Business

1. A slower frontier is fine
2. Commerce clips Kalshi
3. Time to fix balance sheets
4. Walmart’s GLP-1 coaches
5. Equities in Lagos (and Dallas)

Another AI doomsday exit post … Odds of a Fed rate hike soar to 92%

Chuck Prince, CEO of Citigroup from 2003 to 2007, is remembered for one quote that captured the greed and spinelessness of Wall Street bosses chasing riches while steering the global economy toward a cliff: “As long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

Today’s music is AI, not subprime mortgages, and it’s still playing. But this crop of Chuck Princes seems willing to consider stepping off the dance floor. I’m still not sure what Dario Amodei’s idea to “pace the frontier” actually means in practice — slower Wi-Fi at the Anthropic office? Tying the developers’ shoelaces together? — but it’s clearly a warning issued at the cost of some short-term riches, which is more than Prince ever managed.

Prince knew how dangerous Wall Street’s subprime addiction was but couldn’t quit. Some peers knew too, and quietly did: JPMorgan began exiting subprime lending in late 2006, and Goldman Sachs’ strong-arm collateral demands ensured it was not stuck holding what Jeremy Irons’ Dick Fuld-esque character in the film Margin Call would later call “the biggest bag of odorous excrement ever assembled in the history of capitalism.”

Both firms paced their own frontiers. Neither did anything to stop the overall machine. The loudest alarms back then came from outsiders — misfit investors like Michael Burry and academics like Raghuram Rajan — who got plenty of grief for their candor.

The calls this time are coming from inside the house.

The impact of a slower frontier

A slowdown on the AI frontier would barely register for big companies working to adopt AI, for the simple reason that they are nowhere near the frontier.

“Even if the technology stops advancing — turn ‘pacing the frontier’ into ‘halt the frontier’ — we have a decade-plus of diffusion of benefits into the economy with the technology as it exists today,” said Chris Taylor, CEO of Ode, the $1.5 billion joint venture between Anthropic, Blackstone, Hellman & Friedman, and other investment firms that is focused on implementing AI inside big companies.

Corporate use of cutting-edge models has fallen in recent weeks, according to data from Ramp, as companies realize most of their challenges — onboarding customers, iterating prototype tweaks — can be accomplished with older AI models that cost less (and don’t carry civilization-ending risks). Even Microsoft last month switched many employees to less-powerful models.

Kalshi pressured on AI compute futures

The US Commerce Department last month ordered Kalshi to take down one of its products tracking the price of AI compute, the crucial power from data centers that’s driving the artificial intelligence boom.

Commerce officials cited national security concerns when they told Kalshi to unpublish its AI-compute future curve, which pulls together data from several markets that allow users to bet on the cost to rent Nvidia chips, people familiar with the matter. Kalshi quietly complied, though many underlying markets remain open for trading. It was a rare intervention that surprised an industry used to White House enthusiasm for both AI and financial-market innovation. Kalshi declined to comment. “This story is false,” a Commerce spokesman said.

It’s unclear why Commerce is worried about the nascent market, which aims to do for AI what oil futures do for crude — let buyers and sellers of compute lock in prices, and give traders a way to bet on where those prices go. One potential concern is that compute futures could be manipulated, which might destabilize AI stocks and debt markets. Some of these markets are thinly traded, which could lead to volatility even without bad actors.

— Reed Albergotti and Liz Hoffman

Slowing AI could boost balance sheets

Any slowdown in AI spending would let hyperscalers catch their financial breath and ease their reliance on borrowing to fund their buildouts.

A Semafor review of analyst estimates finds that at current projections, as tracked by S&P Capital IQ, Amazon, Alphabet, Meta, and Microsoft are expected to spend $66 billion more on capital spending (nearly all of it AI-related) than they earn in cash from operations over the next six quarters. Debt, stock sales, and complex deals that shift that spending off their balance sheets are filling the gap. Even a 10% pullback in capex flips that to a $74 billion surplus; a 20% pullback puts them more than $200 billion in the black.

These companies might still choose to tap outside funding — “always spend other people’s money” remains a cardinal rule of corporate finance — but they wouldn’t be forced to. They could spend some time rebuilding balance sheets that have become stretched by breakneck spending or restoring stock buybacks that have largely been sacrificed on the AI altar.

Semafor is expanding its coverage of healthcare with a new weekly briefing led by veteran healthcare journalist David Lim. At the intersection of politics, policy, and business, Semafor Healthcare will bring clarity to the forces shaping the industry, explaining how decisions in government affect the private sector and global economy. The briefing will go beyond the headlines to show what is really driving health policy in the US and around the world.

Each week, readers will get original reporting, scoops, and analysis on the people and institutions driving change across healthcare, from policymakers and major companies to scientists, investors, and technology leaders.

Walmart hires GLP-1 coaches

Walmart wants to coach Americans on using GLP-1s. The chief medical officer for the retailer, which is the third-largest pharmacy operator in the US, told Semafor at its Future of Health Forum Tuesday that it’s adding trained pharmacists to some of its stores to counsel shoppers on the medications, as well as nutrition, sleep, and stress management.

The share of Americans taking GLP-1s jumped to 11% this year, up from 3% two years ago, according to Gallup. While conventional wisdom holds that grocery stores and retailers would be hit, it is leaning into the change. Walmart’s original admission three years ago that customers taking GLP-1s spent less on food sent shares down across the sector. Walmart became Lilly Direct’s first in-store pickup pharmacy last year, offering discounted GLP-1s to Walmart customers. And in August, it said the drugs made a material impact on its health and wellness sales, which are now growing faster than its grocery sales.

— Shelly Banjo

Africa’s biggest IPO to test capital markets

Africa’s biggest-ever IPO will test the continent’s resurgent capital markets. Refining giant Dangote is aiming to raise more than $4 billion at a value of $50 billion, which means it would account for up to 40% of the total value of Nigeria’s stock exchange when its shares start trading, Semafor’s Alexander Onukwe reports from Lagos.

Global capital-raising is finding new homes: Big UK companies are relisting in New York, US tensions are pushing some Asian listings to Hong Kong, and NYSE’s Texas outpost is getting some real traction, with its first true primary listing. (Previous listings had been secondary to the flagship exchange in New York, easily dismissed as political window-dressing.)

IPOs are also finding new ways to reach new buyers. Robinhood is helping underwrite Oura’s IPO, giving the company access to millions of day traders directly. Similarly, Dangote is seeking to court retail investors, giving millions of Nigerians their first exposure to the stock market.

Read between the headlines. Underneath every jobs report, Fed statement, and earnings call is a thematic current that explains where the economy is headed. The trouble is, most finance coverage never gets past the headline. The Daily Upside cuts past the headline with sharp, context-driven reporting in a free, five-minute morning read. Start reading.

➚ BUY: Toronto. Wall Street elite including BlackRock’s Larry Fink and KKR’s Joe Bae attended an inaugural investment summit in Canada, Mark Carney’s answer to US trade provocations.

➘ SELL: Ontario. The US National Weather Service started the process of changing map names to Lake America.

Companies & Deals

• IP: China’s well-documented habit of inviting US companies in and cribbing their business models now extends to … blueberries, per a WSJ deep dive.
• Purloined: Polish oil refiner Orlen handed $230 million to a Dubai trader chasing sanctioned Venezuelan oil, and lost nearly all of it to questionable Caracas middlemen and USB-stick crypto handoffs, the FT details. It ended up with almost no oil and a criminal case.
• SPCXTSLA: Elon Musk floated again the idea of merging Tesla and SpaceX. “Great question,” Musk responded when asked why the two are still separate at the All-In Summit. “Who could imagine what action one might take when there’s so much close collaboration in so many areas?”

Markets

• Job drama: A record share of Americans are worried that technology will take their jobs, new Gallup data finds, a small price to pay if it destroys humanity in the end anyway.
• Hike hype: US Treasury yields hit another record high as the Fed’s interest rate decision looms.