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This Week In AI: OpenAI asks for Bailout / $1B Google x Apple / The Rise of TPUs · In the Loop AI

0:00
Josh: Everyone's asking, are we in a bubble? When is the bubble going to pop?
0:04
Josh: How big can AI get before it all comes crumbling down?
0:08
Josh: And yesterday, the OpenAI CFO may have delivered some hints as to how and why this happens.
0:15
Josh: She used the word, and I'm ashamed to say it out loud, this feels like a bad
0:19
Josh: word, she used the word backstop.
0:20
Josh: And if you're familiar with the word backstop, it's what a lot of banks were
0:24
Josh: experiencing in 2008, where the government kind of sits there to fund any sort
0:29
Josh: of negative repercussions that happen as a result of this build out.
0:32
Josh: And then after seeing this interview, it kind of begs the question, are these circular
0:36
Josh: economics we've been seeing among NVIDIA, Microsoft, AMD,
0:39
Josh: is it really a capitalist efficient thing or
0:42
Josh: is this is are we really starting to see early signs of a
0:45
Josh: bubble starting to burst so we're going to get into all that we are also talking
0:48
Josh: about a deal that was just confirmed with apple where
0:51
Josh: they are paying google a tremendous amount of money to actually offload their
0:55
Josh: ai compute to build a new model so we have an official deal there we have a
0:58
Josh: new hardware device in the world of ai and we have just a bunch of cool space
1:02
Josh: related stuff so you just let's get into the big news of the day which is open
1:06
Josh: ai asking for a backstop that sounds scary walking That's exactly what happened.
1:11
Josh: Because I feel like some things get lost in translation here.
1:13
Josh: What exactly did they say and what does it mean for us?
1:15
Ejaaz: Yeah. So let me set some context. Sarah Fryer is the current CFO at OpenAI.
1:21
Ejaaz: And she did this interview with the Wall Street Journal, where obviously they
1:25
Ejaaz: get into the economics of OpenAI's revenue model and how they're going to pay
1:28
Ejaaz: for all these trillions of dollars worth of compute. And she had a few choice words.
1:34
Ejaaz: The most choicest was around this backstop that you're talking about,
1:38
Ejaaz: josh um let me let me kind of paint it out for you so
1:41
Ejaaz: open ai has currently signed 1.4 trillion
1:45
Ejaaz: dollars worth of compute deals this is open ai agreeing to pay compute providers
1:51
Ejaaz: or chip providers or gpu providers like nvidia amd hundreds of billions of dollars
1:56
Ejaaz: in order to buy their gpu so that they can train the next best ai model agi
2:00
Ejaaz: there's one massive problem,
2:03
Ejaaz: they don't have enough cash. They don't have enough money. In fact,
2:06
Ejaaz: they are currently running at a loss.
2:09
Ejaaz: There's no plan or near-term kind of goal that they can achieve to pay for this stuff.
2:14
Ejaaz: So then the question becomes, what happens if they can't pay for this stuff?
2:18
Ejaaz: What happens if Chachupiti stops becoming profitable in the future as they're
2:23
Ejaaz: projected? What happens then?
2:25
Ejaaz: And Sarah had one simple answer to that, which was the government can bail us out.
2:30
Ejaaz: And so specifically what she described was an ecosystem where the government
2:36
Ejaaz: basically pays OpenAI and gives them the money that they need to buy these GPUs
2:42
Ejaaz: if they happen to default,
2:44
Ejaaz: if they happen to not have enough money to pay for these things.
2:47
Ejaaz: This, in turn, will give the private equity firms and the banks that are agreeing
2:53
Ejaaz: to loan OpenAI money in the first place to buy these GPUs, the sanctity and peace of mind that
2:58
Ejaaz: ah, I'm going to be okay. I'm going to get my money back if OpenAI doesn't deliver through.
3:04
Ejaaz: The craziest part about this, Josh, is I feel like I've just been ricocheted
3:09
Ejaaz: across the room for two weeks straight.
3:11
Ejaaz: Because Sam Altman went from operating a non-profit to operating a non-profit
3:16
Ejaaz: that is kind of a private company, where they kind of turned a part of their
3:22
Ejaaz: company into a for-profit, so they're kind of like lying about it.
3:24
Ejaaz: Then kind of breaking rumors around doing a $1 trillion IPO.
3:30
Ejaaz: What is your immediate gut reaction to this? Is it lies? Is it real? What's happening?
3:34
Josh: I just like, I keep repeating the words too big to fail in my head,
3:37
Josh: too big to fail, too big to fail.
3:39
Josh: It seems like that's what I want to get to. And I'm like, I'm of two minds of
3:43
Josh: this. One is that, well, AI is a matter of national security.
3:47
Josh: It is very important to get this right and to move as fast as possible.
3:49
Josh: If that requires some government help, that probably make sense to an extent.
3:53
Josh: And then the second thing is, well, if you are asking for government help,
3:58
Josh: that's probably not a good thing in this instance.
4:02
Josh: And government help really means taxpayer help. Like we fund this stuff.
4:07
Josh: And to pay a backstop for Sam Waltman when we don't even get public stock exposure
4:14
Josh: because it's still privately held.
4:15
Josh: And another thing is she admitted here that they actually have little to no
4:20
Josh: interest in IPO-ing anytime soon.
4:21
Josh: So now there's no real trajectory for the public being able to own any upside
4:25
Josh: and only participate in the downside.
4:28
Josh: After they've been signaling that they are not for profit since inception,
4:32
Josh: it's just like these really horrifically mixed signals with no clear intention.
4:36
Ejaaz: It's exhausting.
4:38
Josh: Um, it's a lot. Yeah. I guess the, the way that you described it being like
4:41
Josh: ricocheted across a room, it like, it kind of feels that way.
4:44
Josh: And it's a little disturbing, but I wonder if this is kind of at the core of
4:48
Josh: what we've been seeing with this circular economic thing happening where opening,
4:52
Josh: I sent to deal with Google with Microsoft.
4:53
Josh: It's all very, it feels very incestual, but maybe it's because it really is
4:57
Josh: a matter of national security and the government's just kind of allowing them
4:59
Josh: to do a lot of things that wouldn't traditionally have been acceptable.
5:04
Josh: But it looks like we have some qualifications, right? Yeah, I mean,
5:08
Josh: maybe we should take this as a grain of salt.
5:10
Ejaaz: Yeah, so a grain of salt being that Sarah Fry, the same CFO that kind of made
5:15
Ejaaz: these claims, walked back her claims in the interview, specifying that OpenAI
5:20
Ejaaz: is not seeking a government backstop for our infrastructure commitments.
5:24
Ejaaz: And she goes on to give this official statement about, you know,
5:27
Ejaaz: OpenAI, you know, being profitable and going to be able to pay their way through
5:30
Ejaaz: this all. The issue that I have with this, Josh, is I don't think it's an honest statement.
5:36
Ejaaz: Why don't I think it's an honest statement? Because her boss.
5:40
Ejaaz: CEO Sam Altman, has claimed so many times in interviews and his own blog posts
5:45
Ejaaz: that he's written that he has no issue asking the government for a bailout, for a backstop,
5:51
Ejaaz: to help him kind of like cover his deficits and his debts if he's not able to pay for it.
5:56
Ejaaz: I have an excerpt from an interview pulled up here where he goes,
6:00
Ejaaz: at some level, when something gets sufficiently huge, whether or not they are
6:05
Ejaaz: on paper, the federal government is kind of an insurer of last resort.
6:08
Ejaaz: As we've seen in various financial crises and insurance companies screwing things
6:12
Ejaaz: up, they basically cover us.
6:15
Ejaaz: And so this is again, and this is the second time we've spoken about this this
6:19
Ejaaz: week, about Sam Altman's character inconsistencies, where he says one thing and means another.
6:25
Ejaaz: We did an episode earlier this week where we covered a 52-page deposition,
6:29
Ejaaz: where his co-founder and former chief science officer, Ilya Sutskeva,
6:35
Ejaaz: basically says that Sam was like incessantly lying and that's what led to his
6:40
Ejaaz: ousting, his firing in November, 2023.
6:43
Ejaaz: Fast forward to present day, it seems like Sam's still at it, Josh.
6:47
Josh: There's a lot of character inconsistency. And what's certainly not helping the
6:51
Josh: case is all of his co-founders from day one to up until a few years ago,
6:56
Josh: they're all testifying against him. Elon strongly disagrees with Sam.
7:00
Josh: Ilya and Mira, they strongly distrust Sam. So this is not, this is poor signal
7:05
Josh: coming from the public perception, but also from people who know him personally,
7:09
Josh: which is not really making a good case.
7:11
Josh: So we'll see. We'll continue to monitor the situation. That's kind of where
7:14
Josh: we're at with OpenAI News.
7:15
Ejaaz: I just want to... Sorry, I think we need to just...
7:20
Ejaaz: Look at the other side very quickly, Josh, and I'm curious of your take here
7:23
Ejaaz: specifically. Yeah, let's get into the bubble.
7:25
Ejaaz: So the take from this is, oh my God, we're doing circular investing.
7:31
Ejaaz: This is a massive bubble. It's so obviously going to pop.
7:34
Ejaaz: They're asking for a literal government bailout before the crash actually happens.
7:38
Ejaaz: We've seen this with COVID. We've seen this in 2008. What are we doing here?
7:42
Ejaaz: And the counter argument to that is, if you look at every other hyperscaler,
7:46
Ejaaz: maybe not put open AI side for a second.
7:48
Ejaaz: If you look at Meta, if you look at Google, if you look at Microsoft,
7:53
Ejaaz: although they're spending hundreds of billions of dollars and committing to
7:55
Ejaaz: do that over the next couple of years, they still haven't made a crazy enough
8:01
Ejaaz: dent where you should be getting worried on their profit and loss sheet.
8:05
Ejaaz: Remember, these companies all have other businesses that are massively profitable
8:09
Ejaaz: and they're making tons and tons of money.
8:11
Ejaaz: The money that they're investing in compute right now, technically,
8:14
Ejaaz: if you weigh it up against that, isn't too crazy.
8:17
Ejaaz: It is crazy. It is a bigger dent that we've seen them spend on anything else
8:21
Ejaaz: over the last decade, but it's still not overcompensating for what they're earning right now.
8:27
Ejaaz: And that's the only argument against it, which is like, hey,
8:29
Ejaaz: we're seeing demand with our enterprise customers.
8:31
Ejaaz: We're seeing demand with our retail customers. And so it makes sense for us
8:34
Ejaaz: to invest in this compute. I don't know what you think about this.
8:37
Josh: Yeah. Like in the case that AI scaling laws stop tomorrow,
8:40
Josh: where suddenly we figure out oh oh no like this this isn't actually
8:43
Josh: going to work spending more money the market gets harmed very
8:46
Josh: badly but it's not catastrophic it is not a recession level bubble um in the
8:52
Josh: case that this continues to prolong companies like open ai that don't have a
8:57
Josh: cap table like companies like microsoft and google who exist outside of ai and
9:01
Josh: are now using their balance sheet to pay this off i think that's probably when
9:04
Josh: you start to see problems so
9:06
Josh: I kind of agree with you in the sense that we're still good.
9:08
Josh: Like things are still good. I'm not particularly concerned of a short-term bubble happening here.
9:14
Ejaaz: I want to emphasize that like OpenAI isn't just kind of sitting on their hands
9:18
Ejaaz: and not coming up with other ways to turn on revenue.
9:21
Ejaaz: One other thing that she revealed in this interview, Josh, was I think it's
9:25
Ejaaz: number six on the screen here.
9:27
Ejaaz: Additionally, they will do creative commercial deals.
9:31
Ejaaz: What they mean by that is if there's a company, say a pharmaceutical company
9:35
Ejaaz: that uses ChatGPT and finds a cure for cancer using ChatGPT,
9:41
Ejaaz: they're signing a deal with that pharmaceutical company such that they get a
9:45
Ejaaz: percentage of profits from that drug that they create using their AI intelligence
9:50
Ejaaz: that will occur for God knows how long after that.
9:55
Ejaaz: And so taking a percentage of profit or revenue share from people who are using
9:59
Ejaaz: it as a product to create other products, or if you're a company that sells products via ChatGPT,
10:05
Ejaaz: Etsy is a common example that is live on chat gpt right now um they get a percentage
10:10
Ejaaz: of profits um and then there's the obvious one which is chat gpt is going to
10:14
Ejaaz: open air is just going to turn on ads and when they turn on ads who knows how
10:18
Ejaaz: much money that's going to bring in so they are making efforts towards i don't
10:21
Ejaaz: want this to be like a hey like
10:23
Ejaaz: bad open ai thing but it's just unlikely given the amount that they've committed to spend.
10:28
Josh: That first point you mentioned around like health breakthroughs
10:31
Josh: through chat gpt getting a percentage that sounds like a train wreck waiting
10:34
Josh: to happen that's a very messy monetization structure so a lot still to be evaluated
10:38
Josh: but you just i want to talk about apple now we had an episode yesterday with
10:42
Josh: apple um and google and how they kind of relate to each other particularly around
10:45
Josh: a deal in which apple kind of sucks at ai they're really just not good at it and they need help.
10:50
Josh: And here is Gemini coming to the rescue. We officially have a deal that is unofficially
10:55
Josh: official, and it looks like they're going to be paying $1 billion a year,
10:59
Josh: Apple, to Google in order to get a 1.2 trillion parameter Google Gemini model custom for Apple.
11:05
Josh: This is a really big deal. Apple is struggling.
11:07
Josh: Apple has not done anything in the world of AI. And suddenly they have this really powerful model.
11:12
Josh: So this seems like it's going to be very important for the case of the bull case for apple at
11:17
Ejaaz: Least so i'm happy about this uh for a few reasons normally i'd be laughing
11:22
Ejaaz: right i'd be like haha this obviously apple's failed they're.
11:29
Ejaaz: In Apple's sense, it's kind of a smart move. Think about it, right?
11:33
Ejaaz: They haven't spent hundreds of billions of dollars trying to invest in GPUs
11:37
Ejaaz: and train a complex AI model.
11:39
Ejaaz: They haven't taken on any of that risk. They just tap Google on the shoulder,
11:43
Ejaaz: who's done all the hard work and say,
11:45
Ejaaz: yo, are you down if I pay you a billion dollars per year and you make our own
11:48
Ejaaz: custom version of an Apple AI model that I can plug into Siri and will run on
11:54
Ejaaz: our private cloud instance?
11:55
Ejaaz: So, you know, Google won't necessarily get access to all of it,
11:58
Ejaaz: but they just get the payment every year.
11:59
Ejaaz: That sounds like a pretty sweet deal. The other thing I like about this is this
12:03
Ejaaz: isn't just any kind of like model.
12:06
Ejaaz: It's a 1.2 trillion parameter model.
12:09
Ejaaz: That is like up there with like one of the biggest models that would be out there.
12:12
Ejaaz: And to combine that with the kind of personalization that I'm presuming Apple
12:17
Ejaaz: is going to integrate into Siri and in the consumer experience with using text
12:22
Ejaaz: and other apps on the phone, that's pretty attractive to me.
12:25
Ejaaz: The other thing that I thought was super cool on the Google side here, Josh,
12:29
Ejaaz: is to be able to run a 1.2 trillion parameter model at an economically viable
12:35
Ejaaz: cost, aka they're making money from that, just goes to show that there's some
12:39
Ejaaz: pretty crazy engineering that Google has achieved.
12:43
Ejaaz: This indirectly tells me that they have absolutely nailed their chip design
12:47
Ejaaz: and their TPU architecture to be able to pull this off. Just super cool.
12:51
Josh: There's a lot more info if you
12:53
Josh: want to find out about Apple on our episode that we released yesterday.
12:55
Josh: And also I am publishing an essay in the newsletter today when you're watching
13:00
Josh: this all about the economics and why this makes sense for Apple to do.
13:03
Josh: So if you're interested in hearing more of these takes, like more thoughtful
13:06
Josh: takes, check it out on the newsletter.
13:08
Josh: I'm like very proud of this article. I think it'll do really well.
13:11
Josh: It's just really fascinating to see the Apple strategy kind of accidentally step into this
13:17
Josh: amazing situation for them um where it was
13:19
Josh: certainly not by design but they somehow managed to put themselves in a
13:22
Josh: really good place but on the topic of google i also want to talk about the new
13:26
Josh: hardware that they just announced which is their new ironwood tpus now again
13:30
Josh: in yesterday's episode this is a good one we talked about what a tpu was and
13:33
Josh: how it relates to a gpu and today in some new news we got new tpus ej so can
13:38
Josh: you walk us through what these ironwoods are what they do why they're impressive so
13:41
Ejaaz: Ironwood is google's latest tpu tpu stands for tensor processing unit.
13:46
Ejaaz: All you need to know is that the TPU of Google is the equivalent of the GPU
13:51
Ejaaz: from NVIDIA, but with some additional perks.
13:54
Ejaaz: It is more specialized and custom fit towards Google software and AppSuite, right?
14:01
Ejaaz: It's the thing that has powered and trained all their models.
14:03
Ejaaz: They've never actually relied on NVIDIA at all to kind of train and inference
14:08
Ejaaz: a bunch of their models. They've been kind of like this lone entity.
14:11
Ejaaz: And why this is so cool, and we explained this on yesterday's episode,
14:14
Ejaaz: which you should check out,
14:15
Ejaaz: is Google's been super independent and they've been able to make several breakthroughs,
14:19
Ejaaz: which have allowed them to train the same type of models that OpenAI and Microsoft produce,
14:25
Ejaaz: but much cheaper or cost efficient and can scale massively with a greater number
14:31
Ejaaz: of models that they build.
14:33
Ejaaz: And now they've released this new model called Ironwood, which is basically
14:36
Ejaaz: the next generation of their TPU.
14:38
Ejaaz: It is four times faster than the prior version, and it can basically clamp together
14:44
Ejaaz: as one singular stack in a much more feasible way, which means that training
14:49
Ejaaz: larger models at scale is going to be much easier.
14:52
Ejaaz: But the biggest news about this for me, Josh, is they're going to start selling
14:57
Ejaaz: these TPUs and making it more accessible for anyone else to buy their TPUs and
15:02
Ejaaz: train or influence their own AI models.
15:05
Ejaaz: Why this is such big news is this means they're formally stepping into the ring to compete with NVIDIA.
15:11
Ejaaz: Now, don't get me wrong. They're not doing this at the scale that NVIDIA is currently doing it.
15:16
Ejaaz: But currently, there has been no feasible challenger to NVIDIA.
15:19
Ejaaz: And now you have Google entering the ring, which has a lot of distribution and technical expertise.
15:24
Ejaaz: It's notable and probably a hint that the Google market cap should be much, much higher.
15:30
Josh: Yeah, I wouldn't say no one is competing with NVIDIA. There are AMD chips.
15:33
Josh: China's creating their own alternatives. So I'd say it's at that level where
15:36
Josh: it's trying to compete, but there is going to be a very steep mountain in order
15:40
Josh: to get there, to become a real NVIDIA competitor.
15:42
Josh: In other news, we got a new AI hardware device this week, and it goes by the
15:45
Josh: name of Sandbar. And it comes in the form factor of a ring.
15:49
Josh: Now, I have an Oura ring on it. I love my Oura ring. It's a great non-intrusive sleep tracker.
15:54
Josh: This is a totally new take on a ring because it gets into these things that we call edge nodes.
15:58
Josh: And when you deal with ai systems there there are
16:01
Josh: sensors that can then send requests back to the
16:04
Josh: actual ai system and this is a new sensor so what
16:07
Josh: we're seeing on screen is a promo video of this person who has a ring you press
16:11
Josh: a button on the ring and you can speak into a microphone now this microphone
16:14
Josh: acts as an interface between yourself and the ai system and you could ask it
16:19
Josh: to do things like remind you to query questions against it to record conversations and it's this really
16:25
Josh: unique and I guess somewhat novel form factor in the world of AI hardware devices.
16:30
Josh: This was interesting to me, Ejaz, at least because
16:32
Josh: I'm so fascinated about what OpenAI is going to make next year with Johnny Ive in terms of AI hardware.
16:38
Josh: And this is an interesting experiment to kind of see how the ring form factor would work.
16:42
Josh: So the way this kind of exists is it's a microphone that has passive audio back
16:47
Josh: to your earbuds, or I assume back to your phone.
16:49
Josh: And it's this really fun and somewhat intuitive way of using AI without AI getting in the way.
16:55
Josh: So I think a lot of the things that we're going to start to see in this
16:59
Josh: removal of the smartphone is this the suite of
17:02
Josh: ambient devices where you can just kind of engage with ai wherever you
17:05
Josh: are at any time and a ring is a really neat form factor for
17:08
Josh: this because it's it doesn't really get in the way it's just kind of
17:10
Josh: always there if you want to engage with it you summon it if you don't you don't
17:14
Josh: even think about it and i think this is this is an interesting experiment and
17:18
Josh: it's something i'd kind of want to try this not that i think it's a successful
17:22
Josh: product but i think it's an it's
17:23
Josh: an interesting take on what the future ai devices could look like yeah
17:28
Ejaaz: Well where my mind immediately leaps when i
17:30
Ejaaz: i look at this is um her holding up
17:33
Ejaaz: her hand to speak into the ring it either looks like
17:36
Ejaaz: she's about to cough or like you know in the movies where
17:39
Ejaaz: the the bodyguards are like touching their ear when they need to speak
17:42
Ejaaz: into the secret service it kind
17:44
Ejaaz: of seems like something like that so habitually i'm kind of curious as to how
17:48
Ejaaz: this kind of integrates into society but i agree with you i think like the ring
17:51
Ejaaz: is super subtle and kind of non-obtrusive and it makes it super convenient to
17:56
Ejaaz: kind of engage with this technology without needing to stare at another screen
17:59
Ejaaz: and whilst maintaining the ability to kind of interact with real life.
18:03
Josh: Yeah, this led me down a rabbit hole because we were on the topic of Apple and
18:07
Josh: it really, I'd love for Apple to start doing things like this.
18:10
Josh: Like for example, Apple has a hundred billion dollars in cash. They go acquire Aura.
18:14
Josh: Now they get the custom Gemini model from Google. Suddenly they have AI. They ship this
18:19
Josh: this ai ring that is compatible with these new gemini models they ship a new
18:23
Josh: set of airpods that have visual sensors on them so you could collect data from
18:26
Josh: the outside world and you start to get this suite of devices that isn't an iphone
18:30
Josh: but is increasingly capable and more powerful and approaching what we can do
18:35
Josh: with an iphone so i hope this is a trend that we see where the next
18:39
Josh: iphone level device isn't a device it's a suite of devices maybe the ring is
18:43
Josh: one of them maybe it's not but it's an interesting experiment to see what it
18:46
Josh: could look like if that became the case I
18:48
Ejaaz: Want to talk about the dark horse of the AI race, which is Anthropic.
18:53
Ejaaz: Now, I'm going to hold my hands up here, Josh. I have given Anthropic a lot
18:57
Ejaaz: of flack, and I've kind of called them the narc AI model.
19:00
Ejaaz: They follow the rules, they go to the government, they run to the government
19:04
Ejaaz: and say, hey, can you give us this deal or whatever?
19:06
Ejaaz: And I've kind of looked down on Claude since they kind of maintained their parity
19:11
Ejaaz: at the coding agent level. So I was kind of like, whatever, Why would I use Claude?
19:15
Ejaaz: Turns out I was very wrong. So the information leaked a report on projected
19:20
Ejaaz: revenue for Anthropic, and it basically puts them at the same level as OpenAI,
19:26
Ejaaz: in some cases, better, Josh.
19:29
Ejaaz: So the major takeaway from this is they're projecting $70 billion worth of revenue
19:34
Ejaaz: by 2028 and a $400 billion valuation.
19:38
Ejaaz: Bear in mind that OpenAI is currently valued at, I think, $500 billion.
19:42
Ejaaz: So to make that leap from where they are currently, which I think is $200 billion, is a crazy jump.
19:49
Ejaaz: But number two, this would assume they then become profitable way earlier than OpenAI.
19:55
Ejaaz: OpenAI at the same time, 2028, will be making technically more money than Anthropic,
20:00
Ejaaz: but won't be profitable.
20:02
Ejaaz: And so the immediate question that I asked myself was, well,
20:06
Ejaaz: how are they planning to do this?
20:08
Ejaaz: So far, they're losing on the retail sales. So Like, do they have a Hail Mary?
20:12
Ejaaz: And the answer I connected to the dots, Josh, comes right here.
20:16
Ejaaz: In the enterprise AI market share, where Anthropic has sneakily surpassed OpenAI.
20:24
Ejaaz: They currently command, I think this chart is a little outdated,
20:26
Ejaaz: but they currently command around 25% of the enterprise API share.
20:31
Ejaaz: And why this is super important is, although there may be fewer enterprise customers
20:36
Ejaaz: in terms of numbers, like so, you know, OpenAI has 800 million weekly active users.
20:42
Ejaaz: Anthropic might have, I don't know, a couple hundred thousand enterprise users.
20:46
Ejaaz: Each enterprise user pays way, way, way more than the average retail user.
20:51
Ejaaz: And so it's just something that I didn't see, Josh.
20:54
Ejaaz: They're like engaging with a lot of enterprises behind the scenes.
20:57
Ejaaz: They're signing these multi-billion dollar contracts and they're actually like
21:01
Ejaaz: translating these contracts into useful products that these businesses are using
21:06
Ejaaz: behind the scenes. How we prove that, I don't know.
21:09
Ejaaz: Maybe it's like the economic GDP over time from a bunch of these different companies
21:13
Ejaaz: that they've signed deals, but I thought this was cool to point out.
21:16
Josh: Yeah, this to me intuitively makes sense. It's like when you think of coding,
21:19
Josh: you think of Claude. And I think that's kind of the universal truth amongst corporations.
21:24
Josh: And when you want a bot to write code for you, you are using Claude.
21:28
Josh: And if you're pinging an API that is writing code for you, odds are you're using Claude.
21:32
Josh: So while the retail general public facing sentiment isn't that optimistic around Claude and Anthropic,
21:39
Josh: because it's just not as useful as ChatShapute or Gemini, The reality is that
21:43
Josh: if you're writing code and if you are a company that wants a model that writes
21:46
Josh: fantastic code, you are using Claude and Anthropic.
21:49
Josh: And Anthropic is just collecting a lot of the upside without a lot of the public
21:52
Josh: facing noise because those are just private entities. They're just swiping their
21:56
Josh: credit cards and they're getting all their tokens and they're just happy and they're on their way.
22:00
Josh: So, yeah, I mean, I'm happy for Anthropic.
22:03
Josh: I hope this is durable. I like the fact that we're starting to see each of these
22:07
Josh: companies kind of slot themselves into a portion of the market.
22:11
Josh: So I like that Anthropic is just working on code. I think that's great.
22:14
Josh: Don't try to be the best at everything. Try to make the best coding model and
22:17
Josh: look how much money you could print from it. This is a positive sum game.
22:20
Josh: The pie is continuing to grow so quickly.
22:22
Josh: So if you could just own a small corner of it, like Anthropic is doing,
22:26
Josh: all the power to them. Keep it going.
22:27
Josh: Someone who's not faring as well as Anthropic is our good friends over at Meta and Mr. Zuckerberg.
22:34
Josh: They got absolutely crushed this week after earnings for a series of reasons.
22:39
Josh: This doesn't really come as a shock. I think we've been pretty bearish on Meta as a whole.
22:44
Josh: After that whole glasses debacle, I became increasingly bearish on Meta as a
22:49
Josh: company and their ability to execute in this world of AI.
22:52
Josh: But Ejaz, do you have any takes on what happened after the Meta earnings report?
22:55
Ejaaz: I do. So we put out an episode, I think two weeks ago, on the Meta bull case.
23:01
Ejaaz: And so the question a lot of you might have is like, you know,
23:04
Ejaaz: do you still maintain some of that?
23:06
Ejaaz: The short answer is yes, but over a longer time period.
23:09
Ejaaz: Like here's the facts. So earnings came out for Meta last week and it wasn't
23:16
Ejaaz: as great as they'd hoped for one particular reason.
23:19
Ejaaz: Their spend on AI was ludicrous for the quarter.
23:24
Josh: The company spending tens of billions on employees is overspending.
23:27
Josh: I would have never guessed.
23:29
Ejaaz: Exactly. So they had spent billions and billions of dollars,
23:32
Ejaaz: in some cases, in crazy ways, just to hire a couple of people,
23:36
Ejaaz: but also to pay for CapEx investments for their Hyperion data center,
23:40
Ejaaz: to invest in different apps being built, to fire a bunch of people,
23:44
Ejaaz: just ludicrous amounts being spent. And I think that...
23:48
Ejaaz: Meta shareholders had a bit of PTSD from the Metaverse days in 2022,
23:53
Ejaaz: where they renamed their entire company from Facebook to Meta based on this
23:58
Ejaaz: Metaverse theory and ended up not panning out, right?
24:01
Ejaaz: NFTs weren't a thing. And so they have a bit of PTSD where they're seeing Zuck
24:04
Ejaaz: spending all this money, but no real ROI.
24:07
Ejaaz: One clear example is they launched an AI assistant and no one really uses it.
24:12
Ejaaz: No one's really on Facebook and it's not really integrated well into their existing
24:15
Ejaaz: products. People just use ChatGPT.
24:17
Ejaaz: They then launched a Sora competitor called the MetaVibes app.
24:22
Ejaaz: No one uses that either. Do you remember that, right?
24:25
Ejaaz: And then they launched, they pioneered, they said, listen, we're going to stop
24:28
Ejaaz: copying people. We're going to do our own thing. And they launched their own
24:30
Ejaaz: hardware device, which is the AI glasses.
24:32
Ejaaz: The reception and feedback from their diehard fans was the worst they've ever
24:37
Ejaaz: heard it. They hated the entire experience.
24:39
Ejaaz: They think it is a lesser product than anything else on the market.
24:43
Ejaaz: So for all of these reasons and much more.
24:45
Ejaaz: People just don't have faith in Zuck's ability to spend and deliver on this.
24:49
Ejaaz: And it's reflecting in the share price.
24:51
Ejaaz: They lost $250 billion in 24 hours, Josh, on market over.
24:55
Ejaaz: Just completely insane, down 15%. So now going on to the bull case,
24:59
Ejaaz: I do think they picked themselves out.
25:01
Ejaaz: I actually think Meta is probably like a really good buy at this point.
25:04
Ejaaz: And for one solid reason, which is I don't think Zuck wants to lose this race.
25:08
Ejaaz: And he's willing to figure any and all out to get himself to a point.
25:13
Ejaaz: Is he able to produce like a bunch of really cool apps that leverage kind of
25:18
Ejaaz: like the distribution that he has using AI, like Google has,
25:21
Ejaaz: like OpenAI has? I don't know. TBD.
25:24
Ejaaz: But yeah, Josh, do you have any thoughts?
25:26
Josh: There's this interesting phenomenon happening where
25:29
Josh: I feel absolutely zero inclination to use any of Meta's products.
25:33
Josh: And that doesn't exist with any other company.
25:35
Josh: Like I've experimented with pretty much everything.
25:38
Josh: There is not a single part of any of Meta's AI product stack that I'm remotely interested in.
25:44
Josh: In fact, the only touch point I have with Meta is Instagram because Facebook
25:48
Josh: is such a disaster and it's cluttered and it just doesn't, I haven't used it in years.
25:52
Josh: So the Meta ecosystem as a whole is not interesting. the meta hardware delivery
25:59
Josh: is horrific at best like ijaz you you wanted the glasses you ordered the glasses
26:03
Josh: you still don't have the glass dude
26:05
Ejaaz: I couldn't order the glasses i couldn't walk into the.
26:07
Josh: Store yeah so so that's my point is to have
26:10
Josh: a flagship product like that um be that
26:13
Josh: despicable it's it's really it's it's high signal that there is
26:16
Josh: some sort of lack of care in terms of what's being delivered and
26:19
Josh: perhaps move fast and break things worked early on in the days of
26:22
Josh: facebook but in a fully formed meta that is
26:25
Josh: a huge behemoth now that doesn't work as
26:28
Josh: well because the costs are so high i don't like
26:32
Josh: anything about it the hardware even if
26:35
Josh: it was exceptional even if meta released true augmented reality glasses today
26:40
Josh: and they locked me into the facebook meta ecosystem i'm not a user so they could
26:45
Josh: have the best product in the world the product that they hope to release five
26:48
Josh: years from now even if they released it today i'm not a user because i don't
26:51
Josh: care for that ecosystem and they don't care to unlock the ecosystem.
26:55
Josh: So I think they have a lot of hard problems to solve.
26:58
Josh: One is actually building a product people like in the hardware world.
27:01
Josh: One is building a software stack that people like, and one is shifting these
27:04
Josh: billions of users that they have over to something more meaningful than a social
27:08
Josh: media feed. And maybe they don't do it.
27:09
Josh: I don't know how they monetize in the case that they don't, but there's a lot
27:13
Josh: of questions that need to be solved from Zuck and the Facebook team that remain to be
27:18
Josh: unknown.
27:19
Ejaaz: Josh, are you, is it hot where you are? You look to be, you're sweating a little bit.
27:26
Ejaaz: Like, very, very interesting, because
27:28
Ejaaz: in this next and final topic of the episode, I am pleased to announce,
27:35
Ejaaz: Google is launching GPUs into space.
27:39
Josh: I feel like I need boxing gloves every time I bring this up,
27:42
Ejaaz: My God. To create an AI data center in space, which Josh hates so viscerally.
27:48
Ejaaz: But one of the richest mans in the world is going to give you his argument as
27:51
Ejaaz: to why it's an important thing to explore.
27:55
Ejaaz: So termed Project Suncatcher, a moonshot attempt to launch GPUs into space by
28:00
Ejaaz: Google to harness the power of the sun,
28:04
Ejaaz: solar energy, which equates to 100 trillion times humanity's total electricity production.
28:10
Ejaaz: These are Sundar Pichai's words, the CEO of Google, not mine, right?
28:15
Ejaaz: He then goes on to explain how he would attempt to do that.
28:18
Ejaaz: You know, he says like, listen, I know that there are problems in space.
28:21
Ejaaz: There's radiation, but we're working on that.
28:23
Ejaaz: We're running trials and tests right now, which actually proves that our TPUs
28:27
Ejaaz: can survive in that radiation.
28:28
Ejaaz: Okay, checkpoint number one. But of course, the question remains,
28:31
Ejaaz: how on earth are you going to harness the energy that comes from the sun in
28:36
Ejaaz: an efficient manner? Maybe that's easy to solve.
28:38
Ejaaz: And then the obvious one is, it's so expensive to send stuff into space.
28:44
Ejaaz: How are you going to pay for that? And actually, if you dig into his report and his announcement,
28:48
Ejaaz: he argues and he makes the point that like, you know, if you extrapolate the
28:53
Ejaaz: cost of space going forwards, it should end up being equivalently pretty cheap
28:57
Ejaaz: for us to send GPUs where it makes sense to create a data center in space.
29:01
Ejaaz: I'm going to pause there before I start gloating. But Josh, any feedback on this?
29:07
Josh: OK, one thing that I do like is they're readjusting these timelines here.
29:10
Josh: These timelines are starting to feel a little more realistic.
29:12
Josh: Launch two prototypes by 2027.
29:15
Josh: So we're pre-prototype now. This makes me happier.
29:19
Josh: We are going to launch prototypes in two years. We are hopeful that SpaceX and
29:23
Josh: Starship will be able to get the cost per kilogram to orbit down low enough where it makes sense.
29:27
Josh: Fine. Okay. If you want to experiment with these moonshots and you want to take your time with it,
29:31
Josh: all right i guess i give up like i'm i i got nothing else
29:34
Josh: to say this seems like do it like you
29:37
Josh: got the billions of dollars you put it into r&d you do it
29:40
Josh: um i think it's like go go to
29:42
Josh: space i don't care i'm just done i'm done fighting about this i got nothing
29:45
Josh: else and also i'm running out of out of arguments because he is
29:48
Josh: like methodically um removing the constraints by
29:52
Josh: um i guess just just taking more time and assuming
29:54
Josh: the unit economics makes sense the problem with doing it right now
29:57
Josh: is the cost per kilogram to orbit is so unnecessarily high um
30:01
Josh: and the technology is so difficult to prove as prototypes
30:04
Josh: that it doesn't seem worthwhile i hope that
30:07
Josh: they can figure it out i guess is what i have to say but anyway that that's
30:10
Josh: all we got for this week there was a lot of craziness a
30:13
Josh: lot of chaos all across the board all of our favorites open ai meta
30:16
Josh: google apple they all got some screen time
30:19
Josh: this week because they're all up to no good well
30:22
Josh: i guess some some are up to some good it's a it's a mixed bag this week uh
30:25
Josh: there was a good a circular good there was one last
30:28
Josh: bit of news um on the topic of space and uh
30:31
Josh: that is that jared isaacman has been nominated for head of nasa which
30:34
Josh: is exciting because nasa i'm not sure if you realize this nasa at one point
30:38
Josh: they sent people to outer space like they actually had rockets that went up
30:41
Josh: into outer space and it functioned it was a functioning part of society uh which
30:46
Josh: has unfortunately degraded over the years and the space program has kind of
30:48
Josh: faltered to nothing which is i think where a lot of the enthusiasm around SpaceX come from.
30:53
Josh: Thankfully, Jared is someone who is really passionate about space.
30:56
Josh: In fact, he has been there twice.
30:58
Josh: So he has a lot of experience. He understands how this works.
31:02
Josh: And I'm hoping we'll provide a jolt into NASA to just make the space program more exciting again.
31:08
Josh: They have the Artemis II program, I believe, which is supposed to be taking the
31:13
Josh: a rocket to the moon fairly soon. So I'm just excited to see this new ambition happening with space.
31:18
Josh: Congrats to Jared on a nice, a nice win.
31:22
Josh: And that's pretty much it. That's everything for this week. If you enjoyed,
31:25
Josh: as always, please do not forget to share with your friends, like,
31:29
Josh: subscribe, drop a comment about what you want to hear about next.
31:32
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31:35
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31:39
Josh: content there please we do
31:40
Ejaaz: Not have a government bailout so we need you we need you to bail us out when
31:45
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31:50
Ejaaz: to us wherever you are tell your friends to do it even if they don't listen
31:54
Ejaaz: it would help us out so much.
31:55
Josh: So with that i think we're done for the week um we're gonna go take a nice show
32:00
Josh: weekend we'll be back bright and early next week for whatever hot news happens
32:04
Josh: to come over the weekend so stay tuned and as always we will see you guys in
32:08
Josh: the next one until next time peace
32:10
Ejaaz: See you guys.