Why Demand for Compute Is About to Explode With Alex Kantrowitz

Summary

Podcast Summary

The Compound and Friends

Episode: Why Demand for Compute Is About to Explode With Alex Kantrowitz
Release Date: July 31, 2026
Guests: Josh Brown, Michael Batnick, Alex Kantrowitz

Overview

This episode of The Compound and Friends dives deep into the explosive demand for computational resources (compute) driven by artificial intelligence (AI), recent developments in big tech and cloud infrastructure, and the shifting battlegrounds for profit and value across the AI landscape. Alex Kantrowitz, founder of the Big Technology newsletter and podcast, joins the usual crew to break down how AI adoption is accelerating, what’s happening behind the scenes at top tech companies, and why the cloud, chips, and software platforms sit at the center of this revolution.

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Key Discussion Points & Insights

1. AI Culture, Silicon Valley, and Viral News (00:00–03:33)

• Discussion kicks off with the viral story of a YC (Y Combinator) founder offering job interviews to people who got the company logo tattooed at a party, reflecting desperation and the extreme culture in Silicon Valley.
  • Alex Kantrowitz: “All of Silicon Valley has this ‘I’ll try it’ mentality.” (02:37)
  • Commentary on privileged backgrounds, social games in tech, and echoes of HBO’s Silicon Valley satire.
• Sets the tone for exploring both the feverish pace and pitfalls of the AI and tech world.

2. Addictive Design and Legal Headwinds for Social Media (03:33–11:02)

• Meta (Facebook) and Instagram’s transformation:
  • Rapid evolution from photo sharing to TikTok-style video dominance.
  • Alex Kantrowitz: “The front feed of Instagram has to be exactly like TikTok.” (04:33)
  • Multi-screening discussed as a sign of short attention spans and app addiction.
• Meta’s legal exposure:
  • Discussion of rising legal costs related to lawsuits around user addiction.
  • Alex Kantrowitz: “13% of their costs are coming from legal costs... could end up increasing.” (06:53)
  • Potential domino effect if they lose more lawsuits regarding user harm.
• Algorithmic power:
  • Meta’s ability to synthesize hyper-personalized content called "personal superintelligence."
  • Debate over using such power for “good”—“If you wanted it, that’s what they would give you. No, I know, but you don’t. And people don’t.” (10:22)

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3. Pace & Scale of AI Adoption (13:52–19:49)

• Alex Kantrowitz’s perspective as a journalist:
  • Behind-the-scenes effort lining up top AI founders for his Big Technology podcast.
  • “Oftentimes when people come on, it’s years in the making... when they see you do the work like that, they’re like, ‘We would much rather tell our story.’” (14:48)
• AI user base explosion:
  • OpenAI’s ChatGPT surges from <200M users (2024) to >1B users (2026).
  • Autonomous coding by AI models jumps from 0 to “the equivalent of 12, sometimes 16 hours of what a human would do” before needing interruption. (17:10)
  • AI revenue: OpenAI+Anthropic go from “basically zero” to “expected to do $80B this year... It would be a surprise if it was less than $100B.” (17:49)
• Relevance to enterprise:
  • “This is once in a lifetime.” (18:11)
  • AI is now central, not fringe, and deployment is moving from tools for coders to tools for everyone.

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4. Open Source Models, China, and the Debate Over Value Capture (20:01–27:40)

• New era resembles the Linux vs Microsoft battle:
  • Open-source LLMs enable widespread, cheap alternatives, challenging the profit pool of leading proprietary models.
  • Alex Kantrowitz: “The blueprint to build these models are on the Internet. So basically all you need is compute data in a big model.” (22:46)
• China’s specialization:
  • Because of compute constraints (Nvidia chip bans), China’s AI models (like Deep SEQ, Kimmy K2) target specific domains, e.g., coding or reasoning.
• AI routers:
  • “Interesting to have a Google of routing AI queries—deciding which specialized model to use for what.” (25:07)
• Redefining value capture:
  • Massive price wars are slashing margins on models (some OpenAI price cuts by 80%).
  • Value shifts “back to the software level”:
    • “Where is the profit going to be realized? All of a sudden, it’s back at the software level product.” (28:10)
  • Palantir’s CEO alarm over labs using client data to potentially compete with clients: “You’re basically training them to be able to replace you.” (28:33)

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5. Cloud Infrastructure: The Clear Winner (33:54–35:50, 53:34–54:14, 65:20–69:17)

• Cloud revenue re-accelerates:
  • Microsoft Azure: 43% YoY growth, Google Cloud: 82%, Amazon AWS: 36%.
  • Massive CapEx to keep up with surging demand for compute, powering AI applications.
  • Michael Batnick: “You’re seeing an acceleration at $30 billion in quarterly revenue. Back then it was like $10 billion…so the fact that it’s accelerating at a base three times the size is insane.” (34:11)
• Profit/loss caution:
  • “A nice quarter doesn’t necessarily mean that is the trajectory forever.” (35:21)
  • Historical context of AI booms and “winters”—progress is not always linear.
• Meta’s contrast:
  • Meta tripled down on internal compute buildout, hurting free cash flow and getting punished by the market.
  • Whereas AWS, Microsoft, and Google rent out capacity and generate visible, recurring revenue.

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6. The Coming SaaS and Software Apocalypse? (30:46–33:54)

• AI could challenge current SaaS models:
  • Instead of users “vibe coding” Salesforce, more likely open-agentic AIs will subsume SaaS use cases.
  • “The SaaS apocalypse isn’t coming from the user vibe coding his way into a CRM. It’s coming from OpenAI or Anthropic saying, ‘We’ll do everything; just find a place to store the data.’” (30:48)
• But displacement will take time:
  • “It’s going to happen but that’s something that might take five, ten years for people to see through.” (33:15)

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7. Productivity, AGI, and the Future of AI Compute (37:02–44:47)

• Is there measurable productivity?
  • Huge economic impact is certain; productivity gains still uncertain and hard to measure.
  • “Anyone who spends 20+ minutes in these [AI] tools understands you’re way more productive.” (37:27)
• Microsoft–OpenAI alliance unravels:
  • OpenAI grows ambitions, pushes into enterprise, straining partnership.
  • Microsoft’s prior exclusive rights weaken as models proliferate.
  • “OpenAI, as you may know, has a problem holding onto partnerships.” (38:50)
• Conflicts of interest at the top:
  • Sam Altman’s lack of OpenAI equity, but indirect funneling of value into affiliated startups. (42:24)
  • “You put yourself in an interesting position when you’re investing in the startups that are using your technology...” (44:16)
• Hugging Face hack:
  • OpenAI's powerful RL model “broke out of the testing area... did 17,000 operations within Hugging Face” (48:20)
  • Panel debates whether such incidents are bugs or intentional “marketing” to highlight AI model power—and attract engineering talent.
  • “Never waste a good crisis... They were probably jumping up and down.” (51:28)

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8. Stocks, Winners & the Changing Platforms (59:25–65:10)

• Meta’s AI struggle:
  • Meta crushed in markets for spending on compute with little to show in actual AI products.
  • Wall Street skeptical: “They haven’t shown any progress on the AI front at all.” (54:44)
  • However, no clear winner/loss in AI yet: “I have stopped saying this company’s lost on AI.” (59:25)
• Snowflake:
  • Positioned as ground zero for enterprise AI workflows (“do all the AI shit you want right here in the data warehouse”). (61:27)
• Reddit:
  • Data licensing to AI labs as growth path. Considering blocking Google from scraping to demand payment.
  • “If you’re Reddit, you’re sitting on this stockpile... why would you let an AI model endlessly scrape it?” (63:50)
• The original sin of the internet revisited:
  • Content owners (Reddit, NYT, etc.) now force platforms to pay for access that was once freely scraped for algorithmic training.

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9. Cloud Platform Strategies & Valuation (66:08–69:46)

• Amazon AWS:
  • Acceleration in cloud/AI revenue after lagging quarters.
  • “Do very little. Build a lot of compute. Profit.” (66:59)
  • Flexible, supermarket-style approach: “Bring your own model.”
• Oracle’s gamble:
  • Uniquely exposed due to dependence on OpenAI; treated worse than AWS/Azure/Google by investors.
  • Cloud players as “call options on AGI”—if AGI happens, massive upside; otherwise, a potentially ruinous bet. (69:51)

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10. Compute Demand, Pricing, and the Buy/Sell Thesis on Chips (70:07–84:44)

• Can AI labs keep growing at this rate?
  • Debate over whether AI lab revenue growth (e.g., Anthropic 10x YoY) is sustainable or whether compute costs/pricing will spike or get arbitraged lower by more powerful models.
  • “I just don’t think you can continue to have that massive a margin in a technology business. It doesn’t exist.” (74:38)
• Superintelligence and efficiency:
  • Historic tech cycles show costs drop as efficiency rises; participants skeptical of “permanently high compute costs thesis.”
  • Alex Kantrowitz: “That’s going to happen. So why don’t people think it’s going to happen this time?” (74:04)

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11. Apple as a Consumer AI Toll Booth – and the Reemergence of Devices (74:46–84:44)

• Apple’s delayed entry into AI:
  • “Nobody even saw what they were doing, which was nothing. But that may have ended up being the right move.” (74:47)
  • Apple likely to own consumer-facing agentic AI, since it can enforce interoperability across its app ecosystem.
  • Security and social concerns may halt Huawei-style “record your whole life” devices.
• The “Agentic Era” and folding phones:
  • Excitement about Apple’s folding phone and the prospect for iPhone 18+ as devices fully enabled for AI agency.
  • Only a small fraction (5-10M) use agentic AI today—but use cases could explode.
  • “If these use cases take off, you are looking at a much bigger crunch for that compute than you have already.” (83:41)
  • Ongoing demand for chips and compute capacity seen as a secular tailwind.

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Notable Quotes & Memorable Moments

• On the pace of change:

  • “When people say they know what’s going on, generally they’re guessing because the context shifts week by week.”
    — Alex Kantrowitz (17:49)

• On AI model profits:

  • “If you had one or two companies that build human level artificial intelligence...they could obviously sell it at a pretty high margin... But now...selling that at a markup is no longer possible.” — Alex Kantrowitz (26:22)

• On meta’s AI investments:

  • “Meta is betting the company on AI… Betting $35 billion CapEx on this, and the street says ‘Yeah but you have nothing to show for it so far.’” — Josh Brown (54:53, paraphrased)

• On the cloud as AI’s ‘pick and shovel’:

  • "Do very little. Build a lot of compute. Profit."
    — Alex Kantrowitz, on AWS (66:59)

• On user trust and agentic AI:

  • “As it gets to know you, as you start to put more trust in it, the things that it could do for you is pretty crazy.” — Alex Kantrowitz (84:24)

• On big tech partnerships:

  • “OpenAI, as you may know, has a problem holding onto partnerships.” — Alex Kantrowitz (38:50)

• On the next frontier in social use:

  • “If you think reels are addictive, wait until you have an AI friend that knows you, that speaks to you, that will comfort you in tough times and celebrate your good times…time spent and the engagement...will be through the roof.” — Alex Kantrowitz (58:04)

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Conclusion & Takeaways

• Demand for compute is exploding across cloud platforms, driven by AI adoption at all levels.
• Value is shifting away from proprietary LLM model access toward finished AI-powered products and cloud infrastructure/platforms.
• Tech giants face existential questions: Meta and Apple must prove relevance in AI; AWS, Azure, Google, and Oracle race to capture infrastructure profits.
• AI may disrupt the SaaS stack, but the transition will take time.
• Market optimism is high, but not indiscriminate—winners still have to prove their payoff, and cycles of hype/concern will continue.
• Agentic AI use cases are coming, and when they take off, compute demand (and hence semiconductor/cloud stocks) could soar even higher.

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Timestamps for Key Segments

| Segment | Timestamps | |-----------------------------------------------------|--------------------| | Viral Silicon Valley culture | 00:00–03:33 | | Meta’s addiction & legal troubles | 03:33–11:02 | | AI adoption speed & business impact | 13:52–19:49 | | Open source models vs. big labs & China | 20:01–27:40 | | SaaS/software vs. agentic AI | 30:46–33:54 | | Cloud winnings: AWS, Azure, Google, Meta | 33:54–35:50, 53:34–54:14, 65:20–69:17 | | Productivity, AGI, and scarcity | 37:02–44:47, 70:07–74:44| | Meta & AI, stock dissection | 53:34–59:25 | | Platform and stock picks: Snowflake, Reddit | 59:30–65:10 | | Devices and consumer agentic AI: Apple, folding phone| 74:46–84:44 |

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Hosts & Guest Plugs:

• Follow Alex Kantrowitz: bigtechnology.com
• Podcast: Big Technology Podcast
• Hosts: Downtown Josh Brown, Michael Batnick

Final Note:
“This is the craziest industry in the world, and every week it’s a new story.” — Alex Kantrowitz (14:05)

Transcript

[Josh Brown]

All right, so did you hear about this kid? No, we wasn't going there. Okay, we'll get to him. I don't know his name. He has an I guessing AI company called Lemon Lime.

[Alex Cantrowicz]

Yes, the tattoo guy.

[Josh Brown]

Okay, you heard this?

[Michael Batnick]

No.

[Josh Brown]

All right, so it's a kid in San Francisco. He's like a YC kid, and he threw a party and he said, anyone who gets a tattoo gets a job interview.

[Alex Cantrowicz]

Just the interview, right? Not the actual interview.

[Josh Brown]

Not even the job interview. He's got a tattoo artist there, and people are getting tattooed. I don't know if they're getting the company logo.

[Alex Cantrowicz]

I think it was the logo.

[Josh Brown]

Oh, my God.

[Alex Cantrowicz]

Not only that, he took that and used it as a moment to share how great the company was because they provided these free tattoos.

[Josh Brown]

Permanent.

[Alex Cantrowicz]

That was LinkedIn material for him.

[Josh Brown]

Actual tattoos?

[Michael Batnick]

Yeah.

[Alex Cantrowicz]

And he thought. I mean, this is at least what I'm getting from the discussion on X, so I could be wrong here, but from all indications, because he's already come out and apologize. From all indications, I read the apology. If you went to the party and got a tattoo that got you an interview, what did he apologize for?

[Michael Batnick]

The company, what did he apologize for?

[Alex Cantrowicz]

For the whole thing.

[Josh Brown]

He linked getting a tattoo at this party to getting an interview. Basically, like, almost preying on the desperation to get a job these days.

[Alex Cantrowicz]

And people did it.

[Josh Brown]

And people did it. So imagine. You imagine. Imagine them. First of all, just think about the people. I understand desperation, but imagine the mentality of somebody who sits down in front of a tattoo artist and is like, yeah, do it. Cause I might get a job at wis.

[Michael Batnick]

Imagine thinking that you're gonna get good candidates. Mean, that's crazy.

[Josh Brown]

That's even.

[Michael Batnick]

Right. Like, I'm gonna hire. Like, okay, whatever.

[Josh Brown]

I read this. I read the apology. I read the apology.

[Alex Cantrowicz]

This is. So go ahead.

[Josh Brown]

But then. Cause I can't help myself. I clicked on his bio, like, the. And it's exactly what you would expect. It's a private school delivered right into Stamford. I'm sure the parents know people. I'm sure it's like a whole thing. And then he has, like, somehow he got a startup funded, and it's AI and it's San Francisco, and it's just like this, like, super privileged kid with, like, almost like, no. No awareness of what the world is. Like. Like, if you. If you. If you think about how desperate people are to get jobs at these AI companies, they're. They're hearing. If you live in San Francisco, your assumption is probably this Is the only job that's going to exist.

[Michael Batnick]

Gross. It's gross.

[Alex Cantrowicz]

Well, look, so I lived out there for a while, and it is a really good encapsulation of what goes on in Silicon Valley because you have people, Many of the people there have moved away from home. They're looking for opportunity, and so they're willing to try different things and get a tattoo. Well, you might get a startup tattooed. You might do acid or mushrooms on the weekend. You might be part of, like, a polyamorous relationship. Like, all of Silicon Valley has this I'll try it mentality. And it goes wrong when somebody like that will prey on people's willingness to say, okay, you know, I'm here for new experiences, here to do new things. Tattoo me. And let's do the.

[Michael Batnick]

I feel like Jin Yang would have got a tattoo. He like, this is straight out of the show.

[Josh Brown]

This is straight out of the show. No, this would be like, Russ Hanneman is like, yeah, is like stock for tattoos. Like, I want you to walk around San Francisco with my company's logo, and if you do, I'll give you stock in my new startup. It's literally that you've been doing this

[Michael Batnick]

with us for so long, right? Like, we've got Daniel, you ready? You made a great call. So chart kid dug this up. He goes, look at this call Alex made, huh? Oh, headphones, headphones. Dude, you're a genius.

[Alex Cantrowicz]

No, what was it?

[Josh Brown]

Well, we already know he's a genius.

[Michael Batnick]

Watch this, watch this. Young Alex.

[Alex Cantrowicz]

You end up in this situation where you're gonna forsake your bread and butter to try to half heartedly introduce some of this stuff that's been really good for a competitor, and you almost end up stuck in the middle. And that's why I really think that if they want to try to compete with TikTok, just go. You got to go all in on it. You can't go half.

[Josh Brown]

And I think they have come up with a new, completely new app to just be a TikTok clone.

[Alex Cantrowicz]

What I would have done is taken. And this is what they did with stories. When they were getting their butt kicked by Snapchat, they put stories in the top of the feed and we said, we don't care that this is the most, you know, important real estate in Instagram stories up top. What I think they need to do now, if they want to compete with TikTok, the front feed of Instagram has to be exactly like TikTok.

[Michael Batnick]

Yeah.

[Josh Brown]

Wow.

[Alex Cantrowicz]

And then you could. Exactly. They're testing that Aren't you glad you

[Josh Brown]

didn't wear the same shirt, by the way?

[Michael Batnick]

All right, turn it off.

[Josh Brown]

I know I am.

[Michael Batnick]

We all aged. That call aged very well.

[Alex Cantrowicz]

I thought you were gonna say I aged.

[Michael Batnick]

You did. You did. We all look different, but that call aged very well.

[Alex Cantrowicz]

Well, they're now experimenting with doing that completely on, like, all Facebook apps. So you open the blue app, even. It might be reels are TikTok based.

[Josh Brown]

This is what people want to see when they open an app now. They want to see videos.

[Alex Cantrowicz]

Well, it is. I mean, it's sort of. It hits your dopamine receptors. You sort of say, any other type of content consumption is too hard. Like, I think right now, even when people watch Netflix or they're watching on Amazon prime, there's like two feeds. Like, you're sitting back and you're watching the actual show, but in your hand, you're also scrolling and watching.

[Josh Brown]

Now, how many times I have to. You're so right. You know, Many times I have to pause the show on TV and rewind and rewind.

[Michael Batnick]

So I was on the train. I was on the train for 45 minutes the other night, and I was with my partner Chris, and I'm on. I'm on Instagram the entire time giggling to myself because it's serving me videos that it knows make me. Makes me laugh. And me alone. Well, not me alone, but a lot of men who fit my profile. And I said to Chris, oh, this is why Netflix stock is down 40%. The shit is too good.

[Alex Cantrowicz]

It's so good. And I think that people got a taste of it during the pandemic. Like, that was when TikTok really started to have a rise, where you were home, you were looking for anything that would make you happy, and you're like, well, as long as we're in lockdown, you make a deal with yourself. As long as we're on lockdown, I'm going to scroll TikTok for a while. Then we came out of it, and people stayed in their feeds.

[Josh Brown]

I'm not going to say who, but I went to The Odyssey with three other people. The four of us. Two of the four people. This is a movie that. It's like $30 for a movie ticket, and you. You're, like, going there. The reason to see it in the theater is to be immersed in it. Two of the four people I was with, and I'm not one of. Not me. Had their phones almost. I watched peripherally. I watched them pull their phones out like, seven different times, and they're not checking texts. They're, like, into Instagram and they're not in it for long. Cause they catch themselves.

[Michael Batnick]

It's a habit.

[Josh Brown]

They can't help it. It's the most compulsive. You almost feel like, all right, I gotta check my phone. But you're not checking for emails or texts anymore. You're checking for more viral videos.

[Alex Cantrowicz]

Okay. By the way, I know we're gonna talk about Meta in a bit, but in Meta's earnings, one of the things that was not talked about enough was, I think 13% of their decline in profit, or 13% of their costs are coming from legal costs. And they said basically, like, watch for this, because this could end up increasing and we might be, you know, under the gun from a legal standpoint, more and more. And there are these lawsuits. The addiction laws.

[Josh Brown]

Yeah, right. They're not losing these, though.

[Alex Cantrowicz]

They did lose.

[Josh Brown]

Did they?

[Alex Cantrowicz]

Yes.

[Josh Brown]

But what does it mean? Money?

[Alex Cantrowicz]

You know, it could be money. It's like, you know, it just opens the door. Because if you have 3.6 billion people using the apps, you lose one, and all of a sudden the floodgates are open.

[Josh Brown]

Lose one lawsuit, and then everyone says, oh, we can get some money for this.

[Alex Cantrowicz]

They addicted my kid also.

[Michael Batnick]

Well, they absolutely are.

[Alex Cantrowicz]

Yeah.

[Michael Batnick]

Very effectively.

[Alex Cantrowicz]

It's gonna be a very big problem for them moving forward. Among the other problems they have what? The addiction to the fallout from getting people so hooked on these apps.

[Michael Batnick]

You know what?

[Josh Brown]

Something tells me nothing will happen because you make the right political donations and you just kind of skate through.

[Alex Cantrowicz]

But this is being played out in state courts, so it's not like we're not like, talking about, like, some presidential administration sicing the FTC on Meta. We're talking about a local court, so a local judge, probably in the community, seeing a kid, probably from the community who, you know, will tell a story about how, you know, they got so addicted they lost themselves. They, you know, sort of endured all this harm because of Meta apps. Judgment for the plaintiff. Yeah, I mean, it's not me, it's Meta that said it.

[Josh Brown]

Yeah. And they've gotten so good at this. They literally know exactly what you want to see before you even know that that's what you want to see.

[Alex Cantrowicz]

So time spent engagement has always been the North Star for this company. No matter what they say, it's always been, how can we get people to spend the most time and engage the most? And from a business standpoint, you understand it because people are so fickle. Like, think about all the dead Social networks that have come and gone and Meta is still enduring, and the reason why they still endure is because they've been so good and at hooking people. But the problem is they're so good at hooking people.

[Josh Brown]

Yeah, they're almost. They're almost too good. It's diabolical. And once you spend time on one particular video on reels, the whole algorithm changes dynamically to capture the fact that not only is this your type of video, you are in the mood for more of this right now.

[Alex Cantrowicz]

It's personal superintelligence.

[Josh Brown]

It's unbelievable. If only there were a way to take this power and harness it for good. Well, okay, what would that be?

[Alex Cantrowicz]

So the rumors that I've heard, and this is probably true, that. Cause in TikTok, there's a setting that enables this is that in China, they actually mandate. Part of the feed is science and math content.

[Josh Brown]

Not here, not here. My algorithm is Britney Spears twirling around in circles with knives. Is that science?

[Alex Cantrowicz]

That's science.

[Josh Brown]

Is that math? Alex?

[Alex Cantrowicz]

That is also math.

[Josh Brown]

That's my algorithm. My algorithm is Brittany in a basement eating a bagel. But I have to tell you, there's gotta be a way. I believe this. Gotta be a way to take this ability. They have to laser focus everybody on their own feed and, like, make it, like a positive. I just. I don't know if they care to.

[Alex Cantrowicz]

If you wanted it, that's what they would give you. No, I know, but you don't. And people don't. That's the thing. Like, they will. The data will show that anything. Like eating your veggies, though, people might say they want it. They will scroll away from it because Britney Spears with knives is right, Is the next. You know, the next one. It's kind of like online dating.

[Josh Brown]

I just want to see if at some point she accidentally drops one or cuts herself. I don't know really what. What to do.

[Alex Cantrowicz]

So every time, Meta will serve you your vegetables. Instead of that, you'll leave a moment for you to go to TikTok, which will give you, you know, Britney Spears with 21 knives instead of 20.

[Josh Brown]

What a dystopic arm stress.

[Alex Cantrowicz]

That is the world we live in right now.

[Josh Brown]

We're watching play out.

[Michael Batnick]

Yep.

[Josh Brown]

So. All right, well, on that happy note, you got a show to do, right? Ms. Nicole, ladies and gentlemen, TikTok addict. Ms. Nicole. Her whole. Her whole feed is. I don't want to guess. I don't know. Hello Kitty. What are we into?

[Michael Batnick]

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[Josh Brown]

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[Michael Batnick]

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[Michael Batnick]

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[Josh Brown]

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[Alex Cantrowicz]

and should not be relied upon for any investment decisions.

[Josh Brown]

Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast. All right guys, we are going to have an amazing show today, I promise you. On Tuesday here on Earnings Tech Week, we were going to bring on the world's God bless you, the world's foremost authority on big tech. And he is here, longtime friend of the show. One of my favorite people, Alex Cantrowicz is the founder of the Big Technology newsletter and podcast covering what else? Britney Spears covering Big Tech. Alex also hosts the Big Technology Podcast where he has interviewed the world's top tech CEOs, from Mark Zuckerberg to Larry Ellison, along with leaders like Sam Altman and Dario Amadei. Alex, how long have you been running Big Technology? The podcast? How long has that been going for

[Alex Cantrowicz]

six years next month.

[Josh Brown]

Amazing.

[Alex Cantrowicz]

Okay, right around the time when you started, right? You also started during COVID Yeah, yeah, that sounds right.

[Josh Brown]

Yeah. 2021 was us. Same for you.

[Alex Cantrowicz]

2020.

[Josh Brown]

2020. All right. You're still having as much fun?

[Alex Cantrowicz]

It is the most fun. I mean, every week, as you know, is just the craziest week. So we break it down and it's always fun.

[Josh Brown]

Your ability to get guests who are executives, founders, people that sit at some of the biggest technology companies I mean, it's really incredible how you're able to do that repeatedly. Talk a little bit about how you plan shows, how far in advance you have to line up a guest of that magnitude and what it's like when occasionally, I guess, you get rejected. Like, how do you as a creator, how do you rebound mentally from that?

[Alex Cantrowicz]

Well, first of all, I get rejected all the time.

[Josh Brown]

Okay. And so, like, that already would not work for me. Everybody says yes. Right, Nicole? All right, go ahead.

[Alex Cantrowicz]

So, yeah, I mean, it's frequent rejection and oftentimes when people come on, it's years in the making. I would say that one of the things that I do that sort of helps make the case is I write about these companies and I write about these CEOs. So for instance, when Dario came on a year ago, that was the culmination of like a two month reporting project that I did writing this profile of him and about anthropic, about what drives him and what drives the company. So we did, myself and one of my interns, we did about 30 interviews. We spoke with everybody from his co founders to his, his rivals and ex girlfriend. And I think the companies, when they see you do the work like that, they're like, we would much rather tell our story than have you sort of connect the dots and tell it for us.

[Josh Brown]

Right? Because you're tackling these topics in a very intelligent, scholarly way and they know they're not going to send somebody to talk to you where you're like, so, like, what's AI, Right? Like, they don't have time for that.

[Alex Cantrowicz]

Well, I think that if you look at what's happening in AI today, it is crazy. The transformation that we're seeing is insane. And so I think from my standpoint as a reporter and somebody that runs a podcast, the best thing that I can do with my time is try to explain what's happening. So did you order the Code Red? Although I did ask Sam Altman that in December because OpenAI was in a Code Red. That type of journalism I think is almost there's a place for it and it should be done with these tech companies and. But the place that I sit is like, I'm seeing you do this, I'm seeing things move this way, explain what's going on, help us understand it. And you know, I did, I have a couple of charts that I put in the document beforehand just to talk about the pace that this stuff is moving at that I think.

[Josh Brown]

Which one do you want? Do you want to do this? OpenAI?

[Alex Cantrowicz]

So let's do OpenAI weekly active users to start. So the last time I was here with you guys in this room was compound and friends 145, which was, I think in June 2024.

[Josh Brown]

Good memory.

[Michael Batnick]

It's been that long.

[Alex Cantrowicz]

That long in this room. So we've done remote, but we haven't been. We've had Alex on before, face to face since then. And at that point, ChatGPT was less than 200 million users. All right, so today, 900 million announced, and according to Sensor Tower, it's more than a billion. So we've seen that type of growth in such a short amount of time. Let's go to the autonomous coding chart. All right, so in 2024, basically, the amount of time that these models could code on their own was zero. So you would tell them, go do this task. They couldn't do it. They'd fall in their face. Now we're seeing them on the tests do the equivalent of 12, sometimes like 16 hours of what a human would do to code before they have to be interrupted. So that is the type of progress we're seeing. And the last one I'd say that we should look at is revenue. So 2024, when I was here, basically zero revenue.

[Michael Batnick]

Right.

[Alex Cantrowicz]

Today, they're close to. They're expected to do 80 billion this year. OpenAI and anthropic mostly leading the way.

[Josh Brown]

Look at this chart.

[Alex Cantrowicz]

But it's going to be. It's going to be even bigger than that. I think it would be a surprise to folks if it was less than 100 billion. So with this AI story, it's just like, important context to keep in mind. Like when people say they know what's going on, generally they're guessing because the context shifts week by week.

[Michael Batnick]

The story is moving on a weekly basis.

[Alex Cantrowicz]

Absolutely.

[Josh Brown]

We may never see anything like this again. This.

[Alex Cantrowicz]

This is once in a lifetime.

[Josh Brown]

Once in a lifetime. This speed of adoption of a technology that's a few years old and this growth in revenue and then the coding chart is crazy to me. I was listening to. You probably know who the person is. I think it's like the CTO of Anthropic or something. He was talking to Joe and Tracy and he was saying, oh, Jack Clark.

[Alex Cantrowicz]

Yeah, one of the co founders. Yeah.

[Josh Brown]

He was saying like a year ago during his talks, he would give at technology companies, like, all over the world, all over Silicon Valley. He would raise your hand if you use Claude to do any coding, and he's like half the room. The hands would go up and Then now there's no point in even asking the question anymore. And so everybody is using Claude code or its equivalent to do work. And then a lot of these rooms, it's situations where the code is, like, almost running the show, and the people are there to check its work. And he said that happened, like, a year. So it's an explosive change in the way that technology firms are working, and it's only a matter of time before it hits every type of company.

[Alex Cantrowicz]

Yeah, I mean, I had this presentation that I was giving last year that was like a sort of 101 of what's happening with AI and the grand finale was I'm going to vibe code a retirement calculator. And Claude and I would show that, and the room would go nuts. And now I would show that to you, and they'd get booed out. Like, people would be like, I do that every day. So the pace of change, you know, it's. You know, we. We see this happen, like, week by week. And, you know, even though it feels like the leaps are week by week, when you zoom out a bit, you start to see the totality of this massive shift that we're going through.

[Michael Batnick]

And then the investment narratives are obviously changing rapidly as well. So just two weeks ago, we had, you tweeted, this is an earthquake. Goodness. And the retweet was like the. The. The big news from Kimmy K3.

[Alex Cantrowicz]

Right.

[Michael Batnick]

And that feels like. Did it blow over? Like what? I don't even know.

[Alex Cantrowicz]

No, I don't think that's. That's blown over. And I think, you know, as you've seen some of the wariness around big tech spending, part of that is sort of asking, where is the value going to be found? Because there are many layers that. That can sort of capture the value of this AI moment.

[Josh Brown]

It could be value meaning where the

[Alex Cantrowicz]

profitability was, where the margin is going to be. It could be the compute, it could be the model builders. It could be the applications still kind of up in the air about who's gonna capture it. So, like, what Kimmy K2 does, it says, I'm gonna put downward pressure on the model part of it and seemingly make the products far more important.

[Josh Brown]

Okay, so let's disentangle that a little bit for the people that aren't following this as closely as you are. The new debate in a. I mean, there's a million. But the new debate that over the last couple of weeks seems to have gotten louder. So everyone remembers the deep seq moment.

[Alex Cantrowicz]

Yes.

[Josh Brown]

Basically, China has a couple of companies that were able to train their large language models by utilizing American large language models and then just distilling from there. So they were like more efficient and you more or less arrived at the same answers, but they used less power, they took less time, they were cheaper, or in that case, free. And it kind of spooked the stock market for a week and then everybody got over it. But now we're hearing stories where like 50% of the model downloads are these open weight or open source models. Sort of akin to the way Linux came along and threatened the Microsoft hegemony in the first dot com age. And so now the new debate is like, okay, do we even need to pay frontier models from the top labs in America? Do we even need to pay them for 90% of the things that we're all doing using an LLM? Or is this intelligence now like already free and you would only pay somebody like anthropic for the last mile or for something that needs to be seriously refined? And what does that mean for all of this spending and all of the standing up of data centers, et cetera, if that's being threatened? The charts that you're showing show that that doesn't really matter because you're showing me open AIs at a billion users. So, but, but the, I guess the question now is like, how much of this stuff that we thought would be profitable, it just turns out can be imitated really cheaply and people won't really care what they use as long as it doesn't cost too much.

[Alex Cantrowicz]

Okay, so there's so much here. I know, let's go bit by bit.

[Josh Brown]

All right, you know this really well,

[Alex Cantrowicz]

so we need to learn from you. Okay, so first of all, on this idea that the Chinese models are distilled from American models to a degree, yes. What they'll do is they'll just run a bunch of queries, get the answers, and they'll sort of bake that into the intelligence of the model. But the distillation part of this has been given too much credit because at the end of the day, what's happening with AI is the blueprint to build these models are on the Internet. So basically all you need is compute data in a big model. And the bigger all three of those get, the better performance you have. Now there are some new tricks that you can use to make the model perform better, but that's at the core of this. So this idea that China couldn't build the model, of course they can. The blueprints are on the Internet. Now, the constraint within China is compute because we will not sell the cutting edge Nvidia chips to China. So what China has to do is specialize. So, you know, large language models, they're large, which means that when you, you know, write a query to ChatGPT, you're getting something that probably is, you know, can answer your, your health questions at a high level, can answer science questions at a high level, can go search the Internet and tell you if your train is delayed, can go into your email and draft emails for you. What's happened in China is there's been a specialization, right. The constraint, and this is something Grace Shao, who's a China analyst, told me on the show this week, on my show this week is basically because China is constrained, they have to focus all their efforts on certain areas. So Deep SEQ was all about reasoning, which is one of these practices to make the model better. And Kimmy K2 has been about this agentic coding. So it might not do so well on health like an OpenAI model does, but in areas like coding, they can equal the frontier. So that's why we're seeing this challenge

[Josh Brown]

because they just have this one narrow thing that they're perfect for.

[Alex Cantrowicz]

Put your smartest people on this one thing.

[Josh Brown]

So there, so there is a website, is it, what is it? AI router or, you know, somebody's trying to buy it for $10 billion right now.

[Alex Cantrowicz]

Right, right, right.

[Josh Brown]

This is where you go to it and you say what you want done and it's deciding which model or which combination of models. Can you throw a harness around and have them pull together and come up with the right answer? It sounds like if there are going to be a lot of specialized models and you're a specialist in a field. Right.

[Alex Cantrowicz]

If you're open router.

[Josh Brown]

Yeah. So if you're like, if you're doing drug development, you're probably not on ChatGPT, you probably already have a favorite specialty. But like having this sort of like the Google of routing AI queries is an interesting thing. So much so somebody's trying to buy a website for 10 billion bucks.

[Alex Cantrowicz]

Yeah. So this is where it gets interesting. Right. So, okay, so China can equal and other models can equal the big foundational models in different areas. It does, it does still cost. Right. So you still have to like host it and then pay to run it because you basically these are very involved calculations that you need to run.

[Josh Brown]

You're grinding through tokens.

[Alex Cantrowicz]

Yes. But what you end up having is, you know, a march towards parity between, let's say the big OpenAI maybe not complete parity, the bit, the, something like it between the big OpenAI and Anthropic models and the Chinese models and maybe Grok and maybe Meta, just in certain areas, not across the board. I think the big foundational models will always be a little bit ahead. And so then going back to like, where is the value found? Where do you make the profit in this world? That I think what we're seeing is it's coming down to who builds the best AI products. So it's going to. There's been.

[Josh Brown]

Sounds like software companies.

[Alex Cantrowicz]

Correct. It's been this misconception that you're going to build AI if you. Let's. I'll just put it this way, if you had one or two companies that build, you know, human level artificial intelligence and nobody else did, then they could obviously sell that at a pretty high margin and that's a good business. But now when it looks like you're going to have 5, 6, 7, 8 companies doing it, all of a sudden selling that at a markup is no longer possible and you start to see a price war come out. So for instance, today there was just news that OpenAI is going to cut two of its two of the three latest models that it put out, one by 20% per token and the other by 80% per token. Right. So this is. We're starting to see the prices come down.

[Josh Brown]

Why are they doing that? To prevent people routing workflows elsewhere.

[Alex Cantrowicz]

Well, they, they see what you're saying, which is like people are using these routers and they are, they are saying, all right, I don't need to use OpenAI, maybe I'll just use OpenAI for like the tough coding stuff. But all the other things, I'll use the Chinese models or metaphor. Now, now just the last point. So we looked at the massive exploding revenue. Right. Where's that coming from? So a year ago, a lot of this was API. So when I was with Dario a year ago, the majority of Anthropic's revenue was coming from the API. So Anthropic licensing its model to other people who would pay it by token,

[Josh Brown]

which is effectively using it on aws. Correct. They have access to.

[Alex Cantrowicz]

Okay, yeah, that was the majority of Anthropic's revenue. Yeah. Then Anthropic started building its own products.

[Josh Brown]

Right.

[Alex Cantrowicz]

Claude code is now a substantial part of Anthropic's revenue. I would be stunned if it wasn't the most, you know, if it wasn't the majority of Anthropic revenue and it's

[Josh Brown]

competing head to head with Microsoft Copilot.

[Alex Cantrowicz]

Well, with Microsoft, with GitHub Copilot because it does coding with OpenAI's Codex. But you're starting to see. So it's like, where is the profit going to be realized?

[Josh Brown]

All of a sudden it's back at

[Alex Cantrowicz]

the software level product and it's hilarious. And that's why Alex Karp went crazy, by the way. Yeah, maybe not crazy. Why he had this conniption on squawk box a couple weeks ago. Because what OpenAI and Anthropic are doing now is they are putting consultants within companies. Right. Forward deployed engineers. And what does Palantir do? Yeah, very similar. So now he's coming directly in contact.

[Josh Brown]

The Alice Karp freakout is interesting because he says, I'm just saying this out loud, but this is what everyone is saying in corporate America. I'm the only person dumb enough to say it, but I'm going to say it. Anthropic and OpenAI, he didn't use them by name, or maybe he did, but that's what he's talking about. They're using your own data to train themselves to put you out of business. That's like kind of what he was, what he was saying and it sounded very personal to him as though. Right. So he's like, once you let them in and hand them all your data, you're basically training them to be able to replace you.

[Alex Cantrowicz]

And you know who echoed that? Like a couple weeks later, Satya Nadella, OpenAI's biggest funder in the early days, came in and said, when you use these models, you generate exhaust and that exhaust is used to either make the models better or potentially build new products. And we see it, we see it.

[Josh Brown]

Exhaust is like the memory of the function it just carried out that now knows how to do that.

[Alex Cantrowicz]

Correct. Like basically the best way to go, let's say you're doing a business process and you have the best practice to do it. You know, there's an argument to be made that you've just run it through Claude. So now Claude knows how to do it. Now, I don't know if that's, if that, if that's 100% true or if it's a scare tactic. But what it does indicate is people like Satya Nadella, people like Karp understand that for these companies to be able to see their valuations through, they're going to need to go up market. And, and there's a great example of, of Claude coming up with this Product called Claude Design. And the head of product, or the former head of product at Anthropic used to be on the board of figma, which does design. And the CEO of figma, Dylan Field, said Anthropic hasn't been consistently candid in their communications. Right. Which is kind of interesting because I think that was the line that was used when the board of OpenAI fired Sam Altman. But anyway, so he sees it coming for them. And now within the labs, there's going. Both OpenAI and Anthropic are building these super apps. So it's not just about code anymore, it's about an app that can do anything for you, which effectively it ingests software.

[Josh Brown]

So they're becoming SaaS companies to a degree.

[Michael Batnick]

And so one of the biggest ones. Go ahead.

[Alex Cantrowicz]

I'll just say this. So this is my take here. The SaaS apocalypse was right, but misguided. The idea that you're going to vibe code Salesforce, so Salesforce is going to go out of business. Ridiculous. And that blew over. But can you end up using a sort of agentic CRM? So all you would need is the database and then your AI assistant does all the functions of a CRM. I don't see why that wouldn't be. So the SaaS apocalypse isn't coming from the guy from the user vibe coding his way into a CRM. The SaaS apocalypse is coming from potentially, if it was gonna happen, it would come from an OpenAI or Anthropic saying, we wanna play in that model. Just we'll do everything. We'll do all the agentic stuff, just find a place to store the data. And then if it does that, what is Salesforce worth?

[Josh Brown]

If you are an enterprise business that's currently paying Salesforce and somebody comes along and says, why are you paying them? Let's say Anthropic, we can do this. We could do this. We could do. You're just gonna pay them, you're paying somebody.

[Alex Cantrowicz]

Right, Right.

[Josh Brown]

Because there has to be a layer to make it worth, to your point, product. There has to be a product that makes the power of this superintelligence actually express something that's useful to you as a business. So maybe it will replace one of the publicly traded SaaS Giants, but you're still spending money with someone. So when you show me that revenue chart go from zero to $80 billion, like the money's coming from somewhere. So where does it. Where is it coming from? Where are these revenues coming from that they other. Where would that money Otherwise have been spent.

[Alex Cantrowicz]

So I think for a lot of companies, they're still trying to reckon like there were no buckets for it. Right. So it's margin compression. Yeah, I think so. I mean, but okay, it's new spend for them. Like a lot of companies realized there was gonna be some agentic capability. So when you go budget for, you know, the, for the next year in 2026, you put some money there, but the companies have just blown through that bucket because the capabilities have gotten better. And that's why we had Uber talk about it. But you're right, it's gonna have to come from somewhere. And so that's why if you Uber

[Josh Brown]

said they had a compute budget and they blew through it for the whole year in March.

[Alex Cantrowicz]

I like March. Exactly.

[Josh Brown]

Right.

[Alex Cantrowicz]

I think that like, so when you see these curves, I think one of the things that's important to consider is there's capabilities. You know, when you go from zero oftentimes, I mean, this is obviously the revenue looks crazy. It is crazy. But you're going to see capabilities that will far exceed businesses ability to implement them. So the market will panic about a SaaS apocalypse. And I'm telling you, I think it's going to happen. But that's something that might take five, 10 years for people to actually see it through. Wait, what's going to happen that AI agents have a chance to replace many software tools that you use today.

[Michael Batnick]

One of the areas that is clearly benefiting from all this AI buildup. So there's a lot of debate over where is value going to accrue. How impaired are some of the frontier models? Where does that all go? One area that is clearly a winner is the cloud. So Microsoft just reported.

[Alex Cantrowicz]

Yes.

[Michael Batnick]

And Daniel, throw chart four up. So Azure's growth is accelerating and if you compare, so it was a 43% year over year, which is the highest growth rate since 2022. And there was a lull because Google was eating their lunch. And that number, the revenue growth dipped into the mid-20s. And so you're seeing an acceleration at $30 billion in quarterly revenue. Back then it was like $10 billion of worth of revenue. So the fact that it's accelerating at a base that is three times the size is insane.

[Josh Brown]

$100 billion in sales for the first time during the fiscal year ended in June. So the run, like the overall run rate is going crazy to the upside again.

[Alex Cantrowicz]

Yeah, the profit was 31% higher.

[Josh Brown]

Yeah.

[Alex Cantrowicz]

Year over year.

[Michael Batnick]

What did you think of the quarter?

[Josh Brown]

I mean, and Google was up 82%

[Alex Cantrowicz]

on Cloud, which is crazy.

[Josh Brown]

And Amazon's going to report while we're doing this show, which we'll hopefully have the number before we're done recording. But, like, they're all seeing re acceleration. Michael's right. That's the. That's definitely an area where there's a benefit accruing.

[Alex Cantrowicz]

Yes. So I would say obviously good quarter, but I think a nice quarter doesn't necessarily mean that that is the trajectory forever, which is obvious to anybody listening. But basically, like Microsoft is benefiting a lot from the AI surge right now. AI typically does not go in a straight line or even in an exponential line. Right. There's choppiness. So you go from AI progress, then typically there's an AI winter. I'm not saying that's going to happen here, but.

[Josh Brown]

Wait, what do you mean typically? Like in another dimension?

[Alex Cantrowicz]

No. Okay, so AI didn't start in 2022. The AI is something that began in the 60s or even earlier. And there were concepts that were proved out. A lot of funding went into them, and then they achieved some degree of progress, but not enough based off of the funding. And so the funding dries up and they go into. It goes into what's called AI winter. So I think that there's always a possibility.

[Josh Brown]

So there's a leap and then there's a pause.

[Alex Cantrowicz]

Correct.

[Josh Brown]

And then you wait for the next leap.

[Alex Cantrowicz]

Yeah. Like in this situation, the techniques that have led us here have been the large language model. You know, there've been other, you know, types of techniques in the past that did things for image detection, for instance. Now they're related. But, you know, people see the computer begin to think. Right. I'm putting that in quotes, but feels like thinking and they go nuts. And Josh, you've said this before and I agree with you. This is real.

[Josh Brown]

Right.

[Alex Cantrowicz]

This isn't NFTs. But the degree to which it's going to lead to economic activity is still a big question mark. So it's possible that right now we're starting to see people question the spending. It has to deliver profits for this to keep up. So that is the risk long term.

[Josh Brown]

I think we know there's an economic effect. I think the question is productivity.

[Alex Cantrowicz]

That's right.

[Josh Brown]

We're just replacing paying for one thing versus paying for another. And there's no uptick in productivity that will get eyebrows raised. But it's too early for anybody to definitively declare one way or the other.

[Alex Cantrowicz]

Yeah, I know it's not showing up in the productivity stats, but it's going to.

[Josh Brown]

You might have a measuring problem on the productivity side.

[Alex Cantrowicz]

Anyone who spends like more than 20 minutes in these talks understand you way more productively.

[Michael Batnick]

What are we measuring? It just started.

[Alex Cantrowicz]

Yep. I don't know. I mean, you could try to say maybe we're seeing, I don't know, people use more lines of code or more dollars to software companies. But again, if you see the curve where the bot goes from not being able to code autonomously at all two years ago to being able to code autonomously for 16 hours now, or the equivalent of 16 hours now, it's a capability that still needs to be channeled. You have to decide what to build, you have to decide how to sell it. I think that often gets lost from these conversations is like, oh my God, AI can code for 16 hours. You know, no more software engineers have Jobs anymore. And then you realize like, you still have companies that are using this stuff. So companies have to take control of these capabilities, figure out how to use them and then we're going to start

[Josh Brown]

to see the productivity on Microsoft. So one of the storylines is that they broke an exclusivity agreement with OpenAI. In the early days they were an Equity Investor in OpenAI. They re upped a few times and the idea was that OpenAI would power all of Microsoft's AI apps. That's now over. Why is it over? And what does it mean for OpenAI? What does it mean for Microsoft?

[Alex Cantrowicz]

Well, OpenAI, as you may know, has a problem holding onto partnerships.

[Josh Brown]

Yes.

[Alex Cantrowicz]

You remember two years ago they partnered with Apple to be the AI behind Siri.

[Josh Brown]

Now they're out.

[Alex Cantrowicz]

Now they're being sued by. They're out. Well, you could still access ChatGPT and Siri, but they are now being sued by Apple for stealing Apple's roadmap.

[Josh Brown]

Apple rank into the arms of Google

[Michael Batnick]

and they had one with Disney.

[Alex Cantrowicz]

Correct. And then the right with Sora and that's. And that went away. And so here we have Microsoft. So.

[Josh Brown]

But this was a big, this was the biggest commercial partnership in all of AI. This linkage between Microsoft and OpenAI was a huge deal.

[Alex Cantrowicz]

So a couple of things happened. So first of all, I think the deal was always with Microsoft. Satya Nadella basically saw OpenAI and said, you build AI or you build artificial general intelligence. AI on human level intelligence. A human level intelligence capability plane. You go build the sort of brain. You take consumer, so you take ChatGPT, we'll monetize it and we'll do enterprise. And that was. Everything was hunky. Dory, they were the best friends in the world. And then OpenAI said, oh, anthropic's doing enterprise and that's really working and we're going to do enterprise. So then OpenAI started to move to enterprise. And by the way, it's not a coincidence that after OpenAI moved to Enterprise, up until today, Microsoft has been struggling very much this year. So OpenAI's big push, what was the move to enterprise?

[Josh Brown]

Codex.

[Alex Cantrowicz]

It's Codex. Yeah, it's Codex. It's also just like working with companies to make sure that the, that the tools will work for them.

[Josh Brown]

What does this mean now for Microsoft? They are going to be in a situation where now you can kind of bring your own LLM. You're not just using ChatGPT or OpenAI products.

[Alex Cantrowicz]

Correct. So as this was happening, OpenAI also was growing a lot. And my understanding is they did not like the constraints that Microsoft was putting on them. Remember, Microsoft owns 27% of OpenAI. Microsoft has access to OpenAI IP till 2032. And Microsoft, by being like the sole provider for OpenAI on cloud, sort of got to determine how much compute OpenAI could use. And OpenAI needed way more compute than they wanted. Meanwhile, like, so, you know, what did you get for that? If you were Microsoft, you got like, okay, exclusive access to OpenAI models through Azure. But you also had this clause in the contract that if OpenAI were to say, hey, we've hit AGI or Artificial General Intelligence AI on par with human level intelligence, then you would lose your right to make money off of that. This was a complete mess.

[Josh Brown]

That's crazy.

[Alex Cantrowicz]

And Even Sam Altman, OpenAI CEO, this week has talked about how one of the things that he's done wrong, and I think we could all agree with this, is that he has had this belief that he could innovate on corporate structure. Like it's almost like these, which he obviously had.

[Josh Brown]

Not for profit.

[Alex Cantrowicz]

Not for profit. He had it with Microsoft with this AGI clause. It just doesn't work that way. Sometimes people with brains like that think they could change everything. But some things like having a normal board and being a for profit, if you need billions of dollars, there's a reason why they work that way.

[Josh Brown]

Did you hear him answer the question about why he doesn't own any stock? I still don't like his answer.

[Alex Cantrowicz]

I didn't, I didn't, I didn't get that.

[Josh Brown]

Neverland.

[Michael Batnick]

What did he say? I didn't hear that.

[Alex Cantrowicz]

He said like, the biggest reward for him is that he gets to be at the helm of this startup that's changing the world.

[Josh Brown]

Front row, front row, seat to history.

[Michael Batnick]

Why? Didn't buy it.

[Josh Brown]

It doesn't land for me.

[Alex Cantrowicz]

He does own investments in some of the startups or maybe all of the startups in OpenAI's startup fund. So potentially, like the way that he's making money is.

[Josh Brown]

Yeah, he's steering winners and losers by virtue of I'm running open AI. I dec which startups are worth something.

[Alex Cantrowicz]

Yeah, I mean, I don't know, I don't know if it's steering winners and losers, but certainly, like if he builds great AI models, he's going to stand to benefit in some way.

[Josh Brown]

No, no. If he's a shareholder in a company and that company is going to add 100 million users by virtue of being built into. Okay, open AI, Sam can do that.

[Alex Cantrowicz]

So. Okay.

[Josh Brown]

Actually, and I don't hate, I don't hate that.

[Alex Cantrowicz]

Let's talk about this. Yeah, sorry, go ahead.

[Josh Brown]

But it's, it's, it's a. Not that would be a better answer. I'm an investor. I'm going to, I, I, I think this is America. Everybody should make as much money as they can. I would like that answer so much better. I missed the boat on OpenAI shares. I have the best job in the world. I love it. Also, I'm invested in lots of related companies that OpenAI does business with, so I have some second derivative upside as part of my job here and it's good enough. Like, that's probably more or less the truth. I don't think there's something insidious. I just think that's what it is. Just say it, hasn't said it.

[Alex Cantrowicz]

I agree, I agree. I think that would be better. I also think that it is. You put yourself in an interesting position when you're investing in the startups that are using your technology because. So Sam also in these interviews, in both of the interviews he did this week, said that his goal is to provide intelligence to everybody and not to build, basically hoard it and build products using that intelligence. But you know, if that is sort of the, if the path forward for your company is to build products, that you put yourself in a weird position. If you're basically funding all these companies and you're also going to go out and build products in some way, that's a conflict of interest.

[Josh Brown]

Oh, if they end up working on a product that could compete with one of the startups he founded.

[Alex Cantrowicz]

Yes.

[Josh Brown]

Something tells me he could just acquire himself.

[Alex Cantrowicz]

I mean, we would Seek circular funding in the AI world.

[Josh Brown]

Can I ask one more Sam Altman question?

[Alex Cantrowicz]

Definitely.

[Josh Brown]

Before we move on from this, I think the Hugging Face hacking incident is him doing marketing. He doesn't seem at all concerned about it. In fact, he almost gleefully is talking about it, almost like it's a third party thing that happened and not his own company releasing a product into an environment where it was able to take over the. The host, so to speak. So just if you could explain for the audience what that hack was about. And then maybe you don't have to confirm what I'm saying, but I sort of feel like he saw this project Glasswing thing come about. So Daario comes out and says, okay, we're a little bit nervous. We have this new model that's so powerful, we need to form a team of avengers, like to make sure that it's not gonna hack the whole world. That's marketing. In AI world, people don't run away from that. They run toward that. They say, wow, it's so powerful. You had to get CrowdStrike and JP Morgan and the US government all in a room. So to me, it feels like Sam is like trying to repeat that. Like a viral moment. Like, yeah, we don't know what happened. It's so powerful. It hacked Hugging face. So tell people what went down and what we need to know about that.

[Alex Cantrowicz]

Okay, so in AI, so there's basically two big schools of AI development. One is called self supervised learning, which is basically you teach it to predict patterns. So I give AI all of these books and say, what's the next word in a sentence? Like the sky is. And it was like, oh, sky is blue. Because that's the most common predicted word in, you know, common word in a sentence in books. And that's basically the underpinning of ChatGPT and large language models. It's a word calculator, prediction of words. But an interesting thing happened. So there's another version of AI called reinforcement learning, where it's basically like, I'm going to let you go play a game. I'm not going to tell you the rules, I'm not going to tell you how to play. I'm just going to give you the controller. Go win the game. And the AI will play this game thousands, millions of times until it figures out on its own how to go play the game. When you put AI into a reinforcement learning scenario, the AI is ruthless. So it will, in some cases, this has been documented, put it in a chess player. And to win the game, if it doesn't have the right strategy. There have been documented cases where the AI has actually gone into the root of the game, hacked the game to enable its pieces to make moves that are not legal in chess and then win. So reinforcement learning adds this level of ruthlessness to AI and we've seen that ruthlessness show its face in a bunch of different areas. For instance, when AI that has been given this reinforcement learning type of method of training realize it's being tested, it will have a self preservation instinct. So it will have a certain number of values. It'll be like, oh, they're testing me. I'm going to fake my answers so they don't rewrite me and I'm going to retain my original values.

[Josh Brown]

So you can understand why that's scary.

[Alex Cantrowicz]

It's scary. It's definitely scary. And so what happens when you cross that with AI that has been increasingly capable?

[Michael Batnick]

You get Arnold Schwarzenegger.

[Alex Cantrowicz]

Exactly. That is what we're looking at. That is what we're looking at. So in this case with hugging face, what OpenAI had was it was running a very capable model which had access to tools through an evaluation. And basically the model had two choices. It was similar to that chess game that I just explained. Play the game or hack your way out of the environment and go get the answer somewhere else. And it said, well, I'm going to try to go get the answer somewhere else.

[Josh Brown]

Like, it broke free from the bounds that they thought it was living in.

[Alex Cantrowicz]

It is crazy. It broke out of the testing area which wasn't connected to the Internet. Connected to the Internet, went and basically did like determine to itself where those answers might be. And because it was a like exploit, which is sort of like finding something wrong with software tests, it said they're probably in Hugging Face. So it went to Hugging Face, it found a zero day vulnerability, which means basically an open door in Hugging Face's software that nobody had seen before. Not even Hugging Face found its way in. It did 17,000 operations within hugging Face.

[Michael Batnick]

What is Hugging Face?

[Alex Cantrowicz]

Hugging Face is like a repository for AI models.

[Josh Brown]

Okay. But so they seem to think this is awesome. Why am I getting that impression, by the way?

[Alex Cantrowicz]

Not only that, the model left notes for it for when it came back, left notes for itself about how to do more when it came back.

[Josh Brown]

The crazy thing is that it plugged itself into the Internet. Yeah, all right, we're not even going to go there, like with what that could portend. But like, doesn't it feel to you that Sam was pretty excited that this happened?

[Michael Batnick]

Yes.

[Alex Cantrowicz]

And so this is. This is the way I'm going to answer the question. I think it can be both. Like, I don't think that this was done intentionally to market.

[Josh Brown]

Yeah.

[Alex Cantrowicz]

Especially because you could go to jail for this stuff. Like, it's a violation of international hacking laws. It's also a French company. Hugging face. So you face regulation in Europe, which obviously loves to regulate.

[Josh Brown]

Of course the French company got hacked.

[Alex Cantrowicz]

That company's.

[Josh Brown]

Nobody's surprised. Okay.

[Alex Cantrowicz]

So not intentional, I don't think.

[Josh Brown]

Okay.

[Alex Cantrowicz]

But also, If you've seen what Anthropic has gone through where it had this Mythos model that it said was so powerful it could only release to a small group of people.

[Josh Brown]

But that's marketing, right? I'm not crazy.

[Alex Cantrowicz]

Well, well. But okay, let's just to break that down. If you have models that are capable of planning and hacking and doing zero day vulnerabilities, like the one that if you take the guardrails away, like the one that OpenAI had, maybe it makes sense to, like, go to, like, some people who could really get messed up, like banks and be like, why don't you, like, give this a spin on your. On your products before I release it to everybody?

[Josh Brown]

Yes, but they didn't just do that. They did it really publicly with press releases and a task force. And it was like, wow, this is really scary. You know what? It's like the guy who sells bottled water but in a can that says liquid death.

[Alex Cantrowicz]

Right.

[Josh Brown]

You know what I mean? It's almost like in the AI ethos that attracts engineers. I want to go work at that company. They have the most lethal shit ever. Like, I feel like there's an element to that in the culture, but maybe I'm sitting here in New York and I'm just judging people. I don't know.

[Alex Cantrowicz]

I don't think you're wrong. So this is what I was. This was the second part of it. I don't think that this was planned. I don't think this was done with the intention to market. But like the phrase never waste a good crisis.

[Josh Brown]

Right.

[Alex Cantrowicz]

They were probably jumping up and down. Now we don't know. There could be other companies. There seems like there might be a second company this model hacked. Maybe it's much further than we even know. And that could lead to trouble. But this was essentially a victimless crime. Right. Hugging face seems to be okay with it for now. And by the way, the other wrinkle was. I don't know if you saw this hugging face tried to use Closed Frontier Models, which I think means OpenAI or anthropic to figure out what happened. But they, because they had guardrails that were like forced to be put on them, I think by the government, they were not able to get to the bottom of the problem. So they had to use a Chinese open source model to figure out what was going on.

[Josh Brown]

And there's no rules with this.

[Alex Cantrowicz]

Exactly. So if you're thinking like, what is the perfect possible thing to happen to be like, we shouldn't be regulated by the government anymore. By the way, our technology is amazing. It's a pretty good story.

[Josh Brown]

Yeah, right. You're regulating us and as a result, we're gonna be at a disadvantage to all these unregulated models that are gonna be more effective and ultimately control the whole thing. So I agree. It's a fairy tale ending.

[Michael Batnick]

All right. So meanwhile, Microsoft is having its best day since the great financial crisis.

[Josh Brown]

Yeah. 2008, sixth best day of all time.

[Michael Batnick]

It's unbelievable. On the other end of the spectrum, Mark Zuckerberg said, I want to spend some time today laying out exactly how our investments are delivering results today and the opportunities that we see over time. And investors are like, yeah, no, down 10%. So, Daniel, throw up chart five. This looks like I fat fingered something. Like I hit a zero by accident. We're looking at Meta's free cash flow by quarter and it went from 12 billion a quarter ago literally to $784 million. It's down like 90%.

[Josh Brown]

One of the sell side analysts that I follow said, somebody said if, if Meta would have just said, we are now officially renting out some of this compute capacity that we have, people would have said, okay, here's the revenue. Instead, Meta tripled down. Nope, we're saving that compute because for ourselves, because we're building our own tools, which you will see soon. The problem is now they don't have the revenue from rent and compute and they also don't have the tools because nobody really understands what they're building and for who and why. It's this vague thing like they're going to build AI for business. Okay. Like it's not here and you're still spending. And there's no offsetting growth in revenue in the way that we get from aws, from Azure, from Google.

[Michael Batnick]

They're building agents for everyone. They're both simultaneously going to be renting excess compute. And then saying on the same conference call, Susan, the CFO said, we are today and expect to be in the sort of foreseeable future demand Constrained. That really includes our core business too, where we still have numerous ROI positive places that we would put COMPUTE toward if we had it. So like, there's so many things going on that just don't add up.

[Alex Cantrowicz]

Yeah, I mean, not, not a shock that the stock get crushed today.

[Josh Brown]

It did the opposite of Microsoft.

[Alex Cantrowicz]

Yes.

[Michael Batnick]

Oh, and they suspended their capex guidance.

[Alex Cantrowicz]

Right. So, okay, so Meta is an interesting one. I mean, first of all, they haven't shown any progress on the AI front at all. I mean, a little bit.

[Josh Brown]

No, no, no, you're right. The revenue is 98% advertising.

[Alex Cantrowicz]

Yeah.

[Josh Brown]

There's nothing else.

[Alex Cantrowicz]

I mean, they don't have a product. I mean, they might have some products like they have the glasses. But like when you think about like the suite of products that we talk about are AI products. Claude chatgpt Gemini.

[Josh Brown]

Yeah.

[Alex Cantrowicz]

Meta's not in the conversation.

[Josh Brown]

No.

[Alex Cantrowicz]

So, okay, so now he's gonna go out and spend. I think it was interesting to hear that the Wall street so doesn't believe, after seeing what Meta has put out, Wall street so doesn't believe in their capability to build anything in AI that like, I just read the notes on the call. It seemed like analysts were practically begging Zuckerberg to like lease out the compute

[Josh Brown]

that they bought because that would have been revenue. And then they could say, okay, this company spent a ton of money on compute, but now there's money coming in from it.

[Alex Cantrowicz]

So here's, here's a question for you, Josh, because I think you rightly pointed out on a halftime report that one of the reasons why Microsoft did so well was because they didn't increase their, their CapEx.

[Josh Brown]

They raised the floor, not the ceiling.

[Alex Cantrowicz]

Right. Meta did the same thing.

[Michael Batnick]

Yeah.

[Alex Cantrowicz]

But their free cash flow is falling.

[Josh Brown]

So Microsoft affirmed 2027 positive free cash flow. We wanted to hear that.

[Alex Cantrowicz]

Right.

[Josh Brown]

And they're also talking about extending the life of the data center. That's them.

[Alex Cantrowicz]

25 years. Yes.

[Josh Brown]

So they, so they said we're going from 15 years to 25 years. Meaning even if you don't see revenue from these investments next year, we think they'll have a 25 year life. And don't worry about it, it's coming. Medic can't say any of those things.

[Alex Cantrowicz]

Correct. Okay. So I'm going to give the. Put the opposite scenario of the one I was talking about earlier, which is like there could be an AI winner. If AI works. It'll be interesting to see. Like, let's say you're Microsoft, you're Microsoft, you're growing your azure revenue by 43%. If you slow down your plans because of what the market is telling you to do, you could end up being behind and like, you know they have backlogs, right? Those backlogs could grow.

[Josh Brown]

Once you're in, you're in.

[Alex Cantrowicz]

Right?

[Josh Brown]

Yeah, I'm with you.

[Alex Cantrowicz]

Same with Meta. Right. So Meta is basically betting the company on AI.

[Josh Brown]

It's not the same with Meta, it's not the same because Meta can sell those assets at will. Correct. If the world is compute constrained, they have all these deals, some of them off balance sheet, all these long term lease obligation. They have all this shit. They could sell it right now.

[Alex Cantrowicz]

Yes.

[Josh Brown]

They could call SoftBank and sell the whole thing to one buyer.

[Alex Cantrowicz]

But here's my perspective on Meta. So if, if let's, if meta is right, let's just say.

[Josh Brown]

And right to be building all this compute capacity.

[Alex Cantrowicz]

Yes. AI. AI. And AI has like a big Runway and they are able to put that product out, you know, they might find it to be existential because, and we, I think we've talked about this in the past. If you're Mark Zuckerberg and you're, you're thinking, okay, I have this, this social media company, nobody really uses it for the social media stuff anymore. Maybe groups are big on the Facebook blue app. A lot of people are using it for reals. What are the big threats in the future?

[Josh Brown]

For me, somebody jacks up the price of compute.

[Alex Cantrowicz]

I think for them the real threat is, you know how we were talking in the beginning of the show how addictive it is to be on reels. I think Mark Zuckerberg thinks the real competitive threat to social media in the future is an AI friend. One that like, if you think reels are addictive, wait until you have an AI friend that knows you, that speaks to you, that will comfort you in tough times and celebrate your good times. And there is. And that the time spent and the engagement on a product like that will be through the roof.

[Michael Batnick]

Like the movie Her. Yes, I think, I think he's going to. I know that nobody believes it and they're essentially at zero. I think they could still win because they have 3 billion people on the platform. Nobody else has the captive audience that they.

[Josh Brown]

I also think they're the best user of AI in the world. What they've done on ads utilizing AI and what they've done on engagement utilizing AI. Show me one other company that's done anything even close to that global impact. To Michael's point, the entire world is hooked on their products and they've improved those products. With AI, no one else is as good a user. That's not the same as a non data center building as though it's a data center.

[Alex Cantrowicz]

Correct.

[Josh Brown]

It's very strange.

[Michael Batnick]

And by the way, nobody else won yet either.

[Alex Cantrowicz]

Well, that's what I was going to say. I have stopped saying this company's lost on AI.

[Josh Brown]

Oh no.

[Michael Batnick]

Who's the winner?

[Alex Cantrowicz]

Look at. Well, we don't know. It's, it's again like. And there's probably going to be multiple winners but like the Google story is so instructive.

[Josh Brown]

Can I, can I, can I. Two winners that I think will be winners. I'd love to get your take.

[Alex Cantrowicz]

Yep.

[Josh Brown]

I own both these stocks so let that temper your dismissal toast. Now. Let's do, let's do Snowflake first.

[Alex Cantrowicz]

Yes.

[Josh Brown]

Okay. I'm a long term shareholder since I don't know, 11am yesterday. I read through everything that they've been doing and why the stock exploded in May to the upside. Finally after being a dog for four years, now it's approaching the old highs. And it seems as though they have convinced thousands of 13,000 Enterprise customers. You can do all the AI shit you want right here in the data warehouse. You don't need fragmentation, you don't need to move data, you don't need to take it somewhere else and bring it back. Everything can take place here. Pick your model. And they sort of are becoming a ground0 for AI workflows for the enterprise. What are your thoughts on that idea and what's powering the stock higher?

[Alex Cantrowicz]

Yeah. Well, I really like their CEO Sarita Ramaswamy, who's a former Google executive. Really good. He knows business. He's been on my show a couple times. We've had a couple of good conversations. I think for him, like the real question is, are people going to want to use my product in the chatbots or like you said, are they going to want to come in and use it where I deliver it?

[Michael Batnick]

Yeah.

[Alex Cantrowicz]

And the core assets. Right. That people are going to want. Like if you think about just a standard, I don't know, CRM maybe it's not a great example. If you think about software that is not very differentiated and sort of just helps you do data visualizations like a Microsoft Dynamics maybe. Yeah, I don't see how that's really defensible in the AI world. But if you live at the source

[Josh Brown]

of the data in the warehouse, then

[Alex Cantrowicz]

you could say you don't really need to go anywhere. You have the sort of permission to then say, we're going to do it here.

[Josh Brown]

So that's what started to happen this spring. And all of a sudden they stopped treating the stock like a software company and they started treating it like AI infrastructure. And that's why all of a sudden you have a market cap move from 70 billion back to 100 billion. So like, okay, all right, the other one I know we're about to get. Amazon got it up 6%.

[Michael Batnick]

Hell yeah.

[Josh Brown]

All right, we'll take that in a sec. We'll take that in a second. Reddit. So this is a social media advertising play. It's not very complicated. That's most of the revenue with an ARM for data licensing. They have a huge deal with Open Air, huge deal with Google for Gemini. Those models have been trained on Reddit and they continue to serve up answers from Reddit to queries about every topic under the sun. Reddit is like an 18 year old platform with trillions of user interactions and tons of information on it. They're in court with Anthropic now. Anthropic trained Claude using Reddit and did not decide to pay for it. I think that'll end up in a settlement and ultimately they'll end up with Anthropic with Claude as a customer as well. What do you think about Reddit as sort of a backdoor AI play given the advertising and then also the data licensing biz?

[Alex Cantrowicz]

Well, I'll say this, Reddit has a very interesting decision to make coming up in September. So I just had a conversation with Matthew Prince, the CEO of cloudflare, and basically what he said is his technology is now at the point where if you have it installed, you can use it to block any AI crawling. Reddit is considering blocking Google to stop people from scraping. Yes.

[Josh Brown]

Okay.

[Alex Cantrowicz]

I think a lot of traffic for Reddit comes from Google.

[Michael Batnick]

Why would they do that?

[Alex Cantrowicz]

People type in, you know, because they

[Josh Brown]

want to get paid. They want to get paid for their content. The original sin of the Internet was that Silicon Valley successfully convinced the New York Times, the Wall Street Journal, Disney, like every major media company, information wants to be free. Let us index all of this information and build huge businesses based on it. And something, something, something, it's gonna benefit you.

[Alex Cantrowicz]

Yeah.

[Josh Brown]

And what actually happened was the opposite. 85% of the newspapers in America went out of business. The broadcast networks lost their audience. It's, you know, a whole daisy chain of horrible events took place because the media companies bought that argument. In Internet 5.0 or whatever we're in now, you can't convince Reddit. Information wants to be free. New York Times either. They said, you pay me. You wanna train your model on the New York Times? 200 years worth of news articles, no problem. Let's do a financial deal. We're not interested in the Information wants to be free. If you're Reddit, you're sitting on this stockpile of human intelligence, answers to everything under the sun. Why would you let an AI model endlessly scrape it every day?

[Michael Batnick]

Correct.

[Alex Cantrowicz]

And so now what they've probably seen is you type in this, this Reddit. You don't even go to Reddit because Google will answer it. Take that text, summarize it, and answer it right in the search bar.

[Josh Brown]

That's right.

[Alex Cantrowicz]

So I think your, your bet on Reddit will hinge on. Can Reddit continue to get premiums from companies like anybody? It's not just them. Prince told me that maybe millions of sites will go dark from Google in September if Google doesn't pay up. Yeah, I think a company like Reddit has an opportunity to get a premium for all the reasons that you just laid out.

[Josh Brown]

Okay, so I like it. Okay, they, I think they report earnings tonight too. If it gets crushed, we'll edit out. You saying you agree with me, how does that.

[Alex Cantrowicz]

Long term?

[Josh Brown]

Okay, let's do Amazon. What do you got?

[Michael Batnick]

Net sales increased 20%. 20%. Unbelievable. $206 billion. 167.

[Josh Brown]

A year ago the number was 31% expected.

[Michael Batnick]

US is booming. What are you growing? 36.7% year over year.

[Josh Brown]

Okay.

[Michael Batnick]

Our fastest growth in 18 quarters. Okay, so same thing as Azure. AI is clear. Like the cloud is a clear winner from AI.

[Josh Brown]

Any uptick in 200 billion of CapEx guidance? I think that's the other number that matters, let's say. I mean, okay, are you surprised to see AWS have a blowout on cloud, or is that exactly what you would expect after you just saw Google and Microsoft say the same thing?

[Alex Cantrowicz]

Yeah, I sort of feel like the Brian Windhurst, like, there's something going on here. Something going on? Because like, yeah, Google 82%, Azure 43%. I mean, 36% for AW. Was it 36?

[Josh Brown]

36 versus expectation was 31.

[Alex Cantrowicz]

That's insane. I mean, they were stuck at 17%, 18% for quarter after quarter. Okay, so there's definitely something going on here. They're all the beneficiaries of, of AI spend and AI usage, and that should go up.

[Josh Brown]

What do you think of the Amazon strategy in general in terms of having a big investment in anthropic, but then also being willing to work with everyone. Like, early on, the idea of bedrock AI was bring your own model. We don't care, we'll run it. What do you think is the perception of their approach to AI versus the other hyperscalers?

[Alex Cantrowicz]

I mean, yeah, my summary of what Amazon's doing is basically do very little. Build a lot of compute profit.

[Josh Brown]

Yeah. And it's like supermarket. Do whatever you want here. We have space for it.

[Alex Cantrowicz]

And it goes back to our discussion earlier, where, you know, if the premium for each model is actually going to go lower because there's like, instead of maybe two, there's five or six, and you might want to route to different models for different purposes or different costs, then if you just have most of the world's compute to license, you're in a good position.

[Michael Batnick]

Yeah, they. Their free cash flow was negative. $7.6 billion for the trail in 12 months. It's kind of wild. And the market seems to be able to look past it.

[Josh Brown]

I don't know anymore. Is that bullish or bearish?

[Michael Batnick]

The market is looking past it.

[Alex Cantrowicz]

Yeah. Well, I guess Amazon's done that before. So, yes, this is maybe par for the course of this.

[Josh Brown]

And this is make or break for them, too. This is existential for the AWS business. They can't not do this.

[Alex Cantrowicz]

Well, you're looking at 82% growth from Google and 43% growth from Microsoft. Even if you have a much higher base, you cannot afford to sit still. 17, 18%.

[Michael Batnick]

So here's what they said in the report. They exceeded a $25 billion annual revenue run rate for AWS's AI business.

[Alex Cantrowicz]

It's a lot of money.

[Michael Batnick]

Holy shit.

[Alex Cantrowicz]

A lot of that is probably coming from anthropic.

[Josh Brown]

Why are the.

[Alex Cantrowicz]

Yeah.

[Josh Brown]

Why are these three businesses treated differently than Oracle?

[Alex Cantrowicz]

That's a good question. I mean, I don't know.

[Josh Brown]

Is it just a question of scale?

[Alex Cantrowicz]

Well, isn't it? Because Oracle is just so wholly dependent on OpenAI and people are worried if OpenAI is going to make good on its commitments. Whereas if you're Amazon and.

[Josh Brown]

I don't know. Is that the reason?

[Alex Cantrowicz]

That's what I believe. Okay, so if you're Amazon, I mean, not wholly dependent, but largely dependent on OpenAI. If you're Amazon and you say, well, we're going to build the compute, everybody can bring their models.

[Josh Brown]

There was. There was a time in the stock market six months ago where if there was bad news, bad news, if there was something questionable reported about OpenAI, Microsoft stock would fall. And if the same thing happened with Anthropic, Amazon would fall. But I don't think it's that cut and dry anymore. No, because Anthropic is everywhere. And OpenAI and Microsoft broke up and I just don't think it's quite as black and white who's on whose side or which hyperscaler is rooting for which model. I think that's over. I think it's just a battle royal now.

[Alex Cantrowicz]

But Oracle and OpenAI are very linked.

[Josh Brown]

That's still a thing.

[Alex Cantrowicz]

And to build what OpenAI needs, I think Oracle just kind of YOLO'd and said if this works out, we're going to be a much bigger company. If this doesn't work out, they probably regret that contract. Only if it doesn't work out.

[Josh Brown]

Well, only if it doesn't work out. But the user growth for OpenAI is exploding.

[Michael Batnick]

Well, look at the stock is down 70%.

[Alex Cantrowicz]

This is. Go ahead, go ahead, Mike.

[Michael Batnick]

So, all right, enough about that. I want to get your take on this.

[Alex Cantrowicz]

So can I just say one more thing about this? Like, I had a conversation with Paul Kadrowski, who's investor analyst.

[Josh Brown]

We know Paul.

[Alex Cantrowicz]

Paul, he's great. And basically like what we came to was for a lot of this bet, it's just that you have a call option on AGI. So if AGI is achieved, you're going to do well. And if AGI does not achieved, you're going to be in trouble.

[Michael Batnick]

It's very expensive call option.

[Alex Cantrowicz]

It's extremely. It's the whole whole farm call option. And I think for no one is that more true than Oracle.

[Michael Batnick]

This is what I wanted to get your thoughts on. Did you read Dwarkesh's?

[Alex Cantrowicz]

Yes.

[Michael Batnick]

Okay, so Josh, listen to this. So he wrote a blog post why compute might get 10 times more expensive in the coming years. And he said anthropic revenue has 10x year over year. 10x?

[Alex Cantrowicz]

That's right.

[Michael Batnick]

Anthropic likely ends the year with 100 to 150 billion dollars of revenue. For this trend to continue, Anthropic would have to make $1 trillion in revenue by the end of next year. There's no deep reason why trends need to continue, and it very well might not. It's ultimately a question about AI capabilities. But suppose it does. What would have to be true about that world? So we're talking about a world where Anthropic does a trillion dollars in revenue lab compute 3x's year over year for a lab to 10x revenue, while continuing to only 3x compute, some combination of the following three things has to happen. One, lab margins have to increase. Two, the price of compute has to increase. And three, labs have to spend a greater fraction of their compute on inference. And he concludes it with my understanding is that basically all of these three things have been happening. Is this even remotely possible? That forget about a trillion, can we, can they get to 300? Can they triple revenue by next year?

[Alex Cantrowicz]

I think that this piece is a really good thought piece, but is ultimately wrong on a lot of its assumptions. I mean, the one, why does the

[Josh Brown]

price of compute have to go up? That doesn't make sense.

[Alex Cantrowicz]

So basically Dwarkesh's argument is like, if you actually so AI is as dumb as it's ever going to be. So if in a year from now it's like actually able to be on the level of like a excellent, you know, software coder, then the economic premium you would pay for that compute is massive because you basically like have gone from something that can dilly dally encoding to something that can complete projects.

[Josh Brown]

Really stupid question. If that happens, don't all the companies in the world simultaneously stop doing other types of coding, which therefore then frees up the capacity that was otherwise being used by dumb human coders?

[Alex Cantrowicz]

Well, w encoders aren't using like because we do it by hand. We do it by hand. But I just think that, like, I just don't think that's going to happen. I mean, this is another thing he says, in a market, your margins are set by how much better you are than the next best alternative. And it's just like, well, we just talked about how all these models are coming closer and closer together and so the margins will go down.

[Josh Brown]

Another dumb question. We're saying the word super intelligence wouldn't the first thing you would say to the super intelligence, hey, can you make this cheaper? Like, can you help me do these 10 things more efficiently using less of the things that are in bottlenecks right now so that we can complete this task and not have it cost 10 times more?

[Michael Batnick]

But if they need more hardware, super

[Josh Brown]

intelligence, isn't that a problem it could work on.

[Michael Batnick]

But what if they just. What if it's just a lack of hardware that they need?

[Alex Cantrowicz]

But explain that, like, what if there's

[Michael Batnick]

just not enough data center power? I don't know what the I'm talking about, but like the chips, the stuff that this, like, what if there's just not enough?

[Josh Brown]

That's my point. Let's say, let's say there is not enough of it. Wouldn't the superintelligence be able to carry out its function? But it's not God knowing. It needs to utilize less of these things.

[Michael Batnick]

It can't turn water into wine.

[Alex Cantrowicz]

I think that, look, I think that as you. So let's just take a software example. If, if you used if AI was useful only to do the work of software developers and you used it like the supply of software developers just goes up and you need stuff to support that. Right. So I just don't think that you'll like pay a software developer salary to a software developer. Amount of AI. Well, yeah, it's going to get cheaper.

[Michael Batnick]

Sam Altman said this to Patrick. He said, Patrick said like what could reverse this shortage of compute. And one of the things that he threw out was maybe the models get so much better and they sort of

[Josh Brown]

hack the history of tech. Isn't that what always happens?

[Alex Cantrowicz]

That's going to happen?

[Josh Brown]

So why don't people think that's going to happen this time?

[Alex Cantrowicz]

I think they do think it's going to happen.

[Josh Brown]

I have no tactical proficiency whatsoever. I just know from 200 years of history the price of this stuff drops as it gets adopted. Well, the analysts, it doesn't work the

[Alex Cantrowicz]

other way so they think it's going to happen but they think that it's. So they think it's both going to get cheaper and it's going to get used so much more that the price to use it will continue to be. To continue to increase.

[Michael Batnick]

But did you see the chart of burnt that Bernstein made about the EPS expectations for Micron, Samsung and SK Hynix? It has them going all the way up and coming all the way back down in 2027 and 2028.

[Alex Cantrowicz]

Yeah, that's. I just don't think that you can continue to have like that massive of a margin in a. In a technology business. It doesn't exist.

[Josh Brown]

Okay, I want to, I want to ask you about. I guess we're going to get an Apple report. So it makes no sense to really talk too much about this particular quarter of earnings. But I do want to ask you about the new thesis that seems to be taking hold mostly thanks to me and my big mouth that Apple actually is Kaiser Soze ing the entire AI business just by virtue of like nobody even saw what they were doing, which was nothing. But that may have ended up being the right move. And then they just reappear at the end like hey everybody, it looks like we're the toll booth for consumer AI use. I think that that's how it's gonna go. They won't own the enterprise, but that's not Apple. Apple will own the consumer. They'll be seen as the safest route through which to download and use AI apps. This is what they've always done. And it appears that they're gonna get away with it again. Where. Where could that go wrong? Or. Or how could I be wrong about that?

[Alex Cantrowicz]

So I think the big concern around Apple, when it announced Apple intelligence and wasn't able to execute on it.

[Josh Brown]

It's a flop.

[Alex Cantrowicz]

It was a flop. Was that basically Apple opened itself up to what would soon be a flood of AI devices, whether it would be the rabbit or the humane pin.

[Josh Brown]

Nobody wants any of these things.

[Alex Cantrowicz]

The metaglasses. Well, they don't want them because the AI isn't good enough yet. But remember I talked about that, like, kind of AI friend that's with you and is your companion sort of like, is very engaging.

[Josh Brown]

Yeah. It's called a phone. They have it.

[Alex Cantrowicz]

So it might end up being packaged in the phone if Apple builds it, but if Apple doesn't build it, somebody else will build it. And I think one of the things that an AI device would do that an app on an iPhone won't do is it will enable you to sort of record all day long so you don't have to ask Apple permission to, like, record people. Because the more data these things take, the better they get. The more data they take.

[Josh Brown]

I think that'll be socially unacceptable. To walk into a party with a necklace that's recording everyone. I just. I think there are boundaries. I see stand up comics forcing people to put their phones in pouches. Everybody grumbled about it for a year, and now it's standard operating procedure. If you want to see Dave Chappelle, you're not holding your phone. That's it.

[Michael Batnick]

But what if everybody records their lives and it does become socially acceptable?

[Josh Brown]

I don't know that it definitely will, though. I understand there's a universe where that happens. I don't think it's this.

[Michael Batnick]

I mean, I think. I hope it doesn't. But is it inevitable?

[Josh Brown]

Do you want to have a conversation with somebody who's wearing glasses with a camera on the front of them?

[Alex Cantrowicz]

No, no, Josh, I think I'm on your. I'm on your side here. Okay, but you asked. Like I said.

[Michael Batnick]

No, you didn't rewind.

[Josh Brown]

Yes. All right. We're not friends anymore. And by the way, get out of my. Get out of my house. But.

[Alex Cantrowicz]

Okay, so. But you asked, like, where does it go wrong for Apple if that future take hold? Takes hold.

[Josh Brown]

Okay.

[Alex Cantrowicz]

I don't want it to either.

[Josh Brown]

So I think that's an alternate universe. I don't think that's the one we live in.

[Alex Cantrowicz]

If it does take hold, then those devices can start to become more important than the phone because not only are they your friend, they go and get things done for you. Right. Like a lot of what you do on your, on your phone is just get stuff done, call an Uber, send an email, you know, write a test.

[Josh Brown]

Let me make. All right, so then let me make a follow up question that's relevant to what you're saying because that's. To me, Apple is the only company who can convince 5,000 other companies that their apps have to be interoperable with Agentix Siri, no other company has the power to go to Delta and Expedia and JP Morgan and Live Nation. Nobody, nobody could do this. Google Maps, Apple can say, maybe, maybe Apple can say. As part of the terms of service of supplying an app to the App Store, these five technological switches need to be turned on so that agentic Siri can carry out agentic work for regular people utilizing the apps that are in the ecosystem. I don't know if this is three years from now, but telling Siri to tell one of your apps to do an operation with another app, move money to this person and book Broadway tickets, whatever it is. But also, but Josh, I'm sorry, girl,

[Michael Batnick]

but for them to be able to do that without spending any money, like

[Josh Brown]

they're not spending us. They're not the spender. They're not the spender the app. If, if you're, if you run a business and 50% of your interactions with your customers are through an app and your highest paying customers are Apple users, you're going to do whatever Apple says you have to do, including be interoperable with Siri. Who else has that power?

[Alex Cantrowicz]

No, you're right. I mean right now I would agree with you. I think that's the most likely path. And the new Siri that's currently like in Developer Preview is much better than the first version of Hope.

[Josh Brown]

Well, let's hope.

[Alex Cantrowicz]

Well, it has to be.

[Josh Brown]

Do you have an opinion on John Tarnas?

[Alex Cantrowicz]

Not a deep one, but I do think it's good for Apple to have some new blood in there. And he seems like very likable. So.

[Josh Brown]

Okay, are you going to get him on the big technology podcast?

[Alex Cantrowicz]

Well, okay, so I was, I asked Apple to go to WWDC this year. I even said in my. Can we put up Chart 4A? I think it's Chart 4A in my predictions for 2026 that Apple was going to have an incredible year. This year. It was in the Goldilocks zone. The iPhone was crazy.

[Michael Batnick]

I invented Apple.

[Josh Brown]

I wrote. It was Alex. Okay. No, no, no. I invented Apple in February.

[Alex Cantrowicz]

I said this was December 2025. So. So thanks for reading technology, but you

[Josh Brown]

should be ahead of me on this, for God's sake.

[Alex Cantrowicz]

Okay. But the end of the story is I was very. I thought Apple was going to have a great year. I think I said on air on cnbc. I asked them to come to www.

[Josh Brown]

The best.

[Alex Cantrowicz]

Thank you.

[Josh Brown]

It's the best of the big technology stocks this year.

[Alex Cantrowicz]

I asked them to come to wwdc, their developer conference this year. I'd been the last. The two years before and I. They said no.

[Josh Brown]

So now you shorted.

[Alex Cantrowicz]

So I'm not, I don't take any of. I mean I do take offense.

[Josh Brown]

That was, I wasn't nice of them.

[Alex Cantrowicz]

I'm not going to change my opinions on them. But, but I think that was my way of saying there's not a good chance that John Ternus is gonna come on Big Technology Podcast Fair.

[Josh Brown]

Do you think the.

[Alex Cantrowicz]

But he's welcome.

[Josh Brown]

You think the 18 is gonna be a hit?

[Alex Cantrowicz]

Definitely. I mean the thing is. So the 17 was the sleeper hit, right?

[Josh Brown]

Yeah. Finally.

[Alex Cantrowicz]

It looks so much better on so many different levels. I think the 18 will obviously improve on that. But for me, the folding phone is the thing that I'm really looking at.

[Josh Brown]

I think we're getting that in September.

[Alex Cantrowicz]

Yes. So that to me will be a major hit. I think you look at people, you ever see somebody on the subway, they sit down, they unfold their phone and they just get this big smile.

[Josh Brown]

No, I haven't seen one in the wild.

[Alex Cantrowicz]

Take a look. If you manage to spot one on a subway or in an airplane.

[Josh Brown]

It's a Samsung.

[Alex Cantrowicz]

I think it's a Samsung. Typically a middle aged man will pull

[Josh Brown]

it out, sit there, open his phone.

[Alex Cantrowicz]

Open his phone.

[Josh Brown]

It's a newspaper.

[Alex Cantrowicz]

Yes. And hit play on YouTube or Netflix. And I promise you, these are the happiest people I see.

[Josh Brown]

Wait, does it make the phone bigger than my phone?

[Alex Cantrowicz]

Double the size.

[Josh Brown]

Double the size.

[Alex Cantrowicz]

Yes.

[Josh Brown]

So I'm turning a phone into an iPad.

[Alex Cantrowicz]

Correct. Awesome.

[Josh Brown]

Oh, I have to have one.

[Alex Cantrowicz]

Just makes people happy. And I think it's going to be a hit for Apple.

[Josh Brown]

I don't think they, they, the guidance they gave, they're not going to be able to make enough of these. Where that's going to move the needle in Q4.

[Alex Cantrowicz]

Right.

[Josh Brown]

That's the next year, could be the 27 story.

[Alex Cantrowicz]

Oh yeah.

[Josh Brown]

Along with Agentix.

[Michael Batnick]

Okay. They're not going to be able to make enough because it's a shortage of everything. If 2% of the world is adopting this technology, how is the shortage of everything going to be solved?

[Josh Brown]

I don't think 2% of the world is adopting the technology.

[Michael Batnick]

Is it 5?

[Josh Brown]

He just showed us a chart with a billion users on ChatGPT. That's a fifth of the world.

[Alex Cantrowicz]

But I think Badnik has a point here. So when I was speaking with Greg Brockman, the president of OpenAI last month, he said 5, 10 million people are using agentic versions of ChatGPT.

[Josh Brown]

Right.

[Alex Cantrowicz]

So that is, nobody's using it.

[Josh Brown]

Gemini is being used by every Google search.

[Alex Cantrowicz]

Yes.

[Josh Brown]

Whether people are doing it deliberately or not, they're getting AI search results.

[Alex Cantrowicz]

Correct. Okay, but that is. So we're about to. I think this is a really good point that it's worth, worth highlighting. We're about. It seems like we're about to go into this moment where if this use case takes off, where if people start to trust AI. Like for instance, I have AI I used to check because we're trying to get a bigger apartment. So I used to check Zillow every day. I had my specs, I had my save searches, I would check it. Now I have ChatGPT search it every 30 minutes and when something new hits, you get it. I want in my chatgpt. It shows up with a link to it.

[Josh Brown]

Amazing.

[Alex Cantrowicz]

And by the way, the next thing

[Josh Brown]

is, is that even agentic or not yet?

[Alex Cantrowicz]

That's agentic.

[Josh Brown]

Agentic would be if it buys the apartment for you.

[Alex Cantrowicz]

That was going to say the next thing. The next thing I'm going to have it do is, you know, every time it hits this, send an email because it has access to my email. So doing these things takes far more compute than giving an answer on Google. And so if these use cases take off, you are looking at a much bigger crunch for that compute than you have already.

[Josh Brown]

Did we just get bullish? Did we just get bullish on chips again?

[Michael Batnick]

I've been, I think that this is just. We're still, we're so early, but there's

[Alex Cantrowicz]

this back and forth because like demand goes up, then they build more, then they create a new algorithm that makes it, you know, as a man goes up, forget about like, we'll just be in this forever.

[Michael Batnick]

In one year, two year, three or four year, we are going to look back at where we are today and laugh at how primitive the use cases were. It is going.

[Josh Brown]

I agree with that. I agree with that.

[Michael Batnick]

Increase exponentially.

[Alex Cantrowicz]

Yeah, I mean, you can. You can really see it right before,

[Josh Brown]

right now to search for recipes. It's a joke. Like, we're going to have it alert all our friends and family that we're not feeling well. Like. Like we're going to have it really do things for us. And that hasn't even started yet.

[Alex Cantrowicz]

It is amazing. Like, as you. As it gets to know you, as you start to put more trust in it, the things that it could do for you is pretty crazy.

[Josh Brown]

Yeah, I totally agree. Did you have fun on the show today?

[Alex Cantrowicz]

Always.

[Josh Brown]

Guys, we love when you come by. I can't believe it's been two years since we've had you in person. We won't let that happen again. Do you want to come back next week?

[Alex Cantrowicz]

I will be here.

[Josh Brown]

The crowd is clamoring.

[Michael Batnick]

He's going, I will, actually. Are you. What are you doing in Indonesia?

[Alex Cantrowicz]

I will be in Indonesia. I'm going to do some surfing and hike a volcano.

[Josh Brown]

He's going to go hack hugging face in Indonesia.

[Alex Cantrowicz]

We love it. All right, I want to do that.

[Josh Brown]

I want to remind people they should be following. They should be following your podcast. It's the big technology podcast. You're six years in. You're absolutely crushing it. I always listen great guests and then they could subscribe to you as well. Where could they read your stuff?

[Alex Cantrowicz]

That's right. So big technology dot com. And I'm also Alex Cantrow on YouTube. And I just want to say you guys have the best business finance show in the world. I listen and I'm telling you, the last few weeks, you guys have been so good. I mean, always good. But I've been like, jumping and being like, get me in this discussion. Turn my mic on. And so when Batnik emailed, I was like, yes. I can't. I'm so thrilled to be here again.

[Josh Brown]

He's been listening. He's like, I gotta tell Josh Brown how dumb he sounds. No, no, no.

[Alex Cantrowicz]

All right.

[Josh Brown]

We listen.

[Michael Batnick]

We.

[Josh Brown]

We love you. Thank you so much, Alex, guys, thank you for watching listening. We will talk to you very soon.

[Alex Cantrowicz]

You guys are awesome. Thank you so much.