The Coming AI War

Date: 02/06/2023
Author: Mr. X

Over the last few weeks, Elon Musk has been redeemed. Though he still faces political opposition and there are investigations against him and his company, he won a crushing victory in the courts by getting a “Not Guilty” verdict in just two hours. Musk was facing a shareholders’ lawsuit because of his 2018 tweets in which he mused about taking Tesla (TSLA) at over $400 a share. The jury ruled that Musk did not mislead his investors.

This was the second piece of recent good news for Musk. He also announced that though Twitter had been hell for him recently, something he wouldn’t wish on his worst enemy, the company is moving closer to breaking even. The advertiser boycotts, the rogue employees, the media opposition, the supposed flight to competitors like Mastodon, and activists looking to take him down – none of these things have managed to take the TecnoKing’s crown.

Yet the biggest gamechanger is Tesla’s price war. When TSLA begun cutting prices, many thought this was a sign of desperation. Yet TSLA is up more than 62% over the last month. Its competitor Ford (F) is down almost 17%. Rivian Automotive Inc (RIVN) is down almost 47% and caught a great deal of the blame for Amazon’s (AMZN’s) recent losses. General Motors (GM) is up 10% – nothing compared to Tesla’s recent performance.

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It seems predictions of Musk’s fall were premature. The biggest reason why is that Tesla, with its new factories, is ready and able to wage a price war when it comes to EVs. Other companies that are just now moving into the sphere in a big way simply aren’t. Market share in the next major emerging industry is all-important.

But EVs are going to be dwarfed by Artificial Intelligence (AI), which is going to change everything.

Microsoft [MSFT]’s partnership with OpenAI was the opening shot in what is going to be a war. OpenAI’s most famous product is ChatGPT, which got more than one million users in less than a week. Needless to say, they are already moving to monetize it, with a ChatGPT pro feature that will reportedly cost $20 a month. Microsoft is expected to relaunch Bing (you know, that search engine you never want to use) with AI, making a direct challenge to Google on its core business. CEO Satya Nadella says that Google will lead the “age of AI.”

Google will strike back as soon as today. Its response to ChatGPT is called “Bard,” and is reportedly in the testing phase. However, ChatGPT’s success has been something of a Sputnik moment for Google, which is reportedly accelerating its efforts. “Bard seeks to combine the breadth of the world’s knowledge with the power, intelligence, and creativity of our large language models,” said Google CEO Sundar Pichai. Bard is powered by its own AI model, called LaMDA. The company is urging all hands on deck to test Bard, “in the spirit of an internal hackathan,” according to a companywide memo.

One thing that could slow down the rush into AI is are intellectual property laws. With AI threatening photographers, graphic artists, journalists and others, there will be a legal push to restrict ownership and the commercial use of AI. Getty Images is suing Stable Diffusion, an AI art generator, for using images without a license. Various copyright owners are also suing not just Stable Diffusion, but Open AI and Microsoft, because they supposedly piggybacked onto software written for GitHib.

I figured I’d ask ChatGPT what it thought. It said:

The use of artificial intelligence (AI) is likely to have significant ramifications for intellectual property (IP) laws. AI can create new forms of IP, such as AI-generated works such as music, art, and writing, which raises questions about who should own the rights to these works. Additionally, the use of AI in the creation of new products and services may also lead to disputes over ownership of IP rights.

Another issue that AI raises for IP law is the concept of authorship. In the traditional sense, authorship is tied to the idea of human creativity and originality. However, with AI generating new forms of content, it becomes more difficult to determine who should be credited as the author of a particular work.

The use of AI also has implications for patent law. For example, AI systems that generate new inventions or discoveries may raise questions about who should be granted a patent for these innovations.

Moreover, AI may also impact trademark law. As AI is used to generate new brands, logos, and other forms of distinctive branding, it may become increasingly difficult to determine who has the right to use a particular mark or logo.

In conclusion, AI is likely to have far-reaching implications for IP laws, and these laws may need to be updated to address the challenges posed by AI. It will be important for policymakers and legal experts to closely monitor developments in AI and IP law and to ensure that the legal framework adapts to the changing needs of this rapidly evolving technology.

Given American efforts to limit Chinese access to advanced semiconductor technology, you won’t be surprised to hear that China is also stepping up its own AI efforts. Baidu is rolling out its own AI to completement its search engine soon. This alone had Baidu Inc [BIDU] rising late last night, leading a recovery in Asian markets.

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The best situation for consumers would be a price war between Google, Microsoft, Baidu, and others. AI is going to be weaponized soon, wreaking havoc on the “creative classes” that have been held to be fundamental to the New Economy. I’d expect a brutal legal battle to be waged over copyright laws and the use of AI, as workers try to protect their jobs from being simply replaced by a machine. Yet such a battle is likely to be doomed in advance, as workflow will go to countries with more permissive regulations.

As we can see from Tesla in the EV Price Wars, being first is best. Unless Google has something extraordinary to show us, it’s already playing catch up. MSFT looks like it’s leading the way in AI. This could be bigger than MSFT’s (slowing) cloud business in the long-run. This isn’t my “Trade of the Decade,” but investors looking for something that will hold up for the long-term should consider MSFT, which has already staked its claim to be the most important company in the most important emerging market.

Mr. X is an investment analyst working in the Washington DC area who specializes in the intersection of business and public policy. After fifteen years working in politics, he writes on a classified basis for to bring you news on what those with power are debating, planning, and doing.

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