The AI Build-Out Is Inflation’s New Driver

Summary

WSJ What’s News

Episode: The AI Build-Out Is Inflation’s New Driver

Date: June 25, 2026
Host: Luke Vargas
Guests: Jason Chao (WSJ Reporter), Justin Lehart (WSJ Economics Reporter), Andy Jassy (Amazon CEO - Clip)

Episode Overview

This episode delves into how the rapid build-out of artificial intelligence (AI) is emerging as a new inflation driver in the U.S. economy. It also covers related topics such as the geopolitics of AI technology between the U.S. and China, the growing cost pressures associated with AI data centers, and new policy moves to prepare the American workforce for AI-driven disruption.

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Key Discussion Points & Insights

1. Earthquakes in Venezuela and Humanitarian Response

• A brief mention of breaking global news: deadly earthquakes in Venezuela with major international response.
  (00:33 – 01:30)

2. Allegations of AI Model Theft: Anthropic vs. Alibaba

• Anthropic, a leading American AI lab, has formally accused Alibaba’s AI lab (Quinn) of a “distillation attack”—training a Chinese model by copying answers from Anthropic’s advanced Claude model. (01:31 – 05:30)
  • Jason Chao (WSJ, 02:48): “Distillation is simply the process of training AI models by learning from the responses of another, usually more advanced model to replicate their capabilities.”
  • Anthropic alleges Alibaba used nearly 25,000 fake accounts and carried out 29 million interactions with Claude between late April and early June 2026.
  • The stolen features targeted advanced problem-solving, coding (“agentic reasoning”), and long-horizon planning.
  • These “distillation” attacks turn billions of dollars in U.S. R&D into a “subsidy for a geopolitical competitor”—raising echoes of earlier Chinese intellectual property theft concerns in Washington.
    • Luke Vargas (03:47): “I’m having flashbacks to the sort of Chinese IP theft narrative which may be sort of diminished a bit in recent years.”
  • The Trump administration has previously warned against such attacks but has yet to escalate sanctions.

3. The AI Build-Out as a Driver of Inflation

• Following other top economic news (Micron earnings, oil prices), the show zeroes in on how the demand for AI data infrastructure is adding new—and potentially lasting—cost pressures to the economy.
  • Justin Lehart (WSJ, 07:16):
    • “Sort of the most dramatic thing we’ve seen is with DRAM and NAND chips... the prices for these have gone up a lot.”
    • The price hikes affect not only data centers and major tech firms but also consumer goods—such as iPhones and home electronics—through supply chain effects.
    • “It does add upward pressure to inflation in the years ahead.”
  • Psychological & Labor Impact:
    • Justin Lehart (08:00):
      • “If you expect more inflation, you’re going to demand higher wages... If people are seeing prices go up for certain items and you think, oh my God, that’s AI making prices go up. And in the meantime people are worried that AI is going to take their jobs away.”
      • “A business that on the one hand is raising prices and on the other hand is threatening your job, that’s not a business that you’re real jazzed about.”
  • The Federal Reserve faces political and public relations challenges, given inflation has exceeded its 2% target for over five years.

4. U.S. Policy Response: Preparing the Workforce for AI Disruption

• Coverage of a major bipartisan coalition launch to help American workers prepare for workforce disruptions from AI. (08:44 – 10:01)
  • Led by former Commerce Secretary Gina Raimondo and former Indiana Governor Eric Holcomb.
  • The coalition, backed by $500M+ in funding, includes state governments, philanthropic organizations, and major companies (Microsoft, Bank of America, Eli Lilly, Amazon).
  • Potential policy changes discussed include updates to unemployment benefits and transition programs for displaced workers.
  • Andy Jassy (Amazon CEO, 09:28):
    • “It’s going to radically change how we work. It already is... Every single one of these functions that we all do at work are going to very significantly change.”

5. Broader Workforce Anxiety

• Experts are drawing comparisons between the impact of AI on jobs and previous waves of globalization and offshoring, emphasizing the urgency for proactive solutions.

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Notable Quotes & Memorable Moments

• Jason Chao (02:48): “Distillation is simply the process of training AI models by learning from the responses of another, usually more advanced model to replicate their capabilities.”
• Luke Vargas (03:47): “Turning billions of dollars of American R&D into a subsidy for a geopolitical competitor… I’m having flashbacks to the sort of Chinese IP theft narrative.”
• Justin Lehart (07:16): “The prices for [DRAM and NAND chips] have gone up a lot… and it’s going to have sort of knock-on effects on a lot of electronics. So, you know, it’s not like runaway hyperinflation here, right? But it does add upward pressure to inflation in the years ahead.”
• Justin Lehart (08:00): "A business that on the one hand is raising prices and on the other hand is threatening your job, that's not a business that you're real jazzed about."
• Andy Jassy (Amazon, 09:28): "It’s going to radically change how we work. It already is... Every single one of these functions that we all do at work are going to very significantly change."

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Timestamps for Key Segments

• 00:33 — Headlines and introduction: Venezuela earthquake, Anthropic vs. Alibaba, AI-driven inflation.
• 01:31 — Anthropic accuses Alibaba of distillation attack; explanation and implications. (w/ Jason Chao)
• 06:19 — Markets update: Micron, tech rally, oil prices.
• 07:16 — AI build-out and inflation explained. (w/ Justin Lehart)
• 08:44 — New bipartisan coalition for AI workforce transition; Andy Jassy soundbite on AI’s workplace impact.
• 10:01 — Context: Policymakers compare AI-driven job risks to offshoring/globalization.

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Summary & Flow

This tightly packed news podcast explores the ripple effects of AI’s meteoric growth. Using expert guests and company soundbites, it examines the mounting inflationary pressures created by the global AI race, especially the competition between the U.S. and China, and anticipates widespread economic and social disruption. Finally, it highlights a pragmatic, bipartisan push to prepare American workers for the next era of AI-driven change.

For listeners seeking to understand the intersection of technology, geopolitics, inflation, and job markets, this episode offers a succinct and comprehensive briefing.

Transcript

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[Luke Vargas]

Deadly earthquakes rock Venezuela. We'll get the very latest. Plus, Anthropic accuses China's Alibaba of illicitly accessing Claude to train its own AI systems and meet inflation's new catalyst, the AI buildout.

[Justin Lehart]

There's a lot of things that go into these data centers. There's cooling equipment, there's electrical equipment, there's batteries. So it puts cost pressures on a number of businesses and those costs are likely to get passed on to consumers.

[Luke Vargas]

It's Thursday, June 25th. I'm Luke Vargas for the Wall Street Journal and here is the AM edition of what's news, the top headlines and business stories moving YOUR world today. Rescue workers in Caracas are working to free survivors in collapsed building after back to back earthquakes rocked Venezuela yesterday evening. The U.S. geological Survey said that a 7.2 magnitude earthquake was quickly followed by a 7.5 magnitude quake about 200 miles west of the capital. Venezuela's acting President Delsey Rodriguez said that 32 people were killed and at least 700 injured, with those numbers expected to rise. Rodriguez declared a state of emergency and said Caracas main international airport is closed because of damage from the quakes, which were felt as far away as northern Brazil. She said Mexico, the Dominican Republic, El Salvador and Qatar have dispatched rescue teams to Venezuela. And she also thanked President Trump, who said the US Was ready to send help. American AI lab Anthropic is accusing China's Alibaba of carrying out a brazen campaign to harvest the capabilities of its frontier AI model. Claude reporter Jason Chao has been reviewing a letter that Anthropic sent to a pair of US Senators about what it's calling a distillation attack. Jason, I'm not certain we've talked about distillation attacks here on the podcast directly before. Just how do they work and what exactly is Anthropic alleging here?

[Jason Chao]

So distillation is simply the process of training AI models by learning from the responses of another, usually more advanced model to replicate their capabilities. And so Anthropic is accusing Alibaba and its AI lab Quinn of training their model on anthropic's Claude model illicitly.

[Luke Vargas]

And this is happening on a mass scale. This is not just, you know, a few accounts doing this.

[Jason Chao]

Yes. So in the letter, Anthropic said that they found that Alibaba created almost 25,000 fake accounts to access Claude, and that involved nearly 29 million exchanges between late April and early June this year. And so they're accusing Alibaba of targeting some of Claude's most valuable capabilities. So that includes agentic reasoning, software engineering, and Long horizon tasks, which are some of the most difficult tasks that an AI model can perform.

[Luke Vargas]

And Jason Anthropic writes to these senators, turning billions of dollars of American R and D into a subsidy for a geopolitical competitor. I'm having flashbacks to the sort of Chinese IP theft narrative which may be sort of diminished a bit in recent years. I mean, just as a way of trying to forecast how this letter is likely to be received in Washington. What is the mood like there on this issue? Have we seen the Trump administration weigh in on distillation?

[Jason Chao]

Yes. So American AI labs, and that's not just anthropic, you know, OpenAI as well, for example, have accused Chinese AI labs of accessing their models and training the Chinese models on American frontier models without permission. And so that's been signaled to the Trump administration before. The White House has issued a memorandum earlier this year sort of warning Chinese organizations of creating these proxy accounts and then using all types of jailbreaking techniques to distill American models. And they've already said that's unacceptable. But we haven't seen sort of further more severe sanctions or penalties that's been imposed to some of these Chinese firms in the way Chinese AI labs are roughly about, depending on who you ask, roughly about six months to, at most a year behind American labs. And that gap is widely considered to be shrinking. And propaganda said that it's a priority for them to make sure that the Chinese AI models do not surpass American models. And this is the latest sort of escalation of those tensions.

[Podcast Host/Producer]

Great.

[Luke Vargas]

We'll see what response we get from Washington and from Capitol Hill, if any. I've been speaking to Wall Street Journal reporter Jason Chow in Singapore. Jason, thanks so much.

[Jason Chao]

Thanks for having me on.

[Luke Vargas]

And coming up, we'll get the latest markets news, plus a look at the launch of a new bipartisan coalition aimed at readying the American workforce for major AI driven disruption. That's after the.

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[Luke Vargas]

Micron's earnings have revived the AI trade, lifting tech stocks in pre market trading. Futures contracts tied to the Nasdaq 100 are rallying after the memory chip maker yesterday blew past analyst expectations for its latest quarter. The result seems to have been enough to assuage fears about whether huge investments into AI will ultimately pay off, with South Korea's tech heavy KOSPI index gaining more than 5% this morning. Meanwhile, oil prices continue to fall today with WTI near pre war levels trading below $70 a barrel. Well, that recent drop in oil probably won't be reflected in today's index of personal consumption expenditures, the Fed's preferred inflation gauge. That said, investors are hoping that inflation has peaked after hitting a three year high earlier this month. Higher energy and food prices are largely to blame, but as Journal economics reporter Justin lehart explains, so too is the AI buildout.

[Justin Lehart]

Sort of the most dramatic thing we've seen is with DRAM and NAND chips, the storage chips, you know, that go into everything, your phone, your washing machine, your car. And the prices for these have gone up a lot. And the Wall Street Journal reported that prices of iPhones are poised to go higher because of this. And it's going to have sort of knock on effects on a lot of electronic. So you know, it's not like runaway hyperinflation here, right? But it does add upward pressure to inflation in the years ahead.

[Luke Vargas]

And as the Fed weighs whether to start hiking interest rates instead of cutting them as was expected earlier this year, Justin says that people's expectations for inflation will also start to impact prices.

[Justin Lehart]

Like if you expect more inflation, you're going to demand higher wages. If you're a business, you're going to demand raise prices to sort of get in front of it. And you know, one of the problems now is it's been over five years since inflation has been at the Fed's 2% target. And that's a problem for the Federal Reserve. You know, the other problem that the AI buildout is causing here is a PR problem, maybe political problem too. If people are seeing prices go up for certain items and you think, oh my God, you know, that's AI making prices go up. And in the meantime people are worried that AI is going to take their jobs away right So a business that on the one hand is raising prices and on the other hand is threatening your job, that's not a business that you're real jazzed about.

[Luke Vargas]

And what are the odds that that exact theme is coming up today with the launch of a new bipartisan coalition aimed at readying the American workforce for major AI driven disruption. Led by former Commerce Secretary Gina Raimondo and former Indiana Governor Eric Holcomb, the group will study how to transition workers into new fields as and plans to propose policy changes like tweaks to unemployment benefits. The organization says it's raised more than a half a billion dollars and counts state governments, philanthropic groups and big employers as members, among them Microsoft, bank of America, Eli Lilly and Amazon, whose CEO Andy Jassy, told investors in April just how much AI was already changing the company's internal operations.

[Andy Jassy]

It's going to radically change how we work. It already is. I mean, just look at how coding agentic cod is changing, how we're all building products. I think it's going to have a comparable impact on how we do DevOps and how we do customer service, how we do research, how we do analytics, how sales is conducted. I think every single one of these functions that we all do at work are going to very significantly change.

[Luke Vargas]

Business groups and lawmakers have warned that more must be done to prepare the US Workforce for AI related upheaval, with some experts comparing its potential threat to jobs to that of globalization and offshoring in recent decades. And that's it for what's news for this Thursday morning. Today's show was produced by Daniel Bock and Hattie Moyer. 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.

[Podcast Host/Producer]

Until then, thanks for listening. Foreign.

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