Closing Bell - Closing Bell Overtime: San Francisco Fed President On Inflation & The Rate Debate; Tesla’s Path To $2T Market Cap 6/20/25

Episode Date: June 20, 2025

San Francisco Fed President Mary Daly talks inflation, policy, and the path of the economy. Schwab’s Kevin Gordon weighs in on this week’s market action. Dan Ives of Wedbush breaks down Tesla’s Robotaxi momentum and IBM’s recent breakout. Meta CTO Andrew Bosworth talks the company’s AI push, competition with defense contractors, and joining the U.S. Army Reserve. Our Pippa Stevens reports on the high-stakes competition between states to land data centers—and what it’s costing taxpayers.

Well, that's the end of regulation. American Integrity Insurance Group bringing the closing belt, the New York Stock Exchange, Docko doing the honors at the Nasdaq. Stocks closing mixed on the session with the Dow eking out gains. Now for the week, the Dow Nasdaq posting modest gains. While the S&P, it looks like, finishing mostly flat.

We'll see where it settles out here. Healthcare and materials were the laggards for the week. Financials and tech led. After a flight to safety last week, gold-snapping a two-week winning streak, posting its worst week in nearly a month, silver-taking a breather too. But Coinbase and Circle continuing their torrid rally

as this so-called stable coin summer unfolds. Coinbase set to close higher by 26% this week. Circle of 81% this week. With today's move, Circle's market cap is now about even with, get this, FedEx. Kroger the top performer in the S&P today thanks to strong earnings. The Grocer Hiking, same store, sales guidance. Accenture though, that was the worst S&P performer. The Tech Consultancy lower despite a beaten race thanks to a 6% drop in new bookings.

And that is the scorecard on Wall Street for Winter's Day Late. Welcome to Closing Bell Overtime. I'm John Ford alongside Morgan Brennan. Ahead, San Francisco Fed President Mary Daley. We'll get her take on this week's decision to hold rates steady and how tariffs could impact inflation and much more. Plus, Metta's Chief Technology Officer

on the AI talent wars where the tech is headed and the company's push plus his own into defense as a partner with the military and a CNBC investigation our state's giving away too much to lure data centers but we begin with the Federal Reserve and their possible next move so let's send it over to Steve Leesman who's joined now by San Francisco Fed President Mary Daly Steve thanks so much Morgan yes we are pleased to bring in San Francisco Fed President, Mary Daly. Steve. Thanks so much, Morgan. Yes, we are pleased to bring in San Francisco Fed President, Mary Daly. President Daly, thank you so much for joining us.

My complete pleasure. Thank you. Well, great. Let's start off with this issue of inflation versus employment and where you stand on the conflict or the contrast or the tension between both sides of the mandate, given the tariffs that are coming and what you have seen in the employment data? So, right now, I see that things are in pretty good balance. We have inflation continuing to come down and the labor market remains solid. We're watching both sides of that information, of course, but so far the economy remains

in a good place and policy is in a good place. If you think about what could happen on inflation, you know, there has been quite a number of concerns that the tariffs will push up inflation, but every day we get additional news that so far they're not seeing that, that the tariffs are coming down, that indeed the tariff, announced tariff rates are coming down, and then indeed what's happening is that firms are finding ways to mitigate some of the impact on consumers. So we still have to watch and make sure

that we don't see it in inflation, and my eyes are on that, but I don't think it's, the concerns are as large as they were when the tariffs were first announced. Well, give me your read then on the May inflation data. Did you feel like you were out of the woods stepping out of the woods in something of a clearing in the middle of the woods? I know you like to hike so give us your sense of where we were from the May data and then kind of a sense of well where you'd be hiking this summer? Okay that's a great question and I do like

hiking so the May data just confirmed an ongoing pattern that in the services and other sectors we saw, housing in particular, we saw inflation continue to come down. This is great news both for our inflation mandate but also for American families. So this is really good news. In fact, the fundamentals of the economy, the ones that are absent looking forward to the impact the tariffs might have, are really good. We would be considering, in my judgment, you know, starting to normalize the interest rate with the labor market slowing and inflation

coming down gradually. Of course, what we saw last month is not a predictor of what we'll see in coming months, just because we do have the tariffs and we do have immigration policy. We do have tax policy and deregulation, all of which can have some type of an effect on the economy and inflation. And so we have to continue to watch that going forward. Now, again, I said the predictions of what that might look like from models in history can be pretty dire in terms of how much it will contribute to inflation but where there's also many things that can happen

leakages wedges that get in between what is the published effective tariff rate and what actually passes through to consumers and households so there's just more to watch but we we cannot wait so long that we forget that the fundamentals of the economy are moving in a direction where an interest rate adjustment might be necessary. Do you see a meaningful, I don't want to pick up on that in just a second, but do you see as the chair put it, a meaningful increase to inflation coming in the summer months? You know, Steve, it's a great question and it's certainly a possibility.

So I see three possible scenarios as really driving the landscape of what we need to look at. One is that this has just been a delayed effect, that we're going to get a meaningful increase in inflation. And then the question there, is it going to be persistent and we really have to lean against it, or is it going to be a one-time event that, you know, we can look through? But the third possibility is really that, you really that perhaps it won't have the big impact on inflation that models in history would tell us, and that it will be less responsive, less impactful

on inflation. For that, we're just going to have to wait and see and collect more information. There's a lot of information we'll be able to collect to make those decisions. And we spend a lot of time talking to CEOs of businesses across the country, the Reserve Bank presidents. That's one of the features of Reserve Banks is they're out there all the time. When I talked to CEOs just today, I heard a little more optimism, cautious optimism, of course, but a little more optimism of just what will eventually be the tariffs they have to pay and then eventually what they'll be able to not have to pass on to consumers.

So could a July rate cut be on the table for you President Daley? You know I think we want to be thoughtful enough to collect the information and we do have these three scenarios that could unfold so I'm for me I'd look more to the fall and by then we'll have quite a bit more information and businesses are telling me that's when they're going to look to for some resolution to some of the uncertainty. So I think with it, unless we saw a faltering in the labor market that was meaningful and we thought it would be persistent, then I would say the fall looks more appropriate to me.

Mary, great to have you here on overtime. You were mentioning immigration. I'm wondering, are you yet seeing any impact of immigration policy on labor availability, on wages? And if not, where and when would you expect that to show up in the data? We really haven't seen an impact on wages. Wage growth is coming in line with our long run values of inflation and productivity growth. And we do hear of pockets where there have been some disruptions to the ability to get

labor. I think this is something that's reported nationally as well on, you know, maybe hotels or other entertainment venues. But right now, we haven't seen a broad impact, and that's so far. You might continue to see it, but you know but what's happening at the same time that some of this immigration policy is taking place is that job growth is slowing. And so we don't have a lot of mismatch there. The unemployment rate remains low, and people are finding jobs.

It takes a little more time to find them. But I don't hear of a lot of shortages. In fact, firms are telling me that they have an easier time finding workers today than they did just last year. So if we stick with labor, Marion, it's great to see you. It's Morgan. How about the impact of AI, which I know you're studying and you are interacting with the technology. We know Fed Chair Powell earlier this week said

it's too soon to tell, but how are you gaming that out? Absolutely, it's a good question. and we do study it as you know. And what we're hearing, we talk to a lot of CEOs about this, we have regular round tables, and what they tell us is they are using it. What went from something that seemed like it might work to something that's really affecting how they think about implementing it in their businesses. But again and again, they repeat to us that this is not a way to reduce their payrolls as much as is the way to augment their payrolls. They had a really tough time finding workers,

and they want to make sure that those workers can do very productive things. And so they're trying to take less productive activities off, things that they can do easily with AI, and don't present any risk to their profitability or their reputation. So we're not hearing of job losses yet, but certainly a wait and see approach is a good thing. We've had history of technology where specific people or sectors are affected, but I always remind people there hasn't been a technology and the history of technologies that has reduced

net employment overall. President Daley, I just have a couple more questions for you. Do you feel confident enough in some of the theories that are out there about the idea that, well, a tariff is a tax and a tax you ought to look through, and you could go ahead and cut rates even while inflation is higher because you're confident enough in the theory that Inflation that tariffs will pass through and not raise not create a broader inflation issue You know Steve I've done this job long enough and I've been economists long enough that I never trust just the theory There's really three things you have to look at. The theory helps us. History also helps us.

And then you have to talk to people. People live in the economy, and businesses are really sophisticated at knowing when they can pass things through, when they can't. Consumers will tell you, am I going to pay that or not? Right now, I think there's a lot to be said for it can be a one-time thing. You put the tariffs on, they find workarounds, they move on and we don't have a persistent inflation growth. But I think that we just can't call that for sure

and I wouldn't be preemptive. I really look to balance the two goals we have, which is inflation bringing it gradually down to 2% and the labor market and both are at the top of my mind. President Dell, you've been a fan of using the phrase which is also used by the Fed chair of policy being in a good place. But I'll just give you my observation that it sounded to me like you're maybe a little less certain when it comes to the employment side of the mandate that economy, that the

policy is in a good place. Could you just put some detail on that for us? Well, I'm definitely not uncertain that policy's in a good place today, even with the labor market considerations I've raised. What I'm saying is that if you ask me where we are in the labor market, I would say we're at a point where additional softening

could easily turn into weakening, which I don't want to see. And we can't allow for that to happen because we're waiting for inflation to pop up just around the corner. You know, it's a... Central banks are very good at fighting the last war. The last war was we missed on inflation because we said it was transitory. I don't want us to lose on this one because we think it's coming, but it doesn't come.

Very daily, happy trails this summer. Thank you so much for joining us today. because we think it's coming but it doesn't come. Very daily happy trails this summer. Thank you so much for joining us today. Yeah, thank you for having me. And Steve, thank you as well. John, back to you. All right, thank you. We got a news alert out of Washington. Megan Casella has that for us, Megan.

Hey John, we just had a chance to hear from President Trump today speaking to reporters outside of his golf club in Bedminster, New Jersey And there's really three top headlines that I see here all on the ongoing conflict between Israel and Iran First the president was asked this question of whether he might ask the Israelis to pause their strikes It's something that the Iranians have said would show that the u.s. Is serious about negotiations. He was asked that question, here's what he said. But we're ready, willing and able and we've been speaking to Iran and we'll see what happens. What was the thought process behind the two week timetable? Just a time to see whether or not people come to their senses.

He had said there it was very hard to make that request of the Israelis to pause their attacks, saying if somebody is winning it's harder to do that than if somebody is losing. So not suggesting he's likely to ask the Israelis to pause their attacks right now. Two other pieces, he was asked on Israeli Prime Minister Benjamin Netanyahu made some comments today that the Israelis on their own would be able to take out Iran's nuclear capabilities. The question there is why would the US then get involved if Israel could do that on their own?

The president said the Israelis really have a very limited capacity. They could break through a little section, but they can't go down very deeply. And then finally, he was also asked what intelligence he has that Iran is in fact building a nuclear weapon. He has said they are, but there's been some mixed opinions coming from the U.S. intelligence community, including from the director of national intelligence, Tulsi Gabbard, on that. He was asked about it and the president replied, quote, my intelligence community is wrong. So standing by his assessment there

that the Iranians are in fact building a nuclear weapon and very close to doing so. Guys. Megan, thank you. Coming up, we'll get instant reaction to Mary Daly, the San Francisco Fed president we just heard from. Fed Governor Waller also saying this morning the Fed could cut at the July meeting,

but we just heard Daly said she sees the fall is more likely. So when will the Fed make a move? Plus, why this building materials company is at the center of a multi-billion dollar bidding war. We're going to break that down. Overtime is back in two. Welcome back to overtime. We'll take a look at shares of GMS, the stock soaring after a bidding war for the company

developed between Home Depot and Qx o the move is Home Depot's latest attempt to diversify and take more control of its supply chain betting big on distribution that expands its business With pros. This is something actually Home Depot's CFO Richard McHale discussed McPhail, excuse me discussed with me recently on overtime, Home Depot's bid for GMS comes after last year's $18 billion deal for roofing distributor SRS, but other building suppliers like Blue Links installed building, top builds, those all moved higher on the news as well.

John, I'd also just note that despite the reports about all of this, Home Depot has not commented publicly on its bid in this process, but it still spiked shares up double digits today. Interesting. Okay. Well, let's get back to the market as well. We just heard from San Francisco Fed President Mary Daley. Here's what she said about where the economy stands right now and on the Fed's two main goals to keep inflation tame and employment full. So right now I see that things are in good, pretty good balance. We have inflation continuing to to keep inflation tame and employment full. So right now I see that things are in pretty good balance. We have inflation continuing to come down

and the labor market remains solid. We're watching both sides of that information, of course, but so far the economy remains in a good place and policy's in a good place. If you think about what could happen on inflation, you know, there has been quite a number of concerns that the tariffs will push up inflation. But every day we get additional news that so far they're not seeing that, that the tariffs are coming down, that indeed the announced tariff rates are coming down. And then indeed what's happening is

that firms are finding ways to mitigate some of the impact on consumers. Let's get reaction from our guest, Charles Schwab, Senior Investment Strategist, Kevin Gordon, Kevin, good to have you here. So you heard Daley saying things look good now, but you've also talked in the past about the impact policy uncertainty is having on business confidence.

How do you see that playing out in the markets for the rest of the summer? Yeah, well so far, I mean, the uncertainty has been more on the survey-based side of things where you look at things like capex intentions and the lack of capital spending that's at least planned for companies because of the tariff policy uncertainty. I would characterize it maybe less as uncertainty and more as instability because that's probably more of a fair way to characterize it.

But as it, I think, pertains to markets, the way we think about it is, path of least resistance from the beginning of the year for tariff rates is higher, but path of least resistance from the ultimate peak clearly has been lower. And I think that's been more of the focus since the April 8th flows for the S&P 500. Clearly the reversal or the pause in the high tariff rates was what has driven, or has been a big reason of what has driven us off those lows and back near record high territory. So from here, our thinking about this for the back half of the year going into 2026

is, you know, how does the market digest a higher tariff rate, effective tariff rate than what we had at the beginning of the year, but how does that ultimately weigh on the economy and particularly the labor market? I think that's what I was really paying attention to during Mary's interview was what is that line between softening and quick weakening in labor? And I think eventually in the back half of the year, that's going to be the metric to focus on and things like the unemployment rate, which is, by the way, risen every month this year so far, if you take out a couple of decimal points.

How are you factoring in the various unknowns, including what the ultimate tariff rates will be with the most important partners, what's happening with consumer credit, how that might affect the back half of the year, especially Q4, and then how much inventory has come in already ahead of those expected tariffs coming on full force? Yeah, you know, the inventory story and the export-importential is going to be a huge driver of GDP volatility this year. I mean you're already seeing it from first quarter weak headline GDP but underlying business investment or consumer spending was was strong. You're probably going to see not a complete reversal in the second quarter because we still think

that business spending and consumption will remain relatively healthy but you're probably going to get a pretty significant jump in GDP because of the reversal of the export import data and probably a reversal of some of the inventory data too. So you're probably going to have maybe 2025 as a full year of that kind of those kind of swings in GDP. So it's going to be less focused on the headline more more focus on you know the underlying subsurface activity, but we would view almost all facets of economic data

that way, especially company earnings. Don't necessarily look at what the top line or the bottom line is, even look at the guidance and how companies are approaching tariffs and what they're doing to sort of stomach some of the volatility. Because even within sectors, if you look at consumer discretionary,

if you look at consumer staples, companies have had very different reactions to tariffs and how they've been able to digest them, whether it's passing it on to the consumer because they don't have the buffer to do it or the buffer to take it in their margins or taking it in the margins because they built up enough of a buffer going into this. Yeah, I thought that was interesting too when Mary Daly made that comment that some of the CEOs she's spoken to have said that even if they're taking on more cost-tied tariffs, that they're not pushing it out to their end users as well.

So a dynamic to watch. How do you assess and navigate geopolitical risk? And we're going to the weekend is a little bit calmer based on the president's headlines we just got, but it's certainly not over. Yeah. I mean, it's a new normal, it seems, unfortunately, to have so much tension around the world and literally wars that are happening. Now we've got three really to track. new normal it seems, unfortunately, to have so much tension around the world and literally wars that are happening.

Now we've got three really to track. I think that as it pertains to U.S. growth and the hits eventually to U.S. markets and the economy, clearly everything runs through the energy channels. So that's why there's been so much focus on whether the Strait of Hormuz is actually closed or blocked and that starts to affect how global oil is shipped around the globe, if that doesn't happen you probably have a little bit more of a buffer for the economy at least in the US. And I would add too, if you look at energy spending and the share that it commands as a percentage of overall consumer spending in the US, we've come down from a peak

of just above 9% in 1980 to 3.5%, 3.4% now. So you're not going to see as much of a pass-through to the consumer, for various reasons. I would say the number one being that we've become a net oil exporter, and we've become a little bit more energy dominant and independent. So there's less of a pass-through effect there, but as geopolitical tensions go, as far as they go, that's probably where you see most of the hit, if at all. All right. Cameron Gordon, thank you.

Good to see you, thank you. Well, the S&P 500's up 6% since the start of April, but as the quarter comes to a close, is there something happening in the market that could jeopardize those gains? Mike Santoli's gonna join us on that. Plus, Palantir is up 440% in the past year. By far the best stock in the S&P 500.

With gains like that, it's no wonder other tech giants are trying to get into the defense space. We're gonna be talking to Metta's Chief Technology Officer on his recent induction into the US Army as it looks to speed up its technological reach. Lots to talk about there over time is back in two. Welcome back, let's bring in senior markets comment commentator Mike Santoli for a look at the rebalancing that's happening as

the quarter enters its final ten days Mike. Yeah it's about when- firms on Wall Street start to handicap how this might look based on the relative performance of equities and fixed income take a look here S. and P. five hundred quarter

to date. Relative to the total return. Of the aggregate bond index. They're both total returns. You see a pretty good margin of advantage from equities because of that big comeback we got off the early April lows. JP Morgan saying this might create some somewhat modest selling pressure in equities to rotate into fixed income from pension funds and other balanced investors mainly because they do true things up on a three-month basis.

I wouldn't say it'll be decisive for the next move but it's really different than what we saw in the first quarter when everybody was rotating into equities after their drop. Take a look here at the current total return portfolio value of the 60-40 portfolio. This is the Vanguard balanced index fund really within a whisker of its all-time high maximum value. So this is a you know just a one-year chart, but it shows you actually have kind of remained protected. Total return over that period, about 8.6%.

That's right in line with the very long-term, average annualized return for this strategy, so it's not dead yet, guys. All right. Mike Santoli, thank you. And now it's time for a CNBC News update with Kate Rogers. Kate. Hi, John. A federal judge has asked California and the Trump administration whether a law that bans

troops from conducting civilian law enforcement domestically is being violated in Los Angeles. The judge today held off from issuing any additional rulings and instead asked both sides for briefings on his question after an appeals court allowed the president to keep control of National Guard members he deployed amid protests. A federal judge ruled this afternoon that Harvard can continue to enroll foreign students as the school continues its fight to overturn President Trump's ban. Harvard sued the administration in May after it revoked the school's certification to host international students.

And the Trump administration reportedly sent layoff notices to more than 600 employees at the federally funded Voice of America News Organization today. According to New York Times, the reductions will shrink the staff to less than 200. Voice of America provides independent reporting to countries with limited press freedom. Morgan, back over to you.

Okay, Rogers, thank you. Well, coming up, Elon Musk's big moment. Tesla holding a robo taxi launch event in Austin. That's this Sunday. And up next, we'll talk to an analyst who says this is a trillion dollar opportunity for Tesla. We'll be right back. Welcome back to overtime. Almost down and a mostly down day, I can read here. A mostly down day for the markets to close out the week. It was the third straight day of losses for the S&P actually,

but the down the Nasdaq did end the week slightly in the green. Bond yields fell today as Fed Governor Waller suggested inflation had softened enough to make a rate cut possible at the Fed's next meeting. But we did just speak to San Francisco Fed President, Mary Daley, who sees a fall cut as more likely, of course, based on the data.

Yes, and let's turn now to Tesla, company launching its long-awaited robo-taxi in Austin this Sunday. First rides will be limited, invitation only, and in a geo-fenced area of the city with remote drivers as backups. But bulls on the street say this moment could be key for Tesla's growth, justify the multiple.

Joining us now is Dan Ives, Redbush Global Head of Technology Research. Dan, happy Friday. Great to be here. So Alphabet's Waymo is way ahead of Tesla on autonomous execution. So how much better does Tesla have to be, you have to believe its model is,

to believe it's a trillion dollar opportunity for Tesla alone. Yeah, Guaymode clearly, you know, the big head start, but four cities, 230,000 hour cars, right? I mean, my view is the golden age of autonomous starts on Sunday in Austin for Tesla, because it's the scale and scope. I mean, John, my view is like 25, 30 cities in the next year.

And as they start scaling cyber cabs and get to true level four, I believe it's a trillion dollar opportunity valuation for Tesla. And I think this is actually the start of their biggest chapter of growth and actually valuation upside. Don't they have to be almost perfect

to get to 25 to 30 cities within a year to have that kind of scale? And so how do you factor risk into this model too? I mean, to ramp this, Tesla has to first put its own vehicles on the street, but it also wants Tesla owners to offer up their cars as well. Do they need that to achieve the profitability that make them worth a trillion?

It's a great question. I don't think that they need that. I mean, to me it's really, when I view CyberCabs and where I see this all going, I mean, I think ultimately 20% of the transportation industry, in my view, will be autonomous when we look out the next six, seven, 10 years. I think Tesla, it starts off with,

when you look at what's happening with CyberCab, but ultimately other automakers, they're going to have to OEM that technology from Tesla. So my view is that this is the start. When you think about AI and you think about true AI and really what the golden goose is going to be, autonomous, Tesla, I believe, is going to lead this market handily. And ultimately, it all starts on Sunday with the launch in Austin. But I think it's step-by-step.

They're going to show that they could get true level four. I think we're going to look back. Sunday, I think is a historical moment for Tesla. Is there room for everyone though? We're talking about Tesla looking to Sunday, Waymo, which is obviously deploying in cities and continues to grow its licenses. New York City, for example, earlier this week.

You've got the dark horse in all of this too, which is the Amazon-backed ZUKES autonomous fleet that's being built out too. If you're only talking about potentially 20% of vehicles in the US becoming autonomous in coming years, is there room for everyone? Look, I think there's room for others and you're gonna have a convergence

in terms of transportation tech, just like you talked about. Lema will clearly be a player, Uber, you know, obviously they'll partner more and more, but I think, look, when it comes to true scale and scope, I don't think anyone matches Tesla. And that's sort of our view is that where this is going, I mean, you talk about a company when you think about,

you know, 2 million, 1.7 to 2 million vehicles per year, CyberCabs ultimately, this is something that you'll beat three, 400,000, 500,000. And I think that's really true AI. That's why I believe Tesla is the most undervalued AI play in the market today. I don't think the market is valuing this piece. I do want to get your thoughts on IBM

because you put out a new note on that. You've raised the price target to what, 3.25 per share. This is already trading at record highs of 18% in the past two months. It's the other AI play, slash quantum play, slash, slash, slash. Why do you continue to be so bullish here now at these levels?

Yeah, I mean, the Mojo and Armonk, right? I I mean my view when it comes to IBM is that this is just the beginning. It's a page out of Microsoft's playbook. I mean the $100, $200 move, no one believed, $200, $300. I believe this could be a $400 or $500 stock because it's about the install base, not even just the quantum piece, monetization on AI and all of our checks, which is why we raised our price target, showing the adoption continuing to increase.

I think what Arvind's done at IBM, it's really the magic. He has been the key to what we're really now seeing, a renaissance of growth in Armok from IBM. All right. Dan Ives, thank you. Great to be here. Armok, not just for suburban soccer moms, for technologists too. But also for suburban soccer moms. Those two. Well, coming up, why did the US Army recently recruit executives from some of the biggest tech companies, including Palantir, OpenAI, and Meta?

We're going to ask one of the service's new lieutenant colonels, Meta's Andrew Bosworth, is going to join us on the other side of this break to talk AI on the battlefield and much, much more. Welcome back to Overtime. Four of Silicon Valley's most prominent tech executives are shedding their C-suite suits for army fatigues. Detachment 201, the Army's Executive Innovation Corps, is a new initiative to bring new technology into the service faster. Executives from Palantir Meta, OpenAI,

and Thinking Machines Lab were all recently sworn in as the first Lieutenant Colonels. They will serve as senior advisors part-time in the Army Reserve. It's the latest piece of the service's push to transform itself. So with us now, Andrew Bosworth, Meta's Chief Technology Officer.

Bos, it's great to have you on, or maybe I should call you Lieutenant Colonel. So let's start right there. How did this come about? And why did you feel it was so necessary to serve? I'm a former U.S. military officer, it's great to have you on or maybe I should call you lieutenant colonel. Let's start right there. How did this come about and why did you feel it was so necessary to serve? in a narrow sense, but really more deeply in partnership with the Department of Defense.

That's something that Brent, the previous, the head of HR for the DOD had put together as an idea last summer and Shyam ran with it and approached me and Kevin and really, as soon as he said it to me, I thought it sounded like a great idea and I was happy to be a part of it. And of course you're gonna go through some training,

but not necessarily traditional bootcamp. And you come in at a pretty senior ranking position. It's a personal, it's personal service for you, but it also speaks to your professional prowess, particularly when it comes to something like AI, which is getting deployed in real time on the battlefield. So given the fact that Meta has been pushing further into its defense contract to work with the military,

why are we seeing that happen now? What does it mean for Metta and what does it mean for you as a senior executive at Metta? Yeah, believe it or not, these really did happen completely separately. This was something that I'm doing in my personal capacity as a private citizen, something I've always wanted to do. I've always felt called to serve some way and I'm doing in my personal capacity as a private citizen, something I've always wanted to do. I've always felt called to serve some way and I'm just glad to find an opportunity to do that. I have a history of military service in my family. Many of my cousins are in the armed services.

Separately, we started partnering with Palmer Lucky and Anderil on a number of pieces where we're not going to be a contractor ourselves, but we're partnering with Anderil, who is on taking some of the technology we've already developed and making it available to the DOD. I think they're both good things. I think they both help, but they are separate. In fact, one of the important jobs that I have and the commitments that I've made in joining the Army is to have a real separation between my professional work at Meta and the work that I'm doing in service of the Army.

AI has definitely become a lightning rod in terms of the geopolitical landscape and this idea. It gets framed a lot as US versus China, but how are we seeing in real time AI make its way into the battlefield? What will be your role in advising on that, especially given the fact that we have had another war erupt here in the past week between Israel and Iran?

Yeah, I mean, we think that AI is going to be a part of every facet of the future, not just, okay, is it gonna change the way that warfighters are engaging in war, but all the way back to logistics. Like, how are we planning in terms of what types of materials and supply chain we need, and how are we gonna effectively get that supply chain to the battlefield?

And so really the question of AI isn't, it's we so often focus on the very last mile of AI. Is it going to be making autonomous decisions? That is a decision that's out there of my command. But what I can do is help advise huge parts of the army who are involved in supporting our troops and our efforts overseas and domestically in being more efficient, more effective with a smaller force, and therefore freeing up resources to do more elsewhere. So I think for us, we're not thinking of AI as, okay, this is specifically how do we focus on lethality. It's how do we think of this new technology as being able to improve a huge number of parts of the way the army operates?

And shifting to a different type of war if you will the talent war I mean that has been in the headlines for the last couple Of weeks you just recruited Alex Wang from scale AI Reports that Daniel Gross and not and not Friedman are being courted right now Talks between Metta and perplexity Metta has apparently walked away, according to sources familiar. And Sam Altman saying that massive signing businesses have been offered by Meta to some of the open AI executives as well.

How does it speak to the investments we're seeing and how important talent is now as the technology is further developed and deployed? Yeah, it's an incredible market out there. You know, Sam neglected to mention that he's countering those houses. as the technology is further developed and deployed? Yeah, it's an incredible market out there. You know, Sam neglected to mention that

he's countering those offers. So the market is setting a rate here for a level of talent, which is really incredible and kind of unprecedented in my 20 year career as a technology executive. But that is the great credit to these individuals who five or six years ago put their head down and decided to spend their time on a then unproven technology which they pioneered and have established themselves as a relatively small pool of people who can command an incredible market premium

for the talents they've raised. I think the free market will do its thing. People see these numbers and they're going to start to build this expertise. So I think a couple of years from now it'll probably be very different and there'll be a lot of people with this talent pool, but today, it's a relatively small number, and I think they've earned it. Boz, good to see you here on Overtime, it's John Ford.

So continuing on AI, I wanna ask about Reality Labs, which of course Mark Zuckerberg is champion, I believe you oversee, lost $4.2 billion in the first quarter alone, a staggering amount of money. And the tech conversation seems to have shifted over time from the metaverse, which I guess primarily is about human interactions in an artificial world, to agents, which are more about digital interactions

in the real world. And I get that VR and AR really bridges that a bit. But are you prepared to further pivot reality labs after this year, perhaps, to be more about AI, much less about AR? Yeah, I mean, I would say we invested that money. I wouldn't say we lost it. That's the idea is we're taking that money

and putting it in technology that we believe is gonna be the foundation of the future of how people interact with not just machines, but also with each other. We still have that vision. The metaverse was always this expansive thing. It's not just people in virtual worlds, that's part of it. But it's also people, when they look at their phones

and they're not with you, they've transported themselves. The future is here, it's just not evenly distributed, as they say. So for us, the nice thing about AI arriving is they're completely compatible investments. Our augmented reality glasses, which we're working on, have been now, we've got exciting offers. Just this week, we launched the new Oakley Houston model glasses, Oakley Meta glasses, and they may not have augmented reality displays yet, but you can ask AI questions and that AI has the context of the world around you.

It can hear, it can see from your point of view, and I think that is going to be a game changer for unlocking these digital assistants when they have all the context about you and what you're trying to do already. So for us, these two investments aren't separate. They're actually coming together. So you said 2025, I think, is a pivotal year for Reality Labs. What are the metrics you're gonna be watching

to determine whether it's pivoting in the right direction for you? Yeah, the success of our Ray-Ban Metaglasses, you know, kind of puts competitors on notice. Like there's, we see them waking up, we see all the news reports that you see of people spinning up their own efforts to go compete with that product.

And so what I told my team is, you know, all years in a decade aren't equally important in terms of making progress and establishing product market fit. Some years are disproportionately important, and I think 2025 is one of those years. Certainly you're looking at conventional metrics in terms of making progress and establishing product market fit. Some years are disproportionately important, and I think 2025 is one of those years. Certainly, you're looking at conventional metrics in terms of how sales are going and how engagement is doing,

but you're also looking internally at technology metrics. Are we on the path we expected to be on to deliver not just now glasses that have cameras and audio but also have displays in them and more? Boz, quickly, AI super intelligence lab, what is it, what will it do? Yeah, we really believe in a future where a super intelligent AI is gonna be helping humans at every step of the way,

wherever they could use an extra helping hand, it's there for them. And so we've been lucky to have this kind of team rally around with external now and increasingly internal with people like Alex Wang, this kind of team rally around, both external now and increasingly internal with people like Alex Wang. This idea of super intelligence and doing what it takes to pursue that vision. Obviously we've seen already in our financial disclosures,

the amount that we're investing in compute to make that possible. Now we're meeting that investment in personnel and the compute and the people together are what makes it happen. Andrew Bosworth of Meta, thank you for joining us. Thanks for having me. Well, AI data centers are the wave of the future.

Every state wants a piece of the action. Coming up CNBC investigates big tax breaks for big techs data centers and how those deals impact state economies. Be right back. Welcome back to Overtime. The mad rush to build data centers has sparked a massive boom in tax breaks with legislators

across the country doling out billions in sales tax exemptions to attract big tech. While there's no question that tax incentives are alluring business, there is a debate over whether it's a good deal for taxpayers. Pippa Stephens is here with more. Pippa. Hey John, so in the past five years, just 16 states have handed over almost $6 billion in data center tax breaks, arguing the incentives create jobs and spark economic growth. But not everyone is convinced.

Here's the story. Should states hand multi-billion dollar tax breaks to the largest tech companies in America? They attract investments that wouldn't otherwise have come there. The answer depends on who you ask. Does Big Tech deserve these subsidies? I don't think they do. Here's how it works. A Big Tech company agrees to build a data center in a specific state promising economic growth, jobs and revenue. In exchange, that state says it will not charge sales tax on equipment like computers, wires

and air conditioning units. A CNBC analysis found 42 states give a full or partial sales tax exemption to data centers or have no state sales tax. And only 16 of the 37 states with data center tax breaks have reported or estimated the total amount they've granted. Only Illinois, Missouri, Nevada, and Washington break down the data by recipient. For instance, CNBC found that one Microsoft data center

in Illinois received more than $38 million in tax breaks but created just 20 permanent jobs. Microsoft declined to comment on the project. Greg Leroy, the executive director of Good Jobs First, a research group on economic development, says the tax breaks benefit big tech's shareholders. The truth is these are warehouses full of computers, right? Using a lot of land, sucking up a lot of electricity, generating very few permanent jobs. That's not how Steve DelBianco sees it.

He's lobbied for data center tax breaks on behalf of big tech. Many of these big tech companies are worth more than a trillion dollars. Why are they being offered these generous subsidies? It's going to generate tremendous income during construction. It builds an entire ecosystem of contractors that know how to build and maintain and operate data centers. Virginia, often called the data center capital of the world, took a closer look at the data center sales tax exemption, finding it provided a quote, moderate economic benefit.

That said, the state only recoups about 48 cents for every dollar it forgoes in sales tax. Additionally, while data centers create thousands of jobs, most are temporary construction positions not permanent. Of the big tech companies we contacted, Microsoft, Google Meta, and Amazon, said they follow all disclosure requirements on incentives and work with the local community around their data centers. Apple, Oracle, and OpenAI did not respond

to repeated requests for comment. For more, go to cnbc.com backslash data center tax breaks. Pippa, great work. I guess one could argue not only are these energy hogs in the community, but also the AI out of them could take jobs, not necessarily in that community, but more broadly. That's exactly right. And I think it's the speed with which this theme has taken off. So in a lot of these states, some of these sales tax exemptions were implemented all

the way back to 2010. And that's when a data center was totally different. It was so much smaller. They weren't all over the place, and we weren't talking about Gen. AI now potentially coming for jobs. And so now that we're scrutinizing it more, people are starting to take a sharper look at, do we really want these in our community?

What really are the benefits and how much are we forgoing in order to have big tech in our backyard? Yeah, some heat in Memphis over that this week, so very timely, Pippa, thanks. Great reporting. Well, market's ending Memphis over that this week. So very timely, Pippa. Thanks. Great reporting. Well, markets ending a busy week near the flat line, but we've got a lot more news coming next week. Economic data and even a few earnings reports are going to tell you what you need to know.

Welcome back to overtime. Busy week ahead for investors, economic data front and center. Monday's manufacturing and services PMI, as well as existing home sales. Tuesday, we get consumer confidence. New home sales on Wednesday. Thursday is big with durable goods and the final read on first quarter GDP. And Friday, we'll get personal income. On earnings front, KB Home, FedEx, Micron, General Mills,

and Nike are your headliners. And quite a few of those names, John, I think also offer economic barometers in their own right, whether it's goods, services, or in the case of FedEx, trade and global economic developments as well. So certainly some key reports to watch there. I'd also note a lot of Fed speak, bank stress tests, some treasury auctions, and deregulation of the banks is in focus too with the Fed meeting. So we've seen those names pop ahead of that. Middle East conflict was a big question mark heading into this week.

The Dow and S&P, I think both ended up down just about a third of a percent for the week overall. So that is cooling off. But of course, there's always something else to watch. Yeah. And I put the crude move into context because we're higher than May, but we're actually lower than a year ago. Speaking of geopolitical risk, that does it for us here at overtime.