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Top stories today:
1. House passes debt ceiling deal by 314 × 117, with defections from both sides
2. Elon leaves China after a Twitter-silent trip where he met CCP leaders
3. Elon Musk is back as the world's #1 richest person
4. OpenAI announces “process supervision” to reduce hallucinations
5. Apple says $1.1T in billings was facilitated by the App Store in 2022
6. Markets now price in 64% odds of no rate change in June

0. Data and calendar

1. House passes debt ceiling deal by 314 × 117, with defections from both sides

The no votes were concentrated among the progressive and pro-Trump wings of the parties

The NYT maintains that the bill only cuts $1T, rather than $1.5T

It was one of the most bipartisan debt ceiling votes in recent history

The Treasury only has $37B left, underscoring the importance of fast action

The Senate is expected to approve before the June 5 Yellen x-date; it could be today

Rand Paul wants to force a vote on cutting most spending by 5% for each of the next 2 years

• In exchange for not delaying the vote on the broader debt ceiling bill, so that it presumedly could be passed today. - The Hill

Our view: Rand Paul's amendment will fail and the Senate will approve the debt ceiling bill

• Paul probably wants to force Republican Senators to be transparent on whether they really want cuts or are just bluffing.

• What the U.S. needs is an Elon Musk-type CEO, someone who can significantly cut costs and increase efficiency at the same time.

  • It's a shame that Elon cannot be President, under the most common interpretation of the natural-born-citizen clause, although the Supreme Court has never looked at that issue in detail.

  • Of course, Elon could be appointed the federal government's CEO/COO, while someone else is the de jure President.

2. Elon leaves China after a Twitter-silent trip where he met CCP leaders

• Elon had 3 major CCP meetings: he met Foreign Minister Qin Gang, the Minister for industry and information technology Jin Zhuanglong, and visited the Ministry of Commerce. - Bloomberg

He didn't use Twitter on May 30 and 31, signaling respect and deference for China and Chinese law

GOP candidate Vivek Ramaswamy was fast to criticize Elon, albeit calling him a “hero”

Our view: China decoupling is hard if your supply chain is fully dependent on the country

• Right now, Western hardware manufacturers completely depend on China, so they have the upper hand.

  • Google and other software companies managed to stay out of China — but it's much easier when your business is fully digital and doesn't require massive factories.

• Hopefully, just the threat of decoupling will improve political and business conditions in China.

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4. Elon Musk is back as the world's #1 richest person

His wealth has fluctuated wildly, and is now back up thanks to a rise in Tesla's stock price

Most of his wealth is Tesla stock, but he also has large private positions, such as SpaceX and Twitter

5. OpenAI announces “process supervision” to reduce hallucinations and improve alignment

• Process supervision, rather than outcome supervision: “We've trained a model to achieve a new state-of-the-art in mathematical problem solving by rewarding each correct step of reasoning (“process supervision”) instead of simply rewarding the correct final answer (“outcome supervision”). In addition to boosting performance relative to outcome supervision, process supervision also has an important alignment benefit: it directly trains the model to produce a chain-of-thought that is endorsed by humans.” - CNBC, OpenAI, paper

Process supervision performs better at math

Our view: unclear whether this improves alignment or can be integrated into GPT-4/5

• OpenAI's announcement was vague: it did not provide evidence of alignment improvement, nor did it state if and how this method can be used by LLMs powering their chatbots.

• Still early-stage research: Professor Suresh Venkatasubramanian said it well: “In this world, there are a lot of results that come out very regularly, and because of the overall instability in how large language models work, what might work in one setting, model and context may not work in another setting, model and context.”

6. Apple says $1.1T in billings was facilitated by the App Store in 2022

• Only 9% from digital goods and services, 81% from commerce, and 10% from advertising.

  • Apple is touting that they only take their 15-30% fee from the 9% of digital goods. - Techcrunch, Apple

51% of these billings were in China, which helps explain the company's deference to the country

7. Markets now price in 64% odds of no rate change in June

WSJ's “Fed whisperer” Nick Timiraos wrote the “Fed prepares to skip June rate rise but hike later”

• “Barring a sizzling jobs report”: “Investors in recent days had expected the Fed would lift rates at its meeting June 13-14, prompting two policy makers Wednesday to publicly underscore their preference to forgo a hike, barring a sizzling jobs report on Friday.

  • “The strategy would give officials more time to study the economic effects of the Fed’s 10 consecutive prior rate rises, as well as recent banking stress, by spacing out further increases.” - WSJ

8. NVIDIA falls 6%, now out of the $1T club

$932B is its current value:

Our view: the stock trades at impressive multiples

• The stock now trades at an unusual 197 P/E.

  • And a forward P/S of 21, assuming their $11B revenue guidance is even correct.

C3 AI fell by 22% after hours, but is still up 4x since January

Their ticker (AI) really did some magic this year:

• The stock fell after weak guidance: midpoint of sales +15.5% to $308M in FY 2024, vs. $317M expected.

• Their forward P/S is a more reasonable 11, which would be in line with historical norms for a high-growth company, not a 15.5% growth company.

9. Bill Ackman calls for Jamie Dimon to run for President

• Dimon previously had said that “it's crossed my mind” when asked about getting into politics. - Insider

• Meanwhile, Dimon was accused by Jes Staley, the former JPM investment banking CEO, of knowing about and discussing Jeffrey Epstein's accounts at JPM. - WSJ

10. U.S. fertility rate at 1.665, much below the replacement level

Birthrates continue to be higher in the 25-34 age group

Our view: immigration is key for a growing population and economy

• If you can't produce in-house, import it. If Americans want fewer kids, fine, immigration solves the declining population problem.

• America was and is built by immigrants.

  • Elon Musk, Sergey Brin, Albert Einstein, the list goes on and on — many (or even most) of America's geniuses are immigrants.

  • And since U.S. economic growth depends on innovation, immigration is key to growth.

11. Other headlines

AI

• Lightmatter, using light for AI computing, raises $154M, led by Google.

• Runway raises ~$100M at ~$1.5B valuation, led by Google.

• Character AI claims 1.7M app installs in 1 week.

• Perplexity AI in talks with Instacart, Klarna about search partnerships.

• AMD CEO interview on the AI revolution and AMD's strategy.

• Banks are hiring AI developers by the thousands.

• Amazon using AI to improve its warehouses and delivery operations.

Tech

• Mac desktops with M2 Max and M2 Ultra chips coming.

• India's chip manufacturing plans going slower than wanted by PM Modi.

• Reddit app Apollo would need to pay $20M under new API pricing.

Biotech

• Pfizer's RSV vaccine approved by FDA, as anti-evidence hesitancy is high.

• Semaglutide: FDA warns against compounded versions.

• APOE4 may increase inflammation in early Alzheimer's disease.

Business

• Amazon to pay $31M to settle FTC privacy claims.

• Meta asks court to bar FTC's attempt to change $5B privacy settlement.

• Meta threatens to remove news content from CA over payments bill.

• Salesforce revenue +11% YoY to $8.25 in Q1, operating margin of 5%.

• Saudi-led OPEC bars Reuters, Bloomberg, WSJ from Vienna meeting.

• GRE test cut from 4 to 2 hours, as fewer grad schools use it.

Crypto

• USDT invests in CityPay, Georgia-based payment processing startup.

• Magic, “wallet-as-a-service,” raises $52M at ~$500M valuation, led by Paypal.

• Binance to delist privacy coins in France, Italy, Poland, Spain.

• USDC ditches all Treasuries in favor of repurchase agreements.

• Multichain: “defi” project says it can't contact its CEO.

U.S. politics

• Trump talked on tape about Iran classified documents he kept: CNN.

• Mike Pence to announce presidential campaign in Iowa on June 7.

• Chris Christie to announce presidential campaign in NH on June 6.

• Trump proposes 1-year celebration of America's 250th anniversary.

• Chesa Boudin hired by UC Berkeley Law school.

• Oklahoma Supreme Court rules part of abortion laws unconstitutional.

• Project Veritas sues founder James O’Keefe for bullying, misuse of funds.

World

• Kyiv: another 3 killed in early morning strike.

• Kremlin denounces West over Moscow drone strike even as it strikes Ukraine.

• Latvia elects first openly gay president.

• WSJ journalist's Lefortovo jail used by Stalin's Great Purge: feature.

• UAE could be out of Gulf maritime coalition led by U.S.

12. Interesting tweets, memes, and images

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