# AI Market Recalibration: CapEx, IPOs, and Agentic Infrastructure

**Podcast:** The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
**Published:** 2026-05-28

## Transcript

I can't remember where corporate America was so convinced of the ROI of something as it is right now of AI.
So Antropic has done as much in Q1 as all of last year, and OpenAI has done 30% of what they've done last year in Q1.
Within a couple of quarters, Antropic will be visibly and obviously ahead.
Profitable, growing more quickly and bigger.
That's Pareto dominant on all three vectors.
It could be the GeoCities deal of the AI era.
We could look back on this.
And listen, I'm on Team Elon, okay?
But 100 times trailing sales, we may look back and say these were some good companies.
But 100 times, my God, my God, that's worth $2 trillion?
Renting out chips because Jensen's your buddy and you're a good customer?
But what you are is a more efficient core wave.
I love the S1, but I think it's all madness.
I wouldn't buy a share.
I just love the optimism.
It's SolarCity on steroids, and we're all here for it because we love AI, but it makes no sense.
The picks and shovels of the agentic revolution is just a good place to be investing.
This is 20VC with me, Harry Stebbings.
It's my favorite show of the week.
Rory O'Driscoll, Jason Lemkin discussing the biggest news in tech this week.
Starting off, OpenAI confidentially files their S1.
What does this mean for Anthropics?
to go public.
SpaceX then drops theirs, the largest IPO in history.
Anthropic then hits $44 billion in ARR and laps OpenAI in revenue.
And then NVIDIA, print $81.6 billion in revenue and the market yawns.
Then layoffs, click up and more discussed with Jason and Rory.
Again, my favorite show of the week.
This is the one podcast that you have to listen to every week to stay up to date with tech news.
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Boys, I am so excited for this.
I have to admit, I was wondering where we start, given the sheer amount of news that came out in the last few days.
Jason, you lied to me on email, like, oh, not that much this week.
I'm like, if this isn't much, I'm glad we do the show today and not three, four years ago, because Jesus, NVIDIA, we got to start with NVIDIA, $81.6 billion revenue quarter, $91 billion Q2 guidance, $80 billion buyback.
And after all of that, the stock barely moved.
How did you guys analyze NVIDIA's quarter, the stock not moving?
Help me understand.
Let's do the trivial bit.
First of all, I think you forgot the most compelling number, right?
It's not the 81 billion in revenue, which is pretty damn compelling.
It's the 50-something billion in profits, which makes it the most profitable company on the planet because typically Google clocks in around 100 to 120 billion now a year.
These guys in a quarter made 50 billion plus, 56 billion of profits.
So if that were continued all year and there was some non-recurring stuff, that's 200 billion of profit a year.
That actually, to me, was the big ass compelling number, right?
So first, it's not just a great revenue business growing at 80%.
It's a wildly profitable operating margin business, right?
And then the second thing to your point about what you make, you know, you kind of were whining about the stock on the day.
And, you know, honestly, don't look at the stock on the day.
The big picture is over the last, I mean, in the last six, nine months, the stock's up 20%.
I mean, it's basically, it had a one-off jump, you know, from 23 on when everyone just totally internalized in the space of a year the amount of spend that would take place in AI CapEx.
And it, you know, gapped up and it got to 140, 150 about a year, a year and a half ago.
And then it's just growing more steadily because even though the news is amazing, it's what you got to ask yourself, the stock moves not on the total news, but on the Delta news.
So they beat slightly.
It's gone up slightly over six months.
But the big picture comment is a year, year and a half ago, it was a credible question to ask, is this CapEx thing sustainable?
And I remember asking it myself.
I even, shock horror, priced Nvidia puts to say at 140, 150, is this thing done?
And I decided that would be a done bet.
And thank God I did.
Here we are a year later.
The company continues to grow at 80%.
The stock doesn't grow at 80% because stock markets anticipate.
So about a year and a half ago, the stock grew 3, 4x.
And now it's kind of growing at 20%.
What it's saying here is, this is great.
This is amazing.
We trade at a mid-20s PE.
We kind of think this is really cool, but we're not sure it's going at 5x in terms of growth from here.
So it kind of all makes sense.
The market's pretty happy at NVIDIA right now.
Well, maybe just two thoughts for sure.
That's a good summary.
One is I think in today's market, not falling after your quarter is a strong sign because the markets are expecting insane growth.
And so this growth was just what we expected.
It's just good enough.
And I'm not being facetious, especially when NVIDIA is 77% of all of our 401ks.
It's not just a niche stock.
It's not even just us.
It's 7% of all Americans' life savings are essentially in NVIDIA this morning with concentration.
You know, we're all in, you know, S&P 500 and VTI inversion.
So everyone's on board with, whether they realize it or not, everyone's on board with NVIDIA, right?
When NVIDIA falls, we all fall with 7% of our life savings.
We're all AI investors, whether we...
realize it or not, but it's so hard.
Like you got to beat, raise and accelerate.
Like that's the mantra today, beat, raise and XBRA.
And so even just trading flat, I'm all for it.
That's a good quarter.
AI CapEx is going to be about a hundred billion this year.
You look at it and go most of the time, GPUs are 50% of total CapEx, 400 billion.
NVIDIA has pretty commanding market share, not alone, but that probably says, you know, that NVIDIA business.
no surprise, is a $300 billion a year run rate.
And there it is at $320 billion.
When you look at the announcements of the hyperscalers last week, you kind of know what they're going to do this week in NVIDIA.
It's plus or minus 2%.
So we're really dealing with small numbers.
And at that point, I think market reaction is in the noise.
Jensen Wang said this week, sorry, on AI CapEx infrastructure spend that we'd reach three to four trillion by 2030.
Do you think that is an extrapolation over exaggeration?
Or can you feasibly see that happening?
2030.
Let's just do the quick math here.
And what does it mean?
As Harry always says, what does it mean?
If we just use the same idiot guideline of 50% of, what did you say, two to three trillion, that would be one and a half trillion of total semiconductor CapEx.
And that's to say at that point, there were only 70% market share because training and all the other bullshit.
That's roughly a trillion dollars in revenue from 300 now.
I mean, brutal comment.
I don't think the market's quite anticipating that, to say the least.
Extrapolating the past gets you there.
Extrapolating the growth rate of the last three or four years gets you there.
But I think the million, not the million, but the $64 trillion question is, does that...
growth continue?
Or do you start to hit not technical constraints, obviously, but economic constraints?
Is the ROI there economically on the next $2 trillion?
To go from roughly $1 trillion of CapEx right now to $3 trillion, which is what he's saying it'll happen in, it's now shockingly only four more years.
There has to be an ROI on that next, you know, on that next $2 trillion.
And I think that's the question.
Well, the Uber COO says no, right?
The Uber COO says we've reached, if they're not, Talking their own game, even Microsoft allegedly moving off Anthropic to saying it's too expensive to use Opus, which I think is talking your own game.
But at least to the markets, they're saying the incremental ROI isn't there, to Rory's point.
It's not there.
Jason, how did you read that?
Uber COO saying that they spent the whole year's Anthropic credits in four months, but they weren't seeing the gains or the productivity or efficiency gains that they needed?
Did he say the second part of that?
Just want to be clear.
He said it wasn't measurable.
He said it thought it was probably there, but it wasn't measurable.
The COO.
And oh, got it.
What do I think?
Yeah.
Well, first of all, a CLO is often a bean counter with a different name.
So, listen, I think we all need COOs to scale, right?
But sometimes they're not the most creative person in the organization.
Sometimes they think they're product-centric, but they really just sit in meetings.
And so I always take a little grain with a grain of salt when a COO says, we don't need more engineers, we don't need more product, we don't need any of this.
Because they're not usually, and I should have looked up this background, they're usually not deep engineering product backgrounds.
So they often live in a pre-AI world where products are.
static.
And I would argue Uber in many ways is a static product.
Uber, Uber Eats and everything.
These are not radically different products than four or five years ago.
These are clever marketplaces that scale like nobody's business.
The second point I'll say is I think what actually what I do think is more interesting from this is I hate to say that everything's bifurcated, right?
But I do think we're going to enter a world where things are more and more bifurcated and we will see folks who get more and more gains.
from AI spend, they will token max forever, right?
Often folks well north of a million in revenue per employee, 2 million in revenue per employee will token max until there's no tomorrow.
If you're already hyper-efficient, you will find more ways to use AI.
The folks that are less efficient, that are larger organizations and more traditional, I think will, as the year goes on, will become more skeptical, especially if prices go up.
And maybe prices are, if you look at anthropic raising prices, right?
If you look at nebius raising prices, as prices go up, the area of experimentation is ending and people will see very different results from that.
I think it is the core question of the, it's going to be the question of the year.
I think we said that last week, right?
And as I say, one of the reasons I...
And it almost sounds like heresy to raise it.
It's like, you know, maybe you won't get a return on your marginal dollar of AI.
As I say, it feels like, you know, sometimes when I say it in San Francisco, it's literally like, you know, wandering around the Vatican saying, you know, is this Pope guy the right guy?
It's like criticism, the core thing.
But when it's the only question that determines the answer to that you get to $3 trillion in revenue in CapEx or not, you got to ask it.
And I was reading, it's funny, over the weekend, Actually, our data scientists sent me an archive paper, The Price of Progress, Price, Performance, and the Future of AI.
It's just a recent paper, just basically benchmarking exactly this, you know, right?
The summary, no surprise, is don't just look at kind of benchmarks in the abstract.
Look at benchmarks and pricing at the same time.
Because implicitly, you have to start thinking about ROI.
And, you know, obviously, benchmarks get faster.
Price per token, price for all those metrics going down amazingly every year.
But token consumption going up every year because as these models do more agentic reasoning, the total compute cost of that goes up.
So the net cost of serving the customer goes up on aggregate.
It's a reasonably clear concept, and they don't actually come to a definitive conclusion.
But it at least starts to say the trend here is exponentially increasing costs as you move from simple chat interaction all the way to full-on agents.
So even though all the cost per token stories are yay, amazing, going down, the actual cost to do something goes up a lot.
So as you look at those SWE benchmarks, the thing that's here is not just one-tenth.
It might be 100 of the thing that's next level out to the right.
So you can...
consume vast amounts of token dollars.
So you're right, Jason.
I mean, maybe it is what you said.
Maybe there are businesses that have a lot of white space ahead of them where they can write a lot of software and they can get a lot of value.
And maybe there are other businesses where you hit a marginal return much quicker.
I don't know, but I do know that it's probably the most important question.
When you're spending $3 million, you can be a bit laissez-faire and say, it's all fine.
We're probably getting a return.
When you're spending $300 million, someone probably needs to know.
The other thing is, I think that Uber's gross profit margins are 39.75%.
Okay.
This isn't Nvidia, but it's an awfully good business.
And I think folks like that, they're going to have different perspectives on the ROI of AI.
When you're at those 40% margins, it sounds great, but you're very focused on protecting them in most cases, right?
We're not all Zuck, right?
And so if job number one is protecting the profit margin, you're going to be really skeptical of spending too much on AI.
And it's a trade-off.
And in some ways, folks with margins like this...
We just have to take what they say with a grain of salt, not because it's not important.
It is extremely important to understand that we can't all spend like a drunken sailor with 2 million of free credits out of YC, right?
We can't spend that way.
But it also means there's a backwards looking bias in here.
There's a skepticism in the org where I think what also the CEO said, it's there, but we can't measure it yet.
Right.
So if you're Zuck, you're not, not literally Zuck, but if you're Zuck, you're going to lean the hell in, right?
When the team is telling you it works, you're going to say, let's give it the rest of the year.
If you're a skeptic, maintaining those profit margins, you're going to be like, okay, this is, this is performative token maxing.
Get me out here.
Right.
And I think the interest for, and maybe there's going to be a case study of DoorDash versus Uber.
DoorDash is still founder led.
one of the most aggressive CEOs out there, right?
JFC.
I haven't seen DoorDash say, let's use less token guys.
If I see it from both now, interestingly, if I see it from both from one of the most aggressive founder led companies out there, you know, one of Uber's biggest competitors, then I'll consider myself chastised.
If Tony says the same, then I'll be like, okay, we have, we got ahead of ourselves for real companies, but I haven't heard it from DoorDash.
Is it not a very simple realization of what is your core business?
Uber's core business is moving people, hard logistics, real world, and Facebook's precision of advertising between consumer and provider or advertiser.
And so, of course, you're willing to spend on one.
It is your core business and then physical world.
No, that sounds credible on some level is.
But I mean, if you think of it really in terms of both of them have lots of software developers.
And the big picture question is how much leverage does a software developer get, you know, using AI?
That should be more similar across different entities.
It's not obvious to me that a software developer working at Uber still has a software problem to work on.
If AI gives lift across all industries in terms of software development, then he or she should experience the same lift.
So, no.
I mean, what might be true, Harry, is to Jason's point, if you start with 90% gross margins and you're ideologically committed.
to the program anyway, then you might close your eyes.
And I think it's exactly what Jason said, the burden of proof.
You don't impose the burden of proof.
There's no one at Facebook yet, or that might change, saying, are we getting value from our billions of dollars in AI?
We just assume we are and keep going.
I do think in companies where they have the same idea, same software engineers, but where just the way they run their business because of the overall margin structure is more careful.
then you might have people asking the same question.
Because to be clear, and just to nail your point for good, if what you're saying is you only get AI software productivity lift in industries that themselves are digital, that would be really bad news because that's a significant subsegment of the tab.
I'm saying your willingness to spend is much greater when it is your core business versus a non-cruise.
Then we're saying the same thing.
The more you're ideologically committed to belief, the more you spend.
But just to put it out there now, I can't remember, except maybe for a year in the internet in the mid-90s, where corporate America was so convinced of the ROI of something as it is right now of AI.
The sluice gates are open.
The money is being authorized.
I mean, the proof that the sluice gates are open is you just look at Entropic going from $5 billion in gap revenue to $10 billion in gap revenue.
There's not a ton of querying going on right now.
So there is a willingness to spend.
So therefore, I do think the next shoe to drop will be, OK, that was fun.
We spent 10 billion.
What did we get?
And it's just the way the narrative has to play out.
Well, I think that was a very prescient recognition of anthropologist revenue growth.
But you missed the core number there.
for me.
I think you missed it personally.
Gross margins expanded from 38% to 70%.
They're going to have a 559 million operating profit in Q2 projected.
Yes.
And if you remember, we talked about last year's margins, which I think were 34%, don't quote, right?
The prior year, they were negative 60.
So the trajectory was really strong.
The margin profile went from negative at the gross margin level in 24 to positive 34.
That's two points.
That's a trend.
So no surprise when on top of that, when your revenue keeps going so you have more fixed cost recovery and you got a little bit of pricing power, not surprised the margins went up.
And as long as your margins continue to improve, if you're doing $5 billion in revenue and losing a little money, and then the next quarter you add another $5 billion in revenue at any kind of, let's just say even if it was.
It's not seven.
Let's say it was even 50%.
You have $2.5 billion of cash coming to cover OPEX.
It's just hard to spend that much money.
High growth and improving margins meant profits were inevitable.
So, yeah.
Now, will they keep them?
Are they about to spend a whole ton with SpaceX?
Yes.
But I wasn't surprised.
We run an internal model just to understand the ecosystem.
And it's funny this happened because Antropic had only talked about...
getting profits in 27.
And I kept running this like idiot internal model, which is just growth, gross margins, training costs.
And I'm like, it's hard to lose money with this level of growth, any kind of decent margin structure.
So I wasn't surprised by it, but obviously damn impressed.
From the profit, just to some folks say some of it may be partially due to a discount with SpaceX the first couple months, right?
So I just put an asterisk and a dagger.
It has nothing to do with Rory's trend.
It just may mean that the headline metric is not as impressive as it looks.
It is great, but the flip side of it is there's a bit of a bear case on Anthropic out of this.
which is that Anthropic has benefited from two things versus OpenAI at a minimum, right?
It has become a premium product since the end of last year.
It is twice the cost of its competitor, especially after 4.6, it started to charge enterprises clearly per token, per use case.
They charge them directly, prices doubled.
It is a premium product.
It is twice the price of its competitor.
In a sense, it lucked out by not going into video, which just ended up being the biggest cash sink that OpenAI ever did.
Probably Grok.
abandons it too.
But everything is go, go, go at Anthropic, right?
Every single light across the room is green.
But if, if the market, if, if even if DoorDash is, Antonio at DoorDash is spend everything, right?
DoorDash compared to Uber said, we make so much more money on AI.
We just, we, with engineering savings, we just justify our token savings with our engineering savings.
He views the ROI is very clear.
Uber says it's not there.
Okay.
If even half the world says the ROI isn't there for a premium product.
Claude's growth is impacted.
Either it has to cut its prices to match the competition or it will maintain a premium product like Apple, but won't be able to maintain its market share, right?
Just at the end of the day, it's twice as expensive as its competitor given the pace of this world.
How long can it maintain it?
Like, I'm not sure it's clear it can maintain it infinitely.
And it doesn't feel like it today, but that might be a hint of the bear case is that the premium cannot be maintained.
The demand is there, but the premium may not be able to be maintained.
But I think right now, even though they are the premium product, the proof is the revenue traction.
The revenue traction Q1 to Q2 is so strong.
What it means is, as I say.
It requires, maybe this way it's this way, it would require a change in behavior from where the default switches are now in corporate America for that number to change.
Now, you're exactly right, Jason.
It could happen, and it will all be about probably two things.
One is the ROI there.
We just talked about that.
And second, are the competing products in the marketplace competing strongly?
And there, obviously, we're talking about OpenAI, and obviously, to some extent, we're talking about Gemini.
And the truth is, right now, Anthropik stole the show in Enterprise.
And one of the other two was distracted.
I think that's open AI with consumer.
And then Google, despite having amazing raw tech, just didn't do a great job productizing.
So right now, the inertia bet is more of the same.
And something would actually have to change in terms of competitive dynamics for that to be true.
And as I say, I think there can only be one of two things.
Either kind of the green eye shades come out and start talking about ROI or the competitive dynamics change.
Absent one of those two things, the trend is your friend, as they say in trading.
Listen, the Uber CEO complaining and the Microsoft stuff, like I can take some potshots at it, but also I just think it's showing you the future.
More folks are going to come out and say the same by definition, right?
Going to happen.
So the bear case is just as that happens, it might seem like the reaction is no more AI guys go back to pulling up your old ID encoding by hand, but more likely is we will just get better at token budgets.
And as folks.
struggle to manage it themselves, that may degrade pricing power for Anthropic as folks just, you know, like, you know, I'm just going to use a combination of GPT-4, it's older, and some Sonnet and some Deep Seek, because that's the way I'm going to...
spend my budget, right?
It's just a bare case.
That's all.
I think you're exactly right.
And the reason I think this is going to happen, that's why I was reading that paper, is this.
At some point, when you go from experimental to, we spent $300 million on tokens.
We don't want to change our guidance.
We got some lift in efficiency, so we can touch a hundred.
We don't have $100 million of better off operating income, so yay us.
But that means we have $200 million of OPEX we didn't expect to have, and we have to terminate a whole bunch of people.
At that point, HR comes in.
And if you think you can do that just on vibes or no ROI, you're fooling yourself.
So I actually agree with you.
I think once AI spend starts to eat big chunks of wages in large companies, you're just going to have to have that discussion.
And it's going to become more quantitative.
It's going to have to be more provable.
And not just for humane and political reasons, but just because economically it makes sense.
I mean, someone should stand there and say, OK, we've never done a layoff in five years.
We're about to terminate 10% of our people.
Are we sure that we're getting the ROI from this investment?
And if the person leading the investment says, I think so, but we haven't really checked, hopefully a CEO will say, well, before we terminate 1,000 people, shouldn't we check?
Perhaps take another week here, guys?
Isn't that the ultimate symbol, though, that the layoffs that we're seeing is ultimately a case of overhiring during COVID, not AI efficiency?
That's the dumbest take I've ever seen on Twitter, is that this is overhiring during COVID.
Dumbest take.
From the smartest people, including Marc Andreessen, who's got 40 IQ points on me.
The dumbest take I've seen since our last show.
The dumbest take.
Why?
Because every single person- When was COVID?
I'm starting to forget COVID.
Even 2020.
I mean, what is, Rory, what is natural attrition across your portfolio?
15% a year, 20% a year, 25% a year, right?
This is not over hiring.
It might be that your worst employees didn't leave.
That's a related but different issue, right?
And actually, I think that's kind of part of it is the unreskillable need to go.
But this is not over hiring with 20% attrition.
What's 20% times six?
How does that compound?
It doesn't matter.
Yeah, exactly.
You get to the same place.
You're saying the 16,000 cut from Intuit, the thousands cut from Coinbase, the 800 cut from LinkedIn.
You're saying that is not overhiring.
That is AI efficiency.
I'm saying there is already more natural attrition since 2020 than these numbers.
So blaming it directly on overhiring is clickbait.
It's clickbait because it's not mathematically true.
Let me try.
First of all, let me try, Harry, because I saw a really cool tweet that basically said, it's five years since COVID, people.
Haven't you heard of performance?
with yous.
That was me.
That was you.
That was my tweet.
I love that.
That was my point.
I mean, you have no excuse.
Like you couldn't manage, you had five years to manage your low performers out and now you're blaming it on overhiring?
Hang on.
The only thing that could be true, just articulate the case.
The only thing could be true is you're hired to this level and you have this kind of human anchoring whereby you perceive you need all these people.
So every time they churn, you just rehired because you had myopia and you didn't realize you could get by on, you know, much less.
And now suddenly terror has opened your eyes.
It is possible in mature organizations with monopoly type profits, you see that behavior.
But I'm with you, Jason.
It's weird to see it across the board.
Yeah, it just can't be true.
Like, it's just, it's an excuse.
And I don't totally get this mea culpa, this click up cloudflare mea culpa on Twitter.
I don't totally get what the vibe is here.
And I do think they're 80% honest and direct, but this bloat thing seems like the excuse.
Jason, can you just explain the click up and the cloudflare just so people have some context?
Well, just publicly explaining why we're doing 20% layoffs in 2000 word tweets.
And I just actually don't, I'm not, I'm literally saying I don't understand the PR benefit.
And the meta problem I find is even if it's true, they're sort of blaming the employees, like, or even if they're not, it's perceived to be blaming the employees for not understanding AI, not being able to change, not being able to evolve.
So we've got to let you go.
Before the Cloudflare click ups, they were always like, our very best people have to go.
Please hire them.
Here's a Google sheet.
There's no one better than Harry, Rory, and Jason we've ever hired.
It has nothing to do with organizational change or the world or that there are low performers.
It's just a flip of the coin.
Like we had to let somebody go.
We flipped a three-headed coin, a four-headed coin, and Harry, Rory, and Jason came up.
But they're just as good as the folks we kept.
That was the vibe like even through last year.
Now it's like it's ruthless.
Like Matthew's like Cloudflare is doing great, and we're still walking 20% of the people out the door.
Look, it's some sort of messaging to the markets.
employees and others that I don't totally, I think CEOs feel that they should be direct, right?
In a way that everyone was uncomfortable to do through 2024.
Everyone was uncomfortable being direct.
Everyone had to say, everyone's great.
I don't know if it's gone too far, but it's very public.
Like if Cloudflare is laying off 20, 21%, I mean, I know they're a public company, but that's about all I need to know.
It's funny because you're damned if you do, damned if you don't, because the Intuit CEO did it.
It's not about AI and also got slammed for that.
People saying, well, of course it's about AI because look at these deals you did on Tropic.
you're being competed with.
It's always about AI one way or the other, isn't it?
Directly or our growth is slowed because we don't have an agentic product or we're not being renewed by CEOs because they need budget for anthropic tokens.
The world isn't static, right?
That's the honest message.
That would be my tweet.
Guys, sorry, the world isn't static.
I partially screwed up.
This is what I'm doing to try to fix it.
Blame me.
Look, there's no easy way to give bad news.
There's no easy way to lay off a thousand people.
So no matter what you say, you know, you're going to get dinged on it, which is it's been evolving over the last six months how people have approached it.
I liked what Zeb said, though, from ClickUp, even though he got hazed more than math.
One of the things I like that he said, and it was very transparent.
It's like, listen.
I'm laying off 22% of my company so I can pay a million dollars to my high performers in the age of AI.
Because one, it's, well, he didn't really say it's market, but that's one reason you have to do it.
The other point is if a 10X engineer is a 100X engineer or $1 million bookings a year sales rep is now two and a half million, I got to pay them.
I got to pay them.
I got to pay what was a three or 400 or $500,000 a year and a million dollar employee because they're delivering that much value.
I've lived it.
I mean, we've gone not to be.
a broke record we're doing with two and a half people, we're doing what we did with 20 and everyone's get paid more on my little team, right?
Everyone should make a million bucks because we don't have the 18 other people's salaries to pay and we're more productive, right?
And I don't know if it's going to happen at the Uber scale, but it's going to happen all across startups, right?
And with $2 million or more per employee in startups, you got to pay, man.
You got to pay your high performers.
And to be fair, you're consistent because when I did my three months ago, I was kind of doing my four different reasons for AI, the layoffs, only some of which are AI.
You added that fifth, which is I'm terminating people to get different people, which effectively is what this guy is doing.
It's like I'm terminating people to make room for people that might cost more per head that are just of different skills.
Well, that might be what he's doing.
But what Zeb really said is I just want to pay my.
current high performers more.
It's to say I'm making space for people who you can keep more salary dollars to.
And the funny thing is, guys, This is the counter argument to the last discussion.
We're actually repeating ourselves in a weird way.
We just had a discussion on this.
Does 20% of R&D spend on tokens make sense?
And if it does, because the first section of the podcast was, you know, does token spend make sense and has a deposit of ROI and thus it's good for entropic?
And then the second section is I'm shocked to discover there's layoffs.
And if you zoom out a million miles, that's the consequence of the first.
These are actually the same discussions.
If there is efficiency gains from AI across R&D and sales and marketing in particular, and then on top of that, if there's also product impacts, which I always like to separate internal impact versus product impact, if those things are true, then everyone's going to be doing 20% layoff just because it's 20% more efficient.
My aha is this discussion and the last discussion are, in fact, the same discussion.
In one case, we're focusing on the winner, which is Entropic, and in one case, we're focusing on the loser, which is employees.
Yeah, but the top employees, I think what ClickUp...
You see them on social media, Anthropics hiring a social media manager in King's Cross for $450,000 a year.
And you're like, how could that be?
Right.
But their revenue per employee is so astronomically high that it all ties.
Right.
And I think the new paradigm, when the three of us met.
2 million per employee was what you reached someday.
That was Apple and others.
Startups never got there.
I think 2 million per employee is going to become the new normal as you scale.
And that will mean that your high performers can make two to three times what they used to make, just like at Anthropic, because you just don't need as many people and you're going to do what ClickUp does.
You're going to funnel your compensation to your high performers.
Instead of...
that high-performance making 40% or 50% more than your mid-pack, it should be 5X.
What you're basically saying is a new set of tools have come to the floor in the last two or three years.
And if you know how to use those tools, your productivity relative to someone who doesn't have those tools is so great that we can afford to pay you half a million bucks because you're obviating the need for three people.
being an agentic expert should be like Excel in 12 or 24 months.
Everybody should be able to do it because, because prompting has gotten so much.
You don't even need to know how to prompt anymore, right?
It should be true.
But I, I have some lingering concerns that instead what happens is the agentic experts get another 10 X better.
And everyone else falls further and further and further behind and are unemployable.
And we go to 4 million in revenue per employee and 5 million in revenue per employee.
And it's exhausting.
Like I'm the most tired I've ever been in a sense, but my productivity rate is off the charts.
You're right, Jason.
What you're saying is if you're on this exponential curve, Dario and Sam keep talking about, then the knowledge to be frontier keeps growing every year, and it's just super hard to keep up.
In which case, it does get pretty brutal.
I mean, one of my favorite Max Planck quotes is, you know, science advances funeral by funeral.
In other words, if people don't learn and change their views, they're just the people with the wrong views die.
And it's pretty brutal, but it's true.
Gradually, all the people who believe the earth was flat died.
And retraining is hard.
I mean, it is, which explains the unpopularity.
It's uncomfortable to have to learn new stuff beyond a certain age.
And it must be pretty dystopian to have to do that or die.
Don't worry, Roy.
As a podcaster now, you're safe.
The venture investors are screwed, but now you're a podcaster.
Good to know, Harry.
I got you.
Don't worry.
I look forward to seeing the past true income from your advertising dollars coming into my account.
So far, I've looked and they haven't hit, Harry.
Oh, don't worry.
Don't worry.
They're coming soon.
They're coming soon.
Just like productivity gains.
Okay?
Yes, they're cute.
Listen, S1.
Let's start with OpenAI.
DeRoy, you teased it out at the end of last episode brilliantly as it kind of came breaking through.
Confidentially files S1, $852 billion to a trillion dollar valuation for a Q4 listing.
The main question that I had, I think probably is on the minds of everyone, is OpenAI forcing its way out before Anthropic?
Let's start with that.
Yes, and they have to, and they should, and they must, and they got to go now.
Because they've been lapped.
And it's pretty grim.
Last year, Entropic Gap revenue, $4.5 billion.
OpenAI Gap revenue, $13 billion.
Q1, Entropic Gap revenue, $5 billion.
So more than the entire last year.
Q1, OpenAI revenue, $5.5, $5.4 billion.
So still bigger than Entropic, which is the point they were making by leaking that number.
But if you look at it, it's only, what is it?
35% of last year's revenue.
So, Antropic has done as much in Q1 as all of last year, and OpenAI has done 30% of what they've done last year in Q1, and they're only slightly bigger than Antropic.
You play that out for a couple more quarters.
We know Antropic, if they do anything close to 10, and then they flat for the rest of the year, let's say 10 in Q2, Q3, Q4, that's $35 billion in gap for the year.
If one company is growing 10x year on year and the other company is growing 2, 3x year on year, and they're pretty close now, within a couple of quarters, Anthropic, on the current trajectory, and it could change, will be visibly and obviously ahead.
I mean, it could be something like high 20s gap revenue for one, high 30s gap revenue for Anthropic.
That's not a good look, especially when the one with the high 30s is profitable.
Profitable, growing more quickly and bigger.
That's Pareto dominant on all three vectors.
And OpenAI could be smaller.
Growing less quickly, still unprofitable.
That's a horrible strategic place to be.
But that's a tough message to come out into market with.
But to tell you this, yes, it is.
But you've got two choices.
You go first.
And at least you can say, here's a chance to buy the first foundation model.
Go now.
Which all the chat GPT, everyone knows who you are.
Are you wait?
And are you waiting till the other guys go?
And then you go right after them as, hey, we're like entropic, but smaller.
and not as good?
Or are you saying you wait two years and grow your way out of it?
Because nothing's forever.
You re-accelerate growth and you go public in 2029.
No, that's craziness.
The rule of life in all these markets is the number one gets to choose what happens and the number two has to respond.
OpenAI was number one, had that degrees of freedom.
Now they could be number two.
When you're number two, what you do not do is wait till the number one prices goes public and then you come out as a pale version of that.
I think they're smart to go and they got to go.
And this might be one actually where the risk is you exhaust some of the capital pool available because these IPOs are, this is always something people would say, but it was never really true, right?
But traditionally folks that bought into the IPOs was a fairly slim segment of the market because you can always buy the next day, right?
Now we have, you know, Cerebus really was maximally oversubscribed, right?
As Roy made the point, it priced to the exact highest thing you could do without refiling, right?
Without taking the risk of refiling with the SEC, but it's still a relatively thin investor pool, right?
with Schwab and everyone coming in for SpaceX.
So this might be the one time where it really does help to go just to not exhaust the capital pool.
And tell the story.
You know, look, and given the trajectory of the last five years, they're too entitled to tell the story.
They did build a category.
I would much prefer to go public as the first financial model in the category.
then go public.
If, in fact, the numbers that we've had leaked, and I always caveat this because no one sees the numbers, right?
If the numbers that have been leaked are correct, such that by the middle to latter part of this year, you're visibly number two, losing money and growing more slowly, then you do not want to wait until that becomes painfully obvious.
If you're anthropic, do you change anything on the back of seeing OpenAI now force this out?
And again, I'm going to repeat myself, because you're number one, You don't have to change what the other guy does.
As a total historical analogy, I remember when Britain ruled the waves.
I like to do my little Britain digs here.
When Britain ruled the waves and the British Navy ruled the world, Jackie Fisher, the Lord of the Admiralty, said, why do you have the British Navy?
He said, to go anywhere you damn well please, whatever force you want.
You can do whatever you want.
That's the point of being number one.
This is what you want.
You don't want to be sitting there agonizing about what the other guy does.
It doesn't matter if Entropic could decide, oh, my God, OpenAI is going to go public in September.
Maybe we go in November.
And maybe they do bring it up a little.
Well, to your point on exhausting capital supplies, we've got SpaceX.
And let's worry about that.
Because look, to some extent, it's a thing.
But if you're profitable and growing nicely, let's just say that if you are the better company, right, and you have the more attractive metrics, and the other guy's going out three months ahead of you, everyone who's investing will think, I'm going to put some money in this, but I'm going to keep some money for the good one, especially if they have Telegraph when they're going out.
The truth is this.
Operational excellence gives you a fair amount of strategic independence.
I mean, you've got way more degrees of freedom.
Or maybe, maybe if Anthropic truly is profitable and truly has infinite demand for its shares, it doesn't need to IPO at all.
If I'm Daria, I've already pledged 90% of my shares to charity, right?
I still have an altruistic mission at my heart.
If I'm profitable and I have, and I can do infinite secondaries, maybe ironically, they stay like Stripe.
They're like, listen, we crushed it.
Why would I want to float a small amount of my shares and deal with the headaches?
I am going to stay true to my mission.
I'll tell you why.
And I actually think that the dynamics of staying private longer are super different for people like Stripe than Antropic.
Because at Stripe, you're in a fair degree of predictability.
The business model is understood.
The capital needs are light.
You're kicking off cash.
You're buying back shit.
Those guys can't actually stay private as long as they want.
It's a payment processing company at scale with profits.
It's a glorious thing.
Who knows how it will be valued?
And that's still TBD in the public markets.
But you can chunk on forever.
I just think the capital needs for Antropic.
Entropic are such that you would be wise to access the public markets when you can, because unlike Stripe, where your capital needs are light, in the case of Entropic, even though you're not bearing those capital needs today because you are lucky enough to have hyperscalers foolish enough to build on your behalf, for every dollar of revenue that you add, someone has to invest four or five dollars in CapEx up front.
So if one day you want to do a hundred...
billion in revenue, someone's got to invest 500 billion, and you probably want the operational freedom to get more of that money for yourself.
Does a dollar sum above which only the public markets can do it?
Because even though, again, people talk about, oh, my God, the private markets.
SpaceX, as its prospectus points out so wisely, was pretty cap inefficient.
$23 billion raised, right?
It's not 100 billion.
And it's entirely credible that if Jensen's correct, Going back to the thing, and if CapEx is shock-powered, $3 trillion a year, and you're the leader in that industry, you might need to raise $300 billion because maybe two years from now, Microsoft or Amazon doesn't want to be your hyperscaler provider.
So I think they go public because the capital needs here dwarf anything we've seen.
Or at least it may provide some independence, right?
NVIDIA's got $200 billion of cash flow a year.
It needs to do something with.
And the other thing, going back to the beginning of the conversation, that's why I don't think this circular revenue is as negative as you think.
NVIDIA has so much cash.
It has to recirculate this capital.
It has no other use for it, right?
Just going back to this, before we do SpaceX, if OpenAI were to go out, what do you think the reception would be?
Do you think it will be overwhelmingly positive?
In today's market, yes.
because we're risk-on and people want to make an AI bet.
And they're the leader.
They are the leader.
They built the category.
You go outside the valley and you utter the word Claude and people look at you.
ChatGPT is the thing.
And they're going to have stellar revenue, albeit lost.
And clearly, losses aren't a problem at the moment.
I mean, when you look at where SpaceX is going to.
come out.
So I think that would be really good.
I mean, really good might mean not quite as good as Entropic, which is all that plus profits too.
But I think right now, the public doesn't have any pure play AIs other than something like CoreWeave, now something like Cerebus.
It's obvious that the top of the heap are the foundation model companies, and I think it'll be a great reception.
That's why they'd be crazy not to do it.
You've got to remember all this leaked.
We're not going to be ready yet from the CFO 2027, 2028.
I would imagine...
We had a good internal session where like, we're doing this, guys.
Thank you for your input.
But the day after the litigation settled, we are going for this thing.
And I think they're right.
I just think two things.
One.
We're going to get a little preview, which is if this retail demand for SpaceX is super high, then OpenAI can copy it, right?
I mean, Elon's putting 30% of this massive IPO, the largest in history so far, into retail.
It sounds like he's being democratic and meritocratic in Robinhood, and maybe he is, but I think it will benefit the stock price because they want to own Elon.
Not the jury in Oakland, but a lot of the country wants to own it.
And it will give, if OpenAI clones that for its fan base and it drives the stock up, they'll get a little preview of how well that strategy works.
And the other thing is, it's fun to talk about this two horse race on.
the 20 VC.
But again, I don't think there's anything wrong with owning both as a public market equities investor.
I think owning both is a good strategy.
Why?
There's so much change.
Even if Anthropic is better, why not buy into the IPOs of both?
Put in 50 million into each, 100 million, 250 million to each and see how it plays out over the next years.
The overall trends are strong.
Not everyone needs to be a savant.
One of the ways to think about this is These are three CEOs trying to do something incredibly hard, which is stay on top of the most dynamic, evolving industry and tech trend we've ever seen.
None of the three of them, and by that I mean SpaceX, Entropic, and IPO, is pitching a perfect game.
You can look at aspects of what any of the three of them have done and go, oh, that's not as good.
But the truth is, all three of them, from a standing start, have built companies worth plus or minus a trillion dollars and are riding this trend, and no one else is even close.
I mean, so if you look at the report card, you know, yeah, you're right.
Antropic did an amazing job of building the model, which ironically meant that their CapEx forecasting was wrong because they underestimated the success of their own model.
And to some extent, OpenAI has been the other way around.
They really nailed it on CapEx.
They nailed it on compute, but maybe should have spent a little more time on the enterprise features of their model.
So they're behind there.
And obviously, you know, if you look at the X.AI part of SpaceX, leaving aside.
The thing just focused on their AI business.
They're the world's best builders of fast data centers.
So they get points for that.
But on the other hand, they lose points because they weren't able to fill it with their own stuff.
And you're right.
It's not quite perhaps as modern or as SOC 2 compliant as some of the stuff OpenAI got.
So, yeah, you can make knocks on all three.
But zooming out from a standing start, they've each created a trillion dollars in AI in the last five years.
You know, what did you do on your summer vacation?
Well, and Elon founded both of them.
You have to remember that.
Plus Neuralink, plus he's controlling people's bodies with his brains, plus the Hyperloop, plus Tesla.
Well, we can talk about that the entire, because the SpaceX, when we come to talk about SpaceX, the proportion of their future value they attribute to AI.
This is Elon, you know, effectively losing open AI and says, God damn, I'm going to have one of my own and made it happen.
Realized it from whole plot.
Let's discuss SpaceX directly then with the S1 dropping.
Rory, given the fact that I didn't correctly.
identify the most important numbers.
What did you think were the most important numbers when you looked at SpaceX's S1 dropping?
Cynical answer, I don't think the numbers matter damn, right?
Because the point is this.
Evan said the same thing.
You run the sum of parts on those three businesses.
There's a lowish growth, but tech enabling amazing space business.
There's a good growth, profitable Starlink business that has much, you know, a bigger TAM than this simple rocket business and the launch business, but it's growing 30, 40%.
And then there's X.ai that at the time of filing was a great big gaping hole of 15 billion in CapEx and no obvious revenue.
Since then, obviously, he's done two amazing deals to find the revenue.
And now he's got a 15 billion dollar run rate business.
But you add it all up.
Right.
And the truth is, you get to launch business.
You have a Starlink business, which you can value.
And you have a core weave type business because that's what the AI business has now become.
And the sum of those parts is so far lower than the proposed valuation.
And the only difference between the two is the Elon premium.
And that's not a number that comes out of the prospectus.
So I looked at the numbers.
I read them.
I understood them.
But they offer me no value in trying to value this company, you know, other than saying utterly stupid things like the fundamental value of Tesla is 200 billion and the trading price is six times that.
So maybe the Elon premium is 6x value.
I don't know.
It could be the GeoCities deal of the AI era.
We could look back on this.
And listen, I'm on Team Elon, okay?
But 100 times trailing sales, we may look back and say these were some good companies.
But 100 times, my God, my God.
No, no, no.
I'm going to defend.
No matter what happens, these are three amazing companies.
Twitter's growth has fallen off.
It's shrunk 50% since he bought it.
Elon's the magician of revenue compression in Twitter.
Revenue has fallen 50%.
Yes, Twitter, agree.
Twitter is, I mean, again, if you disaggregate the three businesses, the launch business is a good, stable, boring business with amazing technology that probably would get...
tapped out at 10 to 20% growth rate.
The Starlink business is a great business with a much bigger TAM, but 30, 40% growth rate, 10, well, think about 14 billion in revenue and EBITDA positive, right?
So actually, I will give you the most interesting chart, Harry, and the number in the thing with the TAM analysis.
And I want to say for memory, it was something like 28 trillion, largest TAM in history.
That's actually not as interesting.
The interesting part is, even though, let's say 10 years ago, this is a launch company.
And two years ago, this was a launch company with a communications business.
90% of the town that they identified is not in those two sectors.
It's all about AI.
So the interesting thing is the story they're trying to tell is a story that's 90% not focused on the two things where they're unique and differentiated.
They're not unique and differentiated in the AI story because Grok as a foundation model has gone nowhere.
They did make an enormously clever deal in the sense that they had Colossus.
They built it quick.
And again, the S1 is very clear on that.
We think we build faster than anyone else.
And they've sold that to Entropic.
They've rented that to Entropic for $1.25 billion a month with, I think, a 90-day cancellation clause on either side.
So basically, it's $15 billion a year, right?
In one sense, that's amazing because it's amazing to think that you had an $18 billion business built over 20 years, and then you just added $15 billion to that in one transaction on a product you only built a year and a half ago.
So in one sense, it validates the comment that the AI business is so much more dynamic even than the launch or the comms business.
If you're willing to spend the capital up front and invest $10 billion in a hole in the ground and the compute demand is there, you can get to $15 billion in revenues pretty quickly.
But what you are is a more efficient core wave.
That's worth $2 trillion?
Renting out chips because Jensen's your buddy and you're a good customer, that's worth $2, $4, $3 trillion?
Or are the rockets growing 10% or the Twitter declining 50%?
Which of them exactly is worth $2 to $3 trillion?
And that's why I jumped on the GeoCity thing.
I love the S1.
I think it's all madness.
I wouldn't buy a share.
I just love the optimism.
I just love the fact that they've done this thing for 20 years.
And, you know, some of the assertions of why they're great were totally true.
We've been fairly capital efficient for people who put rockets in space.
We build faster than anyone else.
We have organizing principles around engineering that, you know, the algorithm to make things efficient.
There's a lot of balls out claims here that are justified on the basis of 20 years achievement from probably one of the most talented entrepreneurs everywhere.
It was a great read.
Go America that we can have this.
So after I say all that, you're right, Jason.
I'm so far from $2 trillion in DCF that my head hurts.
Well, you know, it's almost worse.
The 100x trailing revenues is like, it's hard to tie, right?
And listen, I'm on Team Elon.
I've bought five Teslas.
I've got like three Starlink subscriptions across.
I am from the very early days, but...
In some ways, this is just very cynical.
This is financial engineering, which I have mad respect for.
But my God, you're taking a bunch of disparate assets that most of them have no connection.
You're throwing an S1 talking about the history of AI, which wasn't even your business a year ago.
A little bit of financial engineering I'm all for, but man, this is so much fun.
This is bailing out my failed Twitter acquisition.
My idea that I'll compete with OpenAI just by buying chips, that didn't work.
I'm bailing both of them out.
I had a quiet business, which...
which I should have kept private with SpaceX, right?
It was a great private business that blended, was doing great things.
Now I'm bailing everybody out in this massive confab.
It's SolarCity on steroids and we're all here for it because we love AI, but it makes no sense.
This conglomeration of friends of Elon makes no sense to anyone but the folks getting bailed out on Twitter.
It just doesn't make any sense.
The answer is the launch business enables Starlink and the launch business will enable data centers in space.
And we've proven that we can build capacity on the ground.
So therefore, we'll be able to build capacity in space and we'll be able to get 100 gigawatts of capacity a year, five years from now.
Data centers in space is the thing that joins all the dots together, which is different than me saying, even for a second, I ascribe a high probability to that.
There is a coherence to the narrative, but only if the next thing happens.
And that's always the way.
If you buy into data centers in space with work, then it makes sense to have a launch business in the same company that has a data center business.
And the tweets?
Where do the tweets fit into all this?
The tweets don't fit in at all.
Let's get real here.
The tweets don't fit in at all.
And the truth is, the $44 billion on Twitter was a miserable acquisition, and the value of that company is less today than we bought it, and that was pretty obvious two years ago.
He's chosen to bail everyone out.
by rolling it into X.ai.
He's trolling to bail X.ai out by rolling it into SpaceX.
And to be fair to X.ai, even though we just used the words bail it out, if they can keep the $15 billion a year, that's a very high.
I mean, the total capex in X.ai over the last two years, I think it was $12 billion and $7 billion, $19 billion.
One year and a bit of entropic revenue at $1.25 billion a month, and you covered your nut.
which is a pretty high cash-on-cash return for a data center project.
So, look, I sat there thinking it's all crazy, too.
And then I'm like, he built something right at the time when capacity is at a premium and he's found a way to monetize it.
Now, again, Jason, I repeat, so you apply the core weave multiple and you get to under $100 billion.
I'm not sure what to make of that information, but it was definitely a get-out-of-jail-free card when he got the Entropic business.
By 2030, what will that core business be?
Will it be Starlink?
Will it be data centers in space?
Will it be NeoCloud?
Good question.
I think Starlink will be the vast portion of the value.
I don't think data centers in space will be a meaningful percentage of revenue.
And I think their existing data center business will be a high revenue.
relatively low return on equity business.
How that compares to Starlink, TBD, but I think we'll discover that, as I say, it's core weave with the world's best engineering and construction team.
So implicitly, I'm saying not a whole ton of data center and space revenue on top.
And that will only be worth anything like the current value if the narrative is tracking towards data centers, which again goes back to the first sentence of the show, which means if Jensen is right that you're spending three trillion a year and the ROE is there for the full three trillion, as Jason has pointed out, and if we can't build shishet anywhere else, then at some point you'll want to stuff them into space regardless of all the pain and suffering involved in doing that.
And then Elon will be right.
If any of those if clauses turns out not to be true, then it'll be a bridge too far.
The one human being on the face of the planet who's earned the right to say, give me a trillion dollars, I'm going to make the bet is Elon.
And if you want that bet, I'm glad it's going to be available for people.
If you want to scratch that itch, go scratch the itch.
Look, I think he made a compromise to get it all done.
I think he's going to have to build a $50 billion Corwe business to make the math tie.
And I think he had to give up on going to Mars and go to the moon.
Like he got, we reached a certain point in life where to achieve our goals, we have to be practical again.
He's got into a practical phase.
He's got to take this thing public.
He's got to mash it all together.
You know, the anthropic thing either has to die or keep going, right, to make this work.
So he's got to commit to building a 50 plus billion dollar core weave and going to the moon, which is pointless.
But it doesn't mean it won't get him there in the end.
He could also, if the world changes, I mean, we're on such a...
intense trajectory, right?
But if the world changes, he could also dump this whole Corwe business and just move on, right?
If it is possible, you can write off the chips, you can write it all off if the world goes a different way than we expect.
And proving how little we all know at this point, how little you can know, let me give the other option is, if everyone else proves incredibly mediocre at building new data center capacity, and Entropic keeps continuing to grow, then, you know, even though I was thinking they did this like 1.25...
billion a month.
It's kind of like we all buy storage capacity.
You know that when you buy kind of storage for your stuff, when you send it away to storage, you have extra furniture, and you pay 100 bucks a month, and you think, I'll be out of this thing in six months.
And then five years later, you're still paying, and they're now charging you 400 bucks a month, right?
Basically, this is public storage, but for compute.
And he could well be there for the next five years when Anthropic just needing the capacity and making a ton of money.
Consumer Storage Solutions, one of the best businesses.
Yeah.
Yeah.
This is like that.
And you go in, I'm sure Entropic went in and taken, we're only going to pay them 1.25 billion for four months, but they're relying on other people building data centers and life is tricky and not everyone will bulldoze a true like Elon did.
And because remember, this is very profitable revenue.
You cannot take it away.
In a shitty CapEx business where CoreWeave is a good company but makes only okay profits, at 1.25 billion, it's a great deal.
Right, relative to his capex.
So his ROE on that is pretty damn high in a low ROE business, return on equity business.
And don't forget, it's a poor analogy, but it's the same guy.
There's no one in the US or Europe that can produce EVs remotely as efficiently as Elon.
like the investments he's made.
And I'm not saying it's the same.
He can't control the whole supply chain, but the man has a history of doing things that are both at the cutting edge and radically more by investing hard, like Colossus and all of this, by doing things that are radically, maybe he does build his own massive fabs in the US and they work and we can take shots at it like we did when the Tesla Roadster came out, but no one can, outside of China, no one can approach what he's done in EVs.
Maybe it happens in data centers.
I mean, CoreWeave has nothing.
What do Nebius and CoreWeave have?
nothing, no special technology.
He could accelerate past everybody.
He's got the capabilities, right?
And we could turn around in five years and say, my God, he owns every data center in the galaxy.
Who else?
You can't compete with a Model 3.
A Model 3, you can lease Harry in the US for $299 a month.
It's self-driving, it needs no fuel, and it's better than all its competition.
And the only reason we don't all drive them in the US is 60% of the country hates them.
Otherwise, there would be no other car in this country.
It might be with Colossus and friends and everything.
He's actually doing this, for real.
Because remember, the one thing you need to be successful in a CapEx intent of data center business is a low cost of capital.
And I think we can agree that a $2 trillion pre-money, that's a pretty damn low cost of capital.
So yeah, no, he can sell.
I mean, if he gets 75 billion, he can put 25 billion into another Colossus.
Sell that for another 15 billion.
Away you go.
Now, there are two private market stories that I want to touch on that we haven't touched on.
One, AI slop, spelt backwards is...
I feel like we're being pumped.
Listen, it is a company that enables...
A single person to build a business and that business is then run by AI.
It is bluntly not very popular.
It's sent out a huge amount of emails unwanted, which is why a lot of people don't like it.
The founder of OpenClaw, Peter Steinberger, even responded to the funding announcement saying how much he disliked these solicited emails.
But they raised 30 to 40 million bucks.
I can't remember the exact amount.
At a $250 million valuation.
Some pretty well-known firms in there.
Jason, I'm intrigued.
I think you'll have a...
thought on this one.
I feel like I could do it.
I feel like I could just call it AI swap instead of Pulsia.
I feel like they can raise the 250.
I feel like the only question, if I did this, could I take the 40 million out of secondary?
Is that okay?
Do they care?
I would do this if I could do it all.
I mean, listen, I mean, it would be nice.
I, unfortunately I wouldn't get QSBS on it, right?
Because it would be very, that's the negative, but I wouldn't mind taking 40 million.
I think I could do 10 million like this if I knew I could.
Just the fact that you have a startup named AI Slop raising it 250.
If this is the peak, we're going to look back and make fun of this one, but I don't know enough about it in all fairness to be sure I'm wrong on this.
It's just, I feel so punked by a startup.
called AI Slop Raising to 250.
I just feel like this is a bigger F you than Multbook pretending these agents are talking to each other in a social network when it's all humans telling the agents to go onto Multbook and talk to each other.
I just don't know who, is this the next Multbook?
I just, I literally don't know, but I would at least have asked them to please change the name.
I did admire the tweak though.
I mean, it is just such a two finger salute to the great AI marketplace.
I'll tell you what I don't like about it.
What it's actually having just begun to build an app while we're on this Zoom or this whatever.
Yeah, it's pretty good.
From a marketing perspective, it's pretty good.
So I asked it to build an inbound AISDR for me.
I've already done this and bought and used a bunch of these tools.
The way it qualified and spec'd out this product, pretty good.
Pretty good, right?
Certainly better than Replit or Lovable, which are horizontal tools.
The journey it guided me through, it did what May couldn't do while we're here.
It researched sastradoc.ai.
It figured out what I did.
It analyzed what tool I would likely want to build.
It spec'd out the tool.
Did a great job.
Like I give it a 10 out of 10 in terms of the journey so far.
And then it immediately asked me to give a credit card and pay $49 a month before I got any value.
My general experience in agentic tools like this is that when they ask for money before they deliver any value, it's not that good.
Like the marketing exceeds the value of the tool.
I can't think of an exception.
I'm not saying they're out there, but every time I go through one of these, I immediately try to figure out where the cancel link is and it doesn't exist.
But I give them a 10 out of 10 for the sort of before I put in my credit card journey.
It's pretty good.
Like they definitely make you feel like they can build something pretty badass for you.
I have to say one thing that is impressive.
I met them as part of the fundraise, to be very candid.
It is one founder.
There's no team.
There's no them.
You're right.
It is one guy, right?
It's one guy, right?
So it's pretty, I'm impressed with the aesthetics of it.
And I know a lot of founders disagree with me this day.
A lot, and a lot of accelerators tell you to charge instantly for these genetic products.
But I know the ones that I love, right?
That I use every day.
They give you value before you have to put in a credit card.
And this is going back to the Y Combinator 2 million of tokens.
Invest $5 in me or $1 of tokens in me or $2 to earn $49 a month, which is the entry points for the product.
You can't invest $2 in me?
Disappointed.
But I get why a lot of young founders or others think it's not worth $2.
But to me, I'm out.
Boys, what other stories have I missed that you think we should cover?
Exit raised $250 at $2.2 billion to build the search engine for AI agents.
Today, OpenRouter announced their round, which was, I think, $150 million at $1.3 billion, led by Capital G.
Manus founders are trying to now buy back the company in quite a contorted deal.
Yeah.
I mean, I think, look, what all these have in common, and the first two have in common, and the third one's obviously very different, is, look.
super interesting kind of infrastructure companies all about the build out in AI, right?
And the big picture here is, you know, enterprises are adopting AI.
Yes, they're using LLMs, but there's a coterie of other tools that developers and people need to kind of build great agents.
And what Exit does is around search, because if you remember back when ChatGPT first came out, was dumb about anything other than what the model had been trained on.
And then people like perplexity add internet search.
So now when you do a chat GPT query or perplexity query or an entropic query, it queries the web at the same time so it knows what's going on.
Well, in the same way, if you're building as an enterprise, building an agent of your own and you have access to the OpenAI API or the entropic API, what you also will want is some version of a structured web search.
either across the whole web or across a set of kind of defined websites so that when you build your own internal agent, it's a smart agent that knows what's going on and execators to that need.
It's done really nicely themselves in parallel of the two companies doing that that have recently raised.
And my point is merely there's just a whole bunch of infrastructure going on one level below the foundation models that are just super interesting.
You know, we talked about Open Router before, I think, which is a company that allows.
their customers to switch between various different models, both the foundation models and the open source models.
They have, I think, 50 plus models hosted on there to allow, obviously, enterprises to access the lowest cost model.
And these are all just interesting trends because, you know, I think the open router one is interesting because going back to what Jason says, if people are spending $300 million on a premium product, and having to lay off people as a result of that, there's going to be some interest in exploring cheaper costs.
And I think companies like OpenRouter, the value proposition is, hey, not every query you need to make.
needs to be done on the most expensive foundation model.
And there are other places to do that.
So I think, again, it's just the cliche, the picks and shovels of the agentic revolution is just a good place to be investing.
And I think it will be going forward.
Strong, interesting teams doing good stuff.
You can squint one way and say foundation models hoover it all up, but I don't think they do.
I think there's a lot to be done around building your great next generation agents.
I mean, Jason, do you guys use...
parallels or XR or what for web search when you're building your agents.
Yeah.
And I'm a small investor in Exa.
It's just a great product, right?
It's another one where I was a user before an investor, right?
An early user.
And the reason I think it's super interesting, even more interesting than OpenRouter, right?
Which is a great one is OpenRouter is really interesting because it's a.
Well, first of all, they nailed the ability to dynamically and easily pick your LLM, right?
They nailed something.
And so it's a proxy for all these discussions, right?
It's a great proxy and insight.
X is more interesting in some of its peers because these are products that have no use without agents.
And when we throw these term agents around, but agents have a lot of meaning, right?
At least as far as I'm aware of, if you're not building an agentic product, you have no use for a tool like XF, right?
Agents don't hop on Google and do search.
They don't and they don't create files on Dropbox and they don't hop on Zoom.
Like agents have a whole, true agents have a different set of workflows and tools they use.
And Exit nailed one of the core.
It wasn't even obvious to me until I started.
There was an obvious issue.
Like your agents do need to find current information.
Like it's just that simple.
Just like we, Google was the killer use app for humans.
Your agents need it.
but they don't need Google and putting aside whether Google should have built it rather than promote Exa, which was a ball bouncing the right way, to see the type of growth, even at the early stage, for something that agents need and humans directly don't.
It's a look into the future.
And it also says that a lot of stuff isn't BS, that a lot of this stuff is real.
And that the idea that we may all manage more agents than humans isn't just XBS.
It's real.
And they needed a whole different set of tools.
They don't need Zoom.
They don't need a traditional CRM.
They need tools like X.
And maybe we should only be investing in those things and leave those human tools behind, guys.
Enough investing in human software.
A very dangerous thing to do.
Can you paint to me the upside case here?
At 2.2 billion, what is that upside case from here?
Is this a $100 billion company which powers the future of agents?
And what is the market composition of this market?
We've got Paragate Parallel doing it as well.
Is this an Uber Lyft where one of the providers takes 90%?
Is this an AWS Google Cloud?
Just help me understand that.
I think it's more the latter than the former.
It doesn't have...
You know, it's a developer tool.
There's not huge network effects.
So you can easily contemplate two companies being pretty successful here.
I mean, we did some work on this.
We looked at Exa back in the last run.
I think super team and good product.
Someone bit higher and they won the deal and great name to benchmark.
So what can you do?
I actually think it's a super good company.
I like the team.
I think they're smart.
I think the market's there.
And I don't think it's a winner take all.
I think it'll be a couple of players because it just doesn't pay.
You're not going to have 10 because it's not economically efficient to have that.
But at the same time, it's not like Google where the winner take all.
emerged because it was a consumer product.
And then the ad network and the kind of structure of the market for ad sales kind of pointed to a winner take most.
In this case, individual developers will be making decisions.
So I can imagine comfortably two players here dividing, you know, reasonable market share, just like most developer tools.
I think next level, how big can it be is the question.
I think Jason's right.
It's all about.
The more you believe in agents, the more you believe they're going to want to access structured information.
And this thing's going to co-attach to all that.
So that's the bet here, right?
You are betting on lots of agents needing lots of information, doing lots of reasoning, just doing lots of search.
So it's a derivative bet on agents.
Right now, that's been a good bet.
How you think about getting to a billion dollars in revenue, which is probably what you need to be in a normal market to be worth 10 billion.
in market cap.
Going back to first principles, if we're spending $3 trillion on CapEx, that's the Jensen comment.
Then the second comment is if you look at the SpaceX S1, remember I said that 90% of the market is AI?
One of the next interesting things is within that AI, they said 90% of that is enterprise.
So they're basically saying the vast bulk of AI spend is going to be enterprise building shit.
And if that's the case and they're building enterprises to frankly replace human work, then I think there's a pretty compelling market for the product that allows structured information to be accessible to that agent.
I think you'll expand beyond just web search.
I think you'll do curated lists.
I think you'll do internal information.
But there's totally a need for that product.
That's fucking wild.
Another benchmark company.
This fund is going to be one of the best performing funds in history.
I mean, seriously.
Yes, good for them.
That's the job.
You'll be like every company, Jason.
The number of hits.
Yeah.
And like, and so they did exit 700, right.
Or something like that.
Right.
I think, um, I think you're right.
That's the, this is 20 VC.
So, so it'll be an Epic fund.
I think also going in early and realizing that investing in a smidge of traction and breaking your rules a little bit was the right bet for today.
Arguably, I think was maybe another insight too, right.
You know, Jack Altman just joined, right.
And he just did Monaco, which I know well, I'm a small shareholder and.
they marked up the deal very quickly, almost 2X from Founders Fund.
But when Founders Fund invested, it had no revenue.
So he got a much better deal for Benchmark by investing the markups a couple months later.
But going from pre-revenue to blowing up, right?
That's, if you can get into the moment an AI leader blows up, that hour.
That's when you want to invest, right?
And so then they've tripled their exit valuation.
And I just think this going back to seed is for suckers.
Like you want to invest the hour it blows up.
The minute it blows up, you want to get the DM and just wire the money in AI.
That's the play.
Pushing on that a little, because first of all, you got to give huge credit then to Lightspeed for doing the seed in Exa.
Yeah, for suckers.
Well, I mean, if a sucker means you won't a lot of percentage at low dollars, yeah.
No.
But I think what you're saying is actually, so first of all, I just wanted to give that credit.
But second, I think what you're saying is correct, which is there's a quantum reduction in risk when you go from no revenue to revenue.
And then there's a linear reduction in risk thereafter.
So the sweet spot, I always think, on the risk return continuum is early product market fit, which is why we focus on it.
Now, you're right, Jason.
The amazing thing about these AI companies is that moment used to be a year, year and a half, maybe two years.
early product market.
Now what you're seeing is you go from early product market fit to, oh my God, it's incredibly obvious just given the take rate literally sometimes in, you know, weeks, if not months and definitely not years.
I mean, you know, the lovable and replic numbers.
I think the same thing kind of happens here.
You got to find that moment and yeah, you got to pay.
I mean, you know, in retrospect, I was wrong.
You shouldn't have bid what I bid.
You should have bid 750.
Yeah.
But also you have to abstract away.
Not only does it happen so fast.
But the counterside is you have to abstract away some of the competitive risks.
You have to not worry that Google could.
Why didn't Google do it?
Right.
Because otherwise you'll do none of these deals.
Even if Google wouldn't do it, the company didn't even exist a year ago in its current form.
So what are the renewals going to look like?
Like we don't know any of these data points.
Right.
I mean, I agree.
This is actually an interesting discussion about our job as this thing from being public market pontificators.
You're right.
You have to decide that you're willing to pay more on less information than the SAS era.
simply because the market and traction that you're going to see if you're right comes so much quicker and is so much bigger.
That is the core of figuring out what's going on right now.
And that's been the bet that's worked.
And I look back on the stuff we did that I feel right about.
Those are the criteria.
And then obviously you have to get the traction.
If you don't, you feel like a moron.
And on the stuff you missed, you look back and you go, you should have leaned in even more.
You should have been more willing to give conviction on the traction, even though the data points were sparse.
Because the stuff that's working, that's in tune with what people are trying to build, it's the universality of the propensity to adopt right now.
There's no 10-year cloud journey where some people decide now and more people decide two years from now.
It goes back to the first thing we said.
Corporate America flipped the switch a year ago and said, thou shalt do AI in 2026.
And if you're selling anything on the picks and shovels business to help corporate America do AI, you get revenue this year.
You don't get the luxury of waiting, oh, I'll wait to see one year's renewals before I bid.
There's a thread, which is, if you have a Gentic products, can you make up in volume?
So there is a software explosion.
The number of apps we are building, it may not be benefiting Dropbox, right?
Where Drew just stepped down.
But overall, the number of apps is exploding at a rate we've never seen before.
So apps are being built everywhere.
Workflows are being built everywhere.
Agents are being built.
If you consider an agent a piece of software, it's exponential, right?
At Databricks, Neon, which is their super-based competitor, over 90% of the databases are built by agents, not by humans, okay?
But they don't pay as much as they pay Mongo.
And I don't think Exa makes anywhere near what Google makes on a search, right?
And so where I think we're going to get caught in a lot of these tools is where there aren't orders of magnitude more volume.
And the reason Supabase and Exa and these groups are neat is because you don't need them for every app you build or every use case, but you sure need them for a lot.
You sure need them for a lot.
And we're going to make mistakes as investors.
I know I've already made one or two and they're not fatal mistakes, but where it all, it's an agentic workflow.
Agents need it, but they don't need it all the time.
And so I can't make it up in volume.
Like we need vast volume for these plays to work.
Vast.
You're right, Jason, because you're right.
The dollars per search of will.
And basically what you're saying is what are the core parameters that it takes to build an agent?
What are the other things that pretty much most?
enterprise developers will figure out, oh, I need this, that, and the other to make my agent.
And if you pick the thing that only 10% of developers need because it's corner case, you'll pay up and you'll have a tiny market.
You'll be sad.
But there probably is going to be five or six things like a database, like a search engine, like some kind of observability where, you know, over the next two or three years, revealed preference will say, The vast majority of developers realize they need this.
It doesn't come in the box, in the harness from Antropic or OpenAI, and therefore standalone companies will be built doing it.
You're right.
And we just actually had that discussion last week.
What are the five or six things that you need to own?
And I think it's a credible argument that agent search, which is XI, and actually I think I could be wrong on the open router thing, is that a model switching layer could be two of those things that every, when you look back five years from now, every app company either building a third-party app, or building in-house said, oh, I need that product.
So they end up with mass developer adoption.
That's the best.
Okay, we're going to do a final round, which as always is rage bait, but real.
I just tweeted and me and Jason were talking about it.
I just interviewed a CEO who said three things.
Number one, we replaced our 600K Salesforce contract with a vibe coded CRM, which we built in three weeks.
Number two, we will get rid of 80% of the SaaS we use internally.
And number three, if Anthropic doubled pricing, we would not change our usage.
Which do you think is the most rage bait statement there?
I think the first one is Klarna-esque rage bait.
And it's unhelpful.
It's unhelpful.
If you want to build your own CRM on top of Postgres, go for it.
Go for it.
We moved to headless Salesforce.
Okay.
We don't log into Salesforce anymore.
We're a small enough organization.
We could swap that out for our own database.
It's not worth it.
It's not worth maintaining that database.
It's not worth fixing the connectors to our 10 external agents, which all natively built, build into Salesforce.
It's not worth giving up agent force, but if we needed no third-party apps and we had time to burn.
Sure, because we already have our own layer, right?
We already have our own autonomous agents running on top of Salesforce.
But this is such a waste of time talking about vibe coding away Salesforce when we have more important.
threats to our existing portfolio than this one or more important things to invest in.
So I just think it's a dated 2025 take, even if there's truth in it, even if there's truth in it.
So his statement was actually that the functionality was so much better in what they were able to custom build when the integrations that they needed, given they're a healthcare focus company, that actually it was worth it to build their own and that they were able to do so much more.
It might be if you have extreme vertical focus and willing to have an internal CRM that is not collaborative and you have a relatively small team using it and the benefits of knowing of a traditional CRM interface and the thousands of apps that integrate with them are zero to you and you have time because you don't save any money.
This isn't worth it for the money.
If all those things are true, vibe it away, dude, vibe it away.
But this is of all the threats there are to Salesforce and HubSpot and Monday and Atlassian, this ain't in the top 10, right?
That's why I think it's rage bait because it matters, but it's not important in today's world.
And it's not even the SaaS, it doesn't even explain the SaaSpocalypse, right?
Other things explain the SaaSpocalypse, right?
I like that answer on the first and agree.
Yes, if you can get better functionality for knock yourself out, but vibe coding, that's just silly.
I actually want to take the third one and actually put it back on the CEO.
What he basically said is, if Anthropic doubled their prices, I wouldn't mind.
Then you should be ashamed of yourself.
You know why?
Because what it basically says is the ROI on this AI is so good I can pay twice as much.
Well, in that case, let me tell you what you should do right now.
You should go in and tell your people, use twice as much because logically there is some kind of, there's an ROI on every token you spend and the early ones are really great.
And eventually you probably hit the marginal cost is exactly equal to marginal advantage.
And then you're over, and if you're token maxing, you're overspending.
If the projects that you're doing right now with AI really, not just rage bait, but really have a return that's 2x better, that could support twice as much the price, then what you should say to your engineers is you're not using enough, go do more, right?
Because two things have to be true at the same time, right?
If Entropic could double your prices and this project is still economically viable, then what's the next project on your to-do list?
Go do it.
I'm with you.
But the company Harry's talking about is at $2 million in revenue per employee, so they can afford it.
Let's be clear.
They can afford to spend more on tokens.
You're right.
Of course you're right, Rory.
If you're that efficient and you don't care what it costs, spend more, right?
You haven't reached that.
But I will tell you, because we're there, I don't care what we spend on Anthropic either.
Our AI VP of marketing customer success costs $257 a month.
I don't care if it's 500.
What's 257?
We're getting toward the end of the pod.
It doesn't matter.
But here's the interesting thing.
This is why I actually think it's interesting, is if you're really good at this stuff, the issue isn't more money.
The issue is idle.
Idleness.
Our agents are idle.
We don't have enough brain sight.
Like this is why these, what's the term for folks that can't sleep in San Francisco?
They're coding all night.
They have a, what's the term?
I forget what it is.
I could be cynical and say incels.
No, there's this term where you're like addicted to it.
Like your brain's been rewired.
What the problem is with, like, listen, there's the Uber issue where we spent too much on slop.
Okay.
Or we don't know what to measure.
There's a different issue coming, which is coming for more of us in tech, which is that our humans just can't process all the output.
It's not even about the money anymore.
If you wake up and build me 50 features every single day, how many features can I even qualify overnight?
Because we wake up every day, Rory, and our AI VP of marketing nags the hell out of us with three ideas we should be doing every day.
It's exhausting.
You can't implement 21 ideas a week, right?
Every day, 7, 13 a.m., three ideas of the day, 10K comes up with and pushes.
You didn't get to my idea yesterday, did you?
Now you're behind, right?
First of all, you're right.
I agree with what you're saying.
I just still go back to my comment, though, is that, I mean, that paper I cited is that, you know, you can increase the complexity of the task and spend more money.
Because he's implicitly saying he's getting way more value than he's paying for, right?
So when you look, and you're saying the same, $250, which is nothing.
You're saying you get three great ideas a day and you can't process them.
Correct?
Yeah, we get more than that.
But in addition, we get nagged.
Three things we need to do.
We're going to end on a note of optimism.
In that case, you need to hire another human.
I agree.
Because if the AI is giving more good ideas than the humans can process, and this is kind of a whole nation of complements and substitutes.
If the AI is now giving more ideas than one human can process, and they're good ideas, hire a second human who will be now more effective, and the return on human capital will go up.
But you know, you're right.
But you know what the problem is to tie it all together?
I desperately need a human for those ideas.
But one 25K laid off click upper is worth nothing to me.
I need a million dollar person to process these ideas.
And they need to turn that into 5 million.
And I will hire them today for a million bucks.
No joke.
But you got to be the million dollar person.
Not want to be that person.
You got to be that person.
The odd thing is every single discussion here has gone back to, you know, what's the optimal spend between humans and tokens?
And what are the consequences of that configuration?
That is the same question the whole time.
Jason also does not like other humans.
And so that would be thoroughly again.
I do.
I don't know why people say this.
I'm a people person.
That's what they all say.
I'm a people person.
As long as I don't have to interact with too many on any given day.
Jason, I hate to be with you.
If you have to say you're a people person, you're not a people person.
I know.
I know you're right.
You have to say you're honest.
Do you want me to be honest?
Whatever the two by two is, Harry and I are at the opposite ends of whatever the two by two is in terms of the extroversion, people person.
Everyone's Harry's best friend.
I never get that.
Why don't I have to see on social media?
I was just in London meeting with my best friend, Harry Stebbings.
I see like 11 of these on Twitter a day.
Because you're not insincere like Harry.
I see.
That could be part of it.
That might be part of it.
Yeah.
No dude, it's because I'm my big Ben.
When people are in town, they come see me.
Yeah, but they're always my best friend.
How many best friends can you have?
300?
Oh, many.
The Dunbar number is 160, just for the record.
Best friends?
Oh dear.
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