Good morning. Andrew here. Amid a slew of headlines about A.I. agents escaping their sandboxes, Nvidia is releasing a software platform that aims to put firm guardrails around agentic software. It says the system would have prevented the recent hacking of Hugging Face by OpenAI’s models. In related news, we have a scoop on Instinct, the hot A.I. agent start-up. This 14-person company has raised $1 billion at a $10 billion valuation from some of Silicon Valley’s biggest venture capital firms. More below. (Was this newsletter forwarded to you? Sign up here.)
Liability questions lingerResearchers have announced a steady drumbeat of discoveries of artificial intelligence models behaving badly, pushing the topic of A.I. safety to the fore. That raises a big question for investors in potential blockbuster I.P.O.s by Anthropic and OpenAI: How much liability could they be on the hook for? The latest:
Safety and liability remain major worries. We’ve written before about how the big A.I. labs could face huge legal liability if their tools end up being responsible for great harm. Others have been sounding the alarm:
The liability risk may grow with the expected surge in use of A.I. agents, bots that can take actions proactively on users’ behalf — and that have been at the center of high-profile breaches and goof-ups. (More on agents below.) These concerns don’t appear to be derailing the expectation of I.P.O.s for Anthropic and OpenAI, at least for now. Sam Altman of OpenAI told Fortune that his company most likely wouldn’t go public this year “given everything happening with safety.” The company’s efforts to revamp its business mean an I.P.O. in 2026 already looked unlikely. A.I. labs say they are working to improve guardrails for their products, including better containment and so-called alignment training. But if more reports about breaches and other bad behavior keep surfacing, investors could think twice about buying into the giant listings.
A powerful storm continues to drench the northeastern U.S. A nor’easter that slammed into parts of the East Coast, knocking out power and canceling flights and events, is expected to remain over parts of the region until tomorrow. Warming waters in the Pacific, driven by the El Niño cycle, powered the storm and two hurricanes threatening Hawaii and Mexico. El Niño could cost the global economy close to $1 trillion in its first year and more in later years, according to the Peterson Institute for International Economics. Boeing admits to a software flaw in its new 737 Max jets. The Federal Aviation Administration is investigating the issue, which can cause an automated navigation feature to fail during certain landing situations, The Wall Street Journal reported, citing unnamed sources. Southwest and United Airlines have reportedly told Boeing that they don’t want to receive new 737 Max jets with the flawed software, creating a new engineering challenge for the plane maker. Inflation and labor data will be in focus this week. The Commerce Department is set to publish the Personal Consumption Expenditures report on Wednesday, and Friday is jobs day. The Fed is expected to watch the releases closely as investors brace for more interest rate increases. Also worth watching: Micron, the memory chip maker, is set to release its latest quarterly results on Wednesday. The company is seen as a bellwether for the artificial intelligence trade. Scoop: The A.I. company Instinct is now worth $10 billionThe hottest tool in artificial intelligence right now is arguably the consumer agent, software that essentially functions as a digital personal assistant. And one of the buzziest start-ups in the business, Instinct, plans to announce today that it has just completed a big fund-raising round, DealBook is first to report. The company is seeking to compete against trillion-dollar competitors like Meta. Instinct has raised $1 billion at a $10 billion valuation. The fund-raising comes almost exactly one month after Instinct raised $250 million at a $2.5 billion valuation. Investing in the round announced today were Benchmark Capital, Sequoia Capital and Coatue. The company is really young. Instinct, whose platform is built primarily on open-weight models, was founded last year and went into beta testing in February. (The tool is still by invitation only.) It has just 14 employees. Its founder, Noah Shinn, is a 23-year-old dropout from Northeastern University who used to be a research scientist at another hot A.I. start-up, Sierra. Instinct has been ahead of the curve on the agent frenzy. Users can communicate with their Instinct agents via text, email or WhatsApp and ask them to manage their calendars, book tickets, negotiate and pay bills, and more. Over the last several months, the company has added features including recognizing a user’s location and then making suggestions of activities and allowing users to coordinate their Instinct agents with other users’. Most of the new money will go toward more computing power, an increasing expense for A.I. companies. Users noted in recent weeks that the tool said “responses may be slower” because it was running at full capacity. Instinct has been criticized over its handling of privacy, with some people pointing to what they say are overly broad terms of service. Others have complained that the tool is vulnerable to phishing and that it has taken actions without their consent (a somewhat common problem with agents). The big challenge is competition. This month, Meta released its own agent, Muse, which has drawn high praise and tops the download chart on Apple’s iOS App Store. Elon Musk’s company SpaceXAI has introduced its own agent tool, Grok Bot. Analysts expect others, including OpenAI and Google, to introduce similar services soon. Will Amazon, which has blocked Muse and other third-party agents, introduce a tool as well? What to watch: If Instinct continues to grow rapidly, could a tech giant hoping to catch up on agentic A.I. make a takeover bid for it?
More market turmoilRising oil prices, the scourge of global markets, are dinging stocks, bonds and cryptocurrencies this morning. The sell-off comes even as Washington and Beijing disclosed over the weekend plans to potentially cut $60 billion worth of levies on each other’s exports. Trade watchers may be disappointed at which products were left off the list, especially U.S. soybeans and Chinese rare-earth minerals. The latest:
Soaring energy prices could force central banks to get tough on inflation. Traders this morning assign a 70 percent chance to the Fed’s raising interest rates by another quarter-point at its next meeting, days before the U.S. midterm elections. That would most likely draw the anger of Trump, who is determined to see rates fall. Despite the prospect of higher-for-longer borrowing costs, the S&P 500 is trading within 1 percent of a new record. But Wall Street is wondering how long the stock rally can last with bond yields at multidecade highs, threatening corporate profits and consumers’ spending power. Arguments over taxing Washington State’s wealthyTaxes on the wealthy are becoming a major political question in the midterm elections, notably in California. But some of the most visible and bitter disputes are in Washington State: Voters are being asked to repeal a recently adopted 9.9 percent tax on income over $1 million (which would come into effect in 2028) and to vote on a new wealth tax on those with at least $1 billion in assets. Proponents say the measures would update the state’s tax code, which doesn’t tax personal income and, they say, isn’t keeping up with expansions of government services. Opponents, including a group led by a hedge fund millionaire, Brian Heywood, say it will make Washington inhospitable to new businesses. The state has already had several prominent departures, including by Jeff Bezos, the Amazon founder, and Howard Schultz, the former Starbucks C.E.O. More on the debate from The Times: But just 25,000 households make enough to pay the new tax. A Cornell University researcher named Cristobal Young studied the impact of taxes on higher earners in New Jersey and California and found minimal out-migration in their wake. Washington also hasn’t yet seen significant out-of-state movement after lawmakers created a capital-gains tax in 2021. “Overwhelmingly, millionaires stay,” Mr. Young said. “They pay the new tax rate. They figure out ways around it.” Another argument that proponents of repealing the tax are making is whether more taxes could follow.
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