Biden’s AI order didn’t go far enough to address fairness, but it’s a good first step, advocates say
US Vice President Kamala Harris applauds as US President Joe Biden signs an executive order after delivering remarks on advancing the safe, secure, and trustworthy development and use of artificial intelligence, in the East Room of the White House in Washington, DC, on October 30, 2023.
Brendan Smialowski | AFP | Getty Images
After the Biden administration unveiled the first-ever executive order on artificial intelligence on Monday, a frenzy of lawmakers, industry groups, civil rights organizations, labor unions and others began digging into the 111-page document — making note of the priorities, specific deadlines and, in their eyes, the wide-ranging implications of the landmark action.
One core debate centers on a question of AI fairness. Many civil society leaders told CNBC the order does not go far enough to recognize and address real-world harms that stem from AI models — especially those affecting marginalized communities. But they say it’s a meaningful step along the path.
Many civil society and several tech industry groups praised the executive order’s roots — the White House’s blueprint for an AI bill of rights, released last October — but called on Congress to pass laws codifying protections, and to better account for training and developing models that prioritize AI fairness instead of addressing those harms after-the-fact.
“This executive order is a real step forward, but we must not allow it to be the only step,” Maya Wiley, president and CEO of The Leadership Conference on Civil and Human Rights, said in a statement. “We still need Congress to consider legislation that will regulate AI and ensure that innovation makes us more fair, just, and prosperous, rather than surveilled, silenced, and stereotyped.”
U.S. President Joe Biden and Vice President Kamala Harris arrive for an event about their administration’s approach to artificial intelligence in the East Room of the White House on October 30, 2023 in Washington, DC.
Chip Somodevilla | Getty Images
Cody Venzke, senior policy counsel at the American Civil Liberties Union, believes the executive order is an “important next step in centering equity, civil rights and civil liberties in our national AI policy” — but that the ACLU has “deep concerns” about the executive order’s sections on national security and law enforcement.
In particular, the ACLU is concerned about the executive order’s push to “identify areas where AI can enhance law enforcement efficiency and accuracy,” as is stated in the text.
“One of the thrusts of the executive order is definitely that ‘AI can improve governmental administration, make our lives better and we don’t want to stand in way of innovation,'” Venzke told CNBC.
“Some of that stands at risk to lose a fundamental question, which is, ‘Should we be deploying artificial intelligence or algorithmic systems for a particular governmental service at all?’ And if we do, it really needs to be preceded by robust audits for discrimination and to ensure that the algorithm is safe and effective, that it accomplishes what it’s meant to do.”
Margaret Mitchell, researcher and chief ethics scientist of AI startup Hugging Face said she agreed with the values the executive order puts forth — privacy, safety, security, trust, equity and justice — but is concerned about the lack of focus on ways to train and develop models to minimize future harms, before an AI system is deployed.
“There was a call for an overall focus on applying red-teaming, but not other more critical approaches to evaluation,” Mitchell said.
“‘Red-teaming’ is a post-hoc, hindsight approach to evaluation that works a bit like whack-a-mole: Now that the model is finished training, what can you think of that might be a problem? See if it’s a problem and fix it if so.”
Mitchell wished she had seen “foresight” approaches highlighted in the executive order, such as disaggregated evaluation approaches, which can analyze a model as data is scaled up.
Dr. Joy Buolamwini, founder and president of the Algorithmic Justice League, said Tuesday at an event in New York that she felt the executive order fell short in terms of the notion of redress, or penalties when AI systems harm marginalized or vulnerable communities.
Even experts who praised the executive order’s scope believe the work will be incomplete without action from Congress.
“The President is trying to extract extra mileage from the laws that he has,” said Divyansh Kaushik, associate director for emerging technologies and national security at the Federation of American Scientists.
For example, it seeks to work within existing immigration law to make it easier to retain high-skilled AI workers in the U.S. But immigration law has not been updated in decades, said Kaushik, who was involved in collaborative efforts with the administration in crafting elements of the order.
It falls on Congress, he added, to increase the number of employment-based green cards awarded each year and avoid losing talent to other countries.
Industry worries about stifling innovation
On the other side, industry leaders expressed wariness or even stronger feelings that the order had gone too far and would stifle innovation in a nascent sector.
Andrew Ng, longtime AI leader and cofounder of Google Brain and Coursera, told CNBC he is “quite concerned about the reporting requirements for models over a certain size,” adding that he is “very worried about overhyped dangers of AI leading to reporting and licensing requirements that crush open source and stifle innovation.”
In Ng’s view, thoughtful AI regulation can help advance the field, but over-regulation of aspects of the technology, such as AI model size, could hurt the open-source community, which would in turn likely benefit tech giants.
Vice President Kamala Harris and US President Joe Biden depart after delivering remarks on advancing the safe, secure, and trustworthy development and use of artificial intelligence, in the East Room of the White House in Washington, DC, on October 30, 2023.
Chip Somodevilla | Getty Images
Nathan Benaich, founder and general partner of Air Street Capital, also had concerns about the reporting requirements for large AI models, telling CNBC that the compute threshold and stipulations mentioned in the order are a “flawed and potentially distorting measure.”
“It tells us little about safety and risks discouraging emerging players from building large models, while entrenching the power of incumbents,” Benaich told CNBC.
NetChoice’s Vice President and General Counsel Carl Szabo was even more blunt.
“Broad regulatory measures in Biden’s AI red tape wishlist will result in stifling new companies and competitors from entering the marketplace and significantly expanding the power of the federal government over American innovation,” said Szabo, whose group counts Amazon, Google, Meta and TikTok among its members. “Thus, this order puts any investment in AI at risk of being shut down at the whims of government bureaucrats.”
But Reggie Townsend, a member of the National Artificial Intelligence Advisory Committee (NAIAC), which advises President Biden, told CNBC that he feels the order doesn’t stifle innovation.
“If anything, I see it as an opportunity to create more innovation with a set of expectations in mind,” said Townsend.
David Polgar, founder of the nonprofit All Tech Is Human and a member of TikTok’s content advisory council, had similar takeaways: In part, he said, it’s about speeding up responsible AI work instead of slowing technology down.
“What a lot of the community is arguing for — and what I take away from this executive order — is that there’s a third option,” Polgar told CNBC. “It’s not about either slowing down innovation or letting it be unencumbered and potentially risky.”
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Technology
European tech funding declines for third consecutive year — but the sector is finally stabilizing
On Monday, British tech lobby group Startup Coalition warned in a blog post that there was a risk Reeves’ tax plans could result in a tech “brain drain.”. (Photo by Oli Scarff/Getty Images)
Oli Scarff | Getty Images
Venture capital investment in European technology startups is projected to decline for a third straight year, according to VC firm Atomico — but there are signs that things are finally stabilizing as valuations improve and interest rates fall.
Europe’s venture-backed startups are expected to secure $45 billion of investment by the end of 2024 — slightly lower than the $47 billion they raised last year, Atomico said Tuesday in its “State of European Tech” report.
Still, Atomico said this shows that European tech funding levels have finally “stabilized” despite worsening global macroeconomic conditions leading to three consecutive years of declines.
The firm stressed that the continent’s tech ecosystem is in a much better place than it was a decade ago, with funding this year still set to eclipse the $43 billion startups raised between 2005 and 2014.
In the period spanning 2015 to 2024, European startups have bagged $426 billion, dwarfing the sum of investment deployed into tech firms the decade prior.
Tom Wehmeier, head of insights at Atomico, told CNBC that Europe still has a few key areas of improvement to address before it can produce companies of similar scale to the largest tech firms in the U.S. and China.
“There’s frustrations about the continued challenges faced when it comes to regulation, bureaucracy, access to capital and this idea of scaling across the fragmented European marketplace,” Wehmeier said in an interview.
For example, pension funds in Europe face barriers to investing in venture capital funds and therefore aren’t gaining much exposure to the continent’s fast-growing startup ecosystem, Wehmeier said.
European pension funds allocate just 0.01% of the $9 trillion worth of assets they manage into venture capital funds based in the continent, according to Atomico’s report.
The 2024 publication marks the 10th anniversary since Atomico began compiling its annual report, which is produced in partnership with data firm Dealroom.
Europe’s first $1 trillion tech firm?
According to Atomico there are signs that the sector is improving. In the U.K., for example, Finance Minister Rachel Reeves last week laid out plans to consolidate 86 separate local government pension pots into eight “megafunds” to boost investment in domestic assets.
British tech advocacy group techUK said the reforms “should address barriers to greater availability of pension fund capital and encourage a vision that sees more investment into UK tech science start-ups and scale-ups.”
Reforms to pension schemes are either underway or being discussed in several other countries across Europe.
“These changes could result in billions more being made available to European scale-ups — and that’s something that could be the difference between the best and brightest companies scaling from here in Europe, versus being forced to relocate,” Wehmeier told CNBC.
Atomico said it’s optimistic about the next decade in European tech. The VC firm, which was established by Skype co-founder Niklas Zennström, is predicting the entire European tech ecosystem combined could be valued at $8 trillion by 2034, up from around $3 trillion currently.
Atomico also predicts that Europe will mint its first-ever trillion-dollar tech company in a decade’s time.
While Europe is home to several so-called “decacorns” valued at $10 billion and above, including Arm, Adyen, Spotify and Revolut, it has so far failed to produce a company valued at $1 trillion.
That’s unlike the United States, where several of the so-called “Magnificent Seven” technology companies are now worth over $1 trillion. They include Google parent company Alphabet, Amazon, Apple, Facebook-owner Meta, Microsoft, Nvidia and Tesla.
“If we can unlock capital at scale, keep the brightest minds in Europe, maintain that focus on solving really hard problems for society and the economy, that’s how we go and unlock the first trillion-dollar company,” Wehmeier said.
Hiroki Takeuchi, co-founder and CEO of GoCardless.
Zed Jameson | Bloomberg | Getty Images
LISBON, Portugal — Financial technology unicorns aren’t in a rush to go public after buy now, pay later firm Klarna filed for a U.S. IPO — but they’re keeping a watchful eye on it for signs of when the market will open up again.
Last week, Klarna made a confidential filing to go public in the U.S., ending months of speculation over where the Swedish digital payments firm would list. Timing of the IPO is still unclear, and Klarna has yet to decide on pricing or the number of shares it’ll issue to the public.
Still, the development drew buzz from fintech circles with market watchers asking if the move marks the start of a resurgence in big fintech IPOs. For now, that doesn’t appear to be the case — however, founders say they’ll be watching the IPO market, eyeing pricing and eventually stock performance.
Hiroki Takeuchi, CEO of online payments startup GoCardless, said last week that it’s not yet time for his company to fire the starting gun on an IPO. He views listing as more of a milestone on a journey than an end goal.
“The markets have been challenging over the last few years,” Takeuchi, whose business GoCardless was last valued at over $2 billion, said in a CNBC-moderated panel at the Web Summit tech conference in Lisbon, Portugal.
“We need to be focused on building a better business,” Takeuchi added, noting that “the rest will follow” if the startup gets that right. GoCardless specializes in recurring payments, transactions that come out of a consumer’s bank account in a routine fashion — such as a monthly donation to charity.
Lucy Liu, co-founder of cross-border payments firm Airwallex, agreed with Takeuchi and said it’s also not the right time for Airwallex to go public. In a separate interview, Liu directed CNBC to what her fellow Airwallex co-founder and CEO Jack Zhang has said previously — that the firm expects to be “IPO-ready” by 2026.
“Every company is different,” Liu said onstage, sat alongside Takeuchi on the same panel. Airwallex is more focused on becoming the best it can be at solving friction in global cross-border payments, she said.
An IPO is a goal in the company’s trajectory — but it’s not the final milestone, according to Liu. “We’re constantly in conversations with our investors shareholders,” she said, adding that will change “when the time is right.”
‘Stars aligning’ for fintech IPOs
One thing’s for sure, though — analysts are much more optimistic about the outlook for fintech IPOs now than they were before.
“We outlined five handles to open the [IPO] window, and I think those stars are aligning in terms of the macro, interest rates, politics, the elections are out the way, volatility,” Navina Rajan, senior research analyst at private market data firm PitchBook, told CNBC.
“It’s definitely in a better place, but at the end of the day, we don’t know what’s going to happen, there’s a new president in the U.S.,” Rajan continued. “It will be interesting to see the timing of the IPO and also the valuation.”
Fintech companies have raised around 6.2 billion euros ($6.6 billion) in venture capital from the beginning of the year through Oct. 30, according to PitchBook data.
Jaidev Janardana, CEO and co-founder of British digital bank Zopa, told CNBC that an IPO is not an immediate priority for his firm.
“To be honest, it’s not the top of mind for me,” Janardana told CNBC. “I think we continue to be lucky to have supportive and long-term shareholders who support future growth as well.”
He implied private markets are currently still the most accommodative place to be able to build a technology business that’s focused on investing in growth.
However, Zopa’s CEO added that he’s seeing signs pointing toward a more favorable IPO market in the next couple of years, with the U.S. likely opening up in 2025.
That should mean that Europe becomes more open to IPOs happening the following year, according to Janardana. He didn’t disclose where Zopa is looking to go public.
Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7.
Annabelle Chih | Bloomberg | Getty Images
Embattled server maker Super Micro Computer said on Monday that it’s hired BDO as its new auditor and submitted a plan to Nasdaq detailing its efforts to regain compliance with the exchange. The shares jumped 23% in extended trading.
“This is an important next step to bring our financial statements current, an effort we are pursuing with both diligence and urgency,” Super Micro CEO Charles Liang said in a statement.
Super Micro is late in filing its 2024 year-end report with the SEC, and said earlier this month that it was looking for a new accountant after its previous auditor, Ernst & Young, stepped down in October. Ernst & Young was new to the job, having just replaced Deloitte & Touche as Super Micro’s accounting firm in March 2023.
Super Micro said it told Nasdaq that it believes it will be able to file its annual report for the year ended June 30, and quarterly report for the period ended Sept. 30. The company said it will remain listed on the Nasdaq pending the exchange’s “review of the compliance plan.”
Shares of Super Micro soared more than twentyfold over a two year period from early 2022 until their peak in March of this year. But the stock has been hammered on troubling news about its compliance with Nasdaq. Once valued at about $70 billion, the company’s market cap was at $12.6 billion at the close on Monday, following a 16% rally during regular trading.
Super Micro has been one of the primary beneficiaries of the artificial intelligence boom, due to its relationship with Nvidia. Sales last fiscal year more than doubled to $15 billion.
On Monday, Super Micro announced that it was selling products featuring Nvidia’s next-generation AI chip called Blackwell. The company competes with vendors like Dell and Hewlett Packard Enterprise in packaging up Nvidia AI chips for other companies to access.
Super Micro was added to the S&P 500 in March, reflecting its rapidly growing business and then-soaring stock price. Less than two weeks after the index changes were announced, Super Micro reached its closing high of $118.81.
The troubles began within months. In August, Super Micro said it wouldn’t file its annual report with the SEC on time. Noted short seller Hindenburg Research then disclosed a short position in the company, and said in a report that it identified “fresh evidence of accounting manipulation.” The Wall Street Journal later reported that the Department of Justice was at the early stages of a probe into the company.
The month after announcing its report delay, Super Micro said it had received a notification from the Nasdaq, indicating that the delay in the filing of its annual report meant the company wasn’t in compliance with the exchange’s listing rules. Super Micro said the Nasdaq’s rules allowed the company 60 days to file its report or submit a plan to regain compliance. Based on that timeframe, the deadline was Monday.
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