Yesterday we quoted from the latest weekly JPMorgan Prime Brokerage report, “Signs US Shorting Getting Extreme…EU Bought, China Not, Credit / FI ETFs Turn Risk Off” (note available here), which laid out several reasons why a tech short-squeeze is looking increasingly likely; specifically, according to JPM Prime, hedge funds have been on a shorting stampede and high short interest stocks in the US have seen a 6 week period of persistent short additions: “The magnitude and duration of these short additions is on par with the largest we’ve seen in past years and the cumulative additions put shorts in these types of stocks back at multi-year highs.”

Today we compare JPM’s data with the latest Prime Brokerage data, this time from Goldman (full note available here), and find that hedge funds are indeed running for the hills, and shorting everything tech-related in the process.

According to GS Prime, overall Book Net leverage ended the week at the lowest level since Jun ’19, even as Fundamental L/S Net leverage is off the lows and currently around one-year average, with the recent rise driven in part by increased net exposure across China focused L/S managers.

Gross trading flow increased for a 2nd straight week, which resulted in modest net selling (-0.6 SDs) driven by short sales outpacing long buys ~2 to 1. Single Stocks saw the largest net selling in 7 weeks, while Macro Products were modestly net bought. North America was by far the most notionally net sold region, driven by short sales, while EM Asia and Europe were the most net bought, both driven by long buys. 8 of 11 global sectors were net sold on the week, led in notional terms by Info Tech, Health Care, Comm Svcs, and Energy, while Financials, Real Estate, and Materials were net bought.

Additionally, while US equities were net sold in each day last week, “driven mainly by short sales”, Chinese stocks were net bought in each of the past 13 days on the Prime book, pushing the weighting vs. MSCI World to +9.5%, the most O/W level since Oct ’20.  Some more details:

• In notional terms globally, US was by far the most net sold market while China was the most net bought on the Prime book this week, which points to continued regional rotation by hedge funds.
• Chinese stocks were net bought for a 3rd straight week (5 of the last 6) and saw the largest net buying since early December, driven entirely by long buys led by A-shares and to a lesser extent ADRs. Chinese stocks were net bought in each of the past 13 days – weighting vs. MSCI World now stands at +9.5%, the most O/W level since Oct ’20.
• In contrast, US equities were net sold in each of the past sessions, driven mainly by short sales. US weighting vs. MSCI World is at -4.9%, the most U/W level since Nov ’19.
• Positioning thru thematic baskets tells a similar story. Aggregate L/S ratio across SPX constituents now stands at 1.9, near 5-year lows. On the other hand, aggregate L/S ratio in China ADRs (GSXUCADR) is at 4.1, at 1-year highs and in the 67th percentile on a 5-year lookback.

Looking at just the former market darling, the TMT (Tech/Media) sector, here Goldman finds that the TMT long/short ratio fell to the lowest level on Goldman record (since 2016) amid the largest net selling in 9 months.

• Ahead of US NFP data, HFs heavily net sold TMT stocks which accounted for ~70% of the notional net selling across all US single stocks
• HFs have net sold TMT stocks in 10 of the past 12 weeks. This week’s notional net selling in US TMT is the largest in 9 months and ranks in the 98th percentile vs. the past 5 years, driven by long-and- short sales. Nearly all subsectors were net sold on the week (sans Entertainment), led in notional terms by IT Svcs, Semis & Semi Equip, and Software.
• The aggregate US Info Tech and TMT long/short ratios ended the week at 1.85 and 2.08, respectively, both at the lowest levels on Goldman’s record since early 2016. On a micro level, aggregate L/S ratios are either at or near 5-year lows across Semis & Semi Equip, Mega Caps (GSTMTMEG), Growth Software (GSCBSF8X), and Non-Profitable Tech (GSXUNPTC) stocks.
• US TMT over/under-weight vs. SPX ended the week at -4.6% U/W, near 5-year lows in the 1st percentile

In light of this shorting frenzy, it’s not a surprise that yesterday morning we saw a scramble among the HF community to cover crowded shorts in growth software: as Goldman notes, “our growth software basket (GSCBSF8X) squeezed +327bps.”

Finally, for those who missed it, here is JPMorgan explaining why it, too, is concerned about a powerful tech squeeze (more here):

• HFs Keep Shorting High SI stocks in the US…but will it persist?:  When looking at N. America gross flows, they rebounded from a -2z level to a +2.6z level in late Dec.  In particular, High SI stocks in the US have seen a ~6 week period of persistent short additions. The magnitude and duration of these short additions is on par with the largest we’ve seen in past years and the cumulative additions put shorts in these types of stocks back at multi-year highs  
• US Themes…Energy and Defensives Bought and Airlines flip:  From a sector perspective, HFs appeared to be buying the dip in Energy this past week, alongside buying Defensives vs. selling Financials (led by Banks), Comm Services, Cons Disc.  At a more granular level, there’s been a big reversal in Airlines from shorting to buying, though net exp remains low as shorts are still high.  In contrast, while there’s still a lot of negativity towards Tech in general, broader Software (JP1SFT) has seen some net buying over the past week and month (via longs and shorts).  This is NOT so much the case for Expensive Software (JP1XSFT) where flows remain nearly paired off

More in the full Goldman prime note available to professional subscribers.

Authored by Charles Kennedy via OilPrice.com,

A federal judge has dismissed a lawsuit brought to a California court last year by a group of individuals claiming the Trump administration and U.S. oil producers colluded with Russia and Saudi Arabia to keep oil and gasoline prices high.

Defendants named in the lawsuit included the American Petroleum Institute, Chevron, Exxon, Occidental Petroleum, Phillips 66, and Energy Transfer.

The plaintiffs—about two dozen of them—alleged that the defendants conspired with Saudi Arabia and Russia, with the help of the Trump administration, to keep the prices of oil and fuels high.

The suit cites events from 2020, when Russia and Saudi Arabia temporarily locked horns and flooded the market with oil, causing prices to plunge. The plaintiffs also cite a statement made by API chief Mike Sommers, who said that:

“What we have here is . . . a supply shock because of the decision by Russia and the Saudis to flood the market with oil. Ultimately the solution here is to work in a diplomatic way to make sure that oil markets are well balanced.”

The statement is taken by the plaintiffs to mean it was made at the instigation of the companies named as defendants and that it prompted API’s Sommers to seek consultation with the White House on remedying the matter.

The plaintiffs also targeted President Donald Trump for taking part in the conspiracy, citing a couple of tweets from April 2020, when the President first hailed lower fuel prices resulting from the price war between Russia and Saudi Arabia, only to do a U-turn a few days later and suggest that an end to that production conflict would be good news for everyone, especially the U.S. oil industry.

In his ruling, Judge Jeffrey White said, as quoted by Courthouse News Service, that “The allegations include specific foreign policy decisions allegedly made by the Trump administration in furtherance of the alleged conspiracy.”

“The court lacks jurisdiction over a complaint that ‘requires and inquiry into’ whether foreign nations entered an agreement with defendants at the behest of the President of the United States,” he also wrote.

A UN-backed scientific panel tasked with assessing the effects of the 1989 Montreal Protocol – an international agreement to phase out Ozone Depleting Substances – has found that the ozone layer continues to strengthen, and as a result, the earth will avoid 0.3 – 0.5°C of global warming by 2100.

Under the 1989 agreement, 99% of ozone-killing chemicals, including chlorofluorocarbons (CFCs) that once kept fridges cool, were banned due to a thinning of the ozone – also known as an ozone hole – above Antarctica.

In around four decades, the thinning of the Antarctic hole will be completely reversed, according to the report. The much smaller hole above the Arctic is expected to repair much sooner, DW reports.

By 2066, the Antarctic ozone hole is expected to reduce to its size in 1980, while the Arctic hole will do the same around 2045. Thinning around other areas of the globe should recover around 2040.

Beyond CFCs, ozone-eating chemicals including halons, methyl chloroform, carbon tetrachloride, hydrochlorofluorocarbons (HCFCs) and methyl bromide were once abundant in refrigerators, air conditioners, aerosols, solvents and pesticides. 

These compounds attack ozone by releasing chlorine and bromine atoms that degrade ozone molecules in the stratosphere.

Since the substances were banned, declining concentrations of chlorine and bromine have helped to limit human exposure to harmful UV rays from the sun that can cause skin cancer, cataracts and suppress the immune system. -DW

“Thanks to a global agreement, humanity has averted a major health catastrophe due to ultraviolet radiation pouring through a massive hole in the ozone layer,” said UN Secretary-General Antonio Guterres last September 16, World Ozone Day. 

Impacts on climate change?

Meanwhile, in a fringe benefit that won’t likely silence environmentalists, the panel affirmed the treaty’s positive impact on the climate.

“By protecting plants from ultraviolet radiation, allowing them to live and store carbon, it has avoided up to an extra 1°C of global warming,” said UN head Antonio Guterres, who praised the protocol’s impact on the ozone and the climate, adding that it was a “universally ratified and decisively implemented” model for global action.

“Only by mirroring the cooperation and speedy action of the Montreal Protocol elsewhere can we stop the carbon pollution that is dangerously heating our world,” Guiterres continued. “The Montreal Protocol is a success because, when science discovered the threat we all faced, Governments and their partners acted.”

Authored by Simon White, Bloomberg macro strategist,

The stock market will remain stuck in a bear market until new sector leadership is clearly established.

The new year has brought with it some optimism, with a seemingly very upbeat take on last week’s jobs data – a belief that somehow recession will be averted and the Fed will cut rates. While this is akin to betting a coin is going to land on its edge, there is a more structural headwind to stocks: changing leadership.

The tech sector drove the US stock market through the last cycle. Its exceptional outperformance could be explained on the premium investors were willing to pay for FAANG-like stocks.

However, that exceptionalism has seemingly been jettisoned, with Tesla down 70% from its highs, Meta down 60%, and Amazon and Nvidia over 50%. Apple and Microsoft are relatively unscathed, but even they are not immune to much steeper falls.

Tech remains the largest S&P 500 sector, but its weight is dropping fast, and other sectors’ weights are rising.

The world is changing and stock leadership eventually must reflect those changes. We are in state of flux, and it is not clear yet how much tech will be “humbled,” and who the new leadership will be, but one clear beneficiary in a more autarkic world with rising geopolitical tensions is energy.

We need only go back to 2008 to reach a time when tech and energy had a similar market cap. In the ensuing go-go years of all things new and shiny and tech, energy was dismissed, and technology grew to be the largest sector, accounting for almost 30% of the S&P.

The market-weight gap between tech and energy has started to narrow and could go much further in a resource-constrained world where tech valuations are prone to overshooting to the downside, which would keep pressure on the headline index.

Investors will also continue to adapt to an inflationary world where higher-duration assets will fare less well, and if one is to own them, one needs to be sufficiently compensated. Tech is one of the highest-duration sectors, but its long-term expected EPS growth is inferior to energy, which also has a very low duration, and should fare better with elevated inflation.

Other sectors have lower long-term expected EPS growth than tech, but have lower duration to compensate.

Until the market has an assertive leader again, it is unlikely stocks can embark on a new bull market.

Following the Monday passage of the House rules package, the next order of business will be “populating” the chamber’s committees.

And after Democrats weaponized Nancy Pelosi’s gavel over the last two years – booting GOP Reps. Marjorie Taylor Greene and Paul Gosar off committees over QAnon wrongthink and posting memes – Republicans are set to return the favor, with McCarthy expected to boot Reps. Adam Schiff, Eric Swalwell and Ilhan Omar from their committees.

Democrats are expected to name Schiff and Swalwell to the Intelligence Committee, and place Omar on Foreign Affairs, according to Punchbowl News, citing multiple Democratic leadership sources.

“Swalwell can’t get a security clearance in the private sector. I’m not going to give him a government security clearance,” newly minted House Speaker Kevin McCarthy told Punchbowl. “Schiff has lied too many times to the American public. He should not be on Intel.”

“I made all [three] cases before. It’s not like it’s anything new… Remember, this is what Nancy Pelosi, this is the type of Congress she wanted to have,” McCarthy added.

Swalwell notably banged an alleged Chinese spy who helped him fundraise in 2014. After an FBI briefing on the woman, the top Democrat said he cut all ties with the woman – Christine Fang, also known as Fang Fang.

In 2020 when the news broke, McCarthy called for Swalwell to be “removed from Congress.”

.@GOPLeader Kevin McCarthy on China planting a spy in Congress: @RepSwalwell should be “removed from Congress” [via @IngrahamAngle] pic.twitter.com/2m9c5tojcJ

— Tom Elliott (@tomselliott) December 9, 2020

Schiff, of course, vehemently peddled the Russiagate hoax and played a large role in both impeachments of former President Trump (and claimed there was ‘more than circumstantial’ evidence that Trump colluded with Russia).

When asked about losing his seat, Schiff told Punchbowl that McCarthy “will adhere to the wishes of Marjorie Taylor Greene.”

And the Somali-born Omar has made anti-Semitic comments and probably married her brother in an immigration scam, according to the Daily Mail.

More via Punchbowl News:

Also: Texas GOP Rep. Jodey Arrington is the new Budget Committee chair. Arrington beat Reps. Buddy Carter (Ga.) and Lloyd Smucker (Pa.) to win the gavel in just his fourth term in the House.

Recap: Missouri Rep. Jason Smith is the new chair of the Ways and Means Committee. He beat Reps. Vern Buchanan (Fla.) and Adrian Smith (Neb.). North Carolina Rep. Virginia Foxx won another term as chair of the Education and the Workforce Committee. Check out our full coverage in Monday’s Midday and PM editions.

Isn’t this fun?

Authored by Chris Menahan via Information Liberation,

The hero customer who shot and killed an armed robber at a Houston taco joint last week has been ordered to face a grand jury by District Attorney Kim Ogg, the Soros-funded prosecutor who appears to have let the career criminal he put down out on bond.

WATCH:

From KTRK, “Grand jury will decide fate of ‘hero’ customer who shot and killed robber at taqueria, HPD says”:

A grand jury will decide whether an armed taqueria customer, who shot and killed a robber last week in southwest Houston and is now being hailed a hero, will be criminally charged.

Investigators said the 46-year-old customer, who police have not identified because he’s not under arrest, turned himself in and is cooperating with detectives.

Fortunately, our hero hired an attorney to defend himself and exercised his right to remain silent.

His lawyer put out the following statement:

“My client, who wishes to remain anonymous, was dining with a friend at El Ranchito Taqueria and as it has been seen on video, a robbery suspect entered the restaurant, and pointed a weapon at my client and the other customers demanding money. In fear of his life and his friend’s life my client acted to protect everyone in the restaurant.

In Texas, a shooting is justified in self-defense, defense of others and in defense of property. The customer has met with the Harris County District Attorney’s Office and Investigators with HPD homicide. He fully intends to continue cooperating with the ongoing investigation.

When the investigation is complete, this case will be presented to a Grand Jury. We are confident that a Grand Jury will conclude that the shooting was justified under Texas Law. This event has been very traumatic, taking a human life is something he does not take lightly and will burden him for the rest of his life. For that reason, he wishes to remain anonymous. Due to the overwhelming coverage, we ask the media and the public to respect his privacy.”

The thug he shot was a career criminal who should have been locked up in prison, KTRK reports:

On Monday, the medical examiner identified 30-year-old Eric Eugene Washington as the robbery suspect who was killed.

Records show Washington had an extensive criminal history and was out on bond during the would-be robbery.

Records show that in 2015, Washington was convicted on a lesser charge of aggravated robbery with a deadly weapon and sentenced to 15 years in prison in connection to the shooting death of 62-year-old Hamid Waraich, a cell phone store owner. Houston police also charged two other men.

According to records, Washington was released on parole in 2021 and charged with assaulting his girlfriend in December 2022.

Waraich had a fiancée and three sons who reacted strongly when contacted by ABC13.

“If the guy who sopped Eric was around 10 years ago, maybe I’d still have my dad,” Aman Waraich, the son of the store clerk that was killed, said.

“Eric was an evil criminal that took joy in harassing and robbing innocent families. The individual at the taqueria is a true hero!” Sean Waraich, the victim’s other son, added. “He did the right thing in stopping the robber and in protecting the community from a dangerous perpetrator.”

WATCH:

Our hero never would have even been put in this position if Kim Ogg actually locked criminals up rather than kneel before them.

This is a clear-cut case of self-defense but you never know how a jury will rule in the Black Lives Matter era.

Shares of Broadcom will be on watch heading into today’s cash session after news broke Monday that Apple would be taking steps to “ease its dependence” on the chipmaker by late 2024.

Apple is targeting replacing a Broadcom chip from its devices in the same fashion it phased out Intel with custom silicon, according to AppleInsider this week. The report notes that Apple will be releasing its first modem by the end of 2024/early 2025, which will result in dropping a Broadcom component. 

Broadcom shares slipped more than 1% toward the end of the day Monday on the news and are down another 1% in pre-market trading on Tuesday.

Apple is Broadcom’s largest customer, the report notes, and accounts for about 20% of the company’s revenue, amounting to about $7 billion last year. It has been “working to limit its reliance on other chipmakers,” reporting by Yahoo Finance said on Monday. 

Stacy Rasgon, an analyst with financial services firm AB Bernstein predicted that the move could cost Broadcom $1 billion to $1.5 billion in revenue. Broadcom’s radio frequency chips would likely not be replaced in the short-term, Rasgon said, because they are too complex to make. 

AppleInsider noted that Broadcom CEO Hock Tan had mentioned this potential situation on a conference call in December. He said “that while Apple would be reducing its dependence on Broadcom, the company will continue to work with Apple”. 

Tan said: “We believe we have the best technology and delivering value to our customers. There’s no reason to find something else where you’re not the best.”

Qualcomm has also been on watch as Apple is reportedly looking to swap out its cellular modem chips with its own on the same timeframe. 

By Ven Ram, Bloomberg markets live reporter and commentator

Take a loaf of hope, knead it with oodles of optimism, add a generous sprinkling of speculation and definitely avoid even a hint of reality. Bake the concoction carefully, and what do you get? The current state of mind of investors positioning for runaway gains in US stocks.

In January last year, I posited that the S&P 500 will find its equilibrium band for 2022 between 3,900 and 4,130. As it turned out, the average for the year was 4,098. Despite Friday’s dizzying rally in stocks, the S&P is still struggling to breach that band.

At the heart of stocks’ recent optimism is speculation that the Federal Reserve will pivot enough to cut rates this year — a scenario that is largely predicated on inflation and the US economy alike crumbling like a soggy winter cookie. While the macroeconomic backdrop may indeed sour to some extent, it seems premature to conclude that price pressures will wane sufficiently enough to converge to the Fed’s target.

A headline inflation rate of, say, 4%-6% will have the press running breathless headlines about cooling price pressures, but the Fed will still see those rates as unacceptable in reference to where it wants that number to be — a message that Chair Jerome Powell has reiterated umpteen times, only for the markets to gloss over that piece of guidance on an equal number of occasions.

As a basket, the S&P 500 now offers an earnings yield that is about 225 basis points more than long-dated Treasury yields, way below an average of some 375 basis points that has prevailed since the global financial crisis. If anything, the Nasdaq 100 offers a paltry pick-up of 120 basis points.

If you believe in mean reversion, you have got to assume that either stock prices will have to tumble a fair bit from here or earnings need to skyrocket. Even assuming that the latter is what happens, what kind of economic scenario would cause inflation to slow and simultaneously spur earnings to shoot up to the stratosphere? Such a plot would no doubt require an ingenuous recipe, but one you can’t cook up in reality.

At 9am ET, Powell will be speaking at a Riksbank panel on “central bank independence and the mandate – evolving views”, and accordingly, some believe that there is a risk that he disappoints those who are looking for fresh insight on the current monetary policy outlook. The stream is below (and also here, scroll down on the page to view the video).

Stocks slumped ahead of Powell’s speech yesterday on fears that Fed chair will talk stocks down as financial conditions have once again eased notably since the FOMC even though Powell explicitly warned that “unwarranted easing is a problem.”

Courtesy of Newsquawk, here’s what to look for in Powell’s comments:

“PEAK INFLATION” HAS BEEN DISCOUNTED: The start of 2023 has been characterized by data that continues to allude to cooling inflation pressures combined with softening activity data that alludes to deteriorating growth dynamics Judging by traders’ reactions to last week’s ISM reports {weak activity in both manufacturing and services) and non-farm payrolls {wage growth cooling), there is a feeling that the ‘peak inflation’ narrative has now been fully discounted and traders are increasingly fretting about the challenging growth situation These dynamics will again be put to the test this week with the release of various inflation reports out of the US. Ahead of Thursday’s December US CPI data, the NY Fed’s survey of consumer inflation expectations for that month was mixed with the lyr ahead expectation easing to 5% from 5.2%. expectations for 3yrs ahead was steady at 3%. while the 5yr rose to 2 4% from 2.3%. Participants will also be eyeing the Preliminary January University of Michigan survey on Friday particularly the inflation expectations

WHEN WILL FED PIVOT FOCUS ONTO GROWTH: If these inflation data continue to show a cooling in price pressures, traders will gain confidence in the notion that the Federal Reserve will need to pivot its focus to support the growth side of the equation, which may involve easing up on some of its hawkishness Fed Chair Powell’s remarks on Tuesday will also be eyed in this context although the Fed is expected to continue its hawkish messaging on inflation until they see substantial evidence that inflation has indeed peaked and that its price target is back within sight.

TERMINAL RATE: Despite the Fed’s December Staff Economic Projections penciling in a peak Federal Funds Rate of 5 1% {5.00-5 25% FFR target), and warnings by some officials that if inflation doesn’t behave then 5.4% could also be seen (5.25-5.50%). money markets continue to see the peak at between 4 75-5.00 from March onwards, and expects rates will stay there until November when markets begin to price rate cuts Fed officials – burned by their incorrect pandemic view that inflation was transitory – are trying to re-establish their inflation-targeting credentials so are unlikely to relent on their hawkishness any time soon, out of fear of causing credibility issues. Analysts note that, historically, the Fed has stayed at terminal for between 3-15 months, with the average being around 6.5 months

LAYING THE GROUNDWORK FOR A PIVOT:

While the Fed may not explicitly pivot its policy until it has seen substantial evidence that inflation has peaked there are some elements that officials could introduce that suggests that its focus is moving.

“SUBSTANTIAL PROGRESS”: At the December FOMC. Powell suggested that the Fed wants to see “substantially more evidence” that gives confidence that inflation is on a sustained downward path and while inflation has been cooling, at around 6% it is still three times the Fed s 2% inflation target.

“ONGOING” RATE HIKES: Although the Fed s December meeting statement was little changed it still ‘anticipates that ongoing increases in the target range will be appropriate’ : there were some outside expectations for the Fed to tweak this guidance in December to something to the effect that it sees some further’ rate hikes ahead. Accordingly, if officials begin using language like this, it might hint that the last rate hike of the cycle is in sight.

GROWTH CONCERNS: Many consider the ISM’s reports on business to be a more forward-looking indicator than releases like the jobs report Last week, the ISM data showed that the headline and new orders components for both the manufacturing and services sectors were sub-50 in contractionary territory. Analysts note that, historically, when this happens the Fed is usually easing policy to support the economy However. Fed officials’ base case, for now. is only a growth slowdown, and many are not predicting a recession, instead citing the labor market strength. If officials do begin expressing concerns about slowing growth, and backing away from their previous baseline views, traders might use that as part of the case that shows the Fed is realigning its focus onto growth

FINANCIAL CONDITIONS: Some argue that the Fed’s concerns about loosening financial conditions (read lower yields, higher stock prices) is second only to inflation and currently ranks above growth concerns Powell in December said that the Fed’s tightening had engineered tighter financial conditions but added that these conditions fluctuate in the short term in response to many factors, but it was important that over time these conditions reflect the policy restraint that the central bank is putting in place to return inflation back to the 2% The latest minutes also revealed that participants were wary of an “unwarranted” easing in financial conditions. If Powell continues to express concerns about easing financial conditions, it would not be a sign that he was preparing us for a policy pivot (and vice versa).

In recent weeks, viral artificial intelligence bot ChatGPT has lit up the internet, gathering millions of users as its imitation of human conversation sparked speculation about its potential to supplant professional writers and even threaten Google’s core search business (Google’s management even issued a “code red” over the potential rival, the  The New York Times reported in December).

OpenAI, the organization behind it, was co-founded by Elon Musk and Silicon Valley investor Sam Altman in 2015, and makes money by charging developers to license its technology.

the first day of openai, seven years ago today pic.twitter.com/4kQUQtgb6t

— Sam Altman (@sama) January 4, 2023

And now, Semafor reports that Microsoft is in discussions to invest as much as $10 billion in OpenAI, valuing the company at $29 billion.

As part of the current deal Microsoft is negotiating, it’s proposing to get 75% of OpenAI’s profits until it gets it recovers its investment, after which Microsoft’s aims to get 49% stake in the company, per the media outlet.

Other investors are expected to own another 49% of the company, while OpenAI’s nonprofit parent would hold the remaining stake, per Semafor.

The Wall Street Journal reported last Thursday that OpenAI was in talks to sell existing shares of the company in a tender offer that would value the firm at $29 billion (the company is currently valued around $20 billion).

Venture capital firms including Thrive Capital and Founders Funds were in talks to invest at least $300 million in the share sales, according to the Journal.

Bloomberg reports that Microsoft has previously invested about $1 billion in OpenAI.

It’s also working to add ChatGPT to its Bing search engine, seeking an edge on Alphabet’s dominant search offering.

The bot is capable of responding to queries in a natural and humanlike manner, carrying on a conversation and answering follow-up questions, unlike the basic set of links that a Google search provides.

So, is Microsoft about to ‘bail out’ Musk’s Twitter bridge loan?