Is ChatGPT Freeloading On Publishers?

Plus: Powell raises rates while Yellen raises fear ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

March 23, 2023

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TOGETHER WITH

Good morning.

With investors the world over already on pins and needles, the nearly unthinkable happened on Wednesday: GameStop turned a profit. The oft-embattled shopping mall staple saw its share price explode 35% after announcing it was nearly $49 million in the black in its fourth quarter after losing $148 million in the same three months a year ago.

Can a meme-stock revival be far behind? The news triggered brief jumps in fellow meme stocks like AMC and the teetering Bed Bath & Beyond, though both companies still closed down by the end of trading. Time to check in on everyone’s least favorite Reddit board.

Morning Brief

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Interest rates just keep on keepin’ on.

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Can publishers get ahead of AI?

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A Covid vaccine will finally cost you.

Markets

Another Fed Rate Hike, Powell Confident on Banks

(Photo Credit: Simone Fontana/Flickr)

The Federal Reserve Chairman surprised practically no one by hiking interest rates on Wednesday, but the Treasury Secretary scared almost everyone.

Despite the fun and games of the past couple weeks, Fed Chair Jerome Powell voiced confidence in the state of banks while announcing his anticipated 25 basis point hike. But while Powell was preaching calm and ample liquidity, Treasury Secretary Janet Yellen sent investors into a tizzy by telling Congress that she was not yet considering any kind of unilateral expansion of FDIC deposit insurance for regional banks.

Up, Up, and Away

The rate hike everyone saw coming was absorbed pretty well by a market that was still praying it wouldn’t come after the recent banking unpleasantness. But Powell was clear that poor risk management and digital bank runs were not enough of a reason to doubt the system and let inflation run wild. And while Wall Street may be baking in rate cuts later this year, Powell was explicit that he and his fellow Fed officials “don’t see” that happening.

The real mic drop belonged to Yellen, who sent traders running towards the Sell button with their hair on fire. In response to a question from the Senate Finance Committee, Yellen stated that the Treasury has “not considered or discussed having anything to do with a blanket insurance or guarantees of all deposits.” While Powell had earlier also stated that the Fed had no plans to backstop all bank deposits, it was Yellen who seemed to have the ear of Mr. Market.

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After rising slightly in the wake of the rate hike, the Dow Jones Industrial Average fell 470 points after Yellen’s answer in the Senate.

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Powell and Co.’s ninth consecutive hike brought the funds rate to the 4.75% – 5% range, its highest level since September 2007, a date that should come with its own ominous music.

Anyone who still thought the Fed would hold or cut can refer to what Powell said at the tippy top of his Wednesday press conference, reminding Americans that “Inflation remains too high and the labor market continues to be very tight.”

Is it safe? First Republic Bank is the most hotly watched victim of SVB’s aftershock. Nervous wealthy investors began pulling their money and running after SVB’s collapse. Since the start of the month, First Republic’s stock value has plunged 90%, and Barron’s reported the bank is exploring a sale or at least trimming assets. If only First Republic had the confidence of Jerome Powell.

– Thornton McEnery and Griffin Kelly

Tech

Publishers Want a Legal Fight Before AI Takes Flight

A new mega talent is making a big splash in publishing, and everyone is desperate to know: who is this ChatGPT? And who are its biggest influences?

At recent meetings hosted by publishing trade group the News Media Alliance, according to a report by The Wall Street Journal, publishers wondered out loud if Silicon Valley’s so-called large language models are largely modeled after their intellectual property… and if publishers are therefore entitled to any AI-generated profits.

Do Large Language Models Dream of Electric Sheep?

Publishers spent the past two decades desperately arguing that Big Tech made countless billions off of their content (i.e., nobody would use Google if The New York Times or ESPN didn’t appear in search results). But now yet another tech paradigm shift is upon us, and publishers are again leaning on their back foot to wade into the constantly-evolving frontlines of AI.

AI’s output of zippy summaries of news events inherently terrifies (and entices) the desperate-for-clicks publishing class. But the human content purveyors and AI developers may have a much trickier legal quandary on the input side of the equation. After all, The “P” in “GPT” stands for “pre-trained.” As in, OpenAI and its competitors trained its large-language models with billions of bits of data and published content from across the web. Thus, publishers see their work being reused and commodified in nearly every ChatGPT and Google Bard response — not just the ones erasing search traffic.

But whether or not Silicon Valley had any right to pump all that content into their own personal chatbot/possible doomsday machine is another question entirely:

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OpenAI has argued that “fair use” copyright laws allow for fairly liberal use of scraped online material, though has conceded it has struck deals for certain specific, often highly technical content. Google and Microsoft, meanwhile, have implemented some source-citing and linking in their bot responses, but publishers say the practice remains far too limited.

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Congress may soon pass legislation allowing publishers to collectively negotiate with Big Tech without stepping on antitrust tripwires, and the US Copyright Office last week began a study on AI’s reading material. In other words, we’re still in the legal wilderness.

Learn to Code: Ironically, techies have their own AI copycat problem. GPT4, OpenAI’s recent ultra-powerful ChatGPT update, has shown itself to be fully capable of writing code to create apps and software — likely riffing off existing code in the process. The big hoopla, of course, will come on the possibly not-too-distant day when AI is capable of creating another AI, which can create another AI, which can create another AI, which can… well, that’s a story plenty of human writers have written before.

– Brian Boyle

Sponsored by Puck

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Everybody on Wall Street reads Bill’s private newsletter, Dry Powder, religiously. In his latest edition, Bill detailed SVB’s desperate behind-the-scenes scramble to shore up financing before the bank imploded.

It’s truly must-read reporting, and you can access it for free by signing up here.

Health

It Will Cost More Than $100 to Get a Moderna Covid Vaccine

Remember when they used to be free?

As the US government winds down its pandemic emergency spending, health giant Moderna is preparing to shift its vaccine to commercial distribution. On the free market, the jab will be priced at roughly $130, The Wall Street Journal reported. To put that in perspective, that’s six-and-a-half flu shots.

Shots Fired

A handful of medical companies reaped great rewards for being at the forefront of the fight against Covid. So far, the US has spent more than $30 billion on vaccine development, purchases, and distribution, according to health nonprofit the Kaiser Family Foundation. Just last July, the Biden administration reached a $1.7 billion deal with Moderna for 66 million doses. By the end of 2022, Moderna had generated revenue of $19.3 billion.

But now the gloves and masks are off. The White House plans to cut its vaccine spending in May, so Moderna, as well as Pfizer, is getting ready to sell its antiviral serum commercially:

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The US was paying between $15 and $26 for Moderna doses, which were then administered to hundreds of millions of Americans for free. Right now, 69% of the population is considered fully vaccinated, meaning there’s still about 100 million people in the country who haven’t had their boosters.

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Senator Bernie Sanders wrote to Moderna, urging the company to reconsider its pricing, especially since the US paid for part of its development. Moderna President Dr. Stephen Hoge shot back and told the WSJ the pricing was fair because vaccine doses for pneumonia, hepatitis, and meningitis typically cost even more.

“We feel we have honored the support we got and then paid it back and then some,” he said.

Getting the Vaccine: Don’t get too worried, though. As long as you’re insured — which roughly 90% of the country is — you won’t be paying out of pocket. The other 10% are still eligible to receive the shot at no cost, Hoge told the WSJ. So you can rest easy knowing you can still afford Netflix and remain inoculated.

– Griffin Kelly

Extra Upside

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The Buck stops here: A Pennsylvania county sues TikTok, Instagram, YouTube, Snapchat, and Facebook for “exploiting” young people.

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Flew the coop: FDA approves Good Meats’ lab-grown chicken safe for human consumption.

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