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    OpenAI outlines new for-profit structure in bid to stay ahead in costly AI race

    (Reuters) -OpenAI on Friday outlined plans to revamp its structure, saying it would create a public benefit corporation to make it easier to “raise more capital than we’d imagined,” and remove the restrictions imposed on the startup by its current nonprofit parent. The acknowledgement and detailed rationale behind its high-profile restructuring confirmed a Reuters report in September, which sparked debate among corporate watchdogs and tech moguls including Elon Musk. At issue were the implications such a move might have on whether OpenAI would allocate its assets to the nonprofit arm fairly, and how the company would strike a balance between making a profit and generating social and public good as it develops AI.Under the proposed plan, the ChatGPT maker’s existing for-profit arm would become a Delaware-based public benefit corporation (PBC) – a structure designed to consider the interests of society in addition to shareholder value.OpenAI has been looking to make changes to attract further investment, as the expensive pursuit of artificial general intelligence, or AI that surpasses human intelligence, heats up.Its latest $6.6 billion funding round at a valuation of $157 billion was contingent on whether the ChatGPT-maker could upend its corporate structure and remove a profit cap for investors within two years, Reuters reported in October. The nonprofit, meanwhile, will have a “significant interest” in the PBC in the form of shares as determined by independent financial advisers, OpenAI said in a blog post, adding that it would be one of the “best resourced nonprofits in history.” OpenAI started in 2015 as a research-focused nonprofit but created a for-profit unit four years later to secure funding for the high costs of AI development. Its unusual structure gave control of the for-profit unit to the nonprofit and was in focus last year when Sam Altman was fired as CEO only to return days later after employees rebelled. ‘CRITICAL STEP'”We once again need to raise more capital than we’d imagined. Investors want to back us but, at this scale of capital, need conventional equity and less structural bespokeness,” the Microsoft-backed startup said on Friday. “The hundreds of billions of dollars that major companies are now investing into AI development show what it will really take for OpenAI to continue pursuing the mission.”Its plans to create a PBC would align the startup with rivals such as Anthropic and the Musk-owned xAI, which use a similar structure and recently raised billions in funding. Anthropic garnered another $4 billion investment from existing investor Amazon.com (NASDAQ:AMZN) last month, while xAI raised around $6 billion in equity financing earlier in December.”The key to the announcement is that the for-profit side of OpenAI ‘will run and control OpenAI’s operations and business,'” DA Davidson & Co analyst Gil Luria said.”This is the critical step the company needs to make in order to continue fund raising,” Luria said, although he added that the move did “not necessitate OpenAI going public.”The startup could, however, face some hurdles in the plan.Musk, an OpenAI co-founder who later left and is now one of the startup’s most vocal critics, is trying to stop the plan and in August sued OpenAI and Altman. Musk alleges that OpenAI violated contract provisions by putting profit ahead of the public good in the push to advance AI.OpenAI earlier this month asked a federal judge to reject Musk’s request and published a trove of messages with Musk to argue that he initially backed for-profit status for OpenAI before walking away from the company after failing to gain a majority equity stake and full control.Meta Platforms (NASDAQ:META) is also urging California’s attorney general to block OpenAI’s conversion to a for-profit company, according to a copy of a letter seen by Reuters.Becoming a benefit corporation does not guarantee in and of itself that a company will put its stated mission above profit, as that status legally requires only that the company’s board “balance” its mission and profit-making concerns, said Ann Lipton, a corporate law professor at Tulane Law School.”The only reason to choose benefit form over any other corporate form is the declaration to the public,” she said. “It doesn’t actually have any real enforcement power behind it,” she said.In practice, it is the shareholders who own a controlling stake in the company who dictate how closely a public benefit company sticks to its mission, Lipton said. More

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    U.S. Weighs Ban on Chinese Drones, Citing National Security Concerns

    The Commerce Department requested that private companies comment on the implications of the rule by March. The final decision will fall to the Trump administration.The Biden administration said on Thursday that it was considering a new rule that could restrict or ban Chinese drones in the United States out of national security concerns.In a notice, the Commerce Department said the involvement of foreign adversaries — notably China and Russia — in the design, development, manufacture and supply of drones could pose “undue or unacceptable risk to U.S. national security.”The notice requested private companies to comment on the scope and implications of the rule by March 4. The decision of what restrictions to impose, if any, on Chinese and Russian drones will fall to the Trump administration.China and Russia have shown a willingness to compromise U.S. infrastructure and security through cyberespionage, the Commerce Department said, adding that the governments could leverage their laws and political situations to “co-opt private entities for national interests.”Beyond the use of drones by hobbyists, the devices are employed in a variety of U.S. industries. They help farmers monitor crops and spray for pests, inspect pipelines for the chemical industry, survey bridges and construction sites, and aid firefighters and other emergency responders.But drones have evolved over the past decade to include sophisticated cameras, receivers and artificial intelligence abilities, fueling concerns that they could be turned into a useful tool for an adversarial government.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Richard A. Easterlin, ‘Father of Happiness Economics,’ Dies at 98

    He put forth the so-called Easterlin paradox, finding that the richer you are doesn’t mean the more satisfied you’ll be with your life.Does getting a year-end bonus or raise make you happier? Does the lift it gives you tend to quickly fade, especially if others around you also won out in the annual compensation sweepstakes?If the answer is that a boost in income doesn’t greatly improve your sense of well-being, then you are a proof point of the Easterlin paradox, the economic theory that more money, over the long run, won’t buy more happiness.The paradox was put forth by Richard A. Easterlin, an economist, a demographer and a seminal figure in the field of academic research into happiness. The University of Southern California, where he was an emeritus professor, called him the “father of happiness economics” in announcing his death. He died at 98 on Dec. 16 at his home in Pasadena, Calif.Mr. Easterlin’s work challenged both conventional wisdom and a core economic tenet that economic growth in a society leads to a general improvement in feelings of well being.Economists, policymakers and ordinary citizens had long taken it as a given that increasing a nation’s gross domestic product — its total economic output — improves its people’s happiness.But in the 1970s, Mr. Easterlin, then at the University of Pennsylvania, published research showing that even though incomes in the United States had risen dramatically since World War II, Americans said in surveys that they were no happier.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    US 30-year fixed-rate mortgage flirts with 7%

    The average rate on the popular 30-year fixed-rate mortgage increased to 6.91%, the highest level since early July, from 6.85% last week, mortgage finance agency Freddie Mac (OTC:FMCC) said on Thursday. It averaged 6.62% during the same period a year ago.”Compared to this time last year, rates are elevated and the market’s affordability headwinds persist,” said Sam Khater, Freddie Mac’s Chief Economist.Mortgage rates have trended higher despite the Federal Reserve cutting interest rates three times since starting its monetary policy easing cycle in September. They have risen in tandem with U.S. Treasury yields amid a resilient economy and investor fears that President-elect Donald Trump’s proposed policies, including tax cuts, higher tariffs on imported goods and mass deportations, could reignite inflation. Mortgage rates track the 10-year Treasury note. Sales of previously owned homes surged to an eight-month high in November, mostly reflecting contracts signed in October and possibly September when mortgage rates were mostly lower. Sales could still rise in December after contracts increased to a 21-month high in November. Increased supply is pulling more buyers into the market, but rising mortgage rates could discourage some homeowners from putting their houses on the market, especially if they would need to buy another home.Many homeowners have mortgages below 5%. The so-called rate-lock effect could mean fewer homes being listed, reducing inventory and pushing up prices. This would combine with rising mortgage rates to reduce affordability for many prospective buyers. More

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    SoFi shares fall after KBW downgrade on valuation concerns

    (Reuters) -Shares of SoFi Technologies (NASDAQ:SOFI) fell 6% on Thursday after KBW downgraded its stock on concerns over the fintech firm’s lofty valuation and ambitious financial targets, further cooling a months-long rally. Analysts at the brokerage firm rated the stock “underperform” and established a price target of $8 — nearly half of SoFi’s last closing price.The move reflects the challenges and higher expectations startups such as SoFi, a digital banking and brokerage app that offers loans, credit cards and investing services, face as they transition into mature financial services providers.A strong economy, lower interest rates and the company’s “success driving better scale and profitability… justifies shifting our investment thesis towards a more long-term view of what a mature SoFi looks like,” the brokerage said. “The stock’s valuation has become overstretched across a wide matrix of multiples.”Earnings per share forecasts for 2026 and the company’s long-term target for a 20%-30% return on tangible common equity (ROTCE) will be tough to achieve, the brokerage added.Shares were last trading at $14.53 and are heading towards a fourth consecutive session of losses, if current levels hold. As of last close, they had nearly doubled since October.The company trades at 69 times expected earnings for 2025, while the median for consumer digital lenders is 12.2 according to KBW.SoFi did not immediately respond to a request for comment. More

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    US weekly jobless claims hit eight-month low as labor market remains resilient

    WASHINGTON (Reuters) -The number of Americans filing new applications for unemployment benefits dropped to an eight-month low last week, pointing to low layoffs at the end of 2024 and consistent with a healthy labor market.The report from the Labor Department on Thursday added to a recent raft of upbeat economic data, including consumer spending, in reinforcing the Federal Reserve’s projections for fewer interest rate cuts this year. Labor market resilience is keeping the economic expansion on track.”A stable job market will squelch the Fed’s appetite for cutting rates aggressively amid nagging services inflation,” said Jeffrey Roach, chief economist at LPL Financial (NASDAQ:LPLA).Initial claims for state unemployment benefits dropped 9,000 to a seasonally adjusted 211,000 for the week ended Dec. 28, the lowest level since April. Economists polled by Reuters had forecast 222,000 claims for the latest week. There were sharp declines in unadjusted claims in California and Texas. Large increases in filings were recorded in Michigan, New Jersey, Pennsylvania, Ohio, Massachusetts and Connecticut.Claims tend to be volatile around the end of the year. Through the volatility, however, they have remained compatible with a labor market that is steadily slowing at a pace that does not signal a deterioration in economic conditions.The four-week moving average of claims, which strips out seasonal fluctuations from the data, fell 3,500 to 223,250. The dollar rose to a two-year high against a basket of currencies, while stocks on Wall Street were slightly stronger. Yields on longer-dated U.S. Treasuries edged higher.CONSTRUCTION SPENDING UNCHANGED     The U.S. central bank last month delivered a third consecutive interest rate cut, lowering its benchmark overnight interest rate by 25 basis points to the 4.25%-4.50% range. It, however, projected only two reductions in borrowing costs this year compared to the four it had forecast in September, acknowledging the resilience of the jobs market and economy. The Fed’s policy rate was hiked by 5.25 percentage points in 2022 and 2023 to quell inflation.The labor market is being underpinned by very low levels of layoffs, but employers are hesitant to add more workers after a hiring spree during the recovery from the COVID-19 pandemic. As a result, some workers who have lost their jobs are experiencing long bouts of joblessness, with the median duration of unemployment approaching a three-year high in November. The number of people receiving benefits after an initial week of aid, a proxy for hiring, decreased 52,000 to a seasonally adjusted 1.844 million during the week ending Dec. 21, the claims report showed. The so-called continuing claims continued to rise in Washington state, long after a strike by factory workers at Boeing (NYSE:BA) ended. They remained elevated in North Carolina in the aftermath of the devastation caused by Hurricane Helene, and in Michigan and Ohio, which have suffered job losses in manufacturing.Economists have also attributed some of the continued elevation in the so-called continuing claims to difficulties stripping out seasonal fluctuations from the data. They expect the unemployment rate to have held steady at 4.2% in December.The government is scheduled to publish its closely watched employment report for December next Friday.”Businesses hired fewer employees in 2024 than they did in 2023 and 2022, leading to the persistent increase in continuing claims in 2024,” said Stuart Hoffman, senior economic advisor at PNC Financial (NYSE:PNC). “But the economy is still creating roughly enough jobs to keep up with labor force growth.” A separate report from the Commerce Department’s Census Bureau showed construction spending was unchanged in November as a moderate rise in single-family homebuilding was offset by a sharp decline in outlays on multi-family housing projects. That followed an upwardly revised 0.5% rise in October. Economists had forecast construction spending would gain 0.3% in November after a previously reported 0.4% rise in October. It increased 3.0% on a year-on-year basis in November.Spending on private construction projects edged up 0.1% after increasing 0.6% in October. Investment in residential construction nudged up 0.1%, with outlays on new single-family projects rising 0.3%.  New construction could be hampered by higher mortgage rates, President-elect Donald Trump’s threat to impose tariffs on imports, and the labor shortages that could result from his incoming administration’s broad promise to deport immigrants. Trump’s policy pledges, including tax cuts, have contributed to the elevation in mortgage rates even as the Fed has been lowering borrowing costs. Outlays on multi-family housing units fell 1.3% in November. Spending on home renovations continued to increase.Investment in private non-residential structures like offices and factories was unchanged in November. Spending on public construction projects dipped 0.1% in November after easing by the same margin in October. State and local government spending slipped 0.1%, while outlays on federal government projects dropped 0.5%. More

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    Merz pushes for EU free trade deal with Trump’s US

    Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe German conservative leader Friedrich Merz, who is in pole position to become the country’s next chancellor, has said the EU should make a fresh attempt at a sweeping free trade deal with the US once Donald Trump becomes president.“We need a positive agenda with the US, which would benefit both American and European consumers,” the Christian Democrat leader said in an interview with DPA news agency. “A new European-American joint free trade initiative could avert a dangerous tariff spiral.”It is unclear what kind of reaction Merz will get in Washington. Trump halted negotiations on the Transatlantic Trade and Investment Partnership (TTIP), a planned trade agreement between the EU and US, shortly after becoming president in 2017 and went on to impose tariffs on European imports.Merz was speaking less than two months before snap elections in Germany prompted by the collapse of Chancellor Olaf Scholz’s fragile three-party coalition in November. Polls suggest Merz’s centre-right CDU/CSU bloc is on course for victory.Ahead of Trump’s re-entry into the White House on January 20, Germans are becoming increasingly apprehensive about the potential negative impact of his so-called Maga (“make America great again”) policies on the Eurozone’s largest economy.In his first term Trump aggressively pursued an “America First” approach aimed at closing the US trade deficit and boosting homegrown production, which often entailed trade conflicts with some of the US’s closest allies. In a sign of turbulence to come, he warned last month that the US would impose tariffs on EU goods such as cars and machinery unless the bloc stepped up its purchases of US oil and gas. A study last year by the German Economic Institute in Cologne (IW) predicted the German economy would incur losses of up to €180bn over a second four-year Trump term as a result of a trade war between the US and Europe.It said German carmakers and machine-building companies would be particularly hard hit by Trump’s plans to raise import tariffs to 10 per cent or even 20 per cent. The US was Germany’s biggest trading partner in the first half of 2024.Speaking to DPA, Merz said he expected tougher conditions for European business when Trump becomes president. “It will be challenging,” he said. The EU should, Merz added, expect the US to focus on safeguarding its own interests, including by imposing high import tariffs. “But our response to that shouldn’t be to start with our own tariffs,” he said.Instead, the EU should concentrate on restoring its declining competitiveness, and then tell the Americans: “Yes, we are prepared to face this competition with you, too.” He added: “The right response is to react with innovation and good products.” Merz has pledged to improve the competitiveness of the German economy, which is stuck in its first two-year slump since the early 2000s, if he becomes chancellor.In its manifesto the CDU/CSU says it will reduce corporate taxation to 25 per cent from about 30 per cent currently, cut social security contributions, halve electricity network charges for industrial customers and slash bureaucracy.Other parties, such as Scholz’s Social Democrats, and some economists have warned that many of Merz’s proposals are unfunded.Merz said Germany must reduce corporate tax rates and become a more attractive place to do business in order to better compete with the US, where tax credits provided under President Joe Biden’s Inflation Reduction Act have prompted many German companies to consider moving production to the US.He said Germany’s non-wage labour costs such as social security payments were also too high. “You can’t resolve that on a European level, you have to do it on a national basis.” Indeed, the country’s non-wage labour costs are now at their highest level ever, according to figures released on Thursday, thanks to an increase in contributions to medical insurance, which came into effect at the start of the year. Some 42.3 per cent of gross wages go towards medical, social and unemployment insurance, according to calculations by the Augsburger Allgemeine newspaper. More

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    World shares start 2025 with a wobble on Trump trepidation

    LONDON/SINGAPORE (Reuters) -World shares struggled for traction on Thursday after a jittery close to 2024, while the dollar weakened as investor sentiment dithered ahead of Donald Trump’s return to the White House.The start of the New Year was shaping up to be a less favourable one for European and Asian equities, as uncertainty over the policies of incoming U.S. President Trump and a more hawkish Federal Reserve outlook looked set to dominate market rhetoric for now.Global shares, which had closed out 2024 with a strong annual gain of nearly 16%, clocked a monthly loss of more than 2% in December and ticked 0.1% lower ahead of the Wall Street open. European stocks eased during their first trading session of 2025 but the STOXX 600 index last recovered earlier declines and steadied by midday. U.S. stock futures pointed higher, however, as S&P 500 and Nasdaq futures climbed roughly 1%. Other major bourses hovered either side of the unchanged mark with notable underperformance seen in France where the CAC 40 shed around 0.7%.European oil & gas stocks were buoyed by higher crude futures, as Russian gas firm Gazprom (MCX:GAZP) halted gas exports via pipelines running through Ukraine after Kyiv refused to renew a transit agreement.Autos and luxury goods underperformed. An index tracking the region’s banks fell as much as 2.35%. China stocks ended sharply lower, logging their weakest New Year start since 2016, as factory data disappointed investors who were also waiting for more policy support. China’s blue-chip CSI 300 Index closed down 2.9%, while the Shanghai Composite Index tumbled 2.7% and Hong Kong’s benchmark Hang Seng fell 2.2%.Global markets are kicking off 2025 with a sharp focus on key economic and inflation indicators, said Bruno Schneller, managing director at Erlen Capital Management in Zurich. “The latest PMI release from China, falling short of expectations, underscores challenges in the manufacturing sector. However, President Xi’s announcement of more proactive policies to boost growth signals potential shifts in economic strategy for the region,” added Schneller. China’s Xi Jinping said on Tuesday in his New Year’s address that the country would implement more proactive policies to promote growth in 2025. Investors are closely monitoring China’s recovery with Trump’s talk of tariffs in excess of 60% on imports of Chinese goods potentially posing a significant headwind.”With Donald Trump’s return to the White House amplifying external risks and an already fragile domestic economy, a debt-deflation trap leading to a generational downturn could be perilously close if upcoming stimulus measures are delayed or misdirected,” said Yingrui Wang, China emerging market economist at AXA Investment Managers.LEVYING TARIFFSTrump will be sworn in as U.S. president on Jan. 20 for his second term in office. Friday will see the new session of Congress begin, with a Republican majority in both the House of Representatives and the Senate. “A big question will be how the new administration moves on new tariffs, and which countries they’re focused on,” Deutsche Bank (ETR:DBKGn) analysts said in a note.The dollar erased downward pressure against other major currencies, up 0.2% by 1221 GMT. The euro ticked 0.2% lower to $1.0328 but strayed not too far from a more than one-month trough.Markets now price in about 42 basis points worth of rate cuts from the Federal Reserve this year, compared with more than 100 bps from the European Central Bank and 60 bps from the Bank of England.In London trade, U.S. 10-year Treasury yields were down around 4 bps at 4.22%.Oil prices rose, with Brent crude futures up $1.03 to $75.67 a barrel. U.S. West Texas Intermediate crude gained $1.01 to $72.74. [O/R]Spot gold traded 0.7% higher at $2,641 an ounce. The yellow metal had a banner year in 2024, surging more than 27% in its largest annual gain since 2010. [GOL/]Russian gas exports via Soviet-era pipelines running through Ukraine came to a halt on New Year’s Day, marking the end of decades of Moscow’s dominance over Europe’s energy markets.The gas had kept flowing despite nearly three years of war, but Russia’s Gazprom said it had stopped at 0500 GMT on January 1, after Ukraine refused to renew a transit agreement.The benchmark front-month contract at the Dutch TTF hub hit a 14-month high in earlier trading but then settled back a bit, up 2.29% at 50.01 euros per megawatt hour (MWh) by 1225 GMT, according to LSEG data. More