AI Daily: Altman challenges Musk with plans for Neuralink rival

Catch up on the top artificial intelligence news and commentary by Wall Street analysts on publicly traded companies in the space with this daily recap compiled by The Fly:

NEURALINK RIVAL: Microsoft (MSFT)-backed OpenAI and its co-founder Sam Altman are preparing to back a company which will compete with Elon Musk’s Neuralink by connecting human brains with computers, heightening the rivalry between the two billionaire entrepreneurs, Financial Times’ Ivan Levingston, George Hammond and James Fontanella-Khan report. The new venture, called Merge Labs, is raising new funds at a $850M valuation, with much of the new capital expected to come from OpenAI’s ventures team, according to three people with direct knowledge of the plans. Altman has encouraged the investment and will help launch the project alongside Alex Blania, who runs World, an eyeball-scanning digital ID project also backed by the OpenAI chief, said two of the people.

NVIDIA COMPETITOR: Rivos, a chip startup that aims to compete with Nvidia (NVDA), is seeking to raise between $400M-$500M, according to two people familiar with the matter, The Information’s Valida Pau and Wayne Ma report. The startup, backed by Intel’s (INTC) CEO Lip-Bu Tan, is seeking a valuation of more than $2B, one of the people said. It’s not clear if the valuation would include the new investment, the authors note. If finalized, the new round would bring Rivos’ total funding to more than $870M since it was founded in 2021. The company is designing a graphics processing unit for release as early as 2026 that could make a dent in Nvidia’s dominance in the artificial intelligence chip market, according to four people with direct knowledge of the matter.

AI CHIPS: U.S. authorities have placed tracking devices in shipments of advanced chips that have been deemed as high risk of illegal diversion to China, Fanny Potkin, Karen Freifeld and Jun Yuan Yong of Reuters report, citing two people with direct knowledge of the law enforcement tactic. Five other people involved in the AI server supply chain say trackers have been used in shipments of servers from Dell (DELL) and Super Micro (SMCI) as well as chips from Nvidia (NVDA) and AMD (AMD).

Meanwhile, China is discouraging firms from buying Nvidia’s H20 AI chip despite its role in trade negotiations with the U.S., as Chinese authorities fear reliance on U.S. technology and potential security risks, and are instead pushing for domestic chip alternatives, The Wall Street Journal’s Raffaele Huang and Robbie Whelan report. Nvidia faces cybersecurity review demands in China amid concerns over chip tracking and potential “kill switches.”

CHROME ACQUISITION: RBC Capital analyst Brad Erickson notes that according to an unconfirmed Wall Street Journal article, Perplexity reportedly has submitted a bid to Alphabet to buy Chrome for $34.5B and positioned the deal as a way to provide a remedy to Google’s (GOOGL) Search case that it lost earlier this year. The proposed price is nearly 2-times the company’s last valuation but it has reportedly secured access to the necessary financing from VCs. The judge’s decision on what remedies will be mandated for Google is expected at any point here in August. The firm believes the judge is fully aware there are willing and able buyers – one in particular with a valuation of more than 15-times that of Perplexity. RBC has felt for some time that the browser would be critical to ramping distribution for competing horizontal GenAI applications and thus, relative to a $34.5B bid, it would think OpenAI potentially would be prepared to pay significantly more for it in an auction scenario given the value unlock. The firm has an Outperform rating on Alphabet with a price target of $220.

EXTREMELY WEAK RESULTS: Oppenheimer downgraded C3 AI (AI) to Perform from Outperform without a price target. The company announced “extremely weak” preliminary fiscal Q1 results which imply a 35% sequential revenue decline, the firm tells investors in a research note. Oppenheimer views the quarter as a “major concern” given the recurring nature of C3 AI’s subscription revenue, suggesting the services are not working as advertised. The firm is concerned that the results indicate secular weakness in the company’s underlying trends.