Welcome to this week’s Market Pulse, your 5-minute update on key market news and events, with takeaways and insights from the Sidekick Investment Team.

Today, we’re looking at the ASML-Mistral deal, central bank gold holdings, and the Anglo-Teck merger.

But first, our number of the week…

$300 billion

That’s how much computing power OpenAI has agreed to purchase from Oracle, according to a new agreement the two firms signed this week. While that figure covers a five-year period, it remains one of the largest cloud computing deals in history.

Sidekick Takeaway: The OpenAI-Oracle deal capped off a flurry of AI dealmaking this week, following the ASML-Mistral deal discussed below. As investors anxiously watch for any sign of an AI slowdown, deals like this should provide reassurance about the long-term promise of the technology. 

Only have a minute to read? Here’s the TL;DR:

• Dutch chip equipment firm ASML announced a €1.3 billion investment in French AI firm Mistral, bringing together two of Europe's leading tech companies. The deal could enable deeper integration of AI hardware and software capabilities, with ASML's lithography machines being tailored to support Mistral's models (and vice versa).
• For the first time since 1996, global central banks now hold more gold than US Treasuries in their reserve portfolios. This shift reflects growing uncertainty about America's reliability as a financial partner amidst tariff threats and potential Treasury default fears.
• Anglo American agreed to purchase Canadian mining firm Teck as part of a $53 billion merger in what looks to be the second-largest mining deal ever. The transaction helps both companies avoid unwanted takeovers, with the combined entity remaining primarily listed in London – a boost for the city's financial sector.

It’s important to note that the content of this Market Pulse is based on current public information which we consider to be reliable and accurate. It represents Sidekick’s view only and does not represent investment advice - investors should not take decisions to trade based on this information.

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Model Citizens: ASML-Mistral Deal Could Unlock New Tech

With cutting-edge LLMs coming out of America and China, it may seem like Europe is falling behind in the AI race.

But an intriguing deal this week could help jumpstart the continent’s AI ambitions.

On Tuesday, Dutch chip equipment firm ASML announced its intent to invest €1.3 billion in French AI firm Mistral. The deal brings together two of Europe’s largest public and private companies.

ASML likely sees potential in Mistral’s business-focused AI. The French firm already counts names like Stellantis and BNP Paribas among its corporate customers.

But the most intriguing aspect of the deal could be an opportunity to more deeply integrate AI hardware and software capabilities.

ASML, Mistral deal could result in specialised hardware, models

Over the years, AI hardware and software development have become closely intertwined. This is exemplified by Nvidia’s AI accelerator chips, specifically designed for the needs of LLMs. 

But the ASML and Mistral tie-up could lead to tailored hardware further up the supply chain:

• As the world’s only manufacturer of high-grade lithography machines, ASML is an essential supplier to the world’s chipmaking industry. 
• ASML machines are a key part of the process for creating advanced chips from firms like Nvidia. 
• The ASML-Mistral deal could help ensure that the former’s equipment is precisely tailored to support the latter’s models, and vice versa.

Speaking to reporters, Mistral’s CEO indicated that working closely with ASML could help the firm’s models unlock capabilities far beyond what competitors can offer.

Sidekick Takeaway: The ASML-Mistral deal has drawn significant attention as a story about European AI, but the tie-up could have implications far beyond the continent. Integrating AI-aware manufacturing throughout the chipmaking supply chain could yield exciting possibilities for future model development. 

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Bluster and Luster: Central Bank Gold Holdings Eclipse Treasuries

Since January, America’s reliability as an international financial partner has grown increasingly uncertain.

Not only has the Trump administration threatened elevated global tariffs, but US policymakers have flirted with the idea of potentially defaulting on Treasury securities. 

These statements are typically written off as mere bluster. But there are growing signs that the uncertainty they create is beginning to have a real impact.

As global officials increasingly shun dollar assets, evidence of ‘de-dollarisation’ is starting to appear.

Central banks drop Treasuries for gold

For the first time since 1996, global central bank portfolios now appear to hold more gold than Treasuries. 

• Official data shows that global central banks currently hold roughly $3.9 trillion worth of US Treasuries as reserve assets. 
• Meanwhile, analyst estimates indicate that global central banks have $4.2 trillion worth of gold. 
• This is a sharp reversal from the past few decades – Treasuries may be losing their shine as the world’s reserve asset.

What’s more, other currencies have been gaining ground. A recent survey among central banks showed that the euro was the most in-demand currency over the next 12 to 24 months.

Sidekick Takeaway: The dollar’s dominance certainly won’t evaporate overnight, but the fact that gold holdings now eclipse Treasuries is meaningful evidence that a shift is occurring. Given that there are both costs and benefits to being the world’s king currency, however, it’s not clear that other governments will leap at the chance to take the crown.

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New Major Miner: Anglo Teck Deal Forms Mining Giant

With annual revenue of nearly $30 billion, Anglo American is already one of Britain’s three largest mining firms. But following a landmark acquisition this week, the company is set to get even bigger.

According to a preliminary agreement, Anglo American will purchase Canadian firm Teck in a merger set to create a $53 billion entity. 

This acquisition is the second-largest mining deal ever and represents a significant industry consolidation. 

The merger is still subject to shareholder and regulatory approval. However, the deal could help both firms avoid more unpleasant acquisitions elsewhere.

Merger helps Anglo, Teck avoid takeovers

Both Anglo American and Teck have been the subject of competitive interest in recent years:

• Last year, mining giant BHP attempted to acquire Anglo. The deal ultimately fell apart as Anglo opted to pursue an independent turnaround plan.
• Meanwhile, Teck previously courted an offer from Glencore, who was keen to acquire the Canadian firm’s lucrative copper mines.
• The Anglo-Teck merger creates an entity large enough to fend off other acquirers and was unanimously recommended by the boards of both companies.

However, not all shareholders may be so eager about the deal. 

Given Teck’s poor recent performance, Anglo American did not offer the company’s investors a premium in the acquisition, a structure typically reserved for distressed acquisitions.

Sidekick Takeaway: While Anglo Teck will be headquartered in Canada, the firm’s primary listing will remain in London. That will be a coup for the city’s financial services industry, which has seen a steady and painful trickle of listings leave London in recent years.

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Notices

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