👀 Bugged

SCOREBOARD

Monday close. S&P up 0.4%, with Amazon up 5.0% after a Morgan Stanley top-pick call and chip stocks bouncing. On the week: Nvidia −4.1%, S&P −1.5%, Nasdaq −3.0%. Prices via CNBC.

ON WATCH

A San Francisco federal judge ordered former OpenAI engineer Abdulrahman Alfozan held without bail on Monday. He's accused of hiding a recording device in an executive conference room where, prosecutors say, "OpenAI executives met with government officials."

Court filings say he was in frequent WhatsApp contact with a member of the Saudi royal family who tried to recruit him to a Saudi AI initiative. The royal once wrote "Saudi needs you more then [sic] the US!", and Alfozan replied "100."

After his arrest, his wife and son flew to Qatar on a business-class ticket prosecutors say a member of the Saudi military paid for. The Saudi consulate in Los Angeles offered to cover his bail.

"Once he leaves, there's no getting him back," Judge Alex Tse said. The US and Saudi Arabia have no extradition treaty, and prosecutors say his conduct "could pose a danger to the national security of the United States."

His lawyer, William Pernik, says it was "an open room where anyone could walk in" and that "OpenAI encouraged Mr. Alfozan to be involved with Saudi Arabia."

In fairness, he's charged with one count of illegal eavesdropping, not spying or theft of secrets. OpenAI says it has no indications he took model weights, source code or customer data.

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THE MACHINE

The cost of insuring SoftBank's debt against default hit a four-year high on Tuesday, according to Bloomberg data. Its five-year credit default swaps reached 432 basis points, up more than 30 in a week.

Let Meerkat translate. A credit default swap is insurance against a borrower not paying, and 432 means about 4.3% of the debt a year for that cover.

The worry is how much SoftBank has borrowed for AI. On 1 October it finished paying for a $64.6 billion stake in OpenAI, helped by a record $11.1 billion junk-bond sale paying up to 9.75%.

It's also reportedly weighing an $18 billion takeover of security firm Allied Universal. And OpenAI is racing to raise $30 billion more before Anthropic lists, with SoftBank in talks to join, Reuters reports.

The case against the panic is that the OpenAI stake is worth far more than SoftBank paid. Its roughly 13% comes to about $110 billion at OpenAI's March valuation of $852 billion, and the new round is pitched above $1.4 trillion.

SOMEONE SMART SAID

Microsoft sells AI agents to businesses. On Monday the head of its security business told those businesses to treat the agents like insider threats, the way a bank treats a staff member with keys to the vault.

Say it back simply. If you give an AI agent access to your systems, plan for the day it uses that access badly, whoever built the model.

Microsoft sells both the agents and the tools to watch them, so it has a commercial reason to say this. It's still rare for one of the biggest AI sellers to put "cannot be trusted" in writing about what it sells.

THE CHART

The Philadelphia Semiconductor Index fell eight sessions in a row through Friday, its longest losing run since October 2008, and finished about 15% below where it started. Traders were selling on worries about how long the AI spending lasts.

Set against that, this chart shows what the chips actually earn. Nvidia's data-centre sales went from $15 billion in its 2023 financial year to $194 billion in the year to January 2026, nearly thirteen times as much.

HEADS UP

ON THE HORIZON

MEERKAT ON YOUTUBE

OpenAI's $1 Trillion Bet Is Going Horribly Wrong! OpenAI is spending around $1 trillion on a machine it hopes will one day work out how to earn that money back. Meerkat walks through the plan, and what happens if the money never comes home. Watch on Meerkat Explains.

THE BURROW

Quick vote. Prosecutors say a Saudi royal tried to recruit a fired OpenAI engineer (Business Insider). Who should guard the AI labs' secrets?

Trivia. In a 1983 film, a teenage hacker breaks into a US military computer and nearly starts a nuclear war while thinking he's playing a game. What's the film called? Answer's at the bottom of the email. No peeking.

ALSO WORTH YOUR INBOX

The daily crypto brief from the same burrow. Crypto Nutshell is Bitcoin, the news and the numbers in a five-minute read.

HOW DID WE DO?

One tap, and Meerkat listens. How did today's issue land? Hit a button, and add a line if you want to tell Meerkat why.

Meta and Tesla report tomorrow after the bell. That's two more chances for the chip bounce to stick.

Anyone you know letting an AI agent loose on the company files? Forward them this.

Meerkat is not a financial adviser, and nothing here is advice. Meerkat is a small animal with a whiteboard and a second-hand Pepper robot from SoftBank. Please do not sue Meerkat.

TRIVIA ANSWER

WarGames. Matthew Broderick plays the hacker, and the computer, WOPR, only stops when it learns that some games can't be won. More here.