E217: Anthropic $150b valuation (now $170b!!!); xAI + Valor for GPUs; Figma IPO valuation set at $15-$16b

0:00Clint Sorenson:Fellas, it came out this morning, I think. It's Monday. Then Anthropics looking at$150 billion valuation. MGX, which is a sovereign wealth fund out of Middle East, is looking to lead the round. At least that's what I can gather from what I'm seeing. But like two weeks back, they were floating$100 billion valuation. Okay. The last round that they did was in March of this year at$61.5 billion post money. So this is a 143 % increase in like four months. That's pretty good. Okay. So the$4 billion ARR is where they're at right now. So this is a 37X revenue multiple. their revenues up 4x from january yeah that's not a mistake 4x from january that's three billion dollars of incremental arr in just um six months time so fellas what do you think about anthropic maybe clint we'll start with you man like are you like how do you think these guys stack up with like open AI, XAI?

1:16Clint Sorenson:Like, what do you think of this valuation? Like, give me your thoughts.

1:19Nick Fusco:I mean, the valuations on these things, all of them are just absurd at the end of the day. But the valuations on public market stocks are absurd. And when you've got, you know, I saw a report, I think it was from Goldman last week that said that in terms of percentile speculation on companies with enterprise value versus sales of greater than 10X is in the 98th percentile. So, look, this is just the nature of the world we live in. Money isn't real. NVIDIA is worth more than the material sector, industrial sector, close to the whole value of the financial sector. You're talking about the Ricky Bobby economy, which is you're either first or last.

1:58Nick Fusco:And AI, if you've got AI on the name, people are going to throw money at it. So these valuations have gone crazy. As far as Anthropic, I don't see how they beat out the other players in the space. There's more room for one, but I kind of want to bet on the winners there. And so I think there's other places to go. We talk about this all the time in terms of investing in AI. I'm not a big fan in investing in these large language model systems or platforms. I prefer infrastructure where the money's flowing than to bet on the players that are having to spend the most money. So it's going to be really interesting to see kind of how they fare, but the product's great.

2:39Nick Fusco:I just don't see how this valuation can be justified. Even though they 4X sales in a short order, can they maintain that type of growth? When you're talking about 37 times sales as a valuation, you have to make that bet. You're betting on persistence of that insane growth rate, and I just don't think that's a realistic expectation. Right.

3:03Clint Sorenson:Okay, so to Clint's point, Nick, to Clint's point on the infrastructure component, like XAI and OpenAI have both gone out and bought their own like GPUs, right? That's like a thing. They're building their own data centers to run their models off of. Anthropic hasn't done that. They like cut deals with, you know, some of the larger cloud providers. Like is that – also too, Anthropic's had a lot of dilution, right? That$61 billion round that they did, there was a lot of dilution that flowed through from some of the convertible notes. What do you think about the deviation of business strategy? Does that impact, you think, the valuation in the long run?

3:49Clint Sorenson:What are your thoughts on how these things are shaking out, these large language models and the paths that they're taking going forward? I think Anthropic is doing a pretty good job of maintaining some semblance of independence and getting to pick how they're paying for what they're paying for in terms of compute and not having to be completely aligned despite some of the aspects with Amazon and things like that. It's not the same as the situation as OpenAI plus Microsoft. And then that growth rate of 4X is pretty wild. So obviously, they're doing something right, not being restrained by any partner beyond excessive dilution and having to raise a whole lot of money.

4:36But if you compound out 4X growth over such a short period of time, you can get to that 37X multiple. So that's where my head's at. And it sounds like they're chasing the money and the Middle East is a good place for it. We were talking about the players before, who are the players out there. It's like Cristiano Ronaldo getting picked up by the Saudi Pro League at a quarter billion dollars a year. That's just how this is happening. When there's a lot of money, folks can take these big, big bets. And I think at the 25x come 37x, it's actually not terribly nuts. So I'm going to be pretty supportive here because everybody's really concerned about how the next generation of search might look as well.

5:24You know, looking at, could Google be disruptive? Yes. And might it be one player or could it be several? I think in this case, it still could be several. Anthropic perplexity, OpenAI, because when people are using these, they're doing slightly more research than trying to navigate to a website. So yeah, I think this is pretty cool as a bet. And then I do feel as though they are a better position than someone like an open AI and it justifies that. Right. Okay. Right.

5:56Clint Sorenson:Okay. So Evan, you're my like resident product guy here, right? What do you think about like ultimately I think what both Clint and Nick just said is like if the revenue growth persists, then this maybe makes sense, right? but that's like potentially a very challenging thing to do. Like, do you think, how do you think of Anthropik's product, like, and how it stacks up to what, what's happening with like open AI and XAI? Do you think these guys are going to be able to continue this type of revenue growth? Do you think they got a product that can, that can do that? Or a product team that can continue to innovate and deliver kind of interesting products that drive, continue to drive that, that revenue growth?

6:37I do. I think Anthropik has a world-class product. um i you know i've said it on this pod before i'm a pretty big user of all the models but claude tends to be the one that i lean to for a lot of important tasks um also claude code has like totally taken over the developer world by storm you know windsurf and cursor are all the big stories for the first half of the year and now everybody you hear is just like well just claude code like the end of the day and claude's model underneath it was ultimately the thing powering those shifts anyways. So you're seeing them go after verticals pretty effectively.

7:10They just launched their cloud for financial services. They're going after different, like they're going to do legal next. I think they have an excellent product and I do believe that they can execute and they are executing. I also think we're really early on in a big paradigm shift market. And so I think there's a massive greenfield for them to grow into. 37X seems expensive, but not unbelievable in my opinion. I think that there's a lot of opportunity there. I guess the challenge is, is I think that if you look at the daily active users and market share compared to open AI, open AI, it doesn't feel like they're 50 % less.

7:47If open AI is trading at 300, they're certainly, they have way less than 50 % of the users of open AI. Yeah. So they have a lot to grow. And the question is, is like, well, it was open AI overvalued. Is it tropic overvalued? Where's which one is right or wrong? I think there's a lot to be determined there. But I think that from a product perspective, it's an excellent product. And I don't plan to stop using it. And I could easily see myself paying more.

8:13Clint Sorenson:Yeah. I mean, it's a good point. They're identifying specific use cases and good developing solutions for that and going after it. Like Bloomberg Terminal, okay? That thing hasn't been the hasn't been updated forever right i mean that thing looks the same as it does today as it did like 20 years ago when i first saw it you know um you know maybe there's like additional functionality right but the interface is the same and it's like it's it's a big ramp there's a big learning curve to really know how to use that thing properly so i mean having a That could be very interesting to see a new competitor, a real competitor in that space.

8:57And the announcement on July 15, Claude for Financial Services announced the partnerships with Databricks, Faxet, Morningstar, PitchBook, and S &P Global. There's your shots fired across the bow for a Bloomberg or anyone else. Not that there's a good comparison there.

9:16Clint Sorenson:That's just really interesting. as a salesperson, as an old school salesperson, to have a widget that you can then go and say, hey, let's go and identify everybody that owns a Bloomberg terminal and put this in front of them and see if we can take some seats or market share. That's very interesting to me. So yeah, it's like 150 billion is a lot. I think I'm with all you guys. I just want to see where the revenue growth comes from. I'm a believer, like Evan said. I think they can do it. And Nick said that too. I'm a believer. I think they can do it, but they got to put the... I think we're at a point now with all these companies where they got to put points on the board.

9:54Nick Fusco:What's the moat in these businesses? That's what I just have such a struggle with. It seems like you've got first mover advantage, and it's just about getting as fast as possible in user growth. But what's the sustainable moat? That's my big challenge. I think that's a great question. But as someone who uses all of the models, and I'm actively using Gemini, OpenAI, Claude, and Grok, probably on a daily basis, and perplexity, I continue to move and use Claude for the most, in my opinion, my most important tasks. And so if the moat is just the best quality product, and the thing that matters the most, I think that's a pretty...

10:38It's like, well, can they defend that? It's going to be challenging. But they're doing a great job so far.

10:43Nick Fusco:Yeah, quality can be a moat, right? I was mainly speaking on the whole industry in general. It's a challenging environment to get my head around from a valuation perspective without sustainable long-term moats because as we saw the deep seat, just how quick disruption can rise from the ashes and shake things up a little bit. And now you're hearing, I think you guys talked about this on the last podcast, but now you're seeing financial institutions start to cuff the data a little bit, right? I think you're going to see that more and more. We've always talked about on this podcast that the war is going to be over data and data access and usage.

11:24So, I don't know.

11:25Nick Fusco:It's just such an interesting, I mean, it's the greatest time to be alive, be able to witness these things. But it's going to be interesting to see how that unfolds without a sustainable.

11:32Clint Sorenson:I would say this, though. I would answer this, Clint. I think access to GPUs seems to be something that you could probably build a moat around. And that seems to be a huge area of focus, obviously, for people. Electricity, access to electricity is something. The infrastructure component, I think, is a big one. The talent thing is nuts. I mean, these metas hiring people, paying them a billion dollars over five years. It's wild, right? Money's not real anymore, guys. point though to your point though like a bunch of fellows from china you know rip out deep seek and like surprise everybody you know what i mean so like i guess there's always potential for that but you know one could argue if you're paying these big dollar amounts that these people must be what wildly talented right um the investment is real we're seeing mass the investment is massive yeah the one thing i am interested is like google google hasn't let it rip yet They really haven't.

12:25Clint Sorenson:Right. You know, and I'm just like this personalized context thing really like hit me this summer at their last developer conference. Right. That they did like when they if they wanted to flip the switch and just go all in like I have all your data. Do you say yes to letting Jim and I have access to everything? Right. And then what that looks like or if they started standing up solutions around that, like they could be they could catapult themselves very quickly into like, you know, a top three position.

12:56Nick Fusco:I use agent mode on OpenAI, and it's fantastic, man. Yeah. Just the other thing, just going back to the moat for a second, people used to say the same thing about cloud. They're like, oh, well, Azure, Google Cloud, AWS, what's the moat? And what we learned from that business, which I feel like is parallel to this, is that stickiness, once you've gotten integrated, is very high. And cost of switching becomes higher. Remember, Amazon is a massive investor in Anthropic, and AWS is still the market leader, just from my understanding, in cloud. And so if you are a business or an enterprise building on AWS, there's a high probability that Claude or Anthropic software will be somewhat integrated to that, which creates a massive opportunity for them too, and it's very sticky.

13:45So I'm not as concerned about the moats at this very moment, but I do think that we've seen in the past that stickiness can be the sort of thing that keeps people.

13:55Clint Sorenson:This is a very good point. And I'd also offer too, like in the context of large language models, there's also like the memory around that, which, you know, which is not kind of quite the same as stickiness for the cloud provider. It's like a new thing that's specific, probably AI. But like, if you're using, if you're a business and you're using Anthropic or any of these platforms, right. And you're generating that, the AI is like, has that memory, your instance of the AI has that memory around your business, that's going to be tough to like pull yourself away from that and go somewhere else if you can't, if you can't take it with you.

14:27Clint Sorenson:Right. Yeah.

14:28Nick Fusco:That's a great point too. Cause that's like with me with open AI, I've tried, I've done so many projects with, with it on the pro version. I mean, it's got everything in there. It like knows you, man. I have the inverse problem actually though. I feel like, cause I've used it for so many document revisions, like, you know, large contracts and policies where I've dropped it into chat GPT and it uses memory and it remembers errors, like things I changed. Like I can't, I can't unlearn it. I'm like, Oh, I don't remember that. I actually changed that policy. Like, and it's like, Oh, like you said this thing.

15:01And I'm like, no, I, you need to forget that. I don't know how to update it with like the right context.

15:06Clint Sorenson:Yes. That's a good point. You should write the open AI team. Maybe they could find a solution for you for that. Maybe. All right, fellas, let's move on. All right, so XAI did this really interesting deal with Valor, which is one of their venture capital fund investors, right? So Valor is going to go out and buy$12 billion of GPUs. Okay, my estimate is that's 350 ,000 GPUs. It's a lot, right? I mean,$12 billion, a lot of money, full stop, right? And then they're going to lease these GPUs back to XAI. I can only imagine there's some covenant. There's something going on here where this isn't happening through XAI's legal entity structure.

15:49Clint Sorenson:I know they just did a debt raise.

15:51Nick Fusco:It reminds me of Enron. I was going to say, it sounds a little fishy to me.

15:55Clint Sorenson:I wonder, they just did a debt raise. I wonder if there's covenants in that bond, that note that they did, if they can't do more or something. So this is a creative way to circumvent that, I suppose. Yeah. I put the same notes down when you said, hey, we want to talk about this Valor debt facility. I actually didn't spark anything fishy on me. It was just, you know what, these are going to be loans that have a number of covenants on them that will just guarantee those guys are going to come out decently well. So if now Valor wants to benefit from earlier investments and exposure they already have to the company on the equity side, they want to promote growth, and maybe they don't want to add on additional equity or additional risk, that same degree of risk, they can come in with this and kind of guarantee or as close to guarantee their payback while helping the company at the same time.

16:54So, yeah, I don't smell anything fishy. I just bet that they're going to be benefiting immensely from what people aren't seeing written all across those those debt facilities. So I think it's a good play for Valor, for sure. Valor is like, dude, those guys are those guys are ride or die with Musk.

17:12Clint Sorenson:Antonio Gracias and Musk, I think, been friends forever. And in fact, Gracias even helped out with Doge. He was doing like social security stuff. So hats off to him. Thanks for the time and effort. I mean, like the, but I mean, those guys are like joined at the hit, which is awesome. I think for the valor folks and right. You know, I've, I like everything that I hear about valor. They're like very smart people over there. Right. So, um, I'm sure this is a very good deal for both investors, XAI and valor. I would have to imagine. Right. Right. But maybe but maybe the other thing that caught me by surprise on this.

17:54Clint Sorenson:OK, so Musk put out a tweet. So Musk wants to get to a million GPUs, which I thought was like an astronomically high number, considering like what's going on out there. Like I think Grok 4 was trained on like one hundred thousand, one hundred fifty thousand. I tried to find like the exact number through some research. I couldn't I couldn't put my finger on it. But Grok 4 is, I think, a very good model. I use that a lot, right? And it tested very well with a lot of the benchmark scores. So I can't only imagine what a model that's trained on a million GPUs is going to look like, right? So there's that.

18:31Clint Sorenson:But there's a couple things as I was putting together notes on this. So one, it looks like they already have 230 ,000 GPUs operational. Musk said another 550 ,000 are going to go online in a few weeks' time. So that's 780 ,000. I don't know if in that 550 that includes – it must include this 350 ,000 coming from Valor. It must, right? I would have to think. But anyway, that's 780 ,000. So they're getting close to the million, right? But since I also love Grok, G-R-O-Q, the semiconductor company, Musk also noted in that same tweet that inference is happening through their cloud providers. So these million GPUs are used only for training.

19:22Clint Sorenson:And inference is happening through rented chips from other parties, whether they're GPUs or Grok inference or whatever it is. Like very interesting. I don't think a lot of people, I didn't fully appreciate that. Right. So I'll stop talking. So maybe Evan, we'll go back around the horn this way. So what do you think of, you know, a million GPUs, like Grok 4, you know, being trained on, I think something less than 200 ,000. Is that going to make a difference? It looks like it is. Like, what are your thoughts on just this Valor deal and how they're structuring it? Let it rip. Oh my God. So many different things.

20:00All right. So I'm going to work backwards on this. So a million GPUs. Well, one, I understand that the latest model of Grok was trained on several, like a couple hundred thousand GPUs. And it demonstrated that the amount of GPUs does have some sort of impact on the quality of the output. It's theoretical, of course, whether or not there's that scaling law actually applies or if there is like a S curve where at some point it sort of peaks out. So there's some big risk there, specifically on the financial side. A million GPUs, I still wonder if they have the electricity output capable of running it.

20:35I mean, I believe this is somewhere in Tennessee, correct?