They’re here…

First the ads came to search, then they came to social media, then they came to Netflix. And now (as discussed in today’s first news item), they’re coming to ChatGPT. 

Thirty years on, the internet just can’t seem to quit its advertising dependency. Even AI, for all its magic, can’t generate a different business model.

More news below.

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ChatGPT gets its ads on

OpenAI CEO of applications Fidji Simo said Friday that ads will begin appearing at the bottom of ChatGPT’s answers for users of the free product and for Go subscribers (who pay $8 a month) in the U.S., opening an important new source of revenue for the high-flying startup which has been valued by investors at $500 billion.

The ads, which will begin appearing in the coming weeks, will be clearly labeled, and users’ conversations with ChatGPT will be kept private, Simo wrote in a blog post. 

OpenAI emphasized that subscriptions remain its long-term priority, and said that the $20 per month Plus and $200 per month Pro subscriptions, as well as the Business Enterprise version of the product, will remain ad-free. Still, the introduction of ads to ChatGPT is a moment many saw as inevitable: running frontier AI models is brutally expensive, burning through staggering amounts of computing power, electricity, and GPUs. 

OpenAI expects to generate “low billions” of dollars in revenue this year, and more each year thereafter, the FT reported on Friday citing an unnamed person “close to the company.”—Sharon Goldman

AI acqui-hire deals to get FTC scrutiny

U.S. regulators are taking a look at the creative hiring practices prevalent in the AI business, specifically the so-called acquihires made in recent years by Microsoft, Google, Nvidia, and Meta among others.

The deals have allowed the Big Tech players to on-board a startup’s team of AI experts without actually acquiring the startup. To wit: Meta’s $14.3 billion deal to nab Scale AI's founder and 49% of the company, and Microsoft’s 2024 licensing deal with Inflection AI that brought cofounder Mustafa Suleyman and his team to Microsoft. 

Critics of the practice have long said the deals were a means of sidestepping antitrust scrutiny, since there is technically no acquisition for regulators to review. And on Friday, FTC Chairman Andrew Ferguson told Bloomberg Television that the agency was “beginning to examine these acqui-hires to make sure they are not an attempt to get around” the rules. 

Ferguson reportedly then went on to blame the Biden administration for overly aggressive antitrust enforcement, which he suggested had caused the companies to resort to the workarounds (It’s a curious logic, since the point of the current FTC review is, presumably, to be more aggressive about ensuring compliance with the rules.)

Could the FTC try to unwind some of these acquihire deals and essentially force the companies to fire their prized AI talent? This is one to watch in the coming months.—AO

A Boring Co tunnel to Tesla's Gigafactory?

Elon Musk’s tunneling startup Boring Company is working with a Nevada state-affiliated group to study a tunnel project that would go under the nine-mile stretch of highway from Reno to Tesla’s Gigafactory, according to documents reviewed by Fortune.

The prospect of the tunnel is still very conceptual and one of many options being explored to alleviate the steep rise in traffic and accidents along Interstate 80 as more companies and data centers move into the 107,000-acre Industrial Center east of Reno and Sparks, Nev.

The two largest companies in the center—Tesla, which Musk leads as CEO, and Panasonic—have been in contact with the Nevada Governor’s Office about potential solutions. Tesla and Panasonic have sponsored a study for a commuter rail system and have also provided funding to the Economic Development Authority of Western Nevada, which is working with Boring Co on conceptual designs and a feasibility report for a tunnel.

A Reno tunnel would represent a major expansion of the Boring Company's transportation tunnels (a 4-mile stretch underneath the Las Vegas Convention Center is currently the only operational tunnel) and represent a physical connection between two major Elon Musk businesses. It’s not clear if the report has been completed yet. —Jessica Mathews

More tech

—OpenAI's mystery AI gadget is still on track for a second-half 2026 launch.

—Google's latest Gemini model is seeing a surge of API calls from developers.

—iPhone reclaims top spot in China. Local handset makers are getting pinched by high memory prices.

—Microsoft's Xbox Cloud Gaming service may get an ad tier. Like we said, the internet biz loves ads.

—Palmer Luckey has thoughts on Meta's big VR layoffs: "A good thing for the long term health of the industry."