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Wall Street’s A.I. Panic
Update: 2025-01-28
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American tech stocks plummet as China’s “DeepSeek” programs upend the artificial intelligence market. The Justice Department fires several prosecutors who worked on criminal cases against President Trump. And outbreaks of avian flu are affecting food prices around the country.
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Transcript
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00:00:26
It's Tuesday, January 28th.
00:00:30
That whole AI revolution everyone's waiting for might not be made in America.
00:00:34
You start here.
00:00:37
Stocks plummet for one of America's most valuable tech companies as a Chinese competitor burst on the scene.
00:00:44
This deep-seek model seems to be saying, "Less is more."
00:00:49
This was the largest one-day loss in value we've ever seen, so what's got the tech world so nervous?
00:00:55
Government workers are being fired left and right.
00:00:59
From the official that has spoken to in recent days, they're surprised at how rapid this has been.
00:01:04
Including the DOJ lawyers who prosecuted the case against Donald Trump.
00:01:09
And if the eggshells looked empty in your grocery store, you're not alone.
00:01:13
Most mornings were selling out within two hours.
00:01:15
Like cases of bird flu could sicken the broader economy.
00:01:20
From ABC News, this is Start Here.
00:01:25
I'm Brad Milky.
00:01:27
If you're watching the stock markets yesterday, say the S&P 500 or especially the NASDAQ, which is heavy and tech stocks, you could tell right away something was off.
00:01:41
Is the opening bell sounded?
00:01:44
There was this instantaneous drop.
00:01:46
Not catastrophic, but it was clear investors were spooked.
00:01:50
And the word you kept hearing all day were deep-seek.
00:01:53
Deep-seek is the most popular free app in the Apple Store and American tech stocks like Nvidia, Microsoft, and Oracle are all down.
00:02:00
Deep-seek is a Chinese tech company.
00:02:02
It's less than two years old.
00:02:04
There recently has been rolling out this new AI chatbot.
00:02:07
Think the Chinese version of chat GPT?
00:02:09
Well, in just weeks, it became insanely popular and in the span of one day, America's largest AI company in video lost almost $600 billion in value.
00:02:21
Now, the stock market is not the economy, but the concern here is the fallout could go way beyond stocks.
00:02:27
So let's start today with ABC's Mike DeBusky, who covers tech.
00:02:30
Mike, can you just back me up here like, what happened yesterday?
00:02:34
Yeah, so Wall Street reacted in a big way to deep-seek this new Chinese AI company.
00:02:41
Just to back up a little bit here, Brad, a lot of tech stocks are kind of underpinning how investors are feeling more broadly, right?
00:02:49
The idea being that many of those companies were hitching themselves to American artificial intelligence companies, right?
00:02:55
Meta, which has a model called Lama, Amazon, which has its own model and open AI, which is of course the biggest player in the game.
00:03:03
They've got a whole bunch of different models out there.
00:03:06
And for a while, that worked really well, right?
00:03:09
I mean, I know that if you add AI to your business and the business was generally American at this point, you were in for a pretty sky high valuation.
00:03:18
But clearly with the entrance of deep-seek to the picture, that logic was turned on its head.
00:03:23
Yeah, I see.
00:03:24
So all these companies, including like non-tech companies, have been investing in this AI revolution we've been promised.
00:03:29
And here comes along like a competitor, where did they come from?
00:03:32
Like what is the deal with deep-seek that's so interesting?
00:03:34
Yeah, so deep-seek, it's this Chinese AI research company.
00:03:37
As you said, they've been around for a few years now.
00:03:40
They released this artificial intelligence model.
00:03:42
And they say this model can not just compete with, but occasionally supersede, outperform the best models that America has to offer.
00:03:52
So the model in question here is called R1.
00:03:54
It's a reasoning model.
00:03:56
And deep-seek says this thing scores better or the same as equivalent models from companies like open AI.
00:04:03
And meta in things like logic puzzles and that type of thing.
00:04:07
So that would already be enough to worry a lot of American tech firms, Brad.
00:04:11
But deep-seek also claims that they were able to build this model for less than $6 million.
00:04:17
And to put that into context, meta spent about $65 million on their model, which is called Lama.
00:04:24
And open AI spent over $100 million on their GPT4 model recently.
00:04:29
So how do you do that?
00:04:29
How is this company so much more efficient than these AI companies we've been told with the future of this thing?
00:04:35
Well, I mean, that's the big question that a lot in Silicon Valley are asking right now, Brad.
00:04:40
We don't know exactly the answer to that.
00:04:42
But there is a bigger picture here, which might shed some light on some of those questions.
00:04:46
So back in 2022, the Biden administration put severe limits on chip manufacturers.
00:04:52
Computer processor makers companies like Nvidia, right?
00:04:56
And the idea here was that they were trying to prevent those companies from exporting their newest and most powerful chips to China.
00:05:05
And that was all in an effort to hinder China's progress in AI development.
00:05:10
They didn't want China to make a more powerful AI model that could potentially endanger American business or the American way of life.
00:05:18
But if deep seek is to be believed, that strategy backfired on the American government, Chinese engineers reportedly committed to using cheap software readily available methods and other ways to basically make really efficient technology.
00:05:33
And that's how they came up with this model that goes toe to toe with the big guys while using just 120th of the processing power they claim.
00:05:41
Well, yeah, and wait, just so I'm clear, Mike, like, what is the actual program?
00:05:50
Like it's like it's like chat GPT basically or what?
00:05:56
Yeah, it's like chat GPT bread in the sense that like you can go to the app store and download an app and open that app and then talk to it just like you would talk to chat GPT.
00:05:57
That is essentially how this technology works.
00:06:00
However, that app is built on this underlying model, right?
00:06:05
This R1 model and that is the technology that has really spooked Silicon Valley and Washington DC and Wall Street, right?
00:06:13
The model is essentially flying in the face of prevailing wisdom in the American AI space.
00:06:20
Many in the tech world in the AI space used to think that IP intellectual property was solely yours, right?
00:06:27
Open AI owns its model.
00:06:30
Whereas deep seek, this model is open source, you or I could go log on and play around with it and build an app out of it if we really wanted to.
00:06:38
And again, speaking of prevailing wisdom, Brad, up until last week, the open AI's of the world and the meta's of the world would tell you that more is better,
00:06:48
more training data, more computing power, more chips, more energy.
00:06:52
What this deep seek model seems to be saying is that less is more that these multi-billion dollar companies you don't really need all that.
00:07:02
You don't need the investment, you don't need the energy outlay and that opens the industry up to a whole lot of new players, players that otherwise would not have access to technology like this.
00:07:15
The other important part of this here, Brad, is of course this is a Chinese model, right?
00:07:19
There are already concerns being raised about what you can ask this chatbot and what you cannot ask this chatbot people have struggled to get it to talk about, for example, Tiananmen Square.
00:07:30
Now, to a degree, all AI models have limitations on them.
00:07:33
For example, Google's model Gemini doesn't know who the president is.
00:07:39
They try to avoid political topics for fear of potentially spreading disinformation or misinformation.
00:07:46
So there's a degree of this that is to be expected.
00:07:49
There's a degree of this that is a geopolitical concern and you can imagine that a lot of different stakeholders are going to be paying very close attention to all of those things going forward.
00:07:58
That's interesting that it's not just American companies spooked by one competitor or even a new type of competitor, but also having the Chinese government clearly at the center of all this could be a game changer.
00:08:08
All right, Mike DeBusky covering tech really helpful.
00:08:10
Thank you.
00:08:11
Of course, Brad, take care.
00:08:12
Next up on Start here, they took on cases.
00:08:17
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00:08:19
Now they've been fired for it.
00:08:21
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00:08:22
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00:10:06
Every time a new president takes over, lots of people's jobs get switched around.
00:10:14
New cabinet members are installed and maybe that cabinet member was a member of Congress before.
00:10:18
So they bring some of their staffers over with them.
00:10:20
The old deputy loses their job.
00:10:21
That's just what happens with political appointments.
00:10:24
However, the vast vast majority of government jobs are not political appointments.
00:10:29
The bureaucrats that do the same work regardless of who's in charge, from IRS auditors to national weather service scientists, to FBI agents, you tell them what to do, they'll do it, and they'll do it well.
00:10:40
But within days of President Trump taking office, lower level government workers have described being ousted, not for incompetence, but because they're not considered personally loyal to the current president.
00:10:51
And yesterday, this went a step further when prosecutors at the DOJ were fired for working on the now dismissed cases against Donald Trump.
00:11:00
Let's bring an ABC's Alex Malin who covers the Justice Department.
00:11:03
Alex, we don't even have an official attorney general who's been confirmed yet.
00:11:06
So I mean, who is in charge and what is happening there?
00:11:09
Yes, so Brad, these fires were carried out by the acting attorney general's name is James McKendry.
00:11:14
He was appointed last week when President Trump was inaugurated.
00:11:17
He's a career DOJ official who largely oversaw immigration cases.
00:11:22
Mainly, he was the lead of the administrative office of immigration review during President Trump's first administration.
00:11:28
And so he, in a letter to multiple, we believe over a dozen officials who worked on special counsel, Jack Smith's prosecutions, fired them in this letter to these DOJ officials that he fired.
00:11:40
McKendry said, quote, the proper functioning of the government critically depends on the trust superior officials place in their subordinates.
00:11:47
Given your significant role in prosecuting the president, I do not believe that the leadership of the department can trust you to assist in implementing the president's agenda faithfully.
00:11:57
Again, this is McKendry, a longtime career DOJ official firing scores of career DOJ officials who worked on these prosecutions into President Trump, both his handling of classified documents after leaving the White House and also his efforts to overturn the election.
00:12:13
The prosecutor in the case, I will call it our case, is a thug.
00:12:18
I've named him deranged Jack Smith.
00:12:22
President Trump during the election said that upon taking office, if you were elected, he was first day, he would fire special counsel Jack Smith.
00:12:31
As you recall, special counsel Smith brought those cases and after Trump's election based on the policy, the DOJ policy that sitting presidents cannot face prosecution, he then moved to drop both of those cases.
00:12:43
And then he resigned, submitted his final reports to Attorney General Garland, but that left these, you know, more than a dozen career officials who declined to resign and then went back to positions inside DOJ.
00:12:55
Being a fair and good prosecutor is a very important thing, but some of these animals, I mean, they are bad.
00:13:02
And obviously, given those threats that we heard from President Trump during the campaign, it's really no surprise bread that one of the first actions taken by leadership that he has installed at the Justice Department is moving to fire those people.
00:13:14
Maybe no surprise Alex, but still shocking in a way in that, like these were not prosecutors who were on record as saying, like, I dislike President Trump, and that's why I want to work on this case.
00:13:23
And even after this case ended, I assume they go off to work on different cases that have nothing to do with politics or whatever.
00:13:29
So what the case is just that the vibes are too strong, the vibes are too bad if they stick around.
00:13:34
Yeah, I mean, these were career officials, Brad, some who served decades within the department before joining special counsel Jack Smith's team as what we call detail ease.
00:13:44
It's not even clear whether they personally tried to reach out to special counsel Jack Smith to join his investigation.
00:13:50
These are typical assignments when a special counsel is appointed, whether it be special counsel Robert Hurr or special counsel David Weiss, they pull in people who are career officials from across the department whose jobs are to follow the facts and the law.
00:14:05
We've heard that repeatedly from former Attorney General, Mayor Garland, who stressed that his prosecutions of President Trump were not political in any way.
00:14:14
Only an independent justice department can ensure that the facts and the law alone will determine whether a person is investigated or prosecuted.
00:14:26
You're bolster that credibility when you have these officials who have prosecuted both Democrats and Republicans joining your team.
00:14:43
But obviously, Brad, we're facing an extraordinary situation in the justice department where these people were part of prosecutions that they believed could put President Trump in prison for potentially decades if they were able to get a conviction.
00:14:48
So you do have this extraordinary moment where the incoming team that is coming into the justice department is in service of a president that many of these career officials believes should not be in office but should be behind bars.
00:15:01
You cannot escape the fact that there is a conflict there.
00:15:04
You got to think these prosecutors will not be like, I think he's actually innocent.
00:15:07
Like they probably think he was guilty.
00:15:09
Where does this put the Department of Justice?
00:15:11
Like, when you're in the building, what's the vibe they're like right now?
00:15:14
I mean, it's really quiet.
00:15:15
I think that that's partly due to the fact that most of President Trump's team is still not confirmed yet.
00:15:23
You do not have as Attorney General nominee Pambondi confirmed yet.
00:15:27
You don't have as Deputy Attorney General Todd Blanche confirmed yet.
00:15:30
But really what we see is this team that has been placed in here largely a roster from what is called the America First Policy Institute.
00:15:38
This group that was propped up by Stephen Miller, who's obviously over at the White House.
00:15:41
So if you think about it, the team at the Justice Department, the political team is largely overseen by this group that is heavily aligned with the team at the White House.
00:15:50
It is unlike any Justice Department, I have ever covered given the fact that it is so deeply aligned with the White House.
00:15:57
Even when Attorney General Bill Barr, who was a staunch Trump loyalist was there, he tried to maintain the fact that there was a level of independence from the White House.
00:16:06
From the official that I've spoken to in recent days, they're surprised at how rapid this has been the change that is being instituted at the Justice Department, the overt political language that we're seeing.
00:16:19
And obviously, I think what really stirred them is those partens of January 6th writers.
00:16:23
These were people that actually love our country, so we thought a partner would be appropriate.
00:16:28
That was the largest criminal investigation in DOJ history and to see it unravel in the complete dismantlement that we saw.
00:16:36
I think really shocked a lot of people and Brad, people who were previously overseeing the levers of our National Security apparatus are being reassigned to these sanctuary cities, task force,
00:16:47
being told that they are going to be sent around the country to basically prosecute immigration law.
00:16:52
When these are people who oversaw some of the more significant public corruption cases and national security cases of the past decade, I think that that shifting of the deck chairs has really alarmed some of the career officials.
00:17:04
And you're just talking about the DOJ.
00:17:06
We are hearing this from reporters at nearly all the federal agencies we're covering about how surprised people are at the swiftness and the severity of these personnel changes.
00:17:14
Alex Malin, thank you so much.
00:17:16
Thanks, Brad.
00:17:18
Lately, you've probably been hearing that there are more and more cases of avian flu or bird flu.
00:17:23
You might have heard it referred to as a specific strain, H5N1, although just yesterday, a different strain appeared among American poultry called H5N9 at a California duck farm.
00:17:34
Now, the vast, vast majority of these cases appear to be among animals, some are humans getting it from animals.
00:17:40
At this point, you got 67 confirmed American cases among humans, 67, almost 1,000 cases among cattle, and 40 million poultry affected in just the last three months.
00:17:50
It was right when the temperature started changing, so we're like, oh, maybe it's environmental or, you know, the next day hundreds were gone.
00:17:56
Now, the nightmare scenario would be that this virus could start spreading between humans and potentially create another pandemic situation.
00:18:02
The worry now is that the more it spreads among these animals, the more chances it has to mutate.
00:18:07
But, even though this is not considered a clear cut threat to humans, not yet, it is undeniable that bird flu and the mass culling that is happening on many American poultry farms is having on our wallets.
00:18:18
I want to go to ABC's Business Correspondent Alexis Christopher, because Alexis, just in the last couple days, I've had friends being like, I'm nervous, I'm going to be paying $10 for Carton of Eggs soon.
00:18:27
Like, what is happening here?
00:18:28
You know, we're not there yet.
00:18:30
Brad, hopefully we don't see that, but certainly wholesale prices have gone up quite a bit in a number of states, and what we're seeing as retailers are just passing that along to consumers.
00:18:39
I'll give you a few examples.
00:18:40
In New York, for instance, the wholesale price of a dozen eggs was $7.24 a dozen.
00:18:46
In the Midwest, $6.84 in California, large eggs, $8.35 per dozen, and that's at the wholesale level.
00:18:53
So, you know, some consumers now are paying even higher than that.
00:18:57
And one of the challenges, too, is can you even find a carton of eggs?
00:19:01
Before, we used to put 20 dozen in the farm store, and it would last the whole day, or until the next morning.
00:19:07
Now, most mornings were selling out within two hours.
00:19:10
I was shopping this past weekend at my local grocery store, and the egg area was stark.
00:19:15
I mean, the shelves were just, there was nothing there.
00:19:18
And I just thought, oh, what's this going to be for a day or two?
00:19:21
It's been like that for a week.
00:19:22
It's a daily, daily quote, I hear, pretty much on point with that of, think goodness you have eggs, or they come in, and, oh no, you don't have eggs.
00:19:30
And the thing about eggs is, you can't really panic by eggs.
00:19:33
You can't stockpile eggs, because they're not going to last in the way, you know, a non-perishable one.
00:19:38
Oh, it's just about to say, it doesn't sound like this is a demand thing.
00:19:40
This is a supply issue, then.
00:19:41
Well, I think those MG store shelves, you know, in a number of grocers, is a good indication.
00:19:46
But just to give you a feel for it, the virus, it killed over 17 million egg-laying hens in November and December.
00:19:56
Just to give you perspective, that's nearly half of all birds killed by the virus in all of 2024.
00:20:02
So it has definitely gained momentum in the past couple of months.
00:20:06
What does that mean for, like, farmers and ranchers?
00:20:08
Like, I'm thinking about consumers.
00:20:10
It sucks to have to pay more.
00:20:11
I'm also wondering if there's people who are like, oh, my whole living is based on the idea that, like, American poultry is healthy.
00:20:18
If that's not the case, that have a larger effect.
00:20:20
It's been a tough decade for the farmers, and something like these egg prices now going up, and just not being able to produce the supply that they need to,
00:20:31
is definitely squeezing farmers who have a concentration with hens and eggs.
00:20:36
Unfortunately, when you have a situation where you have a flock that's infected, the remedy is to put the entire flock down.
00:20:44
In this particular incidence, it's over 100,000.
00:20:48
It takes time to replenish a hen population for some farmers.
00:20:52
They've had to get rid of an entire, a million hens I've read, where they've had to just slaughter a million hens who were infected with this virus.
00:21:00
And you can't just replace that overnight.
00:21:03
The good news, I guess, if there's good news, is that they've been dealing with the avian flu now for a few years.
00:21:08
And so, many farmers have a better handle on how to deal with it, but bouncing back from something like this does take time, and they have to be extra vigilant to make sure that viruses don't spread amongst the hens in their pens.
00:21:22
And at the end of the day, Alexis, it sounds like President Trump made a huge deal about lowering prices, and I guess he would know all too well that you can't control how viruses end up affecting the economy that you inherit.
00:21:32
Yeah, it's just one of those things that are completely out of the control of the White House.
00:21:37
We're already seeing economists are predicting egg prices will probably be higher for the rest of the year.
00:21:43
They're predicting 20% higher.
00:21:45
There's just simply not enough ends laying eggs to keep up with the demand, especially in the winter months when everybody in the cold wants to be baking and cooking and consumption rates are higher right now.
00:21:55
Overall, food is supposed to go up by 2.2%, so we're still seeing food inflation in the grocery store.
00:22:01
In addition to that, orange juice, beef, and coffee prices are also on the rise.
00:22:06
I know that Vice President Vance was out recently saying that the president is doing all he can to lower food and gas prices, but they haven't really gotten specific yet on how they plan to do that.
00:22:16
Really, interesting.
00:22:17
All right, Alexis Christoffer, thank you so much.
00:22:19
You bet.
00:22:20
Okay, one more quick break.
00:22:22
When we come back, a golf shot should never take what?
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More than 40 seconds to contemplate?
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00:23:31
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00:23:38
And one last thing.
00:23:41
I enjoy playing around if golf.
00:23:43
I'm pretty terrible, but when I get a chance, it's a lovely afternoon.
00:23:46
What I can't bring myself to do is spend my Sunday like my dad often does, sitting and watching a golf tournament on TV.
00:23:53
Like, how can you bear it?
00:23:55
Well, recently, even hard core golf fans have been gripping about their viewing experience.
00:24:06
A couple weeks ago, the final group at the American Express PGA tournament took five and a half hours to finish their round.
00:24:13
Like, forget the other 70 players.
00:24:14
If you had just tuned in when the leaders started their rounds, you would have been on your couch for five and a half hours.
00:24:20
This past weekend at the Farmers Insurance Open, the commentators sounded like they'd had enough.
00:24:24
At one point, the former golf champion and veteran CBS reporter, Dottie Pepper, said this was verging uninsulting.
00:24:31
No, Frick, I think we're starting to need a new word to talk about this pace of play issue and its respect for your fellow competitors, for the fans, for broadcasts, for all of it.
00:24:41
It's just gotta get better.
00:24:45
And over the last few days, that has opened the door to a concept that PGA Tour rarely talks about, a shot clock.
00:24:52
Some popular players, like Ricky Fowler and Matt Fitzpatrick, have promoted the idea while others have said, "Look, you want us to play these super difficult courses with all this money on the line?
00:25:01
It's gonna take me an extra few moments to clear my head, deal with it."
00:25:05
But what's funny here is the average golfer knows exactly how long it should take to line up your shot.
00:25:11
40 seconds.
00:25:12
That is the US Golf Association's guideline, and it's the rule on just about every golf course in America.
00:25:18
If you're taking too much time on a busy course, a dude called a Marshall will drive up on a golf cart and a rep for a man do in front of everyone.
00:25:25
That's if the guys behind you haven't already started hitting balls toward you.
00:25:29
So, golf fans do not have a lot of patience for long pauses.
00:25:32
And this year, there's a new reality to compete with.
00:25:35
This is TGL presented by SoFi, 24 of the best players in the world.
00:25:38
No, the universe pitted against each other three versus three.
00:25:44
Earlier this month, Tiger Woods and other pros launched a bold, ambitious golf league called TGL.
00:25:50
Instead of a four-day tournament on a spread-out course, this is an indoor event where teams of pros compete on virtual courses.
00:25:58
Golf simulators have become a big thing among younger players where you get together with your buddies, you smack a ball into a screen while the others sit on the couch, and you let a computer tell you whether you would have landed on the green at Pebble Beach.
00:26:09
This is that concept on steroids.
00:26:12
So, how about it for Tiger Woods Tiger?
00:26:15
In this arena full of cheering fans, golfers hit off real grass and sand toward these screens, and then when it comes time to put, the floor transforms into a huge,
00:26:25
undulating green using a series of hydraulic gears.
00:26:29
You can actually simulate the greens at Augusta National or Beth Page Black.
00:26:33
It's a total made for TV product, and because of that, it comes with what else?
00:26:37
A shot clock.
00:26:38
By the way, there's a shot clock.
00:26:40
Afterwards, the New York Golf Club is asked for any rules you'd like to see implemented.
00:26:43
Immediately, they all said shot clock.
00:26:45
There were lots of sports designed to be played without clocks.
00:26:48
Their fans often say they're in lies the beauty, but from tennis to billiards to baseball, every time sports have introduced a shot clock in recent years, fans have loved it.
00:26:58
The PGA has never implemented penalties during around simply for taking too long.
00:27:02
They have fine players for slow play, and those fines multiply for repeat offenders, but with purses in the millions, 5 or 10,000 bucks seems trivial, especially if you stop to think about it.
00:27:14
My dad taught me it's called a ready golf.
00:27:18
Like, be over your ball when your playing partners are hitting theirs, and so you just go boom, boom, boom.
00:27:24
So I got that lesson.
00:27:25
I did not get the lesson where you relaxed and watch the FedEx Cup tournament that's on more and all these stories on ABC News Live, which you can get on at the ABC News app, on Hulu, on YouTube,
00:27:35
or every stream live news.
00:27:37
It's there.
00:27:37
I'm Brad Milky.
00:27:38
See you tomorrow.
00:27:39
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