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We got big news in the past couple of days concerning a European court ruling against Google. But bear with me, this is not one of those knee-jerk anti-U.S. tech decisions we often see coming out of Europe. This ruling makes some sense—and could have broader implications for the AI sector. A court in Germany found that Google is responsible for what its AI models say in AI-written answers to search results. While the ruling is preliminary, according to Google, the finding spotlights an unresolved question about who’s responsible for costly errors made by AI models.
The court ruled in favor of two businesses that sued Google over AI Overviews results describing those businesses as scams when in fact they weren’t. (German publication The Decoderreported the ruling.) The errors were made by Google’s AI—the judgment noted that the AI Overviews answer said things not mentioned by the websites that were the supposed source. “These are unique assertions invented by Google’s AI tool,” the ruling said, which Google “must accept responsibility for.”
The ruling highlights how AI-written responses could undercut the legal protections Google and other tech firms enjoy in the U.S. under section 230 of the Communications Decency Act. That law says tech firms aren’t liable for content that appears on their services. Some of those same protections apply in Germany, the ruling indicated: “For standard search engines, courts usually rule that operators do not have to check every link in advance.”
But as the ruling points out, an AI Overview answer, unlike a traditional search response, “weaves information together to create brand-new text statements.” (In a statement, Google pointed out that “the overwhelming majority of responses” in AI Overviews are accurate, although it acknowledges Overviews can get things wrong at times.)
Google had argued, according to the ruling, that users could check AI answers by looking at the websites the answers link to. But the court noted, “If an AI overview were legally treated as completely unreliable text that required users to check every single link anyway, the entire feature would lose its stated purpose.” Good point!
Oracle's Mixed Quarter
Oracle’s expansion of its AI cloud business is on track. But its pesky software business is holding back its overall growth. Software has long been Oracle's most important operation, but AI data centers now outshine software.
The company reported on Wednesday that in the May quarter, concluding Oracle’s fiscal year, revenue grew 21%, a percentage point slower than in the previous quarter, although the slowdown appeared to be due to currency fluctuations. On a constant currency basis, Oracle’s growth picked up. Even so, a 20% or so growth rate understates the massive explosion underway in Oracle’s cloud operation, where revenue jumped 93% in the quarter compared with a year earlier to $5.8 billion.
On the software side, however, it’s a different story. Oracle’s traditional software business has been declining, as businesses switch away from buying software to subscribing to it in the cloud. Oracle has a cloud software business that should in theory pick up some of the customers switching away. But businesses have lots of choices about cloud software, with new AI firms widening the array of those alternatives.
And Oracle’s own cloud software business isn’t doing that great. It grew just 10% to $4.1 billion in the most recent quarter, 3 percentage points slower than in the previous quarter. Oracle executives noted that contracted cloud software revenue is growing more quickly than we saw in the quarter. Even so, investors have reason to worry about the company’s software outlook.
In Other News
• OpenAI CEO Sam Altman told staff in a Slack message on Monday that he expects OpenAI to go public “within the next year” and that “many things could cause it to be sooner or later in that range, but filing now gives us optionality if we want to go sooner.” Another OpenAI leader also teased an upcoming new AI model the company is preparing to release.
• SoftBank is running into further problems borrowing $6 billion secured against its OpenAI stake, Bloomberg reported.
• Advertisers can now create ads for specific products on ChatGPT by sharing feeds of product information with OpenAI, according to communications with advertisers reviewed by The Information.
• Microsoft’s Xbox gaming unit plans to cut staff in the coming months as its financial picture worsens, according to someone with knowledge of the plans. In a note to staff Wednesday, CEO Asha Sharma said Xbox’s “accountability margins”—a term Microsoft uses internally to refer to profit margins—have fallen to 3% in the fiscal year ending this month, a trend she said “cannot continue” (more here).
Today on The Information’s TITV
Check out today’s episode of TITV in which we hear initial reactions to Claude Fable 5 from Replit’s head of AI.
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