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Equinor.co.uk. Good morning from the Financial Times. Today is Tuesday, December 3rd, and this is your FT News Briefing. Yesterday was a bad day to be a CEO, and OpenAI is open to advertisements. Plus, Shanghai was supposed to be the future of finance, but it didn't live up to the hype. I'm Sonya Hudson, and here's the news you need to start your day. Some major CEO drama unfolded yesterday. Pat Gelsinger abruptly stepped down from the top job at Intel.
He failed to revive the struggling chipmaker over the past four years, and investors lost faith in his vision. Stellantis also waved goodbye to its chief executive, Carlos Tavares. Tavares' relations with the board had reportedly soured over his EV strategy. Stellantis is the world's fourth largest car maker. Its share price has tumbled this year during the wider downturn of Europe's auto industry.
OpenAI is thinking about putting advertisements on its artificial intelligence platforms. That's because the company behind ChatGPT needs to find new revenue sources. AI companies across the board are trying to figure out how to turn this shiny new technology into a sustainable business model. I'm joined now by the FT's Madhu Mita Merjia to explain. Hi, Madhu. Hi there. So give me a sense of OpenAI's financials and why they need to find new revenue streams.
Until a couple of years ago when ChatGPT launched, OpenAI had some revenues. But really, since the launch of ChatGPT, their revenues have surged because it's become such a blockbuster success. So currently, we think that their revenues are about $4 billion on an annualized basis. Most of that is because of ChatGPT, the paid tier. Now, the reason they need more revenues is that developing AI software is a really, really... really costly endeavour because you need huge amounts of computing power.
And OpenAI is on track to burn through more than $5 billion of cash this year, according to insiders. And so they really need to find a way to get this technology to start paying for itself, aside from raising outside money. Got it. So OpenAI is set to burn through about a billion dollars more than they have in revenue. How do you find out about these discussions to potentially introduce advertising?
I was interviewing Sarah Fryer, who recently joined as the CFO of the company. And what Sarah Fryer said is that they had been internally discussing this idea of introducing advertising, but haven't quite decided to do it yet. But she also said, you know, she herself, as well as the new chief product officer, Kevin Wheel, who came from Instagram and Twitter, they both had a lot of advertising experience between them. Beyond that, we also had reporting about a lot of...
hires being made with advertising expertise and experience. And we had other sources telling us about this internal debate. Yeah. So what do we know about these internal conversations? Are people into this idea? I did the story with colleagues in San Francisco who've spoken to employees and others close to the company, and they think that it is quite a divisive conversation internally, particularly saying that the CEO, Sam Altman,
wasn't particularly convinced, but is coming around and warming up to the idea now. And they still haven't quite figured out what those ads would look like, what form they would take. And what is the internal concern about introducing advertisements?
In our interview, Sarah Fryer talked about a few drawbacks of ads as well. One of the drawbacks that she pointed out was that ads can be sensitive to swings in the broader economic cycles. She also pointed out that when you move to ads... your focus as a company shifts from your customers you know your users to the advertisers who become your primary customers and that sort of shifts the balance within a company of who you're building for but as she said that doesn't mean she's against them
precludes them, but just that they have to be thoughtful about how they do it. And Madhu, what does this discussion about advertising and open AI tell us about the development of the industry more broadly? So I think it's clear that for companies that are building these large language models they're going to need these models to start paying off because of how costly it is to build them. So I think we will see over the next year.
new types of products, new ways to make money, as these companies also try and raise external capital in order to show that payoff in the shorter term before investors and the markets start getting nervous about how. expensive it's getting. Madhu Mitamurgia is the FT's artificial intelligence editor. Thanks, Madhu. Thank you. The US hit China with new export controls yesterday. They target chip manufacturing tools.
The goal is to weaken China's advanced semiconductor industry and its use of artificial intelligence in the military. The, quote, groundbreaking and sweeping package is the strongest so far. More than 20 types of chipmaking tools now face restrictions for the first time, and 140 Chinese companies have been blacklisted. The new rules also prevent American firms from exporting some tools to China via third countries. That would make it harder for U.S. companies to dodge sanctions.
Shanghai is the world's biggest container port, and it was on course to become a major international financial center. But that ambition has faded. And now it's struggling to overcome the tensions between Beijing and Washington. My colleague Thomas Hale is based in Shanghai and has been looking into what went wrong. Hi, Tom. Hi there. So what were some of the goals that Beijing had for Shanghai?
Well, Shanghai has been for many years a critically important port. And I think if you look at the world's biggest international financial centers, most of them are ports and their financial history has gone hand in hand with their history.
as a center of trade and a center of connecting different countries so i think that was really at the basis of expectations for shanghai to become an international financial center and that did for many years play a role in the extent to which the international financial community were building and expanding their presence here over the last two decades.
Did the government in Beijing take any action to support the goal of turning Shanghai into an international financial center? I think it's fair to say from about the early 2000s onwards. there was a real sense that Shanghai was at the vanguard of China's move towards a more market-orientated approach, of course.
There are some examples of policies that do amount to a certain kind of liberalisation. There's a policy called QDLP, which essentially allows asset managers to receive a quota to invest. funds from clients in mainland China and especially in Shanghai overseas. And that was pioneered by the Shanghai government.
Nobody really thought that Shanghai was very close to becoming an international financial center in the sense of London or New York. The sense that it was moving in that direction, even if it was moving very gradually and slowly, has in the last couple of years. really come into very, very deep question. China still has very strict capital controls, the movement of information, of data and of people.
across its borders is very much restricted. And it's difficult to make a case that it is still moving in that direction. What made China's leaders change their minds about this? Well, there was a stock market crash in 2015 and that really cemented a critique of the financial sector that had been circulating widely in Beijing since 2008. And of course, the way Beijing has evolved its approach in recent years is much more based around industrial policy, around directing capital.
towards key sectors like new energy or AI, particularly in light of US sanctions and worsening geopolitical relations. So the sense of a market driven financial approach has really faded. So is this the start of a long decline for Shanghai or do you think it could recover? Yeah, so it's important to emphasize that Shanghai is, of course, still...
an enormous and incredibly important city. It's a base for many foreign companies. But in terms of international finance specifically, foreign staff here now, it's unclear precisely what role they would play given the heavy domestic focus of markets in the sense of building the capital domestically here rather than integrating with the outside world, which is still largely done through Hong Kong.
And the relations between the US and China have worsened a lot. So I think that has made it more challenging for international finance to build itself into a bigger role here on the ground. Thomas Hale is the FT Shanghai correspondent. Thanks, Tom. Thank you very much. You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.
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