Tag: Nvidia

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Apple, Microsoft and Nvidia invest in OpenAI despite $158 loss: per second

Summer is over so starting next weekend, this newsletter will again be weekly instead of monthly. With apologies for the late mailing, herewith the most notable recent topics covered in this newsletter:

  • OpenAI loses $158 per second yet is worth $100 billion
  • Nvidia breaks revenue records but is very silent on customer success
  • Shares of AI-driven companies rose sharply in August
  • Energy consumption of AI threatens climate goals of Big Tech companies, appear to try to change the rules of the game 
  • Telegram and other social media are obviously being targeted by governments
  • podcast of Taylor Swift's boyfriend, and his brother, to Amazon for $100 million
  • Midjourney will make hardware

OpenAI loses $158 per second but is worth $100 billion

According to The Information, OpenAI, maker of ChatGPT, is fast heading for a $5 billion loss this year, or: $158 per second. This is a negligible run-up loss in the eyes of CEO Sam Altman and his supporters, as he appears to be successfully raising new funding at a valuation of $100 billion. That compares to the value Facebook had at the time of its IPO in 2012, but Zuckerberg did make $1 billion in profit!

Interestingly, the three most valuable companies in the world, Apple, Microsoft and Nvidia, apparently consider participating in this investment round. Thrive Capital as lead investor is doing $1 billion and Nvidia $100 million. That's a hefty sum, but how far does that take OpenAI?

How well is Nvidia doing?

At an annualized loss of $5 billion, OpenAI can go on for a scant week with that $100 million from Nvidia, which itself posted second-quarter revenue of $30 billion with a net profit of $16.6 billion. So it only takes the chipmaker thirteen hours (!) to earn the $100 million it invested in OpenAI. A nice tip for keeping a big customer happy.

Is Nvidia doing well or badly? Opinions vary.

Nvidia's performance is being interpreted in different ways. People from outside the tech industry, such as financial analysts, do not seem to understand that the manufacturing problems Nvidia is experiencing in producing the new Blackwell chip are temporary.

A company's performance is determined by a combination of revenue, growth and profit. Nvidia's sales will be fine for the next few years, due to a lack of competition and the huge demand from the Big Tech companies that develop AI applications or provide platforms for AI developers: Microsoft, Amazon, Google, Oracle and Salesforce are just a few of the customers who cannot drive their AI efforts without Nvidia. So aside from revenue, Nvidia's profit margin is in good shape for now.

A bigger problem for Nvidia is the growing doubt that all those customers can make healthy profit margins on their AI investments. So far, those hoped-for profits are failing to materialize, and that does represent a long-term concern at Nvidia. Top executive Jensen Huang is very quiet when asked about his customers' return on their AI spending at Nvidia. The question becomes how long for Huang silence is golden.

August was a fine month for AI companies.

AI Spotlight 9 rose sharply in August

While NVDA shares rose over 11% last month, it was also a fine month for many other companies benefiting from the rise of AI. Super Micro took a huge hit after it failed to produce its annual results on time.

My totally subjective AI Spotlight 9 has been updated and I have added Arm (chips), Arista (networking) and Marvell (chips). After all, Nvidia, Google and Microsoft are already in the "regular" Spotlight 9 of leading tech investments.

The S&P 500 closed very close to its all time high on Friday August 30th. Shares rose in the last 10 minutes of trading on Wall Street, with the S&P 500 up 1% and all major sectors on the rise. But the outlook for September is less bright.

Since 1950, the S&P 500 has generated an average loss of 0.7% in September and finished higher only 43% of the time, making September the worst month for stocks based on average return and positivity percentage. The past four September months have also been remarkably weak, with respective declines of 4.9%, 9.3%, 4.8% and 3.9% for the index. It will be interesting to see how tech stocks and especially AI companies do in the coming weeks.

AI versus climate

Due to the huge growth in data center energy consumption in pumping AI applications like ChatGPT and Google Gemini, tech giants risk missing their climate goals, usually ambitiously defined as "net zero," or carbon-free operations. There is great concern that smart techbros like Bezos are indirectly manipulating the definition of zero emissions

The Financial Times is particularly concerned about the influence of Amazon and Jeff Bezos's $10 billion Bezos Earth Fund on the carbon credits market, especially through its funding of the Science Based Targets Initiative (SBTi). The SBTi sets standards for corporate climate goals, but experts worry about potential conflicts of interest as large technology companies, including Amazon, want more flexibility in using carbon credits to achieve net zero targets.

This influence could change the way climate standards are set, potentially favoring cheaper carbon credits over actual emission reductions. Compare it to a penalty taker in soccer who often misses, upon which he decides to make the opponent's goal thirty feet wider and higher. And as a goalkeeper a garden gnome.

Telegram and X crackdown

Once upon a time, the credo of telecom operators was "we have zero responsibility about our customers' messages". For Internet service providers, I unfortunately know from experience, this was not such a simple matter. I wrote about that earlier. For social media, it is even clearer that they should intervene whenever possible if their networks are being used for criminal activity. The Washington Post explains it clearly:

"Global Internet regulators are no longer playing around. Two days after France sued Telegram CEO Pavel Durov on several charges, Brazil on Friday ordered the suspension of Elon Musk's X after it ignored an order to appoint a legal representative in the country. While the details differ in important ways, both cases involve democratic governments losing patience with cyberlibertarian tech magnates who perhaps turned their noses up at authorities a little too often.

The crackdown, which comes months after the passage of a law in the United States that could lead to the banning of TikTok, heralds the end of an era. Not the era of social media, which is still going strong. But the era when tech giants had free rein to shape the online world - and enjoyed a presumption of immunity from real-world consequences.

Although unfettered Internet companies have long clashed with authoritarian regimes - Google in China, Facebook in Russia or pre-Musk Twitter in Turkey - Western governments did not, until recently, consider social media and the vision of free speech they promoted to be fundamentally at odds with democracy. Politicians and regulators recognized that there were bad things on the Internet, condemned it and sought ways to limit it. But banning entire social networks or arresting their executives was simply something liberal democracies did not do. Now, for better or worse, they do."

The arrest of Durov in France is akin to firing a gun at a gnat. But until the full charges are revealed and it is clear what crimes Durov is accused of, it also remains difficult to vouch for his innocence. If Telegram is actually being used for pernicious activities and could well have intervened, appropriate punishment is warranted.

Friend of Taylow Swift and his brother podcast for $100 million 

The Kelce brothers make a nice podcast, and the fact that the youngest brother is Taylor Swift's bearded arm candy also won't have deterred them from striking a $100 million deal with Amazon, which is trying to bring in more ad revenue. Actors Jason Bateman, Will Arnett and Sean Hayes struck a similar deal with satellite radio station SiriusXM early this year for their podcast, also for $100 million.

But Alexandra Cooper's podcast is the clear winner with the very well chosen name for her podcast Call Her Daddy, Cooper is reportedly getting $125 million from SiriusXM over three years.

According to Midjourney, I am more handsome than my reflection and I was typing this newsletter laughing on a beach. Then it must be true.

Battle over AI photos enters new era

While Elon Musk's picture maker Grok seems to know no limitations, spitting out everything from famous singers in lingerie to Kamala Harris with a firearm, the launch of the web version of Midjourney has been much less in the news.

That's a shame, because Midjourney is a fantastic tool that was previously only available via the cumbersome Discord. Fascinatingly, Midjourney also plans to get into hardware. Since hardware head (his real title) Ahmad Abbas previously worked on the Apple Vision Pro, some think it will be "smart glasses" but Midjourney CEO David Holz is far too smart for that. Everyone knows that if you want to make money in the smart glasses business, you might as well get in the shower, light up a cigar and burn thousand-dollar bills with it.

The question is, and all suggestions are welcome: what hardware is Midjourney going to make?

Thanks for the interest and see you next weekend, then hopefully just again on Sunday!

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AI invest crypto technology

AI forces Microsoft and Google to revise climate goals and stock market in Great Rotation?

Switching to a monthly frequency of this newsletter over the summer in anticipation of a newsless summer did not prove to be the smartest decision, so in last month's avalanche of tech news, I try to make sense of the two most important developments. First, the massive energy consumption of AI forcing Microsoft and Google to rethink their climate goals. And fears of recession seem to be ushering in a "Great Rotation" in stock markets, with investors fleeing tech funds into more conservative stocks.

Greenpeace and Amnesty against Microsoft?

It seemed like agreed-upon work: on July 2, as many as eighty nonprofit organizations including Greenpeace and Amnesty International declared that the use of carbon offsets (carbon credits) by companies, actually undermines rather than supports climate goals. The objection is that companies are buying virtually worthless carbon credits and not reducing their emissions.

Companies in sectors ranging from technology to mining, on the other hand, argue that carbon offsets are actually crucial to reducing corporate emissions and moving toward net zero emissions. How can the parties be so opposed when they claim to be pursuing the same goal?

Need for high-quality and reliable carbon removal assets

At its core, this is a confusion of concepts. Opposition to useless carbon credits, issued for, say, forest areas that are never threatened, is justified. But companies such as Microsoft, on the contrary, are voluntarily focusing, without legal requirements, on carbon credits based on actual removal of carbon from the atmosphere. And that removal is crucial: annual global greenhouse gas emissions are about 50 gigatons, but as much as 2,200 gigatons must be removed to stay below one and a half degrees of warming. Simply turning off the tap will not have sufficient effect.

Reducing all emissions to zero will save 50 Gigatons - but there are still 2,200 Gigatons to be removed from the atmosphere.

"It's about creating a market for high-quality, reliable and sustainable carbon removal assets," Melanie Nakagawa, chief sustainability officer at Microsoft, said in a recent interview. "Think about sequestering carbon in the soil through accelerated weathering of rocks or stones that absorb carbon and are turned into concrete. Or Mombak, a large forestry project in Brazil." Another example of carbon sequestration is 280 Earth, nota bene once spawned by Google.

AI threatens climate goals, but there is hope

On July 3, the day after the 80 organizations shared their objection to bad carbon credits, the very club magazine of business, the Wall Street Journal, reported that Google's total emissions had increased 13.5% from 2022 to 2023.

In fact, since 2019, emissions have increased by nearly half, Google reported deep on page 31 of its sustainability report. Competitor Microsoft's total emissions increased 29% between 2020 and 2023.

Google stopped carbon offsets and focuses on removal
source: Bloomberg

Google had just promised to reduce emissions by 50% from 2019 levels, and Microsoft has been saying for years that it will be carbon-negative by 2030.

To cost-effectively combat climate change, it is crucial to find the most cost-effective methods to reduce greenhouse gases (GHG). A fascinating study published in Nature estimates the cost per ton of CO2 for two reforestation methods: natural regeneration and plantations. By creating new maps of costs and carbon storage, it shows that natural regeneration and plantations are cheapest in about half of the suitable areas for reforestation.

Together, at less than $50 per ton of CO2, these methods can reduce 44% more emissions than natural regeneration or plantations alone. This is far more effective than previous estimates by UN research organization IPCC showed. In short: there is hope for effective, affordable carbon removal.

OpenAI loses $5 billion a year

The AI craze is largely responsible for the increasing energy consumption and associated emissions of tech giants. Large language models (LLMs) such as ChatGPT are powered by energy-intensive data centers.

Training, maintaining and using LLMs consumes processor power and thus energy. It therefore came as no surprise that OpenAI is on track to lose $5 billion a year. The question of how all the investments in AI will ever be recouped is becoming more pressing. The gap between investment and market value is now $600 billion.

The quality of LLMs is also being questioned in increasingly wider circles, raising the question of whether other forms of AI do not offer better solutions. Professor Deepak Pathak thinks that not understanding physical environments structurally limits the quality of LLMs.

An LLM can read thousands of reports on gravity without understanding what happens when you drop a ball from your hand. That's why Pathak is trying to develop AI with "sensory common sense.

Spotlight 9: carnage in the stock market

Last Friday, August 2, the stock market experienced its worst day since 2022. This after, to say the least, a turbulent month in the stock market for the technology sector. Initially stock prices were still rising on expectations of a Federal Reserve rate cut in September, but weak economic data, including a drop in manufacturing activity and rising unemployment, caused a stock market sell-off.

The only gainer in the month of July was Bitcoin. Apple also remained steady.

Chip stocks were hit particularly hard, market leaders such as Nvidia and AMD fell sharply but the once proud Intel was hit the hardest: falling sales led to mass layoffs and a 32% drop in Intel shares!

Crowdstrike lost nearly half of its stock market value after the global outage, but the entire AI sector took substantial hits.

The sell-off was not limited to U.S. markets, as investors worldwide were gripped by fears of a global recession. In recent years, larger exchange traded funds such as Apple, Microsoft and Amazon, have far outperformed smaller ones. Still, reports of a "Great Rotation" of large tech funds into lower-market and undervalued "value stocks" seem as exaggerated as the conspiracy theory of a Great Replacement.  

Link Tips

Elon Musk gives update on second human with Neuralink implant

Politically, Musk has been on the lookout for what is beyond the far right for a while, but as soon as he talks about technological advances, he remains fascinating. By the way, Musk himself always appears to play podcasts at twice the normal speed. Nicest quote from his latest appearance on Lex Fridman's podcast: "If your vocabulary is larger, your effective bitrate is higher."

PayPal mafia's love for Donald Trump explained

Another interesting podcast, More or Less by the couples Morin and Lessin, tried to explain why people like Elon Musk, Peter Thiel and David Sacks are such ardent Trump supporters. A disconnect between intelligence and empathy can be observed.

How crypto affects U.S. presidential election

Investors Marc Andreessen and Ben Horowitz are donating to Trump, to the annoyance of The Verge, but LinkedIn founder Reid Hoffman and other top investors are rallying behind Kamala Harris. Crypto regulations are proving to be a divisive issue. I expect Harris to propose a different crypto policy before the election than President Biden implemented with the SEC during his presidency.

XRP had an amazing July, but Solana also held its own while the rest of the crypto world processed corrections.

How do you hire a CEO?

Top investor Vinod Khosla, who was at odds with Elon Musk just a few weeks ago over his support for Donald Trump, explains how to hire a CEO. Khosla is certainly no supporter of Trump and shared in his familiar clear terms what to look for when choosing a CEO. What's nice is that the way he shares it differs on Medium and on X.

Small, delicate drone

The HoverAir X1 drone is the first interesting drone not made by DJI in years. Small problem is that the drone will land on its own, including over water. I'm sure there will be a solution to that soon.

Apple Vision Pro on sale in Europe and Asia

Totally overlooked by the media and by consumers: the Apple Vision Pro is now on sale in most countries but no one cares. Too bad the beautiful device is alarmingly expensive and too little good content remains available for it. When will Apple dare to lower its margin and create a market by, for example, offering substantial discounts on the Vision Pro, say to buyers of a Mac or an iPhone?

Dr. Sachdev lectured and we listened especially attentively. The entire webinar is here.

Five, no yet six, tips for successful Web3 projects

Dr. Nisheta Sachdev and Gert-Jan Lasterie discussed the success and failure factors when introducing new projects in the Web3 world. Together with the webinar participants, I asked the questions. It is especially interesting to see which tactics for quickly building a real community are also applicable to other products and services.

Nice finale for hot days

Even one glass of alcohol a day can lead to serious consequences for your health. But there is also good news: "It is healthier to be social without the need for alcohol, but the benefits of spending time with others are still likely to outweigh the risk of consuming one to two units of alcohol." In other words: raise a glass together, otherwise don't.

Cheers, and see you next month!

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 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.

Categories
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.

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

Beautiful 'gallery of hope' and more positivity about technology

"It’s November 2025. My son’s graduation day. I’m so proud to be stood surrounded by all my brilliant children." Photo: Jillian Edelstein.

Let's start with positive news, because with the billions being thrown into AI, it's quickly becoming about corporate politics or the egos running the companies. Which often ignores the new applications that can affect our lives in a positive way.

Gallery of Hope and AI Consensus

That's why the Gallery of Hope, an exhibition in London of memories yet to be made, is very special. AI was used to offer sick people a glimpse into their future, from attending a child's wedding to taking a special holiday, moments they know they may not live to see. It is a valuable contribution of technology to breast cancer awareness and the fight against it.

There is more positive news about AI from the UK. Where social media have played a detrimental role with disinformation during elections, Polis is now being used, an AI-powered tool that allows groups with very different opinions to reach consensus through voting and discussion. Might be a good tool to start with in most parliaments! 

Interview tip: Hassabis instead of Altman

OpenAI CEO Sam Altman was a guest on Lex Fridman's podcast for nearly two hours, in the week it was announced that Altman is making the rounds in Hollywood to promote Sora, the new service that can generate complete videos from text instructions. Altman remained very vague on the issue of who gets paid for OpenAI's use of other people's work as training data:

"We’ve tried some different models. But if I’m like an artist for example, A, I would like to be able to opt out of people generating art in my style. And B, if they do generate art in my style, I’d like to have some economic model associated with that."

- Sam Altman, CEO OpenAI

Sounds sweet, but Fridman didn't ask further about that sentence "we tried different models.What was tried and with whom? Which website, YouTuber or Instagrammer was paid for the fact that OpenAI probably, because that too was not discussed, copied their data and fed it into their system? The movie studios are eager to reduce actors' and crews' gages by using Sora, but how will they be compensated if their work is reused without the proper attribution and permission?

Supercar made by ... Sora? Or Bugatti after all?

Take a look at this beautiful video created with Sora that OpenAI shared on Instagram: would Bugatti and Audi have given their permission, let alone been compensated, for the obviously brand-inspired images?

A more interesting insight into the thoughts of a leading AI developer than the podcast with Altman is this portrait of Demis Hassabis, the AI project leader at Google. The intro alone is feature-worthy:

"Demis Hassabis stares intently through the screen when I ask him whether he can save Google. It’s early evening in his native U.K. and the DeepMind founder is working overtime. His Google-owned AI research house now leads the company’s entire AI research effort, after ingesting Google Brain last summer, and the task ahead is immense."

Google is still doing quite okay

It is true that OpenAI and other smart chatbots pose an existential threat to Google, but Gemini is certainly not hopeless. Especially since Gemini can be deployed for free while OpenAI has to charge a subscription fee to survive, as the company needs every billion. That Altman is not a cheap guy, but I'll come back to that. Looking at the numbers, the financial performance of Alphabet, Google's parent company, has not suffered from the rise of OpenAI: 

Quarter | revenue | net income
Q4 2022 | 76.05 | 13.62
Q4 2023 | 86.31 | 20.69                     

These are amounts in billions of dollars, pushing Alphabet's projected revenue toward three hundred and fifty billion dollars this year. That is comparable to the GDP of Colombia or Denmark, so Google's obituaries are somewhat premature.

Incidentally, am I the only one who thinks, upon reading that Hassabis has a Chinese-Singaporean mother and a Greek-Cypriot father, "so nice, how will they have met? 

Voice clone not public for a while yet, because of... voting?

Back to OpenAI, which announced it had created a voice clone application, but currently only for a select group of companies because of the dangers of misuse.

"We recognize that generating speech that resembles people’s voices has serious risks, which are especially top of mind in an election year" said OpenAI, which claims it can mimic someone's voice with just 15 seconds of recording a person talking.

An investigation is already underway into an incident in which thousands of voters received "robocalls" from President Biden during the Democratic primaries in New Hampshire - at least, that's what they thought, because it wasn't him. Although Biden could also have been mistaken, which apparently happens to him occasionally.

According to ChatGPT, this is what Stargate will look like. 

A hundred billion dollar data center

The phenomenal site The Information had another scoop: Microsoft and OpenAI are working on a whopping one hundred billion dollar data center for an AI supercomputer with the delightfully pretentious name of Stargate. This in an effort to reduce dependence on Nvidia.

Reading the reports more closely, I'm especially interested in the rounding off method used by the journalists who reported the story: apparently, the project is estimated to cost "more than one hundred and fifteen billion dollars," but that doesn't look as good, so they rounded it off, downwards, to one hundred billion. For that fifteen billion after the decimal point, thirty juggernauts of data centers could normally be built. In AI, everything is bigger and more expensive; but a few hundred times more expensive?

Elon Musk and Amazon are still in it

Musk announced on X that his latest AI chatbot, Grok 1.5, will be available next week and will be better than all AI models, but he also said the same thing about the built quality of the Tesla Cybertruck before the window shattered seconds later. In short, we'll see.

Amazon announced it was investing nearly three billion dollars in OpenAI competitor Anthropic, maker of AI chatbot Claude. I enjoyed the way the Amazon man barely gave the journalist a chance to ask a question and regurgitated his entire press release, seemingly without breathing. You can see him trying to hold his laughter.

Open source AI model: Databricks

In the titanic battle between OpenAI/Microsoft, Google, Amazon and Meta, it is nice that startup Databricks has managed to develop a powerful open source AI model. Hopefully this will prove to be a serious option for startups and large companies to develop new AI applications without dependence on the Big Tech titans.

Last notable fact: among all the calls for software startups at leading startup incubator Y Combinator, Sam Altman's former employer, was a call to bring old-fashioned manufacturing back to the United States. Indeed, it is helpful if people can build something, especially when well over a hundred billion is being put into a new kind of data center. In this, Elon Musk is right: there is a lot of focus on design, but not enough on production. Microsoft and OpenAI are going to experience that when they actually start building a mega data center combined with a supercomputer. That's something very different from a big X-Box.

Spotlight 9: Cathie Wood guardian angel of Tesla

A dull stock market week, in which Tesla suddenly rises after a horror quarter

In what has been so far a dramatic year for Tesla, in which the company lost nearly 30 percent of its market capitalization, becoming the worst-performing stock in the S&P 500, TSLA shares suddenly rose more than five percent this week.

Cathie Wood's Ark Innovation ETF bought TSLA on Monday for twenty-eight million dollars, and as if that wasn't enough, Ark pocketed some more Tesla shares on Thursday for fourteen million dollars. Earlier this month Ark published a jubilant analysis of Tesla to which Musk responded briefly on X with: "wow.

Ark Invest has about as many haters as fans but at least it dares to come up with striking public reflections. Hopefully Ark will be proved right with this optimistic view of the near future:

"Techno-economic discontinuity is a process whereby technological breakthroughs create sudden and unprecedented transformations. Such discontinuities occurred during the second industrial revolution after introductions of the internal combustion engine, electrification, and telephony. We believe that a similar, unprecedented technological boom is now underway. ARK identifies five innovation platforms—Public Blockchains, Multiomic Sequencing, Energy Storage, Robotics, and Artificial Intelligence—as the areas of technological foment creating the most meaningful convergences today. They are the emerging “general purpose technologies”1 that we believe will transform and accelerate economic growth."

- Ark Invest

This is a very positive vision, but one strongly focused on economic progress. If this economic growth can be accompanied by the development of technology that enables large-scale removal of CO2 from the atmosphere, there is hope for the world.

I would love to hear your response and tips and comments are always very welcome.

Enjoy your Sunday, see you next week!

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 technology

Spotlight 9: the week of Nvidia and Reddit

On the right the Hopper H100 and on the left Blackwell. 

Nvidia shows it is unbeatable for now

'Blackwell is not a chip, but a platform'.

- Nvidia CEO Jensen Huang

That was the main message from Nvidia CEO Jensen Huang last Monday during his no less than two-hour (!) presentation at the Nvidia developer conference GTC AI. Reuters summarized the main news facts well, those who want to stay somewhat abreast of developments in the field of AI I especially recommend watching the short summary of Huang's speech. All the brave words from Google, Microsoft and Amazon notwithstanding, it does not look like any other company will be able to match the performance of Nvidia chips in the coming years.

The robotics side of Nvidia is also becoming increasingly interesting. CNET made this nice video comparing Nvidia's approach to Tesla's robotics strategy.

Super Micro is welcomed into the S&P 500 with a hit of -12.29%

Probably the high expectations were already priced into the stock price, because Nvidia shares did not do spectacularly for the rest of the week. Indeed, Broadcom rose faster but that was overshadowed by the misadventures of Super Micro: which was included in the S&P 500 due to its massive share price appreciation over the last year, announced it was raising financing and then SMCI shares plunged over 12%.

Apple loses a lot compared to the S&P 500

It's not a panic at Apple yet, but at any other company the storm ball would be raised if you're doing 17% worse than the S&P 500.

It is nice to take a look at Apple's stock as well, given all the developments. That is performing dramatically, purely because investors no longer see growth and new products that have serious impact on sales have not yet been presented. But a P/E ratio of 26 is extremely low, even taking into account that Microsoft has a P/E ratio of 36. Microsoft's profit margin is higher; still, the lack of revenue growth seems to be a particular problem for Apple among investors.

Apple is suffering from lack of investor confidence, Bitcoin and Ethereum are taking profits after the spectacular rises in recent months.

Otherwise, it was an unspectacular week for leading tech stocks. The crypto world is watching with trepidation a likely investigation by the U.S. Securities and Exchange Commission (SEC) into Ethereum, examining whether Ethereum should be classified as a security. That would mean that all regular securities laws would come into effect for Ethereum, and that would greatly depress its price.

Reddit opens strong and drops second day

Reddit went public this week and opened unexpectedly strong, at the upper end of its expected price: the stock was priced at $34 as its opening price. The first price day closed at $50.44 which can be called a downright spectacular first price day, but closed the second day lower, at $46.

Reddit stock is for speculators. Websites that run on advertising and don't have the ad volume of Meta or Google (see Elon Musk's X) face structural headwinds, so Reddit's big losses make sense. That's why the stock price is downright surprising. RDDT can't really be called a value stock.

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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!