Andrew, I'm here. Happy New Year, and it's Saturday. This morning we think about what may or may not happen in 2025. This is not an effort to crystallize the future, but rather an overview of the big topics the DealBook team and I are working on. New Year's radar screen.
The list includes changes in dealmaking in the new Trump era, the future (or end) of DEI efforts, the growing momentum for employees to return to the office, the evolution of China-U.S. relations, new investments in artificial intelligence, and Yes, Elon Musk's role in all of the above. Let us know what you think. Then, at the end of the year, I'll look at this list again.
Transactions flow. After four years of pent-up activity under President Biden, in which antitrust enforcement officials challenged a record number of mergers, dealmakers are almost universally concerned about the large number of transactions under President-elect Donald Trump. is expected to be carried out. A more interesting question is: What kind of companies would make such deals? Furthermore, given President Trump's support for the industry, an entry into the energy sector seems likely. Banking deals could also take off: After the local banking crisis, Treasury Secretary Janet Yellen said the country could benefit from more consolidation. Deals may also emerge to address cybersecurity concerns, the impact of GLP-1 drugs, and intense AI competition.
Media companies will reorganize. Media executives and their advisors have been saying for years that the industry needs a fundamental overhaul to deal with the new reality of a glut of streaming options and the decline of traditional cable. A deal that was deemed virtually impossible under Mr. Biden's powerful antitrust enforcement agency may finally be given the green light under the Trump administration.
All eyes are on what a few major companies will do next. Will Comcast's move to spin off its cable operations encourage other companies, such as Warner Bros. Discovery, to do the same? Will Paramount use Larry Ellison's deep pockets to buy a streaming business? Will Rupert Murdoch respond to his failed attempts to change his family's trust by selling Fox, growing the company, or trying to buy out some of his children? Will President Trump allow a major media company (or his own) to acquire TikTok?
Big Tech may not break out. While American companies are hoping for a prolonged tug-of-war under the Trump administration, Silicon Valley's biggest companies may still face increased scrutiny. Several of President Trump's key regulatory appointees, including Andrew Ferguson of the Federal Trade Commission, Gail Slater of the Justice Department's Antitrust Division, and Brendan Carr of the Federal Communications Commission, will continue to support Big Tech. It seems likely that they will continue to monitor this closely.
Lawsuits challenging the market power of big tech companies come from a progressive perspective, and unlike outgoing FTC Commissioner Lina Khan, many of Mr. Trump's picks are conservative, with companies like Google and Meta He accuses them of silencing voices.
What will Elon Musk do with his powers? The tech billionaire has been one of the most influential and ubiquitous voices in President Trump's ears since the election, and his seat as co-director of the Department of Government Efficiency potentially gives him significant influence. Potentially – some critics say it's an overstatement – budget cuts for feared government agencies.
But the extent of Mr. Musk's intentions remains unclear. He is already battling longtime Trump allies to protect the skilled worker visa program known as H-1B, and so far he appears to have won that battle. He is also likely to push for further deregulation and further opening up when it comes to AI and cryptocurrencies. One thing that is unclear is how Musk, who sells a large number of Teslas in China, will interact with the Chinese government's policies.
Management wants employees back in the office and politics out of the office. Starting this month, many of Amazon's corporate staff will be required to work in the office five days a week, up from three days a week previously. This mandate for tech companies to return to the office has caused a stir, and there are signs of increased attendance across industries.
However, remote work remains prevalent, with approximately 30 million workers working in hybrid or fully remote environments. Will other big tech companies follow Amazon's lead in 2025?
In addition to coming into the office, executives are cracking down on employee activity. Starbucks sued the union representing some of its employees after the local affiliate posted pro-Palestinian posts on social media (the union countersued). After Google fired dozens of employees last year over protests related to its cloud computing contract with the Israeli government, Google CEO Sundar Pichai told employees they would not be able to do their jobs. He said it was not a place to “fight over destructive issues or discuss politics.” This sentiment seems to be spreading. Big tech companies that protested after Trump's election in 2016 remained silent after his election in 2024. Will the silence last?
DEI is a fight for life. In 2024, the program was attacked by lawsuits, activists like Robbie Starbuck, and conservative lawmakers. As companies prepare for the Trump administration, companies like JetBlue and Molson Coors have cited diversity, equity and inclusion policies as risk factors in their security filings. Walmart, Ford Motor Co. and Toyota have canceled some programs, and other companies are rebranding their initiatives without advertising in hopes of attracting attention. Few companies fight back publicly, but Costco last month challenged an activist shareholder's proposal to end its DEI efforts.
Infrastructure will be the focus of the AI race. The fight for control over artificial intelligence is also spurring investment in infrastructure to generate the vast amounts of electricity needed for artificial intelligence. The International Energy Agency predicts that data center energy demand could double by 2026.
Some of the tech industry's most prominent executives are investors. OpenAI's Sam Altman, Jeff Bezos, and Bill Gates all back fusion startups. Last year, Microsoft and BlackRock launched a $30 billion fund to invest in AI infrastructure. Private equity firm Silver Lake is investing heavily in data centers.
One company to watch this year is Softbank. Japanese tech investors have reportedly discussed setting up a $20 billion AI investment fund with private equity firm Apollo, and SoftBank's mercurial CEO Masayoshi Son is looking for a deal.
Defense technology could have a bumper year. President Trump has promised to end the war in Ukraine. Whether he succeeds or not, the defense technology industry stands to benefit either way. It's already happening. Venture investment in defense startups soared last year, surpassing total investment in 2023 by September. Data analytics company Palantir posted star results. The company's market capitalization has soared nearly fivefold to $180 billion in 2024, its operating margins have increased significantly, and it joined the S&P 500 in September.
Some companies are profiting from heightened global uncertainty. Anduril Industries, a California-based defense startup backed by venture capitalist and Palantir co-founder Peter Thiel, raised $1.5 billion in a funding round valued at $14 billion in August. It was announced that. Helsing, a German startup that uses AI to process live data from the battlefield, is one of the most funded companies in Europe.
If President Trump is able to end the war, it is entirely possible that Western defense companies will find opportunities to help build up Ukraine's military. Otherwise, more of their technology could be deployed on the ground. Small AI-powered companies are already testing their equipment in real time in warfare, where drones and other technologies play a major role.
How will President Trump confront China, and how will the Chinese government respond? President Trump has accused the Chinese government and Chinese companies of unfair competition and promised to increase tariffs on products from China. This is the same stance he took during his first term as president, when he gradually tightened trade restrictions with the world's second-largest economy.
While much uncertainty remains about how Trump's threats will play out once he takes office, Chinese companies have been adept at finding ways to circumvent previous regulations. has been proven. Some companies moved final manufacturing and assembly operations to countries such as Mexico, Vietnam and Malaysia so that they could export directly to the United States without paying the 25% tax that President Trump imposed during his first term. Other companies, such as e-commerce company Temu, have set up operations in the United States to appear less Chinese and more American. Even after its facade has faded, Temu still thrives. Temu became the most downloaded free app on Apple's App Store in 2024.
How will President Trump's policies affect the economy? President Trump's tax cuts and red tape plan will keep gross domestic product (GDP) growth steady at about 3% this year, with short-term U.S. corporate profits are expected to strengthen in the coming months. But his pledge to impose tariffs on some of the country's biggest trading partners on his first day in office could severely hamper global growth in 2025.
Another pressing issue is whether President Trump will repeal the Inflation Control Act, which would have put billions of dollars worth of tax credits at risk. The prospect has even some big oil executives lobbying Trump hard to uphold the law.
Wildcard: Inflation. Will President Trump's policies reignite it and scare both the Fed and so-called bond vigilantes? Market participants say they want to keep an eye on the yield on 10-year government bonds. The surge could force the administration to scale back its most ambitious plans to stimulate growth. The Fed has already lowered its outlook for rate cuts in 2025 due to inflation concerns.
Thanks for reading! See you on Monday.
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