Chapter 1: What is the main topic discussed in this episode?
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Coming up, OpenAI raises $110 billion with key Amazon backing in a deal that values the startup at $730 billion. Plus, Anthropix dispute with the Pentagon and intensifies over safeguards around the use of its AI technology. And Block plans to cut close to half of its entire workforce in a move the company describes as a bet on AI.
But first, we check in on these markets that have a lot more to digest than just AI on the day. We're off by 0.4%. The Nasdaq investors trying to navigate what has been a pretty brutal month. Yes, there's anxiety over AI capex spending. Yes, there's worry about where on inflationary pressures are going. The PPI data today showing that maybe the Fed can't cut as much as the market had wanted.
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Chapter 2: What is the significance of OpenAI's $110 billion funding round?
It's about what you use those plugins to do. Who is leaning into AI to provide AI-empowered services to bolster competitive moats to do more? And the other thing, you know, crossing headlines today is around labor disruption. And I'll say... You know, companies that are thinking about how they use AI to substitute their workers, they're missing the forest of the trees here.
The real transformative impact from AI is what you can do to do more, to do faster, to build better, to do things that you wouldn't have done before, and ultimately outrun your competition in doing so. We are going to be discussing Block at length in a moment, but I'm assuming that's exactly where you're pointing, the fact that Jack Dorsey
Has admitted he overhired and in some ways has been rectifying and rebalancing block from a personnel perspective. But he is saying, I am late and we are going all in on AI and other companies are going to follow. Are there other companies to follow who are bloated, who do need to rectify and are going to use AI as a good excuse?
I think the reality is AI is going to create a lot of transformation in work.
Chapter 3: What are the implications of the Anthropic and Pentagon dispute over AI use?
And that transformation could at times look like layoffs in some areas. But I think over the medium term, we're going to see all sorts of job creation too. Really, like what? Because we all keep talking about prompt engineering. Well, that's sort of a thing of the past. It is a thing of the past.
Chapter 4: How is Jack Dorsey's Block adjusting its workforce in relation to AI advancements?
Well, one of the things is, look, these agents can create a whole bunch of work. They can automate processes. But the amount of work that they can reliably automate relative to what a human worker does in a services-oriented economy is still a fraction. I should add, and all of our listeners should know, hallucination rates for the current frontier models still range between 26% and 80%.
Whatever frontier model you're using, Claude, Gemini, ChachiBT, they're still getting things wrong. There is still a real layer here of human oversight. And the thing is, the need for human oversight only compounds when now we're talking about a lot more product, a lot more output, because AI is helping us achieve that.
It's interesting because of late, I think there's been pushback on the hallucinations that are happening at the very cutting edge models.
Chapter 5: What are the market reactions to AI-related investments and funding?
And yes, that might be a thing of the past. So I'd love to dig into that data that you're still seeing maybe up to 80%. More broadly, how are you thinking about the macro impact and whether or not we will see a Fed that's able to tackle this in any way or not? Yeah, it's a challenge. And that's some artificial analysis. For the Fed, it's a challenge.
Right now, you see there's a bit warmer inflation right now. We kind of know what's contributing to that. It's tariffs. Maybe we can see through that. And I was just in D.C. earlier this week hearing from a bunch of these Fed governors. And there is a range of opinions here. But I think the reality is the Fed is very data dependent. And right now, in the hard data,
you still see very, very early impacts of AI labor disruption. Over the medium to long term, there are, I think, some big questions. I think we have to rely on, I guess, what history has told us, and then ultimately the fact that, yes, we're all amazed at the exponential growth of the technology at the frontier, but the diffusion of the real economy isn't exponential. It's linear.
It's going to be jagged. That's going to give us time. It's going to give policymakers time to adjust. Stephanie, thank you for helping push us forward. Stephanie Aliaga of J.P. Morgan Acid Management. Now coming up, Anthropic rejects the Pentium's latest offer in a dispute over AI safeguards. All the details coming next. This is Bloomberg Tech.
I offered more talks, so long as they're in good faith. We're always open to talks, and we set a deadline, and we meant the deadline, and up until that deadline, I'm open to more talks than I told them so.
Emil Michael there. Under Secretary of Defense for Research and Engineering, after Anthropic rejected the Pentagon's latest offer in a dispute over safeguards around the use of its AI technology by the U.S. military. Now, Anthropic's CEO said, quote, we cannot in good conscience accede to their request. And now, well, the deadline for any further talks is fast approaching.
Bloomberg's tech and industrial policy reporter Maggie Eastland joins us for more. It's fast approaching. It's 5 p.m. New York time, Washington time, Maggie. What can be done until then? Exactly. So look, the rhetoric here has been rather intense. You see Emile Michael, the Pentagon undersecretary, accusing Dario Amadei of having a God complex last night.
You see Dario continuing to say that we need these two safety guardrails. And those guardrails are no autonomous strikes without a human in the loop and no surveillance of U.S. citizens.
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Chapter 6: How is Amazon involved in OpenAI's funding and what does it mean for the tech industry?
And without that, he doesn't seem willing to budge. So definitely these two sides are staring each other down, and we're going to find out at 5 p.m. who's willing to blink. We're also seeing coalitions of workers who are employees at Amazon, at Google, at Microsoft, at OpenAI, also asking their companies to join Anthropic in refusing to comply with the Defense Department demands.
Maggie, what is the argument coming, not only from Emile Michael saying he's got a gold complex and actually calling him a liar, but... But what are the legal protections already in place? Right, so the Pentagon has said, look, according to the Constitution, according to U.S. law, the U.S. is not allowed to have domestic surveillance over its own citizens.
Now, Anthropic's take on that is actually that AI might propose some new legal ground where there are situations where just due to the sheer power of artificial intelligence to aggregate public data, it could lead to new surveillance use cases under which the law isn't clear. So there's definitely some semantics going on here
At the same time, these are real sort of life and death questions about how the U.S. wants the AI tools to be used for warfare. Maggie Eastland, your reporting throughout has been stellar. Thank you very much for joining us on it. Let's continue the conversation. Sarah Kreps is with us, director of the Tech Policy Institute over at Cornell University.
And you're at the intersection of how national security, geopolitics and tech policy intertwine. This is anthropic, having to lead the charge here in many ways. And the only one who's got this sort of relationship with the Pentagon thus far. What do you make of Dario's pushback?
Yeah, and I think we should take a step back and acknowledge why they're at the tip, no pun intended, the tip of the spear here with the Pentagon, which is that a year or so ago, they seemed to go in the direction of focusing on enterprise. And with that, more than a year ago, because their first contract with Palantir was in 2024. And so that's the market they're going for.
And so they were part of... you know, $200 million contracts with Palantir and the Pentagon in part of that enterprise kind of business that they're focusing on. And so as part of that, that enters them into a, you know, this arrangement that I think has then led to where we are now, which is this standoff
in terms of how they balance their kind of ethical constitution with the need to be doing enterprise work that will bring in the revenue.
There is a lot at stake because it's not only just a $200 million contract of work that Anthropic has, but there's almost a threat coming from the Pentagon that if you don't abide by our rules, we're going to say that you're a supply chain issue and lots of other military-related companies are not going to be able to use your models in the future.
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Chapter 7: How does AI impact job cuts and workforce dynamics in tech companies?
But, you know, we still don't think it'll be enough to avert the drop that we're seeing. The other strategy and mitigation strategy that they're thinking about or going to leverage is that they're going to try to move up in price segments. Right. So it's target above $200 price.
um phones but again the challenge there is that demand there is going to be very sensitive because one there's going to be so much increased competition from more established players in those price segments that it's going to be really harder hard for the low end below 100 brands to be able to get demand or consumers to buy their devices above 200 so even though they're being ambitious i think it's going to be a big challenge to um operate at the same volume
at higher price segments. So, you know, that brings me to my other point.
Chapter 8: What are the potential future trends in AI and its effects on employment?
We're not only looking at a full competitive landscape change where many players exit and, you know, share change between the larger players that are remaining, but also a complete product makeshift of the industry that is going to last for a long time. Because even when the crisis stabilizes, and memory prices go down slightly, they're not going to go back to prior levels.
So it's almost never permanently uneconomical to make those sub-$100, $150 devices.
So are we going to be keeping our phones for longer, Nabila? That was already a trend.
Yes, exactly. So the consumers that are not going to be able to afford those higher price segments or higher prices, which are across the board, not just on low end, some are going to end up resorting to keeping their devices longer or resorting to the used market. So there's just so many dynamics at play and we're eager to see how OEMs and consumers adapt.
But it's going to be a very challenging couple of years.
Nabila Popal, it was fascinating research. Senior Research Director at IDC. Thank you. Coming up, a new way to start your weekend. Bloomberg TV is launching Bloomberg This Weekend. Co-host David Gurra is going to be joining us for a preview. This is Bloomberg Tech. NASA shaking up its Artemis mission to the moon.
The space agency decided to cancel a multi-billion dollar Boeing upgrade to the Centerpiece Space Launch System rocket and is slotting in a test fighter flight closer to Earth as the program remains beset by delays in coast overruns. Now, even with this latest turn of events, NASA insists the 2028 deadline for a lunar touchdown remains unchanged.
Meanwhile, there is something changing at Bloomberg TV, unveiling a brand new show to start your weekend, Bloomberg This Weekend. Joining us is the program's co-host, David Gurra, one of three, and a whole team behind it. David, I have a feeling you might be talking some tech stuff this weekend. Indeed we will. So there'll be plenty of tech stuff.
Certainly watching what's been happening with the Pentagon and Anthropic and also the private credit story continues to be roiling as well. So I think it highlights why we're doing this program. That is, it doesn't seem like everything is contained in a Monday through Friday week anymore. It seems like it starts to build even more at the tail end of Friday going into the weekend.
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