Good morning. Andrew here. Jay Powell, the Fed chair, will take questions from reporters today after the central bank announces its decision on interest rates. We’ve got some, too; see what we would ask below. Also: DealBook’s Michael de la Merced has news about a new A.I. start-up investment deal — and, more important, how these transactions let employees sell their stock long before an I.P.O. And Peter Eavis takes a look at Union Pacific’s plan to merge with Norfolk Southern in a $72 billion deal and whether regulators will approve it. (Was this newsletter forwarded to you? Sign up here.)
Powell on the spotIt’s decision day for the Fed. The central bank is widely expected to leave borrowing costs unchanged after policymakers voted to cut interest rates at the past three meetings. But it’s the news conference with Jay Powell, the Fed chair, that Wall Street and Washington are waiting for. Pay attention to Powell’s assessment of the economy — and whether he says anything about President Trump’s escalating pressure on him and his colleagues. Here’s what we would ask him: What’s going on with the federal criminal investigation? This month, Powell accused the Trump administration of using threats of a criminal investigation into him — ostensibly over testimony he gave to Congress about renovations of the Fed’s headquarters — as “pretexts” to push the central bank into lowering rates. Powell and his allies are worried about inflation. Many analysts expect policymakers to keep rates steady for a while. Is there any sign that the administration is backing down? Powell’s statement appeared to rally widespread support behind him. Key backing has come from Senator Thom Tillis, Republican of North Carolina and a member of the Senate Banking Committee, who vowed to block confirmation of Trump’s Fed nominees until the legal matter has been resolved. How are the administration’s efforts to push out Lisa Cook going? The Supreme Court heard oral arguments last week in the legal battle to oust Cook, a Fed governor, over accusations of mortgage fraud; court watchers thought justices were likely to side against the administration. Powell attended those arguments, rankling Treasury Secretary Scott Bessent. Will you stay on the Fed board after your term as chair ends? Powell’s tenure as chair is set to expire in May, and Trump has said repeatedly he has identified a successor. (That said, none of the presumed short-list candidates is a perfect fit.) Powell could further spoil Trump’s Fed plans by staying on as a Fed governor through early 2028, depriving the president of a chance to install another loyalist policymaker. What makes you so bullish on artificial intelligence? Last month, you suggested that A.I. would be an important factor in driving economic productivity. In the past, such a thesis has drawn skepticism from the likes of the Nobel laureate economist Daron Acemoglu.
SoftBank is reportedly considering another huge investment in OpenAI. The Japanese tech investor has held talks to pour up to $30 billion into the artificial-intelligence start-up, according to The Wall Street Journal. OpenAI has been seeking to raise about $100 billion in a round that could value it at $830 billion. SoftBank has already invested tens of billions of dollars in OpenAI, taking its stake in the ChatGPT maker to 11 percent. Tim Cook calls for “de-escalation” in the Trump administration’s immigration crackdown. The Apple chief told staff in an internal memo that he was “heartbroken by the events in Minneapolis” and had spoken to President Trump about his concerns after the killing of Alex Pretti by federal agents. Cook had been criticized for attending a White House screening of “Melania,” a movie about the first lady, hours after the fatal shooting. He is the latest C.E.O. to speak out about the administration’s immigration enforcement campaign. TikTok settles a social media addiction lawsuit. The short-video platform reached an agreement with a California resident who claimed that social networks had deliberately engineered their products to hook users to an unhealthy degree. The settlement was announced on the first day of jury selection in the trial; Meta and YouTube are still defendants in the lawsuit. Amazon announces another round of layoffs. The tech and e-commerce giant said it was laying off 16,000 corporate employees, after an October round that cut 14,000. (The company inadvertently announced layoffs in its cloud computing division yesterday in an email to workers.) Amazon, which is scheduled to report quarterly earnings next week, plans to spend heavily on artificial intelligence. Clay and the growth of tender offersClay, the maker of a fast-growing automated sales and marketing tool, let employees sell some of their stock just under nine months ago, at a $1.5 billion valuation. Now it plans to announce today that it’s doing it again — at a $5 billion level, Michael de la Merced is first to report. The transaction underscores how, for many start-ups in the artificial intelligence age, letting workers cash out some of their holdings well before an I.P.O., and sometimes several times, is becoming standard practice. The news: Clay will let employees sell up to $55 million worth of stock to a group led by DST Global, the tech investment firm, as well as the venture capital funds Conviction and Avra and a group of angel investors and tech executives. Clay raised a primary capital round — as in, the company itself sold stock to investors — in August at a $3.1 billion valuation. Younger start-ups are turning to employee tender offers earlier and more often. It’s a change from previous eras of Silicon Valley, during which companies tended to let workers cash out only once they went public. That was partly out of fear of sapping employees of motivation or freeing them to hop to a different job. But many entrepreneurs now have a different approach:
And investors are on board: “There’s a real war for talent in the A.I. world,” Rahul Mehta, a founder and managing partner at DST Global who led the Clay tender offer, told DealBook. Many start-ups are in a better position to do tender offers sooner, too. Clay, for instance, is doing well financially — it more than tripled revenue last year and hasn’t spent much of the capital it has raised — and still had interest from investors like DST Global. About 60 percent of the tender offers conducted in the 18 months that ended on June 30 last year were by companies valued at $1 billion to $10 billion, according to a report by Gunderson Dettmer, a law firm that advises start-ups. DEALBOOK QUIZ How thirsty is A.I.?This question comes from a recent Times article. Click an answer to see if you’re right. (The link will be free.) Artificial intelligence requires a lot of water. More specifically, the data centers that power A.I. consume huge amounts of H20 to absorb the intense heat generated by the densely packed computer servers and keep them cool enough to operate. The A.I. boom and its accompanying infrastructure build-out mean that technology giants like Microsoft (which reports quarterly earnings after the closing bell today) are recalculating how much water they’ll need in the years to come. That math may clash with previous sustainability promises. In 2024, Microsoft used 10.4 billion liters of water at its data centers worldwide. The company recently updated its forecast for future consumption. How much water, in liters, does Microsoft now expect to use in 2030? Chart of the day: dollar downerA slumping dollar is jolting global markets again this morning. The latest move comes after President Trump’s apparent embrace of a weak greenback: When asked yesterday by a reporter about the dollar’s tumble — it is down more than 10 percent against other currencies since he returned to office, while gold has hit a record — he responded: “Look at the business we’re doing. The dollar’s doing great.” But Robert Kaplan, a vice chairman at Goldman Sachs and a former Dallas Fed president, warned that a battered buck could sink demand for U.S. Treasury notes and bonds.
A rail megamerger under scrutinyUnion Pacific’s ambitious plan to merge with Norfolk Southern in a $72 billion deal — creating a powerful new transcontinental freight rail network — hit a snag this month when a federal regulator said the companies’ application was incomplete and demanded that it be refiled. The pushback from the regulator reflects broader concerns about too much consolidation in the U.S. freight rail industry, Peter Eavis reports. Yesterday, Union Pacific’s C.E.O., Jim Vena, said the Surface Transportation Board’s objections were “a short-term blip.” He said that the companies would refile and that they did not expect the deal to be delayed for long. (Union Pacific and Norfolk Southern are hoping for the tie-up to be sealed in 2027.) The merger would be a historic event. One attempt to build a single transcontinental network came close to succeeding in the early 20th century but fell apart in the financial crisis of 1907. Vena says a single network would make it easier to move goods across the country. He met with President Trump last year and discussed the virtues of the deal. Union Pacific donated an undisclosed sum to Trump’s White House ballroom project. “We give because we think it’s a worthwhile cause,” Vena said in November about the donation. One issue the Surface Transportation Board raised goes to the heart of why this deal is prompting concerns. The freight rail market is dominated by four companies: Union Pacific, Norfolk Southern, CSX and BNSF, which is owned by Warren Buffett’s Berkshire Hathaway. The fear is that if Union Pacific and Norfolk Southern combine, CSX and BNSF will, too. That would put more than 80 percent of rail car movements in the hands of just two companies. Checking the math: In the merger application, filed in December, Union Pacific and Norfolk Southern provided the S.T.B. with a combined market share after their proposed merger. Later, rival railroads pointed out that this figure did not include the merging companies’ expectation that they’d be winning extra business after the deal was consummated. The S.T.B. asked for a new calculation. Union Pacific said it would provide one. The application did not make the companies’ estimated future market share number public. Analysts, using data reported to the S.T.B., have estimated that Union Pacific and Norfolk Southern would together have 43 percent of the market. “You might end up with that number,” Vena told DealBook in an interview yesterday, “and I won’t argue with that number.” We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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