transcript

Speaker 1:
[00:00] So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300,000 can use AI to fill their HR questions, resolving 94 percent of common questions. Not noise, proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smart to business, IBM.

Speaker 2:
[00:34] The Senate funds ICE and Border Patrol, pushing past Democratic calls to reform how immigration enforcement is carried out. Plus, another shakeup of the Pentagon's top brass and the NIMBY movement finds its next target.

Speaker 3:
[00:48] Americans are hiding lots of stuff in self-storage facilities, but now we have to hide the self-storage facilities.

Speaker 2:
[00:55] It's Thursday, April 23rd. I'm Luke Vargas for The Wall Street Journal, and here is the AM Edition of What's News, the top headlines and business stories moving your world today. We begin in Washington, where senators pulling an all-nighter have pushed forward a budget plan to fund DHS, in spite of Democratic opposition and calls for restrictions on enforcement operations. The bill, which passed by a 50 to 48 margin, will hand ICE and Border Patrol an additional $70 billion and see them funded through the end of Trump's term. The bill now heads to the House. Defense Secretary Pete Hegseth has fired Navy Secretary John Phelan in the latest shakeup at the Pentagon after Hegseth's dismissal of nearly two dozen military officers and amid an ongoing feud with the Secretary of the Army. Phelan didn't immediately respond to a request for comment. Joining me with more is Journal Washington coverage chief Damian Paletta. Damian, we report that Pentagon officials told Congressional aides that Hegseth had fired Phelan because he felt he wasn't moving quickly enough on President Trump's shipbuilding priorities. That priority will now fall on current Navy Undersecretary Hung Kau who's being elevated to Secretary. What do we need to know about all this?

Speaker 4:
[02:13] So in getting rid of the Navy's Secretary, he's getting rid of someone who is in the middle of this Iran conflict, in the middle of this naval blockade that's core to the White House's strategy of trying to pressure Iran. And it's very unusual in the middle of a war to do something like this with someone so senior. The reason that this appeals to President Trump, though, is because part of his whole agenda, his economic agenda, is reviving, and his military agenda quite frequently, is reviving the shipbuilding industry in the United States after really decades of lower output. And the naval secretary who was just fired actually was very plugged in with President Trump. They would meet at Mar-a-Lago and talk quite often. But President Trump believes that the shipbuilding industry needs to be reborn much faster than is happening.

Speaker 2:
[02:57] Damian, it seems telling how big a challenge this could all be of someone like Whalen, who said he regularly texted with Trump in the middle of the night about shipbuilding and was actually the one to pitch him on the idea of new Trump class warships, couldn't get this done.

Speaker 4:
[03:10] Right. Well, it's one thing to be able to talk to President Trump and text him about it. It's another thing to actually build the ships. And so maybe that's what after months and months the president is looking for. President Trump envisions this Trump fleet of naval ships. You know, he has a personal identity now that he wants associated with these ships. But it's very complicated, expensive, and it quite frankly is going to need a lot of cooperation from Congress if they're going to get the kind of output that President Trump is envisioning. And whether the fired naval secretary's successor can pull this off is an open question.

Speaker 2:
[03:42] That was The Journal's Damian Paletta. And a Virginia judge has blocked a new voter approved measure to redraw the state's congressional map, siding with the Republican National Committee, which had contended that the referendum was procedurally invalid. Virginia's attorney general said he would appeal the injunction and look forward to spending the election in court. If upheld, this week's redistricting vote would give a big boost to Democrats' efforts to reclaim the US. House in November. Meanwhile, the conflict with Iran has entered a damaging new phase that leaves the Strait of Hormuz closed and the prospect of escalation looming. Although President Trump has agreed to an indefinite extension of a ceasefire with Iran, tensions are nevertheless continuing to flare in the vital waterway the US and Iran are now boarding ships and taking control of commercial vessels. Drew Dowell is the Journal's Middle East editor.

Speaker 5:
[04:37] Both Iran and the US are talking tough out front and with a lot of threats going back and forth. What we had understood is that in the background, there are actually exchanges of messages and some level of engagement that could form the basis for negotiations. But, you know, right now the situation in the Strait has come to the fore. Iran is insisting that the blockade be dropped before it comes to the table. The risk is that as this goes on, and both sides take provocative steps, like boarding each other's ships or pulling ships into quarantine, that someone could take a military action that then escalates. It's not as dangerous as like kind of the outright war was, but it's still fraught and still a significant issue for the global economy, which depends heavily on Persian Gulf oil supplies.

Speaker 2:
[05:22] While securing access to those vital oil routes is also why the Trump administration is looking to reset ties with the North African country Eritrea whose coastline faces the Red Sea. We are exclusively reporting that Trump official Masad Boulos has discussed lifting sanctions on the authoritarian state. That comes as Iran-backed Houthis have threatened to support Iran by shutting the Bab el-Mendeb Strait at the mouth of the Red Sea. However, officials warn that a change in US policy could trigger tensions with landlocked Ethiopia, which says that it has historic claims to Eritrean coastlines. Coming up, Tesla surprises Wall Street with better profits. We'll take a look at how America's self-storage craze has reached a tipping point after the break.

Speaker 6:
[06:09] Time is your most important asset, and AI is transforming the speed of business. Your innovation and how you protect it depends on the technology you choose to trust. AI is changing the world. We're securing it. Crowd strike. We stop breaches.

Speaker 2:
[06:27] US officials are trying to get a grip on how much risk has built up in the $3 trillion private credit industry. Here's finance reporter Caitlin McCabe.

Speaker 7:
[06:36] So sentiment about the private credit industry really began shifting last year and then kicked into overdrive further this year when traders really started to get spooked about AI and how it would affect software companies. Some private credit firms have quite a bit of exposure to software loans. We've also seen investors asking to pull money from these private credit firms. And so now this is just the latest step of really seeing storm clouds growing over private credit.

Speaker 2:
[07:06] Three different regulators are now probing the sector, with the SEC focusing on valuations and loan selection, the Treasury Department looking into firms' business models, and the Fed asking banks about their exposure to private credit. Though, as Caitlin explains, the watchdogs aren't yet sounding the alarm.

Speaker 7:
[07:23] Regulators are just starting to ask questions. They're not sounding dire alarms. And the Trump administration has basically said the same. They don't think losses in private credit funds would ripple through the financial system. And that's really similar to what executives and bankers have said, too. At the same time, regulators are honing in on some of the areas of private credit that I think folks really have had issues with. So one of those things is the opacity surrounding private credit, meaning you just don't always know how these loans are valued. Paul Atkins, the SEC chairman, talked about that very issue in a speech earlier this week.

Speaker 2:
[08:06] Shares of Tesla have slipped off hours despite the company reporting better revenue in the first quarter compared to last year and rising car sales.

Speaker 8:
[08:13] But Wall Street isn't really that interested in these numbers. Tesla is in a moment of transition where they say pretty clearly their electric vehicle business is not the focus.

Speaker 2:
[08:26] That's Journal Tesla reporter Becky Peterson, who said the big news from the call was that Tesla had a lot of cash in the first quarter and is looking to spend it.

Speaker 8:
[08:35] This is big news because Wall Street had been expecting Tesla to be making really heavy CapEx investments. This quarter the CFO reiterated that they'll be spending $25 billion on CapEx. Their focus is on getting the new products up and running. Those products which are autonomous vehicles, the robotaxi ride hailing app and humanoid robots, which they're calling Optimus.

Speaker 2:
[09:03] CEO Elon Musk said that cars will remain important to the company, but that those other projects will be what drives its next phase of growth.

Speaker 9:
[09:10] As you've heard me say a few times, I think Optimus will be our biggest product, not just Tesla's biggest product ever, but probably the biggest product ever. And I remain convinced of that conclusion.

Speaker 2:
[09:26] Tesla also revealed plans for a massive new facility near its Giga Texas factory that would build 10 million second-generation Optimus robots a year, and set up plans to repurpose its Fremont, California car factory to build robots. Optimus' sales are expected to begin in 2027. And NVIDIA supplier SK Hynex has reported a five-fold jump in quarterly net profit as the world's second-largest memory chipmaker continues to be a key beneficiary of the AI boom. And so, too, does European chipmaker ST Microelectronics. Its shares surged this morning after the Apple, Tesla and SpaceX supplier posted strong first-quarter sales and said its revenue climbed 23 percent compared to last year. Meanwhile, shares in Southwest Airlines are down almost 4 percent in off-hours trading after it warned that its full-year profit guidance was at risk because of rising jet fuel prices. Other carriers have also noted rising costs, and we'll hear from American Airlines this morning. That's alongside results from American Express and Lockheed Martin, with results from Intel due after the closing bell. And finally, you've probably heard about mounting local backlash against data centers. But what about the battle against another perceived scourge on the landscape?

Speaker 3:
[10:46] When I put my things in storage 35 years ago, there was only one self-storage facility in Northwestern Connecticut. And now there are probably 50.

Speaker 2:
[10:56] That's journal contributor Fred Bernstein, who reports that while the self-storage industry continues to fire on all cylinders, with more than 160 million more square feet of storage under development, communities are pushing back on facilities that they say are hogging land and sapping towns of street life.

Speaker 3:
[11:13] They're dead zones. And so a lot of cities and towns are trying to keep them away, or at least confine them to certain industrial zones. There's at least one that is disguised as a row of houses that's in Bristol, Rhode Island. So this long façade is dressed up as if it were six or eight separate houses with different materials and colors of paint. And it's not fooling anyone. It's at least a $60 billion a year business in the US. And anecdotally, the margins are extremely high for people who own these facilities. 12% of households in the US have at least one remote storage space. Houses are getting bigger and bigger. Family sizes are getting smaller and smaller. And still people need a lot of storage space.

Speaker 2:
[12:00] Or as my grandfather says, a home is where you keep your stuff while you go out and buy more stuff. Though you might not have used the word stuff. Nice one, Pop. We've left a link to Fred's reporting and your stories about self storage in our show notes. And that's it for What's News for this Thursday morning. Today's show was produced by Hattie Moyer and Daniel Bach. Our supervising producer is Sandra Kilhoff and I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.

Speaker 10:
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