Why Corporate America Is Now Rationing AI

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Alex Ossola (0:33)

Companies wanted their workers to use more AI, until it started costing too much.

Brad Olson (0:39)

There's lots of queries that were happening at companies that were costing lots of tokens for these essentially useless or queries that could have been free.

Alex Ossola (0:49)

Plus, a federal judge puts a temporary pause on the creation of President Trump's quote anti-weaponization fund.

And why film studios are rushing to set up shop in New Jersey? It's Friday, May 29th. I'm Alex Ossola for the Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today.

We begin today's show in Virginia, where a federal judge has hit pause on the Trump administration's $1.8 billion anti-weaponization fund because of a legal challenge to stop it. The order temporarily prevents officials from transferring money into it or paying claims out of it. The Justice Department didn't immediately respond to requests for comment. And in another legal ruling against Trump today, a federal judge in Washington, DC said that the president's name must be removed from the Kennedy Center. He said the decision to change the name must come from Congress. And he gave the Cultural Arts Center two weeks to remove Trump's name from the building. The judge also said that the Kennedy Center can't be closed for two years while it's under renovation. But he said that the repair work can go forward.

Turning to the banking industry. Several of the largest banks in the US say business is humming along. Dealmaking, trading, and lending appear to all be going as planned despite geopolitical unease that has rattled markets. At a banking conference this week, JPMorgan Chase CEO Jamie Dimon said things are gung-ho.

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Sponsors are busy, companies are busy.

SPEAKER_1 (2:27)

There's a lot of exuberance out there. So yeah, right now it's good.

Alex Ossola (2:31)

Dimon said his bank might outperform the increase in markets and investment banking revenue that analysts are expecting for the current quarter.

Universal Music Group Today rejected the $65 billion buyout offer from Bill Ackman's Pershing Square Capital. Universal's board said the bid undervalues the music company. Universal's largest shareholder is also opposed to the deal for the same reason. A Pershing Square spokesperson declined to comment.

We've heard it from companies in ways large and small this year. Employees need to start using AI more in their work. The companies want to send a message to Wall Street that they won't be left behind in a coming wave of disruption. But all that enthusiasm for AI has come at a big cost, specifically with the money they spend on tokens, the basic unit of measurement for AI computing. Some businesses have hit their annual budget in just three months, or seen their AI spending bills double or even triple. Deputy Tech Bureau Chief Brad Olson has been following corporate use of AI and is here to tell us more. Brad, why is it getting so expensive? I mean, are the tokens themselves more expensive, or are companies using more of them, or is it both?

Brad Olson (3:40)

I think in the beginning, companies were just wanting to encourage all their workers to use AI, to try to think about how to do work and measure things that they could do better. And that was kind of like phase one. And now they're confronting the cost of widespread, uncontrolled experimentation and rethinking things that, you know, ended up being very costly. As we know, something may start in a very well-meaning way, and then the incentives that exist can become kind of perverse and give employees here, use AI at all costs and we're going to grade you on your AI use. Then all of a sudden, employees can be like, sure, I'll use AI as much as you want. And then you're not really discerning between like a good use and a bad use. I spoke to a startup founder named Matan Grinberg. He runs a company called Factory, which automates coding. One of the companies he was consulting with, which he just said was a financial institution, had racked up huge amounts of charges from like very simple queries like the weather.