This Week in AI: OpenAI's $38 Billion Bet
Another week, another massive investment in AI. This time, OpenAI has announced its first partnership with Amazon to deliver cloud access to AI hardware, powered by NVIDIA chips of course. This announcement would represent an eye-watering amount of money in any typical situation, but it’s just the latest and not even close to the largest of the AI age.
These investments have become so large and so frequent that they have raised questions about how sustainable the tech industry is, and whether or not AI is in a market bubble (even Microsoft co-founder Bill Gates thinks it might be.)
One concern is that investments like OpenAI's in particular create circular demand, where NVIDIA invests staggering sums into OpenAI, and then OpenAI turns around and invests some of those staggering sums into Amazon and then Amazon turns around and announces plans to buy more chips once again from NVIDIA.
"While some caution is warranted, we think the better question is not whether today's deals resemble the dot-com era, but whether the underlying fundamentals do," JP Morgan analysts recently wrote. "The scale of spending is enormous, the pace unprecedented and some assumptions around ROI, like the useful lives of assets, remain open questions."
This won’t be an issue, of course, if the AI industry continues to grow and delivers the profits that many investors are betting on. It's worth noting that OpenAI, for its part, has still not shown a profit, and other large AI companies similarly have made a lot of big business deals, but not a lot of profit.
Speaking of OpenAI...
OpenAI CFO pumps breaks on IPO talk
Last week, Reuters reported that OpenAI was "laying the groundwork" for an IPO that could value the company at up to $1 trillion, marking one of the biggest stock sales ever. Speaking at a Wall Street Journal conference, OpenAI CFO Sarah Friar said an IPO is "not in the cards right now," likely cooling the talk but also not entirely refuting it. The WSJ, for its part, added that it had heard OpenAI discuss public stock listings "as soon as 2027."
Then she said something that got people thinking something else entirely, when she suggested the US government should “backstop” the company's investments in infrastructure. "The backstop, the guarantee, that allows the financing to happen, that can really drop the cost of the financing but also increase the loan-to-value, so the amount of debt that you can take on top of an equity portion," she said.
In other words, she's saying the government should protect AI companies if they fail.
CNN reported that the company had suddenly gone into crisis mode, as the financial world digested not just a denial of an IPO but potentially talk of bailouts. OpenAI quickly retracted those statements, as did the White House, which said "There will be no federal bailout for AI."
AI in space
One of the pressures on AI has been its constant need for energy. The issue has become such a big topic that tech companies, including Microsoft, Amazon, Google, and others have announced projects to build energy generation systems of their own, including nuclear reactors. Even then, energy prices appear to be growing across the country in part because AI demands are so high already.
In an effort to respond, Google is looking to the heavens, literally. The company announced plans to use satellites in orbit around the globe to help power AI chips on board, which would do processing work using the sun’s radiation rather than relying on energy here on Earth. It's called Project Suncatcher.
"In the right orbit, a solar panel can be up to 8 times more productive than on earth, and produce power nearly continuously, reducing the need for batteries," Google wrote. "In the future, space may be the best place to scale AI compute."
It makes sense, even if it sounds a little like something a James Bond villain would do.
Of course, the tech industry has been playing with space technology for quite a while now. Elon Musk most notably has built SpaceX into a massive internet provider by launching thousands of low-orbit satellites that beam "Starlink" connections across the globe. Others, including Amazon, Google, and Facebook, have attempted similar systems.
One question companies will quickly run up against this time, however, is about space junk. Experts have raised concerns that we now have so many satellites that the skies are getting crowded. If every AI company starts building AI computers to run in space, that problem will only get bigger.
Apple's Siri, powered by Google?
Apple‘s relationship with Google has been a long and winding road worthy of a soap opera. Executives have oscillated between friends, betrayal, competition and partnership. Steve Jobs famously launched a “thermonuclear war” against Google's Android, which competed directly with the iPhone. Jobs called Android "a stolen product" shortly before his death in 2011.
There’s also been a lot of money involved, including the pair’s controversial mutli-billion dollar deal, in which Google has paid to Apple to make its search engine the default option on iPhones and iPads.
Now, it seems a new chapter is about to begin. New reporting from Bloomberg says that after years of struggling to improve Siri in order to compete with the AI age, Apple is preparing to potentially pay $1 billion per year to use a "custom" version of Google's Gemini AI.
"Apple still doesn’t want to use Gemini as a long-term solution," Bloomberg added. "Despite the company bleeding AI talent — including the head of its models team — management intends to keep developing new AI technology and hopes to eventually replace Gemini with an in-house solution."
However short-term this may be, Apple's decision marks a key turning point for the iPhone maker as it seeks to find its position in the ultracompetitive world of artificial intelligence.
Apple has been a trendsetter and titan of industry for decades, but that all changed in 2023 when OpenAI's ChatGPT chat took the world by storm. Apple's seemingly unstoppable iPhone has since struggled to catch up, with new initiatives like Apple Intelligence falling short of expectations.
Of course, it’s never smart to count Apple out. In the late 1990s, the company was perpetually a few bad days away from bankruptcy and seemed destined for failure before Steve Jobs and his team remade the Apple into a powerhouse with products like the iPod music player, iMac personal computer, and eventually the iPhone. Apple may very well discover and invent a new product that powers it for the next 25 years, and this time the company is far from financial trouble as it looks for answers.
Still, Apple's seeming willingness to work with Google is a sign of how seriously it wants to succeed at AI. The company routinely prefers to build its own technology rather than rely on others, and it’s even gone so far as to acquire startups to help design specialized chips to power its devices. An agreement with Google is effectively an acknowledgment that Apple needs outside help, at least for now.
Coke's AI holiday ad fizzes up more debate
Coca-Cola released its second annual AI ad for the holidays this week, re-energizing conversations about the future of AI in marketing and entertainment.
This year's ad, under the title "Holidays Are Coming," was created alongside the agency WPP and creative studios (plural) Silverside and Secret Level, which also worked on Coca-Cola's AI ad last year. Coca-Cola said about 100 people worked on the AI ad overall, according to the WSJ, sorting through a staggering 70,000 AI-generated clips.
The end result is certainly better than the nightmare-fuel videos from years ago. These days, we've gotten used to seeing AI videos of all sorts of things, including fictional vlog-style posts from Star Wars stormtroopers, and mashups of celebrities like the late physicist Stephen Hawking in a wrestling match.
With all those technological leaps in mind, the blog Futurism said Coca-Cola's ad "still looks like garbage." The Hollywood Reporter noted that the backlash has been about the same as when Coke released its first spot last year.
What makes Coca-Cola's ad particularly interesting is all the work went into it. Dozens of people working on anything isn’t cheap, though that's apparently still less than Coke typically spends. When The Hollywood Reporter spoke with the Secret Level's founder, "he made an insistent case that producing an AI commercial is at heart no different from making any animated film."
"It’s not just saying a series of words and pressing buttons. I hope people can see that," he said. THR pushed back, noting that critics say it's rehashing existing work, not merely another tool for animation. "It’s just using technology to help human creativity and collaboration."
Coke likely knew the holiday video is likely to stir up debate either way. And it’s not alone. Netflix this year said it used AI technology to create at least one shot for a TV series it had produced. Meanwhile, a European entertainment agency announced the creation of an "AI actress" call Tilly Norwood.
AI will unquestionably find a place in the process of creating video and other entertainment, but Coca-Cola's ad asks another question altogether: Does an ad created mostly by a computer look good enough to be anything more than a stunt?
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Ian Sherr is a widely published journalist who's covered nearly every major tech company from Apple to Netflix, Facebook, Google, Microsoft, and more for CBS News, The Wall Street Journal, Reuters, and CNET. Aside from writing, he tinkers with tech at home, is a longtime fencer -- the kind with swords -- and began woodworking during the pandemic.
