Axios

It's no secret that AI has become a splitting headache for private equity, or at least for funds that bought big into enterprise software.

• But this isn't just a backward-looking problem, which can be temporarily stemmed by Q1 equity markdowns and maturing debt renegotiations.
• Almost every industry big that spoke to Axios at the Milken Global Conference this week said that AI has created massive modeling challenges for new deals, almost regardless of sector.

Private equity is a long-term asset class, typically holding portfolio companies for a minimum of three or four years.

• For context, it's been only three-and-a-half years since ChatGPT was first released.
• Subsequent AI advancements — including the introductions of Claude, Gemini, etc. — have upended industries.
• Any financial sponsor (or lender) who claims a high degree of confidence in the environment three-and-a-half years from now is either lying or self-deluded. Even if it partners with a major frontier lab.

"Modeling exit multiples has always involved a lot of guesswork, but now it feels like throwing at a dartboard blindfolded," said one private equity veteran.

• The known unknowns are more pronounced, even in industries that appear AI-resistant or more likely to benefit from the tech than be disintermediated by it.

Private equity has plenty of dry powder, with limited partners continuing to invest despite the DPI drought.

• So new investments will obviously be made. Even if the industry's long-term nature, always one of its greatest strengths, is becoming a material weakness.

After years of development, autonomous trucks are gaining traction across the Sunbelt, but the industry's next breakthrough is economic, not technical.

Why it matters: Large-scale adoption won't happen until driverless trucks become cheaper to operate than human-driven ones — an inflection point that could soon reshape freight logistics, labor and supply chains.

Anthropic said Wednesday it has struck a deal to gain access to compute capacity from Elon Musk's SpaceX, a move that could help the company deal with surging demand.

Why it matters: Anthropic has been struggling to meet the needs of developers which has led to aggressive rate caps and a shift to usage-based pricing.

The way leaders get advice is changing.

Meet ALEX by Admired Leadership, an AI coach built on a rare foundation: more than 40 years of research into 15,000 exceptional leaders and nearly 2 million words of proprietary research on what actually works in high-stakes leadership moments.

If AI causes a sustained surge in the economy's productivity potential, it will significantly ameliorate America's dire fiscal picture — though by how much depends on how bumpy the path is for workers and how much the government does to assist people whose jobs are displaced.

The big picture: That's the upshot of new modeling from the Budget Lab at Yale, which shows that in the most optimistic scenario — one with strong productivity growth but without mass unemployment — the national debt would level off as a share of the economy.

Open-source AI platform Hugging Face will formally launch an app store Wednesday for its Reachy Mini robot, CEO Clément Delangue tells Axios.

Why it matters: The goal is to help nontechnical people create customized uses for the open-source robot, Delangue said.

LOS ANGELES — Media companies should focus on creativity instead of growth, The Chernin Group co-founder and North Road chair Peter Chernin said at a May 3 Axios Live event.

Why it matters: Original content gives smaller studios a rare opportunity to compete with industry titans.

Axios' Dan Primack spoke to Chernin for the event, which was sponsored by Edelman Smithfield.

Fun fact: At the time of the interview and a first for the streaming platform, Chernin's production company had the No. 1 TV show ("Man on Fire") and movie ("Apex") on Netflix.

What they're saying: "You can't beat an incumbent on scale," Chernin said. "You beat an incumbent on creativity."

• Studios are also "wildly over-focused on sequels," he added. "Those companies should be in the business of creating and inventing original" intellectual property.
• "The most exciting things happen where young people and talent and technology come together."

Case in point: North Road's new movie "Backrooms," directed by YouTube creator Kane Parsons and based on a 2019 viral internet post, is projected to be "the most successful new horror movie in the last several years," Chernin said.

What's next: Chernin recommends that major platforms rethink their approach to keeping everything in-house when it comes to ownership, production and distribution rights.

• "Embrace independent, creative companies" to stay competitive and relevant, Chernin said.
• "Resisting technology is a stupid idea," he added.

Content from the sponsor's segment:

Lisa Leiter, Edelman Smithfield's managing director and U.S. co-head of financial services, told Axios publisher Nicholas Johnston that the rise of AI is causing concern.

• "People are worried about losing their jobs," she said, "and there's a fear that [AI] could really damage society."
• Companies should be clear, concise and specific as they share information with the public to reinforce trust, she added.

The director of the Pentagon's Economic Defense Unit has heard your "Deal Team Six" jokes. He thinks the nickname is both fun and fitting.

• "Economic warfare has been a part of all successful nations for thousands of years," George Kollitides, who's months into the job, told Axios at the Milken Institute Global Conference in California.

The big picture: Dealmaking is synonymous with national security. There is no missile production, no shipbuilding, no crazy venture valuations, no European rearmament and no American reindustrialization without it.

Scale AI CEO Jason Droege tells Axios that AI is often too unreliable for mission-critical use by business, military and government.

• "The cost of mistakes in these environments can be high," Droege, 47, said in an interview from San Francisco, where Scale — which celebrated its 10th anniversary this week — is based.

Why it matters: Droege — who succeeded founder Alexandr Wang last June when the wunderkind became Meta's first chief AI officer, and Meta took a 49% stake in Scale — wants to signal that it isn't merely a data annotation company, but has long been an AI infrastructure and deployment company.

AI is helping make doctors the unwitting stars of deepfake videos that hawk questionable products or spread misinformation, prompting calls from clinicians for more privacy and transparency laws.

Why it matters: The profusion of AI content on social media platforms could further erode public trust in the medical establishment.

Coinbase is the latest in a string of companies to pair layoffs with announcements that AI is changing the way the company operates.

Why it matters: Companies are increasingly blaming AI for job cuts, but the evidence points to a messier mix of automation, cost-cutting and market pressure.

The simplest AI playbook we know doesn't involve a single model. It's three questions, asked by YOU to YOU. They work for any size company, any seniority level:

1. What are the three things, in order of importance, you must do to meet or exceed expectations in your gig?
2. What are three things you think you're supposed to be doing that make no sense, could be done better or not at all?
3. What are three things AI could do better than you to 10x your output?

That's it. Nine answers per person.