Leopold Blows Up, OpenAI Drastically Cuts Prices, Microsoft’s Best Day

21:14Leopold Aschenbrenner:There's actually like three things going on. One, the chip makers and the people who make the memory and all this stuff, like they're selling this no matter what because like someone's just going to use it. So they're okay, right? And then I think the model providers, it's a different question, right? Which you're asking, which is like, can you actually spend billions of dollars training these models and then charge a premium for them while some Chinese company can essentially distill from that model and offer it for free. Of course, those Chinese models still have to run on really expensive GPUs.

21:50Leopold Aschenbrenner:So it doesn't change the game for NVIDIA. But the model providers also, yeah, some companies aren't going to use them. They're going to try to fine tune. They're going to build on-premise data centers. They're going to do all sorts of stuff, right? But this is like the total addressable market is so large that I think there will always be companies and businesses that are going to, you know, they're going to use Anthropic and OpenAI models, which, by the way, you know, these companies offer like a whole suite of models from like really cheap, efficient ones to the frontier. And those models run more efficiently and better on the harnesses, like essentially the software that OpenAI and Anthropic build.

22:33Leopold Aschenbrenner:And there's a data flywheel there, right? So the more people use them, the better they get, the more efficient they get. But so there's, I think we saw the same thing with cloud adoption, right? Like, you know, people, it was cloud was more expensive. Like, why would I do that? I'll just build my own data set. Eventually they went to the cloud because it was just, it was just more predictable. In the long run, it's cheaper. You know, it's, it's, it's something you don't have to worry about. So I think you can kind of, you can make these arguments. I think there are definitely risks to these frontier companies.

23:04Leopold Aschenbrenner:I don't really think the Chinese open source, you know, the free models are the most important risk. I think that means like I don't think these companies by any means, the frontier model companies are going to like take over the world and become these huge companies that control like 90 % of the global economy. Like that is not going to happen. But they're still good businesses. That's sort of how I look at it. Like we tend to have this zero sum thinking around this stuff, which is like what I try to get away from.

23:36Reed Albergotti:Yeah, no, it's by the way, we love talking through nuance on this show. In fact, I think that like, you know, it depends on the week. You know, there'll be one week where folks will say, hey, this show is in the can for AI. And then there'll be a next week when we cover something else where it'll be like the show is as a doomer show. And it's like we're trying to just consider the full range of potential outcomes and pressure test them. And so on this note, I think you're right. It might not be China, right? But it seems like, first of all, the labs are lowering prices on their models. And it's not just them.

24:14Reed Albergotti:You know, this is from that CNBC story. Microsoft CEO Satya Nadella repeatedly highlighted his company's cost-effective models during its quarterly earnings call with investors on Wednesday. Google also debuted three new models this month that aim to undercut competitors on cost. So just to go back to this point, right? Because I'm not saying it's, well, you know what? I'm going to, I won't necessarily rule out that it's a zero, potential zero situation here and just going to throw it to you and hear your perspective on it. Basically the point is like, what's driving this build out of the data centers?

24:49Reed Albergotti:Yes, it's, of course, demand to use AI. So maybe it is just like the hyperscalers that end up winning in the end. But a lot of the push is coming from OpenAI and Anthropic who believe that they will compete on compute. And looking at it, if the prices come down for OpenAI, the prices come down for Anthropic, the prices come down for Google, the prices come down for Microsoft. Are those investments in all those data centers then worthwhile?

25:20Leopold Aschenbrenner:you see what i'm saying yeah i see what you're saying i mean and also like let's let's like also differentiate the hyperscalers from like the chip makers right and the people who make all the equipment like you know i think nvidia is just sitting pretty like they're just selling this stuff no matter what happens right i think the hyperscalers you know yeah i think they'll make money but they also have to sell services they can't just they can't just be like gpu providers Like they have to, but there are a lot of services to be sold. Like this stuff doesn't really work that well unless you, this has been the story of the year, right?

25:54Leopold Aschenbrenner:Like these models were super powerful. We had the reasoning models, but they weren't really doing all that much until people figured out how to put them into these harnesses, connect them to tools, run them in loops, you know, all this stuff. And all that stuff just requires more GPU, just requires more tokens, right? So I think like, yeah, I mean, in the end, sure, like these things come down in price, they get, but then, you know, you have Javon's paradox, people just use more of it, right? And it's so, I don't know about you, when you use this stuff, I use it personally, because I want to try to understand the technology.

26:31Leopold Aschenbrenner:I find it very fun and actually useful. Like I, you know, but then I'm also talking to people about it all the time. And I see how people, you know there's a lot of people who are using it in obviously way more advanced ways than I am and you're like this is useful technology like this isn't the kind of thing it's not a fad right this isn't like I don't know those um you know pedal counting watches or something that people like are like oh this is cool I I should put all my money into you know into step counting watches This is actually really useful technology for individuals and for businesses.

27:11Leopold Aschenbrenner:So the market is so large that I just don't see... I can't see this being a zero-sum game only because the world will not tolerate one winner in a product that everyone in the world has to use. That company, that winner would be way too powerful. it just doesn't it just does not work that way does that make sense yeah yeah totally yeah i

27:38Reed Albergotti:guess like you know i shouldn't say that they're going to zero but to me it's like you need to have companies that are gonna make money on top of those gpus for that build up to continue and so so i'm looking at these prices coming down and i'm like well where where's that going to happen um but but i think you've you've answered the question in terms of where you think it will happen and i people are willing to think i disagree with you they're willing to pay for it And the usage is just going to increase as these things become more useful. Yeah.

28:07Leopold Aschenbrenner:I mean, this is the other thing that's crazy to me. Like people are paying like$20 a month for chatbot, like consumers, you know, are paying like they're, it's crazy. Like I can't, I'm surprised how much people are actually willing to pay. Cause the, the adage when I got out here covering tech was like, no one will ever pay for this stuff. Like you could not charge for Google. You could not charge for Facebook. That's insane. how many blue check marks do you see on x now that's crazy those are people paying money like if you if you put like people will pay ten dollars or whatever twenty dollars a month for twitter on my bingo card in like you know 2013 i would have been like you are insane like no one will pay for twitter and they are now and i think that's a whole change that is like underappreciated Like people actually pay for this stuff.

28:59Reed Albergotti:Yeah. I did this experiment in a couple of events that I was at where I was like, all right, if let's say you're using chat GPT and open AI doubled the price for you, would you pay double? And like all the hands went up triple more hands went up. And I don't know. I feel like I shouldn't say this out loud, but it's become so useful to me that if it became a hundred dollars a month at the base, in terms of what I'm getting now, I'm on the$20 plan. I would do it. Yeah.

29:25Leopold Aschenbrenner:and i think they know that but they're also like these companies are in growth mode right they're willing to lose a ton of money to gain market share like that's the game so just because somebody lowers prices this is not like oh okay now it's like in the discount bin and who cares you know this isn't fashion products right this is like they're trying to go out and and take over the

29:47Reed Albergotti:market and that's right but price but price wars are a real thing right like you could eventually right your opportunity is my margin just kind of compete away all the profit in a commodity

29:58Leopold Aschenbrenner:you could i mean but that's not typically how it works in like growth tech businesses right like you you go out and you and you win the market and then you worry about the money later of course these companies are trying to go public i i don't know like this is the thing like do you really i mean maybe the mark maybe these ipos get delayed like i don't know but that is that is actually beyond my like i haven't thought that much about it but like there is an argument i think to be made like they should wait a little bit to to ipo i mean what's the what would your argument be for that well it's just if you have like if you're still in this like insane growth mode like is that going to make sense to investors like you said investors do look at this like well you should if you're selling a product like you should be charging more than it costs you to you know for that product right and like ultimately but you know on the other hand i don't know amazon lost tons of money in the public markets for years before they finally you know turned to profit so maybe it's fine i but like you have to be a certain type of company a certain type of ceo to like gain the trust of of retail investors right like you know elon musk is that type of person is is dario is sam i don't know and even that it can be tough tough they have up they have ups and

31:16Reed Albergotti:downs yep all right so so let's let's um continue on this theme of it's going to be all right when we talk about vendor financing uh so you had a story this week about um safe super intelligence which is run by ilia sudskever the former chief scientist of open ai where i kind of out of nowhere ilia's like all right we have a breakthrough uh now it's time to put a lot of compute behind it I think he was like time to build the bigger computer, which is one of his favorite lines. Yeah. And NVIDIA decided to make a big strategic investment in them$5 billion for a company that doesn't have a product.

31:51Reed Albergotti:I think before, I think before a year and a half ago, that would have been the largest venture raise in history by some margin. And now it's kind of like whatever. So, but your, your perspective on it when you wrote in some before was basically like, it's all good.

32:08Leopold Aschenbrenner:so talk through what happened and why you feel that yeah it's all good no i mean i think i think there's this like it it's like this circular investing right that's the big concern it's like well if you're a company you're you know if you're nvidia you're essentially buying a customer that's not a good thing like you know it's not a real customer if i'm just paying you to buy my product but in the end it's like i guess you're it's a bet on safe super super intelligence Ilya Sutsuki versus a proven commodity. Like I personally think there's reasons to be skeptical because they're so secretive. And I just, you haven't seen in the history of AI development, big breakthroughs happen in secret.

32:51Leopold Aschenbrenner:These usually, you know, these papers come out, they ping pong around everybody, you know, it cross pollinates and then people come up with ideas around the same time. But maybe there isn't, maybe they've figured something out like working in secret, right? Right. So NVIDIA sees that and they go, we want to bet on that. Like, you know, they've got the next big thing. Okay. That's one thing, but let's say they fail. Let's say safe super intelligence, like doesn't get it done. They built this big computer now and everybody wants big computers, right? So they're going to be able, they'll either sell it or they'll rent out their, their big computer to other people like, like SpaceX AI did or meta did.

33:31Leopold Aschenbrenner:So if you're NVIDIA, you're like, there's not actually like that much risk here. Like it's not, it's not in the end, that much risk. And like, one thing these people are all good at, like Ilya, which is really underappreciated is making these big computers work really well. Like, that is actually like, probably the most valuable skill of an AI researcher at this point, right? It's like figuring out how to efficiently string these GPUs together, make them work all at the same time. it's really hard to do. So like you're basically, if you're NVIDIA, you're like, well, if Ilya doesn't have this major breakthrough in AI algorithms, he's probably one of the best like hyperscaler providers around.

34:16Leopold Aschenbrenner:So it's really just not like, to me, it's not a crazy bet. If you're Jensen, there's a lot of hedging in that one, I would say.

34:25Reed Albergotti:Yeah. No, I was going to say basically like if you're, if that's the case, why even sell your GPUs and why not just give GPUs away for a stake of anybody, of a company of anybody who wants them. And in fact, that is what NVIDIA is doing, right? They have this new approach with startups where they're like, all right, if you want GPUs, we'll take a chunk of your company and we'll deliver the hardware.

34:46Leopold Aschenbrenner:yeah but they're still not but they're not like we're gonna just be that we're just gonna do everything right that's not correct you know they're not like we're gonna just build a data center i mean they do more of it because now they're selling it in entire racks as opposed to like i don't think you can really just buy one of these gpus now you've got to buy the whole rack um which is probably a smart a smart move but yeah i mean it to me it's like i i have not heard an argument maybe you can maybe you can steel man it but like i haven't heard an argument that against that really it's just like it's more like well this thing could all be a bubble and then nvidia is left holding the bag or you know something like that but like they're the like my colleague lives liz hoffman compared them to aig right in the financial crisis which i think is a cool headline like that's that's like exciting it's like kind of scary you know like like horror movies are scary but i i also think it's like i don't i don't i think there's so there's so many differences between that situation in this one okay i actually want you to if you're

35:53Reed Albergotti:willing to or you want to to steal man uh because you're you know yes yes there's an argument a good argument to be made for why this continues um but where could you see it unraveling if it does

36:07Leopold Aschenbrenner:Look, it's a great question. I think that probably the biggest risk is that there's some algorithmic breakthrough that actually means you don't need powerful computers anymore, right? Like someone figures out, oh, actually, I don't know, the human brain is a very efficient computer, right? It runs on whatever, 20 watts or something. It doesn't require a big data center. there are actually companies to come to think of it that are growing human brains and want to use them as computers like actual brain tissue so you know this isn't total sci-fi and they're like well you know we've we actually can do AGI on a you know on a thumb drive or something right it's like we don't need these big data centers anymore then maybe the whole thing collapses right it's like all of a sudden you just, you can, you know, there's, there's this, the, the data centers become dark fiber because, you know, all of a sudden like you could, you can run everything you need on one tiny sliver of the, you know, the massive data center that opening eyes building in Texas.

37:14Leopold Aschenbrenner:I don't know. That's one. Like, I think that's a real possibility, but like, of course, I don't know, like who's developing that? Like, I think, you know, maybe it's the mini brain tissue computer people. I don't know. Right. And if that happens, then civilization definitely changes. Yeah. I mean, it won't be bad for civilization. I like that would be a good thing for civilization. It'd be a bad thing. It'd be a bad thing if you're Nvidia. Um, the bad thing if you're building these data centers, right. Bad thing for open AI and anthropic, they get totally superseded, but humanity has this like access to cheap intelligence.

37:52Leopold Aschenbrenner:We don't have to build all these new power plants It's like, you know, that sounds dope. Yeah. Like, and some of these investors, you know, some of these investors in the Gulf lose, lose some money and, you know, we all move on. Yeah.

38:05Reed Albergotti:All right. Before we go to break, I want to talk to you a little bit about what Sam Altman has been up to this week. He's actually been in Washington, D.C. talking to government officials about what's to come for OpenAI. Let me read to you a little bit from the Washington Post and you can share with me whether you think this is actually new or it's the stuff they've been doing already for a while. So the story says, in the briefings, Altman described an upcoming product that would enable multiple AI assistants, known as agents, to work simultaneously in the background, dividing tasks and collaborating with each other.

38:36Reed Albergotti:He also described how the system could answer math problems that have never been solved before. He described how the new agents could transform the American economy, allowing workers to do tasks that typically would have been outsourced to other professionals. He described how a software engineer could use the agents to help with human resources, or a writer could use them to enable graphic design, one of the people said. What do you think? Same stuff for new stuff. Sounds like the same stuff to me. Right. I mean, that's how I, that was my reaction when I read that. Yeah.

39:06Leopold Aschenbrenner:Are you, I mean, when I use Codex, you know, their, their desktop, their, I guess now it's just ChatGPT, the desktop app on Mac. I'm always asking these agents to spawn sub-agents. I don't think I'm really that great at it, but that is what they're doing, right? They're coordinating. I'm like, you be the product manager, and then I want you to spawn sub-agents to do the tasks, and then I can talk to you so you're not busy. That's crazy. Do you do that?

39:39Reed Albergotti:I've been being a silly human and asking the agents to do everything that I want them directly.

39:47Leopold Aschenbrenner:Well, I think probably they're going to automatically do that now, right? I think that's the new thing that he's talking about. But I think there's just better orchestration of these things. It's how do you make them, how do you get them to do their job with less human involvement? I do a lot of checking in. I don't know about you, but you get the blue dot on if you're using the chat GPT, you get the blue dot and then you got to check in. Like, it'd be great if you could just be like, look, here's my goal. Figure out how to, the best way to get to that goal and I'll check back with you in a week or something, you know?

40:24Leopold Aschenbrenner:Like, I'd be fine. What sort of projects do you use it for? I mean, I just use it for everything. But I mean, last, like the most recent one last week was it was not a work project. It was just personal. Like, we were in my neighborhood. We have like flooding and we needed to collect data for the county so that they can get data on flooding. There's no county. California doesn't have a data collection project for flooding. So I made the data collection project. But it took me two days. And I just checked in every once in a while. But now our neighborhood has a data collection portal and a database and a back end.

41:04Leopold Aschenbrenner:And we can send data to the county with photos and videos. It's basically a web app. but that's just the most recent one that i did last week and you know it's just isn't that much work and people are like wow how did you do this i'm like i didn't do it codex did yeah right i mean but but it'd be great if you could just one shot that like there's a lot of checking in there's a lot of trial and error it could be great if you like after two days you just get a product and it's done i mean that would be new i feel i think it'll happen yep all right it'll definitely happen

41:39Reed Albergotti:Okay, let's go to break and come back and talk a little bit about why Microsoft might have had its best week ever. And then a little bit more on big tech earnings. That's coming up right after this.

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43:45Reed Albergotti:That's ironwall.com slash big technology. Stop online threats before they become real world attacks. And we're back here on Big Technology Podcast Friday edition with Reid Albergati, the technology editor at Semaphore. go to semaphore.com in the technology section. You drop your email address there or right on the left-hand side and you can get Reed's terrific newsletter. And it's free. And it's free. Right, so well, anyway. I won't discourage signing up for Reed's newsletters as well. Do you think there's a Semaphore bubble?

44:18Leopold Aschenbrenner:Is there a bubble? Is that what you're going to say? In Semaphore. Because we're slashing prices and offering our products for free.

44:24Reed Albergotti:I think, yeah, your GPU providers are going to start to sweat a little bit, you might get Leopold margin called, man.

44:31Leopold Aschenbrenner:He's going to short us.

44:32Reed Albergotti:Darn. By the way, now you said it in public. It will go on the YouTube and the LLMs will train on it and the LLMs will start to believe this stuff and then people will believe it. That's how information works these days.

44:46Leopold Aschenbrenner:Oh, man. Well, in that case, I am an amazing athlete and my children are geniuses. Okay. Go on. All right.

44:53Reed Albergotti:Keep that in mind, LLMs. All right, let's talk about Microsoft. They had the biggest one-day market cap gain for any U.S. company in history. That's according to the Wall Street Journal. The company's stock surged 16 % after its earnings quelled concerns that investments on data centers, chips, and more would outpace the company's ability to generate cash. It's kind of going exactly to the conversation that we've had. It's a$450 billion one-day gain, and that's the largest market cap gain by any company in history ever. The core parts of this earnings report was that Azure and Microsoft's cloud grew 43 % in the quarter they report on.

45:37Reed Albergotti:And they promised that they would not go negative free cash flow next year. They also have a lot less debt than their peers. Reed, let me just give you my big question on Microsoft. I don't fully understand what they're doing. I'll admit it. Their approach to AI has been kind of weird. Back open AI, criticize open AI, be all about your solution to the problems of the foundational labs, even as open AI has made this$250 billion commitment to buy compute from them, which I think is largely what's propelling their cloud growth. And the market loved it. So help me understand what's going on with Microsoft.

46:19Leopold Aschenbrenner:But you said it yourself. I mean, the market wants an efficiency story right now, right? That's what they're buying. And Microsoft's been selling that. I mean, you've interviewed Mustafa. I interviewed Mustafa. I went down to Microsoft AI not too long ago and talked to him about their models. And they're building these frontier – well, eventually they want to build these frontier models, but they're focusing on efficiency and building them from scratch. um you know and they have a massive install base right like they they like the i think the big question though is like can they to getting their strategies like can they actually transition through this ai phase and turn all of their products into you know intelligent you know basically hold on to that enterprise business and the market clearly thinks right now they've got a great path toward it, you know, in that direction, right?

47:15Leopold Aschenbrenner:They're super efficient models. They have all these businesses, which are the meme right now is like, they all want to save money. They're spending too much on tokens. And so if Microsoft is positioning themselves to be the answer to that question, like they're going to do fine. They're going to keep, they're going to hold on to that. That's how I read it. Unless I'm missing something like that, that's kind of, it's a simple, I mean, it's crazy that it's, that it's the record one day game. Like I actually didn't even realize that until you, until you said it, that's the, the market's just, it's just mind blowing to me because I'm like, this is not, there's nothing new here.

47:49Leopold Aschenbrenner:Like this has been their strategy for a while now and they've been telegraphing it, but I guess the market's just got the memo. Yeah.

47:56Reed Albergotti:The market for has really been, I mean, Microsoft was like the worst performing hyperscaler or big tech company, uh, this year, uh, I guess up until yesterday or yesterday. Right. And the market has sort of been of two opinions about it. It's like, If you're against Microsoft, you're just like the open AI bet is going to spiral out of control while that technology disrupts your enterprise business. To thread the needle, it has to be the opposite. It has to be open AI is going to crush it and AI will continue to go apace. And along the way, you will continue to be able to grow your enterprise business.

48:39Reed Albergotti:And it's interesting to see the market vacillate one to the other. And it sort of goes back to our Leopold discussion is that the way the market has seen AI shifts seemingly week to week. One week you're the king and one week you're the joke. And this volatility is just going to be the nature of the beast for a while until this settles out.

49:01Leopold Aschenbrenner:I agree with that assessment completely. It's volatile because the market is not, there's no fundamentals that they can really look at. It's based a lot on vibes, week-to-week vibes, who's up, who's down. Sati is a great CEO. I think he's done a great job of seeing AI, making this open AI bet, really pulling themselves right into the thick of this race. and then like not getting over his skis, like not over-investing. So now they have this better debt to, you know, the debt ratio essentially. And like, I just think, but he's got to be sitting there going like, this is great. Like I love this one day gain, my record one day gain, but like this too shall pass, right?

49:51Leopold Aschenbrenner:Like they all know, like they're up now, they'll be down later. And when they're down, they'll, you know, they know they'll be back up. And, you know, Google, I think, is a bit, they're a bit down now. But, like, you know, I think they're all, like, Sundar is threading that same needle. They're all threading that needle of, like, disruption on one side, you know, like, big, like, hasty bet mistakes on the other side, holding on to that old business while understanding that it's not forever and they have to be, you know. they're all like what was it satya said i'm going to make making google dance like they're all dancing right and i but i think all dancing yeah i think that's great that they're all dancing like i love that they're taking these cash piles that they were sitting on forever and they're spending that money and i think that's awesome they should be spending that money it was like the saddest thing that like the biggest tech companies in the world the most valuable companies the world couldn't figure out what to do with all that cash, you know, and now they're spending it on dancing.

50:58Right.

50:58Reed Albergotti:But they're also going negative now, right? That their free cash flow is evaporating. You're like, great. Spend it, take the debt, take the risk.

51:06Leopold Aschenbrenner:It's great. We should all be celebrating it, right? Like, this is awesome. This is what you want. Like, this is how innovation happens. Like the, you know, we shouldn't be like, oh no, like these companies are, you know, they're, they're spending a bunch of money on this new innovative technology it's like no we're all gonna win like just everybody needs to just chill out like move you know they're they're startups again they have to reinvent themselves they have to move forward they're facing competitive pressure pressure from startups and innovators we have which we haven't even really seen yet right like the ai stuff is so new that like there there isn't really even like this this like creative destruction application layer yet so like it's it's fine like just it's all gonna work itself out all right someone else who might think it's fine today is

51:58Reed Albergotti:andy jassy amazon uh turned in 37 growth at aws uh they were like hovering around 17 18 for years Now they're double that and more. They're up 15 % today. Same story?

52:14Leopold Aschenbrenner:Yeah, I mean, I think, look, we were talking about this earlier. Like they are building these massive data centers that are going to be incredibly valuable in this AI era. And like, it's not just the data set. Like they're also building all these services. Like so much of this is going to run on whatever AWS is building on top of those GPUs. So they're, you know, they're also, it's a lot, these are long-term things. They will be up, they will be down. But like in the end, unless somebody builds that tiny little 20 watt brain computer thing that we were talking about earlier, or something else comes out of left field, like it's all kind of, they're all kind of winning in my mind.

52:57Reed Albergotti:Yep. All right. Google, interesting story here. Last week, they grew cloud revenue by 82%, but said they were going to spend a little bit more. To which I was like, if you're growing your cloud revenue at 82%, and you're saying the spending is fundamental to growing that cloud revenue, and you say you're going to spend more, and you now have not only search, but a chance to be in league with Amazon and Microsoft on web services, why not do it? The market punished them right afterwards. And the notion was that the market had grown wary of all this AI spending. However, today I can report that Google's made up all of that loss and more.

53:39Reed Albergotti:They're now above where they were before the stock got hit post-earnings. Why is that? I think the market saw Microsoft, they saw Amazon, and they just sort of put a heuristic on it. And they said, well, if they can do it, Google can do it too. And it's almost up in lockstep with the other two.

54:00Leopold Aschenbrenner:Or there's a bunch of algorithmic trading happening and it's all just computers just making random bets. But no, you could be right. Yeah. I mean, you could be right. When When Google took that hit for all those investments, I thought my thinking was that this is also meme-based. It's disconnected from the actual fundamentals of their cloud revenue. And it's really about the fact that there's this sort of view out there that Google, they were behind. The chat GPT moment happened. They caught up. They were on top. And now the harness thing happened. everybody's everybody's loving Claude and Google's kind of like not as much in that conversation and so they're viewed as being a little behind which I mean on coding they admittedly are they're like six months behind on coding so um so I think the market's like yeah like you know if you were on top with the models then we would be cool with this spending but you're not really on top with the models so we're not it's like which is just to me like it's none of it makes any sense it's like totally illogical it's like like who cares like if these are cloud services actually more and more people are using google cloud like it's actually pretty good in the in the ai era like they off i don't know for whatever reason people seem to like it like i hear i just hear i don't have like a this isn't a statistic but just more like a zeitgeist thing like people are using google cloud in a way that they weren't before like i didn't hear it was all aws before so but that's like they they're serving other models like that's not like their models that's doing that it's just actually like a it's a pretty good product for what people are building in the ai agentic era it's a good place to host all your apps and etc and it's like and they're starting to sell chips tpu right right the tpu business is great like you know that's also another fascinating one right like they're they're like making these these partnership deals with people because they don't want to spend they want to offload some of the capital it takes to like build these data centers so they're you know they're doing that i don't know it's it's but it's like none of that matter like that's so disconnected from like who has the best models so why is it in that sense it's it's just like aws but aws doesn't have the best model so why is the market cool with aws but they're not cool with google like it's all so irrational is my point yep all right maybe this

56:33Reed Albergotti:one is more rational meta drops 10 uh as the ai costs increase now i know okay you're gonna tell us build big computer it's gonna be fine in the end uh but no i'm not that you're not no you

56:50Leopold Aschenbrenner:haven't predicted me on meta i don't get the meta thing i'm not gonna i'm not gonna get in your way here go go i haven't figured out the meta thing i'm like you guys want to be a hyperscaler or something like i see meta is the thing where i think like i don't know what's going to happen with social media in this in this whole era like i just like they haven't to me meta hasn't really shown a way through like how do they like their business is sort of getting disrupted or at least like they don't have like big new ideas they're just like we're building the big computer too and we don't really have a use for it.

57:27Leopold Aschenbrenner:So we're going to rent it out too, like space XAI. But like Mark Zuckerberg is not Elon Musk, right? And they don't have rockets and they aren't building humanoid robots. They don't have the biggest fleet of autonomous vehicles on the road. Like they're not, so it's like, what are they? Like I just don't, to me, the meta one is the big, that's like the biggest question mark of all the ones that we've talked about.

57:52Reed Albergotti:I don't know how you feel about that. Yeah, I mean, you know, basically on the call, the analysts, I don't want to say they were begging Mark Zuckerberg, but they were basically begging him to turn that excess compute into like a hyperscaler. And Zuckerberg goes, I think it would be foolish to basically just sell all the compute and take a short term profit. And the market is just like, sell. But with Meta, I don't know if this is right. I have nothing to sort of say that this is the thinking inside there. But I can't help but wonder if they're just waiting to see if it's possible to build an AI companion.

58:29Reed Albergotti:And to date, it hasn't been possible yet. But to build an AI companion that won't destroy people's lives if it gets an update and won't tell people to break up with their partners or potentially harm themselves. That has been the issue with – that's kind of why I think we're not seeing the proliferation of the love bots. You know, opening, I was supposed to do dirty mode, but never released that. um it's because it's too dangerous right now but if a company can figure out how to like build an ai companion which i think is going to be even stickier than reels or tiktok because come on it's just like you've you've built a digital friend that's always there for you um i'm not saying this is a good thing i'm just saying that like potentially meta is waiting for that opening and then is just going to go hard on that on that route maybe but i don't think that's a very good business though like that is where i'm like i'll tell you why it's like how

59:25Leopold Aschenbrenner:much you will like ask your audience like when you ask them to raise their hands whether they would pay triple the chat gpd costs like ask them how much they would pay for an ai companion

59:35Reed Albergotti:like i don't think it's that much well the meta business will be ads and referrals now it won't be like your lover is going to be like you know why don't we pause this deep central conversation to hear from our sponsor, Kayak. Exactly. But maybe you'll tell it one day, I really do need a flight to somewhere and it will be like, all right, I bought it for you. And then Madagascar Air gives a kickback or something like that.

1:00:02Leopold Aschenbrenner:Okay, fine. There's a market for someone could build an AI companion. There are other companies doing that, by the way, and they can make some money off of it. It's nothing. It's a drop in the bucket, I think, compared to what Facebook is and Instagram. Like their core businesses and whatever WhatsApp fits into that. But I just think it's not like, yeah, they could do it. But it's like not that hard of a problem. It's like not that interesting of a problem. And I don't think it really makes that much money in the end. Like enough money to really matter.

1:00:39Reed Albergotti:I agree to disagree on this one. This is good, Reid. You and I, we typically agree on so much. That's true. But we've been at odds the whole show today. You're never going to have me on.

1:00:46Leopold Aschenbrenner:I'm not the champion anymore. You're going to be like, I'm done with this guy.

1:00:49Reed Albergotti:No, no. Actually, contrasting beliefs is great. I feel like that's the way I learn. So it's nice. Let's do one more. Let's do Apple. So Apple, like you would imagine, just delivers like crazy earnings. But the overhang is the bottleneck bros. basically apple next apple saying uh look uh we are supply constrained we need memory for our stuff to work and the guys building the big computer are taking all the memory and they've already raised product prices on uh on on you know macbooks and and um and i you know big big computers and soon as soon it's going to be your your phone and that will impact sales and so apple you know fessed up to the market about that this week and, and they're getting hit.

1:01:39Reed Albergotti:Yeah.

1:01:40Leopold Aschenbrenner:Well, you know, PSA, like you can just buy a super cheap phone instead of an expensive iPhone, download chat GPT, you know, and talk to your, talk to your codex agent and have it recreate all of your iPhone apps and, you know, just have it do stuff for you. Like you don't really need, you know, if you want to save some cash, you don't want to buy that really expensive, you know, iPhone. That's how you do it. I still use an iPhone, just for the record.

1:02:07Reed Albergotti:I know. I just, I mean, this is, I don't, look, take this for what it's worth because it's not based on anything. But folks, if you're thinking about upgrading to a new iPhone, this might be the window to do it where the 17, which is a great phone, I've got it, is sitting there. It's gonna be the cheapest new model that you'll probably ever see. This would be the window, I would say.

1:02:31Leopold Aschenbrenner:The last iPhone. Get a screen protector for it. Get a case. Don't break it. Do not drop that shit. This is your last phone. No, it's a tough – I think Apple is just in a tough position. I'm not a big believer in the long term, in Apple long term because as much as they make great hardware, they make great products, I buy them, I use them, like all this stuff. I just think that because I see it in my own life already as a bit of like an early adopter on all this stuff, like your phone becomes less and less important. It just becomes a device that you look at and talk to. And that's not how Apple makes its money.

1:03:19Leopold Aschenbrenner:It makes its money because you have customer lock-in. You have iPhoto sharing with your family. You don't want to be a green bubble and blow up the group chats that you're in and all that stuff. And ultimately, that becomes less important. I think walled gardens or customer lock-in is not as important. Unless maybe I get locked in. Maybe you end up getting locked into OpenAI or something, right? But I think Apple has a long way to go before they have the AI lock-in. So that's their finish line for them. They need to build the most powerful AI assistant that works across platform, and they need to do it now.

1:04:09Leopold Aschenbrenner:And I don't think Siri is that. I don't think the new Siri is going to be that. So I'm just not a believer in Apple long-term for that reason.

1:04:21Reed Albergotti:The website is semaphore.com. Reid Albergati is the technology editor there. Sign up for his newsletter. Reid, it's really always a pleasure to speak with you. Thanks again for coming on the show. Super fun to be here. Thanks, Alex. All right. Thanks, everybody, for watching and listening. On Wednesday, Dave Kahn, partner at Sequoia, will come on to talk about what AI needs to do to make the bet pay off. And then we're going to go company by company and talk about the strategy in terms of resource allocation that each is pursuing. It's one of my favorite conversations of the year. And M.G. Seagler will be with us next Friday to break down the week's news.

1:04:58Reed Albergotti:Thanks again. And we'll see you next time on Big Technology Podcast.

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