Dylan Patel: NVIDIA's New Moat & Why China is "Semiconductor Pilled”

21:36Dylan Patel:And, you know, what are you doing for different kinds of attention? and like, oh, like all these sorts of things, like there's a lot of specialization here. And so some people are betting big on different types of specialization. And I think like you could clearly see a world where companies do care about different stuff, right? Like if, for example, a chip optimized for video and image generation existed today and it was better than NVIDIA or NVIDIA made it, I think MidJourney would absolutely only use that for inference. I think for training, they'd still use the general purpose thing. And as would like Meta and Google would like, they should do that, right?

22:07Dylan Patel:And hey, Meta actually has two lines of AI chips. Their MTIA, there's a line that's focused on recommendation systems. And then there's a line that's focused on Gen AI. The Gen AI one is a new line, but that recommendation systems line is still continuing, right? It's not sexy, no one cares because there's no, and ByteDance also has a recommendation system line of chips. And it's not really focused on Gen AI, which is fine because, you know, this is a$200 billion business or something, which is just deciding what ad to serve me, right? And what order to put my friend's stories and, you know, things like this.

22:36Dylan Patel:So I think like it's perfectly fine for there to be specialized AI chips, given the target market is big enough and you have to have vision to know what that target market is. Unless you're hyperscaler, then you can like just like you can just use general purpose until you've like it's clearly there and then you can make your ASIC. Right. Fascinating. Turning to the geopolitical aspect of all of this, which is always fun, Huawei and NVIDIA in China. Last year, there was like 10 or 12 percent of their overall revenue. And this year they were saying that their market share has basically dropped to not very much.

23:08Is that Huawei chips? Is that restrictions? Is that tariffs? What's happening over there?

23:12Dylan Patel:I think it's a variety of things. Actually, in some quarters last year, it was even north of 20, I think. I don't remember exactly. But anyways, you know, if you look at 2022, China was almost the size of the U.S. in terms of buying server hardware, right? Almost. Not quite, but getting there. And it looked like they were going to be the same size as America in like a year or two after that, right? And if you look at like global data center capacity, global cloud capacity, et cetera, et cetera, et cetera, it's American companies and Chinese companies, right? That dominate the world. American companies are obviously doing a lot better here, but both of those dominate the world.

23:42Dylan Patel:And if you look at like every industry, right? You know, it's very clear that like China wants to insource stuff, right? So in 2015, they made these five year plans for 2020 and 2025, where they set the percentage of semiconductors they wanted domestically produced. And they've missed the goal both times, which is fine, right? They set really aggressive goals and shoot for the moon, even if you miss, you hit the stars, right? And that's sort of what's happened, right? Like, look, China is not caught up on leading edge semiconductors, but microcontrollers from China are almost as good as the microcontrollers are as good and cheaper than the ones from Texas Instruments or STMicro or, you know, et cetera, Right.

24:20Dylan Patel:Or like this power, random power chip is better than or the same as the one from like another company. Right. And so they've really built up a semiconductor industry and started insourcing a lot more. I don't see why China wouldn't be buying, you know, 30, 40 percent of the world's AI chips and the U.S. like 50, 60 percent. And then the rest of the world, like, you know, and when I say U.S., I mean U.S. origin companies. That seems like a more natural state for the world. but there are restrictions and hey this is the biggest change in human history maybe ever knowledge work and you know everything that's going to happen there and and then eventually like robotics and all these things like you know obviously there's there's a lot of geopolitical stuff and so there are restrictions nvidia has been hand capped and handicapped from selling their best chips to china and so that's obviously impacted the sales a lot because like why would you do that and so when you look at who rents the most gpus in the world it's three companies right So one of them is obviously OpenAI.

25:10Dylan Patel:Second one, actually, they were bigger than OpenAI. They are bigger than OpenAI today. Or no, they were bigger than OpenAI and OpenAI eclipsed them recently, is ByteDance. ByteDance rents tons of chips from Oracle and Google and many other cloud companies because they couldn't get the chips they needed in China. They're mostly just serving TikTok, right? Okay, well, they're not allowed to buy them, and that sucks, but they're allowed to rent them. And so, okay, if I'm not allowed to get the best ones, I'm gonna rent externally. And if ByteDance is the second biggest renter of GPUs in the world, that's substituting demand that would have been built in China in many cases.

25:40Dylan Patel:It's instead being built in Malaysia. And Oracle has over a gigawatt of capacity in Malaysia that ByteDance is going to take, right? So things like this are, you know, hundreds of thousands, millions of chips, tens of billions of dollars of capacity that would go to China, but it's not. It's going to Malaysia instead, as an example. Another sort of point around this is China's like, you know, they've had these five year plans. So and you know, the way these initiatives work from China is there is like some top down ordering, but then they just kind of whip the whole like everyone just kind of gets into it.

26:07Dylan Patel:And it's really cool. Like, I don't think it's as top down as many people think. Like, I think the entire country is like semiconductor pilled, right? There are dramas where people fall in love in the fab or dramas where people fall in love and they're photovoltaic like solar cell researchers and engineers. And it's like, it's like, this is just the backdrop. And it's like, actually, this is, it's like super cool for your like significant other to be that semiconductor engineer or to be that photovoltaic, you know, a solar panel researcher. As opposed to an influencer. As opposed to an influencer, right?

26:41Dylan Patel:Like, I'm sorry. Love Island is, I watched like for 10 minutes cause I was forced to, I was like, this is fricking terrible. But you know, like, we are so cooked. No, you know, seriously, we're cooked, we're cooked. I think like when you think about like this happens, it's like it's diffused into drama even. People like like there's multiple dramas like taking place about semiconductor industry. And they're like romance, comedy, like the entire spectrum, right? Drama really is like it's like what the heck is going on? Anyways, you have all these provinces, you have all these local cities setting out ordinances and giving out subsidies and all sorts of stuff.

27:18Dylan Patel:Right. It's truly like crazy. Like there's some national level stuff like, oh, no taxes on this. Oh, we're going to ban a few things. But as far as I understand, the national government has not banned NVIDIA's H20 or H200. But the local ones have, right? A lot of local ones have said, no, you know, you must use China manufactured chips. And it's like, who told you that, you know, you're here to uphold this? It's like, doesn't matter, right? I mean, like, it's cool because then you have this like survival of the fittest. All these provinces and cities are trying to attract different companies with different types of subsidies and grants and industrial parks and like all these different things.

27:55Dylan Patel:And then like the ones who succeed actually develop an industry and they take over. This is how one thinks of China, right? It almost sounds like more like the U.S. or like it was a federal government and states with the provinces of authority over their purchasing. I mean, it's actually like great. there's this one TikTok and Instagram person, and they sing it. They're like, if you want to buy things in China, make sure you go to the right place. And then they just say the most random shit and name the city. And then you look into it and you're like, wow, this city has the entire supply chain for this.

28:25Dylan Patel:It's like lampshades, and then it names the city. It's like, what the fuck? There's a city that specializes in lampshades. It's like microphone arms, like microphones. Literally, there's a city in China that specializes in things. And guitars as well, right? this one city that became the guitar. It's literally everything. Yeah. Literally everything. There's a city and it's not like, hey, specifically for camera arms, for example, there's ball bearings in this and the ball bearings are like there's ball bearings. There's multiple manufacturers of ball bearings for camera arms. And then like most of the camera arms in the world come from that one city.

28:55Dylan Patel:It's like, what the hell is going on? And so like the semiconductor industry, I think people don't realize is absurdly specialized. I'm not answering your question. I'm just going a little bit of a rant because I think people don't understand China semiconductors. It's really sick or semiconductors in general, but like, you know, like in Japan, they like focus on a few different types of chemicals and they're the best at it. And it's like almost a cultural thing, right? Like Japanese people are so precise, like with sushi and like, it's all about the trade and the craft and like, you know, the French food in Japan is better than the French food in France because the Japanese chefs went there and then come back and they perfected it in Japan and like, cause they're so precise.

29:28Dylan Patel:And, and there's so many different like things that like Japan is so good because they're so precise and like dedicated to the craft. And it comes out of like, I don't know, like samurai culture or something. I don't know, right? Like, I don't know exactly know how that culture came up. And so when you look at like, and it's like across the world, there's different places where things like this happen, right? Like, oh, like the Netherlands makes UV tools. Cool, I guess so. And you look across the semiconductor industry, there's a famous economic essay called Eye Pencil or something like that, or talking about how the pencil, like a simple pencil comes from like, oh the rubber comes from like indonesia for the eraser and the graphite comes from this mine here and and the wood comes from these aspen trees in canada and like you actually can't make a pencil without aggregating this entire supply chain semiconductor industry is like way crazier because like i would say there's like 15 or 20 countries that could shut down the entire semiconductor industry right even like austria could right and it's like what it's like well yeah there's two different companies there who have like 90 share in like some random niche stuff.

30:23Dylan Patel:And it's like, okay, cool. I guess Austria can. And oh yeah, those two companies have less than a billion of revenue, but they just happen to have linchpin critical things. And there's linchpin critical things everywhere because the process is so complicated. And so China has been trying to replicate this. Is there one thing they're missing that they don't have yet? I think there's a lot of things. I think if you were to close your eyes and say, or if you were to cut off every country and say, there's no more globalism, China has the most vertical stack in semiconductors today. And they're the best at semiconductors in the world because their fabs could still run somewhat on a lot of things because they have built some of these chemical supply chains, right?

30:54Dylan Patel:Like TSMC for certain kinds of chemicals, a hundred percent share from Japan, right? Or Intel, same thing, right? Or, you know, for certain kinds of tools, a hundred percent share from Netherlands or a hundred percent share from, you know, this American company or that, you know, Austrian company or this or that, right? Like there's just all these, like, you know, this Swiss company, like it was just all these different places have a hundred percent share. It might be one company, it might be three companies, geographically or in the same area. And China's built that up, right? Because they've created this made in China initiatives, which just plowed money into it.

31:22Dylan Patel:And they've got this culture of like the diffused, like, you know, these provinces are like, yeah, I just decided I'm going to fucking focus on, or it might not even be the city, right? It may be the like, you know, someone brought it there and decided, and then people were like, oh, wow, you're doing that? Me too. Like I'm a Patel and I grew up in a motel. And guess what? We like almost all the Patels I know grew up in a motel and it's because some random Patel immigrated to America and like worked at a hotel motel and then bought a motel that like just started happening. Right. Like it's sort of like these things are serendipitous of sorts.

31:52Dylan Patel:And like, I don't know, like it's like I view it as the same kind of specialization. Right. Chinese cities are like starting to do these things. China is missing a lot of things. Right. I would say like if you say minus 10 years tech, China is complete and no one else is complete. Right. Taiwan is not complete. The the fabs would shut down without foreign supply, you know, and you go down or you go across the stack. But if you go to 10 year tech, maybe, maybe more like 20 year tech, you could get a fully vertical supply chain in China, which I do not think any country could do. Like America could not build a fully vertical fab without stuff from elsewhere, even if it's 20 year old tech, probably not even 40 year old tech.

32:24Dylan Patel:And so, so that's interesting. But then when you look, flip side is like, well, like you kind of do need specialization. That's how that chemical gets the purest, best, most engineered, or that slurry of chemicals or that gas or that tool. Because every smart person or a lot of them in that country grew up around that culture and the supply chain is there and everyone kind of knows and it's like a drive away. And this is what makes supply chains work, is that there is this specialization and the best of the best only comes when you have that hyper specialization. So China doesn't have lithography.

32:59Dylan Patel:Their lithography is like 10 years behind. And I think it'll be five years behind in a couple of years, right? They're catching up fast. I don't think they'll be as good as ASML for a long time. You know, maybe, I don't know, maybe they will be, you know, you know, China, you shouldn't ever underestimate China, but like in Chinese engineers or, you know, but like for a while, right. Or like, you know, I don't think they'll be able to make leading edge chemicals like many Japanese companies or many American companies and their tools. And like, you just go across the supply chain. They're not, hey, forefront on really anything in the manufacturing supply chain.

33:31Dylan Patel:On the design supply chain, there's some things that they're starting to be similar par, but like cheaper or like a year or two behind, but cheaper. And that's like fine for a lot of stuff. An example of that is Huawei, right? Huawei in mobile phones was on par with Apple, like entirely. And they had become Apple TSMC's biggest customer when they were designing the best thing. And they are number one in telecom. And their tech is just literally better. and so when you think what happens is you know is is is china missing anything well it's like they don't they don't they don't have the best of much that you know today in the ai supply chain they have a complete package and a couple years behind and they'll figure out how to make it cheaper slash do more slash catch up and and create a robust industry but there's a reason like i don't think that like jensen is scared of amd really he's paranoid i mentioned he's paranoid i'm sure he's a little bit scared of them right like i think some of the things that they've done are reactions and competitive dynamics with AMD or Google's TPUs or whatever, right?

34:26Dylan Patel:There's a CoreWeave deal today. And I think that's directly the result of what Google's been doing. Yeah, the 2 billion pipe that NVIDIA announced. Yeah, NVIDIA invested 2 billion in CoreWeave. But what's more important is that that's like sort of just like the sticker. What's really relevant is NVIDIA is going to work with CoreWeave to acquire and backstop and all these things, the land, the power, the energy, the transmission, help build the data center, all this capital side stuff because NVIDIA has so much money, they can backstop CoreWeave doing it because CoreWeave then can be the one who generates demand.

34:59Dylan Patel:Anyways, there's like, because Google was doing that and they did that with like a couple of companies such as FluidStack and Terrowoof and Cypher. These are some public deals that have been announced. And so Google is doing that with TPUs and NVIDIA reacted, right? And so in the same way, I think NVIDIA has reacted to AMD and in the same way, I think the thing is, Nvidia is like deathly terrified of Huawei because Huawei has caught up to Apple and actually surpassed them as TSMC's biggest customer before they got banned. Right. They did just crush Nokia, Sony, Sony Ericsson, et cetera. Right.

35:27Dylan Patel:Like the entire telecom supply chain, they just like completely destroyed them. And there's so many other areas like they straight up made a folding phone. Right. You know, I have a Samsung folding phone. They have a folding phone that's better than Samsung's folding phone. Yeah. And it's like, bro, what? Like, you know, you know, Huawei is really, really cracked. And so, of course, they're terrified of, and Huawei is the most vertical company in the world. No company is more verticalized than Huawei, which then leads to huge innovations. It's something that we don't fully appreciate in the US, but when you travel in Europe, you see everybody who's like honors, honor phones.

35:59And it's like the footprint of Huawei is huge in phones in a way that people -

36:04Dylan Patel:But not just phones, you know, security cameras. Actually, I think they have like, you know - There's a lot of training on the - a captive group of testers. Exactly, exactly. I think Huawei is terrifying, right? And so, like, yes, their chips are not as good today. And is that already happening? I mean, obviously, the U.S. and China are the two biggest markets, but, like, for other markets, I don't know, UAE, Middle East, Europe, are NVIDIA and Huawei already head-to-head in deals? Huawei shipped a little bit, but, like, mostly just, like, sticker capacity. Like, there's nothing, like, no, like, I would say, like, a little bit as in like a few servers, not like a billion dollars worth of stuff.

36:41Dylan Patel:Right. The thing is, China's supply chain has to ramp up. Right. China, China's express goal is to have all internalized. But then like a company like Alibaba is like, I don't want to use Huawei. Right. Like I want to make, I want to use NVIDIA and just make the best freaking models. Right. Because that's my business. My business is not, you know, using a Huawei thing, but it's like, okay, it's being pushed upon me. There's other companies too, like CameraCon and so on and so forth. And so there's sort of like supply chain, you know, companies in China don't want to use Huawei, They're kind of encouraged, obviously, and pushed, you know, you must some local provincial government be like, well, you're doing this much business here.

37:14Dylan Patel:You got to do this, right? Like there's all sorts of like crazy stuff that, you know, pushing of companies to use Huawei. The challenge is Huawei can't manufacture enough, right? We've like done a lot of work on this and we've just put it for free, you know, instead of like to our customers, because it's like something that's like national security, which is how was Huawei actually building chips? Well, actually, they were using shell companies to get chips from TSMC and using different methods of sneaking HBM, which is memory, from Korea through Taiwan to China. All sorts of crazy stuff we've reported on.

37:45Dylan Patel:And people, it's like a whack-a-mole, right? They shut it down. Or tools that get shipped to China and they shouldn't be for making leading-edge chips, but they actually are. And all these sorts of things are happening because they can't make everything. And if they want to make the leading-edge stuff, they do need to rely on the foreign supply chain quite a bit in terms of the upstream supply chain, right? memory, logic chips, tools for fabs, chemicals for fabs, et cetera. Huawei cannot satisfy the market because there's not enough advanced leading edge capacity in memory, logic, you know, and all these other things domestically in China.

38:16Dylan Patel:And they're trying to build it as fast as they can, but that means there's just not enough to satisfy the market. So NVIDIA has a market. I think they'll figure out how to sell chips to China. And Jensen's in China, I think like right now, or was yesterday. And so like, he's clearly like a wheeling and dealing to try and get his chips into China because, you know, I think NVIDIA's argument is if we sell them chips, then they won't, you know, there won't be enough of as much of a domestic market. The feedback loop for software and everything else won't be there. That was sort of like really challenging, right?

38:42Dylan Patel:Like most of the open source software for AI has a lot of Chinese contributors, right? BLM and PyTorch, SGLang and like all of these other like libraries and things that are just like, you know, and it goes to low level software, especially, right? A lot of the best open source stuff is actually just from a Chinese company who decided to open source it. And same with models, right? And so it's like, okay, well, if they can't use NVIDIA chips anymore, then this open source stuff won't be designed for NVIDIA chips. It'll be designed for Huawei chips. And now does that weaken the CUDA mode? And now not only is China domestic, now they have a feedback loop internally, and then they can externalize across the rest of the world.

39:17Dylan Patel:So this is the argument NVIDIA makes. I'm not sure if I am like, I think my AI timelines are so fast. I'm not that fast. not in terms of AGI, but like, hey, AI is$100 billion of revenue across the industry. I think the industry could hit$100 billion ARR by the end of this year. Like$45.50 for OpenAI, like$35.40 for Anthropic, and then Vertex, DeepMinds models at Google, Gemini, right? And then Vertex API for Anthropic models and Bedrock APIs and Azure Foundry APIs. I think$100 billion is end of this year. That's a lot. And then what's the economic value of that$100 billion? Now, how much of that is in China, right?

39:59Dylan Patel:Like China's number is probably 10x lower, right? Because they just haven't been able to pervasively push AI, right? ChadGPT has a billion users, roughly. And, you know, then you add on Gemini and Meta claims they have 500 million users. I don't know. I think people just accidentally click like generative sticker or something. But like, anyways, like there's like, there's like a lot of usage of AI in the West already and it's going to climb, it's going to keep climbing. And like, you kind of have to get used to it. And so like, the question is like, do you, you know, what's, what's the economic benefit to the world?

40:29Dylan Patel:Right. And at the end of the day, this is an economic war, right? If the U S and the West win in AI and control, you know, more powerful AI systems that have this feedback loop that improved economic growth and weapon systems and whatever else, right? Engineering of grids and cyber attacks and all these sorts of things, they have this like advantage over China, then China will not rise to be the global hegemony. But without AI, China definitely will rise to be the global hegemony. They're just going to outrun America. And so the question is like, you know, that's, I think like the other view, right?

40:58Dylan Patel:And how fast are super powerful AI systems versus, you know, China building a domestic ecosystem for chips and models and everything that is a few years behind. Like what's actually the value, right? Like that's It's sort of like around restrictions and regulations. Where do the U.S. onshoring efforts fall in that category? What do you make of them from the Chips Act to like all the thing that is being built? Everything looks like it's massively delayed, by the way, which perhaps is not surprising. I think TSMC is manufacturing wafers and they're like building real wafers and there's real fabs.

41:30Dylan Patel:And like, you know, there's some other fabs that have been announced and like they're doing well. And there's like a bunch of like different kinds of plants, like a Korean company making a random gas plant in Texas for, you know, their chips, right? Like for chips and all these sort of things are happening. I think the chip stack did really well with its$50 billion. It's just, I don't think people understand the scale of the semiconductor industry. It is the most complicated supply chain in the world, right? It's much bigger than, you know, say manufacturing airplanes. It's much bigger than like, you know, really anything else, right?

41:58Dylan Patel:If you look at the top 10 companies like of the world, I think eight of them designed semiconductors, right? Now, obviously like Google designed semiconductors, but it's like, oh wait, no, but their cost of search would be like 10x higher if they didn't have TPUs. And TPUs were super optimized for search, right? Or like, you know, you go down the list, right? Like Meta serves recommendation systems with their chips, right? Like you go down the list, it's everyone is making their own chips. Apple devices would be materially worse if they didn't have their own chips, right? And you just go down the list.

42:26Dylan Patel:It's like, it's the most complicated supply chain. And they're spending something on the order of like$150 billion roughly in subsidies a year to the chip industry. We are doing 50 over like a decade. There's a difference in scale here, right? The collective total amount of like CapEx that has been spent in Taiwan is like 500 billion plus, right? Across the industry, across all the companies that are making semiconductors in Taiwan. And Taiwan doesn't have a domestic industry. How is$50 billion of subsidies going to change America's needle, right? It does move it a little bit, right? I want to be clear.

42:59Dylan Patel:Like the Chips Act is awesome. I don't understand why like EVs or like solar was given this massive, massive like trillion dollar package. Semiconductors were only given 50. Like semiconductors need a lot bigger package to actually incentivize the on-shoring. I think what's happened so far has proven that it's working well. TSMC is literally making chips for NVIDIA and Apple and AMD and others in Arizona today. Right. And I think that's really great. Is your sense that the broad American government is just aware of all of this? Well, you know, the chipset only passed because the automotive prices went up because car manufacturers are like the worst because they do just-in-time inventory, right?

43:39Dylan Patel:Or worse, but it's just like a thing, right? Just-in-time inventory systems. COVID happened, sales plummet, fabs that were making, you know, random power ICs or random microcontrollers for engines got repurposed to the boom from COVID, which was data centers and PCs and smartphones. so that stuff was booming and then when people were like oh wait actually like you know i have some money i stayed at home i didn't go out i didn't drink i have a lot of i have some cash right let me buy a car they went on about cars and cars started skyrocketing in prices oh let's restart and let's let's oh yeah can you sell me that microcontroller for the engine again it's like no i i'm making a slightly different microcontroller that works for you know uh let's say a keyboard or a mouse right or whatever and it's like and and they actually didn't just leave me flat footed and they were like a partner through COVID, right?

44:23Dylan Patel:You know, versus you just left me screw you Ford or whoever, Toyota, um, or automotive OEM, you know, you know, that supply chain. And so chips act did not get passed only got passed because that happened. And people were like, Oh my God, the semiconductors are why cars can't be made. If that didn't happen, we wouldn't even have the chips act. It's like, it's like silly. So like, I don't know, like, I think, you know, whereas like, and even though that's what was pitched to all the senators, like I know people who are running around Capitol Hill, just pushing that narrative and story and that's why it finally got passed in reality it was all for advanced leading-edge chips right nothing that goes in a car right and so it's like this like funny thing so in other words do you think my words my words not yours but is it is it hopeless that the u.s is going to i'm very optimistic okay i mean do you think that's a world where the u.s just decides to invest in semiconductor at the scale that you know i thought we just needed a bigger chips act but look, Trump's kind of gotten TSMC to promise to invest a fuckload more and they're moving on it.

45:19Dylan Patel:Right. They're like actually like just building it. It's like, I'm going to tear off the shit out of you unless you build a fab. And it's like, we'll build a fab and they're building it right now. The timelines for fabs just takes forever. Cause again, it's the most complicated thing in the world. The cleanest space in the place in the world is not like a hospital or a biotech lab or whatever. It's a semiconductor fab. And the most expensive tools in the world are not, you know, any of these medical tools or whatever it's semiconductor tools or it's not a rocket it's a semiconductor tool right like everything you know i describe it as um i remember when i was a kid i was like i want to be a rocket scientist and then i was like oh i want to be a surgeon and i'm like wait chips are like rocket surgery uh but even cooler right like i think um anyways like sort of like there are there are fabs being built in america they won't take america to self-sufficiency i don't think that's a relevant i don't think that's a goal relevant like that's relevant right like globalism is generally just good hot take uh like in terms of economics turn this into a short a youtube short globalism is good dude you're gonna get me like canceled i tweeted about ice it was a complete joke but so many people got mad at me because i can't be you know i'm too i'm too much of a joker you know these are serious things yeah no i know the i know the feeling yes anyways um i think i think you know i think we are building fabs and i think it's like gonna move and now even elon's talking about building fabs now because he sees the shortages in the world right uh there's a lot of semiconductor related shortages for building out ai and so i don't think it's hopeless i think i'm like very optimistic that we're going to do more and more and more and maybe this administration threatens tariffs and they get the deals and the next administration comes back with the carrot if it is the democrats whatever happens i don't know So I was at a comedy club on Sunday night and like he's like, oh, I use Chad GPT.

46:58Dylan Patel:And then like there are a couple of people who booed. He's like, yeah, I'm one of those guys. I know. And like it's like, wow, people hate AI. And that has not even started, right? Like the actual impact of AI. Or like New Jersey power prices are up, right? Is it because of a data center? Well, New Jersey, the governor's election, like I think literally like there's like an election that changed recently in New Jersey because power prices were up. and people blamed a Microsoft Nebius data center in New Jersey for that reason. But in reality, that data center has nothing to do with power prices going up.

47:30Dylan Patel:It's super storm standee, like five years ago, knocking or whatever, how many years ago, knocking down the state's electrical infrastructure and then improving all these improvements. And then those improvements have to be paid by someone. And it turns out the consumer has to pay for them with higher power prices. Right. And so like, you know, like there's like, there's a lot like going on in that regard. right um that kind of is uh sad um and and people hate ai and they're blaming ai on it and artists hate ai and like you know you see all this deep fake stuff and like i think i think it'll be the hottest button issue especially as like we're really getting into like i think last year google spent three billion dollars on waymo and we're waiting for their guide for this year three billion dollars on waymo taxis but their their waymos went from like 300k to like 100k or 90k the new waymo car and they're gonna spend more than three because they've just launched in like four cities now, right?

48:18Dylan Patel:Or five cities. And they're testing in a lot. And the same with Robotaxi. Like, people are going to hate AI for that reason. People are going to hate AI because the slop on the internet. People are going to hate AI because, you know, the perceived job replacement. People are going to hate AI for all these reasons. And so, yeah, it's going to be a hot button political issue, don't you think? Yeah. Talking about that. So, CapEx, is there a CapEx bubble? Are we investing too much or actually are we investing not enough given what what you were saying earlier about the rate of revenue increase and therefore implied demand that you expect for this year?

48:52Dylan Patel:I'm obviously a maxi. I think we're going to need a lot of infra. And I think I'm literally paid to like analyze the supply chain and do consulting. Like that's what my company does. So like, obviously I'm very biased. I think we're pretty good at calling when things go down though, right? Before like part of the supply chain or whatever. But anyways, you know, again, going back to the economics of it, It's north of$100 billion of revenue exiting this year for AI from a base of sub$1 billion, gen AI, because ads and stuff is already a multi-hundred billion dollar AI industry. Go back to 2023, it was less than a billion.

49:26Dylan Patel:In 2024, I don't know exactly what number, maybe let's call it 10. And 25 was maybe like 30, 40. It'll be north of 100 easily. If you're talking about$100 billion of revenue, let's say at a 50 % gross margin, So that's$50 billion of gross profit and$50 billion of COGS. That$50 billion of COGS needs to run on infra, which costs roughly, if you're talking about five-year depreciation, call it$250 billion, right, of infra for$100 billion of revenue. Okay, what is the actual spend on AI and for this year? It's going to be like, I mean, it depends on what layer. If you're talking about energy, those are longer-lived assets and all these other things, right?

50:05Dylan Patel:Data centers are longer-lived assets. The chips are not as much. People are putting CapEx down. And the hyperscalers CapEx is going to be like$500 billion this year or something like this. And then besides them, there's also a lot more CapEx elsewhere. And so, you know, is it a bubble? I mean, theoretically, like, you know, it's twice as much as it should be, but it's also like, well, no, there's an R &D component to this. And the excess spent that wasn't revenue generating last year is what led to models being so good this year and led to like everyone who can using cloud code and like that changing their life.

50:39Dylan Patel:this is like, it's not a bubble, right? I don't think it's a bubble yet. I think if AI model progress stops, and that's the main thing, right? The moment model progress stops, all the spending is for naught. But so far, we've had consistent improvement. As you put in more compute, you get more performance and better models. Yeah. Model performance being a lagging indicator of hardware progress or data center capacity. Or yeah, of CapEx, right? Ultimately, the CapEx that Microsoft spent in 2024 for OpenAI is what results in 2025 for OpenAI or CoreWeaver or whoever is what results in their models being so good this year.

51:12Dylan Patel:Same with Anthropic and Amazon Google and their models now being so good now is that CapEx. And actually, they still haven't paid for those chips yet because those chips still have a useful life for another few years, right? I think model progress is very clear. The moment that stops happening, right? If we hit a wall, there's no new research directions, then it's cooked, right? And that assumes that a better model leads to more demand, which is a reasonable assumption. Yeah, for sure. I mean, there's still the adoption curve, regardless of how good the model is in the enterprise. Yeah, but like 2 % of GitHub commits today are CloudCode.

51:48Dylan Patel:Yeah. As in committed by CloudCode. You can disable that where it's not automatically committed. But 2 % of GitHub commits today are CloudCode. $2 trillion of software wages paid in the world. If it was 2%, then you're like, wait a second. this is an insane amount AI is under earning the value that it's producing in the world right? By a significant margin already today. Boris Cherny from Cloud Code who we had on the pod was saying that he's written all of Cloud, what is it called, Co-Work the new product entirely we're very much in that world one of my roommates I was asking him because he's always been a really low level good programmer and he started, you know, I was like, he's like, he had this, um, holiday obsession, right?

52:35Dylan Patel:I mean, he was using cloud code for work already, right? Like whatever. Um, but he had this holiday obsession. We got into playing age of empires to myself, you know, my roommate, a handful of people from like open eye GDM anthropic. We just would do land parties of AOE to over the holidays a bit. Not, not like Christmas, but like a little bit before a little bit after, you know, cause most of us went home for Christmas. Um, but like we do these lands, my roommate got so obsessed with like the game that during a christmas week because he didn't go home he just stayed in san francisco um he just worked on an rts game and he built an entire rts game and i think i kid you not i think he he used like ten thousand dollars of clod in one week and built an entire rts from scratch uh about age like but instead of like being a standard rts where it's like oh age of empires where you advance through ages or starcraft it is it is an rts where it's China versus the US and you're in the AI race and you go from the start of the information age all the way through to, you know, AGI and like robots and humanoids and like space-faring civil...

53:36Dylan Patel:Like, it's crazy. He built it in a week and he didn't type a single line of code, right? He only dictated to the model. And he told me, yeah, like we have an indicator internally at Anthropic where you see how many people actually write code now. There's only a few holdouts left. But I guess the question to the bubble is really a question of... timing as well, right? It's whether the build, which is the supply side and the demand side, are going to land sort of at the same time. Is that fair? Yeah. But also the economics of like, say, you spend, let's say you spend, you build a gigawatt, you put down roughly$50 billion across, you know, the data center, the chips, the networking, blah, blah, blah, blah, blah, right?

54:15Dylan Patel:Let's say it has a five-year useful life. So it's$10 billion a year. Is it a bubble if the first year you didn't make any money, it's zero? The second year, it's zero. And then third, fourth, fifth year, you're at 50 % gross margins. And so you make 20, 20, 20. Now you've made$60 billion off of this$50 billion investment. It's not the best return on invested capital, but it did pay for itself. Is that a bubble? Well, that's what's happening today is that people are spending all this money on infra and there's no return for a lot of it, right? A lot of it is just doing research and trying to get adoption and it's free users.

54:46Dylan Patel:And what does that mean? Yeah. Depends a bit on the timing. That's the timing though. But that$50 billion CapEx was spent in year one. What about energy? In the data center world, you had this fun post about the gas replacement for energy. So is AI basically destroying the grid? What if the utilities were willing to let it? But I think the utilities are so slow and dumb that they don't want to. Not destroy, but like expanding the grid. I think the U.S. could have a way better grid, but we just don't want to. Like no one's made the effort or initiative. You know, there's not enough power. America's not built power for 50 years, really, right?

55:23Dylan Patel:It's like converted from coal to gas and like things like this, but like really just have not built wholesale new power on a large scale. And there've been a lot of times where the industry blew up, right? Independent power producers, IPPs, have blown up multiple times in the 2010s when Korean and Japanese investors like flooded the market with, because they saw such a good return there. Or before in the early 2000s, power was growing a little bit for a little bit. And so people overbuilt on power. So power industry has been burned a couple of times. So no one really builds power. And then you've got data centers now all of a sudden coming online and going from 2 % to 10 % of the U.S.

55:55Dylan Patel:grid in just a handful of years. And so you've got this humongous, humongous change in the industry. We don't have the labor, right? I think ultimately that's the biggest problem is the equipment and the labor. And equipment is basically, you know, again, labor and time takes time to build a factory so you can build the things. I think the equipment side of things will be solved like more reasonably. And one example is like gas, right? People initially thought, oh, you can only use like the two vendors, right? Siemens or GE Vernova for gas turbines. They have the best ones, the most efficient ones.

56:22Dylan Patel:It's like, okay, well, like, okay, also Mitsubishi exists, and they're ramping up production fast. Oh, Doosan and Korea exist, and they're ramping up production fast. Oh, actually, I can just take Cummins engines, right? Like, you know, if you've ever, like, ridden a pickup truck or, like, you know, like diesel trucks, like, everyone loves Cummins, right? You know, you see the Ram on the street and it has the Cummins, like, badge. It's like, that's like an aura symbol for a certain kind of redneck from South Georgia, which I have a little bit of. Anyways, I don't have a truck. I have, though. But anyways, there's all these engines.

56:50Dylan Patel:People are figuring out how to make the equipment. Solar sucks. It's too intermittent. Wind sucks. It's too intermittent. Nuclear sucks. It takes forever to build. Coal sucks. It's way too dirty. How do you make power for data centers besides gas? Okay, the grid's not willing. Just put the gas on your site. That's what Elon did. Now everyone's doing it, right? This other cool poster just last week or two weeks ago that was about the water consumption. Do you want to talk to that? Yeah, yeah. So there's this annoying thing where everyone's like, oh, AI is using all the water. Oh, wow. AI and data centers are going to use up all the water and now we don't have any water.

57:24Dylan Patel:And it's like, that's so silly. Water is a distribution problem, not a we don't have enough problem, right? You look at California. It's like California has shitloads of water. But people decide to make oat milk, which consumes like 1 ,000x the water of anything else, like regular milk even. And cows obviously consume a lot of water. But anyways, like, you know, data centers consume very little water actually, right? So the U.S. grid will get to like 10 % of power by like 28, 27 is data centers. For water consumption, it's not even gonna crack 1 % by the end of the decade. And what was the metric?

57:58Dylan Patel:And so the comparison we made is because like, you know, it's a bit of a shit post, but it was like serious research. Basically like we were doing serious research because we keep getting this like question and debunking it and we would do it seriously. But then I was like, no, no, no, this is like too like complicated. Like let's make it very simple. So I was like, guys, why don't we just compare it to like hamburgers? Right. Cause, cause you know, I've heard that argument from some like vegetarian people before or some Hindus or like, I'm Hindu myself. Although, you know, and I do eat beef sometimes, you know, like I'm Hindu, but like, you know, so we made this comparison to hamburgers, right?

58:32Dylan Patel:Hamburgers require a shitload of water because cows, you know, for them, they require a ton of water. And when a cow is taking a lot of water, it's not the cow itself. It's all the feed you're feeding them. Right. Because no one grass feeds their cows and just lets the rain take care of the grass. They either rain the grass or most likely they do mass industrial farming of corn, soybean, alfalfa, et cetera, which uses shitloads of water, right? Or almond milk uses tons and tons of water. Produce is the main user of water. I think the metric was the entirety of Elon Musk's Colossus Data Center, right?

59:10Dylan Patel:uses as much water as two and a half in and outs. Because that's, you know, you do the calculation on how many, how many burnt, what's the average revenue per in and out? And how many hamburgers does that translate to, right? If everyone's ordering like a combo, right? Okay, let's ignore the drink. Let's ignore the fries. Let's just talk about the hamburger. Let's ignore the bread, which does have grain. Let's just do the meat and the cheese. And all of a sudden, all this water is, there's so much water, right? Like a single query, like all of your AI usage from chat GPT of the average user is like a hamburger, right?

59:43Dylan Patel:Like it's like, okay, this is nothing, right? You know, because these things are, the data centers actually are like, they're mostly closed loops and like, sure, they evaporate some water for like cooling reasons, but like by doing evaporative cooling, they're using less power, right? And that's actually better for the environment than not using evaporative cooling. There's all these reasons why. This myth or hoax of AI using all the water is just nonsense, right? Like Meta's data center in Louisiana is getting protested because the water, it's going to be the largest data center in the world.

1:00:11Dylan Patel:It's going to be like four or five gigawatts, at least announced so far. We're tracking some other ones that may be as big or bigger. But Meta is getting protested because the local population around that area is like, oh, the water's dirty. It's because of this Meta data center. And like there's these trucks on these big trucks on these back roads that used to be empty completely. They're just like mad and annoyed about that, right? But at the end of the day, what actually made the water dirty is that that's an area where you go fracking. Like fracking is absurdly worse. And almost all of that gas is being shipped to an LNG terminal and being shipped to Asia, like, you know, like Japan or Taiwan or China or Korea and some Europe as well.

1:00:48Dylan Patel:Right. Like like actually all of this water is dirty because of regulation slash fracking. Like I support fracking, by the way, but that's that's an insane take to maybe. But like water usage is like not a relevant argument. Are you bullish on the sort of energy companies? I'm thinking Constellation for Nuclear or Vistra, I guess, as an independent power producer. I think IPPs will do well. I think IPPs can secure contracts at premiums to what they've previously been able to for new power plants that are either dedicated or grid connected, but come with a pairing of a grid load. right for example utilities won't let you just do data centers now but if you come with a a pair right you're like hey i'm going to build this massive data center but we're also going to have this massive uh power generating asset right say you know whatever it is right some ipp they're going to partner with and they'll build the load and the uh consumption even if it's connected through the grid for better stability and more reliability um or it's not it's behind the meter i.e not connected to the grid at all um like some part some data centers like partially like Colossus from Elon, the original one, or part of Abilene's Texas OpenAI, right?

1:01:59Dylan Patel:Like Crusoe. There's a lot of room for power producers to get outsized returns. I'm not necessarily bullish nuclear. Existing nuclear, fine. Yeah, it can find a higher buyer, higher priced buyer. But majority of it will be gas. But like you can do like renewables backed by gas and then just turn off the gas and like it's cost more, but whatever, right? Or you can do wind backed by gas. And why not nuclear? Takes too long. Takes too long. No one can build nuclear fast. Mm-hmm. even China takes like five years to build nuclear, right? Like it's complicated. It's unsafe, right? You know, and I love nuclear.

1:02:30Dylan Patel:I wish it would work. It's just not relevant in the timescale that like AI's power is going crazy. But yeah, there's a lot of interesting stuff. Like have clients would like, had a client buy a coal plant and we were advising them on the transaction based on, they just like showed up and they're like, yeah, we want to buy power assets. We believe in this power story. It's like, okay, great. So yeah, so here's all of the like power plants that we know of. Like you can get some from EIA, blah, blah, blah. which are these like, and then we like work through the economics and we looked at new data centers being built in the region and all this.

1:02:58Dylan Patel:And then they decided to buy a coal plant and they restarted it. And they're like making tons of money now because now someone, a certain hyperscaler wants to buy the entire pipeline of power and put a load near it, right? Instead of just being a grid connected asset. So it's like a super awesome investment. So like, you know, power is, power is going to do great. Yeah. I was going to talk about piece dividends of the AI boom. Generally. Yes. Right. Like hyperscalers are paying for transmission upgrades, which people will benefit from, right? Or like, you know, investors are obviously going to benefit.

1:03:28Dylan Patel:People who work in the industry, electricians' wages are skyrocketing, you know, et cetera, right? Like plumbers' wages are skyrocketing. So there's like a lot of trades that are doing really well too. I think that's definitely also part of it. Yeah. I wanted to come back quickly to that NVIDIA and CoreWeave deal that you mentioned as we sort of closed the discussion on CapEx and a bubble. It seems like there is circular deals, but also a lot of debt kind of like flushing around. I don't know the specifics of that deal, but I did hear variations of this where effectively you have a large player guaranteeing the debt being the last recourse for a lot of infrastructure build.

1:04:08It is sort of this plus the whole like Oracle commitment. There is a fragility into this whole thing that can be a little unnerving. What do you make of it?

1:04:19Dylan Patel:I think it's like completely fine and I think like people are like freaking out and making narratives where there really is shouldn't be one it's like well okay Google doesn't have enough data center capacity they need people to build data centers but no one can build a data center because they don't have the capital like don't have you know in many cases capital is not the you know they don't have capital right or like no one will give them a loan because they don't trust some random fucking company and it's like but then Google's like well no we've due diligence then we think they can build it here we'll like even guarantee we'll buy the thing or start using it once they build it.

1:04:47Dylan Patel:You know, just having a customer alone spoken for it was enough, right? In the case of CoreWeave, they were actually able to, no backstop, right? They were able to just say, hey, look, here's our Microsoft contract for this many GPUs. I want to put in that data center, that data center, that data center. Here's the contract for renting those GPUs. I want to hire these people. I want to do this. No one will like, they don't have any money, but then they were able to like have it work out because they were able to get people to lend to them. I think like CoreWeave did that and there was no circular financing, but that was when there was like the scale of investment was like single digit billions or less than a billion, right?

1:05:15Dylan Patel:Now the scale of investment is hundreds of billions. And so the question is like, oh, well, if I want data center capacity, how do I get data center capacity? I just go to everyone who's going to build it, looks smart, is smart enough to do it, but can't afford to do it and tell them I'll take it. And in fact, I won't just take it. I'll go to your debtor and be like, I'll guarantee you. Because, you know, obviously you're a new company. I vetted you, but the debtor hasn't. And so, you know, like, you know, they don't want me to just be able to walk away. Because like in the Microsoft CoreWeave deals, Microsoft could have walked away if CoreWeave fucked it up, right?

1:05:45Yeah.

1:05:45Dylan Patel:I mean, yeah, there's always like sort of like cancellation or whatever possibilities. And so there's just a further form of guarantee as far as on like a lot of these backstops, as far as on like Oracle getting the money and then OpenAI getting money and NVIDIA, you know, paying and it's a whole circular. It's kind of nonsense because it's like NVIDIA is getting equity in OpenAI. They're basically saying, hey, every gigawatt you buy will also buy some equity. Yeah. Right. OK, well, cool. Now NVIDIA owns an asset which they think is valuable, OpenAI, right? Right. OpenAI is turning around and is like trying to rent those, use the equity they buy.

1:06:17Dylan Patel:What are they, what are they, what was their use of equity? People's cash pay isn't that great. Right. It's mostly just 99 plus percent of their spend at the company is probably just compute. Yeah. So, so sort of like, it's like, okay, well then I raise this money. I'm going to do the, the whole thing where I explained earlier, right? Year one and two, I lose money. Year three, four, five, I hope to make money on it. Right. And OpenAI has been doing that. Right. So I'm going to, okay, I'm going to go out there. I've raised$50 billion. I've raised$10 billion. I'm for five years for$65 billion. And I've rented that contract.

1:06:48Dylan Patel:And now I only have enough to pay for the first year, to be clear. But I think, you know, you trust me, Oracle, you think I'm going to grow and you think I'll be able to pay for it. Oracle's like, yeah. Or if you're not, I think I'll be able to sell it to someone else. So like, okay, cool. I'm going to spend$50 billion this year to build that data center. And this is like for a gigawatt. And so is it like circular that OpenAI is every amount of GPS they consume, maybe it's an investment, that investment is turned around to pay for the first year of the rent of the cluster or second year. And then first two years go, you know, it's sort of like, it's fine.

1:07:17Dylan Patel:Yeah. Yeah. Like, it's like, it's like, it is a little bit funky, but like, I don't think it's a big deal. Yeah. Love it. Contrary intake. Maybe let's finish with models and the software side of things. We talked extensively about hardware and supply chain and all the things. I get a sense that you are super, super bullish on what's happening next in AI. Your roommate, Sholto, I assume was the roommate that you were talking about earlier on this pod, effectively making the point that we're just starting to scratch the surface and there was so much low-hanging fruit around RL and all the things.

1:07:50You're in Silicon Valley circles. Is that your sense as well? And what are you tracking on the model side?

1:07:56Dylan Patel:One thing is like, you know, simple stuff like GitHub commits. Other things are like, what's the amount of usage? How much are people using? Like all these sorts of things. I think there's so many different alternative data sources for tracking AI model progress. Area tokenomics, token economics, tokenomics. And so that's like an entire practice for us. Are you rebranding the term from crypto? Yeah, I don't believe in crypto people. Like I've always hated them. So now you're taking the term. Yeah, yeah. And Jensen's used it now. So I've like, I've convinced him to use the word. He's used it as sovereigns.

1:08:27Dylan Patel:And so I think, I think we won. That's awesome. Congratulations. I've said it to him. We've written it in articles. It's an entire practice of consulting that I just started. I started in like 23. was token economics. And we've been trying to build out these like, you know, but basically I think the main things are like, people who don't code can use cloud code now, right? I think people don't understand that. Like, even if you don't code, you've never had any training in software development. You've never had a job as a software developer. You can code. Let's take an example of what's one of the analysts that my company did, right?

1:08:53Dylan Patel:Comes from a engineering background, but on like semiconductor systems, right? Like worked on mechanical systems, worked on these sorts of things. And they coded this thing, which was they want to do an analysis of area of clean rooms, right? Clean rooms are the building that the fab has all the tools and the most complicated kind of building in the world, has all sorts of chemical systems and all this. Area of that, a company who builds these systems and revenue of that company, right? And so it was like, okay, we have this fab data set, pointed at it as like, hey, here's this fab data set. What's the square footage of all of them?

1:09:28Dylan Patel:And we have this thing that we built, which just pulls with Cloud Code separately, which for data centers and fabs and everything else just calculates the area of something from a satellite image, right? Very simple. So we have the square footage of all these things. What's that? Here's the company name. Okay, go find the filing. So it dug through all these filings. It pulled the data, right? Okay, great. Now tell it to compare these two. Make a chart. Great. Oh, wait, there's this like weird inflection. Oh, that's because they bought a company five years ago. Can you do a pro forma of this analysis without those financials of that company they acquired?

1:09:58Dylan Patel:Okay, great. And then like we were able to like figure out an investment case for clients, as well as like, you know, some other interesting details from someone who's never really coded, just using Claude Code and it like doing this all. And this is like not even there. And it wrote the note and they just like, they didn't even like work on this full time for like three hours. They just told the model and would go work on other things and told the model and worked on other things. They just did this. People don't understand that like the skill sets that like, I think like if you go talk to an analyst, right, a very junior analyst at any company, right?

1:10:29Dylan Patel:Whether it's venture or especially growth venture or public markets or private equity, their job is like finding data, cleaning it, making charts. It's like, this is Claude Code now. You don't need junior analysts. Just like a lot of companies have stopped hiring L4 engineers because it's useless. Why would I hire an L4 engineer? I just tell Claude to do it. You sort of like have this has happened. And this is a really big like shift, I guess, like is that like low level knowledge work just doesn't matter, right? Why would I use Excel when I can just tell Claude to manipulate CSVs? Why would I use Word when Claude will just generate the markdown and I can copy and paste the markdown directly into our WordPress and then that WordPress is fully formatted now and it's like, oh my God, what's the point of Word, right?

1:11:12Dylan Patel:And what's the point of doing all sorts of stuff? I think when we look at model progress, that's just Opus 4.5. OpenAI's new model I think will be better than Opus 4.5. It's coming somewhat soon in March-ish timeframe, maybe February, March-ish, but yeah. because OpenAI has a better RL stack than Anthropic today. It's just their pre-trained models suck compared to Anthropic's pre-training, right? And so like if they catch up a lot on pre-training and keep their better RL stack, they would actually have a model that's much better, right? Flip side, Google has a better pre-trained model than Anthropic or OpenAI, but their RL stack sucks.

1:11:43Dylan Patel:So if they catch up on RL, like these models are gonna get ridiculously, and then Anthropic is obviously advancing as well, right? And then you look across the ecosystem, everyone's advancing, really fast progress. these moments are happening, right? You know, chat GPT was a moment. Ghibli was a moment. Those are more consumer. Those are less like, I mean, chat GPT is everyone using it for work too. But like, I think Cloud Code is like a new moment, right? Opus 4.5 on Cloud Code is a new moment where the way you work has forever changed. And so now we're trying to force everyone in my company.

1:12:10Dylan Patel:There's 54 people here. I think like half of them have coded. The other half, we're trying to force them to use like Cloud Code. And it could be like, oh, well, actually you come from a semiconductor consulting background. Oh, you come from like a semiconductor, like engineering of like packages. oh, you worked in a fab, right? Like these kinds of people, they're using Cloud Code now, right? And their productivity is being boosted. And it's like, you know, workspace, Cloud Workspace is new. It sucks compared to Cloud Code, but it'll get there, right? He said he coded it entirely in Cloud Code.

1:12:37Dylan Patel:You know that, right? Or it was on your pod, right? Yeah, yeah. So like, you know, I've heard that. And I think maybe that might've been from your pod, original disclosure. My pod was before that, but yes. Oh, okay, okay. That's the guy on my pod, but he subsequently said that. Ah, okay, okay. I think it's like a brand new age and like there's so much low-hanging fruit. As Shilto said on the episode when he was here, there's so much low-hanging fruit. Yeah, I mean, for the models progressing and then I think model progress will translate to revenue. Adoption is difficult, but like actually the UX of Cloud Code sucks, but like give it six months, the models will be good enough that the UX can be like talking to it.

1:13:10Dylan Patel:And you don't even have to have like, you know, CLI integration, right? It's something even easier. Or like Cloud for Excel was released recently and it's like not bad. You know, building models and like all these sorts of things are just going to be like tell someone, right? Like why tell a junior analyst, right? When you can just do it yourself. I think it's a whole new world and it's a$2 trillion of software work, but also of wages, but it's also, we have more north of 2%, 2 % is Claude and then, you know, there's Kodaks and Cursor and all these other guys. So probably like 5 % of code committed today is AI generated, if not higher, marked as AI generated.

1:13:40Dylan Patel:What's going to happen when normal workers who do spreadsheets and office processing start automating their workflows? I think it's a whole new world. And speaking of Sholto, we both agreed that he was a perfect specimen. dude i've i've been i'm straight but i've been accused of being uh homosexual which is perfectly fine for for how much i like praise this man because like think about it right he's like six foot four he's like really good looking he's like australian accent sounds amazing like you've heard his episode i have like a annoying voice probably his voice sounds amazing he's absurdly good at coding he was an olympian level fencer like like he picks up any sport he's really good at it right because he's athletic.

1:14:21Dylan Patel:It's like, holy crap, you're a specimen. Yeah, yeah. So this is going to be eclipsed incentive for sure. Yeah. It must be, you know, I guess maybe some people don't follow the play-by-play on Twitter and haven't heard of the fact that all of you guys are roommates. You're a roommate with Sholto and then with Dworkish. And Dworkish is like the podcaster's podcaster. So it must be absolutely— What's a podcaster's podcaster mean? the podcaster that other podcasters aspire to become or learn from. Yeah, yeah. When he's preparing, you know, it's like he's so locked in and he prepares so hard for interviews.

1:15:02Dylan Patel:It's great. No, he's just incredible. And then he might only say like 100 words on the episode. Yeah. But he's prepared so hard. And then like I think people just realized, oh, wow, he's not just like, you know, it's like, oh, he just has good guests. No, no, no. Like he's preparing really hard. but you can't tell if you're not like realizing that and then once he started writing more and he started writing more people like oh wow he's actually really really smart it's like yeah because he's studying like crazy like it's like oh i'm interviewing an ai researcher who worked on this i'm gonna try and train a freaking model yeah right it's like that's the level of like commitment he goes to when he records this stuff what do you guys talk about when you bump into each other is that is that ai non-stop or you talk about everything but ai with sholto it's like the age of empires game you know because we got super into it for a bit we talked only about that and his RTS that he made with Dwarakash.

1:15:46Dylan Patel:I mean, it's all sorts. It's like normal roommate stuff. It's like, how's your dating life? Oh, okay. You want to know how to date? It wasn't well. It didn't go well. Okay, well, okay, yeah. You know, like, oh, you know, like, that's me. That's me. You know, my dates don't go well. No, just kidding. Or like, it's like, oh, you want to like have dinner? We can invite a few friends. Like, yeah, great. Or like, you know, it's like all sorts of like normal stuff too. Obviously, we also do talk about a lot about tech, right? Like we are like, this is our lives. and tech is the most fun thing. Awesome.

1:16:13Well, great. Great San Francisco lore. Dylan, thank you so much. That was absolutely fabulous. We enjoyed it. Learned a lot. So we appreciate your coming on the pod. Thank you so much. Hi, it's Matt Turk again. Thanks for listening to this episode of the Mad Podcast. If you enjoyed it, we'd be very grateful if you would consider subscribing if you haven't already or leaving a positive review or comment on whichever platform you're watching this or listening to this episode from. This really helps us build a podcast and get great guests. Thanks and see you at the next episode.