OpenAI smashes records with $9.6b raise

Good morning. Here's what happened overnight and what you need to know today.

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1.

OpenAI boom: OpenAI completed its USD6.6 billion ($9.59 billion) funding round in the largest VC deal ever, and nearly doubling its valuation in just months to become one of the three largest venture-backed startups alongside SpaceX and ByteDance. The deal values the company behind ChatGPT at USD157 billion, post-investment, up from a USD86 billion valuation in a tender offer to employees earlier this year, who will again get the chance to sell some of their shares in the startup through a new tender offer. Thrive Capital invested USD1.2 billion and has an option to invest an additional USD1 billion next year at the same valuation. OpenAI reportedly discussed awarding CEO and co-founder Sam Altman an equity stake worth over USD10 billion, which the company has not confirmed. Nvidia, Microsoft, SoftBank, Khosla Ventures, Altimeter Capital, Fidelity and Abu Dhabi’s state-backed MGX also invested. The closing comes amid ongoing restructuring efforts to shift from a nonprofit to a for-profit model, with investors securing terms allowing them to renegotiate the valuation or claw back their investments if OpenAI doesn't complete its for-profit transition within two years. (Capital Brief)

2.

ME conflict: Eight Israeli soldiers have been killed in the first day and a half of combat in southern Lebanon as Israel’s military clashed with Hezbollah in intense close-quarter combat, officials said. Israeli Prime Minister Netanyahu said Iran would "pay" for firing over 180 missiles, but President Biden urged restraint, supporting proportional retaliation but not an attack on Iranian nuclear sites. Biden said other G7 nations shared a similar viewpoint and backed additional sanctions on Iran. Meanwhile, Israel barred UN Secretary-General António Guterres from entering the country, declaring him persona non grata for what it said was a failure to strongly condemn Iran’s missile attack. Guterres later told a UN Security Council emergency session that he condemned Iran’s attack. The “deadly cycle of tit-for-tat violence must stop,” he said. (The New York Times)(Reuters)

3.

Vuhledar falls: Russian forces took control of the strategic eastern Ukrainian city of Vuhledar after more than two years of resistance. Ukraine's military confirmed a retreat to avoid encirclement. Russian troops, using a numerical advantage and pincer tactics to trap and then constrict Ukrainian strongholds, surrounded the city, cutting off vital supply routes. Reports of intense artillery and drone strikes suggest many Ukrainian soldiers were killed or wounded while attempting to evacuate. Both sides incurred heavy losses, but neither disclosed figures. The city, once home to over 14,000 people, is now nearly deserted, with only about 100 civilians remaining, according to media reports. Russia is now moving towards Donetsk, targeting particularly the logistics hub of Pokrovsk. (BBC)(Reuters)

4.

Algo probe: The European Commission has formally requested YouTube, Snapchat and TikTok for more details on how their algorithms work to recommend content, and specifically regarding their handling of potential threats to electoral processes, mental health and child safety. The EU regulator invoked the Digital Services Act, enacted in 2022, to request the information, threatening fines and potential formal proceedings if the companies failed to comply. The platforms have until 15 November to respond, with the EU able to impose fines for failure to reply by the deadline or if the information is incorrect, incomplete or misleading, it said. The Commission already has ongoing proceedings against TikTok, AliExpress, Facebook and Instagram related to compliance with its recommender system regulations. (Capital Brief)

5.

AI competition: Character.ai has abandoned developing its own AI models following its USD2.7bn ($3.91 billion) deal with Google, instead focusing on its popular chatbot platform. Dominic Perella, the San Francisco-based start-up’s interim CEO, told The Financial Times the company had largely abandoned the race to build large language models against better-funded competitors like Google, Microsoft-backed OpenAI and Amazon, the paper reported. Instead, the firm will concentrate on its consumer-facing chatbot platform, which has garnered significant traction among young users aged 13-25. It also follows the deal with Google that saw the tech giant acquire a one-time licence to Character.ai’s technology and poach 20% of its staff, including its co-founders. “It got insanely expensive to train frontier models . . . which is extremely difficult to finance on even a very large start-up budget,” Perella told the FT in his first interview since taking the role in August. (Capital Brief)

6.

Ports strike: The port worker strike at US East and Gulf coast ports has halted shipments of essential goods, including beef and seafood, hurting the food supply chain, automobile shipments and exports, with more than 50 container ships anchored off US ports. US beef imports – including from Australia – which surged due to declining domestic cattle supplies, are being delayed, threatening shortages and price inflation if the strike continues. Retailers and food importers rushed to stock up before the strike. The union is seeking wage increases and an end to automation projects. In a post on X, President Joe Biden pressed port employers to offer a better deal to workers, but has said it won't intervene directly. Economists warn that a prolonged strike could disrupt the economy, potentially costing billions and raising food prices. (Reuters)

7.

Reverse swoosh: Nike shares dropped by as much as 8.3% after the company withdrew its annual revenue target, leaving investors uncertain about the timeline for the company’s turnaround. The shoemaker reported 1Q revenues 10% lower than the previous year’s, even as it increased promotions to help drive sales. Incoming CEO Elliott Hill is taking over on 14 October and has been given flexibility to reassess Nike’s strategies. But investors were disappointed as the company cancelled its 19 November investor day and CFO Matthew Friend warned of a weaker holiday season. The company has been facing pressure from competitors, particularly in high-performance running shoes from brands like On Holding and Hoka. “Our teams are energized as Elliott Hill returns to lead NIKE's next stage of growth," Friend said. (Capital Brief)

8.

Tesla disappoints: Tesla shares fell as much as 6.4% on Wednesday before paring losses after the EV maker missed third-quarter delivery estimates. Tesla said it delivered 462,890 vehicles, falling short of FactSet’s 463,310 and LSEG’s 469,828 average estimates. The automaker is struggling with competition from Chinese rivals like BYD and Nio, as incentives like price cuts and zero-interest financing have failed to boost demand outside of China - despite hurting margins. Analysts are concerned Tesla may not hit its full-year delivery target, requiring a record-breaking fourth-quarter performance. Investors are now focused on Tesla's 10 October robotaxi event, which is expected to mark a pivotal moment for its AI and autonomous vehicle strategy. (CNBC)(Reuters)