Chinese AI Model Closes Gap on US & African Teams Surprise at the World Cup

0:00Heat up your 4th of July at the Home Depot with our wide variety of grills under$300 and make every gathering one to remember. Give your outdoor space a glow up. Whatever your budget is, the savings on seasonal plants starting at$5. With the grill fired up and your backyard set to perfection, you'll be able to invite friends and family over to kick off the party. Start celebrating with low prices guaranteed at The Home Depot. Prices may vary by store. Exclusions apply. See homedepot.com slash price match for details. Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Chinese AI models are quickly narrowing the gap with the U.S.

0:39Then, why African nations are dominating at the World Cup. It's Monday, June 29th. Let's ride.

0:57So, I was browsing through Twitter this weekend when I saw one post that stopped my scroll. Noah Kahn, the singer-songwriter, wrote this, and I apologize if you're eating breakfast right now. If you have to poop at a show, please, dear God, just go to the bathroom, LMAO. I've pooped my pants as much as the next 29-year-old, but you gotta understand there's a venue worker out there with a 1 ,000-yard stare after dealing with that. He did not add any context, but apparently this did, in fact, happen at Noah's show in Philadelphia on Friday night. Hey, that's a real fan right there. I mean, what are we doing here, Neil?

1:33First of all, it's far too early for this conversation. And needless to say, don't do this. But the craziest part of this is the line from Noah saying, I pooped my pants as much as the next 29-year-old. How many times is that, Noah? What is the proper amount for a 29-year-old to have pooped their pants? We've probably already spent too much time on this. So I'm going to focus on keeping my bowels under control for the rest of this show. Hopefully you're doing the same at home. And now a word from our sponsor, On Investing, an original podcast from Charles Schwab. Each week, host Liz Ann Saunders, Schwab's chief investment strategist, and Colin Martin, head of fixed income research and strategy for the Schwab Center for Financial Research, bring you fresh insights into what's happening in the markets and why, and what the implications might be for your portfolio.

2:16Join Colin and Liz Ann as they explore questions like, how do you evaluate corporate bonds that look interesting? And what sectors are on the move right now? You can download the latest This episode and subscribe at schwab.com slash oninvesting or wherever you get your podcasts.

2:58While supplies last, ends June 30th. Terms at aka.ms.collegepc. 18 months ago, Chinese company DeepSeek dropped a cheap AI model that went toe-to-toe with America's best, causing a market meltdown. They might have just done it again. Another Chinese AI firm, ZAI, released a system that matches the performance of Anthropics' top model Mythos in certain cybersecurity situations. While the market likely won't crash this time, it's a sign that China's tech industry has narrowed the gap with the U.S. in the high-stakes AI arms race. So let's talk about this Chinese model. It's called GLM 5.2, and according to security researchers, it is as effective at identifying security bugs as Anthropics or OpenAI's top-of-the-line systems, but falls short when it comes to other tasks.

3:44Another key distinction is that it's open source, like many other Chinese models, which means it's much cheaper to use than American tech. The New York Times reports that GLM 5.2 costs about one-eighth as much as Anthropics clawed Opus 4.8. That means if you're a business leader trying to rein in runaway spending on AI, you're going to take a closer look. China's hitting the gas on AI comes as the U.S. government is pulling the emergency brake on its own AI champions. Last week, the Trump administration limited the rollout of OpenAI's new model, angering CEO Sam Altman, and has stymied the release of Anthropics' cyber-focused models Mythos and Fable.

4:20Toby, all of a sudden, this arms race is neck and neck with huge geopolitical implications. Yeah, cheaper is definitely the big selling point here because costing roughly an eighth as much, like that is a massive amount of money that you're saving right there. One quote from a VC put it well. He said, do you need to drive a Ferrari everywhere? Probably not. The Ferrari being something like Claude Opus or Claude Mythos, whatever top model that you are using. The fact that it is open source, companies can modify it. They can run it themselves. They don't have to pay API fees. Those are all massive selling points here, especially because it does feel like there's more restrictions on U.S.

4:59Anthropic models than there are Chinese models. One startup founder literally said that. He said, right now, there are more restrictions on models from Anthropic, which is just a crazy thing to say. So you factor in the availability of these Chinese models, the fact that they're open source, and the fact that they're cheaper, of course, they're going to start making inroads on the big boys here in the U.S. Is there a possibility that your company is going to have you use a Chinese AI model? I mean, it's not crazy out of the question because a number of the big cloud computing providers like Microsoft are now considering whether to include Chinese models on their platforms.

5:32And Microsoft has also already started offering access to a bunch of these systems, DeepSeq, ZAI, Minimax, and a bunch of other Chinese startups. So this is a huge question about, I mean, we've talked on the show in recent weeks about how companies are trying to rein in their spending on AI because they had this token maxing phase. And then they looked at their budget and said, well, actually, we can't afford all this because Anthropic is very expensive. Open AI is very expensive. Well, China is developing these super cheap AI models. Not sure about whether we can do this geopolitically, but it's something that, you know, your CTO might start thinking about.

6:09How are they doing this? That's the big question. How is China making these top tier models at a fraction of the cost? One thing that maybe U.S. companies would say is that they are doing something called distillation, where you basically ask a frontier model a lot of questions about how it works, and then you use those answers to copy the technology. So Anthropic recently accused Alibaba of doing this, creating 24 ,000 fraudulent accounts to try to distill their top models. But it goes a little bit deeper than just copying. China's open source strategy is a big portion of it. Chinese companies have been subsidized by government development, and they've embraced this open source philosophy where they are trying to kind of race to the bottom, release very powerful models at extremely low prices.

6:56It's almost like what's happened in manufacturing over the last couple of decades where they are trying. It's a race to the bottom. But if the bet is that you put out these open source models, this next technological revolution is going to be built on Chinese technology. That's the bet that they're trying to make right now. We'll see if over time the Chinese government can continue to subsidize these models. But obviously you'd be shaking in your boots right now if your model is so much more expensive than an equally powerful one coming out of China. So the U.S. government is looking at this and at the same time slowing the role of OpenAI and Anthropic.

7:30This happened on Friday. So OpenAI announced three new models, but said that the U.S. government asked it not to release it publicly and only to, quote, a small group of trusted partners. Sam Altman, the CEO, was not happy with this, as well as a bunch of other critics and how the government is really putting its thumb on the scale of these releases of the models. He said, I just don't like the idea of the government picking the customers. Confident we will get to a better place. Adam Kovacevic, who's the CEO of this tech lobbying group, wrote American AI innovation running into Trump's patronage and tribute admin is no bueno.

8:04This comes after two weeks ago when the federal government also told Anthropic to not let any foreign nationals use Fable and Mythos, its top cybersecurity related models. So you're seeing the U.S. government take a much more aggressive interventionist role in the rollout of American models. Meanwhile, China is catching up. Let's move on. The Swift Observatory is a telescope that has been up in space since 2004, but its middle age is catching up to it and it's falling out of orbit. Swift was only designed to last two years anyway, so 20 years beyond its mission timeline, it's all right to just let it fall and burn up.

8:41No big deal. But tomorrow, NASA is spending$30 million to save it in a never-before-attempted mission. The idea is simple. Launch another spacecraft, have it chase down Swift, and boost it higher. But the execution is anything but. NASA contracted a startup called Catalyst Space just nine months ago to build and launch a rescue spacecraft called Link that will use its ion engines and three robotic arms to rendezvous with Swift and slowly drag it higher. Again, this is an old satellite. Why go through all the trouble? Well, Swift is really good at its job of spotting and quickly documenting gamma ray bursts, the biggest explosions in the universe.

9:22Emphasis on the quickly. Swift can turn and observe a big explosion in minutes, whereas the Hubble Space Telescope, for example, takes two days to repoint. Neil Swift is sort of like messy in this World Cup. NASA thinks it's got a few more good years left, so it's going all out to save it. Yeah, they're calling it the ultimate battle against time and gravity. So nine months ago, NASA goes to Catalyst, which is an unproven Arizona-based startup, and says, I have two tasks for you. This needs to happen by this summer and B, don't make things worse. And here's why it's so urgent. Right now, Swift is at an altitude of 224 miles above the Earth's surface.

10:03Once it hits 185 miles, which is expected to by about October, it will fall and burn up in the atmosphere. So what Swift is going to do is send this little robot, it's about the size of a small fridge, up to Swift. It's called Link. They're going to send it up to Swift and hopefully grab onto it and then push it back up to about 373 miles in low Earth orbit. So that is the goal. You have two tasks. Get it done by June or July. And also, don't make things worse. But I'm not sure they could get any worse. The worst possible case scenario here is that it just burns up in the atmosphere and we lose Swift forever.

10:38I mean, yeah, the best possible scenario is NASA does prove that servicing a satellite could become a way to extend expensive missions. I mean, Swift cost$250 million back in 2004 to put up into orbit. The fact that we could, you know, get a couple more years of service out of it is a good thing. And you're right. Yeah. The worst case scenario is what it was going to happen anyways. Swift is up there. It's a lame duck. It doesn't have any propulsion system itself. And kind of the reason why it is falling out of space is that solar storms have expanded Earth's upper atmosphere because when a solar storm hits the atmosphere, it heats up, which means it expands.

11:15And that has caused more atmospheric drag. So that's why Swift is losing altitude a little bit quicker than expected. Also, we just got to give the flowers to this satellite because it's done a lot of great stuff. Not only the fact that it is very mobile and can turn and see these explosions very quickly. It also has confirmed many of the universe's heaviest elements, gold, platinum. They are created during those violent cosmic events that it is observing. So I guess we know where gold comes from. And then two, it discovered the boat, which is the brightest of all time gamma ray burst in 2022.

11:51That's the most energetic explosion ever observed. So this is my goat because it observed the boat. It's a very cool satellite. But the one problem is that it wasn't intended to be serviced in space. There's no docking ports. There's no grappling fixtures. There's no handles for this robot to latch onto. And that's what makes it so, so hard. A bunch of other satellites like James Webb Telescope. They launched that with the understanding that they would probably have to do some work on it. But back in 2004, when they launched Swift, they were like, well, we'll just let it go and then it'll burn up.

12:22But now they're like, I actually want to fix it. But we didn't actually include a way to fix it. But the big deal for this is Catalyst, which is the startup, thinks this could be a huge industry where if Elon's setting data centers to space and we're building other big infrastructure pieces in space, well, they could be the maintenance guys. They could be the waste management. They could be the, you know, the folks that do all of the repairs and the maintenance. And probably the nearest situation that they'll have to deal with is Hubble in 2028, which they're expecting to have to fix or service or push up back to orbit in a couple of years.

12:53They're definitely putting Hubble in all their decks because everyone loves Hubble. Like, it's just the most loved space satellite. The fact that we even know its name, everyone knows its name, shows that. So I would imagine that they have an eyes towards 2028 because that is something that is beloved. And that is something that a lot of people are going to want saved as well. Let's move on. It's winners of the weekend time, the segment where Neil and I picked two stories that had a better weekend than someone who did all their laundry and meal prepped. I won the pre-show game of the radio game.

13:23So I'm up first. And my winner of the weekend is African teams at the World Cup because they have performed extremely well so far. Four years ago, Morocco changed the conversation around African soccer. They became the first African nation to reach a World Cup semifinal, going toe-to-toe with traditional powers along the way. Come this World Cup, it looks like Morocco wasn't a one-off. Africa brought a record 10 representatives to the expanded 48-team tournament, and nine of them advanced to the knockout rounds. Those nine that advanced gave us some vintage performances along the way. Cape Verde held a mighty Spain to a draw.

13:59Ghana took points off of England. Egypt, Ivory Coast, Algeria, and DR Congo all broke through to the round of 32, and Morocco once again looked every bit a contender after tying Brazil on the group stage. In years past, it was always that one-off surprise team that made a run, but Africa has invested in facilities, has better academies, great youth development, and has done well recruiting diaspora players. Neil, South Africa became the first of those nine teams to be eliminated yesterday at the hands of Canada, but it doesn't seem so far-fetched anymore to imagine an African nation winning the world cup in the future?

14:32My favorite story is probably Congo, the DRC. So Congo have not played in a world cup since 1974, which was their first and only time. And they weren't even known as Congo. Then they were, they were a country called Zaire and they lost their three matches by a combined score of 14 to zero. But now they're back. They tied Portugal in that first game and they beat Uzbekistan. So now they're going on. This is a huge country, 116 million people to the 15 most populous country in the entire world. So if you could marshal these people who live there and the people who've moved abroad to play for your team, that's a ton of talent possibly.

15:08So I'm really excited by them. And they also have probably the best fan at the entire World Cup. I don't know if you've seen him, but his name is Michael Kuka Mbola Dinga. And he stands in the stands while the game is going on for the entire 90 minutes and he remains perfectly still and his right arm is raised standing like just completely like a statue and that is a tribute to uh congo's first prime minister after they gained independence from belgium who was assassinated just a few months into office named lumumba so his nickname is lumumba vea or lumumba lives he was denied a visa to attend the last match so we'll see somebody took his place actually of doing the statue thing but we'll see if he gets to go to their match against England on Wednesday?

15:51I mean, you hit the nail on the head that talent has never necessarily been the biggest issue. Africa has players. They've always had fantastic players. The issue has been just investment in, you know, facilities, in infrastructure, in training parks because a lot of African players end up leaving for Europe early on because the development opportunities over there are better than the ones at home. It's actually very similar to what happens in America right now. But now you've been seeing investment by a lot of different countries. Morocco is definitely the blueprint. They have one of the world's top training facilities that they've recently built.

16:30Ivory Coast has recently built 24 different fields in the lead up to this World Cup. So when you see people invest in the infrastructure portion, then the talent can show their stuff basically on a world stage. So I think that this is not the last we'll hear of Africans becoming much more of a dominant force on the global soccer stage. It's just remarkable. Nine out of 10 to qualify for the knockout stages. The previous record was two, and that's the highest share of any continent. The other region of the world I want to shout out as maybe a sub winner of the weekend is Yugoslavia. So Marco Jukic on Twitter pointed this out, that despite making up just 0.2 % of the global population, players with ethnic heritage of the former Yugoslavia represent 7.5 % of players at the World Cup round of 32.

17:22And that includes Kristen Pulisic of the United States, whose father is from Croatia. The former Yugoslavia. Former Yugoslavia. It doesn't exist. Now there's a bunch of Balkan countries around there, but they are overly represented, just like African teams at the World Cup. All right, we're going to take a quick break and come back with Neil's winner of the weekend right after this. It's freezing in here. What gives? I'm trying to preserve my freshness, Neil, like how iHerb stores and handles their supplements and sports products in GMP, ISO, and NSF certified climate controlled fulfillment centers designed to protect potency and product integrity.

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19:56My winner is the good old bus, which is enjoying a mini renaissance following the implosion of Spirit Airlines. The ultra budget Spirit was known as the Greyhound of the sky, so it shouldn't be a surprise that people are flocking to the Greyhounds of the ground in the aftermath of Spirit's liquidation. According to the Wall Street Journal, within the first week of Spirit's demise, Flix North America, the parent company of Greyhound and Flixbus, reported a 30 % surge in passengers over the prior year across its routes that overlap with Spirit's schedule, while search interest rose 20%. Traveling between cities by bus has been ticking up since COVID gutted the bus industry, forcing half of inner-city operators and charters to shut down.

20:35In 2025, passengers rode 43.9 billion miles on motor coaches, which is up roughly 9 % from a year earlier. That's more than twice the level from 2020, but still about 37 % lower than 2015 levels. Buses still have a long way to go to become an attractive option for travelers who can afford trains or planes. Stations are often outdated. The coaches themselves are uncomfortable. And customer service feels like it's managed by Stan Shunpike. But they do offer value. They get you from point A to point B on the cheap. And at a time when inflation is pinching bank accounts, gas prices are elevated and affordable airline alternatives are evaporating.

21:13People are taking a second look at the bus. High gas prices actually help buses, not hurt them. While the airline industry is suffering under these extremely high jet fuel prices, buses are like, actually, our prices haven't really budged whatsoever. So the very things that drove Spirit under are also the very same forces that allowed buses to succeed. The thing that is holding buses back is still just the general image around it. I mean, if you look at the Yelp rating and the TripAdvisor rating of Greyhound currently, 1.3 stars on Yelp, 1.3 stars on TripAdvisor. So clearly there's some issues with customer service, with, you know, broken bathrooms on the delays, buses breaking down, dirty stations.

21:58So that's probably the next wave of change that needs to happen in the bus industry for it to truly, you know, take the mantle of the budget airline industry, which has had its fair share of struggles. And Greyhound is making some investments through their German owner, Flick. So they are trying to cut the average age of their vehicles in half. They ordered 185 new buses last year. They have 80 more on order. They also are trying this new design trend. So this is the hot new thing in coach design. If you're curious, it's called two and one. And so it's two seats on one side of the bus and then one seat on the other.

22:32And that is trying to alleviate maybe some of the anxiety or uncomfortability with if you're a single or solo traveler, you don't have to sit next to someone. So someone like myself who might travel just to go down to Philly or Massachusetts on a bus, having that ability to have like one seat and then the window and then there's nobody there. I mean, that makes it a little more attractive. And the other thing they need to do is upgrade the stations. Now, if you look, if you tell someone in New York City about Port Authority, they'll probably roll your eyes and say that's the worst station, like even worse than Penn Station.

23:02But it looks like a bunch of cities are upgrading their Greyhound bus terminal. Chicago just voted actually last week to buy and renovate the former Greyhound bus terminal for$19 million. Atlanta, Boston, Detroit, Los Angeles, some other cities that are renovating their bus stations. I feel like you'd be the type of guy who would want to sit next to a stranger on a bus ride. Would you not? You want to do your own thing over there? I don't talk to people on planes or buses. I just like to read or just plug in my headphones. I don't know. Especially if you start a conversation early in the trip.

23:32Then you're done. You don't know. You can start a conversation with 10 minutes left because there is an out. But it gets a little too awkward for me. if it's like a four-hour bus ride and you start talking you're like okay what do we do now here's the bus ride that you would not want to sit next to somebody else on uh greyhound offers a boston to seattle trip that takes 104 hours 104 hours that's when you wish spirit airlines still existed because no matter how cheap that might be i don't think that is cruel and unusual punishment that's a great fantasy football punishment by the way send the loser of your league on 104 hour cross country greyhound bus trip.

24:07But here's the thing. They went on price. So from Nashville to Atlanta, round trip on a bus, it's just four hours, costs$75 to just go to Nashville to Atlanta and back. And I looked on Southwest Airlines website this morning for that same for that same flight. And the cheapest I could find this is like if you leave at Tuesday at the worst time and come back on Wednesday at the worst time. I mean, it's about double that round trip. So buses are going to lean into their value proposition. If they can make it a little more comfortable and gloss up their actual vehicles and their stations, I think they are in a prime position to win in this inflationary atmosphere.