China Defiant, TSMC Virus, HSBC Expenses: CEO Daily for August 6, 2018

August 6, 2018, 9:28 AM UTC

Good morning.

Apple won the prize for becoming the first trillion-dollar company in the U.S. last week. But barring a recession, I suspect it won’t be long before Alphabet, Amazon and Microsoft—each valued at between $800 billion and $900 billion—join the club.

Why? Because all four companies—along with other data-rich firms like IBM, Facebook, Salesforce and Chinese giants Baidu, Alibaba and Tencent—are investing heavily in artificial intelligence. And almost every thoughtful business leader I know thinks AI will transform the business landscape in the decade to come. Sales and profits will inevitably follow.

How should other companies, not directly involved in this race of giants, prepare for the technological onslaught? That was the subject of a virtual gathering Fortune held for members of its CEO Initiative last week. Joining us was Accenture’s Paul Daugherty, co-author of the book Human + Machine; Reimagining Work in the Age of AI. He focused his comments on what kind of skills companies will need in the AI future. Some excerpts:

“It isn’t necessarily the STEM skills, and it isn’t necessarily the coders and machine learning specialists…There is one new set of jobs where people will need to help AI, to help the machines, and we call these ‘trainers, explainers and sustainers… We have been hiring people like sociologists, psychologists and even poetry majors who really understand the nuance of language and can help train the engineers and the machines. Then there is a second broad category of people where AI and the like will help them do their jobs more effectively, increase their productivity, and give them, in essence, new superpowers…

“It’s going to be hard to find people with these skills in the market because some of these things don’t exist at scale in the market now. So we believe the right approach is (for companies) to invest in new learning platforms so you are able to bring your employees along as these new skills emerge…

“We did an interesting survey as part of the book (in which) we asked executives if their workforce was ready for AI, and 65% said ‘no, our workforce isn’t ready.’ Then we asked: ‘Are you investing in training for your workforce,’ and only 3% said ‘yes.'”

That should be a wakeup call for companies. More news below.

Top News

China Defiant

Chinese state media insisted over the weekend that the country was ready to deal with the fallout of the trade war with the U.S., despite President Donald Trump's claims that he has the upper hand. "Considering the unreasonable U.S. demands, a trade war is an act that aims to crush China’s economic sovereignty, trying to force China to be a U.S. economic vassal," said a Global Times editorial. Bloomberg

TSMC Virus

The Taiwanese chipmaker TSMC, which is a major Apple supplier, was hit by a virus over the weekend that reportedly crippled its systems. The company blamed the infection on "misoperation during the software installation process for a new tool," and said no confidential information was compromised. However, the infection has led to shipment delays, and TSMC expects to take a $255 million hit. CNN

HSBC Expenses

HSBC's Q2 profitability took a hit due to higher operating expenses from IT investments and Chinese expansion. The bank's operating expenses reached $8.1 billion in the quarter, 7% up year-on-year. Pre-tax profits were down 1%, disappointing analysts, and net profit was up 5.6%. Financial Times.

Infowars Purge

Apple has become the latest content indexer to scrub Infowars' conspiratorial podcasts from its lists. The reason? As with YouTube and Spotify, which have also taken action against Alex Jones's operation, the reason is hate speech. "Podcasts that violate these guidelines are removed from our directory making them no longer searchable or available for download or streaming," said Apple. "We believe in representing a wide range of views, so long as people are respectful to those with differing opinions." Buzzfeed News

Around the Water Cooler

Tech Stocks

Deutsche Bank thinks it's "premature" to suggest that "tech has lost its market leadership position," and investors should still embrace tech stocks. Yes, 18% of the S&P 500's IT sector is down more than 20% from year-to-date highs, but the sector is still 28% up over the last year. Larry Adam, chief investment officer of the bank's Wealth Management Americas unit also noted that tech firms have had record cash flows leading to robust dividends and share buybacks. CNBC

Trump Admission

President Trump yesterday admitted that Donald Trump Jr.'s meeting with Kremlin-linked individuals in 2016 was "a meeting to get information on an opponent," though he said this was legal and he didn't know about it. The president's son had said in a statement—reportedly dictated by President Trump—that the meeting was about the adoption of Russian children. New Yorker

Goldman Sachs

Goldman Sachs will reportedly name Jim Esposito as global co-chief of its trading arm, alongside Ashok Varadhan. Varadhan's co-heads resigned in June, and the fact they weren't replaced was seen as unusual. Wall Street Journal

Fortnite Decision

The Android version of Epic's hit game Fortnite will be made available through the company's website and not through the official Google Play store. It's a move that's designed to avoid Google taking a 30% distribution fee for the wildly popular game and, if other production houses follow, that could be very problematic for Google. Fortune

This edition of CEO Daily was edited by David Meyer. Find previous editions here, and sign up for other Fortune newsletters here.

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