- Front Research
- Posts
- 📉 AI Stock Market Excitement Dips, Posing Risks for Tech Giants
📉 AI Stock Market Excitement Dips, Posing Risks for Tech Giants
+ ChatGPT's Security Issue | Thrasio's Crisis | Startup Risk
Kristoffer Lindström
November 17, 2023
Hello, tech world!
It's November 17, 2023, and we've got today's top stories: market shifts in AI, Thrasio's financial woes, and the latest in AI advancements from leading tech giants.
AI Market Woes - Diminished excitement in AI stocks challenges tech giants.
Thrasio's Financial Turmoil - Bankruptcy looms despite massive funding.
Tech Spending Cuts - Small businesses reduce software investments.
Microsoft's Open AI - Embracing open-source AI alongside major partnerships.
ChatGPT's Privacy Alert - Recent update raises data security concerns.
Google's AI Leap - Launching a revolutionary AI-driven notebook.
GPT-4's Edge - Surpassing Google in AI hallucination tests.
Startup Risk Tactics - Decoding the risk-reward balance in tech startups.
Microsoft's Cloud Evolution - Introducing a new, innovative cloud PC app.
and more…
Stay tuned for detailed insights on these stories and much more.
Tech Companies
⚡️ Quick: Goldman Sachs observes decreased AI mentions among S&P 500 earnings calls, signaling a cooling in AI stock market enthusiasm. This change may pose a risk to tech giants investing heavily in AI despite analysts recognizing continued AI growth opportunities.
Goldman Sachs reports a reduction in mentions of "AI" in the Q3 earnings calls of S&P 500 companies, signaling a possible cooling of AI hype in the stock market. This follows a surge of interest linked to OpenAI's ChatGPT in 2022. The shift could pose a risk to mega-cap tech stocks like Microsoft that have pivoted into AI, especially given hedge funds' recent large-scale investment in these companies. Despite this, Wedbush analyst Dan Ives sees continued growth opportunities in AI for tech companies.
💡 Why this matters: The cooling AI hype may precipitate a shift in market dynamics, posing potential risks for mega-cap tech stocks heavily invested in AI and potentially impacting hedge funds' aggressive positions in these stocks. The slowdown may also influence future tech-related regulatory discussions.
Thrasio Holdings, the Amazon aggregator known for acquiring third-party sellers, is on the brink of bankruptcy amid a post-pandemic online spending decline. In spite of raising $1 billion in 2021 and totalling $3.4 billion in funds, restructuring options are being explored with law firm Kirkland & Ellis.
💡 Why this matters: Thrasio's potential bankruptcy may trigger a significant shift in the Amazon third-party aggregator landscape, possibly resulting in market consolidation, increased scrutiny on business models, and heightened caution amongst investors in similar ventures.
Unity's AI-powered Muse platform, designed to streamline game development, is now officially accessible. Apart from code sourcing and 2D sprite generation, it promises advanced AI mechanisms in future updates.
Startup Scene
Small and medium-sized businesses (SMBs), such as Joe Coffee, are reducing their software expenditures, alarming Wall Street. The Seattle-based coffee company cut its subscriptions with HubSpot, a marketing automation software provider, and is reconsidering its contract with Stripe, the payment processor. This aligns with latest earnings reports from companies like Paycom, HubSpot, and ZoomInfo, indicating potential economic turbulence due to consumer's response to inflation and high interest rates. SMBs are vital for the US economy, contributing to 40% of the GDP.
Menlo Ventures has secured $1.35 billion, targeting AI startups for investment. The venture firm, seeing AI as a key innovation area, has previously backed several AI companies. It currently manages over $3.8 billion across various fund groups.
AI Corner
At its Ignite 2023 conference, Microsoft announced its renewed commitment to open-source AI, including bringing Meta's Llama and Mistral's models to Azure and potentially making its Phi-2 AI model open-source.
💡 Why this matters: Microsoft's renewed commitment to open-source AI models might impact tech entrepreneurs and workers who rely on affordable, accessible AI platforms. This shift in strategy presents new opportunities for tech investors and enterprises to utilize free-to-use AI models in their businesses, potentially transforming their strategies and lowering costs. This move could also disrupt the monopoly of closed-source AI entities like OpenAI.
ChatGPT, OpenAI's popular AI system, is reportedly vulnerable to security risks due to new updates like the Code Interpreter. Experts suggest that the new file-upload feature has led to a massive loophole for prompt injection attacks that trick the software into executing third-party commands. Despite seeming unlikely, the security threat poses serious concerns and could vary across different usage scenarios. OpenAI has yet to respond to the concerns.
Google has opened up access to NotebookLM, its AI-first notebook project announced earlier this year. The tool lets users upload various texts to ask questions or understand given information, identifies major themes and suggests questions based on chat history. Initially previewed in July, it now seems ready for wider testing, with many waitlisted accounts gaining access.
Vectara's leaderboard ranks AI chatbots on their 'hallucination' tendencies with GPT-4 leading and Google's Palm-Chat lagging due to a 27% hallucination rate.
Markets & Money
Following Walmart's disclosure of weakening customer spending and dismal labor market data, the Dow Jones experienced its first loss in five days. Despite the S&P 500® Index (SPX) and Nasdaq Composite (COMP) reporting slight gains, the overall mood in the stock market was low. Fears over the Federal Reserve's rate position potentially harming the economy were raised after jobless claim reports showed a three-month high last week.
US CPU export restrictions have led Alibaba to call off the IPO of its cloud division, Cloud Intelligence Group. Despite strong Q3 earnings, the sanctions may hamper hardware upgrades and overall business operations.
Insights & Analysis
⚡️ Quick: Venture-backed startups fetch more money at exit, with Series C ventures presenting the highest weighted growth according to an analysis of 14,000 U.S.-based startups from 2014 and 2015. Conversely, seed-stage startups pose the greatest risk.
An analysis of 14,000 U.S.-based startups that raised funds in 2014 or 2015 revealed that joiners at Series C, A, or B series typically see more profitable exits on average despite increased risk. Conversely, exits for Series E and later are more likely but yield smaller returns. Seed joiners face the highest risks, with only 6.9% of the startups analyzed exiting successfully. Selecting startups backed by top-tier venture capital firms significantly increases the likelihood of a profitable exit.
💡 What we can learn from this: If you're seeking to join a startup, 'Where to join?' is a crucial question. The research suggests that the best risk-reward tradeoff generally lies in joining startups at the Series C stage, followed by Series A and B. Entering at the seed stage or post-Series D offers less favorable odds. Also, startups backed by top-tier venture capitalists considerably boost the probability of success. This insight can support tech entrepreneurs, workers, or investors in strategically deciding which stage of startups to join or invest in, bolstering potential returns.
Apps & Gadgets
Microsoft has introduced a preview of the new 'Windows app,' available for iOS, iPadOS, and web users, enabling access and connection to remote Windows PCs, including Windows 365, Azure Virtual Desktops, and Microsoft Dev Box. This move adds to speculation that a consumer version of Windows 365 may be on the horizon. Alongside, Microsoft announced enhancements to Windows 365 including GPU support and new AI capabilities.
Amazon has launched Astro for Business, a security robot for small and midsize businesses. The AI-driven robot can surveil up to 5,000 square feet, provide intelligent motion detection, and set up scheduled patrols. The Astro for Business robot is available for $2,350, with optional subscription services for enhanced features.
Reply