Who is the real Sam Altman? 5/20/25

0:00Bring in show music please. This is Squawk Pod 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. And 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?

0:49Karen Howe joins us. 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. Plus, Home Depot doesn't plan to raise prices due to tariffs. For now, JPMorgan 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?

1:33I'm CNBC producer Zach Valisi. It's Tuesday, May 20th. Squawk Pod begins right now. Stand Becky by in three, two, one. Cue it, 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. Comp sales were down by three-tenths of one percent.

2:16That was more than the drop of one-tenth of a percent that analysts expected. But the company did show pretty marked 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 were down by 3.3 percent. They rose by 0.3 percent for the month of March. And then for the month of April, they were up by 1.8 percent. 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 percent.

2:52This 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.

3:22Investments 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 tariffs, when it comes to tariffs, it's pretty important to give context that for Home Depot, more than 50 percent of our purchases 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 percent of Home Depot's purchases.

3:58He 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 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 big companies, these big retailers that have to bring in a lot of products from China and beyond. So he said they've been working on this for about 10 years. It's a little easier for them to handle some of these things. The other thing the company is doing is affirming its guidance for the full year.

4:31It 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 percent, comps for the full year being up by about 1 percent when you compare it on a 52-week period. Last year it was 53 weeks, but this is, if you did it on a comp, 52-week period. Gross margins at 33.4 percent, operating margin at about 13 percent, and diluted earnings per share, they're expecting that they will drop by about 3 percent 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?

5:08Is 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. They did it again in the last quarter. That's six quarters in a row they did that. I asked why. 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.

5:46And 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. Well, where are they sourcing? But all these other places. More than 50 percent. And I did ask them that. There's 10 percent tariffs at least for every place you go. But more than 50 percent of their products are sourced here in the United States. So they're not they're in a better position than a lot of the big box retailers are when it comes from that perspective.

6:17There 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 of the business that's out that's less than 50 i don't know exactly how much i i know he said more than 50. well whatever it is i don't know why you're arguing with me i know no no no no no i'm not arguing with you i'm just what i'm wondering you know 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.

7:08And 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.

7:45My 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 OK 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.

8:19Look, he didn't say they aren't going to raise prices at all. If you listen very closely, Sid, 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. 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.

8:53I 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 J.P. Morgan CEO Jamie Diamond. Diamond 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 Diamond'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.

9:30My 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.

10:06Obviously, 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 the market has completely bounced back from the losses we saw. Again, the S &P 500 closing yesterday less than 3 percent from the all time highs. Right. But a lot of people worried about the bond market yesterday. Yeah. That spike. And then I think that also raised some concerns. So we'll see what happens next.

10:36In 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.

11:13The 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.

11:46Emily, 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.

12:27and 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, 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.

13:05The provisions in the bill are also likely to see changes in the Senate. Senator Kevin Kramer 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 I'm not sure we'll be up for that, but we will definitely be up early tomorrow morning to recap whatever they decide.

13:45Exactly. It's going to be an early morning for everybody, I think. Emily, just talking through, I mean, 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.

14:24But 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 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. 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 U.S.

14:58wants to stay dominant, that they are going to need to make sure that they are incentivizing and all of the above 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.

15:34You 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.

16:11I 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. Tees will be next. Coming up next on Squawk Pod, the U.S. Commerce Department is warning against using chips from Huawei.

16:45And 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 an arm of the Chinese government? I think there is no such thing as a free market company in China.

17:13This is Squawk Pod. Up and Andrew, Q. 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 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.

17:47It is an arm of the Chinese Communist Party with access to unlimited state resources. It is a central node in the CCP's 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.

18:25You need an alternative. We don't have an alternative that can effectively compete with Huawei, which is why we need to forged trade deals with our closest allies when to get them to finland finland eyes in our direction so a lot of work to be done so but complicated so here we are um 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 uh you got to pay us to be my friend right and that some people are arguing is put is going to send parts of europe parts of africa parts of other parts of the uh the world india even into the arms of China and Huawei.

19:04Well, 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 Gulf 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.

19:33And then we can start to build out from there. No one, I think, is saying a big multilateral trade agreement is 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 would redound to our advantage. So we still have a better hand. We just have to play it well on the world stage. And you think that we can effectively block Huawei 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.

20:11I 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 50 percent increase to commerce's export control arm, BIS. I think we actually can learn from the lessons of the last time we tried to take on Huawei and ZTE and be more effective this time. Can I ask one related question? Do you think that every company in China is an arm of the Chinese government? I think there is no such thing as a free market company in China. By law, every company in China is beholden to the Chinese Communist Party. Now, that's not to say there aren't people and companies in China that would like to be free from the yoke of the Chinese Communist Party.

20:53That's not to say there isn't true innovation happening in China. But the system is a Marxist, Leninist, technical totalitarian system. Yes. OK, 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.

21:27For 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?

21:59So 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 Xi Jinping continues to threaten to do, they would be able to hold the rest of the world completely hostage economically. Is your view that they're going to at this point? What's your base case on taking Taiwan, let's say, during this administration?

22:34My 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. OK, and let's say they do it during this administration next three years. 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.

23:11I 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. I don't think it's a fantasy idea. What has to happen to get us there? Because it seems like we are a long way from that right now. For example, we've been talking for years about we need to turn Taiwan into a porcupine, right? And we've been encouraging our friends in Taiwan to spend more on defense.

23:43Our 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? Listen, the lesson of dealing with Marxist-Leninist regimes, the lesson of all Solzhenitsyn's writings is that, you know, 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.