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Generative AI models require huge amounts of training data to enable their systems to produce advanced outputs. But the data that goes into them is often from sources where copyright restrictions are in place.

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San-Francisco-based startup Story said Wednesday that it raised $80 million of funding for a blockchain designed to prevent artificial intelligence makers like OpenAI from taking creators’ intellectual property without permission.

The round values the two-year-old company at $2.25 billion, sources familiar with the matter told CNBC. The sources preferred not to be named as the information has not been made public.

Story said that it raised the funds in a Series B round — typically the third major round of funding in a private startup’s growth journey after seed and Series A — led by Andreessen Horowitz, which is also known as a16z.

Crypto-focused venture capital firm Polychain and Brevan Howard, the investment fund of British billionaire hedge fund manager Alan Howard, also invested.

Building an ‘IP legoland’

A blockchain is a distributed database that maintains an immutable record of activity. It is the technology that underpins cryptocurrencies, such as bitcoin and ether.

Story acts as a blockchain network that allows creators to prove they made a piece of content and are the intellectual property owners by storing their IP on the platform.

The firm’s tech works to protect individuals and entities’ IP by embedding terms associated with it, such as licensing fees and royalty-sharing arrangements, into smart contracts.

Smart contracts are digital contracts stored on a blockchain that automatically execute once a certain set of terms are met.

This makes copyright holders’ IP “programmable,” SY Lee, Story’s co-founder and CEO, explained to CNBC, as it sets up rules for how their content can be used and the price to pay for reproducing or remixing their works.

The benefit of this, Lee said, is that it effectively cuts out the middlemen typically involved in disputes over copyright theft in the media landscape.

“Now it’s turned from IP into IP Lego,” Lee told CNBC. “Now, you don’t need to go through lawyers. You don’t need to go through the agents. You don’t need to do this very lengthy business development negotiation. You just embed your licensing, royalty-sharing terms into small contracts.”

Story makes money by charging a network fee for any action that takes place on its network.

One example of a firm using Story is Ablo, an AI tool that allows users to make their own tailored items of fashion using designs from household brands including French designer clothing firm Balmain and Italian luxury fashion house Dolce and Gabbana.

Brands are compensated for their use of fashion designers’ IP through various respective licensing and revenue-sharing agreements.

Fighting AI copyright theft

Story is now trying to tackle a timely problem with its tech — theft of copyrighted media on the internet by powerful generative AI models like OpenAI’s ChatGPT.

These models, which power many AI chatbots that are increasingly being used as an alternative to search, require huge amounts of training data to enable their systems to produce advanced and informative answers to user queries.

But the data that goes into fueling these AI models is often from sources where there’s copyright restrictions in place.

The New York Times last year hit Microsoft and OpenAI with a copyright lawsuit seeking damages over abuse of the newspaper’s intellectual property.

In the suit, the Times included several examples of instances where GPT-4 produced altered versions of material originally published by the newspaper.

Big tech companies like Microsoft, which has invested $13 billion into OpenAI and is reportedly entitled to a 49% stake in the firm, are “essentially stealing your IP for training purposes and actually capturing all the upside,” Lee said.

In a motion to dismiss part of the Times’ suit in March, Microsoft said that such claims were “unsubstantiated,” and that the lawsuit presented a false narrative of “doomsday futurology.”

Content used to train these models, Microsoft’s lawyers argued, “does not supplant the market for the works, it teaches the models language.”

Microsoft was not immediately available for comment when contacted by CNBC about Lee’s comments.

AI start-up Perplexity launches publisher program

Good IP is needed to train such AI models, Story’s Lee told CNBC, but he added that AI firms stand to lose long-term if they don’t adequately compensate the publishers and creators they’re sourcing those vast troves of IP data from.

“You need great IP going into AI to have a sustainable growth in AI. Without great human-created data, AI models are not going to be able to train themselves and improve themselves,” Lee said.

Not many startups are designing tech designed specifically to combat IP theft by AI.

One project from the University of Chicago, called Glaze, offers a free app for artists to combat the theft of their IP by AI tools with technology that makes subtle changes to artworks designed to disrupt AI models’ ability to read data on the works of art and mimic the style of the artwork and its artist.

Story, which was founded in 2022, plans to use the fresh cash to build out its IP network infrastructure and onboard more developer partners. The company already has over 200 developers using its platform to enable content creation using programmable IP.

Lee added: “There’s a huge, amazing digital renaissance making everyone a creator or a studio, but at the same time, if no one’s actually compensating and actually getting the IP monetized right, it’s a suicidal action for AI in the long term.”

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Microsoft AI chief Suleyman sees advantage in building models ‘3 or 6 months behind’

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Microsoft AI chief Suleyman sees advantage in building models ‘3 or 6 months behind’

Microsoft owns lots of Nvidia graphics processing units, but it isn’t using them to develop state-of-the-art artificial intelligence models.

There are good reasons for that position, Mustafa Suleyman, the company’s CEO of AI, told CNBC’s Steve Kovach in an interview on Friday. Waiting to build models that are “three or six months behind” offers several advantages, including lower costs and the ability to concentrate on specific use cases, Suleyman said.

It’s “cheaper to give a specific answer once you’ve waited for the first three or six months for the frontier to go first. We call that off-frontier,” he said. “That’s actually our strategy, is to really play a very tight second, given the capital-intensiveness of these models.”

Suleyman made a name for himself as a co-founder of DeepMind, the AI lab that Google bought in 2014, reportedly for $400 million to $650 million. Suleyman arrived at Microsoft last year alongside other employees of the startup Inflection, where he had been CEO.

More than ever, Microsoft counts on relationships with other companies to grow.

It gets AI models from San Francisco startup OpenAI and supplemental computing power from newly public CoreWeave in New Jersey. Microsoft has repeatedly enriched Bing, Windows and other products with OpenAI’s latest systems for writing human-like language and generating images.

Microsoft’s Copilot will gain “memory” to retain key facts about people who repeatedly use the assistant, Suleyman said Friday at an event in Microsoft’s Redmond, Washington, headquarters to commemorate the company’s 50th birthday. That feature came first to OpenAI’s ChatGPT, which has 500 million weekly users.

Through ChatGPT, people can access top-flight large language models such as the o1 reasoning model that takes time before spitting out an answer. OpenAI introduced that capability in September — only weeks later did Microsoft bring a similar capability called Think Deeper to Copilot.

Microsoft occasionally releases open-source small-language models that can run on PCs. They don’t require powerful server GPUs, making them different from OpenAI’s o1.

OpenAI and Microsoft have held a tight relationship shortly after the startup launched its ChatGPT chatbot in late 2022, effectively kicking off the generative AI race. In total, Microsoft has invested $13.75 billion in the startup, but more recently, fissures in the relationship between the two companies have begun to show.

Microsoft added OpenAI to its list of competitors in July 2024, and OpenAI in January announced that it was working with rival cloud provider Oracle on the $500 billion Stargate project. That came after years of OpenAI exclusively relying on Microsoft’s Azure cloud. Despite OpenAI partnering with Oracle, Microsoft in a blog post announced that the startup had “recently made a new, large Azure commitment.”

“Look, it’s absolutely mission-critical that long-term, we are able to do AI self-sufficiently at Microsoft,” Suleyman said. “At the same time, I think about these things over five and 10 year periods. You know, until 2030 at least, we are deeply partnered with OpenAI, who have [had an] enormously successful relationship for us.

Microsoft is focused on building its own AI internally, but the company is not pushing itself to build the most cutting-edge models, Suleyman said.

“We have an incredibly strong AI team, huge amounts of compute, and it’s very important to us that, you know, maybe we don’t develop the absolute frontier, the best model in the world first,” he said. “That’s very, very expensive to do and unnecessary to cause that duplication.”

WATCH: Microsoft Copilot beginning of a seismic shift in AI integration, says Microsoft AI CEO Suleyman

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Former Microsoft CEO Steve Ballmer says, as shareholder, tariffs are ‘not good’

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Former Microsoft CEO Steve Ballmer says, as shareholder, tariffs are 'not good'

President Trump’s new tariffs on goods that the U.S. imports from over 100 countries will have an effect on consumers, former Microsoft CEO Steve Ballmer told CNBC on Friday. Investors will feel the pain, too.

Microsoft’s stock dropped almost 6% in the past two days, as the Nasdaq wrapped up its worst week in five years.

“As a Microsoft shareholder, this kind of thing is not good,” Ballmer said, in an interview with Andrew Ross Sorkin that was tied to Microsoft’s 50th anniversary celebration. “It creates opportunity to be a serious, long-term player.”

Ballmer was sandwiched in between Microsoft co-founder Bill Gates and current CEO Satya Nadella for the interview.

“I took just enough economics in college — that tariffs are actually going to bring some turmoil,” said Ballmer, who was succeeded by Nadella in 2014. Gates, Microsoft’s first CEO, convinced Ballmer to join the company in 1980.

Gates, Ballmer and Nadella attended proceedings at Microsoft’s Redmond, Washington, campus on Friday to celebrate its first half-century.

Between the tariffs and weak quarterly revenue guidance announced in January, Microsoft’s stock is on track for its fifth straight month of declines, which would be the worst stretch since 2009. But the company remains a leader in the PC operating system and productivity software markets, and its partnership with startup OpenAI has led to gains in cloud computing.

“I think that disruption is very hard on people, and so the decision to do something for which disruption was inevitable, that needs a lot of popular support, and nobody could game theorize exactly who is going to do what in response,” Ballmer said, regarding the tariffs. “So, I think citizens really like stability a lot. And I hope people — individuals who will feel this, because people are feeling it, not just the stock market, people are going to feel it.”

Ballmer, who owns the Los Angeles Clippers, is among Microsoft’s biggest fans. He said he’s the company’s largest investor. In 2014, shortly after he bought the basketball team for $2 billion, he held over 333 million shares of the stock, according to a regulatory filing.

“I’m not going to probably have 50 more years on the planet,” he said. “But whatever minutes I have, I’m gonna be a large Microsoft shareholder.” He said there’s a bright future for computing, storage and intelligence. Microsoft launched the first Azure services while Ballmer was CEO.

Earlier this week Bloomberg reported that Microsoft, which pledged to spend $80 billion on AI-enabled data center infrastructure in the current fiscal year, has stopped discussions or pushed back the opening of facilities in the U.S. and abroad.

JPMorgan Chase’s chief economist, Bruce Kasman, said in a Thursday note that the chance of a global recession will be 60% if Trump’s tariffs kick in as described. His previous estimate was 40%.

“Fifty years from now, or 25 years from now, what is the one thing you can be guaranteed of, is the world needs more compute,” Nadella said. “So I want to keep those two thoughts and then take one step at a time, and then whatever are the geopolitical or economic shifts, we’ll adjust to it.”

Gates, who along with co-founder Paul Allen, sought to build a software company rather than sell both software and hardware, said he wasn’t sure what the economic effects of the tariffs will be. Today, most of Microsoft’s revenue comes from software. It also sells Surface PCs and Xbox consoles.

“So far, it’s just on goods, but you know, will it eventually be on services? Who knows?” said Gates, who reportedly donated around $50 million to a nonprofit that supported Democratic nominee Kamala Harris’ losing campaign.

— CNBC’s Alex Harring contributed to this report.

WATCH: There will be many LLM winners, says infrastructure investor Morrison

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AppLovin can offer TikTok ‘much stronger bid than others,’ CEO says

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AppLovin can offer TikTok 'much stronger bid than others,' CEO says

Piotr Swat | Lightrocket | Getty Images

AppLovin CEO Adam Foroughi provided more clarity on the ad-tech company’s late-stage effort to acquire TikTok, calling his offer a “much stronger bid than others” on CNBC’s The Exchange Friday afternoon.

Foroughi said the company is proposing a merger between AppLovin and the entire global business of TikTok, characterizing the deal as a “partnership” where the Chinese could participate in the upside while AppLovin would run the app.

“If you pair our algorithm with the TikTok audience, the expansion on that platform for dollars spent will be through the roof,” Foroughi said.

The news comes as President Trump announced he would extend the deadline a second time for TikTok’s Chinese-owned parent company ByteDance to sell the U.S. subsidiary of TikTok to an American buyer or face an effective ban on U.S. app stores. The new deadline is now in June, which, as Foroughi described, “buys more time to put the pieces together” on AppLovin’s bid. 

“The president’s a great dealmaker — we’re proposing, essentially an enhancement to the deal that they’ve been working on, but a bigger version of all the deals contemplated,” he added.

AppLovin faces a crowded field of other interested U.S. backers, including Amazon, Oracle, billionaire Frank McCourt and his Project Liberty consortium, and numerous private equity firms. Some proposals reportedly structure the deal to give a U.S. buyer 50% ownership of the company, rather than a complete acquisition. The Chinese government will still need to approve the deal, and AppLovin’s interest in purchasing TikTok in “all markets outside of China” is “preliminary,” according to an April 3 SEC filing.

Correction: A prior version of this story incorrectly characterized China’s ongoing role in TikTok should AppLovin acquire the app.

WATCH: AppLovin CEO Adam Foroughi on its bid to buy TikTok

AppLovin CEO Adam Foroughi on its bid to buy TikTok

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