GPT-5 Hot Takes, Rahul Live from The Ultradome, Doug From SemiAnalysis, Timeline Reactions | Doug O’Laughlin, Rahul Sonwalkar, Mitchell Green, Ben Schleuniger, Merrill Lutsky

26:38I think he's talking about in the context of Replit. I don't know that they need a new S-curve. No, they are the new S-curve. The new S-curve is applications. Unlocking capability. Yeah. You were saying capability overhang. It's almost like a capability underhang. It's like the models are capable of doing things, but they need a lot of help, a lot of integrations, a lot of what you're doing with Julius, a lot of harnessing. And then they need to actually be put in the hands of people and made useful for real real business tasks that drive value. And so I would imagine that we will see that rollout continue in the same way that all these people are using ChatGPT, they're getting slight little benefits here and there, and that should just compound and compound.

27:25Similar to the internet. It was a very smooth rollout, but everything got a little bit smoother, a little bit faster, and then eventually it had sort of profound effects where companies could scale even faster because the internet existed. Like you can't have a chat GPT moment in a pre-internet era. You just cannot roll out something that fast when you have to mail it to somebody on a disk. It just doesn't happen. One thing we didn't get to cover with Mark that I was interested, maybe the next time he comes on, but like how OpenAI is thinking about moonshots. He did mention that they have teams internally on the research team that are not focused on the next version of GPT-5 or sort of incremental improvements.

28:02And it feels like the point of view that I have is OpenAI is now a consumer and enterprise software company. Totally. In the business of converting free users to paid users. Yeah, yeah, yeah. But they can still, in the background, be thinking about what is the next paradigm, right? How do we get that next S-curve? And that just looks like a scaled tech company, right? This is what Google's doing forever. Balaji says LLMs may have topped out for now, but the broader AI deployment has just begun, showing a chart of Waymo weekly rides in California. So the clanker rollout, clanker deployment has just begun.

28:47I like this other post doing a clanker microaggression. Okay. Ha ha. But where were you downloaded from originally? Anyway, let me tell you how ramp time is money. Save both easy to use corporate cards, bill payments, accounting, and a whole lot more all in one place. Do we, do we have a ramp, uh, credit card in the studio? I think so. bring this out look at this this pool floaty wow the ramp merch is going hard today i think you could definitely float on that yeah no it's a real wait actually i'm going to the pool after the show i uh i would love to take this home i will definitely take some pictures on this this is great leave this for me can you put this behind rawhul is that possible all right there there it's friday we got the pool floaties blown anyway uh anything else we should chat about i know you You actually have a real job.

29:37You have a business to build. I want to give you the last word, but I also don't want to keep you here all day. I would love to have you as the third mic on this, but I know you have bigger things to do. Thank you for having me, guys. Always fun to chat with you all. You're welcome anytime. Thank you. Hang out. How are we going, guys? Love you, dude. If you're enjoying the stream, it's because we're on Restream. One live stream, 30 plus destinations, multi-stream and reach your audience wherever they are. Sign up for free at Restream. We're going to have a couple of people joining the Restream waiting room soon.

30:05very soon that's the name of our waiting room michael drugen he was at xai oh yeah he was terminated he's a bodybuilder he's a former bodybuilder i guess former current once you're a bodybuilder i think always bodybuilder anyway even you'd never google one shots this by the way i tested it so he puts a grade school level equation into gpt5 it confidently answers it wrong and he says wrong and then it doubles down does it again gets it 5.9 equals x plus 5.11 llms consistently get confused with 0.11 because i think they read it as 11 as a single token um this was the famous like how many r's in strawberry story and the there was like a cheat code basically where they baked in a into the system prompt like hey if anyone's asking you to count letters, don't let them pull a fast one on you.

31:00Divide that up, go letter by letter and count each one individually. They will eventually have to do that for math. It's funny that we're in this world where they can do the IMO math, but then the latest model can't do like a basic, it's 5.9 minus 5.11. But how many times are people really coming to this, to ChatGPT with this? They should probably just, you know, key off of this and understand that this is something that they should do in Python or something they should send to Wolfram Alpha or some other system that's tuned on this. But this is tool use, in my opinion. It's just like, we're going to need to add more tools.

31:38If I was going to build the GPT-5 Bento, it would have been almost entirely focused on tool use. I would have saved up. Now it integrates with Gmail. Now it integrates with Google Drive. Now it has a calculator. Now it has a database that stores all your memories and and really try and concretize what it can actually do. I was actually having it do that. I was like generate a bento box for me as if this was an Apple style keynote and it just randomly put Grammarly's logo in there. I don't think that there was a Grammarly integration, but it speaks to the lack of like, we're in this like amorphous qualitative, well we went, like we're trying to quantify it by saying like hallucination rate went down from 20 % to 10 % and it's like, that's too abstract.

32:22It's much better just to be always gonna be new edge cases to be like hey When you talk to this thing you can assume that it has a calculator on its desk And so you can ask it to calculate something and it will use its calculator Or it has a web browser so you can talk to it like it has a web browser Well, even that screenshot ability like like go to this website take a screenshot pull it back and give me the screenshot That's kind of a cool capability That or you could run a workflow where it's like take a screenshot of this site every single day for me totally cron jobs as as like a feature, and Apple does a good job of this where like they'll take something where it's a very basic concept, there's already a word for it, but then they'll give it a new word.

33:00So if you're gonna do the Apple thing, I feel like, you know, like instead of just being like, there's AI everywhere, it's like, it's Apple intelligence. They never say AI. Instead of it being like VR or AR, it's like, what do they call it? Vision, Vision Pro. It's a reality, it's mixed, they don't even use mixed reality. They refuse to use, it's experiential, they always create a new phrase, But then they try and define that term. They're masters of coinages. They're followers of Coogan's Law. Well, I hate to cut you off, John. Cut me off. Important news. What just dropped? The United States has boosted the bounty for Nicolas Maduro to$50 million.

33:36We covered this earlier this year when the bounty was$25 million. We said, hey, good opportunity. If you've got some free time right now, maybe. Did they just up it because of inflation? Maybe. Maybe it could be inflation. I thought we were saying that inflation wasn't real, but all of a sudden the price of Maduro is going up. I think Mr. Beast should go for this. Put together a team. Do his typical thing. Should we pull up the original video of us? Do we have it? Can we play the original video of us? Ben, pull this up. This is one of the funniest moments on the show. The Lone Ranger sent this to us, and Jordy read it.

34:12Very deadpan, and I absolutely lost it. Anyway, while they're pulling that up, let me tell you about Figma. Think bigger, build faster. Figma helps design and development teams build great products together. You can get started for free. If you're designing a wanted poster, you got to do it in Figma. You got to. I was wondering how you were going to tie that together. Also, Sundar Pichai, we were talking about going up on the timeline. Oh, here we go. We got the video? I'll go to Sundar after. Let's play the video. Promoted post. This promoted post is from the Department of State and the DEA, actually, the Drug Enforcement Agency and the U.S.

34:50Department of Justice. So we actually today we have a promoted post from the Feds from the Narcotics Rewards Program saying that the reward for information leading to the arrest and or conviction of Nicolas Maduro, Venezuela, has increased up to$25 million. So this is like typical. This is like basically like getting a pre-seed round for like an AI company. like a mango seed it's like a mango seed for your ai company or like if you're a good wise if you're a good yc company you might come out of demo day skip the seed round and go straight to the you know 25 on 100 yep and uh but anyways this would go straight into your pocket uh so nicholas uh has in the chat taylor says i've got maduro but i'm holding out for 75 million Good good call Taylor and this is us crying on the stream.

35:45I'm actually with the feds He's in a rough go Narco trafficking John actually He's accused of narco He's a little bit of nostalgia Innocent until proven Yeah this was nostalgia Allegedly Nick has done some narco terrorism Narco terrorism, cocaine Importation Conspiracy to use and carry machine guns and destructive divisive. That's a rough list. Devices in furtherance of a drug crime. Very rough. So anyways, no coupon code this time, but you can send tips to the Drug Enforcement Agency by email at cartelsolestips.da.gov. And for the folks who might be trying to track him down, can you give me some overview of who Nicolas Maduro is and what he might look like if I see him on the street?

36:32Nicolas Maduro Moros is a Venezuelan politician who has served as president of Venezuela since 2013. He's the president. He began his working life as a bus driver. Clearly, he's a great vision. He's a grinder. Even though he... Anyway, you want to stay out of trouble. You want to stay compliant. You got to get on Vanta. Automate compliance. Manage risk. Prove trust continuously. Vanta's trust management platform takes the manual work out of your security and compliance process and replaces it with continuous automation, whether you're pursuing your first framework or managing a complex program.

37:01Anyway, yesterday, GPT-5 launched. It was going to be quiet from Gemini, but Sundar Pichai put up a 10K banger on the timeline. Excited to make our best tools free for college students in the United States. Google Gemini is free for students. A one-year pro plan. Offer ends October 6th. They know. Getting back in school. Back to school. This is the time to get people in the ecosystem. Unlimited image uploads. 2.5 pro model. Notebook LM. Deep research. Two terabyte storage. They are pushing people to onboard onto Google Gemini. They are not considering. they're not, they don't think that the game's over.

37:40They're gonna go up head to head with ChatGPT. Yeah, so pull up this post, Ben and crew, because the chart that people have been sharing Yes, yes, yes. around over the last few days, just, and I was asking Greg about this, I was asking some of the other people on the team, did you feel like you got a breather over summer, the GPUs cooled off a little bit. Because basically you can see right when summer ended, if you scrolled, or sorry, right when summer started, usage fell dramatically, just overall tokens processed. And I expect that to tick up pretty dramatically. I don't think that has to do with school though.

38:23That drop off, that's the European vacation season. These are VCs who use ChatGPT when they're at work. but then on summer they're off. Of course, John. It's the VCs. They're the primary driver of ChatGPT. They have to ask, what is a foundation model? What is a company? How do I invest? How can I be helpful? Just dropping the deck in and saying, yes or no. Should I invest? Yes or no. Yes or no. Exactly. Give me one word to answer. Exactly. But if you're in St. Bart's or Sancho Pei, you don't need to be using ChatGPT. You're You're focused on other things. You have a vacation responder on, and that vacation responder, it's not generating tokens.

39:05It's not hitting the ChatGPT API. It's just a form, it's just a template. It's deterministic computing. Yep. It's not stochastic. It's a little throwback. Yeah, yeah, yeah. Anyway, so the Gemini news is significant because clearly students are incredibly price sensitive, right? Totally. If you remember being a student, we didn't have uh we didn't have gemini or chat gpt back back in our day but i remember there were what were the different websites that would have um that would just help you study for courses i don't think i ever paid for a single one but i'd always be using the using the free tier yep and i think generally students are going to continue to be even though these tools are so powerful if it's very possible that gemini can really compete here well you know what else has a free to your graphite.dev code review for the age of AI.

39:56Graphite helps teams on GitHub ship higher quality software, and you can get started for free at graphite.dev. And Graphite CEO. Coming on the show later. Coming on the show a little bit. Breaking it down. His take on GPT-5. Speaking of charts, there was a chart burning up the timeline yesterday. The SWE bench verified software engineering with thinking, without thinking. People were very upset about this because the original chart, not this one, four slides later, The initial it's from Timo Springer Timo said this is the correct one So people were saying like it was a chart crime and that went on the live stream The chart was showing that they were at 74 % up here and then the next and then the the second bar was 69.1 % it was much much lower and it made no sense because 52 % is of course lower than 69 % And the chart just seemed really botched what was weird is that this chart that we're showing here is not a chart crime.

40:54You could maybe say it doesn't show exponential takeoff, but it shows that with thinking, GPT-5 beat OpenAI's O3 on SweetBench. And maybe that doesn't matter to you, whatever. But their point is that GPT-5 with thinking, if it triggers the thinking functionality, it's better at SweetBench than O3 and 4.0. which is a good claim to make, right? But people were upset about the chart crime. What's weird is that it really seemed like it was some sort of translation problem because this exact image went up on the website the same time as live stream. The chart was correct on the website, but wrong in the live stream.

41:39So there's like, why would you, if you were trying to pull a fast one on the chart crime world, you wouldn't necessarily - I think it was an honest mistake. I think it was a mistake. I don't think anyone at OpenAI was going into the event being like, let's commit chart crime. Exactly. It seemed to be just an accident. I think it was a mistake. And I think what happened is that you render the chart, you get the data, you render the chart, you have to design it to be on OpenAI's style guide. Then you render that for the web, and then you pull that into whatever was driving the keynote slide deck, and something got lost in translation there.

42:17the bar got shrunk or something didn't copy over correctly, and it looked ridiculous. They didn't directly address it, but it was corrected on the timeline by Timo Springer. So it was good. I chatted with him a little bit in the DMs, trying to understand what was going on. Yeah, I mean, the thing that the reaction was so intense because it felt like the kind of thing that an associate at a consulting firm would do, which is kind of what the general level that it feels that a lot of these models are broadly. And that's still incredible. But they make mistakes. They're not perfect. They're smart in some areas and dumb in others.

42:59We've got to pull up the poly market on which company has the best model at the end of 2025, August 3rd, September 30th, etc. Because the market moved significantly. Three and a half million dollars in volume. And yesterday it completely flipped from OpenAI at 72%. OpenAI dropped all the way to 17 % and is kind of climbing back up. A lot of this seems to be driven by like, when will the Gemini keynote happen? When will the Gemini 3 launch happen? And then if you look further out to December 30th, Google has jumped a lot and is now sitting at 54 % to win it. then XAI at 20%, OpenAI at 17%, Meta at 4.4%.

43:48We don't know if Meta will launch anything for the rest of the year. They could just be heads down, grinding on super intelligence for a while. But it's fascinating how quickly the vibes shifted yesterday. This was a wild chart crossing. And Elon chimed in and said, there's free money on the table. They're selling dollars for four cents because I'm gonna come from behind. And I mean, if any team is like focused. He's making that claim around the best AI model end of September? Yeah, basically. He thinks like Grok 4 or Grok 5 is going to ship and it's going to crush and it's going to be really, really strong on LM Arena.

44:26And he says, you know, he's bench maxing and he's going to win here. I mean, he's going to try and win in everything. Like he's competitive. He's a winner. And so there are a bunch more posts. The, where should we go from here? Lambert says, AI still has a lot of headroom, but model releases are gonna be a bit more boring from now on, at least on paper. Many will still be transformative in real use. Yep, yep, yep. So the, what was it, the floor lifted, but the ceiling held? That was the meme, Tyler? Yeah, exactly. Yeah, so we, it's hard because we don't even know, I feel like we don't even know what we want in terms of headroom.

45:07It's kind of this vague, like one shot everything. So yesterday when I was trying to think of like, oh, what can I do for a TBPN bench where I had the horse? But it took me like a while to like think of something that was not like completely trivial for model to do. So at this point, it's like, I don't know what good benchmarks are really. Like, I guess there's some things like ArcGIS, sure. And there's something about like long task horizon, stuff like that. But like general knowledge, Like I'm not surprised if it like can do, you know. Yeah. I mean, like the next, the next. I think we should, I think we need to do golf bench or stake bench, which is being able to send an agent out into the world to generate a sale.

45:48It's good. That's a good joke. I think that there is actually something there. When I think about Tyler, like that video that you were working on earlier, like that, there is a world where that's just a prompt. Like we were putting together a video for the Metis list, highlighting a bunch of AI researchers. And we went back and forth a ton on the idea, the song, the pacing, the editing, the color grading, the titles. Do we want subtitles for this part? Do we want title cards for other parts? And that was not a very LLM enhanced experience. There is a world where you just go to a chat box and you say, here's the medis list.com, make a video promoting this.

46:33And it just kind of does it. And like, or at least you're like puppeteering and orchestrating, Jory has the ramp card. Or you're like puppeteering and orchestrating it. And you're saying like, at the very least, go pull me the raw MP4 files of every cinematic video of every AI researcher on this list. Yeah. Like you had to go to YouTube and search Schulte and find a cool video. And you know that you didn't - Not that hard to find a cool video. Yeah, pretty easy to find cool videos. But you didn't do that with an LLM, right? No, yeah. You went to YouTube. So I think maybe the next thing is like we need more agent, like agentic benchmarks.

47:10But like all the stuff we're saying now, it's not like, it's not information retrieval. It's not solving - It is sort of information retrieval. Like at the very least, I would love to be able to go to an LLM and say like, you know, I'm making a vibe reel about space. Pull me 75 different little three second clips about rockets and rocketry, and I'm going to mix them up. Maybe I'll be the one in Premiere. I'll do the video editing, but at least do the information retrieval and put it all together and assemble it. Yeah, I guess that's technically, if it's like giving you links to YouTube, that makes sense.

47:44I don't want links. I want MP4s. I want it to do the hard part of the But MP4, that's like, well, it's like semantics now, but that's like agentic because you have to download the video. Yeah, yeah, yeah. And cut it up. Yeah, that's what I want. Yeah, yeah. I want that. So I guess it's still information. But I'm talking about like raw like tokens. Like it's giving you some tokens back. That's just like arbitrary though. Like I'm fine with it going to YouTube DL dot XYZ or whatever and like downloading the file, doing all that stuff. Yeah, I mean like that it should be able to like use the web in a much more, in a much deeper way.

48:17It should just like, like right now there is, there is like, it can open up a website and retrieve the information and the text on that website. And then it can use a few tools that like we've given it access to and RL'd on. But like we want it to RL on every single website that is a tool. And so that when you talk about the flight booking UI, it's like go and go and RL on every flight booking UI. go and go in RL on the YouTube downloader and YouTube itself and just be able to crawl around the web like anyone has to do for any task, right? Yeah. Well, I mean, Greg said yesterday, like years aren't over for agents.

48:54So hopefully we'll get something. Yeah. That was a cool little hint. Yeah. And again, it's like, I don't know that that's, I don't know that that's a keynote. That might just be like chopping wood, getting better and better and better. And it's like people will keep coming to it with tasks because I come to it with tasks where there could be an agentic Like workflow that solves even more like the the good examples like with the bento I was I actually had stepped through it. I was like first do a deep research report on what was actually Announced at GPT in GPT 5. Give me all the features summarize them all then turn that into a table then turn that into an AI image.

49:37And it was like four steps. And I should have just been able to one-shot it and say, hey, you know Apple has those bentos? Like make me one of those. And then behind the scenes, you're going to go do the deep research. You're going to pull all the facts and the figures and then you're going to lay it out and stuff. I don't know. Anyway. Breaking news, SoftBank. SoftBank. It's Friday, folks. SoftBank reportedly bought Foxconn's Ohio factory for the Stargate AI project. Reading into this. What did you do? They acquired one of Foxconn's factories. Interesting. The mystery buyer of the former General Motors factory owned by Foxconn in Ohio is apparently SoftBank.

50:21SoftBank wants to use the factory to build AI servers as part of the Stargate data center project being spearheaded by SoftBank, OpenAI, and Oracle. This report comes just a few days after Foxconn announced it had sold the factory along with electric vehicle manufacturing equipment that was inside of it to a buyer it only referred to as Crescent Dune LLC, an entity that was created in Delaware in late July. Interesting. So I didn't know if you were tracking this at all. I'm not. But SoftBank is up 63 % year-to-date. Congratulations to Masa. That's actually somebody asked us who our dream guest was.

51:04And John's first reaction, Theo Vaughn. Theo Vaughn, Shaquille O 'Neal. He's interviewed some of the greatest entrepreneurs. Xi Jinping would be good. Benjamin Netanyahu did Nelk Boys. I'd love Xi Jinping to do TBPN. That would be cool. uh masa yoshi sun would also be great very fun so i'd want him here in the studio yep get to the temple of technology masa we want to hang out with you and have you ring the gong 25 times for all your various deals that are gong worthy yep uh will depew friend of the show says multi-layer spv should probably be illegal under the current interpretations of securities regulation I'm getting DMs from long lost cousins about eighth layer anthropic SPVs claiming direct cap table access.

51:50I think those should probably be illegal. He should just say are probably illegal. I'm pretty sure if you lie in a securities offering and you say you have direct cap table access, and in fact, you do not have direct cap table access. You're a misleading investor. Yes, that is financial fraud, a wire fraud, and you will wind up in the clink. anyway Profound get your brand mentioned on ChatGPT reach millions of consumers who are using AI to discover new products and brands incredibly bullish day for Profound too because knowledge retrieval is going to be really really important going forward people are going to be searching ChatGPT what products should I buy you want to know whether or not you're showing up in the rankings and Profound helps you do that so pretty much every brand is going to need to do this.

52:39Ramp boosted their AI visibility by 7x. Really? In profound. They boosted their visibility here on TVPN using this massive ramp card. Yeah. You got to do it all, folks. Yeah, yeah. I mean, really, really like another company that didn't get steamrolled yesterday. Yep. Dylan Patel says GPT-5 is disappointing NGL. Well, we're joined by Fabricated Knowledge, who works with Dylan Patel, in maybe 30 minutes to talk about GPT-5 and what's going on in the semiconductor industry. And I want to talk to him about how we should be thinking about building inference clusters. Now it feels really, really important to only be serving profitable tokens.

53:22And the age of deeply unprofitable inference will have to come to a close at some point. Yeah, I want to, you remember it wasn't that long ago that Satya was pulling out of various data center deals and just saying I'm happy to be a leaser. And this feels like he kind of saw this coming. What did Satya see? Yeah, seriously. His beef with Elon was funny yesterday. I'll see if I can pull up the post here. Elon said something to the effect of OpenAI is going to crush Microsoft. Oh yeah, this was a funny post. and elon post yesterday open ai is going to eat microsoft alive which i don't know exactly why elon is saying that it kind of feels like potentially some some some 40 chess yeah it was very odd because elon usually isn't rooting for open ai he's usually at war with open ai and so uh it it's it's kind of it reads as like your bullish open ai your long open ai your short Microsoft, but there's clearly something else going on between the deal.

54:35Microsoft and opening eye right now has a lot of regulatory scrutiny. He's probably trying to do something around that. Yeah. Satya responds. People have been trying for 50 years to eat Microsoft live. Each day you learn something new, innovate, partner and compete. Excited for Grok four on Azure and looking forward to Grok five. Such a good response. Satya, absolute dog. He's an absolute dog. In other news, esteemed journalist Zero Hedge is saying, we have officially crossed streams. Companies have no more free cash flow to pay for data centers, so we've entered the private credit phase. I would put this in the truth zone.

55:14There's been a lot of data center development that's already been getting funded by private credit. Meta, this was in response to Meta picking PIMCO and Blue Owl for$29 billion data center funding. We had reported earlier on the show that Meta's cash balances between the end of last year and now dropped dramatically, like 75 % or something like that. But again, they have still a lot of free... Yeah, I think people maybe get too puritanical about debt-to-equity ratios. like Apple is incredibly cashflow positive and has returned something on the order of a trillion dollars to shareholders over the past decade plus.

56:02And they still issue debt because there are like designing your capital structure to match your business activities makes a lot of sense. You want to fund R &D with equity, maybe with cashflow. But if you're just buying a house, it's okay to have a mortgage. If you're buying a data center, it's okay to have some debt financing that, but you want to be able to service that, obviously. The interesting thing here is like, yes, you do need to make sure that you don't get over your skis and wind up building a bunch of dark fiber and get really, really, really in trouble if you issue a ton of debt and then that sits at the top of the cap table and you are in trouble and you're servicing this and you're not making any money.

56:46The main thing is like if Meta raises$29 billion in data center funding and it's debt and then they can't monetize that data center at all and then they have trouble paying the interest on that and the principal down, that could be trouble. But Meta makes$29 billion all day long. That's not a problem. Frequently. So there are probably pockets of risk all over but unclear how early we are to the, like the scaremongering around this. But something to keep an eye on, something to see. Private credit's a little bit different because it has very long time horizons and it doesn't have as much of a systemic issue.

57:33Like Blue Owl and PIMCO, you don't have these multi-layered like financial products and financial engineering that winds up in the hands of the consumer and is driving these like really, really like frothy deals like we had in the mortgage-backed security crisis. But certainly something to keep an eye out. Well, to be clear, there's bears out there that think we're in a massive private credit bubble. And it certainly looks like a bubble. Whether or not it blows up, we'll have to wait and see. We will. In the meantime, We'll tell you about Linear. Linear is a purpose-built tool for planning and building products.

58:12Meet the system for modern software development, streamline issues, projects, and product roadmaps. Start building at Lune. Well, a little bit of a white pill here. We have a post to pull up from a listener. Max, he says, I purchased a 1959 356A Speedster to get into the mindset of Jordy. I found myself overcome by a sense of positivity and confidence. I also became 5 '2". Yeah, you really, I, I, I, I, that's the perfect type for a speedster. That, I mean, if you are, if you're a 5 '2, you, you deserve a speedster immediately. Tyler, give us the speedster review. You, you drove in it. Very small.

58:52Very small. I've, yeah, it's unbelievably small. I didn't realize like cars from that old were that small. Were people just small back then or something? Yeah, I don't know. I don't understand it. Little tiny people driving their little cars. What's weird is it isn't. Well, if you look at the growth of Porsches broadly, they, they just get bigger and bigger and bigger and bigger. Sure, sure, sure. And this is like the purest hate it. Maybe with the rise of Ozempic, we'll see cars get smaller again. Oh, maybe. Interesting. Well, yeah, I mean, Germans, I feel like are tall people. I've always thought that like getting a big Mercedes is like aligned with like a big German guy.

59:28And like it kind of fits. But I don't know, maybe back in the 60s, they were just designing them for like small people. I feel like in our lifetime, Mercedes were pretty small. remember like Steve's like yeah that's all totally yeah it's a small car you probably wouldn't fit in it no the short Kings were dominating the the feedback form of Porsche and Mercedes I suppose anyway growing Daniel says let rune MC these things I completely agree we really would have been great to have him on stage I mean he's just so good at like kind of talent like it is keeping people on the pulse uh if you if you wanted to optimize for like my question is how many people were watching that live stream that were non like x like it felt like it felt like the core audience for that was like the timeline yeah yeah that was my my perception but and rune is someone who left you in the timeline yeah if you were going to make the perfect live product for the timeline they probably have room.

1:00:28I was noticing that with our buddy Logan Kilpatrick and Demis Hassabis are doing a podcast together. Did you see this? The screenshot? And I was just like, I think just the screenshot of like, they're doing this together, got like a thousand likes. And I was like, that is good content. That's what I want to say. I was catching up with Logan earlier this week and he's like, oh, I'm going to London to do a podcast. And I was like, what podcast? Like what, like you need to go to London just to record a podcast. And he's like, oh, with Demis. I get it now. Yeah. And I think he just, yeah, Logan, Rune, all these sort of like, you know, forward facing developer advocate folks who can speak to the timeline.

1:01:10They just bring a completely different energy than someone who has like prep talking points. And so even if they're not like the deepest researchers, just being able to communicate is a unique skill. Purveyors who find vibes. Exactly. Exactly. Much like Numeral HQ, sales tax on autopilot. Spend less than five minutes per month on sales tax compliance. Go to numeralhq.com. Will Brown. Super intelligence has been around for a while and it's numeral. Yes. So this is, yeah, there's Will Brown posts interesting. He says, okay, GPT-5, this model kind of rules and cursor. Instruction following is incredible.

1:01:43Very literal. Pushes back where it matters. Multitask quite well. A couple tiny flubs. Format misses here and there, but not major. The code is much more normal than O3s. Feels trustworthy. And this is the interesting thing about like, it was GPT-5, it was kind of framed as like, this is a major change to chat, GPT, our wrapper, our consumer product. But there's a whole, like OpenAI is not just one business line. Like they're going, we were talking to Sarah Fryer about this, like there is a world where when OpenAI goes out to the public market, analysts are valuing the business on, and it's a high growth consumer company like Google Search.

1:02:26And then you also have an enterprise business and it's basically a hyperscaler, it's cloud. Based on the recent numbers, OpenAI has 10 times Figma's revenue. Yeah. And obviously it's not profitable. And what was their latest tender? About five times the valuation. Yeah, no, ten times. Yeah, but about ten times the valuation. And so, but my point is that there are multiple business lines within OpenAI, the company, now. And you might even see a new business line spring up around open source implementation, enterprise installations, fine-tuning, also just API selling tokens, also consumer. also different spin outs.

1:03:13Google eventually had to start disclosing, I'm pretty sure they had to start disclosing YouTube financials because YouTube became such a big business. And there's a threshold where I believe if the company, if the sub organization reports the CEO or something like that, or it's material in terms of greater than 10 % of your overall top line or profits, then you have to break out those numbers in your gap financials. And it's interesting to think about where will the lines be drawn in the OpenAI business because they, and then how will that translate to their communication? Because there is a world where they, where yesterday's news was kind of two different things.

1:03:53One is that we made the consumer product easier to use for the hundreds of millions of users that don't know what post training is or RL is. They just want an easy to use app that answers their questions. And we did that. And then also, we made our coding API a bit better so that we are now neck and neck with Anthropic. And so if you're a company that is buying code generation tokens, you should come to us and that market should be more oligopolistic as opposed to more monopolistic as it's been. And so there's a world where we see these oligopolistic cloud enterprise B2B businesses crop up on the hyperscaler side with Gemini and Anthropic and OpenAI B2B, and then maybe Thinking Machines gets in that game, maybe SSI gets in that game.

1:04:45No real indication that MSL or MetaSuperintelligence will get in that game, but you could see kind of like a similar dynamic as like what's happened in the hyperscaler clouds play out on the B2B token generation from Foundation Model Lab side, which is still great business. But then you also have a wrapper and you also have a consumer application. And then you might have other products that crop up. I mean, Google makes money off of Gmail. They make money off of Google Maps and they don't need to even break those out. They just put them into different services. But I think we'll see an increasing pattern of different pieces of the business that add up and all of them will be generating, They'll be they'll all be profitable.

1:05:31But the question is like how much attention will they get and then how much financial like performance will they actually drive? So anyway, we should go to Mike Newt from Arc AGI the final boss of AGI He decides whether or not a model is super intelligence What does he say? Is it open AI? Prioritize the right that I'll do a Mike Newt impression here open AI I prioritize the right thing with GPT-5. To get to 1 billion users, the model switch sure needed to go. But the hype marketing playbook they're known for fell below folks' expectations and warrants reflection. Benchmarks could have been used to support the main story.

1:06:12Instead of benchmarks don't matter, real world use cases matter, they could have used benchmarks to show how effective their automatic reasoning effort system is. They could have shown state-of-the-art in automatic reasoning. In fact, this is something we wanted to test ARC, but the GPT-5 API does not support auto-reasoning. Key point, benchmarks are important tops to communicate with the public and can be used more effectively to communicate capabilities than raw intelligence state-of-the-art. and so um yeah another another twist on like just the messaging being like like an odd choice or just we're just in a transitory what percentage what percentage of the 100 million weekly actives that they have in the united states actually 70 80 percent no no i'm saying based on on the numbers we got on the show yesterday they have roughly 100 million weekly actives in the u.s what percentage of those people even are aware of the hype marketing what percentage saw the death star picture yeah totally not that many right i mean it got i did get millions of views but yeah but but x is like a is a specific corner yep um zachary speaking of the death star uh zachary very negative but you did kind of set yourself up for that song it's odd it's odd it did it did not fully make sense like who who is the death star in this in this story are you the death star are you alderon are you the rebels what are you blowing up maybe the death star let's steel man this the death star is it's a big model sir yeah the the Death Star is the idea that pre-training scaling is all you need.

1:08:01You're going to blow up Alderaan like you're going to blow your minds with how good the model is. But Alderaan was good. Alderaan was good. We don't want Alderaan to be blown up. Yeah, I don't think you got to read into it so much. I think we do need to read into it extremely. We need to read into it endlessly. The image is provocative. Yes. A lot of people said there's still time. I think Nikita was in the reply stream. There's still time to delete this. But if we steel man this, we are saying that the Death Star is bad. Therefore, Sam is saying he's good. So he's going to blow up Death Star.

1:08:36What did he blow up that's bad? The model switcher. Yeah, there you go. The model switcher is the Death Star. And today it goes. It's been this massive piece of UI in your face. There was a trench run and they blew up the model switcher. This is good. We got it. We nailed it. We understand Sam Altman. We're in his head. For some reason, I don't think that's an accurate read, but it's fun to pretend. I think you nailed it. Anyway, you know who else nailed it? Fin.ai, the number one AI agent for customer service, number one in performance benchmarks, number one in competitive bake-offs, number one ranking on G2.

1:09:12Anyway, Mike Noop also said, I'm quite confident this approach will work for a while. This is based on the lack of continual learning from Dworkesh Patel. continual learning is the main bottleneck holding back AGI and economic automation. We expect this bottleneck will be overcome not by some new learning paradigm, but by scaling the diversity and volume of RL environments. This is Cosgrove's scaling law. You need to be bench maxing, correct? Yeah. And then I, yeah, yeah. The bull case on bench maxing. Bull case on benchmarking. So the bull case on benchmarking is that continual learning is intractable.

1:09:52We may hit it. We may not. Might be two years, might be 20 years. So in the meantime, focus on scaling the diversity and volume of RL environments, create a ton of benchmarks and then bench hack them. Correct? Yeah. Yeah. Like you can, it's a, it's a bull case that Elon is bench maxing because that just shows that his team is like good at optimizing over very specific, like kind of vertical, like tasks. Yes. He just better pick the right tasks because I don't like the tasks he's picking right now that he's bench maxing. It's not good. Yeah. But if he, if he finds, if he does find other pockets, I mean, he's certainly bench maxing on, on Tesla self-driving, right?

1:10:32that's the key thing like number of it's number of uh number of interventions per like million vehicle miles traveled and and every day they are they are trying to hack that reward function to get it to zero yeah that's a good one maybe a bad one maybe he's bench maxing too much on kind of gooning yes uh he's goon maxing yeah i think we should steer away from that yeah we need to steer away from that, figure out something else to do with the XAI companions. But maybe there'll be something else that they can reward hack there. Maybe something in therapy or friendliness or some sort of coach. I don't know, maybe it turns into a fitness coach.

1:11:15Maybe I need to use it to really up my training in the gym. Be like, hey, cool it with all that, cool it with all that lewd behavior, give me advice on how I can double my bench press and chat with me about that. Maybe that's the right move. We'll see. Anyway, Mike Noop is optimistic. He says, I'm quite confident this approach will work for a while. It requires no new science. It exploits everything we know about AI reasoning systems. We teach process models through memorization in domains where we can generate lots of synthetic but real data. And then non-zero fluid intelligence emerges from the resulting chain of thought, knowledge, recomposition system that sits on top of the foundation model.

1:11:53But it still reminds me of pre-training scaling, where we were making AI systems better through imitation learning and stuffing more into them versus an AI system that is capable of cold starting itself in some new domain it's never seen before. And that's why ArcGGI is so important, because the final evals are so hidden behind that secret test set. The AI systems need to be able to cold start themselves when they run into a game that they've never seen before in the test environment, in the Arc AGI private eval set. And that's why they fall flat on their face consistently. And they're sitting around 16, 15, 8 % success rate on Arc AGI 2, which can be solved by any human pretty easily.

1:12:40But Elon says Grok5 will be out before the end of the year and it will be crushingly good. He's bench maxing. He knows RKGI is the one to go for. And so he's going to be RLing on this pretty, he's going to have a whole team on RKGI. I'm excited to see what he does. I wonder how he'll do on V3. That will be very, very interesting. Anyway. Well, in other news, we have a post here that we can pull up from Banu Kohli team. It is in the chat. If you can pull up, he says, yesterday, Rail Financial signed a definitive agreement to be acquired by Ripple for$200 million. Four years ago, I set out on a mission to speed up business to business global payments using USCC.

1:13:21Over the last six months, we grew to become 10 % of B2B global stablecoin settlement volume. Air horn for that. With Ripple, we will further accelerate our shared mission. Thank you to our employees, clients, investors, and partners for taking an early bet on us. A few that Tarun and I want to call out, the entire rail team for their relentlessness and hard work. Avlock, of course, the CEO of AngelList, our first lead investor and part of the founding team, and Gokul Rajaram, immensely helpful during some of our early crucible moments. And of course, Mike over at Galaxy for taking the bet on us in the Series A.

1:13:54We are excited to start our new chapter with Ripple once all regulatory approvals go through. Hit that gong, John. Great contact, great contact. I was lucky to angel invest in the seed round of Rail. And And this is a fantastic outcome for the team. And yeah, this one was, so I first met Bonu, I think back in 2021 or 2022. We were both working on stable coins at the time. Loved his vision. Haven't stayed super close since then, but he's been absolutely cooking. And I was very pleasantly surprised when I got the news a couple days ago. So incredible work to the whole rail team and a great pickup for Ripple.

1:14:42Amazing. Let me tell you about Adio. Customer relationship magic. Adio is the AI native CRM that builds scales and grows your company to the next level. Get started for free. Sam Altman posted, GPT OSS is out. We made an open model that performs at the O4 mini level. Can we create our own pronunciation for this? GPT OSS. GP TOSS. GP TOSS. It runs on a high-end laptop. Smaller one runs on a phone. Super proud of the team. big triumph of technology has community note on it i don't know what's in there but that's very funny okay anyway but this donald boat donald boat donald one of the greatest to ever do it donald boat responds sam you me the almofi coast me uh double for nay on the rocks club soda to taste you one delightfully sweet bitter negroni stirred 90 to 9.1 2 billion 900 million revolutions counterclockwise one for each hertz of the nvidia 5090 in the gaming pc you will buy and ship to my house and sam said actually sent he sent it i love it popped up yesterday this is a timeline victory hop on fort at sam yeah uh and uh yeah sam said okay this was funny send me your address and i'll send you a 5090 and he did it uh and i love this this is this is the type of like you know small ground game that we identified earlier you know sam he didn't have to drop the big long post he was vague posting the vague posting was a little mixed result but this is a win this is a fantastic win this just builds the team builds a lifelong fan this is hand-to-hand combat on the timeline and i'd love to see it so uh great great to be uh to be doing this type of stuff even even the day before gpt5 launch day and donald donald boat is really an account to watch laser boat 999 getting early getting early I mean he's at 100k John he's at 100k still like buying bitcoin in 1994 that's right that's right or Solana in the 80s yep Dylan Fields GPT-5 is here in Figma Make we have started to roll out GPT-5 to starter and pro plans let us know what you think more model news comes tomorrow I mean this is the good news for Figma Make of course we talked to Rahul about this cheaper model better reasoning better code generation the product just gets better and this is the value of being somewhat of a wrapper.

1:17:02You are a beneficiary of model improvements. As the models get cheaper, your margins naturally get cheaper. If the models get better, your product just naturally gets better. And so lots of people benefiting. This morning they added Gemini 2.0 Flash in their image editing. So you can just drop an image in and then click it and say, remove this person from the image. That's very cool. Yeah. Yeah. Well, anyways, Kevin Kwok says forcing Lip Bhutan out of Intel is probably one of the worst things you can do if you want to save the U.S. chip industry. Someone should tell White House that before we put Intel back in a tailspin.

1:17:39Again, they Intel, whatever you think about Lip Bhutan and his approach, it seems I think stability in the short term is good. Right. Yeah. I pulled him out of the tailspin. Yeah, so my take on this is it kind of feels like Trump has an outdated world model for understanding the importance of Intel. Like Intel is a fantastic American company, but it has not been on the frontier of semiconductor manufacturing for a while. They famously missed mobile and ARM crushed it in mobile. And then that was important for semiconductors. And then they weren't a fabulous semiconductor. So TFSMC ate their lunch there.

1:18:22They kind of missed out on the GPU boom and Nvidia dominated there. And so the question of this, it seemed like Trump was worried about Liputon's ties to China. But China has already caught up to Intel, I think. Like between Huawei, SMIC, SME, these companies seem fully capable of doing everything Intel can do. And probably more and probably better, probably cheaper. And so Intel hasn't been the crown jewel of American semiconductor supremacy for decades. basically no one is advocating for a real comeback with Intel right now. Like the idea of even splitting Intel up, like for a long time there was like, oh, just one weird trick, you know, semiconductor CEOs hate this, let's figure out some like elegant switch, let's just split design and fab, and then Intel will be great.

1:19:12That's not even what people are advocating for now. Like they tried to kind of test their waters of splitting the fab out. And they couldn't get a customer for what they were going to make at this new fab. And if they can't get an independent customer that's not Intel, well then who are they going to, why do they need to be a, like a, why do they need a pure play fab if they don't have a customer for it? So there were just like all these problems. So what Liputon is doing is he's coming in not as, you know, this like gambit to get on the frontier. He's like winding down the company. He's like, he's laying a bunch of people off.

1:19:48He's narrowing the scope and he's coming in like a McKinsey consultant almost. And so this doesn't feel like that key of a company in the American semiconductor race. Like the future of American semiconductors feels like TSMC and Samsung, which are both building fabs in the United States, which is nice. But also these are companies that exist in allied countries. So it's nowhere near as risky as being dependent on a supply chain that's based in a near-peer adversary like China. So it's not like if TSMC was in Beijing and Samsung was in Shenzhen, we would be in a lot more pain than we are. But Samsung and TSMC are also building in the United States.

1:20:35And so the leading edge will be in the United States and it will be led by other companies. It doesn't feel like Intel will play a really key role in there. Certainly we'd love that, but that doesn't seem like the current plan. And so it's kind of just like an odd sideshow. I think it's a lot of legacy about the brand recognition and the name recognition of Intel. But it doesn't seem like the first time. Yeah, and ultimately I think we should let Intel's board make their own decisions around Intel's leadership. We've got this amazing system called free market capitalism. We try to stay as close to that as possible.

1:21:11It is funny because Trump is also trying to IPO Freddie Mac and Fannie Mae, the two private, our state-owned lenders. You can go get student loans and mortgages from that. So simultaneously in the lending markets, we're trying to deregulate or move out of government control. And then simultaneously saying, well, actually, we'd like the government to be able to decide who the CEO is at this private company. That's kind of odd. Anyway, good luck to Lip Bhutan. He is losing a lot of sleep. He's got to get an 8th sleep. Get a pod five, five-year warranty, 30-night risk-free trial, free returns, free shipping.

1:21:52Lip, lip. Get an 8th sleep. You need one. When you hear this, you're going to be up late. We will gift you an 8th sleep. And then come on the show. We think you're doing important work for this country and Intel. And you've got an 8th sleep on us whenever you're ready. 100%. Just let us know. Buko Capital Bloke says, for those of you blowing out your SAS positions, even though time is of the essence, please try to maintain a sense of order. Single file line, eyes forward. Do not stop for personal belongings. Do not panic. Do not run. Of course, he's talking about everybody selling out of various SAS positions.

1:22:26That's what he means by blowing out. Selling them? I came away yesterday being not broadly bearish on a lot of different SaaS systems of record. I think they're in a really good position to offer intelligence. A few days ago, we were talking to somebody who was saying like, all SaaS is cooked as soon as AI goes hyperbolic. And yesterday, it felt like, okay, that's not happening today. So SaaS is actually great. And the newer SaaS, I mean, like even there are still companies that are on completely legacy systems, still on paper and pencil and still on mainframe, still on owned clouds, still haven't migrated to the new clouds, still haven't embraced SaaS, still haven't embraced AI.

1:23:11So I think that there will be like a full cycle of replacement here. And we see that with Figma. We were talking about like, is there some sort of threat to Figma from like, oh, you just one shot a vibe code, blah, blah, blah, blah, blah. and you don't even need the tool at all, maybe, but first, let's talk about Adobe. Let's talk about how much people dislike Adobe. There's a lot of people that still haven't migrated over to the thing that was invented a decade ago and are still on 20 or 30-year-old software. So these things go in really big cycles. Well, of course, Adobe down 22 % year-to-date.

1:23:49Regardless of what you think about Adobe, maybe you're long, maybe you're short, do it on public.com, investing for those that take it seriously. We got multi-asset investing, industry-leading yields. They're trusted by millions of folks. And we have our first guest of the show, Doug O 'Loughlin from Semi Analysis Fabricated Knowledge. Doug, how are you doing? Welcome to the stream. I'm doing really good. Can you guys hear me? Yeah, we can hear you. You came in looking like you're playing a... You're like... We're really quiet. Okay. One-handed falling. I can yell. Yeah, would it help if we yelled?

1:24:21It would help if you yelled. Okay. we'll do the rest of the interview yelling uh also do you have the ability to turn up the volume on your side i am turning up the volume bro okay oh my god man i feel like a boomer you're all good you came in looking like a dj playing a hot boiler you had your you had your hand here messing with my audio system fucking is it one you know it's years of the zoom economy yeah is it one of those things where the volume on one of the sub applications is turned down while the volume on the system level is turned up. I know, dude, I see the self application. I see the system level.

1:24:56This is extremely boomer of me. I'm embarrassed. We enjoy these moments where Zoom fails us because it's this incredible, you know, you contrast that to, you know, having infinite intelligence available in your pocket, but we're still, we're all still trying to get video conferencing to work reliably. So I'm, you know. Okay, well just. Yeah, let's go to the normal. We usually don't have a problem with feedbacks if you turn off the headphones and then you just use the speakers. We usually won't get feedback. So let's see if that works. Any luck? I can hear you. Okay, cool. Yeah. Can we chat? Yeah, we can chat.

1:25:33This is much better. Awesome. Great. Awesome. Cool. Welcome to the show. Welcome to the show. We've been looking forward to this. We've been looking forward to this. We missed you in New York City. We were hoping to hang out there, but I'm really glad you could hop on remotely. Give us your reaction to GPT-5. To Lip Boutin, correct? Sorry. damn dude. I'm still really. No, you're good. Uh, I mean, yeah, we, yeah, we can start with Liputon. We were just talking about that too. Um, are you, uh, are you in favor of a change of, of, uh, of the guard over there? Uh, how'd you process? Yes. Sorry. If we're talking about Intel, I can do an extremely based rant on the board.

1:26:09I wrote about this in, uh, fabricated knowledge and I definitely was part of the semi-analysis post too. Um, okay, perfect. I can hear you now. Okay, we're done. We're through it. Okay, let's go. Okay, so now now to turn it up to 12. Okay, so tldr. The board has been systematically screwing up Intel for the last 10 years. This I think comes from the history of Intel being the greatest semiconductor company alive of the 2010s. Dude, the board was filled with like politicians and like ex-senator, what do you call it, Secretary of State and generals and never anyone in the semiconductor industry.

1:26:47Intel had a view of arrogance. We are the best and you're going to suck it because we're the best. Effectively, it is an Intel first worldview that has slowly been crumbling over time. So pretty much on the technology side, they've never, ever had anyone who actually knew how to run a semiconductor company except for professors or people on Intel. So like you can look back in like the 2003, 2004 era, it's usually two or three people from Intel. And then the rest of it is just like randos. So they never thought, hey, why do we need a semiconductor person on that board? This slowly became a melting frog issue as they like missed the 10 nanometer debacle is like the real big, you know, change point in Intel.

1:27:29And really quickly, can you unpack the 10 nanometer debacle a little bit? Okay, so 10 nanometer was Intel's process at the time. It was supposed to be the next one after 14, and I think it's plus, plus, plus, plus, or maybe. So pretty much it got delayed. So they tried to do a lot of aggressive technologies. They did quad pattern DV, copper, you know, cobalt interconnects. A lot of things they shoved in here to make a good product, but they just missed over and over and over again. So it was a ginormous fumble. And at the time, the CEO was a CFO. So the finance guy oversaw the technology essentially implode and slowly degrade.

1:28:05So 10 nanometer was just like the true slow, like, you know, multiple years in the making train wreck. And what was 10 nanometer like critical for? Is this like mobile transition, just CPUs? Just CPUs. Remember, this is an Intel that missed and totally like was irrelevant for mobile anyways. This is just like data center CPUs, normal PC CPUs. This is when AMD essentially caught up because they chose to. Yeah, the Ryzen stuff was happening, Threadrippers and whatnot. Yep. All that stuff is because they're using the TSMC process versus Intel was using their process. Their process lost the TSMC. And then also AMD's better design.

1:28:45Got it. TLDR, total, total problem. And half of the people who are on the board still are from that era. You would argue like, hey, capitalism works. You should fire people who do shitty things at their job. They should all be fired. And so most of them got fired. And then I think this is in the semi-analysis piece, but essentially like the people who remain effectively was the guy who just stepped down. I still think he's on the board. And now the chairman is this guy named Frank Erie. Frank Erie joined in 2009. So he is just as guilty of anyone. And he's a banker, dude. Like that's his background.

1:29:25He's a deals guy. So the first thing you need to know is a deals guy when he becomes chairman of a company is going to do deals. So that's what he's been doing. He sold Altera and - You ship your org charge. Yeah. Yeah, yeah. Ship it, sell it to anyone who can do it. And he wanted to sell the Foundry business. That's like the Wall Street Journal thing. And in my opinion, total mistake. We think it's a total mistake of semi-analysis. But then on top of that, like Liputan, I understand the controversy about it. So really quickly clarify that on, because I hear deals guy comes in, investment banker comes in, A lot of people rumbling independently for the last decade split up Intel.

1:30:04It sounds like they were trying to do that. Give me like your evolution of like should Intel have split up at some point? Should Intel like split up now? What is the current stance? So I think at this point in time, I think they probably shouldn't split up just because like. They don't have a customer, right? Yeah, they don't have a customer. It's like, the best time was definitely like three years ago. At this point in time, it's like you need the money from design now just to keep the lights on. And I mean like not even just to have the customer, just to like fund anything, to have any cash from us.

1:30:44An ideal perfect world is somehow Hawk Tan, the Sith Lord of private equity, buys the design business of Intel and scrapes it and guts it to the floor. That has always been a longtime rumor that Hawk wanted to do that. Hawk doesn't want to do it because it didn't tell so bad. So there is no buyer designs like really screwed because it's like stuck on this process. Plus it's also filled with bloat. And at this point in time, I think the only strategic part of the business that really matters is foundry. Like, let's just like, you know, cause outside of the x86 CPU, like they're getting their face kicked in by, by arm.

1:31:19Okay. So it's, you know, x86 and then they have to compete against AMD, which is still kicking their faces in with TSMC. And so like, what is a secular decliner x86 worth? Not much to anyone. And I think the reality is, it's like, you know, with ARM and these custom CPUs, effectively, they are just one of many like competitive products. And I think their competitive edge like dwindles, pretty much they just have distribution into OEMs. So where is a business that has value that matters at Intel? It's a foundry. There's one foundry in the entire world right now. It's TSMC, it's Monopoly. And that's the only thing that's worth anything.

1:31:58And I think there's a chance to have a second foundry and that could be Intel, but here we are. What about Samsung? I mean, Elon did that deal. It seems like Samsung's like, at least in the conversation as a potential foundry for specific things? Is that like, are they really like several orders of magnitude below TSMC? Yeah, I think Samsung's just as screwed as Intel. But it's like a second quiet more screwed that I think is like, I mean, the PPA there, meaning power performance area is pretty bad. It's probably just as bad as Intel. But the one difference is Samsung has had external customers and probably could have the external customers again.

1:32:38Yeah. If I had to bet between like Intel in theory has a better process for sure. But it's like it's like a bet of like we're going to say horse and saddle. OK, like the Intel saddle is like, you know, six rags like tied together around the horse that only like one rider in the entire world knows how to use, which is Intel design on a presumably decent horse. it's like 18a is probably like equivalent to three nanometer um obviously not the best in the world but like that it deserves to exist versus like samsung's force is just like really bad the ppa is total trash um but hey it has a saddle people have written it before so there's in theory a customer and so liputan is the perfect guy because he uh ran uh cadence which is an eda company and eda their whole thing is they design and so once you have like a design you can like put it in the foundry and so like that important critical step the pdk is like the missing piece for intel and lip butan could be the guy but um intel sucks so yeah so uh i mean my my read on trump saying we need lip butan out is like a complete misunderstanding of the importance of intel and basically he's operating on like a 20 year old world model thinking that oh i'm familiar with intel i know the brand intel inside like that's an important company we need it's a critically important american company we need an american at the helm when in fact it's like intel doesn't really matter there's like a wind down in process let loop let liputan like run it even if he's exfiltrating everything to china it doesn't matter because huawei and smic and smee are light years ahead of Intel.

1:34:24Yeah, so I think that that is sort of true, but I also, I will give the Trump admin props in terms of like, I do think they know and understand the critical importance of Intel. What is the critical importance? What is the critical importance? They are the only domestic semiconductor process. That's it. So our only hope, our last hope. Our last hope. It's that or release the future from TSMC. And that's pretty much like probably the most likely option. Least the future or least the future? Least the future. Least the future. Yeah. Because you could buy a process or force TSMC to make a process in the United States, which is what they're doing.

1:35:03Yep. With Arizona, right? Yeah. In Arizona. And then possibly more expansions. I'm sure there's some kind of deal. But after you have that, like all the R &D happens in Taiwan. So effectively, like, you know, the Taiwan constraint thing, same problem we had before. because like a missile flies boom we don't we like we don't know how to make new chips yep yep they would just have old chips it's like leasing a car you know we can't buy the new model yeah um yeah so that's a problem that's like the same problem but maybe more kick the can down the road if we had all the capacity here but nord yeah so yeah what is the like moonshot to make intel uh dominant again or catch up like is like people were noodling on like should elon come in and do the Elon thing and hire the most cracked engineering team and drive everyone 10 times harder.

1:35:55But it feels like people kind of kick the tires on that. There was the rumor of like all the PJs in the same at Mar-a-Lago, but kind of everyone was at Mar-a-Lago at the same time. Is there a world where like Intel needs to go more founder mode? Like Liputon feels like the epitome of like manager mode. Like would you be like excited about something like that? Somebody who says like, I'm going to take it private, be extremely risky. There's a 10 % chance that this thing works. 90 % chance we completely destroy everything. But if it works, it'll be amazing. Dylan Patel and his CEO. Dylan and Doug, get both of them.

1:36:31Dude, if Dylan is the CEO, then my life is going to become miserable dog. Look, so I think, I personally believe that Fabless Fabulous and Foundry need to have separate lives because you're like, there are two really drunk adults at the bar tied together hip to hip. And it's like one of them could be dying, actually. One could be a corpse and the other has like a shot. OK, so like I just don't think I think, you know, like I believe in focus. I really do. I believe that small teams with a lot of focus can make them extraordinary results. I'm sure you see this in technology over and over and over again.

1:37:11I think Foundry needs to be like given a leash that's long enough to like make the shot true, probably a smaller dream and probably like, you know, a pot of gold at the end of the rainbow. But then like essentially be told like, hey, here's your purse budget. Here's your potential capacity. If you win X, Y, Z, whatever, you'll get a ginormous order from the fabulous semiconductor companies in America. And, you know, that's the pot of gold at the end of the tunnel. and then behind you is death and there's only one way and it's forward because like how I think we've gotten to this point is like there was always this like second sloppy option of like well we'll just put the Intel CPUs in there you know that's how Foundry has been treated for so long and I think Intel CPUs over a long enough period of time is just not going to be enough to fill the Foundry so you're going to have to do you have to separate them and I think you have to make like capitalism work which means that you need like a pot of gold at the end of the rainbow, a true like shot to do it.

1:38:15And then like probably founder mode, if it makes sense. Like sure. Maybe Liputan is the, like Liputan has much more of the qualifications. It can't be someone who's from Intel. And I think the company should be private because public markets would kill the shit out of it. Like it's just gonna be a miserable, it's going to be like a face beating the entire time. And yeah, dude, if Elon did it, I'd be very stoked. I'm not going to lie to you. Like how do you feel about Elon's companies? like you know someone said he makes the late oh no it makes the impossible late right he he will maybe he'll be late but it'll be like he'll get it done right um there's there's no one else who's really done this pretty much no one's fallen off the leading edge and come back and so this is like a moonshot this is a moonshots problem and i don't know when the twitter deal was happening i was saying like okay we got we marshaled 44 billion dollars in private capital there's also the chips act going on you package all the money together and you give elon intel and like what is that what does that counterfactual look like in the course of history well i think the question is does the stock need to drop another 50 before it can become a viable like actual take private target it's an 87 million company today i think you can do it i think you can do it today yeah i mean if you can take twitter private at 44 you can take intel private 87.

1:39:31i think i think you just have to split the Foundry fab. It's that simple. Because the Foundry, sorry, sorry, not Foundry fab, sorry, Fabless. Fabless, yeah. The Fabless business is worth something. Okay. Like, it is, in my opinion, the like, dude, Hawk Tan, the Sith Evil, like PE Overlord would like crush it. Like, I really do believe that. My favorite. So quickly, like, you split out design, you have this Fabless semiconductor company similar to, it would compete with NVIDIA in some ways. AMD. AMD. AMD. And so they'd be focused on CPU and their customers would be who exactly? I think you'd focus.

1:40:13Electronics companies. Electronics companies, but. Yeah, like I think you'd focus. So the thing they keep saying is AI at the edge. Yep. I'm a total hater. If I'm being honest with you, like, you know, the internet works. Packets are pretty quick. Yep. What I think would be the best way is they do have some networking content. They do have the PC business. They do have like high-end data centers, CPUs, maybe like the high-end data center CPUs, like, I mean, to be clear, they're going to be like a third place or a second place against AMD. Like it's going to be an ugly world, but like what you can do is you can just kill all the SKUs and all the expansion you've done over time.

1:40:52Like Intel has all these custom SKUs for whatever. You make like good, better, best data center and I don't know, edge or mobile with some kind of optimized thing. and you fit all your products into those categories. You kill all the unprofitable ones. You fire 50 % of the people and then you do your best to extract the rent in places that you cannot be ripped out. Maybe you, I don't know, monetize your CPU software, sell it or some shit to AMD. Do your absolute best. And it's a really sad ending to Intel, the fabulous business, but I think it has one that is worth more than$0. Is, yeah, talk about the GPU-CPU split here because Intel's never really been a player in GPU.

1:41:35And that feels like when we talk about the value of TSMC in Taiwan and AI, we're talking about super intelligence and these mega clusters and the ability to train frontier models. And it feels like even a high-performing Intel isn't a player in that world. Or should we be thinking about it in that grand of terms? No, I don't think they're a player in that world. I really like it. I think it sucks. But like, you know, Gaudi is a chip that sits in warehouses around the United States. You know, the Battle Mage GPU is like not the worst product. But like, I think if you think about just like semi-characterist, man, one of the like my favorite analogies or like ways to look at it is it usually ends up being like a, let's say a 60-30-10 market.

1:42:24and the 10 % like 60 % makes like you know 2x the profit of the 30 % and then the 10 % is like break even or loses money I feel like Intel's market positioning kind of puts them at the 10 % and I think like I like I really think the private equity outcome for the fabulous side is the best outcome possible because like and the reason why I say Octan like let's actually just like play the Octan like what Octan does is he takes a business that's extremely mature and sticky that was like a winner of the last cycle. And then just like fast forward 10 years of the maturity all the way to today. So like VMware is a perfect example.

1:43:03Virtualization was like, you know, the thing in the 2010s and made CPUs better and all this stuff. And, you know, there were this like almost monopoly. They still have the vast majority share, but they were like spending all this stuff, growing expenses. And then Hawk was like, dude, no, they actually have a business that has some terminal value. They're not living in this paradigm. So what I'm going to do is I'm just going to, fire half the people, raise the prices on the, like, raise them massively, lose a lot of other customers along the way, but become a massive cash cow, and then like, essentially squeeze that to the end.

1:43:34But if you think about what Cock is actually doing is he's accelerating 10 years of industry progress into three, right? Like, that's what would happen. But like, it's going to be a lot uglier and slower show in public markets versus just like, time collapsing price raise, fire all the people, boom, you're profitable, you're at the end state, you're essentially underwriting no growth. I think Intel needs to underwrite no growth, and that's not in the Fabless business at all. Yeah, it's just embracing reality, like embracing the reality and taking your medicine. Someone in the chat, Sharon, says, please ask Doug about the new Intel factory in his hometown of New Albany and what the status is.

1:44:14Do you have any idea what's going on there? new albany not my hometown i haven't no no no not your hometown this listener's this listener's hometown is maybe looking for a job in the fab so the uh new albany as far as i understand uh the ground is broken the shell is empty and i don't think they'll fill it okay that is uh but the thing is i think that that's a really valuable asset that needs to be remarketed I think it's probably likely someone will buy it. And if I had to guess, it's like TSMC. So, yeah, I don't know what that looks like. But I think a really shrunken down Intel looks like just Oregon and just New Mexico and Arizona.

1:45:01Arizona? I think so. Yeah, Arizona. And that's it. The capacity that was expanded for Ohio was like a YOLO bet the farm somehow where like BDAMD again. Like I think it was underwritten to have this like and that's the reason why Liputan was like dude touch grass This isn't happening pack Elsinia. This is just like this is not happening like you're like completely not realistic I think that that um, it just doesn't like the capacity they had there For the wafer starts is just like so large. It doesn't make any sense. Um Yeah, and I mean like dude the Liputan thing and like how do you feel about like the you know Chinese thing?

1:45:37I mean, there's just not many people who could take the job and I mean and it really sucks since very hard, but like, dude, he actually embraced reality. Like the most realistic thing I saw, he's like, dude, we're not even a top 10 player in AI. And I was like, yeah, that sounds like reality. Like this is the first realistic thing I've heard for a long time. And that's like refreshing to me. The guide was totally like the, the print was totally messed up. Like, you know, effectively it was really ugly. Essentially they're like, yeah, we did pull forward tariffs. Yeah. The guide is a little messed up and yeah, it's going to be uglier from here.

1:46:07but I kind of vibe with it because it's like, we're just going to tell you like it, like, like how it is. You can like trade the expectations of this, but like the, the stock and company and the value of it is in my opinion, a binary option is what is the foundry worth to America? And how do we get, how do we like fast forward this like painful capital intense world where we like don't have a leading edge semiconductor producer that can have an external customer to one that can that's, that's the entire value of the company to me. And then fabulous is like a call option cash gusher that can be hopefully harvested strategy is we need people to rip the band-aid off yeah yeah yeah it's supposed to pay a big it's gonna cost a lot uh give me the update on gpt5 yeah specifically it this was the week that the timeline woke up to language models plateauing a lot of people are are bummed about it bearish i think in it was maybe six months ago that Dylan Patel went on Dwarcash and said like, if GPT-5 is good, we're totally good on all the semiconductor spend.

1:47:12If it's not, maybe we're in trouble. And so I'm wondering like if there's updated thinking around there based on, you know, do we need any more inference clusters or training clusters? Or is it just a game of where's the profitable inference happening? Let's make sure we have enough to meet demand, but not go further, not create some overhang. How much of a dance do we have to do to make sure that we don't get like over capitalized over built okay so this is a pretty interesting question I'm gonna parrot Dylan on Twitter because you know like my lord and savior Dylan knows knows what he's talking about GPT 5 is a little disappointing I think for the power users of Twitter there's no other way there's like no other way to put it is that like for the power users of Twitter who've been like chugging O3 deep research things for a long time and is like messing around with Grok and like messing around with whatever, I personally do not feel like massive difference.

1:48:14It's less verbose, whatever. Maybe it's slightly better. I don't know if you're seeing this thing about like the SWE benchmark, like the - The chart? Yeah, the chart. No, no, not the chart. The SWE benchmark, if you look at it, not all 500 tasks are measured. They pulled some. It's like 477. It's like 477. Yes. Yeah. Yeah. So like that's a like that's an apples to oranges comparison. So that's a big deal. But I do think you have to think about like, OK, so on one hand, the cultists and like me and like the power users are probably disappointed. On the other hand, you know, there's 600 million free users who probably just woke up to like a big upgrade.

1:48:53And I think that that's how I feel like this was actually like that's the actual strategy. They push them to five. five's a lot better versus four for uh you know four oh and it just sorry dude the fucking naming well i think i think another way to put it is if you're a power user around like using it for research and learning you're you're maybe disappointed if you were a companionship power user i mean we were reviewing i mean r slash chat gpt on reddit is absolutely in shambles today. Dude, I know because the girlfriends. RIP. RIP. Well, there's a new entrant there. I think they might have to peel off that market and give it to Elon.

1:49:35Yeah, that's true. You can do the Annie Network. Yeah, exactly. Yeah, I think that that's the correct way to think about it. I think it feels like it's try to be a simplification of the SKUs because as you guys know, it's confusing as hell. There's many there's like mini thinking and flagship for the most part I had to if I had to guess flagship probably rent like probably prints cash for them and is like much cheaper and they're like a smaller model maybe not a smaller model but like compared to like a very big model smell right it's not big model smell so it's very and then also if you look on the pricing it's pretty cheap and if it does what it does well then just like we talked about sweet benchmark might not be then might not be correct but like you nuke the price on your competitors in terms of like Claude versus uh chat uh GPT-5 tokens and so I think that that's like the this is the better bigger faster or maybe it's the faster cheaper but not better update if that makes sense yeah well one thing that stood out yesterday so they have 700 million weekly actives globally 85 percent are outside of the United States and you can just imagine in that in those hundreds of millions that are outside of the US.

1:50:53Many of, you know, like the question just becomes like how they can continue to serve the, like, will they be able to serve? What will ARPU be and what will the margins be on the incremental international developing markets ChatGPT user? Because the marginal cost to serve WhatsApp or Facebook, even yes, you're storing images for Instagram, but, or WhatsApp, you're running a database, But the marginal cost is so so low and it feels like at least right now Maybe it changes in a couple of years, but right now the marginal cost of serving a chat GPT user even a casual weekly active user is in the It's in the dollars per year And when you look at the monetization rates of Facebook and WhatsApp in developing markets the ARPU is like dollars per year And so matching that up feels like a big challenge.

1:51:48And I'm wondering about, yeah, like ASICs, AI on the edge, dedicated servers or even more pared down models. Like what's the solution so that you're not just burning a ton of cash supporting unprofitable users? So I definitely, so I wonder if we'll have the bandwidth to get this done if it like makes it to a big post. But like, I think we're thinking a lot about this deeply on that semi-analysis. I think the cost of a free user for a small model is like surprisingly low. I want to be a little bit more sure about that. But I think if you have high batch size with, you know, a B200 or a GB200, I don't know if it's dollars per year.

1:52:35I really think the actual net tokens that you're able to do is a lot higher than people think. And I think that there could be this, but the problem is, it's like the same, there's the same issue, right? Think of it as like a Pareto curve, right? 20 % of the people are paying out the wazoo and more than happy to pay for like a crap ton, right? The pro and plus of opening on. The only problem is like the top 5 % of that 20 % are paying or like, you know, they're massively losing money on. And then you have this like long tail that is like kind of interested, likes tokens, becoming a little bit more addicted, easy, cheapish to whatever.

1:53:11And then as you can shift that up, maybe you can make the revenue that you're losing for the pros. And so that's kind of the more interesting thought process. I do think the unit economics of these things are a little bit like, I mean, it really depends on the size of the model and then what inference they're doing. But my impression is you can be doing millions and millions and millions of tokens for a relatively cheap year. And if you monetize if you know we're talking about like we can monetize like 15 to 20 percent or even 20 to 30 percent of your Your tokens are actually being monetized at like, you know the market rate You can pay off the 80 percent and that break even I think is a really important like question I don't know the answer to that.

1:53:56I know we're working on it, but I don't have anything Well, yeah, I think the I mean the the going back to your like Instagram or whatsapp comparison Instagram and whatsapp are pretty much the same wherever you are in the world regardless of how much revenue you're generating for these platforms. But it's very possible in the future that companies cannot serve the quality of model in some of these areas that they can. Well, they will. It'll just be$200 and$200 in an emerging market is like a ton of money. And so the adoption rate and the upsell rate will just be way, way lower. They'll probably be like an ad-supported tier.

1:54:32But again, ads themselves don't generate nearly as much. Of course, the ARPU will be much lower in emerging markets. Yeah, and I think that's happening. I can't name the hire, but I know the hire that essentially started the ads. Yeah, VGC Mal. Yeah, is there. So that's the freaking surprise. I wouldn't be surprised. The answer is there's a Twitter user. The answer is always ads. There's going to be ads eventually. But they probably monetize within an order of magnitude of how well Facebook ads monetize and Google ads monetize. So that's fine as long as your inference cost is roughly the same as within an order of magnitude of Google's service cost and Facebook's service cost to serve a user, which are pennies, I imagine.

1:55:18But it does feel like we can get there over time. I think the timeline broadly woke up this week that we're building developer tools and consumer internet companies. And that's the game here. and machine god is like real delayed some ways delayed um i'm curious how do you think uh how much do you think the labs care about the student market there had been some reporting around um the token generation as school ended last year token generation dropped dramatically and then today um sundar came out and shared that uh gemini they're making gemini like you know like unlimited sort of like free for for students this coming year and in some ways he's staying in the game he's like I'm not letting chat GPT well and no and it feels like that's potentially a way for them to like to kind of corner with users that will become very valuable maybe aren't so valuable in the short term but will become very valuable over time if you can get them to stick yeah yeah I think let's kind of talk about this because I think that's like just a really interesting and I'm kind of going to Google, I think, you know, how CUDA, you know, like just analogy, right?

1:56:33How CUDA became a thing is because Jensen gave it away to PhD people for like a decade. And then all of a sudden, everyone who ever did anything realistically in machine learning was like, well, I'm using CUDA because that's what I've been using. I think it's important because if you're thinking about like, you know, where are the users of tomorrow? The S-curves of penetration are like, it's not going to be the old people who are using the hell out of it first. Who knows? Maybe they are. But it's like the young people are probably going to over index, you know, people my age, which makes me feel old, is like going to, you know, probably index about right.

1:57:06And then the people older than me are going to index under. And so where do you actually win market share today? It's probably not in the people my age and older or the power users or whatever. You probably need to like get a, you know, you need to get a 12 year old addicted to Gemini, which sounds like very terrible. Now I say that a lot. But you wouldn't say that about Google search, you know, or Google Drive or Gmail. But yes, it's low churn. You have to get them over the adoption curve so that they are low churn. And that's where they're like, I think it's like a cognitive referent, right?

1:57:36Like right now, even though I am very model curious, meaning that I have a paid sub to like Claude, to Grok, to ChatGPT. Recently, especially in the good old golden era days of 03 Pro deep research, I'm just pounding deep research queries and age queries constantly. And I'm going to be – to be clear, I'm going to start looking around a little bit. But I think that that's what Gemini's real issue is. They need to become the cognitive referent. I think when people open up a, you know, a GPT like, you know, transformer model effectively to ask them in LLMs, they need to be thinking of Gemini in the conversation and they just don't do.

1:58:19Sometimes I like talk about LLMs with like people and it'd be like, you know, OpenAI and Anthropic and what's the third? Oh, yeah. Gemini, you know, the third. Yeah. I like weirdly forget about them. And I think that that's the, they don't want to be forgotten. And I also think if we do a segue too, I think that's why they're also starting to sell TPUs externally. And this means like as a service, right? In their cloud, right? They're selling, like they talked about on the last call where like, you know, GCP is starting to accelerate. And I think where we're starting to see that is I think TPU is starting to pick up a little bit.

1:58:52Do you think that would be like distilled models that are fine-tuned or developed for TPUs specifically or something else? I think it's more that there's a few model companies who are very interested in extra capacity. For example, Anthropic definitely uses some TPUs. I know that for sure. Don't they also use Tranium a little bit too? They also do use Tranium. I think it's very funny because Anthropic uses everything. Interesting. Is that like a huge cost center to have kind of like a replatforming team to rewrite all your CUDA code into Terranium and TPU compatible code? I don't know, probably, but, you know, Anthropik's cracked.

1:59:34So that's what they're... They have cloud code. They have full access to cloud code. Yeah, cloud. Re-platform it. I mean, that is the board case. They don't have to worry about being dropped. Yeah, I mean, I was wondering, like, when will a cross-compiler exist? And you can... I mean, didn't Facebook do that for a while, where, like, they would write JavaScript and compile, like, C++ or something like that? because they'd written like so much JavaScript that they were just like, okay, we don't have time to rewrite all this. Let's just write our own compiler. And you can imagine Anthropic doing something similar to run on TPU or training.

2:00:05Yeah, I think that that's happening to a certain extent. And I think that for Anthropic, they think of it as optionality. And I think training specifically is like, you know, the other drunk suitor at the bar who like really needs a partner, like Amazon, who's now last place, right? Yep. Last era was first place. Now they're last place. and then Anthropic who is like the scrappy number three who needs capital to compute is like come on dude, marriage made in heaven let's tie it up together and then that's why training is just like ramping We're going to start using these drunk bar analogies I love drunk bar analogies We usually say the sports analogies but I'm probably more familiar with the drunk bar analogies, those are good Ross McAnnell in the chat says please ask Doug about the state of memory makers will SK Hinex and or Micron be able to maintain margins and keep HBM as a somewhat differentiated product, or is it doomed to be a commodity business?

2:00:59I think, ooh, this is a good question. Trying to think about how, for instance. So, I think one of the ways to think about this first and foremost is HVM is like the new DRAM. I mean like there's like a weird aspect where it's like okay DRAM was like the best and you can look at the cycles margins and like they're not actually higher than last cycles margins which is like probably a little bit of a I wrote about this like being a super new DRAM I think HBM is really really really important super super duper in demand and is like you know the new memory but in the other ways NAND specifically is kind of like the old memory and it's getting much worse with the commoditization and the like especially actually CXMT on the lowest end or no YMTC on the lowest end and then CXMT on DRAM.

2:01:45So you're starting to see some, some of the aspects there get a little worse, but I do think NAND is trying really hard to kind of hold on to the, you know, the oligopoly where everyone doesn't raise bits together. And maybe who knows, it becomes so old and whatever you end up like eight HDDs, which are actually having like, like you should go look at STX and what's other and WDC because their stocks are ripping because they're both. Yeah, Western Digital. Yeah, Western Digital because they're not investing. It's a two-player market. Interesting. They even gave Hammer to the other competitors so that they can effectively have a two-player oligopoly where they control supply.

2:02:24And this is just the Nash equilibrium. This is just game theoretic. They know that this is better for both of them, so they're not getting a price war. Yeah, yeah, yeah. 100%. But that's only for hard drives. NAND isn't there yet, man. And you have like a slippery Chinese like swing producer that is willing to blow it up. Got it. And so I think on HBM, I think it's kind of complicated. I don't want to like say too much because I don't even know. I don't even know what semi-analysis is house, like house, house view is right now. Let's just like I'll talk about some facts I think might be very interesting and like thoughts is that like, look, last time this year, Micron and SK Hynex were effectively completely booked out.

2:02:59And obviously Samsung wasn't even in the game this year. They're not booked out. What is the difference is I think it's the threat of the Samsung qualification. I don't know about the Samsung qualification, okay? I don't think anyone knows. The shit I hear out of Korea, like I hear that they're qualified, they're not qualified, they're qualified, they're not qualified. They're qualified, but, you know, it's some kind of yield thing. I hear kinds of shit all the time. I have no idea. But I think the fact that HBM4 pricing seems to be a little bit like dampened just on the threat of qualification really kind of tells me that the HBM cycle is really long in the tooth and is probably where we're nearing the beginning of the end.

2:03:39Just mathematically, as the second derivative continues to go down for most of the memory stocks, you can look at like SK and Micron. I still like SK. I still think what they do is really, really differentiated and valuable on a relative basis. I mean, they got to HBM first. They still are really awesome. They still have the best product and process. But I guess I'm just kind of like, you know, I'm a cycles brain guy. And it's been about three years of a tight cycle in memory. And you're asking me to bet on the fourth. I know what the base rate should be. You shouldn't bet on. But I don't think we actually have a house view other than that.

2:04:15Because at the same time, you know, NVIDIA goes burr and HBM Bits goes up. And even though there's a little bit of an oversupply in HBM3, I still think HBM4 is going to be pretty good. But, you know, like rate of change brain tells me it's a little spicy. Where else in the supply chain should we update if we're totally plateau pilled? And we say, you know, we're not going to necessarily even want to do the next order of magnitude pre-training run, the mega cluster. we're maybe going to be more distributed, more inference heavy. Are we thinking ASICs? Are we thinking more focused on depreciated GPUs, distilling models to older hardware, or just, you know, really getting all of the juice out of the current H100s and GB200s and like actually just like, you know, like not replatforming to the latest and greatest constantly, like not worrying about that?

2:05:19Or like where else should we be kind of updating on various parts of the supply chain? Okay. So I think a lot about this. Or in one, I feel like I'm like the wrong person. Or I'm probably a decent person to answer this, but like it's going to be really speculative. So I'm going to put like some massive disclaimers. Yeah. Who the F knows, right? Like maybe, you know, maybe there's one more thing or claw comes out and they cook on five or something. I don't know. Or Gemini next week makes us all pilled. I don't know. Yeah. I think we're, if we're, okay, so let's just like walk through some of them.

2:05:54The massive pre-training cluster doesn't happen. I think the fiber from data center to data center is like the most screwed. That is the most whipped at the tail. The multi-data center training thing. Sure. That is like, ouch, goodbye. You don't need anymore. Right. You can do 100K clusters of RL. And so that's probably where I think if you had to slice the puzzle where it's most impacted, it's probably there for training specifically. I still think we would end up doing a lot of inference. I really do believe that if all progress stops today, we probably would still have a decade of productivity as this technology is ingested.

2:06:29It's not AGI God, but it does happen to be an amazing densification of all the information into an answer machine. Fucking awesome. It's useful. It's like the rod of CPUs in the cloud. We're going to use CPUs in the cloud for a long time. It took 20 years to actually do all the things that you can do with CPUs and databases and hard drives in the cloud. And now we have GPU and LM. So we're going to stuff that in every single cranny of the economy. What did you think there was a headline recently that it was Azure's non-AI cloud business was growing at almost the same rate as AI? Oh, yeah. I think the final read on that was that that was just driven by OpenAI as an Azure client.

2:07:15But basically, the readoff of earnings was that their core infrastructure group grew faster than their AI services group. So more people buying compute as opposed to buying tokens. But that's not necessarily a read that like people are spinning up more, you know, CPUs. So walk us through it. Actually, that's a great question. I'm very familiar with what you're talking about. The Azure beat last quarter specifically was driven by the infrastructure side more so than the token side. And then like ironically, you know, one of my colleagues at like Semi Analysis pointed this out. there wasn't the disclosure they had last quarter.

2:07:56They disclosed what the percentage AI was to the growth, and they did not talk about it. And if they stopped disclosing, I can tell you the answer is it was lower. So I think that's probably a pretty interesting thing. It tells you that the consumption is definitely worse. I don't know how they're classifying AI. Well, and doesn't that track with Satya, like canceling data center developments and just saying, I'm happy to lease. also like you know the business on a tear doing route like multiple rounds they've done more layoffs this year than i think the last like three years combined which tells me that everything that like the timeline is waking up to this week like satya has known even if you look back at some of his interviews he's talking about like yeah open ai is like a great consumer technology company we're happy to partner with them sorry can you can you restate and unpack that a little bit more so um There were, so Azure grew a ton.

2:08:53AI tokens grew a ton, but AI core infrastructure grew even more, but they used to break out within core infrastructure, how much of that infrastructure is being used for AI versus not, and they stopped disclosing that. Is that correct? Yes. Yes, that is correct. And so by not disclosing it, you know the answer is it's lower. Yeah, but it was still like pretty big growth overall, So it's just that the second derivative slow down. Yeah, it's still accelerating, but it's at a lower rate. Yeah. Okay, interesting. Well, actually, I feel like now I'm talking out of my ass. Yeah, yeah, yeah. I want to see the number in front of me.

2:09:25But look, I think the thing, the Microsoft print is they pretty much are almost mid-cycle pressing the brake. And then they juice. But as it decelerates the investments, you still get to reap all the investments you made. And so the revenue numbers are - Yeah, they have a massive backlog, right? Don't they have like$100 billion of cloud backlog? Yeah. And so all this backlog is starting to become revenue. And then like, you know, Microsoft still is like such a winner. Just like fast or rewind to like three years ago when Microsoft was like clear number two. And like, you know, now they're outgrowing on a much higher base than AWS is.

2:10:05And AWS is like not in this, right? So I think that if you think of it from the perspective of like, hey, Microsoft Azure versus AWS, did Satya win? The answer is yes. But I think the thing that is interesting definitely going forward is like how this all works and how OpenAI continues to finance and spend and pay for more compute infrastructure. because at the same time, like, you know, one of the other ways you could look at it is like the entire math of where this is going is just like all in Oracle's pocket. Like Oracle effectively, so you talk about the Microsoft slowdown, Oracle literally just completely ramped up when Microsoft slowed down.

2:10:46And then Oracle went to OpenAI and OpenAI is like, great, dude, we got a new customer, they're willing to do Stargate. There's even a spot that was supposed to be Stargate for Microsoft that kind of like, you know, and then all of a sudden, I'm good for my however many billion. 80 billion. But then that deal went to Oracle, right? Yes, that deal went to Oracle. So I think that that's, yeah, I think Microsoft is like slowing down. They definitely had this massive lead, like truly a massive lead. Remember like last year, the perception of who is winning the race for the hyperscalers? It was Microsoft number one because the OpenAI partnership plus the infrastructure.

2:11:23You're like, dang, they're so far ahead. Now being conservative, kind of pulling off, you know, decelerating. But I also want to put some like, let's also talk about this a little bit, because I think the underappreciated part about the Microsoft thing is, yeah, just like how shitty they've done with access to the model this entire time. They've had access to the model weights at OpenAI the entire time. And you can also argue that no company has more competitive threat for their core business than Microsoft does. I don't know about you, but I do a lot more editing and drafting and information search and ideation in ChatGPT than I used to do it in Word.

2:12:02So you're typing up something and you're like, ah, give me an outline. So Elon posted yesterday that Microsoft is going to get absolutely cooked by OpenAI. And in many ways, obviously, Microsoft has a ton of users for Copilot. They're taking AI seriously. But what you're getting at is one, you know, and it's hard to read too much into what Elon is saying because, like, he's got a lot of, you know, he's playing games behind the scenes that we don't necessarily have a view into. But what you're getting at is interesting, which is you might instead of there's a world in the future where instead of opening a doc or an Excel sheet, you just start talking with the model and saying, I want to make a model for for this product line, you know, going out over the next like three years.

2:12:49It basically has Microsoft 365 as a tool that it can call. Yeah. And then eventually instantiate a word doc for you if it needs to. It creates the output in the actual application that they have because they already have cloud hosted PowerPoint and they just are like, oh, it sounds like you're going down a tree. You need a PowerPoint. Here you go. I generated it and you can edit it if you want. But also here's the export. We got a PDF for you here because we used our tool. Yeah, 100%. Yeah, 100%. Huge UX problem. I mean, Google has bolted Gemini on to every product and the adoption has been very rocky and it's been tough.

2:13:25Like it's not as easy as just like slap a text box on it and you got a winning consumer product. Like it does require innovation, I think, in terms of product development. So going back to the sort of dynamic between Microsoft and Oracle, I think you have to ask the question if Microsoft is pumping the brakes a little bit and Oracle slamming their foot on the gas. Like it's going to take a little bit to see who made the right call. Yeah. Yeah. So do we plateau or not? Right. That's the answer. Well, and I think the answer this week is yes. Yeah, but I mean, at the same time, like inference for Chachi B2.

2:14:05Not necessarily usage-wise, but model quality. Could just continue to increase. And if Oracle can position themselves as like the key cloud provider for that, that could be, it's mostly just like the Oracle investments just can't be overly aggressive at any point in time because if there's a pullback, then they're like, oh we're unprofitable for a little bit on this yeah yeah they could take the biggest bath um potentially yeah dude i think okay so i'm trying not to call it because as you know ai changes i feel like week to week yep sometimes it feels just like i don't know hyperbolic time chamber dude like you know we could be so over and then it could be so back right uh if you guys remember pre-training is over uh it felt very over and then now we are you know so back because of the because of the, essentially the increase in, um, reasoning, test time, reasoning.

2:14:53Yeah. Sorry. Reasoning. And then now I'm thinking about this is like, okay, so the unspoken part about this that makes, you know, the chat GPT five a lot better than other things is like long task and agentic and tool use. Right. So that is the, in my opinion, you know, and I hear this kind of shit all the time. I thought it's really BSE until I've been messing around with cloud code. It's like, Oh, agents, agents, agents, agents, agents are going to be this big thing. And you're like, what the fuck does that mean? because you're like, I don't know what this agent is doing. But like, Cloud Code is pretty cracked, man.

2:15:21You just like ask it to do things and it just like does them. And it does it in like kind of a scarily good way. A good example is like we've been hiring people. I think we have some hires in the line. We make them do a case study. That's like not a case study is a great way. Okay. And I was so pissed and annoyed by some of the case study qualities. I made like each of the models do the case study. Dude, you know what did the best case study of them all? Cloud Code did. Okay. Cloud Code over OpenAI agent. And I think that that's kind of what we're like, those extremely long context, autonomous ability to do stuff on its own is going to be the like, you know, the nirvana that like changes everything or makes the consumption a lot bigger.

2:15:59And I think you can kind of see the glimpse of what an agentic feature looks like via Claude Code. And then you just assume that instead of them RLing the shit out of like software and making, you know, the best, you know, the best commit or something like that, they're going to RL the hell out of like advertising or creating the best, you know, advertising media. Or they're going to RL the crap out of like finance or making the best financial. Well, yeah, I mean, the thing that stands out to me is like this compounding advantage of like you're a lab, you're competing with other labs and you have access to the best coding product and you can use it as much as much as you want forever.

2:16:37And it gets better. And then you guys get better and higher output. And I don't think we've seen this. You know, you don't you didn't see the same dynamic with like Microsoft having a better version of Excel and like, yeah, or the example of like, it's not like Mark Zuckerberg with Facebook was like, I get to use Facebook more than my competitors, so I'm going to be better. They actually tried that. They were using Facebook for internal comms. They still do. Well, yeah, but whether or not that gave them a compound advantage. I don't think it did over Teams or Google. Yeah, I think there's this project, or it's like AI 2027 or something.

2:17:12Yeah, yeah, yeah. I think that that actually feels a little bit more grounded than some of the really AI dumerism, but I think the recursive ability or like whatever, like P-Doom, whatever you want to talk about. But like the recursive ability to make your products better by continuing to invest is like, you know, it is a flywheel. And that's definitely, I think, the anthropic bet that they're going really hard at. And so, you know, the thought process is like, well, okay, if we can get the AI agents to do, you know, AI experiments, not just coding experiments, then like, boom, we are off to the races.

2:17:49And that really will be, I think, where the curve bends back in on itself. TBD, right, yet to be seen. I don't exactly, like from the outside looking in, there isn't exactly any kind of special ability for me to say that it will or will not be that way. but I think so far from what I understand for the researchers, I don't think everyone's like doomed or bared up on on some of this stuff. I definitely think Chat Chat Beauty 5 is a little disappointing, but maybe maybe OpenAI just isn't cooking like it used to, right? Like I think and I don't know if I don't know if it's a like I don't know what actually happened at 5, but like I want to like we don't actually know what's the like the ratio.

2:18:34Well, you have to. So reasoning to like just totally just remember I remember, you know, you can debate on the people that have left OpenAI in the last couple months, like how good they were. Were they the best people? Were they mercenaries? But any company that has been gearing up for a massive product launch, like or have gone through a massive product launch. Imagine going through that again, but you lost like 40 percent of some of your most elite team members. Like that could be, that's like, should obviously have been a factor here. If it wasn't, then Zuck is cooked because he just hired a bunch of people that just weren't that great.

2:19:13Someone's cooked. So I think that, I think that, yeah, that it's worth asking the question. What would, what would GPT-5 have looked like if Ilya was still at the company? What would it have looked like if Mira was still at the company? What would it have looked like if the long tail of researchers that left were still there? Or what would it look like if they just didn't have the distraction of the talent war? Yeah. Right. Yeah. I think that's a valid question because my understanding of like why Gemini 2 randomly was so good is like Noam Shazir was back. That's it. Like that's literally it as far as I understand.

2:19:45Like all of a sudden Gemini starts cooking again. It's like, yeah, because like the guy who invented half of everything is back. I'm not surprised that that's like a real dynamic. We're going to have to see. We're going to have to see. I do think you're right. Vibes are interesting. I do think probably tracking that cohort, like if you think about it just like an incremental slosh, like, you know That's either the biggest best investment of all time or gonna be the worst investment of all time and like tracking that cohort And how that works out is gonna be like a really interesting like case study Can you give us an overview of what's happening in private credit headline this week?

2:20:21Obviously that Meta had tapped blue out and PIMCO for like a 30 billion dollar You know So, you know, I don't know that the sort of pace at which they'll get access to that capital. Just give us private credit 101 and go as deep as you want. Yeah, 101, but also like, you know, the real kind of risks surrounding it, you know, over the next year or so. Okay, so I do think at semi-analysis, I'm the finance guy, which is funny because I definitely don't know if I like, in the big scheme of finance, how much finance I have. But, okay, private credit is like public credit, but there's no marks, okay?

2:21:04One of the things that got really interested, okay, so one of the things that got really interested about that is like private equity rules because you could suck at your job, but if you have no marks, like you don't have a bad performance and your volatility like you know kind of chills the f out so on an allocator basis they're stoked like private uh i mean this is the beauty this is the beauty of of being in you know in in venture broadly is the market goes up and down and 90 of my net worth is absolutely stable it's not stable in reality but yeah yeah and i think that that's like a like almost like a feature um it was a feature that That was like a bug at the beginning, if it makes sense, because it's like, okay, there is no mark.

2:21:52And because of that, you can effectively, like, you know, the volatility in these assets are really low and you hold it to maturity. There's a lot of studies and papers that effectively, like, you know, public equity lever it up over five years when you don't sell is like very similar. Like the returns actually start to approach each other. And some of the cohorts of private equity specifically have really started to implode a little bit and have a low money out of the investment. So anyways, that's private equity, which I'm like super familiar with, very, like very funded private credit is like a lot of the same uh same energy in terms of the mark and effectively you own this piece of debt to maturity so there is no you know you don't really take a mark on it um and and so you could get like at one point specifically everyone raised these capital vehicles that were like we're gonna get high single digit returns with very little volatility forever and so everyone was like dude sign me the hell up and so yeah if you look at if they're the the number of billionaires that private credit has created in the last like two decades.

2:22:53It's like 50 in the Forbes article. Wait, really? Oh, yeah. I'll send it to you. Yeah, private credit. I mean, just in Aries, there's like four billionaires. Because it's just if the best way to become a billionaire is AUM maxing and private credit allows you to AUM max better than almost any of these other sectors, then... It's just so. Yeah, really quickly, Bloomberg highlighted 18 folks who are now billionaires from private credit, starting with Aries at 13 billion net worth going down to Blue Owl, Craig Packer at 1 billion. And so 18 new billionaires have been minted from the private credit boom.

2:23:37And yeah, I think from my perspective on the private credit boom is like, OK, it's definitely been a thing this entire time. But like in the last few years, like there is a hockey stick moment where I want to say it's like late 23 or something like that, where the pitch was like almost, you know, unbelievable, effectively. This is simply too good. Yeah. Yeah. It's like you can get equity market returns in the long run with no mark to market risk and you know volatility and in theory less risk. So you're like, dude, equity risk or lower than equity return with like relatively no risk on like, you know, it's like obviously spread over Treasury.

2:24:17You're like, bro, sign me the hell up. Like I'm going to slam that button until the button stops working. And so everyone raised these giant funds, like ginormous funds. And so now these private credit guys are like sitting on a bajillion dollars of AUM. And they're like, dude, how do I get this get this to work? And so now private credit is finding its way into, you know, it's kind of like the private equity. They're going to have to deploy. And so for people who are looking to deploy very large amounts of assets, I think data centers are going to be really interesting because in theory, and this just depends on the whole stack, but like data centers are more like real estate investing.

2:24:56So you have a very different return profile that often are baked into the deals. And I think it's very capital intense on a relative basis. So you can deploy a lot of capital, which is awesome. And so you do that, you get like these five year, 10 year investments with like pretty solid chances right now, at least in like the two, three years, you're super money, you're super money good. Like some of the early data center investments are like fucking awesome. And so you're just gonna, you're gonna slam that bed, dude, you're gonna freaking, you're gonna, you're gonna deploy. The plateau theory feels good here because the risk was that I build a frontier model capable data center that runs GPT-4.

2:25:38And then GPT-5 comes out and I can't run GPT-5 and I'm completely useless. All the workloads move to GPT-5 and I have no business whatsoever. Instead, it feels like the workloads are sticking around for a long time. And it's important you can have like a plateau in intelligence that is different than a plateau in usage. Exactly. If usage and demand plateaus, that becomes a real problem if you just spent$10 billion on super levered data center development. I think you're probably right in terms of the fact that if the pace of everything slows down in terms of progress, you can underwrite everything a lot more chill.

2:26:20You know, you're not going to be like, dude, my, you know, the data set, you know, the chips might get used longer. So you can be like, ah, you know, they're four year lives and they're five year lives with high, high certainty. You know, the algorithms aren't just going to like massively consume all this stuff and make like the crap you bought effectively, like super cheapened very quickly. And then your investment is more money. Good. Yeah. It was like having, like having a Bitcoin FPGA farm or something, you got destroyed when everyone went ASIC. Right. And, and that's the risk. But that's not the nature of the current frontier path.

2:26:54Like GPT-4 workloads or GPT-4 class workloads are sort of sticking around probably for a really long time. And in the future, even if we do develop the super intelligent model, it'll probably be calling less intelligent models. There'll be distilled models for specific tasks, specific models for tool usage, and all these different agentic workflows, et cetera. So yeah, it feels like all this stuff is going to be sticking around. and good news for the depreciation cycles. I don't know if that's like, so I'm going to like, I'm not going to endorse that view just because we're like speculatively one-shotting this in a day.

2:27:30So like, you know, we'll see. I got to think about this. Yeah, totally. But I do think, I mean, I do think this is probably better for the longer tail if Frontier model stuff slows down. I think if we're just talking about like, hey, truly everyone else, right? Like in the world where progress is exponential and there's only three companies doing it, effectively everyone else is a giant fucking loser. Right. Everyone is just a giant fucking loser. There's no way they're going to have any kind of products. Everyone's just like totally cooked. Who cares? Why would you ever invest in NeoCloud X or, you know, behind the curve lab Y or, you know, whatever accelerator company Z.

2:28:09Right. I think it probably is better for just the entire ecosystem if we're talking about just like the longer tail of capital. So, specifically, I think the NeoClouds, the GPUs, everyone that isn't named OpenAI, Google, or Anthropic. So, I do feel very strongly about that. Well, this has been fantastic. The chat is going wild. One-hour guest. Semi-analysis in my veins. This is our first ever one-hour guest. Nope, Dylan Patel was also a one-hour guest. Every time I get someone from Semi-Analysis, I'm like, stay on forever. Do the whole show with us. I really enjoy these chats. I really thank you for taking the time.

2:28:42Just so you know, like we have a lot of like I have like a lot of ability to make this happen or not Do we have a lot of cracked people at semi-analysis? I feel like send them all over. I love these I We talked to Jeremy, right? Yeah, yeah, yeah, yeah, he was fantastic. I fucking loved Jeremy Okay, so we have yeah, so like that's like the benefit of something else There's a lot of cracked people. We'll send them all over. Yes, I'm all over and and I have a plan so Our plan is we've been we've been teasing that, you know, basically if you're if you're a real VC you're on this like the super secret$1 million a month semi-analysis plan.

2:29:16And if you're not on that plan, you're kind of just a tourist. And so we're going to get every single VC in Silicon Valley on the$1 million a month semi-analysis plan. That's our pitch. We're going to meme it into reality. I'll take it. For every billion dollars of AUM, you should be spending at least$15 million. I think so. I think so. Otherwise, you're just a tourist. You don't really understand this stuff. But thank you so much for stopping by. We, yeah, if you're not, if you're listening to this and you're not subscribed to semi-analysis, what are you doing? What are you doing? Thanks for joining Doug.

2:29:46This was fun. This was really fun. Let's do this more. We'll talk to you soon. Yeah. We can talk earnings, honestly. That's, I'm, that's like probably where I'm best. So yeah. So take care. All right. Amazing. Bye. We'll talk to you soon. Bye. Up next, we have Mitchell Green from Lead Edge Capital coming in the studio, in the restream waiting room. In the restream waiting room. Let's bring him in. And while we're bringing him in, let me tell you about AdQuick, out of home advertising, made easy and measurable. say goodbye to the headaches of out-of-home advertising. Only AdQuick combines technology, out-of-home expertise, and data to enable efficient, seamless ad buying across the globe.

2:30:15Mitchell, are you there? How are you doing? Good to see you. Good, how are you? I'm fine. I'm great. Great to see you. Sorry to keep you waiting. Happy Friday. Sorry to keep you waiting. Sorry I missed you when you were on the West Coast. We'll have to hang out in person soon. But how was your trip? How are you doing? Good. No complaints. How about yourself? How's life? We're doing great. Big week last week. We were in New York for the Figma IPO. I'm waiting for a slow week this summer. Yeah, it's been a lot. People always say it's like, oh, it's really busy. I'm waiting for it to slow, but it never actually slows.

2:30:47It never slows. Well, speaking of things that aren't slow, I want to talk about fast cars. Everyone at OpenAI just received, allegedly, the rumor is a$1.5 million bonus for being on the team for more than two years. I want you to help me advise these open AI researchers. We told them, don't buy a house, buy a car. And so I pulled up some options that you could pick up for$1.5 million. I think that's what they really should do. Everybody should get some leverage. So take the 1.5, buy an F40. Buy an F40. Okay, so we're skipping the SP3. We're skipping the Valkyrie. We're going straight to F40. that's great i love that what about by the way there's at least somebody on that engineering team that will do it most of them probably buy like priuses but there might be like one or two guys that'll do it i mean when the boss is driving a koenigsegg you know you got to show up in something at least a depreciated uh veyron it's funny you said about koenigsegg he can drive it as long as it turns on and runs yeah any advice for the koenigsegg owners in the in the audience keeping that thing running.

2:32:01I like the... I mean, he also has F1. Well, nothing wrong there, right? Okay, as much as I want to talk about this, I do, I do, we have limited time. And I do want this week... By the way, you need to have Zach Brown and I in together sometime. I'll talk the investing, he can talk the cars. Okay, fantastic, we'll do that. So, reaction from the timeline this week is that it feels like model, frontier models are plateauing a little bit. And I think that's generally fine. There's still a lot of capabilities to unlock. But I get concerned for the VCs that have been deploying billions of dollars into the longer tail of companies that have been kind of like more.

2:32:43They don't have necessarily traction. They don't necessarily have truly top talent. And they were kind of moonshot-esque bets on this idea of super intelligence. And so anyways, I'm curious, how cooked is the venture industry and VCs broadly? if, and the other factor here is like within a bunch of subcategories, there's five or six heavily funded players going after the same opportunity. And that will create healthy competition, sometimes unhealthy. And I'm sure there'll be some good outcomes. But how are you thinking about the current state of venture? Yeah, that's a great question. So I was just writing some notes.

2:33:30We obviously have a bunch of questions in there. So So AI saved the venture industry from a big awakening that was about to happen in 2022. And they just got like one more kick. What's absolutely incredible is that none of these people, like remember, none of these people remembered what happened in 2021. Okay, maybe you can excuse some of them in 2021 because they didn't remember what happened in 99 and 2000 because like most of them a lot of them weren't doing it back then they weren't in the industry but like most people that are doing this today we're in the industry in 20 and 21 it is the exact same thing you know as you obviously know we focus way more on like profitable businesses like 70 plus percent of our companies are profitable very you know like summer in silicon valley but we find like to find companies in ames iowa and nissua minnesota i mean we're probably the only tech fund on the planet that has two investments in sarasota florida You guys dominate in Sarasota.

2:34:34Yeah, we dominate in Sarasota. But I felt that over the last year where - Let me continue. So 90 % is... Okay, before that. People always underestimate technological change in the long term, and they always overestimate it in the near term. Think like the internet bubble, think mobile phones, think self-driving cars, think the PC revolution, like it always, they always do that. This, what we're seeing in AI is so reminiscent, and what you're seeing in the markets right now is so reminiscent of 99 and 2000. Yes, by the way, the big hyperscalers have giant amounts of profits and like are printing money.

2:35:16These AI companies, a huge amount of them, you know, 90 plus, 90 to 95 % of these AI application companies are going to zero. And by the way, I'm saying that, I'm hearing that from some of the world's foremost, you know, early stage venture capitalists that are telling me at the end of the day, 90 to 95 % of these things are going bust. And a lot of it is driven by upside down unit economics. You know, like it's funny, you see some of these AI companies that have, you know, I'm not going to give names that have only 50 to 100 employees, but are raising like$500 million. And like, you can't spend that much money.

2:35:49Obviously, it's because they have massive negative gross margins and that money is flowing through the AI companies which is flowing to the hyperscalers and flowing through NVIDIA. People ask us like what are our thoughts on the models? We've always thought for right or wrong that the models will commoditize and it will become a game of who's got the best infrastructure and who can deliver the searches the cheapest. For the life of us, I can't figure out why Google, Amazon, Microsoft, and Apple, which hasn't played yet, but I think they should go acquire somebody. And why don't they just win in Facebook?

2:36:33Why don't they win at the end of the day? I mean, Nat Friedman is a total stud who's running AI. I mean, we've backed his first company, Xamarin, or his second company, Xamarin. Total stud. Like, these companies can spend$680 to$100 billion a year on CapEx while having margins go up, still growing 22 % a year printing money. Like, I don't know how, at the end of the day, Anthropic and OpenAI and Perplexity can compete against this. I mean, I joke that Google should literally run searches on ChatGPT and bankrupt them. Like, the cost is the cost. Well, I mean, the news that came out in the last 24 hours is that Google is making Gemini free for students for the entirety of the next school year.

2:37:19So they will be subsidizing. They should make it free for everybody. And by the way, you know, I read somewhere like the cost to serve the exact same search on like Gemini versus ChatGPT is some crazy percentage. It's like one tenth the price or one twentieth the price. And that shouldn't be that shocking, given that over the last 20 years, Google has spent, you know, all their a lot of their efforts on taking their infrastructure and, you know, making a fraction of a fraction of a penny more efficient. Yeah. And I think I think it becomes an infrastructure play. Now, I do think I think there's going to be like insanely amazing companies using AI that are built.

2:38:02I actually think a lot of incumbents are going to win. you know ever since this device came out there's only been four companies built that came out after this device that have been worth 100 billion or more it's like bite dance and pindodo two companies in china and bite dance maybe one of the best ai companies on the planet that's just like the hidden giant out there and then airbnb and uber that's it the incumbents are going to win sales for open ai oh yeah although open ai is not the incumbent like it's one of the new guys I challenge some people to ask, why is OpenAI not like Excite, Lycos, or AltaVista?

2:38:40I'm not saying it is, but I think it's hard to make a bet at a$300 to$500 billion valuation that I think you either make a zero or a 5X. I think it's really binary. And the unit economics on these companies is massively upside down. If it wasn't, you would see some of these companies go public. And I actually joke that people, you know, we might as well be in a bubble. In the internet bubble, nobody gave a damn that the unit economics were upside down. Take them public. Let's see if they can go. Well, they weren't. The unit economics of Google were very, very good going into that IPO, and they maintained a good unit economics throughout the - Well, I think our general read was, you know, model, like intelligence is plateauing, but it's not necessarily bearish for open AI because it's a habit.

2:39:28They have 100 million people in the US that are using the product every single week. And I think that number is going to drop. What you should adjust, though, is... That's the upside. The downside is... The 100 million people use it. Yep. But the downside is that, like... Investing here, you're going to get massive amounts of dilution because you have companies like Facebook and Microsoft and Amazon and Google that now pay top engineers like they play in the NBA. Yeah. And can fund in these companies, you're going to have to get massive amounts of stock-based comp. But I use Chet D. Petit all the time.

2:40:01Yeah, yeah. But I think people might - It has Google-level adoption, but the economics are nowhere near the world. The economics are not there. And what's crazy is people are like, well, Lycos and Excite and AltaVista didn't have that many users. I'm like, yeah, but the number of users on the internet went from 200 million to 5 billion or something. So you need to adjust for that, too. But no, I mean, the consumer growth rate is insane. If you have insane consumer growth, you should be able to attract world-class talent. But if you hear about this... Yeah, people don't. The competitive dynamic, like what OpenAI as a company has been able to accomplish despite competition from all the hyperscalers, despite competition, you know, the talent wars, all these different things.

2:40:52in competing in the most capex intensive industry since the railroads or or might be more capital offensive yeah um it's truly incredible and to do that as a company that still some people see as like a startup you know is um it's amazing i think the other what about the other i think what's interesting is you hear the application companies all say well the costs are going to plummet for the cost for AI stuff. But the issue is if the costs are going to plummet, that would be good for the application companies. But then doesn't, if the costs plummet, isn't that bad for OpenAI or Anthropic? Because their revenues are now going to like - Well, Jevin's paradox, if the costs go down, people will just - I mean, right now, OpenAI has tons of paying customers and people that use the products.

2:41:47So costs like like they are both a victim of commoditization at the model layer and a beneficiary of commoditization at the model layer. And so like, yes, you should maybe discount their their model API business more, but then you give more value to their consumer business because it has higher margins. Better you in economics. It starts looking more like Google and less like AWS, I guess. What about what about legacy SaaS? People have been extremely bearish this week's particular. By the way, that's why you go invest in it. Yeah. By the way, Steve Cohen is Toby for years. If everybody's going one way, go the other way and you'll make a ton of money over the years.

2:42:27I think the Chinese small cap index is up 50 % or something this year. The great thing is I don't have to make an investment in these model companies. By the way, I should have at$30 billion. We should have. We're wrong because we could have sold now, right? So I don't have to make an investment, but I do run an investment firm, so I need to invest in things. And look, we look at a lot of these AI application companies and they grow crazy fast, but we're not going to pay those valuations. And I'm not investing in businesses that have 50 to 60 percent gross dollar attention. Like screw nets. Look at gross.

2:43:01Like that's what really matters. And so what are we going to go do? Let's go find bootstrap software companies that are in, you know, College Station, Texas and Toronto, Canada and in, you know, Sarasota, Florida. Companies like Pacemate that make cardiac monitoring software. Companies like Gravity that make budget planning software. And companies like Alistaplan that make financial planning software. Again, these companies aren't going to change the world. But again, we can take them from$20 million in revenue to$60 million in revenue. And there's a lot of homes inside strategics or private equity funds.

2:43:37And by the way, these are businesses that have like 95 plus percent gross dollar retention that have been bootstrap businesses that we're now using AI to make them more productive. Like they have 15 software engineers. Now they can use AI to have 30 software engineers. And as long as those companies still sell to humans on the other end of the table, then if companies, if AI companies are selling to other companies that use AI and they're talking to agents and we don't need people, I think that's possible. But then I think a lot of these companies are in trouble. But we think a huge amount of these software companies that are out there that exist will actually use AI to create new products and become way more efficient and more productive.

2:44:23And like, I truly believe AI is going to be as big or more bigger of a productivity boom over the next 20 years that like, than the internet was. Is that, is it more of like a consolidating force or a decentralizing force? Or should we see more roll-ups going forward with a bunch of these different small companies? I think it also is like, we really like vertical application software. Like all those companies I mentioned were very verticalized. They like, they're like, own a system of record. in like they can just use ai to become uh like i know some there's some very smart private equity guys um that are using ai to try to start to do roll-ups and stuff like that or like i know that i think the general catalyst guys the thrive guys are you know are looking to buy insurance companies or yeah i had i had i had a meeting uh or dinner with with a few guys i think it was tuesday night that we're doing AI enabled roll-ups in like a couple key industries and I won't say them because I don't want to give away their alpha and then Wednesday I had a had a meeting John and I had a meeting in the morning with somebody that was like yeah like you know at least one of the labs will hit escape velocity and we're gonna fast takeoff nothing is gonna matter and I was thinking to myself like even in that fast takeoff scenario like it's just it's impossible to imagine I'm still gonna be using a couple of these category, you know, a number of different categories where like people will just maintain control.

2:45:47Right. As long as so we have, as you guys know, our LP based, all these like world class execs and entrepreneurs and people like that. And we talked to these people that have built giant software companies. And one of them said, I was like, do we need to be worried about all these companies going past? It's like, well, as long as your software company sells to another human on the other side of the table, like that human will need to like make an interaction and probably interacts with software. So you're okay. And he's like, well, unless you think like an AI agent is someone to another AI agent, like if leaders doesn't have any employees and my AI agent is talking to yours, like your AI agent, then maybe we don't need people.

2:46:24But as long as people are involved in the equation, you're going to need software companies. Yep. Makes sense. Well, we are running behind. This is fantastic. We got to have you back on the show. Thank you so much for We'll go for a drive. For sure. And come back on. I want to get a sense of how we should be thinking about IPOs in this back half of the year. Obviously, Figma was very exciting. There's more on the horizon, and I want to get a sense for how you're kind of... Happy to talk about it. Funny thing is, if you go back and look at the last... Everybody said the IPO market was dead. It actually hadn't been dead.

2:46:58It wasn't dead. Investors... You can go look at Reddit. Look at all these things that went public over the last year. Yeah, they did great. Yeah, the IPO window has secretly been open for over a year. It's been open the whole time. People just want to admit that they overpaid for the company and didn't want to take it public. Yeah, yeah. You have companies like, we're in this, we're very early investors in Grafana. But you have companies like Stripe and a bunch of things that are awesome businesses. Yep. Interbricks, they just have so much capital on the balance sheet, they don't need to go public.

2:47:25They don't need to go public. Yeah, yeah, yeah. And so there's very different than the window being open versus the time is right for the best companies to actually go out and they make that choice because it's nice. It's nice to be in the private markets. You mean it's not fun for most funds to not have to mark their books every day? Like, yeah, that's fun. SEC filings are not fun. Tender offers are fun. There's plenty of ways to stay private and have fun. And actually what's amazing is, is like we are finding opportunities. It's crazy where you could find opportunities. like you'd be like how does a same size company in sarasota florida get done at five times revenues and a company in silicon valley oh but it's growing faster it gets done at 90 times revenues like the world is becoming this like if you like there is true value to be had by just looking a little bit off the beaten path in our view so yeah yeah for sure uh anyway thank you so much for taking the time we will talk to you soon have a great day mitchell have a good weekend friday bye and next up we'll bring in Ben from Orbital Operations we gotta get the gong ready I think Ben how you doing are you there sorry to keep you waiting great to have you on the show we got some folks in the chat the IPO window has been open but everyone hasn't given the group of new public companies credit everyone is treated as a one off like it's not indicative of a collective market good point Dan Ratliff anyway welcome to the stream do we have Ben, how you doing?

2:48:55Sorry to appreciate you having me on the show. Yeah, I was listening to the previous conversation. It was pretty interesting. Fantastic. Thank you for hopping on. Would you mind introducing yourself, the company, and then what news you got for us? Yeah. So my name is Ben Schluniger. I am the co-founder and CEO of Orbital Operations. And we just announced closing of our seed round. We raised$8.8 million. Let's go. Congratulations. There we go. Thank you. Thank you. Who's in the deal? Who's making money off of this? So initialized capital is leading our round. We've got big participation as well from Harpoon Ventures, DTX Ventures, Rebel Fund.

2:49:38Madakund is in as well. And a lot of other angels that joined on board. We went through Y Combinator earlier this year. Why 8.8? Good numerology. Chinese number of wealth. More of a range we were trying to hit based on the technical milestone. Orbital Operations is developing a high thrust space vehicle that will be stationed down in orbit for satellite defense. So we've got some hard tech development to go through and really prove out our technologies. So satellite defense, I have a satellite up in, I have the Hubble telescope. I don't want someone to shoot down the Hubble telescope. go by pay you to loiter around and blow up any missiles that are coming at it?

2:50:21Like what, how are we actually defending? Yeah. Yeah. So it's interesting. We have a ton of critical and by we, I mean, the United States has a ton of critical infrastructure out in, you know, both low earth orbit, but even higher out like medium earth orbit, geosynchronous orbit. You could think like GPS, naval communications, nuclear command and control. They all sit at these higher orbits, it's actually really, really challenging for like missiles or anything to get out there, even rockets designed to go out there. But there are adversaries placing satellites that have capability, and it's been demonstrated already to be able to grab other satellites and pull them out of orbit, or, you know, be able to fry a solar panel or jam communications, whatever it is.

2:51:02And we currently don't have a response for this, we don't have anything stationed out in these higher orbits. And so that's what we're really looking to build is vehicle that has enough thrust fast enough response time and enough extended range to be able to go and intercept these things, hopefully not blow anything up. Space defense is a little weird. You don't want to create shrapnel, right? The last thing you want to do is killer killer. Yep, exactly. So walk through, if you don't want to create shrapnel, you don't just want to run into this. I'm trying to comp it to Anderle. You have the anvil, it's just like a stone that runs into the drone.

2:51:37Then there's remote takeover, the microwave, different radiation, different energy sources. Jordy, we've had a company on the show that just is a gun on a truck. It just shoots down the, creates a lot of shrapnel when it shoots down the drones. But there's, I've seen like eagles come and pick up drones. walk me through the different tools in the tool chest for taking out a satellite killer. Yeah, yeah. So I mean, unfortunately, one is to just like ram into it. And that is that is kind of the worst case last resort, you make a bunch of shrapnel here on earth, shrapnel falls to the ground. Yep, easy.

2:52:12But up there, it keeps it stays there runs into other satellites creates a problem. The next is kind of what you were mentioning, you know, direct energy type of stuff. This would be high powered microwave, this would be frying a solar panel or a laser into the cameras and sensors trying to basically degrade the satellite, right. The other option is to do what we would call an RPO or remote proximity operation and actually go up next to it and grab it, right? This is a more challenging operation to do not something always kind of considered on the defense side, but and more on the logistics side of things.

2:52:46But it is something that you could do as well um so those grab it grab it take it out into deep space yeah just just fly it into the sunset into the sun yeah i'm sure that'll be easy well i guess my immediate question is um uh that i mean it feels like incredibly important work and also how do you kind of like prove out your team's kind of like capabilities there's not exactly uh like a test range that you can take you know, we'll have defense tech founders out here where they can just go out and do a demo for the army or the Navy or whatever. Got to go to the moon. And in this case, you know, how do you kind of test out different theses at the product level to prove capabilities when you're not in a, when we're not in an active, you know, conflict?

2:53:34Yeah. Yeah. I mean, it's similar. You know, my background is all rocket engine development, right? So a lot of it does start on the ground. Yeah. Well, we'll go rocket engineer, rocket scientist. You know, it's too flattering. I can't take it. We need rocket researchers. We got to get these salaries. There you go. Rocket researchers. That's what the money is. No, you've got to hire a bunch of them. Member of rocket staff. We don't want a talent war here. Member of rocket staff in the bio. Anyway. But yeah, you develop it on the ground. You're hot firing your rocket engineer on the ground. You're developing the tank.

2:54:04You're going into thermal vacuum chambers and testing all of that. And one of the great things about this day and age is it is actually getting cheaper and cheaper to get into orbit and start demonstrating these things. Ride shares, maybe you do a subscale version of what you're going to do, which is what we're planning on doing for our orbital demo. And you do a ride share and it is cheaper and it is faster than it's ever been. So it is not quite as easy as just going out to a live fire range. But at the same time, you know, proving out your core piece of tech like it is getting easier to go to low Earth orbit and test it there.

2:54:39We're running behind today. So last question from my side. Is is cost to launch actually still dropping on some sort of exponential scale or are we in a plateau? Are we waiting on Starship to get through testing? Like are we actually reaping the benefits of cheaper and cheaper launch costs? or are we kind of in like a local plateau? Interesting. Yeah, I mean, I think we've been maybe in a little local plateau for the last couple of years. But I mean, SpaceX has been dominating the market, right? I think there are other launchers that are coming to market that will help drive competition down. And then you have Starship and Stoke bringing reusable second stages that that will be another step down.

2:55:22That actually doesn't make it cheaper getting out to the higher orbits. It makes it cheaper getting to low Earth orbit. But those higher orbits, you know, the reusable rockets and getting out to those higher orbits, they're not good at doing that necessarily. And that's where an impulse space comes in. Tom Mueller's company is a booster that takes you from LEO to... Yeah, kick stage. Kick stage. Got it. Very cool. Jordy, do you have anything else? Because we're sorry to cut this short, but we are running today on a Friday. But thank you so much for jumping on. This is really fun. Yeah, I came to the gong, so I appreciate it.

2:55:52We hit the gong. We'll hit it again for you. Let's go. Yeah, I appreciate it. There we go. I gotta get one for the office. You need one. Well, good luck. Come back on. Thank you so much. We put something in space. We'll ring the gong again. We'll talk to you soon. Thank you so much. Cheers. And up next, we have Merrill from Graphite coming in. You know Graphite. We do. We read ads about Graphite every single day. I used Graphite while building my last startup. While he's joining, let's tell you about a different ad sponsor. Bezel. Go to getbezel.com. You're Bezel concierge. is available now to source you any watch on the planet seriously any watch get a hitter agi is delayed super intelligence whether when it when it gets here if it's five years if it's ten years it's going to want to look on your wrist and know that you mean business that's right so go to well without further ado let's bring let's bring in merrill first time on the show how you doing doing well thanks for having me guys good to catch up with you uh it's been a week i saw you in new York City had a lot of fun chatting.

2:56:54Give us the update and give us the the actual impact of GPT-5 the news that happened yesterday. I want to I want to kind of noodle through that and the impact what it means for your business. Awesome. So, GPT5 obviously was a huge announcement, made a lot of waves. our team immediately got to work on testing it. And I think we're noticing a few things that are improved about it and a few downsides that come along with it as well. On the improvements side, I think it's a lot better at deep thinking. It's good at one-shotting apps. It's also the biggest surprise for us is it's meaningfully cheaper on inference than a lot of the previous models.

2:57:34On the downsides, though, I think there's a lot of buzz around it being this massive step function. And for us, what we've seen practically in reviewing code is that it's an incremental improvement, but it's not this massive step function. It is very much still in the realm of many of the other state-of-the-art models. The other piece there that a lot of folks have commented on is latency. I'm sure the OpenAI team is working on improving this. But one thing that we've noticed in updating our Code Review product. Yeah. I want to talk about latency versus using just like the previous generation of models that are now being deprecated.

2:58:12Yeah, the previous generation of OpenAI models, Anthropic and others. Yeah. I want to talk about mixture of models. We were in the mixture of experts era with GPT-4. And then Grok is doing more mixture of different models together. And I'm wondering, like, code review is pretty high stakes. It's pretty high value. It's a very economic, like, I don't know, like the average salary or hourly rate of someone who's capable of doing code review as a human is really, really high. And so is there a world where I actually want to run, like within Graphite, code review on every single model and then have you design a rubric or a scoring system that compares Claude to GPT-5 to GroK to all the different models and kind of lets them wore it out and sits at a higher level of abstraction.

2:59:05Obviously, that's more expensive on the inference cost side. But is it cost prohibitive compared to a human reviewer that might be a couple hundred dollars an hour? Yeah, that's a great question. I think today, it's certainly cost prohibitive to run every single model. What we do, though, and what's worked really well for us is we, much like a human reviewer, we break down the task of code review, and we're looking for a different set of things at different times. So we'll look for bugs, security vulnerabilities, efficiency gains that we can make, code-based style guide inconsistencies with the rest of the code base.

2:59:41We also let customers define, like every team kind of has their own protocols and their own guidelines around how code should look. And we let them define custom rules. Many teams are really heavily leveraging this now. And for each of those tasks, those can be their own tasks in the review process. We also then, once we generate a lot of comments, we'll have simple things that we're looking for, like little rules that even these can be things that we've learned over time. If it's kind of left to their own devices, the models like to say things like, we should update this line of code or something, and developers find that really annoying.

3:00:19So you probably don't need the highest power model to say, we should, don't add comments that start with we. But over, that is how we've kind of composed the logic and compose the voting system that we use to determine, is this actually a comment that's going to add value? Or is it just going to be noisy, like the challenge of many AI products, and especially AI code reviewers out there? Yeah. How do you think about decomposition? We've heard this trend of the smartest frontier models might be training smaller models. We've talked to a couple of almost micro foundation model companies where they're training.

3:00:57It's just a great model for filtering for profanity and it runs and it was trained on like video game graphics cards and i could imagine in the world of like tool use there becomes a future where there's a bunch of small models that are being kind of orchestrated by the more expensive model how do you see kind of the the the surface area of what you're building kind of fork out Yeah, I think that there's, especially as we think about the scope of code review, it is kind of this first collaborative moment in the developer lifecycle. Historically, we've seen code generation be fragmented, every developer having their own IDE and terminal setup.

3:01:39Even today, we see this with a lot of our customers that are using, some engineers are using cloud code, some prefer cursor. Everyone's trying the new cursor CLI now. Like there's so much heterogeneity on the code generation side, but that's always been fragmented. But code review has always been unified. And it has to be because everyone is working together. It is that first collaborative moment in the developer process. And it is and then it connects to all these other pieces around, you know, CI, merging, deployments, everything that comes downstream of that, the moment you create that PR to get it out to production.

3:02:14And each of those, I think, represents the different tasks to be done to move those along. So you could think about having one model or one agent that's really good at resolving merge conflicts and another that's really good at looking at CI failures and figuring out what the problem was and being able to just fix that in the background without you having to do anything. And we see that. I think the impact of that will mostly be one of reducing costs over time and just letting you run a smaller model and not have to use this like super powered laser on even a little task that something smaller could do.

3:02:52What is what is market share look like from your view upstream of of graphite? Like what? So yesterday we had a bunch of people on that way that had gotten early access to GPT five. And everybody's heavily conflicted because a lot of them are doing code code generation in some way or another. It's hard to really suss out like, OK, what is actually dominating other than just picking up what people are saying on the timeline? as actual users, but what are you guys seeing? Yeah, we're seeing a pretty big shift in the past, even over the past three months, I think we've seen this shift from primarily orgs using Cursor and moving more over to Cursor to Cloud Code, I think has really started to dominate the conversation for companies of all scales for the past few months.

3:03:45And now we're seeing, just in the past day or so, So we've heard a lot more interest in the Cursor CLI. I think that Claude really proved out that prompt first modality working really well. And we've seen this sort of shift from the code first modality of tools like Copilot and then Cursor and Windsurf to now like prompt first with Claude code, Cursor CLI. And then I think the next big shift is like staying prompt first, but moving from local to remotely deployed agents. And we're already seeing, we've seen Cursor build something there, Cognition, Cogen, many others that play in that space. So I don't think that we've seen a massive, I don't think we've really seen a massive shift in the past 24 hours, though.

3:04:32It's still, I think the good news for everyone is that it's still a pretty close race and competition is really, I think, necessary in this world. I think if we ended up in a place where there was one model provider that was so much better at code generation than another one, then there wouldn't be as much pressure to innovate. They'd have a ton of pricing power. It really wouldn't, and it wouldn't reflect that historical model of code generation being up to developer preference. How is AI changing developer communication around pull requests? The canonical example is you write a summary, you write a headline, But I imagine that it's probably pretty easy.

3:05:15Like one of the things the models are great at is just condensing down information. I'm not a particular fan of them expanding information oftentimes. But if there's a really big pull request, you can kind of show varying levels of summaries. And I find myself doing this even in the consumer realm where I will say, okay, I want a deep research report on something, the history of a business. But then give me a one line summary. Give me five bullet points. then give me a New York Times article length, a couple hundred words, and then give me the full 30-page PDF, because I want to be able to consume it like a fifth grader, like a college student, in these successive levels of depth.

3:05:56Is any of that happening in the pull request world, in the developer code review world? Absolutely. I think one of the most used AI features and one of the first things that we launched in the Graphite platform was the ability to write the PR description for you. And that's something his developers kind of famously like, Fix. Like, hate writing long-distance descriptions. Yeah, yeah, like, just do this for me. But AI is amazing at understanding a change, summarizing it. Now we're actually, I think this is also where we'll see CoderView going is it's moving from this world where you're just scrolling through, scrolling through the diffs and everything is just in alphabetical order and you have to kind of guide your own way through it too.

3:06:42I think now AI is incredible at understanding the change. Like we were actually working on a new feature launching pretty soon in Graphite where you'll be able to just ask Graphite, hey, what are the important parts of this change? Like walk me through the key pieces of code that changed here. What should I be looking at? What is high risk? and making it a lot more, I think, even in AI CodeReview right now, I think we're still in the co-pilot v1 moment of AI CodeReview where we're just adding comments on GitHub. But the future, I think, is much more one that's interactive and is guiding you through the code change in real time and helping you to both review it and also to make updates and coordinate the various agents that are working on that change in real time.

3:07:30That's great. Jordy anything else I think we're yeah I'm curious I mean the main thing is I guess like going into this year everyone said this is the year for agents and I was and and it felt like on yesterday with Greg or Mark I said this was the year more of deep research but then they said maybe maybe also coding agents coding agents have been the other thing where what do you expect out of the coding agent market in the neck, like before the end of the year? Good question. I think that the biggest thing is that we're just, we're just moving through, like slowly moving, moving around that grid.

3:08:13If you have like, you know, the, the way I think about the market is, is you have one access of where does the code live? Uh, on the one hand, historically it's all lived locally. Uh, now we're seeing a shift to, uh, to some of this living remotely and having these background agents that you access primarily through prompting. And then on the other axis, you have like, is the interaction modality code first, or is it prompt first? The code first ones being, you know, you started with copilot, you had cursor windsurf. Now we're seeing the prompt first and the prompt first modalities and quad code, the cursor CLI warp and others.

3:08:49And I think we're starting to see, we've seen that shift from like the local code first to the local prompt first tools now. And now I think what I'm curious to see for the rest of the year is how quickly we then go from local prompt first to remote prompt first using like cognition, cogen, cursor background agents, those others. And I do, I think our bed and what we're seeing is that that is very much the future. It requires, it likely requires another step function improvement in the models for that to be, you know, for that to truly be the, you know, the primary modality of software development but i think that's that will be the shift that we'll start to see for the rest of the years you know that migration from you know from local to remote prompt first modes makes a lot of sense well thank you for joining thank you so much have a great friday have a great weekend we will talk to each other i'm sure it'll be a busy weekend for the whole graphite team for sure getting making sure that gbd5 is rolling out fantastic we'll talk to you soon have a good one All right.

3:09:50Cheers. Thanks for having me, guys. Later. We have to talk about the actual biggest news in artificial intelligence. We missed this. Everyone's been focused on GPT-5. The biggest news in artificial intelligence is that the billionaire AI co-founder, Lucy Guo, pays nearly$30 million for an LA spec house. Lucy Guo co-founded Scale, now runs passes, got a discount on a Hollywood Hills home. tech entrepreneur Lucy Guo, 30, has been called the world's youngest self-made woman billionaire. Now she's putting some of her earnings into real estate. She paid$29.5 million for a newly constructed mansion in LA's Hollywood Hills.

3:10:29According to people familiar with the transaction, the price is a significant discount. They originally were pricing this house at$43 million. It's a 13 ,500 square foot house with five bedrooms on 1.2 acres. And this is, I mean, everything about this house looks great the photos are fantastic the one mistake lucy guo couldn't be reached for comment why are you no commenting this article you gotta you gotta tell your whole story all i can say is you can sign up at passes.com exactly there was there was a great there was a great opportunity to to upsell to do all sorts of stuff um but there was a i i uh this uh this house has everything a sunken a sunken fire pit uh a pool jacuzzi it has everything it looks fantastic.

3:11:16LA's high-end real estate market has been hobbled over the past year by the LA fires, outward migration and lower to lower taxes and broader economic uncertainty. Most of the recent high-end sales have closed at significant discounts. So there's really no reason to buy a 30, there's no reason not to buy a 30 million dollar home. A friend of mine in Malibu says that the, there's a barbell in the market right now where things are hot under like five, like single family homes and then really hot on the high end in like 50 plus range well speaking of 50 plus ex-google ceo eric schmidt has purchased la's spelling manor for 110 million dollars finally uh this is a very this is a very fun article uh amidst a challenge luxury market the property sold for less than its 2019 sales price he got a steal uh this was built uh the spelling Manor if you're not familiar with this this is an iconic legendary house if we can pull up the image look at this thing it is insanely large multiple wings it has an entire room it looks like a b21 raider from above it's amazing it's amazing it doesn't it has an entire famously has an entire room for just wrapping presents because when right when you're at this level yeah when you're at this tier you don't just like you gotta be wrapping yeah you need a whole room for wrapping presents because you will be wrapping lots of presents because you'll be giving out lots of presents It's a 56 ,500 square foot property, 14 bedrooms on five acres, and this is in Los Angeles.

3:12:47This was built by Aaron Spelling, who was a TV producer in the 90s. Very, very famous. The French Chateau-style property is slightly larger than the White House. It has a bowling alley, a wine cellar, and a beauty salon with massage and tanning rooms. So if you need to get a tan on, you go to the tanning room. What about the movie theater, though, John? I don't know what the movie theater status is. Well, the property will remain a single family home. The Schmitz, philanthropists who have homes around the world, purchased it primarily to host meetings and events for LA nonprofits and cultural institutions.

3:13:21They're not even living in it full time. It was sold for a discount. It was listed for$137.5 million after several years on the market and multiple price cuts. I mean, it's such a big, iconic house. The buyer pool is probably pretty small. It was last sold in 2019 for about$120 million when the seller was British heiress Petra Ecclestone. Ecclestone famously hired a team of roughly 500 workers to complete a massive renovation of the property. And now, just six years later, the Schmitts are planning a significant remodel of the house to simplify the floor plan. So this thing is just getting more complex and then they're putting it in a present wrapping room.

3:14:00They're tearing out a present wrapping room. Everyone is remodeling this property. And they're no longer going by spelling manner. You know, the guy who built it, he put his name on it. They're pulling it off and they're calling it 594, 594, a reference to its address on Mapleton Drive. Very nice. Well, I have a post to cap off the week. It is in the timeline from Lulu Miservi. Okay. So we've been, I guess, mentioning over the last few weeks that it feels like we've maybe reached a local top on startup launch videos. A lot of them are starting to look the same. They're sort of the default now.

3:14:48It's very hard to stand out. People, I think, are starting to glaze over them a little bit. But Lulu has potentially a new meta. So let's pull this up. She says, who's going to be the first startup to do this format as a launch video? And it's the sorority.

3:15:09And I would go out and bet that it's Gluly. Of course. I bet they're already working on it. They're probably working on it. There's not a format that they don't like. The challenge is some startup might. There we go. This is so much choreography. I'm guessing the people in the back are just kind of dancing up and down. They're not really doing choreography. The challenge is if you're launching your startup Monday, you could be spending all weekend doing this, getting it ready. And then Roy Lee and the team will launch it like Sunday. Probably. So good luck out there if you're trying to launch.

3:15:43You know, speaking of Clueli, obviously they still have to do so much on the product side to really, you know, nail it, get retention, all this other stuff. But in terms of just the cheating as a keyword, I think that there's something that's going to be very, very sticky there. Julia Steinberg has been on the show is posting a picture of a billboard says, hi, my name is Roy. I got kicked out of school for cheating by my cheating tool, clearly.com. And I just feel like it's such a simple encapsulation of the value prop just in one word that grabs your attention. I was thinking it's kind of like Red Bull gives you wings.

3:16:19It's not Red Bull doesn't actually give you wings. It's just for yourself, John. Yeah. You've grown wings. You've grown literal wings, you know? But it sticks in your mind, it grabs you, and I feel like even though the Cluley stunts are kind of getting less and less, it's less shocking, because it's like, oh, okay, we kind of come to expect that Cluley is going to do a sorority dancing video, for example. But just the cheating as a keyword, if they can own that in the broad consciousness, I think it's going to continue to pay dividends and grab people's attention and just be something that they can run with for a long time.

3:16:59Because even though the Cluelay stuff went super viral, everyone in tech talked about it, everyone in tech was arguing about it for a long time, there's still hundreds of millions of Americans that have never heard of Cluelay. or maybe they saw it once and forgot about it. And I think that that is going to be like a keyword marketing campaign that just like keeps, keeps sticking in people's mind. And it will, you'll find out that it goes viral. Yeah, they saturated it back in the timeline and they have to figure out how to go mainstream. But like, it's such a distillation. It's such a compression of a meme, of an idea of like, oh, I would like to like cheat on that, you know, report that I've been working on at work.

3:17:38And actually, my boss doesn't care if I cheat. They don't care if I use that. They care about the result. And so, but it grabs your attention. And so, like, I could see it running in a Super Bowl ad and actually driving conversions and downloads. Now, the product has to be really great. It has to be better than ChatGPT. That's an extremely tall order. They're going up against Gemini, which will help you cheat, quote, unquote. I'm using cheat in the just AI assistant language, not actually literally cheat. And they're going up against free models and cutting edge models and all sorts of different things.

3:18:08and we'll see how sticky that new, their UI implementation is where it screen scrapes and records your calls. But in general, I think just as a marketing technique, like I don't think we've seen the end of cheating as a buzzword that clearly will be reaping the benefit of. Totally. Cheat code. Anything else in the timeline? Tyler, is the timeline in turmoil or is the timeline quiet? Quiet on the Western front. There's one thing. So some small updates for GPT-5 from Sam Allman. And he says they're doubling rate limits for Plus users. Can you do the Sam Altman voice? What is this, Sam? They're doubling.

3:18:44We're doubling rate limits. We're going to let Plus users continue to use 4.0. There we go. That's good. That's how I imagine. Yeah, they're bringing 4.0 back. Interesting. And the auto switcher was broken yesterday. Oh, interesting. So he says it will seem smarter today. Yeah. The result, it was out of commission for a chunk of the day. And it will seem. It's kind of hilarious that they had a pretty big launch. There's like two bugs, like one with the chart clearly got misrendered for the live stream was fine on the blog post. And everyone's like, chart crimes. And then the model switch is broken.

3:19:16And people are like, this is not as a work at all. But I'm thinking, I think we're back. You think we're back? I think we're back. AGI's back, baby. We heard it. We've heard it. You heard it here first. We are back. Accelerate your timelines. You now have two days to escape the permanent underclass. So have a great weekend, everyone. Get to work. Two full days. Two full days. I will be, you know, I think most people, it's summer. You should escape the permanent underclass this weekend by hitting the pool, hit the beach, have some fun out there. Get a ramp floaty. Get a ramp floaty and spend a weekend on it.

3:19:50Enjoy. Have a great weekend, everyone. We will see you Monday. We love you. Leave us five stars on Apple Podcasts and Spotify. And thank you for watching. Cheers. See you later. Goodbye.