(Preview) The Hidden Benefits of Bubble Economics, Microsoft and OpenAI Make a Deal, Notes on Taylor Sheridan, Sora, and Nexperia

Discussing Ben's interview with Substrate CEO James Proud, including the "insane" challenge he's undertaken as Substrate attempts to compete with TSMC and ASML, and the ways in which a bubbly environment benefits innovation by incentivizing exactly that sort of moonshot. From there: Ben's thoughts on the "Too Big to Fail" era in tech that may be averted, reactions to the latest humanoid robot, and thoughts on both sides of the OpenAI-MIcrosoft announcement earlier this week. At the end: Taylor Sheridan leaves Paramount for greener pastures, Sharp Text and lessons from Grantland, a temperature check on Sora one month later, lessons from the Nexperia mess in Europe, a question about Magic: The Gathering, and a few corrections to last week's show.

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 fantastic. You look great, Andrew. Why do you look so good today?

• 0:22Andrew Sharp?

  Coming in nice and crisp today. Lot of good things happening in the Sharp Tech universe. You want to tell the people?

• 0:28Ben Thompson?

  Well, I have fiber.

• 0:32Ben Thompson?

  We have functional internet.

• 0:33Andrew Sharp?

  No, no, no. I think the thing to emphasize is that Ben didn't have fiber internet for the last month or two. And so some of the recording sessions, we were dealing with internet from like 10 or 15 years ago. But now coming in high def, no interruptions to any of the podcasts. I'm very excited about the future.

• 0:55Ben Thompson?

  No, you understate how dire the situation was. You know, I acquired, I bought the location that I'm at because one of my best friends like literally lives next door. This actually, I learned this totally on accident. I moved into a place in Taiwan to be closer to the kid's school. Moved in, literally in Taiwan, everything is a condo, right? You're all in sort of high rises. We were in a 15 story building. I'm on the, so the, the building we're in, there is two units per floor. Literally next door ends up being this other guy from Wisconsin, ends up becoming one of my best friends. We still hang out all the time. You've had the pleasure.

• 1:29Andrew Sharp?

  I've met him. He's great. It's amazing that you ran into each other like that.

• 1:33Ben Thompson?

  It is. And I realized actually a real fundamental key to happiness is in fact, location, location, location. Now usually locations about weather and I think weather does contribute to happiness. You should ask for an update on my weather feelings in two to three months.

• 1:49Andrew Sharp?

  We'll check back in February to see where your head's at.

• 1:51Ben Thompson?

  But the other one is being close to friends is fantastic. So I got a house that is literally next door to one of my best friends. I did not sort of think about or look into the internet situation at this house. This particular neighborhood was built 30 years ago or so, which means most of the people here are, you know, older at this point. Maybe don't appreciate what their expectations should be as far as internet goes. It's a little bit remote and their only option is the local cable company. And the local company knows they're the only option. There is fiber like a sort of across the street. I heard they built that out. Very few people took it up, I think for the dynamics that I'm talking about. So they just stopped building.

• 2:33Ben Thompson?

  And I, so I, I basically have had non-functional internet. And I talked to technicians, I've had multiple technicians come over. They're like, yeah, your neighbor was totally saturated. Like, because I.

• 2:44Andrew Sharp?

  Impressively dysfunctional internet, not just slow internet, but internet.

• 2:48Ben Thompson?

  It goes down multiple times a day, all the time. Usually only for a few seconds. Going down for a couple of seconds is not great for a podcast, for recording a podcast. Okay. So I've actually, it's not a few months. It's been a while since I've been here. You actually had to remind me, make sure you switch to Starlink before every podcast. Because at least it's reliable, even if theoretically the speeds are not so. So first up, love Starlink, God bless Elon Musk.

• 3:15Andrew Sharp?

  Thank you, Elon.

• 3:16Ben Thompson?

  No, it's amazing. So I have one on my house. I have like a portable one. I've talked about before, using it, using it around. But yeah, it's absolutely, you know, again, another example to get me back on the sort of anti-monopoly train. Albeit a real sort of monopoly with like wires in the ground. And when there's one option, they don't need to fix it and make it better. So I've really, I spent an unfortunate amount of money. The way you can get fiber, you're not going to get it from AT&T or whoever. However, there are business fiber companies that will build out to various locations if you're willing to pay for it. And.

• 3:52Andrew Sharp?

  Yeah. Well, you're running a business over there in addition to living next to your best friends.

• 3:56Ben Thompson?

  Yes.

• 3:57Andrew Sharp?

  So it makes sense and here we are.

• 3:59Ben Thompson?

  And so it's funny though, I did appreciate and love every time that our podcast cut out for the last three months. Because it just reaffirmed this ungodly amount of money that I'm spending.

• 4:11Ben Thompson?

  Was going to be worth it.

• 4:12Andrew Sharp?

  Because I would try to, I would tell you like, uh, it's not that bad. And you were like, don't tell me that. And then I would have the freedom to be honest and be like, Ben, I didn't hear what you were saying for about four minutes of that podcast. So.

• 4:24Ben Thompson?

  Well, maybe this could be a big problem for you. You're going to have to have some accountability to actually listen to my ramblings when I'm going on a monologue. So.

• 4:31Andrew Sharp?

  There you go.

• 4:32Ben Thompson?

  But yes.

• 4:32Andrew Sharp?

  A lot of pressure going forward.

• 4:34Ben Thompson?

  Back in the world of fiber, uh, seriously sincere things to Starlink has basically made techery and sharp tech possible for the last five to six months. Um, as good as it is, it does not compare to the clarity that we have right now. It's amazing. So.

• 4:50Andrew Sharp?

  It's great. Yes. Uh, one other question on your house. This is your first Halloween back in America. Are you prepped for the neighborhood? I feel like.

• 4:58Ben Thompson?

  Full size candy bars, baby. Full size candy bars. Absolutely. You gotta make a good first impression. So.

• 5:04Andrew Sharp?

  Good. Good to hear. I love it. Uh, well, I'll be, I'll be trick or treating more than handing out candy with Charles, who's like two and a half years old. Very excited for his first real trick or treating adventures.

• 5:16Ben Thompson?

  No, my son was asked like, I've never really gone trick or treating. I mean, like you, they had it in Taiwan. There was a, you know, you, they always, the building always had it. So you'd go up and down the floors and, and get it. And then there's one in the neighborhood where we were at called, called Tiamu. All the stores will have stuff. It's not quite the same sort of walking down a busy street and going to a convenience store and getting some like piece of Haichu or something like that. There was the, the, uh, AI T, the sort of American embassy had like a neighborhood up on the top of Yau Ming Shan with traditional houses and you could actually go door to door. But again, it was a very sort of like, this is a thing you're going to do. The idea of just in your neighborhood, going door to door, and it being sort of a thing. Yeah. He was remarking like, I've never done that before.

• 5:58Ben Thompson?

  It's have like, yeah, that is kind of interesting. It'll, it'll be cool. So, uh, do you do the, do you do the Christmas light decoration thing, by the way?

• 6:05Andrew Sharp?

  Uh, what's that?

• 6:07Ben Thompson?

  Like do you decorate your house with Christmas lights or?

• 6:09Andrew Sharp?

  Well, yes. I, I was wondering whether there was some special Christmas light thing. Yes, I do put Christmas lights on the house.

• 6:16Ben Thompson?

  Okay. Um, no, just, just thinking about planning again. It's very funny where all this stuff that is like very normal, I'm like sort of thinking about it considering for the first time.

• 6:27Andrew Sharp?

  A whole new world here in the United States of America. Fantastic stuff. Well, speaking of the United States of America, we're going to begin the show with a note from Greg who wrote in Wednesday responding to a digression of yours on the last episode as we were discussing American resilience. Greg writes, it's time for some American ingenuity, huh? Ask and you shall receive. And then he links to substrate.com before asking, does this have any legs? And Ben, as fate should have it, you interviewed the CEO of substrate this week. Delightful conversation. We'll put a link in the show notes for people.

• 7:09Andrew Sharp?

  And for anybody who hasn't been following the news, substrate is a company that claims to have developed an alternative manufacturing process for semiconductors that would cut the manufacturing costs in half by channeling light from a giant instrument known as a particle accelerator through a tool the size of a car. That technique would allow substrate to print a high resolution microchip layer comparable to images produced by the world's leading foundries. I'm cribbing from the New York Times for that synopsis, but more importantly, substrate is an American company. What do you think? Does it have legs? Does this idea have legs?

• 7:47Ben Thompson?

  I don't know.

• 7:48Andrew Sharp?

  Responsible answer.

• 7:51Ben Thompson?

  Yeah, it's, so I've been doing, it's really interesting because I got, you know, some pushback on this interview saying like, you didn't push on any technical details. There's so many things that are going to go into this, all of which are fair and appropriate. Part of the reason I'm not getting too much technical details is he wasn't going to share any of them.

• 8:10Andrew Sharp?

  He couldn't, right?

• 8:11Ben Thompson?

  Well, yeah, to the extent there's something real.

• 8:15Ben Thompson?

  Is obviously a massively valuable secret, whatever they figured out. The concept of X-ray lithography is not new. So you have, one of the weird things is we talk about one nanometer, two nanometer, three nanometer chips, which is mostly a marketing term. Basically, the idea is the, the, the width of like the lines you're drawing are getting in the distance between the distors is getting smaller and smaller all the time. And the big breakthrough was EUV, which reduced the width of light to 13 nanometers. It's like, wait, actually, the light is wider than, yes, that is true, the way that it's happening. But what, what happens is they, they do this crazy focusing with all these mirrors. And even when they get smaller, they sometimes have to go over a chip multiple times.

• 8:56Ben Thompson?

  Called multi-patterning and, and sort of, uh, and that, every time we do that, it's more complex. It's more expensive, all these sorts of challenges. And lithography has come to be by far the most difficult and most expensive step in the process. It's, it's the number one driver as to why foundries are getting more and more expensive. We're in the 20 billions at this range, the next generation, we're going to be in the 30 billions, 50 billions. I think, as you know, I might be in the 30 billions in the, uh, right now.

• 9:23Andrew Sharp?

  And when we say lithography, we're talking ASML effectively, right?

• 9:27Ben Thompson?

  Yes, they dominate the space. The story of how they came to dominate, it used to be Canon and Nikon. Um, I think particularly Nikon that, that was big in this space. They were very closely aligned with Intel. There was a, a period where ASML was, was the upstart. And ASML and TSMC have always been sort of hand in hand. The rise of TSMC is the rise of ASML and vice versa. A big factor, I think I might have talked about this in the podcast previously, was the shift from 200 millimeter wafers to 300 millimeter wafers, where the physics of it changed, they're larger, right? Intel basically didn't care. They, and this was actually, came up with the Intel earnings call, where the CFO was like, to be honest, we didn't really care about yields before.

• 10:12Ben Thompson?

  Um, Intel was always so far ahead and had such a monopoly and could charge such high prices, that they didn't need to really care about throughput and efficiency, as long as it was good enough and they got the level. They needed, they could charge high prices and it would sort of pay for it. One of the huge challenges they have in becoming a foundry is you have to maximize throughput. You have to get as much stuff through as possible. Your yields have to be high so that you can be competitive in pricing. You're not sort of internalizing everything. You have to charge sort of a competitive price relative to to a TSMC or whatever it might be.

• 10:44Andrew Sharp?

  And so Intel was able to, they were making so much money that it didn't matter that a certain percentage of their chips weren't used.

• 10:52Ben Thompson?

  Right. Well, and also their throughput was was never actually that high. Like how many chips were going through per hour or per day or whatever it might be. And so this is going back like 20 years. When you had this shift, the Nikons of the world, I guess Canada Nikon was the was the big one at the time, but they, they, they sure will do bigger wafers. They didn't rework the entire process. And so if you're moving a larger wafer, you just did it slower because like the centrifugal forces and things like that. ASML actually completely reworked how they their machines in hand in hand with TSMC to. It's a new wafer, a new size. You have to rethink the whole thing so it can go through faster. So you can actually achieve the benefits of having a much larger wafer, which you can put more chips on.

• 11:37Ben Thompson?

  If that larger wafer goes through much more slowly, which basically is what was going on at Intel. You're not getting any gains. You're just doing a bigger wafer more slowly. So ASML TSMC completely reworked this process to get the volume, to get the gains and going through it. There's other sort of stories here.

• 11:53Andrew Sharp?

  And better yields. Yeah.

• 11:54Ben Thompson?

  Yeah.

• 11:55Andrew Sharp?

  Kind of unbelievable.

• 11:55Ben Thompson?

  There was a, there was a big earthquake in Taiwan in 2001. I believe it was that ASML got in there with TSMC, got the machines up and running in a matter of weeks. The Japanese machines took months. Like, and that was another sort of moment of of just sort of this shift and balance and power. All this culminated with ASML bought some of the critical technology for EUV way back when. We already discussed this, you know, the idea came from Japan, actually. A lot of it was propagated by by Intel and the US government. ASML did the hard work to bring it to market. And now it's totally dominant. No one else can make an EUV machine, but they're extremely. Expensive and

• 12:36Andrew Sharp?

  I was gonna ask ballpark, are we talking like 200 million dollars?

• 12:40Ben Thompson?

  I was like 500 million for that. I think the 200, like the current ones are like 250 million, but they're like the next generation, I think are closer to 500 million. I'm pulling

• 12:47Andrew Sharp?

  And a foundry needs like 10 of those lithography

• 12:50Ben Thompson?

  Yeah, you need a bunch of them, right? And so, um, so, yeah.

• 12:54Andrew Sharp?

  So that's where the cost is in all of this.

• 12:56Ben Thompson?

  Well, everything is expensive, to be clear, but the biggest center of cost for sure is lithography. I think it's like 30, 35% and that's much higher than it used to be. And the idea here is what if we could do instead of using blowing up tin, creating this artificial light and focusing it through these crazy mirrors and drawing these lines? What if we could use X-rays to do this instead? And it's actually even thinner. So you theoretically, you can, you don't need to do multi-patterning. And also it can just be cheaper overall. Now, a lot of the details are sort of unclear. Like I said, how it's gonna work. The big question for X-ray has been a consistent light source, uh, which they claim they're getting for, or consistent like source of, of the X-rays.

• 13:40Ben Thompson?

  They're using a particle accelerator to sort of, uh, do it, which sounds absolutely crazy. There's questions about like the X-rays breaking through and disrupting. Does it interrupt the doping process? Like where are you actually like infusing these transistors to be more performant? Like there's all these open questions about X-rays that were faced in the eighties and nineties. And it was decided actually ultraviolet light is a better solution with these mirrors and these, in these optics. And that's where the industry went. Now, this theory that actually it was an idea that didn't work 40 years ago, but now might work today, I think in principle is totally plausible.

• 14:20Ben Thompson?

  I also think it's totally plausible that no one in the current semiconductor chain is going to go this direction because they're all pot committed to the way things work as they are today. And they're under pressure as it is to make more, do more, like you'll, TSMC, I wrote about this week is kind of almost a break on the AI bubble. Yes, they're building a ton and they're trying to support this. If this whole thing were to pop, they're the ones holding the bag because they're paying all this money for all this equipment.

• 14:47Andrew Sharp?

  Lot of upfront investment based on the ecosystem exactly the way it is today.

• 14:51Ben Thompson?

  Right. Yeah. It just, I mean, if you cost $30 billion to build a fab and that fab is not filled and not running, you're in big trouble. So this idea that number one, An old idea could be possible today that wasn't possible previously makes sense to me. The idea number two, that no one in the current chain is going to do it also makes sense to me. And this idea that if you're going to do it, actually you're you, you need to not just make a lithography machine, but be a foundry also makes sense because.

• 15:20Andrew Sharp?

  So you say that makes sense. I'm very curious because that's where I found myself raising an eyebrow. Um, and James Pound, he explained it to you, but I mean substrate.

• 15:30Ben Thompson?

  Uh, James Proud, yes.

• 15:32Andrew Sharp?

  James Proud, excuse me. Uh, they are not only trying to disrupt ASML, but also TSMC. That seems very ambitious and everybody who's tried to displace either one of those companies has failed over the last 20 years. So why, why are they building a foundry in addition to this lithography?

• 15:52Ben Thompson?

  Well, if the key step, this is where I go back to that TSMC and ASML hand in hand partnership. The entire sort of process has been optimized around this central step of, of the lithography. It's the most expensive piece. It's the most complex piece. It requires the most precision and everything sort of fits in around that. If you're going to replace that, it makes sense. You actually have to rework the whole process, even if most of the steps are still the same. Now those steps, you can buy the equipment. It's not like they're going to reinvent etching machines or max machines or doping machines or all these sorts of bits and pieces. But we already know the makers of these machines are happy enough to sell to whoever.

• 16:34Ben Thompson?

  The whole point is they're selling to China. You're using a lot of the same machines for trailing edge chips as you are for a leading edge. Like etching is going to happen at 28 nanometers or 14 nanometers or two nanometers. Same thing with a lot of these, you know, the, the, the chemical coatings, all the, all these parts. So it's not that they're going to reinvent every step, but if the key step is completely new, the way all that other stuff integrates into the process, it makes sense. It would need to be reworked. And TSMC and ASML, it's kind of like Windows and Intel to an extent. It's sort of this hand in hand partnership that makes this all work.

• 17:14Ben Thompson?

  And if you're tearing out one piece, you probably can't just drop it into TSMC. And if you're an Intel, you're even if you're behind, all your expertise is still on the old way of doing things. Are you going to completely rework this? It makes sense. You're, you sort of have to start from first principles. It's also totally insane, right? Like, like, and the chances of success seem, number one, does the x-ray photography even actually work? Did all these problems actually be overcome? It'd be nice to see more evidence than we got, just to be totally honest. And number two, are you biting off more than you can chew, right? Like, on one hand, it makes sense that a Thiel fellow who's most well-known for creating

• 17:57Ben Thompson?

  a sleep tracker, it would take someone totally on the outside, that's kind of crazy to do this. On the other hand, it's like, this is the guy that's going to do this, right?

• 18:07Andrew Sharp?

  Well, I will say for the record, James Proud was pretty honest about it, and he recounted conversations with investors and said, there's a 1% chance this will succeed, but I'm going to operate with a 100% conviction and that it can't fail. And he said, maybe the percentages have gone up a little bit since then, as some of the technology breakthroughs have come through. But by the same token, I found him more credible by his free acknowledgement of how long the odds are for any of this to work.

• 18:41Ben Thompson?

  For sure. And so why talk to him now? I mean, there's an, and I was kind of pressed, like, what, what, what's, why are you discussing it? He's like, well, this is not going to be a secret for much longer, anyway. There's also a bit where I'm sure they're going to be raising money soon, I'm sure this is tied to it, was Chitakari basically used as a vehicle to help them raise money, probably? Like, but number one, I'm certainly cheering for him. Uh, that's, you know, I, I want to see that succeed.

• 19:09Andrew Sharp?

  Not only that, but on the last episode, when you were talking about potential breakthroughs in the way we make chips, I recall thinking on this end of the line, like, I mean, yeah, it's great to want things, I don't know why you would ever mention that, because, for me, it's a good reminder that the technology we have today is not fixed, and it's easy to forget that all of this can evolve and has, when you look at the history of technology over the last 40 or 50 years, and it does make sense that the tech will be in a different place 10 or 15 years from now, or at least could be.

• 19:44Ben Thompson?

  It does, and a topic we've come back to a couple times over the last few months is, it's so fascinating.

• 19:52Ben Thompson?

  To be in a bubble, like I was, you know, I was aware of the bubble in the 90s. I wasn't working in tech, you know, I was consuming lots of stuff that was coming from, from the bubble, you know, often to my financial benefit because all these people were insane. But to actually feel the dynamics internally, bubbles, we intrinsically, I think, attribute a negative connotation to them. Like you feel like, and you feel this as an analyst, like should, like, should I write about this, knowing that it could pop tomorrow and then you look like a dummy because you supported stuff and then it blew up? Even if you know intellectually, this will pay off in the long run, right? Like I was just talking to John on Dithering, you know, your pets.com.

• 20:37Ben Thompson?

  Chewie exists today. It also took 20 years and a massive recession and a total, total dead, you know, a cold frost, ice age in tech. And, you know, and everyone, bubble is viewed negatively. And there is the theoretical construct, the Carlota Perez construct of productive bubbles. And, and we, we've also talked about this. What is going to be the productive payoff from this bubble? Ideally, it's power generation. Like, we actually spend tons of money on power generation. All the investment that goes into it ends up being kaput and people go bankrupt. But hey, we have like power plants that run for 50 years or 100 years or whatever it might be. And that is going to be a positive effect, right? The railroad tracks were a huge benefit, even though everyone building the railroad tracks went bankrupt.

• 21:21Ben Thompson?

  My beautiful fiber probably at some point is touching some dark fiber that was late in the late 1990s. And it's amazing and it's great. We have a great video podcast, right? I appreciate WorldCom and everyone else that went bankrupt, uh, sort of back in the day.

• 21:36Andrew Sharp?

  Yep.

• 21:36Ben Thompson?

  What is that going to be to be today? Like you have the GPUs that aren't going to last for 50 years, right? And how are we going to get sort of the productive angle? This is where I keep coming back to Bern Harbert's, Hobart's book, which was also about bubbles. He called it boom. And we discussed, I, we had an interview with him. We'll put a link in the show notes. What I got from the book originally, but I didn't feel until really recently, is one of his points is the function of a bubble isn't just this infrastructure investment. It's coordinated.

• 22:14Ben Thompson?

  Creation, coordination, innovation, coordinated invention.

• 22:17Andrew Sharp?

  Yeah.

• 22:18Ben Thompson?

  Basically, you have a lot of people working on a lot of hard problems all at the same time. A lot of those sort of, the ones that succeed are gonna pay off the other ones. Like, everyone's sort of really dependent on everyone else also inventing things at the same time. And you have this week, you have this discussion of this creation. You also have all these tech company earnings where they're like, "Yeah, you thought we were spending a lot last year? Full speed ahead, we're spending even more." And that spending, a lot of it's going to Nvidia. Nvidia, some of that money is going to TSMC. A lot of that money at TSMC is going to ASML.

• 22:59Ben Thompson?

  And there's so much money coming in that it is suddenly making someone like Proud and Substrate seem,

• 23:08Andrew Sharp?

  Yeah.

• 23:08Ben Thompson?

  "Why not?" Yeah, it might be a 1% chance, but the payoff of that 1% is getting so astronomically large that here's all the money you need to sort of do it. You have that, this new chip that was just announced this week about this, this thermodynamic chip where you excite the chip according to a probability distribution that you want as it sort of decays and goes back to a neutral energy level.

• 23:35Andrew Sharp?

  Mm-hmm.

• 23:35Ben Thompson?

  It's actually doing computation according to a probability curve that you sort of set it to. And you can do things like image generation, at least in theory, like 10,000 times more efficiently than you can on chips. And you think about it, I've talked about the idea that our chips today, even GPUs, they're one in zeros, they're binary computers. And it's kind of weird, we're using binary deterministic computing for probabilistic outputs, which is what AI is. The idea in theory that you'll have a probabilistic chip that actually uses natural forces, uses thermodynamics to do computation.

• 24:19Ben Thompson?

  Of course, that's going to be dramatically more efficient. Of course, that could align with probabilistic computing to have a probabilistic decay in this chip that is actually doing your computation. Also, sounds totally insane. Who's going to actually spend the money and to do this in a normal period? No one is.

• 24:39Andrew Sharp?

  Yeah.

• 24:40Ben Thompson?

  In a bubble, when companies are spending tens of billions, hundreds of billions of dollars, you have all this crazy thing going wrong. Suddenly, all this insanity seems more viable? And, yes.

• 24:53Andrew Sharp?

  So it pulls the investments forward.

• 24:55Ben Thompson?

  It coordinates the investments. You have all this stuff happening at the same time. And man, Bern really nailed it with this insight. And, and we embrace the bubble, right? Like, this is why I don't feel bad talking to James and is it going to work out? And do, have I pushed him sufficiently on the tech or should he share more? Probably all this is true, but is this all going to blow up where at some point we're going to say, wow, we got a little crazy then? Yes. Is the future going to depend on what emerges from the rubble? That would have never emerged otherwise if there, that didn't? Also, almost certainly, yes.

• 25:37Ben Thompson?

  And it's really hard to write about and to analyze. Because as an analyst, you want to be sure. You want to have clarity. You, you want to be able to follow logic. And it's kind of like, sorry, I hope you're doing a good job listening in my very

• 25:54Andrew Sharp?

  I'm listening, don't worry.

• 25:56Ben Thompson?

  But no, I've just been thinking so much about this. It's kind of like doing probabilistic computing on top of deterministic chips. It's kind of weird and a little uncomfortable. There is a bit where I want to be a deterministic analyst that follows a logic chain, A to B to C to D to E.

• 26:16Andrew Sharp?

  Mm hmm.

• 26:16Ben Thompson?

  I had the Pleasure of doing that for the first decade of stratechery. Actually, a lot of the job felt very easy because I felt I could see very clearly what was happening. I just needed to articulate it. I could do a daily update about Microsoft earnings or Google earnings. Draw it very clearly to the dynamics of aggregation theory and all these sorts of pieces.

• 26:35Andrew Sharp?

  Welcome to the nonlinear future, Ben. Here we are.

• 26:39Ben Thompson?

  No, exactly.

• 26:39Andrew Sharp?

  Who knows what direction it'll go.

• 26:41Ben Thompson?

  I feel like I'm trying to do, there's going to be a challenge in doing deterministic analysis on top of probabilistic outcomes. We're in a probabilistic world, not just in terms of AI, but in terms of the expected value of what's going to happen. Is James Proud going to figure this out? I don't know. Is someone else going to recreate the chip fabrication process? I don't know. Is it important and valuable that someone's trying to do it? Absolutely. Would the funding and the desire to do it exist without the mania that we're in? Probably not. And that's super important, valuable.

• 27:19Andrew Sharp?

  I mean, it's unbelievable. A premise of our chip conversations for the last two and a half years, specifically the Intel conversations. One of the premises in that conversation is that it's just not economical for anybody in the US to try starting a foundry today. It would be insane. It's not gonna happen.

• 27:40Ben Thompson?

  It takes so long to move down the learning curve that in the meantime, you're gonna go bankrupt 100 times over because China's making chips, TSMC's making chips, you have old global foundries. You can't just jump to 2 nanometer with the current processes. You need, we talk about this with China, right? They're going to move down the curve because the chip controls gives them a motivation to be super uneconomical. In a world of no chip controls, nothing happens. TSMC just kind of rules the roost forever.

• 28:08Andrew Sharp?

  On the leading edge, yeah.

• 28:09Ben Thompson?

  Right. And because again, why would you buy from anywhere else? And that's why, number one, the chip controls is actually a big forcing function. And China probably is working on stuff like this as well. I'm sure they are looking at whatever

• 28:22Andrew Sharp?

  They're working tirelessly.

• 28:23Ben Thompson?

  substrate is looking at with a high degree of interest, to say the least. Like, I'm like, what's your security situation like? It better be very high.

• 28:31Andrew Sharp?

  Yeah.

• 28:32Ben Thompson?

  The, but.

• 28:34Ben Thompson?

  Leaving aside the geopolitical points and the global competition aspects, the fact of the matter is we have way more investment going into this space than we would normally. In this case, it's because of political considerations. The point of the bubble is because of the mania, because there's so much money at stake, because everyone is pushing in the same direction, that also is sort of insane. And I appreciated proud being like this, we're an ideological company. We think the US should win. And you look at that, it's like, well, can we have like a technical reason why you're gonna win? Like, like, like, why this should be a thing? But that doesn't sound that much different than the AI companies thinking they're inventing God.

• 29:16Andrew Sharp?

  Yeah.

• 29:16Ben Thompson?

  And it's like, you guys are religious about this. It's like, yes, they're religious about this. That's why they're spending crazy amounts of money with the belief that there's gonna be AI takeoff. There is gonna be AI that dominates the world. And you need religious fervor to break through, to break out.

• 29:33Andrew Sharp?

  To push forward.

• 29:34Ben Thompson?

  To like, Sir Tekkery was easy for the first decade because the tech industry was in stasis. Because we were just colliding around these big five tech companies who were in their lane, did what they did, and it got a little boring, right? Twenty, like, I thought about when's the end in 2020, 2021? Just because it's like, I don't want to write about antitrust lawsuits for the rest of my life, right?

• 29:56Andrew Sharp?

  Yeah, totally.

• 29:57Ben Thompson?

  And so, yeah, so I'm getting what I wanted for it, good and hard. It makes my job much more difficult, but it is.

• 30:04Andrew Sharp?

  Your brain is melting on a weekly basis, but it is very, very exciting. And static is a good word for what the ecosystem can look like when you look around at trillion dollar companies that are firmly entrenched. And then you remember that there's always more to this story. And the future tends to be nonlinear and more complicated than one might expect.

• 30:26Ben Thompson?

  Right, it's precisely because TSMC is so dominant that you feel like a company like substrate has a chance. Just because you can see how TSMC is not going to respond to this. I'm sure they're looking on with interest and they'll, you know, if they ever get asked about it, they'll say, mumble something or whatever it might be. There's no way. They can even explore or think about this because they're so large, so pot committed to the current thing that's going on and so dominant in the space that actually makes it more viable for something completely new to come along because there's not going to be a response. And so again, I'm not making any pronouncements on the viability, how, if it's going to happen, what's going to work. I think it's exciting that it's happening

• 31:09Ben Thompson?

  and all this stuff ties together. The big tech company spending, the cost of these machines and these crazy moon shots that suddenly, again, a 1% expected return, that overall number, if it succeeds, has to be really, really large. And we're getting to the point of those numbers being really, really large.

• 31:29Andrew 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 Certechery and the Certechery Plus bundle. Check it out. And if you've got feedback, please email us at email at sharp tech.fm.