The Week in Breakingviews: Sizing up AI stragglers

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OPENING LINE

“The academic theory of negotiation holds that rational actors come to the table once they understand each other. Theory has a habit of crumbling upon contact with Donald Trump, however.”

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Read more: US-Canada co-dependence is too valuable to squander.

FIVE THINGS I LEARNED FROM BREAKINGVIEWS THIS WEEK

1. U.S. regional banks grabbed 23% of the investment banking fees paid by domestic clients last year.

2. Only 2% of the EU’s goods exports currently go to India.

3. American taxpayers are set to receive $100 billion more in tax refunds this year than last.

4. Chip equipment maker ASML’s (ASML.AS), opens new tab stock market premium over peers has .

5. Japanese car exports have fallen by a third since 2008.

ARTIFICIAL OBSOLESCENCE

When investors and bankers get together these days, it’s often not long before one of them raises the question everyone is pondering: which artificial intelligence firm will run out of money first? As tech companies race to build even larger data centres, snap up greater quantities of cutting-edge chips, and lure AI researchers with lavish salaries, the financial industry is trying to identify who is struggling to keep up with the pack. It sets the stage for what Rob Cyran and Jonathan Guilford call an AI-budget murder mystery.

The prospect of the AI industry suffering a capital crunch may seem far-fetched. Meta Platforms (META.O), opens new tab is splashing out up to $135 billion on capital expenditure in the coming year – almost double its 2025 outlay, and nearly three times what it spent in 2024. Microsoft (MSFT.O), opens new tab also continues to crank up investment. Japan’s SoftBank may inject another $30 billion into OpenAI, Reuters reported, while the ChatGPT inventor is talking to Amazon (AMZN.O), opens new tab about a $50 billion investment, according to the Wall Street Journal, opens new tab. Not to be outdone, rival Anthropic has doubled its fundraising goal to $20 billion, the Financial Times reported, opens new tab.

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Besides, the fates of many of these companies are intertwined. Microsoft is a shareholder in OpenAI, while the company run by Sam Altman accounts for 45% of the tech giant’s $625 billion backlog of contracted revenue, opens new tab. Nvidia (NVDA.O), opens new tab, which supplies most of the chips used to train and run AI models, has invested in multiple companies. As Karen Kwok argues, SoftBank founder Masayoshi Son is unusual in betting mainly on one startup.

Yet the scale of these investments dwarfs the revenue the products are currently bringing in. While OpenAI’s sales run rate of more than $20 billion a year is impressive, the firm continues to bleed cash. The likes of Microsoft, Meta and Google owner Alphabet (GOOGL.O), opens new tab can cover most of their AI investments from existing cash flows. But it’s far from clear what kind of return they will earn as newer and better large language models overtake existing ones, and Nvidia chips rapidly depreciate.

Tech giants have been quick to identify an AI productivity boost. “We’re starting to see projects that used to require big teams now be accomplished by a single very talented person,” Meta’s Mark Zuckerberg told analysts, opens new tab. Broader corporate adoption remains patchy, though. And even if the bonanza continues, some will struggle. Shares in software giant Oracle (ORCL.N), opens new tab, an aggressive builder of AI data centres, have almost halved since last September. SambaNova, once a poster child for bespoke AI and valued at $5 billion, is seeking fresh funds after a $1.6 billion sale to chipmaker Intel (INTC.O), opens new tab fell through. As Sebastian Pellejero argues, even perfect-looking venture capital investments can falter. Tech investors are used to backing multiple startups in the expectation that only a handful will succeed. Though the sums are much larger, the financial law of the jungle still applies.

CHART OF THE WEEK

Is the dollar losing its clout? The question that has been debated for at least five decades is back again thanks to Donald Trump’s erratic and aggressive moves against erstwhile allies. The value of the greenback has fallen against other currencies, and its presence in central bank reserves has shrunk. Yet as Jon Sindreu points out, the dollar’s share of bonds, loans and foreign-exchange transactions is remarkably stable. “The dollar is our currency, but it’s your problem,” U.S. Treasury Secretary John Connally remarked in 1971. It’s still true today.

THE WEEK IN PODCASTS

It’s almost 10 months since Donald Trump launched his trade war: how are American firms dealing with tariff turmoil? That’s the question I explored with Mike Musheinesh, the CEO of Detroit Axle, a family-owned distributor and manufacturer of auto parts, on The Big View, opens new tab. We talked about supply chains, the prospects for bringing manufacturing back onshore – and making the decision to sue the U.S. government.

Diplomatic strains haven’t stopped European companies from listing their shares in the United States. Gambling firm Flutter Entertainment and building materials group CRH are some of the firms that have shifted stateside in search of higher stock market valuations. Liam Proud joined Aimee Donnellan and Jonathan Guilford on the Viewsroom, opens new tab to discuss the lure of U.S. markets, and which other companies might make the transatlantic trip.

PARTING SHOT

Prediction markets are gaining momentum. Online venues like Kalshi and Polymarket, which allow punters to take a view on events from sporting contests to tomorrow’s weather, have exploded in popularity. That has attracted the interest of professional traders, and of operators like NYSE owner Intercontinental Exchange (ICE.N), opens new tab. For all the focus on the Polymarket punter who successfully bet on the removal of Venezuelan President Nicolas Maduro, prediction markets are still sports-heavy. But as Pranav Kiran writes, don’t rule out traditional exchanges joining the action.

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Editing by Liam Proud; Production by Oliver Taslic

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Peter Thal Larsen

Thomson Reuters

Peter is Global Editor of Reuters Breakingviews, based in London. He was previously EMEA editor, and before that spent four years in Hong Kong as Asia Editor, where he oversaw the launch of Breakingviews’ Asian edition. Prior to joining Reuters in 2009, Peter spent 10 years at the Financial Times, including five years as the paper’s banking editor, leading its award-winning coverage of the credit crunch. Between 2000 and 2004 Peter reported for the FT from New York, where he covered a range of stories including the 9/11 attacks and their aftermath. A Dutch national, Peter has degrees from Bristol University and the London School of Economics.

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