Business

1. ICE to target employers
2. Another Boeing crash
3. Bessent defends ‘revenge tax’
4. Pizza LBO with a Gulf twist
5. Wall Street’s recruiting pause
6. AI swallows Cannes
7. A PE playbook, tested
8. Spheres of influencers

UK’s Poundland sells for less than that…

“There are five ways out,” David Rubenstein told me in Washington this week, ticking through America’s options to deal with its $36 trillion national debt.

The Carlyle co-founder was a debt hawk before it was fashionable, sounding the alarm in the post-2008 days of free money and Barack Obama’s technocratic optimism. The political center has shifted Rubenstein’s way with startling speed, hastened by President Donald Trump’s deficit-widening tax cuts.

“One, you cut spending, but no one wants to do that,” he told me. “Two, you increase taxes, and we don’t like to do that. Three, you can go to the IMF for a bailout,” at which point I realize we’re entering strange territory. “Four, you can say [to your creditors] ‘Look, we’re sorry’ and default.” Uh oh.

The fifth option is for the economy to grow its way out of the hole. It’s a bet that a combination of AI, tax cuts, AI, energy independence, and AI will unleash productivity gains not seen since the 19th century and let America’s earnings catch up with its borrowings. It’s first-year business-school math: how much debt a company carries relative to how much money it makes. When that ratio gets too high, as America’s is now, you can either decrease the numerator or raise the denominator.

But big economies grow slowly. “We’re talking about a $28 trillion economy,” Rubenstein said. “Can you grow it at 5% or 6%?” Excluding the pandemic snapback, the US economy hasn’t strung together consecutive quarters of annualized 4% growth since 1999, when the economy was less than half the size it is now and deep into a stock market bubble.

The Trump administration economic advisers are annoyed at this line of reasoning. They say a 3% growth rate is more than sufficient to shrink the debt over time. Maybe because of Silicon Valley’s influence on the White House, they’re more bullish on AI and more likely to see it ushering in a “fourth industrial revolution.”

I’m not an economist, or Semafor’s AI expert. (Sign up for Semafor Tech, written by my colleague Reed Albergotti!) I’m only pointing out that even Trump’s critics and allies seem to agree that the US’ best shot to defuse a debt bomb is the same thing overleveraged private-equity portfolio companies will say this year when creditors come knocking: AI, trust us.

Plus: Semafor’s Ben Smith and Max Tani are heading to Cannes next week for media and marketing’s biggest event. Whether you’ll be on the Côte d’Azur or just want to keep up on yacht talk, subscribe to Semafor Cannes.

Trump border czar: ‘massive’ employer crackdown

The Trump administration will civilly and criminally prosecute companies that have employed migrant workers, White House border czar Tom Homan said in an interview with Semafor’s Ben Smith Wednesday, a new dimension of risk for executives.

“Worksite enforcement operations are going to massively expand,” he said. “They’re coming here for a better life and a job and I get that… If they can’t get a job, most of them aren’t going to come.”

Putting heat on employers that, knowingly or not, depend on undocumented workers would shake huge segments of the US economy and undercut two of Trump’s campaign promises: make housing more affordable and keep food prices down. As we reported Tuesday, almost a quarter of construction workers and as many as half of meatpacking workers lack legal status.

Further reading: Stepped-up immigration enforcement is pressuring brands that rely on Latino customers, WSJ reports, as shoppers stay home rather than risk getting caught in a dragnet. Coca-Cola, Colgate and Constellation have all felt the hit.

Indian plane crash renews Boeing worries

A fresh tragedy has reignited concerns about Boeing and clouded the tenure of its new CEO. An Air India Dreamliner crashed Thursday morning, killing more than 200. It’s the first serious challenge for Kelly Ortberg, who took the top job in August with a mandate to restore the company’s engineering prowess and safety culture. Shares fell more than 5% in morning trading Thursday.

Customers will be keeping a sharp eye on the fallout. “I do think Boeing has turned the corner,” United CEO Scott Kirby, who was one of the jetmaker’s loudest critics during its safety lapses, said at Semafor’s World Economy Summit earlier this year. “It’s not gonna happen overnight, you know. It’ll take decades to get there.”

Bessent defends ‘revenge tax’

Treasury Secretary Scott Bessent defended a provision in the Trump-supported megabill that has Wall Street on edge. Dubbed the “revenge tax,” it would apply to US investments by foreigners from countries that tax digital services offered by US companies — like the UK’s 2% digital service tax or Poland’s 1.5% levy.

The proposed tax, which would start at 2% and go as high as 20%, “will allow us to prevent our corporate revenues from being drained into foreign treasuries, and that is in the hundreds of billions of dollars,” Bessent testified Wednesday.

The administration’s tariff policy has mostly focused on goods, in the hopes of reviving American manufacturing and securing supplies of critical hardware like semiconductors. But the US’ biggest export is its brainpower, in the form of streaming apps and financial advice.

On Wednesday’s upbeat inflation report: Economists say prices haven’t yet risen because companies stockpiled inventories ahead of Trump’s tariffs. But those looking for evidence of a tariff-wrecked economy will have to keep waiting.

A $2B pizza deal draws Qatari royal

Apollo and an investment fund backed by a member of Qatar’s royal family have offered $2 billion to buy Papa John’s, people familiar with the matter told Semafor’s Rohan Goswami. It’s an unlikely pairing: Apollo, one of Wall Street’s deepest pockets; and Irth Capital, which is backed by Sheikh Mohamed “Moe” al Thani and managed just $190 million as of Dec. 31, regulatory filings show. With Papa John’s stock trading around $48 a share before Semafor’s scoop Wednesday, the consortium made a bid in the low $60s, people familiar with the matter said.

Wall Street’s recruiting détente has an AI shadow

Finally, a pause in the Wall Street recruiting frenzy. Apollo told prospective investment-banking candidates that it won’t interview or extend offers to the class of 2027 this year, Bloomberg reports, after bank executives complained about investment firms raiding their junior employees.

If others follow, the move would restore a bit of sanity to a process that has become nonsensical over the past decade, with private-equity firms dangling future-dated job offers to grads just weeks out of college. JPMorgan has complained loudly about the practice, which CEO Jamie Dimon has called “unethical,” and threatened to fire anyone who accepted such an offer.

But there’s another angle worth watching: Financial firms are grappling with how AI will change their need for junior employees, whose bread-and-butter work — making PowerPoints, running Excel models — is already being done by AI agents. Delaying their recruiting buys time.

AI anxiety at Cannes Lions

Brands and the media companies hungry for their advertising dollars are heading to the French Riviera next week for the Cannes Lions conference. But the gathering was swallowed years ago by Big Tech, whose AI rush will define the next age of advertising.

It’s not just anxiety from creative types. Rather, the rise of AI has given a retroactive purpose to the dominance of Meta, Google, and, to a degree, TikTok, which together control about half of digital advertising. It used to be conventional to complain that “the best minds of my generation are thinking about how to make people click ads,” but it turns out the real product these tech giants were building was AI.

Their ad revenue has funded Nobel-winning breakthroughs in AI at Google and underwritten the nine-figure salaries Meta is reportedly dangling in front of top AI talent. Some of that money will trickle down to lavish beachfront parties next week on the Riviera, where the industry’s other players — the big advertising companies, the publishers, and smaller tech firms — bicker over the crumbs.

— Ben Smith

An $8B test of PE’s rollup playbook

A private-equity playbook is about to get tested. Hellman & Friedman and Warburg Pincus are seeking a buyer for Edelman Financial Engines, a network of financial advisors they built by acquiring small teams and solo operators. The $8 billion asking price, related by people close to the process, struck a few bidders as ambitious.

Edelman is a classic roll-up — a trendy PE strategy but one that hasn’t been validated by big exits. The idea is to combine mom-and-pop establishments into sizable companies with centralized purchasing, smarter sales tactics, better technology, and fatter profits. There are optometry rollups, carwash roll-ups, laundromat roll-ups, and multiple financial advisory firm roll-ups, of which Edelman is the oldest and one of the biggest.

The question: Now what?

China’s ‘influencer diplomacy’

China is beckoning American influencers to show off its technology and culture — while the US has expelled the world’s most-followed TikToker. A new Chinese initiative will pay for US influencers to visit and collaborate with local counterparts, in what is both an investment in soft power and a domestic propaganda coup. State outlets praised a recent visit from YouTuber IShowSpeed, whose six-hour video from Shenzhen has nearly 9 million views, for showcasing “authentic” life in China, Bloomberg wrote.

Elsewhere: US authorities recently detained the world’s most popular TikToker, Italian citizen Khaby Lame, who left the country after being reported by a rival influencer who is friends with Barron Trump.

— J.D. Capelouto

The media industry has spent the last decade talking about its own decline — but where is it actually headed? This week on Mixed Signals, Ben kicks off a special three-part crossover with Peter Kafka of Channels and Brian Morrissey of The Rebooting. In Part One, the three discuss the future of media bundles, misplaced cable nostalgia, and whether journalism is better, or just lonelier, outside of institutions.

Listen to the latest episode of Mixed Signals now.

➚ BUY: Friends. China pledged to cut tariffs on almost all African countries, seizing on Trump’s trade wars to deepen its economic ties with the continent.

➘ SELL: Family. A Walmart heiress surprised company executives by taking out full-page ads urging people to attend anti-Trump rallies this weekend. The break has echoes of Abigail Disney, whose activism has needled the media giant her grandfather founded.

Companies & Deals

• Bitter pill: Fierce lobbying and a “save-our-pharmacies” text campaign by CVS didn’t stop Louisiana legislation that will ban pharmacy benefit managers from operating pharmacies. A similar bill in Arkansas takes effect next year. State crackdowns are a bad omen for CVS and rivals Cigna and UnitedHealth, as they fight a federal antitrust lawsuit. A Federal Trade Commission investigation found they favored their own pharmacies over independent ones, which are closing at an alarming rate.
• McFakes: McDonald’s left Russia along with most Western companies after Vladimir Putin invaded Ukraine. Now the local company that operates look-alike restaurants, where Big Macs are Big Hits, is lobbying Putin not to let international brands return, warning of foreign control. McDonald’s Pushkin Square opening in 1990 symbolized a post-Soviet Russia open to the world, a sharp contrast to the nationalist, suspicious, and corrupt workings of Putin’s wartime economy.
• Electric feel: BYD launched its cheapest and smallest electric vehicles yet in Europe, as the EV price war deepens. After years of cars getting bigger, compact is back.

Markets

• Vigilante check: The US Treasury will test investors’ nerves with a $22 billion auction of 30-year bonds today. Trump’s proposed tax cuts have rattled bondholders, who will be expected to pay for them. Wednesday’s auction went smoothly, though Carlyle’s top investment strategist, Jason Thomas, said that Treasury can lean on bidders when it wants to: “There’s a lot of attention here,” he told Semafor. “Generally bad auctions happen when people aren’t paying attention.”

A big chunk of Meta’s $15 billion investment in Scale AI requires the startup to provide future work to Mark Zuckerberg’s firm, two people familiar with the matter told Semafor’s Reed Albergotti.

The deal reflects how companies pushing the boundaries of AI are racing to gather more training data that can be used to improve the capabilities of AI models, and is a masterful move by Zuckerberg, Reed notes.