TOP STORY
🤖 Elon Musk Sues OpenAI in Battle for AI's Ethical Future

Elon is back in the press with another legal battle, hot off the heels of last month when a Delaware judge tossed out Elon’s ‘unfathomable’ $56B Tesla pay package after a shareholder lawsuit.

This time, Elon is the one doing the suing, with OpenAI and Sam Altman in the crosshairs.

Here are the cliff notes of the drama:

• 🌎 Elon claims OpenAI has strayed from its founding mission of ‘prioritizing humanity’s welfare over profits’ and has become a ‘de facto subsidiary’ of Microsoft

• 📝 The lawsuit centers on a breach of contract claim, stating Open AI breached its foundational agreement, but no such explicit agreement exists

• 🪧 Elon demands the public release of all research developed by OpenAI

Certainly a lot to unpack… let’s dive in.

🤨 OpenAI’s Bizarre Corporate Structure

First off, let’s talk about what the heck is going on with OpenAI’s corporate structure - aka how can Elon sue OpenAI for prioritizing profits? Isn’t that what companies are supposed to do?

Well yes, but OpenAI isn’t actually a ‘for-profit’ company… technically. It’s a bit more complicated. Here’s OpenAI’s corporate structure:

Yup, it’s a confusing mess. Essentially when OpenAI was founded by Sam Altman, Elon Musk, Ilya Sutskever and Greg Brockman in 2015, it was set up as a non-profit.

🤑 A transition to for-profit

In 2019 (after Elon left), OpenAI transitioned to a ‘capped-profit’ model to increase its ability to raise capital and attract top talent. To do this, OpenAI came up with a unique structure where the non-profit board would control a for-profit entity, with a capped upside of 100x.

🤔 Microsoft doesn’t own any Open AI?

As a result, Microsoft was able to invest $1B, and later another $10B in January 2020. However, due to the unique corporate structure, Microsoft “does not own any portion of OpenAI” and instead is just entitled to a share of profit distributions.

If all this sounds strange, it’s cause it is, with Harvard calling it a ‘failed experiment in governance’.

💼 Unpacking the Lawsuit

Elon’s lawsuit hinges on the claim that OpenAI breached a foundational agreement, which included commitments to developing artificial general intelligence (AGI) to distribute freely, create open-source software, and transparently communicate its model operations to the public.

While no formal ‘Founding Agreement’ exists, the lawsuit references:

• 📩 An email from Altman to Musk in June 2015 outlining a vision for creating AI, suggesting a small founding team, a governance board including Musk and Altman, and discussions on open-sourcing work.

• ✒️ The December 2015 certificate of incorporation for OpenAI Inc., which describes its mission as funding research and development in AI for public benefit, explicitly stating that it was not organized for private gain.

👏 OpenAI Claps Back

OpenAI “categorically disagrees” with the lawsuit suggesting that Elon ‘has regrets’.

Altman also delivered a back-handed compliment, calling Musk a hero of his and said he “misses the person he knew who competed with others by building better technology.”

🥊 Who will win the match?

While it’s still too early to determine, experts have doubts that Elon will win the lawsuit, as “in order to prove that this is a breach, Musk must show that GPT-4 is artificial general intelligence.”

Even so, the lawsuit could potentially harm OpenAI even if it fails, diverting resources and tarnishing its reputation among customers and employees.

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ECONOMY
💰 Buffet is Sitting on a Pile of $168B in Cash

Berkshire Hathaway is hoarding cash, reporting a record-high cash reserve of $168 billion in its annual report. That’s a $60 billion increase in just 15 months.

Berkshire’s total stock portfolio is now $369.4B, with the following top 5 positions:

• 🍎 44% in Apple

• 🏦 9.6% in Bank of America

• 💳 9% in American Express

• 🥤 6.4% in Coca Cola

• ⛽️ 5.2% in Chevron

With $168B in cash, and a $162.7B stake in Apple, this increase makes Buffet’s pile of cash his #1 holding!

💵 Holding Tight to T-Bills

Most of this cash (79%) is held in Tresury bills generating yields between 5% to 5.4%, earning Buffet ~$7B per year.

In the past, Buffett has called Treasury bills his "default" choice for the company's cash when investment opportunities are scarce, due to their liquidity and safety.

However, Buffett also acknowledges the long-term risk of T-Bills when the yield falls below inflation.

🤑 Repurchasing Shares

Another way Buffet has used cash in the past is repurchasing Berkshire shares. In 2023, Berkshire spent $9.2 billion on buybacks, enhancing shareholder value by reducing the number of outstanding shares.

🚨 A Warning Sign?

According to some experts, this cash pile is a warning sign of a potential stock market decline and looming recession.

However, it’s important to note:

• 🌪️ As an insurance company, Berkshire needs to keep a large cash reserve in case of a catastrophic event. Buffet has stated Berkshire will never hold less than $30B cash.

• 📈 Berkshire’s operating earnings soared to $37.4B in 2023, a 21% increase from the previous year, driving a large boost to the cash balance.

• 😣 With a $900B market cap, it’s difficult for Buffet to find investments that will really move the needle.

Buffet also calls out that the cash hoarding will “likely prove to be unneeded behavior”.

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STOCK SWINGS
📈 Beyond Meat Jumps over 40% after Q4 Earnings

This week, Beyond Meat saw dramatic fluctuations in its stock price after releasing Q4 reports:

• ❌ Earnings per share: -$2.40 per share (vs -$0.89 per share expected)

• ✅ Revenue: $73.7M (a ~8% decline, but beating analyst expectations by 2%)

📈 A Sudden Stock Surge

On Tuesday, Beyond Meat’s stock catapulted up over 80% before falling back down and ending the week up ~25.6%.

The stock jump was driven by comments from the CEO of a 2024 plan to steeply cut costs.

While Beyond Meat’s 2024 revenue guidance for 2024 suggests little growth, gross margin is expected in the mid to high teens, compared to the negative 24% in 2023 after cutting operating expenses by ~25%.

😣 Challenges Remain

Despite the jump, many analysts still point to concerns over revenue growth and intense competition in the plant-based meat sector.

Beyond Meat is also heavily shorted, with shorts interest accounting for 38% of the stock’s total float - this was also likely a driver of the large stock swings.

FROM THE BLOSSOM COMMUNITY
🎙️ Top Discussions this Week

🗞️ What else you might’ve missed:

• 🚗 Carvana ($CVNA) surges 40% after first annual profit

• 🛒 Walmart ($WMT) gearing up for 3-for-1 stock split

• 🤖 Google ($GOOGL) debuts Gemini for Business as tech firms seek to monetize AI investments

• 🍎 Apple ($AAPL) boosting iMessage security to protect against future quantum computing attacks

• 🛻 Ford ($F) Stops Shipping Electric F-150 Pickup Due to Quality Issue