Three Things (1/8)

“It isn't what we say or think that defines us, but what we do." — Jane Austen, Sense and Sensibility

Max issues

The FAA ordered a temporary grounding of hundreds of Boeing 737 Max 9 aircraft for inspections after a piece of the aircraft blew out in the middle of an Alaska Airlines flight. Images and video of the flight that were shared on social media showed a gaping hole on the side of the plane. United Airlines and Alaska Air are the two primary operators that make up the 171 total MAX-9 fleet globally. 

The plane was relatively new so the issue is certainly surprising and adds yet another concerning chapter to Boeing’s Max franchise. Boeing and Airbus function in the classic case study of duopolistic power – could the recurring deficiencies signal that the lack of competition is actually hurting the aircraft giant?

One click search

Perplexity AI, a startup going after Google’s dominant position in web search, raised $73.6 million in a funding round led by IVP with additional investments from Nvidia and Jeff Bezos. Sources familiar with the matter indicate that the round values Perplexity at $520 million post-money. Unlike traditional search engines, Perplexity offers a chatbot-like interface that allows users to ask questions in natural language and the platform’s AI responds with a summary containing source citations. As a matter of fact, the above was entirely written by Perplexity’s natural language model (citation provided here and here). Not bad. 

Bringing users to their desired answer in fewer clicks is an interesting value prop that has the potential to disrupt Google’s cash cow advertising business. The end state seems squarely in Google’s swim lane but it could be the classic innovator's dilemma - the business would have to sacrifice revenues in the short term to keep up with changing consumer preferences. Google has usually elected to lead with innovation but this is a new potential challenge to protect the company's competitive moat. 

Design M&A

Synopsys is in advanced talks to acquire Ansys for ~$35 billion in a stock and cash deal that could be one of the first major transactions of 2024. Ansys makes software that helps predict how products will or won’t work in the real world, operating in aerospace, healthcare and automotive industries, among others. Synopsys is discussing paying around $400 per share for Ansys, a premium to the $344.08 closing price on Friday.

The two companies have partnered in the past as Ansys’ technologies were integrated with some of Synopsys’ in 2017. A deal for Ansys would also give Synopsys certain solutions around simulation and analysis that it previously wasn’t able to offer at scale. It also prevents rival Cadence Design Systems from making a splash acquisition. Synopsys is paying a lofty premium so they must believe the synergies and competitive advantages are meaningful over the long-run.

As of writing, GOOGL is a holding in Titan's Flagship strategy.