Nvidia Takes Aim at Frontier AI Developers

[MUSIC PLAYING] The gloves come off after Canada U.S. trade talks break down. Plus, she and prices its long-awaited IPO well below the fast-fashion giants one-time valuation. And Nvidia takes aim at frontier AI developers. The models that Nvidia is going to be building are going to compete directly with open AI model, graphics models, Google models. And that might be seen as a problem, right? Because if you're a customer of Nvidia, you might be looking at them saying, oh, what the heck? Now, you guys are going to be designing models as well. It's Monday, August 24. 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. Instead of sealing a trade agreement, which appeared to be within reach on Friday, the U.S. and Canada are instead spiraling toward a trade war. Late Friday night going into Saturday, we saw trade talks between the U.S. and Canada collapse. And this led to the imposition of new 50% tariffs on about $20 billion worth of Canadian goods. Now, that's only about 5% of Canadian exports to the U.S. each year, but the risk here is for escalation. That is journal trade reporter Gavin Bade. The Canadians have already said that they're going to reply dollar for dollar with a similar set of tariffs. That will go into effect on September 8. And then we'll have to see what the Trump administration does. They have said of Canada retaliates. We will likely retaliate as well. So there's some risk here that we could see the spiral into an all-out trade war. The regnition of tensions comes after divisions between the two sides had looked to be narrowing. Last week, we reported that Washington was open to lowering top-line tariffs on Canadian steel, aluminum, and automobiles. But Gavin says the devil was in the details. This is rather technical, but right now the U.S. allows companies to get a tariff rebate for the value of all of the U.S. made parts in their automobile. Canada wanted to expand this to be Canadian and North American content as well. Well, the U.S. didn't want to do that is what our sources have told us. And then there are a number of other issues as well. The Canadians have said that the U.S. wanted to put limitations on their ability to do trade deals with other nations. And they saw this as a violation of their sovereignty. Basically, you can't tell us who we can go and make a deal with. And so that was something that clearly ruffles of feathers north of the border here. The Canadian Prime Minister, Mark Carney, was really bristling about that in his press conference after the talks fell apart. We've consistently proposed long-term partnerships. Well, America has often pursued short-term transactions. The gap between partnership and competitor, unfortunately, has remained too wide in recent days. So last evening, I instructed our negotiators to return to Ottawa. We cannot accept what they've offered. And we will not give what they've asked. Among the Canadian goods, hit by the latest U.S. tariffs are paper and textile products, hockey sticks, honey, and cement. Canada has yet to reveal the target of its retaliatory tariffs, which are set to go into effect after Labor Day. Paramount is today meeting with officials in California in a bid to resolve the antitrust lawsuit that's standing in the way of its $81 billion takeover of Warner Brothers' discovery. Led by California Attorney General Rob Bonta, a dozen Democratic-led states have sued to block the deal, arguing that it would create too much concentration in the market for theatrical films and cable television channels. We exclusively report that Bonta is expected to ask Paramount to divest some cable channels and maintain a separate movie studio before proving the deal. There's been increasing pressure on the Attorney General to engage in settlement talks with Paramount. And speaking on Friday, California Governor Gavin Newsom said he hoped the two sides would find common ground. You heard the Attorney General himself say, he'd prefer this settled in the boardroom, not the courtroom. So I think there's some universal sentiment there if that's possible. Paramount spokeswoman declined to comment, while Bonta's office didn't respond to a request for comment. [MUSIC PLAYING] Nvidia is paying $6 billion to license open-weight language models from AI startup poolside. Under the agreement, the chip giant will hire more than 100 of the startup's core engineers, the bulk of its technical talent, who will be reassigned to Nemo Tron. Nvidia's ongoing open-weight AI initiative, which General Tech reporter Robbie Wheelan says is part of a bigger strategic bet. [MUSIC PLAYING] Basically, they're different from other normal models that most Americans might use. The models that poolside designs are much more similar to the types of AI models that design in China. So there's code and there's sort of numerical weights that underpin these models. And poolside shares some of those with users and allows them to therefore customize the models to their needs, make them fit certain types of tasks in a more efficient way. [MUSIC PLAYING] The reason why Nvidia is doing this is because in video-- and especially its CEO, Jensen Wong-- they believe very strongly that open-weight models are going to be a big part of the AI future. And they're worried that if the US doesn't develop open models, then China is essentially going to eat the US's lunch. And there's already been a number of open models that have come out of China such as DeepSeek, Kim E.K.3, and others that have been really impressive. And they're really cheap and they're really easy to customize. [MUSIC PLAYING] And so there's this huge competition going on right now, especially in the corporate world, where you have a lot of giant corporations that want to buy or license AI models in order to design what are called enterprise AI tools. So that means everything from chat bots that help you book a flight to a drug discovery by pharmaceutical companies, to coding of certain algorithms that are useful in finance, and in logistics, and all sorts of things. And you can do those using an open model, or you can do them using what's called a closed model. So open AI is chat GPT and throttpix, clawed models. Those are examples of closed proprietary models that you have to pay a lot of money for. And they don't share the code underlying those models with the users, and they're much harder to customize to your needs. And NVIDIA sees that open way models are really going to be a much bigger thing in the future and going forward, and they want to invest in that world. Because I think that it's something they can dominate. It's something they can do a really good job at. They have tons of computing power, almost an endless supply of chips and servers, and data center capacity that they need in order to develop these models. So it's kind of a natural fit for them to get involved in this world. The other thing to understand is that if the people who are sort of financing the AI industry are to be believed, there's an almost endless demand for everything related to AI. And so having many models, not just a few, and having those models be more accessible and more customizable by users, could arguably be a good thing. Because when you have so much demand, there's only so much of that demand that can be serviced and satisfied by the big AI companies in America. And so there's this enormous battle going on, all sorts of different players, all sorts of different battlefields. And NVIDIA really is the richest and most well-capitalized company in the entire space as this tremendous advantage. And this is an example of NVIDIA CEO really looking at the world and saying, look, there's no reason why I should be only supplying chips to the market. I can also make the models that make the AI world go around. That was journal tech reporter Robbie Wheelan, and we'll have much more. Mon and video's plans later in the week when the company reports earnings on Wednesday after the closing bell. Coming up, we'll get the rest of the day's top market stories as some of Asia's biggest tech companies and retailers hit up investors to fund their AI ambitions. That and more after the break. (upbeat music) In more markets news today, fast fashion retailer Shian has priced its upcoming IPO in Hong Kong at $27 billion. That is a far cry from the $100 billion it once boasted about and comes after plans for a New York listing fell through amid scrutiny of its supply chain and labor practices along with later plans for a London offering which were rejected by Beijing. The IPO is expected September 1st with Shian saying that it would use the funds it raises to invest in data analytics and AI. Well, similar AI motivations are driving Alibaba's plans to issue more than $10 billion in new shares and SoftBank's plans for a record bond issuance north of $6 billion. Our Fabiana Negrino Choa has more from Singapore. - So in terms of the use of proceeds, Alibaba unequivocally said that it will use all of the share placement proceeds to invest in AI across the full stack so that involves infrastructure and also its chatbot development. While SoftBank is planning to use the proceeds from its bond sale to fund artificial intelligence investments and that's part of its multi-billion dollar commitments to open AI and related projects. Fabiana with all of these companies kind of tapping markets in their own way to fund their AI plan should investors be worried they can no longer just dip into their own cash piles to afford this while there's a lot to unpack there, I think undoubtedly more fun raising without tangible returns on a investment is certainly going to add to existing worries about the sustainability of corporate spending on AI. But it's not really a black and white issue the initial negative market reaction to Alibaba's announcement probably has more to do with concerns about shared dilution and the fact that AI spending has been weighing on the company's earnings over the past quarters. However, that investment is paying off in the sense that Alibaba's air and cloud business has been a bright spot for the company over the past quarters. The concerns around one soft bank comes to tap the markets is that it's over leveraged and that it has a lot of exposure to very volatile AI investments. But this particular issuance is for retail investors and analysts think that actually it should be able to draw quite good demand and this is an avenue of funding that's become just a go to for soft bank. And if it gives it more firepower to deliver on its long term agenda, then that's also something that could help ease concerns about its financial position. That was Dow Jones Newswires editor Fabiana Negreen Ochoa. Fabiana, thanks so much. Returning state side members of the United Auto Workers Union have rejected a contract offer from Farm Equipment Maker Dear, setting up one is likely to be a contentious bargaining process next year. Dear had offered union members two years of 4% wage increases and $3,000 bonuses if they accepted the offer, which the company said provided certainty for employees amid a decline in equipment demand. After a month's long strike in 2021, Dear's UAW workers secured a six-year deal that included a 10% raise and $8,500 bonuses. And in a push to turn around slowing growth and reclaim lost ground to Amazon, Walmart is placing a big bet on the trendier shopper. Walmart is introducing a new women's apparel store brand called scenario to try to attract younger shoppers. That's retail reporter Sarah Nassauer who says that costly past attempts by Walmart to increase clothing sales by offering more fashionable items had left memorable scars. It's trying its hand again now following seven straight quarters of growth and clothing and accessories. This is part of Walmart's effort to attract a broader group of shoppers to its apparel categories. It has a ton of folks that buy groceries. It's the country's largest grocer, but it wants more people to spend more on different categories of goods like apparel, like home goods. And they are seeing some traction, their gaining market share amongst department stores, specialty retailers, but Amazon is still growing their apparel market share a bit faster according to some third party data. And that's it for what's news for this Monday morning. Today's show was produced by Hadi Moir and Daniel Bach. Our supervising producer is 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.