• Christmas timing: Deal news surfaced on December 24 with speculation that NVIDIA timed the announcement to coincide with the holiday season.
• Deal structure: NVIDIA is paying Groq about $20 billion for a non-exclusive inference technology licensing agreement rather than a traditional acquisition.
• Hackquisition framing: The structure is likened to other Big Tech “hackquisitions,” where companies secure talent and assets without formal purchase.
• Strategic talent targets: Key Groq figures Jonathan Ross and Sunny Madra apparently motivated the agreement, with Ross credited as the TPU creator.
• TPU rivalry: NVIDIA’s move is interpreted as a response to Google’s TPU success and broader efficiency narratives threatening NVIDIA’s GPU dominance.
• IP leverage: NVIDIA likely values Groq’s technology license to integrate its techniques into future chips despite the “non-exclusive” label.
• Regulatory concern: A full acquisition would likely face antitrust resistance due to NVIDIA’s >90% AI chip market share, so the licensing deal may circumvent scrutiny.
• Industry precedent: The transaction follows a pattern of similar deals by Microsoft, Amazon, Google, Meta, and others seeking talent plus technology access.

Twas the night before Christmas and all through the house, not a creature was stirring, not even a... wait. What's that? Is that Jensen Huang scurrying around doing deals over the holidays?!

It sure is!

Well, presumably he had been working on the deal with the specialized AI chip startup Groq before the holidays started. But I also wouldn't rule out that this deal came together in a hurry given what we know about how he's operated in the past with some mega deals, such as the um, (up to) $100B investment in OpenAI. A deal which came together quickly, perhaps on a trip with a certain President, and perhaps right after the rumors of OpenAI potentially looking at a deal with Google to use their TPUs – we'll come back to that. It was also a deal which was announced three months ago but apparently still has not been finalized, by the way, so there's that.

Anyway, you can't help but wonder if the real key for the timing here may have been to bury it under the spirit of Christmas. Because boy is it a doozy.

CNBC first broke the news with the headline: "Nvidia buying AI chip startup Groq for about $20 billion in its largest acquisition on record". But as it turns out, that wasn't quite right. And actually, it was NVIDIA that wanted to make that clear. They weren't buying Groq, they were merely paying Groq that $20B for a "non-exclusive licensing agreement".

Oh, you've heard that terminology before? Of course you have. It's the magical incantation one must cite in order to summon the spirits of the "hackquisition".

With this deal, NVIDIA is following their Big Tech brethren down this now well-trodden path. Microsoft, Amazon, Google, Meta, and NVIDIA have done deals which aren't technically acquisitions, but effectively are. Because they allow the acquiring – sorry, non-acquiring – company to sort of pick and choose what they want from the acquired – sorry, non-acquired – company in exchange for considerations that can go to... well, sort of anyone they choose. Certainly the investors to get them to sign off on such deals, and often the key employees at those companies. Sometimes the other employees of the companies too, but that's mainly so they don't feel bad and/or raise a stink about the faux-deal. Because when they do that, all hell tends to break loose, at least from a PR-perspective.

Anyway, the first wave of "hackquisitions" were almost more like "hackquihires" because they were simply a way to get access to key talent at those companies and any licensing agreements were seemingly an excuse to make it all a little less blatant. But as such deals have grown in size, they've grown to look even more like actual acquisitions. For example, Meta's nearly-$15B deal with Scale.ai bought them 49% of that company alongside their key talent, namely CEO Alexandr Wang. Why? Presumably Meta wanted more for that amount of money and they thought Scale, a hot company at the time, might still give them some upside. Of course, they were also effectively gutting said company and it seems decidedly less hot now – especially since many of their customers were Meta competitors who no longer wanted to send their data to Scale – shocking, I know. Still, Meta also likely believed they could use Scale's service to help with their future model training – efforts which were rebooting alongside bringing Wang on board.

NVIDIA's Groq deal seemingly has similarities. Namely, the key was clearly to bring CEO Jonathan Ross on board. And every story also points to company president Sunny Madra being crucial as well. But beyond that, it sounds like NVIDIA may actually care about some of the IP rights here (which they're presumably getting a license to with their "non-exclusive licensing agreement"), to be able to leverage Groq's techniques in would-be future chips.

In that way, "non-exclusive" feels less important here – that's another framing to make it seem less like an acquisition, but is anyone else really getting access to this IP now? Regardless, NVIDIA probably feels confident that with Ross and Madra – not to mention their own in-house prowess – they'll be able to implement it and execute upon it far better than anyone else. And they're undoubtedly not wrong.

And that points to another layer to this as well. Ross is not just a co-founder of Groq, he's also the creator of the TPU – something which he cites in his own bio. You may recall the TPU was last a part of a major news cycle when Jensen Huang was "delighted" about Google's success with their AI chips. How do I know that NVIDIA is actually not so "delighted" about Google's success here and is in fact sweating the rise of the TPU? Well, this deal, for one!

NVIDIA is paying $20B to grab some talent and license some tech. Twenty billion dollars. It's one of the largest deals of any sort in the history of deals. And they're technically acquiring nothing.

Granted, Groq's technology and first batch of chips have been divisive in the industry. Some seem certain they're the future of inference, others aren't sure they're the future of anything. Maybe NVIDIA is fully bought in on the former, or maybe they simply want access to key talent that created the TPU – and, importantly, to keep them away from anyone else who might try to make their own XPUs.

Many are trying, of course. But only Google has really found some level of success thus far. But that level of success has seen them not only train their own state-of-the-art models to rival any of those trained on NVIDIA chips, but also now growing talk about how much more efficient the TPU is versus the GPU. In an era of growing energy fears, this is... potentially a real problem for NVIDIA. To the point where they probably need to have their own TPU-like option – even if they remain fully committed to their GPUs as being the bigger and better option.

Certainly they need to counter this narrative on the inference side. And again, that's where Groq was focused. Maybe their chips were legit, maybe they weren't, or maybe they weren't yet, but even $20B is a relatively small price to pay to effectively lock this team and tech up. NVIDIA made $32B in profit last quarter. This potentially helps them protect those profits.

Speaking of... one can't help but wonder if this isn't the "hackquisition" that breaks the regulators' back, as it were. They've looked into these deals before and largely haven't pursued them. But this is a situation where a "regular" acquisition between NVIDIA and Groq almost certainly would have been blocked simply because NVIDIA controls over 90% of the AI chip market.

So what will regulators do here? Certainly it seems smart of Jensen to try this under the current administration versus any other. It's a group that keeps trying to help him out with China – for a fee, naturally – even if China continues to be a problem on their end.

Regardless – and this remains a key to these "hackqusitions" – NVIDIA will get access to Groq and their team fast with this structure. Will anyone even remember the $20B deal after the holidays? Nothing like some last-minute Christmas shopping!

👇

Previously, on Spyglass...

[

Hackquisitions & Hackquihires

A look at Meta’s Scale deal in relation to other such deals…

SpyglassM.G. Siegler

](https://spyglass.org/hackquisitions-hackquihires/)

[

An OpenAI Acquisition Turns Into a Google ‘Hackqusition’...

A rough few weeks may signal some real talent trouble for OpenAI – at the worst possible time

SpyglassM.G. Siegler

](https://spyglass.org/openai-windsurf-google/)

[

Behold: the Hackquisition

An acquisition by any other name…

SpyglassM.G. Siegler

](https://spyglass.org/hackquisition/)

• MarketPanic: Generative AI fears drove Indian IT underperformance by over 30% as investors feared automation would make the labor-driven industry obsolete.
• IndustryResponse: Firms cut margins, restructured workforces, built platforms, and pitched integration expertise for legacy SAP, Oracle, Workday, and middleware landscapes.
DeploymentReality: UBS reports under 15% of organizations meaningfully deploying generative AI, while CLSA notes analysts shifting focus back to deal pipelines.
• EnterpriseConstraints: Regulated industries cite governance gaps, high error rates, and “workslop,” leaving AI stuck in boardroom theatre rather than production.
• IndianITOpportunity: Preparatory work—data cleanup, cloud migration, system integration—offers a 2–3 year billable runway before enterprise-wide AI adoption.
• CompanyStrategies: TCS invests in data centers and platforms; HCLTech expands partnerships and acquisitions; Infosys deploys 2,500 genAI projects and Topaz/Cobalt assets; Wipro and Tech Mahindra build vertical and sovereign AI stacks; Persistent and LTIMindtree report productivity gains and learning transfer teams.
• BudgetOutlook: IT budgets have grown ~8% annually for six years, with AI, cybersecurity, and cloud taking larger shares while services shrink from 38% to 25% of enterprise tech spending by 2029.
• ValuationRisk: Nifty IT trades at a slight premium to the broader index and discount to Nasdaq, but a fading AI-led global tech rally could drag the sector despite its narrower defensive case.

For the last two years, generative AI was going to kill Indian IT. The argument seemed almost self-evident — if machines can write code, a $250 billion industry built on getting humans to write it cheaper has nowhere left to go. Investors acted accordingly, and the sector has since underperformed the broader market by 30% or more.

The industry has spent this year pushing back. It cut margins, restructured workforces, built platforms, and told clients that AI has not transformed their enterprises because their enterprises are a 30-year accumulation of SAP, Oracle, Workday and middleware that was never designed to talk to anything. And finally, Indian IT is who you call when systems need to talk to each other.

Despite all the hype, generative AI is moving slowly. Less than 15% of organizations are meaningfully deploying the new technology at their firms, according to investment bank UBS. And the narrative about the Indian IT dying is beginning to recede. Investment group CLSA titled a note this month, “Discussion moving beyond AI,” a sign that the existential panic has subsided enough for analysts to return to debating deal pipelines and vertical demand.

Enterprise AI has underwhelmed, though of course not from lack of enthusiasm or capital. Industry players say the tech remains inadequate for regulated industries where someone has to sign off on the output. They cite “workslop,” weak governance and high error rate as reasons the gap between AI as boardroom theatre and AI as functioning software remains so wide.

In the meantime, the Indian IT companies are reporting gains from the same force that was supposed to disrupt them.

[

](https://substackcdn.com/image/fetch/$s_!J4QM!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F32197142-243f-4d2b-b051-d1d6a8f9a740_2916x960.jpeg)

All figures in USD, million

[

](https://substackcdn.com/image/fetch/$s_!T7-y!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ffc552ee4-20a6-4f0b-8a94-f1014b2da12c_2912x954.jpeg)

All figures in USD, million

[

](https://substackcdn.com/image/fetch/$s_!ePpJ!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fa6bf652b-c865-43b0-80dd-8b41b7466c33_2914x942.jpeg)

All figures in USD, million

Infosys now calls AI-led volume opportunities a bigger tailwind than the deflation threat, a reversal from 2024, and orderbooks held steady in the third quarter even as pricing pressure filtered through renewals. Infosys expects its own orderbook to grow more than 50% this quarter, anchored by an NHS deal worth $1.6 billion over 15 years.

The AI capex cycle has been concentrated among a handful of hyperscalers and labs, while the Fortune 500 is still figuring out what to do with what they have bought. Indian IT is betting that figuring out what to do is billable work. Channel checks suggest a two-to-three year window of preparatory work – data cleanup, cloud migration, system integration – before enterprise-wide AI becomes feasible, and that window is where Indian IT plans to earn its keep.

The IT industry has always been reactive to new technology, late to consulting and early-stage advisory but quick to capture implementation spend once the experiments end and the plumbing needs building. The firms believe AI will follow the same arc: a hype phase they mostly miss, followed by a deployment phase where scale, client relationships and tolerance for unglamorous work become valuable again.

TCS, which cut its headcount by 2%, is spending on the “less fashionable” layers – a 1GW data-centre network in India, an indigenous telecom stack, a sovereign cloud – alongside platforms called WisdomNext and MasterCraft. It acquired Coastal Cloud, a Salesforce advisory firm, for capability it did not want to build from scratch.

HCLTech cut margins by 100 basis points, redirected savings toward specialist hiring, and became one of first large systems integrators to partner with OpenAI. The firm announced this week that it had acquired Jaspersoft for $240 million and Belgium-based Wobby to boost agentic AI capabilities. Coforge said on Friday it had agreed to acquire Encora, which offers AI tools for product, cloud and data engineering, at an enterprise value of $2.35 billion.

Infosys has taken a different route, building an asset library rather than data centres. It runs 2,500 genAI projects, has deployed 300 AI agents in its own operations and claims productivity gains of 5-40% depending on service line. Its AI-suite, Topaz, holds 12,000 assets, 150 pre-trained models and 200 agents for code generation, IT operations and billing; Cobalt holds 35,000 cloud assets and 300 industry blueprints.

Leadership now describes the systems integrator as an “orchestrator” – not building models but making them function inside client businesses, where function means plugging into SAP, Oracle and Salesforce without hallucinating key details. Forward deployed engineers sit inside key accounts to identify use cases and move pilots toward production.

Wipro has built vertical platforms including AutoCortex, WealthAI and PayerAI and signed a sovereign AI deal with Nvidia, though the company faces stiff competition in vendor consolidation where productivity baselines already run at 15% before AI shows up. Tech Mahindra has invested in sovereign LLMs and a one-trillion-parameter domain-specific model, hoping India’s national AI push provides differentiation.

Among smaller IT firms, Persistent is reporting what it claims is early evidence of AI-driven productivity, with revenue growing at double digits while headcount stays flat. LTIMindtree has assembled an AI team of over 1,000 to build what it calls a “learning transfer” model to carry lessons from one deal to the next.

IT budgets have grown about 8% annually for the past five to six years for the industry, and the expectation is that the trend continues, with AI taking a larger share alongside cybersecurity and cloud migration.

Large customers want productivity passed through when they adopt genAI, and vendors concede the hit arrives at renewal rather than all at once, which means revenue growth may not return to mid-to-high single digits until FY28 or FY29. IT services are forecast to shrink from 38% of enterprise tech spending in 2018 to 25% by 2029, even as the absolute market grows to $1.3 trillion.

Valuations have not collapsed: the Nifty IT still trades at over 6% premium to the Nifty versus a 10-year average of 10%, and at an over 15% discount to the Nasdaq, close to historical norms. One risk for 2026 is that if the AI-led global tech rally fades, Indian IT would likely suffer rather than benefit, because relative performance has tracked broader tech sentiment even as the underlying business case has diverged.

The IT companies are not claiming victory. The argument is narrower: that the preparatory work AI requires – data cleanup, integration, compliance, tuning – creates enough billable hours to offset what automation takes away, that the middleman remains necessary for different reasons than before.

The bear case assumed AI would work out of the box, that enterprises would deploy it themselves, that Indian IT would have nothing left to sell. Two years in, AI does not work out of the box, enterprises have found it difficult to deploy it themselves, and the firms that were supposed to be dead are still hiring specialists and winning deals.

• Phone Bans Drive Outcomes: Florida’s large urban district saw test-score gains and rural Sierra Sands posted sharply improved behavior after classroom phone bans.
• Phones Blamed for Disruption: Early district data show devices were central to threats, vaping meetups and fights, prompting administrators to remove them from instructional time.
• Discipline Metrics Improve: Sierra Sands cut threats/physical-injury incidents to 142, harassment actions to 19 and suspensions to 72 in the first ten weeks of the current year.
• Enforcement Hurdles Persist: Initial reliance on teachers led to patchy enforcement, prompting state mandates and uniform policies in 37 states.
• California Law Drives Policy: The 2024 Phone-Free Schools Act gives districts until July 2026 to limit phone use, with some using signal-blocking Generation Faraday pouches.
• Physical Controls in Classrooms: Sierra Sands stores phones in shoe racks and uses Faraday pouches, and a single ringing phone proved how easily class dynamics shift.
• Research Notes Long-Term Gains: Florida’s statewide ban first raised suspensions, but later reduced discipline issues, improved attendance and lifted test scores, especially for male students.
• Teachers Report Better Climate: Sierra Sands special-education math teachers note smoother lessons, respect for privacy, and students engaging in childhood play after work is done.

By

Julie Jargon

Dec. 27, 2025 7:00 am ET

16

Vincent Kilbride

A large urban district in Florida saw an increase in student test scores. A smaller school district in rural California is experiencing a dramatic decline in student behavioral problems. The reason for both: the absence of smartphones in the classroom.

Early data on the effects of school phone bans confirm what teachers and administrators have long suspected—that phones in the classroom were the primary culprit behind bad behavior and low engagement.

“When you have 267 incidents of threats and physical injury in the first 10 weeks of a school year, that’s a serious problem,” said April Moore, superintendent of the Sierra Sands Unified School District near California’s Mojave Desert, of last year’s disciplinary problems.

Students were using their phones to plan bathroom vaping meetups, gossip sessions and fights. “When behaviors escalate in an invisible space, we can’t prevent them or react as fast,” said Moore, who presides over a district of about 5,000 students.

Since a districtwide ban on cellphone use during instructional class time went into effect this fall, student behavior has turned around.

Incidents involving threats and physical injury in the first 10 weeks this school year declined by almost half to 142. The number of disciplinary actions for harassment dropped by nearly 83% to 19. Total suspensions were down 69% to 72. Moore said the district won’t have data on how the ban has affected academic performance until first-semester grades are tallied next month. 

It might seem like a ‘no-duh’ moment, but the effort to get phones out of the classroom wasn’t easy—and continues to be a challenge for many school districts. 

New laws

Parents who had grown accustomed to being able to reach their kids at any moment pushed back when some districts proposed phone bans. Many schools that had phone-free policies left enforcement to the teachers, leading to a patchwork of practices. Some teachers quit after growing exhausted from policing devices.

It wasn’t until states began mandating school districts to develop phone policies that more uniform enforcement began. As of this past month, 37 states have enacted some kind of school phone law or policy.

In California, the 2024 Phone-Free Schools Act mandated that districts have until July 2026 to develop policies limiting student phone use. Many districts have determined it isn’t enough to expect students to keep their phones in lockers or backpacks. Some districts require students to lock up their phones in Yondr pouches during the day. Sierra Sands introduced pouches from Generation Faraday that block wireless signals.

Generation Faraday bags block wireless signals so phones can remain relatively inactive during class. Generation Faraday

Moore recently visited a fifth-grade classroom where student phones were placed in a shoe rack. “All of a sudden a cellphone rang. It immediately interrupted the flow and changed the whole dynamic of the room,” she said. The school’s principal immediately asked Moore for 24 more pouches.

“Our campuses are so much calmer this year,” Moore said.

A rough start

In some districts, the phone-free transition was initially rough.

Two economics researchers studied a large district in Florida, the first state to implement a statewide school phone policy in 2023. The district, which wasn’t named in the paper, saw an increase in student suspensions in the ban’s first year. The researchers attribute this to students being disciplined for using phones when they weren’t supposed to. The disciplinary issues have since dropped to pre-phone ban levels, and unexcused absences have decreased.

By the second year of the ban, students in the most phone-heavy schools showed improvements in testing, even after taking overall postpandemic increases into account. Their average test scores rose by 0.6 percentile points, meaning these schools are now outperforming a larger share of the country than they were before the ban went into effect.

The gain was even greater for male students. The improvement in test scores could be due, in part, to stronger student attendance after the phone ban, the researchers said.

Despite it being a logical deduction, it wasn’t a guarantee that banning phones would lead to better learning environments, said the paper’s co-author David Figlio, an economics professor at the University of Rochester.

No more TikTok

Tatiana Edwards, who teaches special-education math at Sierra Sands’ China Lake Junior High School, said she hasn’t tabulated the improvement in grades yet but has noticed students performing better.

“People forget how much behavior affects grades,” she said.

SHARE YOUR THOUGHTS

Should all schools ban phones? Why or why not? Join the conversation below.

Plus, she doesn’t have to interrupt her lessons to remind students to put their phones away anymore.

Her classroom feels like a more sacred space. Students were constantly recording videos on their phones in class, often without fellow students’ consent. Even Edwards was the subject of one: a video of her at her desk ended up in one student’s TikTok.

She said the phone ban has resulted in other intangible changes, including kids being kids again.

After some girls completed their classwork recently, they played a hand-clapping game. “I’m seeing a bit of the innocence of childhood coming back,” she said.

Write to Julie Jargon at Julie.Jargon@wsj.com

Copyright ©2025 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

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• Weapons independence: Netanyahu approved NIS 350 billion over the next decade to build an independent Israeli munitions industry to reduce dependence on external suppliers.
• Lessons from war: The move follows two years of multi-front war experiences and restrictions imposed by allies such as the US, UK, and Germany after the October 7 Hamas attack.
• Export demand: Despite restrictions, Netanyahu noted that many countries, including Germany, continue to want to buy Israeli military systems.
• European pressure: European allies’ impatience with Israel’s conduct in Gaza sparked calls for arms embargoes and reignited public debate over dependence on foreign weapons.
• “Super-Sparta” remark: A prior comment about Israel becoming a self-reliant “super-Sparta” caused uproar, prompting Netanyahu to clarify he referred only to defense ministry capabilities.
• Aerial superiority: Netanyahu vowed to prevent Turkey or others from receiving F-35s, framing Israeli aerial supremacy as fundamental to national security.
• F-35 inventory: Israel remains the only Middle Eastern country operating F-35s, currently flying 45 jets with an additional 30 on order and emphasizing skilled pilots.
• Regional dynamics: Turkey, removed from the F-35 program after purchasing Russia’s S-400, now seeks rapid acquisition from European partners and the US, while being a vocal critic of Israel as it faces regional competition.

Israel is working to gain as much independence as possible in its weapons production, Prime Minister Benjamin Netanyahu announced on Wednesday, in a development he said was the result of the lessons learned during the past two years of war on multiple fronts.

“I approved, along with the defense minister and finance minister, a sum of NIS 350 billion [$108 billion] over the next decade to build an independent Israeli munitions industry,” Netanyahu said in an address at a graduation ceremony for Israeli Air Force pilots.

The move, he said, stemmed from a desire to “reduce our dependence on all players, including friends,” after allies including the US, UK, and Germany all imposed various restrictions on weapons sales to Israel since the October 7, 2023, Hamas attack.

Still, he noted, many countries around the world, including Germany, “want to buy from us more and more systems.”

The premier has long been calling for Israel to develop its own self-reliant military industry, and in January 2024 announced that the government would invest in a “multi-year plan to free Israel from dependence on external purchases.”

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The matter returned to the public eye earlier this year as Jerusalem’s European allies began to grow impatient with Israel’s conduct in Gaza, with some calling for arms embargoes and sanctions.

People march behind a banner reading “Against Genocide Let’s block everything” during a nationwide strike in solidarity with Palestinians in Gaza and calling for a halt to arms shipments to Israel, in Rome on September 22, 2025. (Andreas SOLARO / AFP)

In that light, Netanyahu briefly caused an uproar in September when he admitted that Israel was facing increased isolation on the world stage and that, to combat that, it would have to become a more self-reliant “super-Sparta” in the years to come.

The remarks sparked outrage and spooked the markets, forcing him to clarify them in a follow-up press conference the next day, when he insisted that he had been referring only to the defense ministry rather than the overall Israeli economy.

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Israel will “prevent whoever must be prevented from receiving these instruments,” the premier promised, adding that the Jewish state’s “aerial superiority in the Middle East is a cornerstone of our national security.”

Maintaining this, he said, rests on Israel’s skilled pilots and “the best aircraft in the world.”

Israel is currently the only country in the Middle East with F-35s in its arsenal, currently operating 45 of the aircraft with another 30 units on order.

Israeli Air Force F-35I fighter jets depart for strikes in Iran, June 13, 2025. (Israel Defense Forces)

During US President Donald Trump’s first term, Washington removed Turkey, a NATO ally, from its flagship F-35 fighter jet program, after Ankara purchased the S-400 surface-to-air missile system from Russia.

But now, anxious to bolster its air power, Turkey has proposed to European partners and the US ways it could swiftly obtain the fighter jets as it seeks to make up ground versus regional rivals such as Israel.

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Turkey is one of the world’s most outspoken critics of Israel, with President Recep Tayyip Erdogan often accusing Israel of genocide over the past two years, and praising Hamas.

Further bolstering Israel’s fears, Trump recently announced the sale of F-35s to Saudi Arabia, although US officials and defense experts told Reuters that the jets to be sold to the Saudis will be less advanced than those used by the IDF.

Times of Israel staff contributed to this report.

• Program Launch: NYC began charging drivers on Jan. 5, 2025 to reduce congestion, improve air quality, and raise $15B for transit upgrades.
• Opposition: Critics spanning NJ Governor Phil Murphy to former President Trump warned the $9 fee would harm small businesses and hardworking families, but the plan survived years of debate.
• Pollution & Traffic: A Cornell study and MTA data show pollution down about 22% and an 11% drop in vehicles (71,500 fewer per day, 23.7M fewer annually) in the tolled zone.
• MTA Revenue: The authority is likely to exceed its $500M net revenue goal with $548.3M through December and plans to issue congestion-pricing bonds to finance $15B of infrastructure work.
• Funding Uncertainty: A legal challenge rooted in actions from the Trump administration threatens the MTA’s planned borrowing against congestion pricing revenue next year.
• Visitor Trends: Despite the toll, the area south of 60th Street drew 3.4% more visitors than in 2024 versus a 1.4% Manhattan-wide rise.
• Retail Vacancies: Midtown and downtown storefront vacancy dipped to 15.5% in Q3, 0.9 percentage point lower than the same period in 2024 and better than Manhattan overall.
• Sales Tax: January through November sales-tax collections reached $9.9B, marking a 6.3% year-over-year increase and outpacing neighboring counties.

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Traffic enters the Congestion Relief Zone from the Ed Koch Queensboro Bridge in New York.

Photographer: Michael Nagle/Bloomberg

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By Michelle Kaske and Aaron Gordon

December 22, 2025 at 12:00 PM GMT+1

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Takeaways by Bloomberg AI

• Congestion pricing is working as planned, with a significant drop in pollution and traffic declining by 11% in the tolled zone.
• The Metropolitan Transportation Authority is poised to beat its target of generating $500 million of revenue from the program after expenses.
• Despite initial concerns, the business impact in the district doesn't appear to be as onerous as some had feared, with a 3.4% increase in visitors and a 6.3% boost in sales-tax revenue.

Nearly a year ago, New York City embarked on a controversial program to toll drivers entering some of Manhattan’s busiest streets. The goal of the congestion pricing plan, the first of its kind in the US, was to improve air quality and raise $15 billion to upgrade the city’s extensive — and aging — transit system, all while relieving traffic in a routinely clogged part of town.

Critics of the initiative warned that imposing a $9 fee on most drivers would dampen economic activity in an area that was still trying to rebound from the Covid-19 pandemic, while placing an outsized burden on small businesses and working families. Opponents ranged from New Jersey Governor Phil Murphy, a Democrat, to Republican President Donald Trump, and it narrowly survived years of political bickering before finally become a reality on Jan. 5.

E-ZPass readers and license plate-scanning cameras over Second Avenue in Manhattan.Photographer: Michael Nagle/Bloomberg

Despite all that, congestion pricing by a number of measures is working as planned, a reality that may turn New York’s experiment into a blueprint for other US urban centers. Early indicators point to a significant drop in pollution in parts of Manhattan, according to a Cornell University study, with traffic declining by 11% in the tolled zone. The Metropolitan Transportation Authority, which implemented the new toll, is poised to beat its target this year of generating $500 million of revenue from the program after expenses. And the business impact in the district, which runs from 60th street to the southern tip of Manhattan, doesn’t appear to be as onerous as some had feared.

“I undoubtably see it as a success, in the reduction of traffic, the improvement of public safety and air quality and the funding of public transportation needs,” said Sarah Kaufman, director of New York University’s Rudin Center for Transportation.

Challenges remain. The MTA’s plans to borrow against congestion pricing revenue as soon as next year are in limbo as the program faces a major legal hurdleBloomberg Terminal stemming from the Trump administration. And yet based on results, congestion pricing is doing its job. These five charts show how:

Congestion is down. The toll immediately created a financial disincentive to drive south of 60th Street, and an average of 71,500 fewer vehicles entered the area each day from January through November. That’s an 11% reduction from 2024, according to the MTA. A total of nearly 23.7 million fewer vehicles have entered the area in the first eleven months of this year, the MTA said. That helped the authority’s buses pick up the pace — a little bit— in and around the central business district, making mass transit a more appealing option when every minute counts.

Revenue is up. The MTA’s goal was to collect $500 million of net revenue in 2025 from the new toll — or roughly $42 million a month, on average — and the agency is poised to surpass that target with an anticipated $548.3 million generated through December, according to MTA documents. The transit agency is planning to sell its first-ever congestion-pricing bonds in 2026, secured by the new toll revenue. Over time the MTA will issue $15 billion of such debt to help modernize train signals, add elevators to subway stations and extend the Second Avenue subway to Harlem.

It’s busier. A major concern with implementing a congestion pricing toll was that fewer people would come into the area for shopping, appointments, entertainment and dining. But not only did people still seek out neighborhoods south of 60th, that area saw a 3.4% increase in visitors from 2024, a bigger boost than the 1.4% gain across all of Manhattan.

Filling up: The higher storefront rents in Midtown and downtown neighborhoods tend to keep vacancy rates for those areas above the rest of the city. Still, the 15.5% vacancy rate in the third quarter of this year is 0.9 percentage point less than the same period in 2024, a bigger decline than all of Manhattan and better than the city’s flat performance as a whole.

Business is good. Even with the toll, residents, visitors and commuters were steady spenders in the city, which pulled in $9.9 billion of sales-tax revenue from January through November, a 6.3% boost compared with the same period in 2024. New York City as a whole performed better than its neighboring counties, which saw smaller increases in sales-tax collections.

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• Projection accusation: Erdogan’s criticism of Israel mirrors his own Ottoman revivalism, denial of Armenian genocide, and transformation of Hagia Sophia amid international protests.
• Regional alliances: Turkey now sides with destabilizing actors, reportedly aiding Pakistan, building Sri Lankan bases, and sheltering Hamas operatives.
• Hamas support signal: After Israel killed Hamas leader Ismail Haniyeh, the Turkish Embassy in Tel Aviv lowered its flag to half-staff, demonstrating ongoing backing.
• Opposition to Gaza deployment: Israel, Saudi Arabia, and the UAE all privately oppose incorporating Turkish troops into a Gaza multinational force due to fears of further Hamas preservation.
• F-35 sale concern: U.S. talks on selling F-35 jets to Turkey are advancing, with a reported 40% approval chance, raising questions about Ankara’s true objectives.
• Threat to Israel: Turkish rhetoric and national-security documents now list Israel as an existential threat, fueling fears that advanced jets would be aimed at the Jewish state.
• Qualitative edge risk: Selling F-35s to Turkey could erode the Israel Defense Forces’ military edge, upset regional balance, and enable potential future dogfights between U.S.-supplied aircraft.
• Historical warning: Citing Bernard Lewis, the author warns against empowering an Islamist Turkey that may surpass Iran as the region’s foremost threat and emphasizes keeping the countries separate.

By

Amit Segal

Dec. 24, 2025 5:54 pm ET

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Turkey's President Recep Tayyip Erdogan in Johannesburg, South Africa, Nov. 23. Jerome Delay/Associated Press

Turkey embodies everything it accuses Israel of being. Psychologists call it “projection”: When President Recep Tayyip Erdoğan accuses Israel of encroaching on its neighbors’ territory in an attempt to establish “Greater Israel,” he’s mirroring his own desire to revive the Ottoman Empire, which once ruled those same regions. When he claims that Israel has “set its sights on” Turkey, he ignores his own prayers to Allah asking for Israel’s destruction. While claiming that Israel is committing genocide against the Palestinians, he denies the genocide his country committed against the Armenians. When he accuses Israel of attempting to turn the Al Aqsa Mosque in Jerusalem into a Jewish temple, he ignores that he turned the Hagia Sophia in Istanbul from a church into a mosque over international protests.

Turkey was once the “Sick Man of Europe.” Now, like Qatar, it’s a dangerous Muslim brother of the Middle East. It stands by many bad actors in the region, supports terrorists and fuels instability. It allegedly has aided Pakistan against India, is reportedly building military bases in Sri Lanka, and, worst of all, hosts and protects Hamas members. When Israel last year killed Hamas leader Ismail Haniyeh, one of the planners of the Oct. 7 massacre, the Turkish Embassy in Tel Aviv lowered its flag to half-staff.

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Israel opposes the integration of Turkish soldiers into the multinational force in the Gaza Strip—and it isn’t alone. Behind closed doors, the Saudis and Emiratis have also voiced strong reservations over Turkish involvement in Gaza. If Turkey is trying to preserve and nurture Hamas in Istanbul, it’s safe to assume it would do the same in Gaza.

Nothing good would come of allowing Turkish power in the region to increase. The U.S. ambassador to Turkey earlier this month tweeted that recent conversations about Washington’s potentially selling F-35 fighter jets to Ankara have been “fruitful.” This is deeply concerning. A senior Israeli official told me on Dec. 12 that the chance of the sale’s approval was around 40%, much higher than he thought a few weeks earlier.

Why would Turkey, already a global military power, need such an advanced fighter jet? The U.S. has at times considered sales of identical jets to the United Arab Emirates, and it recently signaled that it would try to sell F-35s to Saudi Arabia. Although Israel expressed concerns about such sales, it’s clear that the Saudis would use these aircraft to defend against Iranian aggression, not to practice attacking Tel Aviv. By contrast, Mr. Erdoğan preaches the destruction of “Zionist Israel.”

These fighter jets no doubt are intended for a future war with Israel. Reports indicate that Mr. Erdoğan’s government this year added the Jewish state to the Turkish “Red Book,” a core national-security document, as an existential threat to the country. Turkey did so under the false pretext that Israel seeks to conquer Anatolia.

More than one-third of Turks view Israel as the greatest threat to their country, with the U.S. in second place. While Mr. Erdoğan cozies up to President Trump to get the fighter jets he wants, his supporters see the U.S. and Israel as enemies.

Selling the jets to Turkey would give the U.S. a short-term profit at the cost of jeopardizing national security. It would unsettle the delicate balance in the region and diminish or even wipe out the Israel Defense Forces’ qualitative military edge, which the U.S. is committed to maintaining through congressional action. Michael Doran, a Middle East expert at the Hudson Institute, has suggested that if the U.S. wishes to keep the region calm, it must separate Israel and Turkey as much as possible. So why enable a future scenario in which F-35 jets conduct dogfights against each other?

The late historian Bernard Lewis said in 2011 that the day would come when Iran would become like Turkey and Turkey would become like Iran—the ayatollah regime would be replaced by a secular democracy, while the secular republic of Turkey would turn into a threatening Islamic empire. In June, American-made Israeli jets destroyed outdated Iranian F-14s. It would be a mistake to equip an increasingly aggressive and Islamist Turkey—which might in time supplant Iran as the most threatening country in the region—with far more advanced American weapons.

Mr. Segal is chief political commentator on Israel’s Channel 12 News and author of “A Call at 4 AM: Thirteen Prime Ministers and the Crucial Decisions that Shaped Israeli Politics.”

Review & Outlook: European leaders including NATO Secretary General Mark Rutte, German Chancellor Friedrich Merz and the U.K.’s Chief of Defense Staff Richard Knighton are urging voters to make sacrifices to guarantee national security.

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