Finimize - ⚔️ Musk vs OpenAI

What’s going on here?

Elon Musk sued Microsoft-backed OpenAI for the sake of humanity – apparently.

What does this mean?

OpenAI was originally a non-profit company with a mission to make sure that AI would benefit humanity. It takes a lot of cash to develop world-changing technology, though, so ChatGPT’s owner added a capped profit-making arm in 2019. But Elon Musk believes the company’s veered too close toward a traditional money-making model, arguing that truly working for the benefit of humanity would involve sharing the underlying code with the world. Mind you, plenty of skeptics believe that Musk’s lawsuit is a shrewd competitive move. He has his own rival AI firm, after all. Either way, the Tesla tycoon isn’t afraid to pick a fight: he’s currently battling Google, Disney, and the US government.

Why should I care?

For markets: Microsoft’s in hot water.

Microsoft makes a fortune selling ChatGPT services, a revenue stream that would likely dry up if the latest updates were freely available. Plus, Musk’s lawsuit alleges that OpenAI’s latest model should be classed as artificial general intelligence, the Black Mirror-style type that can do as well as humans on some tasks. Microsoft doesn’t have a deal for that, though, so it could lose its exclusive access. On top of that, the New York Times has also sued Microsoft and OpenAI for copyright infringement, and US, European, and British competition watchdogs are keeping a close eye on the duo. Bear in mind, though, that legal threats have a habit of harboring more bark than bite.

The bigger picture: This could be the start of the storm.

Economist Carlota Perez has described a necessary “reset” that takes place when a revolutionary technology moves from development to deployment. According to Perez, that includes social tensions, government interventions, a shift in political thoughts, and often, a financial crash. Take note, AI investors.

What’s going on here?

The UK’s boardrooms filled up this year, as bargain-hunting dealmakers picked up the companies that investors have dropped.

What does this mean?

British companies have been attracting a lot of attention lately, with both foreign and local buyers spending over $22 billion so far this year on acquisitions in the country. That’s more than double the amount spent by this time last year. Just this week, warehouse business Wincanton was caught in a bidding battle between a US logistics firm and a French company. Some companies are still opting to go it alone, though: Direct Line Insurance Group and electrics retailer Currys both turned down offers from abroad this week.

Why should I care?

Zooming out: Americans love to shop.

It might sound like British companies are simply too good to resist, but that’s not quite the case. Companies around the world are struggling to find lucrative investment opportunities in today’s economy, so they’re buying up other firms to quickly expand their businesses and cut down on costs. Remember, the last decade of low interest rates made it easier for companies to store away some extra cash. So now that the US dollar is a lot stronger than the British pound, stateside companies can use their savings to snap up UK firms for a decent price.

The bigger picture: Check your metrics.

When a business is eyeing up a deal, it'll check out the firm’s “enterprise value-to-earnings multiple”. That basically tells investors how much they’d pay for each unit of earnings compared to the company's total worth. As far as that metric’s concerned, British companies would cost around 40% less than their European and US rivals. No surprise: the country’s been up against rampant inflation, sharp interest rate hikes, lagging economic growth, and a mass exodus of investors. Mind you, now that inflation seems to be skipping town, putting interest rate cuts back on the table, today’s cheap-as-chips British stocks could turn into tomorrow’s fish supper.