E215: Aquihires a better M&A?; JPM to kill fintech?; 6 new, huge primary rounds!; Does anyone have an electricity guy?

20:13Clint Sorenson:Right. So is it now that they can see the finances and be like, wait a second, those guys are making all this money. Plus they're at this higher interchange rate. Right. Because they're, you know, working with Bancorp Bank. You know what I mean? So like. They got an unregulated interchange. They're giving them data for free. Like, you know, like this is BS. Like we're throwing up gates. Yeah. Now that I see it, I'm throwing up gates, you know? Yeah, I think reading the article and the way that Jamie Dimon discussed it is he's basically saying that the connectivity of data through Plaid and other providers sort of commoditizes the concept of a bank.

20:55And it makes JP Morgan, who's got trillions under management, tons of security structure, policies, all the services under it. And it makes them look like Rockville Center Bank and Trust, like the small little bank with a few million dollars. And it makes them all sort of ubiquitous and connected in almost the same. And he's saying that it makes our brand look worse because we can offer similar services. Customers should come to us and they should use our services and we should defend those services. I think that's a, I mean, I understand the argument, but I don't necessarily agree with it. I think it creates worse experiences for the end customer.

21:27And it ultimately really, it comes down to the concept of whether you believe your transaction data is your data or JP Morgan's. And to me, I believe when I make a transaction, when I pay my rent or I pay my taxes or I pay a provider, a service provider, a vendor, whatever, that's my data. And I should be able to take my data wherever I want. Right. You should. But in my world, that's a dual IP, unfortunately. We share it. Yeah. But to your point, yeah, he may be shooting himself in the foot. And now he's well smarter than I am, right? So he's probably not. But if I go into my QuickBooks now and I can connect every bank under the sun except for my Chase because there's going to be an extortionate fee associated, yeah, then I'm going to think twice about buying business in QuickBooks.

22:14If I have to go into any other platform that's connective and there's an added fee or – I have to think about it. It's like when I go out to eat and someone says, oh, you want to use an Amex. We charge an extra something percent just because you're using Amex or we don't accept Amex. it could become like that dynamic.

22:33Clint Sorenson:Yeah, it's true. Make a similar parallel as like what Costco did when they switched from Amex to Visa. Remember, it's like, oh, do we think the customer is going to stay with Amex? Do they like Costco enough to get a Visa carded? I think we saw a very low number of people, you know, not - Stop going to Costco. Stop going to Costco, exactly. They want the Costco. Costco is a cult in a good way, in the best way possible. Yeah, that's right. But Nick, that's actually like, To your point, that's the key thing. Like what Evan said, it's like, are people going to pick the bank or the interface? So if I'm using QuickBooks and all my stuff's in QuickBooks, and now all of a sudden I can't tie my JPMorgan Chase bank account to QuickBooks, am I going to find a new books and records provider or am I going to find a new bank?

23:26Clint Sorenson:To me, I don't call me crazy. I like people, you know, your accounting software as that using that example, like you live inside of that thing. Right. Some businesses do. So like I could see people being like, I'm not changing QuickBooks, so I'm going to get a new bank account. Yeah. Because if you use zero or anybody else, you know, you're going to have the same issue. Right. Right. Right. Right. Yeah. But in that one use case, but I could see other use cases where it'd be like, I don't really need that. I'll go use some other provider. And now that use that chase, you know, doesn't have an incremental fee on it.

23:57Clint Sorenson:but I, I don't know. It's just like, to me, to me, the innovation thing is what, first of all, first of all, I think to your point around private company stock price valuations and how this impacts revenue, I think it's, you're right. You got to wait and see what happens. Cause it looks like there's some stuff going on with the Trump administration and the current, you know, consumer financial, you know, bureau that implemented this rule in the first place. So they had a rule out there and now it looks like they kind of pulled it back. So we'll see what happens there. So this may not happen at all anyway, but if this does happen, I do think it's going to negatively impact fintech valuations.

24:33Clint Sorenson:I think it's ultimately why I wanted to bring it up with you guys, because this seems like it's going to be expensive. It's not going to be like a little toll. It's going to be a 1 % or 2 % toll. It sounds like it's going to be very material. So there could be an account opening fee. You almost have to charge it, an account opening fee now, or your profitability on a new account is going to go from six months to a year or something like that before your break even on that account. That's material. Or being a negative Nancy on this, the worst case scenario is, oh it worked out for jp morgan pnc starts to do it capital one starts to do it bank of america starts to do it you know everyone just follows suit yeah and that yeah and that could certainly happen as well so wait and see is not the worst not to get not to get too cheeky but then you have like this genius act stuff start and then people are like well forget it we won't use ach we won't use swift and wires we won't use visa mastercard just do everything on the blockchain and then instant verification, all of it's wallets.

25:41Clint Sorenson:It's simple. There's some stuff. Yeah, yeah, yeah. This can go way better. Fintechs will move outside. I think you're absolutely right. If you're rolling back innovation at the traditional side, you will see that innovation double down on the technical and forefront side. And that will be a losing battle in the long run for the traditional finance players. Yeah. Okay. All right. Sounds good. Let's talk rounds. So guys, like a lot of rounds this last week. You got Revolute. Went from, they announced around$65 billion. They were at$45 last round. SpaceX,$400 billion round. I wouldn't be surprised if that goes up, right, from there.

26:21Clint Sorenson:But the prior round was$350. Grok,$6 billion round. Prior round was$2.8 billion. That's Grok, the semiconductor company with the Q, right? Right. Minstrel, the French large language model business, 6.2 billion. The last round was two. Right. Harmonic, which is a mathematics specific AI model that Vlad Tenev, who's the CEO of Robinhood, is the chairman of$875 million valuation. And then XAI, they did the$10 billion round a couple of weeks back with some debt and equity. But then now they're talking about a$200 billion valuation round, which Musk has said is not happening on X. So maybe that's not happening.

27:07Clint Sorenson:But anyway, just throw it in the mix. So a lot going on. So is this like a moment in time? Nick, is this like a moment in time? Is it just like summer and people are doing rounds over the summer? Which not for nothing, that's kind of how some of this stuff works. or is there actually something happening in the market that's warranting this deal activity? I think deal activity begets deal activity. And besides, let's say, a bankruptcy and aspiration, you've got IPO with Circle, Hinge Health, Omada Health, Time, like data stacks getting acquired or that being out there. A lot of the Aqua hires that we mentioned in the first part of this conversation, everybody's having good success here for the most part.

27:53So we're going to ride the wave. I forget the Charlie Munger, the surfing model, right? I mean, we're already on the move. Let's just pile in while we can, especially because last year was a bit tough. So no, I think there's just a huge amount of momentum and we're just going to see if it's going to fall flat or what will occur. But why not keep it up until somebody falls flat interface. Okay. All right. That's just to be really generic about this response. I got you. I got you.

28:25Clint Sorenson:What do you think? Any thoughts on this? Is this just a moment in time or just normal cycles? I definitely think it's moment in time. It's definitely a part of a cycle. I think that, believe it or not, that the opportunity of AI continues to be underestimated, I think, by everybody. And I think now the bigger it gets up and the bigger the market grows, the more you see the improvements at the model level, at the LLM, the customer usage, et cetera. I think people are just realizing like, this is where you back the truck up. This is one of those moments. And so you're just seeing these exceptional companies building exceptional technologies and investors who have tons of dry powder.

29:08Remember, they've been sitting in money market funds, trillions of dollars sitting in money market funds. And they're just sitting there being like, well, this is the opportunity and this is the time. So whether or not it's the frothy part, or it's a good of right good or like the pricing is good or bad will be remain to be seen but right people are people are in the gambling mood right now and i think it's if you're an operator and

29:28Clint Sorenson:you're building a great company this is the time to do it yeah yeah i don't get the sense like i don't know i guess i i like live inside this we all do right but i you know like i look i kind of look at these one by one and every single one of these has like a different story you know what i mean on so like i don't look at it and be like hey it's a moment in time like they're all like Like, oh, everyone's going out raising money. Let's go raise money too. It's kind of a natural cadence. SpaceX does something every six months. Grok didn't do... They're literally one year from their last raise. So they do something that looks like every July or August.

30:01Clint Sorenson:So that's kind of on brand for them. Minstrel's doing something that looks like every six months. The$2 billion is something they did fourth quarter of last year. They did something first quarter of this year that was at the same valuation. So this is kind of like almost a continuation round. uh harmonics brand new so no kind of back tested revolute's interesting so they did around last year 45 but it was trading down right like nick pm insights has it down from the 45 so then they're coming out and doing the 65 it's kind of like a that's a very well against the grain against the grain the last time i mean we i forget what the the numbers were but we we saw it trading in the secondary market, 20 % under the 45 mark.

30:48And this is around the time when people were announcing rounds and then the secondary market would snap up to whatever that round was. It just wasn't happening. And then eventually it was Revolut did. So if it weren't last time -

31:00Clint Sorenson:Why is it? That's the only stock that does that. Is it because it's a European company? My only thought is maybe that's just like European investors just refuse to pay a premium in the secondary market. So they're like forcing a discount. And then the company that comes out and does a round and it's up from the last primary round, right? That's the only thing I can think of because that's just not how any other company operates. They're kind of secondary market, right? Right. I mean, that's the most on its nose, but it's also one of the more traditional looking businesses that would be tracked along everything else that we've just mentioned.

31:38So they're not the most innovative company. They're not the most advanced cutting edge technology or anything like that. So maybe that's why it's slower to react. But yeah, everything is much more reactive in the secondary market that we've discussed today. Right.

31:56Clint Sorenson:Okay. I won't bet against the revolution. on play. That is true. I mean, they're growing very fast. And they have almost like no traction in the United States too. So I don't know what that's going to look like, but it'd be interesting to see if they actually get a foothold here, right? Okay, so last thing on XAI. So I don't have any data rights or any kind of inside information on XAI, right? I just read what everybody else reads in the news. But the one thing that I just can't get past is, which I now think is a good thing, is that Musk wants to build a million GPU data center, right? So my understanding was that this new Grok 4 was trained on 100 ,000 GPUs.

32:42Clint Sorenson:And Grok 4 is sick. It's awesome. I know we were talking about it before we started the thing. It's like, I'm like blown away. Like it's so much better than any other large language model that I've used, like full stop, right? My opinion. That's only 100 ,000 GPUs. The guy wants a million. Like I can't even imagine what an AI trained on a million GPUs with a bunch of guys, like the ex-AI guys, they have like photographs of them sleeping in tents at the office. Like these people are animals, right? They like work to them bone. I can't even imagine what a million GPUs at that team's disposal is going to look like.

33:19Clint Sorenson:It's going to be, that's like, you're talking like super intelligence. That's kind of the thing that everyone's talking about now. I have to imagine you're getting close to that, if not there, right? On a million GPUs. But here's the thing. What do you guys think? Like, here's my question for you. GPUs aren't cheap, right? Like from what I'm seeing, it's like for every 100 ,000 GPUs, it's like a$6 billion capital investment. Okay. So if he's got, my understanding is they got 300 ,000 now. So that's 700 ,000 more times the six. It's like 40, call it$40 billion of capital the guy needs to raise.

33:56Maybe there's a volume discount that NVIDIA gives if you're buying that much.

34:01Clint Sorenson:But if you're the guys at XAI and the merger valuation was$113 billion, right? You can't raise$40 billion on$113. You're driving up that valuation. There's a start. You know, you got your cross-pollination of SpaceX putting 2 billion of it in into XAI. But to me, it's more about dilution, though, Nick. What do you think about the dilution? It's a massive punt. And it goes back to exactly what we're saying, that so much dry powder is being deployed. Everyone has to see if this is going to work. because imagine if you were the one company in the year 2000 that didn't fully commit to the internet you're toast yeah you know that's that's that's lights out for you guys so yeah i don't i don't know that the jump from 100 000 to a million gpus uh is necessarily going to be much more than incremental we don't no one knows that answer because no one's been able to do it yet right Right.

35:06And also this attack from the quasi acquisition of scale AI, a lot of it's about the training data as well. So if you have so much more kind of training data, yeah, I think that would almost be more impactful potentially. But nobody really knows the answer until somebody's done it. And if he's the richest man in the world, why wouldn't it be him to do it? Yeah, we're not. I don't know. I think we're going to have more questions than answers. halfway there.

35:38Clint Sorenson:Right. But I mean, can you agree though, that if they, if he does in fact pull the trigger and go to a million GPUs and spend the 40 billion, that that valuation of this company is going to have to go up a lot. Right. Yeah. It would have to, otherwise we're getting diluted to hell. So yeah. So like, I mean, this is where you saw like open AI go from like 86 to 157 to 300. You know what I mean? Like I know, I wouldn't be surprised if we're seeing something similar for XAI. It's in the$300 billion valuation range in the next nine months. Yeah. I mean, there's also a world where they do debt financing, right?

36:16Clint Sorenson:You know what? That's actually a good point. You know what's interesting about that, Evan? I don't know if I've heard of anything around OpenAI doing debt financing, but XAI just did debt financing, right? Yeah. I mean, there's a world where the equity component is not the exclusive way that they raise capital for that sort of project. No, but that's an interesting, okay. But if you're in management team though, that's a very interesting differentiator, right? In how you're managing your cap table and how you're accessing capital, right? Equity versus debt. Right. Plus two, it might be interesting, you know, because XAI has less revenue than OpenAI at the same time, like maybe OpenAI can justify the $300 billion valuation and pulling in$40 billion to not dilute themselves.

37:09Clint Sorenson:But maybe if XAI did that without the same revenue base, it's a tougher pull. So you do the debt instead. You can always refinance the debt, I guess, right? Absolutely. Or you can pay it off faster. They would probably be treated much better in the debt capital markets if they were public. so maybe that's a consideration but yeah i don't think yeah that's true that's a good point evan i suppose i hadn't i mean i've obviously thought about debt but i haven't thought about it in that magnitude like if they did you know billions i mean i suppose core we've doing debt but like that's it's a little bit of a different revenue model because it's more direct i suppose right like they're literally selling that you know data centered you know tokens or whatever right so like uh or if it's now public and make it easier so right but you know like you could really line that up you'd be like okay you know company a client you know customer customer uh company a wants x i need to build a new data center to service that the data center has cost me why the revenue from this is that i can take that to a bank and waive that contract in front of them they'd be like oh yeah sure we'll give you the loan for that money you know what i mean like or the investors for the bonds or whatever right um yeah and private credit markets are massive right now.

38:22I mean, they're just getting bigger and more. They're massive and they're getting bigger and more mature and they are expanding their reach into every single place, including the NFL. So we're seeing it all over. Yeah, that is true. So there's definitely a play to do half and half or some portion of it.

38:36Clint Sorenson:Right. Plus I got to tell you too, to your point around credit investors, private credit, maybe there's so much money in private credit, it's like bananas. I think from what I hear, people are dying to find places to put it. So maybe that kind of delivers a better interest rate to you. Yeah. I mean, the other thing just to put a cap on this is that for a million GPUs in Nashville, I believe is where they're building it. There isn't the energy capacity to have a data center that size. So while there's a whole level of infrastructure investment that needs to happen before that can even go live. So I don't think this is a problem that we as the markets are going to be experiencing or figuring out how to finance in the month's timeline.

39:22Clint Sorenson:Here's a question for you, though. Do you think Elon Musk will not find a solution to his power constraints? Over what time period? I don't know. I do believe that that man will find a solution. The question is whether you will find it in the next – he's also not the best at keeping to the timelines. He tends to be much more optimistic in reality. Fair point. That's fair. And look, not to fanboy him or anything like that. I think he can definitely figure out a solution for it. But I don't think it's going to be the sort of thing that they figure out in the next six to nine months or 12 months.

40:00I feel like this is a –

40:01Clint Sorenson:Well, he does – but that guy does – I mean that guy does like – he makes like the impossible possible. Like I wouldn't, I wouldn't put it past him to, you know, like go buy some nuclear power plant just outside of where he's building it. That's being decommissioned. He privatizes it. Or Nick. It's like solar, you know, like solar. Like I've, I don't, I can't even tell you how many times I've heard him say, like, you know, if you did a five mile, whatever, crazy 50 mile by 50 mile square solar field, it would power the entire United States. Like I've heard him say something like that along those lines.

40:39Clint Sorenson:multiple times like you know like i wouldn't be so he takes down like he's in nevada companies are headquartered in about like he takes down like a huge portion of the desert or something puts up a huge solar field boom you know power for your data center i don't know i hope you're right i mean i would love to know that solar is that efficient but he owns a solar company right he owns solar city right yeah i mean the wild thing is he could do it all within he could do it all within his own companies, theoretically. Of course, he'd have to make the solar panels, but the guy makes things. He's going to make things, right?

41:17Clint Sorenson:Yeah. Going back to it, I think he's going to find a solution. I just don't think it's going to be something that we as investors in the market need to be figuring out how to finance today. It could be a long-term contract. Remember, Stargate's still out there. There's hundreds of billions available for that. There's deep pockets of private credit. I think if and when that opportunity arises, we'll have more clarity on what the optionality is and how to finance it. Okay. Here's my big challenge. Here's my big challenge for you two and anybody who cares to respond to this. I'm dying to find a way to invest into electricity as if it was a commodity.

41:52Clint Sorenson:I found one gentleman that does it. It's not futures. He's literally buying the electricity contracts and then selling them and making a spread, right? Yeah. It's almost like a high-frequency trader type thing. It's wild. He's like, yeah, I wake up at 4 a.m. because the electricity markets, I guess, open up at 4.30 in the morning. It's like that. He's super dialed in, this guy. I'm like, will you take outside investor money? He's like, I don't take outside investor money. He's like, it's my own money. It's like crazy. The guy's worth like, he's worth, he's very wealthy man, right? All from this electricity trading, right?

42:34Clint Sorenson:I can't find anything. There's no commodities on, there's no futures, there's nothing, right? You know, people are like, buy utilities. It's like, it's not the same thing, in my opinion, right? Buy nuclear company stocks, buy this, like, I don't know. I just, I want to buy the commodity, man. I can buy oil. I can buy natural gas. I can buy, you know what I'm saying? I want to buy electricity. No, we got to tap Clint on this. This is his bread and butter. He loves this stuff. No, I would go air towards the interim of buying the nuclear company, knowing how much energy we're going to need and how stifled nuclear has been in the US.

43:20I've done that, and that's working out. but I, Oh,

43:25Clint Sorenson:you've bought nuclear company, like invest in their stocks. Correct. Yeah, I have to, but we talked about this. It's not the standard of the year wrap up. Didn't we like what the things you're investing in? We did talk about that. I'm listen. I'm okay. I'm putting this out into the universe. Okay. Someone please call me and tell me how to do invest directly in electricity. Cause I will, I will, I will invest. Okay. Dylan at ag Dylan.com. Please email me. and tell me how to do this? Wait, let me tell you. Let me tell you how it can be done. Because I had to buy a hamster and a hamster wheel. I can tell you how it can be done.

44:00But here's the thing. So what you want to do... Well, so there's two different things that you're discussing. There's one, like trading energy contracts, which are like SRECs, effectively available, like stuff that you sell back to the grid and back and forth. I don't know if you want to explicitly purchase the contracts. What you really want to do is you want to invest in finance. That's what this other guy does, I think.

44:19Clint Sorenson:Is that what this other guy's doing? What he's doing is trading. That's a trickle day, right? Yeah, he's trading available electricity between what is available and access to the grid, which in certain states is state regulated. So each state has its own structure. And actually, it's regional. It's not even structure. It's like the Northeast region has its own trading contracts across states, across places. And you get this crap. Yeah, like my understanding, he was literally – the way he described it to me, and this is a couple months ago, so I apologize if I get this wrong. but he was literally calling like the companies that are generating the electricity, like the utility companies.

44:53Clint Sorenson:And he was like, there was like Frank. I mean, come on, like we're all New Yorker guys, right? Like this is how this shit works. There's like Frank at Commonwealth Edison or whatever. Right. And he knows Frank. So he calls him up, Frank, I want X, Y, and Z this much. What's the price? He tells him the price. He goes, okay, sounds good. I'm a buyer of this. And then he's like done. And then do the trade. And then he turns around and he goes to like the state of New York or New Jersey or whatever, and he sells it to the grid, you know, or sells it to some other utility that needs it because they didn't do as much production that day or whatever.

45:26Clint Sorenson:Right. That's like the market. As far as I understand it. And so that is a way to invest in the commodity. There's a lot of different ways to get that. It's again, it's a credit swapping thing. So you're effectively buying someone's excess power utility and selling it to them. There's a market for that. You can definitely invest in that. But I think what you really want to do is you want to do the project finance for industrial capacity production, which is really where you get that. I think I want the contracts. You just want the contracts. But the thing is, if you buy the production scale, if you invest in the project finance, what ends up happening is that the power is actually purchased on a long-term purchasing power plan.

46:01So it's like you're buying 20 years at a certain kilowatt hour, and basically you finance that with upfront capital, and you get consistent dividends from production and access.

46:09Clint Sorenson:I don't want that either. That's what I'm saying. I understand what you're saying. I don't want that. I want the R. There's going to be more demand and not enough created. So I want to live in the middle of that. So if I bought you the world's biggest Energizer battery and you sucked up power usage in the middle of the night when no one's using their air conditioning, you sucked it up and put it in your battery, and then you sold it back to everybody when they need their ACs on during the day, peak heat. That's what you want? I would do that. I would consider that. I would consider that. Christmas list.

46:472025.

46:48Clint Sorenson:Listen, it's just like, this is where like my entrepreneur bells go off. Cause I'm like, okay, you know what? Like if I can't figure out how to invest in this and it's too tough, then there's an, there's like an obvious opportunity here. Like I should start a business. You know what I mean? I don't know. I just. But if you, but if you believe capacity is going to continue to increase X, like not exponentially, but directionally upwards and capacity production is not going to be able to keep up with that demand, you will ultimately never have a scenario where the supply side will be able to offer you an opportunity to buy into it.

47:19You need to be the producer because then you control the price.

47:22Clint Sorenson:Yeah, but that's like a different level of – but that's like a different – there's a different underwriting to that. That's a long-term versus his short-term, right? So the short-term volatility, you can take advantage of. I'm okay. I would even be okay doing the long-term, Nick. It's just a different underwriting. Like now I got to like – who are the people building this? you know uh you know the who are they building are they going to be able to manage and maintain it over time like i'm locked into now that one site or whatever like whereas like if it's oil or natural gas that i go by the futures on i'm just betting that oil and natural gas are going to go up or down or however you're betting you're trading it you know what i mean like like just on the simple level you know and there's a whole bunch of things that impact that right but on just like the simple level it's you know you're betting on the commodity the price of the commodity going up.

48:07Clint Sorenson:And I've yet to find a way to do that for electricity. Just the commodity. Listen, as you hear it at first, present us your options. We'll get you there. Oh, not only do I, am I confident I would write a nice check into that, but I have a lot of people that would come in, pile in behind that. So anyway, anybody who's got an idea, let me know. I'm dying to know it. I'm dying to find out. But all right, boys. All right. It's good talking to it's great great conversation I appreciate you gentlemen