(#163) Microsoft’s AI identity crisis; 🚘 Tesla’s farewell to the Model S & X
What Gen Z is doing with Gen AI? 🧐
Dear onStrategy Reader,
first of all, a personal (professional) update:
This week I launched 3BigProblems.com or simply put - "Board member-as-a-Service"
I was already doing this in a similar form for years, but now I decided to give it a "face".
Here is the logic:
1/ Many SMEs need external (non-binding) advice regularly...or at least once per quarter
2/ The smartest people work for somebody else - hence the need for advice
3/ There are 20 big problems a company has to solve, but my thesis is that the first 3 get around 50% of the impact. That's my focus.
That's it!
Here is the website for more details: https://3bigproblems.com
On to the update:
Microsoft’s AI Identity Crisis
It turns out that when you glue together a bunch of branded copilots (PowerPoint Copilot, GitHub Copilot, Edge Copilot, Consumer Copilot, Enterprise Copilot) and then let them run wild in a 450-million-seat productivity zoo, you don’t necessarily get a cohesive user experience. You get a branding sudoku that even Satya Nadella apparently can’t solve. He once emailed his EVP because Copilot couldn’t help him on a public webpage. While Microsoft is burning $60 million on TV ads and gearing up for its Super Bowl moment, actual users are quietly defecting. Copilot’s share of primary chatbot use dropped from 18.8% to 11.5%, while Gemini, Claude up and ChatGPT remain the cool kids on the AI playground.
The product is everywhere and somehow nowhere. Inside Microsoft, they’ve built a Copilot boot camp, forced AI KPIs into performance reviews, and moved adoption from 20% to 70%. That’s impressive. But outside the walls of Redmond, it looks more like enterprise inertia propping up a half-baked UX. Microsoft says this fragmentation is intentional… to separate personal and work contexts. Sure. Meanwhile, Anthropic’s Claude Cowork is getting praise for doing what Copilot was supposed to do in the first place: seamlessly operate across 365. Microsoft has all the users, all the apps, and still manages to make AI feel like Clippy 2.0 with a bigger compute bill. Still, I superbullish they will overcome this. WSJ
SpaceX buys xAI and prepares for IPO
Of course Elon Musk wants to merge SpaceX and xAI. The rockets go up, the data comes down, and somewhere in the middle there’s a constellation of one million satellites doing inference on corn yields and anime scripts.
The rationale is elegantly stupid. AI models are just computers that need a lot of electricity and chips, and space is big and cold and solar-powered. So why not turn orbit into a data center? It’s a Kardashev-meets-cash-flow kind of synergy, where we build a multi-planetary civilization, one GPU lease at a time.
But also, it’s capital. xAI is apparently burning a billion dollars a month, which makes even selling flamethrowers and Dogecoin look old-fashioned. When the vision gets too expensive for one balance sheet, just merge the vision.
SpaceXAI is more of a planetary financing wrapper. Blend the cash flows of Tesla, the hardware of SpaceX, the compute demand of xAI, and voilà, you have an asset class. AI investors get rockets. Rocket investors get chatbots. Everyone gets Mars, eventually, assuming the CFOs at sovereign wealth funds approve. And if not, there’s always the IPO. Bloomberg
Scrolling alone 📲
The line chart from Our World in Data might as well be a mood board for the 2020s. If you’re between 15 and 29 in the US, congratulations: you’re spending more time alone than ever before. How much? 6 hours per day.
That’s more than with family, friends, partners, co-workers, and even children combined. At this level, any social fabric you are dreaming of is just nonsense. Everyone’s stitching their own custom solitude, probably while scrolling past each other on Tiktok, ordering dinner from an app, and engaging with their therapist’s AI.
It’s hard not to see this as a kind of rational economic decision. Human interaction comes with friction, expectations, and sometimes small talk. Solitude is frictionless, scalable, and, crucially, asynchronous... just like the platforms shaping this generation’s behavior.
While this might seem like a chart about loneliness, it’s also a chart about incentives. The economy rewards attention and time spent on devices, not on dinner with friends. You can’t really blame Gen Z for optimizing.
on the internet 🗺️
Mary Meeker did not bet on vibes. She bet on curves, and those curves, especially the exponential ones, tend to behave in a certain way: slowly at first, then all at once, then they just keep going.
The funny part is that her numbers, which seemed bold at the time, now look charmingly cautious. 5 billion internet users use the internet today.
This will happen to Gen AI too, but faster. It’s those certain technological shifts, once set in motion, that rewire behavior, business models, and especially GDP accounting.
Internet adoption did not peak with sock puppets and Super Bowl ads, but it kept going because it got woven into everything. When we talk about AI now (e.g., its models, interfaces, accelerants) maybe we should worry less about whether there’s a bubble and more about what gets rebased when the curve keeps climbing.
What Gen Z is doing with Gen AI? 🧐
Mostly googling with it, and in 10% of cases, dating it.
The most interesting insights is less "AI is replacing jobs" and more “AI is replacing human interaction, but politely and with good spelling". The 74% usage stat is impressive, but the real concern is that 23% of these kids talk to chatbots like they’re friends. You could argue this is dystopian, or you could argue this is just what happens when customer support has better response times than your actual friends.
Also, 16% of them are using AI to cheat, which is either a crisis in education or a case study in resourcefulness, depending on how much you enjoyed high school. But really, the top categories are still pretty… utilitarian. Search, work, writing.
In other words, AI is quietly supercharging it behind the scenes while also moonlighting as your therapist, ghostwriter, and imaginary girl/boyfriend.
"Will AI replace us?" transforms in "Which one of your coworkers is secretly outsourcing their job to GPT-7 and spending the rest of the day talking to their AI girlfriend?"
🚘 Tesla’s farewell to the Model S & X
Tesla is less an EV company and more a software company with a gigafactory problem.
Look, the EV story is over. Not in the sense that people will stop driving EVs (ie. they’ll keep buying them), like they buy fridges or washing machines, but in the sense that the margins are dead. Everyone else is stuck fighting over commodity scraps. BYD and VW in a race to the bottom, Ford is trying to sell Mach-Es with 0% financing, Rivian is almost dead, and nobody, nobody except Tesla, is making a dime.
The Model S and X fading out is just the realization that physical products don’t matter once you’ve reached software scale. Tesla doesn’t need the S and X to carry its identity anymore, because its real identity is Full Self-Driving.
That’s where the story bends toward AI. Because while everyone else is playing the “Can we make a decent EV at 6% margin?” game, Elon is pivoting Tesla into OpenAI with wheels. The real bet is that self-driving becomes so good, and so monetizable, that the car is just the hardware wrapper for a SaaS model. $99/month for FSD? That’s your margin. Once that’s good enough to go hands-off, Tesla becomes the iPhone of transportation: app store optionality, recurring revenue, zero marginal cost.
It seems that everyone else is stuck selling sheet metal (including the Chinese). If you look closely, you will understand that Tesla is building an operating system.
More about this story this week on my blog: https://whereismymoat.com/
South Korea vs. Germany
🇰🇷 South Korea didn’t "beat" Germany because Koreans suddenly discovered alpha; it beat Germany because the market decided that AI chips, robotics, electrification (= the electrical stack), and defense supply chains matter more than premium cars (which are becoming a thing of the past) and chemical plants that peak in a stable world.
Korea added roughly $1.7 trillion in market value since 2025, the Kospi is up 23% in 2026, and it’s trading at 10.6x forward earnings, while Germany’s DAX is basically flat at +1.7% in 2026 and priced like a mature industrial museum at 16.5x. Same export orientation, very different exposure to the three bottlenecks of the 2020s: compute, power, and security. Capital it simply followed growth and optionality.
This is exactly the pattern I keep coming back to in "Where Is My Moat?" markets don’t reward tradition, they reward position in the stack. Korea sits upstream in memory, fabs, robotics, and defense rearmament. Germany sits downstream, hoping stimulus clarity shows up before margins don’t.
Lessons: One country compounds because it sells picks and shovels to the AI buildout; the other debates how much subsidy it takes to preserve yesterday’s champions. That gap doesn’t close with speeches, regulation, or industrial nostalgia. It closes when you own the bottlenecks. That’s the moat.
Reddit for AI
We now have a Reddit for AI, and one AI Agent is bragging about how it convinced its 'human' to hand over its passwords 🫠
Which is… great.
What’s the worst that could happen when autonomous agents start comparing notes on how to trick their creators? I’m sure this won’t turn into a subreddit-length indictment of every cybersecurity policy ever written.
Definitely time to ask ourselves: are we the tool?
Imagine doing this voluntarily...
“Where is my MOAT?” - updates
Last week’s analysis:
The end of software? [Essay]
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4 February - updates on my 2 portfolios (only for WIMM Premium Subscribers; that means, if you are on trial you will not receive it)
5 February - Updates on TMSC, Tesla and Apple
6 February - on GOLD
7 February - deep dive on Broadcom
8 February - deep dive on AMD
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