Business

1. Pentagon hires LBO gurus
2. Fink predicts AI bankruptcies
3. CEOs’ new buzzword: ‘moat’
4. Trump has an energy problem
5. Shoppers want tariff refunds

Washington State beats California to a millionaires’ tax … Anthropic may form a consulting venture with PE firms …

Tucked into Nvidia CEO Jensen Huang’s essay on AI this week were two paragraphs that will be recalled as either the forward to a great American Renaissance or the epitaph of end-stage capitalism.

“You do not need a PhD in computer science to participate in this transformation,” he wrote in the essay, part AI primer for the layman, part roadmap for the way forward.

Hyperscalers like Meta, infrastructure players like Nvidia, and financiers like BlackRock admittedly have no idea the extent of the havoc AI is wreaking on white-collar jobs — they just know it will be ugly. But they are pivoting hard to support the blue-collar workers whose labor is crucial to building out AI. That’s partly out of necessity: Without the electricians, plumbers, and pipe fitters to finish them, their data centers will languish, leaving models dumber and IRRs deteriorating by the day. It also points to a recognition that jobless growth — an economy that is expanding but not taking people with it — ends with (metaphorical, probably) heads on pikes.

That worry was on full display in Washington this week at BlackRock’s infrastructure summit, where I interviewed CEO Larry Fink about the dire shortage of skilled labor.

AI “is going to create many jobs and we’re not prepared as a society to fulfill those jobs,” Fink told me, touting the company’s $100 million donation to trade-work training, announced Wednesday. “This is a crisis.”

Fink brought along Mike Rowe, TV’s patron saint of manual labor, who talked touring a BlackRock-owned data center in Plano, Texas, where he met electricians making more than $240,000 a year.

But what about the white-collar wipeout? “This May when our college graduates are graduating, we may see the highest unemployment rate of that group” without an accompanying recession, Fink acknowledged. Couple that with the astronomical wealth that’s accumulating in the hands of AI’s private backers, and it’s a powder keg.

In the past few weeks, there’s been a distinct change in the posture of Big Tech and financial firms. They are waking up to the backlash and rushing to get ahead of it. “A post-grad jobs wipeout and baby boomers aging in their four-bedroom house because of interest rates is a witch’s brew for intergenerational strife,” Matt McDonald, CEO of DC corporate advisory firm Penta Group, tells me. “The ‘OK boomer’ movement is going to pale in comparison to what’s coming.”

It’s much easier to see the knowledge-economy jobs AI is destroying than the ones it will create. And AI job losses could certainly drag out (who among us hasn’t nailed our thesis but botched the duration call?) Here’s an idea for Silicon Valley: Put your in-house futurists in a room and don’t let them out until they have some ideas.

Pentagon headhunts bankers

The Pentagon is building a new team of investment bankers steeped in private equity to invest $200 billion over three years in defense deals, aiming to counter China’s rise, Liz scoops. The Defense Department is targeting bankers at firms including Goldman Sachs and Morgan Stanley; a headhunter brief pitches a chance to deploy “more capital than most investors deploy in their entire careers.” President Donald Trump has long strived to direct a massive sovereign wealth fund akin to Gulf and Asian countries, using private capital to wield political power. The administration has hundreds of billions of dollars to invest in critical industries, but there’s been a bottleneck in finding deals, Liz writes. The headhunter brief also promises recruits will receive “unmatched access to top-level government officials and privileged information flow — whatever you need, you can get.”

Larry Fink says the quiet part out loud

“I am sure we’ll have one or two bankruptcies” among large AI companies, BlackRock CEO Larry Fink told Liz on stage at the company’s infrastructure event in Washington this week. “We’re going to have some huge successes and a couple failures… That’s capitalism!”

When it comes to AI fears, Fink said he’s more worried about the US “losing to China” than capex overspending and recounted a recent conversation with a CEO of an unnamed hyperscaler, who told him: “I may be overinvesting in the short run, but the one thing I can tell you with certainty, I can’t be third.”

The problem is that someone will be third and fourth and fifth, and those stragglers have raised huge amounts of equity and debt that is now oozing through the financial system. Fink said those players have healthy enough margins in their advertising and other businesses to keep shareholders happy. Let’s hope so.

Watch the full conversation here.

CEOs all think they have an AI ‘moat.’ Just ask them.

CEOs have a new favorite word: “moat.” At least 118 companies touted the moats they have, or are building, against AI this quarter, AlphaSense data shows. That’s a record, and the quarter isn’t over yet.

They’re trying to pull up the drawbridge against the oncoming agentic hordes, and looking to tamp down on investor panic about which SaaS businesses will survive the vibe-coding era. “[Investors are] trying to figure out who’s the Amazon.com and who’s the Pets.com,” says Autodesk CEO Andrew Anagnost, drawing a comparison with the dot-com era.

Etsy’s moat is its handmade goods in an AI slop world — “being able to buy something that is really meaningful,” CEO Kruti Goyal said earlier this month at an industry conference. CH Robinson, the trucking company whose stock has been one of the stranger casualties of the AI panic, says its moat is “domain expertise.” Banking app Dave says its moat is its regulatory relationships and its credit underwriting. For Palantir, it’s just sweat equity, I guess. “Twenty years of grinding has built a unique moat,” Palantir CTO Shyam Shankar said earlier this year.

The moat discourse is a grim flip on the buzzwords of past earnings cycles — remember when every company had a blockchain strategy? — and shows how executives are nervously watching their stock prices as AI barrels toward them.

There’s little evidence that investors are buying most of those narratives. (Palantir is, of course, doing fine.) And software companies that help organize companies’ data without bringing any of their own are in trouble, Uber CEO Dara Khosrowshahi told us last week on Semafor’s Compound Interest show: “If you’re a thin UI layer on top of, let’s say, systems of record, you’re going to have to earn your keep,” he said.

— Rohan Goswami

Energy inflation is a political liability

The Iran war is going to have serious political implications around the world, with energy-related inflation shaping up to be the inescapable deciding factor for global politics this year, Semafor’s Tim McDonnell writes. Oil prices shot up to nearly $100 per barrel again Thursday, and US gas prices — emblazoned in big numbers on signboards across every city — surpassed $3.50 per gallon this week, the highest level since 2024.

Despite Trump’s promises for quick and decisive military action, the campaign is showing no signs of letting up: Ships are regularly being attacked in the Strait of Hormuz, which remains closed. Saudi Arabia is diverting tankers to its southern Red Sea coast, while Oman’s key export terminal was evacuated over safety concerns, and two tankers were hit in Iraqi waters.

Gas prices are the most tangible and emotional touchpoint of the global economy for US voters, and infamously decisive in national elections.

“The administration’s foreign policy actions have collided directly with the affordability message Republicans are trying to cement ahead of the election,” a former Obama administration economist told Tim.

Costco customers want a share of retailer’s legal spoils

Costco may have won its legal fight against Trump’s tariffs, but its customers still want to see receipts. The big-box retailer was slapped with a lawsuit this week by a Costco member in Illinois, who alleges the company owes customers refunds for the higher prices they paid to cover for added tariffs, which were struck down by the Supreme Court last month. The suit is seeking class-action status, which would make millions of Costco members eligible.

On its earnings call last week, Costco CEO Ron Vachris said the company planned to take its legal winnings and plunge them back into the business, offering customers relief in the form of lower prices rather than direct, tariff-related refunds. But given Costco’s unique business model — it knows exactly what each shopper paid for each product because it runs a closed-loop membership club — some customers want checks.

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➚ BUY: Delivery. Qatari-backed Irth Capital is launching another bid to take Papa Johns’ private. Irth previously tried to acquire the pizza chain alongside Apollo, Semafor reported last year.

SELL: DiGiorno. California Pizza Kitchen is deepening its retail push with Nestlé as a partner, expanding its frozen pizza range and bringing new restaurant offerings to grocery stores.

Companies & Deals

• Dirty jobs: Cintas’ $5.5 billion deal for UniFirst is a bet on the blue-collar economy surviving the AI wave: All those electricians and plumbers need something to wear and someone to clean it.
• Smell test: Estée Lauder is suing Jo Malone for using her own name — the rights to which she sold the cosmetics giant in 1999 — on packaging for a perfume collaboration with Zara. A reminder for founders (and college athletes joining the NIL goal rush) to read the fine print when selling your namesake.
• Era of efficiency: Oracle is the latest tech giant to prep AI-related layoffs, almost on cue as CEOs tighten their belts after cycles of overhiring and underfiring.
• Stop betting: Only 35% of Americans think prediction markets “generally should be legal” — compared to 61% who say the same about state-run lotteries — but they want regulation, a new poll from Paradigm, an investor in Kalshi, finds.