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Welcome to AI Decoded, Fast Companys weekly newsletter that breaks down the most important news in the world of AI. You can sign up to receive this newsletter every week here. Nvidia gets burned by Trump on China chips Silicon Valley magnates fell over themselves to placate and appease President Donald Trump. Nvidia just found out why thats no guarantee of success. The company said in a Securities and Exchange Commission filing on Tuesday that the Trump administration will now require a license for the company to sell its H20 chipsthe most powerful GPUs still legal for exportto Chinese companies. Nvidia says it will take a $5.5 billion charge in its April quarter earnings reflecting a belief that the license is a permanent requirement and that it has little chance of getting one. With its market cap already down 20% this year, the company watched its shares plunge another 6% in after-hours trading on Tuesday. The license requirement comes after Nvidia had already made overtures toward Trump. CEO Jensen Huang recently dined with the president at Mar-a-Lago and has reportedly pledged to spend hundreds of billions of dollars on new U.S. data centers. Following the Mar-a-Lago dinner, NPR reported that the White House had backed off a plan to restrict the H20 chips. But in the end that wasnt enough to prevent the administration from effectively banning the H20 and gouging out a big chunk of Nvidias revenues. We lower our fair value estimate for wide-moat Nvidia to $125 from $130 as we cut our revenue estimates to exclude China now and in the future, Morningstar strategist Brian Colello wrote in an investor brief on Wednesday. We retain our Very High Uncertainty Rating. Shares appear undervalued to us, as tariff concerns are likely weighing on the stock. You can almost see the shrugged-shoulders emoji next to Colellos words: Nvidias investor downgrade has nothing to do with real demand for its products, which remains very high. The administration claims the export controls stem from national security concernsthat H20 chips would pose a threat should Beijing get control of them. But more likely, Trump recognizes Nvidias central role in the generative AI boom, and seized on the companys success as a chess piece in his grudge match against China. The move comes as Chinese AI companies are pulling ahead of their American counterparts in areas like self-driving cars and robotics, and are within striking distance of surpassing the U.S. in frontier model development. Many D.C. and Silicon Valley insiders will applaud the H20 restrictions. After all, they feed the defense sectors push to bulk up for a military conflict with China (perhaps around Taiwan), and may even slow Chinas considerable momentum in AI research. But this zero-sum, winner-take-all approach may have its downsides, too. Chinese company DeepSeek, for example, was spurred to some impressive AI innovation precisely because it was denied top-tier chips from U.S. competitors. And, as the pundit Thomas Friedman pointed out on The Ezra Klein Show, this centurys biggest problemsthe environment and AI safetyare world problems that will require cooperation and openness between the worlds two superpowers. And its not just Nvidia. Mark Zuckerberg is learning the same lesson: that Trumps loyalty can often seem transactional at best. The Meta CEO is this week being grilled in the witness chair of a government anti-trust action that could break up his company. Trump has an obedient, all-GOP commission, and yet hes done nothing to stop the case. This after Zuckerberg and company gave $2 million to Trumps inauguration fund, stood behind Trump at the inauguration, bent the knee at Mar-a-Lago and the White House a number of times, abandoned fact-checking on his social platform, promoted longtime Republicans to high positions within Meta, and discontinued DEI programs at the company. Zuckerberg offered the Federal Trade Commission $450 million, then $1 billion, to keep the case from going to trial, but FTC Chair Andrew Ferguson balked at the numbers and kept the court date. Trump didnt intervene. My guess is that all these tech honchos will eventually learn, in one way or another, what so many others havethe giant black sucking hole that is Donald Trumps ego simply cant be appeased. OpenAI releases its newest reasoning model, o3 OpenAI on Wednesday unveiled its next flagship reasoning model, called o3. As the second generation of OpenAIs thinking models, o3 can quickly gather contextual data and follow multiple reasoning paths to a correct answerall in real time in response to a user prompt. OpenAI says the new o3 model outperforms the o1 series in every respect and will replace it. A key advance lies in o3s ability to use external tools to arrive at sound answers. For instance, it might review all the published papers on a specific research problem before crafting its own novel answer, or reason over the contents of an uploaded image. The combined power of state-of-the-art reasoning with full tool access translates into significantly stronger performance across academic benchmarks and real-world tasks, OpenAI said in a blog post published Wednesday. According to OpenAI, the o3 model earned state-of-the-art status atop the Codeforces (coding skill), SWE-bench (software engineering skill), and MMMU (visual and textual reasoning skill) benchmark tests. OpenAI says it used 10 times more computing power to train the o3 model than the o1, utilizing new reinforcement learning that incorporates either human or synthetic feedback to improve the quality of its answers. To me the magic is that under the hood its still just next-token prediction, OpenAI President Greg Brockman said during a livestreamed demo Wednesday. Weve changed the objective, changed where the data comes from, and now were able to really hook it up to the world. Alongside o3, OpenAI also released a smaller, faster, and more budget-friendly reasoning model called o4-mini, which the company says excels in math, coding, and visual tasks. In addition, the company introduced Codex CLI, a desktop coding assistant that is powered by the o3 and o4-mini models. A vibe shift in the way enterprises are talking about AI and the workforce When corporate executives say AI will usher in a new age of efficiency, what exactly do they mean? At first blush, it sounds like an opportunity to cut down on labor costs (personnel-related headaches). But the truth is more complicated. Over the past year, people in both the corporate and technology worlds have been quick to stress that AI will assist human workers, not replace them. And that narrative has been picked up by people at the management level, as a new survey from Beautiful.ai seems to suggest. The firm, which sells an AI presentation builder, surveyed 3,000 managers and found that as AI tool use in the workplace rises, most doubt that AI can or should replace human workers. The percentage who said their teams wouldnt function well if some humans were replaced by AI rose 20% over last years survey, to 63% of respondents. And only 30% think replacing staff with AI would be financially beneficialdown 17% from 2024. Meanwhile, 65% say employee resistance to AI remains a top concern. Its hard to say how much these managers are simply parroting the PR du jour to a surveyor. But it does raise the concern that as real workers begin to gain experience with AI tools, confidence in their potential for actually altering workflows doesnt seem to be growing. Meanwhile, a survey by HR software provider G-P finds that 67% of U.S. executives remain willing to cut headcount and use AI to become 50% more productive. More AI coverage from Fast Company: What Ex Machina got right (and wrong) about AI, 10 years later Docusign expands beyond signatures with new AI-powered contract management tools The next big AI shift in media? Turning news into a 2-way conversation Krea, an Adobe for the AI era, discusses its $500 million vision Want exclusive reporting and trend analysis on technology, business innovation, future of work, and design? Sign up for Fast Company Premium.
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The Trump administration on Wednesday sued Maine for not complying with the government’s push to ban transgender athletes in girls and women’s sports, escalating a dispute over whether the state is abiding by a federal law that bars discrimination in education based on sex.The lawsuit follows weeks of feuding between the Republican administration and Democratic Gov. Janet Mills that has led to threats to cut off crucial federal funding and a clash at the White House when she told President Donald Trump: “We’ll see you in court.”The political overtones of the moment were clear, with Attorney General Pam Bondi and one of the athletes who joined her on stage at the Justice Department citing the matter as a priority for Trump. Bondi said other states, including Minnesota and California, could be sued as well.“President Trump, before he was elected, this has been a huge issue for him,” Bondi said. “Pretty simple: girls play in girls’ sports, boys play in boys’ sports. Men play in men’s sports, women play in women’s sports.”Trump campaigned against the participation of transgender athletes in sports in his 2024 race. As president, he has signed executive orders to prohibit that and to use a rigid definition of the sexes, rather than gender, for federal government purposes. The orders are being challenged in court.Trump’s departments of Education and Health and Human Services have said Maine’s education agency is violating the federal Title IX antidiscrimination law by allowing transgender girls to participate on girls teams. The Justice Department is asking the court to order the state to direct all schools to prohibit the participation of males in athletic competition designated for females.Maine officials have refused to agree with a settlement that would have banned transgender students from sports, arguing that the law does not prevent schools from letting transgender athletes participate. Mills said Wednesday that the lawsuit was expected and is part of a pressure campaign by Washington to force Maine to ignore its own human rights laws.“This matter has never been about school sports or the protection of women and girls, as has been claimed, it is about states rights and defending the rule of law against a federal government bent on imposing its will, instead of upholding the law,” Mills said in a statement.Maine’s attorney general, Aaron Frey, said Wednesday he is confident Maine is acting in accordance with state and federal law.“Our position is further bolstered by the complete lack of any legal citation supporting the Administration’s position in its own complaint,” he said in a statement. “While the President issued an executive order that reflects his own interpretation of the law, anyone with the most basic understanding of American civics understands the president does not create law nor interpret law.”The government’s complaint cites as examples the case of a transgender athlete who in February won first place in pole vault at a Maine indoor track and field meet and a transgender athlete who last year began competing in female cross country races in the state and placed first in a girl’s 5K run.The lawsuit reflects a stark philosophical turnabout from the position on gender identity issues taken during Democratic administrations.Under President Joe Biden, the government tried to extend civil rights policies to protect transgender people. In 2016, the Justice Department, then led by Attorney General Loretta Lynch, sued North Carolina over a law that required transgender people to use public restrooms and showers that corresponded the gender on their birth certificate.Trump signed an executive order in February, “Keeping Men Out of Women’s Sports,” that gave federal agencies wide latitude to ensure entities that receive federal funding abide by Title IX in alignment with his administration’s interpretation of “sex” as the gender someone was assigned at birth.Bondi was joined at the news conference by former University of Kentucky swimmer Riley Gaines, who has emerged as a public face of the opposition to transgender athletes. Gaines tied with a transgender athlete for fifth place in a 2022 NCAA championship and has testified before lawmakers across the country on the issue. She and others frame the issue as women’s rights.During a February meeting with governors, Trump threatened to pull federal funding from Maine if the state did not comply with his executive order. Mills responded: “We’ll see you in court.”Maine sued the administration this month after the Department of Agriculture said it was pausing some money for the state’s educational programs because of what the administration contended was Maine’s failure to comply with the Title IX law. A federal judge on Friday ordered the administration to unfreeze funds intended for a Maine child nutrition program.Questions over the rights of transgender people have become a major political issue in the past five years.Twenty-six states have laws or policies barring transgender girls from girls school sports. GOP-controlled states have also been banning gender-affirming health care for transgender minors and restricting bathroom use in schools and sometimes other public buildings. Whittle reported from Portland, Maine. Associated Press writer Geoff Mulvihill in Philadelphia contributed to this report. Alanna Durkin Richer, Eric Tucker and Patrick Whittle, Associated Press
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Elon Musk’s SpaceX and two partners have emerged as frontrunners to win a crucial part of President Donald Trump’s “Golden Dome” missile defense shield, six people familiar with the matter said. Musk’s rocket and satellite company is partnering with software maker Palantir and drone builder Anduril on a bid to build key parts of Golden Dome, the sources said, which has drawn significant interest from the technology sector’s burgeoning base of defense startups. In his January 27 executive order, Trump cited a missile attack as “the most catastrophic threat facing the United States.” All three companies were founded by entrepreneurs who have been major political supporters of Trump. Musk has donated more than a quarter of a billion dollars to help elect Trump, and now serves as a special adviser to the president working to cut government spending through his Department of Government Efficiency. Despite the Pentagon’s positive signals to the SpaceX group, some sources stressed the decision process for Trump’s Golden Dome is in its early stages. Its ultimate structure and who is selected to work on it could change dramatically in the coming months. The three companies met with top officials in the Trump administration and the Pentagon in recent weeks to pitch their plan, which would build and launch 400 to more than 1,000 satellites circling the globe to sense missiles and track their movement, sources said. A separate fleet of 200 attack satellites armed with missiles or lasers would then bring enemy missiles down, three of the sources said. The SpaceX group is not expected to be involved in the weaponization of satellites, these sources said. One of the sources familiar with the talks described them as “a departure from the usual acquisition process. There’s an attitude that the national security and defense community has to be sensitive and deferential to Elon Musk because of his role in the government.” SpaceX and Musk have declined to comment on whether Musk is involved in any of the discussions or negotiations involving federal contracts with his businesses. The Pentagon did not respond to detailed questions from Reuters, only saying it will deliver “options to the President for his decision in line with the executive order and in alignment with White House guidance and timelines.” The White House, SpaceX, Palantir, and Anduril also did not respond to questions. SUBSCRIPTION SERVICE In an unusual twist, SpaceX has proposed setting up its role in Golden Dome as a “subscription service” in which the government would pay for access to the technology, rather than own the system outright. The subscription model, which has not been previously reported, could skirt some Pentagon procurement protocols allowing the system to be rolled out faster, the two sources said. While the approach would not violate any rules, the government may then be locked into a subscription and lose control over its ongoing development and pricing, they added. Some Pentagon officials have expressed concerns internally about relying on the subscription-based model for any part of the Golden Dome, two sources told Reuters. Such an arrangement would be unusual for such a large and critical defense program. U.S. Space Force General Michael Guetlein has been in talks on whether SpaceX should be the owner and operator of its part of the system, the two sources said. Other options include having the U.S. own and operate the system, or having the U.S. own it while contractors handle operations. Guetlein did not respond to a request for comment. Retired Air Force General Terrence O’Shaughnessy, a top SpaceX advisor to Musk, has been involved in the company’s recent discussions with senior defense and intelligence leaders, the two sources said. O’Shaughnessy did not respond to requests for comment. Should the group led by SpaceX win a Golden Dome contract, it would be the biggest win for Silicon Valley in the lucrative defense contracting industry and a blow to the traditional contractors. However, those long-standing contractors, such as Northrop Grumman, Boeing and RTX are expected to be big players in the process as well, people familiar with the companies said. Lockheed Martin put up a webpage as a part of its marketing efforts. MANY BIDS The Pentagon has received interest from more than 180 companies keen to help develop and build the Golden Dome, according to a U.S. official, including defense startups like Epirus, Ursa Major, and Armada. Members of the White House’s National Security Council were briefed by a handful of companies about their capabilities, four sources said. The Pentagon’s number two, former private equity investor Steve Feinberg, will be a key decision-maker for Golden Dome, two U.S. defense officials said. Feinberg co-founded Cerberus Capital Management which has invested in the cutting-edge hypersonic missiles industry but not in SpaceX. Feinberg, who did not respond to a request for comment, has said he would divest of all his interests in Cerberus when he joined the administration. Some experts believe the overall cost for Golden Dome could reach hundreds of billions of dollars. The Pentagon established several timelines for capabilities to be delivered starting with early 2026 to those delivered after 2030. SpaceX is pitching for the part of the Golden Dome initiative called the “custody layer,” a constellation of satellites that would detect missiles, track their trajectory, and determine if they are heading toward the U.S., according to two sources familiar with SpaceX’s goals. SpaceX has estimated the preliminary engineering and design work for the custody layer of satellites would cost between $6 billion and $10 billion, two of the sources said. In the past five years, SpaceX has launched hundreds of operational spy satellites and more recently several prototypes, which could be retrofitted to be used for the project, the sources said. Reuters reviewed an internal Pentagon memo from Defense Secretary Peter Hegseth issued shortly before a February 28 deadline to senior Pentagon leadership asking them for initial Golden Dome proposals and calling for the “acceleration of the deployment” of constellations of satellites. The time frame could give SpaceX an advantage because of its fleet of rockets, including the Falcon 9, and existing satellites that could be repurposed for the missile defense shield, the people familiar with the plan said. Despite these advantages, some of those familiar with the discussions said it was uncertain whether the SpaceX group would be able to efficiently set up a system with new technology in a cost-effective way that can protect the United States from attack. “It remains to be seen whether SpaceX and these tech companies will be able to pull any of this off,” said one of the sources. “They’ve never had to deliver on an entire system that the nation will need to rely on for its defense.” Mike Stone and Marisa Taylor, Reuters
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