Brian McCullough (0:04)

Welcome to the Tech Meme Ride home for Thursday, July 17, 2025. I'm Brian McCullough. Today, TSMC earnings suggest the AI buildout is continuing apace. Stablecoin regulation clears a major hurdle. Is Anthropic doing well? Growing revenue? Maybe not OpenAI well, but well enough. More signs Microsoft is struggling to sell its own branded AI and how AI might be about to change how we pay for everything forever. Here's what you missed today in the world of tech. We don't typically discuss TSMC earnings on this show, but as a bit of further data suggesting the AI buildout is still going strong, I'd like to make note of the fact that TSMC reported Q2 net income up 61% year on year to $13.5 billion, meaning they have now beat estimates every quarter they've reported since 2021. And the company raised its 20 sales growth guidance from mid 20% to 30%. So 30% growth. Quoting Bloomberg, the world's biggest contract chip maker on Thursday forecast sales growth of about 30% in US dollar terms this year, up from mid 20% previously. That reinforced expectations that tech firms from Meta to Google will keep spending to build the data centers essential to artificial intelligence development. NASDAQ stock index futures swung to gains, while top supplier ASML holding gained more than 2%. TSMC's move underscores resilient demand for high end chips from the likes of Nvidia and amd, which is outpacing its production capacity. Chief Executive Officer CCY confirmed on Thursday that AI orders still run hot, seeking to dispel persistent speculation that tech firms may curtail spending. While he stressed that underlying AI demand is strengthening, the uncertainty around the Trump administration's tariffs merited caution. This is quote supporting the AI value chain and AI optimism still holds, said Billy Long, investment strategist at Global X ETFs in Sydney. For investors, TSMC results again ease fears of an AI slowdown. Margins hold, demand outlook good generally reinforces the AI buildout is still well underway. Related TSMC CEO Y says the company is speeding up construction of its second and third Arizona plants by several quarters to meet chip demand from US Clients. I almost did a segment yesterday about how several crypto regulation bills backed by the Trump administration had failed to clear a key hurdle in the U.S. house of Representatives after 13 Republicans voted with Democrats to block the legislation moving forward. But glad I waited because I can now tell you that the House voted to advance those crypto bills following over nine hours of private talks on July 16. A day after President Trump intervened to save the bills, Quoting Reuters A bill to establish a federal framework for stablecoins is likely to be the first to be passed in what would be a watershed victory for the crypto industry. It has already been approved by the Senate and if approved by the House, it would go to Trump for his signature. Stablecoins, a type of cryptocurrency designed to maintain a consistent value, usually a one to $1 peg, are commonly used by crypto traders to move funds. They have gained much momentum in recent years, offering faster and cheaper transaction costs than moving money through a bank. In addition to stablecoins, the House is set to consider a bill to establish market structure rules for crypto products, including defining when the products are a commodity and not subject to oversight from the securities and Exchange Commission. The Senate has yet to take up a similar measure. The third bill, strongly backed by conservatives, would prohibit the Federal Reserve from issuing a digital currency of its own. Some Republicans argue a Fed digital currency could give the government too much control over Americans finances. Current Fed leaders have said they are not considering such an initiative, end quote. The information has sources who say that Anthropic's financial performance has prompted some investors to indicate interest in additional funding of the startup at a greater than $100 billion valuation. As I said on the socials last night, this is interesting to me because there had been some whispering that while OpenAI was reportedly blowing the doors off the place in terms of revenue growth, maybe some of their peers were not. The idea was OpenAI might be winning the branding race, but this news suggests otherwise, at least for Anthropic Quote. As Anthropic's sale of artificial intelligence has surged, the company has told investors some of its profit related metrics are improving even as it burns a tremendous amount of cash. That financial performance has prompted some investors to indicate interest in funding Anthropic at a valuation of more than $100 billion if the company decides to pursue a deal, compared to a $58 billion valuation in a financing announced four months ago, according to two people involved in the discussions. The company raised $3.5 billion in equity financing in March, but previously told some investors it planned to raise $5.5 billion in total this year. And it recently let some investors see part of its financial performance, one of these people said. In another piece of good news, Anthropic hired back two former leaders of its coding product who had joined Anysphere, a rival that operates the Cursor Co two weeks ago. Anthropic recently told investors. Its gross profit margin from selling its AI models and Claude chatbot directly to customers was roughly 60% and is moving towards 70%, according to two people with knowledge of the financials. The margin figure typically refers to gross profit as a percentage of revenue after accounting for the cost of the servers and customer support required to power the company's revenue generating products. Those gross margins can fluctuate depending on how efficiently the company plans and uses its computing resources, including AI chips that power its technology, the person said. The 60% gross margin figure doesn't tell the whole story, though. Anthropic also sells cloud models through Amazon Web Services and Google Cloud, and that business was generating a gross margin of minus 30% earlier this year, these people said. This could be because Amazon and Google, which both have also invested billions into Anthropic, take a significant cut of revenue when they sell Anthropic models to cloud customers. Anthropic sales through cloud providers is likely a minority of its revenue. As of the end of 2024, about 70% of Anthropic's revenue came from direct sales rather than through the cloud providers, though it previously projected that in the coming years cloud providers would account for much of the revenue it generates from selling models to other businesses. It isn't clear what percentage of Anthropic revenue comes from direct sales today, but the latest disclosures suggest Anthropic's overall gross margin may not have improved since the end of 2023, when the figure was between 50 and 55%. In comparison, OpenAI earlier this year projected a gross profit margin of 48% in 2025, OpenAI projected steady improvements in the coming years en route to an eventual 70% gross profit margin by 2029. It isn't clear whether the two firms calculated their margins the same way. Of course, Anthropica and OpenAI's gross margins don't reflect the billions of dollars a year they spend to develop their AI and to cover operating expenses such as salaries, all of which are higher than traditional software businesses. Overall, OpenAI had been operating more efficiently than Anthropic. It has been burning significantly less cash despite generating several times more revenue, according to its financial disclosures. As part of its fundraising process in the first quarter, Anthropic told investors it will burn $3 billion this year after burning $5.6 billion last year, and it projected rapid growth to as high as $12 billion in revenue by 2026 on the strength of its market leading AI for coding related tasks. Anthropic's revenue increased four times in the first half of the year to more than $4 billion in annualized revenue, calculated as last revenue multiplied by 12. The Claude chatbot now includes Claude Code, a coding assistant powered by Anthropic models, which the company says is growing quickly after becoming broadly available to customers. In May, for instance, weekly downloads of Claude code increased sixfold, to 3 million from June, the company has told investors. The company has also told some investors that it attributes more than $200 million in annualized revenue, or more than 16.7 million per month, to Claude Code, which can be accessed as part of a Claude Chatbot subscription or through Anthropic's application programming interface. In a chart accompanying this piece, OpenAI is reportedly projecting $50 billion in revenue by 2027 as comparison, while Anthropic's optimistic projection for that same year is around $35 billion in revenue. The base, which I assume is the conservative projection, is in the neighborhood of $12 billion by 2027. I guess if things don't hope, I swear it's like the dot com days these days in terms of everything being horse race news, who's up, who's down, who's getting traction and raising a new round, who's maybe not getting traction and maybe burning money. Bloomberg has a piece positing that Microsoft's Copilot is struggling to make headway against rival AI assistants. Sensor Tower says Copilot's mobile app has around 79 million downloads, far below ChatGPT's greater than 900 million. What was I just saying about OpenAI maybe winning the branding war? Quote Microsoft shares have surged about 20% so far this year, based largely on Wall Street's expectations that the company's AI bet will help secure its future. But some investors are starting to get impatient. They have to win this, said Gil Lauria, an analyst with DA Davidson. If they don't, someone else will. Microsoft is staking its future on three Copilot branded products a coding assistant for developers, a workplace helper embedded in the likes of Outlook and Word, and a personal assistant built to help people navigate and understand the world. At an all hands meeting in May, Chief Executive Officer Satya Nadella told employees the goal is to get hundreds of millions of people using Microsoft's family of AI apps. Bloomberg previously reported the company started baking AI into its products two years ago. The Bing search engine was restyled as an AI companion for the Web. Windows users were told to get ready for a chatbot that would personalize and navigate your PC but behind the scenes, engineers were struggling to create the new world executives were pushing for. They had access to the same raw material, the large language models built by OpenAI, but mostly came up with slightly different spins on how chatbots might improve the lives of users searching the web or writing an email. Whatever advantage Microsoft had, thanks to its close ties with OpenAI, wasn't translating into hoped for market share gains in products like Bing. Nadella eventually tired of the halting progress and recruited Mustafa Suleiman 15 months ago to run Microsoft's consumer AI operation. Depending on who you talk to, Suleyman was either an inspired or a risky hire. A British founder of two well regarded AI startups, DeepMind and Inflection, he's widely considered a brilliant recruiter and motivator of engineers. He also acknowledged missteps while managing large teams at Alphabet's Google, including setting Quote pretty unreasonable expectations. Besides leading the teams working on the consumer focused Copilot, he's responsible for a bunch of existing products the Edge browser, the MSN News and web landing page Bing Search that boasts millions of users but little cultural cache. Suleyman tends to wax philosophical on the subject of artificial intelligence, thinking aloud in LinkedIn posts and frequent podcast appearances on what it means to be human and the nature of computer intelligence. Translated, he's essentially saying that he wants to build AI assistants that keep humans in the loop and help better themselves. He professes zero desire to create machines smarter than people for the sake of a milestone. Artificial general intelligence is not our mission, suleyman said in an interview earlier this year. Products are our mission, and we are singularly focused on Is it useful? Does it help? Is it supportive? Am I happy? End quote? Suleyman has said that AI will eventually remake graphical interfaces like Windows. But for now, Microsoft executives are wary of alienating users by forcing them to learn new habits and tend to bolt AI innovations onto existing tools. When the company started rolling out an AI agent to help manage PCs last month, it wound up up in Settings, not the Copilot app. There are technical challenges, too. The operating system only gets a few major updates a year and isn't set up to receive frequent tweaks of the sort the Copilot team are rolling out. That's our big challenge, suleyman said. There's a kind of annual rhythm to it, and there's also just a degree of freedom that is restricted. So by default, Copilot is a smartphone app. That's a problem because Alphabet's Android and Apple's iOS power virtually all of the world's mobile devices. Both are also weaving their own artificial intelligence into their mobile operating systems. There's no precedent for Microsoft building a must have smartphone app from scratch. It's incredibly difficult, especially when the owners of these devices are trying to do the same thing, said Matthew Quinlan, a former Microsoft manager who tried with little luck to get people using a Cortana smartphone app a decade ago. Microsoft struggles with its Consumer Copilot echoed the challenges the company is experiencing with the version it created for corporations. Bloomberg has reported that many office workers prefer ChatGPT and have been pressuring their bosses to let them use it. Some companies are testing Both Copilot and ChatGPT and awaiting employee feedback before deciding whether to use one or the other or both. Microsoft's long standing relationship with corporate clients gives it leverage in the workplace. Should corporate IT managers deem Copilot the superior option, they can simply tell employees to use it. Microsoft, aside from the nudges it can drop into Windows, has no such way with consumers. Executives say they aren't sweating the user chasm between ChatGPT and Copilot, confident that when the time is right, they can get the product in front of consumers. They see Copilot's emphasis on being a personable companion as a potential advantage with a younger cohort that tends to use AI tools as sounding boards rather than replacements for web search. A trial advertising campaign this spring catapulted Copilot up the charts on Apple's App Store, the company says. Copilot's monthly active users have increased 76% between April and June to 23 million, Sensor Tower says. But the app's growth rate over the last year has trailed its major rivals, according to market intelligence firms. End quote. There's a great new way to have a great time with friends without the booze or the bad decisions. Cornbread Hemps THC seltzers just came out and you've gotta try them. I've got them in my fridge right now. Finally, a THC seltzer that tastes and feels amazing. 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Fortune says Delta Air lines plans for 20% of its fares to be individually determined using AI by the end of this year, up from 3% of fares now, with the goal of completely eliminating static pricing entirely, quoting Fortune. Fresh off a victory lap after a better than expected earnings report, Delta Air Lines is leaning into AI as a way to boost its profit margins further by maximizing what individual passengers pay for fares over time. The goal is to do away with static pricing altogether, Delta President Glenn Howenstein explained during the company's investor day in November. This is a full re engineering of how we price and how we will be pricing in the future, he said. Eventually we will have a price that's available on that flight on that time to you, the individual. He compared AI to a super analyst who is working 24 hours a day, seven days a week and trying to simulate in real time what should the price points be. While the rollout would be a multi year process, he said, initial results show amazingly favorable unit revenues. Delta accomplishes this pricing through a partnership with Fetcher, a six year old Israeli company that also counts ajul westjet, Virgin Atlantic and Viva Aerobus as clients. And it has its sights set beyond flying. Once we will be established in the airline industry. We will move to hospitality, car rentals, cruises, whatever, co founder Robby Nissan said at a Travel conference in 2020. While Delta is unusually open about its use of AI, other carriers are likely to follow already. United Airlines uses generative AI to contact passengers about cancellations, while American Airlines uses it to predict who will miss their flight. Personalized pricing has been an airline goal for the past decade and a half, gary Leff, a travel industry authority who first noted Delta's AI strategy, told Fortune. Delta is the first major airline to speak so publicly about its use of AI pricing, to tout it for its potential upside at its investor day in the fall, and to offer concrete metrics around its use in its recent earnings call. End quote. And indeed, to be sure, airlines have long offered different prices to different people even for the same route, based on factors like how travelers book, for example, directly or via a comparison shopping site or a travel agent, or how far in advance they shop. As far back as a decade ago, travel websites showed different prices for precisely the same itinerary based on details like which browser a purchaser was using to search for fares. But the use of AI supercharges this type of price discrimination and puts airlines into a legal gray area. AI isn't just optimizing business operations, but fundamentally rewriting the rules of commerce and consumer experience, matt Britton, author of Generation AI, told Fortune. For consumers, this means the era of fair pricing is over. The price you see is the price the algorithm thinks you'll accept, not a universal rate. End quote. So I read this and in the shower my mind started spinning. When we talk on this show about how when corporate America is coming out suddenly and talking about how AI is boosting efficiency, what they're really talking about is money. And yeah, one version of that is, you know, big law firms don't need as many junior associates to churn through documents and discovery. AI can do that now and do it in hours instead of weeks. But also, we're probably talking about this pricing is probably about to become a thing of the past, at least how we've understood it. Airlines are a famously low margin business, so if they can get folks to pay even 2 to 3% additional, that is huge for them. You know what's another famously low margin business? Groceries. How much are you really willing to spend for that box of cereal? You might be willing to pay more than I would for that particular brand. And if that brand knows that. But Brian, how would they achieve differential pricing if you're not buying online, if you're actually in the grocery store? Oh, I don't know. They stop posting prices, the little price stickers go away forever. But then Brian, how would I know the price? Well, you go through the store basically shopping with your store app on your phone. So you want to know the price. You scan the barcode and you see a price that is your price. It might be a higher price because they know you like that brand more, but I would see a lower price because they know I've never tried it before and they want to hook me. It's all sort of related to zero marginal cost. Thinking the plane's already scheduled to take off, right? It's going to fly anyway. But what if they can get you to pay $100 more than me for the seat next to me? That cereal box has already been manufactured, shipped to the store. Or think about a sneaker. Nike probably knows I can afford to pay $300 for a pair of sneakers, whereas a 14 year old kid might have only been able to save up about $100 to pay for a pair of sneakers. Could there be some sort of scenario where it's like the inverse of the whole idea of graduated taxing as a system where less well off people pay less in taxes in theory and rich people pay more in theory? Would I be eventually subsidizing that 14 year old kid's sneaker purchase by paying more for my pair than they pay for theirs? These are all in the shower. Jack Handy Deep thoughts, so not extensively thought through, so feel free to poke holes in what I just I, as always, don't really have an opinion on this either way. I'm just speculating. But I do think pricing like this is inevitably coming and it's probably coming sooner than we think. Talk to you tomorrow.