Elon Musk’s xAI shows there’s more money on the sidelines for AI startups | Equity Podcast

[Music] Hello and welcome back to equity The Tech runch podcast about the business of Startups where we unpack the numbers and The Nuance behind the headlines this is Alex good morning today is April 29th 2024 welcome to the week Welcome to our Monday show we're going to talk about The weekend and take a very short look Ahead at the week that is to come on the Show today we have of course stocks and Crypto lots to talk about there then a New open AI content deal the latest Tesla news from China the European Union And apple scrapping over iPad OS and Then finally I want to ask are startups Raising enough money let's talk about It let's start with my favorite thing in The entire world which is the stock Market if you spend that Globe shares Are higher over in Asia today lots of Eyes on what the Japanese yen is doing After a recently lost value against the Dollar keep an eye on that shares are Higher in Europe and they are set to Rise here in the US at the open how is That for green across the board for a Monday now the individual stock that is Making the biggest news this morning is Tesla it is far higher in pre-market Trading more on the why behind that in Just a second but first earnings there Are a lot of names this week guys I had To cut it down I tried my best it's

Still a little bit long I apologize but Let's talk about it so on Monday we Shall hear numbers from nxp Semiconductors F5 lattice semiconductor Sofi corsera and cheze so simis fintech And edtech then Tuesday Amazon AMD PayPal super micro computer Pinterest Lemonade and root that's Ecom chips Fintech consumer social and chch then Wednesday is ADP Marcato Libre door Dash Procore Zillow Informatica Etsy fresh Works tenable and fastly and then Thursday brings the big names Apple Coinbase block Cloud flare rocket Companies GoDaddy 59 Ora and Yelp so That's consumer Hardware crypto trading Fin Tech internet infra it's a lot of Companies basically no matter what part Of tech you care about this week is Going to bring you a lot of information And a lot of numbers but if stocks are Up sadly enough for the crypto fans out There token prices are down in the last Week Bitcoin has lost 5% ethereum's off A pretty modest 1% Solana's token Dropped 12% the same drop we saw from Dogecoin trading volume is also in Decline indicating the last kind of mini Boomlet that we saw in crypto could be Fading this does raise some question Questions about the having the recent Reduction in the amount of Bitcoin that Miners are given for running the Calculations to power that blockchain it

Is well seemingly priced in as some People thought and some people did not The other news item in the world of Crypto that I have kept tabs on in the Last couple of days is that yugal Labs Has had layoffs and the nft market does Appear to be somewhat stuck in first Gear for now so while we have seen some Gains some trading booms and coinbase Will report not everything is Rosy over In Cryptoland moving on into big news that Matters let's talk about open AI which Has locked down yet another news Licensing deal in Europe that brings the London's Financial Times into its Growing list of Publishers that the AI Company pays for Content access that Said techwrench writes that this latest Deal does look a little bit Cozier than Other recent open aai publishers tie ups I'm thinking about deals with Axel Springer or the AP or Publications from France and Spain as well so the basics Here are kind of what you would expect Open AI gets use of the ft's content for Training its AI models and where Appropriate it will display in its Generative AI responses produced by Tools like chat GPT credit for the Ft The bigger deal here is the Strategic Side of things the Ft wants to boost its Understanding of generative AI Especially as a Content Discovery tool

And so this partnership is going to also Be a collaboration that will help and I Quote new AI products and features be Built for Ft readers so this does Suggest that ft wants Tech and open AI Want's content and they've come to a Deal on those terms however we don't Know how much money we're talking about As with earlier open AI publisher Licensing deals the financial elements Of the arrangement are not being made Public that said this is a non-exclusive Deal and open AI is not taking the stake In the Ft on one hand it's good to see Single deals out there happening between Big AI model companies and folks who Provide training material on the other Hand our oneoff deals going to get us All the way to a fair Marketplace I Doubt [Music] It and then we have a big old Scoop from Our very own Connie loes it turns out That X AI Elon musk's 10-month-old Competitor to the AI Phenom open AI is Raising a lot of money it could raise as Much as $6 billion on a pre-money Valuation of 18 billion that's according To one trusted Source who was very close To the deal and this deal which will Give investors about one quarter of the Company is expected to close in the next Couple of weeks unless the terms change Why worry about that well the terms have

Changed once already at as of last Weekend Jared burall the guy who heads Up musk's family office was telling Prospective investors that xai was Raising three billion on a $15 billion Pre-money Valuation 183 you can do the math given that the Number of investors that were clamoring To get into the deal those numbers were Adjusted so our source now says and I Quote here we all received an email that Basically said it's now 6 billion on 18 And don't complain because a lot of Other people want in okay so lots of Demand what's driving that what's the Pitch well of course it does involve Elon musk's other companies one of which Is X the social media platform has Already Incorporated xi's chatbot grock Into its platform as a paid add-on and Yet that is just one piece of what musk Tells investors will become a sprawling And virtuous cycle so to stick with Gro As an example X is both a customer and Provides grock with massive distribution Eventually so goes the pitch grock will Be fed data from musk's other companies Helping it Master the physical world in Potentially endless ways starting with Truly self-driving cars okay chat Bots And self-driving data I guess llms are Flexible spooky things so maybe that Will work out the things that I'm taking

Away here are a little bit different one There's still this much money out there On the sidelines waiting to go into Foundation model companies in the world Of AI and also that no matter what you And I might think about Mr musk well Investors still absolutely love him and That is the perfect segue to what we're Talking about [Music] Next as we promised up top we are going To talk about what Tesla's stock is Doing and that is going up 10.5% in pre-market trading okay so why Well the company is part of a group of Car companies that have now passed data Security rules in China woohoo could That be good for Tesla the answer is yes And the argument or the hope if you will Is that now Tesla will be able to launch Its paid self-driving service in the Country CNBC and a couple of analysts Aren't so sure that that is going to Happen with the service in its current Form and Tesla does face a lot of local Competition on the self-driving side of Things that said still it is good for Tesla to get some good news after a Brutal last few weeks but it does seem That this bit of news is far from being A complete GameChanger for the company Even if Traders are treating it as it Was still with car revenues Under Pressure the more software that Tesla

Can sell the better and recall that the Company does have big plans for Self-driving as its future Around the World perhaps even to the loss of Cheaper models down the Road moving along along the EU is going To apply its Flagship Market fairness And contestability rules to Apple's iPad OS that's news from the commission this Will expand the number of Apple owned Platforms that are regulated under the Digital markets act or D24 what does this mean well it means That Apple won't be able to self- Preference its own services on iPad in Europe and will be forced to allow for Thirdparty app stores side loing of apps And also third party payment options This is the thing that Apple has tried To avoid for so very very long but in The EU at least with iPad and iOS well It's not going to get its way now this Result has engendered the usual run of EU regulatory conversation with some Funks saying that rules like this are Why the European Union has no Tech Titan Of its own well thinking out loud There's Spotify and Clara and asml and Accenture and sap those are all big European Tech companies though I do have To admit that they are not as big as Apple or Microsoft so perhaps it's not An entirely unfair point but I would Also say that there is enough going on

In AI in Europe across startups and Foundation models that it's too soon to Count out the continent even if Apple May make slightly less money there for Some Time to close off I have a question for You this morning which is are AI start UPS raising enough money and that Question came to me because I was Reading a report from The New York Times That leaned on a lot of pitchbook data So let me just run you through the Numbers and then you'll see what I'm Talking about so the times writes and I Quote investors have poured $330 billion Into about 26,000 Ai and machine Learning startups over the past 3 years That's pitchbook data and it's up 2third From the amount of money that was Invested between 2018 and 2020 so lots more money and also Hundreds of billions of dollars Certainly that's enough to fund all the Startups dreams right well the times Also had information on anthropic so it Turns out anthropic is doing about $150 To $200 million a year in Revenue so Claude its AI model family must be doing Something right however the company is Spending about $2 billion a year According to the times leaving a roughly $1.8 billion yearly cost Gap well that Explains the fundraising I suppose if You're losing about $150 million a month

You need to keep fundraising now the Money that we talked about earlier that $330 billion over the last 3 years is Not just going to companies like Anthropic that probably have large model Training costs but I still think that The anthropic numbers show how much Money is going to be needed and for how Long if startups are going to put up a Real fight against big tech companies And that's why I'm curious if there is Enough total Capital going into AI Startups period if these losses are Going to continue for a long time before Startup AI profits come in then well VCS Might need to get even busier with their Checkbooks because the pockets over at Big Tech are literally [Music] Limitless and that is our show for this Ever so Delight Monday morning here in Providence finally spring is in the air And that means summer is around the Corner so your boy is feeling good and That means lots more fun Equity pods Coming up for your enjoyment so Equity Pod over on X and threads and if you Want more from me I am Alex over on X All right I'll talk to you soon we're Back on Wednesday Bye Equity is hosted by myself Alex Wilhelm and Tech rench senior reporter Mary an azto we are produced by Teresa Loans solo with editing by Kell Bryce

Durban is our illustrator and a big Thank you to the audience development Team and Henry pette who manages Tech Runch audio products thank you so much For listening and we'll talk to you next Time