IMF Warns AI’s Riches Are Increasingly Concentrated

Asian tech stocks sell off on fresh signs that China is catching up in the chips race. Plus, the IMF warns that AI's riches are being funneled to a shrinking list of countries. AI supply chains are highly concentrated in a few countries, sectors and firms. Moreover, a market value correction and AI threats to cyber security could weigh on growth and add financial stability risks. And President Trump considers firing Kimberly Gilfoyle, following a journal reporting that is on void to Greece, asked a donor to cover her personal expenses. It's Tuesday, October 13th. I'm Luke Vargas for the Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. Are AI investors merely gamblers? The CEO of Broadcom suggested as much yesterday, telling a tech conference in Singapore that many AI investors had, quote, "no clue what they are investing in." Those comments proceeded a major dip in South Korean stocks today, led by a chip sell-off that prompted the country's Cosby Index to temporarily halt trading. News from China's CXMT fueled some of those jitters after the chipmaker unveiled a leaner chip that analysts say could make its products more competitive against foreign competition. That tech sell-off is showing signs of moderating an early European trade, and US stocks are looking for direction. Their next test will come in the form of fresh US consumer price data that could offer clues about the Fed's next rate moves. That's due tomorrow at 8.30 AM Eastern. At the same time, market uncertainty has more AI-linked companies reconsidering their listing plans. Blackstone-backed data-center operator AirTrunk has delayed its Singapore IPO, following similar moves by Nvidia-backed cloud computing company Firmis Grid and data-center company Vitro-Rit. Sources say AirTrunk, which operates one of the largest data-center platforms in the Asia Pacific and Middle East, may look to list in the first or second quarter of next year instead. And that AI build-out is creating a bigger headache for grid operators, we're struggling to separate ready-to-build data-center projects from phantom requests and may never materialize. Data-center developers and tech companies are desperately trying to find places to build large data centers for AI, but they require so much power. It's very difficult to do. It can take a long time to connect to the grid, so the tech industry has to scout around the country and often request electric service in a number of different places. And that means that multiple utilities are getting the same data-center request. It may be real for one utility, but a phantom for another. That's Energy Reporter Jennifer Hiller, who looked at a report from research firm Wood McKenzie, that estimated that, while 23% of those requests are high confidence, the rest are speculative, leaving utilities facing a tough dilemma. There's a couple of risks here. If utilities underbuild, they miss the growth opportunities that data centers would bring to their industry, but if they overbuild and a data-center project falls through, those transmission investments get shared among all the other customers. So residential customers and other businesses would end up paying for that, and that would increase their bills, maybe a little bit beyond what you would have otherwise expected. So to avoid that, utilities are now making contracts a lot more complex. They're locking in data-center companies for longer periods of time, and they're creating something of a gating system for them to move through, and requiring larger upfront payments. Meanwhile, the IMF is warning that a thus far resilient global economy could face a sharp slowdown unless inflation and rising borrowing costs are addressed. Our Fabiana Nagreen Ochoa has been covering the World Bank and IMF's annual meetings in Bangkok this week, where the world economic outlook was released just a few hours ago, and we've got her on the line from those meetings now. Fabiana, this was a very glass-haffful, half-empty kind of report. Let's start with the positives, I guess. The IMF is holding its 2026 global growth forecast at 3.1% that's unchanged from April, which considering the fact that the Iran War isn't over, and energy disruptions haven't been resolved as maybe rather impressive now. It is indeed impressive how remarkable the resilience has been, and it's something that the IMF and other institutions have noted, and of course, that's largely due to AI, and if you take AI out of the equation, then obviously growth becomes a lot weaker. So, that is something that the IMF has continuously warned about, and it sort of underlined that very strongly in this latest outlook, and noting that the resilience has not been even. It's very concentrated on the haves and have not. So, if you're a high-tech producing economy, you're doing pretty well right now, even if you are an energy importer, so we're talking about economies like South Korea and Taiwan. But if you are an economy that isn't occupying a prime position in the air value chain, then you're not fearing quite so hot. And Fabian, I was actually sort of taking it back by the fact that just since April, the IMF says that the gulf between countries profiting off of AI investment and those sort of not seeing it is actually widening. Absolutely. 32 economies now account for 95% of global growth, and that's down from 54 in April, and also nearly half of economies actually got a forecast downgrade in the latest world economic outlook. And that is very much painting a picture of global growth that's putting all the eggs into one basket, and it's going to be increasingly challenging to sustain that momentum of growth, even if the AI boom continues, because you're trapped in a cycle of ever rising expectations about AI and disappointment. And if the AI productivity gains don't materialize and you have an unwinding of investment, that will bleed over into other asset markets, and start weighing on consumption, investment, everything will tumble like dominoes. But aside from AI, there's also the problem of debt deficits are at historic highs, you're having rising borrowing costs, and there's an increasing sense of alarm about fiscal sustainability, and if there's a loss of credibility and confidence in policymakers getting those risks under control and keeping their fiscal house in order, that's going to have very detrimental effects on both asset markets and then the broader economy. I've been speaking to Fabiana Nagrin Ochoa, breaking news editor for Dow Jones Newswires in Bangkok today. Fabiana, as always, thanks for the update. Thanks very much. President Trump is looking at firing Kimberly Gilfoyle, telling us that he's not happy with his ambassador to Greece after a general report revealed that she'd asked a donor to cover personal expenses in the lead up to her confirmation hearing. The State Department Office of the Inspector General is now investigating whether Gilfoyle received gifts or favors from private businessmen, and we now understand that Trump administration officials spent the weekend discussing whether Gilfoyle should continue on as ambassador. Spokesman for Gilfoyle didn't immediately return requests for comment. Meanwhile, damaging revelations about Texas Attorney General Ken Paxton continued to emerge. Trump endorsed Paxton over incumbent Senator John Cornyn earlier this year and helped to scandal-plague Texas Attorney General to clinch victory in the GOP primary. That decision now looks like a mid-term gamble, as Democratic nominee James Talleriko holds a narrow lead in polls. And today, the journal is reporting how Paxton spent New Year's Eve 2024, celebrating in Dubai, with two fugitives from U.S. Justice and a woman that wasn't his wife. One of the fugitives is a health care executive charged with fraud who donated $190 to Paxton's campaign. Paxton's senior adviser Nick Maddox didn't directly address the Dubai trip, but said that Paxton has been politically persecuted for years, and that every time voters have seen through it and sent him back to office. For more on that story and the journal investigation into Kimberly Gilfoyle's conduct, check out the links we've left in our show notes. Coming up, we'll look at how internet-connected cameras have become a powerful new tool of more time intelligence gathering. You'll want to stick around for this one after the break. There are an estimated 1.2 billion internet-connected cameras in the world. From filming our front doors, to monitoring our babies, they've become a fixture of everyday life. But as the journal's Dan Michaels reports, cyber security experts and hackers say those cameras are vulnerable to snooping that can turn them into a tool of wartime intelligence gathering. Dan, I think listeners will remember a story from Jack Gillum earlier this year, in which we look at how digital home devices were being used to carry out cyber attacks. But that was much more about malware and those devices, just basically facilitating internet activity in the background. But what you're reporting about here is actually much more about what these cameras are filming. Just first of how did you hear about this? A center of my reporting is the wars going on now in Ukraine, in the Middle East, and tensions around them, like here in Europe, where I'm based. And it's a theme that keeps positive. popping up on the periphery of other stories about more traditional conflict, like things that are being shot and exploding. But for example, the Dutch intelligence agencies this summer put out a warning about Russia using webcams as a tool of espionage and intelligence gathering. For example, the middle of the curse bridge that Russia built between Russia and occupied Crimea, these views from these cameras could only have come from unintended access, one side hacks in and gets access and often posts what they got on social media to show how good they are at getting inside the enemy. - Dan, there are a number of really vivid examples from your piece that illustrate what's going on here. Tell us about one that you profiled a poultry farm in Israel. - So the poultry farm, which is quite an interesting example, the Israeli security services publicized this because they wanted people to be aware of the threat and alert. And in that case, there was a chicken farmer in Northern Israel who had a webcam on his chicken coop to see if there's any foxes or other animals going after his poultry. And one day he went on the app for his camera on his phone and the language had been changed to Arabic. So he contacted the authorities who found that, in fact, the webcam and the app had been hacked and it turned out that this camera was actually webcasting images of Israeli troops on maneuvers. - From your reporting, Dan, it sounds like this vulnerability that's being exploited here has actually existed for quite a long time, but what's really new is how easy it's become to exploit that vulnerability. Tell us about how that occurs and how an enemy even knows these cameras exist in the first place. - Every camera, potentially, it's the location or it's existence is visible on special services of the internet, things that the average internet user isn't going to know about but people who are deep in coding or internet engineering are well aware of. So once you know that a camera exists, it's a matter of essentially knowing a door exists and can you pick the lock? And what's really changed in the past couple of years is like with so much artificial intelligence because AI allows systems hackers to scan the internet for cameras and then use AI to turn through millions or even billions of passwords and a thing with cameras is often the security is quite poor so they're easy to hack into. - Just curious, did you come across any evidence in your reporting that this is also occurring in Western Europe and in the United States? - Definitely, it may not be on the scale of a war zone but the Dutch intelligence agencies and others have flagged what they say was Russian hacking of cameras in Western Europe, probably to spy on assistance to Ukraine and in the United States and other places, there definitely is camera hacking going on. Sometimes it's done to get the view from the camera. Sometimes cameras are the gateway to get into other systems for example, might be a bank or some other institution where hackers wanna get, for example, financial information and the easy open door happens to be a webcam because webcam security is notoriously weak. And finally, Dan, is there anything that listeners can do to protect themselves either from being snooped on directly or just inadvertently giving away sensitive information that could be valuable to someone else? - The general response on how to address it broadly is take the same kind of steps to protect your webcams that you would take to protect any other internet connected device, do not use the default password with whatever the device is and change it occasionally every few months or every year. Just in case somebody hacks it and it ends up on on one of these lists that are on the internet, always buy products that come from reputable name brands because they're gonna want to protect their reputation. So they will, for example, issue updates to the software to address potential vulnerability and generally be aware of who you're giving passwords to, who you're allowing onto, for even your home Wi-Fi network, and avoid hulking me into your home network, any devices where you really have questions about the security. - Dan Michaels is the Wall Street Journal's Brussels Bureau Chief and you should really do yourself a favor and check out his reporting complete with some really terrific graphics and video clips, which we have linked to in our show notes. Dan, as always, thanks so much. - Thank you. - Good to talk. - And before we go, a quick correction in earlier version of this podcast, he incorrectly said that US CPI data was due out today at 8.30 AM Eastern. That release is, in fact, set for tomorrow. And that's it for what's news for this Tuesday morning. Today's show was produced by Hattie Moyer, our supervising producer, his Sandra Killhoff, and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show. And until then, thanks for listening. [BLANK_AUDIO]