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Microsoft is making a big AI play with its revamped Bing search engine and Edge web browser, both of which are powered by what appears to be exclusive access to the successor to OpenAI’s popular ChatGPT large language model.

The new AI is unnamed for now, only described in a blog post as following:

…A new, next-generation OpenAI large language model that is more powerful than ChatGPT and customized specifically for search. It takes key learnings and advancements from ChatGPT and GPT-3.5 – and it is even faster, more accurate and more capable.

“Customized specifically for search” was repeated by multiple executives at the Microsoft event, so it must be some agreed-upon language that doesn’t over-commit the model’s capabilities one way or the other. They did call it a “new large language model,” though how much of a step up it is from OpenAI’s previous ones is hard to say. Speculation was that it was GPT-4, but so far that term has not been used. I’ve asked OpenAI for more information and will update if I hear back.

One of the drawbacks of large models like these is the immense computing power required to run them, which has led many a prospective ChatGPT user to wait a few minutes before getting a session going. Microsoft’s focus on scaling makes sense, especially since it will certainly be footing the compute and server bill.

Unlike ChatGPT and the other GPT models, the AI-powered Bing is accessed directly through a normal search interface, and wrapped in a Microsoft-created safety system they call Prometheus. It’s an ominous name to be sure, for although Prometheus was a god of wisdom and cunning, he also famously ended up in endless torture, chained to a rock with a huge bird forever pecking his guts. Let’s hope Bing doesn’t end up the same way.

Prometheus is part of a safety and control layer around the model that acts as a sanitizer and filter, watching for obviously inappropriate or incorrect results. But it also brings in relevant data like location, context and up to date info to customize or improve the inputs and outputs from the core model.

The next-gen model was also applied to Bing’s search ranking index, “which led to the largest jump in relevance in two decades.” It takes strength to admit that!

We will have more details on the new Bing and the AI model that powers it after today’s event at Microsoft headquarters.

Future electricity demand expected to be met by clean energy sources, agency says

The power sector is getting close to “a tipping point” on its carbon dioxide emissions as renewable energy and cleaner sources of electricity generation are set to provide almost all the new global electricity demand in the next three years, the International Energy Agency has forecast.

The IEA said it expected demand to increase “at a much faster pace” of an average of 3 per cent to 2025, after plateauing in 2022 when the global energy crisis and exceptional weather in some parts suppressed demand.

Global electricity generation is one of the most significant contributors to the greenhouse gas emissions behind climate change, from the burning of fossil fuels.

But Keisuke Sadamori, director of the office for energy security at the IEA, said he expected renewables and nuclear power to meet more than 90 per cent of the additional demand. “Emissions from power generation are set to plateau by 2025,” he added.

The forecast comes after a turbulent year for energy as a result of Russia’s war on Ukraine., when Europe turned to fossil fuels and fired up coal-fired plants in response to the energy crisis. The Asia-Pacific region has also remained heavily reliant on power generated from coal, the dirtiest fuel.

This has led to oil producers maximising profits from fossil fuels, with BP this week scaling back its commitment to cut oil and gas production after reporting record earnings thanks to soaring prices.

But Sadamori said he did not expect this retreat to use of fossil fuels to continue in Europe. The war in Ukraine and subsequent energy crisis had forced Europe to take more “robust measures” in power systems, he said, including more focus on energy efficiency and faster deployment of renewable energy.

“The energy crisis is accelerating rather than slowing down the transition of the power energy systems,” said Sadamori.

IEA executive director Fatih Birol said the rise of renewables and nuclear energy suggested “we are close to a tipping point for power sector emissions”.

“Governments now need to enable low-emissions sources to grow even faster and drive down emissions so that the world can ensure secure electricity supplies while reaching climate goals.”

While the IEA said it expected cleaner energy sources to become more dominant, it predicted a rise in coal-fired generation in Asia-Pacific.

Last year, electricity demand in Europe eased by 3.5 per cent, but rose in the US, India and China.

In the US, this growth was driven by economic activity and higher residential use of electricity during a hotter summer and a colder winter.

The latest IEA report confirmed that electricity demand and supply worldwide was increasingly weather dependent as a result of global warming, with Europe’s unusually mild winter partially accounting for less demand.

The luxury parka-maker is set to add new categories, like home, while doubling its store count.

Dani Reiss has his sights set on bringing a lot more Canada Goose to the world — with a little more of everything, from stores to product categories.

In Canada Goose Holdings’ first investor day since its 2017 IPO, the president and chief executive officer laid out plans to grow revenues to 3 billion Canadian dollars in fiscal 2028, up from the nearly 1.2 billion Canadian dollars expected in the fiscal year ending in April 2.

While Canada Goose investors are still smarting from last week’s disappointing third-quarter report — which told how macro pressures in the U.S. and COVID-19 restrictions in China led to top and bottom line declines — Reiss is doubling down on the true-to-brand approach that built his track record.

Reiss first became CEO of the company in 2001, when the firm founded by his grandfather, Sam Tick, had just $2 million in sales. The next two decades saw the Canadian player transform into a powerhouse.

“We are a brand like no other Canadian-based and -built in the European style of iconic luxury brands,” Reiss said. “We take annual price increases and we don’t have discounts. Our supply chain is vertically integrated. Our [direct-to-consumer] margins reflect that we control our distribution and we create icons….My vision for this brand was to take the decades of experience that we had in making the warmest outdoor [gear] in the world and to create a luxury consumer brand. We didn’t realize at the time how daring that vision was.”

It’s an approach that had the brand keep its manufacturing in Canada and, with others like Moncler, refashion what was the relatively sleepy outerwear category.

Now, the company sells in 62 countries with more than 1,500 wholesale accounts and 51 stores.

To realize the next leg of growth, Reiss said Canada Goose would:

• accelerate its “consumer-focused growth” by building deeper relationships with customers, growing their lifetime value to the brand and expanding with women shoppers and Gen Z;
• more than double the brand’s retail footprint while also growing the digital side of the business, and
• expand into new categories while growing in the existing offering. That means more heavyweight and lightweight down and quicker growth in apparel, rainwear and footwear as well as the addition of eyewear, luggage and home.

“It’s important to note that, as we execute against our strategic growth levers, that we do so responsibly,” Reiss said. “We will focus on investing where we see high return, protecting our brand and delivering high-quality profitable growth, just as we have since our IPO through the pandemic.”

The plan has Canada Goose’s revenues continuing to grow at a compound annual growth rate of about 20 percent as regional sales balance out with an “equitable split” between the North American region, Europe, the Middle East and Africa, and the Asia Pacific area.

Adjusted earnings before interest and taxes are slated to stand at 30 percent in 2028. That marks a big swing up from the expected EBIT margins of 14.2 percent to 15.3 percent for the year ending in April, an outlook that assumes heavy strategic investments in leadership hires, digital and strategic initiatives.

For their part, investors seem to be waiting to see how the plan plays out. Shares of Canada Goose closed up 1.6 percent to $21.33 on Tuesday after trending down earlier in the day.

Binance’s dominance of crypto trading grows after FTX collapse

Exchange scoops more than half of global volumes as digital assets rebound

Binance has taken its largest share to date of the market for trading cryptocurrencies after scooping up the majority of the business from defunct rival exchange FTX.

The controversial exchange hosted 55 per cent of the world’s spot crypto trading in January, an increase of seven percentage points since the collapse of FTX in November, according to data from research provider CryptoCompare.

Its advances were made even though Binance, led by Changpeng Zhao, rejected the chance to buy its struggling rival in the days before FTX filed for bankruptcy. Several of FTX’s senior executives including co-founder Sam Bankman-Fried face multiple criminal charges, including wire fraud and conspiracy to commit commodities and securities fraud.

The offshore exchange, which claims it has no formal headquarters, has frequently faced scrutiny from global regulators over its activities. This month US authorities named Binance as a counterparty to Bitzlato, a crypto exchange that Washington alleges has been a conduit for laundering money. The exchange said at the time it was committed to working with law enforcement.

Binance said this week it would temporarily halt bank transfers in US dollars, the world’s reserve currency. It gave no reason for the suspension. Last month the exchange said one of its banking partners, Signature Bank, would no longer support crypto exchange customers buying or selling amounts of less than $100,000.

Binance’s growth in market share also comes during a broader upturn for the crypto market after a turbulent 2022, when token prices tumbled and several high-profile companies collapsed.

The size of the crypto market recently exceeded $1tn for the first time since days before FTX’s November collapse while the world’s most popular digital tokens, bitcoin and ether, have risen around 40 and 30 per cent respectively this year. Digital asset investment products have had inflows of $230mn this year, data from investment group CoinShares has found.

Binance’s remaining rivals have struggled to keep pace. Since FTX’s collapse, US-listed Coinbase has increased its share of the spot market by less than one percentage point to 6.5 per cent. Kraken and Crypto.com have seen declines in market share during the same period, according to CryptoCompare. At its height last summer, FTX controlled roughly 5.6 per cent of the spot market.

Binance also increased its share of exchange-traded crypto derivatives, in which FTX had a 4 per cent market share before its collapse. Since November, Binance’s portion of on-exchange crypto derivatives trading rose from 58 per cent to 61 per cent, while rival OKX’s portion was flat, at between 13 and 14 per cent.

“Whatever pie is left for centralised exchanges, Binance will get a big part of it . . . you saw a period of very sharp declines in Binance’s reserves prompting a fear of a run on Binance, and that just didn’t materialise,” said Ilan Solot, co-head of digital assets at Marex Solutions.

In the months following FTX’s collapse, Binance has made a concerted effort to attract non-US customers, with a deal to buy Japanese group Sakura Exchange BitCoin and an investment in South Korean crypto exchange Gopax earlier this month.

“Binance seems to be taking advantage of the void left by FTX by focusing on retail segments where there is still significant interest in crypto,” said Andrew Thurman, an analyst at blockchain analytics platform Nansen.

Over 20 years, Siemens has led the way while Deutsche Bank languishes at the bottom

Two decades ago, German engineering giant Siemens was notorious for being an example of a badly run conglomerate. The Munich-based behemoth at the time boasted 13 different operational units with an eclectic product range from nuclear power plants to lightbulbs and hearing aids. “Siemens makes anything but a profit,” analysts used to joke back then.

Not anymore. Since 2003, the 175-year old company ditched unprofitable units and those who would not fit with core businesses. It spun out its struggling lighting unit, energy operations and fast-growing and highly profitable healthcare segment. It invested heavily in software and green energy kit. The company also worked on longstanding compliance issues that had led to one of the largest bribery scandals in German corporate history.

The transformation has paid off lavishly for shareholders. Over the past 20 years, Siemens has created the largest amount of shareholder value among all of Germany’s listed companies, according to a study published last month by the research arm of German asset manager Flossbach von Storch.

Since 2003, Siemens generated €126bn for its investors as its shares tripled and the company paid out billions in dividends and share buybacks. Including its spin-offs Siemens Healthineers, Siemens Energy and Osram Licht, the total shareholder value created rises to €152bn, a stunning 9 per cent of all the value that the 1013 listed German companies created between them over the past 20 years.

Siemens even eclipses software maker SAP, a long-term favourite of the stock market which created €117bn in shareholder value for investors. Even more strikingly, the five most successful German companies since 2003 — Siemens, SAP, Allianz, Mercedes-Benz and Deutsche Telekom — between them accounted for a remarkable 29.8 per cent of all value created.

“The value which was created is concentrated on just a few stocks,” the study’s author Philipp Immenkötter says. Among the 1,013 companies that since 2003 have been traded on a major German stock exchange, only 58 per cent created any value at all over the full 20-year period.

This degree of concentration in returns is not peculiar to Germany, but mirrors findings of similar research for the US published in 2018 in the Journal of Financial Economics, an academic journal.

The result partly owes to the study’s methodology, which focuses on the companies’ absolute amount of capital gains, dividends and share buybacks. This gives large companies a higher weight than smaller ones.

Moreover, the ranking depends on the cut-off dates. Immenkötter started his survey in 2003 at the trough after the bursting of the dotcom bubble, making it easier, for example, for Deutsche Telekom to shine as its prior value destruction is excluded. Between its initial public offering in 1996 and the end of 2002, the stock surged stratospherically before cratering.

The finding that positive stock markets returns are largely driven by a few uber-successful names has implications for investors. On the one hand, the results help to explain why so few asset managers consistently manage to beat their benchmarks. Given that the choice of value-destructive shares is so big, fund managers only need to get their calls on a few of the crucial value-creating stocks wrong to miss out.

One other insight from the study is that shareholders who wanted to make money over the past 20 years would have been advised to stay clear of German financial companies, consistent destroyers of shareholder value.

This is not only because of failures such as real estate lender Hypo Real Estate and Wirecard, but also the struggles of lenders such as Commerzbank and IKB, which only survived the financial crisis due to billions of euros in bailouts from the taxpayer.

Of all 1013 companies that were screened by Flossbach von Storch, Germany’s largest lender Deutsche Bank sits at the bottom of the pile, having destroyed an estimated €25bn in a period that was shaped by billions of losses, heavy fines and painful capital increases. Over the past five years, chief executive Christian Sewing has steadied the ship, and the bank last week reported its highest profit in 15 years. Sewing also reiterated his promise to hand back €8bn in capital to shareholders by 2025. He will be hoping past performance will not be a guide to future performance.

Spread of antibiotic resistance revives interest in bacteria-killing viruses

Experts believe bacteriophages could be crucial extra tool

Bacteria-killing viruses can provide a crucial extra tool in the fight against antibiotic resistance, researchers believe — leading to increased interest in their use, alongside the development of new drugs.

Bacteriophages, or phages, were first discovered and used to treat infection about a century ago. But they were quickly supplanted by antibiotic drugs, which are easier to make and can work against many different bacteria. Estimates of the size of the phage market today range from $42mn to $1.1bn — much smaller than the roughly $43bn market for antibiotics.

However, in recent years, interest in phages has grown as bacteria evolve to become resistant to antibiotic drugs — a development branded a “pandemic” by public health experts and one that caused 1.27mn deaths in 2019.

Bacteria and phages are naturally occurring and in constant competition with each other. Every species of bacteria is continually evolving mechanisms to leave its predator phage redundant — prompting the phage to evolve, in turn, to overcome this resistance.

But the great potential for phages as a treatment lies in the fact that there are usually several for each species of bacterium being targeted, and they are specific to it — leaving beneficial bacteria in the body unharmed. While antibiotics can often destroy many types of bacteria by disrupting one of their internal processes, phages attack a specific species of bacteria and can overcome resistance.

“This means . . . there should always be a way to maintain phage effectiveness, for example by alternating treatments,” explains Jason Clark, chief executive of Fixed Phage, a UK supplier. “You can’t do this with antibiotics.” Phages are particularly effective against biofilms — a common feature of severe antibiotic-resistant infections, especially those acquired in hospitals.

Some bacteria and their phages are easier to find than others. “If it were E.coli, I could pop out to my back garden and find some [in soil or pond water] quite easily,” says Clark. One case in 2016 involved an American man who entered a coma and developed multi-organ failure after antibiotics proved ineffective against an infection he acquired on a cruise holiday. Phages derived from sewage were administered to the man and he recovered.

Research also indicates that phage treatments can be effective in ‘last-resort’ cases where antibiotics have failed. A review of 59 clinical studies, published in The Lancet Infectious Diseases last year, found that, of 1,904 patients with chronic and drug-resistant infections treated with phages, 79 per cent showed improvement. Target bacteria were eradicated in 87 per cent of 1,461 cases. Adverse events were reported in only 7 per cent of patients after phage therapy compared with 15 per cent in the control group, and these were “generally mild and resolved after the phage treatment ended”.

More research is needed, though, according to Martha Clokie, professor of microbiology at the University of Leicester and founding editor of the journal Phage. There have been just four clinical trials using predefined combinations of phages to treat infections, all of which failed, but due to technical reasons.

“One failed because they used the wrong phages; one because the phages weren’t stable; and another because the patients got better and went home so there was non-compliance,” she says. “As we go forward, and more people are interested, and people are doing bigger trials, hopefully, the trial design will be improved.”

There are some further barriers to the use of phage treatments in last-resort cases, adds Josh Jones, director of UK Phage Therapy, a non-profit clinical phage supplier. First, the type of bacteria has to be identified, which can take time. Then, if there is a mixture of bacteria in a patient’s infection, phages that can target all of them will have to be found. Finally, the phages can be neutralised by antibodies developed in a patient during a lengthy course of treatment. “The solution is to use another phage,” Jones says. “So there is a way round that.”

But the most significant barrier to widespread use of phages today is regulatory, as current regulations were designed for static antibiotics. There is also a split within the scientific community as to how regulations should change to support phage therapies.

Some argue for a more personalised approach, with bespoke phages for individual patients. This would require completely new regulations and the design of new trials, and is more suited to chronic and drug-resistant infections than to day-to-day infectious diseases.

Others argue that the best approach is to regulate phages more like traditional antibiotics. This means selecting a range of phages in “cocktails” designed to kill all the strains of a species of bacteria. These can then be mass-produced and used as a direct replacement for certain antibiotics.

Clokie believes a mixture of the two will be tried in future: using cocktails for the majority of patients; then utilising the personalised approach if this fails.

“The regulators are often blamed as the gatekeepers,” says Clokie, “but, actually, nobody has come to them with any suggestions. The regulation is not fixed and will move with the science.”

There are signs that the regulatory approach is changing. US company Adaptive Phage Therapeutics is developing a ‘phage bank’ that could be used for personalised treatment, and its chief executive, Greg Merril, says the US Food and Drug Administration, “has recognised there is a significant problem” with the current rules.

He reports that the US regulator’s unit for biologic medicines, which oversees products such as the seasonal flu vaccine, is evaluating APT’s products. “They are experienced in reviewing a product that evolves over time and are leveraging that experience,” Merrill points out.

In the UK, a parliamentary science committee began investigating the barriers to the development and use of phage therapy late last year. It is examining regulation, research, and funding.

Advocates of phages, whether standardised or bespoke, stress that their greatest advantage is that they are not antibiotics — and they should not be evaluated as such.

“It is very difficult to have to constantly measure against antibiotic therapy and have phage therapy fit directly into the box that antibiotics do,” says Francesca Hodges, a microbiologist at Innovate UK, a government agency that provides support for new products and services.

“They are completely different. The whole point of developing phage-based technology is so that antibiotics still work — it is not to replace them completely, but so that we have something else in the toolkit to use alongside antibiotics.”