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Top stories today: 1) Fed expected to raise rates by 25 bps, 2) Google disappoints with Bard AI launch, 3) Microsoft integrates DALL-E into Bing, 4) Adobe launches Firefly AI in beta, and 5) TikTok spy scandal erupts as CEO testifies on Thu.

0. Data and calendar

1. Today at 2 PM ET: Fed expected to raise rates by 25 bps to 4.75% - 5.00%

• 25 bps is a nod to inflation, a nod to banking. It seems like the most prudent move, as it signals that the Fed is aware that inflation is still very far off from its 2% target, and at the same time recognizes that there is still uncertainty in the system and that more bank runs and failures may occur.

2. Google launches Bard AI in beta, worse than GPT-4

• Worse than GPT-4 and Claude, both anecdotally and in formal tests. - Techcrunch, Bard

• Waitlist only, available for select users in U.S. and UK.

• Available on bard.google.com, not Google Search. Both points show how Google is not yet fully confident in its AI chatbot. Previously, Google said that AI bots would likely be useful in NORA queries, i.e., those with Not One Right Answer. We generally agree: for most questions, traditional snippet-powered search is much superior to an AI bot.

3. Microsoft announces DALL-E integration with Bing

Still only available on Microsoft Edge:

AI-powered visual Stories and Knowledge Cards are launched for all users

• Features that Google doesn't have, but is it enough to get users over? That is unclear, but just the fact that this is now a topic of debate is a threat to Google's hegemony. The fact that Bard is much worse than GPT-4/Bing Chat should also be worrying for Google.

4. Adobe announces its AI image generator Firefly

• Only available online, in private beta. So far, this is looking like an easy-to-use version of DALL-E 2. At this stage, it is unclear whether its model is comparable quality-wise to DALL-E 2 or Midjourney v5. - The Verge, Adobe

• Integrations with other Adobe software will be game-changing: we expect this to be released over the year, and to be how Adobe differentiates vs. stand-alone apps like DALL-E.

• AI is benefiting the incumbents: other than OpenAI, which develops AI base models, we see generative AI as features that will be integrated into all software. And so far, the large software incumbents (Microsoft, Google, Adobe) are doing a very good job of keeping up with the pace.

5. TikTok employees can spy on private data of individual Indian users: Forbes

• "NSA-To-Go" internal tool: "One social mapping tool [can] spit out a list of any public or private user’s closest connections on TikTok and personally identifiable information about them, and it still pulls up the TikTok profiles of people in India, according to a review by Forbes. Staff can plug in a TikToker’s unique identifier [to] retrieve the TikTok usernames (often, first and last name) of hundreds of friends and acquaintances; the region where they live; and how they share TikTok content with phone contacts and users across other social platforms." - Forbes

• We expect that this tool works for users all over the globe. It is likely that Meta, Twitter, and other social media have similar tools -- the question is: who has access to them? Only a very slim compliance team should have access to it, on a case-by-case basis. And governments only with a warrant for a specific person.

Tomorrow, TikTok CEO will tell House his app is safer than most

• Prepared remarks include all the expected talking points: "Let me state this unequivocally: ByteDance is not an agent of China or any other country."

  • $1.5B Oracle deal to keep U.S. data separate: special subsidiary will have 1.5K employees. - Bloomberg, prepared remarks

• Deepfakes also being banned: new moderation policy covers "synthetic and manipulated media." - The Verge

• Fun fact: ByteDance is a Cayman Islands company. Both the U.S. and China companies are actually subsidiaries of the Cayman holding. Even then, ByteDance's physical headquarters is in China, so the company is expected to have to follow Chinese law, including its authoritarian "national security" ones.

6. White House report strongly criticizes crypto, says FedNow is the solution

The table of contents of the Economic Report of the President summarizes the administration's negative view on crypto, while suggesting the FedNow (and potentially a CBDC) is the best technological option for the U.S. financial system:

• Problems with FedNow/CBDC: only available to U.S. residents, easier to censor. One of the great innovations of stablecoins is that they democratize global access to the U.S. dollar, as opening a U.S. bank is extremely hard for non-U.S. residents. Additionally, if individuals have accounts directly with the Fed (or CBDCs tied to their name), the government could directly censor their money, while with a traditional bank account or stablecoin, the government needs to get a Court order and go through the private issuer.

7. SVB insider loans tripled to $219M before bust

In related news...

• Yellen says U.S. could protect deposits at more banks.

• Sen. Warren wants to tie more FDIC insurance to more regulations.

• First Republic taps Lazard for help with strategic options.

• First Republic may rely on government backing to reach deal.

• Summers predict "cleaning out" of fintech after SVB failure.

8. Trump is expected to be indicted this week, and surrender next week

• Indictment likely today, arranged surrender next week. - Daily Mail

• Classified docs also got worse for Trump: the Justice Department managed to convince the federal judge that Trump likely knowingly misled his own attorney about his classified documents. - ABC

• Georgia "find" votes and Jan 6 criminal cases are the most damning: still, given the election one and a half years away, even with indictments, we expect judges to hold off on starting criminal trials until after the election or term in office.

DeSantis increases his criticisms of Trump in Piers Morgan interview, to be released Thu

• Slammed Trump's character and style: "So, the way we run the Government I think is no daily drama, focus on the big picture and put points on the board."

• But offered very little in terms of policy differences: "Well I think there’s a few things. The approach to COVID was different. I would have fired somebody like Fauci." - NYPost

Still, polls show Trump ahead of DeSantis, from +1 to +28

9. Youtube and Netflix lead streaming in Feb

But streaming stopped growing as a percentage of total TV consumption

10. Other headlines

Tech

• NVIDIA's DGX Cloud lets companies rent GPU boxes, at $37K+ a month.

• Instagram launching search ads and Reminder Ads.

• Microsoft competes with OpenAI in offering OpenAI licenses.

• Tonal in talks to raise $125M at $200-300M valuation, big fall vs $1.6B val. in 2021.

• NVIDIA unveils new laptop and desktop GPUs.

• Grammarly has new CEO starting May 1.

• Intel's Chief Architect leaving to start AI gaming company.

• eToro raises $250M at $3.5B valuation; company offers high fees brokerage services.

• Bill Gates says AI is the 2nd greatest tech revolution after the GUI.

Business

• CHIPS: firms that take money can't expand China output by more than 10%.

• Netflix bets $200M+ on "The Electric State".

• Nike sales jump 12% to $12.4B.

• Gamestop stock up 38% as it records $48M profit, first in 2 years.

• Home prices fall 0.2% yoy while existing home sales rise 14.5% mom.

• Combined weights of MSFT and AAPL in the S&P 500 reaches 12%.

Crypto

• Magic Eden launches Bitcoin NFT marketplace, embracing Ordinals.

• Sushi Chef asking DAO for $3M to cover legal expenses.

• Tomi DAO, building web3 version of the internet, raises $40M.

• OP3N raises $28M at $100M valuation to build "Whatsapp meets Amazon."

• Celsius custody account holders will have option to get 72.5% back, Judge says.

• Cathie Wood sells $13M in unprofitable Coinbase stock, a first since July.

Washington and more

• Xi and Putin vague on peace plan, blaming West.

• Pentagon to send Abrams tanks to Ukraine by the fall, vs previous 1-2 years.

• Taliban faces blowback over girls' school ban from his own movement.

• Eight states weight requiring phones to have anti-pornography filters by default.

• Tucker Carlson: "I love Trump", aiming to take back his "hate Trump" text.

11. Interesting tweets, memes, and images

To watch:

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