Coatue's Public Market Update, Wall Street Sounds the Alarm on U.S. Debt, Nvidia's Business Booms, and Nike Returns to Amazon | Doug Philippone, Divyansh Kaushik, Aaron Ginn

30:02People never think about Iceland Air being on the cutting edge of the planet. Have you been to Iceland? I have. You have. Was it nice? I had to go there. I once was in Africa and I was in college and I had$400 in my account and I had to get back to America. So you went through Iceland? And I charted the most heinous route from Morocco to London through Iceland back to San Francisco and I made it back. What's the bull case for Iceland there? And the flight that was going to and from Iceland was, the chairs were like bench seats and almost made of plastic. It was rough. It was a really, really long flight.

30:51Like a bus. But I made it home. Nice. I made it home. I feel like the bull case for Iceland Air is probably Greenland becoming a state or protectorate or something. Yeah. Many people go there. And then Iceland Air probably is going to be the one to get you there, at least in the short term. Totally. They're going to have a direct flight from, I don't know what people would be going to Greenland from, probably Park City. Anyway, CO2 goes into OpenAI, and they're digging into this thesis that tokens are more important than tariffs. And so they ask, what just happened at OpenAI? The number of monthly active users, MAUs, post-launch.

31:28And so they're tracking the number of months post-launch for all of these companies. You can see Twitter now X over 96 months. They grew to 288 million active users, monthly active users. Instagram's over a billion. Facebook's over a billion. TikTok's over a billion over that 96-month launch period. And you can see that these social networks, they grow exponentially, but it looks like a complete grind compared to what OpenAI is putting up. And of course, that's because OpenAI can travel so much faster because they can leverage the virality of the social internet and everyone already has phones and internet.

32:10Whereas for something like Instagram, many people didn't even have iPhones yet. And of course, Instagram launched exclusively on the iPhone and took them a while to launch an Android phone. And I imagine that 36-month bump is probably them launching on Android or maybe desktop, who knows. but OpenAI launched Deep Research and Operator just 24-ish months after they launched the original product and they jumped from 400 million users to 800 million users. And this of course is based on a quote from Sam Altman who says the users doubled in just weeks. And so it's a little bit of like they're creating this graph somewhat speculatively.

32:51They're not exactly sure all the numbers, they're trying to work backwards. And there are of course questions about who are those users, where are they, how monetizable are they, but all of that stuff is kind of something that investors will be digging into down the road. Right now, it's very clear that OpenAI is breaking through in a massive way all over the globe, honestly. And so, Kotu also highlights the comments of Satya Nadella from Microsoft, talking about a major AI inflection. Microsoft says, we processed over 100 trillion tokens this quarter, up 5X year over year, including a record 50 trillion tokens last month alone.

33:30So that quote just really says like exponential growth in inference. And this is going to be very, very important for our discussion on NVIDIA earnings because Jensen previously had revealed the ratio between inference and training loads. And he hasn't given as much guidance on that now. And so there's a big question about how fast is the shift actually happening? How much demand is there? If you can compress these models and deliver a great product with less GPUs, basically you could see exponential growth in token generation. But if you see exponential savings in the amount of GPU cycles it takes to create a token, you see flat GPU adoption and rollout.

34:18No one's really expecting that. Everyone's building tons of these massive AI factories And Jensen did actually go into unpacking the AI factory idea a little bit more which I'm excited to talk about but Jensen continues this is from the Microsoft Earnings call on April 30th while we continue to bring data center capacity online as planned demand is growing a bit faster Therefore we now expect to have some AI capacity constraints beyond June Which is interesting because he was saying oh like maybe I'm gonna be a leaser Maybe I'm not going to answer that. Market clearing order inbound. The market is definitely clear.

34:49He's excited to be a leaser. Yeah. He said earlier this year he was canceling some projects, but he said he's excited to be a leaser. And we saw actual capacity constraints at Google in their last earnings, remember? Yeah. And so it'll be interesting to see. Well, we see capacity constraints every day with you and Veo. I know. Throwing your phone across the room, getting rate limited. I need to set a recurring reminder on my calendar for every night. Yeah, because if I miss a day, it's like, oh, I can't get those back because I only get three a day, and I'm paying the max. So the actual best practice is to set myself a 15-minute calendar hold where I use VO to the max, basically.

35:32Although there's probably a better way to interface with it over the API or something like that. But anyway, Satcher goes on to write, with deep reasoning and agent flows like Copilot Studio, customers can build agents that perform more complex tasks and also handle deterministic scenarios. Now there's this interesting debate going on. I don't think we got to it in the timeline, but the founder of Zapier was Wade Foster, not Mike, who's been on the show. Wade was saying like, we are doing a lot of stuff with agents at Zapier and he kind of mapped out one of his agentic workflows and somebody was kind of chirping at him being like, this is just a workflow.

36:11This isn't, this isn't actually like fully, this isn't AI because like you defined, for example, like you would have one agent that processes an inbound form and then another agent that, so like, let's say that we're doing inbound sales. You have a, you have a website and a landing page. And then if somebody is interested, they fill out a form and say where they're from, what size company they work for, that type of stuff. You have a, you have one form that processes that. And then that hands it off to an agent hydrates and says, Hey, go scrape their LinkedIn in and see who they're who else they're associated with are we affiliated with them are we already selling to them kind of like fact check that then you might have a different agent that sits there and triggers okay based on what we know about them now that we've hydrated the the account let's send them an email or let's send a phone call or let's route it to Steve who's already been talking to somebody else at that company yeah right and and then and then on and on and on and so these are these are like workflows but they're powered by LLMs at every phase but there's this question of like are they agents or are they not It almost doesn't matter.

37:10All I care about is business value. People want to chirp at Zapier because they're an established large company that's been operating forever, but you would have to apply the same rigor and framework to every company that says they're an AI agent right now. Yeah, I think people are maybe overly obsessed with the idea of, and I've certainly fallen into the strat before, this idea of end-to-end learning, one-shotting, This idea that it is creating an ensemble approach of different models, different technologies, some business logic, some deterministic logic, some non-deterministic AI generating tokens and reasoning tokens to get you the result.

37:54It's all semantics. I mean, it does have an impact on the super long-term future and kind of the way we design these systems. But at the end of the day, most businesses just care about resolution results. Right, results. And so we're seeing that at Microsoft. The Azure revenue, their cloud is accelerating. So Microsoft Azure's revenue growth on a percent year-over-year basis through up in March of 2021, they were growing at 55%. That went down to 25 % in March of 2023. And then it grew to 35 % in March of 2024. It was down at 31%. in September, and now it's on an upswing again. We're incredibly back, is what Satya is saying.

38:43He also reported in that last earnings call that already 70 % of the Fortune 500 is using Microsoft Co-Pilot for a bunch of AI tasks. 70 %? Yeah, I mean, which is... The last 30%, we know what they have to do. Which is, again, it's kind of like Google saying, we already have a billion people using AI overviews or whatever the metric is, because they're just sort of slotting it in. Yep. Because, you know, I'm sure that 70 % of the Fortune 500 already runs on Microsoft Teams or whatever infrastructure they have set up. Or they run on Linear. Linear is a purpose-built tool for planning and building products.

39:21Meet the system for modern software development, streamline issues, projects, and product roadmaps. Linear for agents. Check it out. Speaking of... If you're not on Linear yet, what are you doing? They got Cursor, Runway. complexity, retool, mercury, ramps, open AI scale for cell. Arc. Absolute dogs. They're absolute dogs over there. That's fantastic. They probably wouldn't describe themselves like that, but we do. Yeah, we do. So speaking of agents, the reasoning unlock, this is back in the CO2 deck, agents thinking on their own, solving problems creatively. Quote from Sam Altman, we view this as the beginning of the next phase of AI, where you can use these models to do increasingly complex tasks that require a lot of reasoning.

40:06And so chain of thought reasoning is multi-step trajectory where the model thinks and iterates. It writes code. It searches the web. It creates the reports, build tables, and all of these. The model keeps asking, does this make sense? I should verify the source. Let me edit my work. And so this reasoning revolution, these agentic workflows, it feels very much like this narrative of like, oh, we kind of capped out on the previous thing. We need a new buzzword. but it's actually showing up in the data and we're seeing it in upward revisions to cloud capex when you add up Amazon my Microsoft Google meta Oracle and Tesla oh We got the big six and it's a different six different six CapEx has gone from 213 billion dollars to 310 billion dollars a a 70 % jump.

40:58And today the CapEx forecast is up at 365 billion. Which is pretty crazy. Again, Tesla's up here. Good work getting in. Not a huge contributor to this. Their expected CapEx is going to be around 10 billion. Yeah. It would be interesting to see how Tesla and XAI kind of partner on the CapEx side, build these hyperscale data centers, because you're already kind of seeing that take shape with Stargate where it's a separate entity. And within Stargate, there are also separate entities where who owns the land, who owns the power production. It doesn't necessarily make sense to always bundle all of those in the same company.

41:40And so Oracle's projected CapEx for 2025 is 16. So between Oracle and Tesla, you still have over 300 billion, well over$300 billion just coming from the core for Amazon, Microsoft, Google, and Meta. Yeah, I mean, this is why we refer to the core four as like the hyperscalers truly. And when you look at Amazon, Microsoft, Google, and Meta, you're seeing high double digits of CapEx in the billions,$60,$70,$80 billion going into CapEx. And that's driving the majority of that $365 billion of overall CapEx. But if AI wasn't real, if there wasn't real demand, And it would be extremely hard to justify this level of CapEx investment.

42:24And so this is all driven by actual demand for Google Cloud, actual demand for Azure, actual demand for reasoning tokens. Actual demand. I mean, Meta was in the news this week talking about how building, they want to ultimately create the ads that they run. Yeah. Well, speaking of ads, let's run an ad for Numeral. NumeralHQ.com. Sales tax on autopilot. Spend less than five minutes per month on sales tax compliance. There is a fantastic company that runs on Numeral. Lucy. Lucy. Yeah, my company runs on Numeral. Anyway, going back to Kotu, they say, tokens are greater, greater, greater than tariffs!

43:02Exclamation point! Exclamation point! I love it. This deck is, you know, obviously built by a crossover fund, hedge fund, like very successful, like very serious on Wall Street. Like when they bring a little personality in. Yeah, I see them as, yes, they are a major player in venture, but they're also a major player on Wall Street. I see them as like a respected institution. And yet they're having some fun with the deck. And most importantly, they're clear. It's very clear, digestible, not too much jargon. Yes, there are some very small bullet points or footnotes that I haven't been reading, but in general, done a great job of summarizing these things.

43:31They have three takeaways. From a market perspective, we remain vigilant, but have confidence in the AI trend. Completely agree. Remaining flexible, tracking bleeding edge data carefully. AI could be such a game changer. We need to capture this trend. I think it's spot on, spot on. And so that's their conclusion. My only, I know they can't give investment advice here, but I wish they took a slightly firmer stance and said AI will be a game changer. We need to capture this trend. They sort of leave some ambiguity there. But yeah, I think that that's drawing it back to earlier stage venture that feels like people are doing rounds that they feel are quote unquote overpriced, that they're a little bit uncomfortable with valuations or the amount of investment that's being made at oftentimes, you know, with just a deck and a team.

44:26But at the same time, you know, nobody can afford to miss AI. Like if you come out of the next five years and you don't have, you know, multiple bangers, don't expect to be a, you know, serious fund over the long run. Yeah. So the poly market on the U.S. recession in 2025 is down at 30 percent. Still a little bit higher. Like wouldn't be that crazy if it did wind up happening. But in general, that's that's looking pretty positive on on Liberation Day. It was at 42 percent on April 1st, the day before tariff. So it was already climbing. I think people were expecting something to happen. It was very low at the start of the year, February of 2025.

45:09This was down at 22%. Spiked all the way up to 66 % post-trade war. Was kind of hovering around 50%, 60%. More likely than not to happen, recession. And it's since been dropping and dropping. And basically every day for the past few weeks, it's dropped and is now around 30%. But we got to get it to zero, folks. We got to get it to zero. It's a team effort over here. in the American economy. Let's make it happen. Don't, you know, next time you're frustrated with the economy, don't be thinking, what's the economy going to do for me? Ask yourself what you can do. Exactly. Don't take it. Don't take your frustration or your consumer sentiment out on the economy.

45:49It's okay if somebody calls you up. Hey, I'm from Pew Research. How are you feeling? You can tell them the truth. You can tell them you're not feeling good. But when it comes time to do some Christmas shopping, just go all out. Just go all out. Just get on Bezel. Just buy the most expensive watch you can possibly afford do it you're contributing to yeah yeah I mean your bezel concierge is available now to source you any watch on the planet and what could help build the American economy more than fantastic luxury watches available on demand at get bezel comm anyway the other side of this narrative going even yes going even broader is there's now questions about the the the US debt and so Wall Street has been sounding the alarm on the US debt.

46:33This time it's worth listening, says the Wall Street Journal. Jamie Dimon says, you are going to see a crack in the bond market, and he has plenty of company here. So I wanted to give a little bit of a review of this because even Elon Musk has been talking about the struggles of the government and how some of his optimism around writing the budget and creating a budget surplus did not come to fruition like he was hoping for. So the big question is, is the U.S. going broke? It's not possible. Joe Weisenthal, we print dollars. We're good. We have a dollar machine. We have a dollar machine. Yeah, the other element, this went out right as we were about to go live, but Elon posted at 1031 about an hour ago.

47:21I'm sorry, but I just can't stand it anymore. this massive outrageous pork filled congressional spending bill is a disgusting abomination shame on those who voted for it you know you did wrong you know it wow so not mincing words it's rough um and breaking breaking rank from uh he's not a government employee anymore he's just a citizen he can yeah he can voice his opinion however he wants. I think the bigger question is like this. Yes, like this, this might be depressing to Elon. This might not be the outcome he wanted, but in many ways, this is business as usual. And and so how can the U.S. economy steer its way through and how can markets react and how can companies build through what is continues to be a pork spending package as it has been for decades.

48:17Right. And I think the answer we're going to come back to again is just continue to dominate on the frontier of technology, continue to win in AI and space and all of the companies that Elon is already working on. So Elon is kind of focusing on the thing that actually helps. He had already shared something like a week ago that he said, I'm not convinced we can solve our problems politically through the government. We need to just grow GDP. Exactly. And so if GDP does start growing at 5%, 10 % because of all the technology that folks are working on building right now, well, then that probably actually does start solving the budget deficit.

48:52Unless we just find ways to spend more pork. Who knows? Hopefully we can hold it in. So featuring an illustrated Uncle Sam with pockets turned inside out, that was the cover story of America's most influential news magazine in March of 1972. Sounding the alarm about a debt crisis has been great for companies shilling gold coins and flashy financial products, but has made smart, sincere people look silly when nothing happened. Financial markets equivalent of Y2K. So why are several people suddenly worried? Because the math is getting daunting with interest on the debt blowing past$1 trillion annually and Washington acting recklessly.

49:31Even people who have issued past warnings deserve a second or third or fourth hearing, and they link to something which I'm sure is someone who has warned many, many times. So hedge fund manager Ray Dalio does have something to sell. His book, How Countries Go Broke, out Tuesday. Yeah, so he launched this this morning. Oh, cool. It's available now. Let's invite him on the show. It'd be great to have him. Yeah. But the world's 172nd richest person is hardly staking his reputation on royalties, and his arguments are compelling. Again, Ray Dalio, I actually did a, I made a YouTube video about like, like when is a, like how would you quantitatively define kind of a, like a fake guru, someone who talks about business, but doesn't actually, like, like what is the difference between like an entrepreneur or an investor that just get talks or writes a book versus media is their only thing.

50:24And, And Dalio, you can kind of, yes, he has incentives around his business, but he does not make the majority of his money from his book. And so the optimistic case is that his book is less about just selling copies. It's more about actually sharing his worldview or trying to influence his broader business. Even maybe hiring at Bridgewater could be more of a needle mover for him than just selling copies. So I think it's worth investigating. Dalio told Bloomberg he gives America three years, give or take a year, to avert an economic heart attack. Peter Orszag, chief executive of investment bank Lazard and former budget director, wrote last week, those who bemoaned the unsustainability of deficit spending and debt levels back during his time in government seemed to cry wolf a lot.

51:21Now he's worried too, because the wolf is lurking much closer to our door. The package. So this is what Elon was alluding to. The package of tax and spending measures sent to the Senate now officially called the one big beautiful bill act could act like budgetary wolf bait. It would add around 3 trillion to debt levels over the next decade compared with existing estimates and$5 trillion if certain temporary features were made permanent, according to the Nonpartisan Committee for Responsible Federal Budget. For perspective, the federal interest this fiscal year already will be more than the defense budget and more than Medicaid, disability insurance, and food stamps combined.

51:58Moreover, the Congressional Budget Office estimates assume that the bond market will not only tolerate a surge in spending but become more relaxed about it with lower yields. Consider if the yield on the 10-year Treasury note stayed at today's level around 4.4 % for the coming decade. Then the CRFB estimates it would add another$1. trillion in interest costs over that period. Wow. And what if yields surge instead in a vicious cycle? JP Morgan chief and absolute Chad Jamie Dimon warned on Friday of the consequences. You're going to see a crack in the bond market, okay? Yeah. Yeah, it's interesting.

52:33I feel like as I grew up. We should try to pull up what he was saying exactly before and after that, because I'm assuming that it adds some important context. Please, yeah, go pull it up. I'm just thinking about, like, throughout my life, there's been whole news cycles around this idea that the defense budget is so massive, and it's this massive part of the federal budget overall, or Medicare and Medicaid and disability insurance. These are huge, huge costs, and they drive the majority of the federal budget. And now we're at a point where people would always talk about the defense budget or Medicaid as being maybe wasteful or maybe unoptimized, but at least you're getting something for that.

53:21You know, like with those budgets, even if it's 60 % or 50 % or 20 % less efficient than it could be, at least you're getting something. with interest you're literally getting nothing you're just paying the debt and that's it it's like it doesn't even have the opportunity to create to create any like value or security or health care for someone like it's pure just just paying back for something yeah so after a long time ago after jamie diamond said you're gonna see a crack in the bond market okay he says uh and this is why the journal didn't want to include it because it's uh he says after stating this quote Diamond emphasized that this bond market fracture is inevitable, though he is uncertain whether it will happen in six months or six years.

54:03He warned regulators directly that you are going to panic, but he himself would not panic and expects JPMorgan Chase to manage through it. He also highlighted that current bank regulations restrict banks' ability to hold bonds, limiting their capacity to provide liquidity during market disruptions, which could exacerbate the crack in the bond market. So, anyways, he's seemingly frustrated with the new spending bill and spending broadly. Yep. The Wall Street Journal continues, Yet the bond market isn't exactly collapsing, even if 30-year yields recently hit a post-crisis high. So who are you going to believe?

54:40Millions of fairly relaxed investors or some wealthy pundits? Another hedge fund manager, Paul Tudor Jones, calls the paradox an economic kayfabe, a term from professional wrestling. Let's give it up for professional wrestling. We love professional wrestling on this show. Round of applause. WWE, if you're listening, I'm ready to get in the ring. Let's do it. Let's do it. We could be the absolute, it's heel that everyone hates. Yeah. They'd be like, these slick tech bros, like that tech bros. And then we just get destroyed by like the - Logan Paul. Yeah, Logan Paul. Great. So he says, those who know that the numbers aren't sustainable are happy to suspend belief while the show continues.

55:22Treasury Secretary Scott Bessent reiterated this past weekend that the U.S. will never default on its debt, but it doesn't have to. Rapid inflation would accomplish the same thing if the Fed had to ride to the rescue through a measure called fiscal dominance. What is the tipping point for the bond market to go for mild anxiety? Bad things, something so cool. I know, sounds great. We do have fiscal dominance. Former IMF chief economist Kenneth Rogoff an authority on debt crises explained in April that they are never a matter of simple arithmetic. Almost every country default, either through outright default or high inflation, occurs long before debt calculus forces it to.

56:03Despite Dalio's guesstimate, knowing when doomsayers will be proven right is impossible. Consider Stein's law. If something cannot go on forever, it will stop. Contrary to urban legend, that line wasn't uttered by Ben Stein, who played the boring economics teacher in Ferris Bueller's Day Off, but by his father, Herb, an actual economist. Life comes at you fast. Very rough. Well, if you're losing sleep over the tumult in the public markets and the global economy, you got to get an eight sleep. They have a pod five ultra, a five-year warranty, 30-night risk-free trial, free returns, fast shipping.

56:36Are you about to tease what I'm going to tease? Yeah, I was going there. I mean, I don't know if we should I don't know if we should roof it out. John's had a good bit lately that eight sleeps are just so comfortable that they actually, they should test them on animals. Well, recently I've been doing some animal testing at home, actually, with my eight sleep. With your own dog. Yes. So my dog, obviously grumpy because there's now kids around the house and I think he's getting less attention. And also he's just a grumpy old 10-year-old Newfoundland. But I come home and he's always sleeping on the bed, on my bed, on my eight sleep.

57:08And he's doing it more, and I don't know if it's correlation or causation, but I think he loves the eighth sleep. Yeah. But he sleeps right in the middle. So he's getting, like, warm on one side, cold on the other side. He wants a blend. That's good. So he can just roll to one side. Yeah, yeah, yeah. So, you know, proudly animal tested. You can change the temperature on either side. It's perfectly adjusted. Once he learns to use the app, it's going to be a game changer for him. You should get him an iPad by the bed that he just tapped around. Yeah, we just need his nose. How did you do last night?

57:38I got an 87. I'm not proud of it. I was up a little bit late, but I kind of slept in a little bit. I bet I got crushed on the regulation. The consistency. The consistency. 82. 82. Okay. What'd you get? I got an 87. I just need to put up seven straight nights of sleep dominance. Sleep dominance. We'll see you tomorrow. NVIDIA earnings. So from the Wall Street Journal, NVIDIA's business is booming despite being shut out of China. We've been covering this for a while. Jensen's been running around the globe building AI factories everywhere on an absolute tear and most recently the Nvidia shares surged 5 % after hours as quarterly revenue surged to a record 44 billion.

58:21Let's hear it for Jensen. I think you should hit the gong for Jensen. I mean, 44 billion. Why don't you hit it John? I want to see you on the can we get the gong cam pulled up? Market clearing order inbound. There we go. There we go. It just keeps ringing too. Yeah, yeah, it just keeps ringing. When we hit the soundboard, it's pretty quick. The soundboard's in and out in like five seconds, but the gong, the real gong, you can't beat it. It's the best. And so, NVIDIA's business is still booming, even with the company effectively shut out of one of the world's largest markets for advanced AI chips.

58:59Chips, the chip titan has been on a roller coaster over the past few months after the Trump administration moved to limit sales on chips to the Chinese market. We're having Aaron Gin come on later in the show and he'll break down kind of what's happening most recently with Nvidia and chips. He's the GPU whisperer. You of course know him if you've been watching the show. Nvidia, which has emerged as one of the most valuable companies because its chips provide the computing power needed in a global AI arms race, posted another quarter of record breaking sales on Wednesday. Let's hear it for them.

59:29Revenue reached$44 billion for its first fiscal quarter, a 69 % increase that was curtailed by Washington's new limits on Chinese chip sales. The company was unable to ship$2.5 billion of its H20 processors and projected$8 billion in lost revenue for the current quarter due to the policy. It's just a flesh wound, John. You lose$8 billion in revenue, which is high margin revenue, too. We're not talking Amazon here. and you still put up$44 billion and your stock goes up 5%. It's fantastic. NVIDIA's longer-term outlook in China remains a major question mark. The company admitted on Wednesday that has limited options.

1:00:07The significant thing here, NVIDIA surpassed Meta in quarterly revenue. Yeah. Wow. That's insane. Insane. Yeah. Yeah, and I mean, yeah, absolute dominance of the NVIDIA CUDA ecosystem, The number of developers on Nvidia has been surging as we saw in Mary Meeker's trends report And the company seems very very well run at the same time Dylan Patel George hots putting the screws to arm arm seems to be or AMD seems to be catching up seems to be taking that Feedback and trying to solve some of the problems that have been keeping developers off of that platform Even though the cost per flop has been quite good on AMD the ecosystem hasn't been quite there but obviously everyone there is well aware of the opportunity of taking a little bit of NVIDIA's market share.

1:01:00And so this is an interesting takeaway. NVIDIA credited its new Blackwell gaming processors, part of the same family as its current lineup of AI chips that are seeing red hot demand. Blackwell for gaming is a home run, NVIDIA's CFO, Colette Kress, said in an interview. For the current quarter, NVIDIA projected revenue of$45 billion plus or minus 2 % compared with analysts' view of$45.84 billion. The company expects meaningful decrease in data center revenue from China as a result of the H20 ban. And so this is the interesting takeaway from Ben Thompson's post-earnings analysis. So he said he is really focused on the difference between the transition from training build outs to inference.

1:01:45Because training, we've seen the scaling law there, we kind of know the race to get a build a 20K cluster to 100K cluster, and that's pretty easy to forecast because the CEO of a foundation model company comes out and says, we're gonna build 100K cluster, and you know they're gonna buy that many GPUs, right? But the inference is much more consumer demand based, and it's always unclear. These products seem great, but how are they actually going to get installed? How many tokens are they actually going to be generating? And then what is the trade-off within those tokens of reasoning and heavy test time inference workloads versus more like lower volume workloads?

1:02:27And so Ben Thompson says, last year I expressed concern that inference workloads were not increasing as a proportion of NVIDIA sales. So he says, it's worth noting though, that while the company reported that 40 % of its chips were used for inference, that is the same percentage of last quarter. So keep that in mind. 40 % of NVIDIA chips are used for inference. It's 60 % training. I think that's the breakdown when he's talking about AI specifically. Granted, that is a large increase in absolute terms, by and large matching NVIDIA's revenue increase. And of course, training large models requires ever more GPUs, but the arrival of meaningful AI workloads will be marked by an increasing percentage of chips being used for inference, assuming, of course, that inference workloads will be run on NVIDIA chips.

1:03:12And there was always a question of like, maybe you train the model on a big NVIDIA cluster and then you bake it down so small that it runs on the iPhone locally or it runs on a CPU or it runs, I mean, unlikely that that would ever happen. But people have been able to distill models down so far that you can inference them on other chips that might be more affordable. But that really hasn't happened because of the CUDA ecosystem. And it feels like in general, most of the inference has stayed with NVIDIA and we see that in their earnings. But yeah, now you have the TPU and then Meta's Artemis. Yep.

1:03:42And so Amazon has Tranium and Inferentia. So they have a training chip and an inference chip. There's different. I think it's Inferentia. But both of those are in-house chips. But for most companies, they're training and inferencing on NVIDIA. And so on the latest NVIDIA earnings call, Jensen Wong and Colette Kress, the CEO and CFO of NVIDIA, were adamant that workloads for inference were skyrocketing. And here are a couple of quotes that Ben Thompson highlights. AI workloads have transitioned strongly to inference and AI factory buildouts are driving significant revenue. This is from Colette Kress.

1:04:19And so I think we were kind of asking the question of AI factories. Is that just some buzzword? Is there a distinction there? And what I'm hearing there is the start of AI factory means more data center that's more... Producing intelligence. Exactly. It's more inference-focused data center design, which I think there are specific trade-offs that you would need because you don't necessarily need to run the same code over the entire data center. You can shard it up a little bit more because one inference job can be done on the single rack. and so maybe linking all the racks together is not as important.

1:05:01Potentially, I don't know enough about how training breaks down. And you were right, by the way, Amazon's in-house AI chips are called AWS Trainium and AWS Inferentia. Let's go. Let's hear it from my memory. Yeah. Still got it. Yeah, golden retriever mode. Yeah. Colette Kress went on to say, we are witnessing a sharp jump in inference demand. OpenAI, Microsoft, and Google are seeing step function leap in token generation, which we saw from that Satya Nadella quote. Microsoft processed over 100 trillion tokens in Q1, a five-fold increase on a year-over-year basis. And so she's now quoting Satya, talking about token increases.

1:05:38Wong says, reasoning is compute intensive, requires hundreds to thousands of times more tokens per task than previous one-shot inference. Obviously the difference between 4.0, one-shotting something, and deep research, which says they're generating tokens for 20 minutes, wildly different. Reasoning models are driving step function surge in inference demand. AI scaling laws remain firmly intact, not only for training, but now inference two requires massive scale compute. Wong goes on and says, the first positive surprise is the step function demand in increasing reasoning AI. I think it's fairly clear now that AI is going through an exponential growth phase and reasoning AI really busted through concerns about hallucination or its ability to really solve problems.

1:06:21And I think that a lot of people are crossing that barrier and realizing how incredibly effective agentic AI is and reasoning AI is. So number one is inference reasoning and the exponential growth there, demand growth. And so Ben goes on to say, this is all great news for NVIDIA specifically and AI generally. But what was missing was an update on that percentage of chips used number. It certainly sounds like it's more than 40%, but it would have been nice to receive concrete information that that number has, in fact, increased. And so I don't know how we get that information. We're talking to Dylan Patel on Friday.

1:07:02We can kind of see if he has a way or a methodology to try and figure that out. But that does seem like a very, very interesting question to ask. It might just be too soon to really be shifting, but maybe the plan for the next data center and the order hasn't hit NVIDIA yet will be more inference focused and we could see a boom in, and we could see a shift in that number. And maybe it just hasn't shifted yet in Q1 revenue, but it's totally possible that Jensen has visibility into Q2, Q3, Q4 orders and sees that demand is going to go crazy for inference specifically. we're gonna be looking at 10 % training, 90 % inference, but he can't say that yet because the orders haven't actually been placed and he's only looking backwards.

1:07:47So he's trying to kind of like, you know, message that inference is picking up. You can see a bunch of public data points from Satya talking about this, but nothing to report on the actual order side just yet. And so he doesn't want to send the message that it's not moving because then people will be like, well, maybe it'll never move. So I don't know, that's my reading on that. Anyway, let's go into NVIDIA's China argument. So the upside surprise for investors is that NVIDIA is growing just fine without selling to China. Although, again, although Ben Thompson says, I'm not sure this is a surprise.

1:08:18NVIDIA's sales have not been gated by demand, but by supply for a long time. I remember you making this exact statement last year. I got it from Alex Wang. Yeah. Why do we need to sell to China at all when there is effectively... Larry Ellison and Elon Musk are getting dinner with Jensen saying, we will buy as many GPUs as you can produce. Like they are good for the deal. Like you can just sell to them. But of course, if you're a global company, like there is a shareholder responsibility to have some diversity of revenue. And then there's also that interesting argument of, is there value to - We want them to be dependent on American AI.

1:08:57But - Yeah, I mean, the hypocritical thing here is that we, you know, I'm sure we have said, hey, you know, it's not fair that TikTok operates here while Facebook can't operate there. Well, now, what would we be talking about right now if Facebook was actually in China operating? Would we be like, they shouldn't be? Like, it's a powerful tool. It's beneficial. Google is there. That's a beneficial tool. Why are we helping them? So, like, we're in this weird dynamic where you can't say both, right? You can't say it's wrong that companies are banned in China, American companies are banned in China, but also the ones that aren't banned should, like, self-ban.

1:09:35when in fact most American companies for a long time have. But this is all part of the shifting narrative and the shifting geopolitical equation. So it is unclear. Ben goes into the timeline. Somebody's quoting a post from the Financial Times. Jensen saying four years ago, NVIDIA had 95 % market share in China. Today it is only 50%, the CEO said, criticizing the curbs for spurring rivals such as Huawei to develop their own AI products. Balding's World says this has been the story of every CEO that has gone to China, how do these I'm not gonna say that how do these guys not get this story yet I won't even see I won't call a big tech CEO an idiot yes it's disrespectful I can't do it anyway so Ben says what I believe balding is referring to is the pattern in which a multinational moves manufacturing to China at the cost of a joint venture or technology transfer only to see their market share competed away by Chinese competitors benefiting from their technology this is of course the exact opposite of what is happening to Nvidia.

1:10:35The company's market share in China is falling because of the US government's export controls, not because of Chinese government policy. Is that fully true? I think so. You don't think competition is factoring in there at all? No, no, no. I mean, because if you look at the cost per flop, Huawei Ascend is more expensive on a per cycle basis. And so if it was a truly free market, that you wouldn't see nearly as much demand for that. And also in the same way that demand for GPUs uncapped in America, it's uncapped in China. Like they want to build a hundred thousand cluster right now. They would if they could.

1:11:13Yeah, but I'm sure in a supply constrained market that would naturally help other upstarts get market share, even if they're selling an inferior product, but if customers can't access, but you'd rather have a Huawei GPU than no GPUs at all. Yeah, yeah, yeah, yeah, totally. Absolutely. Moreover, unlike the vast majority of other product categories, one would in fact expect NVIDIA to maintain its market share if it were able to compete. The difference, of course, is software. NVIDIA chips are not just about GPUs, but about the CUDA software layer, which has network effects. NVIDIA not only has the best performing chips on the market, matched at times in pure performance by AMD, they also by far have the largest ecosystem of software and developers, which makes them the first choice for everyone if you can buy them.

1:11:55Wong's argument is that not only does NVIDIA want to sell to China, but the US should want him to sell to China too from the call. This is a tough argument to make, but you know, let's hear him out. He says, China's AI moves on with or without US chips. It has to compete to train and deploy advanced models. The question is whether China will have AI. It already does. The question is not whether or not China will have AI. It already does. The question is whether one of the world's largest AI markets will run on American platforms. Shielding Chinese chip makers from US competition only strengthens them abroad and weakens America's position.

1:12:30Export restrictions have spurred China's innovation and scale. The AI race is not just about chips, it's about which stack the world runs on. As that stack grows to include 6G and quantum, US global infrastructure leadership is at stake." And yeah, it's interesting. is the control over Facebook was so strong that because there's network effect, but also all of the data is run on Facebook servers, that Facebook really has an insane amount of control. When you hand over a GPU, obviously there are some value to the ecosystem and the lock-in, but you can kind of do whatever you want with it because it's hardware and you're not maintaining the software and gating access.

1:13:15So there is something different there, but I do take his point. And so Ben Thompson goes on to say, it seems clearly in America's interest for China to have a dependency on a US software platform. Then again, it also seems to be in America's interest to have China dependent on Taiwan for chips, but that argument is not winning the day either. This article goes on, it's great, and you should subscribe to Techery to get the full thing. So anyway, we should go to this Bloomberg piece that Ben highlights a little bit. NVIDIA's open ecosystem to rival chip makers is in global push. They're opening AI ecosystem to these chip makers.

1:13:57So NVIDIA Corp. Chief Executive Officer Jensen Wong outlined plans to let customers deploy rival chips and data centers built around its technology, a move that acknowledges the growth in-house semiconductor development by major clients such as Microsoft and Amazon. on Monday, Wong kicked off Computex in Taiwan, Asia's biggest electronics forum, dedicating much of his nearly two-hour presentation to celebrating the work of local supply chain partners. He's gone for a two-hour presentation. Oh, okay, yeah. It sounds crazy, the fact that he's going and opening up this conference and giving a two-hour presentation.

1:14:31It's pretty awesome. But then I remember we come up here and do three hours a day. And do three hours a day. Every day. Well, he should come do the show with us sometime. Do the whole show. Yeah, let's do the whole show. We'd love to have you. Imagine ripping some timeline with Jensen. We'll make it happen. It'll be electric. But his key announcement was the new NVLink fusion system that allows the building of more customized artificial intelligence infrastructure, combining NVIDIA's high-speed links with semiconductors from other providers for the first time. And so this is a little bit of what we're seeing where there's now chip startups that are building chips for specific use cases.

1:15:11So an example would be like Etch. They're baking the transformer architecture down onto silicon. But you could even look at Apple Silicon as something that might benefit from the NVLink fusion system. Potentially, I don't know if it's actually saying, hey, we know you hyperscalers are building your own chips. We still want you to be dependent on our software, even if you're going to plug in. Yep. And so to date, NVIDIA has only offered complete computer systems built with its own components. So you buy all the chips and all the racks and everything wires together very nicely. And that is very important for data interchange and especially while you're training.

1:15:47This change gives data center customers more flexibility and allows a measure of competition while still keeping NVIDIA technology at the center. NVLink Fusion products will provide customers the option to use their own central processing units with NVIDIA's AI chips. Their CPUs now pair with NVIDIA's GPUs or pair NVIDIA Silicon with another company's AI accelerator. So you can kind of do the inverse and bring up a specific accelerator for a specific use case. Santa Clara, California-based NVIDIA. They love to throw in the location of these companies. It's very funny. Oh, yeah. Everybody associates NVIDIA with Santa Clara.

1:16:26I guess. They're trying to shore up its place at the heart of the ad boom and keep the surge going in the face of concern that spending on data centers isn't sustainable. The company relies heavily on a select group of giant cloud providers known as hyperscalers for much of the revenue. And all of those hyperscalers are, of course, thinking about building their own chips because if they're going to be ordering so many, the margins are so high, why not just go to TSMC directly? And so this bit of news, this is back to Ben Thompson, this bit of news from Computex two weeks ago is a reminder that CUDA isn't NVIDIA's only moat.

1:16:58The company is also dominant in networking, particularly the ability to link multiple chips together so that they function as a single large chip. The key to this so-called scale-up capability is NVLink. And so NVIDIA will license its chip-to-chip C2C technology to enable custom configurations. For example, Grace Hopper was an NVIDIA ARM CPU and an NVIDIA Hopper GPU. Oh, I didn't realize that. The Grace Blackwell is an NVIDIA ARM CPU and two NVIDIA Blackwell GPUs. If you don't want that configuration, you're out of luck, or at least you were, because now you can license NVIDIA's C2C technology, and license seems important there, to make any number of combinations, and it doesn't have to be NVIDIA chips that are being combined, although NVIDIA is obviously confident that you'll choose their GPUs, because yes, they are the best in the business.

1:17:51Fascinating. Anyway, we should move on to this Nike story in the information, because there's a very, very interesting chart, again, from Ben Thompson that I thought everyone should be thinking about in any of their business. So the big news is this is from the information in May 21st. So it's a little bit of an older article. But Nike announced that they are going to sell on Amazon for the first time since 2019. So it's been six years off. So six years ago. They went all in on D2C. Yeah. They really got the D2C bug. They did. And they said they read the thought pieces. They read the newsletters.

1:18:29Cut out the middleman. Yeah, they were pissed at the middleman. They tried to cut him out. And now they're making a deal with the middleman. And so six years after Nike stopped selling through Amazon in favor of going direct to customers through its own stores and websites, the two companies are getting back together. I'm sure it was super rough because tons of people probably went to Amazon every day, typed in Nike, and just got Nike knockoffs, right? Because they were just used to buying on Amazon. Amazon plans to start selling Nike products with supplies coming directly from the company. An Amazon spokesperson confirmed Wednesday, winning back one of the world's best-known brands is a victory for Amazon, which has long tried to expand its fashion business by wooing skeptical brands.

1:19:09Nike's deal with Amazon, meanwhile, comes as the sneaker maker is trying to revive slumping sales. So Amazon is going to buy from Nike for the first time since 2019. And this is all an effort to revive slumping sales. Now, Nike's revenue is down a ton. In the most recent quarter, it fell to$11.3 billion, down 9 % from the same period a year earlier, while wholesale revenue fell 7 % to$6.2 billion. And so Ben Thompson calls this Nike's disastrous pivot. He says there's a lot that has been written by Nike struggles over the last few years, including a LinkedIn post by former Nike's executive. And he outlines three key mistakes here.

1:19:58The elimination of categories like running, basketball, et cetera. A massive deprioritization of wholesale in favor of direct-to-consumer sales. And a shift away from brand marketing to direct response. Trying to avoid middlemen in business is rough. It's like, oh, we're going to have our own retail stores. And it's like, okay, well, you have a landlord. So he's your middleman now. And so, yeah, the middleman analogy. Are you selling online? Yeah. Okay, welcome. Meet Mark Zuckerberg. He's going to be your new middleman. It's like trying to avoid the middleman is very difficult, right? It's interesting because the middleman analogy has actually worked just fine.

1:20:39And Ben Thompson has this cool chart of the CPG value chain and shows that Procter & Gamble literally does not cut out the middleman. In fact, they leverage the middleman and they're doing fine. So what does Procter & Gamble do? They do research and development and they do manufacturing, but they don't handle the middleman. So they don't handle logistics or retail, but they do dominate shelf space with trade marketing and then marketing, like brand marketing. And so CBG companies like P &G harvested most of the value by integrating research and development, manufacturing, marketing, and shelf space.

1:21:14Raw materials, retail, and logistics were modularized and commoditized. D2C companies, meanwhile, saw research and development as increasingly unnecessary and over-served markets. As I noted in the context of Dollar Shave Club, razors are a particularly salient example of over-serving. And shelf space on the internet was effectively infinite. Their goal was to integrate marketing, retail, and manufacturing. And so the theoretical, if you scroll down, the theoretical D2C value chain is no R &D, just manufacturing, no logistics, but yes, retail. You don't have shelf space, but you do the marketing.

1:21:51And so Ben Thompson says the problem, though, is that marketing on the internet was entirely different than the analog marketing that previously dominated the CPG industry. their being good at advertising, whether it be coupons in the Sunday paper or television ads during the evening news, was mostly a matter of the ability to spend, which was itself a matter of scale. Digital marketing, though, didn't really work at scale, at least relative to TV. In fact, it only made sense if you could target consumers with advertising and track how it performed. On the one hand, this was a critical factor for making D2C companies viable.

1:22:25The advantage of targeted advertising is that it takes a lot less money relative to TV to reach customers who are actually interested in your product. The problem, though, is that getting good at targeted advertising requires massive amounts of both research and development to build the capability and inventory across a sufficiently large customer base to make the whole effort worthwhile. In the end, no D2C company was actually good at marketing. They outsourced it to Google and Facebook, which both had the inventory and the capability to spend billions necessary to develop sophisticated targeted advertising.

1:22:55The problem is that in the process of depending on Google and Facebook for marketing the DTC companies gave up their planned integration in the value chain and the associated profits to Facebook and Google. And so the actual DTC value chain is they're not a manufacturer. They don't do retail. They don't do logistics. They don't do marketing. Instead, they just do R &D and ad inventory. And so the actual customer is just completely owned by Facebook. And that's why you see a lot of DTC companies that have really, really struggled. So the actual integrated players, Google and Facebook, integrate customers and research and development to dominate marketing.

1:23:27D2C may have online retail operations, but that is a modularized and thus commoditized part of the value chain. And, oh yeah, he called up Brandless, the D2C kind of like roll-up that had a whole bunch of products. And he said, here's the problem for D2C companies. Facebook is really better at finding them customers than anyone else. That means the best return on investment for acquiring customers is on Facebook, where D2C companies are competing against all the other D2C companies and the mobile game developers and the incumbent CPG companies and everyone else for user attention. That means the real winner is Facebook, while D2C companies are slowly choked by ever-increasing customer acquisition costs.

1:24:08Facebook is the company that makes the space work, and so it's only natural that Facebook is harvesting most of the profitability. dynamic where meta is incentivized to uh make uh customer acquisition like basically extract as much of the profit from the ecosystem as possible without putting the companies out of business yeah right and so it's this infinite dance yeah i mean that that's actually a very simple equation it's take all the net profits but not any further yeah so that the company can continue to go but the equity value is effectively zero. And this is why when Sean Frank from Ridge was on the show one or two times ago, we were talking about how historically I've seen D2C brands benefit from net new platforms.

1:24:54Like a lot of brands exploded from cheap advertising on TikTok, right? If, you know, it seems like LLMs are an interesting new acquisition channel, still relatively small channel for a lot of brands, but it's possible when ads hit LLMs that they're cheaper and that that could drive you know a period of where brands say hey let's like shift a bunch of spend over here because it's you know really efficient um but who knows facebook is still the best marketing channel in the history it's the second best in fact the number one obviously ad quick out of home advertising made easy and measurable say goodbye to the headaches of out of home advertising only ad quick combines technology out of home expertise and data to enable efficient, seamless ad buying across the globe.

1:25:39But seriously, Nike is the king of billboards. Yeah, they really are. I mean, they used to be. They used to be. They used to be. And the billboards were fantastic. And everyone remembers a Nike billboard. No one remembers a Nike direct response ad on Instagram. Yeah. Like, I'm sure people clicked on them, and I'm sure they drove some sales. But the economic equation just didn't quite work. Yeah. Well, we walked by some billboards today that are funny. There is a huge billboard campaign across LA called Just Blood. Oh, yeah. talking about uh basically it's a campaign to prove that elizabeth holmes is innocent so there are effectively uh i think there there's got to be 20 billboards up around la uh so i'm interested to follow along with this campaign if you go to justblood.com it's quite a lot of ai generated assets um and it seems it's kind of an angry website but i'm interested to dive deeper there going back to some of nike's errors the they deprioritized wholesale and then the big one was a shift away from brand marketing to direct response marketing so when people think about why they love nike maybe sometimes it's about the product but a big part of it is how the nike brand has made them feel over time and it's really hard to make people emotional through direct response advertising because direct response advertising is like problem solution yeah it's not about the emotion yeah and when i think about the moments in my life where i've where i've paid attention to nike and you know been made made to feel anything by nike it was these sort of bigger brand campaigns and brand marketing does provide a halo effect that can reduce overall customer acquisition costs because if you see some nike campaign that inspires you or makes you emotional and then you see a direct response ad later, you're more inclined to actually click through.

1:27:34And so big miss by John Donahoe to just sort of not realize that so much of Nike's dominance was around the brand. The other thing is like, you know, you look at these upstart players in apparel, things like Rory, Aloe, Lululemon, they're all, you know, and we talked about this on the show before, Nike missed wellness, right? They miss this trend that a huge amount of the population, people, consumers with a lot of discretionary income stopped seeing themselves as athletes and started seeing themselves as yogis, people that meditate, people that eat healthy but don't necessarily see themselves as I'm an athlete.

1:28:16So big miss that I believe they're still trying to actually get tapped into. Yeah, well, it seems like they're pivoting back to the more traditional strategy. And probably we'll see some refocusing on brand marketing. Because they'll just be everywhere. And they won't try and cut out the middleman anymore. They'll just be everywhere. And hopefully we'll see some amazing Nike ads coming up soon. Anyway, we have our first guest of the show, Doug Philippone from Snowpoint Ventures, joining us. I'll let you take the intro. Perfect. I'll be right back. Doug, how are you doing today? Let's bring him in here.

1:28:53I'll give a little bit of background on Doug in the meantime. He has a degree from West Point, spent 17 years in the military, and then another 17 years at Palantir, building the defense business from nothing into a global defense lead. So we're excited to talk to him about that. And it'll be very interesting to cover the Ukraine drone attack, which we talked a little bit about yesterday. But there's a lot more that we can dig into there. So Doug, how are you doing today? Great. Thanks for having me. Thanks so much for joining. I'd love to kick it off with just a little bit of your background first, and then we can go into the latest news in Ukraine.

1:29:30Yeah, no, that's great. Yeah, so what is it? Well, I've been on a life journey. I've done a lot. Everything has been hard. I think about everything that I've done in my life, people have told me I couldn't do it, and I sort of thrive in that world. That's awesome. That's always the case, right? yeah well look nothing nothing worth doing is you know is easy uh yeah no i think when i was a young man i was just um i went to college for just a minute and then i was like this is stupid i'm in the hamster wheel uh and i said i wanted to join the army i went into the rangers as a list of guy and then you know got into west point a little bit later um while i was there i studied math all my friends made fun of me uh they're like what are you gonna do with math and uh uh i definitely got the last laugh there that's amazing uh were they just saying like like computer nerd type jokes or no it was just like i mean basically you gotta remember i'm a little bit older but i uh in the 90s it was like it was before the modern internet era and so forth and so um you know computer science was like a hobby more than a real thing you know the internet you know was just coming out while i was in school and so it was um it was just like the idea of like you're going to be a high school math teacher and that's like the that's the end of what math is for and so look at my focus was I'm going to go be an army officer I'm going to go back in the rangers and that's going to be my career but you know I did six tours in the war and got hurt wow and so um you know at that point I went back to grad school and then found a job in the very early days of Palantir and literally like the only reason I got hired was they were trying to start their defense business and they sort of thought that like a terrorist hunter mathematician was a really cool thing.

1:31:14I sort of found like the perfect first job. Yeah, how did you walk me through how you actually met the Palantir folks? What was the first day on the job like? Who was around the table? Was Sean Sankar there? Who else? Yeah, that was fascinating. So back in the day, it used to be, you know, it's like maybe 50 people there, you know, they really had a product. But the interesting thing. So one of my very best childhood friends, Dan Cervelli, he was one of the best engineers at Palantir period. He was like a alternative student. I say alternative. He's like older getting his bachelor's when he's like 32 or something.

1:31:49And he was interviewing at Facebook at Palantir. He's like, Doug, you got to see this. You got to come over. And then he had just joined. And so when I saw like the first demo, even though it was all Intel based, it was very clear I just went back to my time as a commander in the Rangers it was just I was just I was convinced that if I had this I could have done everything better and I really was you know a lot of my friends were still going back to the war and getting wounded or killed and so it was just for me it was about purpose you know I think you probably you probably know a lot of Palantir people but we're all like in this you know strange family that is Palantir everyone is uniquely driven for a sense of purpose.

1:32:34And for me, it was like, I wanted to do something where I could give back. And if I, you know, if I'm honest, if I would have stayed in versus obviously I was hurt, so it didn't matter, but like, I have easily contributed a thousand times what I would have, if I just stayed in towards the, you know, towards, towards the issues. I feel quite proud of that. So, so while you, while you were in the service and you see what Palander can do, could you give Give us a more concrete example of what you're thinking. I mean, I often give, there's a little bit of a meme online, like what does Palantir actually do?

1:33:07And the example that I often give is like, think about if there's IEDs all over the place, some of those IEDs are going to have C4, some of them are going to have nails. And if you put those all on a map, you can decide, you can start to see clusters of trends just on a map, and then you can decide, okay, there's a bomb maker in this town, we should go and investigate that. that's the most concrete example I've been able to come up with that I've read just from the literature. But as someone who was there, what was exciting to you? That's definitely like that. That would be the 2010 version. You know, just sort of like, you know, at the core, it's like they make a software architecture that helps combine a myriad of data systems.

1:33:46So like all these legacy systems, if you think of the defense world, all these different areas, whether it's commercial businesses or the military, the larger they are, the more that they all look the same. The military might be the most complex, but it's all similar in the sense that you have a myriad of legacy technology that's built and modeled around information and capabilities at a certain time. And then over the course of history, it's hard to get rid of those old systems. So if you look at the IT infrastructure of the Department of Defense, it's like you have old mainframes on one end that's modeled certain things on the edge, And then you have like the most exquisite AI sensor that's real-time data and computer vision on the other end.

1:34:28And as a commander, what you're trying to do is assimilate the real world in real time. So it's like you're looking at a map. You're looking at all of your feeds from either videos or satellite footage to understand what's going on and what's changing. And then if you're ever going to go like to understand what's going on in the real world. So you're understanding things and you're making decisions based off that data that you might have to go without Palantir. you have to go a hundred different places. So that was like the existing paradigm that we were replacing is how do you, if you, an old school analyst or an operator would have to literally go individually search a hundred different systems and use an individual tool for each one of those systems that may or may not be good.

1:35:12And then they would put all that stuff in their mind and they write it back on PowerPoint. And then that's how you, and you'd have no legacy search and discovery. you would be violating all of the like handling of the data you lose all the security of it and it's just like on a flat file and you're emailing around i can't tell you like how long that was the paradigm of the military and most corporations can you can you talk about the practical challenges of that there's this concept of the fog of war and i imagine you experience this on your different tours where you have a bunch of data but parsing through it and fully understanding and i I can imagine in many ways, Palantir, if you can more quickly and accurately process information from more sources, you can reduce that sense of sort of unknowing that seems to be historically, you know, common across every different type of battlefield.

1:36:08Yeah, no, I mean, the short answer is like, it will save your life. And you can have a successful mission or not. I mean, the historic vignettes that are like pretty powerful for regular people to understand is like, as the military would plan a mission to go in and out, like forget about the real time stuff that is obviously very relevant of just like knowing what's going on and how strategic things are moving around. And if someone's attacking you, like you have to have that side of it, which Pounder does a lot of. But like from a historic perspective, once you're planning a mission to be able to understand the full history, if you're staring at a piece of dirt or you have like, hey, we think the bad guys are at this compound or there's a military, a legitimate military target that you're going to strike.

1:36:50To understand the whole corpus of data that you may know about that for the last 10 years. so to give an example of like you know the failures of um the afghan war or iraq for that matter just using the american experience you can do this just about any war is that you know as units would go in and out of a region you would have these like learning experiences that would last three to six to twelve months and then they would at best they would put all the information that they learned whether it's like say so say i went on a mission i interviewed somebody and i I took fingerprints and took pictures.

1:37:28I would write a little note that say, here's the, here's the human terrain of this area. This is what the people care about. Here are the projects. Here's where we did a mission. You know, they usually do an after action mission report about it. And you put on a hard drive and then the new commander would come in, you hand it to them. And then they would probably look at it for two seconds. And I mean, that's literally how it was done for 20 years. And you're just, you want, you're like, how can this with, with all of our might and all of our superiority in every way and the money that we're throwing at this why does it suck so bad anyway so that was you know palantir's mission was to like how do we change that paradigm so that you know the interesting thing if i give a one of the compelling things we did this with the british um you know with with uh i don't even know if you want to say this but think of their most sexy unit the brits yeah and they were they were going into um a specific area.

1:38:22And what they didn't realize over the past five years, they had every time they flew a helicopter into a region, you know, they have this host of analysts that are like they work with helicopter pilots, and they do mensurated graphics. So you understand the exact perfect helicopter landing zone for the mission. And what they didn't realize was that each new team would come in and they would always do their expert analysis, and then always pick the same exact place. And so then all of a sudden, when we integrated all this data for them, they saw for the first time, holy cow, every single time for the last five years that we've gone into this valley, we always landed in the same place.

1:38:59So it ends up being like a very easy, low tech thing for the enemy to put a bomb at the middle of the HLZ. And they're like, anytime Americans come, just blow up the bomb. But that's like, they call that knowledge management, which is like, that's a bit old school, but it's like that was a very unsolved problem forever. And then now, if you get to like real time, what we're doing now, it's like, okay, well, now you're taking real time signals intelligence, you're taking real time video feeds where you're overlaying what the video of the surveillance aircraft will be looking at. And then with the entire corpus of information, you would know about the area.

1:39:34So as soon as you're looking at a piece of ground, you're like 10, 10 reports pop up of everything you know about it. So you immediately have situational awareness that'll help say help you stay alive that's really important can you tell us the story of uh d sigs and the distributed common ground system like how that played out and like the loss to any at any level of detail that you think is appropriate yeah no i don't know i mean look that was my personal vietnam except i won so it's like it's okay it's congratulations yeah think of a different long war that somebody won and that'll be it but it was like 10 years of my life wow 10 years yeah no it was wild and i will tell you that there's a lot of times when i just didn't think or when i literally flew up to new york one time and and rode in the car with dr carp and i was like sir do you still want me to do this you know because it's like i don't know if there's like any amount of hard work or expertise that is going to allow us to win and he had this like great moment of leadership where it was like if any soldiers are still asking this is maybe 2012 I forget exactly but he was like if any soldiers still want this it's worth fighting for it's too important and you know it was just that moment of leadership that I needed so I got out of the car and you know and then like just a you know a few maybe the next week I had some massive win on Capitol Hill but it was I mean look I credit that i mean it's the the reason i started snowpoint and um like the the modern defense tech landscape exists because palantir was able to break that paradigm and you know if you think of the new executive orders kind of like really focusing on uh acquisition reform so you know it was like an old 90s thing um the lawsuit was about this but there's an old 90s it was called the federal acquisition streamlining act i think of 94 but it's during the clinton days um i don't know how old you guys are but it's it was basically um there were these scandals about the 400 toilet seat and the 200 hammers that sounds cheap by modern standards i feel like every day i see a soap dispenser there was a soap dispenser that was like 50 000 or something no but it's the same bs so the interesting thing is so before 1994 and i might be screwing this year up by a year or two But before then, there was this old term called mil spec.

1:41:58And the mil spec idea was that the preference of the US government was to buy custom things as the priority. And so all of those scandals turned it on its head and created this idea where you have a commercial item preference. And so, you know, this is sort of like the, when I talk about the invention or say that, you know, the start of the modern defense tech era, it was the winning of the lawsuit, which I think was 2016 or so. It was the first time since a lot of been passed it had actually been enforced. So our lawsuit was like the precedent setting thing. And all we were finding out, they have like, there's protests all the time.

1:42:39Like almost every major contract gets protested. So that part of it wasn't unique. What was what part of that was unique about this was we weren't it was called a pre-award protest. And so normally a protest is like somebody else wins and then Lockheed gets pissed at Raytheon and then they just argue about who's better. And then the court decides our protest was that we thought we were getting screwed by the army, which we were where they specifically wrote the contract where I had put so much pressure on the army. to expose all the flaws of D6. Like D6 was like simultaneously failing while they spent billions of dollars on it, while over half of the army's brigade commanders were requesting urgently Palantir.

1:43:25So there's this huge battle where, you know, it was like units would request Palantir, the army would block it, I would go to Congress, expose it, and then there was just this back and forth. And I was like enemy number one for years. and this is where all my war fighting skills came into play it was like in many ways fighting bureaucrats was just as hard as fighting terrorists and so i had that like this is why people call you a boardroom general right yeah i was on the front lines though uh but anyways yeah so so in this particular case so the lawsuit it was interesting because this is another experience of like you know between peter teal and carp it was like they trusted me and um i couldn't have done it like it's very unique in the palantir world that like they would that uh everyone said we're gonna lose period and i think like statistically they weren't wrong i think the the the chances of winning these cases are like three percent so it was like clear and then if we won it so basically this is so everybody's like you guys are crazy and they're like doug just do this and um but it was like we were uniquely driven in the sense that we had the moral high ground.

1:44:34We had all the evidence. It was the perfect setup. But anyway, long story short is, we did end up winning. And then we won the appeal three to zero. And so it sort of set up this thing where, you know, at the end of the day, when we won, we didn't get any money. It was like, basically, we just burned 3 million, 3 to 5 million bucks in the hallway on legal bills. But then we had to go compete for the original D6 contract. So it wasn't sure, like I was halfway terrified we threw all this trouble and then the army would blackball us um which could have happened but long story short is that was sort of the the real um legitimate beginning where it was no longer a guerrilla campaign for palantir where we were just winning enterprise contracts yeah you know on the run and then on the merits and it's just you know the software is 10 times better i mean it's just it's so impressive uh to watch i mean obviously i'm officially retired but it's like I'm in the mafia for life.

1:45:27Yeah. Yeah. So can you talk about like the long term build out of the defense business at Palantir, where it is now and then where you're seeing opportunities in defense tech, whether on top of Palantir with their AIP program or just generally outside of the it just seems like the army is modernizing and the DoD is modernizing generally. So companies won't need to go through the same 17 year journey necessarily. really no i mean look that's the whole reason i started snowpoint was the idea was like you know during my journey say i did 100 things right and a thousand things wrong it's like how can i help other companies accelerate through that that cycle and and you know ultimately help help our whole society it's like having everyone succeed including for the services um it's it's a win for everybody in long story short but you know i think it's like it's interesting um you know because during like early years, I was, um, I got the seed corn in across like SOCOM and JSOC, and then a few initial army units.

1:46:27And then that was kind of growing, but we were still searching for the elusive program record. And then we went to, you know, across, there's like 17 different countries that we kind of got started in the military business. I was flying on airplanes everywhere. Um, and we got the seed cord done. And then there's like NATO is like, it was kind of the inside joke of like that's never going anywhere and then now you know of course this is 18 years later it's like we finally you know won this huge contract with nato i'm like you know it's taken it's taken forever but it's it's it's been fascinating to watch and i think that like um what i what i had determined you know again this is rewinding a little bit was like we have to win in the u.s and then once we won in the u.s it was sort of like this the dominoes started falling where, and this is a deep history with Palantir, and I tell a lot of my portfolio companies the same thing, is this idea of like exigent crises is that, you know, many different companies with a lot of different technology will, they all look similar on paper.

1:47:28And so it's like, how do you prove it? And one of the like defining things that I believe about Palantir in particular, but a lot of my, I hold my portfolio companies the same standard is this idea that when there is a moment an exigent moment where it really matters and so in the military context that means that like a commander is doing something people are dying uh you have to win then at that point all the bullshit goes away and you have to have something that actually works that's that's real and um that is something unique in the sense that like palantir has never screwed that up and um and it was just sort of like knowing that it's like you gotta obviously it took us forever But it's like we're past that.

1:48:10We're way past that, you know, say by a couple of years, but past that momentum point where, you know, you were always fighting. Like the biggest barrier to entry was like some loser CIO or CTO inside a corporation or the government saying, don't worry about this. I have this PowerPoint slide and I can build this cheaper, faster, better. and then all the incentives are wrong and then they would slow roll you and and you wouldn't make anywhere and and so the the challenge where we would always say is that the open door was around who cares and are you actually talking to the profit loss owner like where it actually matters where the bottom line matters and in the military that was like the operational commander like if you got buried in the pentagon where they're talking about programs you can't walk four feet without running into like a$300 million disaster.

1:49:02They're all in denial about it. And it's like, because it like either tests out on paper or they're like, it's coming. It's going to be here. It's going to be so awesome. Just don't buy Palantir. It's too expensive. We're going to do something. You know, I mean, dude, don't even get me started. We're getting you started. Let's flip to something much more concrete and timely. What's going on in Ukraine? What's been your reaction and what is the solution or impact to the defense tech ecosystem? Yeah, you know, it's interesting. I traveled to Ukraine in the very early, when Palantir was just getting started there in the very early times of the war.

1:49:44I went to Kyiv just to see what was true and what wasn't true as we got kind of started. And, you know, it's fascinating to think there's like a, there's a deeper political thing and there's obviously a military and technology thing about this. But it also applies to NATO and the defense tech market in Europe versus the United States. And what the hell is Europe going to do now that they have to do something real and stand up their own capabilities? I think this is a fascinating time of accountability. And I think it's good for the world. I do believe that the world is better when the US is the hegemon.

1:50:25I believe that deeply. It's like we can argue about whether or not we can afford it. But I'm like a firm believer in terms of like what I'm doing in the defense tech market. But it's also good for Palantir. All the companies, it's like with less budgets. I mean, I suppose it's always good with more budgets, but it's like with less budgets or trimmed budgets, it's like if you need something real and you have like a short timeline, that's the perfect environment. There's no free chicken. And like the entrepreneurs still have to actually deliver on what they said they're going to do. They have to deliver.

1:50:57But that's the time when you can really succeed. Because when it's like you're kind of doing nothing and you're just like talking about these like five year programs, the tendency is just to waste money. So going back to the Ukraine example, you know, in many ways, like Zelensky single handedly saved NATO, you know, because it's like Biden's plan was to get him on a helicopter and get out of it. like it was just on the heels of the failures in Afghanistan. And then it was like, it was clear, like enemies of the United States, this is your time. Screw with America as much, do whatever you want.

1:51:30Biden's not going to do anything. So it was a very tricky time. The fact that he decided to stay and fight, you know, it was super impressive. It definitely saved NATO. And you have to think also initially, and this kind of goes to like the deeper problem of like, what's the resolution of this and what can we learn from it and i'll try to go faster but um think of this initially is ukraine stopped russia by themselves in the beginning yeah that's something to like really pay attention to and there was there was a few scenes early on because i used to model this of like china versus russia is like the russia was the real military um and china is like this paper tiger and i just kind of like flip-flopped all that in my head now but it's like russia could not have screwed up more than they did.

1:52:18And, you know, there was those scenes of like, I was like, God, if we only had a squadron of A-10s on board, we could have like, you know, I don't know, you have this like trail of tears of like, it was literally just like the first Iraq war, where it was like a, you know, a 10 or 20 mile convoy of like every military vehicle in Russia was stuck on one row. And I was like, please, baby Jesus, where is an A-10? with all we need right now. But look, there's a very deep asymmetry with Russia versus Ukraine. I think the truth is, I don't have a good filter here, but it's like the truth is that both armies suck.

1:53:01Both militaries suck. And they've devolved into some sort of World War I BS thing. If you look at the numbers, it's like, you know, in terms of pushing back, this drone attack seemed extremely sophisticated. This did not seem like it's evolved. You're not wrong. You're not wrong. But but but that is that is it's a brilliant move. Will it have any impact on the course of the outcome of the war? Untold. It does it also mess up the peace um oh yeah yeah it's sort of like deep in in russian territory it could be seen as aggression look you could you can talk about this like there it is a it is a massive and uh incredibly laudable tactical victory um it's impressive in every possible way i love it you know in a lot of ways you know because you sort of think of the you know again this is a very asymmetric fight if you look at like you know people it's like 1.3 million on the russian cyber active duty 200 000 on the u on the ukraine side but they've just kind of devolved into this like frontline thing and so like is is the deep attack going to actually change um the front lines or the course of the war i'm not convinced of that at all it definitely the the challenge here is like how do you degrade the ability of of russia um because they they have a huge like production problem like they have they they outnumber if you look at tanks and armor it's like you know 17 000 um but so i you know it's like one of the interesting statistics here is that russia has like 17 000 tanks but they've lost during the war they've lost 8 000 tanks the u.s only has 4 600 tanks just to put it in perspective but but it hasn't made ukraine win you know like they're still stuck with this sort of like hey how do we do so this is incredible like um but tactically tactically is this return to world war one style almost trench warfare that we're seeing is that a byproduct of new technology coming onto the battlefield that is asymmetric and you know generally both armies don't fully understand how to deal with yet yeah the interesting thing is It's like, you know, if I say to my military colleagues, it's like there's a lot to learn from what's going on.

1:55:27But don't learn too much because this is a very unique thing in the sense that Russia in particular, but Ukraine as well, have have completely failed to be able to execute a joint combined arms fight. And so this is the thing that the United States is uniquely the best in the world at. In a sense where, like, what does that mean? It means that you integrate space, air, land, sea, artillery, all into one, like, you have a decisive point of the battle, you have a bunch of shaping efforts to the battle, and then you can succeed and you can pour troops into and accomplish something. The US, this is the most complicated thing you can do.

1:56:11And it's super expensive. That's why we have a$800 plus billion budget. And that's what the US is like a thousand times better at than anyone else in the world. And what I can tell you is the Russians, the reason that they lost against the Ukrainians by themselves is because they don't know how to do that. They were treating Air Force as like artillery. None of it was combined. They totally failed like in terms of communications, the ability to communicate and command and control, like all of that stuff, total disaster. And here we are four years into it or whatever. It's like, what's the outcome?

1:56:46I'm curious what Russia's early stage defense tech market even looks like. I imagine a lot of it is government directed, but how are they adapting? Are there private companies? Yeah. The thing about Russia is like... Again, they've been very good at advertising specifically very low production or one production type things where they're like exquisite systems. and then they have two of them and then the the the majority of their uh stockpiles are soviet era bullshit that's horrible and if you think about it like this um think of the soviet union back in the day it's like and they're still not good at this is that or even you go about all the way back to world war ii it's like they've never been good at manufacturing like think of how many cars are made in the soviet union or the russia right how many real planes do they make right And so like all that stuff is like they can build one or two off, but they're fully reliant on the West for all this stuff.

1:57:54They've never been good at it. What they've been good at is like, can we stamp out thousands of really cheap, attritable systems? And do tanks fit into that category? Yeah, but they're not fighting with them because you could argue that like because of the tactics, how relevant are they on the modern battlefield? you know and i think ukraine with like a ridiculous uh underdog approach has been able to use cheap drone war and like to be clear here i think that ukraine is probably the best in the world at drones uh and they have really at a tactical level again it's not changing the outcome but they're at least holding the status quo and there are millions of them like they they figure out and they're legitimately good yeah i mean it's that part is fascinating to watch i just don't know that like, um, yeah, the way that we fight, if you were to put the U S if you take away the nuclear component of this, which always makes it tricky.

1:58:51The reason we have nukes is to make it tricky. Right. So you don't do these things. Um, but I'm just not convinced that we would do it this way at all. And how quickly would we, would we win? Um, that part's fascinating. How do you think about counter UAS technology right now? You have to imagine that Russia's thinking about every and any and every response to make sure this never happens again? Yeah. And look, I was I was I apologize for being like too bearish about like, how much does this matter? The attack is like stunning. It's almost it's not quite as good as the Hezbollah beepers, but it's pretty close.

1:59:25Okay. I have both beepers. I did my master's thesis on Hezbollah. So it gave me like, you know specific joy but i um you know the the idea that like the uncertainty um and kind of a step back that it would take within russia so basically now they're searching every single truck you know they're like super heightened security this has caused mass chaos across russia now they can't mask those those jets together anymore so you have to space them out so this has like serious consequences to their like strategic capability let alone their ability to just go bomb Ukraine. Do you think that, uh, do you think that going forward, various militaries, Russia in particular, will seek to place, uh, strategic bombers and aircraft like that in hangars and provide some type of defensive mechanism?

2:00:17Cause the fact that they were just sitting out in the open, we had to know, I actually think that there's like, there's, I don't know specifically this off to look it up, but there's like, there is like, it's part of like the um there's a part of a nuclear treaty is that so so it mostly got rolled back russia rolled it back at the beginning of the war from what i've seen but you can imagine they would say hey we're not going to participate anymore but they wouldn't necessarily build all the structures necessary to actually adapt yeah no i mean look all this stuff takes time too i mean that's the the biggest thing is like you know for the a lot of those planes i mean first of all they're going to have to do that whether there's a treaty that says they have to be in plain sight or not, they're going to have to do that.

2:00:59I mean, so this is like this, this attack has caused a strategic impact, whether that gets Russia to the, uh, to the table faster or better, or it gets land concessions for Ukraine or it gets them. I'm not convinced of that, but it definitely is like a very successful thing. And we also don't know the ramifications like, you know, does this up the ante? does this get us towards World War III? I don't know. That part scares me. I do want the war to end. And it definitely gets into the Trump administration is trying to end the war. And neither Putin or Zelensky are playing ball. That's kind of the disappointing part of this.

2:01:40Well, I mean, we have to have you back on. I feel like we could go all over the world and talk about geopolitics for four hours. So expect to get another calendar invite because this is a fantastic conversation yeah thank you for jumping on i really appreciate it thank you both uh we'll talk to you soon thanks so much bye uh and we have our next guest already in the studio so we'll bring him in we're going to talk we're going to recap some of the middle east ai deals talk about uh geopolitics in ai some of the chip stuff uh i still have yet to figure out what the horse means why i just love horses john you just love horses i grew up i wasn't a horse guy i have I have an extreme respect, admiration, and broad appreciation.

2:02:23My mom texted me after the show last night. She said she was watching the show, and because you were playing the horse sound, her dog was running around looking for a horse. So give the dog some horse. For all the dogs that are listening, you're now on the hunt for a horse. For all the dogs. Anyway, welcome to the stream. How are you doing? Good. How are you? Great. Welcome. Thank you so much for joining. Would you mind kicking us off with a little bit of introduction on yourself for everyone who's listening? Great. Yeah. So, I'm Devan Shkoshek. I am at Beacon Global Strategies for a national security advisory firm.

2:02:56So, basically, what I do is work with U.S. industry on how to be better national security partners to the United States. Great. And I wanted to have you on to kind of look at a retrospective on what happened in the Middle East. We saw Jensen Wong go over there. I think Elon and Sam and Alex Wang and all the big tech CEOs went over. What is your read now that we have a little bit more distance from how those relationships are changing, what we should expect, what the actual trade deal came, how everything netted out, basically. Yeah, I think it's a very interesting thing that happened over there because you look at what the Biden administration did in January.

2:03:37They tried to approach AI diffusion with three key strategic objectives. They're like, we want to prevent offshoring to the Gulf. We want to prevent these chips being smuggled into China, which is mostly a Southeast Asia problem. And the third one, we want to prevent remote access, where Chinese entities are just using these chips through the cloud. There are hyperscalers trying to build big data centers for Chinese companies and Malaysia and all. Using this technology as a tool of economic statecraft, I think, was a secondary objective, not primary. whereas I feel like what has happened, what we've seen with the Gulf trip is more of an upside down where we're using this technology as a tool of economic statecraft.

2:04:20We're trying to get concessions. We're going to give you these trips but we want reciprocal investment in the United States. We want one-to-one investment and we want certain security conditions. Now, a lot of that is yet to be cleared out. We haven't finalized, it seems, for media reporting on what the security conditions are, whether they apply to specific entities or whether they apply to the UAE government or the Saudi government as a whole. Do they get to host Huawei chips or Huawei infrastructure in the same data centers where they're hosting US chips? Right, there are reasonable concerns that some people have raised and those are things obviously I think the security details will probably be figuring out because if you remember, Microsoft and G42 did a similar deal at a company level last year in April.

2:05:13That was accompanied by an intergovernmental assurance agreement, which required G42 to do certain things like not have Chinese hardware in a certain number of years, just restrict access for military or intelligence purposes. That deal was really well drafted. There were a lot of things that people pointed out that could be done on top. So I think we'll see how this shapes out in the next coming few weeks, how we see the security guarantees coming together. But overall, I think this is in line with what the president has said, that we'll give you our technology, but what will you give us in return?

2:05:54So that's the theme that I expect to continue to see. Art of the deal. Art of the deal. So how important is LAMA in this emerging geopolitical narrative around AI? We're hearing that these, I've been calling them like kind of jump ball countries. They're countries that aren't full allies and they kind of could do business with China. And that's kind of the geopolitical backdrop for all this. If they don't do a deal with NVIDIA, they're probably going to run Huawei Ascend and DeepSeek and Manus on top of that. is an open source stack important to some of these countries? Yeah. No, I think there are two questions in there.

2:06:33First, whether China can even export, which there are actually, the data suggests, you know, China has enough dyes that TSMC shipped to China, or TSMC shipped to Huawei in violation of US export controls, like about 2.9 million dyes, enough to produce a million 910Cs, or 900, 910Bs. Now, you know, that's a lot of GPUs, but they also have a lot of domestic demand. So the question becomes like, will they be able to meet their domestic demand, let alone export? I don't think that they have the capacity to produce it domestically at scale to export. There was this announcement from Malaysia recently, which the minister walked back afterwards, which made for a splashy headline that Ascend data center is coming online in Malaysia.

2:07:27But if you look at the details, it was 3 ,000 cents by 2026. Yeah, it's nothing. So they can't meet that. That's one thing. It's like a JTR point, right? Because some of these countries have worked with China a lot. Yeah, of course. Well, one of the things of bringing countries into our fold is that we have to work with countries that are in China's fold right now. Yeah. That is a precursor of bringing them into our fold. But you have to be realistic what the risks are and how do we mitigate them. Some of these countries have been doing joint military exercises in Xinjiang, of all places, are hosting military bases.

2:08:05And Saudi Arabia, I believe, like a month or two months ago, their national telecom champion did a strategic announcement with Huawei. And so you have to be realistic and put in place those mitigation agreements. But separately, to your point on open source, I think we should be flooding the zone with American open source stack at the expense of Chinese models. I think we're not paying enough attention to what can happen when a state-controlled company, to some extent. There are a lot of PLA ties that DeepSeek has been scrubbed from the internet. Now, if the state wanted to, there was a great anthropic paper last year, I'm not sure if people remember, but on sleeper agents that can be converted into models.

2:08:58If the Chinese state really wanted to cripple U.S. infrastructure or get into your phones, why wouldn't they just put in sleeper agents that would activate in a year or two years? Yeah. If it runs into critical infrastructure, it changes the way it reasons. Exactly. And so we should be pairing ICTS action, right? Like we're doing a lot of export controls on American tech not going to China. But where's the import actions on preventing this Chinese tech from coming into the United States or helping other countries deploy American tech? Like, look, come on, let's be real. Nobody in Kenya is going to pay$200 a month to access advanced AI models.

2:09:44We should be deploying American open source stack there. We should be incentivizing companies with, like, loan programs from the development finance corporation, exit bank, whatnot. Yeah, kind of a new AI belt and road strategy, something like that. Exactly. Makes a ton of sense. Yeah, do you think we'll see something to the effect of a Stuxnet within AI in the next 10 years, 15 years? I'd be surprised if there are not zero-day attacks that have already been exploited. Yeah. That we don't know yet. Yeah, that makes sense. There's been a lot of talk around NVIDIA's earnings around the shift from training to inference.

2:10:30And we saw with DeepSeq some really, really creative engineering around distilling models and switching to, I think, FP8 and floating point and just a whole bunch of optimizations to get a really great result out of less significant hardware. And so I wonder if there's, is there any risk that the, as pre-training plateaus, we wind up with a scenario where the distillation process continues and inference shifts onto lagging edge semiconductors. And all of a sudden, the gap between TSMC's leading edge 3 nanometer and China's ability to produce in mass at 7 nanometer, even beyond 10 nanometer beyond, that actually changed the dynamic.

2:11:23Yeah. And I think, you know, right now we have the lead there. It's possible that that happens. And the answer I would tell you that many people in the US government would give you is we should not be complacent about it. We should not be providing components to Chinese companies to build semiconductor manufacturing equipment there to produce these semiconductors. So what is your take on the chip ban and this idea that you kind of either need to be all in or all out? like it's either don't just worry about the chips, but also worry about the entire supply chain? Or is there a creative argument that you could potentially make where there is value to the American semiconductor and I guess Western semiconductor stack, ASML, TSMC, actually having a benefit in China?

2:12:20It feels very counterintuitive, but I was just remembering a decade ago, everyone in technology was making the argument that Facebook and Google should be allowed to operate in china and now we're making the argument that the other tech company should not be allowed to operate in china and i i kind of agreed with both of those but they do seem at odds walk me through that argument yeah i think look uh there are choke point technologies right where we do not want uh the prc to gain access like there are multiple arguments for why you should not get them but the effectiveness really depends on whether it's a choke point technology or not.

2:12:58ASML machines, when we export controlled extreme multi-violet lithography, then, well, China has not been able to produce anything domestically. They are still stuck on seven nanometer dual node multi-patterning, right? And I think that set them back by seven to 10 years at least. but so export controls are not about the point that they will never develop that technology yeah it's about buying time and space so that we can extend our lead sure and that is what matters so if we say tomorrow decide you know further tools should not go to china or other semiconductors not should not go or as it happened, EDA software should not be sold.

2:13:51We also need like some promote agenda to really extend our lead. So Huawei Ascend versus NVIDIA. Is this a quality or quantity battle? Like what is the shape of that differentiation? I think it's both quality versus mix yields. you know they're at about 20 percent or so when producing the dies for a sense so just cost yeah it's extremely cost and you know inefficient and so without state subsidies uh the latest Huawei server that came out it is using technology that NVIDIA was using seven years ago wow right it's putting more GPUs on the same server to come up at the same amount of memory and uh interconnect bandwidth and whatnot yeah now yeah can they they have a state-controlled economy they can do a lot of this it's not sustainable at the end of it uh so that's one thing uh i i think there are a couple other things with regards to should we be okay for instance if it turns out that some many of these technologies like look to be real china is a an economy that hasn't It is a system of government with an explicit civil military fusion strategy.

2:15:12Every research and development project that happens for civilian purposes is and will be used for military purposes. The vice president of research for Shinguo said that explicitly. Like, so are we okay with them developing technology that may be used to kill American soldiers or threaten America's allies in the South China Sea or, you know, take over the Taiwan Strait? So those are questions that are, you know, they're very nuanced questions and hard to answer. But in this scenario, I would say perhaps not. Perhaps it's not okay for us to benefit PLA's modernization. So Huawei can do what it is doing right now.

2:16:05I don't think it can scale. I think the U.S. export controls to much extent are working. The question is, how do we extend our lead further? So reviewing this year so far, do you think we're in a better position than we were last year? Or are we trending in the correct direction, I guess? Yeah, I think overall, it depends on how do you define the strategy here. The strategy is to win. I mean, yeah, the goal is to win. If the strategy is to stop their development of the technology altogether, that's not going to happen. Technology races never stay one. The Soviets learned that. So Chinese have learned that too.

2:16:53But if the idea is to maintain a lead, then they come second, we come first. Yeah, I think we're headed in the right direction so far. Now China has tried to weaponize, like try to mimic what BIS does with export controls through their own export controls. but their export control system is just like five years old. Their law passed in 2020. The nuts and bolts rules for dual use items, they did not arrive until December of last year. So they're very much in an amateur state over there with regards to this. So the US does have a lead on that as well. Very cool. Well, thank you so much for joining.

2:17:35This was fantastic. Super insightful. We'll have to have you back and talk more soon. Awesome. Thank you very much. Have a great rest of your day. We'll talk to you soon. And next up, we have Aaron Ginn, the GPU whisperer himself, to take us further into the discussion around AI chip controls, geopolitics, and all of the fun things that go along with that. Jordi, I'll let you take the intro, and I will be right back. Perfect. Aaron, welcome to the studio. Play some soundboard. Let's go. Let's go. The GPU whisperer is back. It's great to have you. What's happening? When I come visit you, I'm going to bring you this.

2:18:15Wow. Is that for the gong? No, it's not a gong. No, it's also not a sexual toy. It's called a talking stick. In Canadian culture, I got this in Kenya, basically the person that would represent the tribe would carry this around. Whenever you'd show up at a tribe, you would show them this and they're like, hey, I'm i'm coming to the the tbvn tribe who should i talk to right and then you find the guy with the talking stick because you know yeah you find the guy right and and so yeah the kenya if you represent your sort of head of your tribe or head of your family you carry that around and then and the great thing is like you can uh when you're in travel meetings uh if like you know someone's arguing you hold the talking stick right and you're like hey yeah hey yeah so it's like you So we can span two different continents.

2:19:04You have Gong, represent my Chinese heritage, and now you have something from the Akron continent. So you've got to find something from Europe. I like that. Maybe we could make it the... Sam Lesson from Slow was on the show talking about the potential of the e-cane, you know, sort of a smart cane device. Maybe that could be the American equivalent of a talking stick is a smart cane that the leader of an organization carries. Definitely something there. What's on your mind this week? I know you've been busy publishing, also scaling Hydrohost. What's going on in your world? So NVIDIA released its numbers.

2:19:43I frankly was surprised they still beat expectations despite having a lot of regulatory headwinds for at least a quarter. And, of course, as you all have covered, those rules changed. And now we're back to sort of October 2023 rules, which still had restrictions, but it was a little bit more friendly to some of the countries that were trying to form deeper relationships, aka Europe. So, like, previously, half of Europe was on, you're on the crap list, you're a bad boy. Switzerland. Yeah, yeah, Switzerland was bad, Austria was bad, Greenland was bad. We can buy the country, but we can't sell them GPUs.

2:20:20And Mexico as well, which assembles 90 % of all of our GPUs. So that's all gone. So a new era has, or just say returned to the old era, which is 2023. And we have this kind of new thing, which I've talked about previously on the show, which is the sovereign AI with America being deployed into regions. The biggest one was the G42 slash Saudi Arabia to build out GPU capacity within regions. and and this will i think in the next coming years americans will see gradually over the course of time how important both this infrastructure is to the world but also how we ourselves will most likely become a default exporter like like boeing like a default exporter of this technology not necessarily like we're always using it but the rest of the world is using it and they deeply rely on our infrastructure that's the trajectory of this the this is is heading and and what was surprising from the video numbers uh which like i know that uh john uh mentioned was that uh jensen has jumped more head first into politics under the biden he was very you know hands off he's just like i don't support this stuff but now he was meeting trump in mar-a-lago he's uh at basically proactively advocating both at conferences and in earnings calls a actual posture about how the world should work and how the world should operate according to, uh, you know, the video preferences, but Americans then, Americans then accept that like a video is our champion.

2:21:53They are a national champion. If they lose, we lose, like we're tied together at the hip. And if they go down, we go down with them. There's not like AMD. It makes sense that he's getting involved with politics when, uh, in, you know, or geopolitics when NVIDIA is valued at the GDP of the United Kingdom. Yeah, I was thinking about that. It is in many ways just a function of the size and scale of that company because you don't see the same, yeah, you're not seeing the same behavior from like the other pieces of the stack, like the DRAM supplier or the transformer supplier or the energy provider.

2:22:30I mean, to some degree, but, you know, certainly not getting as much face time because it's like just a less critical piece of the economy. and and the and the one some important things he said in the earnings call was that nvidia lost 50 percent of its market share in china for the last four years and he mentioned the acceleration of huawei from seven nanometer to five nanometer processes uh so i when we as americans think about gpus and export controls we're we're kind of battling two different metaphysical complexes that we don't fully accept or understand. We have one, which is generally was part of the Trump train back in 2016.

2:23:10China Hawk, they're a threat. They're taking our stuff. They're breaking into Geordi's house, stealing his watches. They're following John, trying to take a couple inches off his hike. Right now, like, Chinese are everywhere. They're in universities. They're taking our research. That was like Trump. Trump 1.0, Trump 45. We've got to be aggressive. And he changed America's view on China. him alone like he was the lone republican on stage and in fact rubio and rand were saying that he's uh saber-rattling uh and the whole stage was like no they're gonna engage them but then there's this new version which has co-opted itself into which is part of the uh accelerated altruist people mixed with anti-trade mixed with protectionism who took that laundered it and are using it as justification to be China Hawk.

2:23:59And this goes to my most recent piece, which we must return all, which is that America has to be an AI exporter. I'm like, oh, gee, China Hawk. I'm like, we got to win with commerce, the dollar, free trade, sell to many people as possible, like Boeing, as many Boeing airplanes in the world, because it's a point of leverage, it's a point of us being able to spread human rights, freedom, Western values, and not have to have bombs attached to it on the airplane right it'd be passengers around the bombs and this other wing which is small but very loud they've they've co-opted themselves into the altruistic you know basically deceleration people kind of uh like protectionism anti-trade unions and china hawk people they're the like abandon taiwan don't sell to anybody we if giving it to the gulf region means giving it to china which is bizarre it's 12 hour flight away i don't i don't understand that And it's also insulting to the Saudis.

2:24:56They're like they actually will use it. It's them saying the Jerusalem arm. It's all this complex kind of vagaries around patriotism. Like after that earnings fall, people call Jensen unpatriotic. Well, you got to put profits, you know, about patriotism, right? And it's this really bizarre like world that these people live in where they think that like, well, if we just don't sell them in, there's no harm, right? They can just wait. They can just wait for us. When Huawei is like, please do. And the customers in China that were part of the information, they had this on the publication, the customers of GPUs in China, they said that by the export controls, they created the market for Huawei.

2:25:40So we only have two options as a country. We either win or we lose. That's it. There's no way in between. There's none of this like, we'll just choke you off. We'll just hold you on the inside. You can see this using a non-technology example is when we've done this with food aid, when we've done this with other semiconductors, like when the first semiconductors came out, we shifted to India and China. All of them produced their own industry. In fact, there's a famous episode between – I think it was Johnson and Gandhi whenever she was prime minister when Johnson was like, hey, India, you've got to back us on Vietnam.

2:26:16Otherwise, we're going to gradually send this food aid. There's a massive famine going on. And Gandhi, she said publicly, I will never depend on America ever again. And after that, she spent all of her money invested in agricultural improvements that became self-sovereign. So this is not a weird abstraction of, well, this is only unique to the situation. When they have the engineering horsepower, they cover 90 % of all rare earth mineral production, not ownership, but just production. They build their own boundary program. It's already active. We don't have one. and it's the focal point of all the accessory products of a server, like fans, cables, things like that.

2:26:54And we're like, well, we'll just go off and just wait whenever we want to give it to you. It's like, no, why would they ever do that? They just build their own and they show that they can. So in that world, the Gulf Stargates, we should have a South America Stargate, we have a European Stargate, we need one in Africa. We have to own footprint. Otherwise, Huawei will just go out, sell cheap gear, own the footprint, own this rare, data center space is not prolific anymore, own that. And then all the government data in those regions will be running on Huawei stuff, which will hurt our natural security interests.

2:27:25Yeah. What about actually selling to the Chinese directly? Like, should we be building a Chinese Stargate? There's this, like, weird, like, thread we've been pulling on. ChinaGate doesn't have a great ring to it.

2:27:41I know it is different, but I want to kind of unpack all the different ways it's different. because for years, tech was beating the drum of Google should be able to operate in China. Facebook should be able to operate in China. This would be a net win for the United States if we could operate there. GPUs are different because it's more than the supply chain and there's different things you can do with it. We might be powering adversarial dual-use technology. But is there a world where these two situations are more similar than they are different? Yeah, the dual use argument is an argument in vacuum.

2:28:17It's an argument from ignorance. We don't have an example of what this dual use could be. There was a response to Jensen in some article I read somewhere where they could use AI for missile targeting. You're like, they don't need AI to do missile technology. They have perfectly fine missile technology to target. What about just the idea that large language models, chat models, they increase productivity. And so, you know, if you give a soldier on a base, ChatGPT, they will be able to inventory the rations faster and that will increase military productivity. Oh, heavens, right? So like one is that by us not entering in the Chinese market, we created a TikTok problem.

2:29:02Yeah. We created an Alibaba. We created like maybe it's because I am. I unpack that because I feel like we definitely tried to enter the social media market in China. We were blocked. And then I don't understand how we created that problem. Well, it's because like we wanted to enter on our own terms. Oh, sure. So, yeah, like I'm not saying we have to do business with them always. Like that's not what I'm saying. I don't want to sell F-35s. I don't want to sell F-22s. Like logical like things. When we sell F-777, it should logically have our GPS technology removed, anything that's aligned with like kind of our connectivity.

2:29:36Sure. like we would do that today that's fine they they but when you when it comes to actual like core platforms gpus is not just the card because just because um you know you own a a g63 mercedes doesn't mean i can build one like there's just like misunderstanding of like jensen is pursuing a three nanometer two nanometer sort of direction of this company they don't have the ability to do that and just because i own a g-wagon doesn't mean i know how to build one doesn't mean i can't build one and there's a disconnect between that so one is that we should restrict anything that is on the supply chain level i'm totally cool with that but if we want to target founder equipment if we want to target data center equipment totally cool with that problem with that we don't build any that stuff other countries do yeah but we have american ip so we actually do have a point of leverage over asml equipment if i remember that correctly yeah yeah foreign direct role right yeah so so so yeah So it's a stretch because like Japan can still do what it wants.

2:30:35Like it doesn't, it doesn't have America has limited, limited, like the, the regular authority framework, the, the regulatory framework, the commerce is limited to its ability to, to basically tax authority. So if you have money in America, then they could do something. But if you don't have money in America and you say foreign direct rule in Japan, it does like, like, they're like, okay, that's nice. Thank you for your memo. Like it, so I, but again, it goes to like how we treat GPUs that if we want to create a point of leverage between the Dutch and Japanese over founder equipment, we should probably not cut half of the Dutch economy off from GPUs, which is what we did.

2:31:07So if we want to be allied with them, we should realize what's important, what's not important. To me, supply chain production is important, not consumption. Consumption is not very important, mainly because there's another risk factor, which is significantly more important, which is like, is it worse for the world if Huawei is everywhere? Or is it better for the world that nvidia is everywhere and and when you're talking about the dual use question it's like they don't even think about that well if we if we don't actually engage them on our own platforms we finance their current platforms and we encourage them to do that they will still do it like i i i think we have to understand that it's a both and a framework in china i if we if we sell them a fighter jet they'll buy the fighter jet and make their own fighter jet but but the point is that is to starve and to use, like doesn't starve the local economy as much as possible and to create dependency on us.

2:32:00The more dependency on us, like the less likely the war. Also, we can maybe gain leverage on like other trade issues like, you know, cheap goods, fentanyl, Taiwan. There's a whole other layer of additional things and just saying dual use, which again, we don't know what that means. People just say it and they didn't, we don't, I don't know what I mean. And as well, you can still do it with Huawei. So like, what does it matter? Like it's this kind of vague bigories around it without understanding the clear differentiation to production, consumption, title ownership, cloud consumption and building metal limb.

2:32:32All those are commingled around NVIDIA when each of those are distinct different things that shouldn't be coming. Can you give us an update on on the Biden administration in January was focused on remote access? Is that a wide scale problem today? You can imagine it's a lot easier to access GPUs remotely in another country. If you want to train a model, then it is to smuggle them in across different borders and things like that. Yeah, the January controls assumed two things ended up being 100 % wrong. One, how close was Huawei? They assumed like five years, totally wrong. It was like basically 12 months.

2:33:12The other one is that LLMs are remote, and they're not. So, like, what does it matter? deep seek is the number four right because mainly because it's open source that that's the main reason uh and it became a brand name so people know it uh but there's lots of alternatives to to deep seek there's lots of different reasoning models there's lots of foundational models and multimodal models so it's not a moat so what does it matter they make their okay we make another model like it's not an innate just use a different model so so they're we're not going to prevent them for making models they they're gonna do what they're gonna do the question is we're not we're gonna be better so it's a technically if you're like a racing a car uh i'm going to have one race in canada the uh next week nice if the everyone driver is staring at the guard rail is he gonna win and that's what we're doing we're like looking at it you're like oh my god right like are we looking at the finish line are we looking to win because if we win it doesn't matter because we choke off the local industry we become the global dominant player and then they become comic which is the Chinese version of the airline, the alternative Boeing and Airbus.

2:34:14It's going to be decades before they get anywhere with that airline. And it's because Airbus won, Boeing won. And market penetration is a moat. And not everything that happens in China is just because they copied us or they stole something. They're legitimately good at engineering. And this is where the point that Jensen's been making is that when half of all AI researchers are chinese we can't just be like you know can't see it can't see it like we got to engage with it because because at least it's better that it's on our platforms and if the federal government wants to spy on that like why not like i it's like we can't even appreciate the asymmetric style of that of like imagine if we sold them the video stuff and we just spied on it like it's like let's do what they do to us but it's there like no right like dual use like oh military right it's it's bizarre to me.

2:35:05What's been your reaction to the Russia Ukraine development? I've always been struck by the fact that Russia has produced so many incredible mathematicians and yet seems so irrelevant in the AI conversation. Any chance that that changes? You know, you talk about dual use seems like they can barely, you know, deal with any technology over there. Yeah, they make a few drones, but like they're, they're years behind the AI race. Yeah. We're certainly not testing the limits of artificial intelligence on the battlefield over there. The, uh, let me do this, that, uh, so with our, with our company being international, we come across all sorts of characters.

2:35:46So in Riyadh, I met a Russian who Russian, I should brought her caucuses. So he speaks Russian, but he's not really Russian who runs data centers in the region. And he was telling me that about like what Russia was doing. And he said that like, don't underestimate them being quiet. Doesn't mean they're not doing something. And this goes to the Stargate thing and proliferation is like when somebody does something bad with this, which is going to happen, without a doubt it's going to happen. The Ukrainian attack on Russian planes wasn't AI. It's just fancy remotes. And there's no evidence that it had a model that was, I don't even know why you would need a model.

2:36:24You can look at the plane and just like. Yeah, it was a very bizarre way of kind of reading that situation. It was very clearly like remote control. But when someone does something bad with this technology, which is inevitable, the world will be very woken up to how, one, the power of this technology is, but two, how lazy they've been on some of these things that we're talking about, where it matters if we're everywhere. because if we're everywhere, and let's say someone does something bad with us, what does that mean? That means that we have the ability to project influence now across the hundred countries that have our infrastructure.

2:37:06That could be everything from utilizing the infrastructure in a way to bring along allies to counter something, but as well as creates a new type of NATO, a new type of framework, which is the defense of the next century. China will pursue, it's almost like a known quantity China's been China there's very little things we can actually can do to impact the directory of 1.3 million people outside of the natural entropy of China itself China has imploded seven times in its whole basically 6 ,000 years of history so yeah exactly please right so so communism is just the next iteration of whatever revolution the Qing dynasty the Shan dynasty, the Shang dynasty, the Mongols, right?

2:37:52All those were different iterations of the same. Millions of people died, build a new regime, a million people died, build new dreams. The ability of us externally being able to influence it is very limited unless we do what we did to Japan and South Korea, which is we totally obliterate the entire society. We built spaces there. We gave them democracy and we gave them markets. Then you can influence and they can be part of the order, but they don't want to do that. So China's going to China. What we have to do is we do best, which is win, trade, commerce, be the best, invest as much money as possible into NVIDIA products.

2:38:29With their recent announcement, I don't know if it's selling Computex, but they're at this, basically, NVIDIA link as a platform. It's the best way to understand it. Yeah, break that down for us. So, yeah, so because all of this new GPUs are coming out, like the broadcast drones, Huawei, the most valuable parts of NVIDIA's infrastructure is its interconnect. And interconnect is both software defined and hardware defined. NVIDIA is the king. Like on the GPU level, Huawei is getting closer and closer as is AMD. But from an interconnect level, Jensen's in the stratosphere. The key is so far beyond.

2:39:01So as an effort to keep them in the CUDA system, which is this most significant software mode, he's releasing into LinkedIn platform to where you can plug in other GPUs and you can work through NVIDIA fabric. As John just said, the commerce is going to foreign direct rule that to that thing. So it's probably not gonna make it into China. And that actually has a legitimate claim. Like, you know, we made this software, we produced it and it goes versus Japan is a little bit looser claim. And so I don't think it's going to make it in China, but that's the premise is that he's trying to protect the CUDA mode.

2:39:32The CUDA mode is the mode of NVIDIA. And if Huawei continues to accelerate, open source, frameworks, accelerates, NVIDIA's mode declines, which means more Huawei product basically gets released into the wild. More models are defined by Huawei. Is that NVLink licensing more relevant to international companies that want to combine different CPUs and GPUs together? Or is it more relevant to just maintaining dominance in the American market? Yeah, with hyperscalers that are developing their own chips, things like that. Yeah. Yeah, the pitch is to hyperscalers, but the actual target is China. I'd say that that's the goal.

2:40:13But I mean, you're predicting that it won't make it to China. So why even pitch that if it has a very low shot of actually getting through? I mean, they have 75 % margins. So they could do lots of things that don't go anywhere. And also, they view that there's two risks to Jensen, just as putting on Jensen hat. I'm not an investor. I'm not talking about my own book. I'm not Chamath. I'm not talking about my own book. So the – is public cloud with their GPUs, which goes to this MVLink platform in Huawei. Those are the two risks. So he's targeting to both. But the issue with the – what public cloud is doing is that they are trying to deleverage from them as much as possible, which is why most of the future deployments, I suspect, in public argument are core.

2:40:58Core is like a third-party just reseller into cloud. But his real angle is to Huawei gear, where they do not have the ability to build this interconnect via the Huawei products. Cloud Matrix is closest and it's still pretty far behind. As well as you look at the networking expense in terms of the margins and the public reporting, it's still growing in revenue significantly on the networking side, but they're not making very much money. It's because they view networking as the moat. So they're really just trying to push something into the Chinese market so they can retain that CUDA advantage. Because they do think that China is accelerating on the most important models, which are the open source models.

2:41:38That NVIDIA sees the more and more open source accelerates, the farther and farther it gets ahead, the more that it's going to basically cannibalize NVIDIA's footprint. Because if NVIDIA is only selling to closed source models, that again, limits their ability to sell widely and to keep our platforms. America has to realize like that I'm not just talking about like that's our national champion so so it's like Lockheed it's like a Boeing it's like it is our expression into the world of what the future should be and the ability to are or have like or have our values built into technology which is privacy security western values freedom of freedom of thought freedom of information on the internet uh and so I I'm I'm fine with the the product idea I don't think it's a risk really much to anything.

2:42:22But most likely commerce will restrict it because if they're already restricting found equipment, which I generally agree with because it's found equipment cost $100 million in the size of a house. So like you can regulate that. We export control airplanes. Well, yes, because you have to put it on a ship or you fly it over there. That's not somebody you can go buy at Best Buy and put it in your backpack. I mean, Nathan Fielder was able to buy an airplane recently for a show. I want to switch gears for a second. There was some news this morning that Meta is partnering with nuclear energy company Constellation Energy to power some of its AI, I guess, AI factories, data centers for the next 20 years.

2:43:06post these new executive orders on nuclear energy. Do you expect to see a lot more deals between hyperscalers or foundation model companies and various nuclear players? Unfortunately not. I'm a big fan of fusion. I'm a realist when it comes to politics. I'm conservative through and through. Adam Smith, Milton Friedman, Thomas Sowell, they're my heroes. But I'm a realist when it comes to D.C. because DC is ideology is an excuse for decisions that are self-serving. That's the way DC works. Nuclear, I love the technology. I think it's immensely safe. I don't believe in this irrational phobia related to it.

2:43:44It has the third party or the existential causes of the pollution or whatever. The energy is put in a barrel, put it underground. It's like so amazing. And even that, they're making recycle like 98 % of it now. But power generation is very different than energy. America is really good at energy. It's really bad at power because power is a federalized decision. And I just don't see a significant amount of willingness to change about that. I hear lots of talk, but the talk is also a little bit like Doge, which is the operational mandate of Doge is discretionary. And even that, it has to get the deference of the secretary.

2:44:25It doesn't have a lot of power. You have to have mandatory spending. You have to have Congress do something because that's the way it works. Same with power. It's like Department of Energy can't just say do it. Like the state – because it's federalized. That's the whole point of freedom is that if the state says no, they're going to say no. It's not going to happen. So maybe on federal lands, maybe on Indian lands, that stuff makes sense. But it's – I think it's extremely unlikely. I think it's more likely the Stargate is essentially a sovereign power infrastructure where they're buying natural gas turbines, which we have a significant amount of natural gas.

2:44:58They build it in deregulated energy environments and they attach it to the data center. I think that's more likely because that doesn't require 10 years of approval and people who have degrees who have never done anything in the world showing up and telling you how to do business. It doesn't require any of those things. It's natural gas. It's fine. And their pipes are everywhere. So what we hear on the data center level is much more of a stretch toward natural gas and that nuclear, while there's entertaining, I want this stuff to happen. I'm just so realistic. I think it's – you shouldn't bet on it.

2:45:29And many of those contracts you see, they're more like LOIs if you dig into it because the Amazon, the Microsofts, the Facebooks of the world, they know the regulatory hurdles of doing this stuff is years. And so they're basically using the announcement as a means they're trying to press through the regulatory cycle to get stuff done. Well, just to give you some more insight, this deal in particular is for a power plant called the Clinton Clean Energy Center. So it's from a different era, right? It's taking an asset that we've already had and then doing a net new deal. It's not as exciting as, hey, some new nuclear company just signed a 20-year deal with Meta.

2:46:12At the very least, hopefully— But they didn't have government easy approval of putting servers in the building or putting it around the building. That's not something that's going to be easy. Yes, exactly. The fear around nuclear is unfounded. Yeah, but it's still real. It's real. And this is democracy. You don't get everything you want. And if people don't want it in their backyard, they don't. And it is what it is. So like, uh, but yeah, but I'm pro those things. I'm pro clean fusion, uh, uh, like low heat, like cold nuclear reactors. I think all of those are super cool technologies that we should embrace.

2:46:44Yeah. This thing is, is interesting because the, the reactor at this site was going through a decommissioning process. So they're effectively bringing it back online. Oh, great. Similar one to the deal that, uh, constellation did with Microsoft in Pennsylvania with the three mile Island plant last year. So, um, so yeah, at least at the very least, it's great to see plants that are clean and functioning, staying online and serving a purpose. Anyway, thanks so much for stopping by. This was fantastic. We'll talk to you soon. Always a pleasure. Yeah. See you, man. Cheers. We'll talk to you soon. Uh, let's close that with some timeline.

2:47:20Uh, there's news about perplexity. Uh, Apple is reportedly planning to adopt perplexity as an alternative to Google search on the iPhone as well as a replacement for chat GPT integration with Siri. This is kind of rumor mill at this point, but apparently perplexity is also in talks with Samsung, could become a default installed search provider on Samsung Galaxy phones and Android phones. Arvin's cooking. Arvin's cooking. Yeah, it's interesting. It's like, obviously the product is not like completely broken through. Do you think this is because they sponsored an F1 team? Maybe. Maybe it's that.

2:47:52Didn't they do a Super Bowl ad? No, they just did a really cinematic ad. But they've definitely been out there sponsoring stuff. Replexity sponsored Ferrari. Ferrari, really? No way. They just fully sent it. That's amazing. Tim Cook saw that. He goes, okay, let's talk. Let's talk. It's time to talk. Yeah, I mean, certainly smart to break through. And I mean, a lot of these companies like win on these default installs. It's always tough when there's another company that's like going viral and just growing like crazy, like ChatGPT. but you got to get creative and figure out where the value is and who's hurting.

2:48:25And Apple and Samsung seem like they're at the top of the list for needing a partner to really keep up with ChatGPT in some ways. Anyway, we should tell you about Wander. Find your happy place. Find your happy place. Book a Wander with inspiring views, hotel-grade amenities, dreamy beds, top-tier cleaning, and 24-7 concierge service. It's a vacation home. Go figure out plans for summer. Yep. Book a home on Wander. Yeah. And report back. We also have some cool, probably AI images from if Tesla was made in the 1980s. I don't know how I found this at least five likes and 220 views, but I really like this.

2:49:06I thought it was a cool design. Looks kind of like an Aston Martin bulldog. Or there's a lot of Aston Martin in there. But yeah, I hope with Elon spending more time at Tesla, we get some crazier designs. I want to see a convertible. I want to see something that competes with a Jeep. a full-size SUV, the Cyburban, the Cybertruck converted into an SUV. I mean, we've talked about this. A sedan with the aesthetics of the Cybertruck would rip. The Cybericon, the Huracan version of the Cybertruck, like the new Roadster with the Cybertruck aesthetic. I mean, I still think the Cybertruck aesthetics are really cool, but it's just like not everyone needs a full-size truck.

2:49:45You never see somebody with a Cybertruck using it as a truck. I've never seen anything in the bed ever. But also we're in LA, so most of the cyber trucks are influencer-based. Semi-analysis breaking down Tesla's optimist, speaking of Tesla. Ever wondered how those humanoids are dancing in the videos? Check out Tesla optimists here hitting a smooth shuffle. Let's dive into one of the methods they may have used. In the paper ASAP, Aligning Simulation in Real-World Physics for Learning Agile Humanoid whole body skills. The researchers did train the humanoid to perform these actions in simulated environments, but there's more to this.

2:50:21So we've been talking a lot about simulation in the context of robotics. It seems to make a lot of sense that you could model all of those joints in a physics engine, run that in Unreal Engine or something. I mean, it does look remarkable. I don't know if you can see that, Jordy, but the, I mean, the dance is definitely not the Biden walk, right? So the problem... Play it? Let's see it? Yeah, yeah. Here. There you go. Okay. What? What are you thinking? Conspiracy time? No, no. It's pretty good, right? I mean... It's definitely a unitary level. Yeah, I mean... I don't see why they'd be any farther behind unitary.

2:50:56But obviously there's a lot of... I think Gen Z would say the robot low-key has aura. Aura, yeah. The problem, the robot policies like guidebooks for performing an action trained in simulations often stumble when transferred into a physical robot. This is called the Sim2Real Gap. We'll have to talk to more folks in robotics about that. Many complex interactions can occur in real life that are difficult to model. ASAP decides to train their policy in simulation by using retargeted human motion, like Ronaldo's SUI Celebrations motions, but mapped onto a humanoid so they can produce the same motions in its own body.

2:51:32However, to mitigate the issues upon transferring to real life, they then deploy the policy onto the Unitary Robotics G1 Humanoid, this is from a researcher, and train a delta action model. The model watches and learns what the differences are between the desired simulated motion and the real world. This delta correction. This clip in particular, this jumping motion. It's wild. It's wild. Wild. The jumping. Because that's using effectively the same physics as a human to do that. And it just feels a lot more human. So they do a bunch of simulation, they transfer it to the robot, then the robot does it and messes it up because there's all these fine details that emerge when you're crossing that sim to real gap.

2:52:20That delta correction is then fed back into the simulator, effectively aligning the virtual simulated world and robot with reality. The result is significantly improved agility and coordination and now fluid reproduction of famous celebrations. ASAP is a major leap forward for humanoid robots, but there still remains some challenges in simulations. And Semi-Analysis says, what do you think? And so it's interesting because it's basically creating a real life feedback loop for humanoid robotics based on simulated data. So you go and simulate the robot to get it like 80 or 90 % of the way there. Then you run those simulations on the real robot and let it make a bunch of mistakes and then feed all of that data back in.

2:53:02So you're generating a lot of robotics data and you can actually have like a learning loop to improve this. So still unclear how close we are to like fully utilizable, fully useful humanoid robotics. But it does seem like more and more algorithmic progress is being made. More and more like AI training strategies are being made to really make this stuff valuable. And then of course, We care about getting closer to the robot games where they're going to have these robots do surfing at Jaws, cliff diving, things like that. Can't wait. Getting closer. Let's tell you about Adio. Adio is customer relationship magic.

2:53:43Adio is the AI native CRM build that builds, scales, and grows your company to the next level. You can get started for free at adio.com. They have range in their customers. Everyone from Union Square Ventures uses them to Coca-Cola. Wow. That's a big range. Big range. And TBPN, of course. Of course. When I first opened Adio, I instantly got the feeling that this was the next generation of CRM. It is fast. It's trying to make money. It's smooth. If you're doing deals, get on Adio. We also have some news. There's a new company launching. Amy from Joe Perkins, the AI agent for private market investors.

2:54:18Stop wasting 30 % of your week on busy work. Amy handles sourcing, diligence, ops, admin, and research 24-7. remembers every interaction and sharpens over time. Yeah, this is interesting. I have the website pulled up. They do deep diligence. So you can imagine some type of deep research product, watchlist monitoring, anti-portfolio analysis, which is fun. Basically track your passes, memo drafting, exit planning, customer diligence, auto sourcing, market mapping, team evals, meeting prepper, pretty extensive. It's cool. Well, the timeline was in turmoil. as Megan Neivold kind of sort of anonymously called out Alex Lieberman for co-founding too many companies.

2:55:02Oh, wow. That was, I saw Megan. You saw that post. I had no idea. I had no idea who it was either. And Alex kind of self-doxed himself here. And he says, someone called me out publicly for co-founding five businesses. What? A man can't co-found five businesses. Come on. I think I've actually co-founded maybe four businesses at this time, although I kind of moved on. I wasn't doing them all at the same time. It was one at a time. Yeah. But But I love the reaction and it makes total sense. So I thought I'd explain, says Alex Lieberman, the business barista. He says, I very much don't recommend people do what I do.

2:55:33History has proven time and time again that relentless focus on one thing for decades is how you build anything of consequence. I didn't set out to build a startup studio and co-found five companies. It was the result of trying to optimize for my two highest order goals post-exit. Be an A-plus entrepreneur and an A-plus family man. Read, have full control over my schedule and time. Spend 90 % of my time in the negative one to one of business. Early stage businesses make me feel like a kid in a candy store. I do not work 120 hours a week. I work about 50 hours a week. Most mornings I start drinking coffee, walking the dog with my wife.

2:56:03Most days I finish eating dinner and walking the dog with my wife. Those moments are sacred for me. I have an amazing co-founder and CEO for each of my businesses. So he's not the CEO of these businesses. That would be very, very difficult. Who I trust deeply and gives me space to focus time. I view myself as a media company that creates surface area for an array of opportunities. So yeah, a little bit of an uncommon decision, but he's certainly enjoying it. And so, you know, hats off to him. Yeah, I mean, I think the thing that matters is ultimately having a CEO that is a regular founder, as incentivized, as a traditional founder, or over time, you'll get cooked by a truly founder-led company.

2:56:43Totally, totally. So yeah, there's a big question about like, you can be a small angel that owns 0.1 % of a business. You can be a VC who owns 20 % of the business and uses the word we when describing the company. Then you can be an incubator or a silent co-founder. Or you can be the co-founder CEO, the founder CEO. And these are kind of a spectrum and everyone kind of plays in different roles. But historically, it's served to work at kind of the fringes of those. But there's different models that work for different folks. This is an interesting trend that I want to dig into, kind of the future of Hollywood.

2:57:18We've been joking about this, but there is something interesting with what Tony Lashley says. Sequoia investing in Essence and Mubi and Thrive investing in A24 in the past four years. I'm proud of you for pronouncing Essence properly, John. Yes. So just Scents. And Thrive investing in A24 in the past four years is quite fascinating. And so apparently the Essence investment maybe didn't do so well. Definitely they're clearly struggling, but the model works. And so Sequoia is getting into the independent movie business. Thrive is already in with A24. And so very, very interesting to discuss the impact of AI on Hollywood and independent moviemaking.

2:57:58As these movies, it feels harder and harder to get the power law outcome in movies, the Avengers moment, the Avatar moment, the Top Gun moment. But A24 has clearly made a different strategy work, and they're breaking through all the time. And so it's justifying increased investment. Um, yeah, uh, another perplexity news. They, they, they did the thing that we've been talking about. Like you can now travel search and book on, uh, on perplexity, no scrolling, 847 hotels and photos trying to spot a decent gym. I asked, find me a hotel in Amsterdam with a serious gym walkable to conference vendor use under 300 euros per night result.

2:58:36Perfect recommendation. The exact hotel I actually use. Could you actually click book? I think so. I think so. And so they're definitely working on it. And this is like an obvious agentic workflow. But Simon Taylor, let us know. Did you actually book? And did you go through with the booking? And was it easier than just going to the website? Or was it merely better search? Because I think people won't be fully satisfied until it's an entirely chat-based workflow. And they don't need to do anything. And they never get routed to another website. David Sachs has a little review of Mountainhead. He says, Mountainhead costume designer Susan Lyle on the All In Pod.

2:59:12It was a very good source for research for me. One of the hosts, Chamath Palihapitiya, went to the inauguration of President Donald Trump, and he showed pictures of all the things he wore. I couldn't believe it. He had a Laurel Piana jacket here and a Brunello Cuccinelli there. He obviously really knew his stuff. So, hats off to all in. Very cool. That said, it shouldn't take too much research to understand that capital allocators enjoy Laurel Piana and Cuccinelli. Yeah, it's good stuff. This is an interesting post by Ashe Sangvi. So, Anthropic just went from$1 billion in annualized revenue to$3 billion in annualized revenue in five months.

2:59:51Crazy growth at this scale. And Ashe says, I remember the days when Snowflake doubled at 500 million ARR in a year and people lost their minds. And yeah, the numbers have gotten so big in the AI race that going from$1 to$3 billion is like, what have you done for me lately? Claude, step it up. but congrats to everyone at Anthropic we're having some Anthropic folks on the show this week fantastic growth extremely impressive but I don't know why that is super surprising It's impressive, but shouldn't be surprising if you're paying attention. given the actual technology. You mean that? Just how useful these tools are?

3:00:30Yeah, if you just look at anthropic trailing open AI, they have less significant of a consumer business, but it's still very big in enterprise. It's loved by developers. Yeah. What else do we want to go through? Yashio Bengio has a new nonprofit research lab called Law Zero. Sharon Gaffery has the story in Bloomberg. She's coming on the show soon. And I thought this was interesting because I was wondering if, like, has anyone in AI safety actually just tried to use Isaac Asimov's three laws of robotics to design a safer AI system? Like, it would be very ironic and hilarious if that was the solution all along, was just hard code in, don't hurt humans, which is basically what the Isaac Asimov Three Laws of Robotics are.

3:01:22But of course, the premise of the Asimov movies and books is that even though they try to encode that, it still goes wrong. So there's still a little bit of an AI doom scenario, but he raised$30 million on it. So congrats to Joshua. And hopefully there's some good AI research that comes out of it. And as we've seen, even if you don't believe in the AI doom scenario, the paper clipping, there's still a ton of other ways that AI can go wrong and have negative effects even if it's just creating overly addictive products or dual-use technology. There's a bunch of interesting, the Manchurian candidates and the sleeper agents that Anthropic discovered or hypothesized.

3:01:59AI, Stuxnet. Yeah. And so I think this is worth funding. I think this is worth researching, but you have to take it with a grain of salt and you have to realize the full picture and the full dynamics of geopolitics and the AI race before you actually go and execute against what one of these nonprofits is saying. I thought this post from Justin Moore was hilarious. Have you seen the new Google AI feature? It's on Gemini. It's literally on AI studio. You can probably find it on Google ultra one dude. It's on flow. It's a search labs, labs original. You can find it in Google docs. It will appear as a pop-up when you least expect it.

3:02:35It's so ridiculous and so true. Just put it, just put it in the Google search bar. If you care so much, they just want to test their product market fit they want to see how hard they can make people work for it and still get adoption yeah you know they're both different yeah we have some some news separately Toma Bravo oh yeah is announced this morning the completion of fundraising for new buyout funds totaling more than 34 billion that's got it

3:03:07we get the gong view please can we get the gong view there we go Nice hit, John. Nice hit. And notably, they soft-circled$1.8 billion out of the$34 billion for Europe. Oh, interesting. So, you know, not... Get ready. If you're a software company over in Europe, you might have a buyout offer on your desk. If your growth is good but not great, get ready to meet Orlando. If you're in need of transformation and on optimization, get ready. Yeah. Good to see private equity finally raise some real money. Yeah. Yeah, getting some real size. In other news, open evidence. The Sequoia-backed AI medical assistant is reportedly raising$100 million, a$3 billion valuation, just months after its$75 million Series A at$1 billion.

3:03:53GV and Kleiner Perkins are in talks to lead the round, though details are still being finalized. As soon as it's finalized, got to have the CEO on the show. Let's do it. Some of the investors. It'd be interesting. I am very interested in this, like the vertical, it's like vertical SaaS, right? the niche verticalization of the platform layer. Everyone's agreeing with like value accrual at the application layer. The question is like, how many applications will there be, right? Will there be five or 10 or 50 or 100? There seem to be a lot of companies getting into the unicorn territory. How many will make it through and win?

3:04:27But it's all exciting. Also, Chime has just launched their IPO roadshow. Dan Primack has a story in Axios. A 9.1 billion dollar market. market cap if it prices in the middle versus the 25 billion market cap valuation. VC back to unicorns are maybe are finally done clinging to their Zerp era valuation, seeing this more and more. And we covered this. They're taking their medicine. Yeah, they're taking their medicine. Hari calls out, I think they bid it up to 12 billion or so during the roadshow and pops up to 15 billion on IPO day. Fair value is in the high teens, is his point of view. Yeah. But we saw this in the information.

3:05:03A lot of private companies are done with their venture journeys. They're ready to go out into the market as soon as the IPO window is open just enough to get through. And so they might take their medicine. They might take a slight down round when they're going out. But then historically, that hasn't been that bad in letting them actually perform once they get into the market and go public. So good luck to them. We should have lesson on. Yeah, just to discuss. This next one to discuss this next post from Bucksate. Very exotic sounding. He says, clearly intern son or VC scout daughter, which is.

3:05:40I love that Roy is in the comments immediately. Let me get both. We got to have Roy back on to get the update because he and the team seem to just be wilding out right now. It's insane. It's actually insane. I see, again, I'm starting to feel like a bit of a boomer because I see some of their exchanges. and i'm like this has to be yeah i'm like there's no way this is real yeah there's no way yeah um uh there's no you know it can't possibly be real but i don't think they ended up hiring 50 interns yeah but it seems like they have a lot gotta have them back on yeah uh to break it all down we should have all the interns on we should have him with all the interns standing behind him and they can just shout answers over each other loudest intern wins he had an interesting so he had a post that went fairly viral yesterday.

3:06:29He was quoting somebody who said, what genuinely pisses me off about younger founders or just new people getting into startups is how obsessed they are with raising. Goes on and on. Roy said that? No, no, no. Roy quotes that and says, hot take, founders need to focus more on hype chasing. Okay. Startups don't live and die by a product being 5 % better. They die because of lack of money or delusion. Hype chasing helps with both. I don't know how hype chasing helps. Yeah, you still got to build a product, but distribution is really important. And so like you can - He said inflated revenue is still revenue.

3:07:01Users who pay out of curiosity are still users and good engineers who are down to interview after a cool launch video are still good engineers. Viral moments are not so easy to come by and the potential upside of making the most of them is higher than you think. I like this because like it's a debatable point. Roy, you know, his story is clearly going to break one way or the other. It'll either be a breakout success or kind of a learning lesson. He had another post that I saw where he said he's paying founding engineers like hundreds of thousands of dollars in cash because he said that he can just raise infinite amount of equity, which is...

3:07:37Built different. He's just built different. And yeah, I'm just interested to follow on. I'm rooting for him despite him being controversial. I want to see him succeed. I think he is... he's very good at causing controversy like that even just that the idea of like oh we're not giving equity we're giving all cash like that's a controversial approach and some equity yeah it's just like i value i value equity way more i'm just gonna pay you know yeah but he's selling the equity at high value it's like you could do that with the shares it's it's very odd but it's like good bait no i mean if he says my if he believes that his equity is worth a multiple of what yeah but he's selling it to pay the cash he's not making money he has cash in his bank account today.

3:08:20He says, I'm going to 4X my valuation in a couple of months. Yeah. Makes sense. Anyway, interesting post from Epirus. We haven't had them on the show yet, but we have to at some point. So quoting Defense Index, unstoppable China can produce 500 ,000 FPV drones every month and scale up to 700 in wartime, which actually feels like roughly the same scale as Ukraine, maybe within an order of magnitude, which is actually kind of lower than I expected, but it's obviously a lot. And Epirus says, this is not unstoppable. Yeah. So Ukraine is doing just under 400 ,000 a month right now at their current rate.

3:08:58Okay. So they're doing that basically in a cave. They have to. It's scrapped. Yeah. Like China has all of the, you know, so I imagine China could actually do well beyond this. Yeah. It's also a weird narrative because like in what scenario, like are these FPV drones can they get over the Taiwan Strait because like I believe they're pretty short range and so it's it's more for like yeah like what is the trench war scenario that would happen over there where these would be super relevant yeah it's interesting to think about they could have basically a bunch of floating docks that yeah I guess that's it yeah just boats I mean especially if you can just put them into a shipping container and then move the shipping container so it's like instead of an aircraft carrier you just have a shipping like a cargo ship.

3:09:41Yeah, the interesting thing about, so with Epirus, I'm interested to see how Epirus is actually doing against these FPV drones. Soren yesterday said he hadn't seen an American electronic warfare company reliably take down FPV drones. I'm sure Epirus can in certain conditions and it should be a part of a broader system. Yeah, so they say that their mission is to overcome the asymmetric challenges inherent in the future of national security. And so good luck to them. So, you know, we want everyone to win here who's working for America. And we should note earlier today, Chamath was sharing an image of a scale.

3:10:22I forget what machine this is. It's not a scale. I think you hold these devices. Like an in-body. Yeah, that sort of track your body fat. He says, hot girl, summer, bring it. She's putting up 11.5 % body fat. Pretty good. At allegedly 6 '2". And Delian responded and saying, are you trying to get your body fat percentage as low as the IRR of anyone that invested in your 2021 specs? Fortunately, that would be I don't think it's possible to go negative on the body fat front. But then Chamath made a very lewd comment. Delian fires back. And I said, brothers, this conversation is unbecoming of the high technology industry.

3:11:04I propose we shift the conversation to what really matters, capital. Would you both like to join TVPN today? And Chamath, unfortunately, turned it down, so we didn't get here. Maybe in the future. But he's busy podcasting. I don't like when capital allocators are fighting. I like everyone working together to maximize returns at all times. Yeah, I think we need to work on our pay-per-view format, get the boxing ring set up. Imagine smashing the soundboard as two allocators just duped it out. I mean, no better entertainment. It'd be spicy, but that'll have to be for another day. Anyway, thanks for watching.

3:11:42This has been a fantastic show. We will see you tomorrow. Looking forward to it. Have a great afternoon. Bye. Cheers.