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Top stories today:
1. Google previews Generative AI in Search
2. Google Workspace apps are also getting generative AI features
3. More Google I/O announcements: Bard, Fold, Tablet, Android
4. Trump supports GOP fighting for cuts, OK with temporary default
5. Markets happy with CPI (core) at 4.9% (5.6%)

0. Data and calendar

1. Google previews Generative AI in Search

• Closer to New Bing than ChatGPT: the main product is still searching content from other websites, and generative AI is used more to summarize a text response. This is in contrast to ChatGPT without plugins, where the UI is that of a classic chatbot.

Users will have the option to “ask a follow up”

• Opt-in, waitlist, U.S.-only: very far from a global rollout. You can sign up for these experimental AI features at Google Labs. - The Verge, Google

Our view: AI is catching up fast with OpenAI and Microsoft

• Never bet against Google. They are proving that they can quickly incorporate generative AI into their best-in-class search product. After all, they have all it takes: the talent, the technology, the history — of note, Google researchers created (and patented) Transformers technology, the T in ChatGPT.

• AI snippet answers make more sense than an AI chatbot for most search queries. For the overwhelming majority of searchers, users want a quick visual answer, not to waste time typing back and forth with a chatbot.

• The risk for Google is their slow release cycle: why can't anyone try this new Google Search now? Especially as New Bing just got publicly released.

2. Google Workspace apps are also getting generative AI features

In Google Docs, for example, AI can help users with drafts

All Workspace products are getting AI

Sheets, Slides, Gmail, Tasks, you name it:

• Opt-in, waitlist, U.S.-only: the same conservatism as in Google Search's AI features.

3. More Google I/O announcements: Bard, Fold, Tablet, Android

Bard is now available to everyone

The Pixel Fold is Google's inaugural foldable smartphone-tablet and will cost $1,799

• Of note, Apple appears to have no plans to launch its own fold device. - Bloomberg

The home-focused Pixel Tablet includes a charging dock and will cost $499

Android is also integrating generative AI

The Magic Editor lets you easily edit photos leveraging AI

There are more announcements: a 16-minute summary of the Google I/O presentation

3. Bing's market share inches forward to 5%, as it tries to become Firefox's default

Bing's desktop global sessions went from 4% to 5% since the release of New Bing, according to YipitData:

Google currently pays Mozilla hundreds of million per year

• Harder for Microsoft to pay up, since their ARPU is lower than Google's.

• Yahoo tried this strategy and failed: in 2014, Yahoo replaced Google as the default search engine on Firefox in the U.S. and did not succeed in gaining market share.

  • Of course, Yahoo had a much worse product, while New Bing is almost as good as Google, in our view.

ChatGPT has been the real winner here, not Bing

4. Trump supports GOP fighting for cuts, OK with temporary default

• The full quote: “I say to the Republicans out there, Congressman, senators, if they don't give you massive cuts, you're going to have to do a default. And I don't believe they're going to do a default because I think the Democrats will absolutely cave.”

• OK to use ceiling as leverage now: he had a funny line when asked why it was now OK to use the debt ceiling as a negotiating tactic, but it was not OK when he was President: “Because now I'm not President.”

Biden and Yellen warn about global problems in case of default

• Biden: “If we default on our debt, the whole world is in trouble. Higher interest rates for credit cards, car loans, and mortgages. Payments for Social Security, Medicare, our troops, veterans could all be delayed. Our economy would fall into recession. And our international reputation would be damaged in the extreme. We shouldn’t even be talking about this situation.” - Bloomberg

• Yellen: “It would spark a global downturn that would set us back much further. It would also risk undermining U.S. global economic leadership and raise questions about our ability to defend our national security interests.” - U.S. News

5. Markets happy with CPI (core) at 4.9% (5.6%)… is 5% the new unnamed target?

• CPI: 0.4% MoM / 4.9% YoY in April, vs. expected 0.4% / 5.0%, from 0.1% / 5.0% in March.

• Core CPI: 0.4% / 5.5%, in line with expectations, from 0.4% / 5.6%.

Our view: inflation to remain higher than 2% for a long time, which is good for debt-to-GDP

• As we've said before, we believe inflation will hover around 3-5% this year and are skeptical that inflation can get back down to the 2% official target any time soon.

  • Inflation is showing to be sticky, especially in terms of wage growth. That vicious cycle can be very hard to break, particularly as companies and employees start locking in annual pay raises based on the previous year's inflation.

• Having inflation above target can be good for debt-to-GDP, as most of the debt pays nominal interest rates, and GDP naturally grows with inflation.

  • The Fed will never admit to any of this: neither that inflation is not coming back down to 2% soon nor that this helps the fiscal situation.

• The fiscal theory of the price level could apply here: “The fiscal theory of the price level is the idea that government fiscal policy, including debt and taxes present and future, is the primary determinant of the price level or inflation as opposed to monetary theory. FTPL requires confidence the government will not default on its debts, but rather 'inflate away' debts.” - Wikipedia

6. Other headlines

Tech

• Youtube testing blocking ad blockers.

• Twitter rolling out encrypted DMs for Blue subscribers.

• Robinhood to launch 24-hour trading on weekdays.

• U.S. live shopping market estimated at $32B this year.

• Tucker Carlson's Twitter show could scare advertisers.

Biotech

• FDA panel recommends approving OTC sales of birth control pill.

• Pancreatic cancer mRNA vaccine shows promise in Phase I trial.

• Senate hearing: PBM and Pharma point fingers at each other.

  • The FDA is actually to blame for high drug prices.

• Martin Shkreli-founded Phoenixus AG files for bankruptcy.

Business

• Softbank posts record -$32B loss at Vision Fund tech arm.

• Microsoft not raising base salaries this year.

• Disney revenue +13% YoY to $21.82B; subs -2% to 158M.

• NYT revenue +3% YoY to $561M, net profit 5x to $22M.

• Robinhood revenue +47% to $441M, losses at -$511M.

• Amazon gets $1B in tax breaks for $12B Oregon data centers.

Crypto

• IRS files claims totaling $44B against FTX bankruptcy.

• Tether reports $1.5B in net profit in Q1 as AUM reaches $83B.

  • The 5% interest on the $83B gets to $4.15B revenue/year.

• SEC issues another subpoena to crypto miner Marathon.

• 3AC founder and alleged fraudster Su Zhu obtains Singapore restraining order against Arthur Hayes.

• EU to start sharing crypto tax information between member states.

• Binance CSO: focus on UK, as U.S. is “very difficult” to do business.

• Circle no longer holds Treasurys that mature beyond early June.

• Robinhood Crypto custody AUM +37% YoY to $11.5B.

• Crypto derivates market share rises to 78%.

U.S. politics

• Trump CNN townhall: more election fraud lies.

• Biden 45% x 43% Trump: Yahoo News/YouGov poll.

• Biden family received $10M from foreigners; no direct link to Biden.

• Manchin goes to Iowa as he explores a 3rd party run.

• Fox hit with new suit from Biden's former “disinformation chief.”

  • Government officials should be a no-go for defamation suits.

• Trump $5M rape conviction: 8 reasons why Carroll won the case.

• George Santos’s 13 federal counts unsealed; pleads not guilty.

• CNN to offer Don Lemon's 9 PM spot to Kaitlan Collins.

World

• Saudi Arabia wants to launch their own Al Jazeera.

7. Interesting tweets, memes, and images

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