Welcome back. Brexit is on track to occur late Friday, setting off a transition period in which the U.K and the EU are supposed to resolve the details of their divorce. Today, we look at what Brexit might mean for recruitment among tech companies in the U.K., especially those in the growing and highly competitive AI sector. Angus Loten has the story for WSJ Pro. 

Do you expect Brexit to have an impact on hiring or other dimensions of your business? Share your thoughts by sending us an email using the links at the end of this newsletter.

Also: Ginni Rometty is stepping down as CEO of IBM. She has staked much of the company's future on the development of AI.

AI companies in the U.K. brace for Brexit. Technology recruiters in the United Kingdom are grappling with uncertain labor and immigration policies, as the country on Friday officially breaks with the European Union.

The move, which begins a transition period expected to last through the end of 2020, comes as U.K. employers face an already tight labor market for technology workers, recruiters and tech industry analysts say. The U.K. tech sector includes a large and growing community of AI companies, Angus Loten reports for WSJ Pro. 

A complex challenge. Andrius Sutas, chief executive and co-founder of AimBrain, UK-based artificial intelligence startup, said job seekers have brought up concerns about Brexit and the company’s contingency plans during the interview process. “Some of the potential candidates even dropped out of our hiring process, as a U.K. company, when they received competing job offers from an E.U. entity,” Mr. Sutas said.

The U.K. AI sector has produced leaders such as DeepMind, now a subsidiary of Alphabet Inc. It is still ramping up. U.K. artificial-intelligence startups received about $3.2 billion in venture-capital funding in 2019, an increase of 23% from $2.6 billion in 2018, according to a study released this month.

Brexit is a complex challenge “with many unknowns,” said Iggy Bassi, founder and chief executive of London-based Cervest Ltd., which focuses on using AI to predict how climate change will affect governments and businesses.

The company has employees from about a dozen countries: “We continue to attract outstanding scientific and commercial talent. Brexit has not hindered this,” he said in an email.

Across the U.K. economy. More than 40% of employers said it had become more difficult to fill open job vacancies over the past year, with just 5% saying it was not an issue, according to a report by the Chartered Institute of Personnel and Development, a human-resources trade group based in London.

Ginni Rometty stepping down as CEO of  IBM. Chief Executive Ginni Rometty is stepping down after a challenging eight-year run at the top of the iconic technology company, as she struggled to deliver growth at a time other tech giants’ fortunes blossomed, The Wall Street Journal reported.

Ms. Rometty, 62 years old, will formally step down on April 6. She will be succeeded by Arvind Krishna, who heads the company’s cloud and cognitive-software division, the company said on Thursday. Jim Whitehurst—the chief executive of Red Hat, the open-source software giant that IBM acquired for about $33 billion last year—was appointed the company’s president.

It is the first time IBM will have a leadership structure with a CEO and separate president. They form a dual executive team—one member with deep IBM experience and another new to the company—focused on reviving its fortunes.

“I think she made a lot of changes,” said David Grossman, an analyst at Stifel Financial Corp. “You could argue that she didn’t make enough changes quickly enough, but I think the business has transformed during that period.”

The Red Hat acquisition was Ms. Rometty’s signature effort to fast track IBM’s revival. The deal, in the last quarter, returned the company to modest top-line growth, though analysts said the jury is out on whether Red Hat will return the hefty premium IBM paid for the business.

Ms. Rometty will continue as executive chairman of the board until the end of the year. Under her leadership, IBM has invested in AI, staking much of its future growth on the Watson platform, as well as cognitive software and the cloud more broadly.

She emphasized the need to coordinate technological change with updated business processes. "One of the reasons why some people say they haven’t gotten as much value from AI is that the workflow didn’t change. You have to reimagine the kind of work and how it should be done for this to work the best,” Ms. Rometty told WSJ Pro in January 2019.

Carrying the PyTorch. OpenAI said Thursday it will migrate to the PyTorch machine learning framework in future projects, eschewing Google’s TensorFlow platform, VentureBeat reports. Facebook publicly released the PyTorch open-source machine-learning library in October 2016, VentureBeat said. OpenAI is the San Francisco-based AI research firm co-founded by Elon Musk and others, with backing from LinkedIn co-founder Reid Hoffman and former Y Combinator president Sam Altman, VentureBeat said. OpenAI cited PyTorch’s efficiency, scalability, and adoption, VentureBeat said.

IBM rolls out labeling tool for AI training. International Business Machines Corp. introduced a tool that automatically labels images in videos when training AI object-detection models, according to ZDNet. The free tool can reduce the legwork of training AI systems to recognize specific objects, which typically takes between 200 to 500 human-labeled images. The tool is part of IBM's open-source Cloud Annotations image toolset.

AI drug compound heads to clinical trial. An AI-invented drug compound is headed for clinical human trials for the first time, the FT reports. The compound, which aims to treat obsessive-compulsive disorder, was developed by U.K.-based AI startup Exscientia and Japanese pharmaceutical firm Sumitomo Dainippon Pharma. The AI system involved generated tens of millions of potential molecules--designed to target a specific receptor in the brain involved in OCD—then decided the best ones to synthesize and test. The process took about 12 months to get to a clinical trial, compared with a typical process of nearly five years. 

The World Health Organization declares the coronavirus outbreak in China a global public-health emergency. Meanwhile, the CDC confirmed the first person-to-person spread of the virus in the U.S. (WSJ)

Amazon’s fourth-quarter sales hit record numbers, and the company’s profits beat estimates, as shipping costs for its one-day Prime program began to stabilize. (WSJ)

Microsoft Corp.'s cloud business is continuing to serve as a source of strong profits even as the company spends heavily to expand its offerings and acquire new customers.The Redmond, Wash., software giant Wednesday posted stronger fiscal second-quarter earnings on record sales, driven by growth in its cloud-computing offerings. (WSJ)

WSJ Pro Artificial Intelligence Executive Forum coming soon. Join The Wall Street Journal on March 31, 2020, in New York for the WSJ Pro Artificial Intelligence Executive Forum. Among the speakers: Tassilo Festetics, global vice president, solutions, Anheuser-Busch InBev; Robert Joseph, director, industrial strategy, Industry 4.0, Stanley Black & Decker; Jeff McMillan, chief analytics and data officer, Morgan Stanley; and Rana el Kaliouby, chief executive officer, Affectiva. Request an invitation.

Write to Enterprise Technology Editor Steven Rosenbush and Pro AI Deputy Editor John McCormick.

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