Transcription
Joining us right now is Senator Dave McCormick of Pennsylvania, who is in the midst of hosting the second annual Defense and Innovation Summit in Carlisle, Pennsylvania, and JP Morgan Chase CEO and Chairman Jamie Dimon, who joins us this morning from the Navy Yard in Philadelphia with a very big announcement. Good morning to both of you, gentlemen. I'm going to start with you, Jamie, because I know that you're about to announce, well, it's your announcement, so I'll let you do it.
Yeah. Well, first of all, welcome everybody, CNBC viewers. Senator McCormick, thank you for doing this. It's this is a great American effort. You know, I applaud the Senator. I'm going to join him later in Carlisle. But, but we're sitting in the Philadelphia Navy Yard where we build ships. They build ships here that won the Revolutionary War, that helped win World War II. And so, you know, you now have this, the arsenal of the arsenal of democracy has been reignited, and shipbuilding, people said couldn't happen. But here you have Hanwha Shipbuilding at the Philadelphia Navy Yard, which is going to be building components for nuclear submarines and major ships. We're so, we're just, we're just aiding here by doing some financing, you know, special kind of financing for Hanwha here. But very importantly, and this, people have to remember this, is like one big complex ecosystem. We're also financing, you know, people we need 300,000 electricians, welders, etc., to build ships in the next 5 or 10 years. So, we're helping finance people who train people who will train people here. There's 16,000 workers here. That number may very well double over the next 5 years as it builds more ships and we build a lot of shipbuilding back to the United States. There's also a whole ecosystem here. I'm going to meet with Rose Industry later. You know, there's probably 100 vendors who help supply all the things that take place here. So, we're doing our part to help, you know, protect the future of freedom and the future of America.
Jamie, let me just follow up real quick. So, this is a, my understanding is the $24 million investment includes an $18 million in loans and investment and then $6 million in philanthropic grants. How do you think about this perhaps differently than maybe a a traditional loan that the bank might otherwise make? And how does this work in the sort of larger picture of of your new focus, I think, on infrastructure and defense in this country?
Yeah, so this, this fits right into it. So, we've always done things like this, but, but we can, you know, and there's there's a tax credit financing of a new submarine facility or new submarine bay to help build some of those things and the $6 million for training. We do that around the country. In fact, we do that around the world. And it fits kind of what I, we call the American dream, getting kids skills or all workers skills that they have jobs that could pay $80, $90, $100,000 a year after, you know, a year or two of training. So, this, you know, listen up to America. It helps build the defense industry, and we didn't talk about it in this press release, but around that, we financed Hanwha. We probably financed some of the folks here. I'm sitting at Urban Outfitters headquarters. We helped finance Urban Outfitters. So, you know, we get involved far beyond just those grants you're talking about here. But this is the Security Resilience Initiative on the road, real time, starting to build more ships in the United States of America. And, you know, if you look at America, you know, and Andrew, I can't even overemphasize this. If you want the world to be safe and free for democracy, it's predicated upon two things: have maintained America's preeminent military strength, and that's pre-ed, pre- the the foundation that has maintained America's economic strength. And that's why we're here. We give it our all. There are a lot of other people helping, by the way. JPMorgan is just one player in all that.
Senator McCormick, you're hosting a big event. Jamie's on his way there in just a little bit. This is now the second event you've held in the state. In terms of, in terms of where this all goes, how much of this is about attracting money into the state that from legacy companies? How much of this is about new companies? There's obviously a whole sort of new defense tech space that's opening up around the country.
Yeah. Well, thanks for having me, Andrew, and, um, great, great to hear Jamie and really appreciate his leadership, really in the country of talking about this is a is a key responsibility not just of defense companies but of of a big financial institution like JP Morgan. What's happening here today is is really exciting. This is essentially the answering the question of how you achieve peace through strength. What does it mean to retool our industrial base? What does it mean to take advantage of these new technologies to make sure that we can protect those young men and women abroad and keep America safe and secure? So, here over the last two days, we have 1,300 participants. We have 500 organizations, companies represented. We have 600 C-level executives, and the focus is on how do you expand the people at the table and do things differently to make sure that our defense industry can evolve to make sure and ensure that we are the the strongest military in the world. And so, today we're going to announce over $10 billion of investments across 30 different announcements that are going to support 4,000 jobs. But it's, it's much more than that. It's getting everybody aligned on on how we achieve this transformation defense. We have the president of the North American Building Trades here. We have great financiers like Jamie and John Gray. We have all the CEOs of the of the defense contractors. We have some of the biggest investors in defense tech. That's what it takes. It's a team sport, and we need to get all the people at the table to make sure America's strong and safe.
Senator, help me with this. When you think about the defense budget, on one end, there's been a talk for a long time about how do we frankly, you know, hold the line, prevent the, you know, prevent us from spending more money. There's been a long talk about, you know, know, technology uh be able to do that. Uh this administration spent a lot of time uh talking to Europe uh and some of our allies about spending their own money so that we're not spending more money, and yet we are now spending uh about a 44% increase uh in terms of defense spending in this country. What, what do you think is the the right number?
Well, you know, I, you have to look at it within the context. The one thing the government is responsible for is keeping America safe, kee- keeping our citizens safe. And you have three big factors. One is the world's a dangerous place and getting more dangerous with the rise of China. You have the face of war changing dramatically with drones and AI, and you see that in the battlefields of Ukraine and Iran. And frankly, you have a defense uh uh industry that's been lethargic and hasn't kept up. So, we do need to increase the size of the pie, and that's why I've supported, um, President Trump's budget proposal and voted for the NDAA yesterday. Unfortunately, that didn't pass because there were was opposition from the Democrats. But, we also have to reallocate how the dollars are spent within that pie of money. And frankly, we have to do things a lot differently. Most of the companies here are our next generation emerging technologies. Our procurement process in defense uh has been uh very slow and uh it's been very difficult for a for new entrants to get in. That's changing under President Trump, but we need to accelerate that change. Um, so, we need to do both. Spend more, but spend it differently. And better.
Jamie, you, Jamie, you've you've long been uh warning that that some of these uh skirmishes and wars and other things could tip the balance in terms of the global economy, and yet the market has remained uh, I would argue, shockingly resilient. Uh, we've gotten your earnings, a lot of other bank earnings have come out. Uh, it looks like things are are going quite well. How do you think about the the risk then in this moment uh given all the things that are taking place around the around the world?
Yeah. So, I, look, I totally support what the, just said. I mean, this transcends the economy this year and next year. I mean, national defense is sine qua non. And obviously, you want to spend it wisely, but when Ukraine got invaded, and then you had the terrorist activity in the Middle East, and obviously, our war in Iran, you know, look, the world learned again, the world's not a safe place. What makes the world a safe place is a American leadership and having the strongest military in the world, which is the way to prevent actual wars from getting worse over time. And so, you know, the senator mentioned is that the these are huge geopolitical risks. We don't know how they're going to affect the economy or when they're going to affect the economy. And yes, the economy seems more resilient, but this is way beyond that. This is about global security, American security, American leadership, uh, and doing it right. And if sen- senator mentioned something that's very important to us, policy. We have to give the military more ability to change how they procure things, have more multi-year budgeting. You know, we have to prepare like we didn't have enough productive capability to build all the missiles we need. Well, obviously, we should have productive capability to turn on if we need to double, triple productive missiles. That's going to take a a change of budgeting and maybe some legislation through Congress, but these are things we have to do. And I, I'm just thrilled that people see it and they're acting on it. And like I said, I wouldn't look at this as a budgetary item. Obviously, be efficient. I would look at this as a sine qua non. This is what you do to protect uh America and keep it free and safe.
Jamie, when you think though about the broader economy right now and the markets, how much of that is being buoyed, do you think, by AI? I mean, we we talk about AI almost, you know, incessantly. Um, and yet, we also talk about what's happening in Iran, but uh, you know, typically during a situation like that with oil prices up and everything else, you think it'd have a bigger impact, but it seems like the the AI piece of it is is winning that battle, if you will.
Yeah, look, the American economy is hugely complex. I mean, we, I think we spend $4 trillion in cap backs. You know, AI is $750 billion. It was probably driving it, but know, when you travel around the world, you know, Andrew, I mean, our innovation here is everywhere. It's in manufacturing, it's in agriculture, it's in AI. Some of that's being driven by AI, it's in the medical profession, it's it's everywhere. You know, AI itself, when you, The American Post said, "It's going to cure cancers. It's going to reduce deaths on the road, and deaths in hospitals. It's going to invent new composite materials. It's going to be an unbelievable thing." And like any new technology, there are downsides. You know, planes were misused, drugs were misused. Uh, so, we, we want to do is get the best out of AI, and you know, now you have AI for the first time, you're starting to see it is it being deployed deeply in research, medical science, the physical world, the physics world itself. And so, there's a lot more to come in AI, and you know, we'll see how it plays out, but yes, the world is more resilient. It does not mean, and again, this is very important, that there's not a tipping point. It just may be a lot harder to get there. And And uh, so, we just, you know, we should always be cautious about that. But like I said, this this transcends AI, and it transcends anything else. Whether you had AI or not, we should be having this initiative today. This is what This is what's important for the future of America.
Jamie, whenever you are.
If I, if I could add to, if I could add to that, Andy.
Okay, go ahead, go ahead, Senator. Then I'll, I'll.
Yeah, if I could just, yeah, if I could just add to that, that when when we're here at this Defense and Innovation Summit, AI is underpinning all of this dramatic change. So, when you think about the the compute power that's needed in the data centers, you think about energy security, you think about drone warfare, or robots on the battlefield, all of that's underwritten and underpinned by AI. So, this convergence of military technology and commercial technology is more important now than it's ever been, and that's part of the reason we need dramatic reform and innovation, and that's what we're trying to do here today.
Yeah, okay, Jamie. Here we go. It was Davos a couple of years ago, I don't, I remember what. And I know you remember the quote, "I'm just barely a Democrat." So, now that's what you said anymore. Now you got the Look what's happening. I mean, look around you. Think about this. Think about the center that of the Democratic Party right now. Would you like to go all the way now? And then think about someone like McCormick, who is a Republican. If there's someone from Pennsylvania that's going to be president, don't you think it should probably be be this guy at 60 years old or whatever it is? Will you, will you give me that? Will you give me a nod on on those two fact? Have you made the, have you made the total switch? You made the total switch yet? Have you jumped in? The water's fine. Come on in.
Yeah, I'm not, I'm not, I'm not doing any of that for you, but I will tell you David McCormick will be a great president, very capable. I love the fact that him and Senator Fetterman talked together. That is democracy. You kind of work things out. The democracy by its nature is compromised. It isn't like one part of the thing just jamming what they believe in the other part. And so, I applaud what they're doing. I think it's excellent. And and Joe, when I go to DC, you know, we always complain about the people on the, you know, the far left and the far right. But when you go to DC, there are a lot of people you know, in the middle. They want to do the right stuff. They want to get policy right. They need to have, they need government. They need collaboration. Uh, so.
Say it again.
Center left. Still, still a Democrat.
I'm, I'm nothing at this point.
[laughter]
You're so much. You're so. And we love having you on.
Let me ask you a different question, which is, we had Alex Karp from Palantir on the broadcast. Obviously plays a huge role in the defense space and sector. I hope maybe you guys had an opportunity to see parts of that interview because it appeared to go viral. He made a couple of really provocative comments both about how he felt that a lot of the AI LLM companies, large language model companies, effectively were both overcharging their customers to the point that a lot of corporate clients may not be getting the sort of ROI return on investment that they would hope for, but also worries about IP itself in terms of whether some of the these large language model makers are effectively collecting prompts from companies and then going into their businesses. And I'm thinking Jamie, I wanted to get your sort of take on that. He seemed to suggest if we called a bunch of CEOs, at least privately, they would they would express that view. So, I wanted to ask you, but I also wanted to ask Devin McCormick how he thinks about that in the in the defense space itself in terms of thinking about the role of government. Jamie?
Yeah, so look, I, I didn't see that. I, I did hear about it, but I love Alex Karp's unabashed patriotism. And I, I feel the exact same way, and anyone who doesn't understand that this country, what this country stands for, should really read the history books all over again and stuff like that. So, I don't know exactly what his comments were. Obviously, companies are going to be looking at how they spend their money and looking for ROIs, and there's going to be a lot of token management, and I've already seen tons of systems, you know, how people are going to send, you know, queries to the cheapest token and the cheapest thing that's already happening. And that's going to happen with power, it's going to happen with data centers, going to happen with everything we do that, of course, you got to have a return on over time. So, I would expect the LMM players know that, and they have to navigate as they could be negotiating with these big companies, and we are very protective of our data and our IP. And so, you know, and I know there are issues about how it gets distilled out in the marketplace. You know, you, you should assume that JP Morgan will do everything it can to protect its own data, its own IP, to protect our customers.
But, but are you hearing from other CEOs who are saying we're not, we're not getting the ROI yet on this and either thinking about, you know, how how to? I, I think you're at very early stages. So, you know, obviously a lot of CEOs are talking about what is the return AI, how do you look at the NPV? Should you even look at NPVs? There's sometimes, you know, you're doing some as table stakes. You, you want to do a better job for your customer. You can't look at an NPV or something like that, but everyone's using it. They're going to get better at it. They're all going to navigate it. They all see the cost going up rapidly. So, of course, they're all going to be rational about it, like any other resource we use. And, you know, we, we, we negotiate with vendors all the time about, you know, what, what the value to us and why we want it. And uh, so, you know, that's kind of a normal state of affairs between uh companies and and uh their vendors.
Jamie, you're, you're almost a trillion-dollar company. First time, I think. Are you, are you following that at all? Do you, were you aware?
Of course, I'm aware, Joe. You don't think I pay, pay attention to the marketplace? Yeah, no, I, I'm aware of that. I'm, I'm looking at the company.
Time, we're going to be expecting a big party at the spanking new headquarters if you're still [laughter] here at, you're still here in New York City and and don't get the hell out of here alive.
I will invite. And I'll invite you, Becky, and Andrew, okay?
We will, we will do. And business is good. I mean, the overall backdrop is good, isn't it? And, and I mean, the market, the stock market, people say, "Oh, that's the market. It has nothing to do with the real economy." The stock market is the ultimate barometer of of how we're doing, don't you think?
Not always, Joe, cuz the stock market sometimes has been dead wrong if you look at '72 to '74. So, but, but I, but I do think.
Years for that, Jamie.
Things are very good right now. Companies are growing. Earnings are up. Uh, uh, employment is, unemployment is low. So, for now, you know, it's pretty good.
Uh, I'm going to leave it, uh, give it, give the last word to the Senator, Senator McCormick. Uh, just weigh in on the AI piece of this, because the other component part is, you know, you're trying to create more and more jobs in your state, and at the same time, I think there's a big question about whether AI is going to help or ultimately hurt with that. Where do you land?
Well, first of all, Freedom's Forge in World War II was always about it. Always has been about the private sector and the government working hand-in-hand to make sure America's strong. So, that's absolutely essential. Listen, this AI revolution is, this pace of innovation is unlike anything we've ever seen in our lifetimes, maybe in human history. It's essential we win this battle, uh, that we maintain supremacy in AI as we, um, as we think about it, the dangerous world. We can't have China uh leading the charge on AI leadership. So, uh, the compute power, the energy infrastructure, uh, it's all critical. In Pennsylvania, we have not seen any uh job loss in the skilled, skilled trades. In fact, as Jamie said earlier, we have huge demand. If you're a, if you're an experienced welder, electrician, we can't get enough of you. We have to have workforce that meets this incredible demand. I'm sure it'll create some, um, some disruption uh in the workforce over time, but I think it probably creates a lot more opportunity. And, uh, you know, as I said earlier, we have the trades here with us today because we can't be, we can't meet the needs for our changing defense industry and our defense industrial base without these people who can build things. So, uh, we're building things again in America. We're building things again in Pennsylvania, whether it's US Steel or Hanwha or Eli Lilly's new plant in the Lehigh Valley. Uh, that's a large part due to the president's policies, and it's due to industry and government coming together and say, "How can we make sure America wins?" America can always win if we're uh working as a team on these things.