Good morning. China’s largest semiconductor maker has been declared a Chinese military supplier by the Pentagon, blacklisted by the Commerce Department and added to a Treasury Department list banning Americans from trading its shares.

Still, its business with the U.S. is booming.

Semiconductor Manufacturing International Corp. last year grabbed a record $1.5 billion in revenue—a fifth of its overall sales—from American semiconductor-design companies that hire SMIC to make their chips.

• Drawing a line: Despite being blacklisted, SMIC plays an integral role in the U.S. semiconductor industry, with the Commerce Department, which administers export controls, granting licenses to the American companies to work with the Chinese company. That dynamic puts SMIC at the center of a debate over where to draw the line between protecting U.S. national security and doing business with China.
   
• Balancing act: Security hawks, including influential members of Congress, argue that current U.S. restrictions are porous. They say the U.S. is helping the company acquire cutting-edge capabilities and produce chips that China’s military could use to fight the U.S. and its allies. The Biden administration counters that the restrictions protect leading technologies, and that the U.S. should balance national security with allowing other business to go unimpeded.
   
• Huawei shock: Both camps got a jolt in recent weeks when Huawei Technologies—another blacklisted Chinese company—released a new smartphone that industry analysts say is powered by an advanced chip made by SMIC, the kind of breakthrough the U.S. controls were designed to forestall.

The WSJ Pro Sustainable Business Forum on Oct. 12 will include a discussion about risk and resilience in corporate sustainability programs with Maryam Golnaraghi, director of climate change and environment at The Geneva Association and Torolf Hamm, head of physical catastrophe and climate risk management at Willis Towers Watson.

Other sessions will cover reporting to U.S. and European standards, the role of artificial intelligence and what corporate decarbonization measures are proving effective. Register here.

SEC sues Elon Musk to enforce subpoena.

The Securities and Exchange Commission on Thursday asked a San Francisco federal court to order Elon Musk to comply with the agency’s ongoing investigation of his 2022 takeover of Twitter, the social-media platform he has since renamed X.

Musk was scheduled to provide testimony to the SEC on Sept. 15 but failed to appear at the agency’s San Francisco office, the agency’s filing says. The SEC later offered to allow Musk to testify closer to his home in Texas, but the agency’s efforts “were met with Musk’s blanket refusal to appear for testimony,” the SEC wrote.

The agency is probing Musk’s purchase of Twitter stock and his disclosures of his investment in the company, the filing says.

It’s their job to put Sam Bankman-Fried in prison.

A handful of assistant U.S. attorneys in the Southern District of New York have come to work for much of the past year to do something that many people around the world can only dream about: They get to make the case against Sam Bankman-Fried.

They have been strategizing for the trial that began this week since before he was in handcuffs. A columnist spoke to former SDNY lawyers who have been in their position before to find out how they might have prepared.

Thursday at the trial, former FTX employee Adam Yedidia returned to the stand and offered a look at the lack of personal and professional boundaries at the exchange.

• Can Someone Lose Track of Billions of Dollars? SBF's Jury Will Decide

• Facing questions from Congress last week about the Maui wildfires that killed 98 people, Hawaiian Electric Chief Executive Shelee Kimura repeatedly referred to what she described as a robust wildfire mitigation plan that the company had spent four years developing. Kimura said the plan was finalized in January, but state power regulators, utility activists and local wildfire prevention groups say they hadn’t seen it until very recently. It was only shared with the regulators last week.

Hackers with AI are harder to stop, Microsoft says.

Hackers are using AI and encryption in new ways to make cyberattacks more painful, according to new research from Microsoft.

Stealthier attacks are being crafted by hackers using both artificial intelligence tools that have been on the market for a while and generative-AI chatbots that emerged last year, said Tom Burt, Microsoft’s corporate vice president for customer security and trust.

• MGM Resorts Refused to Pay Ransom in Cyberattack on Casinos

Army Plans Major Cuts to Special-Operations Forces

The Pentagon is poised to make controversial cuts to the Army’s storied special-operations forces, amid recruiting struggles and a shift in focus from Middle East counterterrorism operations to a threat from China.

The Army is cutting about 3,000 troops, or about 10% from its special-operations ranks, which could include so-called trigger-pullers from the Green Beret commando units who have conducted some of the nation’s most dangerous and sensitive missions around the world, from the jungles of Vietnam to the back alleys of Baghdad.

• Foreign executives are scared to go to China. Their main concern: They might not be allowed to leave.
   
• A U.S. jet fighter shot down a Turkish drone Thursday after it was deemed a threat to U.S. forces in northeast Syria, a person familiar with the episode said. The shootdown is likely to add to the tensions between Turkey and the U.S., which are North Atlantic Treaty Organization allies.
   
• The decision by the United Auto Workers to forgo the all-in strike that many auto industry observers had expected has so far considerably softened the disruption to the companies’ factory footprints and bottom lines.
   
• Surging violent crime this year has spread fear and frustration across the District of Columbia, as police here struggle to curb the bloodshed at a time when many U.S. cities are seeing double-digit declines in homicides.
   
• Fewer people are choosing accounting careers, threatening to worsen an already dire shortage of accountants.

CEOs and corporate boards are leading the charge on AI.

At the WSJ CIO Network conference held in New York, CIOs and CTOs talked about the pressure to include AI in the digital transformation efforts that began during the pandemic years.

Here are some highlights:

• Walmart tech executive David Glick and Johnson & Johnson CIO Jim Swanson share business decisions that guide their deployment of AI.
   
• The CIOs of Goldman Sachs, Abbott and Rocket Cos. spoke on the lessons from early AI deployment.
   
• Generative AI startups have offered a bright spot for venture capitalists this year, say Kleiner Perkins partner Leigh Marie Braswell and Bain Capital Ventures partner Aaref Hilaly.

• Several Republican lawmakers are looking to be the next speaker, after the House ousted Rep. Kevin McCarthy.
   
• Modelo continues to win over Bud Light drinkers.
   
• Artificial intelligence threatens some careers, but other opportunities are on the rise.
   
• When he was campaigning for president, Joe Biden pledged that “not another foot” of border wall would be built on his watch. But this week, his administration announced plans to do just that.
   
• When did rock concerts become so tame? Thank alcohol-free Gen Z.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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