원문 보기
Bring in show music, please. Hi, I'm CNBC producer Zach Felice. Today on Squawk Pod. A massive fund raise for the massively valuable private company Open AI. 110 billion dollars including from Amazon. Leaders of both companies join us on this news. Open AI's Sam Altman. The more we see revenue growing, the more we see demand growing, the more we want to invest to be able to serve that.
And Amazon's Andy Jassy. This is the most significant transformation in technology and maybe business in our lifetime. Plus, Paramount one step closer to a long sought prize. The legacy assets of Warner Brothers Discovery. It's either the end of of Hollywood and theaters or it's the magnification right of Hollywood.
And we never thought artificial intelligence would come for us. It's just a bonkers and backwards thing to think cuz here we have this great innovation, this great technology is supposed to move us forward which it may, but it could take our jobs in the in the meantime. It's Friday, February 27th. Squawk Pod begins right now.
Stand Andrew by in 3, 2, 1. Cue Andrew. Good morning and welcome to Squawk Box right here on CNBC. We're live at the Nasdaq Market Side in Times Square. I'm Andrew Ross Sorkin along with Joe Kernan. Becky is off today, but uh we got a lot going on on this Friday morning. Take a look though at shares of fintech company Block.
They are soaring uh literally right now uh up about uh 20% here uh this after the company said it would lay off roughly half of its workers. Block CFO saying if the company sees an opportunity to in her words move faster with smaller highly talented teams using AI to automate more work. Block's uh head count is uh in this case going to go from more than 10,000 people uh to just less than 6,000 people and this may be one of those moments about AI and what it does to employment.
In a letter to shareholders, CEO Jack Dorsey saying that AI tools have changed what it means to run a company. He said, quote, "I don't think we're early to this realization. I think most companies are late. Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes.
I'd rather get there honestly and on our own terms than be forced into it reactively." And if you think about this, if you could cut 50%, 40% of your workforce, which is what these folks are going to be doing literally overnight, what does that mean for the rest of us? I need a list of companies that are in a position like Block where they can do that.
You must have some ideas. Well, I would imagine, first of all, you could look at a lot of the By the way, the question is whether this is all white-collar jobs that you could do this with or whether this this is just um you know, in this case, uh transactional companies. Could Stripe do this to itself, for example?
Stripe, by the way, may want to buy PayPal. Okay, well, good. PayPal Don't give me individual names, then. Give me total percent total of the S&P 500 that could do something similar. 20%? 60%? Oh, I wonder whether it's 50%. 50%? Yeah. Why not? That's a frightening and that doesn't even include all the the things that we've talked about with truck drivers and you know, not just AI, but you know, look at
I think the truck drivers are at the future 5 years. Well, there's a lot of them No, I know, but I'm saying I actually think truck drivers are are better off than are more are safer in this moment than uh In this moment. In this moment. Before you get to robotics. Well, that's what I mean. Well, I mean, just talking about 5 years.
I'm talking about the future, not just AI. And the way AI will inform robotics, too. So, that the all whole of this is I saw it yesterday. I was like, is Block in trouble? It's not necessarily in trouble. It's that's that's usually when you hear of a 40% work for whatever it is cut, that's usually what what you're thinking of.
Cost cutting or I'm often asked, how can you get you could we ever have another 1929? You kidding? Which ultimately Why would they ask you? Which ultimately turns into unemployment of of 25% in 1932. I'm not even sure by the way I'd even say that the crash is related to the that. But what there's there's a couple ways to get there in 1932 of 25% unemployment, but oddly the successive AI could be one of them.
Which is such a bonkers and backwards thing to think cuz here we have this great innovation, this great technology that's supposed to move us forward, which it may, but could take our jobs in the in the meantime. And I don't even know if there's a transit What I don't can't figure out is people just talk about a transitionary period, right?
You go from what you know, horse and buggies to this and that. Question is, what is the transition in this case? Two. I don't know whether it means a a 1929 type thing. Is it possible that it's so powerful and and it increases productivity so much that we all only need to do three or four-day workweeks and we all have all this leisure time that there is some kind of UBI that we all you know, that that that it's actually a boon for maybe someday we don't have to work.
We can just all we need to do is play golf and I don't know that's what Elon Musk would say, but that only works if some people and I'm pointing to you, but people that that you like and associate with decide that UBI and redistribution are the way to do it because otherwise all of the economics get concentrated in a very small number of hands and and then I really don't know what happens.
Well, let's just hope the machines aren't deciding what to do with us. Sure, but what I'm what I'm suggesting is you're not going to This This idea of this leisure society is a false choice if you believe that there's a group of people in America who don't believe in in any form of redistribution. That can't That's But then you're back to how many boats can you waterski behind?
Elon Musk is never going to spend his trillion dollars. I mean Yes, but what I'm saying is for a very very long time there's been uh in particular on the right a view of not to tax people uh not not not to provide benefits to people and services to people. what it is at all. The right thinks that the private sector can generate more prosperity than the government which helps the people that you're talking about.
And in fact the the the policies of the left nine out of 10 times end up hurting the people they are intended to help through redistribution. No one That may be in the current You you No one wants to be a a a a liege of the state where all of a sudden But what I'm suggesting to you unfortunately is in in the context of what you're saying, everybody may be a liege of the state.
You may be a liege of the state. think that is a a really false premise that Republicans don't want to do any redistribution cuz they want to keep it for themselves cuz they're greedy bastards. I think they think that this is the best way to to grow the pie for everyone. but how would that work in this this new world?
I don't know how it's going to work in this new that approach may not work in this new world. Let's talk Netflix. Netflix abandoning its pursuit of Warner Bros. Discoveries studio and streaming assets after Warner's aboard labeled a revised bid by Paramount Skydance and saw it as a superior offer. Shares of both Netflix and Paramount jumping this morning and I'm not going to say that that that Netflix is up because uh it it it was I mean there's arbitrage, there's all kinds of things, right?
For why it's up. Maybe people were short Netflix. Netflix has got bigger problems than just trying to you know than what we talked about uh whether there was a negative reaction to trying to to buy Warner Bros, which maybe it didn't even need. But in a statement, Netflix's co-CEO said, "At the price required to match Paramount Skydance's latest offer, the deal is no longer financially attractive." They went on to say this transaction will always was always nice to have at the right price, not a must-have at any price.
In his own statement, Warner Bros. Discovery CEO David Zaslav wished Netflix well. He said, "Once Warner's board approves the Paramount merger, it will create, in his words, tremendous value for our shareholders. The deal will still have to pass regulatory muster with the Department of Justice." California's Attorney General also saying the state intends to carefully review the deal.
Do you have any firm knowledge of what went on yesterday at the White House? I do not. I've been trying to get some knowledge. the reports from from different places that he that that Zaslav met with Pam Bondi But did not meet with the president. Did not meet with the president, but got the feeling that this is going to be tough.
And so that's the big question to me. Was the So I was surprised that they were walking away. I thought invariably for a buck a share, you know, can't be that much of a difference There's more to it than just If they really If they really wanted this asset, I always thought Paramount would raise. Right.
Well, that's not what they're saying. I thought Netflix would match. them. I don't know. Well, they're saying it was nice at this price and it's not that's what they're saying and what I'm I'm suggesting to you is it Walking into yesterday, my expectation was that they would try to match. They were fighting it out and then all of a sudden they stopped fighting it out.
Now, I don't know how much of that was about yesterday's meeting at the White House. I think there could have been some element to that. By the way, I think it could have even been some of the not noise, but indications and signals they got around the regulatory regime and what it would mean for them uh prior to ever showing up in the White House yesterday.
And around the world even. And and it would create a pretty big streaming company. Uh I don't know if it's too big. You know that people that work in the business, I've said this all along. It was a terrible choice that according to them, like film Twitter type people. It's either the No, it was a terrible choice.
It's the end It's either the end of of Hollywood and theaters or it's the magnification Right. No, that that is the And now that is the It's almost a Now they went Now they went from the frying pan into the fire a lot of these people. Into the and it set their hair on fire immediately about the Ellisons and Trump and what it means
Right. for Hollywood. And Netflix, the more you heard about it, there are a lot of people not I'm, you know, that I know of. Yeah, you know I'm not one of them Uh-huh. that think um that Netflix is really selling a certain narrative in terms of the culture wars that they don't approve of. Right. So, see, now now we're getting somewhere.
Now we're getting to No, we're getting to what I imagine has to underneath this been the problem for Ted Sarandos. You see it as a problem. I've always said I can't wait for Barry Weiss to be running CNN. I didn't say it was a problem. I said that it was a No, what I said the problem The problem Neither one of us have any No, no, I said Okay.
Neither one of us have any force in this No, I'm talking in the context of of Ted Sarandos. I'm saying the problem that he was going to confront All right. trying to buy this asset was going to be the steady drumbeat of Susan Rice, uh the type of films that you think that they are trying to push or the political message they're trying to push.
push. You can see it in everything. I don't see it. I know you see it. I didn't think you didn't see it. How about even Disney? It's got the same uh But nonetheless, I I believe in a free market, so I think that everybody should be able to do whatever they want. They certainly are able to at this point.
And well, they're able to do only certain things. They're not allowed to buy other people because new now the new regime is going to be able to make whatever kind of movies it wants to make in the free market. Well, the question the question in this case is how free is the market? free was the market before when it was 99% slanted to the left?
I don't understand where you're even going with it. The free market is the free market. If if Netflix and Disney wants to buy is still the free market, right? And if you think Trump's telling the Ellisons what to do No. Well, then why why isn't it the free market? elements to it. One is if you believe that Ted If you believe that Ted Sarandos couldn't acquire Warner Brothers because of its approach, Right.
then guess what? It isn't a free market. Let's start there. That's just That's just plain as day. That's a lot That's a lot of assumptions that you're making that you And I don't know. I have no idea. I'm just And then then the flip side of that question is do you believe that the Ellisons were bending over backwards to do things to placate this administration in certain ways, in which case around around either coverage or this or that, in which case that wouldn't be the free market.
Well, I guess Sarandos didn't go to the White House yesterday to try to sell Melania the sequel. That probably That might have might have huh? That was my idea. New York Zohran Mamdani says that he had what he called a productive meeting with President Trump and suggested that the two had found common ground on building more housing in New York City.
Mamdani posted a photo on X from the Oval Office. A President Trump uh held up a copy of the famous New York Daily News headline, Ford to city drop dead, as well as a mock-up of a Daily News front page that said, "Trump to city, let's build." A small sub-headline says that Trump delivers 12,000 plus homes.
Later on, Mondaire said he had spoken to President Trump on the phone, and the president told him a Columbia University student detained by Immigration and Customs Enforcement would be released. Uh Columbia's acting president said the student had been detained by agents who misrepresented themselves by saying they were looking for a missing child to get access uh to a residential building.
You know, the mayor, Andrew, I I I thought that picture I thought it was a delicate dance for for for the mayor. And I thought the president's smile he he's beaming, like he like he always does. I'm trying to read the mayor's expression. mayor's usually beaming. That's what I mean. And he's not in this picture.
a smile that that uh What I don't know is did they just kind of is this like the one shot the one shot or shot where he wasn't where he wasn't cuz usually he is pretty I'm not sure what that is. It's almost like, "I hear you. Uh I this is not something I want to do, but I I I'm doing it for you. I have to You know, that's sort of what it looks like to me.
Like he's I don't know. But I don't want to read too much into that. But the president That's his genuine big toothy grin, which is Yes. Yeah. It's very He's charismatic. They're both. And I think that's part of Trump's um approach Mondaire is he he he admires his political skills. Don't you think? Charisma on charisma.
Right. Keys will be next. Coming up on Squawk Pod, they're coming to take us away. Mega shifts in mega technology. Former Wall Streeter and former White House staffer Gary Cohn on the changes AI is making to the job market. This is a trend we're going to continue to see as people fight with higher interest rate costs, higher input costs, higher commodity costs, and more trade tariffs.
You're listening to Squawk Pod. Stand by Joe in 3 2 1 his mic cue. Shares of financial technology company Block shooting higher after CEO Jack Dorsey said he was laying off 40% of the team due to AI efficiencies. In a letter to shareholders, he said intelligence tools have changed what it means to run a company.
That's just one of the things we're going to talk about with IBM vice chair and former NEC director Gary Cohn. Someone did write write in to me Gary and welcome. It's good to see you. That Elon Musk bought Twitter and got rid of like 90% of their employees and no one not one thing happened. So maybe Dorsey has some bloated employee ranks at that companies that he owns.
Yes. Or runs. Joe, look thank it's great to be here. Look I I I think we're in this this reality where companies are being forced to run themselves much more efficiently. You know, we saw head counts around the world blow pretty dramatically after COVID. You know, people were hoarding labor. When people were working from home, they were working two three four days a week the productivity rate was down.
So companies had to make sure they had excess capacity excess employees. We're now back to a much more normalized environment people back in the office. We're getting productivity out of workers and we've got this whole new AI you know, thing upon us. Let's call it. And you know, it it's hard for companies to actually explain how they're using API how they're using AI.
But the one KPI that they can tell you is we've cut heads. So, today we've sort of made the world synonymous with I'm using AI, therefore I need less heads. I ultimately don't think that's the truth. But, companies don't have a better way to explain to you how they're creating synergies, how they're creating productivity.
They're saying, "Look, we're just being more efficient by cutting heads." And and and I think that's the trend we are seeing and we have seen for the last year or so. Because you have been on in past appearances and and and I remember you were explaining something that was very confounding about I guess the labor force or or the the jobs Fridays, what was going on.
And you said people don't need that it Oh, I remember what it was. The reason uh that uh one way to deal with tariffs is you look at the whole situation of at your company and if your margins are going to be hurt by some increased uh costs, then you're not going to hire people. And that's the way they were dealing with it.
Yeah. So, if if if if you look continuing. I agree. And if you look back on the last few years and you think what companies have had to live through, you know, A, we went from a zero interest rate environment in '22 to the Fed raising rates to the five and a half, five and three quarters percent. They did that to slow the economy down.
Right? That's why you raise interest rates. So, we we went through that period of of of zero interest rates to higher interest rates. We've gone through this period of what I would call trade trade wars, trade imbalances, higher input costs. We've gone through this world where the dollar continues to go down in value, meaning that a lot of the commodity input costs continue to go up in value in in dollar terms.
So, if you're going through this period of time where your input cost, whether it's cost of funding, cost of labor, cost of raw materials, go up and you don't feel like you have pricing power to the consumer, you the company's going to get get get get squeezed somewhere. And and where they've been trying to um alleviate the the earnings problem is they've been doing it through human capital.
So, human capital has been sort of the lever that companies have been pulling to make themselves profitable. And you saw it even in in this last quarter's earnings announcements, we saw well over 100,000 announced layoffs in some of the bigger companies. And I think this is a trend we're going to continue to see as people fight with higher interest rate cost, higher input cost, higher commodity cost, and more trade tariffs.
One thing that President Trump tried to do the other night was highlight some of the things in the economy that the administration feels are underappreciated. And there are a lot of things that are underappreciated. We we maybe we had Mike Wilson, I know you you follow his work. Don't the other day he said, "Look, the stock market anticipates future positive business activity.
And then as it starts playing out, some of the money comes out of the stock market and goes to to fund the increased corporate activity. He's expecting some blockbuster year, inflation trending down or maybe at least flat. Um You you have the same optimism. It's not reflected in polls. Look, I I'm fairly optimistic right now.
You know, we've got a lot of really strong tailwinds. And I think the president tried to talk about some of these tailwinds during the State of the Union. You know, look, we we've got the Build Back Better bill. And what people are now starting to understand for the first time is when they put that legislation through, they changed things in the tax code retroactive to last year, but they didn't change the withholding tables.
Meaning that we could have withheld less money from from workers every day. Instead, what they did and and and probably very smartly is they kept the withholding rates at the same level. So, as people are actually filing their taxes today, they're getting a much bigger refund that they might have expected.
They're allowing to deduct higher SALT deductions. So, whether it's state and local taxes, real estate taxes. That's giving people more money. So, the consumer is getting more money in their pocket. You look at what's going on in the capex boom and and the reindustrialization of the United States. Is that happening?
It it's it's happening, but I I've always sat here and said, "Look, this stuff is slow." As fast as the federal government wants to work and as fast as the federal government wants to get manufacturing built and they want to get data centers built, local state and local regulation does not move at the speed that federal regulation moves.
So, these these plans to build and these plans to develop factories, they're in state they're in state courts, they're in state zoning committees, they're in city courts, they're in city zoning commission. We're starting to now see some of that money being put to work in real construction projects. The Dow hit 50,000, we heard that the other night.
The S&P hit 7,000, but Monday was a Was it Monday Monday or Tuesday scary day today? We're I think we're down 450 now. Nvidia, unable with with a great report yesterday, unable to save the the technology sector or the AI or or software or whatever. Or is this just a normal backing and filling after a big gain or or is there more to it?
So, Joe, I think I think we're having a bit of a rotation. If you look at the S&P itself, you know, the market cap weighted index, so the biggest companies have the biggest influence, which are the companies we've been talking about, the Nvidias, the Googles, the Microsofts. They've gone so up so much.
That Well, this year it's Basically it it Today right now with with today's activity is about flat. Flat. But prior to that If you look at the equal weighted index, where every company is equal, that index as of last night was up about 6%. Okay. So, net net, we're seeing the stock market as a whole hold its value.
We're just seeing a rotation where people want to be. People are starting to reevaluate the growth numbers that they had on a bunch of these I would say technology companies, software companies, technology companies, and they're starting to reevaluate the growth of what I would say traditional companies in America.
And traditional companies like Walmart, like J&J, like Exxon, like like Verizon, companies like that are all trading basically at their 52-week high as people are saying, "Look, I still want to be invested in the market. I still want to be long the economy. I just want to be long it in in in a more judicious fashion where I don't have as much exposure to the mag seven or the top five or seven names.
I want to have exposure across the board." We didn't talk about the sub four 10-year in in mortgage rates falling below 6%. So, some of those things that takes time for all this stuff to happen, but it does seem to be happening. Do you you think that the mood of the country eventually improves if we believe the polls?
I I do. I I I believe that the mood of the country does improve. Like, you know, these PPI numbers today are not going to be helpful. Um but a lot of this is when you see on the producer side, a lot of this is you can see is is is input costs. Remember when when you're when you're talking about producer price index, you know, the producer has to absorb the input cost.
They have to absorb the higher commodity prices, the higher copper prices, aluminum prices, steel prices, nickel prices. They have to absorb the higher interest rate prices. They have to absorb the higher labor prices. Um and so, we're we're see and they have to absorb trade. You know, the cost of trade has gone up.
And you saw that in in in the numbers. The ex-trade numbers were not nearly as high as the numbers included trade. So, look, I I I think we still have to be realistic that there is some pressure in the system and that inflation still is lingering around. That said, I I agree with that. There's a lot of positive news.
As you see, interest rates, you know, mortgage rates falling, 10-year down below 4%, and tax refunds and and the and the cap ex will continue to stimulate economic growth, continue to stimulate jobs. The uh beginning of the the show today in in relation to the the block news, I didn't initially think about Twitter and you know, how many extraneous irrelevant employees they obviously had at the time.
I don't know if the same situation applies, but we immediately wrote it off to to AI and and what the future looks like and we even Okay, so we jumped to conclusions. We even got to UBI because no one's going to have a job. Universal basic income. We actually uh we actually got all the way there because I I don't know.
I've we've seen past disruptions and you know, when people lose their job making buggy whips, they they end up making transmissions. We understand how that works, but this time seems like it's it's harder to connect the dots to a positive future for everybody with 300 million people in the in this country.
What what if there's all these agents and truck drivers are are gone, what what's everybody going to be doing, Gary? You know, Joe, guy I look at it like this. If you look at the history of technology and technological advancements, we've always gone through these periods where it's been oh my god, it's the end of work, it's the end of civilization, it's the end of life as we know it because what I do isn't going to exist tomorrow, a machine's going to do my job.
Right. And that has we we we saw that you're right. You go back to the internal combustion engine, you go back to the cotton gin, you go back to the internet, you go back to all of these technological advances that really changed the way we work. We all we had all of these fears. What happened over history, and I believe it will happen again, is these are all productivity tools.
Productivity means that we produce more units of output per labor. When we do that, the economy gets bigger. The economy gets dramatically bigger. It's It's what drives economic growth here. As we grow productivity, we will need people. People will do different things. As you said, you won't be cleaning bars anymore your barns.
You'll be changing transmission fluids or you'll be building transmissions. We are going to need people to drive the economy. We're going to have to have people that know how to work in the economy. And look, there are things that AI couldn't can do. I'm afraid that we were were were not going to allow AI to do it and it's probably the right thing because people are going to have to learn skills.
So, you know, if if you're working in an investment bank today and you need to put out a presentation, can an AI machine do the presentation fairly well? It probably can. But 3 years from now when you're the banker sitting in front of the client trying to get a transaction closed, you have to understand the way the income statement works.
You have to understand the balance sheet. You have to be able to pre play with the Excel spreadsheet in front of the client to make the deal work. So, even though the AI machine can do these things at, you know, 90% confidence interval, I still think we're going to need people there getting things done.
We we've never proven that we can get something done without human intervention, without human logic, and without human interface. But we've never had something that that futurists were calling the singularity. And that that's when the machines get so smart that they know a billion times all human knowledge and this time could be different.
This time Look, this time could be different and we said this time could be different before. We'll probably be dead. Anyway, anyway, no, we're both young. And now we might live forever with with AI. Anyway, thank Gary. Stay tuned. Up next, the interview of the day. OpenAI's Sam Altman on his company's huge $110 billion funding round.
And Amazon CEO Andy Jassy who chipped in 50 billion. A record raise on technology and what it means for the future of artificial intelligence. Right after this. This is Squawk Pod from CNBC. Up and Andrew, Q. A massive deal this morning. Open AI now raising a $110 billion in new funding. It values the company at $730 billion.
Investors in the round include SoftBank, Nvidia, and importantly the biggest one now, Amazon, committing $50 billion in funding for this round. And the pair now announcing a new multi-year strategic partnership, which may reshuffle the landscape of AI all over again. Joining us now for a first on CNBC interview is Amazon CEO Andy Jassy and Open AI CEO Sam Altman.
Good morning to both of you on what appears to be a watershed transaction. Sam, I'll start with you. Uh $110 billion, $730 billion valuation, but explain if you could how you think this deal shifts the balance. I was suggesting it shifts the balance in large part because the relationship you've had for so very long was with Microsoft, and now you have Amazon as well and in certain cases on an exclusive basis for for a big part of the sort of the next the next push.
Good morning. Thanks for having us. We're we're super excited about this deal. We will continue to have a great relationship with Microsoft. We're excited to have a great relationship with Amazon. AI is going to happen everywhere. It's transforming the whole economy, and the world needs a lot of collective collective computing power to meet the demand.
The world also needs a lot of new kinds of products, and we'll continue to do our work with Microsoft, but we're very excited about the new product work we'll do together with Amazon. And I think it as you said it will be a great very long-term partnership. We're going to get into all of it. Andy, $50 billion, a huge investment from Amazon.
As part of that investment, there's a whole bunch of component parts around the partnership that you're going to have with this company. But, interestingly, in the press release, you talk about $15 billion up front, $35 billion that will come after if certain conditions are met. And I think there's going to be a lot of people who are going to read that and say, "What does that mean?" Well, you know, thanks for having me.
I appreciate it. And we're excited about what we what we announced. And yeah, we have a significant investment that we're making. It's in two tranches, as we mentioned. And you know, first tranche will be in the next month here in $15 billion. And the second tranche will will come when certain milestones are met.
And we're excited about the the investment we're making. If you think about it's so early right now in the AI space and OpenAI is off to an amazing start. They're going to be one of the very big winners, we believe, long-term. I think we can help them quite a bit as part of this partnership. I think just having their offerings available on Bedrock, you know, being able to leverage training, which gives them 30 to 40% better price performance, matters a lot in AI.
And I think it's going to be a very strong long-term partnership where we're going to also be happy about the investment. It'll It'll yield a good return for Amazon over a long period of time. So, Andy, what one of the things that's interesting about this is OpenAI, it says, will consume 2 gigawatts of training capacity through AWS infrastructure to support the demand for what's called stateful runtime environment frontier and other advanced workloads, some of which is going to be exclusive to Amazon.
My question to you is twofold. One is, how long is that exclusivity period for? And two, how much revenue do you imagine you will ultimately get paid by OpenAI? Well, you know, the there are multiple components of this. If If you think about the you know, we've collaborated and invented together on a stateful runtime environment powered by OpenAI's GPT models that will be available in in Bedrock.
And if you if you think about um, you're an AI application developer, you don't want to start from scratch every time you're actually using models. And so, being able to access state, whether it's memory or identity, or being able to call tools, or call out to compute, being able to do that in a stateful way where we're together training those the uh that stateful runtime environment on AWS's infrastructure, there's nothing else like that today.
It's It's really the next generation of how AI developers are going to build their AI applications. And then, you know, the training Today, we now have the two largest AI labs, um who are both significantly betting on Trainium, which is exciting. And um, you know, in the relationship we're building is very unique and it's long-term.
And And we'll have this partnership for a long time. Sam, can can you speak to that in terms of just what you think the business ultimately looks like with Amazon? Obviously, they just made a big 200 billion-dollar infrastructure investment. Uh a lot of people had asked questions about it. It now this may very well be part of that answer.
Yeah. We continue to see just rapidly growing demand. Uh the Codex in particular, I think it grew like 30-something percent in the last week. Um and that that is an indication of what's happening with enterprise and what people are ready to do now. Uh as we started to look at the growth that is coming, we realized we did not have uh enough compute to support that.
Uh we're excited, thrilled to get this additional Trainium capacity. Uh I think it'll go to great use with customers. We also think, as Andy was saying, that Amazon can deliver so much more to us in terms of uh new demand and new opportunities in the market that there there will be huge incremental revenue here uh into the whole ecosystem, and we're thrilled to get to do that.
Uh one question which I imagine investors will ask, uh which relates to maybe the question I asked Andy about the conditions uh on the 50 billion, it sounds like it comes in tranches, Sam. Uh 15 now, uh 35 later with some kind of condition. And I just wonder whether that is similar in terms of the terms for every other investor in this round.
There's been lots of speculation that that one of the things that every investor in these new rounds wants, of course, is eventual IPO. We are open to going public at the at the right time. There are advantages to being private. There are clear advantages to being public. In addition to all of the reasons that you know, we get more access to capital.
I also think that if these AI companies are as important as we think they may end up being, we we want all investors to have access to them. So, yes, there is definitely some excitement from various investors of ours to go public and it is something that we are open to doing, but we need to figure out the right time to do it.
Sam, help me with this though because you know that people often times look at some of these transactions as what they call circular. They look and say, a vendor effectively is going to make an investment in in in your company and I and I and on the other end, you are going to be making effectively an investment or buy services from that company.
How do you think we should think about that? I get where the concern comes from, but I don't think it matches [clears throat] my my understanding of how this all works. This only makes sense if new revenue flows into the whole AI ecosystem. If people are not willing to pay for the services that we and others offer, if there's not new economic value being committed, then the whole thing doesn't work and it would just it would be circular.
But revenue for us, for other companies in the industry is growing extremely quickly and that's how the whole thing works. Now, given the huge amounts of money that have to go into building out this infrastructure ahead of the revenue, there are various things where people, you know, finance chips and invest in each other's companies and all of that, but that is like a financial engineering part of this and the whole thing relies on us going off or other people going off and selling these products and services.
Um so as long as the revenue keeps growing, which looks like it is. I mean demand is just a huge part of our my day is figuring out how we're going to get more capacity and how we're allocating the capacity we have. Uh then I don't think it looks circular even though the need to finance this given the huge amounts of money involved does require a lot of parties to do deals together.
Andy, how do you think about that? I see him as different. You know, I I think that you know, Open AI wouldn't use Trainium if it wasn't compelling for them. You know, the fact of being able to save 30 to 40% in price performance, that's a big deal when you do AI at the scale that Open AI does. And I would also say that for us the investment is because of what I said earlier, which is you know, it's this is this is the most significant transformation in technology and maybe business in our lifetimes.
And we're incredibly even though it's growing really quickly, we're incredibly early in this. And Open AI is going to be one of the really big winners here and I think we can help them be more successful as I mentioned earlier and we're going to like that investment over a long period of time. Andy, you know, you would announced earlier this year that you're going to be spending $200 billion.
There were a lot of folks in the investment community that said, "Oh my goodness, that's a lot of money." And I suggested just now that maybe this was part of the answer. Did you have line of sight, if you will, that this was a deal like this was possible at that point? Yes. You know, Sam and I have been talking and our teams for for a while and that was very much in our projections at time.
And you know, as I said during the call when we said that we were going to spend about $200 billion in CapEx this year, we have very strong demand signals, very clear line of sight to those. This is a good example of that. Remember the the capital we spend in '26 is for infrastructure that will be put in place, you know, 18 to 24 months later.
And so we we have very high confidence that we're going to be able to monetize what we're spending or we're going to like the economics a lot in that business. And And when you think about that investment, and maybe both of you can speak to this, do you think there's genuinely a a just a massive upfront cost and at some point that that the cost really does tail off or from where you sit today, it I mean this is what I think some people are concerned about, is that it's just an exponential cost, that it's just going to be year after year after year and there's not going to be a moment where the investment stops, if you will.
I I'll start. You know, the the way to the AWS business works in such a way where um the faster we grow, the more capital we put out there. And because the model works, you know, we're we're investing in capital in um data centers, power, land, uh chips, hardware, networking gear. So all this infrastructure 18 to 24 months in advance of when we can monetize it.
And then we spend the money in the first year, but a lot of these assets that we're investing in are 30 to 40 year useful life assets like a data center. And so um what happens is that you spend the money in year one, but then you actually monetize it over a long period of time and you really like the return on invested capital over time.
You saw that in the early days of AWS. Um you know, as we were growing like crazy just on the CPU side where we were investing a lot of capital and um and the free cash flow looks different than it does once the growth rate start to level off. And so as the growth rates are really high, we'll spend more capital, um but we like the operating income and the return on invested income over a long period of time because those assets we can monetize over a long period of time.
Sam, how do you think about that? And And both on the CapEx side for uh some of the folks providing these data centers but also for your own business. Yeah. I I very much agree with what Andy said. The investment needs to happen early but the revenue growth and the ability to monetize that investment looks like it will continue to be steep over a long period of time and the like Andy the more we see revenue growing the more we see demand growing the more we want to invest to be able to serve that on this 18 to 24 month lead time.
So the the fraction of revenue that goes into training will that will come down but the total amount of capital that goes into training I expect that to continue to increase but I expect what Andy said to really hold true. Now as the industry matures like you know when Andy says 30 to 40% less expensive training training them that that's a big deal.
Everyone's very focused on how we're going to bring costs of delivering these services down. You know people joke in our industry about intelligence too cheap to meter but we want to get as close to that dream as possible and getting very capital efficient on delivering these services at huge scale is how we see this working.
And and back to this exclusivity idea in terms of this uh statefulness um effort. How long will this be with with Amazon? Is it possible you're going to want to do this with I imagine other people are going to want to do this with you. I mean this is sort of the next frontier of what a what a gentic AI looks like.
Sam. Yeah. Um we Andy can talk about timelines and stuff if he if if he would he'd like to but we want to have a long deep relationship here. We've done this in the past you know we did a we and still have a long stateless API exclusivity with Microsoft and there's a nice thing about aligning with a partner on a on a piece of technology and this is a place where I think an approach where we're really going to go together and do this together uh will be great for both companies.
Andy, you know, one of the things I imagine people are going to be asking this morning is you've had a long relationship with Anthropic and Claude. And you had an early investment with them. How does this change that dynamic if it does at all? We still have a very strong relationship with Anthropic.
Remember, we have we have lots of customers who run Claude models in Bedrock. Anthropic has been early and very substantial customers and users of Tranium, they're training their next version of Claude as we speak on top of Tranium. And we have a significant investment in in Anthropic as well. And they've always had multiple partners and we do too.
And and so that relationship will stay strong and we're really excited about the partnership we're building over a long period of time with with OpenAI. Hey Sam, while I have you here, just cuz I know everybody's fascinated by it and it's it's sort of the story in the news this morning beyond this big news that you've just announced, which is this debate between the Pentagon and Anthropic about how to use these large language models and whether they can be used improperly and what kind of rules should be placed around them.
What do you think? Look, the first of all, the government, the Pentagon needs AI models, they need AI partners. This is like clear and you know, I think Anthropic and others have said they understand that as well. I don't personally think the Pentagon should be threatening DPA against these companies, but I also think that companies that choose to work with the Pentagon as long as it is going to comply with legal protections and the sort of the few redlines that the field we have I think we share with Anthropic and that other companies also independently agree with.
I think it is important to do that. I've I've been for all the differences I have with Anthropic, I mostly trust them as a company and I think they really do care about safety, and I've been happy that they've been supporting our war fighters. Uh I'm not sure where this is going to go. In terms of uh OpenAI and where you go, $730 billion is a huge valuation, uh and $110 billion uh provides you what runway in terms of when you think about the timing of what that capital uh gives you, and then to the extent that you may think you need more capital in the future.
I don't know the exact date, uh but it's a very long runway. I expect we will need more capital. I don't know what the form will be. It may not You know, there's like a lot of ways we could continue to finance growth, but this is this is like a long runway from now. Related to that, and and maybe Andy can speak to this, uh the other big story of the morning it which relates very much to AI, and I think we're all trying to understand it.
You know, Andy, you and I have talked about jobs for a long time in AI. Um Jack Dorsey uh just announced a a plan that effectively cuts 40% of his staff because he believes that AI is going to allow him to be just as productive if not more so. And I wonder what your reaction is to that, and and what you think it portends for the rest of the rest of us, if you will.
Well, I you know, I I haven't really digested that news very much, and and I think every company is going to make their own decisions on these things. And you know, my my view of it is what we've talked about in the past, Andrew, which is just um you know, I I think that this is the most transformational technology shift that we've seen in our lifetime.
I think it's going to impact the way we all do our work. And I do believe that um a lot of the jobs that we've thrown human beings at the last 20 or 30 years, you won't need um as many human beings doing those same jobs, but I also think there're going to be other jobs created, and that has always happened in every technology shift.
And you know, I mean, 15 years ago, there was no such thing as a cloud solutions architect, and today there are tens of thousands, maybe a 100,000 plus of these types of jobs. So, we will have lots of new jobs and um you know, and there'll be some sort of transition and we'll work through it together.
Sam, before we let you go, you know, one of the things that people have always talked about is AGI. You and I have talked about AGI for a long time. One of the deals that you or or terms you had in one of your earlier deals with Microsoft had to do with, you know, what happens once you get to AGI. So, I was going to ask you whether any of those terms exist either in this in this fundraising round and sort of how far you think we are to that now?
I don't have I can't tell you the exact date that AGI arrives and also, you know, it's gotten to the point where people define it in different ways. The field is clearly making rapid progress. So, I don't want to like give a timeline, but if you look at what the current models are capable of, you know, you hear people say, man, it feels it feels like something I didn't expect to see this faster.
I didn't expect to see this in my lifetime. The I expect continued steep progress from here. I think we are all going to be surprised about the amount of AI progress the field sees this year, probably every year after that. So, I don't have a timeline to give you, but it does feel like we are making maybe faster progress than even I expected.
Does that change any of the the deals though or is there are there these these AGI term limits, if you will, in any of these transactions you're you're doing? The the Microsoft one has one as you mentioned. But but not But going forward AGI will have like a very strong long relationship with Microsoft.
We're not given that we think it's like a near term thing now. It's we're not doing new deals that like, you know, stop when AGI gets reached. Fair enough. Sam and Andy, congratulations on the deal. It is a big one, a big tectonic shift in the AI business and we appreciate you joining us first after the deal was announced.
delighted to get to work together. Thank you. Great to see you both. Looking forward to it. Thanks for having me. You bet. Thanks. Thank you for listening to Squawk Pod today and whenever you do. That wraps up the week for us here. Squawk Box is hosted by Joe Kernan, Becky Quick and Andrew Ross Sorkin.
You can tune in on TV weekday mornings on CNBC at 6:00 Eastern or get the best interviews, conversations, even jokes from our TV show right into your ears when you follow Squawkpod wherever you get your podcasts. We'll meet you back here on Monday. Have a great weekend. And we are clear. Thanks, guys.
Comments 0