Morning Brew Daily - ChatGPT’s Image Generator Goes Viral & Tesla Unfazed by Tariffs?

Episode Date: March 28, 2025

Episode 549: Neal and Toby discuss the nearing of CoreWeave’s IPO which has some investors excited about the warming of the IPO market, and some nervous about the downsizing of its offering. Then, OpenAI launches a new image generator for ChatGPT that has everybody commenting on how scarily good it is. Also, Trump’s 25% auto tariffs have hurt many car brands…except Tesla – make it the Stock of the Week, while everybody else is the Dog of the Week. Meanwhile, JPMorgan Chase doesn’t just crunch numbers at banks…it can also crunch random numbers with QUANTUM. Let’s go weekend!  00:00 - Kermit the Frog at Maryland 3:40 - Coreweave’s IPO 7:45 - ChatGPT’s image generator goes hard 12:30 - Stock of the Week: Tesla 15:30 - Dog of the Week: Everybody else 18:30 - Quantum’s first 22:00 - Sprint Finish! Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Learn more at sophos.com Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow Learn more about your ad choices. Visit megaphone.fm/adchoices

Marketers, tell us if this sounds familiar. You invest in something that seems incredible like millions of views, but then don't see any revenue. Instead, invest in what looks good to your CFO. LinkedIn Ads generates the highest row ads of all major ad networks. Spend $250 on your first campaign on LinkedIn ads and get a $250 credit. Just go to LinkedIn.com slash MBD. That's LinkedIn.com slash MBD.

Terms and conditions apply. Good morning, Brewers Daily show. I'm Neil Fryman. And I'm Toby Howell. Today is the biggest AI IPO of all time going to be a flop. Then ChatGBT's new image generator is making everyone look like they're the main character in Totoro. It's Friday, March 28th. Let's ride.

It was a roller coaster day for my University of Maryland Terrapins. Yes, last night, the men's basketball team got thumped by Florida in the Sweet 16 ending our March Madness run. But earlier in the day, some better news, the school announced. that world famous amphibian, Kermit the Frog, will deliver the commencement address to Maryland's graduates in May. In many ways, this is a homecoming for Kermit because his creator, Jim Henson,

is an alum of Maryland, and both Kermit and Henson have bronze statues right outside the Student Union on campus. Toby doesn't totally make up for the loss, but Kermit, as a commencement speaker, isn't a bad consolation prize. I'm taking a very pessimistic view of this. Can you imagine being a parent

you likely contributed to your child's education, sacrificed a lot of time and money to see your kid graduate, and then a freaking Muppet gets up there. I've learned that graduations are as much, if not more so, for the parents than they are for the students. And once his crokey voice kind of rings out talking about the challenges he had to overcome from,

to get to the top of the frog keep, as he calls it, it would push me over the edge. No, that's the wrong take over. Okay. Maryland, my commencement speaker was Cow Ripkin, who is a Baltimore-Lexamination. But he got up there and was just not exciting at all and we were all hung over and we were just like, please. And this is not, this is not fun.

We want a little spice, a little pizzazz. And Kermit will bring that. Doesn't matter what he says, but you just want something to perk you up a little bit. I'm not really thinking about the parents. I don't know why you are. I'm thinking about those kids that are graduating and they want a final sendoff that is worthy. I think Kermit will deliver. I had John Krasinski, so I think I win everything.

And now a word from our sponsor, Sophos. Neil, what happens when one team has a weak spot? That's when the other team attacks every time. For instance, if I saw you in a rec basketball league, Toby, I would take it to the rack every time we matched up. First of all, I know you can't go left. Secondly, you're right about the weak spots. Cyber attackers look for gaps in your businesses' defense under staffed teams, outdated tools,

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But not before you all head to SOFOS.com. That's S-O-P-H-O-S.com. Study and play. Come together on a Windows 11 PC. And for a limited time, college students get the best of both worlds. Get the Unreal College deal, everything you need, to study and play with select Windows 11 PCs. Eligible students get a year of Microsoft 365 premium, and a year of Xbox GamePass Ultimate with a custom color Xbox wireless control. controller, learn more at Windows.com

slash student offer. While supplies last, ends June 30th, terms at a.k.a.m.S. slash college PC. You believe that AI demand will keep going up and to the right. Investors will stare that question right in the face today when Corweave goes public on the NASDAQ. This IPO is the most anticipated in years because Corweave is the first pure play AI company

to hit the stock market, and as such, it is considered a bellwether for the AI revolution more broadly. While no one had heard of this New Jersey company a few years ago, it's become a massive business by hoovering up Nvidia GPUs and renting them out to AI companies to train and run their models. So if you are confident that AI giants like Microsoft will keep spending tens of billions on cloud computing, then Corweave would be a great way to put your money where your mouth is. Others are far more skeptical about Corweave's growth prospects, saying that it's sitting on a ticking time bomb of mounting debt, stagnating demand for data. centers and old hardware that is depreciating rapidly. Those concerns may have factored into Corweaves pricing ahead of its IPO. It raised $1.5 billion far below its initial target of $3 billion at a valuation of $23 billion.

At one point, it was aiming for evaluation of $35 billion. Toby, Corweave's IPO was supposed to be a landmark moment for AI, but the vibes are off. Yeah, there's two ways to look at this. One, the optimistic take is that this is ushering in a new neoclass category to the stock market. A lot of people have calling it the pure play. That is a little bit of a tongue twist here. AI IPO of the year. And so if you are wanting to, you know, buy into the AI hype, then Corleave is a great bull case for that. But then a lot of people also see it as maybe a highly levered, you know, debt-ridden way for Microsoft, which is one of their biggest

customers, do offload some of its less desirable workload to this company. Or, you know, or for Nvidia, who has an investment in CoreWeave, to turn that small investment into a very large customer. Correve buys a lot of their GPU. So this structure totally works, too, as long as AI demand continues to go up. But if cracks start to form, then Corrieve starts to become a little bit of an ugly duckling. And most of you probably have never heard of Corweave, and that's very understandable. It started in 2017 as an Ethereum cryptocurrency miner as a side project of two trades.

and they were buying all this computing power. And then when, you know, crypto hit the skids in 2021 and 2021, they pivoted to AI. And it's been extremely lucrative. Revenue searched 700% last year alone to hit nearly $2 billion. And that doesn't include a deal they just signed with OpenAI with a contract value of $12 billion through October 2030. So they've been riding this AI wave really well. to immense financial success. However, there does appear to be cracks forming.

One criticism of Corley's business model is that a lot of the Nvidia GPUs that they have, which is 250,000 of these, are Nvidia's H-100 chip, which is dated to 2022. This industry moves so fast. Invidia already has a new generation of chips called Blackwell, and they're rolling out and even another new family of chips next year, and prices on renting out the old one, H-100, are depreciating rapidly. Renting one for an hour used to cost anywhere from $4 to $8.

Now it costs as little as $1. And then also another kind of crack forming is that in a separate report this week, this analyst, T.D. Cowan said that Microsoft is cancelating new data center projects left and right due to an oversupply issue. And so if you are, again, a company like Corrieve that rents out AI compute and you see one of your biggest customers canceling data center contracts, that's not exactly a bullet signal either. So this is going to be a polarizing debut. It could, I mean, I'm just going to give every option.

It could swing either way here depending. But it looks like right now you said the vibes are off and it looks like the bears are maybe the ones that are more prevalent right now ahead of its debut. If your timeline has recently looked like a cross between Spirit Away and every meme ever made, you're not hallucinating. You're just witnessing the magic of ChatGBT's latest upgrade. Earlier this week, OpenAI dropped a major upgrade to its GPT-40 model. You can now natively create and edit images within the ChatGBT app and browser, meaning it added an image-crafting soushift next to the textual line cook you're used to interacting with.

It's also a whole lot better than OpenAI's previous image gen software, Dolly. GPT-40 doesn't spit out things that are clearly AI anymore. It takes a beat longer to think, then deliver images that are quite honestly scarily accurate. It can even manage hands now. Beyond just generation, it can also add, remove, and modify stuff in existing images. So if you wanted to cook up a mock-up image for your pickleball shoe brand and the style of a Don Draper ad, it can do that text in all. The internet quickly got fixated on one particular use case, though.

Studio Ghibli memes. Thousands of AI-generated images started popping up in the style of My Neighbor Totoro and spirited away, but depicting popular internet moments like The Hawk to a girl. Even Open AICO Sam Altman joined the party, changing his profile picture on X to a gibli-ified version of himself. Meanwhile, back at OpenAI HQ, the max giblification effort, was putting some serious strain on its tech. It's been fun seeing people love images in Chachabit, Altman posted, but our GPUs are melting.

Demand got so intense, they had to temporarily rate limit image generation. All in all, there's been this outburst of shock, awe, and in some cases, disgust, Neil, at the abilities of this new technology. Let's talk about that disgust, because the creator of Studio Ghibli, the mastermind behind it, Haya Miyazaki, who created this animation style that is so beloved, over the world and was the subject of all of these memes. What does he think about AI? Well, in 2016, he was shown in AI animation demo, and he said, quote, I am utterly disgusted. If you really

want to make creepy stuff, you can go ahead and do it. I would never wish to incorporate this technology into my work at all. And then he added, I strongly feel that this is an insult to life itself. And, you know, that is the pushback to what we have been seeing over the past few days to swarm everybody's social media feed. There's a lot of questions about how this blurs the line between reality and make made-up stuff. And also, it reminds you that what is created has been trained on millions, perhaps,

of copyrighted works all over the internet. It really is, I can't stress enough to how big of a step forward this was for the image generation capabilities, because when this was rolling out, they did it kind of in stages, and I still had the previous model, And when I was trying to recreate the images people were putting out there, it was just night and day how much worse Dolly was than this.

This is truly the first time where, you know, it is depicting things correctly. It's putting the correct number of fingers on the hands. Remember, AI has always struggled with that. It's so easy to change people into different animation styles. I mean, you know, I was putting your face through it and I made you look like Wallace and Gromit, made you look like South Park. And it is truly remarkable how good it is at capturing the essence. So there was definitely this. shock and awe period where everyone's like, whoa, this is definitely a step forward. But there was also

soon after this big pushback because, you know, these are artistic styles that were developed by people over time and you don't necessarily want to see a program trained on that data, spitting out what was the result of a lot of human hours of effort. Right. And so A.I, Open AI is now facing certain legal questions, which it has for years now over whether it was infringing on people's copyright right now. It does look like capturing A particular style or copying that style is in a legal gray area because you, its style is not explicitly protected by copyright. So OpenAI does not appear to be breaking the law, but you have a bunch of other companies like

the New York Times suing it and this year or this week on Thursday, a judge allowed that lawsuit to proceed. So OpenAI is the best of times. It was the worst of times. Welcome to Stock of the Week, Dog of the Week, the segment where Toby and I pick one stock that has all their weekend plans lined up, and another that's going to text all their friends. So is anyone doing anything tonight?

I won the pre-show game of Tag, you're it, so I get to go first. And my stock is Tesla, which might sound a bit odd. After all, President Trump just slapped 25% tariffs on cars made outside the U.S., which sent most of the auto world plunging yesterday. But not Tesla. Tesla is up more than 16% for the week after analysts pointed out it would emerge as a winner from the new tariffs, well, at least compared to its rivals who are getting walloped. As one Bernstein analyst put it, Tesla wins, Detroit bleeds.

And that's because unlike Detroit automakers, Tesla makes all of its cars for the U.S. market in the U.S. at plants in California and Texas. Detroit's Big Three have sprinkled factories in Canada and Mexico, and bringing those into the U.S. will now cost them. CEO Elon Musk was quick to point out that Tesla isn't completely insulated from the tariffs since they apply not just to finish cars, but car parts. and Tesla doesn't get all of its parts from the U.S. Between 60% and 75% of the components Tesla uses are manufactured in America, depending on the model,

which is why Elon wrote that the tariff impact on Tesla is still significant. As for Elon's relationship with Trump and how that may have impacted the car tariffs, the president said Elon did not advise on the plan due to conflicts of interest. Yeah, I mean, Tesla has made a debut in this category a lot for us, usually in the dog league category because it's kind of been on a downroad spiral. since the election. This was a bout of positive news because of the fact that it is more insulated. Again, it's not completely protected from these tariffs because a lot of parts go into categories. The bat into cars, motors, batteries, raw materials, these still need to be imported from

other countries. But compared to its competitors, it's going to fare a lot better. I mean, if you look at some of the North American competitors that have been maybe stealing some market share from Tesla over the last year, companies like GM, who makes the chef. have the Equinox, Ford who makes the Mach E. A lot of those vehicles are far more exposed than that Tesla is, which is why you saw comparatively it stock do better than those legacy automakers this week. And one particular model to pay attention to when it comes to tariffs is the Tesla Model Y competes in the mid-sized crossover segment.

That category will now see close to half of its vehicles hit with tariffs. Meanwhile, the Model Y probably won't have to raise prices, whereas its competitors do. So in that mid-sized crossover, that's just like one area where you see Tesla emerging as a clear winner because it builds everything here. And that was a long-term plan that Elon Musk executed and it's paying off right now. And then one final, if Tesla is our 1A winner of the week, our 1B winner of the week is Rivian 2, which is another EV maker who does manufacture all of its vehicles in the U.S. as well. So you saw its stock jump about 7% yesterday as well for many of the same reasons that. Tesla's did. Up next, we got our dog of the week. We're the Hartford, with decades of experience ensuring millions of unique small

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that bring it all together. Shop spring backyard days for seven days at the Home Depot. Now through May 6th. Exclusion supplies to homedipo.com slash price match for details. My dog of the week is pretty much every auto company not named Tesla. All big three Detroit carmakers, GM Ford and Stalantis, finished in the red yesterday, especially GM who has the highest exposure to these foreign tariffs.

Roughly 30% of GM vehicles sold in the U.S. during the first three quarters of 2024 were assembled in Canada and Mexico. And it's not just domestic car makers that are feeling the pinch. Foreign car companies are also sweating. For many foreign automakers, the U.S. isn't just a market. It's the market. Nearly one in three Porsches and one in six BMWs and up stateside, along with $8 billion worth of German car parts each year. For instance, the BMW 3 series was once the world's best-selling premium cars, but under the new rules, it's the subject of a 27.5% tariff, potentially adding more than $10,000 to its sticker

price. Even if Ferrari isn't speedy enough to outrun these levies, the super luxury carmaker warn consumers that it plans to hike prices by 10% on select models to cushion the blow from tariffs. Neil, let's just say that it was really easy to find dogs the week by sniffing around the auto industry. If you are someone who likes, you know, German premium cars driving around what is the ultimate driving machine, BMW, then the cars you like will probably face a price hike from these tariffs. You mentioned the BMW 3 series. Another something in this general category is the Audi Q5 SUV. That's made at, Audi is a VW brand. That's made at their factory in Mexico. It's Audi's top-selling U.S. model. So that is just another, another vehicle

in this category of, you know, more premium European cars where they don't have a huge factory footprint in the United States. They make some cars in Europe. They make some cars in Mexico. They make a few cars in the United States as well. But if you enjoy those cars, you might have to pay up for them. And if you have, you know, finer taste in life, I want to talk about Ferrari a little bit because Ferrari price hikes are always kind of wild to think. think about because on the one hand, the dollar amounts themselves are huge. For one SUV that starts at $430,000, that 10% hike amounts to $43,000. But for a limited edition, F80, that sticker price starts at $3.5 million. So that increase adds $350,000 to it. On the other hand, though,

Ferrari customers are obviously a little bit more price resistant than normal folks. So Ferrari stock actually ended the day up because they can weather that 10% price hike more than, you know, a normal person, everyday person buying a car. But it is crazy. They're like, ah, shoot, just tack another $350,000 on there. It doesn't matter to me. For the second time in this podcast, I'm going back to University of Maryland. I'm remembering Econ 101, the concept of price elasticity, and the buyers of Ferrari will probably be able to weather that 10% hike.

It might be us one day, Neil, one day when our ship comes in. Think of a number in your head between 1 and 10. Then do that about a trillion billion more times, and you too can match the output of a new quantum breakthrough courtesy of J.P. Morgan. In a first of its kind discovery, the bank announced it had produced truly random numbers using quantum computing. But wait, can't you just roll a dice, or heck, use a random number generator online to achieve such a thing? Well, don't tell your buddies when picking your fantasy football draft order, but those programs are not really random, and if you run them enough times, eventually they follow predetermined sequences. So J.P. Morgan

is saying its breakthrough means it's the first institution to generate, to mathematically certify truly random numbers using a quantum computer. Partnering with Honeywell in a squad of government labs, J.P. Morgan's discovery paves the way for near-billiproof encryption, smarter trading algorithms, and more simple things like fairer online poker. It's also a major flex for the bank to be the one to make this step forward in quantum computing, which is a field that has long been heavy on hype and light on real-world use cases.

Neil, look at the finance pros go, making quantum breakthroughs in their little vests. making quantum breakthroughs, I'm not sure they know exactly what to do with it. I mean, here is the head of global technology applied research at JPMorgan. He told Bloomberg, it's a breakthrough result. The next step will be to understand where we can apply it. So they've done this cool thing by creating an actual random number generator, which is very important. Now they need to figure out how to apply it to their business.

They say they can do things like solve complex problems, portfolio optimization. derivative pricing, things like that that will obviously help them make more money. So there are certain applications, especially in the cybersecurity world. We'll see how JPMorgan tries to randomize this. Yeah, financial modeling in simulations are a big part that financial analysts use. They use these random numbers to simulate thousands of possible future outcomes for everything from, you know, risk exposure to stock prices. So the more randomness, the better insight you get.

But you're right. With cryptography and cybersecurity, random numbers are the backbone of encryption. everything from securing, you know, your WhatsApp messages to financial transactions, if the numbers aren't truly random, a hacker with a powerful enough computer can start predicting patterns, and that's game over for data privacy. The third reason that I mentioned to is online gambling and gaming, because slots, poker, random number generators are deciding the outcome. So you do want confidence that the things you're waging on are truly random and not, you know, the result of some of these repeating algorithms. Now, if you are, you know, if your ears,

are perking up and you're, this is interesting to you. I recommend going deep into the world of random numbers because there's a long history of scientists and regular people trying to figure out how to generate random numbers because it is hard to do with a computer. So they've looked to external factors to try to translate, you know, the random things that happen in our world to actual randomness in computers that can be used in daily life. So people over history have looked at things like raindrop falling on glasses or bubbles. in a fish tank or the unpredictable behavior of a kitten to try to capture that randomness and translate it to ones and zeros and data.

But there is a very rich history of the search for randomness and relying on external factors or things that happen in nature and using that in real life. Can I tell you my favorite way to generate randomness? It comes from Cloud Fair, which is an internet security company. They have in their San Francisco office what they call the Wall of Entropy. What's the Wall of Entropy? it's a bunch of lava lamps lined up and they have a camera looking at it

and wherever the blobs are going that kind of translates to pixels which translates to random numbers so if you ever want to know why your webpages are secure there's a wall happening in San Francisco a very groovy well I might add of lava lamps you know creating that entropy that is needed

okay I don't want to move on from that story but we have to let's sprint to the finish this Friday with some final headlines knock knock it's Robin Hood I've got your cash you ordered right here That situation could soon be a reality after Robin Hood announced it would start an online banking platform that will include perks like door-dashing cash to your house when you request it. Called Robin Hood Banking, the service is the next step in Robin Hood's evolution from a disruptive trading platform to an all-in-one app for your financial life. If you pay for a gold subscription, $50 per year, you will have access to checking and saving accounts, same-day cash delivery, and even luxury perks like potential masters and MetGala tickets.

Not sure how that will work, but either way, it shows Robin Hood is going after deep-pocketed consumers with a more exclusive-feeling banking experience. Yeah, they're definitely leaning into the exclusivity aspect. They also said that they would give access to private plane, travel, personal chauffeurs. Though, they did not really elaborate on where these perks are actually coming from or how they would work for members. But they're also, you're seeing the evolution of Robin Hood as a platform. It's growing up as a banking platform. They're saying they're going to launch a wealth management aspect. well, where you can invest in this mix of ETFs in stocks.

They would have a little bit of a management fee on top of that. Basically, you're seeing it just start to mirror some of the other features that you would expect of traditional banks with, you know, its own Robin Hoodification flare. Like, the fact that it can deliver cash to your doorstep faster than these legacy banks is something that separates it, even as it is trying to compete and, you know, kind of catch up to them as well. GameStop is getting into the Bitcoin game, but the way it's going about it has investors scratching their heads. The rollercoaster of a mean stop climbed higher earlier this week,

as investors cheered the board's unanimous approval of a plan to buy Bitcoin using corporate cash, copying a move made famous by micro strategy. However, the excitement quickly turned to trepidation when it was revealed that GameStop planned to fund its shopping street by issuing $1.3 billion in debt, leading to a 22% plunge in its stock yesterday. Plus, GameStop's foray into Bitcoin might not be as successful since the stock is already valued at more than twice its cash balance. So analysts are skeptical it can boost that value using the same scheme that the more modestly valued micro strategy popularized. In other words, don't copy other people's homework if you are GameStop. This feels like a stand-up comedian on stage who's kind of bombing and then they just go

immediately to crowdwork to try to save their set. I mean, GameStop is a declining actual business. So this reeks of desperation that it would start buying Bitcoin like Micro Strategy has successfully done. The thing is, GameStop is doing a pretty good job of making its business more efficient and approaching profitability. It closed 1,000 stores last year. Plans on closing a ton more this year. It only has a loss of less than $10 million over the past two years. So it's eking towards profitability, but it's doing stunts like this to stay relevant in the meme stock world, and at least this one did not pay out for them. Finally, it turns out that the Hunger Games still has its fastball as a franchise.

Sunrise on the Reaping, the latest Hunger Games novel from Suzanne Collins, is selling like hotcakes and moved more than 1.5 million copies worldwide during its first week, which is the biggest opening ever for a book in the illustrious series. Its sales in the U.S. over that period have more than doubled that of its predecessor, the Ballot of Songbirds and Snakes, and more than triple the number for mocking Jay, which came out in 2010 and is the last book that I thought existed in the series. But clearly, the dystopian world of Pan Am still has a stranglehold on the literary community. It does.

And the film community as well, this franchise has made over $3 billion at the box office. They already optioned this book for another movie coming out in 2026. So Suzanne Collins, I mean, what an absolute juggernaut. I also, though, had to look at Onyx Storm, which is Rebecca Yaros book in the fourth-wing series. 2.7 million copies in its first week. So it looks like the new age of Romanticie is surpassing, you know, the old guard of Hunger Games, even though Hunger Games, you know, still has some juice left in it. I think so. Let's wrap it up there. Thanks for starting your morning with us and have a wonderful Friday. For any questions, comments, or feedback, send an email to Morningbrewdaily

at Morningbrew.com. Let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Olivia Graham and Olivia Lake are our associate producers. Yuchinawa Ogu is our technical director, Scoop Starteris is on audio, hair, makeup, volunteers as tribute. Devin Emery is our chief content officer and our show is the production of Morning Brew. Great show today, Neil. I wish you all well. All pay off your home, travel for life, drive a Ferrari. In celebration of the world premiere of the Monopoly Big Board Buckslot Machine by Aristocrat Gaming, Yamava Resort and Casino at San Manuel is giving one person a $1.6 million dream package. The biggest prize in Yamaba's history.

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