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Top stories today:
1. Meta revenue +3% YoY to $28.6B, VR revenue -51%
2. UK regulator rejects Microsoft, Activision deal
3. Elon meets with Schumer on AI regulation
4. House passes GOP debt ceiling bill by 217-215
5. Trump 53% x DeSantis 21% in latest Fox poll

0. Data and calendar

1. Meta revenue +3% YoY to $28.6B, operating margin falls from 31% to 25%

• MAU: +5% YoY to 3.81B.

• DAU: +5% YoY to 3.02B.

• Instagram time spent +24% due to AI-powered Reels recommendations. - Techcrunch

Metaverse/VR revenue was -51% to $0.34M, operation deficit deepened 35% to -$4.0B

The long-term trend of metaverse losses is horrible

Meta is trying to hide the “meta” and pump the “AI”

• “Our vision for AR glasses involves an AI-centric operating system that we think will be the basis for the next generation of computing,” CEO Mark Zuckerberg said on the investor call.

• More open-source approach to AI: “We’re not selling a cloud-computing service where we try to keep the different software infrastructure that we’re building proprietary. For us, it’s way better if the industry standardizes on the basic tools that we’re using, and therefore, we can benefit from the improvements others make.”

• Zuckerberg sees “an opportunity to introduce AI agents to billions of people in ways that will be useful and meaningful.”

The stock was +12% on the news

Read more: WSJ, Meta.

Our view: Zuckerberg is exceptional at copying things that work, but VR is a major risk

• Instagram and Facebook have been able to fend off attacks from newer apps like TikTok and Snap. They were quick in launching Reels, a copy of TikTok's core short-video product.

• On VR, it is already a flop, having low and falling sales. Could AR save the day? We think there is a chance, but Meta has said the first AR glasses are only expected for around 2027.

  • Apple threat: it is also not clear whether Meta will win the AR/VR battle. Apple has a history of being the “last-mover”, i.e. not being the first to the game but completely dominating the field after launch (e.g. iPhone, iPad, Watch).

2. UK regulator rejects Microsoft, Activision deal

• They argue Microsoft is already too powerful as is: “Microsoft already accounts for an estimated 60-70% of global cloud gaming services and has other important strengths in cloud gaming from owning Xbox, the leading PC operating system (Windows) and a global cloud computing infrastructure (Azure and Xbox Cloud Gaming).” - Bloomberg, CMA

Markets saw this as irrelevant for MSFT (it was up due to earnings), while ATVI was -11%

Our view: it is bad for markets that any global regulator can halt a deal

• Too many regulators: Western companies now have to respect the whims of the regulators of the U.S., the EU, and the UK… what's next: India, Brazil, and Mexico too?

• Solution: free markets with fines: It would much preferable if deals like these were approved by default, and any illegal action tackled later via fines. The current situation just brings too much uncertainty to M&As.

3. Elon meets with Schumer on AI regulation

4. House passes GOP debt ceiling bill by 217-215

• 4 GOP defections: Matt Gaetz (Fl.), Ken Buck (Co.), Andy Biggs (Az.), and Tim Burchett (Tn.).

• “Dead on arrival” in the Senate. - CNN

The bill would cut the debt by $4.8T in 10 years, with debt-to-GDP going from 118% to 106% in 2033

Our view: this bill is remarkably sensible

• Most savings come from capping discretionary spending growth at 1% per year, meaning the government has time to adjust to tighter budgets.

  • We would prefer Elon-style restructuring, but that seems outside the current realm of possibilities.

• The bill also repeals Biden's student loan debt relief and green energy tax reliefs.

5. Trump 53% x DeSantis 21% in latest Fox poll

Trump's lead extend from +30% in March to +32% now:

On betting markets, Trump rises to a 65% favorite, while Tucker Carlson shows up at 2%

Carlson posted a 2-minute video on Twitter, his 1st appearance since being fired from Fox

• Of note, this video already has 33M+ views, vs. Carlson’s usual 3M viewers on Fox.

Our view: the Trumpist/populist wing has fully taken over the GOP masses

• Luckily for the country, the House and Senate GOP representatives are not all in favor of economic populism and overturning elections. The House debt ceiling bill is evidence of the former.

6. Other headlines

Tech

• Senate bipartisan bill to require parental consent for teen account creation in social media, ban those under 13.

• Harvey, AI for lawyers, raises $21M Series A from Sequoia, OpenAI.

• eBay revenue +1% YoY to $2.51B in Q1.

• Roku subscribers +2% QoQ to 72M in Q1.

• Discord revenue +44% YoY to $445M in 2022.

• Samsung operating profit -95% YoY to $0.48B in Q1.

• DraftKings planning stream video service, merging sports and betting.

• Sundar Pichai: a profile on his management style and AI strategy.

• Amazon shutting down its health-focused Halo division.

• Google Authenticator says end-to-end encryption coming later.

• Microsoft Edge is sending website history to Bing's API.

• iMessage finally comes to Windows.

Biotech

• Orbital raises $270M for novel (no longer just circular) mRNA therapies.

Business

• Elizabeth Holmes’s prison-reporting date delayed after appeal.

• Time to remove paywall, currently with 250K paying subscribers.

• Black Mirror season 6 is coming.

• SF office building expected to sell for $60M, from $300M in 2019.

Crypto

• Grayscale CEO expects court decision on ETF conversion by Q3.

• GOP stablecoin bill likely won't make it to the floor as is.

• Solana Labs's ChatGPT plugin to allow AI to fetch blockchain data.

• Franklin Templeton CEO: blockchain, not bitcoin.

U.S. politics

• Disney sues DeSantis and Florida for unconstitutional retaliation.

• Trump loses appeal to block Pence from testifying about their conversations.

• Biden cheat sheet suggests he knew question from a journalist.

• DeSantis expected to announce exploratory committee mid-May.

• Jack Teixeira could still leak more docs if released: prosecutors.

• Smartmatic case: Fox to provide more Murdoch docs.

• Thiel not expected to donate in 2024, citing frustration with culture war fixation (we strongly agree).

• Ro Khanna interviewed on AI, China Cold War.

World

• Xi calls Zelensky, pushing for deal, but Zelensky is not buying it.

• Russia preparing for Ukraine's counterattack.

• China appears to be building military site in UAE: leaked docs.

• South Korea: U.S. to dock nuclear-armed subs for 1st time in decades.

• WSJ reporter: WSJ, NYT, WaPost run a full-page ad urging release.

7. Interesting tweets, memes, and images

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