Good morning. It’s fair to say that Stellantis is rarely at the forefront of AI conversations.
But as the owner of a Fiat 500—by far the most popular vehicle among the mechanics at my local shop, though not for its technological prowess—I’ve been wondering what the automaker might come up with in this area, given its more pressing operational issues.
Colleague Nick Lichtenberg spent some time with the company to see what’s cooking in Auburn Hills, Michigan. His report is a good look at how one of Detroit’s Big 3 automakers is trying to embrace the future—whether through people, process, or technology—in a capital-intensive business that works on six-year product cycles.
“Some of the stuff we want to do, we can do today,” one exec told him. “And some of the stuff we want to do, we cannot.” (Amen, brother.)
Today’s tech news follows. Have a productive day. —Andrew Nusca
Thoughts? Suggestions? Hot tip? Drop me a line.
THE BIG STORY
The AI boom hits a wall on Wall Street
The seemingly endless gusher of capital that’s been showered on Silicon Valley during the AI boom may be coming to an end soon as Wall Street pushes back on massive spending plans.
Following a brutal selloff in tech stocks over the past week, OpenAI slashed the target on its latest fundraising round to $20 billion from $30 billion, sources told the Financial Times, and cut its expected valuation to $1.25 trillion from $1.4 trillion.
The funding round was also upstaged by Anthropic, according to the report, as OpenAI’s arch-rival prepares to go public next month. Ahead of its IPO, Anthropic filed an S-1 on Monday that showed revenue has soared and its cash flow turned positive in the first half of this year.
The timing couldn’t have been worse. Quarterly earnings reports from hyperscalers this week spooked investors. Alphabet saw its cash flow sink deeper into negative territory in the third quarter, with the Google parent also joining Meta and Amazon in charging ahead with massive spending plans. On Thursday, Alphabet fell about 12%, its worst day on record.
To be sure, there were other positive signs in addition to Anthropic’s bullish S-1. Microsoft reported strong cloud growth and stayed cash flow positive, though it said its capital spending will accelerate, while AI chip maker SK Hynix blew away earnings forecasts.
But the narrative had already turned bearish, especially after AI debt fears sent shares and bonds of “neocloud” companies tumbling earlier this month.
The prospect of hyperscalers continuing to hemorrhage funds was too much for S&P Global, which cut its outlook on Meta to “negative” from “stable” late Friday, citing negative cash flow and uncertainty around capital expenditure plans.
The credit ratings agency maintained Meta at AA- but warned the social media leader’s leverage could top 1.0x as soon as 2027, which is the downgrade threshold for the current rating.
The bearish environment on Wall Street also comes as rising bond yields have sent borrowing costs sharply higher, the political backlash against data centers is expected to help Democrats retake Congress, and the Iran war could re-escalate after midterm elections.
Still, some bullish voices aren’t convinced the AI boom is about to go bust, and even think some retrenchment is a good thing.
According to market veteran Ed Yardeni, the AI investment boom faces financial, physical, and political constraints. If any of these constraints worsen, stocks could dive further, especially considering that AI is now a major driver of corporate earnings and GDP growth, he wrote in a note this week.
“However, we view these constraints as healthy for the durability of the AI boom!” he wrote, adding: “Further AI jitters therefore could set up buying opportunities rather than signal the end of the boom.” —Jason Ma
THE BLIND BOX
“We are no longer proving a concept; we are scaling a commercial reality.”
THE RUNDOWN
—Out: “Data centers.” In: “AI compute campuses.”
—The $6.3 billion Binance hack is linked to an elite North Korean hacking team, per the FBI.
—Meet Castelion, the $13 billion startup racing to close America’s hypersonic gap.
—Were freezer failures at U.S. military commissaries in August related to French supermarket fridge outages in October?
—Anthropic is offering $350,000 to $850,000 base salaries for staff software engineers.
—Saudi Aramco acquires a 49% stake in Humain. Saudi Arabia's PIF retains a 51% stake in the Riyadh AI startup.
—Unlike the U.S., Brazil offers tax breaks and cheap power to data center providers.
—Orbital data centers can cost 100X more than Earth-based ones, per Google's data center energy chief.
THE PARTING SHOT
Apple CEO John Ternus has yet to meet President Trump. In case you were wondering!