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Fmr. Google CEO raises ethics concerns over conflict of interest with AI investments

About four years ago, former Google CEO Eric Schmidt was appointed to the National Security Commission on Artificial Intelligence by the chairman of the House Armed Services Committee.

It was powerful perch. Congress tasked the new group with a broad mandate: to advise the US government on how to advance the development of artificial intelligence (AI), machine learning and other technologies to enhance the national security of the United States.

The mandate was simple: Congress directed the new body to advise on how to enhance American competitiveness on AI against its adversaries, build the AI workforce of the future and develop data and ethical procedures.

In short, the commission, which Schmidt soon took charge of as chairman, was tasked with coming up with recommendations for almost every aspect of a vital and emerging industry. The panel did far more under his leadership. It wrote proposed legislation that later became law and steered billions of dollars of taxpayer funds to industry he helped build — and that he was actively investing in while running the group.

If you’re going to be leading a commission that is steering the direction of government AI and making recommendations for how we should promote this sector and scientific exploration in this area, you really shouldn’t also be dipping your hand in the pot and helping yourself to AI investments.

Walter Shaub

Senior Ethics Fellow, Project on Government Oversight

His credentials, however, were impeccable given his deep experience in Silicon Valley, his experience advising the Defense Department, and a vast personal fortune estimated at about $20 billion dollars.

Five months after his appointment, Schmidt made a little-noticed private investment in an initial seed round of financing for a start-up company called Beacon, which uses AI in the company’s supply chain products for shippers who manage freight logistics, according to CNBC’s review of investment data in database Crunchbase.

There is no indication that Schmidt broke any ethics rules or did anything unlawful while chairing the commission. The commission was, by design, an outside advisory group of industry participants, and its other members included other well-known tech executives including Oracle CEO Safra Catz, Amazon Web Services CEO Andy Jassy and Microsoft Chief Scientific Officer Dr. Eric Horvitz, among others.

‘Conflict of interest’

Schmidt’s investment was just the first of a handful of direct investments he would make in AI start-up companies during his tenure as chairman of the AI commission.

“It’s absolutely a conflict of interest,” said Walter Shaub, a senior ethics fellow at the Project on Government Oversight, and the former director of the U.S. office of Government Ethics.

“That’s technically legal for a variety of reasons, but it’s not the right thing to do,” Shaub said.

Venture capital firms financed, in part, by Schmidt and his private family foundation also made dozens of additional investments in AI companies during Schmidt’s tenure, giving Schmidt an economic stake in the industry even as he developed new regulations and encouraged taxpayer financing for it. Altogether, Schmidt and entities connected to him made more than 50 investments in AI companies while he was chairman of the federal commission on AI. Information on his investments isn’t publicly available.

All that activity meant that, at the same time Schmidt was wielding enormous influence over the future of federal AI policy, he was also potentially positioning himself to profit personally from the most promising young AI companies.

Institutional issues

‘Fifth arm of government’

The nonprofit Project on Government Oversight has called federal advisory committees the “fifth arm of government” and has pushed for changes including additional requirements for posting conflict-of-interest waivers and recusal statements, as well as giving the public more input in nominating committee members. Also in 2010, the House passed a bill that would prohibit the appointment of commission members with conflicts of interest, but the bill died in the Senate.

“It’s always been this way,” Holman said. “When Congress created the Office of Government Ethics to oversee the executive branch, you know, they didn’t really want a strong ethics cop, they just wanted an advisory commission.” Holman said each federal agency selects its own ethics officer, creating a vast system of more than 4,000 officials. But those officers aren’t under the control of the Office of Government Ethics – there’s “no one person in charge,” he said.

Eric Schmidt during a news conference at the main office of Google Korea in Seoul on November 8, 2011.

Jung Yeon-je | Afp | Getty Images

People close to Schmidt say his investments were disclosed in a private filing to the U.S. government at the time. But the public and the news media had no access to that document, which was considered confidential. The investments were not revealed to the public by Schmidt or the commission. His biography on the commission’s website detailed his experiences at Google, his efforts on climate change and his philanthropy, among other details. But it did not mention his active investments in artificial intelligence.

A spokesperson for Schmidt told CNBC that he followed all rules and procedures in his tenure on the commission: “Eric has given full compliance on everything,” the spokesperson said.

But ethics experts say Schmidt simply should not have made private investments while leading a public policy effort on artificial intelligence.

“If you’re going to be leading a commission that is steering the direction of government AI and making recommendations for how we should promote this sector and scientific exploration in this area, you really shouldn’t also be dipping your hand in the pot and helping yourself to AI investments,” said Shaub of the Project on Government Oversight.

He said there were several ways Schmidt could have minimized this conflict of interest: He could have made the public aware of his AI investments, he could have released his entire financial disclosure report, or he could have made the decision not to invest in AI while he was chair of the AI commission.

Public interest

“It’s extremely important to have experts in the government,” Shaub said. “But it’s, I think, even more important to make sure that you have experts who are putting the public’s interests first.”

The AI commission, which Schmidt chaired until it expired in the fall of 2021, was far from a stereotypical Washington blue-ribbon commission issuing white papers that few people actually read.

Instead, the commission delivered reports which contained actual legislative language for Congress to pass into law to finance and develop the artificial intelligence industry. And much of that recommended language was written into vast defense authorization bills. Sections of legislative language passed, word for word, from the commission into federal law.

The commission’s efforts also sent millions of taxpayer dollars to priorities it identified. In just one case, the fiscal year 2023 National Defense Authorization Act included $75 million “for implementing the National Security Commission on Artificial Intelligence recommendations.”

At a commission event in September 2021, Schmidt touted the success of his team’s approach. He said the commission staff “had this interesting idea that not only should we write down what we thought, which we did, but we would have a hundred pages of legislation that they could just pass.” That, Schmidt said, was “an idea that had never occurred to me before but is actually working.”

$200 billion modification

Schmidt said one piece of legislation moving on Capitol Hill was “modified by $200 billion dollars.” That, he said, was “essentially enabled by the work of the staff” of the commission.

At that same event, Schmidt suggested that his staff had wielded similar influence over the classified annexes to national security related bills emanating from Congress. Those documents provide financing and direction to America’s most sensitive intelligence agencies. To protect national security, the details of such annexes are not available to the American public.

“We don’t talk much about our secret work,” Schmidt said at the event. “But there’s an analogous team that worked on the secret stuff that went through the secret process that has had similar impact.”

Asked whether classified language in the annex proposed by the commission was adopted in legislation that passed into law, a person close to Schmidt responded, “due to the classified nature of the NSCAI annex, it is not possible to answer this question publicly. NSCAI provided its analysis and recommendations to Congress, to which members of Congress and their staff reviewed and determined what, if anything, could/should be included in a particular piece of legislation.”

Beyond influencing classified language on Capitol Hill, Schmidt suggested that the key to success in Washington was being able to push the White House to take certain actions. “We said we need leadership from the White House,” Schmidt said at the 2021 event. “If I’ve learned anything from my years of dealing with the government, is the government is not run like a tech company. It’s run top down. So, whether you like it or not, you have to start at the top, you have to get the right words, either they say it, or you write it for them, and you make it happen. Right? And that’s how it really, really works.”

Industry friendly

The commission produced a final report with topline conclusions and recommendations that were friendly to the industry, calling for vastly increased federal spending on AI research and a close working relationship between government and industry.

The final report waived away concerns about too much government intervention in the private sector or too much federal spending.

“This is not a time for abstract criticism of industrial policy or fears of deficit spending to stand in the way of progress,” the commission concluded in its 2021 report. “In 1956, President Dwight Eisenhower, a fiscally conservative Republican, worked with a Democratic Congress to commit $10 billion to build the Interstate Highway System. That is $96 billion in today’s world.”

The commission didn’t go quite that big, though. In the end, it recommended $40 billion in federal spending on AI, and suggested it should be done hand in hand with tech companies.

“The federal government must partner with U.S. companies to preserve American leadership and to support development of diverse AI applications that advance the national interest in the broadest sense,” the commission wrote. “If anything, this report underplays the investments America will need to make.”

The urgency driving all of this, the commission said, is Chinese development of AI technology that rivals the software coming out of American labs: “China’s plans, resources, and progress should concern all Americans.”

China, the commission said, is an AI peer in many areas and a leader in others. “We take seriously China’s ambition to surpass the United States as the world’s AI leader within a decade,” it wrote.

But Schmidt’s critics see another ambition behind the commission’s findings: Steering more federal dollars toward research that can benefit the AI industry.

“If you put a tech billionaire in charge, any framing that you present them, the solution will be, ‘give my investments more money,’ and that’s indeed what we see,” said Jack Poulson, executive director of the nonprofit group Tech Inquiry. Poulson formerly worked as a research scientist at Google, but he resigned in 2018 in protest of what he said was Google bending to the censorship demands of the Chinese government.

Too much power?

To Poulson, Schmidt was simply given too much power over federal AI policy. “I think he had too much influence,” Poulson said. “If we believe in a democracy, we should not have a couple of tech billionaires, or, in his case, one tech billionaire, that is essentially determining US government allocation of hundreds of billions of dollars.”

The federal commission wound down its work on Oct. 1, 2021.

Four days later, on Oct. 5, Schmidt announced a new initiative called the Special Competitive Studies Project. The new entity would continue the work of the congressionally created federal commission, with many of the same goals and much of the same staff. But this would be an independent nonprofit and operate under the financing and control of Schmidt himself, not Congress or the taxpayer. The new project, he said, will “make recommendations to strengthen America’s long-term global competitiveness for a future where artificial intelligence and other emerging technologies reshape our national security, economy, and society.”

The CEO of Schmidt’s latest initiative would be the same person who had served as the executive director of the National Security Commission. More than a dozen staffers from the federal commission followed Schmidt to the new private sector project. Other people from the federal commission came over to Schmidt’s private effort, too: Vice Chair Robert Work, a former deputy secretary of defense, would serve on Schmidt’s board of advisors. Mac Thornberry, the congressman who appointed Schmidt to the federal commission in the first place, was now out of office and would also join Schmidt’s board of advisors.

They set up new office space just down the road from the federal commission’s headquarters in Crystal City, VA, and began to build on their work at the federal commission.

The new Special Competitive Studies Project issued its first report on Sept. 12. The authors wrote, “Our new project is privately funded, but it remains publicly minded and staunchly nonpartisan in believing technology, rivalry, competition and organization remain enduring themes for national focus.”

The report calls for the creation of a new government entity that would be responsible for organizing the government-private sector nexus. That new organization, the report says, could be based on the roles played by the National Economic Council or the National Security Council inside the White House.

It is not clear if the Project will disclose Schmidt’s personal holdings in AI companies. So far, it has not.

Asked if Schmidt’s AI investments will be disclosed by the Project in the future, a person close to Schmidt said, “SCSP is organized as a charitable entity, and has no relationship to any personal investment activities of Dr. Schmidt.” The person also said the project is a not-for-profit research entity that will provide public reports and recommendations. “It openly discloses that it is solely funded by the Eric and Wendy Schmidt Fund for Strategic Innovation.”

In a way, Schmidt’s approach to Washington is the culmination of a decade or more as a power player in Washington. Early on, he professed shock at the degree to which industry influenced policy and legislation in Washington. But since then, his work on AI suggests he has embraced that fact of life in the capital.

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Apple scores big victory with ‘F1,’ but AI is still a major problem in Cupertino

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Apple scores big victory with 'F1,' but AI is still a major problem in Cupertino

Formula One F1 – United States Grand Prix – Circuit of the Americas, Austin, Texas, U.S. – October 23, 2022 Tim Cook waves the chequered flag to the race winner Red Bull’s Max Verstappen 

Mike Segar | Reuters

Apple had two major launches last month. They couldn’t have been more different.

First, Apple revealed some of the artificial intelligence advancements it had been working on in the past year when it released developer versions of its operating systems to muted applause at its annual developer’s conference, WWDC. Then, at the end of the month, Apple hit the red carpet as its first true blockbuster movie, “F1,” debuted to over $155 million — and glowing reviews — in its first weekend.

While “F1” was a victory lap for Apple, highlighting the strength of its long-term outlook, the growth of its services business and its ability to tap into culture, Wall Street’s reaction to the company’s AI announcements at WWDC suggest there’s some trouble underneath the hood.

“F1” showed Apple at its best — in particular, its ability to invest in new, long-term projects. When Apple TV+ launched in 2019, it had only a handful of original shows and one movie, a film festival darling called “Hala” that didn’t even share its box office revenue.

Despite Apple TV+ being written off as a costly side-project, Apple stuck with its plan over the years, expanding its staff and operation in Culver City, California. That allowed the company to build up Hollywood connections, especially for TV shows, and build an entertainment track record. Now, an Apple Original can lead the box office on a summer weekend, the prime season for blockbuster films.

The success of “F1” also highlights Apple’s significant marketing machine and ability to get big-name talent to appear with its leadership. Apple pulled out all the stops to market the movie, including using its Wallet app to send a push notification with a discount for tickets to the film. To promote “F1,” Cook appeared with movie star Brad Pitt at an Apple store in New York and posted a video with actual F1 racer Lewis Hamilton, who was one of the film’s producers.

(L-R) Brad Pitt, Lewis Hamilton, Tim Cook, and Damson Idris attend the World Premiere of “F1: The Movie” in Times Square on June 16, 2025 in New York City.

Jamie Mccarthy | Getty Images Entertainment | Getty Images

Although Apple services chief Eddy Cue said in a recent interview that Apple needs the its film business to be profitable to “continue to do great things,” “F1” isn’t just about the bottom line for the company.

Apple’s Hollywood productions are perhaps the most prominent face of the company’s services business, a profit engine that has been an investor favorite since the iPhone maker started highlighting the division in 2016.

Films will only ever be a small fraction of the services unit, which also includes payments, iCloud subscriptions, magazine bundles, Apple Music, game bundles, warranties, fees related to digital payments and ad sales. Plus, even the biggest box office smashes would be small on Apple’s scale — the company does over $1 billion in sales on average every day.

But movies are the only services component that can get celebrities like Pitt or George Clooney to appear next to an Apple logo — and the success of “F1” means that Apple could do more big popcorn films in the future.

“Nothing breeds success or inspires future investment like a current success,” said Comscore senior media analyst Paul Dergarabedian.

But if “F1” is a sign that Apple’s services business is in full throttle, the company’s AI struggles are a “check engine” light that won’t turn off.

Replacing Siri’s engine

At WWDC last month, Wall Street was eager to hear about the company’s plans for Apple Intelligence, its suite of AI features that it first revealed in 2024. Apple Intelligence, which is a key tenet of the company’s hardware products, had a rollout marred by delays and underwhelming features.

Apple spent most of WWDC going over smaller machine learning features, but did not reveal what investors and consumers increasingly want: A sophisticated Siri that can converse fluidly and get stuff done, like making a restaurant reservation. In the age of OpenAI’s ChatGPT, Anthropic’s Claude and Google’s Gemini, the expectation of AI assistants among consumers is growing beyond “Siri, how’s the weather?”

The company had previewed a significantly improved Siri in the summer of 2024, but earlier this year, those features were delayed to sometime in 2026. At WWDC, Apple didn’t offer any updates about the improved Siri beyond that the company was “continuing its work to deliver” the features in the “coming year.” Some observers reduced their expectations for Apple’s AI after the conference.

“Current expectations for Apple Intelligence to kickstart a super upgrade cycle are too high, in our view,” wrote Jefferies analysts this week.

Siri should be an example of how Apple’s ability to improve products and projects over the long-term makes it tough to compete with.

It beat nearly every other voice assistant to market when it first debuted on iPhones in 2011. Fourteen years later, Siri remains essentially the same one-off, rigid, question-and-answer system that struggles with open-ended questions and dates, even after the invention in recent years of sophisticated voice bots based on generative AI technology that can hold a conversation.

Apple’s strongest rivals, including Android parent Google, have done way more to integrate sophisticated AI assistants into their devices than Apple has. And Google doesn’t have the same reflex against collecting data and cloud processing as privacy-obsessed Apple.

Some analysts have said they believe Apple has a few years before the company’s lack of competitive AI features will start to show up in device sales, given the company’s large installed base and high customer loyalty. But Apple can’t get lapped before it re-enters the race, and its former design guru Jony Ive is now working on new hardware with OpenAI, ramping up the pressure in Cupertino.

“The three-year problem, which is within an investment time frame, is that Android is racing ahead,” Needham senior internet analyst Laura Martin said on CNBC this week.

Apple’s services success with projects like “F1” is an example of what the company can do when it sets clear goals in public and then executes them over extended time-frames.

Its AI strategy could use a similar long-term plan, as customers and investors wonder when Apple will fully embrace the technology that has captivated Silicon Valley.

Wall Street’s anxiety over Apple’s AI struggles was evident this week after Bloomberg reported that Apple was considering replacing Siri’s engine with Anthropic or OpenAI’s technology, as opposed to its own foundation models.

The move, if it were to happen, would contradict one of Apple’s most important strategies in the Cook era: Apple wants to own its core technologies, like the touchscreen, processor, modem and maps software, not buy them from suppliers.

Using external technology would be an admission that Apple Foundation Models aren’t good enough yet for what the company wants to do with Siri.

“They’ve fallen farther and farther behind, and they need to supercharge their generative AI efforts” Martin said. “They can’t do that internally.”

Apple might even pay billions for the use of Anthropic’s AI software, according to the Bloomberg report. If Apple were to pay for AI, it would be a reversal from current services deals, like the search deal with Alphabet where the Cupertino company gets paid $20 billion per year to push iPhone traffic to Google Search.

The company didn’t confirm the report and declined comment, but Wall Street welcomed the report and Apple shares rose.

In the world of AI in Silicon Valley, signing bonuses for the kinds of engineers that can develop new models can range up to $100 million, according to OpenAI CEO Sam Altman.

“I can’t see Apple doing that,” Martin said.

Earlier this week, Meta CEO Mark Zuckerberg sent a memo bragging about hiring 11 AI experts from companies such as OpenAI, Anthropic, and Google’s DeepMind. That came after Zuckerberg hired Scale AI CEO Alexandr Wang to lead a new AI division as part of a $14.3 billion deal.

Meta’s not the only company to spend hundreds of millions on AI celebrities to get them in the building. Google spent big to hire away the founders of Character.AI, Microsoft got its AI leader by striking a deal with Inflection and Amazon hired the executive team of Adept to bulk up its AI roster.

Apple, on the other hand, hasn’t announced any big AI hires in recent years. While Cook rubs shoulders with Pitt, the actual race may be passing Apple by.

WATCH: Jefferies upgrades Apple to ‘Hold’

Jefferies upgrades Apple to 'Hold'

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Musk backs Sen. Paul’s criticism of Trump’s megabill in first comment since it passed

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Musk backs Sen. Paul's criticism of Trump's megabill in first comment since it passed

Tesla CEO Elon Musk speaks alongside U.S. President Donald Trump to reporters in the Oval Office of the White House on May 30, 2025 in Washington, DC.

Kevin Dietsch | Getty Images

Tesla CEO Elon Musk, who bombarded President Donald Trump‘s signature spending bill for weeks, on Friday made his first comments since the legislation passed.

Musk backed a post on X by Sen. Rand Paul, R-Ky., who said the bill’s budget “explodes the deficit” and continues a pattern of “short-term politicking over long-term sustainability.”

The House of Representatives narrowly passed the One Big Beautiful Bill Act on Thursday, sending it to Trump to sign into law.

Paul and Musk have been vocal opponents of Trump’s tax and spending bill, and repeatedly called out the potential for the spending package to increase the national debt.

On Monday, Musk called it the “DEBT SLAVERY bill.”

The independent Congressional Budget Office has said the bill could add $3.4 trillion to the $36.2 trillion of U.S. debt over the next decade. The White House has labeled the agency as “partisan” and continuously refuted the CBO’s estimates.

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The bill includes trillions of dollars in tax cuts, increased spending for immigration enforcement and large cuts to funding for Medicaid and other programs.

It also cuts tax credits and support for solar and wind energy and electric vehicles, a particularly sore spot for Musk, who has several companies that benefit from the programs.

“I took away his EV Mandate that forced everyone to buy Electric Cars that nobody else wanted (that he knew for months I was going to do!), and he just went CRAZY!” Trump wrote in a social media post in early June as the pair traded insults and threats.

Shares of Tesla plummeted as the feud intensified, with the company losing $152 billion in market cap on June 5 and putting the company below $1 trillion in value. The stock has largely rebounded since, but is still below where it was trading before the ruckus with Trump.

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Tesla one-month stock chart.

— CNBC’s Kevin Breuninger and Erin Doherty contributed to this article.

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Microsoft layoffs hit 830 workers in home state of Washington

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Microsoft layoffs hit 830 workers in home state of Washington

Microsoft CEO Satya Nadella speaks at the Axel Springer building in Berlin on Oct. 17, 2023. He received the annual Axel Springer Award.

Ben Kriemann | Getty Images

Among the thousands of Microsoft employees who lost their jobs in the cutbacks announced this week were 830 staffers in the company’s home state of Washington.

Nearly a dozen game design workers in the state were part of the layoffs, along with three audio designers, two mechanical engineers, one optical engineer and one lab technician, according to a document Microsoft submitted to Washington employment officials.

There were also five individual contributors and one manager at the Microsoft Research division in the cuts, as well as 10 lawyers and six hardware engineers, the document shows.

Microsoft announced plans on Wednesday to eliminate 9,000 jobs, as part of an effort to eliminate redundancy and to encourage employees to focus on more meaningful work by adopting new technologies, a person familiar with the matter told CNBC. The person asked not to be named while discussing private matters.

Scores of Microsoft salespeople and video game developers have since come forward on social media to announce their departure. In April, Microsoft said revenue from Xbox content and services grew 8%, trailing overall growth of 13%.

In sales, the company parted ways with 16 customer success account management staff members based in Washington, 28 in sales strategy enablement and another five in sales compensation. One Washington-based government affairs worker was also laid off.

Microsoft eliminated 17 jobs in cloud solution architecture in the state, according to the document. The company’s fastest revenue growth comes from Azure and other cloud services that customers buy based on usage.

CEO Satya Nadella has not publicly commented on the layoffs, and Microsoft didn’t immediately provide a comment about the cuts in Washington. On a conference call with analysts in April, Microsoft CFO Amy Hood said the company had a “focus on cost efficiencies” during the March quarter.

WATCH: Microsoft layoffs not performance-based, largely targeting middle managers

Microsoft layoffs not performance-based, largely targeting middle managers

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