Microsoft, Apple Drop OpenAI Board Oversight Over Antitrust Concerns – Capital Brief

Good morning. Here’s what happened last night and what you need to know today.

1.

Departure of the management: Microsoft has stepped down from its observer role on OpenAI’s board, while Apple has decided not to take a similar position, amid growing regulatory scrutiny of Big Tech’s AI investments in the U.S. and Europe. The Financial Times reported that Microsoft, which has invested $US13 billion ($19.3 billion) in OpenAI, announced its immediate withdrawal in a letter to the AI ​​startup late Tuesday. Apple had been expected to take on an observer role as part of a deal to integrate ChatGPT into its devices, but will now refrain from doing so, the publication reported, citing an informed source. Apple has not commented. OpenAI plans to hold regular meetings with partners and investors under the chairmanship of Sarah Friar, its newly appointed chief financial officer, the publication reported. The surprise moves come as antitrust regulators in the EU and U.S. are investigating Microsoft’s partnership with OpenAI amid concerns about Big Tech’s dominance in the AI ​​sector. (Financial Times)

2.

The most important change: As Paramount Global’s merger with Skydance Media nears completion, local Network 10 CEO and president Beverley McGarvey assured about 900 employees that there are no immediate plans to cut jobs at local networks, despite layoffs at rival networks. But she didn’t completely rule out future cuts, saying any impact from the merger likely won’t be felt locally for about a year. The $US2.4 billion ($A3.6 billion) merger means David Ellison’s Skydance, backed by RedBird Capital and the Ellison family, takes control of Network 10’s parent company. New leaders Ellison and Jeff Shell this week outlined bold ambitions for the company, including technology-driven improvements, $US2 billion in cost-cutting plans — likely including job cuts, program reductions and TV production consolidation — and potential asset sales. Paramount will focus on its Paramount+ streaming service and Hollywood studio Paramount Pictures. The agreed-upon deal includes a 45-day “go shop” window in which Paramount could find a better deal. (Capital Brief)

3.

Biden’s Battle: Joe Biden’s reelection bid has taken a new blow as more key figures have expressed serious concerns about his chances of defeating Donald Trump. George Clooney, an actor and prominent Biden fundraiser, wrote in The New York Times: “I love Joe Biden. But the one battle he can’t win is the one against time.” Influential Democratic lawmaker Nancy Pelosi also suggested in an MSNBC interview that the president should reconsider his reelection bid, saying that “time is running out” to make a decision. “It’s up to the president to decide whether he’s going to run,” she said. “We all encourage him to make that decision. Because time is running out.” Eight House Democrats have publicly called on Biden to resign. On Tuesday, Colorado Sen. Michael Bennett became the first senator to publicly express serious concerns about Biden’s chances against Trump. That followed reports that Bennet and fellow Democratic senators Jon Tester of Montana and Sherrod Brown of Ohio privately told colleagues at a meeting that Biden could not win. U.S. Federal Reserve Chairman Jerome Powell was asked if he had noticed any decline in the president’s mental or cognitive function during the meetings, to which he replied no, explaining that he had only met the president briefly at an event where they shook hands. (Reuters)(New York Times)

4.

Before 2% reduction: U.S. Federal Reserve Chairman Jerome Powell said the central bank will not wait for inflation to reach its 2% target before cutting interest rates because by then it will be too late. For the second straight day speaking to Congress, Powell told the House of Representatives that the bank has “some confidence” that inflation is headed toward its target but wants to make sure it gets “more good inflation readings” before lowering the official lending rate from 5.25% to 5.50%. PCE inflation, the Fed’s preferred measure, rose 2.6% in the year through May, down from 7.1% in June 2022. The next reading is due in two weeks, and economists expect another measure due Thursday, the CPI, to come in at a slightly lower annual reading. “If you’ve waited this long (for inflation to hit 2%), you’ve probably waited too long because inflation is going to come down and we’re going to get well below 2%, which is not what we want,” Powell said. “We also have a jobs mandate, so I could see us cutting (interest rates) as well … if we see some unexpected weakness in the labor market.” Traders are pricing in about a 70% chance the Fed will cut rates at its September meeting. (House Financial Services Committee)(Capital Brief)

5.

Conflict in Gaza: An Israeli missile struck a tent camp in the southern Gaza Strip, killing at least 29 people, mostly women and children, who had gathered to watch a soccer match at a school, Reuters reported, citing Palestinian officials. The Israeli military said the attack was aimed at a single Hamas fighter involved in an Oct. 7 airstrike on Israel that sparked the war, and that it was reviewing reports of civilian harm. Witnesses described a scene of destruction with body parts strewn about and blood everywhere, Reuters reported. Israel continued its offensive in northern and central Gaza, urging civilians to evacuate Gaza City, an early target of the war, where fighting has resumed. The war has left more than 38,000 Palestinians dead, according to health officials in the Gaza Strip. Israeli Defense Minister Yoav Gallant said 60 percent of the Hamas fighters had been killed or wounded. Meanwhile, ceasefire talks are set to resume in Doha. (Reuters)(Associated Press)

6.

Indefinite strike: South Korea’s largest Samsung Electronics union has extended its initial three-day strike indefinitely, demanding better pay and benefits. The Samsung Electronics National Union (NSEU), representing about 30,000 workers, or about a quarter of the company’s workforce nationwide, began the three-day strike on Monday. It decided to extend it indefinitely because of a lack of response from management, Reuters reported, citing the union. About 6,500 workers participated, the union said. Samsung said the strike did not cause any disruptions in the first three days, and in a statement to Reuters, the company also pledged to “ensure” there are no disruptions to production lines. The union is demanding a 3.5 percent increase in base pay, a day off to celebrate the union’s inception, and an equal split of bonuses between employees and management. (Reuters)

7.

Flight Refunds: The UK Supreme Court has ruled that airlines must pay compensation to passengers if a flight is cancelled due to a pilot’s illness, potentially resulting in a multi-million pound compensation bill for airlines. The decision stemmed from a case involving British Airways subsidiary BA Cityflyer, which refused to pay 200 pounds ($380) to Kenneth and Linda Lipton after their flight from Milan to London was cancelled in 2018. The airline argued that the pilot’s illness was an “extraordinary circumstance” that exempted them from compensation. However, the Supreme Court ruled that pilot illness is a regular business event, not something extraordinary. “Although the amount at stake is small, the decision could affect tens of thousands of claims made each year,” the court said in a summary of its judgment. (Financial Times)

8.

Huawei ban: Germany will remove Huawei and ZTE components from its 5G mobile networks by 2029, finally aligning with the U.S. and allies over concerns about security risks posed by Chinese technology, the Wall Street Journal reported, citing sources. Under the draft agreement, Germany’s major telecoms carriers will eliminate the components from their core networks by the end of 2026 and from their radio access networks by the end of 2029, the newspaper reported. The move addresses long-standing concerns about espionage and puts Germany in line with other Western nations. A spokesman for the German Interior Ministry confirmed the decision to secure critical parts of the country’s 5G wireless networks but declined to provide details. Security agencies, including in Australia, have reported increased Chinese espionage activity. (Wall Street Journal)