What We Know About the Engineer Accused of Bugging OpenAI Conference Room

[MUSIC PLAYING] Silicon Valley was already bracing for honeypods and insider threats before an open AI engineer bugged a company conference room. Plus, longtime competitors, Meta, and Apple are teaming up to bring open-weight AI to Mac computers. AI is a new era for everything. Technology is maybe so quickly. The stakes are so high that you might say, hey, it's actually maybe a good idea for me to partner with my rival here. And President Trump reverses Defense Secretary Pete Hegseth's decision to livestream the execution of Fort Hood Shooter, Nadal Hassan. It's Thursday, October 15. I'm Alex O'Solev for The Wall Street Journal. This is the PM edition of What's News, the top headlines and business stories that moved the world today. [MUSIC PLAYING] We begin our show tonight with more details about an incident that's rattled Silicon Valley. Abdul-Raman Al-Fazan, a 35-year-old engineer for Open AI and a Saudi National, was arrested this week. The Justice Department charged him for violating a federal recording statute. And it's exactly the kind of incident big tech companies have been working hard to try to prevent. Max Zeph covers the AI industry for the journal and joins me now. Max Al-Fazan had been working at Open AI for about a year before this incident. What do we know about what he did and why he did it? Most of what we know about what Al-Fazan did comes in the form of a Department of Justice complaint that was filed in a federal court last week. In the complaint, they allege that Al-Fazan effectively scoped out a top-secret conference room at Open AI's office, which he did not have access to. And he inserted a microphone behind a TV and wrapped it in toilet paper. And the allegation is that he wanted to extract the comments and conversations that were being said in that room. Al-Fazan wound up getting caught on camera and arrested after Open AI found his microphone in a regular security sweep. What does Al-Fazan or his attorney say about this? Al-Fazan was charged with putting a recording device in Open AI's office. You're not allowed to record people without their consent. But he wasn't charged with being a spy. And Al-Fazan's lawyer in a statement to us has basically said we would hope that people wouldn't jump to conclusions here. He was just charged with putting a recording device here and we're still waiting to learn more. Where is he now and what can we expect to come next in his case? Al-Fazan is currently in federal custody. He's expected to appear next week before a federal court. He's expected to have a speedy trial. We'll have to see what else on Earth's in this case and whether there are any alleged ties to Saudi Arabia. And maybe he can explain himself as to why he put that recording device in Open AI's office to begin with. For the charge he's facing right now, he could face up to a few years in prison in a $250,000 fine. If new allegations are brought, I mean, that could change. But I mean, also, it's hard to think about what his future job prospects might be after this. - So interestingly, just before Al-Fazan's arrest, Open AI had held training sessions to prevent exactly this kind of scenario. How common are spying incidents and are tech companies getting more worried about them now? - These kinds of spying incidents aren't exactly common, but tech companies are warning their employees to be aware of stuff like this. In one example that my colleagues reported on, Open AI actually tells employees, if you're a young man and you're at a park and a beautiful woman comes up to you to ask yourself, is this a spy trying to get information out of me from where I work, which is kind of just a hilarious example of just kind of the paranoia at the company's developing frontier AI systems these days? - What are these organizations or countries that are potentially spying on companies like Open AI doing it for? What information are they hoping to get? - In these executive conference rooms that Al-Fazan tapped, it's not like they were reading out, you know, line by line the source code of Open AI's next model. The conversations that were happening in that room were probably much more high-level plans about designs for future AI models, plans for future products kind of roadmaps for the business. And these are still incredibly sensitive top secret details, but it's possible that just any of this information could help another country or a competitor, anyone else get a leg up on Open AI. - That was WSJ reporter, Max Zeff. Thank you, Max. - Thank you. - In other tech news, Metta said today that it's releasing a new open-weight AI model and is collaborating with Apple to run it locally on the company's Mac computers. It gives developers another American-made AI option to power things like research projects, app development, and video production. Megan Bebrowski covers Metta for the journal and is here now with more. Megan, what is an open-weight model? - So an open-weight model means that some of the core components are available to be publicly downloaded. So researchers, AI developers can publicly download the model and build on top of it for free or for a low cost. Close models in comparison that we've seen from Inthropic Open AI, you have to access them via an API, it's a bit more complicated, and you have to pay to do that. - So this model from Metta called News Spark Open is, as we say, open-weight, which many of the low-cost Chinese models also are, is this model intended to compete with those and how does it fit in for the options for models in the US? - I interviewed Alex Wang, who is the leader of Metta's AI efforts, and he specifically told me, "We think open-weight models are going to be a big thing "and we want them to be American." So it was very clearly putting this in the context of Americans using American-made open-weight models versus using Chinese ones. - Now Metta is teaming up with Apple for this endeavor. They have famously been rivals for a long time. I mean, how are they able to team up here? - One of the most interesting things about this announcement today was you have Metta and Apple, which historically have not gotten along at all at one point, Mark Zuckerberg said privately that he wanted to inflict pain on Apple. After Apple did a bunch of changes that made Metta lose money and contract people as much anymore. What this shows is AI is a new era for everything. Technology is moving so quickly. The stakes are so high that you might say, "Hey, it's actually maybe a good idea for me to partner "with my rival here because they have something "that would help me get my AI technology out "with more people." Just to be clear, this partnership, it allows more people to access Metta's models and it allows Apple to sell more Mac computers. So that's the deal here. - That was WSJ Tech reporter Megan Pabraski. Thanks, Megan. - Thanks for having me. - Coming up, what's got major indexes closing higher after investors' concerns about tech stocks more after the break? (upbeat music) (upbeat music) - Investors came back to safer assets today. The benchmark 10-year treasury yield fell to 5.086%. Its biggest one-day drop in more than a year. Gold and transportation stocks also rose and all three major indexes were higher with the Dow leading the gains and rising more than 1%. For more on the day's market moves, journal markets reporter Jack Pitcher is here to discuss. Jack, we started the day with this pretty clear tech sell-off but now the NASDAQ ended the day slightly higher, about 0.1%, were tech stocks overall down today? - Yeah, tech is still underperforming and it's been a continuation of a trade we've seen for most of the week where people seem a little more cautious on the AI theme. There's a couple things that have made people nervous. Last week, we had a couple Australian AI companies that were set to IPO and they ended up opting to push those back and not go right now 'cause it seemed like a tough market. Coming into this week that had a lot of people sort of cautious and scrutinizing the AI trade, we had some comments from the Broadcom CEO saying the market feels a little bit like a casino right now the way things are moving and really ever since those comments on Monday, tech has been selling off to varying degrees depending on the day and there's been a rotation into safer assets. For the first time now in several months, we've had a significant move off of the highs and treasury yields to sign that big investors on Wall Street have been shifting money into government bonds, which is something that often happens when investors are cautious. They're worried about a bigger drop potentially coming. - I wanna talk about one company in particular and what's been going on with its stock price. So Core Weave was down by as much as 9.5% today because of concerns about how much debt has taken on to be this major AI cloud computing provider. But at close, it was nearly 6% higher. What happened there? - So Core Weave is a really volatile stock. It's referred to as a Neo Cloud company. It's a business that is tried to pivot into becoming a big data center and cloud computing provider in order to do that. They are borrowing a ton of money compared to their earnings. And unlike some of the bigger companies doing this Amazon Google, they do not have massive cash flows to help cover the interest on all that they've been borrowing. If there was a change to its business outlook, if demand for computes down the line, ended up not as strong as people were expecting. This is a company that could top over pretty easily because of its high debt load. So when there's a risk off feeling in the AI trade in general when you're seeing tech stocks getting hit, company like Corrieve. It's often going to be getting hit the hardest. The same way it gets bit up a lot when people are feeling good. It's kind of a high risk, higher reward stock. Journal Markets reporter Jack Pitcher, thanks so much for joining us. Thank you. Meanwhile, retailers sales rose by 0.8% last month to $745 billion. That's a slow down from August 1.3% rise, but was still higher than economists expected. Heads up that we dropped a special bonus episode earlier today. In the latest What's News in Earnings, we look at how Wall Street trading and deal-making are powering bank results and how rising borrowing costs are casting a shadow on that profit engine. That's in your What's News feed now. President Trump has canceled plans to livestream the execution of Fort Hood shooter Nadal Hassan. It's a reversal of a decision by Defense Secretary Pete Hegseth, which was met with backlash from some of Trump's closest allies. In a post on social media, President Trump said he initially thought that the livestream would be a "strong deterrent for the world to witness." But later changed to his mind, because, quote, "many very good and well-meaning people would rather not watch him die." He noted that the execution by firing squad would happen as scheduled, just wouldn't be livestreamed. And the FBI said it's investigating suspicious mailings, some containing what it calls an unknown substance that were sent to election offices across the country. The Bureau said that the letters were sent to addresses, including Secretary of State offices and related election offices, and that authorities are working to identify the people responsible for the mailings. The FBI didn't disclose the individual locations that received the mailings, but people in several states, including Louisiana, Oklahoma, and Ohio, reported suspicious mailings earlier this week. And that's What's News for this Thursday afternoon. Today's show is produced by Anthony Bansi, with supervising producer Melanie Roy. I'm Alex O'Sola for The Wall Street Journal. We'll be back with a new show tomorrow morning. Thanks for listening.