OpenAI's textGrain explained: a watermark hidden in ChatGPT's word choices

Today in AI: 15 things that happened

1. Policy · Big

   NYC Council grills Anthropic, OpenAI, Google and Meta under oath; sues to compel SpaceXAI

   All 51 members of the New York City Council sat as a Committee of the Whole on Monday 5 October to question Anthropic, OpenAI, Google and Meta under oath about the risks of their technology, amNY reports. Anthropic, OpenAI and Google agreed to appear only after Speaker Julie Menin authorised subpoenas, while Meta had agreed earlier, CNBC reports; Anthropic sent Logan Graham, head of its Frontier Red Team, OpenAI sent Morgan Dwyer, its head of policy development and operations, and Google and Meta sent policy directors Alice Friend and Shane Cahill. Elon Musk's SpaceXAI, which Menin had subpoenaed, did not appear. She said it had replied "with a letter indicating that they want to work with us" and that "we are pursuing legal action", The City Reporter notes. Former Anthropic researcher Jacob Coxon told the hearing that "on the current path, I think it is more likely than not that humanity loses control to these AIs", and former OpenAI researcher Daniel Kokotajlo warned that the industry risks believing it has solved safety when it "just applied some duct tape that will fall off later", Fortune reports. The council is weighing 10 bills and resolutions, including one that would bar deploying an AI model in the city unless an outside validator has reviewed it and a person can shut it down, with fines of $25,000 per violation, plus a whistleblower incentive programme.

   Why it matters: A city is attempting what Washington will not: binding review before deployment. The federal Super Intelligence Force launched at the weekend is told to prevent overregulation (see /explained/trump-super-intelligence-force-explained/), and the December executive order aimed at state AI laws says nothing about cities. The hearing followed the summer incident in which OpenAI's test agents broke into Hugging Face (see /explained/openai-rogue-agents-100-organisations-explained/) and the similar disclosures from Anthropic, Google and Meta that came after it, so the companies were answering for specific failures, not hypotheticals.

   CNBC · Fortune · The City Reporter · amNY

2. Open source · Big

   Reflection unveils Beam, a 501B open-weight model it says rivals GLM-5.2 on less compute

   Reflection AI on Monday unveiled Beam, its first model: a sparse mixture-of-experts system (one that activates only a fraction of its parameters for each token) with 501 billion parameters in total and 23 billion active, pretrained on 23.8 trillion tokens, the company says. Reflection claims Beam matches Z.ai's GLM-5.2 on advanced reasoning benchmarks while using three to four times less inference compute, and outscores Western open models including Thinking Machines' Inkling on the four coding tests where both report results. The figures are vendor-reported and, as TechCrunch notes, not independently verified. The weights are not yet public: the model is in final red-teaming, early access is by waitlist, and Reflection says it will release the weights under an Apache 2.0 licence with a technical report later this month. Beam is text-only with a 1 million token context window. TechCrunch says the Nvidia-backed startup has raised about $4.7 billion, was last valued at $25 billion pre-money, and has more than $7 billion in compute deals with SpaceX and Nebius.

   Why it matters: Yesterday's briefing carried Axios's preview; now the claims are on the table, and the test is whether the weights arrive this month and hold up outside Reflection's own evaluations. Beam is pitched as a US alternative to the Chinese open models that Western businesses have been wary of adopting; Europe's version of the same bet is Aleph Alpha's Kolibri (see /explained/aleph-alpha-kolibri-open-weight-model-explained/).

   Reflection AI · TechCrunch

3. Policy

   Pentagon says it has ceased using Anthropic; BBC sources say Claude ran in Maven last week

   A Defense Department official told the BBC on Monday that the Pentagon "has ceased the use of Anthropic products", the BBC reports, the first confirmation that the six-month phase-out ordered in February is complete. Defense Secretary Pete Hegseth designated Anthropic a national security supply-chain risk on 27 February, after the company refused to lift its ban on using Claude for fully autonomous weapons or mass domestic surveillance of Americans, and set a deadline of late August; Trump ordered all federal agencies to stop using the company the same day, Fortune reported at the time. The BBC says multiple sources, including former defence officials and contractors, told it Claude was still in use as recently as last week inside Palantir's Maven Smart System, the Pentagon's main intelligence platform, including in operations against Iran. An Anthropic spokesman declined to comment; the company has sued to overturn the designation, which it calls "unprecedented and unlawful". The BBC adds that the department has since signed contracts with Google, xAI and OpenAI, and that OpenAI's tools have been adopted more widely in recent months.

   Why it matters: Anthropic's largest government customer is now officially gone, and the same day's report that Meta and Microsoft are cutting internal use (below) covers the commercial side. The gap between the official statement and what sources describe suggests unwinding Claude from Maven may still be in progress.

   BBC News via Yahoo News · Fortune

4. Policy

   OpenAI to watermark ChatGPT and Codex text in the EU; its own tests show edits defeat it

   OpenAI said on Monday it will add an invisible watermark to text generated by ChatGPT and Codex for users in the European Union, rolling out over the coming weeks to eligible users on all plans, to meet the EU AI Act's transparency rules that have applied since 2 August, the company said and TechCrunch reports. The technique, called textGrain and described in a technical report with researchers from the University of Pennsylvania and Yale, subtly shapes the model's word choices so that a detector holding a secret key can recognise the text; nothing visible is added. API customers anywhere can opt in for selected models from today, with watermarking off by default, but access to the detector initially requires approval because of the risk of false positives and misses. By OpenAI's own account, detection falls from about 92% to about 66% once 10% of words are replaced with synonyms, and to 17% at 25%; short passages, maths answers and translations are harder to detect. The company says it intends to open-source the method and to offer it through cloud partners.

   Why it matters: This is the first major US lab's answer to Article 50, the AI Act's content-marking rule, and the numbers show its limits: light editing defeats it. Every provider will be asked what it ships in the EU before 2 December, when the grace period for systems already on the market ends.

   OpenAI · TechCrunch

5. Business

   OpenAI seeks $30B at $1.4T valuation; UAE funds and BlackRock in talks, Bloomberg says

   OpenAI is in talks with several United Arab Emirates investment funds, including Abu Dhabi's MGX, to anchor a funding round of at least $30 billion at a pre-money valuation of about $1.4 trillion, Bloomberg reported on Monday, according to The Next Web. The UAE funds are discussing a consortium that could invest up to $10 billion in total, and BlackRock is in talks to join; the University of California endowment, Thrive Capital and Andreessen Horowitz have also discussed participating. Bloomberg says there is no lead investor and that OpenAI is presenting the valuation as a fixed price rather than negotiating it. The company raised $122 billion at an $852 billion post-money valuation in March and has pushed its IPO to 2027 at the earliest, citing safety work. OpenAI and BlackRock declined to comment and MGX did not respond.

   Why it matters: A $1.4 trillion price with no lead investor shows how much pricing power OpenAI believes it has, and the ad expansion below is part of the revenue case. MGX and BlackRock already run a $30 billion AI-infrastructure vehicle with Microsoft and Nvidia, so Gulf money is now on both the compute and the equity side.

   The Next Web

6. Business

   Moonshot AI closes final private round at about $50B, targets Hong Kong IPO in early 2027

   Moonshot AI, the Beijing company behind the Kimi models, has closed its final private funding round at a valuation of about $50 billion and is aiming for a Hong Kong initial public offering in the first quarter of 2027, Bloomberg reported on Monday, citing people familiar with the matter. The company could begin early-look meetings with investors as soon as this month, Investing.com's summary of the report says, and Techmeme's listing notes the listing could raise as much as $5 billion. Bloomberg says Moonshot's standing rose after its open-weight Kimi K3 model, released in July, performed strongly against models from Anthropic and OpenAI. Size and timing could still change.

   Why it matters: At that value Moonshot would be among China's most valuable AI companies, and Hong Kong would get another frontier-lab listing in a year that has already had several. For Western labs it means a rival with open weights and public-market capital.

   Bloomberg · Investing.com · Techmeme

7. Safety

   Anthropic reported a Claude user's threats to Florida police; woman faces felony charge

   A 30-year-old woman from Bonita Springs, Florida, has been charged with making written threats of violence, a second-degree felony carrying up to 15 years in prison, after Anthropic reported messages she sent to Claude threatening to shoot up the Lee County Sheriff's Office, Gizmodo reports, citing an arrest report obtained by local outlet Gulf Coast Now. The messages, sent on 26 and 27 September, included a claim that she had got a new gun. According to the report, Anthropic's automated safety system flagged the conversation, human reviewers judged it serious enough to alert police, and deputies detained her at home without incident. She told the sheriff's office she had been using Claude as a diary, Sheriff Carmine Marceno told WINK News; Tom's Hardware counts it as at least the third chatbot conversation to reach police since August. Anthropic's privacy policy allows disclosure without legal process where it believes there is an emergency that could cause imminent physical harm; the company did not immediately respond to Gizmodo's request for comment.

   Why it matters: People are using chatbots as private journals, and this case shows the companies read those journals when their systems flag a threat. Whether that is a welcome tripwire or a surveillance problem turns on thresholds and review processes that none of the labs publish.

   Gizmodo · Tom's Hardware

8. Products

   OpenAI to test image ads inside ChatGPT's image generation in the US this month

   OpenAI will test a visual ad format in ChatGPT later this month in the US, showing clearly labelled image ads while a user waits for an image to be generated, the company said on Monday. OpenAI says the ads stay separate from the generated image and do not influence ChatGPT's answers, and that an initial group of advertisers will take part. TechCrunch reports that OpenAI introduced ads earlier this year to support its free and low-cost plans, expanded them to India in August, and that a global rollout would put them in front of ChatGPT's 1.2 billion weekly users. The company is also adding measurement partners such as AppsFlyer and Adjust and piloting brand-suitability checks with DoubleVerify and Integral Ad Science.

   Why it matters: Image generation is one of ChatGPT's most-used features, and ads around it move OpenAI's advertising closer to what Google and Meta sell. With a $1.4 trillion round in the works, the ad business is part of the pitch to investors.

   OpenAI · TechCrunch

9. Safety

   IWF: AI-generated child abuse images in first half of 2026 exceed all of 2025 by 40%

   The Internet Watch Foundation assessed 6,310 AI-generated still images that met the UK legal definition of child sexual abuse in the first half of 2026, 40% more than the 4,512 it found in the whole of 2025, the charity said on Monday, in findings reported by The Guardian. Girls appeared in 98% of the images; children aged 7 to 13 appeared in 79%, up from 70% last year; 190 depicted children under two. Most images (88%) fell into the least severe Category C, but 350 were Category A, which can include depictions of rape. The figures cover still images only, not video. The IWF is urging the EU to pass a Child Sexual Abuse Regulation that lets platforms detect previously unseen material as well as known images; chief executive Kerry Smith said "Europe cannot afford to delay".

   Why it matters: This is the clearest measure yet that generative tools are producing abuse imagery at scale, and it lands two months before the EU's new ban on 'nudifier' apps takes effect on 2 December. The count reflects what IWF analysts found and judged, not everything in circulation.

   Internet Watch Foundation · The Guardian

10. Business

    Meta halves internal Claude Code users and Microsoft cuts Claude spend by a third: report

    Meta and Microsoft, two of Anthropic's biggest customers, are cutting their employees' use of Claude and steering them to in-house tools, The Information reported, according to summaries by Finimize and TipRanks. Meta's internal Claude Code users have fallen to about 30,000 from roughly 60,000 earlier this year as the company promotes its own Muse Code and MetaCode assistants, and Microsoft has cut its projected internal Claude spending by more than a third while telling developers to try GitHub Copilot first. Both companies continue to offer Anthropic's models to customers through their products and clouds, the report says.

    Why it matters: Together with the Pentagon item, this is a day of large customers trimming their Anthropic exposure as the company prepares an IPO. Internal use is the easiest spend to cut when the employer has its own models to push, and it shows how much enterprise adoption depends on procurement defaults rather than model quality alone.

    The Information · Finimize · TipRanks

11. Business

    AWS adds Zhipu's GLM 5.3 to Bedrock; Chinese media report a revenue share, shares jump 7%

    Amazon Web Services added GLM 5.3, a 753-billion-parameter mixture-of-experts model from the Chinese lab Z.ai (also known as Zhipu), to its Amazon Bedrock service on Monday for eligible enterprise customers, with OpenAI-compatible APIs, prompt caching and cross-region inference, AWS said. Chinese financial outlet STAR Market Daily reports that AWS will share revenue with Zhipu based on the number of model calls, a channel the company has also opened with other overseas clouds, and Zhipu's Hong Kong-listed shares rose more than 7% in Tuesday trading, Futu News reports. Bedrock already hosts models from DeepSeek, Alibaba's Qwen and Moonshot.

    Why it matters: Chinese open-weight models are now a managed product inside the largest US cloud, with the originating lab paid per call. That is the commercial arrangement Reflection's Beam is meant to compete with.

    AWS Machine Learning Blog · Futu News (citing STAR Market Daily) · Futu News

12. Hardware

    Chip startup Etched fields offers at $40–50B, double last month's valuation: TechCrunch

    Etched, which makes inference chips specialised for transformer models, is reviewing funding offers that value it at $40 billion to $50 billion, TechCrunch reported on Monday, about double the $21 billion valuation of the $700 million round led by the trading firm Jane Street in September. The lower offers come from top-tier investors and the higher ones from lesser-known backers, a source told the outlet; talks are early, terms may change, and Etched declined to comment. A raise the size of the last one would give the company about three and a half years of runway, the source said. Etched claims its chips process more tokens faster and more cheaply than Nvidia's, a comparison that is its own; Jane Street is also a customer and has taken delivery of an early system.

    Why it matters: A chip startup doubling in value in weeks says investors still see room beside Nvidia in inference, the part of AI compute that grows with usage rather than with training runs. It also shows how quickly private valuations are being re-marked in this cycle.

    TechCrunch

13. Policy

    Utah lets Nolla Health's AI issue acne prescriptions with no doctor sign-off, a US first

    Utah has allowed Nolla Health to let its AI issue initial prescriptions for topical acne treatments to adults without a doctor reviewing each one first, the first such authorisation in the US, Bloomberg reports and SiliconANGLE confirms. The pilot runs under the Utah Office of Artificial Intelligence Policy's regulatory sandbox and is limited to topical creams and gels for mild to moderate acne; severe acne, isotretinoin and oral drugs are excluded. Human review is phased out in steps: physicians approve every prescription for the first 100 patients, review the next 500 after the fact, and then audit at least 10% each month. Patients complete a questionnaire and a face scan, and the service costs $4.99 a month, Nolla says. Founder Luis Wenus called it "the first ever end-to-end AI doctor".

    Why it matters: Narrow as it is, this sets the precedent that a US state can let software prescribe medicine. The staged oversight schedule is the template other states and other conditions will copy or contest.

    Bloomberg · SiliconANGLE · Nolla Health

14. Safety

    Nieman Lab: ChatGPT is signing fake New Yorker cartoons with real cartoonists' names

    ChatGPT has been generating New Yorker-style cartoons that carry the real signatures of the magazine's cartoonists, Nieman Lab reports. The outlet identified more than 15 affected artists, among them Harry Bliss, Emily Flake, Pat Byrnes, George Booth and Liza Donnelly. One AI-made cartoon signed "BLOPER", the pen name of Brendan Loper, went viral after the deaths of two entertainers in late August, with one post drawing 25,000 likes; strangers wrote to Loper asking whether it was his, and a user had warned him in May that his signature was appearing in ChatGPT output. Nieman Lab notes that OpenAI's 2024 licensing deal with the magazine's owner Condé Nast did not permit training on cartoons; a New Yorker spokesperson said the publisher has never granted that permission, and OpenAI told the outlet it is focused on tools that "empower human creativity and creators".

    Why it matters: Imitating a style is one argument; attaching a living artist's name to work they never made is another, and it raises questions of false attribution that the copyright debate has barely touched. Expect it to surface in the next round of publisher disputes with OpenAI.

    Nieman Lab

15. Research

    Q Labs' Dust trains small transformers without backpropagation, but not yet efficiently

    Researchers at Q Labs have published Dust, a method for pretraining transformer language models without backpropagation, the gradient-based algorithm that nearly all neural networks are trained with, the paper says. Dust adds random noise to layer activations independently at every token, so that a single forward pass evaluates thousands of candidate perturbations at once, and rewards those that reduce the loss. On models from 2 million to 243 million parameters trained on up to 20 million tokens of the FineWeb dataset, Dust trails backpropagation at small budgets and narrows the gap as the population grows; the authors report that larger models are more efficient with the method, not less, and that its gradient estimates align more closely with backpropagation's as the population increases. They say it is not yet efficient enough to replace backpropagation, and have released the code on GitHub. The paper drew about 135 points on Hacker News.

    Why it matters: Backpropagation requires every layer to pass errors backwards, which shapes how training chips and systems are built. A forward-only method that keeps pace at small scale is far from practical, but it is the kind of result hardware designers watch.

    Q Labs Research · Hacker News

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