Amazon joins nuclear race with X-Energy bet

Good morning. Here's what happened overnight and what you need to know today.

1.

Nuclear bet: Amazon is joining the nuclear bandwagon with three new agreements to support the development of nuclear energy projects, including an investment in US-based X-energy as part of a USD500 million fundraising round that includes Citadel’s Ken Griffin and others. X-energy, a US nuclear developer backed by chemical giant Dow, is aiming to deploy small modular reactors (SMRs) for clean energy solutions. The goal is to bring more than 5 gigawatts of SMR energy online by 2039. “We need smart solutions that can help us meet growing energy demands while also addressing climate change,” Kevin Miller, Amazon’s VP of global data centres said. “[It’s] an important step in Amazon’s work to achieve our Climate Pledge commitment to be net-zero by 2040.” Other tech giants like Microsoft and Google have signed similar nuclear energy deals recently, driven by surging demand from AI data centres. The announcement propelled nuclear stocks higher. Meanwhile, Amazon also unveiled its first colour Kindle e-reader. (Capital Brief)

2.

Banking cycle: Morgan Stanley’s third-quarter profit surged 32% to USD3.19 billion ($4.78 billion), or USD1.88 per share, beating analyst expectations and wrapping up a solid earnings season for the largest US banks with a resurgence in dealmaking boosting earnings across the board. Morgan Stanley posted a 56% surge in investment banking revenue, driven by M&A activity and corporate debt issuance, outpacing growth at Goldman Sachs. MS’s archrival posted a 45% jump in profit the day before, helped by a 20% increase in investment banking fees. "We are seeing a rise in equity capital markets activity led by financial sponsors, not only for IPOs in the US but also in Europe," Morgan Stanley CFO Sharon Yeshaya told Reuters. "We are only getting started and capital markets are only going to get stronger,” she told Bloomberg, adding: “It’s good but it’s not the peak.” Morgan Stanley shares rose as much as 8.22% to USD121.45, the biggest intraday gain since November 2020. (Capital Brief)

3.

Price drop: UK inflation fell sharply to 1.7% in September, down from 2.2% in August, marking the lowest level in over three years, the country’s Office for National Statistics said. The decline, driven by lower airfares and petrol prices, surprised markets and heightened expectations for interest rate cuts from the Bank of England. The euro fell to a 2-month low as many now anticipate a 0.25% cut in November, with a potential second cut in December. Core inflation dropped to 3.2%, and the crucial services inflation fell to 4.9%, from 5.6% in August, its lowest level since May 2022. Analysts at AJ Bell and KPMG UK pointed to a "nailed on" November rate cut, while the Treasury welcomed the news as "welcome relief" for households. (Capital Brief)

4.

Sky high: United Airlines shares surged as much as 14.52% after the company forecast improved profitability in the airline industry as carriers have, since August, been reducing the excess capacity that had hurt earnings. “There’s an incredible amount of unprofitable capacity in the US marketplace and we’ve seen that exiting at a rapid pace starting in mid-August that continues into next year,” Chief Commercial Officer Andrew Nocella told analysts during the company’s 3Q earnings call on Wednesday (Thursday morning AEST), Bloomberg reported. “The changes we’ve seen so far are only actually the tip of the iceberg.” Prices for leisure flights have risen sharply, while business bookings have improved as more workers return to the office. United’s third-quarter profit exceeded Wall Street expectations, with an operating margin of 10.5%, the highest among major US airlines. (Bloomberg)

5.

BN-Sell Now?: Klarna has sold most of its UK buy now, pay later (BNPL) loan portfolio to US hedge fund Elliott, The Financial Times reported. The sale will free as much as £30 billion ($58.49 billion) for growth, the paper said. As part of the deal, Elliott reportedly bought a junior note in a vehicle holding the loans, boosting Klarna’s capital reserves as it eyes a US IPO. “By efficiently managing our assets, we can deploy shareholder equity more effectively,” CFO Niclas Neglen told the FT. Klarna will continue to underwrite and service the loans, the paper added. The Swedish fintech has been expanding aggressively, especially in the US, partnering with Apple and Uber Eats. (FT)

6.

Light chips: Photonic chip startup Lightmatter raised USD400 million ($600 million) in a Series D funding round led by T Rowe Price that values the Mountain View, California-based company at USD4.4 billion. Existing investors, including Fidelity and Alphabet’s GV, also participated, the company said in a statement. In an interview with Reuters, Lightmatter’s co-founder and CEO, Nick Harris, hinted at an IPO. Lightmatter plans to use the funds to manufacture and deploy its photonic chips, a type of computer chip that uses light (photons) instead of electrical signals (electrons) to process and transmit information. They are designed to boost AI cluster performance while reducing power consumption in datacentres. "We see a future where most of the high performance computing and AI chips very soon are going to be based on Lightmatter tech." (Capital Brief)

7.

Intel security: The Cybersecurity Association of China, a state-linked industry group, called for a security review of Intel's products sold in China, claiming they pose a threat to national security due to frequent vulnerabilities and allegations of backdoors linked to the US National Security Agency (NSA). The accusations, published in a long post on WeChat, could lead to an investigation by China's cyberspace regulator, the Cyberspace Administration of China. Revenues from China account for over a quarter of Intel's overall sales. The accusations come as tensions rise between the US and China over technology, and the US’ export controls on advanced AI chips. (WSJ)(Reuters)

8.

Boeing’s cash: Boeing is closing in on a plan to raise about USD15 billion through common stock and mandatory convertible bonds to support its finances, Reuters reported citing unnamed sources. The move comes as the company faces increasing financial pressure due to production issues and a strike that has halted output of its 737 Max aircraft. Boeing announced a shelf registration earlier this week, allowing it to raise up to USD25 billion through a mix of stock and debt. The timing of the capital raise remains uncertain, though some investors believe it may occur when Boeing reports its third-quarter earnings on 23 October. The company also secured a USD10 billion credit agreement with major lenders, including Bank of America and Citibank. Boeing’s investment-grade rating is at risk, with rating agencies warning of a potential downgrade to junk if it fails to stabilise its balance sheet. (Reuters)