Finimize - 💸 The next big AI spending frenzy

What’s going on here?

SoftBank set a multi-billion-dollar target for investments into AI, determined to give its Vision Fund something to focus on.

What does this mean?

SoftBank is preparing to push nearly $9 billion into AI investments. The cash will come from the famed SoftBank Vision Fund, which has struggled to find an opportunity that lives up to its successful purchase of UK-based chip designer Arm from many moons ago. So now, the Vision Fund is selling off assets to focus on what’s worked before: chips and high tech. SoftBank has even said that it could end up spending more than the $9 billion target, so long as the right deal comes along. That shouldn’t be hard to find, either. SoftBank has $180 billion in net assets, reassuring any lenders that they’ll get their money back.

Why should I care?

Zooming out: It’s a group effort.

SoftBank has pegged areas like data centers and power generation for its investments, since they have the potential to benefit from the rise of AI and come in handy for Arm. That does mean, however, that SoftBank’s pitting itself against the likes of Microsoft, Amazon, and Google, which have committed billions to AI-focused partnerships. That said, Japanese-based SoftBank has a tailwind: Japan’s low interest rates make it cheaper for the company to raise funds.

The bigger picture: Talk about strong-arming.

Arm’s market value has hit the roof since going public last year, reaching the lofty heights of about $120 billion. That means SoftBank’s 90% stake in the chipmaker is worth more than the whole investment company’s business. To keep that up, SoftBank aims to launch an Arm AI chip and a large language model – a Japanese rival to OpenAI’s ChatGPT – this year. But it risks becoming a little fish in a big pond: Statista Market Insights data predicts that Japan’s AI market will be worth some $13 billion by 2030, roughly 17 times bigger than last year.

What’s going on here?

Elon Musk’s artificial intelligence startup raised $6 billion, which might show those former allies at OpenAI what they’re missing.

What does this mean?

Elon Musk was once a big backer of OpenAI, but he distanced himself in 2018 when his concerns over the safety of AI uses were seemingly pushed aside. So now, he’s all-in on his own AI startup instead. xAI has already birthed Grok, a generative AI system that runs on X, formerly Twitter. And eager to keep the momentum up, Musk’s startup has just raised $6 billion to bolster infrastructure, speed up research and development, and fund product launches. The round attracted some of Musk’s usual partners, including Saudi prince Alwaleed Bin Talal’s Kingdom Holding, and Silicon Valley titans Andreessen Horowitz and Sequoia Capital.

Why should I care?

For markets: Show me the money.

A $6 billion funding round is off the charts for an early-stage startup, and values xAI at an eye-watering $24 billion. So clearly, investors believe in the money-making potential of both Musk’s startup and AI itself. Good job, too: developing and operating AI doesn’t come cheap, since the tech runs on vast data centers, costly licensing deals, and expensive top-of-the-line chips. Add in the fact that companies need to front sky-high salaries to win over the very best talent, and it’s clear that they need to spend big to win big.

The bigger picture: Shuffle the deck.

The headlines might make AI seem like the only tech worth tinkering with, but in reality, traffic on ChatGPT is starting to level out. So wary of the hype dying off, tech giants are rethinking their strategies. Some are trimming down to sleeker, more efficient language models, while others are introducing more advanced and flashy features that juggle text, images, and audio. Case in point: Meta is betting big on a new approach called “world modeling,” which aims to give AI human-like common sense and understanding.