A Tight House Vote & OpenAI’s New AI Device 5/22/25

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. The bill is passed. A tight vote in the House for a massive tax bill made possible by a few holdouts changing their minds, like Congressman Chip Roy, who is still hoping for some edits in the big, beautiful bill's next phase. We're going to be pretty strong on some red lines ourselves. The fiscal hawks saying, look, guys, don't come back and send us a bill that's going to ratchet up deficits. And the summer travel season kicks off with the Memorial Day holiday. The points guy, Brian Kelly, on what the industry expects.

0:40Americans are still traveling, but what the airlines need are those premium customers paying a lot of money to fly to Europe. Plus, Nike to raise prices on tariff uncertainty. And the iPhone designer, Johnny Ive, teams up with OpenAI's Sam Altman, our Steve Kovac reports. Wow, wow, wow. I could not believe this was happening. But what are they building? I still need to know what it is. It's Thursday, May 22nd. Squawk Pod begins right now. Stand Becky by in 3, 2, 1. Cue, please. Good morning, everybody. Welcome to Squawk Box right here on CNBC. We're live from the NASDAQ market site in Times Square.

1:21I'm Becky Quick along with Joe Kernan and Andrew Ross Sorkin. Roughly 1.5 % to 2 % losses for the major averages yesterday. Yesterday, you saw pressure across the board for the Dow. It was UNH that was the biggest decliner. But there was pressure on the S &P as well. It was down pretty sharply, and Apple was the biggest decliner there. Treasury yields jumped yesterday. You can see this morning they're down just slightly. The 30-year is still above 5 % at 508. The 10-year is at 457. There was a disappointing auction of 20-year bonds. The 20-year bond did not generate the interest that had been anticipated.

1:56Also, there were some concerns over the U.S. deficit. You have what's happening in Washington and talks about the budget for next year, really in the backdrop for all of this as we kind of see what happens. But if you look across the board on the long end, the basis, the yields are about 14, 15, 16 basis points higher than they were at Friday's close. A lot of things have happened. You had Moody's downgrading the country, but that was really catching up with the other ratings agencies. But again, it's the action in Washington, the expectation for additional deficits to be racked up. It's not just here.

2:29It's around the globe, too. But Jamie Dimon was talking about this, just issues that he sees there. The inflationary trade that's also happening with the remilitarization around the globe, changes with trade policies, all of those things adding to some concerns. And we have seen that with the yields over the last several months. The 30-year bond actually broke above the key 5 percent for the level for the second time this week. it reached a level that hadn't been seen before then since October of 2023.

2:58Johnny recently gave me one of the prototypes of the device for the first time to take home, and I've been able to live with it. And I think it is the coolest piece of technology that the world will have ever seen. The products that we're using to to deliver and connect us to unimaginable technology. They're decades old. Yeah. And so it's just common sense to at least think, surely there's something beyond these legacy products. Sam Altman and Johnny Ive, the man who helped Apple design many of its most iconic products, including the iPhone, teaming up on what they hope will be the next generation of devices.

3:38Steve Kovac joins us right now with more, And there is so much in this story. Oh, my God. This is probably the biggest story. The first thing I said when this broke yesterday, I was just like, wow, wow, wow. I could not believe this was happening. And that's because Johnny Ive, he left six years ago. He left Apple to start this new design firm called Love From. And a few years later, he ended up poaching some of the top design talent at Apple, brought them over to his new startup. And now that startup is called I.O. is being bought by OpenAI for six and a half billion at least in stock in OpenAI.

4:11And this really paints a picture of Apple under the Tim Cook era, which, by the way, the performance speaks for itself. Just look at the stock, look at the growth numbers. Massive success there. There's no question about that. However, there's also been this growing schism of thought around what's happening at Apple, this idea that the design-forward, innovative hardware products has gone since Johnny Ive left the company. And now Johnny Ive is here. we just saw that video of him with Sam Altman. He and Sam Altman are saying, we've created this amazing new product that is going to kind of wean you off the iPhone.

4:46It's going to be focused on AI. All the stuff that we talk about Apple kind of missing out on, Johnny Hive is now bringing that as a potential rival over there. And at the same time, we've seen Apple kind of stumble out of the gate to get innovative products out. The Vision Pro has not exactly been the breakout product that Apple and so many other people probably hoped it would be. And then, of course, this year that big artificial intelligence miss when they failed to deliver on that siri upgrade at the same time we're seeing opening eye they're putting enormous pressure on themselves guys so they say whatever this mystery project is they're saying what it's not it's not a phone it's not glasses it's not something you wear like that humane pin that was a flop this is going to be something else and if they don't really knock our socks off here this is going to look like a six and a half billion dollar blunder at the same time if they do knock our socks off watch out Apple.

5:36Could it be socks? It could be socks. It could be socks. I was going to say it's all in stock. So let's talk about the economics about it. Exactly. There's no cash here. There's no cash. And I believe it's only based on evaluation of OpenAI reaches at$300 billion. Right over that. So ultimately, it's diluted. Well, not just diluted. All I was just going to suggest is there's a performance element. Exactly. Right. And then, you know, according to the journal today, Sam was saying to folks inside the company that he thought this could elevate them to become a trillion dollar proposition. Yeah. And that we're talking about not just a device that's going to go, you know, millions, third device, but like hundreds of millions.

6:19Like he's he said, 100 million, 100 million. That's huge. That's huge. But keep in mind, there are a billion iPhones in the world. So there's a long way to go from there. And he also didn't say, according to this Wall Street Journal report, we're not going to make 100 million overnight. Right. We're going to it's going to take some time to get there, but we're going to get there faster than anyone ever has. I guess I'm just so fascinated by the speed dating, the trading and partnerships that are taking place here. If you look at Microsoft and how they're stepping away from Altman. And, you know, there's just the constant rotating dance partners and who's doing what, what your mission is.

6:55Keeping that form of magic, keeping that attention of the markets, it's tough to do. And who better than that than Johnny Ive. And keep in mind, when he left the company, it was a brain drain within the design group. Because, again, he brought over two very top executives, Evans Hankey, his successor over there at Apple, brought her into this. And he named them by name. In that video that we were just watching yesterday, he said, we came up with it. We've kind of cracked the code to what an AI device should look like. Why did he leave? Why did he do that within Apple? There are so many rumors about this.

7:27There's a really good book about this by Trip Mickel over at the New York Times, kind of talking about this schism between, you know, the Johnny Ive school of thought designed for Steve Jobs school of thought and the operations focused Tim Cook, which, again, massively successful. You still need to know what it is. And if it's like if it's some implanable thing, what difference does it make? What kind of design it is? Exactly. But can you imagine if this thing is a flop? How embarrassing I would think. But how much of it is, the one thing I was going to suggest that I was fascinated by was, if you watch the video, the design aesthetic, even of the video, is going to change the aesthetic and the feeling of ChatGPT and OpenAI.

8:08Meaning, part of what I think Johnny and his brilliance is this sort of sense of humanity that he actually brought to Apple, that the devices felt human in a way they didn't feel technical. When you see a Google device, for example, or back in the day you saw a Sony device or whatever, it felt like some kind of electronic thing. Is it going to be a robot? It sounds like something more personal. That's at least what they're saying. But I think he's going to do that to the entire company. And that's the bigger point. Because Love From, which is kind of separate from this I.O. company that got, is going to be the design leader for all of OpenAI.

8:43I read that as even the apps, not just the hardware. But you could feel it in the video. It was like, it's a feeling. It's a vibe. And that's very hard to capture. And it's very clear he sees Sam Altman as a Steve Jobs type of figure where he did not see that with whatever he saw going on at Apple. There's a reason he got out of there before that Vision Pro launched. Clearly did not like what was going on, wanted to do his own thing. And now he's done it and he's saying, I designed the best thing since the iPhone and I'm not going to make it for Apple. I'm going to make it for you, Sam. That's super fascinating.

9:13Steve, thank you. Yeah.

9:17Troubling overnight. Officials say two staff members of Israel's embassy in Washington, D.C. were shot and killed outside of the Capitol's Jewish museum last night. Washington Police Chief Pamela Smith said the suspect shouted free, free Palestine while in custody and implied that he committed the shooting. The suspect was identified as 30 year old Elias Rodriguez of Chicago. Smith said he was observed pacing outside the museum before the shooting. The victims were named by the Israeli embassy as Yaron Lashinsky and Sarah Milgram. Earlier, Israel's ambassador to the U.S. said that they were a couple on a night out.

10:00In an early morning post on True Social, President Trump said these horrible D.C. killings based obviously on anti-Semitism must end now. Hatred and radicalism have no place in the U.S.A. condolences to the family of the victims. So sad that such things as this can happen. God bless you all. Terrible. Terrible, terrible, terrible, terrible. There's nothing else to say. No, there's not. We know the... I mean, I don't even want to get into it, but in this case, hopefully we do not hear from legacy media that we're still trying to figure out what the motive was, because that's what we hear every single time, when it's so obvious what a motive is, and they just won't ascribe it to that.

10:39But by yelling free, free Palestine, I think we know. Can we just write it down? We know. We know what it was.

10:47Nike planning to raise prices now on a wide range of footwear, apparel, and equipment. As soon as this week, a source telling CNBC that prices on apparel and equipment for adults will increase between$2 and$10. The hikes cover a large part of Nike's products assortment, but many items will remain the same price. In a statement, Nike said, quote, We regularly evaluate our business and make pricing adjustments as part of our seasonal planning. The name of the company, I should almost add, of course, did not say the decision was related to tariffs, but was likely related to tariffs. Separately, Nike planning to resume selling on Amazon after a six-year hiatus.

11:24Nike saying it's investing in its marketplace to make sure the company is offering the right products wherever consumers shop. So that's actually an interesting development. Because I like Amazon, and it just makes life easy, but you can't buy a lot of Nike stuff. It's the season of tariffs. This is seasonal planning. It doesn't go beyond that. I don't know what you're trying to insinuate, but it's the season of tariffs. It's planning for the season.

11:53After 21 straight hours of debate in the Rules Committee and 42 pages of amendments to win over hesitant GOP lawmakers, President Trump's big, beautiful tax bill passed in the House of Representatives. This is definitely a huge victory at this moment for Speaker Johnson. Reporter Emily Wilkins watched the vote second to second in D.C. alongside our gang in New York. On this vote, the yeas are 215, the nays are 214, with one answering present. The bill is passed. There it is. The Speaker Johnson himself is standing up at the podium. There's the gavel. Votes closed. And you hear the applause on the floor.

12:35So they have gotten that passed through the House. Next step is to move on to the Senate. We'll see how they handle with that. Small of a canary. Did you see that smile? And now we get to watch the markets. And I don't expect much. I think the markets probably figured this was going to happen. Probably. I mean, I guess the place to look would be the Treasury markets at this point. You can see the actually we've cut some of the losses for the Dow. We were down by about double that, down by about 45 points before. 30 years actually picking up that yield. S &P's up now. By about 5.9%. Ten-year looks like it's right around the same as where we'd been.

13:12And the two years just above, maybe a couple, yeah, 401. So it's still in the same range. So what's the timeline for, how long will it take the Senate, Emily? I know you can't say for sure, but how long? Well, no, we have a timeline because we know what the deadline is, right? We know that this bill would raise the debt limit. So we know it's going to be the X state. The way I've heard it laid out to me is that the thought is kind of give Senate the month of June to be able to go through the bill, debate, discuss any changes, have them move it then, come back with the House maybe end of June, early July, work out anything there and make sure that they're able to get this passed before the next day or, of course, before they go on their August recess, which they are very protective of, make sure they're not going to hit that debt ceiling.

13:57So that's the timeline right now. Emily, thank you. Emily Wilkins watching as that vote goes down. Next on Squawk Pod, one of those one-time Republican holdouts, Texas Representative Chip Roy, who voted yes on the tax bill. I didn't get everything I wanted. I think there's some other stuff that I hope the Senate might address, both on deficits and on the Medicaid issue. That and more when we come back.

14:31Welcome back to Squawk Pod from CNBC. On the day House Republicans have passed, after an all-night session, President Trump's key legislative agenda, a massive tax bill. And I encourage our Senate colleagues to think of this as a one-team effort, as we have, and to modify this as little as possible, because it will make it easier for us to get it over the line ultimately and finished and get it to the president's desk by July 4th. And that's a big thing. Here's Becky Quick. We are joined right now by Congressman Chip Roy of Texas. He voted yes on this bill after being one of the very big sticking points along the way with this.

15:07Congressman, thank you for joining us this morning. I just want to go back to where you were, you know, 36 hours ago versus where you are this morning. On Tuesday evening, you were saying that you hadn't decided what you were doing. You said we're in a better spot than we were a week ago. We're in a better spot than we were 48 hours ago. but there's still a lot of things we're ironing out. So what got ironed out to get you to yes? Well, thanks for having me on. I mean, yeah, it was great to get the bill done. And by the way, I agree with my friend Warren Davidson, who makes very good points that there are far too much.

15:38There's too much spending and too many deficits in the near term and in the front load and too much savings in the back load. He's correct. That's one of the things that I think the Senate ought to address. But we moved the needle a lot in the last 72 hours. We got pretty firm commitments yesterday from the White House in the form of legislative language to help the non-expansion states under Obamacare get some additional support to try to prevent the pressure on Texas and Tennessee and Florida to expand. I think that's bad for the country. So we got 110 % plus up on the state-directed payments, which is important.

16:11We also got some commitments out of the White House to make some other changes that they might be taking some actions on at the executive level that we'll see, I think, in the coming weeks. And we were importantly able to make sure the Inflation Reduction Act had stringent requirements on construction. So within 60 days of enactment, if you're not constructing, you're not going to get subsidies at the back end on in-service. What that means is, in short speak, it tightens down the number of subsidies that could possibly go to any more of these plussed-up wind and solar projects, which are making the grid less reliable.

16:43So those were all really big, important wins for us. I didn't get everything I wanted. I think there's some other stuff that I hope the Senate might address, both on deficits and on the Medicaid issue with all of the ridiculousness of the F-MAP and provider tax games they play. That's a money laundering scheme that I think we can still improve. But we got a lot of work to do still in the Senate and to bounce back to the House. Right. If the Senate changes anything, the House has to vote again. And the Senate is not necessarily all that concerned about the very fine lines that you all have drawn.

17:13Where do you see push come to shove here? What happens? What happens if the Senate changes it and it ends up spending more money than the bill the House just sent over? Yeah, well, I think that would be a bad thing. I mean, again, I think if we learned anything from those guys in the so-called SOC caucus, when they were pushing to have a higher cap on their high, you know, to protect their high local tax and state tax jurisdictions, that we're going to be pretty strong on some red lines ourselves. The fiscal hawks saying, look, guys, don't come back and send us a bill that's going to ratchet up deficits.

17:43We can't have that. And by the way, I think the overriding governing principle ought to be watch the bond markets. Let's do our job to make sure that we can have the liquidity and the capital that we need and bond markets that are strong. We've been seeing a lot of issues in recent days. We saw the Moody's downgrade. Our nation needs to have fiscal discipline from its leadership so the bond markets can have faith that we'll have stable markets going forward. And I think that ought to be really governing everything we do. And most business leaders across the country should agree with that. We need good tax policy.

18:14We've done some of that in this bill, but we also need to have spending restraint. And that's been one of our governing principles here. My friend Jody Arrington, the Budget Committee Chairman, those of us who created a structure in the budget to say, guys, we love tax cuts, but we're going to tie them to the spending cuts. The Senate better not break that deal because that was the deal that got us through the through the House. And we need to do even better. We need to, as I said, Warren's right. We can't have a front-loaded spending and front-loaded deficits and then have the savings in the out years.

18:44We need to start at the beginning. Congressman, you must constantly have to keep repeating yourself. Don't let the perfect be the enemy of the good. Because just listening to you talk about how we have made it a little bit harder for Texas and Florida to do the same thing that you're not reversing at all in all those other states. and I know that that's what that's what you'd like to do and and you know you have the presidency the Senate and the House and already the reason you can't do more is because you're already worried some members are worried about two years from now what's the Senate's problem those guys those people have more time they're gonna dilute this probably even more why don't they have the intestinal fortitude to act like what Republicans are supposed to do with Medicaid and rain some of this bill coming back to you is probably going to be a nightmare.

19:37Yeah, well, we'll see. Look, yeah, you're right. They have six-year terms. They can afford to be bold. I think some of my good friends over there, like Mike Lee and Ron Johnson, Rick Scott, my former boss, Ted Cruz, my former boss, John Cornyn, those guys, I think, hopefully they'll all get together and start tugging it to the right. And look, we've got to make sure the Senate does a good job. We did a good job getting it through the House. The Senate needs to keep that structure, but then make it better. And you alluded to the Medicaid situation here for Texas, right? And other non-expansion states.

20:07We need to do better than we did. We got a big win yesterday when we were at the White House, getting us to get 110 % plus up for the non-expansion states on what's called state-directed payments. But we still haven't addressed the fundamental fraud, the scam that is the combination of the 90 % F-MAP along with the provider taxes, which for those, if you're watching this, you don't know what all that means. It's basically saying that we give seven times more money for the able-bodied than the vulnerable. That's not President Trump's message. That's not what the American people want. So I think we can make those changes.

20:38We've been educating the Senate and the House during this process. The Senate's very interested in dealing with these issues. So we'll keep working on it. That's the way the process is supposed to work in a bicameral system like we have in this republic. Congressman, it sounds like you took a page or two, you said, from the SALT caucus where they held out and got what they wanted and refused to vote yes until they got to that point. It sounds like you are going to take that same sort of strong arming when and if the Senate bill comes back. Well, look, it's a combination of things. We didn't draw red lines on purpose because we didn't want to hamstring our leadership too much.

21:15But we did create a framework and we were very strong in saying, guys, we need to address Medicaid. We need to address the Inflation Reduction Act. And you know what? We got a lot. We got a lot of really good stuff in that. So we will continue that way of doing things. But I do think we will draw a few red lines because we learned a little bit from the SOC caucus. They're like, look, guys, we're going to get our state and local tax or bust. And guess what? They got a$40 ,000 pop that's$350 billion worth of cap increase. That's really expensive. I'm not so sure the Senate is going to just say a thumbs up to that, right?

21:46The constituency in the Senate for the SOC caucus is not as strong as in the House. So we've got a lot of work to do and going back and forth. But in fairness to those guys, when it comes back to the Senate, we got to pass it through the House, too. So we all got to work together to make sure we deliver for the American people and for the president's agenda. You mentioned, I guess you would call it the yippiness of the bond market this morning, the 10 years at 461, the 30 years at 514. Is that something that others in Congress are paying attention to at this moment? I mean, you've been at that same fiscal hawkishness for a long time.

22:23It's a different thing when you have the bond market backing you up a little bit? Well, I would I hate to say that I guess it's helpful that that what we're seeing in the bond market at this current moment, it is a little helpful. Obviously, I want to see the bond markets get healthy and strong. But look, the bond markets are reacting. You cannot condemn their other forces, Japan. And there's a lot of things going on in the world. And if the president moves his agenda, I think you'll get some more stability in the markets. But we've got to demonstrate to the world that we're going to be responsible.