OG tech giant IBM is launching a counterstrike in the industry's suddenly-hot AI fight with today's announcement of Watsonx, Axios' Ryan Heath reports.

The big picture: Business-focused IBM claims its latest AI offering, set to launch in July, provides more accurate answers and takes a more responsible approach than rivals.

• Microsoft, OpenAI and Google are rushing to lock down potentially massive new consumer markets for generative AI.
• IBM is instead leaning into helping other companies implement their AI via a "data model factory" that offers IBM clients products tuned for their specialties in domains like language, code, chemistry and geospatial data.
• Watsonx, in partnership with startup Hugging Face, incorporates open-source models; uses narrower, carefully culled datasets; and provides a "toolkit for governance."

IBM's top execs threw shade on rivals at a Monday Watsonx preview.

• Dario Gil, IBM's head of research, said systems like ChatGPT are "not ready for primetime" thanks to "all sorts of random and made-up facts."
• CEO Arvind Krishna, who wasn't at last week's White House AI meeting, seemed pleased to be out of the firing line. He told Axios it gave him more time to court clients "who care a lot about accuracy."

Between the lines: IBM knows about failed AI hype. It won headlines when its original Watson won Jeopardy in 2011, but after that the company's revenue declined for 10 consecutive years — leaving Watsonx with a lot to prove.

Krishna addressed a range of AI topics, including...

• America's AI regulation debate: "The conversation has been lagging." Krishna claimed credit for IBM helping to draft the EU’s upcoming rules, which focus on regulating high risk uses of AI.
• New work category: "AI ops" covering activities like coding assistance and supply chain management.
• Humans aren't replaceable: "The systems still have years to go," when it comes to "trying to replace a human being in their completeness."
• There's no explainable AI: "Anybody who claims that a large AI model is explainable is not being completely truthful. They are not explainable in the sense of reasoning and logic." But AI can transparently show its source data, and third parties can measure whether its answers show "bias with respect to gender, or age or ZIP code."

What they're saying: "AI may not replace managers, but managers that use AI will replace the managers that do not," per Rob Thomas, IBM's chief commercial officer.

• Yes, but: Krishna's already on-record saying IBM will pause hiring for back-office functions that AI can handle, and that includes managers.

The other side: IBM isn't the only AI provider to claim the mantle of responsibility nor the only one targeting businesses, rather than consumers.

• OpenAI has faced criticism for pushing GPT out to the world, but the public has embraced it. Meanwhile, even as it sets a fast industry pace, OpenAI — like many competitors — also touts its ethical scruples, pointing to its pre-deployment risk analysis and publicly grappling with the challenges of reducing harms.
• Google took heat first for being too cautious in withholding the fruits of its AI research —then for an about-face that has seen it scrambling to ship generative-AI products.

Disclosure: Ryan's spouse is an IBM employee.

The debt ceiling standoff is reverberating in Silicon Valley, where tech companies, dealing with high interest rates and inflation, have already been struggling, Axios Pro Tech Policy's Maria Curi reports.

Driving the news: President Biden is meeting with House Speaker Kevin McCarthy (R-Calif.) and other congressional leaders Tuesday as the U.S. gets dangerously close to defaulting on its debt.

• A default — which the Treasury Department projects could happen as early as June 1 — could spark a recession and wipe out jobs throughout the economy, forcing tech companies to double down on the cost-cutting already underway via hiring freezes and layoffs.

Threat level: No sector in the economy relies more heavily on capital than tech, Moody's Analytics chief economist Mark Zandi told Axios.

• Just the threat of a default makes it more difficult to get investors on board, especially for the high-risk ventures the tech industry is known for. And that's all in the context of the banking crisis in which Silicon Valley Bank and others have shut down.

What they're saying: "A default — or even the plausible threat of it — would be a significant unforced error that could have a devastating impact on the people and companies that make up Silicon Valley. We don't have time for this," Silicon Valley Leadership Group CEO Ahmad Thomas told Axios.

• Zandi: "Tech is on its back heels. It's already in a recession and adjusting to weaker demand. You throw in a debt limit breach, and those parts that are underwater would be pushed even more so."

Of note: Beyond Silicon Valley, the debt fight threatens one of the few bipartisan policy efforts in the U.S.: competing with China.

• "Here we are working hard to redirect resources and capital to address climate change, supply chain resilience and a lack of chip production. But they're all priorities that will be upended in a debt limit breach," Zandi said.

Between the lines: Senate Majority Leader Chuck Schumer (D-N.Y.) last week announced his goal of passing bipartisan legislation to "deal with the Chinese government" by investing even more in tech in addition to implementing the CHIPS and Science Act.

• Key areas in the package include investing in domestic industries of the future and making the U.S. a credible alternative to China's Belt and Road Initiative.
• Several lawmakers contended that the debt drama is counterproductive to those efforts, including Sen. Bob Menendez (D-N.J.), who said at a press conference the GOP debt ceiling bill "would undermine the United States' ability to compete with China."
• "The Chinese Communist Party is rooting for House Republicans to drag this country into default," Sen. Chris Murphy (D-Conn.) said at the press conference. "This would be a gift-wrapped present to the Chinese Communist Party."

1. The Xbox will not outsell Sony's PlayStation or Nintendo's Switch this console generation, Microsoft head of gaming Phil Spencer acknowledged in a recent interview.

Between the lines: Microsoft isn't giving up on consoles or games but rather is attempting to reframe the narrative in an unusually blunt way, reminiscent of a successful Nintendo pivot nearly two decades ago. "We're not in the business of out-consoling Sony or out-consoling Nintendo," Spencer said during an interview with Kinda Funny's Xcast last week.

2. Qualcomm on Monday said it is buying Autotalks, an Israeli maker of "vehicle-to-everything" communications chips, with a focus on preventing crashes.

Why it matters: This reflects how big chipmakers continue to view vehicles as a key growth area as smartphone sales cool and cars increase in both automation and complexity.

On Tap

• A bunch of companies report earnings after the markets close today, including Airbnb, Toast, Electronic Arts and Twilio.

ICYMI

• Microsoft-owned LinkedIn, which had already dropped its primary service in China in favor of a simplified jobs board, is now cutting that as well, eliminating 716 jobs. (Reuters)

As we've written, some of the coolest applications of generative AI are going combine the technology's capabilities with characters and content people care about. A good early example of how this can work is this site that lets people upload a selfie and become part of the Spiderverse.