Who is the real Sam Altman? 5/20/25
35:09 Share

As America's leading business lender, Bank of America is on your corner and in your corner. With $215 billion in business loans and over 3,700 business specialists across the nation, we help businesses thrive so communities prosper. What would you like the power to do? Learn more at bankofamerica.com slash localbusiness. Bank of America, official bank of FIFA Club World Cup 2025. Copyright 2025 Bank of America Corporation. All rights reserved.

Don't just ride the index, seek to outperform it with FELC, the Fidelity Enhanced Large Cap Core ETF. Unlike passive ETFs, FELC is run by a team of experts to adapt to market conditions and pursue upside potential wherever it's hiding. And

And while you get the potential outperformance of an actively managed fund, you can still buy and sell it on your terms, just like any other ETF. Discover FELC, the Fidelity Enhanced Large Cap Core ETF, part of Fidelity's suite of active ETFs. Learn more at fidelity.com slash FELC.

Bring in show music, please.

This is SquawkPod from CNBC. Here's what you need to know today. Trade wars and a tech race. Congressman turned defense industry exec, Palantir's Mike Gallagher, on deals and competition. We still have a better hand. We just have to play it well in the world state. After the U.S. issued an industry warning against using Chinese computer chips.

Across the world, people still want to be the friend of the United States of America. In China, the Chinese Communist Party is not interested in having allies. They want vassal states that they can control. And who is OpenAI's Sam Altman, the author of the latest biography on the tech CEO changing the game for artificial intelligence? Karen Hao joins us.

Plus, Home Depot doesn't plan to raise prices due to tariffs. For now, JP Morgan chases Jamie Dimon with a warning on complacency. And President Trump's big, beautiful bill comes down to the wire. Our Emily Wilkins reports.

Republican leaders are still struggling to get consensus on Trump's mega bill and tax package. But there could be fallout on the big, beautiful cost. If we're running these budget deficits now, what happens when we do see an economic downturn? I'm CNBC producer Zach Valisi. It's Tuesday, May 20th. Squawk Pod begins right now. Stand back, you buy in three, two, one. Cue, please.

Good morning, everybody. Welcome to Squawk Box right here on CNBC. We're live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Andrew Ross Sorkin. Joe is out today. Home Depot just reporting its earnings. The company reported earnings of $3.56 a share. That missed estimates from the street by about three cents. Revenue came in at $39.9 billion, and that beat the estimates of $39.3 billion yesterday.

Comp sales were down by three tenths of one percent. That was more than the drop of one tenth of a percent that analysts expected. But the company did show pretty market improvement through the course of the quarter. Take a look at this. If you were looking at the comp store sales for the month of U.S. comps for the month of February, we're down by three point three percent.

They rose by 0.3% for the month of March, and then for the month of April, they were up by 1.8%. I spoke with the CFO, Richard McPhail, and he talked about how for the first two weeks of May, that was pretty consistent with customer growth. That continued to show some of those numbers where, again, the comps were up by 1.8%. This was for U.S. comps.

And that trend continued for the first two weeks of the second quarter. HD Sales made a strong progression through that entire quarter as we were talking about these things. And Richard McPhail said that momentum has really continued when it comes to small projects for customers.

He said they have yet to see an uptick with the bigger projects that require financing. He thinks that's because of high rates. At least that's what happens when they ask their customers why they're not doing those bigger investments. Now, he said overall, they're trying to control for everything that they possibly can. Investments both in terms of speed and reliability. They did say pro customers had positive turns for the first quarter.

And when it comes to tariffs, that's really the big question that everybody's wondering about. After what we heard from Walmart last week, we'll be hearing from Target this week. He said, when it comes to tariffs, it's pretty important to give context that for Home Depot, more than 50% of our purchases are

are sourced in the United States. He says the vast number of suppliers have diversified sourcing. And he said this, 12 months from now, no single country outside of the United States will represent more than 10% of Home Depot's purchases. He says because of our scale, great partnerships with our partners and our suppliers,

and productivity we continue to drive our business he said we intend to to generally maintain our current pricing levels across our portfolio and that's pretty different than what you've heard from most of the rest of these uh... big companies these big retailers that have to bring in a lot of products from china and beyond so they he said they've been working on this for about ten years it's a little easier for them to handle some of these things the other thing the company is doing uh... is

affirming its guidance for the full year. It gave guidance back in December at the end of last year, and it's sticking with that guidance, and that covers a lot of different metrics in terms of total sales being up about 2.8%, comps for the full year being up by about 1% when you compare it on a 52-week period. Last year it was 53 weeks, but if you did it on a comp, 52-week period. Gross margins at 33.4%, operating margin at about 13%.

and diluted earnings per share, they're expecting that they will drop by about 3% from the $14.91 a share they earned in the last fiscal year. So are they effectively saying they're going to eat the cost of the tariffs? Is that what he's trying to tell you? Yeah. Basically, he said there's several things that they've done. He said that they've had greater than expected supply chain productivity, meaning what they can get out of their suppliers along the way. And second of all, they've been able to mitigate shrink rates.

They did it again in the last quarter. That's six quarters in a row they did that. I asked why have they been able to fight the theft that was taking place in the stores. He said because over the last two years they've been working with municipalities to go after organized crime rings. They've also done other mitigation in the stores that they don't want to talk about because they don't want to let the thieves know what they're doing to keep them from stealing things.

And all of those things, the work that they've done internally to make things more efficient and improve their own operating margins, help them pass some of that on. The other thing, though, is that they're sourcing from different places, so they're not getting as much from China. But where are they sourcing? But all these other places... All of the places. Right, but all these... More than 50%. And I did ask him that. There's 10% tariffs at least for every place that you go. But more than 50% of their products are sourced here in the United States. So they're not... They're in a better position

position than a lot of the big box retailers are when it comes from that perspective. There have been sourcing things, he said, over the last couple of years. Some product lines have moved back to the United States, including power tools, outdoor power equipment. Some flooring lines have done that. So they've already been making this push and it's something they've been working on for about a decade. Right. I'm just trying to figure out

There's still 50 percent of the business that's coming. Less than 50 percent. I don't know exactly how much. He said more than 50 percent. But whatever it is. I don't know why you're arguing with me. I asked him all these questions. No, no, no, no. I'm not arguing with you. What I'm wondering is whether he or the company, you know, the lesson of Doug McMillan of being public and saying we might have to raise prices because of tariffs, I think has been a lesson that has been internalized.

at least by the people that I was talking to over the past 72 hours of the weekend. And I just wonder whether it's Home Depot or Lowe's or any of the companies that we're going to be hearing from over the next week or two that are going to effectively soft pedal the idea of... I don't think that makes sense with Home Depot. You're going to have Target, which already said last quarter that, yes, very much we are going to have to raise prices and raise them pretty immediately. I don't know what they're going to say tomorrow.

But I do know that Home Depot is a fairly different situation. I don't think that they would be able to go out and affirm their guidance based on a pivot that they did after Saturday from the blowback that Walmart took from the president on that day. My guess would be you're going to have a lot of CEOs who want to lay low, maybe don't want to come on and talk about things, who maybe don't want to get public about some of these issues. But I don't think Home Depot could make a pivot to say,

We're going to affirm our guidance that we'd already given, and we think we're going to be okay and not have to raise prices. I don't think you can make that up.

three days, you know, within three days of hearing that from the president. Oh, I don't. So either I don't think either. But I think the question is whether they ultimately do raise their prices marginally or whether they do do other things that they just don't indicate. Look, he didn't he didn't say they aren't going to raise prices at all. If you listen very closely, sit it. We intend to generally maintain our current pricing levels across our portfolio.

Now, I don't know if you saw Drudge yesterday. The lead story was a story about how a Target employee was saying, look, here come the price increases, looking at like a USB cord that's now $17.99 versus $9.99 from before. Right.

I don't know where you're going to see some of these things or if they're going to be specific instances that pop up at a Home Depot. But overall, they're saying they don't think they're going to have to raise prices significantly. I do think they're in a different position than the Walmarts and Targets of the world. It'd be fascinating to see.

And investors focusing on the latest market and economic commentary from JPMorgan CEO Jamie Dimon. Dimon spoke at the bank's annual investor day in New York, saying he thinks the risks of higher inflation and even stagflation aren't properly represented by stock market values. Complacency was the theme in Dimon's remarks. He characterized central banks as complacent in the face of big deficits.

He also mentioned complacency in the context of markets and the U.S. trade war with other countries. My own view is, you know, where people feel pretty good because you haven't seen an effect of tariffs. The market came down 10 percent. It's back up 10 percent. I think that's an extraordinary amount of complacency.

That's my own view, that when I've seen all these things adding up that are on the fringes of extreme kind of thing, I don't think we could predict the outcome. And I think the chance of inflation going up and stagflation is a little bit higher than other people think.

Diamond's comments follow that credit downgrade by Moody's on Friday, the agency citing concerns over the U.S. government's growing debt burden. Obviously, the markets turned around yesterday, but Diamond and others were making comments about their concerns when it comes to that huge fiscal deficit and whether that path can continue, whether the markets will allow it. I think part of the reason you hear so many of these comments is concern.

The market has completely bounced back from the losses we saw. Again, the S&P 500 closing yesterday, less than 3% from the all-time highs. Right. But a lot of people worried about the bond market yesterday, that spike. And I think that also raised some concerns. So we'll see.

What happens next? In another development from J.P. Morgan, Diamond saying the bank will now allow its clients to buy Bitcoin. But J.P. Morgan will not custody that cryptocurrency. A person briefed on the bank's plan saying J.P. Morgan looking at offering clients access to Bitcoin ETFs. Still, Diamond made it clear he is not a Bitcoin fan, highlighting issues like money laundering and cryptocurrency, with cryptocurrency rather, and what he sees as a lack of clarity surrounding ownership. ♪

Meantime, President Trump heading to Capitol Hill today to try to get Republicans to unify around what he calls one big, beautiful bill containing a number of his top priorities. The president's going to be visiting with the House GOP at its weekly conference meeting. The gathering will include lawmakers from higher tax states who still want to see an increase in the deduction amount for state and local taxes and a group of lawmakers who stalled Trump's bill last week.

before it advanced over the weekend. Now, a key committee hearing is taking place on that plan set for very early tomorrow morning, starting about 1 a.m. The GOP hoping that early start will lead to a House floor vote by tomorrow afternoon. So a lot of folks are going to be working overnight.

Emily Wilkins joins us right now with some of the key sticking points. Emily, good morning. Good morning, Becky. Well, yeah, Trump is going to be heading up to the Hill today as Republican leaders are still struggling to get consensus on Trump's mega bill and tax package. Divisions remain on the overall cost of the bill. Fiscal hawks still pushing for more cuts.

Plus, a late night meeting last night on raising the cap on state and local deductions has yet to reveal any sort of consensus. Another major holdup is what to do with the tax credits for clean energy sources. Now, these include things like wind and solar, but also include nuclear.

And the current House bill would begin phasing out many of these credits that were put in place during the Biden era, starting in 2028 and ending in 2032. Now, fiscal hawks want these credits to phase out even sooner. It's what they push for in meetings with Republican leadership this weekend. But you've had more than a dozen House Republicans that have pushed back. In a recent letter, lawmakers led by Congresswoman Jen Kiggins asked for changes to allow more projects to qualify for the tax credits.

They wrote that they appreciate how the Ways and Means Committee, the tax writing committee, putting America first by investing in American energy dominance. But the last thing any of us want is to provoke an energy crisis or cause higher energy bills for working families.

The provisions in the bill are also likely to see changes in the Senate. Senator Kevin Cramer of oil-rich North Dakota said it is important to keep backing technology like nuclear and carbon capture. He told me that if the U.S. wants to be a part of the AI and crypto revolution, they're going to need to build more reliable energy sources like nuclear and use the tax package to incentivize that.

We're going to be getting a much better sense of the last minute changes that the House plans to make to this mega bill at a hearing tomorrow morning at 1 a.m. And Becky, I'm not sure we'll be up for that, but we will definitely be up early tomorrow morning to recap whatever they decide.

exactly it's gonna be an early morning for everybody i think um emily just talking through i mean this is this is not between democrats and republicans this is the republicans themselves those who are fiscal hawks and those who are interested in spending more maybe investing more however you want to call it which

has the upper hand in these negotiations? Because I don't think we're going to hit a point where we don't get a budget because there's too much riding on this, the idea that they don't come to some conclusion. But which one of those two factions of the party holds more weight? I think it's really, well, at least in the House, it's what other faction is willing to vote no and sink the bill and take all the heat that will come from that by doing so. But I will point out, I mean, I think it's very worth noting that this bill, whatever the House passes, is going to see changes every

in the Senate. And you certainly have a number of industry groups from hydrogen, other green energy sources who have been on the hill really lobbying lawmakers to say, look, we understand that eventually you want to phase out and that these tax credits can't support us for forever. But given some of the big energy and electricity demands that are coming with AI, with data centers, with EVs, with crypto, there needs to be energy to match that. And they're arguing that if the US wants to stay dominant,

that they are going to need to make sure that they are incentivizing and all of the above energies, energy outlook. That includes things like nuclear, wind and solar. Yeah, you can call it spending. You can call it investments. I guess the big question comes with the market's reaction to it. The front page of the journal just again points out the fiscal concerns that are out there. Jamie Dimon and others have really kind of put the point on

the fiscal responsibility aspect of things. And the Journal makes a good point. The size of the recent budget deficits have been especially alarming because it's been happening at a time we've had a good economy. You would anticipate that the budget spending would ramp up in a downturn to try and help people who are unemployed, help businesses that are struggling at that point. If we're running these budget deficits now, what happens when we do see an economic downturn?

No, it's a great point, Becky. And it is worth noting that since a lot of these tax credits are in place and they're now being phased out, this actually counts as a savings toward the bill. So some of the other provisions that they've put in here, stuff Trump wants on taxes, making certain things permanent, cutting these other tax credits is a way that they can pay for it and keep the cost...

I'll say relatively low. I don't think anyone thinks that three to four trillion dollars is low. But this is something that's just a part of the overall math and how they get this bill done and how they get this bill across the finish line. But I think it is going to be a very interesting item to watch, not just as this bill goes through the House, but then if the House does clear it this week, what happens then when the bill goes over to the Senate and what does the debate look like there? OK, Emily, thank you very much. Cheese will be next.

Coming up next on SquawkPod: The U.S. Commerce Department is warning against using chips from Huawei. And China firing back, saying this could upset a burgeoning trade deal. Mike Gallagher, former congressman and now Palantir Technologies head of defense, on the chips war. Do you think that every company in China is in arm with the Chinese government? I think there is no such thing as a free market company in China.

Don't just ride the index, seek to outperform it with FELC, the Fidelity Enhanced Large Cap Core ETF. Unlike passive ETFs, FELC is run by a team of experts to adapt to market conditions and pursue upside potential wherever it's hiding. And

And while you get the potential outperformance of an actively managed fund, you can still buy and sell it on your terms, just like any other ETF. Discover FELC, the Fidelity Enhanced Large Cap Core ETF, part of Fidelity's suite of active ETFs. Learn more at fidelity.com slash FELC.

Before investing in any exchange-traded fund, you should consider its investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus, an offering circular, or, if available, a summary prospectus containing this information. Read it carefully. While active ETFs offer the potential to outperform an index, these products may more significantly trail an index as compared with passive ETFs. Fidelity Brokerage Services, LLC. Member NYSC SIPC.

How will you shape the future of energy with confidence? What does it mean to deliver affordable and reliable energy for all?

This is SquawkPod. Up and under, cue.

You're watching Squawk Box on CNBC. I'm Andrew Ross Sorkin along with Becky Quick. Joe's off today. China has now accused the U.S. of undermining the U.S.-China trade agreement. This follows a recent U.S. Commerce Department alert warning against using Chinese chips, specifically Huawei. For the latest, I want to bring in Mike Gallagher. He's Palantir Technologies' head of defense. While in Congress, he served as chairman of the select committee on the CCP. So you have strong support.

views on this what do you think well the first thing to understand if you take a step back is that huawei is not a real company it is a arm of the chinese communist party with access to unlimited state resources it is a central node in the ccp strategy to dominate us technologically

especially with AI. And so I think it is wise for us to use all the tools in our kit in order to constrain Huawei before their operating system, the new Harmony OS, is on every device globally. So whether that's export controls, whether that's sanctions, something we learned in Trump 1.0 is that we need to actually enforce the export controls we put in place

But we also learned that that's not enough, right? It's not enough to go around the world and just say Huawei's bad, Huawei's scary. You need an alternative. We don't have an alternative that can effectively compete with Huawei, which is why we need to forge trade deals with our closest allies. We need to get them to Finlandize in our direction. So a lot of work to be done. Okay, so but complicated. So here we are.

not necessarily making friends with our friends, right? We have a lot of allies where we are now saying, hey, you want to be my friend? You got to pay us to be my friend, right? And that, some people are arguing, is going to send...

parts of Europe, parts of Africa, parts of other parts of the world, India even, into the arms of China and Huawei. Well, here's the good news. I think across the world, people still want to be the friend of the United States of America. And China, the Chinese Communist Party, is not interested in having allies. They want vassal states that they can control. So we still have an enormous advantage.

To your point, I do think it would be wise for us to start striking bilateral gold standard trade agreements, right? We have a huge opportunity building off the momentum the president has from his golf trip to build off the Abraham Accords and add a technological component to that. I would like to see a trade deal with Japan reached in the near future. And then we can start to build out

from there no one i think is saying it being multilateral trade agreements in the offing but something akin to a regional digital trade agreement in the indo-pacific building off former japanese prime minister shinzo abe's vision of data free flow with trust i think we're down to our advantage so we still have a better hand we just have to play it well in the world state and you think that we can effectively block huawei from from getting on all of the different services that exist

around the world because they're basically offering it for free. I think if the United States Congress and the United States President work in tandem, I was happy to see my former committee, the Select Committee, starting to investigate the Harmony OS system. I think if we resource our export control enforcement, which is why I was heartened to see that even in the era of Doge,

the president is proposing a fifty percent increase to you commissars export commerce is export control arm b_i_s_ i think we actually can learn from the lessons of the last time we try to take on huawei and ctd more effective this time this is one related question do you think that every company in china is an arm of the chinese government i think there's no such thing as a free market company in china at by law

every company in china is beholden to the chinese communist party that's not to say there are people and companies in china that would like to be free from the yoke of the chinese communist party that's not say there isn't true innovation happening in china but the system is a marxist leninist tech totalitarian system okay so then what do you think of the american businesses that are doing business in china so

What do you think of Elon Musk, given his relationship with the president, but the big business that Tesla has in China? Do you believe that he is therefore under the thumb of China? Do you believe that Tim Cook is under the thumb of China? What I've been saying for a decade is that it is going to be increasingly difficult to do business in China and maintain presence in China. For all the talk about decoupling, whether we're decoupling, selective decoupling, the fact is that Xi Jinping is attempting to decouple from us.

and American businesses that don't understand that risk and take steps to diversify their supply chain, I fear are going to get caught in the supply chain. The other component of this is that in order to... Say that again, the ones that are... That don't model the risk are going to get caught in the decoupling going on. Excuse me. The other thing I would say is that one thing that completely undermines our deterrent posture, even from a conventional military perspective, is our dependency on China economically, right? So what is China threatening to do in response...

to us prohibiting the huawei ascend 910 bc and d chips they're threatening to weaponize their dominance in rare earth and critical minerals in order to bring us to our knees we need to wean ourselves off of that dependency so that they cannot threaten us and hold us hostage

in that way and similarly if they were to take taiwan as he's imping continues to threaten to do they would be able to hold the rest of the world right pletely hostage economic here they're going to have a good point what what's your what's your base case my taking taiwan

Let's say during this administration. My view, informed by what we've seen in Ukraine in recent years, is that if a dictator tells you they're going to do a thing, even if that thing seems outlandish from a Western perspective, we should take it pretty damn seriously. Okay, and let's say they do it. Yes. During this administration, next three years. Yes.

What do you believe that this administration does? Well, first, I do believe this administration is committed to preventing that from happening. I think it's a bipartisan position to say it would be nice not to go to war with China. We should move heaven and earth to deter a war with China. And we can do it if we actually act with a sense of urgency, leveraging autonomous systems, leveraging advanced technology and things like that.

I do think there is one of the missing pieces of our strategy right now is breaking down all the barriers to technological and military collaboration with our key allies and partners in the Indo-Pacific so that we have a joint deterrent posture, not just a U.S. deterrent posture. That sounds like a fantasy idea.

at least a fantasy idea and i think for happen to get us there to look like we are a long way from everyone one of the fit for example we've been we've been talking for years about we need to turn taiwan into a porcupine right well we have of and we've been encouraging our friends in taiwan to spend more defense

Our encouragement would be stronger if we were, for example, to clear the $20 billion backlog of foreign military sales items that we've approved but have yet to be delivered to Taiwan. That's absolutely something we could. But that would antagonize China in a very big way. What would be the repercussions from China if we do that?

if we do that. Listen, the lesson of dealing with Marxist-Leninist regimes, the lesson of all of Solzhenitsyn's writings is that you need to put steel in their path if you want them to stop. The fundamental paradox of Marxist-Leninist regimes is that they get more aggressive the more accommodating you are to them. So the only thing that will convince Xi Jinping to reverse course is if he concludes that

that his lifelong ambition i.e taking taiwan is in fact unachievable because his military isn't ready and he's scared of our military and our deterrence rests on our ability to scare him if that blows up the detente that we have right now when it comes to trade is it worth it i actually think it enhances our our ability to sit across from the table with xi jinping and talk about economic and technological issues you can't silo these things right

In fact, a credible military deterrent gives life to our soft power, gives life to all of our diplomacy. If you don't have that fundamental foundation, you're not going to be able to strike a trade deal that's worth anything. Thank you, Mike. It's fascinating. We could talk about this for like hours on end. Come on back. Well, we want your viewers to come back, so we shouldn't talk about it. No, no, no. Trust me. It's fascinating. It really is. Thank you, Michael.

Next on SquawkPod, a new book out today on Sam Altman and the risk and rewards coming from the AI revolution. We talked to the author Karen Howe right after this. The way that Silicon Valley and OpenAI leading the charge has really approached AI development is very much an embodiment of the way Silicon Valley has developed technology over the last decade, which is growth at all costs.

How will you shape the future of industrials with confidence? Whether you need to define your strategy, optimize your supply chain, or keep pace with data-driven manufacturing, EY professionals understand industrials and the sectors they supply, bringing the insights that deliver real outcomes. With a full spectrum of services, EY helps strengthen your business from factory floor to product development and beyond. So when the global market shifts, your business is agile enough to adapt.

EY, shape the future with confidence.

This episode is brought to you by Schwab Market Update, an original podcast from Charles Schwab. Join host Keith Lansford for this information-packed daily market preview delivered in 10 minutes or less, including projected stock updates, monetary policy decisions, and key results and statistics that may impact your trading. Download the latest episode and subscribe at schwab.com slash market update podcast or find Schwab Market Update wherever you get your podcasts.

Welcome back. You're listening to Squawk Pod today with Becky Quick and Andrew Ross Sorkin. OpenAI kickstarted the artificial intelligence arms race with the explosive debut of ChatGPT in late 2022, turning the startup into a $300 billion company and founder Sam Altman into a household name.

joining us right now is tech journalist karen howe whose latest book is out today it's called empire of ai dreams and nightmares and sam altman's open ai the book is a culmination of over 300 interviews conducted over the last seven years karen thanks a lot for coming in today thank you so much for having me congratulations on the book

Thank you. You were writing about OpenAI before anybody had any idea what this was. Your first take on them was 2019. How did you find them and what did you think?

I was a reporter at MIT Technology Review at the time covering the cutting edge research in AI. So at the time, OpenAI was a fundamental AI research lab, and that was why I was tracking them. And what I realized was they were originally founded as a nonprofit, but they were quickly starting to develop commercial intent. They were starting to become competitive and secretive.

And that had ramifications for not only the AI world, but potentially the way that AI would be introduced into society all around the world. What's your biggest concern of the ramifications of that? The way that Silicon Valley and OpenAI leading the charge has really appropriated

approach to AI development is very much an embodiment of the way Silicon Valley has developed technology over the last decade, which is growth at all costs. They have really chosen to pursue AI models that are extraordinarily large. They require a lot of data, a lot of labor, a lot of computational resources, which has environmental implications.

And my greatest concern is that we are pursuing a path of AI development that is extremely harmful to a lot of people around the world. In terms of jobs? In terms of jobs, in terms of their environmental health, their ability to access economic opportunity, to access quality information.

And AI is a beneficial technology if we can also mitigate all of the ways that the supply chain of the current-- - One is worse than the other at the moment. - Yeah, so there are many different types of AI technologies. - But you see, is there a line at which you say to yourself, this is actually gonna improve people's lives, it's going to improve productivity to a level where it's gonna create economic efficiencies, gonna create opportunities, all sorts of things, or do you see that that's sort of a fantasy?

No, there's just, so I think there are AI technologies that tackle very specific challenges and are well scoped that is very different from general AI technologies that are supposedly meant to do anything.

If we can target AI towards problems that AI is very good for, optimization problems, computational problems, healthcare, towards integrating more renewables into the grid. These are things that AI is very good at. They are also well scoped. So it's not nebulous how you should be applying AI in that situation. But right now, these Silicon Valley companies are trying to make everything machines.

And when you're trying to make everything machines, not only are they not going to be high quality in everything,

people are going to have a fundamental misunderstanding about how they should be using these technologies, and inevitably it is going to harm them. Karen, you're one of a number of books that have been written about Sam Altman and OpenAI. Your book was not written with Altman's cooperation. In fact, he wrote something on X recently that's kind of backhanded criticism. He said, there are some books coming out about OpenAI and me. We only participated in two. No book will get everything right, especially when some people are so intent on twisting things.

What happened? Why didn't he cooperate? Because you'd known him for a while. Yeah, because when I published my very first profile for MIT Technology Review, they gave me a lot of access. I embedded within the company for three days, and they were extremely not happy that I drew my own conclusions.

And so ever since then, I've had a very fraught relationship with the company where I've continued to do my reporting. I've continued to get insider sourcing. I've continued to really grapple with their technology because of my background. I ultimately have a really good understanding of the research and its capabilities.

But at the end of the day, OpenAI didn't want to participate in my book. What did you hear from insiders that concerned you that maybe they didn't like? What types of things? There are some people who say, you know, if you listen to Elon Musk or others who are very familiar with this, they think it's the equivalent of like nuclear weapons and this could end the world.

Right, that's definitely a view. So one example that I heard with respect to the amount of computational resources that are now being used in the supercomputers that they have to build, one employee told me, "We are running out of land and energy."

The scale at which they're building the models, they actually have run out of places to put the size of the supercomputers that they need because there is no place in the world where utilities can deliver that much power to one location. I mean, that's been pretty well documented, the concern about getting more power. But we also have the increase in technology that seems to get better and better and better over time. So maybe there's a way to...

shrink the needs for the computational power. That is, I think that's exactly, you know, like when we look at other supply chains in history, you know, the fashion supply chain, there were plenty of challenges with the fashion industry.

the solution was not to just not wear clothes, right? You still need to have fashion, but we really need to shore up the supply chain in order to access the benefits. I was going to ask you about the fascinating relationship that OpenAI has with Microsoft. Some people questioning whether that partnership is fraying.

the news yesterday that Elon Musk's Grok, I don't know if you saw, is now going to be in partnership with Microsoft. Yeah. Going to run on Azure. You saw Satya Nadella doing effectively a video cast with Elon.

That's fascinating, given the fact that Elon has been attacking open AI and frankly attacking Microsoft, oddly enough, for the last two years. And Sam Altman. And that's by the way, that's not the first time that Nadella has done that. He also hired Mustafa Suleiman to lead Microsoft's AI efforts. And Mustafa Suleiman was a DeepMind co-founder and DeepMind was one of the original founders.

rivals of OpenAI. Is that an enemy of my enemy is my friend or does that just all work with anybody who's the best in the business at the time? Well, I think that Nadella has realized that putting all of his eggs in one basket with OpenAI is not the best strategy, in part because of the blip, as employees call it, which was the board crisis that fired and then rehired Altman in a span of five days.

but also because OpenAI doesn't necessarily have a research lead anymore in its capabilities for its models. It certainly has a lead in household name recognition, but as I talk with application developers who are using these AI models every day, they're making their platforms AI vendor agnostic.

because they don't actually think there is a clear leader anymore. And I think Nadella is a very smart business person. So if you were to project out two or three years from now, that's a company that's had a lot of success, in part because of the open-air relationship, this idea that it is ahead of everybody else, given that relationship. What does that relationship look like? Does Microsoft and Mustafa create their own large language models? Are all these things so commoditized that they're worthless? What happens?

They're definitely trying to develop their own in-house models. They're also trying to strike up as many partnerships as possible with other types of models so that they can all be on the Azure platform. And Microsoft can then offer to any customer that's using Azure here the full array of options. Pick which one's best for you. You don't use ChatGPT. Do you not use other open source models either? Do you not use any?

I don't use generative AI models that are developed by companies that I think are engaging in a lot of environmental, social, and labor harms at the moment. Do you know of any that aren't? No.

There are some that are more open source, that are more transparent, that are really trying to develop a better understanding. Like who are you talking about? Hugging Face, open source technology platform. They don't develop their own generative, well sometimes they do, but they're primarily a platform for bringing generative AI models onto the platform. But their primary goal is to try and help people

like scientists, public researchers, policymakers, be able to understand the technology because in other environments like opening an anthropic, it's completely behind closed doors. It's a longer conversation. There's a lot to talk about. Karen, congratulations on the book. Thanks for coming in today. Thank you so much for having me.

That's the pod for today. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern. If you missed the show, get the smartest takes and analysis right into your ears. Follow Squawk Pod wherever you get your podcasts. We'll meet you back here tomorrow. We are clear. Thanks, guys.

Hey everybody, Conan O'Brien here with an ad about my podcast, Conan O'Brien Needs a Friend. I've had so many fantastic conversations with people I truly admire, people like Michelle Obama, Bruce Springsteen, Maya Rudolph, Tom Hanks. New episodes are out every Monday and we have a really good time. So subscribe and listen wherever you get your podcasts.