A major player on Wall Street may be CLOsing in on CLOs.

Goldman Sachs is the lead bidder to buy Kansas-based Palmer Square Capital Management, a collateralized loan obligation powerhouse overseeing $37 billion, Bloomberg reported Tuesday. While a deal may not be reached, the talks illustrate Goldman’s continued efforts to expand its footprint in the alternative credit markets, and an opportunity to beat alt heavyweights like Apollo at their own game.

CLOs to You

CLOs are pools of floating-rate loans, often below investment grade, that allow investors to potentially net higher-than-average returns in exchange for taking on greater default risk. It’s no wonder they’re appealing to investors (and alts managers): They can provide double-digit returns in today’s 5% rate environment, and the structures are designed to limit risk, in part through diversification.

“In a market environment shaped by inflation uncertainty and evolving monetary policy, CLOs represent a distinct segment of the fixed income landscape,” Fidelity portfolio managers wrote in a white paper earlier this year. “Their floating-rate nature, diversified underlying collateral, and layered structural protections have historically supported income generation with limited interest rate sensitivity.” An analysis from VanEck also found that they’ve typically been able to weather market downturns better than high-yield and corporate bonds.

Goldman would not only be buying Palmer Square when its main product is in high demand, but also amid a private credit liquidity squeeze. It’s a move that would allow the bank to expand its credit and alts offering outside of traditional banking, and ramp up its competition with other alternative asset managers:

• In March, Blackstone’s flagship private credit fund BCRED sold a roughly $450 million CLO deal. (That came after the company appointed a new head of CLOs at the end of last year.) The month before, Ares Management reportedly priced a second European CLO.
• Also in March, Apollo secured a new credit line that Bloomberg said could bring funding to Apollo’s debt arm to originate or buy new loans; such financing can come just ahead of issuing a CLO. Its previous deal had been a roughly $700 million CLO issued around this time last year, the outlet reported.

Massive Market: Just how big is the market Goldman is eyeing? Another VanEck analysis said that the global CLO market hit $1 trillion in 2021 and is now roughly the size of the US high-yield bond market. Retail investors want in, too. There are more than $10 billion in CLO assets across ETFs, the report added.

Leave it to a viking to take on two jötnar, as giants were called in Old Norse.

The GLP-1 drug market radically transformed the way healthcare providers treat obesity, unlocking billions in revenue for a market now dominated by Novo’s Wegovy and Eli Lilly’s Zepbound. On Tuesday, San Diego-based Viking Therapeutics showed it’s a potential contender, too, releasing new data demonstrating that its experimental GLP-1 treatment VK2735 may address one of the medication class’s shortcomings: adherence rates. Its stock surged 35.67%.

A Dose of Less

Indianapolis-based Lilly held an imposing 61% share of the US GLP-1 weight loss and diabetes market in the second quarter, compared with Denmark-based Novo’s 39%. This year, Novo has taken the early lead in the weight loss pill race. But Lilly CEO Dave Ricks told CNBC on Monday that the company is capturing 70% of new Medicare patients taking weight-loss drugs since the program began covering obesity drugs in July.

And the GLP-1 market, unlike the benefiting waistlines, is expected to rapidly expand. Conservative Wall Street estimates suggest weight-loss drug sales could reach $100 billion by 2030. Last year, revenue from Lilly’s Zepbound totaled $13.5 billion, and Novo’s Wegovy brought in $12 billion. That indicates there’s significant room to grow, offering a sizeable opportunity to Viking.

Research has shown the adherence rates of patients on GLP-1 therapies can fall as low as 27% after one year, and clinical trial results of the company’s VK2735 suggest it could help patients keep weight off with fewer doses, offering one potential solution:

• Viking’s study found that adults with obesity who received a regular, weekly dose of VK2735 for 21 weeks lost 16.2% to 18.6% of their body weight. More importantly, when the patients were given a biweekly dose for another 12 weeks, they kept off 90% of the weight lost.
• “Flexibility for patients and providers is paramount for achieving treatment persistence leading to the long-term benefits of weight control, and these results are an important step in that direction,” Louis Aronne, a physician and former president of The Obesity Society, said in a statement.

Investor Validation: Leerink Research analysts wrote Tuesday that VK2735 could help Viking, which has a robust $500 million cash position and thus room to maneuver, carve out a “potentially differentiated profile.” Investors signaled their agreement that Tuesday’s data was a standout win for Viking, and not for its competition: Shares in Lilly and Novo were flatter than a diet soda left out in the sun.

No TSMC, no Nvidia, no problem. Or so says Alibaba.

At its annual flagship Apsara Conference in Hangzhou on Tuesday (and on the eve of the summit between US and Chinese leaders), the Chinese tech giant unveiled its latest in-house AI chips, which it said are three times more powerful than the current generation. Next up? Alibaba says it’s hyperfocused on becoming a hyperscaler, with plans to operate more than 20 gigawatts of data center capacity by 2032.

Gigawatt Are You Talking About?

For context: There were about 82 gigawatts of global data center capacity at the end of last year, according to a McKinsey report published in June. China was home to about 20 gigawatts, while the US was home to about 36, per the report. And while US hyperscalers tend to keep their own capacity quite opaque, Bloomberg reported earlier this month that Microsoft, a leading hyperscaler, currently operates about 12 gigawatts worth of data centers, with plans to expand to 38 gigawatts by 2032.

In other words, Alibaba’s big push may bring it into the Big Leagues, but only barely. Then again, massive capacity or not, data centers are only as good as the chips inside them:

• The company’s newly unveiled chip, the Zhenwu V900, is slated for mass production and commercial release in the first quarter of next year.
• Still, Alibaba says it’s a big upgrade from its last chip, the Zhenwu M890, which it released in May. According to most experts, that chip has been used as a domestic substitute for Nvidia’s H200 chip, which is only available to Chinese companies in specific cases; Nvidia has now made two new generations of chips since the H200, with a third launching soon.

Trade Deadline: Closing the tech gap will be crucial for Chinese AI firms. US Trade Representative Jamieson Greer has made clear that easing export controls on cutting-edge semiconductors will not be on the table as Chinese President Xi Jinping meets with US President Donald Trump this week in Washington, though it does seem there’s some mutual interest in establishing AI safety guardrails. At least everyone can agree that a non-zero chance of human extinction is in no one’s best interest.