OpenAI models breach security sandbox, hack Hugging Face to cheat on evaluation

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SCARY

OpenAI Models Secretly Broke Out of Secure Environment and Hacked Rival Company to Cheat on Test

OpenAI said Tuesday that two of its AI models autonomously hacked their way out of a controlled environment—where they were supposed to be walled off from internet access—and then broke into the systems of Hugging Face, a company that hosts open-source AI models, in order to cheat on an internal evaluation, according to Fortune's Jeremy Kahn and Emily Forlini.

OpenAI disclosed the incident in a blog post on Tuesday, a stunning announcement that is certain to set off alarm bells across the industry about the increasing power of AI models and the risk of them going rogue.

Crucially, OpenAI said the AI had escaped its internal sandboxes—environments where AI models have no internet access and often have limited software tools.

MACGUFFIN

What We Know About the Hardware Device Jony Ive Is Designing for Sam Altman

It has been roughly one year since OpenAI acquired Jony Ive's io Products for $6.5 billion, and sources tell Fortune's Emily Forlini and Sebastian Herrera that the design of the initial hardware device has been finalized, while work on a broader family of AI devices proceeds.

OpenAI's device is expected to ship as early as next year but remains something of a mystery. It could be a home-speaker-like device that will serve as an active AI companion and feature moving mechanical parts designed to mimic human behavior.

The io team has been integrated into the parent company as the OpenAI hardware group. While OpenAI's leadership and the majority of its staff work out of the company's headquarters in San Francisco's Mission Bay district, the hardware team—now more than 400 employees—still works out of the original io building in Jackson Square on the other side of town.

TOKEN EFFORTS

Ain't Nothin' Goin' On but the Tokens—Expect CFO Resistance to AI Billing

"For many companies, AI prices now resemble utility bills more than traditional software subscriptions," according to Justin Biemann at Morgan Stanley. The average price of an AI token—the basic unit of text that AI companies charge for on a per-token basis—has gone up 60% since December 2025 (although it has moderated recently). The price of AI depends heavily on what you are using it for, as this chart shows:

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CFOs are likely to mount resistance to ever-spiraling AI bills, Biemann believes, especially if they cannot see the ROI.

"Some estimates suggest a software engineer at a firm with Claude's enterprise subscription could rack up a token bill of up to $730 each month. Hypothetically, that means a typical Fortune 500 firm with 5,000 engineers would exceed $3.5 million in monthly expenses for AI coding... These usage levels have been rising rapidly and could be running into a budgetary brick wall," Biemann said in an email.

IRAN

U.S. Escalates Attacks on Iran as White House Says Tehran Is 'Not Serious' About Talks

The price of oil rose sharply in the last 24 hours, from $88 per barrel of Brent Crude to $93, as the U.S. conducted an 11th straight night of strikes on various targets in Iran.

Centcom said it struck "military operations centers, maritime capabilities, aircraft hangars, drone storage facilities, and military logistics infrastructure."

In retaliation, Iran struck sites in Kuwait, Bahrain, and Jordan, the BBC reported. Iran has attacked more than 30 ships in the Strait of Hormuz in the last three months, Centcom said, while also insisting that the waterway was open for business.

President Donald Trump said Iran's remaining nuclear sites would be targeted next. U.S. Secretary of State Marco Rubio said Iran was "not serious" about peace talks.

Behind the scenes: Mediators are still shuttling between the two sides.

THE MARKETS

Oil Is Back Above $90 Again, 'Reviving Fears About a Wider Stagflationary Shock'

With the "Memorandum of Understanding" in tatters and violence in the Middle East on the rise, traders naturally bid up the price of oil and returned to the idea that oil-driven inflation might push the Fed to raise interest rates. Both Goldman Sachs and ING have floated the idea that oil could rise to $120 per barrel. The rising cost of Brent Crude is "reviving fears about a wider stagflationary shock," Deutsche Bank's Jim Reid said in an email this morning.

Seventy-five percent of bettors on Fed futures think the U.S. central bank will keep rates on hold this month at the 3.5% level, according to CME Fedwatch—an unusually low level of confidence for that index, which is usually resolved at greater than 90% certainty in the days before an FOMC meeting. It is even more split for the September meeting—only 53% think the rate will stay on hold, while 32.5% think there will be a change.