May 12, 2024: Major Indices Advance, Lots Of M&A

Major indices resumed their move towards record or 52-week highs last week — Dow Jones gained 2.2%, S&P 500 rose 1.85%, and the Nasdaq composite was up 1.1%. Chinese EV maker Zeekr priced its US IPO at top of range to raise US$441 million, the stock popped 30%+ on its debut. S&P 500 companies that have reported Q1/24 results disclosed buying back US$181.2 billion of their shares during the period, up 16% y/y. Since the start of 2023, the volume of M&A financed by stock or a mix of cash and stock has touched its highest level in more than two decades. SoftBank is in talks to acquire Graphcore, a struggling British semiconductor startup once valued at US$2.8 billion. BigCommerce reportedly hired bankers to explore potential sale. Private equity firms are reportedly circling Peloton for a potential buyout. Warren Buffett gave a prominent gesture of confidence to Apple at Berkshire Hathaway’s annual meeting on Saturday, saying it’s “extremely likely” the stock will remain his holding company’s biggest investment despite Apple’s recent struggles. OpenAI will announce and demonstrate updates to ChatGPT and GPT-4 on Monday via livestream, the company said on X on Friday. Apple is finalizing a deal with OpenAI to bring ChatGPT features to iOS 18. TikTok and its parent company ByteDance sued the U.S. government on Tuesday to block a new law signed by President Biden forcing a sale or ban of the short-form video app. In Canada, Sophic Client, Kraken received $3.5 million of orders for subsea security equipment. Tantalus Systems announced a $10 million bought deal financing. American Aires announced a $3 million private placement. Shopify fell 18% on Wednesday, shaving almost US$20 billion off the company’s value, after the company gave revenue and profit guidance for the current quarter that spooked investors.

Sophic Client Kraken Robotics (PNG-TSXV, KRKNF-OTC) receives $3.5 million of orders for subsea security equipment.

Kraken Robotics Inc. announces that it has received an order for spares and sustainment of its KATFISH™ Mine Counter Measures (“MCM”) solution totalling $2.2 million. In addition, the Company received an order for AquaPix® synthetic aperture sonars (SAS) totalling $1.3 million. These systems will be integrated to Autonomous Underwater Vehicles (AUVs) from two new navy customers for use in minehunting and subsea infrastructure security applications. Both customer details cannot be disclosed. Deliveries will occur in 2024. https://bit.ly/3Up7X32

Tantalus Systems Holding Inc. (GRID-TSX) announces $10 million bought deal financing.

Tantalus entered into an agreement with a syndicate of investment dealers led by Cormark Securities Inc. and Canaccord Genuity Corp. pursuant to which the Underwriters have agreed to purchase, on a bought deal private placement basis, 6,250,000 common shares from the treasury of the Company, at a price of $1.60 per Common Share for total gross proceeds of approximately $10 million. The Offering will consist of 4,937,500 Common Shares issued pursuant to the listed issuer financing exemption available under Part 5A of National Instrument 45-106 – Prospectus Exemptions in each of the provinces of Canada, other than Quebec, for maximum gross proceeds of $7,900,000 (the “LIFE Tranche”). In addition, the Company will complete, concurrent with the LIFE Tranche, a brokered private placement of 1,312,500 Common Shares on the same terms as the LIFE Tranche, for gross proceeds of $2,100,000. The Company will pay a fee in connection with the Offering comprised of (i) a cash fee equal to 6.0% of the aggregate gross proceeds of the Offering, and (ii) an aggregate number of compensation warrants equal to 6.0% of the aggregate number of Common Shares issued pursuant to the Offering. All securities issued in connection with the LIFE Tranche are expected to be immediately freely tradeable under applicable Canadian securities laws if sold to purchasers resident in Canada. All securities issued in connection with the Concurrent Private Placement Tranche and the Compensation Warrants and underlying Common Shares will, where applicable, be subject to a statutory hold period of four months and one day following the date of issuance in accordance with applicable Canadian securities laws. https://tinyurl.com/3upkbxsd

American Aires (WIFI-CSE) announces $3 million private placement.

Americas Aires Inc., entered into an agreement with Eight Capital dated May 8, 2024, pursuant to which the Eight Capital has agreed to act as agent, on a “best efforts” basis, in connection with a private placement of up to 3,158,000 units of the Company at a price of $0.95 per Unit for gross proceeds of up to $3,000,100. Each Unit will be comprised of one common share of the Company and one common share purchase warrant of the Company. Each Warrant will entitle the holder thereof to purchase one common share of the Company at an exercise price of $1.20 per Warrant Share for a period of 5 years following the closing of the Offering. The Company has also granted Eight Capital the option to sell up to an additional 810,911 Units at the Issue Price, exercisable in whole or in part at any time up to 48 hours prior to the Closing Date. If the Agent’s Option is exercised in its entirety, the total gross proceeds to the Company from the Offering will be $3,770,465 from the sale of 3,968,911 Units. The Company shall pay to Eight Capital: (i) a cash commission equal to 7% of the aggregate gross proceeds of the Offering; and (ii) non-transferrable broker warrants of the Company exercisable at any time prior to the date that is 24 months following the closing of the Offering to acquire that number of Units equal to 7% of the number of Units issued under the Offering at an exercise price equal to the Issue Price. https://tinyurl.com/3hxvb22v

Shopify (SHOP-NYSE, SHOP-TSX) shares plunge 18% on weak guidance.

Shopify shares tumbled 18% on Wednesday, shaving almost US$20 billion off the company’s value, after the company gave revenue and profit guidance for the current quarter that spooked investors. The better-than-expected first-quarter results were overshadowed by Shopify’s outlook for the current quarter. The Canadian e-commerce company said it expects second-quarter revenue to grow at a high-teens percentage rate year over year, which is in line with consensus estimates for growth of 19.5%, but still represents a slowdown from recent quarters. Shopify has posted year-over-year revenue growth in the low-to-mid 20s for the past six quarters. On a conference call with analysts, Shopify executives said consumer spending in the U.S. remains strong, but “we have factored in headwinds related to [foreign exchange] from the strong U.S. dollar and some softness in European consumer spending in our Q2 outlook.” Gross margins for the second quarter are expected to decrease by about 50 basis points compared with the first quarter, as a result of the sale of Shopify’s logistics business to freight forwarder Flexport last May. Meanwhile, Shopify said it expects operating expenses to increase in the low- to mid-single digits quarter over quarter, while Wall Street had projected flat growth. https://tinyurl.com/fp72ken6

Wealthsimple enters mortgage space through Pine partnership.

Wealthsimple has officially launched into the mortgage space through a new partnership with Toronto-based digital mortgage startup Pine. Wealthsimple has introduced a new co-branded mortgage product that uses Pine’s digital application platform. This service includes support from Pine’s advisory team throughout the application process. According to the companies, users can receive a pre-approval rate in minutes and a formal approval process can be completed in less than 24 hours, which they say is much faster than the typical timeframe of up to three days offered by traditional banks. Wealthsimple’s mortgage products come on the heels of significant quarterly growth. According to a recent report from The Globe and Mail citing financial results from IGM Financial—a subsidiary of Power Corporation of Canada—Wealthsimple grew by $6.1 billion in the fourth quarter of 2023, and $7.7 billion in the first quarter of 2024. Per The Globe, in the fourth quarter of 2023, Power and its subsidiaries, as well as other Wealthsimple shareholders, bought out Allianz Group. Allianz invested in Wealthsimple in 2019 as part of its $100 million funding round. https://tinyurl.com/44pv6n8r

China’s Zeekr prices US IPO at top of range to raise US$441 million.

Chinese electric vehicle maker Zeekr Intelligent Technology priced its U.S. initial public offering (IPO) at the top of its indicated range, raising US$441 million, it said on Friday. Zeekr, which is the premium brand of Chinese automaker Geely, upsized its IPO to sell 21 million American Depositary Shares (ADSs) at US$21 per share. It had earlier planned to sell 17.5 million ADSs. The IPO gives Zeekr a fully diluted valuation, which includes securities such as options and restricted stock units, of US$5.5 billion. On a non-diluted basis, the IPO values the company at about US$5.1 billion. Three strategic investors accounted for US$300 million worth of stock sold in the IPO, with Zeekr’s parent company Geely Automobile taking US$271 million in shares, according to a person familiar with the deal. Contemporary Amperex Technology (CATL) took US$19.1 million and Mobileye Global, opens new tab US$10 million, the person added. Geely had originally said it would take up to US$320 million, in the IPO, a term sheet from the deal’s launch showed. Even after the Zeekr deal was upsized, the value of shares sold to investors outside those strategic buyers was small compared to previous large China listings in New York. The IPO was multiple times oversubscribed, two sources said, but analysts are not convinced there will be a rush of Chinese companies listing in New York any time soon. The strong demand for Zeekr’s IPO comes against a backdrop of a fierce EV price war in China that has undercut profits, leaving a number of companies to pursue expansion outside China where they can charge more and beef up their margins. Zeekr is one of a number of Chinese automakers, including BYD, SAIC and Great Wall Motor that have set their sights on Europe, rolling out electric models as they seek to compete with legacy European automakers on their own turf. BYD and state-backed Chery have already announced plans to build cars in Europe. While Zeekr successfully pulled off its U.S. flotation, its IPO valuation represents a climb-down from the US$13 billion it was valued at when it raised US$750 million from new and existing investors last year. The Zeekr listing is the biggest Chinese flotation on U.S. stock exchanges since 2021 when LianBio listed its shares in New York. Last year, Zeekr had put its IPO plans on hold, Reuters previously reported. The number of Chinese companies that have pursued stock market flotations in the U.S. in the past few years has plummeted, after Chinese ride-hailing giant Didi Global was forced to delist its shares following a backlash from Chinese regulators. https://tinyurl.com/mv8r4bff

Buybacks are back: corporate America is on a spending spree.

S&P 500 companies that have reported first-quarter results as of Monday have disclosed buying back $181.2 billion of their shares during the period, according to data compiled by Birinyi Associates. That is up 16% from the year-ago quarter. The pace of purchases has been brisker than usual for nine straight weeks, BofA Securities said Wednesday in a research note. Big tech companies are leading the charge: Facebook’s parent, Meta Platforms, repurchased US$14.5 billion of its shares in the first quarter, up about US$5 billion from a year earlier. Apple, Netflix and Nvidia are among the other companies that have stepped up buybacks, as well as Wells Fargo, the construction equipment maker Caterpillar and the tobacco manufacturer Altria Group. The spending is expected to continue. Apple shares had their best day since 2022 on Friday, after the tech company said it plans to buy back US$110 billion of its own stock. In all, 443 companies have announced a buyback plan this year, up from 378 a year earlier, data from Birinyi shows. https://archive.ph/QB8T0

Dealmakers eye all-stock deals as US rate cut hopes fade.

As markets dial down expectations for U.S. interest rate cuts this year, America’s largest corporations are poised to rely more heavily on their stock and a bulging cash hoard instead of expensive debt to finance acquisitions. Since the start of 2023, the volume of mergers and acquisitions financed by stock or a mix of cash and stock has touched its highest level in more than two decades, according to data from LSEG. All-stock M&A transactions accounted for US$263.6 billion, or about 24% of overall announced volumes so far this year – the highest percentage year-to-date since 2001 when the comparable figure was 47.2%, according to LSEG. Cash-and-stock deals have accounted for 10.8% of total announced transaction volumes this year, which is the highest level since year-to-date 2021 when the figure was 17.5%. Put together, all-stock M&A volumes, including the common stock value of cash-and-stock transactions, has accounted for roughly 29% of total deal volumes so far this year – the highest percentage since 2001 when the figure was 30.7%. Several investment bankers, deal lawyers, and Wall Street analysts expect this funding strategy to gather pace this year, as hopes of near-term interest rate cuts fade and debt borrowing costs are expected to remain higher for longer. Since the start of 2023, all-stock mergers have accounted for 19.5% of overall volumes – the prior ten-year average of all-stock M&A deals as a percentage of overall volumes is 14.8%, according to LSEG. Overall M&A volumes are expected to rise 50% in 2024, Morgan Stanley analysts said in a March report, largely due to pent-up demand from last year when volumes touched a decade-low. But expectations of how they will be financed has taken a sharp U-turn from earlier in the year as some investors are pricing in just one or two U.S. rate cuts this year compared to three. https://tinyurl.com/mtrbpp8

SoftBank is said in talks to buy troubled AI chip firm Graphcore.

SoftBank Group Corp. is in talks to acquire Graphcore Ltd., a struggling British semiconductor startup once valued at US$2.8 billion, according to people familiar with the deals. The two companies have held discussions over several months but entered into more advanced deal talks recently, said the people, who asked not to be identified discussing private matters. Financial terms haven’t yet been decided and the talks could still unravel, they said. A final agreement isn’t imminent, one person said. The talks come amid a surge in sales for SoftBank, thanks largely to its majority stake in another UK-based chip designer, Arm Holdings Plc. On Feb. 7, Arm reported a strong outlook for its expansion beyond smartphones into more artificial intelligence applications. Arm shares have soared by about 40% since. Graphcore works on a different type of chip technology than Arm. Formed in Bristol in 2016, the company develops designs for large “intelligence processing units,” meant to help with AI software processing inside data centers. The startup touted its product as a rival to Nvidia Corp.’s high-end graphics chips, and secured high-profile investors including Samsung Electronics Co., Bosch and Sequoia Capital. A 2020 financing round valued Graphcore at US$2.8 billion. But Graphcore has since struggled to get traction and suffered from slowing hardware sales. Graphcore reported just US$2.7 million in revenue for 2022, a 46% drop from the prior year, according to its latest financial report. Pretax losses widened to US$204.6 million. The company said in the filing that it had closed operations in Norway, Japan and Korea and that it would reduce headcount in other markets. It also said that it needed to raise more capital to remain a “going concern.” The Graphcore talks come as Son is seeking to pool some US$100 billion to bankroll an AI chip venture, Bloomberg News reported in February. After SoftBank paused its rapid-fire tech investing in 2022, the Japanese giant signaled a return to dealmaking late last year with several bets on AI and autonomy. Chairman Masayoshi Son has described this as a strategy centered around Arm’s business. The Financial Times reported in September that SoftBank had made a preliminary offer to buy Graphcore, which the startup denied. https://archive.ph/vGWYC

BigCommerce reportedly hires bankers to explore potential sale.

Publicly traded e-commerce software maker BigCommerce has tapped bankers to explore a potential sale of the company, Reuters reported. BigCommerce is working with investment bank Qatalyst Partners to solicit interest from potential buyers including private equity firms, the report said. The company, which went public in August 2020, has seen its shares fall more than 90% since its initial public offering, and has struggled to win larger customers and compete with other software providers like Shopify. BigCommerce shares closed up 11% Tuesday, giving the company a market cap of more than US$530 million. The company also has long-term debt of around US$340 million. https://tinyurl.com/mty32d3h

Private equity firms circle Peloton for potential buyout.

A number of private equity firms have been considering a buyout of Peloton as the connected fitness company looks to refinance its debt and get back to growth after 13 straight quarters of losses, CNBC has learned. In recent months, the pandemic darling has had talks with at least one firm as it considers going private, people familiar with the matter said. The firm’s current level of interest in acquiring Peloton is unclear. A number of other private equity firms have been circling Peloton as an acquisition target, but it’s unclear if they have held formal discussions.Firms have zeroed in on how to cut Peloton’s operating expenses to make a buyout more attractive. Last week, Peloton announced a broad restructuring plan that’s expected to reduce its annual run-rate expenses by more than US$200 million by the end of fiscal 2025. Shares of Peloton soared more than 18% in premarket trading after CNBC’s report was published. Shares closed more than 15% higher. There is no guarantee a deal will be made, and Peloton could remain a public company. The people spoke on the condition of anonymity because the talks are private. Over the last two years, Peloton has been on a downward trajectory as it struggles to grow sales, generate free cash flow and chart a path to profitability. Demand for its hardware has fallen and its costs have been too high for a company of its size. Last week, Peloton announced CEO Barry McCarthy would be stepping down as it issued a disastrous earnings report that missed Wall Street’s expectations. On the same day, it announced plans to cut its staff by 15%, or by about 400 employees, explaining “it simply had no other way to bring its spending in line with its revenue.” https://tinyurl.com/4hj4h5kz

Synopsys to sell unit for as much as US$2.1 billion to private equity firms.

Chip-design company Synopsys Inc. is selling its software integrity business to two private equity firms for as much as US$2.1 billion in cash. Clearlake Capital and Francisco Partners are buying the cybersecurity-focused business and will run it as a new, as-yet unnamed independent company, according to a statement issued Monday. Synopsys is getting US$1.5 billion at closing, US$125 million over five quarters and as much as $475 million contingent upon a specified rate of return. The move allows Synopsys to focus on its core business of supplying semiconductor design tools, Chief Executive Officer Sassine Ghazi said in the statement. The transaction comes about three months after the firm agreed to buy engineering software maker Ansys Inc. for about US$34 billion in one of the largest tech acquisitions in recent years. The divestment could be a boost for Synopsys’ margins, as the software integrity unit has been a drag on profit growth in recent years, wrote Piper Sandler Analyst Clarke Jeffries in an April note. Synopsys’ management first disclosed last year it was considering selling the unit. Some analysts consider the US$2.1 billion price for the unit to be a discount. https://archive.ph/tpTTL

Arm shares fall 7% on revenue forecast.

Shares of Arm Holdings Plc fell 7% in after hours trading on Wednesday after the chip designer forecast full-year revenue that indicated only a modest acceleration in growth from last year’s rate. Investors had hoped the company would benefit more from artificial intelligence computing. The U.K.-based company, which licenses chip designs to other companies that make traditional data center server chips, expects to generate between US$3.8 billion and US$4.1 billion in sales this year, representing as much as 26% growth from last year. In 2023, ARM generated US$3.2 billion, up 21% from the year prior. In contrast, Nvidia, whose graphic processing units have become the backbone of AI computing, more than doubled revenue last year to US$61 billion. In the first quarter, Arm generated US$928 million in revenue, up 47% year over year. https://tinyurl.com/yyb2d658

Uber reports first-quarter results that beat expectations for revenue, but posts net loss.

Uber reported first-quarter results Wednesday that came in slightly above analysts’ estimates for revenue, but the ride-hailing company posted an unexpected net loss. Shares of Uber closed down more than 5% Wednesday. In an interview with CNBC’s “Squawk Box” on Wednesday, Uber CEO Dara Khosrowshahi said the company’s move to a loss had “nothing to do with the operating business.” “We did have to mark down those equity stakes that resulted in a loss,” he said. “We don’t expect that to keep happening going forward.” However, Uber cannot predict the markets, Khosrowshahi added. For its second quarter, Uber said it expects to report gross bookings between US$38.75 billion and US$40.25 billion, compared with StreetAccount estimates of US$40 billion. Uber anticipates adjusted EBITDA of US$1.45 billion to US$1.53 billion, compared with the US$1.49 billion expected by analysts. The number of Uber’s monthly active platform consumers reached 149 million in its first quarter, up 15% year over year from 130 million. There were 2.6 billion trips completed on the platform during the period, up 21% year over year. https://tinyurl.com/yre9zej4

Airbnb beats earnings expectations for first quarter but offers weaker-than-expected guidance.

Airbnb reported first-quarter results on Wednesday that beat analysts’ estimates but offered weaker-than-expected guidance. Shares fell more than 6% in extended trading. The company said revenue in its second quarter will come in between US$2.68 billion and US$2.74 billion. Analysts were expecting US$2.74 billion for the period, according to LSEG. In its letter to shareholders, Airbnb said it is already experiencing “robust demand for travel” ahead of the peak summer season, particularly around upcoming events like the Olympics in Paris. The company also said it expects that year-over-year revenue growth for its third quarter will accelerate compared to the second quarter, in part because of its summer travel backlog. Other special events like the solar eclipse in North America helped drive engagement with Airbnb’s platform during the first quarter. The company said it had 500,000 guests stay on Airbnb during the eclipse, according to its investor letter. https://tinyurl.com/kuf2vtkw

Reddit shares soar 11% after company reports revenue pop in debut earnings report.

Reddit shares rallied 11% in premarket trading on Wednesday, a day after the company released quarterly results for the first time since its IPO in March. Revenue climbed 48% from US$163.7 million a year earlier. The company reported US$222.7 million in ad revenue for the period, up 39% year over year, which is a faster rate of growth than at its top competitors. Digital advertising companies have started growing again at a healthy clip after brands reeled in spending to cope with inflation in 2022. Meta’s ad revenue jumped 27% in the first quarter, followed by 24% growth at Amazon and 13% growth at Google parent Alphabet. For the second quarter, Reddit expects revenue of US$240 million to US$255 million, topping the US$224 million expected by analysts, according to LSEG. The midpoint of the guidance range suggests growth of about 32% for the second quarter, up from US$183 million from a year earlier. Reddit began trading under the ticker symbol “RDDT” on the New York Stock Exchange in March. The company priced its IPO at US$34 per share, which valued the company around US$6.5 billion. When tech valuations were red hot in 2021, Reddit’s private market valuation reached US$10 billion. The stock climbed past US$58 in after-hours trading on Tuesday before coming back a bit. https://tinyurl.com/yxn9ymue

Instacart shows slight improvement in revenue and profits.

Instacart reported a slight improvement in its growth rate for the first quarter, although the grocery delivery service continues to grow at a relatively tepid rate. Instacart shares fell 5.4% in after-hours trading. The company reported 8% higher revenues of US$820 million, while the gross transaction volume—a measure of consumer spending on the platform—rose 11%, a notable appreciation on the fourth quarter. The revenue number included ad reenue, which grew 9% to US$217 million. Instacart said its performance in the quarter was partly seasonal, “as more customers typically turn to our service in times of inclement weather.” It noted that Instacart did better at fulfilling orders than in past winter seasons. The company’s net income improved marginally to US$130 million. https://tinyurl.com/5a6d5686

Buffett defends stake in Apple.

Warren Buffett gave a prominent gesture of confidence to Apple at Berkshire Hathaway’s annual meeting on Saturday, saying it’s “extremely likely” the stock will remain his holding company’s biggest investment despite Apple’s recent struggles. The topic was raised at the closely watched conclave after Berkshire sold about 13% of its giant stake in Apple in the first quarter—leaving it with a position still worth more than US$135 billion. Lately, Apple shares have fallen amid declining iPhone sales. Nonetheless, Buffett said, Apple remains an “even better business” than American Express and Coca-Cola, two other prominent Berkshire stocks. https://tinyurl.com/yeuaw4rr

DeepMind CEO targets US$100 billion-plus AI drug discovery business with AlphaFold.

Google DeepMind has released a new version of AlphaFold, a landmark tool for predicting protein structures, that puts the artificial intelligence software on a path to make breakthroughs in biology research and bolster a business that Google’s AI chief says could be worth north of US$100 billion. The AI system has the potential to revolutionize medicine and create “enormous commercial value,” for DeepMind spinout Isomorphic Labs, Demis Hassabis, the chief executive officer of both subsidiaries, said in an interview with Bloomberg Television. “I hope to do both with Isomorphic: build a multi-hundred billion dollar business — I think it has that potential — as well as be incredibly beneficial for society and humanity.’’ Isomorphic Labs, a unit of Alphabet Inc. created three years ago, was built to commercialize DeepMind’s AI for drug discovery. DeepMind first released AlphaFold in 2018, with advances in decoding the shape of proteins, a scientific problem often compared to mapping the human genome. Now in its third iteration, AlphaFold can model a range of molecular structures, including DNA and RNA, and predict how they interact with one another. “To really understand biology, you need to think about the interactions between different biological molecules,” Hassabis said. “And that’s what AlphaFold 3 is a big step towards.” Hassabis described the update, which was also published in the scientific journal Nature, as “essential for drug discovery” because of its critical insight into the kinds of chemical compounds used in designing and testing new medicine, including vaccines. “I would be expecting, maybe in the next couple of years, the first AI-designed drugs in the clinic,” Hassabis added. AI in medicine is a hot field. It’s driven by a belief that software algorithms can find and help develop new drugs at drastically lower costs and much faster than the decades it can take now. The craze has drawn pharmaceutical firms, venture capitalists and tech giants like Nvidia Corp. into a market worth an estimated US$50 billion. Investors have poured more than US$18 billion into “AI-first” biotech companies in the past decade. But even with more cash and computing advances, companies working on the tech have yet to show major clinical success. Some biotech firms specializing in AI drug discovery, such as BenevolentAI and Exscientia Plc, have struggled in public markets. In January, Isomorphic Labs announced its first two commercial partners, Eli Lilly & Co. and Novartis — alliances the tech company said “could be worth nearly US$3 billion” if they’re successful on a range of performance milestones. Alphabet has tried turning its health-care innovations into new business opportunities before, with units such as Verily, a “precision health” platform for managing medical data. But those have shown limited commercial success so far. https://archive.ph/iKiTg

OpenAI to announce ChatGPT, GPT-4 updates on Monday.

OpenAI will announce and demonstrate updates to ChatGPT and GPT-4 on Monday via livestream, the company said on X on Friday. CEO Sam Altman said on X that the company would not be announcing the next iteration of its conversational AI, GPT-5, or an AI-powered search engine, which The Information first reported on in February, at this event. However, the model developer has also been working on a new AI model that will be able to process and generate text, images and audio in recent months, The Information reported on Friday. Other potential product announcements include computer-using agents that can speed up software development and other computer-based tasks and its AI video generator Sora, which it first previewed in February. https://tinyurl.com/ye268n7u

Apple finalizing deal with OpenAI to bring ChatGPT features to iOS 18.

Apple is finalizing an agreement with OpenAI to bring some of its technology to the iPhone this year, according to a new report from Bloomberg. With this deal, the report explains that Apple will be able to offer “a popular chatbot” powered by ChatGPT as part of its AI-focused features in iOS 18. While Apple is also still in talks with Google about an AI partnership, tonight’s report says Apple has “closed in on an agreement with OpenAI.” “An OpenAI accord would let Apple offer a popular chatbot as part of a flurry of new AI features that it’s planning to announce next month,” the report explains. More specific details about how these features and integrations might work remain unclear for now. From Mark Gurman at Bloomberg: The two sides have been finalizing terms for a pact to use ChatGPT features in Apple’s iOS 18, the next iPhone operating system, said the people, who asked not to be identified because the situation is private. Apple also has held talks with Alphabet Inc.’s Google about licensing that company’s Gemini chatbot. Those discussions haven’t led to an agreement, but are ongoing. The report cautions that there’s still “no guarantee” that a deal between Apple and OpenAI “will be announced imminently.” A report on Thursday emphasized that iOS 18’s AI features will be powered (in part) by Apple data centers with Apple Silicon processors. The majority of iOS 18’s AI features, however, will be powered entirely on-device, allowing Apple to tout privacy and speed benefits. Apple is slated to announce iOS 18 and its new AI features at WWDC, which kicks off with a special event on June 10. OpenAI is set to make its own, separate announcement during an event on Monday. The Information has reported that one feature in development at OpenAI is an AI voice assistant to compete with Siri and Google Assistant. Follow Chance: Threads, Twitter, Instagram, and Mastodon. https://tinyurl.com/mr2rrtep

Apple reportedly building M2 Ultra and M4-powered AI servers.

Apple has started building its own AI servers that use the M2 Ultra chip, Haitong analyst Jeff Pu reports. Pu provided the analysis based on supply chain checks in a new note to investors seen by MacRumors. Foxconn is said to currently be assembling Apple AI servers that contain the M2 Ultra, with plans to assemble AI servers powered by the M4 chip in late 2025. Last month, a reputable source on Weibo said that Apple was working on processors for its own AI servers made with TSMC’s 3nm process, targeting mass production by the second half of 2025, which may line up with this report about M4-powered AI servers. While Apple is rumored to be prioritizing on-device processing for many of its upcoming AI tools, it is inevitable that some operations will have to occur in the cloud. By the time M4-based servers could be operational in data centers, Apple’s new AI strategy should be well underway. In line with broader industry expectations, Pu also expects Apple to announce on-device AI features at WWDC in June, such as audio recording summarization, photo and video editing, and live translation. While the iPhone 16 lineup will tout a range of AI features, 2025’s iPhone 17 models will apparently be more focused AI devices. Apple’s decision to build its own AI server is reflective of the company’s ongoing strategy to vertically integrate its supply chain. Apple will likely use its own chips to enhance the performance of its data centers and future AI tools that rely on the cloud. https://tinyurl.com/y73a3jp3

Apple unveils new iPads using AI chip.

Apple unveiled new iPad Pro devices that will run on the M4, Apple’s next generation chip that it says should make artificial intelligence software run better and use less power than alternatives used in other personal computers. It also introduced the latest Pencil Pro, which includes advanced features like haptic feedback, and iPads with high definition OLED displays. The company will sell the new iPad Pros for US$999 and US$1,299 for the 11-inch and 13-inch models, respectively, and iPad Airs for US$599 and US$799 for the 11-inch and 13-inch models. Pencil Pro goes on sale for US$129. Apple is also working on its own AI chips to power web servers and data centers, according to the Wall Street Journal. https://tinyurl.com/37s9af3t

Google’s Waymo crosses 50,000 paid driverless rides per week.

Waymo, Google’s autonomous car unit, said it now completes more than 50,000 driverless rides per week in three cities, up from 10,000 in May last year. The growth in the paid service, Waymo One, should help the 15-year-old project reduce the heavy cash burn that’s raised the ire of Alphabet investors. It also extends its lead over rivals such as General Motors’ Cruise and Tesla, whose CEO Elon Musk has said will reveal a robotaxi this summer. Waymo One, which now operates in San Francisco, Phoenix and Los Angeles, has received approval in other cities on the West Coast and is planning to expand to Austin. It expects to grow “rapidly to 10 times” last year’s numbers by the second half of 2024, it said. Waymo has raised US$5.5 billion in funding from external investors as well as Alphabet and was once valued at US$30 billion, according to data from PitchBook. https://tinyurl.com/bp4uz27a

In streaming milestone, Disney and Warner Bros. Discovery team on bundle featuring Disney+, Hulu and Max. Disney and Warner Bros.

Discovery are breaking ground in streaming with a bundled offering featuring Disney+, Hulu and Max. The companies are aiming to launch the bundle this summer. The exact launch date and the price point have not yet been announced, but plans call for both ad-free and ad-supported versions to be available. The move creates the first cross-company partnership for any of the top-tier services to come to market as the race to catch up with Netflix began in earnest about five years ago. It follows years of speculation and public musings by top executives about when bundling across the industry might reduce friction and begin to make streaming more cost-efficient for programmers and consumers alike. Pay-TV operators long served as third-party bundlers in the cable age, but while distribution deals with the likes of Roku and Amazon are key to any streaming service gaining traction, it’s mostly every-app-for-itself in the streaming era. In yet another sign of the times, Paramount+ and Showtime’s streaming service fully merged in 2023. Paramount Global’s recent travails and efforts to finalize a potential merger have also been accompanied by speculation that Paramount+ would be ripe for the kind of bundle announced by Disney and WBD. Comcast and Paramount had held talks about a Peacock-P+ combo, but those discussions reportedly faltered due to disputes over control. Disney, despite rolling up all of Hulu in a buyout of Comcast’s one-third stake in recent months, has shown increased interest in joint ventures. It recently teamed with Fox Corp. and WBD on a sports-focused streaming bundle. That still-unnamed service, nicknamed “Spulu,” is due to launch this fall. Brands to be showcased in the new Disney-WBD bundle include ABC, CNN, DC, Discovery, Disney, Food Network, FX, HBO, HGTV, Hulu, Marvel, Pixar, Searchlight and Warner Bros. The new offering will be available for purchase on any of the three streaming platforms’ websites. https://tinyurl.com/3j4ze696

TikTok sues over potential U.S. ban.

TikTok and its parent company ByteDance sued the U.S. government on Tuesday to block a new law signed by President Biden forcing a sale or ban of the short-form video app. The companies argue the law is unconstitutional and violates freedom of speech. Under the law, TikTok has about a year to find a new owner. But the lawsuit says a divestiture is “simply not possible: not commercially, not technologically, not legally … There is no question: the Act will force a shutdown of TikTok.” TikTok previously said it would fight the law in court. https://tinyurl.com/4nbj5ewk

U.S. revokes licenses for Qualcomm, Intel to supply chips to Huawei.

The U.S. government has revoked licenses that allow companies such as Qualcomm and Intel to supply chips for laptops and smartphones to Huawei, the Chinese tech giant that has been under western sanctions, several media outlets including Bloomberg reported. The latest move comes after Huawei launched its A.I.-enabled laptop, the MateBook X Pro, which used Intel processors. U.S. lawmakers and officials have been alarmed by Huawei’s ability to make advanced chips for smartphones despite years of western sanctions. Republican lawmakers, concerned about national security risks, had been urging the U.S. government to cancel licenses that allowed U.S. companies including Qualcomm and Intel to continue to sell chips to the Chinese company. Huawei already had been reducing its dependence on Qualcomm by designing its own 5G wireless chips. Qualcomm had been allowed to only sell older 4G chips to Huawei but recently said it didn’t expect to generate significant revenue from Huawei beyond this year. https://tinyurl.com/w7j67ccj

US eyes curbs on China’s access to AI software behind apps like ChatGPT.

The Biden administration is poised to open up a new front in its effort to safeguard U.S. AI from China and Russia with preliminary plans to place guardrails around the most advanced AI Models, the core software of artificial intelligence systems like ChatGPT, sources said. The Commerce Department is considering a new regulatory push to restrict the export of proprietary or closed source AI models, whose software and the data it is trained on are kept under wraps, three people familiar with the matter said. Any action would complement a series of measures put in place over the last two years to block the export of sophisticated AI chips to China in an effort to slow Beijing’s development of the cutting edge technology for military purposes. Even so, it will be hard for regulators to keep pace with the industry’s fast-moving developments. The Commerce Department declined to comment while the Russian Embassy in Washington did not immediately respond to a request for comment. The Chinese Embassy described the move as a “typical act of economic coercion and unilateral bullying, which China firmly opposes,” adding that it would take “necessary measures” to protect its interests. Currently, nothing is stopping U.S. AI giants like Microsoft-backed OpenAI, Alphabet’s Google DeepMind and rival Anthropic, which have developed some of the most powerful closed source AI models, from selling them to almost anyone in the world without government oversight. Government and private sector researchers worry U.S. adversaries could use the models, which mine vast amounts of text and images to summarize information and generate content, to wage aggressive cyber attacks or even create potent biological weapons. One of the sources said any new export control would likely target Russia, China, North Korea and Iran. Microsoft said in a February report that it had tracked hacking groups affiliated with the Chinese and North Korean governments as well as Russian military intelligence, and Iran’s Revolutionary Guard, as they tried to perfect their hacking campaigns using large language models. https://tinyurl.com/48yr54va

China hacked Ministry of Defence, Sky News learns.

MPs will be told of a massive data breach involving the Ministry of Defence, targeting service personnel. The government will not name the country involved, but Sky News understands this to be China. The Chinese state is to be accused of two or three attempts at hacking MoD employees – including personnel. The cyberattack was on a payroll system with current service personnel and some veterans. It is largely names and bank details that have been exposed. All salaries will be paid this month. China’s foreign ministry said it “firmly opposes and fights all forms of cyber attacks” and “rejects the use of this issue politically to smear other countries”. Tobias Ellwood, a Conservative MP and former soldier, told Sky News that China “was probably looking at the financially vulnerable with a view that they may be coerced in exchange for cash”. Defence Secretary Grant Shapps will make a statement to the Commons today, with the BBC reporting he will set out a “multi-point plan” which will include action to protect affected service men and women. The MoD hopes serving personnel will not be concerned about their safety. They will be provided with advice and support. The contractor system is not connected to the main MoD computer systems and has been taken down with a review launched. https://tinyurl.com/2hyfr89v

In Tesla Autopilot probe, US prosecutors focus on securities, wire fraud.

U.S. prosecutors are examining whether Tesla committed securities or wire fraud by misleading investors and consumers about its electric vehicles’ self-driving capabilities, three people familiar with the matter told Reuters. Tesla’s Autopilot and Full Self-Driving systems assist with steering, braking and lane changes – but are not fully autonomous. While Tesla has warned drivers to stay ready to take over driving, the Justice Department is examining other statements by Tesla and Chief Executive Elon Musk suggesting its cars can drive themselves. U.S. regulators have separately investigated hundreds of crashes, including fatal ones, that have occurred in Teslas with Autopilot engaged, resulting in a mass recall by the automaker. Reuters exclusively reported the U.S. criminal investigation into Tesla in October 2022, and is now the first to report the specific criminal liability federal prosecutors are examining. Investigators are exploring whether Tesla committed wire fraud, which involves deception in interstate communications, by misleading consumers about its driver-assistance systems, the sources said. They are also examining whether Tesla committed securities fraud by deceiving investors, two of the sources said. The Securities and Exchange Commission is also investigating Tesla’s representations about driver-assistance systems to investors, one of the people said. The SEC declined to comment. Tesla did not respond to a request for comment. Last October, it disclosed in a filing that the Justice Department had asked the company for information about Autopilot and Full Self-Driving. The probe, which is not evidence of wrongdoing, could result in criminal charges, civil sanctions, or no action. https://tinyurl.com/2zec8jxa

Instacart is getting restaurant delivery — thanks to Uber Eats.

Grocery delivery service Instacart is expanding into restaurant takeout thanks to a new partnership with Uber Eats. In the coming weeks, Instacart will add a new feature for restaurant delivery, with the back-end mechanics powered by Uber. The listing of restaurants will be provided by Uber, the transaction will be overseen by Uber’s software, and the food will be picked up and delivered by Uber Eats couriers. The only difference is that everything will take place within Instacart’s app or website. Neither company would share the financial details of the deal, so we don’t have any insight into how much Instacart is paying to use Uber’s food delivery software. Uber spokesperson Noah Edwardsen said that prices would not change for customers, nor would couriers see smaller payouts. “Consumers will see the same restaurant menu prices on Instacart that they do on Uber Eats, and couriers will be paid the same way they would be for orders directly from Uber Eats,” Edwardsen said. Uber says its motivation is to “drive more orders to Uber Eats restaurant partners,” while Instacart gets to add a galaxy of new businesses to its delivery operation without having to go through the laborious process of building it from the ground up. In its press release, Uber says it is joining Instacart to “create technologies and solutions that support brick-and-mortar businesses.” Still, it’s a curious move considering both companies compete with each other over grocery customers. Instacart dominates digital grocery delivery, capturing more than 70 percent market share in 2023. Still, Walmart and Amazon remain the biggest players in the overall grocery delivery business. https://tinyurl.com/bdzhxmdt

Corporate climate watchdog document deems carbon offsets largely ineffective.

Staff at an influential corporate climate action group whose board announced a plan to allow companies to offset greenhouse gas emissions from their supply chain with carbon credits has now found such offsets are largely ineffective, a confidential preliminary draft reviewed by Reuters shows. At stake is the growth of the still nascent market for voluntary carbon offsets. While they are used by some of the world’s biggest companies, including Microsoft, Salesforce and Amazon, the size of the market remains small at around US$2 billion. The Science-based Targets initiative (SBTi), a U.N.-backed nonprofit that audits the emission reduction plans of companies, triggered a revolt among staff last month by declaring its intention to allow use of carbon credits prior to concluding its research on them. Since then, the SBTi’s board of trustees has issued a clarification to state it had not yet changed its policy and that any decisions would be “informed by the evidence”.The findings in the SBTi staff document seen by Reuters have not been previously reported. They are based on a review of evidence in scientific papers and other submissions by interested parties in a consultation. The findings are subject to further analysis and review, including from the Scientific Advisory Group, a panel comprising climate scientists from around the world. If upheld, they would represent a major obstacle to SBTi’s board of trustees adopting carbon offsets as part of companies’ emission reduction plans. Many of the SBTi’s financial backers, including the Bezos Earth Fund, are pushing for adoption, as is former U.S. climate envoy John Kerry. They argue offsets are needed to spur more investment in clean energy and meet a global pledge to reduce emissions to zero on a net basis by 2050. An SBTi spokesperson said its research on carbon offsets has not been completed and that it would be incorrect to state that there are even interim findings at this stage. The United Nations’ COP28 climate talks failed in December to seal a deal on new rules which would allow the launch of a central system for countries and companies to begin offsetting their carbon emissions and trading those offsets. https://tinyurl.com/4e2xuys3

Rivian sticks to production forecast below Wall Street targets.

Electric-pickup maker Rivian on Tuesday stuck to a 2024 production forecast well below Wall Street targets and reported a wider-than-expected first-quarter loss as it ended a weeks-long manufacturing halt. Rivian shares fell 6% in after-hours trading as the muted forecast drew questions from some analysts about demand for its pricey R1S SUVs and R1T pickups. High inflation has soured consumer sentiment for electric vehicles, with hybrids gaining sales traction. Rivian shut down for the start of its second quarter and resumed production of its flagship vehicles late last month. The three-week shutdown allowed it to upgrade its assembly line to reduce costs in the long run. Rivian said it will make 57,000 vehicles this year, while nine analysts polled by Visible Alpha expected 62,277. The factory retooling, however, added costs in the first quarter, and the supplier changes might limit the production ramp and rate in the near future, Rivian said. While a broader slowdown in EV demand has forced automakers to slash prices, Rivian has shied away from major discounting. It has instead introduced lower-priced variants with shorter range. As a result, the average selling price of its vehicles has fallen to US$88,607 in the first quarter from US$94,123 in the prior quarter. https://tinyurl.com/4ey9vcpp

Texas spot power prices jump almost 100-fold on tight supply.

Texas electricity prices soared almost 100-fold as a high number of power-plant outages raised concerns of a potential evening shortfall. Spot prices at the North Hub, which includes Dallas, jumped to more than US$3,000 a megawatt-hour just before 7 p.m. local time, versus about US$32 at the same time Tuesday, according to data from the Electric Reliability Council of Texas. This morning, Ercot, as the state’s main grid operator is known, issued a “watch” for a potential capacity reserve shortage from about 7-9 p.m., meaning the buffer of spare supplies could fall to low enough levels to call on back-up generation, cancel or delay outages or curb usage. The conditions are the tightest of the year so far and raises the risk of prices rising to the US$5,000 cap — which they last did on April 16, when Ercot also warned of a potential shortfall. Unusually hot weather in the region has boosted demand for cooling and lowered the efficiency of many power plants. Wind output has also fallen from a day earlier and there are more outages. The high prices may force big consumers, including Bitcoin miners, to curtail their operations for a few hours. Batteries are also expected to ramp up to keep the grid stable. https://tinyurl.com/muw59a7y