Fed chair choice who wants to lower rates, in a bind. And make sure to read Niko Gallogly’s report about the wild legal fight over the calorie count of David protein bars, the hottest new product in the food market. (Was this newsletter forwarded to you? Sign up here.)
The Fed’s Iran problemThe war-driven surge in oil prices has rippled through the global economy, battering Wall Street, house hunters, farmers and more. “The largest supply disruption in the history of the global oil market,” per the International Energy Agency, could also complicate matters for the Fed. Some economists and traders have lowered their expectations for rate cuts this year even as President Trump has urged immediate action. That could put Kevin Warsh — Trump’s pick for Fed chair whom the president expects will push for lower borrowing costs — in a bind. The latest:
“A higher inflation path will make it harder for the Fed to cut soon,” David Mericle, the chief U.S. economist at Goldman Sachs, wrote to investors yesterday. Goldman now expects the central bank’s first rate cut of the year to come in September instead of June, citing the war and inflation. (June would be Warsh’s first meeting as Fed chair if confirmed by the Senate, though the nomination is being held up by Senator Thom Tillis, Republican of North Carolina.) Futures traders today give a 41 percent chance of any rate cut this year, and certainly not before December. Before the war began, they were betting on two cuts. Warsh’s Senate confirmation hearing could be feisty. (No date has been set yet.) Trump’s nominee criticized a Fed rate cut in September 2024, but has appeared more supportive of lowering borrowing costs since Trump took office last year. Meanwhile, Trump continues to demand action, and fast. Yesterday he chided Jay Powell, the current chair, for not “dropping Interest Rates, IMMEDIATELY.” But the risk of war-driven inflation probably opens Warsh’s position on rates to tough scrutiny from lawmakers. Next week’s Fed meeting may offer big clues on what’s next. Officials will release their quarterly forecast on rate cuts. In December, 12 of 19 policymakers foresaw at least one cut this year. If that dynamic holds, “it’s not as big of a lift for Warsh to convince people to cut in June,” David Seif, an economist at Nomura, told DealBook. He argued that other Fed watchers are discounting how the Fed’s politics “fundamentally changes on the day that Warsh becomes chair.”
U.S. states step up their challenge to President Trump’s new tariffs. The 24 states that filed suit to stop Trump from imposing a new 10 percent global tariff have asked the Court of International Trade to expedite the case. They argue that new levies, created under a 1974 law known as Section 122, must be canceled to avoid “irreparable harm” to businesses. Elon Musk reorganizes his business empire ahead of SpaceX’s planned I.P.O. The F.T.C. approved Tesla’s move to convert its $2 billion investment in Musk’s xAI into a stake in SpaceX, after the rocket company acquired xAI last month. Meanwhile, Bloomberg reports that the S.E.C. is considering a rule change that could accelerate SpaceX’s entry into the S&P 500 after its I.P.O. Joining the S&P 500 could supercharge SpaceX shares, requiring many index-tracking funds to own the stock. Honda scraps its electric vehicle plans. The Japanese carmaker announced that it would record its first annual loss since going public in 1957 and ended plans for three electric vehicle models to be produced in the U.S. Meanwhile, the E.V. makers Rivian and Lucid announced new models for around $50,000, underscoring how the market has moved away from established carmakers since the Trump administration ended tax incentives for E.V. purchases.
Another A.I. setback for MetaAfter Meta fell behind in the artificial intelligence race, its C.E.O., Mark Zuckerberg, took dramatic action to catch up, spending billions to reshuffle his company’s entire A.I. division. Since July, those new hires have been hard at work on a new A.I. model while rivals like Anthropic, OpenAI and Google continue to introduce improved models. Zuckerberg said his new A.I. lab, led by the 29-year-old tech entrepreneur Alexandr Wang, would “push the frontier in the next year or so.” But as Meta prepares to release its new model, code-named Avocado, that timeline is shifting, Eli Tan reports for The Times. Wang and Meta’s A.I. team delayed its release to at least May, instead of this month, because of performance concerns, Tan reports. The new model is better than Meta’s old one, Llama 4, but not yet as good as the latest versions of competitors like Google’s Gemini or Anthropic’s Claude. Specifically, Avocado performs somewhere between Gemini 2.5, which came out last March, and Gemini 3.0, which came out in November. Meta’s potential plan B: temporarily licensing Gemini for its products. That move would be similar to what Apple did in January. And it would be a huge win for Google, with consumers using Gemini on its own products, on Apple devices and on Meta’s social platforms. How Meta’s A.I. model performs is being closely watched by the rest of the industry. The tech is the basis for developing new chatbots, video generators, coding tools and other products, which in Meta’s case would be used by billions of users across Facebook, Instagram and WhatsApp. Being at the front of the pack of A.I. development also helps recruit top researchers. The company says it’s excited about its progress. Its A.I. lab already has a name for the model after Avocado: Watermelon. “As we’ve said publicly, our next model will be good but, more importantly, show the rapid trajectory we’re on,” Meta said in a statement. “Then we’ll steadily push the frontier over the course of the year as we continue to release new models.”
David vs. the calorie countersIn the era of peak protein intake, the David bar has become a sensation. It broke through in an already saturated market in less than two years, thanks to an industry-leading ratio of protein to calories and endorsements from Arnold Schwarzenegger and the health influencer Dr. Andrew Huberman. But a lawsuit filed against the bar’s maker, David Protein, asserts that its central claim — that its products offer a low calorie and fat count — is untrue, and the company pledges to fight back, Niko Gallogly reports. David’s differentiating factor: One bar contains 28 grams of protein but only 150 calories, a nutritional profile made possible by E.P.G., a modified plant fat that the body mostly can’t digest. In other words, it delivers a rich taste without a caloric downside. Those stats, along with canny marketing, have made David a best-seller: By last summer, it was on pace to hit $180 million in sales for 2025. Last May, David raised money at a valuation of $725 million, using some of the funds to buy Epogee, the maker of E.P.G. The lawsuit claims David bars undercount their calories and fat. The plaintiffs, who are seeking class-action status, argue that an F.D.A.-certified lab found that the bars contain nearly double the calories and about six times the fat listed on their nutritional labels. The bars “are unlawful, misbranded, and violate state and federal law,” the plaintiffs wrote in their complaint. The company has drawn criticism and scrutiny before. Several competitors sued David over its takeover of Epogee, a lawsuit that was dismissed last month. Earlier this year, David cut ties with Dr. Peter Attia, who had been its chief science officer, over his ties to Jeffrey Epstein. David’s co-founder and C.E.O., Peter Rahal, called the lawsuit “frivolous.” Rahal, who previously helped found the also successful RXBAR, told DealBook that the plaintiffs are “using the wrong method to test our product.” He added that David had hired Alex Spiro, the high-profile litigator at the law firm Quinn Emanuel Urquhart & Sullivan. “We’re going to fight back,” Rahal said. Dr. Marion Nestle, a professor emerita of nutrition and food studies at N.Y.U., told DealBook that the plaintiffs’ claims were based on counting calories from a “concocted ingredient that’s not absorbed” by the body. The lawsuit was likely to be dismissed, she added. Not that Nestle was weighing in on the healthfulness of David bars: “Whether anyone should be eating non-absorbable fat is another discussion,” she said.
Talking A.I. with the C.E.O. of YahooEvery week, we’re asking a leader how he or she uses artificial intelligence. Jim Lanzone, who leads Yahoo, told DealBook’s Sarah Kessler that A.I. will be writing almost all of the company’s code by the end of the year. His answers have been condensed and edited. How do you personally use A.I.? We entered the A.I. answer-engine race in January, with Yahoo Scout. Four or five months prior to the launch, I did every prompt on multiple A.I. chatbots at the same time and compared the answers with Scout, even when I was just checking the weather. Which is not the most efficient way to live. What have you told your employees about how you want them to use A.I.? A.I. coding has just changed the game for us. What used to take months now takes days. And I think by the end of this year, A.I. will be producing the vast majority of our code. Potentially all of it. Frankly, it’s the best way to do it now. It doesn’t take that much nudging. Has A.I. created any management challenges? I think it has created a form of A.I. slop, where employees are now producing almost too much content — like a deck that used to be 10 pages, now has 35 pages. And people can’t keep up with all the reading. You almost need A.I. to summarize a deck back down. What can you do about that? We’re going to have to create a culture of respecting people’s time. It will require a new form of empathy for your teammates, including your boss. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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