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 Trump’s Fed nomination, OpenAI’s record-breaking valuation, and Elon Musk’s latest pay package. 

But first, our number of the week…

4%

That’s the BoE’s current policy rate following a quarter-point rate cut this week. While UK rates now stand at their lowest level in over two years, it took an unprecedented two rounds of voting for the committee to make its decision. 

Sidekick Takeaway: The internal friction over this latest cut showcases ample concern over a potential inflation spike. Markets will be left highly uncertain as to the BoE’s next move, something that Governor Andrew Bailey acknowledged. 

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

• Following Fed governor Adriana Kugler's surprise resignation, Trump quickly nominated economic adviser Stephen Miran to fill the vacancy. While Miran has sharply criticised the Fed, his extensive credentials should provide some reassurance to global investors. 
• OpenAI could reach a $500 billion valuation as part of the company’s latest deal, potentially dethroning SpaceX as the world's most valuable private company. Nonetheless, OpenAI faces growing challenges from competitors and mounting costs.
• Tesla issued Elon Musk a fresh $30 billion pay package as a 'good faith' payment tied to disputed compensation. However, shareholders may not be too enthused about the deal given Tesla’s 20% year-to-date stock price decline and continually sliding sales. 

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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The Apprentice: Trump Gets Surprise Fed Appointment 

Despite Donald Trump’s ongoing battle with the Federal Reserve, the US President has had few pathways to push the central bank to lower interest rates.

Following a surprise announcement last week, however, Trump is set to gain more sway over the Fed’s decisions. 

Last Friday, Fed governor Adriana Kugler declared her resignation as a member of the bank’s board. Kugler’s term was originally supposed to run through next year.

That vacancy gave Trump the chance to nominate a new governor – an opportunity he quickly took advantage of.

Amidst a shortlist of orthodox and heterodox candidates, Trump struck a middle road by selecting one of his chief economic advisers to fill the role.

Miran unlikely to spook markets

Trump’s battle with the Fed had raised concerns that he would select an unqualified loyalist as governor. However, that turned out not to be the case:

• Stephen Miran, Trump’s selection, is a Harvard PhD with extensive Wall Street experience.
• While Miran has expressed sharply critical views of the Fed, he is less disruptive than other potential picks may have been.
• However, Trump noted that Miran is expected to be a temporary selection, and that the White House would ‘continue to search for a permanent replacement.’

Depending on the speed of Miran’s appointment, he may be able to vote on the Fed’s next rate decision.

Given the internal dissent over Fed chair Powell’s hawkish stance, that may be enough to tip the board toward rate cuts.

Sidekick Takeaway: With dollar assets serving such an important role in the international financial system, the Fed’s monetary policy decisions have ramifications around the world. Trump’s choice should provide some temporary reassurance for global investors. 

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Long Live the King: OpenAI Seeks $500bn Valuation

Currently, SpaceX holds the crown for the world’s most valuable private company. The firm achieved a $350 billion valuation during its most recent funding round.

But reports this week indicate that a new king could be set to take the throne – OpenAI.

Early negotiations between the company and counterparties have explored a valuation of $500 billion. 

If finalised, that would represent a sharp jump from the company’s $300 billion price tag earlier this year.

The deal comes as OpenAI releases its long-awaited GPT-5 model this week. The new model is expected to be one of the most innovative LLMs on the market today.

OpenAI’s mega-valuation is impressive. But it could mask the growing challenges the company is facing in the AI arms race.

OpenAI faces surging competitors, corporate restructuring

Despite potentially being worth half a trillion dollars, OpenAI continues to deal with both internal and external pressures:

• OpenAI’s original non-profit status has created mounting frustration for the company, especially as partners like Microsoft negotiate over a potential restructuring. 
• Meanwhile, competitors like Meta and xAI continue to pour billions of dollars into LLM development to catch up with OpenAI’s models. 
• Finally, securing AI talent has grown exorbitantly expensive across Silicon Valley, with pay packages of over $100 million being offered to leading researchers. 

OpenAI’s record potential valuation shows that investors are still confident in the company’s future. 

But standing out in the crowded AI market is proving more challenging than ever.

Sidekick Takeaway: Notably, OpenAI’s $500 billion valuation is being discussed as part of a secondary sale for employee shares. One downside of OpenAI’s private status is that the company cannot offer employee liquidity as easily as public tech firms.

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Shifting Gears: Musk’s Pay Soars as Tesla Stalls 

According to the most recent figures, Elon Musk’s net worth exceeds an impressive $350 billion.

Following a controversial court decision, however, some of these billions have been stuck in legal limbo.

Last year, a Delaware court struck down a $56 billion pay package tied to Musk’s performance at Tesla. According to the judge, shareholders were not fully informed during the vote. 

Repeated efforts by Musk and Tesla to restore the pay package have since failed. Now, the company has taken matters into its own hands, issuing Musk a fresh $30 billion.

According to the firm’s board, the deal is a ‘good faith’ payment tied to the original disputed package.

Given Tesla’s recent performance, however, shareholders may wonder whether Musk’s price tag is justified.

Tesla slips on the year following Musk controversy

This year, Tesla shares have declined roughly 20%.

That follows slowing sales in key markets and the pending elimination of EV credits in the US.

What’s more, other parts of the Musk empire have faced headwinds as well.

This week, US lawmakers sent Musk a list of questions about his Boring Co., which risks turning into a $900 million dud. 

Still, it’s clear that the Tesla board thinks Musk’s continued attention is vital to the company’s success.

One of the preconditions for the $30 billion pay package is that Musk serve as CEO for at least another two years.

Sidekick Takeaway: Doubtless, Tesla hopes that making good on Musk’s disputed compensation will help keep the billionaire focused on business, rather than politics. Nonetheless, it’s worth asking whether that compensation is still justified when Musk’s Midas touch seems to be faltering.  

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Notices

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