Week 39, 2024

Key Developments

1
Intel will spin off its foundry business, instead of selling it.

• This is part of Intel's recent restructuring plan.
• The foundry division will become an independent subsidiary.
• Intel has invested $25 billion annually in foundry for two years.
• Returns on this investment have been minimal.
• There was speculation about selling the foundry business.
• The spin-off shows Intel's commitment to continue foundry operations.
• Intel aims to attract external funding for the foundry business.
• Intel secured a chip production deal with Amazon.
• And they received an additional $3.5 billion in U.S. government subsidies.
• Yet Wall Street remains skeptical about Intel's recovery.
• The foundry market is moving towards a 'TSMC-dominated' structure.

2
Qualcomm is exploring the acquisition of Intel.

• WSJ reports Qualcomm aims to acquire all of Intel.
• This goes beyond Reuters' earlier report of Qualcomm seeking to buy parts of Intel.
• Qualcomm, the mobile chip leader, has long been interested in Intel's PC and server chip business.
• Intel's stock price has plummeted 60% this year.
• Intel's market cap is now about half of Qualcomm's, making the acquisition conceivable.
• Realistically, the deal faces significant challenges.
• Qualcomm's cash assets are only about 10% of Intel's market cap.
• Intel's workforce is more than double Qualcomm's, even after planned reductions.
• Intel's x86 license agreement with AMD could be an obstacle.
• Antitrust reviews are expected to be the biggest hurdle.
• The deal would require approval from both U.S. and Chinese authorities.
• Both companies have had acquisition deals blocked by Chinese antitrust authorities before.
• Some view Intel, once the world's top chipmaker, being an acquisition target as a "humiliation".

3
TSMC has started its first semiconductor production in the US.

• The Arizona Fab 1 has begun operations.
• It uses a 4nm process to produce A16 chips for iPhones.
• This start is at least 4 months ahead of schedule.
• Initial production yield is lower than in Taiwan factories.
• But it is expected to match Taiwan levels within months.
• Fab 2 construction has already begun.
• It is expected to start production around 2028.
• Cultural differences between Taiwanese managers and US workers are a concern.
• NYT reported on US employees quitting due to cultural clashes.
• TSMC is known for its strict corporate culture and high work intensity.
• TSMC's work intensity is notorious even in Taiwan, where long hours are common.
• How TSMC manages these cultural differences will significantly impact its US operations.

4
iPhone 16's initial sales are lower than expected.

• Pre-orders are down 13% compared to the previous model.
• Lack of AI features and hardware innovation are cited as main reasons for poor sales.
• 'Apple Intelligence' was not launched with iPhone 16 as anticipated.
• Current AI features are in beta, needing more time for full implementation.
• Hardware changes are minimal compared to the previous model.
• Demand for higher-end Pro lineup is particularly low.
• Tim Cook says, "It's just the beginning, let's wait and see."
• Apple has already started employee discounts to boost sales.
• Xiaomi has overtaken Apple as the world's second-largest smartphone maker by market share.

5
OpenAI has released 'o1', a model with enhanced reasoning abilities.

Reasoning AI

• It's pronounced as "o-one".
• The model was internally known as 'Strawberry'.
• o1 is the first in the 'Strawberry' series.
• It breaks down complex problems into steps for logical approach.
• The model focuses on science, code, math generation and debugging over language tasks.
• It showed doctoral-level abilities in physics, chemistry, and biology tasks.
• o1 achieved 83% accuracy in International Mathematical Olympiad, up from 13% of previous models.

Slow by design and expensive

• It's slower than GPT-4 due to its deep thinking process.
• o1 costs 4 times more than GPT-4 to run.
• The high cost is due to additional hidden processes and computing.
• It's designed more for scientists and developers than general users.
• GPT-4 is still more suitable for most queries.

Not quite AGI

• CEO Altman cautioned against overhyping o1.
• He emphasized o1 is not AGI, just a beginning.
• Hallucinations are significantly reduced but not completely eliminated.

6
OpenAI aims to secure $11.5 billion in new funding.

• $6.5 billion through investments and $5 billion via debt financing.
• Thrive Capital is leading the investment round.
• Tiger Global, Khosla, and Sequoia are expected to participate.
• Big tech companies like Microsoft, Apple, and Nvidia are also exploring participation.
• The investment is conditional on OpenAI converting to a for-profit company.
• A key condition is removing the profit cap for investors.
• CEO Altman hinted at a likely change in company structure next year.
• He suggested the company will move closer to a traditional for-profit model.
• If converted to a for-profit, OpenAI's market value could soar to about $150 billion.

7
Microsoft and BlackRock are creating an AI infrastructure fund.

• The fund is a response to increasing AI power demands.
• It aims to strengthen AI supply chains and clean energy sourcing.
• The fund's target size is $30 billion.
• It may expand to $100 billion with external funding.
• BlackRock's CEO Fink called it a "multi-trillion dollar long-term investment opportunity".
• Most investments will be made in the US.
• Nvidia will advise on data centers and other infrastructure.
• MGX, a UAE-backed investment firm, will participate as a GP.
• Middle Eastern oil-rich countries are increasing AI investments for economic diversification.
• The US wants this money invested domestically rather than in China.
• Saudi Arabia's PIF is discussing a $40 billion AI investment with Andreessen Horowitz.
• The Biden administration is considering allowing export of Nvidia's latest chips (H200) to Saudi Arabia.

8
Microsoft is pushing to reactivate a decommissioned nuclear plant to meet AI power demands.

• Constellation Energy plans to restart commercial operation of Three Mile Island Unit 1 in Pennsylvania by 2028.
• Three Mile Island was the site of the worst nuclear accident in US history.
• The plant was shut down in 2019 due to low economic viability.
• Constellation Energy is the largest nuclear power company in the US.
• Microsoft signed a 20-year exclusive contract for all the plant's power.
• The plant will supply power exclusively to Microsoft's data centers.
• This is Microsoft's first dedicated nuclear plant for its facilities.
• Nuclear power is attractive to tech companies for its high stability.
• Nuclear power offers 24/7 reliability needed for data centers.
• Renewable energy sources like solar and wind have fluctuating output based on weather.
• Amazon also operates a nuclear-powered cloud campus in Pennsylvania.
• OpenAI has invested in SMR developer Oklo and fusion startup Helion Energy.
• Nuclear waste disposal remains a challenge.

9
Meta is creating new "teen accounts" for users under 18.

• Meta will automatically switch Instagram accounts of users under 18 to "teen accounts".
• This is part of Meta's recently announced "Youth Safety Policy".
• Teen accounts can't view sensitive content like sexual material or self-harm.
• These accounts can only receive messages from followers or connected people.
• Parental supervision features are being enhanced.
• Parents can set daily time limits and view message recipients.
• Meta says it can track users who lie about their age.
• This move is a form of self-regulation in response to public criticism.
• There's growing concern about social media's negative impact on youth.
• Last year, 33 US states sued Meta, and the EU launched an investigation.
• Instagram's CEO expects a significant decrease in teen users.
• He believes short-term losses will lead to long-term business benefits.
• The goal is to gain parents' trust and reassure them about the platform's safety.

10
Amazon is ending remote work completely.

• The policy takes effect from January 2nd next year.
• Employees must work from the office 5 days a week, barring special circumstances.
• Currently, Amazon requires a minimum of 3 days in-office per week.
• Amazon is the first big tech company to demand 5-day office attendance.
• The announcement faced immediate backlash from employees.
• Some employees expressed intentions to quit or demanded pay raises.
• Experts suggest this could be a strategy to encourage voluntary resignations.
• Studies show strict return-to-office policies increase attrition among senior staff.
• This move may prompt other companies to mandate in-office work.
• Google, Apple, and Meta have already implemented 3-day office weeks since last year.
• A KPMG survey of 400 US CEOs found 80% expect full-time office return within 3 years.

Other

AI

• Sam Altman leaves OpenAI's safety committee, which will operate as an independent body.
• OpenAI hired a former Coursera executive to expand AI use in schools and classrooms.
• Google added an 'AI debate' podcast feature.
• Microsoft unveiled 'Copilot Pages', an AI collaboration tool.
• Oracle's stock surged 11% due to AI-related gains.
• Alibaba released a new AI model called 'Qwen 2.5'.

Chips

• Google shifts from Samsung to TSMC for production of next-gen AP.
• TSMC buys ASML's latest equipment at a discounted price.
• Nvidia launches AI Aerial to optimize wireless networks.

E-commerce

• Amazon unveiled 'Amelia', an AI assistant for sellers.

Social Media

• Meta's AI is scraping users' photos and posts.
• X moves its headquarters near Austin, Texas.
• TikTok deleted the account of Russian state media 'Sputnik'.

Content/Entertainment

• Microsoft lays off 650 employees from its Xbox division.
• Adobe provides weak guidance for the fourth quarter.

Device/Hardware

• Apple's Vision Pro sales have plummeted.
• Apple received FDA approval for hearing aid functionality in AirPods.
• Apple is pursuing a credit card partnership with JP Morgan.
• Microsoft is partnering with Anduril to develop combat goggles for the U.S. Army.

EV/Autonomous Vehicles

• Tesla has produced 100 million 4680 batteries.
• Tesla begun hiring employees in the Philippines.
• Uber expands its partnership with Waymo.
• BYD now has the world's largest R&D workforce.

Space

• SpaceX conducts the first civilian spacewalk.

Energy/Environment

• Meta buys 3.9 mln carbon credits in Latin America.
• Google signs a 128MW solar power purchase in Texas.

Policy/Regulation

• Alphabet's $1.66 billion EU antitrust fine has been overturned.
• U.S. government met with CEOs of major AI companies.

Etc

• Microsoft announces a $60 billion share buyback program and a 10% dividend increase.
• Microsoft hires a former GE CFO as its new Chief Operating Officer.