Finimize - 😳 Microsoft left OpenAI

What’s going on here?

Microsoft hopped out of its OpenAI board seat “effective immediately”, according to the firm’s letter out on Tuesday.

What does this mean?

Microsoft’s party line is that its observer seat – which lets the holder chime in on discussions but not vote, essentially a gossiper’s dream – is no longer needed, as OpenAI has cleaned up its act since last year’s boardroom fallout. Apple has also stepped away, despite previously planning to pin its name on one of the startup’s spinning office chairs. But this distance might have something to do with the heat coming from both European and US regulators. They’re concerned that Big Tech companies are wielding too much power, especially in the potentially world-changing AI sector. Mind you, Microsoft has hardly cut the cord: the firm’s $13 billion investment in OpenAI entitles it to a chunk of profit for some time, and it’s still making bank from the startup’s reliance on its Azure computing services.

Why should I care?

Zooming out: Magic act.

TSMC briefly joined its fellow AI explorers in the exclusive trillion-dollar club this week. As the sole supplier of advanced AI chips for Nvidia and Apple, the Taiwanese chipmaker has investors under its spell – and that’s not likely to change anytime soon. TSMC announced on Wednesday that last quarter’s sales were a better-than-expected 40% higher than the same time a year ago.

The bigger picture: Money’s no object… yet.

Big Tech companies are spending whatever they need to secure chips, data centers, and innovative technology in the pursuit of super-smart systems. But maybe they should watch the budget: skeptics doubt that AI will be all it’s cracked up to be, and Big Tech has gambled on anticlimactic technologies before. (You’ll notice you’re not driving an Apple car or working from the metaverse yet.) Apple might have the right strategy, then, partnering up with OpenAI instead of spending billions to develop its own systems.

What’s going on here?

China released disappointing inflation data for June on Wednesday, and the numbers suggest the world’s second-biggest economy could use a pep talk.

What does this mean?

While most major economies are contending with inflation, China is nearing deflationary territory. Consumer prices were 0.2% higher in June than the same time a year ago, less than the 0.4% expected. The core consumer price index, which strips out volatile food and energy prices, wasn’t much different. It rose just 0.6% compared to last June – the same tiny increase that China reported in May. Prices of products straight from the factory have been on the slide since 2022, too. Now, against the backdrop of bigger bills every time you pick up milk, falling prices might sound like a relief. But deflation is a real stumbling block, indicating that folk aren’t spending enough to keep the economy moving. And unless China can bolster its struggling real estate market, which is shaking folks’ financial confidence, purse strings are unlikely to loosen anytime soon.

Why should I care?

Zooming out: Double trouble.

China’s fortunes now rest on the export industry. It’s bad timing, then, that the country’s being stamped with trade tariffs left, right, and center. China has a glut of EVs that it wants to shift to the US and Europe, at government-subsidized prices that the likes of Tesla can’t compete with. The US has already brought in a 100% tax on Chinese EVs, while Europe has fees up to 38%.

The bigger picture: More arguments than a university debate club.

China isn’t taking tariffs lying down. The country’s opened an investigation into European Union trade barriers, questioning whether the new tariffs are an illegal barrier to free trade. Along with cars, China’s looking into sectors like rail, solar, and wind power – all of which Europe is trying to protect from Chinese competition. No wonder China is stuck on many investors’ “avoid” lists.