Did Apple Get AI Spending Right?, Microsoft & OpenAI’s New Reality, Where’s Stargate?
Channel: Alex Kantrowitz
Published at: 2026-05-05
YouTube video id: 1OIYs4QJ2xY
Source: https://www.youtube.com/watch?v=1OIYs4QJ2xY
Was Apple right all along to stay away from the AI spending race? And is that about to change? Microsoft and Open AAI are where exactly after their latest new agreement. And where is OpenAI's Stargate program? That's coming up with MG Seagler right after this. Welcome to Big Technology Podcast. It is the first Monday of the month, which means MG [music] Mondays are back. And we're here with MG Seagler to talk about everything going on in the world of tech. We have a lot to recap on the bigger picture talking about uh Apple's AI spending, whether it's about to ramp up capex expenses. There are some signals that [music] it might be. Microsoft and OpenAI have a new new agreement. It seems like there's another one every week, [music] but this one might actually be a meaningful step towards letting OpenAI work with everybody else. And then of course, we [music] have an update on Stargate. What is it? Did it actually ever exist? And is OpenAI meeting expectations there or [music] never actually going to build those data centers that it promised? Uh so a lot to talk about today. We might even cover the Musk Altman case because we have some [music] uh breaking news on that front and it's great to welcome you back to the show MG. Good to see you. >> Great to be back, Alex. And we joke about this every time that there's like an unending stream of news, but it feels like the fact that the Cook and Turnis transition happened what, like a week and a half ago or something like that, maybe not even. And it feels like it was months ago, which is wild. Like that's how that's how wild the news is is moving at this pace right now. >> Yeah. It's we're like fully into the turnest era. It's like when there's a new presidentelect and then all of a sudden you go from like calling this guy like by his name to like president-elect or president whatever it is and it's like that feels weird for like a couple weeks and then all of a sudden it just settles in. >> Um and we're we're definitely there because we're getting some indications of where Turnis is going. And to set it up I think that we should talk about this great piece that you have about Apple's capital expenditures. And of course to our listeners and viewers, it's no secret that big tech has been spending a lot of money on capex. Uh we might see a trillion dollars in AI capex this year, but you look at Apple and their capital expenditures are actually going down. And I don't think I've seen anyone illustrate just how stark the divide is um as well as you've done in this recent piece called Apple's binary bet. Uh Apple you say is on track to spend nine bill 9 9 to 10 billion in capex this year. Uh compare that with Meta which just raised its expectation to 145 billion. Um and it's clear that Apple just is not in the foundational model game. I always thought that this was a liability but now maybe it's a strength. I'm open to it. What do you think about this divergence? So this um quarter and this time of year was interesting specifically because four of the technology of the big tech companies all reported on the exact same day, right? Um I think it was Amazon, Microsoft, Meta and Google, Alphabet all reported at the same time. And so it was, you know, some people called it earnings apocalypse. Um and Apple was the very next day. And so it was a a unique sort of aligning of the stars moment where you could more uh easily um sort of do the comparison of of uh the capex spend. It's still a little bit tricky because they're on different physical calendars. Microsoft famously is different from I think the rest of them. Um but still the fact that Apple who again reported the day after those other four they came in with their Q2 numbers and as a part of that they don't break out capex in the way that the others do because they're not spending as you noted like to the extent that the others are. So, I don't think that that Wall Street sort of demands it, but um they did give the CFO did give an update on the the half year since it's again the end of Q2. And yeah, the number was insanely low compared to obviously what everyone else is spending. And it's as you noted, it's basically it was three to four maybe four and a half trillion, sorry, billion. And um what it ends up being is that it's probably going to come in below what it's even was last year. And then I I went in I went ahead and just did the obvious thing which is porting those numbers and asking um you know in this case Claude to go back and look at the past 5 years of of capex spend um and chart it out and sort of normalize again for those different fiscal um time periods. And it looks the chart is fun because it's basically everyone obviously starting around 2022. So obviously that was uh you know a little bit after the chat GBT moment. Um starting in 2022 all of those companies basically started to really ramp up. Amazon as you know better than most was already ahead because they have huge capex spends related to their um you know core business of obviously delivering goods and they need warehouses and whatnot. And then they had AWS of course which they also needed um you know capex spend for but the others including Amazon too all start really start to ramp up and Apple it just stays the same. It's always like in this line that's around 10 billion sometime one year they jumped up a little bit from like seven and but this was like 5 years ago from like 7 till 9 and everyone's like whoa what's going on there and it's like I mean that's hilarious to look back up on now uh compared to where things are but again Apple's in the same place. They're down slightly this year. Um, and it's it's just a wild discrepancy when you compare it to, you noted what Microsoft spending, but Amazon and Google, I think, are both guiding towards 190 billion now. Um, and and that's this get updated every single quarter. So, they very well could spend well over 200 billion um, for what ends up being the year and Microsoft will be right there. Meta is a little bit lower, but Meta, as you know, as you know, is getting hit left and right as from a stock perspective because they don't have the obvious returns because they don't have a cloud business, right? They're saying it's doing well for their for their ads business. And certainly their numbers look good, but it's not as straightforward as it is for the other uh other players, it seems, right? >> They don't have an AI product either, Meta. No AI. >> I mean, they they sort of just rolled out their new models and Yeah. Um and >> what have they done? Nothing. So, >> they've done nothing. So, they're baking it into everything. And again, they're baking it into their their ads product. But again, back to Apple, even compared to Meta, like Apple, if they do 10 billion this year and Meta does 140 or 130 140 billion, I mean, that's just an incredible incredible discrepancy. Um, regardless of what you think about, you know, the future in AI, it it's just like it's wild how far how much lower it actually is right now. >> Yeah. And you have this paragraph that I highlighted from your piece uh that sort of says that puts this in relief. You write, "Everyone thinks AI is going to be a core bit of technology that they each need to control less they be beholden to someone else. This is exactly why Microsoft shoved open AI aside despite their early extremely preient bent on the startup that remains the leader in the field. Even though Microsoft owns 25% of the company with IP rights and access, they're now spending billions to build out AI on their own. So, let's tackle this question. Uh because I also was on this path of like, well, if this is such a transformative technology, you would be best to have your own models and not rely on somebody else. And even if you, you know, made a great deal with Google, let's say you got Gemini for free, which you won't. You're going to pay u you, you have less control over it because you're you're you're a step removed from the technology and it's going to be much more difficult to productize it. But the other side of the um the other side of this argument is it seems sound now which is basically that like we are seeing this that you know if Apple is right you would say that they've seen that all these models are going to commoditize the compute will commoditize. We talked about this a little bit on the Friday show. There's going to be a price war. Apple can just wait until the technology matures, the price war happens and then implement it. Maybe they can even implement it on device. Um, how much credence do you give if that is the bet? And it sounds like that might be the Tim Cook Apple bet. U, how much credence do you give to this idea that they might be right? >> Yeah. I mean, hence the title, the binary bet, like and and that's um [gasps] I I think that there is a chance, right? I mean, obviously I think in the short term it's a lot uh more straightforward for that to, you know, if that plays out that way because it's so relative. Everyone believes that it's relatively early in this in the AI game. And so there's a world there's a world in which there's a few avenues where it works out for Apple and it's not just um you know the lack of of spend on on training these models. I mean we you know we've talked about it before. What if LLMs don't end up being the end all beall of AI that gets us to AGI, right? What if you need to sort of even not fully pivot, but you need to basically then ramp up sort of these other massive um infrastructure um arrangements in order to to build up, you know, world models and and whatever else comes next down the pike and robotics and and everything else in order to get us to uh what many would consider to be the sort of holy grail of AI. And so if even just in not choosing to participate in this LLM buildout, maybe Apple's wise in that they're realizing or you know lucking into even if you you don't necessarily believe in their um vision of this to date um that it's not just going to be LLM that the LLM are step one of of many steps to get us towards um the future of AI. And so maybe Apple's bet is like they're okay sitting out the LLM part of it, but then they're going to come in hard on the robotics part of it, right? like the actual physical robots part, but then you would say like, okay, but they still need models or something to run on those. Um, and so even if they're getting unique data because they have hardware out there in the world, um, they still need, you know, to be in charge of their models. Um, but you could also say like, yeah, they're they're making, um, a bet that they can partner on it, much like they've done, uh, you know, with things like Google Maps, which ends up being an interesting analogy to that, right? because of f famously of course they had to go uh against Apple at one point and and launch their own product because they wouldn't agree to the terms that Google put out there um in order to keep that deal going and that's the [snorts] downside right of being beholden to someone else at the end of the day and this is Tim Cook doctrine right they Apple wants to build their own technologies they don't want to be beholden to anyone else this dates to the jobs days and even uh you know very early iterations of Apple when various software players Adobe and and everyone else didn't want to make software ware for the Mac and for other earlier versions of Apple products and so Apple decided like that they needed to ultimately be in charge of that. That's not to say that they always do that. I mean the most famous counter example is Google search, right? Apple decided they didn't need to build a search engine and that's worked out great for them, right? Microsoft famously has spent billions and billions building up Bing and what have they gotten out of I mean they it makes money now but it's not it's not Google and it's not it's not uh you know something that I think is is absolutely vital to Microsoft and so uh what did they ultimately get out of those billions spent and all that time and all those resources and engineers and whatnot being devoted to that and so I think you would say that Apple made the right bet in that regard by partnering and getting billions of dollars sent to them right with famously as we've seen now play out over the antitrust lawsuits getting paid by Google to use Google search and So maybe Apple in their head is thinking this will play out similarly to the way that Google search has where um you know we can basically just ride off of this and we don't need to own this and it won't end up coming to hurt us. I think most people at least right now would think that that's a little bit too risky of a bet to make. Again speaking of what we we already talked about with what they're spending in the capex number but you can see why they're at least trying you could back into why they're trying to do this or why they're okay doing this. >> Yeah. Let let me throw out like the where this goes really well and where this goes really poorly for Apple. The way I could see this going really poorly is that AI becomes so powerful that we just sort of converge on this one sort of you know Star Trek computer-like AI uh interface where you know the open AI device really works. The assistant is amazing. We access all information like we would through you know a screen that is effectively powered by AI and probably some audio only or perceptry devices like headphones and a pin right so basically in that world the only thing that matters is how good your AI model is how it can operate all the programs and be your agent for you um and then Apple doesn't really have this opportunity to lease that technology because let's say it's open AAI that's built the best version of this or Google that's built the best version of this you're like sitting there as Apple, you're this like you'll become a legacy device maker without access to the technology that is the most important thing of any device. And I think that's a real risk for Apple. And that's sort of like it's far further away than I think many people anticipated. I think a lot of people expected AI devices to be more farther along here. And we're going to definitely talk about that on the show in the next couple weeks. Like where are the AI devices? um that is that and and Apple could be in some serious trouble because it will effectively have to beg Open AI or Google for the technology that will enable that set of devices experiences that that's where it could go poorly. Uh where it goes well for Apple is basically you know unlike um let's say the the the um the software battles that it's had in the past or the times that it's been forced to build its own technology. there is a powerful and almost equal uh open-source uh uh AI development movement going on right now. They can definitely take advantage of that. And then if you look at those who have tried to develop proprietary models outside of that open-source uh world, it actually isn't as simple as we thought it was. Like we used to think it was spend uh spend a hundred billion dollars and you have a world-class model. Well, if you look at if you think about it, uh, Amazon, obviously they have the infrastructure, but Amazon Nova has gone nowhere. Most people don't even realize that Amazon has a foundational model. Uh, Google's done a good job of it. Microsoft, after separating from OpenAI, has not been able to do it. Meta has not been able to do it. XAI has not been able to do it. So, it's not just throw money at the problem and build build your own AI. And then it's it would be almost the ultimate wise move from Apple to be like we we are not winning that race. Uh we're just going to rely on licensing or open source and we don't think that this you know universal AI device moment is going to happen. >> What do you think is more likely of those two scenarios or will we see a combination of both? Um, so first first of all just to hit on the point you just made because I think it's a good one and an important one that Apple might just be it may be as simple as Apple recognizing like look guys we're behind in AI. The reality is like in order to try to catch up we would have to spend like Elon has been doing right and and building these massive data centers in a hurry and as Zuck has been doing. But it's it's tens of billions and it's ultimately hundreds of billions of dollars. And as you just noted, I've written about this too, like the throwing the money at it, it seemed like when Elon was ramping up the the quoteunquote colossus data center that maybe he could just all of a sudden jump back into the race because, you know, he was able to build a data center that that could train an XAI model in in record time in record speed. Ultimately though, it didn't work like it just didn't matter, right? And so Apple might be looking at those that situation, the meta situation, obviously famously, you know, acquiring scale AI and and bringing in this new team and trying to get up to speed as fast as possible and that's sort of not really working yet. Um, and they just may be realizing, you know, in a in a self-recognition way that look, we're not going to be able to do this. No, we might have all the money, all the resources in the world, but that's not all that matters. We don't have the right talent, right? and and what what we would need to do in order to get that would be like as we've previously talked about acquiring anthropic or something wild that would take hundreds of billions if not trillions of dollars to potentially do. And so again, they could just recognize like we're just not going to get there. And so what's the point of burning these billions and billions of dollars whereas again we can go down the path of making sort of these later bets that it's not just LLMs and that we can sort of ride out the coattails of the others who are doing that well for the time being while we work behind the scenes of course and build our own stuff um internally um but behind the scenes but to go back to your question um which one is is more likely I do still think that there is a very good chance that Apple ends up a quote unquote winner of the AI movement simply because of the iPhone because it's the best device out there to run models potentially and to run these applications and I do think that that's the major fear obviously of Meta Zuckerberg has famously sort of complained you know about the fact that they're beholden to Apple with any devices obviously the smart glasses um but anything else that they want to do and then I think it's a problem obviously for open AI if and when they come out with their device with famously Johnny IV uh you know designed device um I do think that there's a real scenar scenario in which the iPhone ends up being the key device for AI and at the very least Macs uh fall back to you know Mac computers um with obviously the the Mac Mini and the and the Mac Studio it seems like they can't keep them in stock because uh of all the all the fun things that the fun work that people are doing with the agenda capabilities now but anyway Apple makes great the best hardware and so the fact that they can't uh they can keep doing that they would still benefit from it and I I think it's a matter of timets right it's a matter Is this a decadel long uh situation where the iPhone remains um you know and I framed it in writing about Turnis like it's very possible that Turnis's entire tenure is still dominated by the iPhone like Apple is still the iPhone company by the time his 15 years is ending right and again the the world that you're laying out that first scenario is uh the sort of the opposite of that where it's like yeah this this OpenAI device these meta devices and even potentially some new devices from Apple come in and take over that mantle from the iPhone. I still just think the iPhone is probably going to be the central computing hub and maybe even more so. Um, and again, that's a big part of that bet and why Apple maybe can afford to make that that type of bet. >> Quick diversion on this. I mean, if that is the case, right, that the iPhone becomes the uh device of record for AI. Uh, that seems kind of bearish for OpenAI. Now, this is like a caveman brain take, but like if you can serve AI models that are just as good or almost as good on device, then maybe spending $1.3 trillion on a hard or an infrastructure buildout is not the best bet. >> And I mean, there's, you know, yeah, that's that's a that may be the Caveman argument, but you're that's not the only it's not only caveman making that argument right now, right? Certainly on Wall Street. And um and there's there's bets, tangential bets to open eyes since you can't bet directly on it since it's not a public company, but there's tangential bets being made left and right right now, you know, in order to to believe that that's sort of the way that it plays out. A couple other points to to your your question. One, I do think that there is also the world you talked about how yeah the other players are having a hard time at the frontier. The open- source uh question is is interesting, right? Because we just saw the new Deep Seek get launched out there, right? V4 after you and I had a had a had a good podcast a year plus ago when when the deepseek moment the quote unquote deepseek moment happened and it seemed like everything was changed and really what has changed in the intervening time. I mean certainly there's been um a lot of talk about all of the the open source movement and how you build and how you train these models and can you do it for much cheaper and and all of the all the talking points over the past year. But the fact that DeepSeek now has their new version out, it's gotten very little buzz compared certainly compared to what uh you know the last version was and now the sort of the papers are starting to come out sort of comparing it and it's definitely everyone acknowledges that it's behind still the frontier. But the real question is is it actually diverging where where uh it feels like the frontier is accelerating faster than where the open- source sort of community is at right now and I think that that's like sort of an interesting way to look at this as well. like what if it's just not playing out that way that open source is is doing it. Now the counter to that would be we'll get to a point where yes like the the gains just keep getting more incremental on the frontier models, right? And open source is is quote unquote good enough. Uh but who knows? I mean this could this in some ways in an odd way this might go back to the old iPhone versus Android and and Clayton Christensen's sort of debates of like is you know good enough good enough like you know the commoditized hardware and commoditized sort of features are they do they end up being good enough and with the iPhone versus Android it's the case where the iPhone is making just as much of the the profit share and is more popular you know in many metrics than it's ever been before even though we have the proliferation of all these other devices thanks to the Android ecosystem out there and So there are worlds in which um it doesn't play out that way. The last point I would make is just the the notion of Apple's other big bet and I think a lot of people have been dancing around this and and we maybe have have danced around this a little bit and you hit on it just now is that ondevice models um could be good enough for almost everything that we're going to we're going to need. And with what point does that do we hit that and how many years out do we get from there? Because if that ends up being the case and again Apple has the best hardware that makes it a really really different sort of conversation I feel like. >> Yeah. Oh my goodness. The Apple chip versus the Nvidia chip will be a very interesting battle. >> The ultimate battle like could you imagine if it goes back to that like those two companies famously have a a sort of a a history where they don't like each other. They wouldn't let uh Nvidia GPUs for gaming run in in Apple systems. And Apple famously is the one company not buying up uh as many Nvidia GPUs for these training runs left and right as much as possible, you know, and even when they're doing them, they were using potentially TPUs and whatnot. But anyway, yeah, if that becomes that that ultimate thing and and there's lots of talk, right, that that Nvidia wants to potentially obviously build CPUs, which they've been doing for the the flip side for inference and everything else that they're going to be needed for in the future of AI, but there's even talk that they would build their own, you know, potential actual PC systems, right, to go after sort of more of those markets and presumably go after more of the hardware front end because right now, obviously, they're they're the biggest company in the world, but a massive player on the backside of all this AI work that's being done, but if they really want to be a front-facing company and brand again, like do they go for it and start to build their own machines um you know with with their capabilities? >> Yeah, that'll be interesting. All right, so let me just deliver the the punchline to the beginning of our conversation here, which is you know um is is Apple making the the right bet on uh you know with with spending much less on capex? Um obviously new CEO coming in and we have signals that he believes in some part that they've been going too light on the AI spending. Um first when he came in when John Turnis came in first thing he said was this is the most exciting time to develop products uh highlighted artificial intelligence right at the top. Then last week he was on Apple's earnings call and signaled that Apple would take a somewhat different approach financially than it did under Cook. I'm just going to read a little bit from Bloomberg uh an article by Mark German about this and it's a little bit financial. I'll try to go go through it at a high level and then we can talk about what it means. German writes underturn buybacks and or dividend hikes could potentially slow in size or frequency based off of the conversation that he had on the earnings call and that may alter Apple's long-standing pitch to investors will gen will generate enormous cash flow and return it to you. Now they have the optionality to do it less. Evercore analyst Ahmed Dani said um in other words Turnis could spring for a blockbuster acquisition or dial up spending on R&D he could expand the company's AI infrastructure something it Silicon Valley peers are doing at a furious pace. Uh I I I think that these things don't happen by accident. I don't think it's like let me you know create the option for myself. Obviously we know Turnis has been preparing to take over the CEO position for probably a year or longer. he had to have been thinking about this. This is one of his first major financial signals. Maybe the AI spending is coming. >> At the very least, I feel like this is optionality, right? Like this gives him the ability to basically go out and spend uh far more to a far greater extent than Apple has to date because to that that point like this is a big moment. Apple has a famous policy in place to try to be, you know, cash neutral as you're noting. They don't do they don't actually do that because they generate so much so much profit that they still hold a bunch of money on their balance sheet. But remember there was a time I guess under the in the Steve Jobs days where their cash balance was ballooning to the point where it was just way out of line out of band versus what everyone else had in the industry because they were generating so much profit and holding it all and not not doing major M&A and not doing stock buybacks. Tim Cook changed that and I do think that that's a big part of why the stock has has done so well right under him and and it's become a $4 trillion company because he does dividends and he does stock buybacks and basically they're signaling now not necessarily that they're going to stop it entirely and I think that there's still some mechanisms in place to do some of the buybacks that have been promised already and so they're going to continue that at least for the somewhat foreseeable future but they are sending a signal and it's an explicit signal they wouldn't say it if it wasn't something there that they might not they they don't have that policy anymore that they want to remain sort of that cash neutral position and instead they could start hoarding cash again and they that could be used for a few things as you noted either either they do M&A they start to do some M&A they start to do more R&D and by the way in the in the binary bet piece I note like they did hit a record in R&D spend last quarter and um that signals something interesting that they're spending and you know looking into more and more uh future technologies At the same time, all their peer group is also spending more. You know, everyone's of course focused on on the capex because the number is is immen is much much greater, but still they're all spending record amounts on R&D and Apple is in that group too. They're spending records amount and this might help them to further accelerate that. Um they could also sort of retire some debt, I guess. You know, there's other more wonky sort of financial reasons why they might want to do this, but to me again, I think it's sending a signal. I think they're doing it now for a very good reason, which is that even though Curtis has now been uh, you know, announced in place, it's still Tim Cook running the company. And so this sort of gives them a little bit of cover. So it's like when when uh Turnis actually takes over in in the fall, he's not his first order of business isn't to to blow up Apple's capital sheet and and freak out Wall Street. It's like, look, guys, we're guiding towards this. Like there might be a time in the future where we're going to need to spend more. And again to your exact question, I think that it's a reasonable assumption to make that they're going to start spending more on capex too. Um even if they're not going to train models, they're not going to train an LLM inference and and doing other things that you need to do. We already know that they're doing work behind the scenes. And another key part of this remember of this entire announcement was Johnny Suji who's Apple's chips chief and obviously a very vital part of the company given that they announced on the same day that they're announcing a new CEO they announced that he has a new title a new seuite level title um and I don't think that those two things are are unrelated and I do think that the fact that he's working on um you know arguably the most important um thing that Apple has done over the past decade which is their silicon and um if they're also as has been sort whispered about and rumored. If they're working on their own chips and able to do inference and be able to do more AI workloads, um they need capex in order to do that. And so again, all these things potentially are related and I think this is signaling that more spend is coming for sure. >> Yeah, I agree. I think Apple's going to make some big acquisitions in turn his first year for him to set the tone that it's going to be different and I think that's good. I'm I'm in favor of that. Uh two more Apple things before we go. First of all, uh, you know, looking at the calendar, we are going to, you know, right now we are saying maybe Apple's making the right move. Um, but even still, they have a ter they have a terrible AI product. Like nothing. Uh, we're going to find out in a month about whether all this like, you know, sort of >> um, what would you call it? uh uh wise uh restraint uh is actually wise or whether they're just being stupid and they have no idea how to build these products cuz new series supposed to come next month. >> Yeah. And I mean I think it's wild that it's that quick already that it's happening. At the same time like if you believe the the reporting by you know Mark German, it's basically like they've still delayed it a couple of times right from when it was going to roll out in potentially beta form um to get it out there early. And you know, maybe it's just wanting to to keep it back in order to make a big big wow moment at at WWDC when they do actually launch these things and unveil them to the world. Like, look, we finally did it. Sirius finally fixed and we can make a big to-do of it. You hope that's the case. It's also possible that it's the opposite of that, that they're having still some troubles integrating it and and the edge cases, right? Because much like Amazon, as you brought up with with sort of, you know, their own work and and Alexa and whatnot on AI, dating back to the Siri days, the earlier Siri days too, it they they've had a hell of a time and Google has as well sort of transitioning from their original models, Google Assistant to Gemini to Bard and then to Gemini and then Alexa to Alexa Plus and Apple Siri to I assume it's still going to be called Siri. Maybe it shouldn't still be called Siri, but it's still like, you know, there's a world in which Apple is having a hard time uh sort of making that transition just as the others have before them. >> I think Alexa Plus is the best of the bunch, I have to say. I really I really like using it. >> It is good. Um, you know, relative, I think, to where it was at. It's it's a good sort of conversational AI. Do you use it though for any of the things that Amazon, you know, hopes to use it for? Do you shop with it, for example? >> Sometimes. Uh, but I was shopping with old Alexa, but what I really use it for is to settle arguments in the house. Like when we're debating things, like my wife and I, I think I've said this before, but I'm American, she's European, we have strong opinions on which system is better. Um, so we'll just sort of get into a debate and then all of a sudden we'll just summon we we changed it name to Ziggy like it has some other name. So we'll summon Ziggy and that tends to settle the uh settle the argument for us. And I mean that sort of speaks directly to what you know the iPhone point earlier. It's like it sounds like you use it basically because you have devices around your house, right? And it's a it's a good conversational AI and so you can use it instead of taking out your phone and and bringing up chat GPT or claude or whatnot. Um and I think that that's again a case in in Apple's court like what's the best AI device? It's the one you have on you. >> Exactly. The one in your hand. >> It's not the one that it's not the theoretical one out there. It's the one that billions of people already have. >> That's right. Okay. Last thing and then we're going to go to break and then talk about Microsoft and OpenAI. Uh I think we can spike the football for a moment and you in particular that when this Turnist talk was starting to surface I think we both felt strongly that there was something there and there were voices out there that said nope Tim Cook is going to stay for a while and uh and and here it happened. The transition is underway. >> Yeah. I mean again I we had talked about this and I feel like beyond sort of the reporting I think Financial Times right ends up looking really good in the way that they framed it and I think that you know that was accurate and I think it was accurate for a reason. I think that there was you know that someone wanted it to be known uh that Cook was very seriously weighing this decision and maybe it wasn't a slam dunk you know that it was going to happen for sure. Maybe he wanted to take the holiday time to think it through and and make sure that uh you know like unlike Bob Iger in the past that uh when he handed off that first goaround to Bob JPEC and then COVID hit and and the world blew up and and it ended up being a really bad situation for Disney, you know, maybe Cook also wanted some optionality and just to see, you know, what what it was. But we had talked about it seemed like it was there was some smoke to you know some fire behind that smoke because it just was a perfect time for for him to do it if he chose to do it because of the way that um the earnings were going to play out which they did in Q1 record all-time record earnings for Apple and because of the way that the stock was likely to react and it's $4 trillion now and because of Apple's 50th anniversary in April 1 and you know Cook obviously that was important to him he made it very clear and and so all of these things came into place. The one thing that I think was downplayed um for the most part that I didn't read about too much, but I think was in my mind at least a big indicator of this was the the sort of board minations of and maybe this is just cuz this is sort of you know my my world of of investing in VC and and whatnot and board dynamics where when the Apple announced that Arthur Levenson and Ronald Sugar would be able to stay on board after their 75th birthdays which is the historic um step down time for Apple board members. and the fact that Eleven was the um the board chair, that to me indicated that it was very likely that they were waiting on something, right? They didn't want to appoint a new board chair if Tim Cook was going to come in within a very short amount of time and become that board chair. And I think that that's uh you know in some ways it might be as simple as that that they basically extended you know the the contract of those folks and allowed them to stay on but because they needed a good transition um you know for the overall company there's been a lot of turnover as has been uh clear over the past many months um beyond just the cook stuff there's a lot of executive turnover and even some on the board and so they wanted uh steady steady hands but you also want steady hands when you're doing a CEO transition and I think again you could read into a lot into at uh tea leaves wise and I think that that ended up being the case. >> All right, let's go to break. We're going to talk about Microsoft and OpenAI doing away with the AGI clause and Microsoft allowing OpenAI to work with any cloud provider which is fairly big news uh that I don't think has been played up enough um as far as the Open AI story goes. Of course, there's been a lot of stuff in the news, so hard to follow everything, but we'll try to cover this story and also give you the latest on the Stargate infrastructure buildout when we come back right after this. And we're back here on Big Technology Podcast with MG Seagler of Spyglass. You can find it at spyglass.org. Highly recommend you go check it out and sign up for the newsletter. One of my favorite reads. Uh MG, let's talk a little bit about the clause, right? So, Microsoft and OpenAI famously um have had very interesting and weird iterations of their tie-up uh including this one clause in the contract that if OpenAI uh sort of reached AGI then uh Microsoft lost all rights to its technology after that and last week basically what happened was Microsoft and OpenAI came to this agreement where uh first of all open AAI could work with any cloud provider and then it immediately ran and announced this deal with AWS. Uh so it's now available on on Amazon for Amazon cloud customers and I anticipate and you know given my conversations that I've had with Thomas Curry and the head of Google Cloud Platform that it will come to Google fairly soon as well. He wants it there. Uh so that's one. But then the second and the maybe the weirder thing was this AGI clause uh is now gone and basically Microsoft has access to OpenAI's IP till 2032 and that is the state of the partnership today. Uh, is it is is it too simple to read this as um Microsoft has been kind of annoyed working with OpenAI and has this huge stake in the company realized that two companies would basically be better as far apart as they could be. Uh, and meanwhile wants OpenAI to grow because it has such a large stake in the company that it says go ahead and work with anybody. you're not helping our Azure business as much as we thought you would and so we'd rather just you kind of get out of here, be big, be be as big as you can and we'll just take the money. >> Uh, nope. Not too simple to read it that way. That's the way I read it. [laughter] I mean, this is fun. It's just following this whole drama and this saga has been fun, especially because they keep insisting that there's, you know, nothing to this. like everything is great and you know we'll get the Sam and Satcha picture tweeted out every once in a while but obviously at this point like there's been enough reports there's been enough just of these weird deals the fact that this deal this new this new update to their agreement is happening 6 months after the last one which was this massive undertaking right in in and with a lot of changes made so that openai could clear the path to eventually become uh you know the the public benefit corporation and get actual equity uh holders in the company and that of course would pave the way for them to eventually go public which they're obviously still working towards. The fact that the AGI clause didn't go away in those negotiations was interesting, right? Like they tweaked it, but they didn't kill it outright. And presumably that still annoyed Microsoft because at the end of the day, they still had this weird thing hanging over their heads where even though they tweaked it to the point where previously, if I have it right, uh the OpenAI board uh could have announced AGI and just torpedoed the deal. basically ended the the relationship with Microsoft and they were able to do whatever they wanted and so they had this unilateral power over over the deal. Um so Microsoft got away did away with that in the last goound of those negotiations but it's still there. They just had to sort of co-agree and so it seemed like a deacto going away of it, right? Like is was Microsoft ever going to agree to let them go away uh from their obligations uh from a B business perspective? Probably not. But now it's much cleaner. Now there's no more AGI clause. I don't know when I when I wrote about this, I didn't know if to read into that that uh if there was anything to read into it to the notion that maybe OpenAI thought uh it was coming sooner or thought it was coming later, right? Like that they felt like that they could do this now because they didn't care. But ultimately, I'm not sure that that matters at all. I think that all that matters is they had a deal that they wanted to do with Amazon. They had famously taken a huge investment from Amazon which we had talked about previously. Um Microsoft >> Microsoft almost sued them about right they were going to sue them and uh because it was a question of the definition of uh you know like state state versus stateless models or you know getting into the weeds of of what the um what they could legally do. Um and so that was obviously going to be another headache and battle going forward. And at the same time, open AI, I think that there's a very real case to be made that part of the reason why Anthropic has seen this the sort of incredible surge by all accounts that they've been seeing is because they have this path where they can sell their models via Amazon and via Google, right? And now via Microsoft as well. And so they have a much um much more green field opportunity because they have all of the major cloud providers that they could sell on whereas OpenAI was restricted and that they could only really do it through uh through Microsoft. And so I think that the two sides, it sounds like Satcha and Sam got together and basically hashed out a simple at least relatively speaking more simple agreement, get rid of the AGI clause and allow us to run our models anywhere. Oh, and by the way, the most interesting thing to me about this entire announcement was uh while Microsoft no longer has to pay revenue share back to OpenAI, OpenAI still has to pay it to Microsoft and they have to pay it even when they're using AWS or potentially Google in the future. And so beyond what your point about um Microsoft being incentivized with the um you know with their equity holding which obviously they care about and want that to be as as big of a company as possible so that their percentage of that big company is bigger. Um, the fact that they're going to be making more and more money off of their chief rivals in the cloud potentially obviously help grease those wheels and make that happen. I feel like >> what's more valuable to Microsoft? I mean, it's hard to know exactly, but having OpenAI grow, let's say 50% bigger and having your 25% stake, you know, you know, grow in that in that same nature or uh if you believe because I think in your recent pieces you've stated OpenAI has the best models. It certainly seems like uh in terms of released models, GPT 5.5 is the best on the market right now. >> Mhm. >> I think you know maybe being the only place making Azure the only place you can get those models is so is just even if it I mean I'm thinking from a Microsoft standpoint even if it hampers Open AAI a bit uh it's almost like no matter how annoying Sam might be to you like going and working with Amazon that is a tough thing to give up. That exclusivity is a tough thing to give up. And while I can understand how like, you know, physiologically the Microsoft might have been like kind of like to hell with it, go do what you want. I still kind of think that it might be a mistake to let open AI go everywhere. >> So, and this speaks to, you know, my the point of my piece writing about the the end of the clause is that there's another potential clause in here which I think was downplayed a little bit in that and I can just read this part of it. uh Microsoft remains OpenAI's primary cloud partner and OpenAI products will ship first on Azure unless Microsoft cannot and chooses not to support the necessary capabilities. So to me that's that and is very important right because it's basically saying assuming that they worded this like in very direct very deliberately in this way which you have to believe that many lawyers poured over poured over such a statement. This was a statement in the blog post >> co-pilot >> co-pilot maybe co-pilot hallucinated the entire thing the agreement but but if this is to be believed it's basically that >> Microsoft still has a right of first refusal on these new models and new capabilities that openai puts out there. So say you know when they roll out uh GPT 5.5 for the first time there might be a world in which they could say like hey we want this to be exclusive on Azure for a set period of time. I'd love to know what those terms look like how long they could actually you know keep such exclusivity if they're allowed to. Um could be something you know like and if they roll out a new product um if open rolls out a new product they have to offer it you know first on on Azure as well. Um and it's basically open eyes only out in that situation is again if Microsoft cannot support whatever it is or they choose not to. So it's not even the fact that they would say like yeah but you guys don't have X Y and Z capabilities in Azure and so therefore we're going to roll this out on AWS. We're going to roll this out on Google Cloud. They have to Microsoft has to explicitly say we will not roll out whatever X Y and Z is. Now, who knows, you know, if they ever get to that point, but you could see a world in which, you know, say OpenAI and Amazon come up with some new uh amazing product offering that they're saying is only available, only able to be done on AWS. And Microsoft getting again mad because they would say like, well, look, we can roll that out on Azure, too. Like, so I don't I don't agree with your uh your ability to roll this out exclusively on AWS. You know, this is going to come up again. like there's no way this is the end of this uh of this conversation and the end of like uh the animosity between all the parties here like because to your point m the fact that Microsoft is is okaying uh open AAI their 25 27 whatever it is now percent holder uh you know giant equity portion of the company working with their chief rival the biggest cloud provider in the world uh is is sort of incredible and so obviously this is still going to come up time and time again But there's there's new clauses to be to be had here. >> It seems like anybody who can say the sentence, "Open AI would not exist without us," tends to get very annoyed at Open AI, whether it's Elon or Microsoft or >> Yep. >> whoever it might be. >> Yep. It's never going to end. And this is um Yeah. [laughter] I this whole when they do a deal, to your point, they're obviously going to do a deal with Google. They're going to be in GCP at some point. And then it sort of becomes uh you bring up an interesting point around Azure and Microsoft's game plan. You know, historically I think uh Amazon has more run the game plan, but now to the point that all the clouds are doing it. They all want to offer all the models, right? They're saying like we want the customer to choose whatever model they want. We want them to be operating on our cloud, but we want them to choose. We don't care if it's our own model. We don't care if it's a OpenAI model, if it's an anthropic model. So they're reaching to the point now with the with OpenAI's cap new new unlock that they'll all be able to offer basically all of the models and Microsoft I guess with this with these newer smaller clauses might be able to say you should pick Azure because even if um you can run all of the other players you know models on the other clouds we're going to get uh the first look at the new uh the latest OpenAI models and maybe that's enough to sway some companies uh you know to go you can still choose choose Claude if you want. You can still choose uh maybe not Gemini, but you can still choose something else. Uh some of these other models, DeepSeek and whatnot if you want. Um but we're going to have the the First Look Advantage. Um still, even if we don't have the exclusivity uh fulltime, it's almost like movie windowing. It's a weird It's a weird new uh weird new world we're entering [laughter] >> now in theaters. GPD 5.5 before it comes to DVD AWS in uh in early April. And yeah. >> Oh my goodness. Yeah. No, there is there's truth to that. Uh, all right. I I definitely want to cover this Stargate story uh because it's one of those big stories where uh if folks if you recall OpenAI announced this 500 billion dollar buildout of AI infrastructure um Elon Musk famously said they don't have the money and then Stargate there were reports that like oh the Stargate company never formed and Stargate itself uh didn't didn't uh you know get started and now Stargate is kind of this like catch-all word uh encapsul ating all of OpenAI's infrastructure and MGI, you know, let me know if you think this is this makes sense. This is like a good window into uh OpenAI's infrastructure as a whole. Uh because I think the conventional wisdom that OpenAI was going to go out and build a lot of its own infrastructure and actually it's shifted to OpenAI has secured those data centers as opposed to building those data centers. And this has kind of happened in a really quiet way that uh the headlines in the beginning were very loud and you know obviously got a lot of attention but what's happened afterwards uh certainly has not. So take us into that story. >> Yeah and it got loud to the point where remember this was President Trump's first day back in office. He has Elon Musk sorry not Elon Musk famously not Elon Musk there even though he's a part of the new Doge part of the whole administration. He is not there but there with him is Sam Alman Elon's big rival um Masaasan and Larry Ellison. So the three of them are there alongside President Trump in the in the White House announcing the Stargate Project Stargate which was going to be a $500 billion which you know uh was a massive deal. It even it looks sort of quaint almost now uh when you when you talk about these numbers given where these companies are valued at. But it was a massive infrastructure deal and obviously it was a big win for the Trump administration. We could argue that a lot of these deals were maybe already in place and maybe they were repurposing things and and whatnot, but that's that's sort of part for the course it seems like with with some of these announcements. But still, it was regardless it was a great PR moment and a great uh moment for all these companies and it looked like a great moment, you know, potentially for America. we were going to have this huge huge new AI initiative backed by these major companies um and and in including obviously the government. And so fast forward um over the next year, it basically went into place that the first Stargate which was going to be in a in a data center in Abalene, Texas, which by the way did not start out as a Stargate project. It started out oddly as an Elon Musk project that Oracle was building. A whole range of people were building. Blue's Blue Capital is involved with it. a lot of other players are involved with it, but basically uh OpenAI was able to bring this in with Oracle to make it now a uh the first Stargates and it was going to go from there. But fast forward again over the next year, there were just a lot of weird reports about deals getting backed out of and nothing sort of coming online in the in the way that they had hoped. They again had talked about of the 500 billion a 100red billion was committed right out of the gates and they were going to come out swinging and again it was just really slowgoing and the subsequent reports had it that like yeah well maybe we're not going to use this um this facility and maybe SoftBank was having a hard time raising the debt needed to get this facility off the ground. Maybe Oracle was having a hard time raising the debt needed to get out. Oh, by the way, Oracle and and OpenAI are backing out of this facility, the the extension of the Abalene site, and who's coming in? Microsoft, oddly. And so, all of these weird things going on, but you're exactly right that to me, this basically encapsulates uh the change that OpenAI has made um over that time. And I think that there's other plays in here which are sort of tangential but related, including the big deal with Nvidia, which is another interesting deal, right? We had talked about it previously where Nvidia announced with much much pomp and circumstance with with Jensen and Greg Brockman and Sam Olman that they were going to invest a hundred billion dollars into open AAI over an extended period of time and then all of a sudden that quietly went away. Well, what was a big part of that deal? A big part of that deal was clearly in order to secure the debt required for Open AI to continue these buildouts. Open has been talking about in blo various blog posts over the time span since Stargate came out that they needed to come up with interesting and mysterious new ways of doing capital financing for these the data center buildouts. And yes, to your exact point, the thought process seemed to be that they felt like they needed to own these. They weren't going to own the Abene site because that was already sort of again backed into that was already in place. But going forward, they wanted to own a lot of these. And to me, that just read like they realized that their real threat was Google. Google of course famously owns you know their data centers and owns all of the infrastructure that they need and so how was open a going to be able to compete with that well they couldn't as a massively money losing startup be able to raise the debt needed in order to build out these facilities and so they were partnering with Oracle with SoftBank eventually with Nvidia but again all of these sort of came back and were pulled back to varying degrees and now the narrative it seems like has shifted fully um and I've written about this because it felt like that was an easy thing to read in between the lines of that they were changing the that narrative that it was no longer going to be project Stargate building up you know these these massive infrastructure for uh open AI whereas it's going to be now we're going to figure out how to build up this massive infrastructure individually all these companies and maybe we'll rope them into Stargate and Stargate will just be the catch-all term exactly as you laid out and now that seems to be the world and the only thing I would say the other layer of this is the weirdness is is related to sort of the PR the evolving PR strategy of uh of Open AAI where they now write blog posts that are sort of gaslighting in the way that they're basically saying like yeah as you know we announced this as a it was always going to be the plan that this was this was sort of going to play out this way and that's just not the case. Like if you look at those old blog posts, they were not they were not laid out in the way that they're currently laying out the current Stargate initiative. And you see it in the in the pullback again of Stargate, not just in the US either, in the UK and all around the world. Like they have these initiatives and it's all tied to it seems like it's all tied to obviously the need for them to corral spending a little bit if and when they're going to really try to go public. >> Yeah. I mean, one thing I'll say is that this new strategy also shifts all the risk to like the partners. Yes. through the oracles and Nvidia and a lot of the neoclouds that kind of exist like the Nebus and the core weaves we had coreweave on and the one thing I couldn't you know I thought they did a great job explaining their business when they were here on the show and obviously I think their stock popped like 12% after their appearance so folks put your put your people on big technology podcast but um but I I think the the weakness in the whole story is um your whole business is based off of open AI keeping this promise of a uh of building out the infrastructure and last week in particular when there was that Wall Street Journal report which OpenAI pushed back on very uh strongly that like Sarah Frier the CFO was like if we don't make more money we're not going to build more data centers. Uh that caused a real reaction in in these these partners in the Neoclouds um the the whole wave of them got hit pretty hard and that's that is like if you're looking for areas of risk or weakness in this whole AI story that's the place I would look. Yeah. And and going forward, the the question is going back to their old strategy or what seemed to be their old strategy where they felt like maybe they had to combat Google, right? And Google again owns the infrastructure. And why what's the reason why you'd want it? Why wouldn't you just want to offload all this, right? Because it'd be great. Well, at the end of the day, like you're still like you're paying people in order to do this this work, right? And if you own and control it completely, just like we talked about with Apple owning owning, you know, the whole stack and whatnot, you're going to have better uh cost advantages over, you know, the people who don't. And so Google's in a much better position, it feels like at the highest level of being able to do all of the AI work that they need to do um because of their massive infrastructure uh capabilities, whereas OpenAI just doesn't have that. and look at now what's happening even with Anthropic where they're scrambling to ramp up in on the infrastructure side because I think OpenAI is a good point that you know for all the all the talk of uh of the past many months that maybe um you [snorts] know uh I don't remember how exactly they framed it but that open AI was spending like drunken sailors or whatnot you know like in terms of their their infrastructure plans there was a upside to that in that they now have the capacity to to meet the demands whereas anthropic it feels like does Not. And so again, does Google have those problems? No. Uh does Microsoft I mean all the cloud providers are saying that they're capacity constrained and they are to certain degrees, right? Because it comes down to ultimately chips andor power. But still, if we believe that we're going to get to a world where those those issues are eventually resolved, uh Google's just overall owning of again that entire stack when it comes to the infrastructure is going to give them massive cost advantages over what OpenAI is going to be able to offer up at that steady state. We're not in that steady state right now. Um and so it's sort of masked a little bit, but there's a reason why they wanted to get there, right? they're not are they going to be able to compete on a on a cost basis with um with the Googles of the world and you know increasingly the Microsofts Amazon's uh of the world as we go forward with these massive clouds and so that's what it comes down to and that's going to be but that's like that's a few years down the road it feels like right and maybe OpenAI is public already by then maybe they get in a situation where it ends up playing out okay from them because they're now a public company they're able to sort of they were able to corral spending a bit focus. I'm laying out a, you know, a good case scenario for them and and they're able to sort of use different uh monetary instruments to raise what they need to raise debt and whatnot um to build out their own infrastructure and because of the way that the things are constantly evolving, maybe it doesn't matter so much that they don't control the infrastructure at Abolene and it does it doesn't matter so much they control, you know, the first few Stargates. what's matters is the Stargates going forward because those are the ones with the the latest chips and the the better inference and able to do the better inference and and whatnot. And so there's a world I guess that they can do that but still it's going to be there's going to be so much money needed to get from A to B where that's going to be the story of the next, you know, couple years, few years at least. >> Most definitely. Uh this hour went by extremely fast. We I we we're talking about potentially covering the Musk [music] Alman trial, but I think when you're on in June, we'll actually maybe have a verdict to discuss. So, we'll leave it till June. >> Think about talk about things that are moving fast. Like that's going to change 10 times in between now and then. >> Yeah, exactly. So, uh we'll keep an eye out on that. That'll be interesting. [music] And uh and again, folks, definitely recommend you go check out Spyglass at spyglass.org. MG, great to see you again. Thanks for coming on. >> Thank you, Alex. >> All right, everybody. Thank you so much for listening and watching and we'll see you next time on Big Technology Podcast.