WSJ What’s News - The Tech Rally Appears to Be Fading

Episode Date: August 25, 2025

A.M. Edition for Aug 25. The prospect of September interest rate cuts gave markets a boost late last week, but as the tech slide continues, WSJ finance editor Alex Frangos explains why investors are being more cautious of the Magnificent Seven. Plus, Eric Trump tells WSJ’s Vicky Ge Huang that the decision by some banks to close family business accounts after the Jan. 6 riot at the U.S. Capitol drove him to explore cryptocurrencies. And, Keurig Dr Pepper strikes an $18 billion deal to buy coffee company JDE Peet’s. Azhar Sukri hosts. Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Wendy's most important deal of the day has a fresh lineup. Pick any two breakfast items for $4. New four-piece French toast sticks, bacon or sausage wrap, biscuit or English muffin sandwiches, small hot coffee and more. Limited time only at participating Wendy's taxes extra. Ahead of InVidio's earnings this week, we look at whether the tech rally is starting to fade. Plus, how banks and Eric Trump helped to drive the first family's rapid entry into the cryptos. auto currency business. The Trump family's crypto empire is really expanding at a rapid pace, and it seems like every couple of months there is a new project on the horizon.

And Kyrig Dr. Pepper says it's spinning off its coffee and soda businesses after snapping up arrival. It's Monday, August the 25th. I'm Azhar Sukri for the Wall Street Journal. Here is the AM edition of What's News, the top headlines and business stories moving your world today. After Federal Reserve Chair Jerome Powell opened the door for rate cuts in September on Friday, sparking a rally that boosted sectors, including real estate, banks and manufacturers, investors are wondering what's next for the tech rally, which has been showing signs of losing steam.

Wall Street's most popular stocks, the magnificent seven tech giants, have been hit recently by questions about the potential for AI, concerns about their increasingly stretched valuations and competition from other market sectors. Journal European Finance editor Alex Frangos says the data shows how individual investors, often the most enthusiastic fans of tech firms, have grown more cautious. Individual investors did really well in the kind of trade war panic. They stuck to their guns and rode a lot of these Mag7 stocks higher. You know, now some of them are getting excited about non-AI parts of the economy that are doing really well in an environment where, you know, interest rates start to come down, especially things like real estate or other debt-intensive industries.

So starting to see some people move into those sectors. Alex adds Nvidia's upcoming earnings on Wednesday mark a key test for the tech sector. Well, I mean, Nvidia is the kind of 800-pound gorilla, or the $4 trillion dollar gorilla, most valuable company in the world. and its chips are what's powering all of these AI models to develop themselves and offer their services. And so what everyone's looking for is like, what's their outlook? Not only are they meeting the incredible high expectations that people have for selling their chips, but what are they seeing in the future in the next three, six, nine, twelve months in terms of demand for what they make. We are exclusively reporting that Kyrig, Dr. Pepper, has struck an agreement to buy

European coffee firm J.D.E. Peets for roughly $18 billion. After the deal closes, Kyrig Dr. Pepper plans to reverse the 2018 merger of Kureig and Dr. Pepper by separating into two U.S. listed companies, one focused on coffee and the other on refreshment beverages, including Dr. Pepper and Seven Up. Kurek Dr. Pepper's coffee business has long struggled as competition among coffee companies has heated up. However, the company reported, some improvement in the most recent quarter for its coffee segment, with CEO Tim Kofa saying the deal is happening at a time of financial strength for the firm. The Trump family's crypto footprint seems to be ever growing these days,

and much of that can be attributed to the president's son, Eric Trump. The 41-year-old has been at the forefront of the first family's rapid entry this year into the world, of digital assets, which has so far spanned meme coins, a stable coin, Bitcoin mining, and other crypto ventures. A stake in one firm, World Liberty Financial, was recently valued at $4.5 billion. But in an interview with the journal, the younger Trump told reporter Vicky Gouang, he once shared the president's early skepticism of cryptocurrencies. He said he really started to sort of realize the potential of crypto. after the Jan 6th riot in 2021.

And that was when several banks that the Trump organization did business with closed hundreds of accounts that the family had with those banks. And he believed those accounts were closed for political reasons. And this has actually become a phenomenon known as debanking. And it has really become a rallying cry within conservative circles these days. But Vicky says ethics lawyers have lambasted the Trump family's crypto endeavors. So most critics, ethic lawyers and government watchdogs have really criticized President Trump's involvement in these crypto ventures because he's sort of regulating or setting regulations for this very new industry while also participating in the industry and benefiting from it.

These critics have said that this is sort of an unprecedented conflict of interest and blurring. of the lines between his presidential duties and business interests. White House press secretary Caroline Levitt said, quote, the media's continued attempts to fabricate conflicts of interest are irresponsible, adding the president nor his family have ever engaged or will ever engage in conflicts of interest. We've left a link to the interview with Eric Trump in our show notes. Coming up, Europe's economic and cultural dynamism goes back centuries, but today the continent is losing economic, military, and political clout.

That story after the break. Why just survive back to school when you can thrive by creating a space that does it all for you, no matter the size. Whether you're taking over your parents' basement or moving to campus, IKEA has hundreds of design ideas and affordable options to complement any budget. After all, you're in your small space era. It's time to own it. Shop now at IKEA.ca.

Now, whether it's per capita GDP, the share of global stock market valuations, military prowess, or even the number of rocket launches, Europe lags behind the US, and a combination of red tape, an aging population and the war in Ukraine mean that economic prospects for the continent appear bleak. to the point where the journal's UK bureau chief, David Luno, writes that Western Europe's share of global economic output is now likely its lowest since the Middle Ages. David, how did the region get here given the fact that it gave the world the Renaissance, the Industrial Revolution and, more recently, candy crush? So we're accustomed to sort of Europe punching above its weight. And I think after World War II, there was this extraordinary period of peace where the continent tried to get past its all divisions, came together in what became the European Union, broke down barriers to trade. It had favorable demographics. So it really boomed and it sort of regained its footing as really among the leaders of the world. But in the last two decades, it lost that footing. For a lot of reasons, some of them sort of structural. It's the continent that's getting older. Europeans are quite a bit older than Americans. So going forward, there's just going to be a lot more retirees and fewer working age people to pay for them. But along the way, Europe has just sort of hit the limits of its economic model, really.

Just in the last 15 years, the number of EU regulations have doubled. So, you know, it had a pretty good run there for a while. Recently, it kept going through a combination of cheap energy from Russia, through the Germans really sending a lot of industrialized exports to China, which was growing fast. and through Americans kind of subsidizing their security. So Europeans were spending a lot less on defense, spending more on welfare, and all three of those things are now gone. And so Europe finds itself, you know, the tide has gone out and we see Europe's kind of naked. The economic growth has just stopped.

Yeah. I mean, Europeans might argue, as you say, that they're comfortable with high levels of regulation compared to the U.S. if it means that they have tighter environmental controls, for example, or cheaper health care. How sustainable are these levels of government spending and red tape? Do Europeans need to just accept that debt levels are too high and that governments will have to make deep cuts? Yeah, I mean, both the U.S. and Europe right now have really enormous quantities of debt. The difference is America has a reserve currency in the dollar and it's growing.

But if you're not growing, then suddenly your debt problems become pretty big, pretty fast, especially if yields start to rise and lenders start charging you more. So here in the UK, the UK is now spending a good $150 billion a year just on interest for its income. That's about two times defense spending. So if you're going to try to raise defense spending to try to scare off Russia in any kind of future conflict, where's that money going to come from? Because that interest bill is just going to keep growing. So it's sort of time for some hard choices. But again, it's been very difficult for governments to make these choices.

Let's talk about perhaps one success story. And I mentioned Candy Crush, and perhaps Sweden is an example of maybe one country in Europe that has gotten it right from a policy perspective. What have they done right that the rest of the region could learn from? Sweden in the American popular imagination is sort of the poster child of the European welfare state. Americans still think of Sweden as this incredibly high tax, generous welfare state. It still is high tax, but they've taken some sensible decisions. They've started to pare back a bit of their welfare state, revamp pensions, for example, and lower taxes on businesses, that's created a little bit more of a dynamic economy. They're not booming, but they're certainly doing a lot better than some of their peers in Europe.

And I just want to end on the fact that a lot of Europe's economic growth of the last few decades has been predicated on exports of manufactured goods. given Europe's vulnerabilities, as we've been saying, are we likely to continue to see the US, for example, being able to dictate its terms to the EU on economic and possibly other matters like security? Yeah, I think the short answer is yes, unless if you don't have enough of a growing economy, if you don't have enough military power, then your diplomacy and your ability to shape world events is just going to decline in tandem with those. So we've seen that with tariffs, China was able to very much push back on the Trump tariffs, and that has yet to shake out, but Europe did not. And right now you're in a situation where European companies are going

to be paying higher tariffs to the U.S. than U.S. companies will be paying it to Europe. It's shocking to me that Europe accepted that, but that's the situation it finds itself unless it decides it is really going to get its act together and become a more meaningful player in the future. You know, in the Ukraine war right now, you largely have the U.S. and Russia negotiating about a war that is on the EU doorstep that has torn a scar of several thousand miles across European landscape. And yet Europe is a supporting actor in this at best. So as far as the European Union goes, deepening integration, having some joint capital markets, making it easier for companies to do business across other European countries would unleash more productivity.

Working together in the defense space might do that. And I think a unified Europe, a strong Europe, good for the world. And I think a world with European sensibilities in it is good for the West. It's good for America. So they should be cheering for Europe. Journal UK Bureau Chief, David Luno. Thank you very much indeed. It's a pleasure. And that's it for what's news for this Monday morning. Today's show was produced by Kate Bullivant. Our supervising producer was Daniel Bark. I'm Azhar Sukhri for the Wall Street Journal. We'll be back tonight with a new show. Until then, thanks for listening.

Thank you.