Business

Biden administration announces almost $11 billion to bring clean energy to rural America

The U.S. Department of Agriculture announced a nearly $11 billion investment on Tuesday to help bring affordable clean energy to rural communities throughout the country.

Rural electric cooperatives, renewable energy companies and electric utilities will be able to apply for funding through two programs, U.S. Department of Agriculture Secretary Tom Vilsack said during a media briefing on Monday.

Vilsack said it was the largest single federal investment in rural electrification since President Franklin D. Roosevelt signed the Rural Electrification Act in 1936 as part of the New Deal.

This is an exciting opportunity for the Rural Utility Service to work collaboratively with our great partners, the Rural Electric cooperatives, in order to advance a clean energy future for rural America, Vilsack said. So this is an exciting and an historic day, and it continues an ongoing effort to ensure that rural America is a full participant in this clean energy economy.

The Empowering Rural America program will make $9.7 billion available for rural electric cooperatives to create renewable energy, zero-emission and carbon capture systems.

Jim Matheson, CEO of the National Rural Electric Cooperative Association, praised the administration for the investment.

This is an exciting and transformative opportunity for co-ops and their local communities, particularly as we look toward a future that depends on electricity to power more of the economy, Matheson said. USDA has smartly structured this program in a way that will help electric co-ops leverage new tools to reduce costs and keep energy affordable while meeting the future energy needs of their rural communities.

The Powering Affordable Clean Energy program will make $1 billion available in partially-forgivable loans for renewable energy companies and electric utilities to help finance renewable energy projects such as large-scale solar, wind and geothermal projects.

The Department of Agriculture said in a press release that the goal of this program is provide affordable clean energy to vulnerable, disadvantaged and Indigenous communities. But there is tension between building a clean energy infrastructure for all and mining the materials needed for that infrastructure.

For example, conservationists and Indigenous communities in Nevada have sued to block the opening of the largest mine planned in the U.S. for extraction of lithium used in electric vehicle batteries.

When asked about tribal concerns about mineral extraction at Mondays briefing, Vilsack said there would be a significant tribal consultation for mining projects on land his agency controls. But when pressed about what would happen if an Indigenous community said no to a mining project, he declined to answer the question, calling it hypothetical.

Rural electric cooperatives can apply for grants, loans and loan modifications through the Empowering Rural America program between July 31 and Aug. 31. The application period for the Powering Affordable Clean Energy program is June 30 Sept. 29.

Experts told The Associated Press that these programs could have a significant impact for rural America. The ERA Program has the potential to help rural electric co-ops and municipal co-ops move the needle toward a cleaner, less carbon-intensive electricity mix, said Felix Mormann, a professor of law at Texas A&M University who specializes in energy law and policy.

The programs will have relatively less impact on electricity growth in rural communities than the Rural Electrification Act during the New Deal, said Carl Kitchens, an associate professor of economics at Florida State University.

When enacted in the 1930s, only 10 percent of farms had electric power; by 1950, it had risen to over 90 percent, Kitchens said. Today, electricity is nearly universal except for a few small pockets and portions of reservation land.

Funding for the new programs comes from the Inflation Reduction Act, which has generated hundreds of billions of dollars for renewable energy transition and environmental cleanup. In February, the Biden administration announced details on how states and nonprofits could apply for $27 billion in funding from a green bank. The next month, officials announced $2 billion to create the Rural Energy for America Program.

And since the beginning of the year, theyve announced hundreds of millions of dollars for the renewable energy transition from climate-warming fossil fuels, environmental cleanup and climate mitigation in poor communities and communities of color.

Coinbase founder Brian Armstrong raises $40 million for NewLimit, a startup that wants to 'cure aging'

NewLimit, a startup that aspires to reverse aging by manipulating cells, announced on Tuesday that its raised $40 million in a Series A round from Kleiner Perkins and other venture firms, and from prominent individuals like former Google CEO Eric Schmidt and Y Combinator CEO Garry Tan.

The startup launched in late 2021 with the backing of Coinbase founder Brian Armstrong, who sold 2% of his holdings in the crypto company to invest an initial $110 million in the new venture alongside geneticist Blake Byers. The pair are two of four NewLimit cofounders.

While NewLimits mission to cure aging sounds akin to a modern day quest to find the mythical Fountain of Younth, recent breakthroughs in epigeneticsthe study of environments impact on genesmeans the project is not as fanciful as it sounds.

According to the NewLimit founders, the startup is exploring how to manipulate genes so cells that have flipped from young to old, which occurs as part of the aging cycle, flip back again, causing the body to display youthful traits. In an interview with Fortune, they explained that scientists know how to change a cells typesuch as instructing a brain cell to behave like a blood cellbut not its age.

Armstrong declined to make specific predictions about how many years this sort of research might extend human life, instead emphasizing that NewLimits focus is on health span not life spanthe goal is more quality of life than length of life.

The mission at NewLimit is to radically extend human health span, which is intending to give us more healthy years, Armstrong told Fortune. So, yeah, I think its important to make that distinction.

As for specifics of how the startup will go about this, Byers said the teams initial focus is on T-cells, which are integral to the immune system. Producing the research is capital intensive, and the company is planning to use its new funding round to hire scientists and pay for lab equipment.

NewLimit declined to provide any schedule for when the startup might begin commercializing its research, in part because its efforts are for now focused on foundational discoveries rather than developing products.

Armstrong, however, did suggest that NewLimit might partner with large biotech companies in the event any of its findings promise to have an immediate application. He added that, eventually, the ability to bring in revenue is a truth serum for startups to show they are viable.

He compared NewLimits efforts to those of the space exploration company SpaceX.

An analogy would be how SpaceX is trying to get to Mars. But theyre also able to get some satellites into orbit in the meantime. And that actually helps them on their journey to get to Mars because it helps them perfect the technology needed for the broader mission, said Armstrong.

Other investors in the Series A include the venture firms Dimension and Founders Fund, as well as serial entrepreneur Elad Gil and Coinbase cofounder Fred Ehrsam.

Peloton's former CFO takes on a new role at data-driven startup Alation

It was immediate. It was the first time I actually felt like my life and my work were kind of in harmony with one another. Thats what Jill Woodworth tells me about becoming a CFO and knowing it was her calling.

Woodworths first role as a finance chief was at the exercise equipment company Peloton Interactive. But in April, she joined the data-driven startup Alation, and the company made the announcement on May 11. In addition to finance, Woodworth is also in charge of IT and legal functions.

Alation CFO Jill Woodworth.

Courtesy of Alation

I just want to meet everyone, she says of her plans for the first few months. I want to understand what were doing well and where there are opportunities to improve. Woodworth was drawn to the company by its people and a unique opportunity to learn a new business model and enterprise software.

Alation, founded in 2012, completed a $123 million Series E funding round in late 2022, which brought total funding raised to $340 million to date. The up-round elevated the companys current valuation to more than $1.7 billion. The company is focusing on growing the business and not pursuing an IPO at this time, Woodworth says. In essence, Alations software can crawl an organizations databases in order to build data search catalogs, and automatically index the data by source. It uses machine learning to continually improve human understanding.

Woodworth compares how the platform works to Yelp, where you can conduct a simple search for a particular restaurant location, read reviews, and see what restaurants are the most popular. Alation is a platform that allows you to see from a crowd-sourced perspective what data and what queries are being used by the organization, she explains. You are able to select from data thats widely trusted and used by the organization, and you can see that visualization in the tool. Just like Yelp. Kind of like a Google platform.

Companies that use Alation include Pfizer, Salesforce, Robinhood, and Aon. Were already servicing over 450 customers across the worldLatin America, APAC, EMEAand we service 35% of the Fortune 100, Woodworth says.

Three lessons

Prior to joining Peloton in 2018, Woodworth worked in investment banking at Morgan Stanley and as a managing director at J.P. Morgan. She built a global finance team at Peloton to support the companys growth and led their IPO and several other capital raises.

At the height of the pandemic, Pelotons business performance was boosted by skyrocketing demand for at-home workouts, with its stock surging 350% and revenues jumping 172% in a single quarter, Fortune reported. But when this momentum couldnt be sustained, Peloton suffered a staggering fall. The companys problems led cofounder and CEO John Foley to step down in February 2022. Foley was replaced by Barry McCarthy, a former CFO at Spotify and Netflix.

Woodworth stepped down from her role in June 2022 and stayed on as an advisor through September. Peloton said in an 8-K filing that her departure is not the result of any disagreement with the company on any subject, including its operations, policies or practices. Woodworth tells me she made the decision to move on and seek new opportunities. Her successor, Liz Coddington, a former Amazon Web Services executive, began in June 2022.

Any learnings from both what went right and what went wrong at Peloton? A few things, Woodworth says. One thing, having managed Peloton through extreme growth, and obviously COVID exacerbated that tremendously, [regarding] wanting to really meet the consumer demand at the time, I really learned in retrospect the importance of balancing that growth while building that back office operational scale to be able to handle that growth. You cant really have one without the other.

She continues, You need to balance investments in your own technology stack and work with a team to develop scalable operating processes that will enable the company to grow in the future. And if you dont grow those things together, it makes it a bit challenging.

Another lessonwhat I did at Peloton and what Im doing [at Alation] with amazing talent is building a finance team that plays a critical role in company-wide decision-making by relying on data and financial analysis to understand where investments should be made, Woodworth says. Whats working well, whats not? How to fail fast and course correct.

And, I think it goes without saying, an important lesson is to keep a close eye on cost structure, regardless of where you are in your growth cycle, or what the investor mindset is at any given time, Woodworth says. In all economic client climates, I think its a responsibility to really make sure were managing risk and costs.

Although shes no longer with the company, Woodworth enjoys exercising on the equipment in her spare time. I love everything Peloton, she says. The Peloton rower, the treadmill, not so much the bike. Thats my husbands thing.

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Big deal

In the asset management sector worldwide this year, through May 2, private equity and venture capital firms announced $5 billion of investments across 43 transactions, S&P Global Market Intelligence finds. "With a strong private equity interest in the sector, it is likely the 2023 full-year aggregates will match private equity investments in asset management in 2021 and 2022," according to the report. In the first quarter of 2023 alone, the asset management companies pulled in $4.89 billion across 30 deals, the research found.

Courtesy of S&P Global Market Intelligence

Going deeper

A study in the Journal of the American Heart Association found that U.S. workers who experienced workplace discrimination correlated with an elevated risk of hypertension. "The adverse impacts of discrimination on cardiovascular disease have major implications for workers' health and indicate a need for government and employer policy interventions addressing discrimination," according to the study. The researchers tracked 1,246 workers for about eight years. During that period, they measured instances of workplace discrimination and hypertension.

Leaderboard

Nchacha E. Etta was named EVP and CFO at Omnicell, Inc. (Nasdaq: OMCL), a maker of automation systems for hospitals and pharmacies, effective June 1. Etta succeeds Peter J. Kuipers, who, as previously announced, will be stepping down from the role. Kuipers will remain with the company through July 1 for a transition process. Etta has more than 20 years of experience leading global finance organizations. He most recently served as CFO of Essilor of America, Inc., a subsidiary of EssilorLuxottica SA. Before that, Etta served as the Worldwide VP and CFO of Johnson & Johnson Vision. He has also served in several financial roles of increasing responsibility at The Coca-Cola Company, Microsoft Corporation, and Eli Lilly and Company.

Steve Weber was promoted to CFO at FICO (NYSE: FICO), an analytics software company. Weber was named interim CFO in January 2023, succeeding Michael McLaughlin. FICO retained a global executive search firm and executed a search before selecting Weber, according to the company. Before taking on the interim CFO role, Weber served as the companys VP, treasurer, tax and investor relations. At FICO, he has served as head of FP&A, and has led several public bond issuances, managed syndicated bank lending, stewarded due diligence and integration for mergers and acquisitions and guided strategic financial planning.

Overheard

"My baseline case is we wont be really thinking about cutting [rates] till well into 2024. In my world, inflation doesnt come down that quickly and in that regard, cutting rates doesnt really fit into that scenario."

Atlanta Fed President Raphael Bostic told CNBCs Squawk Box in an interview Monday.

Wall Street bear Mike Wilson warns stock market is headed for 'lose-lose' debt ceiling outcome

A Wall Street stalwart is expecting some sharp swings in the equity market as the clock ticks down until an agreementor defaulton the debt ceiling.

The U.S. is edging closer to its $31.4 trillion borrowing limit every day and is supposedly on track to run out of cash by the first day of Junean outcome which would be catastrophic according to Treasury officials, politicians and financiers alike.

With conversation between President Biden and the GOPs Congressman Kevin McCarthy ongoing, all Wall Street can do is hope.

Morgan Stanleys Mike Wilsona staunch bearhas warned investors in the equity market that some sharp swings will be on the cards.

Wilson, ranked the best portfolio strategist in the 2022 Institutional Investor survey, said most clients believe it [the debt ceiling] will ultimately get resolved but not without some near-term volatility with the majority believing the event is a lose-lose for markets.

The strategist outlined that Wall Street would still be hit even if the debt ceiling was lifted because it could potentially squeeze liquidity and push the S&P 500 even lower, given the indexs sensitivity to changes in liquidity in recent history.

Morgan Stanleys historic data revealed that utilities and energy stocks have fared the best during previous debt ceiling standoffs.

Following past resolutions, health care, consumer staples, technology and dividend growth have bounced back well, the data added.

Wilsonwho correctly called the U.S. stock downturn last yearadded: the market is speaking loudly under the surfaceit is bracing for further macro and earnings disappointments.

Such uncertainty is deterring investors from making a wager on underperforming stocks like regional banksdespite it being a bet Big Short investor Michael Burry is willing to take.

Burrys hedge fund Scion Asset Management snapped up $2 million worth of First Republic stock at the end of the first quarter, according to regulatory filings, before it was bought out by JPMorgan Chase.

Wilsons note seen by Bloomberg adds the current White House impasse isnt the only thing the market will need to navigate.

Although earnings reports in the first quarter havent been hit as hard as expected, Wilson added he remains bearish in the longer-term on full-year profits amid slowing economic growth.

What Wall Streets saying

Wilsons sentiments were echoed by Jean Boivin and Wei Li, strategists at the BlackRock Investment Institute, who said they expect to see market volatility in the run up to the showdown on the debt ceiling issue.

Elsewhere on Wall Street JPMorgan is similarly projecting a major stock market meltdown in the final days of May if an agreement isnt reached.

JPMorgans Asset Management chief global strategist David Kelly added that markets should recover quickly, saying: It is best not to think of the debt-ceiling crisis as a potential rerun of the Great Financial Crisis.

Restoring confidence in the U.S. banking system in the wake of the subprime crisis was an immensely complicated and uncertain task, he explained. By contrast, recovery from a debt-default crisis would likely start the day Congress, belatedly, suspended the debt ceiling.

Bank of America has similarly been preparing for a default for months, with CEO Brian Moynihan saying: Hope is not a strategy.

In February he told CNN: Its a political process and theres got to be an argument about how we make sure we live within our means as a country, and that arguments going to go on.

How to prevent quantum-A.I. hybrids from taking over the world

The 21st century is the Quantum Age. Although it will be several years before general-purpose quantum computers become a reality. Hybrid emulations harnessing quantum phenomena on classical hardware are already entering the market, both domestically and internationally.

The liberal democratic values we must adhere to as we develop quantum technology (QT) responsibly while maintaining freedom as we know it in the free world contrast with the technologys likely uses by regimes with far less regard for fundamental human rights.

In addition to the existential importance of collaborating on broad items such as climate change, equality of opportunity, and preventing A.I. from taking over, the free world must support democratic values in any race for technological dominance.

As quantumA.I. hybrids become more prevalent, business and government leaders must seize the moment to connect with experts in research and innovation as well as the general public, in an effort to establish ethical standards, accountability, and responsible technology frameworks for quantum-powered solutions, including quantum-classical synergies.

From any major technological advance arise important considerations of justice, benefit, and risk. The enormity and rapid pace of QT-enabled advances, and their extraordinarily counterintuitive nature, make some such concerns especially important and urgent.

Real-world interactions between quantum and classical computing are enabling remarkable advances in a variety of fields, including quantum chemistry and spectroscopy, quantum biology, novel drug design, quantum minerals and mining, novel materials for aerospace engineering, logistical optimization problems, clean energy, and weather forecasting. Important business opportunities lie ahead in these domains.

However, quantum computing equally poses imminent threats, the most widely understood of which may be its threat to cybersecurity and data privacy as presently implemented.

Stakeholders worldwide are currently considering how to balance the expected benefits of QT against its risks and threats. Many are taking account of existing Responsible Research and Innovation (RRI) principles, whose four main pillars are responsiveness, inclusivity, reflexivity, and anticipation. It holds that scientific and technological breakthroughs should emphasize social norms and ethical values, environmental sustainability, and public involvement as much as they do scientific brilliance and economic rewards. It encourages the integration of societal concerns into the entire researchdevelopmentinnovationadoption process, from initial explorations to distribution and use of findings.

In this context, a Stanford-led interdisciplinary research groupcomprising scholars in law, data science, theoretical physics, philosophy and ethics, social sciences, materials science and engineering, and innovation policyhas proposed a novel guide to research and development.

The guide, Responsible Quantum Technology (RQT), seeks to actively steward QT toward equitable outcomes, mitigate risks, and encourage an interdisciplinary approach to quantum R&D. It embeds the key principles of responsiveness, inclusivity, reflexivity, and anticipation alongside ethical, legal, socioeconomic, and policy implications. Its aim is to ensure that research and innovation efforts meet societal expectations and enhance planetary welfare.

The RQT framework may provide policymakers with a basis for designing timely regulatory interventions that will promote responsible quantum innovation in order to protect citizens rights and safetyan opportunity we missed in the fields of A.I. and nanotechnology. Such norms, standards, and regulations must accord with a liberal-democratic vision of a free world, with a basis in civil liberties, human rights, and the rule of law.

In a second paper, the same research group reached 10 Principles for Responsible Quantum Innovation, with the ultimate goal of safeguarding, engaging, and advancing quantum technologies, society, and humankind. With their guidance, tools of technology-impact assessment, using appropriate RQT benchmarking metrics to monitor, validate, and audit quantum applications throughout their life cycle, can complement hard laws, including certification, and help anticipate problems.

The timing of interventions in novel general-purpose technologies is tricky. Its called the Collingridge dilemma: the near-impossibility of striking the right kind of regulatory intervention at the right moment, between a technologys ideation and its adoption. Ideally, we would create a system that encourages rapid advances all while meeting the concerns underlying the precautionary principle.

The key to safeguarding society in advancing quantum technology is to stay ahead of the game. In a thriving, values-based quantum ecosystem, a triple helix of industry, academia, and government must focus on public-private partnerships, train tomorrows quantum workforce, and enable a vibrant quantum-A.I. ecosystem to produce several strong national champions in areas such as computation, sensing, simulation, and communicationwhile focusing on and investing in sustainable development goals.

The nuclear industry has taught us that the existence of a technical possibility doesnt always warrant pursuing it.

Significant promises and perils exist in both the nuclear and quantum realms, many intersecting with geopolitical uncertainty and macroeconomic unpredictability. Countless industrial catastrophes demonstrate that we must employ modern system-safety engineering approaches rather than rely on reductionist risk-assessment tools, whose inability to handle emergent properties makes them unfit for analyzing the risks of complex systems.

Multidisciplinary embedded responsible quantum technology offers significant competitive advantages and the capacity for exponential innovation.

In a culture of openness, trust, and mutual understanding, embracing responsible quantum technology will enable us to actively navigate toward beneficial societal outcomes on a planetary scalewith our eyes wide open.

Mauritz Kop is a fellow and visiting quantum and law scholar at Stanford University, director at AIRecht.nl, and general counsel at Daiki, a company committed to building a trustworthy A.I. future. Vivek Wadhwa is an academic, entrepreneur, and author. His book ,From Incremental to Exponential, explains how large companies can see the future and rethink innovation. The authors thank John Harvey for his excellent editorial support.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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Carl Icahn faces probe after Ponzi scheme allegations

Icahn Enterprise LPs disclosure of a May 3 inquiry from federal prosecutors in New York sent the companys shares reeling, but its far from the first time Carl Icahn has faced a government probe.

If the US attorneys office for the Southern District of New York is examining the allegations made about Icahn Enterprises by short seller Hindenburg Research, however, that could be a far more sweeping probe than even the one into Icahns ties to Ivan Boesky, legal experts said.

The US attorneys office has not said what triggered the information request. But it came one day after Hindenburg released its report accusing Icahn Enterprises of greatly inflating its asset valuations. The short seller likened the firm to a Ponzi scheme, saying it paid an unjustifiably high dividend to existing investors by bringing in new ones drawn both by Icahns reputation and the dividend.

Icahn Enterprises said last week that its complying with a request for information on its corporate governance, securities offerings, dividends and due diligence, among other materials and noted that prosecutors had made no allegations against Icahn or the firm. Lawyers for Icahn Enterprises declined to comment on Monday.

Former federal prosecutor Sam Amir Toossi said it would make sense for the Southern District to look at the Hindenburg claims.

Hindenburg is accusing the asset management company of inflating the valuations by as much as 70%, and theyre using the term Ponzi scheme, so of course the US attorneys office is going to look into that and lob a subpoena and see what they find, he said. Of added concern, Toossi said, was that Hindenburg suggested retail rather than institutional investors were being harmed.

Public Harm

When the public could be harmed, its definitely more of interest to a federal prosecutor, he said. I would argue it would weigh in favor of being a bit more aggressive.

Prosecutors rarely disclose the status of inquiries that dont advance to criminal charges. If the Southern District decides not to pursue a fuller investigation after Icahn Enterprises responds to its information request, the office is unlikely to issue a statement to that effect. The matter will simply be dropped, as has happened a number of times in the past with Icahn. who has never been charged with a financial crime.

Icahn first rose to fame in the 1980s as one of the original corporate raiders, famously acquiring Trans World Airlines in a hostile takeover and then selling off its routes and other assets. During that time, he frequently rubbed shoulders with figures like Boesky and Michael Milken.

As detailed in James Stewarts Den of Thieves, Icahn and Boesky in 1983 both acquired stakes in Gulf and Western Industries Inc., the conglomerate that then owned Paramount Pictures. Boesky later named Icahn to prosecutors investigating the unsuccessful takeover bid as possible market manipulation. Another Boesky associate, John Mulheren, was later convicted for his role in the Gulf and Western transaction, but the probe of Icahn didnt advance past the subpoena stage.

In more recent times, Icahns name came up in a 2014 insider-trading investigation that led to the conviction of Las Vegas gambler Billy Walters. At trial, Walterss primary broker said that Walters got most of his trading ideas from Icahn. Icahn, who wasnt accused of wrongdoing, told Bloomberg TV at the time that he has never given out inside information.

Southern District prosecutors have also looked at whether Icahn took advantage of a longtime friendship with then-President Donald Trump, whose administration he joined as an unpaid special adviser. In November 2017, Icahn Enterprises revealed in a regulatory filing that Manhattan federal prosecutors had issued it subpoenas seeking information on whether Icahn had sought to influence environmental policy in a way that would benefit CVR Energy Inc., an independent oil refiner in which he owns a majority share.

Though he left his White House role amid the criticism, Icahn said he never had access to confidential information, didnt profit from his position and said his advocacy was rational given that he owned a stake in a refinery.

Trump Tariff Plans

In May 2019 Icahn revealed in another filing with regulators that Southern District prosecutors sought information about his sale of shares in Wisconsin crane manufacturer Manitowoc Co. to determine whether he profited from nonpublic information about US plans for tariffs on imported steel while he was Trumps adviser. Icahn said he had no knowledge of tariff plans before his company sold more than one-third of his stake in the company.

In both instances, Icahn Enterprises said it was complying with the requests. Its not clear if anything came of either inquiry.

Rather than focus on a specific transaction, the Hindenburg report, alleges Icahn Enterprises engaged in a lengthy pattern of mismarking the value of its assets.

Southern District US Attorney Damian Williams has made cracking down on mismarking the use of questionable methods to make illiquid and private assets look more valuable than they are a major focus of the office. In recent years, Southern District prosecutors have brought several cases over such conduct against hedge funds, private equity funds and family offices.

Intentionally Inflated

Hindenburg cited CVR in its report as an example of Icahns alleged asset valuation inflation. According to the short seller, Icahns valuation for the company, its second-largest holding, fails to account for a cyclical decline in refinery margins as well as major drop in the price of fertilizer, a major product for CVR.

Southern District prosecutors have previously investigated claims Hindenburg made about another company. Nikola Corp. founder Trevor Milton was convicted of fraud in October for exaggerating to investors the capabilities of the companys debut electric truck.

Toossi said any prosecution stemming from Hindenburgs allegations about Icahn Enterprises wouldnt be an easy case to bring though.

Valuation cases are hard to make because a prosecutor has to show that the valuations are intentionally inflated, he said. Its not enough to say that theyre wrong. Its not enough to say they are not well-grounded or not well-reasoned. You really have to show there is an intent to inflate them, to juice the stock price or whatever the case may be. In any white collar case, intent is the hardest thing to prove.

Warren Buffett completely sells his TSMC stake

Warren Buffett, known for his long-term investing philosophy, changed his mind on one multi-billion dollar investment in just a matter of monthsand its all thanks to geopolitics.

In a stock filing on Monday, Berkshire Hathaway revealed that it had sold its entire remaining stake in Taiwan Semiconductor Manufacturing Company, exiting an investment the company had disclosed just six months earlier.

Last November, Berkshire Hathaway revealed that it purchased 60 million American depository receipts in TSMC, worth about $4.1 billion, in the preceding quarter.

Yet Buffett quickly soured on the company. Just one quarter later, Berkshire Hathaway revealed that it had dumped 86% of its total stake.

In an interview with Nikkei Asia in April, Buffett admitted that geopolitical tensions were a consideration in selling the shares in TSMC.

Berkshires CEO has continued to be concerned about Taiwan as an investment destination since then. I feel better about the capital that weve got deployed in Japan than in Taiwan, Buffett said at the companys annual shareholder meeting earlier this month, referring to Berkshire Hathaways recent investments in major Japanese trading companies.

That is the reality, and Ive reevaluated that in the light of certain things that have been going on, he said.

Still, Buffett praised TSMC, calling it a fantastic enterprise and that theres nobody in the chip industry thats in their league during the annual meeting.

Geopolitics

China claims sovereignty over the island of Taiwan, considering the territory a renegade province. Beijing has threatened to use force if Taiwan unilaterally declares independence as a separate country.

U.S. politicians have suggested that the country should build closer relations with Taiwan as relations between Washington and Beijing get worse. Both current U.S. Speaker of the House Kevin McCarthy and his predecessor Nancy Pelosi have met with Taiwan president Tsai Ing-wen in the past year, despite complaints from Beijing.

Beijing criticizes any attempt to treat Taiwan as a political entity separate from China, and the countrys military conduct drills near the island in what are widely seen as protests against actions taken by Taiwans government or its allies.

Buffetts concerns have dinged TSMCs stock, with shares in the chipmaker down around 7% since Buffett first revealed he was selling his shares in mid-February. (The broader Taiwanese stock market has been flat over the same period.) Yet hedge funds like Tiger Global Management added TSMC shares to their holdings last quarter, notes Bloomberg.

The semiconductor industry is going through a slump due to a crash in demand for consumer electronics. In late April, TSMC forecast as much as a 16% drop in revenue for the current quarter and a low-to-mid-single digit decrease in sales for the whole year.