WHAT TRUMP'S CRACKDOWN ON "WOKE CAPITALISM" MEANS FOR FASHION AND OTHER TOP10 STORIES OF THE WEEK 01.27.2025

Key Takeaways from The Business of Fashion

?? The President’s rhetoric on tariffs that could redraw fashion’s supply chains remains as robust as ever, though none have yet been actioned.

?? But this week’s orders took aim at topics like diversity, equity and inclusion programmes and climate action, institutionalising a growing backlash against so-called “woke capitalism” that has already had a chilling effect on corporate DEI programmes in the fashion industry and created a more permissive environment for brands to roll back climate commitments.

?? The President’s move to follow through on his vow to withdraw America from the Paris Climate Accord was expected. Nonetheless, the move threatens already dubious global progress to curb global warming, even as extreme weather-related disasters become more frequent, more deadly and more expensive to manage.

?? State-led and international regulatory efforts, along with growing business risk, mean brands are unlikely to abandon climate commitments altogether, but executives will be under less pressure to show they are delivering.

??? One of the most immediate threats to the fashion sector came in the form of a directive that federal agencies should draw up lists of “up to nine” companies to investigate for “DEI discrimination.” Whether the government would be able to prosecute businesses for initiatives intended to promote inclusivity and support marginalised employee groups is a question that may well end up in court.

?? But even before this week’s actions, the industry’s environmental and diversity efforts were in retrenchment. Sustainability has moved down executive agendas, as concerns about consumer demand, inflation and geopolitics have moved up. And over the last year, brands have whittled down sustainability and diversity departments and missed key targets.

?? Many have merged DEI and sustainability into ESG functions or shifted diversity initiatives to human resources, with companies often claiming they can uphold the principles of diversity, equity and inclusivity without a formal structure. DEI proponents warn that dismantling or weakening these departments hurts employee retention, innovation and consumer reach.

?? While fashion leaders have been less full-throated in their endorsement of Trump than Silicon Valley’s tech titans, Bernard Arnault, chairman of leading luxury group LVMH, and his children Delphine and Alexandre, attended the inauguration and precious few fashion firms have followed the likes of Patagonia in defending diversity programmes. That’s in sharp contrast to recent years when brands jumped on movements like Black Lives Matter.

Amid shifting politics and popular sentiment, many appear to have decided that standing up for the DEI programmes they once flaunted is no longer worth the risk.

“It’s so difficult to know what the sentiment is that brands will probably sit on the sidelines,” said Quynh Mai, founder of digital creative agency Qulture. “No one’s demanding it of them anymore; there’s not a women’s march, not a BLM where citizens are demanding they have a stance and it’s safer to stay silent.”

FRENCH CULTURE MINISTER UNVEILS NEW PLAN FOR FASHION

Key Takeaways from Fashion Network :

?? French Culture Minister Rachida Dati unveiled a new plan for French fashion including financial support for young designers and residences for fledgling talent.

?? “Wherever you go, when you think of fashion, you think of Paris. And we are determined to guarantee that remains the case,” explained Dati, in what was billed as a media statement but turned into a scrum of French TV crews. ? Before the self-assured minister revealed that the ministry will provide some €200,000 in annual financing for various aids to young designers.

?? Among the innovations, she promised access for young designers to the?Quadrilatère des Archives,?a series of grand palaces in the Marais. Even though these spaces have been used quite frequently in recent years by emerging designers to stage shows.? ? The ministry will also provide a $10,000 grant and one-month residency in the Villa Medici, the French cultural center in Rome.

?? A bourse of €20,000 to fund the creation of costumes for the Chaillot Theater working with a young choreographer; a Patrimony of the World bourse of €10,000 for three years for a research student in public fashion archives; and a further three years bourse of the same amount to study fashion prospective and innovation. ?

?? Dati made her remarks inside Sphere, the talent incubator of the Federation de la Haute Couture et de la Mode, French fashion’s governing body. Touring the space and chatting animatedly with young designers both French and foreign – from Arthur Robert of denim-driven Quest from Paris; to Spanish-born Marie Bernard of the label Les Fleurs. ? Earlier in the day, she had visited the Louvre, where she helped unveil Louvre Couture, an unprecedented exhibition of the great museum’s rare couture archives, curated by fashion and applied art expert Olivier Gabet. ?

?? Dati, one of 11 children born into a family from a poor district in provincial France, studied law before entering politics. Rising to be Minister of Justice in the government of Nicolas Sarkozy. Last year, under the presidency of Emmanuel Macron, she was named Minister of Culture of France, the first country to have created such a position back under General de Gaulle. ?

?? At times, it felt as if a flash mob had descended around Dati into Sphere, as fashion honchos, a half-dozen French TV crews, a dozen political paparazzi, nervous ministry staff, designers and models vied for her attention. ? In effect, despite the laudable initiatives, the confusing scramble and soi-disant presentation unintentionally mirrored the confusion in the greater political scene in France.?

THE U.S. JUST PLEDGED HUNDREDS OF BILLIONS TO PROTECT ITS AI LEADERSHIP. A CHINESE STARTUP WITH A "JOKE OF A BUDGET"MAY HAVE ALREADY UNDERCUT THOSE HOPES

Key Takeaways from Fortune :

?? It’s David vs. Goliath in the world of AI.?

On one side: The U.S. and its new “Stargate” project, a massive $500 billion pledge with backing from the biggest names in tech to build data centers across the U.S. On the other, a scrappy Chinese startup that’s released an impressive open-source model trained on a shoestring budget.

?? Earlier this week, DeepSeek unveiled its R1 model, which the startup claims meets, if not exceeds, performance from OpenAI’s o1 model released last year. (o1 is designed to tackle reasoning and math problems). DeepSeek has released its models to the public, and reviewers are impressed with their ability to handle tasks like coding and reasoning.

?? The R1 unveiling follows a December announcement from the Chinese startup that its large-language model, V3, was trained using just $5.6 million worth of computing power, far less than the $100+ million reportedly used to train GPT-4. DeepSeek said its V3 model matched performance by OpenAI and Anthropic’s models on leading benchmarks, and Andrej Karpathy, who worked on AI for Tesla and OpenAI, praised DeepSeek’s ability to train its leading-edge AI on a “joke of a budget.”

?? These announcements have put DeepSeek at the forefront of China’s already-crowded AI sector. DeepSeek’s 40-year-old founder, Liang Wenfeng, met Chinese premier Li Qiang on Monday, joining a group of leading industry experts, according to the South China Morning Post.

DeepSeek’s success is showing how China’s tech sector is finding its own niche in the global race to build AI, in spite of being denied access to Nvidia’s chips, the gold standard for training AI models.

Where did DeepSeek come from?

?? DeepSeek, based in Hangzhou, was born from HighFlyer, a Chinese quantitative hedge fund with 10 billion yuan ($1.4 billion today) in assets under management as of 2019, according to the South China Morning Post. The fund spun off DeepSeek in 2023, setting it up as an AI startup to develop models and build AI products.

?? DeepSeek AI founder Liang Wenfeng studied AI at Zhejiang University before co-founding HighFlyer, whose deep pockets allowed it to snap up thousands of Nvidia AI chips ahead of U.S. restrictions in 2022. That gave DeepSeek a leg up over many of its smaller competitors, allowing it to keep working and train models as other AI startups scrambled to find processing power.?

?? AI experts differ on how well DeepSeek performs against OpenAI’s ChatGPT and Anthropic’s Claude, suggesting the Chinese AI model meets benchmarks under specific hardware configurations, while struggling in other scenarios.?

?? But DeepSeek is focused on doing what has been achieved by OpenAI and Anthropic more efficiently and at a lower cost.?The startup’s models use a lot of smart software innovations to get around the constraints of its “mixture of experts” model, where different parts of the AI are trained to tackle specific kinds of questions.

?? Another difference is that DeepSeek’s model is open source, allowing it to be used on different kinds of hardware. And, importantly, the model shows how it got its answer, unlike OpenAI’s o1.

But that might be enough for customers priced out of expensive U.S.-developed models, particularly those in the rest of the world now constrained from accessing vast reserves of American computing power.

Why is the U.S. worried about China’s AI?

If U.S. officials had their way, a Chinese company would not have been able to produce a leading-edge AI model.?

?? The U.S. has controlled sales of advanced AI chips to China since 2022, preventing Chinese companies from getting access to the processors needed to train the leading-edge AI models. Chipmakers like Nvidia and Intel have tried to create processors for the Chinese market that align with U.S. requirements, only for Washington to tighten the rules further.

?? That leaves Chinese AI companies with few options: rely on U.S.-made chips that were imported before bans came into effect; tap grey-market smuggling rings that ship chips in from third locations; rely on data centers outside China; or turn to Chinese-made alternatives made by companies like Huawei. (Huawei claims its AI chips outperform Nvidia’s A100 processor, but the Chinese tech giant has reportedly struggled with making the chips reliably at scale).

“Money has never been the problem for us; bans on shipments of advanced chips are the problem,” Liang told Chinese outlet 36kr last year (translated by the ChinaTalk newsletter in November).

?? In addition to the chip export ban, the Biden administration also banned U.S. investment in Chinese AI.?

Still, China has fostered a vibrant and diverse AI sector. Big Tech firms like Baidu, Alibaba, and ByteDance are developing their own foundational models and offering new AI services to companies and ordinary users. Chinese AI startups like Minimax and Moonshot AI have released consumer-focused services that have even seen success in the U.S. market.?

?? Yet, China’s AI sector is crowded, which means companies are locked in a price war to push out their competitors. Throughout 2024, companies like Alibaba and ByteDance slashed prices by as much as 90% to promote their models over the competition.?

China’s success in AI is unnerving the U.S., implying that the broad measures taken to protect U.S. leadership in AI aren’t working.?“I thought the restrictions we placed on chips would keep them back,” former Google CEO Eric Schmidt said last November at a talk at Harvard’s Kennedy School.?

?? The developer behind ChatGPT is already ringing the alarm bells about China. Last week, OpenAI claimed in a policy paper that there was an “estimated $175 billion in global funds awaiting investment in AI projects.”?

“If the U.S. doesn’t attract those funds, they will flow to China-backed projects—strengthening the Chinese Communist Party’s global influence,” OpenAI said.?

OpenAI hopes it’ll soon get to tap some of that money. On Tuesday, OpenAI CEO Sam Altman, Softbank CEO Masayoshi Son and Oracle co-founder Larry Ellison announced the Stargate Project, a venture that pledges to invest $500 billion in AI infrastructure across the U.S.