Inside the $Trillion AI Money Machine

0:00Are AI stock valuations hitting all-time highs? And is this never-ending cycle of announcements and gains unsustainable? This week, we saw another round of significant partnerships between OpenAI and a major chipmaker. OpenAI making a deal with AMD on data centers. In today's episode, I'm joined by Madeline Renbarger to discuss how this dynamic is evolving and just how much OpenAI is propping up public tech stocks with the promise of future demand. Later in the episode, Madeline shares her dispatch from Anthropic Cloud's pop-up in New York. Hot AI labs are taking a note from fashion hypebeasts.

0:31But is it really going to translate into new business? Finally, we're going to talk about a story I wrote about how Hollywood's failure to adopt AI video generation products is a sign that companies like OpenAI will be shifting away from enterprise solutions. This is the Newcomer Podcast.

0:52This podcast is supported by Google. Hey folks, Stephen Johnson here, co-founder of Notebook LM. As an author, I've always been obsessed with how software could help organize ideas and make connections. So we built Notebook LM as an AI-first tool for anyone trying to make sense of complex information. Upload your documents, and Notebook LM instantly becomes your personal expert, uncovering insights and helping you brainstorm. Try it at notebooklm.google.com. All right, so last week, Madeline, we had Alex Heath on, and there was this thing that kind of stuck in my head from that conversation, which was that at a dinner that he went to that I was not invited to.

1:34Well, the record show Tom was not invited to the dinner. I was not invited to the Sam Altman off the record. No, on the record dinner. Because you forgot Tom not invited. Yes. If I brought it up multiple times on the show now. Sam, I guess, was bragging after a question or hinting at, teasing, after a question I think Alex had asked him, which was that like, how are you going to pay for all of these deals that you guys keep announcing? Like, where's the money going to come from? And it sounded like Sam kind of had like a panicked but excited glow in his eyes as he responded like, I think I figured out a new instrument, a new way to fund all of these deals.

2:10And we sort of laughed at the time. We were like, oh, maybe it'll just, there's not that many ways to fund these things. There's raising debt, there's selling equity, and then there's vendor financing. And I guess rate, yeah, Yeah, selling equity. It appears that he may have actually figured out a version of, kind of sounds like vendor financing, but we may be witnessing what the instrument is. And that's this AMD deal that came out on Monday. And basically, what this deal was about is that AMD is agreeing to give six gigawatts worth of chips to OpenAI worth tens of billions of dollars. And in response, in return, OpenAI is given warrants so they could purchase up to 10 % of the equity of AMD if certain performance targets have met.

3:00That, just to clarify, that adds up. It's a stock option, basically. They get the option to buy up to 160 million shares of AMD. Right, right, which ends up equaling out to 10 % of the company. And that's based on performance targets that are met and whatever. But after this deal was announced, AMD stock shoots up, as has been the case for almost all of these open AI deals in the last couple of weeks. Sam and a CEO of a chip company make an announcement. The stock shoots up and the deal kind of pays for itself in terms of increased equity value. Man, I don't know what to make about these things anymore.

3:37it's really gotten to a point now where like we talked about last week in the story that I did that like Sam has infiltrated and like integrated himself into like the core structure of all of these publicly traded companies because of all the deals that they keep announcing um how much higher can it get how much longer can this particular strategy keep going on that is just I think that's the multi-trillion dollar question Tom right like I these deals as they function now They seemingly juice the stock market and everyone's happy. And the announcement from OpenAI partnering with your company is enough to then fund said partnership.

4:18So it's great and everyone's happy. But it just seems to be adding a lot and a lot more risk. And that doesn't mean that there's going to be an inevitable crash if some of this doesn't work out. But it does just seem like all of the public tech company stocks that have the ability to partner with OpenAI that are doing so, that is basically keeping us afloat right now. Those partnerships are what are landing. It's basically, I won't even say this is a new point. This is just like we're hitting our point from last week again on the head with this new AMD deal announcement. It's like just when we thought it couldn't get any deeper, we get another deal and Sam sparks this other point.

4:55And obviously NVIDIA is wrapped up in a lot of these deals too, especially with Oracle. you know, Oracle spends, you know, billions, tens of billions on NVIDIA chips to run its centers for all this compute. So it's not solely open AI. NVIDIA is very tied into this as well. But I think it's really these two. Yeah, well, it's interesting. Well, and Broadcom and the chips that they're going to be building on their own that supposedly will fit somehow into their, you know, infrastructure play as well. But, you know, So the NVIDIA deal was really this example of Sam and Jensen getting super close and them basically intertwining their fates even more so.

5:34And we refer to it as some sort of like, well, I didn't use the term, but it's kind of like a mutual destruction pact across the tech industry, but certainly between those two. But then the AMD deal was interesting because it is a competitor. They are going to be developing chips that they would be using in lieu of NVIDIA's GPUs. And Nvidia stock fell a bit when the news was announced. And so, you know, as close as these guys are and as important as, you know, each company is to the other's future, you are seeing at least some diversification on on OpenAI's part. That makes sense, you know, from one perspective, like it'd be kind of silly to place all your bets on just your one this one supplier of this critical component.

6:20but um you know like i don't know if you read the articles or saw the interview i didn't have a chance to like jensen was on cnbc and he was like yeah that was interesting i didn't i didn't know they were going to do that um well it's a very creative financing deal that they put together um like that john mulaney bit that's like i didn't know knew how to do that you know yeah like yeah the horse in the hospital look we're all like making this stuff up in real time uh how finance things at this scale. And it's funny that Jensen, I didn't see the video, so I couldn't detect if there was any sort of derision in his demeanor on the AMD OpenAI deal.

7:01But let's not throw stones here from the glass house, Jensen. You have constructed an extremely circular deal with OpenAI in which you are giving them effectively... There's a letter of intent to give them$100 billion in exchange for them using$100 billion on your chips. I mean, the circularity of every single deal that has been announced here is on a different level. This is a whole economy that is being propped up by circular deals. I mean, there are some interesting charts that have come out. Maybe we can flash it on the screen for those watching the YouTube video. But the relationship between Microsoft, this goes back to the beginnings of OpenAI, right?

7:43Like Microsoft gives open AI billions of dollars that ends up being used as an Azure credits, which props up Microsoft stock for a while. There's obviously the Nvidia stuff. There's the AMD stuff. The Oracle thing isn't quite circular. That's a pretty standard client, you know, provider relationship. Right. It's 300. It's a massive deal, but it's for cloud services, which they provide. So, you know. As Alex mentioned on the show last week, like they are providing, Basically, Sam put the ball into Larry Ellison and Oracle's court and said, you guys figure out how to raise the money that it'll take to build the things that you're asking for.

8:19So, I mean, I don't know. I guess we're back at the question that we were at last week, which we don't have any more of an answer to, which is like, how much longer can this go on? How many more of these deals can OpenAI keep striking and the markets keep responding in kind and saying like, great, let's keep pushing up the value of these stocks that you make the deals with? I mean, is that literally all it is? Like, is it just like deals for the sake of announcements that can prop up a stock and then like kind of keep the machine like running? I mean, we'll have to wait and see, honestly. I wish I had more info for you.

8:52I'll dig around for a scoop if I can. But yeah, it's kind of like we're all in this waiting game together. Yeah. And like, I don't know, credit to Sam throughout all this stuff. Like as absurd as as it is as a reporter and you know like anyone with i think a grounding and common sense that you can kind of continue to fund stuff based essentially on like future returns um that seems to be the only way to operate at the scale that he wants to operate right like this is a this is a a i don't know legitimate but it's like a way that you can you can you know get to the hundreds of billions of dollars that he's talking about to to build i guess it's just agi that's just basically the play?

9:34Well, that's the pitch, right? We'll hit AGI and then all of this will be solved. And it kind of feels like we're floating and waiting for this milestone of AGI to fix all of this from unraveling or changing. And also once we hit AGI, everything will be great and it won't really matter as much. Right. We're talking about, we have the skeleton key to unlock trillions of dollars in transformations across the economy. So this is all a bargain. And you're getting in on the ground floor by investing at a stock that is suddenly got a wildly inflated PE ratio. Anyway, I mean, you want to move on to kind of the other side of it.

10:18So we have like hype in terms of stock market appreciation and deals based on future returns. And then we have the hype based on like brand and the, I don't know, emotional attachment that certain people have to companies and large language models. Like, I'll be honest, I've been very buried in a bunch of other stuff. Like what is going on with the Claude pop-up? First of all, for a little context, all of the major AI labs and coding assistant companies have discovered basically brand activations. That was a marketing tactic that was foreign to them until last week. And then all of them kind of descended and realized that the New York influencer ecosystem is actually a great place to get your products up and running in the tech sphere outside of San Francisco.

11:05So last week, Anthropic hosted a limited pop up for Claude at a coffee shop owned by the former Vanity Fair editor. It's kind of a sceney place shop place in Soho. and people were waiting in line around the block to pick up anthropic branded hats and notebooks and to get their be seen and be seen at their brand activated pop-up. It was definitely a huge success but I actually if you'll excuse me I'll go grab the hat. I'll have to run off for a sec. So you actually went off and did this. I did manage to wait in the line and secure a hat. While you're doing that I can regale the audience with another tale from the Snapchat reporting past that maybe only I will care about.

11:52But this is all very reminiscent to me of Snapchat spectacles that came out, I think in like 2017 or so. This was Evan Spiegel's big play to create camera glasses. And they were very cool and it was from a vending machine and they, I think had one in, they had one. There it is. There's the hat. Oh yes. If you're watching on YouTube, you can see the hat here. It is a thinking cap, which I thought was actually pretty clever. And it's part of Anthropic. Sorry to cut you off, Tom, but - Yeah, no, people got the point. Basically, this has been tried in the past by tech companies in New York playing into the desperate, hype-y nature of people that hang around the New York scene.

12:31And love streetwear. Tell me about getting this hat, Madeline. I have to say, people are very excited to get the hat. I think it's quite clever, Thinking Cap. It's part of their broader thinking campaign, because Anthropic is sort of positioning itself right now as the Apple think different, almost, you know, fun, sleek, branded, you know, they have all the Claude merch with its nice design. The logos on the different pieces were clearly done by some thoughtful designer that rather than, you know, just standard corporate logo on something, it has more of an illustrated touch. I have to say the hats to plug our own conferences, they look quite similar to our deus ex medicina hats so they got the memo that lowercase font simple is really in right now but we were ahead of the curve fonts yeah yeah we we we were ahead of the curve on that one so let the record show but i will say they are positioning themselves in this way that i think in some ways given you know open ai's deeper partnership with microsoft it almost seems like there's this kind of foil of like the Mac versus PC campaign.

13:41That's like, we're the fun, creative model that's actually making you think and avoid slop and not building a social media platform yet. And I think those associations are getting placed in with Anthropics brand and the actual pop-up structure. I know Cursor is hosting one later in October in New York as well for the Cursor Cafe. So you can pop up and get merch and coffee as well and code live with all your friends using Cursor. But I don't think it has quite the same appeal as the smart brand in addition to the free hat with the thinking and kind of how they're positioning themselves in the marketplace.

14:24So we'll see how it lands in terms of actually acquiring customers. But I think it was smart. Describe to me the type of person that was waiting in line to get a hat. Like what was their scene? Who is their customer? How would you describe like a tech hype beast? I would say that's who was in line. Like, oh, that's a real thing now, right? I mean, these people have like taken over San Francisco. Yes. And now we have them in New York, too. There were a couple of people I know who, at least from Twitter, claimed to have flown from San Francisco to New York to acquire the hats. So that is it's a it's a bi-coastal hype train here.

14:59And I would say there were also a lot of people who were, I would say, maybe more in definitely developers, younger crowds who are familiar with all of these tools, but some influencers from just the general creative sphere of New York coming in to check out what is a lovely brand activation and get the hats. So are they reaching an audience that they necessarily want? Maybe there's people who maybe wouldn't have used Anthropic otherwise that are showing up at this. yeah i i don't know what to make of this personality type this is in one sense something that's been around for a while like it's the hype beast it is the person like camping out outside of the store getting the oh shit like what's the shoe drop that they always do um or like not jordans maybe not the and ones well supreme would do all of the drops like supreme would do the drops yeah i mean look there's no question that is like a monetizable personality i don't know oh, is that the Claude audience?

15:57Are those people coders? The thing that gets me about this strategy is you mentioned the Mac versus PC analogy. Macs was the creative tool. It was the personal tool. It was like everyone should have a Mac in their home because it shows how independent of a thinker that they are. And also they're standing apart from the John Hodgman, I'm a PC crowd. but open ai is the consumer product open ai is you know oh cat gbt is a consumer product like like like anthropic is the api company they're the api enterprise company with with the coding assistant i know yeah so in some ways it's it's a weird consumer play focusing on how good you are at enterprise and thinking and using your brain business but it's it's with consumer language.

16:51So maybe in some ways it could be to widen a broader audience and eventually go for this. It certainly earned a lot of goodwill. I just, I do agree with you. I'm not sure if this is going to translate into like real money revenue for Anthropic, other than just eating out everyone else out as being the scene-y AI lab. Yeah. Again, it's just like, if you know the people like Dario, the CEO, not to say that Sam Altman is cool by any definition of the word, but Dario was less cool than Sam. Dario was like the geeky, effective altruist dude who has stuffed animals in the office and sort of runs the company in a very sort of warm, fuzzy, we need to...

17:32Well, there's also the kind of we need to make sure we don't enable the destruction of the world through AI mentality. But I just don't think of Dario as like a hype beast or a scene kid. I think they're trying to make him a hype beast because at this event, they were giving away little booklets of Machines of Love and Grace with this name on them and his writing about the future and his vision. So they're making it a product. They're trying to make fetch happen. yeah i mean this is like clearly some marketing person's like you know boardroom or you know whiteboard pitch that they were like i mean why not just give it a shot let's just see what happens um that's so i mean like is this going to go on down the line here like do you think like other companies need to respond in kind like are there other model made like does gemini need to like carve out their thing like are they like for i don't know like sports fans like are they like Because Gemini, the water sports or something.

18:27I just don't... Does there need to be branding for all these other competitive models? What is XAI's too? What is Grok? I guess that's just anti-woke. No, they're just anti-woke. Yeah, theirs is just the conservative AI, I guess, if that is a thing. Yeah, they have their own meetups. Yeah, they have their own meetups separately. But yeah, I don't know. We'll see how this plays. I found it very fun to attend. and very smart. And as working for a newcomer, a big fan of live events, I love a live activation. I'm not sure how it's going to play ultimately other than just getting a bigger brand awareness and being known as something fun and cool compared to actually generating a ton of revenue.

19:10You were mentioning the New York influencer scene, which I observe only through TikTok. A lot of those people are paid to appear. Did you get the sense that they had kind of shelled out a bit to get certain people to show up? The day I went, no. I think there was just genuine interest for people coming. There were people who were paid kind of almost like, you know, like people on the street, like brand people that were handing out these, these Claude gift giveaways. But mostly it was that rather than, you know, maybe some shiny influencer showing up at this event. So I do think they did have some organic growth, but they didn't, I won't say that there were like people with millions of followers from Tik TOK clamoring to get into the clog coffee shop.

19:55It was much more people in the tech ecosystem. If they had flown out like Iela or one of these, you know, net cap girl, Twitter people, then maybe we could talk. But I think the influencer models are a little different. Or like the New York, like food influencer scene, the guys that are all just showing up at like every new, like soup dumpling place in St. Mark's or the ones here, come with me and you can try the best pancakes, the golden diner. like that that wasn't that wasn't the model right no that was not the model they didn't they didn't have um the vip list like insulting you if you didn't come down to the clog coffee shop right yeah yeah there weren't like people what's the the influencer scandal that always happens where like all these influencers start like calling out these various restaurants after making like completely unrealistic demands of them it's like i want to bring three of my friends here and i want like a fully comped dinner and the restaurant's like no and then the influencer like puts them on blast.

20:47Yeah. Yeah. They didn't do that. They did not do that for quad quad cafe. You're safe another day. Um, and we'll see if they do more activations. It seemed like it was definitely a big hit for New York people. I also think per, you know, New York second string here, we like when tech events come to us. So I think there was a lot of demand of the New York tech people just excited to go for something like this. We don't, we don't have like a, you know, a tech activation on every block these days. Yeah. Well, we're a week away from Dreamforce in San Francisco, which is the ultimate tech activation wannabe tryhard crew.

21:22It's basically like SantaCon for people who don't really understand what their job is. That's the Dreamforce model. You should stalk outside and get a hat or some merch or something. Oh, there's all kinds of merch. They're very national park oriented. It's very like a kind of Ranger Rick type thing with Dreamforce. Yeah. It'll actually be interesting to see. Yeah, it is fun. Sure. It'll be interesting to see if like the models, you know, if any of the LLMs try to like set up similar activation because like they need, you know, they want play within. I mean, it's a ton of CMOs and CIOs showing up at Dreamforce.

21:59Oh, absolutely. It would be the perfect time for them to hawk this thing. If you see a range of AI Lab coffee shops with sweet merch popping up around you, let me know. I'll get the hat. You'll get the hat. Yeah. What do you think about the Cursor one too? Because there are obviously a handful of Gen AI coding tools out there, but it does seem like Cursor has the most brand recognition. It's the one that in the space people maybe have the most association with or emotional attachment to. I'd say so, yes. From enterprise customers, I would say it's kind of a battle between Cloud Code and Cursor in terms of which ones people favor the most right now.

22:43So I think they have an audience of, you know, rabid coding fans that will be excited to play influencer in New York in a couple of weeks for sure. But I, to your point, I don't know if they're the one that needs this brand activation. Like where's, where's windsurf, you know, like doing this pop-up, where are they going next? Well, Tom, I know you've been digging a lot into Hollywood and AI, And obviously we've been playing around with the Sora 2 app quite a bit. Is it dead, by the way? Before we go into this next topic, like, you know, really slop maven Katie Natopoulos declared on X that Sora is over.

23:23What a title to retain, slop maven. I hope it makes it a run. I hope she hears this. She loves this stuff. I mean, she's really one of the best people at like kind of shitposting out there. I have nothing but respect for Katie Natopoulos. and so when she declares something it has weight I care when she has sort of a declaration on the state of a thing that was popular and she says Sora 2 is over that she can't get people to use her sign up codes anymore and you know that all the big influencers or whatever that existed have fled the platform and it's a it's moment brief as it was is over but what do you what do you think?

24:02She's right. In at least my understanding, anecdotally, I can't get any of my friends to use my codes that you gave me with your invite. So, um, I've still got two left if anyone wants one. Um, I think we'll see. I think there's some novel. Yeah. If you know, Madeline at newcomer.co, if you want to code, prove me wrong. Do you want my code source still going. No, I think it's kind of suffering what always like a lot of flashy in a flash in a pan consumer features do, right? Like once the novelty wears off, like how do you retain users to actually stay? And I thought that they had an edge as we talked about with Alex last week around, you know, having your friends participate so that it's a bit more social.

24:46But if people aren't really chatting or networking beyond just posting the videos in the feed, do people want to stick around? but it did drive a ton of signups. So that was an effective play if you wanted to get a lot of people to sign up. Man, when Alex was on, and Alex is great and we hope to have him on a ton more, but I disagreed with him at the time that this was a long-term play for OpenAI on Sora specifically. To me, it had all the makings of the Studio Ghibli moment or any of the face filters that had popped up on Snapchat. Or, you know, I'm not huge on TikTok. I mean, my account certainly is not huge on TikTok, but as a user, I don't spend a ton of time on there.

25:30But they have little memes, obviously, that, you know, get big from time to time, little games or filters or whatever on TikTok that sort of like run the hype cycle and then disappear. To me, this Sora AI video thing had all the makings of that. And I think that is what it turned out to be. Like it was kind of like a, you know, a TikTok feature basically that got its own app to its own credit, but effectively like, you know, ran through in a very short period of time the excitement and then sort of another toy that you put back on the shelf. Yeah, I guess I could say if the feed itself was the launch and that was the big product, maybe it hasn't landed yet or is suffering.

26:15But if the tool itself was to get people to sign up and test their video features and get a lot more training data than afterwards, after getting all of that, then it was a resounding success. So it's kind of like it's hard to launch a feature as a standalone company, but they can launch it within OpenAI and still work and get a ton of information out of that. Right, right. Yeah, it's always movable goalposts with it. And it would be stupid to call Sora a failure by any extent. But it does seem like the people who had dubbed this like, oh, my God, they just made TikTok wildly overshot the attention that this was going to get from people, I think.

26:55We all ran back to TikTok. Yeah, well, a lot of these videos made their way to TikTok. Well, yeah, you can save them so they're getting posted on other platforms. I've seen Sora videos everywhere on TikTok and Reels. So obviously that's sure promotion for OpenAI, but people aren't sticking around on the Sora feed. They're using Sora the app to make the videos and then sharing them elsewhere. Right, which I guess back to OpenAI is why they're such an interesting company, because they truly are doing everything. I mean, the number of products and strategies that they are juggling at the same time is incredible.

27:30And it's like at the same time that they have basically attempted maybe to build a TikTok and got to number one in the app store and got a huge amount of viral buzz, they're also becoming the next hyperscaler and building... And they're also going to be the next big coding tool. And they're also the next Google with their search tools. And, you know, it's like not even really to Snapchat's detriment that like Sora may have like peaked and fallen off. It's just like another example of like what their ambitions can be when they're like really dialed in. Watch out, Elon. OpenAI is coming to be the everything app.