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1.

Markets wrap: Wall Street turned higher overnight as oil prices fell and investors bet on a Middle East peace deal, with the Dow Jones Industrial Average rising 0.56%, the S&P 500 gaining 0.13% and the Nasdaq unchanged. Brent crude fell 2.3% to USD102.58 a barrel after hitting USD108 earlier in the day, as Secretary of State Marco Rubio told The Financial Times he saw “some good signs” a deal could be reached, while Iranian President Masoud Pezeshkian said the nation “will never back down,” in talks. Nvidia fell 1.7% despite reporting and forecasting record sales and earnings that beat analyst expectations, as some investors took profits after the result. IBM jumped after the Trump administration agreed to award USD1 billion to the company to build a quantum-computing chip foundry. That is part of a USD2 billion package that also sent shares in D-Wave Quantum, Rigetti Computing and Infleqtion surging. Walmart dived about 7% after the retailer maintained its full-year targets and warned that high fuel costs could lead to higher prices for shoppers. Ralph Lauren jumped about 10% after quarterly revenue and earnings each rose 17%. SoftBank surged 19.8% in Tokyo after the WSJ reported OpenAI plans to file for an IPO as soon as Friday. (WSJ)(Bloomberg)(Reuters)

2.

Musk’s vision: Elon Musk’s SpaceX Nasdaq listing could land with valuation that would likely make it America’s seventh-largest company, but with an annual revenue of about USD19 billion ($26.6 billion) that ranks it about 200th on a par with General Mills, the American cereal maker behind Cheerios. The 300-page prospectus would cement Musk as its virtually unfireable CEO, laying out a vision of orbital AI data centres, asteroid mining and passenger transport to Mars. The filing lays bare the scale of the bet. The FT calculated that to justify a USD1.75 trillion valuation, SpaceX needs to capture just 3% of its claimed USD28.5 trillion total addressable market within a decade, assuming a 30x earnings multiple in line with Apple, Amazon and Alphabet today. But nearly 80% of that TAM is enterprise applications, territory already contested by Anthropic (whose expected June quarter revenue of USD10.9 billion is already more than double SpaceX’s) and OpenAI. The TAM also includes USD600 billion in digital advertising, which The Information noted is about USD100 billion more than Meta and Google’s combined ad revenue last year. As Reuters puts it, the sequential logic underpinning the investment thesis rests on Starlink revenue funding the development of Starship, which will then reduce the cost of reaching orbit and open new markets, and those new markets will eventually support the AI business. But space revenue in the March quarter fell 28.4% and the same prospectus warns that “delays or challenges” in the Starship program on which the entire growth strategy depends “have in the past occurred, and may occur in the future”. Other interesting morsels of information included in the document include a USD60 billion option to acquire AI coding startup Cursor 37 days after the IPO (or face a USD10 billion break fee), the mammoth USD40 billion contract with Anthropic to lease capacity across SpaceX’s two Colossus data centres that carries a 90-day cancellation clause that may prevent investors from treating it as guaranteed revenue, and the Terafab chip factory with Tesla and Intel the prospectus describes as a “general framework for future development” with neither partner obligated to proceed. SpaceX is carrying USD29 billion in debt, US government contracts account for 20% of revenue, and Musk faces no restriction on competing with SpaceX through his other businesses including Tesla. Musk’s pay package includes a billion-share bonus for putting one million people on Mars and hitting a USD7.5 trillion market capitalisation, with no deadline attached. Reuters reported most analysts are bullish (not surprising when there are 23 banks involved in the IPO). Mike Alves, founder and fund manager of VIDA Vision Fund and early SpaceX investor, told Bloomberg he was shocked by how aggressively the company was pitching its AI capabilities. “For a rocket company, that’s wild,” he said. SpaceX is expected to kick off its investor roadshow on 4 June, price on 11 June and list on the Nasdaq under the ticker SPCX on 12 June. (FT)(Reuters)(The Information)(Bloomberg)(Capital Brief)

3.

Budget frost: Labor’s fifth budget has received a frosty reception from voters, with exclusive new DemosAU/Capital Brief polling showing One Nation overtaking Labor on the primary vote for the first time. A plurality of respondents (42%) described the budget as “generally bad”, compared to 23% who described it as “generally good”. On treasurer Jim Chalmers’ tax changes — scaling back negative gearing and capital gains tax concessions — 44% said they will hurt the economy and 53% said they will make it harder for the average Australian. Only 27% agreed with Labor’s central claim that the budget would make Australia “a fairer place”, compared to 36% who disagreed. While Labor’s primary vote has remained steady at 26%, it picked up 6 points among voters aged 18 to 34 but suffered a swing against it among Australians aged 34 to 54 (-3 points) and those above 55 (-2 points), with those older voters appearing to have shifted to both One Nation and the Coalition. The poll also shows a sudden drop in Albanese’s personal approval rating among Labor voters, from 82% to 58% in just a month. (Capital Brief)

4.

Bankers vs AI: JPMorgan Chase boss Jamie Dimon said the Wall Street giant will hire more AI specialists and fewer traditional bankers as adoption of the technology accelerates. “I think it will reduce our jobs down the road,” Dimon told Bloomberg at the bank’s China Summit in Shanghai. “There will be all different types of jobs, and I think we will be hiring more AI people and fewer bankers in certain categories, and it will make them more productive.” Dimon argued the transition can largely be managed through natural turnover rather than sweeping layoffs, with JPMorgan’s annual attrition rate of roughly 10% or about 25,000 to 30,000 departures a year. JPMorgan is also implementing AI tools across its investment banking business globally, with Asia Pacific investment banking head Paul Uren telling Reuters the bank is “in the early phase adopting AI tools throughout our investment banking business globally.” Dimon also stood by Standard Chartered boss Bill Winters, who this week said the bank is replacing “lower-value human capital” with technology to eliminate 8,000 support roles by 2030. He described Winters as a friend but said the remarks were “an inartful way to say something.” McKinsey estimates roughly 30% of work hours in finance and insurance could be automated by 2030, while Citigroup research indicates more than half of all banking jobs have high potential to be replaced or augmented by technology. (Bloomberg)(Reuters)

5.

Experimental results: Eli Lilly’s experimental obesity drug retatrutide helped patients lose 28% of their body weight on average in a late-stage clinical trial, the company said. The results put it on par with bariatric surgery and surpass every weight-loss drug currently on the market. In the 2,339-person phase 3 trial, patients on the highest dose lost an average of 70 pounds over 80 weeks, while those with severe obesity who continued for two years lost an average of 85 pounds, or 30% of their body weight. By comparison, Eli Lilly’s own Zepbound and Novo Nordisk’s Wegovy deliver around 20% weight loss over a similar period. “This is the largest weight loss I’ve ever seen in any medication trial,” Dr Susan Spratt, an endocrinologist at Duke Health who was not involved in the trial, told NBC. RBC Capital Markets analyst Trung Huynh called the trial “a clean win” for Lilly, after setting the bar for success at weight loss of between 28% and 30%. The results came at a cost, though. About 11% of participants on the highest dose dropped out due to side effects including nausea, diarrhoea and constipation, a higher rate than existing obesity drugs. About 12% of patients on higher doses experienced dysesthesia, an uncomfortable nerve sensation. Eli Lilly has not yet applied for regulatory approval, though NBC News said the company expects to file as early as this year. The results have not been peer reviewed. (NYT)(WSJ)(Bloomberg)(The Hill)(Eli Lilly)(NBC)

6.

Order delayed: Donald Trump pulled a landmark AI executive order at the last minute overnight, cancelling a signing ceremony even as tech executives were midair on their way to the White House. “I didn’t like certain aspects of it,” Trump told reporters in the Oval Office. “We’re leading China, we’re leading everybody, and I don’t want to do anything that’s going to get in the way of that lead.” The order would have granted the federal government oversight of new AI models before their public release, directing agencies including the Office of the National Cyber Director to develop a process for evaluating models and identifying security vulnerabilities, according to reports. Major AI companies had asked to voluntarily share models between 14 and 90 days before release, the NYT reported. The WSJ reported Trump’s decision was a win for business-focused advisers including venture capitalist David Sacks, who co-chairs the President’s Council of advisers on Science and Technology and has pushed for an industry-friendly approach since the start of Trump’s second term. Meanwhile, California governor Gavin Newsom signed an executive order mandating his state prepare policies to address job losses caused by AI. (WSJ)(NYT)(NBC)(CNBC)

7.

R&D reckoning: Australian deep tech firms backed by the National Reconstruction Fund are calling for exemptions from a proposed 10-year time limit on claiming the R&D tax incentive scheme, warning the move puts local high-skilled jobs at risk. Rocket manufacturer Gilmour Space Technologies, which is among the companies set to lose access to the program, said the refundable stream of the R&D tax incentive is ”very important for companies like ours…it helps us hire more engineers and technicians, continue development, and keep building advanced capability for the nation”. The introduction of a 10-year cap has blindsided many R&D-intensive businesses in the biotech and space sectors that can spend decades before generating revenue. Gilmour, which spent $43.6 million on R&D in 2022-23, said the limit seems “arbitrary”, particularly when companies automatically move off the scheme once they are generating net income. Satellite company Myriota chief executive Ben Cade told Capital Brief companies will have to consider whether they can afford to continue employing technical staff funded through the scheme, while Quantum Brilliance chief executive Mark Luo called on the government to consider “carve outs around sectors that align with Australia’s national priority areas”. (Capital Brief)

8.

On The Call: Labor’s budget backlash is now in its second week and showing no signs of fading. Capital Brief editor-in-chief John McDuling, associate editor Jennifer Duke and ideas editor James Hennessy unpacked a government that walked into a fight it wasn’t prepared for. Chalmers stopped by the Capital Brief suite in the press gallery lockup convinced he had a startup-friendly budget. The reaction from the startup and small business communities suggests otherwise. As McDuling put it, it is rare to see Labor on the wrong side of a cultural moment in the current political landscape, and that is exactly where it finds itself. The CGT changes have drowned out the housing message entirely, Labor MPs are openly anxious, and the government hasn’t been able to explain the inflation deduction or the small business exemptions clearly enough to cut through. On the R&D tax incentive, the panel noted that Tesla chair Robyn Denholm, who led the review, has made clear the 10-year cap was not her recommendation. Something slipped through that blindsided the biotech sector and nobody softened the ground. On the politics: the Coalition has finally found its opening, and Angus Taylor is using it. Listen on Apple or Spotify.