Good morning, and happy Friday. Rough day in the markets yesterday, with some major indices (and big corporations, led by Apple) having their worst day in five years.

We’ll see what happens next.

— Ian Krietzberg, Editor-in-Chief, The Deep View

In today’s newsletter:

• 🤖 AI for Good: Flexible robots

• 🔏 Study: Surviving the AI integration is the key challenge for businesses

• 📊 What Trump’s tariffs mean for AI

AI for Good: Flexible robots

Researchers at MIT, collaborating with researchers at the University of Notre Dame, have developed a soft, flexible robot intended to aid first responders in the ‘search’ part of search and rescue operations. It’s called Sprout (Soft Pathfinding Robotic Observation Unit). 

The details: The robot was specifically designed to enable teams to quickly and easily understand the layout of a collapsed structure, without having to drill holes through cement. 

• The robot consists of an inflatable, snake-like tube. Filled with air, it expands from a base, where it can be directed up, around, over and through tight gaps in the rubble. 

• Sensors and cameras around the tip enable the robot to map its surroundings, information first responders can then use to determine where people might be trapped within the structure. 

Though currently teleoperated with a video game controller, the team plans to incorporate other robotic technologies to the system, complete with mapping algorithms, in order to “provide a complete operating picture to teams before anyone enters a rubble pile.”

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Study: Surviving the AI integration is the key challenge for businesses

A recent study that explored the integration of AI among manufacturing companies found that in the long term, automation leads to stronger, healthier businesses. But that’s only for the companies who are physically able to survive the dramatic short-term upheaval caused by the very same integration. 

The details: The researchers, analyzing U.S. Census Bureau data between 2017 and 2021, identified “causal evidence of a productivity J-curve, where short-term productivity losses precede longer-term gains.”

• Since the integration of automation interferes with existing practices, it causes a lot of upheaval, leading to “significant increases in work-in-progress inventory, investment in industrial robots and labor shedding, as well as declines in productivity and profitability.” Older businesses, they found, are hit the hardest.

• But, over time, those early adopters experienced much stronger growth, “conditional on survival.” 

“In the short term, we see a lot of pain,” Kristina McElheran, one of the authors of the paper, said at a recent European Central Bank conference. 

“Surviving this seems like part of the problem,” she added, saying that older, larger companies tend not to experience that longer-term rebound. 

Why it matters: The findings go against a prevailing idea that integrating generative AI technologies will immediately boost and augment enterprise productivity, underscoring the rollercoaster of cautious enterprise adoption we’ve been tracking since 2023. Corporate spending on AI projects has increased, but the bulk of AI projects never get out of the pilot phase; in the context of this research, to implement AI projects would require a de-adoption of existing business strategies and approaches, far from an easy task. 

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• Runway’s new funding: Runway, the AI startup perhaps best-known for its video-generating models, has raised $300 million in Series D funding. Investors included Nvidia, Fidelity and SoftBank.

• We’re supposed to be going down, not up: When OpenAI first tested its o3 model on ARC’s AGI benchmark, ARC estimated the cost of o3 low to be $20 per task. But this week, ARC updated those numbers, saying that o3 low costs $200 per task, a 10x increase. Toby Ord, a senior researcher at Oxford University, said that this 10x increase likely exists across the board: “presumably, o3 high has gone from $3,000 to $30,000 per task, which is why it breaks their $10,000 per task limit and is no longer included.”

• The real story behind Sam Altman’s firing from OpenAI (WSJ).

• US plans to develop AI projects on Energy Department lands (Reuters).

• OpenAI and Anthropic are fighting over college students with free AI (The Verge).

• Devin 2.0 is here: Cognition slashes price of AI software engineer to $20 per month from $500 (Venture Beat).

• The Federal Reserve is not likely to rescue markets and economy from tariff turmoil anytime soon (CNBC).

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What Trump’s tariffs mean for AI 

On Wednesday night, President Donald Trump unveiled a sweeping list of global levies, a massive restructuring of global trade that is centered around the introduction of a 10% baseline tariff against all U.S. imports, which impacts most countries in the world. Some countries have been singled out specifically, including China (with a 34% tariff), Vietnam (46%) and Taiwan (32%). 

China’s new duty will be in addition to existing tariffs against the country, which will raise its effective tariff rate to 54%. 

The tech sector, encompassing everything from smartphones to AI, sits in the middle of a vast global ecosystem that is heavily reliant on hardware supplies, particularly from those Asian countries that are facing the steepest levies. 

Technology is about to get much more expensive.

Noted tech bull Dan Ives said in a note Thursday morning that “it would be a self-inflicted Economic Armageddon” if the tariffs remain in place at these levels. “We have to assume this is the start of a negotiation and these rates will not hold … stocks will sell-off massively but ultimately our view is these numbers would throw the U.S. into a clear recession and cause stagflation almost immediately.” 

The baseline tariffs will take effect on April 5, with the individual tariffs taking effect on April 9. 

Deepwater Management’s Gene Munster said that “the AI trade isn’t over — it’s just paused.” 

What it all means for AI: Let’s start with the AI trade that, as Munster noted, is now “paused.” Here, I’m referring to the AI-related, publicly-traded Big Tech names — largely the Magnificent Seven group of stocks — that so successfully pushed markets higher in 2023 and 2024, all on excitement over the potential of AI. 

• Well, that theme hasn’t quite played out this year, with investors finally responding to persistently high valuations and unclear returns on investment. Markets have been edging lower, led by pullbacks among Big Tech. Even in light of all that, stocks plumetted on Thursday, with the Dow dropping 1,600 points, the S&P 500 falling 5% and the tech-heavy Nasdaq falling 6% (the Nasdaq is now down roughly 14% for the year). 

• Big Tech was deep in the red, with Microsoft and Google avoiding the worst of it, falling between 2% and 4%, respectively. Apple led the sell-off, falling more than 9%, while Nvidia fell more than 7% and Amazon fell nearly 9%.  

Collectively, the seven stocks are looking at nearly $1 trillion in market cap losses. 

Why? The supply chain: All these names are reliant on foreign imports. The bits and pieces that make up Apple’s devices are assembled in a number of countries, including China. The chips that power these devices are fabricated by Taiwan Semiconductor Manufacturing Company, or TSMC, a leading chip fabricator that does most of its production in … Taiwan (32% tariff). 

• Indeed, TSMC is something that all the Magnificent Seven have in common; Nvidia’s chips — which fill the data centers of every Big Tech hyperscaler — are fabricated by TSMC. 

• Now, according to a White House fact sheet, semiconductors will be exempt from Trump’s reciprocal tariffs, but the details there remain unclear. According to the fact sheet, energy and “certain minerals” that are not available in the U.S. will additionally be exempt; again, the details are unclear. 

Added to this mix of bad news and not awful news is the fact that the semicodunctor tariffs, as CNBC noted, haven’t been quashed; they’ll simply be addressed at a later date. All the big semiconductor companies — TSMC, Broadcom, Micron — fell hard Thursday. 

“I do think that there could be some short-term impacts,” AMD CEO Lisa Su told Yahoo Finance Monday. “I think it's too early to say what the longer-term impacts are. I think we have to look at how things play out over the next number of months.”

AMD’s chips are also manufactured by TSMC. 

D.A. Davidson analyst Gil Luria told Reuters that “there's no doubt that the equipment that goes into data centers will become significantly more expensive,” something that could delay the ambitious infrastructure plans — such as Project Stargate — touted by Trump and being advanced by major infrastructure players. 

“Most American software and hardware will get expensive and open up emerging markets to develop self reliance supply chains,” AI expert Dr. Srinivas Mukkamala told me. 

Indeed, Bloomberg reported Thursday that Microsoft has pulled back on data center projects around the world. 

What it means for adoption: As a technology, generative AI is early in its lifecycle. Adoption is a key marker for growth, and adoption hasn’t been easy; corporate spending on AI projects has been on a somewhat steady rise, but the tech is far from becoming widespread (something the tech companies need if they want to recoup their investments into costly AI infrastructure). 

• The tariffs, however, could create “demand destruction, which means cutbacks on software and cloud spending,” Ben Barringer, a global technology analyst at Quilter Cheviot, told Reuters. 

• Ives said that the “sheer uncertainty” from the tariff announcement could “cause some IT budgets to freeze and C-level management to figure out their own supply chain and how to navigate this near-term Category 5 hurricane.” 

This all shortly follows a Goldman Sachs report that contends the current situation is not quite the same as the dot-com bubble that burst 25 years ago, since valuations aren’t as extreme and fundamentals are stronger. 

Still, it is a hype cycle where “the returns on capital invested by the innovators are typically overstated.”

No one really knows what’s going to happen next. 

If the tariffs stay in place, and if those tariffs lead to a recessionary environment, we might well see a reduction in demand, which will infect and slow down the pace of the infrastructure build-out, something that’s evidenced by Microsoft’s backpedaling on data centers. 

That could lead to an unravelling of the “AI trade,” something that could impact the advancement of the state-of-the-art, considering the expense necessary to build AI.

But we’re dealing with a lot of ifs. 

🤔 Your thought process:

Selected Image 2 (Left):

• “The face on the mountain goat in Image 1 was too clean.”

Selected Image 2 (Left):

• “The back horn of the fake goat is placed too far back on its skull.”

💭 A poll before you go

Thanks for reading today’s edition of The Deep View!

We’ll see you in the next one.

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A third of you don't think you’d do well in the Turing Test — you’re too easily fooled by generative AI. A third of you aren’t sure, while 27% are convinced you’d be great: you just have to ask questions to jailbreak the models.

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