Why Corporate America Is Now Rationing AI

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0:33Alex Ossola:Companies wanted their workers to use more AI until it started costing too much. There's lots of queries that were happening at companies that were costing lots of tokens for these essentially useless or, you know, queries that could have been free. Plus, a federal judge puts a temporary pause on the creation of President Trump's, quote, anti-weaponization fund. And why film studios are rushing to set up shop in New Jersey? It's Friday, May 29th. I'm Alex Oselev 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.

1:18Alex Ossola:We begin today's show in Virginia, where a federal judge has hit pause on the Trump administration's$1.8 billion anti-weaponization fund because of a legal challenge to stop it. The order temporarily prevents officials from transferring money into it or paying claims out of it. The Justice Department didn't immediately respond to requests for comment. And in another legal ruling against Trump today, a federal judge in Washington, D.C. said that the president's name must be removed from the Kennedy Center. He said the decision to change the name must come from Congress, and he gave the Cultural Arts Center two weeks to remove Trump's name from the building.

1:54Alex Ossola:The judge also said that the Kennedy Center can't be closed for two years while it's under renovation, but he said that the repair work can go forward.

2:05Alex Ossola:Turning to the banking industry, several of the largest banks in the U.S. say business is humming along. Dealmaking, trading and lending appear to all be going as planned, despite geopolitical unease that has rattled markets. At a banking conference this week, JPMorgan Chase CEO Jamie Dimon said things are, quote, gung-ho. Sponsors are busy, companies are busy, you know, there's a lot of exuberance out there. So, yeah, right now it's good. Diamond said his bank might outperform the increase in markets and investment banking revenue that analysts are expecting for the current quarter. Universal Music Group today rejected the$65 billion buyout offer from Bill Ackman's Pershing Square Capital.

2:46Alex Ossola:Universal's board said the bid undervalues the music company. Universal's largest shareholder is also opposed to the deal for the same reason. A Pershing Square spokesperson declined to comment.

2:59Alex Ossola:We've heard it from companies in ways large and small this year. Employees need to start using AI more in their work. The companies want to send a message to Wall Street that they won't be left behind in a coming wave of disruption. But all that enthusiasm for AI has come at a big cost, specifically with the money they spend on tokens, the basic unit of measurement for AI computing. Some businesses have hit their annual budget in just three months or seen their AI spending bills double or even triple. Deputy Tech Bureau Chief Brad Olson has been following corporate use of AI and is here to tell us more.

3:32Alex Ossola:Brad, why is it getting so expensive? I mean, are the tokens themselves more expensive or are companies using more of them or is it both? I think in the beginning, companies were just wanting to encourage all their workers to use AI, to try to think about how to do work and measure things that they could do better. And that was kind of like phase one. And now they're confronting the cost of widespread, uncontrolled experimentation and rethinking things that, you know, ended up being very costly. As we know, something may start in a very well-meaning way. And then the incentives that exist can become kind of perverse.

4:11and give employees here, use AI at all costs, and we're going to grade you on your AI use, then all of a sudden employees can be like, sure, I'll use AI as much as you want. And then you're not really discerning between like a good use and a bad use. I spoke to a startup founder named Matan Grinberg. He runs a company called Factory, which automates coding. One of the companies he was consulting with, which he just said was a financial institution, had racked up huge amounts of charges from like very simple queries like the weather. It's not a great use of tokens to spend a lot of model energy and computing energy being like, what is AI?

4:52You know, very basic queries like that.

4:54Alex Ossola:So the companies got to this place where they're not allocating the tokens in the right places. So what are they doing to reduce their use of tokens? Some of them have basically made certain advanced models and capabilities available only to a small subgroup. So one example was Microsoft. And to be clear, Microsoft said, we didn't do this because of cost. They don't want to send a message to the market that like they're scrimping on AI. So there was this group of employees that had access to a program called Claude Code. And then they stopped making that tool available because those employees have access to a Microsoft tool that does similar things.

5:36That's the kind of steps I think companies are taking, trying to help employees be like, OK, you don't need to use Opus. You can go on a Google search. But I think a lot of the companies still want to spend money. I just think they want it to go toward kind of the best use cases.

5:54Alex Ossola:That was WSJ Deputy Tech Bureau Chief Brad Olson. Thanks so much, Brad. Thanks for having me.

6:03Alex Ossola:Stocks are back in record territory after President Trump said he was considering a possible peace agreement with Iran. In a Truth Social post today, Trump said he'd be making a quote, final determination about a deal. The Dow led the gains in the three major indexes and closed up 0.7 percent. And oil prices slid with the international gauge Brent crude dropping 1.7 percent to just over$92. Futures dropped 19 percent in May, their worst month since March 2020. Coming up, a Russian drone crashes into an apartment building in Romania, and we tell you what a ranchbassador is. Those stories and more after the break.

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7:19Alex Ossola:In international news, a Russian drone crashed into an apartment building in southeastern Romania today, injuring several people. The drone incursion raised alarms among NATO allies who worry that Russia is trying to escalate military conflict beyond Ukraine. It's not clear if the drone was intentionally sent across the border. Russian President Vladimir Putin questioned whether the drone was Russian. He added that Russia didn't want conflict with the West, but that Moscow would counter direct military threats. In the Middle East, the Journal has learned that the United Arab Emirates has been more deeply involved in attacking Iran than was previously known.

7:54Alex Ossola:In coordination with the U.S. and Israel, the UAE carried out dozens of airstrikes against Iran, beginning in the early days of the war and continuing through the day after the April ceasefire was announced. The scale of the UAE's response has deepened divisions within the Gulf, with Saudi Arabia saying the UAE's attacks raised the risk of more strikes on energy infrastructure from Iran.

8:20Alex Ossola:The movie business ain't what it used to be. Studios are producing less overall for streaming services, and big-budget movies are being made overseas to save money. There's just one state in the U.S. where film and TV production is actually thriving, and it's New Jersey. Journal Entertainment reporter Ben Fritz visited the state recently to get a glimpse of what's going on there. Ben, first, of course, it was L.A., then a few years ago it was Louisiana, then there was Georgia. Why is Jersey now the hub for film and TV production? So in New Jersey, they've actually done this thing no other state's done before, where they have authorized their tax incentive program for film and TV production through 2049.

8:59So the studios can be confident that the money is not going to disappear if there's a tight budget in a few years from now. And in exchange, studios like Netflix, Lionsgate, Paramount, they're making big investments in downstage facilities. So I'd say that the administration in New Jersey is optimistic that they've solved the problem that ended up causing a boom and bust in other states like Georgia and Louisiana.

9:22Alex Ossola:Here in Brooklyn, I see film crews set up all the time. And it's like both kind of cool when you see the names you recognize on the little paper, but it's also like kind of annoying to work around it. Yeah, I think a lot of people in New Jersey are excited right now because Steven Spielberg's there, Timothee Chalamet is there. You know, that's pretty cool. I'm sure in a few years, they'll start to feel like you do, where they get sick of the traffic being blocked all the time and the giant trucks in the way. And I will say, on the other hand, living in Los Angeles, where we used to constantly have production and now we have so much less.

9:51We all used to complain and now we miss it because it brings a lot of jobs and a lot of economic stimulus.

9:57Alex Ossola:How much of an economic benefit is it to have Hollywood come to your town? The short term is, hey, they're here shooting this month, which means hundreds of people are there. It's a great short term economic stimulus. But these big tax credits that they're giving are only if the studios make a long term commitment. So Netflix is building a billion dollar plus facility in Fort Monmouth, where they are going to have 12 sound stages. That's obviously a lot of construction jobs. Those are long-term investments in the economy where there'll be production happening for years, or if all goes really well, decades to come.

10:30Alex Ossola:That was WSJ reporter Ben Fritz. Thanks so much, Ben. Sure. My pleasure, Alex.

10:38Alex Ossola:And finally, the hottest job this summer seems to be a spokesperson for one of my least favorite condiments, ranch dressing. This summer, in honor of America's 250th birthday, we're hiring our first ever ranch ambassadors to spread the flavor of America, ranch, all around the globe. Picture this. Hidden Valley Ranch fielded more than 6 ,000 applicants, and they posted about their love for ranch on social media. Makes sense, since social media posts would be part of the job. Hello, everybody. This is my formal interview to be the Hidden Valley Ranch Ambassador. And we're looking to be the Hidden Valley Ranch Ambassadors.

11:14Alex Ossola:Stay tuned for 19 days of fun. 19 days. 19 days we'll be squirting ranch on all different things. If y 'all think for one second that I'm not applying to be a ranch ambassador for Hidden Valley, then you don't know me, okay? Today, the company announced the three pairs of hires. Their stops will include France, Germany, Ireland, Spain, Portugal, and the UK. And that's What's News for this week. Tomorrow you can look out for our weekly markets wrap-up, What's News in Markets. Then on Sunday we'll be discussing peptides, drugs that people all over social media are using to look and feel better, but that may come with risks that users don't think about.

11:51Alex Ossola:That's in What's News Sunday. And we'll be back with our regular show on Monday morning. Today's show is produced by Danny Lewis and Anthony Bansi, with supervising producer Tali Arbel. Michael LaValle wrote our theme music. Aisha El-Muslim is our development producer. Chris Zinsley is our deputy editor, and I'm Alex Osola. Have a great weekend and thanks for listening.

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