OpenAI Raises $40 billion, Is AI a Letdown?, Musk Sells X to xAI

Channel: Alex Kantrowitz

Published at: 2025-04-02

YouTube video id: yxVFTQNxsNg

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

OpenAI has raised $40 billion, the
largest funding round in history. What's
it going to do with the money? And Alexa
Plus finally debuts. Analysts ask
whether AI is a letdown. And does it
matter that Elon Musk sold X to XAI?
Welcome to Big Technology Podcast Friday
edition, where we break down the news in
our traditional coolheaded and nuanced
format. We're running this week's show
on Wednesday, and we have a big
interview coming Friday. So this week,
we are swapping our shows. We have so
much to talk about this week. We're
going to talk about OpenAI's
fundraising. We're going to talk about
the incredible momentum that OpenAI and
other AI companies have right now and
how AI is picking up speed in a way that
it hadn't at least all through last
year. We're also going to cover whether
AI still is underwhelming despite the
consumer use. It sounds like a bit of a
contradiction, uh, but we're going to
get into it. And then, of course, we're
going to talk about Elon Musk selling X
to X AI. Joining us as always for our
Friday show but today on Wednesday is
Ron John Roy of Margins. Ranjan, great
to see you. Welcome back. It's good to
be back. Thank you Masa Sun and Sam for
giving me giving me this beautiful news
to start to start the week with.
Exactly. Now uh Ranjan, there's going to
be some confused users. They're going to
be like this is the Friday show and you
just said as always that Ranjan hasn't
been on for the last 3 weeks and we I
know we have new listeners who've come
on. So just to go through what we do
here, we usually do a flagship interview
on Wednesday and then Ronan and I break
down the news every Friday. We'll have
our flagship interview on Friday.
Ranjon's back. Ranjan was on vacation.
He is back. So you will hear from him
consistently on Fridays as we break down
the news. And so let's get right to it.
Big funding news. Uh and that is an
understatement. OpenAI has finalized $40
billion in funding at a $300 billion
valuation. That is according to
Bloomberg Ranjan. This is the biggest
fundraising in history by far. Last
year, OpenAI had the title of the
biggest fundraising ever. It was 6.6
billion. This year, they've multiplied
that by about five times to 40 or even
more, more than five times to $40
billion. In normal times, this would be
the biggest business story of the year.
It seems like it's gone by in kind of
like a hoham fashion where there aren't
many people that have been talking about
just how crazy this is. I mean, it's
right rewriting the rules for private
company financing. What do you make of
the financing? I know that you're
already seizing onto the fact that
SoftBank is in the lead. And what do you
think OpenAI is going to do with all
that cash? All right. So, first in terms
of SoftBank being involved and is this
big news? I think the $40 billion
headline number we have to take with a
grain of salt cuz when you start digging
into the numbers underlying it, there's
around 10 billion that's actually
supposed to be raised, which still is a
shocking number and is uh bigger than
6.6 billion from last year. The other 30
billion is supposed to be through the
end of 2025 and thereafter, but
basically be going to the Stargate
project, which is a series of data
centers that's involving Oracle and
others, and helping build those data
centers. So, the the idea that this is
$40 billion going to allow us to create
more Studio Ghibli images isn't exactly
accurate. like it's it's a large number,
but it's so convoluted like so much of
these sto so many of these stories that
I think it's not it's not as shocking as
uh as it seems at first glance. Okay, so
let's break down the numbers. So,
SoftBank's going to lead the round. It's
going to be 7.5 billion right away. So
that alone is the largest VC round in
history and 2.5 billion from an investor
syndicate that also includes Microsoft
CO2 altimeter capital and Thrive Capital
which led the last round. Then there's a
second trunch of 30 billion that's
supposed to be invested by the end of
2025 including 22.5 billion from
SoftBank and 7.5 billion from a
syndicate. I guess the caveat here is
that if open, this is from Bloomberg, if
OpenAI's restructuring isn't completed
by the end of the year, SoftBank would
have the option to reduce its total
contribution to 20 billion from 30
billion. So, OpenAI really does need to
com complete this for-profit
restructuring. That being said, I don't
understand how this is not real, Ranjan.
I mean, it is the agreement. It's
supposed to come next year. Why are we
already saying that this is fake? I'm
not saying it's fake. I'm not saying
it's fake at all. I'm saying it's taking
a bunch of different announcements and
kind of mixing them together. Again,
Stargate, we heard numbers as crazy as
500 billion hundred billion dollars this
year. If we remember the announcement on
the uh in the White House a few months
ago. So, it's taking part of that and
then kind of again mixing it into this
announcement where again it's a it's 7.5
and 2.5. It's $10 billion coming up
front. That is a lot of cash. And we can
definitely get into how they're going to
use the money and whether that's going
to be enough for them to actually handle
their burn over the next three years
because they're supposed to turn
profitable if we you remember the
numbers in 2028 after burning 7 billion
in 2027. So, so they're still
forecasting a lot of burn, but I still I
don't know. I I think and I'm not giving
the overall press and market so much
credit that they're getting into the
nuance and recognizing that's why it's
not that exciting a story. I just think
these numbers get so big and the deals
get so convoluted that it's hard to try
to make sense of it and process it and
get excited about it. Yeah. And it's
also I think the main reason why people
have been like okay whatever is because
OpenAI already announced this 500
billion dollar uh project Stargate and
so that people see 40 billion which is
like by far the biggest VC run funding
round in history multiples of what that
typically would be and they're just like
okay all right it's onetenth of what you
told us and maybe there is a backlash in
some ways to these these big boasts of
these large dollar amounts. When you
kind of come in in what in any other
environment would be the one of the the
most impressive financial announcements
in history, people are just like, well,
it's much smaller. Even your valuation
is smaller than the amount that you
pledged to raise. Well, also when we
talk about that
valuation, their revenue projections are
incredible. Incredible. So, they're on
track to make $3.7 billion this year.
They're forecasting to triple that next
year to 12.5 billion. So, first thing,
the valuation, and this is kind of what
blows my mind, the $2.5 billion
syndicate of CO2, Altimter, Thrive,
they're investing at a 100x revenue
multiple. Like, we're not talking in the
20s and 40s here anymore. they're going
in at a 100x on the forecast that
SoftBank's going to end up putting in
another 30 billion anyways. Like how you
even start to get to those kind of
numbers is is shocking. But then my
favorite part about the revenue
projection is a third of the So they're
expecting next year 12.5 billion that's
going to then go to $28 billion and a
third of that revenue is going to come
from SoftBank. Soft Bank spending on
OpenAI for all of its own companies and
portfolio companies. So you just start
to see I mean the the mathematical
gymnastics and financial gymnastics
involved here are are only worthy again
of Masasan.
Yeah. In tech circles I think it's
fashionable to say that if you invest in
OpenAI you're betting that it's either
going to infinity or zero. basically
that they invent AGI and it is the or
super intelligence really it does
everything for humanity and your 7.5
billion dollars that you put in in 2025
SoftBank becomes one of the biggest
bargains of all time the other side of
it is they do just burn so much money
trying to serve Studio Ghibli images and
you flush that money down the toilet
basically trying to enable uh that
behavior well that that's why this the
growth number the user growth is
spectacular. Sam Alman has been on a
tweeting tear this week kind of say
talking about biblical demand for the
platform saying that I think that they
had added a million users over a few
months and then added a million users in
an hour like and again the studio Jibli
which you had a great show with Brian
last week and you know explaining it
it's the whole viral format of creating
images in the style of a Japanese anime
type thing that just went completely
completely viral. I will say plenty of
nonAI normie friends I saw posting those
on Instagram even not just on X. Like it
was real. It's real. People are going on
it. People are doing it. But that's not
that's ex that's that's cool. That's not
making you money. like that's that's not
necessarily the best forecast for uh you
getting to your $28 billion revenue in
just three years and somehow also being
profitable on that revenue. Yeah, the
Studio Ghibli thing continued to be
crazy. Over the weekend, my brother, who
has not ever sent me anything AI, uh
drops the family chat, uh flooded the
family chat with the images of him and
his wife and his daughter and uh created
multiple Chat GPT accounts to be able to
make more images. That is how insane the
demand was. And you're right, it's not a
profitable use case. Even though we know
that OpenAI had lots of signups. I mean,
adding a million users in an hour is
impressive, but they're melting these
GPUs which cost 20 to 40,000 a pop. So,
let's just take this to its logical
conclusion. You are open AI. You just
raised 40 billion or if you're uh in Ron
John's camp at least 10 and we'll see
what happens next. What does that money
go towards? This is where I mean
obviously and Sam was tweeting about
like if anyone has 100k GPUs send them
our way. We're we're mel as you said
melting on demand that there we need
anything we can get. This is getting
crazy. So obviously it's going they're
still positioning this as it goes to the
compute it goes to just and building
large new foundation models GPT5 one
day. So it seems like and and we've
talked about this a lot. The plan over
the next few years is still the same
strategy that's been there for the last
two launch some new really cool products
but then the entire bet is on the
transformational foundation model GPT 5
6 whatever it's going to be as you said
AGI things that change everything and
that's the only way they're going to
make their money
right I think it was Dylan Patel who
talked about how the next wave wave of
he's going to come on the show from semi
analysis. He's going to come on the show
in a little bit in a couple weeks. Uh we
recorded already and basically what he
said was the bet is not that they're
just going to make a better chatbot is
that they are going to automate
effectively full industries including
software engineering and that is
interesting because you're you're right
that this is something we talk about all
the time product how the product is
important and how it's a consumer and an
application company at this point. Um,
and OpenAI showed incredible momentum,
right? They have 500 million people
using Chat GPT every week. That's brand
new numbers that they announced in their
fundraising. And that would be amazing
if there was It is amazing. But it would
be even more incredible if there was no
hardware cost to be able to serve the
product. Like when Instagram hits 500
million active users, that's incredible.
And the best thing about that is you can
serve that product without investing
billions in GPUs. But OpenAI is
investing billions in GPUs and it's
going to burn that 7 billion. What did
you say in 2026 or 2027?
And so I'm wondering how do we in 2027.
So I'm wondering Rajan how do we think
about this because you at once have this
massive investment in GPUs and a very
successful consumer product and I'm
trying to make sense of it because I
want to say I'm bullish on OpenAI
because of all the users but the bearish
thing is the expectations now after the
money coming in are beyond through the
roof. There's no more roof anymore.
They're through the stratosphere and
it's going to be very very difficult to
meet those expectations. No, I think you
said it. It's infinity or zero, which is
not really the the bet and the decision
calculus you want to hear as an
investor, I feel, but apparently many of
the world's leading investors are very
happy to hear that. I think that's
exactly it. It's that the uh the this is
not traditional software. These are not
70 to 80% margins. It's not, you know,
like uh no marginal costs to serve new
users or almost zero marginal costs.
This is a completely different. It's
almost an industrial product in the way
it's built right now. And they're
they're continuing to go in that
direction. But again, in their credit, I
will say they're and we're going to get
into the conversation around is AI a bit
mid right now and is it is it creating a
letown? They're creating these moments.
They are the household name. They are
creating very cool products. They
continue to. And again, operator, not
great, but looks really cool. Deep
research both looks and acts really cool
and is great. Like they they're still
leading the way on generating excitement
across the entire industry. So, so they
they have that going for them, but still
the numbers are tough. Numbers are
tough. So, now I'm going to contradict
myself on the infinity or zero thesis.
And it is interesting because we're
always talking about this uh question on
the show about whether the business is
going to work. And of course, we talk
about it because if the business works,
then the products will continue to get
better. If the business falls apart, we
won't see any more advancement.
Everything is linked in this question
about whether there's going to be a
return for OpenAI, its investors etc.
And let me now make the middle case of
saying it won't be infinity and it won't
be zero. And that is that if you take
the applications that we have today,
chat GPT, the image generation, the
video generation, the voice generation,
all this stuff is quite useful. And in
fact, we shouldn't gloss over the fact
that OpenAI in a year has gone from a
100 million Chat GPT users to 500
million Chat GPT users. I mean, that's
extraordinary growth. And at the pace
they're going with these uh image
generation rollouts and every new
product thing they did, we know voice
played into this. We did a full episode
on that. Um they're go they're going to
get they will get to a billion users of
chat GPT. No doubt in my mind that's
coming. And what happens is every time
there's an advance, it cost a tremendous
amount of money to build that advance.
But every single time we also see that
companies figure out how to deliver how
to deliver that more efficiently. So I
would say if OpenAI stopped development
today and just found a way to make
what's in chat GPT more efficient, they
could run a profitable business with
that 500 million or that billion users.
uh and and that's how you get to uh
somewhere where a company can persist
and can deliver a lot of value and can
be profitable uh but just has to give up
on some of these wild ambitions if for
whatever reason they find out maybe like
Yan Lakun said on the show a little
while ago that you're not going to be
able to just scale up these models and
get AGI. Well, okay, to push back a
little on that, it sounds like, and
we've seen this in all different types
of the companies that flamed out, the
the story was always acquire users at an
expensive cost and then you could just
turn down your marketing spend and then
become profitable. And that did not work
for a lot of companies. In this case,
the thesis that like acquire the users
and then make the compute more
efficient, which I don't argue is going
to happen. We saw it with the deepseek
effect itself that it should be getting
more efficient and cheaper. I think the
only problem here is that's not the
philosophy of how they're building. It's
still bigger and more expensive and
they're they're they've really laid it
out that that's how we are going to win.
So there the idea that they're going to
really move like if they're really going
to automate entire industries the
economics even for the companies who
would be automated aren't there given
bigger more expensive models. So I still
think it's a tough one. Yeah. If you're
MASA you don't want to hear what I just
said. You want to hear that you're going
to infinity and that's the only option.
And um and let's put a pin on this
automating entire industries uh boast
because we will come back to it in a
moment. But I do think we should take a
moment just to appreciate perhaps how
these products are gaining steam because
I do think that there was another side
of this. There's two sides of the AI
discussion. One is is it going to be
profitable? Two is is it useful and is
anybody going to want to use it? We
didn't really have clarity on the second
question up until recently. And as I'm
putting together some of the stories
that we're looking at this week, I'm
starting to say, "Wow, it really is
happening for AI." So again, 500 million
people use Chat GPT every week. It's not
just the number, but it's the velocity
to which they got there. In March 2024,
so a year ago, they had 100 million
users. They've added 400 million in uh
in a year which is crazy. Now the
revenue side of it, this is from the
information. Chat GPT revenue surges 30%
in just 3 months. And the company they
say has hit 20 million paid subscribers.
This is something that OpenAI has uh
disclosed. That's up from 15.5 million
at the end of last year. And this is the
information it says. It turns out a lot
of people are willing to pay for a
chatbot that can code write and give
personalized health advice and medical
diagnosises and cook up detailed
financial financial plans among
countless other tasks. The strong growth
rate suggests Chhat GPT is currently
generating at least 415 million in
revenue per month a pace of about 5
billion per year and that is significant
money. So open AAI is really on the
upswing. Now, one more thing. Let's talk
about the other bots. It's not just
them. This is from TechCrunch. Chat GPT
isn't the only chatbot that's gaining
users. We see that Google, this is
according to Similar Web. Uh Google's uh
Gemini web traffic grew to 10.9 million.
Average daily visits worldwide in March.
That's up 74 7.4% month over month.
While daily visits to Copilot, that's
Microsoft bot increased to 2.4 million,
up 2.1% from February. Similar web also
says Anthropics Claude reached 3.3
million average daily visits in March
and Deepseek had 16.5
uh in this million visits in the same
month. So Chachi PT of course is way
more but you're seeing growth across the
board and to me this is just a moment we
have to admit it it's a moment where it
really is coming together for AI maybe
punctuated by all these AI images that
we're seeing with chat GPT. Do you
agree? I completely agree. I will
say this in the last few months the and
I would actually say even thinking from
the Super Bowl there was still a little
bit of uh skepticism I would hear from
everyone. Everyone I know is using some
kind of chatbot right now. A lot of
people are paying for it. It's become
kind of the norm. Oh, I have a chatbt
plus subscription or a cloud
subscription. But like it feels like
more and more people are putting in
their budget 20 bucks a month which we
have been doing for a long time and uh
and and choosing one and it just is
becoming more and more part of their
daily habit. I think Gemini seems
interesting because again it's free.
It's really good. It's getting better
and it's integrated into the entire
Google suite of products. So it's still
in terms of who could be number two or
even overtake number one. But overall, I
I do agree. We we've passed the
inflection point. It's normal. It's it's
And when people again, I was just
traveling for a few weeks and the number
of people around me I saw taking
pictures and putting them into chat GPT
for translations or just even asking
questions around travel. I myself, this
was an all perplexity chat GPT even met
Rayban asking questions on the fly trip
for me. the the days of just pure Google
search are long gone. So, it's
happening. I I completely agree with
that. Who's going to make money and how?
That's that's a separate question,
right? And this is definitely going from
a moment uh where it goes from toy to
being practical. And just thinking about
the image gen that we saw from chat GPT
over the past week. Yes, it's been fun
to turn ourselves into the Muppets, but
it actually has like a real business use
case as well. And this is again from the
information. There's this company called
Solowood Flowers. It's a Utah based
e-commerce company that sells replica
flowers mostly used in weddings. It
canceled its plans to spend between
150,000 and 200,000 on photography this
year after its manager saw Chachip's
ability to place customers real image
into an AI generated scene. So, we're
going to see this really have, I think,
significant economic impact and
consequences in the advertising
industry. It's also going to definitely
be used in the interior planning uh
interior design industry. You can there
was a Dallas uh based real estate
developer that uh posted on X. This was
a great that great thread um images of
an empty apartment and then ask Chachi
PT to show it furnished and that
inspiration is is and it looked good and
we're going to see inspiration there.
People will design websites and apps.
I've seen some of those come through.
People will design merchandise with it.
Uh you might even see building
renderings and custom charts. And I
thought that was really interesting.
Ethan Malik uh from one useful thing uh
the sub the Wharton professor one useful
thing on Substack he had uh the new chat
GPT image generator create some pretty
good uh infographics and his point here
was that basically the image is coming
from the model not being sent off to
some image generator and so you're
starting to see just really intelligent
AI image generation where we can
actually get accurate text and real
infographics uh coming into the model.
So again, just going from effectively
toy to something with real business
value. Yeah, I think the visual side of
things or the image side of things makes
this even more promising to reach a
wider audience because it just feels and
looks more real. Like it's one thing
with text, it's just not as I don't know
exciting or enticing, but it's also like
when you prompt understanding what that
output is is more difficult to re
understand the nuance. But to see, okay,
wait, if I prompt this one way, this is
the type of actual visual representation
of that prompt. And if I change a few
words, that changes the actual style or
like really clear images. I think makes
this a lot more accessible for people. I
will push back a bit that there is this
constant gap between what you see as a
cool example on X and when you go in the
real world and try to create things for
your business and I have been working
with a lot of generative image AI
generative AI image uh especially for
marketing and advertising over the last
couple years and it's gotten a lot
better but to really get it consistent
and good enough to push into the
marketing sphere unless maybe you're a
teu ad I think is uh it's still very
difficult to make it like incredibly
consistent. It's really easy to be like
okay create me a fake DTC brand called
Ron John's snacks of healthy snacks and
it makes like a really nice looking
packaging logo and then even a website.
I I was actually playing around with
this and this came out nicely and I'm
like, "Holy crap, I could actually turn
this into a Shopify website if I
actually could manufacture snacks." But
anyway, but like but I'm I'm going to be
launching like a thousand random
products I think soon. But but but but
in reality like to do that on a
consistent basis for a real business,
it's not there yet. It's getting closer.
But when it's why the you get this kind
of feeling of letdown because you're
promised this great thing. You can do a
really cool experiment or uh jiblify
yourself and that's quick and cool and
it works but when you actually got to go
to try to put this in a in a work
context it's suddenly not as cool. like
the custom charts. I guarantee you if
right now people actually take their
data and I use cloud and chat GPT to
actually feed CSVs and create graphs and
stuff and it works. But to like upload
the charts themselves and to extract
data or to transform them into different
visualizations, if that stuff's not
perfect, it's going to be a problem.
Don't fight the revolution, Rajan.
Cancel the flower photo shoot. Fire your
attitude to the moment. It's here. I'm
keeping my flower photo shoot. At least
in 2025. It's in the budget for my
replica flowers. I don't use real
flowers. I I I No, all jokes aside, I
think you make an excellent point here.
We're going to cover it in the next
segment. And um one more thing about
this, I was again listen going through
all the examples that I've seen of of AI
coming through. This one kind of doesn't
really I hope I don't know. I I can't
say I hope it's not true because I hope
it is true, but I kind of don't feel
like this is possibly accurate. There is
a study out of Dartmouth again from the
information that says that a customuilt
AI chatbot called Therabot uh reduced
patients symptoms at a level comparable
to traditional therapy. People with
depression reported 51% better feeling
51% better on average while many people
with anxiety reported a 31% average
improvement. And this was the first
clinical trial on AI therapy via chatbot
according to the researchers. I I kind
of don't even think that last sentence
even holds muster. Are you going to go
to an AI therapist? Is this is are we
there? I the that story actually
reminded me of the Evan Ratliff
Shellgame episode, an interview he did
where he cloned his his voice with an AI
and sent that to the therapist and sent
it to an AI therapist. Like I don't
know. I I do think this like for this
it's chat. It's back and forth
conversation. It's relatively structured
and programmatic answers. And I say that
I mean with a grain of salt, but like
it's a trained psychologist is going to
have like really structured ways of
answering your question. So there's no
reason that shouldn't happen here.
Whether people are okay with that or
feel comfortable with that is another
it's another question. But if it's
literally texting back and forth, is it
really that different than uh sitting in
a room with someone and talking to them
face to face? It's different. But could
it do a relatively good job? I think I
don't think that's crazy. Yeah, I would
I would certainly not uh sit down with
an AI therapist. Not yet, at least. You
do let these things sit down or text
with like chat. I wouldn't text with it
either. You let these things into your
inner self and then they can manipulate
you. I just don't feel okay with a
computer program doing that. But I do
think going back to the Evan Ratliff uh
episode, it was really funny when the AI
therapist is telling his AI bot to
breathe into a balloon and fill the
balloon with all of his anxiety and
worry and then let the balloon float
away. And the AI bot is like, I am
breathing into the balloon now. The
therapist is like, good, good. I don't
know. really is is scrolling through
your Instagram feed really that
different about letting a a technical
system know all of your innermost
desires and then present you with
algorithmically generated or curated
content to to answer those needs and
desires. Not to get too philosophical
here, but yes, I think it is. I I mean,
I really think that you're talking
Instagram is only a subtle manipulation,
though it is a manipulation. I think
that when you're I mean when you're
speaking with an AI therapist, maybe I
should try it before I I knock it
because I have spoken with the replica
AI companion. Um and that certainly
opened my eyes once I started talking to
that. I I do. How did that go? Yeah. Are
you a little too real for me, man? A
little too real. I didn't fall in love,
but I could definitely see how people
do. Yep. Yeah. So I do think that uh
yeah these things can get real and what
happens if the you you develop a deep
relationship with this AI therapist the
company updates the you know the
software and the next thing you know it
forgets everything about you be a pretty
traumatic incident I can just imagine
the like scroll bar loading and it's
like sorry we have lost your data please
start again could you imagine it's it's
happened before it's happened with
replica okay one last story about AI
then We're going to move on to we'll
move on to our next segment. OpenAI is
planning to release an openw weight
language model in the coming months.
This is from Sam Alman. We are excited
to release a powerful new openweight
language model with reasoning in the
next coming months. We want to talk to
developers about how to make it m
maximally useful. It's the first open
weight language model release since
GPT2. We've been thinking about this for
a long time, but other priorities took
precedence. Now it feels important to
do. I have so many questions. Uh, but I
want to hear what you think about this.
Ra. Well, I again I love that. I mean,
you just raised $40 billion, so you can
at least make it again hopefully a year
or two without uh needing to raise
again. So, you can start to say maybe we
will totally open source our models and
at least provide the waitings. I think
this is one of those odd interesting
things where OpenAI to me still lives as
kind of a research house and versus like
a fully operational capitalist business.
To me, there's still this they want to
be a leader among the research
community. They want to be a leader
among AI thinkers. And obviously Deep
Seek created the entire conversation
around the need to or the potential
around openweight models. So but I will
also agree I'm probably equally confused
as to why now I think they're trying to
help them. Yeah, they agree it's the
product and it's not the model. So
Samsung all about model being
commoditized and now it's just product
that matters. But we're gonna invest10
billion dollars in our next model.
That's weird.
That is weird. I mean, you're right.
It's hard to It's hard to basically
square that circle. Yeah. I think
there's a lot of uh circles that are not
squared in the overall open AI structure
and story, but they make good products.
They got good models.
Here's my conspiracy. Okay. Okay. There
we go.
Elon Musk is trying to stop OpenAI from
going for profit, saying that the
company abandoned its original
open-source methods. And what happens?
OpenAI raises 10 to 40 billion. We still
don't know yet. Predicated on it
transitioning to a for-profit. What's
going to make that for-profit transition
easier? An open-source model. I like it.
That's it. No, I mean I I I genuinely
cannot think of another. I tried ear a
second ago. I didn't even feel convinced
myself as I was trying to explain my
theory. I like that one a lot better.
And actually that's going at Elon in
that way. That's fun. That's fun. Oh
yeah. I mean you can just see it now.
Your honor, we are open AI. Yeah. Just
look at this. Listen, looked at all the
participation we got from thousands of
developers as we requested feedback.
Clearly, we are serving the market in
the way our initial charter intended. We
motion for this case to be dismissed.
Case closed. Masa, your check will be
wired immediately.
There we go. All right, let's take a
quick break. When we come back, we're
going to talk about a couple of, I would
say, anti- AI op-eds, including this one
from the New York Time. New York Times,
the tech fantasy that powers AI is
running on fumes. And another from CNN
saying, "The problem with Apple
intelligence isn't Apple, it's AI
itself." Do these authors have any merit
in their attacks? We will dig into it
right after this.
And we're back here on Big Technology
Podcast Friday edition running on a
Wednesday as we break down the news in
anticipation of an interview dropping
Friday. Of course, Ron and I will be
back not this Friday but a week from
Friday. So, let's talk about AI being
somewhat mid. There is a New York Times
oped called the tech the tech fantasy
that powers AI is running on fumes. It's
by Trusty McMillan Cadum. Uh she says,
"Behold the decade of
midte." This is what I want to say every
time someone asks me what about AI with
the breath breathless anticipation of a
boy who thinks this summer he Oh my god.
Can I do I have to read this? I think
you do. I think you do. This is what I
want to say every time someone asks me
what about AI with the breathless
anticipation of a boy who thinks this is
the summer he finally gets to touch a
boob. I'm far from a lite. It is
precisely because I use this technology
that I know mid when I see it. She goes
on to argue that artificial intelligence
is no revolution. It is middling tech.
It is something that is promised to do m
magical things but when you put it into
production it doesn't. Think about
checkout. She says checkout automation
was supposed to change the experience at
the supermarket. She calls it pretty
mid. Cashiers are still better at
managing the point of sale. She says,
"Think about facial recognition. That's
supposed to get you through security
faster." And the TSA's adoption,
however, hasn't particularly
revolutionized the airport experience or
made security screening lines shorter.
Artificial intelligence is supposed to
be more than radical, more radical than
automation. Tech billionaires promise us
that workers who can't or won't use AI
will be left behind. politicians
promised to make policy that unleashes
the power of AI to do something, though
many of them aren't sure exactly what. I
wanted to hate this op-ed, but as I read
it, I started to think, you know what,
we still haven't seen the killer use
cases for AI. Yes, you can use chat GPT
to help you sort through a document a
little bit more, but has it lived up to
the boast of it of the technology being
that revolutionary and, you know, really
empowering the people that use it beyond
those that don't? I don't know. I
couldn't fully hate this
story. This article, this this story
took me on an emotional journey as well
because I I think same thing. I wanted
to hate it, but also it raises the
point. I feel it's too
uh it's still selling the promise too
short, but it's not lying about the
present. And this is where, and I've
been ranting about this for a long time,
AI companies have a branding problem.
And we see this the way Google the Super
Bowl ads and the way Gemini was
presented and the way Chat GPT tried to
whatever present whatever they were
trying to do with that ad. Overall
everything the promise of automating
entire industries or these big boastful
things or people on X doing threads
about 10 crazy use cases I just
discovered with the new cloud update.
like that is what everyone is building
the like uh the promise around and what
they're raising money around. So they
have to do that and that's not where the
technology is right now. It's not if you
are very good at using it you can make
it do a lot of those things and there's
more and more again products being built
on top of these models to allow more and
more people to do these things. But
because the industry is promising that
that's the present as opposed to the
even near future, it's going to leave a
lot of people feeling like this. Again,
I my mom going back to me at the Super
Bowl turning to me and being like, "So,
what can I do with this AI like and not
being able to give her a clear exp like
simple explanation and these products
not delivering that for her?" and we're
going to talk about Apple intelligence,
our favorite topic, but certainly that
as well, not actually delivering on what
they show in the ad. So, I think this is
something the industry and I think this
year there's going to be a reckoning
with it that when you're promising too
much, at a certain point consumer
fatigue is going to hit in. It's going
to hit and uh people it you might see
those user numbers start dropping and
then you can actually hopefully get to
the actual work. But I think the
industry is moving in the wrong
direction on that side and this article
captured it. I'm totally on board with
you and it's so much it's funny cuz it's
the exact emotional journey that I had
where I was like, you're wrong. There's
so much useful stuff you can do with AI
and there were passages in there that
felt beyond over the top for me. Here's
one. The tech fantasy is running on
fumes. We all know it's not going to
work, but the fantasy compels riskaverse
universities and excites financial
speculators because it promises the
power to control what learning does
without paying the cost for how real
learning happens. Just this idea of
that, okay, we're all going to uh we all
know it's not going to work. Uh just
struck me as being totally removed from
the details. But then she also talks a
little bit about why she is so negative
on the technology. And again, it's the
delta between the promise and the
reality. This is what she writes. Every
day, an internet ad shows me a way that
AI can predict my lecture, transcribe my
lecture while a student presumably does
something other than listen, annotate
the lecture, anticipate essay prompts,
research questions, test questions, and
then finally write an assigned paper.
How can professors outeach an
exponentially generative prediction
machine? How can we inculcate academic
values like risk-taking, deep reading,
and honesty when it's this cheap and
easy to bypass them? So she's an
academic but I think this point is valid
in that the industry has promised to do
all this. I mean think about how often
we are talking about industry promises
of AGI. And I think I'm pretty proud of
the fact that on this show we haven't
sort of gone with the marketing uh hype
and sort of tried to take a nuanced and
coolheaded approach to what we're
hearing from the industry. And there's a
reason for that. We think that it's
important for listeners to get the truth
here. And by extension, Ranjan, you've
been talking for a long time about this
branding issue that the promises from
the industry that you're going to have,
you know, these brilliant AIs that are
going to be walking around with you. Uh
feel like they should be here already.
And I think the industry oversells what
there is today. It's not there. It's
going to take years. Sort of undersells
what we already have, right? So there's
both this overselling and underelling
happen in terms of the actual
capabilities and then it's no surprise
that you're left with somebody who is
not a techie but deals with the
technology and kind of looks at you and
says you know what shut
up right yeah I think that's exactly it
that I mean when you and in that gap
between expectation and reality like
like even the chat GPT generating images
for brands like I worked on something
and with the chief marketing officer of
a fashion brand and I'm like okay here
is the product on an completely
artificially generated model which then
this is like a year ago and it's blowing
my mind that I've been able to do this
and the first comment is the print on
the fabric is not exactly the same and
it's a very intricate detailed print and
it's like wait do you not understand
just what just happened. I just created
a person and put our this product on
them and it the first reaction was a bit
of disappointment because the
expectation was it was going to be
perfect and I'm sure like this is
happening across the entire industry
especially when you get into the more
enterprise and professional use cases
and I do think this is this is the exact
branding problem in addition to the fact
that she even throws in that like it's
been Doge has been an infomercial for AI
that the the use cases and the like
where it's where it's living and who's
promoting it is causing some problems
too on the branding side. Right now,
let's go to this CNN story. CNN says
Apple's AI isn't a letdown. AI is the
letdown. And I think continuing on this
Apple beatdown that's been going on in
the press for the past couple of weeks,
it says, uh, "The real reason companies
are doing this is because Wall Street
wants them to. Investors have been
salivating for an Apple super cycle, a
tech upgrade so enticing that consumers
will rush to get their hands on the new
model. Fact check. True. In a rush to
please shareholders, Apple has made a
rare stumble. The company is owning its
error and now delaying the Apple
intelligence features to the coming
years. And um this goes to a little bit,
this is actually a very incisive point
that this author makes here. In June,
they write uh Apple floated a compelling
scenario in the new fangled Siri.
Imagine yourself frazzled and running
late for work simply saying into your
phone, "Hey Siri, what time does my
mom's flight land and is it at JFK or
LaGuardia?" In theory, Siri can scan
your emails and texts with your mom to
give you an answer. That saves you
several annoying steps of opening your
email to find the flight number, copying
it, then pasting it into Google to find
the flight status. If it's 100%
accurate, it's a fantastic time server.
If it's anything less than 100%
accurate, it's useless. Because even if
there's a 2% chance it's wrong, there's
a 2% chance you're stranding your mom at
the airport, and your mom will be
rightly very disappointed. Our moms
deserve better. Our moms deserve better.
I agree. The thing that kills me, Here's
to the moms and picking them up at the
airport 100% of the time. The thing that
kills me about this is honestly that
that query should be answerable at 100%
success rate. I'm sorry Apple, you guys
should figure that out. That's a that is
a straightforward thing. But this is
again going back to the problem that I
do well actually I will disagree that
Apple's AI is a letdown and I know
regular listeners know that's how I feel
but that is a problem that actually most
AI systems and chat bots that have if
you upload a bunch of emails and you ask
that exact question into claude it will
get that answer right. So I think Apple
the biggest letdown and again going back
to the gap between promise and reality
is they essentially promised everything
all at once to everyone rather rather
than being like okay let's solve the go
to your inbox and answer all of your
travel questions travel planning make
travel planning like a little feature
make it a little app make it like a
popup Apple tips with for Apple
intelligence but instead The idea was
all questions could be answered right
away and that's of course it's going to
be a letdown but again I think AI should
be able to today solve a lot of this
stuff. Yeah. I wanted to read that out
there a because it sort of harks back to
our attempt to use Siri. Yes. And
failing miserably and I think you kind
of seized on my follow-up point here
which is AI can and should get that
right. There's no excuse not to get that
right and it is going to start
delivering and that's why like when we
talked earlier in the show about how AI
is finally hitting its stride. This type
of stuff is going to push it even
further. I'll give you one example. I
was in my Gmail inbox and just used the
Gemini. I'm always reticent to use these
things because they usually don't work.
But I said, "Okay, I have a pretty
complex task and it will be worth
wasting the 30 seconds on a Gemini query
um to see if it can work." And that was
I wanted it to pull out all the paid
subscribers of Big Technology. I wanted
to pull out their emails and separate
them by commas so I could invite them
into our Discord. And I typed that into
Gemini and lo and behold, Gemini
produced the list perfectly accurate
from a number of emails going back a
month. And I was just able to copy and
paste that into the BCC field and invite
the subscribers into the Discord. That's
incredible. I mean it is effectively
applying a conversational probabilistic
technology into a deterministic scenario
and it proving that it can execute and
once it starts getting that stuff right
and doing it for a broad degree of use
cases whether that's Google or Apple or
Amazon or Microsoft or all of them
that's when you're going to see the
movement. Well, the I think that in that
exact example in that exact example is
kind of ref like it's a good reference
point to one of the points in the
article. She's kind of going at Kevin
Roose at the times and she's like he had
said it sounds like she listened to a
hard fork episode and was like pissed
off. Yeah, she both goes in on Kevin and
Casey. Okay, continue the because Kevin
said there are people who use AI systems
and know that they're not perfect and
that those are the regular users that
there's a there's a right way and a
wrong way to query chatbot. And then the
author is this is where we the people
are apparently failing at AI because in
addition to being humans with jobs and
social lives and laundry to fold and art
to make and kids stories, we should also
learn how to tiptoe around the
limitations of large language models
that may or may not return information
accurate information to us. I like the
line. It's a it's it's a good line. It's
good writing at the end. But I also to
me this is where Apple it's a let down
on their part because they promise to a
human with a job in social lives and
laundry to fold that they'll get all
these right. The example you gave is a
perfect example of if you kind of know
what's possible and how to ask, it's
going to get it right and it's
incredible. But that this gap between
knowing how to use it, like that's where
either there needs to be more user
education or the product needs to get
better because the models are good
enough to answer all these kind of
queries. Yeah. I don't know. I mean, no
one is expecting you to use the LLMs to
make your life better. just to me seems
like all right tech companies built
these tools like go and use it if you
want or don't use it if you don't want
sort
of that comment but these investors are
certainly needing that to happen they
need that but you don't you don't have
as a consumer you have agency and 20
million people feel it worthwhile to pay
for chat GPT so clearly this is working
for some people I would
argue your agency
with Apple
intelligence is is a bit limited when
it's shoved at into every part of the
iPhone and product and accidentally I
call Siri even on my MacBook right now.
Yeah. I I think they're questioning free
will in terms of interacting. Turn that
off. I don't know. Just turn it
turn it right off. Do you think Do you
know how to? I haven't tried. I know
it's possible. I haven't tried either,
but I I might go and do it and we should
talk about it next week because I have a
feeling it's probably going to be a pain
in the ass. All right, next week folks,
you tune in. Ranjan and I will both try
to turn off Apple Intelligence Live on
the air and uh we'll see if we can do
it. All right, very quickly on this
line, Amazon's uh Alexa Plus is out and
this is from the Washington Post. It's
missing some features. The new enabled
uh assistant Alexa Plus is launching on
Monday. So, that's Monday of this week,
but not all the features the company
showcased are ready. Some of the new
features uh that aren't going to be
coming out include uh ordering takeout
on GrubHub based on a conversation about
uh what you're craving uh or using Alexa
plus to visually identify family members
and remind them to do specific chores
like walking the dog. I guess that's if
you have the security camera in the
house. Other stuff like brainstorming a
gift idea or generating a story to
entertain your kids also won't be
released until later. So, I don't know.
We saw the live demo at the release
event, but I think this is just another
case of Amazon or of a company making a
big promise about an AI assistant. Now,
at least they shipped it. I guess they
shipped something. I try to get it to
work on my devices. I have to I think I
have to disable uh multil- language and
I can start using them and so we can
report back on that next week. But I I
don't know should we be excited that
they launched or or also just be like
all right here we go again they uh they
are missing features of courseh this is
where I'm genuinely excited about this
is we talked about a few weeks ago I
might get rid of all my HomePods and
move back to Alexa. But to me, what was
very interesting about that announcement
is brainstorming a gift idea is a pretty
straightforward generative AI question.
Generating a story to enter your
entertain your kids. I do that all the
time with chat GPT voice and it's
amazing. I'll literally be like, "Tell
me a story about this really specific
subject involving my kid like this
really specific scenario." And he loves
it. So it can do that job. So why like
using facial recognition to identify
family members and remind them to do
specific chores? That's a tougher
problem. That's a that's a tougher
problem to solve. But and ordering on
GrubHub and not getting that wrong and
like at 100% accuracy otherwise people
would be really pissed. I get that stuff
taking time. But why advertise that
stuff if it's not close to ready? That's
just like guys bring back consumer trust
in this. Make people happy, make them
excited. You know what? Open AAI is
actually doing that pretty well. Like in
terms of they are doing it the best of
everyone, which explains why they have
the product that's working. Yep. No,
that's why they're at 500 million.
That's why people trust it even more
because you go there, you actually, do
you know what I'm going to admit right
now? I was unable to jiblify an image. I
did. I kept hitting a content policy
thing when I tried to put a picture of
me or my wife up there and like try to
jiblify it. Were you able to do people?
I have been able to. Yeah. What is What
I'm paying you, OpenAI. I'm paying you.
Let me jiblify myself. I don't know.
Yeah. What I would do is just um I would
just go to the web version. Have you
been using the app? The web version is
seemingly more permissive. No web
version. I I actually got a little
obsessed with this because I on Sunday I
landed back in New York and I all I saw
was this all over different social media
platforms and I'm like, "Okay, how can I
not do this right now? I'm going to
write a whole New York Times oped on how
AI is letting me down because Open Chat
GBT is not letting me jiblify myself."
It's mid. It's mid. Okay, let's just end
this segment. Um, I think we have
consensus here, which is that we both
believe that AI is not going to just
fizzle out and it's not a, you know,
fake revolution, so to speak. But we
also think that that overpromising is
going to have some serious consequences
and we're already starting to see some
signs of that
backlash. Agreed on that.
All right, couple minutes left. Let's
just talk about the XAI acquisition. So,
XAI bought or the X acquisition. Too
many X's. uh XAI bought X. So Elon
Musk's AI company bought uh X. It's kind
of a weird deal. So there was uh one set
of advisers working for both sides. It
is a val it put XAI's valuation at 80
billion even though there was no new
money in and that increased its
valuation from 80 billion to 50 billion.
So that 30 that 33 billion uh that X uh
X got is actually probably smaller if
you just use the last fundraising
amount. We have a professor from um UCLA
that says it's funny money is telling
the Wall Street Journal it's funny
money. It's like using monopoly money to
buy Pokemon cards. And as someone who
has done that in the past, let me tell
you, don't knock it till you rock it.
Professor Andrew Verstein. And uh it is
interesting that basically we're seeing
AI which is the next platform swallow
social media which is the last pro
platform and this is what Axio says. AI
eats social media as XAI swallows X. All
your X data was going to be used to
train these models anyway and now it
definitely is and there's no getting
away from it. So that's the headline on
the deal. Ranjan, I'm curious what you
think about it and if there's anything
you think the common narrative might be
missing about what this deal means.
I think it's like using Monopoly money
to buy Pokemon cards. If that's the
common narrative is the right one.
Again, the kudos to Elon Musk and the
adviserss who worked on both sides of
the deal cuz you would never see
something like that to raise the
valuation of XAI from 50 to 30 50 to 80
and then simply add in the $33 billion
price tag and maybe that's what you're
attributing the rise in valuation to be
the simple, you know, add-on of the $30
billion or so for X is quite incredible
to then be able to just make up whatever
valuation you want. Forex is incredible
because remember he bought it for 47
billion I believe it was they valued it
at
45ish and and they said $33 billion with
the valuation minus debt. Like basically
he's he's able to just say, "Oh yeah, it
hasn't lost any value." Even though
we've all seen endless reports and you
can even see it in the advertising when
you load your X feed like just how
ridiculous it is that they're not making
money. They're losing money. It's not
going in the right direction. And he
just was able to say, "Oh yeah, it's
worth what it was when I bought it.
That's okay." And now it's part of XAI,
my other company that has an obscene
valuation. It's the same investors on
both sides. It's the same bankers and
lawyers on both sides. I mean, this one
Masa is jealous of this one. Yeah. I
mean, he's he he he thought his 40
billion and we're forecasting revenues
about my own the investor actually
paying money to the portfolio company.
This puts that to shame. Well, the
interesting thing is that now XAI XAI's
revenue is going to be coming from X,
which is interesting. Like X will be the
revenue arm of XAI in some ways because
you're going to pay for Grock through
Twitter or old Twitter. You're going to
have ads still coming in to X. So, that
adds a interesting wrinkle to it. But,
let's just end let's end on this.
Uh, this is the close. Well, it's not
fully the closing chapter cuz we don't
know what's going to happen to XAI, but
this, let's say, the intermediate
closing chapter, which makes no sense,
but you know what I'm saying on the X
saga. Was that a good buy for Elon Musk
strictly from a business standpoint? I
think it was a great buy for Elon Musk
from a business standpoint because he
still owns it, no cash changed hands and
he got to just label a valuation that he
wanted to on a a property that is not
worth that. So that kind of financial
engineering I think we should all be
fascinated, proud and terrified of.
Well, I think that says it all. Ranjan,
it's so great to have you back. Welcome
back to the show. It's good to be back.
See you next week. All right. See you
next week. On Friday. Yes. Thanks
everybody for listening. Special episode
coming up this Friday. So stay tuned for
that. And then Ron and I will be back a
week from Friday to break down the
week's news as usual. We're back, baby.
Back in action breaking down AI news
like it's been no time at all. All
right. Thanks for listening and we'll
see you next time on Big Technology
Podcast.