THE BIG STORIES
Swinney’s plan to revive Scotland’s NHS | A big rise in water bills is on its way | Tech stocks take a huge fall

📣 First Minister John Swinney has set out his plan to reform Scotland’s NHS, creating 150,000 new appointments and new procedures in hospitals. There will also be more funding for GPs. It’s all intended to reduce congestion and treat people more effectively amid another serious winter crisis for the country’s health service.

• Swinney admitted there were “unacceptable” crises within the organisation, with patients not getting the care they needed. (Herald)

• Those reforms include “frailty teams” to intercept the elderly and redirect them away from busy A&E waiting rooms. The Sun has a memorable phrase for them: granny bouncers. (The Scotsman)

• Unions and opposition politicians said the package of reform did not contain much that was new (The Times) or enough detail to make it a reality (The Telegraph)

📣 Scottish Water bills are going up by 9.9% from April, it was announced this morning. The large rise is likely to raise some questions: it follows another chunky (8.8%) jump last year and a 5% increase the year before. (BBC)

• The rise comes at an awkward time: The Times reported at the weekend that Scottish Water’s chief executive had a financial package worth £483,000 - or £53,000 a month - in his first nine months in the job. He’s the best-paid quango boss in Scotland (The Times)

• Staff at Scottish Water, meanwhile, are going to ballot on strike action after pay talks collapsed. (BBC)

📣 A two-year boom in technology stocks and investment came to a hard stop yesterday as investors realised DeepSeek, a Chinese start-up with cheap and highly effective technology, could upend the Artificial Intelligence (AI) world.

• The Nasdaq 100 fell 3% yesterday, wiping almost $1 trillion off company values. Nvidia, a microchip maker, lost $600 billion in value - the biggest wipe-out in history. (Guardian)

• Donald Trump said DeepSeek was “a wake-up call” for US tech firms. (BBC)

• DeepSeek challenges everyone’s assumptions about AI costs. (🎁 Gift Link for Early Line readers: Bloomberg)

We explain the significance of all this below… ⬇️

IDEAS
What on earth has just happened in the world of AI?

🗣️ US and Asian stock markets have taken a tumble on the back of dramatic developments in artificial intelligence (AI). A new Chinese-produced AI model, DeepSeek, rivals its US-based competitors for quality but was made with 2% of the resources.

That’s of consequence to us all because AI is seen as a foundational and disruptive technology across manufacturing, services, even warfare. It has attracted billions in investment. If you have a pension, or a stocks and shares ISA, chances are you’re invested in these companies too.

So what’s going on? Open AI, Meta, Google and others have been piling money into AI. The big AI models, to date, have needed vast computing power: only last week, President Trump announced a $500 billion investment in infrastructure to “outpace rival nations in the business-critical technology”.

That sort of investment has been a boon to companies that produce the hardware—not least Nvidia, whose powerful processors are the AI engine of the moment. In 2021, Nvidia generated $26.9 billion in revenue, and in the quarter ending 31 October 2024, it generated $35 billion. You get the idea.

You can also imagine the upset, then, when this year-old Chinese startup, DeepSeek, launched an AI model that is at least as good as its US rivals, and faster. (The Register performed some tests yesterday to determine just how good it is - including riddles which often trip up AI models.).

That’s what hit the value of Nvidia yesterday, and tech stocks more generally since. The thinking is that if big advances can be made without vast computing resources, demand for their chips will fall.

The precedent for that reaction, however, is not clear. Vaulting levels of computing power through the 1980s and 1990s did not restrict the growth of personal computing, after all: it just meant more people had more powerful computers on their desks, and the sophistication of the tasks they could accomplish grew quickly. (Today, you can buy a watch with a more powerful processor than the original Intel Pentium PC.)

This appears to be the more likely outcome for AI: as with PCs, cheaper AI will become more pervasive, and we’ll find more sophisticated, more demanding ways to use it. Computing power will still be needed.

Two big concerns remain, however. First: it looks a lot like the way today’s big US AI firms are developing their software may need to change. They are burning through billions… while there are better, cheaper ways to achieve their goals. Second, this new, apparently touched-by-genius way forward came out of China, despite attempts to stop AI knowledge from spreading.

The realisation that US companies won’t have it all their own way in this AI revolution has also spooked investors. All of a sudden, backing a horse in AI looks like a less certain, more risky proposition: the technology world itself may be getting disrupted.

AROUND SCOTLAND

📣 Seven people convicted of being part of a Scottish child abuse ring were handed life sentences at the High Court in Glasgow. Judge Lord Beckett said the evidence heard was “harrowing” and plunged “to the depths of human depravity.” (Daily Record)

📣 Scotland’s botanic gardens have launched an emergency appeal after last week’s storm caused extensive damage at their gardens. (The Scotsman)

📣 Police searches of the RIver Dee for missing sisters Eliza and Henriette Huszti have been stood down. The women, 32, were last seen in the small hours of January 7 in the centre of Aberdeen. A search of coastal areas will continue. (Press and Journal)

AROUND THE UK

📣 Coca-Cola has sold drinks in the UK that are now part of a Europe-wide alert over “higher levels” of the chemical chlorate. Five brands - Coke, Fanta, Minute Maid, Sprite and Tropico - are impacted. The risk to consumers is low, the company claims. (BBC)

📣 Storm Herminia has brought flooding and power cuts to thousands in the South of England and Wales, while more than 60,000 homes are still without power in Northern Ireland following Storm Eowyn. (Independent)

📣 God is making a comeback among teens and 20-somethings, research has claimed. Gen Z is the least likely generation to call themselves atheists, while middle-aged Generation X are the most. (Independent)

AROUND THE WORLD

🌎 Is Dubai overheating (metaphorically as well as literally)? A growth in population from 255,000 in 1980 to 3.8m today, with a target of 5.8m by 2040, is bringing problems of its own - absurd property prices and jammed traffic, being two. (AP)

🌎 Here’s an interesting read on Greenland’s extraordinary mineral wealth… which may help explain Donald Trump’s interest in buying the island. (BBC)

🌎 Rain finally arrived in Southern California last weekend after weeks of fires caused billions in damage. But the downpours brought their own problems: mudslides and impassible roads. (AP)

🌎 Lady Gaga will release her seventh studio album on March 7. The new album will be called “Mayhem”. (Rolling Stone)

SPORT

⚽️ Former referee David Coote has spoken to The Sun about the events last year that got him sacked. He said he hid the fact he was gay and that “led me to a whole course of behaviours”. (The Sun)

⚽️ Jota is back at Celtic: the Portuguese winger, a hero from his exploits during his first spell at Parkhead, has returned after a frustrating spell abroad in the Saudi and French leagues. And he’s signed up for the long haul: he’s got a contract for the next five-and-a-half years. Celtic fans are delighted with the news coming as another fan favourite - Kyogo Furuhashi - travels in the opposite direction. (The Herald)

⚽️ Motherwell manager Stuart Kettlewell has resigned because of personal abuse directed at him by fans. He’s stepped away with the club - despite poor recent form - fifth in the table. (The Scotsman)

📺 Remember it is a Champions League week… but the final round of league stage games happen tomorrow night. We’ll carry details in tomorrow’s newsletter.