WEBVTT - Daybreak Weekend: US CPI, Paris AI Summit, Trade War 0:00:00.280 --> 0:00:07.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:10.320 --> 0:00:12.719 This is Bloomberg day Break Weekend, our global look at 0:00:12.720 --> 0:00:14.840 the top stories in the coming week from our Daybreak 0:00:14.880 --> 0:00:17.560 anchors all around the world. Straight ahead on the program, 0:00:17.560 --> 0:00:20.240 and look ahead to some key data in the US 0:00:20.560 --> 0:00:23.759 how it may impact FED policy moving forward. I'm Tom 0:00:23.840 --> 0:00:24.759 Lusby in New York. 0:00:25.120 --> 0:00:28.560 I'm Kroline, Hepkeitt in London, where we're asking what next 0:00:28.760 --> 0:00:30.200 in the global AI race. 0:00:30.760 --> 0:00:34.120 I'm dek Chrisner looking at the potential fallout of Donald 0:00:34.120 --> 0:00:37.040 Trump's trade war with China. 0:00:38.400 --> 0:00:42.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:42.440 --> 0:00:46.160 eleven three Yeero, New York, Bloomberg ninety nine to one, Washington, DC, 0:00:46.640 --> 0:00:50.880 Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 0:00:51.320 --> 0:00:54.520 Sirius XM one twenty one, and around the world on 0:00:54.600 --> 0:00:57.760 Bloomberg Radio, dot Com and the Bloomberg Business App. 0:01:02.280 --> 0:01:04.360 Good day to you. I'm Tom Busby. We begin today's 0:01:04.360 --> 0:01:06.800 program with some key economic data here in the US. 0:01:07.440 --> 0:01:12.560 CPI data on Wednesday, US retail sales on Friday. Now 0:01:12.600 --> 0:01:15.160 for more on these readings, what they tell us about 0:01:15.200 --> 0:01:18.600 the consumer, how they may impact FED policy, moving forward, 0:01:18.760 --> 0:01:23.760 we're joined by Stuart paul Us, economist with Bloomberg Economics. Stuart, 0:01:23.760 --> 0:01:26.800 thank you for being here. Now, before we look ahead, 0:01:27.040 --> 0:01:29.320 let's start with some important data we just got at 0:01:29.360 --> 0:01:32.160 the end of this past week, the January jobs report. 0:01:32.400 --> 0:01:35.240 Why don't you tell us those numbers and how do 0:01:35.240 --> 0:01:35.840 you read this? 0:01:36.440 --> 0:01:39.680 So my read of the January jobs report is that 0:01:39.720 --> 0:01:42.240 it's a bit mixed. The data are a bit mixed. 0:01:42.640 --> 0:01:46.119 Headline job growth actually surprised to the downside. We had 0:01:46.120 --> 0:01:49.920 just one hundred and forty three thousand jobs added in January. 0:01:49.960 --> 0:01:53.000 That's below our estimate about two hundred thousand jobs added 0:01:53.080 --> 0:01:56.000 during the month. And in addition to that, there were 0:01:56.080 --> 0:02:00.640 downward revisions of past month's data. But and this is 0:02:00.680 --> 0:02:02.800 where it gets to be a little bit mixed, the 0:02:02.880 --> 0:02:07.200 downward revisions weren't as steep as we had expected. As 0:02:07.240 --> 0:02:10.160 most of Wall Street had expected, we saw just six 0:02:10.240 --> 0:02:13.920 hundred and ten thousand fewer workers on payrolls at the 0:02:14.120 --> 0:02:18.119 end of twenty twenty four. Most folks were expecting over 0:02:18.200 --> 0:02:21.640 nine hundred thousand fewer workers on payrolls at the end 0:02:21.680 --> 0:02:24.640 of twenty twenty four. So those downward revisions weren't actually 0:02:24.680 --> 0:02:28.480 as steep as folks had expected. Where we did see 0:02:29.040 --> 0:02:32.400 a little bit of negative details were in some of 0:02:32.440 --> 0:02:35.040 the industry level composition of those revisions. So at the 0:02:35.080 --> 0:02:37.359 end of twenty twenty four, there were fewer workers working 0:02:37.360 --> 0:02:42.120 in professional and business services, leisure and hospitality, manufacturing, some 0:02:42.200 --> 0:02:45.960 of those more cyclically sensitive industries. So we take the 0:02:46.000 --> 0:02:49.079 downward revisions, we take the industry level composition, we take 0:02:49.160 --> 0:02:52.959 slowing payroll growth to start twenty twenty five, and it's 0:02:53.000 --> 0:02:56.920 really just not a great picture in terms of the 0:02:57.000 --> 0:02:59.960 labor market right now. It does characterize labor market cool. 0:03:00.600 --> 0:03:04.040 But we did see the unemployment rate move lower. 0:03:03.840 --> 0:03:06.520 That's exactly right. Adding to the mixed nature of this 0:03:06.639 --> 0:03:10.400 job report, we see the unemployment rate inching lower. Some 0:03:10.480 --> 0:03:14.880 of that is because of updates and revisions to how 0:03:14.919 --> 0:03:17.480 the household survey is computed. A lot of it comes 0:03:17.520 --> 0:03:21.880 from revisions or updates to the total population. The estimate 0:03:21.880 --> 0:03:24.920 of the population increased by about three million people, and 0:03:24.960 --> 0:03:28.200 the number of people who the Bureau of Labor Statistics 0:03:28.360 --> 0:03:32.840 estimates are employed increased by way more than we had anticipated. 0:03:33.160 --> 0:03:35.480 That creates downward pressure on the unemployment. 0:03:35.120 --> 0:03:38.840 Where people joining the workforce, unemployment I mean sounds like 0:03:40.080 --> 0:03:42.600 former President Biden left on a pretty high note here. 0:03:42.680 --> 0:03:44.720 If it's four percent unemployment. 0:03:44.280 --> 0:03:48.120 That's right. Adding to his economic legacy of delivering a 0:03:48.120 --> 0:03:51.560 slower pace of inflation without creating a massive disturbance in 0:03:51.560 --> 0:03:53.960 the labor market. That's going to be part of his 0:03:54.120 --> 0:03:58.560 economic legacy. And so again, you know, as he exited 0:03:58.640 --> 0:04:02.120 on the twentieth of January, this is a rather favorable 0:04:02.680 --> 0:04:05.560 little detail for his economic legacy. But in terms of 0:04:05.600 --> 0:04:08.360 the job to report overall, it is a pretty mixed picture. 0:04:08.560 --> 0:04:13.000 Payrolls not looking great, but then again unemployment inching down. 0:04:13.680 --> 0:04:18.599 Now you mentioned inflation and the legacy of former President Biden, 0:04:19.240 --> 0:04:20.919 I mean, it has been the bete noir for this 0:04:21.000 --> 0:04:24.520 economy and for consumers. And what are you expecting to 0:04:24.520 --> 0:04:28.400 see on Wednesday? That would be the January CPI. Everybody 0:04:28.400 --> 0:04:30.760 goes to the gas station, everybody tries to buy eggs 0:04:30.800 --> 0:04:34.360 if there are eggs in there. There's a lot into this. 0:04:34.880 --> 0:04:37.200 What do you expect to see and why? What is 0:04:37.240 --> 0:04:38.919 the reason it is so stubbornly high. 0:04:39.040 --> 0:04:42.840 We're expecting to see headline inflation registering zero point three 0:04:42.920 --> 0:04:45.520 percent on a monthly basis. That's a little bit slower 0:04:45.520 --> 0:04:48.680 than we saw in December. There are a couple tricky 0:04:48.839 --> 0:04:53.400 seasonal factors operating the background that are allowing for that 0:04:53.640 --> 0:04:57.800 slow down in the monthly pace of headline inflation. But 0:04:58.120 --> 0:05:01.320 underneath the surface, what's going on the sumer level for 0:05:01.520 --> 0:05:06.080 headline inflation is that gasoline prices are exceptionally stable through 0:05:06.120 --> 0:05:09.279 the winter. Typically, you would expect to see a major 0:05:09.320 --> 0:05:14.159 decline in December that never materialized that boosted the December number. 0:05:14.560 --> 0:05:17.480 Now as we get into January, there's less of that 0:05:17.520 --> 0:05:20.960 going on again. Just at the pump, things are relatively stable, 0:05:21.320 --> 0:05:22.520 and so we're going to see a little bit of 0:05:22.520 --> 0:05:25.200 a slow down to the pace of headline inflation. When 0:05:25.240 --> 0:05:27.800 it comes to the core, we're also expecting to see 0:05:27.880 --> 0:05:32.279 just barely zero point three percent monthly inflation. That's faster 0:05:32.760 --> 0:05:35.600 than we saw it in December zero point two percent December, 0:05:36.120 --> 0:05:39.560 but favorable base effect will allow the annual measure of 0:05:39.600 --> 0:05:42.440 core inflation to inch down just a little bit to 0:05:42.560 --> 0:05:46.560 three point one percent, still stubbornly high. It's still characteristic 0:05:46.600 --> 0:05:50.080 of that long last mile to the FEDS two percent target, 0:05:50.920 --> 0:05:52.760 And a lot of what's going on in the background 0:05:53.200 --> 0:05:57.800 is that goods disinflation deflation in goods, which is typical 0:05:58.200 --> 0:06:02.520 for the US decade, It's just not there. We're just 0:06:02.600 --> 0:06:06.400 not getting that goods deflation that we would typically rely on. 0:06:06.600 --> 0:06:08.760 Now on Friday, we're gonna see the result of this 0:06:08.880 --> 0:06:12.000 with retail sales for January. What are you expecting to see? 0:06:12.480 --> 0:06:15.000 Is the consumer pulling back? And is it not just 0:06:15.160 --> 0:06:17.520 low way journers but all consumers. 0:06:17.960 --> 0:06:21.080 What I'm really seeing for the retail sales number is 0:06:21.120 --> 0:06:27.240 a consequence of pretty negative weather consequences from the polar vortex. 0:06:27.279 --> 0:06:31.479 In January. We saw really dismal auto sales during the month. 0:06:31.720 --> 0:06:34.679 The annualized pace of auto sales fell to about fifteen 0:06:34.720 --> 0:06:38.080 point six million units from sixteen point eight million units 0:06:38.120 --> 0:06:41.919 in December. So that major decline is characteristic of folks 0:06:41.960 --> 0:06:45.160 who just really don't want to walk the lot and 0:06:45.320 --> 0:06:49.120 get pitched on, you know, the undercoat cealant by the salesman. 0:06:49.480 --> 0:06:51.560 It's just too cold to do that during the month 0:06:51.560 --> 0:06:54.320 of January during a polar vortex. And when you have 0:06:54.400 --> 0:06:57.320 auto sales declining like that, that could result in headline 0:06:57.360 --> 0:07:00.240 retail sales declining by that zero point four percent during 0:07:00.240 --> 0:07:02.560 the month. And that's what we expect well a. 0:07:02.480 --> 0:07:05.040 Lot to look forward to. Our thanks to Stuart paul Us, 0:07:05.120 --> 0:07:09.440 economist with Bloomberg Economics. We move next to corporate earnings 0:07:09.440 --> 0:07:12.840 from the fast food giant McDonald's. It's fourth quarter results 0:07:12.840 --> 0:07:15.360 out on Monday. For more on the world's biggest burger chain, 0:07:15.440 --> 0:07:18.320 the state of the fast food industry, and whether consumers 0:07:18.760 --> 0:07:21.520 are pulling back on their spending. We're joined by Michael Halen, 0:07:21.600 --> 0:07:26.560 Bloomberg Intelligence Senior Restaurant and food service analyst. Michael, thank 0:07:26.600 --> 0:07:30.440 you for joining us. Now, Like every other dining establishment, 0:07:30.520 --> 0:07:33.720 McDonald's has how to face a lot of challenges. Rising costs, 0:07:34.040 --> 0:07:37.800 look at the price of eggs, higher salaries, cautious consumer spending. 0:07:38.080 --> 0:07:40.880 It also had an E Coli outbreak last year that 0:07:40.960 --> 0:07:43.640 may have really set things back. So what are you 0:07:43.960 --> 0:07:46.760 looking for in this earnings report out on Monday. 0:07:47.360 --> 0:07:49.880 Yeah, I think this earning report is going to be 0:07:49.920 --> 0:07:53.040 kind of ugly, So, you know, to your point, e 0:07:53.160 --> 0:07:57.760 Coli through a wrench into things. They had started off 0:07:57.760 --> 0:08:01.120 the quarter well October seem store sales were up mid 0:08:01.200 --> 0:08:04.320 single digits, Traffic was positive. They had kind of re 0:08:04.440 --> 0:08:08.160 established themselves as as you know, one of the big 0:08:08.160 --> 0:08:10.720 dogs in terms of value providers in there in the 0:08:10.760 --> 0:08:13.400 restaurant business in the United States. With their five dollars 0:08:13.400 --> 0:08:15.960 meal deal, it was going really well. Uh and then 0:08:16.000 --> 0:08:20.320 they were hit that E Coli outbreak. And so from 0:08:20.440 --> 0:08:22.800 data we've seen and you know, just what we expect 0:08:22.800 --> 0:08:26.800 November and December, we're probably pretty pretty tough months for 0:08:27.000 --> 0:08:29.200 the chain. You know, I think what the street is 0:08:29.240 --> 0:08:32.920 really interested in is how January is doing so far. Right, 0:08:32.960 --> 0:08:37.559 They've they've revamped their mcvalue menu, which hasn't been touched 0:08:37.559 --> 0:08:40.920 in quite some time, and we think that could could 0:08:41.000 --> 0:08:43.160 create some buzz. You know, the street really wanted to 0:08:43.200 --> 0:08:46.400 see some some progress here on the same source. 0:08:46.400 --> 0:08:50.360 Sales and traffic. Well, I'd say more than any other chain, 0:08:50.400 --> 0:08:53.679 they are pretty nimble. They're willing to change. And how 0:08:53.679 --> 0:08:57.760 do you think they McDonald's did reacting to that ecali scare. 0:08:57.800 --> 0:09:00.320 I mean they shut things down right away. That quarter 0:09:00.320 --> 0:09:03.720 pounder was unavailable I think nationwide even for a while, 0:09:03.840 --> 0:09:07.640 just to la fears. But how do you think they 0:09:07.679 --> 0:09:08.400 came back from that? 0:09:08.920 --> 0:09:11.160 Yeah, so sales and traffic haven't bat back. I think 0:09:11.200 --> 0:09:14.040 they handled it pretty well. They quickly, you know, stop 0:09:14.240 --> 0:09:17.720 serving quarter pounders and quick got to the bottom of 0:09:17.720 --> 0:09:21.160 the issue. You know, I think what's going to help 0:09:21.240 --> 0:09:23.960 McDonald's versus say Chipotle, which was the last you know, 0:09:24.360 --> 0:09:27.400 largely coal air brick in the industry. You know, we 0:09:27.480 --> 0:09:30.640 think this is going to be a much shallower event 0:09:30.720 --> 0:09:33.400 for McDonald's because it wasn't their fault. It wasn't because 0:09:33.440 --> 0:09:39.000 of poor procedures or cleanliness issues or cross contamination or 0:09:39.040 --> 0:09:41.640 anything like that. They receive bags of onions from a 0:09:41.679 --> 0:09:44.240 distributor that were infected with E. Coli, right, And so 0:09:44.280 --> 0:09:46.280 for that reason, we think this is going to be 0:09:46.280 --> 0:09:51.240 a much shallower impact the same sort of sales. We 0:09:51.280 --> 0:09:54.440 had some work done by a partner of ours, Cognovi Labs. 0:09:54.480 --> 0:10:00.640 They use AI to analyze tweets and online forums and 0:10:00.960 --> 0:10:03.400 things of that nature. And what their research found for 0:10:03.480 --> 0:10:08.680 us was that mentions of ecal i quickly faded throughout 0:10:08.720 --> 0:10:12.120 the fourth quarter in November and by year end, and 0:10:12.160 --> 0:10:18.280 also the negative emotions tied to ecoali comments dissipated pretty quickly. 0:10:18.320 --> 0:10:20.960 And so that what that tells us is that we 0:10:21.080 --> 0:10:23.040 think this is going to be a much faster recovery 0:10:23.080 --> 0:10:25.400 than ben Chipotle experience. We don't know if it's going 0:10:25.440 --> 0:10:27.760 to be the end of by the end of one 0:10:27.840 --> 0:10:30.000 Q or not. But you know, there's a potential for 0:10:30.040 --> 0:10:32.520 them to increase sales LITW single digits here in the 0:10:32.559 --> 0:10:35.920 second quarter, which, like I said earlier, the street wants 0:10:35.920 --> 0:10:37.840 to see progress. We want to see progress in this 0:10:38.679 --> 0:10:41.400 earnings report. We want to hear that January is doing 0:10:41.440 --> 0:10:43.760 better than December, which did better than November. 0:10:43.880 --> 0:10:47.240 Right right, right now. You mentioned the five dollars meal 0:10:47.280 --> 0:10:50.480 deals that they had, and everybody, it seems, came up 0:10:50.480 --> 0:10:52.520 with our own meal deals after that, and not just 0:10:52.559 --> 0:10:56.920 fast food but quick service restaurants, casual dining chains. Do 0:10:57.000 --> 0:11:01.160 you think that really changed the industry McDonald's launching those 0:11:01.200 --> 0:11:03.480 five dollars It seems like that started. I think in 0:11:03.559 --> 0:11:06.240 June of last year they extended it still going on. 0:11:06.320 --> 0:11:08.400 You say, now they're going to revamp their mcvalue meal. 0:11:08.920 --> 0:11:12.160 I mean, is this for right now here to stay? 0:11:12.720 --> 0:11:16.360 Yeah, And I'd say that the big reason is that 0:11:16.360 --> 0:11:22.200 that quick service chains are heavily frequented by low income consumers, 0:11:22.200 --> 0:11:26.640 and low income consumers are are still being impacted more 0:11:26.679 --> 0:11:30.000 than other consumers by inflation. Inflation is cumulative, right, and 0:11:30.040 --> 0:11:32.439 so last year was a restaurant's recession. And that's why 0:11:32.480 --> 0:11:35.320 we saw McDonald's start to lean into this. You know, 0:11:35.480 --> 0:11:37.400 early in the year. Last year, there was a lot 0:11:37.520 --> 0:11:41.160 of shade being thrown at McDonald's because a big mac 0:11:41.160 --> 0:11:43.959 meal was eighteen dollars at a store in Connecticut, right, 0:11:44.000 --> 0:11:46.559 And there was other quick service and fast casual names 0:11:46.600 --> 0:11:48.839 like five Guys actually had a twenty two or twenty 0:11:48.840 --> 0:11:51.880 three dollars meal deal, right, And so it was really 0:11:51.960 --> 0:11:55.320 important for Quick Service to re establish that value proposition, 0:11:55.400 --> 0:11:58.560 and that's why they did these five dollars meal deals, 0:11:58.559 --> 0:12:01.280 and that's why they're going to continue to do them. 0:12:01.360 --> 0:12:01.560 Right. 0:12:02.320 --> 0:12:05.400 It was a tough year for restaurants, and Quick Service 0:12:05.440 --> 0:12:08.520 had to do what they could to keep the low 0:12:08.559 --> 0:12:11.720 income consumers coming back. You know, we're we're more bullish 0:12:11.760 --> 0:12:15.959 on twenty twenty five. You know, with asset prices including 0:12:16.120 --> 0:12:19.920 SMP bitcoin, home prices all near all time highs, we think, 0:12:20.400 --> 0:12:22.520 you know, middle income, higher income consumers are going to 0:12:22.600 --> 0:12:26.520 spend more. You know, we think there could be you know, 0:12:26.559 --> 0:12:28.840 the results since the election have been better as well, 0:12:28.880 --> 0:12:32.199 and so and some of the economic data that we watch, 0:12:32.280 --> 0:12:34.720 and so, you know, for that reason, the low income 0:12:34.720 --> 0:12:37.440 consumer could be a little bit better too. But you know, 0:12:37.559 --> 0:12:40.280 because of the impacts of inflation on them, we think 0:12:41.360 --> 0:12:44.679 quick services is probably the segment of the industry we're 0:12:44.720 --> 0:12:47.280 the least excited about in twenty twenty five, and so 0:12:47.360 --> 0:12:49.319 you're going to continue to see these discounts. 0:12:49.679 --> 0:12:52.600 Oh that's good. Well McDonald's Q four earnings along with 0:12:52.640 --> 0:12:56.120 the return of the Shamrock shake out on Monday, Haart 0:12:56.120 --> 0:12:59.000 thanks to Michael Hale and Bloomberg Intelligence Senior restaurant and 0:12:59.040 --> 0:13:02.360 food service Adaly. Coming up on Bloomberg day Break Weekend, 0:13:02.400 --> 0:13:05.280 we'll look at what comes next in the global AI race. 0:13:05.640 --> 0:13:19.760 I'm Tom Busby, and this is Bloomberg. This is Bloomberg 0:13:19.840 --> 0:13:22.000 day Break Weekend, our global look ahead at the top 0:13:22.040 --> 0:13:24.920 stories for investors in the coming week. I'm Tom Busby 0:13:25.000 --> 0:13:27.480 in New York. Up later in our program, we'll look 0:13:27.480 --> 0:13:30.559 at the potential fallout of Donald Trump's trade war with China. 0:13:30.720 --> 0:13:34.160 But first, a summit on artificial intelligence taking place in 0:13:34.320 --> 0:13:37.200 Paris this week, set to bring together the biggest names 0:13:37.200 --> 0:13:40.160 in the sector, including government officials and business leaders. But 0:13:40.800 --> 0:13:44.400 this comes after Chinese startup Deep Seek jolted competitors around 0:13:44.440 --> 0:13:47.480 the world with a debut of its AI model, trained 0:13:47.480 --> 0:13:50.200 at just a fraction of the cost of rivals. How 0:13:50.240 --> 0:13:53.760 will the international community respond for more? Let's go to 0:13:53.800 --> 0:13:56.559 London and bring in Bloomberg day Break europe banker Caroline 0:13:56.600 --> 0:13:57.959 hepger Tom. 0:13:57.720 --> 0:14:00.560 The AI Action Summit is duced to take place in 0:14:00.600 --> 0:14:04.480 Paris in the next few days and at a fascinating moment. 0:14:04.880 --> 0:14:07.440 It will be the first trip abroad for the newly 0:14:07.480 --> 0:14:12.040 installed US Vice President jd. Vance. The Trump administration is 0:14:12.160 --> 0:14:15.480 keen to take a leading role in this area. Just 0:14:15.520 --> 0:14:20.200 look at President Trump's Stargate initiative, a one hundred billion 0:14:20.280 --> 0:14:25.840 dollar venture designed to accelerate AI development. Plus, the gathering 0:14:25.920 --> 0:14:29.920 takes place in the wake of Chinese firm Deep Seeks model, 0:14:30.240 --> 0:14:34.000 raising questions about the billions of dollars firms have spent 0:14:34.400 --> 0:14:39.960 to develop artificial intelligence technology and whether Beijing is closing 0:14:40.000 --> 0:14:43.840 the gap with the US in this rapidly developing sphere. 0:14:44.480 --> 0:14:47.920 So what's in store at the Paris AI Action Summit 0:14:48.040 --> 0:14:52.120 and beyond for the industry, I've been asking Bloomberg's Technology 0:14:52.200 --> 0:14:54.440 opinion columnist Pami Olsen. 0:14:55.080 --> 0:14:58.400 The summit came about in twenty twenty three as an 0:14:58.400 --> 0:15:02.960 AI safety summit in the UK and Bletchley Park which 0:15:03.000 --> 0:15:05.400 is kind of famed for being home to a lot 0:15:05.400 --> 0:15:09.400 of computer related innovation, and it was brought together, I think, 0:15:09.400 --> 0:15:12.280 out of concern about the speed at which AI was 0:15:12.320 --> 0:15:15.840 developing and the sense that there needed to be guardrails 0:15:15.880 --> 0:15:17.880 put in place. And there was a lot of talk 0:15:17.920 --> 0:15:21.200 back then about not just the short term risks of AI, 0:15:21.440 --> 0:15:25.720 such as the rise of misinformation that chatbots could contribute to, 0:15:26.160 --> 0:15:31.600 or the way that they could perhaps entrench certain stereotypes, 0:15:31.920 --> 0:15:37.640 racial stereotypes, gender stereotypes, and biases, but also the potential 0:15:37.720 --> 0:15:43.440 existential risk that AI could bring to civilization. These were 0:15:43.440 --> 0:15:45.920 the sorts of things that Rishie Sunak, who was the 0:15:45.960 --> 0:15:48.760 British Prime Minister at the time and he was hosting 0:15:48.800 --> 0:15:51.920 the event, spoke about. It's a very different tone this 0:15:52.040 --> 0:15:56.640 time around. The name has changed from AI Safety Summit 0:15:56.760 --> 0:15:59.600 to AI Action Summit, and I think that's a very 0:15:59.640 --> 0:16:04.480 interesting sting potential shift there in how governments want to 0:16:04.520 --> 0:16:09.160 approach AI Now. They seem to be more eager to 0:16:09.280 --> 0:16:12.600 kind of remain ahead in this race and maybe even 0:16:12.680 --> 0:16:17.120 stimulate and encourage their own national champions more so than 0:16:17.200 --> 0:16:20.080 putting guardrails in place for companies, which was really the 0:16:20.120 --> 0:16:22.760 focus of the first of the first stummit. 0:16:23.280 --> 0:16:26.280 Yeah, so why is this taking place now? 0:16:26.320 --> 0:16:26.520 Then? 0:16:26.880 --> 0:16:29.200 Well, as I understand it, this is an annual event, 0:16:29.280 --> 0:16:31.200 and so there was one in twenty twenty three, then 0:16:31.200 --> 0:16:34.360 there was another one in Seoul, South Korea last year, 0:16:34.400 --> 0:16:37.240 and this year we've got one in Paris. That the 0:16:37.280 --> 0:16:40.720 reason these have started is again just because of these 0:16:40.840 --> 0:16:45.240 rapid advancements. You know, since chat GPT came out two 0:16:45.320 --> 0:16:48.800 years ago, the rate at which AI models have been 0:16:48.840 --> 0:16:52.880 improving is even taking scientists by surprise. You know, some 0:16:52.920 --> 0:16:55.400 of the academic studying this stuff will read one paper. 0:16:55.760 --> 0:16:57.680 By the time they've finished reading it, it's sort of 0:16:57.840 --> 0:17:01.200 out of date because Anthropic or open AI or Google 0:17:01.240 --> 0:17:04.040 have come up with something more incredible, like a video 0:17:04.080 --> 0:17:09.679 generation tool. And you know, for businesses, investors, and policy makers, 0:17:09.520 --> 0:17:13.400 it's been very tricky just to keep up, whether it's 0:17:13.400 --> 0:17:15.639 to try and plug these systems into your businesses or 0:17:15.640 --> 0:17:18.040 try and put the standards in place to keep them safe. 0:17:18.880 --> 0:17:21.560 So and the other reason why I think this is 0:17:21.600 --> 0:17:25.680 happening is I think that governments have realized over the 0:17:25.760 --> 0:17:29.440 last decade that Silicon Valley companies should not be left 0:17:29.440 --> 0:17:33.639 to regulate themselves and governments need to come together and 0:17:33.880 --> 0:17:37.520 maybe put together some sort of international agency related to 0:17:37.520 --> 0:17:40.879 the United Nations that can put some standards in place 0:17:41.359 --> 0:17:44.920 that companies have a perhaps a legal obligation to follow, 0:17:45.320 --> 0:17:50.800 because you know, there is nothing like that yet in existence. 0:17:50.840 --> 0:17:54.600 And just a case in point, Google announced that they 0:17:54.640 --> 0:17:57.639 are now removing their own ban on the use of 0:17:57.680 --> 0:18:02.320 their AI for a military purpose, for weapons and for 0:18:02.480 --> 0:18:05.960 surveillance tools, and so this has really caused a lot 0:18:06.000 --> 0:18:11.920 of concern and consternation, particularly among civil society organizations and 0:18:12.760 --> 0:18:16.160 policy makers that really governments need to step in and. 0:18:16.040 --> 0:18:20.280 Do something interesting. So in terms of the heads of 0:18:20.320 --> 0:18:22.440 state who are going to be there and the important 0:18:22.480 --> 0:18:25.960 players out of Silicon Valley, who do you think will 0:18:25.960 --> 0:18:29.080 be them? And obviously in Manu and Macon, but also 0:18:29.200 --> 0:18:34.240 possibly JD. Vans possibly the other Silicon Valley leaders. Could 0:18:34.280 --> 0:18:39.040 things get a bit tense given that everybody is jostling 0:18:39.080 --> 0:18:41.639 to be at the forefront of this AI race. 0:18:42.080 --> 0:18:44.199 You know, at first I thought there might be a 0:18:44.240 --> 0:18:48.119 lot of tension between the US and China, so as 0:18:48.160 --> 0:18:51.080 there always is on this topic of AI governance. But 0:18:51.119 --> 0:18:54.880 it was interesting when the first AI s at International 0:18:54.920 --> 0:18:57.760 AI sam It happened in the UK two years ago. 0:18:58.840 --> 0:19:02.439 China sent uh this kind of biace minister for Science 0:19:02.480 --> 0:19:05.320 and Technology, and he was really kept at arm's length 0:19:05.800 --> 0:19:09.720 on these kind of national security concerns. Now I think 0:19:09.760 --> 0:19:12.880 it's going to be different. I think that China's officials, 0:19:13.080 --> 0:19:15.680 and China is sending one of its top government officials 0:19:15.680 --> 0:19:19.479 a very close ally to Jijiping, much higher ranking than 0:19:19.480 --> 0:19:21.760 the guy who came the first time. I think he's 0:19:21.800 --> 0:19:25.280 going to be given a much warmer welcome, just because 0:19:25.320 --> 0:19:28.159 of deep seat that the Chinese company that in the 0:19:28.240 --> 0:19:31.119 last couple of weeks has really shocked the market with 0:19:31.160 --> 0:19:36.080 its ability to make AI models so efficiently and really 0:19:36.119 --> 0:19:40.840 disrupt the economics of this new market. And so just 0:19:40.920 --> 0:19:44.280 given what Chinese companies have been achieving in research and development, 0:19:45.720 --> 0:19:47.639 I think the Chinese officials there are going to be 0:19:47.640 --> 0:19:51.680 given a warmer welcome. Overall, there might well be some 0:19:51.680 --> 0:19:55.959 some tensions over what policy should be, but also it 0:19:56.000 --> 0:19:58.360 really just depends on who ends up who ends up 0:19:58.400 --> 0:20:03.840 going to represent the United States, and I believe some 0:20:03.920 --> 0:20:05.960 quite high ranking people from India are going to be 0:20:06.000 --> 0:20:08.679 there as well. And again that's I think again that 0:20:08.720 --> 0:20:11.680 comes down to what happened with deep Seat Deep Deep 0:20:11.760 --> 0:20:15.680 Seek showed that the you know, the current AI race 0:20:16.240 --> 0:20:20.480 in it, the guaranteed winners are not necessarily American companies, 0:20:20.680 --> 0:20:24.640 America's tech giants. It could be smaller companies from developing nations. 0:20:25.520 --> 0:20:28.680 Yeah, which is which is fascinating, isn't it that Deep 0:20:28.720 --> 0:20:34.040 Seek has for such a rethink. But a lot of 0:20:34.040 --> 0:20:38.840 the big US companies are still committed to spending on 0:20:38.840 --> 0:20:42.800 on growth open AI in particular and others. I wonder 0:20:42.840 --> 0:20:46.600 whether there's any development in on that front. As far 0:20:46.640 --> 0:20:47.920 as you're concerned. 0:20:47.640 --> 0:20:49.720 I think the spending is going to continue, and we 0:20:49.920 --> 0:20:53.440 saw a commitment to that actually just in last week 0:20:53.640 --> 0:21:00.960 when tech companies like Microsoft and Meta Platforms were announcing 0:21:01.040 --> 0:21:03.840 their earnings. So it was an awkward time for them 0:21:04.000 --> 0:21:07.800 because they had just been completely undercut in a way 0:21:07.640 --> 0:21:10.320 by deep Seek, and then they had to talk to 0:21:10.400 --> 0:21:15.080 their investors about these tens of billions of dollars They 0:21:15.080 --> 0:21:18.800 want to continue spending on AI, and I think actually 0:21:19.840 --> 0:21:25.480 they can continue. They do have some justification to spend 0:21:25.480 --> 0:21:28.840 that much because in the last week there have been 0:21:29.359 --> 0:21:33.639 a lot of security concerns raised about deep Seek. Some 0:21:33.880 --> 0:21:36.840 security researchers have said that although deep Seek made its 0:21:36.880 --> 0:21:40.200 model very efficient, it's actually really low on the scale 0:21:40.280 --> 0:21:43.920 when it comes to the ability for people to jail 0:21:43.960 --> 0:21:47.479 break its model, meaning they could get it to do 0:21:47.560 --> 0:21:53.600 things it's not supposed to, or steal private information that 0:21:53.680 --> 0:21:56.800 the model is kind of plugged into. So I think 0:21:56.800 --> 0:22:00.760 that would really hurt deep seak prospects in terms of 0:22:00.760 --> 0:22:04.159 getting business customers potentially, And that is a little bit 0:22:04.200 --> 0:22:08.119 of a vindication for the tech giants who are spending 0:22:08.200 --> 0:22:11.640 a lot on infrastructure, billions and billions of dollars on infrastructure, 0:22:11.720 --> 0:22:14.400 which isn't just the power AI, but also to keep 0:22:14.400 --> 0:22:15.359 it secure. 0:22:15.600 --> 0:22:18.240 And tell us also a little bit about one of 0:22:18.240 --> 0:22:22.400 the other ventures within AI, which is Stargate and what's 0:22:22.480 --> 0:22:24.520 kind of happening with that and why people think it's 0:22:24.560 --> 0:22:27.840 so interesting what may come in the weeks and months ahead. 0:22:28.359 --> 0:22:31.359 Yeah, so I think we really it's it's an open 0:22:31.440 --> 0:22:35.000 question because this is a project that was a five 0:22:35.080 --> 0:22:40.760 hundred billion dollar project to really just boost the infrastructure 0:22:41.720 --> 0:22:45.919 investment in the US on AI data center spending and 0:22:46.000 --> 0:22:49.800 so forth. I've heard some people say that five hundred 0:22:50.280 --> 0:22:53.480 million like the billion. It doesn't it doesn't need to 0:22:53.520 --> 0:22:57.800 be that high. That for what the government is trying 0:22:57.840 --> 0:23:00.240 to do and what open ai is trying to do 0:23:00.320 --> 0:23:03.679 as a potential beneficiary to all this just does not 0:23:03.800 --> 0:23:07.480 need that amount of funding. But we'll see, i suppose, 0:23:07.480 --> 0:23:11.080 in the in the months ahead, whether open ai actually 0:23:11.119 --> 0:23:15.639 is able to make good on some of the discoveries 0:23:15.640 --> 0:23:18.840 that deep seek has made, because remember deep seek is 0:23:19.880 --> 0:23:22.439 not strictly open source, but it's it's an open weights 0:23:23.680 --> 0:23:28.159 uh model, and that it has put the blueprints for 0:23:28.240 --> 0:23:31.000