Good day. Global information-tech spending will grow at a slower 5% to 7% pace this year, far less than the previously expected 9%, according to a revised forecast by S&P Global Ratings. The reason is tariffs–and their economic ramifications.

The S&P projections assumed a base case of “a global average effective tariff rate of 10%-20% for all technology imports, with no exemptions.” In ratcheting their forecast lower, the analysts focused “on the secondary order impact of a weakening macroeconomy on the U.S. tech sector" that would “inevitably slow revenue growth at the margin” across the board, including for software.

The economic headwinds come at a time when many AI startups are trying to prove their products are worthwhile to their customers and their high valuations are justified. Those valuations reflect extremely optimistic expectations for growth.

Many corporations haven’t yet found a tangible return on investment in their AI-linked projects, making the case for the new technology more difficult, especially in uncertain economic times. There’s also the hyper-competitive sales environment, with vendors going after the same market, offering discounts and long free trials, said Anna Barber, a partner at venture firm M13.

Yet many venture investors have remained hopeful that artificial-intelligence software sold by startups will continue to be in demand given its promise to improve operational efficiency.

“Many AI-native platforms offer a really clear and immediate cost benefit, so companies are going ahead with this spending knowing it will yield savings on day one,” Barber said. “We aren't seeing any slowdown in spending on customer support or sales automation, for example.”

Despite the potential for slower economic growth and the cut-throat competitive dynamics, Barber remains confident.

“I think the long term view is still really exciting for the enterprise AI category, and that's what investors are betting on,” she said, adding: “The multiples on today's revenue don't really tell a story, and investors will give these companies a few years to grow into their valuations.”

And now on to the news...

The market disarray caused by President Trump’s tariff moves will likely intensify private-equity investors’ longstanding need for cash, which so-called continuation-fund deals can provide. But buyers and advisers say they don’t expect a flood of such deals just yet, WSJ Pro reports.

• Private-equity firms increasingly turned to continuation funds to return cash to investors in recent years after rising interest rates and debt costs slowed the pace of mergers and acquisitions. Firms raised continuation funds to recapitalize assets backed through older investment vehicles, giving their limited partners in those vehicles the option of cashing out, yet still allowing the private-equity general partner to hold the assets.

Sam Altman once said OpenAI and Microsoft had the “best partnership in tech.” Now, their Silicon Valley marriage is on the rocks, The Wall Street Journal reports.

• Microsoft turbocharged the artificial-intelligence startup’s growth over the past six years with billions of dollars in funding, helping OpenAI’s ChatGPT accumulate more than 500 million weekly users. OpenAI powered cutting-edge generative AI tools for the technology giant, helping its share price triple.
   
• That relationship has become strained. The chief executive officers are increasingly at odds over the computing power Microsoft provides to OpenAI, the access the startup gives the technology giant to its models and whether the Altman-led company’s AI systems will soon achieve humanlike intelligence, according to people familiar with their relationship. Microsoft CEO Satya Nadella has also made it a priority to beef up sales and usage of ChatGPT rival Copilot, and last year hired a rival of Altman’s who launched a secret effort to build models for Microsoft that would reduce its dependence on OpenAI.

On an overcast spring morning this year, a group of bankers, investors and officials from some of the world’s largest companies gathered at the Royal Institution in London to discuss technologies they hope can save the world from the effects of climate change, WSJ reports. 

• Despite their optimism about advances in how carbon can be removed from the atmosphere, they reached a dispiriting conclusion as they sat around a table in a centuries-old building that has witnessed scientific breakthroughs going back to the Victorian era: The market that could drive carbon removal doesn’t exist in any meaningful way and trying to scale it at the moment is a fruitless task.

People

Measurabl, a sustainability data management platform for real estate, appointed Kumar Brahnmath as chief product & technology officer. He was previously at SunPower and Amazon.

Identity security technology provider Semperis appointed Alex Weinert as chief product officer. He was previously vice president of identity security at Microsoft.

Apollo.io, an AI-powered go-to-market sales platform, appointed Marcio Arnecke as chief marketing officer and Adam Carr as chief revenue officer.

Thunes, a Singapore-based cross-border payments company, scored $150 million in Series D funding led by Apis Partners and Vitruvian Partners.

Cast AI, a Miami-based Kubernetes automation platform, closed a $108 million Series C round led by G2 Venture Partners and SoftBank Vision Fund 2.

Navro, a London-based startup that simplifies international payments for businesses, secured $41 million in Series B financing led by Jump Capital.

Zoe Financial, a New York-based wealth management startup, completed a $29.6 million Series B round led by Sageview Capital.

Growers Edge, a Johnston, Iowa-headquartered provider of financial products and tools to agricultural retailers, held the first $25 million close of a round co-led by S2G Investments, Cibus Capital and Lowercarbon Capital.

Gorgie, a Boca Raton, Fla.-based energy drink brand, landed $24.5 million in Series A funding led by Notable Capital.

Hoofprint Biome, a Raleigh, N.C.-based startup developing probiotics and natural enzymes for improved cattle health and reduced methane emissions, collected $15 million in Series A funding led by SOSV.

Queens Carbon, a Pine Brook, N.J.-based low-carbon cement manufacturing startup, was seeded with a $10 million investment led by Clean Energy Ventures.

TeamOhana, a San Francisco-based headcount management and compensation planning software provider, was seeded with a $7.5 million investment led by Lerer Hippeau and Collide Capital.

• Activist Robby Starbuck sues Meta over AI answers about him
   
• Amazon rules out displaying tariff impact after White House attack
   
• Super Micro expects earnings well below initial expectations
   
• Spain blackout is first of clean-energy era
   
• Trump Administration dismisses researchers working on climate-change report
   
• Spotify subscriber gains continue, with revenue buoyed by price hikes
   
• Amazon wants to be a satellite-internet powerhouse. It has a long way to go.
   
• Starbucks says it’s making progress on quest to fulfill orders faster

• IXI raises $36.5M from Amazon and others to bring autofocus to prescription glasses (TechCrunch)
   
• OpenAI rolls back update that made ChatGPT ‘too sycophant-y’ (TechCrunch)

This newsletter was compiled by Yuliya Chernova and Zachary Cole.

WSJ Pro Venture Capital is a premium service of The Wall Street Journal. We cover venture capital and the global startup ecosystem. Share your tips, comments and questions: vcnews@wsj.com

The Team: Matthew Strozier, Yuliya Chernova, Brian Gormley, Angus Loten and Marc Vartabedian.

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