NYT Shares Unchanged Amid High-Stakes Lawsuit Against Microsoft and OpenAI

A high-stakes lawsuit against Microsoft and OpenAI has investors paying close attention to The New York Times Company (NYT) stock. Unsealed statements from executives at both companies threaten the 'fair-use' defense in the case, which rests on showing that the accused product is neither a substitute for nor a direct competitor to the source work.

According to unsealed material, an OpenAI executive allegedly acknowledged their chatbots were exactly that: an 'existential threat' to journalism, delivering information directly and sparing readers the click-through. The companies are accused of copying millions of copyrighted articles for training, possibly exploiting hacks to retrieve them, which led to a significant drop in The New York Times' click-through rates.

OpenAI co-founder Greg Brockman allegedly wrote that he was 'deeply motivated by the gazillions' he hoped to earn commercializing the technology in 2017. The findings raise the odds of either a massive settlement and licensing deal or, failing that, a Times victory at trial that would be catastrophic for the defendants.

The Department of Justice recently filed a statement of interest asking the court to hold that training AI models on copyrighted work is fair use, citing national security concerns. If foreign adversaries will train on anything they can access by any means, the argument goes, restricting U.S. systems risks ceding an insurmountable lead.

Despite the significance of the case, New York Times shares have been flat year-to-date and barely moved on Friday. However, options activity has heated up, with a purchase of roughly 4,400 October 72.5/77.5 call spreads for a $0.925 debit, risking just 1.3% of Friday's close to win at least 4.6% by October expiration.