Why Wall Street Is Feeling So Bullish
Booming corporate profits are driving the S&P 500 near another record, dampening concerns about the war, inflation and more.
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Andrew here. I’m writing to you on Tuesday from Aspen, where the Aspen Economic Strategy Group’s annual meeting is underway. A group of global policy leaders and economists have gathered for the two-day summit. Among those in the room: Jay Powell, the former Fed chair, as well as the former Treasury secretaries Hank Paulson, Tim Geithner and Janet Yellen. Also here is Neel Kashkari, the Minneapolis Fed president who recently made waves dissenting against Kevin Warsh.
High on the agenda: the trajectory of Fed policy; the continued tensions around the Strait of Hormuz; whether the A.I. boom is treading into bubble territory and what it means for jobs; and the growing national debt. I’ll have much more for you on Wednesday.
Great gains
S&P 500 futures are edging higher on Tuesday, approaching another record.
That’s despite plenty of noise out there: a precarious U.S.-Iran cease-fire that’s whipsawing oil markets; growing odds of a Fed interest-rate increase; President Trump’s renewed trade war.
The big reason: Corporate profits are blowing away Wall Street expectations.
Eighty-six percent of the S&P 500 companies that have reported this earning season have posted earnings-per-share results that beat analysts’ forecasts, as of Friday’s market close, according to FactSet. Shares in Palantir, Snap and On Semiconductor are all soaring in premarket trading after the companies reported impressive results on Monday.
Robust consumer and business spending, and companies’ pricing power, have helped pad bottom lines. “Otherworldly” sales growth, in the words of Alex Karp, Palantir’s C.E.O., powered his company’s latest quarter, prompting it to lift its full-year outlook.
Up next: SpaceX delivers its first quarterly results after the closing bell on Tuesday.
“Expect earnings to be the primary driver of stock gains” this year, Jeff Buchbinder, the chief equity strategist at LPL Financial, wrote to investors on Monday.
LPL hasn’t raised its year-end S&P 500 target, but analysts at Goldman Sachs, JPMorgan Chase and Citigroup have.
Worries about spending on artificial intelligence aren’t dampening the mood:
Hyperscalers have rallied in recent days, with Amazon surpassing $3 trillion in market value.
Shares in Meta, which has seen its huge capital expenditures weigh on its stock, are on a three-day run, snapping their worst-ever losing streak.
Helping matters is that the bull market rally is no longer dominated by A.I. The equal-weighted S&P 500, a broader measure of the benchmark index, is at a record high.
What could go wrong? Plenty, including:
Volatile oil prices could batter stocks and bonds. (The yield on the 10-year U.S. Treasury note traded at 4.694 percent on Tuesday, up from 3.95 percent on the eve of the Iran war in late February.) President Trump called his push for peace talks a “last chance” for Tehran. And Iran and Oman appear to be near an arrangement to reopen the Strait of Hormuz — but transit costs are now likely to exceed prewar levels.
Record borrowing is juicing the market rally. But government borrowing costs are climbing, potentially squeezing the most highly leveraged investors.
And watch the yen. The joint intervention by Tokyo and Washington bolstered the battered currency on Monday. But the yen is dipping again on Tuesday, as concerns grow that the move won’t be enough.
Some market watchers see another risk: Intervention could undermine the popular “carry trade,” in which investors borrow cheap yen and reinvest in riskier assets, like emerging market currencies and tech stocks. Investors could rethink that trade now that Tokyo and Washington want to see a stronger yen.
HERE’S WHAT’S HAPPENING
Tech giants reportedly will meet with the Trump administration on Tuesday to discuss artificial intelligence safety. Anthropic, Google and OpenAI are among those expected to participate, according to Bloomberg, as businesses and policymakers are on edge over reports of A.I. models going rogue and hacking other companies. The Trump administration also said it has devised a voluntary framework for evaluating the safety of frontier models. At the same time, competition from cheaper Chinese models is intensifying.
Is Jeanine Pirro in the hot seat? Her future is being closely watched after President Trump said on Monday that Pirro, the U.S. attorney for Washington, D.C., had “choked” in dismissing his claims that the damage to the Lincoln Memorial Reflecting Pool was done by vandals. Trump has discussed ousting her, according to The Wall Street Journal, citing unnamed sources. But The Times reports that her job is safe for now.
Twenty-five states sue the administration over tariffs. The coalition, consisting mainly of blue states including California and New York, argues that the administration acted illegally in imposing new duties under Section 301 of a 1974 trade law. While the Supreme Court struck down earlier tariffs, the so-called 301 levies are thought to be on safer legal ground.
Who owns how much of OpenAI
Investors have committed more than $180 billion to OpenAI — and they’re expecting a hefty payoff when the artificial intelligence start-up goes public, possibly early next year, near a $1 trillion valuation.
On March 31, OpenAI announced that it had raised a colossal $122 billion from investors including Amazon and Nvidia at an $852 billion “post-money” valuation, which includes the new funds.
Who holds how much of OpenAI’s stock is closely held information. But Sri Muppidi obtained the company’s capitalization table after its recent funding round, confirmed by two additional people with knowledge of the matter.
Here’s what the cap table tells us:
OpenAI’s founders and employees own the largest share of the company. Those with vested shares hold Class A common stock equaling 48.93 percent of the company, the document shows.
That group also includes investors that participated in OpenAI’s 10 employee tenders over the years, including Thrive Capital and SoftBank, according to one of the people.
One notable exception: Sam Altman, OpenAI’s C.E.O., famously doesn’t have any equity in the company.
Microsoft owns more than a quarter of the company. An early backer of OpenAI, Microsoft has invested more than $13 billion in the company since 2019.
Investors from previous rounds own nearly 20 percent. These hauls include:
OpenAI’s initial funding round of $194 million in 2019 from backers including Khosla Ventures and the LinkedIn co-founder Reid Hoffman;
a $6.6 billion round led by Thrive Capital, at a $157 billion post-money valuation;
a $41 billion round led by SoftBank in 2025, at a $301 billion post-money valuation.
Investors in OpenAI’s latest round own about 6 percent of the equity so far. That’s because the money is being invested in installments:
The first tranche of investment brought in $47 billion, including $15 billion from Amazon and $10 billion each from Nvidia and SoftBank by April 1, according to two sources.
Amazon completed a second installment of $35 billion last week, while Nvidia and SoftBank each put in an additional $10 billion last month. Nvidia and SoftBank have each committed to invest another $10 billion by Oct. 1.
OpenAI’s nonprofit arm owns a stake, too. The OpenAI Foundation owns Class A common stock and additional shares from OpenAI’s 2019 round, according to one of the people with knowledge of the cap table.
It’s not clear how much stock the foundation now owns. It was 26 percent last fall, before being diluted by the $122 billion round.
Quote of the day
“Uber’s strategy recycles an old and ugly script: If a woman drank, if she rode alone, if it was late, if her memory is imperfect, then maybe she is to blame.”
Nora Freeman Engstrom, a legal ethics professor at Stanford Law School, to The Times on the aggressive defenses Uber has used in lawsuits against the company over allegations of sexual assault by drivers.
Tony West, Uber’s chief legal officer, said in a statement: “Defending the company in a lawsuit and treating survivors with humanity are not mutually exclusive; we must do both. ”
JPMorgan gets yellow card for failed FIFA deal
For FIFA’s president, Gianni Infantino, the plan to spin off FIFA’s commercial assets into a new entity, in which the soccer giant would sell a 20 percent stake, has been a disaster.
The now-abandoned deal, which would have valued the spinoff at $20 billion, has resulted in boycott threats and calls for Infantino’s resignation.
For JPMorgan, which worked with Infantino on the deal, the fiasco probably feels familiar, writes Tariq Panja of The Times.
The bank played a similar role in a 2021 plan to create a so-called Super League featuring only the richest soccer clubs, which drew condemnation from fans and governments alike:
Chastened, the Wall Street titan issued an unusual apology for its role in the fiasco. The bank pledged to learn from how it had “misjudged” the effect the plan would have on the feverish world of global soccer. Even Jamie Dimon, the bank’s outspoken and all-powerful chief executive officer, acknowledged that the company had misunderstood the passions that would be aroused.
This time around, JPMorgan’s involvement was led by Mary Erdoes, the head of the bank’s asset and wealth management division. (JPMorgan sports investment bankers also worked on the deal.)
Infantino worked with Josh Kushner, the venture capitalist and the brother of President Trump’s son-in-law Jared Kushner, on the plan. JPMorgan’s role was to recruit investors to join the deal with Thrive Eternal, a new subsidiary of his firm Thrive Capital:
The depth of JPMorgan’s involvement in the plan was underlined by its logo appearing on a 25-page FIFA sales deck that leaked to the news media. The bank, according to the person with direct knowledge, had analyzed the reputational risks associated with the project before going ahead. The deal being proposed was for the investors to own a slice of the new company, like they would a professional sports team, and hope for the valuation to increase in the years to come rather than to expect regular dividends.
Part of FIFA’s pitch to its 211 member associations was to share a portion of the profits back with them from its proposed new commercial entity, FIFA Forward Enterprise.
Sri Muppidi obtained a copy of the slide deck FIFA had prepared. Excerpts are below.
The growth in future distributions would come from increased revenue via broadcasting and sponsorships, among other things:
Where FIFA got things wrong: “The recurring mistake is to assume that fans are a captive audience,” Ronan Evain, the executive director for Football Supporters Europe, an umbrella body for fan groups, told Panja. “The Super League proved we are not.”
What’s next: Lawyers for European soccer’s governing body have demanded that FIFA retain all documentation related to the project — including any correspondence with JPMorgan.
THE SPEED READ
Deals
Investors in AstraZeneca questioned the wisdom of a potential tie-up between the British drugmaker and Bristol Myers Squibb; its London-traded shares were down 9 percent on Monday. (FT)
Base Power, a battery power company whose founders include Zach Dell, has raised $1 billion at a $13 billion valuation. (WSJ)
“Inside Google’s $200bn Wall Street Finance Machine for Anthropic” (FT)
Politics, policy and regulation
The Senate overwhelmingly passed a bill to avert another government shutdown, but it’s unclear whether the House will follow suit. (NYT)
The Treasury Department fined UBS $125 million for inadequate anti-money-laundering controls, eight years after the Swiss bank was punished for a similar problem. (FT)
Best of the rest
“This High-Powered Real-Estate Fund Is Run by College Students” (WSJ)
Gen Z can’t afford a first date. (NYT)
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Andrew Ross Sorkin is a columnist and the founder of DealBook, the flagship business and policy newsletter at The Times and an annual conference.
Bernhard Warner is a senior editor for DealBook, a newsletter from The Times, covering business trends, the economy and the markets.
Niko Gallogly is a Times reporter, covering business for the DealBook newsletter.
Brian O'Keefe is the managing editor of DealBook, a newsletter from The New York Times that covers business, policy and culture — and the many ways they overlap.
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