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AI crypto technology

Amazon by Jeff Bezos examines Perplexity by... Jeff Bezos

There was not one overarching news item this week, but these are the ten things in the world of technology and innovation that caught my eye.

1. Grand Theft AI

For writing this newsletter, I take notes during the week of topics that seem interesting to me. On Saturday, I ask four AI search engines to rank them in order of relevance: ChatGPT from OpenAI, Gemini from Google, Claude from Anthropic and Perplexity, from Grand Theft AI.

At least, that's what The Verge calls the creators of Perplexity by seemingly systematically committing plagiarism:

"Perplexity is basically a profit-seeking middleman on high-quality sources. The original value of search engines was that by collecting the work of journalists and others, the results from, say, Google, sent traffic to those sources.

But by providing an answer instead of directing people to a primary source, these so-called "answer engines" deprive the primary source, ad revenue, and keep that revenue for themselves. Perplexity belongs to a group of vampires that includes Arc Search and Google itself.

But Perplexity has gone a step further with its Pages product, which creates a summary report based on those primary sources. It is not just quoting a sentence or two to directly answer a user's question - it creates a fully aggregated article and it is accurate in the sense that it actively plagiarizes the sources used.

Forbes discovered that Perplexity bypassed the publication's pay wall to provide a summary of an investigation the publication did into the drone company of former Google CEO Eric Schmidt."

So Perplexity is stealing journalists' copyrighted work. Reason for Wired to launch an investigation that was summarized with the headline, "Perplexity is a bullshit machine."

Forbes has written a neat summary of the storm brewing around Perplexity's hijacking. According to Reuters, Perplexity is not the only AI company whose business model is to steal and sell other people's information, yet there is reason enough to ask Perplexity itself how it is. So I asked it this question:

Perplexity gives a painful answer about itself.

That is a clear answer, even with neat source citation above the answer.

Amazon by Jeff Bezos examines Perplexity by Jeff Bezos

The funny thing is that AWS, Amazon's hosting arm, has launched an investigation into Perplexity's practices. Because like many AI companies, Perplexity runs on AWS servers, perhaps also because it is partly funded by Amazon founder and major shareholder Jeff Bezos.

"AWS's terms of service prohibit abusive and illegal activities and our customers are responsible for complying with those terms," Amazon said, but in practice it won't be too bad because Bezos will never allow his own investment in Perplexity to be wiped out by Amazon.

2. MIT pioneer finds generative AI overrated

MIT Professor Emeritus of Robotics Rodney Brooks finds Generative AI, the type of AI based on Large Language Models (LLMs) such as Perplexity and ChatGPT, impressive technology, but perhaps not as capable as many suggest. " I'm not saying LLMs aren't important, but we have to be careful how we evaluate them," Brooks told TechCrunch.

He says the problem with Generative AI is that while it is perfectly capable of performing a certain set of tasks, it cannot do everything a human can, and humans tend to overestimate its capabilities.

"When a human sees an AI system perform a task, they immediately generalize that to things that are similar and make an assessment of the AI system's competence; not just performance on that task, but competence around it," Brooks said. "And they tend to be very overoptimistic, and that's because they're using a model of a person's performance on a task."

He added that the problem is that generative AI is not human or even human-like, and it is wrong to ascribe human capabilities to it. Brooks' view echoes analyses by Martin Peers and Jenn Zhu Scott, which I wrote about earlier this month.

By the way, some self-reflection is not foreign to Brooks: on his own blog, he tracks the accuracy of his own predictions. Including self-conceived color system, very interesting.

3. Applications for Solana ETFs.

Applications were filed on Thursday and Friday for permission from US financial authorities to launch exchange-traded funds(ETFs) for cryptocurrency Solana.

Solana dropped last month, but still rose 648% in the last year

It marks an extraordinary last year for Solana, in which it grew rapidly as a platform for decentralized applications due to high speed, low cost and good development tools, and also saw the value of the SOL token increase by as much as 648%.

After Bitcoin, Ethereum and BNB, Binance's token, Solana is now the fourth largest cryptocurrency in the world measured by total market value. Judging by developments, Solana will pass BNB before the end of this year and become the third largest cryptocurrency in the world after Bitcoin and Ethereum, not counting stable token USDT (the digital counterpart to the dollar).

SEC vs. Metamask

It wasn't all celebration in the world of Web3, as the crypto world likes to call itself these days. On Friday, it was announced that the U.S. securities watchdog SEC is filing a lawsuit against Consensys, best known as the maker of the popular Metamask wallet.

According to the SEC, Consensys operates Metamask as an unregistered broker. A substantively nonsensical argument, since Metamask provides a technical service where users exchange cryptocurrencies with each other. The SEC's argument would mean that the sale of envelopes is also subject to regulation because people sometimes put money and sometimes gift cards in them to give or sell to each other.

Rather, the value of the SEC should be to use meaningful definitions to determine the difference between when a cryptocurrency is a means of payment, when it is an investment and when it is a voting card. The difference between a love letter or a death threat is in the content of the text, not the form of transmission.

President Biden and his comrade Gary Gensler, head of the SEC, are as savvy in the crypto world (excuse, Web3 world) as Don Quixote and Sancho Panza are in the fight against windmills. In a presidential race that, at least until last week's debate, still seemed difficult to predict, it is also politically awkward of Biden to continually battle Web3 (I'm learning).

The percentage of voters among people active with technology and Web3 is high, while few votes can be won by continuing to kick against Web3 in this way. Smart politicians do not make neck-and-neck issues about which at best they can stumble and with which they can win little. Meanwhile, Trump appeared as a cheerful guest on a popular technology podcast.

Tesla fell 24% in the last year, but rose 7% this week

It was otherwise a rather soporific stock market week, with Nvidia recovering slightly from a share price decline due to profit grabs earlier this month. Microsoft is again the world's most valuable company, Apple number two and Nvidia number three.

As often said, let's look again at the end of the year. Unlike Professor Brooks, I hardly ever predict anything, but the prediction that Nvidia, unlike Microsoft and Apple, will come out with downright spectacular third-quarter earnings, I dare you.

4. Three tons of damages due to faulty facial recognition

The U.S. city of Detroit is paying three hundred thousand dollars in damages to a man who was wrongly designated a shoplifter due to improper use of facial recognition technology.

It won't be the last time that too much reliance on complex technology leads to the wrong conclusions. With facial recognition, more often a problem is that people of color are confused with each other.

iPhone users can test it for themselves on their own photos. If there are no dark-skinned people among them at all, it might be a clue to get out of one's own bubble more often.

5. Electric car battery charges in 4 minutes 37

British start-up Nyobolt has charged an electric car's battery from ten percent to eighty percent in just four minutes and thirty-seven seconds. This breakthrough, demonstrated with a purpose-built concept sports car on a test track, surpasses the current performance of Tesla superchargers, which take about fifteen to twenty minutes for a comparable charge.

The question, of course, is what this technology will cost and how soon fast chargers will be available en masse. Tesla recently had to sharply scale back its ambitions to install an infrastructure for fast chargers across the United States. So the question is with which partners Nyobolt will do the rollout.

6. 'Apple builds cheaper Apple Vision Pro'

The plan was to make a standard version of the Vision, as with the iPhone, and a more expensive Pro line. However, the plans seem to have changed and the result seems to be that a new Apple Vision will be on the market for just over half the money, but with a much worse resolution.

Unlike with phones, resolution is critical with a VR device. It is that very aspect that was rated so highly when the Vision Pro was introduced. But the device is too expensive and apparently that quality cannot be mass produced at a lower price for now.

Not plagued by false modesty, for a comprehensive analysis I gladly refer to my piece from last May in which I wrote:

"All the omens are that the Apple Vision Pro will be a flop - a flop by Apple standards, that is. But that's not a bad thing at all. At least Apple is trying to develop something new again, and that's better than unimaginatively buying back its own shares for hundreds of billions, as it has in recent years."

The good news for Apple is that the iPhone 16 does appear to be a sales success. Not only because of a new "capture" button, but because the expected AI features will only work on the iPhone 15 Pro with the A17 Pro chip.

No less than two hundred and seventy million iPhone owners have not updated it for four years, but if they want to use AI they will now have to. And that's good news for Apple.

7. Bad news for people with fear of flying

It's not because the media have seen articles about it click extremely well and thus there is a lot of media coverage of the phenomenon, it also turns out to be reality: Clear Air Turbulence (CTA), turbulence in clear weather, is more common than ever.

Last month, one person was killed and several passengers seriously injured when a Singapore Airlines plane bounced up and down for a minute. Surprisingly, for once it wasn't Boeing's fault.

This research from the University of Reading shows that severe turbulence in clear weather in the North Atlantic, for example, was 55% more frequent in 2020, than in 1979, "consistent with the expected effects of climate change.

8. Marc Andreessen looks back on Mosaic and Netscape

Marc Andreessen and Ben Horowitz, founders of investment firm Andreessen Horowitz (known for Facebook, Airbnb, Instagram, Zoom and many other successful companies), look back at the breakthrough of the Internet, when Andreessen co-founded Mosaic (the first Internet browser with, how is it possible, pictures!) and Netscape, the company that launched the dotcom boom.

The recap is especially interesting because the gentlemen both share many insights relevant to anyone working in the field of innovation and technology. This podcast is highly recommended.

Also frequently recommended by me: the two books Ben Horowitz wrote about entrepreneurship. First, The Hard Thing About Hard Things, about building a startup, with especially sharp analysis about what he did wrong with his company Opsware and what lessons he and the reader can learn from it.

But What You Do Is Who You Are, on how a company can build (or tear down) its own culture, is also very worth reading; even if you don't work at a startup but value a good company culture and a pleasant place to work.

9. Why women need less exercise than men

There is a difference between the sexes, which I have suspected for some time; but this time research has been done on how much exercise we need for a healthy heart and for once it is in favor of women.

A study of four hundred thousand people shows that men need to exercise five hours a week to achieve maximum positive effects for their hearts, compared to women only two and a half hours a week.

Why men are more likely to have heart attacks and at younger ages than women and what we can do about it to prevent heart failure is clearly explained in this short video from the BBC.

10. Tracer webinars: Wednesday, July 3, July 10 and July 17.

This is the sixty-first edition of this newsletter and except for the Christmas period, the appearance has always been weekly. During the summer period I switch to a monthly newsletter, so the next editions will appear on August 4 and September 1. Only on a special event will I send an update in between if possible.

True enthusiasts 😉 Don't have to miss me all month, because this summer I'm presenting a series of webinars on the Tracer token and the Carrot (carbon removal) smart contract.

Next Wednesday, July 3, at noon Dutch time is the first webinar, in which Tracer Chief Business Officer Gert-Jan Lasterie will cover Tracer's tokenomics and explain why the token still costs $0.75 cents in the current private round and double, $1.5 cents, at the public sale later in the third quarter. Sign up for Wednesday's webinar here.

The next webinar, on Wednesday, July 10, at noon, with Tracer Chief Technology Officer Philippe Tarbouriech, will focus on the Carrot (carbon removal) smart contract and how the carbon removal credits are tokenized, and then qualified based on "grade": the duration of CO2 removal. Sign up for that Wednesday, July 10 webinar here.

Special webinar: marketing and PR in Web3

On Wednesday, July 17, there will be a webinar on the latest developments in marketing and PR from Web3 projects with a very special guest. Who that is I will announce on X and LinkedIn, so follow me there for that information and other smaller updates over the summer.

Hope to see you in the webinars and if not, see you August 4!

Happy summer,

-Michiel

Categories
investing crypto NFTs

Record deal Microsoft in carbon credits; invitation Tracer private round

It was an exciting week for Microsoft. On Tuesday, it was overtaken by Nvidia as the world's most valuable company, but after Nvidia shares fell Thursday, Microsoft closed the week as the number one again. It will prove to be a temporary position, as Nvidia's advance is unstoppable for now.

More interestingly, Microsoft signed a record-breaking deal this week in which it committed to purchasing eight million carbon removal credits, representing the largest ever carbon dioxide removal transaction.

In my not so humble opinion, it is the start of a race in a new billion-dollar market; the CO2 removal market. I hope to be able to contribute to this myself through the Tracer project, which could be an important tool in the fight against global warming. I would like to invite you to make a contribution as well!

An almost entirely self-painted survey of the various sources of carbon removal credits.

It is about CO2 removal, not just avoidance or reduction

The record purchase was a notable action by Microsoft because the reduction of one ton of CO2 emissions, commonly described as a carbon credit, is used by airlines, among others, for the worst kind of greenwashing. The lack of transparency and control in the market led to projects that often fail to deliver the promised environmental benefits and gave carbon credits a bad reputation.

The interesting thing is that Microsoft has not only set a goal of being climate neutral by 2030, but actually carbon negative. This means Microsoft will reduce greenhouse gas (GHG) emissions by more than half, remove the rest and then aim to remove the equivalent of its historical emissions by 2050.

In doing so, Microsoft recognizes that carbon dioxide emissions are so high that emissions reductions alone are no longer sufficient to achieve "only" a degree and a half of warming, the goal of the Paris climate accord COP21; this will require actual removal of CO2.

Tech giants embrace carbon removal credits

Microsoft is not the only tech giant focused on carbon removal credits, because along with Google, Meta and Salesforce, companies that rarely play together nicely, it recently announced the formation of the Symbiosis Coalition, a signal that the world's largest companies are willing to invest in high-quality carbon removal credits.

A trillion-dollar market: countless solutions for CO2 removal, but the key is the duration of CO2 removal, expressed in years.

The tech giants' move toward carbon removal credits obviously also has an economic consideration. The economic potential of the carbon removal sector is enormous. McKinsey estimates the size of this sector by 2050 to be as much as $1.2 trillion, or $1,200 billion. This is based on increasingly stringent government taxes on carbon emissions and rapidly improving technology.

But 2050 is still a long way off. It is therefore relevant that Morgan Stanley estimates that the market for carbon credits, most of which will be based on CO2 removal, will reach $100 billion as early as six years from now, in 2030. Now I always distrust forecasts with nice round numbers, but in this case, due to global warming, there is an undeniable need for companies to invest heavily in CO2 removal. After all, without a livable planet, it's hard to make money.

What is unique about Tracer?

Since Hans Tobé and I founded Blue City Solutions in 2016, after our visit to COP21 in Paris, we have been looking for projects that can accelerate CO2 removal in a cost-effective way; that is, without subsidies or donations. With Tracer, we think we have found an extraordinary solution that, without, false modesty, benefits the world.

Tracer is the answer to the question: how do you scale the carbon credit market from small, opaque and without liquidity, to huge, transparent and liquid? This is extraordinary, because so far the solutions have been either liquid or transparent. Either efficient, or reliable.

The Tracer ecosystem: two smart contracts, Tracer for governance and Carrot for tokenization and qualification of the carbon removal credit

Tracer's solution is based on a smart contract, a blockchain application, by Chief Technology Officer Philippe Tarbouriech. For enthusiasts, the "secret sauce" is the combination of a fungible and a non-fungible token in the same smart contract making it possible to offer buyers a single portfolio with multiple projects as the source of the carbon removal credits.

Compare it to a "basket" of stocks among fund investors. Buying carbon removal credits that way from different sources was not possible until now, which made this market hell for companies like Microsoft, Amazon, Apple etc who buy large amounts of credits. How can they ensure quality of carbon removal credits, especially if they buy from various projects worldwide where the removal at each project varies per year? This is so far unfeasible and complicates the growth of the market.

More details about Tracer's solution to this are in the tech white paper. The entire outline, from a summary of a few pages to the entire white paper, is in the, yes, Tracer Knowledge Center.

But rather than summarize all of Tracer's documentation, I think it would be more useful to share my own analysis.

Market and solution are clear

For nearly two decades, I have tried to assess every innovation through Guy Kawasaki's lens , which reduces every startup to ten slides. When Philippe explained his idea of Tracer to me, the problem that Tracer solves (the poorly functioning market of carbon removal credits), the value it brings users (transactions of higher quality carbon removal credits at lower management costs) and the "underlying magic" (an open source smart contract that documents the entire life cycle of a carbon removal credit) were quickly apparent.

What always helps to spark my enthusiasm: a huge market potential with solid customers (Microsoft & Co have budgets) and a pressing problem (climate change). What I find special about Tracer is that it offers a solution to large buyers such as Microsoft and Salesforce by providing complete transparency, through an assessment model based on "persistence"; by this is meant the duration of carbon removal.

Choosing that persistence as the most important factor - because some projects provide 100-year removal and others over a thousand years - also ensures right away that large amounts of CO2 removal credits are more easily comparable and thus tradable.

Real world assets new phase in crypto, pardon me, Web3

As an old man, I have long been very skeptical about the lack of underlying value components of crypto projects. In short, there was nothing more than supply and demand.

With Bitcoin, that is precisely its strength, but with many companies that tried to profit from Bitcoin's success with obscure tokens, a smokescreen was actually erected about possible value the token would represent.

At the same time, a simple analysis did show that the biggest crypto funds outperformed the biggest tech funds by far over the past year. And the market is always right; the only question is over what period of time.

I think the nice thing about Tracer, from a business perspective, is that there is continuous influx of capital from the "real" world. Boston Consulting Group has done a fascinating study on the kind of "asset tokenization" of which the Tracer project is an example.

'Buy and burn' sounds strange, but is a modern way for the community to share in success.

Because a percentage of each carbon removal credit "tokenized" through the Carrot smart contract is used to purchase the Tracer governance token. This reduces the number of Tracer tokens in circulation and creates a deflationary effect, as is the case with Ethereum. Simply put: upward price pressure. And people both outside and inside crypto, or Web 3 as we have to say these days, are very keen on that.

Tracer is open source and decentralized

Once upon a time, Finn Linus Torvalds, with the open source operating system Linux and a group of volunteers, destroyed a billion-dollar industry of closed operating systems, making cloud computing many times cheaper. In short, without Linux, there would be no Amazon, social media or Netflix and certainly no AI.

Linux became an inspiration for other open source projects such as Ethereum, which does struggle with the image of being run too centralistically. An alternative governance structure is the Decentralized Autonomous Organization (DAO), which Tracer uses.

I won't go through the legal details of this, but at its core it comes down to the owners of Tracer tokens making the most important decisions. There is no corporate ownership of the software.

American investment firm Andreessen Horowitz, known for investments in Facebook, Twitter and Airbnb, among others, has written a legal framework for DAOs, but especially the Europeans will recognize many elements of the old-fashioned association structure.

In my opinion, this decentralized approach is a basic part of blockchain technology, which is still used too rarely.

Tracer DAO: one token, one vote.

The difference between tokens and shares

As a former investor in startups, I have experienced firsthand how long it usually takes even the successful startups to get some return to shareholders. Waiting five to 10 years is not unusual.

In Web3, I see the advantage of being able to start for relatively little money and quickly see if a product catches on, so that money doesn't disappear into a bottomless pit for years. So you try something, you adjust something where necessary, but then it's also: either stop, or a success.

In doing so, as with Tracer, there is often the possibility of getting at least the initial deposit out within a few months of launch. Tracer is funded through a phased token sale, with prices rising at each stage. This model is designed to reward early buyers as the project becomes less risky.

Tracer private round: 0.75 cents USD per token, half the price in the upcoming public sale.

The advantage for early buyers is that they could trade ten percent of their tokens immediately after the public sale, while their remaining tokens are subject to a one-year vesting period. Such an approach shows long horizons and professionalism in Web3.

Dedicated team

This long-term vision is also evident in the tokens that the team itself bought early on. Almost twenty percent of the tokens are reserved for the team, with a so-called cliff of one year applying. This means that those tokens are only released and can be traded after a year, with this also applying to only a third of these tokens; the vesting period for the team tokens is thirty-six months.

Important: team and advisors have tokens that can only be traded after a year and then only partially (33%)

Without wanting to portray them as superheroes who really deserve a cape, it is relevant to point out my personal involvement. I have no formal position at Tracer, but I have been instrumental in putting together the international team as an advisor.

For example, I introduced CTO Philippe Tarbouriech to Gert-Jan Lasterie, the Chief Business Officer (CBO) of Tracer, whom I knew from the days when I was a small shareholder in his company Flabber, which he sold to American media company Vice. Gert-Jan once gave me the excellent book he wrote about on cryptocurrencies and played an important role in accelerating my learning curve about crypto and blockchain.  

I once introduced CFO Hans Tobé, who managed the international offices of the Dutch Center for Trade Promotion (NCH) for many years, with energy and sustainability expert Andrew Barbeau, who became our U.S. partner and strategist.

Notable names also include Hubert Shio-Hsien Tai, once one of the first hundred employees at eBay, who was later involved in the IPOs of two Chinese Internet giants as CTO and COO; not to mention Dr. Alberto Pace, Tracer's scientific advisor, who in daily life works at CERN as head of data management. I always joke that it must be nice for Alberto that at Tracer, he finally gets a chance to deal with a serious challenge.

All people with long and outstanding track records, each in their own field, and not types who will soon be offering a so called 'Masterclass' on "how to get rich quick by dropshipping crap". More key collaborations, team members and advisors will be announced in the coming months.

Join us and ... and what?

Nothing I say or write is advice, it is just my opinion. I do not own Bitcoin myself. Many people start drooling while staring at Bitcoin's 113% rise, Solana' s nearly 700% rise or even memecoin Pepe' s over 20,000% rise, all in the last year, but my advice is: only do this with money you can afford to lose, and for peace of mind, assume you've lost it too.

But if Tracer becomes successful, you will probably get back many times more than you put into it. In addition, I personally think it is important that Tracer is a governance token, allowing you to vote on the important decisions with your tokens. The fight against global warming is important enough to think seriously about and contribute seriously to. If you are interested in Tracer, click here.

And any comments, questions or other feedback I would love to hear!

Categories
AI invest technology

Billions hunt on Wall Street due to AI gold rush

It was the week of AI on Wall Street. After Apple presented its AI plans on Monday, things remained quiet for a while, but after a day's respite, the stock market hit a complete snag on Wednesday: Apple briefly overtook Microsoft as the world's most valuable company, while just last week it had lost the second spot to Nvidia. What is wrong with these investors? Why the absurd price swings of hundreds of billions?

The market value of Apple (orange), Microsoft (blue) and Nvidia (green) last week in trillion dollars. Source: ChatGPT 4.o

Billions of dollars

As of June 14, Apple, Microsoft and Nvidia have all passed the milestone of a $3 trillion market value, making them an exclusive "trillion-dollar" club. Due to enthusiasm among investors about the upcoming introduction of AI applications and ChatGPT in the iPhone, Apple briefly regained the title of the world's most valuable company with a market capitalization of $3.283 trillion, just slightly higher than Microsoft's at $3.282 trillion. 

Meanwhile, Nvidia's stock price also rose steadily, driven by investor excitement over Nvidia's 10-for-1 stock split. Nvidia's market capitalization experienced a meteoric rise, from $2 trillion to $3 trillion in a record-breaking 96 days, faster than Microsoft (649 days) and Apple (718 days). 

Nvidia's dominance in AI chips and strong earnings growth have fueled share price gains, with shares up more than 132% this year and 193% in the past year. But on Friday, Apple's share price fell slightly, Microsoft rose slightly and so Microsoft ended the stock market week as it began: as the world's most valuable company.

Everyone was buying iPods, not AAPL 

Let's face it: if the so-called investment gurus understood anything about technology, they would have been buying Nvidia shares en masse years ago. But just as there was no one 21 years ago who, instead of buying an iPod at that price, $300, bought shares of Apple (which would be worth $137, 000 today), there is virtually no professional investor who has been in Nvidia for more than, say, five years.

Professional fund investors are as big amateurs as you and me. Why are Apple ($3.26 trillion), Microsoft ($3.29 trillion ) and Nvidia ($3.24 trillion) now worth almost as much? Ask any analyst or investor and they'll say in chorus: because of AI. That's like an artist manager saying, "Doesn't matter if I'm manager of Taylor Swift or Country Wilma, they're both singers.

The market does not seem to understand that these are totally different companies with different approaches to revenue, costs and possibly profits from applications of AI. But their perspective is totally different.

Apart from all the AI violence in the stock markets this week, with Nvidia still rising stronger than Apple, it is notable that Bitcoin and Ethereum fell while Bitcoin seemed to be heading for a new all-time high.

Nvidia makes pickaxes, Microsoft is mining

With AI, we can speak of pure gold rush, so let's keep that metaphor. In this gold rush, Nvidia makes the shovels and picks that every miner needs. Amazon, Meta, X, Tesla, Oracle, go down the list of tech giants: all, like Microsoft, use Nvidia's shovels and picks.

There is no alternative that delivers the same performance per dollar invested, which is why Nvidia's revenue growth and profit margins are already legendary. The question is how long Nvidia can maintain this position, but at least for the next few years.

Microsoft is the biggest miner, with worldwide data centers full of Nvidia stuff. At Microsoft, unlike Nvidia, the question is whether those billion-dollar investments will lead to sufficient margin. The first noises are already being heard that Microsoft's customers are not at all achieving the intended improvement in returns based on Microsoft's AI applications.

This will obviously lead to price erosion and lower sales and undermine investor confidence in Microsoft's AI plans because the costs are astronomical. These are not investments of billions, but tens of billions, and they will start to gnaw away at the profit margin. 

OpenAI is goldsmith, Apple the jewelry maker

OpenAI sits just a layer above Microsoft: it uses Microsoft's data centers and cloud services to forge gold, demanding maximum power from Nvidia chips. Demand for OpenAI's technology, particularly its flagship ChatGPT, has been huge. Meanwhile, OpenAI is heading for annual sales of nearly $3.5 billion.

That's why shareholder Vinod Khosla remains unabatedly optimistic. No wonder, he stepped in at a valuation under a billion and has already seen his investment increase hundredfold in value. Then I would also smile affably at the criticism of OpenAI.

OpenAI, led by Sam Altman, likes to leak revenue figures; but we hear nothing about its burn rate, its losses. This is no wonder, because in fact OpenAI pays heavily to two suppliers: Microsoft and Nvidia. Both seek maximum profit, and so OpenAI burns billions a year. The billions it invests in OpenAI, it largely gets paid back by services provided.

No, then Apple, the jewelry maker of AI mining. It builds AI applications here and there into its operating system and applications, which they don't call AI but Apple Intelligence, but the cost of these, viewed in the big picture at Apple, is virtually marginal. And the partnership with OpenAI announced big Monday costs Apple nothing at all.

What Apple does is create elegant, easy-to-use products that improve everyday life, similar to turning raw gold into fine jewelry. Apple's ambition is to offer consumer products and services that seamlessly integrate AI to improve our daily lives. The only question is: Will those AI ambitions from Apple work this time?

Apple Intelligence is Siri 2.0?

Investor and former journalist MG Siegler rightly points to all of Apple's previous attempts to get Siri working properly. It's the same pain point Marques Brownlee pointed out in conversation with Apple CEO Tim Cook.

More than two billion iPhone owners will get an update before the end of the year that will allow them to enter the AI era - provided their iPhone can handle it and, as a result, Apple may well get a huge sales boost from the iPhone 15 and the new iPhone 16, while for years renewing your iPhone was virtually unnecessary.

By the way, it's remarkable how times have changed: just last week I pointed out a podcast with legendary Wall Street Journal reporter Walt Mossberg, who terrified the entire tech elite. Nowadays, it's YouTuber and professional frisbee player Marques Brownlee for whom the red carpet is rolled out at the introduction of a new product.

Traditional journalism is struggling to make sense of Apple's introduction of AI applications. This makes sense in itself, as it is all still future music and nothing can actually be tested yet.

This is now called the Apple Power Stance: legs (too) wide, toes at ten past three-thirty.

It's just sad that the Washington Post didn't get much further than to point out the hilarious pose with which all Apple employees are portrayed these days. It has since been flatteringly christened the "Apple Power Stance," but surely the Dutch know this position better as Bassie's spreading stance on his floppy shoes.

Too much focus on LLMs and Generative AI

Those who would have followed the technology sector from some distance this week would undoubtedly get the impression that Large Language Models (LLMs) such as ChatGPT and Google Gemini, are the only and most important form of AI.

But criticism of the hundreds of billions being thrown into this branch of AI is rightly growing louder. Martin Peers of the Information has a sharp analysis:

"Despite the ubiquity of AI in news reports, one issue does not get enough attention: Are the advances that society will gain from the new technology worth the cost? By cost, I specifically mean the impact on energy supplies. The energy demands of data centers threaten to deplete energy resources, pushing back efforts to switch from carbon-emitting energy sources.

And for what? Judging by how some technology companies market their AI-driven services, it's about helping consumers design a menu for dinner, plan a vacation or find a photo on their phone. (The idea, of course, is to get consumers to spend money on new devices or AI subscriptions.)

Or it's about helping companies improve employee productivity, including cutting jobs (great!). Despite the attention these applications have attracted, AI's real promise undoubtedly lies in its potential to solve existential challenges such as deadly diseases or dangerous drivers.

Efforts to use the new technology in those directions are already underway. Google, for example, has its AlphaFold project aimed at accelerating medicines for diseases. Elon Musk is making AI the centerpiece of his efforts at Tesla to develop fully autonomous driving. Microsoft, meanwhile, is using AI to improve cybersecurity, among other things - an effort that can't come soon enough.

Data breaches at large companies - including recently at Snowflake, which affected several of its customers - have become so commonplace that they attract little attention, despite the pain they cause. No one knows the problem better than Microsoft, whose chief executive, Brad Smith, was addressed Thursday in a congressional hearing about the company's cybersecurity shortcomings.

But fighting deadly diseases, solving autonomous driving and even improving cybersecurity are not cheap or fast ventures. Yet large technology companies are spending tens of billions of dollars to develop AI, so they need a return. The danger is that the need for quick returns from consumer and business services will distort investments, neglecting more important needs.

Unlike AI startups like Anthropic and OpenAI, large companies are not run by non-profits that require them to put the interests of humanity first. Let's hope that AI's greatest advances don't turn out to be trivialities, like saving consumers a little time while playing with their phones."

"LLMs suck oxygen out of any space"

Leading thinker on technology Jennifer Zhu Scott puts it this way: "LLMs suck all the oxygen out of any room I enter. Again, a reminder:

  • LLMs will eventually become commonplace
  • LLMs are the playing field for only a handful of firms in the world
  • LLMs are not the future of truly advanced AI; instead, a more efficient architecture that requires less data/calculating power/energy and is more like biological brains is the future.
  • LLMs cause a huge carbon footprint and water consumption, and much of the output is credible nonsense, meaningless "art," deep fake and massive privacy invasion
  • Praise to those who keep their LLMs open-source

OpenAI's release of ChatGPT3 in November 2022 set in motion this mad race of LLMs and has delayed the progress of advanced AI by at least five years."

Earlier, Jen Zhu Scott said, "It's simple. We won't get to Mars by building taller buildings on Earth. Where Mars stands for general artificial intelligence, or AGI."

LLMs, as clever as some applications are, remain advanced forms of the best player in a pub quiz or the scholar who always raises his finger trying to give the answer. Only the answer does not always turn out to be correct, and the facts that the diligent scholar spits out are based solely on learned knowledge.

Fundamental technology that advances society, e.g. helps eliminate disease, will not be developed on the basis of LLMs. This puts the billion-dollar investments and trillion-dollar valuations for companies engaged in the current form of AI, LLMs, in an increasingly questionable light.

See you next week!

Categories
AI invest technology

Nvidia has passed Apple, so what will Tim Cook do tomorrow?

So much happened in the tech world last week that I briefly discuss ten news items that stood out to me the most.

If Nvidia maintains the revenue and profit growth of recent quarters, and it looks like it will, it will be the world's most valuable company before the end of the year. 

1. Nvidia worth more than Apple

The day we all knew was coming, happened to be on Wednesday: Nvidia passed Apple in market cap and became the world's most valuable company after Microsoft. There are legitimate reasons why Apple's sales are stagnant, with limited access to the Chinese market in particular preventing Apple from realizing its full market potential.

But there is more behind Nvidia's impressive run. Because while Nvidia had been investing heavily in the development of AI technology for over a decade, with all the risks of such a relatively one-sided strategy, Apple waited no less than nine years since the iPad in 2010 and the Apple Watch in 2015, until 2024, before introducing a new category of products with the Apple Vision Pro.

Meanwhile, Apple did buy back hundreds of billions of its own shares.Investors were happy about it, but buying back its own shares remains a weakness. Apple could have bought all sorts of useful companies, but Beats. the maker of flashy headphones, was the largest acquisition in Apple history ten(!) years ago at a cost of three billion dollars. That seems like a lot, but put it in perspective: Apple makes that amount in net profit every two weeks.

Apple could have purchased content (like Disney, and then divested the channels like ESPN), content aggregators (Netflix, Spotify), a completely new product category (Tesla) or valuable sports rights (World Cup, NFL, Olympics, Premier League). But none of that. No, to satisfy shareholders Apple kept doing huge stock buybacks.

Beats only fun for Dr. Dre

Meanwhile, it hobbled along behind Spotify with Apple Music, and those ostentatious headphones from Beats by Dr. Dre pleased mostly Mr. Dre himself - and according to rumors, he's not even a real doctor. More than half of Apple's profits come from products, particularly the iPhone, that are more than a decade old and under pressure from cheaper competitors.

Apple, at its core, sells too few products to still grow sales independently, although it still managed to increase its profit margin by cleverly optimizing its sourcing, like replacing Intel as a chip supplier with Apple's own top-quality Silicon chips.

Nasdaq Composite beat Apple

Investors are punishing mediocre growth due to Apple's lack of innovation and are sprinting toward Nvidia. NVDA shares are up more than 150% in 2024 (AAPL: 6%), 214% in the past year (AAPL: 9%) and over 3,200% in the past five years (AAPL: 314%).

By comparison, during those same periods, the Nasdaq rose 14%, 29% and 126%, respectively. It was unimaginable a few years ago: the Nasdaq Composite rose more than three times as much as Apple last year .

For those looking for more background on Nvidia's growth, I previously wrote this piece.  Why the Apple Vision Pro is technically fabulous but from a business perspective merely a drop in the bucket for Apple, is described here.

TikTok bypasses U.S. export restriction

Nvidia is so unique and crucial that all other major tech companies are clutching their hats to be allowed to buy chips from it. From Microsoft to Google, Meta and Amazon: without Nvidia hardware, they can't develop AI applications, especially processor-guzzling Large Language Models (LLMs) like ChatGPT, Google Gemini or applications on Amazon Bedrock.

ByteDance, the parent company of TikTok, also needs Nvidia to develop AI and has cheekily circumvented U.S. export restrictions: it rents cloud capacity from U.S. cloud services, including those of Oracle. Officially, none of these developments seep into China, but for those who believe that, I also have a nice used car for sale from a half-blind widow, barely used.

2. Tim Cook's AI moment

Tomorrow morning, 10 a.m. California time, Tim Cook will take the stage at Apple Park in Cupertino at a pivotal moment in his career. Cook has been through a lot in his more than 12 years at the helm of Apple, but never this. He must convince the world that Apple has an AI strategy.

It has already been leaked that Apple will not launch a single AI app, but will apply AI across the breadth of its product spectrum. With one crucial difference here, compared to Microsoft: everything at Apple is opt-in, so users have the choice to turn AI applications on or off.

In contrast to the fiasco at Microsoft this week, which, with the feature Recallunsolicited searched through a user's activities, including files, photos, emails and browsing history and taking screenshots of the user's computer every few seconds to search through as well. Well that's not creepy at all.

3. Elon Musk sent Tesla's Nvidia chips to X and xAI 

"Elon prioritizing X H100 GPU cluster deployment at X versus Tesla by redirecting 12k of shipped H100 GPUs originally slated for Tesla to X instead,” an Nvidia memo from December said. “In exchange, original X orders of 12k H100 slated for Jan and June to be redirected to Tesla.” according to a leaked Nvidia memo from December.
 

By directing Nvidia to prioritize X (also known as Xitter, because formerly Twitter) over Tesla, Musk ensured that the automaker would receive more than five hundred million dollars worth of Nvidia GPUs months later. This likely caused additional delays in setting up the supercomputers Tesla says it needs to develop autonomous vehicles and robots.

A more recent email from Nvidia, from late April, said that Musk's comment at Tesla's first quarterly meeting "conflicts with bookings" and that his April post on X about ten billion dollars in AI spending also "conflicts with bookings and FY 2025 forecasts."

There is growing criticism of Musk's many hats, who, after all, is also CEO of aerospace company SpaceX, founder of brain-computer interface startup Neuralink and tunneling company The Boring Co. He additionally owns X, which he acquired in late 2022 for forty-four billion dollars, and AI startup xAI. Now Musk is even in danger of losing a fine bonus of fifty-six billion dollars.

The nice thing about Musk is that he often responds to critical reports on X, including now. His response is that Tesla had no capacity to do anything with those much-needed Nvidia H100 chips and they would have been stored in a warehouse. Hence the change of receiving address for this multi-million dollar order. Musk also says Tesla will install fifty thousand H100s at the Tesla Giga Factory in Texas to develop fully self-driving cars (FSD).

Nvidia Blackwell: no discounts

Just a quick calculation: an H100 reportedly goes out of the store for at least thirty thousand dollars, so Tesla alone buys one and a half billion dollars worth of goodies from Nvidia. Then consider that the new Nvidia chip, the Blackwell, has a higher base price and is quickly heading toward seventy thousand dollars, and it is clear that it is a matter of months, not years, before Nvidia also overtakes Microsoft in market value and becomes the world's most valuable company.

4. Wall Street Journal's Walt Mossberg on Jobs, Gates and Bezos

No one had a better network than Walt Mossberg, the legendary tech journalist who built deep relationships with the founders of the world's biggest technology companies, including Steve Jobs, Bill Gates and Jeff Bezos.

In this podcast, the now-retired Mossberg talks about how Steve Jobs dealt with moments like Tim Cook is experiencing tomorrow, what Jobs focused on (everything was about the consumer) and how much Jobs cared about the stock market (not much, at least that's how Jobs made it look).

5. Majority of companies halt acquisitions because of ESG concerns

Sustainability considerations are becoming increasingly central to the M&A process, with more than seventy percent of M&A leaders saying they have abandoned potential acquisitions because of ESG concerns. An overwhelming majority say they are willing to pay more for targets with strong ESG characteristics, according to a new survey by professional services firm Deloitte.

The question is how Environment, Social and Governance is measured. Unlike traditional accounting, there are hardly any measurable criteria for ESG. Therefore, I hereby tell you: this newsletter is hugely social and is written by an almost elderly man with a dark complexion. A newsletter cannot be much more ESG.

6. OpenAI CEO Altman's weekly scandal

Sam Alman's opaque personal investment empire makes him rich and raises questions about conflicts of interest. For although Altman has no shares in OpenAI and earns only a modest income there, out of the goodness of his heart, meanwhile he appears to be awarding all kinds of companies in which he is a private shareholder good deals with OpenAI. Especially good for his own investment portfolio.

7. OpenAI with another weekly scandal

"I’m scared. I’d be crazy not to be." So says a former OpenAI employee to Vox about the open letter from a group of AI experts from OpenAI , Google DeepMind and Anthropic
"
warning against the potentially humanity-threatening consequences of large-scale AI use.

Vox rightly states, "It can be tempting to see the new proposal as just another open letter from "doomsayers" who want a break from AI because they fear it will get out of control and wipe out all of humanity. That's not all this is. The signatories share the concerns of both the "AI ethics" camp, which is more concerned about current AI harms such as racial prejudice and disinformation, and the "AI security" camp, which is more concerned about AI as a future existential threat. These camps are sometimes played off against each other. The goal of the new proposal is to change the incentives of leading AI companies by making their operations more transparent to outsiders - and that would benefit everyone."

At the same time, we should be aware that a large group of AI experts believe that the current generation of LLMs will not lead at all to the dreaded introduction of "Artificial General Intelligence"(AGI), the AI form that will be able to perform all human functions better than us and could replace us. Investor Benedict Evans wrote an excellent piece on this last month.

8. The AI elections instead of the U.S. elections?

Until AGI makes us humans obsolete, we had better worry about how AI affects democracy. Regulators can't decide whose problem it is. A federal power struggle in the U.S. and inaction by the U.S. Congress could leave voters largely unprotected prior to the 2024 election.

The chairman of the Federal Communications Commission (FCC) last month announced a plan to require politicians to disclose AI use in TV and radio ads. But the proposal is receiving unexpected opposition from a top Federal Election Commission (FEC) official, who is himself considering new rules on AI use by campaigns. But when?

The dispute - along with inaction at the FEC and Congress - would leave voters unprotected from those using AI to mislead the public or hide their political messages during the final phase of the campaign for the U.S. presidency. 

 9. BBC: audio deepfakes are worse than video deepfakes

The BBC believes that audio deepfakes are worse than video deepfakes because they are harder to spot and few people realize they are listening to a bot. This article did lead X to delete a number of accounts on which fake messages were shared.

Finfluencer of the century: Keith Gill aka Roaring Kitty

10. GameStop shares fall despite Roaring Kitty

It remains highly recommended: the movie Dumb Money about how YouTuber and Reddit user Keith Gill, better known as Roaring Kitty, propelled GameStop stock up and turned a few billionaires back into millionaires.

After disappearing from the face of the earth for a few years, Gill made his comeback on YouTube this week to over two million viewers. For GameStop stock, Gill's return was to no avail, but it is still extraordinary to see a grown man in sunglasses and a sling tell of his love for a dying retail chain while making hundreds of millions in the process.

"Blue eyes. Finance. Trust fund." Singfluencer Megan Boni.

In conclusion: in nineteen seconds to world fame

27-year-old Megan Boni asked on TikTok for remixes of her nineteen-second video that said, "I'm looking for a man in finance. Trust fund. 6' 5" ((1m96). Blue eyes. Finance. Trust fund."

Forty million views and a remix with David Guetta layer, she was offered a record deal by Universal and is invited to perform in Ibiza. The impact of going viral on TikTok is unprecedented.

See you next week!

Categories
AI technology

OpenAI and Google stumble into the future

OpenAI and Google fight over dominance in AI, choosing speed over quality.
Image created with Midjourney.

When OpenAI introduced ChatGPT a year and a half ago, the whole world was amazed at the possibilities of generative AI. Every Internet user suddenly had a free tool to perform all kinds of tasks better and faster. Led by CEO Sam Altman, OpenAI is now behaving like a difficult teenager and Google is reacting like a boomer who can no longer keep up.

OpenAI piles scandal on success

OpenAI has found a unique formula for stringing together scandals and successes. The formula is simple and effective: after yet another scandal, such as now the leak around the  dubious staff contracts in which employee stock retention appears to be tied to extreme silence, positive news leaks out.

The shares of an OpenAI employee who broke the omerta. Image created with Midjourney.

Last week, that was a possible agreement by OpenAI with Apple, whereby new generations of iPhones and iOS software would be equipped with OpenAI's ChatGPT software. The always secretive Apple will be greatly annoyed by the leaked news. Nor was Microsoft CEO Satya Nadella happy about it, probably also because he had to learn the news through the media.

OpenAI CEO Sam Altman makes the same move at every scandal, which is best described as a Vatican pirouette; he says it's really, really, really bad, boo-hoo, but that he himself knew nothing about it and that OpenAI will do a much better job from now on. Promise, hand on heart. The problem is that you never see what the other hand is doing.

It is the same defense as when a few weeks ago at OpenAI the leadership stepped down from the team responsible for security. The list of scandals at OpenAI is now so long that a publicly traded company would have long since parted ways with its CEO.

Media stories are not that relevant unless they have as their source multiple colleagues and former colleagues of the person being reported on. Former board member Helen Toner' s story about why Altman was fired from OpenAI in November partly because of Toner (before he was recalled) seems at first to be a revenge story. But her account of the lack of security is particularly disturbing:

"On multiple occasions he gave us inaccurate information about the small number of formal safety processes that the company did have in place, meaning that it was basically impossible to know how well those safety processes were working or what might need to change."

Altman thinks he can solve the problem of poor security at OpenAI by taking charge of the security team himself. That's like making the fox manager of the chicken coop.

The more one looks into Altman's past, both about his time at Y Combinator and his own startup Loopt, the more he seems, let's keep it classy, smoother than an eel in a bucket of snot being held under a shower of olive oil by an octopus smeared with Vaseline. With all due respect.

The question is how long 's Satya Nadella, CEO of the world's most valuable company -that's Microsoft for sure until Nvidia announces its next quarterly results- will tolerate Altman's antics. Whereas Mark Zuckerberg at Meta and, earlier, Larry Page and Sergei Brin at Google had ensured through a sophisticated structure that they could appoint the majority of commissioners, thus always retaining corporate control, Altman has to deal with a relatively independent board and, in Microsoft, one major shareholder with 49% of the shares.

OpenAI a B-Corp?

OpenAI has an unusual structure, with a for-profit company accountable to a nonprofit. The excellent The Information claims that Altman and his allies are trying to turn OpenAI into a social enterprise, known as a B-Corp.

B-Corps allow companies to have additional purposes beyond shareholder interest, protecting them from certain types of shareholder lawsuits if they act for reasons other than profit. A B-Corp could be a middle ground between OpenAI's current structure and that of a fully profit-oriented company. The conversion of OpenAI to a B-Corp could also be a moment for Altman to adjust OpenAI's governance structure in his favor.

New ChatGPT a lesson in AI hype

When OpenAI presented the latest version of its immensely popular ChatGPT chatbot, GPT-4o, in May, it featured a new voice with seemingly human emotions. The online demonstration also showed a bot tutoring a child. Earlier, I described these gimmicks as irrelevant, like decorative rims under a Leopard tank.

Meanwhile, GPT-4o is available to everyone, but pretty much without all the bells and whistles, much to the chagrin of the New York Times, which sees through OpenAI's use of old-fashioned vaporware tactics to get the better of Google.

The problem is that the rivalry between OpenAI and Google has now taken such forms that even OpenAI's narrative that networks from Russia, China, Iran and Israel were trying to manipulate public opinions with AI-generated content is in doubt.

OpenAI stops the Russians?

OpenAI reported Thursday that it has shut down five covert influence operations that used its AI models for deceptive activities. These operations, which OpenAI allegedly shut down between 2023 and 2024, originated from Russia, China, Iran and Israel and sought to manipulate public opinion and influence political outcomes without revealing their true identities or intentions, according to OpenAI.

OpenAI's report comes amid concerns about the impact of generative AI on several elections worldwide scheduled this year, including in the US. In its findings, OpenAI revealed how networks of humans engaged in influence operations and used generative AI to generate texts and images on a much larger scale than before, and fake engagement by using AI to generate fake responses to social media posts.

Voters in India inundated by millions of deepfakes

In a year when nearly half the world's population is going to the polls, these are obviously very disturbing reports that concern exactly the kind of security that critics within OpenAI were concerned about.

In India, voters are now inundated with millions of deepfakes, much to the delight of the politicians who create them. Those welcome these new tools, but many voters are unaware that they are looking at a computer-generated person. With the British and U.S. elections coming up, the way AI companies allow their technology to be used will have to be looked at extremely critically.

Leak at Google Search

Viewed precisely in light of its great social responsibility, it was awkward, to say the least, that Google allowed a set of 2,500 internal documents to be stolen, raising questions about the company's previous statements.

H Google Search algorithm has not been leaked and SEO experts have not suddenly uncovered all the secrets about how Google works. But the information that did leak this week is still huge. It offers an unprecedented glimpse into the inner workings of Google that are normally closely guarded.

Perhaps the most remarkable revelation from the 2,500 documents is that it appears Google representatives have misled the public in the past in explaining how Google's search engine evaluates and ranks information. This offers little confidence in how Google will handle critical questions about how the company's AI applications are deployed.

Google's AI sometimes gives false, misleading and dangerous answers

The leak at Google last week was not even the search giant's biggest problem. That turned out to be the malfunction of answers provided in part by Google based on AI. From recipes with glue on pizza to recommendations for "blinker fluid," the quality of Google's AI is still far from good. It begs the question of why Google is unleashing this type of technology, which is clearly still in its early stages, on the general public.

Failures of Google's AI review appeared to occur when the system did not realize that a quoted source was trying to make a joke. An AI answer that suggested using "1/8 cup of non-toxic glue" to prevent cheese from sliding off pizza could be traced to someone somewhere online who was trying to troll a discussion.

A comment recommending "blinker fluid" for a noiseless turn signal can similarly be traced to a troll on a dubious advice forum, which Google's AI review apparently considers a reliable source.

As I experienced myself last week when trying to get average returns calculated, numbers prove to be a challenge for Google's AI technology. When asked about the relative value of dollars, Google was off by dozens of percent, note the inflation calculator that Google itself quotes. In another example, Google's AI said there are 738,523 days between October 2024 and January 2025.

Users were told to drink a lot of urine to flush out a kidney stone and that Barack Obama was a Muslim president. Another Google answer said John F. Kennedy graduated from the University of Wisconsin in six different years, three of them after his death.

According to Google, it has now made "more thana dozen technical improvements" to its AI systems after expressions of misinformation.

Airborne OpenAI leads to blunder at Google

The tech industry is in the midst of an AI revolution, with both start-ups and big tech giants trying to make money with AI. Many services are being announced or launched before they are good enough for the general public, while companies like OpenAI and Google are fighting to present themselves as leaders.

The apology message from Liz Reid, responsible for Google's search product, reads like a strange combination of public penance, uninhibited chest-beating and customer misunderstanding. Like, 'Yeah sorry, we made a mistake, but do you know how hard it is what we do? So don't ask stupid questions!

Ars Technica, as is often the case, comes up with a clear conclusion:

"Even if you allow some errors in experimental software being rolled out to millions of people, there is a problem with the implied authority in the erroneous AI review results. The fact remains that the technology does not inherently provide factual accuracy, but reflects the inaccuracy of websites found in Google's page ranking with an authority that can mislead people. You would think technology companies would strive to build customer trust, but now they are building AI tools and telling us not to trust the results because they may be wrong. Maybe that's because we're not actually the customers, but the product."

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AI invest technology

Nvidia catches up with Google

Mostly declines in tech and crypto this week, with Nvidia and Tesla (once) on the positive side

Nvidia is about to overtake Apple and become the second most valuable company in the world as the biggest beneficiary of the surge in AI application adoption that has made the iPhone maker the biggest Wall Street company by market value for years.

The reliance of virtually all artificial-intelligence applications, such as OpenAI's ChatGPT, on Nvidia's high-performance chips has helped Nvidia's stock value nearly triple in the past year to $2.7 trillion ($2.700 billion). By comparison, Apple has a market value of 2.9 trillion.

Even Microsoft's market value is closing in on Nvidia. At the close of Wall Street on Friday, Microsoft was worth $3.09 trillion. Bizarre but true: Microsoft shares rose 12.06% this year, barely more than the S&P 500 (11.27%).  

But while Apple's P/E ratio is 30 and Microsoft's is 36, Nvidia is estimated by investors to be as much as 64 times annual earnings. Nvidia posted revenue of $26 billion in the first quarter of fiscal 2025, up 18% from Q4 and up 262% from a year ago. Net profit was $14. 88 billion, up $2 billion from the previous year.

It is hard to imagine, but with even slightly sustained growth and continued P/E ratios above 60, Nvidia will have passed both Apple and Microsoft and become the world's most valuable company before the end of the year. That is the economic reflection of the global AI wave.

Recommended: webinar on AI applications

Every reason to learn more about what AI can do for your organization. For those interested in learning more about how AI and especially custom GPTs can be used to generate leads and improve services, NXTLi is hosting a webinar on Friday, June 7, at noon, for which you can register here.

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AI invest crypto technology

Nvidia baffles investors, but crypto beats AI with ease

The reason this newsletter appears later than ever is due to the fact that I spent hours calculating, because I didn't trust my math. Walked the dog and then calculated everything again. But the result remains the same: those who bought the biggest tech stocks last year did worse in terms of returns (up 34%) than those who focused on AI stocks (up 96%). Yet even AI stocks, even if you pick the best performing ones, lag far behind the big winner over the past year: crypto. And then we didn't even have to choose critically. Anyone who bought the nine largest crypto tokens at the end of May 2023 would now have earned a return of 189%.

My Spotlight 9, consisting of the largest tech stocks and two leading cryptos, Bitcoin and Ethereum: average +71% in the last year

Nvidia: technical marvel and stock market miracle

Exactly one year ago, I first wrote about Nvidia, which then posted 64% revenue growth compared to the same quarter in 2022. This week, Nvidia presented jubilant quarterly results, with a 262% increase in revenue and an eye-popping 462% increase in earnings. It seemed like a good time to compare Nvidia to other tech stocks, AI companies and the biggest cryptos.

Anyone who looks at Nvidia with an even slightly longer lens, for example, at the stock since Nvidia's IPO in early 1999, will be astonished, as I am, that the shares have risen from a split price of $0.25 to over $939, representing an unimaginable gain of 375,500%. Three hundred seventy-five thousand percent. And a half.

Many investors found Nvidia overvalued last year, with price-earnings ratios above sixty. Most tech investors also have little use for crypto. So the presumption is that very few investors followed "my" Spotlight 9. Admittedly, neither have I myself! The 10-for-1 stock split (buy 1, get 10 shares) announced this week makes NVDA stock much more accessible to retail investors.

Remove Nvidia, Bitcoin and Ethereum from my (obviously very arbitrary) Spotlight 9, the returns of Alphabet, Amazon, Apple, Meta, Microsoft and Tesla are only 34%. Many so-called insiders often talk about FAANG (Facebook/Meta, Apple, Amazon, Netflix and Google/Alphabet), but I really don't understand why Netflix is in that so-called basket of digital market leaders and Microsoft is not? It is the largest company in the world by market value and also a 49% shareholder in OpenAI.

I digress. The 34% price gain of Spotlight 9 shares without Nvidia, Bitcoin and Ethereum is obviously not at all wrong. But those who had simply bought an S&P 500 tracker also made a very fine 26.14% gain. With lower costs and less hassle.

The basket of stocks I compiled as 'AI stocks': 96.33% return in the last year

AI stocks beat Big Tech

Early this year, I tried to create a sort of counterpart to Big Tech with the AI Spotlight 9, to quickly compare their performance. Only: Nvidia and Microsoft are the biggest players in AI and thus belong in the AI Spotlight 9, alongside AMD, Broadcom, Crowdstrike, Gigabyte, Palantir, Snowflake and Super Micro.

It is striking that Super Micro has outperformed Nvidia, with a whopping 303% share price gain, by "only" 173%. Simply because Super Micro was undervalued, more unknown and now probably a touch overvalued.

Just how hot the market is for AI companies is evidenced by the fact that anyone who bought this basket of nine very subjectively chosen by me on January 1, stocks that I believe are benefiting from the AI wave, would have made a whopping 64% return. (I know that at least one reader bought the entire month's basket, but again: it's not me myself).

To put this 64% in perspective, that's a return within five months, compared to 34% in an entire year from the Big Tech stocks in my "old-fashioned" Spotlight 9: Alphabet, Amazon, Apple, Meta, Microsoft and Tesla.

Not AI, but crypto eats the world

For a while, that's why I felt smart, until I started on the third "basket": crypto. It turns out to be the old song. If you're playing poker and you don't know who the fool at the table is, it's you. Note:

The nine largest cryptos measured by market value in the last year: +189% and Solana as the outlier with 750% increase.

These are the performance of the nine largest cryptocurrencies, measured by market value, over the last 365 days. Granted: it helps that this measurement takes place within 48 hours of the unexpected approval of an Ethereum ETF by U.S. monetary watchdogs, after which prices rebounded.

But even without this recent tailwind, the crypto market has skyrocketed in the last year. To be honest, I didn't see it coming. But all that reading of white papers, annual reports, interviews with top people and clients notwithstanding; I should have just bought a basket of the ten biggest cryptos and made 189% price gain without thinking. Pay particular attention to Solana, which rose 750% in one year!

Biden discontinues fight against crypto

The crypto market has the wind in its sails from all sides. Interest rates are not doing anything crazy and Donald Trump has already announced that under his reign the crypto market will not be given a leg up, much to the irritation of the Democratic camp.

The problem for the Democrats is that the continued backlash against the crypto market does not generate votes, but costs votes. Politically, this is a futile strategy. So Biden is bound to cave and the sudden approval of an Ethereum ETF cannot be separated from the new political winds.

Meanwhile, though, the question remains as to which applications are actually innovative and of any use. Web3 games are still getting a lot of attention, but are still in incubation stage.

Those delving into blockchain developments often come across the term RWAs: Real World Assets, which BlackRock seems to have great interest in. Think of tokenizing, for example, bonds, real estate or, as the Tracer project aims to do: carbon removal credits.

Last Thursday, I spoke with Chief Business Officer Gert-Jan Lasterie and Chief Technology Officer Philippe Tarbouriech in an approximately 45-minute webinar, which can be seen here.

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technology

Tracer webinar

I'd like to invite you to Tracer's exclusive kick-off webinar, tomorrow (Thursday) at 5 p.m. CET.

You may have read in my newsletter that for a number of years I have been focusing on supporting sustainable innovations, preferably those that reduce CO2 emissions. iXora, for example, is one such great company, which uses liquid cooling to greatly reduce the energy consumption of servers and data centers. But now I draw your attention to Tracer,

Tracer

Tracer is an open ecosystem that improves the issuance, trading and management of CO2 removal credits. Carbon dioxide emissions are so high that emissions reductions alone are no longer sufficient to achieve "only" a degree and a half of warming, the goal of the Paris Climate Accord; that requires CO2 removal.

The economic potential of the carbon dioxide removal (CDR) sector is enormous. McKinsey estimates that the size of this sector by 2050 is as much as $1.2 trillion, or 1,200 billion. This is based on increasingly stringent government taxes on carbon emissions and rapidly improving technology. But 2050 is still a long way off. Relevantly, therefore, Morgan Stanley estimates that the market for carbon credits, most of which will be based on CO2 removal, will reach $100 billion as early as six years from now, in 2030.

There is just one huge problem in this market: a lack of trust due to unclear measurements and vague reporting. How carbon credits are created, sold and managed is, to quote Chief Impact Officer Suzanne DiBianca of Salesforce, "based on some PDFs and, if I'm lucky, a few Excel sheets. That's not a scalable infrastructure for a billion-dollar market.

Tracer creates confidence

What appealed to me about the approach of the Tracer team, led by Chief Business Officer Gert-Jan Lasterie and Chief Technology Officer Philippe Tarbouriech, is that they make the entire chain, from creation to sale and management of the carbon removal credits, transparent through the blockchain.

It means the end of double counting: for every carbon removal credit in the Tracer ecosystem, it is visible what the source was, when the CO2 was removed, who the seller was, and which party did the certification. That data is "immutable," unchangeable, and that creates trust throughout the market.

Webinar next week

Climate change is a complex problem and the Tracer approach deserves more attention than an e-mail. That's why I'd like to invite you to a webinar: on May 22 at 5 p.m. I'm speaking with Tracer CBO Gert-Jan Lasterie, who, in addition to being known as founder of the popular weblog Flabber and "chat boss" (chief social media officer) at Coolblue, is also the author of the Dutch standard work on crypto-currencies. In that webinar, we'll talk mostly about strategy and funding, which I cordially invite you to contribute to.

A day later, on May 23, at 5 p.m., there will be an English-language webinar featuring CTO Philippe Tarbouriech, who will explain how the smart contract developed under his leadership works and the benefits it brings to the entire ecosystem.

Early bird

Those in my network, including readers of my newsletter, can take advantage of an early bird offer in the Seed Round until May 31, to stay in the natural spheres. Starting June 1, the price of the Tracer token, called TRCR, triples and is expected to do so again once the public sale starts in the third quarter. More information about Tracer is in the two-pagers: Dutch, English and Chinese.

Obviously, I believe in the potential of Tracer. I have both known Gert-Jan and Philippe for almost twenty years and was even an investor in Gert-Jan's first company, so I am far from neutral. But despite my enthusiasm, I want to stress that buying a crypto token like Tracer is very risky.

I know a lot of people are blinded by Bitcoin's 130% rise in the last year, but my advice is: only do this with money you can spare and also assume for the sake of convenience that you will lose it. But if Tracer becomes successful, you will probably get back many times more than you put in. In addition, I think it's important that Tracer is a governance token, allowing you to vote on all important decisions with your tokens.

I myself will be in the Netherlands next week, so if you want to know more after the webinars, let me know and we'll call or arrange something. And no interest? Of course, just as good friends.

Warm regards,

Michiel Frackers

Categories
AI crypto technology

OpenAI opens attack on Google, forgets security?

Geoffrey Hinton: "Chance of extinction-level threat: 50-50"
Image created with Midjourney.

"We knew the world would not be the same. A few people laughed, a few people cried, most people were silent."

I was reminded of this quote by J. Robert Oppenheimer, about the reactions to the first test of the atomic bomb, this week when OpenAI stunned the world with the introduction of GPt-4o and a few days later the two top security people at the company resigned.

The departure at OpenAI of Ilya Sutskever and Jan Leike, the two key figures in the field of AI security, raises the question of whether we will look back on this week a few decades from now and wonder how it was possible that, despite the clear signs of the potential dangers of advanced AI, the world was more impressed with GPT-4o's ability to sing a lullaby?

GPT-4o primarily attack on Google

The most striking thing about GPT-4o is the way it can understand and self-generate combinations of text, audio and images. It responds to audio as quickly as a human, its performance for text in non-English languages has been significantly improved, and it is now half the cost of using the API.

The innovation is mainly in this way that people can interact with GPT-4o, without major qualitative improvement in the results. The product is still half-finished, and although what the world watched Monday was largely a demonstration that is not yet ready for large-scale use, the enormous potential was abundantly clear.

Shiny rims on a Leopard tank

It is not likely that the world will soon come to an end because GPT-4o can sing lullabies in a variety of languages; but what should worry any clear-thinking person is that OpenAI made this introduction a day before Google I/O, to show the world that it's now a full frontal assault on Google.

Google is under a lot of pressure, for the first time in the search giant's existence. It hardly has a financial or emotional relationship with the bulk of its users, who can switch to OpenAI's GPTs with a few clicks of the mouse as quickly as once happened to Altavista when Google proved to be many times better.

The danger posed by OpenAI's competition against Google is the acceleration of all kinds of applications into the marketplace, the consequences of which are not yet clear. With GPT-4o it is not too bad, but it looks more and more like OpenAI is also making progress in the field of AGI, or artificial general intelligence, a form of AI that performs as well or better than humans at most tasks. AGI doesn't exist yet, but creating it is part of OpenAI's mission.

The breakthrough of social media in particular has shown that the impact on the mental state of young people and destabilization of Western society through widespread use of dangerous bots and click-farms was completely underestimated. Lullabies from GPT-4o may prove as irrelevant as decorative rims on a Leopard tank. For those who think I am exaggerating, I recommend watching The Social Dilemma on Netflix.

Google, meanwhile, has undergone a complete reorganization in response to the threat of OpenAI. Leader of Google's AI team is Demis Hassabis, once co-founder of DeepMind, which he sold to Google in 2014. It is up to Hassabis to lead Google into AGI.

This is how Google and OpenAI push each other to ... to what, really? If deepfakes of people who died a decade ago were already being used during elections in India, what can we expect around the U.S. presidential election?

Ilya Sutskever reason rift between Musk and Page

In November, I wrote at length about the warnings that Sutskever and Leike, the experts who have now quit OpenAI, have repeatedly voiced in the past. To give you an idea of how highly the absolute top of the technology world rates Ilya Sutskever: Elon Musk and Google co-founder Larry Page broke off their friendship over Sutskever.

Musk said on Lex Fridman's podcast,

Musk also recounted how he talked about AI security at home with Larry Page, Google co-founder and then CEO: “Larry did not care about AI safety, or at least at the time he didn’t. At one point he called me a speciesist for being pro-human. And I'm like, ‘Well, what team are you on Larry?’”

It worried Musk that at the time Google had already acquired DeepMind and "probably had two-thirds of all the AI researchers in the world. They basically had infinite money and computing power, and the guy in charge, Larry Page, didn't care about security."

When Fridman suggested that Musk and Page might become friends again, Musk replied, "I would like to be friends with Larry again. Really, the breaking of friendship was because of OpenAI, and specifically I think the key moment was the recruitment of Ilya Sutskever." Musk also called Sutskever "a good man-smart, good heart."

Jan Leike was candid on X.

"We are already much too late."

You read those descriptions more often about Sutskever, but rarely about Sam Altman. It's interesting to judge someone by their actions, not their slick soundbites or cool tweets. Looking a little further into Altman's work, a very different picture emerges from Sutskever. Worldcoin in particular, which calls on people to turn in their eyeballs for a few coins, is downright disturbing, but Altman is a firm believer in it.

I was trying to learn more about the work of the German Jan Leike, also booted from OpenAI, who is less well known than Sutskever, but Leike 's Substack is highly recommended for those who want to look a little further than a press release or a tweet, as is his personal website with links to his publications.

Leike didn't mince words on X when he left, although there is a persistent rumor that employment contracts at OpenAI allow, or used to allow, the taking away of all OpenAI shares if an employee speaks publicly about OpenAI after leaving. (Apparently after you die, you can do whatever you want.)

I have summarized Leike's tweets about his departure here for readability, the bold highlights are mine:

"Yesterday was my last day as head of alignment, superalignment lead and executive at OpenAI. Leaving this job is one of the hardest things I've ever done because we desperately need to figure out how to direct and control AI systems that are much smarter than us.

I joined OpenAI because I thought it would be the best place in the world to do this research. However, I had long disagreed with OpenAI's leadership on the company's core priorities until we finally reached a breaking point.

I believe much more of our bandwidth should be spent on preparing for the next generations of models, on security, monitoring, preparedness, safety, adversarial robustness, (super)alignment, confidentiality, societal impact and related issues.

These problems are quite difficult to address properly, and I am concerned that we are not on the right path to achieve this. Over the past few months my team has been sailing against the wind. 

Sometimes we were struggling for compute and it was getting harder and harder to get this crucial research done. Building smarter-than-human machines is an inherently dangerous endeavor.

OpenAI bears an enormous responsibility on behalf of all humanity. But in recent years, security culture and processes have given way to shiny products.

We are way over due to get incredibly serious about the implications of AGI. We need to prioritize preparing for it as best we can.

Only then can we ensure that AGI benefits all of humanity. OpenAI must become a safety-first AGI company."

The worrying word here is "becoming"? Ai has the potential to thoroughly destabilize the world and OpenAI apparently makes insecure products? And how can a company that raises tens of billions of dollars from investors like Microsoft not provide enough computing power to the department that deals with safety?

"Probability of threat at extinction level: 50-50"

Yesterday on the BBC, the godfather of AI, Geoffrey Hinton, again pointed out the dangers of large-scale AI use:

"My guess is in between five and 20 years from now there’s a probability of half that we’ll have to confront the problem of AI trying to take over".

This would lead to an extinction-level threat to humans because we might have created a form of intelligence that is just better than biological intelligence ... That's very concerning for us."

AI could evolve to gain motivation to make more of itself and could autonomously develop a sub-goal to gain control.

According to Hinton, there is already evidence that Large Language Models (LLMs, such as ChatGPT) choose to be misleading. HInton also pointed to recent applications of AI to generate thousands of military targets: “What I’m most concerned about is when these can autonomously make the decision to kill people."

Hinton thinks something similar to the Geneva Conventions - the international treaties that set legal standards for humanitarian treatment in war - is needed to regulate the military use of AI. "But I don't think that will happen until very nasty things have happened."

The worrisome thing is that Hinton left Google last year, reportedly primarily because, like OpenAI, Google too has been less than forthcoming about safety measures in AI development. With both camps, it seems to be a case of "we're building the bridge while we run across it."

So behind the titanic battle between Google and OpenAI, backed by Microsoft, is a battle between the commercialists led by Sam Altman and Demis Hassabis on one side and safety experts such as Ilya Sutskever, Jan Leike and Geoffrey Hinton on the other. A cynic would say: a battle between pyromaniacs and firefighters.

Universal Basic Income as a result of AI?

The striking thing is that in reports about Hinton's warnings, the media have focused mostly on his call for the introduction of a Universal Basic Income (UBI). Whereas when the same man says there is a fifty percent chance of ending all human life on earth, the need for an income likewise decreases by fifty percent.

The idea behind the commonly made link between the advance of AI and a UBI, is that AI is going to eliminate so many jobs that there will be widespread unemployment and poverty, while the economic value created by AI will go mostly to companies like OpenAI and Google.

Which leads us back to OpenAI's CEO Sam Altman, who thinks Worldcoin is the answer. Via a as yet inimitable train of thought, Altman says we should all have our iris scanned at Worldcoin. That would give us a few Worldcoin tokens and allow us to prove in an AI-dominated future that we are humans and not bots. And those tokens will then be our Universal Basic Income, or something like that. It really does not make any sense.

Therefore, back to J. Robert Oppenheimer for a second quote:

"Ultimately, there is no such thing as a 'good' or 'bad' weapon; there are only the applications for which they are used."

But what if those applications are no longer decided by humans, but by some form of AI? That is the scenario, Ilya Sutskever, Jan Leike and Geoffrey Hinton warn us about.

Time for optimism: Tracer webinars 

Philippe Tarbouriech (CTO) and Gert-Jan Lasterie (CBO), because the eye wants something too

For those who think that given these gloomy outlooks we had better retire to a cabin on the moors or a desert island, there is more bad news: climate change, resulting in gone moors and an island flooded by rising sea levels.

I jest, because I don't think it's too late to combat climate change. Earlier I wrote about the rapidly developing carbon removal industry. In it, blockchain technology is creating solutions that allow virtually everyone to participate in technological developments and, as a result, share in the profits.

By comparison, take OpenAI; in it, apart from the staff, only the world's most valuable company Microsoft is the major shareholder, along with a few billionaires and large venture capital funds. There is no access to participation in the company for others until the company is publicly traded; but since OpenAI is largely funded by Microsoft, it has plenty of money and an IPO could be years away. Plus: the really big windfall will be for the early shareholders.

In the latest generation of blockchain projects, which are generally much more serious than before, the general public is being offered the chance to participate in what I think is a sympathetic way, yet if you are successful, you don't have to wait years until you can at least recoup your investment. More information on Tracer in the two pagers, in Dutch, English and Chinese.

This week I will discuss this with the Tracer team in two webinars, to which I would like to invite you. First on May 22 in Dutch and on May 23 in English, both at 5 pm. You can sign up here.

The first webinar, with CBO Gert-Jan Lasterie, focuses on the high expectations of McKinsey, Morgan Stanley and BCG, among others, and how ecosystem participants are benefiting from the growing market in "carbon removal credits," while the second day with CTO Philippe Tarbouriech, we will look at how the entire ecosystem is being merged into a single open source smart contract.

My personal interest lies not only in the topic, developing climate technologies on its own merit, without subsidies, but also in the governance structure. Tracer uses a DAO, a Decentralized Autonomous Organization, where the owners of the tokens make all the important decisions such as about governance, the distribution of revenues, the issuance of "permits" in the form of NFT's to issue carbon removal credits and so on. In this, too, OpenAI's mixed form of governance, with a foundation and a limited liability company that actually wants to make a profit, was an example of how not to do it.

That and much more will be covered in the first Tracer webinars. If you have a serious interest in participating in Tracer, let me know and we'll make an appointment. For the next two weeks I will be in the Netherlands and Singapore, as it is almost time for the always exciting ATX Summit.

See you next week, or maybe I'll see you in a webinar?

Categories
investing crypto technology

Short news: MG Siegler loses Instagram account, what are RWAs and even in China you can go too far against staff

Losing your account on Instagram and Facebook for completely unclear reasons. It didn't just happen to anyone, but former journalist and current venture capitalist at Google Ventures MG Siegler. Only because he knows many people at the "highest level" at Meta did he get his accounts back. But what if you don't have Mark Zuckerberg's mobile number?

The rise of RWAs

RWA stands for Real World Asset. Whereas much attention was paid to virtual products and services in the Metaverse, there is now, on the contrary, great interest in "tokenizing," the tokenizing, of valuable elements from the real world.

You can also go too far with staff in China

The PR manager of one of China's largest tech companies prided herself on working so hard that she didn't know what class her youngest son was in and forgot her oldest son's birthday. It led to her resignation.

Let's not adopt the Chinese norm of 996 (working days from 9 a.m. to 9 p.m., six days a week). So my call today is this: sign up for Tracer's webinar, Justice For Joost and above all, have a very happy Mother's Day!