What's up: How Trump will decide which chips companies must give up equity; Nvidia halts H20 chip production work; Google measures enviromental cost of AI prompts, Google, Meta set to enter cloud deal.

Good morning. Everyone wants a piece of the AI action, even though one study after another raises questions about the extent that companies are capturing sufficient value from it. The U.S. and China are using their leverage to control the supply chain for chips and other crucial infrastructure, with the Trump administration even eyeing equity in certain semiconductor companies that aren’t boosting investment in the U.S. (More on that below.)

Yet earlier this week, a new study from MIT said that only 5% of companies were driving fast revenue growth from AI. It’s not the first such observation. Philip Rathle, CTO of graph database software company Neo4j, noted at a WSJ event in October that roughly 70% of business customers’ generative AI projects were still stuck in a pilot or testing phase.

The AI productivity paradox. Neither sentiment is incorrect. The demand for AI is real, and it is transforming companies and the economy. But for most companies, it’s too early to start thinking in terms of productivity or return on investment, because they are still figuring out how to use it.

And that’s normal. It took years for the internet to have a measurable impact on productivity. As Lareina Yee, senior partner and director at the McKinsey Global Institute, told me earlier this year, only 1% of U.S. companies that have invested in AI report that they have scaled their investment, while 43% report that they are still in the pilot stage. “One cannot expect significant productivity gains at the pilot level or even at the company unit level. Significant productivity improvements require achieving scale,” she said.

For now, the most relevant questions about AI and AI agents in particular are how their capabilities are evolving and whether they scale. Once we see a fuller demonstration of scale, we can measure value in a meaningful way.

What is the ROI  on your laptop? AI is becoming so pervasive that we may not even think about it in terms of productivity, according to Jeetu Patel, president and chief product officer at Cisco. “20 year-olds coming into the workforce don't think of this as a productivity tool. They think of it as a companion, a brainstorming partner,” he told me. “How many people do an ROI for a laptop? No one. You couldn’t even do your job without it…. Everyone has a smartphone. We all pay $1,ooo for this thing. It would have seemed absurd 20 years ago, and now it is like oxygen, you know? I think that is going to happen with AI.”

Taking equity in chip companies. While the Trump administration is considering taking equity stakes in companies receiving funds from the 2022 Chips Act, it has no plans to seek shares in bigger semiconductor firms that are increasing their U.S. investments, a government official tells the WSJ.

The government is currently in talks to take a 10% equity stake in Intel, but it is not looking to own equity in companies like Taiwan Semiconductor Manufacturing that are increasing their investments, the official said.

The approach is the latest from the administration rewarding or punishing tech companies based on their U.S. investments, notes the Journal. President Trump recently said he would exempt companies spending more in the U.S. from roughly 100% tariffs on chip imports.

Shifting $$ to rare earth projects. The Trump administration is also looking at shifting some $2 billion from the Chips Act to fund projects linked to rare earths, minerals critical for electronics and defense industry supply chains, Reuters reports.

Snagging bulk discounts. The General Services Administration said Thursday that Google will provide its Gemini for Government AI and cloud services for 47 cents each, the Hill reports. Earlier this month AWS said it would offer federal agencies up to $1 billion in discounts while OpenAI said it would charge U.S. federal agencies just $1-a-year for its enterprise product.

Even making government websites prettier. Airbnb co-founder Joe Gebbia was named the government's chief design officer following the signing of an executive order Thursday. His remit will include redesigning government forms, processes and websites, Bloomberg reports. 

Weeks after the Commerce Department began issuing licenses for Nvidia to send its H20 chip to China, the chip maker is now telling some suppliers to suspend production work, the Information reports. The stoppage comes amid claims by the Chinese government that the chips posed security risks.

Meanwhile, shares of companies across the semiconductor supply chain were leading gains in Hong Kong and China on Friday following speculation on Nvidia's recent move.

Google released details on the colossal amount of power required to respond to everyday AI queries. 

The company in an environmental report found that its emissions have jumped 51% since 2019 because of AI needs. But its AI systems are becoming more efficient, Google said, and the energy used to power a median Gemini text prompt is 33 times less today than it was 12 months ago.

Still, little things can add up. Every time a user asks Gemini a query, it takes the same amount of energy as watching nine seconds of TV. A single Google Gemini text query emits 0.03 grams of carbon dioxide equivalent and consumes about five drops of water, according to Google.

Meta Platforms has signed a $10 billion cloud deal with competitor Google as the social media company looks for more computing power to supercharge its AI efforts, the Information reports. The agreement marks the first major cloud deal between the two companies.

Crusoe, the developer behind OpenAI’s Stargate data center project in Texas, is in talks to raise funds at a $10 billion valuation as the former cryptocurrency mining operator aims to become a major cloud provider, the Information reports. 

AI startup Anthropic, maker of the popular Claude AI models, is in talks to raise $10 billion in a new round of funding, Bloomberg reports.

Axios sees an agreement by Thoma Bravo to acquire HR software provider Dayforce for $12.3 billion as a possible signal for additional HR tech mergers amid a slowing labor market.

OpenAI is planning this year to open its first office in India, ChatGPT’s second-largest market by user numbers.

Hackers are using AI tools to quickly whip up replicas of real websites, complete with fake forms designed to capture personal or financial details. Hackers have created sites imitating everything from well-known retailers such as Amazon and PayPal to toll-collection agencies, the WSJ reports.

... and AI is contributing to a rise in CEO impersonator scams, with criminals using deepfake voice and video of executives to bilk companies out of millions. Companies reporting CEO impersonation attacks include carmaker Ferrari, cloud-security company Wiz, and advertising firm WPP, WSJ Cyber Pro’s Angus Loten reports.

For anywhere from $40,000 and $65,000 a year, parents can enroll their children in Alpha School, which says it uses AI-enabled software to help students complete core subjects in just two hours daily, WSJ reports. Alpha has existing locations in Texas, Florida and California. It comes to New York in September.

Intuit said sales rose by 20% in its latest quarter, but forecast slower sales gains going forward. Last month, the tax preparation company last month launched a set of AI agents on its business platform that aim to automate functions across CRM, financial analysis, payments and accounting.

Workday posted a profit of $228 million, compared with $132 million in the same quarter a year earlier. Subscription revenue, which makes up most of the human-resources software company's  top line, was up 14% at $2.17 billion.

A federal judge has ordered that the government dismantle much of “Alligator Alcatraz,” one of the flagship immigrant detention facilities in President Trump’s enforcement effort. (WSJ)

Trump’s hopes for a summit with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky to hammer out a peace agreement haven’t materialized. Nor has his backup plan for Putin and Zelensky to meet by themselves to discuss ending the 3½-year-long war. (WSJ)

International food-security experts said a famine has taken hold in the Gaza City area, the first-ever such determination in the Middle East and one that puts more pressure on Israel as it prepares to expand the war amid a catastrophic humanitarian situation. (WSJ)

Walmart, Amazon and the owner of T.J. Maxx are scooping up market share from rivals by offering shoppers good deals and convenience. (WSJ)

This September, The WSJ Technology Council will convene senior technology leaders to examine how AI is reshaping organizations—redefining teams and workflows, elevating technology’s role in business strategy, and transforming products and services. Conversations will also delve into AI’s evolving security risks and other fast-emerging trends shaping the future.

Select speakers include:

Carolina Dybeck Happe, COO, Microsoft
Severin Hacker, CTO, Duolingo
Yang Lu, CIO, Tapestry
Tilak Mandadi, CTO, CVS Health
Helen Riley, CFO, X, Google's Moonshot Factory

September 15-16 | New York, NY
Request an invitation | Participants and program

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.