New Week #135
A tech-fuelled Cold War is intensifying
Welcome to this update from New World Same Humans, a newsletter on trends, technology, and society by David Mattin.
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To Begin
This week, an update on a rising NWSH obsession: the emerging Techno-Cold War between the US and China.
Also, a dive into the launch of Apple Intelligence, and what it tells us about the future of AI.
Let’s go!
👾 You’ve Had Your Chips
This week, news that the US is considering yet further restrictions on China’s access to AI chips.
The Biden administration is mulling a ban on export of chips that utilise gate-all-around (GAA) architecture. GAA is a stacking technique that allows for more computational power and energy efficiency; it will play a key role in the next generation of chips manufactured by TSMC, Samsung, and Intel.
This comes amid reports that Chinese tech giants including Alibaba and Tencent are trying to circumvent current export restrictions. Tech publication The Information says that now those companies are unable to import high-end AI chips, they’re instead talking to Nvidia about renting access to them on US soil.
Remember, all this comes against a background of huge spending on both sides. Last month the US announced a $6.1 billion grant to memory chip-maker Micron Technology; in April it awarded over $16 billion to TSMC to supercharge the construction of three chip plants in Arizona.
It’s ever-more clear that the US and China are best understood as already amid a kind of Exponential Age Cold War. One that will have deep implications for the years ahead.
⚡ NWSH Take:
US restrictions on the sale of AI chips to China are just one piece of a far larger puzzle.
The US and China are in a race to own the Exponential Age. And AI is at the centre of that story. Both parties know that the future belongs to the great power with the most effective, and effectively deployed, AI. There are clear military advantages to be won. But the real prize is economic dominance. Amid falling working age populations, both the US and China are chasing an AI-fuelled productivity miracle that sends GDP spiralling upwards.
How will all this play out?
The vast spending on compute resources tells us much about the growing intensity of this new Cold War. But what the US and China are questing after, in the end, are AI instantiations of two different and often opposing worldviews.
We’re going to see the emergence of two distinct systems of machine intelligence, one originating in the Global North and one in China. In time, we’ll come to see these two powers as, in some deep sense, defined by their immersion in these two different systems of intelligence. Two different ways, that is, of processing the world around them and producing outputs.
One early signal? We learned last month that the CCP has already created an AI incarnation of its current leader:
Created by the Cyberspace Administration of China, the so-called Chat XI PT is trained on XI’s political philosophy — ‘socialism with Chinese characteristics’ — and public remarks.
We’re going to see a whole lot more of this. And soon enough we’ll see aspects of government outsourced to these kinds of AI models. Will Xi, who is now allowed to rule as ‘president for life’, even demand that government is handed over to an AI incarnation of himself after his death, rather than a new human leader?
In the meantime, the Exponential Age Cold War intensifies. In the US, defence tech is becoming a big deal. Former Google CEO Eric Schmidt has founded an AI military drone startup called White Stork; he’s reportedly poaching talent from Apple and SpaceX and testing the drones in Menlo Park.
And former US national security expert Susan Rice, an advisor to the Obama administration, says US companies aren’t doing enough to stop China stealing their AI secrets.
All of this as China steps up military activity around Taiwan. Last month it held a series of war games that saw it encircle the island with bomber planes and fire mock missiles towards key targets.
A few instalments ago I wrote about the possibility that all this will end via some Grand Exponential Age Bargain. It’s possible to imagine a scenario in which the Global North contents itself that it has sufficient control of its own compute resources — that means TSMC has built out capacity on US and European soil — and then quietly looks the other way while China takes Taiwan.
I lead on technology research for a publication called Global Macro Investor, read by many of the world’s leading hedge funds, investment banks, and family offices. At a recent gathering the possibility of such a Grand Bargain — and the implications if one does not materialise — were a central topic of conversation.
There are interesting times ahead. I’ll keep watching.
🌊 The One True Moat
We all saw Apple’s long-awaited WWDC event this week. As expected, AI was the star.
The company announced Apple Intelligence, which will see it weave AI through the user experience on iPhone and Mac. Users will be able to use AI to help them draft emails, and create bespoke images and emoji.
As expected, Siri gets a major upgrade. The AI assistant it now fuelled by an LLM, and so capable of far more complex and fluent conversation.
And another headline? A new partnership with OpenAI means ChatGPT is now integrated across Apple devices. In practise this means that if Siri can’t handle a request it will seamlessly hand over to ChatGPT — and flag this — to handle the interaction.
⚡ NWSH Take:
Last week I looked forward to Apple’s WWDC. It could herald, I said, the emergence of the virtual companion — a 24/7 AI-fuelled philosopher and friend — in the mainstream.
Seen against that mighty expectation, the announcements were a little underwhelming. I foresaw a reimagining of the iPhone around the virtual companion; what we got instead is a new way to do emoji.
Okay, that’s a little harsh. But you see where I’m coming from. Still, two related thoughts:
First, it shouldn’t be such a surprise that Apple are treading carefully. After all, they’re trying to integrate a new wave technology into one of the most successful consumer-facing products in history, used by over 1.5 billion people. This is about bringing generative AI to the mainstream, and Apple can’t afford a misstep. Even their launch tagline is intended to be reassuring:
And that points towards the deeper point, which is the vast power the Apple wield here.
When the Apple/OpenAI partnership was first mooted, everyone naturally wondered about the financial arrangement that would underlie it. New reports suggest that Apple are paying OpenAI nothing — zip, zero — for the ChatGPT integration. Their argument is that bringing the app to all those new users is payment enough; and that’s pretty hard to argue with.
This makes stark where the balance of power lies when it comes to Apple and OpenAI. And it lies with Apple because they have vast distribution: direct access to 1.5 billion pockets and the minute-by-minute lives of their customers.
I’m driving, here, at a consequential truth. In this AI revolution, who has the most powerful moat? Many point to Nvidia, and their unique combination of AI chips and developer software.
But even Nvidia’s ecosystem, in the end, can be copied. Sure, it will be hard.
But Apple’s bet is that the one true AI moat is human attention. That is, the ability to distribute AI apps and features to billions of users, and to shape new features via the data those users provide.
This points to a future in which LLMs are essentially commodities; in which OpenAI and competitors become something akin to providers of electricity. In that case, their business will depend on building relationships with the organisations who take that intelligence and turn it into products, apps, and AI features that billions use.
OpenAI and Nvidia are the rockstar companies of this AI revolution right now. But Apple is the one that can claim a deep relationship with 1.5 billion humans. And here, already, are signs that this is what will matter in the end.
Seen that way, OpenAI’s zero fee arrangement with Apple makes perfect sense.
There’s much talk at the moment of AI rendering we humans irrelevant. Here is a reminder that for all that talk, human attention is still the end game.
Humans Are Us
Thanks for reading this week.
The intensifying Cold War between the Global North and China is a story we must understand if we’re to navigate the new world taking shape around us.
I’ll keep watching, and working to make sense of it all. And there’s one thing you can do to help: share!
Now you’ve reached the end of this week’s instalment, why not forward the email to someone who’d also enjoy it? Or share it across one of your social networks, with a note on why you found it valuable. Remember: the larger and more diverse the NWSH community becomes, the better for all of us.
See you next week with another postcard from the new world. Until then, be well,
David.
As always excellent and thought-provoking insights, both on the China/US tech Cold War and Apple’s AI integration. On the latter, if they get this right a lot of us are going to want to upgrade our devices. I’m not much of an upgrader because they just keep working for years. But this is intriguing. However, as is usual with Apple, early adopters get burned. Second Gen improvements are always better in my experience. Thanks!