Tech Brew Ride Home - Tue. 04/23 – Microsoft’s Own LLMs and Perplexity’s Big Raise

Episode Date: April 23, 2024

Microsoft has launched new lightweight AI models. Perplexity has a big new raise. Meta wants other people to build Quest headsets. Another reason Apple needs to find new revenue. And if Congress really is going to ban TikTok, are they ever going to tell us exactly why? Links: Microsoft launches Phi-3, its smallest AI model yet (The Verge) Meta Expands Its Mixed Reality Beyond the Quest Headsets (CNET) Meta wants to be the Microsoft of headsets (The Verge) China Smartphone Sales Remain in Black on Huawei, HONOR, Xiaomi Outperformance (Counterpoint) AI Search Startup Perplexity Valued at $1 Billion in Funding Round (Bloomberg) Adobe’s new Firefly model makes it easier to use Photoshop’s AI tools (The Verge) If TikTok Is Such a Threat, Show Us the Receipts (Bloomberg) 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 Tuesday, April 23rd, 2024. I'm Brian McCullough today. Microsoft has launched new lightweight AI models. Perplexity has a big new raise. Meta wants other people to build Quest headsets. Another reason Apple needs to find new revenue. And if Congress really is going to ban TikTok, are they ever going to tell us why exactly? Here's what you miss today in the world of tech. Lots of stories of trends continuing today. First up, Microsoft continues to diversify aggressive. they've launched Phi-3 Mini, a 3.8 billion parameter model that competes with GPT 3.5, and they plan to release Phi-3 small and Phi-3 medium versions with 7 billion and 14 billion parameters, quoting the

verge. The company released Phi 2 in December, which performed just as well as bigger models like Lama 2. Microsoft says Phi-3 performs better than the previous version and can provide responses close to how a model 10 times bigger than it can. Eric Boyd, corporate vice president of Microsoft Azure AI platform, tells the verge Phi-3 Mini is as capable as LLMs like GPD 3.5, quote, just in a smaller form factor. Compared to their larger counterparts, small AI models are often cheaper to run and perform better on personal devices like phones and laptops. The information reported earlier this year that Microsoft was building a team focused specifically on lighter weight AI models. Along with Phi, the company has also built Orca Math, a model focused on solving math, problems. Microsoft's competitors have their own small AI models as well, most of which target simpler tasks like document summarization or coding assistance. Google's Gemma 2B and 7B are good for simple chatbots and language-related work. Anthropics, Claude 3 Haiku, can read dense research papers with graphs and summarize them quickly, while the recently released Lama 3 8B from

meta may be used for some chatbots and for coding assistance. Boyd says developers trained Phi-3 with a curriculum. They were inspired by how children learned from bedtime stories, books with simpler words, and sentence structures that talk about larger topics. There aren't enough children's books out there, so we took a list of more than 3,000 words and asked an LLM to make children's books to teach Phi, Boyd says. He added that Phi-3 simply built on what previous iterations learned. While Phi-1 focused on coding and Phi-2 began to learn to reason, Phi-3 is better at coding and reasoning. While the Phi-3 family of models knows some general knowledge, it cannot beat a GBT4 or another LLM in breadth. There's a big difference in the kind of answers you can get from an LLM trained on

the entirety of the internet versus a smaller model like Phi-3. Boyd says that companies often find that smaller models like Phi-3 work better for their custom applications since for a lot of companies, their internal data sets are going to be on the smaller side anyway. And because these models use less computing power, they are often far more affordable, end quote. And Zuck continues to get aggressive with VR. Meta has opened its VROS, now called Horizon OS, to third parties and says AISIS and Lenovo plan Horizon OS compatible headsets. Meta also plans to release an Xbox branded Quest, quoting CNET. Future headsets will be able to connect via the same

MetaQuest app on iOS and Android that currently exists, but its name will change to Meta Horizon. AIS is making a performance-based VR gaming headset under its Republic of Gamer's brand. According to the Post, Lenovo is also planning to make VR devices compatible with Meta Horizons OS. Lenovo made the Oculus Rift SPC connected headset with meta, and it's made lots of VR and AR products over the years. According to Meta, Lenovo's headsets will focus on productivity, learning, and entertainment. There will also be an Xbox branded MetaQuest coming as a limited edition inspired by Xbox products, product with some involvement by Microsoft, although Meta's vague on the details. There are some big changes coming to how the Quest's mixed reality software works, though.

AppLab, a semi-hidden part of the Quest App Store that's been a big source of emerging software for years, is going to be a more visible part of the app store soon. Meta is also promising an open mixed reality framework, so all these headsets and developers can start figuring out how AR-like experiences on future headsets can work better. Meta's CTO, Andrew Bosworth, hinted to CNET in a conversation a few weeks ago that Meta's upcoming AR and VR devices could start expanding into new more-focused variants. That's exactly what this move seems like. A chance to expand Meta's footprint with other brands and designs. A fitness-focused headset would also seem like a logical move, but there's no news on that front yet, end quote. As the verge points out, this is basically an attempt to make the quest, sort of like the Microsoft of VR, quote. Zuckerberg has been clear that he wants his company to be a more open platform than Apple's. Here, he's firmly positioning Meta's Horizon OS as the Android alternative to Apple's Vision Pro. Given how Android was more of a reaction to the iPhone, an analogy he'd probably prefer is how Microsoft

built the early PC market by licensing Windows. Microsoft once attempted to turn Windows into an operating system for VR headsets 2 with its Windows Mixed Reality Initiative, but also hedged its bets by supporting Meta's first Oculus Rift. Meta's headset originally came with an Xbox GamePad when it launched in 2016, and it soon gained the ability to stream Xbox One games. At the time, Microsoft suggested it would only create its own VR headset if it had, quote, something unique to add. Meta's move has been a long time coming. In the open ecosystem, basically, you have much broader partnerships, Zuckerberg told me in an interview in the fall of 2022. So Microsoft didn't build the chips, they didn't build the PCs, they didn't build the app store.

It was all this key stuff that was developed around the ecosystem, similar to Android. And that's basically what we hope to build here is the open ecosystem for the next generation of computing around virtual and augmented reality in the Metaverse more broadly, which means that there are going to need to be all these partnerships, end quote. iPhone sales in China fell 19.1% year-on-year, giving Apple a 15.7% share of the smartphone market in China and Q1 of this year. This is continuing the narrative of Apple needing to find new revenue fast. They basically leaned on China over the last decade or so for hardware sales growth. But while iPhone sales dropped nearly 20%, the overall smartphone market in China actually grew. Quoting Counterpoint Research, commenting on the market Dynamics Associate Director Ethan Chi said, Momentum seems to be building on a recovery as China's smartphone sales continued their growth trajectory and grew 4.6% quarter over quarter in Q1 of 2024.

The sales promotions during the Chinese New Year festivities were the biggest growth driver. The average weekly sales during the four weeks leading up to the Chinese New Year saw a robust growth of 20% when compared to a normal week, according to Counterpoint's China Smart Phone Weekly Model Sales Tracker. Commenting on OEM performance, senior research analyst Ivan Lamb said Vivo gained a top spot this quarter with 17.4% share, driven by strong sales of the Y35 plus and Y36 models in the low-end segment and the S-18 in the mid-end segment. Honor ranked second with a 16.1% share, followed by Apple with a 15.7% share. Apple's sales were subdued during the quarter as Watway's comeback has directly impacted Apple

in the premium segment. Besides, the replacement demand for Apple has been slightly subdued, compared to previous years. Looking forward, Lambs saw the possibility of an iPhone recovery, however, we are seeing slow but steady improvement from week to week, so momentum could be shifting. For the second quarter, the possibility of new color options combined with aggressive sales initiatives could bring the brand back into positive territory, and of course we are waiting to see what its AI features will offer come WWDC in June. That has the potential to move the needle significantly longer term, end quote. Perplexity has raised $63 million led by Daniel Gross at a greater than $1 billion valuation up from a $520 million valuation back in January, quoting Bloomberg.

The financing set to be announced on Tuesday doubles perplexity's valuation from just three months ago. Investor Daniel Gross led the round with participation from billionaire Stanley Drucken Miller, Y Combinator Chief Executive Officer Gary Tan, and Figma CEO Dylan Field. Several earlier perplexity backers, including Amazon founder Jeff Bezos and Nvidia also joined the round. The Wall Street Journal previously reported perplexity was in funding talks. Founded less than two years ago, Perplexity offers an AI chatbot that summarizes search results, lists citations for its answers, and helps users refine their queries to get the best responses. With an emphasis on accuracy, Perplexity has quickly distinguished its chatbot in an increasingly

crowded market and earned fans like NVIDIA's CEO Jensen Huang, who has said he, uses the product almost every day. Perplexity has processed more user queries in the U.S. so far this year, nearly 75 million, than it did in all of 2023. Perplexity, which offers free and paid versions of its service, said it's generating $20 million in annual recurring revenue. Like many other AI companies, Perplexity is now trying to boost revenue by focusing on selling AI services to businesses. The startup is announcing a new enterprise version of its chatbot priced at $40 a month, with added features including stronger security and data protection, bridgewater associates, Zoom Video, and the Cleveland Cavaliers are among the early group of

businesses using the product. We want to get perplexity in the hands of every single company in the United States, Aravind Srinavos, the company's co-founder and CEO said in an interview, the 55-person startup remains far smaller and less capitalized than chat GPT maker OpenAI, not to mention Google. Serena Voss acknowledged that his company is competing with big sharks, but said perplexity's edge is being nimble and designing its technology from the ground up to focus on accuracy, end quote. I'd point you back to that bonus episode from a few weeks ago that Chris and I did with Aravind. Adobe has added AI tools to Photoshop, powered by its new Firefly Image 3 model, including reference images to inspire the AI's output available in beta on desktop right now,

quoting the verge. The most notable tool is reference image, which uses user-uploaded images to inspire the output generated by Adobe's AI, matching similar elements in style and color. For example, instead of repeatedly tweaking a prompt description like a blue vintage truck with flower decals, users can instead provide a reference image that Photoshop will use as a guide. Prompting is a pain in the butt, Eli Greenfield, chief technology officer for digital media at Adobe told the verge, why spend an hour trying to craft a three-paragraph prompt? If you have an image that you've created, that's exactly the thing you want to reference. The saying, a picture is worth a thousand words, applies here. Users are expected to have the rights to use images they want to reference. Greenfield

told the Verge that a message will flag this ownership requirement when the tool is first used and that the company is working on a universal do-not-train tag for Adobe's Content Authenticity Initiative. That will also block images from being used as a reference. Images uploaded as reference materials won't be used to train Firefly. Despite the ownership responsibility being placed on users, Adobe says this new referencing tool is still safe for commercial use, one of the most notable advantages that Adobe claims Firefly has over rival generative AI models. Additional generative AI tools available in the Photoshop beta app include Generate Background, which replaces and creates new background images for things like product photography,

and enhanced detail, which increases clarity and makes images appear sharper. Adobe's third-generation Firefly model, which has higher-quality image generation capabilities compared to its predecessor, is also available in a public global beta for anyone to try out outside of Photoshop via the Firefly web application. Adobe says its latest Firefly model delivers photo-realistic quality like never before, with better lighting, positioning, and attention to detail. Firefly Image 3 is more capable than the previous Firefly model at understanding long-descriptive text prompts and can produce clearer text in the images it generates, end quote.

Finally today, I continue to not have a position on the whole TikTok banning situation, Plenty of folks, I respect, fall on both sides of this issue. But Dave Lee in Bloomberg makes a point that others have made before and that I continue to find compelling. As Congress's TikTok bill moves ahead, lawmakers kind of need to show the public on what grounds the government is banning an extremely popular and culturally significant platform. Quote, supporters of a ban against TikTok, which is owned by BytDance, say this new technological era warrants such protectionist measures on the cusp of a revolution that could dwarf the internet's impact, the U.S. believes that China must be shut off from developing sophisticated artificial intelligence

by whatever means necessary. At the highest level, this means choking off the availability of cutting-edge semiconductors and fabrication machines. At the other end of the funnel, the vast amounts of user data and biometrics that China could harvest from TikTok represents the uranium of this next arms race. Maybe not a danger in its own right, but a critical component of a potentially more significant threat. It's a compelling enough argument, though many others have rightly pointed out that if this was China's goal, it could have saved itself a lot of time and effort by buying Americans' data from the many shady brokers happy to sell it to them. A stronger privacy law affecting all apps, regardless of their country of origin, might be a better

way to protect against this. More interesting, then, is lawmakers claim that TikTok is a coiled spring, a platform that can be harnessed at any time to exert Beijing's influence over the U.S. population, particularly its impressionable young voters. Unfortunately, the public knows little about the precise details of the security briefings representatives received before voting on the bill. One of the bill's authors, Texas Republican Michael McCall, described the app as a spy balloon in Americans' phones. Senators called a behind-closed doors briefing a shocking insight into TikTok's capabilities. The message is, trust us. This would carry more weight had Congress not consistently embarrassed itself on technology matters, like when a senator asked Mark Zuckerberg how Facebook makes

money, or when TikTok chief executive officer show Chu was asked whether his app connects to home Wi-Fi. If Congress wants Americans to support its ban of TikTok, it's time to bring out the receipts. Show precisely on what grounds the U.S. is banning one of the world's most popular and culturally significant social networks. With the battle likely heading to the courts, a judge will need to be convinced that this isn't a measure that squashes the free expression of millions. And for America's position as a global leader in internet governance, transparency is imperative if this murky episode is not to cause lasting damage, end quote. As I was finishing up the script for the show today, Apple announced a special event for May 7th. It will be online,

and the tagline is let loose, or let luge? Weird script on the wording there. Anyway, we're all assuming this will be for new iPads, since it includes in Apple Pencil in the announced graphic. OLED display is coming to iPad Pros. Talk to you tomorrow.