The Aftershock: Tech’s Reaction to a Blue Wave

0:00 Bring in show music, please. >> Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod, the day after the day after, our post-election focus on the corner office. CEOs have made a lot of trips to Washington in the last 2 years. >> Tim Cook and his ethos as a person, everything he represented, everything Apple represented at one point. You would have described Tim Cook as woke. Will the blue tsunami of 26 prompt a sea change for tech execs who have gotten closer to President Trump?

0:33 >> How long does it take before either party realizes it's just a losing trade to be against AI? >> The information founder Jessica Lesson on the AI policy issue that drove midterm voters. >> Are these projects going to still get approved? Yes. Are the big tech companies going to pay more? Pay more to the cities. Pay more to the towns? Yes. And will the leverage between Washington and big tech shift with the balance of power? Well, >> it's not just the ballroom. I think unfortunately, and by the way, I think the American public decided there was a lot less virtue to it.

1:06 >> Plus, artificial intelligence pioneer Kyu Lee led Google China and built Microsoft in China. He has written a new book on leadership. >> I see so many CEOs every year and they all talk about AI transformation and 99% of them are doing it all wrong. And he says there could be room in the AI race for more than one winner. >> There's room for everyone to play. And also closed model is like iPhone. Open model is like Android. There is room for a leader in each place.

1:37 >> It is Thursday, November 5th, 2026. SquawkPod begins right now. >> Standby in 3 2 1 up and you >> Good morning. Welcome to Squawkbox right here on CNBC. We're live at the NASDAQ market site in Times Square. Many Sorcin along with Joe Kernin. The Dow up about 277 points. The Nasdaq off about 136 points. You look at the S&P 500 right now up about 17 points. This as the Dow coming off a more than 3% gain yesterday. That was the averages best day in more than 18 months. The S&P 500 and NASDAQ saw their best days since August and September, respectively. Take a look at the energy complex. JD Vance's comments. those pushing things perhaps a little lower. WTI crude at 8859. You got Brent at 96005.

2:28 WTI and Brent falling yesterday after those comments from JD Vance online saying that the Iran war was what he thought was the main factor that cost Republicans their majorities in the House and Senate. We're going to have a lot more on that in just a moment. We should say WTI fell more than 8%. That's its biggest drop since May. saw its lowest settle since the end of August >> when it started. JD Vance was supposedly >> against it >> trying to talk him out of it. It was interesting yesterday that he was so outspoken though and as you noted Santis Kiad soared >> soared >> yesterday >> I that was my first instinct last that night. I thought >> just weird if you think about sort of where the Republican party may be it's in Florida. But if you need Trump's backing and endorsement for his MAGA base, it was interesting that JD Vance, some type of calculus in his head, decided he could do that yesterday.

3:26 >> Not only that, I mean, we should probably go through what JD said, but what was even more interesting to me was that Don Jr. then retweeted it >> what JD Vance >> what JD Vance said and said 100%. So either you believe that he's reading something that's different than maybe the way you're reading it, maybe he's not reading it when he retweets it. I don't know what what really led to that. >> And you know on another topic, you know what happened 18 months ago for the Dow to rise that day.

3:59 a tariff respit. >> The tariff respit which he does which he did not include in his list of reasons which I would >> is yesterday was yesterday part of the underlying sort of assumptions that it's going to be harder to continue or that maybe his resolve will weaken because I guess he he did Aean talked to him later in the day. >> I guess he did say that the tariffs are going to continue. Why don't we we got a little bit of of stuff to show you and then we can sort of maybe walk through all this.

4:31 President Trump sending what was bipartisan signals in the wake of the Republicans midterm losses. The president telling CNBC as Joe was just referring to told Aean Jabers that he can work he says with Democratic majorities in the next Congress. In his words many on many more things than people understand. He specifically mentioned financial matters that could be mutually beneficial for both parties. but he threw some cold water on the idea of easing tariffs. Meanwhile, and this was the debate that we were just having, JD Vance, the vice president, blaming the Iran war for the GOP losses on Tuesday night in a lengthy post on X.

5:07 Vance said that Republican voters showed up, but too many of them voted for Democrats. He said, "The reason we lost is the war. The president himself said so last night. If you'd like to argue it was worth it that losing the Senate for the next six years was worth it, then do so. Argue it was a worth argue it was worthwhile cost to pay. Agree or disagree. That's at least honest. He added to the people who are pissed off and want to say, "I told you so. You're right. You did tell us so." We've been saying that for a while, especially about affordability and and oil prices and inflation and everything else. we know what it's from. You either disagree or agree with with the initial decision and you can argue that till till you say >> we won't know for a long time. And I think it's a slightly different I have a slightly different perspective which is I think there's a lot of people that could agree that Iran is a problem that perhaps we should have prosecuted Iran >> 47 years >> but that if you're going to do it you have to do it meaning you have to execute it perfectly and wars are hard to execute perfectly but in this case not only did we begin to prosecute it we then went in and had a ceasefire and once we got to that ceasefire, then it sort of changed the dynamic. I think there's a lot of people that I talked to in the Republican party that say if you're going to be principled, if you're doing it for the principle, if you're doing it because you need to do it and go all the way, you can't do this sort of halfway.

6:39 >> I saw that measure. I saw people saying that that there was a period before theou where you needed to go full boore and he was talked out of it or or and there there and and there are certain people that talked him out of it that supposedly are their jobs are at risk right now. >> They don't do it or you wait to do it until you feel like you have all your ducks in a row. Clearly, we did not have our ducks in a row as it relates to >> you saw the cone pegs. They're talking about the Kane raising Kane. They're talking about some of the main players and I don't know who the president would he does depend on advice. He may it makes a lot of decisions himself obviously, but he can find people that may have given wrong advice and he's been known to to maybe I don't know Suzie W. I don't know. I don't know who was involved. I certainly had nothing to do. What was he? Oh, >> you you you say we debate a lot of things. I think there's a lot of times where where that's it sounds good for TV because it sounds like two sides, but most of the time >> we're not necessarily debating.

7:45 >> Many times we are or it could be with anyone. We're conversing. We're we're >> we're highlighting a lot of different >> points. Some of which both they're right on both sides. They're different perspectives. They're nuances, but it's not. >> Are you coming? You're You're trying to You're >> No, I'm I'm just saying that I don't No, there's a lot of >> My side's not a political side's a reasonable side. >> No, you always say we're going to debate that issue. And there's time with with guests and with with segments that are coming up. And a lot of times I don't think it's a debate. I think it's a an elucidation of the all of the >> I'll take that >> concerns about a potential slowing of the AI buildout. once Democrats take power in Washington hit all the neo clouds yesterday and the chip stocks.

8:35 It was fascinating what we saw in terms of the winners and and losers yesterday in a market that Dow that was up 1600 points basically coreweave lost close to 10%. Nvidia was down more than 3%. But we pointed this out yesterday before the market even opened that the hyperscalers were indicated sharply higher all day. the Googles and the metas and the factors in play included potential changes to tariff policy which we were just alluding to as well as hopes for lower oil prices.

9:06 Apple, Microsoft, Amazon all rose at least 5%. Needm analyst Laura Martin wrote that tech giants could get a boost from more regulation which could make it harder for startups to compete with them. You got to really connect a lot of dots to to figure out what people are thinking. got to to try to figure out exactly what happened in the markets yesterday. You got to connect a lot of dots. It was crazy. Does this continue? Was it a oneshot deal? Who knows?

9:34 Elon Musk, Tesla, and SpaceX fell. Musk recently worked to repair his relationship with President Trump, donated heavily to Republicans in the midterms. OpenAI is attempting to burnish its image with everyday Americans following the midterm elections and a backlash over data centers. In a series of commitments published earlier this morning, OpenAI affirmed its promise to pay for the full cost of powering those data centers that it owns and operates while also saying it will seek local community input and stay away from the use of non-disclosure agreements with public officials. In a policy blueprint, OpenAI urged policy makers to codify logical or local protections into laws.

10:22 >> Amazon adding Uber Eats as a restaurant perk now for Prime members, replacing Grubhub. It's going to offer a $0 delivery fee on orders of $25 or more directly through Amazon.com and through the Amazon app that's powered by Uber Eats. Now, Prime members can start ordering immediately with no new app. no Uber account or credentials would be required. That perk only for restaurant orders and doesn't include grocery delivery, which Amazon and Uber Eats each already provide. Now, Amazon had previously partnered with GrubHub for a zero fee perk since 2022, but Prime members are required to link their account and order through GrubHub's app.

11:01 So, for those of you who are Amazon Prime customers, another way to use your account, and you know, I'm always trying to ninja hack all of the the discounts. So, this is >> Are you sure? >> This is this is a good one for us. >> >> always always. I'm I'm You can't clip coupons anymore, but if I could, I would. >> You You can at certain like at supermarkets, you can do it online. There's little coupons. Do you do that?

11:27 >> Sometimes you have to do the the the QR code thing on the thing. You can do that as well. >> I go to a place where even after all the dis it's like it's not quite whole paycheck but it's pretty darn close. >> I've heard about that. I mean you I should just say Jeeves is usually >> you don't >> doing it. So I don't want to >> overstate the but if he screws up that's I think that's the scary part if he doesn't get you some some kale the right kind. Right. Tofu tofu burgers remnants are around still. Andrew, the the GDP, the full the full employment, the there are wage gains are just being dwarfed by the where we are >> with everything else >> with inflation.

12:10 >> >> you got to admit some things stock market right on high as it it was kind of was it squandered? Squandered for what? >> And what what squ what was squandered? >> Everything was going the right way. He was having a very successful second term after a year into office >> in certain ways, right? The you're saying the market and >> the border was closed, >> right? I know we can go through the list of of of the positives.

12:38 >> We're in a very different place right now because that was one of the biggest routes in history, >> right? The American public didn't >> they did then they did and it's just been I'm saying it's subsequent everything that happened since then was push was pushing it and maybe not pushing it the right way. And the other the counterfactual is the markets still did well. The economy still did well with the tariffs. I is the market yesterday saying think if we had never done that >> saying that we'd even the counterfactual could we be we could be even higher theoretically or not.

13:10 >> But I think it's so much more than just affordability. I I I I think to pinpoint it on that one word or to say it's just the Iran war or to say it's just tariffs. Yeah, I I I don't I think you're going to the erratic behavior and we saw that in the first four years and he still got reelected. >> No, I understand that. >> So, people knew who Trump was. I I >> I understand that, but I I would I first of all, in the same way that the president and maybe you would suggest that the Republican candidates that were put up were not great candidates. Kla Harris was not a great candidate. So, that that's something just you you always say everything's relative like who's ch people are choosing in certain for certain reasons.

13:48 >> That whole process was okay. And then >> the reason you got stuck with it was because Democrats stuck with a guy that they knew was. >> But my but my point is you look at where we are where you know you could add the tariff piece, you got the war piece and whether you like the war or not then you have the oil piece on the pricing. >> That's the same thing. Yeah. >> I do think the ICE piece of it not not by the way immigration and and dealing with the border is one thing. I think the aggressive tactics was another and I think that that was a big piece of the story. depends on depend on who's dictating the narrative. You you mentioned someone I didn't even know who's you were talking about. You mentioned her name. See, I know names like Lake and Riley. I know names like Sheridan Gorman. I don't I don't professional agitators that got and that was a bad accident. I think a lot of other people in the country know some of these other names >> which there there's thousands of of the of the former and there you what do you got three that that are are >> I think that when you have government officials shooting people and killing them in front of you. It's a different it's a different story.

14:54 >> The guy that they shot had a gun and had just kicked out a tail light. >> You said you didn't want a debate. We want to have a conversation. >> I just will be next. >> Coming up on Squawk Pod, the political shift post election for the class of CEOs who might have spent a lot of time in Washington during Trump 2.0. Where do they go now? The information's Jessica Lesson is next. >> So, people of the valley are calling their closest Democratic VC friends and trying to make up for several years of having gone the other way.

15:35 >> >> You're listening to SquawkPod from CNBC. Here is Andrew. >> Welcome back to Squawkbox. Neocloud stocks tumbling yesterday following the Democrats midterm wins. Hyperscalers though rose. the stocks moving moves highlights a renewed debate over how Democrats in Congress may or may not choose to scrutinize big tech and especially AI right now. joining us is I call her the queen of the valley Jessica Leon is here founder and CEO of the information. >> what do you think post midterms the the implications are and what are people in the valley saying about all this? So people of the valley are calling their closest Democratic VC friends, right?

16:15 And trying to make up for several years of having gone the other way. But you know, I think the voters handed at least the big tech companies a gift by basically saying in the short term, it's going to be harder to get new compute. If you have it, it's way more valuable and your margins are going to be better. >> So you think this for for the tech industry or at least those who have it, it's great. But if you're a supplier, for example, >> tough. Yeah.

16:36 >> Tough. >> Tough. Nvidia tough. Obviously the Neocloud's tough if sort of all your existing business is baked into your valuation tough I should say there are a lot of other asterisks that could be bad for the big tech companies in terms of other regulation and so forth but on this question of data centers which was the question you know I think if you've got compute it's going to be a lot more valuable >> any implication for this expected IPO from Anthropic that's >> we'll see I mean anthropic is a big buyer compute. I think the numbers are good enough for it to get out where it wants to, but I think >> but will this slow its growth or will it slow everybody's growth?

17:18 >> We don't know is the honest answer. And I think there's so much scrutiny on margins as there should be. And so cost of compute going up for anthropic, not a good sign overall, especially relative to open AI, it's a pretty efficient business. >> The election's over. How long does it take before either party realizes it's just a losing trade to be against AI and even even we got to figure out a way to do data centers and you see what they're you know some of the companies are talking about now we'll pay for everything we'll make sure that you know we'll talk to communities we'll provide jobs but I mean it's going no matter what and and for an election you might say one thing okay but are we already there where they're like yeah we said that but we're willing to work with the industry >> I think the industry's is big enough now that there's it's a lot of different things, right? Are these projects going to still get approved? Yes. Are the big tech companies going to pay more? Pay more to the cities, pay more to the towns, yes. but right now, the the rhetoric is pretty against them. And so, I think it's going to take a big change to change the rhetoric, but I think projects will get done. I think you'll see those who have projects be able to scale their existing projects more easily because they're already have reached those agreements. So you expect Democrats to continue to to talk negatively about AI and data centers?

18:37 >> Absolutely. It's like least unpopular least popular halfife of six months or a year. There's no way you can stay in in that camp. >> Well, I I think look, these tech companies have to prove a couple things. They have to prove that they can build products not just that make business workers more productive and wealthier, but also change their lives in positive ways. And they have to build trust and stop having all these cyber attacks.

19:03 >> I want to know behind the scenes what you think is happening as it relates to so many of these companies that that basically rotated maybe over rotated in a very big way hard pivot towards Trump towards MAGA. I'm thinking about Mark Zuckerberg. I can go down the list. >> Absolutely. >> they hired lobbyists that all lived in that universe. They hired lots of people, right? >> >> do they rotate in some other way? Are they are they calling all of their friends right now saying we got to find some some Dems who can become friends and so >> I know the first thing is he's not gone.

19:40 So so they're still they're keeping those ties. But absolutely. Last night on my way out to dinner, I get a call from a venture capitalist on the West Coast and saying, "My phone is off the hook because I've been one of the only ones who's still very close publicly to the Democratic party. This person's going to Washington DC to go make the case for, you know, some of these companies." Absolutely. But but they have been quietly hiring up Dem lobbyists behind the scenes. This didn't surprise them, but they're really trying to rebalance >> though. Do you I mean from a in the crosshairs there's clearly a sense that Elon Musk and his companies are are going to be challenged by this.

20:19 >> Absolutely. >> Who else is challenged? Who's not challenged? Is it going to do? Is it theater? Is it more than theater? Whatever you think >> challenged. I mean I think crypto's challenged which isn't quite big tech but that there's a lot of nervousness around that right now. when you look at the Dems who could be leading these key committees I think you know sort of everyone who's been standing on the podium next to Trump is expecting you know to be dragged before in some way but Musk is really in the crosshairs >> and what what does that mean?

20:51 >> I think it means it's a great question. I think it means hearings. >> I think it means all sorts of probes. And then the question is, you know, no one thinks that there's going to be any sweeping regulation of any sort, but if the Democrats continue this into the next administration, you think back to what the Biden Musk relationship was like, which is actually how we got to the positive Trump Musk relationship. So, there's a lot legislatively that could be very tough for these companies.

21:21 >> And when they answer these questions, what do you think that they're going to say? Meaning, >> it was a good question. Yeah. What what when when when they're asked you gave money to the ballroom, you did this, you did that. >> Is the answer we give to everybody as they've been saying or they're going to say, you know what, yeah, we over we we we went too far. >> I don't think they'll say that. I think the result is a lot of embarrassing text messages, you know, a lot of embarrassing signal chats. Like I think you have seen this bending of the knee towards the Trump administration that probably isn't going to be a good look against a different backdrop. I think that's largely what they're going to be contending with optics-wise.

22:00 >> And then finally, OpenAI, announcing the sort of plan to try to change the perception or image of data centers and their role in them and put out sort of ethics policy and everything else. How far does that go? >> I don't think rebrands work. I understand why they're trying to do it, but I think the proof will be in how these companies act in their communities, how they act with their customers. And >> where do they sit right now? I mean, they're they're not going public.

22:29 >> They're raising money, but not as much as they had planned for in part because I think the valuation anthropic may not be as much as they had planned for. >> What does that mean longer term for for OpenAI? Look, OpenAI had a really tough beginning of the year and they did turn it around as their enterprise sales grew. If that continues, I think they'll be in a good place to have a solid showing. If they improve margins though, I think they have historically really gone for scale >> verse margins. you know, that round my sources say it was much more about getting the new valuation to go out and do more acquisitions than it is about needing the money today. But I think there's clearly a nervousness around them. They're gonna have to contend.

23:09 >> You say acquisitions. What kind of acquisitions? >> You know, cyber applications, these things that are going to get them bigger contracts with businesses. >> Jessica, thank you for coming in this morning. >> Just I'm just trying to figure out. So, if you did give money to the ballroom is the does it become a problem when there you've prove a quid proquo for something or why is it by definition just a problem? Because we can go back to any other administration you want and see people curring favor with with the people in power hoping for influence or even hoping for a quid proquo. Why is it different is just so bad for big tech, you know?

23:46 >> Yeah. But why why because it's a rep Why isn't it bad when big tech coddles you know anti-b businessiness Democratic administration? That's even stranger to me that that you're seen in a in a at a an event at a at the Biden White House when he's just eviscerated the you know the profit motive in corporations in in his last dark Brandon speech where he's saying they're all there. David Ruben said they're all there. Why aren't they why don't Republicans haul them in front of a committee after they get back in power? You'll have to ask them, but text.

24:18 >> But but we talk about it like it's absolutely normal that these guys, >> you know, overstepped somehow by by coing up to Darth Vader administration with Republicans. I don't get it. I don't get the whole the the whole perspective from that side. Can you do you understand what I'm saying? >> yes. And I'll tell you why. >> Is it a quid proquo that they're getting? >> I think there's I think there's two things that are >> different about this >> that are different about this. one is just how visible it was, meaning how how and two how at odds some of the policies were that the administration was pursuing on one end that was at odds with them. And so that was the distinction. I'll give you an example.

25:02 Tim Cook, >> okay, Tim Cook and and his ethos as a person, everything he represented, everything Apple represented at one point >> was anti-ICE or something. No, it would be. By the way, you would you would have described Tim Cook as woke >> in the past, >> right? >> And all of a sudden, he went from being woke on one end, your not your words, but that perception to, >> you know, I'm doing everything on the other side. And so people would look at that and say, "This is hypocritical. You took one position one way and now the second this person's in position, I'm going to do everything in my power."

25:38 >> But it could be the hypocrisy. It goes goes the other way, too. So this administration really is pro business and it was and that's why all those guys come CEOs come you know you're you're you're billionaires we love you we don't immediately think that we need to by the way I think >> well that's why when they're at the Biden it's the same kind of hypocrisy what are true business leaders I'm going to give you I'm going to give you with I'm going to give you the one of I'm going to give you the one point that I use all the time because it's the most acute and and very clear on the h the hypocrisy piece and it goes back to the silencing the CEOs. You're saying that they're coming because they they want to be embraced and they like being embraced. Everybody wants proximity to power is power. Let's be honest.

26:19 >> But there's a secondary issue here which is that they had opinions >> that they did not express and the the biggest employ. And the biggest example of that though is the tariffs. So when the t when when the government put the tariffs in place u not only did you hear nothing from the big companies by the way who actually had an authentic claim to say something about it but didn't you didn't even have the business roundt or the chamber of commerce file an amikas brief on a case that by the way they won effectively against the tariffs and they didn't because right they were scared of retribution. Hold on. I want to keep going because then we had the president on our air if you remember and after they won and genuinely were allowed to go get refunds.

27:05 >> If you take refunds, you're you're >> they didn't rush to get the refunds. Why? Because they were scared and the president said that he was honored that they weren't getting the refunds and that he was going to remember those who didn't. It's more in the open. >> That is the issue. >> It's more out in the open there. There there's no doubt about that. But you're always worried about your actions and whoever's in power at the time and not rubbing people the wrong way. It's just more you think that it's it's qualitatively different or quantitatively different?

27:35 >> Both. Because I don't you know I can understand why you you'd want to cozy up to an administration that's going to help your business prospects instead of being a you know a thorn in your side administration did it too. I mean, and how different point of view and how different it was during 2016. >> Probably different. Probably >> right. You had >> Trump is Trump. That's the way he rolls. There's no doubt. But, you know, in terms of the ends, justifying the means.

28:04 I I I like how business has benefited. And I don't I didn't like the prior four years. >> I I know you didn't. Jessica, thank you for coming and participating in all this to be. Exactly. And before I think we're going to go to break. I I got one one other point to make. There there's there's people that >> are woke and I love Tim Cook. I think he's a great guy. But you remember the Godfather, you know, we're all part of the same hypocrisy. you remember Ricky Jerves and how uncomfortable Tim Cook was at the Golden Globes. I think the quote was morning show, a superb drama about the importance of dignity and doing the right thing. made by a company that runs sweat shops in China.

28:50 And and Tim was that they showed him and he was like, "Holy crap, I just got caught out." So all the and then you got guys like Reed Hoffman that give to all these liberal progressive cases and and you know his history. So you see what I mean? You you can virtue signal and come off like a woke person who shouldn't be at the Trump administration, but let's let's get real. You know what I mean? There we're all part of the same hypocrisy. I don't >> you think some of these people are more virtuous too virtuous to be at the >> I think it's a little different.

29:20 I think a lot of people lost >> giving money for a ballroom that's going to be here 20 years after Trump's gone. >> Well, it's not just the ballroom. I think I think unfortunately and by the way I think the American public decided there was a lot less virtue to it. So >> who knows there's a million reason of what happened on Tuesday. There's a million reasons what happened. >> Did you see what Mitt Rom I know you I know you think oh my god you saw what Romney said. I did. And I I mean, Mitt's never going to, you know, >> and I thought >> we know what happened with Mitt. He >> I thought Mitt Romney's explanation was was as reasonable as as any could.

29:50 >> Well, let's bring on let's bring on some other Republicans like Adam Kidser. Well, we can't do Swallwell anymore. He He kind of fell out of favor. That used to be Evani. Too bad he didn't run for president. That's who. Next on Squawkpot, a conversation with artificial intelligence pioneer and former president of Google China, Kyu Lee. >> China is very clever in being a strong follower at onetenth the price. So I think US now leads 6 to 12 months in any given scenario. But I would say that for most companies that 6 to 12 months lead is either okay to wait for or okay to accept the deficit. The geopolitics playing out in tech, plus what CEOs are getting wrong about the AI revolution.

30:46 >> This is Squawk Pod today with Joe Kernan and Andrew Ross Sorcin. >> Stand Andrew by up and Andrew Q. >> Our next guest is the author of a new book and it is out this week. It is titled AI Native, the mandate to transform your company. Joining us right now is Kyu Lee. He's the founder and CEO of 01 AI, a chairman of Sanovation Ventures and a former executive at Google, Microsoft, and Apple. I think of you as one of the the OGs when it comes to AI in so much of the tech world. Thank you for being here.

31:19 >> Thank you. >> tell us tell us about this book. You've written a whole bunch of them. Yeah. >> but but this sort of takes it to a different place. Well, this book AI native is a different story. It is it is about the corporate executive. I see so many CEOs every year and they all talk about AI transformation and 99% of them are doing it all wrong. >> What does that mean? >> It means they're looking for, you know, cases where AI can be deployed in customer service, in legal and finance and so on. They're looking for numbers.

31:51 I have thousand agents and I'm saving I've cut 200 headcount. But that is not how AI matters. AI is now at IQ300. Imagine if you have an IQ300 employee. Would you put it with him or her on customer service or legal document checking? You want that person to help you run the company? And that's what AI native is about. >> So how are you h how do you use it? For example, and by the way, I'm not always so sure that it has an IQ of 300.

32:18 I sometimes find it's very helpful to help me think about issues. >> Yeah. >> But not necessarily. oftentimes I need to push back on it. Yeah. So that I can get better >> answers not necessarily that it's coming up with the right answer. >> Yeah. IQ300 isn't perfect. Albert Einstein would make mistakes being your adviser from time to time. So we do have to pay put a harness to make sure that it's understands its reasoning so that you can check for hallucinations. But the way I use it I'm actually the first user nine months ago of what we call boss AI. Boss AI.

32:52 >> Boss AI is my company's product. And what it does is takes all of the data from the company plus meeting notes and email transcripts and chat records and sales calls and customer service calls. Everything that is owned by the company and legal to use, it puts in the repository. So now it can help me analyze issues like in all the meetings in the company, what are the biggest issues I as a CEO need to be aware of? How can I be a better CEO? Who are the best people in running AI? So, >> how worried are you about connecting and attaching these various models to all of your information? So, one of the things that I think has people concerned >> Yeah.

33:35 >> is that very issue. >> Yeah. different people have different concerns. Some people are trust the cloud, some people trust AI companies. That's to each his own. But our position is we recommend open source models. So with our deployment is completely on premise open source model. We put the whole model in your company. There's no data going to anthropic open AI is certainly not going to China. And then these are completely under your control. >> And the models do you think are as good with the right harness as what the frontier models were doing?

34:10 >> for the purpose of assisting the CEO to do AI transformation, it is better. for the purpose of generally answering a question it is not as good. >> Okay. So, but explain explain that because people don't understand that piece of it which is yeah that that an open weight model might not be as good as the frontier model in a certain way but you're saying can somehow be better than the frontier model in another way. >> Well, it's better not because of the open weight model. The open weight model is always 6 to 12 months behind the best closedweight model. But our approach of adding the harness adds two additional knowledge that any model does not have and cannot have. One is understanding the details of the company. The org chart decision- making workflow everything that is true about your company that you're is confidential and you're unwilling to release.

34:58 >> The second thing is provide a logical reasoning process that makes the AI explainable so that you can know when there is hallucination. Can you help us understand given the sort of global nature of where you live and what you do where you think these US frontier models are relative to the China models and and sort of what that competition really is? >> Yeah, there's no doubt that US leads in the AI breakthroughs and China is very clever in being a strong follower at onetenth the price. So I think US now leads 6 to 12 months in any given scenario. But I would say that for most companies that 6 to 12 month lead is either okay to wait for or okay to accept the deficit.

35:47 >> And you know you know here in the US even post midterms there's now a lot of questions about slowing things down. Yeah. >> And about regulating AI. I have always thought and you may disagree with me. I always thought that China ultimately would regulate its AI in a meaningful way. I always think of them as actually often very permissive early on with new technology, crypto, you know, some of the stuff that Alibaba was doing and financial early on. But then, there sometimes becomes a sort of tipping point, >> where the government there I think decides, okay, it's now time that we need to regulate this. And I'm curious if you think that that thesis is right because it matters to how these US models and the regulators think about this sort of race, this sort of idea that everyone just has to keep rushing ahead.

36:30 >> Yeah, I think the Chinese government should be thought of as a rational government that does what it does to be good for itself like any other country is. And based on that premise for China, it's as important to compete in the AI race as it is for the US. That's very understandable. But I think the dangers have become clearly known. So that if US extends an olive branch and says let's sit down and work something out. I think that would be the right thing to do.

37:00 What anthropic is proposing let the democratic country make the rules and force China to accept is a ridiculously idea based on hubris. Not going to work. >> Not going to work. >> No. I mean, China or any other country that's number two is not going to accept such a deprecating, insulting premise. If you're number two, you deserve to sit down with number one and work it out. >> And given what you know about this technology, do you see it as a winner take all? I mean, there is this sense that if one of these frontier models can somehow get to recursive sort of an AGI place that it becomes a hockey stick and that they can then sort of own the whole space. No, I absolutely do not believe that if if all if you know Open AI and Anthropic is 6 to 12 months ahead of everyone else including Google, Meta and the Chinese companies, they'll catch up in 6 to 12 months. So there's room for everyone to play and also closed model is like iPhone, open model is like Android. There is room for a leader in each place.

38:00 >> Kyouli, the book is called AI Native. Thank you for coming in this morning. Congratulations. >> Thank you. That is Squawk Pod for today. Thanks for listening. We've been doing this podcast now for 7 years, bringing you the best of our Squawkbox Morning Show in an easy to listen to digest of the conversations and interviews that you can't miss. If you've been listening for a while, let us know. We're on X at Squawk CNBC or you can write a brief review on Apple Podcasts. Whatever you think, we'd love to hear from you.

38:32 Squawkbox is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorcin. Weekday mornings starting at 6 Eastern on CNBC. Squawk Pod is available wherever you like to listen to podcasts. Have a great day. We'll meet you right back here tomorrow. >> We are clear. Thanks, guys.