Good morning. It's Thursday, July 2, and we're covering the retirement of an internet legend, the AI rivalry between the U.S. and China, and Anthropic's latest effort to balance frontier AI with stronger safeguards.

Plus: yesterday's Real or AI verdict, and a new poll about the AI layoff reversal.

Anthropic brings Claude Fable 5 back after restricting it over cybersecurity concerns, but some coding and debugging requests still route to Opus 4.8. The company says new classifiers are designed to block more cyber-related misuse while reducing false positives over time. Anthropic is also developing an AI jailbreak assessment framework with Amazon, Microsoft, Google, and other partners, while expanding model safety collaboration with the government.

The WSJ reports that SpaceX showed investors a "handset-like" AI device pre-IPO that is sleeker and slimmer than an iPhone and runs on a proprietary OS integrating xAI, with the design still subject to change; Musk called the report "utterly false" on X. The prototype fits SpaceX's broader wireless ambitions (Starlink Mobile is already positioning against Verizon and AT&T, and one analyst has floated T-Mobile or AT&T as acquisition targets), and it takes direct aim at OpenAI's forthcoming Jony Ive device.

Companies that replaced workers with AI are increasingly rehiring after automation falls short in real-world tasks. Ford, IBM, Commonwealth Bank, and Klarna have restored roles requiring human judgment, customer service, or institutional knowledge. Robert Half found 32% of U.S. hiring managers rehired AI-displaced roles, while Orgvue reported 55% of AI-related layoffs were later viewed as mistakes.

Ford, IBM, Klarna, and Commonwealth Bank all laid off workers for AI, and are now quietly rehiring them. A new survey finds 32% of US hiring managers reversed an AI-driven layoff, and 55% of business leaders admit they made the wrong call.

Anthropic alleges Alibaba used 25,000 fake accounts to distill Claude. Could KYC become mandatory for access to frontier AI models?

Palo Alto Networks and CrowdStrike posted their strongest quarter on record between April and June 2026, with shares rising 113% and 95%, respectively, as growing AI-powered cyber threats fueled demand for advanced security tools. The surge follows the emergence of powerful Mythos-class AI models, which have heightened concerns about automated vulnerability discovery and large-scale cyberattacks.

Both companies secured early access to Anthropic's Project Glasswing and OpenAI's Daybreak cybersecurity initiatives. They are also expanding investments in identity security and agentic AI defenses. CrowdStrike said Falcon Shield delivered fourfold annual recurring revenue growth, reinforcing expectations that AI will continue driving cybersecurity spending. → Continue reading here.

Vinton Cerf, widely known as the "Father of the Internet," will retire from his role as Google's chief internet evangelist in early July 2026 after more than 20 years with the company. Cerf, 83, co-developed the TCP/IP networking protocols with Robert Kahn in the 1970s, laying the foundation for the modern internet and earning honors including the Presidential Medal of Freedom and the Turing Award.

Speaking at the Open Frontier conference, Cerf argued that the rise of AI agents will require standardized communication protocols rather than relying solely on natural language, predicting interoperability will become essential as autonomous systems increasingly interact. → Read the full article here.

The Trump administration’s shifting approach to advanced AI regulation has sparked concerns among security experts that inconsistent restrictions on U.S. AI models could give Chinese developers an opportunity to narrow the technological gap. After imposing export controls on Anthropic’s most advanced models and encouraging OpenAI to limit the release of GPT-5.6, the administration reversed course on June 30, 2026, lifting restrictions on Anthropic following weeks of negotiations.

Meanwhile, Chinese companies including 360 Security Technology and Z.ai unveiled new AI models they claim rival leading U.S. systems at lower cost, with some researchers suggesting Z.ai’s capabilities may have been aided by unauthorized distillation of American models. Experts say the episode highlights the challenge of balancing national security with innovation as both countries compete to define the future of AI-powered cybersecurity. → Read the full article here.

Chinese robotics company UBTech has unveiled the U1, a humanoid robot designed for personal companionship rather than industrial work, marking a push into the consumer robotics market. Introduced in Shenzhen on July 1, 2026, the robot features lifelike silicone skin, 88 servo joints, locally running emotional AI powered by Rockchip's RK3588 processor, and on-device data storage for enhanced privacy.

Available in male and female versions, the U1 is offered in Lite, Pro, and Ultra models priced from 119,800 yuan (US$17,650) to 990,000 yuan. The launch reflects a broader effort by Chinese technology companies to bring AI-powered humanoid robots into homes as demand expands beyond factories and warehouses. → Read the full article here.

Meta Eyes AI Cloud Revenue: Meta will sell excess AI compute, creating a new cloud business to monetize unused capacity and ease spending concerns.

Square Adds AI Restaurant Ordering: Square lets ChatGPT and Claude users order directly from restaurants, avoiding marketplace commission fees.

Portugal Open-Sources National AI Model: Portugal releases Amália, its first national AI model, as fully open source rather than a commercial chatbot.

Together AI Raises $800M: Together AI raised an $800M Series C and secured 500 MW of compute to expand its open-source AI platform.

Venice AI Hits $1B Valuation: Venice AI raised $65M at a $1B valuation after reaching 3M users and a $70M annual revenue run rate.

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Yesterday's image was REAL. Here's how you voted: The vote was nearly split, 51% identified it as AI, while 49% believed it was real.

Thanks for reading. See you next time!

— Matthew Berman, Nick Wentz & the Forward Future Team