AI Code Breaks Amazon From Inside & This Startup Wants to Abolish Night

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0:38Toby Lenk:Good morning, Bird Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, the startup that wants to abolish night.

0:45Neal Freyman:Then AI code is breaking Amazon from the inside out. It's Wednesday, March 11th. Let's ride.

0:56Toby Lenk:Just when you thought the protein craze couldn't get any weirder, It has. Buffalo Wild Wings announced a chicken wing flavored espresso proteini, which contains 10 grams of protein and is infused with buffalo dry rub, a spice mixture that will also be spread around the rim. The new drink or abomination is rolling out ahead of National Espresso Martini Day on Saturday and will cost 12 bucks. Toby, this sounds great, actually.

1:21Neal Freyman:An espresso proteini. What a world we are living in. Rimmed with buffalo dry rub is a stroke of genius. I am of the mind that if you combine three awesome things, you just get an awesomer thing. Protein shake, espresso martini, and wings, those things, and then head directly to the bathroom because that is not going to sit well. And now a word from our sponsor, Tax Act. Dude, thank goodness I don't have to do my taxes this year.

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2:24Neal Freyman:Amazon has been generating too much code with AI, and it's breaking their systems. Such was the topic of a big meeting called by the company yesterday that took a deep dive into the spate of outages affecting the business recently. Last week, Amazon store malfunctioned for a few hours, which the company attributed to a software code deployment. In December, the company's cost calculator was down for 13 hours when Kiro, its AI coding tool, decided the best way to change the code was to delete and remake the entire system. According to Financial Times, the meeting led to a new policy being put in place.

2:58Neal Freyman:Junior and mid-level engineers now have to get senior engineers to sign off on any AI-assisted changes. AI shipping code is sort of like having a bull in an Amazon shop. It's really good at doing a lot, but things are certainly breaking. Software in general seems to be getting less reliable. OpenAI and Cloud both dropped to 98 % uptime during February, which sounds good, but in reality means there have been multiple outages. GitHub, a site that hosts software development projects, has also had more outages in the first quarter of this year than a three-year stretch from 2016 to 2019, according to the ex-user 4.0.

3:33Neal Freyman:Neil, reliability is a key part of Amazon's pitch to customers, especially in its cloud division, which is trying to fend off challengers like Google and Microsoft. Now it's facing uncomfortable questions around whether AI-assisted code is doing more harm than good.

3:48Toby Lenk:Yeah, Amazon called these high blast radius incidents, which I'm going to adopt in my own vernacular. Here's what they're talking about. On March 2nd, customers on Amazon marketplaces saw incorrect delivery times when adding items to their carts, which led to 120 ,000 lost orders and about 1.6 million website errors. That is smaller. That's a smaller blast radius than what happened a couple days later on March 5th. Another outage caused a 99 % drop in orders across Amazon's North American marketplaces, which resulted in 6.3 million lost orders. That led to this e-commerce guy kind of rallying the troops and saying something is not working here and some of it has to do with AI code.

4:29Neal Freyman:And a lot of people are looking at Amazon and saying, if Amazon, who has one of the most robust engineering systems in the entire world, if they can't figure out how to safely deploy AI code, then why are other businesses saying that, hey, AI is going to absolutely remake our businesses? And in general, people see software becoming less reliable across industries right now. And this story that people think are being laid out by AI companies right now is that you subsidize AI code generation so that a lot of people kind of lose the nuts and bolts of how to ship reliable code. And then what you do is you charge people even more money to review that code using AI tools because people looked at a recent Claude launch from Anthropic called Code Review, which, again, does what a senior engineer would do and go through line by line and make sure your code is actually going to work.

5:22Neal Freyman:They are charging$15 to$25 per pull request, which is very expensive, maybe even more expensive than just having a human do it. So this is sort of the flywheel that they think that these AI companies are building. make everyone reliant on your product and then make sure they have to use your product to check their code as well and charge them even more for it.

5:41Toby Lenk:Now, in their communications to the press about this meeting and overall AI coding issues, Amazon has been downplaying the impact of broken AI code. It said it was a coincidence that AI tools were involved in some of these incidents. However, I'm kind of thinking of this like self-driving cars where it's a new technology that is being adopted rather quickly and there's going to be more of a microscope on this particular rollout as it would. So even if a human developer caused an outage, which has happened in the past, and so did an AI, the AI one is going to be looked at a little more critically, or a lot more critically, because it is just a new technology that's being adopted.

6:18Neal Freyman:In general, I think back to this PW survey that was conducted recently. They talked to 4 ,400 chief executives on AI's impact on their bottom line. Only 12 % say that they saw the benefits like increased revenue or decreased spending. 55 % saw no benefit from AI tools at all. And I'm thinking about Amazon right now. Maybe people are seeing negative impact from these tools because of what they do to their businesses. So every time you just see these stories and you see all the massive capital expenditures going into AI, which we'll talk about in our next story, you start to wonder at what point do they need to see results because you are spending a lot of money on building these systems.

6:57Toby Lenk:What a segue, Toby. Let's go to that next story. It is about Oracle, which delivered a more pleasant surprise than when an old friend calls you out of the blue. The tech giant shares popped 10 % after reporting a thumping quarter that relieved some concerns about an AI bubble. Sales jumped 22 % on the year, topping expectations, while its revenue backlog grew to$553 billion. The demand for cloud computing for AI training and inferencing continues to grow faster than supply, the company said. The vibes around Oracle have not been good recently. Its value has been cut in more than half since peaking last fall, as investors worried about its soaring debt load and dependence on one partner.

7:35Toby Lenk:Remember that backlog I just mentioned? $300 billion comes from a single company, OpenAI. And there have been commitment issues. On Friday, Bloomberg reported that OpenAI and Oracle would not be expanding a planned data center partnership in Abilene, Texas, which added to longstanding concerns that Oracle had built too many data centers too quickly, all while borrowing too much money. Yesterday's report put some of those fears to rest for now. So the Oracle's earnings were seen as a key litmus test for the entire AI sector. It passed.

8:03Neal Freyman:Yeah, I think the big win here for investors was that the company maintained its outlook for capital expenditure in the current fiscal year at$50 billion. If that number started creeping ever higher, that opens up a bevy of questions about whether this AI build-it is going to be worth it. But the fact that they just maintained it was music to investors' ears. I do want to talk about this Abilene OpenAI data center problem that Bloomberg was reporting on. There is this tension in the data center market right now because AI chips are being upgraded more quickly than data centers can be built. Think about NVIDIA's product release timeline.

8:40Neal Freyman:They are pumping out a new and improved chip. It used to be every two years, but now they've dropped that to every one year. It takes a while to bring a data center online, though. So Oracle orders all these state-of-the-art, top-of-the-line Blackwell NVIDIA chips. But then NVIDIA goes, hey, we have a new chip coming, Verirubin, that does way better than Blackwell. OpenAI is like, we want the Verirubin chip. We want the newest and latest and greatest technology. Oracle is like, dang, we just filled it all with this latest and older generation chip. So there is a little bit of a timeline issue where people aren't syncing up when it comes to the latest and greatest technology.

9:16Neal Freyman:So that is one thing that is in the back of people's minds as these data centers are built.

9:20Toby Lenk:It's like your shoe rack. When you order new sneakers, you don't put them on the one with the old sneakers. You have to get an entire new rack to put the new sneakers on. There are also another narrative in Oracle's earnings was around just overall SaaSpocalypse. Enterprise software has taken a big licking over the past few months. Oracle is a part of that industry. And so the executives were asked, what do you see yourself? Are you going to get disrupted by AI? And the answer by Oracle executives was pretty funny. They said, yeah, everyone else is getting disrupted, but not us. And Larry Ellison, who is the chairman, he said, we are quickly adopting AI tools into our systems.

9:59Toby Lenk:So that's why we think we're a disruptor. That's why we think the sasspocalypse applies to others, but not to us.

10:05Neal Freyman:Yeah, it is actually a mirror image of the Amazon story. I'm segwaying back into our first story because Oracle is saying like, hey, we have pared down our workforce. We are seeing efficiency gains from these AI tools. Again, maybe it's more talk than actual execution, but it does seem like there's two companies that are saying diametrically opposite things. We just saw Oracle stock go up, so maybe it's saying the right things. Moving on, Fabletics, the athleisure brand that made its name selling comfy yoga pants, is launching its first ever denim collection on Thursday. It's yet another sign that the athleisure boom that dominated the pandemic era is losing steam while denim is reclaiming its spot as the casual fit of choice.

10:48Neal Freyman:Fabletics CEO Adam Goldenberg says over a million customers have asked them to make jeans, so it made jeans. And it feels confident listening to customers because they've been behind some of Fabletics' most successful launches. Case in point, the scrubs category customers asked for has grown into a$75 million business line. It thinks it can do the same with denim. We do believe denim is on an upswing, Goldenberg said, and there is certainly truth to that. Globally, denim outgrew athleisure 4 % to 2 % last year as people started wearing real pants again. The denim market has grown by a whopping 28 % since 2020.

11:25Neal Freyman:Neal, jeans are in right now. I think back to Levi's big deal with Beyonce centered around her Cowboy Carter album. Then came American Eagle and Sydney Sweeney and Cat's Eye and Gap. Now you have athleisure companies getting into the jeans game.

11:39Toby Lenk:I thought it was interesting to hear what Goldenberg said about fashion trends right now because he was talking about the leisure and comfort trend of the pandemic. And obviously that was a big thing. And athleisure is perhaps on its way down now. But he still said that people want to dress up at the same time they still want to be comfortable. He said, as consumers are, I would say dressing up more than they still wanted to do it in a way that feels good and is more comfortable. And we heard that very loudly from our customers when we were developing denim. Maybe denim threads that needle between looking presentable but also feeling okay in your pants.

12:11Neal Freyman:There are some cautionary tales that industry watchers are looking at. One is Lululemon. Lululemon has obviously expanded more outside of its core yoga pant assortments into more outerwear, T-shirts, different lifestyle categories. Some are saying that maybe that's come at the expense of their core business. And Lulu has struggled lately. Also, you look at Nike. Nike moved very heavily into the lifestyle in streetwear style. They kind of started relying on Dunks and Air Force Ones to power most of their business. And it worked for a while. Nike sales went up dramatically coming out of the pandemic.

12:48Neal Freyman:But now that growth has stagnated again because they feel like they've neglected their core audience of athlete consumers. Fabletics has a very similar business to those two companies. Are they making a mistake by broadening their horizons where they should just be focusing on their core people?

13:03Toby Lenk:Well, they would say, look at our track record. We have done a very good job at expanding into new categories. In 2020, they launched a menswear line, which they hadn't, it was just women's focus for their entire history. That's now a$300 million business. It counts for 30 % of their entire sales. And then the scrub line, which grew to$75 million in sales in just over two years, It's expected to pass$100 million this year. And they say that these new lines are great entry points to get people back into their core offerings. The company says that over 50 % of people who buy scrubs within the first 90 days move into and buy at leisure.

13:41Neal Freyman:Listen to your customers. It's a revolutionary concept, but it turns out it works. All right, we're going to take a quick break and come back with a very cool story about space right after this.

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15:49Toby Lenk:How's this for an out there business idea? A startup wants to turn night into day by launching 50 ,000 huge mirrors into space that will reflect sunlight onto areas of the Earth where it's nighttime. It feels like science fiction, but it could become a reality. The company, named Reflect Orbital, has applied to the FCC for its first prototype satellite and could soon receive approval, according to the New York Times. Everyone knows the night is dark and full of terrors, but it's also an economic drag. When it's dark out, solar farms can't function, actual farms have to shut down, and search and rescue operations, life or death scenarios are also hindered.