Rise of the Machines ??
This week, we talk about the mayhem that unfolded at OpenAI, the world’s biggest AI startup, and at Binance, the world’s biggest cryptocurrency exchange. We also explain why TCS will have to pay millions in damages after losing a US lawsuit and why Go First Airlines may be forced into liquidation.
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Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
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The week gone by saw stuff that could have been straight out of science fiction. Except that it wasn’t. Hollywood director James Cameron started ‘The Terminator’ series of movies four decades ago, with Mr. Universe Arnold Schwarzenegger as a robot-assassin sent back in time, from 2029 to 1984, by an artificially intelligent defence network known as Skynet to kill a woman. In the 2003 sequel, Terminator 3: Rise of the Machines, Schwarzenegger’s character makes a comeback, albeit to save the humanity this time.
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As 2029 comes closer, artificial intelligence is literally taking over the world by storm, or the media headlines at least. So, here’s what happened over the past seven days.
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The board of OpenAI, which came into the limelight a year ago after its chatbot ChatGPT became popular worldwide and turned it into the world’s top AI startup with a valuation of over $80 billion, fired its CEO Sam Altman on Nov. 17. The board didn’t disclose the actual reasons for sacking Altman, but practically accused him of lying to them. Altman’s ouster shocked the tech world and hundreds of OpenAI executives threatened to resign. A couple of days later, Altman joined Microsoft, which has invested billions of dollars in OpenAI. And then, a couple of more days later, Altman returned as the CEO of OpenAI and fired almost everyone on the board that had sacked him in the first place!
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The shakeup wasn’t the first at OpenAI. Tesla CEO Elon Musk, a co-founder of the non-profit, was once its co-chair. In 2020, some OpenAI executives left to start competitor Anthropic, which claims to have a greater focus on AI safety.
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This unusual saga did not end here. A news report by Reuters claimed that the imbroglio at OpenAI began after the company’s researchers wrote to the board of directors, warning about a powerful AI discovery, dubbed Project Q*.
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This breakthrough is about artificial general intelligence, or AGI, which Altman described in a blog earlier this year as “AI systems that are generally smarter than humans”. He also talked about how AGI could help elevate humanity. But he also warned that “AGI would also come with serious risk of misuse, drastic accidents, and societal disruption.”
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Indeed, the quick development of AI technologies has given rise to concerns globally about their potential dangers—creating misinformation, committing frauds and other illegal activities.
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This has prompted the US, the European Union and even India to take steps to regulate AI. The Indian government, for instance, says it will frame regulations to control AI-created deepfakes—videos where the face or body of a person is digitally altered to spread false information—and has even termed these a “new threat to democracy”.
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So, are we all going to be ruled by machines soon? We don’t know that, but what we can promise you is that this newsletter is being written (like literally typed out) by real human beings and not some generative AI tool.
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As for what lies ahead, only God, and Altman, know!
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Crypto crisis
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Altman wasn’t the only CEO in the firing line this week. Changpeng Zhao, the founder CEO of Binance, the world’s largest cryptocurrency exchange, quit after pleading guilty to money laundering violations.
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Binance also agreed to pay $4.3 billion in penalties and forfeitures to settle a case with the US Department of Justice, which said the company helped users bypass sanctions and made it easy for criminals and terrorists to move money.
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“Between August 2017 and April 2022, there were direct transfers of approximately $106 million in bitcoin to Binance.com wallets from Hydra. Hydra was a popular Russian darknet marketplace, frequently utilised by criminals, that facilitated the sale of illegal goods and services,” the department said.
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Binance also enabled nearly $900 million in transactions between US and Iranian users, and facilitated millions of dollars in transactions between users in the US and Syria, and in the Russian-occupied Ukrainian regions.
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In a post on X, formerly Twitter, Zhao said: “I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.”
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Zhao’s guilty plea could deal a body blow of sorts to the crypto industry. The industry has been in the crosshairs of governments and central banks including those in India, which has made it prohibitively expensive for people to trade in cryptocurrencies.
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As we always say, invest wisely and remain cautious of what you are potentially getting into.
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Secret no more
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Meanwhile, India’s biggest IT services company, Tata Consultancy Services (TCS) is set to take a $125 million hit in its third-quarter earnings over a trade secret lawsuit filed nearly a decade back by US-based company Epic Systems. Epic Systems had accused TCS of stealing its intellectual properties to develop its own when it contracted the Tata Group company to implement its healthcare software.
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The US Supreme Court on Nov. 20 rejected TCS’ appeal against a verdict passed by the District Court of Wisconsin, upholding an order that includes $140 million in punitive damages.
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To be sure, it could have been much worse for TCS. In fact, TCS was found guilty by a jury in 2016 and Epic was awarded damages of $940 million initially. After further hearings, a year later, the fine was reduced to $420 million, which included $280 million in punitive damages and $140 million in compensatory damages. The punitive damages were subsequently reduced to $140 million in July 2022 following a TCS appeal.
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Going nowhere
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The Indian civil aviation market is booming. IndiGo, Air India and Akasa are adding hundreds of aircraft to their fleet, and flying to new destinations within and outside the country. However, the Nusli Wadia-promoted Go First may be staring at closure.
领英推荐
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The beleaguered carrier’s lenders are reportedly set to vote on a proposal to liquidate the carrier after it received no proposal for revival by the end of the deadline this week. Naveen Jindal’s Jindal Steel was the only one to make a preliminary inquiry for buying Go First but didn’t eventually bid.
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Media reports say the lenders feel the airline will not find any buyers due to its legal and operational issues, and so are inclined towards liquidation. Go First’s lenders have now extended the resolution timeline by another 90 days, though the extension might not help in securing a deal.
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Go First owes more than Rs 6,500 crore to its creditors. Its plane lessors have already taken it to court, seeking the deregistration of the planes since the leases were terminated before a moratorium was declared on May 10.
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Go First is also entangled in a legal tussle with engine maker Pratt & Whitney. It has accused P&W of providing faulty engines that were not replaced on time. This, the airline says, led to the grounding of half of its fleet.
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An airline shuttering is the last thing India’s aviation industry needs. We certainly hope that it never comes to pass, but if it does, the airline gets a knight in shining armour and that there are no jobs lost.
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IPO updates
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India’s IPO market has been on fire this year, and the trend continued this week with five companies launching their maiden share sales.
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The Rs 3,042-crore IPO of Tata Technologies, the first Tata Group company to go public since TCS in 2004, was subscribed over 69 times by Friday evening, the last date of the issue. Qualified institutional buyers (QIBs) led the bidding, making offers to buy 203 times the number of shares reserved for them.
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The IPO of state-owned Indian Renewable Energy Development Agency (IREDA) was covered almost 39 times. Again, bidding was led by QIBs, which placed orders to buy 104 times their quota.
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The IPO of writing instruments company Flair Writing Industries Ltd was subscribed 47 times while that of Gandhar Oil Refinery (India) Ltd was covered almost 64 times by Friday evening.
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However, Federal Bank’s NBFC arm, Fedbank Financial Services (Fedfina), got weaker response. Its Rs 1,092-crore IPO barely managed bids for double the amount.
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Market Wrap
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Both the Sensex and the Nifty managed to end the week marginally in the green, gaining around 0.2%, but the broader markets remained mostly flat.
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The Nifty Stock s?that gained the most during the week included Hero MotoCorp and Bajaj Auto. Others that rallied were Bharat Petroleum, Dr. Reddy’s Laboratories, Bharti Airtel, Titan, JSW Steel, Reliance, Power Grid Corp of India and HDFC Bank. Hindalco, NTPC, Tata Steel, and Hindustan Unilever were some other counters in the green.
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The Nifty stocks that ended in the red included ONGC, Bajaj Finance, State Bank of India, Adani Ports, Cipla and Coal India. Other losers included Axis Bank, Kotak Mahindra Bank, ICICI Bank and IndusInd Bank.
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Other headlines
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That’s all for this week. Until next week, happy investing!
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