French government in crisis mode after a weekend of riots

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0:33Good morning from the Financial Times. Today is Monday, October 19th, and this is your FT News briefing. The French government is in crisis mode after a weekend of riots. And investor jitters are only increasing over AI. Plus, Canada's oil-rich Alberta is voting on whether to become a sovereign country. Someone described it as a bit like when you're a kid and you write a letter to your parents saying that you're running away from home. Maybe deep down they don't really want to leave. I'm Josh Gabor-Doyant, and here's the news you need to start your day.

1:19Violent protests in France have put some serious pressure on President Emmanuel Macron. The government is now facing criticism that it screwed up policing of the riots this weekend. Over half a million people, many students, have been protesting against the high cost of living and conditions in schools. On Saturday night, peaceful demonstrations turned violent to a level officials called, quote, unprecedented. Protesters attacked city halls in Lille and Marseille, burnt down a historic clock tower in the city of Limoges, and there was heavy rioting in cities across the country. Macron's government blamed the far left for the riots, while the opposition parties accused the government of being unprepared for the violence that followed weeks of widespread peaceful protests.

2:02Ministers deny that accusation. It all comes at a pivotal time for France. We're only six months away from a highly uncertain election that will determine who succeeds President Macron. Far-right candidate Marine Le Pen is currently the frontrunner in the polls.

2:22in the canadian province of alberta a separatist movement has been gaining steam residents of the western province will vote today on whether they should break away from canada and become a sovereign state it's a non-binding vote but if it passes it could be the first step towards an actual referendum who to explain is the ft's ilia gridneff hi ilia hi how you doing good ilia But just to start us off, why do some people in Alberta want to break off from Canada? Well, that's a good question. The main issue is that Alberta is an oil-rich province in the country's west. They feel ignored. They feel that they've been taken advantage of and that they basically bankroll the rest of the nation with all that money from the oil.

3:07And it really came into sort of momentum in the 70s and 80s. And again, it was tied very much about resentment over the federal government's energy policy. There's just a traditional sort of animosity between Alberta and Ottawa. Okay, so longstanding animosity. Why then is this coming to a head right now? Well, in many respects, this latest iteration of the separatism movement has come out or is a continuation of protests out of COVID. People were very angry about the federal government's lockdown laws, vaccine mandates, mask mandates. And it created a groundswell of protests and a very online ecosystem that sort of incorporated some of the wilder kind of conspiracy theorists.

3:50And over the years, that movement has grown momentum and it's sort of coalesced into a protest and a push to become an independent state. Essentially, the Premier, Danielle Smith, to placate members of her own party who are pushing to leave Canada, said, well, we'll have a vote on the issue. The vote today is actually a vote about a vote. The question is more about whether we launch the legal process to do this formally and hold a formal referendum. So it's still a long way to go. And depending on the outcomes today, it will determine whether there is a more formal vote to leave Canada. And separatism isn't unique to Alberta, is it?

4:27I grew up in Quebec, which has had two similar votes, in fact, on whether to separate. Oui, bonjour. Yes, exactement. It's not the first existential crisis that Canada has faced. over its identity. As you mentioned, Quebec in the country's east, the French-speaking part of Canada, has had two unsuccessful referendums in 1980 and 1995. But both of these efforts to leave Canada really had a traumatic effect on the nation. It's sort of an issue that's popped up most recently because the Parti Quebecois, which has got a separatist platform, was recently re-elected the first time in over a decade. So there is a sense that this issue is bubbling away in the background.

5:08But in many respects, due to the hostilities from US President Donald Trump and the US, there seems to be a pervasive attitude that Canada wants to stick together in a sort of united effort to fend off the attacks from its southern neighbor in the US. Right. I mean, Mark Carney, Canada's prime minister, he's really been locking horns with Trump over trade recently. What could an emboldened separatist movement mean for him and his plans for the country? Well, it doesn't help. It's creating a major distraction. It's sort of making people concerned. It's slowing investment. And at the same time, there are certain elements within the US government that is taking advantage of that.

5:46And some of the separatists from Alberta have met State Department officials. There's talk about the MAGA ecosystem that's promoting separatism. So there's certainly something in the U.S. to benefit and gain from destabilizing Canada's unity at this critical moment in the U.S.-Canada relationship. And what would it actually look like if Alberta separates? Well, that's a good question. Depending on who you speak to, it might be great for those that want to separate and it might be sort of disastrous for others. The reality is that we're a very long way away from anything real happening. And in the data or in the polling, it also looks that a lot of the people who are promoting and pushing for independence or separating from Canada.

6:28It's more about sending a message to Ottawa. It's funny, you know, when I've been up in Calgary talking to people, someone described it as a bit like when you're a kid and you write a letter to your parents saying that you're running away from home. Maybe deep down, they don't really want to leave, but they kind of want to rattle the cage a little bit to get a bit more power and autonomy. Interesting. And do we know what the outcome of the vote today might look like? Yeah, well, you know, if we're to take the polls as the way things are heading, I mean, it seems that the remain in Canada is the far more likely option.

7:00Angus Reid Institute on Friday put out a new survey showing that 66 % of those surveyed wanted to stay in Canada. And then from the remaining 40%, about a third support a future binding separation referendum. But then, of course, there's the wild card of voter turnout. So if the separatists who seem to be much more motivated to get out and vote against Ottawa, they might get the numbers where a big turnout will lead to a positive vote. But again, you know, we're all going to find out soon enough. Ilya Gridniff covers Canada for the FT. Thanks, Ilya. Thanks a lot.

7:42A$10 trillion AI infrastructure boom has been hitting some big potholes recently. Investors have sold off a bunch of debt and shares in these companies over the past week. We had the FT's market columnist, Katie Martin, on the show to talk about it on Friday. There is just a real sense of nerves now, a kind of uh-oh moment that says, hang on, there's a lot of companies out there that have borrowed an awful lot of money to build an awful lot of data centers, and we still don't really have a good understanding of how they're going to make money out of this? And has it all gone a little bit too far too fast?

8:21This is all a big problem for the industry, a problem that the FT's George Hammond has been covering. He joins me now. Hi, George. Hey. So what are these potholes that we've been seeing? What's going on? So I think Katie put it really, really well there. There's been just an enormous build out at an enormous speed. And yes, now we are running into some fairly deep potholes. So we've seen some of the companies at the heart of this massive infrastructure boom start to sell off. One of the central ones here is CoreWeave, which is basically leasing the chips that are at the heart of the AI boom. CoreWeave at the beginning of last week was a$44 billion company.

9:00Its shares have created about 25 % over the course of last week. Bonds in the company have begun selling off and some of those have reached distressed territory. And its fate is indicative of what's happening across the space as companies which were really floating along on this promise of almost infinite demand for AI start to reckon with a potential slowdown. Yeah. And George, you know, when you speak to investors, why exactly are they worried? I think there's a few things happening here. One of them is the question of higher rates. The origin of all of this funding was in a lower interest rate environment, which meant it was much cheaper for these companies to borrow.

9:39Interest rates have now gone up, making it more expensive for the companies to borrow, and meaning ultimately they have less to spend. There is also renewed doubt about the revenues which are going to validate the investment up front. I mean, the spending is estimated to be close to 4 % of US GDP in the next few years. That dwarfs the infrastructure build out of the railways, the highways, the electrification of the US. That has been driven so much by sentiment and bullishness about the use of AI tools going forward and the revenues generated by those tools. We have seen in the last few weeks just some anxiety coming in about those revenues and how sustainable they are, particularly the numbers coming out of the two big labs, OpenAI and Anthropic.

10:21So I think that has given investors pause for thought as well. For AI infrastructure firms, the ones that we were talking about earlier, what does it mean for their ongoing projects and their deals to lease out chips? This is going to make it far harder for them to deliver on their very, very grand promises. These companies have gone out and pitched themselves as the group who will provide for the big AI labs, that's Anthropic, OpenAI and others. And if they are finding it harder to raise capital, if they're finding it harder to raise debt, that's going to become an increasingly difficult challenge.

10:55So take SB Energy, which is a data center developer largely owned by SoftBank. they have going into the future contracts worth up to 430 billion in future revenue, but they have to spend close to 200 billion to develop the data centers that will drive that revenue. If they can't raise the money, it's going to be very, very challenging for them and others to fulfill those goals. And speaking of, I mean, we've started to see a lot of data centers get delayed or even canceled entirely. We had a story of the weekend of a deal between Microsoft and the NeoCloud operator N scale breaking down. Given that the AI boom is so strongly underpinning basically the entire American economy, what is this sell-off going to mean for everyday people, for you and me?

11:41Yeah, I think as you point out, the AI boom has been really driving the US economy. It's been the critical growth engine for the country and this infrastructure build out is right at the heart of that. If we continue to see these cracks deepen, then I think that whole process slows down. We might well see some of these newer companies struggle going forward. We will generally see a slowdown across the piece. And I think that will drag on the economy and therefore hit Main Street as well as Wall Street. George Hammond is the FT's venture capital correspondent. Thank you, George. Thank you so much.

12:21Before we go, there are countless voices competing to break the news and tell you the what, the who, and the where. But to get a true understanding, you need to know the why. With over 700 of the best journalists in the world, the FT goes deeper to help you see the whole story and truly understand why it happened, why it's important, and why it matters. Subscribe to the FT today and save money on a standard annual digital subscription until October 28th. We'll have the link to that and all of the other stories from today's episode in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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