Trump Orders US Agencies to Drop Anthropic After Pentagon Feud

Summary

Bloomberg Businessweek – Episode Summary

Episode: Trump Orders US Agencies to Drop Anthropic After Pentagon Feud
Date: February 27, 2026
Hosts: Carol Massar and Tim Stenovec

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Overview

This episode centers on two major business and tech stories:

1. President Trump's order for federal agencies to stop using Anthropic’s AI products, following a high-stakes standoff between Anthropic and the Pentagon over the use of AI in military applications.
2. Broader discussions on tech and economy, including an in-depth interview with Duolingo’s CEO on their AI and growth strategy, and an exploration of a major housing partnership aimed at addressing affordability.

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Key Segment 1: President Trump & Anthropic-Pentagon Standoff (02:12–09:44; returned to topic at 40:44–41:37)

Main Points

• Trump’s Order: President Trump directed all US government agencies to phase out use of Anthropic’s AI products over six months, especially in the Pentagon, citing concerns over adhering to the Constitution versus AI vendor terms. Trump’s post on Truth Social stated:

  "The left wing nut jobs at Anthropic have made a disastrous mistake trying to strong arm the Department of War and force them to obey their terms of service instead of our Constitution. Their selfishness is putting American lives at risk." — President Trump [02:18]

• Nature of the Dispute:

  • The Pentagon wants flexible use of AI, potentially including autonomous systems; Anthropic refuses to allow its technology to be used for fully autonomous lethal weaponry.
  • Anthropic has a significant role in defense tech stacks (e.g., Palantir’s Maven Smart), making their removal complex and risky for continuity.

• Negotiations and Deadlines:

  • Pentagon and Anthropic reportedly still in last-minute negotiations per an Axios report.
  • Defense Secretary Pete Hegseth threatened to declare Anthropic a "supply chain risk" if a deal was not reached by the 5:01 PM deadline.

• Stakeholder Perspectives:

  • Some officials characterize Trump’s move as politicized, not just about security (per Senate Intelligence Committee input).
  • Katrina Manson, Bloomberg reporter and author on military AI, emphasizes how embedded Anthropic is and the underlying military hesitancy about the technology’s readiness.
  • Both Anthropic and some military leaders stress concerns over AI autonomy, not purely political or commercial issues:

    “They didn’t want their tools being involved in autonomous warfare because they’re not ready.” — Katrina Manson [05:44]
    “The technology isn’t ready yet.” — Jack Shanahan, former Project Maven leader, paraphrased by Manson [06:33]

• Complications of Transition:

  • Six-month phase-out would be operationally complex.
  • Anthropic has offered to support transition and help improve system reliability, but Pentagon has so far refused R&D collaboration.
  • The fundamental disagreement reportedly centers on whether “human judgment” will always apply to use of force.

• Notable Quote:

  “They are saying 'we want to help you use this wild technology in a reliable way and help us help you.’” — Katrina Manson on Anthropic’s R&D proposal [09:25]

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Notable Timestamps

• 02:12 — Trump’s directive and context
• 03:50 — Katrina Manson explains Anthropic’s entrenchment in defense and transition issues
• 05:29 — National security implications and readiness concerns
• 07:38 — The performative nature of the standoff and the deadline’s meaning
• 09:19 — Anthropic’s offer to collaborate and Pentagon’s response
• 40:44 — Recap on Trump’s post and restatement of Anthropic’s red lines

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Key Segment 2: Compass & Rocket Companies on Housing Affordability (13:36–27:13)

Main Points

• Strategic Partnership Announced:

  • Compass (largest real estate brokerage) and Rocket (largest mortgage lender) unveil a three-year alliance to improve home affordability and inventory.
  • Aim to bring 500,000 to 1 million previously unavailable home listings to market, focusing on private exclusives and “coming soon” listings.

• Affordability Focus:

  • The initiative seeks to lower barriers for sellers and provide mortgage incentives (up to $6,000 closing coverage, rate discounts).
  • Target both sides of the market — unlocking inventory for buyers and creating new tools for sellers.

• Changing the System:

  • Proposal to eliminate “days on market” and “price drop history” visibility for sellers, mirroring practices in markets like Australia.
  • The intent is to reduce sellers’ hesitancy and increase inventory, though some hosts question if reduced transparency could mislead buyers or contribute to price inflation.

• Industry Reform Requests:

  • Robert Reffkin (Compass CEO) urges abolition of the National Association of Realtors’ “clear cooperation” rule, which mandates MLS listings, arguing for seller autonomy.

• Notable Quotes:

  • “There should not be these artificial barriers... We are taking [negative insights] off the listing.” — Robert Reffkin [14:09]
  • “It’s really important, I think, to acknowledge that and to diversify the way you qualify folks.” — Varun Krishna, Rocket CEO, on credit and income evaluations [17:35]
  • “We believe if you, the buyer, what you would you need is you need more inventory. So to help you, the buyer, the best thing we can do is just let the seller sell however they want.” — Reffkin [19:42]
  • “There should be no fear to list. There should be no downside to list. There should be no barrier... If you take away all those barriers, you will have more inventory.” — Reffkin [22:20]

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Notable Timestamps

• 13:36 — Introduction to partnership
• 14:33 — Reffkin outlines partnership impact for sellers and buyers
• 15:45 — Krishna details inventory unlock and mortgage incentives
• 17:35 — Discussion on expanding mortgage qualification criteria
• 22:20 — Emphasis on removing barriers for sellers

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Key Segment 3: Duolingo’s CEO on AI, Growth & Investor Concerns (30:29–37:58)

Main Points

• AI Strategy:

  • CEO Luis von Ahn emphasizes Duolingo’s focus on leveraging AI for superior teaching, aspiring to an app as effective as a human tutor and as engaging as a game.
  • Duolingo holds vast data on user learning, giving it an edge in AI training.

• Competitive Position:

  • Little concern over new AI entrants in language learning; company has 85% market share and billions of user interactions for model improvement.
  • Points to the distinctive value in fostering user streaks and learning habits, not just content delivery.

• Growth and Monetization:

  • Short-term profit margins will be sacrificed for long-term user growth (goal: double active daily users to 100 million by 2028).
  • Expansion to new disciplines (math, chess, music); currently ~15% of active users engage outside language learning.

• Investor Misunderstandings:

  • Stock is down due to a forecast for slower short-term growth, but leadership underscores a long-view strategy.
  • Shift this year to focus on “growing the pie” (total active users) rather than monetizing the existing base.

• Notable Quotes:

  • “Because of AI, we’re going to be able to teach significantly better... our sense is that within the next few years, we’re going to have an app that teaches as well as a one-on-one tutor, but also is as fun as a mobile game.” — Luis von Ahn [31:26]
  • “The hardest thing about learning something by yourself is staying motivated... we motivate people to continue doing it. And that’s hard to get right.” — Luis von Ahn [33:09]
  • “One of the main advantages that we have certainly against new entrants is scale. There’s no other education app that has the scale that we have.” — Luis von Ahn [37:41]

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Notable Timestamps

• 31:26 — Vision for AI in EdTech
• 32:12 — Duolingo’s competitive advantage rooted in scale and data
• 33:09 — Importance of habit formation and motivation
• 34:13 — On investor skepticism and long-term strategy
• 36:31 — Discussion of new subject areas and future growth

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Key Segment 4: Market Analysis — AI, Credit, and Employment Risks (42:11–49:46)

Main Points

• Financial Markets & AI Risk:

  • Uncertainty reigns in markets due to multiple factors: risks in private credit, rising loan delinquencies, and reliance on private funding for tech giants like Anthropic/OpenAI.
  • AI spending is crucial to tech-sector growth, but layoffs (e.g., Square’s 40% workforce reduction) stoke fears about automation’s threat to white-collar jobs.

• Broader Economic Implications:

  • The panel reflects on historical tech disruption: while previous innovations eventually created jobs, current AI trends aim directly at eliminating intermediary (white-collar) work, raising deeper economic and social concerns.
  • Lack of transparency in the financial deals sustaining AI giants sparks additional market anxiety.

• Notable Quotes:

  • “If all these companies can do more with half the number of employees, where do those employees go and then what does it mean for their spending power?” — Tim Stenovec [45:13]
  • “This specific technology is designed to make things more efficient… which is to eliminate the need for you and I to be intermediaries and that’s white collar jobs… this could actually go right after those people that we need to be spending, which is scary.” — David Gura [46:26]

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Notable Timestamps

• 42:11 — Market trends, credit worries, the AI funding cycle
• 44:48 — Concern about job destruction in the age of AI
• 45:44 — How AI efficiency affects labor and consumer spending
• 46:12 — Comparison to past technological disruptions

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Memorable Moments

• Trump’s no-holds-barred attack on Anthropic as “left wing nut jobs” accused of putting “American lives at risk” [02:18]
• Katrina Manson’s macro perspective: “It’s very significant that the President’s weighed in and called this directive… unraveling Anthropic over the course of six months will be extremely complicated… They are used in combat operations on Maven Smart system which is a Palantir system.” [03:50]
• Concise summary of what’s at stake for the Pentagon: “The technology isn’t ready yet.” — Jack Shanahan, paraphrased [06:33]
• Robert Reffkin’s real estate paradigm-shift: “You should be able to list however you want... if we do that, there’ll be more inventory.” [22:20]
• Luis von Ahn on AI and motivation: “The hardest thing about learning something by yourself is staying motivated… that’s what we do differently.” [33:09]

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Conclusion

This episode delivers a front-row seat to current business and tech turmoil:

• The collision of political directive and private AI development, and its knock-on effects for national security and federal tech policy
• A transformative alliance in real estate aimed at remedying America’s housing crisis
• Candid CEO perspectives on AI’s power and uncertainty, both in edtech and beyond
• Persistent worries (and some optimism) regarding the broader economic effects of AI-driven change

For anyone tracking the intersections of Silicon Valley, Washington, housing, or financial markets, these conversations are both urgent and instructive.

Transcript

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[Carol Massar]

Bloomberg Audio Studios Podcasts Radio News this is Bloomberg Business Week Daily reporting from the magazine that helps global leaders stay ahead with insight on the people, companies and trends shaping today's complex economy. Plus global business, finance and tech news as it happens. The Bloomberg businessweek Daily Podcast with Carol Massar and Tim Stanweck on Bloomberg Radio

[Tim Stenovec]

President Trump directed US Government agencies to stop using anthropic products, capping a feud between the AI giant and the Pentagon over safeguards on its technology. The President said before 4 o' clock today, right there would be a six month quote phase out period for agencies including the Defense Department that are using anthropics products. I thought and he his we're going to bring up his tweet in a second. Here it is the left Truth Social not a tweet. I'm sorry. The left wing nut jobs at Anthropic have made A disastrous mistake trying to strong arm the Department of War and force them to obey their terms of service instead of our Constitution. Their selfishness is putting American lives at risk.

[Carol Massar]

Meantime, we've also seen according to Axios saying that Anthropic and the Pentagon are still negotiating a deal is still that was, that was after, after the President's post on social access reporter citing a source on Anthropic and Pentagon in an ex post. So I don't know. Clock ticking though here.

[Tim Stenovec]

Well, fortunately we got Katrina Manson back with us. She's Bloomberg News reporter who covers tech and national security. She's also the author of the forthcoming book Project Maven A Marine Colonel, His Team and the dawn of AI Warfare. The book comes out next month but you can pre order it now. She joins us from New York. Katrina, congratulations on the book. I'm looking forward to reading it. I know it's been a long project, but it's totally related to exactly what you have been reporting on in recent weeks and sharing with us on our program the back and forth that Carol and I just had. Where is, where is this anthropic Pentagon relationship right now?

[Katrina Manson]

Well, it's very significant that the President's weighed in and called this directive. But of course you're quite right to say that to indicate this is a, this is the man who knows the art of the deal and things are going to keep going. Unraveling Anthropic over the course of six months will be extremely complicated. They're in the tech stack, they're in the intelligence community. They are used in combat operations on Maven Smart system which is a Palantir system. It's not impossible to replace them. And of course the president is suggesting a six month phase out and even Anthropic when they gave their very strong statement yesterday said we will help if the choice is to remove us, we will make sure that transition is smooth. And then you've got now Warner calling in from the Senate Intelligence Committee suggesting this is a politicized attack. And of course the President did call them left wing nutjobs. So he is concerned that this is not really a debate about the future of war but a jostling for position over which company gets what. And if the Axios report is correct, I don't have separate reporting to that, then this could be still part of that process. Hegseth of course the Secretary of War or Defense had given us until 501. So we'll also still be waiting to see if the Defense Department wants to

[Carol Massar]

weigh in, you know, I think about national security with all of this stuff. I, you name it, you know, raw materials, everything. And I just think about if, if this comes undone, is that a loss for national security for the United States?

[Katrina Manson]

It's quite hard to work out the ways in which the US military machine is dependent on AI at the moment. Well, that's what I've been trying to do in this book honestly. And it has threaded through of course LMS and agentic AI. This is something that is being rapidly adopted but also really, really unknown and unreliable in many cases. So the military and the intelligence community, both of them in terms of national security, have been experimenting from pretty early on after that first moment when ChatGPT was launched back in when was November 2023. And they have started really trying to develop their own systems. Obviously Anthropic is the interesting one because they're on the classified cloud. They found a way to do it and they were threaded through a number of systems, mostly helping things run faster if you imagine an enterprise service, but just happening in a classified way, really trying to draw on data points and make things go swifter, quicker, connect things, smash through bureaucracy. In that sense that could slow national security down. But of the thing they said that they were worried about wasn't politics, it was autonomy. They didn't want their tools being involved in autonomous warfare because they're not ready. And we were increasingly beginning to hear from military leaders, not just the campaigners who you would expect to have a problem with this, like stop killer robots, but actually the former leader, the former director of Project Maven Jack Shanahan, who's a retired three star general, said look, are not ready for prime time. He put that post out yesterday and just said this technology isn't ready yet. Which is very much in line with what Anthropic had been saying.

[Carol Massar]

I want to go back to the Axios. We have a little bit of a fuller read through on this Anthropic and the Pentagon still negotiating ahead of the Pentagon's 501pm ET deadline to reach a deal. Citing a source familiar, Axios goes on to say if no deal is reached, Defense Secretary Pete Hexith plans to declare Anthropic a supply chain risk. This 501deadline, might it Katrina be extended? What, where did this talk deadline in the past? You know deadlines can move.

[Katrina Manson]

I mean so much of this is performative, isn't it? We've seen a lot of very loud public statements. As we actually have learned, the disagreement on paper comes down to the term as appropriate. There have been letters going backwards and forward, so we've been told that are about whether human judgment will be used over the use of force in an autonomous situation. And we had Emil Michael talking to Bloomberg tv much more cool headed than he was last night. Last night he was calling Darrow Amaday a liar and saying he had a God complex. This morning with Bloomberg he was saying, look, talks are carrying on. So I think, of course this is a negotiation. They've acknowledged, I think in multiple ways that they're really dependent on Claude and that Claude is really good and they want to keep using it. Claude doesn't want to be involved in autonomy. And I was learning, of course that if the department pushes ahead with autonomy in the way it wants to do, it could be quite hard to have one system that allows autonomy and another system that doesn't touch autonomy that Claude would be on. So they do need to work out exactly what their red lines are, even if they're coming to a much softer accommodation behind closed doors now. But you know, with the president weighing in and with Hegseth maintaining this position, there's no reason to think they will reach a deal at 501.

[Tim Stenovec]

So Katrina, just in the last 20 seconds that we have with you, when I was on my way home yesterday, this crossed, it was just minutes after you were on our program talking about it, but it said it was this post from Anthropic's Dario Amade saying that the company cannot accede to the Department of Defense. Did you learn anything? Just in 30 seconds? Did you learn anything new in that post last night?

[Katrina Manson]

Yeah, I've got it right in front of me, actually. I thought there was a very interesting part of it, a detail to pick out, which is we've offered to work directly with the Department of War on R and D to improve the reliability of these systems, but they have not accepted this offer. I thought that was very interesting. They are saying we want to help you use this wild technology in a reliable way and help us help you.

[Carol Massar]

Which is similar to what the undersecretary of defense said earlier this morning. You go to a dinner party, you want to sit to somebody, you want to sit next to somebody like Katrina.

[Katrina Manson]

I'm just going to put that out there.

[Tim Stenovec]

Stay with us. More from Bloomberg businessweek Daily Coming up after this.

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[Tim Stenovec]

Well, two companies are looking to address that. We're talking about Compass and Rocket Companies. The two announced a three year strategic alliance aimed at expanding home listing inventory to create a significantly enhanced and affordable home buying and selling experience for American families.

[Carol Massar]

All right, we wanted to know more. Also, we should point out our next two guests. Both of them had earnings last night. Compass shares are a little bit lower. The company forecast first quarter revenue that topped analyst estimates and shares of Rocket rallying after the mortgage finance company posted revenue and adjusted profit for the fourth quarter that beat the average analyst estimate. Which means we're going to get to the macro as well. With us in studio, Robert Refkin. He's founder, chairman and CEO of Compass International holdings and Varun Krishna, president CEO of Rocket Companies, both joining us here in studio.

[David Gura]

Welcome.

[Carol Massar]

Like you are the perfect guests to have right now with so much going on. I want to talk about the partnership though and how it gets to the affordability issue. Let's go right there. Robert or whoever wants to kick it off, please go ahead.

[Robert Reffkin]

So that's a good partnership. Well, look what this represents is the number one largest brokerage in the world, Compass, 340,000 agents, nine brands, Compass, Corcoran, Sotheby's, Caldwell Banker, Better Homes and garden, ERA Central 21 Christie's in AD Properties, partnering with the largest mortgage company in the world to help sellers by giving them something they've never had before, which is the ability to market their homes to 60 million buyers without days on market and price drop history. Ultimately, there's a risk to listing negative insights that are on listings that we are taking off the listing. So for the first time so that they can market without risk, there should not be these artificial barriers.

[Tim Stenovec]

Yeah, come on in here. Because if we think about affordability, you know, what we hear over and over again from economists is, yeah, mortgage rates matters matter. You know, it matters how much people are, are thinking about buying and their salaries and how they think about affordability. But it really has to do with supply. And if we're not building more homes in places where people want to live, we're just not going to make a dentist. How do you do it if you're not a builder?

[Varun Krishna]

I think it's a very complicated problem and I think it's really important that industry participates and does its part. And the purpose of this partnership is really to attack affordability in two ways. The first one is inventory. As Robert shared, we plan to bring, as a result of this partnership, 500,000 to a million listings to the market that are not accessible.

[Carol Massar]

And so why aren't they accessible?

[Varun Krishna]

Because part of the issue is that certain sites provide access to these private exclusives and coming soon listings. And these are inventory. That really comes down to a more flexible way for sellers to be able to advertise their home. And what we think is that everyone is really focused on the buyer. That's obviously a very important side of the equation. But in some ways, the entire world has forgotten about the other side of the equation, and that's the seller. And so this partnership first is focused on the seller. It's about lowering the barrier to entry so that more listings can be advertised online on Redfin and on Compass. That's one side of the equation. The second side of this is a mortgage partnership, and that's where we are building a more integrated platform for buyers so that buyers that use Rocket Mortgage, that use Compass, can actually save money. They can get up to $6,000 in closing cost coverage. They can save up to 1% on payments for the first year. And so it's a very multifaceted challenge to fix affordability. But what's great about this partnership is it. It fixes things for both buyers and sellers on both sides of the ecosystem.

[Carol Massar]

But I got to ask, you know, one of the things that Tim and I, we've covered this a lot in terms of affordability, and yes, it's. Some of it is buying homes, affordable homes where they are needed. It's not just buying homes, but the other thing is a lot of folks have said we need to pay people more, that it's an income thing. So, like, are you guys going to give mortgages? Are you changing your metrics in terms of income? And so on and so forth.

[Tim Stenovec]

Like who qualifies?

[Carol Massar]

Yeah, because. Because that gets to the affordability issue too.

[Varun Krishna]

Yeah, I mean, I think, look, the reality is affordability, as you said, is much more than just supply and demand, although supply and demand are probably the major ways to attack the problem. But a part of this is you have to have more ways to qualify people. You have alternative ways to look at things like credit. You have to think about reform, you have to think about wage. Are you talking about self employed? We have diversified the way that we look at our population. I mean, you look at things like the creator economy, you look at the self employed economy. So you have different ways that people make income, have credit. And it's really important, I think, to acknowledge that and to diversify the way you qualify, folks.

[Tim Stenovec]

So the idea in big picture is you increase supply, you get more homes listed out there. It frees up inventory for people to buy that, that first home. Robert. But yeah, go ahead.

[Robert Reffkin]

So you mentioned developers, builders. Look, unfortunately that will just take too long. If we attack the builder side, that will take two years to have even the most modest impact. The bigger impact.

[Tim Stenovec]

Not really where you play.

[Robert Reffkin]

The bigger impact, exactly. Well, we play on both, but the bigger impact is on existing home sales. And that's where there's, there's been less inventory because so many homeowners are locked into low mortgage rates and they don't want to lose that low mortgage rate to transfer to a 6% mortgage rate. So the way to expand the existing home sale market is to reduce the barriers to entry. And so let me give you some examples.

[Carol Massar]

Yeah.

[Robert Reffkin]

Why do sellers say, hmm, when's the right time to list? There shouldn't, there shouldn't be a right time to list. But they're worried about days on market. Why are, why is there a fear of what price should we go at? Well, there shouldn't be a price drop history. That shouldn't be a conversation. You know, my, my wife would never want to sell her home. But if you ask her, is there a price you'd sell your home?

[Carol Massar]

Yes, there's a price.

[Robert Reffkin]

There's always a price.

[Tim Stenovec]

But don't those, don't those histories inform the potential seller? Doesn't that data show and help inform a buyer? Doesn't that provide more information to the market?

[Robert Reffkin]

So look, if I were buying your company, I would love. Your investment banker told me how long you've been trying to sell your company, how many times you drop the price. But that's not what I'm buying. That's A negotiating point for leverage. If buyers deserve to know price drop history and days of market, sellers deserve to know how long has that buyer been searching, how many times they put in offers that fell through and fell out of contract. And so we, we believe if you, the buyer, what you would you need is you need more inventory. So to help you, the buyer, the best thing that we can do is just let the seller sell however they want. And if we do that, there'll be more inventory.

[Carol Massar]

So then, wait a minute. So then now, does the seller have more information or you're just getting rid of it and it's just kind of a through.

[Robert Reffkin]

We're just getting rid of it for the first time.

[Carol Massar]

So you just list it and you go.

[Robert Reffkin]

If you go to Australia, the word days on market and price drop history are not on the sites. They don't exist. The reason why is that system was built for sellers here. It was built because everyone's forced to put in the mls. It was built for buyers. And so we're just trying to bring the pendulum back and give individual homeowners the same advantages as the builders. Builders market without days on marketing price drop history. So we should give homeowners the same opportunity.

[Carol Massar]

What makes you so sure this is going to work in terms of the affordability issue? Because I also wonder if you remove some of that information to Tim's point, if, if there have been price drops, that ultimately brings down the cost of the price of housing. But if you don't have that and it just kind of stays and maybe doesn't really indicate what's happening at the broader market, doesn't that lead to price appreciation and that doesn't get to the affordability.

[Varun Krishna]

There's two things to point out. I think the first thing is I think no one can disagree that today there is no inventory. Right. Like, we have an issue with the way the system works today, which is that we looked at some Redfin data and so. So half of the homes that are listed right now have been on the market for 60 days plus. So we have a lot of stale inventory. You don't have a lot of new inventory.

[Carol Massar]

So I understand my neighborhood because I like to check and keep an eye

[Varun Krishna]

in terms of there's not much inventory coming on market. So to me, it's less about some of these metrics. It's more just like, how do you create more inventory? More inventory creates more competition, it reduces scarcity and that creates pricing advantage. And so the bigger picture for us is just how do you attack the supply problem? Because without sellers, you're not going to have buyers and every seller ends up being a buyer. And that's really what we're focused on here.

[Tim Stenovec]

Robert, you are a data driven guy. How do you measure if this actually works? Like, what's the metric?

[Robert Reffkin]

We will see more inventory come to the market.

[Tim Stenovec]

How much more inventory?

[Robert Reffkin]

Before restrictions came into the industry through something called clear cooperation, which forced every individual American homeowner to put their listing in the MLS after 24 hours, 90% of our listings started off outside of the MLS system. And when that rule came into effect, we saw less inventory. And so I can't give you the exact number, but we will, we will see how much more inventory we will bring to market and we'll share that with the public.

[Carol Massar]

Will this work in any rate environment?

[Robert Reffkin]

Absolutely. Just there should be no fear to list. There should be no downside to list. There should be no barrier to list. You should be able to list however you want. Do you want. Do you want to not disclose the price and say price upon request? Do you want to have how many photos you want? Do you want to have no photos? Do you want to have an address that just says fifth Avenue luxury penthouse, without seeing the exact unit number? Whatever you want. If you take away all those barriers, you will have more inventory.

[Carol Massar]

Help me understand too, what does this do to the selling process? The real estate agents who are selling properties who often, sometimes I would say covet certain properties. Does that change any of that?

[Robert Reffkin]

Well, obviously I believe deeply in real estate agents. My mom is a real estate agent.

[Tim Stenovec]

That's all.

[Robert Reffkin]

My clients are agents calling you and

[Carol Massar]

say, what the heck are you thinking about?

[Robert Reffkin]

My mom supports this idea.

[Katrina Manson]

Okay.

[Robert Reffkin]

She supports the partnership. But no agents are at the center of this. And you know, we both are companies with loan officers and real estate agents. Yeah, we, we are empowering the real estate professionals that are required to make the transaction happen.

[Varun Krishna]

The other thing I would add around the rate environment to that question because

[Carol Massar]

you guys did kind of smile when I said, and what was going on with the 10 year and how we saw rates move down? Well, it does impact well.

[Varun Krishna]

It's great to see rates moving in a good direction. We think that gets more buyers off the sideline. But I think what's unique?

[Carol Massar]

Economy slowing down and nobody's going to be working.

[Luis von Ahn]

That's right.

[Varun Krishna]

What's unique about Rocket in particular is that Rocket has the home search experience. We have a servicing book, and because of that, we can acquire clients at a lower cost. And when you can acquire clients that are lower cost, you can help save them money on the overall transaction. And so you eliminate a lot of the friction. You become more efficient by using technology and that turns into real savings in terms of lower rates and lower fees. And that happens in any rate environment. That's what's unique about business model.

[Carol Massar]

Some of the mortgage origination costs, some of these things will go away or be reduced or what?

[Varun Krishna]

That's right. And that's because, that's because many of the clients are buying, they're already homeowners that, that we service and then they're buying their next home. And so the cost to acquire that client becomes significantly lower. And because we do a good job servicing them, we can then provide them with their next purchase, a cash out, refinance home equity loan. And we can do all of that more efficiently because that cost of acquisition has come down significantly.

[Tim Stenovec]

Well, we have a couple minutes left and we want to talk a little bit about the macro environment and the individual companies. As Carol mentioned, both of you guys reported earnings late yesterday. Compass shares down about 1.5%. The company forecasts first first quarter revenue that topped analyst estimates. When you look out at the landscape right now, where are you seeing signals of strength and where are you seeing signals of weakness?

[David Gura]

Robert?

[Robert Reffkin]

So overall we have more inventory, which has been the key bottleneck over the last five years, which has not been enough inventory. So we have 9% more inventory than we did this time last year, but still less than pre pandemic levels. Prices are basically flat to up 1%. We have 4% more pending contracts than we did this time last year. So things are, things are okay. We're not out of the woods yet. Mortgage rates being at three year lows at just under 6%. I think the key is can we see sub 6% mortgage rates not for a day, not for three days, but for a season? If we do, then I think we will start, we'll be out, we will see strength in the market for same question to you.

[Carol Massar]

What do you see when it comes to the macro? How does it compare from last year? A year ago, six months ago?

[Varun Krishna]

Yeah.

[Carol Massar]

Your visibility on the outlook.

[Varun Krishna]

Yeah, I mean generally when you look at all the different industry forecasts, we expect the mortgage market to be bigger in 2026 than 2025. I think the question is just how much bigger and how far up and to the right. So more activity, more activity, More purchase behavior, more refinance behavior. Obviously, as Robert said, we see inventory starting to creep up a little bit, which is good. We're starting to see rates cooperate, which is good. And I think that for the first time, you're starting to see a 5 handle on the rate environment. And that's going to bring a lot of buyers off the sideline. And so so we do expect 26 to be better than 25. But a big part of this is just some companies have built a business model to be able to thrive in any rate environment. And that's kind of what our focus is.

[Tim Stenovec]

We know the president is so focused on affordability. He's focused on making sure that people can get into homes. Have either of you guys had conversations with the administration?

[Varun Krishna]

We have. I mean, we have great relationships with everyone at the administrative world and we support reform, we support affordability, we support new programs, new initiatives. Anything we can do to create more buyers and sellers and improve the supply challenge that we have in this country, we support.

[Carol Massar]

Was there anything in terms of a specific program that you would like or policy that you'd like to see the administration support?

[Robert Reffkin]

Yeah, I would very much like to see them eliminate nar. The national association of Realtors Clear Cooperation rule that forces homeowners to put their listings in MLS is not NARS home. It's the homeowner's home. And they should have the freedom to market their home when, where and how they want.

[Carol Massar]

Great stuff. Please come back. Let us know how this partnership's going and the impact that you guys are seeing. Really appreciate it. Robert Refkin, founder, chairman and CEO of Compass International holdings, and Varun Krishna, president and CEO of Rocket Companies, joining us right here in studio. Gentlemen, thank you again.

[Tim Stenovec]

Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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[Luis von Ahn]

Yep.

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[David Gura]

The news doesn't stop on the weekends.

[Carol Massar]

Context changes constantly, and now Bloomberg is the place to stay on top of it all.

[David Gura]

Hi, I'm David Gura. Join us every Saturday and Sunday for the new Bloomberg this Weekend.

[Carol Massar]

I'm Christina Raffini. We'll bring you the latest headlines in depth analysis and big interviews, all the stories that hit home on your days off. And I'm Lisa Mateo. Watch and listen to Bloomberg this weekend for thoughtful, enlightening conversations about business, lifestyle, people and culture.

[David Gura]

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the podcast that's Bloomberg this weekend. Saturdays and Sundays starting at 7am Eastern. Make us part of your weekend routine on Bloomberg Television Radio and wherever you get your podcasts. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business App app or watch us live on YouTube. Shares of Duolingo are tanking today. The stock in fact right now down about 17%. It did, though, hit its lowest intraday since February of 2023, now down more than 80% since May of 2025. And about 22% of the float is short. So there's some real negative sentiment on the name shares sliding after the company said its drive to gain subscribers would mean slower earnings growth and narrower profit margins in the short term. Tim, you keep reminding us that there's a lot going on at the company, some transformations here.

[Tim Stenovec]

Yeah, the company said it would step up investment in AI and sacrifice some degree of monetization in order to accelerate user growth and engagement. The goal? Double the current number of daily active users to 100 million in 2028. Great to be talking again with a member of the Duolingo C Suite. Back with us, Luis Von Ahn, co founder, chairman, President and CEO of Duolingo. He joins us from New York. Louise, always good to to see you. We're going to talk about the quarter and the outlook in a minute, but I want to start big picture with AI because I mean, you've been thinking and researching AI for decades at this point. You recipient of a MacArthur Genius foundation grant back in the year 2006. We're working on AI. This is nothing, nothing new to you. What's happening right now. But answer the question for investors is a threat to your business?

[Luis von Ahn]

Well, first of all, thank you for having me. You know, I think that we're in a unique point in time where because of AI, we're going to be able to teach significantly better. And you know, Duolingo is by a wide margin, the largest app in education in the world. And I think because of that, we're going to be able to really take advantage of this AI boon to be able to teach significantly better. Our sense is that within the next few years, we're going to have an app that teaches us well as a one on one tutor, but also is as fun as a mobile game. And if we're really able to do that, I think there's just so much more that we can capture. So that's what we're doing. We're really shooting for that.

[Carol Massar]

So jumping on the AI bandwagon, I mean, I guess what investors want to know is what is Duolingo's advantage over potential new AI learning apps?

[Luis von Ahn]

Well, you know, at the moment we're not, we're not particularly concerned with competition in terms of, you know, other, other education apps. We have, for example, for language learning, we have about 85% of the market share of, of all daily active users of people who are learning a language. So we have huge scale. And, and what differentiates us is that because of that scale, we just have more data into how people learn than anybody else and we can use that to train our own specific models. So we just have the advantage of scale, of being able to watch literally billions of exercises every day by people who are learning different things.

[Carol Massar]

But as you know, this is going and this is moving pretty quickly, the AI impact, it seems. And to be fair, you are right. Like we'll see many say this is, you know, we're kind of early in on this process and the impact. But what does Duolingo offer that can't easily be replicated by a large language model? And how do you kind of view that competitive landscape evolving?

[Luis von Ahn]

Yeah, I mean, there's a, there's a, there's a number of things. I mean, for one, with Duolingo, what we do is we try to build a habit of learning. I mean, for example, 15 million of our daily active users have a streak of longer than 365 days, meaning they have been using Duolingo for a year or longer and haven't missed a day. So we're really trying to build a habit for that. And this is why Duolingo is part game, part education. And that's, you know, I think that's just the right thing. It just turns out the hardest thing about learning something by yourself is staying motivated. That actually the content to learn has been there for a long time. So, for example, it's, you know, you've been able to learn a language by just reading a book for hundreds of years that has been there. It's just what we do differently is we motivate people to continue doing it. And that's hard to get right.

[Tim Stenovec]

So what are, what are investors not getting right, in your view, Carol? Carol mentioned some of the stock moves and now, you know, down at a point that you haven't seen since February of 2023. What are investors missing here?

[Luis von Ahn]

I think it's a matter of timing. You know, on our end, we are trying to build a company for the very long term. We're trying to do something that, you know, for example, in our, in our shareholder letter, we said that we're shooting to have double the daily active users that we have now. I mean, at the moment we have a little north of 50 million daily active users worldwide. We're trying to have more than 100 million, but we're saying that that's going to take some time. And so we're concentrated in the long term. And what we're doing is we're trading off this year's financial metrics for a much larger thing in the long term.

[Tim Stenovec]

Yeah, go ahead.

[Carol Massar]

Well, I get that. Right. Companies have to invest in order to provide growth going forward. And I fair to say that we understand why investors, I mean, they're not loving your forecast for first quarter, adjusted ebitda. That's missing the mark from what the street was expecting, 2026 revenue. Also that forecast missing same story for 2026 adjusted EBITDA overall. So you talk about building this to double your daily active users to 100 million. How much will, how long will that build actually take? And what kind of visibility do you have on that to kind of maybe reassure investors that this isn't something that takes longer while the AI world continues to challenge established players?

[Luis von Ahn]

Yeah, I mean, we're, the way we're seeing it is we're going to spend this year really working on three things, really teaching better, improving the free user experience, and also expanding to other subjects. I mean, by now we are, we already teach math, music and chess. And we've been Growing quite a bit. About 15% of our active users are learning things that are other than languages. Our chess course has grown quite significantly. These are the three things that we're working on and we're going to be working on that for the rest of the year. We're expecting that towards the end of the year we're going to see some improvements in our year over year growth rate. We're still growing. I mean We've had five years of really phenomenal growth. We IPO'd in 2021 and since then we've more than 5x our active users. So, you know, we expect that we'll continue growing pretty, pretty strong.

[Tim Stenovec]

Luis, is the idea in making changes to the free tier, is it to get more people who don't use Duolingo now to use the free tier or is to get those free free tier users to upgrade to a paid tier?

[Luis von Ahn]

Historically, what we have done is we have tried to. The way we generate value on Duolingo is there's two parts to it. One is how many active users we have. That's kind of like the size of the pie that has grown quite significantly. And then there's how many of these people are paying us because we have this freemium model that's like the fraction of the pie that our payers historically we have worked on. Both we have worked on growing the pie and also growing the fraction of the pie that it's paying. Which is why our bookings have grown really significantly over the last five years. This year we're mainly concentrating on just growing the pie. That is the number of people that are actively using Duolingo because it is our belief that because of the moment that we're in, we really want to have as many people as possible actually learning something meaningful in Duolingo. And once we're able to do that, I mean one of the main advantages that we have certainly against new entrants is scale. There's no other education app that have us the scale that we have.

[Carol Massar]

Well, great to always get a check on what you guys are up to and really appreciate it. Love to hear more too as we go out throughout the year how things are going.

[Tim Stenovec]

I'm at 355, I think I'm almost at a year.

[Carol Massar]

I think, I think Sebastian actually said he's on his streak is about 770. That's one of our producers. Hey Louise, thank you so much. Luis VON ON Co Founder Chairman President CEO of Duolingo when we come back back a check on trading and stocks on the move. This is Bloomberg Businessweek Daily.

[Tim Stenovec]

Stay with us. More from Bloomberg Businessweek Daily. Coming up after this.

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[Robert Reffkin]

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[Tim Stenovec]

The President posting about anthropic and Federal agencies. He's telling all agencies the president that is to stop using anthropic federal agencies. Cease Use of Anthropic's technology. Anthropic made a mistake to strong army the Pentagon. This is now a redhead cross in the Bloomberg terminal. The President posting on true social about anthropic and federal agencies. The latest, the President telling all agencies to stop use of anthropics technology. We're going to have Katrina Manson on the program in the 4 o' clock hour. There was a 4pm 5pm Eastern Time deadline yesterday. Anthropic Starry Amade came out just after our program ended and essentially said we are not, not wavering from our position about our technology not being used for these two things. Mass surveillance of Americans.

[Carol Massar]

Correct.

[Tim Stenovec]

And fully autonomous drones. Drone. Fully autonomous weapons.

[Carol Massar]

Right. Yeah, but, but talking a lot about in terms of mass drones being used and my understanding was that the Pentagon was going to be talking with Anthropic so we're kind of counting down to the wire on that as well. In the meantime, we want to get to our own Eric Weiner. Weiner Talk a little bit about the trade today, the week, the month, ready to start a new one. Eric Wiener, senior editor, Equities Americas here at Bloomberg News in our interactive broker studio. Never a dull day. Interesting trade. Interesting trade. Where should we begin here as we are wrapping up?

[Tim Stenovec]

One word. Yeah, that's interesting is one word to use.

[Carol Massar]

I mean I just. Stocks are down for the week overall.

[Tim Stenovec]

I start with banks.

[Katrina Manson]

Well, yeah. Because.

[Tim Stenovec]

Yeah.

[Carol Massar]

Well, yes, but I am also confused about a hot inflation print. But yields are down and I'm trying to understand that doesn't make sense to me. Is it just that we are so worried about the outlook here? The private credit worries, the private market worries leading to. Yes, what you said. So homage to you, Tim, in terms of banks.

[David Gura]

Did you, did you say that? Because that's actually what's what appears to be going on. I mean you can't get a straight answer directly from like the bond market. But but that does appear to be what's going on which is, I mean the key word would be uncertainty. There's so much up in the air. It's because it's not just, you know, private credit. It's basically the whole lending landscape possibly being, you know, under in risk, at risk. And so you're looking at, you're talking

[Carol Massar]

about corporate, retail, individual, everything. Well or what.

[David Gura]

So there's risk that there's rising,

[Luis von Ahn]

rising

[David Gura]

problems in credit cards. There is, you know, rising delinquencies across the, the lending spectrum. And then you have all of this private funding which is less regulated and has been financing a lot of the technology growth that's been going on. So you have this big mishmash of risks that are flowing in ways that we can't really predict right now. What we do know though is that the last time there was a blow up it got really ugly. So that's really what like the first brands thing, you know, all of the stuff that happened to couple of years ago is really scaring people right now. And if you look at who's exposed to it, it's much bigger companies and much more important in central companies because you're talking about open air, you're talking about anthropic, you're talking about companies that are driving the technological growth that we need and that we're counting on. And if they can't get the funding that they are anticipating, then that spending that is ricocheting across the market could be pulled back. And that's really the underlying fear of everything going on with AI right now. So it sort of spills over into a whole bunch of different places. And we haven't even talked about Iran yet.

[Tim Stenovec]

We're going to talk about Iran. But, but you've got me on the underlying fears about AI and that's certainly one of them is, is the idea that maybe we won't see the, the results of all this spend. Another one is what happened with Block Slash Square last night and a 40% reduction in force. And it has people thinking and I'm sorry to beat a dead horse, but we've been doing this.

[Carol Massar]

No.

[Robert Reffkin]

Yeah.

[Tim Stenovec]

All day today because I think there

[Robert Reffkin]

are a lot, yeah, there are a

[Tim Stenovec]

lot of questions still about is this idiosyncratic to Jack Dorsey and to Square or is this something that is actually going to happen at many different companies with white collar jobs? Because it does raise market questions. And yes, the stock reaction for Square today is up. But then when you start thinking about this, okay, if all these companies can do more with half the number of employees, where do those employees go and then what does it mean for their spending power?

[Carol Massar]

So Citrini, right?

[David Gura]

Well, yeah, in other words, and we did all, I mean look, I made my bones on that this week.

[Tim Stenovec]

But

[David Gura]

you're, you're on the tip of the whole concern, which is that if you look at all of the technological innovation that has happened, you know, over the last hundred years or so, mostly it's involved things that may kill a job here or there, but will ultimately increase jobs.

[Tim Stenovec]

The horseless carriage, for example.

[David Gura]

Yes, exactly. The, the, the automobile which, you know, put Buggy whips out of business, but then created a whole transportation industry. So this specific technology is designed to make things more efficient in a very specific way, which is to eliminate the need for you and I to be intermediaries and that's white collar jobs. So the concern is very real and Dorsey kind of got after it. I mean, he's running a successful business, they're making a lot of money and he can. And if he can make things that much more efficient, then great for him. However, what we're hearing is that we are very, very far away from this. It's interesting, you know, the Pentagon attacking anthropic. Nobody would say that right now you need automated weapons. You know, we're just not there yet. And the idea that we shouldn't have guardrails on this seems like very much being out in front in the same kind of way that like thinking that everybody is going to be replaced tomorrow is being way out in front. However, the longer term risk is yes, that high earning job, this is coming after high earning jobs which are really underpinning the economic growth, not just through production, but through consumption. And this could actually go right after those people that we need to be speaking spending, which is scary.

[Tim Stenovec]

Fortunately, between now and Monday, if we don't get replaced. I think I can say this, that you're going to join me for a special live conversation on Monday morning. I'll send out the details of it, but it's at 11:00am Eastern time and we're going to talk about this exact thing. Carol?

[Carol Massar]

Yeah, I don't know. I do worry about this circular financing that's confusing and you know, I don't want to say Ponzi scheme or anything because I think that, that but this idea of. Right.

[David Gura]

Did you look at the OpenAI deal today?

[Carol Massar]

Yes.

[Tim Stenovec]

Oh yeah, we've been talking.

[Robert Reffkin]

Do you know what I'm saying?

[Carol Massar]

Like, so I want to be careful. I don't want to accuse, I'm not that smart, but I.

[David Gura]

This is the risk. This is the risk. So, and realize that and then figure, take one step back and realize that it's coming from private credit. So like if you look at OpenAI today, okay, Amazon is going to spend $50 billion and then OpenAI is going to spend 100 billion more on AWS. And all of this is coming from. Well, Amazon has cash, right. But while their free cash flow actually is going to be negative next year. But the, the, the idea is that they don't really need the private look at how like.

[Carol Massar]

Yeah, but it's okay.

[Varun Krishna]

It's okay.

[David Gura]

Well, but they don't really need to, the private market, but OpenAI does. So if all of that gets pulled back and they can't honor the $100 billion that they promised, that unwinds a whole bunch of expectations, including a Amazon's expected revenues. So, like, how do you value the stock? And that's really the question when I

[Carol Massar]

go to our expert, Rachel Metz, brilliant, smart on this AI and we say to her, I want to understand OpenAI's balance sheet. And she's like, like me too. And so that to me is we talk about the importance of transparency and understanding value and yet we don't quite have it. And I feel like we're going to have to do this. You have five seconds.

[David Gura]

Well, that is really, that's really it. That's the danger of the private. Now they're going to go public, so they will have the stock. But this is the danger of private companies.

[Tim Stenovec]

Bow down to Eric Weiner. We do it because he is the best.

[Carol Massar]

So killer. Eric Weiner, thank you so much. Senior editor here at Bloomberg News. This is the Bloomberg Business Week daily podcast, available on Apple, Spotify and anywhere else you get. Your podcasts listen live weekday afternoons from 2 to 5pm Eastern on Bloomberg.com, the iHeartRadio app, TuneIn and the Bloomberg Business app. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.