BG2Pod with Brad Gerstner and Bill Gurley: Liberation Day, Tariffs, US v China Open Source, OpenAI Fundraise, $CRWV, TikTok | BG2 w/ Bill Gurley & Brad Gerstner

Release Date: April 4, 2025

In this compelling episode of BG2Pod, host Brad Gerstner engages in a dynamic conversation with seasoned venture capitalist Bill Gurley. The discussion traverses critical topics such as the implications of Liberation Day, the latest tariff announcements, the competitive landscape of open source between the US and China, OpenAI's substantial fundraising activities, Core Weave's IPO, and the ongoing TikTok negotiations. The dialogue is enriched with insightful analysis, strategic perspectives, and notable quotations that provide listeners with a comprehensive understanding of the current tech and economic climate.

1. Liberation Day and Tariffs

The episode opens with a reflection on Liberation Day, a significant event following President Trump's latest tariff announcements. Gurley and Gerstner delve into the substance and market ramifications of these tariffs.

Market Reaction:

• Bill Gurley reflects on the immediate market response: "There was a headline that hit right after the market closed from the Wall Street Journal. I believe that it was 10% across the board. And the markets jumped up like two and a half percent." (03:22)

• Brad Gerstner elaborates on the volatility: "The tariffs largely break down into, let's call it three or four big buckets... the market is not liking this at all." (05:24)

Tariff Details and Exemptions:

• The discussion covers the complexity of Trump’s tariff calculations, including non-tariff trade barriers like currency manipulation and judicial restrictions. They highlight specific sectors such as automotive tariffs at 25% and exemptions for semiconductors and pharmaceuticals.

• Gerstner notes the political undertones: "Politically, this is what Democrats were running on 20 years ago. And it just shows how much the political parties have changed." (07:00)

Implications for CEOs and Business Planning:

• Bill Gurley expresses concerns about the uncertainty these tariffs introduce: "The administration has a reputation of maybe some of this is for negotiation, maybe some of it's not real." (12:00)

• Brad Gerstner emphasizes the challenges CEOs face in planning amidst ambiguity: "Nobody knows what to do. And remember, the Fed had just come out last week, had taken down their forecast for GDP growth..." (14:44)

2. US vs China Open Source and AI Developments

Transitioning to the realm of open source and artificial intelligence, the conversation shifts focus to the strategic maneuvers of the US and China.

China’s Embrace of Open Source:

• Bill Gurley explains China’s long-term commitment to open source: "China has been supportive of Open Source for well over a decade now. They've been in on it for a long time." (19:57)

• Gerstley adds historical context: "They embrace Open Source over a decade ago because it made a ton of sense for them in a world that had pointed a finger at them from an IP standpoint." (22:20)

OpenAI’s Open-Weight Models:

• Brad Gerstner highlights OpenAI’s strategic shift: "Sam has been dropping the breadcrumbs on Twitter that they wanted to launch an open source model. They've been GPU constrained..." (26:41)

• Gerstley discusses the competitive advantage: "Openness is a continuum, it's not black or white... It creates ease of distribution so you could run on multiple clouds." (22:59)

Competitive Dynamics:

• Bill Gurley underscores the defensive nature of open source: "They will embrace Open Source as an attempt to level the playing field." (24:00)

• Gerstner anticipates regulatory responses: "Washington may intervene to take action because there are people perhaps lobbying against... open source Chinese models." (25:38)

3. OpenAI Fundraise

The conversation moves to OpenAI's significant fundraising efforts, shedding light on the capital dynamics within the AI sector.

Investment Round Details:

• Brad Gerstner outlines the fundraising specifics: "They announced the long-rumored investment that was led by SoftBank... a $40 billion investment round." (34:34)

• Valuation Perspectives:

  • Gerstley compares OpenAI’s valuation to its peers: "OpenAI at 20 times versus anthropic or X AI at 50 or 80 times." (37:43)

• Operational Insights:

  • Brad Gerstner examines Core Weave’s business model and unit economics, arguing for sustainable growth despite high capital expenditure: "Think about their unit economics... they expect to pay back all the CapEx, OpEx and GPUs in three years." (40:37)

4. Core Weave’s IPO

Core Weave’s recent IPO is dissected, with Gerstner and Gurley providing their investor perspectives and market expectations.

IPO Performance:

• Brad Gerstner shares his experience as a shareholder: "The stock in the last couple of days, despite the fact they took it public last Friday... it's a good thing for us." (52:38)

• Bill Gurley offers a candid take on IPO challenges: "It's so funny. We sit around and complain about the IPO market not being open... anyone that tells you when you're ready to go public that you have to wait on the markets to be in a particular place, I would tell them to shut the fuck up." (54:15)

Valuation and Future Prospects:

• Gerstley discusses Core Weave’s strategic diversification and future contracts: "Google's gonna buy a bunch of Nvidia chips through Core Weave... they've emerged as the leading AI kind of cloud." (53:00)

5. TikTok Negotiations

The episode delves into the intricate negotiations surrounding TikTok’s status in the US, highlighting potential outcomes and investor implications.

Deal Structure and Ownership:

• Brad Gerstner outlines the proposed structure of TikTok US: "The new company would be partly owned by ByteDance, but under 20%, and partly by new investors like Amazon, Andreessen, Oracle." (66:32)

• Bill Gurley probes the financial implications: "Where would that money go, Brad?"
  Gerstner clarifies: "The money would go into this new company... it would have a new board." (66:42)

Stakeholder Perspectives:

• Gerstley discusses ByteDance’s stance and value considerations: "Most people think the fair value of this is closer to a trillion dollars or certainly to 800 billion." (70:06)

• Brad Gerstner emphasizes the importance of regulatory certainty for investors: "Whatever the dilution is caused by this, it's nominal relative to the value of the total." (70:06)

Geopolitical Implications:

• Bill Gurley raises concerns about Chinese government intervention: "The Chinese government could probably block the deal." (71:29)

• Gerstner remains optimistic about bilateral trade relations: "The president wants to do a deal with Xi... the bilateral trade relations are going to really dictate the direction of global growth." (71:44)

6. Closing Remarks

As the episode draws to a close, Gurley reiterates the commonality among major tech companies that have successfully navigated market challenges.

Notable Riddle:

• Gurley recounts an opening riddle: "What do Salesforce, Netflix, Square, Amazon, Palo Alto Networks, Facebook, Snap, Proofpoint, Netsuite and Core Weave have in common? They all broke even." (00:02, 62:36)

• Brad Gerstner echoes the sentiment: "It's just such a wrong way to look at things." (62:50)

Key Takeaways:

• Tariff Uncertainty: The administration's tariff announcements introduce significant uncertainty for CEOs, impacting investment, hiring, and strategic planning.

• Open Source Strategy: Both the US and China are leveraging open source as a strategic tool in the AI sector, with OpenAI making bold moves to outpace competitors like Meta’s Llama.

• IPO Insights: Core Weave’s IPO highlights the challenges and opportunities in the capital-intensive AI infrastructure market, emphasizing the importance of long-term contracts and unit economics.

• TikTok Negotiations: The outcome of TikTok US negotiations holds substantial implications for investors and the broader tech landscape, underscoring the intricate interplay between geopolitical factors and corporate strategy.

• Market Dynamics: The episode underscores the rapid evolution of the tech market, driven by AI advancements and shifting trade policies, and the critical role of strategic adaptability for sustained growth.

This episode serves as an essential listen for investors, tech enthusiasts, and industry professionals seeking to grasp the nuanced interplay between technology, economics, and geopolitics shaping the future landscape.

Timestamp References:

• [00:02] – Opening riddle introduction
• [03:22] – Initial market reaction to tariffs
• [05:24] – Breakdown of tariffs and market dislike
• [07:00] – Political implications of tariffs
• [12:00] – Uncertainty in policy impact
• [14:44] – Challenges for CEOs amid economic uncertainty
• [19:57] – China’s support for open source
• [22:20] – Historical context of China’s open source embrace
• [22:59] – Openness as a strategic continuum
• [24:00] – Defensive use of open source by major companies
• [25:38] – Regulatory responses to open source AI models
• [26:41] – OpenAI’s open-weight model announcement
• [34:34] – OpenAI’s $40 billion fundraising round
• [37:43] – Valuation comparisons between AI companies
• [40:37] – Core Weave’s business model and unit economics
• [52:38] – Core Weave’s IPO performance
• [53:00] – Core Weave’s diversification and future contracts
• [54:15] – Gurley’s candid take on IPO market challenges
• [66:32] – Structure of TikTok US negotiations
• [70:06] – ByteDance’s valuation and investor perspectives
• [71:29] – Potential Chinese government intervention in TikTok deal
• [71:44] – Optimism about US-China bilateral trade relations
• [62:36] – Reiteration of the opening riddle
• [62:50] – Critique of market perspectives on IPOs