Microsoft to cut 4,800 jobs in Xbox reset

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

1.

Hit reset: Microsoft will cut 4,800 jobs or about 2.1% of its global workforce, as it overhauls its struggling Xbox gaming division and divests up to five gaming studios. The gaming restructuring accounts for 3,200 of the cuts, with 1,600 employees laid off on Monday and the rest over the next 12 months, Xbox chief executive Asha Sharma wrote in a note to staff. “Our business today is not healthy,” Sharma wrote, adding Xbox was operating at margins three to 10 times lower than comparable businesses. The remaining cuts fall largely on Microsoft’s sales and commercial divisions. Chief people officer Amy Coleman told employees the eliminated roles were “not being replaced by AI", though she said AI is changing how work gets done. Microsoft has poured tens of billions into Xbox, including its Activision Blizzard acquisition, but has struggled to close the gap with Sony’s PlayStation and Nintendo. As part of the restructure, Compulsion Games and Double Fine Productions will return to private ownership under their founders, while Ninja Theory and Undead Labs will be sold to undisclosed buyers to continue work on current projects, Sharma said. Arkane Studios in Lyon, France, will begin consultations over its future. (Microsoft)(XBOX)(Reuters)(Bloomberg)

2.

Political football: FIFA’s decision to clear US striker Folarin Balogun to play against Belgium has become the World Cup’s biggest controversy and spilled into transatlantic politics, after Donald Trump confirmed he personally called FIFA president Gianni Infantino to request a review of the red-card ban. The reversal landed as the US president prepared to leave for a NATO summit in Turkey amid already fraying ties with European allies, whom he has accused of disloyalty over the war in Iran. European football body UEFA said FIFA had crossed a red line. Belgium’s foreign minister Maxime Prevot, a former referee, said if a phone call explained the decision it would undermine the most basic rules of sport. Infantino said FIFA’s judicial bodies operated independently and that he told Trump the case was subject to an ongoing legal process. FIFA kept the red card but suspended the ban for a one-year probationary period, citing Article 27 of its disciplinary code. Meanwhile FIFA rejected Belgium’s challenge to Balogun’s eligibility as inadmissible, saying it had no standing to appeal. Belgium said it had only asked FIFA to explain the original decision, but FIFA treated that request as an appeal, appointed a judge and gave Belgium only hours to respond before rejecting it. The Europeans said they still had no reasons for the decision to let Balogun play. (NYT)(Reuters)(FT)

3.

Memory bank: South Korea’s SK Hynix kicked off the formal marketing process for its US raising, as the chipmaker looks to capitalise on surging investor demand for the memory-chip sector. The company, the world’s top supplier of high-bandwidth memory, is seeking to sell American depositary receipts representing about 17.79 million common shares, which would be valued at about USD28 billion based on Friday’s closing price in Seoul. The offering, one of the biggest share sales in history, comes after the firm’s Seoul-traded stock rallied about 260% this year, propelling its market capitalisation above USD1 trillion. The offering has already drawn more orders than there are ADRs available, Bloomberg reported. Baillie Gifford, Coatue Management and Situational Awareness Partners have indicated an interest in buying as much as USD7 billion worth of ADRs, according to terms of the deal seen by the outlet. (SEC)(Bloomberg)

4.

Relief bounce: Technology stocks rallied overnight, halting a back-to-back selloff in chipmakers as investors bought companies linked to artificial intelligence ahead of what is expected to be a strong second-quarter earnings season. The Nasdaq Composite gained 1.12%, while the S&P 500 rose 0.72%. Broadcom jumped after it and Apple agreed to extend a deal through 2031 to develop and supply a range of custom chips. Nvidia said its road map was intact after a report on a server delay had jolted tech shares in Asia. The gains kick off a week that will test appetite for the AI trade, with Samsung expected to give a second-quarter update on Tuesday and SK Hynix’s USD28 billion US listing to follow. Microsoft fell after it said it was cutting 2.1% of its workforce. (Reuters)(WSJ)(Bloomberg)

5.

AI advice: Britain’s financial regulator was urged to consider whether large language models such as ChatGPT, Claude and Gemini should fall within its rules, because of their growing influence on consumer financial decisions. The recommendation came in a review of the impact of AI on financial services led by Financial Conduct Authority executive director Sheldon Mills. The review found that a fifth of UK adults, equivalent to 11 million people, were open to using tools such as OpenAI’s ChatGPT, Anthropic’s Claude and Google’s Gemini to make financial decisions such as on savings or borrowing, even though the models are not covered by regulation and there is no compensation if money is lost. Mills recommended the FCA consider within three to six months whether to secure and adapt the regulatory perimeter. He said personal recommendations by a chatbot could blur the boundary, as “continuous, adaptive recommendations” may start to look like regulated advice. Mills also warned that reliance on a handful of technology providers could create system-wide risks. (FCA)(Reuters)

6.

Custom fit: Broadcom said it will expand its partnership with Apple through 2031 to develop and supply new custom chips, cementing its role as a critical supplier to the iPhone maker. Under the agreement, the two companies will partner on ASIC silicon, short for application-specific integrated circuit, which will be found in multiple generations of Apple products, according to a Broadcom filing. The chips are increasingly vital to processing artificial intelligence-related tasks. The deal eases investor fears that Apple would replace Broadcom’s components with its own chips in the near term, and shows that despite efforts to design its own modems and processors, Apple needs Broadcom for complex custom silicon, Reuters noted. Apple accounts for about 20% of Broadcom’s annual revenue, according to analysts. It comes after the two companies had in 2023 entered a multibillion-dollar agreement for Broadcom to develop and manufacture 5G radio frequency components. (Broadcom)(Bloomberg)(Reuters)

7.

Cloud cover: Nvidia has drafted in neoclouds for a power battle with hyperscalers over AI supremacy, launching a new program designed to support the sub-sector in a move that may boost short term demand but has added to questions about circularity and durability. Through the so-called AI Compute Partnership, Nvidia will rent back unused GPUs from neocloud partners, which include Australia’s Firmus and Sharon AI, in exchange for a share of their revenue, providing a financial backstop if they fail to find AI developers to rent the chips. The program caps a watershed week in the US, in which SoftBank set up a dedicated neocloud subsidiary and the AI-focused hedge fund Situational Awareness disclosed a 19.9% position at the top of Sharon AI’s cap table. Elm Responsible Investments’ Jai Mirchandani, who holds Firmus shares for clients, sees it as the latest move in a power battle between Nvidia and hyperscalers such as Microsoft, Amazon and Alphabet now developing their own AI chips. “They’re moving into Nvidia’s market, so of course Nvidia’s got to respond and support neoclouds to increase competition in that space,” Mirchandani told Capital Brief. All this comes as local investors await the market debuts of Firmus and Sharon AI. (Capital Brief)

8.

Golden handcuffs: IREN’s co-CEOs have secured an equity package worth around USD800 million ($1.2 billion), igniting a public clash among shareholders over the Nasdaq-listed neocloud’s governance. The board issued nearly 18.2 million shares over the next four years to co-CEOs Dan and Will Roberts, though the stock cannot be traded for two years after vesting. Family office founder Neel Khokani told Capital Brief the pair could collectively be “awarding themselves roughly anywhere between USD120 million to USD150 million” annually, which he called “egregious”, noting it exceeds Nvidia CEO Jensen Huang’s FY26 pay of USD36.3 million. Short seller Jim Chanos said the package is about 17% of IREN’s estimated cumulative adjusted net income of USD4.7 billion over FY27 to FY30. Not everyone agreed. EMJ Capital’s Eric Jackson, who holds a long position, said the restricted stock is locked up through 2033 and represents alignment, not a payout machine. Nasdaq-listed IREN’s stock fell more than 10% on Thursday. (Capital Brief)