The Information's TITV
00:04:13 · Akash Pasricha, Aaron Holmes
[00:04:13] S0: Right. So, Aaron, big picture here, when I look at these delay stories that have been trickling in, see it as much worse for the neo cloud companies like IREN and EnScale than it is for Microsoft. Is that your read on it as well? [00:04:31] S1: Yeah. I mean, I think you're right that this environment we're going into, especially after the midterms, it's going to be a lot harder to set up new capacity and to get permitting and, you know, connected to power for for new facilities that are built. So, you know, the the general consensus so far is that that is potentially gonna give the big hyperscalers that already have tons of existing facilities and already have a lot of projects that are, you know, well underway or that already have gotten permitted and access to power, that those big companies are gonna have a bit of a leg up over these smaller firms. Another big difference is that, know, Microsoft has this huge cash flow machine from its software business, which none of these smaller clouds have. So they're... They've had to, you know, raise significant debt in order to build the data centers that they are now trying to lease to other companies, And that's only going to put more pressure on them as they struggle to get revenue as quickly as they had hoped.
00:04:31 · Aaron Holmes, Akash Pasricha
[00:04:31] S1: Yeah. I mean, I think you're right that this environment we're going into, especially after the midterms, it's going to be a lot harder to set up new capacity and to get permitting and, you know, connected to power for for new facilities that are built. So, you know, the the general consensus so far is that that is potentially gonna give the big hyperscalers that already have tons of existing facilities and already have a lot of projects that are, you know, well underway or that already have gotten permitted and access to power, that those big companies are gonna have a bit of a leg up over these smaller firms. Another big difference is that, know, Microsoft has this huge cash flow machine from its software business, which none of these smaller clouds have. So they're... They've had to, you know, raise significant debt in order to build the data centers that they are now trying to lease to other companies, And that's only going to put more pressure on them as they struggle to get revenue as quickly as they had hoped. [00:05:26] S0: And the other way that I'm thinking about it is, I mean, there are so many of these Neo Cloud companies now that have popped up. Isn't it quite easy conceivably for Microsoft to just say, Okay, well, if you can't do it, I'll find another Cloud company that can? I mean, is it as easy as that or is it a little more nuanced?
00:05:26 · Akash Pasricha, Aaron Holmes
[00:05:26] S0: And the other way that I'm thinking about it is, I mean, there are so many of these Neo Cloud companies now that have popped up. Isn't it quite easy conceivably for Microsoft to just say, Okay, well, if you can't do it, I'll find another Cloud company that can? I mean, is it as easy as that or is it a little more nuanced? [00:05:45] S1: I mean, that is the the approach that we've seen Microsoft take so far. They have, you know, deals with CoreWeave, Nebius, and scale, IREN, like, basically, all of the the major players in this sort of neo cloud space, which has been their approach just because they want capacity faster than they can build it themselves. But, you know, if that starts to shift and all of those smaller companies all are facing these issues of getting capacity online as quickly as possible. We might see, you know, Microsoft start to invest more in just trying to cram more, you know, capacity into the data centers that it already owns. So it... It'll be very interesting to see how that plays out in the coming years. [00:06:24] S0: And just remind us, Aaron, we saw the company reported earnings, I think it was last week, although the weeks are all blending together now. So, what kind of commentary did we hear about Microsoft being constrained by capacity here, and how important is that a story for them right now?
00:06:24 · Akash Pasricha, Aaron Holmes, Yueqi Yang
[00:06:24] S0: And just remind us, Aaron, we saw the company reported earnings, I think it was last week, although the weeks are all blending together now. So, what kind of commentary did we hear about Microsoft being constrained by capacity here, and how important is that a story for them right now? [00:06:44] S1: Yeah, the supply crunch very much continues. Microsoft says that they have more demand, for GPU rentals than they can meet from customers. And, of course, they also wanna set aside some of their GPUs to run their own, Copilot AI software and and use to train their own models. But, you know, there's kind of a flip side of that where if the entire market faces this demand crunch in a new environment post midterms, you know, potentially the the rental rate for GPUs is going to go up, which at least in the short term could actually kind of boost the revenue that Microsoft and and other cloud providers can extract from customers, especially big labs like OpenAI and Anthropic. [00:07:22] S0: Great. Well, Aaron, I wanna thank you for coming on. That is Aaron Holmes, our Microsoft reporter here at The Information. Big banks may not be thrilled about allowing AI agents just yet, given the risks that are involved with them, but my colleague Yueqi Yang has new reporting that smaller banks are embracing these tools. I want to bring on Yueqi to share more of her reporting. Welcome to the show, Yueqi. It's great to have you back. [00:07:48] S2: Hey, Akash. Thanks for having me.
00:07:48 · Yueqi Yang, Akash Pasricha
[00:07:48] S2: Hey, Akash. Thanks for having me. [00:07:50] S0: So, I want to start with the risks here. When you've been talking to your banking sources about these agents, I mean, on one hand, there's using agents in your own course of work, as an employee at a bank. On the other hand, there's customers using agents for some of their banking products. What are some of the risks here on both sides here that have been coming up in your conversations? [00:08:20] S2: So I think bankers are generally pretty concerned and cautious about people giving their logging and bank account information to their agents, especially as agents are becoming more popular, like Meta's Muse and Instinct are taking off very quickly and people wanted to use these agents to do shopping for them and potentially looking into their personal finances. And we've heard from the big banks saying that their policy is to block the agents. And that's because they're worried that agents might go rogue. And if your agent is misspending your money, then it's unclear who is going to be liable for that money. But at the same time, I've also talked to some of these more FinTech friendly banks, such as LiBank, Cross River Bank, Column, and they're actually going in the opposite direction. And for them, agents is just another extension of what they've provided before, which is to provide API access for banking use cases. And they're the early movers that are embracing agents to allow them to access bank accounts by consumers.
00:08:20 · Yueqi Yang, Akash Pasricha
[00:08:20] S2: So I think bankers are generally pretty concerned and cautious about people giving their logging and bank account information to their agents, especially as agents are becoming more popular, like Meta's Muse and Instinct are taking off very quickly and people wanted to use these agents to do shopping for them and potentially looking into their personal finances. And we've heard from the big banks saying that their policy is to block the agents. And that's because they're worried that agents might go rogue. And if your agent is misspending your money, then it's unclear who is going to be liable for that money. But at the same time, I've also talked to some of these more FinTech friendly banks, such as LiBank, Cross River Bank, Column, and they're actually going in the opposite direction. And for them, agents is just another extension of what they've provided before, which is to provide API access for banking use cases. And they're the early movers that are embracing agents to allow them to access bank accounts by consumers. [00:09:40] S0: So, we'll get to the smaller banks here in a second. But the big banks, I mean, have they said outright, we're not going to allow agents to access accounts or anything like that?