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A top analyst warned of a ‘prisoner’s dilemma’ and ‘AI wobble’ in the stock market just days before Palantir seemed to confirm everyone’s fears

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A top market analyst’s warning in late October about a looming “prisoner’s dilemma” and an “AI wobble” in the stock market became chillingly prescient this week as even bullish earnings from Palantir failed to stop a dramatic tech-led selloff.

The remarks came from Tony Yoseloff, managing partner and chief investment officer at Davidson Kempner Capital Management, in conversation with Goldman Sachs’ Tony Pasquariello, for the podcast Exchanges: Great Investors, recorded on Oct. 20 and released 11 days later.

Yoseloff posed some hypothetical questions about the much-covered question of “circular financing” in the artificial intelligence (AI) space, where the same firms are funding each other that are also selling to each other.

“So the way I like to think about it is: Is there going to be an AI wobble at some point? Are investors going to be concerned about how those CapEx dollars are being invested?”
Right now, he continued, alluding to a famous game theory scenario, “there’s a little bit of a prisoner’s dilemma, let’s call it, among the larger firms. You have to invest in it because your peers are investing in it, and so if you’re left behind you’re not going to have the stronger competitive position to it.”

The investor continued by comparing today’s heavy concentration—where 10 stocks wield 40% of the S&P 500’s weight—to historic bubbles like the “Nifty Fifty” of the early 1970s and the dot-com surge at the millennium. He warned that in those eras, investors waited as long as 15 years just to recover losses after valuations cracked.​

‘Big Short’ bet and the market’s response

The foreboding message arrived nearly synonymous with famed investor Michael Burry, best known for profiting from the subprime mortgage collapse, revealing a $1.1 billion short position against major AI bellwethers Nvidia and Palantir in early November. His move sent shockwaves through global markets already jittery about the narrowness of tech gains: Bank of America Research analysts noted the “Magnificent 7” tech stocks contributed more than 80% of the S&P 500’s total returns last month, heightening fears of a reversal.​

Markets responded violently. Palantir shares, having soared 154% year-to-date and surging 7% after its Q3 earnings initially, reversed course and plunged nearly 8% in a single day. Asian and European indices followed suit, highlighting how tightly global sentiment is bound to a handful of AI leaders. In South Korea and Taiwan, for instance, one or two tech stocks accounted for nearly half the national index returns, illustrating Yoseloff’s “wobble” risk: Any crack in confidence could bring a swift, severe correction.​

Palantir CEO Alex Karp was angry and typically outspoken as he appeared on CNBC’s “Squawk Box” the next day, when he was asked specifically about Burry’s short position. Karp responded that when he hears of short sellers attacking his company, “what I believe is clearly the most important software company in America and therefore in the world,” he said “it just is super-triggering, because these people, they could pick on any company in the world. They have to pick on the one that actually helps people, that actually has made money for the average person, that is actually supporting our war fighters.” Karp added it’s “crazy motivating” and he believes “the short sellers are constantly getting screwed by Palantir.” The company’s stock was trading down another 2% on Wednesday.

To Karp’s point about the company’s success, Palantir reported a record-setting quarter with $1.18 billion in revenue, besting estimates and boasting U.S. government contracts up 52% over the year. Karp’s combative tone on the earnings call, touting his “anti-woke” approach and Palantir’s government synergies, did little to calm investor jitters. Analysts voiced concern that even robust sales and guidance “don’t justify its valuation” given the scale of capex and the unproven returns from AI-driven bets.​ To their point, Palantir has a whopping price-to-earnings ratio of more than 100x.

Karp brushed aside critics of Palantir’s strategic direction, but a closer look at the trading floor suggested his boasts were no match for market structure. Yoseloff’s warnings about the prisoner’s dilemma—where tech giants are locked in costly, self-reinforcing arms races, largely because they cannot afford not to invest—seemed vindicated as even strong results triggered a sell-the-news spiral.​ Top Wall Street CEOs piled on, with Goldman’s David Solomon and Morgan Stanley’s Ted Pick both projecting corrections of up to 20% for stock valuations.

With both analyst warnings and high-profile action heralding a potential regime shift in markets, the AI sector’s “wobble” may only be beginning. As Palantir’s swift reversal shows, confidence in continual AI-driven growth is no longer bulletproof. If the “prisoner’s dilemma” continues, there is a risk “dead capital” could haunt tech valuations for years to come—as happened after past bubbles.

Yet for seasoned investors like Yoseloff, the period ahead promises not just volatility, but new opportunities, as “absolute return strategies” thrive when markets finally force a separation between true winners and casualties of unmet expectations. In that sense, the fears that Palantir’s earnings could not vanquish may yet prove to be the financial world’s next big inflection point.​

For this story, Fortune used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing. 



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Trump fast tracks ‘three-week’ nuclear approval for big tech to fuel AI race

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President Donald Trump offered Silicon Valley an extraordinary deal on Wednesday: Build your own nuclear power plants to fuel AI, and his administration will approve them in just three weeks.

Speaking at the World Economic Forum in Davos, Switzerland, Trump addressed a room of tech executives struggling with an aging U.S. electrical grid.

“I came up with the idea,” Trump said. “You people are brilliant. You have a lot of money. You can build your own electric generating plants.”

Trump talked for about 10 minutes about energy in his speech, making it clear Trump views a straining electric grid as a central economic risk of 2026. As artificial intelligence pushes electricity demand to record highs, the administration is framing power shortages as an existential threat to growth and national security. Slashing approval timelines, Trump argued, is a necessary response to an energy system he said he believes is fundamentally unprepared for the AI era.

“We needed more than double the energy currently in the country just to take care of the AI plants,” Trump said. 

The proposal marks a radical departure from the traditional Nuclear Regulatory Commission (NRC) process, which historically requires four to five years for environmental and design approvals as well as rigorous site selection. Trump claimed that while tech leaders initially “didn’t believe him,” he assured them the government would deliver approvals for oil and gas plants in just two weeks, with nuclear projects following in three.

Trump said he wasn’t “a big fan” of nuclear power before, but now sees it as a newly viable solution due to safety improvements. 

“The progress they’ve made with nuclear is unbelievable,” he said. “We’re very much into the world of nuclear energy, and we can have it now at good prices and very, very safe.” 

While the potential upcoming wave of small modular nuclear reactors (SMR) could receive regulatory approvals in less than two years, there is little basis for going through an approval process with the Nuclear Regulatory Commission in closer to three weeks, and such an expedited process would trigger widespread concerns about safety and environmental risks.

Trump also touted a new energy alliance with Venezuela, noting the U.S. secured 50 million barrels of oil last week following the “end of an attack” on the nation that led to the deposition of President Nicolás Maduro. He said the new cooperation between the two nations would make Venezuela “fantastically well” while driving U.S. gasoline prices toward $2.00 a gallon.

Gasoline prices are the main inflationary measure by which costs have fallen during the first year of the new Trump administration. But they’re nowhere close to $2.00 per gallon. The national average for a gallon of regular unleaded is $2.76 per gallon this week, down 32 cents from a year ago, primarily because of rising OPEC oil production.

But Trump drew a sharp contrast with Europe’s energy landscape. Trump mocked the “Green New Scam,” citing a 64% spike in German electricity prices and the “catastrophic” decline of energy production in the United Kingdom. He targeted the North Sea and the proliferation of wind farms, which he labeled “losers” that “kill the birds.”

“Stupid people buy” wind farms, Trump laughed.



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Slipping on ICE: innocent retailers are the latest collateral damage from Trump’s perpetual noise machine

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In her classic 1961 book The Death and Life of Great American Cities, pioneering urbanologist Jane Jacobs advised that the key to safe cities is “more eyes on the street.”  She advocated that the best way to get these was to have neighborhoods filled with stores and restaurants. With local business providing a multitude of reasons for people to be active in city street life, eyes on the street would follow. It was these eyes that were mentioned by Minnesota Gov. Tim Walz in his January 14 primetime media appeal for the public to witness and document the increasingly horrific actions of the agency known as ICE, the once celebrated U.S. Immigration and Customs Enforcement office.

Increasingly known for daily video footage of seemingly arbitrary and brutal force, used by masked ICE agents against shoppers and workers at retail shops and restaurants, Walz urged shoppers to “take out that phone and hit record.” The public has been horrified by the killing of Renee Good, an unarmed 37-year-old mother of three and an American citizen, who was shot multiple times in the face by an ICE agent in her own Minneapolis neighborhood. But the footage of ICE brutality is everywhere, and much of it is occurring in retail establishments.

Consider the vivid hypocrisy of the ICE agents who were seen feasting at the popular El Tapatio Mexican Restaurant in Willmar, Minnesota, and then returning later to arrest the owner and employees of this café that had graciously served them. ICE actions have led several local establishments to close for foot traffic, taking only phone orders, while others reported sales drops of 75%. 

As for larger enterprises, with recent raids occurring in Los Angeles, Charlotte, and Phoenix, Fortune 500 giants around the nation including  Home Depot, Walmart, Target, Ross, Keurig Dr Pepper, and Constellation Brands have all increasingly warned about the impact of ICE raids on their businesses. Patrons and laborers at one Walmart in Van Nuys, California, faced multiple raids in the same day with people tackled and dragged away from ICE agents. Calls for boycotts of retailers who aid and abet ICE enforcement are understandable but retailers are also victims here. They can and should do more to make their roles more clear.

The eyes on the street

The impact of such ICE invasions into Minnesota is being shared nationally, with profound cost to local commerce and also local communities. Local merchants serve a deeper purpose to society than selling goods that are often available through ecommerce. Retail stores are among the last remaining shared civic spaces—places where people of all backgrounds still cross paths in the course of everyday life. Shopkeepers are community pillars because they build social ties, foster local identity, boost the economy by keeping money local, and act as hubs for connection, often providing personalized service and supporting local events, making neighborhoods more vibrant, resilient, and unique places to live and shop. They transform basic commerce into meaningful relationships and community gathering spots, strengthening the social fabric. 

America’s great retailers have long understood this. From Walmart’s Sam Walton to J.C. Penney to The Home Depot co-founders Bernie Marcus and Arthur Blank, retail legends have long described stores not merely as institutions of public trust. Blank has spoken of retail as a civic platform—a space where people from different walks of life come together in ordinary, human ways. Marcus has emphasized that Home Depot was built on dignity: respect for customers, respect for workers, and a belief that welcoming people into shared spaces strengthens communities rather than fragments them.

So, what could possibly disrupt that vision?

Last week, videos ricocheted across social media showing federal immigration agents restraining a man inside a Walmart in Minnesota and detaining individuals at the entrance of a Target. Days later, in Los Angeles, Home Depot parking lots—long informal hiring sites for day laborers—again became flashpoints for enforcement actions and community backlash. These were just a few of many ICE raids playing out across the country, in locales as varied as New York, Georgia, Texas and beyond, where shoppers have reported increased immigration enforcement activity near department stores and shopping centers, triggering protests, boycotts, and a growing sense that retail spaces are being repurposed into stages for public confrontation. 

This is surely not the retail experience that Marcus and Blank had in mind when they spoke of dignity and friendly community commons.

President Donald Trump is likely pulling this lever unprovoked to tear apart communities’ harmonious fabric as the kind of diversionary tactic that he often utilizes. Trump’s first year has been soundly rated a failure in all major national polls and in each dimension of national and international priorities.  Barely 37% say that Trump places the good of the country above his personal gain, and 32% say that he’s in touch with the problems ordinary Americans face in their daily lives. As we write about in our new book, Trump’s Ten Commandments, the president has long resorted to “perpetual noise machine” distractions when faced with plummeting poll numbers and challenges on the economy and affordability, seeking to divert attention away from his difficulties. This diversion comes at a real cost to retailers and to the American economy.

Multiple major national polls reveal that the ICE mission is failing, with most Americans condemning these raids as making American cities less safe — with 82% of Democrats and Democratic-leaning independents leaning in this direction, but also 67% of Republicans and Republican-leaning independents. Even MAGA-friendly podcaster Joe Rogan launched a harsh takedown of ICE, likening them to the Gestapo secret police of Nazi Germany.

In fact, Minneapolis Police Chief Brian O’Hara, recently showed on Fox TV that, before the ICE invasions, all major categories of crime including violent crimes like murders and carjacks were down last year from 20% to 50%. Former Secretary of Homeland Security Jeh Johnson has shown this weekend that there has been no surge of undocumented immigrants in Minneapolis to justify what is now five times the number of federal law enforcement officers as there are municipal police.

It appears that even Trump is recoiling, offering a surprising criticism of ICE overreach in a New York Times interview this week. Indeed, unless there is some inexplicable policy goal to get Americans to buy ladders, hammers, toilet seats, piles of bricks, washers, dryers, and garage doors online instead of at neighborhood stores, there is no reason why retailers need to become ground zero.

Why would ICE want to hurt businesses that form the backbone of the American economy? After all, we don’t know how good UPS is at delivering garage doors house-to-house, or if FedEx could really handle deliveries of bricks, sinks, and toilets, if they were bought from Amazon instead of from neighborhood stores. While that notion might seem ridiculous, there is nothing funny or ludicrous about the fact that these administration/ICE overreaches risk serious and genuine economic damage if they continue unabated.

The facts about retailers’ lack of complicity

While ICE might be slipping on the ice, the activists who are attacking America’s most beloved retailers as somehow “complicit” with ICE raids in their stores are similarly slipping up. That narrative is wrong, and retailers need to throw rock salt urgently, to avoid flipping over themselves. Here are the facts, which are too often lost in the crossfire, and should be clarified urgently.

First, retailers need to clarify that they have not been complicit and have had no advance knowledge of these raids. Retailers are not accessories with ICE, nor enablers; they are also victims, caught in the crossfire of a political and legal dispute they did not choose.

This clarification is urgent, because critics on all sides misrepresent what retailers can—and cannot—do. One widely circulated myth holds that retailers invite ICE into their stores. In reality, ICE agents, like any law enforcement officers, may enter public spaces open to all customers without needing a warrant.

Another myth suggests that retailers can simply “ban ICE” from their properties if they choose, with some choosing to do so while other stores invite them in with open arms. That, too, misunderstands the law. A retail store is not a private home. As a public-facing space, retailers cannot selectively exclude certain groups—whether law enforcement or anyone else—from areas open to the general public. A store manager cannot “kick out ICE” the way they might remove a shoplifter. Even if a retailer tried to ban ICE, or any other law enforcement agency, from their otherwise public facing spaces, the law enforcement agency could simply ignore it under the law, and the retailer could be subject to a variety of legal claims, including discrimination or obstruction by the affected government entities. Some have suggested that perhaps stores could put whistles by the cash registers or parking lots, but in reality, retailers have no control.

A third myth claims that retailers are facilitating the arrest of their employees or customers. That is false. As Federal law enforcement officers, ICE agents have the authority to make arrests in any public spaces based on probable cause, without the consent—or cooperation—of the venue. While there are allegations that surveillance cameras operated by such retail partners as Flock Safety are being use to assist ICE raids as some activist investors charge,  retailers should assert this electronic collaborating is not true—consistent with denials by Flock Safety.

Retailers did not ask to be put into the middle of America’s political and legal fight over immigration. But they are being drafted nonetheless, and need to scream these facts loudly from the mountaintops to deescalate a worsening situation. Fortunately, they are not likely to use needlessly incendiary language the way some overreacting public officials do. Home Depot’s public statements capture the hard edge of their dilemma: the company has said it is neither notified in advance nor coordinating with immigration enforcement, while also acknowledging that it cannot legally interfere with federal agencies.

Now that retailers find themselves in the middle, they deserve something too often missing from this debate: truth, and they need to be screaming this truth loudly from the mountaintops. They are neither covert Quisling collaborators nor law enforcement-subverting antagonists. They are institutions built to welcome the public of all stripes, not to adjudicate federal policy—and they should not be targeted as such by either side.

Some may wonder, why target retailers? If the goal is to trigger unruly public unrest to justify presidential invocation of the insurrection act as some charge, why not visit the spirited crowds at WWE instead. The average Home Depot store has an impressive 2,000 transactions a day but a WWE slapdown such as Raw or Westlemania easily draws five times as many for 10,000 heated fans. If the goal is to capture foreign guests, why not raid the Metropolitan Opera crowds filled with EU national as performers or the American Ballet Theater or the Colorado Ballet known for their high Russian degree of heritage dancers, or the several hundred heavily promoted high kicking Shen Yun performances each year sponsored by the Chinese Falun Gung religious movement.

It is painful to see ICE arrests taking place in the aisles, parking lots, and entry foyers of Minneapolis stores. Who would have thought that even the raucous reputation of the Minnesota Vikings would look refined compared to the hard-edged, ICE enforcement actions? Perhaps they should drop their cowardly masks to hide their identities by donning Viking helmets with horns to more accurately dress for their retail raids. Regardless of the bias in whatever racial or political agenda may be behind this nightmarish remake of Eugene O’Neil’s dark drama of societal miscreants, The Iceman Cometh, the ICE men are making sure their own approval rating melts, while doing damage to both commerce and community safety.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

This story was originally featured on Fortune.com



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China has fulfilled its initial commitment to buy 12 million metric tons of soybeans from the U.S., but it’s not clear if the trade agreement announced in October can withstand President Donald Trump’s ever-shifting trade policy as American farmers are still dealing with high production costs.

Earlier this month, Trump said he would impose 25% tariffs on any country that buys from Iran, which would include China. Then last weekend he threatened to impose 10% tariffs on eight of America’s closest allies in Europe if they continue to oppose his efforts to acquire Greenland.

So the administration’s trade policy continues to change quickly, and Iowa State University agricultural economist Chad Hart said that could undermine the trade agreement with China and jeopardize the commitment by the world’s largest soybean buyer to purchase 25 million metric tons of American soybeans in each of the next three years.

“Those new tariffs — what does that mean for this agreement? Does it throw it out? Is it still binding? That’s sort of the game here now,” Hart said.

Beijing paused any purchase of U.S. soybeans last summer during its trade war with Washington but agreed to resume buying from American soybean farmers after Trump and Chinese leader Xi Jinping met in South Korea and agreed to a truce.

Treasury Secretary Scott Bessent announced the purchasing milestone China has met in an interview with Maria Bartiromo on Fox Business on Tuesday from the sidelines of a major economic forum in Davos, Switzerland, where Bessent met with his Chinese counterpart, Vice President He Lifeng. Bessent said China remains committed.

“He told me that just this week they completed their soybean purchases, and we’re looking forward to next year’s 25 million tons,” Bessent said. “They did everything they said they were going to do.”

Last fall, preliminary data from the Department of Agriculture cast doubts on whether China would live up to the agreement because it was slow to begin purchasing American soybeans and there is a lag before the purchases show up in the official numbers.

On Tuesday, the USDA data showed that China had bought more than 8 million tons of U.S. soybeans by Jan. 8, and its daily reports indicated that China placed several more orders since then, ranging from 132,000 tons to more than 300,000 tons.

China has shifted much of its soybean purchases over to Brazil and Argentina in recent years to diversify its sources and find the cheapest deals. Last year, Brazilian beans accounted for more than 70% of China’s imports, while the U.S. share was down to 21%, World Bank data shows.

Trump is planning to send roughly $12 billion in aid to U.S. farmers to help them withstand the trade war, but farmers say the aid won’t solve all their problems as they continue to deal with the soaring costs of fertilizer, seeds and labor that make it hard to turn a profit right now. Soybean farmers will get $30.88 per acre while corn farmers will receive $44.36 per acre. Another crop hit hard when China stopped buying was sorghum, and those farmers will get $48.11 per acre. The amounts are based on a USDA formula on the cost of production.

That and uncertainty about trade markets and how much farmers will receive for their crops has even some of the most optimistic farmers worried, said Cory Walters, who is an associate professor in the University of Nebraska-Lincoln’s Department of Agricultural Economics. Soybean prices jumped up above $11.50 per bushel after the agreement was announced, but the price has since fallen to about $10.56 per bushel on Tuesday. So prices are close to where they were a year ago and aren’t high enough to cover most farmers’ costs.

“Everything is changing — the land rental market, the fertilizer market, the seed market and it’s all pinching the farmer when they go to do their cash flows. The ability to make a decision is tougher now because of all the uncertainty in the market,” Walters said.

___

This story has been updated to correct that Bessent spoke on Fox Business, not Fox News.

___

Funk reported from Omaha, Nebraska. Associated Press writers Didi Tang and Fatima Hussein contributed from Washington.



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