Big Technology Podcast
00:11:04 · Ranjan Roy
[00:11:04] S1: I'll agree that I think it is, the beginning of a negotiation. It's gonna be an ongoing negotiation. But but, again, I think, like, I I keep thinking about this not in terms of, you know, is it going to happen or is it not going to happen? All that matters to me and I think all that matters to the market, is it going to happen the way it was assumed to have to happen to make a number of valuation stories come true? That's it, and it won't. Can't... Every, if Gina Hinojosa is saying, actually, and I think she had said that if the groundwork has already been laid, then maybe those and they're scheduled for completion into 2027, that those can go ahead. And there's gonna be all that kind of nuance around this and which is good. I think like I actually think that's a very good thing. And I think we're gonna... Maybe we do end up in kind of a world of some kind of debate and rationality around this, But that is not what the story requires for everyone from Anthropic, the hyper scare scalers, the oracles of the world, that's not what will work for them.
00:12:12 · Alex Kantrowitz
[00:12:12] S0: Yeah. And it does go back to some of the the developments or some of the volatility, I would say, that you've seen from these companies and and basically from the whole trade. And to me, I think, you know, part of this... And and just to go back to my comment about the volatility here is that so much of this is narrative base. It's a story about potential, and it's less of a story of what's happening today. So let me at least give you my theory of the case for why I think we're seeing the volatility. And then you can, you know, let me know what what you... Whether you think that there's merit there or not. So I just wrote like a couple of of bullet points here. So here are some givens. I think AI is a technology, with potential and a great story, but that story is not commensurate to its current earnings. So you have trillions of dollars in public company traded and trillions of dollars in public company valuations or stock traded on the expectations of effectively two companies with a $100,000,000,000 in combined revenue. So the AI lab's potential was so great that they ended up leading to subsidized demand for AI chips. And that demand went through the roof. But to live out that story, or give it a shot of working, they need the data centers to be built. And all this is basically hinged on these like, you know, small but growing rapid companies. And the market is is used to some sort of certainty around it. But again, new companies, new technology, and small size that are getting bigger is never going to be a normal trade until it starts to, you know, settle out and it hasn't settled out yet. So any hiccup and everything goes haywire, because the small so yeah, because of the small size of the business, the early state of technology and all the hope And data centers in particularly are the linchpin here. Once they go, the story evaporates.
00:14:09 · Ranjan Roy, Alex Kantrowitz
[00:14:09] S1: This is exactly my argument. I I appreciate this. You just laid it out even more eloquently in an instructed way than I did. I mean, this is it. It's it's exactly the... It's a narrow set of companies that the entire trade is built around and anything... Again, we've talked about this even on Anthropic specifically, we're gonna get more into the current state of the IPO, but everything assumes perfect execution. That's on their own internal businesses, that's on growth, that's on revenue, that's on unit economics, but that is also on the data center story to be the infrastructure for this gigantic story and all this promise. So everything depends on perfect execution, and we're seeing even this little hiccup or... Can actually completely derail that story. [00:15:01] S0: Big hiccup. [00:15:02] S1: Mean, yeah. Yeah. [00:15:03] S0: Right. But this is what I'm this is. So this is why I'm going back and forth on it. And I haven't fully made up my mind on it yet is to just go back to is it really the end? Like I you know, I understand that I understand why the market will see a sign like that, and they wants to buy in. But I don't know if it's really the end or not because of all the different times we've seen this negative thing happen and it not actually manifest
00:15:26 · Ranjan Roy
[00:15:26] S1: the way people But so I'll push back on... In the past, the whole, like, idea around regulation and the tech clash was very limited to the actual singular companies themselves. And, like, can the FTC go after Meta? Can... And again, we've seen, I think what was it, New Mexico going after Meta for $25,000,000,000. Like we've seen more and more things happen. And again, Lina Khan and the FTC, there's certainly like actual action taken against large Big Tech. But by the same token, these companies have gotten significantly more powerful than they ever were before. This is a little different to me because this is the regulation is or the government involvement becomes so much more small and targeted in a locality and whether they're gonna actually allow a data center to be built. And that's gonna happen on a one by one basis across the country. So it's not these massive, like centralized federal and central company issues of whether Meta's lawyers can beat the FTC's lawyers. This is gonna happen throughout the country and I think that is what makes it far more unpredictable and actually in a interesting way makes it more likely that something can actually happen to these companies.
00:16:48 · Alex Kantrowitz
[00:16:48] S0: Now, here's some so as I've talked through this, let's talk through the some more evidence that I think would agree with your point. These are major planning projects, right? To be able to build a data center, you need to go through land approval, you need to buy the land, you need to find the land, you need to hire the company that's going to go build it for you if you're working with subcontractors. And then remember, we're dealing with, you know, power issues. So you have to figure that out, you have to figure out who the electricians are going to be who the tradesmen are going to be, to be able to put this together. So, you know, as much as you could say, and as much as I've brought up this idea that you can shift the data center from let's say, Ohio to Wyoming, and maybe you can. You also run into the fact that you're gonna have to do this from step one. And so, you know, the question is, you know, how many years do you end up delayed because of it? Now, let me bring something up to you, Ranjan. Some people have said that because of this, we're about to see the peak of AI CapEx. I just don't see that being true. I just think it might be drawn out across more years, than it is, than we've seen it today. And it it may... You know what? The funny thing is, this might be the thing that paces the frontier. You know? Well, no. But the At the end of the
00:18:06 · Ranjan Roy
[00:18:06] S1: day That's what I... That's why I'm not over... This does not make me more or less bearish or bullish on AI in general as a technology. I mean, we speak, I... Our our recording almost stopped because I have clawed in the background editing a separate video that I'm working on, and it's... I just got a notification from Riverside saying it's constraining my compute on my MacBook. And I can only imagine the amount of compute that that consuming. And like those kind of token heavy use cases are gonna continue to explode, and I strongly believe that. And... But it's not gonna happen in a straight line over the next two to three years in a way that a very small number of companies will actually be the beneficiaries in a way that has been predicted so far. And I think that that's gonna be the... That is sinking in and the market is bouncing back a bit today, but these things never go in a straight line down. Even the trade war and liberation day was like two days down, one day up, two days down. So so I think we we... Today in the last two or three days is not gonna be fully reflective. This is gonna take at least a few weeks to start to get a sense of like, how much has it set in, but I think it has set in, I definitely