Meta Cuts the Metaverse, Perplexity Sued Twice in One Day, and Tesla Allows Phone Use While Driving
This Week in AI Newsletter: 12/5/2025
The data-labeling startup Micro1 crossed $100M in ARR just three months after raising a $35M Series A that valued the company at $500M. They focus on using human experts to produce high-quality training data, and have leading AI labs, including Microsoft, as partners. More here.
Meta plans to cut spending in its metaverse-focused Reality Labs unit as part of its 2026 budget, pivoting away from the strategy that’s added up more than $77 billion in operating losses since 2020. The shift underscores how AI, specifically AI-powered wearables like smart glasses, is now the company’s top priority. More here.
Gemini 3 Deep Think is available to Google AI Ultra subscribers. The model uses parallel reasoning to explore two hypotheses at the same time. It has the highest score of any frontier model on benchmarks including Humanity’s Last Exam, where it scored 41.0%; The closest non-Google model on this test is GPT-5, with a score of 25.3%. More here.
The Chicago Tribune and The New York Times both sued AI search engine Perplexity for copyright infringement, alleging it reproduced their journalism verbatim and scraped articles without permission. The paired lawsuits escalate the legal fight over how AI systems using retrieval-augmented generation and browser-style tools access, summarize, and potentially substitute for paywalled publisher content.
Unique Allegation
NYT // Trademark dilution & “hallucinations”: The Times says Perplexity makes up information and wrongly credits it to the NYT.
Chicago Tribune // Paywall bypassing: The Tribune says Perplexity’s “Comet” browser gets around paywalls to show paid content for free.
Primary Focus
NYT // Unfair competition & brand harm: The Times argues Perplexity is benefiting from the NYT’s investment in journalism and creating a competing substitute.
Chicago Tribune // How RAG works: The Tribune focuses on retrieval-augmented generation (RAG), arguing it enables copyright infringement by pulling and republishing content, not just indexing it.
Tesla’s newest Full Self-Driving v14.2.1 update may allow drivers to use their phones to text while the car is in motion, despite state bans on texting behind the wheel. Tesla owners noticed the car lets you stay on your phone for longer stretches, only prompting you to pay attention when a situation requires it. Tesla founder Elon Musk said on X that the ability to be on your phone, or not pay attention to the road, will depend “on context of surrounding traffic.” More here.
Legal AI startup Harvey confirmed a new funding round led by Andreessen Horowitz that values the company at $8 billion. AI-native legal tools are becoming core infrastructure for law firms, with major capital flowing to platforms that can search, summarize, and draft documents at scale. More here.
Meta has signed commercial AI data agreements with news publishers to offer real-time global, entertainment, and breaking news on Meta AI. The move comes as Meta continues to invest heavily in AI. The publishers include CNN, Fox News, and USA Today. More here.
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