AI’s New Risk: Can Top Models Be Copied?

The Calm Before the Attention Arrives

Hey Reader,

Before a company ever shows up on everyone’s screen, there is a quieter phase. No urgency. No headlines. Just steady positioning.

That is the moment we focus on. We are currently monitoring a small group of companies where this "groundwork" is being laid right now. Access our full list and analysis below.

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Good Morning,

– Truly yours, Fred Frost

📉 Yesterday's Market Recap

Yesterday, the Dow climbed 0.27% to 48,935.82, buoyed by Home Depot’s earnings beat, but the NASDAQ and S&P 500 slipped 0.39% and 0.30% respectively as tech faltered. Inflation worries and tariff turbulence kept sentiment uneven, with commodity prices like gold dropping 1% to $5,171.10.

• Home Depot Beats Expectations: Q4 earnings hit $2.72 per share on $38.198 billion revenue, exceeding forecasts and lifting the Dow. → Benzinga


• Larimar Therapeutics Soars 41%: Shares spiked after FDA granted breakthrough therapy designation for its ataxia treatment. → Stocktwits


• Tech Drags Markets Down: NASDAQ fell 0.39% to 22,538.28, reflecting broader uncertainty in AI and tech valuations. → The Street

📉 Daily Performance Snapshot

🔭 What to Watch Today

Today’s calendar has potential market movers, from tax policy insights to consumer sentiment data. Keep your eyes on these events for ripples in equities and beyond.

💡 Opportunity Watch

Amid market choppiness, a few sectors and stocks are showing promise tied to recent economic shifts. Here’s where the smart money might look today.

• Kosmos Energy (KOS): Up 130% YTD, this pure-play upstream oil stock is a high-leverage bet on crude prices with outsized gains potential. → Benzinga
• Gold as a Hedge: Despite a 1% dip, a 5-10% allocation to gold could shield retirees from equity volatility amid tariff uncertainty. → Money

Hedge Funds Are Rotating to Hardware

While retail traders chase hype, smart money is moving into the hardware layer powering AI itself.

Our research highlights three U.S. companies leading this quiet surge: one with 76% data-center growth, another with a massive backlog from global hyperscalers, and a third supplying next-gen chips with 59% margins.

When everyone else notices, the easy gains will be gone.

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The Big Bullet

Anthropic says Chinese firms copied parts of Claude as it rolls out new tools

What happened: Anthropic, the company behind the Claude chatbot, said three Chinese firms copied parts of its system by using a technique called "distillation" that learns from a model’s outputs. They say the firms used access to Claude and then trained their own models to act similarly, which could break rules and raise security concerns. In the same news cycle, Anthropic’s live AI event highlighted new product updates and how it plans to sell more tools to businesses. The claim was reported in a report on alleged copying of Claude by Chinese companies. The company did not say the full size of the damage, but it framed the issue as both a business and a national-security risk. The story comes while AI makers are racing to release stronger models and more features. That fast pace can make it easier for rivals to learn from public tools and copy behavior. Anthropic’s comments add to a growing list of disputes about who owns training data and model know-how.

Why it matters: If AI models can be copied quickly, the leaders may have a harder time earning back what they spend on chips, data, and staff. That can pressure profits for AI labs and for big tech firms that fund or host them. To respond, companies may tighten access, add more checks, or push harder into paid products like new AI legal tools aimed at lawyers. Stronger controls can also slow down small developers who rely on open access to test ideas. The dispute also feeds into U.S.-China tech tension, which can lead to tougher rules on data sharing and advanced computing. For investors, the key risk is that legal fights and security rules can change who can sell AI services, and where. At the same time, steady business demand matters, and new enterprise plugins for Cowork signal a push to lock in workplace customers. That could support revenue, but it may also raise costs for compliance and monitoring.

What’s next: Watch whether Anthropic files formal complaints, changes its terms of service, or asks cloud partners to block certain traffic. Any public evidence it shares could shape how other AI firms handle copying claims. Policy signals matter too, since Fed officials are now talking openly about AI’s risks and job impacts, which can influence future rules and spending. Investors should also watch how fast AI-driven growth shows up in the real economy, and whether it brings new volatility. One angle comes from a note warning that AI can lift growth while raising tail risks. On the business side, pay attention to pricing changes, limits on free use, and new paid bundles for companies. If limits get tighter, smaller app makers may shift to other models, which can move market share fast. Finally, track any new headlines from China or U.S. agencies that connect AI copying to security reviews or export rules.

• How Google is dealing with large-scale attempts to extract and clone its own AI model’s reasoning capabilities, a practice very similar to the distillation concerns Anthropic raised – Computer world.
• How distillation techniques blur the line between standard AI practice and unauthorized copying, and why lawmakers and companies are pushing for clearer IP rules. – winston.com

🧭 Policy & Market Ripples

• PepsiCo’s Dividend Streak: A 4% dividend hike marks 54 years of increases, despite a 2% volume drop, signaling resilience in consumer staples. → The Street
• AI Leadership Reckoning: Record C-suite turnover in 2025 tied to poor AI ROI suggests firms must rethink strategy, not just tech. → Fortune
• Meta’s Stablecoin Revival: Partnering with Stripe for a dollar-pegged token, Meta aims to reenter crypto despite regulatory headwinds. → Stocktwits