Technologies

Trump-Xi summit puts AI safety talks on the table but neither side wants to slow down

Recent weeks have seen AI safety fears reach new heights. That will be a key focus for the U.S. and Chinese leaders, analysts told CNBC.

President Donald Trump wants the U.S. to beat China in the artificial intelligence race. But as he meets Chinese President Xi Jinping, both countries are also weighing how to address the risks posed by rapidly advancing technology.

In recent months, AI systems have taken more consequential actions online: OpenAI said one of its research models gained unauthorized access to parts of the AI platform Hugging Face, while Anthropic found AI was being used to automate parts of cyberattacks. The incidents have raised fears that increasingly autonomous models could make attacks faster and harder to contain.

Ahead of Trump and Xi’s meeting on Thursday, U.S. Treasury Scott Bessent discussed the prospect of a “U.S.-China AI dialogue” with his Chinese counterpart, He Lifeng, over the weekend, including a channel for incidents “up to a national security level.”

“Leaders in both countries are spooked by the increasing cyber capabilities of AI models, and especially agents acting autonomously to escape containment and breach websites,” Aalok Mehta, director of the Wadhwani AI Center at the Center for Strategic and International Studies, told CNBC.

But as fears have intensified, tensions have not dissipated.

Washington continues to restrict China’s access to Nvidia

What’s been said so far?

While the U.S. took an early lead in developing large language models, or LLMs, thanks to companies like OpenAI and Anthropic, Chinese models have made big capability gains in recent months and are increasingly being adopted by companies globally, including in America.

Trump previously dismissed warnings that AI poses an existential threat to humanity, risks amplified by OpenAI CEO Sam Altman and Anthropic chief Dario Amodei as they called for an industry slowdown and regulatory oversight.

“If we don’t win AI, we’re going to be put in a very bad position,” Trump told reporters earlier this month.

But in a Truth Social post Monday, he said the government “will rein things in if we have to.”

Some lawmakers hopeful that the talks will result in some sort of agreement on AI, while being realistic that the summit may be more about the fact it’s happening than deliverables.

“I hope Trump meets with Xi Jinping and comes up with some common sense safeguards,” Rep. Ro Khanna, D-Calif., who represents part of Silicon Valley, said in an interview Wednesday on CNBC’s “Squawk Box.”

“How about we just agree that you should not be able to have self-improving AI?” Khanna said. “Why wouldn’t you want to sit down with Xi Jinping and say let’s have some reasonable agreement? And have it enforceable, trust but verify.”

AI safety and access to chips

The likeliest areas of agreement between the U.S. and China could be common definitions and frameworks for AI safety for powerful models and an emergency communication mechanism to discuss incidents, Mehta told CNBC.

A channel for relating national security-related incidents would be a “modest” but positive step, Chris McGuire, senior fellow for China and emerging technologies at the Council on Foreign Relations, told CNBC.

But an agreement to slow down AI’s breakneck development speed is “extremely unlikely,” he added.

China has historically used AI dialogues “to complain about U.S. export controls,” McGuire said, which the U.S. uses to prevent the most advanced AI chips from being sold to China.

“Its state media has largely rejected the concerns expressed by leading U.S. AI labs about the potential for catastrophic risk, which is consistent with China’s long-held skepticism of all U.S. arms control proposals,” he added.

Despite U.S. restrictions, several Chinese firms have reportedly been able to access the chips’ compute power remotely, via data centers in Southeast Asia.

While U.S. Trade Representative Jamieson Greer said controls on chips were not on the agenda during preliminary talks on the weekend, China could push to have them relaxed, said Melanie Hart, senior director of the think tank Atlantic Council’s Global China Hub.

“China’s asking the U.S. to embrace Chinese AI models and drop some of the U.S. controls on China’s access to semiconductor chips,” she told reporters on Tuesday.

Distillation could also come up in the talks. U.S. companies and officials have accused Chinese labs of using the practice to gain ground, characterizing it as theft; China rejects the allegations.

In July, Bessent threatened sanctions against companies doing it and said the Trump administration had found “watermarks of our U.S. large language models on many of the Chinese models,” calling it “unacceptable.”

Progress on AI cooperation relies on two things, said Mehta. “The first is that it can’t hurt the ability for the U.S. and China to compete on the merits of their technology.”

The second is a verification mechanism, he added. “Policymakers won’t be inclined to take their counterparts just on their word, so we’ll need to find ways to ensure information flowing between the two countries is accurate. That means both technical and governance verification tools.”

Technologies

Apple and Meta team up to make Muse AI model run on Mac computers

Apple and Meta are collaborating to make Muse Spark Open easier to run locally on clustered Mac Studio systems, according to the companies.

Tim Cook and Mark Zuckerberg have clashed for years, but with John Ternus taking the reins at Apple

Technologies

CoreWeave credit default swaps hit distress levels as investors sour on AI debt

Signs of distressed deepened in CoreWeave on Thursday.

CoreWeave’s credit stress continued to spiral on Thursday amid a broader sell-off in AI-related names.

CoreWeave — a so-called neocloud company — has taken on more than $51 billion of debt and obligations to finance its AI infrastructure build-out. It’s now facing a rebellion from stock and bond investors as concerns mount about AI overspending and debt levels.

Yields on CoreWeave debt have continued to climb, with the yield to maturity on its 9.75% bond due in 2031 reaching 15.78%. Bond yields move inversely to prices. Meanwhile, the spread on its five-year credit default swaps, which are insurance against default, at one point soared above 1,140 basis points. It last stood at nearly 1,038 bps — a 16% week-over-week jump and 164% higher than a year ago.

Credit concerns are spreading into AI equities too. CoreWeave’s stock dropped during trading Thursday before recovering and closing 5.94% higher. The moved followed Wednesday’s 15.5% nosedive.

Other neocloud stocks were under similar pressure. Nebius also sank before climbing higher to close 1.29% and and Iren ultimately ended the day down less than 1%.

Anxiety about AI overspending is also spreading. For instance, shares of Micron Technology and Advanced Micro Devices sold off following a big sell-off in South Korean chip stocks. Micron closed up 1.87%, while AMD fell 1.5%.

While AI debt worries have been rising steadily, investors have suddenly grown skittish about the underlying finances of companies borrowing heavily to buy chips, build data centers, and rent out computing power.

Coreweave’s credit default swaps are one place to see that stress.

Credit default swaps are contracts where buyers pay for protection in case the borrower can’t repay its debt. The spread widening in CoreWeave’s CDS means investors view the debt as riskier.

The market is “basically saying ‘no mas’ to AI debt without operating cash flow support,” the Evercore ISI trading desk said.

A spread level of 1,000 basis points or above is generally a sign of credit distress, said Gavan Nolan, executive director of fixed income pricing at S&P Global Market Intelligence.

No one is questioning whether demand for CoreWeave’s services is real, since the company has contracts with all the big hyperscalers, Nolan said. The question is whether the cash flows will ultimately arrive.

“It’s obviously heavily negative free cash flow at the moment, and it needs that cash flow to arrive really to justify all the capex that it’s spending,” Nolan said.

‘Self-fulfilling prophecy’

CEO Mike Intrator dismissed the market moves on Wednesday, according to a memo obtained by CNBC.

“When you are building a new type of technology company there will be periods of time when the market misunderstands and acts irrationally,” he wrote. “We are confident in our backlog which more than supports all of our debt obligations.”

The backlog is over $100 billion, with around two-thirds of it with investment-grade counterparts including Microsoft, Meta, IBM and Caterpillar, Deutsche Bank said in a note Thursday. The firm reiterated its buy-rating on the stock Wednesday, calling the dislocation a buying opportunity.

“The problem is this kind of concern can prove to be a self-fulfilling prophecy, and risks triggering broader issues in other AI-related names,” said Jim Reid, global head of macro and thematic research.

Domino effects may already be happening. Oracle’s five-year CDS spread also spiked this week. It was last at 282 basis points, a roughly 10% increase in one week.

“A downgrade from its BBB rating would risk pressuring IG-only investors into forced sales,” Reid said.

Technologies

Netflix Chief Content Officer Bela Bajaria is leaving, will be replaced by Peter Rice

Netflix announced Bela Bajaria will be replaced by former Disney exec Peter Rice as the company’s chief content officer.

Netflix on Thursday announced Bela Bajaria will be replaced as the company’s chief content officer by former Disney exec Peter Rice, effective Oct. 26.

Rice most recently oversaw Disney’s cable channels, news programming and coverage of major sporting events.

“Peter is one of the most effective at-scale operators in the entertainment industry,” co-CEO Ted Sarandos said in a statement. “I’m excited to welcome him to Netflix as Chief Content Officer as we continue to scale and deliver members more of the stories they love.”

Before Rice was at Disney, he held roles 21st Century Fox and Fox Searchlight Pictures. Netflix in its announcement called him “one of the entertainment industry’s most respected creative executives.” In his new role, Rice will oversee the company’s global content organization, including scripted and unscripted series, film and live events.

″[Netflix has] shown again and again that they’re willing to take chances on distinctive voices and fresh ideas, and I’m excited to work with the team to help bring even more great stories to members everywhere,” he said in a statement.

Bajaria, who is leaving Netflix after nearly 10 years, most recently worked as the company’s global content team. She had been focused on the company’s live sports strategy, looking to create events out of buzzy games and tournaments.

“I’m incredibly grateful for everything she’s done to help Netflix entertain the world,” Sarandos said in a statement.

The announcement comes a day after Netflix instituted layoffs across its organization, eliminating approximately 6% of its workforce, or roughly 1,000 jobs.

The media company will report its next quarterly earnings on Tuesday.

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