Pentagon Gives Anthropic Ultimatum in AI Use Clash

0:03Dario Amodei:The Pentagon gives Anthropic an ultimatum in their spat over use of the company's AI tools. Plus, U.S. stocks rise after Meta and AMD announce a$100 billion chip deal.

0:14Robbie Whelan:It might feel sort of circular because it is, but we're still in the stage of the AI boom right now where every one of these big deals is such a big headline and it's so exciting for investors that investors just bid up the stocks of the companies that are doing them.

0:26Dario Amodei:And what lawmakers are doing to address the housing affordability crisis. It's Tuesday, February 24th. I'm Alex Osula for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that move the world today.

0:46Dario Amodei:A meeting today between Defense Secretary Pete Hegseth and Anthropic CEO Dario Amadei ended in an ultimatum. Anthropic has until Friday to comply with the Pentagon's demands on using its artificial intelligence models, or the company's contract will be canceled. That's according to people familiar with the matter. The people said that if Anthropic doesn't show more flexibility working with the military, Hexth said that he could label the company a supply chain risk, a move typically reserved for overseas companies linked to foreign adversaries. Or he said he could invoke the Defense Production Act to essentially force the company to work more collaboratively with the Pentagon.

1:22Dario Amodei:Experts have said that either move would be nearly unprecedented. The meeting comes after a recent feud between the Pentagon and Anthropic. Hickseth wants the military to be able to use Anthropic's clawed and other AI tools in all lawful use cases, including domestic surveillance and autonomous lethal activities, a move the company has resisted. In other AI news, Meta has agreed to buy 6 gigawatts worth of artificial intelligence computing power from advanced microtevices. devices. The deal is valued at more than$100 billion and could result in Meta owning as much as 10 % of AMD's stock. For more about the deal, I'm joined now by Robbie Whelan, who covers semiconductors for the journal.

2:01Dario Amodei:Robbie, AMD's stock was up 8.8 % today, while Meta's rose just 0.3%. Why are investors betting this is such a big deal for AMD?

2:11Robbie Whelan:Well, the context here is that AMD is really an upstart when it comes to the chip industry. There's one big dog in this industry, that's NVIDIA. They control somewhere around 85 % or 90 % of the market for GPUs, which are the really in-demand chips that power AI computing. And what we've seen, especially over the last six months, is that every time one of these semiconductor companies like NVIDIA or AMD does a deal where they sign up a new big customer or expand an existing customer relationship, their stock just jumps like crazy. These companies have learned that they can do these kind of novel financing approaches when they do these deals.

2:48Robbie Whelan:We've got AMD offering warrants on about 10 % of its stock to Meta, 160 million shares of AMD's stock. In this case, it's one cent per share of stock. Similar to an option, it's basically a contract that says you're going to get a good deal on our stock. So in other words, Meta is agreeing to buy a ton of chips from AMD. AMD is giving Meta money in the form of stock warrants. And it might feel sort of circular because it is. But we're still in the stage of the AI boom right now, where every one of these big deals is such a big headline. And it's so exciting for investors that investors just bid up the stocks of the companies that are doing them.

3:27Dario Amodei:Are there any downsides to that kind of structure of a deal?

3:30Robbie Whelan:Well, there's kind of like a conceptual cognitive dissonance here, which is that if truly there is insatiable demand for AI computing, One would think you wouldn't need to pay these customers to incentivize them to buy your chips. You would think they would just come to you and buy them with cash or with debt. But a lot of the companies in this space are still, for better or for worse, startups. Not public, doesn't have an investment grade credit rating. It's not so easy for them to finance these deals themselves. So they rely on their suppliers to help with the financing. That's great for them.

4:03Robbie Whelan:But what it does on the other side of the equation is that it makes people look at these deals in a sort of circumspect way and think, well, if the demand there is not totally organic, then does that mean that we're in a bubble? So every time one of these deals happens, the chip companies prosper and their stocks go up. But it does kind of contribute to this broader sense in the market that maybe we're moving too fast, maybe we're in a bubble.

4:27Dario Amodei:Back to the specifics of this deal for a second. I mean, six gigawatts worth of AI computing power, that sounds like a lot, is it?

4:35Robbie Whelan:Six gigawatts is a ton of computing power. I mean, we're talking about many, many football fields worth of data centers. Just to sort of put it in context a little bit, Meta has committed to building out tens of gigawatts, 10, 20, or 30, something like that, this decade. That's their entire program for building out AI infrastructure. And so six gigawatts is a large chunk of that. That's kind of their whole plan for the next four or five years. It's all happening at once right now with AMD.

5:03Dario Amodei:That was WSJ reporter Robbie Whelan. Thanks, Robbie.

5:07Robbie Whelan:Thanks for having me, Alex.

5:12Dario Amodei:U.S. stocks rose today as news of the meta-AMD chip deal took some of the sting out of a viral AI report that contributed to yesterday's sell-off. Major U.S. indexes were up, with the Nasdaq leading the gains, adding about 1%. The Dow and the S &P 500 were both up about 0.8 percent. In other corporate news, Novo Nordisk says it plans to slash U.S. prices for two of its most popular drugs. Starting next year, weight loss and diabetes drugs Wagovi and Ozempic will have list prices of up to 50 percent lower than their current prices. The reductions escalate a price war with rival Eli Lilly, though Novo says it's making its first-ever price cuts to improve patient access and affordability.

5:52Dario Amodei:Its stock closed down about 3 percent. And Warner Brothers Discovery said today that it has received a revised offer from Paramount to buy its entire company, but didn't provide details of what the offer included. Warner said it's reviewing the bid. If Warner accepts the Paramount offer, Netflix has the right to match it under the terms of its agreement with Warner. Coming up, President Trump considers enlisting banks in his crackdown on illegal immigration.

6:18Alex Ossola:That's after the break.

6:30Alex Ossola:We're exclusively reporting that the Trump administration is considering requiring banks to collect citizenship information from customers. People familiar with the matter said that the action could task banks with requesting a new category of documents, such as a passport, from both new and existing customers who want to maintain a bank account in the U.S. It's a new front in the administration's crackdown on immigrants living in the U.S. illegally, and the people said that discussions about the potential executive order have alarmed banks in recent days. This report comes just a few hours before President Trump is expected to make his State of the Union address to a joint session of Congress.

7:05Alex Ossola:As we mentioned on this morning's show, Trump is planning to use the speech to sell the public on the economy, and he's expected to unveil new measures meant to lower costs ahead of the midterms. But one thing you might not see much of is Democrats. About 50 Democratic members of the House and Senate plan to skip the speech, an unusual rebuke of a sitting president. Most of the Democrats protesting will appear instead at dueling counter-programming events in Washington that will feature a range of Trump critics.

7:36Dario Amodei:A new report out today showed that U.S. home prices grew 1.3 percent for the year ending in December, its lowest annual gain since 2011. That's according to the S &P cotality Case-Shiller National Home Price Index, which measures home prices across the country. But that doesn't mean that buyers are finding homes to be more affordable, as mortgage rates and inflation have continued to weigh on buyers. Recently, though, lawmakers have been working on it. The House and Senate recently passed their first significant bills in decades aimed at solving America's housing shortage. Rebecca Picciotto, who covers residential real estate, is here to tell us more.

8:12Dario Amodei:Rebecca, what are some of the major points in both of these bills in both the House and the Senate? Let's start with how they're trying to make it easier to build more homes.

8:20Pete Hegseth:Yeah, what these bills have in common is they are pushing cities to build more. The Senate bill specifically authorizes a program where certain cities that receive certain federal grant money, if they're behind in housing production, some of that federal funding could be revoked and transferred to cities that are building more. They also are both taking on the federal government's environmental review process. They are offering new exemptions for certain housing projects and overall trying to streamline the process. And this is the federal government's version of what some states have already been pursuing themselves, like California and New York.

9:00Pete Hegseth:They are also trying to broaden manufactured and modular housing construction. Factory-built homes are cheaper and quicker to produce according to builders. So the House and Senate bills are taking some actions to amend building codes to make it easier for builders to pursue a factory-built construction model.

9:25Dario Amodei:So it sounds like they're doing a bunch of different things to try to make housing more available.

9:29Alex Ossola:But do these bills include anything that would help people more easily afford buying one?

9:34Pete Hegseth:Yeah. So both bills are focused primarily on boosting supply, but they do include some demand-side levers. Both housing packages direct federal agencies to expand access to small-dollar mortgages, generally less than$150 ,000, though that can vary. Private lenders tend to not pursue small-dollar mortgages as much because it can be less profitable. Both bills also are experimenting with a potential pilot program. Certain low-income families would feed a portion of their rent payments into a savings account that could be eventually used for a down payment or some other kind of big life cost.

10:13Dario Amodei:So, of course, it's not just Congress. President Trump has had a few proposals, including barring people who own over 100 properties from buying single-family homes. Do these proposals figure into the bills at all? They don't currently.

10:25Pete Hegseth:The House passed their bill earlier in February that did not include the investor ban despite White House requests to do so. Now the White House has their eye on this Senate bill, which is currently being renegotiated, to add the amendment. Once the Senate passes their version, both the House and Senate will come together and try to reconcile these two packages into one bill, which they will send to the president's desk in hopes of getting signed into law. That was WSJ reporter Rebecca Pichotto.

10:56Dario Amodei:Thanks, Rebecca. Thanks so much for having me. And that's What's News for this Tuesday afternoon. Today's show is produced by Pierre Bien-Aimé with supervising producer Jana Heron. I'm Alex Osula for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.