The Briefing
By Cory Weinberg
Thanks for reading The Briefing, our nightly column where we break down the day’s news and preview The Information’s coverage. If you like what you see, I encourage you to subscribe to our reporting here.
Greetings!
The biggest news on a slow news day in a slow news week is about the news. That’s the way the news people want it.
The New York Times Co. grabbed the lonely spotlight Wednesday morning with a lawsuit against OpenAI and Microsoft, seeking compensation for the ChatGPT developer’s use of the newspaper’s articles to train ChatGPT. The lawsuit is an interesting read, complete with examples of how ChatGPT sometimes spits out Times articles verbatim.
But before you start dreaming of a high-profile trial with Sam Altman, Satya Nadella and A.G. Sulzberger taking the stand, you should view this for what it is: a negotiating tactic. It would be far too risky for The Times to go to trial over how the fair use doctrine—which allows limited use of copyrighted material—applies to artificial intelligence models. A court determining that OpenAI was operating legally would cut off The Times from getting a cut of the licensing revenue it seeks.
The Times said in the lawsuit it approached OpenAI and Microsoft about a licensing deal in April, but the talks have “not produced a resolution.”
To get tech companies to pay it for its content, The Times has been playing whack-a-mole lately. It made headlines earlier this year when it struck a $100 million, three-year deal with Google to showcase Times stories in certain news products. But that barely offset The Times’ lost revenue from when Meta Platforms stopped paying the newspaper to feature the Times’ content in the Facebook app, securities filings show. (Licensing revenue is less than 10% of The Times’ total revenue, dwarfed by subscription and ad revenue.)
Instead, The Times is going after OpenAI and Microsoft at a time when they’re vulnerable to public relations pressure. The lawsuit cites reports that Altman was concerned about ex-OpenAI board member Helen Toner taking aim in an academic paper at his company’s approach to copyright law. It also points to a growing criticism from OpenAI (coming from Elon Musk, among others) that the chatbot company contradicts the word “open” in its name by closely guarding what data it uses in its most recent large language models.
For now, expect this latest news tech battle to play out in the court of public opinion as executives haggle over deal terms behind the scenes.
Given the sour mood this year in the market for IPOs, it might surprise you that the company responsible for the biggest IPO of the year has blown away expectations. The stock price of SoftBank-owned chip designer Arm is up 45% from its $51 September IPO price, in stark contrast with other notable tech IPOs Instacart and Klaviyo, which have disappointed by trading below the prices at which they went public.
As we’ve reported, Arm pitched itself to Wall Street as benefiting from price hikes on its chip architecture that will increase its royalty fee revenue in the coming years, even in a slow-growing market for smartphone sales. Equity analysts working at the horde of investment banks that took Arm public have almost unanimously been bullish. The company would benefit, as investment bank Mizuoho wrote this month, “from long-term secular trends for increasing processor efficiency and AI.”
Even if you believe the story—and clearly lots of investors do—the stock has gotten well ahead of itself. Arm’s gains are more than double the rise in the overall market for semiconductor firms since mid-September, according to the PHLX Semiconductor Index, which weighs comparable firms like Nvidia, Qualcomm and Marvell Technology. And investors are valuing Arm at a significantly higher multiple of future sales, earnings and free cash flow than for those peers.
More-independent investment firms seem less bullish. In a report last month, research firm New Constructs wrote that even around its IPO price, investors were pricing Arm with the assumption that it would grow revenue 3% annually for more than a century. While that amount of annual growth might seem reasonable, any projection for how much a smartphone-related business will grow over 100 years seems inherently problematic.
- An appeals court temporarily suspended the U.S. International Trade Commission’s import ban on certain kinds of Apple watches, giving the tech giant some breathing room as it tries to appeal the ban.
- Amazon will start showing commercials to Prime Video viewers in the U.S. beginning on Jan. 29, the company started telling customers this week.
- MicroStrategy acquired another $616 million worth of Bitcoin in the past month, the company revealed in a securities filing, noting that its total investment in Bitcoin is now $5.9 billion.
JPMorgan Clashes With Partly Owned Greek Fintech
Chinese VC and AI Founder Predicts Shakeout in China’s AI Sector
The Late-Night Email to Tim Cook That Set the Apple Watch Saga in Motion (Bloomberg)
Altman and Ive Hire Apple Design Exec for AI Devices (Bloomberg)
Pandemic’s E-Commerce Stars Are Coping (Wall Street Journal)
Four Year Campaign Backdoored iPhones Using Advanced Exploit (Ars Technica)
The Information · 1 Post Street, Suite 1050, San Francisco CA 94104
