Business

1. BigLaw’s Trump olive branch
2. Microsoft’s $12B option play
3. Sequoia joins Delaware fight
4. Government debt squeeze
5. DEI retreat hops the pond

Welcome back to Semafor Business, where our security clearances are still valid (send tips!).

President Donald Trump’s attacks on law firms have found a soft target. In recent weeks, the president has yanked security clearances and federal contracts from two big firms, Paul Weiss and Perkins Coie, whose lawyers worked on cases against him and his political allies. Trump also exerted narrower pressure on a third, Covington & Burling, whose employees worked with Special Counsel Jack Smith.

Trump’s pressure tactics take advantage of BigLaw’s dramatic shift in recent decades, from independent partnerships with diverse client bases to high-end subcontractors for private equity firms and other financial giants. Now firms pay their rainmakers like Wall Street stars — and have shifted their self-conception toward commerce, and away from the old above-the-fray scruples. It’s a shift that reminds me of the transformation at investment banks in the 1970s and 1980s from sober and discerning gatekeepers to hired guns.

That mercantilism complicates BigLaw’s calculus now: Should it go to the constitutional mats to defend itself from Trump’s retribution or cut a deal to make it stop? Paul Weiss has already lost at least one client over the skirmish, and — as we scooped — the firm’s powerful chairman is scrambling around Washington trying to cut a deal. Corporate executives eager to prove their own loyalty to Trump may see firing their lawyers as an easy give.

Powerhouse law firm makes overture to Trump

One of the US’ top law firms is scrambling to blunt an attack from the Trump administration.

Brad Karp, chairman of Paul Weiss and one of the most powerful lawyers in New York, has been in Washington this week meeting with officials in Trump’s orbit. The visit comes days after the White House revoked the security clearance of attorneys working at the firm.

Karp is discussing a particular path back into the administration’s good graces, people familiar with the matter told Semafor: helping the White House respond to alleged instances of antisemitism that came out of the wave of campus protests last year. Trump this week ordered Columbia University to oust some academic leaders or risk losing its federal funding, his boldest broadside yet against a set of elite universities he feels have fostered antisemitic and otherwise “woke” cultures.

Trump’s executive order last week attacked Paul Weiss for its pro bono work against Jan. 6 defendants, for employing a lawyer who later worked on the Manhattan district attorney’s investigations of Trump, and for its diversity practices. The order also bars Paul Weiss employees from federal buildings and orders federal agencies to terminate contracts with the firm.

—Ben Smith, Liz Hoffman, and Gina Chon

Microsoft’s $12B CoreWeave option

Microsoft last month chose not to exercise a nearly $12 billion option to buy more data-center capacity from CoreWeave, people familiar with the matter said, a sign that big tech companies are starting to right-size and tailor their AI budgets.

CoreWeave, which is readying for the year’s most closely watched IPO, quickly found another buyer (OpenAI snapped up the contract), and Microsoft has reiterated its plan to spend $80 billion on AI. Nvidia CEO Jensen Huang told thousands of fans at the company’s annual conference on Tuesday that the appetite for AI is only growing, and the limiting factor is the raw power needed to run gargantuan data centers. Microsoft and CoreWeave declined to comment.

Still, it’s a potentially worrisome sign for the AI economy, which is being subsidized by public shareholders of Microsoft and Meta until a broader set of companies start spending real money on AI software.

— Rohan Goswami and Liz Hoffman

Sequoia backs Musk in Delaware pay fight

Venture capital giant Sequoia is backing Elon Musk in his fight against Delaware, adding Silicon Valley muscle to a brawl that has captivated and split the corporate community.

Sequoia said in a court filing Tuesday evening that a Delaware judge’s decision to invalidate Musk’s $56 billion pay package from Tesla threatens the ability of “superstar CEOs” to innovate and deliver big returns for shareholders. The promise of huge bonuses is “necessary to propel founder-led companies to the heights Sequoia aspires to,” the firm wrote in a friend-of-the-court brief.

It’s a shot across the bow as the state’s legislature advances a key piece of corporate-friendly legislation in response to Musk moving Tesla’s legal home to Texas after his bonus was nixed last year. Delaware, which depends on corporate fees to fund its budget, is scrambling to avoid broader exodus.

Government debt costs are soaring

Government borrowing costs are soaring everywhere. Interest payments sucked up the biggest portion of Western countries’ economic output since 2007, according to new data out today from the OECD, whose 38 members include most advanced economies.

Interest expense is crowding out spending on the energy transition and social programs — despite the fact that many European countries locked in ultra-cheap debt in the years before inflation spiked. (Austria’s 100-year bond, issued in 2020, was Vienna’s gain and bondholders’ loss.)

OECD countries are spending more on debt payments than on defense, though that ratio may flip back as Europe rearms. The EU spends less than 2% of its GDP on the military, a level its leaders are discussing raising to as much as 3.5% in what the Financial Times calls a “costly end to Europe’s peace dividend.”

DEI pressure hops the pond

Swiss pharma giants Novartis and Roche are abandoning diversity hiring targets in the US, Reuters reports, to avoid government scrutiny in one of their biggest markets.

It’s an early indication that Trump’s anti-DEI push is starting to cross the Atlantic. European regulators and shareholders are still committed to diversity and environmentalism and want their companies to stay the course. But the US is the largest single market for many European businesses, accounting for 53% of Roche’s pharma revenue and 42% of Novartis’ total sales. That has created some corporate code-switching, with companies dialing back the politics in their American divisions while holding firm back home.

➚ BUY: Raine. The low-key Hollywood investment bank landed a trio of deals this week, advising SoftBank on its takeover of Ampere, the San Francisco Giants on a stake sale, and Endeavor on a sports-rights house-cleaning. It narrowly missed a fourth when its client, private-equity titan Stephen Pagliuca, lost his bid for the Boston Celtics, whose $6.1 billion sale makes it the most valuable team in sports history.

➘ SELL: Wind. The EPA killed a nascent project off New Jersey’s coast that Trump had previously said he wanted “dead and gone,” a move that will cost French energy giant EDF €900 million.

Making Business Great Again

Semafor is keeping tabs on the business community’s MAGA shift and the Trump administration’s crackdown on corporate diversity efforts. The news is coming fast, and we’ll bring you updates in this newsletter.

• Anchor investor: Commerce Secretary Howard Lutnick told Fox viewers to “buy Tesla,” arguing that the stock would “never be this cheap again.” The plug follows Trump’s South Lawn showroom demo and comes as Tesla shares have fallen 40% this year on concerns about slower European sales and Musk’s divided attention. True believers will soon have a new way to ride the stock back up: MAGA investment firm Azoria yesterday announced a turbo-charged Tesla ETF that uses derivatives to amplify gains (and losses).
• Contracting: “The new administration has a clear goal to run the federal government more efficiently,” Accenture’s CEO told investors this morning. “Many new procurement actions have slowed.”
• China détente: A Republican senator will deliver Trump’s America-first message to Chinese leadership in Beijing at a conference this weekend, expected to draw the CEOs of Western companies, including FedEx and AstraZeneca, amid rising trade tensions between the two countries.

Markets

• Jay curve: The Federal Reserve is “not in any hurry” to start cutting interest rates, Chair Jay Powell said at yesterday’s news conference after the central bank held rates steady. The Bank of England also held rates steady this morning.

Companies & Deals

• Eat now, pay later: Klarna, heading toward its IPO, struck a deal to offer installment loans to DoorDash delivery customers to “align with their paycheck schedules.” (I’m wary.)
• Steady state: Elon Musk’s X raised $1 billion in fresh equity at the same value of its 2022 buyout, Bloomberg reports. That’s not the math most private-equity investors are going for, but represents something of a win as advertisers trickle back to the platform.
• Re-Armament: SoftBank’s $6.5 billion deal for data-center processor maker Ampere brings expertise as SoftBank-backed Arm looks to launch its own chip later this year.
• Matter of convenience: 7-Eleven’s Japanese owner took the first step toward starting takeover talks with Canada’s Couche-Tard, which has been pursuing it for months. The talks, if successful, would build on recent Western M&A successes in Japan: KKR won out in a brewing battle with Bain for Fuji Soft in February, while activist intervention spurred a take-private for Toshiba in 2023.

Watchdogs

• Brussels vs. Big Tech: The European Commission is keeping the pressure up on Google and Apple, even as Trump lambasts the EU’s pond-hopping enforcement habit.
• Antitrust airbrush: The US Federal Trade Commission deleted blog posts critical of Big Tech, WIRED reports. The move — which scrubbed Biden-era articles like “Hey Alexa! What are you doing with my data?” — is a confusing data point from an agency that has so far toed its predecessors’ tough stance on consumer privacy and protection.

China’s global infrastructure push is being driven by green tech: More than three years after Chinese leader Xi Jinping pledged to stop building new coal projects abroad, the country’s Belt and Road Initiative is increasingly driven by renewables.

It would be easy to frame this trajectory geopolitically, Xiaoying You writes: China’s dominance over the hardware needed for the global energy transition gives it an advantage over the US. Yet its core is more prosaic: Chinese companies’ global footprints reflect the industrial landscape inside China.