ChatGPT’s Image Generator Goes Viral & Tesla Unfazed by Tariffs?
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Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today is the biggest AI IPO of all time going to be a flop? Then ChatGPT's new image generator is making everyone look like they're the main character in Totoro. It's Friday, March 28th. Let's ride. Hey,

It was a roller coaster day for my University of Maryland Terrapins. Yes, last night, the men's basketball team got thumped by Florida in the Sweet 16, ending our March Madness run. But earlier in the day, some better news. The school announced that world-famous amphibian Kermit the Frog

will deliver the commencement address to Maryland's graduates in May. In many ways, this is a homecoming for Kermit because his creator, Jim Henson, is an alum of Maryland, and both Kermit and Henson have bronze statues right outside the Student Union on campus. Toby doesn't totally make up for the loss, but Kermit as a commencement speaker isn't a bad consolation prize.

I'm taking a very pessimistic view of this. Can you imagine being a parent? You likely contributed to your child's education, sacrificed a lot of time and money to see your kid graduate, and then a freaking Muppet gets up there? I've learned that graduations are as much, if not more so, for the parents than they are for the students. And once...

his croaky voice kind of rings out talking about the challenges he had to overcome to get to the top of the frog heap, as he calls it, it would push me over the edge. No, that's the wrong take. Marilyn, my commencement speaker was Cal Ripken, who is a Baltimore legend, but he got up there and was just not exciting at all, and we were all...

And we were just like, please end this. This is not fun. We want a little spice, a little pizzazz. And Kermit will bring that. It doesn't matter what he says, but you just want something to perk you up a little bit. I'm not really thinking about the parents. I don't know why you are. I'm thinking about those kids that are graduating and they want a final sendoff that is worthy. I think Kermit will deliver. I had John Krasinski, so I think I win everything.

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Do you believe that AI demand will keep going up and to the right? Investors will stare that question right in the face today when CoreWeave goes public on the NASDAQ. This IPO is the most anticipated in years because CoreWeave is the first pure play AI company to hit the stock market. And as such, it is considered a bellwether for the AI revolution more broadly. While

no one had heard of this New Jersey company a few years ago. It's become a massive business by hoovering up NVIDIA GPUs and renting them out to AI companies to train and run their models. So if you are confident that AI giants like Microsoft will keep spending tens of billions on cloud computing, then CoreWeave would be a great way to put your money where your mouth is. Others are far more skeptical about CoreWeave's growth prospects, saying that it's sitting on a ticking time bomb of

mounting debt, stagnating demand for data centers, and old hardware that is depreciating rapidly. Those concerns may have factored into Corweave's pricing ahead of its IPO. It raised $1.5 billion, far below its initial target of $3 billion, at a valuation of $23 billion. At one point, it was aiming for a valuation of $35 billion. Toby, Corweave's IPO was supposed to be a landmark moment for AI, but

the vibes are off. Yeah, there's two ways to look at this. One, the optimistic take is that this is ushering in a new neo-cloud category to the stock market. A lot of people are calling it the pure play, that is a little bit of a tongue twister, AI IPO of the year. And so if you are wanting to, you know,

buy into the AI hype, then CoreWeave is a great bull case for that. But then a lot of people also see it as maybe a highly levered, debt-ridden way for Microsoft, which is one of their biggest customers, to offload some of its less desirable workload to this company, or for Nvidia, who has an investment in CoreWeave, to turn that small investment into a very large customer. CoreWeave buys a lot of their GPUs. So this structure...

Totally works, too, as long as AI demand continues to go up. But if cracks start to form, then CoreWeave starts to become a little bit of an ugly duckling. And most of you probably have never heard of CoreWeave, and that's very understandable. It started in 2017 as an Ethereum cryptocurrency miner as a side project of CoreWeave.

two traders, and they were buying all this computing power. And then when crypto hit the skids in 2021 and 2022, they pivoted to AI. And it's been extremely lucrative. Revenue surged 700% last year alone to hit nearly $2 billion. And that doesn't include a deal they just signed with OpenAI with a contract value of

billion through October 2030. So they've been riding this AI wave really well to immense financial success. However, there does appear to be cracks forming. One criticism of Corby's business model is that a lot

of the NVIDIA GPUs that they have, which is 250,000 of these, are NVIDIA's H100 chip, which is dated to 2022. This industry moves so fast. NVIDIA already has a new generation of chips called Blackwell, and they're rolling out another new family of chips next year. And prices on renting out the old one, H100, are depreciating a

rapidly. Renting one for an hour used to cost anywhere from $4 to $8. Now it costs as little as $1. And then also another kind of crack forming is that in a separate report this week, this analyst, T.D. Cowan, said that Microsoft is canceling new data center projects left and right due to an oversupply issue. And so if you are

Again, a company like CoreEve that rents out AI compute and you see one of your biggest customers canceling data center contracts, that's not exactly a bullish signal either. So this is going to be a polarizing debut. I mean, I'm just going to give every option. It could swing either way here, but it looks like right now, you said the vibes are off, and it looks like the bears are maybe the ones that are more prevalent right now ahead of its debut.

If your timeline has recently looked like a cross between Spirit Away and every meme ever made, you're not hallucinating. You're just witnessing the magic of ChatGPT's latest upgrade. Earlier this week, OpenAI dropped a major upgrade to its GPT-4.0 model. You can now natively create and edit images within the ChatGPT app and browser, meaning it added an image-crafting sous-chef next to the textual line cook you're used to interacting with.

It's also a whole lot better than OpenAI's previous image gen software, DALI. GPT-40 doesn't spit out things that are clearly AI anymore. It takes a beat longer to think than deliver images that are quite honestly scarily accurate. You can...

It can even manage hands now. Beyond just generation, it can also add, remove, and modify stuff in existing images. So if you wanted to cook up a mock-up image for your pickleball shoe brand in the style of a Don Draper ad, it can do that text and all. The internet quickly

got fixated on one particular use case though, Studio Ghibli memes. Thousands of AI generated images started popping up in the style of My Neighbor Totoro in Spirited Away, but depicting popular internet moments like the hawk to a girl. Even open AI CEO Sam Altman joined the party, changing his profile picture on X to a Ghiblified version of himself.

Meanwhile, back at OpenAI HQ, the Mac's gibblification effort was putting some serious strain on its tech. It's been fun seeing people love images in chat, but our GPUs are melting. Demand got so intense they had to temporarily rate limit

image generation. All in all, there's been this outburst of shock, awe, and in some cases, disgust, Neil, at the abilities of this new technology. Let's talk about that disgust because the creator of Studio Ghibli, the mastermind behind it, Hayao Miyazaki, who created this animation style that is so beloved all over the world and was the subject

of all of these memes. What does he think about AI? Well, in 2016, he was shown an AI animation demo and he said, quote, I am utterly disgusted. If you really want to make creepy stuff, you can go ahead and do it. I would never wish to incorporate this technology into my work at all. And then he added, I strongly feel that this is an insult to life itself.

And, you know, that is the pushback to what we've been seeing over the past few days to swarm everybody's social media feed. There's a lot of questions about how this blurs the line between reality and make made up stuff. And also it reminds you that what is reality?

created has been trained on millions, perhaps, of copyrighted works all over the internet. It really is. I can't stress enough to how big of a step forward this was for the image generation capabilities, because when this was rolling out, they did it kind of in stages, and I still had the previous model. And

when I was trying to recreate the images people were putting out there, it was just night and day how much worse Dali was than this. This is truly the first time where, you know, it is depicting things correctly. It's putting the correct number of fingers on the hands. Remember, AI has always struggled with that. It's...

it's so easy to change people into different animation styles. I mean, Neil, I was putting your face through it and I made you look like Wallace and Gromit, made you look like South Park, and it is truly remarkable how good it is at capturing the essence. So there was definitely this shock and awe period where everyone's like, whoa, this is definitely a step forward.

But there was also soon after this big pushback because, you know, these are artistic styles that were developed by people over time. And you don't necessarily want to see a program trained on that data spitting out what was the result of a lot of human hours of effort. Right. And so AI.

OpenAI is now facing certain legal questions, which it has for years now over whether it was infringing on people's copyright. Right now, it does look like capturing a particular style or copying that style is in a legal gray area because its style is not explicitly protected by copyright. So OpenAI does not appear to be breaking the law, but you have a bunch of other companies like the New York Times suing it and this year,

or this week on Thursday, a judge allowed that lawsuit to proceed. So open AI is the best of times. It was the worst of times. Welcome to Stock of the Week, Dog of the Week, the segment where Toby and I pick one stock that has all their weekend plans lined up and another that's going to text all their friends. So is anyone doing anything tonight?

I won the pre-show game of tag, you're it, so I get to go first. And my stock is Tesla, which might sound a bit odd. After all, President Trump just slapped 25% tariffs on cars made outside the U.S., which sent most of the auto world plunging yesterday. But not Tesla. Tesla is up more than 16% for the week after analysts pointed out it would emerge as a winner from the new tariffs, well, at least compared to its rivals who are getting walloped.

As one Bernstein analyst put it, Tesla wins, Detroit bleeds. And that's because unlike Detroit automakers, Tesla makes all of its cars for the U.S. market in the U.S. at plants in California and Texas. Detroit's big three have sprinkled factories in Canada and Mexico, and bringing those into the U.S. will now cost them.

CEO Elon Musk was quick to point out that Tesla isn't completely insulated from the tariffs since they apply not just to finish cars, but car parts. And Tesla doesn't get all of its parts from the U.S. Between 60 percent and 75 percent of the components Tesla uses are

manufactured in America, depending on the model, which is why Elon wrote that the tariff impact on Tesla is still significant. As for Elon's relationship with Trump and how that may have impacted the car tariffs, the president said Elon did not advise on the plan due to conflicts of interest. Yeah, I mean, Tesla has made a debut in this category a lot for us, usually in the dog league category because it's kind of been on a downward spiral since the election. This was a

a bout of positive news because of the fact that it is more insulated. Again, it's not completely protected from these tariffs because a lot of parts go into categories, the bat into cars, motors, batteries, raw materials. These still need to be imported from other countries, but compared to its competitors,

it's going to fare a lot better. I mean, if you look at some of the North American competitors that have been maybe stealing some market share from Tesla over the last year, companies like GM, who makes the Chevy Equinox, Ford, who makes the Mach-E, a lot of those vehicles are far more exposed than Tesla is, which is why you saw comparatively its stock do better than those legacy automakers this week. And one particular model to pay attention to when it comes to tariffs is the Tesla Model Y competes

in the mid-size crossover segment. That category will now see close to half of its vehicles hit with tariffs. Meanwhile, the Model Y probably won't have to raise prices, whereas its competitors do. So in that mid-size crossover, that's just like one area where you see Tesla emerging as a clear winner because it builds

everything here. And that was a long-term plan that Elon Musk executed, and it's paying off right now. And then one final, if Tesla is our 1A winner of the week, our 1B winner of the week is Rivian, too, which is another EV maker who does manufacture all of its vehicles in the U.S. as well. So you saw its stock jump about 7% yesterday as well, for many of the same reasons that Tesla's did. Up next, we got our dog of the week.

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My dog of the week is pretty much every auto company not named Tesla. All big three Detroit car makers, GM, Ford, and Stellantis, finished in the red yesterday, especially GM, who has the highest exposure to these foreign tariffs. Roughly 30% of GM vehicles sold in the U.S. during the first three quarters of 2024 were assembled in Canada and Mexico. And it's not just domestic car makers that are feeling the pinch.

foreign car companies are also sweating. For many foreign automakers, the U.S. isn't just a market, it's the market. Nearly one in three Porsches and one in six BMWs end up stateside, along with $8 billion worth of German car parts each year. For instance, the BMW 3 Series was once the

the world's best-selling premium cars, but under the new rules, it's the subject of a 27.5% tariff, potentially adding more than $10,000 to its sticker price. Even a Ferrari isn't speedy enough to outrun these levies. The super luxury car maker warned consumers

that it plans to hike prices by 10% on select models to cushion the blow from tariffs. Neil, let's just say that it was really easy to find dogs of the week by sniffing around the auto industry. If you are someone who likes, you know, German premium cars driving around, what is the ultimate driving machine, BMW, then...

then the cars you like will probably face a price hike from these tariffs. You mentioned the BMW 3 Series. Another something in this general category is the Audi Q5 SUV. Audi is a VW brand. That's made at their factory in Mexico. It's

Audi's top selling U.S. model. So that is just another another vehicle in this category of, you know, more premium European cars where they don't have a huge factory footprint in the United States. They make some cars in Europe. They make some cars in Mexico. They make a few cars in the United States as well. But

But if you enjoy those cars, you might have to pay up for them. And if you have finer taste in life, I want to talk about Ferrari a little bit because Ferrari price hikes are always kind of wild to think about because on the one hand, the dollar amounts themselves are huge. For one SUV that starts at $430,000, that 10% hike amounts to $43,000. But for a limited edition F80, that price,

sticker price starts at $3.5 million. So, that increase adds $350,000 to it. On the other hand, though, Ferrari customers are obviously a little bit more price resistant than normal folks. So, Ferrari stock actually ended the day up because they can weather that 10% price hike more than a normal person, everyday person buying a car. But it is crazy, though. Like,

Ah, shoot, just tack another $350,000 on there. It doesn't matter to me. For the second time in this podcast, I'm going back to University of Maryland. I'm remembering Econ 101, the concept of price elasticity, and the buyers of Ferrari will probably be able to weather that 10% hike. It might be us one day, Neil. One day when our ship comes in.

Think of a number in your head between 1 and 10. Then do that about a trillion billion more times and you too can match the output of a new quantum breakthrough courtesy of J.P. Morgan. In a first-of-its-kind discovery, the bank announced it had produced truly random numbers using quantum computing. But wait, can't you just roll a dice? Or heck, use a random number generator online to achieve such a thing? Well, don't tell your buddies when picking your fantasy football draft order, but those programs are not

really random, and if you run them enough times, eventually they follow predetermined sequences. So, J.P. Morgan is saying its breakthrough means it's the first institution to generate and mathematically certify truly random numbers using a quantum computer. Partnering with Honeywell and a squad of government labs, J.P. Morgan's discovery paves the way for near bulletproof encryption,

smarter trading algorithms, and more simple things like fairer online poker. It's also a major flex for the bank to be the one to make this step forward in quantum computing, which is a field that has long been heavy on hype and light on real-world use cases. Neil, look at the finance bros go making quantum breakthroughs in their little vests. They're making quantum breakthroughs. I'm not sure they know exactly what

to do with it. I mean, here is the head of global technology applied research at J.P. Morgan. He told Bloomberg, it's a breakthrough result. The next step will be to understand where we can apply it. So they've done this cool thing by creating a random an actual random number generator, which

Yeah, for sure.

Financial modeling and simulations are a big part that financial analysts use. They use these random numbers to simulate thousands of possible future outcomes for everything from risk exposure to stock prices. So the more randomness, the better insight you get. But you're right, with cryptography and cybersecurity, random numbers are the backbone

Thank you.

poker, random number generators are deciding the outcome. So you do want confidence that the things you're wagering on are truly random and not, you know, the result of some of these repeating algorithms. Now, if you are, you know, if your ears are perking up and you're, this is interesting to you, I recommend going deep into the world of random numbers because you're

There is a long history of scientists and regular people trying to figure out how to generate random numbers because it is hard to do with a computer. So they've looked to external factors to try to translate, you know, the random things that happen in our world to actual randomness in computers that can be used in daily life. So people over history have

looked at things like raindrop falling on glasses or bubbles in a fish tank or the unpredictable behavior of a kitten to try to capture that randomness and translate it to ones and zeros and data. But there is a very rich history of the search for randomness and relying on external factors or things that happen in nature

and using that in real life. Can I tell you my favorite way to generate randomness? It comes from CloudFare, which is an internet security company. They have in their San Francisco office what they call the wall of entropy. What's the wall of entropy? It's a bunch of lava lamps lined up, and they have a camera looking at it. And wherever the blobs are going, that kind of translates to pixels, which translates to random numbers. So if you ever want to know

why your web pages are secure. There's a wall happening in San Francisco, a very groovy wall, I might add, of lava lamps, you know, creating that entropy that is needed. Okay, I don't want to move on from that story, but we have to. Let's sprint to the finish this Friday with some final headlines. Knock, knock, it's Robinhood. I've got your cash you ordered right here. That situation could soon be a reality after Robinhood announced it would start an online banking platform that will include perks like DoorDash and cash to your house when you request it.

called Robinhood Banking. The service is the next step in Robinhood's evolution from a disruptive trading platform to an all-in-one app for your financial life. If you pay for a gold subscription, $50 per year, you will have access to checking and saving accounts, same-day cash delivery, and even luxury perks like potential Masters and Met Gala tickets.

Not sure how that will work, but either way, it shows Robinhood is going after deep-pocketed consumers with a more exclusive-feeling banking experience. Yeah, they're definitely leaning into the exclusivity aspect. They also said that they would give access to private plane travel, personal chauffeurs, though they did not really elaborate on where these perks are actually coming from or how they would work for members.

But also, you're seeing the evolution of Robinhood as a platform. It's growing up as a banking platform. They're saying they're going to launch a wealth management aspect as well, where you can invest in this mix of ETFs and stocks. They would have a little bit of a management fee on top of that. Basically, you're seeing it just start to mirror some of the other features that you would expect of traditional banks with its own Robinhoodification flair. The fact that it can deliver cash to your doorstep

faster than these legacy banks is something that separates it, even as it is trying to compete and, you know, kind of catch up to them as well. GameStop is getting into the Bitcoin game, but the way it's going about it has investors scratching their heads. The roller coaster of a mean stop climbed higher earlier this week as investors cheered the board's unanimous approval of a plan to buy Bitcoin using corporate cash,

copying a move made famous by MicroStrategy. However, the excitement quickly turned to trepidation when it was revealed that GameStop planned to fund its shopping spree by issuing $1.3 billion in debt, leading to a 22% plunge in its stock yesterday. Plus, GameStop's foray into Bitcoin might not be as successful since the stock is already valued at more than twice its cash balance.

So analysts are skeptical it can boost that value using the same scheme that the more modestly valued microstrategy popularized. In other words, don't copy other people's homework if you are GameStop. This feels like a stand-up comedian on stage who's kind of bombing and then they just go immediately to crowd work to try to save their set. I mean, GameStop is a declining industry.

actual business. So this reeks of desperation that it would start buying Bitcoin like MicroStrategy has successfully done. The thing is, GameStop is doing a pretty good job of making its business more efficient and approaching profitability. It closed 1,000 stores last year, plans on closing a ton more this year. It only has a loss of less than $10 million over the past two years. So it's

eking towards profitability, but it's doing stunts like this to stay relevant in the meme stock world. And at least this one did not pay out for them. Finally, it turns out that The Hunger Games still has its fastball as a franchise. Sunrise on the Reaping, the latest Hunger Games novel from Suzanne Collins, is selling like hotcakes and moved more than 1.5 million copies worldwide during its first week, which is the biggest opening ever for a book in the illustrious series.

Its sales in the U.S. over that period have more than doubled that of its predecessor, The Ballad of Songbirds and Snakes, and more than tripled the number for Mockingjay, which came out in 2010 and is the last book that I thought existed in the series. But clearly, the dystopian world of Panem still has a stranglehold on the literary community, Neil. It does, and the film community as well. This franchise has made over $3 billion at the box office. They

already optioned this book for another movie coming out in 2026. So Suzanne Collins, I mean, what an absolute juggernaut. I also, though, had to look at Onyx Storm, which is Rebecca Yarrow's book in the fourth wing series. It sold 2.7 million copies in its first week. So it looks like

the new age of romanticism is surpassing, you know, the old guard of Hunger Games, even though Hunger Games, you know, still has some juice left in it. I think so. Let's wrap it up there. Thanks for starting your morning with us and have a wonderful Friday. For any questions, comments, or feedback, send an email to morningbrewdaily at morningbrew.com.

Let's roll the credits. Emily Milliron is our executive producer. Raymond Lute is our producer. Olivia Graham and Olivia Lake are our associate producers. Uchenna Waogu is our technical director. Scoop Stardaris is on audio, hair, makeup, volunteers as tribute. Devin Emery is our chief content officer, and our show is a production of Morning Brew. Great show today, Neil. I wish you all well.