Bradley Olson (2:34)

Absolutely. I think in the end, these companies at Least kind of by the rubrics of Wall street, were always well capitalized, they had tremendous cash flow. And that's kind of changing. In order to afford the kind of spending that they're going to have to make, they're changing the way they operate and they are becoming kind of more indebted and using that to pay for AI infrastructure and data centers. And they're also cutting staff. You know, you mentioned Meta, that was one example. And Microsoft also offered buyouts and they said it'll be another year in which their headcount will go down.

Luke Vargas (3:10)

Brad, I think it's safe to say if these companies were paring down their cash holdings, you know, borrowing heavily to engage in this capex and there were no AI revenues to offset that, investors would have some big problems. And yet it seems like the revenue side of the AI buildout is now finally starting to show some signs of life across these earnings that maybe kind of these companies saving grace.

Bradley Olson (3:31)

Absolutely. You're seeing it in different companies manifest in different ways. So for Meta, you know, it's kind of an advertising story. AI tends to help with ad targeting. I think that's happening a little bit with Google as well. And then with Google you also have typical things like subscriptions, uses of Gemini, their AI model. And then you have people ordering Google's chips. And so Google kind of has a full stack of revenue opportunities, you know, ways to get customers in many different kinds of ways. Microsoft offers cloud access and then the number of paying subscribers for Copilot went up about 33% and it's 20 million now. It's not a huge number when you look at the entire volume of Microsoft users and paying Microsoft users. But in the end these numbers are starting to get high for all the different companies. And then of course Amazon's cloud growth, they have so many customers that are inside the AWS Store system. One thing that we saw Even recently is OpenAI did this deal with Amazon and with Microsoft so that OpenAI could be an option inside of what's called Bedrock, Amazon's platform for developing AI and AI agents. And so there's big opportunities for growth for Amazon as sort of a platform and a go to place where you can go. So across the different companies there is a revenue story. I just think the numbers are so high that investors are just trying to kind of constantly gauge their comfort level with the spending relative to what these revenue numbers are going to be. Meta, you know, had a really rough earnings, for example, they're down about 7% after market in some of the things that I saw, and I think that was just because the spending increase was really, really a little higher than investors expected it to be.

Luke Vargas (5:15)

Though putting that aside, Brad, I mean, it seems like the broad narrative around these earnings is actually that this was by and large the quarter when demand for AI and the revenues stemming from that demand really took hold.

Bradley Olson (5:25)

So, you know, people measure it in something called tokens, but it is on a trajectory that is almost like a double exponential. So if you're making a bet on a data center, a lot of companies there is investor concern about the level of indebtedness, the level of spending. But then you can look and say, well, how much demand is there for AI? And then you look at these token usage, and it's just going up in a way that's almost doesn't resemble any other product in history. And so that I think is giving investors a little bit more confidence about, you know, that these data centers and the infrastructure build out, you know, paying out in the end.

Luke Vargas (6:01)

Bradley Olson is the Wall Street Journal's deputy tech bureau chief. Brad, thanks for coming on.

Bradley Olson (6:06)

Thanks for having me. Really appreciate being on.

Luke Vargas (6:08)

Coming up, we've got the rest of the day's news, including a fresh surge in gas prices. And we'll look at what's next for Liv Golf as Saudi Arabia plans to cut off funding. Those stories and much more after the break.

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Luke Vargas (6:57)

Oil prices have hit new wartime highs today following Journal reports yesterday that President Trump was preparing for an extended blockade of Iran and comments from him suggesting he's losing patience with the regime in Tehran into that environment. We're now exclusively reporting that US Diplomats are being asked to try and persuade governments to join an effort to help jumpstart shipping traffic through the Strait of Hormuz. I asked Journal Middle east correspondent Jared Malson what to make of that.

Jared Malson (7:24)

What our colleagues are reporting this morning is that the State Department is urging other countries to join what they're calling a maritime freedom construct that they've spelled out in a State Department cable. The issue with this is that they've tried to do this before. Trump has obviously been very vocal about his displeasure with European countries, specifically not signing up to some kind of military coalition that might reopen the strait. And it's unclear whether anyone is going to sign up to this new initiative now.

Luke Vargas (7:55)

While the conflict in the Middle east is also dealing a major blow to Europe's hopes for an economic revival, with France and Spain both reporting a slowdown in growth to start the year as a net importer of energy, Europe is more exposed to surging energy costs that have made consumers fearful of rising inflation and sent business activity to a 17 month low. Economics reporter Chelsea Delaney said that complicating a pair of major rate decisions due in the coming hours for both the

Chelsea Delaney (8:23)

European Central bank and the bank of England, we're not expecting them to change interest rates today. Central banks here in Europe, the Fed, they're facing this real dilemma because the war in the Middle east is pushing them in two different directions. On the one hand, it is raising inflation, which in many cases their response to that would be to raise interest rates. But it's also really clouding the growth outlook. So higher energy prices mean that people are likely to spend less on other things and companies as well. So that means growth is likely going to take a hit. Raising interest rates will weigh on growth even more.

Luke Vargas (9:03)

After starting the year with expectations for further rate cuts, both the ECB and Bank of England are now expected to raise rates twice in 2026. Well, those rate decisions will come shortly before today's US GDP. Print the first reading of how the American economy fared in the first quarter. Investors will be parsing that data along with the Fed's preferred inflation gauge for signs of how the war in Iran is affecting underlying growth and consumer pricing. Both are due out at 8:30am Eastern. In more earnings, weight loss drug giant Eli Lilly will report results this morning, followed by Apple this evening. And if you can't get enough earnings updates, you're in luck. In the latest what's News and Earnings, we'll be looking at what rising fuel costs mean for airlines and for travelers. Look for that special bonus episode right here in your what's News feed at midday. The White House is opposing plans from Anthropic to expand access to its powerful new AI model, Mythos, which is able to find and exploit Software vulnerabilities. Around 50 businesses and organizations that manage critical infrastructure have access to the model, and Anthropic had proposed widening that to a further seven. However, we exclusively report that Trump administration officials are opposing that move because of security concerns and worries that Anthropic lacks the computing power to expand the Mythos rollout without hampering the government's ability to use the tool effectively. Anthropic said last week it's investigating potentially unauthorized access to Mythos, adding to fears about its ability to facilitate cyberattacks. Staying in Washington, House Republicans have passed a budgetary framework to fund DHS's immigration enforcement arms, setting them up to craft a reconciliation bill that would fund ICE and Border Patrol. The House also narrowly approved a three year extension of a contentious foreign surveillance power and voted to ban central bank digital currencies, though GOP leaders in the Senate say that measure is a non starter. And a brief correction because on yesterday's show I incorrectly referred to Louisiana Republican Mike Johnson as the House Majority Leader during our coverage of the DHS funding debate. He is in fact the House speaker while Steve Scalise is majority leader. And finally, Saudi Arabia is pulling the plug on LIV Golf, the upstart circuit that's been dividing the professional golf world since it first teed off in 2022. We report that Saudi Arabia will end its funding after this season, leaving an uncertain future for the league's players and fans. Players and executives have been fielding questions about the future of the league since Saudi Arabia's public investment fund laid out its five year plan recently. With the no mention of liv. At a recent tournament in Mexico, LIV CEO Scott o' Neill said the business is in good shape.

Scott O'Neill (11:53)

No matter from a business standpoint. We did almost half a billion dollars in sponsorship last year with big brands like Rolex and HSBC and Salesforce. These are global Aramco global brands. So I am like thinking we're in a wonderful position from a structural standpoint. This business will continue to evolve as it has over the last 12 months.

Luke Vargas (12:14)

Another evolution to watch could be the process for players wishing to return to the PGA Tour after some left for LIV in violation of their PGA contracts and were suspended. And that's it for this Thursday morning's edition of what's News, the show where you're always welcome back no matter if you've listened to other podcasts in the past. Today's show was produced by Daniel Bok. Our supervising producer is Sandra Kilhoff and I'm Luke Vargas for the Wall Street Journal. We will be back tonight with a new show and until then, thanks for listening.

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