This Dutchman moved to San Francisco a year ago to help tech giants prepare for new EU rules
European Union flags flutter outside the EU Commission headquarters, in Brussels, Belgium, February 1, 2023
Yves Herman | Reuters
When Gerard de Graaf moved from Europe to San Francisco almost a year ago, his job had a very different feel to it.
De Graaf, a 30-year veteran of the European Commission, was tasked with resurrecting the EU office in the Bay Area. His title is senior envoy for digital to the U.S., and since September his main job has been to help the tech industry prepare for new legislation called The Digital Services Act (DSA), which goes into effect Friday.
At the time of his arrival, the metaverse trumped artificial intelligence as the talk of the town, tech giants and emerging startups were cutting thousands of jobs, and the Nasdaq was headed for its worst year since the financial crisis in 2008.
Within de Graaf’s purview, companies including Meta, Google, Apple and Amazon have had since April to get ready for the DSA, which takes inspiration from banking regulations. They face fines of as much as 6% of annual revenue if they fail to comply with the act, which was introduced in 2020 by the EC (the executive arm of the EU) to reduce the spread of illegal content online and provide more accountability.
Coming in as an envoy, de Graaf has seen more action than he expected. In March, there was the sudden implosion of the iconic Silicon Valley Bank, the second-largest bank failure in U.S. history. At the same time, OpenAI’s ChatGPT service, launched late last year, was setting off an arms race in generative AI, with tech money pouring into new chatbots and the large language models (LLMs) powering them.
It was a “strange year in many, many ways,” de Graaf said, from his office, which is co-located with the Irish Consulate on the 23rd floor of a building in downtown San Francisco. The European Union hasn’t had a formal presence in Silicon Valley since the 1990s.
De Graaf spent much of his time meeting with top executives, policy teams and technologists at the major tech companies to discuss regulations, the impact of generative AI and competition. Although regulations are enforced by the EC in Brussels, the new outpost has been a useful way to foster a better relationship between the U.S. tech sector and the EU, de Graaf said.
“I think there’s been a conversation that we needed to have that did not really take place,” said de Graaf. With a hint of sarcasm, de Graaf said that somebody with “infinite wisdom” decided the EU should step back from the region during the internet boom, right “when Silicon Valley was taking off and going from strength to strength.”
The thinking at the time within the tech industry, he said, was that the internet is a “different technology that moves very fast” and that “policymakers don’t understand it and can’t regulate it.”
Facebook Chairman and CEO Mark Zuckerberg arrives to testify before the House Financial Services Committee on “An Examination of Facebook and Its Impact on the Financial Services and Housing Sectors” in the Rayburn House Office Building in Washington, DC on October 23, 2019.
Mandel Ngan | AFP | Getty Images
However, some major leaders in tech have shown signs that they’re taking the DSA seriously, de Graaf said. He noted that Meta CEO Mark Zuckerberg met with Thierry Breton, the EU commissioner for internal market, to go over some of the specifics of the rules, and that X owner Elon Musk has publicly supported the DSA after meeting with Breton.
De Graaf said he’s seeing “a bit more respect and understanding for the European Union’s position, and I think that has accelerated after generative AI.”
‘Serious commitment’
X, formerly known as Twitter, had withdrawn from the EU’s voluntary guidelines for countering disinformation. There was no penalty for not participating, but X must now comply with the DSA, and Breton said after his meeting with Musk that “fighting disinformation will be a legal obligation.”
“I think, in general, we’ve seen a serious commitment of big companies also in Europe and around the world to be prepared and to prepare themselves,” de Graaf said.
The new rules require platforms with at least 45 million monthly active users in the EU to provide risk assessment and mitigation plans. They also must allow for certain researchers to have inspection access to their services for harms and provide more transparency to users about their recommendation systems, even allowing people to tweak their settings.
Timing could be a challenge. As part of their cost-cutting measures implemented early this year, many companies laid off members of their trust and safety teams.
“You ask yourself the question, will these companies still have the capacity to implement these new regulations?” de Graaf said. “We’ve been assured by many of them that in the process of layoffs, they have a renewed sense of trust and safety.”
The DSA doesn’t require that tech companies maintain a certain number of trust and safety workers, de Graaf said, just that they comply with the law. Still, he said one social media platform that he declined to name gave an answer “that was not entirely reassuring” when asked how it plans to monitor for disinformation in Poland during the upcoming October elections, as the company has only one person in the region.
That’s why the rules include transparency about what exactly the platforms are doing.
“There’s a lot we don’t know, like how these companies moderate content,” de Graaf said. “And not just their resources, but also how their decisions are made with which content will stay and which content is taken down.”
De Graaf, a Dutchman who’s married with two kids, has spent the past three decades going deep on regulatory issues for the EC. He previously worked on the Digital Services Act and Digital Markets Act, European legislation targeted at consumer protection and rights and enhancing competition.
This isn’t his first stint in the U.S. From 1997 to 2001, he worked in Washington, D.C., as “trade counsellor at the European Commission’s Delegation to the United States,” according to his bio.
For all the talk about San Francisco’s “doom loop,” de Graaf said he sees a different level of energy in the city as well as further south in Silicon Valley.
There’s still “so much dynamism” in San Francisco, he said, adding that it’s filled with “such interesting people and objective people that I find incredibly refreshing.”
“I meet very, very interesting people here in Silicon Valley and in San Francisco,” he said. “And it’s not just the companies that are kind of avant-garde as the people behind them, so the conversations you have here with people are really rewarding.”
The generative AI boom
Generative AI was a virtually foreign concept when de Graaf arrived in San Francisco last September. Now, it’s about the only topic of conversation at tech conferences and cocktail parties.
The rise and rapid spread of generative AI has led to a number of big tech companies and high-profile executives calling for regulations, citing the technology’s potential influence on society and the economy. In June, the European Parliament cleared a major step in passing the EU AI Act, which would represent the EU’s package of AI regulations. It’s still a long way from becoming law.
De Graaf noted the irony in the industry’s attitude. Tech companies that have for years criticized the EU for overly aggressive regulations are now asking, “Why is it taking you so long?” de Graaf said.
“We will hopefully have an agreement on the text by the end of this year,” he said. “And then we always have these transitional periods where the industry needs to prepare, and we need to prepare. That might be two years or a year and a half.”
The rapidly changing landscape of generative AI makes it tricky for the EU to quickly formulate regulations.
“Six months ago, I think our big concern was to legislate the handful of companies — the extremely powerful, resource rich companies — that are going to dominate,” de Graaf said.
But as more powerful LLMs become available for people to use for free, the technology is spreading, making regulation more challenging as it’s not just about dealing with a few big companies. De Graaf has been meeting with local universities like Stanford to learn about transparency into the LLMs, how researchers can access the technology and what kind of data companies could provide to lawmakers about their software.
One proposal being floated in Europe is the idea of publicly funded AI models, so control isn’t all in the hands of big U.S. companies.
“These are questions that policymakers in the U.S. and all around the world are asking themselves,” de Graaf said. “We don’t have a crystal ball where we can just predict everything that’s happening.”
Even if there are ways to expand how AI models are developed, there’s little doubt about where the money is flowing for processing power. Nvidia, which just reported blowout earnings for the latest quarter and has seen its stock price triple in value this year, is by far the leader in providing the kind of chips needed to power generative AI systems.
“That company, they have a unique value proposition,” de Graaf said. “It’s unique not because of scale or a network effect, but because their technology is so advanced that it has no competition.”
He said that his team meets “quite regularly” with Nvidia and its policy team and they’ve been learning “how the semiconductor market is evolving.”
“That’s a useful source information for us, and of course, where the technology is going,” de Graaf said. “They know where a lot of the industries are stepping up and are on the ball or are going to move more quickly than other industries.”
WATCH: Former White House CTO Aneesh Chopra on A.I. regulation
Jakub Porzycki | Nurphoto | Getty Images
Mark Zuckerberg’s announcement this week that Meta would pivot its moderation policies to allow more “free expression” was widely viewed as the company’s latest effort to appease President-elect Donald Trump.
More than any of its Silicon Valley peers, Meta has taken numerous public steps to make amends with Trump since his election victory in November.
That follows a highly contentious four years between the two during Trump’s first term in office, which ended with Facebook — similar to other social media companies — banning Trump from its platform.
As recently as March, Trump was using his preferred nickname of “Zuckerschmuck” when talking about Meta’s CEO and declaring that Facebook was an “enemy of the people.”
With Meta now positioning itself to be a key player in artificial intelligence, Zuckerberg recognizes the need for White House support as his company builds data centers and pursues policies that will allow it to fulfill its lofty ambitions, according to people familiar with the company’s plans who asked not to be named because they weren’t authorized to speak on the matter.
“Even though Facebook is as powerful as it is, it still had to bend the knee to Trump,” said Brian Boland, a former Facebook vice president, who left the company in 2020.
Meta declined to comment for this article.
In Tuesday’s announcement, Zuckerberg said Meta will end third-party fact-checking, remove restrictions on topics such as immigration and gender identity and bring political content back to users’ feeds. Zuckerberg pitched the sweeping policy changes as key to stabilizing Meta’s content-moderation apparatus, which he said had “reached a point where it’s just too many mistakes and too much censorship.”
The policy change was the latest strategic shift Meta has taken to buddy up with Trump and Republicans since Election Day.
A day earlier, Meta announced that UFC CEO Dana White, a longtime Trump friend, is joining the company’s board.
And last week, Meta announced that it was replacing Nick Clegg, its president of global affairs, with Joel Kaplan, who had been the company’s policy vice president. Clegg previously had a career in British politics with the Liberal Democrats party, including as a deputy prime minister, while Kaplan was a White House deputy chief of staff under former President George W. Bush.
Kaplan, who joined Meta in 2011 when it was still known as Facebook, has longstanding ties to the Republican Party and once worked as a law clerk for the late conservative Supreme Court Justice Antonin Scalia. In December, Kaplan posted photos on Facebook of himself with Vice President-elect JD Vance and Trump during their visit to the New York Stock Exchange.
Joel Kaplan, Facebook’s vice president of global policy, on April 17, 2018.
Niall Carson | PA Images | Getty Images
Many Meta employees criticized the policy change internally, with some saying the company is absolving itself of its responsibility to create a safe platform. Current and former employees also expressed concern that marginalized communities could face more online abuse due to the new policy, which is set to take effect over the coming weeks.
Despite the backlash from employees, people familiar with the company’s thinking said Meta is more willing to make these kinds of moves after laying off 21,000 employees, or nearly a quarter of its workforce, in 2022 and 2023.
Those cuts affected much of Meta’s civic integrity and trust and safety teams. The civic integrity group was the closest thing the company had to a white-collar union, with members willing to push back against certain policy decisions, former employees said. Since the job cuts, Zuckerberg faces less friction when making broad policy changes, the people said.
Zuckerberg’s overtures to Trump began in the months leading up to the election.
Following the first assassination attempt on Trump in July, Zuckerberg called the photo of Trump raising his fist with blood running down his face “one of the most badass things I’ve ever seen in my life.”
A month later, Zuckerberg penned a letter to the House Judiciary Committee alleging that the Biden administration had pressured Meta’s teams to censor certain Covid-19 content.
“I believe the government pressure was wrong, and I regret that we were not more outspoken about it,” he wrote.
After Trump’s presidential victory, Zuckerberg joined several other technology executives who visited the president-elect’s Mar-a-Lago resort in Florida. Meta also donated $1 million to Trump’s inaugural fund.
On Friday, Meta revealed to its workforce in a memo obtained by CNBC that it intends to shutter several internal programs related to diversity and inclusion in its hiring process, representing another Trump-friendly move.
The previous day, some details of the company’s new relaxed content-moderation guidelines were published by the news site The Intercept, showing the kind of offensive rhetoric that Meta’s new policy would now allow, including statements such as “Migrants are no better than vomit” and “I bet Jorge’s the one who stole my backpack after track practice today. Immigrants are all thieves.”
Recalibrating for Trump
Zuckerberg, who has been dragged to Washington eight times to testify before congressional committees during the last two administrations, wants to be perceived as someone who can work with Trump and the Republican Party, people familiar with the matter said.
Though Meta’s content-policy updates caught many of its employees and fact-checking partners by surprise, a small group of executives were formulating the plans in the aftermath of the U.S. election results. By New Year’s Day, leadership began planning the public announcements of its policy change, the people said.
Meta typically undergoes major “recalibrations” after prominent U.S. elections, said Katie Harbath, a former Facebook policy director and CEO of tech consulting firm Anchor Change. When the country undergoes a change in power, Meta adjusts its policies to best suit its business and reputational needs based on the political landscape, Harbath said.
“In 2028, they’ll recalibrate again,” she said.
After the 2016 election and Trump’s first victory, for example, Zuckerberg toured the U.S. to meet people in states he hadn’t previously visited. He published a 6,000-word manifesto emphasizing the need for Facebook to build more community.
The social media company faced harsh criticism about fake news and Russian election interference on its platforms after the 2016 election.
Following the 2020 election, during the heart of the pandemic, Meta took a harder stand on Covid-19 content, with a policy executive saying in 2021 that the “amount of COVID-19 vaccine misinformation that violates our policies is too much by our standards.” Those efforts may have appeased the Biden administration, but it drew the ire of Republicans.
Meta is once again reacting to the moment, Harbath said.
“There wasn’t a business risk here in Silicon Valley to be more right-leaning,” Harbath said.
While Trump has offered few specific policy proposals for his second administration, Meta has plenty at stake.
The White House could create more relaxed AI regulations compared with those in the European Union, where Meta says harsh restrictions have resulted in the company not releasing some of its more advanced AI technologies. Meta, like other tech giants, also needs more massive data centers and cutting-edge computer chips to help train and run their advanced AI models.
“There’s a business benefit to having Republicans win, because they are traditionally less regulatory,” Harbath said.
Meta’s CEO Mark Zuckerberg reacts as he testifies during the Senate Judiciary Committee hearing on online child sexual exploitation at the U.S. Capitol in Washington, U.S., January 31, 2024.
Evelyn Hockstein | Reuters
Meta isn’t alone in trying to cozy up to Trump. But the extreme measures the company is taking reflects a particular level of animus expressed by Trump over the years.
Trump has accused Meta of censorship and has expressed resentment over the company’s two-year suspension of his Facebook and Instagram accounts following the Jan. 6 attack on the Capitol.
In July 2024, Trump posted on Truth Social that he intended to “pursue Election Fraudsters at levels never seen before, and they will be sent to prison for long periods of time,” adding “ZUCKERBUCKS, be careful!” Trump reiterated that statement in his book, “Save America,” writing that Zuckerberg plotted against him during the 2020 election and that the Meta CEO would “spend the rest of his life in prison” if it happened again.
Meta spends $14 million annually on providing personal security for Zuckerberg and his family, according to the company’s 2024 proxy statement. As part of that security, the company analyzes any threats or perceived threats against its CEO, according to a person familiar with the matter. Those threats are cataloged, analyzed and dissected by Meta’s multitude of security teams.
After Trump’s comments, Meta’s security teams analyzed how Trump could weaponize the Justice Department and the country’s intelligence agencies against Zuckerberg and what it would cost the company to defend its CEO against a sitting president, said the person, who asked not to be named because of confidentiality.
Meta’s efforts to appease the incoming president bring their own risks.
After Zuckerberg announced the new speech policy Tuesday, Boland, the former executive, was among a number of users who took to Meta’s Threads service to tell their followers that they were quitting Facebook.
“Last post before deleting,” Boland wrote in his post.
Before the post could be seen by any of his Threads followers, Meta’s content moderation system had taken it down, citing cybersecurity reasons.
Boland told CNBC in an interview that he couldn’t help but chuckle at the situation.
“It’s deeply ironic,” Boland said.
— CNBC’s Salvador Rodriguez contributed to this report.
WATCH: Meta is returning to free speech tradition, says Facebook’s former chief privacy officer Chris Kelly
Jaap Arriens | Nurphoto | Getty Images
Apple is losing market share in China due to declining iPhone shipments, supply chain analyst Ming-Chi Kuo wrote in a report on Friday. The stock slid 2.4%.
“Apple has adopted a cautious stance when discussing 2025 iPhone production plans with key suppliers,” Kuo, an analyst at TF Securities, wrote in the post. He added that despite the expected launch of the new iPhone SE 4, shipments are expected to decline 6% year over year for the first half of 2025.
Kuo expects Apple’s market share to continue to slide, as two of the coming iPhones are so thin that they likely will only support eSIM, which the Chinese market currently does not promote.
“These two models could face shipping momentum challenges unless their design is modified,” he wrote.
Kuo wrote that in December, overall smartphone shipments in China were flat from a year earlier, but iPhone shipments dropped 10% to 12%.
There is also “no evidence” that Apple Intelligence, the company’s on-device artificial intelligence offering, is driving hardware upgrades or services revenue, according to Kuo. He wrote that the feature “has not boosted iPhone replacement demand,” according to a supply chain survey he conducted, and added that in his view, the feature’s appeal “has significantly declined compared to cloud-based AI services, which have advanced rapidly in subsequent months.”
Apple’s estimated iPhone shipments total about 220 million units for 2024 and between about 220 million and 225 million for this year, Kuo wrote. That is “below the market consensus of 240 million or more,” he wrote.
Apple did not immediately respond to CNBC’s request for comment.
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