FT : Brazil launches China anti-dumping probes after imports soar

Brazil launches China anti-dumping probes after imports soar
Investigations reflect fears of flood of cheap Chinese products but could strain Brasília’s ties with Beijing


Brazil’s industry ministry has launched a number of investigations into the alleged dumping of industrial products by China as Latin America’s largest economy reels from a wave of cheap imported goods.

At the request of industry bodies, the ministry has in the past six months opened at least half a dozen probes on products ranging from metal sheets and pre-painted steel to chemicals and tyres.

The Brazilian measures come at a time when the world is bracing for a flood of exports from China as the world’s second-largest economy struggles with excess capacity amid a property sector slowdown and weak domestic demand.

To stimulate its economy, China is investing in advanced manufacturing, especially in solar energy, electric vehicles and batteries.

In addition to Brazil, China’s steel exports to Vietnam, Thailand, Malaysia and Indonesia have risen sharply in recent months.

Developed markets have started taking extensive measures against imports from China, with the EU launching an anti-subsidy probe into Chinese EVs and the Biden administration recently raising security concerns over the Asian country’s vehicles.

China’s exports grew 7.1 per cent in the first two months of this year, far outpacing growth in imports.

“Prolonged declines in China’s export prices may cause trade tensions between China and some major economic powers to rise,” analysts at Nomura said in a research note on Friday.

China’s exports to and imports from Brazil both rose by more than a third in the first two months of the year, according to Chinese customs data.

“Last year saw one of the most critical situations in the entire history of the national chemical industry,” said André Passos Cordeiro, president of the Brazilian chemical industry association. “We see temporary increases in import tariffs as an indispensable regulatory tool for combating these predatory operations and preserving the domestic market.”

The trade tensions create a dilemma for leftwing president Luiz Inácio Lula da Silva, who has sought to both nurture relations with Beijing and protect and develop Brazil’s national industries.

Since returning to the presidency for a third non-consecutive term last year, Lula has put industrial policy at the heart of his economic strategy.

But Brasília is also likely to try avoid a confrontation with Beijing, which is its largest trading partner and significant purchaser of commodities such as soyabeans and iron ore. Last year, Brazil exported more than $104bn worth of goods to China, while importing $53bn.

Of the 101mn metric tonnes of soyabeans shipped from Brazil last year, 70 per cent, worth about $39bn, went to China.

One of the most recent investigations was launched earlier this month following a request by CSN, a large Brazilian steel producer, which alleged that between July 2022 and June 2023 imports of particular types of carbon steel sheets from China rose almost 85 per cent.

In opening the probe, which is scheduled to take 18 months, the industry ministry said there were “sufficient elements that indicate the practice of dumping in exports from China to Brazil . . . and damage to the domestic industry resulting from such practice”.

Brazilian steelmakers have requested the government slap tariffs of between 9.6 per cent and 25 per cent on imported steel products. Overall imports of steel and iron from China rose from $1.6bn in 2014 to $2.7bn last year.



Soaring steel imports are a particular sore spot for the Brazilian government as the Latin American nation is one of the world’s largest exporters of iron ore — a primary ingredient in steel production.

Chemicals and tyres are also points of contention, with the industry ministry launching separate investigations in recent months. According to official data, imports from China of the chemical phthalic anhydride rose more than 2,000 per cent in volume terms between July 2018 and June 2023. In the same period, imports of tyres grew more than 100 per cent to 47mn units from 23mn units, with roughly 80 per cent coming from China.

Brazil is not the only emerging market to voice concerns about the surge in industrial products from China. In Thailand, the government has accused Chinese companies of evading anti-dumping duties, while industry groups have warned of big losses from cheaper steel in the market.

Vietnam’s government has launched investigations into dumping of wind towers and some steel products from China after complaints from the local industries.

In August last year Mexico imposed tariffs of 5-25 per cent on imports of hundreds of goods from countries with which it does not have a free trade agreement, with China being one of the countries most affected.

The tariffs were put in place amid increasing pressure from US officials, who have suggested that Mexico is not doing enough to clarify the origins of steel imports from third countries, in what trade experts say is a reference to China.

The Chinese government did not immediately reply to a request for comment. It has consistently attacked what it calls “protectionism”, particularly by the US and the EU.

>>> Barron’s Weekend Summary

Barron’s Weekend Summary: Barron's has published its fifth annual list of the 100 Most Influential Women in US Finance

Cover:
-Barron's has published its fifth annual list of the 100 Most Influential Women in US Finance, which recognizes the leaders in financial services, corporate world, and government who are shaping the economy, markets, and industry in meaningful ways. Women now account for a record 10% of Fortune 500 chief executives and hold more than a third of all S&P 500 board seats. This year's roster includes 23 newcomers, including Titi Cole, head of Legacy Franchises at Citi, who is an "advisor, mentor, and friend" to a deep network of senior leaders. Federal Reserve officials and government leaders are well represented on the list, with Commerce Secretary Gina Raimondo helping navigate the changing US-China relationship and spur a domestic manufacturing revival. The role of chief financial officer is one area where women continue to make strong gains, with the number of female CFOs at Fortune 500 and S&P 500 companies more than doubled to 58 in 2023.

Interview:
-Online shopping flourished during the Covid pandemic, but Dana Telsey, who runs a retail-focused research, sales, trading, and investment banking firm, believes that the brick and mortar stores are what "make the magic happen." Telsey is the CEO of Telsey Advisory Group, and she still visits brick-and-mortar locations every week to see what truly engages consumers, from the mall to Fifth Avenue. She grew up working a cash register at her family's bookstore and believes retail has always been a part of her heritage. Telsey has been included on Barron's annual list of the 100 Most Influential Women in U.S. Finance since it was launched five years ago. She speculates on how the industry might evolve, incorporating artificial intelligence to serve customers even better and shares some of her favorite investment ideas.

Tech Trader:
-Microsoft and Oracle went public in March 1986; and that marked a significant moment in artificial intelligence history. Microsoft's IPO documents did not address AI, machine learning, or large language models, and neither prospectus listed risks tied to the availability of AI chips from Nvidia. Microsoft's role as a leading player in the AI story is well appreciated by investors, as it is the only public company with a market cap above $3T, $400B ahead of Apple. Oracle, on the other hand, is no slouch when it comes to cloud computing and AI. However, the strength of the company's position has only recently become clear to Wall Street. There is still ample room for investors to bet on Oracle's continued turnaround, which was first highlighted in a cover story three years ago. Oracle continues to be a key provider of enterprise software applications and database software, and recently announced new AI capabilities for some of its business apps. The key driver for Oracle is now cloud computing and the associated opportunity in artificial intelligence.

The Trader:
-The US stock market has been largely unaffected by inflation, with the federal-funds futures market predicting a 58% chance of the Fed cutting interest rates by July. However, other financial markets have reacted, with the two-year Treasury yield rising over 30 basis points to 4.7%. The stock market is ignoring these signals, and the Fed may need to provide a wake-up call at its monetary policy meeting, which ends on Wednesday. The current "dot plot" suggests three cuts this year, but it is possible that this could change. The Fed's policy meeting could be highly consequential, as it could "formally extend the wait-and-see period." If the Fed officially dashes hopes of rate cuts this year, the market would not be thrilled, as investors are placing too much emphasis on the timing and magnitude of potential rate cuts.
-Spice maker McCormick has lost nearly half its value since its record high in March 2022. The company's growth has been impacted by the rise of private-label brands, which offer similar products at lower prices. Sales have dropped from 11% to $6.3B in 2021 to $6.7B, and demand has dropped. The market is not expecting much from McCormick when it reports earnings, with analysts expecting sales to drop 1.1% to $1.55B. Lower commodity prices should nudge gross margins up a bit, but earnings are likely to fall two cents to 57 cents a share. McCormick can drive growth with product innovation, such as its Flavor Solutions segment, which aims to identify the types of flavors and foods that new and younger generations are likely to buy. Investors are looking for "improving volume trends as pricing tailwinds wane and innovation ramps," with up to a full percentage point of gross margin improvements this fiscal year.

Features:
-Reddit has announced that the Federal Trade Commission is investigating its agreements to license user-generated content to third parties for AI model training. The company, which is in its early stages of AI data licensing, does not believe it conflicts with the rights of Redditors. The company has not engaged in any unfair or deceptive trade practices and is seeking to raise up to $748M by listing its shares on the New York Stock Exchange under the symbol RDDT. The FTC is interested in learning more about Reddit's plans and intends to request information and documents from the company as its inquiry continues.
-Micron Technology's stock has seen a 61% increase in price, according to Citi analyst Christopher Danely. Danely believes the company should receive a premium due to its increasing AI exposure, which has seen other AI-exposed stocks like AVGO and AMD see a 100% increase in their multiples. The price target hike comes five days before Micron's fiscal-second quarter financial results, and Wall Street is eagerly awaiting management's growth in the AI space. Danely expects the company to post upside to consensus and increased guidance for F3Q24 due to strong DRAM pricing and shipments of higher-priced, higher-margin High Bandwidth Memory, which is used in Nvidia AI systems. Shares of Micron rose 2.1% to $93.37 on Friday.

Europe:
-The European Union has approved the bloc's AI Act, which aims to protect European citizens' rights from certain AI applications and bring stricter oversight to the technology. The Act will affect companies like Alphabet, Amazon.com, Microsoft, and Meta Platforms, as the EU's rules apply to anyone providing AI within the bloc. The potential penalties for violating the Act are considerable, including 7% of a company's global annual turnover in the previous financial year for violations involving banned AI applications. The law passed the European Parliament with 523 votes in favor, 46 against, and 49 abstentions, and the overwhelming majority should ensure it is signed off on by the EU's member states. The Act introduces a stricter regime for "high impact" foundation models, including model evaluations, assessing and mitigating systemic risks, and reporting on incidents.

Emerging Markets:
-No update

Commodities:
-US Steel stock fell 6.4% after it was bought by Nippon Steel. President Joe Biden defended the acquisition as vital for maintaining strong American steel companies powered by American steel workers. The stock closed down 6.4% at $38.26, well below the $55 a share Nippon Steel has agreed to pay. American steel workers would continue to operate U.S. Steel's mills even if Nippon Steel buys the company. The White House did not immediately respond to a request for comment about the fact that U.S. workers would remain in the mills or what new capital and technology from a leading steel company could do for US Steel. Nippon Steel is the fourth-largest steel company in the world, while U.S. Steel is now in 27th place.

Streetwise:
-Jack Hough, a football enthusiast, was surprised to learn about formations in the video game Madden and the Netflix documentary Quarterback. AT&T, once a phone monopoly, was broken into lots-opoly in 1984 by regulators. Over time, the baby bells changed names and then bought each other up, leading to the industry becoming a triopoly. In 2015, AT&T paid $67 billion for DirecTV, a company whose business plan involved mounting dishes to customer roofs. Six years later, it spun that diminished business off into a separate entity. AT&T fought regulators for years for the right to buy Time Warner, but lost it in 2022 for much less than it paid. Today, AT&T is under new management and sticking to phone company services, including wireless and wireline service, fiber broadband, and DirecTV, delivered via the internet. Despite debt from past misadventures, free cash flow is rising, and shares trade at around seven times this year's consensus. The company's 6.5% dividend yield is increasingly credible.

>>> Weekly Market Update

Weekly Market Update: Inflation data gets more stubborn as markets await central bank action

Coming into the week the focus was squarely on inflation. Reports surrounding ongoing Japanese wage talks provided fodder to those who think the BOJ will start to raise rates, perhaps as soon as next week. For the second straight month US CPI ran hotter than most expected, but some of the sting of the surprisingly strong January data was softened by negative revisions. The owners-equivalent-rent index decelerated as expected, but the widely tracked supercore services index did not slow as much as many had hoped. PPI readings also surpassed estimates along with import/export price data and came alongside a rise in New York Fed inflation expectations. US Treasury yields tracked higher with the 2-year climbing above 4.7% and the 10-year back to 4.3%. Oil prices also moved up throughout the week as geopolitics remained a worry on the supply side, and strong US demand continued to underpin global demand. Fed rate cut expectations receded, but only modestly given the inflation data. Fed fund futures markets continued to price ~75bps of cuts this year, likely to begin in June or July. ECB officials pointed to a similar playbook by suggesting rate cuts are still likely coming in June and perhaps July, too.

For the most part, equities initially whistled past the signs inflation data was proving to be stickier than most have been forecasting. Nvidia and the SMH continued to drift below the exuberant highs seen just one week ago. As the week progressed, though, rates tracked higher and equity sentiment deteriorated. Bitcoin continued to forge new all-time highs above $70K before reversing into Friday. For the week, the S&P and Nasdaq each slipped 0.1%, and the DJIA was about flat.

Corporate news featured a few more notable reports from the tail end of the earnings season. Oracle continued the successful expansion of its cloud business, beating its numbers and touting that this was the first quarter in which cloud revenue has surpassed license & support sales. Shares of Dick’s Sporting Goods surged to new all-time highs as it reported muscular results in Q4 and boosted its dividend payout. ADM reported solid results in its delayed quarterly report after cleaning up the accounting mess in its Nutrition unit.

In deals news, US Steel got the rug pulled out from under its merger with Nippon Steel after President Biden took a stand against the agreement in an effort to court union votes. Former bidder Cleveland Cliffs said it would not reinstate its loftly offer for US Steel, but could consider a much lower bid. In the same vein, British electronics store Currys found itself without any bidders after both Elliott Advisors and JD.com announced they would not pursue an offer. Meanwhile, TikTok remained under pressure from the US Congress to relinquish ties to mainland China and former Treasury Secretary Mnuchin stepped in to try and buy the US-facing part of the social media platform.




LAST WEEKED
(CN) CHINA FEB CPI Y/Y: 0.7% V 0.3%E; Feb food CPI Y/Y: -0.9% v -5.9% prior

MON 3/11
(CN) US Steelworkers Union (USW) to file USTR petition on China practices related to shipbuilding and maritime logistics - FT
(EU) Reportedly ECB is likely to keep banks minimum reserve level (MRR) at 1%, despite push by some officials to raise it – press
(JP) BOJ seen ending negative rate policy next week if Rengo wage data on Mar 15th is 'strong' – JIJI
(TW) Taiwan top security official: We do Not see any signal of a war in the Taiwan Strait breaking out; China running joint combat readiness patrols near country every 7-10 days on average - Parliament comments
(US) TTN Reminder: Fed's Bank Term Funding Program (BTFP) set to cease making new loans today, on Mar 11th, as scheduled
BALY Standard General (23.2% shareholder) proposes deal at acquire all remaining shares at $15.00/shr - 13D/A filing
ORCL Reports Q3 $1.41 v $1.37e, Rev $13.3B v $13.3Be
ORCL Guides Q4 EPS $1.62-1.66 v $1.64e, Rev +4-6% including Cerner (+6-8% ex Cerner) v +6.5%e - earnings call
ORCL CEO teases a 'joint announcement' with Nvidia next week - earnings call

TUES 3/12
(IN) INDIA FEB CPI Y/Y: 5.1% V 5.0%E (6th straight month within target range)
(JP) MORE PRESS REPORTS THAT BOJ OFFICIALS SAID TO BE CURRENTLY SPLIT OVER HIKE IN MARCH OR APRIL; BOJ'S MARCH 18-19TH MEETING OUTCOME IS CURRENTLY TOO CLOSE TO CALL – PRESS
(US) Atlanta Feb Sticky-CPI annualized 4.0% v 6.7% m/m, Core 4.3% v 6.8% m/m (update)
(US) FEB CPI M/M: 0.4% V 0.4%E; Y/Y: 3.2% V 3.1%E (1st reacceleration since Dec 2023)
(US) BofA Feb credit & debit card spending per household +2.9% y/y v -0.2% y/y prior; Notes retail spending has turned softer over the last few months
(US) FEB MONTHLY BUDGET STATEMENT: -$296.3B V -$298.0BE
(US) Republican Ken Buck to leave congress on March 22nd
7203.JP Outcome of fourth scheduled meeting with union for Spring wage negotiations: Co responds to union's wage hike demand in full (biggest pay hike in 25 years) - Japanese press
ADM Reports FY23 $6.98 adj v $7.03e, Rev $93.9B v $101.6B y/y; Adds $2B to its share buyback program; Recorded a goodwill impairment charge of $137M related to the Animal Nutrition reporting unit
AAPL Apple said to let developers distribute apps directly from their sites for the first time, as part of changes required by new EU rules - press
HON Guides Q1 $2.12-2.22 v $2.18e, Rev $8.9-9.2B v $9.01Be; Affirms FY24 $9.80-10.10 v $9.96e; Rev $38.1-38.9B v $38.4Be, Organic Rev +4-6% - JPM conf slide
KSS Reports Q4 $1.67 v $1.24e, Rev $5.96B v $5.97Be

WED 3/13
(US) Association of American Railroads weekly rail traffic report for week ending March 9th; 472.7K total units, +5.0% y/y (update)
(UK) JAN MONTHLY GDP M/M: 0.2% V 0.2%E
(JP) TTN Research Alert: Japan large caps such as Toyota, Nissan, Mitsubishi Heavy, Nippon Steel, Hitachi, Panasonic and others reported meeting their respective union’s demands in full
(US) DOE CRUDE: -1.5M V 0ME; GASOLINE: -5.7M V -1ME; DISTILLATE: +0.9M V -0.5ME
(US) TREASURY $22B 30-YEAR BOND REOPENING DRAWS 4.331% V 4.229% PRIOR; BID TO COVER 2.47 V 2.37 PRIOR AND 2.41 OVER LAST 8 REOPENINGS
ADS.DE Reports Q4 Op -€377M v -€373Me, Rev €4.81B v €4.81Be; Notes should see some growth in Q1
BUD Altria (10% holder) announces intends to Sell a Portion of its Investment in Anheuser-Busch InBev
EOAN.DE Reports final FY23 Adj Net €517M v €1.83B y/y, adj EBITDA €9.37B v €8.06B y/y, Rev €93.7B v €115.7B y/y
ITX.ES Reports FY23 Net €5.40B v €4.13B y/y, EBITDA €9.85B v €8.65B y/y, Rev €35.9B v €32.6B y/y; Feb 1st to Mar 11th sales +11% y/y
LEN Reports Q1 $2.57 v $2.21e, Rev $7.31B v $7.44Be; Notes demand strength driven by strong household formation
LLY Amazon Pharmacy said to deliver certain prescription drugs by Eli Lilly, including weight loss treatment Zepbound, directly to patients’ homes through the new direct-to-consumer website LillyDirect – press
X Reportedly Pres Biden plans to voice concerns about Nippon Steel takeover of US Steel - FT

THRS 3/14
(CN) CHINA PBOC CONDUCTS CNY387B IN 1-YEAR MEDIUM TERM LENDING FACILITY (MLF) AT 2.50% VS. 2.50% PRIOR
(UK) PM Sunak: Ruling out May 2nd election - TV interview
(US) FEB ADVANCE RETAIL SALES M/M: 0.6% V 0.8%E; RETAIL SALES (EX-AUTO) M/M: 0.3% V 0.5%E
(US) FEB PPI FINAL DEMAND M/M: 0.6% V 0.3%E; Y/Y: 1.6% V 1.2%E (highest annual pace since Sept 2023)
(US) BOFA INSTITUTE: WEEK-TO-MAR 9TH TOTAL CARD SPENDING +0.1% Y/Y V -1.0% PRIOR WEEK; OVERALL, SPENDING IN MARCH SEEMS TO BE IMPROVING AFTER A SOFT BUT STABLE FEBRUARY
IEA Monthly Oil Report (OMR); Sees some room for OPEC+ to increase oil production later in 2024
2317.TW Reports Q4 (NT$) Op 48.9B v 51.7Be, Rev 1.85T v 1.96T y/y; Expects sales for AI servers to grow more than 40% in 2024
BYTEDANCE.IPO Former Treasury Sec Mnuchin: We are putting together group to try and buy TikTok – CNBC
DKS Reports Q4 $3.85 v $3.35e, Rev $3.88B v $3.78Be; Raises Quarterly dividend 10% to $1.10 from $1.00 (indicated yield 2.34%)
NUE Guides Q1 $3.56-3.65 v $3.83e

FRI 3/15
(JP) BOJ leaning toward guiding short term rate to 0.0-0.1% range during rising wages - Nikkei
(JP) Japan's Rengo Union [largest trade union in Japan]: 1st round of FY24 annual wage hikes at 5.28% v 3.80% y/y (largest in 30 years and first time above 5% since 1991); Base pay to rise 3.70% v 2.33% y/y [**Note: last key data point ahead of BOJ meeting next week]
(JP) Japan unions said to have won >5% average wage hike - Japanese press
(JP) Japan Trade Union Confederation (Rengo): Scheduled to deliver overall % wage increase following Spring wage talks 03:15 ET (07:15 GMT)
(US) FEB IMPORT PRICE INDEX M/M: 0.3% V 0.3%E; Y/Y: -0.8% V -0.8%E
(US) MAR EMPIRE MANUFACTURING: -20.9 V -7.0E; Prices Paid: 28.7 v 33.0 prior (1st drop in 3 months)
(US) MAR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 76.5 V 77.1E
(US) Redfin: Feb new listings jumped 3.8% m/m on a seasonally adj basis to the highest level since Sept 2022 and up 14.8% y/y, the largest annual gain since May 2021
CURY.UK JD.com says it does NOT intend to make an offer for Currys

>>> Weekend Papers Summary

Weekend Papers Summary

FINANCIAL TIMES
-US investors have backed the Federal Reserve's forecast of three interest rate cuts this year, ending a months-long stand-off between markets and the central bank. Traders were pricing in only three quarter-point rate cuts by the end of the year, following economic data showing high US inflation. Before the unexpected rise in inflation, investors had bet on almost a full percentage point of cuts by December. The persistence of inflation has forced investors to back down, leading to US stocks falling on Friday. The markets now put the chance of an interest rate cut by June at just two in three, compared to a 100% probability last month.
-TikTok has reached $16B in US sales, even as its future in the country is uncertain. The app, owned by Beijing-based ByteDance, achieved record revenues in 2023, highlighting the scale of the group's operations in the country. ByteDance is on track to overtake Facebook owner Meta as the world's largest social media company by sales. In 2023, ByteDance racked up $120B in revenues, up about 40% from the previous year, driven by TikTok's growth. The US House of Representatives has approved a bill to force TikTok to be sold to a non-Chinese company within six months or be banned from US app stores.
-Apple has agreed to pay $490M to settle a class action accusing CEO Tim Cook of misleading investors in 2018 by exaggerating demand for the iPhone in China. The investors claimed Cook overstated demand on a November 2018 earnings call, leading to a 10% stock fall in January 2019 when it announced it would miss its revenue guidance by up to $9B. Apple has denied violating US securities law and the settlement still requires approval from the California federal judge overseeing the case. The settlement would mark Apple's largest US securities fraud class action settlement.
-The National Association of Realtors has reached a settlement with home sellers over alleged conspiracies to inflate agents' commissions. The association would pay $418M in damages and agree to changes to its rules that could reduce commission fees, which provide the majority of its 1.6M members' income. The system, which required sellers to hire realtors to expose their homes to buyers and advertise on multiple listing services, violated antitrust laws. Starting in July, listing services will no longer disclose commissions, allowing buyers and sellers to hire agents for reduced services or forgo them altogether. The NAR will also mandate agents to sign representation agreements outlining their fees and services.
-US prosecutors have suggested that Sam Bankman-Fried should face up to 50 years in prison for orchestrating one of the largest financial frauds in history. Bankman-Fried, who was found guilty of seven charges of fraud and money laundering, allegedly stole over $8B from customers and investors before his cryptocurrency exchange collapsed in November 2022. Federal prosecutors dismissed Bankman-Fried's lawyers' claim that leniency should be given due to the potential recovery of funds through FTX bankruptcy proceedings. Bankman-Fried's lawyers requested a sentence of no more than six-and-a-half years, arguing that a 100-year sentence was "grotesque" and "barbaric" for a person with autism spectrum disorder.
-G7 nations have raised concerns over Iran's military cooperation with Russia, including the transfer of advanced rockets. They are preparing to impose a new wave of sanctions on Tehran. While Washington has not confirmed the shipment of short-range ballistic missiles, a senior administration official said negotiations between Russia and Iran were actively advancing. The G7 is prepared to respond swiftly and in a coordinated manner, including with new measures against Iran, if Tehran continues to supply missiles or technology to Russia.
-Academics are boycotting Wiley's Gender, Work and Organization journal, citing an "anti-woke" drive against radical views. Nearly 500 advisers, reviewers, contributors, and readers have written resignation letters to Wiley, protesting the journal's "mainstreaming" and changing aims, including removing references to queer theory. The appointment of business academics as editors-in-chief has also been criticized. Professor Carl Rhodes, dean of the business school at the University of Technology Sydney, believes this is an "anti-woke backlash" against radical aspects of the journal.

THE NEW YORK TIMES
-President Biden praised Senator Chuck Schumer's speech criticizing Israeli Prime Minister Benjamin Netanyahu, calling it a "good speech" that raised concerns shared by many Americans. Although Biden did not explicitly endorse the speech's criticisms or Schumer's call for elections to replace Netanyahu, his comments were the latest in his escalating public critique of the Israeli prime minister. The two have clashed in private, but Biden has been reluctant to publicly split with Netanyahu. Schumer said delivering the speech was important to show that even if you strongly disagree with Netanyahu, you can still be a strong ally of Israel.
-A judge's ruling on Friday resolved a major cliffhanger in the Georgia criminal case against Donald J. Trump, allowing Fani T. Willis to continue prosecuting the case if her ex-boyfriend withdrew from it. However, the resignation of former boyfriend Nathan J. Wade, whom Willis hired as a special prosecutor, only settled so much. A fresh array of problems lies ahead for Willis and one of the most significant state criminal cases in American history. The defense effort to disqualify Willis began in early January, making it unlikely to reach trial before the November rematch between Trump and Biden. Republicans have smelled blood, with G.O.P. lawmakers creating new ways to investigate Willis, potentially leading to her removal from office.
-Nathan J. Wade resigned as special prosecutor in the Georgia Trump investigation after an Atlanta judge gave his boss, Fani T. Willis, an ultimatum to step down. The ruling by Judge Scott McAfee on accusations of a conflict of interest cut a middle path between removing Willis and her full vindication. The judge criticized her for dating Wade, calling it a "tremendous lapse in judgment."
-Jared Kushner, son-in-law of Donald J. Trump, is reportedly closing in on major real estate deals in Albania and Serbia, marking the latest example of the Trump family doing business abroad. Kushner's plans in the Balkans have been influenced by relationships built during Trump's time in office. He is working on deals with Richard Grenell, who served as acting director of national intelligence and ambassador to Germany and special envoy to the Balkans. The proposed projects include developing an island off the coast of Albania into a luxury tourist destination, and a luxury hotel and 1,500 residential units in Belgrade, Serbia. The first two projects involve land now controlled by governments, and the third project is planned to be built on the Zvernec peninsula in Albania.
-A commission investigating the Lewiston mass shooting has concluded that local law enforcement officers should have taken the gunman into custody and seized his weapons before he killed 18 people. The commission argues that the decision to give the shooter's family responsibility for removing his weapons was an abdication of law enforcement's responsibility. The commission has held seven public meetings since November, collecting testimony from the shooter's Army Reserve supervisors, local and state police officers, survivors, and family members of the victims. The commission aims to provide early findings to legislators weighing proposals for changes to the state's laws.
-Senator Katie Britt, a Republican from Alabama, delivered a controversial speech to President Biden's State of the Union address, causing widespread criticism from both Republicans and Democrats. Britt used a misleading account of sex trafficking to criticize border policies, claiming it had occurred in Mexico during the administration of President George W. Bush. The speech, given before her first Senate speech, is now considered a defining moment in her early days on the national political stage and will likely be the single thing most Americans know about her.
-Mike Pence, the vice president of Donald J. Trump, has stated that he will not endorse the Republican presidential nominee, Donald Trump, as he has done with other rivals like Ron DeSantis, Vivek Ramaswamy, and Tim Scott. Pence stated that he could not in good conscience support Trump this year, and declined to say whether he would vote for Trump in the November election. He also ruled out running for president as a third-party or independent candidate, stating that he remained a Republican.
-Australia's foreign interference laws were passed six years ago to address concerns about Chinese government meddling in Western democracies. However, the first case, that of one Mr. Di Sanh “Sunny” Duong, was a low-stakes affair, involving the Australian government's involvement in a dispute over interpretations of two words and a $25,000 donation to a community hospital. In December, a jury found Mr. Duong guilty of preparing for or planning an act of foreign interference, and he was sentenced to two years and nine months in prison. He is expected to serve a year behind bars.
-The Justice Department is expanding its criminal investigation into the door plug that blew off a Boeing 737 Max 9 jetliner in January. The panel was detachment from the fuselage of an Alaska Airlines flight, causing passengers to be terrified and requiring an emergency landing at Portland International Airport. The National Transportation Safety Board reported that four bolts were missing before the panel blew off. The Justice Department has opened a criminal investigation into Boeing, which had reinstalled the door plug during maintenance in Renton, Wash., before delivering the plane to Alaska Airlines in October. The incident led to the Federal Aviation Administration grounding over 170 Max 9 planes, which were then inspected for construction flaws. Boeing has pledged to cooperate and prioritize safety.
-Ferdinand Marcos Jr., the first Philippine president to visit Germany, emphasized the importance of maintaining the South China Sea as a safe passage for international commerce. Analysts believe this diplomacy could deter China, but they also acknowledge Beijing's increasing territorial claims, increasing the risk of a conflict that could draw the United States, the Philippines' oldest treaty ally. Washington has condemned Beijing's actions and pledged to aid Manila in case of an armed conflict. Marcos' foreign policy strategy is different from his predecessor, Rodrigo Duterte, which focused on the West and China. He has revived ties with traditional security partners like the United States and Japan, cultivated new relations with Sweden and France, and pushed for arms deals and military drills. Tensions flared again this month when Chinese boats blocked Philippine vessels off the Second Thomas Shoal, a contested reef 120 miles off the coast of Palawan.
-United Nations investigators have discovered new evidence of systematic and widespread torture of Ukrainian prisoners held by Russian security forces two years after Russia's invasion of Ukraine. The United Nations Commission of Inquiry detailed a range of Russian war crimes, including summary executions, sexual violence, and forced transfer of Ukrainian children into Russia. The commission paid special attention to the "horrific" treatment of Ukrainian prisoners by Russian security services at detention centers in Russia and occupied Ukraine. The commission will deliver a report to the Human Rights Council in Geneva next week, detailing accounts of torture from four locations in Russia and seven in occupied Ukraine.
-Iran and the US held secret, indirect talks in Oman in January to address the threat posed to Red Sea shipping by the Houthis in Yemen and attacks on American bases by Iran-backed militias in Iraq. The talks were held in Muscat, Oman, with Iranian and American delegations sharing messages. The meeting was the first time Iranian and American officials had held in-person negotiations in nearly eight months. Iran requested the meeting in January, and the Omanis strongly recommended that the US accept it. Since the beginning of the war in Gaza after Hamas's attacks on Israel, the US and Iran have reassured each other that neither was seeking a direct confrontation, conveyed through intermediaries.
-A convoy bringing aid to hunger-stricken northern Gaza ended in bloodshed late Thursday, with Palestinians killed and wounded in an attack surrounding the trucks. Gazan health officials and the Israeli military have offered divergent accounts of what happened. The Gaza Health Ministry claimed that at least 20 people were killed and over 150 injured, accusing Israeli forces of carrying out a "targeted" attack against a gathering of civilians waiting for humanitarian aid near the Kuwait traffic circle in Gaza City. The Israeli military denied the allegation, blaming Palestinian gunmen and stating that no tank fire, airstrike, or gunfire was carried out toward the Gazan civilians at the aid convoy.
-New York's legal obligation to provide shelter to homeless people will be significantly reduced under an agreement announced on Friday. Adult migrants will be allowed to stay in shelters for only 30 days, with some longer stays if they meet certain conditions, such as having a medical disability or an "extenuating circumstance." This change is a significant shift in a policy that has set New York apart from other big US cities. The agreement resolved months of negotiations in state court between city officials and plaintiffs in the original consent decree. The new rules will apply temporarily during the migrant crisis, which has led to over 180,000 migrants passing through the city's shelter system since spring 2022.
-The Senate appears to have little enthusiasm for a bill that would force TikTok's Chinese parent company, ByteDance, to sell its stake in the app or face a nationwide ban. The bill passed the House with a 352 to 65 vote, but has not been decided on its floor. Senator Chuck Schumer of New York has not decided whether to bring the bill to the floor. The Senate is keeping its cards close to their vest about their stance on the TikTok measure, despite acknowledging the House's vote. The legislation mandates that ByteDance sell its stake in the app within six months or face a ban.

THE NEW YORK POST
-New York City will continue to limit shelter stays under a settlement with the Mayor Eric Adams administration and the Legal Aid Society. The agreement allows the city to limit a single adult migrant's ability to reapply for shelter after their 30-day stay. However, only those with a disability or "extenuating circumstances" will be approved on a case-by-case basis. The settlement also allows younger adult migrants aged 18-23 to have up to 60 days in the shelter system before being booted. This agreement will still house thousands of migrants each week.
-The US is expanding its investigation into India's Adani Group, focusing on its founder, Gautam Adani, and potential bribery ties. Prosecutors are investigating whether Adani or its associates, including Adani, paid Indian officials for favorable treatment on an energy project. The investigation is being handled by the US Attorney's office for the Eastern District of New York and the Justice Department's fraud unit.

The Information : The Sora Saga Has Only Just Started

The Sora Saga Has Only Just Started
A tiny sneak preview of OpenAI’s groundbreaking video tool last month has sent outsize shockwaves across countless industries. Here’s how Sora is already changing everything from Hollywood to videogames to Madison Avenue.

A month ago, Greg Pilon, a 44-year-old visual effects artist on such films as “Deadpool 2,” thought he heard the tick-tock of a doomsday clock for his industry.

What set the gears in motion? His initial glimpse of Sora, OpenAI’s new text-to-video artificial intelligence tool, unveiled by CEO Sam Altman. In a 10-minute demo video, OpenAI showed the tool instantly spinning simple strings of words into realistic footage: a sweeping drone shot of the Amalfi Coast, a close-up of a man pondering his life at a Parisian cafe, a clip of a groovy kangaroo at a disco and many other scenarios.

Sora appeared far more advanced than any other generative AI video software, and while Pilon had figured it would take years before the other, cruder programs would endanger his livelihood, Sora sparked a fear of imminent obsoletion. “Well, I’m gonna get replaced in two years now,” he recalled thinking to himself.

OpenAI hasn’t even given a release date for Sora, but the tool’s mere unveiling has roiled every industry built around video—from Hollywood to videogames to Madison Avenue, among many others. The most prominent example: A week after Sora’s debut, prolific movie and television producer Tyler Perry canceled an $800 million expansion of his Atlanta studio, with the billionaire saying the technology had potentially eliminated the need for 12 new soundstages.

Yet Perry’s very public move stands out as an exception. Most of Sora’s immediate and longer-term consequences are playing out in private, as conversations with more than a dozen founders, executives and investors within those industries over the past several weeks underscore. Behind closed doors, the sophisticated tool’s imminent arrival has intensified conversations around existing AI; sowed significant anxiety and confusion about what changes Sora will eventually bring; and deepened the problems for a slew of industries beleaguered by broader woes, including budget cuts, layoffs and labor unrest.

Are the fears overblown? Maybe. As much as the Sora reveal seemed like a showcase of strength for OpenAI, it was also a clever piece of marketing—an important factor for a company that must constantly burnish its image as it seeks more employees and more capital. Speaking of capital, it will certainly cost OpenAI dearly to run Sora, and that puts some limits on its disruptive powers. And there’s always the chance that the product won’t connect with consumers as well as OpenAI’s Dall-E image generator and ChatGPT have.

Yet the odds of significant tumult ahead increase based on the fact that it’s not only Sora working on such technology. Startups like Runway and Pika Labs, which have taken in $236 million and $55 million, respectively, from the likes of Google and Lightspeed Venture Partners, have for months been offering AI that can produce clips as long as 15 to 16 seconds. (Sora can reportedly produce minutelong footage.) And two weeks after Sora’s demo, Israeli startup Lightricks announced its text-to-video offering, LTX Studio, and Alibaba debuted its own nascent generative AI video tool, Emo.

“We’re going to see 10 more Sora-type announcements between now and June,” said Mike Grandinetti, a former software engineer who now teaches a Harvard University class on AI and business. “We just have to strap ourselves in.”

Pilon has had to steer through turbulent times before. He initially went to ​​the Conservatory of Recording Arts and Sciences to become an audio engineer, but as audio-editing software advanced in the 2000s, his work prospects dwindled, and Pilon made a break for Hollywood, hoping to try his hand at film and visual effects editing next. He proved pretty good at it and worked on shows including “Game of Thrones,” adding snow to various landscapes as the series’ plot went from summer to winter, and “The Vampire Diaries,” drawing the veins in the eyes of bloodthirsty teens. It’s the type of work Sora might soon be able to do.

After looking at the Sora video, he realized it could have the power to do in minutes what took him months. “If it’s as good as they’re claiming it is…I don’t think anyone expected it to be this far along,” said Pilon, who only just returned to work last week after last year’s Hollywood labor strikes shuttered production. “What we thought was maybe a decade away now is maybe a few years.”

Like Pilon, Ben Kvalo has knocked around Los Angeles’ creative corridors. For a time he led Netflix’s push into videogames after he held earlier roles at two major video companies, 2K and Blizzard Entertainment (now part of Microsoft after that company made a $69 billion deal to buy parent Activision Blizzard last year).

Last May, Kvalo left Netflix and departed California for Wisconsin, where he formed his own videogame publishing company, Midwest Games. Even at a remove from his industry’s epicenter, he can foresee Sora’s possible consequences. In particular, he believes concept artists, who work with videogame developers to sketch out the initial characters and settings for a game, could lose work. “Artists have certain styles that they are good at doing,” whereas generative AI “can do whatever style or can try a completely different mix,” he said.

Kvalo, who expects to see about 40 pitches from indie videogame developers a month as he determines which games his company will release, is readying himself for a surge of AI-generated visuals in those pitches. He believes smaller developers could benefit the most: Smaller teams, who never had the resources to hire concept artists in the first place, are suddenly able to pitch games that “appear at a level above and beyond” where they’re at and secure funding they wouldn’t have otherwise been able to access.

Moreover, Kvalo believes one day generative AI could get to a point where games can have what he calls “sentient” nonplayable characters. The NPCs that populate a game’s world—say, the limping zombies in The Last of Us—are typically restricted to short canned lines and basic movements. If AI could allow those characters to spontaneously invent dialogue and improvise actions, a videogame’s storyline would seem more robust.

“You’re able to deliver the content that allows [players] to engage with [a game] over and over and over and over,” he said. “That is a dream scenario for a lot of game developers.”

On Madison Avenue, many executives talk about Sora less as a harbinger of doom than as a possible godsend. As opposed to the slow-paced auteurism that underpins many movies and games, the ability to quickly develop pitches—possibly with multiple visual styles—and change course fast based on client wishes is what fuels the ad world.

Scott Maiocchi, a senior vice president at creative agency (add)ventures, has already seen his firm, which has worked with major clients like CVS Health and Stop & Shop, use image-generating AI tools such as Midjourney and Stable Diffusion to develop interesting visuals and inspiration images. (In one instance, the process led to an image of a photorealistic man painting a sunset; in another, it rendered the painting man in Corporate Memphis style, drawn with bright colors in a minimalist way.)

Sharing his screen on a video call, Maiocchi gleefully showed off how easy it is for (add)ventures employees to use the custom AI tool. In a Slack channel called addAI, he typed a prompt: a description of a woman captured through a rain-droplet–covered camera lens. The Slack channel immediately spit out a picture created by Dall-E, OpenAI’s image generator.

“Create a 30-second commercial script from that,” he wrote next, watching ChatGPT produce a script. From there, he could give the AI more specific instructions, like “Start the script with a close-up of the woman’s face” or “Add a product tagline to the picture.”

“Anybody in the company right now can use this and play with it,” he said. “It’s not for final delivery on a final product because it’s just not really game ready,” alluding to the litany of copyright infringement lawsuits against generative AI companies.

To name just a few: The New York Times is suing OpenAI and Microsoft for allegedly training their models off the paper’s articles. In September, a group of famous authors including George R.R. Martin and Michael Connelly joined a class-action lawsuit against OpenAI for the same reason. And Getty Images is suing Stability AI, accusing it of using over 12 million copyrighted Getty photographs in its model. There’s a pervasive fear among ad agencies like (add)ventures that using generative AI advertisements could leave them vulnerable to similar litigation, and it’s hard to imagine that Sora and other video AI tools will be any safer to use.

But he believes the models could be ready for commercial use sooner rather than later. Maiocchi predicted that within two years, AI video software will be good enough to take raw commercial footage and, with some text instruction, spit out a final edit. “It’s going to be just that holistic change of how content is actually created,” he said.

Maiocchi has already been experimenting with Pika, RunwayML, ElevenLabs and other generative AI video tools, and he is excited to get his hands on Sora to see if it will “enhance the storytelling process.”

He believes so deeply that generative AI is the future of advertising that he’s added AI skills—or at least a willingness to explore AI technology—to (add)ventures job descriptions.

Similarly, commercial film director Justin Poirier, who has worked with brands such as Bose, CVS and Hasbro, has been using generative AI to build mood boards. Before, he spent hours searching for inspirational images, a particular challenge when he’s working on an animation and needs to show the client options for what the art could look like.

It makes sense, he said, that AI models, which pull from so many artists’ work, would work well in the advertising pitch process. “Most clients want to see that something has worked in the past,” said Poirier. “In a certain sense, advertising and marketing has always relied on the creativity of things that came before it.”

In the future, Poirier believes brands will likely use AI-generated films for b-roll, instead of sifting through Getty or Shutterstock for stock footage as he recently did to find office shots to set the scene for an insurance company’s ad. “Not every project has the budget to hire a drone to shoot a city skyline, but once AI video is widely available, you’re going to be able to make one in seconds,” he said. “To be clear, I’m not advocating for not shooting or using stock, but I’m sure that some clients will start mandating it.”

Advertising executives aren’t the only ones peering through the Sora storm clouds and focusing on the silver lining. In Hollywood, director Scott Mann has been thinking about the technology’s potential for years and predicts it will “have the biggest impact on our industry since the invention of the film camera.”

In 2018, he co-founded Flawless, which makes AI filmmaking tools. The company’s most buzzy product fixes dubbing issues spotted in film editing—saving on costly reshoots—and can also dub movies for foreign markets, using AI to edit actors’ faces so their lips align with the new language.

Mann has deployed the tool in his own films. In his most recent production, “Fall,” a thriller about a pair of friends trapped atop a 2,000-foot communication tower, the characters swore often, and the film initially earned an R rating. He used Flawless software to dub over more than 30 instances of the F-word in “Fall” without requiring reshoots or having to accept that the performances wouldn’t match the audio. The new version received a PG-13 rating, expanding the film’s potential audience, and “Fall” grossed nearly $22 million on a $3 million budget, a roughly 7 times return.

Mann, an action-movie director whose films include 2015’s Robert De Niro–led “Heist,” acknowledges that the technology will radically change some jobs—but believes it will lower production costs so significantly that it could lead to more original, creative projects getting made. “We need a better rate of return, where you’re able to produce and create better, bigger films for less,” he said. “Using the right tools, this is going to save the industry—not destroy it.”

CrunchBase : The Week’s 10 Biggest Funding Rounds: Applied Intuition And Luminar

The Week’s 10 Biggest Funding Rounds: Applied Intuition And Luminary Cloud Rise Above

This week was a story of the haves and have-nots. Of course there were more big AI-related rounds (the haves) but also a couple of big raises from some sectors that had been eschewed by investors not that long ago — autonomous vehicles and industrial security (the have-nots).

All in all, it was another strong week for big rounds. The top 10 list also includes three new unicorns.

1. Applied Intuition, $250M, autonomous vehicles: Autonomous vehicle software developer Applied Intuition locked up a $250 million Series E valuing the company at $6 billion — a 67% uptick in value from its previous round. The new round was led by Lux Capital, Elad Gil and strategic investor Porsche Investments Management. The Mountain View, California-based startup develops software for the automotive, trucking, construction, mining and other industries. The company leverages generative AI in developing software to help customers create driver-assistance systems and automated driving solutions. The up round comes despite venture funding in the autonomous vehicle sector continuing to be in decline. Last year, autonomous driving startups raised less than $5 billion — the sector’s lowest funding total since 2017, per Crunchbase data. The drop has come amid numerous setbacks for the industry. Just last month, Apple unceremoniously shuttered its autonomous electric car initiative after a decade of work. Founded in 2017, Applied Intuition has raised more than $600 million, per Crunchbase.

2. Luminary Cloud, $115M, software: Engineers make a lot of cool things nowadays. To do that, they need to simulate how things will react under certain conditions. Luminary Cloud, a computer-aided engineering SaaS platform, came out of stealth this week to help them do just that. The San Mateo, California-based startup also announced a $115 million raise led by Sutter Hill Ventures. The company has customers in the aerospace and defense, automotive, industrial equipment and other industries, looking to solve challenges such as increasing the range of electric vehicles and achieving energy efficiency goals.

3. Zephyr AI, $111M, biotech: Mclean, Virginia-based healthcare startup Zephyr AI closed a $111 million Series A from investors that included Revolution Growth and Eli Lilly & Company. Like many biotech startups raising big money currently, Zephyr is bringing AI to the sector. The company pairs its healthcare dataset with artificial intelligence algorithms to create insights in the areas of oncology and cardiometabolic disease. Founded in 2020, the company has raised nearly $130 million, per Crunchbase data.

4. Together, $106M, artificial intelligence: It was less than four months ago that AI startup Together made this list with a $102.5 million Series A funding round led by Kleiner Perkins. Well, the Menlo Park, California-based startup is back with a $106 million round led by Salesforce Ventures . The new round doubles the company’s valuation to $1.25 billion. The Nvidia-backed company has developed a cloud platform to allow developers to build on open and custom AI models — allowing customers to fine-tune open source foundation models. Founded in 2020, the company has raised nearly $230 million, per Crunchbase.

5. Nozomi Networks, $100M, cybersecurity: Things are looking up for industrial cybersecurity startups. A week after Claroty made this list, startup Nozomi Networks locked up a $100 million Series E from investors including Mitsubishi Electric and Schneider Electric. The San Francisco-based company offers industrial security — also called operational technology (OT) security — and IoT security platforms. While the sector is not threatening generative AI’s hold on investors, it does show once again investors — especially strategics — are eyeing the industry as attacks and threats mount. New OT security platforms have long been thought to hold potential, but securing older industrial control systems that were designed decades ago — long before cyberattacks were a reality — has proven difficult to build. Founded in 2013, Nozomi has raised $266 million, per Crunchbase.

6. CarbonCapture, $80M, climate: Los Angeles-based CarbonCapture, a direct air capture company, completed a $80 million Series A led by Prime Movers Lab. Founded in 2019, the company has raised $115 million, per Crunchbase.

7. Liquid Death, $67M, beverage: Trendy beverage startup Liquid Death hit unicorn status after closing a $67 million financing at a $1.4 billion valuation. No lead investor was named, but the round included investment from the likes of SuRo Capital, strategics and several folks in the entertainment and sports world. The Los Angeles-based healthy beverage startup, founded in 2017, has raised nearly $268 million, per Crunchbase.

8. Bear Robotics, $60M, robotics: Redwood City, California-based Bear Robotics, a robot waiter startup, raised a $60 million from LG Electronics. Founded in 2017, the company has raised nearly $176 million, per Crunchbase data.

9. Serenity Kids, $52M, food: Austin, Texas-based Serenity Kids, a maker of shelf-stable pouched baby food, closed a $52 million minority investment and partnership with Stride Consumer Partners. Founded in 2016, the company has raised nearly $64 million, per Crunchbase.

10. Berachain, $69M, blockchain: Minnesota-based blockchain platform Berachain reportedly raised more than $69 million in a funding round co-led by Brevan Howard Digital and Framework Ventures that values the company at $1.5 billion. Founded in 2021, the company has raised $111 million, per Crunchbase.

Big global deals
Applied was the biggest round of the week globally, but the second largest of the week came from Europe.
  • Germany-based Tubulis, a chemotherapeutic medication developer, raised a more than $139 million Series B.

TechCrunch : This Week in AI: Midjourney bets it can beat the copyright police

This Week in AI: Midjourney bets it can beat the copyright police

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world of machine learning, along with notable research and experiments we didn’t cover on their own.

Last week, Midjourney, the AI startup building image (and soon video) generators, made a small, blink-and-you’ll-miss-it change to its terms of service related to the company’s policy around IP disputes. It mainly served to replace jokey language with more lawyerly, doubtless case law-grounded clauses. But the change can also be taken as a sign of Midjourney’s conviction that AI vendors like itself will emerge victorious in the courtroom battles with creators whose works comprise vendors’ training data.

Generative AI models like Midjourney’s are trained on an enormous number of examples — e.g. images and text — usually sourced from public websites and repositories around the web. Vendors assert that fair use, the legal doctrine that allows for the use of copyrighted works to make a secondary creation as long as it’s transformative, shields them where it concerns model training. But not all creators agree — particularly in light of a growing number of.studies showing that models can — and do — “regurgitate” training data.

Some vendors have taken a proactive approach, inking licensing agreements with content creators and establishing “opt-out” schemes for training data sets. Others have promised that, if customers are implicated in a copyright lawsuit arising from their use of a vendor’s GenAI tools, they won’t be on the hook for legal fees.

Midjourney isn’t one of the proactive ones.

On the contrary, Midjourney has been somewhat brazen in its use of copyrighted works, at one point maintaining a list of thousands of artists — including illustrators and designers at major brands like Hasbro and Nintendo — whose works were, or would be, used to train Midjourney’s models. A study shows convincing evidence that Midjourney used TV shows and movie franchises in its training data, as well, from “Toy Story” to Star Wars” to “Dune” to “Avengers.”

Now, there’s a scenario in which courtroom decisions go Midjourney’s way in the end. Should the justice system decide fair use applies, nothing’s stopping the startup from continuing as it has been, scraping and training on copyrighted data old and new.

But it seems like a risky bet.

Midjourney is flying high at the moment, having reportedly reached around $200 million in revenue without a dime of outside investment. Lawyers are expensive, however. And if it’s decided fair use doesn’t apply in Midjourney’s case, it’d decimate the company overnight.

No reward without risk, eh?

Here are some other AI stories of note from the past few days:

AI-assisted ad attracts the wrong kind of attention: Creators on Instagram lashed out at a director whose commercial reused another’s (much more difficult and impressive) work without credit.

EU authorities are putting AI platforms on notice ahead of elections: They’re asking the biggest companies in tech to explain their approach to preventing electoral shenanigans.

Google Deepmind wants your co-op gaming partner to be their AI: Training an agent on many hours of 3D game play made it capable of performing simple tasks phrased in natural language.

The problem with benchmarks: Many, many AI vendors claim their models have the competition met or beat by some objective metric. But the metrics they’re using are flawed, often.

AI2 scores $200M: AI2 Incubator, spun out of the nonprofit Allen Institute for AI, has secured a windfall $200 million in compute that startups going through its program can take advantage of to accelerate early development.

India requires, then rolls back, gov approval for AI: India’s government can’t seem to decide what level of regulation is appropriate for the AI industry.

Anthropic launches new models: AI startup Anthropic has launched a new family of models, Claude 3, that it claims rivals OpenAI’s GPT-4. We put the flagship model (Claude 3 Opus) to the test, and found it impressive — but also lacking in areas like current events.

Political deepfakes: A study from the Center for Countering Digital Hate (CCDH), a British nonprofit, looks at the growing volume of AI-generated disinformation — specifically deepfake images pertaining to elections — on X (formerly Twitter) over the past year.

OpenAI versus Musk: OpenAI says that it intends to dismiss all claims made by X CEO Elon Musk in a recent lawsuit, and suggested that the billionaire entrepreneur — who was involved in the company’s co-founding — didn’t really have that much of an impact on OpenAI’s development and success.

Reviewing Rufus: Last month, Amazon announced that it’d launch a new AI-powered chatbot, Rufus, inside the Amazon Shopping app for Android and iOS. We got early access — and were quickly disappointed by the lack of things Rufus can do (and do well).

More machine learnings
Molecules! How do they work? AI models have been helpful in our understanding and prediction of molecular dynamics, conformation, and other aspects of the nanoscopic world that may otherwise take expensive, complex methods to test. You still have to verify, of course, but things like AlphaFold are rapidly changing the field.

Microsoft has a new model called ViSNet, aimed at predicting what are called structure-activity relationships, complex relationships between molecules and biological activity. It’s still quite experimental and definitely for researchers only, but it’s always great to see hard science problems being addressed by cutting-edge tech means.

University of Manchester researchers are looking specifically at identifying and predicting COVID-19 variants, less from pure structure like ViSNet and more by analysis of the very large genetic datasets pertaining to coronavirus evolution.

“The unprecedented amount of genetic data generated during the pandemic demands improvements to our methods to analyze it thoroughly,” said lead researcher Thomas House. His colleague Roberto Cahuantzi added: “Our analysis serves as a proof of concept, demonstrating the potential use of machine learning methods as an alert tool for the early discovery of emerging major variants.”

AI can design molecules too, and a number of researchers have signed an initiative calling for safety and ethics in this field. Though as David Baker (among the foremost computational biophysicists in the world) notes, “The potential benefits of protein design far exceed the dangers at this point.” Well, as a designer of AI protein designers he would say that. But all the same, we must be wary of regulation that misses the point and hinders legitimate research while allowing bad actors freedom.

Atmospheric scientists at the University of Washington have made an interesting assertion based on AI analysis of 25 years of satellite imagery over Turkmenistan. Essentially, the accepted understanding that the economic turmoil following the fall of the Soviet Union led to reduced emissions may not be true — in fact, the opposite may have occurred.
“We find that the collapse of the Soviet Union seems to result, surprisingly, in an increase in methane emissions.,” said UW professor Alex Turner. The large datasets and lack of time to sift through them made the topic a natural target for AI, which resulted in this unexpected reversal.

Large language models are largely trained on English source data, but this may affect more than their facility in using other languages. EPFL researchers looking at the “latent language” of LlaMa-2 found that the model seemingly reverts to English internally even when translating between French and Chinese. The researchers suggest, however, that this is more than a lazy translation process, and in fact the model has structured its whole conceptual latent space around English notions and representations. Does it matter? Probably. We should be diversifying their datasets anyway.

Business Of Fashion : What Is It About Celine Beauty?

What Is It About Celine Beauty?
News of the luxury house expanding into cosmetics had fashion and beauty lovers buzzing about the latest extension of Hedi Slimane’s expanding universe.

When we broke the news earlier this week that Hedi Slimane was launching Celine Beauté, my inbox, text messages and DMs were immediately flooded:

“Have you seen any of the product?” “Bring all the comps tomorrow,” “Who is doing the PR?” The comments on The Business of Beauty’s social media pages were equally fervent.

At a time when nearly every fashion business is hoping to launch a beauty enterprise of their own — Dolce & Gabbana, Kering, Richemont — or partner with a licensing company for a makeup or skincare collection — Prada, Miu Miu, Marni, Etro — I wondered why the response for Celine’s offering was so … enthusiastic.

First off, it seems as though Celine is taking more of the curated Hermès route with coordinated, pulsed collections than launching everything at once. The house is starting with a single red lipstick, Rouge Triomphe, this autumn before offering a complete, 15-piece lineup of satin lipsticks in January 2025. Each season that follows will be dedicated to a category from lip balms and mascaras to loose powders and eye pencils, and will tie back to runway collections.


That last bit is critical to why people are so excited. The runway connection ensures each drop will evoke Slimane. Since he became artistic, creative and image director at the French house, the designer has launched menswear (2018) and fragrances (2019), filling out the Celine universe. And it has become a megabrand in the making. According to sources, Celine is closing in on €3 billion ($3.27 billion) in annual revenue. Beauty is an extension of that, and we can already see touches of the fashion line, including Celine’s interlocked Cs, imprinted on the upcoming Rouge Triomphe lipstick and eye pencil caps.

That approach will draw a distinction between Celine’s beauty offerings and lines from rival fashion brands, as products from licensing partners often lack cohesion. Prada’s new and improved Prada Beauty line with L’Oréal looks almost as clinical as L’Oréal Paris’ products versus the covetable collections that Miuccia Prada and Raf Simons present on the runway. Meanwhile, since Alessandro Michele left Gucci, Gucci’s makeup line, which was created with Coty, feels dated and disjointed from Sabato De Sarno’s designs.

But that doesn’t mean every fashion label can successfully pull off their own in-house beauty brand.

L’Oréal, Coty, Interparfums and the like are experts at beauty — they have decades of product development experience and marketing knowhow. No matter how much fashion executives want to say beauty and fashion are the same, selling a lipstick is far different from selling a bag or a couture dress. Fashion labels that are entering beauty on their own must assemble the right team, with the right experience and, crucially, the right amount of investment.

That’s why sources have told me Kering is taking its time putting its infrastructure in place to better incubate its own beauty labels, and why its first move in the space was an acquisition (Creed) versus an in-house line.

Celine is intent on creating a world for its customers across fashion, fragrance and now cosmetics. So far, Slimane’s vision across the house is working. And LVMH has plenty of beauty expertise, with learnings from Dior Beauty, Benefit and Sephora right at its fingertips. The luxury group also has a new secret weapon in beauty as former L’Oréal USA chief executive Stéphane Rinderknech was named chairman and CEO of the beauty division at LVMH last year.

Here’s betting a rush for Rouge Triomphe come September.