AI revenue, AI friends, and the Senate pushes ahead with social media regulation

Top News

• Microsoft promises AI revenue acceleration: Shares of Microsoft are down a few points this morning after the software giant posted cloud growth in the calendar second quarter which left some investors wanting. The company is also spending heavily on cloud infrastructure, promising investors that Azure growth will pick up in a few quarters after it handles supply constraints. (You can watch our Microsoft Earnings In Two here.)

• The Senate passes new child-protection bill: The Senate passed the Kids Online Safety Act (KOSA) and Teens’ Online Privacy Protection Act yesterday on a vote of 91-3. The bills face an uncertain future in the House. Still, the bipartisan nature of the bills underscores Congress's appetite to regulate social media. Some groups are worried that the bills could chill online speech, The Verge reports.

• Everyone’s talking about Friend: A new AI wearable is causing waves. Dubbed the ‘Friend’, the pendant costs $99 and is designed to be a companion instead of a helper. Friend is not the first AI hardware startup, a category that has been fraught with products that promise a bit more than they can deliver, leading to scathing online reviews. Friend, in contrast, merely listens to you and chats along. Alex preordered one to test and will report back when it arrives in early 2025.

TWiST500

As we expand the TWiST500 — now at around 75 startups and growing — I want to highlight a few companies that have been added recently.

Working through dozens of funding rounds from the last two quarters that were outsized compared to their traditional ranges, two names came up: Rivos and Etched.

Each has something interesting about it that made it ripe for inclusion, even if both companies are comparatively nascent and revenue-light compared to the Gustos and Deels that are also on the list.

As both companies are putatively Series A startups, we’d expect them to have less revenue than the goliaths of the private markets. Still, the pair are hardly traditional early-stage companies. Etched has raised $125 million, while Rivos has secured $250 million. Sure, Series As have gotten bigger over time, but those figures are massive even for today.

The large checks make sense. Etched is betting that chips designed to run transformer-related workloads will have a long and large market footprint. Chips are famously expensive to design and manufacture, so the capital raised fits the mission in question. What Rivos is precisely up to is not entirely clear — by design, the startup is playing coy — but does promise chips and hardware to run fast and efficient servers.

Both startups are a bet that compute demands continue to grow, and that lots of chips and more specialized silicon are the way forward. The wagers the two companies are taking could come up bare, but they both have a shot at a truly massive return. That makes them not only prime venture capital candidates but also perfect TWiST500 companies. — Alex

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This Week in Startups

E1986: Jason sat down with WEKA CEO Liran Zvibel and Valor’s Antonio Gracias to dig into what the data platform startup is up to, and why Gracias joined its board after its latest funding round. The conversation is a must-listen if you want to learn more about modern data management techniques. To close, the latest JCal winner Ramsey Schaffer, CEO of Uptrends AI came on to share what his startup is building.

E1985: Etsy CEO Josh Silverman swung by the podcast to talk about how his company is reacting to the AI era. Etsy is best known for its hand-crafted goods that small creators sell. Jason and Silverman dug into how to build and maintain a unique marketplace, operating a company in a remote-friendly world, and how organic traffic flows are changing today.

E1984: Jason and Alex’s latest news roundtable dug into the Google-Wiz deal’s demise, new AI models from Meta, and even the latest UBI study. Wiz’s choice to pursue an IPO over a sale could yield greater returns down the road, but at what price is not clear. Meta’s new Llama 3.1 405b model, meanwhile, has put open-source AI at the front of the pack when it comes to performance, shaking up the artificial intelligence landscape for months to come.

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