Headlines this week - Dec 22, 2024
A look at how capital is being deployed across future opportunities
This week in the future:
A financial bubble around GenAI? Investors keep discussing. Some of them still believe, but others are reducing exposure to companies doing the massive investments that this technology requires (including the “Big Tech” leaders)
OpenAI is seen as a paradigmatic example, with huge projected expenses for the coming years (almost $40bn / year by 2029).
OpenAI and Google announced new progress in “reasoning models”, in a reaction to the fact that the traditional “raw scaling” approach to models is now reaching diminish returns
OpenAI’s o3 showed impressive results in performance benchmarks
Google also presented a prototype, that differs vs. OpenAI’s models by being more transparent (and showing its whole “thinking process” to the user)
Data analytics for enterprises emerges as a “low hanging fruit” for AI. Companies like Palantir have significantly grown in valuation this year, and now Databricks, a startup in this field, has reached a $60bn valuation
Competition to SpaceX keeps growing, both at home (with Jeff Bezos’ Blue Origin as the biggest rival) and abroad, where nations (e.g.: Europe) increasingly look to become self-sufficient in a technology generally perceived as “strategic”
The US is pushing to decouple the Electric Vehicle supply chain from China. Part of the effort is coming from new battery designs that require different raw materials (e.g. sodium, abundant in the US, vs. lithium, dominated by China)
Concerns are growing on an energy “demand tsunami” driven by AI. The progress of AI will depend not only on technological innovation, but also on access to reliable, cost-effective energy sources
Nuclear energy startups are making progress: Oklo (supported by Sam Altman) just signed a big contract for data centers; Commonwealth, a fusion startup, has committed to have an operational plant by 2030
Many initiatives under way to develop quantum computing algorithms, in anticipation for the availability of commercial computers
2025 is expected to be the year of smart glasses: many different versions of the product being launched, driven by the commercial success of the Meta Ray-Bans
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1 - Population and Natural Resources
Biotech
Great expectations are emerging:
Chronic hepatitis B as a key target. This virus affects 254 million people globally and causes 1.1 million deaths annually. It remains a neglected public-health issue, so it is becoming key target for emerging biotechnology techniques. A Cancer-Causing Virus Hiding in Millions of Americans
Biotech also can help with critical shortage of organs for transplantation (e.g. from other animals). Key trends include the use of advanced genetic engineering to improve compatibility, and minimizing side effects / immune rejection after transplantation. If these techniques become more robust, they could also help with overcoming regulatory barriers for progress. A Third Person Has Received a Transplant of a Genetically Engineered Pig Kidney
However, the volatility of the market for new medicines is a challenge to achieve actual impact. Startups in the field need to be conscious of this, and robust enough to operate in this context:
A clear example are the current “anti-obesity drug wars”. After some alternatives, Eli Lilly is now dominating the anti-obesity drug market, in detriment of Novo Nordisk, And there is limited visibility about what could happen next. There’s a New Obesity King
Roche’s struggles with a drug for Parkinson’s disease also show how difficult it is to bring a new drug to market, and how clinical trial outcomes can significantly impact a company's value..Roche’s Parkinson’s Drug Candidate Misses Key Goal in Mid-Stage Study
E-Health
Many researchers are looking to use digital tools to treat mental health. The hope is that they will be more effective than current medicines (which have not made so much progress with many relatively common illnesses) The new tech treatments that could improve mental health
Space
Competition in the space industry is increasing, driven by rivalry between Jeff Bezos and Elon Musk:
Blue Origin (supported by Jeff Bezos) is reportedly catching up with SpaceX (after a massive $14bn investment). Jeff Bezos Prepares to Close the Gap in His Space Race With Elon Musk
At the same time, Amazon's Project Kuiper is directly challenging SpaceX's Starlink network in providing internet access from space. They have already spent over $16bn to make this possible. Now they’re talking to Taiwan about building a local service there (seen as a geo-strategic need). Taiwan in talks with Amazon’s Kuiper on satellite communications amid China fears
Meanwhile, SpaceX moves ahead as the de-facto industry leader. They’ve just signed a deal with Vast, a startup, to launch 2 missions to the Space Station. SpaceX, Startup Vast Ink Deal for Astronaut Trips to Space Station
Beyond the US (and China), other countries plan large investments, aspiring to become self-sufficient:
Europe: €10.6bn investment to build the region’s response to Starlink: Europe signs €10.6bn Iris² satellite deal in bid to rival Elon Musk’s Starlink
Materials
Efforts in the US to decouple from China in the battery supply chain:
Sodium emerges as an alternative to lithium for batteries. Abundant and easily accessible, and with the US dominating key reserves, sodium batteries would enable a domestic US-based supply chain, a key geo-strategic objective. The Unlikely Ingredient That Could End U.S. Dependence on Chinese Batteries
Efforts to produce graphite (another key battery component) locally. The US government is giving a $755m loan to an Australian company to build a plant in Tennessee. US backs graphite factory to loosen China’s EV supply chain grip
Tech & Geopolitics
Nvidia’s growth out of the US could be in conflict with the US government’s geo-strategic priorities. The company expects $10bn in foreign sales this year, but some of them might be use as a “bypass” to provide advanced chips to China. Nvidia’s Global Chips Sales Could Collide With US-China Tensions
TikTok (again) under threat in the US. The deadline (set by a law) getting closer (Jan 19), and there is not much visibility about what could finally happen. For now, Apple and Google have been asked to remove the app from the app stores before that date. US lawmakers tell Apple, Google to be ready to remove TikTok from app stores Jan. 19
The “tech Cold War” could now also affect TP-Link home routers. US authorities are considering a ban. The company has a 60% market share for home routers in the US. Exclusive | U.S. Weighs Ban on Chinese-Made Router in Millions of American Homes
2 - Efficiency / Productivity
Energy
Concerns are growing on a “demand tsunami” driven by AI. The long-term success of the AI industry will depend not just on technological innovation, but also on access to reliable, cost-effective, and (ideally) sustainable energy sources:
The expected surge in demand would be the highest since World War II, and it could be difficult to address it only with “clean” energies. Can the US Power Industry Meet AI’s Steep Energy Demands?
The US and Canadian grids are currently not prepared for this. The US energy authorities think there could be energy “blackouts” at peak hours. AI poses threat to North American electricity grid, watchdog warns
In the AI world, owning strong energy sources is becoming a geo-strategic advantage. With energy as a critical resource for data centers, nations with abundant, low-cost energy could leverage this as an advantage to attract AI investments. Big Tech Will Scour the Globe in Its Search for Cheap Energy
Nuclear
Startups making progress:
Oklo, the nuclear energy startup supported by Sam Altman has signed a deal with a data center operator. It is a 20 year agreement to build reactors with a capacity of up to 12GW (enough to power almost 8m homes for 1 year). Sam Altman-led nuclear start-up signs major AI power supply deal
Commonwealth, a nuclear fusion startup, is planning a commercial plant, which would start to operate by 2030. They are expecting to achieve commercially feasible fusion reactions in 2027. Fusion Leader Commonwealth Plans First-Ever Commercial Plant
Renewables
Storage technologies are key to scale up renewable energies. Main “clean energy” sources (e.g.: sun, wind) are “intermittent” by nature, so it is key to be able to efficiently store the energy produced. Companies, governments and research groups are working to develop several technologies for that. Solving renewable energy’s sticky storage problem
A commitment to decarbonize the British electricity system by 2030. To deliver this, the two transmission networks in the UK have committed an investment of £77.4bn in the next 5 years. UK electricity networks plan ‘unprecedented’ £77bn investment in clean power push
New Transport Technologies
Electric Vehicles
Nissan and Honda are partnering to be more competitive in EVs. Scale could be key to sustain the effort. But this Lex column from the FT argues that it would probably be not enough, and suggests outsourcing of manufacturing to focus on software and design (easier said than done). Honda and Nissan need off-road thinking to solve EV challenge
Huawei wants a piece of this market. They want to exploit the fact that China is becoming a global leader in electric cars, and are positioning as a key supplier for the industry (“a Bosch for EVs”). ‘A different animal’: inside Huawei’s nascent EV business
Autonomous Cars
Waymo is starting to expand internationally. They have a project to deploy the service in Tokyo, together with two local taxi companies (Nikon Kotsu & GO). Waymo is sending autonomous vehicles to Japan for first international tests
Flying Cars
DoorDash is working with Wing (an Alphabet unit) to deploy drone deliveries in the US. They have already launch the service in one local market. Wing and DoorDash launch drone deliveries in Dallas-Fort Worth
Defense companies are developing submarine drones for the military. They are claimed to be ideally suited to gather intelligence, protect undersea infrastructure and counter potential threats in the sea. The New Frontier for Drone Warfare Is Deep Underwater
Supersonic Airplanes
There is a global debate about next-gen fighter jets. Recent experience shows how efficient drones have become in war, so some people (including Elon Musk) are now saying that budgets should pivot away from traditional fighter jets (e.g. the American F-35). Musk’s attack on F-35s fuels debate over expensive fighter jets
Meanwhile, Europe (lead by the UK in this) seems to be betting on a new fighter jet. It is a long-term project (for 2035), so there are still many uncertainties, including if it will require a human pilot… U.K. Seeks to Entice Australia, European Allies into Fighter-Jet Program
Artificial Intelligence
AI: Apps
B2C
Search is becoming a key add on to chatbots:
OpenAI just launched the service for all ChatGPT users. It was previously limited to premium users. ChatGPT’s AI search engine is rolling out to everyone
Perplexity is expanding it to local search of the user’s work files. They just acquired a startup to power this. Perplexity acquires Carbon to connect AI search to your work files
Google just released an app that uses images as prompts to generate other images. Google’s Whisk AI generator will ‘remix’ the pictures you plug in
Most commercial AI gadgets have failed, at least for now. One year ago, they were expected to be one of the key themes for 2024. The great AI gadget debacle of 2024
But Nvidia is not discouraged, and has now announced a $250 AI-centric device, targeting early adopters (and small enterprises). Nvidia Introduces Device Aimed at Small Companies, Hobbyists for AI Use
B2B
Databricks shows that data analytics for corporates has become an attractor for investors. This comes after a massive stock market rally for Palantir this year.
Databricks, a data analytics startup, has just raised $10bn, at a valuation of close to $60bn. Databricks raises $10bn in the biggest US venture deal this year
It is now one of the fastest growing startups, after what looks like a successful turnaround. His Startup Is Now Worth $62 Billion. It Gave Away Its First Product Free.
Use of Generative AI at companies looks out of control. Interestingly, there does not seem to be a problem of adoption (that some analysts had forecasted). Bosses struggle to police workers’ use of AI
AI: Foundational Models
A wave of skepticism among some investors:
Goldman wonders if there is an AI investment bubble. At a recent conference, analysts discussed use cases, the total addressable market, and challenges for further development and adoption of the technology. Can generative AI overcome questions around scalability and cost?
Blue Whale Growth, an investment fund, is reducing its exposure to “Big Tech” firms, under concerns about their massive investments in AI. Peter Hargreaves’ Blue Whale sells major tech stocks over AI concerns
Gary Marcus, a famous industry “contrarian”, is also skeptical. He just published a Wired article arguing that GenAI models have not yet proved to be useful. Generative AI Still Needs to Prove Its Usefulness
In this context, OpenAI is attracting most of the attention, as the leading representative of the industry:
The company plans to spend almost $40bn per year by 2029. Their annual spending is already $5.4bn. They obviously need a fast path to monetization and revenue growth. Why OpenAI Needs So Much Money
Spending in larger models would be starting to have diminishing returns. A substantial part of the expense is being used to build larger, more powerful models, but these would now be behind schedule, according to some comments. The Next Great Leap in AI Is Behind Schedule and Crazy Expensive
But the company is already shifting to a different approach: “reasoning models”. They just announced o3, their most powerful model for now, which is relying more on a “deeper” inference computation. OpenAI Unveils More Advanced Reasoning Model in Race With Google
Is Elon Musk a threat? Many people see the new job of Elon Musk, now a Trump lieutenant, as a threat for OpenAI (given Musk’s disagreements with Sam Altman) Sam Altman reckons with a growing threat to OpenAI: Elon Musk
Google made several announcements this week, confirming they’re also at the head of the industry:
A new “reasoning model” (aligned with the current trend) Google reveals AI ‘reasoning’ model that ‘explicitly shows its thoughts’
A new model targeting automation of business analysis. It is even capable of defining Python scripts for complex analysis, giving analysts more precise control over the results they generate. See how Google Gemini 2.0 Flash can perform hours of business analysis in minutes
Their own version of Sora (the video generating model that OpenAI has recently released) Google DeepMind unveils a new video model to rival Sora
Perplexity has a $9bn valuation. Perplexity’s value triples to $9bn in latest funding round for AI search engine
Apple is working with Nvidia to improve the performance of LLMs, with focus on the speed of text generation. Apple collaborates with NVIDIA to research faster LLM performance
In the future, neural networks built directly from computer chip hardware could improve the speed and energy efficiency of AI systems, making it more feasible to embed them in end devices. The price to pay would be a reduction in performance (due to some challenges in the training process). The next generation of neural networks could live in hardware
AI: Security / Safety
Microsoft bets on systems that “augment” humans. The company’s head of “responsible AI” claims that research focus should be in building systems that complement, rather than substitute humans. Microsoft’s Sarah Bird: Core pieces are still missing from artificial general intelligence
Making LLMs to do what they’re not supposed to is apparently easy and can be automated. This is the conclusion of an analysis by a research team from Anthropic APpaREnTLy THiS iS hoW yoU JaIlBreAk AI
Google defends the use of AI in “high risk domains”, with humans in the loop. Google says customers can use its AI in 'high-risk' domains, so long as there's human supervision
AI: Infrastructure
AI-centric cloud startups continue to grow. This week one of them (Vultr) raised $333m from investors including AMD, at a valuation of $3.5bn. AMD is using this as a tool to challenge Nvidia’s dominance. Exclusive | Cloud AI Startup Vultr Raises $333 Million at $3.5 Billion Valuation
Indonesia wants to be a data center hub in South East Asia. They’re trying to convince Elon Musk to deploy infrastructure there. Indonesia Plans to Pitch Data-Center Opportunities to Elon Musk
AI: Chips
Microsoft has bought almost 500m Nvidia chips this year. This is part of their effort to become the reference cloud for AI, and also to support the development of OpenAI (their key partner). Microsoft acquires twice as many Nvidia AI chips as tech rivals
Broadcom has reached a $1trn valuation, driven by AI, where they compete with Nvidia, but also complement them in many ways. Broadcom’s AI Success Won’t All Come at Nvidia’s Expense
Quantum Computing
Bloomberg: a positive view of Google’s recent quantum computing announcement. They see the industry getting closer to a commercial computer, and investors getting interested, The questions (once again) are (1) how long we will have to wait (probably more than what some people expect) and (2) what will be the use cases (probably more limited than what some people expect) Google Is Pushing Quantum Computing Closer to Reality
Many companies are already working to develop quantum algorithms. These will only deliver their value when we have practical quantum computers, but they’re helpful now to understand the opportunities. The Age of Quantum Software Has Already Started
Intelligence Augmentation
Augmented Reality
Meta’s Andrew Bosworth posted a summary of the company’s vision with respect to AI and the Metaverse. Accelerating the Future: AI, Mixed Reality and the Metaverse | Meta
Smart glasses as the next computing platform? This is part of Meta’s vision, and the market seems to agree…
A new update of the Ray-Bans software makes it possible to use AI to discuss real-time video (not possible in Europe, for now…) Meta updates its smart glasses with real-time AI video
2025 could be the year of smart glasses. Many companies are preparing to launch competitors to Meta’s Ray-Bans. 2025 Will Be Smart Glasses All the Way Down
Human-Computer Interfaces
The US Government sees brain-computer interfaces as an opportunity. The "Government Accountability Office” (GAO) has published an assessment of these systems, which see with the potential to significantly improve the quality of life for people with disabilities and offer a wide range of other applications. They also see substantial challenges, including data privacy, and the required regulation (still to be developed…) Brain-Computer Interfaces: Applications, Challenges, and Policy Options