Good morning. Andrew here. Will the Fed cut rates? That’s the question of the day — and we’ll get the answer this afternoon. We go deep on what could happen next. We also take a look at Meta’s A.I. strategy. And we do some math on just how much U.S. taxpayers could make off Nvidia’s sales of its H200 chips to China. More below. (Was this newsletter forwarded to you? Sign up here.)
An uncertain path from hereFed policymakers are widely expected to cut rates today, their third such move since September. Traders this morning were penciling in 88 percent odds of a quarter-point cut, which would bring the central bank’s benchmark lending rate to a range of 3.5 percent to 3.75 percent. That said, expect dissenting votes. Beyond that, little about the meeting appears straightforward — but its consequences are likely to reverberate throughout the global economy. Market watchers are divided on what comes next. Economists at Goldman Sachs see the Fed lowering rates once next year; those at Citi forecast two cuts in the first quarter. Still, many investors appear to expect fewer reductions next year, as suggested by the yield on the 10-year Treasury note — a closely watched rate that tends to underpin mortgage and credit card rates — which has reached a three-month high. This split-screen view will weigh on the Fed’s outlook, set to be released today. In September, the last time the central bank gave such guidance, officials foresaw the benchmark rate at the end of next year hovering at a range of 3.25 to 3.5 percent. That would suggest just one quarter-point cut next year. Fed officials are in a bind. They have less visibility than usual because the government shutdown led to key inflation and labor market data being delayed or scrapped. Data released by the New York Fed on Monday showed that consumers were downbeat about their finances, even as President Trump rejects suggestions that the country is experiencing an affordability crunch. “Our prices are coming down tremendously,” the president said yesterday at an event in Pennsylvania. “Inflation is stopped,” he added. (Official government data tells a different story.) Trump will loom over today’s meeting. The president continues to push for lower rates, as does Kevin Hassett, a top White House economic adviser who is viewed as a front-runner to replace Jay Powell as Fed chair. There is “plenty of room” for further cuts next year, Hassett told The Wall Street Journal. But Hassett added he would not be swayed by pressure from Trump were he to lead the central bank. Succession drama is in the air, too. Trump will soon begin his last round of interviews with finalists for the central bank’s chair, including Hassett and Kevin Warsh, a former Fed governor, according to The Financial Times. There’s yet another wrinkle to consider: Would Powell consider staying on as a Fed governor through January 2028, depriving Trump of the chance to install another loyalist to the bank’s rate-setting committee anytime soon?
SpaceX is said to be planning an I.P.O. next year at a $1.5 trillion valuation. Elon Musk’s rocket company is moving ahead with plans to go public, with a fund-raising target of more than $30 billion, according to Bloomberg. That would make its offering the biggest ever, surpassing Saudi Aramco’s; its potential valuation is driven in large part by huge sales of its Starlink satellite internet system. MacKenzie Scott says she has given $7 billion this year. The billionaire philanthropist quietly disclosed the figure in a blog post that touched on the recipients of her aid, including an organization combating tropical deforestation and several scholarship funds. That brings her total gifts to more than $26 billion, with Scott having been lauded by some philanthropy experts for giving her wealth away at a rapid pace. Customs and Border Protection may soon review international tourists’ social media accounts. People visiting the U.S. from abroad — including from countries like Britain that qualify for the visa waiver program — may have to submit up to five years’ of social media activity, according to a proposal the agency disclosed yesterday. Some immigration experts suggested that the move could affect tourism numbers, which are already expected to be down this year. Private equity tackles college football. The University of Utah agreed to a landmark deal with Otro Capital to create a for-profit joint venture that will operate the school’s athletics business, and that is expected to generate an estimated $500 million for the university. The arrangement comes as Wall Street is circling the booming business of college sports; other schools may strike similar deals. Meta plays catch-up in the A.I. raceDespite having as much cash and engineering talent as any of its tech giant rivals, Meta has been playing catch-up in the artificial intelligence race for the past few years. But this spring, Mark Zuckerberg, Meta’s C.E.O., decided he’d had enough. He invested billions to overhaul his A.I. division with new researchers, and to lead the revamped effort he chose an outsider: Alexandr Wang, the 28-year-old C.E.O. of Scale AI, a data labeling start-up. But in the first few months of Wang’s tenure at Meta, tensions are forming, Eli Tan reports. Namely, Wang has had disagreements with the inner circle of Zuckerberg’s C-suite, including Chris Cox, the chief product officer, and Andrew Bosworth, the chief technology officer. At the center of the tension is Zuckerberg, who needs to support the company’s longtime business — advertising revenue from social media — while also pursuing what he sees as its future, which is creating superintelligence, loosely understood as A.I. that’s smarter than a human brain. Since long before Wang took over Meta’s A.I. effort, the company’s researchers have complained that it lacked a clear vision for what it was trying to build. Despite the new leadership and dozens of splashy hires with pay packages in the hundreds of millions, Meta seems no closer to articulating what that vision is. Some background: In June, Meta, which currently has a market valuation of more than $1.6 trillion, invested $14.3 billion in Scale AI and made Wang its new chief A.I. officer. Bringing in an outsider to lead the A.I. efforts was seen as a drastic move for a company that has long valued loyalty: Cox and Bosworth, for instance, have each worked there for nearly 20 years. While Wang oversees Meta’s entire A.I. division, his main task is to create a new “frontier” A.I. model to rival those from companies like OpenAI and Google. That model is expected to be released next year, and its success will determine what Wang’s future looks like at Meta. Who will win out? So far, Wang has been focused on creating superintelligence, a godlike fantasy technology that is similar to what companies like OpenAI are trying to build. Cox and Bosworth have been focused on improving Meta’s core business, including its recommendations algorithm. It remains to be seen if the two goals can coexist, and which goal Zuckerberg will ultimately favor if they can’t.
Chart of the day: Silver surgeSilver continues to set records, as the price of the precious metal topped $61 per troy ounce this morning. (The commodity’s rise this year has outpaced gold’s.) Driving the spike in silver prices is a combination of factors, including a flight to safe-haven assets amid a weakening of the dollar, concern over U.S. tariff policy, Fed jitters and soaring demand from industrial companies that use the metal for electronics components. How much could the U.S. make from chip sales to China?President Trump said this week that Nvidia would be allowed to sell its advanced H200 chips to China, despite concerns that doing so will erode America’s competitive advantage in the artificial intelligence race. But he wants the federal government to get a 25 percent cut of the proceeds. How big might the windfall be? Niko Gallogly digs into the math. The hype could exceed the payoff. Analysts at Wells Fargo estimate that lifting export controls to China for Nvidia’s H200 chips could result in $25 billion to $30 billion annual revenue, or $5 billion to $7.5 billion in annual revenue for the U.S. government. Nvidia had $57 billion of revenue in its most recent quarter. But even if Nvidia were to capture 100 percent of the Chinese A.I. chip market, which the semiconductor giant estimates to be worth $50 billion, that would only result in $12.5 billion for U.S. taxpayers. Compare that with the $4.9 trillion in annual tax revenue collected in the U.S. last year. Some analysts are skeptical about projecting significant sales. “It remains unclear whether there will be actual orders for these older G.P.U.s,” Sebastien Naji, a research analyst at William Blair, wrote in an analyst note on Monday, referring to the Nvidia chips. He added that the firm would not update its Nvidia revenue expectations based on the news. That said, Alibaba and ByteDance have shown interest in buying H200s if Beijing clears such sales, according to Reuters. Export volumes could be squeezed by both governments. The U.S. Bureau of Industry and Security, which is responsible for granting export licenses, might take a restrictive approach to H200 approvals. And Beijing has pressured Chinese tech companies to use domestically made chips instead of American ones. Still, a recent report from the Institute for Progress, a nonpartisan research organization, noted that “Chinese A.I. companies will remain highly incentivized to purchase significant volumes” of advanced semiconductors like H200s “for which China has no competitor and has imposed no restrictions.” There is a legal elephant in the room. It is generally illegal to charge fees for export licenses, according to U.S. trade law, which states that “no fee may be charged in connection with the submission, processing, or consideration of any application for a license.” That’s unlikely to deter Trump. “You could see Trump saying, ‘Jensen you owe us 25 percent’” which might result in a “voluntary” 25 percent donation to the Treasury Department from Nvidia, Andrew Grotto, a researcher at the Center for International Security and Cooperation at Stanford, told DealBook. (“Jensen” is Jensen Huang, Nvidia’s C.E.O.) But that move could expose Nvidia to shareholder lawsuits. “Creative lawyers on his team may have some theory cooked up,” Grotto said of Trump’s legal team. “Whatever that theory is, it is certainly not obvious to me.” We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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