Headlines this week - Dec 11, 2022
ChatGPT might change everything. Apple and Twitter. Microsoft, Activision and regulators. TSMC increasing presence in the US. Meta under pressure. Space as a geo-strategic asset. And more
IN SUMMARY - TOP 15 THEMES THIS WEEK
(1) OpenAI releases ChatGPT, so everyone is impressed (and many feel threatened…)
This week AI finally entered the mass market, with ChatGPT, an interactive “chatbot-like” version of GPT-3 (OpenAI famous Language Model) (WSJ)
Everyone seems impressed by the how well the tool works, and by the number of potential applications. People are even talking about “brilliance” (NYTimes)(TheEconomist)
As a friend of mine recently told me, the “Turing Test for written communication” has probably been passed (Bloomberg)
As with all good tools, lots of potential disruptions and collateral effects are possible. There are discussions on the threat to Google Search,… (Bloomberg)
… on the effects of automated text-generation on political and regulatory processes (which could suffer a documentation overload), … (Bloomberg)
… on how to regulate AI, to control potential risks (as almost always, with a debate between “paternalistic” vs. “libertarian” approaches), … (FT)
… and (of course) on the potential impact on (white collar) jobs, with a particularly interesting discussion regarding education (NYTimes)(OneUsefulThing)
An “AI revolution” may be starting. OpenAI is planning to launch an API for developers to incorporate the tool to all kinds of apps (Bloomberg)(TheEconomist)
(2) Apple solves the Twitter crisis, but investors remain concerned about risks in China
Tim Cook showed his diplomatic skills once again, and neutralized the “war” that Elon Musk had started against Apple (FT)
Apparently, the agreement included the commitment by Apple (the largest advertiser on Twitter) to buy ads again (Bloomberg)
For some people, this reveals Apple’s strength. Musk would have accepted Apple’s 30% fee on in-app revenue because Twitter depends on the iPhone so much… (Bloomberg)
The point is that Twitter needs the money, so they didn’t want to share 30% with Apple. Meanwhile, Apple couldn’t set a precedent and reduce the fee for Twitter (Bloomberg)
To solve the issue for its new “Twitter Blue” subscriptions, Twitter has opted for using a higher price ($11/month vs. $7/month) , if they’re paid via the iOS app (TheVerge)
Meanwhile, Apple’s supply chain issues in China could be on the way to be solved, as the government is easing the Zero-Covid rules that were causing conflict in factories (WSJ)
In any case, investors remain concerned about Apple’s dependence on China. This crisis could be seen just as an indicator (WSJ)
(3) Microsoft facing regulatory action against their acquisition of Activision
This weekend the US Federal Trade Commission confirmed it is suing to block the deal (FT)(WSJ) (NYTimes)(Bloomberg)
Microsoft could fight the challenge in court, offer more concessions or walk away and pay a breakup fee of up to $3bn. There is also a risk of contagion to other regulators (WSJ)(FT)
Before the FTC’s decision, Microsoft committed to put “Call of Duty” on the Nintendo Switch. This is the kind of concessions (or remedies) we could expect from now on (WSJ)(Bloomberg)(FT)
With this, the FTC is shifting to a forward-looking approach to M&A approvals (unlike what happened with previous deals, e.g. by Meta). That is why cloud-gaming future is (a key) part of the discussion (Bloomberg)
(4) Regulators in the US have started to think about forcing Facebook to pay to media companies. And the company is not happy
After the (angry) discussions in Australia in the past, the threat is now arriving to Facebook’s core market: a proposed law in the US would force Big Tech to pay publishers for content (FT)
Facebook is (understandably) not too happy about this. They’re are threatening to pull news from their platforms (WSJ)
But the problem is expanding to other countries, including Canada (where another proposal is being discussed) and New Zealand (WSJ)
(5) Meta and Google facing more regulatory pressure on their (targeted-ads) business models, and on content safety
In Europe, privacy regulators want Facebook and Instagram to stop using the “terms of service” to get users (implicit) approval of private data collection for ad targeting (WSJ)
In the US, the Justice Department is supporting a family that has sued YouTube for showing ISIS-related content. One more sign that content safety pressure keeps growing (Bloomberg)
Meanwhile, within Meta, the debate continues. The company’s own Oversight Board has criticized the use of different content moderation rules when dealing with famous people (FT)(Bloomberg)
(6) Amid all the noise about Twitter, competitors and new startups want to take advantage of the crisis
Snap is in a bad need of more revenues, to appease investors. Advertisers leaving Twitter give them hopes, because Snapchat offers the same kind of “brand positioning” ads (Bloomberg)
Even Meta is considering to “build a new Twitter”. And there are several startups, like Mastodon, and Hive Social, that are also trying to occupy that space (NYTimes)
Other startups (like Post or Narwhal Project) are trying to solve some of Twitter’s fundamental issues, such as moderation and tools for connecting with other users (TheVerge)
Finally, some people (at the left of the political spectrum) see the Twitter case as a reflection of a deeper crisis, that only direct governments’ intervention (and “public apps”) could solve (Slate)
(7) Meanwhile, Musk keeps trying to solve Twitter’s financial issues. According to some people, this could be at the expense of Tesla’s investors
Elon Musk is trying to cut Twitter debt (a high risk for the company , given interest rate trends). He would be considering to get new, cheaper loans using Tesla’s stock as collateral (Bloomberg)
Of course, Tesla’s investors are not happy with this (Bloomberg)(Bloomberg2)
(8) Is Oracle entering the “hyperscalers” club?
The US Pentagon’s $9bn cloud computing contract has been split in different pieces, and Oracle has been selected as a provider, together with the 3 “hyperscalers”. This is a clear win for them, amid their current efforts to catch up with Amazon, Microsoft and Google (FT)
(9) Vodafone’s CEO is leaving. Everyone expects a deep restructuring, now
Vodafone’s CEO has finally resigned, after months of pressure from activist investors (Cevian) and a disappointing results conference call a few weeks ago (FT)
The expectation now is that this should accelerate the company’s restructuring, including the sale of the company’s assets in some countries (FT)
However, as shown by the potential deal with Three in the UK, there are lots of regulatory and political barriers for this restructuring moves to happen (Bloomberg)
(10) Verizon makes efforts to recover its (lost) leadership position in the US connectivity market
First, the Consumer division leader is being replaced but the CEO (H Vestberg), after the company’s recent poor results in this segment (WSJ)
Second, they’re trying to re-ignite market perception about their network leadership, by accelerating the deployment of 5G in C-band (3.7-4GHz) spectrum, enabling higher access speeds (PhoneArena)
(11) TSMC reinforces its commitment to build a plant in the US, with support from Apple and Nvidia
This week TSMC confirmed its commitment to build a second chip foundry plant in Arizona, and raised the total expected investment in the US to $40bn (FT)
The new plant will be used to build the most advanced chips (3nm) for Apple, AMD and Nvidia, among others, with production due to begin in 2026 (Bloomberg)(WSJ)(Nikkei)
This has been perceived as a triumph for President Biden, that will help the US hedge its supply chain for critical semiconductors against risks affecting Taiwan (NYTimes)
Still, other sources question that point, and claim that $40bn of investment is a “minuscule” effort if you compare it with the global chip production capacity (Bloomberg)
On top of this, the project won’t be easy. TSMC is already facing high costs and a shortage of skilled labor force, in the construction of its first US plant ($12bn of investment) (WSJ)
(12) Political pressure on TikTok US keeps increasing
The previous crisis (during Trump’s presidency) was solved with a commitment to work on a deal between TikTok and the US government, but now negotiations have stalled (WSJ)
At the same time, the rhetoric against the company keeps growing, from both the Biden administration and the Republicans, who keep talking about “security concerns” (FT)
This week the State of South Dakota banned the app in all state-owned and state-leased devices. And the perception is that this will expand across the whole country (WSJ)(WSJ2)
After South Dakota, Texas announced a similar ban (Bloomberg)
In the meantime, the company looks pretty healthy. They’re one of the few apps that are being able to produce revenue growth in the current slowdown of the digital advertising market (FT)
(13) We may be entering a new age for investors. And for the technology industry too
A new era may be starting for investors, after 20 years of abundant capital continuously looking for growth opportunities. Tech stocks won’t be so attractive, as investors will prioritize higher returns over shorter investment horizons (TheEconomist)(Bloomberg)
This is already affecting tech startups, with VC investments decreasing. Looking at past tech downturns (2001, 2008) analysts believe that government incentives could turn this into an opportunity. But they disagree on what will drive the next cycle (AI or Augmented Reality?) (WSJ)
(14) The World in the next 50 years (according to Goldman Sachs)
Goldman Sachs have just published a long-term economic vision (with an horizon of 2075). And the picture for world growth is not pretty, due to a demographic crisis and to a lack of productivity gains (Bloomberg)(GSReport)
(15) Investing in the future: what is happening in long-term innovation
Crypto / Web3
Vitalik Buterin, creator of the Ethereum blockchain, has published a new blog post about exciting things happening in Ethereum, including opportunities in money and decentralized finance (VitalikBlog)
Electric Vehicles
Apple has apparently delayed its plans to launch an Electric Car. The debut has now been shifted to 2026, and it won’t be an autonomous vehicle. Target price would be below $100K (Bloomberg)
News of this delay punished the stock of LG, which is perceived as a key partner for Apple in this project. The FT tries to sell us the long-term value of this relationship, but we’ll see (FT)
Meanwhile, Elon Musk is moving ahead with Tesla’s Electric Truck project, which might have found its “ecological niche”, and has an opportunity to capture government subsidies (Bloomberg)(WSJ)
Tesla is also having good results in China, at least for now. They sold a record number of units last month, and they’re even using subsidies and price reductions to accelerate sales (WSJ)(Bloomberg)
Tesla is also starting to fight for other Asian markets, in direct competition with Chinese brands. They are now entering Thailand, while BYD (China) is entering Malaysia (FT)(Bloomberg)
Batteries
Looking to catch up / compete with Tesla, the European car industry is becoming increasingly dependent on China for its battery supply chain (FT)
The strategic importance of batteries, and of the materials used to build them, keeps increasing. Battery prices just went up for the first time in more than a decade (FT)
Space
Space is becoming a geo-strategic asset. SpaceX is developing Starshield, a product offering Earth observation and communication that they’re trying to sell to the Pentagon (WSJ)
Maybe due to these potential military links, OneWeb is shifting from Russian rockets to SpaceX (a competitor), to put its satellites in orbit (Bloomberg)
Several countries are announcing plans to build their own “space agencies”, with a vision that the presence in space will be key to get access to “strategic” materials, and plenty of commercial opportunities. South Korea and Saudi Arabia made announcements this week (Bloomberg)(NationalNews)
Blue Origin (Jeff Bezos’s space company) is trying to get exposure to NASA’s Artemis mission to the Moon. They’re bidding (again) for the Moon Lander shuttle that will transport astronauts from the main ship to the Moon (WSJ)
FoodTech
Several startups work to develop and commercialize a “fake” chocolate that does not use cocoa, a product currently surrounded by controversies regarding ethical issues on its supply chain (BusinessWeek)