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“The best bromance in tech” is under pressure
Few partnerships in the technology world in recent history have been as transformative as Microsoft’s alliance with OpenAI, which paired a computing giant with a start-up that is among the leaders in artificial intelligence.
But that alliance is showing signs of strain, The Times’s Cade Metz, Mike Isaac and Erin Griffith report. Any disruption could shake up the A.I. world, even as other companies, including Google, take steps to better compete.
It’s hard to overstate the importance of the Microsoft-OpenAI relationship. The tech giant has poured tens of billions of dollars into OpenAI, most recently in the start-up’s $6.6 billion funding mega-round that closed this month. That has included both cash and access to the hugely expensive cloud-computing resources needed to develop A.I. services. (OpenAI expects to spend as much as $37.5 billion annually on compute by 2029, according to internal documents.)
In return, Microsoft has incorporated OpenAI services into the A.I. offerings that it has staked its future on. Access to the start-up’s products is so important that Satya Nadella, Microsoft’s chief, intervened in the revolt at OpenAI last year that briefly led to Sam Altman’s ouster as C.E.O.
But tension is building in what Altman once called “the best bromance in tech.” Microsoft began to get worried after last year’s upheaval at OpenAI and moved to hedge its A.I. bets. That included spending at least $650 million to hire most employees from Inflection, an OpenAI rival led by the former Google executive Mustafa Suleyman. At Microsoft, Suleyman’s role includes building tech that could supplant OpenAI’s products, which has riled some of the ChatGPT parent’s executives.
From The Times:
OpenAI executives are also complaining that Microsoft isn’t providing enough computing power. The start-up has already negotiated their to let it sign a $10 billion contract with Oracle for additional compute, and secured reductions in how much Microsoft charges for its cloud resources.
Both sides are working with investment banks — Goldman Sachs for OpenAI and Morgan Stanley for Microsoft — over how much of a stake the tech giant should have when the A.I. start-up becomes a for-profit entity, according to The Wall Street Journal.
The strains come as Google restructures to better compete in A.I. The company has moved the team responsible for its Gemini chatbot out of its search and ads team to its DeepMind research division.
That streamlines the reporting structure for Google’s A.I. offerings, The Information notes, potentially resolving one of the hurdles the tech giant faced in keeping up with OpenAI.
HERE’S WHAT’S HAPPENING
CVS replaces its C.E.O. The embattled health care giant appointed David Joyner, the head of its pharmacy benefits management business, as its chief, succeeding Karen Lynch. Roger Farah, its chairman, has become executive chairman. The moves come as CVS weighs strategic options including a breakup as it faces pressure from investors such as the hedge fund Glenview Capital.
President Biden renews call for cease-fire in Gaza after Israel kills Hamas’s leader. Biden congratulated Prime Minister Benjamin Netanyahu on the assassination of Yahya Sinwar — and said that he was sending Secretary of State Antony J. Blinken to Israel to discuss a postwar plan for Gaza. The comments came as the U.N. said that an Israeli airstrike on a school in northern Gaza this morning killed “scores of people,” including children, the third attack on a U.N. outpost this week.
Netflix beats expectations on subscriber and revenue growth. The streaming service added 5 million customers in the third quarter and said that sales grew 15 percent to almost $10 billion. Netflix’s shares are up more than 6 percent in premarket trading — they’ve risen by almost 50 percent this year — but analysts warned that the company still needed to find new sources of growth.
Musk steps up his Trump support
Elon Musk endorsed Donald Trump in July, after the first assassination attempt against the former president, and has since funneled $75 million into the pro-Trump super PAC he created.
A town-hall meeting that Musk hosted in Pennsylvania on Thursday — his second in-person campaign appearance and first solo event — is the latest evidence that the tech billionaire is going all in for Trump, The Times’s Danielle Kaye writes for DealBook.
“I haven’t been politically active before,” Musk told the audience of nearly 700 at a high school auditorium in suburban Philadelphia. Wearing a mustard-yellow MAGA hat, Musk made his pro-Trump stance clear: “I’m politically active now because I think the future of America, the future of civilization is at stake,” he said.
But Musk also pushed debunked claims about election fraud: “When you have mail-in ballots and no proof of citizenship, it’s almost impossible to prove cheating,” he said in response to a question about the 2020 election, echoing Trump’s own false remarks on the matter.
It’s a further sign of Musk’s pro-Trump conversion. The South Africa-born entrepreneur, who became a U.S. citizen in 2002, had mostly voted for Democrats for years.
But he began to lean more heavily Republican amid frustrations with the Biden administration on labor and regulation. “I disagree with the idea of unions,” Musk said at the DealBook Summit last year, a stance at odds with the Biden administration’s largely pro-union approach. (He has also faced scrutiny by regulators of his employment practices.)
Since taking over the social platform now known as X, Musk has amplified pro-Trump accounts and leaned into Trump’s baseless claims about election fraud. Trump has suggested that Musk could become a key adviser should he win in November.
Some Democrats have raised concerns about Musk’s appeal, especially in key battleground states. The billionaire “has a brand that’s attractive to a demographic that we need to have to win in Pennsylvania,” Senator John Fetterman of Pennsylvania told CNN, noting Musk’s appeal to independent voters.
Not all of Musk’s campaign initiatives appear to be working, however. Some Republicans have warned Trump that the field operation organized by the tech mogul’s super PAC is failing in swing states, according to Rolling Stone.
The cost of controversy at Harvard
Harvard has had a tough year. Accusations that it hadn’t done enough to combat antisemitism after the Oct. 7 attacks on Israel helped lead to the departure of its former president and prompted many donors to keep their wallets shut.
The cost of that became clearer on Thursday after the university released its latest financial report, showing a drop in giving as expenses grew.
Total gifts to Harvard fell 14 percent in the year ended June 30, to $1.18 billion, in what The Harvard Crimson said was one of the biggest year-on-year drops in decades. Funds earmarked for the university’s endowment, which can’t be spent immediately, were down 35 percent, to $366.5 million.
There was some good news: Current-use gifts, which can be spent immediately, rose 10 percent, to $530 million.
Many donors have said that they won’t give to Harvard, citing its response to antisemitic activity at the school. (Among them, the billionaires Len Blavatnik and Ken Griffin.)
Claudine Gay resigned as the school’s president in January after facing pressure from alumni, including the outspoken financier Bill Ackman, over the school’s approach and accusations that she had committed plagiarism in her research.
A prolonged slowdown in donations could spur concerns about the school’s finances. Harvard remains one of the wealthiest universities in the world: Its endowment stands at $53.2 billion, and its investments returned a healthy 9.6 percent last year. But endowment distributions rang in at $2.4 billion last year, or 37 percent of the school’s total revenue, and expense growth outstripped increases in the school’s topline for the second year in a row.
Ackman warned at a conference this month that Harvard might have to rely more on debt if more donors don’t return soon. The school said on Thursday that it borrowed $1.6 billion during the fiscal year, adding that it secured “favorable borrowing costs with historically low credit spreads.”
Harvard makes clear that it’s trying to win back recalcitrant benefactors. In Thursday’s report, Alan Garber, Gay’s successor as university president, highlighted the school’s task forces to combat both antisemitism and anti-Israel bias and anti-Arab, anti-Muslim and anti-Palestinian bias. He also promoted an initiative to allow for “more meaningful communication and constructive disagreement.”
“Some of the new commitments have been disappointing compared to past years,” Garber told The Crimson last week. “There are also some indications that we will see improvements in the future.”
China’s malaise
The Chinese economy grew at its slowest pace in 18 months in the third quarter, according to official data released this morning.
It’s the latest sign that the country is a long way from getting out of a yearslong slump as Beijing rolls out stimulus measures that are lifting Chinese stock markets.
Growth was lower than the government’s official target. The economy expanded 4.6 percent year-on-year. That exceeded the 4.5 percent forecast in a Reuters poll of economists but was down from the 4.7 percent growth achieved in the previous three months.
Chinese consumers are spending less: Much of their wealth is tied up in real estate where prices have plunged. (The spending slowdown has also squeezed big global brands, including LVMH and Starbucks.)
The weak showing may explain Beijing’s decision to start unveiling stimulus measures. China’s economy has been in a slump since the Covid pandemic and the government has faced calls to give it a jolt. A monetary stimulus package announced last month prompted a big rally in the country’s stock markets.
This morning, the governor of China’s central bank said it could cut the benchmark interest rate as soon as next week, minutes after the economic data was published. Investors approved: The CSI 300 index of Shanghai- and Shenzhen-listed stocks and the Hang Seng Index in Hong Kong closed more than 3.5 percent higher.
Will Beijing try to boost consumer spending? Analysts say an increase in demand is key to turning around the economy. But President Xi Jinping is more concerned about averting a financial crisis among local governments and reviving the stock market than he is about bolstering consumer spending, The Wall Street Journal reported this week.
What’s next? Analysts are hoping for more details about fiscal spending plans at the next meeting of the National People’s Congress, China’s rubber-stamp parliament, in the coming weeks.
THE SPEED READ
Deals
Intel is said to be seeking a minority investor for its Altera chip business, at a valuation of about $17 billion. (CNBC)
Pony.ai, a Chinese-based robotaxi company backed by Toyota, filed to go public in the United States. (Reuters)
Elections, politics and policy
Republican lawmakers called on the Justice Department to investigate McKinsey for a potential conflict of interest, given its work for China and the Pentagon. (FT)
Tobacco giants offered to pay $24 billion to settle a lawsuit in Canada that accused them of knowing that their products caused cancer. (Reuters)
Best of the rest
The dysfunctional U.S. political system is leaving the country unprepared for how A.I., automation and aging are going to transform the economy, argues Daron Acemoglu, the M.I.T. professor who recently won the Nobel Prize in economic science. (NYT Opinion)
“Want to Understand America? Watch ‘Shark Tank.’” (NYT)
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