AI policy hangs in the balance & Meta’s big AI bets

Welcome back to a new edition of AI Odyssey!

Microsoft’s AI plans face a snag as data centers struggle to keep up, slowing Azure’s growth. Over at Meta, Zuckerberg pushes AI hard but warns Reality Labs' losses keep mounting.

1: Election results could mean two paths for AI policy

The news: With the U.S. election looming, AI regulation hangs in the balance. A win for Vice President Harris would likely mean a continuation of the Biden administration's cautious regulatory approach. But if former President Trump takes office, tech leaders like Elon Musk could gain significant influence.

Why it matters: Harris is expected to push a moderate AI agenda, emphasizing incentives for chipmakers and modest oversight, avoiding strict transparency and licensing requirements. However, Trump’s unpredictable style and Musk’s backing suggest a more volatile approach, potentially benefiting Musk’s xAI while sidestepping OpenAI, a company he has previously criticized.

Big picture: The Congressional outcome will impact AI legislation; Republicans favor minimal regulation, while Democrats might pursue a more proactive approach if they gain control. States, especially California, are likely to drive stricter AI rules regardless of federal decisions.

Looking ahead: No matter who wins, AI companies will continue making critical decisions, shaping the industry’s trajectory as they go.

2: Meta's AI spending surge amid strong earnings

The news: Meta’s Q3 earnings topped forecasts, with revenue climbing 19% to $40.6 billion and net income rising 35% to $15.7 billion. However, CEO Mark Zuckerberg warned that AI spending will ramp up significantly in 2025 as the company invests heavily in infrastructure.

Why it matters: Meta’s shift to AI is paying off in user engagement, with AI-driven feed enhancements boosting time spent on Facebook by 8% and Instagram by 6%. But rising infrastructure costs, especially with its ambitious Reality Labs, signal big challenges ahead. Reality Labs posted a $4.4 billion loss for Q3, and full-year losses are expected to grow.

Big picture: Meta is pushing AI tools like its chatbot, Meta AI, and open-source language model, Llama, while also doubling down on AI-powered wearable tech in its Ray-Ban partnership. Still, competition with AI giants like Google means Meta must prove it can monetize these costly AI ventures effectively.

Looking ahead: Meta forecasts Q4 sales between $45B-$48B, with 2025’s capital expenditures to “accelerate significantly” as it scales its infrastructure fleet.

3: Over 25% of Google’s code is now written by AI its code

The news: Over a quarter of Google’s new code is now generated by AI, Alphabet CEO Sundar Pichai shared in their Q3 earnings call, showcasing the tech giant’s deeper AI integration. Google’s cloud division saw a 35% revenue jump to $11.4 billion, fueled by AI-powered services attracting more enterprise clients.

Why it matters: AI isn’t just rewriting code—it’s boosting Google’s main revenue streams. YouTube ad and subscription revenue hit $50 billion over the past year, while AI-enhanced search tools have driven demand, particularly from younger users, leading to a 12.3% rise in search revenue.

The big picture: Google’s “full stack” AI approach is transforming its operations, impacting not just code and cloud but also workforce strategy. With over 1,000 fewer employees, the company has refocused teams on AI, particularly within DeepMind.

Looking ahead: Alphabet’s reorganization signals a more streamlined, AI-powered future, as CFO Anat Ashkenazi emphasized reallocating capital to fuel even more AI-driven growth. Shares popped on the strong Q3 results, underlining investor confidence in Google’s AI-led strategy.

4: Delaware AG questions OpenAI's move to for-profit status

The news: OpenAI’s nonprofit-to-for-profit conversion plan is facing scrutiny from Delaware's attorney general, Kathleen Jennings. In a letter to OpenAI’s lawyers, Jennings raised concerns about transferring assets to private interests without due consideration, Axios reports.

Why it matters: Delaware's AG has jurisdiction over OpenAI's nonprofit, putting billions in investment on the line. A potential challenge from the AG could slow down OpenAI's planned transformation. Key investors, including Microsoft, have pressed OpenAI to shift to for-profit or risk losing funding.

Catch up fast: OpenAI launched as a nonprofit to ensure AI benefits everyone, but the stakes have changed. Investors demand a switch within two years or their money back. OpenAI’s board chair Bret Taylor stated the transition would “ensure the nonprofit thrives” while fulfilling the AGI mission.

Between the lines: Converting a nonprofit isn’t straightforward due to strict regulations. However, Delaware’s approach to overseeing nonprofits and for-profits is often hands-off, which could work in OpenAI's favor.

What’s next: OpenAI says it’s engaging with the AG to answer questions as it works on a structure that could satisfy both legal and investor needs.

AI NOTES 🗒️

Read: How The New York Times is using generative AI as a reporting tool (Ars Technica)

X of the day: