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 EU pitching a minerals partnership with the US, Elon Musk betting big on a SpaceX-xAI merger, and Rachel Reeves calling for UK-EU unity to weather global volatility.
But first, our number of the week…
$46.9 Billion
That was the total value of software industry debt trading at distressed levels in the US this week, the highest level since 2022. Software loans have suffered the biggest loan value declines of any industry so far this year.
Sidekick Takeaway: While many tech firms have boomed on AI optimism, others could see their moat evaporate. With AI increasingly able to write code and analyse data, investors are growing sceptical that many software-as-a-service firms can maintain their competitive edge.
Only have a minute to read? Here’s the TL;DR:
- After Donald Trump unveiled a $12 billion critical minerals stockpile in the US, the EU proposed a strategic partnership to reduce reliance on China. However, geopolitical issues could undermine the economic logic of a joint minerals alliance, especially following continued tensions over Greenland.
- Elon Musk confirmed that SpaceX will acquire xAI in an all-stock deal that values the combined entity at $1.25 trillion. While Musk claims the merger will help enable orbital data centres, analysts see the move as financial engineering designed to use SpaceX's robust capital access to fund xAI’s massive burn rate.
- Chancellor Rachel Reeves urged the UK and EU to “speak with one voice” on trade and security to counter the global volatility unleashed by Donald Trump’s return. Despite Labour’s push for closer alignment, Keir Starmer remains wary of fully rolling back Brexit, making deeper integration with the EU uncertain.
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.
Digging In: EU Offers Minerals Partnership as Trump Builds Stockpile
China has long held a vice grip on the global supply of critical minerals.
Beijing is estimated to control about 90% rare earths processing, giving it significant leverage over Western supply chains.
That vulnerability has been exploited by China in recent trade negotiations. Now, it’s forcing Western leaders to seek new ways to insulate their economies.
Both the US and the EU are racing to secure access to these vital resources.
However, recent tensions could undermine the possibility of a truly joint approach.
EU seeks partnership amidst tensions
This week, President Donald Trump unveiled “Project Vault,” a $12 billion strategic stockpile of critical minerals designed to protect US manufacturers.
Shortly after, reports circulated that the EU planned to pitch a strategic partnership to coordinate minerals efforts with Washington:
- The EU’s proposal aims to reduce reliance on Chinese imports through joint projects and subsidies.
- However, the path to a deal is fraught with diplomatic landmines. Notably, the EU’s draft insists that both sides respect “territorial integrity” as a condition of the agreement.
- That clause serves as a direct rebuke to President Trump’s aggressive rhetoric toward Greenland, which has severely strained relations with the EU.
While the economic logic for a US-EU minerals alliance is undeniable, the geopolitical reality is messier. The EU’s inclusion of territorial clauses signals a deep distrust in Trump’s predictability.
Sidekick Takeaway: If the US continues to alienate allies with erratic foreign policy moves like the Greenland bid, building a cohesive front against China’s mineral dominance may prove impossible. What’s more, America’s previously negotiated trade deal with the EU remains in limbo, making any future partnerships even more tenuous.
Escape Velocity: Musk Merges SpaceX and xAI in Trillion-Dollar Bet
Elon Musk manages a sprawling empire of distinct companies.
Usually, they stay in their own lanes – Tesla makes cars, SpaceX launches rockets, and X runs a social media platform.
But this week, the borders of Musk’s business empire blurred significantly.
On Monday, Musk confirmed that SpaceX will acquire his artificial intelligence startup, xAI, creating a combined entity valued at a staggering $1.25 trillion.
Orbital ambitions, financial reality
Under the all-stock deal, xAI will become a wholly-owned subsidiary of SpaceX:
- Musk’s stated rationale for the deal is technical. He envisions orbital data centres that leverage the cold of space for cooling and solar energy for power, solving two of AI’s biggest bottlenecks.
- However, analysts suggest the motivation may be more financial than physical. xAI is currently burning through roughly $1 billion a month in its race to catch up with competitors like OpenAI.
- By folding the two companies together, Musk gets to leverage SpaceX’s capital-raising ability to help fund xAI, giving his AI firm a longer lifeline to reach profitability.
SpaceX is widely expected to IPO in the near future, potentially raising as much as $50 billion for the combined entity.
Sidekick Takeaway: Musk has a long history of pitching futuristic concepts that struggle to come to fruition, notably including fully autonomous self-driving cars and humanoid robots. Regardless of whether Musk’s orbital data centres actually pan out, the merger is a shrewd piece of financial engineering to help support xAI’s survival.
Finding a Voice: Reeves Urges EU Unity to Counter Trump
Early this week, UK ministers and EU officials concluded a series of high-level meetings in London.
At the end of the session, Chancellor Rachel Reeves issued a warning to the joint group: the global economy is “sliding towards a world where the rules are less clear.”
The comment was a thinly veiled reference to the volatility unleashed by Donald Trump’s return to the White House.
Reeves concluded her speech by urging the UK and EU to “speak with one voice” on trade and security. That proposal, however, introduces complexities of its own.
Labour’s Brexit tightrope
The UK government is currently trying to thread a difficult needle – unwinding the economic damage of Brexit without technically reversing it.
In an article earlier this month, Labour trade minister Nick Thomas-Symonds argued that aligning with EU rules is now a “sovereign choice” to boost growth.
However, the party hasn’t quite figured out what that alignment will look like.
While key figures have floated the idea of a customs union, Prime Minister Keir Starmer remains cautious about crossing Brexit’s red lines.
For their part, EU negotiators are hesitant to be burned again.
EU diplomats have warned that while they are open to cooperation, deeper access to the single market typically comes with a heavy price tag.
Sidekick Takeaway: While Trump is forcing the UK and EU closer together, shared frustration with the US doesn’t solve the fundamental mechanics of Brexit. Given Starmer’s hesitancy to implement a true reversal – and the EU’s hesitancy to allow greater integration – Reeves’ comments may fall on deaf ears.
Notices
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𝘗𝘭𝘦𝘢𝘴𝘦 𝘳𝘦𝘮𝘦𝘮𝘣𝘦𝘳, 𝘪𝘯𝘷𝘦𝘴𝘵𝘪𝘯𝘨 𝘴𝘩𝘰𝘶𝘭𝘥 𝘣𝘦 𝘷𝘪𝘦𝘸𝘦𝘥 𝘢𝘴 𝘭𝘰𝘯𝘨𝘦𝘳 𝘵𝘦𝘳𝘮. 𝘠𝘰𝘶𝘳 𝘤𝘢𝘱𝘪𝘵𝘢𝘭 𝘪𝘴 𝘢𝘵 𝘳𝘪𝘴𝘬 - 𝘵𝘩𝘦 𝘷𝘢𝘭𝘶𝘦 𝘰𝘧 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵𝘴 𝘤𝘢𝘯 𝘨𝘰 𝘶𝘱 𝘢𝘯𝘥 𝘥𝘰𝘸𝘯, 𝘢𝘯𝘥 𝘺𝘰𝘶 𝘮𝘢𝘺 𝘨𝘦𝘵 𝘣𝘢𝘤𝘬 𝘭𝘦𝘴𝘴 𝘵𝘩𝘢𝘯 𝘺𝘰𝘶 𝘱𝘶𝘵 𝘪𝘯.