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technology

Apple says sorry, Microsoft closes carbon megacontract

What's the reason an oompa loompa went off on Apple CEO Tim Cook?

Hugh Grant: 'The destruction of the human experience. Courtesyof Silicon Valley.'
Image created with Midjourney.

In the latest commercial for the iPad Pro, titled Crush, virtually every expression of human creativity is crushed by a huge vise until what remains is an iPad Pro that has survived the slaughter. A ridiculous idea in terms of content, and also an almost exact copy of a 2008 commercial for an LG cell phone. Apple imitating LG, the company actually called "Lucky Goldstar". How the mighty have fallen.

Since Crush debuted on Tuesday, Apple has been getting hammered daily in leading publications such as AdAge and Variety, but even the usually cautious BBC eagerly quoted actor Hugh Grant, who I adored in his role of Oompa Loompa in Wonka, responding to Apple CEO Tim Cook on X: 'The destruction of the human experience. Thanks to Silicon Valley.' A brief anthology of other headlines:

A crushing blow

Apple doesn't understand why you use technology

Apples also rot

Apple's 'Crush' ad is disgusting

Oops.

Afrojack versus Apple

Afrojack found it "maybe not such a good campaign. When the man, who parked a new Ferrari in the guardrail within an hour after picking up from the dealership and who fathered a daughter named Vegas with a contestant from a reality tv-show called The Golden Cage, when that man is concerned about your brand, we may speak of a crisis situation.

Apple has since announced it will no longer air the commercial and even apologized. A revealing report on how things could have gone so wrong at the company behind the most legendary TV commercial of all time, 1984's Superbowl commercial for the Macintosh, will surely appear at some point.

The Crush commercial is better backwards.

'Marketing is about values'

It has now been thirteen years since Steve Jobs passed away, and it's cheap to shout at every Apple mistake that it never would have happened under his leadership. But it is interesting to revisit this internal presentation Jobs made in 1997 just after his return to Apple. Introducing the campaign around the new slogan "Think Different," which was even grammatically incorrect, Jobs told the Apple employees:

"For me, marketing is all about values. The world is very complicated. It's a noisy world. We don't get many opportunities to make sure people remember us. No company gets that chance. That's why we have to be very clear about what we want them to know about us."

What impresses regardless of the content is that throughout the 15-minute presentation, Jobs never reads anything aloud, doesn't look at any screen or uses cheat sheets; the man lives this text, he means it. That's the only reason he can convey it so clearly. Even while wearing cargo shorts.

Apple was: help dissenters

The crux of the Crush commercial's failure lies in the fact that its creators seem to have forgotten Apple's values. Apple in the 1980s stood for the slogan "the power to be your best.Apple wanted to provide the tools that allowed people to be their best. So in 1997 it became "think different," an ode to people who think differently and follow their dreams.

In Crush, iconic symbols of creativity are literally crushed to introduce a new iPad, in a tragic unintentional metaphor for Apple's current identity crisis. The clumsy attempt to equate technological progress with the total destruction of artistic expression underscores how far Apple has strayed from its original mission.

Instead of unveiling revolutionary products, Apple is now focusing on licensing technologies such as OpenAI's ChatGPT. Such collaborations illustrate the shift from innovative leadership to reliance on external sources for innovation. The lack of appealing new products is the reason behind steadily declining sales. The Apple Vision Pro is beautiful, but a drop in the bucket in terms of sales.

It's high time Apple remembered the lines from its own Think Different TV commercial:

"Because the people who are crazy enough to think they can change the world, are the ones who do." 

Webinar on Tracer on May 22 and 23

Speaking of the kind of optimists who think they can make the world a better place: I've been getting a lot of questions about the blockchain project Tracer and how to participate in the emerging gigaton industry of CO2 removal, which I wrote about last week.

I share the amazement of many readers at the downright gigantic expectations expressed by firms like McKinsey, Morgan Stanley and Boston Consulting Group in their reports about the huge market of carbon removal.

The team at Tracer is therefore kindly hosting a webinar next week, especially for the readers of this newsletter, on the latest developments in carbon removal, how blockchain plays a role in it and how you can support this initiative. The webinar will be given in Dutch on May 22 and in English on May 23. Register for the obviously free webinar here.

On May 22, I talk with Gert-Jan Lasterie, Chief Business Officer of Tracer. While studying business administration, he started the weblog Flabber, which grew into a site with millions of visitors per month, partly due to successful series such as New Kids and Buitenbeeld. Lasterie sold Flabber to the American media conglomerate Vice, after which he headed social media at Coolblue with the lovely self-titled "chatty boss" and held various management positions at Telegraaf/Mediahuis.

In addition, Lasterie wrote the book "Bitcoin and other crypto currencies," which is considered the Dutch standard work on crypto investing. If only for the amusing subtitle: 'How you thought you were late getting into crypto but became more successful than people who didn't read this book.'

On May 23, in the English-language webinar, Chief Technology Officer of Tracer Philippe Tarbouriech joins us. Tarbouriech held technical positions at startups and large tech companies in Europe and the U.S., with his time as a Technology Fellow at Electronic Arts (EA) including working on the gaming classic SimCity. In a transition from virtual city builder to real life world savior, Tarbouriech has in recent years focused on blockchain applications such as the Carrot smart contract, which creates and tracks carbon removal tokens .

During the webinar, Lasterie and Tarbouriech will, of course, also discuss Tracer's funding and how you can still participate in the project during the seed round this month.

Microsoft signs largest ever contract for CO2 removal

The day after my last newsletter, which was devoted almost entirely to the carbon-removal industry (high word value in Scrabble), the New York Times published an article about it with the headline, 'Will there be a carbon market? A huge amount of work is being done to remove carbon from the atmosphere, but who is going to pay for it?'

Coincidence makes sense, to paraphrase Johan Cruijff, so it was nice that less than a day later Microsoft and Swedish energy company Stockholm Exergi announced a 10-year off-take agreement, under which Stockholm Exergi will supply Microsoft with more than three million tons of carbon removal certificates from its planned bioenergy plant with carbon capture and storage (BECCS) in Stockholm.

It is the largest carbon removal contract in history. 

In an effort to be not only carbon-neutral but even carbon-negative by 2030, Microsoft has in recent months announced a series of carbon removal agreements covering a wide range of technologies and approaches, including reforestation, direct air capture (DAC), ocean carbon removal and biochar-based projects.

On Thursday, Microsoft also announced that it will buy three million tons of removal credits in Brazil over a 15-year period. With this, the world's most valuable company gives a clear answer to the New York Times as to who will pay for carbon removal. No amounts were disclosed with either purchase, but I estimate that Microsoft is setting aside at least three billion dollars for these six million tons; an average of five hundred dollars per removal credit.

As if it were agreed work, the world's largest CO2 vacuum cleaner also opened in Iceland on Wednesday. Everything about Mammoth, from Climeworks, is impressive, as is seeping from the report CBS made. From nearly a thousand dollars per ton of CO2 removed, the price of removal credits produced by Mammoth should drop to less than three hundred dollars by 2030. 

Companies give sustainability higher priority

It is striking that while in the political arena many conservative parties are in power around the world, with lackadaisical policies on climate, it is precisely companies that are taking the lead on carbon removal. It seems as if companies better understand that in order to make annual sales and profits, it is quite convenient if there is still a livable planet thirty years from now. Politicians tend to view the world through a lense with a 4 year view, at most: until the next election.

The rosy forecasts from McKinsey, BCG and Morgan Stanley are obviously based on information coming directly from their clients' boardrooms. More than half of CEOs indicate that sustainability is a higher priority now than it was a year ago and that carbon removal is considered the top long-term strategic priority, according to a new survey by EY.

Categories
AI technology

Musk and Zuckerberg swap roles and BlackRock and Temasek invest in decarbonization

What conservative investors think climate technology investments look like.

Elon Musk had a fantastic week and Mark Zuckerberg saw two hundred billion in market cap evaporate as shareholders doubt his billion-dollar investments in AI. Costs are high and potential returns still completely unclear as Meta AI, powered by their latest language model Llama 3, is offered free and open source.

The sentiment that returns are unclear was also often heard about investments in climate tech, yet the world's largest investor BlackRock and Singaporean state investment fund Temasek are investing heavily in this crucial sector through a new fund: Decarbonization Partners.

Those considering investing in the rapidly developing sector of climate tech and decarbonization as well, I look forward to meeting you in May when I am in the Netherlands and Singapore. But first: the surprising week of Elon Musk and Mark Zuckerberg.

After 52 editions, here it is: Tesla is the best-scoring stock of the week. What happened?

Musk wins despite gas pedal glue - yes, glue

It was, as is often the case in the tech sector, a tale of two extremes this week: Tesla soared, while Meta plunged. This is especially notable because Tesla shares had slipped to $138 after reaching an all-time high of $409, while Meta was one of the biggest risers in the stock market over the last year. What happened?

After the recall of all Tesla Cybertrucks sold due to possibly glued gas pedals and unclearstories about robotaxis 
were received with deafening silence from the investor side, Tesla almost hid this sentence at the bottom of page ten of its quarterly report:

"We have updated our future vehicle line-up to accelerate the launch of new models ahead of our previously communicated start of production in the second half of 2025."

In other words, Tesla's long-awaited Model 2, the cheapest Tesla ever, which is supposed to be Tesla's version of the Volkswagen Golf, the car for the masses, comes to market earlier than expected. Promptly, TSLA shares rose 12%.

Meanwhile, Musk' s intended opponent in a cage fight between what would have been the two palest fighters in the history of martial arts, Meta's Mark Zuckerberg, had one of those moments when your confidence overrules your sanity.

Zuckerberg punished for candor

During Meta's quarterly earnings presentation, Zuckerberg let slip that it will take "a number of years" before investments in AI will translate into profits. Zuckerberg added truthfully that once Meta has found a revenue model, it will be very good at monetizing it.

Only nobody heard it anymore, much like when a party runs out of drinks and snacks, then the sound system breaks down but the host happily suggests that we all hold hands and sing together. Result: a 16% collapse in Meta's share price and a loss of two hundred billion dollars in market cap.

Meta lost as much as forty-five billion dollars since 2020 via its Reality Labs division on investments in smart glasses and not-yet-existing Metaverse business. No shareholder wants Zuckerberg to lose that kind of money on his investments in AI, while meanwhile the good ole' ad business is doing spectacularly well: also because Chinese discounters Temu and Shein advertise for billions via Facebook and Instagram, ad revenue rose 27% to over $35 billion in the first quarter.

Shareholders think about today, investors think about tomorrow

Shareholders would rather grab dividends than invest. Google owner Alphabet became worth two trillion dollars (two thousand billion) this week after it announced it would pay twenty cents per share in dividends and buy back its own shares for seventy billion dollars. This makes Alphabet the fourth most valuable company in the world after Microsoft, Apple and Nvidia.

This ignored the fact that Google's revenue growth, like Microsoft that presented outstanding quarterly numbers, was also driven by substantial growth (thirty percent) in cloud services, in which AI played a major role.

Yet Google, like all other tech companies, should be valued more on long-term vision and making the right choices in the process. Cloud services, with nine billion in revenue, are almost seven times smaller than ad revenue (62 billion), because for too long there was too little focus on cloud services and AI. Since then, Google has been playing catch-up.

Elon Musk is often ridiculed, sometimes rightly so, but anyone who looks a little longer at his activities has to admit that he possesses the rare combination of skills in being able to analyze the market correctly and subsequently position his own companies in them.

It is no coincidence that Musk, despite OpenAI's late start and dominance with ChatGPT and Google's huge competition with Gemini, managed to raise six billion dollars from investors for his AI company xAI. Last weekend that was supposed to be three billion dollars on a valuation of $15 billion, but then potential investors received an email to this effect:

"We all received an email that basically said, ‘It’s now $6B on $18B, and don’t complain because a lot of other people want in."

Now that is an email I would like to send around sometime, only with a happy smile emoticon at the end.

Elon Musk's pitch for xAI boils down to the company's ambition to connect the digital and physical worlds. Musk wants to do this by pulling training data for Grok, xAI's first product, from each of his companies, including X (formerly Twitter), Tesla, SpaceX, his tunneling company Boring Company and Neuralink, which develops computer interfaces that can be implanted in the human brain. It's a worldview that will generate a lot of resistance, but at least it shows long-term vision.

Decarbonization Partners: no website, but business cards that appear to be made of old tofu

BlackRock and Temasek raise $1.4 billion for climate tech

Solving the world's biggest challenge, climate change, also requires a long-term vision combined with a willingness to invest billions. The world's largest investment firm BlackRock and Singaporean state investment fund Temasek have therefore raised $1.4 billion to invest in technologies that combat climate change.

Predictably, the Wall Street Journal, widely read by Republican "ho-ho-not-so-fast-it-was-always-hot" investors, does not write about investments but about "wagers": a term used in a casino when putting your chips on red or black.

Greenhushing as bad as greenwashing

Knowing that the capital market looks with suspicion at the results of risky investments in unproven projects, making more and more companies guilty of greenhushing rather than greenwashing, Decarbonization Partners rushes to say that it invests only in "late-stage, proven decarbonization technologies."

It is unfortunate that investing in startups is avoided because there is much need for capital for start-ups, unproven companies; after all, how else will companies ever get to the stage of having proven themselves? It's a bit like saying as a parent that you love your kids as soon as they can walk well; but how they learn to walk, those kiddies figure that out for themselves.

In total, more than thirty institutional investors from 18 countries have invested in the fund, including pension funds, sovereign wealth funds and family offices, and at $1.4 billion it has raised even four hundred million dollars more than targeted.

Investments have already been made in seven companies developing various innovative decarbonization technologies, including low-carbon hydrogen producer Monolith that I wrote about last week, biotechnology company MycoWorks and electric battery material producer Group14. These are developments that are hopeful.

Carbon credit exchange in ... Saudi Arabia

Other hopeful news that has been snowed under in all the stock market turmoil, a rare word in connection with Saudi Arabia, is that the world's largest oil state will open a carbon credit trading exchange at the end of this year in partnership with market leader Xpansiv, which will provide the infrastructure for the exchange.

The announcement of a carbon credit exchange in this region quickly resembles a chicken breeder announcing he is going vegan, but should be seen as part of Saudi Arabia' s larger plan to move to a sustainable economy. It is looking more and more like it is serious, so it will be fascinating to follow what market share the Saudis can capture in the global carbon credit market, which Morgan Stanley estimates to be $100 billion by 2030.

Finally: I'm in May in the Netherlands and Singapore

In closing, a personal note in the fifty-second edition of this newsletter. Looking back over last year, one notices that I write a lot about market developments and investments, whereas thirty years ago I just started as an entrepreneur in the tech industry, launching the first national wide available internet service provider in the Netherlands.

Because I am no longer running a business, which for me always resulted in running with blinders on toward a dot on the horizon, I have the opportunity to mentor various entrepreneurs and help them invest where possible.

Since I started this newsletter, I have regularly received friendly invitations from readers to catch up on possible joint investing. I plan to do that next month; I'll be in the Netherlands and Singapore in May. If you're interested in hearing more about the projects I support, always focused on sustainability and a large international market, I'd love to hear from you.

Have a great Sunday and see you next week!

Categories
AI crypto technology

Ayatollah at the controls, crypto market plummets

Welcome to the fiftieth edition of this newsletter, in which I intended to look back, pontificate and stare into the distance, all inspired by Dutch comedians Koot and Bie classic line: "But enough about myself, what do you think of my hair? But then an ayatollah pushed a few buttons, forcing even the announcement of my new podcast to give way to the impact of world news. Because if there's one thing I excel at, it's modesty.

Originally I wanted to spend this 50th edition mostly on the final breakthrough of crypto, which is slightly ironic because after the Iranian attack on Israel, Bitcoin and Ethereum, in particular, are experiencing the biggest drop in a year.

Iron Dome saves markets

Crypto trading never stops so while Wall Street celebrates the weekend, BTC and ETH plummet

In the above price chart of the last five days, the cryptos' decline is especially notable because Microsoft stock and the S&P 500, which I included for comparison, have been stationary since Friday. Chances are that when Wall Street opens tomorrow, the market will be over the initial shock and the equity markets will fall less than the crypto market this weekend. Also because Israel's Iron Dome is holding up well, as Wired explains.

If Iran's leaders wanted to hit the detested West harder, they should have attacked on a day when Wall Street was open. Now Bitcoin and Ethereum in particular are getting the brunt of it, with all the altcoins in their wake.

For those who want to follow the crypto market at a glance, the top 100 biggest risers and fallers is always handy. In this, one can distinguish between the "hit list" within the top 100 largest cryptos measured by market cap; or for the real daredevils, the overview of all coins. It is not unusual to see in it, like today, a riser of 32951% (this is not a typo) like Policy or a fall of 98% like NTD is experiencing.

Except that those kinds of tokens have nothing to do with investing or innovation, so don't expect any attention to the latest memecoins or other geeky stuff here. Those are the crypto versions of roulette or slot machines, only with even worse odds. Blockchain technology offers special opportunities, especially when combined with a decentralized structure such as Bitcoin, unfortunately those aspects tend to be underexposed because of all the nonsense in crypto.

New: Crypto Spotlight 9

The best cryptos in the last month beat tech stocks, but note the huge price differences in the top nine cryptos!

Original idea: a podcast

There are seemingly between three and five million podcasts in the world, so high time to add one. No fear of me rehashing my drivel in audio form: I'm not doing this alone. I'll be co-creating the podcast with a successful entrepreneur who has made his mark in online media and e-commerce.

The nice thing is that he started his startup while he was still a student, but after selling his company decided to join a very successful e-commerce company first and later work in the corporate world to broaden his experience. This unique combination offers a special perspective on the technology of today and tomorrow.

My co-presenter also happens to be an expert on cryptocurrencies and author of a leading work on the subject. His expertise allows him to make analyses and predictions, to which we are going to hold him to.

We want to make a weekly effort to analyze tech news and look a little beyond the delusions of the day. Don't expect reflections on the number of megapixels on the new iPhone or the clock speed of an Nvidia GPU. What we want to discuss is: how do Microsoft and Google react when Amazon makes its AWS even more attractive to AI startups? And what does that mean for you if you work at a startup, or indeed at a large corporate, and see all this technology coming your way?

Please be warned

The very fact that we make a newsletter and a podcast about technology and innovation shows that we have the pretense of being able to proclaim something meaningful about it. But it's more fun to make that pretense measurable.

So we are each going to build an investment portfolio, which will consist of a mix of tech stocks and crypto currencies. (Although one of us will be cowardly enough, or wise enough, to include an index fund.) Either way, we're going to keep score weekly.

We're going to try to get smarter together. Very happy to get suggestions, comments and questions from readers and listeners to respond to. But in any case, what we're not going to do is give tips or advice. Please remember this motto: "read the newsletter and listen to the podcast, but never listen to us."

The lightning quick reaction of the markets to developments in the Middle East this weekend does underscore the need for us to offer some sort of alert function as well. Think of a message when one of us adjusts his investment portfolio because he expects a price change of more than ten percent. But again; that's not investment advice then.

Do you have any tips, advice or warnings? I'd love to hear it via email or in a comment on LinkedIn and Medium, where this newsletter appears in English.

I do demand make up for every podcast, like here in Singapore during the ATX Summit 2023. Even it's audio only.

Special links

Some noteworthy items from this week:

AI researcher Dr. Andrew Ng joins Amazon's SB, replacing ex-MTV CEO Judy McGrath. It underscores that the AI war has become primarily a battle for top talent, after Microsoft recently brought in former Google DeepMind founder Mustafa Suleyman. This makes Google the loser of the week right away, as it is notable that both ex-Googlers are now with AI competitors Amazon and Microsoft.

In addition, it shows that Amazon places little value on someone with a media and marketing resume like McGrath, preferring instead to bring in top technical talent. The nerds are winning the war over the hip media kids.

Ng previously co-founded the Google Brain project and was chief technologist at Chinese Internet giant Baidu. His newsletter The Batch is highly recommended, and his presentations at TED and Stanford are also engaging for anyone interested in the potential impact of AI on society.

Ng has a gift for explaining complex topics like AI in a clear and understandable way. At his presentation last year in Singapore, I took pictures of almost every slide, no matter how ugly they were and in far too small font, because Ng knows how to visualize a lot of information in a very concise manner.

'For $699 and $24 a month, this wearable computer promises to free you from your smartphone. There’s only one problem: it just doesn’t work.'

The Verge wrote a heartfelt but scathing review of the AI pin I wrote about in November:

'The whole presentation video is interesting to watch, but perhaps not for the reasons the founders hope. First of all, I don't understand why you would buy a $699 device that can do little more than a smartphone, which everyone always carries with them and is not going to be replaced with an AI pin. To live stream with then, from your chest? That's mostly fun for self-loving mountain bikers and Hamas members.'

And now it turns out that thing doesn't even work, for seven hundred dollars plus monthly subscription. I also still don't believe in smart glasses like Meta's. I already have glasses and would prefer to get rid of them! I'd prefer tech companies to make my watch smarter, as a possible replacement for the smartphone.

Ken Kantzer is CTO of startup Truss and shared interesting experiences from working with ChatGPT on a large scale. One conclusion stood out, when testing all kinds of prompts: "Why is this crazy? Well, it’s crazy that GPT’s quality and generalization can improve when you’re more vague – this is a quintessential marker of higher-order delegation / thinking." Apparently, vague is good in AI.

"People are all meant to get along. Online text-only media have given us the delusion that people can't get along, but actually everyone gets along."

Thus Naval Ravikant, founder of Angellist, who started Airchat along with Tinder's Brian Norgard.

I haven't been able to try it out yet, but would love to hear reactions from people who are already Airchatting. I'm not a fan of the name, but anything is better than Air X or X Air.

In 1991, as a student internship, I wrote a business plan to start a weekly sports magazine called... Sportweek. Hey, you got it or you don't. Only one publisher in the Netherlands was remotely interested: Maarten van den Biggelaar, previously founder of popular Amsterdam student nightclub Dansen bij Jansen and founder of the business magazine Quote, a more elitist version of Fortune. After months of visiting media buyers and advertising agencies, it was clear: there was zero interest.

Disillusioned, I left to do a student exchange program in San Francisco, where I first stumbled on the Internet. Forget Philips, IBM or TNO: back in the Netherlands, Van den Biggelaar was the only one who recognized that the Internet would become a mass medium, and he became our first investor in Planet Internet, which became the biggest internet service provider and most popular website in the country - well, until this Google thing started, but by that time I had left.

High-speed trains are an excellent alternative to short-haul air travel; faster, cheaper and more sustainable. I wouldn't bet against him and think Van den Biggelaar is on the right track with this train plan - please excuse the pun, I couldn't resist. Oh, and Sportweek: a few journalists started a magazine with that name a few years later, apparently without first asking the advertising world about its appetite. It quickly went belly up.

Conan O'Brien came to Hot Ones with his own doctor, or was it his dealer?

Within two days, this video has already been viewed nearly five million times: comedian Conan O'Brien was a guest on the popular YouTube series Hot Ones, in which host Sean Evans and a guest eat chicken wings with increasingly hot sauces.

The trick lies in the combination of Evans' stunningly good preparation, with the utter despair of his guests who find it hard to keep up their PR talk under the sweat and pain attacks. It's sort of a mirrored version of waterboarding.

At least, until O'Brien was a guest Friday and even decided to drink from the hottest sauce bottles. Asked about his familiarity with spicy food, O'Brien replied in advance:

"I grew up in an Irish-Catholic family in Boston. I never saw herbs until I was about 52 years old."

Conan O'Brien

These are the 19 best episodes of Hot Ones: featuring Shaquille O'Neal, Margot Robbie, Gordon Ramsay and Billie Eilish, among others.

In conclusion

Music festival Coachella streams live from many stages from the California desert. Today is the final day with Doja Cat, among others. Enjoy!

Categories
AI crypto technology

Smart tips, tricks and hacks for a better life

Not what is meant by the Eisenhower Matrix, but I like it. Image created with Midjourney.

It's tempting to get swept up in news about gadgets, apps and gimmicks that the technology sector pours out on us daily. So this time we turn our gaze beyond the delusion of the day in search of insights that can improve our lives. With fewer links, but references to longer articles, videos and podcasts: in short, less to more. Starting with the most important problem: how do we spend more time on the important things and less time on nonsense?

On a typical workday, it can feel like everything needs to be done immediately. The Eisenhower matrix helps us categorize the onslaught by organizing tasks by importance and urgency. If revisited regularly, the matrix can help us clarify our goals and values as well as how we should spend our most valuable resource — time. President Eisenhower never seems to have literally phrased it that way, but this way of thinking named after him leads to very effective productivity gains. A real productivity hack, in millennium speak.

Laugh and learn about tech

The mainstream media, even the comedy shows, have discovered technology as a subject on which there is much to report and, not insignificantly in the era when Google and Meta are gobbling up hundreds of billions of advertising money worldwide that used to be reserved for media companies; it's clicking like crazy. The Daily Show (Comedy Central) and Last Week Tonight (HBO) devoted extensive airtime this week to the impact of technology on our lives. With relevant warnings and tips.

Jon Stewart is back on Monday night on the Daily Show, tackling the AI revolution. Not so much the technology as the annoying habit of tech leaders to promise everyone a better future, while at the same time building technology that plays a major role in our lives in an opaque way.

Watching the item one wonders if the gentlemen at the top of the tech companies would pass the neighbor test: would you appreciate it if this guy (Zuckerberg, Altman, Pichai) moved in next door?

John Oliver describes meal delivery services as "the milennial lifestyle subsidy." He rightly concludes that many restaurants and delivery drivers suffer because of the delivery services, which nevertheless barely make a profit. So who wins? The consumer, but there are raw edges to that victory. Something to think about when the next delivery guy is at the door. Oliver calls for a five-star rating by default, including a nice tip.

Elad Gil may not be a familiar name but he has invested in and advised over forty unicorns, companies with a market value of over a billion dollars, including Airbnb, Coinbase, Pinterest and Stripe. In this video, Gil provides insight into his method of analysis from which we can all learn something.

Writing is better than talking

Stewart, Oliver and Gil clearly have a knack for conveying their opinions on complex topics simply and clearly to the public. The Basecamp software creators shared in a blog post how they "keep everyone in the company informed, without interfering with everyone else."

It's a long piece, but worth reading, especially if you're working with people in different locations. Things I take from it: writing beats talking and asynchronous communication (not live) is more effective than live.

Those who follow the advice and write more while working than talking will benefit greatly from these tips for editing yourself. Everyone has a colleague, especially a manager, who should follow these tips.

GaryVee deserves all the attention

This newsletter also appears in English on LinkedIn, and the gifted conversationalist Gary Vaynerchuk explains in his podcast why LinkedIn is crucial for your organization in 2024. Vaynerchuk struggled to finish high school and then worked in his father's liquor store, where he began making videos about wine that he posted on a then-unknown site: YouTube.

That experience formed the basis for a lightning career as a marketing guru, after which Vaynerchuk revealed himself as a successful investor (Facebook, Twitter and Uber, among others) and a kind of life coach avant la lettre. The writings of "GaryVee" sometimes seem clichéd but are actually thought-through, on any medium. Especially in the US, a cry like "how you make your money is more important than how much you make" is an extraordinary thought, especially as the son of poor immigrants from Belarus.

Learning from failure

Sometimes you learn more from a blunder than a success, which is why this article about how Hertz blundered with its transition to electric cars is downright fascinating. Customers barely charged cars after use, leaving too few available, and in addition, Tesla cars were found to be as much as four times more likely to be involved in accidents than traditional cars running on dinosaur blood.

When everything goes wrong, this is the article to have around. Useful in times with more extreme weather and for me, living in an area of Asia with several possible natural disasters, it's useful advice to keep the go bag better packed with practical tech gadgets.

Spotlight 9: warranty until the corner!

To my no small shock, a reader reported yesterday that she was disappointed "in my tip to buy Snowflake stock, as it had fallen significantly." Therefore, I want to emphasize again that I do not give investment advice.

Reader in question turned out to have purchased my entire AI Spotlight 9. When I came up with that completely arbitrary AI index, I wrote the following:

"These companies are either a driver of AI developments like Nvidia and Super Micro, or a big 'profiteer' of AI technology, think Palantir and Snowflake, for example. AMD, Broadcom, Crowdstrike, Gigabyte, Microsoft, Nvidia, Palantir, Snowflake and Super Micro were up an average of 48% this year already!

Note: I do not give investment advice, I just try to follow developments and if I'm feeling bright eyed and bushy tailed on Sunday morning, I interpret them as well. These are emphatically not buying recommendations. So much for my public service announcements."

Incidentally, the rest of these stocks appeared to have outperformed the Nasdaq Composite and the S&P 500, but again, think of it as a match analysis of a football game. If I were to write that a certain wide receiver scores remarkably easily, that is not an incentive for any team to go out and buy that player. Please only invest with money you don't need to live on and realize that you can lose on investments. And never listen to me.

Notable: Ethereum was a better investment than Nvidia

Every day I am bombarded with questions about crypto and tech stocks, whether Solana is better than Ethereum and which memecoins I hold myself. Precisely because people tend to blame you when something goes down, and congratulate themselves every time something goes up, I never respond to these questions.

I am, however, working with a friend to create a sort of investment section where people can follow our investment portfolios, but like this newsletter, we will do so "for the purpose of learning and entertainment" and not as investment advice. 

That being said, Grandpa Frackers especially wants to point young readers like my smart nephews to the performance of the biggest crypto versus the biggest tech stocks in the world over the last five years.

Even Nvidia stock, the absolute smoking hot stock among tech companies, has underperformed Ethereum. I don't know anyone who predicted in 2019 that Ethereum and Nvidia would dominate this list, so what lesson can be drawn from this? In any case, not that ETH and NVDA will experience the same rise in the coming years.

The mistake often made is trying to predict the future based on the past. I used to get the comment in the 1980s as a water sports reporter (water both in liquid and frozen form), 'Who does snowboarding? Nobody knows about that weird gadget, people like skiing.'

In the 1990s I started as an Internet entrepreneur and for five years I heard, 'Who has a computer and what do you want with the Internet? You can already fax.' I had to listen to the same rant from small minds about cell phones ('only drug dealers use cell phones') and for the last ten years about crypto: 'what can you buy with crypto?'

So once and for all: the average person does not need to buy anything with crypto. Just as the average person does not throw an Nvidia Hopper GPU into their basket at the super market on Saturday afternoon.

But those who can withstand the delusion of the day and have a slightly longer investment horizon than the next summer vacation, are not shocked by a downturn more or less like last week.

I am convinced that in the long run, and I mean years and not weeks or months, Bitcoin, Ethereum and Solana are lucrative investments. Just as I expect Microsoft, Apple and Nvidia to remain solid investments. The main question is which other crypto and tech companies will break through in the next five years. To that end, before you invest with your wallet, I recommend investing in lots of reading and listening. And not to base your investments on solicited or unsolicited advice from others.

Categories
AI technology

Microsoft and OpenAI have the upper hand, will Google and Apple join forces?

The U.S. Department of Justice takes on Apple. Image created with Midjourney.

Microsoft embeds Inflection.ai and attracts a lot of top talent for its AI-strategy; do Apple and Google answer by bundling Gemini into the iPhone?

Consolidation wave in AI started

Meanwhile, in the AI market, what happened slowly in search engines some 20 years ago seems to be happening at lightning speed: the small ones quit or are acquired, until there is one dominant player left with eighty percent market share. The rest share the crumbs. Microsoft wants to avoid that happening with AI and has therefore acquired Inflection.ai, maker of the incomprehensible chatbot Pi. An odd move since Microsoft is already major shareholder of market leader OpenAI, so how and why did this happen?

"Anonymous sources tell The Information that Microsoft is netting about $650 million: $620 million for non-exclusive licensing fees for the technology (meaning Inflection is free to license it elsewhere) and $30 million so that Inflection agrees not to sue over Microsoft's hiring, which includes co-founders Mustafa Suleyman and Karén Simonyan."

Wait: So Microsoft is paying some kind of compensation for taking over staff from a company it invested in itself?

Inflection was after Google Gemini, Anthropic, Mistral, Grok, then nothing for quite a while, a competitor to OpenAI. Founded in 2022, Inflection managed to raise over a billion dollars from investors, at a valuation of a whopping four billion dollars. Investors included Bill Gates, Microsoft itself, former Google CEO Eric Schmidt, Nvidia and a few more well-known players.

A good day, at least for Reid Hoffman

Microsoft's acquisition of Inflection was a clever game of speed chess by Reid Hoffman, who dryly reported on LinkedIn, which he himself founded (and sold to Microsoft), that it was a very good day for everyone. But if Inflection.ai was recently worth four billion and is now selling its crown jewels for six hundred million plus pocket change, how is that a good day for everyone?

A brief game analysis says that as a Microsoft board member, Hoffman obviously knew that the AI race cannot be lost by Microsoft and there is a huge talent shortage in the AI world. OpenAI is the magnet where most want to work, also because its shares have skyrocketed in a few years to the stratospheric valuation of $80 billion. As a result, Inflection.ai and Microsoft increasingly struggled to attract top talent.

Hoffman had founded Inflection.ai with Mustafa Suleyman, who was previously successful with AI company DeepMind, which he sold to Google. Probably Suleyman and Hoffman had come to the conclusion that Inflection.ai, despite the billion invested, wasn't going to make it against OpenAI and Google Gemini, which are throwing tens of billions at it.

The logical solution was for Suleyman to become head of Microsoft's AI division, responsible for all AI products and AI research from Copilot, Edge and Bing. Microsoft CEO Nadella is pleased with strengthening his team led by the new AI-CEO Suleyman, who was thus kept out of the grasping hands of Google DeepMind/Gemini.

The AI battle appears to be turning into a titanic struggle between Microsoft and Google, with the former having moved into the lead. With its stake in and partnership with OpenAI and its recent investment in Mistral, which will also use the Microsoft Azure platform, plus a rapidly growing in-house AI team led by Suleyman, Microsoft has the strongest line up in AI right now.

Google is certainly not hopeless yet, but at the moment it is the Manchester United of the AI competition: a big name, with a uncommunicative leader of a team that is getting inconsistent results. Hence the excitement this week when it looked like Google might team up with Apple. 

Google and Apple, a forced marriage?

Google and Apple are each other's polar opposites in Silicon Valley. Apple is planned, meticulous almost, with a success rate per product released of nearly one hundred percent. Google was paradise for barefoot neo-hippies, known for moonshots, where a product was once introduced that was discontinued a few days later because senior management knew nothing about it.

So much fails at Google that websites have been dedicated to it: Killed By Google and Google Cemetery. That didn't matter, because the search engine makes so much money that all failures are decimal roundings.

The surprise in nerdland was great when this week a photo "leaked" of Apple CEO Tim Cook and Google CEO Sundar Pichai, together at the table, engaged in serious conversation.

Cook and Pichai, together, but in 2017

Insiders, you know them, the former social media experts on Twitter and LinkedIn who had turned themselves into NFT gurus, then became life coaches and have recently become AI-crypto experts, those folks knew for sure: Google Gemini would be baked into the new iPhone 16. There's no way around it!

Until the photo turned out to be fake, at least: dating back to 2017. But by then the genie was out of the bottle. Apple has no AI product on the market and Google Gemini is struggling against Microsoft and OpenAI, so Cook and Pichai would do well to bury the hatchet in the iPhone versus Android war and go to war together against the Microsoft/OpenAI camp.

Sounds logical in itself, also because Google already pays Apple 36% of the revenue it generates from visits coming in through Apple's Safari browser, so the competitors already have a fruitful partnership. Only this week an uninvited guest appeared on the scene: Uncle Sam, in the capacity of the U.S. Department of Justice.

The United States versus Apple

It is not illegal to have a monopoly, but it is illegal to use that monopoly to prevent entry by potential competitors into new markets. 

Of exactly that, keeping the iPhone closed to potential competitors, Apple is accused by the Justice Department and a host of states, in an indictment that is surprisingly easy to read. Page three looks like the opening of a John Grisham thriller, quoting an e-mail from a top executive to Steve Jobs, including Jobs' own response. It is as if the DoJ is trying to sue Jobs posthumously.

Techcrunch has summarized the case well, and The Verge explains why consumers have borne the brunt of Apple's actions, which itself was quick to respond with an explanation. Reuters correctly states that the result of the case may be that the iPhone becomes more user-friendly for consumers: more open, even if Apple wins or settles the case.

Indeed, it is not at all a foregone conclusion that Apple is going to lose: “The fundamental assumption DOJ seems to have is that Apple must cooperate with its rivals to allow rivals to compete with Apple," a legal expert said. "That has antitrust law backwards."

Is bad news driving Apple into Google's arms?

As if the lawsuit wasn't enough bad news, a research team concluded that Apple's phenomenal silicon chip, the flagship product that allowed Apple to jettison Intel, has a serious security flaw. While Apple has boasted for decades that it is so much more secure than the Windows architecture.

Fortunately, the potentially affected group is relatively small, since to access the leak you must first download and run specific software yourself on your Mac. Still, this made it a week of stain upon stain for Tim Cook and Apple.

Meanwhile, the genie is out of the bottle and won't go back, just watch:

  • Bloomberg: Apple in talks with Google to build AI into iPhone
  • CNET: Google Gemini on iPhone becomes the mainstream moment of AI

A possible partnership with Google to package Gemini along with the iPhone 16 and the new iOS 18 operating system could revive Apple's stock price. While the S&P 500 rose more than 10 percent in the last year, Apple's stock fell more than seven percent. Painful for the company that has long been the most valuable company in the world. More on that in Spotlight 9, which I have posted separately on my site so as not to turn this newsletter into a digital version of the Dead Sea Scrolls.

Conclusion: Gemini on iPhone = OpenAI in Windows

All possible lawsuits and investigations notwithstanding, any bundling of Google Gemini with iOS and the iPhone 16 would give Microsoft all the room it needs to do the same with OpenAI.

Because Windows Mobile was a spectacular failure,it means for Microsoft and OpenAI that on mobile devices they are virtually hopeless against the Apple-Google combination and their iPhone-Android devices.

Microsoft Windows is still the market leader in the desktop computer market with over seventy percent market share. In addition, a number of new, unusual players have been warming up around the AI playing field for some time: the sovereign wealth funds of Abu Dhabi and Saudi Arabia are expected to join in with at least several tens of billions, while Singapore also seems to be coming out of the dugout.

The question is which camp these country teams will join. Microsoft/OpenAI seems to be the most active club, working for years to build ties in those regions, with help from Ben Horowitz, co-founder of the powerful investment fund Andreessen Horowitz.

Any illusion that Europe can still play a significant role in the AI market is thus gone. It is likely that the high-quality European AI companies will all be gobbled up by the American giants, with or without the support of Arab and/or Asian money.

Spotlight 9: Apple stock price drop and the week of Nvidia and Reddit

More on Apple's disastrous stock price drop in the last year, not even compared to other tech companies but compared to the classic S&P 500, in the investment section Spotlight 9. In it also more about the unexpectedly successful IPO of the popular but loss-making website Reddit, a possible SEC investigation into Ethereum that depressed cryptocurrency prices and, of course, we focus on Nvidia, which last week had a spectacular  developers conference where CEO Jensen Huang presented no less than two hours of innovations with only one conclusion: Nvidia's rise continues.

"Blackwell is not a chip, but a platform," said Nvidia CEO Jensen Huang, who then showed two chips: the Blackwell on the left and the Hopper H100 on the right.

Super Mario update and my own theme song

Finally, an update on last week's newsletter. I expressed surprise at the fact that Google Gemini won't even say in which countries elections are taking place this year, especially to avoid providing political information, but did produce an educational pamphlet to my question about what Super Mario got into his head when he wanted to save Princess Peach.

Only I mistakenly linked to another answer, when this is what Google Gemini actually said about Super Mario. Yep: the Googlers whispered to Gemini that Super Mario is about teamwork and that the princess and Mario can also remain friends. Maybe Mario wasn't Italian after all.

Another thorny issue was General Motors' selling of its customers' driving habits to insurers. Those who loved a sport turn on their time could be served by their auto insurance company with a substantially higher premium at the end of the year. After a wave of criticism, GM announced it would immediately stop selling the driving records of its customers. Excellent!

Then this week's surprise, which is undoubtedly Suno, the baffling AI service that allows anyone to type in a piece of text and moments later a two-minute song spits out. Apparently, only paying subscribers retain the rights to their music, so that may cause some hassle with the free users. Thanks to Frank van Hoorn and to Michiel Schoonhoven who both tipped me off!

Especially for this Sunday morning, I composed - because this is the new composing - all by myself three variations of a real theme song of this newsletter:

I would love to hear your response here.

Enjoy your Sunday, see you next week!

Categories
AI crypto NFTs technology

Nvidia the world's most valuable company? And Ethereum follows Bitcoin

'Often something has to happen before something happens.' It's one of my favorite quotes from legendary soccer player Johan Cruijff. I was reminded of it when last week stock market analysts, a profession with the same social utility as palm readers, predicted that Nvidia could overtake Apple and Microsoft as the world's most valuable company this very year. Without analysis of why and how this is possible, it is scoreboard journalism of the worst kind. Bitcoin's huge price rise to its highest level ever, of course, is preferably hushed up by most stock market analysts because they spent years trashing crypto. Whereas the price of Bitcoin is based solely on supply and demand, with no underlying products like Nvidia. Seems a lot easier to analyze. Yet most analysts remain silent. Coincidence? No, because coincidence is logical, Cruijff also said.

In a half-baked attempt at self-analysis, I looked up what I myself have written about Apple, Microsoft and Nvidia since I started this newsletter a year ago. Along with OpenAI, maker of the revolutionary ChatGPT, they are the only companies I have discussed more than 30 times.

Nvidia is more than hardware

Looking back, it is clear that I myself struggled to understand what the advantage Nvidia has built up; for the gap with the competition is caused by much more than just the production of very fast processors, the Graphics Processing Unit (GPUs) that are the engine block of AI software.

This newsletter is too short and I lack the technical expertise to go deep into the "software shell" that Nvidia has almost secretly erected around its hardware, making it more complex than it seems for customers to achieve the same results with other vendors' equipment. But it is useful to keep in mind that Nvidia has successfully built a defensible moat around its core business, when yet another analyst swears that Google, Microsoft and Amazon will deliver similar performance to Nvidia within a few years.

Because besides designing and delivering performance in a lab, these types of AI applications have to be tested in the real world for all sorts of different types of applications, followed by optimization (I don't think it's a Mulisch-esque argument myself, but stay with me) and finally a chip manufacturer still has to know how to produce the GPUs in volume and how to support them after the initial sale. That producing, selling and supporting may be harder than designing. I am also a very good singer in principle, but in practice my dog runs away after hearing three notes.

Every day, Nvidia increases its knowledge advantage because it has been working with all these AI customers for years. While Google, Microsoft and Amazon are still on the user side. It's like being a customer at the bakery who decides one day to start a bakery himself. Then the business plan and recipes are not the parts that make the difference either: the crux is in making and selling, which is true in baking croissants and in baking computer chips.

The stock price performance of Nvidia, Apple and Microsoft in the last 365 days.
 

Conclusion: Nvidia has a good chance of adding another trillion in market value within a year and dethroning first Apple and then Microsoft as the world's most valuable company. A position it will then be able to hold for some time. Once Nvidia has surpassed Apple and Microsoft in terms of company value, only then will the general public (and thus most of the media and politicians) begin to understand that a social breakthrough has occurred.

I am not claiming, as is sometimes suggested, that AI is a breakthrough comparable to the invention of the steam engine. That was the case with the invention of the personal computer combined with the Internet, which transitioned much of the world from the industrial to the digital age. There is a significant chance that mass adoption of AI applications will have the same impact on society as, at one point in time, the introduction of the assembly line. In other words, higher labor productivity coupled with fewer process jobs, fewer work hours and shorter work weeks for most desk jockeys. The question is whether average wages will be maintained, or whether higher corporate profits will prevail.

AI in the retirement home

The applications of AI extend much further than initially thought. Obviously, many administrative functions, in fact all process-based functions involving estimation based on existing data, will be replaced by AI. That stuffy insurance salesman who comes by in the evening after dinner in his ill-fitting suit with questionable tie can do a worse job of interpreting what the customer's requirements are, than an AI application that stores all current policies and all claims for the last 50 years.

It recalls the breakthrough of the World Wide Web in 1993 after the launch of the Mosaic browser as well as the period 15 years ago, after the first iPhones and Android phones were introduced. The last two innovations, smartphones and the Internet, are the enabler for today's technological revolution, because that is what we should call AI by now. Just as a mobile app was developed for everything back then, now efforts are being made to incorporate AI into everything.

There sits Grandma, in a home with an AI doll on her lap.
 

A few remarkable innovations were presented at MWC in Barcelona, with AI-powered dolls for the elderly making an indelible impression on many visitors. Who thinks $3,500 for an Apple Vision Pro is not expensive, will surely buy a $1,800 Hyodol for grandma? Seems absurd, but the AI bot in the form of a six-year-old child proved more effective at reminding the elderly to take a pill, keep moving and turn off the stove in Korea.

Innovating is difficult for everyone

Most AI innovations will fail, as most attempts at innovation fail in general. Apple luckily finally stopped developing its own car and is writing off the $10 billion invested as a rounding error. The world had absolutely no need for a new electric car manufacturer. It will be interesting to see if Apple manages to incorporate AI in a useful way into the company's biggest money maker: the iPhone.

There is a lot of talk that Google has completely lost the plot in AI, but that is nonsense. In terms of product, Google has made great strides and Google Gemini was a giant leap. Only Google's corporate culture is proving  a debilitating hurdle in developing breakthrough innovations, as I described the last two weeks.

David Kiferbaum left Google and wrote a truly painful account of what it's like to work in an environment where political correctness is preferred to factual correctness. Recommended reading: How Google blew up. (By the way, Kiferbaum's LinkedIn shows that he also worked for a while at Morrison & Foerster, the law firm with the most apt URL ever for a law firm: mofo.com)

Spotlight 9? Two Spotlights: Bitcoin and Ethereum

It was déjà vu, all over again, as Yogi Berra once said: Bitcoin reached a new record high and then a harsh correction followed.

Bitcoin and Ethereum stand out; Ethereum also headed for a record

Then the most frequently asked question on Whatsapp, during birthdays and after kids' soccer games was: is it too late to get into crypto?

I do not think it is too late to get in and that we are just at the beginning of mass adoption. Again, I echo the advice from 2017, which is a few hype cycles ago, from legendary investor Fred Wilson (Twitter, Tumblr, Zynga, Etsy, Coinbase etc), which he gave based on the investor's profile:

  • young, aggressive risk taker - 10% of net assets in crypto
  • sophisticated investor looking for a high-performing portfolio - 5% of net assets in crypto
  • average investor, somewhat conservative, but with some appetite for risk - 3% of net assets in crypto
  • retiree who wants to maintain portfolio value and generate income - 0% of net assets in crypto

A detailed, careful and at the same time confusing typology. After all, some elderly people may very well be able to absorb a kick where it hurts, because their house is already paid off and they have zero debt. While many young, aggressive risk-takers must sell their textbooks and become Uber drivers or start an Only Fans as they watch their memecoins evaporate.

Because I don't know any young aggressive knuckleheads who manage to limit their crypto gambling to 10% of their net worth, as Wilson advises. Around me I see young people more likely to put 90% of their money into crypto, but that may be a genetic defect in my family. More research is needed on women's investment decisions; are there still fewer women than men in crypto, or are women smarter because they are quieter about it?

How much and in which crypto?

When people ask me how much to invest in crypto, which has been a daily occurrence again since the beginning of this year, I always answer with a counter-question: can you stand to see everything you put into crypto go up in smoke? Evaporate to nothing? And just as important: will you get into a fight with your partner if you lose everything?

The couple lunatics go-getters who then remain always ask the same follow-up question, "which crypto should I buy? To that question, too, Fred Wilson was kind enough reply:

"A diverse set of crypto-assets would include Bitcoin, Ethereum, the other major layer-one blockchains (Solana, Flow, Avalanche, Polkadot, Algorand, etc.), the major DeFi protocols (Uniswap, Aave, Compound, etc.), storage protocols (Filecoin, Arweave, etc.), telecommunications protocols (such as Helium), some layer-two protocols (such as Stacks, Polygon, etc.), some gaming assets (such as Axie, Decentraland, etc.) and maybe some NFTs."

Do I follow Wilson's advice myself? No.

The difference in value

I have been convinced for years that "something enormous" will come out of blockchain innovations. Decentralization and transparency bring an intrinsic new value that cannot be realized in other ways. Unfortunately, it will take longer than I had hoped until a widely accessible application based on blockchain technology becomes available that is relevant to a large audience. Call it the ChatGPT of blockchain, that is what we are waiting for. Such an application would be of great social value.

I believe strongly in the crypto market, but I don't have the chutzpah (anymore) to think I can pick the winners. This has proven difficult with every disruptive advance in technology. The challenge is to identify potential winners early. From that follows a financial value of an innovation; incredibly fascinating, but less interesting to me personally. Before you know it, you spend hours musing about peaks, valleys and candles, without yet knowing what application it is actually about.

Obviously, every investor wants to achieve the highest possible returns with the lowest possible risk, so maybe I should create an investment portfolio myself that is trackable on a weekly basis. I would love to hear via email, LinkedIn or X if you would find such a portfolio interesting. Anyway, all tips, comments and reactions are very welcome.

Enjoy your Sunday, see you next week!

Categories
AI technology

Nvidia triples revenue on rising profit margin

Here is what the company reported compared with what Wall Street expected for the quarter ending in January, based on a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: $5.16 adjusted vs. $4.64 expected
  • Revenue: $22.10 billion vs. $20.62 billion expected
  • profit margin: 74% (compared to 59% last year)
  • Nvidia said it expected $24.0 billion in sales in the current quarter. Analysts polled by LSEG were looking for $5.00 per share on $22.17 billion in sales.
Tesla and Bitcoin down, but the rest all rose: it's a banner year so far for tech

Here is what the company reported compared with what Wall Street expected for the quarter ending in January, based on a survey of analysts by LSEG, formerly known as Refinitiv:

  • Earnings per share: $5.16 adjusted vs. $4.64 expected
  • Revenue: $22.10 billion vs. $20.62 billion expected
  • profit margin: 74% (compared to 59% last year)
  • Nvidia said it expected $24.0 billion in sales in the current quarter. Analysts polled by LSEG were looking for $5.00 per share on $22.17 billion in sales.

At the heart of this stunning achievement, of course, is A.I. If there were a "shareholder value creation" hall of fame, Nvidia's creation of $277 billion in stock market value in one day, would be at the very top.

This sum, if split off as a single company, would now be the 37th largest in the S&P 500, still ahead of Bank of America and Coca-Cola. If it were split off into two companies, they would both be in the top 100, barely smaller than American Express and Siemens.

The AI sector had already risen so much this year that a sizable number of investors took profits this week: as on Super Micro

How did the markets react?

Several leading indices started the year strongly, reaching new highs following Nvidia's results. On Thursday, Japan's main stock market index, the Nikkei, rose 2.19% to close at 39,098.68 - its highest level in 34 years.

In the longer term, other factors boosted the Nikkei, including capital fleeing the troubled market in China and a drop in the value of the yen, but Nvidia's results had a knock-on effect around the world.

Europe's STOXX 600 and Wall Street's blue-chip indices Dow Jones and S&P 500 all reached new highs.

February 2024 marks the first time in history that the leading S&P 500 index has surpassed 5,000 points. As if this were not enough, this month the NASDAQ Composite, dominated by the technology industry, also nearly reached its highest level ever.

How much does AI have to do with stock market gains?

It has played a significant role in continuing to boost the big tech stocks, which play such a disproportionate role in U.S. markets alone. This week, Deutsche Bank pointed out that tech stocks were playing an increasing role in the S&P 500, the largest U.S. index. The bank pointed out that Microsoft, Nvidia, Apple, Amazon and Google's parent company, Alphabet, make up nearly a quarter of the value of the S&P 500.

SMCI is a stock for investors with a strong stomach, NVDA looks boring 😉

New stock market darling Super Micro is experiencing a bizarre month: the stock went from $475 a month ago, to $1,004 last week, to $860 at the close of Wall Street the day before yesterday. It recalls the dotcom boom of the late 1990s.

It is not an AI bubble but an AI boom

I refuse to call it an AI bubble, simply because there are numerous companies to point to that will grow tremendously in terms of revenue, with profit margins that remain at least the same. Nvidia and Super Micro at the forefront, but AMD is also in a strong position while software companies like Palantir should be able to greatly reduce their costs with AI, which should be able to increase their competitiveness (and thus revenue).

The problem is that such a market attracts all sorts of "investors" who barely know the difference between hardware and software, let alone between a fundamental developer like Nvidia and a particularly high-end integrator of someone else's technology, like Super Micro.

This is not to say that one investment is automatically better than another, as Super Micro and AMD were patently undervalued for a long time by investors who could not appreciate developments in AI.

Except that in a price correction and especially in a crash, the child is often thrown out with the bathwater. Think of Amazon, eBay, Apple and Microsoft; they fell as hard as pets.com (dog food home delivered) when the dotcom bubble burst. Only because investors could not distinguish the difference between fundamental developers and their customers.

The challenge for investors is to see who is a customer of whom and where the dependencies lie. Right now, Microsoft, Google, Meta and all the other developers of large-scale AI applications are cap in hand with Nvidia, begging for a handful of chips. And all the busy press releases about proprietary chips and proprietary servers notwithstanding, it will take years for them to catch up with Nvidia in terms of technology.

And then comes the problem of mass production. It is no coincidence that Sam Altman of OpenAI is trying to set up chip factories of his own, because he realizes that design alone will not be enough. And because Nvidia and Apple have well nailed down production of their chips at TSMC, it is not likely that any new party will be able to play a significant role in chip production in the coming years. AMD is a dangerous outsider.

So far, until next week!

Categories
AI technology

Investing in AI: thoughtful investment or blind gamble?

Reflections in water, natural movements of people: groundbreaking!

"A stylish woman walks down a Tokyo street filled with warm glowing neon and animated city signage. She wears a black leather jacket, a long red dress, and black boots, and carries a black purse. She wears sunglasses and red lipstick and walks confidently and casually. The street is damp and reflective, creating a mirror effect of the colorful lights. Many pedestrians walk about."

This was the prompt from which Sora generated a video and this is a still from it. Having walked through Tokyo several times at night, I can assure you that this video is unimaginably realistic. The image is so lifelike that I caught myself pondering which neighborhood this video was based on.

Developments in AI are happening at an unprecedented pace. Last week saw some extraordinary new products introduced, with this "text to video" service Sora from OpenAI being particularly impressive. In all honesty, I did not expect that after the spectacular introduction of ChatGPT in late 2022, so much progress would be made so quickly in the development of AI applications. AI expert Michiel Schoonhoven did correctly predict last year that in 2024 the growth of AI would accelerate.

OpenAI amazes again

OpenAI became world famous in a week with the introduction of ChatGPT, still the most popular AI application for the general public. Sora is equally revolutionary; it can handle complex commands and generate videos with different environments, characters, actions and emotions. Whether describing a busy street, a forest or an action scene, Sora can visualize it. The generated videos have impressive resolution and image quality, making them look almost like real footage.

No competition for Spielberg yet

Sora is still under development and not publicly available. It is not expected that complete series or movies will be generated with Sora in the coming year, but for visualizing projects, creation of storyboards and education and training it seems to be immediately applicable.

Competitors such as Runway, Google Lumiere and Stability AI immediately responded with brave statements like "game on," making the consumer the big winner in this new race.

Google is there, but is less noticeable

It seems OpenAI knows exactly when Google is going to introduce a new service, only to launch something of its own in the same week that attracts all the attention. Again this week, Sora got all the publicity while Google's launch of Gemini 1.5 was underexposed. Not that Gemini 1.5 isn't good, but The Verge describes Google's problem as follows:  

"Google and OpenAI are running a breakneck race to build the best AI tool right now, as companies worldwide try to determine their own AI strategy and decide whether to sign their developer contracts with OpenAI, Google or someone else. Only this week OpenAI announced "memory" for ChatGPT, and it seems to be preparing for a product in Web search. So far, Gemini seems impressive, especially for those already within the Google ecosystem, but there is still a lot of work to be done."

After search engines now the AI agent

The excellent The Information had the scoop this week that OpenAI, presumably in partnership with Microsoft's still unpopular search engine Bing, is coming up with a direct competitor to Google's search engine (article unfortunately behind expensive paywall).

Both Google and OpenAI seem committed to developing AI agents for the consumer market. So where you would normally use Google, or OpenAI perhaps soon, to search for a nice restaurant when you're on vacation somewhere, an AI agent would allow you to make instant reservations or order in the country's language, checkout and have the meal delivered. Something like Apple's Siri, but then useful.

Tech industry once again promises to behave, darling

With such developments, AI will soon invade people's lives in intense and intrusive ways. The question remains whether the tech industry will succeed in managing the potential negative consequences of AI better than it did with the rise of social media.

Amid all the jubilation about AI, and I am such a cheerleader, what remains striking is how easily security measures can be bypassed. "Researchers at Brown University have discovered a way to bypass the security measures of OpenAI's powerful GPT-4 system. The trick? Translating harmful clues into less common languages such as Scots Gaelic (or Zulu) before asking the AI for a response.

The findings show that GPT-4 will easily generate dangerous content, such as instructions for explosives or conspiracy theories, when clues are first translated from English. Of the 520 harmful instructions tested, when translated into languages such as Scots Gaelic, it was possible to create problematic content in nearly 80% of the cases, compared to only 1% in English."

Fortunately, Zulus and Gaelic Scots are peaceful peoples. The tech industry promised betterment at a meeting in Munich last week, without clarifying how the promises will be kept. First goal is to ensure that AI will not play a negative role during elections, as no less than half the world's population, four billion people, are eligible to go to the polls this year.

AI delivers prosperity - first and foremost for its entrepreneurs

For a year now, I've been following the biggest seven tech companies, the two biggest crypto currencies and, as a benchmark, the S&P 500, in a section called Spotlight 9. (Please don't look at me about that name, it was made up by ChatGPT.)

The idea behind it was to see the extent to which the tech world and the crypto market perform as an investment compared to the rest of the business world. Last year, crypto was the clear-cut winner, but upon digging a little deeper, something stood out.

First, Bloomberg reported that virtually all of the wealth created in the last year was generated by AI-related companies. So party time at the Huang family, where not only Nvidia CEO Jensen Huang got to add a few billion, but his distant cousin Lisa Su also became worth $1.2 billion as CEO of chipmaker AMD.

Bloomberg sighs, "Two chipmaker billionaires in one family illustrate the magnitude of the craze around artificial intelligence, which has come to dominate the stock market and is responsible for most of the wealth growth of the world's richest people this year."

I also find it remarkable that both were born in Taiwan and studied engineering at top universities in the US; Su has a PhD from MIT and Huang studied at Stanford. They did not get their jobs by being in the right fraternity or sorority, or from one of daddy's golf buddies. The days when Chinese and Taiwanese immigrants started with a takeout restaurant or a laundromat are far behind us. 

The Biden-administration considers AI and the chip industry that powers it so important, that President Biden is considering providing as much as $10 billion in subsidies to Intel. The very chipmaker that has been huffing and puffing in the AI race compared to Nvidia and AMD. Perhaps Intel should see check if there is another smart cousin available in the Huang-Su family.

When comparing the performance of the "traditional" Spotlight 9 with the forerunners in the AI industry, it is only too apparent how much value is placed on AI companies by Wall Street.

6.5% increase for Alphabet, Amazon, Apple, Meta, Microsoft and Tesla is fine in itself

If we leave out crypto stocks and AI leader Nvidia from the Spotlight 9, this year Alphabet (Google), Amazon, Apple, Meta (Facebook), Microsoft and Tesla rose a combined average of 6.5%, despite Tesla's 20% decline pulling the average down considerably. That's still not bad, even compared to the 5.5% rise in the S&P 500.

Newly made up: AI Spotlight 9

Newly invented: AI Spotlight 9. No investment advice!

The overall AI craze in the market only becomes clear when we compare that 6.5% increase to what is happening this year at companies that I have completely subjectively put together in this "AI Spotlight 9."

These companies are either a driver of AI developments like Nvidia and Super Micro, or a big "profiteer" of AI technology, think Palantir and Snowflake, for example. AMD, Broadcom, Crowdstrike, Gigabyte, Microsoft, Nvidia, Palantir, Snowflake and Super Micro were up an average of 48% already this year!

Please note that I do not give investment advice, I just try to follow developments and if I'm feeling bright eyed and bushy tailed on Sunday morning, I try to interpret them as well. These are emphatically not buying recommendations. So much for the public service announcements.

Also new: retail investor can benefit

With the breakthrough of successively the personal computer, the Internet, the smartphone and social media, the big venture capitalists were the winners. They bought shares when the companies were still worth little, as Peter Thiel bought over 10% of Facebook in 2004 for half a million dollars, at a company valuation of $5 million.

Facebook went public in 2013 at a valuation of $104 billion. The exact amounts are unknown but it can be assumed that the investment of half a million dollars, Thiel made over a billion dollars in profit.

Apple exceptional, from $300 to $157,000

The retail investor, the consumer, could only buy shares of Apple, Amazon, Google or Facebook after they became available on the stock market and the biggest gains in valuation increase had already been made. The revolution took place, the value of the company rose, and then the IPO followed.

With Apple being a unique exception: Apple went public back in 1984 but anyone who had bought shares of Apple stock for the price of an iPod (three hundred dollars) on February 18, 2004, exactly twenty years ago, would have made over $157,000 in profit today.

Nvidia is not expected to generate the same returns as Apple, but it is notable that Nvidia and Super Micro are both over 30 years old. All the companies in my completely arbitrary AI Spotlight 9 have been publicly traded for years, but the big increases are happening right now.

Since the first time I wrote about Super Micro and today, the stock has risen from $573 to $803. And when did I first write about Super Micro? Two weeks ago, on Feb. 4. Things are moving fast in the AI sector!

AI-washing, the word of 2024?

Given this extreme stock market performance, it is probably wise that the U.S. financial market watchdog SEC warned against "AI-washing": the frequent use by companies of the word AI in conjunction with their products, when there is little to no actual AI involved. Most companies use as their core the technology of, say, OpenAI, Anthropic or Google, put it in their own wrapper and then issue ranting press releases.

It's like buying a car from the dealership on Friday, repainting it in a different color with your pals over the weekend, and then issuing a press release on Monday that you are a new car manufacturer. The SEC made it clear that it is keeping a keen eye on companies that engage in AI-washing and will even prosecute where necessary.

'Super Micro is having a super 2024.'

One company that certainly does not do AI-washing and deserves special attention is the aforementioned Super Micro. The company works with both AMD, Intel and Nvidia and has the knowledge to use those various chipsets to build complete motherboards for all sorts of applications, including AI. That knowledge advantage won't be caught up anytime soon, though dependence on other people's chips obviously remains a difficult issue to manage. By the way, the founder and CEO of Super Micro is Mr. Charles Liang, and it is probably no surprise that he too was born in Taiwan.

Yahoo Finance could not contain itself and headlined: Super Micro is having a super 2024. If you look a little further, the rapid rise appears to have started longer ago, as the last 365 days the stock rose a whopping 773%. This year, SMCI already rose 181% and I suspect this will not prove to be the high point.

And we are less than two months underway in the new year. Or, given the large Chinese contribution to this development, perhaps I should better say we are only a week into the year of the dragon.

Categories
AI technology

OpenAI CEO Sam Altman is looking for $7 trillion; that's $7,000 billion

You surely remember the scene from the movie The Social Network where Justin Timberlake, in his role as Sean Parker, says to Mark Zuckerberg, "A million dollars isn't cool. You know what's cool? A billion dollars.' Ah, what simple, innocent times those were, looking back now. The CEO of OpenAI, Sam Altman, who was kicked out of his own company just a few months ago, has only been back in office for a few weeks but is laughing at millions and billions: Altman is looking for seven trillion dollars. Or: seven thousand billion dollars. For an idea, not even for an existing company yet. What's going on?

The face of investors as soon as they hear the amount Sam Altman wants.
 

The Wall Street Journal reported on Thursday that Sam Altman, the CEO of OpenAI, is seeking five to seven trillion dollars to build a global network of chip factories. It was already rumored last year that Altman wanted to set up a chip factory competing with Nvidia under the code name Tigris, but at the time it was not suspected that trillions were involved. The now leaked seven trillion in numbers is 7,000,000,000,000,000, a seven with 12 zeros.

Wait, how much?

To put this in perspective, in 1995 the Internet hype started with Netscape's IPO, much to the dismay of the traditional investment market because the browser maker was not yet making a profit, even though it had millions of users of the popular browser Navigator. On opening day, Netscape raised $82.5 million with the stock sale.

So Altman wants to raise eighty-five thousand times more money from private investors for his idea, for that is all it apparently is yet, than Netscape fetched on the Nasdaq. Times are changing.

To make another attempt to indicate how much money is involved: Altman wants to raise more than a third of the GDP of the entire European Union, the second largest economy in the world, with $7 trillion. The GNP of this planet, by the way, is $88 trillion; Altman would like 8% of that, so he can make a nice clean start.

According to the Wall Street Journal, Altman is in talks with the United Arab Emirates sovereign wealth fund, among others, and then I suspect it's not Dubai, which is better at marketing than making money but the wealthy oil-producing Abu Dhabi. Primarily through its sovereign wealth fund, Mubadala, Abu Dhabi is looking for new sources of revenue as oil wells appear to be slowly but surely closing to retain a chance of a livable planet.

It is plausible that Altman is also swinging by the Emirates' friendly big neighbor, Saudi Arabia, which is gaining traction with the sovereign wealth fund PIF (note the windmills at the top of the page, apparently Saudi Arabia is famous for those). 

What do you spend 7 trillion on?

Altman seeks to address a critical bottleneck to OpenAI's growth: the scarcity of advanced graphics processors (GPUs) essential for training advanced AI models, such as his extremely popular ChatGPT. Despite the success of OpenAI and competitors such as Google Gemini and Anthropic, all of these billion-dollar companies are standing hat in hand at the doors of chipmaker Nvidia, whose lead as as maker of the best GPUs seems unsurmountable. But there's one thing: Nvidia can't handle the demand. And Altman doesn't want to be dependent on one supplier.

One of my New Year's resolutions was to judge people less in 2024, but people who are too cool to use capital letters don't make it easy for me

Altman announced on Twitter, a day before publication of the Wall Street Journal article:

"We believe the world needs more AI infrastructure - manufacturing capacity for fabs, energy, data centers, etc. - than people currently plan to build. Building AI infrastructure on a massive scale, and a resilient supply chain, is critical to economic competitiveness. OpenAI will try to help!" 

- Sam Altman

Solid plan or pipe dream?

His ambitious plan involves setting up a network of several dozen chip factories ("fabs") that would ensure a steady supply of the crucial chips not only for OpenAI but also for other customers worldwide. The plan involves cooperation between OpenAI, investors, chip manufacturers including market leader TSMC, data centers and power producers. Because without their own power plants, chip factories cannot operate on this scale.

What is striking about Altman's tweet is his specific mention of data centers. That means he not only plans to reduce his dependence on Nvidia, but also wants to get rid of his reliance on cloud-based solutions like Microsoft now runs for OpenAI and Google for Anthropic. Microsoft owns 49% of OpenAI's shares and was instrumental in allowing Altman to return to OpenAI after the Palace Revolution in November, so that will be an interesting issue to follow. 

If this initiative becomes a reality, it would mean that the AI industry and many other computing power-guzzling industries could realize their ambitions. But regardless of the money, it will result in a complex ownership structure where it is still unclear who will control and own the intellectual property, aside from all the chip factories, data centers and power plants.

Sustainability and geopolitics major challenges

Sam Altman's plan to radically scale up superchip manufacturing has significant sustainability implications. The environmental footprint of chip factories is significant; they are energy-intensive facilities that also require large amounts of water and produce harmful waste.

The unprecedented scale of Altman's idea would put enormous pressure on natural resources and energy networks. The environmental impact is compounded by the need for new power plants, which will increase CO2 emissions unless renewable energy sources are used exclusively. With financiers from the Middle East, that does not seem a reasonable priority.

Just last week, the Biden administration proudly announced a new initiative in which the U.S. is investing $5 billion in a public-private partnership aimed at supporting research and development in advanced computer chips. This initiative was completely drowned out by the WSJ article on Altman's plan.

President Biden's move underscores once again that the U.S. government recognizes the importance of high-performance chips, and therefore Altman's plan could quickly fuel geopolitical tensions. By attempting to expand chip production within a U.S.-led framework, China will surely respond, as it has also been explicitly pursuing high-end chips with Huawei playing a major role in recent years.

Superchips are a matter of national security and long-term economic growth. China will not stand idly by in the face of a concentration of production of these chips by US allies, possibly leading to retaliatory measures in which US companies and their partners will find it even more difficult to access the Chinese market. Altman's project therefore already casts the shadow of an intense trade war between China on the one hand and the U.S. and its allies on the other.

Categories
crypto technology

Spotlight 9: January party month in tech, except for Tesla

January was great for tech companies and the S&P 500, but not for Tesla

It's confusing, but January saw thousands of people laid off at tech companies who were simultaneously hiring others. At Google and Microsoft, "net" thousands of people went out and as a result (or in spite of it?) both companies rose to record highs. Might make sense, but feels weird.

Leaving aside Tesla, where growth is stagnant, virtually all major publicly traded companies are rewarded for optimism about the growth of the global economy. A Gaza humanitarian tragedy is taking place in the Middle East, but it seems to be taking place in a parallel universe outside of economic reality. When Houthis -who knew this club a month ago- attack a few boats it has a greater impact on the stock market, than great human suffering. Again, perhaps logical, but it is still distressing.

Tech has been in a bit of the doldrums the last few years, after smartphone-induced growth slowed and it was a matter of wait and see to figure out which new trend would kick start a new hype cycle. That new hype has clearly been found in AI. The question is why did the two exponents of blockchain, Bitcoin and Ethereum, fall in January when there is so much optimism about the economy and the new tech wave?

The answer is simple: blockchain is usually slightly ahead of the "traditional" tech economy, and Bitcoin and Ethereum already posted huge increases in 2023. Compared to a year ago, Bitcoin rose 84% and Ethereum 45%. The adoption of the first Bitcoin ETFs thus became an old-fashioned "buy the rumour, sell the news" scenario that even led to fears of another violent price correction for crypto.

Billions have been invested in new applications, many of which will come to market as early as this year. We are often going to talk about multimodal AI (roughly speaking AI that knows and recognizes more forms than just text) and in blockchain, the hype projects have mostly been washed away and serious applications are becoming available. Will Apple run into regulatory and Chinese market problems and NVIDIA become one of the three most valuable companies in the world? Everything points to 2024 being a fascinating year.