Good morning. AI “scare trade” cools. Europe rethinks its nuclear policy. And the CIA sees an opportunity in China’s military purge. Listen to the day’s top stories.

— Angela Cullen

Stocks continued to churn as Thursday’s selloff, fueled by AI concerns, lost steam and traders pivoted to key US inflation data due this morning. Cryptocurrencies got over their latest wobble, sparked by Standard Chartered’s warning of further Bitcoin weakness, though Coinbase’s revenue slump and quarterly loss underscored how quickly a cooling crypto market can squeeze even the most diversified exchanges. CPI probably ran lower than a typical January, according to Bloomberg Economics. A subdued reading would leave room for as much as 100 basis points of interest rate cuts this year, an outcome much desired by Donald Trump. 

Photographer: Andrey Rudakov/Bloomberg

OpenAI is back on the offensive against DeepSeek, telling lawmakers its Chinese rival is siphoning off US models to train its next-gen chatbot. At the same time, the San Francisco company is hedging its bets on hardware—rolling out its first model to run on Cerebras chips as it looks to reduce its reliance on Nvidia. Co-founder Greg Brockman and other AI heavyweights are working on Capitol Hill, pushing for lighter-touch regulations even as voters fret about rising energy costs and job losses. DeepSeek’s ascent challenges the assumption that AI’s future demands even more computing power and energy, and that’s why it’s freaking everyone out.

A Saturday shutdown at the Department of Homeland Security is all but inevitable after the Senate failed to advance a funding bill and headed out on a week-long recess without a deal regarding new limits on immigration enforcement. Many employees, including TSA workers, will be expected to work without pay.

Former White House Counsel Kathy Ruemmler. Photographer: NBC NewsWire/NBCUniversal

Who’s next? The Jeffrey Epstein scandal claimed another high-profile figure. Goldman Sachs’ top lawyer Kathy Ruemmler is leaving the firm after documents revealed her links to the deceased pedophile, whom she called “Uncle Jeffrey,” files showed. Other documents revealed that Epstein paid online reputation firms to suppress negative coverage of his 2008 sex offense conviction. An inventory of Leon Black’s controversial Cambodian art collection also appeared. It’s not clear what the former Apollo CEO still owns, but the list raises questions about the scope and provenance of the works.

Europe’s nuclear rethink. For the first time since the Cold War, European capitals are debating how to develop their own nuclear deterrent. The shock started in March, when the US briefly ceased sharing battlefield intelligence with Ukraine, a move that jolted allies into confronting the possibility that Washington may no longer be a reliable military backstop. That unease hangs over this weekend’s Munich Security Conference. Ukrainians worry the US could press their president into what author Andrey Kurkov calls “capitulation camouflaged as some kind of peace deal.” Here’s how Russia’s invasion of Ukraine has reshaped Europe.

Deep Dive: SALT Cap Boost

Photographer: Kent Nishimura/Bloomberg

Many residents of New York, New Jersey and California are realizing substantial tax savings from a provision in Trump’s tax law—one that delivers disproportionate benefits to Democratic-leaning states. 

• The economic reality of the revised SALT cap legislation is striking: high-earning residents in states with elevated tax burdens—regions that largely opposed Trump in the last election—are emerging as some of the biggest beneficiaries of the signature 2025 tax law.
• Single taxpayers benefit more significantly than married filers. The legislation also reduced taxes for business owners and created new carve-outs for workers earning tipped and overtime income. Notably, the pool of taxpayers claiming the SALT deduction may expand nationwide, extending beyond traditionally high-tax states. Here’s what’s in it.
• Answer these five simple questions to calculate your estimated gain.

The Big Take

Illustration: Petra Péterffy

China’s rising AI billionaires. A new generation of entrepreneurs is challenging US dominance—and rapidly building huge fortunes on the back of Beijing’s quest for technological independence.

Opinion

Photographer: Thomas Kienzle/AFP via Getty

Nobody attending or tuning in to this year’s Munich Security Conference should expect to leave any wiser—or any less pessimistic—about the trajectory of global affairs, writes Andreas Kluth. The bulldozers, wrecking balls and chainsaws will keep bulldozing, wrecking and sawing.

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Before You Go

Photographer: Saul Loeb/AFP/Getty Images

Spies like us. The CIA has spotted an opportunity in Xi Jinping’s recent purge of the People’s Liberation Army top brass. It released a video in Mandarin depicting a fictional mid-level officer reaching out after watching seasoned commanders ousted and replaced by inexperienced leaders more focused on self-enrichment than national defense.

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