WSJ What’s News - Big Tech Commits to Massive AI Outlays

Episode Date: February 7, 2025

A.M. Edition for Feb. 7. Amazon becomes the latest major tech company to double down on AI investments, even as the emergence of China’s DeepSeek leaves investors questioning the wisdom of that spending spree. Plus, the WSJ’s Vera Bergengruen recaps Secretary of State Marco Rubio’s five-country tour through Latin America and the Caribbean, which mixed dealmaking and diplomatic ruptures. And a look at the long-shot wagers behind a potential record-setting Super Bowl Sunday for sports-betting. Luke Vargas hosts.  Sign up for the WSJ’s free What’s News newsletter. Learn more about your ad choices. Visit megaphone.fm/adchoices

Amazon's CEO joins Google, Meta and Microsoft in making it clear AI spending has only just begun. Plus, Secretary of State Marco Rubio returns from a tour of Central America that yielded some deals, but also stirred tensions. Rubio was under a lot of pressure to deliver quote unquote wins for Trump. And these deals needed to be as flashy as Trump's campaign promises, which doesn't always lend itself well to diplomacy. And a look at the long shot bets that can help make this Super Bowl weekend a record

setter for the gambling industry. It's Friday, February 7th. I'm Luke Vargas for The Wall Street Journal. And here is the AM edition of What's News, the top headlines and business stories moving your world today. Amazon shares are slipping in off-hours trading after the company's sales and operating income projections fell short of Wall Street's expectations yesterday. The tech giant also indicated that it's doubling down on AI investments and guided

for a record amount of more than $100 billion in capital expenditures for the year, with most of the increase from last year's $78 billion sum going to AI. The rise of China's deep seek has sparked questions among investors on whether that spending spree is prudent. But Amazon CEO Andy Jassy said yesterday that he saw AI as having the potential to propel historic change. We think virtually every application

that we know of today is gonna be reinvented with AI inside of it. Earlier this week, Google, another of the big spenders on the data centers that power AI, also unveiled plans to ramp up related investments. And together with Microsoft and Meta, the three companies have projected CAPEX of at least $215 billion for their current fiscal years, up more than 45% on the year. Meanwhile, DeepSeek's emergence is also moving markets in Asia, where robust gains by large

Chinese tech stocks have pushed Hong Kong's Hang Seng Tech Index into bull territory, the index, which is like the NASDAQ for Chinese companies listed in Hong Kong, has risen more than 20% from a January low, with PC maker Lenovo and smartphone specialist Xiaomi among the top winners. And on deck today, investors will get a first look at the jobs market since President Trump took office when the Labor Department publishes January payroll data at 8.30 a.m. Eastern. Attorney General Pam Bondi says the Justice Department is shifting resources toward investigations targeting cartels and transnational criminal organizations and away

from efforts to fight traditional corporate corruption, announcing yesterday the dissolution of a task force meant to enforce sanctions on Russian kleptocrats. That marks a shift in how the DOJ enforces the Foreign Corrupt Practices Act, which was passed to prohibit large companies from using their heft to corrupt foreign governments. Justice Department spokesmen didn't respond to a request for comment on the changes. And the US Senate confirmed Russell Vogt as the next White House Budget Director last night, a role that will see the co-author of the conservative Project 2025 policy blueprint helm the White House's budgetary and regulatory nerve center, a position he also held in Trump's

first term. Votes return will test his relationship with Elon Musk, given the overlap between the billionaire's Department of Government Efficiency and Votes' Office of Management and Budget. And while Senate Republicans welcomed the added focus Votes brings on cutting spending and regulation, Democrats, including minority leader Chuck Schumer, sounded the alarm. It's such hypocrisy for Donald Trump to say he didn't know what 2025 was during the campaign and now is putting its chief architect in the most important position where

it can be implemented as a great harm of America and the American people. Coming up with Marco Rubio fresh back from his first trip as Secretary of State, Journal National Security reporter Vera Bergengruen will unpack what we learned about the new administration's foreign policy agenda. That's after the break. Secretary of State Marco Rubio has wrapped up a five-country tour through Latin America and the Caribbean, returning to Washington where the White House has been touting newly announced deals involving Central American countries accepting deportees as evidence of bold America-first action. Journal National Security reporter Vera Bergengruen has been traveling with Rubio, and I caught

up with her from Santo Domingo in the Dominican Republic between flights at the end of that whistle stop tour. Vera, we'll get into the nitty gritty of some of the deals and tension that came out of this trip. But first off, this was a pretty notable first international tour for the Secretary of State coming so early into this administration, was it not? That's right. This is the first time in a very long time that a Secretary of State has prioritized Latin America, and especially Central America. This is the area that he's comfortable with. You know, he is the first Hispanic Secretary of State. He speaks fluent Spanish.

But also, it's an indication that the Trump administration intends to focus closer to home on the Western Hemisphere. Nat. And Vera, there were a number of deals announced during this trip. And as far as I understand, some of them had already been in the works before this. Could that be another reason why this was picked as Rubio's first trip, a place to go out and maybe cite some early successes? Vera. That's right. All of these countries were US allies. They all want to work with the United States. Many of these things were already in the works under the Biden administration. But of course, Rubio was under a lot of pressure to deliver quote unquote wins for Trump. And

these deals needed to be as flashy as Trump's campaign promises, which doesn't always lend itself well to diplomacy. When it comes to diplomacy, you usually want both countries to come forth with a deal to announce something. Of course, that happened in El Salvador, for example. But in Panama, the Trump administration seemed to back them into a corner by publishing a tweet saying that US government ships were going to get free passage in the Panama Canal, something that Panama ended up denying. And even though Rubio did walk away with significant concessions from the Panamanian government, they probably weren't as flashy as Trump would have liked.

Right. And of course, we will be watching how this diplomatic fallout over whether US government ships get free passage through the canal develops. President Trump and the Panamanian president are scheduled to talk on the phone on Friday. But in terms of other big deliverables from the trip, did Rubio score any other significant wins? I think a lot of this seems to be these countries really openly signaling to the new Trump administration that they want to work with them.

They're very cooperative because they've seen what's been happening even with much bigger countries with Canada, with Mexico. So for really small countries here in Central America, they can't withstand a tariff threat or anything else. So they're coming to Rubio with something in hand. In Guatemala, where he was on Wednesday, for example, he said that Guatemala would accept 40% more deportation flights and also of any nationality. So not just Guatemalans from the U S being deported back home, but of any nationality.

For example, in Panama, he observed a deportation flight. We watched them line up and most of these deportees were wearing rubber flip-flops. We saw them get loaded onto a plane. And that's not something that a secretary of state would usually do, but it's a lot of kind of security theater when it comes to immigration, when it comes to drug trafficking and these issues that Trump has really prioritized. Rubio is also watching all these other cabinet secretaries. And it's a little easier for Secretary of Defense Pete Heksef, for example, to send troops to the border. And you know, that is the kind of big flashy announcement that produces great images and Trump really likes. In this case, again, you know, a lot of these incremental

deals, even though sometimes significant, don't lend themselves well to the tweet or to the announcement. And finally, Vera, what have we learned about what the U.S.'s foreign policy agenda is going to look like from this trip? Just before leaving, Rubio was writing in the pages of the Wall Street Journal's opinion section about the need for the U.S. to pay closer attention to its own neighborhood. Though at the same time, back in Washington, we've seen the U.S.

Agency for International Development basically be gutted in the span of just a few days. Did Rubio address that? And does he see those things as potentially being contradictory? Rubio on this trip has defended all of the chaos back home as necessary to align U.S. foreign policy with national security priorities stated by Trump. And it is often coming back to Trump's America first vision. And we've seen this even in, you know, a lot of Rubio's tweets, that they have certain capitalization.

He tweeted, make Gaza beautiful again. So even his tweets are kind of starting to sound like his boss. And what we're seeing is just a full alignment, at least in the public messaging with Trump. While behind the scenes, a lot of it sometimes does, at least here in Central America, seem to be business as usual. At the same time, of course, there's the threat of a Trump tweet, of Trump calling you out from the Oval Office. And that is quite enough to get a lot of these countries in line, or at least really wanting to hand Rubio something to come home with.

It's kind of a good cop, bad cop dynamic if we were to oversimplify it a little. Absolutely. I've been speaking to Wall Street Journal National Security reporter Vera Bergengruen. Vera, thank you so much. Thank you. And finally, who doesn't love an underdog? In Sunday's Super Bowl, that would be the Philadelphia Eagles as they go up against a Kansas City Chiefs team looking to win its third championship in a row.

The sports betting industry is set for a banner weekend with Americans expected to wager almost $1.4 billion on the game, a record according to the American Gaming Association and just the latest milestone in the industry's multi-year ascent from the periphery of sports to a key part of the game. Journal reporter Catherine Sayer told me betting companies are making a killing by offering bets called parlays that require multiple events to play out in order to pay out and which bear closer resemblance to lottery tickets than a traditional pick-em. Skeptics of same-game parlays like to call them a sucker bet.

You know, hey, do people really realize that these odds are that long? Betters I've talked to they just like the fun of it. It encapsulates the stories playing out on the field What are your favorite players doing? How are they performing all their stats? It can be dramatic, right? And it's even become its own world on social media where people are trading their picks. You might have four legs of a parlay, three of them have one. You just need that last one in order to hit it big. And then your player falls just short. And people like to share in that pain when that happens. Alright, so some organic reach there, Catherine, but there's a lot of paid media around parlays as well. Catherine McAllister That's right. You'll often see these same

game parlays being pushed. You turn on ESPN or your favorite sports show, your favorite sports podcast. The reason companies are investing so many of their marketing dollars into parlays is that they just pay off really big. And in fact, the industry looking ahead has raised its forecast from the total online gambling revenues in the U.S. being $40 billion by 2030 to now $63 billion. So that just goes to show you how big a deal this is for the industry. And that's it for What's News for this Friday morning. Before we go, a heads up that we've got a bonus episode coming later today.

In the next What's News and Earnings, we'll be looking at the big insurance companies, how they're navigating the Los Angeles wildfires and other extreme weather events, and what it could mean for the cost of insurance. That'll be in the feed around midday today, before our usual PM show tonight. Today's show was produced by Kate Bullifant and Daniel Bach, with supervising producer Christina Rocca. I'm Luke Vargas for The Wall Street Journal and as always, thanks for listening.