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China Stocks, Uber Drones, Elon’s Tunnel: CEO Daily for October 22, 2018

Good morning.

I’ve written in this space before about the gap between business excitement over AI and actual implementation of AI. But that gap is starting to close. The November issue of Fortune features “25 Ways Artificial Intelligence is Changing Business,” and it’s available online this morning. While the applications don’t yet live up to the hype, there is still a lot going on.

Surprisingly, some of the biggest applications are in HR—usually considered a backwater in business trends. Companies like Vodafone, Nielsen and Unilever are using a smartphone game designed by AI start-up Pymetrics that measures cognitive and emotional traits using algorithms designed to avoid racial and gender bias, before a candidate ever does an in-person interview. Mortgage lenders also are using AI to try and predict a borrower’s likelihood of default. AI is becoming a critical part of cybersecurity strategies. And it’s also making big inroads in healthcare. Take time to read the entire package—an impressive reporting tour de force by the Fortune team—here.

Separately, Deloitte this morning is releasing a study of early AI adopters, covering 1,100 senior executives with direct involvement in their companies’ AI investments (only 17% come from traditional tech companies.) A few takeaways:

  • The majority of early adopters—59%—are taking the “easy route” to AI, using enterprise software solutions with AI baked in–like Salesforce’s Einstein. But they recognize they eventually will need more custom solutions to meet their high expectations for AI.
  • “Transformation” will take longer than originally thought, as companies learn more about the technology’s vulnerabilities and limitations. Only 56% said AI would transform their companies in the next three years, compared to 76% who said the same in last year’s survey.
  • But despite more realistic expectations, AI investment is still on the rise. 88% said they would boost spending on AI in the coming year, and 54% said they would increase spending by 10% or more.

You can read the Deloitte report here. Other news below.

Alan Murray

Top News

China Stocks

The Shanghai Composite just saw its biggest spike in over three years, rising 4.1% on Monday on the back of reassuring noises from Chinese officialdom. The Shenzhen Composite also popped by 4.9%. Chinese financial regulators said Friday that the country’s economic fundamentals were sound, and the recent slump was down to external factors such as U.S.-China trade tensions. BBC

Uber Drones

Uber intends to be delivering food via drone by 2021, according to a new job posting at the ride-hailing firm. The posting was for an operations executive to get the program ready by next year and rolled out across multiple markets within three years. Uber pulled the ad after the Wall Street Journal came knocking, claiming the posting “does not fully reflect our program, which is still in very early days.” WSJ

Elon’s Tunnel

Elon Musk’s Boring Company will open its first tunnel to the public on Dec. 10, the Tesla/SpaceX/Boring CEO revealed (via Twitter, of course). The tunnel, underneath the Los Angeles suburb of Hawthorne, runs around two miles from a SpaceX property. And yes, Musk will be giving the public free rides the day after opening, to show it off. Fortune

Saudi Arms

German Chancellor Angela Merkel has pressed pause on her country’s arms exports to Saudi Arabia, in the light of the killing of journalist Jamal Khashoggi. Merkel: “There is an urgent need to clarify what happened—we are far from this having been cleared up and those responsible held to account…I agree with all those who say that the, albeit already limited, arms exports can’t take place in the current circumstances.” Deutsche Welle

Around the Water Cooler

Italian Showdown

The Italian government looks set to stand by its plans for a 2.4% deficit target next year, which will deeply annoy the European Commission. Italy’s debt is more than 130% of its annual economic output, more than twice the EU cap. The previous Italian government was targeting a 0.8% deficit for 2019, but then the populists took over. On Friday, Moody’s cut Italy’s rating to one notch above junk status. Bloomberg

UBS in China

UBS told some of its staff to hold off traveling to China, while it looks into a matter regarding one of its advisors there. The Chinese authorities apparently asked one of the Swiss wealth manager’s bankers not to leave the country, as they want to question her about something. She isn’t detained as such, but the episode is enough to cause concerns back at headquarters. Financial Times

Alibaba Cloud

Alibaba is building out its EMEA cloud with the addition of two new data centers in the U.K.—its first in that country, joining facilities in Frankfurt and Dubai. “The United Kingdom is one of the fastest growing European markets for Alibaba Cloud, and many of our customers are in key verticals such as retail, finance, media, education and research, and logistics,” a spokesperson told CNBC. CNBC

Canadian Bakin’

Canadian stores that have the newfound ability to legally sell recreational marijuana are discovering major supply problems. It appears demand has far exceeded expectations, leading to a rash of “out of stock” signs. Fortune

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