Also: Iger's new ally, GM's EV miss and Huawei's OS
Good morning.
Kudos to my colleague Jessica Mathews, who started the New Year by assembling the views of smart money investors on generative AI prospects for 2024. You can read her full report for Fortune’s Term Sheet newsletter here. But for the time-crunched, here’s my summary: AI has enormous potential to transform business and society, but don’t expect a straight-line climb to the sky. This year is likely to be one of retrenchment, as investors discover many of the companies they threw money at don’t have a workable business model, and many big companies find that the cost of compute outweighs the benefit. And of course, there are also the Four Horsemen of the AI-pocalypse: Data Bias, Data Security, Copyright Infringement, and Hallucination.
Here’s the best quote of the bunch:
“Due to overhyped expectations and free-flowing AI budgets in 2023, we’ll see significant churn among AI companies in 2024 as companies pull back on AI experimental budgets. Many companies will see growth stall and cash burn increase as they figure out business models, including pricing, and deep product market fit use cases. The companies that will continue to grow and thrive will figure out measurable ROI cases and deeply embed into existing workflows.“
—Cathy Gao, partner, Sapphire Ventures
I suspect this anticipated churn may have something to do with why high-flying tech stocks—the so-called Magnificent Seven—are taking a breather in the first week of the year.
And don’t read too much into the fact that BYD has slightly surpassed Tesla in the market for electric vehicles. The two compete at wholly different price points and in largely different geographical markets. Suffice it to say that both are contenders, with dozens—or in China, hundreds—of others struggling to keep up.
More news below.
Alan Murray
@alansmurray
alan.murray@fortune.com
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Bob Iger wins an ally
The Walt Disney Company will provide confidential information with investment company ValueAct; in exchange, the Disney shareholder will support the entertainment company’s slate of directors at the 2024 shareholder meeting. The agreement gives Disney and its CEO Bob Iger a key ally heading into a proxy fight with activist investor Nelson Peltz, who is demanding a board seat. The Associated Press
GM’s EV miss
General Motors sold 75,000 EVs in 2023, far below its target of 150,000. The company has struggled to ramp up production of its batteries, with workers sometimes forced to assemble them by hand due to problems with automation. GM is also trying to change how it sources some of its EV parts to ensure its cars comply with new U.S. rules barring tax credits for vehicles sourced from China or Chinese companies. Bloomberg
HarmonyOS
Huawei’s locally-developed operating system HarmonyOS is set to become the country’s second most used in China, beating Apple’s iOS, according to a report from analytics firm TechInsights. Huawei launched HarmonyOS in 2019, months after the Trump administration put the Chinese tech company on a U.S. trade blacklist. Now, companies like Alibaba, Meituan and McDonald’s China are pledging to develop services for the domestic operating system. South China Morning Post
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What’s next for tech in 2024? Deloitte’s 2024 TMT Predictions dives into trends and technologies shaping our future. The report encompasses a range of topics: Generative AI, elite women’s sports, streamers pivoting to profits, and more. Read here.
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