Good morning. Andrew here. The unusual arrangement between the White House, Nvidia and Advanced Micro Devices to collect 15 percent of the tech giants’ revenue on certain chips sold to China continues to raise eyebrows. We dive deeper into that — and look at how such an arrangement might expand to other companies, too. We also share some of your insightful takes on the debate. And don’t miss our rundown of who may be starring in what increasingly looks like a reality TV show that could be called “The Apprentice — Fed Edition,” as we assess the possible candidates for the next Fed chair. More below. (Was this newsletter forwarded to you? Sign up here.)
‘Rational industrial policy’?Since Inauguration Day, C.E.O.s have made the pilgrimage to the White House to shake hands with President Trump on big-money deals — proof, he says, that “America is back.” But the business world and Washington are still reeling over one pact in particular: Trump’s announcement this week granting the chipmakers Nvidia and Advanced Micro Devices permission to resume selling some powerful semiconductors to Chinese companies in exchange for giving the U.S. government an expected 15 percent cut. The apparent green light alarmed some China hawks and national security experts, who worry it could ultimately harm America’s tech industry, and the country. Beyond that, DealBook and others have asked, is this just a one-off business arrangement unique to the giants of the chips industry, or Trump’s new rules of global capitalism? Think of it as both, Scott Bessent said. “I think we could see it in other industries over time,” the Treasury secretary told Bloomberg TV yesterday. “I think right now, this is unique, but now that we have the model and the beta test, why not expand it?” He played down security concerns, arguing that the chips in question — Nvidia’s H20 and AMD’s MI308 — were “levels down the chips stack.” He also said that “we would not sell any of the advanced chips.” The legality of granting a company export permissions in exchange for a piece of sales is unclear. At its worst, it is akin to a shakedown, some trade experts say. “This isn’t rational industrial policy. This is intervention into who runs companies and threatening businesses with penalties if they don’t do what Trump says,” Ann Harrison, a former dean of the Haas School of Business at the University of California, Berkeley, told The Times. “He’s micromanaging.” Andrew asked DealBook readers to weigh in this week. Here’s what a few of you had to say. (Some responses have been edited or condensed for clarity.)
A chips setback reportedly forces DeepSeek to delay its new artificial intelligence model. The technical complication stems from the Chinese chatbot maker’s decision to shift from using Nvidia’s semiconductors to the less-powerful Huawei Ascend processor, The Financial Times reports. The snag underscores the potential significance of America’s top chips to China’s A.I. sector, and how import curbs could loom large in trade talks with Beijing. President Trump warns Moscow of “severe consequences” if it doesn’t agree to end the war in Ukraine. While the president changed his tone somewhat before his planned summit tomorrow in Alaska with President Vladimir Putin of Russia, he did not specify how he might try to persuade Moscow to halt its invasion of Ukraine. (He also appeared to downplay expectations for a breakthrough.) One of Trump’s objectives is to use the occasion to potentially swing a “quick second meeting” involving the Ukrainian president, Volodymyr Zelensky. Divisions grow over the Fed’s next move. Trump and Scott Bessent again called on the central bank to cut interest rates, with the Treasury secretary saying the benchmark lending rate “should probably be 150, 175 basis points lower.” But two members of the Fed, Austan Goolsbee and Raphael Bostic, said yesterday that they didn’t see the need for such aggressive moves with inflation high and the labor market robust, setting up more potential friction with the White House and investors. The swelling Fed short listThe list of candidates to replace Jay Powell seems to be growing by the day. The Trump administration is reportedly weighing nearly a dozen contenders for Powell’s Fed chair seat, according to CNBC, giving the selection process the look of an episode of “The Apprentice.” Treasury Secretary Scott Bessent, who has said he will handle the initial interviews before making his recommendations to President Trump, confirmed to Bloomberg TV yesterday that the field had grown to 10 or 11. Whoever emerges will have to contend with a weakening labor market, resurgent inflation and Trump’s repeated attacks on central bank independence. The seat is set to become vacant in May. But Trump said yesterday that he may announce his choice “a little bit early,” creating the prospect that a successor could play the role of a shadow chair seeking to undermine Powell’s messaging. Trump added that he was “down to three or four names.” Wall Street names are making the cut. Trump, the longtime real estate mogul, has made it clear he wants the central bank to lower interest rates early and often. That’s created friction as Powell and his colleagues have held rates unchanged since December as they wait out the potential inflationary effects of Trump’s trade war. Could the front-runner break that deadlock? Here are some of the newly reported contenders:
Also in the mix are Christopher Waller, a Fed governor appointed by Trump who has voted for lower rates; Kevin Hassett, a close adviser to Trump, and Kevin Warsh, a former Fed governor. Trump last week told CNBC that “both Kevins are very good.” (Both Hassett and Warsh have called for rate cuts.) Betting markets give Waller the edge. His odds this morning hovered around 28 percent on Kalshi, the popular prediction market platform. But Zervos and Bullard appear to be gaining ground, potentially closing in on Warsh to crack the top three.
“It’s hard to get 30 people for a corporate dinner to come to a plant-based restaurant.”— Daniel Humm, the chef of Eleven Madison Park, on his decision to bring meat back to the menu as some bookings declined. More than four years ago, the Michelin-starred restaurant jolted the fine-dining universe when it decided to go meatless in a climate-friendly move.
Ready for takeoff?For more than a decade, investment has poured into electric vertical takeoff and landing (eVTOL) aircraft, but the dream of such battery-powered “air taxis” that cut commute times and transport cargo has been mired in red tape. Now, as the White House vows to clear the regulatory runway, the sector looks poised to finally take off, Ian Frisch reports for DealBook. “A lot of the pieces are falling into place,” said Sergio Cecutta, a partner at SMG Consulting, who advises eVTOL makers. One of the biggest eVTOL manufacturers just signaled its confidence. Called Joby Aviation, it announced a deal last week to purchase Blade Air Mobility, a New York-based passenger helicopter company, for up to $125 million. Blade’s routes include the sort of short-distance jaunts best suited for Joby’s aircrafts, whose maximum travel distance is roughly 150 miles. Joby says it can ferry passengers to Kennedy Airport in Queens from Manhattan in seven minutes. NASA first conceptualized eVTOLs in 2009, but many start-ups that pursued the technology failed amid regulatory pushback. (The aircraft are not quite helicopters and not quite airplanes, so new regulations have to be written from scratch.) President Trump has signaled that he wants to remove that barrier. In June, he signed an executive order that directed the transportation secretary and the Federal Aviation Administration to establish an eVTOL pilot program to “accelerate the deployment of safe and lawful eVTOL operations in the United States.” Under its framework, eVTOLs could start operating by the end of 2026. But big obstacles remain. Aside from dealing with regulatory limbo, eVTOL operators must contend with infrastructure availability (launch-and-land pads currently exist only in bigger cities, and building more elsewhere will be costly) and convince residents who are already jaded by helicopter noise that eVTOLs are different (they are nearly silent at a cruising altitude of 1,000 feet). Most important, companies will have to stay solvent until mass adoption and profitability. “Some of the most advanced companies are burning $400 to $500 million a year,” Cecutta said. “And that’s only going to get worse once they are up and running.” We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
Deals
Politics, policy and regulation
Best of the rest
Thanks for reading! We’ll see you tomorrow. We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.
|
