Good morning. Wild news in the Financial Times this morning, which reports that China has substantially increased energy subsidies for some of its largest data centers in a bid to bolster its position in the global AI race.
The move could “cut energy bills by up to half”—a meaningful step for companies like Alibaba, ByteDance, and Tencent as electricity costs rise from use of home-grown chips made by Huawei and Cambricon, which are less efficient than those made by California’s Nvidia.
(And no, data centers using foreign chips aren’t eligible for the discounts.)
The U.S. is certainly doing its part to help its own companies compete with China. Various states have given Big Tech tax breaks to build new data centers, and facility operators have lobbied the Trump administration to keep Biden-era clean energy tax credits—rather than hasten their demise—in a bid to stay globally competitive.
Are big, beautiful, AI-enabling energy subsidies on tap in the U.S.? We’ll see. Today’s tech news below. —Andrew Nusca
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OpenAI and AWS do a $38 billion cloud computing deal
Tired: Another day, another new AI model.
Wired: Another day, another new AI compute deal.
OpenAI and Amazon announced Monday that the former will pay the latter $38 billion over seven years for computing capacity to fuel its AI dreams.
OpenAI says it will train new AI models and process ChatGPT queries using Amazon facilities.
(Sound familiar? OpenAI recently struck much larger—add a digit—cloud deals with Microsoft and Oracle.)
Amazon says its Web Services unit should be able to supply everything OpenAI needs by the end of next year. The larger company’s shares rose 5% on the news.
As I wrote in Friday’s edition of this newsletter, AWS represents less than one-fifth of Amazon’s total revenue but feels like 99% of where investors see the company’s growth opportunity.
It’s already the largest cloud computing provider on the planet (with about a third of the market), but the race to capture new business from AI customers couldn’t be more competitive, pitting Amazon against perennial rivals Microsoft, Google, and others.
Speaking of competition: One of Amazon’s major projects is a multibillion-dollar cloud computing campus for Anthropic, the Puma to OpenAI’s Adidas.
Awkward? Not in the interconnected world that is this AI boom. —AN
Palantir posts ‘the best results any software company has ever delivered’
Palantir delivered blockbuster third-quarter earnings on Monday that topped analyst estimates and sent CEO Alex Karp’s trademark ebullience into overdrive.
“These numbers validate we were right. Please learn from us. That’s what these numbers mean,” Karp told Fortune.
He was bolder still on the company’s subsequent earnings call. “These are not normal results. These are not even strong results. These aren’t extraordinary results,” Karp said. “These are arguably the best results that any software company has ever delivered.”
Palantir posted third-quarter revenue of roughly $1.2 billion, up 63% from the year-ago period and above the average analyst expectation of $1.09 billion.
The company’s $476 million in net income was up 40% year-over-year.
While Palantir’s government contracts business remains strong, business from U.S. commercial customers drove the company’s growth in the third quarter, expanding by 121% year-over-year to $397 million.
Palantir’s revenue figures are still quite small compared to peers of similar market capitalization. And the company’s rich valuation has stoked skepticism among some investors worried about an AI bubble.
Regulatory filings from Monday reveal that Michael Burry, the esteemed short seller known for his big bet against the subprime mortgage market in 2008, has taken out a short position in both Palantir and Nvidia. (The companies recently struck a partnership.)
In a letter to investors, Karp didn’t seem bothered: “Some of our detractors have been left in a kind of deranged and self-destructive befuddlement.” —Jessica Mathews
France threatens to ban Shein over sex doll snafu
Oh là là.
The China-founded retailer Shein announced Monday that it has imposed a “total ban” on sex dolls for sale on its sites after French authorities threatened to block the company from the market.
What happened, you ask? It all started when the Paris prosecutor’s office revealed that it had opened an investigation against Shein and other retailers over the sale of sex dolls, particularly “childlike” products that appeared in their marketplaces.
“These horrible items are illegal,” French finance minister Roland Lescure told a local media outlet, adding that he’d move to kick the company out of France if the items weren’t immediately eradicated.
Shein—a global fast-fashion juggernaut headquartered in Singapore—was mere days away from opening its first physical store in Paris, inside the BHV Marais department store, when the news hit.
Pas bon.
Shein said it deleted all existing listings and images linked to such products worldwide in addition to imposing the ban. The retailer also said it launched an internal inquiry and established a dedicated quality assurance team to sort things out.
But it’s a tough misstep for a company that has weathered endless criticism and fines for its origins (Chinese), products (environmentally unsound), marketing (misleading), and labor practices (grueling).
“These [products] came from third-party vendors,” Shein's chief executive, Donald Tang, reportedly said, “but I take personal responsibility.” —AN
More tech
—Microsoft, IREN sign a $9.7B deal for AI compute.
—MongoDB CEO steps down. Dev Ittycheria will be replaced by Cloudflare vet Chirantan Desai.
—Trump on Binance’s Changpeng “CZ” Zhao, whom he pardoned: “I don’t know who he is.”
—Apple rolls out “tinted” liquid glass option for all of its operating systems.
—Deel names CFO. Former Credit Karma CEO Joe Kauffman becomes the IPO-bound startup’s finance chief.
—Xanadu will go public via SPAC. The dual Canada-U.S. plan values the combined quantum computing business at ~$3.6B.
—CODA’s Sora 2 objection. The Japanese trade association, which represents Studio Ghibli and Square Enix, demands that OpenAI stop using members’ copyrighted content.
