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Relax guys, I don’t own a Ferrari. But the metaphor is apt:

And let’s face it, most work in companies does remain mundane:

1. So why buy a Ferrari just to go buy milk?

2. Why not use a combination of open-source, mid-level and frontier AIs to spread compute costs profitably?

As we already illustrated in our deep dive on OpenAI, finding an economically and socially sustainable usage model for AI is the only way we will survive this race-to-the bottom.

To paraphrase a Chinese proverb:

→ I’d go a step further and say that three ordinary people cost less than one arrogant genius who wants stock options :).

Sadly, none of this makes the case for throwing more trillions at AI data centres any easier.

The stock market spent the week asking the same question from the other side. Alphabet told investors it would spend $15bn more than planned, and the shares fell around 7%, even with its cloud arm growing 82%. Tesla dropped 19%.

Note that we have already flagged some good’ ol’ accounting shenanigans in Google Q2 26 results in one of our posts. Meta is also down ~8% this week. Blackrock placed a ~$12bn bond for a (future) Meta operated data centre and investors demanded a materially higher margin than anticipated.

Clearly, markets are finally catching on to the risks of throwing money at AI hardware with no ROIC in sight.

Enter the real world:

1. Iran-backed forces hit two Saudi oil tankers in the Red Sea, Brent crude pushed past $100 for the first time since May before easing on Friday, and just like that, inflation was back in the room.

2. The odds of a US rate rise next week went from about 13% to 38%. The ECB is on watch still. The Indian RBI is mulling things over again.

The markets that benefited most are the ones most shielded from the AI capex trade. Europe and a steadier London leaned on energy shares and some genuinely good home data. India, facing yet another spike in energy costs, had a bloodbath of its own this week.

What all this means for you: our weekly repetitive advice still stands - keep calm, and take calculated risks.

Markets

• United States (S&P 500, NASDAQ): The AI spenders got slapped on the wrist. The S&P slipped -0.61% and the Nasdaq -1.62%, but strip out Alphabet, Meta and Tesla and tech held up fine. Markets recovered towards the end of the week.

• Europe (Euro Stoxx 600, FTSE 100, SMI): The Stoxx 600 rose +0.46% and the FTSE 100 climbed +1.28%, carried by energy shares and solid home data. The SMI dipped -0.12%, weighed by a heavy Nestlé.

• Asia-Pacific (NIFTY, Hang Seng, Nikkei 225): The Nikkei eked out +0.73% and still sits +54.47% YTD, though a brutal Friday nearly undid the week. Hong Kong’s Hang Seng rose +1.63% on state buying but stays -2.74% for the year. India’s NIFTY 500 fell -1.81%, the worst on the board, and remains the only index in the red YTD at -1.66%

• Bitcoin: +0.71% while everything wobbled. Still down -45.19% for the year. Meh, again.

• Gold and Silver: The haven trade came back this week. Gold +0.84% and Silver +3.33% as the oil scare and rate fears did their work.

Investor Sentiment Gauge

We continue to live in a climate of Fear… or so CNN calculates.

I find this government bond yield ‘staircase’ quite compelling. It summarises the world we live in where governments survive on refinancing debt all the time.

Last week’s important events and what they mean for you

United States

“Is That College Scholarship Taxable? What Parents Need to Know Before Fall.”

Broadly speaking, aid is tax-free when it pays for tuition and required fees, books and equipment, but taxable when it covers room, board, travel or a stipend. The form schools send, the 1098-T, often doesn’t spell out which part is which, and outside scholarship providers need not send one at all, so the record-keeping falls on you.

LFA’s take: A good rule of thumb, put scholarship money against tuition and use a 529 for the living costs, since 529 withdrawals for rent and board are treated more kindly. Match each dollar to the year the cost lands.

What this means for you: before fall, ask the bursar to split the bill into tuition versus living costs, and keep every receipt. Two smaller notes worth knowing: up to $10,000 of a 529 can repay student loans, and up to $35,000 can be rolled into a Roth IRA for the student, a quiet way to turn leftover college savings into a head start on retirement.

United Kingdom

“More than 600,000 UK high earners could be dragged into pension trap by 2032.”

Last week’s advice for anyone nearing the higher tax bands was to pour money into a pension, the simplest legal way to bring taxable income down. This week however we show that there is trap waiting at the top of that same ladder. Once adjusted income climbs above £260,000, the £60,000 you can normally save into a pension each year starts tapering down towards a floor of £10,000. HMRC data shows half a million earners caught by this taper now, and consultants expect another 114,000 by 2032, because the £200,000 starting threshold has not moved with inflation since 2020. It would be worth over £254,000 today if it had.

LFA’s take: This is a tax rise. And a single bonus can tip you over the line for a year without warning.

Our suggestion: if your income is anywhere near £200,000, or a bonus might push it there, work out your adjusted income before you top up your pension, not after. Getting this wrong triggers an extra tax charge. One more thing on the horizon, from April 2027 unused pension pots start falling into inheritance tax, so the pension can be nibbled on the way in and again on the way out. Worth planning properly.

India

“India’s rupee problem has been misdiagnosed.”

When the rupee slid after the (first) oil shock, policymakers called it temporary and spent as much as possible to keep the INR stable. This depletion of forex reserves led the RBI to launch a scheme for NRIs guaranteeing a 6%+ dollar return to claw back $50bn-$70bn by September. This is nothing more than a quick-fix on a structural problem.

LFA’s take: India’s currency weakness is structural: it imports about 35% of its energy against China’s 20%, and keeps prices below market, so a shock bites harder. Deeper still, private corporate investment has halved from its 2000s peak despite stable macro, good infrastructure and fresh trade deals. The only way out of this rut is to transform India into a real manufacturing hub.

What this means for you: the signal to watch for meaningful stock returns is not the exchange rate, but whether private companies start investing again.

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to Leap Finance Academy’s (formerly the FQ) Market Pulse newsletter!

Have you ever watched a Dominoes competition on TV? There is something truly fascinating about the Dominoes ripple effect. Contestants spend months planning their layout, another 30 hours or so building it and then watch the whole thing crumble down in less than 3 minutes. It requires a sick amount of patience to build, and mere seconds of dread while it all topples down.

Well, that summarises last week quite well.

Seoul tipped first, then came Tokyo, Taiwan, Hong Kong, Mumbai/New Delhi until finally New York joined the band. Eleven markets in total behaved like they were all one.

And you know what the funny thing is? For once, the global data feed (despite the active missiles firing around the Strait of Hormuz) was not that bad:

• US Inflation has started to cool down, headline CPI slipping to +3.5% from +4.2%, and the probability of a July rate-hike down to 14%.

• Big US banks beat almost everything in sight (wonder why US mortgage rates are at a 11-month high and who it benefits most hmmm…)

• IT company earnings in India held up.

• Taiwan Semiconductor, which makes the chips the whole AI story leans on, reported profits up nearly 80% and raised its guidance.

• European inflation improved too, with prices cooling to a three-month low of +2.8%, with energy leading the drop. Industrial output fell tho’.

• Britain, for once, grew faster than expected, GDP up +0.7% in the three months to May against forecasts of +0.5% (let’s do what people always do, credit Burnham not Starmer).

• And Europe’s tech. darling ASML reported healthy numbers.

So then why did eleven markets ‘domino it’ down?

I blame irrational exuberance. For weeks on end. For some reason, investors keep (or kept?) ignoring the reality and ‘cost’ of building AI infrastructure at the speed at which OpenAI would like. The demand side of this equation has not been proven yet, and as our deep dive on OpenAI’s business model proved - there is no profit in this business until some radical changes happen. All we are doing is throwing vast amounts of money from one side of the supply chain to another:

So overvalued AI supply chain stocks just collapsed: memory, foundry, equipment, storage, Micron, Lam, AMD, Broadcom, Applied Materials, Western Digital, Seagate etc. It’s more evidence that the entire industry is spending colossally into a demand curve nobody has yet proven pays for itself. The Nasdaq went down -4.13% and the S&P 500 -1.55% (with technology contributing to -1.39%).

And to top it all off, Oracle’s credit rating got downgraded to just above Junk because of its single OpenAI US$300bn exposure (~50% of order book). And SpaceX is now below its IPO price. Also coherent with our analysis of SpaceX.

The relative ‘bright spot’ this week was Europe. Its lack of exposure to chips or AI meant that fundamentals drove the story: the Stoxx 600 ended flat at +0.07%, and London seemed to play haven magically with the FTSE 100 up +0.98%.

What all this means for you: our weekly repetitive advice still stands - keep calm, and take calculated risks.

Markets

• United States (S&P 500, NASDAQ): The wheels came off tech. The S&P slipped -1.55% and the Nasdaq -4.13%, but strip out technology and both were near flat.

• Europe (Euro Stoxx 600, FTSE 100, SMI): The quiet winners. The Stoxx 600 held the line at +0.07%, the SMI rose +0.76%, and the FTSE 100 climbed +0.98%, helped along by a political relief rally as Shabana Mahmood’s likely move to chancellor cheered the pound and gilts.

• Asia-Pacific (NIFTY, Hang Seng, Nikkei 225): Japan took the beating, the Nikkei crashing -6.44% as its chip and memory names were shredded, though it still sits +61.78% for the year. Hong Kong shrugged it off to end +1.60%. India’s NIFTY 500 essentially flatlined at -0.05%, and remains the only index in the red YTD at -0.58%.

• Bitcoin: Up +3.00% while everything tech fell. Still down -41.17% for the year. Meh. I don’t know how many times I will Meh this one! Bitcoin has no backbone to analyse.

• Gold and Silver: The odd one out - where is the safe haven trade? Despite war fears, Gold -2.89% and Silver a hefty -6.25%.

Investor Sentiment Gauge

Last week we were curious to see what happens on 13th July 2026: result is a change from ‘Neutral’ back to ‘Fear’. This constant see-sawing should tip everyone off to ask governments and companies the right questions. Are underlying economies really as strong as they are portrayed to be?

A dose of reality and honest conversations would perhaps, help build a newer set of foundations around the AI supply chain and its effects on mankind.

Last week’s important events and what they mean for you

United States

“Debt Collectors Chase More Consumers in Court.”

A Pew report finds debt-collection lawsuits at their highest in years, past pre-pandemic levels. Missouri’s nearly doubled since 2019; Texas rose 77% to over half a million. Most chase debts under $4,000, and about 70% end in default judgments, often because the person never knew they were sued.

LFA’s take: here’s the dichotomy: US Banks reported record profits this week. But this report highlights an ugly truth about state of affairs in the US. Lenders are fine but borrowers are not. Loan book write-downs should follow next quarter.

What this means for you: reducing consumer debt should be the first item on your list. And if a collector ever sues, don’t bin the letter, you have to turn up in court to stand a fair chance of being granted reprieve.

United Kingdom

“Number of higher and additional UK taxpayers rises 35% in 3 years.”

Frozen tax thresholds are pulling more earners into the top bands. HMRC expects 7.7mn people to pay the 40p higher rate this year, up from 7.29mn and nearly 2mn more than in 2023-24. Those on the 45p additional rate reach 1.29mn, against 893,000 three years ago. The thresholds are frozen until 2030-31, so as pay rises with inflation, more people cross lines that never move.

LFA’s take: This is a tax rise. Because the bands stay still rather than going up, the government collects billions more each year without a minister ever standing up to raise a rate. Thresholds first aimed at high earners now catch ordinary professionals.

Our suggestion: if a pay rise pushes you near £50,271 or £100,000, check what actually lands in your pocket, because the marginal rates around those points are steep. Pension contributions are the simplest legal way to bring taxable income back down, and worth a look before the next rise nudges you over.

India

“The wall is down, the doors have locks.”

The India-UK trade deal (CETA) came into force on 15 July. The UK scrapped tariffs on about 99% of its lines for Indian goods, with walls of up to 70% on processed food, 21.5% on marine products and 12% on textiles all going to zero. Scotch duty halved to 75%.

All sounds good till one realises that India’s goods exports to the UK actually fell 7.6% to $13.44bn in FY26, while UK imports into India jumped 36%.

LFA’s take: The tariff cut has created an opportunity; but paperwork is a major obstacle. Preferential access into the UK is not automatic, a shipment has to prove it “originates” in India, which favours integrated makers with clean sourcing records over those assembling imported inputs.

What this means for you: it is too early to speculate on which sectors in India would benefit the most. This is a wait and watch story. Although I do think that the first beneficiaries will be the Indian services industry as IT firms rotating staff through the UK get a five-year break on social-security contributions.

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Our recent article on the SpaceX IPO was a shiny reminder of how companies hide the real challenges they face behind overstatements, simplifications and marketing glitz.

Fundraising can be a messy business. Sometimes the only way to collect funds is to hide behind a ‘larger than thou’ image. IPO investors are sold the idea first; the shares come almost as an afterthought.

The SpaceX story may very well succeed. As we stated: Success lies in doing and so far Elon Musk’s track record of overcoming what people initially deemed impossible is real. He does already have a cash flowing base, with Starlink and Launch to subsidise the AI division.

All I know is this:

• OpenAI is severely lossmaking – at least US$30bn^[1] of cumulative loss (that we know of).

• For every dollar of revenue it earns, it spends on average nearly three dollars (2.6x).

• It has set an ambitious revenue target for FY30e of US$280bn^[2], a ~21.4x growth from FY25a, equivalent to growing at ~85% every year.

  • o ~US$100bn is expected to come from a new advertising business and the remaining ~US$180bn from the existing AI services business.

• A large portion of its activities are circular in nature: it receives funds from investors like Microsoft and then pays it back to them for compute etc.

• OpenAI has grandiose capital outlay plans: a US$500bn ten gigawatt (each gigawatt costs US$50bn) AI compute data centre, but has barely amassed 10% of the long term capital^[3] required to build it (US$54.3bn that we know of).

• In total, it targets having exclusive access to 30GW of compute capacity by FY30e.

  • Will it be enough to service ~US$180bn in AI services revenues for FY30e?

  • Today it is scrambling to ‘get the hyperscalers’ to build this capacity on their own balance sheets (Oracle being one of their main partners).

• Its business model depends on AI chips, that become obsolete in 3 to 4 years, implying huge periodic and unknown refresh costs. OpenAI is said to be designing their own AI chips to address this issue.

So once and for all, let’s put the value creating PE investor ‘hat’ back on and ask ourselves two fundamental questions about OpenAI:

The PE elevator pitch

Being able to summarise any business in simple words is the starting point of any (Private Equity) investment analysis. So here goes:

• OpenAI is a provider of Artificial Intelligence solutions. It sells access to units of ‘problem-solving intelligence’ – a.k.a tokens that customers use to solve various challenges.

• Specifically, it sells (monthly) subscriptions to retail & corporate customers.

• Customers’ usage of tokens requires computational energy (hardware, software, electricity) to give a response. This is called ‘cost of inference’.

• OpenAI’s main asset is the intelligence engine it develops & maintains and its two biggest limiting factors are the availability of compute capacity globally and the intelligence engines of other competitors.

Based on this, it becomes easy to isolate the key success factors behind OpenAI’s value proposition and then to forecast the effect they will have on its road to profitability:

Inferring OpenAI’s road to business success

We can take this a bit further and graphically map out OpenAI’s revenue and costs chain:

OpenAI’s success lies in ensuring its total cost of providing token services remains as low as possible, even as it keeps rolling out more and more intelligent AI models.

If the number of tokens used to answer the same question keeps going up, that means OpenAI will keep having to buy more compute to solve the same problem. Hence its cost of inference will (keep) going up. It will (keep) diluting profit.

So while announcing stratospheric growth projections, they should also address the main challenge it faces daily (and knows most about):

With all this under the belt, we can now look at the actual status of each KPI that we have identified so far.

Assessing OpenAI’s KPI’s from last 2 years

Overall revenue drivers - Product lines and Customer profiling

Let’s start by looking at the revenue side of its profit equation.

ChatGPT is a true leader in the field of AI. It was the first AI assistant that was ‘good enough’ to cross into mainstream use by reaching 100 million people within two months.

OpenAI kickstarted the AI revolution, quite literally.

But the mass-early adoption of (the then free) ChatGPT has, today, led to a structural dominance of revenues by paying retail customers - in FY25a they accounted for c. 60% of sales. Corporate clients came later and now occupy the remaining 40%^[4] with 2 products: the API platform (c. 25%^[5]) and a corporate ChatGPT (c. 15%).

• On Retail clients:

  • OpenAI’s revenue is retail heavy and its free tier is widely more used than its paying version.

  • The conversion rate of free to paying customers is currently at c. 6.3%^[6] - increasing this would raise revenues for OpenAI.

  • The average monthly subscription is actually c. $13.1/month^[7] (likely due to price and FX differences across countries).

  • Downside: no customer loyalty, widespread reports that OpenAI is bleeding paying retail customers to Claude.

• On Corporate clients:

  • OpenAI was late to the corporate segment.

  • Corporate is vastly more accretive than retail, and the customers tend to be “sticky”.

    • Customers have to invest $/time/energy to adopt an AI solution, and hence tend to want to see it through.

    • API paying developers yield the highest revenue, with an average of about $272.5/month^[8]. Lack of segment information on corporate ChatGPT forced us to assume $80/month (the pro tier pricing).

  • It makes financial sense for OpenAI to reorient itself towards this stickier customer segment.

• Together:

  • As of last available reporting as of FY25a, total of ~50m paying customers.

  • Weighted average monthly subscription is estimated to be $19.44/month.

  • Average daily token usage of 14.6 trillion a day^[9] in FY25a.

Put all together, this led OpenAI to generate revenues of US$13.1bn in FY25a, up +253% YoY.

Group financial performance to date

Clearly not. Against about +US$17bn of revenues reported so far, stands an eye-watering c. (US$47bn) of costs.

There is some improvement though: revenue has grown substantially faster than total costs^[10]. Main question becomes, will this trend continue or not?

OpenAI’s cost of inference (COGS) implies a Gross margin of just 43%.

That is a far cry from a pure play compute infrastructure provider like CoreWeave (c. 72%). Granted, CoreWeave does not create AI inference models like OpenAI, but when ‘so much money’ is being spent on developing AI, then a gross margin of at least 50% is needed to pay for the many overheads that the business will have to bear!

And so we have identified the first crack in OpenAI’s current business model:

The R&D conundrum: at what point does it start yielding a tangible return?

The single largest cost item OpenAI has is Research & Development (‘R&D’). It’s a whopping 147% of sales! The company is already loss-making just with its R&D budget.

But OpenAI is still a ‘start-up’ … an oversized R&D budget is to be expected. OpenAI is doing its best to create the ‘best’ AI for its customers; which means a life-changing new release every few months with black-hole-like spending approach.

The question then arises – what is the actual Return on Invested Capital (‘ROIC’) or NPV of each year’s R&D investment? Right now, looking from outside and without being in Sam Altman’s mind, it’s clearly negative.

Which begs the next question - will its investment in R&D ever have a positive ROIC? One that justifies sustained/repeat R&D investment?

From an operational / business perspective, R&D is not really a function of revenue. R&D is a conscious choice by management to pursue an established list of investments into new discoveries (or to maintain a competitive edge).

These are set in stone long in advance, irrespective of sales dynamics. The only thing that can curtail R&D is lack of cash (not lack of accounting revenue).

I view R&D as a fixed expense: it’s an absolute necessity to survive and it should grow at a fixed rate that includes inflation + employee costs. As a company matures, its value as a percentage of sales will decrease and stabilise (to 15%? Maybe).

Now that puts OpenAI in a real bind.

Their FY25a R&D expenditure was US$19.2bn in FY25a. If that is to be its annual run-rate for R&D, then OpenAI needs $19.2bn of cash + inflation + compute + employee costs + employee retention incentive (stock options) annually for a very long period of time.

Today about 80% (~US$16 bn) goes towards developing frontier models, while the rest goes to maintaining the active AI models (security, bug fixes etc). The maintenance R&D (of about US$3bn) is a cost OpenAI will always have to honour – the concept of ROIC does not directly apply to this line item. But R&D on frontier models? That’s where OpenAI has a lot to answer for.

I am no technology or AI expert. Neither do I have OpenAI’s internal business projections to give you their plan for providing a ROIC.

All I know is what I’ve learnt over almost 20 years of PE turnaround investing. And that is to ask myself simple fool proof commercial questions. For capital intensive businesses, that question is:

I think it should be obvious to all that for OpenAI, to stop investing (massively) is to die.

OpenAI has a ‘fickle’ customer base – price sensitive retail consumers who will run to Anthropic or Gemini (or equivalent) whenever they come up with a better AI model. Even today, it is losing customers to Anthropic. OpenAI also lacks the ‘moat’ of sticky enterprise customers (for now Anthropic has a toe up - just a toe, not a full leg).

Switching is far too easy. OpenAI (or Anthropic for that matter) is not deeply embedded in all our systems, processes and supply chains. It is not yet a critical cog in the global machine, no matter how much its marketing sugar coats its potential.

So Sam Altman has but one choice: keep investing nonstop till ‘hopefully’, he strikes gold with an AI system that doesn’t need ridiculous amounts of (frontier) R&D costs to maintain (and wins an IP monopoly as his ‘moat’).

Enter the next Crack…

How deep does the spending go before OpenAI (or Anthropic) establishes a cash-flowing moat? The answer is truly unknown. The sceptic in me questions the eye-wateringly high amounts as difficult to 1) understand and 2) finance (be it through equity or debt). The investor in me thinks mathematically – doesn’t matter how much a company spends on its assets; all that matters is whether management has a clear pathway to converting massive R&D capex into a cash yielding asset.

Here’s to hope that Sam Altman has a plan. After all, if we look at the roster of OpenAI shareholders so far, they do include some of the most successful tech companies in the world. Surely, they know (or see) something we don’t right?

Let’s look at what it would take for OpenAI to achieve its targets.

Sam Altman’s vision for OpenAI’s growth

Sam Altman has made no secret of his plans for OpenAI. He wants:

• To reach ~$US280bn in sales revenue by FY30e (includes ~US$100bn of advertising).

• To secure (exclusive) access to about 30GW of compute capacity by FY30e, of which 10GW would come from the US$500bn Stargate data centre project.

• To achieve AI super-intelligence by 2028^[11].

• Please note that OpenAI has made no statement about profitability by FY30e.

So let’s test each of OpenAI’s targets.

At this stage, a value creation financial model needs to be built for OpenAI. One where we breakdown the revenue & cost drivers of Open AI into as much detail as possible, and then play with the parameters to identify a critical path to achieve its target.

The FY30e revenue target

Dependent factor 1: Monthly pricing per user

We already stated previously that OpenAI is likely under pricing itself vis a vis is true cost of operations.

Let’s see exactly how bad it is just by calculating at three cases: status quo pricing, break-even pricing and 40% target EBIT margin pricing for FY25a alone.

The results are salient. OpenAI should be charging about ~$85 per user per month to reach a Tech industry standard EBIT margin of 40% - 4 times higher than the FY25a average price. And to break even, they should be charging ~2.5 times that same amount – about ~$51 per user per month.

OpenAI cannot keep subsidising its pricing like this.

Which raises the following risks/value creation questions:

1. How many customers would ‘defect’ to competition?

2. What’s management’s plan to retain (and grow) the paying customer base after such an event?

3. Does OpenAI have the working capital reserve to weather this out?

Dependent factor 2: increasing the number of paying customers

If user price grows only at inflation^[12] till FY30e, what is the total paying customer base needed to reach $280bn in revenue?

This can be modelled in a myriad of ways. Our aim is not to isolate what OpenAI management is thinking, but to backsolve the value creation challenges/targets they have to meet to get there. An investor can then take a call on whether these are realistic or just overstated/’impossible to achieve ‘objectives.

We know that FY25a Retail to Commercial sales split was about 60:40. We also know, based on OpenAI press releases, that the rough number of paying customers in each segment and their inferred token usage. Using these metrics we can calculate^[13] the targets OpenAI needs to meet to reach US$280bn in revenue in 5 years.

I plotted out two basic scenarios: 1) pure growth in paying customers and 2) a better conversion rate of the free tier users:

In both cases, ~US$280bn can only be achieved if OpenAI grows paying retail and commercial customers to ~310 million and reaches the US$100bn advertising ‘subsidy’ business. That implies weekly average users of 2.4 to 4.3 billion (conversion ratio dependent). These numbers are staggeringly high, bearing in mind that it took Netflix about 18 years to reach 325 million customers, paying an average of only US$11.70/month. And that’s a global audience of people!

Can OpenAI achieve what looks like a moonshot? It would be easier for OpenAI to focus on increasing its pricing, rather than believing it can reach so many paying retail customers at the low price they charge today…

For commercial consumers, there are ample firms in the world. But the challenge will be in expanding its appeal to a larger professional customer base, one that does not have a natural proclivity towards programming (the API / coding part is what corporates use the most in terms of tokens). Ideally, OpenAI finds a way to embed itself into core business operating systems to create a natural moat by amplifying switching costs for its corporate customers. Much like an ERP.

Based on these facts, I would raise the following questions to OpenAI management:

1. How do you ensure that customers stay loyal to you and don’t switch to the next best thing overnight?

2. What do you estimate the effect will be in terms of ‘customer loss’ for every $1 of price increase you plan in the future?

3. What is your strategy in ‘cracking’ the corporate market? Which sectors are you ready to address already with solutions? Do you have the teams to sell and implement ready to use AI systems for corporate clients? Or you would outsource this to an Accenture?

Growing revenue requires covering the enabling costs behind AI

We know how important R&D is in keeping OpenAI competitive. But R&D alone will not be enough to attract and retain customers. The company needs a finance function, sales & marketing, capital raising etc. But most of all, the company needs secure and unfettered access to compute. Without it, OpenAI:

1. Cannot respond to paying customers’ queries;

2. Nor can it develop/train new frontier AI models;

So this leaves OpenAI with little choice but to either develop its own AI Datacentres or lease available GPU capacity from hyperscalers like Microsoft. Reportedly, OpenAI had secured access to 1.9GW of compute as of FY 25: 1.6GW was leased with Azure/Microsoft and 0.3GW was coming from its own Stargate project.

By FY30e, Sam Altman targets access to 30GW of compute capacity which includes 10GW from its own Stargate project. Note that initial cost estimates^[14] for this data centre development is US$500bn, which means it costs $50bn per 1 GW of compute built^[15].

If OpenAI wants to own the full 30GW, it would need to invest US$1.5 trillion. To put this into perspective, that is 5% of American GDP and about ~6-7% of the American banking system (by size of assets)! OpenAI is already struggling to find funds for its Stargate project (see next section on known capex commitments), one cannot presume that any equity or credit financing partner would underwrite such a high concentration to a single company with no cash flow moat (yet). That’s why the remaining 20GW of capacity will have to be leased from other companies (most likely at a fixed cost p.a. regardless of usage level).

All this to say that compute itself, is currently extremely expensive. The cost of setting up an AI Datacentre is said to be US$50bn/GW. The cost of leasing 1GW of capacity from a hyperscaler is estimated at US$3.8bn/GW/year^[16]. Hence, leasing the remaining 20GW of capacity would add another US$76bn in (fixed) costs by FY30e.

Again, to put this number into perspective – the cost to rent 20GW of compute is equivalent to increasing the total paying user count by ~325 million customers (at FY25a average pricing per user of US$19.44/month) in a single year!

In a nutshell: OpenAI needs to add more paying customers. And it cannot add more paying customers without adding substantially more compute. This is a vicious lossmaking cycle until OpenAI either drastically increases pricing, or dramatically (even miraculously) reduces the cost of compute.

This can be summarised when we bring the numbers down to batches of 1,000 tokens each:

The total price per 1,000 tokens has to increase to US$3.86 (from US$0.89) to make a 40% EBIT margin.

The Token erosion or Token inflation problem

This problem multiplies the compute capacity AI needs to function exponentially and worsens the capex requirement.

Token erosion refers to the phenomenon where newer, more advanced frontier models consume exponentially more tokens to complete the same task, effectively diluting the utility value of a single token.

This erosion depends on the model used, but the average, it is said to be 80%^[17] erosion year on year. This drastically increases the token usage for the same query and it directly leads to a dramatic increase in cost of compute for OpenAI for each new frontier model it releases. Literally, the snake keeps biting its own tail.

For modelling purposes, I’ve assumed 25% token erosion a year (vs. 80% reality…). I am deliberately choosing to give the AI industry the benefit of the doubt on this one…

The capex requirements from growing the base of paying users

The idea is simply to back solve the actual compute capacity OpenAI needs to put in place to meet its revenue target of US$180bn for AI services.

By linking the FY25a token usage of ~14.6 trillion (daily) to the compute capacity of 1.9GW, we can solve for the required compute capacity over time, as the number of users grows. Assuming as well that utilised capacity of compute is 90% on average, this implies a “daily Tokens to compute” multiple of 8.6x. Meaning each 1 GW of compute available can solve 8.6 trillion tokens daily. Slapping a 25% token erosion p.a. on top, this allows us to back solve the capex and leasing cost of compute over time.

For our “Pure Customer Growth scenario”, OpenAI needs to organise US$177bn in capex funding for Project Stargate, on top of fulfilling compute shortfalls by leasing with other hyperscalers costing ~US$213bn p.a. by FY30e.

The missing compute capacity to service US$280bn of revenue by FY30e is 66.3GW – that’s 36.3GW short of the previously reported target of 30GW by OpenAI. I do believe this is something Sam Altman should be earnest about. Either they are hiding this, or I am totally wrong with the ‘scale’ effect on inference costs. In either case, it is the AI industry’s job to prove this number ‘wrong’, if they want to raise money from all of us.

There is also the added aspect of replacing AI GPUs every 3 to 4 years, a cost I cannot predict or make assumptions about.

Either way, this identifies the next crack in the business:

A brief look into Project Stargate’s funding status

The capital stack of Project Stargate, as of the time of writing, is woefully incomplete. On the one hand, OpenAI assumes a 90% debt financing (10% equity) which is a tall order by all means and on the other, the largest corporate bond ever placed so far has only been US$54bn by Amazon in 2026. How can OpenAI be earnest in their assumption that they can fill in the US$354bn funding gap?

Technically the currebt funding requirement is US$394bn, because Softbank gave a US$40bn one year loan for the Stargate project that is said to become due by April 2027.

Which confirms

So profitability verdict under these two scenarios?

Bottom line is clear: unless OpenAI drastically increases its customer pricing in the coming years AND reduces its cost of inference -> it will remain a loss-making rabbit hole.

Looking at these numbers, OpenAI’s sudden drop in February 2026 about a new advertising business that will scale to US$100bn in revenues by FY30e makes sense: Sam Altman is admitting that cost of growth of AI services will continue to outstrip its revenue (at current pricing) and the best OpenAI can do is to subsidise it with a new revenue source that is not directly linked to inference cost calculations.

In other words, the advertising band aid.

Can OpenAI ever be profitable?

Not if it keeps going this way. Throwing money at the problem and praying to God is not a viable commercial strategy. Not to mention relying on the ‘advertising band-aid’.

Businesses need diligent value creation strategies and competent execution. Sometimes burning the midnight oil, like the whole AI industry is doing, leads to more value destruction than creation.

1. Why is this industry not willing to wait for R&D to mature with cost cutting approaches vs. piling on into a world “now” where all we have is expensive energy and power hungry chips?

2. Why does it have to be ‘now or never’? All it does is to create structural imbalance where demand for compute outstrips supply, and the only thing that can bridge the gap is – surprise – paying more and more for compute.

I truly believe OpenAI can be profitable. But it needs to radically change its strategy on multiple fronts. For example, it can start with low hanging fruit: customer pricing. A steady 10% increase in pricing over 5 years is enough to get it there (again with a huge ~US$100bn advertising subsidy):

Pricing increases will surely lead to detractors, but if their product is truly good, then it should undergo a J-curve effect and bounce back after some time.

If the product is not good, well then let the chips fall where they may.

The Critical Path to profitability for OpenAI

We have identified at least 5 “cracks” in OpenAI current setup, with each controlling one aspect of the profit equation. For now, none of these cracks are being openly / transparently addressed by the AI zealots. In fact, there seems to be an active campaign to bury these issues under as much ‘AI will revolutionise your life so give us money’ talk as possible.

I fundamentally believe that it is only by holding OpenAI’s management’s feet to the fire and asking the right questions, that we will succeed in preserving and creating further value from the firm as investors.

If I was buying OpenAI out as a private equity investment, I would force them to create a critical path to profit and ensure that the whole company subscribes and works towards the below sample plan:

1. Reduce cost of inference by:

   1. Slowing some items down.

   2. Designing new AI chips (shift away from Nvidia) that are cheaper, less power hungry and ideally have a longer shelf life.

   3. Finding ways to reduce the cost of building AI Data centres – what is the need for them to be so big? Can’t a network of smaller Data centres or EDGE data centres work better by segregating between high token usage and low token usage tasks? A load balancing of sorts…

   4. Reducing token erosion to an absolute minimum as new more computationally intensive models come online.

   5. Force compute providers to move towards a usage based pricing model.

2. Increase pricing by:

   1. Moving away from a fixed subscription model to one that is token usage based – transfer the burden of using AI intelligently to the users.

      1. If you give customers a free lunch at a small price, they will maximise its use with even the most simple of questions (taking compute capacity away from other more important tasks).

   2. Gradually increasing pricing across all segments, NOW – not later.

3. Increasing sources of revenue that are not inference dependent:

   1. Advertising is already planned. Maybe there are others?

4. Securing and retaining human talent:

   1. Stock options are one of the most important vectors for retaining employees. But this comes at a huge added cost that investors pay for ‘today’. This is a delicate balance.

5. Securing the funding they need to build Stargate and for working capital

   1. The US$394bn funding gap is real – without a clear way of getting these funds, OpenAI will not achieve its revenue targets.

   2. There is only so much a Softbank can do.

I do wish he chooses my ‘suggestions’ towards profitability 😊. That would be a nice ego boost.

Disclaimer: This deep dive is based on leaked OpenAI financials, reporting from reputed sources and some minor inferences used for financial forecasting. Till OpenAI says otherwise, this remains the only main source of financial information we have. A key item that cannot be covered right now is the quality of the accounting practices behind these numbers; how much is ‘over/under’ stated – we cannot say yet. This Deep dive takes the numbers ‘as is’ for now.
This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

^[1] Cumulative Operating Income / EBIT loss from FY24a and FY25a, prior year losses not known. The source for all available financials is here.

^[2] https://www.bloomberg.com/news/articles/2026-02-20/openai-forecasts-its-revenue-will-top-280-billion-in-2030

^[3] Project Stargate: total equity commitments of US$52.0bn plus US$2.3bn loan from JPMorgan; Softbank organised an additional US$40bn short term loan with a tenor of 1 year (expiring March 27) which needs refinancing or repayment. Other aspects of the capital stack remain murky at best. For now, we can only confirm that a real US$94.3bn of committed long and short term capital has been sourced. Conflicting information exists beyond that amount.

^[4] https://www.bloomberg.com/news/videos/2026-05-15/enterprise-40-of-revenue-streams-says-openai-cro-video

^[5] https://www.ft.com/content/b81d5fb6-26e9-417a-a0cc-6b6689b70c98?syn-25a6b1a6=1

^[6] Our analysis retains 800 million weekly active users (‘WAU’) for 2025, and a ‘rounded up’ 50 million paid subscribers based on the below sources:

• OpenAI Dev Day announcement made on October 6, 2025: 800 million WAU;
  Techcrunch reported 5% conversion rate ~40 million paid subscribers on 14^th October 2025.

• Ed Zitron reported 44 million paid subscribers in 2025: https://www.wheresyoured.at/openai-projects-chatgpt-plus-subscriptions-to-drop-by-80-from-44-million-in-2025-to-9-million-in-2026-made-up-using-cheaper-subscriptions-somehow/

^[7] Calculated on 50 million paid users for 2025. See footnote 6

^[8] Calculated assuming 4 million API users, as reported on OpenAI Dev Day (October 6, 2025)

^[9] 14.6 trillion daily estimated tokens sources:
Retail: 4.5 trillion tokens / day; back solved using 3.0 billion messages/day at an average of 2,000 tokens per message apportioned to retail at 2.25 billion messages/day, https://www.cnbc.com/2025/08/04/openai-chatgpt-700-million-users.html

API: 8.6 trillion tokens / day, as reported on OpenAI Dev Day (October 6, 2025)
Corporate ChatGPT: based on assumed $80/user pricing -> ~2 million users across 92% of fortune 500 generating remaining 750 million messages a day at an average 2,000 tokens per message

^[10] In total costs, we are including cost of goods sold and all reported operating costs till Operating Income/EBIT.

^[11] Youtube Video

^[12] We assume 3%.

^[13] I also assume, that it is in OpenAI’s best interest to grow the corporate segment as much as possible to gain a foothold with sticky commercial clients. I grow commercial customers faster than retail.

^[14] OpenAI

^[15] We are not clear yet whether US$50bn per GW includes the cost of acquiring the land. We assume for now that it does. If it doesn’t, the capital OpenAI will need will be materially higher.

^[16] Part of OpenAI leaked Financials. OpenAI paid US$6.047bn to Azure in FY25a. If we assume that this was for the remaining 1.6GW capacity of FY 25 (out of 1.9GW total), this comes down to US$3.8bn per GW per year.

^[17] Epoch.ai

Welcome to the Leap Finance Academy’s (formerly the FQ) Market Pulse newsletter!

So, how best to summarise this week I wonder… Oh right:

How is it that a country that wants “to make a deal so badly” keeps on firing at passing ships and ended up ‘closing’ the Strait of Hormuz yesterday? Someone out there is embellishing reality a tad too much.

And it seems that markets are suffering from the same ailment.

Mid-week there was panic, as the first tit-for-tat strikes between the IRGC and the American military rocked sentiment. Brent jumped +8% to $80. The DAX lost -2.4% in a session, the FTSE -1.7%. The Kospi cracked some -1,000 points and the Sensex crashed -1,677.

By friday, it was all ‘yada yada yada’, like nothing ever happened:

• The US markets returned to their default setting (of the times): the Tech trade (spurred on by the ADR listing of Korean chip manufacturer SK Hynix, oversubscribed some~7x).

• The NIFTY 500 returned into green territory, not because of tech but ‘everything else’. That’s despite, and not thanks to, a decent earnings report from Tata Consultancy Services, which offered a contrarian rebuttal to the alleged demise of Indian IT at the hands of AI. TCS’s $9.5bn order book, combined with an AI implementation business already running at a $2.6bn annual run-rate. It is still too early to expect the same from other IT players. Wait and watch.

• The Hang Seng jumped +3.53% on China’s AI self-sufficiency push: ChangXin Memory’s upcoming IPO, reports of proprietary domestic AI chips, and a 12% jump in Alibaba on Wednesday…

Japan and Europe did not have that ‘Meh’ moment. With ECB rate hike expectations climbing and no substantial tech industry to buffer against rising oil prices, Europe faltered: Stoxx 600 -1.79%, FTSE -1.70%, SMI -1.31%. The Nikkei also dropped -1.70%, hit by the same oil spike on an import-dependent economy.

This week’s behavioural finance experiment failed though. Many had expected SpaceX’s automatic inclusion into the Nasdaq-100 index trackers on 7 July, forcing tracking funds to buy, to cause a momentary spike in the share price. Instead, the stock kept falling, closing the week -10% and back below its June IPO price. A worthy side note on SpaceX bonds, the spread to treasury has increased by ~+30bps…

Something we all need to keep a watch on: the last Fed minutes were split. Half the committee thinks the next move is a hike, half a cut, and the language hinting at cuts was stripped out. Waller in Rome on Monday said the risks facing the Fed have “completely flipped.” Staff estimate PCE inflation ran at 4.1% in May.

What this means for you: the world is very much the same as it was last week. Staying rational and taking calculated decisions is important to keep your finances as safe as possible. For those who own units in Nasdaq-100 ETFs, beware the drag SpaceX will have on your ETF investment. As a “cash burning furnace”, it is now big enough in the index to pull the whole thing down on its own.

Markets

• United States (S&P 500, NASDAQ): IT alone drove the entire S&P weekly gain. S&P +1.23%, Nasdaq +1.69%. Dow -0.50% as investors rotated out of blue chips into semis.

• Europe (Euro Stoxx 600, FTSE 100, SMI): No tech to cushion the oil shock. Stoxx 600 -1.79%, FTSE -1.70%, SMI -1.31%. Broad damage across industrials, materials, autos and healthcare.

• Asia-Pacific (NIFTY, Hang Seng, Nikkei 225): Hang Seng +3.53% on China’s AI self-sufficiency bid, finally green YTD at +0.61%. NIFTY 500 +0.20%, still the only index red YTD at -0.52%. Nikkei -1.70% on the oil hit but still +72.92% YTD.

• Bitcoin: Doing its own thing. Meh. +1.05%, still -41.70% YTD.

• Gold and Silver: nothing tangible to report.

Investor Sentiment Gauge

Irrational Exuberance at its best: the world is no better than last week. Yet the index has moved from Fear to Neutral. Wait a minute, didn’t the US just bomb 140 Iranian targets last night? Curious to see what happens to this index on Monday 13th July.

Last week’s important events and what they mean for you

United States

“How to Invest When the Global Crises Never Stop.”

The old rule was simple: when stocks fall, bonds rise and cushion the blow. That rule is now broken. When the shock is inflation, as most shocks now are, bonds and stocks fall together. Even gold falls, as it did on Wednesday when the Iran ceasefire collapsed.

Australia’s Future Fund CEO Raphael Arndt drew a surprising conclusion: buy more stocks, not less, because you need higher returns to make up for the higher risk. RBC BlueBay’s Mike Bell added: “markets don’t really price geopolitical things until they actually happen, even if the risks are very clear.”

LFA’s take: the old 60/40 portfolio (60% stocks, 40% bonds) worked because bonds zigged when stocks zagged. Today they often fall together. So the “safe” half of your portfolio is not as safe as you thought.

What this means for you: if you assumed bonds will save you when stocks drop, check that again. One, expect a bumpier ride. Two, keep some cash spare so you can buy the dips. And three, do not rely on bonds alone to protect you. Inflation-linked bonds, real assets can help dilute the pain.

United Kingdom

“Chart of the Week: UK inflation is not distributed equally.”

The poorest tenth of UK households spend nearly a quarter of their income on food and energy, versus about 14% for the wealthiest. So when energy prices spike, as they did this week with Brent back at $80, the poorest households experience roughly double the inflation the headline CPI number suggests.

At the October 2022 peak of the last cost-of-living crisis, the poorest tenth faced 14.5% inflation while headline CPI was 11.1%. Then, from 2023, the pattern briefly flipped: as the Bank of England hiked rates to fight the shock, mortgage interest costs contributed 2 percentage points to the wealthiest decile’s inflation versus 0.4 for the poorest.

LFA’s take: Headline CPI is what the Bank of England, welfare authorities and HR departments watch. But it is an average, one that hides who is actually paying the worst price. There is no clean policy answer on this one.

Our suggestion: If you are on a fixed-rate mortgage expiring in the next 12 months, model your renewal at higher rates, not the current dip. If you are on a variable rate, know that further ECB or BoE hikes will hit you before they hit anyone else. And when politicians point to a falling CPI number as proof things are getting better, remember: it is an average of very different experiences.

India

“India lays groundwork for a big business boost along the coasts.”

India is setting up its first five Marine Export Zones (MEZs) across coastal Tamil Nadu, with about $1bn of investment, aiming to build an integrated seafood export ecosystem from farming to processing to logistics to shipping. Officials estimate the five zones together could generate Rs 32,000 crore (about $3.8bn) in annual exports and 140,000 to 180,000 jobs. India’s seafood exports hit a record $8.5bn in FY26. If the Tamil Nadu pilot works, similar clusters will follow in other coastal states.

LFA’s take: India has one of the largest coast lines in the world - and yet it is severely underutilised mainly due to archaic and ill-suited regulations. Developing this is ‘low hanging fruit’ compared to building Chip manufacturing supply chains in India. Two risks though. One, coordination across land, environmental and infrastructure agencies in India is where these plans usually stall. Two, global buyers now care as much about traceability, sustainability and quality certification as they do about price, so the zones will only pay off if India also invests in ensuring quality and global compliance.

What this means for you: this reform will accrue to the boring companies: the mid- and small-cap logistics, cold-chain, aquaculture-tech and specialty-chemicals firms that plug into these clusters. It will create jobs across the country, not just economic concentration in the NCR and major cities. However, be cautious when selecting firms in this sector: success lies in doing. Watch out for implementation versus regional political ‘blocking’.

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the Leap Finance Academy’s (formerly the FQ) Market Pulse newsletter!

Many of this newsletter’s readers know this all too well. Worrying signs keep popping up every day and yet we all:

Kasper Elmgreen’s nagging question hangs over everything this past week.

Because on paper, it was a good week. The Dow hit a fresh record. Europe hit record highs, with the Stoxx 600 up +2.66% and quietly beating the S&P 500 for the year so far. The S&P added +1.76% and the Nasdaq +0.72%. It’s like everyone forgot last week’s bloodbath in Korea with leveraged ETFs placing outsized bets on single technology stocks.

Now look at what actually happened.

• US jobs growth came in at 57,000 for June, barely half of what economists expected. Typically, this is a warning but markets cheered. Again.

• UK: services PMI is 48.8 (worst since Jan 2023), mortgage approvals at multi-year low & inflation expectations are still sticky.

• EU: inflation cooling but growth is still flat. Fears abound regarding the European auto industry’s demise due to a lack of competitiveness (even ‘backwardness’ vs. China)

• India: the only market that’s still underperforming YTD!

Sometimes I wonder if there is a method to this madness. I do suspect that it’s driven by a mix of the ‘leverage effect’ and unproven profit expectations.

Analysts are now raising their profit forecasts at the fastest pace since the Covid rebound, and some serious voices are calling it an earnings bubble rather than a reason to celebrate:

In parallel, systemic risk is increasing rapidly on the back of leveraged US trading:

US margin debt just hit a record $1.4 trillion, up 54% in a year, while assets in high-risk leveraged ETFs, the ones that double or triple your daily gains and losses, have swelled to nearly $189 billion.

But hey, let’s shrug this one off as well. Keep Calm and…

What this means for you: markets are being held up by an earnings story that a growing number of professionals no longer fully believe in. When expectations are priced this high, you do not need bad news to fall. You just need good news to stop showing up. Keep some cash spare, and do not confuse a rising index with a healthy one.

Markets

• United States (S&P 500, NASDAQ): Wobble first. Elate next. The S&P rose +1.76% and the Nasdaq +0.72%, with the Dow hitting an all-time high despite the weak jobs report. But chip stocks got hammered mid week before ripping back on Friday.

• Europe (Euro Stoxx 600, FTSE 100, SMI): The Stoxx 600 jumped +2.66% to fresh records and is now beating the S&P for the year. FTSE +1.63%, SMI +1.77%. Yet the UK economy looks fragile underneath.

• Asia-Pacific (NIFTY, Hang Seng, Nikkei 225): The Nikkei edged +0.55% and is still up +75.30% YTD, though the yen sits at a 40-year low. Hang Seng +2.99% on a tech bounce. India’s NIFTY 500 rose +0.81% on an IT rally but stays the only index in the red YTD at -0.94%.

• Bitcoin: +1.14% on the week, still down -42.13% YTD. Doing its own thing. Meh.

• Gold and Silver: the safety trade keeps unwinding. Gold -4.59%, Silver -5.19% as war fears faded. Both still way up YTD though, Gold +20.91% and Silver +71.15%.

Investor Sentiment Gauge

From Extreme Fear last week to just Fear this week. Different wood. Same Tree.

Last week’s important events and what they mean for you

United States

“The Rules for Student Loans Just Changed. What Borrowers Need to Know.”

The Trump administration’s overhaul of federal student loans took effect this week, capping how much people can borrow and slashing their repayment options. With US student debt now around $1.7 trillion, the goal is to rein in the runaway cost of college.

Parents can now borrow a maximum of $20,000 a year per child ($65,000 total), down from the full cost of tuition, and lose access to Public Service Loan Forgiveness. Graduate students face a $100,000 cap (down from $138,500), with a $257,500 lifetime limit including undergraduate debt. And repayment plans have been gutted from seven options down to two: a Tiered Standard Plan spreading payments over 10 to 25 years, and an income-based plan (RAP) that forgives debt only after 30 years.

LfA’s take: This is a big deal. Borrowing less sounds like discipline, but for many families it just shifts the cost of education from cheap federal loans to expensive private ones, or prices them out entirely. As one expert put it, Parent PLUS loans should be a last resort, not a first one. The days of borrowing your way through college are ending.

What this means for you: If you or your children have federal loans taken out before this week, you have until June 30, 2028 to switch plans, so do not rush. But if you are borrowing new money, understand the two new repayment options before you sign. And if you are a parent, do the maths on whether the school is affordable before reaching for a loan. Debt taken out at 22 has a habit of still being there at 62.

United Kingdom

“How do we save the wilting new homes market?”

The UK’s newly built homes market is wilting. This was meant to be the year of recovery, with mortgage rates falling and prices rising, until the Iran war in February sent rates back up and demand collapsed. Even with the peace deal now easing rates again, the damage is feeding through. Smaller builders are going bust, land buying has frozen, and the government is tracking below the May, Johnson and Sunak governments on homes delivered, nowhere near the 300,000-a-year target.

The core problem is not planning, it is money. Fewer people can afford to buy new homes at the price developers need to build them. New PM Andy Burnham has promised the biggest council housebuilding programme since the postwar era, but the cash to fund it does not obviously exist. The author’s uncomfortable conclusion: the government will have to intervene to prop up developers, and there is even quiet talk in Whitehall about contingency plans should a major housebuilder go bust later this year.

LfA’s take: Britain has outsourced its housing supply to private developers, so when developers stall, the whole pipeline stalls with it. That is why a rising FTSE and a fragile housing market can coexist. The index tracks global giants; the housing market tracks the actual British economy, where services activity is contracting and mortgage approvals sit at multi-year lows.

Our suggestion: If you are a UK buyer, do not assume the recent dip in mortgage rates means prices are about to run away from you. A weak new-build market usually means room to negotiate, especially on developer incentives. And if a Help to Buy-style scheme returns this autumn, as the article suggests it might, remember last time it mostly inflated builder profits, so treat it carefully.

India

“Indian economy: The confluence case”

The author argues India is quietly the single biggest winner in Asia from the collapse in oil prices. Brent spiked to $120 during the Iran war and has since fallen back to around $73. Since India imports roughly 85% of its crude, every $10 drop in Brent shaves $12bn-$15bn off its annual import bill, and the move from peak to now could cut it by $45bn-$50bn.

The knock-on effects are broad. The current account deficit could narrow from over 2.2% of GDP toward 1.0%-1.3%. Inflation should ease as fuel costs fall, letting the RBI stay dovish (it held rates and called a hike “premature”). And a package of RBI measures, including tax breaks that pave the way for India joining a major global bond index, is designed to pull in foreign money. The verdict: not stagflation, but a “reflationary recovery,” with cheap oil worth more to Indian equities than any domestic policy.

LfA’s take: It is a well-argued case. The problem is that every part of the good news depends on something else going right. Cheap oil depends on the Strait of Hormuz staying open, yet this week US-Iran talks broke down and the strikes started again. Strong demand depends on a good monsoon, which so far is expected to be poor. And the “rising profits” story sits awkwardly next to India’s own IT sector, which had a rough week: KPIT warned on revenue and dropped hard, dragging others down, and the IT index hit a fresh one-year low before bouncing. Even the “stable” rupee is only stable because the RBI has spent $57bn propping it up. That is expensive support. Success lies in doing while keeping ones eye’s open, as I keep saying. This is a good marketing piece with a lot of ifs.

What this means for you: The core point still stands: India may be the one place where the economy is improving while the market sits flat, still the only index in the red on our dashboard this year. Beware the noise, and the vested interests of people who need the market to be irrationally exuberant. Invest wisely and safely!

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the Leap Finance Academy’s (formarly the FQ) Market Pulse newsletter!

I am sure you must be wondering who got caught swimming proverbially naked this week. And that winner is… Sam Altman, CEO of OpenAI!

Sam has always been a bit of a controversial figure. Boards have been trying to fire him for “deceptive and chaotic behaviour” repeatedly. But kudos to him. OpenAI is where it is today thanks to him. He kickstarted a real revolution, one with drastic consequences for the world we all live in. And he brought his vision to the stage of a tentative $1 trillion IPO.

Alas, this week, rumours emerged that OpenAI would likely be delaying its IPO to 2027. After a major financial leak, verified by the Financial Times, it was revealed that OpenAI is a sinking blackhole of losses. Almost $30 billion in cumulative operating losses over the last 2 years.

And so Sam is delaying the IPO, in a likely bid to demonstrate better performance to justify a $1 trillion valuation target. At least SpaceX has a part of its business that is predictable and cash generating (Starlink+Launch). More so than OpenAI.

But some other things broke the camel’s back this week:

1. Alphabet lost two senior AI scientists.

2. South Korea’s regulator publicly warned that leveraged chip ETFs had become dangerously overheated. The Kospi fell nearly 10%, circuit breakers triggered.

3. Accenture cut the top end of its revenue guidance and missed estimates. Accenture is a barometer of sorts for enterprise spending intentions.

4. Apple announced ~20% price hikes on MacBooks and iPads citing rising memory and chip costs → cost increases are now being passed on. Apple fell 6% in a session, wiping $260bn.

The result? The Nasdaq dropped -4.24%, one of its worst weeks in two years. The S&P 500 fell -1.95%. Five consecutive losing sessions for both. SoftBank collapsed nearly 13% on the OpenAI IPO news, dragging Japan’s Nikkei down -2.65%. Hong Kong’s Hang Seng fell -5.24%. Europe held firm, the FTSE gaining +1.40% and the SMI +2.89%, both helped by a rotation into defensives. Oil slid to $72 on Brent and below $70 on US crude, the lowest since the Iran war began. India was essentially flat for the week, closed Friday for Muharram.

What this means for you: be conservative when using leverage to trade markets. Korean investors who piled into leveraged single-stock ETFs got absolutely hammered this week. Hit twice over: once by the leverage, and second by having no diversification.

Markets

• United States (S&P 500, NASDAQ): A tough week for US tech but not for the US market overall. The S&P 500 fell -1.95% and the Nasdaq dropped -4.24%, but the Dow gained +0.60% and the Russell 2000 rose +1.01%. The equal-weighted S&P 500 outperformed its market-cap weighted peer by a wide margin, demonstrating that the sell-off was isolated. Everything else was broadly flat or positive.

• Europe (Euro Stoxx 600, FTSE 100, SMI): The quiet winner. Euro Stoxx 600 essentially flat at +0.04%. FTSE 100 up +1.40% on a rotation into defensives. SMI gained +2.89%. One big development: UK Prime Minister Starmer resigned on Monday. Andy Burnham is the frontrunner to replace him. This is happening too often. Feels like markets have become numb to UK political shenanigans.

• Asia-Pacific (NIFTY, Hang Seng, Nikkei 225): Brutal. Nikkei -2.65% on SoftBank’s near-13% collapse. Kospi lost over 7%, circuit breakers triggered twice as leveraged chip ETFs imploded.

• Bitcoin: Down -7.01% for the week, -43.83% year to date. Meh is all I can say.

• Gold and Silver: no outwardly trend with a potential unwinding of the safety trade: Gold -3.03% for the week, still +20.85% year to date. Silver -11.74%, still +59.32% year to date.

Investor Sentiment Gauge

Well, what should one expect when both the S&P 500 and the Nasdaq had some of their worst weeks in recent history? Extreme Fear is now here.

Last week’s important events and what they mean for you

United States

1. “Why You Are Probably Overpaying For Your Mortgage”

American homeowners who bought since 2022 collectively pay $65 billion a year in avoidable mortgage costs. The reason: most people do not shop around. Over a 30-year loan, that laziness compounds to over $78,000 per borrower.

The counterintuitive part: higher earners overpay the most. Wealthy buyers trust a single recommendation from their agent or wealth manager instead of forcing banks to compete. Financially stretched borrowers shop harder out of necessity and get better rates.

The FQ’s take: the more comfortable you are, the less likely you are to question what you are being charged. The bank is not your friend. It is a business. Treat it like one.

What this means for you: it’s obvious no? Spend proper time shopping for mortgages!

United Kingdom

“Inheritance Tax Changes Fuel Surge in Annuity Demand”

From April 2027, the UK government will start taxing pension pots that you leave unused when you die. Until now, pensions were one of the best ways to pass money to your children tax-free. That is ending.

Wealthy retirees are responding by converting their pension pots into annuities. An annuity is simply a product where you hand your pension pot to an insurer and they pay you a guaranteed income for life in return. If that income is more than you spend, you can gift the surplus to your children completely free of inheritance tax. Rates for older retirees are running at up to 9% right now. Sales of large annuities above £1mn have doubled this year alone.

Do nothing and the taxman could take up to 89 pence in every pound your children inherit.

The FQ’s take: the UK government has quietly handed the annuity industry a huge gift. Expect this trend to accelerate sharply as April 2027 approaches.

Our suggestion: if you have a UK pension pot above £1mn, get proper financial advice now. The old rules no longer apply.

India

“What Ambani’s AI Ambitions Reveal About India’s Limits”

We all want what is best for our nations. Modi wants India to be a top three AI superpower. Mukesh Ambani wants Reliance to be India’s sovereign AI backbone.

But a dose of reality shows us that there is a long way to go.

Reliance’s AI strategy is built on Nvidia chips and Google and Meta language models. There is nothing sovereign about that. Reliance continues to rely on, or even depend on, western technologies, repackaged and sold to 500 million Jio subscribers. If President Trump decided to turn the tap off to particular models, or curb Nvidia chip supply to India, our goose would be literally cooked.

At a national level, we are lagging. India spends 0.6% of GDP on R&D. China spends 2.5%. The US spends 3.5%. And India loses nearly 17% of its AI talent overseas every year. The world’s highest net outflow.

The FQ’s take: In order for India to stand up in this field, we need to become chip ecosystem manufacturing powerhouses. When Jensen Huang was asked whether Nvidia would start sourcing chips from India, he was polite but brutally clear. Taiwan is the best in the world at what they do. Until we can rival that, we will remain dependent on others for chips and for AI.

What this means for you: for now, India’s AI story is a consumption story. Invest cautiously and preferably to help build the manufacturing backbone needed for India to achieve digital and AI sovereignty.

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s Market Pulse newsletter!

Well, that was quick.

You know that “strong deal,” the 14-point peace plan that Trump squeakily signed with his Sharpie in France on Thursday? Well, it was back in hot water a day later as Israel and Hezbollah got back at it. Hezbollah killed four Israeli soldiers, Israel hit back, and the follow-up meeting in Switzerland was cancelled. The never-ending tit-for-tat continues.

So far, 2026 keeps feeling like a game of whack-a-mole. Every time we put a pin on something, out rears a mole from another hole.

US markets were closed on Friday 19 June for Juneteenth, so the exact impact of this news did not dent the good run US markets had this week. The S&P 500 gained 1.44% and the Nasdaq jumped 3.26%. Intel alone soared 12% on Thursday, after Trump posted on Truth Social that Apple would partner with it on chip design. Mind you, neither company has confirmed a word of it.

Other markets had a quieter but positive week: the Stoxx 600 edged up 0.38% and the SMI added 0.48%. The standout, again, was Japan. The Nikkei surged an absurd 7.92% in a single week and is now up over 85% this year, the best performing major market of 2026, riding the same chip and AI wave. India had its best week in months, with the Nifty up over 2% and finally back in positive territory for the year as falling oil eased the pressure on its import bill.

New Fed chair Kevin Warsh held his first meeting on Wednesday. He kept rates unchanged, then deleted most of the Fed’s forward guidance and declined to submit his own rate forecast. US markets became very cranky that day, now pricing in an 85% chance of a hike before year end.

The UK did the opposite and held rates at 3.75% as inflation stayed flat. But Britain has different problems. Gilt yields are jumping as government borrowing blew past forecasts at £23.3bn in May. And Andy Burnham won a by-election that clears his path to challenge Starmer.

China went the other way: retail sales fell for the first time since 2022 and the Hang Seng dropped 3.21%, the worst performer in our table.

On the bright side, the price of oil has tumbled for now.

What this means for you: cheaper oil = good. Let’s see how long that lasts!

Markets

• United States (S&P 500, NASDAQ): A strong week, driven by the usual suspect: technology. The S&P 500 gained +1.44% and the Nasdaq +3.26%, with Information Technology the single biggest positive contributor on both indices. Falling oil, and the relentless AI trade did the work. Energy and Health Care were the only real drags, Energy for the obvious reason that crude collapsed.

• Europe (Euro Stoxx 600, FTSE 100, SMI): The Stoxx 600 edged up just +0.38% and the SMI added +0.48%, but the FTSE 100 fell -1.04%, the odd one out. Across the Stoxx 600, Automobiles and Telecoms led the gainers while Industrial Goods and Banks were the biggest drags. UK: gilt yields jumped as UK borrowing overshot forecasts, Burnham’s by-election win stirred political risk, and banks and retailers came under pressure on Friday.

• Asia-Pacific (NIFTY, Hang Seng, Nikkei 225): A tale of two extremes. The Nikkei surged +7.92% and is now up an extraordinary +85.12% year to date, the standout market of 2026 on the back of the global chip rally. The NIFTY 500 gained +2.41% and has clawed its way back into positive territory for the year at +1.67%. But the Hang Seng fell -3.21%, the worst performer in our table, dragged down by tumbling Chinese property stocks and the first fall in Chinese retail sales since 2022.

• Bitcoin: Up just +0.40% this week and still down -42.08% year to date.

• Gold and Silver: Gold edged up +0.21% but Silver fell -2.29%. Both remain sharply higher year to date, gold up +24.62% and silver up an extraordinary +78.99%. With the war supposedly winding down, the safe haven should cool.

Investor Sentiment Gauge

Largely unchanged from last week: fear has set in.

Last week’s important events and what they mean for you

United States

1. “Warsh’s Bold New Change at the Fed”

Kevin Warsh held his first meeting as Fed chair this week and made his mark immediately. He held rates but won a unanimous 12-0 vote despite some governors previously favouring a hike. The statement was cut to four terse paragraphs, stripping out the usual forward guidance. Warsh declined to submit his own dot to the projections, noting they are filled in “in pencil,” and delivered a blunt message: “The Committee will deliver price stability.”

The FQ’s take: this is a real shift. Warsh wants investors reacting to actual data, not spending their days guessing the Fed’s next move. It is a clean idea, and a polite way of telling traders to stop asking for hints.

What this means for you: Expect more volatility around data releases, not less. Every inflation print and jobs number now matters more, because the Fed has stopped holding your hand through them.

United Kingdom

“UK’s May Borrowing Surge Lays Bare Fiscal Hurdles That Andy Burnham Would Face”

UK government borrowing surged to £23.3bn in May, 30% higher than a year ago and well above the £17.7bn forecast. The main culprit was debt interest payments, which hit £11.7bn, the highest May figure on record. Higher benefit payments and inflation-driven spending added to the deficit. The 10-year gilt yield rose to 4.83% on the news. All of this lands just as Andy Burnham, fresh from winning the Makerfield by-election, eyes a run at Starmer, having hinted at expensive commitments like easing student loans and boosting defence spending.

The FQ’s take: this is the permanent trap every UK government now faces. Borrowing costs are rising because gilt yields and inflation are higher than the forecasts assumed, which pushes up debt interest, which widens the deficit, which makes investors demand even higher yields. Any would-be prime minister promising to spend more, will walk straight into a bond market that has no patience for it.

Our suggestion: If your fixed mortgage rate is expiring soon, watch this closely.

India

“Yuan or Dollar? Indian Businesses Explore Alternatives as Import Costs Climb”

As the weak rupee drives up the cost of Chinese imports, some Indian businesses are exploring yuan settlements to ease the pressure. But adoption stays limited among smaller firms, who lack the treasury tools larger corporates have and are sticking with the familiar dollar. One economist offered the key warning: yuan settlement only works when a country earns yuan, not just spends it. India imports far more from China than it exports, so leaning on the yuan risks piling up liabilities it cannot easily hedge.

The FQ’s take: we have flagged the slow shift away from the dollar before. The direction is real, but for India, swapping the dollar for the yuan is no free lunch. It trades one dependency for another, on worse terms. The real answer is to make more at home and importing less.

Our suggestion: all we can do right now is to brace for impact and save as much as possible!

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s Market Pulse newsletter!

I have a confession to make. I am an avid Stargate and Start Trek fan. So when Ye Ol’ Elon made this statement in his IPO prospectus, my hands immediately formed the Ta’al Vulcan Salute 🖖🏾🖖🏾 and I was transported to the glory days of the Federation of Planets.

There is nothing better than dreaming about a future larger than ourselves. Maybe then we would all look beyond our internal squabbles and build true meaning.

But try as I may, true meaning would have to wait till Trump finished celebrating his 80th birthday with a UFC fight on the White House lawn. Most appropriate.

Hence we get back to the News.

On Friday, a company that shall not be named, completed one of the largest IPOs in the history of mankind. Naturally we have written about it, hence it is fair to not bore you about it. So let’s just fuggedaboutit.

On Thursday, Trump called off planned strikes on Iran and announced that a peace agreement could be signed within days. Oil fell sharply. Stocks surged globally. The S&P 500 ended the week up +0.65%. The Nasdaq recovered +2.34%. Europe had a strong week: the Stoxx 600 gained +1.69%, the FTSE 100 climbed +1.00%, and the SMI jumped +2.39%. Even India’s NIFTY, which has been quietly bleeding for months, managed a +0.60% gain. By Friday, Brent crude had dropped to its lowest level since the start of the war in March.

Iranian officials, meanwhile, denied that any deal text had been approved. It’s interesting that Trump just has to say ‘Deal’, for the markets to assume it as fact.

This is the Bliss Trade at its purest. Nine days of genuinely bad economic data, and one Trump announcement erases everything. US inflation hit 4.2% in May, its highest reading in three years. Producer prices rose 6.5% year on year. The ECB raised interest rates for the first time since 2023, explicitly citing the Iran war energy shock. The UK economy contracted in April. And yet: green arrows almost everywhere by Friday.

What this means for you: it is still more of the same. Keep safe, and start watching the FIFA World Cup 2026 on television.

Markets

• United States (S&P 500, NASDAQ): A tale of two halves. The week started badly. Wednesday saw the Dow fall nearly -2%, its steepest single-day decline of 2026, as US inflation came in at 4.2% and US-Iran hostilities flared up again. Then Trump said the magic word, “Deal”, on Thursday and everything reversed. By the close on Friday, the S&P 500 had gained +0.65% for the week and the Nasdaq +2.34%.

• Europe (Euro Stoxx 600, FTSE 100, SMI): To hope amidst despair. Peace deal optimism and falling oil pushed the Stoxx 600 up +1.69%, the FTSE 100 climbed +1.00% and the SMI jumped +2.39%. Banks were the biggest positive contributor across Europe. Airlines surged on Friday as lower fuel costs finally offered some relief. But the ECB raised rates for the first time since 2023 and cut its growth forecast for the eurozone to 0.8% this year. The UK economy contracted in April.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): The Nikkei slipped -0.85% but remains up an extraordinary +72.95% year to date. The Hang Seng fell -0.98%. The NIFTY 500 gained +0.60%. India is still down -1.94% year to date.

• Bitcoin: Up +4.31% this week but still down -42.08% year to date. Could it be that the SpaceX IPO is pulling liquidity away from crypto as retail investors chase the next shiny thing?

• Gold and Silver: Both fell.

Investor Sentiment Gauge

A fearful sentiment continues on from last week.

Last week’s important events and what they mean for you

United States

1. “US Headline Inflation Matters to Consumers”

US headline inflation hit 4.2% in May, its highest reading since April 2023, driven almost entirely by surging energy prices. Core inflation, which strips out food and energy, came in at a much calmer 2.9%. But here is the problem: core inflation is not what consumers feel at the petrol pump or the supermarket checkout.

The FQ’s take: Inflation is back to Spring 2023 levels. But wage growth is now lower than it was then. And the personal savings rate is falling. The consumer is being squeezed from three directions at once: higher prices, weaker wage growth, and a dwindling savings buffer. The Fed faces a genuine trap: raise rates to fight inflation and crush already stretched consumers further; cut rates and risk fuelling prices higher.

What this means for you: Energy inflation is global. The squeeze on household budgets is playing out across every economy in this newsletter.

United Kingdom

“Over 1mn UK Current Accounts Holding £50,000-plus Earn Zero Interest”

More than a million UK current accounts holding balances above £50,000 earn zero interest. Combined, these accounts hold £116bn. The average balance sitting idle is £111,537. Across all 91 million accounts in credit, 87% pay no interest whatsoever. Habit, convenience and confusion are apparently enough to keep people from having money grow for them!

The FQ’s take: with UK inflation at 2.8% and expected to rise further as the Iran war energy shock filters through supply chains, leaving £111,000 in a zero-interest account is not caution. It is a slow, quiet loss. A one-year fixed savings account currently pays 4.23%. The gap between doing nothing and doing something small is significant and growing.

Our suggestion: check what your current account pays. If the answer is nothing, move the excess. A one-year fixed account or a cash ISA at current rates is not exciting. But it beats watching inflation eat your balance quietly from underneath.

Our suggestion: check what your current account pays. If the answer is nothing, move the excess. A one-year fixed account or a cash ISA at current rates is not exciting. But it beats watching inflation eat your balance quietly from underneath.

India

“Inflation Seen at 5% in FY27, Rate Hikes Likely as Food and Fuel Risks Build”

India’s CPI rose to 3.94% in May, a 16-month high. Food inflation accelerated sharply, with vegetables jumping 5.7% year on year as extreme heat sent tomato prices up 26% in a single month. Energy inflation picked up as petrol, diesel and LPG prices tracked global crude higher. ICICI Bank Global Markets now expects inflation to average 5% in FY27 and sees rate hikes of 50 to 75 basis points ahead.

The FQ’s take: India is being squeezed from multiple directions simultaneously. The Iran war is pushing up energy costs. The monsoon is forecast to be 10% below normal, threatening rain-fed crops. Heat is destroying vegetable supplies. And all of this is landing on consumers who are already under pressure from months of foreign investor outflows and a weak rupee. The recent dip in oil prices on peace deal hopes is genuinely welcome news for India. But unless the Strait reopens fully and stays open, the relief will be temporary.

Our suggestion: all we can do right now is to brace for impact and save as much as possible!

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Both financial and social media are abuzz with statements that SpaceX’s eye-watering $1.77 trillion valuation is ludicrous for a loss-making company.

I am not going to answer that. Not because I cannot, but because I fundamentally believe it is the wrong question to start with. After all, SpaceX is a start-up. And start-ups usually burn cash for a long period before turning a profit. One of the best such examples was Amazon.

And so I stand here today, at the precipice of the SpaceX IPO, and the question arises: should I buy in?

Luckily, the overarching question to address my dilemma is equally simple.

That is it. As a value creation focused PE investor, my starting point is not price. It is whether the company I am investing in can achieve what it has promised.

Where is the cash?

When we acquire a company, we are first and foremost buying into a cash flow profile that we believe can be made significantly larger over a defined investment horizon, typically five to ten years.

The starting point is always the same. What does this business generate today, reliably, independent of any new growth story? We isolate the part of the business that is already strong and assess how it can subsidise growth elsewhere.

And for SpaceX, that baseline is genuinely strong.

Space launch generated $4.1 billion in revenue in 2025, with improving unit economics driven by booster reusability. Starlink generated $11.4 billion at a 63% EBITDA margin, growing at roughly 50% year on year, with 10.3 million subscribers. Morningstar identifies nearly 2 billion people living in low density areas that terrestrial networks will never serve cost effectively, and models Starlink operating margins potentially exceeding 75% as the constellation matures and the incremental cost of adding each new user approaches zero.

SpaceX also has a third functioning leg. Terrestrial AI, meaning the Colossus data centres, the Anthropic compute agreement at $1.25 billion per month, and Grok enterprise licensing, adds a meaningful but genuinely uncertain layer on top.

That is your cash flowing foundation. In PE terms, that is the asset you are buying before you underwrite a single line of the exotic growth plan. We would build a financial plan for these three business lines, anchored in realistic expectations and a defined capex investment profile.

SpaceX already has this sequencing broadly right. Starlink is the cash producer. It generated over $4.4 billion of operating profit in 2025 and is scaling fast. That is the asset that gives you the confidence to fund the aggressive capex cycle sitting on top of it.

The $20.7 billion of consolidated capex in 2025 looks alarming in isolation. Break it down by segment and the picture becomes clearer. $3.8 billion went into Space, $4.2 billion into Connectivity, and $12.7 billion into AI infrastructure. The Space and Connectivity investments are subsidising and expanding businesses with proven returns. The AI spend is the growth bet. And that is precisely where the analysts start diverging.

Valuation side-check

Morningstar and Damodaran value this core SpaceX business at between $780 billion and $1.22 trillion, depending on how generous their orbital AI assumptions are. Goldman is pricing the company at $1.77 trillion. The substantial gap between the three is precisely the narrative premium that our central question is trying to elucidate.

Value creation: go deep into the Capex plan

In PE, when we assess a business plan, we are obsessed with one ratio above all others during the growth phase. How much incremental revenue does each dollar of capital investment actually generate? It’s called the Sales to Capex ratio.

• In 2025, SpaceX’s AI segment generated $3.2 billion of revenue on $12.7 billion of capex. A Sales to Capex ratio of 0.25 times (not alarming given how early stage this segment is).

• Connectivity runs at roughly 2.7 times. That is a mature infrastructure asset leveraging sunk costs.

• Space runs at just over 1 times, held back by the $3 billion annual Starship R&D bill.

This is why the IPO is happening. That is what the $75 billion raise is for.

Where will SpaceX invest and is it a realistic way to increase revenue?

The investment thesis only works if the AI segment's Sales to Capex ratio improves materially as the Colossus clusters reach utilisation and orbital compute begins to generate revenue. Based on the prospectus, the $75 billion raised will first repay a $20 billion bridge loan, leaving roughly $55 billion for real capex deployment across three areas.

1. The AI pivot takes the lion’s share. This means expanding the terrestrial COLOSSUS infrastructure and, from 2028, launching orbital AI.

2. Connectivity expansion covers the Starlink V3 transition, a meaningful capacity increase, as well as the satellite-to-mobile constellation that eliminates traditional dead zones.

3. Space and Starship development funds technological improvements and new launch infrastructure, while also serving as the logistical enabler for the million-plus metric tons of hardware required for a gigawatt-scale orbital AI constellation.

• The Terrestrial AI expansion is feasible: it seems SpaceX got both COLOSSUS structures operational in record time.

• Expanding the Starlink project and gaining more users: also makes sense. The business already has 10.3 million subscribers - the company has to now just grow it.

• But orbital AI, which likely accounts for the lion's share of the long-term value being priced in, is entirely unproven. SpaceX will face serious engineering challenges on top of the inherent difficulty of operating data centres in space: shielding processors from radiation, dissipating heat into vacuum, and securing sufficient radio spectrum to move data to and from Earth at scale.

After reading that last point, the legs of any PE investor would start to feel a little wobbly.

Revenue efficiency

Now comes revenue. Every cent of capex should have an accretive effect on revenue. We have already calculated 2025 Sales to Capex ratios in this article, but the future ones cannot be quantified reliably with the information provided.

→ This is another red flag.

The question no bank research note will answer: how will management pull this off?

A financial model is only as good as the operational plan underneath it. In every transaction I have executed from acquisition to sale, the work that determined success or failure was never in the spreadsheet. It was in the critical path and the competency of the people executing on it.

Goldman’s projections require SpaceX to grow its AI segment from $3.2 billion to $322 billion in revenue by 2030. A hundredfold increase in five years. Damodaran calls this kind of ramp historically unprecedented.

Before I even debate whether the number is achievable, I want to see the operational implementation plan behind it. The picture from independent analysis is not reassuring. The 277 page prospectus offers dozens of pictures of spaceships and a soaring narrative, but is notably silent on specifics.

The questions a PE investor would put to management are concrete.

1. What is the Starship reusability milestone plan? Elon Musk has stated publicly that if Starship cannot be reflown and reused reliably, the orbital AI plan is not economically viable.

2. If full reusability is not achieved, does the entire orbital AI plan become too costly to execute? And what then becomes of the hundredfold revenue plan?

3. When will the heat shield challenge be resolved reliably? The material must survive reentry temperatures of 1,800 degrees Fahrenheit without costly remanufacture. This is currently targeted for year-end 2026.

4. What is the customer concentration in the AI segment? The Anthropic agreement at $1.25 billion per month runs for up to three years. How much of the AI revenue base depends on it, and what happens at renewal?

5. What is the detailed critical path for orbital compute? We have already identified three engineering gates. Management needs to demonstrate it has all three under active control.

These are not conceptual quibbles. They are key success factors that underpin the entire timely cash flow generation story.

→ The lack of clear answers to these questions is a red flag.

Last element: management competency and governance

A PE investor would then layer on governance.

• Elon Musk retains roughly 85% of voting rights through Class B super-voting shares.

• How are other members of management incentivised to succeed within that concentration of control? The prospectus does provide details of stock option plans, but the structural question remains.

• There is no mechanism for shareholders to redirect capital if the orbital programme underdelivers. There is little investors can do if the company doubles down on AI capex even after it becomes clear the market is smaller than anticipated or the engineering timeline has slipped.

Investors will be entirely at the mercy of Musk’s judgement and priorities.

The combination of these elements means a PE investor cannot exercise tangible control over the investment programme. That is a significant additional red flag.

The verdict, and why the price is secondary

SpaceX is asking $135 per share. Morningstar’s DCF lands at approximately $63 per share. Damodaran’s sits at $93 per share. That range will very likely define the trading corridor once the IPO lock-up periods expire and the market finds its own level.

I personally have no doubt that SpaceX will be able to raise the funds it needs. But a diligent PE investor would not look at price until every other prerequisite had been resolved. Namely:

1. Is the Capex plan reasonable and implementable within reasonable timeframes?

2. Will the capex plan be accretive to revenue?

3. Does the management have the competency to pull this off?

4. What is the critical path for each workstream, and does management have it under control?

5. Can the PE investor exercise their rights as significant shareholders and direct the company?

So far, SpaceX is seemingly coming out short on 4 out of 5 of these points. Investors who buy into SpaceX could enter at a $1.77 trillion entry valuation with no governance protection and no margin of safety in case of execution hiccups, buying into a fantasy orbital AI plan which is far from proven.

In other words, the result will be ludicrous.

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s Market Pulse newsletter!

CRASH!

Right now I am wearing a bittersweet smile.

On one hand, I feel vindicated for preaching that markets have been cut off from basic reality and common sense for months. On the other, there is this stomach-churning fear caused by sheer shock at how easy it was for a small, tiny line of dominoes to start falling.

All it took was one Broadcom. Despite the chipmaker posting solid results, its AI revenue outlook fell short of expectations. Result? The S&P 500 posted its first weekly loss since March, ending its nine-week winning streak. The Nasdaq fell over -4.5%. The Fear and Greed index, which sat comfortably in Greed territory just seven days ago, dropped sharply into Fear.

And the ripple went global. South Korea’s KOSPI dropped -5.54% on Friday alone, its worst day since May, dragged down by the semiconductor selloff. Even less technology-heavy markets felt it: European markets lost around -1% on average and India’s gentle bleeding continued with the NIFTY 500 down -0.85%.

This is clear proof that markets with heavy technology concentrations are running on something like snake oil.

All it took was a non-event to start something of an event. As Korg (from Thor: Ragnarok) would say:

Mini falling dominoes aside, the fundamentals keep echoing the same gloomy sentiment:

1. No signs of resolution between America and Iran. The Strait of Hormuz remains closed.

2. The OECD cut its global growth forecast for 2026 from 3.4% to 2.8%.

3. The eurozone economy shrank 0.2% in the first quarter, with stagflation risks acute across Europe.

4. UK construction activity contracted at its fastest pace in six years.

5. In India, the RBI held rates but raised its inflation forecast to 5.1%, up from 4.6%. Foreign investors kept selling. The rupee remains under pressure.

What this means for you: the fat lady has not finished singing yet. Keep safe, maintain a healthy emergency fund, and hold some cash to buy the dip.

Markets

• United States (S&P 500, NASDAQ): The S&P 500 fell -2.59% and the Nasdaq dropped -4.53%, with Information Technology the single biggest drag on both indices. Every sector on the S&P 500 fell except Health Care and Financials, which managed modest positive contributions. The story was Broadcom: down over -12% within seconds after missing its outlook on AI.

• Europe (Euro Stoxx 600, FTSE 100, SMI): The Stoxx 600 fell -0.53%, with Automobiles and Banks among the biggest drags. The FTSE 100 slipped -0.40%, caught between falling commodity prices and renewed Middle East tensions. The SMI dropped -1.14%, its worst showing of the major European indices this week.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): Japan remains the quiet outperformer of 2026. The Nikkei edged up +0.39% and is now up a remarkable +77.31% year to date. But even Tokyo felt the Friday pullback as the global technology selloff hit sentiment. The Hang Seng fell -0.88%. The NIFTY dropped -0.85%, continuing its gentle but persistent slide. India is now down -2.05% year to date, a stark contrast to every other major index in this table. The RBI held rates this week but raised its inflation forecast to 5.1%, and foreign investors kept selling.

• Bitcoin: Down -12.74% this week and now -39.59% lower year to date. We keep flagging this anomaly and it keeps getting more anomalous. Bitcoin is supposed to rise when risk appetite rises. Something structural seems to be shifting in how Bitcoin trades.

• Gold and Silver: Both retreated. Both took a mild hit from ceasefire optimism earlier in the week, then steadied as tensions flared again. At these year to date levels, both metals are still telling a story of deep structural uncertainty that equity markets spent nine weeks trying to ignore.

Investor Sentiment Gauge

Complete reversal of US sentiment, from “Greed” one week ago, to “Fear” today.

Last week’s important events and what they mean for you

United States

1. “America’s New Financial Middle: Not in Crisis, Not Thriving Either”

A new survey found that 51% of US adults describe themselves as financially conflicted: not in crisis, but not thriving either. Only 16% said they felt financially fulfilled. The remaining 32% said they were outright stressed. Roughly seven in ten households earning $135,000 or more said they do not feel financially fulfilled either. Gas costs have jumped since the Iran war began. Food costs have risen. Corporate layoffs are feeding a sense of job insecurity. The personal savings rate dropped to 2.6% in April, its lowest since June 2022.

The FQ’s take: last week we flagged the $1.25 trillion credit card debt pile and delinquency rates at their highest since 2011. The US consumer is not fine at all. How can consumer spending, which drives roughly 70% of US GDP, hold up indefinitely?

What this means for you: the squeeze is real regardless of your income level. Track every recurring cost. Cut what you no longer need. Build your buffer before you need it.

United Kingdom

“UK Taxpayers Suffer from ‘Permafrost’ of Allowances Frozen for Decades”

A study by the Association of Taxation Technicians found that many UK tax allowances have been frozen for so long they have quietly stopped working. The inheritance tax nil-rate band sits at £325,000, set 17 years ago and frozen until 2031. Had it risen with inflation it would be £525,000 today. The annual gift exemption has not moved since 1981. The wedding gift allowance since 1975. Frozen thresholds plus inflation equals a quietly rising tax burden, year after year, with no vote required.

The FQ’s take: this is a tax rise in slow motion. The government simply does nothing, and inflation does the work. The tax system is no longer suitable for the 21st Century!

Our suggestion: for now there is very little you can do, aside from lobbying your local MP. You must at least understand which allowances apply to you and how far they have drifted. On inheritance tax especially, review your position now.

India

“RBI Raises Investment Limits for NRIs and OCIs in Indian Stock Market”

The Reserve Bank of India announced on June 5 that it is raising the limits for NRIs, Overseas Citizens of India, and all individuals resident outside India to invest in listed Indian equities without requiring SEBI registration. The move reduces compliance hurdles and makes it simpler for overseas Indians to access Indian markets. Detailed guidelines on the new limits are still to come.

The FQ’s take: The RBI is clearly trying to widen the pool of buyers for Indian assets by making it easier for the diaspora to step in. Whether it moves the needle depends on the actual limits announced. Watch for the guidelines.

Our suggestion: if you are an NRI or OCI and have been thinking about adding Indian equity exposure, this is worth monitoring.

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s Market Pulse newsletter!

Did you know that the S&P 500 has now risen for nine consecutive weeks? That’s its’ longest run since 2023.

• The Nasdaq is up nearly 25% since the end of March.

• The Philadelphia Semiconductor Index, which tracks the world’s biggest chip companies, is up 81% this year and heading for its best annual return since the dot-com bubble.

And to top it off:

So - what drove markets this week?

• Reports emerged that the US and Iran have ‘mostly’ agreed on a 60-day extension of their ceasefire and a reopening of the Strait of Hormuz (even though nothing is signed and both countries exchanged fire yet again).

  • For now, these are just words. And yet oil fell -11% in a week, its biggest monthly drop since March 2020.

• The AI story added fuel. Dell reported that revenue from its AI servers jumped +757% in a single quarter to $16.1 billion. Snowflake surged +36% in a single day. The honest question nobody wants to ask is whether a handful of technology giants can keep spending at this pace when the returns on that spending have not yet materialised.

Underneath the celebrations, the US consumer is quietly struggling. Inflation rose to +3.8% annually in April while income was flat. The savings rate fell to +2.3%, one of its lowest readings in years. People are still spending, but they are drawing down savings to do it!

There is a potential snowball effect at play here: consumer spending, drives roughly 70% of US GDP. Drawing down on savings to maintain consumption/lifestyle is not sustainable. And when consumer spending weakens… well corporate revenues will follow. So will profits. And so will stock prices.

Europe and UK are not showing any better signs. Contrary to American euphoria, regional performance remains tepid at best. The ECB is moving toward a June rate hike, describing the energy shock as highly persistent. UK shop prices rose more than expected in May. The FTSE fell while everything else rose, dragged down by BP’s chairman abruptly resigning and broad commodity weakness.

In India, the week also ended badly. The Sensex dropped over 1,000 points on Friday as foreign investors kept selling and the weather service forecast the lowest rainfall in eleven years. A likely poor monsoon will hit agriculture, rural incomes and food prices in one of the world’s most populous economies.

What this means for you: the world has not fundamentally changed in one week, no matter what stock markets might be saying. For now, keep safe and last week’s advice applies! Keep your emergency fund intact, stay diversified, and hold some cash.

Markets

• United States (S&P 500, NASDAQ): Almost entirely a technology story. Both the S&P 500 and the NASDAQ held the line and advanced because of Technology stocks. Everything else, taken collectively, fell. Energy was the biggest drag at -0.20%, which makes sense: Brent fell -11% this week on ceasefire hopes.

  • One thing to flag: SpaceX lists on the Nasdaq on June 12. Notwithstanding the plausibility of its business plan, it is our duty to point out that holders of NASDAQ index funds (or an MSCI World fund), will be buying into the IPO whether they want to or not! Under a new Fast Entry rule, SpaceX will join the Nasdaq-100 within 15 trading days. That will trigger $22 to $27 billion in forced buying of SpaceX by index funds and ETFs.

• Europe (Euro Stoxx 600, FTSE 100, SMI): A quiet week. The Stoxx 600 edged up just +0.14%, with Industrial Goods the only meaningful positive contributor. Oil and Gas dragged as falling crude hit the energy majors. The FTSE 100 was the odd one out, falling -0.54%, pulled down by BP following its chairman’s abrupt resignation and broad commodity weakness. The SMI was broadly flat at +0.29%.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): Japan is the story of the year that nobody is leading with. The Nikkei surged +4.72% and is now up +72.58% year to date. The Topix hit an all-time high. But the Sensex ended the week essentially flat at +0.03%, masking a brutal Friday drop of over 1,000 points driven by foreign selling, an MSCI rebalancing and the dismal monsoon forecast.

• Bitcoin: -5.76% on the week and now -32.48% year to date. It’s just odd that Bitcoin is falling despite technology equities being at record high. Bitcoin usually rallies with risk appetite. Not this week tho’.

• Gold and Silver: Gold -0.48% on the week but still +35.64% year to date. Silver -0.33% on the week, still +127.28% year to date. The drivers are largely the same: ceasefire optimism reduced the appeal of these safe haven assets.

Investor Sentiment Gauge

US investor sentiment continues to be in “Greed” mode.

Last week’s important events and what they mean for you

United States

1. “Americans Are Falling Behind on Their $1.25 Trillion Credit Card Bill”

Americans now carry a combined $1.25 trillion in credit card debt. Delinquency rates have climbed to their highest level since 2011. More cardholders are making only minimum payments. Younger borrowers and lower income households are the most stretched. Banks are quietly tightening lending standards in response. And the average interest rate on credit cards sits near a record high of around 21%.

The FQ’s take: we have already flagged the savings rate falling to 2.3%. This article confirms that trend: Americans are not just drawing down savings to maintain their lifestyle. Some are borrowing at 21% interest to do it.

What this means for you: if you carry a credit card balance, the single most important financial move you can make right now is to stop the interest clock. Reduce the balance aggressively, and do not add to it.

United Kingdom

“UK Consumers Under Pressure as Rising Energy Costs Squeeze Household Budgets”

Energy costs are rising again, shop prices are climbing, mortgage rates have jumped sharply since the conflict began, and real wages have turned negative for the first time since 2023. Eight in ten people told the ONS their cost of living had risen in April. The government's response, a VAT cut on children's meals and a delay to fuel duty, was described by one economist as likely to make only a modest impact.

The FQ’s take: the squeeze on every day life is real. The recovery that took three years to build has been unwound in three months. And the worst of the inflation is still coming. Economists expect prices to accelerate further into year end as the energy shock works its way through supply chains.

Our suggestion: reduce variable rate debt as fast as you can. If your fixed mortgage rate expires in the next six months, act now and do not wait for rates to fall. Review every standing order and subscription. Build your safety buffer as quickly as possible.

India

"Indian Power Firms Snap Up Gas to Meet Rising Night-time Cooling Demand"

Record heatwaves are pushing electricity demand to new highs across India, day and night. Cities like Banda in Uttar Pradesh have seen nights barely dropping below 35 degrees, well past levels considered dangerous to human health.

Power companies have quadrupled their gas purchases to cope, paying 64% more than a year ago because the Iran war has made gas expensive and hard to source. Daily power shortfalls of up to 5 gigawatts have followed. In Uttar Pradesh, 93% of homes are facing daily blackouts, some lasting eight hours. People are sleeping in public spaces to escape the heat indoors.

The FQ’s take: the weather is compounding the problems created by the Iran war for the Indian consumer. The poorest households are bearing the full weight of both crises at once.

Our suggestion: If you have family in affected parts of India, check in on them. Heat exhaustion and power outages are a dangerous combination for the elderly, young children and those without access to cooling.

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s Market Pulse newsletter!

Oh man, Doug did it again! What you might ask? Well:

• The Dow hit an all-time high this week. The S&P 500 logged its eighth consecutive weekly gain, its longest run since 2023

• Europe had its best week in months

• Japan surged, and India, well, sprung back into action

Sadly, I cannot stop myself from sermoning investors. Please stop being irrationally exuberant. Markets ignored Greenspan for three years, then proved him right spectacularly in 1999/2000.

Global economic fundamentals are still fragile

The list of ‘worrying’ signs just keeps growing every week:

1. Decreasing consumer and business sentiment: US consumer sentiment fell to a record low of 44.8. The eurozone composite PMI dropped to a 31-month low of 47.5, with services at a 63-month low. UK retail sales fell 1.3%.

2. Growth prospects, revised downwards: The EU Commission cut its 2026 growth forecast to +0.9%. Even that I would consider optimistic.

3. Sovereign borrowing doesn’t have any limit: UK borrowing hit £24.3 billion in April, its worst start to a fiscal year since 2020. The pyramid scheme keeps on gaining strength.

4. Risk-free rates keep climbing: The 30-year US Treasury yield touched 5.18%, a 19-year high. UK gilts hit 5.04%. Japan’s 30-year hit a record. Governments everywhere are paying more to borrow than they have in decades.

In India the situation is now beyond data points. The rupee hit successive record lows through the week. Foreign investors have now pulled more money out of Indian equities in 2026 alone than in the whole of last year. Petrol prices were hiked twice in a single week. And Prime Minister Modi asked citizens to conserve fuel, cut non-essential spending, and work from home where possible. Pain is now rippling through the Indian economy.

One quieter story deserves attention. Did you know that China’s cross-border yuan-based payment system hit record daily volumes in March? Could this be the tempered start to the replacement of the ‘petrodollar’ with a ‘petroyuan’? It is a fact that Iran, Saudi Arabia and Russia are increasingly settling oil trade in renminbi.

Catalyst of the week: Nvidia

What moved markets this week was Nvidia. Record revenues of $81.62 billion, a dividend raised 25 times over, an $80 billion buyback. Enough to overwhelm everything else and cause a cascading ripple of positive performance to end the week. Japan's Nikkei up 3%, South Korea's Kospi up over 9%, and Europe to its best week in months.

The AI story, is torn between proponents of eye-watering capex spending (did you see the SpaceX prospectus, or should I say ‘Space AI’ prospectus?) and fundamental realists who fail to see any tangible payback possibility on said spending.

What this means for you: every week, we keep reminding you to have some dry powder ready to go; the dip will come and it will be worth buying. But this advice is secondary. First and foremost, we cannot keep ignoring the pain everyone is facing. It is therefore vital to ensure your emergency fund ready is and keep your head above your shoulders in these irrationally exuberant times. Only then should you deploy your dry powder when the dip hits.

Markets

• United States (S&P 500, NASDAQ): The S&P 500 gained +0.88% with all sectors positive or flat, a rare show of breadth. IT led the pack. The NASDAQ added +1.22%, with Technology contributing +1.05% of that. The Dow hit an all-time high on Thursday. New Fed chair Kevin Warsh was sworn in on Friday.

• Europe (Euro Stoxx 600, FTSE 100, SMI): Europe’s best week in months. The Stoxx 600 jumped +3.00%, the FTSE 100 gained +2.66%, and the SMI added +2.14%. Industrial Goods and Services led the Stoxx 600 at +0.61%, with Technology and Health Care close behind. The provisional EU-US trade deal ahead of Trump’s July 4 deadline was the main catalyst.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): Mostly positive but uneven. Japan’s Nikkei surged +3.14%, led by semiconductor stocks after Nvidia’s results. The Sensex recovered +0.53%, a fragile bounce after weeks of selling, with IT and Financial Services leading at +0.41% and +0.34%. The Hang Seng was the exception, falling -1.37%, weighed down by weak Chinese April activity data.

• Bitcoin: Down -1.92% on the week and -27.43% year to date.

• Gold and Silver: Both eased slightly as peace talk optimism reduced the safe haven bid. Gold -0.35% on the week but +37.89% year to date. Silver -0.81% on the week, still +132.08% year to date.

Investor Sentiment Gauge

US investor sentiment continues to be in “Greed” mode.

• Doug, our irrationally exuberant friend, continues to castshis long shadow over global markets

Last week’s important events and what they mean for you

United States

1. “A Risky, Unconventional Mortgage Is on the Rise Again”

2. “The Memorial Day Barbecue Is Starting to Cost a Small Fortune”

Nonconforming mortgages, the kind that do not meet post-2008 underwriting standards, now account for nearly 6% of all home loan originations, double their share three years ago and the highest since before the housing crash. Delinquency rates on these loans are already rising faster than on traditional mortgages.

Meanwhile, ground beef is up +14.5% year on year, tomatoes up +39.7%, gas averaging $4.55 a gallon nationally. Americans are shrinking their barbecue guest lists, skipping holiday road trips and cutting beef out from their weekly shopping. Reality on the ground is quite different!

The FQ’s take: the American economy today has two facets: on the one hand the Dow is hitting an all-time high and on the other a 25-year-old real estate agent in Utah is quietly replacing burgers with hot dogs to afford her own party. Rising home loan deliquincies pushed on by on the ground inflation is streching the American consumer. At some point, things will snap.

What this means for you: if you are considering a nonconforming loan, be very careful. Stress test your repayments against a bad quarter, not just a good one. Focus on reducing unnecessary expenses and boosting your emergency savings as much as possible.

United Kingdom

“How to shield your money from inflation”

Inflation is back and it is eating your savings. So which assets actually protect you?

The answers are not what most people expect. Cash feels safe but loses purchasing power over time, reliably. The average one-year fixed rate account lost a tenth of its real value between 2020 and now. Bonds sound logical but fall when the inflation outlook worsens, as UK pension funds discovered painfully in 2022. Gold is the classic hedge but even the World Gold Council admits its relationship to actual inflation is surprisingly poor. That leaves equities. Imperfect, volatile, occasionally terrifying. But the data is clear: diversified shares beat inflation 82.5% of the time on a rolling seven-year basis. Sadly, there is no perfect answer.

The FQ’s take: Guthrie wrote a good piece but it is incomplete. Diversified equities are one of the most reliable long-term inflation hedges, not because they are perfect, but because most alternatives are worse. Real estate income, which gets no mention, belongs in that conversation too.

Our suggestion: resist the urge to convert everything to cash even if it feels safe. Keep your equity exposure diversified and think in seven-year windows, not seven-month ones. If you have bond funds that have underperformed, do not panic sell. Understand what you own and why. And if you are one of the 1.8 million households remortgaging this year, get your credit file in order now across all three agencies, Experian, Equifax and TransUnion, not the week before you apply. The rate you are offered will depend on it.

India

“Wars, Oil and Wealth: The world adapts faster than we think”

A pushback piece on media’s doomsday narrative.

Their argument: India has weathered oil shocks before and it will again. Today it is a four trillion dollar economy with stronger reserves and wider energy relationships than in earlier decades. A $30 per barrel increase costs India roughly $150 million per day. Painful, but not fatal. The UAE has exited OPEC and India has already signed fresh petroleum agreements with Abu Dhabi. Venezuela is back in the market at 1.2 million barrels per day. Adaptation is already underway…

The FQ’s take: the article misses the point. Everyone adapts and overcomes! But the ‘way’ to get there is what will define success or failure. How will the Indian consumer ‘come out’ of this crisis, when things normalise? Will they have money to keep investing in the economy? That is the real litmus test. Facts cannot be ignored: factory workers are leaving cities, fuel hiked twice in a week and Modi is asking citizens to share the pain. Adaptation takes time but nobody is counselling the Indian consumer how to manage these headwinds!

Our suggestion: be selective and top-up your emergency fund. Inflation can come biting so pursue investments that shield you somewhat. Since Indian real estate income is not the best shield against inflation (structrual nature of low rental yields), we recommend falling back to a diversified basket of the RIGHT equities. Many Indian companies still seem overvalued with no earnings growth to show for it.

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

There is no doubt in my mind that Artificial Intelligence (“AI”) tools like Claude Cowork or Gemini will eventually become deeply embedded in the daily workings of businesses across the world. That is, assuming AI chooses to keep remaining a tool that works to benefit humans – and it surely will. Right?

For now, the grand jury is still deliberating. Social media is awash with finance tech evangelists claiming that AI can replace the need for investment banking (”IB”) or private equity (”PE”) junior cohorts. They don’t state this explicitly, but they advocate for the “great task replacement theory.” For instance, Claude can now:

• Download financials and build that discounted cash flow or LBO model on a target within minutes

• Or complete a PE due diligence data room review and draft the investment committee memorandum in record time (vs. a human)

You have to realise that these claims are being pushed by people who have never defended an investment thesis in front of battle-hardened, track-record-heavy senior investors. Nor sat through three-day-long gruelling company acquisition negotiations with a seller who topples the entire approved financial model that an AI may have built a few days prior.

This was, in fact, the most repeated question I received from about 80 ESSEC Business School students 10 days ago. Will AI replace their IB/PE jobs?

Here are the five main reasons why I believe they have nothing to worry about; but with a natural caveat: learning to use AI tools, like I taught them Microsoft Excel, will remain paramount to their success.

Reason #1: An IB/PE analyst’s work starts after the ‘sift’

Junior professionals in all industries are required to find it and ‘sift’ through it to generate meaningful insights for business decisions. We actually called this the ‘sift’ on my junior PE desk!

The ‘sift’ can be gruelling and painful. But fear not! AI deliver on this one. It can build a DCF. It can summarise and extract all relevant assumptions from a 100-page market research report. It can pull comps faster than any first-year analyst. It can explain complex industry supply chains. It can even produce a news-commented share price graph. It pulls data faster, processes it and presents it in a professionally usable shape.

But that’s just it.

What happens after the ‘sift’ in IB/PE?

This is where tech evangelist social media posts start to lose depth. And it’s not their fault: they do not know this job from start to finish. They are outside spectators using FOMO to drive revenue and capital towards them.

The ‘sift’ may consume 60-70% of a junior’s time. But it only contributes to about 20-40% of their assessment and promotion grid. What makes up the gap?

Sifted output has to be judged, framed and analysed by taking into account real life considerations that only a human can make.

Claude says India is a great market to enter. Sure. But how do you enter it? What is the critical path? How much manpower is required? What competencies are needed? Do you know a trustworthy India-based operating partner? Do they think the way you do? Cultural fit? Diligence fit? What are the risks and how do you mitigate them? These are questions that can only be answered by a person. And the first person who deals with these questions is the junior IB or PE professional.

Juniors must focus on learning this kind of judgement as early as possible. AI is just another tool in your arsenal, like Microsoft Excel.

Reason #2: Your promotions hinges on managing human beings, not your analytical prowess

Everyone has a different career advancement story. But they all share one common thread. Promotions, and fast-track careers, depended not on analytical abilities, but on managing people to get things done.

At a junior level, consider the patchwork of humans a professional must coordinate: employees of a client, audit firms, legal counsel, financial diligence consultants, all producing a body of work to support an investment thesis. Each party has its own vested interests, and an erroneously presented statement can make or break a deal. How does AI manage that?

At a more senior level, how does AI convince two CEOs to accept a merger? How does it convince two limited partners to resolve a deadlock on putting unplanned funding into a deal?

The answer to all these questions is a comfortable no.

The investment industry runs on trust, judgement and the ability to get things done with other human beings.

Reason#3: AI has no skin in the game. It has never invested a dime in its life.

When you are deciding between two acquisition targets, or choosing to recommend a factory expansion into India; you are dealing with decisions where real people’s money, careers, and livelihoods are at stake. In fact, your own career is on the line!

So how can AI replace you on this front? It has no skin in the game. Sure, it can execute speculative trades on public markets and perhaps optimise your entry cost, but it has never invested in a company, turned it around, or dealt with the human trials and tribulations required to pull off such a feat. It will give you an answer with the same confidence whether it is right or catastrophically wrong. It has no incentive in your success, no fear of being wrong, no memory of the last time it misjudged a market.

Reason#4: Deal Execution requires creative problem solving in a changing environment

Every deal arrives as a mess. Every deal I have done was half-formed at some point: a regulatory constraint nobody anticipated, a tax authority in a jurisdiction that does not play by the rules you expected, an operating partner who wants a higher slice of profit share than agreed. All of these get resolved by creating legal mechanisms decided on the spot, when problems arise, to get two parties to agree and move forward.

AI cannot function in such an unpredictable environment.

AI is extraordinary at being told a problem. It is not equipped to foresee problems that have not yet emerged. It cannot even anticipate problems in the financial models it builds. If a variable does not behave as expected, its formulas are rarely resilient enough to handle it.

Juniors, from day one, learn pattern recognition and execution foresight. They anticipate future problems and address them as comprehensively as possible today, through legal language and work processes.

Reason# 5: AI cannot do your value creation work for you

Post-acquisition value creation is fundamentally human. It requires persuasion, operational creativity, relationship management and the ability to make judgement calls in ambiguous situations with incomplete information.

As a junior in PE, my most memorable experience was getting a failing operating team to double revenue within a year, simply by managing them and incentivising them fairly. That happened through constant, near-daily human interaction, not through automated AI chatbots and AI-based reporting agents.

The honest take

AI is here to stay. It will keep dramatically optimising the sift. But it will never take away the strategic, commercial and execution role of a junior in IB or PE. If anything, it will unleash their potential, provided today’s juniors focus on developing strategic financial and commercial judgement and leverage AI to support their work rather than letting AI define it.

Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s Market Pulse newsletter!

Another week, another set of cautionary signs. Result: markets ‘see-sawed’ aimlessly.

The S&P 500 did end the week up +0.13%. Energy, healthcare & consumer staples held the show. But the NASDAQ cracked downwards -0.38%. Strip these out from the S&P 500, and America looked much like the rest of the world this week: down.

Sadly, the week had no shortage of reasons to sell, and to buy the dip.

Trump rejected Iran’s latest peace proposal, calling it “stupid”, and declared the ceasefire “on massive life support”. Brent crude crossed $109 and WTI hit $105. US consumer prices rose 3.8% year on year in April, the sharpest jump since May 2023, while producer prices posted their biggest monthly increase since March 2022. US 10-year Treasury yields closed at 4.59%, a one year high. Chicago Fed President Austan Goolsbee acknowledged the US has “an inflation problem”. The Trump-Xi summit in Beijing produced warm words, a photo opportunity, and no breakthrough on semiconductors, export controls or the Strait of Hormuz. Markets had hoped for more.

Outside the US, the damage was more visible. Europe’s Stoxx 600 fell -0.85%, dragged down by banks, industrials and utilities. The UK had a particularly difficult week. Gilt yields spiked up to 5.13%, levels last seen in 2008, as Prime Minister Keir Starmer faced mounting calls to resign following Labour’s bruising local election losses. By Friday, Greater Manchester Mayor Andy Burnham had found a route back into parliament, raising the prospect of a leadership challenge and sending sterling to a five-week low. Investors do not yet know who will lead the UK, or what they will spend. That uncertainty has a price, and gilt markets are charging it.

Japan’s Nikkei fell -2.08%, with 10-year Japanese government bond yields hitting their highest level since 1997. India’s Sensex dropped -2.53% on the week, with the rupee hitting a record low of 96.14 against the dollar. Foreign portfolio investors have now pulled $23.6 billion from Indian equities so far this year. India raised import duties on gold and silver to 15% to try to slow the bleeding of foreign exchange reserves.

Harvard economist Gita Gopinath wrote an important piece in the Financial Times this week. She called current market behaviour the “Bliss Trade”: the belief, built up over years of government rescues, that the safety net is permanent. Her warning is simple. The fiscal room that made those rescues possible has largely been used up. Global public debt is heading toward 100% of GDP by 2029. Bond markets are beginning to reflect this. Equity markets, for now, are shrugging it off.

What this means for you: Markets are being held up by a narrowing group of sectors, in a narrowing group of countries, on a narrowing set of assumptions. Oil is still high. Inflation is still rising. Political risk is rising in the UK and unresolved in the Middle East. Stay diversified but keep some cash available for the dips when they come. They will.

Markets

• United States (S&P 500, NASDAQ): Flat-ish with messy undertones. The S&P 500 managed to nudge updwards by +0.13%, kept alive by four sectors: IT, Energy, Health Care and Consumer Staples. The other seven all fell, Consumer Discretionary the worst at -0.52%. The NASDAQ was more honest: down -0.38%. Hot inflation data pushed the 10-year Treasury yield to 4.59%, its highest in over a year. The Trump-Xi summit delivered nothing concrete. The Iran ceasefire remained, in Trump's own words, "on massive life support".

• Europe (Euro Stoxx 600, FTSE 100, SMI): A hard week. The Stoxx 600 fell -0.85%, the FTSE 100 slipped -0.37%, while the SMI held up with a +0.91% gain. Industrials, Utilities and Banks were the worst performers. The UK stood out for the wrong reasons. Gilt yields hit 5.13%, not seen since 2008, as Prime Minister Starmer faced growing calls to resign. Andy Burnham's potential leadership bid sent sterling to a five week low and 30-year gilt yields to their highest since 1998. EY cut its UK growth forecast for 2026 to 0.8%.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): Broadly negative. Japan's Nikkei fell -2.08%, weighed down by profit taking in semiconductor stocks and rising energy import costs. Japanese government bond yields hit their highest since 1997. The Hang Seng dropped -1.63% as Trump-Xi summit optimism faded quickly. India had the worst week of the three. The Sensex fell -2.53%, the rupee hit a record low of 96.14 against the dollar, and foreign portfolio investors have now pulled $23.6 billion from Indian equities in 2026 alone. Financial Services and IT were the hardest hit sectors. The government raised gold and silver import duties to 15% to defend the rupee.

• Bitcoin: Up +0.29% on the week but still down 21.71% year to date. Little we can say on this speculative market.

• Gold and Silver: Safety from inflationary pressures still rules somewhat. Gold up +1.51% on the week and +42.56% year to date. Silver up +4.92% on the week and 146.15% year to date.

Investor Sentiment Gauge

US investor sentiment is still in “Greed” territory.

• That ‘irrational exuberance’ we discussed last week lingers on….

Last week’s important events and what they mean for you

United States

1. “The Clock Is Ticking on Your Chance to Cash In on a Covid-Era Tax Loophole”

In November 2025, a federal court ruled that Americans did not owe certain interest and penalties on taxes between January 2020 and July 2023, even if the IRS had already imposed them.

The reason: Covid-19 was declared a national disaster, and disaster relief rules relaxed the consequences of missing tax deadlines during that period. Tens of millions of Americans, including individuals, partnerships, corporations and nonprofits, may be owed refunds. But most eligible taxpayers must file IRS Form 843 on paper by July 10, 2026 to preserve their claim. The IRS is expected to appeal the ruling, so nothing is guaranteed.

The FQ’s take: the July 10 deadline is not far away, and the form must be submitted on paper with proof of mailing. The IRS is short staffed and likely to be slow. But if you paid penalties or interest between 2020 and 2023, this is worth ten minutes of your time to check.

What this means for you: log into your IRS online account and pull your transcripts for tax years 2019 to 2022. Look for any penalties or interest charges and the codes attached to them. If you find something, file Form 843 by July 10. If the amounts are significant, get professional help. And be patient. Even if your claim is valid, refunds may take a long time to arrive.

United Kingdom

“Why doesn’t my credit score add up?”

Nearly 1.8 million British households are due to remortgage this year, and outstanding credit card debt has hit a record £78 billion. No surprise then that the number of Britons checking their credit score has jumped 18% in the past year.

But the system is more confusing than most people realise. The UK has three credit reference agencies, each with a different scoring scale. A score of 640 would be “poor” with Experian but “excellent” with TransUnion. Lenders never actually see your score number. What they see is your repayment history, debt levels, address history and court judgments. Your salary and savings count for nothing.

The FQ’s take: This is one of those topics that sounds boring until it costs you a better mortgage rate. The traps are surprisingly easy to fall into. Spending more than 50% of your credit card limit in a single month can hurt your score even if you clear the balance in full. Closing old accounts can hurt it. Moving house and not updating every single provider can hurt it. The system rewards consistency and penalises change, which is deeply unhelpful given that life involves a lot of both.

Our suggestion: Check your credit file with all three agencies, not just one. Experian, Equifax and TransUnion can all show different pictures. Keep your credit card spending below 30% of your limit in any single month if you can. Make sure your address is identical and up to date across every financial account and every app. And if you are planning to remortgage or apply for credit in the next six months, do this now rather than the week before you apply.

India

“India’s workers quit city life over impact of Iran war on gas prices”

When cooking gas prices quadrupled almost overnight following the outbreak of the US-Iran war, hundreds of thousands of Indian factory workers began leaving their jobs in cities like Noida, on the outskirts of New Delhi, and returning to their home villages.

For families earning around Rs 20,000 a month, the sudden surge in energy costs made urban life simply unaffordable. One factory in Noida reported operating at just 30% of capacity because of the worker exodus. The state government of Uttar Pradesh responded by raising the minimum wage by up to 21%, prompting factory owners to threaten relocation to cheaper states.

Raw material and fuel costs have risen sharply across manufacturing, squeezing businesses already operating on margins of 10% or less while competing against China, Vietnam and Bangladesh.

The FQ’s take: The Iran war has added a cost shock that many small factories simply cannot absorb. A 21% minimum wage rise sounds like good news for workers. For factory owners operating on thin margins, it may be the final push toward automation or relocation. Neither outcome is good for the hundreds of thousands of migrant workers caught in the middle.

Our suggestion: The direct impact of this crisis is felt most by those with the least ability to hedge it. But if you are an investor with Indian exposure, this is a moment to review where exactly that exposure sits. Large cap private banks, domestic consumption plays and pharma tend to be more insulated than manufacturing and export oriented names. If you are remitting money to family in India, the rupee at record lows means your foreign currency goes further right now. Lock in rates where you can. And if you are a business owner sourcing from Indian manufacturers, expect lead times and costs to drift higher in the coming months. Build that into your planning now rather than later.

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Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Market Pulse by the FQ

Welcome to the FQ’s Market Pulse newsletter!

There used to be a time when a major crisis (of any kind) guaranteed a prolonged stock market rout, compounded by some form of recession.

But fear not dear investors, those days are long gone! Today, markets ALWAYS bounce back. War in West Asia? Pleaaaase! People can’t make their mortgage payments? Meh! It’s somebody else’s problem, and probably their own fault for defaulting by the way.

In 1996, Alan Greenspan coined a phrase for this. He named it “Irrational Exuberance”: when investors become sufficiently excited about a theme, whether it is railways in the 1840s, internet stocks in the late 1990s, or housing in the mid-2000s, they begin to price assets not on what they are worth today but on an imagined future that may never arrive.

This past week was in fact, a textbook case of irrational exuberance: US earnings, labour data and tentative geopolitical signals all pointed in the same direction, lifting the S&P 500 to 7,399, now up over 30% year to date, and sending the NASDAQ past 29,000. Japan and India surged, despite their energy exposure to the West Asian conflict.

This week, the dominant story was US earnings. With 85% of the S&P 500 having reported, 84% beat estimates, led by technology stocks riding AI infrastructure enthusiasm. But beneath the headlines, the picture is more complicated. This past week, only US Technology stocks gained. Everything else fell. That says a lot.

The hyperscalers have announced collective spending of $725 billion on AI this year (never mind if their free cash flow falls to decade lows): 65% on AI chips, 30% on Data Centre buildings (and a measly 5% on power). The market in turn, irrationally exuberant, prices in “an” upside and drives up share prices like crazy. Believing that ‘value’ from all this is already here.

After 17 years of Private Equity investing; of ‘turning’ things around myself, I learnt that there is a difference between announcing something, and executing on it. It take years of patient, painstakingly boring work to succeed. No Data Centre can be built in a year. It takes years. Power, is not available at the snap of your fingers. It takes years. ASML plans to deliver only 6 top of the line EUV chip making ‘fabs’ in 2026. Why then, should hyperscalers spend 65% of the $725bn on AI chips that will become obsolete before the data centre they need to ‘house’ them in is actually built? Food for thought.

What this means for you: Stay invested and diversified, but treat this week’s technology rally with clear eyes. Announced earnings are still ‘pre-Iran crisis’ to some extent. Caution is advised. Particularly with the Tech sector: the AI spending story, still has more questions than answers. Keep sufficient cash reserves to buy the periodic dips!

Markets

• United States (S&P500, NASDAQ): A strong week indeed. But driven entirely by technology. Technology added +2.48% of the S&P 500’s weekly gain, meaning everything else fell by -0.15%! The NASDAQ tells the same story: Technology up +5.89%, everything else down by -0.39%. Clearly, there is a bigger ‘gloomy’ sentiment that can’t just be written off.

• Europe (Euro Stoxx 600, FTSE 100, SMI): A week of two ‘halves’. Early gains driven by easing Middle East tensions and solid earnings were largely erased by Trump’s threat to impose sharply higher tariffs on the EU unless it cuts its own to zero. The ECB signalled a likely June rate rise, citing persistent inflation, while German factory orders surprised strongly to the upside. The Euro Stoxx 600 ended up just +0.14%, the FTSE 100 fell -1.26% on a shortened week and the SMI slipped -0.27%.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): A positive week across the region, though with different engines driving each market. Japan’s Nikkei surged +5.38%, led by technology and semiconductors, with real wages rising for a third consecutive month reinforcing the case for continued Bank of Japan normalisation. The Hang Seng rose +2.39% as markets reopened to better than expected services PMI data and cautious optimism around the upcoming Trump-Xi summit. India’s Sensex gained +1.90%, with Financial Services and Consumer Discretionary leading, though PSU Banks fell sharply and FII selling continued unabated beneath the surface.

• Bitcoin: Up +5.36% on the week but still down -17.10% year to date. The rebound looks like a technical bounce rather than a shift in conviction.

• Gold / Silver: reflecting sustained demand for safety. Gold up +1.51% on the week while silver gained +4.92%. There is an element of speculation in these markets.

Investor Sentiment Gauge

US investor sentiment is in “Greed” territory.

• Not surprising given the intense focus of markets only on AI/Technology promises!

Last week’s important events and what they mean for you

United States

1. “High Housing Costs Are Pushing Foreclosures to a Six-Year High”

U.S. foreclosure filings rose 26% year on year in Q1 2026 to almost 119,000 properties, the highest level since before the pandemic.

The culprit is not mortgage distress in the traditional sense. It is the layering of rising property taxes, soaring insurance premiums and HOA fees on top of mortgages taken out at peak rates. Homeowners who bought between 2021 and 2025 are most exposed.

The FQ’s take: there is a growing ‘malaise’ and underlying gloom in the US economy. Euphoric headlines about the stock market aside. The American consumer is under meaningful pressure. Homeowners are struggling.

What this means for you: if your monthly housing costs have risen materially in the past two years, review your budget now rather than later. If you are a homeowner in a region where prices have softened, check your equity position. And if you are considering a property purchase, factor in the full cost of ownership including insurance and taxes, not just the mortgage payment.

United Kingdom

“How to build a ‘gilt ladder’”

With UK gilt yields at multi-decade highs, a quiet renaissance is underway among a certain type of investor. The strategy is simple: buy individual low-coupon gilts, issued during the pandemic at rock-bottom rates and now trading well below par, and hold them to maturity. Because the UK does not charge capital gains tax on bond redemptions, the bulk of the return arrives tax-free. A well-constructed ladder can generate over 90% of its annual income outside the taxman’s reach.

The FQ’s take: Gilt ladders will not excite anyone at a dinner party. But for retirees or those approaching retirement with predictable future spending needs, the combination of high yields, deep discounts and tax efficiency is genuinely compelling right now. The Iran conflict and sticky inflation have done ladderites an accidental favour by pushing yields higher still.

Our suggestion: If you have a lump sum sitting in cash or low-yielding deposits, it is worth exploring whether a gilt ladder suits your situation. You will some interest income and benefit from tax free capital gain at maturity! Platforms such as AJ Bell, Hargreaves Lansdown and Interactive Investor can act as custodians. Hold these outside an ISA or SIPP to capture the capital gains tax exemption.

India

“India forex reserves drop $7.8 bn; rupee weakens to 94.47 against the dollar”

India’s foreign exchange reserves fell $7.8 billion in the week ending May 1, the second consecutive weekly decline, leaving reserves at $690.7 billion and nearly $38 billion below their February peak. The RBI has been actively selling dollars to prevent excessive rupee volatility, with the currency hitting a record low of 95.40 before recovering slightly to close the week at 94.47.

The FQ’s take: The RBI is caught in a difficult position. It is burning through reserves to defend the rupee while the underlying pressure, driven by FII outflows, elevated oil prices and geopolitical uncertainty, shows no sign of abating. A central bank can defend its currency for a while. It cannot do so indefinitely.

Our suggestion: If you hold rupee-denominated assets or regularly remit money to or from India, now is the time to review your currency exposure. Those converting foreign earnings into rupees may benefit from the current weakness. Those with unhedged rupee liabilities abroad face the opposite risk. Do not assume the RBI can hold the line indefinitely.

Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Have you ever heard of the “sift”?

That’s what the juniors on my desk in a PE firm called it (sixteen years ago): the slow and painful process of sifting through a myriad of information sources collecting information about a company. Annual reports. News databases. Industry consultants. Hours and hours of it. Before we could even think of writing a single sentence to justify that company’s name on a potential investment list.

Today you have companies that go out of their way to publish quality information, AI tools that hunt, gather and summarise for you... and therefore really no excuse for avoiding the “sift”!

Investing in an educated manner has never been easier than today. But you must do it right.

Looking at a listed company’s share price (or at its key metrics) on Google Finance will give you an initial feeling for over or under valuation. Particularly the price-to-earnings multiple (‘P/E’). It will however not tell you whether there is still potential for the stock price to increase materially or not.

In this article, we summarise our five easy steps to efficiently prepare for an investment analysis.

1. Can you explain the business in two sentences?

What do they sell. Who buys it. What problem does the company’s product solve.

If you can’t do this clearly and simply, stop. This exercise enables you to zero in on the drivers of revenue. A company’s share price hinges on growing revenue and therefore growing profits. Use AI to help you qualify and understand the business.

2. Who has the power in this industry?

Three quick checks: customers, suppliers, and moat.

These are all factors that will drive the company’s ability to increase sales and maintain or grow profitability.

1. Customer power: many customers or a precious few? A diversified customer base helps a company secure recurring revenues and command more pricing power.

2. Supplier power: does the company have leverage over input costs and quality? If a company’s ability to deliver products depends on a handful of irreplaceable suppliers, those suppliers can squeeze its profits. Not to mention that supply chain disruptions would directly affect revenues.

3. Company moat: what actually protects this business from competition? Patents, network effects, switching costs, brand strength? Many great companies don’t have one, but it is a defining feature of compounding stocks.

3. Where is the share price, and why?

Pull up the five and ten year chart. Is the stock near its high, its low, or somewhere in the middle?

Each tells a different story. A stock at an all-time high needs a very good reason to go even higher, and you should be asking hard questions about what is already priced in. A stock that has been drifting down or sitting flat deserves equal scrutiny. Is the market being overly pessimistic, or is it telling you something the headline numbers don’t?

Then look at the valuation multiple. A P/E ratio compared against its own history or against sector peers tells you whether the market is feeling optimistic, neutral, or downright gloomy about this business. That context matters enormously before you start building forward projections.

Claude AI for instance is immensely helpful with historical average multiples and sector peers. It will even propose a list of comparables for further assessment.

4. Is the business actually performing?

Accounting information can be overwhelmingly tedious. The key is to strip out the noise and focus on five metrics that matter at this stage. It is vital to look at the last three to five years of performance.

1. Revenue growth: if the company’s three to five year growth rate is higher than the country’s GDP growth, that is a very good sign.

2. Gross margin: stable, expanding or retreating? This reflects the degree of supplier power over the company.

3. EBITDA or EBIT margins: growing or retreating? You are looking for growth either way. Shrinking margins mean operating expenses are eating into profitability.

4. Earnings per share growth: growing EPS is always welcomed and rewarded by the stock market. There are many rules of thumb here. For example, a fair P/E should roughly equal the EPS growth rate, so a P/E of 15x should imply around 15% EPS growth.

5. Return on invested capital: a consistent ROIC above 10% is generally considered a sign of management capability and capital discipline.

A useful efficiency trick: Claude can pull and put all of this information together for you very quickly. Free dashboards like Google Finance and Yahoo Finance carry most of it too.

5. Who actually owns the business?

This one gets overlooked far too often.

Founders and management with meaningful personal stakes in the business are one of the most consistent markers of companies that compound well over time. When the people running the show have real skin in the game, incentives tend to stay aligned with yours.

Conclusion

Once you have your qualitative assessment sorted, you can finally begin to think about valuing or forecasting company metrics in a more serious manner.

Let’s not forget that the most successful investors, Warren Buffett among them, focused specifically on these questions to justify investing in a company. The complicated underwriting model was only ever there to present the risks. Not to create the investment narrative.

Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s fifth Market Pulse newsletter!

This week was a tumultuous week to say the least.

Across regions, the same theme appeared in different forms: optimism met reality. Some markets sold-off hard while others, buoyed by local specificities bounced back. Investors are all jittery - reacting quickly to negative news and adjusting their positions immediately.

In the US, cracks in the labour market and doubts around AI spending triggered abrupt selling. In Europe and Switzerland, steadier policy, good news on trade agreements and defensive positioning offered some shelter. In Asia, India rebounded on trade agreement euphoria while Tech companies plunged in China/Hong Kong.

The sharp breakdown in Bitcoin and the violent reversal in silver are driven by the same force: when uncertainty rises, speculative (leveraged) trades unwind fast, and safety is sought elsewhere.

What this means for you: Markets are being pulled in multiple directions by local growth concerns, policy signals, and positioning. In this environment, it is important to keep your eyes fixed on the long term, while keeping sufficient cash reserves to buy the periodic ‘dips’.

Markets

• United States (S&P500, NASDAQ): A volatile week. US markets sold off sharply mid-week as investors questioned the scale and payback of Big Tech’s AI spending. The NASDAQ fell hard before stabilising, ending the week down -1.8%, while the S&P 500 was broadly flat (-0.1%). A late rebound showed dip-buying is still alive.

• Europe (Euro Stoxx 600, FTSE 100, SMI): European markets performed. The Euro Stoxx 600 rose +1.1%, supported by steady growth data and the ECB holding rates at 2%. The FTSE 100 gained +1.4%, helped by BoE holding the rate steady, banks and defensives. Switzerland stood out: the SMI surged +2.4%, benefiting from its defensive mix as global risk appetite wobbled.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): Asia diverged sharply. India rallied strongly (Sensex +1.6%) as the India-US trade deal triggered short covering and a sharp rupee rebound (its best week in over three years). Japan rose (Nikkei +1.8%) despite growing concerns about bond yields and yen volatility. China/Hong Kong lagged: the Hang Seng fell -3.0%, as global risk aversion hit tech and growth stocks.

• Bitcoin: Bitcoin broke down decisively. Prices fell -18% on the week and are now -30% year-to-date, wiping out the so-called “Trump rally”. The ownership structure of Bitcoin has fundamentally changed. Insitutional investors have grown in size. When risk increases, insitutionals offset leveraged trade positions, sell and go looking for safety. And that’s what happened this week.

• Gold / Silver: Extreme volatility. Silver collapsed -16% on the week after a weeks of speculative activity. Gold held up better, edging +0.8%.

Investor Sentiment Gauge

US investor sentiment stayed “Neutral” this week - but it edged back towards “Fear”.

• Sentiment is still shaky: consistent with continuing uncertainty.

Last week’s important events and what they mean for you

United States

1. “US job cuts surge to highest January total since 2009”

2. “Republicans Have an Economy Problem”

Disturbing cracks are appearing beneath the US economic “success” narrative.

US employers cut over 108,000 jobs in January 2026, up +205% from December 2025, marking the highest January total since 2009. At the same time, companies are posting fewer new jobs. Job openings have fallen to their lowest level since 2020, signalling growing caution among employers.

All this is happening despite positive headline growth and continued consumer spending. There is a widening gap between messaging and economic reality. As the Wall Street Journal put it:

“It makes people who are suffering feel unseen and abandoned.” (WSJ, 4th Feb 2026)

The FQ’s take: The US labour market seems weaker than assumed by economists. If layoffs continue and hiring does not recover, the Fed may be forced to shift focus from inflation control towards supporting the economy with a rate cut. Underlying all this is a structural truth: as businesses restructure around artificial intelligence, more layoffs and fewer new jobs should be expected.

What this means for you: Be prepared to act fast.
Protect your cash and delay big purchases. If you lose your job - apply for unemployment benefits immediately. if your role is exposed to automation or AI, do not wait for the market to recover: use free government-funded reskilling and job-placement support via CareerOneStop.org or your local American Job Center.

United Kingdom

“Millions more UK workers to be hit by Reeves’ salary sacrifice changes”

The recent UK Budget introduced a cap of £2,000 to the generous salary sacrifice pension scheme. From April 2029, both employees and employers will have to pay National Insurance on any amount above £2,000.

While Rachel Reeves’ intention was to increase NI contributions only for so-called “high earners”, the Office for Budget Responsibility warns that employers may respond by limiting higher payroll costs in other ways, including spreading the impact across the whole workforce, not just high earners.

The FQ’s take: employers will try to avoid higher costs. The risk for you is indirect: even if you personally stay below the £2,000 limit, you could still lose out through weaker pay growth or less generous pension terms over time.

Our suggestion: Employees can’t stop the rule change. But you can influence how your employer responds. Ask early, act collectively, and make pension generosity a core issue. Silence almost guarantees that the higher cost will be spread quietly through lower pay growth.

Switzerland

“Arbeitslosenquote steigt in der Schweiz auf 3.2 Prozent” (‘Swiss unemployment rises to 3.2%’)

Switzerland’s unemployment rate rose to 3.2% in January, up from 3.1% in December. Compared with a year ago, the number of unemployed people is over 12% higher.

The FQ’s take: This is a reminder that Switzerland is also not immune. The labour market is cooling, even as headline numbers remain low by international standards. On the ground, we keep noticing more and more retail outlets closing.

Our suggestion: we continue to reiterate that if your income is linked to export-facing employers, keep financial plans conservative and maintain liquidity buffers rather than relying on continued income growth.

India

Stay tuned for our upcoming articles on the EU-India trade partnership and the Budget 2026 - we will focus on what these mean for you!

“Coming clean may be less taxing”

Buried in the fine print of Budget 2026 is a “quasi-amnesty” for domestic unexplained income. To avoid an eye-watering 78% penalty tax on unexplained income, voluntary disclosure and ‘regularisation’ will only cost 39% provided you declare it first! If however you receive a notice first, your right to a lower penalty tax may be forfeited.

The FQ’s take: The government is signalling that it prefers people to come clean early rather than fight long tax disputes. This is clearly a carrot, but the stick remains for those who do not come forward of their own volition.

Our suggestion: If you have unexplained domestic income, don’t treat this as a casual loophole. The window exists, but it is narrow and risky. Take professional advice and act before your protection window disappears.

Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s fourth Market Pulse newsletter!

This week’s edition shows markets calming down after last week’s sharp moves. Activity steadied across most regions, with small gains in some markets and losses in others, as investors shifted attention away from geopolitics and back toward earnings and central banks.

Gold and silver, which had surged during the spike in uncertainty, fell back sharply. This suggests that immediate fear is easing, even though confidence has not fully returned.

What this means for you: Markets look less emotional, but they are also not signalling strong confidence about the future. For households and long-term investors, this is a reminder to stay steady, avoid chasing short-term moves, and keep financial decisions focused on resilience rather than excitement.

Markets

• United States (S&P500, NASDAQ): Mixed week. The S&P 500 edged higher, while the NASDAQ slipped, weighed down by post-earnings weakness in large technology names, most notably Microsoft. Rising AI investment costs and slower cloud growth triggered profit-taking in tech, even as broader economic data remained unchanged.

• Europe (Euro Stoxx 600, FTSE 100, SMI): European equities advanced modestly, supported by better-than-expected eurozone growth data and a rebound in banks and industrials. The FTSE 100 rose despite a sharp sell-off in mining stocks following the sudden drop in gold and silver prices.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): Asian markets advanced unevenly. Chinese equities were supported by improved sentiment following positive UK–China engagement, while India rose on optimism around the India–EU trade agreement despite lingering valuation concerns. Japanese equities slipped, as a stronger yen (+2.4% this week) weighed on exporters.

• Bitcoin: Bitcoin remained under pressure last week, lagging broader markets as investors stayed cautious toward higher-volatility assets.

• Gold / Silver: Gold and silver stayed elevated but pulled back from last week’s highs. The retreat suggests some easing in immediate fear.

Investor Sentiment Gauge

US investor sentiment stayed “Neutral” this week.

• Sentiment is stable: consistent with continuing uncertainty - neither worsening, nor improving.

Last week’s important events and what they mean for you

United States

1. “Dollar Slides as Trump Says He Is Not Concerned With Its Recent Decline”

2. “A Weaker Dollar Has Always Been Part of Trump’s Plan”

3. “Termites are slowly feasting away at the foundations of the dollar’s dominance”

4. “Don’t bet on dollar dethronement”

The US dollar fell sharply last week as global investors reassessed how safe US assets really are in a more fragmented and uncertain world. The dollar declined by roughly 2% over the week and about 10% over the past year.

At the same time, US government borrowing costs moved higher. This suggests investors are becoming more cautious, even though there is no clear evidence yet of a large-scale exit from US Treasuries.

The FQ’s take: A weaker dollar cuts both ways. It can help US exporters by making American goods cheaper abroad. But the US imports far more than it exports. A falling dollar makes everyday imports (energy, food, electronics, clothing) more expensive. When combined with tariffs, this increases the risk that living costs rise further for US households.

What this means for you: There is no easy way for households to “fix” currency weakness. One fact remains: the US dollar is still the world’s main reserve currency, with no real alternative today. Short-term moves in the dollar or Treasury market are unlikely to affect everyday life unless they persist. Until then, stay alert, manage spending carefully, and avoid overreacting.

United Kingdom

“Anomaly in UK rental reforms would leave thousands paying stamp duty”

Under the Renters’ Rights Act (2025), most residential tenancies will become open-ended from May 2026. Because of a technical gap in the rules, some long-term renters could unexpectedly face stamp duty charges once total rent paid crosses £125,000.

The FQ’s take: This is a hidden tax risk. Stamp duty is usually linked to buying homes, not renting. Yet long-term tenants (especially in high-rent areas like London) could be caught out. The government says it plans to fix the issue, but no solution has been confirmed yet.

Our suggestion: If you rent long-term, stay alert for policy updates around the Budget. Keep clear records of rent paid and don’t assume stamp duty applies only to landlords (housing rules are changing faster than many realise).

Switzerland

“Swiss franc surges to decade high as traders seek last ‘reliable’ haven”

The Swiss franc has risen sharply as global investors look for safety, pushing it to its strongest levels in years. While this keeps inflation low and protects purchasing power, it is putting growing pressure on exporters, whose foreign revenues are worth less in francs.

The FQ’s take: A strong franc is a double-edged sword. It benefits consumers through stable prices, but it can slow economic momentum beneath the surface. As we said last week, there are already signs of a deceleration…

Our suggestion: Enjoy the benefits of low inflation, but don’t assume economic conditions are risk-free. If your income is linked to export-facing employers, keep financial plans conservative and maintain liquidity buffers rather than relying on continued income growth.

India

Stay tuned for our upcoming articles on the EU-India trade partnership and the Budget 2026 - we will focus on what these mean for you!

“Indian EMIs for Dubai dream homes hit a snag”

Some Indian banks have stopped processing EMI payments for Dubai property purchases, citing concerns that such instalment structures may violate India’s foreign exchange rules. While overseas property purchases are allowed, banks are wary that EMIs (especially those spread over years) could fall outside permitted remittance rules.

The FQ’s take: For Indian residents, borrowing against a foreign property or committing to long-term foreign EMIs can fall outside what is permitted under foreign exchange rules.

Our suggestion: If you are an Indian resident, assume overseas property purchases must be largely self-funded. EMI-style payment structures can fall outside what is permitted under foreign exchange rules. Do not rely on developer marketing or influencer claims: do your own regulatory checks before committing.

Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s third Market Pulse newsletter!

This week’s edition reflects a clear shift in market mood. Global markets pulled back as geopolitical tensions resurfaced and investors moved toward safer assets amid rising uncertainty.

US domestic data remained broadly stable, but higher uncertainty led to a sell-off in equities, a weaker dollar, rising bond yields, and renewed demand for traditional safe havens such as gold and silver.

Across regions, markets responded differently: Europe proved more exposed to geopolitical risk, Asia weakened unevenly, and higher-valued markets saw sharper adjustments. Investor sentiment cooled quickly, moving from “greed” back to “neutral” within days.

What this means for you: this week was a reminder of how quickly sentiment can change when uncertainty rises. Even without economic deterioration, markets can reprice fast. Staying diversified and keeping a long-term view matters more than reacting to short-term headlines.

Markets

• United States (S&P500, NASDAQ): US equities sold off as escalating geopolitical tensions triggered a broad reduction in risk-taking, despite US domestic economic data remaining stable week-on-week. Against the backdrop of renewed tariff threats, the dollar weakened and Treasury yields rose, further amplifying equity losses.

• Europe (Euro Stoxx 600, FTSE 100, SMI): European equities fell more sharply, reflecting the region’s higher sensitivity to current geopolitical risk, trade disruption, and currency strength. Given the nature of recent threats, Europe appears more exposed to global risk aversion than the US.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): Asian markets weakened unevenly, with Japan holding up on currency support, China pausing after recent gains, and India underperforming as foreign investors continued to reduce exposure to a premium-valued market amid a global search for lower-risk assets.

• Bitcoin: Bitcoin fell sharply over the week, underperforming equities as investors cut exposure to higher-volatility assets during heightened geopolitical uncertainty.

• Gold / Silver: Gold and silver rose strongly, extending their year-to-date outperformance as investors prolonged a flight to safety.

Investor Sentiment Gauge

US investor sentiment moved from “Greed” to “Neutral” within a week.

• This change reflects increasing risk-aversion: consistent with last week’s rise in geopolitical uncertainty.

Last week’s important events and what they mean for you

United States

“Education Department Delays Wage Garnishment of Student-Loan Borrowers”
The US government has temporarily stopped taking money directly from the paychecks and tax refunds of people who have fallen behind on federal student loans.

The FQ’s take: This gives borrowers some breathing room right now, but the loan itself has not gone away. These paycheck cuts can start again later.

Our suggestion: Use this time to get organised rather than wait. Check official guidance at studentaid.gov, and consider speaking with a non-profit credit counsellor listed by the National Foundation for Credit Counseling (nfcc.org) to understand repayment or rehabilitation options.

United Kingdom

1. “Housing affordability improves for the UK’s first-time buyers”

2. “House prices jump across Britain as sentiment rebounds after Budget”

UK house prices picked up after the Budget, but at the same time buying a first home has become slightly more affordable. Lower mortgage rates and steady wage growth mean first-time buyers now face a house-price-to-income ratio of about 4.7 times (the lowest in over a decade).

The FQ’s take: This is a rare combination: prices are rising, yet affordability is improving. That is not because homes are suddenly cheap, but because wages have caught up and mortgage costs have eased (though affordability remains stretched in London and the South).

Our suggestion: If you are considering buying, focus less on short-term price headlines and more on what you can comfortably afford month-to-month. Run conservative mortgage scenarios and avoid stretching budgets just because borrowing looks slightly easier.

Switzerland

“Die Hypothek läuft aus: sechs Tipps, wie man sie richtig ablöst oder verlängert” (‘The mortgage is expiring: six tips on how to repay it or renew it correctly’)
As many Swiss mortgages reach maturity, homeowners must either renew with their current bank or switch providers. Small decisions around timing, structure, and flexibility can make a big difference to long-term housing costs.

The FQ’s take: Mortgage renewals are one of the most important financial decisions households make. Acting too late, not comparing offers, or locking in the wrong structure can lead to unnecessarily higher costs for years.

Our suggestion: Start planning 12–18 months before your mortgage expires. Compare multiple lenders, keep flexibility where possible, and make sure you still have enough cash reserves after any amortisation.

India

1. “Budget 2026: What the past five years say about this year’s priorities”

2. “Is India still a stock picker’s market?”

Indian Markets weakened further last week, but the focus has shifted from foreign flows to earnings and policy delivery. India’s growth story remains intact, yet earnings momentum has not kept pace with valuations, making markets more sensitive to global risk events.

The FQ’s take: India is not being “sold” because it is expensive. In a week of global stress, investors are trimming exposure to markets where expectations are high and earnings visibility is uneven, rather than abandoning India’s long-term fundamentals.

Our suggestion: Avoid chasing broad market moves. Use volatility to be selective: focus on companies with clear earnings visibility and reasonable valuations, and be patient rather than reacting to short-term market news.

Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.

Welcome to the FQ’s second Market Pulse newsletter!

This week’s edition presents a more nuanced market picture.

While equity markets remain resilient on a year-to-date basis, weekly performance has become increasingly uneven. Recent gains are more selective and appear driven by positioning and sentiment rather than clearer economic fundamentals. At the same time, strong moves in traditional safe-haven assets such as gold and silver highlight the tension beneath the surface.

Investor mood has improved across parts of the US, Europe, Japan and China, while confidence remains weaker in markets such as India, where elevated valuations and continued capital outflows have weighed on performance.

What this means for you: markets are not signalling panic, but they are also not confirming a smooth economic path ahead. In this environment, discipline matters more than conviction: avoid reacting to short-term sentiment swings, stay diversified, and anchor financial decisions to resilience rather than optimism.

Markets

• United States (S&P500, NASDAQ): US equities ended the week modestly lower, as investors reduced expectations for near-term Fed rate cuts rather than reacting to a deterioration in economic fundamentals.

• Europe (Euro Stoxx 600, FTSE 100, SMI): European markets moved higher overall, led by gains in the eurozone and UK, while Switzerland was broadly flat. Performance was supported by industrials, energy, and globally exposed stocks rather than domestic growth momentum.

• Asia-Pacific (BSE Sensex, Hang Seng, Nikkei 225): Japanese equities continued to outperform on currency support and earnings strength, China-linked markets rebounded from depressed levels, while Indian equities lagged amid weakening momentum and increasing institutional fund outflows.

• Bitcoin: Bitcoin rose sharply over the week, moving broadly in line with shifts in global risk appetite.

• Gold / Silver: Gold and silver posted strong weekly gains, extending their year-to-date outperformance driven by continued demand for safety amid geopolitical uncertainty.

Investor Sentiment Gauge

US investor sentiment moved from “Neutral” to “Greed” within a week.

• “Greed” doesn’t imply a bubble: it mainly reflects rising market expectations and calmer trading conditions. Investors appear more focused on recent gains than on unresolved economic risks.

Last week’s important events and what they mean for you

United States

“Would a Credit-Card Rate Cap Help or Harm Consumers?”
Banks and credit unions say a proposed one-year 10% credit card rate cap put forward by Donald Trump could lead to reduced credit limits or account closures, especially for higher-risk borrowers.

The FQ’s take: It’s natural for card issuers to resist measures that compress profitability. While the cap sounds consumer-friendly, it is also logical that lenders may respond by pulling back riskier credit instead of maitining universal access.

Our suggestion: The devil will be in the detail and implementation. Ignore headline promises until the final rules are clear. Regardless of any cap proposal, reducing your reliance on credit card debt remains a core wealth-building principle.

United Kingdom

“UK lenders cut mortgage rates in race for new year buyers”
UK lenders including HSBC, Nationwide and Barclays have cut mortgage rates following December’s Bank of England rate cut. Some banks have also loosened lending limits to up to six times income.

The FQ’s take: Lower rates are driven by competition between lenders rather than a clear economic recovery. With cost-of-living pressures still high, fixed-rate certainty may remain more attractive for many households.

Our suggestion: If buying or refinancing, compare fixed and tracker deals carefully and stress-test repayments. Focus on affordability and maintaining cash buffers rather than maximising the amount you borrow.

Switzerland

“Preise bleiben stabil: Die Schweizer Inflation[…]” (‘Prices remain stable: Swiss inflation rises only slightly in December’)
Swiss inflation stayed extremely low in December, with 2025 average inflation around 0.2%, among the lowest globally.

The FQ’s take: Low inflation is positive. It supports your purchasing power and makes household finances more predictable. But, low inflation often coincides with economic slowdown: the strong CHF is weighing on exporters, and unemployment has begun to edge up...

Our suggestion: Returns on savings are likely to remain modest. Keep adequate cash buffers, but consider allocating surplus savings to diversified financial assets that can compound over time and help offset slower economic momentum.

India

1. “FIIs dump Rs 22,530 crore worth of domestic shares in first fortnight of January”

2. “India needs to import more capital and export fewer workers”

Foreign institutional investors sold over ₹22,500 crore of Indian equities in the first half of January, extending a pullback amid high valuations and global uncertainty.

The FQ’s take: India’s equity underperformance reflects more than short-term sentiment. Persistent FII outflows, alongside concerns that India needs more external capital even as labour exports remain high, highlight a growing imbalance between capital needs and global risk appetite.

Our suggestion: Stay disciplined with your investing. Prioritise high-quality businesses with strong cash flows, and keep some cash aside so you can invest gradually when opportunities become clearer rather than committing everything at once.

Disclaimer: This content is for educational purposes only and does not constitute financial or investment advice. Always do your own research or consult a qualified financial adviser before making any financial decisions.