Podcast Summary: How I Invest with David Weisburd
Episode E127: Interview with CEO of Top AI Company Backed by Founders Fund and Khosla Ventures
Release Date: January 7, 2025

1. Introduction

In Episode 127 of "How I Invest with David Weisburd," host David Weisburd engages in an insightful conversation with the CEO of Akash Systems, a leading AI company backed by prominent investors such as Founders Fund and Khosla Ventures. The discussion delves into Akash Systems' innovative technology, market strategies, funding initiatives, and future outlook, providing a comprehensive understanding of the company's trajectory in the rapidly evolving AI and semiconductor sectors.

2. Company Overview: Akash Systems

The episode begins with an introduction to Akash Systems, a pioneering company in the AI and semiconductor industry.

David Weisburd (A):
"So what is Akash Systems?"
CEO (B):
"Akash Systems is a company that uses synthetic diamond to cool down microchips. These are microchips that are so powerful that we are able to do things like what ChatGPT does or what a satellite does. Very powerful electronics..."
[00:57]

Akash Systems specializes in leveraging synthetic diamond materials to enhance the performance and efficiency of high-powered microchips used in AI servers and satellite communication systems.

3. Technology and Innovation

A significant portion of the discussion focuses on the unique technology Akash Systems employs to address heat dissipation in microchips—a critical challenge in data centers and high-performance computing.

CEO (B):
"We grow diamonds in the lab. These are synthetic diamond materials, and we use these diamond materials to cool down these chips."
[00:59]

The CEO explains how synthetic diamonds are integrated with GPUs and other chips to significantly improve thermal management, thereby boosting performance and efficiency.

David Weisburd (A):
"How much of the cost of a server chip has to do with heat and power?"
CEO (B):
"Oh, my God, most of it. So in a typical data center, for example, something like 40% of the cost of operating a data center... is cooling, air conditioning, trying to reduce that heat."
[02:08]

To illustrate the effectiveness of diamond as a thermal conductor, the CEO demonstrates its superiority over copper.

CEO (B):
"Five times more thermally conductive than the next best material in nature, that being copper..."
[08:20]

4. Market Opportunities and Growth

Akash Systems identifies substantial market opportunities within the AI and satellite communication sectors, projecting a market size between $200 billion to $400 billion.

CEO (B):
"We estimate our market size to be anywhere from 200 to about $400 billion..."
[02:55]

The company plans to expand into additional markets, including electric vehicles (EVs), smartphones, communication systems, and defense-related radar systems, positioning itself for extensive growth.

5. Funding and the CHIPS Act

A pivotal moment in the discussion revolves around Akash Systems securing $68 million through the CHIPS and Science Act, aimed at bolstering semiconductor manufacturing in the United States.

CEO (B):
"We just received $68 million in CHIPS funding from the government, the Department of Commerce's Chips and Science Act..."
[04:05]

This funding will facilitate the scaling of manufacturing and assembly operations in Oakland, enabling Akash Systems to meet increasing demand and enhance its production capabilities.

David Weisburd (A):
"Was that part of that effort or is this just a totally unrelated trend that you're seeing in the market?"
CEO (B):
"The CHIPS act is absolutely connected to the bipartisan effort to try to bring back to the US Manufacturing and assembly of semiconductors..."
[05:37]

He emphasizes the national security and economic benefits of onshoring semiconductor production, highlighting the creation of hundreds of jobs and reducing dependency on foreign adversaries.

6. Competition and Differentiation

Addressing competition, the CEO asserts Akash Systems' unique position in the market.

CEO (B):
"In the area of sort of high powered, highly cooled, high efficiency servers? I don't think that we have any competitor at this point."
[07:24]

Akash Systems differentiates itself through superior thermal conduction capabilities, ensuring unmatched performance and efficiency, which has consistently led to their preferred status among customers.

7. Impact of Market Correction and COVID-19

The conversation shifts to the challenges faced during the COVID-19 pandemic and how market corrections influenced the company's strategic direction.

CEO (B):
"Those were the COVID years... those quiet times enable companies to slow down and get back to basics. What is your business plan?"
[12:56]

Akash Systems used this period to strengthen their product offerings for space applications and expand into AI and data centers, leading to significant contracts and product launches post-pandemic.

David Weisburd (A):
"I believe organisms, when dealt with any kind of issues, either become antifragile or die. You're basically either growing or dying. How did that affect Akash Systems as an organization?"
CEO (B):
"I think that in tough times, if you're not able to answer Those fundamental business 101 questions... then I think you will struggle. If you do, then I think you have some very good years ahead."
[14:32]

The CEO emphasizes resilience and strategic focus as critical factors that enabled Akash Systems to thrive amidst adversity.

8. Leadership and Team

Highlighting the importance of a strong team, the CEO credits the company's success to its talented personnel and supportive investors.

CEO (B):
"I have an amazing team around me... we're constantly challenging ourselves, asking ourselves the right questions."
[17:55]

He acknowledges the role of venture capitalists like Khosla and Founders Fund in guiding the company through challenging periods, ensuring disciplined growth and innovation.

9. Future Plans and Outlook

Looking ahead, Akash Systems has ambitious plans to scale operations, launch new products, and secure significant contracts in the AI and space sectors.

CEO (B):
"We're announcing this big order next week. We're going to... start shipping the servers in Q1. There's another bunch of satellites going up with our radios in April..."
[22:40]

He envisions Akash Systems becoming the world's preeminent high-end server company in AI within the next year, driven by relentless execution and strategic expansion.

10. Conclusion

David Weisburd wraps up the interview by expressing enthusiasm for Akash Systems' future endeavors and the impactful innovations the company is bringing to the AI and semiconductor industries.

David Weisburd (A):
"This has been great and it's great to catch up and always inspiring to talk to you, Felix."
[23:56]

The conversation underscores Akash Systems' dedication to technological excellence, strategic market positioning, and resilience in the face of global challenges, positioning them as a formidable player in the AI and semiconductor landscape.

Notable Quotes:

• On Identifying Market Opportunities:
  CEO (B):
  "Listening to these massive mega trends and knowing that you're going to intersect the world and the puck where it will go to, not where it is today..."
  [00:16]

• On Thermal Conductivity of Diamond:
  CEO (B):
  "Five times more thermally conductive than the next best material in nature, that being copper."
  [08:20]

• On the Importance of the CHIPS Act:
  CEO (B):
  "It helps us in securing our supply chain for all of our nation's major and critical economies."
  [05:37]

• On Company Resilience:
  CEO (B):
  "If you're not able to answer these questions favorably, then I think you will struggle. If you do, then I think you have some very good years ahead."
  [14:47]

• On Future Ambitions:
  CEO (B):
  "We see a place, a world where Akash could become the world's preeminent high end server company in AI period."
  [22:40]

This episode offers a deep dive into Akash Systems' innovative approach to AI and semiconductor challenges, strategic growth initiatives, and the pivotal role of supportive funding and a talented team in navigating complex market landscapes. Listeners gain valuable insights into how Akash Systems positions itself at the forefront of technological advancement and market leadership.