While the U.S. and China vie for A.I. dominance, a Japanese investor—Softbank’s irrepressible Masayoshi Son—is taking the lead in the race to fund it. Son announced he is raising $108 billion for his second Vision Fund, and investors include Apple, Microsoft, Foxconn, and Standard Chartered. Missing from that list—at least so far—is Goldman Sachs, although the company’s involvement was reported earlier by the Wall Street Journal.
Japan itself is not much of a player in the A.I. sweepstakes. Son said recently his home base is an “underdeveloped country in A.I.,” lagging behind China, India and others in Southeast Asia. “It is in a pretty bad situation, so Japan needs to awaken.”
Son’s first Vision Fund of $100 million took some heat because of Saudi Arabia’s role as lead investor. (The Saudis were absent from yesterday’s announcement.). But the first Vision Fund also showed impressive returns and made investments in the likes of Uber, WeWork, Didi and Grab. The usually smart folks at Reuters’ Breaking Views called the new fund “broader, fuzzier” than the original, but I would beg to differ. We know A.I. has the potential to transform almost every industry over the next decade or two, and that’s going to drive a wave of new companies devoted to that industrial transformation. Son’s boldness has put him in a prime position to profit from the trend.
A separate question is why companies like Apple and Microsoft feel so compelled to latch themselves to Son’s wagon. Probably a corporate version of FOMO. My colleague Polina Marinova wrote in Term Sheet yesterday that “an investment is what it costs to gain access to an ecosystem of high-flying companies you can do business with.” But, she added, “what do you do when only SoftBank holds the key?”
More news below.
Renault Feels the Pain
More pain in the auto industry, as Renault cut its sales targets for the year, after net income and operating profit fell in the second-quarter. That’s a drop the company blamed on falling sales, the decline of diesel, and the weak performance from Nissan: yesterday that company said it would begin layoffs as it struggles with poor growth. Amid economic strains, scandal also hasn’t helped, after joint chairman Carlos Ghosn was arrested last November. FT
Australia Gets a Tech Office
Australia announced on Friday that it would develop the first dedicated government unit designed for policing Facebook and Google. The office would be a special branch of the Australian Competition and Consumer Commission, an antitrust office, and would look at the company’s use of algorithms for advertising. That came as one part of a sweeping report that also recommended stronger privacy laws and protection for news media. Reuters
Alphabet Relies on its Roots
Google’s parent company announced better than expected results on Thursday, with the stock surging 9% after hours, and its real strength was its core business: its internet search engine. That continued to be a reliable money-maker, even as the company has remained vague on the profitability of some of its other units, including its cloud business, and hardware. WSJ
Amazon Squeezed On Faster Delivery
Amazon said it spent more than $800 million to increase next-day shipping, the company said in its results on Thursday, news didn’t sit entirely comfortably with analysts, after the company also projected operating income short of expectations. Overall profits were still rising, but the second-quarter did end the company’s streak of record profits over the last four quarters. WSJ
AROUND THE WATER COOLER
Jeffrey Epstein and Victoria’s Secret
The New York Times has this story about Epstein’s links to Leslie H. Wexner, the billionaire behind L Brands, the parent company of Victoria’s Secret, among others. Epstein allegedly used the link to the lingerie brand to lure young models and actresses, the Times reports, while also deepening his ties to Wexner to the point where, as his financial manager, he appeared to take control of Wexner’s personal finances, while his own wealth mounted. New York Times
Apple and Intel
After Intel sold the remainder of its smartphone wireless modem business to Apple on Thursday for $1 billion, Fortune’s Aaron Pressman tallied the winners and losers. Apple gets a long-term win, he writes, as the deal amplifies its ability to develop its own modem technology by taking over Intel’s intellectual property in the area, as well as employees. That should eventually challenge Qualcomm—though likely not for a few years. Fortune
How OpenAI Got Into Bed With Microsoft
Fortune‘s Jeremy Kahn has this story on the ideology behind OpenAI, originally a non-profit: to develop A.I. “the way that is most likely to benefit humanity as a whole, unconstrained by a need to generate financial return.” But the company has now accepted a $1 billion investment from Microsoft. Will OpenAI still achieve what it set out to? Fortune
Juul Goes to China
One of the top scientists behind Juul—the USB-shaped e-cigarette that has exploded in popularity in the U.S.—is bringing a similar device to China. Critics say that, rather than help smokers quit, the flavored devices have hooked a new wave of consumers on nicotine, especially teenagers, and it’s under fire in the U.S. But Chenyue Xing says her, Myst Labs, offers devices with lower nicotine content and flavors that appeal to current smokers, not new ones. Bloomberg