DOJ Weighs Breaking Up Google | Bloomberg Technology

Google Antitrust Lawsuit

• The US Department of Justice (DOJ) is considering a historic breakup of Google due to its monopolistic dominance of online search, with Alphabet shares down 1.6% as a result (1m5s).
• The DOJ has laid out a framework of various things it is thinking about as it crafts a remedy proposal, with a big option being the breakup of Google (1m30s).
• The DOJ will have an official proposal on November 20, outlining everything it wants Google to do, with Google getting a chance to respond (1m37s).
• The timeline for the case includes the DOJ putting in its filing, Google responding, and a two-week remedy trial in late April 2025, with a decision expected in August 2025 (2m7s).
• The judge has promised to issue a decision in August 2025, which will officially wrap up the case at the trial court, and Google can then start its appeal, which is expected to take 18 months to two years (2m45s).
• Google is pushing back on the breakup idea, saying it is a radical idea and that the DOJ should only be looking at specific contracts, not breaking up the company (3m29s).
• The DOJ is also concerned about Google's use of data to build its search results and AI products, and wants to put limits on the company's ability to benefit from its alleged illegal activities in the search and AI market (4m5s).
• Google is arguing that search and AI are different fields, and that the DOJ's concerns about AI are not relevant to the case (4m28s).
• The issue of AI and its relation to the case will be a big issue for the judge to decide next year (4m31s).
• Alphabet's stock is down due to antitrust issues, with the stock experiencing its biggest move since October 7, but it does not feel like many people are pricing in a breakup to this extent (5m38s).
• Antitrust issues make for eye-catching headlines, but they are a long timeline and there are many ifs to speculate on, so it's not recommended to change investment approaches based on this (5m54s).

Investment Strategies Amidst Antitrust Concerns

• To prepare for a hypothetical breakup, investors should ensure that their portfolios are not overweighted in any individual security, where the worst-case scenario could have a reparable consequence on their financial future (6m52s).
• A holistic and disciplined approach to investment is recommended, focusing on making sure positions are not overweighted or underweighted, rather than trying to position for a specific outcome (7m20s).
• Most main cap tech names have some form of antitrust scrutiny in multiple jurisdictions, but if investors are diversified, it's not a cause for much anxiety (7m51s).
• The worst-case scenario is a shifting leadership within the specialized technology sector, but generally, antitrust headlines do not result in material movement within the markets or sectors (8m10s).
• The anxiety for the market is more focused on the possibility of AI revenue, with recent strong numbers from TMC being a good sign (8m44s).
• Valuations of micro-caps are stretched, and it's tough to see these levels going materially higher without breakouts, but it's essential to look under the hood of the portfolio and ensure it's not overweighted in any individual names (9m9s).
• The current macro picture has led to an overweight in the technology sector due to high valuations, making it challenging to rebalance portfolios, especially with rising interest rates (9m56s).
• To rebalance, investors may consider other sectors such as retail and utilities, which were previously undervalued and still have room for growth (10m39s).
• The healthcare sector is also attractive due to its underperformance and potential for mean reversion, which could be further boosted by a decline in interest rates and an increase in mergers and acquisitions (10m52s).
• Lower interest rates could lead to a more active mergers and acquisitions market, benefiting the healthcare sector, particularly biotech (11m4s).
• Nuclear energy is not currently a sector of particular interest, despite its potential to power AI infrastructure investments (11m23s).

AI and the Nobel Prize

• Two Google DeepMind scientists have been awarded the 2024 Nobel Prize in Chemistry, along with US professors, for their breakthrough research on proteins developed through AI (12m29s).
• The Nobel Prize winners' research focused on using AI for science, specifically the AlphaFold project, which has been overshadowed by generative AI but has the potential for commercialization and application in drug discovery (13m36s).
• Jeffrey Hinton, who won the Nobel Prize in Physics for his work on neural nets, acknowledged the contributions of his students, including Sam Altman, and expressed pride in their achievements (14m42s).
• Jeff Hinton, a respected scientist, left Google and warned about the dangers and risks of AI, highlighting the tension between scientists and executives at the company (15m13s).
• Sam Altman's OpenAI is being accused by Elon Musk of harassment as the startup plans to shift to a full-profit business model, with Musk claiming he was manipulated into investing in the initially nonprofit startup (16m4s).
• OpenAI is now accusing Elon Musk of harassment, saying he is using legal warfare to hurt them and benefit his own company, and have asked a judge to throw out the lawsuit (16m50s).
• Elon Musk's end goal in the suits against OpenAI is unclear, but he claims to have been deceived and manipulated into investing in the company, which has shifted from its founding mission of benefiting human good to a for-profit model (17m37s).

OpenAI and Elon Musk Dispute

• OpenAI is building a team in Singapore to support demand for its AI offerings in Asia, with the office set to open by the end of the year and serve as the hub for the region (18m42s).
• OpenAI has also announced plans for a new office in Manhattan, following the expansion of its operations (18m49s).

AI Investment Opportunities

• Turing Capital's Priya Saiprasad discusses how to identify the best industries for AI investment, noting that AI is having an impact across various sectors, including software, hardware, industrial, EV, robotics, and healthcare (19m37s).
• Saiprasad highlights the challenge of identifying genuine AI opportunities amidst the trend of companies labeling themselves as "AI-adjacent" (19m54s).
• A thesis is to partner with entrepreneurs who are building AI-enabled and AI-adjacent software that solves real-world problems and enhances productivity across different industries (20m12s).
• Industries that are general laggards in the initial wave of digital transformation, still relying on pen, paper, and Excel, are seen as opportunities for the most advancement and are considered low-hanging fruit that AI can initially tackle (20m30s).
• A framework is used to determine whether a particular vertical or industry is ripe for AI transformation, looking for a large total addressable market, an actual pain point, and relatively old-school industries that are forced to deal with the tailwinds from AI adoption (21m5s).
• The best opportunities in AI often seem niche to the industry outsider but are life-changing to the end-user, as seen in investments in companies like Numa, an AI communication platform for service professionals at car dealerships (21m52s).
• Investments are typically made in Series B companies with early inflection growth points, having $3 to $10 million in revenues, and around 15-20 employees (22m34s).

Further Developments and Outlook

• A preliminary proposal for the DOJ to propose the breakup of Google is being considered, with the process expected to play out over several months (23m31s).
• Elon Musk is expected to discuss the pathway to be used for a semi-truck at the We Robot conference, generating interest in the future of semi-trucks (23m46s).
• The Global Macro Conference is underway in New York, with discussions on the increased adoption of AI as productivity tools internally, and the need for further clarity on regulation and legal perspectives (24m23s).
• The Department of Justice is considering breaking up Google, and the acceptable outcome will be determined by the end-user experience (25m7s).
• Financial services companies are becoming more open to working with third-party AI providers due to reduced liability and risks (25m18s).
• Citadel Securities partners with top AI providers, including OpenAI, to stay on the cutting-edge of technology and examine new possibilities (25m35s).
• Working with OpenAI enables Citadel Securities to automate high-value workloads, such as debugging and code reviews, which previously consumed a large amount of resources (26m27s).
• The automation of these workloads has led to a 20% increase in productivity, equivalent to hiring six national math empirical analysts (27m46s).
• The increased productivity has improved Citadel Securities' performance as a company, but it's unclear if this will lead to an initial public offering (IPO) (28m6s).
• The company is not seriously considering an IPO at this time, but if they do, it will be announced through Bloomberg (28m22s).
• The use of generative AI and automation is crucial for companies to stay competitive, and those that fail to adapt will lose (28m55s).
• Citadel Securities believes that understanding the market and solving valuable problems for clients is key to success, and they are building better tools to achieve this (29m47s).

Other Legal and Business News

• The company acknowledges that better tools are not enough and that human expertise is still necessary to solve complex problems (30m11s).
• A Delaware judge has ordered X (formerly Twitter) to release old data from 2022 on fake users that Elon Musk tried to use to back out of the deal to buy Twitter, along with several documents and Slack messages (30m35s).
• Shares of TSMC have risen after a quarterly revenue increase, reporting September quarter sales of $23.6 billion and alleviating analyst concerns that AI spending is tapering off (30m52s).
• The CEO of NVIDIA says the future of AI will be in services that can reason, with next-generation tools able to respond to queries by searching and reflecting on their own conclusions, but notes that this requires the cost of computing to come down first (31m7s).
• TikTok has been sued by over a dozen states for allegedly deceiving users about its safety for children and using addictive features to keep users on the platform longer (31m58s).
• The Attorney General of New Jersey explains that the lawsuit against TikTok is different from the federal lawsuit, as it is a violation of state consumer laws for misleading the public about the safety of their products and deliberately treating young residents as commodities (33m2s).
• The lawsuit against TikTok is also distinct from the lawsuit filed against Meta, the parent company of Instagram and Facebook, in October of last year, which was also aimed at protecting children's mental health (33m22s).
• The Attorney General notes that social media companies like Meta and TikTok have targeted youth, deliberately taken steps to keep them on their platforms, and implemented features that cause real harm to kids' mental health (33m49s).
• The Attorney General explains that the point of the lawsuit is to hold TikTok accountable for deliberately misleading the public about the safety of their products, which is different from the federal lawsuit (35m22s).
• The US Surgeon General has stated that TikTok should have a warning label due to its potential to cause significant mental health harm to children, particularly those who use the app for hours a day (35m34s).
• As the State's Attorney General, it is their job to keep 9.3 million people safe, and they feel obligated to step in and protect them from companies like TikTok that prioritize profits over mental health (35m51s).
• The Attorney General is confident in the case they have brought against TikTok, citing the company's knowledge of the harms caused by their products and the resulting compulsive users, particularly among youth aged 13-17 (36m40s).
• The Attorney General believes that TikTok is intentionally profiting off young users, contributing to a spike in mental health challenges, including suicidal ideation and depression (37m0s).

Klarna Board Ouster

• A member of the board of directors of European fintech giant Klarna was ousted after challenging governance decisions, including a bonus plan that could hand the CEO up to $35 billion in the coming years (37m39s).

AetherFlux: Space-Based Solar Power

• A new company, AetherFlux, aims to harness solar energy using lasers and low-Earth orbit satellites to deliver renewable power globally (38m30s).
• AetherFlux's technology collects solar power in orbit and beams it down to locations virtually globally, addressing limitations of energy intermitency (39m7s).
• AetherFlux's CEO, Baiju Bhatt, has a background in physics and a family tie to NASA, and he co-founded the company to bring space technologies to people on Earth (39m31s).
• Bhatt's passion for the space industry and commercial opportunities in space led him to explore how to bring national resources from space down to Earth (40m1s).
• A company is working on a project to beam power from space to Earth using a constellation of satellites in low-Earth orbit, each collecting power and using infrared lasers to transmit it to a ground station (40m23s).
• The process involves collecting power with solar panels on the satellites and then transmitting it to a ground station that forms a connection with the satellite (40m46s).
• The company is financially backed by Bajiu Bhatt, who was previously the co-CEO of a successful startup, and is currently funded by him, but will require more capital to build a large number of satellites (41m16s).
• The company is looking to solve real-world problems, such as delivering power to contested or difficult-to-reach areas, including military applications and remote mining operations (41m41s).
• The project is viewed as primarily an engineering and economics problem, rather than a hard science problem, and aims to use existing technologies to create something that can happen today (42m7s).
• The company is in talks with SpaceX as a potential launch provider and is targeting a launch of its first mission, which will aim to demonstrate the capability, in Q4 of next year (42m39s).