Chris Campbell:

Why Nvidia Defends Chinese AI

Last week a Beijing startup called Moonshot released Kimi K3 – 2.8 trillion parameters, the largest open model ever built, benchmarking near the American frontier at a quarter of the price.

On July 27, Moonshot published the whole thing, free. Anyone can download Kimi K3 and run it on their own machines with the door shut and the internet unplugged. Washington is deciding whether to ban it.

Nvidia CEO Jensen Huang then said the unthinkable: American companies should use Chinese models. He called them excellent.

Nvidia has its reasons to use cheap Chinese AI. Its biggest customers are also its biggest threat. Google, Amazon, Microsoft, Meta and OpenAI buy so many chips that it's become cheaper to design their own. All five are doing it.

Think of Nvidia as a landlord. Five giant tenants rich enough to build their own house are a problem. But 50,000 small tenants who never could are an annuity.

Free models create small tenants. When a hospital or a bank or a 12-person firm can download an excellent Chinese model for nothing, they can finally afford to run AI. And none of them will ever design a chip like Nvidia's biggest customers.

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Ari Goldschmidt:

Tesla Stock in Freefall After Disastrous Earnings Report

Shares of Elon Musk’s embattled carmaker Tesla slid over 13% Thursday morning after posting dismal second quarter results the night before.

The stock is hovering at around $324 at the time of writing, down over 15% over the last five days and about 28% year to date.

The company missed Wall Street expectations, despite its core automotive segment generating just over $20 billion in revenue, up 23% from a year ago. However, the company’s gross profits dropped as operating expenses climbed far quicker than revenue, in large part thanks to AI-related capital expenses and other research and development.

In other words, investors are growing increasingly wary of Musk’s reinvention of his car business. The almost-trillionaire is trying to shift the company’s focus from selling cars to robotaxis, a humanoid robot called Optimus, and AI – a series of major undertakings that's clearly weighing it down financially after multiple quarters of major losses.

Worse yet, Tesla’s woes are clearly having knock-on effects on his rocket company as well. SpaceX’s stock has had a bruising month since hitting an all-time high after going public in mid-June. An aborted Starship test launch and Musk’s dubious plan for orbital data centers have investors betting against the company in incredible numbers.

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Enrique Abeyta:

Google Justifies Its Massive AI Spending With a Booming Cloud Business

Alphabet investors have worried that the company’s massive AI spending isn’t worth the money. With the company’s latest earnings report, those investors should be able to relax a little.

Google’s cloud business is booming. The search giant saw Google Cloud revenue spike 82% from where it was this time last year, climbing to $24.8 billion. That’s well above last quarter’s generous year-over-year growth, which showed a revenue jump of 63% to $20 billion – and it handily beats what Wall Street analysts expected for this quarter’s growth (the expectation was $22.46 billion).

Those cloud gains were driven largely by enterprise AI solutions and enterprise AI infrastructure adoption, while Google's backlog of cloud contracting work had climbed to $514 billion.

The company’s profit hit $112.1 billion, which is a massive jump from this time last year, when the company reported $28.1 billion in profit. Meanwhile, Alphabet’s overall revenue grew 24% year-over-year during the past quarter to $119.8 billion. The company also saw Google Services revenue jump 15% to $94.5 billion.

“Our AI investments are redefining what’s possible across every part of our business,” said Google CEO Sundar Pichai during Wednesday’s earnings call. “We have exciting momentum across the board.”

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