Weekend reading links

1. FT long read on how senator Deborah O'Neill, as chair of the Parliamentary joint committee on corporations and financial services, has single-mindedly exposed and brought the knees the Big Four auditing and consulting firms in Australia. 

Deborah O’Neill has led the charge against KPMG in Australia over a client confidentiality scandal that prompted the departure of the firm’s chair, chief executive, chief operating officer, audit leader and a senior partner over the past month... comes on the heels of a similar implosion at PwC. The rival Big Four firm came unstuck when a data leak led to the exit of senior management... An EY employee was charged with accessing the bank details of Prime Minister Anthony Albanese while working on contract at Australia’s biggest bank. Meanwhile, Deloitte partially refunded the Australian government after admitting that it used AI to compile a report...

In 2023, the Labor senator forced the publication of emails that implicated PwC partners in the tax leaks scandal. PwC partners were caught sharing secret government tax plans that one of them had obtained from his work on an advisory board in Canberra, in the hopes of winning business in the US. This year O’Neill used parliamentary privilege to air allegations made by a KPMG whistleblower that had been inadequately investigated by the firm. KPMG has now been exposed as having used confidential information from existing audit clients to try to win new business from rivals — some from PwC as its audit customers looked to switch in the wake of that firm’s woes...

She entered parliament in 2010 having spent her career in education. O’Neill soon discovered that some Big Four consultants acted like some of her former pupils — copying the answers from the back of the book and then marking their own work, as she puts it — and used her role to put the leaders of the firms under pressure.

2. Soumaya Keynes points to a fascinating study by Rebecca Diamond of Harvard University of the use of GLP drugs that appears to show increased confidence and employment rates among women in the US. The study finds, using data gathered between 2021 and 2023, that the poorest third of women in the US suffered an obesity rate 14 percentage points higher than the richest third, whereas the gap was negligible for men. 

The study's main findings:

After 18 months, women using GLP-1 drugs who start off without a job enjoy employment rates 27 percentage points higher than otherwise similar non-users. Women who start off with a job see their employment rate fall slightly, and although the data is too noisy to pick out effects on their earnings, it looks like their household income rises by 10 per cent. That second effect is a bit surprising, and possibly explained by parallel developments in these women’s love lives. Diamond estimates that GLP-1 drugs give single women a dramatic 29 percentage point increase in their chances of coupling up. On average, their new partners are richer than them, giving their household income a bump. Which could explain why a few of the women losing weight then feel able to drop out of work.

The study also points to a more disturbing consequence.

So far at least, GLP-1 drugs are disproportionately used by the rich. In Diamond’s study two-fifths of the women paid for the drugs out of pocket, at a median cost of $275 a month. Research based on Voy prescriptions shows how, adjusting for relative obesity rates, uptake is skewed towards more affluent areas. If obesity becomes an even stronger signal of economic disadvantage, the stigma attached could grow.

3. The rise of London's King's Cross area as perhaps Europe's AI capital.

Two decades ago, King’s Cross was central London’s most neglected district. Today, it is home to the main foreign outposts for several of the world’s wealthiest companies, from Big Tech giants Google and Meta to their richly funded AI challengers including OpenAI, Anthropic and Jeff Bezos’ Prometheus. AI researchers and entrepreneurs are packing out the area’s canal-side cafés so densely that venture capitalists prowling for their next deal are struggling to prevent their coffee meetings from being overheard by rivals.

For many, this resurgence can be traced back to one individual: Sir Demis Hassabis, the DeepMind co-founder and Nobel laureate who stayed in London to build his AI lab following its sale to Google in 2014 for £400mn. “Demis keeping DeepMind in London and resisting the gravitational pull of [America’s] West Coast is the most important thing that has ever happened to the London tech ecosystem,” says Tom Hulme, a tech investor at Alphabet’s GV venture capital unit... Just as PayPal helped launch the careers of a generation of Silicon Valley founders and investors including Elon Musk and Peter Thiel, a “DeepMind mafia” in London is pulling in billions of dollars to AI start-ups founded by Hassabis’s former lieutenants, including David Silver’s Ineffable Intelligence and Tim Rocktäschel at Recursive Superintelligence...

It was Hassabis’s pursuit of an “artificial general intelligence” capable of scientific research and a wide range of human tasks that in many ways kick-started the current AI boom. DeepMind’s sale to Google prompted Elon Musk to set up a research lab to counterbalance the internet group’s dominance of AI; that lab was OpenAI. DeepMind went on to make a series of AI breakthroughs including AlphaGo, which in 2016 beat the board game Go’s world champion Lee Sedol, and AlphaFold, which used deep learning to predict protein structures with superhuman speed.

King's Cross has emerged as the Canary Wharf of tech in UK, and this description is apt and underlines the continuing importance of personal interactions and connections. 

The density of AI talent in King’s Cross was why the government’s scientific research agency Aria took a “very conscious decision” to base itself there rather than Whitehall, says Pippy James, its deputy chief executive. “We were definitely inspired by Kendall Square in Boston,” she says, referring to the area surrounding MIT where Google, Microsoft and Amazon, as well as biotech companies Moderna and Novartis, have offices. “Value creation comes from those serendipitous collisions.” In recent weeks there has been a steady stream of American AI companies announcing moves into the area. OpenAI and Anthropic have signed leases for tens of thousands of square feet in King’s Cross. Others moving in include Bezos’s “physical AI” company Prometheus, Cursor, the AI coding company that recently agreed a $60bn sale to SpaceX, AI agent group Perplexity and open model developer Reflection. Google, which already has many researchers and engineers in the area, plans to start moving staff into its vast new “Platform 37” office this summer after almost a decade in development.

4. This is a striking factoid about the importance of chips now. 

With SpaceX going public, the list of the 10 most valuable US public companies is entirely made up of tech companies for the first time. Of those, three are semiconductor specialists. But with chips a key ingredient in AI, the other seven are also now all designing their own chips.

Some stats about the global chip squeeze.

... Elon Musk’s xAI to rent out spare capacity in its data centres. In recent weeks, Anthropic, Google and start-up Reflection AI have agreed to pay a total of around $2.3bn a month — or $28bn a year. This looks like a big return on Musk’s data centre investments. As of March this year, xAI’s total capital spending over its lifetime totalled $26.5bn... this surge in demand has already prompted a huge increase in supply, both of planned chipmaking capacity and newly minted chip stocks. One sign is the $600bn that memory chipmakers Samsung and SK Hynix said this week they plan to invest in Korea. Another is the $29bn that SK Hynix hopes to raise when its American depositary receipts begin trading in the US next week... TSMC has said it will boost its capital spending by as much as 37 per cent this year, as it did in 2025. But those increases follow two years of retrenchment and would leave 2026 capex only around 50 per cent higher than 2022. Contrast that with the biggest buyers of AI chips. Seven of the largest data centre operators are planning to spend an astounding $848bn this year, at least five times what they spent in 2022, according to a calculation by the newsletter Exponential View.

5. On the new bonds issued by SpaceX.

The bonds enjoyed very robust demand at the point of issuance, but some see that as a problem in itself. Allianz’s chief investment officer has described the market’s willingness to hand money over to Musk as a clear sign that we have moved from “a healthy boom, a stretched boom . . . into bubble territory”. Ominously, the bonds have weakened since they launched.

6. The AI LLMs scorecard. 

Where will Sarvam stand?

Also national scorecard.

7. The low-margin business of mobile phone assembly. Amber Industries which makes air conditioners for eight of the top 10 brands and more than a quarter of all ACs made in the country, now proposes to assemble smartphones for Oppo. 

Now, the company plans to sub-lease a part of Oppo India’s factory in Noida, set up SMT lines, and start assembling phones there... But smartphone assembly is one of the toughest businesses in electronics manufacturing... The target is to eventually assemble about a fifth of Oppo India’s volumes, scaling from roughly 8 million handsets in the first year to nearly 15 million in the second... Amber expects Ebitda margins of 1.5–2%, excluding benefits from the government’s production-linked incentive (PLI) scheme. That’s well below the 8.8% Ebitda margin generated by its broader electronics business in FY26, and the 7.1% operating margin recorded by its AC-heavy consumer-durables segment... Take Dixon, for instance. The company already accounts for nearly one-fifth of India’s smartphone output. Even at that scale, smartphone assembly, aided by PLI incentives, generates Ebitda margins of only about 3%.

8. AI boom compared with historical episodes.

9. On the rise of non-compete clauses in OECD countries and their adverse impact on productivity.

About 30 per cent of employers surveyed by the OECD said they had increased their use of the clauses in the past five years... It estimates that a 10 percentage-point increase in the prevalence of non-compete clauses in an industry was associated with a 1.9 per cent decline in the level of labour productivity, with workers stuck in sub-optimal jobs and firms less able to gain new skills. In many countries, non-competes have spread into parts of the labour market where the original justification of protecting sensitive information and firm-specific information is “weak or absent”, the research found, pointing to their use among entry-level fast-food staff in the US, manual workers in Italy and childcare workers or yoga instructors in Australia.

10. The market concentration in DRAM chips.

A market in which a monopolist owns 100 per cent gets an HHI of 10,000, a duopoly scores above 5,000, and a perfectly competitive market approaches zero... The US DoJ considers anything between 1,000 and 1,800 points to be “moderately concentrated”. Per Counterpoint Research, as of the first quarter of 2026 the memory market is 38 per cent Samsung (South Korea), 29 per cent SK Hynix (South Korea), 22 per cent Micron (US), 8 per cent CXMT (China), 2 per cent Nanya (Taiwan), and 1 per cent everyone else. This gives us an HHI of 2,838... Both Samsung and SK are two of Korea’s largest conglomerates (the so-called chaebols) which benefit from cosy relations with the state, so viewing them as fierce competitors in the same memory market might be wrong-minded in this case... And if the two companies function as a single economic entity in the global DRAM market, we should probably count them together for HHI purposes. And doing this we get a much higher HHI reading of 5,042. That’s above 5,000 —the HHI of a perfect duopoly.

11. China’s excess capacity in manufacturing requires something similar to what was done by the former Prime Minister Zhu Rongji. 

In the late 1990s and early 2000s… under Zhu’s slogan of “zhua da, fang xiao” or “grasp the large, let go of the small”, Beijing retained its grip on key strategic industries while relinquishing control of a vast sea of smaller companies and factories…Thousands of mines, steel mills and other industrial sites were shut for good. An estimated 30mn to 40mn workers lost their jobs. The process was deemed painful but necessary: not only in setting up China’s accession to the World Trade Organization in 2001, but in freeing Beijing from supporting uneconomic industries… 

Over the past 15 years, as China’s share of global manufacturing surged to around one-third, the share of lossmaking industrial businesses jumped from about 10 per cent in 2010 to nearly 25 per cent last year, according to the MERICS China Overcapacities Monitor. This dynamic exists across everything from steel and cement to cars, computer chips and robots. Take the automotive sector for example. Domestic car sales last year totalled 23.9mn against estimated production capacity of 45mn to 50mn. Sales are highly concentrated among a clutch of leading companies. According to HSBC, more than 70 per cent of EV sales — including plug-in hybrids — are being soaked up by 10 brands, leaving 47 others jostling for the remainder. In the shrinking market for petrol and diesel cars, 10 brands have about 70 per cent of sales and 73 others compete for the rest.

12. South Korean capitalism and windfall profits sharing - SK Hynix and Samsung edition.

Soaring global demand for high-bandwidth memory chips used in AI systems has propelled SK Hynix and Samsung Electronics to record earnings. This week Samsung announced quarterly operating profit of Won89.4tn ($59.7bn). The windfall is being shared with employees. Last September, SK Hynix agreed to pay workers 10 per cent of annual operating profits for a period of 10 years. Samsung followed with a similar arrangement in May after its union threatened strike action. With both firms expected to earn hundreds of billions of dollars this year, average bonus payouts per memory chip worker could reach about Won600mn ($400,000) at Samsung and even more at SK Hynix. Such amounts are staggering in a country where the average worker earns Won50.6mn per year, according to Korea Enterprises Federation data. 

The Bank of Korea has warned of potential inflationary pressure as a result, and towns where many semiconductor workers live are undergoing property price jumps. Competition is intensifying for places at universities offering semiconductor “contract” programmes that guarantee jobs at Samsung Electronics or SK Hynix upon graduation. Admission scores required for some such courses now exceed the average for natural sciences at Seoul National University, the country’s top-ranked university, and are just below those needed for medicine... The boom is also reshaping Korea’s marriage market. Matchmaking agencies, which are known for using meticulously harsh metrics to rank clients, are now giving higher points to chip workers.

13. Data centres are consuming massive amounts of power and water.

Data hubs already devour more electricity globally than all but 10 countries. About 448 terawatt hours last year if you’re interested. The AI boom means that amount is on track to roughly double within four years... By 2030, they could be using enough water to meet the basic needs of all 1.3bn sub-Saharan Africans for a year, UN researchers estimate.

And it is provoking backlashes. Sample this from the US.

An unprecedented 75 US data centre projects worth around $130bn were blocked or delayed in the first three months of this year, nearly as many as in the whole of 2025, says the Data Center Watch research group. It reckons active opposition group numbers have grown from 396 at the end of 2025 to 833 by the end of March.

14. The Strait of Hormuz squeeze was not as bad as earlier episodes. 

15. Transformers are at the heart of power transmission, distribution, and use. Thanks to the AI and data centre boom, transformer prices have gone over the roof.

Specialist electrical steel — essential for transformer cores — is produced by only a handful of global suppliers, many of whom are struggling to keep up with the surge in demand. Market growth, price volatility and limited mining capacity have also strained supplies of copper, crucial to the conductivity of windingsaround a device’s core. But one of the most acute bottlenecks is the shortage of skilled workers needed to carry out complex, labour-intensive manufacturing tasks...

With up to 80,000 different designs, most transformers still have to be built largely to order, taking three to six months to make. The most demanding stage is the windings, when copper wire is applied around a transformer’s core — a “beautiful” process, according to Bruno Melles, an engineer now leading Hitachi’s global transformer business. Each winding is unique and is “still a human manual activity that we’re very proud of”, he says. The number and pattern of these windings dictate voltage — fewer turns lead to lower voltage while higher-voltage devices can have multiple windings stretching hundreds of kilometres. Once complete, the assembly is placed in a protective outer metal shell, where oil acts to insulate and cool the device...

The world’s biggest transformer manufacturers have reported tens of billions of dollars in backlogs in the first quarter of 2026... US developers are turning to imports. The EU, Mexico, South Korea and Brazil are the biggest suppliers of power transformers to the US, together accounting for more than three-quarters of imports by value last year.

Into this mix come innovations in the form of modular solid-state transformers that use modern power electronics and respond dynamically to changing power needs, enabling real-time monitoring and control (which legacy transformers with their steel and copper cannot do).