Brian McCullough (0:04)

Welcome to the Tech Brew Ride home for Tuesday, August 12, 2025. I'm Brian McCullough. Today Elon says he might take legal action against Apple, but it's probably his beef with Sam Altman rearing its head once again. A long piece looking at how Jensen Huang won in China, although also has he won with China yet? And is the race to the bottom in AI pricing happening already? Here's what you missed today in the world of tech. Elon Musk says Xai will take legal action against Apple, saying Apple quote, makes it impossible for any AI company besides OpenAI to top its App Store ratings, a move he calls a, quote, antitrust violation, quoting Reuters Apple is behaving in a manner that makes it impossible for any AI company besides OpenAI to reach number one in the app Store, which is an unequivocal antitrust violation. XAI will take immediate legal action, musk said in a post on his social media platform. Apple has a partnership with OpenAI that integrates ChatGPT into iPhones, iPads and Macs. Musk did not provide evidence to support his claim. Apple OpenAI and XAI did not respond to Reuters requests for comment. OpenAI CEO Sam Altman responded to Musk on Monday. This is a remarkable claim given what I have heard alleged that Elon does to manipulate X to benefit himself and his own companies and harm his competitors and people he doesn't like, he said. On X. OpenAI's ChatGPT currently holds the top spot in the App Store's Top Free Apps section in the US while XAI's Grok ranks fifth. Hey ApolloPP Store, why do you refuse to put either X or Grok in your must have section when X is the number one news app in the world and Grok is number five among all apps? Are you playing politics? Musk asked in an earlier post on Monday. Users on X through the Community Notes feature have pointed out that a few apps besides OpenAI have taken the top spot on the App Store this year. Chinese AI app Deep deepseek reached the number one spot on the platform in January, while in July, perplexity took first place in India's App Store, both occurring after the OpenAI and Apple partnership struck last year. Musk's comments come as regulators and rivals intensify scrutiny of Apple's control over its App Store. Earlier this year, Apple was ordered to pay a fine of 500 million euros, or around $581 million, by the EU antitrust enforcer, which said the company's restrictions prevented developers from steering users outside the App Store, end quote. Now I will point out that these are two Apple pundits, but about all this. Mark Gurman tweeted Elon's argument about Grok X's placement in the top charts to me at least, is pretty baseless. But he's spot on about this. It's very strange Grok isn't in the AI Powered Apps now trending section. I will note Claude, who Apple is close with, isn't either though, end quote. And here's Neil Seibart. X is a news app in the App Store and based on how X treats itself on its App Store listing, they want to be classified as news. It's the top free news Apple More Apple News An Australian federal judge has ruled Apple and Google engaged in anti competitive conduct by misusing their App Store market power, but rejected Epic's other claims in the case. Quoting abc, the ruling clears the way for two class actions covering millions of Australian consumers and developers to pursue substantial compensation for the price and commissions they paid for digital content, which, according to legal representatives for the class actions, were heavily inflated on the app stores. Justice beach also ruled on two cases brought by Epic Games, the developer of blockbuster online game Fortnite. He found Google and Apple breached section 46 of the Competition and Consumer act by misusing their market power to reduce competition. But he rejected other allegations, including that the companies had engaged in unconscionable conduct, behavior so harsh it goes against good conscience. The exact amount of compensation that the 15 million consumers and 150,000 app developers could be entitled to will be determined at another hearing. A key factor in that calculation will be how much less people would have paid Apple and Google and if those anti competitive practices weren't in place, end quote. Now I'm noting this because Apple now says Fortnite will return to iOS in Australia at a date to be determined. Quoting the Verge, beach rejected Epic's claims that the tech giant had broken consumer law or engaged in unconscionable conduct, meaning particularly harsh, unfair or oppressive behavior that goes against social norms. We are still awaiting further details from Beach's final judgment, which is more than 2,000 pages long and won't be released publicly. We welcome the court's rejection of Epic's demands that we distribute app stores from within the Google Play Store and Epic's attacks on other critical security protections that users rely on, google spokesperson Dan Jackson said in a statement to the Verge. In a statement to Australia's ABC News, an unnamed Apple spokesperson said that the company welcomes the court's rejection of some of Epic's claims, but that it disagrees with other aspects of the ruling. Apple faces fierce competition in every market where we operate, the spokesperson said. We continuously invest and innovate to make the App Store the safest place for users to get apps and a great business opportunity for developers in Australia and around the world. End quote. It occurs to me that at least Apple in particular, but maybe with Google and others too, is there some sort of tipping point where if they lose various antitrust things in enough global territories that they basically have to give up the ghost and make changes everywhere? And furthermore, are we reaching that point soon? Nvidia and others get to sell their chips to China again? Big win, right? Well, maybe not yet. Quoting Bloomberg Beijing has urged local companies to avoid using Nvidia's H20 processors, particularly for government related purposes, complicating the chipmaker's attempts to recoup billions in lost China revenue after the Trump administration reversed an effective US Ban on such sales. Over the past few weeks, Chinese authorities have sent notices to a range of firms discouraging use of the less advanced semiconductors, people familiar with the matter said, asking not to be named discussing sensitive information. The guidance was particularly strong against the use of H20s for any government or national security related work by state enterprises or private companies, the people said. The letters did not, however, constitute an outright ban on H20 use, according to the people. Industry analysts Analysts broadly agree that Chinese companies still covet these chips, which perform quite well in certain crucial AI applications. President Donald Trump said Monday that the processor, which he called obsolete, still has a market in the Asian country. Even with Trump's team on board, Nvidia still faces the challenge that Chinese customers are under Beijing's pressure to purchase domestic chips instead. Beijing's overall push affects AI accelerators from AMD in addition to Nvidia, one of the people said, though it's unclear whether any letters specifically mentioned AMD's Mi308 chip. Shares of Chinese AI chip designer Cambricon Technologies surged to their daily limit of 20% on the news of China's guidance, leading a rally in peers such as Semiconductor Manufacturing International. Beijing's stance could limit Trump's ability to turn his export control about face into a windfall for government coffers, a deal that highlighted his administration's transactional approach to national security policies long treated as non negotiable, end quote. Now, this segment might contradict what I just said slightly, but after all the drama in the chips and China story Over the last couple weeks I've been waiting for some background on all of this and the Journal serves it up. Apparently US officials had not yet reviewed the 20% pay to play proposal when Trump first offered it to Nvidia after Jensen Huang successfully lobbied him to allow Nvidia's H20 sales to China to resume. Quote Jensen Huang, chief executive of California based chip designer Nvidia, worked for months behind the scenes in Washington and Beijing to protect tens of billions of dollars in future sales from the heated US China trade rivalry. Huang told President Trump that restrictions on US Chip sales to China would backfire by pushing Chinese technology champions to achieve self reliance. He advised the president to keep China hooked on American tech as a sweetener. Huang said the company would invest as much as $500 billion in the U.S. huang's argument, along with the half trillion dollar offer from the world's most valuable company, appeared to seal the deal. Beijing reciprocated by allowing a $35 billion deal involving U.S. chip software makers that it had held up for about a year in a previously unreported development. Chinese officials also froze an inquiry into an already completed Nvidia deal. With both moves, China's leaders hoped Wang would keep on lobbying Washington for loosened export controls. There was one last hitch, though. At a meeting with Huang in the White House last week, Trump made one more demand that Nvidia give the federal government 20% of its chip sales to China in exchange for issuing the export licenses. If I'm going to do that, I want you to pay us something, trump said, recounting the exchange at a news conference Monday. The unusual pay to play proposal, which hadn't been vetted by White House tech policy staff before Trump offered it, is expected to face legal and security questions. Wang, facing a choice of paying for long term access to a market vital to his company or walking away, countered with 15%. He charmed Trump at the meeting, drawing the president a diagram showing how tariffs would be counterproductive for his goal of increasing US Chip production, and signed it shortly after, Trump said he would exempt tech companies that invest in the US from roughly 100% tariffs on semiconductor imports. At a Washington AI summit in late July, Trump said he had looked at breaking up Nvidia because of its dominant market share. But that was before he got to know Huang and the industry. What a job you've done, trump told Huang, who was seated in the front row surrounded by administration officials and industry executives. America's unique advantage that no country could possibly have is President Trump, huang said at the summit in early April, when the White House was preparing to cut off H20 sales, Huang attended a $1 million ahead dinner with Trump at Mar A Lago. He told the president that selling the chip in China wasn't a threat to national security. Huang also dangled an incentive, a promise to invest as much as half a trillion dollars worth of AI infrastructure and supercomputers in the U.S. huang thought he had made a persuasive case, and Trump announced the $500 billion investment. After the dinner, a powerful rival intervened with a counterargument. Elon Musk, still close to Trump at the time, had his own AI ambitions to consider. He told Trump that any advanced chip in Chinese hands threatened US Tech supremacy. That view, combined with opposition from national security minded officials, persuaded Trump to impose the restriction Huang had tried to stop. Huang had been outmaneuvered and didn't enjoy losing, especially when, as he later said, $15 billion in sales were at stake. Huang found a powerful ally at the White House, the so called AI czar David Sachs. He shared the fear of ceding the advanced chip market to Chinese rivals. The two men drew the support of Commerce Secretary Howard Lutnick, who oversees export controls and is well acquainted with tech companies from his former career as a Wall street dealmaker. All three championed a deal to send Nvidia chips to the United Arab Emirates in May. They later went to see Trump for an unannounced meeting at the White House on July 10. Huang told the president that tight restrictions on Nvidia would just give Huawei a leg up in the AI race. Nvidia needed to access the Chinese market and its AI talent, Huang said. Did the president really want to let China get all the spoils and turn American champions like Nvidia into losers? Winning in Washington was only half the battle, though. Nvidia's market share in China fell to 50% from 95% the past four years under US restrictions, Wang said in May. He thus visited China at least three times this year to reassure Chinese tech executives and government officials that Nvidia was committed to the market. The trips came when many US Executives shunned visits to Beijing or even being seen with Chinese tech titans. Wang has met with top executives of Chinese cloud computing leader Alibaba, smartphone and Automaker Xiaomi and OpenAI challenger Minimax. People in China's tech industry said they appreciated Wang's effort to modify his chips so they could be sold in China. Engineers there nicknamed him Magic Taylor for his skill in designing chips to thread the needle of U.S. regulations. Knowing the importance of the Chinese market to Nvidia, Beijing increased pressure on the company. China's cybersecurity regulator recently summoned Nvidia representatives to discuss alleged security risks of the H20 chips, citing comments by US lawmakers about the need for a bill to require tracking capabilities for advanced chips sold abroad. Huang and others in the industry have lobbied against the bill, which could face more opposition if it gains traction. The White House has said it wants to study chip tracking but hasn't weighed in on the legislation. Specifically, Nvidia denied the H20 chip presented such security risks to Beijing. While the H20 can't be used for creating large AI models such as the ones powering ChatGPT and other chatbots, engineers say the chip is still good at inference the ability of AI programs to tap their training to answer user questions. Since early this year, the H20 chip has played a critical role in filling sky high demand for AI applications using open source models such as Chinese developed Deepsea and Alibaba's Quin, especially since Chinese chip makers have had trouble stepping up production capacity. Chinese engineers say companies often get hooked on Nvidia's software, making them reluctant to switch to other companies. That is setting the stage for a battle over Nvidia's next generation chip that Huang is crafting for China. The company frames the new chip as another stripped down variant, but it is based on the Blackwell architecture, which is Nvidia's most advanced on the market. Nvidia has begun sending samples to Chinese clients for testing. After reading all that, all I can say is Jensen played a blinder here, a political blinder. Finally today, following OpenAI's move that I don't think I told you about, Anthropic has now also signed a deal to provide Claude to US lawmakers for a dollar a year, while a source says that Google is negotiating to offer Gemini on similarly low cost terms. Quoting the FT the Anthropic and OpenAI deals, which will initially last one year, highlight how industry leaders are offering ever greater incentives as they compete for widespread adoption by the government and attempt to deepen ties to lawmakers and regulators. The government Approved Anthropics, Claude, Google's Gemini and OpenAI's ChatGPT as suppliers earlier this month. It is also looking to ink deals with other frontier AI models such as Meta's Llama and Xai's Grok, according to a US official, as well as with smaller bespoke artificial intelligence platforms. While tech companies do not generate significant revenue from such deals, they do benefit from learning which applications are most popular at different agencies. This could lead to products being sold to other enterprise clients or fresh deals after current arrangements expire. That's why I'm highlighting this trend at long last. Okay, so everybody is basically giving dollar menu prices to the government to adopt their AI. And maybe they'll be doing the same for enterprises as well soon. I talked about how in the wake of OpenAI and GPT5's release, if AI proves itself to be a commodity, you know what happens in commodity markets? Race to the bottom prices. That's why people try to form cartels in commodity markets. Because otherwise what happens in commodity markets is everybody bleeds money until most players bleed out and the only ones left standing are those who could endure pain the longest. Are we seeing that beginning to happen in the AI market already? Okay, some observations about London versus New York City at least having not been in London for 15 years and having lived in New York City for 15 solid years now. Number one, everyone here vapes like everyone. Number two, this is a city of bikers. And yes, NYC has become a biker city too, with the Citibike and the electric bike delivery drivers. But these are commuters here in London. They run in pelotons, at least in the neighborhoods I've been in. And not just the protected bike lanes which are everywhere. It's like every street. And then number three, it's pret a manger on every corner. And I mean every single corner. Seriously, pull up a map of Oxford Circus. There are literally 6 pret a manger within a 3 block radius. 6. But no worries about that. I had a decent lunch at 1 today. Talk to you tomorrow.