WEBVTT - After DeepSeek: How China outsmarted America

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<v Speaker 1>Stock markets old just a few minutes ago, and it's

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<v Speaker 1>not pretty down big, especially the tech having nasdak well

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<v Speaker 1>shares of Santa Clara's in video fl hard this morning

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<v Speaker 1>on the popularity of a new Chinese artificial intelligence of bit,

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<v Speaker 1>little known Chinese company sending shock waves through the stock

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<v Speaker 1>market and calling into question US dominance in artificial intelligence.

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<v Speaker 2>The arrival of deep Seek wiped more than a trillion

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<v Speaker 2>dollars off the value of America's tech firms, toppling the

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<v Speaker 2>US from its unquestioned place leading the world's AI race,

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<v Speaker 2>and upstaging Donald Trump as he announced the five hundred

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<v Speaker 2>billion dollar Stargate project. The fact that a relatively small

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<v Speaker 2>disruptor like deep Seek could do such damage calls into

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<v Speaker 2>question everything Silicon Valley would like us to believe about

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<v Speaker 2>artificial intelligence. From Schwartz Media, I'm Ruby Jones. This is

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<v Speaker 2>seven AM today, Managing editor of the Saturday Paper Emily

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<v Speaker 2>Barrett on why Deep Seat caused markets to crash and

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<v Speaker 2>what it means for the tech titans of today. It's Tuesday,

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<v Speaker 2>February four, So, Emily, it's now been a week since

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<v Speaker 2>Chinese AI company deep Seak announced itself and there were

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<v Speaker 2>immediate impacts to that announcement, the value of tech stocks

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<v Speaker 2>in the US crumbled. But could we go back to

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<v Speaker 2>before that happened, and can you tell me a bit

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<v Speaker 2>about the AI landscape before deep seat came along?

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<v Speaker 3>So this was all about America. They were unquestioned in

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<v Speaker 3>their dominance of AI and you know, the brightest minds

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<v Speaker 3>in the country or at work on it. Everything for

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<v Speaker 3>many years now has been set up for the American

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<v Speaker 3>tech industry to succeed. And it's clear that it's been

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<v Speaker 3>a huge focus of the incoming administration as well. As

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<v Speaker 3>soon as he took office, President Trump announced Stargate.

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<v Speaker 4>Stargate, So put that name down in your books, because

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<v Speaker 4>I think you're going to hear a lot about it

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<v Speaker 4>in the future. A new American company that will invest

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<v Speaker 4>five hundred billion dollars at least in AI infrastructure in

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<v Speaker 4>the United States and movement.

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<v Speaker 3>US companies have poured billions and billions of dollars into

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<v Speaker 3>advancing AI and a quarter of a trillion dollars was

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<v Speaker 3>projected for this year alone. And you only have to

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<v Speaker 3>look at the front row of guests at Trump's inauguration

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<v Speaker 3>to kind of get an idea that tech is at

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<v Speaker 3>the forefront of American innovation, and it's certainly at the

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<v Speaker 3>forefront of American policy.

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<v Speaker 1>As Donald Trump is sworn in today, the nation's richest

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<v Speaker 1>and most powerful tech tycoons had some of the best

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<v Speaker 1>seeds in the House.

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<v Speaker 3>Sidebind Trump has made no secret of the fact that

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<v Speaker 3>he really wants to see money getting poured into tech

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<v Speaker 3>in America as the dominating force over specifically China.

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<v Speaker 2>Okay, and central to that investment is the production of

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<v Speaker 2>computer chips. So what has the US government been doing

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<v Speaker 2>to make sure that there is an supply.

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<v Speaker 3>Well, Specifically, the Biden administration signed into law something known

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<v Speaker 3>as the Chips Act that stands for creating helpful incentives

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<v Speaker 3>to produce semiconductors for America.

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<v Speaker 2>Well.

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<v Speaker 1>President Biden signed the Chips Act in the law today.

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<v Speaker 1>The two hundred and eighty billion dollar plan includes fifty

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<v Speaker 1>two billion in subsidies for US computer chip companies, twenty

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<v Speaker 1>four billion in tax credits for new manufacturing facilities.

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<v Speaker 3>This allowed for around two hundred and eighty billion in

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<v Speaker 3>new funding to support chip manufacturing in the US. They

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<v Speaker 3>really want to bring this industry on shore. It's a

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<v Speaker 3>part of them securing their supply chains and a part

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<v Speaker 3>of that competition with China, it included incentives for domestic production,

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<v Speaker 3>tax credits and money for a search and workforce training

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<v Speaker 3>and sort of complementary to that are policies that have

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<v Speaker 3>actually been running since the time of the first Trump administration,

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<v Speaker 3>which were restricting supply of AI chips to China for

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<v Speaker 3>many years. And last year actually Sam Oltman, who is

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<v Speaker 3>the CEO of OpenAI, started trying to raise seven trillion

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<v Speaker 3>dollars to try and remake the global chip industry. The

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<v Speaker 3>US economy, just to put that in perspective, is worth

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<v Speaker 3>about thirty trillion US dollars and Australia's is almost two

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<v Speaker 3>trillion in US dollars. So that's more than three times

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<v Speaker 3>the total value of our economy. Wow. Yeah, And it's

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<v Speaker 3>not just America who wants chips. The race to manufacture

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<v Speaker 3>and to buy chips has definitely intensified, and so America

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<v Speaker 3>has also been reliant on manufacturers in Taiwan, and they've

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<v Speaker 3>been trying to thwart China by putting export bans on

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<v Speaker 3>the leading US chip manufacturer and video. You know, this

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<v Speaker 3>is a hugely important strategic commodity.

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<v Speaker 2>Okay, And so then along comes deep Seek. Tell me

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<v Speaker 2>more about the company itself.

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<v Speaker 3>Yeah, deep Seek is a really fascinating company and there's

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<v Speaker 3>not an awful lot known about it. So it emerged

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<v Speaker 3>in twenty twenty three. It's led by a forty year

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<v Speaker 3>old man whose name is Yang Wanfeng. He was a

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<v Speaker 3>hedge fund executive. He founded a hedge fund called high

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<v Speaker 3>Flyer Want Hedge Fund worth eight billion dollars. That's understood

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<v Speaker 3>to be the finanswer of deep Seek. And the technology

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<v Speaker 3>that was launched was called r one launched crucially at

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<v Speaker 3>the same time as sort of an open source research

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<v Speaker 3>document that people can actually access generally to you know,

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<v Speaker 3>see exactly how this was created, how deep Sek came about,

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<v Speaker 3>what it's based on, how its model works. The most

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<v Speaker 3>important thing for the market reaction was that deep seek

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<v Speaker 3>is able to do what it does on a fraction

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<v Speaker 3>of the budget of what chat GPT can do. So

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<v Speaker 3>it means that software developers can use deep seek much

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<v Speaker 3>more efficiently, much more cheaply than they could use chat GPT.

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<v Speaker 3>So really, I mean, what it's done is it has

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<v Speaker 3>done the traditional job of a disruptor. Deep Zeek has

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<v Speaker 3>called into question the approach of its competitors. So some

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<v Speaker 3>observers have been saying for a while that actually US

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<v Speaker 3>tech companies are overvalued, and they obviously now feel a

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<v Speaker 3>little vindicated by this news and by the market reaction.

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<v Speaker 3>Among them are people like Ed Citron, who was a

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<v Speaker 3>tech analyst, who says that Silicon Valley had just become

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<v Speaker 3>complacent and it was too interconnected to be truly competitive.

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<v Speaker 3>Open AI, it's fair to say, has been making its

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<v Speaker 3>name on promises and imaginative concept. It hasn't been profitable,

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<v Speaker 3>and so critics like Citron are coming to a point

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<v Speaker 3>of having to ask, is this technology is the benefit

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<v Speaker 3>of it clear? Do we know what it's actually good for?

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<v Speaker 2>Coming up after the break, what is AI actually good for? So, Emily,

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<v Speaker 2>AI is clearly very important to Donald Trump. As you said,

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<v Speaker 2>he announced Sargate as soon as he became president. So

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<v Speaker 2>how does the emergence of deep seek complicate his plans

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<v Speaker 2>for America's dominance here?

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<v Speaker 3>Yeah, it's really interesting that China has in a way

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<v Speaker 3>sort of shown that they can get around the trade

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<v Speaker 3>restrictions and the sorts of curbs that the administrations have

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<v Speaker 3>been trying to put on China for quite some time.

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<v Speaker 3>And they got around that this time by simply using

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<v Speaker 3>fewer of the chips. The US, up until this sort

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<v Speaker 3>of point, had still seemed fairly convinced that the battle

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<v Speaker 3>was about money and skills. China has shown that it

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<v Speaker 3>has no shortage of the latter. It's also proven that

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<v Speaker 3>money may not be quite as much of a factor

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<v Speaker 3>because it can innovate more cheaply. It's also important to

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<v Speaker 3>keep in mind that Trump is doing a bunch of

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<v Speaker 3>things that are potentially hurting the industry right even in

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<v Speaker 3>the US. Trump we know that he's a fan of tariffs.

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<v Speaker 3>The industry isn't a fan of that. There have been

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<v Speaker 3>multiple meet he's already videos. CEO has gone to see Trump,

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<v Speaker 3>and people broadly across the tech industry know that putting

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<v Speaker 3>tariffs on supply only pushes up costs domestically. And we

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<v Speaker 3>know that he's not a fan of anything that Biden did.

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<v Speaker 3>So he's trying to differentiate his administration by first of all,

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<v Speaker 3>trying to unpick parts of the Inflation Reduction Act, and

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<v Speaker 3>a key part of that was the Chips Act.

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<v Speaker 2>And Emily, what does all of this say to you

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<v Speaker 2>about Silicon Valley and the tech Titans? Is it the

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<v Speaker 2>case that it is actually a far less innovative environment

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<v Speaker 2>there than the CEOs of these companies would pretend and

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<v Speaker 2>have these CEOs become very very rich off the back

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<v Speaker 2>of tech that was perhaps overvalued.

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<v Speaker 3>I think that's a really good way of summarizing it. Frankly,

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<v Speaker 3>there's a view out there that's emerging, possibly gaining some

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<v Speaker 3>strength now that the tech sector had become very complacent

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<v Speaker 3>that all the money that's been thrown at tech years,

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<v Speaker 3>year after year after year, was really not encouraging them

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<v Speaker 3>to innovate in the way that we're now seeing China

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<v Speaker 3>able to do, and what was really needed in the

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<v Speaker 3>US industry was a genuine threat. So, you know, part

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<v Speaker 3>of this is not only were the AI executives and

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<v Speaker 3>sort of think is no longer thinking in a disruptive way?

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<v Speaker 3>Were they thinking creatively enough about how to bring value

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<v Speaker 3>for money to the sector, but what is the compelling

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<v Speaker 3>use case of AI? People are very captured by the

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<v Speaker 3>potential of AI, and that was also helped by the

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<v Speaker 3>fact that Sam Altman wrote an open letter along with

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<v Speaker 3>a few other AI executives that was literally raising the

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<v Speaker 3>threat of an untrammeled AI what it could potentially do.

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<v Speaker 3>We've all got those images in our heads of some

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<v Speaker 3>sort of terminator, you know, machines against man. Kind of

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<v Speaker 3>debate here. But when we think of AI at this point,

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<v Speaker 3>we think about chat gipt. Now, what you'll hear constantly

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<v Speaker 3>from executives like Sam Altman is you know, these analogies

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<v Speaker 3>to Apple in the early days or to Uber in

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<v Speaker 3>the early days, when you know, yes there was some investment,

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<v Speaker 3>Yes there was a lot of money being thrown around,

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<v Speaker 3>it wasn't entire clear these businesses were going going to

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<v Speaker 3>be that success. When were they going to post profits?

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<v Speaker 3>When were they going to become the giants that we

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<v Speaker 3>know them as today. And his argument would be, you know,

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<v Speaker 3>open AI is on the way to that, it's yet

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<v Speaker 3>to turn a profit. But the difference that people like

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<v Speaker 3>Ed Cetrona pointing out is we knew what Apple was proposing.

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<v Speaker 3>The iPhone was a pretty clear proposition. We may not

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<v Speaker 3>have known at the time exactly how integral it was

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<v Speaker 3>going to become to all of our lives, but it

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<v Speaker 3>was clear what it could do. AI is a complicated,

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<v Speaker 3>multi stranded project that a lot of people have trouble conceptualizing,

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<v Speaker 3>let alone seeing, in terms of their daily lives. Yes,

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<v Speaker 3>we know that can help kids cheat on their tests.

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<v Speaker 3>We know that big data is a very useful way

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<v Speaker 3>of sort of crunching down lots of information into key findings.

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<v Speaker 3>But as far as really understanding a clear cut message

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<v Speaker 3>of how AI is benefiting us in our daily lives,

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<v Speaker 3>it's something that still maybe has to be sold. Maybe

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<v Speaker 3>that's what the market is telling us.

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<v Speaker 2>Emily, thank you so much for via.

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<v Speaker 3>Time, Very welcome. Thanks a lot.

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<v Speaker 2>Also in the news today, journalist Antonette Latouf has given

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<v Speaker 2>evidence in the federal court in her case against the

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<v Speaker 2>ABC for wrongful dismissal. Lawyers for Latouf revealed private messages

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<v Speaker 2>between senior ABC executives arguing they demonstrate the decision to

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<v Speaker 2>dismiss Latouf from her ABC Radio Sydney position was influenced

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<v Speaker 2>by pro Israel lobbying and went against internal editorial advice.

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<v Speaker 2>It was revealed former ABC chair Arta Buttrose pushed for

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<v Speaker 2>Antonette Leatouf to be taken off air, asking why she

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<v Speaker 2>could not come down with flu or covid or a

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<v Speaker 2>stomach upset after receiving a trunch of complaints about her

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<v Speaker 2>presence as a fill in presenter. Under cross examination, by

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<v Speaker 2>the ABC's barrister. Latouf also agreed that she was someone

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<v Speaker 2>sympathetic to the plight of Palestinian people and critical of

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<v Speaker 2>the conduct of the State of Israel and Green Senator

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<v Speaker 2>Sarah Hanson Young says her party will bring on debate

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<v Speaker 2>on a bill to ban gambling advertisements. Prime Minister Anthony

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<v Speaker 2>Albernezi has previously stated his government has no plans to

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<v Speaker 2>ban gambling advertisements, despite being a recommendation of the Peter

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<v Speaker 2>Murphy Report into gambling. Hum. I'm Ruby Jones. This is

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<v Speaker 2>seven am. See you tomorrow.