Hello, and welcome to TechScape. I’m your host, Blake Montgomery, writing to you from an American grocery store, where I’m planning my Thanksgiving pies.
In tech, the European Union is deregulating artificial intelligence; the United States is going even further. The AI bubble has not popped, thanks to Nvidia’s astronomical quarterly earnings, but fears persist. And Meta has avoided a breakup for a similar reason as Google.
Regulation rollback
The hundreds of billions of dollars being spent on AI are overwhelming Europe’s commitment to digital privacy and stringent tech regulation. The EU’s AI Act and General Data Protection Regulation (GDPR) law are being delayed and weakened, respectively. Former Italian prime minister Mario Draghi had warned a year ago that Europe had fallen behind the US and China in innovation and was weak in the emerging technologies that would drive future growth, such as AI. Others, including the EU’s economy commissioner, agreed with him.
My colleague Jennifer Rankin reports on Brussels’s quest for growth:
The plans were part of the commission’s “digital omnibus”, which tries to streamline tech rules including GDPR, the AI Act, the ePrivacy directive and the Data Act.
If agreed, the changes to GDPR would make it easier for tech firms to use personal data to train AI models without asking for consent, and try to end “cookie banner fatigue” by reducing the number times internet users have to give their permission to being tracked on the internet.
The commission also confirmed the intention to delay the introduction of central parts of the AI Act, which came into force in August 2024 and does not yet fully apply to companies.
Read more: European Commission accused of ‘massive rollback’ of digital protections
Meanwhile, the US is taking things even further in its quest to maintain its lead in artificial intelligence, and is seeking to undo any constraints on the future growth of the AI industry. Members of Congress have included language in the yearly National Defense Authorization Act that would direct the federal government to block state-level AI regulation. AI is not heavily regulated in the US in comparison to Europe or China, but it may soon be even less so. The same measure within the NDAA may also bar the Chinese drone maker DJI, the biggest in the world, from launching new products in the US.
Donald Trump drafted an executive order to the same effect last week, and Republicans in Congress proposed a 10-year moratorium on state laws regulating AI earlier this year that failed in a spectacular 99-1 Senate vote. The additions to the act may face a similar avalanche of blowback. On Monday, more than 200 state-level representatives and senators published a letter opposing the measure (pdf).
Under the proposed regulation’s terms, the justice department would sue individual states that attempt to rein in AI, likely California and Colorado. Should the act pass, the US would go even further hands-off with its regulation of the emerging technology, not only declining to impose nationwide regulation on the companies producing it but penalizing any state legislation that tries to do so. Critics say such a measure allows AI’s harms to run rampant and unchecked and impinges on state sovereignty; proponents in Silicon Valley say the fewer legislative hurdles they face, the faster they can grow and make money, which they argue is good for the country as well as themselves.
Trump’s remarks on his desire to simplify AI regulation in the US are ridiculous. “You can’t go through 50 states. You have to get one approval. Fifty is a disaster. You’ll have one woke state and you’ll have to do all woke,” he said at the US-Saudi Investment Forum last week. “You’ll have a couple of wokesters and you don’t wanna do that. You wanna get the AI done.”
What tech to buy
The week in AI
Bubble go pop? Not yet, says Nvidia
Jensen Huang, Nvidia’s CEO. Photograph: Ann Wang/Reuters
Nvidia reported its quarterly earnings last week. They were stellar, as has been the case now for multiple years’ worth of quarterly earnings. Our headline in August: “Nvidia sets fresh sales record amid fears of an AI bubble and Trump’s trade wars”. And this month: “‘We excel at every phase of AI’: Nvidia CEO quells Wall Street fears of AI bubble amid market selloff”.
My colleague Johana Bhuiyan covered the report:
The company surpassed Wall Street’s expectations in nearly every regard, as it has for multiple quarters in a row, a sign that the financially enormous AI boom is not slowing down. Nvidia reported $1.30 in diluted earnings per share on $57.01bn in total revenues, beating investor expectations of $1.26 in earnings per share on $54.9bn in revenue. Sales are up 62% year-over-year. The company reported $51.2bn in revenue from datacenter sales, beating expectations of $49bn. The company is also projecting fourth- quarter revenue of around $65bn; analysts had predicted the company would issue a guidance of $61bn.
“There’s been a lot of talk about an AI bubble,” said CEO Jensen Huang. “From our vantage point, we see something very different. As a reminder, Nvidia is unlike any other accelerator. We excel at every phase of AI from pre-training to post-training to inference.”
The markets cheered, with stocks worldwide surging in Nvidia’s wake. The chipmaker’s success is persistent; so are fears of an imminent steep crash. As evidence of ongoing uneasiness about the enormous spending on AI infrastructure, the day after Nvidia’s strong results, stocks across the board fell. My colleague Callum Jones reported on the market’s deflation:
Leading US stock markets fell less than 24 hours after strong results from the chipmaker Nvidia sparked a rally.
Wall Street initially rose after Nvidia, the world’s largest public company, reassured investors of strong demand for its advanced datacenter chips. But the relief dissipated, and technology stocks at the heart of the AI boom came under pressure.
The benchmark S&P 500 closed down 1.6%, and the Dow Jones industrial average closed down 0.8% in New York. The tech-focused Nasdaq Composite closed down 2.2%.
“The people who are selling the semiconductors to help power AI doesn’t alleviate the concerns that some of these hyper-scalers are spending way too much money on building the AI infrastructure,” said Robert Pavlik, senior portfolio manager at Dakota Wealth. “You have the company that’s benefiting from it, but the others are still spending too much money.”
The Meta store in Burlingame, California Photograph: Bloomberg/Getty Images
Meta defeated a major antitrust lawsuit brought by the US government last week. The logic behind the win echoes the same rationale put forward by the judge in another tech giant’s monopoly case, US vs Google. Both judges said that the landscape in the technology industry had changed quite a lot since the trials began.
In recent years, meaningful competition has emerged in Google and Meta’s spheres of the technology industry, search and social media. For Google, the insurgent competition is ChatGPT and generative AI more broadly. The tech giant has acknowledged that it is in an existential race against its smaller rival, OpenAI. In 2022, Google management called ChatGPT a “code red” for its search business. This David is not fated to win against Goliath, though. Sam Altman recently said Google’s advances in AI would create “temporary economic headwinds” and “rough vibes” for his company.
For Meta, the competition is TikTok. Mark Zuckerberg used similar language to Pichai when he described the app’s rapid rise as a “highly urgent” threat to his company’s social networks. Soon after he said that, Meta debuted Reels, its short-form video feed within Instagram.
Judge James Boasberg cited the rise of the wildly popular Chinese social media app as particular evidence of competition in the social networking market. “The landscape that existed only five years ago when the Federal Trade Commission brought this antitrust suit has changed markedly.” He also chided the FTC for failing to account for the YouTube video platform as meaningful competition. “Even if YouTube is out, including TikTok alone defeats the FTC’s case,” he wrote.
As a result of the new competition, Boasberg ruled, Meta will not be forced to sell off Instagram, which it bought for just $1bn in 2012, or WhatsApp, which it purchased in 2104 for $19bn.
Read more: Meta wins major US antitrust case and won’t have to break off WhatsApp or Instagram
In September, the US judge presiding over US vs Google authored an opinion similar to Boasberg’s, though different in the key fact that Google lost the case. The government had accused the tech giant of operating an illegal monopoly over online search. Globally, the company controls about 90% of the search market, according to the University of Pennsylvania’s Wharton Business School. Google.com is the most popular website in the world. The judge agreed with the government’s assertion. He did not agree that the solution would be forcing Google to sell Chrome.
Google will not be forced to divest Chrome, the most popular web browser in the world and likely worth more than Instagram and WhatsApp combined. Generative AI had altered that market permanently, he said, and introduced the kind of competition Google had not seen in decades. OpenAI and others were in a better position to compete with Google than any previous challengers.
Read more: How Google dodged a major breakup – and why OpenAI is to thank for it
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