Andrew here. Who would have thought that the stock market would be driven by memory chip companies? The demand for memory chips for artificial intelligence — and the shortage of them — is leading to a rush of investment and a profit windfall.
Shares of Micron are up nearly 20 percent in premarket trading. But its broader impact on business is complicated. It’s going to raise prices for consumers, as we’ve discussed before. (Tim Cook made that clear recently.)
We’re also having some fun this morning with a look at the potential economic impact of Taylor Swift’s wedding to Travis Kelce in New York City. More below.
A wedding economic extravaganza?
It looks official: New York will welcome the wedding of Taylor Swift and Travis Kelce, with a party at Madison Square Garden.
The nuptials represent more than just two A-listers tying the knot, however. The whole shebang promises to be the latest gigantic cultural event in New York in a summer full of them, bringing both economic benefits and logistical headaches.
The Swift wedding could be like a mini-Eras Tour concert. Todd Shapiro, a Manhattan publicist, likened the M.S.G. event to an “electrified Met Gala,” with fans potentially surrounding the arena as they did during the Knicks’ playoff run.
People who work for Swift have been seen at Rock Lititz, a campus in Pennsylvania where sets for major concerts are built and top performers sometimes rehearse, The Times reports.
It’s the latest major spectacle in a hot New York summer. Consider that the city has already had a blowout celebration for the Knicks’ N.B.A. championship win and three World Cup matches (technically at MetLife Stadium in New Jersey).
It’s also set to host another World Cup match on July 5, a bigger-than-usual July 4 fireworks show in Lower Manhattan and events tied to America 250, a series of celebrations for the country’s semiquincentennial.
Mayor Zohran Mamdani recently said that New York could handle the influx of people and that he was “excited to welcome the world here.”
“It feels like a city that is coming to life,” he added.
How much of a boost will the summer spectacular provide? The $2 billion Eras Tour was widely studied as an economic bonanza for host cities like New York, leading to sharp rises in hotel prices and plenty of spending by tourists.
Swift fans may very well show up to the city in droves, as they did in Rhode Island last month because of rumors that she and Kelce would get married there.
Then again, the World Cup may not be providing the windfall projected for the New York region, including an estimated $3.3 billion economic impact. The Hotel Association of New York City has halved its forecast for hotel revenue growth to $100 million, with its leader calling the tournament “hugely disappointing and underwhelming.”
The wedding also compounds a logistical perfect storm. Take it from Police Commissioner Jessica Tisch, who mentioned the possibility of a Swift wedding in New York (in jest, she said) among all the city’s summer events at a recent budget hearing:
All of them taken together are unprecedented and are going to place unusual and, I would say, historical demands on the New York City Police Department.
Among the things we don’t know: who’s on the guest list, other than some Kansas City Chiefs players; whether the actual wedding will take place at the Garden, following in the footsteps of Sly Stone; and whether Swift is planning any concurrent moves like dropping her 13th album.
HERE’S WHAT’S HAPPENING
Anthropic is said to poach more top artificial intelligence researchers. Two contributors to Google’s Gemini model, Jonas Adler and Alexander Pritzel, plan to depart for the upstart rival, Bloomberg reported. (Google previously lost a star to Anthropic and another to OpenAI amid a high-stakes war on A.I. talent.) Separately, Anthropic accused the Chinese tech giant Alibaba of improving its A.I. products by illicitly extracting the capabilities of Anthropic’s Claude model.
Big banks pass their Fed stress tests. JPMorgan Chase, Bank of America and other large lenders easily cleared the annual examinations that measure whether they have sufficient capital to withstand a severe economic downturn. The banks responded to the widely expected result by announcing they would spend some of their capital reserves on stock buybacks and dividend increases.
Micron shares are up sharply in premarket trading. But their rally obscures a more systemic problem: The supply of advanced memory chips can’t keep up with demand.
A.I. is spurring inflation. Breakneck demand is helping drive record profits for Micron and rivals like SK Hynix and Samsung. (Micron is building a giant new factory in Clay, N.Y., to help keep up.) But shortages are increasing prices for smartphones, factory equipment, cars and more, and making the build-out of data centers more expensive.
Economists are getting worried, as are central bankers.
How long will the chip crunch last? “We currently do not have line of sight as to when memory supply will be able to catch up with increasing demand,” Sanjay Mehrotra, Micron’s C.E.O., warned analysts on Wednesday on an otherwise upbeat earnings call.
Mehrotra thought the shortfall wouldn’t improve before 2028, which suggests that companies reliant on DRAM and NAND flash chips are in for years of pain.
Investors can’t get enough of the memory chip giants, which have become the latest hot focus of the A.I. trade. Micron’s stock price has risen more than eightfold in the past year. With hyperscalers set to spend trillions of dollars on A.I. infrastructure in the coming years, Micron and its rivals are expected to cash in.
The frenzy is also fueling I.P.O. excitement in China. Two memory chip makers, ChangXin Memory Technologies and Yangtze Memory Technologies, are set to make their trading debuts soon in what would be the biggest listings on mainland China in years.
The tale of two A.I. sectors is playing out in the markets. The tech-heavy Nasdaq Composite looks set to snap its three-day losing streak, bolstered by chip stocks.
But shares in Apple and in Amazon, one of the big hyperscalers, are under pressure in premarket trading.
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Elsewhere, OpenAI on Wednesday unveiled Jalapeño, a chip it jointly developed with Broadcom to run A.I. applications. Both hyperscalers and A.I. labs, including OpenAI, are investing heavily in custom-built chips to reduce their dependence on suppliers like Nvidia and AMD.
Quote of the Day
“I think you guys were right. My incentives were totally and fundamentally misaligned.”
— Chamath Palihapitiya, a podcast host and venture capitalist once known as the “SPAC king,” expressed regret for the lackluster track record of his blank check companies, or SPACs, during the boom in 2020 and 2021. Palihapitiya told Axios that he planned to form more SPACs but wouldn’t profit unless their shares rose sharply.
The Mamdani effect
The outcome of New York’s primary election on Tuesday continues to reverberate through state and national politics.
The stunning results, opening the door to a new generation of democratic socialist lawmakers, have shaken the Democratic Party, and heralded the arrival of New York City’s mayor, Zohran Mamdani, as a kingmaker in the country’s financial capital and beyond.
Wall Street and corporate leaders now face a reckoning after business-friendly candidates backed by labor unions and the Democratic establishment fell to the party’s progressive wing.
After Tuesday’s results, questions loom about the future of New York’s economy, taxes on corporations and the rich, the role of artificial intelligence in the nation’s politics and the possibility of a wider national movement.
Mamdani said the results showed that “New Yorkers are hungry for a new kind of politics.”
Prominent figures weighed in, too.
Some worry about business flight. The C.E.O. of the Partnership for New York City, Steven Fulop, told DealBook he had heard from “lots and lots” of business leaders.
Several Wall Street giants, including Goldman Sachs, Morgan Stanley and Citadel have been staffing up in Texas recently, Fulop noted. “When candidates are villainizing businesses that create jobs, it becomes more difficult” to keep jobs here, he said.
Others fear how democratic socialists will govern. The political organization the Democratic Socialists of America “is not Denmark-style ‘democratic socialism’ it’s Cuban style socialism,” Cliff Asness, a hedge fund magnate, wrote on X on Wednesday.
Democratic leaders were blamed for the leftward shift. “As long as Party leadership like @RepJeffries and @SenSchumer worry more about their own leadership than the future of the party, expect to see more of this,” Dan Loeb, a billionaire investor, wrote on X, referring to two of New York’s most powerful Democrats, Representative Hakeem Jeffries and Senator Chuck Schumer.
The primaries also highlighted tensions over A.I. A legislator who worked on A.I. regulation, Alex Bores, narrowly lost his primary bid after Leading the Future, a super PAC that opposes A.I. rules, poured $8 million into opposing him. Other super PACs focused on A.I. safety spent $19 million supporting him.
That said, Micah Lasher, who was backed by the retiring Representative Jerrold Nadler and defeated Bores, distanced himself from the A.I. money that flooded the race. His blunt take: The millions spent accomplished little more than angering voters.
THE SPEED READ
Deals
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The E.U. is reportedly set to approve Paramount Global’s proposed $111 billion takeover of Warner Bros. Discovery if certain conditions are met. (FT)
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Qualcomm agreed to buy Modular, a developer of artificial intelligence infrastructure software, for $3.9 billion. (Bloomberg)
Politics, policy and regulation
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Senator Elizabeth Warren, Democrat of Massachusetts, called for greater antitrust scrutiny of A.I.: “We need to push back,” she said. (Bloomberg)
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Congressional lawmakers reportedly want to know more about nondisclosure agreements struck by friends of Jeffrey Epstein and his accusers. (Politico)
Best of the rest
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