Indiana State Senator or Local Commentator (3:20)

We have the big investment coming, but if they had to get 50 different approvals from 50 different states, you could forget it because it's not possible to do, Especially if you have some hostile all you need is one hostile actor and you wouldn't be able to do it.

Luke Vargas (3:33)

Democrats and some of Trump's backers, including Steve Bannon and Republican Senator Josh Hawley, have criticized the efforts to rein in state AI laws, characterizing them as a giveaway to tech companies and saying they would undermine state efforts to protect consumers. Well, Speaking of the AI race at the corporate level, OpenAI is rolling out a new version of ChatGPT as it tries to fend off mounting competition from Google and anthropic. OpenAI said the new model, dubbed GPT 5.2, was better at math Math, science and coding skills seen as critical if businesses are to see returns on their AI investments, Journal tech reporter Sam schechner told me. OpenAI needs to act fast to hold onto its early lead in AI adoption.

Sam Schechner (4:18)

OpenAI has seen a lot of challenge lately from competitors. You know the chatbot race, which it ran away with early on and quickly and rose to 800 million users every week for ChatGPT is now super competitive with this new model. OpenAI is really targeting business users. We're talking about all the kinds of white collar office work that people do on their computers. And actually OpenAI built its own metric for measuring how well an AI model does at these they broke out economically valuable office tasks and they actually rated this model against that. And so, I mean take it with a grain of salt, it's their own metric, but they say that it performs far better than just even its previous version from a couple months ago.

Luke Vargas (5:06)

The update to ChatGPT comes as OpenAI races to release a new model by the end of January that can compete with Google's latest Gemini release. Under the so called code red efforts, OpenAI is hoping to make ChatGPT both more warm and personable for users and improve its speed and video generation capabilities. And crypto tycoon Do Kwon has been sentenced to 15 years in prison on fraud charges related to the $40 billion crash. His TerraUSD and Luna coins back in 2022. Kwon pleaded guilty to two charges back in August in exchange for federal prosecutors dropping seven other counts against him. In their closing arguments, prosecutors said that Kwon was driven by greed and arrogance and had lied repeatedly about the utility and safety of his products. At its peak in the spring of 2022, prosecutors said the total market value of all the cryptocurrencies associated with Kwon's Terraform Labs topped the $50 billion, with their failures hurting hundreds of thousands of investors worldwide. Coming up, Animal spirits are back on Wall street, fueling a surge in massive deals. Plus, Rivian looks to take on Tesla with self driving cars. We've got those stories and more after the break.

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Luke Vargas (7:00)

The megadeal is back. And so, it seems, is Wall Street's immense appetite for debt. Paramount's hostile bid for war, Warner Brothers discovery, as well as other recent debt laden transactions have all been possible thanks to a spike in lending. And as Journal credit reporter Matt Wirtz writes, that is making some investors nervous. Matt, before we get too into the weeds here, just talk us through these recent deals we've been seeing, especially those that have not just been cash offers and in fact a number at least seem to have been very dependent actually on loans.

Matt Wirtz (7:35)

Right? So what we are seeing is a boom in very large, what we call megadeals, which technically is over 10 billion in value, but we are seeing over 30 billion in value, over 40 billion in value, over 50 billion in value. So these are very big leveraged buyouts. They involve a lot of debt. And what the debt does is first of all allows the buyer to make a larger offer, which is important in deals like Warner, where there's a bidding war going on. And the other thing it does is it potentially improves the return on their own equity investments. And we're seeing really just a boom in the last two to three months. We're seeing the bidding war on Warner between Paramount and Netflix. Of course, we saw Silver Lake's bid for Electronic Arts, the video game studio that involved a big check from Saudi Arabia's sovereign wealth fund. We saw a massive deal BlackRock and a couple of other partners made for aligned data centers. So we are really in the most recent heyday, the biggest deal boom we've seen, I would say, since 2015.

Luke Vargas (8:47)

And so, Matt, why is this occurring now? I mean, going into 2025, we had seen several years in a row of declining M and A megadeals.

Matt Wirtz (8:55)

Yeah, there's a couple of things. Like, one is obviously the Trump administration, right. These large deals, they often involve very large companies coming together. There are antitrust concerns with that. And the Trump administration has indicated that they're going to be a little bit more play along with those kind of deals. Another thing is that private equity, which tends to be the fuel to the fire of these cyclical trends, they've been building up a lot of what they call dry powder. They just have a lot of money to spend. The other thing that we're seeing, and this involves firms like Silver Lake, is that we just have a lot of easy debt available again. Now what we've. What's similar to past cycles, is the banks are lending again. They've had big profits. M and A is coming back. M and A drives a lot of fees for banks, and they want to be involved.

Luke Vargas (9:42)

All right, Matt, and finally, what is the outlook here? Is this trend going to continue?

Matt Wirtz (9:47)

I like to think of this as kind of like the circle of life of Wall street and capital markets, where right now it's like the rainy season just happened on the Serengeti. There's like all the. All the grasses are growing and like the population is booming and everyone's feasting. And there's a lot of things that are contributing to that. And that leads to a lot of transactions, some of which do very well, but some of which, particularly those that have a lot of debt, if the market turns. And so like if we go into a drought, for example, those deals get harder to both execute. So we could see some hiccups because these deals take a year or more to transact. And then they could also not perform as expected once they're done because they're being transacted in a market where everyone has very rosy expectations. And if the economy, for example, goes into a downturn or a sector has a change like a new technology, like artificial intelligence, things might not work out as planned.

Luke Vargas (10:45)

Some indigestion after that feast on the Serengeti. To push your analogy, maybe a bit too far.

Matt Wirtz (10:51)

I love it. Yeah. Some full bellies and maybe some tummy aches. Yeah.

Luke Vargas (10:55)

I've been speaking to Wall Street Journal credit reporter Matt Wirtz. Matt, thanks so much for the update.

Matt Wirtz (10:59)

Yeah, thank you.

Luke Vargas (11:04)

Let's turn to the UK now, where an interest rate cut is increasingly on the cards. After data this morning showed the economy unexpectedly shrank before last month's budget. A rate cut would be welcome news for property investors. With the UK Housing market having stalled this year. Yesterday, a closely watched survey from the the Royal Institution of Chartered Surveyors said that a pickup isn't expected until the spring selling season with inflation and high interest rates hurting affordability. Meanwhile, shares in Lululemon have soared off hours after the athletic gear maker announced that CEO Calvin McDonald will be stepping down in January. Growing competition meant net revenue in the Americas fell 2% last quarter. With McDonald facing pressure from Lululemon's founder to reverse its, quote, loss of cool and beep beep. Tesla EV maker Rivian is beefing up its autonomous driving features to stay relevant in a tough market for its trucks and SUVs. Chief executive R.J. scaringe said that later this month, Rivian cars on 3.5 million miles of North American roads would be able to drive hands free, up from just 135,000 miles of highway today. And more changes are coming next year.

Indiana State Senator or Local Commentator (12:18)

Starting in 2026, we'll begin rolling out point to point capabilities in which the vehicle can drive address to address. What that means is you can get into the vehicle at your house, plug in the address to where you're going and the vehicle will completely drive you there.

Luke Vargas (12:32)

With EV buyers no longer eligible for large federal tax credits, analysts at Morgan Stanley say the company needs to keep pace with Tesla's self driving product, which has been on the roads for several years. Rivian shares Yesterday closed down 6%. And that's it for what's news for this Friday morning. Today's show was produced by Hattie Moyer and Daniel Bock. Our supervising producer is Sandra Kilhoff and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. Otherwise, have a great weekend and thanks for listening.

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Sam Schechner (13:35)

Look.