Tech Brew Ride Home - Tue. 03/26 – Musical Chairs As Microsoft Reorganizes Itself Around AI

Starting point is 00:00:00 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 Tuesday, March 26, 2024. I'm Brian McCullough today. Executive shuffling indicates that Microsoft is serious about reorganizing itself around AI. The U.S. and UK move against those alleged Chinese infrastructure hackers. Open AI seems to be courting Hollywood for its SORA tool,

Starting point is 00:00:51 and is the IPO window finally open for tech companies? Here's what you missed today in the world of tech. Microsoft has a new windows and surface head honcho. The company has named Pavans. and Davuluri to the role, Microsoft split the Windows and Surface groups after Panos Penae left in September. Also, this probably relates to the shakeup around Microsoft AI, quoting the verge. Davaluri has worked at Microsoft for more than 23 years and was deeply involved in the company's work with Qualcomm and AMD to create custom surface processors. Mikhail Perakken will now report to Kevin Scott during a transition phase, but his future at Microsoft looks uncertain, and it's likely those new roles will be outside the company. Berkin had been working closely on Bing Chat before taking on the broader Windows engineering challenges to Microsoft Edge. The Windows shakeup comes just days after Google DeepMind co-founder

Starting point is 00:01:50 and former Inflection CEO, Mustafa Suleiman, joined Microsoft as the CEO of a new AI team. Microsoft also hired a bunch of Inflection AI employees, including co-founder Karen Simonian, who is now the chief scientist of Microsoft AI. As a result, most of Inflection staff is joining Microsoft AI in what is being seen as a talent acquisition that, carefully avoids direct regulatory scrutiny. Suleiman is now the CEO of Microsoft AI, a new team that will handle the company's consumer-facing AI products like co-pilot Bing and Edge. Suleiman reports directly to Microsoft's CEO Sachin Nadella, and it looks like he was set to manage Mikhail Periken, but that's no longer the case. Microsoft says the Windows team will work closely with the

Starting point is 00:02:28 Microsoft AI team on AI, Silicon, and experiences, but there's going to be some interesting areas of potential overlap that these new leaders are going to have to navigate. Microsoft AI now looks after Edge, a browser that's a key part of the Windows experience, end quote. Canva has acquired the Affinity Creative Suite, popular with Mac users. C.O. Cliff Obrecht says the cash and stock deal is valued at, quote, several hundred million pounds. Quoting Bloomberg. It's the biggest outlay yet by Australia's most valuable startup priced at $26 billion in its latest share sale and marks a milestone in the expansion of its range of professional tools. Joining Canva, is the entire 90-person team of Nottingham, UK-based serif, the startup responsible for Affinities

Starting point is 00:03:20 Portfolio Photo Editing, Publishing, and Illustration Software. Affinities apps have been featured in Apple's presentations of creative products and are, quote, the final piece in our jigsaw, Obrecht said. They will now be used to complement Canva's selection of artificial intelligence powered tools as the Australian firm bolsters its offering of online workspaces. Founded about a decade ago, Canva has grown into the most capable competitor to Adobe, the longtime dominant provider of software for graphics professionals. Adobe has added AI features throughout its products recently, but its shares have fallen more than 15% this year. After a $20 billion deal to acquire Figma fell through in December, investors have long viewed Canva as a candidate to go public,

Starting point is 00:04:01 though the company hasn't discussed plans for doing so. It recently completed a $1.5 billion secondary share sale, Obrecht says. The startup, which has focused on making easy-to-use products targeted at people without formal design training, surpass $2.1 billion in annualized revenue, and has over 175 million users. It added over 90 million new users over the past 18 months, helped by new AI features. The Australian Upstart has now acquired a total of seven companies in Europe, including Visual AI startup, Kaleido AI, and image providers Pexcells and Pixabay, as it looks to expand its presence on the continent, end quote. The U.S. and UK have sanctioned a Wuhan-based company linked to the Chinese state-backed hacking group APT-31 for targeting critical infrastructure organizations, quoting bleeping computer.

Starting point is 00:04:56 These operations targeted U.S. critical infrastructure as well as U.S. business and politicians in support of China's foreign intelligence and economic espionage activities. Over 10,000 malicious emails impacting thousands of victims across multiple continents, as alleged in today's indictment, this prolific global hacking. operation backed by the PRC government, targeted journalists, political officials, and companies to repress critics of the Chinese regime, compromised government institutions, and steal trade secrets, said Deputy Attorney General Lisa Monaco on Monday. These allegations pull back the curtain on China's vast illegal hacking operation that targeted sensitive data from U.S. elected and government officials, journalists and academics, valuable information from American companies and political dissidents in America and beyond, added U.S. attorney, Breon Peace. The State Department is now also

Starting point is 00:05:43 offering rewards of up to $10 million for information on Wuhan XRZ, APT-31, or any of the seven Chinese MSS hackers. The United Kingdom also sanctioned Wuhan XRZ and the two APT-31 operatives for targeting UK parliamentarians hacking the GCHQ intelligence agency and breaching the UK's electoral commission system. The UK can reveal today that the National Cybersecurity Center, a part of GCHQ, assesses that the UK Electoral Commission systems were highly likely compromised by a Chinese state-affiliated entity between 2021 and 2022, a press release issued today says. Between late 2021 and October 2022, the Electoral Commission's systems were compromised by a China-state-affiliated cyber actor. NCSC assesses it is highly likely that the China-state-affiliated cyber actor APT-31

Starting point is 00:06:35 conducted reconnaissance activity against UK parliamentarians during a separate campaign in 2021, end quote. OpenAI has released seven SORA videos from select filmmakers, artists, ad agencies, and musicians. Fairly trained CEO Ed Newton Rex calls that artist washing. Quoting Venture Beat. Open AI has been releasing a steady drip of videos generated by its new highly realistic AI model SORA, but the text-to-video and image-to-video tool remains out of reach to the public still. Now for the first time, the generative AI startup is showing off select SORA creations made by a group of outside filmmakers, artists, advertising agencies, and musicians that have been given access to the model.

Starting point is 00:07:22 While we have many improvements to make to SORA, we're already getting a glimpse of how the model can help creatives bring ideas to reality the company wrote in a blog post published today, including seven of the videos generated by its select group of Sora invitees. Just last week, the new indie horror film Late Night with the Devil, was criticized by dozens online for its use of AI to create still images for certain transitions and seemingly set decor, with some even calling for a boycott on it and any film that used AI instead of hiring artists using more traditional methods. Today, in reaction to the new wave of third-party SORA videos, former stability AI executive and current Fairly Trained CEO Ed Newton Rex posted on X that

Starting point is 00:08:02 Open AI was, quote, artist washing when you solicit positive comments about your generative AI model from a handful of creators while training on people's work without permission slash payment, end quote. Fairly trained is a new nonprofit that certifies AI models that can demonstrate they have been trained on only licensed or public domain data, end quote. This comes on the back of news that OpenAI has been meeting with Hollywood Studios, also media executives and others to form partnerships to encourage filmmakers to integrate Sora into their work. Quoting Bloomberg, the upcoming meetings are just the latest round of outreach from OpenAI in recent weeks, said the people who asked not to be named as the information is private.

Starting point is 00:08:40 In late February, OpenAI scheduled introductory conversations in Hollywood, led by Chief Operating Officer Brad Lightcap, along with a couple of his colleagues, Lightcap demonstrated the capabilities of Sora an unreleased new service that can generate realistic looking videos up to about a minute and length based on text prompts from users. Days later, OpenAI Chief Executive Officer Sam Altman attended parties in Los Angeles during the weekend of the Academy Awards. Runway, a leader in the market previously told Bloomberg that its Gen 2 text-to-video service is already being used by millions of people, including professionals at production

Starting point is 00:09:11 and animation studios who rely on it for pre-visualization and storyboarding. Film editors are also creating videos with runway and combining them with other footage to make B-roll or visual effects, the company said. OpenAI's Sora is still in the research preview stage, the company said, and no pricing has been set, end quote. As I suggested the other day, folks are taking the Reddit IPO as a sign that the window for tech IPOs might be open to a degree, quoting Reuters. Reddit was the top percentage gainer on the New York's.

Starting point is 00:09:46 stock exchange on Monday finishing up 30% at $59.80. Some 90,000 Reddit options changed hands with trades leaning towards bullish bets, analysts said, end quote. That makes a lot of sense. Lots of meme stock action comes from options trading and what could be more of a meme stock than the place where meme stocks happen. But also, look, having a successful run-up after an IPO is the ultimate bullish sign. Quoting Bloomberg, while it takes time to prepare and and this won't happen overnight, assume the thinking has shifted to ready-set-go, said Lease Bayer, IPO consultant, and founder of Class V group about the prospects for tech IPOs. After seeing 97 new venture-back technology listings in 2021, the machine ground to a halt.

Starting point is 00:10:32 Credo technology in January 2020 pulled off the last sizable IPO of a venture-back tech company before equity capital markets slam shut as higher interest rates, dened investors risk appetites. It's been crickets, mostly, ever since. The percentage decline in new listings was steeper than the dot-com busts, according to data provided by Jay Ritter, a University of Florida professor who studies IPOs. The 2020-2020 boom and tech stock IPOs, and following the collapse, is remarkably similar to the 1999, 2000 boom and subsequent collapse in many regards, he said. This creates a big headache for the whole startup ecosystem, venture investors and startup employees, bet on nascent businesses in the hopes that someday they can reap a windfall through selling the company or listing it on the stock market. Instacart and Clavio came along in September, hoping to awaken the market with the thesis that profitability would impress the street.

Starting point is 00:11:21 They were joined by Semiconductor Designer Arm, which wasn't venture-backed, but was also a large profitable tech business. It didn't work. The lukewarm reception for those deals meant there were no sizable tech IPOs for another six months. Last week was the second attempt to reopen the IPO window. This time, both companies had an artificial intelligence theme, albeit with quite different approaches. Semiconductor business Astera Labs surged after pricing considerably above initial expectation, while social media company Reddit, which has an AI partnership with Google, also saw better than expected demand. How will we know if tech IPOs are indeed back? Watch Ibada. For starters, the digital marketing company backed by Walmart filed Friday for an IPO signaling plans to debut in the coming weeks. Heidi Mayon, a partner at law firm Simpson, Thatcher, and Bartlett,

Starting point is 00:12:07 who worked on the Astera Labs listing, said that she's cautioned. optimistic. Just don't expect a flood of filings at once, given the lingering economic headwinds. We are all hopeful that it is a sign of more to come, but it likely does not signal an immediate rush to the public markets, she said. We will start to see more activity in the back half of this year, leading into 2025, end quote. If by 2025 things are more active, it will follow a pattern, according to Ritter. Following a boom and collapse, it typically takes about three years for the IPO market to recover, he said, end quote. Meta has started rolling out its new opt-outher political content settings on Instagram and threads to, quote,

Starting point is 00:12:51 limit political content from people you don't follow. Quoting the Verge, an opt-out setting that limits recommendations of political content has been added to Instagram and threads. You can find it under your content preferences, account settings, and Instagram. From there, limit political content from people you don't follow is enabled by default. The setting applies to threads as well, since that app shares its account system with Instagram.

Starting point is 00:13:14 Meta has framed this new setting as being good for user choice, and the company says it isn't limiting the reach of political content from accounts people choose to follow. While the change was first announced in early February, Meta spokesperson Andy Stone confirmed to the verge that it began widely rolling out last week. As of Monday, the company hasn't sent any in-app notifications alerting people to the setting and the fact that it's on by default. If you talk to people at Meta about why they've soured on recommending politics, you'll usually hear that they believe most people don't want to see. put in their feeds. Last year, however, Instagram boss Adam Oceri was more direct about the company's motivation in a conversation with me on threads. Quote, politics and hard news are important. I don't want to imply otherwise, he said at the time. But my take is, from a platform's perspective, any incremental engagement or revenue they might drive is not at all worth the scrutiny, negativity, let's be

Starting point is 00:14:05 honest, or integrity risks that come along with them, end quote. Finally, today, a recent investigation has detailed the growing black market for Starlink kits being traded and activated illegally, including in regions subject to U.S. sanctions. Quoting Bloomberg. In Yemen, which is in the throes of a decade-long civil war, a government official conceded that Starlink is in widespread use. Many people are prepared to defy competing warring factions, including healthy rebels, to secure terminals for business and personal communications and evade the slow, often-censored internet service that's currently available. Or take Sudan, where, a year-long, civil war has led to accusations of genocide, crimes against humanity, and millions

Starting point is 00:14:50 of people fleeing their homes. With the regular internet down for months, soldiers of the paramilitary rapid support forces are among those using the system for their logistics, according to Western diplomats. Given the security concerns around a private American company controlling internet service, SpaceX first needs to strike agreements with governments in each territory Starlink enters. In Central Asia, where Starlink deals are rare, a government crackdown on illicit terminals in Kazakhstan this year has barely made a dent in its use. All it did was lead to higher prices on the black market, according to a trader who imports the year and who didn't want to speak publicly for fear of retribution. Prior to the government

Starting point is 00:15:26 intervention, customers were able to buy the company's equipment and have it shipped via the local postal service, the trader said. SpaceX didn't respond when asked to comment on a written list of questions submitted on Thursday. If SpaceX obtains knowledge that a Starlink terminal is being used by a sanctioned or unauthorized party, we investigate the claim and take actions to deactivate the terminal, if confirmed, the company said, and a post on X in February, end quote. That's the thing, right? Starlink doesn't work like radio where there are just electromagnetic waves being sent out into the ether that any receiver can pick up. Each Starlink terminal can be identified when it connects to the network. So in theory, illicit use should be relatively easy to crack down on.

Starting point is 00:16:15 Check out the bottom link in today's show notes. It's a link to a YouTube video of an interview Chris and I did yesterday with Nat Friedman. You've heard me discuss on here how Nat is probably the most prolific investor of this AI moment. Thanks to the audience, by the way, for convincing Nat to come chat with us. We get into his investing philosophy, Microsoft's general strategy in the AI space. He was CEO of GitHub, remember? And also what Nat expects from GPT5 and how he thinks AI will change the job of software developer. Good stuff. Talk to you to tomorrow.

Tech Brew Ride Home - Tue. 03/26 – Musical Chairs As Microsoft Reorganizes Itself Around AI

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