Asked who the frontier AI labs are actually afraid of — China, each other, or themselves — Ted Mortonson named none of the three. His answer was open source.
The public argument this week has been about safety. His reading is that it is also an argument about price: open-weight models from Nvidia and Alibaba are pulling the cost of a token down, and regulating open source would fix that.
"So I would say it's a strategy to put open source in a box from a regulatory standpoint. And my personal opinion, that's very dangerous."
Mortonson has covered technology for more than 30 years and sits on Baird's trading desk as its tech strategist, which is where he listened to more than 70 company earnings calls last quarter.
The full segment is covered here so you can skip it.
Here are the 5 calls that matter.
👤 Guest: Ted Mortonson, Managing Director, Tech Strategist at Baird, who has covered technology for more than 30 years
🎙️ Host: Lisa Abramowicz, who co-anchors Bloomberg Surveillance
🧩 Other segments: Guneet Dhingra of BNP Paribas, and Harvey Schwartz, CEO of Carlyle, interviewed by Bloomberg's Daniel Berger
📰 Published: 15 September 2026 on the Bloomberg Surveillance feed
🟣 Apple Podcasts | 🔗 Episode page | ⏱️ 8 min
Key Takeaways
The frontier labs' real competitor is open source, not each other and not China
Nvidia's Nemotron with Palantir, and Alibaba's Qwen, are pulling token costs down and setting the ceiling on frontier pricing
Regulating open source would be a competitive move dressed as a safety one, and he calls it dangerous
He wants the cloud companies and their venture backers to self-regulate rather than invite Congress in
Liability law already exists, and he says Anthropic exposed its own IPO to review by arguing otherwise
The industry's problem is that 80% of the public has not heard the productivity case
He calls the 5.8% drop in the semiconductor index a horrible reaction to reality
He sat on more than 70 earnings calls last season and calls it one of the most robust he has seen in his career
Capital preservation until the midterms, then a shopping list
1. Take a Deep Breath
Lisa Abramowicz opened by reading Mortonson's own note — that the cloud titans and both political parties are trying to control the future narrative in order to control global economic outcomes, and that this is a battle for regulated control — and said she felt she was facing down an information operation run by the leaders of technology.
His first instruction to clients was to stop reacting. "I think, number one, everybody's got to take a deep breath. This is just in this hysteria phase."
His comparison is the early stage of the pandemic, when the assumption was that everybody was going to die, and he said the answer then as now is to deal in the facts.
There are arguments on both sides, which he acknowledged after Abramowicz made the same point.
What he wants instead of a reaction is a plan. Look at the facts, react to the facts, and have a strategy.
He wants this settled before the campaign takes it over, and said the industry needs to get away from the hysteria going into the midterms.
2. Self-Regulate or Lose It
Abramowicz pushed back with the legal position: liability rules are already on the books, and the risks to these corporations are large enough that they should be self-regulating anyway.
He agreed flatly, and named a consequence for one company. "And I think Anthropic opened themselves up for a review of their IPO, quite frankly, on that point exactly."
"The industry has to stay within the guardrails."
"I'm not a huge believer in the federal government regulating an industry."
Where he puts the obligation is on the companies and the people who funded them. "I think the cloud titans and even the VCs that have funded these companies really have to go forward and protect the industry and self-regulate."
His objection to Congress is competence, not politics. Bringing in the politicians is probably one of the worst mistakes because they are not equipped to understand the technology.
"So I think going forward, the CEOs better get together and refine their message and refine their strategy."
3. The Fear Is Open Source
A host asked who the frontier models are really worried about — open source lacks the same compute power, so is it China, each other, or themselves?
"I think they actually are worried about open source."
His example is Nvidia's Nemotron running with Palantir, a combination he said is already affecting frontier model pricing and availability.
The mechanism is cost. With open models — Alibaba's Qwen, Nvidia's Nemotron, or any of them — Mortonson said "those token costs go right through the floor."
That sets the long-term ceiling on what a frontier lab can charge, which is why he reads the regulatory push the way he does.
"So I would say it's a strategy to put open source in a box from a regulatory standpoint. And my personal opinion, that's very dangerous."
Asked whether this is an existential fight for a business model or for humanity, he refused the choice. "It's both." He called it a very complex discussion and said the technology is moving so quickly that both sides of the coin have to be addressed.
4. The Message Isn't Landing
A host asked how much the tech executives are responding to the American backlash visible in polls and in the states pushing for a moratorium on data centers.
"I think their message is not very good." He noted he had made the point on the show before.
He named the companies he means: Microsoft, Amazon, Google and Nvidia. What they have to do is convince the whole US population of what AI can do for humanity, against a perception he says most of the population holds — that this is about self-enrichment.
The case he thinks they should be making is already available. Massive strides in health care, massive strides in productivity, and an effect on the quality of life rather than only on the workforce.
"I don't think that message is getting out to, call it 80% of the population, if you look at some of the polling."
5. The Falling Knife Trade
Abramowicz asked the question she said most viewers actually want answered: is this a headwind to hardware, a gift to the hyperscalers, and how is Baird positioning?
"I think, number one, you have to let the falling knife hit the floor and stop spinning here."
"It's a degree of capital preservation in the near term as we get into the midterm elections." After the beginning of November, he expects things to clear up a lot.
"My personal opinion is I think this infrastructure trade is going to go on for years."
On the previous day's move: "And the stock action you saw on the semiconductor index being down 5.8%-ish yesterday was a horrible reaction to what reality is."
His evidence is what he heard from companies, not from the tape. "I sat on 70-plus conference calls last earnings season. And this was one of the most robust earnings seasons in tech that I've seen probably in my entire career." He added that this is saying a lot, because he has been around for a while.
"The bottom line here is things are not going to stop on a dime."
What has to happen first is the election. He wants to see what Congress and the Senate look like after the midterms and go from there.
His two macro calls are that rates and energy are close to a peak, and on that basis he told viewers to get their shopping list ready very quickly, because after the previous day's selling he sees some incredible buys.
Bonus Insights
Abramowicz's framing of the week was the most vivid line in the segment — that she felt she was facing down an information operation conducted by the leaders of technology and no longer knew what to think.
Mortonson's note, which she read on air, is that the cloud titans and both political parties are trying to control the future narrative in order to control global economic outcomes, and that the fight is over regulated control. He did not soften it when asked about it.
He treats the political calendar as the main variable in the near term, and mentioned the midterms in three separate answers — as the reason to preserve capital, as the reason the industry should settle the argument quickly, and as the point after which he expects clarity.
Mortonson's bottom line is that the safety argument is also a pricing argument: open-weight models are collapsing the cost of a token, regulating them would protect frontier economics, and in the meantime the selling in semiconductors is at odds with what he heard on more than 70 earnings calls.
Products, Companies & Tools Mentioned
Nvidia Nemotron and Palantir (The open-model and deployment combination Mortonson says is already affecting frontier model pricing and availability)
Alibaba Qwen (His other example of an open-source model pushing token costs through the floor)
Anthropic (He says it exposed its own IPO to review by arguing against existing liability rules)
Microsoft, Amazon and Google (The tech titans he says have failed to make the productivity case to the public)
Philadelphia Semiconductor Index (Down 5.8% the previous session, which he calls a horrible reaction to reality)
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