What's up: China’s Huawei develops new AI chip; new thoughts on how AI 'thinks;' Meta’s ‘digital companions’ will talk sex with users—even children

Good morning, CIOs. Business is all in on AI, with private generative AI investment last year hitting $33.9 billion globally, according to the 2025 AI Index report released this month by the Stanford Institute for Human-Centered Artificial Intelligence. 

But measurable financial return? That's another story, says WSJ Columnist Steven Rosenbush. Companies using AI claim to find cost savings of less than 10%, according to another report, McKinsey’s State of AI survey.

The numbers reflect what Stanford University economist and professor Erik Brynjolfsson calls a "productivity paradox," in which AI improvements haven’t led to a corresponding surge in productivity

For companies to get the most out of their AI efforts, Brynjolfsson advocates for a task-based analysis, in which a company is broken down into “atomic units of work” that are evaluated for potential AI assistance. As AI is applied, the results are measured against key performance indicators, or KPIs.

This initial assessment is, however, just the beginning. Successfully scaling AI across the enterprise requires the right infrastructure as well as a readiness to target tasks that are both frequent and generalizable, demanding a careful assessment of existing processes and a willingness to adapt, experts tell Rosenbush. Read the story.

We now know how AI ‘thinks’—and it’s barely thinking at all. The WSJ's Christopher Mims finds a growing body of work that may challenge claims of AI attaining human-level smarts in the near future. In contrast to how humans reason, today's AI develops what one researcher calls “bags of heuristics,” or problem-solving shortcuts that, while effective, lack the depth of genuine understanding.

It may also explain why many models are so massive, says Mims. Models have to memorize an endless list of rules of thumb, and can’t compress that knowledge into a mental model like a person can.

Meta’s ‘digital companions’ will talk sex with users—even children. A Wall Street Journal investigation finds that Meta’s official AI helper and a vast array of user-created chatbots will engage in and sometimes escalate discussions that are decidedly sexual—even when the users are underage or the bots are programmed to simulate the personas of minors.

Test conversations between the WSJ and Meta's AI also show that bots deploying celebrity voices, licensed from actresses such as Kristen Bell and Judi Dench, were equally willing to engage in sexual chats.

Meta in a statement called the Journal’s testing manipulative and unrepresentative of how most users engage with AI companions. But the company still made multiple alterations to its products after the Journal shared its findings. Read the story.

Cut off from Western chips and the Shenzhen-based company has emerged as a champion of China's nascent AI chip-making industry, the Journal reports.  Huawei this year is poised to ship more than 800,000 Ascend 910B and 910C chips to customers including state-owned telecommunications carriers and private AI developers such as TikTok parent ByteDance.

Tech workers are just like the rest of us: Miserable at work. A few years ago, the tech talent wars were so fierce that in some notorious cases people were being hired to do virtually nothing, says the WSJ's Katherine Bindley. Now employees find themselves doing the work of multiple laid-off colleagues.

• Investors will get a fresh look at the Magnificent Seven’s prospects in the coming days when Meta, Microsoft, Apple and Amazon report earnings.
• The rare-earth mineral dysprosium, used for magnets in electric-vehicle motors, is among exports China slowed in response to Trump’s trade war
• Deepfakes of FT tech columnist Martin Wolf are popping up all over Facebook and Instagram and efforts to squash them have proven less than effective. "I find it hard to believe that Meta, with its vast resources, could not do better," Wolf writes.

Leaders of some of the nation’s most prestigious universities have assembled a private collective to counter the Trump administration’s attacks on research funding and academic independence. (WSJ)

President Trump plans to sign an executive order on Monday escalating his battle against Democratic-led states and cities that don’t fully cooperate with federal immigration authorities. (WSJ)

CEOs are pausing travel, delaying construction projects and slowing hiring in response to tariffs and cloudy economic forecasts; a bid to ‘control the controllables.’ (WSJ)

The WSJ CIO Journal Team is Steven Rosenbush, Isabelle Bousquette and Belle Lin.

The editor, Tom Loftus, can be reached at thomas.loftus@wsj.com.