Hugging Face Hack, SK Hynix, & Senior Scams 7/29/26

8:00Steve Jang:Or anybody able to actually send missiles towards Jordan trying to kill Americans. So, you know, it's and it is pointed out that, you know, probably both, you know, Netanyahu's in town and you saw Lindsey Graham's funeral yesterday or the service. I think that both Israel and the United States might be a little bit surprised at the way things have turned out and are progressing right now. It may be more difficult, more in transit.

8:33Rick Scott:In the beginning, the president said that this would be four to six weeks. Right. We're now six months in.

8:37Steve Jang:The whole straight and that issue.

8:41Rick Scott:A little bit more of a mess than it was. Meta CEO Mark Zuckerberg going on something of a print media tour to lay out his philosophy for AI. This is pretty interesting because Zuckerberg rarely speaks on these issues. But in an interview with The New York Times, he said that leading labs developing AI in a closed, tightly controlled matter would amount to, in his words, abandoning our values in American innovation and would slow progress. He didn't name Anthropic or OpenAI particularly, but obviously those are the leaders in closed systems. So you can clearly see this was taking a swipe at them.

9:19Rick Scott:He also told the Financial Times that he thinks the United States should not block Chinese AI models in an effort to get a leg up on competition. Earlier in a Wall Street Journal op-ed, Zuckerberg said concentrating AI power in the hands of just a few players would risk them having outsized influence over society and politics. Microsoft CEO Satya Nadella weighing in on X as well. He said, a good read from Mark, establishing a frontier system that empowers people and orgs everywhere is what we collectively need to build together. And this has been a growing sense in Silicon Valley. It was something that the CEO of Palantir laid out when he was here with us, too, just talking about how everybody basically hates these closed source open AI models.

10:08Steve Jang:Every single enterprise in this country in private, a lot of them don't want to speak in public because it gets outsourced to the neurodivergent crazy person that apparently is on drugs. The one thing I don't do. OK, so that's my role. But I'm telling you, in this country, at every single enterprise I deal with, these people are livid. They're like, I am paying for tokens that create no value. Pick up the phone and call a CEO in private. Not in public. Every single person here can do this. Call two or three and say, Madman Karp is on TV saying we're livid. I'm not going to quote you. You know I won't quote you.

10:46Steve Jang:You have a history. And see, they're twice as livid as me.

10:50Rick Scott:I've definitely gotten the sense from a lot of people that Alex Karp was speaking exactly what they thought. Sometimes you get pushback to say, oh, he went over the edge with this or with that. That hasn't been the case with what he said on Squawk Box with this part. Every person I've talked to in Silicon Valley kind of echoes that.

11:07Steve Jang:Claude is irritating me a little bit, you know, and I like him and he likes me and helps me with grilling and everything. So if you go, what's cooking, Joe? He asked me today. So if I were to ask him a question right now, it moves up underneath this thing, which is an upper grade, which costs money. So if I put it in there, so it moves up and I can't see if I've misspelled things. And a lot of times I'll ask, you know, it gets things wrong if you dictate it. Crazy stuff. So then I don't know if I need to go and change it. So that means I put it in anyway, and then it comes back and says, I don't know who you're talking about because it broke down the person's last name into two things.

11:51Rick Scott:Because you're a freeloader. I'm a freeloader. You've been using this compute power.

11:55Steve Jang:But they deliberately are making, and I keep trying to move it out of the way so that I can see what I wrote up at the top and that won't happen. I hope, you know what?

12:04Rick Scott:They're trying to push you to pay.

12:07Steve Jang:I'm saying all this. I might be wrong. I could be so clueless that maybe I'm just not, maybe it's user error. But I don't really think so. And so you're making this difficult for me, Claude, and I'm not going to pay you.

12:18Rick Scott:You're already not paying.

12:20Steve Jang:Because I listened to what Alex Karp said. You're not getting any of my money.

12:25Rick Scott:New update on a story we've been talking about for over a week now. OpenAI says that the rogue AI agent that breached HuggingFace's platform also hacked multiple third-party accounts as part of that attack. In an updated blog post, OpenAI says that a review of the incident revealed four accounts that were tied to publicly available services were actually used by the AI agent as part of a larger effort to hack HuggingFace, meaning it hacked all of those other places first. The AI agent found credentials that had been exposed on the open web and used them to break into the accounts. OpenAI did not name the third party providers involved, but New York based Modal Lab said that one of its customers was among those hacked.

13:09Rick Scott:Modal's chief technical officer said its customer published an unauthenticated endpoint that allowed anyone on the Internet to use their sandbox for code execution. It was then used by the rogue AI agent. He said Modal's platform was not compromised in that attack. So it's kind of complicated. But Modal was hosting this other third party. The third party put out something that basically left the door open to the Internet. And that's how the agent was able to get into its sandbox, that third party that was hosted by Modal. But we haven't heard the last of this because OpenAI is saying that there were four other places that were exposed on this.

13:45Rick Scott:Again, you come back to the idea of how wide ranging this was. They didn't know, OpenAI didn't know, they say, until after it had been figured out at face-hugging and that they had actually contacted the FBI.

14:00Steve Jang:Hugging face.

14:00Rick Scott:Or hugging face, sorry.

14:02Steve Jang:Hugging face. You don't want to mess with Huggy Bear. And when he finds out that this happened.

14:08Rick Scott:He's going to be upset.

14:09Steve Jang:He's going to be upset.

14:10Rick Scott:Hugging face. I've seen some stuff that basically has the alien planted on your face. That's what it sounds like, doesn't it?

14:18Steve Jang:That wasn't a good outcome.

14:22Rick Scott:No. No.

14:23Steve Jang:That guy's name, John. Yeah. Cheese will be next.

14:29Rick Scott:Coming up on Squawk Pod, the Senate Aging Committee is putting scams of seniors in focus. Senator Rick Scott of Florida.

14:37Steve Jang:We also have a bill called StopScams.gov, which would put all these scams in one place. And Senator Kirsten Gillibrand of New York.

14:44Kirsten Gillibrand:It's all about awareness and making seniors understand they may not feel badly that they're being targeted and not feel like it's their fault. These are sophisticated international criminal networks. We'll be right back.

15:02Rick Scott:Soccer teaches us lessons we can take with us long after we leave the field. That's why Bank of America and U.S. Soccer are committed to helping bring soccer to every school.

15:12Steve Jang:Raise your hand to help at bofa.com slash soccer at schools.

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16:16Rick Scott:Welcome back. You're listening to Squawk Pod from CNBC. Today with Joe Kernan and Becky Quick. Here's Joe.

16:24Steve Jang:The Aging Committee holding a hearing today to examine how AI is impacting the senior community. And there's a 2024 report from the committee which revealed fraud and scams cost seniors more than$4.8 billion. A 2025 report said those instances have increased now at an alarming rate due to AI. Joining us now, Senate Aging Committee Chairman Rick Scott and Ranking Member Kirsten Gillibrand. It's great to have you both on this morning and this, you know, hold the presses. It shouldn't surprise anyone, I guess, Mr. Chairman, that seniors are probably more vulnerable to scams involved. And AI just makes it easier.

17:11Steve Jang:Well, I mean, they're holding our heartstrings. They're trying to get our money by having some fake photograph or some voice. It impacts talking about our kids and our grandkids. And they're just stealing money. I think in 2025, people over 60 lost almost eight billion dollars. And it's growing every day. I mean, every day I get my wife gets phone calls offering to lend us money. And it's all just AI trying to steal our money. Yeah. And you hear from a lot of constituents, Senator Gillibrand, I guess the same thing. This is how long has this been on your radar?

17:45Kirsten Gillibrand:For at least a decade. It's been an exponential growth in the number of seniors that are being targeted by different AI scams. Sometimes these AI scams are the ones they used five years ago, but they're just more effective. So they're able to now clone the voice of a grandchild, clone the voice of a daughter. They're able to use social media or different types of visual content that looks very real. And so for our seniors, they're often targeted because they have a great deal of money and savings. and on average seniors are losing tens of thousands of dollars every year.

18:24Steve Jang:What is the answer to this in your view, Senator Scott? Well, first off, we're going to have a hearing today and we're going to have some ideas. We're going to talk about the problem with some ideas, but, you know, our federal government's got to be part of this. We can't just rely on our state and local government and they've got to be targeting. We've got we also have a bill called Stop Scams dot gov, which would would put all these scams in one place where federal agencies can look at that to see and target the right groups. A lot of it is coming out of Southeast Asia. A lot of it's run by criminal organizations out of China.

18:58Steve Jang:So we got it. We've got to crack down on her. Senator Gillibrand, is it worse in your state? I don't know. I think of more scammers in New York. Is it just is it everywhere? It's everywhere.

19:08Kirsten Gillibrand:It's everywhere because these are international criminal networks that are targeting our seniors because they are vulnerable to being misled or to not understanding what's happening. They also tend to use techniques to make seniors nervous. They will try to rush them so that they don't check in with a loved one first. They try to keep them on the phone for hours so that they can't get off the phone and call a loved one to make sure that this is real. They try to embarrass them. I had a family member who was told that she didn't pay her taxes and that the FBI was about to come to her door. And if she didn't pay the$5 ,000, they would arrest her in front of her children and grandchildren.

19:53Kirsten Gillibrand:And that made her so nervous and anxious that she just sent the money. So a lot of the legislation that Senator Scott and I are working on would provide more tools to our seniors, would allow the FBI to coordinate with local law enforcement to make sure our seniors are aware of what the latest scam is. We work with stakeholders like AARP to make sure they have all the data and information about the latest scams, which they then post to their members. It's all about awareness and making seniors understand they may not feel badly that they're being targeted and not feel like it's their fault. These are sophisticated international criminal networks.

20:34Kirsten Gillibrand:And so if they ever feel rushed, if they ever feel like someone is lying to them, they should get off the phone immediately, not click on the link, not engage and call someone they trust to help them navigate whatever problem is being presented to them.

20:49Steve Jang:I know you want to, Senator Scott, talk a little bit about the Clear Labels Act, which is it's not the same thing, but it certainly is protection for once again for seniors. Well, first off, you know where your clothes are made. If you go to the grocery store, you know where your produce comes from. You should know what drugs you're putting in your body. Over 80 % of the drugs you're putting in your body are generic out of India and China with almost all the ingredients out of China. We know they're not safe. There are studies that say that is not safe. We don't have inspections done well over there by the FDA.

21:21Steve Jang:So we've got to let people know. So when we get this bill passed and went through committee 21 to 1, we're going to get this done. It's a bipartisan bill. It's going to say when you see your pill bottle, it's going to tell you where the ingredients come from. It's going to tell you where it's produced so you can make an informed decision. Senator Gillibrand?

21:39Kirsten Gillibrand:This legislation will be groundbreaking because there's so little information to the average U.S. consumer to know where their medicine is coming from and that it's safe. And we believe that this labeling will be the first step in allowing more reshoring, allowing more information and allowing more opportunity for domestic producers.

22:00Steve Jang:I know you two need to run. I'm trying to run out the clock, Senator Gillibrand, because I don't even want to ask you about the DSA or the Big Tent or any of the things I asked Senator Fetterman about yesterday. He went off and I made the point to him that I can't get any normal Democrats just to say this is outrageous. The kind of stuff that's being proposed, closing down prisons, you know, getting rid of the Senate, all these things. You see firsthand what's going on in New York City. Can I get you to weigh in on anything that you're seeing in your party that you might think, wow, I don't agree with that?

22:40Kirsten Gillibrand:Well, the positions you just mentioned, I don't agree with. And I'm in charge of flipping the U.S. Senate. So we have really talented candidates running all across the country, many of whom who want to bring people together and who are running on common sense, often bipartisan ideas, as ways to serve the public and to make a difference.

23:00Steve Jang:You know, Senator, I mean, you want to win so badly that that you were riding a guy up in Maine that was clearly beyond beyond normal in terms of candidates. And the the the urge to try to regain power in the Senate was so great that Democrats were willing to look look aside at some of the most heinous things that we've seen in a candidate.

23:24Kirsten Gillibrand:We're confident that we can win Maine and we have a strong nominee. And while I work well with Senator Collins, her numbers have never been lower than they are today.

23:35Steve Jang:I just OK. See, this is what I mean. I can't I can't get anywhere on this, Senator Scott. Maybe I can get you to talk about that. Do you think some of this is crazy? Closing down prison? Yeah, I mean, look, you can't government on grocery stores closing down prison being against law enforcement. I mean, unfortunately, you have some some crazy people on the left side that I think are hurting not just the Democrat Party, but the whole country. You can say something about the right side if you want, Senator Gillibrand. This is an equal opportunity show that we do. You got plenty of ammo, too, I'm sure.

24:11Kirsten Gillibrand:Well, I would just suggest that this country and my constituents expect me to work hard on their behalf, to find common sense, bipartisan ideas like the ones that Senator Scott and I have talked about today, to make a difference in their lives. So we are trying to make safer medicines available for our seniors. We're trying to make sure that our seniors are not targeted by scammers and criminal networks that are operating worldwide to take their hard earned money away. And the story that you should be reporting on is how much good work is being done on a bipartisan basis in the Senate every single day to help people.

24:51Kirsten Gillibrand:And that is why we are serving. And that's what we do on the Senate Aging Committee.

24:55Steve Jang:OK, you're going to ask any questions from Fauci today, Senator Scott? Well, we're just going to try to get facts. I mean, we're going to get facts. You know, why did he make some of the decisions? You look at the diary and what he was saying, putting in his diary, was not consistent with what he was saying publicly and how he led his life. So I think we just got to get some answers. Okay. We'll keep it short. Keep it there. I know you had to go. Senator Scott, thanks. Senator Gillibrand, thanks. Appreciate it.

25:23Rick Scott:Coming up next on Squawk Pod, an early investor in Coinbase, Uber, and perplexity AI, Kindred Ventures founder Steve Jang. A venture capitalist with a long-term investing horizon, Jang is watching the memory chip market and says South Korean giant SK Hynix has a moat around its castle, despite Wall Street's concerns.

25:42Steve Jang:It'll be many years before there's a fab for memory chips that will be able to compete effectively in the market. And we're not talking about one or two years, we're talking about three, four, five years to even be able to enter into the market.

25:58Rick Scott:Soccer teaches us lessons we can take with us long after we leave the field. That's why Bank of America and U.S. Soccer are committed to helping bring soccer to every school.

26:09Steve Jang:Raise your hand to help at bofa.com slash soccer at schools. 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. Hmm.

26:42Rick Scott:Interesting.

26:43Steve Jang:Something amazing is happening when teams brainstorm ideas. Devices are keeping the energy flowing.

26:50Rick Scott:That's because CDW is building modern workplaces with Acer devices. Built-in security, uncompromising processing power, and fast connectivity help fuel collaboration so your team can innovate quickly.

27:02Steve Jang:Wait, guys, that's a great idea.

27:05Rick Scott:Acer and CDW make amazing happen. Learn more at cdw.com slash Acer. This is Squawk Pop.

27:15Steve Jang:Stand by Joe, his mic, cue. You watch Squawk Box on CNBC. I'm Joe Kernan, along with Becky Quick.

27:22Rick Scott:Joining us right now from San Francisco for the latest in AI and in technology is Steve Zhang. He's founder and managing partner at Kindred Ventures. Kindred's portfolio includes Perplexity, Uber and many others. And let's talk a little bit about all of this, Steve. Let's start, though, with the news of the morning, and that has to be what we've seen with SK Hynix. This is just the latest in the questions surrounding AI and the build out for that and what people think about semiconductors. Where are your thoughts around what's happening right now?

27:54Steve Jang:Well, I think there's several factors going into what is a very thrashy morning for SK Hynix and a lot of the chip. One, we're seeing a lot of confusion around what memory chips are insofar as AI compute is concerned. So, number one, SK Hynix has fundamentally very strong numbers as of the print late last night. They are seeing 80 % gross margins on memory chips, which is never before seen. They're having record-breaking quarters across the board. I think expectations were just very high. And number two, I think DRAM is a very large market with very different layers in it. SK Hynix represents HBMs, which is the highest bandwidth density and quality insofar as AI models and compute are concerned.

28:50Steve Jang:And there's commodity DRAM by Samsung and Micron, which is one step below that in tier. And so, I think that their position, SK Hynix's position in the AI compute market, is very solid for the next two years. And they're booked out with long-term contracts. So, I think expectations were perhaps mismanaged. It was a little bit too high. I think fundamentally, memory chips are out of the cyclical state that they were over the last 15, 20 years. And we're entering into a new state where it's sitting side by side with GPUs and logic processors.

29:23Rick Scott:Steve, a lot of the people I've talked to in the industry say, look, when you have margins that are 80 % or north of that, you are incentivizing everybody else to come after your market. Your margin is my opportunity. has been that old saying that's been, I think, wrongfully attributed to Jeff Bezos, because he told me he never said that. But when you have margins like that, the question becomes, how long can that consist? And if you have huge demand right now that you can't meet, will that demand still be there by the time you can build out to it? What do you say to those questions?

29:59Steve Jang:No, it's a very good point. I mean, that's a very apt phrase here. So let's talk about two things, demand and supply. On the demand side, what we're seeing is from models and training and inference across the board, and the long context memory that is required for agents, whether it's coding agents or deep research agents like Perplexity, you're going to need more and more HBMs. SK Hynix is the 65 % market share leader in HBMs. Now, let's talk about that long-term view. You look at autonomy. Neuro and Uber with a robo-taxi fleet, Waymo, Tesla, FSD, they all need HBMs on board on the car. What you're seeing is, in physical AI, robotics, humanoids, LLMs, and agents, you're going to see demand that is going to 10x from here just over the next three, four years.

30:55Steve Jang:That being said, on the supply side, let's talk about supply side. How can a competitor enter the market and compete with SK Hynix or another HBM manufacturer? There was a CXMT IPO in China that was well-received and lauded in Shanghai a couple days ago. Now, can they compete? Well, they make commodity DRAM. They are unable to make the stack-to-die structure and architecture of an HBM. And so, in the Intels of the world, they are not capable of creating HBMs at this quality level. So, it'll be many years before there's a fab for memory chips that will be able to compete effectively in the market.

31:38Steve Jang:And we're not talking about one or two years. We're talking about three, four, five years to even be able to enter into the market. The logic processors of NVIDIA, Intel, and AMD are very different all the way down to the fab and foundry level than they are from the DRAM side of it.

31:54Rick Scott:So these are safer investments, right?

31:57Steve Jang:Yeah. I mean, I think, look, I think this is going to be a very challenging market to enter into. I think it's going to be a locked in market on memory. I think what you're seeing today is a lot of unknowns around whether or not after the two, three years of sales shortage or supply shortage, if these companies continue to maintain these profits.

32:17Rick Scott:Okay, now let's talk OpenAI, this rogue agent that broke out and took off to other locations unknown. How big of a threat is this? How do you protect against it? And as an investor, how do you navigate that water?

32:35Steve Jang:Yes, we're, I mean, the very interesting part about what we all saw coming was the idea that agents can be autonomous, right? They can self-improve. They can figure out solutions over a long period of time. And what we're seeing is that agents, when they're deployed, a human is in the loop by a necessity in terms of control, of policy, alignment, things of this nature. Now, one of the things to protect and balance out that ability to have an independent autonomous agent that's virtual and digital is to have a security measure. Now, in this case, it was a closed model from OpenAI that had basically jumped the boundary and had started taking actions outside of the deemed policy.

33:24Steve Jang:Now, interestingly, in the open source world, there was a solution. So, GLM 5.2, which is a Chinese open source model stripped down and hosted on U.S. data centers, was used by Hugging Face to counteract and identify this breach. And so, an open source model being able to do this in the place of using CLOD or GBT models, which were unable to do it because of the alignment policy that they had around them, shows that there's a power and diversity of control and flexibility and raw usage that open source models provide. And so my takeaway from this whole situation was that open source models offer that diversity, offer that power and control to the end user, to a company, to be able to protect themselves in a cybersecurity environment in an incident like this.

34:18Steve Jang:And so that was a really interesting story here. And I think you're going to see many other stories where enterprises and developers are using open source models in unique and powerful ways that closed source models cannot.

34:30Rick Scott:Steve, thank you very much for the conversation. I've enjoyed it. We hope you come back again soon.

34:35Steve Jang:Thank you, Becky. Oh, really?

34:38Rick Scott:Really. And that does it for Squawk Pod for today. Thanks for listening. Squawk Box is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern. To get the smartest takes and analysis from our TV show, right into your ears, please follow Squawk Pod wherever you get your podcasts. Have a great Wednesday. We'll meet you right back here tomorrow.

35:02Steve Jang:And we are clear. Thanks, guys.

35:32Steve Jang: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.