Big Tech Earnings, Elon’s SpaceX–xAI Merge, Genie 3 | Diet TBPN

0:01In the news today, Apple said this morning that it has acquired Q.AI, an Israeli startup working on AI technology for audio. Yeah. Apple didn't disclose the terms. The Financial Times reported it was worth nearly two billion. So pretty meaningful deal. Apple is not known for really paying up on a lot of different M &A that they're kind of folding in to their roadmap. We had Mark Gurman on yesterday talking about how Apple uses M &A effectively to accelerate their roadmap. According to Reuters, Apple did not say how it will use QAI's technology, but said the startup has worked on new applications of machine learning to help devices understand whispered speech and to enhance audio in challenging environments.

0:46QAI last year filed a patent to use facial skin micro-movements to detect words, mouthed, or spoken. We've seen a couple startups that are doing the whisper. it's like telepathy almost. It tracks your mouth movements so you can just... And then it will track what you're saying. Really, really crazy. So facial skin micro movements will be used to identify a person and assess their emotions, heart rate, respiration rate, and other indicators. Crazy. Very sci-fi. It seems like it's normal. Aviad Meisel founded three-dimensional sensing firm PrimeSense and sold it to Apple in 2013. Absolute dogs. They're doing it again.

1:24They call it double kill. That's great. The PrimeSense deal eventually helped apple move away from fingerprint sensors on its iphone and toward facial recognition technology interesting pop quiz for tyler why does apple acquire companies i mean i why questions are usually pretty okay good answer but mark german told us why does apple acquire companies to accelerate accelerate the road map yes uh and and it's funny because because i i asked him like Like, why are we gonna hear Tim Cook say that? And he was like, oh, because of earning. But we're basically hearing him say it today with this surprise acquisition.

2:00That's obviously the line from Apple. And it makes sense. This is something that is uniquely acceleratable because of the Apple hardware ecosystem. They can deploy this through AirPods. They can deploy this through the phones, just like they did with Face ID. If you have that technology and you're like, oh, well, in order to log into your computer with your face, you're going to need a third party device that you plug into the USB, like no one's gonna do that. But yes, I've been very bullish on this. I was thinking back then that, you know, people get their wisdom teeth out. This is very weird in cyberpunk, but if you got your wisdom teeth out, you could potentially create, like add a, like a port for storing a microphone.

2:41Tyler, do you have any of these? I should have got that. Yeah, exactly, because a lot of people get them out, and then you could just put a port there, and you could insert basically the tip of an AirPod, very, very small device that you would charge and then you put it in. And then when you're whispering, you can just hear, it can only hear that and it goes dictation straight to your phone. I was wondering about the quality of whisper transcription these days. Like if I just open up whisper on the ChatGPT app, put my phone in my pocket and just talk, can it just hear through my pants pocket and just dictate perfectly now?

3:13Because like AI is so good at transcription that it can be really muffled. Like you can have music playing in the background and talk to Whisper. It just won't mess up. So there is a world where you don't actually need like a separate pin, you just have something anywhere on your body and it knows, okay, this is what John sounds like. Let's kill all the background noise. Let's kill all the other people talking. Let's isolate that with AI. Like it seems pretty, pretty good for that. One more thing on this QA acquisition, they're using, going back to their patent, using facial skin micro movements to assess emotions, heart rate, respiration rate, and other indicators.

3:48You could imagine a world in the future where you have Apple smart glasses that effectively have health monitoring because it's tracking respiration, heart rate, all these different things, and just basically integrating the features you're getting from the Apple Watch today. I wonder what it's really unlocking that the watch can't do. There's always the question when you pitch a new device, it's like, well, your phone does have a camera on it, so you're not, this is like, the smart glasses aren't the first camera. Yeah, but it's a new device, but it's a Lindy form factor, right? Like this is something we've talked about in the past.

4:19It's like the, you know, the new hardware that's taken off is an existing form factor. It's like headphones, eyewear, you have watches, right? Creating these pendant things so far hasn't hit, right? It's fair. I just think like on the heart rate issue specifically, there was an app before the Apple Watch existed where you could put your finger over the camera of the iPhone and it would use the light, the flashlight, which was right next to the camera to light up your finger so your finger would turn red and then it would take the sensor data from the camera and measure the pulses of the red and give you your heart rate just from touching your camera it's pretty cool like it was completely outside of the apple ecosystem just a just an app that you could download or pay for and so the phone can take your heart rate the watch can take your heart rate if you give me glasses and you say those glasses can also take your heart rate i'm like i i got enough heart rate measurement i can also just go like this and estimate it.

5:12Like there's a bunch of ways to know that your heart rate's spiking. Maybe tracking it's in different, but it feels like they need to go farther. And the real opportunity is something more around audio interfaces, link it to Siri, have more ways to triangulate what the person's trying to say, what they're saying in a noisy environment, whether they're trying to be quiet and you still want to isolate what they're saying, having a back and forth, reducing latency. All of those things are very critical to success in that kind of way. Let's go into Microsoft. Earnings, Microsoft. So Microsoft shares have taken a dive as data center spending overshadows earnings surge.

5:49Let's give some numbers here. So Microsoft's Q4 revenue was$81.3 billion, which was higher than the consensus estimate of 80.23 billion. So they're making money. There's no lack of demand for Microsoft services. Q3 2025 revenue was 77.1 billion, up almost 5%. and year over year growth was 17%. But the stock sold off by 12 % and Microsoft is now just a tiny little $3.15 trillion company. Not bad. I mean, people have been excited about the OpenAI investment, which did show up in earnings. So Microsoft owns 27 % of OpenAI's new for-profit entity. That value is actually reflected in Microsoft's earnings.

6:34And of course, more importantly, the GPT models are truly frontier. Like we've seen it again and again. there's like this horse race over this model's better at this thing this bottle's better today but it's just very clear that that open.ai is on the frontier and in the conversation for pretty much every application possible and so you can just imagine you take gpt 5.2 pro you vend that into knowledge work pipelines for microsoft users that sounds really useful they aren't behind on coding we've heard great stories about how codex is a great model maybe it's a little slow maybe they need to speed it up, but people are having a lot of luck with codex.

7:10And so you can imagine that Microsoft is capable of integrating codex into all sorts of different pieces of the Microsoft empire to create agentic workflows. And then they also have a deal with Anthropic. They also made an investment. So they are multi-model, multi-platform. But the problem is, is that Microsoft seems to be constrained on the data center side. Limited availability of artificial intelligence hardware is affecting how quickly Microsoft's cloud business can grow and it's capping Azure's revenue potential. Not good. They need to take another trip to Abilene. They need to build more data centers.

7:45Maybe it's just a data center capacity issue. What's next? Is it going to be an energy bottleneck? Is it going to be a chip bottleneck? These are stories that we're tracking. Obviously it's amazing that Microsoft owns such a big slug of OpenAI. That's great, but the challenge is so much of their backlog is OpenAI. They're actually getting less credit for that, right? The same way that Oracle had gotten punished for it. Now it's Microsoft's chance to actually get punished. Microsoft, if you actually zoom out a little bit and just look at the last six months, down 17 % in the last six months and down 4 % over the last year.

8:20So it's funny, like in a year where it feels like the last year, Satya and Microsoft have just been on this insane run. They've fully round tripped. Totally. Meta also reported earnings yesterday, $59.9 billion in revenue in Q4 of 2025, beating expectations of 58.5. Revenue's up 16 % from Q3 of last year, which was 51.24. The company's growing its revenue 21 % year over year. That's higher than Microsoft's 17 % top line growth. Market cap is now$1.84 trillion. Mark Zuckerberg told analysts on on the earnings call in 2025, we rebuilt the foundations of our AI program. That should be obvious. There's so many acquisitions, so many hires, so many experiments, so many different strategies and discussions and changing of the guard and restructurings, layoffs and reality labs.

9:18It's the compute desk. There's been so many stories about Meta really rethinking their AI platform, re-architecting the foundations of it. Over the coming months, we're going to start shipping our new models and products. Very excited for that. He says, I expect our first models will be good, but more importantly, they will show the rapid trajectory we're on. And I think that we all have high expectations. I don't think anyone's expecting them to jump way, way out in front of everyone else. but they can just be in the conversation with DeepMind, Anthropic, OpenAI. I think that will quell a lot of the concern.

9:59That, but also what are they doing with them? I think that matters more. You look at Meta's business and the way in which GenAI can accelerate everything from generating more content on the platform to having better ads to better targeting, all these things, right? And not to mention where they can just vend it in at the product level, right? The product level stuff is tricky. I mean, I've bumped into meta AI in Instagram many times, and you do get reasonable natural language responses, but it clearly still has the knowledge cut off. It's not searching the web as effectively. It's not pulling together.

10:38It doesn't feel completely native to the platform. If you go into meta AI in Instagram, and you ask it to go and hunt around in Instagram for a specific creator or reel based on some clues, it doesn't feel like it has the hooks to really go in and understand, okay, based on what you've watched and what I've showed you in the past, this is probably what you're thinking of. Like, that is sort of a superpower where, you know, there's so many times when you're on the timeline and you're like, oh, I saw this post, I didn't bookmark, I didn't like it. What was it? And you want the search products to be empowered magically.

11:18What are you laughing at? What are you thinking? You gonna flashback me again? Yeah, close. Continue. I think that there's the basic case of they gotta get an, you know, an LLM that's frontier, that's, you know, has the big model smell, fun to talk to, good vibes. Then they need video and audio models that are rock solid. And then they do need to vend those in. I think just having an API or just having a place where people can generate, you know, photo real videos, or even things like Sora where it has the aesthetics and pacing and cuts of an Instagram reel. That doesn't feel like it's enough.

11:51It feels like to really empower the Instagram creator, it needs to be built into the platform. Letting people still bring what's personal to them, their family, their experiences, their car, but take a couple photos of their car and turn it into a really, really awesome drone shot of them driving their car. I've seen a lot of really sweet edits where people will fly a drone over a car. Then they'll have a first person GoPro on their chest while they're driving their car. And then they'll use AI to interpolate between the drone shot and their first person view. Because they can't actually, like if you have a multi-million dollar Hollywood budget, you actually can fly the drone into the car, have someone sitting in the car, they grab the drone, and then they hook it on a crane and the Crane takes it out and does a different shot with it, but that's like a multi-million dollar experts, tons of equipment.

12:43And so even just like AI power transitions would be a really, really cool thing to bring. Yeah, not to mention they own Manus now, which is a fantastic product team. They've built some great agents. You can imagine them integrating, like basically like prompts to short form video, right? Where you can just describe the video that you wanna make, insert reel, like basically like generate B-roll for this, pull footage from around the internet, whatever. And so there's so many things that they can do. And again, they've just been using meta AI as a sandbox for the most part, but I'm just excited for them to start shipping across.

13:15The remixing thing is so underrated because there's a lot of people, the number of people that have true inspiration for new formats is pretty low. People always do the stitches. Think about the remix functionality if you see a funny video and you can just basically do a character swap in there. Exactly. And it's like that's a new piece of content that's going to be shared and a bunch of people engage with. Tyler, what's your take on Meta's new plans for 2026? Yeah, I mean, I definitely think the image and video models are much more important to get right than the LLM. Mainly just because, like, it seems like very natural for them to bend it into everything compared to OpenAI or Google, who are, like, right now finding it out in image or in video.

13:56So it seems like if they can kind of do really well, you can get OpenAI and Google out of that race, basically. Yeah, yeah. And then the LLM, it's like, it's unclear what the actual like use case will be in the short term. Eventually you want some cool like, you know, Claude-bought style agent somehow vended in, but it's unclear how that's going to work out. So I think in the short term, I'm very excited on the video model. I really like that model of like the LLM going around and just like seeping into the cracks of all the different product experiences, but in these like really subtle ways. Like YouTube now has AI-generated summaries on videos and you can chat with a video.

14:29So if you're watching someone build a PC, you can ask Gemini on YouTube, hey, just print out the exact list of parts that the person used to build the PC. And there might be a parts list at the end of the video. There might be a parts list that's randomly mentioned throughout. Sometimes a creator might actually link to a real parts list, but Gemini allows you to scrape the transcript and then just get that however you want, and then transform it, or add prices to all of it, or see if it's available in Japan, because I'm in Japan, all these interesting things. And I can imagine on Instagram being able to go to a post that has like thousands of comments and just say, hey, I want the LLM to kind of summarize the sentiment.

15:06Like what are the facts? Like, you know, people were debating whether or not this is AI. Is there a consensus or people were adding context? What was the key context that people were adding? There's a lot of posts that are basically like rage bait or click bait where it's unclear what's going on in the video. And so you go to the comments, people are like, I don't get it. Or like they put up that sign like context needed, please. Right. And so you can kind of do that. Yeah, but I feel like that stuff can just like, I'd rather just have that be in the recommendation algorithm. Like sorted in the comments?

15:34If everyone in the comments is saying this is clickbait, just don't put it in my recommendation algorithm. SuspendedCap says, I got to really respect Zuck, willing to spend over 50 % of revenue next year when they still haven't delivered a single compelling AI product. Hell yeah. Yeah, I mean, the CapEx is crazy. No, the whole thing, though. $200 billion in revenue in 2025. That's so weird. Sounder, no. It's so much revenue. It's a lot of ads. Now they're going to plow$135 billion, according to the Wall Street Journal. The New York Times said$115. But either way, it's like more than half of the revenue.

16:06I think posts like this are funny. And I think you can definitely agree that Meta has not shipped a super compelling AI product yet, even though MetaVibes has traction, not necessarily in our world, but certainly has some traction. like this is the guy that owns the world's largest trough or one of the world's largest troughs, right? And so he has, he knows that it's working. He knows he can see the future, right? He has all the data. He knows that people say they don't like AI content, but in reality, they actually do. They engage with it. They watch it. They make it. The engagement must be growing exponentially, even though it's very small.

16:43It started at a base of zero and then you got Harry Potter, or Balenciaga, and now you have 10 videos a week that are going so viral. So I look at this different than some of the metaverse bets just because Zuck is one of the biggest beneficiaries of Gen AI, and so it's totally warranted to say like, hey, we should invest an obscene amount of money in this. This is clearly the future. Yeah, yeah. Let's talk about Tesla. Tesla reported revenue at 24.9 billion, and this beat the consensus estimate just slightly. Consensus was$24.78 billion. But down 11.4 % from the previous quarter when revenue was 28.1 and 3 % decline year over year.

17:25There's no denying that the Model S and X sales have slowed. And there's a whole bunch more competition at the high-end EV market from Lucid, Rivian. And so Elon is fully thinking about what's next. He broke out subscriptions for autopilot self-driving for the first time. He's talking a huge amount about cyber cabs and robo taxis. He's making that cash investment in XAI. And of course, he's really focused on optimist humanoid robots. And it seems like he could be scaling up production there very, very quickly. A million subs of self-driving. Yeah, not bad. How much is it? I think it's 100. 100 a month?

18:03Yeah. Yeah. So, you know, you got a billion dollars a year coming in from that. Analysts thought Tesla was going to be cash flow negative for the quarter, but they actually were positive. they generated$1.4 billion in free cash flow, and this was down just 30%. So there's plenty of cash to keep the aggressive investments going, especially as Elon shifts the business towards autonomy. Yeah, I think it's a little jarring for some people just because historically, car companies have thrived by creating the perfect car in each category for every different consumer. And Elon is basically saying, actually, I know what you want, and I'm going to give you it.

18:37You don't need that many options. where you're going to be able, like you said, to just leverage the different trim levels and spec out the car to satisfy. And probably, you know, I do think over time, like less and less trim levels. And then eventually it's just cyber cabs and no one's buying cars anymore. Elon's certainly thinking in decades and not afraid to cut an entire business line that is still popular with a lot of people. I mean, I was just talking to somebody yesterday who was singing the praises of his Tesla Model X and how much he loves that and how he would never get a Y because the X is so much more premium.

19:12Everything about it's better. It costs a lot of money when he bought it. Still loves it. But, you know, Elon's thinking to the future. Pull up this video of Optimus learning it has to make up for S slash X sales after they were canceled. Oh, yeah. This is such a crazy video. Taking off the VR headset and just smashing that. I love it. This is really a Tesla Optimus, isn't it? The force with which the Optimist just smashes a water bottle open is crazy. It's amazing. This thing is going to be super powerful. The insurance business that will be built around having a humanoid in your home is going to be remarkable.

19:49One of the standout moments of the earnings call for me, Elon and Tesla are transitioning their Fremont facility to make Optimist. And they plan to scale that facility up to be able to make a million of these things a year on a relatively near term time horizon. So very, very significant. He talked about how the robot would be able to basically learn on the job. It's going to be able to do a number of valuable tasks. And yeah, I think, I mean, the big question for me is like, what is... Will they have ads? That's a good question for me. Will they have an ad support? You have the Tesla walking around your house and it sees you pull out some sort of random credit card.

20:27And it's like, are you not on a ramp? Like, what's going on here? Or it sees you like having like... Sir, would you like a smoothie from Athletic Greens? Yeah, exactly. Is it valuable enough to actually replace a human? Optimist is going to be competing with jobs that are maybe like 40, 50, 60 a year, like somewhere in that range. Yeah. And so that's a pretty high bar to clear. Totally. So we'll see. Some breaking news from Reuters 21 minutes ago. Exclusive Musk's XAI and merger talks with XAI ahead of planned IPO. SpaceX and XAI? SpaceX and XAI ahead of planned IPO. Okay. So this was something that we obviously were talking about predicting months ago at this point.

21:07So no huge surprise here. This always felt like it made sense. So they're in discussions ahead of a Blockbuster IPO planned for later this year. The combination would bring Musk's rockets, Starlink satellites, and X social media platform, and the Grok AI chatbot under one roof. Imagine owning X, the Internet's dive bar, and space in one ticker. So flashing back to 2007, 2010, I mean, yeah, Twitter and that space company that hasn't successfully launched anything, they're going to be part of the same company one day. Expected this to happen. I think it builds a, you know, again, some people will be frustrated with the narrative, the data centers in space narrative.

21:50But we saw this sort of like sort of organized narrative shift around SpaceX being the data centers in space play. Yeah, that was the bridge. Without that, it didn't make any sense. And then once, if you can get behind, okay, data is in centers and space is maybe possible, maybe. Maybe you want some on land too. Then it starts to make sense that the merger fits a little bit more. We have to talk about... Genie. Genie. The Genie is out of the lamp. Logan says, introducing Project Genie, a frontier world model product powered by Genie 3 and available to G1 Ultra users in the US starting today. Are you a G1 Ultra user?

22:29This morning. We were playing around with this this morning. It is absolutely wild. You can basically prompt an entire world. It instantly turns into effectively a simple video game. Yeah. And you can create some really funny scenarios. And we will show you. They added the jump button. They added the jump button. You get to pick if it's third person, or I guess if you don't check that, it's first person. But sometimes even if you don't check that, You can still wind up in a third-person game if it's obviously a third-person request. They need to add this crouch button. But look at this dog. They need to add the crouch button.

23:05Crouch button next, and then the flashbang button probably. Whoa. Yeah, you're jumping. It's so fast. I mean, the previous Genie launch was still called Genie 3, right? Well, no, I mean, yes. This is not like a new product. This is just making it public. Yes. So I think it was in August when Genie 3 was originally released. Yeah. But it was basically just the paper. Sure. and there were some demos, but no one could have to use it. So, so cool. Yeah, I mean, it feels like more directable than VO3 in some ways, and it's certainly more stable as you move around. Well, it's just way cooler, too, because it's a world you can move around in.

23:43It's not like VO3 where you're just creating a video. Yeah, the memory is really good, too. Oh, and you can upload an image. And turn back. You can upload an image. I mean, get ready to play dinosaurs with kids. Do you have the clip of... So we got access. We generated some. Now it's in such high demand that you might not be able to generate these worlds for yourself immediately. There might be some rate limits going on. I'm sure the GPUs are on fire. It is going to be genie three day on the timeline for sure. Do you have John's first prompt? You can't access the videos? No. Oh, no, we didn't download them?

24:20No, because I think the site is being overloaded so much. Shame. Wow. Shame. Hey, Tyler. Take some responsibility. Take some ownership. You're 21 years old now. Take some ownership. You could have downloaded the video. As the show goes on, I'll try to make a new one. We are going to move the goalposts. This is AGI, but it's not sufficient AGI because my definition is not just the jump button. I want mechanics. We generated a video of my Bach driving on the Nürburgring. It was remarkably high fidelity. It was a little sluggish, but that might just be the driving dynamics. I think that was just the driver.

24:57Oh, you think it was the driver? Tyler could not keep this thing on the road. There was just a body roll. I was like, just put it in a straight line, Tyler. Yes, but I'm waiting. I'm moving the goalposts because I want Genie 3 or Genie 4 to be able to generate game mechanics. If I say I'm racing on the Nürburgring, I want a track timer. I want to be able to stop, change my tires. I want to be able to get a refuel overtakes. I want overlays. I want boost pedals. I want DRS. I want shifting. I want the whole Forza simulation. Do you think this is bullish for platforms like Roblox and Fortnite that have the existing network and they can integrate world models so that the players that are already a part of these ecosystems and these economies can generate new worlds quickly, generate new games, new characters, etc.?