(Preview) OpenAI Wants Help from the Government, Apple Taps Google for AI, Q&A on Bubbles, Amazon Groceries, and YouTube TV

Ben and Andrew begin with reactions to the OpenAI CFO discussing a federal "backstop" for prospective financing, as well as Sam Altman's recent comments about OpenAI's spending. Then: An emailer objects to the discussion of Bubble benefits, and questions about Meta's AI spending and a looming the AI backlash as hiring contracts and electricity prices rise. From there: Unpacking the announcement that Apple will use Gemini to power Siri, and two follow-ups to last week's discussion of "Too Big to Fail" in tech. At the end: Thoughts on Amazon's grocery ambitions, Walmart's continued success, the YouTube TV-ESPN dispute, and a listener's mental model of Ticketmaster.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing?

• 0:18Ben Thompson?

  I'm doing OK, Andrew. Just looking for a government backstop and all the networking equipment I keep buying for my house. But all of that, all good.

• 0:27Andrew Sharp?

  You're still looking crystal clear on the new fiber internet, not subsidized by the federal government. But what a joy for me. It's great to be back and we will begin with the federal government and a question from Aaron. You wrote about the benefits of bubbles on Stratechery this week. We covered that in large part last week. So rather than rehash the article on this week's podcast, we're going to hit a variety of bubbly questions at the top here. And the first one-

• 0:57Ben Thompson?

  Someone took issue, so we'll get to it.

• 0:59Andrew Sharp?

  Exactly. We do have a dissenting voice, but first and foremost, there's Aaron who says, "It seems like OpenAI CFO Sarah Fryer finally said what we've all been thinking. The money for the trillion-plus dollars of deals that OpenAI has promised is simply not there. It seems our largest, most successful companies are now content to openly ask the US taxpayer to subsidize their risk. There certainly exists an argument for public assistance of certain parts of the AI stack, particularly power. But are we really already at the point in the bubble where we're asking for bailouts? Most would agree that when the bubble eventually pops, Nvidia and OpenAI are poised to experience some of the largest falls from grace.

• 1:45Andrew Sharp?

  With the amount of hubris shown from both companies, I wonder which one will deserve it more." So Ben, a lot of different directions we could go here, but I'll just repeat Aaron's question. Are we already at the point in the bubble where we're asking for bailouts? What do you think?

• 2:01Ben Thompson?

  No, I think that so-

• 2:04Ben Thompson?

  That is a mischaracterization of what was discussed here. Which is not to excuse the overall request, which is a little bit of saying the quiet part out loud. So, again, Sarah Fryer, the CFO, was out with some sort of clarification, oh, I didn't know what that word meant, blah, blah, blah. We're not looking for federal support. Yeah. What I believe she was referring to is about financing. So, we discussed this in the context of Nvidia, or I wrote about it in the context of Nvidia, I can't remember what we talked about on the podcast. With some of the deals they've done with other companies, like they, one of some of the NeoClouds, they've like guaranteed to buy a certain amount of capacity through X number of years.

• 2:48Ben Thompson?

  And the goal from Nvidia in that case is not to actually buy that capacity. Right. The goal is to allow the NeoCloud to get a lower rate of financing to buy Nvidia chips, with the assumption that NeoCloud is going to rent those chips to someone else. But the risk that a financier would have, well, what if you don't find customers? If you don't find customers, you're gonna go bankrupt and we're gonna lose all our money. Nvidia's saying, no, they have a guaranteed customer, which is us. We will rent the capacity if no one else rents it. Yeah. And that should allow the NeoCloud to have a lower interest rate on their financing, because they have a guaranteed source of revenue.

• 3:32Ben Thompson?

  I think that's what she was referring to. Yeah. What opened, like, this is, and now, this is what I say this week, and I wrote in checkery, obviously, we're in a bubble. The marker of shifting into a bubble is when debt starts entering the equation. So, and obviously, all these deals, to the extent they happen, are, we're getting too big for traditional VC. It's not gonna just be equity, there's going, there's going to be debt. And debt is the idea, you're getting, you know, debt is a very good match, at least in theory, with upfront infrastructure investments that pay off over time. Because you need to build it and then you have the low marginal costs of serving it in the long run.

• 4:17Ben Thompson?

  And you can pay off your debt sort of going forward. The reason why VC companies don't take on debt is because the uncertainty is very, very high. So their interest rates would be sky high. It would consume other free cash flow. So they give away equity, which is they don't have to pay interest. They don't have to pay it back, but they do lose part of the upside. They have to share the upside in the long run. That's just sort of the fundamental district debt and equity. In theory, once you're established and you have predictable cash flows, debt is better because you're not giving away your upside.

• 4:46Andrew Sharp?

  Right.

• 4:47Ben Thompson?

  All you're doing is just, debt is a way to shift time. You're, you're paying for the stuff now with revenue that you're going to earn in the future by virtue of buying the stuff now. The issue is if you're going to take on a bunch of debt, the interest rate really matters. And so what I suspect this reference was to was OpenAI would love if there was an understanding by whoever is issuing debt to them that no matter what.

• 5:16Andrew Sharp?

  The US government is going to guarantee these loans.

• 5:18Ben Thompson?

  That's right. I mean, and it was part of a discussion of banks and government. I think obviously it was an error to say this. It was an error, even if you wanted to say it, to not clarify what you were talking about, which is financing.

• 5:34Andrew Sharp?

  Yeah, I honestly, I feel for Sarah Fryer because the word backstop conjures the federal government bailing out big banks or something like that, which is not really what she was describing.

• 5:46Ben Thompson?

  I don't feel too much sympathy to her because what she was doing, I think, and I sort of said this the line before, was saying the quiet part out loud.

• 5:54Andrew Sharp?

  Yeah. Well, some kind of public-private partnership does feel inevitable somewhere along the line here.

• 6:00Ben Thompson?

  Well, what OpenAI I think is doing with cutting all these deals with anyone and everyone is they're sort of tying everyone into their web so that no one can afford for OpenAI to not succeed.

• 6:14Andrew Sharp?

  Right.

• 6:15Ben Thompson?

  And, you know.

• 6:15Andrew Sharp?

  It's a systemic risk if OpenAI goes belly up.

• 6:18Ben Thompson?

  Right. They're trying to make themselves a systemic risk and thus have guaranteed.

• 6:23Andrew Sharp?

  Makes a lot of sense for the US government to come in and guarantee loans. Yeah.

• 6:26Ben Thompson?

  Right. And so, well, not, I mean, so I'm sure they've talked about this internally. Like, we make a deal with Oracle, we make a deal with Microsoft, we make a deal with Google, we make a deal with Amazon and all the, like, if we become so essential that, yeah, we're taking these crazy risks, but it's in everyone's interest that we succeed. It goes back to that story where if you owe the bank $1,000, the bank owe you, maybe that's a little small, but if you owe the bank a billion dollars, you owe the bank. I think that phrase originated at a time when $1,000,000,000

• 6:58Andrew Sharp?

  Right.

• 6:58Ben Thompson?

  were more meaningful.

• 6:59Andrew Sharp?

  Now it's 10 million and a trillion.

• 7:02Ben Thompson?

  Right.

• 7:02Andrew Sharp?

  OpenAI may in fact owe a trillion dollars somewhere along the line here.

• 7:06Ben Thompson?

  That's my overall read on what they're doing, just to the system as a whole and, and, you know, the, and so obviously implicit in that is, once you get too big to fail, fail, it is valid to draw the line back to banks. So I feel bad for her in that she shouldn't have said the quiet part out loud and it sucks.

• 7:25Andrew Sharp?

  Well, and there's a way to use less loaded terminology that doesn't turn this into like a national news story this week. That's where I feel bad.

• 7:34Ben Thompson?

  Well, but maybe it should be a national news story because what they are doing is like, like we are all getting signed up for this, whether we know it or not. Like, like, so it was one of those, it's definitely an error. I can feel bad for anyone making an error, but in my position as an analyst, uh, I'm not going to say, oh, she misspoke. That's not what she meant. I think that's exactly what she meant.

• 8:01Andrew Sharp?

  Yeah.

• 8:02Ben Thompson?

  And, uh, and so, but again, it's not a bailout. Like, what's the line? What's the difference? What I think it's striving for is they want cheaper financing. The best way to get cheaper financing is to basically have the US government as a backstop. Like, that's, that's literally.

• 8:21Andrew Sharp?

  Well, and I mean, let's ask a more fundamental question because I found it interesting. A, as more evidence that paying for the compute necessary to serve AI to massive audiences may be impossible if you don't already have monopoly profits to fund what you're doing. And that's been a question with OpenAI all along. But then, on the other hand, I understand why people would recoil at this idea. But if you accept the premise that leading edge AI is essential to national security over the next several decades, which is definitely debatable. But developing leading edge AI may only be possible while serving a massive consumer business.

• 9:02Andrew Sharp?

  And in that scenario, I don't think it's that crazy to have the government de-risk some of the lending in order to advance the future of the ecosystem. Do you?

• 9:14Ben Thompson?

  No, I'm not a fan of that. Like, the, where, where do you draw the line? Oh, this one just happens to be so expensive that it, that it sort of has to be done. If OpenAI achieves what they want to achieve, then this, this sort of discussion came in the context of Sarah Fryer saying that, oh, an IPO is not coming soon. If you want.

• 9:40Andrew Sharp?

  It's a fair question.

• 9:41Ben Thompson?

  Funding. Do an IPO and issue a bunch of stock. Yeah. And make your case to shareholders about what they're buying into. That comes with certain responsibilities. That comes with a decrease in equity because you're actually literally selling equity. All these reporting requirements. If you're going to be so systematically important, then I think you should be a public company. Like, you should have the transparency that goes with it. So I actually think the context of these comments makes it worse. Like, so.

• 10:09Andrew Sharp?

  She said specifically an IPO.

• 10:11Ben Thompson?

  I'm going to double down. I completely disagree with you. I don't feel bad for her. Like, it was dumb, but I appreciate her saying the quiet part out loud. And I think it's useful for all of us to be aware of like what the implications of what they're do, of what OpenAI is doing are.

• 10:26Andrew Sharp?

  Yeah, well, fair enough. I look at it and say, all right, well, a logical.

• 10:30Ben Thompson?

  You're a softie. You're the guy who was when Rudy Gobert.

• 10:33Andrew Sharp?

  Sympathetic to any underdog anywhere.

• 10:36Ben Thompson?

  And then he got COVID first, which by the way, was in retrospect, a very appropriate, I would, you know.

• 10:43Andrew Sharp?

  I was right.

• 10:44Ben Thompson?

  Everyone was gonna get COVID anyway. But yes, you are a well-known softie for.

• 10:48Andrew Sharp?

  Anyone who's on the wrong end of an internet pileup, I tend to be sympathetic, a pile on that is. And yeah, we'll see what happens in terms of government involvement with OpenAI, but all part of the bubbly atmosphere we inhabit here. One question I had on the rundown, what's the more appropriate top of the AI bubble? Sam Altman getting indignant when he was asked how OpenAI's $13 billion in revenue can support $1.4 trillion of spending commitments, or President Trump saying last week, everybody wants AI because it's the new internet. It's the new everything. It's one of the biggest things

• 11:28Andrew Sharp?

  anyone's ever seen, so everyone wants it. Yeah. I mean, the only problem is if you don't get it. Which of those do you think is the more appropriate epigraph on the bubble here?

• 11:39Ben Thompson?

  I don't think we're even close to the top of the bubble, so neither are relevant. The popping of the bubble is probably going to come when, you know, if you just follow sort of traditional, like there's the so-called like trough of disillusionment or whatever, where something gets hyped and everyone's getting on board with it, and then everyone's like, oh, this doesn't work, it sucks. And then the bottom falls out. And then actually what happens is it just wasn't ready. It has to be developed and it gets better. And so you look up and holy cow, we've actually vastly exceeded what we thought we were going to get sort of before. If there were some sort of, just like.

• 12:19Ben Thompson?

  Microsoft reports like a huge miss because actually turns out all these companies that signed up for Copilot. No one's using it, yeah. Yeah, or something like something like that. The reality is all these companies, actually, this is something I I'm very curious about. All these companies are saying demand vastly exceeds supply. Yeah. That's why we're justified in increasing our CapEx because, you know, we can't fulfill these. Again, I've been a big defender, I think, of Google in particular, where I have to take my, where I was right about Google points when I can grab them. But because times I've been wrong.

• 13:02Ben Thompson?

  But in this, in January of this year, they, their stock had a big drop because of like there were not too big CapEx increases. And I think the cloud number is a little disappointing. And I'm like, actually, if you look at the cloud numbers, it's super clear, they just don't have enough capacity. Right. So that's number one, why they missed. And number two, why you should not just be happy they're spending more, you should wish they had spent more previously. And that has very much come to bear. You could tell they brought a lot of capacity on this year, huge jumps in Google Cloud, margins jumps and revenue jumps. You know, it's all looking, all looking fantastic. And as, and that by and large seems to be the case.

• 13:40Ben Thompson?

  What's confusing is OpenAI signs a deal with AWS, a relatively small deal, thirty eight billion dollars. But, but the difference is that like a three hundred billion dollar with Oracle, that's for in the future, for data centers that actually still need to be built. This thirty eight billion dollars for Amazon is for access to GPUs right now. Why does Amazon have GPUs to give OpenAI right now if they're telling investors on earnings calls that demand far exceeds supply? Yeah. Yeah. It's a little weird. Well, so I think the theory is.

• 14:17Ben Thompson?

  It's interesting that we've seen a real shift in talking about power on these calls, which everyone's been talking about. And actually, both Microsoft and Amazon said, actually, no, we have plenty of chips. We've been power constrained, uh, which they haven't said that as sort of so, so clearly previously and.

• 14:32Andrew Sharp?

  We knew this was coming. We didn't know it was happening today.

• 14:35Ben Thompson?

  I think AWS probably, they, they talk about, we just brought on a new data center. We're about to bring on X amount of power. And they let OpenAI jump the line because it's a huge boost for them.

• 14:47Andrew Sharp?

  The stock, yeah.

• 14:48Ben Thompson?

  That's right. We have OpenAI. So I think, and OpenAI is paying actually a pretty steep price for these GPUs. So.

• 14:56Andrew Sharp?

  Which is indicative of OpenAI needing chips now as opposed to waiting for Oracle.

• 15:02Ben Thompson?

  Right. Cause the sort of pessimistic take is, yeah, OpenAI is gangbusters and no one else is. Like actually, this is really just an OpenAI story. Um, so I mean, I think, so there is an open question here. I think the story I told about letting them jump the line is probably the case. I, I don't think they've had GPUs just sitting there unused.

• 15:26Andrew Sharp?

  Yeah.

• 15:27Ben Thompson?

  And OpenAI has taken them. I think they probably literally just brought capacity online. That should have gone to people in line and they let OpenAI sort of cut the line because OpenAI is paying more. And so Amazon's stock goes up 10% when they sign the deal.

• 15:42Andrew Sharp?

  Exactly. And the now routine OpenAI press release bump.

• 15:47Ben Thompson?

  It's pretty wild.

• 15:47Andrew Sharp?

  Congrats to the folks at, at Amazon. Uh, did you have any takes?

• 15:51Ben Thompson?

  In this case, it is important to note, I think what makes this distinct, it's not just a press release bump. OpenAI is going to be running on Amazon servers like immediately. So that, which makes this deal. And I suspect that's what happened with Google as well, where they, no one's announced the details of what's going on with Nvidia and Google. They did sign a deal. It is for Nvidia GPUs. It's not for TPUs. Um, but I, I think that's a, like, we need capacity now. Like we're bursting at the seams. And you know, that's, that is the OpenAI bull case is like they, everyone's falling over.

• 16:27Ben Thompson?

  Backwards to give them supply and they still don't have enough.

• 16:30Andrew Sharp?

  And they need it. Yeah.

• 16:31Ben Thompson?

  Yeah.

• 16:31Andrew Sharp?

  No, exactly. Well, as far as the OpenAI bull case, did you have any response to the Sam Altman answer to Brad Gersner over the weekend?

• 16:40Ben Thompson?

  Um, I, I don't know. I, I actually, I should, I, I, most of those, I did not actually watch it. I, I guess I probably should watch it.

• 16:47Andrew Sharp?

  Wow, that's great. Good job touching grass. It went viral for a couple of days there, but you missed it. I like it.

• 16:52Ben Thompson?

  Yeah. Uh, the, I don't know.

• 16:55Andrew Sharp?

  My take, my take is specifically, I have a take. I, Sam's answer was fine. The problem with his answer was his tone. Because the questions about OpenAI's spending commitments are obviously fair and he could acknowledge the questions are fair and then just make his case. Speaking as a podcast host myself, Gersner was just being a good host and teeing up a softball for Sam Altman to address. And then he addressed it in kind of a annoyed way that I think rankled a lot of people. But I think the questions are fair and Sam's answers are also fair. Like they're spending because they are betting that they're going to need the compute.

• 17:39Andrew Sharp?

  And the bigger risk is that they don't have the compute once the market opportunity materializes, which is a rational.

• 17:45Ben Thompson?

  From OpenAI's perspective, yeah, they, they are operating still, even though a very large company with a ton of revenue as a startup. And I think appropriately so. This kind of goes back to your point before. It's, this is an all in bet by them. That, yeah, they could stop now and have a nice business, but what's the, what's the fun in that? Right? Like go, they're going to, they, they want to be the AI for the world.

• 18:15Andrew Sharp?

  All right. And that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes. Or you can also go to sharp tech.fm. Either option will get you access to a personalized feed that has all the shows we do every week. Plus lots more great content from Stratechery and the Stratechery Plus bundle. Check it out. And if you've got feedback, please email us at email at sharp tech.fm.