Good morning. Andrew here. For the past several years, leaders of the big artificial intelligence companies have repeatedly said that they welcome — and even encourage — regulation of their industry. But do they really? Or was that just a way to ingratiate themselves with the public, knowing how long it takes to create and put in effect regulation of any new technology. (Take social media as a precedent: Until recently, there wasn’t much.) Well, a battle is now brewing between A.I. companies about what kind of lobbying approach they should take. We go inside the big-stakes, big-money fight below. (Was this newsletter forwarded to you? Sign up here.)
A heated A.I. rivalry in WashingtonThe artificial intelligence industry keeps amassing greater technological and economic power, raising the stakes for its plan to flex that muscle in Washington. Increasingly, the question is how that will be done. Anthropic’s funding of a new super PAC — one in opposition to a group backed by its rival OpenAI — underscores the growing split within the A.I. sector about how to shape regulation for the industry. The latest: Anthropic just announced that it would put $20 million in Public First Action, a super PAC that will support efforts to more tightly police A.I. safety. It will start with supporting ad campaigns backing two pro-A.I. regulation Republicans, Senator Marsha Blackburn of Tennessee and Senator Pete Ricketts of Nebraska. Washington now has to contend with dueling A.I. super PACs:
A.I. faces political pressure on multiple fronts. The Trump administration has made the technology a major focus — and tended to side with the more libertarian policies pushed by OpenAI and others. President Trump has gone so far as to try to neuter state laws governing A.I. to head off efforts to rein in tech giants. Dario Amodei, the C.E.O. of Anthropic, has long supported the opposite approach, calling for tight regulation of A.I. Lawmakers and others are also increasingly worried about rapidly advancing A.I. technology leading to cascades of job cuts, a point underscored by recent plunges in the stocks of an array of services companies. (Comments by A.I. executives about such disruption — like Mustafa Suleyman of Microsoft saying most tasks done by white-collar workers “will be fully automated by an A.I. within the next 12 to 18 months” — probably don’t help.) And the rising cost of powering A.I. data centers has become a loaded political issue, with the Trump administration now reportedly pushing tech companies to shoulder more of the electricity expenses.
Wall Street bonuses help plug New York City’s budget hole. Mayor Zohran Mamdani told state lawmakers that the bonus windfall, along with cost cutting, would reduce the city’s two-year budget gap by $5 billion, to $7 billion. Still, Mamdani again called on Gov. Kathy Hochul to back his planned income-tax increase on people earning over $1 million — a point of conflict between Mamdani, a democratic socialist, and Wall Street — to reduce the remaining deficit. President Trump’s economic policies are expected to add to the deficit. The tax and spending changes Trump has overseen will increase the federal budget deficit by $1.4 trillion, to $23.1 trillion, over the next nine years, according to the nonpartisan Congressional Budget Office. The estimate does not include the effects of temporary tax cuts passed last year being extended, or the possibility that a future president could lower Trump’s tariffs, which would further increase the shortfall. Fallout from the Epstein files spreads in finance and Hollywood. The documents showed that Jes Staley, the former Barclays C.E.O. who is barred from holding senior management roles in the U.K. finance industry over his ties to the convicted sex offender Jeffrey Epstein, served as a trustee of the Epstein estate, entitling him to annual pay of $250,000. Staley told a British court last year that he had declined Epstein’s request to be a trustee. Elsewhere, organizers for the 2028 Olympics in Los Angeles said the entertainment agent Casey Wasserman would continue to lead the group, LA28, after it reviewed Wasserman’s interactions with Epstein and Ghislaine Maxwell, his longtime companion. The F.D.A. backtracks on its refusal to examine Moderna’s flu vaccine. The agency’s commissioner, Dr. Marty Makary, suggested that it might eventually approve the mRNA flu vaccine, after its top vaccine official overrode staff recommendations. Shares in Moderna haven’t recovered since the F.D.A. announced its rejection, which some federal officials continued to defend. The wrinkle in the jobs numberPresident Trump has been quick to take a victory lap on social media for the “GREAT JOBS NUMBERS” that blew away Wall Street’s forecasts. But yesterday’s Bureau of Labor Statistics report — which showed employers added 130,000 jobs last month, pushing the unemployment rate down a tick to 4.3 percent — could put the president’s new pick to run the Fed, Kevin Warsh, in a bind. The latest: Since yesterday’s release, the futures market has pushed back the timing on the next interest rate cut to July from June. Investors see the central bank staying on hold for a few more months. That’s as the labor market appears to be rebounding (despite giant revisions that show past hiring wasn’t quite as robust as first thought), and inflation staying well above the Fed’s 2 percent target. Even before yesterday’s knockout jobs numbers, Beth Hammack, the Cleveland Fed president, and Lorie Logan, the Dallas Fed president, suggested they saw few compelling reasons to cut any time soon. If the pause scenario holds, that would most likely mean no more cuts during Jay Powell’s term as Fed chair, which is set to expire in May. Trump sees it differently. He renewed his push for lower borrowing costs yesterday. “We are again the strongest Country in the World, and should therefore be paying the LOWEST INTEREST RATE, by far,” he wrote on social media. But economists increasingly see that wish clashing with the economic realities. That dynamic could complicate things for Warsh. He has recently signaled that he was aligned with the president in seeing a need for lower borrowing costs. If he wins Senate approval, Job No. 1 would be to build consensus with fellow policymakers. But the data isn’t doing him any favors. Watch the unemployment rate. If it is “stable or down even further by June, Warsh might be stuck on hold for the rest of the year,” Aditya Bhave, an economist at Bank of America, wrote in a research note yesterday. Traders are still hopeful. This morning they saw roughly 53 basis points worth of cuts by year end. But even there, the conviction seems to be slipping. That’s down from 60 basis points before yesterday’s jobs result.
Why a big food breakup was put on holdKraft Heinz is pressing pause on the company’s plan to break up. It’s the latest twist for the food and beverage conglomerate, which has struggled to deliver results since it was formed, with Warren Buffett’s help, in a 2015 $46 billion merger. Its planned split, announced last year, came amid a deal spree that was shaking up the food aisle. Even if Kraft Heinz doesn’t break up, it and its rivals still face challenges such as lower spending from inflation-hit consumers and the rise of GLP-1 weight-loss treatments, Niko Gallogly reports. A change of plans: The Kraft Heinz split was intended to separate the company’s high-performing brands, like Heinz ketchup and Philadelphia cream cheese, from laggards like Oscar Mayer and Kraft Singles. But Steve Cahillane, who took over as C.E.O. last month, said on yesterday’s earnings call that he wanted to see sales improve before he put a breakup back on the table. (Kraft Heinz’s organic sales fell 4.2 percent in the fourth quarter.) To turn things around, Cahillane acknowledged, he’ll have to take steps like lowering prices for many products. Private-label pressure: Lower- and middle-income consumers are increasingly trading brand-name goods for private-label alternatives. That’s forcing more food and beverage companies to cut prices. Consider:
“Big, diversified food companies were really testing the limits of consumers, and they’ve hit the limit,” Farzad Mukhi, a managing director at the M.&A. advisory firm Kroll, told DealBook. The challenge, he added, will be keeping Wall Street happy, as reduced prices often mean lower profits. Cost-cutting is also driving the industry’s deal spree. Keurig Dr Pepper, which last summer announced a roughly $18 billion bid for JDE Peet’s, a European coffee company, told investors in October that it expected the tie-up to shave about $200 million in costs from its coffee supply chain alone. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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