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What does the disappearance of a $100bn deal mean for the AI economy?

about 7 hours ago
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Did the circular AI economy just wobble? Last week it was reported that a much-discussed $100bn deal – announced last September – between Nvidia and OpenAI might not be happening at all,This was a circular arrangement through which the chipmaker would supply the ChatGPT developer with huge sums of money that would largely go towards the purchase of its own chips,It is this type of deal that has alarmed some market watchers, who detect a whiff of the 1999-2000 dotcom bubble in these transactions,Now it seems that Nvidia was not as solid on this investment as had been widely believed, according to the Wall Street Journal,Negotiations had not progressed, with Jensen Huang, Nvidia’s chief executive, privately emphasising that the deal was “non-binding” and “not finalised”.

Huang appeared to confirm this in Taipei on Saturday, telling reporters that Nvidia would make a “huge” investment into OpenAI’s next funding round, but “nothing like” $100bn,A report from Reuters soon suggested that the feeling was mutual: OpenAI was “unsatisfied” with Nvidia’s advanced AI chips, it said, and seeking alternatives,Nvidia’s stock has taken a 10% hit so far this week, a flurry of headlines have ensued and both companies have stepped into damage control,“We love working with Nvidia and they make the best AI chips in the world,” wrote Sam Altman, OpenAI’s CEO, on X,“We hope to be a gigantic customer for a very long time.

”Even Oracle appears to be shaken: the software company, which is counting on a $300bn cloud computing deal with OpenAI, said it still expects the startup to be good for its commitment even if it does not receive the full amount from Nvidia.In total, OpenAI has committed to compute deals – the infrastructure for building and powering its AI tools – worth more than $1tn.“The Nvidia-OpenAI deal has zero impact on our financial relationship with OpenAI,” Oracle posted on X.“We remain highly confident in OpenAI’s ability to raise funds and meet its commitments.”That a $100bn deal between two of the most crucial players in AI appears to have evaporated over a weekend is unsettling.

But there are solid business reasons behind the apparent shake-up, said Alvin Nguyen, analyst at research firm Forrester.OpenAI’s ambitious growth trajectory means it will be difficult for the company to stick with a single vendor, especially as it plans new, computationally demanding AI models, he said.“They need chips.They need as many as possible.”As for Nvidia, its commitment to the $100bn may have been loose in the first place, even as it was widely reported.

“They will not discourage people from overhyping.Why say something and immediately sucker punch your own share price?”For a giant startup like OpenAI, manoeuvring in and out of deals – for example, with chipmakers – may just be business as usual, said Nguyen: “You know [Altman’s] background as a startup person, and you know the manoeuvres he’s doing make sense from a startup perspective.”For Nvidia, meanwhile, AI hype is part of selling chips.“You don’t know what’s going to happen,” said Nguyen.“And so you let other people put numbers out there for you and let that drive the hype.

”The issue is, of course, that investors and other companies like Oracle may have taken widely reported $100bn commitments seriously.In response to a query from the Guardian, an OpenAI spokesperson referred to Altman’s X post, and to remarks Huang made to CNBC on Tuesday, including: “There is no drama.”The spokesperson added: “Our teams are actively working through details of our partnership.Nvidia technology has underpinned our breakthroughs from the start, powers our systems today, and will remain central as we scale what comes next.”Nvidia and Oracle did not respond to requests for comment.

This is all taking place against the backdrop of a changing investment landscape for AI, where hype is giving way to realities about what aspects of the technology are actually going to earn money,While investors ponder whether OpenAI is going to be able to pay for a $1,4tn compute deal, reality is biting further down the AI food chain,This week has seen a massive sell-off in certain software stocks, prompted in part by the launch of a new Anthropic AI tool that can carry out a number of professional services, which has led to fears that business models exposed to competition from AI products will be disrupted,This is the flip-side of “jagged AI”, which is the term for advanced AI tools having uneven talents, such as being good at sifting through documents but less good at solving complex maths problems.

If advanced systems are good at automating legal work, then legacy companies in service industries will suffer.The losers are beginning to emerge and are being picked up by investors.At the top of the AI pyramid the competitive effects are also biting.OpenAI’s chatbot, ChatGPT, is losing ground to competitors.Data released on Tuesday show its market share has eroded from 69% to 45% owing to the rise of Google’s Gemini, xAI’s Grok and Anthropic’s Claude.

OpenAI appears to have retreated from soaring talk of super-intelligence in the past months, focusing instead on profitable mundanities such as adverts and adult content.The apparent evaporation of a $100bn deal may be of a piece with last year’s sci-fi rhetoric meeting this year’s practicalities.The question is, who might be left holding the bill?“I think there will be knock-on effects,” said Nguyen.“I mean, it’s that statement: the markets can stay irrational longer than you can stay solvent.”
societySee all
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DWP chief accused of overseeing ‘culture of complacency’ that led to carer’s allowance scandal

The government’s most senior welfare official has been accused of presiding over a “culture of complacency” that led to thousands of unpaid carers inadvertently running up huge benefit debts.Debbie Abrahams, the chair of the work and pensions select committee, said the Department for Work and Pensions had repeatedly failed to prioritise vulnerable people, was unwilling to learn from its mistakes, and was slow to fix errors.Abrahams said she found it “difficult to have confidence” in the DWP’s permanent secretary, Sir Peter Schofield, who had promised MPs more than six years ago that he would fix critical flaws in the carer’s allowance benefit but had failed to do so.An award-winning Guardian investigation revealed hundreds of thousands of unpaid carers, most already in poverty, were landed with large bills for overpayments running into thousands of pounds as a result of DWP shortcomings. Several hundred carers are estimated to have also received fraud convictions

about 18 hours ago
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PE funding and the true cost of obesity | Letter

The possible cuts to Whitehall’s physical education funding left one misty-eyed for that jargonistic catchphrase of the Blair era: joined-up government (Government row breaks out over plan to cut spending for PE in England’s schools, 27 January).Coincidentally, your story appeared hours after the NHS published data from its Health Survey England. Inevitably, the 2024 data revealed another rise in the percentage of adults in England who were obese or overweight – reaching 66%, compared with 53% in 1993. About 30% of adults were obese. The survey again illustrated the links between deprivation, obesity and ill-health

about 20 hours ago
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Pentagon threatens to cut ties with Scouting America over ‘core values’

The Pentagon is again threatening to sever ties with Scouting America unless the organization formerly known as the Boy Scouts of America reverts to “core values” and realigns itself with service to “God and country”.A warning to end the US military’s longstanding partnership with one of the nation’s largest and most popular youth organizations came in a Monday night post to social media by the Pentagon spokesperson, Sean Parnell, who insisted the scouting movement “lost its way” in a 2025 rebrand that promoted inclusivity and included admitting girls and LBGTQ+ members.Donald Trump’s defense department under its head, Pete Hegseth, has previously railed against being “woke” in the US military, including diversity, equity and inclusion (DEI) programs, and suggested that women lack the physical strength to be effective combat troops.Hegseth first proposed withdrawing government support for the scouting movement in a memo to Congress in November. The Washington Post reported on Tuesday that a separate draft memo outlining the plan has been circulating in recent days

about 24 hours ago
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Three-quarters of cancer patients in England will survive by 2035, government pledges

Three in four cancer patients in England will beat cancer under government plans to raise survival rates, as figures reveal someone is now diagnosed every 75 seconds in the UK.Cancer is the country’s biggest killer, causing about one in four deaths, and survival rates lag behind several European countries, including Romania and Poland. Three-quarters of NHS hospital trusts are failing cancer patients, a Guardian analysis found last year, prompting experts to declare a “national emergency”.In a new plan to be published on Wednesday, ministers will pledge £2bn to resolve the crisis by transforming cancer services, with millions of patients promised faster diagnoses, quicker treatment and more support to live well.Some cancer performance targets have not been met by the NHS since 2015

1 day ago
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Ministers to crack down on profiteering in care sector and make renewed fostering push

Private providers of child social care in England will be pushed out of the system if they are found to be profiteering, the children’s minister has said.Josh MacAlister, who is in charge of overhauling the care system for children, also called for a fostering equivalent of the Homes for Ukraine scheme to provide homes for tens of thousands of children.Announcing a major push to find homes for 10,000 foster children as part of a bid to rebalance child social care away from private providers, MacAlister said the state was “failing to provide the lifelong, loving relationships that these kids need”.MacAlister led an independent review of child social care under the last Tory government before becoming an MP and then minister. He said his message to private providers was: “If you want to be part of this system in the future, don’t price-gouge; don’t profiteer

1 day ago
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‘Supermax-style units’ for most dangerous criminals to be introduced in England and Wales

The most dangerous extremist prisoners in England and Wales will be held in “supermax-style units” similar to those used in US jails, David Lammy has told MPs.The deputy prime minister also said he would consider drawing up legislation to stop prisoners from using human rights laws to challenge tougher conditions in jail.Jonathan Hall KC, the independent reviewer of terrorism legislation, was commissioned to carry out a review on separation units in May. His report was published on Tuesday.Lammy said he would accept Hall’s 13 recommendations in full

2 days ago
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Six Nations 2026 predictions: our writers on who will win and why

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Winter Olympics 2026: all your questions about the Milano Cortina Games, answered

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Winter Olympics briefing: curling subplots abound as lights go out on first action

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Hilary Knight, Team USA’s north star, chases one more Olympic hockey gold

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Lando Norris driven to defend F1 title but says he has ‘different mentality to Max’

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Welcome to new cold war as world descends on Italy amid global political chaos

about 17 hours ago