Good morning. Fears that AI will wipe out massive numbers of jobs in the near-term have accelerated in recent weeks, but the evidence suggests they are overblown.

Block, the payments company founded by Jack Dorsey said last week that it plans to lay off 40% of its workforce. That news followed the viral “Doomsday AI” memo from Citrini Research that shook financial markets.

Dorsey says his company is a bellwether of how companies are going to adjust their employment levels because “intelligence tools have changed what it means to build and run a company.” He predicted that the majority of companies will reach the same conclusion and make similar structural changes within the next year.

Not everyone is buying it, according to the Journal. “Rather than leading American corporations into a brave new future, some Wall Street analysts say, he is capitalizing on a chance to slash costs at a company with excessive staffing,” Angel Au-Yeung reports.

I spoke with Joseph Briggs, who co-leads global economics at Goldman Sachs, about AI’s likely impact on jobs.

Leadership Outlook: AI and jobs

In a new research report, Briggs says his baseline forecast for the coming decade is that 6% to 7% of workers will be displaced by AI. He expects AI to lower annual hiring by 1 million jobs and boost the annual unemployment rate by a bit over one-half of a percentage point. That’s bad enough, but it’s inline with the history of other technology transitions.

“It's not as if we don't think that AI is going to have an impact. As a macroeconomist when I say that 6 or 7% of workers will lose their job or be displaced during the AI transition, that strikes me as a pretty meaningful impulse,” he said.

But he argues the concerns around AI job losses have nonetheless “run a bit far.” The near-term impact on jobs is limited so far, and over time, technology has been a driver of employment. Job growth for legal service workers, which are considered highly exposed to AI automation, is at its fastest pace in over 20 years, according to Briggs.

Over the long run, Briggs said, AI is expected to be overwhelmingly labor-augmenting rather than labor-substituting. To protect themselves, workers must actively engage with AI to expand their daily tasks. And leadership must find new revenue sources, moving beyond mere efficiency to actual capability expansion.

AI industry sees the light with bets on photonics tech. The AI infrastructure race is moving beyond raw computing power to the physical limits of how fast data can move between chips.

• Chip startup Ayar Labs raised $500 million at a $3.8 billion valuation to commercialize a technology that replaces copper connections between chips with fiber-optic ones. The technology, called co-packaged optics, allows data to travel at the speed of light while consuming less energy. 

• And Nvidia is investing $2 billion each in Lumentum and Coherent, two companies developing photonics technology. The deals are aimed at accelerating the development of high-bandwidth, energy-efficient optical connections seen as critical to the next generation of AI infrastructure.

AWS faces drone attacks. Drone strikes tied to the Middle East conflict damaged two AWS data centers in the UAE and a facility in Bahrain on Sunday, knocking services including EC2 and S3 offline across the region, CNBC reports. AWS warned that recovery would take a while given the physical damage.

Iran cyber activity surges. The digital activity of Iranian-linked cyber groups has risen by tenfold since the start of the conflict, according to Check Point Software Technologies, a Tel Aviv-based cyber security company. 

Block blames AI for layoffs. Analysts aren't convinced. News last week that Block was slashing 40% of its workforce — some 4,000 employees — in a big bet on AI sparked another round of anxiety that the technology was on the verge of wiping out white-collar jobs and devastating the economy. Not everyone is buying it, the Journal reports.

Some accused CEO Jack Dorsey of capitalizing on a chance to slash costs at a company bloated with excessive staffing, the Journal reports.

"This isn't an AI story. It's a workforce correction wearing an AI costume," wrote Jason Karsh, a former Block employee, on X.

Analysts point to years of overhiring, with headcount ballooning from 4,000 in 2019 to nearly 13,000 by 2023, and the company's struggles with profitability amid expansions into music streaming and bitcoin.

Six months earlier, Block celebrated its 16th anniversary with a $60 million employee extravaganza featuring Jay-Z and a nighttime DJ set by Anderson .Paak.

Was it all about the vibes? The WSJ looks at the split between the Pentagon and Anthropic as motivated in part by the contrasting personalities and worldviews between the AI giant’s CEO Dario Amodei and Defense Secretary Pete Hegseth.

Amodei and Hegseth approach the question differently. A bespectacled researcher who often twirls his curly hair, Amodei authors lengthy documents philosophizing about the importance of AI safety and is known for his deliberate approach to problem solving. He has been a vegetarian since childhood.

Hegseth is a former Fox News host with several tattoos tied to his Christian faith and military service. Videos of Hegseth lifting weights frequently circulate on social media and he played a role in President Trump’s decision to rename the Defense Department the Department of War.

As of Monday, the Pentagon hadn’t formally issued the designation against Anthropic, raising the possibility that a deal could be reached.

OpenAI revises Pentagon deal. The AI startup said it was working to update its Pentagon contract after criticism that the original deal contained loopholes permitting domestic surveillance. "We shouldn't have rushed to get this out on Friday," wrote CEO Sam Altman in a post Monday. "The issues are super complex, and demand clear communication." Updates will include ensuring that AI isn’t used for domestic surveillance of Americans, Bloomberg reports. 

Anthropic’s feud with Pentagon earns fans. Anthropic appears to be getting as much love from members of the tech community and casual AI users as it got rejection from the Trump administration, the WSJ reports.

In the last few days, Anthropic’s chatbot Claude hit No. 1 in downloads on the Apple App Store, surpassing OpenAI’s ChatGPT for the first time.

In San Francisco, Anthropic fans wielded brightly colored sidewalk chalk to ornament the pavement outside of the company’s office with messages of thanks, laudatories such as “You are patriots” and references to Nelson Mandela. Outside OpenAI’s office, chalk artists asked employees, “Maybe it’s time to quit?”

Congressional Democrats vow to fight. Bloomberg reports. Sen. Ron Wyden (D., Ore.) pledged to "pull out all the stops," seeking bipartisan support for legislation to address the Pentagon's Anthropic ban, Bloomberg reports.

The U.S. is facing increasing risks to its military forces and diplomatic presence in the Middle East as Iran is launching waves of missile and drone attacks across the region that are testing its ability to defend a swath of territory. (WSJ)

Stock futures deepened losses and oil prices pushed higher, as the Middle East conflict showed signs of widening and escalating on its fourth day. (WSJ)

The Trump administration, in pressing its case for war with Iran, has made a number of accusations about the regime’s threats. U.S. officials and lawmakers with access to classified information, along with experts who have spent their careers poring over public data and government reports, say the administration’s assertions are incomplete, unsubstantiated, or flat-out wrong. (WSJ)

Americans weary of high prices have recently been able to count on cheap gasoline as a welcome offset for sticker shock at the grocery store and beyond. The Iran conflict threatens to throw that off course. (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.