AI Antitrust Battle Looms
Nvidia's AI surge has helped it join the $3 trillion market cap club, making it the second-largest company in the world after Microsoft. Microsoft.
The two companies are at the center of an artificial intelligence boom that has driven gains across the S&P 500, and both are targets of regulatory scrutiny of the sector's largest companies.
The FTC and the Department of Justice continue In an antitrust investigation into the pair and OpenAI, The Times' David McCabe writes: The FTC is already investigating Microsoft, according to The Wall Street Journal, over how the company awarded a contract to a startup called Inflection AI. avoid Scrutiny.
Microsoft hired nearly the entire startup's staff in March and agreed to pay about $650 million to license its technology.
The deal strengthens Microsoft's leadership position in AI. The company has invested in OpenAI, French startup Mistral and Abu Dhabi's G42, and is partnering with these companies on AI development and deployment.
(The New York Times sued OpenAI and Microsoft, alleging copyright infringement of news content related to their AI systems.)
Regulators are divided in their approaches. The Department of Justice will be investigating whether Nvidia violated antitrust laws, while the FTC will focus on OpenAI and Microsoft.
Jonathan Cantor, the Justice Department's antitrust director, told the Financial Times that he was looking into “monopoly bottlenecks” and competition. Cantor also promised that regulators would also look into “hiring by acquisition.” He did not mention Microsoft's deal with Inflexion, but the tech giant's president, Brad Smith, defended the deal. “We didn't want to own the company,” he told the Financial Times. “We wanted to hire some of the people who worked at the company.”
The Biden administration has pushed to rein in Big Tech. U.S. regulatory action lags behind those of other countries such as the European Union, which passed one of the world's first comprehensive AI rules last year.
But the FTC and Department of Justice are stepping up their investigations and are already looking into OpenAI's data collection practices and reviewing the company's partnerships with AI startups.
Geopolitical factors could add further complications. The Biden administration engineered the Microsoft-G42 deal to lock out China, and Washington will seek to keep big tech companies on its side as it tightens its grip on Beijing over control of AI.
What's going on?
Boeing's Starliner finally launches. The company's spacecraft is scheduled to carry two NASA astronauts to the International Space Station on Thursday after a series of costly delays. NASA hailed the launch as a milestone in the agency's efforts to turn to the private sector for human spaceflight — and a rare bit of good news for the company at a time when Boeing's planes have come under scrutiny.
Elon Musk's xAI plans to build a supercomputing facility in Memphis. The artificial intelligence startup will build what local officials described as the “biggest multi-billion-dollar investment” in the city's history, part of xAI's efforts to catch up with more established rivals in accumulating the computing power needed for AI innovation, and cities' efforts to attract tech industry funding.
EBay stops accepting American Express cards due to dispute over fees. The online retailer said it would take the measure starting Aug. 17, citing “unacceptably high fees” the financial giant charges on card transactions. Despite the high-profile fight over interchange fees, analysts say it's unlikely American Express will lower its fees.
Unexpected opposition to abolishing congestion pricing
New York Governor Kathy Hawkle's surprise decision to slam the brakes on a first-in-the-US plan to decongest Manhattan is further fuelling debate over one of the most controversial urban policies in recent history.
But the city's business community has found itself unexpectedly divided, with sectors arguing for and against the measure.
Haukl's announcement was a last-minute change of policy. Just two weeks ago, he spoke publicly in support of the policy, which would have charged drivers $15 a day to enter Manhattan below 60th Street (as long as they use the EZ Pass toll system).
This policy has potentially large economic implications.
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Supporters argued the plan would reduce traffic congestion and air pollution in Manhattan while generating about $1 billion in annual revenue for the city's bus and subway systems.
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Opponents of the bill, which included New Jersey Democrats (Gov. Phil Murphy filed a lawsuit to block the bill's implementation) and suburban lawmakers, argued that the bill would put an undue burden on low-income city residents, commuters, commercial truckers and local businesses.
Background: Similar measures have already been introduced in other cities, including London, with varying degrees of success.
Various business interests opposed the plan. Mr. Hawkle noted that office vacancy rates have at times hovered around 20%, posing a potential chilling effect on commuters, and the president of the Broadway Association, which represents Midtown theaters, hotels and other businesses, expressed concern in March that the plan could lead to a sharp decline in tourism.
Meanwhile, The Lever reported that Hokl had received thousands of dollars in donations from lobbyists for car dealerships concerned about declining auto sales.
A similarly broad group criticized Hokul's change of policy. Among them is the Partnership for New York City, one of the city's most influential business groups. “The toll revenues are just $1 billion a year, far less than the more than $20 billion in lost productivity, overtime, fuel costs, environmental and health costs of excessive congestion,” said Partnership for New York City president Catherine Wilde.
The New York Association of Realtors, a trade group for commercial real estate companies, said the delays would only be temporary, and the president of the New York Building Council, which represents the construction industry, said “we are living through a bad episode of The Twilight Zone.”
At the same time, congestion pricing has garnered support from Uber, even though customers of its ride-hailing service would have to pay an extra fee under some versions of the scheme.
The SEC is at a standstill
The SEC's efforts to crack down on the burgeoning $27 trillion private funds industry and its oversight of Wall Street appeared shaky this morning.
The agency was dealt a major blow Wednesday when a federal appeals court struck down disclosure rules that fund giants including Apollo Global Management and a group with ties to Blackstone have been fighting for months.
The setback puts the SEC in a tough position. The SEC is considering an appeal, which is expected to go to the Supreme Court, but a loss there could further weaken the agency's power as it faces a growing number of lawsuits from pro-business groups that accuse it of regulatory overreach.
summary: The SEC passed rules last year requiring hedge funds, private equity funds, and venture capital firms to provide investors with detailed information about their fees and expenses. At the time, SEC Chairman Gary Gensler said the new rules would provide greater protections for “all investors — large or small, institutional or individual, sophisticated or unsophisticated.”
State pension funds Avid supporter The proposed ruleBut Wall Street has strongly opposed the rule, calling it onerous, and the SEC itself has estimated that it could result in $5.4 billion in compliance costs.
The decision could pose a challenge to the SEC. Jason Brown, an asset management partner at law firm Ropes & Gray, told Dealbook that regulators are also considering other rules on how private funds work with investors. “I think this case will give the industry the courage to challenge these rules in court if they don't come out the right way,” he said.
What's next? One possibility is an appeal to the Supreme Court, whose conservative majority has recently appeared to be open to arguments seeking to limit regulators' power.
Still, regulators scored a major victory last month when a court rejected a challenge to the Consumer Financial Protection Bureau's funding.
PGA Tour and Saudi Arabia, One Year Later
Thursday marks the one-year anniversary of a deal that shook professional golf: The PGA Tour and a Saudi Arabian sovereign wealth fund backing start-up golf club LIV Golf seeking to cooperate.
While the partnership may seem like it's moving slowly, talks are continuing and the two sides are scheduled to meet in New York tomorrow, two people familiar with the plans told DealBook's Lauren Hirsch (the people asked not to be identified because they were not authorized to speak publicly about the matter).
Who will be involved? The PGA Tour's trade committee members include Tiger Woods and Fenway Sports Group's John Henry, and fellow committee member Rory McIlroy will be attending the tournament and participating remotely, one of the people said.
The fact that it is a face-to-face meeting is important. it is, Several There is a real intention to get a deal done, but sources on both sides warn that a breakthrough is unlikely to come soon.
The two sides recently exchanged term sheets, according to DealBook, a sign that the deal, in which a new group of Saudi and U.S. investors are each putting up $1.5 billion, is on more than life support, even if progress appears to be slow.
A year has passed and the PGA Tour looks very different. The company has raised at least $1.5 billion from U.S. investors including hedge fund mogul Steven Cohen, set up a separate division for its commercial business and appointed a new board of directors that includes Woods, Home Depot co-founder Arthur Blank and Fenway's Sam Kennedy to oversee the business.
That being said, two Former PGA Tour board directors have resigned, including Goldman director Mark Flaherty and Jimmy Dunn, the vice chairman of Piper Sandler who spearheaded the deal.
Are further moves planned? The big question on Wall Street is whether Ed Herlihy, the Wachtell partner who worked closely with Mr. Dunn on the original deal, will step down. (He declined to comment.)
Another question is, given high turnover, who has the final say in closing the deal?
Speed Read
Bargain Deals
Elections and Policies
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President Donald Trump and White House Chief of Staff Jeff Zients are scheduled to address the Business Roundtable, a gathering of influential corporate lobbying groups, on June 13. (CNBC)
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Canada became the first G7 nation to cut interest rates this year, and the European Central Bank is expected to follow suit on Thursday. (CBC, DealBook)
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