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Good morning and happy Monday.
Don’t hate me because I’m beautiful. Google on Friday appealed a federal court ruling that found it holds illegal monopolies in online search, saying it “prevailed in the marketplace fair and square.” Last year, Judge Amit Mehta ordered Google to stop entering into exclusive search contracts and to share some data with competitors, potentially including upstart artificial intelligence rivals.
Google says the agreements in dispute weren’t anticompetitive because it developed a “superior search engine” that people simply prefer using. And it took particular umbrage at the notion that it should share its secret sauce with AI firms. Noting many of them “didn’t even exist” during the period covered in the case, the company said they “are already succeeding as wildly as any technology in human history without any need to free-ride on Google’s success.”
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Photo via Weston Hancock/ZUMAPRESS/Newscom
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Like one family destined for Acadia National Park and another bound for Yosemite, consumers and financial markets entered the Memorial Day weekend heading in opposite directions. A reading of consumer sentiment tracked by the University of Michigan fell to an all-time low on Friday, while the Dow Jones Industrial Average closed at a record high.
This morning, at least, there’s enough cautious optimism to fuel a road trip for everyone. The US and Iran signaled over the weekend that peace talks have yielded a potential deal, something that would ease the inflationary shocks unleashed by a nearly three-month-old conflict. International oil benchmark Brent crude is down 5.8% this morning to $97.47 per barrel, on track for its lowest close in a month.
Under Pressure
President Donald Trump said Saturday that the US, Iran and other countries have “largely negotiated” a memorandum of understanding for a Persian Gulf peace deal that would reopen the Strait of Hormuz. While it’s not the first time the White House has suggested the conflict is near a resolution, Iran’s semi-official Tasnim news agency confirmed the talks on Sunday while warning that sticking points, like the unfreezing of Iranian assets, could block a deal.
Overall, it’s a breakthrough at a moment when experts warn energy markets and consumers are near their breaking points. Fatih Birol, the head of the International Energy Agency, said last week that oil markets could hit a perilous “red zone” by July or August if the two sides fail to make progress on reopening the Strait, where a quarter of the world’s seaborne oil trade flows. Fourteen million barrels of oil per day have disappeared from the market since the conflict began on February 28, he said, and production won’t recover for at least a year. Wood Mackenzie analysts warned of $200-a-barrel oil by year’s end. Meanwhile, US consumers, now paying an average of $4.51 per gallon to fill up their gas tank, “appear worried that inflation will increase and proliferate beyond fuel prices, even in the long run,” said Joanne Hsu, the director of the University of Michigan Survey. The prospect of a deal has meant a good day for global stocks:
- With crude oil prices falling, import-reliant Asian markets were in full swing on Monday. Japan’s Nikkei rose 2.9% and topped 65,000 for the first time.
- Futures contracts on the S&P 500, which is currently on an eight-week winning streak, were up 0.9% early this morning.
  Headlines vs. Barrels: A good rule of thumb: Don’t count on a deal until there is one. Last week, Ole Hansen, the head of commodities at investment bank Saxo, cautioned against “reacting to diplomacy headlines” without considering other factors. “Unless those headlines translate into a meaningful increase in physical flows, price weakness risks will continue to be driven more by expectations than fundamentals. Futures trade on headlines; physical markets continue to trade on barrels.”
Written by Sean Craig
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Photo via Tello
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Photo via Abaca Press/ANDBZ/Abaca/Sipa USA/Newscom
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On Thursday, Big Three automaker Stellantis announced a sweeping €60 billion ($69.6 billion) revival plan that includes introducing 60 new models this decade.
Naturally, its New York-listed shares made only limited gains through the end of the week, while rival Ford, which didn’t make any major announcements, rose 9.2%. Wait, what? Shift into reverse gear for a moment.
Markets and Models
Stellantis reported a $26 billion loss last year related to its retreat from electric vehicles while also marking its unlucky seventh year in a row of declining sales. That’s left investors looking to new-ish CEO Antonio Filosa, whose appointment was announced exactly a year ago today, for a turnaround plan.
At an announcement last week, Stellantis executives said 70% of investments over the next five years will go into the tanks of its high-profile Fiat, Jeep, Peugeot and Ram brands, and commercial vehicle division Pro One, which have “the highest potential for profitability.” The plan appears designed to address Stellantis’ patchwork evolution: The company formed out of a 2021 merger between France’s PSA Group and Fiat Chrysler, itself the product of a 2014 merger between Italian and US automakers. Different markets will have different goals, depending on demand and growth prospects. The company’s US brands, for example, will debut 11 new models and update a dozen more, and aim for a 35% sales increase in North America. Affordability will be a key focus, with nine vehicles priced under $40,000, including two Chryslers under $30,000. In Europe, the growth target is just 15%. Which doesn’t answer the question: What got people so excited about Ford?
- Earlier this month, Ford announced the launch of an energy subsidiary, including the redeployment of EV lithium-ion battery capacity to building energy storage systems for US data centers and utilities. Last week, a North American unit of French electricity giant EDF Group signed on as its first customer.
- General Motors is pursuing a similar line of business, and Tesla has had an energy business for years. Stellantis, meanwhile, agreed earlier this year to sell its stake in a Canadian battery plant to LG Energy Solution.
Too Great Expectations: Against that backdrop, it’s not hard to understand the muted reaction to Stellantis, whose Paris-listed shares fell 1.7% the day the turnaround plan was announced, then gained 3% Friday. Its growth goals are ambitious, given analysts expect global auto sales to rise only slightly in the coming years. Roland Berger estimates they will climb an average 1.1% annually to 2040, and that North America, Europe and Japan are near “peak auto.”
Written by Sean Craig
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The Trump administration set aside $2 billion in grants for quantum companies that could shape the next wave of tech while making the US government a minority stakeholder in the selected companies.
Half of the $2 billion will be split among quantum-focused companies including GlobalFoundries, Infleqtion, Rigetti Computing, and D-Wave Quantum, all of which saw their shares surge last week.
The other half will go to IBM, which plans to match the funds with $1 billion of its own cash. IBM will put that pile to work building a standalone quantum foundry called Anderon to fast-track its quantum ambitions.
Quant-pocalypse or Quant-portunity?
IBM is leading the pack with plans to build a fault-tolerant quantum computer by the end of the decade. Much of the chatter around the futuristic tech focuses on its ability to break modern encryption. That event, called Q-Day for extra drama, would put all encrypted systems at risk. A site called the Quantum Doomsday Clock says Q-Day is the end of the military, government, e-commerce, healthcare, and more.
But Q-Day’s not all doom and gloom. Experts expect quantum computers will be able to do a lot more than hack secure systems:
- IBM’s CEO, Arvind Krishna, said that quantum is currently where AI chips were a decade ago, and that the quantum sector has the potential to generate billions of dollars annually by the mid-2030s. Besides bringing in money, quantum computers could help discover new drugs by rapidly running simulations, Krishna said.
- Quantum could also help conduct financial analysis, optimize supply chains, and become the basis for a better version of GPS.
The Art of the Deals: The Trump admin’s investment is similar to last year’s funding of rare-earth startups that supply the materials to make advanced chips and other tech. The way the deals secure a minority stake in the companies has raised red flags about putting people’s tax dollars into new markets. Sprinkling funds among many companies within each sector could help mitigate the risk. But some companies were notably absent from the government’s quantum awards, including Google, IonQ and Microsoft, which could put them and taxpayers at a disadvantage.
Written by Jamie Wilde
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- Lauding Lauder: Shares of Estée Lauder surged last week when the cosmetics giant ended merger talks with Puig, the company behind Charlotte Tilbury makeup.
- Popping In: Since Starbucks began offering the kettle corn flavor of Khloé Kardashian’s protein popcorn, Khloud, its popularity has skyrocketed elsewhere.
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