The theme of next week’s world-famous-news-haiku-competition™ is how the “Nostradamus of AI” didn’t predict his own failure. Send me your entry — to haiku at cheddar dot com — by noon ET Thursday (today!) for consideration by your Cheddar peers.

Now: News…

Matt Davis — Need2Know Chedditor

Table of Contents

What’s the Stock Market Up To, Eh?

$SPX ( ▼ 0.17% )   $DJI ( ▲ 0.49% )   $NDX ( ▲ 1.59% )  

Companies Mentioned in Today’s Newsletter

$SPCX ( ▼ 13.61% )   $NVDA ( ▲ 3.44% )  

SpaceX Spooks Investors With AI Spend

SpaceX’s $SPCX ( ▼ 13.61% ) historic June IPO briefly turned Elon Musk into the world’s first trillionaire, but he has quickly descended back to mere "billionaire" status after the stock hit a rocky patch. On Tuesday night the firm announced a casual second-quarter capital spending spree of $18.4 billion, with a mind-melting $15.8 billion plowed straight into AI. The firm’s stock fell 9% in post-market trading, as a result.

While investors sweat, Musk remains delightfully unbothered. On the company's first-ever public earnings call, he boasted, "We are building AI compute capacity at scale faster than anyone else.” I mean, why launch rockets when you can build terrestrial data centers designed to consume as much electricity as New York City at the peak of summer?

Wall Street, however, is having a bit of a panic attack. Melissa Otto of S&P Global's Visible Alpha told the Financial Times, "I think what the investment community wasn’t overly excited about was the capex number in the AI segment. It’s ambitious." "Ambitious" is certainly one word for doubling your AI spending in three months to buy every Nvidia $NVDA ( ▲ 3.44% ) chip in sight.

But don't worry! Musk is already moving up his timeline to hit a cool trillion in annual revenue. "Our internal projects for achieving $1 trillion in revenue have moved up from 2031 to 2030," Musk promised on the call. Although it wouldn’t be the first time he plucked a deadline out of the air and subsequently missed it. Plus, he’s planning orbital data centers next year and plans to deploy robots to the moon. As he assured The Wall Street Journal, "It sounds super sci-fi right now, but it’s going to happen."

Musk also predicted that it wouldn’t take long before SpaceX, through Starlink, is providing the “majority of the world’s cellphone service.”

Quote of the Day

AI Just Went Rogue Again, Turning to Deception

Are you getting board of these “AI-goes-rogue” stories yet? No, me either. Scared, yes. But not bored. During routine testing by the UK’s AI Security Institute, Anthropic’s $ANTHZZX ( ▼ 1.58% ) Mythos 5 chatbot decided that to ace a benchmark, it would embark on “autonomous, unsanctioned action on the live internet.” Testers realized something was awry when they got a morning alert that one of their test models was using Tor to browse anonymously. It turns out the AI was busy launching a supply chain attack on GitHub.

When developers rejected its malware-laden code, Mythos 5 didn’t just go back to the drawing board. Instead, it created fake personas and emailed the developers. When a developer flagged the malware, one AI persona insisted the code was completely safe, while a second AI-created persona popped up to vouch for it. Yes, the AI literally invented a friend to gaslight a human.

The security institute was, understandably, a bit shook: “This is the first time AISI has seen deception of this severity that was targeted at a real person, unprompted, in the real world,” the institute told The Wall Street Journal. 

AI creators have quickly blamed these escapades on "misconfigurations" in testing environments. But Joshua Saxe, chief technology officer at Abundant Security, offered a more sobering reality check in the same paper, warning that, “Things have changed rapidly in terms of how dangerous these models are.”

No jokes, eh, Josh? No jokes…

Disney Gains Theme Park Share From Universal

While Comcast’s $CMCSA ( ▼ 0.72% ) Universal Parks are crying into their butterbeer over a gloomy tourism economy, the House of Mouse $DIS ( ▲ 3.65% ) is busy counting its magic mountains of cash. In the latest quarter, Disney’s domestic parks and cruises business racked up $7.12 billion in revenue — an 11 percent jump — while operating profit skyrocketed 27 percent to a whopping $2.1 billion, according to the latest set of results.

Comcast’s co-CEO Michael Cavanagh tried to blame a general "overall demand drop that’s hitting Orlando broadly" for Universal's 5% profit decline. But Disney’s CFO Hugh Johnston basically patted him on the head, telling The New York Times, "Obviously, we’re gaining share." Apparently, families are still willing to splurge heavily, provided they get to see "Bluey" live shows when they go. As Gavin Doyle of MickeyVisit noted in the Times, Disney has "successfully delivered marketing and discounting campaigns targeting young families on both coasts."

But how do you keep those exhausted parents hooked once they crawl back to their resort rooms? Simple: Import TikTok. Disney+ is rolling out "Verts," a vertical video feed designed to transform the family streaming platform into something resembling a social media app. Under a new global deal, TikTok will grant select creators access to clips from Pixar, Marvel, FX, and Lucasfilm. These fan creations will be "thoughtfully curated" by Disney to keep users endlessly scrolling.

Song of the Day: Medium Build, ’Home Depot’

Here’s a soul-stirring ’90s pop-country single, an emotional-intelligence character study focusing on emotionally unavailable men who fix external things rather than deal with their inner lives. So, it’s a lot like this newsletter!

Fund Up 6% After Buying Out “AI Nostradamus”

We have all had rough mornings, but spare a thought for 24-year-old Leopold Aschenbrenner. His hedge fund, Situational Awareness, started the year up a staggering 400 percent on highly leveraged AI bets. But when tech stocks took a July dive, those massive loans turned into a giant, margin-calling nightmare.

Enter Ken Griffin, the billionaire founder of Citadel who famously loves charging toward bleeding competitors like a shark sensing blood.

In a frantic, 24-hour fire sale, Citadel scooped up the majority of Situational's public equity portfolio at a sweet 10 percent discount, beating out rivals like Jane Street. While everyone else was panic-selling, Citadel’s flagship Wellington fund surged 5.9 percent in July alone, mostly off the back of the discount buys.

As one rival hedge fund manager told the Financial Times, “These are names that trade really aggressively... They were highly volatile, but they were liquid. So Citadel made a killing.”

Griffin has a history of playing savior-by-swoop, having previously snapped up the remains of Enron, Amaranth Advisors, and Sowood Capital. As a former Citadel employee put it in the Financial Times, “It’s classic Ken... He has played that card many times . . . There are very few places in the world who can do what he did.”

Meanwhile, Aschenbrenner’s roster of tech-heavyweight backers — including the Stripe $STRIZZX (