The Morning Download: China’s Tech Boom Masks Deep Economic Strains

What's up: Marketers face pressure, layoffs over AI savings; data-center construction set to pass office-building construction; readers share their fave books of the year.

Good morning. DeepSeek’s breakout this year showed China can go toe-to-toe with the U.S. in top-tier tech. As access to Western tech narrowed, Beijing has leaned hard into self-sufficiency, lifting R&D spending almost 50% since 2020.

But as the WSJ's Brian Spegele reports, Beijing’s gains are increasingly out of whack, with the state’s heavy-handedness in directing investments fueling enormous waste.

Too many money-losing companies. China had 129 EV and plug-in hybrid brands last year, but only 15 are likely to make it to 2030, according to AlixPartners. And with more than 150 humanoid-robot companies now in the mix, officials are already warning of a looming glut.

Big parts of China's economy remain a mess. The hundreds of billions of dollars China spends each year on domestic technology also eats away at funding for rural education. Home prices are down 17% since the pandemic, according to the Bank for International Settlements, and uncertainty over China’s economic future has many people tightening their belts.

Rapid investment cycles, crowded sectors, a thinning safety net and growing government sway over tech decisions? It all sounds so... familiar. But China isn’t just nudging markets, it’s directing capital at industrial-policy scale. The lesson for both China and the U.S.: Don’t mistake technological momentum for economic stability, and don’t assume the tech dynamics in one country map cleanly to the other.

Spending on data-center construction looks poised to surpass office-building construction as soon as next year, according to U.S. Census Bureau data.

Real-estate firm JLL predicts that North America could see $1 trillion worth of new construction of data centers between 2025 and 2030. 

But there are limiting factors to the boom, starting with securing electricity, which remains a question mark in many areas. The Trump administration's decision Monday to halt construction of all U.S. offshore wind projects, removing a source of electricity generation, probably did not help. 

Also on Monday, one data center customer recently made a move to help address that electricity issue. 

Alphabet agreed to buy renewable-energy developer Intersect for $4.75 billion in cash and debt, WSJ reports. The deal adds projects in development, gigawatts of generation capacity, and Intersect’s team, while keeping operations separate. 

Promised savings is about to get all too real for marketing departments, the WSJ Leadership Institute's Patrick Coffee reports. 

Thirty-six percent of chief marketing officers expect to reduce head count over the next 12 to 24 months “by utilizing AI or eliminating redundancies,” according to a new survey from executive search firm Spencer Stuart based on November interviews with approximately 90 CMOs and other marketing leaders.

At larger companies, the outlook was grimmer. Forty-seven percent of respondents at companies with $20 billion or more in revenue said they expect to cut staff over the next 12 to 24 months, and 32% already did so this year, the survey found.

The key factor is growing pressure to show returns on companies’ significant investments in AI, said Richard Sanderson, who leads Spencer Stuart’s marketing, sales and communications officer practice.

American customers are hoarding products in anticipation of restrictions against Chinese manufacturers DJI and Autel Robotics

The Federal Communications Commission on Monday capped a decade-long effort against China-made drones, banning all drones and critical components made in a foreign country, and all communications and video-surveillance equipment from major Chinese drone manufacturers SZ DJI Technology and Autel Robotics.

Drone owners are buzzing mad. The ban has been met with uproar from large swaths of the nearly half a million certified American commercial drone pilots. DJI accounts for around 70% to 90% of commercial, local-government and hobbyist drones in the U.S. 

Italy’s antitrust agency fined Apple over $114.8 million for abusing its dominance via its App Tracking Transparency policy, WSJ reports. The regulator said Apple forces developers into duplicative consent requests that restrict data collection for advertising and harms partners. Apple plans to appeal.

Nvidia has told Chinese clients it aims to start shipping its second-most powerful AI chips to China before the Lunar New Year holiday in mid-February, people familiar with the matter told Reuters. The chipmaker plans to fulfil initial orders from existing stock, with shipments expected to total 5,000 to 10,000 chip modules - equivalent to about 40,000 to 80,000 H200 AI chips, the first and second sources said.

ChatGPT is releasing its own version of Spotify Wrapped. That is, the OpenAI-owned chatbot is now rolling out an annual review feature called “Your Year with ChatGPT” to eligible consumers in select markets, including the United States, TechCrunch reports.

Instacart is ending all price tests following customer pushback to a report that the online shopping platform was charging different prices for the same items, WSJ reports. The company, whose parent company is Maplebear, said Monday that effective immediately, retailers will no longer be able to use Eversight technology to run item price tests on its platform.

Supply-chain startups have faced a rough fundraising environment since venture investors poured capital into the sector during the pandemic’s early years. Kargo Technologies has beaten the odds, WSJ reports. It has raised a $42 million Series B funding round led by venture firm Avenir, with participation from investors including Linse Capital, Hearst Ventures, Lightbank, Matter Venture Partners and Sozo Ventures.

A suspected cyberattack disrupted services at France’s postal service LaPoste on Monday, delaying deliveries and knocking out online payments during the holiday rush, Bloomberg reports. A spokesman linked the outage to a DDoS attack.

We are asking Morning Download readers to share some of the most important books they have read over the last year.

Ajay Sabhlok, chief information officer & chief data officer, Rubrik
Greatness
David L Cook (2021)

“It explains well the difference between success and greatness, urging readers to imbibe the principles of achieving greatness in all that we do, especially as leaders. Selfless exceptionalism helps not only the person but others around as well as the business.”

Seth Cohen, chief information officer, Procter & Gamble
Human + Machine: Reimagining Work in the Age of AI
Paul R. Daugherty and H. James Wilson (2018)

"As we navigate the evolving landscape of technology, it's easy to focus on the narrative of 'AI taking over the world.’ Yet, I believe the real breakthrough comes from the collaboration between AI and humans. This book delves into the 'missing middle’ – the vital synergy where human insight guides machine learning, and technology amplifies human potential. It presents a thought-provoking perspective on how we can shape a future where AI and people work hand in hand to achieve remarkable outcomes.”

U.S. regulators approved the first GLP-1 weight-loss pill—a tablet formulation of Novo Nordisk’s Ozempic and Wegovy—ushering in a new era of the obesity-drugs revolution that is expected to broaden their use. (WSJ)

The price of new cars and trucks in the U.S. has increased 33% since 2020, and consumers are piling on interest as they stretch out loan terms to eight, nine and nearly 10 years. (WSJ)

The Trump administration abruptly recalled nearly 30 career ambassadors at U.S. embassies around the world, according to multiple officials familiar with the matter. (WSJ)

The president said the Navy would build a new “Trump-class” ship, which will be the centerpiece of his vision for a new “Golden Fleet.” (WSJ)

This February 10–11, technology leaders will gather in Palo Alto for The WSJ Technology Council Summit to explore the realities of enterprise AI, the evolving role of tech leadership and the urgency behind building meaningful, business-driving AI strategies. Join the Technology Council and be part of the conversations shaping the future of corporate innovation.

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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.