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By George Glover

If the company he keeps is anything to go by, then David Ellison is probably best placed to win the race for Warner Bros. Discovery. Paramount Skydance's CEO attended a high-profile White House banquet for Saudi Crown Prince Mohammed bin Salman on Tuesday, the latest reminder of his family's strong relationship with the Trump administration.

Thursday marks the deadline for any interested parties to submit first-round, nonbinding bids for the entertainment company, according to a report from The Wall Street Journal last week that cited people familiar with the matter. Whoever wins will walk away with the rights to beloved characters including Harry Potter, Superman, and Tony Soprano.

Paramount, Netflix, and Comcast are all preparing offers, according to The Journal's report.

Paramount looks best placed to win the bidding war: It has the strongest relationship with the Trump administration, potentially smoothing the process of regulatory approval. At the same time, it can rely on billions of dollars in cash from CEO Ellison's father, Oracle founder Larry Ellison, to get the deal done.

Warner Discovery has rejected three offers from Paramount, the Journal reported last month. The highest of those valued the company at $23.50 a share. Warner Discovery's stock, which has climbed 103% over the past three months in response to excitement about a potential takeover, was trading at $23.69 as of Tuesday's close.

Paramount on Tuesday denied a report from Variety that it was forming an investment consortium with three Middle East sovereign-wealth funds to submit a bid. "The information Variety published is categorically inaccurate," it told Barron's, declining to comment further.

As David Ellison's attendance at the White House banquet illustrates, he and his father have a close relationship with the White House. He was spotted ringside with President Donald Trump, Tesla CEO Elon Musk, and several Trump administration officials at a United Fighting Championship event in April, months before the Federal Communications Commission approved Skydance's merger with Paramount.

Larry Ellison is a close ally of Trump. He is involved in initiatives including the Stargate artificial-intelligence infrastructure project and the search for a buyer for the Chinese video-sharing app TikTok.

"The path of least resistance for success would probably be Paramount Skydance," Seaport Research Partners analyst David Joyce told Barron's. "It seems like they have the regulatory review locked up, given their visibility with the Trump's administration."

He rates Warner Discovery at a Buy with a price target of $24, but is Neutral on Paramount.

Joyce thinks Paramount would likely end up paying at least $27 a share. His financial model assigns Warner Discovery's studios, streaming, and TV networks segments respective enterprise values of 12 times, 15 times, and 5.5 times earnings before interest, taxes, depreciation, and amortization.

Netflix and Comcast are only interested in the streaming and studios businesses, according to The Journal. Neither company responded to a request for comment from Barron's about potential bids for the studios and streaming business.

It's less likely that Warner Discovery's board would accept such an offer, which would leave it trying to find another bidder for its legacy TV networks, Joyce said. The company's legacy network stable includes CNN, TNT and Discovery Channel, but revenue for the segment has plunged as customers pivot to streaming and advertisers rein in spending.

Both Netflix and Comcast have also faced backlash from Trump and his allies this year, which might make it tougher to win regulatory approval. Musk and other conservatives slammed Netflix last month for what they saw as the pro-transgender messaging of its animated children's show Dead End: Paranormal Park. Trump has repeatedly criticized Comcast's NBC and the liberal cable channel MS NOW, formerly known as MSNBC.

Comcast may also find it tough to pull off a deal considering it is in the process of spinning off most of its own cable networks into a new, publicly traded company called Versant. The company expects to complete that transaction in January.

Three of the world's biggest media companies are going head-to-head for Warner Discovery, but this isn't just about the size of the potential bids. With Trump in its corner, Paramount Skydance should be a heavy favorite to get the deal done.

Write to George Glover at george.glover@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

By Martin Baccardax

It wasn't too long ago that the mere mention of "artificial intelligence" in a corporate press release would trigger an upside move for the stock.

Investors, eager to get ahead of the next wave of the new technology's potential, were happy to believe in, and bet on, a bottom-line impact from AI deployment — even if it couldn't be fully explained.

We're not there now.

Target attempted to sweeten the impact of a mixed set of third-quarter earnings and a dour holiday season outlook by floating a new partnership with OpenAI. The struggling retailer vowed to "leverage AI to help guests explore our assortment with ease."

The stock barely budged.

Companies at the center of the AI investment boom are also finding it tough to secure a sympathetic ear for their lofty new tech ambitions.

Meta Platforms shares have fallen more than 20% since its third-quarter update in late October detailed massive capital spending and expenses commitment tied to its pursuit of "superintelligence."

Oracle has slumped nearly 33% since it unveiled a massive increase in its RPO forecast that was subsequently tied to a $300 billion deal with OpenAI. Smaller players in the AI space, such as CoreWeave and Palantir Technologies, have also seen selloffs.

Nvidia, meanwhile, is largely even with the S&P 500's 3% gain since it last reported earnings on Aug. 27. Investors are bullish on the market, but also starting to question the scale and pace of AI investments after one of the worst November slumps since 2008.

Stocks moving in the other direction, by contrast, are doing so largely as a result of faith in their core businesses as opposed to the discounted returns on AI spending.

Google shares have soared nearly 43% since a U.S. court ruled on Sept. 2 that its parent company, Alphabet, could keep its Chrome browser and Android operating system despite having lost a landmark antitrust case in 2024.

The world's most famous value investor, Warren Buffett, recently went along for the ride.

Apple, which has failed to capture investor imagination with its long-game AI strategy, has risen around 34% since late summer off the back of robust iPhone demand that helped generate a record $102.5 billion in revenue over the three months ended in September.

Put simply, while the biggest stocks in the AI trade still dominate index performance with the sheer heft of their market values, investors are separating the wheat from the chaff in the recent pullback. And that likely means that AI will no longer be the proverbial tide lifting all boats in the stock market.

But it doesn't mean the AI rally is over. It may just evolve differently.

Jean Boivin, who heads the BlackRock Investment Institute, sees the capex increases from the sector's biggest players as a "necessary step in the AI buildout," but notes that earnings outside of tech are also showing big improvements.

Magnificent Seven profits for the third quarter, not counting Nvidia, rose 27% from last year, but the rest of the S&P 500 saw much better-than-expected gains of 14%.

That can pull new investment money away from the speculative AI themes and into more traditional, income generating stocks, lowering overall market multiples at the same time.

John Belton, a portfolio manager at Gabelli Funds, also notes that the forward price/earnings multiple for the Mag 7 has already contracted by around 10% since the start of the year, even as an index tracking the group's performance is up nearly 20%.

"That implies that earnings growth, rather than multiple expansion, has propelled share price performance," he argues, adding that only two stocks in the group, Alphabet and Tesla, have seen their forward P/E ratios increase this year.

"This is good evidence that while earnings estimates are always subject to negative revisions, it is difficult to argue that we are in a valuation bubble currently," he said.

And perhaps a good indication that the broader AI bubble may have already popped.

Write to Martin Baccardax at martin.baccardax@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.