Microsoft bids again for AI dominance
The heavyweight battle for dominance over artificial intelligence has entered a new round. Just as Apple and Google are talking about forming a united front to fight back, Microsoft has poached an AI pioneer.
The latest move is a major boost to Microsoft’s efforts to take the lead in artificial intelligence. But it could increase regulatory scrutiny of the company’s deal-making in this high-stakes space.
Microsoft has hired a former Google executive to run its consumer AI division. Mustafa Suleiman co-founded British startup DeepMind, which was acquired by the search giant in 2014 and became central to its AI push. He retired in 2022 and launched his Inflection AI with LinkedIn co-founder Reid Hoffman, raising billions of dollars, including funding from Microsoft.
The tech giant also hired most of Inflexion’s employees, including chief scientist Karen Simonian.
The hire is another big win for Microsoft CEO Satya Nadella. When he took over in 2014, Microsoft was in a state of technological irrelevance. Mr. Nadella rebooted it. This is one of the reasons he was able to make big deals on his AI.
Microsoft’s AI strategy is focused on closing deals. It invested $13 billion in OpenAI and partnered with French startup Mistral. Both startups use Microsoft’s cloud computing platform to build language models at scale. Instead, Windows manufacturers deploy their services in their products.
Under a new CEO, Inflexion will license its technology to Microsoft and shift its focus from personalized chatbot assistants to working with enterprise customers.
Regulators are investigating OpenAI and Mistral transactions –And hiring Mr. Suleiman could raise even more questions. Microsoft may be hoping that focusing on partnerships (rather than acquisitions) will provide some cover.
The FTC announced in January that it was investigating strategic investments in the space that appeared to be aimed at circumventing regulators.
Suleiman’s previous thoughts on AI may prove awkward. In his book, The Coming Wave, Suleiman warns that AI is an existential threat and that governments need to regulate it.
And he said in an interview with DealBook last year that large companies can have a hard time advancing innovative technologies in a profitable way. and society.
Nadella may have convinced Suleiman that he could balance those competing needs. Mr Suleiman is clearly a fan of his new boss. “People like Satya are very proactive about these things and definitely focus on the responsibility that companies have to do the right thing,” he told Dealbook last year.
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Intel receives up to $8.5 billion in U.S. chip subsidies. The CHIPS Act funding, along with an $11 billion loan to Intel and billions of dollars in tax credits, is aimed at boosting domestic semiconductor production and is expected to be announced Wednesday. Separately, Bloomberg reported that the Biden administration is considering imposing sanctions on companies related to Chinese technology giant Huawei after it made breakthroughs in semiconductors despite facing sanctions. ing.
Major Republican donors are flocking to Donald Trump again. Organizers of the fundraiser, scheduled to be held April 6 in Palm Beach, Florida, include financiers John Paulson, Howard Lutnick, Robert Mercer and oil magnate Harold Hamm. It will be done. Separately, the former president asked the Supreme Court to rule that he is absolutely immune from charges related to his own efforts to overturn the 2020 election.
Wall Street bonuses fell last year, according to a new report. The average check fell 2% from 2022 to $176,500, according to New York State Comptroller Thomas DiNapoli. (European banks’ bonuses also fell.) This reflects lower profits for the securities industry, but it also means less money for New York state, which collects 27% of its tax revenue from Wall Street.
What to look out for on Fed decision day
Earlier this month, Fed Chairman Jay Powell told senators that a rate cut would be “not far off.” But Wall Street largely agrees that Wednesday, the end of the central bank’s latest rate-setting meeting, is not that day.
Rate cuts are probably off the table at this point, but there are a number of issues at stake. There are three big questions here.
Does the Fed expect to cut rates three times this year, or just two? The Fed will release its first new interest rate forecast since December. At the time, policymakers expected three rate cuts this year, and economists today more or less stand in that position.
But a series of better-than-expected inflation reports forced some economists to cut their forecasts to two notches. Will the Fed follow suit?
When will the first cut come? The futures market this morning is pricing in a 60% chance that the Fed will announce a cut in prime lending rates in June. But some Fed officials, including Cleveland Fed President Loretta Mester, are cautioning against acting too soon.
They want more evidence that inflation and the job market are cooling before they cut borrowing costs.
When will the Fed start shrinking its $7.5 trillion balance sheet? The central bank rapidly expanded its holdings early in the coronavirus pandemic by buying bonds and other securities to support markets.
Chairman Powell is likely to be pressed about the Fed’s portfolio reduction plans, and any answer is sure to be closely scrutinized by investors.
National security weighs on ammunition trade
Dealers are increasingly wary of national security concerns affecting more areas of M.&A, including American industry icons and British conservative publications.
The proposed $1.9 billion sale of Vista Outdoor’s ammunition business is also weighing on gun companies.
context: Vista, which owns ammunition brands such as Remington and Federal, has agreed to sell its ammunition business to Prague-based defense conglomerate Czechoslovakia Group. That would keep Vista’s non-firearms brands, such as CamelBak water bottles and Fox Racing mountain bike gear, as publicly traded companies.
But MNC Capital, an investment firm linked to former Vista board member Mark Gottfredson, made a $2.9 billion tender offer. all Company’s. Vista rejected the proposal, saying it was worth less than a planned spin-off.
Multinational companies expect national security concerns to have an impact. Vista and CSG referred the transaction to the Committee on Foreign Investment in the United States, a federal interagency committee that reviews certain investments in U.S. companies by foreign buyers. (MNCs that are US companies are not subject to review by the Commission.)
Conservative commentators defend MNCs. Former Secretary of State Mike Pompeo and Sen. J.D. Vance, R-Ohio, have criticized questionable dealings by CSG over the years, including whether the company violated a voluntary embargo on arms exports to Azerbaijan. .
CSG has previously disputed Azerbaijan’s accusations, but did not respond to requests for comment. Vista said it “remains confident in its ability to obtain all necessary regulatory approvals, including with respect to CFIUS.”
There are more specific issues for CFIUS to consider. Vista, along with Winchester and CSG-owned Fiocchi, is a major producer of primers (essentially ammunition propellants) and shotgun cartridges in the United States.
The decline in military ammunition supplies since Russia’s full-scale invasion of Ukraine is a concern for the Pentagon.
What’s next? CFIUS notified Vista and CSG on February 12 that it would take 45 days to review the proposed transaction, but it could take up to 60 days. CFIUS could then approve the deal, impose conditions on approval, or recommend that President Biden block the deal.
The merger agreement allows either party to exit by October 15, but could be extended until January if all closing conditions except regulatory approvals are met. .
Texas ESG mess
Wall Street’s approach to climate finance is once again under attack in red-state America. According to the Texas School Fund, terminate the contract BlackRock Inc. accused Texas of boycotting energy companies and ordered them to take control of about $8.5 billion in state funds.
Tuesday’s move comes as banks face legal challenges from conservative states and investors grow weary of ESG (environmental, social and corporate governance) investment strategies. Ta.
Big Wall Street companies are already scaling back their ESG initiatives Last month, BlackRock, JPMorgan Chase & Co. and State Street reduced or withdrew their participation in the Climate Action 100+, a global coalition of asset managers that has been pressuring companies to decarbonize. did. (BlackRock CEO Larry Fink also said the company remains committed to the strategy, but will no longer use the term “ESG.”)
Texas leads new conservative charge against ESG In parting with Blackrock, The Texas Permanent School Fund says it is complying with a 2021 law that restricts local and state government agencies from working with banks deemed to be selling to oil and gas companies or firearms companies. Ta. This is the largest amount ever withdrawn by a state from a fund administrator over this issue.
BlackRock spokesman Chris Van Ess called the fund’s decision “unilateral and arbitrary,” adding that it “ignores $120 billion in investments in public energy companies in Texas.” Ta.
A tough stance against ESG may not be good for business. The Texas Business Association, a lobbying group that includes major energy companies, released a report this month saying the 2021 law could cost the state millions of dollars.
Approximately 145 anti-ESG bills have been introduced in 28 states this year. But only one passed, said Frances Sawyer, director of Pleiades Strategy, a policy research group that has been tracking legislative battles. The bill faces pushback from a coalition of climate change activists and business groups.
“Extremism is being thwarted,” Sawyer told Dealbook, citing the defeat last month of a New Hampshire bill that proposed making state-funded ESG investing a criminal offense.
speed reading
Information of sale
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Artificial intelligence hardware company Astera Labs has raised about $713 million in its IPO, exceeding expectations. (Reuters)
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CalPERS, California’s giant public pension fund, plans to increase its exposure to private market investments such as leveraged buyouts by more than $30 billion to boost returns. (FT)
2024 Election
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“Inside Biden’s effort to recruit Nikki Haley donors to help defeat Donald Trump” (CNBC)
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More than 100 Democratic donors and activists have sent a letter to President Biden warning that progressive anger over support for Israel’s war in Gaza could lead to a victory for President Trump. (New York Times)
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