Microsoft Announces $1 Billion Investment in OpenAI

Dear Reader,

Before we get to our insights today, I want to remind you about our Accelerated Profits Summit this evening. The event will kick off at 8 p.m. ET, and I am going to share – for the first time – details on my new system for trading early stage technology companies.

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Okay, on to the front lines of tech…

CRISPR takes a big step forward…

Big news on the CRISPR front…

Remember, CRISPR is the genetic editing technology that allows scientists to edit human DNA like software. CRISPR could one day be responsible for wiping out all human disease of genetic origin.

Well, the Broad Institute of MIT and Harvard teamed up with MilliporeSigma (the life sciences division of Merck) to create a CRISPR patent pool.

Basically, the two groups consolidated their CRISPR intellectual property (IP) into this pool to simplify access. Here’s how it works…

Academic institutions, nonprofit businesses, and government agencies will have access to the patent pool. These entities can obtain a research license for free. That means they can experiment with CRISPR without having to pay royalties.

This is great for the industry. It will spark innovation because researchers won’t have to worry about royalties or patent infringements.

Then, whenever an entity wants to commercialize a development, it can come back and sign a royalty agreement with the patent pool that the Broad Institute and Millipore Sigma established. That means the IP holders will get a cut of any future revenues derived from CRISPR-based therapies.

So it’s a win-win for all parties. Having a patent pool will stimulate innovation and remove concerns that hold back companies working with CRISPR technology. It greatly simplifies the patent landscape. Ultimately, that research will lead to for-profit opportunities… which will lead to royalty agreements for the patent holders.

I am delighted with this move. And I’m happy to see that the Broad Institute is demonstrating leadership despite the University of California’s highly litigious and greedy patent assertions against it (UC Berkeley has lost twice already in its assertions). Establishing an industry patent pool and cross licensing is something that I’ve predicted for a while. It is the most logical solution. And it’s necessary to create a healthy IP environment. Expect to hear much more about CRISPR in the coming months…

Equifax is on the hook for $700 million…

Two years ago, consumer credit agency Equifax announced one of the largest data breaches in the history of the world. Through the breach, hackers gained access to the social security numbers and credit card details of 147 million Americans. That’s about 60% of the U.S. adult population.

And investigations showed it wasn’t just bad luck…

Equifax simply didn’t protect its network. In fact, it had more than 8,500 security weaknesses… the types of things it could have fixed just by updating its software… and maybe rebooting every so often.

But because it ignored these weaknesses, the network was basically wide open. It was easy for hackers to get in.

And it gets worse…

Investigations revealed that the chief information officer, Jun Ying, dumped his stock right before Equifax announced the hack. This was the guy who was responsible for network security… And he bailed before the ship went down.

In total, Ying sold $950,000 worth of stock before it tanked 27% on the news. Of course, he was later found guilty of insider trading.

Clearly, Equifax was at fault here. Because of that, the company agreed to a $700 million settlement. Of that, $275 million will go to settling investigations… And up to $425 million will go to reimbursing victims of the breach.

Now, here’s the big takeaway…

On average, corporations have neglected upgrades in cybersecurity technology. They have treated it as a cost center rather than an investment. But this massive settlement will change that. This puts companies on notice that it costs far more to settle a data breach than to pay for the leading-edge cybersecurity technology used to protect against cyberattacks.

As a result, we can expect corporations to increase their spending on cybersecurity going forward. And there are some fantastic bleeding-edge companies out there with innovative ways to keep networks safe.

CyberArk (CYBR) has long been one of my favorite small-caps in this space. Exponential Tech Investor readers know this company well, as they have already tripled their money in this stock since I first recommended it.

Microsoft’s $1 billion self-subsidy…

Here’s a great example of marketing and public relations (PR) fluff… and also a reason why digging a little deeper and understanding the context is always worth doing.

Microsoft just announced that it is investing $1 billion into OpenAI. This is an institute launched by Sam Altman and Elon Musk. Its goal is to develop artificial general intelligence (AGI) – human-level AI – in an ethical way.

Now, Microsoft promoted its $1 billion investment as a benevolent act. It claimed it was to help “democratize” AI for everyone’s benefit. But when we dig deeper, we see a different picture… This is just a PR play.

First of all, Microsoft isn’t writing a check for $1 billion. Instead, the company is likely spreading out those payments over a decade.

And second, the deal requires OpenAI to use Microsoft’s cloud services, Azure. That means OpenAI will take the money each year… and give it right back as payment for Azure.

In other words, Microsoft is just giving money to OpenAI so that OpenAI can turn around and give it right back to Microsoft. It is subsidizing its cloud services in order to give the appearance that it is actually “winning” new business. It’s a market share grab with a big headline. That’s it.

Frankly, I think PR fluff like this is embarrassing. How pathetic. Microsoft, of all companies, completely missed the shift to cloud computing. It is now trying to catch up to Google and Amazon Web Services.

Of course, Microsoft is a giant that won’t be going anywhere anytime soon. It’s an incredible business because it has become the de facto standard for computer operating systems and productivity software (Microsoft Office). It continues to gain extra “rent” for being in that position. But year after year, the company fails to innovate.

It consistently overpays for assets like Skype, Nokia (the mobile phones division), LinkedIn, GitHub, and Minecraft, which have nothing to do with its business. And its cloud services business, Azure, is widely thought of as one of the worst cloud computing platforms to work on… right up there with IBM. Microsoft is about as far away from the bleeding edge as you can get.

Regards,

Jeff Brown
Editor, The Bleeding Edge