Business

Chinse open source AI models are eating the world—the U.S. is the exception

Published

2 months ago

November 25, 2025

Hello and welcome to Eye on AI. In this edition….Gemini 3 puts Google at the top of the AI leaderboards…the White House delays an Executive Order banning state level AI regulation…TSMC sues a former exec now at Intel…Google Research develops a new, post-Transformer AI architecture…OpenAI is pushing user engagement despite growing evidence that some users develop harmful dependencies and delusions after prolonged chatbot interactions.

I spent last week at the Fortune Innovation Forum in Kuala Lumpur, Malaysia, where I moderated several panel discussions around AI and its impacts. Among the souvenirs that I came back from KL with was a newfound appreciation for the extent to which businesses outside the U.S. and Europe really want to build on open source AI models and the extent to which they are gravitating to open source models from China.

My colleague Bea Nolan wrote a bit about this phenomenon in this newsletter a few weeks ago, but being on the ground in Southeast Asia really brought the point home: the U.S., despite having the most capable AI models out there, could well lose the AI race. And the reason is, as Chan Yip Pang, the executive director at Vertex Ventures Southeast Asia and India, said on a panel I moderated in KL, that the U.S. AI companies “build for perfection” while the Chinese AI companies “build for diffusion.”

One sometimes hears a U.S. executive, such as Airbnb CEO Brian Chesky, willing to say that they like Chinese open source AI models because they offer good enough performance at a very affordable price. But that attitude remains, for now at least, unusual. Many of the U.S. and European executives I talk to say they prefer the performance advantages of proprietary models from OpenAI, Anthropic, or Google. For some tasks, even an 8% performance advantage (which is the current gap separating top proprietary models from Chinese open source models on key software development benchmarks) can mean the difference between an AI solution that meets the threshold for being deployed at scale and one that doesn’t. These execs also say they have more confidence in the safety and security guardrails built around these proprietary models.

Asia is building AI applications on Chinese open source models

That viewpoint was completely different from what I heard from the executives I met in Asia. Here, the concern was much more about having control over both data and costs. On these metrics, open source models tended to win out. Jinhui Yuan, the cofounder and CEO of SiliconFlow, a leading Chinese AI cloud hosting service, said that his company had developed numerous techniques to run open source models more cost-effectively, meaning using them to accomplish a task was significantly cheaper than trying to do the same thing with proprietary AI models. What’s more, he said that most of his customers had found that if they fine-tuned an open source model on their own data for a specific use case, they could achieve performance levels that beat proprietary models—without any risk of leaking sensitive or competitive data.

That was a point that Vertex’s Pang also emphasized. He cautioned that while proprietary model providers also offer companies services to fine-tune on their own data, usually with assurances that this data will not be used for wider training by the AI vendor, “you never know what happens behind the scenes.”

Using a proprietary model also means you are giving up control over a key cost. He says he tells the startups he is advising that if they are building an application that is fundamental to their competitive advantage or core product, they should build it on open source. “If you are a startup building an AI native application and you are selling that as your main service, you better jolly well control the technology stack, and to be able to control it, open source would be the way to go,” he said.

Cynthia Siantar, the CEO of Dyna.AI, which is based in Singapore and builds AI applications for financial services, also said she felt some of the Chinese open source models performed much better in local languages.

But what about the argument that open source AI is less secure? Cassandra Goh, the CEO of Silverlake Axis, a Malaysian company that provides technology solutions to financial services firms, said that models had to be secured within a system—for instance, with screening tools applied to prompts to prevent jailbreaking and to outputs to filter out potential problems. This was true whether the underlying model was proprietary or open source, she said.

The conversation definitely made me think that OpenAI and Anthropic, both of which are rapidly trying to expand their global footprint, may run into headwinds, particularly in the middle income countries in Southeast Asia, the Middle East, North Africa, and Latin America. It is further evidence that the U.S. probably needs to do far more to develop a more robust open source AI ecosystem beyond Meta, which has been the only significant American player in the open source frontier model space to date. (IBM has some open source foundation models but they are not as capable as the leading models from OpenAI and Anthropic.)

Should “bridge countries” band together?

And that’s not the only way in which this trip to Asia proved eye-opening. It was also fascinating to see the plans to build out AI infrastructure throughout the region. The Malaysian state of Johor, in particular, is trying to position itself as the data center hub for not just nearby Singapore, but for much of Southeast Asia. (Discussions about a tie-up with nearby Indonesia to share data center capacity are already underway.)

Johor has plans to bring on 5.8 gigawatts of data center projects in the coming years, which would consume basically all of the state’s current electricity generation capacity. The state—and Malaysia as a whole—has plans to add significantly more electricity generation, from both gas-powered plants and big solar farms, by 2030. Yet concerns are growing about what this generation capacity expansion will mean for consumer electricity bills and whether the data centers will drink up too much of the region’s fresh water. (Johor officials have told data center developers to pause development of new water-cooled facilities until 2027 amid concerns about water shortages.)

Exactly how important regional players will align in the growing geopolitical competition between the U.S. and China over AI technology is a hot topic. Many seem eager to find a path that would allow them to use technology from both superpowers, without having to choose a side or risk becoming a “servant” of either power. But whether they will be able to walk this tightrope is a big open question.

Earlier this week, a group of 30 policy experts from Mila (the Quebec Artificial Intelligence Institute founded by AI “godfather” and Turing Award winner Yoshua Bengio), the Oxford Martin AI Governance Initiative, and a number of other European, East Asian, and South Asian institutions jointly issued a white paper calling on a number of middle income countries (which they called “bridge powers”) to band together to develop and share AI capacity and models so that they could achieve a degree of independence from American and Chinese AI tech.

Whether such an alliance—a kind of non-aligned movement of AI—can be achieved diplomatically and commercially, however, seems highly uncertain. But it is an idea that I am sure politicians in these bridge countries will be considering.

With that, here’s the rest of today’s AI news.

Jeremy Kahn
jeremy.kahn@fortune.com
@jeremyakahn

If you want to learn more about how AI can help your company to succeed and hear from industry leaders on where this technology is heading, I hope you’ll consider joining me at Fortune Brainstorm AI San Francisco on Dec. 8–9. Among the speakers confirmed to appear so far are Google Cloud chief Thomas Kurian, Intuit CEO Sasan Goodarzi, Databricks CEO Ali Ghodsi, Glean CEO Arvind Jain, Amazon’s Panos Panay, and many more. Register now.

FORTUNE ON AI

Amazon’s layoffs and leaked AI plans beg the question: Is the era of robot-driven unemployment upon us?—by Jason del Rey

Sam Altman says OpenAI’s first device is iPhone-level revolutionary but brings ‘peace and calm’ instead of ‘unsettling’ flashing lights and notifications—by Marco Quiroz-Gutierrez

Deloitte just got caught again citing fabricated and AI-generated research—this time in a million-dollar report for a Canadian provincial government—by Nino Paoli

Lovable’s CEO targets enterprise customers as the ‘vibe-coding’ unicorn doubles its annual revenue to $200 million in just four months—by Beatrice Nolan

AI IN THE NEWS

White House launches “Genesis Mission” to give AI-driven boost to science. President Trump signed an executive order launching what he is calling the “Genesis Mission,” a massive federal initiative to harness artificial intelligence and government science datasets via the U.S. Department of Energy and its national laboratories. The mission aims to build a unified AI‐driven research platform—linking supercomputers, university and industry partners, and federal data—to accelerate breakthroughs in fields like energy, engineering, biotech and national security. While pitched as a scientific “moonshot”-style effort, the initiative faces questions about its funding model and how it will manage sensitive national-security and proprietary data. Read more here from Reuters.

TSMC sues former executive who defected to Intel over alleged trade secret theft. TSMC has sued former senior executive Lo Wei-Jen, now at Intel, alleging he took or could disclose the company’s trade secrets, the Financial Timesreports. The company alleges that Wei-Jen told it he planned to enter academia after retiring in July. The case underscores intensifying geopolitical and commercial pressures in the global race for advanced chipmaking, as TSMC—responsible for more than 90% of the world’s leading-edge semiconductors—faces rising competition backed by a major U.S. government investment in Intel.

Google debuts Gemini 3 model, hailed by the company and some users as a big advance. Google launched its Gemini 3 large language model last week. The model surpassed rival models from OpenAI and Anthropic on a wide range of benchmark tests and its performance seems to have largely impressed users who have tried it, according to social media posts and blogs. The launch of Gemini 3—which Google immediately integrated into its AI-powered search features, such as AI Overviews and “AI Mode” in Google Search—is being hailed as a turning point in the AI race, helping restore investor confidence in Google-parent company Alphabet after years of anxiety about it losing ground. You can read more from the Wall Street Journalhere.

Anthropic premiers Claude Opus 4.5. Anthropic unveiled Claude Opus 4.5, its newest and most powerful AI model, designed to excel at complex business tasks and coding. The premiere—Anthropic’s third major model release in two months—comes as the company’s valuation has surged to roughly $350 billion following multibillion-dollar investments from Microsoft and Nvidia. Anthropic says Opus 4.5 outperforms Google’s Gemini 3 Pro (see above news item) and OpenAI’s GPT-5.1 on coding benchmarks, and even beat human candidates on its internal engineering exam, and is rolling out alongside upgraded tools including Claude Chrome, Claude for Excel, and enhanced developer features, according to a story in CNBC.

White House reportedly pauses work on Executive Order targeting state AI laws. Reuters reports that the White House has paused a draft executive order that would have aggressively challenged state AI regulations by directing the Justice Department to sue states and potentially withhold federal broadband funds from those that impose AI rules. The move—backed by major tech firms seeking uniform national standards—sparked bipartisan criticism from state officials and lawmakers, who argued it would undermine consumer protection and was potentially unconstitutional. The administration may still try to include a moratorium on state-level AI rules in the National Defense Authorization Act or another spending bill that Congress has to pass in the coming weeks. But so far, opposition highlights the intense political backlash to federal attempts to preempt state AI laws.

OpenAI offices locked down due to concerns about former Stop AI activist. OpenAI employees in San Francisco were briefly instructed to remain inside the office after police received a report that one of the cofounders of Stop AI had allegedly made threats to harm staff and might have acquired weapons. Stop AI publicly disavowed the individual and reaffirmed its commitment to nonviolence. Stop AI is an activist group trying to stop the development of increasingly powerful AI systems, which it fears are already harming society and also represent a potentially existential risk to humanity. The group has engaged in a number of public demonstrations and acts of civil disobedience outside the offices of major AI labs. Read more here from Wired.

EYE ON AI RESEARCH

Are we inching closer to a post-Transformer world? It’s been eight years since researchers at Google published their landmark research paper, “Attention is All You Need,” which introduced the world to the Transformer, a kind of neural network design that was particularly good at predicting sequences in which the next item depends on items that appeared fairly remotely from that item in the prior sequence. Transformers are what all of today’s large language models are based on. But AI models based on Transformers have several drawbacks. They don’t learn continuously. And, like most neural networks, they don’t have any kind of long-term memory. So, for several years now, researchers have been wondering if some new fundamental AI architecture will come along to displace the Transformer.

Well, we might be getting closer. Earlier this month, researchers—once again from Google—published a paper on what they are calling Nested Learning. It essentially breaks the neural network’s architecture into nested groups of digital neurons that update their weights at different frequencies based on how surprising any given piece of information is compared to what that part of the model would have predicted. The parts that update their weights more slowly form the longer-term memory of the model, while the parts that update their weights more frequently form a kind of shorter-term “working memory.” And nested between them are blocks of neurons that update at a medium speed, which modulates between the shorter and longer term memories. As an example of how this can work in practice, the researchers created an architecture they call HOPE that learns its own best way of optimizing each of these nested blocks. You can read the Google research here.

AI CALENDAR

Nov. 26-27: World AI Congress, London.

Dec. 2-7: NeurIPS, San Diego

Dec. 8-9: Fortune Brainstorm AI San Francisco. Apply to attend here.

Jan. 6: Fortune Brainstorm Tech CES Dinner. Apply to attend here.

Jan. 19-23:World Economic Forum, Davos, Switzerland.

Feb. 10-11: AI Action Summit, New Delhi, India.

BRAIN FOOD

OpenAI is optimizing for engagement, even though there’s growing evidence its product harms some users. That’s the conclusion of a fascinating New York Times investigation that details how increasing commercial pressures within OpenAI—and a new cadre of executives hired from traditional tech and social media companies—have been driving the company to design ChatGPT to keep users engaged. The company is proceeding down this path, the newspaper reports, even as its own research shows some ChatGPT users develop dangerous emotional and psychological dependencies on the chatbot and that some subset of those become delusional after prolonged dialogues with OpenAI’s AI.

The story is a reminder of why AI regulation is necessary. We’ve seen this movie before with social media, and it doesn’t end well, for individuals or society. Any company which offers its service for free or substantially below cost—which is the case for most consumer-oriented AI products right now—has a strong incentive to monetize the user either through engagement (and advertising) or, perhaps even worse, directly paid persuasion (in some ways worse than conventional advertising). Neither is probably in the user’s best interest.

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Business

Gates Foundation, OpenAI unveil $50 million ‘Horizon1000’ initiative to boost healthcare in Africa through AI

Published

5 hours ago

January 21, 2026

Jace Porter

In a major effort to close the global health equity gap, the Gates Foundation and OpenAI are partnering on “Horizon1000,” a collaborative initiative designed to integrate artificial intelligence into healthcare systems across Sub-Saharan Africa. Backed by a joint $50 million commitment in funding, technology, and technical support, the partnership aims to equip 1,000 primary healthcare clinics with AI tools by 2028, Bill Gates announced in a statement on his Gates Notes, where he detailed how he sees AI playing out as a “gamechanger” for expanding access to quality care.

The initiative will begin operations in Rwanda, working directly with African leaders to pioneer the deployment of AI in health settings. With a core principle of the Foundation being to ensure that people in developing regions do not have to wait decades for new technologies to reach them, the goal in this partnership is to reach 1,000 primary health care clinics and their surrounding communities by 2028.

“A few years ago, I wrote that the rise of artificial intelligence would mark a technological revolution as far-reaching for humanity as microprocessors, PCs, mobile phones, and the Internet,” Gates wrote. “Everything I’ve seen since then confirms my view that we are on the cusp of a breathtaking global transformation.”

Addressing a Critical Workforce Shortage

The impetus for Horizon1000, Gates said, is a desperate and persistent shortage of healthcare workers in poorer regions, a bottleneck that threatens to stall 25 years of progress in global health. While child mortality has been halved and diseases like polio and HIV are under better control, the lack of personnel remains a critical vulnerability.

Sub-Saharan Africa currently faces a shortfall of nearly 6 million healthcare workers, ” a gap so large that even the most aggressive hiring and training efforts can’t close it in the foreseeable future.” This deficit creates an untenable situation where overwhelmed staff must triage high volumes of patients without sufficient administrative support or modern clinical guidance. The consequences are severe: the World Health Organization (WHO) estimates that low-quality care is a contributing factor in 6 million to 8 million deaths annually in low- and middle-income countries.

Rwanda, the first beneficiary of the Horizon1000 initiative, illustrates the scale of the challenge. The nation currently has only one healthcare worker per 1,000 people, significantly below the WHO recommendation of four per 1,000. Gates noted that at the current pace of hiring and training, it would take 180 years to close that gap. “As part of the Horizon1000 initiative, we aim to accelerate the adoption of AI tools across primary care clinics, within communities, and in people’s homes,” Gates wrote. “These AI tools will support health workers, not replace them.”

AI as the ‘Third Major Discovery‘

Gates noted comments from Rwanda’s Minister of Health Dr. Sabin Nsanzimana, who recently announced the launch of an AI-powered Health Intelligence Center in Kigali. Nsanzimana described AI as the third major discovery to transform medicine, following vaccines and antibiotics, Gates noted, saying that he agrees with this view. “If you live in a wealthier country and have seen a doctor recently, you may have already seen how AI is making life easier for health care workers,” Gates wrote. “Instead of taking notes constantly, they can now spend more time talking directly to you about your health, while AI transcribes and summarizes the visit.”

In countries with severe infrastructure limitations, he wrote, these capabilities will foster systems that help solve “generational challenges” that were previously unaddressable.

As the initiative rolls out over the next few years, the Gates Foundation plans to collaborate closely with innovators and governments in Sub-Saharan Africa. Gates wrote that he himself plans to visit the region soon to see these AI solutions in action, maintaining a focus on how technology can meet the most urgent needs of billions in low- and middle-income countries.

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Business

On Netflix’s earnings call, co-CEOs can’t quell fears about the Warner Bros. bid

Published

8 hours ago

January 20, 2026

Jace Porter

When it comes to creating irresistible storylines, Netflix, the home of Stranger Things and The Crown, is second to none. And as the streaming video giant delivered its quarterly earnings report on Tuesday, executives were in top storytelling form, pitching what they promise will be a smash hit: the acquisition of Warner Brothers Discovery.

The company’s co-CEOs, Ted Sarandos and Greg Peters, said the deal, which values Warner Brothers Discovery at $83 billion, will accelerate its own core streaming business while helping it expand into TV and the theatrical film business.

“This is an exciting time in the business. Lots of innovation, lots of competition,” Sarandos enthused on Tuesday’s earnings conference call. Netflix has a history of successful transformation and of pivoting opportunistically, he reminded the audience: Once upon a time, its main business entailed mailing DVDs in red envelopes to customers’ homes.

Despite Sarandos’ confident delivery, however, the pitch didn’t land with investors. The company’s stock, which was already down 15% since Netflix announced the deal in early December, sank another 4.9% in after-hours trading on Tuesday.

Netflix’s financial results for the final quarter of 2025 were fine. The company beat EPS expectations by a penny, and said it now has 325 million paid subscribers and a worldwide total audience nearing 1 billion. Its 2026 revenue outlook, of between $50.7 billion and $51.7 billion, was right on target.

Still, investors are worried that the Warner Bros. deal will force Netflix to compete outside its lane, causing management to lose focus. The fact that Netflix will temporarily halt its share buybacks in order to accumulate cash to help finance the deal, as it disclosed towards the bottom of Tuesday’s shareholder letter, probably didn’t help matters.

And given that there’s a rival offer for Warner Bros from Paramount Skydance, it’s not unreasonable for investors to worry that Netflix may be forced into an expensive bidding war. (Even though Warner Brothers Discovery has accepted the Netflix offer over Paramount’s, no one believes the story is over—not even Netflix, which updated its $27.75 per share offer to all-cash, instead of stock and cash, hours earlier on Tuesday in order to provide WBD shareholders with “greater value certainty.”)

Investors are wary; will regulators balk?

Warner Brothers investors are not the only audience that Netflix needs to win over. The deal must be blessed by antitrust regulators—a prospect whose outcome is harder to predict than ever in the Trump administration.

Sarandos and Peters laid out the case Tuesday for why they believe the deal will get through the regulatory process, framing the deal as a boon for American jobs.

“This is going to allow us to significantly expand our production capacity in the U.S. and to keep investing in original content in the long term, which means more opportunities for creative talent and more jobs,” Sarandos said.

Referring to Warner Brothers’ television and film businesses, he added that “these folks have extensive experience and expertise. We want them to stay on and run those businesses. We’re expanding content creation not collapsing it.”

It’s a compelling story. But the co-CEOs may have neglected to study the most important script of all when it comes to getting government approval in the current administration; they forgot to recite the Trump lines.

The example has been set over the past 12 months by peers such as Nvidia’s Jensen Huang and Meta’s Mark Zuckerberg. The latter, with his company facing various federal regulatory threats, began publicly praising the Trump administration on an earnings call last January.

And Nvidia’s Huang has already seen real dividends from a similar strategy. The chip company CEO has praised Trump repeatedly on earnings calls, in media interviews, and in conference keynote speeches, calling him “America’s unique advantage” in AI. Since then, the U.S. ban on selling Nvidia’s H200 AI chips to China has been rescinded. The praise may have been coincidental to the outcome, but it certainly didn’t hurt.

In contrast, the president went unmentioned on Tuesday’s call. How significant Netflix’s omission of a Trump call-out turns out to be remains to be seen; maybe it won’t matter at all. But it’s worth noting that its competitor for Warner Bros., Paramount Skydance, is helmed by David Ellison, an outspoken Trump supporter.

It’s a storyline that Netflix should have seen coming, and itmay still send the company back to rewrite.

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Business

Americans are paying nearly all of the tariff burden as international exports die down, study finds

Published

9 hours ago

January 20, 2026

Jace Porter

After nearly a year of promises tariffs would boost the U.S. economy while other countries footed the bill, a new study shows almost all of the tariff burden is falling on American consumers.

Americans are paying 96% of the costs of tariffs as prices for goods rise, according to research published Monday by the Kiel Institute for the World Economy, a German think tank.

In April 2025 when President Donald Trump announced his “Liberation Day” tariffs, he claimed: “For decades, our country has been looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike.” But the report suggests tariffs have actually cost Americans more money.

Trump has long used tariffs as leverage in non-trade political disputes. Over the weekend, Trump renewed his trade war in Europe after Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland sent troops for training exercises in Greenland. The countries will be hit with a 10% tariff starting on Feb. 1 that is set to rise to 25% on June 1, if a deal for the U.S. to buy Greenland is not reached.

On Monday, Trump threatened a 200% tariff on French wine, after French President Emmanuel Macron refused to join Trump’s “Board of Peace” for Gaza, which has a $1 billion buy-in for permanent membership.

“The claim that foreign countries pay these tariffs is a myth,” wrote Julian Hinz, research director at the Kiel Institute and an author of the study. “The data show the opposite: Americans are footing the bill.”

The research shows export prices stayed the same, but the volume has collapsed. After imposing a 50% tariff on India in August, exports to the U.S. dropped 18% to 24%, compared to the European Union, Canada, and Australia. Exporters are redirecting sales to other markets, so they don’t need to cut sales or prices, according to the study.

“There is no such thing as foreigners transferring wealth to the U.S. in the form of tariffs,” Hinz told The Wall Street Journal.

For the study, Hinz and his team analyzed more than 25 million shipment records between January 2024 through November 2025 that were worth nearly $4 trillion.They found exporters absorbed just 4% of the tariff burden and American importers are largely passing on the costs to consumers.

Tariffs have increased customs revenue by $200 billion, but nearly all of that comes from American consumers. The study’s authors likened this to a consumption tax as wealth transfers from consumers and businesses to the U.S. Treasury.

Trump has also repeatedly claimed tariffs would boost American manufacturing, butthe economy has shown declines in manufacturing jobs every month since April 2025, losing 60,000 manufacturing jobs between Liberation Day and November.

The Supreme Court was expected to rule as soon as today on whether Trump’s use of emergency powers to levy tariffs under the International Emergency Economic Powers Act was legal. The court initially announced they planned to rule last week and gave no explanation for the delay.

Although justices appeared skeptical of the administration’s authority during oral arguments in November, economists predict the Trump administration will find alternative ways to keep the tariffs.

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