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“Without vision, even the most focused passion is a battery without a device.” – Ken Auletta

Chart of the Day

Good morning!

Last week, we wrote about how IPOs did not explode out of the gate as anticipated after President Donald Trump returned to the White House. However, we noted that there were signs this might be starting to change. But that was the U.S.

Every dog has his day, and the Hong Kong Stock Exchange appears to be having at least a good morning of it – after several years of lackluster listing activity. The largest share offering in the world this year took place in HK, with the debut of Contemporary Amperex Technology Company – CATL, China’s largest manufacturer of batteries for electric vehicles. Though CATL shares have been traded on the Shenzhen Stock Exchange since 2018, the company’s May 20 secondary offering (135 million shares) on the Hong Kong Stock Exchange raised about $4.6 billion, surging 16% on the first day as investors flocked to a company that reported a 38% market share for electric vehicle batteries in 2024. The company’s battery technology is used in electric vehicles made by Tesla, Volkswagen, BMW, Mercedes-Benz, Ford, Toyota, and Honda. 

We have written previously about the expanding global need for advanced batteries, not just for the transition to electric vehicles, but to meet the surging global demand for electricity driven by growth in AI and cryptocurrency. Meeting this demand will require the expanded use of renewable energy sources alongside more traditional fossil fuels, with neither alone likely to suffice. 

Many observers have noted that China has a significant technological lead over the U.S. when it comes to battery technology, and CATL is a large part of that. The company boasts a battery that reportedly can deliver a range of up to 320 miles with just a five-minute charge, as well as technology that charges rapidly even in cold weather (from 5% to 80% in 15 minutes at 14 degrees Fahrenheit). The company also recently announced that its sodium-ion battery is set to begin mass production. (Sodium ion batteries are no panacea, but they do offer several key advantages – perhaps the most obvious of which is that sodium is far more prevalent and less expensive than lithium.) With this latest share offering, CATL hopes to expand into Europe, something that it could find easier to do amid cooling U.S.-Europe trade relations and waning U.S. support for green projects such as power-storage technology. (This seems like a good time to point out that CATL has long been heavily subsidized by the Chinese government, and is alleged to have ties to the Chinese military. That does not, however, make the company’s technological lead any less real.)

Nevertheless, U.S. companies recognize the technology gap and are working to close it – with or without help from the current administration. A raft of startups are working on new technologies to improve energy density and extend batteries’ useful life.

Large corporations are working on the problem as well. Last month, GM announced that, via a partnership with LG Energy Solution, it had developed lithium manganese-rich (LMR) prismatic battery cells that will offer significantly higher energy density (i.e., more power in a lighter/smaller battery) at a likely lower cost. GM’s announcement follows a similar one from Ford a month earlier. Both companies appear to have solved the durability problems that had previously plagued such technology. 

Meanwhile, the states of California and Texas are busy boosting their battery storage capacity, aiming to better take advantage of the abundant sunshine the states enjoy. In addition to helping to meet the growing demand from AI and crypto, the power-storage industry has reportedly helped to prevent blackouts and brownouts even during heatwaves. 

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📧✍️Here’s what a reader commented📧✍️

Question:  Should AI be regulated on a federal level, by states and local governments, or not at all?

Answer: Answer: If you have 50 different sets of regulations for AI, the U.S. will lose its leadership in AI.  There needs to be oversight, but that should be by Congress.  The question is if Congress is capable of doing anything anymore.

Catch up with FS Insight

Last week, eruption of the feud between President Trump and Elon Musk escalated into public theater. However, the VIX did not surge meaningfully, so markets do not seem to be too concerned.

Technical

Friday’s upward thrust in SPX was encouraging towards expecting that a bit more upside is likely in SPX into this week. However, my short-term view is that the near-term upside progress should be limited.

Crypto

Our current bias favors ETH over BTC and BTC over SOL. After the Pump.fun launch, we will likely flip to favoring SOL over BTC.

News We’re Following

Breaking News

• LA protests live: Protesters told to leave downtown Los Angeles as Trump says ‘bring in the troops’ BBC

Markets and economy

• US, China to resume trade talks in London with focus on rare earths BBG
• China consumer prices slump again, deepening deflation worries as demand stays weak CNBC 
• Junk bond sales surge as companies try to beat fresh tariff uncertainty FT 

Business

• Apple WWDC event likely highlights company’s challenges SEM
• Warner Bros. Discovery plans split into two public businesses BBG
• Sixth Street-backed Caris Life Sciences targets $5.3 billion valuation in US IPO REU
• WPP chief steps down as advertising group struggles with rise of AI FT

Politics

• Trump says relationship with Musk is over BBC 
• Senate Republicans revise ban on state AI regulations in bid to preserve controversial provision AP
• ABC suspends Terry Moran for calling Stephen Miller a ‘world-class hater’ NYT 

Overseas

• Putin unleashes a summer offensive to break Ukraine ECO
• Miguel Uribe Turbay: Colombia presidential candidate shot in head BBC 
• US raises concern over plan for Chinese embassy in London FT 

Of Interest 

• Ancient DNA reveals mysterious Indigenous group from Colombia that disappeared 2,000 years ago LS