Andrew here. We’re still blown away by Nvidia’s earnings on Wednesday night, which highlight surging demand — and acute chip shortages — as the data center boom continues.

But the real intrigue on Thursday is the game theory behind Meta’s settlement, which we previewed yesterday, with state attorneys general over teens’ use of its platforms. When you get into the details, you’ll find that Meta is trying to use the deal to handicap rivals and boost its own business. More below.

Inside Meta’s big settlement

At first glance, Meta’s blockbuster settlement with 47 states over teens’ use of its platforms appeared to deal huge blows to the company.

But a closer read suggests that the owner of Instagram and Facebook was willing to absorb some financial punishment to handicap rivals.

The deal isn’t as big as it appears. Meta is initially on the hook for about $12 billion. (It agreed to an additional $1 billion in a separate settlement with Texas.) But that will be broken into installments over a decade, meaning its annual payouts will be equal to less than 1 percent of the $201 billion in revenue the company pulled in last year.

Less than 1 percent of Meta’s revenue comes from teens, a member of the company’s legal team told reporters.

Meta is trying to do some business jiujitsu. The company agreed to pay an additional $5 billion, but only if Snap, TikTok and YouTube, a Google platform, pay similar penalties and make comparable changes to their products.

While it agreed to limit teens’ use of Instagram and Facebook to two hours a day — down to one if TikTok, YouTube and Snap agree to similar moves — the company says that teens already spend only about an hour a day on average on Instagram.

By contrast, teens spend more time on TikTok and YouTube, according to studies. That would make the terms that Meta is trying to shame its rivals into embracing more onerous — for those other platforms.

“Meta has deputized the state attorneys general as its industry enforcer to go off and do the dirty work against its competitors,” Eric Goldman, a professor at Santa Clara University School of Law, told The Information.

A big question is Meta’s legal vulnerability elsewhere. The deals announced on Wednesday cover 48 states, the District of Columbia and several U.S. territories.

But the tech giant faces more lawsuits with school districts, consumers and others. Here’s what James Uthmeier, Florida’s attorney general, wrote on social media on Wednesday:

The payouts are peanuts compared to the profound harms Meta’s profit-driven addictive features inflicted on kids, and a slap on the wrist for a trillion-dollar corp that’ll pay more to lawyers than to the states.

We’ll see them at trial.

HERE’S WHAT’S HAPPENING

Rescuers in Nepal search for more than 1,000 missing after a flood. At least 335 people died in the sudden deluge of mud, water and ice that snapped bridges into pieces and toppled multistory buildings. (Scientists suggested it began when a giant chunk of ice broke off a glacier at high altitude and tumbled into a river valley below.) Among the missing are roughly 500 international tourists.

The F.D.A. approves a breakthrough treatment for pancreatic cancer. The drug daraxonrasib, made by Revolution Medicines, doubled the life expectancy of patients in a clinical trial, to 13 months. The promise of new cancer breakthroughs — Moderna and Merck announced positive results from a new skin cancer vaccine last week — is reviving investor interest in the pharma and biotech sectors.

Lisa Cook denies fraud accusations as President Trump again seeks her firing. Cook, a Fed governor, and her lawyer said she had not committed a crime — or even been charged with one. The Trump administration has renewed an effort to fire her over unproven allegations of mortgage fraud, even after the Supreme Court blocked an attempt to fire her without a formal hearing.

Nvidia’s knockout results

Global tech stocks are rallying on Thursday after Nvidia’s second-quarter earnings handily surpassed Wall Street’s sky-high expectations.

The results were impressive, but what’s raising the animal spirits is the artificial intelligence bellwether’s bullish call that demand for its chips will remain robust for at least the next year.

“The A.I. infrastructure buildout is at full steam,” said Jensen Huang, the C.E.O. of Nvidia, whose chips are powering the data center boom.

The latest:

• Nvidia’s shares were up 5.8 percent in premarket trading, breaking a paradoxical strong-results-stock-down streak.

• That helped lift the Nasdaq Composite futures, as well as the South Korean index Kospi, a bellwether for chip stocks.

Yesterday’s highlights:

• Nvidia’s quarterly profit ($59.69 billion) and revenue ($96.22 billion) more than doubled year over year.

• In a sign that the A.I. boom has room to run, Colette Kress, the chipmaker’s C.F.O., forecast that revenue growth next year could soar by 70 percent, blowing away analysts’ estimates. If it weren’t for supply constraints, the forecast would be higher, she added.

Still, Nvidia faces challenges. They include:

Rising input costs. Kress said gross margins could be crimped over the next year because of a memory chip crunch that’s weighing on the tech sector and beyond.

Increased competition. Just today, shares in Z.ai soared in Hong Kong after the company reported that it had released a powerful new A.I. model built with its own chips. It’s another sign that Chinese companies are starting to make big strides in a market that Nvidia has been largely elbowed out of because of the Washington-Beijing trade war.

Domestically, Nvidia is also facing competition from longtime customers, including Google, OpenAI and Anthropic, that are designing chips of their own.

• Still, Huang said the A.I. labs would be buying Nvidia chips for a long time to come. “I’m delighted that they’re counting on us to scale up,” he added.

Fuzzy financing. Investors are also watching how Nvidia views its customers. It has invested or committed to invest in a growing number of them. On Wednesday, it said that included nearly $50 billion in frontier A.I. labs.

The company has also acquired some — Nvidia is reportedly buying Hugging Face for $12.9 billion, according to The Information — and extended favorable financing terms to others.

Buy now, pay later? The company has said it now takes 60 days on average to collect customer payments, up from 45 in the previous quarter. Nvidia is also owed $63.1 billion from customers who have yet to pay, up 55 percent from the previous quarter.

All of that has given rise to the moniker of Nvidia as the central bank of A.I. (Morgan Stanley analysts warn that Nvidia has pioneered a “balance-sheet-as-a-service” model that may obscure its debt exposure.)

Kress, the C.F.O., pushed back on some of the criticism:

“We believe these investments, measured against the strength of their demand, the business they create for us, the ecosystem they build on Nvidia’s platform and the equity returns on our invested capital will be excellent, and our risk is limited.”

Quote of the day

“This nonsense of this SaaSpocalypse, I think it’s time for it to stop.”

Marc Benioff, the C.E.O. of Salesforce, addressing investor fears that traditional business software makers (known as “software as a service,” or SaaS) would be replaced by artificial intelligence-based agents.

Shares in Salesforce are up about 10 percent in premarket trading after the company reported quarterly results that beat expectations.

Big is the new small

The Trump administration plans to redefine the meaning of “small business” to include billion-dollar companies.

A proposed rule change by the Small Business Administration, released on Wednesday, would greatly expand the definition of businesses that are allowed to compete for access to government contracts and loans, Sydney Ember and Lydia DePillis report for The Times.

Certain types of businesses, like engineering services companies, would now qualify with up to $252 million in annual revenue, compared with the current cap of $25.5 million. Financial services companies could bring in up to $1 billion or employ over 3,000 people under the proposed rule, more than some publicly traded corporations.

The changes would greatly alter the playing field for mom-and-pop operations:

“These are the biggest size standard changes in history, no question in my mind about that,” said Sam Le, who was the director of policy, planning and liaison at the Small Business Administration from 2020 to 2025.

He said smaller businesses would have more competition for federal contracts and have fewer opportunities for subcontracts. Larger companies that would have had to share some of the work with smaller competitors would qualify as small businesses to take on the work alone.

The agency said in its proposal that the modified size standards would increase the number of businesses classified as small by roughly 114,500. According to the Census Bureau, nearly 90 percent of American businesses have fewer than 20 employees.

Supporters of the rule change argue that companies shouldn’t be penalized for growing, only to suddenly fall off a cliff and not be eligible for federal funds. Last year, the government gave out nearly $273 billion to companies that qualified as small businesses.

A merger boom? With so much money at stake, the new rules might lead to more consolidation as companies look to bulk up and compete with larger rivals.

THE SPEED READ

Deals

Politics, policy and regulation

• KKR agreed to pay $250 million to settle a Justice Department antitrust case accusing the private equity giant of violating federal premerger filing requirements. (Reuters)

• The Trump administration is said to be weighing new tariffs on semiconductors despite industry concerns that could chill the artificial intelligence boom. (Politico)

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