Gavin Baker: Why AI Demand Is Outrunning Compute Supply

a16z’s David George sits down with Gavin Baker to unpack the state of the AI boom, why demand for intelligence may still be dramatically underestimated, and why the outcome doesn't necessarily have to be winner-take-all. David and Gavin explore the possibility that frontier labs, open-source models, applications, clouds, and NVIDIA can all capture significant value as AI adoption expands. They dig into the economics of the infrastructure buildout, why compute investments can have unusually fast payback periods, and what happens when today's relatively small group of heavy AI users expands to hundreds of millions of people. They also debate the risk of an AI bubble versus an AI shortage, the backlash against data centers, orbital compute, the rise of multi-model architectures, and NVIDIA's position at the center of the AI supply chain. Gavin makes the case that the AI buildout could help reindustrialize America, while David explores whether the bigger near-term risk is not overbuilding, but failing to build enough.

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

• 0:00Speaker 00

  When the history of the 21st century is written, you know, there was like the Victorian age. I think this will be like the age of Elon and Jensen, because they are fundamentally altering the fabric of human society and civilization.

• 0:11David George?

  What happens if there's like a massive supply shortage?

• 0:14Speaker 00

  Every time you've had a real profound new technology, you get a bubble because the markets get really excited and they get ahead of themselves. Things get overvalued, that overvaluation leads to an overbuild.

• 0:26David George?

  One of the things that I think has been correct but ineffective is this idea that we need to stay ahead of China.

• 0:32Speaker 00

  You're opposed to data centers. Well, you know what? It's probably the best thing that has ever happened to working class Americans. We are re-industrializing America and it's awesome.

• 0:41David George?

  Assume that you're right. There's not a physics reason why this can't work.

• 0:46Speaker 00

  An increasing fraction of the world's compute is going to be in orbit. This sounds crazy, but asteroid mining is going to be a very real thing. It has more gold, silver, platinum, every precious metal in it than exists in the earth's crust.

• 1:00David George?

  Every LP conversation that we have starts with like, how's this all going to go wrong?

• 1:04Erik Torenberg?

  Gavin Baker has spent the summer asking AI leaders one question. Can you give me a single quantitative data point in your business that's getting worse? So far, the answer has been no. In this episode, 816Z general partner David George sits down with Gavin to take a fresh look at the economics of the AI boom. They discuss why AI may be a positive sum market where from tier labs, open source, applications, clouds and chip companies can all win. And what today's compute economics tell us about the sustainability of the build out. They also tackle the bubble question head on. Every major technology shift has produced overinvestment at some point. But with compute already constrained and AI usage still concentrated among a relatively small number of people,

• 1:49Erik Torenberg?

  what happens when that demand spreads across the broader economy? From data centers and re-industrialization to orbital compute, open source and Nvidia, this is a wide ranging look at what happens if AI demand keeps outrunning supply.

• 2:06David George?

  Gavin, you've been out here hanging out on the West Coast over the summer. And you've been talking about the fact that you're like trying to find someone to give you a bearish case, to make your sentiment more negative. Have you found anybody?

• 2:19Speaker 00

  No, and I ask everyone. My standard question is, can you tell me one quantitative data point in your business? That's getting worse, just one. That's my standard question. And it's at least in July and August, I haven't been able to find a single person. Now, for being honest, you know, Anthropic is, you know, in a quiet period. So maybe they've slowed down a little bit. But I do think the rest of the world has accelerated. OpenAI is clearly accelerated. Open source, I think, has accelerated more. And then I do think Grok, particularly after Grok Bot, has had a pretty dramatic acceleration. And so AI overall, it accelerated in July.

• 3:01Speaker 00

  It accelerated in August and it can't keep accelerating forever. But it's just kind of wild that public stocks have kind of fallen out of bed over the last two months. And I mean, you know, you can drown crossing a river that's on average two feet deep. And so there's not a lot of action at the index level.

• 3:21David George?

  Right.

• 3:21Speaker 00

  But some of these AI names are in pretty significant drawdowns. And they bounced a little bit in August, but still pretty big drawdowns. And things are broadly accelerating.

• 3:30David George?

  Yeah.

• 3:31Speaker 00

  Our friend Eric Fisher did a podcast with Patrick O'Shaughnessy and he said, maybe everyone wins.

• 3:36David George?

  Yeah.

• 3:36Speaker 00

  Anthropic wins, OpenAI wins, SpaceX wins, Meta wins. Google wins by selling a lot of GPUs. Open source wins, Neo clouds win. The inference clouds went on top of the Neo clouds.

• 3:49David George?

  Applications win.

• 3:50Speaker 00

  Yeah, maybe not all applications. Applications that I think execute well and navigate this.

• 3:57Speaker 00

  But that feels like a very possible scenario to me. And there's so much zero sum thinking in the world. And by the way, on Anthropic, what is, my hypothesis would be, if you're Anthropic, one, I think they probably trued up and cleaned up some accounting.

• 4:16David George?

  Yes, definitely.

• 4:17Speaker 00

  You'd rather do that.

• 4:18David George?

  Yes.

• 4:19Speaker 00

  So you rebased and now you're comparable to OpenAI.

• 4:22David George?

  Yeah, in terms of revenue added, in terms of the definition and now I think kind of revenue added.

• 4:27Speaker 00

  Exactly. So you kind of rebased and then they did their testing the waters. And then I would hypothesize, because they've executed well, probably the next disclosure is a re-acceleration. And then there's always this kind of funny game between the frontier model companies. They always have more advanced checkpoints. Anthropic is clearly waiting for OpenAI to release Astra.

• 4:52David George?

  Yes.

• 4:53Speaker 00

  And then it's like, the next day, here's Fable 5.1.

• 4:56David George?

  Yes, exactly.

• 4:57Speaker 00

  Magically, it just happened to be available several hours after Astra.

• 5:01David George?

  Yeah.

• 5:02Speaker 00

  So I think they're being thoughtful in heading into this IPO and everyone is shooting at them.

• 5:06David George?

  Yes.

• 5:07Speaker 00

  Everybody's shooting at them and they're in a quiet period, so they can't really shoot back. So there's a lot of gamesmanship. But I do think having OpenAI and Anthropic be public companies is going to be helpful for the market. Just because it's, you know, it's such a powerful force. And a lot of public investors, you hear, oh, Sarah Fryer said this at an all hands meeting and it's on the cover of Wall Street Journal. Okay, we're going to put that into our model.

• 5:34David George?

  Yeah.

• 5:34Speaker 00

  And it's just, I think it'll be better for them to be public. I am a little, you know, Anthropic is now in their culture interviews, saying, how would you feel if the equity went to zero?

• 5:44David George?

  Yeah.

• 5:45Speaker 00

  Because we're looking for people who are mission aligned.

• 5:47David George?

  Yeah, mission, not mercenary, yeah.

• 5:49Speaker 00

  And that's great. We want missionaries, but we also want people to make money. And at the end of the day, you can't afford the compute you want for your mission. If you go, if the equity goes to zero.

• 5:59David George?

  Yeah.

• 5:59Speaker 00

  Like, I'm no expert, but I'm pretty sure on that. And then I do think they are.

• 6:05David George?

  They're like the accidental enterprise company.

• 6:06Speaker 00

  Oh, for sure. Oh, yeah. They're kind of like the accidental everything.

• 6:10David George?

  Enterprise is just a byproduct of the mission, the objective and, yeah. Whereas I think OpenAI is a little more commercial and obviously SpaceX is a little more commercial, but.

• 6:17Speaker 00

  But all of these companies, let's just say they have 10 gigs of power. And they're allocating eight to inference. And let's just say they're monetizing that inference at whatever, 60 billion a year. So $480 billion a year in revenue.

• 6:32David George?

  Which is like a, on a revenue payback basis would be like a one year payback on a revenue basis, not a gross profit basis.

• 6:39Speaker 00

  Yeah, on a revenue basis. Yeah. And I'm trying to use conservative numbers. People seem to think Anthropic and OpenAI are both monetizing at $100 billion a gigawatt today.

• 6:47David George?

  Yeah.

• 6:48Speaker 00

  Let's say they have a big research breakthrough and they decide, wow, it is to our long-term advantage to go from eight gigs allocated to inference, two gigs allocated to training, to eight gigs on training. And then your revenue just went from 480 to 120. And I think your annualized revenue, and I actually think they would do that.

• 7:11David George?

  That decision, yeah.

• 7:12Speaker 00

  And this is just something that public markets are going to really have to get used to.

• 7:19David George?

  Yeah.

• 7:20Speaker 00

  As you say, OpenAI may be a different animal. And I do think the reality is, you know, everybody has these ideals about how they're going to manage their business. Then they go public and the stock is volatile. And it really impacts employee morale, recruiting, retention. So I'd be surprised if they did such a dramatic cut. But a lot of the revenue is kind of under their control based on what checkpoint they release.

• 7:44David George?

  Yeah.

• 7:45Speaker 00

  Where they price along this kind of Pareto curve. And then how much they allocate between training and inference. So it's going to be Meta and Google and these kind of internet companies. It was just, it was pretty smooth fundamentally, even if the stocks were volatile.

• 8:01David George?

  Well, there was no massive trade off they had to make in terms of the cost or infrastructure to serve revenue side.

• 8:07Speaker 00

  Yeah.

• 8:07David George?

  They were totally separate.

• 8:08Speaker 00

  A hundred percent.

• 8:09David George?

  Yeah.

• 8:09Speaker 00

  Yeah.

• 8:10David George?

  It's fascinating. So if you go back to Eric's point of it's all going to work. Like, I actually think that's a great point. Like, I describe it differently. I've had this conversation with LPs a lot because every LP conversation that we have, it's probably the same for you, starts with, how's this all going to go wrong?

• 8:23Speaker 00

  Yeah.

• 8:23David George?

  And it's like, what's good, what's going to crash? And I'm like, oh, are the large models screwed or the labs screwed because of open source? And I'm like, this is all wrong. This is not an or thing, it's an and thing, right? This is an and thing. Frontier is going to work really well. N minus one models are going to work really well. Open source is going to work really well. There's going to be a bunch of application companies that work really well. The clouds are probably going to be fine. They're probably going to work really well. The five lab companies are probably going to do really well.

• 8:48Speaker 00

  Yeah, and Nvidia is at the center of all of it.

• 8:53David George?

  Yes, yes, they're probably going to do pretty well.

• 8:56Speaker 00

  Yeah, the last 26 years have taught me not to bet against Jensen.

• 8:59David George?

  Yeah, he's in a pretty good position here. I want to come back to that. The point that you made about training versus inference is an interesting one. It seems to me like the labs will decide to take all incremental profits and probably much more than their profits and invest them in training for a long period of time. Would you think that's fair? Like, this is very different than like the clouds, you know? Because like the internet companies in the clouds, they just end up being supply demand driven and they generate tons of profit and they can still grow a certain amount. But they don't have some, maybe with the exception of Meta, like some big long-term bet that's like a multi-year payoff?

• 9:38Speaker 00

  Yeah, I think it's important to kind of be precise. They, for sure, I don't think they will generate free cash flow anytime soon. I think they're going to generate a lot of operating cash flow. And then they'll use that to buy a lot of GPUs, XPU's, whatever, whatever I'm going to call them.

• 9:55David George?

  Or maybe they subsidize heavily. We do know that that's happening at the labs.

• 10:00Speaker 00

  Subsidize what heavily?

• 10:03David George?

  Their first party products. So token consumption of their first party products.

• 10:07Speaker 00

  Oh, yeah, yeah, yeah.

• 10:07David George?

  They're doing all this research and they're spending a lot on data, on compute. And then their first party products are like a heavy subsidy products today, right?

• 10:15Speaker 00

  Yeah, so it's eight gigs of inference and two gigs is for internal research. And then, you know, two gigs is actually training.

• 10:22David George?

  Yeah, exactly.

• 10:24Speaker 00

  And, you know, including probably the inference that goes into post-training. Yeah, I don't, I, I think, given the belief systems that they all seem to have about scaling laws, which continue to hold, I don't think any of them are going to be that focused on generating free cash flow. And you've seen, right, we saw Satya blink.

• 10:46David George?

  Yes.

• 10:46Speaker 00

  And Satya really regrets that, I think.

• 10:48David George?

  Yeah, yeah.

• 10:50Speaker 00

  You know, he kind of blinked, I think it was last year. You know, he gave that great interview for Davos and they asked him about all the CapEx. And he said, I know I'm good for my 80 billion.

• 11:01David George?

  Right.

• 11:01Speaker 00

  And, and I think they blinked a little, they slowed down, they regret that. And then Dario famously, he went on a podcast and he made, and he said, listen, some people are being super irresponsible with their spending and it's a hard decision because if you don't spend enough, you could lose a lot of share, but if you spend too much, you could go bankrupt and like, those are both bad things, but bankruptcy is worse than losing share. So I'd rather be conservative. And he was conservative and OpenAI was aggressive and now OpenAI is back in the game.

• 11:32David George?

  And SpaceX was aggressive.

• 11:33Speaker 00

  And SpaceX was aggressive.

• 11:34David George?

  And so, you know, like they're clear, high ROI's on those, independent of supply, demand mismatches that are happening, like clearly that seems to be the right decision, short term and long term.

• 11:44Speaker 00

  Yeah, absolutely. I mean, we, we calculate, you know, Nebius and CoreWeave both gave some interesting disclosures, but you can kind of get to a nine to 10 month payback for Nebius because, you know, okay, you bring on a gig, it costs 50 billion, you get, you can get an upfront payment for 50 to 60% of that for customers.

• 12:06David George?

  Yeah.

• 12:06Speaker 00

  So now, you know, you're talking about 25 or 30 billion and then you can monetize it if you put it into the spot market.

• 12:13David George?

  The spot, yeah.

• 12:14Speaker 00

  At a, the spot, spot paybacks are probably much faster than nine or 10 months.

• 12:18David George?

  Yeah, you gotta assume like a smoothed out level, like two, two bucks, three bucks, even with that.

• 12:23Speaker 00

  It's very, it's a really high payback.

• 12:24David George?

  And now you can get like five bucks or eight bucks and yeah.

• 12:26Speaker 00

  And then SpaceX, because they build these really big clusters and, and I think at a really important point is they bring them on fast.

• 12:33David George?

  Yes.

• 12:34Speaker 00

  They have an even faster payback and they can monetize it, you know, higher, I have tried to shift, you know, to think of pricing and, you know, per megawatt rather than per GPU. Cause it seems like it's where the world, world is, but like SpaceX, the payback feels well inside of that.

• 12:51David George?

  Yes.

• 12:52Speaker 00

  And I just, in my career as an investor,

• 12:57Speaker 00

  there haven't been that many opportunities where you have companies that could deploy tens, hundreds of billions of dollars and get sub one year paybacks.

• 13:07David George?

  Yes.

• 13:08Speaker 00

  And it's kind of crazy. And then also, like, we should also talk, if particularly if you're buying Nvidia GPUs, to a lesser extent TPUs, you can finance these.

• 13:17David George?

  Yes.

• 13:18Speaker 00

  And there's a very sophisticated, you know.

• 13:20David George?

  Yeah. It's a very low cost of capital to finance them today.

• 13:23Speaker 00

  Yeah. And everybody's, you know, worked up about, you know, circularity and it's like, well, I don't know.

• 13:30Speaker 00

  I know a lot of smart people who work at Blackstone and KKR and Apollo. And they're the ones that are financing it.

• 13:38David George?

  Financing it at a relatively low cost.

• 13:40Speaker 00

  At a relatively low cost. And I think one reason that's happening is useful lives just keep getting extended. And as these models get better and better and better, and the ROI on token spend goes up, you know, the monetization, monetization rate per gigawatt goes up. So, I mean, the true equity payback like might be way inside of a year.

• 14:05David George?

  Yeah, exactly. Exactly. Yeah. And look, there's a case you could make that the prices actually of all the stuff go up, which could make the, the supply side economics even more compelling, right? Like, you know, so on the supply side, like that's the dynamic today. Like it just is what it is. Like there's a ton of data points out there that paybacks are within a year.

• 14:25Speaker 00

  Yep.

• 14:26David George?

  I think it's actually interesting to think about the demand side too, because the knock would be, well, in all these cycles, you get some overbuild and then that, you know, destroys the economics of the supply side. The demand side today, like what are we monetizing? Like the monetization of these companies, which are doing, call it 180 billion of revenue or something in that direction, um, is on the back of what? Like 30 million actual heavy paying users? Like getting real value, I'm talking about like developers.

• 14:57Speaker 00

  I might take the under on 30 million, man.

• 14:59David George?

  So call it, yeah, actually what we see inside our companies is, you know, obviously there's a power law in which companies are spending a lot on tokens, like old banks are probably spending 1%. Very tech forward companies are spending high single digits. But if you actually look at the sort of the, the power law of what's happening of the actual engineers in those companies, the highest spending engineers are spending 10 or sometimes 100x more than the median engineer. And so, yeah, your 30 million is probably way overstated. It might be sub 10. And so there's this question of like, where are we at in diffusion? There's a one and a half billion knowledge workers. Like it feels like we're nowhere on the demand side and we're massively supply constrained.

• 15:41Speaker 00

  And what are, I'm just curious, across the A16Z portfolio, if, what are your best companies spending on tokens per month relative to human compensation? What rough range?

• 15:55David George?

  Oh, high single digits, some at 10%, like some of the very AI native ones, like 10% plus. And so, you know, and then old economy companies are spending, the ones that are probably doing a good job, like 1%. So it feels to me like, when I look at the supply, demand characteristics, it's like supply stuff,

• 16:14David George?

  people say, is that sustainable? Well, like when you pair it with the demand stuff, it feels, it feels pretty simple. Like there could be things that disappoint us in terms of like diffusion into the real economy.

• 16:25David George?

  But it feels like over a 10 year stretch, like we're nowhere.

• 16:28Speaker 00

  Yeah, absolutely nowhere. And I just, my, so at a trade is, our internal token consumption has gone up 100x from the month of March, March through August, 100x.

• 16:40David George?

  Yeah.

• 16:40Speaker 00

  Our token spend. And we just got access to GrokBot Enterprise. And with two people using it, like it looks like token spend might 10 or 20x in a month.

• 16:56David George?

  Yes.

• 16:56Speaker 00

  From August.

• 16:57David George?

  Yes.

• 16:57Speaker 00

  Like, like I think.

• 16:59David George?

  But it's actually extremely valuable. Like we have some heavy GrokBot users here and like, it is very productive use. Like this is not like wasteful tokens, but.

• 17:09Speaker 00

  Yeah. I was, and listen, like I, I try super hard, you know, I always, when I use AI, I just remember when my parents, like I was trying to get them to shift to an iPhone and an iPad and like, you know, get them used to it. And like, you know, and they did a good job. I give them loads of credit. And, but you know, I'm 50 years old, you know, like, how old are you David?

• 17:33David George?

  42.

• 17:33Speaker 00

  42. And you see these like 23 year old kids and just the way they use AI, they're just fluent and native in it. I just feel like maybe in a way that no matter how hard I try, I will never be, and I'm trying really hard. But you know, like we got Claude Code, I try, I, you know, I built some stuff, did some cool stuff. And in like, I don't know, three minutes of type creating GrokBots, I had much better versions of everything I created. You know, so I went on this Patrick O'Shaughnessy podcast like five months ago and I said, you know, like I love having a podcast summarizer. And he was like, how'd you do it? I was like, well, just use AI and do it.

• 18:12David George?

  Yes, pretty simple.

• 18:12Speaker 00

  It takes 10 seconds and GrokBot.

• 18:16David George?

  Yes.

• 18:16Speaker 00

  It's amazing and it's so good.

• 18:18David George?

  Yeah.

• 18:18Speaker 00

  And then, you know, a Substack summarizer, an X summarizer, um, an X sentiment tracker for topics and stocks.

• 18:26David George?

  Yeah.

• 18:27Speaker 00

  And like that, all of those would have taken me, I don't know, hours working with Claude Code. And they each took seven to 12 seconds with GrokBot. And it's better.

• 18:41David George?

  Yeah.

• 18:41Speaker 00

  So to me, GrokBot does feel like another, um, at least for me, like kind of chat GPT moment, because Claude Code, like I could see the data, it was powerful. I did some really cool stuff with it. It was like empowering and this is neat.

• 18:59Speaker 00

  You know, like family calendar apps, things like that.

• 19:02David George?

  Yeah.

• 19:04Speaker 00

  But this is just 10 seconds and it's way better than what I was able to do.

• 19:09David George?

  Yeah. Yeah. The Claude Code thing like was obviously the shift in coding and, you know, our, our most sophisticated engineers, you know, were doing whatever 20% of their code, you know, with, with AI to like, you know, whatever 90 plus 5%. And so now I think everything you described in what you built with Claude Code or Codex is still kind of reactive in a way, right? Like it's, it's still, you know, it's like summarizers.

• 19:35Speaker 00

  Yeah.

• 19:36David George?

  Preparation. It's all like knowledge enhancing, which is part of your job, but it's not actually doing the work for you.

• 19:41Speaker 00

  Yeah. And now you, you have a GrokBot that says, what are the recommended actions?

• 19:46David George?

  Yes, exactly.

• 19:46Speaker 00

  Based on everything the other bots have learned today.

• 19:49David George?

  Yeah.

• 19:50Speaker 00

  What recommendations do you have for me today? And that for sure is like, and it was so easy to build.

• 19:57David George?

  I now have it, it's okay. I'm like horse racing all these, which is like, I have, uh, uh, GrokBot doing it, Codex doing it, all the like action taking for this. I just, I want to know, make me better at my job. Look at everything I do. Give me, give me recommended automations you can do. I have Town doing it as well, which is one of our companies, or at least I've been very good at it. But, and we're like kind of on the bleeding edge of trying to do this stuff. Just wait till everyone does this stuff.

• 20:22Speaker 00

  Yeah.

• 20:23David George?

  And then, and then when we actually click like, yes, go just automate this.

• 20:26Speaker 00

  Yeah.

• 20:27David George?

  It feels like that's sort of endless token.

• 20:29Speaker 00

  Yeah. And, but I do, we should acknowledge like the, the history of financial markets.

• 20:35Speaker 00

  You know, dating kind of back to like the South Sea Bubble is whenever you get this transformational new technology, I actually went on a podcast, I said, I thought the South Sea Bubble was connected to like the invention of longitude and the ability to sail. Turns out it was not. It was just, it was kind of like a more of a tulip episode. But like every time you've had a real, you know, profound new technology, you know, whether it's the automobile, the TV, the radio, internet, the PC, railroads,

• 21:04David George?

  You always get

• 21:05Speaker 00

  steel mills, you get a bubble because the markets get really excited and they get ahead of themselves. Things get overvalued. That overvalue, overvaluation leads to an overbuild. And then particularly if you're funding it with debt, and even today, a majority of this is still being funded out of operating cash flow, which I think is really helpful. You know, debt funded build outs, they demand immediate ROI, not an ROI in three years.

• 21:33David George?

  Yeah. You can't be off in the time.

• 21:34Speaker 00

  You can't be off, off in the time. But I'm just more, you know, like I, you know, I talked to Jazz about how Watson wafers, Jazz, I guess, and Patrick, Watson wafers are these fundamental constraints and just the build out is so big and we're so early that we are, it's like impacting the raw productive capacity of so many industries, you know?

• 21:56David George?

  Yeah.

• 21:56Speaker 00

  Now, you know, everybody, everybody in copper, there's like an AI thesis and like, we're gonna have to, like, think about it to like fill the, you know, if, if 10% of what we just talked about comes true, you know, we're in this acute shortage with, I don't know, several million people are driving a crazy global compute shortage. What happens when that's 500 million? And, you know, how many copper mines do we need to build to like support this?

• 22:26David George?

  Yeah, yeah.

• 22:26Speaker 00

  Kind of a wild thought. And so like these fundamental constraints, I think are slowing us down. And I, and I think that's, I actually think that's good for society. And I would now say rates and regulation, you know, real rates are going up.

• 22:39David George?

  Yes.

• 22:39Speaker 00

  And it just is what it is, which makes sense because we're like investing a lot. So it makes sense that real rates are going up. And then regulation, man, it's, it is like, I'm kind of shocked at what's happening in America.

• 22:52David George?

  We're in a really bad place.

• 22:54Speaker 00

  Yeah. And just, you know, I had this exchange with, with Shulto from Anthropic and Dario on X last weekend. And, you know, Dario said, hey, I don't think I've been negative, you know, I've written, I've written two essays. One was positive, one was negative. So being 50% negative, and particularly when it's like a terrifying negative.

• 23:18David George?

  Like an existential.

• 23:20Speaker 00

  An existential negative. Everybody might be out of, out of a job. Like that Eliezer Yudkowsky guy says, if we build it, everyone will die. And it's like, how about if we build it, like, we're gonna cure cancer. We're all gonna live forever. I thought one of the best things Dario said was like, what we need to do is stop talking about curing cancer and actually cure cancer.

• 23:37David George?

  Actually cure cancer and actually make breakthroughs, like.

• 23:41Speaker 00

  But just somebody like, my favorite line in the Bible is the truth shall set you free.

• 23:45David George?

  Yes.

• 23:46Speaker 00

  But the only person who can, the only group that can tell the AI industry's truth is the AI industry. They need to just start telling the truth. Hey, when we, okay, you're opposed to data centers. Well, you know what? It's probably the best thing that has ever happened to working class Americans.

• 24:05David George?

  Yeah, exactly.

• 24:06Speaker 00

  You know, it's like going to college might be significantly NPV negative now because you can go learn how to be an electrician, a plumber, an HVAC tech, and make ungodly amounts of money.

• 24:18David George?

  Yeah.

• 24:18Speaker 00

  So this has been amazing for working class Americans. We now have a lot of data that particularly with behind the meter power generation, when a data center goes in, it transforms a town. Like tax revenue, it doesn't double. It like 10x's and it is revitalizing all of these like dying small towns all over America. And listen, we're getting, we're getting much better at addressing the environmental stuff. Generally, they use natural gas, which is a pretty clean fuel. There is

• 24:49David George?

  The water, the water consumption thing is totally debunked. It's totally debunked.

• 24:53Speaker 00

  Yeah, it's nothing. It's nothing. So these are like really, really, really good. And they're having a really positive impact on the world. And that's without even considering things like curing cancer. But somebody needs to tell that story.

• 25:05David George?

  It's now, and I think the problem with it now is like the burden of proof is on, not curing cancer, but actually delivering some real tangible, everyday American benefits beyond using chat, you know, or Grok to like answer your questions or substitute for a search engine, right?

• 25:21Speaker 00

  It does feel like we're pretty close to that. Yeah, it does.

• 25:27David George?

  And by the way, like, one of the things that I think has been correct but ineffective is this idea that we need to stay ahead of China. Like, it's like, it is true. Like, I'm very much like, I'm a patriot. Like, I believe that. But it's way too abstract.

• 25:41Speaker 00

  Yeah.

• 25:41David George?

  The abstract for the average American.

• 25:43Speaker 00

  Nobody is worried about China invading America.

• 25:45David George?

  Yeah, exactly.

• 25:45Speaker 00

  I'm pretty sure the Pacific Ocean is really big.

• 25:48David George?

  Yeah, like affordability and like, how is this gonna change my life for the better or worse? Right? And so I think there's a pretty immediate impact you could feel. Like, I, my favorite is, you know, Loudoun County, Virginia, which is like the highest, highest per capita income zip code in the US, or county in the US. And it has the highest density of data centers.

• 26:10Speaker 00

  Yeah.

• 26:10David George?

  And they, and they make a tremendous amount of tax revenue from data centers. Like, we should, we should do this everywhere.

• 26:15Speaker 00

  Yeah, well, it's actually very funny. A, someone very opposed to data centers said, oh, you're for data centers. I'd like to see them put in the highest income zip code and the highest, you know, income county. And they're like, actually, the highest income zip code in America and the highest income county has the highest per capita concentration of data centers. So we've done that. And it worked out really well.

• 26:34David George?

  It worked out really well.

• 26:35Speaker 00

  Yeah. But you know, hey, don't bother me with the details. I'm on my next talking points.

• 26:38David George?

  That's good. That's good.

• 26:39Speaker 00

  And all those talking points, it's tragic. Like, there is an organized CCP funded campaign, I think, against data centers here in America. Like, I think a lot of it gets laundered through TikTok. And it's just tragic because the other thing that's happening is this is re-industrializing America. The combination of having the strata form most closed, which is amazing for America.

• 27:00David George?

  Yeah.

• 27:00Speaker 00

  You know, natural gas here is two or three bucks. It's now 25 bucks in Europe and Asia, 20 bucks or whatever it is. And natural gas is, you know, important input to the cost of electricity, which is an important input to almost all manufacturing processes. And so we have a huge cost advantage for that basic input now. And you have that happening. And you have this kind of data center boom happening. We are re-industrializing America and it's awesome. This is what everyone in both parties has wanted for a long time.

• 27:33David George?

  Yeah, exactly.

• 27:34Speaker 00

  Like bring industry backed, small towns that were left behind by the steel mills closing. Well, data centers are bringing them back.

• 27:40David George?

  Yeah.

• 27:40Speaker 00

  But somebody has to tell that truth. I mean, I tried to do it on every podcast, but like, I'm just a dude.

• 27:46David George?

  Yeah. And like, your audience is the tech audience that already believe you're preaching to the choir, if you will. But yeah, the story, the story, Meta is probably doing the best job of telling that story, I would think.

• 27:56Speaker 00

  Yeah.

• 27:57David George?

  It seems.

• 27:57Speaker 00

  You know, and I think one reason, it's really wired into Meta's DNA. So one of the first things they started doing as a public company, I don't remember if it was on their first earnings call, but Sheryl would run through, Sheryl Sandberg, would run through 10 or 15 very specific small businesses that had started using Meta's advertising products and the impact it had on that business.

• 28:22David George?

  Yeah.

• 28:23Speaker 00

  You know, this cake bakery in Des Moines started, you know, worked with Meta. And, you know, it was, it was, it was two women who are single mothers working by themselves. And now they have 15 locations. They employ 50 people.

• 28:40David George?

  Yeah.

• 28:40Speaker 00

  And this has been amazing for Des Moines and it's been transformative for them.

• 28:44David George?

  Yeah.

• 28:45Speaker 00

  And they would just run through that every time. And I do think the entire AI industry, like I'd love to see, you know, everybody, SpaceX, Anthropic, OpenAI, Google, Meta, say, hey, here are real businesses and real Americans. And like, either name the business or get permission to, if you can, name the American or anonymize it. This is a really positive thing it had on their life.

• 29:10David George?

  Already very tangible. Yeah.

• 29:11Speaker 00

  Yeah, same Nvidia, AMD, Broadcom, all of them.

• 29:16David George?

  Yeah.

• 29:16Speaker 00

  Just run through specifics because the truth shall set you free, but only if you tell it.

• 29:20David George?

  Yeah, exactly. Exactly. Yeah. So it seems more likely than, given that fact pattern, if you go back to just the sort of macro situation that we're in, that we underbuild on the supply side.

• 29:32Speaker 00

  Oh, yeah.

• 29:32David George?

  For, for like, through 28. And, and by the way, like, there's no capacity available with all the forecast builds that will happen through 28, which are probably now going to be delayed, given the political dynamics that they have. So.

• 29:45Speaker 00

  Everybody's worried about oversupply. I'm like more worried about undersupply.

• 29:48David George?

  Massively undersupplied. Yeah.

• 29:50Speaker 00

  Yeah.

• 29:50David George?

  Which, which, okay. So then if that's the scenario, like you could see a scenario where you see, you know, big price increases, actually access the intelligence.

• 29:59Speaker 00

  Yeah.

• 29:59David George?

  Which is the opposite direction of where everybody thinks this is gonna go.

• 30:02Speaker 00

  Yeah. Well, Dorkas had a wild point. I forget what it was, but he was positing, I forget the

• 30:08David George?

  Like the cost of a token could go up 10x or something like that.

• 30:10Speaker 00

  Yes.

• 30:10David George?

  Yes. Which is crazy, but like, we do live in a supply demand world. Like, it's conceivable. If the, if the demand goes massively. And by the way, the, the whole premise of this that's happening so far is that there's a massive amount of consumer or user surplus being generated. Right? So like, why do people select the frontier tokens when they could use the cheaper tokens to do most tasks? There's many reasons why. But like, the biggest one is because there's a tremendous amount of surplus, even if you're using the frontier tokens.

• 30:38Speaker 00

  Yeah, absolutely.

• 30:39David George?

  And so, yeah, what happens if there's like a massive supply shortage?

• 30:43Speaker 00

  Well, I think that would be the, you know, kind of funny, the consequence of like the, these like data center degrowthers.

• 30:54Speaker 00

  Maybe like real compute inequality where big companies and wealthy people can afford compute. And then, you know, two years from now, they'll be on about that. And it's like, well, that happened because of you.

• 31:09David George?

  Yeah.

• 31:09Speaker 00

  You know, that happened because you wouldn't let us build data centers.

• 31:12David George?

  Yeah. And by the way, we've, we've seen this, right? Like the path to a low cost product delivered to consumers in a mass market is advertising. It takes a long time to build an advertising business.

• 31:23Speaker 00

  Yeah.

• 31:24David George?

  As we've seen with all the, you know,

• 31:25Speaker 00

  Yeah.

• 31:26David George?

  consumer internet businesses that we've invested in over the years. And so there may be a disconnect in the period where you can't actually offer that.

• 31:32Speaker 00

  Yeah.

• 31:32David George?

  And that would be a terrible outcome.

• 31:34Speaker 00

  That'd be a terrible outcome for the world. Nobody wants that. So we need to build a lot of data centers.

• 31:37David George?

  Yeah, exactly. Exactly.

• 31:39Speaker 00

  Yeah, like a compute inequality, like future. That's, that's not a good, that's not a good future for anyone, which is another reason that open source is so important. And just one of the things, um, you know, I, you know, I had a Grok make me, make me like a meme of that, like three headed dragon. And one of the heads is like, kind of confused about like all of the really like stupid bearish AI narratives. But people have this idea that open source tokens are free.

• 32:08David George?

  They're not.

• 32:08Speaker 00

  And it's like, it takes the exact same amount of compute.

• 32:13David George?

  Yeah.

• 32:13Speaker 00

  All else equal, to make an open source token has a, you know, frontier token for a comparably sized model. Now, there's a lot of nuances there, but that's broadly true. It's just a question of what are the margins that are charged on top of that?

• 32:29David George?

  Yeah.

• 32:29Speaker 00

  And even then, the Kimi license, something that I don't think a lot of people appreciate, is the Kimi license stipulates a 30% share of any revenue.

• 32:39David George?

  Yeah, yeah.

• 32:40Speaker 00

  So like, Kimi has taken a 30% cut of all the revenue generated on its, and this is because it's open weights, not open source.

• 32:47David George?

  Yeah, exactly. Yeah.

• 32:48Speaker 00

  Yeah.

• 32:48David George?

  But it's also extremely token hungry too, right?

• 32:51Speaker 00

  Oh, yeah.

• 32:52David George?

  It's, it's far, even, we're talking on a, on a token basis, but on a task basis, it's far more inefficient.

• 32:57Speaker 00

  Absolutely.

• 32:57David George?

  So it's very costly.

• 32:58Speaker 00

  Yeah. And I just always like Jensen, he's a great patriot, great American, like we're, we're so lucky to have, we're lucky to have him and Elon. Like, and I think like, you know, kind of when the, when the history of the 21st century, 21st century is written, you know, there was like the Victorian age. I think this will be like the age of Elon and Jensen.

• 33:17David George?

  Yeah.

• 33:18Speaker 00

  Because they have, they, they are fundamentally altering kind of like the fabric of human society and civilization with AI, SpaceX, Making Humanity, Multiplanetary, Starlink, you know, bringing low cost internet access to the poorest communities in the world, which is amazing. Um, which is, you know, something that people don't talk about, but it's like an amazing, you know, you talked about consumer surplus. That is an amazing surplus.

• 33:42David George?

  There was never, there, there was never going to be an economic case to build internet access in those places because of the cost.

• 33:48Speaker 00

  Yeah.

• 33:49David George?

  And the willingness to pay. And now you could.

• 33:52Speaker 00

  No, well, now, now it's there.

• 33:53David George?

  And any incremental internet capacity, like, is not going to be built in a traditional sense on, it's going to come from space. And so I like, that is a huge, that is a huge unlock. I agree.

• 34:02Speaker 00

  It's a good thing, but like, we're, you know, we're like, you know, we should, we should all be grateful for them. Cause I do think that, you know, they're, you know, the, they're making the future as exciting and inspiring as possible.

• 34:14David George?

  Say we are in this supply crunch. Um, it's so funny. Whenever I talk about SpaceX and it's, it's obviously near and dear to both our hearts. Um, you know, I, I say like, first of all, the orbital data center stuff, it's not like big buildings in space. Like it's helpful to actually think of it's like the size of an airplane.

• 34:32Speaker 00

  Yeah, people are.

• 34:33David George?

  It's like a big rack.

• 34:33Speaker 00

  People are picturing like the Death Star.

• 34:35David George?

  Yeah, exactly.

• 34:36Speaker 00

  And like the Pentagon.

• 34:37David George?

  Yeah.

• 34:37Speaker 00

  Floating around in space. That's not what it is at all.

• 34:40David George?

  Yeah, it's a, it's, you know, whatever, the size of an airplane, right? Rack of 72, whatever, chips, whatever.

• 34:45Speaker 00

  Yeah, it's, it's like five of us standing together is kind of roughly the rack.

• 34:50David George?

  The airplane is like the wings.

• 34:51Speaker 00

  You have the solar, solar wings.

• 34:53David George?

  Yeah.

• 34:53Speaker 00

  And then you keep it in a sun synchronous orbit. So you have the radiator that's always in the shadow of the rack. That's how you cool it. And it's like, I can't, it's very hard for me to engage. Now, there's all these people on X and they're like, I am a physics PhD. And I, this is impossible. Um, and actually there's, there's, there's a friend who's another investor who actually is a physics PhD, who had many, um, arguments with him. And he's like, I am a PhD and this is impossible. And then he goes to the SpaceX day and, you know, he talks to SpaceX engineers. He's like, well, I was wrong. And so like, if,

• 35:33Speaker 00

  let's say you're an astrophysics PhD, you were brilliant. You're hanging 100 IQ points on me. Have you thought about this for an hour? Have you thought about it for 10 hours? Have you thought about for five hours? Cause you have 10,000 of the world's smartest engineers at SpaceX who've thought about this each for hundreds, if not thousands of hours. And the sum of that, working with like very sophisticated, you know, engineering tools is, it's a solved problem. And in their minds, it's dramatically simpler and easier.

• 36:05David George?

  Yeah.

• 36:06Speaker 00

  Than a Starlink satellite, because a Starlink has to have the phased arrays and move around.

• 36:11David George?

  I think it's like, so, okay, so assume that you're right. I, I say it's like physics, there's not a physics reason why this can't work. Cost wise, it seems really imposing, but kind of the history of the Elon companies is the cost curve gets dramatically better. Like when we first invested in SpaceX, you know, Starlink, uh, like was not commercially available. And like, we, we had all these questions about how the economics would proceed over time. The same on the launch side, the same with the Model 3. Like I, I just have to think that that will get solved paired with the fact that we're going to have massive under supply, self inflicted on earth. Uh, it feels clear to me at a minimum, it will be swing capacity.

• 36:56Speaker 00

  Yeah.

• 36:56David George?

  And, you know, in the fullness of time, maybe it will be larger.

• 37:00Speaker 00

  Well, no, it's really simple. Like if we use 50, uh, and it is the people, the question people should be asking about orbital compute, which is the one SpaceX is focused on, is starship reusability.

• 37:09David George?

  Yes.

• 37:10Speaker 00

  Because the math is like, let's, let's just say it's 50 billion a gig. And let's just say 35 of that is IT.

• 37:17David George?

  Yep.

• 37:17Speaker 00

  So that's the same. And maybe it grows a little because it's, it's going into space. The rest is power, cooling, labor, all sorts of things that you don't need in space because you have the, so you have the solar panel and the big radiator. Um, and that caused, that's 15 billion. And it's probably inflationary here on earth.

• 37:39David George?

  Yeah.

• 37:39Speaker 00

  Because labor fundamentally feeds into that. We just talked about what's happening to, you know, electrician.

• 37:45David George?

  Yeah, comp, yeah.

• 37:45Speaker 00

  Yeah, electrician.

• 37:46David George?

  Materials are all going to go up.

• 37:47Speaker 00

  Yeah, all of it. Yeah. We're gonna have, yeah, we're gonna run out of, you know, we're, we're, the, the copper bowls are, you know, focused on like copper shortages.

• 37:54David George?

  Yeah, I see all of it. Yeah.

• 37:56Speaker 00

  Yeah. So that 15 billion is inflationary. And so what you have to compare it to is the cost of launch. And with starship reusability, that goes to under a billion. So the economics just instantly flip. Now, you're always going to train on earth. There will always be advantages to having, you know, GPUs right next to each other. Like there are, you know, speed of light limitations are a real thing. Latency matters. So data centers on earth, they're not going anywhere. I think they're going to continue to be very, very valuable, but an increasing fraction of the world's compute is going to be in orbit. And, you know, Elon said that he and Jensen have co-designed a Ruben rack. And there, it's going to launch

• 38:41Speaker 00

  in the fourth quarter of 27.

• 38:42David George?

  Yeah.

• 38:43Speaker 00

  And let's just say, let's just say he's off by two quarters.

• 38:46David George?

  Yeah.

• 38:47Speaker 00

  I mean, that's, that's 2028.

• 38:49David George?

  Yeah, that's still okay. That's pretty soon.

• 38:51Speaker 00

  That, you know, as Brad Gershner says, like, nobody's really paying attention to this. And it's like, kind of happening in plain sight. I mean, it kind of, to me, solves for something.

• 38:59David George?

  Yeah.

• 39:00Speaker 00

  You know, mid, mid single just billions today, which by the way, you know, is like, that's just like keeping share constant.

• 39:08David George?

  Yeah, exactly.

• 39:09Speaker 00

  You know, of like what's happening with.

• 39:11David George?

  Not presuming taking any share on Grokbot.

• 39:13Speaker 00

  Yeah. Yeah. From, from 3 billion. And by the way, man, I would just, I'd probably take the over with Grokbot.

• 39:18David George?

  Yeah.

• 39:18Speaker 00

  I bet it's like changing by the day, just based on my own usage and the number of people who are hitting their usage limits. And then you are starting to get from, you know, Grokbot, like, hey, we're, servers are overloaded every once in a while. And like, they have a lot of compute. Um, so it's just like, okay, you don't want to debate orbital data centers. No problem. Well, like Starlink mobile, like they have a pretty clear, credible plan.

• 39:44David George?

  Yeah.

• 39:44Speaker 00

  For how that's going to work. And that, you know, wireless is, you know, call it another eight, $900 billion of revenue that they address.

• 39:52David George?

  So you're, yeah, your mobile plus your broadband, whatever, it's call it like close to 2 trillion of a market.

• 39:57Speaker 00

  And then you have a really rapidly growing AI ARR base.

• 40:03David George?

  Yeah, AI ARR, you've got the cloud, you know, the sort of new cloud business.

• 40:07Speaker 00

  Yeah. Um, so I don't think, great, you're an orbital compute skeptic? No problem. It doesn't matter.

• 40:13David George?

  Yeah, exactly.

• 40:14Speaker 00

  We don't even need to, we could just look at things that are happening today with terrestrial compute, with cursor, with Grok, with Grokbot. By the way, I think X ads are, you know, we have telemetry.

• 40:24David George?

  Yeah.

• 40:25Speaker 00

  They're also growing. You know, I would expect at some point you'll have like a Starlink, Grokbot, um, X advertising bundle, you know, kind of one of the ways Google built their pod business is they bundled it with ads and like, hey, we're, you know, maybe you're bundling the ads with AI, but why not do that?

• 40:44David George?

  Yeah. Yeah. I actually like the AI position that they're in because it's like heads you win, tails you win, in the sense that their first party business is growing very fast. And they.

• 40:54Speaker 00

  They caught up to the frontier, like very quickly.

• 40:56David George?

  Yeah.

• 40:57Speaker 00

  Um, and so they've made the very aggressive compute investments to enable that first party work.

• 41:03David George?

  Yeah.

• 41:04Speaker 00

  And that's the kind of heads you win and like tails you win. Say they overbuilt their capacity for what they need for inference or training. They have a very compelling six month payback on the compute side. Um, you know, with like massive scarcity of supply. And so I, I think that's a really good setup. And there was a bear case that, hey, okay, well, in, in a, in the open AI anthropic maximalist view where they're the only two companies and they're designing their own chips, then like, where, what's the room for anyone else? Well, like, I don't think they're going to have a reusable starship and multiple spaceports anytime soon. And if the economics are of computer such that orbital is where it makes sense, increasingly

• 41:46Speaker 00

  going forward, because starship should be deflationary, you know, terrestrial cooling, you know, power should be inflationary. Well, like even in, in a world where. They fumble the ball with their first party AI applications like they do still have.

• 42:00David George?

  Then they're a massive infrastructure business.

• 42:02Speaker 00

  Yeah.

• 42:02David George?

  Yeah, I'm so fired up about the Starbase Louisiana.

• 42:06Speaker 00

  Oh, yeah. I can't wait to visit.

• 42:08David George?

  So cool. I was reading about it last night and yeah, it's sort of like it's now the they now have the infrastructure for, you know, thousands of launches a year.

• 42:19Speaker 00

  Yeah, and eventually I think you will see like these starbases in multiple places, multiple coasts all over the world.

• 42:27David George?

  Yeah.

• 42:28Speaker 00

  Like, you know, at some point, you'll probably see one somewhere in the Middle East. You'll see, you know, whatever European country is like the least bureaucratic at the time, you'll see one there, you know, you'll push, I think you'll see probably one in, you know, whether it's Japan, South Korea, who knows?

• 42:42David George?

  Yeah, yeah, yeah, yeah, that's pretty exciting.

• 42:45Speaker 00

  Yeah.

• 42:45David George?

  Yeah, the the capability to do, to call it, you know, whatever, 5,000 launches a year, like that feels very futuristic.

• 42:54Speaker 00

  Yeah, I mean, it's wild and I do think a distinction that, um, you know, SpaceX really tried to kind of hammer home during their IPO is there's a difference between reusability and in China, they did catch kind of a rocket using this. It was actually kind of ironic. It was this kind of jury rigged system of kind of wires.

• 43:14David George?

  Yeah.

• 43:14Speaker 00

  That had actually been suggested on the SpaceX subreddit.

• 43:17David George?

  Yes.

• 43:18Speaker 00

  Like seven or eight or nine, or no, no, it was before they landed the first Falcon. So it's like more than 10 years ago. And like China's clearly paying close attention to the SpaceX subreddit. But that's very different catching that thing from what they're trying to do with Starship where, you know, the the booster gets caught with the things and then it gets moved and then the starship gets caught and then it gets stacked.

• 43:41David George?

  Yeah.

• 43:41Speaker 00

  It gets fueled and just sent right back up.

• 43:43David George?

  Yeah, two a day, two a day per pad. Like those numbers add up pretty fast.

• 43:48Speaker 00

  And there, and I do think, I think they're engineering the pads for more than two a day if I.

• 43:53David George?

  Yeah, I think that's a conservative, I think that's a conservative assumption. Yeah.

• 43:56Speaker 00

  Yeah.

• 43:57David George?

  But yeah, what's the, okay, so SpaceX, like, again, you and I talked a ton about SpaceX.

• 44:03David George?

  What's like the most futuristic thing that you think about with SpaceX? Like the 10 year, okay, so you and I were at this conference together and there was this whole debate about among a small group of public investors of like, what's going to be the the first $10 trillion company? And I think what you said was like, I have no idea, but I know which one's going to be the first $20 trillion company.

• 44:27David George?

  So like, what's the most futuristic like product or market or technology thing about SpaceX that that you can think of?

• 44:34Speaker 00

  Look, I mean, this sounds crazy, but asteroid mining is going to be a very real thing. We're going to capture, you know, there's asteroid psyche. It has more gold, silver, platinum, you know, every precious metal in it that exists in the Earth's crust. At some point, particularly with Starship, you will be, you know, and we may need that lunar base to make this happen. You'll be able to capture these asteroids. You'll bring them into a stable kind of geosynchronous orbit over some, you know, American owned at all in the middle of the Pacific. You know, no humans within whatever 50 miles. You'll, you know, you can imagine like Optimus robots, you know.

• 45:17David George?

  Yeah, doing the work. Yeah.

• 45:18Speaker 00

  Yeah, doing the work. And then, you know, delivery to Earth is free and for sure, some of it's going to burn up. But I think that's gonna happen. And I always think Jeff Bezos said something very interesting. He said, I think in the future, Earth is going to be zoned residential. And, you know, somebody asked him, this is like 15 years ago, what do you mean by that? He's like, all heavy industry will take place in outer space. And then this addresses the pollution concerns, it addresses everything. You know, people always get like really worried about, oh, you know, will we still be able to see the stars? And it's just like, I think it's hard for like the human mind to understand how big space is.

• 45:59David George?

  Yeah.

• 45:59Speaker 00

  How big outer space is.

• 46:01David George?

  Yeah, you don't have to worry so much about emissions up there.

• 46:04Speaker 00

  Yeah. Yeah, so I think that is.

• 46:09David George?

  That's probably the most futuristic thing.

• 46:11Speaker 00

  But in terms of an economic application, but it does.

• 46:16Speaker 00

  I mean,

• 46:19Speaker 00

  I, I do think in the next few years, you're going to have a fleet of starships land on Mars next few years. I mean, I don't know. Let's just say at the outside, this is eight years away.

• 46:30David George?

  Yeah.

• 46:31Speaker 00

  They're going to land on Mars, going to have like, you know, our little ramps can come out of the Pez dispenser and it's going to be a modified starship, the Mars Colonial Transporter. And it's going to be wild. You're going to have Optimus robots holding American flags like walk down and then, you know, they're going to pull out a bunch of solar panels and batteries and racks of compute and they're going to set all of that up. They'll be dropping Starlinks, you know, and maybe the orbital mechanics don't allow this, but I think, you know, they will, they will figure out a way to have, you know, capacity. So just think how crazy it is to watch like the views from Pathfinder. You know, or, you know, whatever these different, you know, Mars.

• 47:15David George?

  Rovers and stuff.

• 47:15Speaker 00

  Rovers are and like, you know, 4K videos through Optimus robots all over Mars. And then after that, there will be humans.

• 47:23David George?

  You can inhabit it. Yeah.

• 47:24Speaker 00

  Yeah.

• 47:25David George?

  Yeah, that is crazy to think about.

• 47:26Speaker 00

  And that, that's going to be an amazing moment for America.

• 47:29David George?

  Yeah.

• 47:29Speaker 00

  I mean, think about the moon landing.

• 47:32David George?

  This is a little bit bigger. Yeah.

• 47:33Speaker 00

  Yeah.

• 47:34David George?

  Yeah.

• 47:35Speaker 00

  So that seems cool.

• 47:38David George?

  That's a good one. That's, that's a good, that's a good one. Yeah, not a lot of chatter about that one out there.

• 47:43Speaker 00

  Yeah, but I think it's highly likely to happen.

• 47:45David George?

  Yeah. Yeah, so you mentioned Microsoft.

• 47:48Speaker 00

  Yeah.

• 47:49David George?

  And the bet that they made, which is like a little bit of, you know, like Apple's the extreme kind of bet against the future kind of bet they made and like Microsoft is kind of a gradient of that.

• 47:59Speaker 00

  Yeah.

• 48:00David George?

  Like what's your, what's your outlook for their decisions?

• 48:05Speaker 00

  Well, I do think the world has gotten a lot friendlier for their strategy. You know, they clearly tried to make a frontier model. They failed.

• 48:11David George?

  Yeah.

• 48:12Speaker 00

  You know, Satya said, we're going to have our own models that are very competitive. Like I think he said that 18 months ago, they don't have their own models that are competitive. But what you're seeing with, um, I think the future is an ensemble of models, you know, there's a Pareto curve. No one model is going to be the best at everything. And I think the future for certainly, you know, kind of the global, you know, 1,000 biggest companies is you're going to take whatever the best open source model is. I think probably in the, in the very near, near future, that's going to be an Nvidia model.

• 48:45David George?

  Yep.

• 48:45Speaker 00

  The labs making ASICs create very interesting.

• 48:49David George?

  Incentives for each to get into each other's business.

• 48:51Speaker 00

  Incentives for Jensen and everybody's, well, oh, in a world where open source wins, who funds the training? Well, the chip companies could fund the training.

• 48:59David George?

  Yeah.

• 48:59Speaker 00

  It's trivial to do a 50 to $100 billion training run, uh, you know, for Jensen and maybe soon. I do wonder if this is kind of Google's like super long term play, like they, they seem to like maybe have opted out of the frontier race for now. We're going to monetize our compute at high rates and we're going to sell TPUs externally. But that generates so much cash flow and open source is getting closer and closer and closer to the frontier. And it just maybe the winner is ultimately just who has kind of the most cash flow to, to fund these big training runs. But I do think you're going to see American open source led by, led by Nvidia get really close to the frontier.

• 49:43Speaker 00

  Like they paid that poolside acquisition was made for a reason.

• 49:46David George?

  Yeah.

• 49:46Speaker 00

  Poolside actually had a lot of really good American open source talent. I either they're, you know, they're doing a lot of smart things, but that is really good for Microsoft and at some level, almost every application software company. Because what you can do now is you can take a base model and Nematron to date has not had a lot of post-training. It's kind of been a good pre-trained model that you could do with what you want. So if you take a really good pre-trained base model and then instead of sharing your own kind of enterprise context, that's truly your IP, that's truly the value, you know, of your company is like, you know, the context embedded in all of your data. And like sharing that with a frontier lab, you know, that may be hazardous for your financial health.

• 50:31David George?

  Yes, certainly with like the shift in the ZDR policy, like yes.

• 50:35Speaker 00

  Yes. And so you take a really capable open source model and you do a lot of RL and supervised fine tuning on your own data. So you own it and it's your model.

• 50:46David George?

  Yeah.

• 50:47Speaker 00

  And then if intelligence is like a super important input into your business, you want to own and control your intelligence, its capabilities, its cost. And then what we've seen from a lot of companies and, you know, Grok Bot, my understanding is, you know, I think it's Gemini 3.7 Flash, Grok 4.6 and some Opus.

• 51:11David George?

  Yep.

• 51:12Speaker 00

  And what you, and behind a router.

• 51:14David George?

  Yeah.

• 51:15Speaker 00

  And you will.

• 51:18Speaker 00

  And I'm sure Elon is very focused on having it all grogged as soon as possible.

• 51:22David George?

  Yeah, of course.

• 51:24Speaker 00

  But I think what you'll see these companies do is they'll have their own model on their data and it will work with one or two other frontier models. Not, not, not, you know, necessarily, but just, you know, checking each other. It'll be kind of transparent to the user.

• 51:39David George?

  The, the, the most frontier for planning and then have execution run by everything else. It's lower cost.

• 51:43Speaker 00

  Yeah, absolutely. And so I think that feels like a very likely future to me. And that's a, that is a much Microsoft friendlier future than one in which there's just only two dominant frontier models. And it certainly looks like there's going to be at least three with Grok. I do think you got to give Meta a lot of credit.

• 52:04David George?

  They've done a great job.

• 52:05Speaker 00

  Yeah. And I mean, they were out of the game and they got back in the game. And it's just, it's kind of amazing. Who could have imagined a year ago, you know, when it was like Gemini was ascendant?

• 52:14David George?

  Exactly. That this is the scenario that we're in.

• 52:16Speaker 00

  I wouldn't even be in the conversation.

• 52:18David George?

  They're not in the conversation.

• 52:19Speaker 00

  And Muse and Meta would be significantly ahead of them from a capability perspective. So it's just, you know, this is kind of like the highest stakes game of like corporate chess ever played. And, you know, people, you know, some people have made bad moves. They've made good moves. You see some people come out of the game, others come back in.

• 52:39Speaker 00

  But a future where that future where it's a, you know, I don't know if we're going to call it multimodal, a hybrid model. I don't know what terminology the world is going to settle on, but I think that's the future.

• 52:50David George?

  Yeah.

• 52:50Speaker 00

  And I'm actually surprised. I think the best broad instantiation of that today, outside of Grok Bot, outside of Cursor, outside of, you know, like Harvey's done some cool things.

• 53:03David George?

  Been great things with that.

• 53:04Speaker 00

  Where they've done it is actually just the fireworks nexus product.

• 53:07David George?

  Yeah.

• 53:08Speaker 00

  Where you can, yeah, you can choose your frontier model. Let us take whatever open source model you want, R L it for you, for your data, for Goldman Sachs, for Morgan Stanley, for JP Morgan, for Fidelity, for A16Z. You have all your own data, you control your intelligence and we make it transparent behind a router.

• 53:27David George?

  Yeah.

• 53:27Speaker 00

  I think that is like a very plausible future. And that's clearly what Lynn from fireworks, she was the first one to say it. And then Alex Karp and Satya, they both kind of like.

• 53:40David George?

  They've, they've taken their own version of it.

• 53:42Speaker 00

  Yeah. But you know, Satya, as I say, of specialized intelligence, like I think it's very plausible. But this stuff is really hard to do. Like that, that sounds easy. I was.

• 53:54David George?

  It sounds easy to describe, like the way I describe it to people is like, who gets to be the abstraction layer to the organization and the users with intel, like of intelligence? It's like the most whatever, vied after space or position that you could imagine in business, like in the history of business.

• 54:10Speaker 00

  Yeah, for sure.

• 54:10David George?

  Right? I think it's like, the answer is and again.

• 54:13Speaker 00

  Yeah, yes, and for sure. It's, yeah, who's the arbiter of intelligence for global enterprises and probably consumers? I was a retail analyst and

• 54:25Speaker 00

  you know, everybody kind of thinks running one of these big chains is easy and there's a lot into it. And it's like, well, it's really easy. Start an American retailer in any category, because America is so big, that's worth over $50 billion. Almost any category.

• 54:41David George?

  Yeah.

• 54:42Speaker 00

  All you have to be able to do is have a fleet of a thousand stores in 50 different states that have very different climates, consumer preferences. You need to have them stocked with the right products at the right time for that region, at the right prices. They need to be staffed by friendly and knowledgeable employees who don't steal from you.

• 55:02David George?

  Who turn over at 100% a year.

• 55:04Speaker 00

  Turn over at least 100% a year. The stores need to be clean and well lit. And if you can do that, press show $50 billion.

• 55:12David George?

  Yeah.

• 55:13Speaker 00

  And like in the history of American business, like you can, I mean, it's more than one hand, but you don't have to go through many.

• 55:21David George?

  Yeah.

• 55:21Speaker 00

  It's really hard to do.

• 55:22David George?

  Yeah.

• 55:23Speaker 00

  And having that abstraction layer, having it work, having it seamless is I think way harder to do than people think. And I do think, well, something I think is very interesting about Cursor. I'd love your opinion on this is like, everybody else in the lab space, you know, had this like,

• 55:46Speaker 00

  we're creating a digital deity, you know, and AGI and ASI, like we're, and the cursor guys were just like, we want to make great product.

• 55:54David George?

  Yes, exactly.

• 55:56Speaker 00

  And in a strange way, of everybody at the frontier, probably Cursor, it was the most product focused.

• 56:04David George?

  Yes.

• 56:05Speaker 00

  I'd say, you know, now they're part of SpaceX, but that suits Elon and his mindset really, really well.

• 56:11David George?

  Yeah.

• 56:12Speaker 00

  Let's make it an engineering problem, you know, create the model factory and then we need to have a really good product.

• 56:19David George?

  Yeah.

• 56:19Speaker 00

  You know, the, you know, the, the Tesla cars, they're amazing. I mean, it's, I don't know if you drive one, but it drives everywhere.

• 56:26David George?

  Yeah, yeah, yeah. But like what Cursor figured out is they're, they had, I would say a similar in-state vision as what those other guys had.

• 56:35Speaker 00

  Yeah.

• 56:36David George?

  It was just a different path to get there. And it's sort of like a practical meet the customer with what, with where they are, meet the technology where it is. And I think, you know, they'll sort of, they have already demonstrated that they kind of legged their way up into autonomy from, from that starting point. Coding is unique compared to everything else in knowledge work. This, this would be like in support of the point that Microsoft is in a good position because it is verifiable and perfectly documented and like nothing else in enterprise.

• 57:02Speaker 00

  Yeah.

• 57:02David George?

  Is verifiable and perfectly documented.

• 57:04Speaker 00

  Yeah.

• 57:04David George?

  And so it will be messy, like that, that leads you to a good, you know, bull case for something like Microsoft, that abstraction layer.

• 57:11Speaker 00

  If they execute, but it's really, really hard to make it really simple for, oh, you know, click my copilot, link to all my stuff, train a model.

• 57:22David George?

  Yeah.

• 57:22Speaker 00

  On our data, convince me that you're not going to share it with anyone else and then put it behind a router that's seamless for me and continuously upgrade that open source model.

• 57:32David George?

  It's not just some middleware, like it's very hard to do. Yeah. And, and by the way, they're going to compete, they're going to be competing with not only the labs to be that abstraction layer, but Databricks. Oh, yeah. Like Palantir, the inference providers, the application companies, right? So like Harvey has done an incredible job of this.

• 57:52Speaker 00

  Yeah.

• 57:53David George?

  And, you know, like legal is sort of in takeoff and, and I think they can see the future of how to be that abstraction layer and do the work. But like legal is also unique because it's very documented and it's somewhat verifiable.

• 58:06Speaker 00

  We'll see tax.

• 58:07David George?

  Tax, we'll see that, we'll see, see things like that. But like the, the one and a half billion, the really appealing broad pie is going to be very messy to go get.

• 58:15Speaker 00

  Yeah, although I do always think, and, um, you know, I think probably in their heart of hearts, Harvey and Legora think of, we solved this. We could be that abstraction layer for everyone.

• 58:24David George?

  Yeah.

• 58:25Speaker 00

  I think probably in their heart of hearts, commission thinks something like that too.

• 58:29David George?

  I think everybody thinks it. And by the way, there's like massive validation of the category because Kirkland and Ellis said, we're going to spend 500 million bucks to build this ourselves. Like first of all, you know, like good luck, that's going to be very hard.

• 58:41Speaker 00

  Yes.

• 58:42David George?

  But that actually tells you that the pie is really big, right?

• 58:46Speaker 00

  Huge.

• 58:46David George?

  Yeah, it's massive.

• 58:47Speaker 00

  And that's, it's, and you know, just, and I'm sure they, they have a very smart head of AI, head of AI, but it's not like a 500 million dollar one-time build. That model has to be continuously updated, switching out the base model. Then all of that has to happen transparently. But I think you're going to have this huge collision between, you know, products like fireworks nexus, these legal agents, coding agents, big companies like Microsoft.

• 59:14David George?

  Databricks.

• 59:14Speaker 00

  Databricks, Snowflake coming up. You know, for sure, um, you know, Salesforce, I think is going to, you know, Salesforce and Workday and all these companies. This is like, everybody's going to go after it. It's just going to come down to who executes the best. And, and this is just, you know, who has the lowest costs?

• 59:33David George?

  Yes, exactly.

• 59:33Speaker 00

  It's going to be very hard, I think, over time, unless you're re, if you're not vertically integrated, you have to be so good to emerge as that abstraction layer.

• 59:43David George?

  Yeah, yeah, yeah. To be the low cost provider.

• 59:45Speaker 00

  Yeah.

• 59:45David George?

  Very hard.

• 59:45Speaker 00

  Because, yeah, you're just simply not going to be the low cost provider if you're not vertically integrated, if you don't own your own compute over the very long, long term.

• 59:56Speaker 00

  And, you know, it's, that's another reason like I, um, you know, I increasingly look at these hyperscalers on EV to net PP and E.

• 1:00:03David George?

  Yes.

• 1:00:03Speaker 00

  Because net PP and E is compute and that is just what the market thinks you're going to monetize your fleet of compute at. And you can kind of look at them and there's some pretty obvious inefficiencies to it.

• 1:00:13David George?

  Yeah, yeah, yeah.

• 1:00:14Speaker 00

  Yeah. Kind of an AI version of price to book.

• 1:00:16David George?

  Yeah, I like the price to book. Okay.

• 1:00:20David George?

  So, okay, you, you mentioned Jensen, you know, I, I share your sentiment, like he's like carrying this industry forward. Like, tell me your thoughts on the video.

• 1:00:28Speaker 00

  So.

• 1:00:30Speaker 00

  I think he's in a very, very good position and his strategy of being vertically integrated, but horizontally open. And it's like, okay, like, let's just say, um, you know, let's, say there's some accelerator that emerges that is really, really, really, really good. Almost certainly, it will be better if it can plug into, and this is why, like, I know you have an accelerator investment. My number one thing is if you're a semiconductor CEO, the only thing you should ever say is, thank you, Jensen. Thank you for creating this opportunity. Thank you. How can we work with you? We want to enable you. Sure, we're going to compete with you on the edges. Yeah.

• 1:01:13Speaker 00

  But, you know, my rule of thumb for accelerators, every 1% share today is probably worth 100 billion. Yes. So there's no need to go head on with Nvidia. Yeah. Just pick a niche, get your 1%, make sure that, you know, That pie's very big. He has, he has nine chips. Yeah. Um, you know, he's got, he's got multiple flavors of accelerators. He's got CPUs. He's got, you know, ethernet switches. He has two kinds of GPUs, you know, he's got, you know, we've gone from just scale out networking being a thing. We have scale up, scale out, scale across, now scale in. Yeah. So just try to find a way to plug into his ecosystem. By the way, this is not foreign. Like, his biggest customers all have competing products. Absolutely. With various of those nine chips.

• 1:01:56Speaker 00

  Yeah. And just try to find a way to plug in, but just be nice to him. Be nice. Be nice. It's all personal. Yeah. You know, and it's just like, sometimes like, you know, you hear some of these and it's like, have you ever seen game tape of the Chicago Bulls when Jordan was, is, you know, it's game 50 of the season. Yeah. And he's a little bored. Yeah. And the Bulls are down because, you know, they're up eight games. You know, they're up eight games over the number two person in their conference. And he's a little bored. And then somebody. Somebody talks shit. Somebody who's, who's kind of young decides, I'm going to talk shit to him because we're beating him. And then he just looks. And it's like. And it's like. It's the best. Those are my favorites.

• 1:02:39Speaker 00

  Yeah, it's amazing. Yeah, we've all seen, you know, whatever, The Last Dance. Just don't do that. Yeah, exactly. You know, just, just like, hey, Michael, man, I'm so happy to be on the court with you. Like, that's, that's, that's, that's the move. But the reason it's particularly important is because Jensen's data centers are financeable. Yes. And it goes back to that point. Like, let's say it's $50 billion. Um, for an Nvidia data center, you need a $15 billion equity check. Yeah. Okay. You can finance the other 35 billion. Yeah. And it's not circular financing. I have a lot of respect for the people I have met from Blackstone and KKR and Apollo. Yeah. And they're underwriting each of those. Yeah.

• 1:03:24Speaker 00

  And they finance it. And then there's a residual value guarantee, which has, as long as that residual value guarantee is less than the gross profit dollars he's getting from selling the chips into that data center, it's like. Yeah, makes sense. Essentially, it's super NPV positive with very little risk. Yeah. Um, and then he, you know, he gets a revenue share. So if you're, um, and his data centers are the most financeable. Yes. And I, like, let's just say a good case for probably TPUs are the second most financeable. Mm hmm. It probably takes, I don't know, double the equity check at least. Yeah. And then the rates on the rest of it are higher. Yeah, exactly.

• 1:04:08Speaker 00

  And so, cost of capital is a huge advantage. And that's why you just want to be part of his ecosystem. And you can see, he's, he has all these chips, he's acquiring land power and shell companies now, matchmaking them with offtake agreements. I think one reason he's doing these RVGs is if he doesn't do them, it's kind of an anthropic and open AI dominated world. Yeah. Because they can pay the most for compute. He can effectively help other people. Yeah, exactly. Compete with anthropic and open AI. Yeah, in the same way that he stood up the Neo Clouds in the first place. Yeah. It's just democratizing compute, which is good for the world. Again, I think he's a patriotic American. His, his interests are aligned with that, though, with, with, with the patriotic American ones, right? Of course, yeah. Fragmentation, right?

• 1:04:52Speaker 00

  Yeah, fragmentation, no dominant AI. Yeah, exactly. Which is, which is really good because he's like a, he is a ruthless competitor and it's awesome that his incentives around fragmentation of AI, fragmentation of models, and, you know, fragmentation of power, um, are completely aligned with what's good for America. And just going back to open source, just like, I, I just can't take it that people think that Jensen is like the world's biggest advocate for open source and it's somehow the, a giant risk to his business. Yeah, exactly. No, it's great for his business. Yes. It's amazing for his business because it means that instead of, you know, having a 90% margin on top of a token made with an Nvidia GPU. Yeah.

• 1:05:37Speaker 00

  Maybe it's a 40% margin. So more of those tokens are going to be consumed, which means you need more compute. Yeah, exactly.

• 1:05:45Speaker 00

  In a supply constrained world. In a supply constrained world. And, you know, let's just, what percentage of the world's supply has he locked up? 70? 80? Somewhere in there. And then, um. You're talking about fab. All of it, all of it. You know, it's just because he saw this coming before everybody else. Yeah, and all the system supply chain. Yeah, he's got, he's got the fab capacity. Yeah. Locked up. He's got DRAM capacity locked up. He's got NAND capacity. He's got laser capacity. He has capacitor capacity. Yeah. He has, you know, what you need to make the racks. And it's just like, you know, he used to say, if I go back, you know, 15 years, he'd say, listen, I'm making a two

• 1:06:27Speaker 00

  or three billion dollar bet every two years and I'm moving really, really fast. Yeah. Now he's making these multi-hundred billion dollar bets, bringing the supply chain alongside him. He's bringing the financing alongside him by kind of standardizing it, making it easy for the very smart people at Blackstone, KKR, Apollo, and Goldman Sachs, and Morgan Stanley, JP Morgan to finance. And like, that is hard to compete with. Yeah. And, you know, it is, um, we, um, my firm, Tradies, we have a pretty big portfolio, private portfolio companies, uh, that are semiconductors. And it's just, um, you know, Elon said, a lot of people are going to learn a hard lesson in hardware. And like, I would

• 1:07:12Speaker 00

  just say, I've learned a lot of hard lessons in semiconductor investing. Like, you can, you can bet on the best team and you tape the chip out. You feel great. Okay, we've taped it out and it. And that's happening faster than ever, right? Yeah, it's happening faster than ever. You feel great about it and we're getting really good with the emulation and the simulations and you feel great about it. And then, um, you know, you'll experience this. The chip comes back from the lab. Everybody, you get a FaceTime from the CEO. They plug it in. Yeah. You know, and like, and then sometimes it doesn't work, you know? It's just like. Yeah. Yeah, this famously happened with Cerberus twice, right? Yeah. And they've powered through and like, they've done a great job.

• 1:07:52Speaker 00

  I think the chip, I think each Cerberus chip worked. It just struggled to find product market fit. Yeah, yeah, yeah, fair. For the first two generations. The chip worked. Yeah. It just didn't have product. And they've done great with it. Yeah. Yeah, but there's a different thing between you, you plug it in. Doesn't work at all. And it doesn't work at all. Exactly. And then it's like, if it doesn't work at all, you might be back to the drawing board and hey, we need another, you know, hundreds of millions of dollars, billion dollars. And we've, we learned our lesson. It's going to work the next time, two years from now. Yeah. Finance it. Yeah. It's, yeah, assuming you can get financing. So it's, um, you know, semiconductors are

• 1:08:33Speaker 00

  hard. Like, the real world is hard. Like, hardware is hard. And what he is doing at the scale he is doing at and the speed and bringing all of this alongside him. Because he, you know, the land of the power has to come. Yeah. You know, the entire supply chain has to come. The financing has to come. Yeah. And so, given that he's, you know, 70, 80%, whatever we want to say, you just want to plug into that ecosystem. Yeah. Be nice to Michael. Part of why Elon made the decision, right? Yeah. Yeah, which I also think was like, a very high elo move. Yeah, totally. So you've had everybody else try and build their own ASIC. Yeah. They've gotten up on stage. Sometimes they say negative things about, you know,

• 1:09:18Speaker 00

  Genshin or Nvidia or take shots. Um, I did think it was pretty smart, you know, the jalapeno team last night, and we should give credit where credit is due. Jalapeno is the, I would say, the first good ASIC other than TPU or Tranium IFC from internal.

• 1:09:37Erik Torenberg?

  You know, in what seems to be a pretty short amount of time.

• 1:09:39Speaker 00

  A pretty short amount of time. Yeah, it's impressive. We should give credit where credit is due.

• 1:09:43Erik Torenberg?

  They do have a good team working on it.

• 1:09:44Speaker 00

  They have a good team. Yeah. Um, so they had a really good team. I think they had a lot of advantages. And I do think if you were a lab and you have the model and you see the direction of research, that's a big advantage for designing your own chip. But then you go back to Nvidia and they work with everyone.

• 1:10:00Erik Torenberg?

  Yes.

• 1:10:00Speaker 00

  And everybody, you know, keeps thinking it's going to really standardize. And if you look at the three big, you know, Chinese open source models, DeepSeek, Kimi, Quinn, they're kind of all evolving in very different ways.

• 1:10:14Erik Torenberg?

  Yeah.

• 1:10:15Speaker 00

  And they can, you know, they can all run on, you know, more general purpose chip, um, a GPU. But you're going to need, if you want to specialize.

• 1:10:24Erik Torenberg?

  Yeah, you're going to need general purposes at a minimum for the types of evolution you see from that. Yeah.

• 1:10:28Speaker 00

  So, um, like, I think he's, I'm very happy his incentives as a CEO are perfectly aligned with what's good for America.

• 1:10:38Erik Torenberg?

  Yes.

• 1:10:38Speaker 00

  Um, so I just make sure your semiconductor guys do not talk trash about Michael Jordan.

• 1:10:47Erik Torenberg?

  Be nice to MJ. Be nice to MJ.

• 1:10:49Speaker 00

  Be nice to MJ. Yeah, exactly. Yeah. And then it's like, you know, sometimes it's like, you know, you tug on Superman's cape and you get confident.

• 1:10:55Erik Torenberg?

  Yeah.

• 1:10:55Speaker 00

  You know, you get confident and you start to talk a little bit of trash. Well, you know, Superman, sometimes he just flies away.

• 1:11:01Erik Torenberg?

  Yeah.

• 1:11:02Speaker 00

  Like, that's what happened to the TPU team.

• 1:11:03Erik Torenberg?

  Yeah.

• 1:11:04Speaker 00

  You know?

• 1:11:04Erik Torenberg?

  Yeah.

• 1:11:05Speaker 00

  And, you know, jalapeno, they're tugging on Superman's cape a little bit.

• 1:11:08Erik Torenberg?

  Yeah, we'll see. Yeah.

• 1:11:09Speaker 00

  We'll see. And it is kind of amazing that, like, jalapeno did something that none of the big, like, this is as competitive of a chip as IFC.

• 1:11:20Erik Torenberg?

  Yeah.

• 1:11:20Speaker 00

  But again, it's just competitive with one of his eight or nine chips.

• 1:11:24Erik Torenberg?

  Yeah, one of his nine. Yeah, of course.

• 1:11:26Speaker 00

  And it's.

• 1:11:27Erik Torenberg?

  They'll continue to work closely together. Yeah.

• 1:11:28Speaker 00

  Yeah, they'll continue to work closely together. So it's like, hey, that's great. You did the one thing. Well, to actually be competitive with him at the system level, you did another eight chips.

• 1:11:36Erik Torenberg?

  Exactly.

• 1:11:37Speaker 00

  Yeah. Um, and he is at, in, you know, Dylan at Semi Analysis talks about how he's the bank of AI. He's like, he's the central bank of AI. He's the Federal Reserve of AI.

• 1:11:49Erik Torenberg?

  Yeah.

• 1:11:49Speaker 00

  And so I actually think it was really smart for Elon instead of like, competing, you know, with somebody who is.

• 1:11:57Erik Torenberg?

  Fully aligned.

• 1:11:57Speaker 00

  Yeah, fully aligned. And I think that history is going to judge that to be a wise decision. In a world that is so supply chain constrained, it's actually really hard to tell what true customer preferences are.

• 1:12:09Erik Torenberg?

  Right.

• 1:12:09Speaker 00

  Because like, you come out.

• 1:12:10Erik Torenberg?

  Yeah, they'll take anything. Yeah, that's, this is how you know that, like, very old, whatever, the price is held up of H100 is very high.

• 1:12:15Speaker 00

  Yeah. And if you have a TSM allocation, you're going to be sold out.

• 1:12:20Erik Torenberg?

  Yes.

• 1:12:20Speaker 00

  Particularly if you can get the DRAM to pair with it.

• 1:12:23Erik Torenberg?

  Yeah.

• 1:12:23Speaker 00

  You're going to be sold out. So it's actually kind of hard to infer true customer preferences. And I actually think one of the best ways you can, like, see true customer preferences is the kind of deals they cut with chip companies. So broadly speaking, you know, the first deal is where the chip company invests.

• 1:12:41Erik Torenberg?

  Yep.

• 1:12:42Speaker 00

  In a customer and you saw TPU and Tranium, Amazon and Google do that with Anthropic.

• 1:12:47Erik Torenberg?

  Yep.

• 1:12:47Speaker 00

  And that was to their immense advantage because it really helped their businesses. I think helped those chips really level up. Because you kind of need to use a chip. There's a cold start problem. And, um, and in that scenario, as long as the dollars you invest are less than the gross profit, can't lose money. And then there's a scenario where you do the RVG, Blackstone finances it or whoever, Blackstone Apollo, KKR, Goldman Sachs finances it. Um, and as long as that RVG is actually less than your gross profit, you can't lose money. And you have upside probably through a revenue share on top of it. Then there are deals where you give warrants away, but they're tied to, um, like a fixed price per million tokens.

• 1:13:28Erik Torenberg?

  Yep.

• 1:13:28Speaker 00

  And as long as the performance of your chip kind of outruns the performance of your stock, you're going to do good in that situation.

• 1:13:35Erik Torenberg?

  Yeah.

• 1:13:36Speaker 00

  If you just give warrants away, it could be negative in PV because the better the stock does.

• 1:13:41Erik Torenberg?

  The more value that's captured by the person. Yeah.

• 1:13:43Speaker 00

  Yeah. And so you can kind of look at that hierarchy of deals and like infer something about true customer preferences.

• 1:13:50Erik Torenberg?

  That's interesting.

• 1:13:50Speaker 00

  Yeah.

• 1:13:51Erik Torenberg?

  So Nvidia does pretty good deals.

• 1:13:53Speaker 00

  Uh, like, yeah, I mean, there's a reason that people I consider smart are investing in their deals.

• 1:14:00Erik Torenberg?

  Yeah, I see it. Gavin?

• 1:14:01Speaker 00

  Thank you.

• 1:14:02Erik Torenberg?

  Fun. Always fun to hang out with you.

• 1:14:03Speaker 00

  Thanks, David. This is great, man.

• 1:14:07Erik Torenberg?

  Thanks for listening to this episode of the A16Z Podcast. If you liked this episode, be sure to like, comment, subscribe, leave us a rating or a review, and share it with your friends and family. For more episodes, go to YouTube, Apple Podcasts, and Spotify. Follow us on X at A16Z and subscribe to our Substack at A16Z.substack.com. Thanks again for listening and I'll see you in the next episode.

• 1:14:32Erik Torenberg?

  As a reminder, the content here is for informational purposes only, should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see A16Z.com/disclosures.