Good morning from the Financial Times.
Today is Wednesday, November 12th, and this is your FT News briefing.
Looks like oil and gas demand could stick around for a bit longer.
And SoftBank pulled out of NVIDIA, but that might not be bad news.
Plus, a small tax cut in Italy has created a huge backlash.
I'm Sonia Hudson, and here's the news you need to start your day.
Global demand for oil and gas will rise for the next quarter century.
That's if worldwide habits don't change, according to the International Energy Agency.
The Paris-based body published its latest forecast today.
It reflects less interest from global governments to stick to climate targets.
Now, this is a change from previous reports.
The IEA's forecast had assumed fossil fuel consumption would peak this decade.
That was disputed by the oil and gas industry and the White House, though.
The IEA says this year there is a wide range of uncertainty around the outlook.
For some, it's, quote, very optimistic.
For some people, it's very pessimistic.
SoftBank decided to sell its nearly $6 billion stake in the chipmaker NVIDIA.
The Japanese conglomerate announced the sale yesterday, and that sent Nvidia shares down almost 3%.
But the divestment might not be all bad for Nvidia.
That's what the FT's John Foley thinks.
He's the head of the FT's Lex column, and he joins me now.
Hi, John.
Hi there.
So what is the argument that losing a 58 billion investment in isn't bad because, you know, on the surface it doesn't really sound that great.
Right.
It's never going to be a fun thing to watch one of your most high-profile investors sell all their shares in your company.
And that is what has happened to Nvidia.
But a few things to put this into perspective.
First of all, the stake in Nvidia was very small compared with Nvidia itself, which is very big.
It's a nearly $5 trillion company.
And this was, as you say, a $5.8 billion investment.
So it's pretty tiny.
What for me is interesting though, is that SoftBank is still actively investing, if not in NVIDIA, in AI.
So it's taking that money out and it's putting it into other companies, particularly companies like OpenAI, all of which are customers of NVIDIA.
NVIDIA makes the microchips on which the whole artificial intelligence boom rests.
So basically, SoftBank is taking this money that it had invested in NVIDIA and creating more business for the chipmaker.
It's creating more business for NVIDIA, yeah.
And if you think that the market currently values NVIDIA at about 20 times its annual revenue.
So in theory, a dollar of new sales is worth $20 of extra market capitalization.
So it's actually quite a good deal for NVIDIA to get more revenue any way that it can.
All through the magic of the stock market.
Why do you think then that NVIDIA shares dropped yesterday?
So Nvidia shares have been a little bit volatile lately.
They're up about 40% this year to date and up about 60% from the low points earlier in the year.
People are a bit jittery about the quantum of AI investment.
I think most investors agree that AI is a game changer, but the extent to which some of the prodigious investment that we're seeing from companies like Facebook owner, Meta Platforms and Google parent Alphabet the question of whether this is too much, just enough, not enough is Investors really aren't sure, because the returns from this investment are so far ahead in the future that really we're just kind of going on trust that these Silicon Valley entrepreneurs know what they're doing.
And we're seeing that reflected in share prices.
And again, NVIDIA is right at the heart of this, because all of these grand AI plans depend on NVIDIA's chips.
Given that, what do you think this soft bank divestment could mean for NVIDIA's dominance in the global AI chip making space?
It's very hard to see NVIDIA losing its dominant role in the AI chip race.
It's great for NVIDIA to have big name investors like SoftBank in its shareholder register, but that's not why NVIDIA is where it is.
NVIDIA is currently the dominant maker of AI chips and it makes about 90 of the high-end silicon on which the AI boom depends.
So that kind of market position, it's really hard to dislodge it.
And customers are trying.
Google, for example, is trying to make its own chips.
Other chip makers like Intel, Broadcom are at the edges nibbling around NVIDIA's monopoly.
But regardless of whether SoftBank owns its shares or not, NVIDIA's stranglehold for want of a better word on this market is likely to endure for some time to come.
John Foley is the head of the FT's Lex column.
Thanks, John.
Thanks.
Jitters about AI have spilled over into the corporate bond market.
In recent weeks, investors have been selling off the debt of US tech giants like Alphabet Meta, Microsoft and Oracle.
There are concerns about how tech groups are using debt to finance AI data centers.
Meta, Alphabet, and Oracle have all issued blockbuster debt packages in recent months.
The premium to buy this debt instead of government bonds is now at the highest level since April, when US
President Donald Trump disrupted the markets with his tariff plan.
There's a political battle raging in Italy over tax cuts.
Prime Minister Giorgia Maloney says her plan will reduce income taxes for middle-class Italians.
But economists are saying...
Actually, it'll mainly help the country's highest earners.
And that has the opposition up in arms.
Here to tell us more is the FT's Amy Kasman in Rome.
Hi, Amy.
Hi.
So, Amy, what exactly is Maloney's tax proposal?
So...
The Maloney government is saying that they are cutting taxes on middle-class Italians and that the tax rate for earnings between 28000 and 50000 a year will be reduced from the current rate of 35 to 33.
And they're saying this is going to help the middle class.
But it also helps people earning more than 50000 a year, who will also see a reduction of of their income tax on that proportion of their income, although they will pay higher rates on earnings above 50000 euro a year.
Tell me about the politics here.
What kind of debate have we seen between Maloney's government and the opposition?
So the Maloney government has tried to sell this as a tax cut that's intended to help the middle class who have been squeezed by higher inflation and who are feeling the cost of living squeezed.
But the Independent Parliamentary Budget Office actually found that more than half the value of this tax cut, which is going to cost the exchequer 3 billion euros, is actually going to go to just 8 of the families, most of whom are earning more than 48000 euro a year.
So in the end, many families better off families from the higher income categories in Italy will be getting the benefits of this tax cut.
And that has sparked off furious political accusations that this is a measure intended to help the rich.
And one of the country's largest labor federations has called a national strike for December 12th to protest.
But the Maloney government have said, absolutely defended the measure and torn into the opposition saying do you really consider someone that's earning 50000 euros a year and maybe has three children as someone who's rich?
If this tax cut does go through, what will it ultimately mean for Italy's public finances and just the economy as a whole?
So the government's argument is that they want to put more money in the hands of middle-class consumers and that that will help boost their purchasing power and hopefully increase economic growth.
The reality is that for all the fighting, it's actually a fairly small measure.
The entire cost of the tax cut is 3 billion euros.
And when you get down to the actual tax, taxpayer level of how much of a benefit will people get?
Well, the Parliamentary Budget Office found that, at the maximum, people earning around €50000 or close to that amount will get a maximum additional benefit of around €400 a year in tax savings.
What does this tell you about Italian politics right now?
I think that the real problem for the government is that they want to show that they're helping workers.
But Italy, you know, faces a lot of budget pressure.
They have very, very little room to maneuver, which is why you end up in this situation where you know you're foregoing three billion euro in revenue, which isn't really that much in the big scheme of things.
And you're ending having these huge fights over what they're doing and who they're doing it for.
Amy Kasman is the FT's room correspondent.
Thanks, Amy.
Thank you very much.
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