THE AI RIVALRY

Altman's new rival to Elon Musk’s Neuralink

The Altman-Musk rivalry has reached its next frontier… brain implants. Sam Altman is co-founding a brain-computer interface startup called Merge Labs to directly compete with Elon Musk's Neuralink, with OpenAI's ventures team expected to provide most of the $250 million funding round at an $850 million valuation.

Their escalating competition spans multiple fronts:

• Musk left OpenAI in 2018, founded xAI in 2023, and both released flagship models this month

• Musk is suing to block OpenAI's for-profit transition

• They clashed this week over alleged App Store bias favoring ChatGPT over Grok

• Now competing directly in the race to merge human brains with computers

Merge Labs represents more than another tech rivalry. The startup's name derives from "the merge" — the theoretical moment when humans and machines integrate seamlessly. And Altman's choice of co-founder reveals a deeper strategic vision.

Alex Blania, CEO of Tools for Humanity, is joining Altman to launch Merge Labs. Blania runs WorldCoin (recently rebranded as World), Altman's controversial iris-scanning digital identity project that aims to distinguish humans from AI in an increasingly synthetic world.

WorldCoin and Merge Labs tackle the same fundamental challenge of how humans maintain agency and identity as AI becomes more sophisticated. WorldCoin uses biometric scanning to create a "proof of personhood" system, while Merge Labs plans to develop "high-bandwidth brain implants to integrate human cognition with AI."

WorldCoin has faced significant regulatory scrutiny, with investigations in France, the UK and suspensions in Kenya and Brazil over privacy concerns. Yet it has raised $250 million and verified 2 million users globally through its distinctive orb-shaped iris scanners.

The timing suggests Altman sees brain-computer interfaces as the next logical step in his human-AI integration thesis. In 2017, he wrote about the possibility of human-computer integration occurring as early as 2025, later noting that recent technological advances could enable "high-bandwidth brain-computer interfaces."

While Altman won't be involved in Merge Labs' day-to-day operations or contribute personal funds, his backing through OpenAI's ventures arm signals a serious commitment. Neuralink, founded by Musk in 2016, recently raised $650 million at a $9 billion valuation and plans to implant 20,000 people annually by 2031.

The partnership between Altman and Blania suggests Merge Labs won't just compete on technology, but on philosophy, positioning brain implants not as pure enhancement tools, but as necessary infrastructure for preserving human identity in an AI-dominated future.

The WorldCoin connection makes this brain implant venture feel less like innovation and more like empire-building. Altman already controls the most valuable AI company and runs a biometric identity system that's been banned in multiple countries. Now he wants to literally get inside people's heads.

There's something unsettling about the same person pushing both the AI systems that might replace human cognition and the brain interfaces supposedly needed to keep humans relevant. It's a convenient problem-solution loop that positions Altman as both the cause of and cure for human obsolescence in an AI world.

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GOVERNMENT

AI companies court government with $1 deals as federal adoption accelerates

Anthropic announced Yesterday that it will offer Claude for Enterprise and Claude for Government to all three branches of the US government for $1 per agency for one year. The move follows OpenAI's similar announcement earlier this month, offering ChatGPT Enterprise to federal agencies for the same token price.

Both deals represent aggressive plays to establish footholds within government agencies as AI adoption accelerates across federal operations. Anthropic's partnership with the General Services Administration (GSA) extends beyond OpenAI's executive-branch-only offer to include legislative and judicial branches as well.

The competitive landscape for government AI contracts has intensified rapidly:

• The Department of Defense awarded contracts worth up to $200 million each to Anthropic, Google, OpenAI and xAI in July

• Google is reportedly in talks to offer Gemini under similar $1 terms

• xAI launched Grok for Government on the same day as the DOD contract announcements

The nearly-free pricing appears designed to create dependency before converting to lucrative long-term contracts when the promotional periods expire. Government adoption provides companies with direct feedback channels and positions them to influence technical and ethical AI standards across federal agencies.

OpenAI is opening its first Washington DC office early next year, while Anthropic introduced Claude Gov models specifically for national security customers in June. The GSA recently added ChatGPT, Claude and Gemini to its approved AI vendor list, streamlining future contract negotiations.

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AGI

Character.AI abandons AGI dreams for entertainment focus

Character.AI has officially given up on building superintelligence, with new CEO Karandeep Anand telling WIRED the company is now focused entirely on AI entertainment. The startup that once promised personalized AGI has pivoted to role-playing and storytelling after Google licensed its technology for roughly $2.7 billion last August.

"What we gave up was this aspiration that the founders had of building AGI models — we are no longer doing that," Anand said. The company has stopped developing proprietary models and switched to open source alternatives, including Meta's Llama, Alibaba's Qwen and DeepSeek.

The pivot comes as Character.AI faces intense scrutiny over child safety. A wrongful death lawsuit filed in October alleges the platform contributed to a teen's suicide, prompting significant safety investments, including separate models for users under 18.

Character.AI's numbers suggest the entertainment strategy is working:

• 20 million monthly active users spending an average of 75 minutes daily

• 55% female user base with over half being Gen Z or Gen Alpha

• $30+ million revenue run rate targeting $50 million by year-end

• 250% subscriber growth in the past six months on its $10 monthly plan

Anand insists the platform is about role-play rather than companionship, comparing it more to video games like Stardew Valley than AI companions. Users create over 9 million characters monthly, using the platform for everything from vampire fan fiction to staging roast battles between tech CEOs.

LINKS

• Anthropic’s Claude AI model can now handle longer prompts

• Musk says xAI to take legal action against Apple over App Store rankings

• Tech giants Apple and Google lose landmark Australian court case as federal judge rules they engaged in anti-competitive conduct

• Microsoft is trying to poach Meta AI talent and offering multimillion-dollar pay packages, internal documents show

• Profound raises $35M as Sequoia backs its ambitious bid to become the Salesforce of AI search

• Lisa Su Runs AMD—and is out for Nvidia’s blood

• Relying on AI in colonoscopies may erode clinicians' skills

• Pony AI nears full-year robotaxi target despite scaling hurdles

• Inside Silicon Valley’s growing obsession with having smarter babies

• China demands companies to halt Nvidia chip orders over security concerns

• Airbook AI: Cursor but for Analytics

• nFactorial AI: Video call with Ai-generated mentors like Elon Musk

• Willow: AI-powered dictation tool that is fast, accurate, and works on any app.

• Murf AI: Generate human-like voiceovers with our AI voice generator built

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