Speaker 1: Stock markets old just a few minutes ago, and it's
Speaker 1: not pretty down big, especially the tech having nasdak well
Speaker 1: shares of Santa Clara's in video fl hard this morning
Speaker 1: on the popularity of a new Chinese artificial intelligence of bit,
Speaker 1: little known Chinese company sending shock waves through the stock
Speaker 1: market and calling into question US dominance in artificial intelligence.
Speaker 2: The arrival of deep Seek wiped more than a trillion
Speaker 2: dollars off the value of America's tech firms, toppling the
Speaker 2: US from its unquestioned place leading the world's AI race,
Speaker 2: and upstaging Donald Trump as he announced the five hundred
Speaker 2: billion dollar Stargate project. The fact that a relatively small
Speaker 2: disruptor like deep Seek could do such damage calls into
Speaker 2: question everything Silicon Valley would like us to believe about
Speaker 2: artificial intelligence. From Schwartz Media, I'm Ruby Jones. This is
Speaker 2: seven AM today, Managing editor of the Saturday Paper Emily
Speaker 2: Barrett on why Deep Seat caused markets to crash and
Speaker 2: what it means for the tech titans of today. It's Tuesday,
Speaker 2: February four, So, Emily, it's now been a week since
Speaker 2: Chinese AI company deep Seak announced itself and there were
Speaker 2: immediate impacts to that announcement, the value of tech stocks
Speaker 2: in the US crumbled. But could we go back to
Speaker 2: before that happened, and can you tell me a bit
Speaker 2: about the AI landscape before deep seat came along?
Speaker 3: So this was all about America. They were unquestioned in
Speaker 3: their dominance of AI and you know, the brightest minds
Speaker 3: in the country or at work on it. Everything for
Speaker 3: many years now has been set up for the American
Speaker 3: tech industry to succeed. And it's clear that it's been
Speaker 3: a huge focus of the incoming administration as well. As
Speaker 3: soon as he took office, President Trump announced Stargate.
Speaker 4: Stargate, So put that name down in your books, because
Speaker 4: I think you're going to hear a lot about it
Speaker 4: in the future. A new American company that will invest
Speaker 4: five hundred billion dollars at least in AI infrastructure in
Speaker 4: the United States and movement.
Speaker 3: US companies have poured billions and billions of dollars into
Speaker 3: advancing AI and a quarter of a trillion dollars was
Speaker 3: projected for this year alone. And you only have to
Speaker 3: look at the front row of guests at Trump's inauguration
Speaker 3: to kind of get an idea that tech is at
Speaker 3: the forefront of American innovation, and it's certainly at the
Speaker 3: forefront of American policy.
Speaker 1: As Donald Trump is sworn in today, the nation's richest
Speaker 1: and most powerful tech tycoons had some of the best
Speaker 1: seeds in the House.
Speaker 3: Sidebind Trump has made no secret of the fact that
Speaker 3: he really wants to see money getting poured into tech
Speaker 3: in America as the dominating force over specifically China.
Speaker 2: Okay, and central to that investment is the production of
Speaker 2: computer chips. So what has the US government been doing
Speaker 2: to make sure that there is an supply.
Speaker 3: Well, Specifically, the Biden administration signed into law something known
Speaker 3: as the Chips Act that stands for creating helpful incentives
Speaker 3: to produce semiconductors for America.
Speaker 2: Well.
Speaker 1: President Biden signed the Chips Act in the law today.
Speaker 1: The two hundred and eighty billion dollar plan includes fifty
Speaker 1: two billion in subsidies for US computer chip companies, twenty
Speaker 1: four billion in tax credits for new manufacturing facilities.
Speaker 3: This allowed for around two hundred and eighty billion in
Speaker 3: new funding to support chip manufacturing in the US. They
Speaker 3: really want to bring this industry on shore. It's a
Speaker 3: part of them securing their supply chains and a part
Speaker 3: of that competition with China, it included incentives for domestic production,
Speaker 3: tax credits and money for a search and workforce training
Speaker 3: and sort of complementary to that are policies that have
Speaker 3: actually been running since the time of the first Trump administration,
Speaker 3: which were restricting supply of AI chips to China for
Speaker 3: many years. And last year actually Sam Oltman, who is
Speaker 3: the CEO of OpenAI, started trying to raise seven trillion
Speaker 3: dollars to try and remake the global chip industry. The
Speaker 3: US economy, just to put that in perspective, is worth
Speaker 3: about thirty trillion US dollars and Australia's is almost two
Speaker 3: trillion in US dollars. So that's more than three times
Speaker 3: the total value of our economy. Wow. Yeah, And it's
Speaker 3: not just America who wants chips. The race to manufacture
Speaker 3: and to buy chips has definitely intensified, and so America
Speaker 3: has also been reliant on manufacturers in Taiwan, and they've
Speaker 3: been trying to thwart China by putting export bans on
Speaker 3: the leading US chip manufacturer and video. You know, this
Speaker 3: is a hugely important strategic commodity.
Speaker 2: Okay, And so then along comes deep Seek. Tell me
Speaker 2: more about the company itself.
Speaker 3: Yeah, deep Seek is a really fascinating company and there's
Speaker 3: not an awful lot known about it. So it emerged
Speaker 3: in twenty twenty three. It's led by a forty year
Speaker 3: old man whose name is Yang Wanfeng. He was a
Speaker 3: hedge fund executive. He founded a hedge fund called high
Speaker 3: Flyer Want Hedge Fund worth eight billion dollars. That's understood
Speaker 3: to be the finanswer of deep Seek. And the technology
Speaker 3: that was launched was called r one launched crucially at
Speaker 3: the same time as sort of an open source research
Speaker 3: document that people can actually access generally to you know,
Speaker 3: see exactly how this was created, how deep Sek came about,
Speaker 3: what it's based on, how its model works. The most
Speaker 3: important thing for the market reaction was that deep seek
Speaker 3: is able to do what it does on a fraction
Speaker 3: of the budget of what chat GPT can do. So
Speaker 3: it means that software developers can use deep seek much
Speaker 3: more efficiently, much more cheaply than they could use chat GPT.
Speaker 3: So really, I mean, what it's done is it has
Speaker 3: done the traditional job of a disruptor. Deep Zeek has
Speaker 3: called into question the approach of its competitors. So some
Speaker 3: observers have been saying for a while that actually US
Speaker 3: tech companies are overvalued, and they obviously now feel a
Speaker 3: little vindicated by this news and by the market reaction.
Speaker 3: Among them are people like Ed Citron, who was a
Speaker 3: tech analyst, who says that Silicon Valley had just become
Speaker 3: complacent and it was too interconnected to be truly competitive.
Speaker 3: Open AI, it's fair to say, has been making its
Speaker 3: name on promises and imaginative concept. It hasn't been profitable,
Speaker 3: and so critics like Citron are coming to a point
Speaker 3: of having to ask, is this technology is the benefit
Speaker 3: of it clear? Do we know what it's actually good for?
Speaker 2: Coming up after the break, what is AI actually good for? So, Emily,
Speaker 2: AI is clearly very important to Donald Trump. As you said,
Speaker 2: he announced Sargate as soon as he became president. So
Speaker 2: how does the emergence of deep seek complicate his plans
Speaker 2: for America's dominance here?
Speaker 3: Yeah, it's really interesting that China has in a way
Speaker 3: sort of shown that they can get around the trade
Speaker 3: restrictions and the sorts of curbs that the administrations have
Speaker 3: been trying to put on China for quite some time.
Speaker 3: And they got around that this time by simply using
Speaker 3: fewer of the chips. The US, up until this sort
Speaker 3: of point, had still seemed fairly convinced that the battle
Speaker 3: was about money and skills. China has shown that it
Speaker 3: has no shortage of the latter. It's also proven that
Speaker 3: money may not be quite as much of a factor
Speaker 3: because it can innovate more cheaply. It's also important to
Speaker 3: keep in mind that Trump is doing a bunch of
Speaker 3: things that are potentially hurting the industry right even in
Speaker 3: the US. Trump we know that he's a fan of tariffs.
Speaker 3: The industry isn't a fan of that. There have been
Speaker 3: multiple meet he's already videos. CEO has gone to see Trump,
Speaker 3: and people broadly across the tech industry know that putting
Speaker 3: tariffs on supply only pushes up costs domestically. And we
Speaker 3: know that he's not a fan of anything that Biden did.
Speaker 3: So he's trying to differentiate his administration by first of all,
Speaker 3: trying to unpick parts of the Inflation Reduction Act, and
Speaker 3: a key part of that was the Chips Act.
Speaker 2: And Emily, what does all of this say to you
Speaker 2: about Silicon Valley and the tech Titans? Is it the
Speaker 2: case that it is actually a far less innovative environment
Speaker 2: there than the CEOs of these companies would pretend and
Speaker 2: have these CEOs become very very rich off the back
Speaker 2: of tech that was perhaps overvalued.
Speaker 3: I think that's a really good way of summarizing it. Frankly,
Speaker 3: there's a view out there that's emerging, possibly gaining some
Speaker 3: strength now that the tech sector had become very complacent
Speaker 3: that all the money that's been thrown at tech years,
Speaker 3: year after year after year, was really not encouraging them
Speaker 3: to innovate in the way that we're now seeing China
Speaker 3: able to do, and what was really needed in the
Speaker 3: US industry was a genuine threat. So, you know, part
Speaker 3: of this is not only were the AI executives and
Speaker 3: sort of think is no longer thinking in a disruptive way?
Speaker 3: Were they thinking creatively enough about how to bring value
Speaker 3: for money to the sector, but what is the compelling
Speaker 3: use case of AI? People are very captured by the
Speaker 3: potential of AI, and that was also helped by the
Speaker 3: fact that Sam Altman wrote an open letter along with
Speaker 3: a few other AI executives that was literally raising the
Speaker 3: threat of an untrammeled AI what it could potentially do.
Speaker 3: We've all got those images in our heads of some
Speaker 3: sort of terminator, you know, machines against man. Kind of
Speaker 3: debate here. But when we think of AI at this point,
Speaker 3: we think about chat gipt. Now, what you'll hear constantly
Speaker 3: from executives like Sam Altman is you know, these analogies
Speaker 3: to Apple in the early days or to Uber in
Speaker 3: the early days, when you know, yes there was some investment,
Speaker 3: Yes there was a lot of money being thrown around,
Speaker 3: it wasn't entire clear these businesses were going going to
Speaker 3: be that success. When were they going to post profits?
Speaker 3: When were they going to become the giants that we
Speaker 3: know them as today. And his argument would be, you know,
Speaker 3: open AI is on the way to that, it's yet
Speaker 3: to turn a profit. But the difference that people like
Speaker 3: Ed Cetrona pointing out is we knew what Apple was proposing.
Speaker 3: The iPhone was a pretty clear proposition. We may not
Speaker 3: have known at the time exactly how integral it was
Speaker 3: going to become to all of our lives, but it
Speaker 3: was clear what it could do. AI is a complicated,
Speaker 3: multi stranded project that a lot of people have trouble conceptualizing,
Speaker 3: let alone seeing, in terms of their daily lives. Yes,
Speaker 3: we know that can help kids cheat on their tests.
Speaker 3: We know that big data is a very useful way
Speaker 3: of sort of crunching down lots of information into key findings.
Speaker 3: But as far as really understanding a clear cut message
Speaker 3: of how AI is benefiting us in our daily lives,
Speaker 3: it's something that still maybe has to be sold. Maybe
Speaker 3: that's what the market is telling us.
Speaker 2: Emily, thank you so much for via.
Speaker 3: Time, Very welcome. Thanks a lot.
Speaker 2: Also in the news today, journalist Antonette Latouf has given
Speaker 2: evidence in the federal court in her case against the
Speaker 2: ABC for wrongful dismissal. Lawyers for Latouf revealed private messages
Speaker 2: between senior ABC executives arguing they demonstrate the decision to
Speaker 2: dismiss Latouf from her ABC Radio Sydney position was influenced
Speaker 2: by pro Israel lobbying and went against internal editorial advice.
Speaker 2: It was revealed former ABC chair Arta Buttrose pushed for
Speaker 2: Antonette Leatouf to be taken off air, asking why she
Speaker 2: could not come down with flu or covid or a
Speaker 2: stomach upset after receiving a trunch of complaints about her
Speaker 2: presence as a fill in presenter. Under cross examination, by
Speaker 2: the ABC's barrister. Latouf also agreed that she was someone
Speaker 2: sympathetic to the plight of Palestinian people and critical of
Speaker 2: the conduct of the State of Israel and Green Senator
Speaker 2: Sarah Hanson Young says her party will bring on debate
Speaker 2: on a bill to ban gambling advertisements. Prime Minister Anthony
Speaker 2: Albernezi has previously stated his government has no plans to
Speaker 2: ban gambling advertisements, despite being a recommendation of the Peter
Speaker 2: Murphy Report into gambling. Hum. I'm Ruby Jones. This is
Speaker 2: seven am. See you tomorrow.