Good morning. Andrew here in Cannes, France. The sunny Riviera backdrop at the Cannes Lions International Festival of Creativity contrasts sharply with the anxieties brewing in global markets. Many attendees have been glued to their iPhones, tracking the tumble in tech stock prices yesterday and today — and wondering if A.I. euphoria is taking a pause, or something more significant. The other talker here on the Croisette: the sudden decision by Amazon, which has a big presence here, to drop “Artificial,” a nearly finished $40 million biopic about Sam Altman that was directed by the award-winning filmmaker Luca Guadagnino. Virtually nobody is willing to pick up the movie. Does that say more about the film itself, or the power of Big Tech? (Was this newsletter forwarded to you? Sign up here.)
A.I. jittersMarkets are sliding globally, and investors are pointing fingers at the artificial intelligence trade. It’s a reminder that the A.I. rally, powered by billions of dollars pouring into data centers and cutting-edge software, is built on investors’ appetite for risk. That can easily evaporate amid concerns about interest rate increases and more. The latest:
Weighing heavily on investors’ minds: the prospect of higher borrowing costs coming sooner than expected. Traders now expect the Fed to raise rates as soon as September, following an unexpectedly hawkish turn by Kevin Warsh, the central bank’s new chairman, last week. A.I.-related stocks are taking a pounding. Shares in the memory chip giants Samsung Electronics and SK Hynix fell about 12 percent each. The stock of ASML, the Dutch chip giant, is down 5 percent. And shares in SpaceX look set to extend a three-day losing streak after plunging 16 percent yesterday. The broader Magnificent Seven group of stocks is also poised for further losses. (More on that below.) SpaceX’s drop is a sign that investor optimism has its limits. Elon Musk’s rockets and A.I. company soared in its first few days of trading, as public-market shareholders seized on the chance to finally buy a piece of it. (The company benefited from other factors, like having a low percentage of its shares available for trading.) Analysts said that investors are mindful of the company’s challenges, including its also-ran status in the A.I. race and its plans to sell investment-grade bonds for the first time. “Why do you need like $100 billion in cash?” Keith Snyder, a senior analyst at CFRA Research, wrote in a research note yesterday. (The SpaceX swoon came despite the company striking another potentially multibillion-dollar deal to lease computing power, this time with the start-up Reflection AI.) That investor concern raises questions about other A.I. companies. OpenAI executives are at the Cannes Lions International Festival of Creativity, the giant ad confab in the south of France, pitching the ChatGPT maker’s nascent ad business. OpenAI sees ads as an important revenue source as it prepares to spend billions on A.I. infrastructure. Potential investors for its I.P.O., which could come later this year, will be keeping a close eye on how it goes.
A sinking Japanese yen spooks traders. Japan’s finance minister, Satsuki Katayama, said today that she had spoken with Treasury Secretary Scott Bessent about coordinated efforts to stem the slide in the yen, which is close to a four-decade low. A volatile yen could be bad news for the global bond market: Japan is a major buyer of U.S. Treasury bonds and notes. Separately, the Treasury Department temporarily lifted sanctions on Iran, giving it a 60-day permit to sell its oil. An Apollo Global private credit fund faces a wave of redemption requests. The private equity giant said it would cap redemptions at the $26 billion Apollo Debt Solutions fund. It’s the latest private credit vehicle to confront investor requests to withdraw capital amid concerns about the health of the sector. Google takes a stake in the movie studio A24. The tech giant is investing about $75 million, according to The Wall Street Journal, as part of a partnership between A24 and Google’s DeepMind artificial intelligence division. It’s the first time Google has taken a stake in a movie studio; it will provide A24 with A.I. tools, but won’t have a say in creative decisions or be able to train its models on A24 titles.
The Greenspan effectTributes have poured in for Alan Greenspan, perhaps the most influential Fed chair ever, who died yesterday at age 100. Fed watchers are examining his legacy as it continues to shape the central bank and Wall Street today. A look back: Greenspan was a longtime Washington power player who advised Richard Nixon, Gerald Ford and Ronald Reagan, but also won over many in the Clinton administration. He was an economist, but also a data geek, a crisis firefighter and the first celebrity central banker (as fans of “The Simpsons” will recall). He played mind games with journalists, teased lawmakers, played the saxophone, befriended the free-market defender Ayn Rand and did some of his best thinking in a bathtub. Greenspan invented the famously cryptic “Fed speak” during his 19-year tenure as Fed chair. Chief among his aphorisms was this timeless question: “How do we know when irrational exuberance” is inflating asset prices? Such coinages “are now part of the vernacular,” Greg Ip wrote in The Wall Street Journal yesterday. Ip added: “The unelected Greenspan was in many ways more influential than the elected people who kept reappointing him. This was first, because he was successful.” Yet the “maestro” had a mixed record:
“Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” Greenspan testified to the House Committee on Oversight and Government Reform in 2008. It all came down to Greenspan’s laissez-faire approach. That “light touch was enough to contain” the shocks he encountered in the 1980s and 1990s, the author Roger Lowenstein wrote in a Times Opinion guest essay yesterday, “but not the larger one to come.” Greenspan’s legacy lives on. Kevin Warsh, the new Fed chairman, appears downright Greenspan-ian, Fed watchers note. In pursuing a “reform-oriented” agenda, Warsh said he wants to bring back a minimalist communication style that harks back to his predecessor. Warsh also sees technology like artificial intelligence making the U.S. economy more efficient, opening the door to lower interest rates. Greenspan viewed the PC boom in the 1990s in a similar way.
Red alertMuch of Europe is under a red alert for heat, with temperatures set to shatter records this week. (Paris, for example, is expected to suffer triple-digit temperatures today and tomorrow.) Extreme weather is taxing power grids and transport networks, driving up health care costs and spoiling tourists’ vacations. This heat wave comes amid a renewed debate over the economic consequences of climate change and how much people are willing to spend to combat it. Climate change could cost the global economy trillions, economists calculate. Scientists warn the fallout could get worse in the decade ahead. Yet there are signs that investment in climate mitigation is slowing. That’s even as Michael Bloomberg, the billionaire who donates to green causes, was set to make a $590 million pledge for various initiatives at London Climate Action Week this week. Global public and private investment in climate finance — including for projects to make cities greener and cooler, decarbonize architecture and move toward renewable energy — hit an estimated $2.1 trillion last year, according to the Climate Policy Initiative, a nonprofit climate advocacy organization. There’s a catch. “Climate finance is growing, but not fast enough,” the group wrote in its most recent climate funding report. Funding for climate start-ups is also drying up. Global venture capital financing for the sector has declined since 2021, according to PitchBook data, as investors make bigger and bigger bets on artificial intelligence.
But many companies are dialing back their net-zero pledges, while strapped governments have let expire or killed many taxpayer-funded initiatives, including the Biden administration’s climate plans. Households and consumers are picking up the slack, according to the Climate Policy Initiative. In 2024, households and other private market participants invested $332 billion in climate-mitigation and low-carbon solutions, accounting for roughly 60 percent of total spending.
Upping the ante in the A.I. talent warGoogle’s stock tumbled yesterday after two of the company’s star artificial-intelligence researchers said they were leaving to join its A.I. rivals Anthropic and OpenAI. The reaction is the latest evidence that the battle for elite talent is central to winning the A.I. race. That contest is only getting more cutthroat after the record-breaking I.P.O. of Elon Musk’s SpaceX, and the expected public offerings of Anthropic and OpenAI later this year, Niko Gallogly reports. Raiding the Googleplex. Google has made huge strides in the A.I. race with its Gemini model in recent months. But it’s losing two senior executives:
Wooing the best A.I. engineers now requires a white-glove approach. Companies treat the recruiting of A.I. researchers “like an executive search,” David Paffenholz, a founder and the chief executive of the A.I. recruiting platform Juicebox, told DealBook. The roles command salaries of seven figures or more. And founders, investors and recruitment teams work together to identify and attract top talent, like Ph.D. researchers, engineers at rival labs and start-up founders. SpaceX made a statement with its purchase of Cursor. Just days after his company’s market value soared past $2 trillion in its I.P.O., Musk snapped up the hot A.I. coding company for $60 billion in an all-stock transaction. It’s not clear how Cursor might be integrated with xAI, SpaceX’s A.I. lab. But SpaceX is signaling that it’s serious about competing for top engineers — and that it has the cash to do so. More than the money: Leading A.I. companies have plenty of capital to throw at talent. That means recruits are often betting on which major A.I. lab they see as leading the A.I. race, Chris Vasquez, a founder of the A.I. recruiting firm Quantum, told DealBook. By that measure, Anthropic and OpenAI may be the best positioned to find and retain top talent, for now. “We’ve poached a lot out of xAI and a lot out of Google,” Vasquez said, but “OpenAI and Anthropic are still very hard to poach from.” We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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