Despite weeks of Wall Street cold-waterboarding AI, Nvidia somehow kept dry — until now. A bad day for the stock market was even worse for the chip juggernaut. And it had a bad PR day to boot. 

Think the teenage boy in your life watches a lot of YouTube? He’s got nothing on Nvidia, except perhaps the law. To compile training data for its AI chips, Nvidia was downloading 80 years’ worth of video per day off of YouTube, Netflix, academic databases, and other sources in what may be serial copyright infringement, according to internal documents seen by 404 Media. 

Training Montage

The market meltdown is in part a course correction to human hallucinations about AI’s near-term prospects. None of this explains why it never occurred to Nvidia to ask for permission — or, umm, a going rate — before compiling datasets that included the links to as many as 130 million YouTube videos. In the process, per documents and Slack messages seen by 404 Media, Nvidia employed IP address-hiding tools to circumvent YouTube’s anti-scraping firewalls, while also tapping datasets previously compiled by academics that were designated for research-only purposes.

When staffers raised legal or ethical concerns, they were told they had “umbrella approval” from the highest level of the company to use the content, 404 Media reports. One vice president-level employee even suggested downloading “the whole Netflix too.” Think of the popcorn. No, think of the lawyers: 

• “Copyright law protects particular expressions but not facts, ideas, data, or information. Anyone is free to learn facts, ideas, data, or information from another source and use it to make their own expressions. Fair use also protects the ability to use a work for a transformative purpose, such as model training,” a Nvidia spokesperson told 404 Media.
• Meanwhile, a Google spokesperson referred to a previous statement that called such actions a “clear violation” of its terms of use, a sentiment shared by a Netflix spokesperson.

Of course, all of this is coming out as Nvidia suffers more than a scrape from investors. The company saw a share price skid of nearly 7% Monday, helping to fuel a nearly 3% downturn of the tech-heavy Nasdaq 100. Nvidia’s share price is still up over 100% year-to-date.

We’re Thriving: Not everyone is an AI pessimist just yet. On Monday AI chip startup Groq raised a $640 million Series D led by BlackRock at a $2.8 billion valuation, or nearly three-times greater than its previous valuation. Meanwhile, Joshua Kushner’s Thrive Capital, which has previously invested in OpenAI, raised $5 billion for its largest pair of venture capital funds to date, per a Wall Street Journal report. 

No part of Big Tech is too small for European regulators.

The European Commission announced on Monday that it had secured a concession from TikTok under the relatively new Digital Services Act (DSA). Specifically TikTok agreed to permanently withdraw a rewards program that it had on “TikTok Lite,” essentially a pared-down version of its core app. OK, sure, it’s a niche part of TikTok’s business with almost no European presence, but it’s still the first official Big Tech retreat the EU has scored under its new, beefed-up regulations. And it could be a sign of bigger things to come. 

I Can’t Believe It’s Not TikTok

TikTok Lite is designed to work on low-data phones, ones with just a 2G or 3G connection. According to a Mozilla report, TikTok Lite has over 1 billion users globally, and it’s become popular in markets including South Africa, Indonesia, and the UAE, according to figures supplied to PC Mag by AppFigures. 

TikTok Lite is missing a lot of features from the core TikTok app — which raises some user protection issues, according to Mozilla — but what it does have is a program called Rewards, which assigns points to users for doing things like consuming videos or interacting with them. Collect enough points, and you can swap them for real-world money, e.g., an Amazon voucher. 

In April, TikTok brought TikTok Lite to France and Spain. The EU was quick to request a risk assessment on how this might impact child users, and it was suspended the same month: 

• The EU’s main concern was what kind of compulsive behaviors the Rewards system might inspire, particularly in children. 
• Technically TikTok Lite is to be downloaded by users 18 and older, but given that age-gating on apps like TikTok is pretty much built on an honor system and TikTok’s user base skews young, that wasn’t much comfort to lawmakers.

“The available brain time of young Europeans is not a currency for social media — and it never will be,” European Commissioner for Internal Market Thierry Breton said in a statement.

First Notch: This is the first DSA investigation to be formally opened and wrapped up, although other Big Tech companies have tried (and failed) to offer compromises in how their products work to get off the EU’s hook. Microsoft tried to tempt the EU with concessions on its bundling of its Teams and Office products, but was ultimately unsuccessful. Similarly, Meta rolled out a paid-for, ad-free version of its services in an attempt to side-step regulation — but instead the EU said the new service was itself a violation of the DSA.

As with Pringles, once a stock pops, you just can’t stop selling. 

Snack maker and Pringle-owner Kellanova, formerly known as Kellogg’s, popped 16% on the NYSE Monday, following a Reuters report that said it’s an acquisition target for privately-held confectionary giant Mars. Yesterday, you may have noticed, wasn’t an especially good day for markets, either.

A Crisp Pairing

Kellanova, which broke off from WK Kellogg last year, has a stable of high-profile, high-calorie brands including Pop-Tarts, Rice Krispies Treats, and Eggo waffles. Last week, the company reported net income of $493 million and revenue of $3.2 billion — both ahead of FactSet consensus estimates — and hiked its 2024 guidance a half-percentage point to 3.5% sales growth.

After Monday’s pop, it’s trading at about 27 times its earnings, in line with the current S&P 500 average. But dealmaking in the packaged food sector is brisk — J.M. Smucker bought Hostess for $5.6 billion last year; Campbell Soup bought Rao’s Homemade owner Sovos for $2.3 billion this year — and CNBC reported that Hershey, Mondelez, and PepsiCo could also size up Kellanova. The incentives for sector consolidation are clear: 

• Food prices were up 25% from 2019 to 2023, the Department of Agriculture said earlier this year, well ahead of core inflation. In March, 64% of consumers said in a Purdue University survey that they expect food prices to keep rising into 2025.
• In May, BMO Capital Markets hiked its estimate of annual weight-loss drug sales to $150 billion by 2033, up from $100 billion. Morgan Stanley analysts estimate US consumption of soft drinks and sweet and salty snacks could fall as much as 4% by 2035, when as much as 9% of the country’s population may be taking obesity drugs.

Astronomical: An acquisition by Mars, which is still owned by the family of founder Frank C. Mars and said it made over $50 billion in sales last year, would likely dwarf its previous biggest takeover — a $9.1 billion acquisition of veterinary hospital operator VCA in 2017 — like the planet Jupiter dwarfs the family name: Kellanova’s market cap is $25 billion. That’s like a whole Snickers bar versus a single M&M.