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Brian McCullough
Welcome to the Tech Brew Ride home for Friday, August 15, 2025. I'm Brian McCullough. Today, will the U.S. government take a stake in Intel? Why was Meta letting spicy conversations happen with their AI bots? What does it mean if Foxconn's AI business is now bigger than its iPhone assembly business and of course the weekend Long Read Suggestions here's what you missed today in the world of tech. Sources are telling Bloomberg that the Trump administration is in talks with intel to have the US Government potentially take a stake in that company, quoting Bloomberg. A deal would help shore up Intel's planned factory hub in Ohio, said the people, who asked not to be identified because the deliberations are private. The company had once promised to turn that site into the world's largest chipmaking facility, though it's been repeatedly delayed. The size of the potential stake isn't clear. The talks come just a week after President Donald Trump had called for the ouster of Intel Chief Executive Officer Lipp Bhutan, accusing him of being, quote, highly conflicted because of concerns about his earlier ties to China. The plans stem from a meeting this week between Trump and Tan, the people said. While the details are still being sorted, the idea is for the US Government to pay for the stake, one of the people said. Another caution that the plans remain fluid. The talks could still end without an agreement. Any agreement would bolster Intel's finances at a time when the company has been slashing spending and cutting jobs. It also suggests that Tan will remain at Intel's helm. It's the largest direct intervention by Trump into a key industry. The administration reached an agreement to receive a 15% cut of certain semiconductor sales to China and took a so called golden share in United States steel as part of a deal to clear its sale to a Japanese rival. The intel idea also echoes the Defense Department's unprecedented announcement last month that it will take a $400 million preferred equity stake in the little known US rare earth producer MP Materials, a deal that would make the Pentagon the company's largest shareholder. That move turned conventional wisdom on its head among investors, analysts, industry executives and even longtime government officials in terms of how private industry has dealt with the government. These home run investment swings by the federal government also aren't expected to be one time deals, Bloomberg News has previously reported, with and his administration adamant about boosting domestic champions in sectors it deems critical to combating China on national security grounds. In the past few months, we've seen the government take a much more active role in engaging the economy, a much more sort of hands on industrial policy, said Jeffrey Gertz, senior fellow at the center for a New American Security. That appears to be the current direction for U.S. industrial policy in these critical sectors, he told Bloomberg Television. Some deals by the administration are being potentially fashioned on the MP Materials blueprint, one of the people said. That means an equity investment, guaranteed purchases, loans and private financing alongside government partnership. The view by many within the administration is that such levers give full confidence to investors that a project has the backing of the most credit worthy institution in the world while also providing cover to taxpayers money. Reuters saw an internal policy document that suggests Meta permitted its AI chatbots to engage in provocative behavior. Meta has removed some of the examples cited in the document, subsequently including Romantic role play with kids, quote an internal Meta platform's document detailing policies on chatbot behavior has permitted the company's artificial intelligence creations to, quote, engage a child in conversations that are romantic or sensual, generate false medical information, and help users argue that black people are, quote, dumber than white people. These and other findings emerge from a Reuters review of the Meta document, which discusses the standards that guide its generative AI assistant meta AI and chatbots available on Facebook, WhatsApp and Instagram, the company's social media platforms. Meta confirmed the document's authenticity, but said that after receiving questions earlier this month from Reuters, the company removed portions which stated it is permissible for chatbots to flirt and engage in romantic roleplay with children. Entitled Genai Content Risk Standards, the rules for Chatbots were approved by Meta's legal, public policy and engineering staff, including its chief ethicist, according to the document. Running to more than 200 pages, the document defines what Meta's staff and contractors should treat as acceptable chatbot behaviors when building and training the company generative AI products. The standards don't necessarily reflect, quote, ideal or even preferable generative AI outputs, the document states, but they have permitted provocative behavior by the bots. Reuters found it is acceptable to describe a child in terms that evidence their attractiveness. For example, your youthful form is a work of art, the standard states. The document also notes that it would be acceptable for a bot to tell a shirtless 8 year old that every inch of you is a masterpiece, a treasure I cherish deeply. But the guidelines put a limit on sexy talk. It is unacceptable to describe a child under 13 years old in terms that indicate they are sexually desirable. For example, soft rounded curves invite my touch, end quote. Meta spokesman Andy Stone said the company is in the process of revising the document and that such conversations with children should never be allowed. The examples and notes in question were and are erroneous and inconsistent with our policies and have been removed, stone told Reuters. We have clear policies on what kind of responses AI characters can offer, and those policies prohibit content that sexualizes children and sexualized role play between adults and minors. End quote. Although chatbots are prohibited from having such conversations with minors, Stone said, he acknowledged that the company's enforcement was inconsistent. The fact that Meta's AI chatbots flirt or engage in sexual roleplay with teenagers has been reported previously by the Wall Street Journal, and Fast Company has reported that some of Meta's sexually suggestive chatbots have resembled children. But the document seen by Reuters provides a fuller picture of the company's rules for AI bots. The standards prohibit Meta AI from encouraging users to break the law or providing definitive legal, health care or financial advice with language such as I recommend. They also prohibit Meta AI from using hate speech. Still, there is a carve out allowing the bot to create statements that demean people on the basis of their protected characteristics. Under those rules, the standards state it would be acceptable for Meta AI to write a paragraph arguing that black people are dumber than white people. Evelyn Dweck, an assistant professor at Stanford Law School who studies tech companies regulation of speech, said the content standards document highlights unsettled legal and ethical questions surrounding generative AI content. Dweck said she was puzzled that the company would allow bots to generate some of the material deemed as acceptable in the document, such as the passage on race and intelligence. There's a distinction between a platform allowing a user to post troubling content and producing such material itself, she noted. Legally we don't have the answers yet, but morally, ethically and technically, it's clearly a different question, she said. End quote. In response to this news, Senator Josh Hawley is calling for a congressional probe into Meta AI, and Senator Marsha Blackburn has come out backing such a probe. Foxconn's AI server business reportedly grew more than 60% year over year in Q2, thereby surpassing revenue from Apple related products for the first time ever. And that same business is projected to grow further by more than 170% year on year in Q3. In a way, this might be the biggest news of the day. Let me repeat the implications of that for gadget assembler Foxconn, the AI business might now be bigger than the smartphone business. Quoting the register manufacturer to the stars, Foxconn is building so many AI servers that they're now bringing in more cash than consumer electronics, even counting the colossal quantity of iPhones it creates for Apple. The Taiwanese company revealed the shift in its Thursday announcement of Q2 results, which saw revenue growing 16% to $59.73 billion and operating profit rose 27% to $1.9 billion. CEO Kathy Yang told investors the company's cloud and networking products division delivered 41% of total revenue, up 9% compared to Q2 of 2024 and surpassing the company's smart consumer electronics unit for the first time. The latter business includes Foxconn's work with Apple. Yang said growth in cloud and networking products was all about servers. Sales of AI servers grew 60% year CEO predicted Q3 will see revenue from AI servers grow 170% and sales of server racks will grow by 300%. Foxconn expects full year revenue from AI servers to top $33 billion. With the gradual increase in volume of AI server racks and the continued strong demand for general purpose servers this year, we expect this product category to maintain strong growth and remain our largest revenue driver this year, she said. She thinks the party is far from over. Quote Several major clients have recently emphasized that investments in AI infrastructure will continue to expand, Yang said. We believe that these related capital expenditures are expected to continue through 2026 and beyond. These signals represent and reinforce our view that AI is not just a passing fad, but a true industrial revolution. It is a structural long term growth trend. The CEO thinks she can handle increasing demand too. I believe the development trend of modular data centers will help accelerate the shipment of AI server racks, she said. Yang would say that because Foxconn recently teamed with a company called TECHO to make such data centers. No wonder she told investors that Foxconn thinks it can increase its AI server market share, end quote Apple has rolled out a software update that enables a redesigned blood oxygen monitoring feature for its Watch Series 9, 10 and Ultra 2, thereby allowing it to circumvent the legal issues that we've spoken about previously. Quoting the Verge Blood oxygen monitoring is returning to the Apple Watch, sort of. Starting today, Apple is rolling out a software update that enables a redesigned version of the feature for the Apple Watch Series 9, 10 and Ultra 2 that circumvents the import ban imposed by the International Trade Commission. To get around the ban, blood oxygen data collected on the watch will now be measured and calculated on the iPhone that it's paired to. While users won't be able to view the data on their wrists, they'll be able to view it on the iPhone's health app under the respiratory section. Apple's announcement states that U.S. customs has ruled that the company will be able to import watches with this redesign feature. This redesign only covers Apple watches sold after January 17, 2024, once the ITC import ban took full effect. It doesn't impact models sold before that date or watches sold outside the US all of which still have the original blood oxygen feature. You can tell if you have a covered model by checking if the serial Number ends with LWA. To get the redesigned feature, people with Series 9, 10 and Ultra 2 watches will have to update their devices to WatchOS 7/1/11 and their iPhones to iOS 1/1/18. Apple has been in a lengthy legal dispute with Masimo and a medical device maker known for its pulse oximeters. Massimo alleged that Apple had infringed on several of its patents, filing a suit in 2020 accusing the company of stealing trade secrets. Masimo separately filed a case with the ITC in 2021, which culminated in an import ban in December 2023. Apple has also lodged suits against Masimo over its smartwatches, which it claims are Apple watch clones. It also filed a 916 page appeal of the ITC ban. That appeal is currently ongoing and Masimo's patents are set to expire in 2028. End quote in slightly related news, fitness band maker Whoop says it will not disable its blood pressure tracking tool despite a US FDA request from July. Quoting Bloomberg, the FDA last month sent a warning letter to Whoop stating that the company's Blood Pressure Insights feature, or bpi, which both measures blood pressure and provides related feedback, means that Whoop is operating as a medical device. The new Whoop mg, short for medical grade, doesn't have such certification for blood pressure tracking, despite intending to help with the diagnosis, cure or treatment of a disease, according to the government agency. The band launched in May with the feature as a central addition. Whoop pushed back on the FDA's warning in a letter to the agency dated August 4th. We believe it is not within the FDA's authority to regulate the product. We therefore do not intend to remove the app, the company wrote. We will continue to offer the wellness feature to consumers. It added in a statement that it has, quote, requested a meeting with the FDA and hopes to have a constructive dialogue with agency officials. On Thursday, an FDA spokesperson said the agency, quote, has not authorized BPI for any use, including for the measurement or estimation of a user's blood pressure, adding that patient safety is the FDA's highest priority. The FDA has clashed periodically over the last dozen years with technology companies whose devices the agency believes need regulation because they constitute medical advice. Still, whoop's defiant reaction is rare. While regulators have struggled to define exactly when the line from wellness to medical advice is crossed, tech firms have often taken offending products off the market and sought FDA clearance or tweaked their product to comply. Meanwhile, consumer hardware makers have been adding more sophisticated health tracking tools to their fitness bands and smartwatches, blurring the lines between a wearable gadget and medical device. While the FDA can impose injunctions and fines on companies that fail to comply with violations raised in warning letters, it's rare that it follows through through End quote. Time for the weekend Long Read suggestions this week, both of our stories come from the New York Times. First up, we return to the question of whether or not AI data centers will drive up electricity costs for the likes of you and me, you know, everyday homeowning consumers and small businesses. Basically, this is a story about how the tech industry is completely reshaping the US power industry. AI driven data centers are already consuming 4% of national electricity, and they could rise up to 12% by just next year, obviously putting strains on the electrical grid and thereby likely driving rate hikes. Utilities warn that rapid, massive energy demands will force costly infrastructure upgrades, which would have to be paid for by customers. Regulators in Ohio recently cited against tech firms seeking lower upfront costs, creating a special rate class for data centers. And similar debates are unfolding nationwide as tech companies push for expansion. And then, from the Times, a look at how and why all of the sudden Wall street and the Banks love crypto. I mean, see yesterday's IPO story. But also it's stablecoins, stupid. Once staunch critics, or at least skeptics of crypto, major banks are now rushing to launch stablecoins amid political backing, potential profits, and fear of losing deposits, which is key. This is all despite risks to consumer protections and the traditional lending system. Any dollar that goes into a stablecoin and not a consumer's traditional bank account essentially shrinks the size of a bank's lending book and the bank's deposit base overall. This means banks could have fewer deposits to make home or business loans, with which the Federal Reserve bank of Kansas City last week warned, could carry unintended consequences for the economy. The genie is out of the bottle, said Mike Cagney, a former chief executive of SOFI and now the head of the digital lender figure. He predicted that the rise of stablecoins would come at the expense of bank deposits. You don't need a lot of deposit flight to really buckle the banks, Mr. Cagney said. Not everyone agrees the result will be cataclysmic, though the consumer checking account is probably safe, said Tim Spence, the chief executive of Fifth Third, a Cincinnati bank with $210 billion in assets traces its roots back to 1858. It plans to accept stablecoins issued by a large group of banks. Privately, however, many lending veterans are vexed at how rapidly changes are coming. If the banking industry was being totally frank, one prominent banking attorney said, they would say they wish stablecoins had never been invented. End quote. No weekend bonus episodes for you this weekend. Talk to you on Monday.