In today’s edition:
- Regulators crack down on AI
- Consequences of AI regulation in the EU
- Wall Street loosens ties with China
- Paramount cuts dividends and jobs
US Stocks ended higher on Wednesday, with all three major indices gaining over 1%. Negotiations between the President and congressional leaders saw signs of improvement as House Speaker Kevin McCarthy expects to reach a deal by the end of the week. McCarthy’s success in getting the President to negotiate may resolve the debt crisis. Meanwhile, Tech stocks rose, with NVIDIA gaining 3.32%.
Regulators are cracking down on AI. Elon Musk’s call for regulating AI has been well-received by policymakers in Europe. Two years before his warnings about ChatGPT, the European Union (EU) published a 108-page proposal to regulate AI technology. In April, Italy became the first European country to ban ChatGPT, citing privacy violations. Last month, new copyright rules were added to the proposal that would force OpenAI to reveal copyrighted material used to train their models. This could open the door for claims of copyright infringement and lawsuits. The proposed bill has already been greenlit by a number of committees and will likely be voted on by the European Parliament mid-June.
The EU AI Act may have far-reaching consequences for entrepreneurs and small businesses. The bill will force AI firms to go through a rigorous and expensive licensing process or face fines of up to €20,000,0000 or 4% of their gross revenue. If the law is passed, anyone with EU citizenship can force the government to take legal action against unlicensed AI models used by foreign companies. This means that only Big Tech players such as Google or Microsoft can expend the necessary capital to use AI in Europe. In effect, this regulation may reduce competition and stifle innovation in the AI market. European small businesses, however, are exempt from the proposed bill.
Wall Street banks are reducing their exposure to China. In 2021, Citigroup, Bank of America, Morgan Stanley, and JPMorgan had a combined stake of $57.2 billion in China which fell by 16% at the end of 2022. China’s drastic security measures have restricted access to valuable information such as corporate data, academic papers, and bond market transactions. Recent raids on financial consultancies, along with the change in the country’s business climate, is forcing Wall Street to reconsider its investments. At present, Morgan Stanley is considering laying off 7% of its workforce in the Asia-Pacific region.
Paramount Global’s stock (PARA) plummeted earlier this month following a disappointing first quarter. Despite the growth in its streaming service, the company suffered over $1 billion in net losses and was forced to cut 80% of its dividend. Last week, the company began letting go 25% of its domestic cable staff and closing entire divisions such as MTV News. However, prices have jumped after Warren Buffet’s Berkshire Hathaway bought an additional 68.9 million shares in the company. At 15%, he is now Paramount’s largest shareholder.