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

This week in AI, we examine the economic implications of OpenAI CFO Sarah Fryer’s "backstop" proposal. We discuss Apple’s $1 billion AI partnership with Google, Google’s new Ironwood TPUs, and a novel AI personal device ring. We also cover Anthropic’s rise as an OpenAI competitor, Meta’s financial struggles, and Google’s plans for space using solar-powered AI data centers.

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TIMESTAMPS

0:00 OpenAI's Government Backstop
3:53 Government Bailouts
7:31 The AI Bubble
11:07 Apple and Google's AI Collaboration
13:11 Google's New TPU Ironwood
15:41 The Sandbar Ring
18:52 Anthropic Shows Life
22:27 Meta's Earnings
27:25 Google Space Compute
31:21 NASA On the Board

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RESOURCES

Josh: https://x.com/JoshKale

Ejaaz: https://x.com/cryptopunk7213

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Not financial or tax advice. See our investment disclosures here:
https://www.bankless.com/disclosures⁠

Episode Transcript

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