You’d think Sam Altman was running for mayor of Silicon Valley the way he’s stumping for support. 

Apple is expected to announce a partnership with OpenAI on Monday, integrating its generative AI product into Apple’s hardware. That’s as big a coup as OpenAI could hope for, but it’s just one node in a sprawling network of enterprise tie-ups OpenAI has made. Adding as many allies as possible is probably helpful in the face of mounting regulator unease. 

With Friends Like These…

Apple isn’t just good for its delicious licensing check. It also gives OpenAI access to the universe of iPhone users, especially those who haven’t played around with Chat-GPT yet. History suggests it’s a winning strategy, as Google’s placement on iPhones allowed it to rise to dominance once people started using the internet on their phones — in fact, the Department of Justice thinks that deal was so powerful it constituted a breach of antitrust law.

But OpenAI’s biggest alliances show it’s also hunting for big enterprise customers and warding off unfriendly entities:

• The consulting sector was one of OpenAI’s earliest adopters, and PwC announced last month it would become the biggest customer for OpenAI’s enterprise product as well as its first reseller, furnishing roughly 101,000 employees with the software.
• OpenAI has now struck content-licensing deals with a bushel of publishers, who might otherwise feel upset the company has (potentially) trained its chatbots on the blood, sweat, and print of their journalists.

OpenAI has added legacy publishers including the Financial Times and News Corp, the owner of The Wall Street Journal and The New York Post. These carry more weight than digital upstart allies like Axel Springer (owner of Business Insider and Politico) and Vox, while OpenAI has The New York Times and The Intercept suing it for copyright infringement. 

Social Media Angst: OpenAI’s least conventional content deal is with Reddit, which just about qualifies as social media. Reddit’s thousands of discussion forums known as subreddits, and all its user posts are now fodder for Chat-GPT training data. The deal isn’t exclusive, Google also inked a deal with Reddit, but training on social media comes with some pitfalls. For starters, ingesting Reddit users’ opinions-slash-jokes could make the large language models used by OpenAI and Google a little haphazard in their fact-checking — though it’s hard to know exactly what causes chatbots to slip up. Google has had to rein in its search “AI Overview feature” because it cheerfully recommended users add glue to their pizza sauce and snack on rocks. 

Even more tricky is navigating social media customers: Meta recently told its UK and European users that it can use public posts for the company’s AI-building purposes beginning June 26. The notification was ill-received by users, some of whom have been looking for ways to opt out of Meta sucking up their data all over again.

Sure it’s summer, but Wall Street’s bears are still in hibernation.

The US economy continues to hum, equities markets continue to set all-time highs, and a long hoped-for soft landing rests more visibly on the horizon. For most, that’s good news. For short sellers, it’s anything but. 

The Sky is Not Falling

While the meme stock short-squeeze mania has had a chilling effect, it’s hardly short sellers’ biggest challenge. Ditto for recent rules introduced by the SEC that require more disclosures from short sellers. 

Instead, a nearly 15-year-long bull market, give or take a pandemic, is by far the most likely reason short sellers are in retreat. In the past decade, the overall S&P 500 market cap has skyrocketed by around $30 trillion.

“Short sellers have a high tolerance for pain,” Stephen Kates, Principal Financial Analyst for RetireGuide.com, told The Daily Upside. “But it can be particularly bad when the market just goes up for a decade-and-a-half almost without fail.” At some point, investors start pulling out. Just ask Jim Chanos, who last year converted his longtime short-selling hedge fund into a family business after its assets had fallen to just $200 million from around $6 billion in 2008. 

And while Chanos may be the trend’s poster child, he’s far from the only one. When we say short sellers are in retreat, we really mean it:

• Since 2008, funds with a short bias have seen assets decrease to $4.6 billion from around $7.8 billion, according to Hedge Fund Research data seen by Bloomberg (there’s nothing like a global financial crisis to bring out the bears).
• Meanwhile, Goldman Sachs estimates seen by Bloomberg peg the median short interest in an S&P 500-listed company at just 1.7% — the lowest level in over 20 years. Breathe easy, bubble watchers: its price-to-earnings ratio remains several healthy steps lower than just before the early-2000s dot-com bubble burst.

That leaves just a few savvy players in the short-selling game, groups that Kates calls “assassins,” such as Hindenburg Research and Citron Research. These small firms make hay by unearthing corporate malfeasance, establishing short positions, then publishing their deep research. 

GameStopped: Noted short-squeezer and king of the meme-stockers Keith “Roaring Kitty” Gill conducted his first livestream since the Gamestop frenzy almost four years ago. Gamestop shares, which had rallied in the lead-up to the YouTube event, subsequently plummeted some 40%. The cat didn’t get the cream on this particular Friday.

Much like a morning cup of coffee, one carmaker might save a few bucks by making electric vehicles at home. 

The European Union is likely to adopt higher tariffs on China-made EVs, and Volvo is reportedly moving some of its production out of China and into Belgium to avoid paying those duties as other companies scramble to navigate a ramped-up trade war. 

Trade War Never Changes

In October, the European Commission opened an anti-subsidy investigation to protect the bloc from being flooded by affordable China-made EVs. Over the weekend, The Sunday Times reported that Sweden’s Volvo, which was bought by Chinese maker Geely in 2010, had considered halting sales of its China-made EVs bound for Europe if higher tariffs were introduced but will now produce those models in Europe. Volvo might also switch production locations for EVs intended for the UK, sources told the British newspaper.

The EU has a 10% tariff on EVs imported from China, but it could soon increase to 25% or 30%. However, China has been the world’s factory since the 1990s, so it’s not just Chinese companies bearing the brunt:

• Western companies like BMW and Tesla rely on their ability to make and import cars from China to the EU, so they’d be slapped with tariffs, too. Even with a 30% tariff weighing it down, BYD’s $10,000 Seagull model is still pretty affordable, but Volvo’s $43,000 EX30 vehicle is a teensy bit more exposed.
• Plus, China is likely to retaliate. Last month, Beijing hinted it would raise tariffs on large-engine cars imported from Europe to 25% if the EU followed through on higher duties. That’s not good for car companies seeking a worldwide footprint.

In May, BMW CEO Oliver Zipse told reporters “We don’t think that our industry needs protection,” adding that operating on a global basis gives major automakers an industrial advantage. “You can easily endanger that advantage by introducing import tariffs.”

Trade War: What is it Good For? As the EU-China trade conflict escalates, those in other sectors are already trying to decrease their dependencies on China. “Those types of companies in Europe are pushing hard to look for alternatives,” Richard Laub, chief executive of Belgium-based Dragon Sourcing, told the Financial Times. Many businesses have begun diversifying supply chains by sourcing from countries like India and Vietnam even at higher costs and longer processing times. Like Neil Sedaka said, breaking up is hard to do.