Tech Brew Ride Home - Fri. 02/09 – Sam Altman Wants To Raise $5 Trillion Dollars. With a T.

Episode Date: February 9, 2024

Sam Altman wants to raise more money for his chip ambitions than the entire semiconductor industry. The Feds might put the breaks on Microsoft’s acquisition of Activision… again. Is Ring raising its subscription doorbell prices too much? And, of course, the weekend longreads suggestions. Sponsors: Robinhood.com/boost Links: Sam Altman Seeks Trillions of Dollars to Reshape Business of Chips and AI (WSJ) Exclusive: Nvidia chases $30 billion custom chip market with new unit -sources (Reuters) Disney’s Epic Deal Values Fortnite Maker at $22.5 Billion, a Sharp Cut (The Information) Activision Had Planned Layoffs Before Merger, Microsoft Says (Bloomberg) Ring video doorbell customers angry at 43% price hike (BBC) Ring is raising the price of its cheapest subscription plan by 25 percent (The Verge) Arm shares surge 48% after SoftBank-controlled chip designer issues strong forecast (CNBC) Weekend Longreads Suggestions: Can AI Unlock the Secrets of the Ancient World? (Bloomberg Businessweek) AI Just Discovered 'Unreadable' Ancient Scrolls (National Geographic) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Friday, February 9th, 2024. I'm Brian McCullough today. Sam Altman wants to raise more money for his chip ambitions than the entire semiconductor industry. The feds might put the brakes on Microsoft's acquisition of Activision again.

Is Ring raising its subscription doorbell prices too much? And of course, the weekend long-rate suggestions. Here's what you miss today in the world of tech. When I say it sounds like Sam Altman is serious about the hardware end of AI. mean, it sounds like he's really serious. Sources are telling the Wall Street Journal that Sam Altman is in talks with investors, including the United Arab Emirates government, to raise funds for an AI chip initiative that would require raising as much as $5 to $7 trillion.

Let me say that again. He's looking to raise $5 to $7 trillion with a T. Quote, the fundraising plans which face significant obstacles are aimed at solving constraints to OpenAI's growth, including the scarcity of the pricey AI chips required to train large language models behind AI systems such as ChatGPT. Altman has often complained that there aren't enough of these kinds of chips known as graphics processing units or GPUs to power OpenAI's quest for artificial general intelligence, which it defines as systems that are broadly smarter than humans. Such a sum of investment would dwarf the current size of the global semiconductor industry.

Global sales of chips were $527 billion last year and are expected to rise to $1 trillion annually by 2030. Global sales of semiconductor manufacturing equipment, the costly machinery needed to run chip factories last year were $100 billion, according to an estimate by the Industry Group semi. The amounts Altman has discussed would be outlandishly large by the standards of corporate fundraising, larger than the national debt of some major global economies and bigger than giant sovereign wealth funds. Total U.S. corporate debt issuance last year was $1.44 trillion, according to the Securities Industry and Financial Markets Association. The combined market capitalization of Microsoft and Apple, two of the highest valued businesses in the U.S., is roughly $6 trillion, end quote. Altman has apparently met with UAE officials in recent weeks and with Masasan, of course.

Now, aside from those eye-popping numbers, more money than the global semiconductor industry itself, think of what this would do to the global startup investing ecosystem, even if this is largely done with debt or something like that. Middle Eastern sovereign wealth funds have increasingly been funding the venture capital industry in recent years. And you would think that Altman would need to raise from more than just them. So if a huge chunk of the global pool of investable money is tied up in something with a $5 trillion with a T valuation, what would that do to the available money for other startups, other investing? Meanwhile, sources are telling the Financial Times that Open AIs annualized revenue hit $2 billion in December, up from $1.3 billion just back in October.

And the company believes it can more than double that figure in 2025. So, you know, Arrow go up. Hot on the heels of that, Reuters says that Nvidia plans to build a whole new business unit focused on designing custom chips, including AI chips, for cloud companies. Custom chips are already a $30 billion market. Quote, the dominant global designer and supplier of AI chips aims to capture a portion of an exploding market for custom AI chips and to protect itself from the growing number of companies interested in finding alternatives to its products. The Santa Clara, California-based

Nvidia currently controls about 80% of the market for high-end AI chips, a position that has sent its market value up 40% so far this year to $1.73 trillion after it more than tripled in 2023. Invidia's H-100 and A-100 chips serve as a generalized all-purpose AI processor for many of those major customers. But the tech companies have started to develop their own internal chips for specific needs. Doing so helps reduce energy consumption and potentially can shrink the costs and time to design. Invita is now attempting to play a role in helping these companies develop custom AI chips that have flowed to rival firms, such as Broadcom and Marvel Technology, according to the sources who declined to be identified because they were not authorized to speak publicly.

Nvidia does not disclose H-100 prices, which are higher than for the prior generation A-100, but each chip can sell from $16,000 to $100,000 depending on the volume purchase and other factors. Meta has said it plans to bring its total stock to 350,000 H-100s this year. NVIDIA officials have met with representatives from Amazon, Meta, Microsoft, Google, and OpenAI to discuss making custom chips for them, according to two sources familiar with the meetings. Beyond data center chips, the company has pursued telecom, automotive, and video game customers. In 2022, Nvidia said it would let third-party customers integrate some of its proprietary networking technology with their own chips. The company has said nothing about the program since, and Reuters is reporting its wider ambitions for the first time, end quote.

Meanwhile, remember that $1.5 billion investment Disney made in Epic games. We have more details on that. Disney's investment will give it a 9% stake in Epic at a valuation of $22.5 billion, which is down around 29% from Epic's 2022 valuation of $31.5 billion, quoting the information. The equity deal is part of a multi-year project for the two companies to create, quote, an all-new, open, persistent and social universe that will bring Disney stories and experiences to life interoperating with Fortnite, Epic said, in a press release. Epic expects its partnership with Disney to generate more revenue than the roughly $2 billion it gets from Fortnite annually, the person said. The price Disney paid is roughly

in line with where mutual funds such as Fidelity, Tiro Price, and BlackRock have marked their stakes in Epic games recently, according to Caplight, which tracks the secondary market for private startup stock. The Disney deal is the latest step in a winding financial history for Epic, which Chief Executive Officer Tim Sweeney started in his parents' basement in 1991. He sold a 40% stake to Tencent in 2012 and raised $1.25 billion in 2017 from KKR, Vulcan Capital, and Kleiner Perkins, at a $15 billion valuation. 2021 and 2022, Epic raised hundreds of millions of dollars from companies such as Sony and the parent company of Lego, as well as financial firms like Appaloosa Management, KKR, and GIC in successive

deals that valued the firm at $28.7 and $31.5 billion, respectively, end quote. Bit of a speed bump here. Word came down yesterday that the FTC is seeking a pause in Microsoft's Activision Blizzard acquisition. Why? Because a couple weeks ago, Microsoft announced plans to lay off around 1900 workers at both Activision and its Xbox unit, and the FTC is arguing those layoffs contradict Microsoft's prior claims about running Activision as a separate business. But Microsoft immediately responded in court by saying Activision had planned layoffs before the merger, quoting Bloomberg. In its letter, Microsoft said that while some of the layoffs relate to overlap between its existing staff and Activision, the company continues to operate

its newly acquired unit in such a way that it could be spun off if later required to buy the court. Quote, consistent with broader trends in the gaming industry, Activision was already planning on eliminating a significant number of jobs while still operating as an independent company. Microsoft told a federal appeals court in San Francisco, the recent announcement thus cannot be attributed fully to the merger, end quote. I mean, they do have a point considering the layoff bloodbath in the gaming industry in recent months, but we'll see if the feds buy that. In the streaming wars, at least, it seems like people have largely accepted all the price rises for their streaming services, but there is a point where consumers will rebel

over something costing more, as Ring, the Video Doorbell Division of Amazon, is maybe finding out. Ring customers are all over the internet right now complaining vociferously about a huge price hike coming next month. Quoting the BBC, after buying the devices, customers can pay a subscription to store footage in the cloud, download clips, and get discounted products. That subscription is going up 43% in Britain from 3499 to 499 per device per year for Basic Plan customers. The firm, which is owned by Amazon, insisted it still provided, quote, some of the best value in the industry. Its customers appear not to agree. One took to the ring message board to say they would cancel their subscriptions and boycott the company. Another user wrote, quote,

40% plus increase in annual fee for no extra benefits, not even an attempt to justify, end quote. Many other customers said they had now canceled their subscriptions, while some said they had previously recommended the cameras but would not do so now. In a statement, Amazon said, quote, since Ring launched its Protect Basic plan in 2015, we've regularly found ways to enhance the plan to give our customers more value. As we continue to invest in the services we offer, we are updating our Protect Basic Plan pricing, end quote. The basic plan has doubled since 2022 when it costs $24.99 per year for each device. Ring customers can also pay monthly for them. Charges are increasing from $3.49 to $499 a month, end quote.

The Verge says that here in the U.S., the price is going up 25%. 499 monthly or $4999 yearly to subscribe to the Ring Protect Basic Plan, an increase of $1 a month or $10 a year. And as the Verge points out, quote, without a subscription, all you can do with a ring camera is view a live stream and get alerts for motion from your camera. The hikes feel designed to push users to subscribe to the company's higher price plans, which are not increasing. The next tier up, $10 a month or $100 a year, covers unlimited cameras and now makes more sense if you have two or more ring devices. Then it's an easier jump to add yet another camera since it won't cost you any more per month, end quote. Lots of weird funding and finance news today, and we already mentioned Masasan

briefly, but hey, SoftBank seems to be bouncing back. They reported net profit of $6.4 billion in its most recent quarter after four quarters of losses, lifted by a T-Mobile U.S. shares windfall. The Vision Fund unit reported a $2.85 billion gain, and that looks like it could be significantly more, because remember, SoftBank used to own Arm. Then they took Arm Public recently. It's a publicly traded company now reporting earnings, and Arm earnings are good. Arm stock closed 47. 8, 9% higher after issuing a strong profit forecast, adding around $38 billion to its market cap. Now, here's the thing. More than $34 billion of that will accrue to SoftBank because SoftBank still

owns 90% of Arm. Quoting CNBC, acquired by Masayoshi-Sone SoftBank in 2016 for $32 billion, Arm went public on the NASDAQ in September. The company sold shares at a $51-a-piece share price in its IPO, and that was trading above $122 a share on Thursday. Son remains chairman of the company, and he's joined on the board by SoftBanks-Ran Fisher. Because of SoftBanks' overwhelming control of the stock, Arm shares remain thinly traded compared to other large-cap companies. That could change in the coming months after the post-IPO lockup period ends in March, and insiders, including SoftBank, are finally able to sell shares.

SoftBank's flagship tech investment arm had a rough time in the fiscal year that ended in March last year, posting a record loss of around $32 billion. amid a slump in tech stock prices and the souring of some of the businesses' bets in China. The company's cumulative loss on WeWork topped $14 billion, end quote. But I guess the lesson here is, you only have to be right once if the bet you're right on was big enough. Time for the week on Long Read Suggestions, and this week there's only one, but it comes in two parts. You might have heard researchers recently used AI to read the Herculaney papyri charred in AD 79 by Mount Vesuvius' eruption. And if they are successful in reading

this trove of documents, it could potentially rewrite key parts of ancient world history. And there's a tech angle to this. You might know Nat Friedman as one of the most prominent investors of this AI era, also the former CEO of GitHub. Turns out Nat personally funded the research that led to this breakthrough. Quoting Bloomberg, The Herculaneum papyri are a collection of scrolls whose status among classicists approaches the mythical. The scrolls were buried inside an Italian countryside villa by the same volcanic eruption in 79 AD that froze Pompeii in time. To date, only about 800 have been recovered from the small portion of the villa that's been excavated. But it's thought that the villa, which historians believe belonged to Julius Caesar's prosperous father-in-law,

had a huge library that could contain thousands or even tens of thousands more, Such a hall would represent the largest collection of ancient texts ever discovered, and the conventional wisdom among scholars is that it would multiply our supply of ancient Greek and Roman poetry, plays, and philosophy by many fold. High on their wish lists are works by the likes of Sappho and Sophocles, but some say it's easy to imagine fresh revelations about the earliest years of Christianity as well. The reason we don't know exactly what's in the Herculaneum papyri is, you know, volcano. The scrolls were presented. by the voluminous amount of super hot mud and debris that surrounded them, but the knock-on effects of Mount Vesuvius charred them beyond recognition. The ones that have been excavated look like leftover logs in a doused campfire. People have spent hundreds of years trying to unroll them, sometimes carefully, sometimes not. And the scrolls are brittle. Even the most meticulous

attempts at unrolling have tended to end badly, with them crumbling into ashy pieces. In recent years, efforts have been made to create high-resolution 3D scans of the scroll's interiors, the idea being to unspool them virtually. This work, though, has often been more tantalizing than revelatory. Scholars have been able to glimpse only snippets of the scrolls, innards, and hints of ink on the papyrus. Some experts have sworn they could see letters in the scans, but consensus proved elusive, and scanning the entire cache is logistically difficult and prohibitively expensive for all but the deepest pocketed patrons. Anything on the order of words or paragraph says long remained a mystery. But Nat Friedman wasn't your average Rome-loving dad. He was the chief executive

officer of GitHub, the massive software development platform that Microsoft acquired in 2018. Within GitHub, Friedman had been developing one of the first coding assistants powered by artificial intelligence, and he'd seen the rising power of AI firsthand. He had a hunch that AI algorithms might be able to find patterns in the scroll images that humans had missed. After studying the problem for some time and ingratiating himself with the classics community, Friedman, who's left GitHub to become an AI-focused investor, decided to start a contest. Last year, he launched the Vesuvius' challenge offering $1 million in prizes to people who could develop AI software capable of reading four passages from a single scroll. Maybe there was obvious stuff no one

had tried, he recalls, thinking, my life has validated this notion again and again, end quote. As the months ticked by, it became clear that Freeman's hunch was a good one. Contestants from around the world, many of them 20-somethings with computer science backgrounds, developed new techniques for taking the 3D scans and flattening them into more readable sheets. Some appeared to find letters, then words. They swapped messages about their work and progress on a discord chat, as the often much older classicists sometimes looked on and hopeful awe and sometimes slagged off the amateur historians. On February 5th, Friedman and his academic partner, Brent Seals, a computer science professor and scroll expert, planned to reveal that a group of

contestants has delivered transcriptions of many more than four passages from one of the scrolls. While it's too early to draw any sweeping conclusions from this bit of work, Freeman says he's confident that the same techniques will deliver far more of the scrolls contents. My goal, he says, is to unlock all of them, end quote. Well, as mentioned, they did on Monday reveal the details of the first scrolls to be read, and the final link in the show notes is to a National Geographic article about that. No weekend bonus episodes for you this weekend, though we've got more coming down the pike beginning next week.

Talk to you on Monday.