Executive Vice Chairman, IBM Common Stock
Former NEC Director Gary Cohn: Rising oil prices will have an impact on U.S. consumption power
Gary Cohn, IBM vice chairman and former Trump NEC director, joins 'Squawk Box' to discuss the state of AI capex spending, state of the economy, impact of Iran war on oil prices, news of White House opposing Anthropic's plan to expand access to Mythos model, the Fed's interest rate outlook, and more.
About Gary Cohn
Gary Cohn, vice chairman of IBM and former director of the National Economic Council under President Trump, has appeared on multiple CNBC programs in recent months to discuss the economy, Federal Reserve policy, and the impact of artificial intelligence. In a June 2026 appearance, Cohn said that without the AI and energy sectors, the stock market would be "floundering" and described the two industries as "intertwined." He stated that he believes computing capacity will be overbuilt and will become a commodity, with companies purchasing it from the lowest-cost provider. Regarding AI's effect on employment, Cohn said he is "in the camp that this time is the same" as past technological advancements, arguing that such innovations historically have not led to the "demise of human capital" but have instead grown GDP and created more jobs. Cohn also commented on economic policy and inflation. In June 2026, he said that if a deal to open the Strait of Hormuz is signed, oil prices would "not... fall like a rock overnight" but that a change in psychology could lead to lower prices over time. On the Federal Reserve, Cohn said that new Chair Kevin Warsh "will remove himself from the political pressure" and "do the right thing economically," adding that the Warsh Fed "will look different than the Powell Fed" with less forward guidance and data releases. In July 2026, when asked about IBM's software business, Cohn affirmed that the company's software is "not being disrupted by AI," and noted that companies are beginning to evaluate the return on investment of their AI spending.
Transcript (25 segments)
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Host0:00
Announcing he'll remain on the board once his term as chairman expires. Meantime, the nomination of Kevin Warsh to be the next Fed chair, clearing a key procedural hurdle in Congress. And joining us now, IBM Vice Chair Gary Cohn. He served as National Economic Council Director in the first Trump administration. And he joins us on set occasionally. And when he comes in, he usually starts talking about something. And usually that's a way that we can probably lead the interview. And what you started talking about today was Caterpillar, and you have a complete explanation for. And it's as simple once again, power centers for.
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Gary Cohn0:40
I was responding to your conversations during the day. Well, you want to talk about Jay Powell and not leaving. Talking about Jay Powell too later. But let's talk about this. You can't announce close to $1 trillion of capex in this country in data centers without having heavy machinery. How do you start building a data center? You move dirt, right? Once you move the dirt, you put a foundation in, then you start lifting steel. All of those processes need Caterpillar. And those heavy equipment manufacturers are right in the middle of this capex boom. And look, it doesn't hurt that if you're a company having to buy another machine or thinking about buying the incremental machine, the fact that you can write it off and depreciate it very quickly under the new bill is helpful. But what's ultimately driving this is the huge infrastructure expansion we have in the United States, both on data centers as well as roads and bridges.
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Host1:28
So just line up the tailwinds. You've got the 100% expensing. I was kidding and I said so it's tariffs bringing back manufacturing. And even though you were in the administration you did not say you didn't attribute it to that.
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Gary Cohn1:42
Caterpillar has been manufactured in the United States for a long time.
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Host1:45
It has. But the reason it's important is because every day we're looking at some of the negative things that you would think might hurt the market, like the war and the, you know, whether we're bogged down in oil prices at 110 and you say, how can this happen? But then you look at a company like Caterpillar, it's a Dow component. The Dow is going to go up when Caterpillar goes up 50 points.
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Gary Cohn2:10
We got two things going on. You've been talking about it both this morning. We have more than two things going on. We've got tech expansion in AI. We've got data centers. You know those three things by themselves today were the earnings story of the morning just this morning. That's what you've been talking about. We haven't been talking about the Fed which is an interesting conversation as well. But those three things are what's driving the economy. The economy is resilient. There is money being spent. This data center expansion is real.
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Host2:37
So do you think we just discount the whole Middle East oil story? I mean, that's what's so interesting is you have oil at prices that people thought of as nosebleed prices and even conversations that they could go even higher. And yet the equity market continues.
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Gary Cohn2:51
Andrew, they are high. We have very high oil prices. We have to remember that the vast majority of this country lives in a place where they drive 50 to 100 miles a day to work, and 50 to 100 miles a day home from work. They go to the gas pump, they hold that lever down and they watch those numbers turn. They know exactly what they paid for that gas tank last week. They know what they paid this week. They know it's higher and they know it's taking away from their disposable income. So no, we can't discount what's going on.
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Host3:20
But where do you land? I'll tell you. I told Joe this, I think on the air. I was with two very famed money managers over the weekend, one of whom said, Andrew, in six weeks from now, it's going to be a problem. This is actually going to hit the economy. And he's betting. I wouldn't say he's short, but he was on that end of it. And the other one was like, no, no, no, no, no. Like don't look over there. It doesn't matter because everything's growing so fast and so strong on this side. It'll outweigh that. So like disregard, which one is it?
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Gary Cohn3:52
Well, like most discussions, the truth is probably somewhere in the middle. You know, this increased oil price is going to have an impact on the consumption power of America. On the flip side, all of these other things on the data centers and the build out and the capex is going on. Look, the one thing we have here in this country that we shouldn't forget, we are an oil independent nation. We do not have a supply problem. If you think of what's going on in Europe, you think of what's going on in Asia. They're talking about running out of jet fuel in 4 or 5, 6, 7 weeks. They're talking about shutting down businesses. They're talking about changing the way they live their life. And that has a dramatic impact on their economy. We don't have that problem here. We have the product. All we're arguing about in many respects is the price and what impact the price has on the US consumer, and it will have an impact. You can't keep raising the price of something that people have to buy and it not have an impact.
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Host4:48
Can I ask you a separate question? We've been talking all morning about this headline in the Wall Street Journal about Anthropic and the White House potentially trying to throttle it back. This new Mythos preview, which I believe has been shared with a whole bunch of corporations, I think, including IBM at some point and banks and others. And apparently this new concern is that it is so powerful. The cybersecurity risks are so real. And more importantly, they appear to be so worried that there's not enough compute power both for them and the government to use it and all the companies to use it at the same time that it could create an even sort of bigger problem. What do you make of that?
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Gary Cohn5:29
Look, what I'm willing to say is there is a large discussion going on in Washington on Anthropic and Mythos. I think the administration has done a very good job of assembling a team of experts in the industry to help them figure out the issues and work through the opportunities, work through the problems. And this is evolving real time as we sit here.
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Host5:49
Do you think? I mean, there is the cynical, skeptical view that it's political and that somehow they're trying to slow Anthropic down. That Mythos is actually not as powerful as some people think it is. And it's a way to allow, for example, an OpenAI or a Google Gemini, whatever, to catch up if you believe that. That's the story.
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Gary Cohn6:10
Mythos is powerful. I don't think what the government is doing is trying to let other people catch up. What I think they're trying to do is understand how to use this important resource and make sure that there's no unintended consequences.
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Host6:24
Okay, so for dissenters. Back to the Fed. And now we're going to get the floor back for dissenters. So decide we should be headed higher. So you look at four dissenters and you said there may be more next meeting, right? And maybe take off the easing bias or something. But Myron still wanted to cut by a quarter or whatever. But I'm just getting back to Caterpillar. You look at Caterpillar running hot like that, you'd think we definitely don't need to cut and we might need to raise. But then it's building things that purportedly are going to increase productivity. Yeah. And we wanted a guy like Warsh or the president did supposedly. So he could be like Greenspan and let something run hot if there's productivity gains.
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Gary Cohn7:09
Look, I think Kevin's coming into a very interesting time. The good news I think Kevin is unbelievably well equipped. I think we all have forgotten that Kevin was at the Fed in 2008 when we went through the financial crisis, and I don't believe we would have gotten to where we are without Kevin. The Fed did some extraordinarily unique things in 2008 by creating all these funding facilities and creating different vehicles. Kevin was at the heart of that. So he's walking into a Fed right now, as you said, which is a little bit at odds with each other. You know, when you've got four dissenters, I don't think we've had four dissenters since the 90s. You've got a position where you're going to have to work with the group to get together. But Joe, you're right. At the end of the day, the data is the data. The Fed will be data driven. You're starting to see more and more inflationary pressures. As we get back to Andrew and the price of oil. The price of oil is inflationary. But we all know it could change relatively quickly if the Straits of Hormuz gets opened up. So I think the Fed's going to be in a position where they're going to have to watch what's going on here real time. Kevin's going to have to work with the fellow governors and figure out how to attack where they're trying to go and what is in the best interest of growing the economy, growing productivity. At the end of the day, we are going to be growing productivity, which means we're going to be growing the size of our economy. GDP will grow.
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Host8:28
Where do you land on Scott Bessent's comments, for example, about Jay Powell's decision to hang tight until and unless he has sort of full clearance and resolution on this?
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Gary Cohn8:39
Well, I found it very interesting that a person, Jay Powell, who claims to be a total traditionalist and a total pragmatist, someone who's tried to protect the Fed at all costs, is doing the opposite right now. He's doing the nontraditional thing after preaching tradition for the last eight years.
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Host8:58
What do you think you would do? Personally? And the reason is, I mean, look, we were just talking about Comey a year later and an Instagram picture being charged. There's an argument to be made on a very personal, most selfish level, you could argue that you just stay in the seat until you actually know because A, it's the only leverage you have. And B, it's potentially the only protection you have. If, in fact, you think that. Pirro, who's publicly said she may want to revisit this herself. I mean, it's not really clear it's over.
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Gary Cohn9:30
Look, I don't know the agreement, but I think it needs the Fed's Inspector General to refer it to Pirro for her to be able to reopen the case. So this is now within the Fed's inner workings and within their own Inspector General. Someone that you would think Jay Powell would be very comfortable with, the Inspector General. He knows what he's done. The Inspector General knows what he's done. It feels like he's in a pretty clear position. And like I said, he's doing something that's fairly untraditional. I don't think it's been done for the last sort of almost 80 years where someone stayed on.
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Host10:02
But the case is also untraditional. You would argue that that's not. More of a personal thing for Jay Powell. I don't think he wants to be there overstaying his welcome and getting in the way of Warsh.
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Gary Cohn10:17
He wants to be there. I think he'd like to be out of there.
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Host10:21
But they said that he's so intent on keeping Fed independence. He needs to be there to the high-minded stuff. I don't know. I don't even if you think it's selfish, I have empathy for that in this particular situation.
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Gary Cohn10:40
But as Gary said, if it's gone, it's gone. If it's not gone, it's not gone. He's only there till '28. His term does end in '28. And he's only one guy voting. I will be shocked if he stays till 2028. I think this is a relatively short. I hope it's a relatively short. I don't think he likes the position he's in.
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Host10:59
I don't think he does either.