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The Chinese AI Startup Rivaling OpenAI & Trump Fires Tariffs at Colombia?

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January 27, 2025

TLDR: Neal and Toby discuss a Chinese AI startup that competes with OpenAI at lower cost, Trump imposing retaliatory tariffs on Colombia for rejecting deportation planes, avian flu increasing egg prices significantly, Costco and sports parlays being victorious over the weekend, and upcoming news highlights.

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In the latest episode of Morning Brew Daily, Neal Fryman and Toby Howell tackle pivotal topics impacting the landscape of technology and geopolitics. They discuss a groundbreaking Chinese AI startup, the implications of recent trade tariffs from the Trump administration, and the ongoing avian flu epidemic affecting egg prices in the U.S.

Key Highlights

1. The Rise of DeepSeek: A Chinese AI Contender

The episode kicks off with a significant development in artificial intelligence. A Chinese startup named DeepSeek has emerged, introducing an open-source AI model, dubbed R1, that can compete with OpenAI's solutions at a significantly lower cost.

  • Core Insights about DeepSeek:
    • Performance: The R1 model outperforms competitors in various math and reasoning benchmarks.
    • Cost Efficiency: DeepSeek developed the model using limited compute resources (about $5.6 million), thanks to U.S. export controls restricting chip access.
    • Industry Impact: The model being open-source poses a threat to subscriber-based services like ChatGPT Pro, potentially causing a significant market shift.
    • Market Reaction: On the announcement, the Nasdaq futures dropped nearly 4% as tech stocks plummeted, showcasing the deep concern in Silicon Valley.

Toby explains that the innovation stems from forced efficiency due to the limited resources historically imposed on Chinese firms. This situation has spurred an arms race in AI development between the U.S. and China, challenging American dominance.

2. Trump’s Tariff Announcement Against Colombia

Transitioning from tech to politics, the discussion shifts to the economic repercussions of Trump's recent tariff threats against Colombia.

  • Circumstances Leading to Tariffs:

    • Colombia’s rejection of U.S. deportation flights prompted Trump to announce 25% tariffs on Colombian imports, escalating to 50% if demands were not met.
    • This marks a surprising move given Colombia's status as a U.S. ally in Latin America.
  • Implications of the Tariff Rollout:

    • The tariffs target key commodities like coffee and crude oil, severely affecting Colombian exports and threatening U.S. consumers with price hikes.
    • Colombia quickly capitulated to avoid the full-blown trade war, emphasizing Trump's willingness to implement aggressive economic strategies.

Neal highlights how this maneuver could deter other nations from defying U.S. policies, reshaping international relations.

3. Avian Flu and Egg Prices Skyrocket

The episode continues with an exploration of the avian flu crisis resulting in a drastic drop in the U.S. egg supply, driving prices up significantly.

  • Key Statistics:
    • Supply Impact: Approximately 38 million chickens have been culled due to outbreaks, representing about 10% of the egg-laying population.
    • Rising Costs: The price of a dozen large eggs surged to $4.15 in December, marking a 36% increase year over year.

Neal emphasizes the resilience of demand for eggs, often viewed as a cost-effective protein source, posing challenges for consumers and bakers alike.

4. Weekend Winners: Sports Betting and Coca-Cola

In the lighter segment of the show, the hosts celebrate winners from the weekend:

  • Sports Betting Parlays:
    • With increasing popularity, sports betting parlays now account for 27% of all betting activities, credited for generating substantial revenue for sportsbooks.
  • Coca-Cola's Triumph:
    • Coca-Cola's successful re-negotiation for its partnership with Costco food courts signifies a win against Pepsi, rekindling nostalgia over Costco's famous $1.50 hot dog and soda combo.

5. Upcoming Events in the Financial World

The podcast wraps up with a preview of significant events affecting the markets:

  • Federal Reserve Meeting: Anticipation builds for the Fed's interest rate announcement, expected to remain steady, but with intense scrutiny on Chair Jerome Powell's comments.
  • Earnings Week: The week ahead is packed with earnings reports from major tech companies, including Microsoft and Tesla, which could be influenced by the developments in AI and trade tariffs.

Conclusion

This episode of Morning Brew Daily provides a comprehensive overview of emerging AI competition, significant geopolitical tensions, and how these factors intertwine with consumer goods and economic policies. For anyone keen on understanding the rapidly changing global landscape, the insights offered in this podcast serve as both informative and thought-provoking.

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