What's up: Walmart CEO issues AI wake-up call; Debt is fueling the next wave of the AI boom; World models: The key to the next AI leap.

Good morning. Recent waves of technological development, from the mobile phone to social media, have been driven by consumers. Each of the great questions surrounding AI are tied to businesses.

Businesses hold the key to providing AI with data to keep training their models, now that public sources on the internet are largely tapped out. And the exploitation of that data is key to providing models with the context that is necessary to drive a return on investment in AI. That can only happen if companies work closely with AI developers, and if they are organized and led in a way that supports those alliances.

To that end, Mistral AI, Europe’s top artificial intelligence startup, will form partnerships with enterprises to further train existing models on their own proprietary data, a phenomenon known as post-training, co-founder CEO Arthur Mensch told the WSJ Leadership Institute’s Isabelle Bousquette last week in Montreal. She interviewed him during All In, an AI event, and also had a conversation with him onstage.

The Paris-based AI lab’s generative AI models compete with those from companies such as OpenAI and Anthropic. It recently doubled its valuation to $14 billion, thanks in part to a $1.5 billion investment from Dutch chip-equipment giant ASML.

Co-developing with customers. Mistral embeds its own solutions architects, applied AI engineers and applied scientists into the enterprise to work on improving models with the company’s data. Those sources of revenue allow the company to give away its open source AI, although it does sell some models under a commercial license.

“The curse of AI is that it looks like magic. So you can very quickly make something that looks amazing to your boss,” but it doesn’t scale or work more broadly, Mensch said.

It’s a mistake, according to Mensch, to think that equipping all employees with a chatbot will create meaningful gains on the bottom line. In a large sense, the future of AI development now lies inside the enterprise itself. “This is a pattern that we’ve seen with many of our customers: At some point, the capabilities of the frontier model can only be increased if we partner,” Mensch said.

Is your company using AI in a way that taps into its proprietary data? How is that going? Use the links at the end of this email and let us know.

It's an AI world. One thing is clear, the primary job for executives is learning how to navigate and lead through this moment in which AI is everywhere and everything all at once. More below.

AI's growing pull on jobs.

Walmart CEO issues AI-powered wake-up call. Walmart Chief Executive Doug McMillon last week said that some jobs and tasks at the retail giant will be eliminated, while others will be created. 

The future workforce: Same but different. Walmart executives tell the WSJ's Sarah Nassauer and Chip Cutter that the size of its global workforce will stay roughly flat over the next three years, but the mix of those jobs will change significantly.

Some changes are already rippling across the workforce. Walmart has built AI agents for customers, suppliers and workers. It is also tracking an expanding share of its supply chain and product trends with AI. New roles have been established, too. Walmart created an “agent builder” position last month—an employee who builds AI tools to help merchant

Meanwhile, other corporations link AI to job cuts

Deutsche Lufthansa said it would cut about 4,000 jobs by 2030, mostly in Germany, as the airline continues to roll out artificial intelligence and automation of tasks. The airline group, which employs around 102,000 people world-wide, said the cuts would mainly affect administrative roles.

The announcement comes days after Germany’s Robert Bosch said it plans to slash 13,000 jobs over the next five years, as the car-parts supplier leans into AI to maximize productivity.

AI rewrites corporate finances.

Debt is fueling the next wave of the AI boom. In the wake of several stunning announcements by AI firms on their infrastructure build outs, attention is growing on the debt fueling their AI aspirations.

Consider the recent OpenAI, Oracle $300 billion contract signed this month in which Oracle is to set up AI computing infrastructure and lease it to OpenAI.

To make good, Oracle has to spend on that infrastructure before it gets paid in full by OpenAI. That means a lot of borrowing, says the WSJ's Asa Fitch. Analysts at KeyBanc Capital Markets estimated in a recent note that Oracle would have to borrow $25 billion a year over the next four years.

OpenAI’s position looks tenuous. It would need to grow to more than $300 billion of annual revenue in 2030 to justify the spending envisioned in the contract, D.A. Davidson analyst Gil Luria estimates. The company’s current run rate is about $12 billion.

And then there is Nvidia. The Information compares the amount of cash it is pumping into AI companies to a stimulus program. 

Advances in AI making the SciFi real: Humanoid robots

What are ‘world models’? The key to the next big AI leap. Artificial intelligence's next leap could come through "world models," simulations of the world that include all the things required to plan, take actions and make predictions about the future, including physics and time.

WSJ Tech Columnist Christopher Mims reports that researchers at Google DeepMind have created a world model, Genie 3, that can generate photo-realistic, open-world virtual landscapes from nothing more than a text prompt. The model could help train the AI that someday pilots robots, self-driving cars and other “embodied” AIs, project co-lead Jack Parker-Holder tells the WSJ.

World models on your face: Could Meta's smart glasses train the next generation of humanoid robots?

Key hires. Earlier this year, Meta hired Marc Whitten, the former CEO of General Motors’ autonomous-car subsidiary Cruise, to oversee a new robotics effort. Among other recent recruits is Sangbae Kim, an MIT robotics professor, to lead R&D. 

Reading List

The U.K. government will underwrite a $2.01 billion loan guarantee for Jaguar Land Rover as the British automaker reels from a cyberattack that has crippled production for around a month.

President Trump on Friday called for Microsoft to fire Lisa Monaco, its head of global affairs, who previously served as deputy attorney general and homeland security adviser under the Biden administration.

Congressional leaders head to the White House on Monday amid low expectations from either party of avoiding at least a brief government shutdown, less than 48 hours before federal funding lapses and agencies partially close. (WSJ)

Investors are gobbling up corporate debt like it is going out of style—even though the rewards, by some measures, are lower than they have been in decades. The frothy mood has some on Wall Street worried that the market is priced for perfection and ripe for a fall. (WSJ)

New York City Mayor Eric Adams’s trademark swagger was missing Sunday when he announced he would halt his re-election campaign, a decision that narrows the field in a hotly contested race to run the nation’s largest city. (WSJ)

St. Louis’s tornado was months ago, but it’s still waiting for hundreds of millions in federal recovery funds to arrive. It’s part of the Trump administration’s plan to shift responsibility to the states and shrink the Federal Emergency Management Agency. (WSJ)

The WSJ CIO Journal Team is Steven Rosenbush, Isabelle Bousquette and Belle Lin.

The editor, Tom Loftus, can be reached at thomas.loftus@wsj.com.