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- [00:00]
Alex Kantrowitz
The AI world is buzzing as a cheap, effective open source model rivals competitors built for billions. OpenAI, Oracle and SoftBank put a half trillion dollars in Stargate, but is the money really there? Agents may finally be here and TikTok is still alive. That's coming up on a Big Technology Podcast Friday edition right after this. The LinkedIn podcast network is sponsored by Dell AI Factory with Nvidia, which provides AI solutions that are easy to implement, secure and tailor to your business. Visit Dell.com to learn more.
- [00:34]
Ranjan Roy
Struggling to keep up with customers with agentforce and Salesforce Data Cloud deploy AI agents that know your customers and act on their own. That's because Data Cloud brings all your data to AgentForce, no matter where it lives. Get started@salesforce.com data welcome to Big Technology.
- [00:50]
Alex Kantrowitz
Podcast Friday edition where we break down the news in our traditional cool headed and nuanced format. Wow. We have a big show for you today. We're gonna cover everything from this new model called DeepSeek, an open source, cheap model from China that is totally reshuffling the AI world as we know it. We're also going to talk about the big project called Stargate where OpenAI, Oracle and SoftBank are putting maybe up to $500 billion into an AI infrastructure project that OpenAI is going to use. OpenAI has also released Operator, a new agentic model and TikTok still here. Joining us as always to discuss all this and more is Ranjan Roy of Margins. Ranjan, welcome to the show.
- [01:31]
Ranjan Roy
And we got real news, some fake news, everything in between. I don't even know where TikTok falls in that, but I'm ready. I'm ready.
- [01:39]
Alex Kantrowitz
This is definitely one of the weeks that I've been looking most forward to recording our Friday show because there is so much stuff to talk about and real important developments that have just come throughout the week. And on that note, we, I'm sure we have some new listeners here coming in from my Demis Asabas interview. Whether you found us on Spotify or, or YouTube or elsewhere, just to give you a rundown of how the show works, we do a big interview every Wednesday with someone like Demis. Next week is going to be Reid Hoffman and then every Friday Ronjan and I break down the news that's happened over the week. We cover a lot of AI anything, big tech. And so we're so glad that you're here. So first let's talk about this Deep Seek story, which is a massive, massive story. Basically what Deep Seek is, is a much more efficient reasoning model. They just released this model called R1. It's built by a Chinese startup. And the crazy thing is that what it's taken American companies billions of dollars to do, it's taken them just a few hundred million. And I think that this could completely upend the AI industry as we know it. We're just starting to see the beginnings of this and everybody seems to think that it's legit technology. So, Ranjan, I'm curious what you think about Deep Seek. Do you think it's legit and what does it mean for the industry?
- [02:51]
Ranjan Roy
I am incredibly excited by this. I think this is one of the biggest stories in a while. Exactly. For what the reason you're saying that being able to train and deliver a model that's relatively on par with the expensive ones with the O1s. I think this is huge. And it's what I've been saying for a long time, that the power of the model, the amount of money that's being kind of like claimed the big shows around massive compute structures was all a bit of a show. And for actually delivering on something that people want to use, this shows that it can be done in a completely different way. And. And have you been using Deep Seek much like everything I've tested, relatively it and Joe Wiesenthal had a good piece on, you know, how a lot of these like ChatGPT can effectively be commoditized like a normal chat interaction with one of these models, you can get similar results. And I already switched between ChatGPT, perplexity CL on a pretty regular basis. And now Deep Seek has made it to my Favorites tab and is up there as well.
- [04:01]
Alex Kantrowitz
That's crazy because it just hit like a couple days ago. So let me just give a couple of stats that just show the magnitude here. So this is from the New York Times. The Chinese engineers said they needed only about $6 million in raw computing power to build the system. That's about 10 times less than the tech giant Meta spent on building its latest AI technology. For further context, I mean, you could build this model for 6 million. We just saw OpenAI raised the largest venture capital round in at $6 billion. Right? So that level of magnitude is crazy. And then you have it. So how does it rank? How does its performance rank? So I was on Chatbot arena arena earlier today, which ranks large language models, and Deep Seq is in a tie for third place. So here is what the rankings on Chatbot arena look like right now. You have number one, Gemini, number two, Gemini, number three, tie for third place between ChatGPT4O, the latest model, and Deep Seek. And then everything else that we've been talking about, Grok and the clods of the world are below Deepseek. So this is crazy. The thing I can't get out of my head is, does this sort of invalidate all the billions that these research houses have been spending on training their models? If Deepseek can do it for peanuts and rank this highly on Chatbot Arena?
- [05:20]
Ranjan Roy
Yes, yes and yes. I think the fact that we're seeing Claude sonet ranked at 18, deep seek tide at number three, I think it completely shows that the way we're thinking about foundation models at the center of the business battle for all these AI companies has been wrong. And I think the products, and this is my favorite, we always get into this every week that for me, it's not the models, it's the products that are built on top of them and how good they are. Maybe this means that finally we're going to move to a world where people actually focus on the product side of things and not the idea that the models and just having to build bigger and bigger and more expensive models is the only way that anyone's going to win.
- [06:05]
Alex Kantrowitz
But then what happens to all this billion, these billions of dollars that these companies have invested in building the foundational models? Really, you think it's completely gone? I mean, isn't that, isn't that like a destructive event for Silicon Valley in a way that we haven't seen before?
- [06:20]
Ranjan Roy
I'm going to go constructive instead of destructive. I think it's going to, it's going to force a reckoning. It's going to really make people try to figure out what's the future the next two to five years, let's say. And the way the, the way the battle has been approached over the last one and a half to two years of constant big unveilings and constant, you know, attempts at trying to sell the idea of these more and more powerful and bigger foundation models. Exactly. It's going to, it's going to move away from that and meta and we're going to get more into what they're doing. The moving into open source, I think was a powerful move from Zuckerberg from the beginning. But now having actual, like, genuine competition on the open source side is fascinating. But, yeah, I think the things that are built are going to be able to have. And it's great for everyone else. It's great for everyone else. It's not great for OpenAI, but being able to readily build and have your choice of what you're going to build on top of, and being able to do it fast and cheap. That's good, that's wonderful. Just not for Sam.
- [07:31]
Alex Kantrowitz
Right. And that's the way that Silicon Valley has been reacting to this. So Marc Andreessen called R1 one of the most amazing and impressive breakthroughs I've ever seen. And as open source, a profound gift to the world. Anze Mitta, who's also at Andreessen Horowitz, said, From Stanford to MIT, DeepSeek R1 has become the model of choice for America's top university researchers basically overnight. Which is fascinating because as we know, research universities just do not have Nvidia H100 chips. They cannot afford them. And Arvind Srinivas, he also said, Deepseek is two orders of magnitude more efficient with capital allocation than OpenAI, by the way. So after Aravind tweeted that, I DMed him and said, hey, let's talk about this, I'm gonna write about this. And then he deleted the tweet and never responded to my messages. So this is obviously, it sort of goes to show that this is really going to stir up Silicon Valley and AI in a way that we're just starting to grasp this week, I think.
- [08:28]
Ranjan Roy
The fact that Andreessen Horowitz is. And Marc Andreessen is saying this, I think is a big deal because, yeah, it's, it's really pushing the idea. And again, you think about it from like a more know, pure venture capital standpoint, it is exciting because rather than only being stuck with having to get into the late inflated rounds of just a few companies, it really potentially opens up the door for way more startups doing interesting things that can actually explode in growth and solve problems.
- [09:00]
Alex Kantrowitz
Yeah. And we should note that Andreessen did sit out the OpenAI round.
- [09:03]
Ranjan Roy
Yep. No, I was definitely thinking about that. That, I mean, did they see this coming from. And that's why they said they sat out. Not. I remember at the time, it was definitely notable in my mind, I was like, maybe they've already, you know, seen some pretty solid returns from their early round investments, but maybe they really are believing in open source as the future and that's really going to hurt and open a eyes of the world.
- [09:30]
Alex Kantrowitz
Yeah, it's quite possible. And I think that's one thing that we really need to hammer home here, which is not that it just took so much less money to build the model, but it takes so much less money to run the model. The model, the way that it works is super efficient. Right. And that is going to allow startups to be able to build on top of this stuff without worrying about what we've been talking about for, for months, which is this subprime, subprime AI crisis. Right. The only thing that could have made this idea of the subprime AI crisis, which is basically that these companies have spent so much money training the models that they're going to have to charge people eventually a lot more than they're paying right now to use them. The only thing that could threaten that is if a model showed up that was so much cheaper to run. And that might be this one.
- [10:16]
Ranjan Roy
Yep. It's rare that I'm agreeing with Chamath, but he came out and said that like AI model building is a money trap. What you are seeing here is a feature of modern AI models. There's no bounding laws like Moore's Law, where advances can be predictably expected and that open source will be the clear winner. And I think it's again, it's clear that we, and the most exciting part about this is we've all been debating scaling laws and what it's going to look like, but to see these kind of like step changes in terms of cost and efficiency just coming out of nowhere, coming from unexpected places and we can get into, you know, the, how this fits into the larger US China technological battle and overall relationship. That stuff that's, that's the exciting stuff. That's the. Rather than just another big fundraise from OpenAI, this is the stuff that I don't makes me happy.
- [11:11]
Alex Kantrowitz
Yeah, same here. I mean, I was just totally blown. I was planning on writing this week about the drama between Elon Musk and Sam Altman about which we'll definitely Stargate, which we're going to get into. But as the news came out about Deep Seek, I said there's no way and I had to make this the main story of big technology this week. And I just have been unable to, to get out of this news because it is, it's so interesting. And then you think about it from the hardware side. So Nvidia, right? Like, what's going to happen with them? Because so many of their chips were needed to run the current models. And so there's a senior researcher who's pretty outspoken from Nvidia, his name is Jim Fan and he's addressed this in two tweets, by the way. So the first one talked about how Deep Seq is like the real OpenAI because they're open source and because they're making it available to so many people. But the second tweet was so interesting because he gets into the finance side of things and I had like DMed him earlier and I was like, what's gonna happen to your business? And he just puts out this tweet. He says, first of all, he says it's a humbling wake up call to us that open science has no boundary. We need to embrace it one way or another. Then he goes on to talk about the financial aspect. Many tech folks are panicking about how much Deepseek is able to show with so little compute budget. I see it differently with a huge smile on my face. Why are we not happy to see improvements in the scaling law? Deep SEQ is unequivocal proof that one can produce unit intelligence gain at 10x less cost, which means we shall get 10x more powerful AI with the compute we have today and are building tomorrow. It's simple math. The AI timeline just got compressed and, and this is the obviously it's the most optimistic. It's the best case scenario and I was thinking to myself when I read that like yeah, if everything goes right, maybe that's the case. But I think I'm starting to be swayed by his argument. What do you think about it?
- [13:00]
Ranjan Roy
Well Jim, I am happy to see improvements in the scale so I think the again trying to actually like directly quantify 10x less the cost, 10x more powerful. Obviously those are nice round numbers but to me the most important thing is it completely changes the competitive framing for every company in the space. Suddenly when you are thinking about and already I think I saw OpenAI said that O3 mini one of the better models will now be part of the free ChatGPT plan. Like it's going to put heavy competitive pressure on everyone and we will move to a world where the expected cost for a developer is more in line with what deepseek's offering with R1 versus what OpenAI and other anthropic are offering with their models. And that's good.
- [13:51]
Alex Kantrowitz
Yeah. By the way, you can use Deepseek right now. So you could just go in, sign in with your, your Gmail account and get using it. And if you click the R1 thinking model you can actually see its chain of thought be written out. And it's pretty remarkable the way that it thinks through problems. And, and let me, let me put this to you because I'm curious what you think about this. Is this sort of the beginning or the end? Here's My argument for the end the AI industry might have hit this wall with the scaling laws. Everyone's talking about how data, you know, there's a data wall. The models aren't getting better, they are starting to see diminishing returns and then the only way to continue to advance them is with reasoning. And what Deepseek might have done is just a spe, a speedrun through reasoning. Right where it's gotten this uptake based because it's figured out reasoning before everybo else and made it much more efficient and put that on top of, you know, maybe it's built that on top of old open source models to get these amazing results. Is it possible that this is just kind of the terminus for generative AI where it's like, okay, it's what we have now, but it's cheaper as opposed to a step towards something more?
- [14:57]
Ranjan Roy
No, I, I think it's, it's certainly the former, maybe the latter, but the former that this is just what we have now, but cheaper. But I actually think that's such a big deal. And you said it. What does that mean for Nvidia? What does that mean for OpenAI? What does that mean for Anthropic and Google and, and actually Microsoft plays a very interesting role in all of this as well, especially the relationship with OpenAI. But it just fundamentally changes the entire competitive landscape. And so whether that truly means. And I'm a bit still, I mean, what is AGI? What is actual true reasoning? Just showing chain of thought processing is a nice UI trick almost and I like it and it's good and you should go to Deep Seek and play around with it. I think every listener should. But, but what does that actually mean in terms of. Does is this something fundamentally different? I am not convinced of that yet. But the same and significantly cheaper is a much bigger deal to me actually than some new level of reasoning.
- [16:08]
Alex Kantrowitz
So can we just take a moment before we move on to appreciate how Deep Seek came about? Because the story is actually unbelievable. So it was built out of a quantitative stock trading firm called High Flyer. This is according to the New York Times, by 2021 it had channeled its profits into acquiring thousands of Nvidia chips which it used to train its earlier models. There's some. Alexander Wang says They may have 50,000 Nvidia chips, but that this came out of a quant firm. Ranjan, I feel like you with some ties to the trading world and some ties to China are uniquely qualified to comment on. Is this like just a typical Chinese story or Trader story or is it as remarkable as I'm seeing it?
- [16:47]
Ranjan Roy
Well, actually I think that's why it makes it even more exciting for me. It's the idea that the greatest innovations, especially something focused around cost and efficiency, it actually seems more likely that it would come from a quant trading firm than a really kind of traditional AI research house, which many of the other companies essentially are with the business attached to it that, that actually it does make more sense to me that making things much faster and more efficient coming out of again unexpected places is actually kind of cooler and, and it also, it changes like what could be next? Who's going to come out with something completely unexpected in terms of what's the next big wave in generative AI? It just opens up the door in a very cool way.
- [17:40]
Alex Kantrowitz
So just game out what's going to happen because of this. I mean I saw there are some interesting pieces on Blind for instance. I don't know if you can trust this stuff. I have a Meta executive coming on in a couple of weeks that I'm going to ask him about it. But basically Meta's panicking that Deep SEQ was able to train a state of the art model for less than the salary of one AI executive. But I'm curious, what do you think this does to the valuations and the funding in the space and does it invigorate AI startups to be able to build in the way they couldn't because it was cost prohibitive?
- [18:09]
Ranjan Roy
It's interesting to me how Meta falls into this because again Meta investing heavily but still like on the side of open source within this. So what did actual monetization look like or how were they thinking about it is very different than pay me for tokens on an API. But I but I do think, obviously taking a breath for a moment it's definitely come in and really taken the entire industry by storm this week and let's let it play out a bit but it's, it changes the overall economics in a good workable way if this is actually going to work and if this actually people are able to start building real things on top of it and the economics of the way things have developed over the last two years for a lot of these companies never made any sense. We've everyone in the industry is Talking about especially OpenAI is the poster child of just burning money and having unworkable economics. This in a weird way makes things actually a lot more rational in terms of business.
- [19:12]
Alex Kantrowitz
Right. And another thing that's interesting is it's open source it has an MIT license, so people have been able to replicate it. So you can't just say that it's like, okay, China subsidizing this stuff, which is interesting. But on that note, I mean, it's interesting that Marc Andreessen is the one that's out there hyping this the most. It is a product of China and it is, you know, if you think about there's this race between the US and China to develop the best AI, and now it doesn't look like they have the best, but they certainly are factoring in the race in a way that they haven't before. And of course, Andreessen's sort of been working with Trump on the transition and he's one of the tech MAGA guys and curious what you think it means. Do you think that this is a problem for U.S. competitiveness? I mean, this is the one thing we haven't touched on before and then we're gonna move on after this. But they were able to do this even though there are constraints on China because they can't import the top level chips and they were able to be creative and work around it. So it's just a fascinating wrinkle in the story to me.
- [20:12]
Ranjan Roy
Yeah, I think it's definitely going to change. It definitely factors into the overall US China dynamic in a big way. Especially kind of showing the world and you know, the companies and the, the executives who are. And we're going to get into Stargate in just a moment. That is the symbol of what the US's leadership on AI looks like. So to kind of just go out and show, oh, we can do it completely differently and everything you're putting up front like that is actually wrong. It's a big deal. I think that the scale of how cheap the actual development and training side of this model, there's definitely a lot of debate around what was built over existing things that America had already developed, whether it was Llama or other models. And you know, what kind of leg up and advantage from a cost perspective did that give deep seek in developing this? There's certainly plenty of conspiracy theories around, like, is this a psyop or a front for the Chinese government just to kind of shake up in the entire industry that American companies have a great deal of leadership on. But I think overall it's a reminder that, let's say they did build on Llama and kind of like use existing work that had been heavily expensive and done by other companies. In a way that's kind of a good sign for innovation. Overall, it's like thank you Metta and others for really putting in the capex to to get the entire industry to a place where smaller organizations can actually do something big.
- [21:51]
Alex Kantrowitz
That's right. And this is from Yann Lecun, the chief AI scientist at Meta, who's the one that's going to be on the show in a couple weeks. Everything goes according to plan, he says to the people who see the performance of Deep Seek and think China is surpassing the US in AI. You're reading this wrong. The correct response is open source models are surpassing proprietary ones. Deepseek profited from open source research. They came up with new ideas and built them on top of other people's work. Because their work is published in open source, everyone can profit from it. That is the power of open source research and open source. So on one hand you have this huge victory for open sourced and cheap models and on the other hand you got Stargate. Stargate. So this is from the AP. Trump highlights partnership investing 500 billion in AI On Tuesday, Trump talked up a joint venture investing up to 500 billion for infrastructure tied to artificial intelligence via a new partnership formed by OpenAI, Oracle and SoftBank. The new entity, Stargate will start building out data centers and the electricity generation needed for the further development of fast evolving AI in Texas. The initial investment is expected to be 100 billion and could reach five times that sum. And so basically there's like to me there's two sides of this equation, right? Two sides of this story. The first side is open source, cheaper models are starting to really hold their own with the bigger models. And the other side is we still don't know what the limits are of the scaling properties in OpenAI and you have to spend a lot of money to get to the outer limit. Ranjan, I'm curious what you make of this. Is this going to be a big like watershed week because we have both of these things or do you think that this is more PR than anything else?
- [23:30]
Ranjan Roy
I think we said there's real news and fake news this week and I think this is going to fall into the ladder. One thing this kind of like triggered in me so I went back and looked for people might remember in 2016 almost like identical like I, I almost felt like I was having deja vu. So in 2016 Masayoshi Son went to the White House, pledged $50 billion to create 50,000 jobs, said the words I couldn't have decided such a thing before this new president. And at the time that's when you know the first vision fund of 100 billion was being kind of finished up. And my favorite part of that whole saga was that they actually invested over $50 billion into the United States to create jobs. Majority of that was in we work. A bunch of it was in Uber, which, you know, did, did, did. All right, but, but overall he took something that already existed, was already under like the works for a number of years, and then went to the White House and said, I'm doing this because Trump is president in. So this one, it really felt like that because we talked about. There was a time, I think, how much did Sam Altman say they wanted to raise? 7 trillion.
- [24:50]
Alex Kantrowitz
7 trillion.
- [24:51]
Ranjan Roy
7 trillion, yeah. So now that was the rumors.
- [24:54]
Alex Kantrowitz
I think he joked, why not eight? But yeah, there must have been some truth to that.
- [24:59]
Ranjan Roy
So basically the FT has reported that this has been under the works. Actually there's a Washington Post White House reporter as well saying that this idea of 100 billion was already being pitched for a number of months and then the money is not there. And this is obviously one of the best juiciest parts of this, is that Elon Musk came out and basically called out this announcement and said that they max have like $10 billion. And then there was plenty of back and forth between Sam Altman and Elon Musk on this. But even the FT reported like that Stargate has not yet secured the funding it requires. It will receive no government financing and will only serve OpenAI once completed. The intent is not to become a data center provider for the world. They have not secured the funding. No one. A lot of people have been throwing out, like, what are the potential, you know, compositions of what a hundred billion can look like, but the numbers don't even add up anyways, so I'm not it. This was such an egregious PR thing that I'm glad it has given us Musk vs Altman on this because at least we got something out of it.
- [26:11]
Alex Kantrowitz
Absolutely amazing comments from President Trump on this. Also they asked him if they have the money. He says, well, I don't know if they do, but you know, they're putting up the money. The government's not putting up anything. They're putting up the money. They're very rich people, so I hope they do. Which is like, okay, so they don't have the money. So Elon is right on that. And even if, I mean, let's say they do get there, right? The question here is going to be is this the right way to train, given what we just learned about Deepseek. Bring it back to Deepseek. This is from venture capitalist Jeremy Liu. If training costs for the new Deepseek model are even close to correct, it feels like Stargate might be getting ready to fight the last war. Like bringing an M1 Abrams MBT to a drone fight.
- [26:57]
Ranjan Roy
No. I loved that. Yeah. The timing was almost comical, but still impeccable that this is the moment. And obviously in the Trump context, you don't want to say we have a faster, cheaper, kind of like more low key way of doing things. It has to be big and audacious. And that number, 500 billion really falls into the. Tell me a big number. What's the big number? Biggest number you want to think of. 500, let's call it that.
- [27:25]
Alex Kantrowitz
But here's the thing. Like we are going to see much more capital put toward a new model, right? Or new model development. Maybe it's not a hundred billion from OpenAI, but it's going to be billions, billions of dollars. Like even 10 billion is double their most recent fundraising round. Then you have Elon Musk, who's going to build this million GPU supercluster. And by the way, hot breaking news right off the press here. Mark Zuckerberg posted this morning. Meta is going to build a 2 gigawatt plus data center that is so large it would cover a significant part of Manhattan. We'll bring along about 1 gigawatt of compute in 2025 and we'll end the year with 1.3 million GPUs. We're planning to invest 60 billion to 65 billion in capex this year, while also growing our AI team significantly. And we'll have the capital to continue to invest in years ahead. This is a massive effort and over the coming years it will drive our core products and business, unlock historic innovation, and extend American technology leadership. Let's go build. I do love how everybody has a note to Trump in their press releases right now. Look, here's, here's what, here's the bottom line for me. You have these three research houses at least, that are building these massive, massive data centers to train the biggest models known to man. And we're going to find out the truth about this scaling hypothesis. Whether you can build and AGI just by scaling up. And I don't know, you might be saying like, let's go build the products. To me, it's exciting that this is actually something that they're testing.
- [28:53]
Ranjan Roy
For me, the exciting part is the shade that's being thrown left and right just as a just as observer. So you have. My favorite part of the post was, and we have the capital to continue investing in the years ahead. And we have the capital definitely, you know, a nice little nudge to the Stargate project. Satya Nadella, in an amazing interview this week, was talking about how Microsoft is going to, you know, and he's like, okay, that's all nice. We're investing $80 billion in capex in infrastructure build this year and I'm good for my 80 billion. So, I mean, Satya and Mark going on strong.
- [29:34]
Alex Kantrowitz
Why does everybody hate Sam? Even Dario Mode Amade from Anthropic was taking shots at him this week. You know, kind of in a veiled way calling Hype man.
- [29:43]
Ranjan Roy
I mean, because I think the secret of OpenAI success over the last few years has been delivering very good consumer products and moving fast, but also very, very. They are more heavily invested in the marketing and hype side of this, and that's how they raise money. And it's been, you know, a critical part of them maintaining some level of leadership in this. But the hype and the marketing are a core part of the OpenAI story. And in reality, like the Anthropic of the world get to ride the coattails of that a bit. So maybe they should be more thankful to Sam on this. But I mean, you figure the Zuckerbergs and Nadellas of the world are like, okay, I'm running my trillion dollar company here that's actually, you know, delivering scaled revenue at unimaginable lengths and profits. And they just look at it and they're like, all right, buddy, come on.
- [30:37]
Alex Kantrowitz
I'm telling you, man, Anthropic is the one I'm, I'm most worried about this year. It has, it seems like the least amount of money on hand of the big ones. It's not developing, as far as we know, one of these massive data centers. Claude is like you mentioned, number 18 in Chatbot arena getting surpassed by Deep Seek in a crazy way. And it doesn't even connect to the Internet right now.
- [30:58]
Ranjan Roy
But Claude is good.
- [31:00]
Alex Kantrowitz
Claude the product, it's my favorite of all the products. So they can't.
- [31:03]
Ranjan Roy
Cloud is good other than their rate limits that sometimes I'll be deep into some kind of coding or other analytical project on cloud, and then I hit the rate limit and have to wait a number of hours even as a paying customer. But fix that one cloud, come on. But other than that, Cloud's a good product. So I think it's. Obviously their marketing has actually been pretty bad they had these kind of comically ridiculous billboards that they tried to push around. And actually, I guess my, my, it's a great product for people who know about it. But I would agree that in terms of being in trouble, how ChatGPT is obviously the kind of household Kleenex, Xerox brand name in the space.
- [31:44]
Alex Kantrowitz
300 million users.
- [31:45]
Ranjan Roy
I'm sure most of my normie friends don't even know what Claude is. And are they going to be able to overcome that? I don't know.
- [31:53]
Alex Kantrowitz
Yep. All right, one more wrinkle in this Stargate project and then we'll move on to OpenAI's operator. And that is. And you know, if you're calling this fake news, maybe I'll take that, take the bone that you're throwing there and say, if it's fake news, why would it be fake news? Like, what would it be in service of? And maybe it is some marketing spin on OpenAI and Microsoft divorcing a little bit on the compute side. So the one thing that happened after this was that we found out that Microsoft and OpenAI, which have been linked together from the very beginning, well, maybe not the very beginning, but linked together very, very strongly for the past few years. And something that's benefited both of them, they're changing the way that their compute arrangement is. So Microsoft and OpenAI announced Tuesday they've adjusted their partnership so that OpenAI can access competitors compute. This is from the Verge. The new agreement includes changes to the exclusivity on new capacity, moving to a model where Microsoft has the right of first refusal and then to further support OpenAI, Microsoft has approved OpenAI's ability to build additional capacity primarily for research and training of models. So Microsoft still has this proprietary ability to sell OpenAI's models through Azure, but OpenAI no longer has to go through Microsoft for compute. And that's what this new project is going to do. And this has been something that's been bothering OpenAI for a long time. It's part of the tension between them and Microsoft and maybe you sort of dress it up as Project Stargate and then all of a sudden everybody's happy and you hope that people don't notice. What do you think about that hypothesis?
- [33:29]
Ranjan Roy
Yeah, I think that's actually everything about Stargate were things that were already in the work. Even Oracle was building a massive data center. And I think it's like Abilene, Texas, that now OpenAI is going to have an exclusive relationship with as part of Stargate, but they were already working on that apparently the information had reported that Elon Musk was offered access to it but had turned it down. So now it was open. So Larry Ellison saw the opportunity to move in this direction. And then even there was reporting that within Microsoft, there's increasing skepticism around generative AI in general and specifically OpenAI based on the negative reactions and rollouts for Copilot. So suddenly within Microsoft, they still see the long term value, but the idea that OpenAI is so magical, that that's going to be a critical part of the success and maybe they realize the product's more important than the model that they start to, that's going to. I'm going to get a T shirt with that. That they start to realize like, okay, we don't need open AI in fact at all, that we've already been moving away from them and financially the potential of any kind of great return from them is dwindling. So why not let it go?
- [34:44]
Alex Kantrowitz
Yep. Okay. Product more important than the model. Well, here we go. We've been talking about agents and assistants and computer use For Forever and OpenAI just released what is probably the best computer use model that exists today. So this is again from the Verge. OpenAI unveils AI agent that can use website on its own on Thursday, OpenAI unveiled a tool called Operator that can go out and onto the Internet and perform tasks autonomously, like shopping for groceries or booking a restaurant reservation. It can navigate websites and take actions on websites much like you and I do, said OpenAI product and engineering lead Yash Kumar. Artificial intelligence researchers call this kind of technology the AI agents. And this is some examples that Kumar showed booking a San Francisco restaurant reservation using Open Table to and then book also buying a list of groceries through Instacart. In the debut video they showed, they showed the thing going through basically looking at a paper grocery list and then going out and buying the groceries. And then I also found this really fun one from this guy, Peter Willinder, who's from Sweden and he says he likes saunas. And he has operator go through TripAdvisor and then basically search through all the hotels in Stockholm and try to find the best hotel sauna. And you just see the thing going through the websites and, you know, searching the dates and searching the hotels and then searching for the sauna and the reviews and then coming to a conclusion. And this is usually something that would take a human a lot of time to do and maybe AI can do it for us. Real product news. Ranjan, your reaction?
- [36:31]
Ranjan Roy
Real Product news and I'm actually Genuinely excited because when Claude or Anthropic had released their take over your computer product, I think it was very limited in terms of ability to use and very buggy. People found OpenAI from at least the demos I've seen, looks pretty slick, looks pretty interesting. But I actually think the problem with this rollout, they need to do say agents, they need to say Agentic. That's just part of 2025. If you want to compete, you gotta say agents. But the use cases in this, I just don't see what is going to actually achieve any consumer level scale with kind of computer takeover workflows and processes. Because again, everyone is showing, okay, I can find and maybe make an open table reservation or buy. I saw one demo where someone, you know, find me a leather jacket of my size that can arrive in two days and it technically worked. I don't see anyone changing their behavior to actually allow an agent to do this for your own personal life. And I think like the companies that are actually what they need to be focusing on, again, this is something where I think Agentic wins in the enterprise, not in consumer.
- [37:49]
Alex Kantrowitz
Well, to further that point, first of all, I thought you'd be more excited, but true to your intellectual honesty, you're calling it as it is. And to further that point, Casey Newton of platformer paid the 200 bucks to upgrade to Pro and played around with operator. And he did two things. He tried to get it to create a list of walking tours in London for him which had canvassed the web and found and then also a curriculum teaching the Great Gatsby, which had been something that the professor Ethan Mollick from Wharton who's been on the show before. I guess both of those folks are friends of the show. He's done that before and used that as a benchmark and it was able to do it sufficiently well. But then here's the crazy thing. Kasey just asked ChatGPT the same questions that it had the operator do. And without having to do the fancy, like go through the whole Internet, it produced better answers, faster. So is this a farce?
- [38:46]
Ranjan Roy
Yeah, I think the interesting part of this should be that last mile of actually booking the walking tour. Like the research side of an agent is not that interesting. It's the can you actually enter my credit card data and actually click buy? Which is pretty amazing and it should be able to do that. But again, from a consumer standpoint, the average person is so far away from letting an autonomous agent actually spend your money or do things or make decisions around your time. So I think that's one of the most important parts. I think like when Apple Intelligence we're going to be discussing like their view of agentic, at least as they presented it is more real for regular people around. Find my flight time, book me an Uber to get me to the airport in time and make that all one action. If it actually worked that would be amazing. But I think like computer takeover agentic AI for the average person is just so far like thinking about what would I use it for, trusting it to use it for that and having it more necessary than as you said, just a traditional LLM search or query. I think we, we, we, we're just so far away from that. But I do like, I'm glad OpenAI makes great products that actually work pretty well. So, so they're, I'm glad they're still pushing this forward.
- [40:12]
Alex Kantrowitz
Yeah, I thought should I pay? Because right now it's only available to these pro users. You pay 200amonth, you get OpenAI's chat GPT unlimited and you could also get this operator. And I said should I pay this 200? And maybe I should, you know, for the love of the game, since I am a reporter covering this stuff. But I just thought, nah, not right now.
- [40:30]
Ranjan Roy
I mean I do think I will recognize it is a big deal. Like if you start rolling out this ability, maybe we'll start to get the genuinely creative, potentially repeatable actions that really. And again not research where you actually take action on different websites and define those actions. I think it's going to start to get pretty interesting. But a lot of this again you could do with a script. Like you could do it with the script and it's basically creating that script like behavior for you, which is cool and which empowers people who cannot code scripts and that's a good thing. And the people will ideally start coming up with creative use cases. But it's. I think they should actually put a, put it as part of ChatGPT plus guys and I'll play with it. Maybe, maybe I'll be impressed. From the demos it did not look that exciting.
- [41:25]
Alex Kantrowitz
Maybe deepseek comes up with their own operator model than open Alias.
- [41:28]
Ranjan Roy
Would you let Deep Seek take over your computer?
- [41:31]
Alex Kantrowitz
No, of course not.
- [41:32]
Ranjan Roy
Of course that's actually one thing. I mean just on that because there were some very on deep going back to Deep Seek, like very egregious demonstrations of censorship around sensitive topics in China that were very clearly baked into the model. And it is interesting because like on one hand we are talking about how this could be completely revolutionary. But on the other, there's a lot of, I think on the trust side, on the security side, there's still going to be some questions, no doubt. And again, taking over, letting even OpenAI take over your computer, I feel behaviorally the average person is so far away from trusting this stuff.
- [42:14]
Alex Kantrowitz
Yeah, I totally agree. And it's something that I've been talking about on the show with everybody who's come on, whether it's Demis this past week or Eugenia from Replica the week before. There's going to be a real reticence to let people, to let computers take over and even to try, I mean, still to trust AI. 60% of people don't really trust AI. We're in a little bubble where we're like, okay, yeah, we trust this to a certain extent, but most people are like, screw that, I'm not touching that stuff.
- [42:39]
Ranjan Roy
I guess you just did mention the CEO of Replica. And you know what? Maybe people won't trust a computer to actually browse the web for them, but they will trust in AI to be their lifelong companion and love interest and romantic partner. So yeah, that's where people are right now.
- [42:55]
Alex Kantrowitz
It's all fun and game till your AI lover asks for your credit card.
- [42:58]
Ranjan Roy
Yeah, yeah, I'll have an AI lover, but I will not give them my credit card info.
- [43:03]
Alex Kantrowitz
Yeah, that's what you say is right now. But just, just wait till that relationship progresses and next thing you know you're buying a digital clothing and you're broke.
- [43:13]
Ranjan Roy
That will happen in the New York Times. Will do like a 6,000-word reflective deep piece with large photographs of someone walking along and looking, looking forlorn.
- [43:26]
Alex Kantrowitz
He fell in love with an AI. She took his money.
- [43:29]
Ranjan Roy
She did, but she did. She spent his money on a shopping spree in a Gentix shopping spree.
- [43:35]
Alex Kantrowitz
Oh my God. It's great business if you could run it. Okay, so you know, you hinted at Apple earlier and the current state of Apple intelligence, is that like, I don't know, I saw Genmoji Ship, which is kind of interesting where you can like prompt and get your own emoji. Or maybe it shipped just in the test version that I'm using. But by and large, Apple Intelligence, you know, speaking of AI product, an AI product for consumer is not working. It's not working now and who knows if it will work in the future. And it's nothing close to the presentation that the company showed at WWDC last year. And as a result, analysts are starting to say, hmm, we don't want to own this stock. So this is from Yahoo Finance. Apple Stock hit with downgrades 2 downgrades on weak iPhone sales and AI outlook so Jefferies analyst Edison Lee downgraded the investment bank's rating on Apple stock to underperform and decreased his price target by 13% to 200 on Monday. Loop Capital also downgraded Apple stock from buy to hold and revised its price target to 230 down from 275. They believe that iPhone sales in China are going to fall between 15 and 20% year over year in the fourth quarter. By the way, Apple earnings coming up next week. There's also been other downgrades. Moffat Nathanson downgraded a couple weeks ago and then everybody believes that that Apple Intelligence is so underwhelming and has not driven a super cycle or any sort of cycle really around the iPhone 16 and are doubtful it will do it over the next devices. And this is something we kind of previewed when we said hey, we think Apple intelligence kind of sucks and it's going to lead to some bad sales numbers. And here it is. So is it victory lap time?
- [45:23]
Ranjan Roy
Ranjan I'm going to take a moment here as I as I have to try to start to explain how bad Apple Intelligence is and for newer listeners. I've had a long time, long time hate hate relationship with Siri and I say this as someone who has HomePods across their house, AirPods in my ears, an iPhone, a MacBook. So I'm still heavily locked into the ecosystem but all I want is Apple to just deliver basic level generative AI in their products. Apple Intelligence now I've been using it, I mean it's been on my phone for a number of weeks now and it misses at every single level. The more I've been thinking about it. The notification summaries are so useless. Like they the the way they will group in different notifications if you get multiple ones from the same app and it will try to summarize it it actually it makes it more difficult than reading for notifications because there's the in terms of how they present the information even I was thinking about a Genmoji I played with. It was kind of fun. The UI side of it is very nice. Like actually probably the only thing that's cool is now when you ask for Siri your phone lights up around the borders of the of the entire screen in kind of a pretty way. But I was thinking about it. It's the most tone deaf thing because the whole value of emojis are that it's kind of like a shared language. It's kind of a common thing where the emoji connotes something specific and we all have that shared understanding. So from a language standpoint, no one wants to create new emoji. I'm very curious about the utilization of it, but that misses the point. Siri working and with ChatGPT is okay, but it's so much worse than ChatGPT Voice or Gemini Voice or any actual other voice mode assistant for any generative AI product. So it, it's genuinely shocking to me. Like a friend of mine was trying to pitch, you know, Apple should buy Perplexity and I genuinely don't. I hope they don't because I think they would ruin it in integrating it into the overall product, an ecosystem. I don't. What do you think is happening over there?
- [47:50]
Alex Kantrowitz
I've always said it's a cultural thing and they just aren't set up for to culturally build AI. They're too secretive, their product groups don't work with each other. You need that and you need to be risk taking a little bit. And Apple is none of those. And therefore I don't think it's going to realize this AI vision until it really is kicked in the face and been and made to. And so we've seen these stock downgrades and obviously Apple cares a lot about its share price and now Nvidia is the most valuable company in the world again and Apple is not. And maybe something will spark within the company, but I don't think Apple today is going to be able to build an AI product that people are going to believe in.
- [48:31]
Ranjan Roy
But do you really think it's cultural how bad it is? And I say that we've been, we are both very early adopters of and test out every generative AI offering. Like Gemini voice is really good. ChatGPT voice mode is pretty good. I was actually like a Gemini Voice. I've been incredibly impressed. I almost want to get an Android just so I can interact with it rather than Siri. I still am so locked into Apple that I have not yet. But the fact that I'm thinking about that is, is something that is very different than anything over the last decade. Like do you think they can actually even. Let's say we see a bunch of downgrades, stock drops 15%. Do you think they shake things up and are able to actually deliver something just on par with what's already out there?
- [49:22]
Alex Kantrowitz
No, I think they're more likely to just Give up on AI. That's my perspective.
- [49:28]
Ranjan Roy
Just no more. I mean, maybe, maybe you can use.
- [49:30]
Alex Kantrowitz
ChatGPT on an iPhone. So it's not, it's gonna be a problem for them. They're gonna need. The thing here's the real issue is that so many iPhones are just kind of the same. Like, I have the iPhone 15, you could tell me today, Alex, you actually have the iPhone 14 or you have the iPhone 16 and I would believe you, or you got the iPhone 13, I would be like, all right, yeah, that sounds about right. Because there's not much difference. And the phones you can hold on to for three, four years. So like those, those upgrade cycles are gonna get more spaced out and there's no real draw to bring people in. So I think that, like, it's less of a, like, people are gonna switch to Android thing and more of a, like, the upgrades are gonna come in much slower now. People are still gonna be using iPhones, so they're gonna be able to buy their services and they'll come in and they'll get the MacBooks every now and again. But ultimately I don't think that they have what it takes to deliver AI. And I could be wrong, and I'll admit it if I'm wrong, but so far I've been right. You can read it. It's in, it's in my book. I've always wanted to say that, but really, in the Apple chapter, I specify why they're going to have a hard time with AI and it's all playing out okay.
- [50:38]
Ranjan Roy
I think, I guess I almost would bet that they will win smart glasses as a category if they launch a product or like, that's the area I could actually see them having more success in building or like launching like a genuinely revolutionary new product. But yeah, I, I think, I agree. You don't leave the Apple ecosystem. You just don't buy the new iPhone. I actually think that would be a power move though, if they just said, you know what? No more Apple intelligence. We're not baking in any AI, like at the device level. Use all the other apps. That's great, but we're over it.
- [51:14]
Alex Kantrowitz
Yeah, they're going to make the most.
- [51:16]
Ranjan Roy
And we're going to, we're going to launch some good new devices.
- [51:19]
Alex Kantrowitz
Yeah, Siri will suck and you will like it. I mean, that's going to be their new motto. What happens when businesses have Dell AI factory with Nvidia? Years of patient data gets distilled in seconds. Investors know the exact moment stocks should be traded and quality checks speed up so production lines never slow down. No matter what business you're in, there is an AI solution that's easy to implement, secure and tailored to you, that can keep your business moving forward. Dell AI factory with Nvidia your way to AI, visit Dell.com to learn more.
- [51:54]
Ranjan Roy
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- [52:24]
Alex Kantrowitz
We should really talk just for a couple minutes about what happened with TikTok. Because at last week's episode I said I would be stunned if we got to this week's episode and TikTok was gone. And TikTok is indeed still standing. However, I don't think you can find it in the App Store. And every company that every company that has TikTok is supporting TikTok, the oracles and the Akamais of the world, they risk fines, daily fines and could potentially really go into lots of money and millions or billions of dollars over time for keeping this thing running, despite the fact that Trump has, quote, unquote, saved the app with an executive order. Just very quickly, what's your perspective on what happens to TikTok from here?
- [53:08]
Ranjan Roy
You know what? It's Friday, January 24th. This has been such a heavy week of news that I forgot, I almost Forgot that whole TikTok ban thing happened on Sunday, I believe, late Saturday night where everyone got a message saying TikTok is shut down and President Trump hopefully will save us. And then you got a message. I think eight hours later, President Trump says saved the app, which was just the wildest thing. Like I like that happened. That happened.
- [53:41]
Alex Kantrowitz
Some girl, a congressperson, allegedly lit a congressperson's office on fire in that 1212 hours. She was mad about TikTok.
- [53:49]
Ranjan Roy
Like it was interesting. I was asking a bunch of younger folks who are deep into TikTok and it was interesting because a lot of people's reactions was genuinely like, do they really think we're this stupid? And yes, yes, I do think the executive leadership team at TikTok does. But yeah, in terms of what's going to happen going forward, this one is going to remain one of the most wildly unpredictable things and very excited to watch what happens because again, finding an American buyer and divesting TikTok was all from ByteDance was always the necessary request. Now we still have to find one. It's always been questionable about who is going to buy at what valuation because let's say we find people willing to buy still negotiating because it's still at a very, very high lofty valuation. People that negotiation is going to be interesting. And then obviously the Twist that somehow 50% of it has to go to the US government, I don't think is makes any sense or I just don't quite understand exactly what that part of it means. But this one, I have no idea what's going to happen, but I'm very excited to watch.
- [55:11]
Alex Kantrowitz
Ranjan, can I just say that this week I expected us to be talking about TikTok ban and all the big tech leaders standing behind or sitting behind Trump.
- [55:21]
Ranjan Roy
Wait, that was the inauguration, wasn't it?
- [55:22]
Alex Kantrowitz
That was Monday. Whole script has flipped. There's been so much news. Even Stargate, which I thought was going to be the lead story, ended up being pushed down the list of stuff to talk about because of Deep Seek. And then of course, we got operator, so. And the Apple downgrades. Fascinating week of news. Appreciate you all for sticking with us and coming back week after week. We break down the news here. Yeah. On Fridays. And Ron, John, thanks for so much for coming on the show.
- [55:47]
Ranjan Roy
Who knows where we'll be in seven days. I'll see you next week.
- [55:50]
Alex Kantrowitz
I could deal with a little bit less on Thursday predictability, but anyway, we will be here next Friday. By any means necessary, we will be here. All right, everybody, thanks for listening and we'll see you next time on Big Technology Podcast.