Good morning. Andrew here. Silicon Valley is locked in a heated debate over new open-weight A.I. models out of China, with critics claiming they were “distilled” — read: stolen — from U.S. counterparts. Against this backdrop, the Trump administration and Chinese officials are expected to discuss A.I. regulation ahead of President Xi’s meeting with Trump on Sept. 24. The big question: Will Washington move to block Chinese open-weight models from the U.S.? And will this become a new chess piece in trade negotiations? (Was this newsletter forwarded to you? Sign up here.)
A.I. protectionismThe U.S.-China race for artificial intelligence dominance has shifted drastically in recent weeks, as more Chinese models (that are largely open-weight) mostly matched the best Western offerings. New reports suggest that Washington and Beijing are weighing steps to protect and advance their national industries — which many in the industry believe could pose more problems than they solve. Some in the Trump administration are pushing for limits on foreign models. The emergence of powerful new open-weight Chinese models from Z.ai and Moonshot AI, which are cheaper to use than closed Western models, have reinvigorated efforts to effectively ban such tools, Axios reports, citing unnamed sources: The Commerce Department last year considered adding multiple Chinese A.I. labs to its “Entity List,” which would effectively cut off U.S. access without a license, a source close to the administration told Axios. The National Security Agency and White House Office of the National Cyber director also considered putting out an advisory on Chinese A.I. lab threats last year, practically discouraging U.S. companies from using their tech, the source said. These voices have gained power in the administration, especially as critics of the approach — including David Sacks, the former White House A.I. czar; Sriram Krishnan, a top White House A.I. adviser; and Chris Fall, the director of the Commerce Department’s Center for A.I. Standards and Innovation — have departed.
Prominent industry figures are still pushing back, arguing that — contra the views of Amodei and Altman — open-source A.I. is good because it forces leading labs to compete on capability and price.
China is reportedly weighing limits for its own models. The country’s commerce ministry has been considering ways to limit foreign companies from getting access to key A.I. and chip-making data or from acquiring important tech start-ups, The Financial Times reports, citing unnamed sources. What to watch: The U.S. and China are set to hold talks in September over how to regulate their increasingly powerful models, according to Reuters.
The war in the Middle East threatens to expand. The Houthis, an armed faction in Yemen that’s backed by Iran, said they would blockade Saudi ships, a potential escalation of hostilities against international commerce. The biggest risk is to global energy prices, though Brent crude, the international benchmark, has held relatively steady at about $90 a barrel. President Trump imposes new tariffs on Canadian products. Trump signed an executive order that will put a 50 percent tax on many goods from Canada in 30 days, claiming that the country is discriminating against U.S. motor vehicles, dairy products and alcohol. He cited a never-before-used provision of the Tariff Act of 1930 to impose the new tariffs, raising the possibility of a new trade war with one of America’s biggest trading partners. Britain’s new leader walks an economic tightrope. Andy Burnham officially became the country’s prime minister yesterday, the seventh in a decade, and has since announced policies like eliminating value-added taxes on electricity. He has also appointed John Healey, a former defense minister, as his economic minister. He’ll have to deal with sluggish economic growth and other issues, though Jamie Dimon of JPMorgan Chase warned Britain against raising taxes on banks.
The ticking clock in Paramount’s deal fightThe 12 states suing to block Paramount’s takeover of Warner Bros. Discovery scored an early win yesterday after the presiding judge agreed to stop Paramount from closing the $111 billion deal for two weeks. Now, the stakes are going to get higher, Lauren Hirsch reports. What happens next: Lawyers for Paramount and the states will meet on Aug. 3 for a hearing on a preliminary injunction, which could pause the deal for much longer. That could be costly for Paramount, which would owe Warner Bros. Discovery shareholders a so-called ticking fee of $650 million for each quarter the deal fails to close, starting in October. The case revolves in part around how to define the market for blockbuster movies. The states argue that the deal would create a company that controls about 27 percent of the market for wide-release theatrical distribution. The judge in the case, Araceli Martínez-Olguín, agreed. “On this combined firm market share alone, the court is persuaded that it can presume the proposed merger is likely to violate antitrust laws,” she wrote. Paramount argues that the states’ definition is arbitrary and excludes streaming services, pointing to blockbusters from newcomers like Amazon’s “Project Hail Mary.” The preliminary injunction hearing will give the company the chance to make this argument in far more detail. Expect Paramount to fight back hard — and quickly. If the company loses the tussle over a preliminary injunction, it will probably seek an expedited appeal, Wall Street insiders say. Martínez-Olguín’s ruling on the temporary restraining order gives it a record of written material to appeal on.
The costs of lettuce distressIn the summer of 1996, a large outbreak of intestinal illness swept across America. Dr. David Relman, then a young medical researcher, had just completed groundbreaking DNA work on the parasite that allowed officials to diagnose cases of cyclosporiasis and trace outbreaks. “Just like today, the C.D.C. was scrambling that summer and trying to figure out where the damn thing was coming from,” Relman, now a professor of microbiology and immunology at Stanford Medicine, told Brian O’Keefe. (The culprit then turned out to be contaminated raspberries from Guatemala.) But this year’s cyclospora outbreak is much bigger, and getting worse, wreaking havoc on U.S. companies as well as stomachs. Cases of the food-borne illness are surging:
The F.D.A. has caused some confusion. On Saturday, the agency said that a sample of shredded lettuce from Taylor Farms, a major supplier of greens to grocery stores and food chains, had tested positive for cyclospora. But the next day, F.D.A. officials said it had been a false positive, though they added that Taylor Farms remains a focus of investigations. The company has already recalled iceberg lettuce sourced from central Mexico, where the contamination is suspected to have originated. Taco Bell has been walloped by the outbreak. Iceberg lettuce supplied by Taylor Farms has been linked to cases of cyclosporiasis. Taco Bell voluntarily removed lettuce from its menu in many states. But it has still taken a hit:
Sweetgreen has been whipsawed. The salad chain’s stock price is down 25 percent for the month, but it staged a comeback on Friday after the outbreak was connected to lettuce from Taco Bell. Still, its shares dropped 6 percent yesterday. Will cases continue to rise? Probably so, Relman said, because of the delayed onset of the illness. But the outbreak should probably start to ease soon. “I doubt that there are nearly as many people eating chopped lettuce as there were two weeks ago,” he said.
Goodbye to ‘Googling’?Google has long championed an open internet, where anyone has a chance of being discovered. But its new artificial intelligence tools threaten to dismantle that vision. The site traditionally sent people to other websites via the links it returned in response to their queries. But the company’s A.I. mode, which summarizes the web’s communal knowledge in response to a user’s question, has been keeping them on its own site for longer than ever. Kate Conger reports for The Times: Users are writing queries three times as long as the keyword-heavy questions they asked of traditional searches, Google said at its developer conference in May. People are spending one to nine more minutes in AI Mode than on traditional Google searches, according to three studies from researchers tallied by The New York Times. One October study from Growth Memo, a newsletter focused on search and marketing, found that in about 75 percent of sessions, users never left AI Mode for the web. For publishers, businesses, banks and others that relied on Google to funnel its billions of users to their websites, the impact has been unmistakable as the company has increasingly incorporated A.I. into search. Google’s users are no longer leaving Google after a search and are just reading its A.I.-generated answers, they said, which means fewer people are coming to their websites and search traffic has dropped. Google has added some features to guide users to the wider web. But part of the problem is that many users are no longer human. Increasingly, searches are performed by A.I. chatbots, according to Cloudflare, a web security company. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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