The Age of AI Diplomacy

0:00Today on the AI Daily Brief, AI diplomacy is officially US policy and Google makes a big AI related change to search. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. Thanks to today's sponsors, KPMG, Blitzy.com, and Super Intelligent. And to get an ad-free version of the show, go to patreon.com slash AI Daily Brief. Welcome back to the AI Daily Brief Headlines Edition, all the daily AI news you need in around five minutes. We kick off today with the news from Google where the company is starting to test AI mode as a core part of their search experience.

0:35Users are reporting a few different UX variants on the Google homepage. Some are seeing a little AI mode at the end of the search bar, while others are seeing it replace the I'm feeling lucky button below the bar. So why would we be covering a UX update? Because frankly, for Google, whose incredibly clean homepage design is iconic, and which has gone through very few changes in the past two decades, this shows just how central to their future plans AI really is. Google started testing their AI mode in March on their Google Labs platform, and it functions in a similar way to Perplexity or ChatGPT Search, basically being a much more interactive design than AI overviews that were introduced last year.

1:14Maybe more important, though, is what this suggests about how Google sees the competition for AI search. Google's stock plunged last week after Apple executive Eddie Q said that AI search engines would eventually replace Google. He also suggested that he's starting to see people switch over in the data. Was the market's reaction to all of that a wake-up call for Google, demonstrating that they need to put their AI features right in front of users and show the market that they're not going to sit passively by while search is disrupted? Maybe. This also could have been just part of a long-standing plan where the timing is just coincidence.

1:46There's also something symbolic about Google deciding whether to kill the I'm feeling lucky button, which presents the user with a random website. Now, in many ways, I'm feeling lucky is an artifact of a different time. It's a nostalgic feature, hearkening back to the early 2000s, when there are only a few million websites on the internet, and someone might plausibly want to just surf around to find something new and interesting. Still, I'm Feeling Lucky has held its spot on the Google front page since the beta release all the way back in 1998. And while ultimately it may not matter all that much practically, again, there is something symbolic about the idea of replacing this thing which allowed humans to explore the uncharted bounds of the early internet with AI mode, putting AI in control of information discovery.

2:27it actually says kind of a lot about the change from human-centric to AI-mediated UX. Pablo Esparza writes, Are we ready for a future where AI is the go-to, leaving spontaneity behind? Now, Google also launched a new fund to invest in AI startups. The AI Futures Fund will back startups ranging from seed to late stage that are interested in building on top of Google's technology. Founders will be offered varying degrees of additional support, including early access to AI models, cloud credits, and the ability to work alongside researchers from DeepMind and Google Labs. A Google spokesperson said, The fund has apparently already backed players like Replit, Vigel, and Synthesia.

3:21Another big social platform, TikTok, is launching a new AI feature. This time it is an image-to-video feature that allows users to animate their photos to make short-form content on the platform. The company writes, The feature uses intelligent editing tools that give anyone, regardless of editing experience, the ability to transform static images into captivating short-form videos enhanced with movement, atmospheric, and creative effects. The Verge reports that video outputs are a few seconds long, and processing takes several minutes, so we're still in the era where technical limitations could prevent AI video from proliferating widely.

3:53Still, it's definitely clear that social media is pushing hard into AI-generated content. We've seen Instagram dabble with similar features over the past year, but nothing really has landed as the first native viral AI content, with the possible exception of GPT-40 flooding X with Ghibli memes earlier this year. Lastly today, some interesting reporting about Project Stargate. According to Bloomberg, the ambitious project is struggling to get off the ground thanks to funding issues related at least in part to tariffs and associated market volatility. Bloomberg sources say that that volatility has caused potential lenders to be much less eager to back the data center build-out.

4:27Now, when Stargate was first unveiled in January, SoftBank committed to deploy$100 billion immediately and raise around$500 billion over time. More than three months later, SoftBank appears to not yet have begun detailed talks with lenders. They opened preliminary talks with dozens of banks and alternative asset managers earlier this year. However, Bloomberg sources say that lenders have become squeamish at the idea of funding expensive data centers in the midst of both rising economic volatility and cost reductions in AI services. Bloomberg writes, Complicating matters is the emergence of a flurry of cheaper AI models, such as Chinese startup deep-seeks, and questions over how they might affect long-term profitability of projects linked to open AI.

5:03Tariffs are also set to weigh on the project even if funding is secured. Cost increases for hardware, including server racks, cooling systems, and chips, have caused data center build costs to rise between 5 % and 15%, according to TD Cowan analysts. Now, obviously, we are in the midst of a big return rally, so maybe this will change. And we also have some, like Futurum Group CEO Daniel Newman, who said that at the Milken conference last week, he heard 100 % the opposite, so who knows? Ultimately, the point which we are going to extend into the main episode today is that macro and geopolitics and AI are getting wound together in interesting ways.

5:37And in fact, that is the perfect segue. So there we will close today's headlines. Next up, the main episode. Today's episode is brought to you by KPMG. In today's fiercely competitive market, unlocking AI's potential could help give you a competitive edge, foster growth, and drive new value. But here's the key. You don't need an AI strategy. You need to embed AI into your overall business strategy to truly power it up. KPMG can show you how to integrate AI and AI agents into your business strategy in a way that truly works and is built on trusted AI principles and platforms. Check out real stories from KPMG to hear how AI is driving success with its clients at www.kpmg.us.ai.

6:19Again, that's www.kpmg.us.ai. Today's episode is brought to you by Blitzy, the enterprise autonomous software development platform with infinite code context. Which, if you don't know exactly what that means yet, do not worry, we're going to explain, and it's awesome. So Blitzy is used alongside your favorite coding co-pilot as your batch software development platform for the enterprise, and it's meant for those who are seeking dramatic development acceleration on large-scale codebases. Traditional co-pilots help developers with line-by-line completions and snippets, but Blitzy works ahead of the IDE, first documenting your entire codebase, then deploying more than 3 ,000 coordinated AI agents working in parallel to batch-build millions of lines of high-quality code for large-scale software projects.

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8:55Welcome back to the AI Daily Brief. We are in the thick of some very consequential geopolitical moves when it comes to AI. In fact, I think it's fair to say that AI is at the very center of U.S. diplomacy right now, with an absolute flurry of AI deals happening in Saudi Arabia this week that could reshape not only AI development in the Middle East, but AI proliferation around the world in general. Now, it's worth getting a little bit of backstory. For those of you who are regular listeners, you will remember some of this over the past couple of years of the show. It has been clear for some time that in the geopolitical competition with China around AI, maybe the most consequential region outside of either the US or China was the Gulf States and the Middle East.

9:38Both geographically, they are right in the center. But more than that, from a business perspective, these companies have been right in the center and trying, frankly, to play both sides as well. You might remember that about a year ago, Microsoft announced a big investment in the UAE-based AI firm G42. This actually led to a congressional inquiry, with the Select Committee on China writing a statement that said, on the one hand, this deal could be very positive for America. It benefits our private sector and promotes closer ties with an important nation in the Middle East. But there is also a risk Microsoft's partnership could open up a backdoor for advanced US technology to flow to the People's Republic of China.

10:12The Select Committee's statement then goes on to connect the dots back to research where they had found that G42 had extensive ties to a number of PRC firms, all of which had already led to concessions in the deal. Most notably, part of the arrangement was that G42 had to decide once and for all whether they were going to lean towards the US or lean towards China, and before the Microsoft deal had even come together, they had made a secret pact to basically completely divest from China. Anyways, this was just one example, but reflective of the type of conversations that we were having about the Middle East when it came to AI.

10:44Now, meanwhile, Saudi Arabia and the Gulf states in general are in the midst of a multi-decade transition where they are trying to be less economically reliant on oil alone. Technology has for some time been the big bet, and AI has become the center of that ambition. And that brings us up to this week, where Saudi Arabia is hosting a group of AI leaders for a US-Saudi investor summit. And it is an absolute murderer's row. Elon Musk is there, Blackstone CEO Stephen Schwartzman, BlackRock CEO Larry Fink, The CEOs of IBM, Citicorp, Boeing, Google, Amazon, Sam Altman from OpenAI, Jensen Huang from NVIDIA, Ray Dalio, Travis Kalanick.

11:23The list goes on and on. Now, additionally, President Trump was present as part of a multi-country Middle Eastern trip. His keynote speech wasn't particularly AI-related, but I do think it gives a lot of useful context for the rest of the announcements. He said, It's crucial for the wider world to know this great transformation has not come from Western interventionists, or flying people in beautiful planes giving you lectures on how to live and how to govern your own affairs. No, the gleaming marvels of Riyadh and Abu Dhabi were not created by the so-called nation-builders, neocons, or liberal non-profits like those who spent trillions and trillions of dollars failing to develop Baghdad and so many other cities.

11:57Instead, the birth of a modern Middle East has been brought by the people of the region themselves, the people that are right here, the people that have lived here all their lives, developing your own sovereign countries, pursuing your own unique visions, and charting your own destinies in your own way. You achieved a modern miracle the Arabian way. Now, if you're paying attention to American politics at all, you'll know that there is a heck of a lot going on between the Trump administration and this region that has nothing to do with AI, and I am very obviously and clearly not getting into that here.

12:24But that is the text and the tenor of Trump's speech. And indeed, the deals that were announced this week seem to chart a course for Saudi Arabia to develop localized AI on their own terms rather than under the close oversight of the U.S. government. This is a sharp pivot from the doctrine under the Biden administration, where it seemed like AI could be headed towards being treated as a restricted technology in the same manner as nuclear energy. So with that framing in mind, let's talk about the rest of these announcements. Yesterday, the Commerce Department officially announced they would rescind the Biden-era AI diffusion rule.

12:53This enhanced form of export controls would have split the world into three tiers, with the first tier of close allies being the only ones with unrestricted access to advanced AI chips. The biggest controversy in this rule came around the second-tier countries, who had very strict permitting required to export commercial quantities of chips, as well as a hard cap on annual supply that was frankly very low. Importantly, this group of nation included India, Israel, as well as Saudi Arabia. And while I covered that debate in detail in recent episodes, the argument was basically about the risk of chips being smuggled into China against the need to spread US-made AI as widely as possible.

13:27I pointed out that even the term diffusion rule was confusing about which of those it was trying to prioritize. In a statement, the Commerce Department said,

13:41The announcement flagged a replacement for the diffusion rule to be introduced in the future, but had no details to give at this stage. The other big part of the announcement was stronger guidance on the use of Chinese AI chips. The department said that using Huawei Ascend chips anywhere in the world violates U.S. export controls, and there was also new guidance on the use of U.S. chips in the training of Chinese AI models. The Undersecretary of Commerce for Industry and Security said, The Trump administration will pursue a bold, inclusive strategy to American AI technology with trusted foreign countries around the world, while keeping the technology out of the hands of our adversaries.

14:14And honestly, this is the clearest call yet. Essentially, it seems directionally like the administration is trying to set up a new paradigm, where most countries have easy access to US AI tech as long as they don't touch Chinese AI. Effectively, a very explicit call for nations to pick a side. Now, pretty clearly, Saudi Arabia has picked a side. Over a trillion dollars in commercial deals were announced yesterday, with the bulk being a pledge from Crown Prince Mohammed bin Salman to invest$600 billion into the U.S. over the next four years, alongside a$142 billion defense and security deal. So what are the several hundred other billion dollars?

14:49Well, those are the AI deals. Essentially, Saudi Arabia has announced deals that amount to a full-stack AI build-out through their newly announced state-owned AI firm called Humane. NVIDIA will supply the kingdom with several hundred thousand AI chips over the next five years. The build-out of new data centers began with an order for 18 ,000 Blackwell GB300 units. AMD will also supply chips, with a$10 billion price tag attached to a joint data center project that, quote, stretches from the Kingdom of Saudi Arabia to the United States. Amazon has committed to spending$5 billion to build an AI zone in the kingdom, which adds to a previous$5.3 billion commitment to construct a cluster of data centers in the country, with that deal expanding to delivery of cloud services and the development of an AI agent marketplace.

15:30Everyone out there wanted to get into the agent marketplace game. Cisco is also in the mix, partnering on networking infrastructure for what's shaping up to be an ambitious AI buildout. And Google is providing capital with the tech giant investing in a$100 million AI fund from Saudi venture firm STV. A statement said the fund would be focused on early stage startups in the Middle East and North Africa, with a focus on infrastructure and the application layer. What's more, there seemed to be another big set of deals to be announced when Trump travels to the UAE later this week. Bloomberg sources state the administration is considering allowing the UAE to import 500 ,000 chips annually until 2027.

16:04This would be roughly four times as many as would have been allowed under the diffusion rule, crucially unlocking the ability to build megaclusters for training. The sources said one-fifth of these chips would be allocated to G42, with the rest going to U.S. companies building data centers in the nation. The other big rumor is that OpenAI is set to announce a data center to be built in the UAE as part of the Stargate project. Now, of course, OpenAI recently announced that they want to partner with national governments to develop AI infrastructure outside of the US, and that announcement came with heavy overtones that the plan was to ensure that USAI outcompeted Chinese AI for global development.

16:36The company wrote, partnering closely with the US government is the best way to advance democratic AI. Now, speaking of G42, OpenAI has a longstanding relationship with that company, so there's the potential for this to be a joint project rather than OpenAI owning the infrastructure layer in the UAE. Opinions on all this are, of course, going to be mixed. As I mentioned before, there are other political issues going on beyond just these AI deals. But then at the same time, you have a lot of vocal support for the deals as well. Kevin O 'Leary, for example, discussing China, said Trump's cutting them off at the pass in the fastest growing region on Earth, the Middle East.

17:10Vittorio on Twitter writes, Trump, Elon, Samay, Jensen, and Saudi royalty. This might be one of the most important events of the decade. Trump signs peace accords and sets up the largest bilateral deal in history. Elon brings autonomy, solar grids, and orbital access. Sam A brings AGI and Stargate infrastructure. Jensen brings silicon and compute. Saudis bring capital, land, and energy. This is how post-scarcity begins. Compute for carbon swaps and desert solar powering AGI. Fabs instead of oil rigs and starship landing pads on Arabian sand. Petaflop replaces petrodollar and sun replaces oil. This is the birth of a post-Western, post-scarcity, post-democratic world order.

17:46Now, obviously, that is an extremely optimistic, if very appealing view of how this could all play out. But what is absolutely clear is that AI diplomacy is now a key part of US policy. It is no longer just something being discussed in the halls of Washington. It is now being enacted around the world, and it could have some very big implications for how AI plays out from here. For now, though, that is going to do it for today's AI Daily Brief. Appreciate you listening or watching, as always. And until next time, peace. Thank you.