Schumer Has Competition

(upbeat music) - The Jensen Huang scandal piles pressure on Trump's commerce secretary, who's now fighting for his job. Plus, a challenger to Chuck Schumer emerges in the race to be the next Senate Majority Leader, and will look at how making a friend could be as simple as asking for one. - It's a huge divergence from how people used to treat loneliness where it was stigmatized. You didn't want to admit it to anyone. Now, people are posting it to thousands of strangers, and the most surprising part is it actually works. - It's Friday, November 13th. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. The fall out from Nvidia co-founder Jensen Huangs, a fair with a suspected Chinese intelligence source, is now consuming the West Wing, and threatening the job of one of President Trump's closest cabinet allies, Commerce Secretary Howard Ludnick, as the journal's Brian Schwartz reports. - Ludnick is under scrutiny and fighting for his job as many in the administration are starting to finger-point and blame him because of his efforts to stall restrictions on chip exports. His long-standing relationship without going CEO Jensen Huang and his pre-existing tensions are some members of the administration. - Critics say that Ludnick's Commerce Department slowed efforts to crack down on U.S. AI chip shipments to Southeast Asia, creating an opening for executives like suspected Chinese spy Alice Swang to do business with Nvidia and route computing power to China. The department had been investigating mega-speed international where Alice Swang was a top executive, but stopped short of blacklisting the company. Meanwhile, bipartisan pressure is mounting in Capitol Hill with Ludnick and Jensen Huang due to testify to the Senate Banking Committee on December 3rd and top Democrats launching their own investigations. Though for now, White House has Trump maintains complete confidence in Ludnick. - Of course, it's not really clear if Trump is going to fire Ludnick. Ludnick has been under scrutiny before. Since the start of the President's second term, there have been many people who have tried to get him fired and have failed, much of which is because he's friends with President Trump. He's been a supporter of Trump for years. And so that relationship has in the past saved him, but still that doesn't mean that people who have been enemies of Ludnick's for years within the administration aren't going to try to weaponize this controversy surrounding Jensen Huang and the affair that Huang had, with what appears to be Chinese intelligence source. - In one sign that the Commerce Department is now trying to address chip security concerns, its advancing rule, restricting chip shipments to seven countries, including Malaysia, Thailand, Indonesia, and Singapore. (dramatic music) - Democratic Senate Minority Leader Chuck Schumer officially has competition in his bid to reclaim the post of majority leader next year. That's after Maryland Democratic Senator Kristin Holland through his hat in the ring yesterday, telling MSNOW's Jen Psaki that the party had a generational opportunity to respond to what he said was the message actually sent by midterm voters. - It should be very clear, while voters have rejected the Trump policies, they've not yet hired Democrats. They've given us a chance. We have to earn their trust. And my view is that you can't earn that trust with old leadership. - Unlike Schumer, Van Hollen backed progressive candidates against moderates in Battleground State Senate primaries, as well as Democratic Socialist Zoran Mamdani in his mayoral run last year. Van Hollen wouldn't put an exact number on his support, but a number of colleagues have signaled their backing for him, including Michigan Senator-elect Abdel Al-Sayed. Schumer responded to Van Hollen's announcement, saying he welcomed discussing the caucus's future, but expressing confidence he had the votes to win. In response to rising prostate cancer diagnoses, the American Cancer Society is now recommending that most men get routinely tested for the disease, starting at age 50. That is a major shift away from prior guidance that didn't directly encourage testing to impart to the risk of over-treatment. Luke Brand is the ACS's strategic director. - prostate cancer is such a common diagnosis. There are 300,000 plus men every year in the United States that receive that diagnosis. There are people who are at higher risk, and you should know if that applies to you, but even if you're not in the high-risk category, you still have recommendations for how you should be screened. - A more than two-decade-long study in Europe found 13% fewer deaths among men, 55 to 69, who received regular antigen screening. We've left a link to the latest screening guidelines, including for older men in our show notes. Microsoft is continuing to try and fix a widespread outage to its services, including outlook in teams that's affecting users in more than 70 countries. Microsoft said the problems began surfacing around one PM Eastern yesterday, and that despite its best efforts, changes made to improve its services aren't working as expected. According to outage tracker, down detector users are reporting a new wave of disruptions again this morning. The outage, which Microsoft says it doesn't believe was a cyberattack mirrors problems that hit cloud flare and Amazon web services a year ago, roiling the systems that individuals and businesses use to communicate with each other. And Cisco systems has raised its yearly outlook after reporting soaring revenue thanks to strong demand from the agentic AI market, the network equipment maker. Up to its 2027 revenue target for AI infrastructure to $9 billion, more than double this year's total with CEO Chuck Robbins telling investors that he's confident the AI build out will stay on track. - Especially as we get out to 28 and beyond, I actually don't foresee, I think the geopolitical side of it's gonna get worked out. And I think that given the demand that we see today, these data centers are gonna get built. Cisco stock is up by roughly a third year to date. Coming up, we'll shift away from demand for network equipment and size up a very different side of the AI growth story for clues to see if the AI bubble could already be bursting. That's the break. (upbeat music) Well, it's been a wacky November for the AI trade between an election result widely interpreted as a vote against data center development. And of course, this week's resignation of NVIDIA's Jensen Huang, but even before that, there've been signs that the AI bubble may already have been starting to burst. Maybe it's a topic that ramp lead economist Aura Karazian and I were meant to tackle on stage at Web Summit in Portugal this week before a storm canceled the day's agenda, but not content to let such an important matter go and settled, we've connected apartments to hotel nonetheless. Aura, I should say ramp is an expense management platform for businesses, so you've got insight into how companies are actually spending their money, especially on AI. And you've got some brand new data to share with us. What does it show? Over the last two years, we've been tracking AI spend in our data set, so we cover 85,000 plus businesses, 275 billion plus a year in annual spend and the fastest growing spend category over that time has been AI. There were points at which we were observing double-digit growth month over month amongst both OpenA'a and Anthropic every month as businesses were ramping up their spend. And now over the past couple months, that has started to slow down into the single digits month over month. Now, so there are a couple questions that the market has to face today is, how do OpenA'a and Anthropic now whether this environment in which businesses are increasingly looking to cut costs on AI? And then second, separate from the question of OpenA'a and Anthropic's valuations, how do we get AI into a place where it's actually economically productive for most of these businesses? Because that's a very different question from whether or not we're in an AI bubble is whether or not we'll actually see economic growth from all of this. Just on the topic of token spending growth, as you alluded to, after a very big month for both OpenA'a and Anthropic in July, your data shows that growth has been quite slow for OpenA'a and even slower for Anthropic since then, which is somewhat remarkable. Is it not given that Anthropic is planning to IPO in the next few weeks? These are not really the numbers you necessarily want to see in the run up to that. Well, the challenge is that it's not even a demand issue. Over the same period, we see businesses using more and more tokens, essentially, using more and more AI. The problem is that AI itself has gotten really, really cheap in large part because of this increasing amount of competition between OpenA'a and Anthropic. Both of them jocking for the top spot in terms of business spend in order to do that, both of them training very expensive models, using very expensive compute to try to get the best one, offering that model at a cheaper cost every month to customers in order to gain market share, simultaneously cutting prices for their standard and light models, and then also offering discounts on contracts so that businesses can keep more of their spend on OpenA'a and Anthropic. So you have a couple factors simultaneously moving in the same direction, leading to less spend on AI models despite rising usage. And it's pretty wild to see this turn of events because only this summer, CEOs were saying that they were burning through their yearly token budgets with no obvious relief in sight. Give us a bit more detail on spending per employee because this is quite helpful in terms of understanding just how many businesses out there are really in a position to keep the AI trade as frothy as it's been with their enterprise licenses and things like that. I mean, hint, it's not a ton of businesses. Well, this is one of the main features of AI spend by businesses is that it is highly concentrated in specific sectors and amongst highly intensive businesses within those sectors. So the top 1% of firms spend about $10,000 per employee per month on AI for the top 10% of firms. It's $800 per employee per month. But the median firm that spends on AI spends only about $16. So that's about a chat subscription or two per employee per month. What if you're thinking about where the money's going to come from for OpenEin Anthropic? Most of it is coming from that top 1% group, which spends so much that they drive 80% of the revenues toward OpenEin Anthropic. Are there any green shoots that you'd highlight that maybe speak to potential areas of AI spending growth in the months to come next year? There are still a couple areas of growth in what I would call new fronts in the AI trade. Things that we should be focusing on that we haven't yet so far. One is that this 2-way race in AI models is likely to become a 3-way race pretty soon. It's long been a game of OpenEin versus Anthropic. I think soon it's going to become OpenEin Anthropic, SpaceX AI, and possibly even meta. So we shouldn't underestimate the level of competition in the sector and that it's going to get even greater. And so that will continue. What I can say today is that the data shows that AI is getting cheaper and cheaper. That's generally going to be pretty good for businesses. That will unlock new use cases, but that also requires the AI model companies to resolve what is essentially a product issue. Which is that today AI models are generally designed for and particularly advanced for engineering use cases. But in order to drive greater growth particularly in enterprise and outside of startups they are going to need to address other enterprise workflows. Customer support is going to be a big one. Cyber security is going to be a really important one as well. Laura Carrasian is the lead economist at ramp, aura thank you so much for being with us. Thank you for having me. And finally, screens. You're probably looking at one right now even if you're listening to this out on a walk. According to a survey earlier this year Americans spend an average of 12 hours a day looking at screens. And according to journal reporter Rachel Wolff all that time on digital devices is making it harder to make friends. There's a new trend that's sweeping social media sites like TikTok and Reddit. And it's posting that you are looking for friends. If you are a girl and you're looking in Paris and you're looking for friends, I'm going to let you think so. I am looking for a new friend. I've been thinking about creating an application for a group of girls to make my friends nice group of girls. I know how good it feels. To be fair, some of those videos are drawing internet trolls. But far more are garnering dozens of supportive replies. And the difference, Rachel said that long-standing stigma around loneliness may be melting away. Now people are posting it to thousands of strangers. And the most surprising part is it actually works. People are getting dozens, sometimes hundreds of responses and making real life best friends. And Rachel says those responses make sense. Given how many people are spending less time out and about and more time alone and at home. They have less friends than they once did and they're spending less time with them. And the adult trajectory is a lot less unified than it once was. People are getting married, having kids and buying houses later if they're doing those things at all. The trend has really worked as a way for people to make friends in the cases that I spoke to because there really is a desire to change the isolation that so many people are feeling. Well, as you might have heard from my voice today, I'm on the road to recovery from a nasty cold. So if you're in the market for a new pal, you'll find me with a nearest pharmacy. Come on, I want to get better. And that's it for what's news for this Friday morning. Today's show was produced by Hattie Moyer, our supervising producer, Sandra Killhoff and I'm Luke Vargas for the Wall Street Journal. We'll be back tonight with a new show. Otherwise, have a great weekend. Thanks as always for listening. [BLANK_AUDIO]