Good morning. Andrew here. Is the era of corporate silence during the Trump administration officially over? Microsoft filed a court brief late yesterday supporting Anthropic’s lawsuit against the Pentagon, a momentous decision for one of the nation’s biggest companies that’s also one of the largest government contractors around. We get into the bigger implications. Also, Miami has a new resident: Howard Schultz, the former C.E.O. of Starbucks, who spent the past 44 years of his life in the Seattle area. His relocation comes amid an effort to raise taxes on wealthy individuals in Washington State. (Was this newsletter forwarded to you? Sign up here.)
Microsoft’s risk calculusThe unwritten rule of corporate America over the past year has been simple: Don’t pick a fight with this White House. For many C.E.O.s, the cost of speaking up — even when the administration hurt their interests — was simply too high. Yesterday, Microsoft decided the cost of staying silent was higher. The company filed a friend-of-the-court brief in Anthropic’s lawsuit against the Trump administration, urging a federal court to temporarily block the Pentagon’s designation of the A.I. company as a supply chain risk. It is, by any measure, a remarkable act. Microsoft is one of the largest government contractors in America. It has deep relationships across virtually every agency in Washington. And it holds billions of dollars worth of federal contracts, including:
In other words, Microsoft has more to lose from White House retaliation than almost any company in Silicon Valley. The calculus, to some degree, appears to be that Microsoft is so embedded inside the U.S. government that it would be too costly to pursue genuine retribution. Microsoft has a lot at stake in Anthropic’s fate. It agreed to invest $5 billion in the A.I. company’s latest fund-raising round. As part of that partnership — the first major move by Microsoft to invest in a rival to the tech giant’s longtime A.I. partner, OpenAI — Anthropic also agreed to buy $30 billion worth of cloud services from the tech giant. The back story: Talks between Anthropic and the Pentagon over limits on the government’s use of Claude A.I. tools for mass domestic surveillance or fully autonomous weaponry broke down last week. The administration then officially labeled Anthropic a supply chain risk — a designation normally reserved for companies linked to foreign adversaries like Russia and China — and required government contractors to stop using its services in military work. A Pentagon official, according to Anthropic’s court filings, said the government intended to “make sure they pay a price.” Many in the tech world’s rank-and-file have sided with Anthropic. Thirty-seven engineers and researchers from OpenAI and Google, including Jeff Dean, Google’s chief scientist, filed a friend-of-the-court brief as well. Microsoft’s move is a shot across the administration’s bow. Its C.E.O., Satya Nadella, has been far less visible in President Trump’s orbit than Jensen Huang of Nvidia or Tim Cook of Apple. Nadella’s approach has been quieter: He didn’t attend Trump’s inauguration, as many other tech chiefs had. He also refused to fire Lisa Monaco, a former Biden official who is now Microsoft’s president of global affairs, after Trump demanded her ouster.
JPMorgan Chase is said to reduce its exposure to private credit. The bank has told private credit lenders that it has cut the value of loans in their portfolios amid worries about the credit quality of their clients, according to The Financial Times. The cut will limit how much JPMorgan lends to the groups against that collateral, a sign that Wall Street is still anxious about the sector. Oracle shares rally on A.I. optimism. The stock rose 10 percent in premarket trading after the company’s earnings report yesterday suggested that its large, debt-heavy investments in data centers appeared to be paying off. Revenues from cloud computing, used to train and run A.I., rose to $8.9 billion in the three months that ended in February, above Wall Street projections; the company also raised revenue expectations for 2027 above analyst projections. The market braces for inflation data today. The Consumer Price Index for February, set for release this morning, is expected to show that headline inflation continued to rise; core inflation, which excludes food and energy prices, is expected to hold steady at 2.5 percent since last year. The numbers won’t show the ramifications of the war in the Middle East, which has caused a spike in energy prices that could put the brakes on the Fed’s expected interest-rate cuts this year. Howard Schultz leaves Seattle for Miami. He announced on LinkedIn that he had left Seattle, his home for nearly 50 years, for the East Coast for personal reasons. But the billionaire former Starbucks C.E.O. has also left Washington State as Democrats there push for a so-called millionaires’ tax that is expected to raise about $3.7 billion a year, amid efforts across the nation to make the wealthy pay more in taxes. Crude movesU.S. stock futures are gyrating this morning as energy prices remain volatile. The latest: The International Energy Agency has proposed that its 32 member nations release a record amount of crude oil — 300 million to 400 million barrels — from their strategic reserves in an effort to tamp down surging prices at the pump. Brent crude, the global oil benchmark, rose above $92 a barrel today. That’s well below Monday’s high, but significantly above where it closed before U.S.-Israeli strikes on Iran began. Investors’ heads are still spinning after yesterday’s trading session. Energy Secretary Chris Wright posted to social media — and then deleted — a claim that a Navy warship had “successfully escorted” a tanker through the Strait of Hormuz, sending oil prices spiraling. The Pentagon later said that it had attacked 16 Iranian mine-laying vessels near the strait. Breaking the logjam in the strait and restoring the region’s energy production to prewar levels has become a huge priority for President Trump. Things are still volatile: A British monitoring agency said three ships were hit by unidentified projectiles in or near the strait. Worth watching: Saudi Aramco, the energy giant and the world’s biggest oil company, said yesterday that “in the next couple of days” it would be shipping roughly seven million barrels of crude per day through pipelines to a terminal on the Red Sea. That would bypass the strait entirely. But Aramco also warned that a prolonged war would lead to “catastrophic consequences.” Exclusive: Zendesk bets big on A.I. customer serviceZendesk is on an A.I. buying spree. And today, the software company is making its biggest bet so far on artificial intelligence as it announces the acquisition of Forethought, a start-up that uses artificial intelligence agents to automate customer service interactions, Niko Gallogly is first to report. The deal is valued at north of $200 million, according to a person close to the deal, who wasn’t authorized to publicly disclose the information. It is Zendesk’s seventh and largest A.I. acquisition in the past two and a half years. A.I. has “fundamentally changed” customer service, Tom Eggemeier, Zendesk’s C.E.O., told DealBook. Zendesk expects more than 50 percent of its voice and chat customer service interactions will be done by A.I. agents this year, assisted by Forethought’s technology. Zendesk was acquired in 2022 for $10.2 billion by the private equity firms Hellman & Friedman and Permira. Private credit lenders including Blackstone, Blue Owl Capital and Apollo Global Management provided $5 billion of debt to fund the deal. Now the 19-year-old company is looking to prove to its investors — whose software bets have been challenged by A.I. — that it is fit for a new era. A bet on A.I. voice: Forethought offers an A.I. product that can answer customer calls and engage in conversational phone chats. Zendesk will embed that technology into its A.I. voice service going forward. “You no longer have the urge to hit zero” when on a call with an A.I. bot, Eggemeier said. “It feels like you’re dealing with a human being.” The deal is the latest example of a software company splurging on an A.I. acquisition. Zendesk is leaning on Forethought to help it achieve ambitious A.I. revenue goals. By the end of last year, Zendesk said it had about $2 billion in annual revenue — roughly $200 million of which came from its A.I. products. The company has set a goal to reach $1 billion in annual revenue from its A.I. products by 2028. There is another reason agentic A.I. is essential for customer service platforms today: managing A.I.-to-A.I. communication. A growing number of customers are using A.I. to solve their customer service headaches, Yoni Rechtman, a partner at the venture capital firm Slow Ventures, told DealBook. That, he said, is “forcing companies to adopt these tools faster.”
DEALBOOK QUIZ The dog-grooming boomThis question comes from a recent Times article. Click an answer to see if you’re right. (The link will be free.) Pets are big business. Some 68 million U.S. households own at least one dog, according to the American Pet Products Association, and together those pet owners buy a lot of kibble, chew toys and dog sweaters. Combine the size of that market with Americans’ growing passion for wellness and beauty products, and it only makes sense that the business of high-end pet grooming — with appointments that can cost hundreds of dollars — is on the rise among those who can afford it. Forget the “K-shaped economy”; call this the K-nine economy. How big is the pet grooming industry expected to be in 2026? We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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