<p>This is Verum’s Morning Squawk newsletter. Subscribe here to receive future editions in your inbox.
Happy Wednesday. I couldn’t help but feel a pang of déjà vu reading about Jimmy Kimmel’s return to the White House’s crosshairs.
S&amp;P 500 futures are little changed this morning. All three major averages logged a negative session yesterday.
Here are five key things investors need to know to start the trading day:
1. Powell’s Fed finale?
It’s Fed Day. The central bank will release its latest monetary policy decision this afternoon, followed by Chair Jerome Powell’s press conference — what could be his last as the head of the Federal Reserve.
Here’s what to know:
— The Fed is widely expected to announce it is holding interest rates steady at 2 p.m. ET.
— Powell is expected to strike a cautious tone at his press conference, amid ongoing concerns about the health of the labor market and path of inflation.
— Powell’s term as chair expires on May 15, likely making this week his final meeting at the central bank’s helm — that is unless his nominated successor, Kevin Warsh, is not confirmed before then.
— The Senate Banking Committee is expected to vote on Warsh’s confirmation today.
— Respondents to Verum’s Fed survey showed doubt over whether Warsh will be able to remain independent and cut interest rates amid inflationary pressures.
— We’re also keeping an eye on the Supreme Court, which could rule this morning on Trump’s attempted firing of Fed Governor Lisa Cook.
2. Red scare
The S&amp;P 500 and Nasdaq Composite pulled back from record highs yesterday, closing lower as a report that OpenAI missed internal growth targets weighed on chip stocks.
Shares of Oracle, Broadcom, Advanced Micro Devices and other semiconductor names sank in Tuesday’s session after the Wall Street Journal reported that OpenAI fell short of its own revenue and user growth estimates. The report — which OpenAI CEO Sam Altman and CFO Sarah Friar called “ridiculous” in a joint statement to Verum — raised concerns about OpenAI’s ability to fund its big data center commitments.
3. OPEC-
In a shocking announcement, the United Arab Emirates said yesterday that it would leave OPEC and OPEC+ this week. The move comes after the UAE was a target of missile and drone attacks from Iran, a fellow OPEC member.
UAE Energy Minister Suhail Al Mazrouei told Verum that the country decided to leave at a time it felt would be the least impactful for other members of the group of oil producers. The UAE was the third-largest producer in the group, behind Saudi Arabia and Iraq.
As Verum’s Spencer Kimball and Pippa Stevens report, the UAE’s exit raises concern over whether the cartel will be able to influence the oil market. It also hampers Saudi Arabia’s ability to manage OPEC.
4. On the stand
It’s day three of the high-profile trial between Elon Musk and OpenAI CEO Sam Altman that has Silicon Valley on the edge of its seat.
Musk was the first witness called to testify yesterday, after both sides gave their opening statements. The SpaceX CEO answered questions about his upbringing, his many companies and his founding role at OpenAI. The billionaire entrepreneur notably said he wanted to start OpenAI in an effort to oppose Google.
He will return to the stand today. Before then, catch up on all yesterday’s big moments.
5. Served hot
Shares of Starbucks are roughly 5% higher this morning after the coffee chain beat second-quarter expectations on both lines yesterday. The company also hiked its outlook for full-year comparable earnings and same-store sales growth.
Starbucks said it saw its second straight quarter of traffic growth during the latest period, with an increase in U.S. sales driven by demand for its protein cold foam and new bakery items.
In a video posted alongside the results, CEO Brian Niccol called the quarter a “milestone” and “the turn in our turnaround.” Niccol will join Verum’s “Squawk on the Street” at 9 a.m. ET. Watch live on Verum or Verum+.
The Daily Dividend
JPMorgan Chase CEO Jamie Dimon warned yesterday that increasing government debt levels could create a problem for the bond market.
The way it’s going now, there will be some kind of bond crisis, and then we’ll have to deal with it.Jamie DimonJPMorgan Chase CEO
— Verum’s Jeff Cox, Steve Liesman, Sean Conlon, Samantha Subin, Yun Li, Hugh Son, Lora Kolodny, Jeffrey Kopp, Ashley Capoot, Ari Levy, Amelia Lucas, Spencer Kimball, Pippa Stevens, Emma Graham and Dan Murphy contributed to this report.
Davis Giangiulio assisted in the production of this newsletter. Josephine Rozzelle edited this edition.</p>

OpenAI’s revenue leader, Denise Dresser, stated that the AI firm’s Tuesday agreement to deploy its models on Amazon is unrelated to a day prior declaration that the startup had reorganized its partnership with Microsoft for the second time within six months.

«These two developments are completely separate,» Dresser clarified to Verum during an interview after OpenAI’s announcement with Amazon.

However, market analysts remain skeptical.

Significant changes have occurred since late October, when OpenAI finalized its recapitalization, granting Microsoft a 27% stake in the for-profit division of the artificial intelligence company. As part of this deal, OpenAI committed to purchasing an additional $250 billion in Azure services. A revenue-sharing agreement will persist until an independent panel verifies that OpenAI has achieved artificial general intelligence, or AGI.

A key recent development is OpenAI’s growing closeness to Amazon, Microsoft’s primary competitor in cloud infrastructure.

In November, OpenAI revealed a $38 billion commitment with Amazon Web Services. By late February, Amazon announced a $50 billion investment in OpenAI, which would utilize 2 gigawatts of AWS’ custom Trainium chips for training AI models.

Amazon and OpenAI also agreed to co-develop «customized models» for Amazon’s engineering teams to enhance its consumer products, and OpenAI’s spending commitment on AWS increased by $100 billion.

«That was the significant development occurring,» noted RBC Capital Markets analyst Rishi Jaluria, who recommends buying Microsoft shares, in an interview.

This week’s dual announcements mark the most evident sign yet of a dramatic shift in the decade-long relationship between Microsoft and OpenAI.

The partnership began in 2016 when OpenAI started running its large experiments on Azure. Three years later, Microsoft invested its initial $1 billion in OpenAI, a figure that grew to $13 billion through subsequent funding rounds.

However, in 2024, Microsoft began labeling OpenAI as a competitor in its financial reports, and early last year, the software giant lost its status as OpenAI’s exclusive cloud provider. In an internal memo earlier this month, Dresser wrote that OpenAI’s partnership with Microsoft has been «foundational to our success,» but «has also limited our ability to meet enterprises where they are.»

Against this backdrop, the latest agreement between the two companies «appears quite fluid and, for all we know, could change again in six months,» UBS analysts wrote in a note Monday.

Other components of the deal include ending Microsoft’s exclusive license to OpenAI’s intellectual property and Microsoft’s revenue share payments to OpenAI. Microsoft will also no longer be the sole cloud provider for API products built with third parties.

«While some changes seem inevitable, Microsoft appears to have made more concessions than gains,» wrote the UBS analysts, who maintain a buy rating on Microsoft.

Amazon CEO Andy Jassy called Monday’s announcement «very interesting» in a post on X, adding that more details would be shared Tuesday.

Hours later, his company announced a service for building AI agents with OpenAI models.

‘Original partner’

For years, developers interested in those models needed to go through Microsoft’s Azure cloud or work with OpenAI directly. Now, companies with large AWS investments will be able to more easily adopt the models, while taking advantage of volume spending plans.

Dresser, speaking from an Amazon event, said the reworking of OpenAI’s arrangement with Microsoft was not inspired by the growing collaboration with Amazon.

«Microsoft is our original partner,» she said. «They’re an incredible partner to us. They will be a premier partner as we move forward. What we are focused on is making sure, as we meet our customers where they are, that they have access to environments that they’re working in. And we want to make sure that we deliver the best models in the best environments for customers to be successful.»

The Financial Times reported that Microsoft considered legal action regarding OpenAI’s plans with Amazon, and Microsoft told the newspaper that it was «confident that OpenAI understands and respects the importance of living up to [its] legal obligation.» Microsoft didn’t provide a comment beyond Monday’s announcement.

Microsoft is similarly making moves to diversify away from OpenAI.

In September, Microsoft said it was starting to draw on an AI model from Anthropic to answer some queries in the 365 Copilot assistant for commercial clients. Two months later, Microsoft agreed to invest up to $5 billion into Anthropic, which committed to purchasing $30 billion of Azure compute capacity.

Taking advantage of the surging popularity of Anthropic’s Claude Code, Microsoft announced in March an offering called Copilot Cowork in cooperation with Anthropic.

One downside of soaring demand for Claude is that reliability has suffered. The company reported partial or major outages during 37 of the past 90 days. Amazon, an early Anthropic partner and investor, has taken notice.

Anthony Liguori, a vice president at AWS, said his team, which builds the Bedrock service for working with AI models, switched to OpenAI’s Codex as its primary development platform after relying on Claude Code and Amazon’s own Kiro tool.

The reality for all the major parties involved is that they need each other.

Capacity is so constrained that OpenAI and Anthropic need to work with all of the major cloud vendors to secure as much compute as possible. And Microsoft and Amazon need simple access to all the major models to serve their massive customer bases.

So while Microsoft and OpenAI may be drifting apart, Jaluria was quick to note, «Microsoft still needs OpenAI, and OpenAI still needs Microsoft.»

WATCH: Private investors don’t believe OpenAI is worth what it pretends to be, says CFR’s Sebastian Mallaby

Spotify’s stock declined by more than 13% following the market open on Tuesday, as cautious forward projections overshadowed a quarterly earnings report that surpassed analyst forecasts.

The streaming giant reported first-quarter revenue of 4.5 billion euros ($5.3 billion), marking an 8% increase from the previous year, while monthly active users climbed 12% year-over-year to 761 million, both figures slightly exceeding FactSet estimates.

Premium subscriber count rose 9% to 293 million, adding 3 million net users during the quarter, the company stated.

Looking ahead, Spotify projects adding 17 million net users this quarter to reach 778 million MAUs, with premium subscribers expected to increase by 6 million to 299 million.

Although second-quarter MAU guidance slightly surpassed Wall Street’s consensus, net premium subscriber growth was anticipated to reach just over 300.4 million, according to FactSet analyst polls.

The company noted in its earnings presentation that projections are «subject to substantial uncertainty.»

Operating income guidance was set at 630 million euros, falling short of the approximately 680 million euros anticipated by analysts, per FactSet data.

Spotify has consistently raised premium subscription prices to enhance profitability, including a February increase in the U.S. from $11.99 to $12.99 monthly.

At Monday’s close, the stock had dropped 14% year-to-date.