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- [00:00]
A
Are we now at the point where the AI investment frenzy means it's AGI or market collapse? OpenAI's $1 trillion infrastructure investment may impact all of us and he's the frontrunner to be Apple's next CEO. We'll cover it all right after this. Capital One's tech team isn't just talking about multi agentic AI. They already deployed one. It's called Chat Concierge and it's simplifying car shopping using self reflection and layered reasoning with live API. API checks. It doesn't just help buyers find a car they love, it helps schedule a test drive, get pre approved for financing and estimate trade and value. Advanced, intuitive and deployed. That's how they stack. That's technology at Capital One. Welcome to Big Technology Podcast Friday edition where we break down the news in our traditional cool headed and nuanced format. We have a great show for you today. We're going to cover all of this crazy AI investment and ask ourselves are we insane for not sounding an alarm and saying this is going to get much worse before it gets better? A lot of money is going into AI and it's time to look at where that money is actually going, what it's premised on and whether it is putting too large of a bet on OpenAI, maybe betting the entire US, maybe the global economy on one company's fortune. We'll also talk about who might be the next Apple CEO and whether if it's time for him to just step up right now. Joining us as always on Friday is Ranjan Roy of Margins. Ranjan, great to see you.
- [01:40]
B
Good to see you. I'll admit it, I am going to be the next Apple CEO. It's breaking right now. He might be the front runner to be the next Apple CEO.
- [01:50]
A
If you fix Siri, I think a lot of people will be happy. So no, no pressure. It's obviously an easy thing that not many people have tried and is quite simple to do.
- [02:00]
B
That was my pitch to Tim. He bought it. He bought it. He's been listening for a while and he realized the only way to fix series to bring me in.
- [02:08]
A
Well, I look forward to being able to do our next set of episodes with you in the big UFO and Cupertino. So that is assuming of course that we still have a global economy by the time you take over. And I'm starting to think it's not such a sure thing because we've seen two things happen. One is an even greater increase in investment in AI infrastructure over the past. Let's say Two weeks. And it's been two weeks since we last spoke and there is so much that's happened. But as that has come up, there has been an increasing chorus from people even within the industry that's starting to say, does this make any sense at all? Is this going to be a problem? And let us return to Dave Kahn, the Sequoia partner who wrote of course a great piece a couple years ago or a year ago Even, about the $600 billion question around generative AI and whether there's going to be enough profit to actually justify the investment. He now says that that question is quaint because we are at a stage of the build out that is much further than that. So he says this one thing has become clear. Nothing short of AGI will be enough to justify the investments now being proposed for the coming decade. This is happening even as AI's potential is being realized. Chachi PT has continued at its epic rise to north of $12 billion in run rate revenue. Anthropic has reached 5/billion dollars in run rate revenue in a meteoric rise. And there's a new club of companies scaling quickly from zero to $100 million in revenue. There's a version of the world, and this is the version that Microsoft and Amazon increasingly seem to be pursuing, where the next frontier is AI adoption. The models have proven themselves to be great and now it's time to monetize these investments and drive a world changing technology evolution. But that point of view is by no means widespread. Outside of these giants, a debt fueled second push is happening. Labs are taking all their profits and capital and plowing them right back into new data centers. And a new breed of companies, namely Oracle, Meta and coreweave, are going all in, no holds barred. Given the scale of these investments, the only objective that can be that can explain this strategy is AGI. So I think Khan is making a really good point here. Two things are happening. One is you have companies like Microsoft, which came on this show last week to talk about how it was basically being more rational with AI spending and Amazon, you could put them in that bucket and then you start to see this crazy build out that OpenAI, Oracle and others are driving that. The numbers really only make sense if you get to AGI, if you get AI that cure cancer. And so much of that is speculative and that is where we might be getting into a danger zone. So Ranjan, I'm just going to turn it over to you. What do you think about that?
- [05:04]
B
Yeah, I'm really glad that he's Making this distinction between those who are kind of just pushing the idea that it's time to monetize these investments and drive a world changing technology evolution versus this debt fueled second push. I've been looking at this a lot over the last couple of weeks around the Oracle deal, the AMD deal, all these deals are focused on capex and not product. Again, I mean there's been some incredible moments in product over the last couple of weeks, Sora included, which we're going to talk about and I've been waiting to talk to you again. But I think overall this idea that, you know, it has to be AGI, it has to be something that justifies all of this Capex, you know, investment is what Oracle meta Core Weave, all these companies are betting and, and there has been absolutely nothing that shows us that we're actually headed in this direction. So it starts to feel more uncertain and irrational and nothing's stopping it right now. But I think it's a good thing that we're talking about it, right?
- [06:07]
A
And over the past couple weeks I've been asking myself like, am I a lunatic for thinking that some of this infrastructure spending is just not following the data that you're seeing in AI research? And it's something we've talked about on the show with people in the industry for I don't know how many months now, six months a year where we've talked about how the gains that you're seeing from scale are leveling off. And that's something that seems to be somewhat consensus, as close to consensus as you're going to get in AI, because there'll be some folks, maybe like the Dario Amanda's of Anthropic who are saying that scale, you know, is a way to get to AGI, scaling up LLMs. But everybody else is saying we're seeing diminishing marginal returns. So you have that seeming consensus and on the other side you have investment that's building as if that's not true. That's building as if you can just scale your way to AGI. Let's go back to Dave Kahn here. He really makes this point. Well, what's surprising me is that this doubling down on capex is happening even as the dream of AGI seems to be cooling off. Two things have happened. First, new model progress has tapered off despite much larger training clusters. Second, as likely consequence, AI luminaries have started to walk back their AGI timelines. In December, Ilya Sutskever said that pre training is dead. In June, Sam Altman said AGI will be more of a gentle singularity. And that same month Andre Kathy forecasted a decade of agents rather than AGI in 2027. It's such an amazing divergence between what the people in the field are saying and what Wall street and the investors are buying. What do you think about this?
- [07:45]
B
I like my singularities to be gentle, so I'm glad, I'm still glad Sam's saying that. But no, no, I agree because it, there's kind of two parts of this. It's one, you know, like is this CapEx investment, are these investments in data centers actually going to be required and is this need for compute going to be like are we going to get to AGI and just these very heavy compute processes that solve all of our problems. But then the other part that I actually think Dave Kahn didn't really get into is it kind of present was presented as binary that like heavy compute leads to AGI, but also the idea that doing these things in a more compute efficient way is still another third path, I think. And we, I mean you on stage with Google hearing about how it's algorithms, not just raw compute. I think we've been seeing a lot more around that. I saw some paper around, I think it was called like a tiny recursive model can actually achieve very similar results as deep seek. The idea that if you actually do things in a more compute efficient way, that makes things a lot more cost efficient for companies and people will much prefer that to the heavy GPT5 is going to think hard and long about every single problem, even very simple queries that you give it just to kind of just drive compute usage. So I think that overall the only way any of this makes sense is if we realize this vision of just like heavy compute AGI, which there's no real signs pointing to at least that I can see. And as you said, even when even Sam and Carpathi and all of these and Ilya are all saying this as well, it's such a disconnect from the actual investments that are being made.
- [09:37]
A
Right. And we'll get into sort of what the logic might be even if we're not going to get AGI simply from growing these data centers and models. But I think we can both agree that it's crazy making in a way what we're seeing right now in terms of the investment and where the research is pointing completely disconnected.
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B
Well, I have a question. What's your current definition of AGI other than Waymo's driving around New York City.
- [10:04]
A
But in this context Obviously that's the first definition.
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B
I mean that's the official industry standard. But, but in all these contexts, I'm curious, like you mentioned, AI curing cancer is kind of one like high level interpretation of this. But how do you look at what could be AGI in this context?
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A
Let's just go with the definition that I think these companies are thinking about and that is that AGI that can do more than 50% of white collar work today.
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B
Okay. I mean, which, but I guess that's the part where I still have trouble kind of squaring this because I really believe you can probably do 50% of white collar work without incredibly heavy compute kind of in that Microsoft and Amazon camp that the models are good and obviously the longtime listeners know where I stand on product versus model. But like, I think there's a world where you can build these very complex workflows and you can do this work. And it doesn't require AGI, it requires the current state of technology and, and all those data center. And we'll get into the actual, like, does the feasibility of these data centers from kind of an investment in chip standpoint even make sense? But, but I think you don't need that interpretation of AGI to actually make this, make AI realize its potential.
- [11:27]
A
Okay, so what you're doing right now is you're giving the perfect rationale for why this build out makes sense. Because I think what the, what the labs would argue to their investors is even if we stop today, we have technology that can, with the right orchestration, automate 50% of white collar work. And therefore this investment is going to be, is going to be worthwhile. And you actually kind of hear it slip from people like Dario, who says that 50% of entry level white collar jobs may be automated within a couple of years. If you don't need a massive technological advance to get there, then that would be the logic for this build out and make the investment worthwhile.
- [12:10]
B
Do you think, I'm curious, do you think that level of a case even has to be made for to investors? Like, do you think that was a pretty good pitch? I'm halfway in there. But, but do you think they're even getting to that level right now or what do you think these conversations look.
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A
Like between some of them? Some of them, yes. You're going to talk about like OpenAI and AMD and we're going to get into it in a moment.
- [12:36]
B
Yeah, the Matt Levine piece was extraordinary.
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A
Some of it, some of it is like, yes, that needs to be made. I feel like that was a version of the pitch made to Lightspeed, for instance, because I spoke with the Lightspeed investor who wrote a billion dollar check into Anthropic and he basically, for the Dario profile, did the math for me and sort of explained it in a way similar to the way that you just explained it. So I, I do think that, yes, that's where the convergate conversation gets in some areas, but I also think there are others who are like, let's just, let's just do a deal, please. We need the OpenAI brand shine and, and that's where, where it nets out.
- [13:17]
B
Yeah, I, I can see that. I, I can, I can see that it can go both ways. And, and on that question of AGI, because I think like Dave Connor even kind of pointed out three thing, three kind of like underlying factors that make things even less likely. And I thought this was interesting because we all talk about AGI as this kind of like vague concept that the labs will get us to. But in reality like the first big thing, which I don't think I hear very much about at all, is that the labs are starving PhD programs of talent. So like now actually that really kind of foundational research moves only towards labs away from universities and kind of more traditional research, even though that's where all of this started, is actually, I think a dynamic that is totally overlooked and could have kind of longer lasting consequences around this. But then, and then one of the other ones I liked was corporate politics tends to favor invoke consensus ideas over more radical unpopular ones. I think it's fair to say that like even though the Sams and the Dario still present themselves as kind of renegade, you know, like us against the world taking on these kind of challenges, these companies are becoming corporations. I mean valuation certainly, but you have to start to imagine, I mean OpenAI's internal politics are the stuff of legend, but, but overall the idea that they're going to still be able to operate truly in that kind of like intense innovation way versus they're starting to get a little Google Cloudified, I think, I think is another risk to this.
- [15:00]
A
Yeah, I think this is a great point that Khan brings up, which is basically you're giving, you're putting so much money towards LM development and you're investing as if scaling LLMs is a straight shot to AGI, that when you get to the, if it's not, you're actually going to slow down that pursuit because you're so focused this way. I think it's a great, it's A great point. I think that you do hear from folks like Demis saying that we need a couple breakthroughs beyond LLMs to get to AGI. And of course Yann Lecun has been loudly talking about that. I think this is a real risk though. I think he's totally right. If you, if you're being thrown millions of dollars to join, let's say Metta to work on LMS and you would have otherwise been pursuing a non LLM solution that you know, sort of out of the box and maybe at a 10% chance of working, but if it worked, would be a big breakthrough then in aggregate what's happening now is probably slowing down the AI field, which is really interesting and let alone what would happen if this actually goes bust.
- [16:07]
B
No, and then I mean on that, like you have to imagine what are the actual human dynamics underlying this. Like this is a small group of people, a lot of these people work together. So you have to imagine the groupthink like really has to pervade the way they're approaching or thinking about anything. And obviously I think that's why Deep Seek was such a moment because it was like, okay, completely separate teams and people actually are, can play in this realm and have a different way of thinking. But it really just becomes more and more clear that this smaller group of people have the kind of same mindset and think the same way. And, and this is the bet they're putting us all in and the entire global economy potentially, as you said.
- [16:55]
A
And then one last part of this is that he talks about how the incentives inside these organizations drive short term thinking on the order of one to three years. I think that's really important as well. It's just that, you know, even if you're. Well, especially if you're OpenAI, you're this, you were founded as a lab on long term research. Now you have to return what like a trillion dollars in investment over the next couple years. You're not going to be like, let's work on the frontier and experimental stuff you like basically have found a method that you like and you're, you're going for it. So, so kind of ends his piece asking what the new compute is for. I'll just read, read this part. If new compute investments aren't getting us closer to AGI, then what's the point? One argument is that the compute is a commodity of the future and that Spock stockpiling this resource is likely to be valuable regardless. I think this sort of goes to Ron John's point. Setting aside the issue of depreciation, which makes this argument tenuous at best. The bigger question becomes how long financial markets will be willing to underwrite such stockpiling and whether investors even understand that this is what they're doing. My sense is that while researchers are increasingly uncertain about how compute translate into capability improvements, Wall street hasn't fully woken up to this. So let's just say, let's just talk about this. You know, wrap a bow on it. Basically. I think we're both a little bit concerned that even if you get to a place where with the current systems you can create real economic val. Economicly valuable work, maybe this current build out is so over enthusiastic and is vulnerable to A the technology not improving or B efficiency improvements that there's a non zero chance that they're light, they're effective. I don't want to say lighting this money on fire, but maybe that's what's happening.
- [18:46]
B
I think it's a generous interpretation almost. I think, yeah, it's in terms of where this takes the economy. I think we definitely need to get into that because like how much of this money is real? How much of it is being spent? And I actually there's like a. I listened to this really good podcast talking about the data centers and like flying a drone over and seeing, you know, like actually hundreds of people working and it's the size of lower Manhattan or I think it was like Central park down to soho. So there's stuff being built, which I think is at least a good reminder for me that this isn't all just kind of like completely made up. But I think, yeah, that we haven't had a genuine discussion investigation around the dollars and how they flow. We've been talking about this for years around like what investments are just compute, what investments are actual cash, where are things being built? What's you know, like it hasn't really been dug into and kind of really analyzed in a traditional financial sense. And maybe this is the moment that that starts.
- [20:01]
A
All right, and why don't we start doing some of that right now? So the Financial Times has a article about it saying that OpenAI's computing deals top $1 trillion and then sort of asking whether this makes sense because ultimately someone has to fund, right, all this, all this build out. Now here's the story. OpenAI has signed $1 trillion in deals this year for computing power to run its AI models, commitments that dwarf its revenue and raise questions about how it can fund them. Here's some of the deals. The deals with Nvidia and AMD could cost up to 500 billion and $300 billion, respectively. Oracle's deal with OpenAI could cost another 300 billion. Core Weave has disclosed computing deals with OpenAI worth more than than 22 billion. OpenAI has also launched an initiative with SoftBank, Oracle and others known as Stargate, and pledged up to 500 billion in US infrastructure for OpenAI. It's not clear how the Nvidia and AMD deals would fit into the Stargate plans, although I think we do. We do believe that they're including that as part of the 500 billion the deals would give OpenAI access to more than 20 gigawatts of computing capacity, roughly equivalent to the power from 20 nuclear reactors over the next decade. Each gigawatt of AI compute capacity cost $50 billion to deploy in today's prices, making the cost total cost about $1 trillion. And then they go to this analyst Giluria at DA Davidson. OpenAI is in no position to make any of these commitments. Part of Silicon Valley's fake it until you make it ethos is to get people to have skin in the game. Now a lot of companies have a lot of skin in the game on OpenAI and as we've mentioned in the past, OpenAI is expected to lose 120 billion between now and 2029. So how does this math work, Ranjan?
- [21:54]
B
I mean it doesn't, it doesn't I think like from again any kind of like standard rational analysis. It doesn't but the thing I keep thinking about is does this kind of like does this force OpenAI and others who are playing this game to push again going back to the topic of kind of like heavier compute solutions like Pulse, we talked about a couple of weeks ago this have you used it yet or do you know anyone who.
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A
Has I have not used it. I do know someone that has Dan Shipper from every he he has some good things to say about have you used it?
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B
I, I, I've not but, but again this idea that it's just going to be like sucking up compute all night long just to give you some some updates in the morning and then potentially ads as we talked about and I've kind of like come to definitely believe that's the direction it's going but SORA itself or even that this was one of the big issues that you brought up around the GPT5 launch but like kind of pushing the model and the the platform into much, much heavier compute thinking and reasoning when it's not required it feels like that is I mean everything around how they're building this company is incentivized to push the absolute least efficient solutions possible to actually make their own economics work. So that, that part I think like they have to go in that direction and they're definitely going in that direction. But otherwise it just yet none of this makes any sense to me.
- [23:31]
A
Wait, explain how pushing least efficient compute projects make the economics of OpenAI work.
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B
Well, someone has to pay for it in the end. So assuming that you'll start paying your $200 instead of $30 for GPT Pro to get your pulse updates and at a certain point they're going to have to charge us for making our cameo soras that to actually account for the amount of compute it's requiring. But, but it's basically that people are not that compute's not going to be leveraged or used if we're just stuck in the current paradigm of what models are needed and what kind of compute's needed. So, so you have to again, like what we were talking about earlier, can you kind of create these workflows based on the technology that exists today and kind of make it more and more efficient? It's to actually show that we are utilizing this compute, this investment in 20 gigawatts and like all these nuclear reactor equivalents, it's, it's going to be very clear very quickly that it's a bad investment and idea unless they can actually show like just as important as revenue is actual like compute utilization for them right now. And I'm sure internally these are conversations they have to be having because otherwise you're putting all this money in and very quickly people will be like, well that next tranche of money we don't need to actually release because no one's using this stuff.
- [24:56]
A
I get it. So for them they want to incentivize massive compute usage because as they go to their investors, they want. They're using that compute usage as a proxy for the value of this technology. Yeah, exactly. This is why our technology is value. We can't, we don't have enough compute. And if they're able to tell that story then then they might get more money. So there. That incentivizes them to use a lot of compute for stuff they don't really need.
- [25:23]
B
Exactly. And us as consumers are benefiting right now because no one actually has to pay for it on the other end. And this kind of makes the like 2010s VC subsidized Uber rides look like a quaint memory where we're just able to get all this benefit as consumers and generate our Sora videos. But in reality no one's paying for that right now.
- [25:50]
A
Do you worry about the debt that's coming in to the picture? So of course a lot of this has been funded by VC money. Now it's starting to move toward debt. This is from the FT story. OpenAI, valued at 500 billion this month is preparing to raise tens of billions of dollars of debt to fund infrastructure. This is also from the Wall Street Journal. Debt is fueling the next wave of the AI boom. And again this is like the phase two that Khan talked about. A few smaller companies, most prominently Core Weave, have been relying on creative financing to vault themselves to the AI forefront for a while. Oracle is also part of this. To make good on its end of the contract with OpenAI, Oracle has to spend on infrastructure before it gets fully paid by OpenAI. Analysts at KeyBank Capital Markets estimate in a recent note that Oracle would have to borrow $25 billion a year over the next five year to fund these commitments. And of course just you know, talking between us, a lot of this is based off of revenue predictions that are exponential increases really for open AI and not just incremental increases. Oracle is already high, highly leveraged. The company has a long term debt of about long term debt of about 82 billion at the end of August and his debt to 8 equity ratio was about 450%. By contrast Google parent Alphabet debt to equity ratio was 11.5% and Microsoft's was about 33%. Don't we get into trouble when these, these bubbles end up taking on debt and they can't pay it back?
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B
Well I think from like a larger economy standpoint it's still a bit unclear because this is still very concentrated. So you know, it's one company here with $82 billion of debt and a 450% debt to equity ratio. This isn't, you know, like homeowners across the country taking on unreasonable debt against their household. So, so what that kind of spillover looks like, I think it's still pretty unclear but, but my favorite was actually just a couple of hours ahead of this recording, my favorite SoftBank. They announced they're taking a $5 billion March margin loan that's secured against its chip unit against ARM Holdings. They've actually taken out $18.5 billion of margin loans against ARM shares. Like, I mean this is the stuff that is Masa son, God bless him, but this is the kind of stuff that I feel you when you look back on and it just doesn't, it doesn't feel right or make sense.
- [28:32]
A
Are you worried that there would, I mean, obviously there's a chance of a real equity pullback, but are you worried about something like a softbank going insolvent from something like this? I mean, what the ripple effect is there?
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B
Am I worried about a softbank going insolvent? I think is Masa will always make his way back, but I don't worry around the direct spillover effects. I really think this is still, it's been seen still like a relatively contained group of people that have made the most money off of this. It's been relatively few companies that have truly benefited from this. I think yes. If there's an equity pullback, what does that mean? Like geopolitically? And I think there's. The world is certainly not in a stable place and any kind of additional uncertainty does not help kind of maintain any kind of stability. But, but overall, I don't know. I still haven't, I've been, I haven't seen a compelling argument about how this really spills over other than just an equity pullback. I mean, there's no growth story for the global economy. If this goes away, it's driving the entire growth that we've seen over the last couple of years. But is that just kind of bringing back to rationality and is that, or is it actually, I don't know. You, you mentioned is. Will the global economy still be here next week? So let's hear your take on.
- [30:03]
A
We can get into that. So let's do this. Then we're going to touch on maybe the AMD deal again. But this is from the Financial Times. America is now one big bet on AI. The hundreds of billions of dollars that companies are investing in AI now account for an astonishing 40% share of the US GDP growth this year. 40% AI companies have accounted for 80% of gains in the US stock so far in 2025. This is helping fund US growth as the AI driven stock market draws its money in from all over the world and feeds a boom in consumer spending by the rich. In a way, America has become one big bet on AI outside of the AI plays. Even the European stock markets have been outperforming the US this decade. And now the gap is starting to spread. So far in 2025, every major sector from utilities and industrials to healthcare and banks have fared better in the rest of the world than the U.S. you know, if AI doesn't deliver for the U.S. the U.S. and its economy will lose the one leg they are now standing on. Your thoughts.
- [31:09]
B
I'm still back to you on this one. Do you think what does that actually mean? If that, let's say suddenly there's like predictions that the compute is not going to be effectively utilized. We get into GPU depreciation and people, someone does the math. What do you think is the worst case scenario?
- [31:30]
A
Probably was. Probably. I think maybe global economy blowing up was an overstatement. Now that we're talking about it in.
- [31:38]
B
Our cool headed and not, not blowing up, disappearing. I think.
- [31:43]
A
Yeah, well you know that might have been the you know, drama podcaster in me but, but no, look, I think it would be bad. I, I think you know, we're obviously the global economy would be intact, you would think, I think you're really right in pointing out that the debt and the investment is really contained. But when it, if it were to go away, if this AI moment were to go away, you would see, see, you would see some really negative economic consequences in the US especially and maybe outside here. This is from Deutsche Bank. They say, they say the AI boom is unsustainable unless tech spending goes parabolic. And it's highly unlikely AI is saving the US economy right now. Says a Deutsche bank analyst. In the absence of tech related spending, the US would be close to or in a recession this year. And this is from Bain. $2 trillion in annual revenue is what's needed to fund computing power, the computing power needed to meet anticipated AI demand by 2030. However, even with AI related savings, the world is still 800 billion short to keep pace with demand and the boom is not sustainable. Yeah, I don't know. It seems to me that there's, there's gonna have to come a point where the rubber is gonna meet the road here and something's gonna go bad. And I don't know exactly where that's gonna be or how widespread it will be. But even with all of AI's promise, and this is what Khan was getting at in the piece we read at the beginning, a correction is there, there will be a correction here.
- [33:18]
B
I, I think one thing that's still kind of like, it was interesting to me the way the Banon company report it talked about. Yeah the $2 trillion in annual revenues needed to, it's what's needed to fund computing power to meet anticipated AI demand by 2030. However, even with AI related savings, the world's $800 billion short. It's still again putting it in that paradigm of like you need that revenue to cover the Computing power that's going to be needed for anticipated AI demand. Demand. But, but I think it, how these numbers get calculated and extrapolated, it's, it blows my mind. It boggles my mind. It's like, like trying to. Is it just a straight line interpolation? Is it, Is it, I mean it's, it's exponential, but like trying to forecast AI demand in 2030 given how much things have changed. And again, like, I think what I saw was it Google, it was like 1.8 quadrillion tokens now being leveraged by Gemini. Like the numbers are pretty spectacular but still extrapolating that out for the next, you know, five years and trying to make any sense of it and really try to put numbers behind it. I don't know. Especially when the machine God's going to come and AGI and super intelligence are going to come. I don't, I don't see how you do that with a straight face.
- [34:46]
A
Well, Ron, John, I think I came in here really down in the dumps looking at these numbers, but you've talked me off the ledge appropriately so. I appreciate that. All right, let's do two, two small dives into a couple companies, Oracle and amd, and then hit the break. First of all, what do you think about this Oracle story? So they're buying obviously a ton of computer. This is from the information. Oracle became the best performing mega stock of 2025 after its executives said last month that the once sleepy database firm will generate an astounding 381 billion in revenue from renting out specialized cloud servers to OpenAI and other AI developers over the next five fiscal years. But the margins they're getting on those are averaging 16%. And in some cases Oracle is losing considerable sums on rentals of small quantities of both newer and older versions of Nvidia chips. In the three months that ended in August, Oracle lost nearly a hundred million from the rentals of Nvidia's Blackwell chips. So you have a software company that's used to 70 or 80% margins. Now they're, they have margins of a retail business. Obviously their sales are up. Does it make sense that their stock is up about 80% this year in their market cap is at 854 billion with a 69 PE ratio.
- [36:10]
B
No, no, I think this is a really good point here. Like, and I think like everyone should start really getting into these kind of numbers because again, we have not talked about like, you know, gross margin on these businesses. We've all said theoretically for a long time that you know like generative AI has a different financial profile than traditional stuff software. And and again it's not something that has like infinite economies of scale or near infinite, but instead has a real cost underlying it. And to see that is actually kind of mind blowing. Like again as you said 70% margins down to averaging 16% and maybe you can argue that this is just at this point as they're kind of, kind of like getting this business up and running and scale scaled but in reality like there's no reason that the margin profile should change over time. Like maybe it starts to improve but it's incremental. Maybe you get to 20, 25%, maybe you squeeze out 30% but in reality like this is a different business than the sleepy database company that was just churning out cash for so long that it really should call into question I think like how what the economics of all these companies are going to look like and it's going to be different and maybe it'll be fine. Like maybe these will be retailer style businesses that are gigantic and operational but it's not going to be 70 margin software businesses.
- [37:45]
A
Right. I think Iluria was and the analyst that we quoted before was on CNBC making this point basically saying like it doesn't make any sense for Oracle to be valued as at more for Oracle to be more expensive than a Microsoft where Oracle is basically like setting up these data centers and not pulling in margin where you have a Microsoft that's actually setting up the infrastructure and making money off of it and making profit. So I don't know what I think sort of what we're seeing is this push towards AI might make sense overall over time but there is some silliness around the margins and that will shake out. Of course there's been some silliness with the OpenAI AMD deal. MG Siegler was here on Monday. We were talking about how maybe it didn't make sense and now there's a really interesting fake conversation that Matt Levine published. Uh, that might be what OpenAI and AMD discussed before. AMD agreed to give OpenAI 10% of its company potentially. Let's talk about that right after this. The holidays sneak up fast, but it's not too early to get your shopping done and actually have fun with it. Uncommon goods makes holiday shopping stress free and joyful with thousands of one of a kind gifts you, you can't find anywhere else. I'm already in. I grabbed a cool Smokey the Bear sweatshirt and a Yosemite ski hat. So I'm fully prepared for a long, cozy winter season. Both items look great and definitely don't have the mass produced feel you see everywhere else. And there's plenty of other good stuff on the site. From moms and dads to kids and teens, from book lovers, history buffs and die hard football fans to foodies, mixologists and avid gardeners, you'll find thousands of new gift ideas that you won't find elsewhere. So shop early, have fun and cross some names off your list today. To get 15% off your next gift, go to UncommonGoods.com BigTech that's UncommonGoods.com BigTech for 15 off. Don't miss out on this limited time offer uncommon goods we're all out of the ordinary did you know your credit card points and miles can lose value to inflation? Credit card companies often reduce the redemption value of your points and miles. Now imagine a credit card with rewards that can grow in value. With the Gemini credit card, you can earn Bitcoin or one of over 50 other cryptos instantly with no annual fee. Every swipe at the store or gas pump earns you instant rewards deposited straight to your account. Plus sign up now for a $200 Bitcoin bonus to kickstart your rewards. Visit gemini.com card today. Check out the link in the description for more information on rates. Again, if you're looking to invest in Bitcoin but don't know where to start, the Gemini Credit card makes it easy. The Gemini Credit card is issued by Web Bank. In order to Qualify for the $200 crypto intro bonus, you must spend $3,000 in your first month 90 days. Some exclusions apply to instant rewards in which rewards are deposited when the transaction posts this content is not investment advice and Trading. Crypto involves risk. The Gemini credit card cannot be used to make gambling related purchases. And we're back here on Big Technology Podcast Examining I think someone said we were. They love how this show has become a detective show for the AI bubble. I love that comment. Let's. Let's keep at it. So of course OpenAI and AMD had this big deal this week where OpenAI and AMD basically spent tens of billions working on data center development. So OpenAI can use AMD chips for inference. And there was this weird element of the deal where AMD said if certain milestones are hit, OpenAI will have the opportunity to get 10% of AMD's company's stock basically for a penny a share. So Matt Levine at Bloomberg surmised why this might have happened and how this might have come together. Here's the fake conversation. OpenAI well, we were thinking that we would announce the deal and that would add 78 billion to the value of the company, which should cover it. Basically paying for the chips. AMD OpenAI AMD no, I'm pretty sure you have to pay for the chips. OpenAI why? AMD I don't know. I guess it seems wrong not to. OpenAI okay, well why don't we pay you cash for the value of chips and you give us back stock. When we announce the deal, your stock will go up and we'll get our $78 billion back. AMD yeah, I guess that works though I feel that we should get some value. OpenAI okay, you can have half, you give a stock worth like 35 billion and then you keep the rest. Levine says the deal between OpenAI and AMD was obviously going to create a lot of stock market value. The announcement of the deal would predictably increase the value the market value of AMD and it's not like it decreases the market value of OpenAI why not use that stock market increase to subsidize the deal? What do you think about this Ron?
- [42:54]
B
I mean this is actually this what I asked you earlier about like what do you think these conversations really look like behind the scenes? I mean I loved this because I, I don't think it's completely out of bounds that this is actually some of the conversation that's happening right now. Like that. Well obviously when we announce this, obviously when we announce this it's gonna boost your stock. That should definitely cover some element of the overall cost of the deal. Like it's, and we've been seeing this forever, like I mean not forever for a few years. This is not that different than imagine a Google or like Amazon and Anthropic and it's like well we'll give you 5 billion but it's going to be like 3 billion in compute but it's going to raise your valuation by this much. So you know like overall this kind of funny money esque element of it has, has been there for a while. It's just at a much grander scale. And one thing I kind of want to bring up like I think what we were talking about a second ago, the average like my life for the last decade has kind of been at the intersection of retail, software, media and like average retailer. PE ratio is around 20 on a good day. Average software company, even Oracle right now sitting around 60. Do you, when you start to actually try to bring some rationality to this and some discipline and rigor. Are these companies going to be more like retailers or whatever? I don't know. Like maybe it's going to be industrial equipment. I've seen a lot around how Stargate is not an AI play. It's an energy play, which is a good business and can be and is interesting. But shouldn't they be valued more like a traditional energy and energy infrastructure company rather than AI and software? I don't know. I think that is something that we're going to be seeing a lot more of and people trying to come up with some new metric for an AI company that's very different than so software. And Even all these AMD OpenAI kind of circular ways of approaching financial analysis, I think start to look ridiculous.
- [45:07]
A
That's right. I think as long as we have good times, then there'll be massive multiples that will be attached to AI companies. But second, we see a sign of a slowdown. I think that will deflate exceptionally fast.
- [45:21]
B
Yeah, I think you've heard it here folks. Go out, come up with your new financial metrics for this new breed of company. It's not software, it's not quite retail. Somewhere in between. We need, we need a new ways to measure this stuff.
- [45:35]
A
And this of course is not investment advice.
- [45:38]
B
So we're telling you to go out and do the research.
- [45:42]
A
Yeah.
- [45:42]
B
Telling our audience. Yeah, right.
- [45:45]
A
All right, let's. Let's finish this long, very long already spanning almost our entire show with. But just to look at how we both feel about this. I mean, what's your scale of concern here from like 1 being not concerned to 10 being concerned?
- [46:01]
B
I'm still going to put it. And regular listeners know that I am often concerned about many things. I'm still putting it at 3.5 to be exact. Exact. To get to the exact feeling of concern. I really think this is a shakeout. It's kind of like a back to reality come down to earth moment. But I don't think there's going to be massive spillover effects from any kind of. Any kind of rational analysis on what's really happening right now. And investors just start to start to come back to down a little bit. I think it's going to be okay. What about you?
- [46:41]
A
I'm at a 5. I do think that there is a non zero chance that progress stalls and a lot of this hype around AI just translate. It just fades. People realize that it's harder to implement than a lot of the hype was making it out to be. And it takes Longer. The timeline is longer than anticipated and, and maybe that just leads to stagnation for a while. I don't know. I'm not convinced that's going to happen, but I, I definitely appreciate the possibility. All right, let's talk a little bit about OpenAI's announcement. This week they had this dev day, developer day. It seems like everybody just wants to build. Have you heard this before? OpenAI held its annual dev day on Monday where the company rolled out its plan to build apps into ChatGPT. The demo showed how programs like Spotify and Figma can be called or discovered without leaving the ChatGPT window. With so much of the tech world barreling ToWards AI integration, OpenAI's demo was the best picture yet of what an AI first Internet might look like with interfaces like Chat GPT querying information and executing commands directly. I'm, I, I, I don't know why I can't get excited about this. Or maybe I do feel like I've heard this from Google, from Amazon, from Apple and Open AI again and, and I'm not like gonna lose my mind over the platformization over of ChatGPT. Am I underplaying this?
- [48:09]
B
No, no, I, until I, so I actually tried, I used the Figma app for Chat GPT a bit and I, and as, as a non UI designer, but someone who's curious, I was like, okay, can I actually start to make mockups and start to like build out my own app interface and in reality you can make like a flowchart in figjam and it was okay, it wasn't anything revelatory but honestly to me like that whole app integration side, I think it should work at some point. But to me like the fact that Google Flights I still go to as opposed to Gemini is integrated directly into Google Flights, which it is, it owns and is the same company. Like I, no one has actually shown what this can look like successfully yet, but, but I do think like using it poses an interesting question for the actual app companies themselves because at what point is the value your database basically or is the value your actual UI and interface? And so like if I can go use ChatGPT to create my Spotify playlist for me, then all my, my DJ on Spotify, like does that all become useless? And do these companies let ChatGPT actually kind of take the UI layer away from them and they're going to push back. So I, I don't see this moving that quickly. Did you try?
- [49:41]
A
Me neither, I haven't tried it yet. I just, I can't I really can't get excited about this. I I'm I'm sick of hearing this story and maybe I'm shut off in a way that's like, bad because I should be open as a reporter covering this stuff. But like, I set up Alexa plus recently and I was like, oh, it's cool, you can call an Uber from, you know, your Echo device. And I was just like, I'll just do it on my phone. I don't know. I'm not sold yet that this is going to be the platform of the future.
- [50:08]
B
Oh, wait, Alexa plus, what are your I did set it up as well. What are your thoughts?
- [50:13]
A
Not enough use to really review it yet, but I did speak with Panos Panay, the head of devices and services of at Amazon, and he said by the end of October, everybody should have it. So no more early access. And I think, you know, if that doesn't pan out, we'll see what happens. But there's the latest promise and I'm very excited to air that episode, which is coming up in a couple weeks.
- [50:39]
B
I'll say I'm liking it. It's getting kind of like somewhat on par with ChatGPT voice just in being able to ask questions while I'm cooking. I have a Alexa Echo show in my kitchen and like asking more detailed questions and it works pretty well. But my favorite was last week, or I think on Monday. I was asking for like NFL scores and I was looking at them. It completely made up that the jets won, which I thought was kind of amazing and hilarious in our context. Alex is a Jets fan and the.
- [51:11]
A
Only universe where the jets could win is AI hallucinating their victories.
- [51:17]
B
You should just create your own entire SORA parallel universe where the jets are winning Super Bowls. All of the above.
- [51:26]
A
I did see a SORA video, I think, probably in my jets discord this week week where the coach was cheering on the players after a loss because they were in line for a better draft pick and that's really all the organization cares about it. It's really like too close to home. It's like we love to lose.
- [51:42]
B
That's as far as the AI can go.
- [51:44]
A
You know, this is a bit of a diversion, but what's the deal with Bill Belichick and UNC, Mr. Patriots fan?
- [51:50]
B
I I'm just thinking about Drake May in the Bills game on last Sunday night. Belichick I yeah, it's such a tough one. I mean, the younger girlfriend, the terrible start. If you became one of the greatest, you know, as one of the greatest independent journalists and media personalities around and build up your legacy over decades to just throw it away. Like what drives someone to do that?
- [52:24]
A
That's, I don't know. It would be the, the, the parallel would be, yeah, becoming one of the greatest journalists and then going to become the editor in chief of a college newspaper and plagiarizing. That is what Bill Belichick.
- [52:36]
B
This is what exactly what Bill Belichick is doing right now.
- [52:40]
A
Lord Almighty. All right, let's talk about, about speaking of Sora. Let's talk about Sora. I mean, we could go on the Belichick thing forever, but we'll leave that to Pablo. So yeah, the, the, the, the Verge has this story. So obviously you and I didn't get a chance to speak about Sora last week. We had Max Zephan. So I want to speak with you about Sora briefly. The copyright thing and usage thing. OpenAI said it wasn't. Sam Altman basically said he was surprised at the reaction or that OpenAI wasn't fully aware of what the reaction would be. He said, I think the theory of what it was going to feel like to people and, and then actually seeing the thing, people had different responses. It felt different to images than people expected. This is of course, about copyright and rights. He was surprised that rights holders were sort of up in arms about the fact that SORA had copied their stuff and gave them an opt out as opposed to an opt in. That seems like crazy and not exactly truthful. How do you not anticipate that?
- [53:42]
B
Well, okay, I wanted, I definitely wanted to bring this up. Last week while I was on vacation, I was itching to be on the podcast just to talk about Sora because so I made video of myself in the Mario Brothers movie fighting Bowser on the streets of Brooklyn. And like, obviously my six year old son loved it. But as I'm looking at it, I'm like, this is insane. Like, I cannot believe that this is okay. Now, two days later, OpenAI did introduce like more strict content guidelines. And it still blows my mind that Sam Altman acted like he was surprised by this. But I wanted to read the statement from OpenAI. 48 hours after like everyone was creating new south park episodes was basically it was. People are eager to engage with their family and friends through their own imaginations as well as stories, characters and worlds they love. And we see new opportunities for, for creators to deepen their connections with the fans. This is Varun Shetty, the head of media partnerships in OpenAI. He does say we'll work with rights holders to block characters from Sora at their request and respond to takedown requests. I think this is nuts and a big deal because they are basically saying like it's out there and you're gonna have to come to us to bring takedown requests, that we're basically okay with this and we're even kind of pushing you to say, you know, you create media. But people really want to deepen their connections by putting themselves in your copyright material. Like I don't know that this in the overall OpenAI story, like this is their approach to copyright and kind of intellectual property. So to me, you, I hear a lot of sensitivity around like people and what data are they really going to upload to OpenAI. And I think this was such a reminder that I don't know, basically whatever your personal feelings, you're telling your ChatGPT therapist might get auto published into a Sora post one day.
- [55:50]
A
Right? And Bruhn of course comes from Meta. And if you ever had to deal with meta copyright infringement, the process, it sucks and it's almost an insult to copyright holders to have to go through something like that. It does not incentivize, it's so arduous, it does not incentivize you to work on it. And by the time Meta will take something down, the thing has already, already spread to the point where it doesn't really make a difference. So of course it doesn't surprise me.
- [56:19]
B
Is that sadly bullish OpenAI then in terms of this is the right approach?
- [56:25]
A
I, I maybe it's good for the business, but ethically I think it's dubious at best. All right, we have five minutes left. Let's talk quickly about the the potential successor for Tim Cook. So it's from Bloomberg. Apple puts hardware chief John Ternus in the succession spotlight. When Tim Cook eventually steps down as CEO, it's likely he would remain involved in some capacity, perhaps as board chairman. That would put him on a path taken by other tech leaders including Jeff Bezos, Larry Ellison, Bill Gates and Reed Hastings. Big questions. Who would run Apple on a day to day basis in terms of a formal CEO transition? Hardware engineering chief John Ternus remains the leading contender and German says Apple probably needs more of a techno technologist than a sales or an operations person. The company has struggled to break into new technology categories even though products like the iPhone 17 are clearly resonating with customers. What do you think about this? I think it's the right, right, the right move. What's your perspective?
- [57:29]
B
I think some new Blood is required. Sorry, Tim, I think it's. I. I don't know. I still feel. I don't know. I'm going to make a call here. They should buy Snapchat and make Evan Spiegel CEO. I said it and I said it. I want some product vision at the company. Again, keep. Keep the operational guys. Tim, it worked from a shareholder perspective. It did not work from a true product perspective. And the day they can only Squeeze so many 29.99 Apple One subscriptions out of me before. Before. This just has to go somewhere else, so.
- [58:06]
A
And you know who would love that? Evan Spiegel would love it. I've heard multiple people around him that he thinks he's Steve Jobs. So certainly Evan would be all about that. What Apple do.
- [58:20]
B
Gave it to you, Evan. I just gave it to you.
- [58:22]
A
I. I doubt Apple would do it.
- [58:24]
B
No.
- [58:24]
A
All right, when. How long do you think Tim Cook should stay in the seat for? Uh, I tend to think that you should probably. He should probably step down sooner rather than later.
- [58:37]
B
Yeah, I think it's actually like, it could be the most kind of smooth. Like no one's going to hold it against him. It's not a. It's not like he was fired or pushed out. It's just time to move on. It's the next phase of the company. Like, it's clear that they have to figure out what's next. And I love Tim. He's not the guy to. To figure out what's next for the company. We've seen it. We've seen this for a few years now that they're not going to. And again, like other companies are just driving ahead with innovation and new product development that, like Apple hasn't done anything with it.
- [59:19]
A
Internus has been at Apple for 24 years, since July 2001. And I almost. I actually like the Spiegel idea even more because I'm of the belief that Apple really needs a not Steve era CEO, because so many things inside that company are done there just because that's the way Steve Jobs did them. The silo is the secrecy and obviously it served them very well. But eventually you have to be like, all right, let's try something new.
- [59:46]
B
Yeah, no, I think. Okay, you've heard it here. This is the proposal from Cantrowitz and Roy. It's a long shot here, but it's out there.
- [59:57]
A
Crazier things have happened. Ron, John, thank you so much for coming on. Really great having you as always.
- [60:01]
B
All right, see you next week.
- [60:03]
A
See you next week, folks. Rick Heitzman, the managing director of First Mark Capital, is going to be on the show on Wednesday to continue our conversation about AI's economics. And then Ranjan and I will be back with you next Friday. Thank you so much for listening. And we'll see you next time on Big Technology Podcast.