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Top stories today:
1. Leaked Google doc: “we have no moat and neither does OpenAI”
2. OpenAI losses double to $540M, wants to raise $100B
3. Microsoft working with AMD on another chip, in addition to its own Athena
4. White House AI plan ignores doomer risk
5. Apple revenue -3% YoY to $94.8B in Q1, as it pivots to India
6. FDIC plans special fee on banks with $10B+ deposits to refill insurance fund
7. To watch: how many banks will go under over the weekend?

0. Data and calendar

1. Leaked Google doc: “we have no moat and neither does OpenAI”

• Written by a senior software engineer at Google, Luke Sernau. - Bloomberg

• 3 core points:

  • “We have no secret sauce. Our best hope is to learn from and collaborate with what others are doing outside Google. We should prioritize enabling 3P integrations.

  • People will not pay for a restricted model when free, unrestricted alternatives are comparable in quality. We should consider where our value add really is.

  • Giant models are slowing us down. In the long run, the best models are the ones which can be iterated upon quickly. We should make small variants more than an afterthought, now that we know what is possible in the <20B parameter regime.” - SemiAnalysis

What if the LLaMA leak was a genius Zuckerberg move?

• “Paradoxically, the one clear winner in all of this is Meta. Because the leaked model was theirs, they have effectively garnered an entire planet's worth of free labor. Since most open source innovation is happening on top of their architecture, there is nothing stopping them from directly incorporating it into their products.”

  • Zuckerberg himself has said this: “Unlike some of the other companies in the space, we’re not selling a cloud computing service where we try to keep the different software infrastructure that we’re building proprietary. So I think to some degree we’re just playing a different game on the infrastructure than companies like Google or Microsoft or Amazon, and that creates different incentives for us.”

Google also is changing its policy on publishing its AI research, due to ChatGPT's success

• “But the launch of OpenAI’s groundbreaking ChatGPT three months earlier had changed things. The San Francisco start-up kept up with Google by reading the team’s scientific papers, Dean said at the quarterly meeting for the company’s research division. Indeed, transformers — a foundational part of the latest AI tech and the T in ChatGPT — originated in a Google study.” - Washington Post

Our view: Google will have the upper hand once AI is no longer a destination

• Today people go to ChatGPT.

  • Tomorrow, AI will be integrated into all apps. We are already seeing the start of this, with Google Workspace, Microsoft Office, and many others previewing generative AI features.

  • Big Tech is being very fast in adapting to AI, and already controls all these consumer-facing apps. In sum, never bet against Google.

2. OpenAI losses double to $540M, wants to raise $100B

• $100B for self-improving AI: “OpenAI may try to raise as much as $100 billion in the coming years to achieve its aim of developing artificial general intelligence that is advanced enough to improve its own capabilities, his associates said.”

  • Money for training and data sets: “Altman said in a public appearance Wednesday that OpenAI is “going to be the most capital-intensive startup in Silicon Valley history,” said a person who attended. Besides covering the costs of training its software, it may also need to pay for access to data sets that aren’t on the internet and that it would want to use to develop its AI.” - The Information

Our view: self-improving AIs are likely close to AGI, and they are cheap at $100B

• Trillions in potential value: AGI could, in theory, replace most human labor, especially if they can be applied to robot humanoids too.

• How to fit in the cap table? By capping Microsoft's profits at a reported $92B, OpenAI could raise the $100B and give the investors the next $1T in profits after the $92B is paid. (This ignores other investors and employee stock, but the logic is the same.)

3. Microsoft working with AMD on another chip, in addition to its own Athena

• Non-denial denial: “Frank Shaw, a Microsoft spokesman, denied that AMD is part of Athena. “AMD is a great partner,” he said. “However, they are not involved in Athena.” - Bloomberg

• AMD stock jumped 6% on the news:

Our view: NVIDIA's hardware + software duo have some advantage, but no big moat

• We don't expect NVIDIA's quasi-monopoly in AI chips to continue over the following years. There's some inertial power in all the big AI supercomputers already using NVIDIA's programming language and software, but their moat is not as strong as Google's or Apple's, let's say.

  • As a reminder, Intel was the global chip leader just a few years ago.

4. White House AI plan ignores doomer risk

• Know the plan: White House, The Verge analysis.

  • $140M in funding from the National Science Foundation

  • Google, Microsoft, Nvidia, OpenAI, and others agreed to have their LLMs publicly evaluated during this year's Def Con.

Our view: doomer risk is what the government should focus on

• It is a matter of national security, if there's any chance it's true. Even if one wants to disregard doomer risk, first, it should be studied deeply, which the White House does not seem to be doing.

5. Apple revenue -3% YoY to $94.8B in Q1, as it pivots to India

Revenue only went up in “Rest of Asia Pacific” (mainly India) and for the iPhone and Services categories:

Net income margin was little changed at 25%

As Apple continues to be an example of efficiency, being the only mega-cap tech company that did not have to resort to layoffs:

• Executives mentioned India ~20 times during the earnings call. - Bloomberg

• AI was also mentioned, with Tim Cook saying that it is “huge” but that there are “a number of issues that need to be sorted.” - Axios

6. FDIC plans special fee on banks with $10B+ deposits to refill insurance fund

• Likely to cover the $19.2B that it cost to cover all depositors at Signature and SVB.

  • Won't cover the $13B cost from First Republic, as the regular quarterly FDIC fee will cover that.

  • Could even only hit $50B+ banks.

  • “Bigger lenders would all face the same fee structure, but could end up having to kick in more money because of balance sheet size and number of depositors, the people said. The riskiness of deposits won’t be a factor.” - Bloomberg

• We estimate JPMorgan could be hit with $3B in these special assessment fees, based on their $2.4T in assets and other factors. It would correspond to 1% of its book value.

7. To watch: how many banks will go under over the weekend?

• The FDIC likes to intervene on Friday night, so there's time over the weekend to patch things up and have the bank ready to reopen normally on Monday.

• Our view: banning shorting would make little difference. Shares can go significantly up or down without any trades, just by bids and asks moving. You don't have to be an efficient market extremist to believe that. - Liz Hoffman

Funny: Pacific West seeks to distance itself from PacWest

So far, it has worked, and Pacific West shares have been remarkably steady

• For a classic case where this didn't hold, check out the famous CUBA incident.

8. Poll: half worry about bank safety

Similar levels of worrying as in 2008

Poor people worry more, even as they can depend more on the $250K per bank FDIC insurance

9. Other headlines

AI

• Hugging Face releases StarCoder, open source code copilot.

• Google letting 10x more people test its AI features in Workspace.

• Ashton Kutcher to debut $243M AI fund.

Tech

• Youtube: 45% of viewings are on TVs, from <30% in 2020.

• Google Pixel Fold to be formally announced on May 10.

• Discord getting rid of mandatory 4-digit suffixes to usernames.

• Shopify cutting 20% of staff, 2K+ people; revenue +25% to $1.5B.

• Doordash revenue +40% YoY to $2.04B, topping estimates.

• Lyft shares drop as margins are compressed due to lower prices.

• Thiel: moving from SV to Florida too expensive due to housing prices.

• Tesla brings back orders for Model 3 with 18.5% discount.

Biotech

• AI mind reader v2, this time with video.

• Moderate exercise: why a lot of it is likely the best for longevity.

• Wegovy (#1 weight loss drug) facing shortages.

• Israel has 1st major longevity conference, Sheba.

• Phaedon Institute: a new think tank focused on longevity science.

Business

• News Corp revenue -7% YoY to $2.52B in Q2 FY23.

• Ben Smith interviewed, now by Reason, on his excellent new book, Traffic.

• Kenvue: J&J's consumer health spinoff IPOed, valued at $48B.

• King Charles’s coronation could cost $125M.

Crypto

• Coinbase revenue -37% YoY to $736M in Q1; still wildly unprofitable.

• Judge orders SEC to respond to Coinbase on guidance in 10 days.

• Block's BTC sales +25% YoY to $2.2B.

• Israel seizes ~190 crypto accounts linked to ISIS and other terrorists.

U.S. politics

• 4 Proud Boys convicted of seditious conspiracy connected to Jan. 6.

• Trump: stars get away with sexual assault, “unfortunately, or fortunately.”

• Tucker Carlson wants to build a multimodal media empire and moderate a GOP debate.

• Tucker text: “when Trump loses, he's going to blame us.”

• Fox strongly opposes unredacting material in Dominion case.

• Convicting a Murderer: Making a Murderer rebuttal to launch on DailyWire+.

World

• Chechnya's head says Russia needs to respond but “not today, not tomorrow.”

• UAE might legalize gambling, attracting Wynn Resort.

10. Interesting tweets, memes, and images

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