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1. Microsoft seeks to differentiate Azure with 3 new offerings
  • OpenAI’s GPT-3 language model in Microsoft’s AI platform: Microsoft, which invested $1B in AI research firm OpenAI in mid-2019, holds an exclusive license to OpenAI’s GPT-3 natural-language model (including access to the underlying code). Microsoft plans to commercialize GPT-3 in its AI products and enterprise services, though details are limited. The general-purpose GPT-3 family, considered the largest and most advanced language model in the world with 175B parameters, can be applied to use cases ranging from journalism to chatbots, semantic search, and summarization. Microsoft has been investing in large AI models – what it calls “AI at Scale – including its own Microsoft Turing model family as well as a supercomputer built to train OpenAI’s models. OpenAI will continue to make GPT-3 available to developers through its own Azure-hosted OpenAI API, which was launched Jun 2020 in limited beta.
  • Azure Communication Services: Microsoft also announced the launch of Azure Communication Services, which – similar to Twilio – streamlines the process for developers of adding voice- and video-calling, chat, SMS text-messaging, and traditional telephony to mobile apps, desktop applications and websites. The offering commercializes the enterprise-grade infrastructure used by Microsoft Teams (which supports 5B+ meeting minutes each day), and is accessed via a set of APIs and SDKs with “just a few lines of code.” Communications are encrypted and compliant with HIPAA and GDPR, and developers using the platform can also tap other Microsoft services such as Azure AI’s language translation. Microsoft calls it the “first fully managed communication platform offering from a major cloud provider,” though Google and Amazon do offer related features.
  • Differentiation continues to be the key challenge for the respective cloud players in the slowing (though still growing) cloud market. Amazon AWS and Microsoft Azure are the clear #1 and #2 players, followed by Google Cloud. Azure revenue grew by 47% in the most recent earnings quarter, though its 18-20% market share still lags behind Amazon AWS (31-33% market share). For Microsoft Azure, its differentiators have been its strength in the enterprise and hybrid cloud – which it is now building on top of in an effort to pull ahead.
Related Briefs:
  • Jun 19 2020 (3 Shifts): OpenAI releases an enormous general-purpose language API for commercial use
  • Nov 22 2019: Shifting tides around the leaderboard in the global cloud race
2. Tesla’s plan to cut battery costs by 56% within 3 years
  • Its push to shift battery production in-house will include manufacturing its own battery cells using new techniques (it already builds its own battery packs), buying unmined lithium deposits, and processing raw materials. Tesla aims to reach 10-20 terawatts of battery production per year and ultimately rely less on its top 3 battery suppliers (Panasonic, LG Chem, Amperex Technology).
  • With respect to the material composition of its lithium-ion batteries, Tesla is working to reduce and eventually phase out expensive cobalt in favor of nickel. (Musk has urged mining companies to mine more nickel.) It is also developing ways to treat silicon – which is abundant but has challenges with degradation – so it can use a more raw (and less expensive) metallurgical grade.
  • Tesla expects the same advances to result in a 54% increase in driving range. In the slightly nearer term, it plans to launch a new Plaid version of its flagship Model S in 2021, which will cost about $140K and be able to run 520 miles on a single charge (its current Model S Long Range Plus can go 400 miles).
  • A $25,000 price point would, however, make a Tesla competitive with a traditional car. It also holds a fairly wide lead on its competitors, given its multiple layers of technological advances. If Tesla can get close to its cost reduction and production targets, it will continue to be the player to beat in the electric-vehicle industry. With California – often a bellwether for national regulation – recently instituting emission rules that could bar new traditional internal-combustion vehicles by 2035, Tesla is looking well-positioned for an electric-vehicle future.
Related Briefs:
  • Sep 11 2020 (3 Shifts): GM will manufacture Nikola’s electric and fuel-cell trucks – if Nikola doesn’t implode
  • Jun 5 2020 (3 Shifts): Investments may spur a rebound in China’s electric-vehicle industry
3. Big 4 accounting firms release the first coordinated ESG reporting standards
  • Earlier this week, the Big 4 accounting firms – Deloitte, KPMG, PwC, and EY – released a joint framework for environmental, social and governance (ESG) reporting standards. The effort, in collaboration with the World Economic Forum’s International Business Council (IBC), is intended to encourage the IBC’s approximately 130 large member companies to adopt a coordinated ESG reporting approach and incorporate into their 2021 financial reporting.
  • The release comes at a time when ESG-focused investing – which considers a company’s performance relative to a broad spectrum of social issues ranging from its carbon footprint to the diversity of its leadership – is at an all-time high. An estimated $19B was invested in ESG-focused ETFs in 2020, compared to just $8B last year. Deloitte estimates that half of all assets under management in the US could have an ESG mandate by 2025. Given the amount of capital being deployed against social impact, investors have become increasingly restless about the lack of consistent metrics.
  • The Big Four framework includes 21 core metrics and 34 expanded metrics organized across 4 pillars: Principles of Governance (how a company defines and adheres to an ethical purpose), Planet (e.g. climate change, ecological impact, and water consumption), People (e.g. diversity, pay equality, employee health, training) and Prosperity (e.g. employment, wealth generation, innovation, community impact).
  • With the pandemic, wildfires and hurricanes, and social issues dominating headlines, there has been growing public attention on ESG issues. This release of the first coordinated approach to ESG reporting by the leading accounting firms could be a meaningful signal of a sea change. The Big 4 are certainly equipped to provide program management, internal audit and assurance services to companies looking to adopt the standards.
  • Challenges remain, however, and whether a critical mass of businesses choose to adopt the standards remains to be seen. Some may view adoption as opening their businesses up to greater liability. Parallel efforts across geographies and industries are stirring enthusiasm but could also complicate implementation. Finally, consistent and effective measurement will not be easy, even with agreed-upon reporting standards.
Related Briefs:
  • Sep 18 2020 (3 Shifts): Major climate commitments by tech firms & energy giants
  • Feb 26 2020: Billions in climate funding from Bezos, Microsoft, KKR & others – Why now?
Disclosure: Contributors have investment interests in Microsoft. Amazon and Google are vendors of 6Pages.
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