TheChek News Flow

In a post on his personal blog, OpenAI CEO Sam Altman said that he believes OpenAI “know[s] how to build [artificial general intelligence]” as the company has traditionally understood it, and is beginning to turn its aim to “superintelligence.”

“We love our current products, but we are here for the glorious future,” Altman wrote in the post. “Superintelligent tools could massively accelerate scientific discovery and innovation well beyond what we are capable of doing on our own, and in turn massively increase abundance and prosperity.”

Altman previously said that superintelligence could be “a few thousand days” away, and that its arrival would be “more intense than people think.”

AGI, or artificial general intelligence, is a nebulous term, but OpenAI has its own definition: “highly autonomous systems that outperform humans at most economically valuable work.” OpenAI and Microsoft, the startup’s close collaborator and investor, also have a definition of AGI: AI systems that can generate at least $100 billion in profits. When OpenAI achieves this, Microsoft will lose access to its technology, per an agreement between the two companies.

So which definition might Altman be referring to? He didn’t specify, but the former seems likeliest. Altman wrote that he thinks AI agents — AI systems that can perform certain tasks autonomously — may “join the workforce,” in a manner of speaking, and “materially change the output of companies” this year.

“We continue to believe that iteratively putting great tools in the hands of people leads to great, broadly-distributed outcomes,” he wrote.

That’s possible, but it’s also true that today’s AI technology is significantly limited. It hallucinates, for one; it makes mistakes obvious to any human; and it can be very expensive.

US set for IPO comeback as private equity firms seek to offload holdings

Bankers hope strong 2024 gains for Wall Street equities and pro-business policies will drive listings rebound

Wall Street bankers are gearing up for a revival in initial public offerings as private equity groups seek to tap buoyant US equities markets to offload some of their flagship holdings.

Several private equity-backed groups have already filed paperwork with securities regulators for IPOs, including medical devices company Medline and software maker Genesys.

Bankers and analysts are expecting a flurry of listing announcements in the first half of 2025, after blockbuster gains by US stocks in 2024 and on hopes president-elect Donald Trump will cut regulations and taxes.

Investors and bankers have also been encouraged by strong share price gains following recent deals. Shares in nine of the 10 largest IPOs of 2024 ended the year above their listing price, with half of them — led by social media group Reddit — recording triple-digit gains.

“Successive improvement and more activity, that’s the headline,” said Eddie Molloy, global co-head of equity capital markets at Morgan Stanley. “With an [economic] backdrop that is a bit more certain, more of a pro-business bent to regulatory policy and the Fed [cutting interest rates], we should be busier for sure.”

The expected rush of US IPOs comes after a drought in the past three years as the Federal Reserve’s campaign of sharp rate rises, which began in 2022, curbed investor demand for new listings.

Higher rates reduce demand for assets that are considered high-risk, or which are valued on the promise of growth far in the future — both common features of newly-listed companies. Economists have scaled back their forecasts for how quickly the Fed will cut interest rates over the next 12 months, but nonetheless expect rates to fall further after the central bank announced three consecutive cuts in late 2024.

US listings raised $32bn in 2024, excluding special purpose acquisition companies, according to Dealogic, up almost 60 per cent on 2023.

Few observers are predicting a return to the dealmaking mania of the pandemic period, when huge government and central bank stimulus programmes boosted markets and led to a surge in IPOs that peaked at $150bn in 2021.

However, bankers are hopeful that equity capital markets activity will top the pre-2020 average of $38bn.

“Large [private-equity backed] IPOs will be the most important theme,” Molloy said.

The trend is partly driven by private equity firms under pressure to return cash to backers after the long dealmaking drought. It also reflects a shift in investor appetite after many were burnt by bad bets on lossmaking start-ups during the pandemic-era IPO rush.

“These are companies that generally speaking are larger and more profitable, and will therefore be more palatable for public market investors,” said Jeremy Abelson, founder and portfolio manager at Irving Investors, a growth-focused fund that invests in private and public companies. “The difference between now and 2021 is that in 2021 there was significant enthusiasm for mediocre businesses. We won’t see that again for a very long time.”

Fintech will also be a closely watched theme in the first half of 2025, with Swedish buy now, pay later group Klarna expected to be one of the first large venture-backed companies to brave the market.

San Francisco-based mobile banking group Chime has also renewed its plans to go public after initially aiming to list more than two years ago. Chime has previously discussed with investors a valuation of between $15bn and $20bn — a similar size to Klarna — according to two people familiar with the talks, though tech and financial stocks have made strong gains since last month’s US election, which could help lift its final valuation. Chime declined to comment.

Some observers have been surprised by the relative quiet in IPO markets considering the broader strength in US stocks over the past two years, with the S&P 500 rising almost 70 per cent from its 2022 lows. However, much of those gains have been driven by a small number of very large companies, rather than the smaller groups that typically float their shares.

Ryan Nolan, co-head of software investment banking at Goldman Sachs, said the broadening of stock market gains in the second half of 2024 had helped confidence. “There’s a lot more excitement and momentum,” he said.

Many private companies secured huge amounts of funding at inflated valuations in 2021, which reduced the urgency for further deals and made executives reluctant to accept new cash at a marked-down valuation. 

Samantha Lau, chief investment officer for small and mid-cap growth equities at AllianceBernstein, said private investors were now showing a “more realistic attitude” towards valuations. 

“Enough time has passed since 2021 that things will have to start to thaw,” she added.

There is fresh evidence the once-mighty innovator is losing market share in more areas

You may think you know how much Intel is struggling, but the reality is worse.

The once-mighty American innovation powerhouse is losing market share in multiple areas that are critical to its profitability. Its many competitors include not just the AI juggernaut Nvidia but smaller rivals and even previously stalwart allies like Microsoft.

One flashing warning sign: In the latest quarter reported by both companies, Intel’s perennial also-ran, AMD, actually eclipsed Intel’s revenue for chips that go into data centers. This is a stunning reversal: In 2022, Intel’s data-center revenue was three times that of AMD.

AMD and others are making huge inroads into Intel’s bread-and-butter business of making the world’s most cutting-edge and powerful general-purpose chips, known as CPUs, short for central processing units.

Even worse, more and more of the chips that go into data centers are GPUs, short for graphics processing units, and Intel has minuscule market share of these high-end chips. GPUs are used for training and delivering AI.

By focusing on the all-important metric of performance per unit of energy pumped into their chips, AMD went from almost no market share in servers to its current ascendant position, says AMD Chief Technology Officer Mark Papermaster. As data centers become ever more rapacious for energy, this emphasis on efficiency has become a key advantage for AMD.

Notably, Intel still has about 75% of the market for CPUs that go into data centers. The disconnect between that figure and the company’s share of revenue from selling a wider array of chips for data centers only serves to illustrate the core problem driving its reversal of fortunes.

This situation looks likely to get worse, and quickly. Many of the companies spending the most on building out new data centers are switching to chips that have nothing to do with Intel’s proprietary architecture, known as x86, and are instead using a combination of a competing architecture from ARM and their own custom chip designs.

A spokeswoman for Intel says the company is focused on simplifying and strengthening its product portfolio, and advancing its manufacturing and foundry capabilities while optimizing costs. Intel interim Co-Chief Executive Michelle Johnston Holthaus recently said that 2025 will be a “year of stabilization” for the company. Intel is currently seeking a permanent leader after its CEO Pat Gelsinger was pushed out last month.

The decades that developers spent writing software for Intel’s chips mean that Intel remains a giant, even as its market share has shrunk, and that legacy will limit how quickly Intel’s revenues can decline in the future. Analysts estimate Intel’s 2024 revenue was about $55 billion, just behind Nvidia’s approximately $60 billion. Intel still has the lion’s share of the market for desktop and notebook CPUs—around 76%, overall, according to Mercury Research.

AMD recently formed an alliance with Intel to collaborate on support and development of the x86 ecosystem that both companies make chips for. Papermaster says that his own company continues to invest in this ecosystem even as AMD also develops ARM-based chips for some applications, such as networking and embedded devices.

For a concrete example of Intel’s challenges, look at Amazon, the world’s biggest provider of cloud computing. More than half of the CPUs Amazon has installed in its data centers over the past two years were its own custom chips based on ARM’s architecture, Dave Brown, Amazon vice president of compute and networking services, said recently.

This displacement of Intel is being repeated all across the big providers and users of cloud computing services. Microsoft and Google have also built their own custom, ARM-based CPUs for their respective clouds. In every case, companies are moving in this direction because of the kind of customization, speed and efficiency that custom silicon allows.

All those companies are also making their own custom, ARM-based chips for AI workloads, an area where Intel has missed the boat almost entirely. Then there’s the 800-pound gorilla in AI, Nvidia. Many of Nvidia’s current-generation AI systems have Intel CPUs in them, but ARM-based chips are increasingly taking center stage in the company’s bleeding-edge hardware.

Intel’s repeated flubs in entering markets for new kinds of computing and new applications for chips are a textbook example of a big, profitable incumbent becoming a victim of the innovator’s dilemma, says Doug O’Laughlin, an industry analyst at SemiAnalysis, which recently published a blistering report on Intel. The innovator’s dilemma holds that powerful companies that are unwilling to cannibalize their biggest sources of revenue can be overtaken by upstarts that build competing products that start out small, but which can ultimately take over the market which the incumbent dominates—like the mobile chips which ARM started off with.

In 1988, former Intel CEO Andy Grove published a book called Only the Paranoid Survive, which highlighted the ways that companies have to be vigilant about what’s coming next, and be willing to disrupt themselves and pursue new technologies. What he intended as a warning to all companies has since become a prophecy foretelling Intel’s current difficulties.

“The book is literally about the importance of not missing strategic inflections, and then Intel proceeds to miss every single strategic inflection since,” says O’Laughlin.

Then there are laptops. After decades of trying to make it happen, 2024 was finally the year of credible, ARM-based laptops running Windows, thanks to efforts by Microsoft to make Windows on ARM work. The company convinced other companies to port their own software, and created tools that allow most existing programs to run on the new laptops, in emulation. Chips in these devices are made by Qualcomm, and benchmarks show that they can finally compete with Apple’s M-class mobile processors, which are also based on a combination of ARM technology and a great deal of custom chip design by Apple’s formidable in-house team.

Another bastion of market share and profits for Intel, the PC gaming market, is also showing early signs of erosion. Portable gaming systems like Valve’s Steam Deck and the Lenovo Legion Go, which can run even very demanding games, use processors from AMD. Future devices that will be part of the company’s plan to license its custom OS to other manufacturers may also use ARM-based ones.

Inherent in Intel’s woes is the way its vertically integrated structure, long an asset, now weighs on the company’s bottom line and ability to innovate. Unlike other companies that either design chips or manufacture them, Intel has stuck to a seemingly antiquated model of doing both.

Intel reported a $16 billion loss in its most recent quarter as it spent big to transform into a contract manufacturer—that is, a company that also manufactures chips for other companies, even competitors—and catch up to rival TSMC, which now produces the world’s most cutting-edge chips.

Analysts expect Intel to return to profitability in 2025, but it won’t be clear for years whether the company’s big manufacturing bets will ultimately pay off.

One of the big bets of Intel’s recently departed CEO Gelsinger, was Intel’s attempt to leapfrog TSMC in terms of chip technology. What it calls its “18A” tech could in theory allow its own chips, and those it makes for outsiders, to once again be the most cutting-edge, and the fastest, on the planet. The company has said it could regain that title by 2026. Intel recently announced it had signed a deal with Amazon to make custom chips for the company, using its 18A technology.

Even if Intel can once again lead the industry with its technology, the best case scenario for Intel’s own products is that it regains dominance in a market that continues to shrink—the x86 CPU one, says O’Laughlin. The removal of Gelsinger, who was betting on an all-in strategy for Intel to regain dominance both in the market for its own chips and in serving outside companies, suggests that Intel’s board agrees that the company can’t continue to count on being the best in the world at everything.

All of these challenges and conflicting priorities may push Intel to someday split in two, severing its product side from manufacturing. Intel INTC 1.68%increase; green up pointing triangle Co-CEO David Zinsner recently said that spinning off the company’s manufacturing side is an “open question.”

It’s also possible, in the worst case, that a fate even worse than being dismembered could be in store for Intel.

Rene Haas, CEO of ARM, recently observed that Intel has long been an innovation powerhouse, but that in chipmaking and design, there are countless companies that don’t innovate fast enough—and no longer exist.

US hedge fund manager called on shareholders of seven trusts to overhaul their boards and install his fund as investment manager

Two UK investment trusts have hit back at US activist investor Boaz Weinstein, who last month called on trusts’ shareholders to overhaul their boards and install his hedge fund as the investment manager.

The board of the Keystone Positive Change trust said on Monday that it was “appalled” by Saba Capital’s approach and warned that the US hedge fund was “acting opportunistically, seeking to seize control of the board without a controlling shareholding, to pursue its own agenda”.

Another trust, Baillie Gifford US Growth, also called on shareholders to vote against Saba’s proposals. The trusts have shareholder meetings scheduled for February.

Weinstein’s Saba Capital called for the meetings to replace directors, stating that they had “failed shareholders” because of the trusts’ weak performance. Saba Capital is targeting seven trusts in total, including CQS Natural Resources Growth & Income, Edinburgh Worldwide Investment, European Smaller Companies, Henderson Opportunities, and Herald Investment.

Saba is the largest shareholder in each of the trusts, with stakes ranging from 19 per cent to 29 per cent. The total value of its stakes amounts to £1.5bn.

The hedge fund is proposing two new directors on each fund, including Weinstein on one of the funds, and Paul Kazarian, who leads Saba’s investment trust strategy, on the other six trusts. If the resolutions are passed and if the new boards decide to replace the existing fund managers, then Weinstein will put forward Saba as the trusts’ new manager.

The board of Keystone, which is managed by Baillie Gifford, said: “We believe Saba’s plan lacks transparency, would flagrantly disregard good governance and may introduce substantially inflated fees. The proposed resolutions are not in the best interest of all shareholders and create significant uncertainty.

“Given Saba’s considerable voting position, every vote against its resolutions is vital. We strongly urge all shareholders to vote against all resolutions — a high turnout is critical.” The resolutions require more than 50 per cent of the votes to be in favour in order to pass.

Last week, the board of the Herald trust recommended that shareholders vote against Saba and said its investment strategy had “been highly successful over the long term”, delivering a net asset value total return of 865 per cent since its launch.

Andrew Joy, chair of Herald, said the board “believes Saba wishes to take control of the company for its own economic benefit and to change the company’s investment strategy, which . . . could result in significant value being lost”.

The investment trusts being targeted by Saba have suffered from their market capitalisations lagging behind the value of their assets. The discounts range from 12 per cent to 14.7 per cent over three years. The other trusts’ managers include Janus Henderson and Manulife.

The UK’s investment trust sector, which manages about £265bn of assets, has come under pressure more broadly from wide discounts.

Saba did not immediately respond to request for comment.

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After ending their own driverless plans, the ride-sharing companies are embracing autonomous-vehicle operators and offering new app features

Uber Technologies UBER 2.25%increase; green up pointing triangle and Lyft LYFT 4.54%increase; green up pointing triangle gave up on big plans to develop their own driverless taxis years ago. Now, they are revamping their businesses to accommodate competitors who may have figured it out.

The ride-hailing leaders are preparing to bring driverless taxis to your door with new app features that allow customers to use their phones to open trunks and honk horns. They are building infrastructure to maintain the high-tech taxis and training human support staff to handle riders without drivers.

Both companies will have driverless cars—from Alphabet’s GOOGL 1.25%increase; green up pointing triangle Waymo and others—on their apps this year. In the coming months, riders in Austin, Texas, and Atlanta will be able to hail a Waymo through the Uber app. Lyft plans to offer May Mobility’s driverless taxis in Atlanta.

Uber and Lyft have agreed to maintain these driverless fleets. They are finding locations to store the cars, equipping them with chargers and high-speed internet, and training workers to maintain the cameras, lidar and other gadgets that driverless vehicles depend on.

“This level of nitty-gritty, it takes years to build,” said Andrew Macdonald, Uber’s senior vice president of mobility. “It’s not something you can do by flipping a switch.”

The ride-hailing giants are reacting to growing signs that driverless technology may finally be ready to spread beyond a few experimental markets.

Waymo, which made its own app available to the general public in San Francisco last year, is challenging Uber and Lyft’s stronghold in parts of the city, according to market-research firm YipitData. And the swift adoption of driverless cars has some gig drivers worried.

Driverless U-turns

Uber and Lyft once invested billions of dollars in developing their own self-driving cars. Uber co-founder Travis Kalanick used to say the company needed to lead the pivot to driverless technology or risk becoming irrelevant.

Both companies gave up on the costly endeavor during the pandemic, selling their self-driving units. Now they are competing to be the platforms on which the robotaxi technology developed by others will operate.

Uber announced more than five U.S. robotaxi partnerships in the past five months, covering Los Angeles, Dallas and other cities. Uber struck a deal with Waymo that will allow customers in Austin and Atlanta to hail the company’s driverless taxis only through the Uber app, a move that will prevent the driverless carmaker from taking market share in those cities. Waymo will continue to operate its own app in other cities.

Uber and Lyft will get a cut of the driverless taxi bookings. The robotaxi companies get access to the ride-sharing giants’ tens of millions of customers without having to advertise or build the expensive technology needed to efficiently connect cars to customers.

Self-driving taxis have yet to prove they can be a viable business. But the ride-hailing leaders are betting robotaxi companies will prefer to join with already popular, established platforms to avoid downtime for their vehicles.

Human-driven cabs aren’t going away anytime soon. The future will be a combination of regular taxis and driverless cars. Uber Chief Executive Dara Khosrowshahi has said it might take a decade before half of Uber’s U.S. trips are on self-driving cars.

Even then, the technology might not work in densely populated cities like New York or under some weather conditions, said Robert Mollins, analyst at Gordon Haskett Research Advisors.

“No one’s saying ‘let’s go send some of these cars to Boston in the middle of winter,’” he said. “What happens when all of these sensors get covered in snow?”

General Motors recently pulled the plug on developing its Cruise self-driving cars. Tesla plans to start producing its Cybercab before 2027. Amazon.com is testing its Zoox autonomous vehicles.

Riders hail the new tech

Still, customers seem to be warming up to the technology. In August, Waymos picked up close to 500,000 passengers in California, up from fewer than 20,000 a year earlier.

Consumer receipts analyzed by YipitData within Waymo’s operating zone in San Francisco found that the company had taken a 22% share in November. Lyft’s share in the area fell to 22% the same month, from 34% in August 2023. Uber’s share in the area slipped 10 percentage points to 55% over the same period.

Uber and Lyft said they haven’t lost riders to Waymo, and their bookings continue to grow in the city.

Lyft CEO David Risher said self-driving cars have expanded the overall ride-hailing market by giving people new reasons to ride.

He said tourists in San Francisco are ordering driverless taxis for their novelty and because Waymo uses high-end Jaguars—a luxury that won’t be the norm as automated-vehicle technology gets installed in less-luxurious cars.

“Tomorrow’s AV experience will be quite different,” he said on an earnings call.

Daniel Garcia was among a small group of San Franciscans who tested Waymos free of charge from 2023. He loved that he could avoid small talk with another human while controlling the temperature and music. He stopped using Uber and Lyft.

After Waymo started charging and allowing everyone on the app, the wait times started getting longer and fares climbed. “It really was a dream until it was harder to get it,” Garcia said.

He has started using Uber and Lyft again, but not as much as he used to because he will still wait for a Waymo when he has time.

Uber won’t say how much it is investing in driverless-taxi infrastructure. It is still a small amount, said analyst Mollins. “All they are doing right now is learning—everything is in test and learn mode.”

Uber created a feature on its app that will allow customers to remotely honk the horn of a driverless taxi to help them locate their ride. It is scouting for locations for autonomous-vehicle depots that will store and service the cars in areas that aren’t too far from rider traffic.

The company is working with existing fleet partners—the ones that operate the premium Uber Black service—to transform their facilities into hubs for autonomous vehicles. That means equipping them with hundreds of electric charging stations and raising the internet speed to 10 times that of a typical office to handle all the data the driverless taxis need.

Lyft is transforming its Flexdrive car-rental locations into depots for driverless taxis and adding new features to its app. Riders will be able to adjust the temperature inside a driverless car through their phones.

The company has trained artificial intelligence on its app to answer riders’ basic questions about unlocking cars and starting rides. It is teaching staff “to do some of the more thornier things” like helping customers retrieve lost items from driverless cars, said Jeremy Bird, an executive vice president at Lyft.

The company is also building technology to let individuals list their personal autonomous vehicles on its app. “You can have your own fleet of 10 AVs, which you can put on our platform and manage,” Bird said.

Some human drivers are feeling squeezed out.

San Francisco Bay Area Lyft driver Ghulam Sakhi said it was already tough to make money after companies cut back on bonuses a few years ago. Then, last year, finding some of the high-paying trips became tougher.

With competition from Waymo weighing on fares in tourist hot spots and downtown, Sakhi is ferrying passengers to and from the airport, where driverless taxis aren’t allowed to go.

“Waymo isn’t the only problem,” he said. “Maybe next year the Tesla robotaxi will come. What about those?”