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 what a fragmented UK election means for long-term policy stability, a major deal that suggests tokenisation is finally getting real, and an unlikely partnership between AI competitors over scarce compute resources.
But first, our number of the week…
84%
That’s the share of S&P 500 companies surpassing analyst earnings estimates this quarter, with nearly two-thirds of companies reporting. That’s the highest share since Q2 2021, when 87% of the index beat estimates.
Sidekick Takeaway: Robust corporate performance helps explain why stocks remain elevated, despite a global energy shock and continued geopolitical uncertainty. Investors may be anxious, but that anxiety hasn’t dented a strong earnings season.
Only have a minute to read? Here’s the TL;DR:
- Britons voted in a broad round of local elections on Thursday, with Labour expected to suffer heavy losses across England, Scotland, and Wales. While Starmer could face a leadership crisis, the deeper story is the fragmentation of UK politics, which threatens any government’s ability to deliver long-term structural reform.
- Crypto exchange Bullish announced a $4.2 billion acquisition of transfer agent Equiniti, which provides infrastructure for global equity markets. Combined with tokenisation efforts from Nasdaq and the DTCC, the deal suggests that the long-discussed shift toward blockchain-based securities infrastructure is now actively underway.
- Anthropic signed a deal to lease over 300 megawatts of compute capacity from SpaceX’s Colossus 1 data centre, despite the two companies being direct competitors. The arrangement underscores just how severe the AI compute bottleneck has become – and how badly infrastructure providers need returns on their capital investments.
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.
Poll Position: UK Elections Showcase Fragmentation Crisis
On Thursday, Britons voted in one of the broadest rounds of local elections in recent memory.
The results are still trickling in. However, Labour is expected to suffer heavy losses, potentially resulting in a leadership crisis for Keir Starmer.
But the real story goes far beyond any one party.
This week’s elections are showing just how fragmented UK politics have become – with serious implications for solving the country’s long-term challenges.
More parties, less clarity
The Labour-Conservative dichotomy once dominated British politics. That system has now been blown wide open:
- Reform UK and the Greens are projected to pick up hundreds of council seats, with the Lib Dems also set for gains. In Wales, a historic Labour stronghold, polls put the party a distant third.
- Starmer’s popularity is already at a historic low. Both Angela Rayner and Wes Streeting have been proposed as potential successors, and a dire result could trigger a leadership challenge.
- Even if Starmer goes, his successor will inherit the same troubling landscape. Amidst fragmented voter loyalties, no party appears to have the political capital to push through sustained structural reform.
The UK faces generational challenges across productivity, infrastructure, and defence. Solving them requires long-term policy commitments.
A fragmented political landscape makes that harder to achieve, regardless of who leads.
Sidekick Takeaway: Political instability is already showing up in bond markets. UK gilts have underperformed their peers in recent weeks, with investors pricing in the potential for enduring policy uncertainty in the country.
Chain Reaction: Bullish Acquires Equiniti in Tokenisation Push
Tokenisation – the conversion of financial securities into blockchain-based digital tokens – has been discussed for years.
Now, a major deal shows that this vision is starting to look more real than ever.
This week, crypto exchange Bullish announced that it was acquiring transfer agent Equiniti – which serves companies like Berkshire Hathaway and Rolls-Royce – for $4.2 billion.
Bullish’s plan is to use Equiniti’s infrastructure as the foundation for an end-to-end tokenisation platform, putting traditional shares and digital tokens under one roof.
From theory to reality
While many investors have never heard of them, transfer agents are important players in global financial infrastructure:
- Transfer agents are responsible for keeping track of who owns what and handling the administrative backbone of equity markets. Bullish’s acquisition is an effort to embed blockchain directly into existing market plumbing.
- And Bullish isn’t alone in that effort. Other infrastructure providers, including Nasdaq and DTCC, are also floating serious tokenisation pilots.
- Most tokenisation efforts are focused on the US, but the UK isn’t standing still. The FCA published final rules for fund tokenisation just last week.
In all likelihood, fully tokenised markets are still years away.
Nonetheless, this activity shows how an idea that once lived in white papers is increasingly seeping into real-world financial plumbing.
Sidekick Takeaway: For investors, tokenised markets could come with extended trading hours and a wider variety of investable assets. But they also pose unique regulatory challenges. It’s not clear whether existing frameworks can fully accommodate a world in which nearly every asset is tradeable 24/7.
Compute and Conquer: Why AI Competitors Are Sharing Data Centres
This week, Anthropic announced that it would be leasing 300+ megawatts of compute power from SpaceX’s Colossus 1 data centre.
At current rates, the deal is worth hundreds of millions of dollars annually.
Anthropic builds Claude; SpaceX houses xAI. In most other industries, sharing resources with a competitor would be bad business.
But AI economics make strange bedfellows – and just as model developers need compute, infrastructure providers need returns.
Both sides of the bottleneck
The Anthropic-SpaceX partnership is a direct result of the competitive pressures facing each company:
- Anthropic’s Claude models have struggled with usage caps following a recent surge in users. The company has already announced that the new capacity will allow it to raise limits across its products.
- Meanwhile, xAI was using just 11% of compute capacity at SpaceX’s own data centres. Ahead of a major IPO, increasing utilisation helps justify the company’s enormous capital expenditure on data centre construction.
- The deal may also have a personal dimension. Anthropic is stuck in a fierce rivalry with OpenAI. Elon Musk, CEO of SpaceX, is embroiled in a lawsuit against OpenAI.
Personal vendetta or not, the deal shows just how scarce compute resources are right now – and how badly infrastructure providers need to demonstrate returns on their capital expenditures.
Sidekick Takeaway: The Anthropic-SpaceX deal has some interesting parallels to the oil sector. In oil, it’s not uncommon for competitors to co-invest in the same projects to reduce risk and lower costs. AI could be heading the same way, with competition focused on what firms do with the outputs rather than where they get the inputs.
Notices
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