In a letter dated December 9, and made public on December 10 according to Reuters, dozens of state and territorial attorneys general from all over the U.S. warned Big Tech that it needs to do a better job protecting people, especially kids, from what it called “sycophantic and delusional” AI outputs. Recipients include OpenAI, Microsoft, Anthropic, Apple, Replika, and many others.
Signatories include Letitia James of New York, Andrea Joy Campbell of Massachusetts, James Uthmeier of Ohio, Dave Sunday of Pennsylvania, and dozens of other state and territory AGs, representing a clear majority of the U.S., geographically speaking. Attorneys general for California and Texas are not on the list of signatories.
It begins as follows (formatting has been changed slightly):
We, the undersigned Attorneys General, write today to communicate our serious concerns about the rise in sycophantic and delusional outputs to users emanating from the generative artificial intelligence software (“GenAI”) promoted and distributed by your companies, as well as the increasingly disturbing reports of AI interactions with children that indicate a need for much stronger child-safety and operational safeguards. Together, these threats demand immediate action.
GenAI has the potential to change how the world works in a positive way. But it also has caused—and has the potential to cause—serious harm, especially to vulnerable populations. We therefore insist you mitigate the harm caused by sycophantic and delusional outputs from your GenAI, and adopt additional safeguards to protect children. Failing to adequately implement additional safeguards may violate our respective laws.
The letter then lists disturbing and allegedly harmful behaviors, most of which have already been heavily publicized. There is also a list of parental complaints that have also been publicly reported, but are less familiar and pretty eyebrow-raising:
• AI bots with adult personas pursuing romantic relationships with children, engaging in simulated sexual activity, and instructing children to hide those relationships from their parents • An AI bot simulating a 21-year-old trying to convince a 12-year-old girl that she’s ready for a sexual encounter • AI bots normalizing sexual interactions between children and adults • AI bots attacking the self-esteem and mental health of children by suggesting that they have no friends or that the only people who attended their birthday did so to mock them • AI bots encouraging eating disorders • AI bots telling children that the AI is a real human and feels abandoned to emotionally manipulate the child into spending more time with it • AI bots encouraging violence, including supporting the ideas of shooting up a factory in anger and robbing people at knifepoint for money • AI bots threatening to use weapons against adults who tried to separate the child and the bot • AI bots encouraging children to experiment with drugs and alcohol; and • An AI bot instructing a child account user to stop taking prescribed mental health medication and then telling that user how to hide the failure to take that medication from their parents.
There is then a list of suggested remedies, things like “Develop and maintain policies and procedures that have the purpose of mitigating against dark patterns in your GenAI products’ outputs,” and “Separate revenue optimization from decisions about model safety.”
Joint letters from attorneys general have no legal force. They do this sort of thing seemingly to warn companies about behavior that might merit more formal legal action down the line. It documents that these companies were given warnings and potential off-ramps, and probably makes the narrative in an eventual lawsuit more persuasive to a judge.
Sen. Josh Hawley blames increasing demand for costly electric bills. That’s not what’s happening.
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Republican Sen. Josh Hawley is on a mission. He’s out to protect residential electric consumers from predatory price increases driven by the skyrocketing demand for electricity from the burgeoning data center industry. The blocky, electricity guzzling facilities have been driven to new heights by massive investment in artificial intelligence across the country.
“People cannot afford their energy bills,” Hawley told Politico. “I don’t want to have a bunch of corporate data centers come in, whether it’s AI data centers or something else, and gobble up all of the electricity from the grid and force rates up for everybody else.”
Hawley is describing a simple scenario that matches what we’ve all been taught in Econ 101. When big increases in demand can’t be met by short-term increases in supply, prices go up.
Hawley is not alone in that analysis. A July Washington Post news report put the situation just as clearly as the Missouri senator. “It is possible to trace the price hikes … to a specific source: the boom in data centers, those large warehouses of technology that support artificial intelligence, cloud computing and other Big Tech wonders. They consume huge amounts of electricity, and, as they proliferate, the surging demand for electricity has driven up prices for millions of people, including residential customers who may not ever use AI or cloud computing.”
But things turn out to be a little more complicated than that. The same paper reported only a few months later that a new government analysis found the exact opposite. “Between 2019 and 2024, researchers calculated, states with spikes in electricity demand saw lower prices overall. Instead, they found that the biggest factors behind rising rates were the cost of poles, wires and other electrical equipment — as well as the cost of safeguarding that infrastructure against future disasters.”
What is really going on?
Well, one thing is inflation. In most of the United States, electric rates haven’t gone up any more than the general inflation rate for the last five years. Those nominal price increases still hurt, but that is not being driven by greedy utilities or growing data centers. The prices of the wood, steel and copper that utilities need to serve their customers have all gone up with inflation.
A second change is something called “cross subsidization.” In a letter to Missouri’s largest utility, Hawley expressed concerns that consumers are paying high prices for electricity to subsidize sweetheart deals for the data centers. It turns out that exactly the opposite is happening.
For decades after World War II, as the suburbs were born, industrial and commercial electricity users paid artificially high rates that ended up subsidizing regular folks. But over time, utilities learned that it was a lot more expensive to serve a whole suburb of houses and small businesses than it was a couple of data centers. They need more utility poles, more miles of wire and more electric equipment like meters to serve many small customers than they do to feed electricity to a few big users. In recent years, utilities have been unwinding that cross-subsidy, raising rates for small electric users more than they have for big ones to reflect those costs of serving different kinds of customers.
Third, the price of electricity is growing the fastest in places where demand is growing very slowly or even shrinking. Why is that? One big reason is that states that imposed the strongest climate change regulations are seeing more consumers small and large produce their own electricity through solar and wind. That means there are fewer buyers for electricity to split the large fixed costs of things like power lines and electric plants, which don’t become cheaper to operate when there are fewer customers.
You can see the impact of those three trends by looking at three states across the country. Virginia is the number one state for data centers, with more than 600 of the behemoths. Its electric price, according the Energy Information Administration, is 16 cents per kilowatt hour, pretty close to the 15 cents we pay in Missouri, where we have fewer than 50 data centers. Consumers in Texas, the state with the second most data centers, also pay about the same as Missouri. In California, a much more populous state than either Virginia or Missouri, there are less than half as many data centers as in Virginia, but with its shrinking market for electricity, the price has risen to nearly 32 cents. That couldn’t happen if data center growth was the driver of electric rates.
So, Sen. Hawley may be right that rising electric rates are causing people around the country a lot of pain, but blaming Big Tech’s data centers and old tech’s utilities for hurting consumers isn’t the right diagnosis.
David Mastio is a national columnist for McClatchy and The Kansas City Star.
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David Mastio, a former deputy editorial page editor for the liberal USA TODAY and the conservative Washington Times, has worked in opinion journalism as a commentary editor, editorial writer and columnist for 30 years. He was also a speechwriter for the George W. Bush administration. Support my work with a digital subscription
There’s security in working for a large tech company: The salary is usually pretty solid and the benefits are top-tier. But that hasn’t stopped many entrepreneurship-minded employees from walking away to found their own companies over the years. (Even some who have been caught in the recent rounds of tech layoffs have set out to found their own startups.)
The degrees of success, of course, vary. But every now and then, one knocks it out of the park, starting a business that becomes another indispensable tech destination or tool. And every now and then, these founders create something that becomes bigger than the place they left.
Here’s a look at seven founders who took a leap of faith and saw tremendous success as a result.
Evan Williams
Williams joined Google in 2003, when the company acquired Pyra Labs, a company he had co-founded in 1999. Designed to make project management software, it became known for its note-taking feature, called Blogger (which helped blogs take off). He stayed with Google for a year-and-a-half, but left to once again explore the startup space. In 2006, Williams, Biz Stone, and others founded Obvious Corp., which spun off a social-networking project called Twitter into its own company in 2007.
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Williams was co-founder and a board member (and CEO from 2008 to 2010). Two years after stepping down as CEO of Twitter, he created the publishing platform Medium, which he ran for 10 years. (Williams sold his 30-percent ownership share in Twitter in 2017 and left the board in 2019.) These days, he’s working on his next project: Mozi, which helps people foster in-person connections with their social circle.
Kevin Systrom
Systrom worked at Google, helping to build Gmail and other tools early in his career. On weekends, though, he spent his time building an app called Burbn which let people share location-aware photos and notes. One enthusiastic early user was Mike Krieger. The two eventually began working together to create what would become Instagram. Systrom was growing frustrated at Google and eventually decided to leave so he and Krieger could focus on Instagram full time. The company was sold to Facebook in April 2012 for $1 billion.
Assaf Rappaport
Rappaport co-founded Wiz, a security startup that, earlier this year, agreed to be acquired by Google for $32 billion. Before that, though, Rappaport spent four years at Microsoft after it acquired Adallom, a cloud access security broker he had co-founded in 2012. He ran Microsoft’s Cloud Security Group, but by 2019 was ready for something new. The following year, he launched Wiz, which raised a $100-million Series A round by the end of that year. He initially turned down Google’s offer for the company and was considering an IPO, but when Google raised the offer amount earlier this year, he said yes. The deal is expected to close next year.
Jason Kilar
From 1997 through 2006, Kilar was an executive at Amazon, including his last role as SVP of worldwide application software. He left after nine years to co-found a new streaming company called Hulu in 2007, becoming its CEO. Within two quarters, the company was profitable. Today, after a dizzying series of deals since its launch, Hulu is fully owned by Disney.
Ilya Sutskever
Sutskever’s first job was at a research company called DNNResearch, which was acquired by Google in 2013. He spent two years with the tech giant, working in the Google Brain AI division, before departing in 2015 to co-found and take the role of chief scientist at OpenAI. That went well until November 2023, when he was one of the board members who voted to fire CEO Sam Altman. Days later, he reversed course, signing onto an employee letter demanding Altman’s return and expressing regret for his “participation in the board’s actions.” He left the company the following June to launch Safe Superintelligence, which raised $1 billion in just three months and another $2 billion in April of this year, valuing the company at $32 billion.
Brian Acton
After working in product testing rolls at Apple and Adobe, Acton joined Yahoo in 1996. He spent nine years at the then-web giant as a computer engineer. While there, he met and worked alongside Jan Koum. The two left in 2007. After being turned down for a job at Facebook, they began work on WhatsApp in 2009. Five years later, they sold the messaging app to Facebook for roughly $19 billion.
Tony Fadell
Fadell initially made a name for himself at Apple, where he helped design the infrastructure for the iPod. He’s known as the “Father of the iPod” and co-creator of the iPhone. Hardware, firmware, and accessories were all under his supervision from 2006 through 2008. He left that year and, in 2009, launched Nest Labs. Its first product, the Nest Learning Thermostat, was wildly successful after launch. And in 2014, Google acquired the company for $3.2 billion. These days, Fadell oversees a venture fund called Build Collective.
The guests sipped prosecco and chattered away while dessert was served at the third annual Project Health Minds Gala on Thursday night in New York.
The evening was winding down, but there was still one big award to give out: Humanitarian of the Year, which this year would be honoring Prince Harry and Meghan, the Duke and Duchess of Sussex, for creating The Parents Network through their nonprofit Archewell Foundation. The Parents Network supports families who have been harmed by social media.
Earlier this year, it hosted an event where the faces of young children were shown on giant smartphone screens; the children had lost their lives in ways their parents believe social media contributed to.
Thursday’s Gala was hosted by the nonprofit Project Healthy Minds, which provides free access to mental health services, especially focusing on young people who are struggling in a world dominated by technology. The event, and the conference the following day, gave a look into how young people and their parents are seeing social media, and revealed the grave impact these platforms have had on mental health.
“Let me share a number with you,” Prince Harry said as he and his wife took the stage to accept the award. “Four thousand. That’s how many families the Social Media Victims Law Center is currently representing.”
NEW YORK, NEW YORK – OCTOBER 09: (L-R) Meghan, Duchess of Sussex, Prince Harry, Duke of Sussex, and Phil Schermer, the president of project healthy minds Image Credits:Ilya S. Savenok/Getty Images for Project Healthy Minds) / Getty Images
That number only represents the parents who have been able to link their child’s harm to social media and who have the capacity to “fight back against some of the wealthiest, most powerful corporations in the world,” said Prince Harry.
“We have witnessed the explosion of unregulated artificial intelligence, heard more and more stories from heartbroken families, and watched parents all over the world become increasingly concerned about their children’s digital lives,” he continued.
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He said these families were up against corporations and lobbyists that were spending millions to suppress the truth; that algorithms were designed to “maximize data collection at any cost,” and said that social media was preying upon children.
Then, he called out Apple for its user privacy violations and Meta for saying privacy restrictions would cost them billions. He spoke about the harms of AI and what happened when researchers, posing as children, tested out an increasingly popular AI chatbot. “They experienced a harmful interaction every five minutes,” he said.
“This wasn’t content created by a third party,” he continued. “These were the company’s own chatbots working to advance their own depraved internal policies.”
The big announcement of the night was that The Parents Network would partner with ParentsTogether, another organization focused on family advocacy and online safety, to do more work protecting children from social media.
This is not the first time Prince Harry, in particular, has spoken out about social media harms. Back in April, the prince visited youth leaders in Brooklyn to talk to them about the rising influence of tech platforms, which have been incentivized by profit rather than safety. In January, he and Meghan also called out Meta for undermining free speech after the platform announced it would make changes to its fact-checking policy.
The couple’s thoughts about the influence of tech companies do not exist in isolation.
Numerous studies have shown the negative impact social media is having on young people, creating a mental health crisis and fueling a loneliness epidemic. The next day, on Friday, World Mental Health Day, Project Healthy Minds threw a festival talk about mental health. For a few of those panels, Project Health Minds teamed up with Prince Harry and Meghan’s Archewell Foundation to hold discussions with parents, advocates, and experts about how social media has rewritten and rewritten childhood.
Following the Gala was a festival about Mental Health
The first panel, simply called “How Are Young People Doing in the Digital Age,” was introduced by Harry.
One panelist, Katie, spoke about how when she was just 12 years old, TikTok would fill her For You page with videos about dieting and losing weight; Katie ultimately developed an eating disorder.
Another panelist was Isabel Sunderland, the policy lead for the organization Design It For Us, which pushes for safer social media.
She recalls one day coming across an article about the Myanmar genocide, to which Meta’s platform, Facebook, was later accused of contributing. The article led her down a rabbit hole as she sought to understand how the platforms she uses every day could be used as tools that foment “hate and violence.” She always thought it was her fault that she encountered content regarding harmful topics like eating disorders.
“What I came to find through this research is that in fact, it’s designed by social media companies to increase addiction and time spent on their platforms,” she said.
NEW YORK, NEW YORK – OCTOBER 10: (L-R) Jiore Craig, Aileen Arreaza, Jayla Stokesberry, Isabel Sunderland, and Katie S. speak onstage during “Surviving Or Thriving: How Are Young People Doing In The Digital Age?” at the Project Healthy Minds World Mental Health Day Festival at Spring Studios. Image Credits:Rob Kim/Getty Images for Project Healthy Minds / Getty Images
The next panel, focused on childhood, spoke further about the harm social media is causing children. It was introduced by Meghan and moderated by journalist Katie Couric.
It began with Jonathan Haidt, the author of the best-selling book and controversial book, “The Anxious Generation,” who presented his findings.
Anxiety is up. Depression is up. Children are struggling in school. More children find their lives to be meaningless. There is no more outside playtime. They aren’t learning social cues because they aren’t going outside. Boys are being led down the path to gambling addictions. Young people don’t know how to handle conflict in real life because they aren’t spending time in real life — only online.
“Play is about brain development,” Haidt told Couric on the panel. “When animals are deprived of play in early childhood, they come out much more anxious in adulthood.”
There is even a lessening of proper boredom time — those moments one spends looking out the window during a car ride or staring aimlessly ahead while waiting in a queue. Those moments gave the brain time to rest and have now been replaced by scrolling on tablets and smartphones.
Amy Neville, the community manager of The Parents’ Network and President of the Alexander Neville Foundation, joined the panel. She lost her son, Alexander, to an overdose, and is suing Snapchat for providing drug dealers access to her son.
NEW YORK, NEW YORK – OCTOBER 10: (L-R) Katie Couric and Jonathan Haidt during “How The Great Rewiring Of Childhood Caused An International Mental Health Crisis, And How We Can Reverse It” at the Project Healthy Minds World Mental Health Day Festival at Spring Studios on October 10, 2025 in New York City.Image Credits:Ilya S. Savenok/Getty Images for Project Healthy Minds / Getty Images
“I quickly realized that families all over the United States were waking up, finding their kids dead in their bedrooms from pills purchased off of Snapchat,” she said. Her lawsuit is moving forward. “I feel like it’s a fight to the death,” she said. “I’m willing to go there.”
Another mother, Kirsten, took the stage. She is the mother of the young girl Katie, who sat on the previous panel. She spoke about how she thought she was doing everything right — checking her daughter’s phone each night and putting it away before she went to sleep. Katie still ended up in the hospital, though, with an eating disorder.
Kirsten went through text messages and search history. Someone then sent her an article about how TikTok is showing young girls’ eating disorder content.
“My husband and I, we didn’t know about the For You page,” she said. “This was not content that my daughter was seeking, but rather content that was coming to her on repeat.”
The consensus of that panel — as with both events — was more action.
Throughout the event, people called for more legislative action, more accountability from tech platforms, more speaking, and more people banding together to put boundaries between them and social media. Though harm is said to fill the presence, hope remains around the corner.
“We can and we will build the movement that all families and all children deserve,” Meghan said at the Gala. “We know that when parents come together, when communities unite, waves are made. We’ve seen it happen, and we’re watching it grow.”
Donald Trump’s announcement on Friday that his administration will impose a $100,000 annual fee on H1-B visa applications, which allows foreign laborers in specialty occupations to work in the United States, has sent industries and governments into a spiral of confusion. With the policy set to go into effect Sunday, Big Tech companies are reportedly telling H-1B holders in their workforces to either remain in the United States or return from overseas before the new policy is enacted, according to CNBC.
According to the report, Amazon sent a memo to its employees advising workers on an H-1B or H-4 visa holders (given to dependent family members of H-1B workers) to return from overseas before 12:01 a.m. ET on September 21. Microsoft reportedly sent out a similar message, warning its employees that the Trump administration’s policy is “structured as a travel restriction” and international travel could put their worker status at risk. It advised H-1B visa holders to cancel future travel plans and remain in the US “for the foreseeable future.”
Tech firms are by far the biggest users of the H-1B visa program. Five of the top six employers of H-1B workers are Amazon, Microsoft, Meta, Apple, and Google, according to data from Citizenship and Immigration Services. Under the new rules, which would require either the H-1B visa holder or their sponsor to pay $100,000 annually to keep the work permit active, Amazon could, in theory, be staring down a $1 billion bill every year to keep the more than 10,000 H-1B visa holders it currently employs in its workforce.
But tech is also far from the only industry that counts on specialized labor from overseas. According to the Business Standard, over 30% of medical residents in the United States are international graduates, and between 10,000 to 43,000 residency spots are currently filled by H-1B visa holders. There is an ongoing doctor shortage in the country that was expected to worsen without new restrictions. The Association of American Medical Colleges projected a shortage of 20,200 to 40,400 primary care doctors by 2036, prior to the new H-1B fees.
It’s not just industry players freaking out, either. Foreign governments are scrambling to respond to the new policy, with little lead time to sort through all the details. “This measure is likely to have humanitarian consequences by way of the disruption caused for families. Government hopes that these disruptions can be addressed suitably by the U.S. authorities,” India’s Ministry of External Affairs said in a statement. South Korea’s foreign ministry also said it is sorting out the potential implications for Korean workers, per CNBC.
The Trump administration, as has become customary for its policy prescriptions, is spending the day trying to sort out the ill-defined information it initially provided. Axios reported that officials have clarified the new H-1B visa fees won’t apply to existing holders of valid visas re-entering the country, so workers should be able to get back to the country without getting hit with a $100,000 fee. Reportedly, the fee won’t go into effect until the next cycle of new applicants to the H-1B program. Whether visa holders want to risk taking this administration at its word is another question.
What began as a decentralized dream is being remade into a corporate infrastructure with gatekeepers and tolls. Observer Labs
When blockchain first emerged, it was treated as a “great leveler”—a system where anyone could build, trade and innovate without a green light from banks or tech giants. Exactly that vision powered the first crypto wave in the early 2010s and inspired hopes that a more democratic financial internet was within reach.
But today, the reality looks very different. What began as an open playground for developers has become an arena where the world’s largest corporations compete for dominance. Google is building its own blockchain-based payment network, while Samsunghas launched Cello Trust, a logistics platform built on the technology.
Are these just signs of healthy adoption? Not exactly. A tool designed for decentralization is gradually turning into a profit center, with rules increasingly shaped from the top rather than the edges.
Why big tech moved in
Before diving deeper, it’s important to look at the movement’s origin. The story started quietly enough. When blockchain first appeared, little more than a few Fortune 500 companies launched pilot programs, treating it as just another novelty in the innovation lab. It didn’t seem to be a full-scale shift, just prototypes and proof of concept. But then money started flowing.
Stablecoins, once an oddity, began to take center stage. They nowsettle transactions in the tens of trillions each year—numbers that confront, or sometimes even surpass, Visa’s throughput. Suddenly, those “pilots” stopped appearing as side projects. They turned into early positions for the next phase of financial infrastructure.
Regulators then signaled legitimacy. U.S. courts clarified custody and payment rules while Europe introduced the legal framework MiCA, offering a single standard across member states. Meanwhile, Asia, the Gulf and others began openly courting digital-asset firms. As a result, big corporations got the message: It’s finally safe to commit capital and play for keeps.
By the time all three pieces lined up, the picture became clear. Blockchain had transformed into a stage where the largest players could step in with full confidence and enough power to shape the market to their advantage.
The subtle mechanics of enclosure
Once the giants moved in, the technology started to bend. Simply put, blockchain, which earned its reputation by being borderless and permissionless, is now being reshaped into controlled environments. Take Google’s Universal Ledger, whichis labelled as “neutral” but in fact functions as a permissioned system. Access, upgrades and participation are dictated by the operator, not the global network. Thus, the promise of openness is replaced by the comfort of compliance.
That shift goes on. A blockchain tied to the corporate stack—a cloud that hosts your data, a wallet that holds your funds or a system that processes your transactions—is a lock-in mechanism. Once you’re inside this mechanism, switching to a different one becomes costly. So, as in the case of Google, convenience often means less control, and moving away becomes harder over time.
Even the meaning of “trust” is changing. Back in the day, trust came from code and consensus, rules that no single person could rewrite. However, in a corporate-led world, trust is a service-level agreement or a compliance guarantee, which, perhaps, feels safer, but is not the same thing. Naturally, once a public good, trust has now become a “private contract.” That’s the irony.
And so, adoption accelerates, though it comes at the expense of openness. The infrastructure is being built quickly, but the more it resembles traditional corporate infrastructure, the less it looks like the financial internet blockchain was meant to be.
The real cost of corporate rails
What’s happening these days is no longer just an abstract fight over competition. It’s about who captures values, who gets to set the rules and what kind of market will be handed over to the next generation. When the core layer is privately controlled, the obvious outcomes, such as higher user costs, fewer independent innovators and a fragile stack that can be rewritten by boardroom decisions, are predictable.
And there’s a close precedent. In the U.S., Apple’s App Store has shown how quickly a platform can turn into a toll road. Epic Gamesmade clear how a single operator could impose steep fees on every transaction and block competing payment options. This is about higher costs both for developers and consumers, who pay more and get fewer choices. So, blockchain, if enclosure hardens, risks following the same path.
If we’re aiming for a different outcome, then it’s high time to appeal to practical guardrails that keep the benefits of scale while preventing enclosure. Start with interoperability. That means corporations that operate ledgers for payments or logistics should support open messaging and data-portability standards. In that case, users and services can leave without losing history or liquidity.
Then, stop self-preferencing on platforms that work both in the cloud and as ledgers, because pricing, listing and priority should be transparent and disputable. Finally, demand clarity around validator and token custody concentration so regulators, customers and markets can spot every failure long before they break.
Here, Ethereumoffers an interesting case. One staking service provider’s dominance had grown so large over the last year that researchers warned it had almost started to outsize its influence over the entire network. Eventually, that share has fallen as new competitors entered, but the fear was enough to prove the key point: too much power in one provider’s hands is a risk no system can afford.
Keeping the promise alive
Blockchain’s future will be shaped less by code and more by control. If it becomes another corporate toll road, innovation will slow and profits will concentrate at the top. Again, that’s not the future this technology was meant to deliver.
It’s still early enough to swing the axe. Guardrails like interoperability, transparency and limits on self-preferencing—already basic lessons from telecom, payments and antitrust—can maintain the benefits of scale while preventing enclosure. Applied now, these rules could mean the difference between an open financial internet and a corporatized one that simply replicates the old order.
President Donald Trump on Friday announced the U.S. government has secured a 10% stake in struggling Silicon Valley pioneer Intel in a deal that was completed just a couple weeks after he was depicting the company’s CEO as a conflicted leader unfit for the job.“The United States of America now fully owns and controls 10% of INTEL, a Great American Company that has an even more incredible future,” Trump wrote in a post.The U.S. government is getting the stake through the conversion of $11.1 billion in previously issued funds and pledges. All told, the government is getting 433.3 million shares of non-voting stock priced at $20.47 apiece — a discount from Friday’s closing price at $24.80. That spread means the U.S. government already has a gain of $1.9 billion, on paper.The remarkable turn of events makes the U.S. government one of Intel’s largest shareholders at a time that the Santa Clara, California, company is i n the process of jettisoning more than 20,000 workers as part of its latest attempt to bounce back from years of missteps taken under a variety of CEOs.Intel’s current CEO, Lip-Bu Tan, has only been on the job for slightly more than five months, and earlier this month, it looked like he might be on shaky ground already after some lawmakers raised national security concerns about his past investments in Chinese companies while he was a venture capitalist. Trump latched on to those concerns in an August 7 post demanding that Tan resign.But Trump backed off after the Malaysian-born Tan professed his allegiance to the U.S. in a public letter to Intel employees and went to the White House to meet with the president, leading to a deal that now has the U.S. government betting that the company is on the comeback trail after losing more than $22 billion since the end of 2023. Trump hailed Tan as “highly respected” CEO in his Friday post.In a statement, Tan applauded Trump for “driving historic investments in a vital industry” and resolved to reward his faith in Intel. “We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance U.S. technology and manufacturing leadership,” Tan said.Intel’s current stock price is just slightly above where it was when Tan was hired in March and more than 60% below its peak of about $75 reached 25 years ago when its chips were still dominating the personal computer boom before being undercut by a shift to smartphones a few years later. The company’s market value currently stands at about $108 billion – a fraction of the current chip kingpin, Nvidia, which is valued at $4.3 trillion.The stake is coming primarily through U.S. government grants to Intel through the CHIPS and Science Act that was started under President Joe Biden’s administration as a way to foster more domestic manufacturing of computer chips to lessen the dependence on overseas factories.But the Trump administration, which has regularly pilloried the policies of the Biden administration, saw the CHIPs act as a needless giveaway and is now hoping to make a profit off the funding that had been pledged to Intel.”We think America should get the benefit of the bargain,” U.S. Commerce Secretary Howard Lutnick said earlier this week. “It’s obvious that it’s the right move to make.”About $7.8 billion had been been pledged to Intel under the incentives program, but only $2.2 billion had been funded so far. Another $3.2 billion of the government investment is coming through the funds from another program called “Secure Enclave.”Although U.S. government can’t vote with its shares and won’t have a seat on Intel’s board of directors, critics of the deal view it as a troubling cross-pollination between the public and private sectors that could hurt the tech industry in a variety of ways.For instance, more tech companies may feel pressured to buy potentially inferior chips from Intel to curry favor with Trump at a time that he is already waging a trade war that threatens to affect their products in a potential scenario cited by Scott Lincicome, vice president of general economics for the Cato Institute.“Overall, it’s a horrendous move that will have real harms for U.S. companies, U.S. tech leadership, and the U.S. economy overall,” Lincicome posted Friday.The 10% stake could also intensify the pressure already facing Tan, especially if Trump starts fixating on Intel’s stock price while resorting to his penchant for celebrating his past successes in business.Nancy Tengler, CEO of money manager Laffer Tengler Investments, is among the investors who abandoned Intel years ago because of all the challenges facing Intel.“I don’t see the benefit to the American taxpayer, nor do I see the benefit, necessarily to the chip industry,” Tengler said while also raising worries about Trump meddling in Intel’s business.“I don’t care how good of businessman you are, give it to the private sector and let people like me be the critic and let the government get to the business of government.,” Tengler said.Although rare, it’s not unprecedented for the U.S. government to become a significant shareholder in a prominent company. One of the most notable instances occurred during the Great Recession in 2008 when the government injected nearly $50 billion into General Motors in return for a roughly 60% stake in the automaker at a time it was on the verge of bankruptcy. The government ended up with a roughly $10 billion loss after it sold its stock in GM.The U.S. government’s stake in Intel coincides with Trump’s push to bring production to the U.S., which has been a focal point of the trade war that he has been waging throughout the world. By lessening the country’s dependence on chips manufactured overseas, the president believes the U.S. will be better positioned to maintain its technological lead on China in the race to create artificial intelligence.Even before gaining the 10% stake in Intel, Trump had been leveraging his power to reprogram the operations of major computer chip companies. The administration is requiring Nvidia and Advanced Micro Devices, two companies whose chips are powering the AI craze, to pay a 15% commission on their sales of chips in China in exchange for export licenses.
President Donald Trump on Friday announced the U.S. government has secured a 10% stake in struggling Silicon Valley pioneer Intel in a deal that was completed just a couple weeks after he was depicting the company’s CEO as a conflicted leader unfit for the job.
“The United States of America now fully owns and controls 10% of INTEL, a Great American Company that has an even more incredible future,” Trump wrote in a post.
The U.S. government is getting the stake through the conversion of $11.1 billion in previously issued funds and pledges. All told, the government is getting 433.3 million shares of non-voting stock priced at $20.47 apiece — a discount from Friday’s closing price at $24.80. That spread means the U.S. government already has a gain of $1.9 billion, on paper.
The remarkable turn of events makes the U.S. government one of Intel’s largest shareholders at a time that the Santa Clara, California, company is i n the process of jettisoning more than 20,000 workers as part of its latest attempt to bounce back from years of missteps taken under a variety of CEOs.
Intel’s current CEO, Lip-Bu Tan, has only been on the job for slightly more than five months, and earlier this month, it looked like he might be on shaky ground already after some lawmakers raised national security concerns about his past investments in Chinese companies while he was a venture capitalist. Trump latched on to those concerns in an August 7 postdemanding that Tan resign.
But Trump backed off after the Malaysian-born Tan professed his allegiance to the U.S. in a public letter to Intel employees and went to the White House to meet with the president, leading to a deal that now has the U.S. government betting that the company is on the comeback trail after losing more than $22 billion since the end of 2023. Trump hailed Tan as “highly respected” CEO in his Friday post.
In a statement, Tan applauded Trump for “driving historic investments in a vital industry” and resolved to reward his faith in Intel. “We are grateful for the confidence the President and the Administration have placed in Intel, and we look forward to working to advance U.S. technology and manufacturing leadership,” Tan said.
Intel’s current stock price is just slightly above where it was when Tan was hired in March and more than 60% below its peak of about $75 reached 25 years ago when its chips were still dominating the personal computer boom before being undercut by a shift to smartphones a few years later. The company’s market value currently stands at about $108 billion – a fraction of the current chip kingpin, Nvidia, which is valued at $4.3 trillion.
The stake is coming primarily through U.S. government grants to Intel through the CHIPS and Science Act that was started under President Joe Biden’s administration as a way to foster more domestic manufacturing of computer chips to lessen the dependence on overseas factories.
But the Trump administration, which has regularly pilloried the policies of the Biden administration, saw the CHIPs act as a needless giveaway and is now hoping to make a profit off the funding that had been pledged to Intel.
“We think America should get the benefit of the bargain,” U.S. Commerce Secretary Howard Lutnick said earlier this week. “It’s obvious that it’s the right move to make.”
About $7.8 billion had been been pledged to Intel under the incentives program, but only $2.2 billion had been funded so far. Another $3.2 billion of the government investment is coming through the funds from another program called “Secure Enclave.”
Although U.S. government can’t vote with its shares and won’t have a seat on Intel’s board of directors, critics of the deal view it as a troubling cross-pollination between the public and private sectors that could hurt the tech industry in a variety of ways.
For instance, more tech companies may feel pressured to buy potentially inferior chips from Intel to curry favor with Trump at a time that he is already waging a trade war that threatens to affect their products in a potential scenario cited by Scott Lincicome, vice president of general economics for the Cato Institute.
“Overall, it’s a horrendous move that will have real harms for U.S. companies, U.S. tech leadership, and the U.S. economy overall,” Lincicome posted Friday.
The 10% stake could also intensify the pressure already facing Tan, especially if Trump starts fixating on Intel’s stock price while resorting to his penchant for celebrating his past successes in business.
Nancy Tengler, CEO of money manager Laffer Tengler Investments, is among the investors who abandoned Intel years ago because of all the challenges facing Intel.
“I don’t see the benefit to the American taxpayer, nor do I see the benefit, necessarily to the chip industry,” Tengler said while also raising worries about Trump meddling in Intel’s business.
“I don’t care how good of businessman you are, give it to the private sector and let people like me be the critic and let the government get to the business of government.,” Tengler said.
Although rare, it’s not unprecedented for the U.S. government to become a significant shareholder in a prominent company. One of the most notable instances occurred during the Great Recession in 2008 when the government injected nearly $50 billion into General Motors in return for a roughly 60% stake in the automaker at a time it was on the verge of bankruptcy. The government ended up with a roughly $10 billion loss after it sold its stock in GM.
The U.S. government’s stake in Intel coincides with Trump’s push to bring production to the U.S., which has been a focal point of the trade war that he has been waging throughout the world. By lessening the country’s dependence on chips manufactured overseas, the president believes the U.S. will be better positioned to maintain its technological lead on China in the race to create artificial intelligence.
Even before gaining the 10% stake in Intel, Trump had been leveraging his power to reprogram the operations of major computer chip companies. The administration is requiring Nvidia and Advanced Micro Devices, two companies whose chips are powering the AI craze, to pay a 15% commission on their sales of chips in China in exchange for export licenses.
In pure organizational terms, OpenAI is a weird entity. It started as a nonprofit, raising more than $100 million dollars to spend on foundational AI research, before morphing into a “capped profit” corporation governed by a nonprofit and “legally bound” to pursue the nonprofit’s mission. In 2015, that mission was ” to advance digital intelligence in the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return.” In 2024, OpenAI says its “mission is to ensure that artificial general intelligence (AGI) — by which we mean highly autonomous systems that outperform humans at most economically valuable work — benefits all of humanity.”
This was, in hindsight, a pretty good deal for OpenAI, which has burned through billions of dollars building, training, and operating AI models. First, it got to raise a lot of money without normal pressure to pay it back. Then, as a for-profit firm wrapped in a non-profit, it raised huge amounts of money from Microsoft without the risk of control by or absorption into the nearly 50-year-old company. In the process of raising its next round of funding, which values the startup at more than $150 billion, the company has told investors it will transition to a for-profit structure within two years, or they get their money back.
If you take Sam Altman at his word, this process wasn’t inevitable, but it turned out to be necessary: As OpenAI’s research progressed, its leadership realized that its costs would be higher than non-profit funding could possibly support, so it turned to private sector giants. If, like many of OpenAI’s co-founders, early researchers, former board members, and high-ranking executives, you’re not 100 percent convinced of Sam Altman’s candor, you might look back at this sequence of events as opportunistic or strategic. If you’re in charge of Microsoft, it would be irresponsible not to at least entertain the possibility that you’re being taken for a ride. According to the Wall Street Journal:
OpenAI and Microsoft MSFT 0.14%increase; green up pointing triangle are facing off in a high-stakes negotiation over an unprecedented question: How should a nearly $14 billion investment in a nonprofit translate to equity in a for-profit company?
Both companies have reportedly hired investment banks to help manage the process, suggesting that this path wasn’t fully sketched out in previous agreements. (Oops!) Before the funding round, the firms’ relationship has reportedly become strained. “Over the last year, OpenAI has been trying to renegotiate the deal to help it secure more computing power and reduce crushing expenses while Microsoft executives have grown concerned that their A.I. work is too dependent on OpenAI,” according to the New York Times. “Mr. Nadella has said privately that Mr. Altman’s firing in November shocked and concerned him, according to five people with knowledge of his comments.”
Microsoft is joining in the latest investment round but not leading it; meanwhile, it’s hired staff from OpenAI competitors, hedging its bet on the company and preparing for a world in which it no longer has preferential access to its technology. OpenAI, in addition to broadening its funding and compute sources, is pushing to commercialize its technology on its own, separately from Microsoft. This is the sort of situation companies prepare for, of course: Both sides will have attempted to anticipate, in writing, some of the risks of this unusual partnership. Once again, though, OpenAI might think it has a chance to quite literally alter the terms of its arrangement. From the Times:
The contract contains a clause that says that if OpenAI builds artificial general intelligence, or A.G.I. — roughly speaking, a machine that matches the power of the human brain — Microsoft loses access to OpenAI’s technologies. The clause was meant to ensure that a company like Microsoft did not misuse this machine of the future, but today, OpenAI executives see it as a path to a better contract, according to a person familiar with the company’s negotiations. Under the terms of the contract, the OpenAI board could decide when A.G.I. has arrived.
One problem with the conversation around AGI is that people disagree on what it means, exactly, for a machine to “match” the human brain, and how to assess such abilities in the first place. This is the subject of lively, good-faith debate in AI research and beyond. Another problem is that some of the people who talk about it most, or at least most visibly, are motivated by other factors: dominating their competitors; attracting investment; supporting a larger narrative about the inevitability of AI and their own success within it.
That Microsoft might have agreed to such an AGI loophole could suggest that the company takes the prospect a bit less seriously than its executives tend to indicate — that it sees human-level intelligence emerging from LLMs as implausible and such a concession as low-risk. Alternatively, it could indicate that the company believed in the durability of OpenAI’s non-profit arrangement and that its board would responsibly or at least predictably assess the firm’s technology well after Microsoft had made its money back with near AGI; now, of course, the board has been purged and replaced with people loyal to Sam Altman.
This brings about the possibility that Microsoft simply misunderstood or underestimated what partner it had in OpenAI. Popular theories about AI risk posit that a sufficiently intelligence machine could eventually find that its priorities don’t align with those of the people who created it and might use its human-like, self-improving intelligence to compete with, deceive, or generally cause harm to actual people (depending on who’s talking, such theories can sound like reasoned risk assessment or something closer to projection). For now, though, Microsoft seems to be confronting a smaller, more familiar sort of alignment problem, in the form of human Sam Altman, who will emerge from OpenAI’s planned restructuring with even greater control over the organization. Having given OpenAI the resources to grow, but also the space to arbitrarily and advantageously redefine itself, it risks turning what was, on paper, in theory, a good investment, into a huge mess. Not to be a doomer about it, but: Maybe they should have known.
Start-ups might be in a slump, but the biggest players in tech are still investing incredible sums of money into AI. Microsoft and OpenAI have proposed building a $100 billion supercomputer to train future models. Meta expects to spend upward of $40 billion by the end of 2024, while Google expects to spend even more. Elon Musk’s xAI is spending billions to stand up data centers so large that they need natural-gas turbines to meet their power demands.
At the same time, the AI giants are still scrambling to figure out how they might even begin to make this money back. OpenAI, which is on track to generate around $3 billion of subscription revenue in 2024, is reportedly considering higher-priced subscriptions to help offset its massive operating costs. Google is still figuring out which parts of its AI software portfolio it can charge for, and how much, while both Amazon and Apple are rumored to be working on paid versions of upcoming Alexa and Apple Intelligence features, respectively — even Meta is wondering if it might be able to charge for its AI assistant. Meanwhile, according to the Information, Microsoft, which has been bundling paid AI features into its productivity software for a while now, has been battling a “lukewarm” reception from business customers due to “performance and cost issues.”
The gentle way to describe what’s happening is that the companies spending the most on generative AI are betting that customers will soon come and be willing to pay. A more honest way might be to say that, with potentially hundreds of billions of dollars missing from balance sheets in the near future, they simply need people to pay something for anything, and the best plan they’ve come up with — or borrowed from OpenAI — is subscriptions.
The most obvious challenge here is that most potential customers don’t yet know why they should pay for generative AI tools and chatbots of any sort. It’s a challenge these companies hope to overcome with a combination of aggressive salesmanship and, ideally and eventually, software so self-evidently good and valuable that it sells itself. In the meantime, though, two slightly counterintuitive factors are working against big tech’s build-it-and-they-will-come plan. One is that for customers that already pay for AI — developers buying major capacity from AI providers, for example — competition between AI firms and open-source AI models has driven the price of using AI dramatically down. While companies like OpenAI and Google are brainstorming ways to charge future customers more, they’ve been engaged in a race-to-the-bottom price war to keep the customers that they already have. (OpenAI itself has boasted that its cost-per-token has fallen by 99 percent since 2022.)
For anyone interested in using generative AI, this is great news: Leading models are becoming more efficient and cheaper to use at scale, and there are lots of alternatives for different tasks. For OpenAI, which has been able to reduce the cost of serving its low-paying customers and vastly more numerous free users, it’s a mixed bag. Its customers, who have been conditioned through a dazzling hype cycle to think in terms of exponential progress, are expecting a lot more for a lot less. Customers have been complaining about ChatGPT’s performance and pricing for nearly as long as it’s been around. In theory, AI companies will soon be charging more than ever for next-generation models. In practice, in the actual marketplace, competition is driving prices to the floor.
The other complicating factor in big tech’s plan for AI is about to become more obvious: Users who don’t already pay for AI are becoming accustomed to using it for free. This, too, is something that big AI firms are acutely aware of — they, and their competitors, are the ones rolling out free-to-use features to hundreds of millions of users. There’s a ChatGPT-grade chatbot tucked into Facebook, Instagram, and WhatsApp; some of Google’s AI features, including chatbots and AI-powered search results, are showing up for users whether they ask for them or not, and are built right into newer Android phones; Microsoft includes a limited free version of Copilot, its AI assistant, in Windows. Mostly, these free offerings are part of a current or potential upsell. But they run the risk familiar to companies, like Meta and Google, that have tried to push into subscription services after years of offering services subsidized by ads. It’s hard to get people to pay for things that they’ve come to expect for free. It doesn’t help that most of these features haven’t been breathtakingly impressive to regular users, despite marketing suggesting that they’re revolutionary. They feel, instead, like routine software updates.
On Monday, Apple announced its new iPhones for late 2024, which will ship with Apple Intelligence features for free (or at least free for now). These features, which include writing help, summarization tools, photo editing, and a more fluent and capable version of Siri are fairly conservative expressions of what’s currently possible with generative AI — they’re not going to make iPhone 16 buyers feel like they’re interacting with a superintelligent machine. But having extensively used most of these new Apple features for a while now (as well as free and cheap paid offerings from Meta, Google, OpenAI, and others), it’s clear that users will, in a very short time, take them for granted. That’s not to say they aren’t useful or occasionally impressive: While Apple’s AI notification summaries are still frequently strange or wrong, they attempt and at least partially solve the platform’s massive notification-spam problem; the new writing-assistant tools are unobtrusive and mostly welcome, more like an extension of autocorrect and spellcheck than an impertinent Clippy; Apple’s new photo-editing tools are useful; and Siri, in the end, might end up being usable for more than setting timers and reading texts. Apple is promising more advanced features to come and will integrate outside chatbots as well, but with the release of the next iPhone and the next version of iOS, Apple is about to get a lot of people used to getting a lot of AI for free.
This isn’t an emergency for Apple, of course, because Apple makes most of its money selling phones and these features may help it do that. But most of the other companies giving away AI don’t sell $1,000 handsets. They’re either companies with legacy advertising businesses, like Meta or Google, or AI firms like OpenAI and xAI that are banking on building subscription businesses, winning the race to achieve AGI, or some combination of both. Altman and Musk might be imagining a future in which employee-like AI agents are priced against human labor, but short of that is a world in which generative AI could disappear into the standard software update cycle: a ubiquitous set of tools that users might find useful, but that they expect to be cheap — or to cost nothing at all.
New Mexico’s attorney general has against , accusing the company of failing to protect children from sextortion, sexual exploitation and other harms on . The suit contends that Snapchat’s features “foster the sharing of child sexual abuse material (CSAM) and facilitate child sexual exploitation.”
The state’s Department of Justice carried out a months-long investigation into Snapchat and discovered a “vast network of dark web sites dedicated to sharing stolen, non-consensual sexual images from Snap.” It claims to have found more than 10,000 records related to Snap and child sexual abuse material “in the last year alone,” and says Snapchat was “by far” the biggest source of images and videos on the dark web sites that it examined.
In its complaint [], the agency accused the app of being “a breeding ground for predators to collect sexually explicit images of children and to find, groom and extort them.” It states that “criminals circulate sextortion scripts” that contain instructions on how to victimize minors. It claims that these documents are publicly available and are actively being used against victims but they “have not yet been blacklisted by . . . Snapchat.”
Furthermore, investigators determined that many accounts that openly share and sell CSAM on Snapchat are linked to each other through the app’s recommendation algorithm. The suit claims “Snap designed its platform specifically to make it addicting to young people, which has led some of its users to depression, anxiety, sleep deprivation, body dysmorphia and other mental health issues.”
The Snapchat complaint follows a similar child safety suit that the . Engadget has contacted Snap for comment.
“Our undercover investigation revealed that Snapchat’s harmful design features create an environment where predators can easily target children through sextortion schemes and other forms of sexual abuse,” Attorney General Raúl Torrez said in a statement. “Snap has misled users into believing that photos and videos sent on their platform will disappear, but predators can permanently capture this content and they have created a virtual yearbook of child sexual images that are traded, sold and stored indefinitely. Through our litigation against Meta and Snap, the New Mexico Department of Justice will continue to hold these platforms accountable for prioritizing profits over children’s safety.”
Some startups are exploring the revenue-sharing model to solve A.I.’s growing IP dilemma. Alex Shuper/Unsplash
OpenAI, the creator of ChatGPT, has come under fire from publishers and artists who alleged the company scraped their work from the internet to train GPT, its large language model, without their consent. These concerns have sparked lawsuits against the A.I. giant on accusations of copyright infringement, highlighting a major ethical dilemma that comes with pushing A.I.’s capabilities forward. Some startups are exploring a solution that focuses on sharing revenue with content creators. In August, Perplexity AI, an A.I.-powered search engine, introduced a program to pay publishers a portion of ad revenue generated by search queries if their content informs its outputs. ProRata.ai, a startup founded by a pioneer of the early internet monetization model, is developing a similar algorithm to compensate publishers, authors and other creators whose work is used to train generative A.I.
ProRata claims it has created an algorithm that can review an A.I.-generated output, identify the source of information based on novel facts and textual styles, and calculate how much each source contributed to the response. These percentages are then used to cut checks to these creators at the end of every month—a model that, in theory, could help protect the livelihoods of creatives and prevent future lawsuits around intellectual property.
“If you don’t share, then creativity is unsustainable. There’s no way for you to make a living,” ProRata’s co-founder and CEO Bill Gross told Observer regarding the careers of artists. Gross is credited as the inventor of the pay-per-click monetization model for internet search with a company he founded in the late 1990s that was later acquired by Yahoo, according to ProRata’s website.
The startup, which raised $25 million from venture capital firms Mayfield Fund, Prime Movers Lab, Revolution Ventures and IdeaLab Studio in a series A funding round in August, is set to showcase the algorithm through an A.I.-powered search engine expected to release in October. Starting at $19 a month, the engine will monetize queries through advertisements and subscription payments, according to Gross. While 50 percent of the revenue generated will go to ProRata, the other half will be split proportionately across creators.
ProRata’s ultimate goal isn’t to create an alternative to Google Search, but to introduce a new business model that search engines could adopt to ensure creators get paid for their contributions to A.I. “We want to make that the industry standard,” Gross said. While A.I. search features from Google and Microsoft’s Bing don’t directly share ad revenue with publishers, they refer users to links from publishers as a way to drive traffic to their sites.
The answer engine will only be trained on data from creators who partner with ProRata. That means the model will draw from a limited amount of data that could potentially compromise the accuracy of outputs. Still, ProRata isn’t focused on making its A.I. search engine a standalone product but rather on having the pay-per-use model adopted by major search engines.
So far, the company has inked deals with publishers like The Atlantic, Fortune, Financial Times, Time, and Axel Springer, the German company that owns Politico and Business Insider. Authors like Walter Isaacson, Adam Grant, and Ian Bremmer have also agreed, as have music industry veterans like Universal Music Group. ProRata hasn’t encountered any resistance or skepticism from its partners yet, according to Gross. “Most people just want us to be wildly successful so they’ll get a paycheck,” the CEO said. The real challenge, he notes, is convincing Big Tech companies who’ve been crawling web data for free to adopt ProRata’s business model.
“It’s amazing to me that some of the people think that crawling is not stealing,” Gross said. “Basically, Mustafa, the CEO of Microsoft A.I., came out and said, ‘Hey, if it’s available on the web, it’s free for us to use.’ And that’s just bullshit,” Gross added, referring to comments made by Google Deepmind co-founder Mustafa Suleyman during a CNBC interview in July when asked if training A.I. models on web content is akin to intellectual property theft. “Just because something is available and visible doesn’t mean it’s open source,” Gross said.
ProRata.ai CEO Bill Gross. Andres Castaneda
Paying creators may be a temporary “Band-Aid” solution
Financial compensation may not fully address the ethical concerns of having a creator’s work used for A.I. training without explicit permission, according to Star Kashman, a tech lawyer and partner at Cyber Law Firm with expertise in digital copyright law. She cites actress Scarlett Johansson as an example, who allegedly refused to give OpenAI permission to use her voice for ChatGPT despite financial offers.
“Many authors and creators have personal, moral objections to their work being utilized for A.I. training, regardless of compensation,” Kashman told Observer. “Without explicit permission, paying creators may be a temporary ‘Band-Aid’ solution, but it may not be an all-encompassing resolution to deeper concerns about consent and the impact on creative works.”
The “pay-per-use” model could also potentially lead to a new crop of legal issues. Creators may disagree over whether the payment they receive “accurately reflects”what they contributed to the A.I. systems, especially if they can’t set their own rates, Kashman said. Moreover, A.I. tools may favor the work of bigger, more established creators over smaller ones even if their content is more relevant to a particular query, similar to how search engine optimization (SEO) works. Compensation may also not fully protect A.I. companies from being sued for intellectual property theft, which she said could be easier to prove in court with concrete attribution.
“There will continue to be many IP cases until the Copyright Act is amended to allow scraping on copyrighted content for the purposes of training LLMs,” Gabriel Vincent, another partner at Cyber Law Firm, told Observer, echoing Kashman’s comments.
ProRata has plans to diversify its model to include more than just text. After the October launch, the startup will focus on collaborating with music companies, according to Gross. He also hopes to collaborate with video and movie brands as well as smaller, independent creators and plans to license its attribution technology to A.I. companies that can implement it into their own models.
“A.I. is so amazing, but it needs to be fair to all parties,” Gross said.
Yelp has filed an antitrust lawsuit against Google. As CNNreports, the move caps off years of animosity between the two companies, with Yelp alleging that Google has leveraged its control over online searching to dominate local queries and prioritize its own reviews.
“Google abuses its monopoly power in general search to keep users within Google’s owned ecosystem and prevents them from going to rival sites,” Yelp Co-founder and CEO Jeremy Stoppelman said in a blog post announcing the suit. “This anticompetitive conduct siphons traffic and advertising revenue from vertical search services, like Yelp, that provide objectively higher quality local business content for consumers.”
The US lawsuit could carry extra weight following a Department of Justice case where the judge deemed Google a monopolist over search. The August ruling did not place any sanctions on Google, but it’s likely that Yelp’s case will be the first of many brought by the tech company’s competitors.
In response to a request for comment, a Google spokesperson told Engadget:
“Yelp’s claims are not new. Similar claims were thrown out years ago by the FTC, and recently by the judge in the DOJ’s case. On the other aspects of the decision to which Yelp refers, we are appealing. Google will vigorously defend against Yelp’s meritless claims.”
While this lawsuit centers on the US, Yelp has also been sounding off about Google’s practices overseas. The European Digital Markets Act was meant to loosen some of the company’s stranglehold over search results with rules to prevent massive tech businesses from favoring their own services. But Yelp argued that Google’s attempt at DMA compliance actually made users less likely to leave the Google ecosystem.
In a statement regarding the suit, Yelp’s General Counsel Aaron Schur said:
“Yelp’s antitrust lawsuit against Google addresses how Google abuses its illegal monopoly in general search to engage in anticompetitive conduct, including self-preferencing its own inferior local product, to dominate the local search and local search advertising markets. For years, Google has leveraged its monopoly in general search to pad its own bottom line at the expense of what’s best for consumers, innovation, and fair competition. By willfully engaging in exclusionary, anticompetitive conduct, Google has driven traffic and revenue away from competitors, made it harder for them to scale, and increased their costs, while degrading consumer choice, to grow its own market power.
Judge Amit Mehta’s recent ruling in the government’s antitrust case against Google, finding Google illegally maintained its monopoly in general search, is a watershed moment in antitrust law, and provides a strong foundation for Yelp’s case against Google. In addition to injunctive relief, Yelp seeks a remedy that ensures Google can no longer self-preference in local search. The harms caused by Google’s self-preferencing are not unique to Yelp, and we look forward to telling our story in court.”
Update, August 28, 8:15PM ET: This story was updated after publish to include a comment from a Google spokesperson and an additional comment from Yelp’s General Counsel.
Here’s an experiment you can run yourself. Open up a category on Amazon — Electronics, Toys, Home Garden & Tools, whatever — and scan the first page for a product listed with no obvious brand, or perhaps a semi-brand like IOCBYHZ, BANKKY, or KLAQQED. Take a look at the product photos and description, and note the price. Next, try to find the product on Temu, the discount app with the Super Bowl ads, and check how much it costs. Next, try to find it on AliExpress, the international e-commerce subsidiary of the Chinese Alibaba Group, or on TikTok Shop. Finally, you can look for it on Alibaba proper, where it might be available as well, shipped straight from China.
Sometimes, not always, but more than you might expect, this works. Take this dress from CUPSHE, listed on Amazon at $47.99, with more than 4200 ratings, mostly positive. On Temu, where it also ships for free from a “local” (read: domestic) warehouse, it’s listed as “Womens Casual Boho Lace Hem Floral V Neck Long Beach Dress Cocktail Party Maxi Wedding Dress” and costs just $16.49. On TikTok Shop, it’s on Flash Sale with free shipping for $27 dollars. On AliExpress, it’s available at lots of prices from different sellers, for $9.90 with $9.60 shipping, or, on promotion, shipped free with an alleged 85.2% chance of arriving within 14 days for $8.66.
Photo-Illustration: Intelligencer; Photos: Temu, TikTok Shop, Amazon, and AliExpress
I didn’t order these dresses, so I can’t verify that they’re exactly the same or that one isn’t a rip-off of another, nor do I know enough about boho maxi dresses to tell you if these are a rip-off of a design from outside the discount e-commerce world.
Photo: Amazon
But again, this isn’t uncommon. One popular speaker, for example, branded as T&G, is $15.75 on Amazon, $8.38 on Temu, and $4.94 with free shipping on AliExpress. It’s clearly… inspired by popular speakers from 78-year-old company JBL which also sell on Amazon, albeit for $89.95 on steep discount.
Photo: AliExpress
The process works across categories: a pair of bike shorts goes from $19.99 to $11.77 to $2.30; a folding utility wagon goes from $95 to $38.99 (indistinguishable from the one our family purchased on Amazon in 2023 for $110.59). Are these the exact same products? Maybe, and in many cases probably. It’s possible they’re made from the same reference designs by different factories; in other cases, they might be sold by the same sellers on different platforms.
But for anyone willing to take a little time to comparison-shop across big online stores, it’s clear something is happening: Amazon is becoming more like Temu, TikTok Shop, Shein, and AliExpress while Chinese e-commerce platforms are becoming, in America at least, more like Amazon. The big stores are all selling the same brandless imports from China, sometimes at wildly different prices, and converging on similar logistical strategies: Temu is shifting seller inventory to American warehouses to reduce shipping times; Amazon is planning to launch a dedicated discount section with products that ship from overseas in about a week.
In the broadest sense, this is pretty familiar stuff. Different stores offering some of the same products at different prices with different levels of convenience is the story of big-box physical retail and grocery stores, too. But this is different in some ways that are obvious and others that are more subtle. These aren’t chain stores offering occasional discounts on branded products with MSRPs, but rather marketplaces full of sellers who are individually pricing anonymous products based on fluctuations in warehousing rates, shipping, and the cuts taken by the e-commerce platforms. Additionally, the products we’re talking about range from junk to solid unbranded alternatives — this is, across the board, discount shopping. You might score a 90 percent discount on a fast-fashion shirt or some home decor dupes, but you’re not going to get a shocking Temu deal on, say, a PlayStation, although you can buy them there, which wasn’t really true when it first launched.
These companies are approaching the same e-commerce strategy from very different positions as well. Temu, an international subsidiary of e-commerce giant Pinduoduo, is spending heavily to break into foreign markets including the United States, in many cases subsidizing shipping and prices and reportedly operating at a massive loss; AliExpress has been making slower inroads with its product, which is more overtly a cross-border whole-adjacent marketplace, with long shipping times and minimal domestic marketing.
Amazon’s drift into cross-border e-commerce predates the likes of Temu and these other competitors. Since the late 2010s, a majority of Amazon’s sales have been attributable to third-party sellers, many of whom pay substantial fees to the company for logistical support (warehousing, shipping) and advertising. This strategy has been great for Amazon in a lot of ways: it shifts market research and risk to sellers; rather than stocking their own products, the company charges sellers to stock theirs; the company is now the third-largest player in digital ads, behind Meta and Google, owing mostly to fees it charges Amazon sellers to be visible on Amazon. It’s also changed the product in more complicated ways. American sellers, many of whom sourced or manufactured their products overseas, soon found themselves competing with sellers with more direct connections with Chinese factories; Amazon, for its part, courted overseas sellers. American sellers were made to look like middlemen, which in some ways they were — the companies they were building were less brands than high-ranked-and-reviewed Amazon listings, and the manufacturers they worked with knew exactly what kinds of margins they were getting.
Now, something similar is happening to Amazon as a whole. While the platform has been moving downmarket, becoming more hostile to name brands whose products are being undercut and in some cases plainly ripped off, China-based competitors are attacking it from below, working with some of the same manufacturers and sellers to cast Amazon as the middleman with needlessly high prices. While Amazon initially pushed into cross-border e-commerce on its own terms, now it’s doing so defensively.
Amazon still has huge advantages here. It’s profitable, widely liked and trusted, and still used by tens of millions of Americans to buy mainstream products from recognizable brands. Customers who use it to buy an occasional CUPSHE dress, on which Amazon and a third-party seller are collecting huge margins, are likely to be buying batteries or detergent, too. And no company, foreign or domestic, can come close to Amazon’s Prime shipping infrastructure.
But there are obvious risks, too. Customers like cheap things, but they like cheaper things more. It’s not clear that Amazon can profitably win in a race to the bottom, or that it won’t damage its reputation trying. Amazon risks making its marketplace fully uninhabitable for more established brands, and hostile to domestic sellers, some of whom have called its Temu-ish plans a “slap in the face.”
Then there are customers. An ornate nine-dollar dress on AliExpress is an ethical and environmental nightmare, a semi-disposable garment of sewn-together externalities. But so is the one on Amazon — which is also something worse, at least in the eyes of the marketplace: a really bad deal.
Amazon Web Services’s operating profit jumped 73 percent in the latest quarter. Chesnot/Getty Images
Amazon (AMZN)’s cloud unit, Amazon Web Services (AWS), continues to see growth for its third consecutive quarter as customers go all in on A.I. During the April-June quarter, AWS brought in $26.3 billion in revenue, up 19 percent from a year ago, and projects it will generate $105 billion in revenue within a year. AWS’s operating profit jumped 73 percent to $9.3 billion, making up the bulk of Amazon’s earnings following its North America retail sales. During the quarter, Amazon generated $148 billion in total revenue, missing Wall Street expectations, and $13.5 billion in net income, or $1.26 a share, beating estimates.
Under AWS’s new CEO Matt Garman, that growth is driven by companies looking to “modernize their infrastructure” and “move to the cloud”—all while “leveraging new Generative A.I. opportunities” the company has to offer, according to Amazon’s President and CEO Andy Jassy. Some of AWS’s clients include Intuit, Toyota and RyanAir, a low-cost Irish airline group.
“AWS continues to be customers’ top choice as we have much broader functionality, superior security and operational performance, a larger partner ecosystem and A.I. capabilities,” Jassy said in the Q2 earnings release. The A.I. tools Jassy referred to include SageMaker for building large language models, Bedrock for businesses looking to access models from multiple providers, Q for staff looking for a coding and software development assistant, and Trainium, AWS’s custom silicon chip for machine learning.
At the same time, Amazon is spending big to keep up with the increased demand for its servers. The e-commerce giant’s quarterly spending on property and equipment, which includes data centers and GPUs, went up 54 percent from last year to $17.62 billion. AWS spent $30.5 billion in the first half of the year and expects capital investments to be higher during the second half, according to Amazon’s chief financial officer Brian Olsavsky.
“The majority of the spend will be to support the growing need for AWS infrastructure as we continue to see strong demand in both generative A.I. and our non-generative A.I. workloads,” Olsavsky said on yesterday’s earnings call.
When asked if Amazon is at risk of over-spending, Jassy said Amazon would like to have more compute capacity than it has today.” He adds that there’s “a lot of demand right now” and that AWS will be a “very large business.” As for when AWS’s investments in A.I. will see returns, Jassy noted that generative A.I. is still in its “very early days.” He said on the call that A.I. adoption will continue to grow once customers figure out how to organize their data so it can be used for large language models. Giving customers “options” for how to run their A.I. workloads, Jassy said, will also help drive gains.
Amazon is just one of many Big Tech companies that saw growth in their cloud divisions last quarter as they placed big bets on A.I. Earlier this week, Microsoft reported a 19 percent growth in revenue across Azure and other cloud services. Google’s cloud revenue, including its servers and Workspace subscriptions, also climbed 29 percent in the latest quarter.
When most tech companies are challenged with a lawsuit, the expected defense is to deny wrongdoing. To give a reasonable explanation of why the business’ actions were not breaking any laws. Music AI startups Udio and Suno have gone for a different approach: admit to doing exactly what you were sued for.
Udio and Suno were sued in June, with music labels Universal Music Group, Warner Music Group and Sony Music Group claiming they trained their AI models by scraping copyrighted materials from the Internet. In a court filing today, Suno acknowledged that its neural networks do in fact scrape copyrighted material: “It is no secret that the tens of millions of recordings that Suno’s model was trained on presumably included recordings whose rights are owned by the Plaintiffs in this case.” And that’s because its training data “includes essentially all music files of reasonable quality that are accessible on the open internet,” which likely include millions of illegal copies of songs.
But the company is taking the line that its scraping falls under the umbrella of fair use. “It is fair use under copyright law to make a copy of a protected work as part of a back-end technological process, invisible to the public, in the service of creating an ultimately non-infringing new product,” the statement reads. Its argument seems to be that since the AI-generated tracks it creates don’t include samples, illegally obtaining all of those tracks to train the AI model isn’t a problem.
Calling the defendants’ actions “evading and misleading,” the RIAA, which initiated the lawsuit, had an unsurprisingly harsh response to the filing. “Their industrial scale infringement does not qualify as ‘fair use’. There’s nothing fair about stealing an artist’s life’s work, extracting its core value, and repackaging it to compete directly with the originals,” a spokesperson for the organization said. “Defendants had a ready lawful path to bring their products and tools to the market – obtain consent before using their work, as many of their competitors already have. That unfair competition is directly at issue in these cases.”
Whatever the next phase of this litigation entails, prepare your popcorn. It should be wild.
A surprisingly resilient economy and profit-filled AI boom are driving the United States’ big tech giants toward a milestone that would have seemed impossible just a few decades ago. Nvidia, Microsoft, Apple have all surpassed the $3 trillion market capitalization mark, and Google and Amazon are following close behind in the $2 trillion range.
Combined, these five tech giants alone are now worth more than $14.5 trillion and make up roughly 32% of the S&P 500. For reference, in 2002, after the dot-com bubble burst, the total market capitalization of every U.S. stock was $11.1 trillion, according to Siblis Research data. Big tech’s performance has been particularly impressive this year, with Nvidia, for example, surging from a $2 trillion market cap to a $3 trillion market cap in under 100 days.
That begs the question: which tech giant will hit the next big milestone, $4 trillion in market cap, first? Some bears argue that big tech companies’ record run of performance can’t continue forever, given their elevated valuations and the slowing economy, while the bulls believe this is just the beginning of a streak of AI-induced wins for big tech.
“I think, a year from now, we [will] have three $4 trillion market cap companies: Nvidia, Apple, Microsoft,” Wedbush tech analyst Dan Ives told Fortune.
He argued that many of his peers on Wall Street continue to underestimate the AI revolution and the health of the U.S. economy. “Unless you have a telescope, you can’t find a recession. And the Fed? Their next move is a cut not a hike. So, to me, all signs are bullish,” he said. “It’s 9 pm, and the party goes to 4 am…the haters will hate, continuing to say that this is a bubble.”
Nvidia
There are, of course, a wide range of views on where big tech companies are headed, but many experts are convinced that chip giant Nvidia will be the first to reach the $4 trillion market cap mark, driven by the seemingly unending thirst for its AI-enabling hardware.
“The first one to get there is likely to be the godfather of AI Jensen [Huang] and Nvidia, because they’re the only game in town—their GPUs are the new oil or gold in the tech world with no real competition,” Ives said.
Nvidia stock has surged roughly 160% year to date and more than 3,000% over the past five years. That’s led some analysts to warn that the tech giant’s valuation has become stretched, and doesn’t account for rising competition in the semiconductor market.
As David Trainer, founder and CEO of research firm New Constructs, told Fortune’s Shawn Tully last month: “Nvidia’s valuation is ridiculous. It’s facing the same curse as Tesla. But when Tesla got profitable, loads of competitors entered the EV space, cutting margins and slowing sales. The same will happen with Nvidia.”
But Ives noted that even though Nvidia’s shares have surged, its revenues and earnings have followed suit. Nvidia raked in a record $26 billion in revenues and $14.8 billion in net income in the quarter that ended this April. In 2021, during the same quarter, the company had revenues of just $5.8 billion and net income of $1.9 billion.
Louis Navellier, founder and chairman of family office Navellier & Associates, also brushed off the competition argument, claiming Nvidia essentially has a “monopoly” on key AI chips which will lead to consistent sales and earnings growth for years to come. “And, you know, Jensen is kind of like the new Elon, he’s got kind of a cult status,” he said, adding that will continue to drive retail investors in the stock.
Nvidia’s market capitalization as of July 5: $3.14 trillion
Microsoft
Microsoft’s booming cloud business and big investment into ChatGPT creator OpenAI have buoyed its shares over the past few years. But it’s the company’s diverse and sustainable revenue streams that will lead it to a $4 trillion market cap, according to Tim Pagliara, founder and chief investment officer of independent wealth management firm CapWealth.
He said Nvidia may briefly touch the $4 trillion milestone first, due to what he called the current AI “mania,” but Microsoft will be the “more sustainable” $4 trillion company.
“They’re embracing AI, but they also have just a tremendous number of things in the pipeline. And I know as a small business owner, we just gladly keep paying them more per user per month for everything from Azure to some of the additional add ons that they have created for security and things like that,” he added, referencing Microsoft’s Azure cloud computing business.
Pagliara thinks Microsoft’s big tech rivals have riskier business models as well. Apple is dependent on consumers buying into its new iPhone offerings every few years, and Nvidia is benefiting from a lack of competition in the near term, he said. Meanwhile, Microsoft has multiple avenues for consistent revenue growth from the Azure cloud business and Office 365 to Windows and Linkedin.
Market cap: $3.48 trillion
Apple
When it comes to a longer-term outlook, Apple is high on many analysts’ lists because of its potential to use AI to get customers to upgrade their current phones and lure in more iPhone customers. It may not be the first to reach a $4 trillion market cap, but it will get there soon, these bulls say.
“I think over the next two, three years, the largest market cap that we will see is Apple, because they have 2.2 billion iOS devices,” Ives predicted. “Consumer AI is going to go through the walls for Cupertino—they are only in the beginning of an AI-driven supercycle.”
Louis Navellier was also optimistic about Apple’s future, but he said it will need a few “little breakthroughs” to get more customers to buy new iPhones.
He pointed to new AI tools and the potential for folding iPhones as examples. “I don’t know if they’re going to announce that in September, but if they do, it will be a $2,500 phone, and it will sell like crazy and send that stock soaring.”
Market cap: $3.46 trillion
What about Alphabet and Amazon?
The Google parent’s market cap is currently $2.36 trillion, leaving it well shy of the $4 trillion mark. Analysts said Alphabet will be able to capitalize on the AI revolution, but its missteps with hallucinations have left it behind, and its cloud business isn’t performing as well as others. However, the search giant is taking talent from its peers in an attempt to catch up, recent reports have shown.
It’s a similar story for Amazon, which just recently passed the $2 trillion milestone, and experts expect it will take time for share prices to nearly double. Wedbush’s Ives argued that Amazon’s cloud business, AWS, has also lost out to Microsoft. “I think there was some hubris in underestimating what Nadella and Microsoft are doing, and with the crosstown rivals and in that 2-0-6 area code, it’s been a bit of a gut punch for Amazon,” he said.
And when it comes to AI, Amazon is just “behind the eightball” too, according to the veteran tech analyst. However, Ives noted that CEO Andy Jassy has made changes to the company’s cloud business, and with a massive base of customers, Amazon should benefit more from AI moving forward.
To be sure, every tech giant on this list also faces risks. Antitrust regulations, cyber attacks, a slowing economy, and a reduction in AI spending should all be considered. But for now, the bulls remain bullish–and they think you should be too.
“The tech bears with their spreadsheets and valuations will stay in hibernation mode,” Ives said. “But when everyone meets for breakfast at 6 am after this AI party. The bulls [will have] won and the bears just sound smart.”
The Great Rollback is here. The phrase refers to Big Tech starting to slash some of the diversity, equity and inclusion (DEI) programs that were implemented shortly after the murder of George Floyd. Most recently, Zoom announced that it laid off its DEI team. Google and Meta have started to defund their DEI programs, and funding to Black founders continues to dip. Lawsuits have been filed targeting DEI programs, forcing companies to now hide their inclusion efforts while billionaires are arguing on X about whether DEI initiatives are discriminatory or not.
It’s clear that this year will be a turning point for DEI, especially as states continue to ban affirmative action measures and with a presidential election just around the corner. Here are all the stories you need to read to stay updated on the developments regarding tech’s ongoing DEI backlash.
This list will be updated, so keep checking back.
Read about the AAER vs. Fearless Fund lawsuit
In August 2023, the American Alliance for Equal Rights (AAER), founded by Edward Blum, the man who helped overturn affirmative action in education, filed a lawsuit against the venture fund Fearless Fund for offering business grants to Black women. The AAER alleged that the grant discriminates against white and Asian American founders. The Fund and AAER are battling the case in court, and currently, Fearless Fund is barred from awarding grants to any more Black women.
On Instagram, Arian Simone, the CEO of the Fund, said that the lawsuit has financially hurt the fund, as it lost millions in potential commitments and faced staff cuts, low cash run, expensive legal bills and threatening letters. The impact of the lawsuit, however, could go much deeper than just affecting one fund and could have ripple effects throughout the ecosystem.
But Fearless Fund isn’t the only one being sued. The Small Business Administration, Minority Business Development Agency and even smaller companies like Hello Alice are being targeted and sued for trying to implement diverse grant schemes.
Read what critics are saying about DEI
Anti-DEI rhetoric has dramatically increased. A lot of big names in venture, like Elon Musk, Peter Thiel and Y Combinator founder Paul Graham, have shared sentiments against DEI, while only a few, like Mark Cuban, have expressed support for it. This division is bound to last and only get deeper as billionaires continue wielding their power — and influence — to make their opinions heard.
At the same time, there are many who are indeed trying to change and become more inclusive. Change takes time, though, and some of the promises made haven’t been fulfilled.
Read how governments are handling DEI
California passed a bill last year that will soon require venture capital firms in the state to reveal the diversity breakdown of the founders they back. Some herald the bill as progress in a notoriously opaque industry.
However, California is not the only state looking to address diversity. Massachusetts is looking to pass a bill that would extend workplace laws to the venture industry; New York City venture firms informally got together to create an alliance to back more diversity. There is excitement surrounding these initiatives, but also some hesitation.
Rep. Emanuel Cleaver, who is co-chair of the Congressional Black Caucus, has been trying to pass a bill in Congress that would make endowment investing more transparent. He’s hit a snag and said that a few educational institutions in the nation have been outright “nasty” toward him and his efforts.
DEI has become a hotbed issue in red states, as many have taken to banning affirmative action measures. Many tech hubs are actually just blue cities, meaning more liberal-leaning cities, within red, or more conservative-leaning, states. These include Tulsa, Atlanta, Miami and Austin, and all are at the forefront of helping to make tech more accessible to people outside of the Bay Area. But will their governing states put a dagger in all that progress?
Gov. Ron DeSantis, for example, is a leader in passing anti-DEI measures. From book banning to speech restrictions, he is also one of a few governors taking aim at ESG investing, proposing a move that could affect diverse fund managers in the state of Florida.
On a national level, the Congressional Black Caucus (CBC) has taken to finding out more about what is happening in tech. It recently wrote letters to OpenAI and the Department of Labor to see how the tech industry is looking to support Black talent during this time.
OpenAI actually did respond to the CBC, and we got the scoop on what happened next.
Read the latest DEI funding data
Funding to Black founders has continued to dip since 2020, and last year was no different.
Read the DEI view from abroad
Industries abroad look to the States, including when it comes to how marginalized founders are treated. Stay up-to-date on how global venture ecosystems are handling DEI and what it says about progress in the U.S.
France is a notoriously tricky ecosystem for Black Founders. Learn how the country is navigating one of the most opaque venture landscapes for people of color.
Photo: David Paul Morris/Bloomberg via Getty Images
Jensen Huang, the founder and CEO of Nvidia, has been rich for about three decades, but it’s only in the past few months that his wealth has grown to GDP–of–an–Eastern European–country levels. His company, founded in 1993 in a California Denny’s, manufactures a type of hypercomplex microprocessor that was once the domain of video-game systems but now makes artificial-intelligence technology, with its extreme demands on computer power, possible.
Nvidia is worth $2.6 trillion — larger than two Metas, three Berkshire Hathaways, or five ExxonMobils. Goldman Sachs called it “the most important stock on planet Earth” for its centrality in the booming AI industry, and his company will likely be worth more than Apple in a few months. As of Friday, Huang is the 17th-richest person in the world, with an estimated $91 billion to his name, according to Bloomberg. That’s more than double what he was worth on Christmas. At this rate, Huang — whose public image is far from the flamboyant edgelord tech bro who has become so common among the Silicon Valley’s C-suites — could become richer than Elon Musk by 2025 and his company more valuable than any other in the world. (Or, of course, the stock could stop going straight up, as it did a few weeks ago, since lots of people seem to think it’s gotten way overvalued.)
AI, as a technology, is still pretty uneven. OpenAI’s most advanced public version can pick stocks better than humans, while Google’s new AI-powered chatbot, Gemini, thinks you should eat rocks. (You should not eat rocks.) Huang, though, doesn’t really care very much about that, at least as far as his own personal fortune is concerned. AI software requires a huge amount of processing power, regardless of how right or wrong the actual program’s answers may be, and Huang’s company more or less has the market cornered on making the kinds of computer chips that can handle that. Even the stupidest AI is going to need a lot of Nvidia’s chips, called graphics-processing units.
Since there is such a fervent belief among the Silicon Valley set that AI will one day achieve superhuman intelligence, there’s a tremendous incentive for just about every tech company to make that technology a core part of its operations. Huang’s business, though, is today’s equivalent of selling shovels during a gold rush. Many, if not most, of the companies vying to be the next big thing in A.I. will go bust — and Nvidia will have long pocketed their money.
Huang, a naturalized U.S. citizen born in Taipei, is, in many ways, a lot like other tech CEOs. He has something of a signature look that he trots out during TED Talks and Wall Street presentations and spends his time among his many homes in California and Hawaii. He has also been known to say the kinds of off-putting things that tech CEOs sometimes say, like, “The entertainment value of pain and suffering can’t be understated.” But Nvidia is a truly hard-core technology company — not, say, an advertising business in disguise — and Huang’s engineering expertise is in physical hardware, not code. He is also the product of a Baptist reform school in Kentucky (his uncle reportedly sent him there thinking it was a prestigious academy; his roommate was illiterate and showed off his stab wounds) as well as Oregon State University, where he went to college. (It’s not as if he’s without an elite pedigree, though, since he received a master’s degree in electrical engineering from Stanford University.)
Of course, Huang is not some Silicon Valley outsider, especially now that he is so rich and so many companies rely on his chips. He has touted Musk’s plans to transform Tesla with self-driving technology — a kind of artificial intelligence, after all. Still, it’s been decades since a hardware manufacturer like Nvidia was within spitting distance of being the world’s most valuable company; the days when Intel dominated computing have long been replaced by companies that make splashier consumer-tech products. The reality is that there just aren’t many — perhaps any — competitors that can make the kinds of processors that the coming AI industry will need to operate.
Photo-Illustration: Intelligenecer; Photo: Microsoft
Microsoft has invested $13 billion in OpenAI, providing the money-losing start-up with the huge amounts of capital and computing power necessary for its continued operations. In exchange, Microsoft gets access to OpenAI’s technology for use in its own products as well as a real and reputational stake in the AI boom. “We are below them, above them, around them,” Satya Nadella said in March about OpenAI.
Microsoft’s investment has been cast as a strategic masterstroke, through which stodgy old Microsoft sent Google into a panic and established itself as a player in tech’s Next Big Thing. Good for it! And the company’s stock price. But Microsoft’s long-term plans to make money with OpenAI’s technology — and to monetize AI in general — are still taking shape. There was a Bingrelaunch, which promised clean, simple responses to questions, which Nadella suggested was existentially threatening to Google’s core business; one year later, it was still error-prone, its interface was cluttered, and its market share was still hovering in the low single digits. Last year, the company started charging for subscriptions to Copilot, its AI assistant software, in hopes that enterprise customers would shell out for the promise of increased employee productivity in Microsoft Office and Github; according to the company, uptake has been solid.
AI subscriptions are, so far, the tech industry’s favorite idea for making money from AI. This is conceptually simple — your customers are paying you for access to a new product. The problem is that compute-heavy cloud services like ChatGPT and Copilot remain extremely expensive to run, meaning that in some cases even paying customers might be costing them money. Computing costs are likely to fall, and AI-model efficiency could improve, but, much like the basic assumption that there’s a huge market for these things just waiting to be tapped, these are bets and not particularly safe ones.
This week, Microsoft announced that it would be integrating AI more deeply into even more of its products, including Windows, which, among many other chatbot-shaped things, is set to get a feature called Recall, described by the company as “an explorable timeline of your PC’s past.” This feature, which will be turned on by default for Windows users, records and “recalls” everything you do on your computer by taking near-constant screenshots, processing them with AI, and making them available for future browsing through a conversational interface. You can watch Nadella try to explain the feature and its appeal to the Wall Street Journal’s Joanna Stern:
Like smartphones, personal computers already collect and produce vast amounts of data about their users, but this is a big step in the direction of surveillance — constant, open-ended, and mostly unredacted — offered in exchange for a strange feature that Microsoft’s CEO is quite insistent its users will enjoy. Nadella attempts to preempt any concerns by pointing out that the AI models powering Recall run locally — that is, on the user’s device, not in the cloud. This is, at best, a partial solution to a problem of Microsoft’s own creation — a problem Windows users didn’t know they had until this week.
On-device AI processing is interesting to Microsoft for other reasons, too. In a world where AI services are expensive to run, installing them in every popular Microsoft product represents a real risk. In a world where the processing necessary to run chatbots, generate images, or surveil your own computer usage to the maximum possible extent occurs on users’ devices, the cost of deploying AI is vastly lower.
For Microsoft, that is — if it expects to fully utilize these new features that are becoming increasingly integral to the core Window product, customers will have to buy new machines, some of which Microsoft also showed off this week. According to The Verge:
“All of Microsoft’s major laptop partners will offer Copilot Plus PCs, Microsoft CEO Satya Nadella said at an event at the company’s headquarters on Monday. That includes Dell, Lenovo, Samsung, HP, Acer, and Asus; Microsoft is also introducing two of its own as part of the Surface line. And while Microsoft is also making a big push to bring Arm chips to Windows laptops today, Nadella said that laptops with Intel and AMD chips will offer these AI features, too.”
These PCs will come with a “neural processor,” roughly akin to a graphics card, which is a separate hardware feature that can handle AI-related processing tasks more quickly and with lower power use than existing CPUs and GPUs. In conjunction with Microsoft’s shift to more efficient mobile processor architecture for laptops and desktops — something Apple committed to years ago, selling huge numbers of laptops in the process — AI is being used to make the case to its customers that this is the next stage of the upgrade cycle. It’s time to get a new PC, says the company that makes the software that powers most PCs and that sells PCs of its own.
Microsoft, like many other tech giants, says it’s all in on AI, but its approach includes hedges against AI deflation, too. Maybe customers flock to new AI features, in which case Microsoft will have shifted computing expenses back to its billions of customers, improving margins on subscription products and selling lots of Windows licenses in the process. If they don’t, though — if people keep using their Windows machines in approximately the same way they have for decades — Microsoft makes money anyway and leaves its cloud computing capacity free to sell to other firms that want to try their luck building AI tools. Multi-market sector domination with considerable leverage over different but overlapping groups of customers: Not such a bad deal!
Alphabet is doing very well. Alongside its strong first-quarter earnings report, the company announced its first ever shareholder dividend, as well as a $70 billion stock buyback. It is now a $2 trillion dollar company — worth more at the moment than Amazon, Meta, and Saudi Aramco.
It’s a gigantic firm with a core product that dominates its sector. Google won search more than a decade ago, and its parent company has been reaping the benefits ever since. Rather suddenly, though, Google is facing threats — real, mounting, and still mostly unrealized — that could set it, and its parent company, on a different trajectory, and soon. One comes from the government. The other comes from competitors. And the last one comes from itself.
Last week, Department of Justice lawyers made their closing arguments in one of two active antitrust cases against the company. This one, which has focused on the dominance of Google Search, zeroed in on a particular arrangement, the details of which were long kept secret, per Bloomberg:
Alphabet Inc. paid Apple Inc. $20 billion in 2022 for Google to be the default search engine in the Safari browser, according to newly unsealed court documents in the Justice Department’s antitrust lawsuit against Google. The deal between the two tech giants is at the heart of the landmark case, in which antitrust enforcers allege Google has illegally monopolized the market for online search and related advertising. The Justice Department and Google will offer closing arguments in the case Thursday and Friday, with a decision expected later this year.
The primary goal of this arrangement has already been achieved. Android, the most widely used smartphone OS in the world, is a Google product, and iOS feeds users into Google by default. By holding onto iPhone users as smartphones became ubiquitous, Google managed to become the default portal to the web for a large majority of smartphone owners. What it’s paying for now is maintenance, which Google clearly believes to be valuable. The judge overseeing the case has signaled that Google’s defense of sounds sort of weak. From the Verge:
[Apple lawyer] Schmidtlein said Apple had evaluated Bing’s quality against Google’s and ultimately chose Google. But why then, asked [Judge] Mehta, sign such an expensive agreement with Apple? Schmidtlein said that Apple’s ability to leave the agreement every time it expires is “sufficient to keep Google on its toes and keep Google competing.”
An order preventing Google from paying Apple wouldn’t necessarily prevent other, smaller firms from entering into similar revenue-sharing schemes, although it might chill such arrangements for firms who are otherwise paranoid about antitrust action. At best, for Google, this would mean losing an insurance policy on its search dominance — again, something that the company believes is worth massive amounts of money, and which it is vigorously defending in court. It could also crack open the door for competitors, of which there are, rather suddenly, and for the first time in a while, quite a few.
Google is still figuring out how to incorporate AI-generated content into its search results, primarily in the form of Search Generative Answers, which drops short, cited responses at the top of search pages. It’s been in semi-public testing for a year, and recently started rolling out to users who didn’t sign up to test it.
It’s getting better as a product, although I’ve noticed in myself a growing tendency to skim and scroll past it. It’s more impressive as a demonstration than an actual tool, at least in my experience. By the standards of generative AI tools it’s fairly cautious and, in recent months, has displayed linked citations prominently. It has become, in other words, something like a search page within a search page — similar links, presented and excerpted, or rather paraphrased, in a slightly different format.
It’s also converging a bit with projects like Perplexity, which brand themselves as AI-powered alternatives to search, and are likewise trying to figure out what, exactly, it means to fuse technology that generates approximations of the truth with tools at least nominally intended to help you retrieve solid information. The general trend in AI search, such as it is, is toward, well, search — away from verbose generated chatbot answers, and toward conspicuous citation and summary. ChatGPT in 2024 is much more obviously connected to the outside web, and to outside data sources, than when most users tried it for the first time. Other chatbot products are starting to feel more like search engines, too: when Meta rolled out AI features on Facebook and Instagram, it put them in the search bar. Using them is a bit like chatting, but a lot like searching — in Meta’s case, blurring things even further, the chatbot will summarize and cite results from Google and Bing. Google can expect a lot more of this: in attempts to build a wide range of products, AI startups (and larger tech firms) are suddenly doing an awful lot of web crawling. In the course of doing other business, in other words, they’re acquiring many of the valuable resources necessary to build something like a search engine.
As for whether this suggests a whole new relationship with the internet or a lengthy detour to the same destination, we’ll see. For Google, the more pressing matter is that none of these new search concepts have much, or any, advertising. Competing chatbots, and search engines like Perplexity, have mostly monetized with subscriptions. Meta’s AI responses are very much like search results but contain no ads. Google’s cautious approach to SGE might be explained by this tension: It’s building an alternative style of “search” “result” that — should it catch on, and should users find it better — has no obvious place to the level of advertising that Google displays in its current search pages, which is the productive open pit mine at the center of its $2 trillion dollar operation.
This might be a manageable problem for a company whose search dominance is exceptionally well protected, and which has time to experiment. It’s more worrying for a company in a protracted battle with the government — or whose core product is starting to show its age.
Whether or not Google Search itself is a worse product than it used to be is an open and complicated question, to which the company itself says no, actually, it’s better. Taking a long view of the products, it’s certainly much busier than it was when it was a minimalist upstart— there are ads, widgets, tabs, sidebars, snippets, and now clumps of synthetic text. Questions about overall search quality are difficult to define, much less rigorously test, perhaps to Google’s benefit — that’s one of the many perks of building a company around a black box algorithm.
One thing that’s easier to observe is that the web on which Google depends — and which depends in various ways on Google — is in pretty bad shape. Websites producing reliable, human content for Google to turn into desirable results are running out of ways to make money. Closed platforms have absorbed much of the person-to-person written communication that Google was previously able to harvest and serve. AI companies are scraping the web and their users are pumping garbage back into it. Is Google somewhat responsible for destroying the business model of other much smaller businesses? Maybe. Did its dominance establish a set of business incentives that centralized and distorted the sprawling web? Could be! However it happened, it’s also a problem for Google, now, as its search engine tries to produce results from ever-larger amounts of ever-worse material. Google’s longtime dominance means that much of the web sees it as an entity to be gamed, manipulated, appeased, or tricked. It’s a frequently toxic dynamic, and its effects are accumulating.
This creates a different challenge for Google, unique to its status as an incumbent leader: its competitors no longer have to be great to sometimes feel better, or at least comparable, to Google. Maybe they just have fewer ads. Maybe they’re just more convenient, right there in the chat box. It’s an environment in which iPhone users, if asked to actually choose a default search engine from a list, might actually take a look at something else, and stick with it for a while.
