OpenAI’s Ghibli Moment, CoreWeave's IPO Letdown, End of Silicon Valley’s Monopoly?

Channel: Alex Kantrowitz

Published at: 2025-03-29

YouTube video id: PjthrUCjqUY

Source: https://www.youtube.com/watch?v=PjthrUCjqUY

Opening eyes's new chat GPT update
leaves the internet giblified and
asserts its dominance once again. The
core IPO leaves some concerned that the
AI run is ending and is Silicon Valley's
monopoly coming to a close. Welcome to
Big Technology Podcast Friday edition
where we break down the news in our
traditional coolheaded and nuanced
format. Ron John Roy is out today. He'll
be back next week. We'll actually be on
on Wednesday. Uh, and joining us this
week, we have a special guest. Brian
McCulla, the host of the Tech Meme Ride
Home Podcast is here for a great episode
where we're going to cover everything
from the new Gibli era of OpenAI, the
new uh hopefully we'll cover the new
Google Gemini model, and we'll also
touch on this Coreweave IPO, which we're
waiting for live. Great to see you
again, Brian. Welcome to the show, Alex.
Thanks as ever for uh having me. It's
great to have you. and you're coming at
an auspicious week because we've
definitely seen AI in the headlines um
not for models really for a consumer
product and that is the chat GPT update
that did a bunch of things. We also know
this week we there's better voice that's
come out but the real headline here
because it's what everybody has
gravitated toward is this new image
generation within chat GPT. This is from
the New York Times. Open AAI unveils new
image generator for chat GPT. Uh the
story says chatbots were originally
designed to chat but they can generate
images too. On Tuesday, opening I beefed
up its chat GPT chatbot with new
technology designed to generate images
from detail detailed complex and unusual
instructions. For instance, if you
describe a four panel comic strip,
including the characters who appear in
each panel and what they are saying to
one another, the technology can
instantly generate an elaborate cartoon.
Actually, Brian, your tweets about this
were some of the earliest that I saw of
like the advanced um technology that is
embedded in this update. We went from
really not being able to uh include text
to being able to include text to create
like pretty cool new images based off of
uh original images and of course the
cartoon stuff is really good. It's
clearly just much more advanced and
capable than previously. But then the
craziest thing happened and everybody
just jiblified themselves. And by the
way, what that is is a I think it's a
Japanese anime style that portrays the
characters as All right, pretty
friendly. You are you are going to get
comments about this because um Miyazaki
is is beloved. He is basically the uh
Walt Disney of Japan. Um my kids adore
his movies. They are his his
um graph his cartoon style. Once you
have watched those movies, you'll know
it instantaneously. Which is part of
this. This is the argument that is being
made is that his style is so distinct
and beloved that that's what people are
freaking out about is that I can take a
picture of my family, put it into the
chatbt and I can get a studio jibli
style um portrait of my family. Describe
what is the style. Describe the style.
Um, it's sort of anime, but I mean to be
honest with you, because I do find these
movies fascinating, um, it's anime with
a sort of dream quality that the
aesthetics of it are just you could take
any frame of a Miyazaki movie and put it
in an art gallery and be like, that is a
masterpiece. Um, and so right that's
that's one of the things is Miyazaki is
beloved. Okay, people are very
protective of his work and his legacy.
Um, and then because it's so
distinctive, like once you've seen the
movies, you will see a a studio jibli
image. By the way, Studio Gibbli is the
studio like Walt Disney Studios was the
umbrella under which Walt Disney
operated, right? Okay. Once you have
seen the Miyazaki/Studio Gibbli style,
you will recognize it instantaneously.
And so that's the other thing. It's not
just that, oh, that kind of looks like a
Wes Anderson movie or that kind of looks
like a Picasso style or whatever. No,
this is dead on, which suggests that
they trained it possibly on millions of
cells and frames of Miyazaki movies. And
so then why do you think it took off the
way it did? Is it just because that this
image style is so fun? Because let me
just give an explanation of how uh pre
prevalent it's become. Um this I'm just
going to read right from uh Techrunch.
It's only been a day since Chhat GPT's
new image went live and social media
feeds are already flooded with AI
generated memes in the style of Studio
Jibli. Uh in the last 24 hours, we've
seen AI generated images representing uh
versions of Elon Musk, Lord of the
Rings, Lord of the Rings, uh President
Donald Trump, uh OpenAI CEO Sam Alman
even seems to have made his new profile
picture into a studio jibli style image.
Let me ask you this. I mean, is it that
these images are so beloved or is it
that OpenAI sort of seeded this style
and people and it's caught on
contagiously from them because they did
make a comment that they are very
intentional about the type of um images
they release at the very beginning and
it does seem that if this was a top-
down choice, it was a very good one from
them. Well, put a pin in that because I
do want to come back to that. Um, I did
a segment on the show today that talks
directly to that. But, uh, to answer
your question, uh, I think Sam, uh,
changing his profile picture to an
obvious Studio Gibbly style, um, made
everyone be like, "Oh, wait, that's what
we can do with this." So, for sure. Um,
and again, I think that they are, this
is not accidental. they are riding a
line here of they know what can go viral
and they know what will get attention
and and even the the questions and the
controversy about the legality of it and
is this where it's going like I think
that they know that that benefits them
at this point.
Um, I would say
that one of, you know, the debate would
be Miyazaki has come out, he has famous
quotes where early on in like 2016, he
was shown using AI to create animation
and he was extremely
uh disgusted by it. If you have the
quote in front of you, jump in right now
and and read it. He says, "I am utterly
disgusted. I would never wish to
incorporate this technology into my work
at all. I strongly feel that this is an
insult to life itself. So this is the
creator of the studio Jibli art
basically saying that the AI uh is an
insult to and he's like an 80s something
year old man. We know that probably the
last movie that just came out, The Boy
and the Heron, might be his last one. So
put all these things together. um a a
beloved artist like pe when I say artist
people think of him on the level of one
of the great visual artists of the last
hundred years like he's that highly
regarded. Number two um an old man that
we know is coming to the end of his
creative output and then so people
feeling like oh look at how technology
is now robbing and cheapening. By the
way, I'm not I don't necessarily uh feel
this way about it, but the argument
would be robbing and cheapening what is
the work of a genuine genius, right? It
is now becoming commoditized, memeified,
and so people feel like that that's
cheaping it cheapening it. Um, the other
level of it is is that if you're a fan
of Miyazaki, like I did put a picture of
my family into this and Miyazaki did
because that's cool and maybe I would
print that out and frame it. So again, I
think every OpenAI user did that. I
spent a good chunk of my day yesterday
just putting friends and family into
this thing and converting them into
Jibli style images.
Well, so I said put a pin in the thing
about
um how this is obviously a this was a
choice by OpenAI. So, um, uh, Joanne
Jang, I did this on the show today, um,
has a blog post up where she
specifically says in regards to this
image stuff that OpenAI is quote,
shifting from blanket refusals in
sensitive areas to a more precise
approach focused on preventing real
world real world harm. Essentially, what
she's saying is that yes, we are getting
a little more permissive when it comes
to what we're going to allow users to
do. She says, um, "AI lab employees
should not be the arbiters of what
people should and shouldn't be allowed
to create. We're always humbled after
launch discovering use cases we never
imagined." Uh, towards the end of the
piece, she says, "My colleague Jason
Quan once passed on to me, ships are
safest in the harbor. The safest model
is the one that refuses everything. But
that's not what ships or models are
for." So, and I'm uh hopefully you can
link to the piece or whatever because
she goes into greater depth about how
they're not just saying, "Oh, we're
opening the floodgates." It's a it's a
we've we've thought this through and we
want to be more permissive, but we're
also still worried about obviously the
the the worst case scenarios of of new
stuff that we put out. But we also think
that if we don't put stuff out that
we're she says something like it's the
graveyard of things that invisible
graveyards of possibilities that haven't
been imagined, right? So they're saying
we we're trying to strike a new balance
between preventing harm and also being
permissive and allowing a thousand
flowers to bloom with the release of new
technologies. So yeah, so like maybe
this is I'm thinking through why this
took off the way it did. And here's a
couple ideas. Uh one is because the
technology is good and that they picked
the right artist. Two is open AI once
having they picked the right artist
seated it through places like Sam
Alman's profile Alman's profile picture.
Uh, three is that they became more
permissive. And one of the things
important that we should note in this
update is that you were able to start to
put well-known public figures or or
basically anybody and they wouldn't
refuse like putting uh transforming a
person. And that's why I read a couple
examples. You saw Elon Musk, you saw
Donald Trump. Every his f basically
every famous historical scene, including
ones that are somewhat disturbing to
have seen, to have been jiblified have
been, which including 911 scenes. I want
to point out MidJourney has allowed you
to do um uh famous figures for a while
now cuz I've done they're just not good
at it. I mean, I've done I've done
images of Zuckerberg and Tim Cook. Yeah.
Within Midjourney, and it spit out like
two men that look like a blend of both
CEOs. And I think yeah, it is again
going back to competency or opening. I
was able to do this better than anybody
else. And there's a technical reason uh
there's a I think it was the verge piece
when it came out um that instead of like
if you do midjourney midjourney does the
entire image coming together at once and
then slowly like comes into focus and if
you do the chat GBT now it's going line
by line drawing it sort of like it used
to be in the dialup modem days of trying
to get a picture downloaded. Yeah. So
apparently for some technical reason
that's one of the advances of it being
more accurate is that in it's it's
literally drawing it line by line. Um
but yeah, so number one, they're
allowing public figures. Number two, uh
I did uh Jack Dorsey as if he was on the
poster of a Wes Anderson movie. You can
do, you know, 1960s Marvel comic style.
you can do styles that people would
recognize and and and at least OpenAI
has not allowed that before and so they
are clearly taking some of the
handbrekes off. Yeah. And I'm going to
kind of push back on this. The ship in
the harbor doesn't do much um point from
OpenAI. It's not that this is like what
models do and that's why they're like
taking the permissiveness off. I think
they do feel pressure from places like
DeepSeek, from other open- source AI
companies. uh and they know that if
they're slow, they're going to be left
behind. And this is sort of where like
the safety message to me falls apart.
Open AI, I think, above safety wants to
win. And this is again their attempt to
win. And it is interesting to me that
they have done this. Uh and we're at a
moment where we're talk we every week we
talk about how models have
commoditized. And when models
commoditize, what you really need is
hits. You're in the hits business. And I
think OpenAI knows this better than
everyone else. They have chat GPT which
is a hit 400 million users. Nobody else
comes close and they're pushing forward.
And by the way, it's no coincidence that
this all comes within chat GPT and not
within Dolly. And every time they do a
step forward in multimodality, we know
that voice was big in terms of them
being able to increase their user base.
I mean, you look at Sam Alman's her
tweet and it's basically an inflection
point where OpenAI goes from 100 million
to 400 million users once people realize
that they can talk to these things. And
this is them again putting the gas pedal
on trying to win that product with yet
another hit. And you're right in the
sense that especially in the last few
months
as you know GBT5 did not come around um
which people were waiting for waiting
for um at
least their their thunder had been
stolen by deepseek by others especially
in the AI and and tech communities other
model makers started to people started
to feel like open AI was falling behind
but you're right what open AAI does have
is the normie brand recognition. And so
this is a pretty smart move. I'm I'm I'm
assuming that it's it's uh conscious and
and um on purpose and and and it it has
to be. Um so this was a genius move to
again sort of grab back the the the
mainstream sort of branding of yeah,
we're still the cutting edge. And that's
what people, especially people deep in
the tech, have been saying for months
now that OpenAI is is losing it and and
and people are racing ahead of them.
Yeah. And I think this is a really
important point to stop because we also
saw a um release from Google. We also
DeepSeek released this week. No one's
talking about that. Uh and in fact, MG
Seagler had a great uh piece about this.
I'm just going to pull it up. It's from
Spy Glass. He said, "Google and
Microsoft, two multi-trillion dollar
companies, also had AI updates to share
yesterday. Seemingly no one cared
because neither could make me look like
a Studio Jively character. OpenAI is on
a roll despite all turmoil and
turbulence they've gone through
internally and externally. They just
keep killing it with all these product
releases to the point where they again
uh don't even have to have a techn
technically they don't even have to
technically roll out a new product. They
can just drop what they consider to be a
feature update and it spreads like
wildfire. Um, I'm just going to point
something out here. So, Google did have
this release of Gemini 2.5. Um, we're we
may or may not talk about it, uh,
because we're getting to it now. We
might may or may not talk about it later
on. Um, but I went through the document
and I like looked through the naming
conventions where this is Gemini 2.5 and
there's Flash thinking and there's and
then I saw on my Twitter feed like
people upset that Gemini wasn't getting
recognition for also being able to jibli
yourself. And I just like looked at this
and I was like, you know, maybe the the
results are are at par or maybe OpenAI
is a little better, but Google can still
do this. And the branding and the
simplicity of this really does matter.
And the fact that this is all within
chat GPT, right? Chat GPT is now a verb
like Google or you know, basically
people call it chat now. uh that is just
this huge compounding advantage that
OpenAI is going to have and releases
like this just help it push uh even
further forward, right? Because they did
just drop it into the free tier and with
with rate limits and the $20 a month
tier, which is what I'm on. I'm not
paying the the $200 a month pro thing.
So, you're you're right again. um as
opposed to creating a new brand for it,
as opposed to, hey, this is additional
dollars per month to do this. It's still
great, but it it's more money. They're
they're just throwing it into the thing
that people are already familiar with.
Um I I'll tell you the other thing about
the you know because was it Microsoft
also had like um there was like a deep
learning uh model that came out this
this week and you know I reported on it
and stuff like that and and I'm sure
that if you're in the weeds of this like
maybe advances are being made but again
as a quasi normie I don't really know um
even if you read the headlines about
like how um Gemini 2.5 is better. I
don't really know what that means, how
it's better, why, etc., if I'm not using
it to call the APIs and stuff like that,
but I sure as hell know that, man, that
blew my mind the the the pictures that I
can create. Now, I don't want to spend
too much time on this, but let's briefly
hop into this copyright conversation and
see, you know, we're not going to debate
the legal side of it, but we're going to
debate like does it actually benefit
Studio Jibli here. So, you have two
sides of this conversation play out. uh
you know in the main discourse over the
past couple days. The first is
represented pretty well uh by by Brian
Merchant whose blood in the machine
Substack uh says OpenAI Studio Jibli
meme factory is an insult to art itself.
Uh and he quotes that um Miyazaki quote
that we just talked about previously.
Miyazaki says, "Every morning, not in
recent days, I see my friend who has a
disability. It's so hard for him just to
do a high five. His arm with stiff
muscle can't reach out to my hand. Now
thinking of him, I can't watch this
stuff and find it interesting. Whoever
creates this stuff, he's talking about
AI. Has no idea what pain is. He does uh
and then he says, "I am utterly
disgusted. I would never wish to
incorporate this technology into my work
at all. I strongly feel that this is an
insult to life itself," which we quoted.
Here's Brian's analysis. This issue
here, the issue here should be obvious.
The man on record with likeliest the
strong with likely the strongly the
strongest and bluntest disavow of using
AI tools for art is now the man whose
notoriously painstakingly handcrafted
art is being giddily automated by Chachi
PT user users for what amounts to a
promotional campaign for a tech company
that's on the verge of being valued by
300 billion. Um, just about everyone in
the AI world knows Miyazaki is adamantly
against AI and they're doing these memes
anyway or worse because they know he'd
hated it. So, that's one side of the
argument. Now, the other side of the
argument is look at all this. I I never
I didn't know what Jubilee was before
this week. Now I know about it. Um, and
that's not uncommon. Here's a here's
some people making that argument that
that's a benefit for them. It's from
Shantanu Goel. I don't care at all
whether people knew about Gibli before
Ghibli before today or not. I'm glad
that more people know about it now than
before. Here's another one. Twitter user
possibly result. Studio Ghibli made
millions today through reaching massive
new audiences for free. Wall gardens
aren't always best for business. Just
curious, Brian, which side of this
debate do you fall on? Uh I'm gonna
You're This is a You'll think it's a
copout, but it's 100% true. I'm 100% on
both sides and I'll tell you why that is
a cop out. No, it's not. Because I'll
tell you, you can hold two ideas in your
head at the same time, Alex. I deny
that. Okay, I'm going to stipulate that
Miyazaki is one of the greatest artists
of the last hundred years because I
believe it. Um, and his genius is
something that a computer or an AI could
not do. Number two, I'm a kid of the
'9s. I'm a I'm a kid of the Napster era.
Um, you know, Tribe Called Quest. What's
that song? I can't remember. They they
never made a dime from one of their
biggest hits because it was uh they had
to uh it was a sample from Lou Reed that
they had to pay Lou Reed for. You know,
I'm I'm I'm a I'm a kid of the the
mashup era. And so I actually it's not
just I I get the idea that it's
um I I concede that memeifying stuff is
cheapening it on some level. But on the
other hand, we are living in a world
where memes are a means of uh
communication and and and cultural
discourse. And so it's it is I I fall
back on the Napster era argument, the
the mashup era argument of new art and
new means of expression for all of
humanity are possible
um if you embrace this technology. Um, I
I guess where I would come down on the
other side a little more is there has to
be some way for artists to be able to
opt out. Totally agree. I mean, that opt
out is so important and you have to be
able to if you're an artist, let's say
you're a Studio Gibbly and you don't
want to participate in this. Like, it
should be their decision, not OpenAI's
decision to make for them, not the
internet's decision to make for them.
just cuz we enjoy it, uh, doesn't mean
that like you can just basically train
or or emulate this style, which is
clearly their distinctive style and do
it because you want to. So, we're going
to definitely see this play out in the
courts um, you know, over the next
couple months without a doubt and years
probably actually now that I think about
it. But what about those that want to
use this um, in the above uh, the above
ground way, in the non-sketchy way? And
it just brings me to this tweet that I
saw from Derek Thompson or a set of
tweets from him uh that I thought were
really interesting because what does
this do to Hollywood? He says, "The
tension I'm trying to work out right now
is one hearing Matt Belly on the town uh
saying Disney can't make an animated
feature for less than 200 million and
then two realizing that Image Gen could
make a full animated film and yeah, a
full animated film for $200 in like a
year or two." And he's saying the point
of course is isn't that these personal
films will be anything like Pixar
quality, but rather that by reducing the
cost of animation rendering and by
expanding the supply of animated films
on the internet, there's a potential
two-front disruption both to the cost of
production and the market for animation.
I think that's such a good point.
Basically, what he's talking about is
the barrier to create animated films is
just going to drop. There was someone
who took I think maybe they used Sora
and they took Lord of the Rings and they
jiblified the first two minutes and it's
actually pretty insane. It's not
perfect, but the fact that like like
Derek is saying, it takes $200 million
to make an animated film and you can use
this technology and do that for much
less uh is going to is going to be I
think a disruption to the animation
house houses and also just like
potentially an explosion of creativity.
Again, talking about double-edged
swords. Yeah. And by the way, we're
talking about uh animation houses now,
but give it 6 months, 18 months, and
we're talking about actual video. We we
know how fast this is going. So, um all
of Hollywood uh creativity uh writ large
really. And then an interesting thing
happened. Whereas so many people started
using this, they quote unquote melted
the GPUs at OpenAI. So, this is from Sam
Alman. Super fun seeing people love
images uh in Chad GPT, but our GPUs are
melting. We're going to temporarily
introduce some rate limits while we work
on making it more efficient. Hopefully
that won't be too long. Chat GPT free
tier will get three generations per day
soon. And I think that's already
happened. And then with Gemini 2.5 Pro,
the Google release, you saw something
similar happen. This is from Logan
Kilpatrick, formerly OpenAI dev
relations now at Google. He says, "We're
seeing a huge amount of demand for
Gemini 2.5 Pro right now and are laser
focused on getting higher rate limits
into the hands of developers ASAP.
That's the number one priority right
now. Stay tuned." Well, Aaron Levy, read
Oh, that's Aaron. Yeah, I was going to
say read that one too right above.
Sorry. I mean Aaron Levy, the CEO of
Box, friend of the show, he he basically
quotes tweets or screenshots both of
these and he says the two biggest
launches in AI in the past month are now
conra constrained by capacity. This is
what we meant by Jevans paradox and it
is interesting. I mean you know we saw
that you know the mo the models had
become more efficient and then you know
we had this deepseek moment they became
way more efficient people dumped Nvidia.
uh but both Google and OpenAI are
telling us in the middle of launches uh
that they are just constrained by GPUs.
So do you think that the sort of um the
run or the runaway from GPU stocks was
kind of overblown given that we've now
seen uh
OpenAI, Google, pretty sure Amazon has
also said that they'll take as many GPUs
as possible and open OpenAI recently
also said that its GPUs were maxed out.
Uh maybe the GPU companies are in better
shape than we thought even as these
models get more efficient. Alex, I'm
going to do it again. Two things can be
true at once. There can be an overbuild
and over capacity and uh there can also
be an infinite demand eventually.
Eventually being the key word because
what a bubble is often times is an
excitement in a market that allows for
people to overinvest, overbuild, and the
timing is not quite right yet. So yes,
fine. We we are seeing Microsoft walk
away from um uh like a full whatever
gigawatts thing of of different places
in Europe and and there was an article
that I did this week about how in China
something like 80% of the buildout of
their data centers for AI is is
currently unused. So you saw the same
thing happen in the dotcom era. No one
was wrong if they bet that we've got to
build out fiber, we've got to, you know,
build out for this internet thing. This
internet thing is going to be huge. they
were right. But sometimes you can be
right too early. Um and but that's not
going to matter if you're an investor
and you bet at the wrong time. But um
again, two things can be true at once.
Eventually the demand can be infinite,
but um the demand could be uh
misallocated right now. But here's the
thing. I mean, we have these companies.
It's not like they can't use the GPUs,
right? I think that was a concern when
these models were getting more efficient
is that they would just have GPUs
sitting there unused. What we're hearing
from them is the opposite that the GPUs
are melting and they are at capacity. I
mean OpenAI couple times in a month said
we can't do anymore. Now the the thing
is they are losing money. Right. So
that's what I was just Go ahead. So is
that the misallocation? Well, again,
it's the mistiming and it is the the
the.com bubble lesson from from that era
of the internet is that, you know,
people weren't making money until
Google. People, you know, Amazon wasn't
making money forever and forever and
forever. So, right, everyone's using
this to create Studio Jibli pictures,
but and yes, people are paying uh OpenAI
to do it, but the the economics still
hasn't like exactly lined up yet. So
people can be using this and the
companies, you know, providing it cannot
be making money. Again, both things can
be true. It's a matter of when the
timing lines up um the right
way. Yeah. I mean, this is from Joe Sai,
the Alibaba uh chairman. Um this is in
Bloomberg. He warned of, this is this
week, he warned of a potential bubble
forming in data center construction,
arguing that the pace of the buildout
may outstrip initial demand for AI
services. A rush of big tech firms,
investment funds, and other entities uh
are rushing to erect servers based in
the US and Asia. And he's saying it's
starting to look indiscriminate. Many of
these projects are built without clear
customers in mind. I start to see the
beginning of some kind of bubble. Um I
am starting I start to get worried when
people are building data centers on
spec. There are a number of people
coming uh coming up funds coming out to
raise billions or millions of capital.
I'm astounded by the type of numbers
that's being thrown around in the United
States. People are literally literally
talking about 500 billion several 100 uh
100 billion. I don't think that's
entirely necessary. I think by the way
uh people are investing ahead of the
demand that they're seeing today but
they are projecting much bigger demand.
So there's two sides to this I would
say. One he's absolutely right that
people are investing ahead of the demand
that will get an
ROI. Two is he's wrong in that these
these servers are being used without
customers. They clearly have customers.
There is use. Um, and that's that's like
very important, I would say, because if
you don't have people adopting this
technology, you're not going to get
anywhere. Now, we we can say that the
use is um not for the best financial
purposes. Uh like I I remember when I
had access to Facebook's M, which was an
early version of their assistant, which
had humans uh basically on the other
side of it, we asked it to draw pictures
all day and basically maxed out its
capacity because it was just people
drawing pictures all day. M um and so
that's what's happening effectively with
these servers just it's the AIs that are
doing it. Um I would say to crystallize
his argument there's this belief that
the next generation of AI is going to be
real really financially renumerative
because it's going to do things like
automate all coding. Um, and I think
that that his argument would be stronger
if he says that that they're bu the
speculation that they're being built on
is that AI is going to do things that we
don't know if it will be able to do
within the next two, five, or even 10
years. And that is where the problems
are. And so even if OpenAI is melting
its servers today, even if Google are
mel melting their servers today, if
there isn't a return on investment with
these higher value propositions in the
next few years, there's going to be a
timeline mismatch. and that's going to
be bad.
Um, web 2.0 happened because there was
so much overbuildout of CA uh fiber
capacity that it was incredibly cheap
for someone to create a Facebook in a
dorm room. Um, and so a lot of investors
got wiped out in the com bubble
bursting, but then um a thousand flowers
bloomed and um Mark Zuckerberg became
uh sent a billionaire. Yes. Yeah. So
that brings us to Coreweave, which as of
now has not yet IPOed. Um Coree, for
those wondering, I'm just going to read
from CNBC. It provides access to NVIDIA
GPUs for artificial intelligence,
training, and workloads, and it counts
Microsoft as its biggest customer by
far. Other clients include Meta, IBM,
and Coher. Its revenue soared more than
700 last year to almost 2 billion, but
the company recorded a net loss of 863
million. Their IPO is going to be a big
disappointment. They initially priced uh
at $40 per share. That's the val that
valuation will be $23 billion. It's way
down from the 32 billion uh that bankers
had been floating in recent weeks. So
almost 10 billion less than they
anticipated uh their their valuation
would be and uh they're going I think
down from 2 billion raising in this IPO
to 1.5 billion. Um and that is going to
be you know are they going to be able to
cover even their losses with that type
of money for a year. Well also um I
don't know if you know this but um part
of what they're raising that much money
for is they're retiring a ton of debt
because again they're they're extremely
capital intensive as a business. And so,
um, when when you see the headline that
they potentially will raise one and a
half billion dollars, um, not all of
that's going to their bottom line
because they're immediately going to be
attempting to retire debt. Um, by the
way, uh, just for my listeners of the
show since we're going to cross post
this on I screwed up today and I thought
that the IPO had happened, but Alex, the
fact that we are talking at almost 1:30
Eastern time and it hasn't floated. fact
that they had to bring it down from the
range that they wanted and the fact that
it's not then this is bad news. Oh yeah.
So like they just opened and they're
opening at $39 per share. Okay. So under
even 40 which is what they under 40
which is really bad. I mean you're going
underneath what you they were indicating
to the market that they might come out
like usually after the IPO there's this
little pop um which is basically just
people buying. Uh it means that the IPO
was was sort of mispriced because
everybody that gets in early um you know
they ended up spending uh they end up
yeah getting less for their money
because the market is willing to give it
more. Um in this case there's clear
bearishness in the market right away. Um
it's already underneath its IPO price of
$39. Very bad. And then not a good
situation for if it closes today like
let's call it like a a a 37 or worse or
something. Uh that's that's extremely
bad news. But the damage the damage was
done basically in the IPO itself where
they just weren't able to raise the
amount of money that they were. And now
now the now we see the public also
turning on them which is which is pretty
interesting. Not in a big way but enough
to be like what the hell is happening
here? Let's contextualize this because I
called it on my show the first IPO of
this AI era, but they're not an AI
maker.
Um, they're a different sort of company.
They're a company that provides the
chips, right? So, one of the context
here is the first gold rush in this AI
moment was, as we've been discussing, we
got to get our hands on these Nvidia
chips. Like, this this is the this is
the oil. This is the the commodity that
we need to to make this revolution
happen. So essentially the argument
would be Coreweee is a pix and shovels
company although they lend you the picks
and shovels um you know and they don't
even make yeah they they buy the picks
and shovels from somebody else and lend
them to Microsoft basically is what they
do. So number one everyone's looking at
this as tech in general hasn't had a lot
of big IPOs for a few years. So this is
a big one but number two um this is the
first of the AI era. So, is this a bad
sign for the um appetite for in the
public markets for AI companies, but is
it really an AI company? Um, and then is
this company specific? Um, I I believe
that uh you you spoke to folks at the
information that have a a a very
specific analysis of this like coreweave
has something like 70% of its um
business is one customer. Um and also if
if you're Microsoft, right? And if if
what your concern is is that again uh
Jevans paradox isn't working out then um
things will get cheaper and cheaper and
cheaper and so you don't need um a
corewave to to get you your chips
because you can do it cheaper and and
all that other stuff. So is this a
companyspecific issue where they don't
have a moat? I think it's company
specific and I also think that it's
still on a trend. Right. I'm going to go
with your line Brian. both can be true
at the same time, right? It's a it's not
a strong company uh in terms of what
you're looking for if you want to get AI
value and AI has been on a downturn at
the beginning of this year and it's not
good for a company that wants to ride
that wave. Um and you're right, this is
from the information. So, this is from
Corey Weinberg. He says, "Tech
investors, and this is making the point
exactly, seem a bit oversted on AI uh
stocks. Uh Oracle and Nvidia, two public
companies investors might compare to
Coreeave, are down 12% and 19%
respectively on the year. It's hard to
ask investors to pay up for a new AI
firm when they're worried about their
existing portfolios. Investors also
worry how much the business is tied to
Microsoft or Nvidia. They worry that
this is important. The core founders
sold so much of their stock already. I
think they sold something like $500
million. They worry how much cash the
company expects to burn, uh which is a
lot. And this is more more from Corey. A
bank anonymously surveyed 135 investors
including hedge funds and long stock
long only stock pickers. A whopping 90%
of the participants said they didn't
think core weave had a sustainable moat.
Essentially meaning it really wasn't
really a good long-term investment.
Here's the money quote. Someone said I
it's radioactive and I think every
investor knows that. So it's not a
strong business at a moment uh where
well it you know it might be a strong
business. I don't know, but it's not a
strong long-term investment, at least
according to these bankers, at a moment
when people are kind of pulling back on
AI, Alex. And you you know what this is,
and we haven't had one of these in a
long time. This is a perfectly timed
IPO. And I'm not casting aspersions. You
mentioned that the the founders have
cashed out a lot, but sometimes
companies ride a wave and they're
private and you try to get to to public
markets before that wave dissipates. Um,
and I think that we're watching that
happen right now. And now, wouldn't it
have been great though if they went like
a like a year ago? It would be it would
have been better for the people that
invested. They could have raised way
more money. I mean, without a doubt.
There was a reason they were they were
hitting a certain valuation then. Yeah.
But they also, you know, their their
revenue was up 700% I think it was uh
over the last 12 months. So, they had
it's all again, it's all timing, Alex.
So you you had to wait until you could
show that level of revenue growth um to
to achieve you know if they didn't have
700% revenue growth over the last 12
months they wouldn't have been able to
get $10 million $10 billion uh uh in in
public markets for sure but talking on
timing I do think what this is also
showing is that the euphoria and the
unquestioned money spigot for AI is over
and I texted Corey who wrote the story I
said what's what's going on here? And he
said, I think people are just stopping.
This is what he's wrote back. I think
people are just stopping and thinking
about how companies are actually going
to make money in AI and who's going to
be left holding the bag. I don't think
that was the case couple couple months
ago. This is definitely AI entering this
new era where people are thinking about
yes, the ROI, the sustainability of the
businesses. And I don't know, I think
that's going to make the AI industry um
make everything more difficult for the
AI industry than it has been up until
this point. Agreed. But it's interesting
to me that you're willing to make a
state. You're you're willing to make a
claim there. Um because again,
apologies. I I wrote a book about the
history of the internet and the the.com
bubble was not a straightup rocket ship.
You had, you know, the the Asian flu
crisis. you had the long-term capital
management crisis. Like there were times
when people were like, "Okay, the boom
is over. The boom is over. The boom is
over." These things move fast and we
could be talking again in 3 months and
there's more euphoria because uh Open AI
lists to go public or something like
that. And um so I I I I like the call. I
I agree with the reasons that you you're
making that. But I would also say talk
to me in 3 months and we could be
talking about something completely
different. Yeah, it's a great point,
Brian, and I I wrote this down in in our
show, Doc, which was just sort of this
thing that I've been scratching my head
about, and I'll just read it. Um, I
don't get how the market is pulling back
on AI because the technology is as cool
as it's ever been. It's getting more
efficient, and we're also seeing massive
data center buildouts uh and chip buyers
out of chips. So, what's happening? I
mean to me and this is basically to
crystallize the point um the technology
like we saw with the JIL statement uh uh
segment we did at the beginning of the
show the technology is absolutely cooler
than ever it's doing all the things that
well not maybe not all the things but
it's doing many of the things but is it
profitable well it's not profitable but
it is it does seem to be on this path to
be able to do I mean you could run I
don't know old chat PT and run it
profitably but the the losses are coming
to try build what's next and then that
will become more efficient. So, it is
interesting to me that the market is not
turning on this technology but cooling
on this technology as it starts to as it
continues to advance more and more and
gather more steam among among people.
Let me let me ask you this real quick.
Um, from your perspective because I'm
I'm interested in talking to you cuz
you're deep in this stuff. If we get a
lot of signs like we've been getting
recently that there is a capex pullback
on data center spend, is that bullish or
bearish for AI because obviously it's
bearish for certain segments of the AI
market because that spend that they were
planning on might not come or is it
actually bullish? Did I say bearish last
time? Anyway, is it actually bullish
because that actually means that things
are coming down in terms of cost in in
sort of like the Moors law sort of way
that we're used to with technology. So
that now if it's cheaper then it's going
to it's going to happen more and there
will be more chances for profitable
companies to be created. I will say I
don't think it's going to happen because
the capex the capex pullback I don't see
it happening. We have big tech that's
going to spend 300 billion on capex this
year. Plus, much of that is going to AI,
open AI. There's rumors now that or
reports really that they're about to
raise $40 billion. Uh they raised 6.6
billion last last year and it was the
biggest VC round ever. Or could you
imagine them raising 40? Uh that's
crazy. Well, Ma likes Musa likes to do
things big. Yeah, that's money. That's
money. So, I don't see a pullback
coming. I think the Microsoft headlines
were largely Microsoft saying, uh, we
had this dedication to open AI. We were
trying to build out for them. They're
going to go do it on their own now or
with other partners or with a diversity
of partners. We don't need to do that.
Um, we're seeing everybody out of GPUs.
We're seeing all those GPUs being used.
We're seeing bigger training runs
happen. Uh, I don't see the pullback
happening. And if we do see a pullback
happening, I I will view that as a
bearish sign
here because I just think that like this
stuff is going to be very expensive and
they're going to need all the GPUs they
can find to serve it and then we'll once
they do that we'll then see um basically
improvements of models and then we'll
try to they'll try to do the next. Yeah,
but that that's my argument and we don't
have to go into this that that if if the
costs do come down that's actually
bullish for the AI as a technology being
becoming pervasive across all of tech
and and society or what but right but
we're going to have we're going to have
Dylan Patel from semi analysis come on
the show uh in a couple weeks maybe next
week no definitely in a couple weeks and
what he basically said I'll just preview
it what he says is basically it's this
step thing where like you advance your
capabilities and then you find ways to
make that more efficient you advance
your capabil ities and you find ways to
make that more efficient and so it's a
step but that always will require uh
spending a lot more money to advance
your capabilities and then you can use
that stuff in a much cheaper way. So um
yeah Brian we should definitely talk
again so in 3 months and we can see
where this thing is going. Uh but before
we go I want I definitely want to get to
your story about um the future of
Silicon Valley. You have a pretty
provocative piece on YouTube and I want
to hear your thoughts on it. Um it the
title is is Silicon Valley about to lose
its monopoly on tech. My thoughts on
sovereign tech stacks. So can you run us
through the argument and then I'm gonna
I think I'll debate you about it a
little bit. Yeah. Yeah. Real quick. Um
so uh this was something that I I did a
bunch of stories this week about how
Europe is maybe going to pull back on on
buying um US cloud infrastructure. Um
there's been a bunch of stories like
that about recently like the uh people
don't want to buy American because
they're concerned about um you know
here's the
thing. Um what if the rest of the world
did to us what we've been doing to China
in terms of like import bans, export
bans, things like that where we don't
feel like your tech is safe to use
internally. Um the you know the the
argument that has been made that we've
been covering for years now is you have
to onshore uh chip development silicon
uh development because if you if you
lose access to chips and uh China
invades Taiwan what your economy is
screwed in the same way that if you lose
access to oil your economy is screwed.
Um the the the term that is being
banding about in recent weeks is tech
sovereignty. So the argument is that if
if people felt that way about silicon
about the chips themselves now it's
moving to the entire tech stack if you
are a country that feels like oh we
could lose access to databases and cloud
computing and even even social media
because social media is the modern
communication network in the same way
that you would fear in a war that an
adversary would take down your telephone
network or whatever.
So people around the world and in my
piece we're talking a lot about Europe
are are are starting to pull back and
say it's not just chips, it's
everything. It's the entire tech stack.
So the argument that I'm making is that
Silicon Valley for at least 30 years
postcold war um has had essentially a
monopoly on the tech stack, right?
And also we made the best stuff and and
brilliant innovation and things like
that but we were the default option. No
one ever had a motivation to choose
other than Silicon Valley. Right? So now
if for geopolitical imperatives, for
cultural uh reasons, people are starting
to reconsider
that Silicon Valley uh for the first
time does not is not the default does
not have the monopoly on the tech stack.
And the example I use is um Palent or uh
Arendrell um Palmer Ly's uh Andre Andre
Andril sorry I never can pronounce that
right. um it is tough the the um the the
defense tech startup and and right now
Europe is rearming. They should be it
should be boom times for them except
Europe's not going to buy from an
American tech company because reasons
that we don't necessarily have to go
deep into but they wouldn't trust
American tech. And it's not just oh
maybe they'll spy on us, maybe they'll
do a a kill switch and and and stop our
drones from flying or something. They're
afraid of tariffs, export bans where all
of the sudden you lose access to the
supply chain, right? Extrapolate out
beyond that and you have things like
Europe saying we don't we need local
cloud because we don't know that if we
if a trade war happens that maybe as
part of the trade war tit fortat u we
lose access to our data. Um, and then
you layer on top of that what we've been
talking about with AI. And I make the
point in the piece that AI is the first
new technology in 30 years. It was born
in Silicon Valley. Silicon Valley is
still the leader of it. But for the
first time at the nent stages of this
technology, it's not a Silicon Valley
exclusive. It's not a monopoly. There is
Chinese tech. There's Middle East,
Chinese AI, Middle Eastern AI. There's
different flavors of this. And so I my
argument
is does the business model of Silicon
Valley is it prepared for the
fact a reality where instead of
addressing 90% of the global market the
market is bifurcating the market is
fragmenting and scale no longer means
potentially every human being on the
planet. Scale means maybe you can only
sell to certain markets and maybe your
own local market. So let me I' I'd love
to hear your thoughts on that. Um
because I value your opinion on stuff
like this. Yeah. So when I read your
story, I was like, "All right, well,
let's see how much like losing what a
market like the European market might
hurt for the tech giants." Uh actually,
even a small decline in Europe would
hurt tremendously. Apple sales in
Europe, uh 26% of total revenue. Meta's
ad sales in Europe, 23% total revenue.
Amazon's international sales, uh 23% of
total. Let me interrupt real quick
because I want to say another thing that
I say in the piece is someone could do
to Meta what we have attempted to do to
Tik Tok which is to say we're going to
ban Instagram right so it's not just
like hard tech or software it's also
tech tech because you know social media
is media and it's communications I'm
sorry go on yeah so that being said I
don't see Europe banning uh these these
software platforms um I just think that
you make your citizens really angry.
They they're restricting, you know,
future development of it. You see Apple,
you see Facebook say, "We're just not
going to roll out our AI products uh
within Europe. But to take something
away like this, uh you you saw how hard
it is for the US to do it with Tik Tok."
I'm pretty sure Tik Tok's still working.
I was on it this morning. Even though
the US really wanted to ban it, I don't
see them taking it away. Let's let's
pull back from a ban because the better
example is the the the piece from was it
wired where that uh European companies
are starting to say we need the cloud
onshored. The idea is onshoring for
things like the cloud for things like
software in the same way that onshoring
or reshoring for chips becomes a
geopolitical necessity a sovereign
imperative essentially. So, like if you
were again I I I I don't have an opinion
on on the this current administration's
policies, but if you're in Denmark and
you are going to buy a cloud uh services
and storage and things like that, maybe
you do want to consider having your
cloud be local, right? What what would
you say to that? I think you're going to
go with best in breed. I mean, I think
you'd have to anticipate that the risk
of like true uh geopolitical fissure
between the US and Europe is gonna is is
present and uh even though like it might
be an Iraqi place right now, uh I just
don't see that full separation
happening. So, I would still go best in
breed if I was building. I mean the the
a world where the U things get so bad
between the eur US and Europe that your
AWS uh stack is at risk uh is to I mean
maybe I'm not imaginative enough but is
to me so far-fetched um that I can't I
can't fully uh I wouldn't say a company
would would begin to change its strategy
on it. That being said, there was one
there was a piece uh part of your piece
that I think is is totally spoton and
actually uh bears paying attention to
and that is that the basically the US
has had a monopoly on tech for a long
time. I mean of course we know there I
mean Spotify for instance which we're uh
broadcasting on today is a European uh
platform. So not completely not a
complete monopoly. Um although certainly
US companies have have tried to squeeze
these companies. I mean, Spotify is one
of Apple's biggest opponents because of
app store revenue. Um, but AI is, you
know, however cliche it sounds, it's a
democratized technology. I mean, we are
seeing models come out of uh really
China. I mean, Deep Seek and we're going
to have a China episode coming up as
well going into all the different um and
and don't sleep on the Middle East and
the Middle East because you're you're
right. I mean basically I'm going to
give you a moment to talk about the
Middle East but basically if this is a
technology that requires scaling
infrastructure and if you have unlimited
you know re energy for sure in the
Middle East and resources you can
compete and they can compete. Uh yeah I
I don't want to talk about the Middle
East but I I'll give you one more
wrinkle to the argument that I'm making
which is that
essentially Silicon Valley tech has been
the default. There's never been a
motivation to choose otherwise. There is
a motivation for the first time and I
agree with you. Listen, tomorrow um this
administration's uh positions may
change. There could be another
administration uh in a few years. But I
think the genie is out of the bottle in
the sense that if people start to
realize the geopolitical necessity of
the tech stack as being
existential that even if everything goes
back to we're all friends and kumbaya
whatever um people have learned this
lesson or have gotten this fear in their
hearts and I think that that is for the
first
time changing how why people would make
decisions and it only takes the genie
being out of the bottle for there to be
well okay maybe there's a market now for
just a European cloud maybe there's a
market I we keep using Europe for a an
India you know if if if Europe doesn't
want to buy um uh US defense tech does
India um does Brazil and so go down the
line in terms of cloud or every product
is a is a tech product now so I can't
buy a Chinese car right now like what if
uh India doesn't allow US uh smart cars
and smart TVs to be sold there. So my
point is is that one of the things that
Silicon Valley has assumed for 30 years
is that we can sell our products to 90%
of the planet. But what if the the
global market starts to fracture and
become localized and localized and then
the last point to layer on top of that
is is what does that do to the talent?
because the talent for the last 30 years
around the world has come to Silicon
Valley cuz that's where you go to
achieve scale to reach 90% of the
planet. But if you can stay home and
have an addressable market that's India,
an addressable market that's Latin
America or whatever um and it is a
fractured world then then the talent
doesn't come to Silicon Valley. And
that's why listen I say in the piece
people have been saying since I got into
tech little stuff Silicon Valley is is
about to die or whatever and it's never
come true. and I've never believed it,
but I see the angle for the first time
where I'm worried and I love Silicon
Valley and I'm an American and that's
from my perspective. So that's why I I
wrote that piece. Yeah. I
mean I think that yeah, if there is a
separation, it's going to be if this if
a separation of this magnitude happens,
it's going to be worse than just like
Silicon Valley losing its dominance. Um
but it it is challenge. It is
challenging I think for companies
outside of Silicon Valley to build in
the same way. It doesn't mean it can't
be done. Uh but the concentration of
talent and capital and you know this cuz
you wrote the history. Um and the
tolerance for risk is really unmatched
outside of that outside of that area
really. And uh it's going to be it'll be
tough for the rest of the world to to
catch up or displace. But this is the
thing. Think about let's end here
because you mentioned you you can't buy
a Chinese car. You can, I think, but
it's just a 100% tariff. Um, but Chinese
phones, think about think about for we
could we we don't have to get all the
way there. We get a little displacement.
Think about what's happened to Apple in
China. Mhm. It became a point of
national pride to not have an iPhone and
to have a Huawei phone, Huawei Mate. And
Apple is still 15% of its revenue in Q4
was coming from China, but that wasn't
the 18%. And that has dogged app Apple
uh revenue for quarters. The fact that
they're that their revenue isn't up to
China standards. So it doesn't have to
be an earthquake. It can be a ripple and
that could be quite destructive. Right.
And and talking to uh Mr. big tech
himself is that that's one of the
concerns for me is in a fractured market
if if an AWS has to go market to market
as you know the the phrase is always
write the code once sell it everywhere
if that if that world changes my only
point was is I don't think people are
talking enough about what would happen
if the world changes in that way where
you have to you know oh Europe is
regulating us so maybe we have to change
our software for the European market.
But what if every market is different
and you have to go bespoke market by
market? Um, if that happens, that is
that is very different than what Silicon
Valley has been used to for 30 years.
Definitely. And another thing that
Silicon Valley has not been used to is
uh dud IPOs, especially bad AI trading
and coreweave is now down under
$39. Down 3.77% on IPO day. That will
change before the market closes, but not
exactly what they've been hoping for.
And certainly a day that we'll come back
to and maybe in our three-month uh
recap, Brian, we'll see. Was that just a
data point or was that a sign? So, I'm
calling it if it's under 37, that is
very bad news by close. Yep. All right.
Brian McCull of the TechMe ride home
podcast has been here with us. You can
find the show on uh in your podcast app
of choice. Just type in techme. A really
nice compliment to big technology. You
can come to us on Wednesdays and Fridays
for our interviews and news recaps and
go to TechMe every day for the latest in
what's happening in AI and the rest of
the tech world. So, Brian, always great
to have you on. Thanks for coming on the
show. Uh, Alex, uh, one of the funnest
conversations I've had in a long time.
Definitely. All right, everybody. We'll
be back on Wednesday with Ron John Roy.
More AI news coming your way and then
we'll have a special guest coming and
joining us next Friday. So, hit uh,
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