Patrick Moorhead (3:45)

Yeah, thanks. Thanks for having me on here. It's craziness out there, so let's chat.

Ed Elson (3:51)

100%. Yeah, we need to make sense of all of it. I think the first thing we need to make sense of, I mean, the big news is met is spending all of these billions of dollars on TPUs. Most people are aware of GPUs, but perhaps not TPUs. What are TPUs and why is this so important?

Patrick Moorhead (4:12)

Yeah, so think of TPUs as the industry term is ASICS. Okay. Which is an application specific integrated circuit. I know I'll have some people challenge me on this, but an ASIC is designed to be a little bit more focused in on the solution it's trying to to fix. It's typically lower power, all things considered, but typically it's a little less flexible. So GPUs are more flexible. TPUs for a specific workload are typically more efficient.

Ed Elson (4:50)

So using less power, which actually we've discussed a lot on this podcast, could be a huge problem because of how much AI, how much power AI is going to drain. And it looks like Meta would rather go for TPUs or they're gonna use that in addition to the GPUs. What's the decision here behind Meta reportedly buying all of these TPUs?

Patrick Moorhead (5:13)

Yeah, yeah. So first off, there's nothing that's ironclad here. So it appears though, and I do believe that they will use both TPUs and GPUs. And meta itself has made a lot of data center silicon themselves. It's called mtia. And They've been, like I said, very focused on certain workloads. So One of their MTIAs is a recommendation engine. And you know what is Instagram and Facebook? It's one giant recommendation engine. Recommend me ads, recommend me content, recommend me friends. But it appears as if they've looked at their own internal capabilities and they looked at Google and said, hey, I like what I'm seeing with this generation generation of Google DPUs. But I do not for a second believe that they won't be using a ton of GPUs as well.

Ed Elson (6:11)

Yeah, yeah, it's so interesting to see what happened to Nvidia. I mean, Google rips Nvidia falls, which seems to suggest that the market believes that Google is, I don't know, stealing Nvidia's lunch to some extent. And then I saw this very interesting a tweet from Nvidia's newsroom, which I just want to read to you. They said, we're delighted by Google's success. They made great advances in AI. Nvidia is a generation ahead of the industry. Nvidia offers greater performance, versatility and fungibility, which is designed for specific AI frameworks or functions. So I read that. I don't really know the technical language they're talking about, but what I get the sense is we're still number one. We're the top dog. What do you make of that?

Patrick Moorhead (6:56)

So I actually agree with that. And what they're talking about with fungibility is I use the word flexibility and think of it like this. Let's say there's three generations of AI out there, okay? And again, an engineer would cringe when I use that. But I'm really trying to simplify this. Let's say you can get three generations out of a certain Nvidia GPU or an AMD gpu. You might only get one out of an asic. And whether that be a TPU or Inferentia and Trainium over at aws, or even an mt, an mtia. So I actually agree and we can debate on performance figures, but if I look at what you can slam into a rack, it does deliver higher performance. And I don't know if it's a year ahead, but it is higher performance.

Ed Elson (7:51)

Would you say then that this, the way that the market seems to be punishing Nvidia here is perhaps unfair? Perhaps everyone wins, Google wins and so does Nvidia.

Patrick Moorhead (8:02)

So in this era, and whether you believe what Sam Altman says or what they're saying over at Anthropic, there is just not Enough compute to go around. And I think everybody's hedging their bets. They're hedging it with amd, they're hedging it with TPU and the general industry terms and xpu. And what they're doing is they are going to do a bake off. Right. First off is let's keep everybody honest, let's cut deals with everybody and then let's see what actually comes out of this. And hey, I can move the knob more on Nvidia or I can move it to AMD or I can move it to tpu. Everybody's keeping themselves honest. And, and I think I was on your, when we did one of your shows, when we really did a deep dive in semiconductors and I talked about nobody being comfortable with any supplier that has 90% market share. The industry will react. That's exactly what you're seeing. And Ed, this market reaction you're seeing is from, I think, people not doing their homework. This is not new. In fact, a lot of the data that we put out talks about Nvidia in two or three years having 70% market share. But the market is gigantic. Everybody can grow and everybody can do very well. So the market's just really catching up with reality. I think they're over indexing. I do believe that the 5 to 6 quarter 500 billion number, billion dollar number Jensen put out there is absolutely spot on. And that means if you just add up that present market value, that adds probably an additional $70 to the stock where it was two weeks ago.

Ed Elson (9:57)

Yeah, it does certainly seem that if the chip race hadn't already begun, certainly everyone seems to understand or recognize that it has begun, whether it's Nvidia or Google or as you say, Amazon's Trainium chips. It seems like all of these players are now building chips. Perhaps they were for a time, but now we all certainly know it.

Patrick Moorhead (10:17)

Yeah, so one of the things is up until this point, nobody was swinging me around the room on Google AI, right? Bard came out and that didn't work very well. Bard 2 didn't work very well. Gemini 1 didn't, didn't work very well. And then Gemini 2 was like API calls going way up. OpenAI has 73% market share and Google has almost the rest. Now with Gemini 3, everybody posting these infographics, these videos out there, it's like, oh my gosh, TPUs can make great AI. And that's the bit what everybody's reacting to because it's in their face 24 by 7. If you hang on social media like you and I do.

Ed Elson (11:01)

Yes. So that sets us up perfectly to just quickly check in on Gemini 3, which was recently released. Certainly a big reason why we're seeing this rally. And a lot of people are very excited about it. I haven't used it yet myself, but I thought it was very interesting. Mark Benioff was very excited about it. He tweeted about it and he pinned his tweet that Gemini 3 was the greatest thing he's ever used, which was interesting. And then reportedly Sam Altman told the OpenAI staff to brace for, quote, rough vibes and temporary economic headwinds. I don't know if that is because of Gemini 3, but I do know that it came after Gemini 3. Tell us a little bit about Gemini 3 and what it means for AI.

Patrick Moorhead (11:46)

Yeah. So, Ed, this falls under the market share of 90% that nobody's comfortable with. Okay. And it seems like this, this wheel of innovation between anthropic Google, OpenAI and some of the Chinese vendors is this. This circle that everybody has. Oh, sorry, Xai as well. Everybody has the best new model within two weeks of each other. So it is a big improvement, primarily because it fixes a lot of the problems that they had before. Code creation, as an example, was something that Google was not great on. And then you see all the visual tools that's getting all of the amazing feedback. With Nano Banana, it is a much better model. Google's first challenge is to figure out, how do I bring higher EPS to Google Corp for its own consumer products? And second of all, how do they monetize this from an API basis for developers? And thirdly, how do they monetize this from a Google Cloud infrastructure as a service? So it is promising Edit, but we still need to see some of the meat downstream that they can monetize this. It's not that Microsoft has a lock on business users, but, Ed, I do these CIO roundtables and I go, everybody's using Microsoft AI. And not just Copilot, but things like Azure, AI agent toolkits and things like that. So that is the. That is going to be a tough thing to break for Google. But, man, what a strong start.

Ed Elson (13:33)

Absolutely. Before we let you go here, I'm going to ask a very reductive question that you, as a technical expert are going to cringe at. But that's okay.

Patrick Moorhead (13:42)

Not at all.

Ed Elson (13:43)

Who's winning the AI race right now? I mean, I thought it was Microsoft and then maybe Nvidia, now maybe it's Google. They've had an amazing year. Who's winning right now in 2025?

Patrick Moorhead (13:56)

Okay, it's not in 2025. I mean, who's winning in 2025 is Microsoft. That's who's winning. If I look at the revenue that they've created based on that, financially, they're winning the last two weeks. Google, Gemini, next week it could be xai. So, but financially, this is Prof. G Markets. It is absolutely Microsoft for 2025. They are crushing it inside of the enterprise, you know, and they still are the back end and the front end for OpenAI. Microsoft is the trusted provider for enterprises. Google's doing great, don't get me wrong. They're picking up a lot of market share, but they still are the number three enterprise cloud out there.

Ed Elson (14:48)

All right, you heard it from Patrick. Patrick Moorhead, CEO and founder of Moor Insights and Strategy. Patrick, always good to see you. Thanks for joining us.

Patrick Moorhead (14:57)

Great to see you, too. Thanks for having me on the show.

Ed Elson (15:01)

After the break, a closer look at Bitcoin's decline. And if you're enjoying the show, give Profg Markets a follow.

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Ed Elson (18:34)

We're back with property markets. Bitcoin has fallen for nearly two months now and it has shown no signs of stopping. As we discussed last week, it has dropped 21% in the past month to roughly $87,000, erasing all of its gains for the year. It's now down as much as 30% from its recent all time high in October. Other major cryptocurrencies including Ethereum and Solana, have seen similar losses as well. And in the stock market, crypto related companies such as Strategy and Coinbase are down more than 20% in the past month. All in all, over $1 trillion has been wiped out in the crypto markets in just six weeks. So for more on what is happening crypto markets right now, we are speaking with Santiago Roel Santos, founder And CEO of Inversion, a crypto holding company. Santiago, thank you very much for joining us on Prof. G Markets.

Santiago Roel Santos (19:27)

Thanks Head. Great to be here.

Ed Elson (19:29)

So bitcoin is down to around 87,000 now. It's down more than 20% in the past month. It's been just kind of a brutal few weeks. We've been trying to make sense of this. What's going on with Bitcoin right now?

Santiago Roel Santos (19:43)

Well, you know, over the net outflows, right? You're basically seeing ETF dry like that, liquidity, dry up the markets. Just the marginal buyer is no longer there. You know, I think throughout the course of the year, the run up to 120k, you saw huge inflows from institutions and you know, that has. Now you're seeing net outflows on the ETF side.

Ed Elson (20:03)

Do we know who is selling and do we know why they're selling?

Santiago Roel Santos (20:07)

Not microstrategy.

Ed Elson (20:09)

True.

Santiago Roel Santos (20:09)

But you know, there are some whales that have taken profit. You know, the hundred thousand is very psychological level. I think you saw a lot of profit taken above that level. So there's still anxiety and nervousness in the market. I think a lot of people just took profit above that 100k level and.

Ed Elson (20:25)

So taking profit meaning selling, basically. It's interesting because when I think about bitcoin, which has something of a cultish ethos around it, I feel like the whole idea is you never sell. Bitcoin is something forever. We're hodling indefinitely. So the idea that people are hitting 100,000 and they're switching back into fiat currency, to me, that's not a great thing for bitcoin at Lodge. What do you make of that?

Santiago Roel Santos (20:56)

Bitcoin's always been this macro hedge digital store value, digital gold. And it's sitting at 1.5 trillion. That's less than roughly 5% of gold's market cap. So I'm not overly worried about it. I mean, I think if anything, bitcoin this year has solidified itself as something that institutions want to have in their portfolio. It's still a very much tied to macro flows. So it's going to continue to be volatile as much as it continues to grow much more volatile than gold. But it's just normal things, bitcoin doing bitcoin things. So the volatility is normal and expected. But I would say a lot of institutions this year and in the next year are going to continue to just get off of zero because, you know, it deserves a place in a portfolio. And I think institutional managers have sort of come around that idea this year, and that's not going to go away.

Ed Elson (21:48)

Does the fact that it's not behaving like gold cause any concerns in terms of this idea that it should be in your portfolio? In the same way that a lot of money managers say gold should be in your portfolio, but gold's up, having its best year in years, and bitcoin's down. Does that cause any concern?

Santiago Roel Santos (22:07)

Absolutely. I mean, I think if you're a portfolio manager, it's hard to go to your client and say, hey, we put a position on Bitcoin and it's down 25%. No one likes that. And it's hard, especially if you're a money manager. In a lot of my conversations, family offices are okay with it. They're more sophisticated. But the retail investor and portfolio managers, I would say definitely volatility is an enemy here because you go to your client at the end of the year and say, here's how everything performed. The Stock market's up 12, 15%, gold is up. This thing that was going to be a representation of gold and a hedge is actually down. And you know this, Ed. But in portfolio construction, you want to have assets that are uncorrelated. And Bitcoin's always pretended to be an uncorrelated asset class. Right. Small, differentiated. That's what gold is. That's what commodities pretend to be. And I think if you're going into the end of the year talking to your clients about putting in a position in bitcoin, this year, you're down and the market's up. And so it's very hard because crypto is still a risk asset. Right. It's really far out on that risk spectrum. And I think there's a pocket of the market and the liquidity that may, on the margin, be more hesitant to put in greater exposure to that because just no one likes volatility as much as everyone wants to be here saying, yeah, we want to uncorrelated returns and get off of, beat the market. It's hard to have that conversation with your clients if you're underperforming.

Ed Elson (23:38)

Yeah. When we look at some of the other cryptocurrencies, especially the altcoins, which have been kind of decimated this year, they weren't crushing already, but the meme coins, all of the stuff that, where all the speculative stuff is happening, is that, that going away? Do you think, do you think that Bitcoin is coming out of this as kind of the one and only crypto, or do you think we're going to see a proliferation of more cryptocurrencies. What do you think this means for the rest of the crypto market?

Santiago Roel Santos (24:10)

Well, it's an interesting question because bitcoin is in a rare category of its own. It's sort of ossified as this digital gold store value construct. Everything else is pure technological bad, that more like a tech stock. And so I think people that come into the casino trying to punt meme coins or Ethereum or Solana, I think of it as the flows that go into investing in things like AI and technology stocks. And so it's very momentum driven, it's very narrative driven. And now I think the main character is just AI. Right. People just want to are more excited to put a position there. It's less volatile, it's well more understood. The narrative is front and center. And so that's sort of my criticism. Being in a longtime investor in the space. I just think the industry is overly reliant on this particular use case, which is a digital casino that is open 247 365. However, I will caveat all that by saying you're going to continue to see a pocket of crypto called stablecoins continue to proliferate. More and more businesses using that. And so it's sort of there's kind of two worlds, right? You have real technology, real use cases, companies like Stripe and Robinhood and SpaceX using stablecoins because it's just a better way of do payments versus the noise which is meme coins. And what's the price of dogecoin and Ethereum? And so there's a big disconnect between the technology and some of these crypto assets and meme coins that are just purely speculative and very volatile.

Ed Elson (25:35)

Yeah. When we look at some of these bitcoin treasury companies, which obviously became kind of popular at the beginning of the year. It's also so interesting because, you know, this administration was the, it was the, it was the crypto administration. And it's so funny, here we are at the end of the year and bitcoin is down. But looking at those bitcoin treasury companies, MicroStrategy is obviously the most prominent and largest example, which is also getting kind of crushed right now. What do you make of what is happening in the Bitcoin treasury space and what do you think's going to happen to MicroStrategy moving forward?

Santiago Roel Santos (26:13)

I'm not worried about MicroStrategy at all.

Ed Elson (26:14)

Okay.

Santiago Roel Santos (26:15)

They have, they're not a for seller. They negotiated phenomenal terms with lenders in the form of convertible notes. So they're not a for seller. Their next maturity is 2028. And so convertible note holders may elect to get paid in cash, not equity. So there's a, there's a huge margin there in a window for MicroStrategy to, you know, the interest payments on that is very low. It's like less than 1%. So that's MicroStrategy. I think Saylor being sailor negotiated great terms. There's the whole category of other microstrategy like vehicles that have less favorable terms. And so you are seeing some for selling. You know, Tom Lee has its own vehicle that is warehousing Ethereum, there's a couple other Solana vehicles they have negotiated as favorable terms. So I'd be paying a lot of attention there because, you know, as prices continue to come down, it will force some selling into the market.

Ed Elson (27:13)

Yeah. Just before we let you go here, what would be your outlook for Bitcoin and for crypto going into 2026? We had kind of a good year that ended up turning bad. If you had to make any predictions, what would it be for 2026?

Santiago Roel Santos (27:29)

I'm not an oracle. I would say it's very much tied to macro and liquidity. It will continue to be that I'm paying a lot of attention to just the actual use cases of the technology that are disconnected from the price, candidly. I mean, I wrote a blog piece last week just the value. You can't really justify the valuations of a lot of these networks putting Bitcoin to the side because it's a commodity, it's purely based on supply and demand.

Ed Elson (27:51)

Right.

Santiago Roel Santos (27:52)

But something like Ethereum, something like Solana, they're valued at 50, 60, 100, 200 times price to revenue. The best, hottest AI company is trading at 25 times price to revenue. So at some point you have to show fundamentals and crypto as much as the hardest question as an investor is is it priced in? The administration came in very favorable. It is delivered on the regulatory piece. Now I think it's a sobering moment for the crypto industry to say, okay, We've created this 24, 7, 365 Internet capital markets. Can we graduate beyond just being a pure speculative asset class and can we deliver on the fundamentals? Will the value capture be there? And I guess to me that's the biggest opportunity, but also the biggest challenge as an industry because if we can't really prove to an investor to the market that the use case is there and the value captures there, I think it's going to be pretty hard to justify the valuation for Ethereum at 350 billion because you'd rather buy any stock like Nvidia in the public markets that is trading at a fraction of that.

Patrick Moorhead (29:00)

That.

Ed Elson (29:00)

Right.

Santiago Roel Santos (29:00)

And so there's a big disconnect between the promise of the technology and the valuation for a lot of these coins. And I think the market's kind of. It is a normal thing as the market grows up and starts to realize, hey, am I getting paid enough to take this level of risk? And I think that's in the back of a lot of people's minds going in, you know, finishing the year and going into next year, I would say.

Ed Elson (29:20)

All right, Santiago. Roel Santos, founder and CEO of Inversion. Santiago, thank you. Really appreciate your time and happy Thanksgiving.

Santiago Roel Santos (29:28)

Thanks, Ed. Happy Thanksgiving.

Ed Elson (29:33)

Tomorrow is Thanksgiving, which means that markets will be closed. And more importantly, we will not be publishing an episode of Markets. Yes. We are taking a break. No episode on Thursday. Also no episode on Friday. We will be back on Monday for a special episode in which we will discuss the relationship between money and masculinity. This was a fascinating conversation, heavily informed by Scott's book. We get into other topics as well. Either way, I'm very excited for you to hear that episode. Until then, we're going dark. We will be giving thanks as it is Thanksgiving. And before we go, I would like to give some thanks myself. So first, I want to thank you guys, our audience. We started this daily show about six months ago. I don't know if it came through, but I was very anxious at first. I was very anxious about hosting this solo, but it turned out to be very successful, and it also turned out to be a lot of fun. And that is thanks to you guys who tune in and engage with us on social media and who offer up your very interesting and often very hilarious perspectives. And it generally just makes this business a lot of fun. And I thank you for that. I also wanna give thanks to Scott. I don't know if Scott is listening, but, Scott, if you are listening, I just want to recognize. I know what you have done for me, and it is more than any other mentee could probably describe, and I am extremely grateful for that. And finally, I wanna thank our team. If it wasn't already obvious, this show would be impossible without all the people we work with behind the scenes on this. So that is Claire Miller, our producer, who is essentially the captain of this whole show. Mia Silveria, our research lead. She is essentially the brainstem of the show. Our research Team, they're the reason we find all of these great insights. Our associate producer, Allison, she's the one who makes us sound good. Our editors, Brad and Joel, they cut this show three nights a week. Our video team, they're the reason we're on YouTube. They're the reason we're crushing on YouTube. There are so many people to thank, and I say this to give them credit, but I also say it selfishly because actually the research shows that by expressing gratitude, literally writing down or saying what you're grateful for, it turns out that that actually makes your life better. It makes you happier. Many studies have shown that. And that's also why I think that this is such a good holiday, because it's not just a meal. It's also a reminder of what actually makes humans happy. It's a reminder that as much money and status as we may try to accumulate, and we talk about that a lot on this show, none of that even registers. If you can't find a way to feel grateful for it, if none of it, it satisfies you. If you don't feel content, if you don't feel appreciative, then none of it has value. It's worthless by definition. And so this holiday is really all about that feeling and what it takes to achieve that feeling. And it basically tells us that the only way to achieve that feeling, to achieve the feeling of gratitude, the only way to do it, is to share with other people. It's to share the food, the space, the camaraderie, the love, the appreciation, et cetera. The whole thing is about sharing. And if we don't share, then it all ends up feeling pretty meaningless and pretty depressing. So that's why I like Thanksgiving. And before we go, I will leave you with a quote from Seneca, the famous Roman Stoic, the ancient philosopher who basically summarized everything I just said in the past rambling few minutes. And this is what he wrote. And this is what we will end with today. Quote. There is no enjoying the possession of anything valuable unless we have someone to share it with. Okay, that's it for today. This episode was produced by Claire Miller, edited by Joel Patterson and engineered by Benjamin Spencer. Our our associate producer is Alison Weiss. Our research team is Dan Shalon, Isabella Kinsel, Kristen o' Donoghue and Mia Silverio. And our technical director is Drew Burrows. Thank you for listening to Profgy Markets from Profig Media. If you liked what you heard, give us a follow. I'm Ed Elson. Happy Thanksgiving, and I'll see you on Monday.

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