Andrew here. There is a fascinating soap opera involving Big Law and the White House that has sprung into the open, thanks to The Times’s Michael Schmidt and Devlin Barrett.
Early in President Trump’s second term, nine law firms struck peace deals brokered by Boris Epshteyn, one of Trump’s personal lawyers, which spared them from what they believed could be crippling executive orders in exchange for nearly $1 billion worth of free legal work.
But those firms — including Paul Weiss, Kirkland & Ellis and Skadden — have now been issued federal subpoenas demanding their private communications. The Justice Department is also seeking documents from four firms fighting the administration in court. Watch this space.
Behind a historic sell-off
Tuesday was a bad day for IBM.
Shares in Big Blue tumbled 25 percent for its worst trading day since at least 1968. The company had previewed quarterly results that would fall well short of analyst expectations because of artificial intelligence.
Now, the big question confronting older software and services companies like IBM is whether more rough times lie ahead as investor fears re-emerge over A.I. disruption of their industries, Niko Gallogly writes.
IBM’s stock plunge dragged down shares in big software makers, including Workday, ServiceNow and Salesforce.
The sector overall has had a rough year to date: The S&P 500 Software Industry Index is down nearly 15 percent so far for 2026.
What worried investors about IBM’s results:
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Business customers are prioritizing capital expenditures for A.I. development — like servers, storage and memory purchases — over IBM’s hardware products like powerful mainframe computers, whose sales fell 7 percent. “We did not anticipate the magnitude of the capex reprioritization,” Arvind Krishna, the company’s C.E.O., wrote in a letter to investors on Tuesday.
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Software sales grew 5 percent last quarter, below Wall Street’s expectations. IBM is facing increasing pressure from A.I. coding tools like Anthropic’s Claude Code: Starbucks, for example, is seeking to build an in-house version of a maintenance tool currently run by IBM, Bloomberg reported last week.
“What played out was worse than our expectations,” Krishna wrote. “These conditions require our teams to execute perfectly, and this quarter we faltered.”
Is it software companies that need to worry — or service ones? Some analysts argued that IBM’s problems were largely tied to its mainframe miss. Generalizing it to software companies as a whole was “a bit of a stretch,” according to Kirk Materne of Evercore ISI.
Technology consulting firms may be at risk instead, according to some analysts. Shares in Accenture and Cognizant Technology Solutions each fell by more than 2.5 percent on Tuesday.
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Some tech companies made gains on Tuesdayon, including cybersecurity providers: Shares in CrowdStrike, for instance, surged 12 percent. (Krishna had noted that IBM clients were “distracted” by cybersecurity worries as new A.I. models exposed fresh vulnerabilities.)
Further pain could be in store, as rising costs for A.I. infrastructure components like processors and especially memory chips swallow up more corporate I.T. budgets.
“Discretionary I.T. spending is worsening and will likely be the main theme across most software companies when they report results,” a Bloomberg Intelligence analyst, Anurag Rana, said in a note.
What to watch: quarterly results from ServiceNow (set for release next Wednesday) and Cognizant (due out July 29) for further evidence of the A.I. effect.
HERE’S WHAT’S HAPPENING
Morgan Stanley reports record results. Revenue at the Wall Street giant in the second quarter rose 27 percent year on year to $21.35 billion, boosted by a 48 percent jump in trading revenue. Morgan Stanley’s results are the latest in positive quarterly earnings from big banks as extreme market volatility and the A.I. boom help trading desks.
China’s economy grows at its slowest rate in three years. Beijing’s National Bureau of Statistics said G.D.P. expanded by 4.3 percent in the second quarter. A consumer spending slump and a persistent real estate crisis have offset an export boom driven by artificial intelligence, raising expectations for more government stimulus this year.
President Trump backs off plans to charge a Strait of Hormuz toll. The president said that Persian Gulf nations would invest in the U.S. instead of paying Washington a 20 percent fee to pass through the waterway near Iran. Traffic through the strait dropped sharply after Iran and the U.S. traded strikes recently, and shippers worry that other countries will try to monetize waterways.
PayPal reportedly receives a $53 billion takeover bid by Stripe. An offer by Stripe and the investment firm Advent International followed an initial approach in April, according to Reuters, citing unnamed sources; the two companies are said to have $50 billion in bank financing lined up. It’s not clear whether PayPal is interested, but a bid would be the latest in what’s shaping up to be a year of big-ticket M.&A.
OpenAI moves ahead with its own hardware as it rejects claims by Apple. The artificial intelligence giant said it was not aware of “any evidence” of merit to a lawsuit by Apple that accuses it of stealing trade secrets to develop its consumer devices. (An Apple lawyer’s mix-up of two OpenAI employees may have helped sour talks between the companies before the suit.) Bloomberg reports that OpenAI’s first device will be a personalizable smart speaker.
How Lucid’s struggles weigh on a Saudi fund
Shares in Lucid Group, the embattled electric vehicle maker, were rattled on Tuesday after a report that it might go private or even bankrupt, which the company denied.
The incident underscored ongoing troubles for the western E.V. industry and was a sign of another souring investment for Lucid’s big backer — Saudi Arabia’s sovereign wealth fund, the Public Investment Fund.
Lucid called a report that it might be delisted “completely false.” The report, by the Eletric-Vehicles blog, led the company’s shares to plunge more than 50 percent. The carmaker added that it had enough liquidity to finance its operations well into 2027.
But the company acknowledged that it had hired the turnaround consulting firm AlixPartners to improve its operations.
Lucid has struggled for some time. The Trump administration’s elimination of E.V. subsidies late last year, just as the carmaker was expanding production of its Gravity SUV, hit its business hard. The company, based in California, has lost about $16.6 billion since it was founded 19 years ago.
More recently, Lucid suspended its vehicle production forecast for the year after supply-chain issues disrupted deliveries of the Gravity SUV. It cut about 18 percent of its work force as part of an overhaul under its new C.E.O., Silvio Napoli.
Saudi Arabia is Lucid’s biggest backer. PIF, as the fund is commonly known, has an almost 57 percent stake in the company. It and affiliated entities have invested about $9.5 billion in the carmaker since 2018, which is more than five times the company’s current market valuation.
Lucid’s troubles are another black eye for the Saudi fund. PIF has retreated from several flagship projects, including the money-losing upstart competition LIV Golf. It has also slowed down projects like Neom, a planned futuristic city in the desert, and it is reportedly facing delays in building a stadium for the men’s World Cup in 2034.
Saudi Arabia faces a multibillion-dollar budget shortfall and has recently borrowed money instead of lending it.
Quote of the day
“The members of our committee have no tolerance for persistently elevated inflation.”
Kevin Warsh, in his first congressional testimony as Fed chairman. Warsh told the House Financial Services Committee that the central bank would set the “right” policy so that “the inflation surge of the last five years will be a thing of the past” — but didn’t commit to raising interest rates as part of that.
His remarks came after the release on Tuesday of the latest Consumer Price Index data, which showed that inflation slowed in June. But economists are worried the war with Iran will drive prices up again.
Neko Health’s star-studded funding round
The confluence of wearables, celebrity influencers and artificial intelligence has again turbocharged venture investing in the wellness space.
Few start-ups have ridden this wave faster than Neko Health, the Swedish health tech start-up founded by Daniel Ek of Spotify and the entrepreneur Hjalmar Nilsonne.
The company announced a $700 million funding round on Wednesday, Bernhard Warner writes. It was led by Lightspeed Venture Partners and O.G. Venture Partners. New investors include Liberty City Ventures, Positive Sum and BDT & MSD Partners.
Here are some of the boldface names who participated:
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Mark Zuckerberg of Meta and his wife, Priscilla Chan. Zuckerberg and Ek have known each other for over a decade;
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Ari Emanuel, the Hollywood superagent and C.E.O. of TKO Group Holdings;
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Tim Ferriss, the best-selling author and investor who helped popularize the “biohacking” craze;
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Jessie Inchauspé, the French biochemist also known as the “Glucose Goddess” for promoting regular glucose monitoring.
(Most of the A-list investors have had a Neko Health scan and became hooked on the technology after the first visit, a company spokeswoman said.)
The round values Neko Health at nearly $7 billion, DealBook hears, a roughly fourfold jump from its last funding round, 18 months ago. The company plans to use the funding to scale up its proprietary scan technology before entering the U.S. market — its third — after the summer.
What it does: Neko Health, which operates eight clinics in Sweden and Britain and advertises its service as “a health check for your future self,” offers A.I.-powered full-body diagnostic scans.
Screening for everyone? Ek told DealBook that investors were attracted by the company’s aim to make preventive scans affordable enough to become part of the annual health care checkup.
Neko Health uses scores of sensors and a mix of proprietary and off-the-shelf technologies to noninvasively measure heart function and circulation, and to photograph every inch of a patient’s body looking for big killers, including cardiovascular and metabolic diseases.
“The visual metaphor early on was around the airport scanner,” Ek told DealBook in 2024.
Health tech has become a hot target for V.C.s again. Funding for these start-ups surpassed $25 billion worldwide in the first half of the year, according to PitchBook, putting the sector on a pace for its best year since 2021.
THE SPEED READ
Deals
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Uber is in advanced talks to buy Delivery Hero, the European food-delivery company, reportedly for more than $13.7 billion. (Bloomberg)
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Thomson Reuters agreed to sell 51 percent of its Global Print business, which publishes legal and tax information, to KKR for about $500 million. (Reuters)
Technology and artificial intelligence
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