Microsoft CEO Satya Nadella has criticized the business practices of leading artificial intelligence developers, arguing that frontier AI companies are applying a double standard by relying on publicly available data to train their models while restricting others from using distillation techniques to build competing systems.

In a post on X on Sunday, Nadella questioned what he described as an imbalance in the AI ecosystem, where model developers benefit from broad access to public information but seek to prevent others from learning from their models.

“While the great innovation that comes from model providers having fair use rights to train models on public data is needed, I find it ironic that the status quo is to then turn around and impose restrictive terms on distillation, and to reserve the right to learn from customer usage and interaction data,” Nadella wrote.

He added that if “learning only flows in one direction,” the companies controlling AI infrastructure would capture most of the economic value while the creators of the underlying knowledge receive little in return.

Although Nadella did not name any company, his remarks appeared to target Anthropic, which has been among the most vocal critics of model distillation. Distillation is a technique that enables developers to train smaller or cheaper AI models using the outputs of more advanced systems, significantly reducing the time and computing resources required to build competitive models.

The comments come amid escalating tensions between major AI developers over intellectual property, data usage and competition, as governments in the United States and China tighten scrutiny of frontier AI technologies.

Anthropic has repeatedly argued that unrestricted distillation threatens innovation by allowing competitors to replicate years of research at a fraction of the cost. In February, the company said distillation enables rivals to acquire “powerful capabilities from other labs in a fraction of the time, and at a fraction of the cost, that it would take to develop them independently.”

The debate intensified last month when Anthropic accused Alibaba of carrying out what it described as “the largest known distillation attack” against the company to date in a letter sent to U.S. lawmakers. Anthropic alleged that Chinese firms had attempted to extract capabilities from its Claude models, though Alibaba did not publicly respond to the accusations.

Nadella’s criticism also touches on a broader legal and ethical dispute surrounding how frontier AI models are developed. Companies including Anthropic, OpenAI and Google DeepMind train their systems using vast amounts of publicly available text, images and other online content. That practice has triggered numerous copyright lawsuits from publishers, authors, artists, and media organizations, who argue that their work has been used without permission or compensation.

Microsoft itself has largely avoided positioning Azure as a developer of proprietary frontier models, instead emphasizing its role as an infrastructure provider. Since OpenAI ended Microsoft’s exclusive cloud hosting arrangement earlier this year, the company has increasingly adopted a more model-agnostic strategy, supporting a growing portfolio of AI models through Azure AI Foundry, including offerings from OpenAI, Meta, Mistral, xAI, DeepSeek and other developers.

Nadella’s latest comments reinforce that strategy by encouraging enterprises to reduce dependence on any single AI model provider.

He argued that businesses should own their AI infrastructure, retain control over their proprietary knowledge and establish independent evaluation and learning systems instead of relying entirely on external foundation models.

According to Nadella, organizations should build their own “learning loop,” allowing AI systems to continuously improve using enterprise-specific knowledge while maintaining strict control over sensitive data.

“That is why enterprises need a real trust boundary for their human capital and token capital to compound,” he wrote. “And it is a hard boundary across which nothing crosses, not even the intelligence exhaust, without consent.”

His reference to “intelligence exhaust” reflects growing concerns among enterprise customers that prompts, usage patterns, and model interactions could become valuable training data for AI providers. While major AI companies maintain enterprise privacy commitments, businesses continue to seek stronger guarantees that proprietary information will not be used to improve third-party models.

The issue has become more important as corporations deploy generative AI across software development, legal services, finance and healthcare, where sensitive commercial data represents a key competitive asset.

Nadella’s comments also echo criticism from other industry leaders. Palantir CEO Alex Karp recently criticized the industry’s “tokenmaxxing” business model, arguing that enterprises should control their own compute infrastructure, models and data rather than depend on external AI providers. Elon Musk has similarly accused Anthropic of using copyrighted material to train its models while opposing the use of distillation by competitors.

The dispute highlights a growing divide within the AI industry over who ultimately owns the value generated by artificial intelligence. Frontier model developers believe that restricting distillation is necessary to protect billions of dollars invested in research and computing infrastructure. Infrastructure providers and enterprise customers contend that organizations deploying AI should retain ownership of the data, workflows, and institutional knowledge they generate while using these systems.

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China’s economy is expected to have lost momentum in the second quarter as soft consumer spending, weak private investment and a prolonged property downturn outweighed the benefits of resilient exports, bolstering expectations that Beijing will roll out additional fiscal support in the second half of the year.

A Reuters poll of 54 economists forecasts that China’s gross domestic product (GDP) expanded 4.5% year-on-year in the April-June quarter, slowing from 5.0% in the first quarter. If confirmed, the figure would place growth at the lower end of the government’s 4.5%-5.0% annual target and underscore the increasingly uneven nature of China’s post-pandemic recovery.

The slowdown comes even as exports have remained surprisingly resilient, supported by robust global demand for AI-related products, front-loaded shipments to the United States ahead of possible new tariffs, and aggressive pricing by Chinese manufacturers. However, economists say the export boom has failed to generate a broad-based recovery in domestic demand, leaving policymakers with the challenge of reviving household confidence while managing structural weaknesses in the economy.

Exports Remain The Economy’s Main Growth Engine

China’s external sector has continued to outperform expectations this year, helping offset weakness at home.

Exports due to be released on Tuesday are expected to show another solid expansion in June, although at a slower pace than in previous months. Manufacturers have accelerated shipments to the United States before the possible introduction of additional tariffs, while Chinese technology companies have benefited from sustained global demand for artificial intelligence infrastructure, electronics and related manufacturing.

Competitive pricing has also enabled Chinese exporters to gain market share as consumers worldwide remain sensitive to higher living costs. The strength of exports has helped stabilize industrial production, particularly in sectors linked to semiconductors, electronics, electric vehicles and advanced manufacturing.

Yet economists caution that export-led growth alone cannot sustain the broader economy.

Domestic Demand Remains China’s Biggest Weakness

The principal drag on growth continues to be domestic demand. Consumer spending has remained subdued despite government efforts to stimulate household consumption through subsidy programmes and targeted support measures.

Private investment has also weakened as businesses remain cautious about expanding capacity amid uncertain demand and ongoing weakness in the property sector. China continues to face a pronounced supply-demand imbalance, with factories producing more goods than domestic consumers are willing or able to purchase.

That imbalance has contributed to persistent disinflationary pressures and raised concerns about excess industrial capacity across several manufacturing industries.

Analysts at Goldman Sachs said the composition of China’s growth has become increasingly uneven.

“Growth has become more uneven: exports continue to support headline activity, but domestic demand has softened notably,” Goldman Sachs analysts wrote.

“Moreover, the boost from exports has not translated into a stronger labor market or meaningful profit improvement, limiting the pass-through from external demand to domestic growth.”

The labor market remains a particular concern because subdued hiring and wage growth continue to weigh on household confidence and discretionary spending.

Property Downturn Continues To Weigh On Confidence

China’s real estate sector remains one of the largest obstacles to a stronger recovery. Years of declining home sales, falling property prices, and financial stress among developers have reduced household wealth and dampened consumer sentiment.

Since real estate has historically accounted for a significant share of household assets and local government revenues, the prolonged downturn continues to affect consumption, investment, and fiscal conditions across much of the country.

While Beijing has introduced targeted measures to stabilize the housing market, analysts say the sector has yet to establish a durable recovery.

Quarterly Growth Also Expected To Moderate

On a sequential basis, China’s economy is also expected to have slowed. Economists forecast quarter-on-quarter GDP growth of 0.9% during April through June, down from 1.3% in the first quarter.

The moderation suggests the economy lost momentum after benefiting from policy support and stronger exports earlier in the year.

China’s National Bureau of Statistics will release second-quarter GDP alongside June retail sales, industrial production, and fixed-asset investment data on July 15, providing investors with a comprehensive snapshot of the economy’s performance.

Investors are now focusing on a Politburo meeting expected later this month, where China’s top leadership is expected to determine economic policy priorities for the remainder of the year.

Most economists expect Beijing to introduce additional fiscal measures rather than aggressive monetary easing. The government has already set a budget deficit target of around 4% of GDP for 2026, one of the highest in recent years, and plans significant government bond issuance to finance infrastructure investment and other growth-supporting programmes.

Analysts believe authorities will accelerate spending during the second half of the year after much of the initial policy support was front-loaded earlier in 2026.

Capital Economics expects fiscal policy to become the primary driver of growth.

“China’s growth should pick up over the second half of this year as fiscal support ramps up,” the consultancy said.

“But domestic overcapacity will remain entrenched, leaving China’s economy reliant on exports for growth.”

Unlike fiscal policy, monetary policy is expected to remain relatively restrained. Economists surveyed by Reuters expect the People’s Bank of China to leave its benchmark seven-day reverse repo rate unchanged throughout the remainder of 2026.

They also expect the weighted average reserve requirement ratio (RRR) to remain steady through the third quarter before a possible 20-basis-point reduction during the fourth quarter.

The central bank has maintained policy rates and reserve requirements unchanged since May 2025, instead relying on short-term liquidity operations to ensure adequate funding conditions while continuing reforms to its monetary policy framework.

Analysts say policymakers have greater flexibility to support growth through fiscal spending than through interest-rate cuts, particularly given concerns about financial stability and capital outflows.

Inflation Remains Subdued

China’s inflation environment remains markedly different from that of many advanced economies.

Reuters’ poll projects consumer prices will rise 1.2% this year, well below the government’s target of around 2%. Inflation is expected to remain at approximately 1.2% in 2027, reflecting persistent weak domestic demand and excess manufacturing capacity.

The subdued inflation outlook gives Beijing room to maintain accommodative economic policies if growth weakens further.

Looking beyond the current quarter, economists expect China’s growth to stabilize modestly before gradually slowing over the coming years. The Reuters survey forecasts GDP growth of 4.6% in the third quarter before easing to 4.5% in the fourth quarter.

For the full year, China’s economy is expected to expand 4.6% in 2026, down from 5.0% in 2025, before slowing further to 4.4% in 2027.

The projections highlight the structural challenges facing the world’s second-largest economy.

While China’s export sector continues to benefit from its dominant position in global manufacturing and growing demand for AI-related products, sustainable long-term growth will ultimately depend on reviving domestic consumption, restoring confidence in the property market and encouraging stronger private-sector investment.

Samsung Electronics said on Monday it will accelerate the launch of its first semiconductor fabrication plant in Yongin, bringing forward the start of operations to 2029 from the previously expected 2030-2031 timeframe as it races to expand production capacity for artificial intelligence memory chips.

The decision follows intensifying global competition among chipmakers to meet soaring demand for advanced semiconductors used in AI data centers, where shortages of high-bandwidth memory (HBM) chips have become one of the industry’s biggest supply constraints.

Samsung said its first fabrication plant in Yongin will now begin operating up to two years earlier than originally planned.

“Plans to begin operations at its first fabrication plant in Yongin by 2029, which is one to two years ahead of the original schedule,” a company spokesperson said.

The accelerated construction schedule reflects the rapid expansion of AI infrastructure worldwide.

Technology companies are investing hundreds of billions of dollars in new data centers to support increasingly powerful AI models, driving unprecedented demand for memory chips that work alongside AI processors supplied by companies such as Nvidia.

High-bandwidth memory has emerged as one of the most critical components in AI systems because it enables processors to rapidly access and transfer the massive amounts of data required to train and run large language models. Strong demand has created persistent supply shortages, prompting semiconductor manufacturers to accelerate capacity expansion projects that would normally take several years to complete.

By bringing forward operations in Yongin, Samsung aims to increase output sooner and strengthen its position in the fast-growing AI memory market, where domestic rival SK Hynix currently holds a technological lead in advanced HBM products.

Government Pushes Semiconductor Expansion

Samsung’s announcement follows a broader national strategy to sustain South Korea’s dominance in memory-chip manufacturing.

Last month, Samsung and SK Hynix each announced plans to invest hundreds of billions of dollars in expanding domestic semiconductor production after President Lee Jae Myung called for measures to reduce regional economic disparities while strengthening one of the country’s most strategically important industries.

The government is seeking to leverage South Korea’s leadership in memory chips to capture a larger share of the global AI supply chain.

Under the national plan, authorities aim to double the country’s memory-chip production capacity within five years. That strategy includes accelerating construction of Samsung’s and SK Hynix’s fabrication facilities in Yongin while also developing a new semiconductor cluster in Gwangju.

The initiative underpins the growing recognition that semiconductor manufacturing has become both an economic priority and a matter of national strategic importance as countries compete to secure critical technologies that underpin artificial intelligence.

The Yongin project forms the centerpiece of South Korea’s long-term semiconductor strategy.

Located south of Seoul, the city is being developed into one of the world’s largest semiconductor manufacturing hubs, bringing together fabrication plants, suppliers, research facilities, and supporting infrastructure in a single ecosystem.

Clustering production in one region is expected to improve supply-chain efficiency, accelerate innovation, and reduce logistics costs while strengthening cooperation between manufacturers and component suppliers.

The concentration of advanced chip production also positions South Korea to respond more quickly to surging global demand as AI adoption expands across industries.

Samsung’s accelerated timetable comes as competition in the AI memory market becomes increasingly intense.

SK Hynix has established itself as the leading supplier of high-bandwidth memory chips used in Nvidia’s AI accelerators, benefiting from a prolonged supply shortage that has driven strong pricing and record profitability across the sector.

Samsung has been investing heavily to narrow that gap, expanding HBM production, improving manufacturing yields and increasing capital expenditure on advanced memory technologies.

Earlier production at Yongin could help Samsung increase supply more quickly and compete more aggressively for orders from hyperscale cloud providers and AI infrastructure companies.

Semiconductor manufacturers globally are accelerating investments as AI infrastructure spending reaches unprecedented levels. Technology companies are collectively expected to spend hundreds of billions of dollars this year on AI-related infrastructure, including processors, memory, networking equipment and data centers.

That investment wave has created sustained demand across the semiconductor supply chain, encouraging manufacturers to shorten construction timelines wherever possible.

For Samsung, bringing its Yongin fabrication plant online ahead of schedule not only supports South Korea’s ambition to expand domestic chip production but also strengthens the company’s ability to compete in one of the fastest-growing segments of the semiconductor industry.

With demand for AI memory expected to remain robust and supply likely to stay constrained over the medium term, accelerating new manufacturing capacity could prove critical in capturing future market share and boosting Samsung’s position in the global race for AI hardware leadership.

U.S. Treasury yields were little changed on Monday as investors weighed renewed military escalation between the United States and Iran against a packed week of economic data that could reshape expectations for Federal Reserve policy.

The benchmark 10-year Treasury yield was broadly unchanged at 4.473%, while the two-year yield, which is more sensitive to monetary policy expectations, rose just over one basis point to 4.223%. The 30-year Treasury bond yield was little changed at 5.071%.

The muted move in the bond market masked a sharp shift in global risk sentiment after the fragile ceasefire between Washington and Tehran came under increasing strain over the weekend, reigniting concerns over energy supplies, inflation and the trajectory of U.S. interest rates.

The latest market jitters followed a fresh round of military exchanges after an Iranian strike on a commercial vessel prompted retaliatory U.S. airstrikes. Iran responded by launching missile and drone attacks on U.S. military facilities across Kuwait, Bahrain, Jordan, Oman and Qatar, according to Iranian state media, significantly expanding the geographical scope of the conflict.

The confrontation has also reignited tensions over the Strait of Hormuz, one of the world’s most important energy corridors through which roughly one-fifth of global oil shipments normally pass.

The latest hostilities have cast fresh doubt over the interim peace agreement signed last month that was intended to reopen the waterway permanently and provide a 60-day framework for negotiating an end to the war. Instead, the renewed fighting has revived fears of prolonged supply disruptions in global energy markets.

Oil Extends Rally As Supply Risks Grow

Oil prices climbed sharply as traders priced in the increasing possibility of further disruptions to crude exports from the Gulf. Brent crude futures rose about 3% to around $78.50 per barrel, while West Texas Intermediate (WTI) advanced more than 2.5% to roughly $73.25.

The gains add to the broader surge in oil prices following President Donald Trump’s declaration last week that the interim agreement with Iran was “over.” Since then, escalating military action and uncertainty surrounding shipping through the Strait of Hormuz have reinforced expectations that energy markets could remain tight for an extended period.

For financial markets, higher oil prices represent a dual challenge. While they support energy producers, they also increase transportation and manufacturing costs, raising the likelihood that inflation remains elevated for longer.

The prospect of persistently higher energy prices has led investors to reassess the Federal Reserve’s policy path.

Markets are now pricing a roughly 71% probability of a September interest-rate increase, up from approximately 63% a week earlier, according to CME’s FedWatch Tool.

Higher oil prices complicate the Fed’s inflation fight because energy costs eventually feed into transportation, food, manufacturing, and consumer prices. That dynamic has reinforced expectations that policymakers may need to keep borrowing costs elevated for longer than previously anticipated.

This week’s economic calendar is therefore expected to carry added significance.

Investors will closely monitor:

• June Consumer Price Index (CPI) data on Tuesday.
• Producer Price Index (PPI) figures on Wednesday.
• Retail sales data.
• Weekly jobless claims.
• July consumer sentiment data on Friday.

Markets will also focus on Federal Reserve Chair Kevin Warsh’s first congressional testimony on Tuesday and Wednesday for signals on inflation, economic growth, and the future path of monetary policy.

Alex Guiliano, Chief Investment Officer at Resonate Wealth Partners, said investors are trying to determine whether the U.S. consumer remains resilient.

“The real question is whether these reports will validate the strong spending narrative, or if mounting geopolitical risks and elevated interest rates have had a more significant impact on the consumer over the last few months,” he said.

Gold Weakens As Yields And Rate Expectations Rise

Gold prices fell for a second consecutive session as higher Treasury yields and expectations of tighter monetary policy outweighed the metal’s traditional safe-haven appeal. Spot gold declined 1.2% to $4,072.49 per ounce, while August U.S. gold futures fell 0.8% to $4,081.30.

Ordinarily, geopolitical crises support demand for bullion. However, analysts said inflation concerns and rising bond yields have become the dominant drivers of the precious metals market.

Ole Hansen, commodity strategist at Saxo Bank, said higher oil prices have strengthened expectations that the Federal Reserve may need to tighten policy further.

“Renewed hostilities in the Gulf rekindle concerns about inflation and the risk of further Federal Reserve tightening, creating additional headwinds through higher bond yields and a stronger dollar,” he said.

He added that ongoing tensions in the Middle East could produce sharp swings in bullion prices.

“Focus on the Middle East and higher oil prices combined with low liquidity during the summer holiday period are key risks that may drive gold prices outside their current consolidation range of $3,900-$4,200.”

Higher interest rates reduce the appeal of gold because the metal generates no income, increasing its opportunity cost relative to interest-bearing assets such as government bonds.

Investor positioning also softened.

Data released on Friday showed COMEX gold speculators reduced their net long positions by 1,964 contracts to 114,854 during the week ended July 7, reversing part of the optimism that had built over the previous three weeks.

Other precious metals also retreated.

Spot silver fell 1.6%, platinum slipped 0.3%, while palladium declined 0.7%.

Dollar Surrenders Early Gains

The U.S. dollar initially strengthened as investors sought traditional safe-haven assets following the latest military escalation.

However, those gains faded later in the session.

The Dollar Index, which measures the U.S. currency against six major peers, rose as much as 0.3% before reversing to trade 0.2% lower at 100.83.

The euro rose 0.15% to $1.1433, while sterling traded little changed near $1.339. The Australian dollar edged 0.1% lower to $0.694.

Thomas Mathews, Head of Markets for Asia Pacific at Capital Economics, said the dollar may not benefit from geopolitical tensions to the same extent as earlier in the conflict.

“The dollar was obviously the big winner from the war last time,” he said.

However, he noted that circumstances have changed.

“It’s not clear to me the greenback would gain as much this time if the situation continued to worsen.”

Markets have already substantially repriced expectations for Federal Reserve policy, limiting the scope for another sharp appreciation in the U.S. currency.

Yen Retreats After Pension Report

The Japanese yen weakened after Reuters reported that Tokyo has no immediate plans to alter the investment allocations of its massive state pension funds.

The dollar rose 0.2% to around 162.05 yen, pushing the Japanese currency back toward levels that have previously prompted official intervention.

The move partially reversed Friday’s rally, which followed comments from Finance Minister Satsuki Katayama indicating the government wanted pension funds, including the Government Pension Investment Fund (GPIF), to increase investments in domestic financial assets.

Reuters reported that while policymakers are exploring ways to encourage greater domestic investment, no immediate changes to GPIF’s strategic asset allocation are planned.

Chris Turner, Head of Global Markets at ING, said currency intervention remains a possibility but warned it is unlikely to reverse the yen’s broader weakness without changes in underlying economic conditions.

“Intervention alone cannot reverse the current bull trend,” he said. “For that to happen, energy prices need to come lower and the Fed must conclude that it does not need to hike rates after all.”