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- [00:01]
Ed Ludlow
The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across hr, IT and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by
- [00:23]
Joe
putting AI where it actually pays off,
- [00:25]
Ed Ludlow
deep in the work that moves the business.
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Kelly
Let's create smarter business.
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Unidentified Short Interjection
IBM,
- [00:33]
Jane Harmon
Bloomberg Audio Studios Podcasts Radio news. You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [00:56]
Joe
Live from Washington, here on Balance of Power, we continue our conversation with about politics and apparently a confirmation process now on ice. That would be Todd Blanch, the President's acting Attorney general because of as we already laid out, the opposition from two senators who have crossed the president, or maybe it was the other way around. They want actual hard paper and a guarantee that the President's proposed anti weaponization fund will not happen and they have not received it yet. The President's not pleased about this. And we bring in Tyler Kendall from the North Lawn of the White House. He was out posting early on this, Tyler, and it looks like he says he even withdraw Todd Blanche's name.
- [01:35]
Tyler Kendall
Well Joe, that's the latest strategy point from President Trump that we could see Todd Blanche's nomination withdrawn on a temporary basis, seeming to indicate that he would then renominate him after these two Republican senators, John Cornyn, the Republican from Texas, and Thom Tillis, the Republican from North Carolina, are out of office after the midterm elections. Now the understanding here is that Todd Blanche would very likely continue in an acting basis. So not much would change. But it' interesting political calculus considering that there are no assurances that Republicans will maintain control of the Senate chamber. So the idea had been trying to get these nominees through as quickly as possible if they do need Senate confirmation. Now as you're laying out here, the demands from these senators is that there has to be something actually in writing, put pen to paper that that $1.8 billion fund, that alleged anti weaponization fund, those plans are being scrapped. As well as that these senators want assurances that this provision in that legal settlement struck between President Trump and the irs, giving him members of his family business immunity from this past IRS audits, that this will not extend to any third parties. They want a little bit more of a firmer guardrail around that IRS settlement at this point, we'll have to see where it goes from here. But President Trump clearly putting out one option when it comes to holding firm, I guess, with his political agenda.
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Unidentified Short Interjection
Yep.
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Kelly
So he has options domestically, Tyler. He also has suggested, and it's been widely reported that he's considering his options for escalation or the lack thereof when it comes to Iran. Until yesterday, it seemed that he wanted to pursue diplomacy anew. And that surprise attack on U.S. forces in Jordan led to the U.S. retaliating in strikes last night. Do we know if there will be another round this evening?
- [03:27]
Tyler Kendall
Well, Kelly, at this point, the White House has kept both options on the table, one for further escalation and this continuation of strikes and retaliation that cycle it feels like we're in, but also the potential that we could see maybe some sort of diplomatic channel open here. We did hear from Pakistan's Foreign Ministry earlier today, of course, a key mediator in this conflict seeming to imply that there are negotiations happening between the US And Iran when it comes to potentially reopening the Strait of Hormuz. But at the same time, pair that with other headlines this morning that said Iranian state media reported that the IRGC had targeted again US Forces in Kuwait and Jordan. And we have this now potential, as you both were outlining at the top of the program, that the conflict could spill over to the broader region, including the fact that we saw overnight two LNG tankers hit off the coast of Egypt, marking the first such attacks in Egyptian waters since the conflict began. So, Joe and Kelly, there is a lot of room for escalation here.
- [04:26]
Kelly
Indeed. All right, Tyler Kendall reporting live from the North Lawn of the White House for us. Thank you so much. And as we consider the room that exists for escalation or for diplomacy, we turn now to former Congresswoman Jane Harmon, the former ranking member of the House Intelligence Committee, who is here with us in our Washington, D.C. studio. Good to see you again, Jane. Thanks for being back here on Bloomberg TV and Radio. We seem to be stuck in this cycle here of we're talking, we're striking, we're talking, we're striking what breaks us out of it and in what direction.
- [04:56]
Jane Harmon
I just think Trump is afraid to lose and he's keeping everything going, hoping he won't lose. But guess what? I think he's likely to lose and not just lose here, but the fact that missile interceptors are tied up in the Middle east instead of going to Ukraine or instead of being pre positioned in Asia against a possible China takeover of Taiwan, means He may lose elsewhere. So I think this is hugely dangerous, even more destabilizing than before. The Senate's about to go out. The House is out. There hasn't been a really serious focused authorization to use force here, and we could lose more Americans while we're at it.
- [05:38]
Joe
What does Jane Harmon think when Saudi Arabia puts fighter jets in the air to strike targets in Iraq, when Egypt is being targeted by we're not even sure who drones are hitting lng. We talked about Kuwait in Jordan. At what point do we start calling this a Middle Eastern war?
- [05:58]
Jane Harmon
Well, I'll, I'll go right there. It is a Middle Eastern war. It's not that every country is at war, but every. Think Egypt, which hasn't been a target. Think Jordan, which is a target. And the Saudis haven't been getting along with the neighborhood. So maybe there's some play there that I'm missing. But my point is the danger of this spreading is huge and we are tying up what's left of our pathetic, fragile defense industrial base in a region where it shouldn't be.
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Kelly
Well, that probably is sending something of a signal to our adversaries. Jane, to your point about we could lose elsewhere if we lose in the Middle east, is that genie already out of the bottle? Or if all of this were to stop now, is the US Adequately prepared to address needs should they arise in other theaters?
- [06:50]
Jane Harmon
Not really. I chaired something called the Commission on the National Security Strategy. I know you both have read the report and loved it two years ago. And on a unanimous, bipartisan basis, we said the dib. The defense industrial base is anemic. We made all kinds of suggestions, many of which were ignored. We also said our diplomacy was being starved. And that's a huge risk here, too, because I don't know who is talking to the Iranians and whether we have a serious sophisticated team doing this in Pakistan or anywhere else. But yes, think Ukraine. Zelensky was just here begging for missile interceptors. Trump promised them and promised that some US Primes would be able to build some of these with Ukraine. In Ukraine, however, that's going to take years. And Ukraine is a big fat target right now for Russia.
- [07:40]
Joe
I want to ask you about the rhetoric that the president has been using because there's a lot of tough talk even as he says that they're begging for a deal and we could have a breakthrough. We're going to have a deal. You know, not only has he threatened civilian targets like power plants and water desalination plants, he told Fox yesterday he was Going to beat the effing s out of them. Which draws me to this. This quick, if you would. Data from Cardiff University. You spent enough years of politics to appreciate this. Cursing is in presidents, vice presidents, presidential hopefuls have used profanity at least 692 times in public since 1919. 605 of those were in the last 10 years. A lot of it is because of Donald Trump's approach to politics. Bernie Moreno is using the f word with Dr. Fauci up there. But how does that resonate overseas in a different language, in a different culture? How is that interpreted by Iran?
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Jane Harmon
It's by Iran. I'm sure it's offensive, but they're offended anyway. And frankly, their behavior doesn't really justify their offense. But broadly, across the world, people are really insulted and just even think, our neighbors in Canada, this language is terrible. Do you want your children to use these words? I remember my grandchildren had the bad word club, which I unfortunately qualified for a few times and had to run around their apartment. Not you, even me. But it wasn't that bad and it was in private. But this is ugly and both sides are using it. It's not just Republicans. But to have the president of our country use words on a regular basis that are truly inflammatory just is. Is very troubling and hurts further US Leadership.
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Kelly
Well, as Joe mentioned, the colorful language from one Senator, Bernie Marino, yesterday, I had my eye on all of the senators as they, Jane, as we were having this conversation, were just taking a vote on another War Powers resolution and yet another has failed, 49 to 50. Are you surprised by that?
- [09:43]
Jane Harmon
Well, I remember the days in the George W. Bush administration, not my party, when we voted, when first of all, the president made the case to Congress about the need for an aumf, first for Afghanistan and then for Iraq, and Congress voted AUMFs for both. The first one was justified. The problem there was once we satisfied its objective, which was to go after those who attacked us, we stayed there. That was a mistake on Iraq, it turns out the intelligence was wrong, and my vote for it was wrong. But at least it was a deliberative process. This is more performative. This is. Let's do a press release today and let's do a press release tomorrow. And the two sides are really not, I mean, the Congress, House and Senate really not addressing the specific issues. What is authorized, what isn't authorized. Are we going to justify more American deaths? I hope not. I see this war, war as very dangerous, not just for US Security, but for world security.
- [10:52]
Joe
Even got dangerous in the Caspian Sea this week as Ukraine enters the fray and attacks an Iranian commercial cargo ship that you probably saw. It's unclear what was on this vessel. They thought maybe missile parts or something
- [11:05]
Jane Harmon
on the way to Russia, but they did it. Or allegedly.
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Joe
But again, we get back to Kelly's point. The the radius is widening.
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Jane Harmon
It's worldwide. And the suffering from the lack of oil supplies, fertilizer and so forth is worldwide.
- [11:22]
Kelly
Well, yeah, that certainly is true. And it's being felt here at home domestically for all of the president's public statements, that he doesn't care about the midterms, that if Iran is trying to essentially put price pressure on him ahead of the midterms, that they would be. Do you believe that that's actually true the closer we get to November?
- [11:40]
Jane Harmon
Well, he's not on the ballot. That would be something he would say. So why should he care? On the other hand, he's going to be really hemmed in if both houses flip or I think he will be. And I even think not just the people he didn't endorse. I mean, he's mad at Cornyn and Tillis, but I think a lot of other people are going to get braver because they're going to realize as his poll numbers sink and the popularity of this war is, you know, below, below zero, that they better move away from
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Joe
it and him once primary season is over, it's going to be interesting to see some of these pivots. Jane, stay in touch with us. It's great to have you here and I hope your summer's going well.
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Jane Harmon
Just nice. I'm here.
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Joe
She is here right now.
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Kelly
Very nice to have you.
- [12:21]
Joe
And you were last time, too. She's, I mean, she's practically living in the bureau now, which is good for everybody. Jane, thank you so much. Stay with us on Balance of Power. We'll have much more coming up after this.
- [12:34]
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- [13:30]
Kelly
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- [13:39]
Joe
Complete disclosures available@public.com disclosures.
- [13:43]
Jane Harmon
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple P CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg 11:30.
- [14:02]
Kelly
Thank you very much. We always love an IPO day here on Bloomberg TV and radio. Billion dollars for Jersey Mike's.
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Jane Harmon
Yeah.
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Kelly
Everybody have a sandwich? Obviously a smaller IPO and not as stellar of a debut as ones we have experienced recently, including of course, perhaps the mother of all IPOs in space x earlier this year, even if it has fallen back below its IPO price. And Musk, the leader of the company, is no longer a trillionaire on paper. He still has plenty of money, though, and plenty of places he can spend it. And we're getting some new reporting now, first from Axios and now in the New York Times with some finer details about the way in which he's planning to spend money in this midterm cycle. According to the New York Times, Elon Musk has authorized his super PAC to spend 100 to $120 million on a new field program and at least eight states to help elect Republicans in November. They're trying to focus on turnout, like
- [14:54]
Joe
a rounding error for him. Yeah, but that's a lot of sandwiches.
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Kelly
Yes.
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Joe
And so we assemble our political panel for their take on this, the re emergence of Elon Musk as a political force. Joining us today, Rosemary, Becky, our Republican strategist, founder, President Jersey first on this Jersey Mike's IPO Day. Doug Farrer is here as well, principal at Baywood Strategies, our Democratic strategist. Rosemary, let's put down the sub for a minute. Is this good for Republicans? I realize it's a financial boost, but Elon Musk is a controversial figure. We remember the Tesla's all burning and the Doge effort and the rest. Will he help Republicans win in November?
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Rosemary Becky
Oh, yes, absolutely. I think that this will be actually very helpful for Republic Republicans having him get involved in this. You know, there are so many, you know, things out there that are swirling and frankly, you know, as we look across the country and we see all, all these different proposals out there with regards to wealth taxes right at the state level, and we're starting to see it emerge even at the federal level. So he's got a vested interest rate in getting involved at this point. And I think that that's an important, you know, opportunity, and I do think that it will help Republicans this fall.
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Kelly
Well, so when we consider then, as the Democrat, Doug, how worried you feel about this? If Elon Musk is having to spend this kind of money to focus on turnout, does that say something about the turnout concerns that Republicans have going into the midterm that may, at least for the time being, advantage Democrats?
- [16:35]
Unidentified Short Interjection
Yeah, I mean, Republicans aren't thrilled, by and large with how things are going. And they're, you know, they're probably not inclined to turn out because gas prices are high, grocery prices are high, and Trump's basically broken all of his promises. Look, that's a lot of money. I mean, Democrats should be worried. And the fact that we have a campaign system where a once trillionaire can drop a rounding error across the country and maybe affect the outcome of races is a huge problem of its own. Musk has tried to pay for elections before. You guys might remember, he paid $10 million to a candidate in Kentucky who decided instead to take a position in the Trump administration. He tried to make himself the face of the Wisconsin Supreme Court election, lost by 10. So hopefully Democrats will attach his name to this effort. But I would say one other thing. It's all going towards knocking on doors. And this is actually one of the worst places or the least effective places you can spend a lot of money because people will just fake door knocks and collect their cash. So, yes, big problem. But maybe not, you know, doomsday for the Democrats.
- [17:36]
Joe
Democrats can have fun with this, though, right? What about the chainsaw of bureaucracy, the falling out with Trump, the black eye from Scott Besant? This is not your everyday political donor here, Doug. You can make a lot of commercials with that, can't you?
- [17:52]
Unidentified Short Interjection
I totally agree. Look, Trump or Musk isn't even popular with Republicans. I saw a poll that had him at 42% favorable, down from 75% when he started DOGE. You know, people don't love rich guys, you know, messing up people's lives and destroying things like USAID that, you know, ended up probably harming thousands and hundreds of thousands of people across the world. So, yeah, I think Democrats will try to attach Musk's name to this effort. They're happy to welcome another toxic billionaire into the Republican fold ahead of the elections, for sure.
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Kelly
Of course, there's also a billionaire in the White House, Rosemary, and his political entity, the MAGA Inc. Pac, has way more money than Elon Musk is prepared to spend. They're sitting on $400 million and they've hardly spent any of it in this cycle. Is it time to start deploying that capital?
- [18:45]
Rosemary Becky
Yeah, I think it is and I think they certainly will. Look, this is going to be a hard fought battle this fall. And you know, and for the House itself, we've got, you know, 18 races that are considered toss up, 14 of those are Republican. And so, you know, the White House is going to have to start to spend some money on these races. And, and you know, there's, it's going to be about the message and it's going to be about who has a better solution. Right. Who can solve the affordability issue. And that's what it's all going to come down to. And so it's going to be really important to get those messages out. Whether it's social media or just good old fashioned knocking on doors, you really got to get that message out.
- [19:41]
Joe
This Scallop poll out today, Doug, might give you pause when you consider what Americans think about our election process. And it just is. It's the backdrop of everything we're talking about here. With deep unease around election integrity, 67% worry that political leaders will pressure officials to change outcomes. Democrats, as you might expect, more than Republicans. Far more anxious. 77% to 56% with Republicans and 57% overall doubt ballots will be properly handled or secured. Republicans more than Democrats. Does this lack of trust and the fan, the flames are being fanned frequently by the President himself result in a lack of turnout?
- [20:29]
Unidentified Short Interjection
It might hopefully as a Democrat result in a lack of Republican turnout, but I think Democrats are pretty fired up. I think they want to prove that democracy and voting and our voting system can work by going to the polls and making it clear that they oppose Donald Trump and his Republican colleagues in the House and Senate. Look, the way people feel about the election system here in this country is 100% Donald Trump's fault because he can't admit he lost an election in 2020. Okay. He has made Republicans think that it's all rigged, which it is not. It is the freest and fairest election system in the world. And he's made Democrats rightly feel that he's trying to steal elections. This is a mess. And I hope that there is a big turnout and that all of the elections go well because I believe the state people in charge of those will do a good job and hopefully we can start to rebuild this trust across the partisan gap.
- [21:25]
Kelly
Well, of course there's more primary elections coming up and a big one on Tuesday for your party is especially Doug, as we watch the Democratic Senate primary in Michigan. The established backed Congresswoman, establishment backed Congresswoman Haley Stevens up against progressive Abdul Al Said. And we have some pretty incredible polling that's just come out from Emerson College in the aftermath of their last debate that finds al said up 1415 points on Haley Stevens 54% to 39%. The age breakdown is perhaps even more remarkable as it's only voters 60 and over who prefer Haley Stevens. But El said gets 61% of those between 18 and 29, 18 and 39. Actually 73% of those between 40 and 49. And I wonder as you look at these figures, Doug, in this kind of internal war that's happening within the Progressive party and the progressive wing of it in the Democratic Party, if it makes you nervous about the prospects of keeping this seat blue in November or if this might be a good thing for
- [22:31]
Unidentified Short Interjection
your party overall, there are a lot of different takes. I think it's a good thing. Look, Haley Stevens has benefited from something like $70 million in outside spending, some of it coming from AIPAC, lots of it coming from corporations. And for the Democrats, a lot of voters are looking at that and saying no thanks, we don't want this anymore. We want change. We want someone who's really going to do something about our affordability crisis. Because Abdul Al Said is pitching Medicare for all. He's pitching lots of different policies that I think are right on the economy and the demo that you noted, which I'm just outside of, I'm afraid to say is looking around, having graduated high school, gone to college and now is trying to figure out what their future is going to be like and saying this economy is not working for me. And when you have a fired up base and a super unpopular president, I think you could see El Sayed do really well in this election despite the some of the, the establishment concerns about his electability against Rogers.
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Joe
Yeah, I'm pretty sure Rosemary is liking that idea. Rosemary, am I right? Mike Rogers thinks he can beat El Sayed a lot easier than dealing with Haley Stevens. How about you?
- [23:36]
Rosemary Becky
Yeah, no, I think that's a great matchup here. Look, I think at the end of the day, you know, the American people and particularly in Michigan are not looking for, you know, socialists to be running this country. And I do think, you know, Mike Rogers is a very strong candidate and will do, frankly, extraordinarily well if, in fact, EL Sayed does win that primary,
- [24:06]
Kelly
although he is not, we should mention, a Democratic socialist, he is not a member of that, even if the DSA may be campaigning for him in Michigan. But Rosa Mary, I would imagine you're not going to be the only Republican we talk to between now and November. If he wins, that's going to try to cast him as one. Is that not the point?
- [24:26]
Rosemary Becky
That's absolutely the point. I mean, and frankly, it's so fascinating to see what's kind of occurring with these primaries and these potential new members of both the Senate and the House. You're going to have, you know, similar to a Freedom Caucus or a Tea Party on, on the left side. Right. And, and frankly, it's going to end up polling, you know, pulling the agenda. And so it would it'll be very fascinating to watch as that potentially could play out in both the House and the Senate, frankly.
- [25:06]
Kelly
Indeed. All right, Rosa, Mary, Becky, founder and president of Jersey Versus and Republican strategist alongside Democratic strategist Doug Farrer, principal at Maywood Strategies. Thank you both for joining us. As we look ahead to that crucial primary on Tuesday. It's going to be one to watch as we beat the drum to November and consider what the ballots of the Senate may ultimately look like, especially Joe, if the president is considering on the post midterm Senate being the one to advance the confirmation of Todd Blanche. We'll see how that all works out
- [25:35]
Joe
for the lame duck report. We're looking forward to hosting that as well after November. Stay with us on Balance of Power. We'll have much more coming up after this.
- [25:46]
Public.com Advertiser
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- [26:42]
Kelly
Investing Brokerage Services by Open to the Public Investing Inc. Member FINRA and SIPC Advisory Services by Public Advisors, LLC. SEC registered advisor.
- [26:52]
Joe
Complete disclosures available at public.com disclosures.
- [26:57]
Jane Harmon
You're listening to the Bloomberg Balance of Power podcast US live weekdays at noon and 5:00pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
- [27:13]
Joe
Watching Wall street on a much better day than yesterday and kind of nice to see someone rewarded for good news here with Again, Microsoft up 17 points. Be interesting to see how Apple and Amazon fare this evening with Apple coming in off the top rope here. It's up quite a bit year to date, more than 20%, Amazon a little bit less. So it's up about 5% year to date, so might not be judged quite as brutally as some of these others. Big question we keep hearing though is about a bubble and Kevin Hassett isn't having any of it. The idea of AI spending bumping into a ceiling and leaving enormous amounts of money that have been bet on the building of data centers and the advancement of AI at risk. He actually joined us earlier today on Bloomberg, of course, the President's economic adviser, live from the White House. Here's what he said. The difference between the dot com boom of the 90s and what we're seeing now with AI is that the AI companies are actually making money. So remember back then we had insane valuation for firms that had yet to make any money at all.
- [28:23]
Kelly
So as we consider who is making money and who's spending a lot of money that the market isn't sure is necessarily going to pay off. And look at what's happening in tech and AI plays overall, we turn to the Bloomberg Tech host Ed Ludlow, who's joining us now from San Francisco. It's of course a very busy week for him as he covers earnings across the board. And before we talk about the earnings that we're getting going to get in just a few hours after the Bell ad, if we could recap the earnings we got yesterday, we're looking at the biggest move for Microsoft going back to 2008 with this 17% gain. Is this just a matter of the stock having been beaten down somewhat? So now we're seeing a massive recovery, or is the cloud growth really that good?
- [29:02]
Ed Ludlow
Well, good point because it was down year to date in a laggard of the Biggest technology names, right, the Mag 7. The other way I'd look at it is that you can look at the percentage gain. But as we write on the Bloomberg, it's on track to add almost $500 billion of market value in a single day, which would be a record, just a market value term. No one's ever done that in the history of the stock market. But it's so interesting because like, you know, for each of these companies, the math, the equation is the same. Here is some data of how much we're spending on AI infrastructure. And then the Wall street says what is the return on that investment? What have you got to show for it? And in Microsoft's case, it was really simple. They gave financial metrics like their cloud computing unit growing at the fastest pace since 2022. But they also said this is the product that we sell Copilot and people use it. And that seems to have been a good message that Wall street like I think Joe Matthew said, rewarding good news. But I would just say it's a different type of news beyond financial numbers.
- [30:00]
Joe
30 million seats was a pretty good number there. And I wonder if Amazon will be able to tell a similar cloud story or if Apple, you know, Microsoft, as we've been discussing, has been rewarded for not spending beyond its means. Apple's been rewarded for kind of not spending at all. Does that continue tonight?
- [30:20]
Ed Ludlow
Well, the Apple story has almost been like Apple is the safety trade. Apple doesn't have a capex story. It's its capex number is probably going to be $12 billion for the fiscal year, maybe just slightly over Amazon by comparison, $200 billion. And so like, you know, Amazon story is very aligned with Microsoft. You know, they expect the cloud unit of us to grow at the fastest pace in some time. But Amazon more recently has been giving these kind of other metrics about how its investments in AI make traction and compare and contrast with Metta last night, you know, Metta just wasn't able to say here's something tangible. Here's the other side of all of the work we've done, not just in the research and development side of AI, but all the infrastructure they've built. So Amazon like again in line with Microsoft, it's a more clear cut story. Apple really is a story about Tim Cook and smartphones.
- [31:11]
Joe
Well, we're going to have a lot more for you coming up later on today after the bell and on the late edition of Balance of Power, we'll be joined by the great Ed Ludlow. It's good to See you. Thank you so much. Bloomberg Tech, of course, course. And the, the man behind it. It's going to be something else. After 4 o', clock, the building here at Bloomberg will shake again as we add the voice of Bloomberg Politics contributor Patrick McHenry. Of course, the former Republican congressman used to chair the House Financial Services Committee. Speaker Pro Tem is with us right now. Mr. McHenry, welcome back. I wasn't planning to talk to you about this but our audience should know that you do a lot of work out in Silicon Valley now and you're, you're, you're a big player in the corporate space. You probably have a much better seat for this show than a lot of investors do. When you hear questions about the durability of this AI build out the race against China and the questions of what inning we are in, what are you hearing?
- [32:08]
Patrick McHenry
Well, Mythos was a defining moment and it shifted the bait in Washington and amongst corporate players on the use of AI. We see the token tracking that every corporate is now engaged in. CFOs went from spend at all cost on AI to now let's make sure we're getting something for this engagement and this extraordinary cost on tokens going to the frontier labs. So we've seen a large shift this calendar year distinct from what we saw last year. Last year is all about the build and the competition with China to make sure that we're ahead. This year we're seeing a shift post methods to ensure we have competition on the frontier and in the second generation and in on with the use of AI and the rising use and need for open models and open weights so that we have open source as a, is a key player to balance out this rising cost of AI usage. So there's a lot happening here. This, this Microsoft story is absolutely fascinating because it's a, you know, one of the long term old players in tech and still had such a massive move today. You're seeing something likewise in Washington policy circles that the shifts on AI, the uncertainty on what I will mean for the economy, that's a huge driver of our politics, not just the day to day stuff. But this is going to be the, really the large debate within the parties and with the electorate not just for the midterm but going into the next presidential. It will be defining, a defining issue of the debate between the candidates and the parties.
- [33:56]
Joe
I just knew I could turn him into a tech stock analyst. It was just a matter of time, 100%.
- [34:01]
Kelly
Speaking of tech stocks really quickly, obviously it's been pretty easy to get on the wrong side of a trade, given all the volatility in AI and software names as of late, that is a problem for the hedge fund. Situational awareness. Situational awareness, which there's been a lot of reporting about today. This was a hedge fund started by a very young man who used to work for Open Air. And Bloomberg is now reporting a redhead just crossing the terminal that its assets are have fallen to about $10 billion after having to offload a bunch of its stock in a sale to Citadel. CNBC had reported earlier today that the assets as of July 1, or the net asset value rather, was $45 billion. So clearly this is a material drop after the losses that they experienced with some wrong way bets on software names. And yeah, that's for sure.
- [34:47]
Joe
And it really speaks to just the incredible amount of leverage that's been behind these trades. I mean, look at Micron today, one of the three top holdings in this hedge fund just moving with abandon. It's up $131 or 18% now, Kelly, after dropping by similar fashion yesterday, people are wondering what these breakneck moves are all about. In situational awareness raises its head as, as at least one of the reasons.
- [35:12]
Kelly
Yeah, a lot of attention Leon Leopold
- [35:13]
Joe
Aschenbrenner, 25 years old.
- [35:16]
Kelly
Yep. And under a lot of pressure, I would imagine, as we bring the conversation though, back to Chairman McHenry, as we have this conversation around the artificial intelligence trade, on the artificial intelligence regulatory race, whether or not we're going to see more action on that, either from the White House or from Capitol Hill. I wonder if the way AI is being treated now reminds you of how crypto was being treated at the beginning. Crypto, which mind you, we still don't necessarily have our regulatory arms around, as the Clarity act still doesn't seem like it has a clear way forward in the Senate, at least as of now. Mr. Chairman.
- [35:49]
Patrick McHenry
Well, here we're in a, in a different context. I can run very hard and grow at a very large rate without the need for clear rules of the road. From Washington, what, what crypto needs is clear rules of the road for mass adoption across heavily regulated financials. The Clarity act is that that opportunity on Capitol Hill to define the clear rules of the road in law on what is a digital asset, the means of exchange and its use. We see the Clarity act having passed the House Representatives over a year ago now. The Senate has been wrestling with this publicly for the last couple of months. The final key issues for the Clarity act are, number one, conflicts of interest for the centralized exchanges, number one. Number two, law enforcement, the clear definition of developer protections for, for open source software developers and DeFi. And then third and finally and most importantly politically is the debate around ethics. You have serious policymakers engaged on that, on defining what is a set of ethics restrictions on the person of the President and elected officials. And you see leaders like Senator Gallego, Senator Tillis who are formulating policy, not just the rhetoric around this, but actually writing policy that is enforceable and durable under law here. This is tough stuff. And I think Senator Gallego and Senator Tillis have shown real leadership in working together on something that could pass muster and help unlock the ability for the Clarity act to pass either this next week or in September or in the fall.
- [37:40]
Joe
Senator Till is showing up in a lot of stories these days. Oh yes, your old friend of the Reason band.
- [37:47]
Patrick McHenry
He's a one man marching band, isn't that true?
- [37:49]
Joe
We're going to play this for him. Tell him we had this conversation because the President wants his Attorney General to be confirmed. Todd Blanche. That confirmation vote has been postponed because of Tillis and John Cornyn, both of whom not great fans I guess of the President and vice versa. He primaried them and they're giving him a hard time back. They want to pick piece of paper that says there will be no anti weaponization fund before they nominate or confirm, I should say the nominee in this case President Trump posting on Truth Social. He might just withdraw the name over this. What's going to happen here, Mr. Chairman?
- [38:24]
Patrick McHenry
Well look, the, the senators that have the deciding votes here are going to get what they want or they're going to get Todd Blanche's head. They're not fighting directly. If you listen to the senators, they're not saying that President Trump is wrong. They're even, even going out of office. That's not something they think is wise. What they're saying is that the President is being ill served by his advisers. That is what you're hearing from Senator Cornyn, Senator Tillis. What they want is an assurance of the Attorney General's proper actions, specifically on the anti weaponization fund and a few other limitations. The Attorney General I think in a normal process would be able to come to terms with directly with these senators and give them that assurance. In this case, it's going to be the White House, the White House staff that's going to determine whether or not those assurances can be given. And until that time, you're not going to see a vote on Todd Blanche's Attorney General nomination. Even if he is well qualified, which is what these senators are saying. But those things will be delayed, and I don't think it's forever, but it could be for a period of time. With Senator Thune trying to manage the Senate floor, this is a very, very complicated closeout before the August recess. The next, the next week, week and a half are going to be very, very challenging for the Senate to get through these set of issues in any sort of reasonable way.
- [39:51]
Kelly
Yeah, wouldn't necessarily want to be Majority Leader John thune right now. Mr. Chairman, thank you so much as always for joining us. The former chair of the House Financial Services Committee, Patrick McHenry, now a Bloomberg Politics contributor.
- [40:05]
Joe
Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already at Apple, Spotify or wherever you get your podcasts. And you can find us live every weekday from Washington, D.C. at noontime eastern@bloomberg.com
- [40:20]
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- [41:01]
Joe
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