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'Que Sera, Sera' in AI. White House, Apple/OpenAI & Elon/SpaceX. ARD #133

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Michael Parekh AI: Reset to Zero
12 hours ago
19 MIN READ

Today’s theme is one of my favorite songs. ‘Que Sera, Sera. Whatever will be, will be’.

It is from The Man Who Knew Too Much, the Hitchcock movie, and it won the Oscar in 1956. Doris Day, Jimmy Stewart. A terrific movie, recommended.

And it applies to today, because there is a lot up in the air in each of these three stories. At the government level and at the company level.

The White House finishing an AI framework and classifying it. Apple and OpenAI trading arguments in public. And whether Elon merges SpaceXAI and Tesla.

Here is what ties them together. In all three, the people with the most at stake are the ones with the least ability to settle it on their own.

That is a different posture from the capex and model-release stories we’ve discussed of late in this AI Tech Wave.

(1) The White House Finishes Its AI Framework, and Classifies It

MP TAKE: The White House is finishing up its AI framework and classifying it. There is a meeting today, and we will hear whatever we will hear from it. Most of the big AI companies are there.

The government is basically trying to thread the needle between two imperatives. Providing some regulatory framework around the big frontier models that threaten things like cybersecurity, and the positioning of the US versus China on AI policies, in terms of models, open source and the rest.

There has been a lot of internal debate in the executive branch, pro and con, on all of this. And the industry has been very focused on it. Specifically on the battle around open source models from China being usable by US companies.

Nvidia assembled the ‘Avengers’, as I wrote about a few days ago. Over forty US companies, all the leaders, including OpenAI and Google who signed on, with the exception of Anthropic, which is on the other side of that national security issue.

And of course Anthropic is the one company up in the rafters saying regulate us on cybersecurity and safety and China. So the government is trying to sort it all out

But in the meantime, they are going to turn what has essentially been an Autobahn for the US tech industry and this tech wave, and turn it in places with occasional traffic lights, and thirty mile an hour school zones to drive through.

We saw exactly that during The Blip 2.0, when they paused both Anthropic and OpenAI from releasing their latest models for almost three weeks. And then of course they lifted it. But it was very ad hoc.

Now this set of policies is hopefully going to provide a broader set of gauges and runways on all of this. A lot of details still to figure out. And whatever will be, will be.

The part I would add, is that the executive order designates the benchmarking process and the coverage thresholds as classified. So the rules exist. The tests are secret and the bar is secret.

Which has a second-order effect worth watching. A secret bar is a bar only the largest labs can afford to aim at.

This threading of the needle is more likely than not to slow the US down on AI globally over the longer term. Not because of anything China related. Because of the friction the process itself creates.

Sources:

For longtime readers:

(2) Apple and OpenAI, and the Court of Public Opinion

MP TAKE: The drama between Apple and OpenAI is continuing in terms of their lawsuits.

Remember a few weeks ago it was OpenAI who was going to potentially sue Apple, for breaking its agreement on distribution of ChatGPT within Apple’s two and a half billion users of iPhones and iPads. That is in the distant memory now, given how fast things move in the AI world.

Then recently, Apple filed a trade secrets lawsuit against two individuals at OpenAI.

OpenAI has hired over four hundred people from Apple in the last few months, to be part of the Jony Ive related unit, where they are building a whole plethora of Apple-focused AI devices. Potentially even an AI smartphone from OpenAI. And a lot of senior people. One of them named in the suit was at Apple for twenty four years.

There is evidence cited by Apple that these people took some secrets away, and a lot of back and forth in the details.

OpenAI now has a list of things saying, hey, Apple did this wrong, did that wrong. They sent the wrong email to the wrong people. And Apple had wrong policies. Their iCloud settings were not correct, which allowed employees, and ex employees, to have documents they should not have had.

Anyway, all of that is going to be litigated.

The broader point I want to leave you with is that these memos are almost litigating all of this in the court of public opinion.

The court cases will go on for a long time, back and forth, and ultimately hopefully will be settled. But it may take a while. In the meantime, this is a public relations battle between the two companies. Especially important for OpenAI ahead of its mega AI IPO, sometime between now and next year.

In the meantime, Apple is about to step on the gas in September. With a new CEO who has been there over twenty five years, and who will be really stepping on the gas in terms of Siri AI. Which is going to be very competitive on devices like the iPhone, iPads and Macs.

I have written a lot about how I think Siri AI and Apple Intelligence, the combination of cloud and local processing, could make Apple a formidable AI device company in the next two or three years. Along with maybe Google, who is also coming on strong with Gemini and their devices on Android.

And of course OpenAI wants very much to compete here. That is why they made the six and a half billion dollar acquisition of Jony Ive’s company.

This litigation is essentially theater for support on either side, in the world of public opinion globally. Both sides have their followers and people cheering them on.

So focus more on the products, and the design of the software and hardware and the services. Less on the litigation details. That is my view and my take.

Sources:

For longtime readers:

(3) Why Elon Might Merge SpaceXAI and Tesla

MP TAKE: On the eve of SpaceXAI reporting their results tonight, and remember they did their big trillion dollar plus IPO back in June, there was a story up in The Information that brings up again that SpaceX and Tesla may be merged by Elon.

This is something I have talked about in several posts. It is part of a playbook Elon has had for a long time.

Remember, he merged Solar City years ago, literally ten years ago, with Tesla. Solar City was a less successful business, and today it is still puttering along within Tesla. Then Elon went on to merge xAI, his acquisition, into X and the model efforts, and then the whole thing into SpaceX.

So this business of putting things onto different shelves and combining them is something Elon has done for a very long time. And most of Elon’s supporters who own Tesla, who own SpaceX, are generally supportive of an eventual merger of these two companies.

Because obviously Elon is managing both of them. And basically mixing and matching assets and people constantly, without regard to the fiduciary niceties in this context, including capital.

Remember, right before the SpaceX IPO, SpaceX bought almost a hundred and forty million dollars worth of Cybertrucks that Tesla could not sell. So there is a lot of this putting things from the left pocket into the right pocket. A merger would just make it simpler.

The one thing the piece from The Information does not talk about is the governance issue.

Elon has a lot more control through supervoting stock on SpaceX versus Tesla. So if there is a potential merger, it probably makes sense technically to have Tesla be part of SpaceX, and have the supervoting umbrella governance protection for Elon. He likes those kinds of things.

And by the way, SpaceX has come down a lot in valuation, from its peak of two point eight trillion dollars after its IPO, to about one point five trillion. Which is about the same as Tesla right now, at one point three.

Both, on fundamental analysis, are relatively overvalued. Analysts I have cited in my pieces have argued by potentially as much as a trillion dollars each for each of the public companies. But that is neither here nor there right now.

The notion of both shareholder camps being merged into one entity is something that is more whatever will be than not be. We will see if it comes up at all in the Q and A on the results this evening.

And remember, in a few days the lockup on SpaceX also comes up, and that has been anticipated. Elon actually went out of his way to get Nasdaq to include SpaceX in the indices currently, instead of a year from now. So that potentially provides public demand from index funds for SpaceX.

All of that may play into some of these possibilities. We will see. Whatever will be, will be.

Sources:

For longtime readers:

My overall take on all of this is that these issues are more qualitative than quantitative.

The White House covenants, and obviously the US and China policy. There is a second meeting at the White House coming up between President Xi and Trump, and that impacts a lot of the things we are talking about.

There are discussions of Tesla potentially divesting itself of its Chinese assets, given some of these issues.

So all of these things are connected and interconnected. And the Que Sera, Sera theme applies. It is very tough to put probabilities on some of these things. At the SpaceX level, at the White House policy level, and of course on the OpenAI and Apple kerfuffles going on.

We will see where it all takes us. But it is important to keep them all in mind.

GADGET AI

Microsoft Figuring Out Its Xbox Destiny

MP TAKE: The Verge had a piece on Microsoft still trying to figure out its Xbox strategy.

They have a new CEO under Asha Sharma, and they are basically lobbying all of the game publishers to allow Xbox to play every Xbox game ever made. That would obviously be a boon for gamers like yours truly.

This is part of a broader story of Microsoft figuring out its Xbox destiny, essentially.

Remember, this is a place where they have invested probably north of a hundred billion dollars. They made the Activision acquisition a little while ago, over seventy billion dollars. And Xbox has been lagging behind Sony’s PlayStation.

AI coming forward is going to be impacting the gaming industry around the world. Microsoft is paring its losses on Xbox, and it is trying to figure out what to do best here.

One of the things Microsoft is considering is what they have always done across their businesses. Bundle different services into price tiers, and make things more palatable for users. It seems like they are continuing on that path with Xbox, and potentially merging in the further back catalogue, and hopefully improving the economics for game publishers. Which is the real challenge in the world of AI, where all of the game companies are trying to figure out how AI impacts their businesses.

And do not forget Ramageddon. It impacts all of these businesses, because the pricing on game consoles, whether it is Sony or Microsoft, is going through the roof. Instead of five or six hundred dollars for the next generation, and we typically have new generations every four or five years, this year it is going to be north of a thousand dollars or more.

That is almost untenable for most regular players, given that game consoles are not sold like phones on subscriptions. And that would impact these businesses in a longer term perspective.

A lot of issues here, which is why I wanted to point it out in the Gadget AI section.

Sources:

For longtime readers:

Q1. What is my favorite part of Xbox to date?

I have actually liked the Xbox subscription bundling strategy. The Game Pass.

Sony had to emulate that with PlayStation, and their catalogue is far less robust, shall we say, versus Xbox. That has been one of my favorites.

Although I do not have time to take advantage of it as much as I would like, it is nice to know it is there. It is kind of like an all you can eat buffet, rather than a la carte.

Q2. What is the one place Microsoft could potentially innovate?

If Microsoft is really trying to figure out whether it wants to exit somewhat from the hardware side of the business, which has been rumoured, one thing they could do is embrace the Linux open source aspect of running games. Less on Windows, more on Linux machines.

This is something that has been pioneered and championed by companies like Valve of Steam fame, with their Steam console. But this could be supersized with Microsoft’s attention.

They could fundamentally rethink their model, especially with Copilot and AI, where the opportunity would be an AI layer just like they have in Copilot across a lot of their other businesses. For game discovery and game playability, across the wider category of games. And potentially open up other avenues of business models that are beyond the traditional gaming elements that have driven businesses like Xbox and PlayStation.

A big broad question, and I will throw it out there. But that would be the one thing I would highlight. Especially when companies like Valve, with their Steam machine, are having difficulty with RAMageddon accessing supplies of memory and chips.

Broader question, whatever will be, will be, definitely applies to this instance as well.

WRAP

Today’s AI-RTZ #1168 is on the AI talent war. The debate increasingly going on at Anthropic and OpenAI and Meta, because they have all been raiding each other on high price talent. There is an increasing debate about missionaries versus mercenaries, in terms of having people that stick with you for the long term. Companies like Nvidia and Apple have managed to do that at the highest levels, despite the impact Apple in particular has had in terms of employees leaving. But this is an issue for all of these companies in the current environment of an AI boom. Take a look at that piece if you have an interest in the topic.

AI Ramblings Daily on AI-RTZ is here to think through AI and reset. Together.

Tomorrow, ARD 134 and AI-RTZ #1169.

Thanks for joining us today, AI Curious Folk. Stay tuned.

— MP

Full Source Reading

For the broader context, see the canonical sources for ARD 133, in today’s narrative order:

Event 1. The White House AI Framework

Event 2. Apple and OpenAI

Event 3. SpaceXAI and Tesla

Gadget AI. Microsoft and Xbox

Clips from today

Clip 1. Apple’s New CEO Steps On The Gas

In the meantime, Apple is about to step on the gas in September. With a new CEO who has been there over twenty five years, and will be really stepping on the gas in terms of Siri AI.

MP Take: Siri AI and Apple Intelligence, the combination of cloud and local processing, could make Apple a formidable AI device company in the next two or three years. Along with maybe Google, who is also coming on strong with Gemini and their devices on Android. And of course OpenAI wants very much to compete here, which is why they made the six and a half billion dollar acquisition of Jony Ive’s company. The litigation is essentially theater for support on either side. Focus more on the products and the design of the software and hardware and the services, and less on the litigation details.

Clip 2. Elon’s Playbook, One More Time

This business of putting things onto different shelves and combining them is something Elon has done for a very long time.

MP Take: The one thing The Information’s piece does not talk about is the governance issue. Elon has a lot more control through supervoting stock on SpaceX versus Tesla. So if there is a potential merger, it probably makes sense technically to have Tesla be part of SpaceX, and have that supervoting umbrella governance protection for Elon. He likes those kinds of things. And remember what came just before the IPO, when SpaceX bought almost a hundred and forty million dollars worth of Cybertrucks that Tesla could not sell. There is already a lot of left pocket into right pocket here. A merger would just make it simpler.

Clip 3. 400 Apple Hires. One Lawsuit.

OpenAI has hired over four hundred people from Apple in the last few months. One of them named in the suit was at Apple for twenty four years.

MP Take: These memos are almost litigating all of this in the court of public opinion. The court cases will go on for a long time, back and forth, and ultimately hopefully will be settled. But it may take a while. In the meantime this is a public relations battle between the two companies, especially important for OpenAI ahead of its mega AI IPO sometime between now and next year. And note OpenAI’s own answer, that Apple sent the wrong email to the wrong people, and that Apple’s iCloud settings let ex employees keep documents they should not have had.

Clip 4. Every Xbox Game Ever Made

They are basically lobbying all of the game publishers to allow Xbox to play every Xbox game ever made. That would obviously be a boon for gamers like yours truly.

MP Take: Microsoft is the master of the bundle across its main businesses, so a similar strategy on the Xbox front is right up its playbook. This is a place where they have invested probably north of a hundred billion dollars, including Activision at over seventy billion, and Xbox has been lagging behind Sony’s PlayStation. And do not forget Ramageddon, because console pricing is going through the roof. North of a thousand dollars for the next generation, against the five or six hundred we are used to, and consoles are not sold like phones on subscriptions.

About AI Ramblings Daily (ARD), and AI-RTZ

Both are daily. Both are free. Both are about AI. But they’re different mediums carrying different messages.

AI-RTZ is the morning text, a deeper written take on one idea, published by at least 5 AM EST. Today: post #1168.

AI Ramblings Daily is the afternoon video + podcast, my ad hoc takes and perspective on the day’s AI issues and news flow, around 20 minutes, with short 1-2 minute clips for quick topic views. Today: episode #133.

Subscribe to either or both on michaelparekh.substack.com. They run as separate Sections you can opt into or out of.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here.)





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