Good Morning! US stocks suffered their sharpest sell-off in over a year after stronger-than-expected jobs data dampened rate-cut hopes. Google will pay SpaceX $920 million a month for compute capacity at xAI data centers. And Ares is owed $547 million after the collapse of Textor's Eagle Football.

Point72 is weighing paying other hedge funds to see their trade ideas. Americans on GLP-1s are overwhelming retailers with their nonstop returns. And Anthropic warns that AI will soon be able to improve itself without human intervention.

Plus: JPMorgan removed its sell rating on Tesla after years, calling it at the "forefront of physical AI," Bitcoin is wallowing 50% below its all-time high, and 3 ways to appear smarter than you are.

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SQUEEZ OF THE DAY

VCs Want Hardware Now

For two decades, the venture playbook was find a smart founder, give them a laptop and an AWS account, and watch them build a SaaS company with low overhead, fast scaling, and beautiful margins. That model is getting stress-tested in real time. AI can now write software in seconds, and the old “business software is the safest bet in venture” trade suddenly looks like the most obvious displacement target.

So Silicon Valley is moving down the stack. The new hot trade is not another workflow app. It is robots, chips, data centers, quantum computing, space infrastructure, and the hardware needed to make AI useful in the real world.

VC investment in global robotics and physical AI grew from $4.2 billion in 2019 to $26 billion in 2025, and companies in those sectors have already raised more than $23 billion through May. Advanced computing startups, including chips, data centers, and quantum, have raised more than $20 billion so far this year.

Even Paradigm, the crypto fund that made its name backing web3, just made its first manufacturing investment, backing a custom sheet metal company that makes parts for robots and data centers. Matt Huang, Paradigm’s co-founder, said the physical world is “much, much larger than the software world.” That is a pretty telling line from a firm built on digital assets. The frontier moved from software to hardware, and the money is following.

The bull case is enormous. SpaceX’s IPO prospectus estimated its total addressable market at $28.5 trillion. Jensen Huang has called physical AI the tech industry’s first shot at a $50 trillion industry. Jeff Bezos is backing Project Prometheus to build AI systems that understand the physical world. Travis Kalanick’s Atoms is focused on robotics for food, mining, and transportation. Figure AI, Physical Intelligence, and Skild AI have raised billions despite limited revenue because investors are betting the next great AI companies will not just generate text. They will move atoms.

Takeaway: The venture capital trade is shifting from apps to infrastructure. Software is still powerful, but AI is making it easier to build and harder to defend. Hardware is messy, expensive, and brutally difficult, which is exactly why it may become valuable again. You cannot fake a factory, ship a robot with a Figma demo, or build a chip company on vibes. The next wave of VC winners may be the firms that can actually underwrite hardware before everyone else realizes software was the easy part.

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HEADLINES

Top Reads

• US adds 172,000 jobs in May, crushing expectations as unemployment holds at 4.3% (CNBC)

• Google to pay SpaceX $920 million a month for compute capacity at xAI data centers (CNBC)

• Ares owed $547 million after collapse of Textor's Eagle Football (BB)

• Point72 weighs paying other hedge funds to see their trade ideas (BB)

• Americans on GLP-1s are overwhelming retailers with their nonstop returns (WSJ)

• Anthropic warns that AI will soon be able to improve itself without human intervention (CNN)

• JPMorgan removes sell rating on Tesla after years, says it's at the 'forefront of physical AI' (CNBC)

• Bitcoin caps a dismal week as price wallows 50% below its all-time high (CNBC)

• Goldman CEO says AI may halt steep rise in banks' engineer ranks (BB)

• Family offices bet on sports, from pickleball leagues to smart soccer balls (CNBC)

• JPMorgan, Citi and big banks plan new tokenized deposit system to answer crypto (WSJ)

• Blackstone's AirTrunk to spend $30 billion on India data centers (BB)

• Buyout and debt funds struggle to spend $632 billion stockpile (BB)

• Institutional investors return to retail in a really big way (CNBC)

• Morgan Stanley sees SpaceX's revenue reaching $3.4 trillion in 2040 (WSJ)

• The 'anything goes' era in private credit lending is coming to an end (WSJ)

• Hillhouse nears stake purchase in Goldman-backed LRQA (BB)

• Big banks' gloves come off in their fight with crypto (CNN)

• The acquisitions Jamie Dimon could be eyeing after $20B war chest reveal (NY Post)

• Warren Equity Partners banks $2.8 billion for infrastructure services bets (WSJ)

• Fannie, Freddie whipsaw as Trump floats trillion-dollar value (BB)

CAPITAL PULSE

Markets Rundown

Market Update

• Markets lower: Stocks and bonds sold off after stronger-than-expected labor data pushed yields higher and reduced rate-cut expectations.

• Tech weakness: The Nasdaq 100 fell roughly 4%, while semiconductors dropped nearly 9% amid continued AI-related profit taking.

• Defensive leadership: Consumer staples and other defensive sectors outperformed as investors rotated away from growth.

• Rates higher: The 10-year Treasury yield climbed to 4.54% following the jobs report.

• Oil lower: WTI crude fell roughly 3% despite ongoing geopolitical uncertainty.

• Weekly streak ends: The S&P 500’s nine-week winning streak came to an end.

Economic Data Highlights

• Payroll growth: The economy added 172,000 jobs in May, well above expectations for 90,000.

• Unemployment steady: The unemployment rate held at 4.3%, while prior months were revised higher by 93,000 jobs combined.

• Wage growth: Average hourly earnings rose 3.4%, easing from the prior month and helping reduce wage-inflation concerns.

• Fed outlook: Markets increasingly expect policymakers to maintain a higher-for-longer stance and are beginning to price in potential hikes.

Sector Trends

• Tech rotation: Semiconductor weakness accelerated after elevated AI expectations collided with softer outlooks.

• Broader participation: Recent strength in the Dow and equal-weight indexes suggests market leadership continues broadening beyond mega-cap tech.

• Bull market support: Rotation toward financials, defensives, and cyclicals could improve market durability if earnings remain resilient.

Movers & Shakers

• (+) Chipotle ($CMG) +4% after JPMorgan upgraded to Overweight, ahead of a summer same-store sales recovery.

• (–) Lululemon ($LULU) -9% because the firm cut its full-year revenue outlook to $11.0–$11.15B from $11.35–$11.5B.

• (–) Micron ($MU) -13% after a blowout May jobs report (172K vs. 80K expected) sparked broad tech selling on Fed rate-hike fears.

Prediction Markets

• Knicks’ game 3 is tonight!

• Trade on real-world events with Kalshi. Use code OWS to get a $10 bonus when you trade $10.

Private Dealmaking

• Supabase, a provider of backend tools for building AI apps, raised $500 million 

• Helion, a nuclear fusion startup, raised $465 million 

• Generalist, an SF-based robotics startup, raised $400 million 

• Contraline, a developer of male contraceptives, raised $92.5 million

• CereVasc, a maker of medical devices for neurological diseases, raised $85 million

• Endra, a Stockholm-based industrial design startup, raised $50 million

For more PE, VC & M&A deals, subscribe to our Buysiders newsletter.

BOOK OF THE DAY

Mastering Connections

Description:
A practical communication guide from Joe Navarro focused on decoding nonverbal signals and building stronger interpersonal relationships. Drawing on decades of experience in behavioral observation and human psychology, the book explores how body language, facial expressions, and subtle cues shape trust, influence, and connection. It provides actionable frameworks for improving communication, reading situations more accurately, and creating more authentic relationships in both personal and professional settings.

Book Length: 288 pages
Release Date: September 16, 2025

Ideal For:
Professionals, leaders, and anyone looking to improve communication, strengthen relationships, and better understand the hidden signals that shape human interactions.

The strongest connections are built not only through words but through the signals we send without speaking.

DAILY VISUAL

Corporate America Has Never Been This Profitable

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DAILY ACUMEN

Below Water

In 1992, a 28-year-old named Nick Leeson was the golden boy of Barings, Britain's oldest merchant bank. His desk in Singapore generated ten percent of the bank's worldwide profit. Then one of his traders hit buy instead of sell, a mistake that cost £20,000. To bury it, Leeson opened a secret account and made a riskier trade to win it back.

It lost too. So he made a bigger one. By the end of 1993 the hidden hole was £23 million. By the end of 1994, £208 million. Then on January 16, 1995, he bet enormously that Tokyo would stay calm overnight. At 5:46am, an earthquake tore through Kobe. Instead of retreating, Leeson bet more each day that the market would recover. By February 23rd he had lost £827 million, and Barings, which had stood for 233 years, was bankrupt.

Leeson was not stupid or reckless. He was running standard human software. When we are ahead, we protect what we have. But the moment we fall below our reference point, the cautious person flips into someone who craves risk, doubling down to get back to even. Every escalation feels like conviction. It is actually a trap.

The lesson is not to avoid losses. It is to know that the version of you sitting on one is more dangerous than the one who started, and to decide your exit before you ever go below water.

ENLIGHTENMENT

Short Squeez Picks

• What would you be willing to wait in a really long line for?

• 3 ways to appear smarter than you are

• A hidden secret to spot a liar through voice inflections

• How to intentionally change how you’re feeling

• Are attention spans really shrinking?

MEME-A-PALOOZA

Memes of the Day

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