A train station.
Photo: Charles Forerunner via Unsplash

AI from China rides Florida’s rails

Protocol Enterprise

Hello and welcome to Protocol Enterprise! Today: a mysterious AI company with ties to China is bidding for U.S. infrastructure projects, Nvidia warns of a rough ride ahead, and why Okta thinks angry customers can be a good thing.

Spin up

While a multicloud infrastructure strategy might sound good to companies that don’t want to rely on a single vendor, putting one into place has a ripple effect. According to new research from Virtana, 63% of multicloud users need more than five tools to manage that infrastructure, and it takes a lot of manual effort to sync data across those tools to actually understand what is happening.

Fast train to China

When he posed for a photo with Texas Governor Greg Abbott, Kai-Shing Tao wore a bright red polo shirt. He flashed a grin for another shot with Chicago Mayor Lori Lightfoot.

Tao’s China-linked AI company, Remark Holdings, tweeted the images in March with captions littered with hashtags like #BorderCrisis, #Transit and #PublicSafety. The photos may have been signs to weary investors that Remark Holdings was making progress in its efforts to score U.S. government projects.

  • Tao is chairman and CEO of Remark Holdings, a company whose AI-based surveillance and security technologies have deep — yet mostly hidden — ties to China.
  • Remark, which sells its AI systems for public safety purposes in transportation hubs, on school campuses and in retail stores, already has a partnership with Florida high-speed rail provider Brightline.
  • The companies said in November that the private rail service will use Remark’s cameras and “smart safety” computer vision and analytics system to detect pedestrians or out-of-the-ordinary objects along a 67-mile stretch of railroad from Miami to West Palm Beach, Florida.
  • Tao says he wants Remark to provide its software, which includes facial and object recognition, to U.S. states and municipalities through infrastructure projects funded by the U.S. government.

But China tech and policy experts say the company is traveling in dangerous territory, and they warn that U.S. lawmakers and regulators could stop Remark in its tracks.

  • Remark says its proprietary data and AI software platform was co-developed with one of its China subsidiaries, although the company appears to have computer engineers based in the U.S. and U.K. according to a LinkedIn search of its employees.
  • Florida Sen. Marco Rubio, a vocal critic of the Chinese Communist Party and its support for AI and emerging tech development, signaled disapproval of the use of tech originating in China for U.S. critical infrastructure such as train lines.
  • When asked to comment on Brightline’s partnership with Remark for this story, he told Protocol, "The Chinese Communist Party is devoting significant resources to firms willing to help them develop the most invasive surveillance state in the world. Those same firms should not be allowed anywhere near critical infrastructure in America.”
  • However, without clarification on who actually built Remark’s AI systems, where its equipment comes from and its data use and security practices, observers will be forced to speculate, and distinguishing between real and perceived risks will be difficult.

“Our trains are American-made and we're 100% Buy American-compliant,” states Brightline on its website, which describes its high-speed train experience as “a safe, fun, and welcoming ride for everyone aboard.”

  • When Brightline and Remark announced their decision to work together, the companies said Brightline would use Remark’s AI-powered cameras and software, which uses computer vision to detect intrusions and monitor for anomalies on tracks and in railyards.
  • “One of the biggest reasons we decided to go forward with this partnership is Brightline is implementing a lot of safety throughout the corridor,” Vanessa Alfonso, director of Media Relations at Brightline, told Protocol in April.
  • Although she could not provide details on what types of equipment from Remark would be installed, Alfonso said, “It would definitely monitor any type of unusual behavior that would happen around the railroad tracks.”
  • It is unclear whether Brightline will use Remark’s facial recognition technology to identify people. When Protocol spoke with Alfonso, she said the two companies were still testing Remark’s system. “We probably don’t have that all nailed down yet,” she said.

Although partnerships between U.S. and Chinese tech companies and academic researchers continue, geopolitical forces are deterring collaboration in sectors of strategic importance such as AI and transportation infrastructure.

  • “[Brightline] maybe doesn’t have the strongest awareness of the geopolitical environment they are operating in,” said Xiaomeng Lu, director of the geo-technology practice at advisory firm Eurasia Group.
  • U.S. legislators and human rights advocates have pushed to ban the use of facial recognition to surveil people in the U.S.
  • There are also bipartisan condemnations of facial recognition use by Chinese authorities to monitor and detain the ethnic minority Uyghur Muslim population in the northwest China region of Xinjiang.
  • Remark’s Chinese website mentions its involvement in an “Intelligent Safe Residential Area” project in Ningbo, China, which employs the KanKan AI facial recognition technology. The project appears to be “part of the [Chinese] government’s blanket video-surveillance program, Sharp Eyes,” said Rebecca Arcesati, a China tech analyst at think tank MERICS.

Despite the potential political scrutiny, Tao has been transparent about his mission to participate in federally funded infrastructure projects.

  • “We have now increased our efforts to major cities like New York City and Chicago, and states like Texas, Nevada, California, Florida and New Jersey. A big part of this increased effort is due to the demand we are seeing from both government and private business post Infrastructure Bill,” Tao said in March.
  • Tao emphasized Remark’s experience operating AI-based safety and surveillance systems in China.
  • “Simply put, the opportunities and funding allocated in the infrastructure bill here are massive, and we could have not written a better bill to reflect our core competencies and products to pursue and capture the specific growth markets allocated by the bill,” he said in November on the day the Infrastructure Investment and Jobs Act was signed into law.
  • “Our ability to bring our proven AI platform to the U.S. from Asia has given us the leading opportunity to capture this business where technology helps augment the effectiveness of the infrastructure bill.”

— Kate Kaye (email| twitter)


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Nvidia’s 'challenging macro backdrop'

There are storm clouds on Nvidia’s horizon.

By most measures, Nvidia issued a solid B+ of a quarterly report card: Its data center segment and video game segment both set revenue records, arriving at $3.75 billion and $3.6 billion, respectively. It showed a nice fat profit of $1.6 billion, which includes the $1.4 billion termination fee it paid SoftBank when the Arm deal collapsed. CEO Jensen Huang said the company is expecting another record quarter for the data-center business, and is bullish on the remainder of the year.

But it’s not all smooth sailing: CFO Colette Kress mentioned the “challenging macro backdrop” a couple of times during her prepared remarks, and said Nvidia would take a $100 million hit to data center sales because Russian customers are now off the table, and lockdowns in China related to COVID-19 outbreaks impacted supply.

The video game segment will take a bigger hit, Kress said, and the company expects $400 million worth of damage because of the same two factors, which will translate to a sequential quarterly decline in revenue. And, as a result of the “challenging macro environment,” Nvidia also plans to slow hiring.

Huang acknowledged that Nvidia will have a tough time predicting the duration of the Ukraine war or the coronavirus lockdowns in China, but said the “impact of our technology and the market opportunities remain unchanged.”

— Max A. Cherney (email | twitter)

Tough love

During the first few months of 2022, the hacker group Lapsus$ burst onto the scene and breached one big tech company after another. Okta — which was impacted via a third-party support provider, Sitel — was not actually one of the bigger names on the list that also included Microsoft, Samsung, Nvidia and T-Mobile. So why did the Okta incident seem to get so much attention and criticism compared to the others?

The fact that Okta customer data was impacted was surely one reason; Okta's position as a prominent cybersecurity vendor was probably another. But in speaking with Protocol, Okta co-founder and CEO Todd McKinnon wondered if there might've been another factor behind the level of public scrutiny.

"When people trust you, then they react like this. But when they don't trust you, maybe they're more quiet,” McKinnon said, echoing comments he says he heard from customers in the wake of the breach. In other words, the criticism of Okta's handling of the breach could actually be viewed as something of a good sign, he said.

Ironically, Okta's clean track record on security prior to the January incident also put the company at a bit of a disadvantage, after the breach was disclosed by Lapsus$ in March, according to McKinnon. "What was really eye-opening as we went through this, is that we didn't have any practice at this," he said. "We'd never had security issues."

— Kyle Alspach (email | twitter)

Around the enterprise

Box posted one of its best quarters in a while,recording an 18% increase in revenue at a time when other SaaS companies have seen a sharp reduction in revenue growth compared to the past few years.

Snowflake, on the other hand, beat revenue expectationsbut shareholders were disappointed that its margins will be lower than expected in the current quarter.

After several years of surging growth, the number of vulnerabilities in Microsoft’s software actually fell 5% last year, according to BeyondTrust.

Quantum computers will need quantum networks to really perform at a game-changing level, assuming they ever arrive. Researchers have now demonstrated how “quantum teleportation” could lead to the development of those networks.


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