Good morning. Andrew here. Jamie Dimon of JPMorgan Chase is out with his annual letter, and we’ve got the details. In it, he raises questions about the valuations of private credit funds, but he says the industry probably doesn’t represent a systemic risk. While he is relatively bullish on the economy, he offered this downside scenario: “The skunk at the party — and it could happen in 2026 — would be inflation slowly going up, as opposed to slowly going down. This alone could cause interest rates to rise and asset prices to drop. Interest rates are like gravity to almost all asset prices. And falling asset prices at one point can change sentiment rapidly and cause a flight to cash.” Also: A piece in The New Yorker out this morning by Ronan Farrow and Andrew Marantz about OpenAI’s Sam Altman is likely to be a big talker in Silicon Valley and beyond. More below. (Was this newsletter forwarded to you? Sign up here.)
Risk factorsWar in the Middle East shows no sign of letting up, exacting a huge toll on the global economy. Amid that volatility, Jamie Dimon dropped his annual letter to JPMorgan Chase shareholders this morning, and he offered little comfort. Dimon sees challenges ahead — not just from the war and “growing geopolitical tensions,” but from concerns about inflation, growth, private credit and the world’s debt crisis. Here’s what he had to say on: Tariffs. The levies have had only a modest effect on inflation and growth, he writes, but “the trade battles are clearly not over.” Watch for a further redrawing of global trade alliances, he said, as markets increasingly focus on how the Trump administration handles Washington’s fraught relationship with Beijing. (More on that below.) Inflation and growth. The U.S. economy is far less susceptible to global energy shocks than it was in the 1970s and early 1980s, he writes. But that doesn’t mean it’s immune from a worst-case stagflationary scenario. That would be especially bad for private credit. Last October, Dimon warned of potential “cockroaches” in the private credit market shaking investor confidence. That was before a recent wave of redemptions. Dimon wrote that private credit is probably not “a systemic risk.” But he reiterated his concern that “credit standards have been modestly weakening pretty much across the board.” The $1.8 trillion sector’s reliance on retail investors could backfire for some private credit lenders, he added. “If anything ever goes wrong, you should assume” these investors “will seek remedy in the courts.” And then there are the private markets. Investors are buzzing about the prospects for a blockbuster pipeline of I.P.O.s, led by SpaceX. But Dimon marveled that “it is a little surprising that private equity firms, which own close to 13,000 companies, have not taken greater advantage of healthy markets to take their companies public.” Dimon’s closely read letter often lands amid turbulent moments. Last year, it arrived during the heights of President Trump’s tariffs barrage and a brutal market sell-off. Today’s version carries stark warnings, but also sees tailwinds coming from Big Tech’s giant investments in artificial intelligence and from Trump’s efforts to revamp taxes and public spending and deregulate business. The war in Iran could squelch those gains, though, leading to “commodity price shocks, along with the reshaping of global supply chains.” That, in turn, could lead to “higher interest rates than markets currently expect.”
OpenAI and Anthropic forecast huge revenues and losses. The artificial intelligence start-ups anticipate breakneck growth that comes at a big cost. OpenAI, for example, is set to lose about $85 billion in 2028, The Wall Street Journal reports, citing financial documents shared with investors. That is substantially more than Anthropic (which also sees plenty of red ink) as both prepare for I.P.O.s in the coming months — though Sarah Friar, OpenAI’s C.F.O., has privately expressed doubts that the company will be fully ready to go public in 2026, The Information reports. Americans’ wealth gains are accelerating. About 31 percent of Americans were part of the upper middle class in 2024, up from about 10 percent in 1979, as the percentage of those in lower economic classes shrunk, too, The Wall Street Journal reports. Meanwhile, the tax cuts passed as part of the “Big Beautiful Bill” last year are reaching Americans’ bank accounts in uneven and, to some tax experts, arbitrary ways that may further widen the rich-poor gap. Inflation and earnings will be in focus this week. Investors are set to get two consequential economic reports — the Personal Consumption Expenditures, the Fed’s preferred measure of inflation, on Thursday, and the Consumer Price Index, on Friday — that could show the Middle East war is sapping Americans’ purchasing power. On Wednesday, Delta Air Lines will report results. Expect questions about how the company is managing the recent surge in jet fuel. Trump’s new Iran ultimatumA sense of calm has largely settled over the oil market as traders await the next move in the war in the Middle East. President Trump is again giving mixed signals. He claimed in an interview with Axios that the U.S. was in “deep negotiations” with Iran and that there was a “good chance” that a deal could be reached. But he also leaned on his new deadline — tomorrow at 8 p.m. Eastern — warning that “if they don’t make a deal, I am blowing up everything over there.” The latest:
In a promising sign: Some ships are navigating the Strait of Hormuz, a key waterway for oil and natural gas imports. An oil tanker passed through yesterday, one of seven Malaysia-linked vessels cleared by Iran, Reuters reported, citing anonymous sources. Over all, 21 ships passed through the strait, Bloomberg reports, over the weekend. But analysts expect big disruptions in the oil market to continue. Eight members of OPEC Plus, the oil producing consortium, said they would raise production quotas by about 200,000 barrels a day — a largely symbolic move given the virtually blocked strait — and warned that “restoring damaged energy assets to full capacity is both costly and takes a long time.”
A former Tesla leader on what SpaceX’s future may holdAs SpaceX proceeds with what may be the biggest I.P.O. ever — its underwriters are reportedly expected to hold a kickoff planning meeting today. There are lots of questions that potential investors are likely to have. Among them: Can Elon Musk run two trillion-dollar publicly traded companies? For one of his former lieutenants, the answer is yes. Jon McNeill, Tesla’s president from 2015 to 2018, spoke with Michael de la Merced about Musk’s management playbook, which McNeill and Musk call “the algorithm.” (That’s also the title of McNeill’s new book.) McNeill recounted how Musk works and what that might mean for SpaceX, Tesla and his other businesses. How does Musk operate? His principal goal, according to McNeill, was getting “down to one day a week at Tesla,” allowing him to focus on “the two or three biggest existential challenges facing the business.” McNeill said that the algorithm was at work at SpaceX, with Gwynne Shotwell, the company’s president and C.O.O., running the business day to day. That setup frees Musk to focus on SpaceX’s existential issues, including producing a Mars-capable rocket and advancing its xAI artificial intelligence. McNeill and others came up with “the algorithm,” a distillation of Musk’s playbook. Its components:
One example: McNeill asked the company’s lawyers to research how many paragraphs in a standard loan document — which can run to 12 pages or so — were required by law or regulations. None, they replied. That allowed Tesla to simplify buying a car down to as few as 12 clicks, McNeill said. What about regulation? Musk has regularly been criticized for aggressively pursuing design decisions perceived as risky, which have led to injuries, fatalities and federal investigations. McNeill’s response: We definitely want to push the boundaries in areas where it’s not a requirement of law or not a requirement of regulation. We want to push the boundaries, but where the law has been decided or where there are regulatory fences, we want to be respectful of that. Would SpaceX and Tesla ever combine, as Musk has often done with his companies? McNeill said there was a case for that. It’s easier for Musk to run one public company than two, he added. And Tesla’s two existential issues at the moment, he said, are autonomous cars and autonomous robots — so “it probably makes a lot of sense from a proximity basis to have those A.I. capabilities close to Tesla.” China’s A.I. gains in focusPower brokers in both Silicon Valley and China’s buzzing tech sector are marking their calendars for mid-May. That’s when President Trump is slated to meet with President Xi Jinping of China, with all eyes on whether advanced U.S.-made chips will be on the agenda. The Trump administration seems to be in deal-making mode. Administration officials last month said that the two governments had discussed forming a “U.S.-China Board of Trade” as Washington and Beijing seek to de-escalate their trade war. That could pave the way for increased sales of U.S. semiconductors. But such a move could clash with China hawks in Congress who see the U.S. at risk of losing its competitive edge in the race to dominate artificial intelligence, Grady McGregor reports. Watch the House Foreign Affairs Committee. Last month, the committee advanced legislation that would aim to force U.S. chipmakers to do more to try to prevent their A.I. chips from being smuggled into China. “America has the best semiconductors in the world,” said Representative John Moolenaar, Republican of Michigan and chairman of the Select Committee on China, “and we must defend our advantage over China.” China’s A.I. companies have become a force in the marketplace. Despite Washington’s export controls on advanced chips, Chinese A.I. companies are quickly growing their customer base, including with U.S. tech start-ups. The main reason: Chinese companies are developing open-source A.I. models, which allows companies and developers to build their own tools on top of free Chinese code. China has “leveraged the open-source community to slingshot themselves ahead of the U.S. in some areas,” Michael Kuiken, the vice chair of the U.S.-China Economic and Security Review Commission, a government agency, told DealBook. By the end of last year, China’s open-source models, like DeepSeek and Alibaba’s Qwen, had become competitive models in the global A.I. market. Last year, Alibaba told investors that it would invest heavily on A.I. infrastructure, and it aims to push A.I. and cloud revenues to $100 billion annually in the next five years. To blunt those gains, Kuiken said the U.S. should maintain export controls on Chinese companies. But he also said Washington should examine Beijing’s successful playbook on open-source A.I. models “so we’re not ceding this space to the Chinese.” We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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