Tech Brew Ride Home - Fri. 03/15 – Apple’s Quiet AI Acquisition

Episode Date: March 15, 2024

Remember that Apple has quietly made more AI acquisitions than anyone else? They quietly made another one. The FCC has a new definition for broadband. Looks like everybody knows the EU is a stick they can beat Apple with now. And, of course, the Weekend Longreads Suggestions. Sponsors: Robinhood.com/boost Links: Apple Buys Canadian AI Startup as It Races to Add Features (Bloomberg) FCC scraps old speed benchmark, says broadband should be at least 100Mbps (ArsTechnica) Spotify says its iPhone app updates in the EU are getting held up by Apple (The Verge) Pornhub Disables Website in Texas Over Age-Verification Law (Variety) Weekend Longreads Suggestions: Can Reddit Survive Its Own IPO? (Wired) One Big Reason Gen Z Is Still on Facebook: To Save Money (NYTimes) How Nvidia beat everyone else in the AI race (Vox) 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 TechMean right home for Friday, March 15th, 2024. I'm Brian McCullough today. Remember that Apple has quietly made more AI acquisitions than anyone else.

They quietly made another one. The FCC has a new definition for broadband. Looks like everybody knows the EU is a stick they can beat Apple with now. And of course, the weekend long-read suggestions. Here's what you miss today in the world of tech. Mark German says Apple recently acquired Darwin AI, which makes tech for inspecting components during manual. manufacturing processes, but also focuses on making AI systems smaller and faster.

Quoting Bloomberg. The iPhone maker purchased the business earlier this year, and dozens of Darwin AI's employees have joined Apple's artificial intelligence division, according to people with knowledge of the matter, who asked not to be identified because the deal hasn't been announced. Darwin AI has developed AI technology for visually inspecting components during the manufacturing process and serves customers in a range of industries, but one of its core technologies is making artificial intelligence systems smaller and faster. That work could be helpful to Apple, which is focused on running AI on devices rather than entirely in the cloud. Alexander Wong, an AI researcher at the University of Waterloo, who helped build the business, has joined Apple as a director in its AI group

as part of the deal. The Under the Radar acquisition comes ahead of a big AI push for Apple this year. The company is adding features to its iOS 18 software that rely on generative AI, the technology behind ChatGBTBT and other groundbreaking tools. Chief Executive Officer Tim Cook has promised that Apple will, quote, break new ground in AI this year, and an announcement is expected as soon as the company's worldwide developers conference in June. Internally, Apple has started integrating generative AI into its operations using the technology to assist with customer service requests. It's also planning to add features to its software for auto-creating presentations and completing blocks of text. And Apple is working on a new

version of its Xcode programming software that uses AI to help developers write code, end quote. The FCC has raised its official broadband speed benchmark to 100 mbPS for downloads and 20 mbps for uploads. From the previous standard of 25 mbps and 3 mbps set in January 2015, that's a big increase. Quoting R's Technica, in FCC press release after today's 3 to 2 vote said the 120 benchmark is, quote, based on the standards now used in multiple. federal and state programs, such as those used to distribute funding to expand networks. The new benchmark also reflects, quote, consumer usage patterns and what is actually available from and marketed by internet service providers, the FCC said. The previous standard of 25 mbPS downstream and 3 mbPS upstream lasted through the entire

Trump era and most of President Biden's term. There has been a clear partisan divide on the speed standard, with Democrats pushing for a higher benchmark and Republicans arguing that it shouldn't be raised. The standard is partly symbolic, but can't. and indirectly impact potential FCC regulations. The FCC is required under U.S. law to regularly evaluate whether, quote, advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion and to take immediate action to accelerate deployment and promote competition if current deployment is, quote, not reasonable and timely. Today's three to two party line vote

approve the 100 MbPS, 20 MbPS standard, and a report concluded, quote, that advanced telecommunications capability is not being deployed in a reasonable and timely fashion. The FCC. C.C. said in its press release. The conclusion is, quote, based on the total number of Americans, Americans in rural areas, and people living on tribal lands who lack access to such capability, and the fact that these gaps in deployment are not closing rapidly enough. The press release said, based on data from December 2022, the FCC said that fixed broadband service, excluding satellite, quote, has not been physically deployed to approximately 24 million Americans, including almost 28% of Americans in rural areas and more than 23% of people living

on tribal lands, end quote. I think people have realized that Apple is vulnerable in Europe in an email to the European Commission. Spotify says Apple is holding up an iPhone app update that adds pricing information and links to subscriptions. Quoting the verge, Spotify writes that Apple has, quote, neither acknowledged nor responded to Spotify's submission to bring subscription pricing information into the app, preventing it from updating the app at all for its users, even to put out fixes for bugs or add other features. On March 5th, Spotify submitted an update to Apple that puts links to Spotify's website, along with pricing information for different subscription options directly in the EU version of its app without using Apple's payment system.

Spotify made the change in response to a ruling issued the day before by the European Commission, which said Apple's anti-steering rules are illegal and ordered Apple to start allowing developers to include information about alternative and cheaper music subscription services. In an email, Spotify says it hasn't heard back from Apple since submitting the update. The company writes that this is, quote, yet another example of how Apple, if unchecked, will seek to circumvent and or not comply with the commission's decision. It also urges the European Commission to contact Apple and requires that it approve Spotify's changes. Given Apple's track record, Spotify is confirmed that Apple's delay is intentional and is aimed at delaying or avoiding compliance altogether,

the email reads. It's been nine days now, and we're still waiting to hear from Apple about our app submission to show EU consumers pricing and a link to our website, which we are now authorized to do by the European Commission's decision on the music streaming case. Spotify spokesperson Jean Moran says in an email statement to the verge, Apple's delay directly conflicts with its claim that they turn around reviews on app submissions within 24 hours, and it also flies in the face of the timeline for adoption the commission laid out, end quote. You'll recall that Apple revoked Epic Games' developer license only to swiftly reverse course

after what was called a, quote, swift inquiry from the European Commission. I have speculated on this show about what the possible political fallout could be if Americans lost access to TikTok, but I always wonder, where are the politics of this? Quoting Variety, Pornhub and other affiliated adult websites have blocked access to users in Texas amid a legal battle with the Lone Star State's Attorney General over an age verification law. Last week, a federal appeals court upheld a Texas law requiring pornography sites to institute age verification measures to ensure only adults 18 and older are able to access them, while it also struck down a part of the law requiring porn sites to display health warnings about the content. That came after a previous federal judge's ruling that the Texas law violated the U.S. Constitution's First Amendment

prohibition against free speech restrictions. The Texas Attorney General's Office immediately appealed that decision. A new message displayed Thursday to users with internet addresses in Texas on Pornhub and other sites operated by parent company ILO explained that it was disabling access to comply with the law as first reported by the Houston Chronicle. As you may know, your elected officials in Texas are requiring us to verify your age before allowing you to access our website. Not only does this impinge on the rights of adults to access protected speech, it fails strict scrutiny by employing the least effective and yet also most restrictive means of accomplishing Texas's stated purpose of allegedly protecting minors. The message reads in part, the Pornhub

cites message continued. Until the real solution is offered, we have made the difficult decision to completely disable access to our website in Texas. In doing, so we are complying with the law, as we always do, but hope that governments around the world will implement laws that actually protect the safety and security of users, end quote. Pornhub called the Texas Age verification ineffective, haphazard, and dangerous, and asserted that it will drive users, quote, from those few websites which comply to the thousands of websites with far fewer safety measures in place, which do not comply. Very few sites are able to compare to the robust trust and safety measures we currently have in place to protect minors and user privacy.

any legislation must be enforced against all platforms offering adult content, end quote. The Texas law was signed by Republican Governor Greg Abbott in June 2023. The legislation Texas HB-11811 was scheduled to go into effect on September 1st, but it was on hold after the lawsuit filed by the Free Speech Coalition, a group that includes Pornhub's parent company, resulted in a preliminary injunction, staying its enforcement. The law applies to online publishers whose content is more than one-third, quote, sexual material harmful to minors, and requires them to verify the age of all visitors using a government-issued ID or public or private transactional data. Pornhub and the company's network of other sites are also blocked or restricted in at least

seven other U.S. states, Arkansas, Louisiana, Mississippi, Montana, North Carolina, Virginia, and Utah, which have adopted similar laws, end quote. Time for the weekend long read suggestions. First up, while looking ahead at the Reddit IPO, this wired piece also takes a deep look back at Reddit's history. quote, one day in the spring of 2005, Huffman and O'Hanian, then a pair of college housemates at the University of Virginia traveled to Boston to attend a lecture by tech investor Paul Graham. They were hoping Graham would autograph a copy of his book and pressing their luck that they'd be

able to pitch him over coffee. When Graham agreed to hear them out, the two fourth years told them their big idea, a mobile platform that would allow customers of places like sheets, the Mid-Atlantic convenience store chain, to order sub-sambuages from their phones while, say, pumping gas. gas. Graham was about to launch a startup incubator called Y Combinator, and he was impressed by the young undergrads, but to secure a spot in Y Combinator's first class of startups, Graham told them they needed a new idea. He even crystallized it for them. They should create a front page of the internet, a real-time forum for links to satisfy the curious and the board. To seal the

deal, YC gave them $12,000 in seed funding at a preposterously short timeline. Huffman, who had been programming since he was eight, coded the platform over three weeks late that spring. came up with the name Reddit, as in I Reddit. Every day, he sketched versions of what he described as a generalist alien mascot named Snoo, as in what's new. When it launched, Reddit let users vote on whether an item was interesting or boring, and those votes determined the order in which the items appeared. To attract users by making the site appear lively, Huffman and O'Hanian created sock puppet or fake accounts. Sam Altman, who was working on his own YC startup, became one of Reddit's first real users. Chris Slow and the late Hacker Act

activist Aaron Swartz put aside their YC projects to help Huffman with engineering. Within a year, Reddit began allowing comments and opening forums for topics like sports, politics, and programming, and one called NSFW, or Not Safe for Work. On all these subreddit's people whose post-garned significant upvotes built up karma, a publicly visible but secretly calculated measure of someone's contribution to Reddit, inspired by scoring systems in video games, end quote. Then we've been recently talking about how, after all this time, the big blue app continues to grow. It seems that Facebook has so many nooks and crannies and various features over the years that there's something that keeps almost everyone coming back. For my mom, it's her Facebook groups for quilting. For Gen Z,

at least according to this New York Times article, it's Facebook Marketplace, quote, launched in 2016, Marketplace has over a billion monthly active users and is the second most popular online site for secondhand goods behind eBay, according to a 2022 survey by Statista, a company that provides market data. Meta doesn't say much about Marketplace as a business, how its demographics may differ from Facebook overall and whether it has a vision to grow the platform in its annual reports. Meta did not respond to questions about whether it has long-term business goals for Marketplace or if it was aware of the platform's popularity among Gen Z. Some buyers say they prefer Marketplace over Craigslist, which was popular among older generations,

searching for used goods because unlike Craigslist users, Marketplace buyers, and sellers have profiles with ratings that make them more trustworthy, and messaging is built in on Facebook making communication easy. Marketplace is free for buyers to use. Although sellers can encounter transaction fees, many of them avoid it by selling locally and asking buyers to bring cash when picking up their purchase. Ms. Chu said she usually paid using Venmo, though she would bring cash if a seller insisted. Ms. Chu and Ms. Sue said their favorite marketplace purchase was a couch from Westdown, which the seller had for less than a year. The couch cost $1,200 at retail, and they purchased it for $145. Ms. Chu said the seller had warned her that the couch had cat scratch marks,

but when she and Ms. Sue showed up to look at it, they didn't see many scuffs, end quote. And finally today, from Vox. I mean, look, it's just another look at where Nvidia is at this moment in time. Quote, just think of Invidia as the the Birken bag of AI chips. A comparable offering from another chipmaker, AMD, is reportedly being sold to customers like Microsoft for about $10,000 to $15,000, just a fraction of what Nvidia charges. It's not just the AI chips either. Invidia's gaming business continues to boom, and the price gap between its high-end gaming card and similarly performing ones from AMD has been growing wider. In its last financial quarter, Nvidia reported a gross margin of 76%.

as in, it cost them just 24 cents to make a dollar in sales. AMD's most recent gross margin was only 47%. It's undeniable that Nvidia put in the investment into courting the AI industry well before others started paying attention, but its grip on the market isn't unshakable. An army of competitors are on the march, ranging from smaller startups to deep-pocketed opponents, including Amazon, Meta, Microsoft, and Google, all of which currently use Nvidia chips. The biggest challenge for Nvidia is that their customers want to compete with them. says an analyst. It's not just that their customers want to make some of the money that

Nvidia has been raking in. It's that they can't afford to keep paying Nvidia so much. Microsoft, quote, went from spending less than 10% of their capital expenditure on Nvidia to spending nearly 40%. Another analyst says, that's not sustainable. The fact that over 70% of AI chips are bought from Nvidia is also caused for concern for antitrust regulators around the world. The EU recently started looking into the industry for potential antitrust abuses. When NVIDIA announced in late 2020 that it wanted to spend an eye-popping $40 billion to buy Arm, a company that designs a chip architecture that most modern smartphones and newer Apple computers use, the FTC blocked the deal. That acquisition was pretty clearly intended to get control

over a software architecture that most of the industry relied on, says Pine Art. The fact that they have so much pricing power and that they're not facing any effective competition is a real concern, end quote. As I said, the interview with the perplexity CEO, will be the bonus episode this weekend. Enjoy that. We're popping down to Miami for a baptism this weekend, but by popping down, I mean we'll be gone for less than 48 hours. So no vacation, just a trip. Talk to you on Monday.