Big Technology Podcast - DeepSeek Rises, Stargate Drama, OpenAI’s Operator Debuts

Episode Date: January 24, 2025

Ranjan Roy from Margins is back for our weekly discussion of the latest tech news. We cover 1) DeepSeek r1, an efficient, cheap reasoning model from China 2) How DeepSeek stacks up against the state of the art 3) Does DeepSeek invalidate the billions of dollars invested in current foundational models 4) DeepSeek's wild origin story 5) How DeepSeek changes U.S. and China's AI rivalry 6) OpenAI, Softbank, and Oracle team up to invest up to $500 billion in AI infrastructure in a program called Stargate 7) But do they have the money? 8) Will Stargate test the limits of the scaling hypothesis 9) OpenAI's Operator agent debuts 10) Will people want Operator? 11) Analysts downgrade Apple after Apple Intelligence disappoints 12) Wait, TikTok is still here? --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Want a discount for Big Technology on Substack? Here’s 40% off for the first year: https://tinyurl.com/bigtechnology Questions? Feedback? Write to: [e-mail]

The AI world is buzzing as a cheap, effective open source model rivals competitors built for billions. OpenAI, Oracle, and SoftBank put a half trillion dollars in Stargate, but is the money really there? Agents may finally be here, and TikTok is still alive. That's coming up on a Big Technology Podcast Friday edition right after this. Welcome to Big Technology Podcast Friday edition where we break down the news in our traditional cool-headed and nuanced format. Wow, we have a big show for you today. We're going to cover everything from this new model called. called Deepseek, an open source cheap model from China that is totally reshuffling the AI world

as we know it. We're also going to talk about the big project called Stargate, where Open AI Oracle and SoftBank are putting maybe up to $500 billion into an AI infrastructure project that Open AI is going to use. Open AI has also released operator, a new agentic model, and TikTok's still here. Joining us, as always, to discuss all this and more is Ron John Roy of Margins. Welcome to the show. Man, we got real news, some fake news, everything in between. I don't even know where TikTok falls in that, but I'm ready. I'm ready.

This is definitely one of the weeks that I've been looking most forward to recording our Friday show because there is so much stuff to talk about and real important developments that have just come throughout the week. And on that note, I'm sure we have some new listeners here coming in from my Demis Asabas interview, whether you found us on Spotify or YouTube or elsewhere. Just to give you a rundown of how the show works, we do a big interview every Wednesday with someone like Demis next week is going to be Reed Hoffman. And then every Friday, Ron John and I break down the news that's happened over the week. We cover a lot of AI, anything big tech. And so we're so glad that you're here.

So first let's talk about this deep seek story, which is a massive, massive story. Basically what deep seek is is a much more efficient reasoning model. They just released this model called R1. It's built by a Chinese startup. And the crazy thing is that what it's taken American companies billions of dollars to do, it's taken them just a few hundred million. And I think that this could completely upend the AI industry as we know it. We're just starting to see the beginnings of this.

And everybody seems to think that it's legit technology. So, Ranjan, I'm curious what you think about DeepSeek. Do you think it's legit? And what does it mean for the industry? I am incredibly excited by this. I think this is one of the biggest stories. in a while, exactly for the reason you're saying, that being able to train and deliver a model that's relatively on par with the expensive ones, with the O-1s, I think this is huge.

And it's what I've been saying for a long time, that the power of the model, the amount of money that's being kind of like claimed the big shows around massive compute structures was all a bit of a show. actually delivering on something that people want to use, this shows that it can be done in a completely different way. And have you been using deep seek much? Like, everything I've tested is relatively, and Joe Wiesenthal had a good piece on, you know, how a lot of these, like, chat GPT can effectively be commoditized, like a normal chat interaction with one of these models, you can get similar results. And I already switched between chat GPT, perplexity clod on a pretty

regular basis. And now DeepSeek has made it to my favorites tab and is up there as well. That's crazy because it just hit like a couple days ago. So let me just give a couple of stats that just show the magnitude here. So this is from the New York Times. The Chinese engineers said they needed only about $6 million in raw computing power to build the system. That's about 10 times less than the tech giant meta spent on building its latest AI technology. For further context, I mean, you could build this model for $6 million. We just saw Open AI raised the largest venture capital round in history at $6 billion, right? So that level of magnitude is crazy. And then you have it, so how does it rank? How does it's performance rank? So I was on Chapot

Arena earlier today, which ranks large language models. And Deep Seek is in a tie for third place. So here is what the rankings on Chapot Arena look like right now. You have number one, Gemini, number two, Gemini, number three, tie for third place between Chachabot KatchipT4O, the latest model, and Deepseek. And then everything else that we've been talking about, GROC and the clods of the world, are below DeepSeek. So this is crazy. The thing I can't get out of my head is,

does this sort of invalidate all the billions that these research houses have been spending on training their models if Deepseek can do it for peanuts and rank this highly on Chaput Arena? Yes, yes, and yes. I think the fact that we're seeing Claude Sonnet ranked at 18, Deep Seek tied at number three, I think it completely shows that the way we're thinking about foundation models at the center of the business battle for all these AI companies

has been wrong. And I think the products, and this is my favorite, we always get into this every week, that for me, it's not the models, it's the products that are built on top of them and how good they are. Maybe this means that finally we're going to move to a world where people actually focus on the product side of things and not the idea that the models and just having to build bigger and bigger and more expensive models is the only way that anyone's going to win. But then what happens to all these billions of dollars that these companies have invested in building the foundational models? Really? You think it's completely gone? I mean, isn't that, isn't that like a destructive event for Silicon Valley in a way that we haven't seen

before? I'm going to go constructive instead of destructive. I think it's going to, it's going to a force of reckoning. It's going to really make people try to figure out what's the future, the next two to five years, let's say, and the way the battle has been approached over the last one and a half to two years of constant big unveilings and constant, you know, attempts at trying to sell the idea of these more and more powerful and bigger foundation models. Exactly. It's going to move away from that. And meta, and we're going to get more into what they're doing. Moving into open source, I think was a powerful move from Zuckerberg from the beginning, but now having actual genuine competition on the open source side is fascinating.

But yeah, I think the things that are built are going to be able to have, and it's great for everyone else. It's great for everyone else. It's not great for open AI, but being able to readily build and have your choice of what you're going to build on top of and being able to do it fast and cheap, that's good, that's wonderful, just not for Sam. Right, and that's the way that Silicon Valley has been reacting to this. So Mark Andreessen called R1, one of the most amazing and impressive breakthroughs I've ever seen,

and as open source a profound gift to the world, Anjah Mida, who's also at Andreessen Horowitz, said, from Stanford to MIT, Deepseek R1 has become the model of choice for America's top university, researchers basically overnight, which is fascinating because, as we know, research and universities just do not have Nvidia H100 chips. They cannot afford them. And Arvin Srinivas, he also said, DeepSeek is two orders of magnitude more efficient with capital allocation than open AI. By the way, so after Arvin tweeted that, I DM'd him and said, hey, let's talk about this. I'm going to write about

this. And then he deleted the tweet and never responded to my messages. So this is obviously, it sort of goes to show that this is really going to stir up Silicon Valley and AI in a way that we're just starting to grasp this week. I think the fact that Andresen Horowitz and Mark Andreessen is saying this, I think is a big deal because, yeah, it's really pushing the idea. And again, you think about it from like a more, you know, pure venture capital standpoint, it is exciting Because rather than only being stuck with having to get into the late inflated rounds of just a few companies, it really potentially opens up the door for way more startups doing interesting things that can actually explode in growth and solve problems. Yeah, and we should note that Andreessen did sit out the opening eye round. Yep. No, I was definitely thinking about that. I mean, did they see this coming from a, and then that's why they sat out, not.

I remember at the time, it was definitely notable. In my mind, I was like maybe they've already, you know, seen some pretty solid returns from their early round investments, but maybe they really are believing in open sources the future. And that's really going to hurt than open AIs of the world. Yeah, it's quite possible. And I think that's one thing that we really need to hammer home here, which is not that it just took so much less money to build the model,

but it takes so much less money to run the model. the model the way that it works is super efficient right and that is going to allow startups to be able to build on top of this stuff without worrying about what we've been talking about for for months which is this subprime AI crisis right the only thing that could have made this idea the subprime AI crisis which is basically that these companies have spent so much money training the models that they're going to have to charge people eventually a lot more than they're they're paying right now to use them the only thing that could that could threaten that is if a model showed up that was so much cheaper to run. And that might be this one. Yep. It's rare that I'm agreeing with Chamath, but he came out and said, like, AI model building is a money trap. What you're seeing here is a feature of modern AI models.

There's no bounding laws like Moore's Law where advances can be predictably expected and that open source will be the clear winner. And I think it's, again, it's clear that we, and the most exciting part about this is, we've all been debating scaling laws and what it's going to look like, but to see these kind of like step changes in terms of cost and efficiency just coming out of nowhere, coming from unexpected places, and we can get into how this fits into the larger U.S.-China technological battle and overall relationship, that stuff, that's the exciting stuff. That's the, rather than just another big fundraise from Open AI, this is the stuff that, I don't know, makes me happy. Yeah, same here. I mean, I was just totally blown. I was planning on writing this week about the drama between Elon Musk and Sam Altman about the Stargate, which we're going to get into.

But as the news came out about Deepseek, I said, there's no way. And I had to make this the main story of big technology this week. And I just have been unable to get out of this news because it is so interesting. And then you think about it from the hardware side. So Nvidia, right? Like what's going to happen with them because so many of their chips were needed to run the current models? And so there's a senior researcher who's pretty outspoken from Nvidia. His name is Jim Fan. And he's addressed this in two tweets, by the way. So the first one talked about how deep seek is like the real open AI because they're open source and because they're making it available to so many people. But the second tweet was so interesting because he gets into the finance side of things. And I had like DM'd him earlier. And I was like, what's going to happen to your business? And he just puts out this tweet. He says, first of all, he says, it's a humbling wake-up call to us that open science has no boundary. We need to embrace it one way or another.

Then he goes on to talk about the financial aspect. Many tech folks are panicking about how much deep seek is able to show with so little compute budget. I see it differently with a huge smile on my face. Why are we not happy to see improvements in the scaling law? Deepseek is unequivocal proof that one can produce unit intelligence. intelligence gain at 10x less cost, which means we shall get 10x more powerful AI with the compute we have today and are building tomorrow. It's simple math. The AI timeline just got compressed. And this is the obviously, it's the most optimistic. It's the best case scenario.

And I was thinking to myself when I read that like, yeah, if everything goes right, maybe that's the case. But I think I'm starting to be swayed by his argument. What do you think about it? Well, Jim, I am happy to see improvements in the scale. I think the, again, trying to actually like directly quantify 10x less the cost, 10x more powerful, obviously those are nice round numbers. But to me, the most important thing is it completely changes the competitive framing for every company in the space. Suddenly, when you are thinking about it, and already I think I saw OpenAI said that 03 mini, one of the better models will now be part.

of the free chat GPT plan like it's going to put heavy competitive pressure on everyone and we will move to a world where the expected cost for a developer is more in line with what deep seek's offering with r1 versus what open ai and other in anthropic are offering with their models and that's good yeah by the way you can use deep seek right now so you could just go in sign in with your your gmail account and get using it and if you click the r1 thinking model. You can actually see its chain of thought be written out. And it's pretty remarkable the way that it thinks through problems. And let me put this to you because I'm curious what you think about this. Is this sort of the beginning or the end? Here's my argument for the end. The AI industry

might have hit this wall with the scaling laws. Everyone's talking about how data, you know, there's a data wall. The models aren't getting better. They are starting to see diminishing returns. and then the only way to continue to advance them is with reasoning. And what DeepSeek might have done is just a speed run through reasoning, right? Where it's gotten this uptake based because it's figured out reasoning before everybody else and made it much more efficient and put that on top of, you know, maybe it's built that on top of old open source models to get these amazing results. Is it possible that this is just kind of the terminus for generative AI where it's like,

okay, it's what we have now, but it's cheaper as opposed to a step towards something more. No, I think it's certainly the former, maybe the latter, but the former, that this is just what we have now, but cheaper. But I actually think that's such a big deal. And you said it, what does that mean for Nvidia? What does that mean for Open AI? What does that mean for Anthropic? And Google. And actually, Microsoft plays a very interesting role in all of this as well, especially the relationship with Open AI.

But it just fundamentally changes the entire competitive layout. landscape. And so whether that truly means, and I'm a bit still, I mean, what is AGI, what is actual true reasoning? Just showing chain of thought processing is a nice UI trick almost. And I like it and it's good. And you should go to deep seek and play around with it. I think every listener should. But what does that actually mean in terms of, is this something fundamentally different? I am not convinced of that yet. But the same and significantly cheaper is a much bigger deal to me, actually, than some new level of reasoning. So can we just take a moment before we move on to appreciate how Deep Seek came about because the story is actually unbelievable?

So it was built out of a quantitative stock trading firm called High Flyer. This is according to the New York Times. By 2021, it had channeled its profits into acquiring thousands of Nvidia chips. which it used to train its earlier models. There's some Alexander Wang says they may have 50,000 video chips, but that this came out of a quant firm. Brunjan, I feel like you with some ties to the trading world and some ties to China are uniquely qualified to comment on.

Is this like just a typical Chinese story or trader story? Or is it as remarkable as I'm seeing it? Well, actually, I think that's why it makes it even more exciting for me. it's the idea that the greatest innovations, especially something focused around cost and efficiency, it actually seems more likely that it would come from a quant trading firm than a really kind of traditional AI research house, which many of the other companies essentially are with the business attached to it, that that actually, it does make more sense to me that making things much faster and more efficient coming out of, again, unexpected places is actually

kind of cooler. And it also, it changes like what could be next. Who's going to come out with something completely unexpected in terms of what's the next big wave in generative AI. It just opens up the door in a very cool way. So just game out what's going to happen because of this. I mean, I saw there are some interesting pieces on Blind, for instance. I don't know if you can trust this stuff. I have a meta executive coming on in a couple of weeks that I'm going to ask him about it, but basically like meta's panicking that, you know, Deepseek was able to train a state-of-the-art model for less than the salary of like one AI executive. But I'm curious, like, what do you think this does to the valuations and the funding in the space? And does it invigorate AI startups to

be able to build in the way they couldn't because it was cost prohibitive? I mean, it's interesting to me how meta falls into this because, again, meta investing heavily, but still like on the side of open source within this. So what did actual monetization? look like or how are they thinking about it is very different than pay me for tokens on an API. But I do think, obviously, taking a breath for a moment, it's definitely come in and really taken the entire industry by storm this week and let's let it play out a bit. But it changes the overall economics in a good, workable way if this is actually going to work.

And if this actually people are able to start building real things on top of it, And the economics of the way things have developed over the last two years for a lot of these companies never made any sense. Everyone in the industry is talking about it, especially Open AI is the poster child of just burning money and having unworkable economics. This, in a weird way, makes things actually a lot more rational in terms of business. Right. And another thing that's interesting is it's open source. It has an MIT license. So people have been able to replicate it.

So you can't just say that it's like, okay, China subsidizing this stuff. which is interesting. But on that note, I mean, it's interesting that Mark Andreessen is the one that's out there

hyping this the most. It is a product of China. And it is, you know, if you think about there's this race between the U.S. and China

to develop the best AI. And now it doesn't look like they have the best, but they certainly are factoring in the race in a way that they haven't before. And of course, you know,

Andresen's sort of been working with Trump on the transition and he's one of like the tech MAGA guys and curious what you think it means. Do you think, do you think that this is a problem for U.S. competitiveness? I mean, this is the one thing we haven't touched on before and then we're going to move on

after this. But like, they were able to do this even though there are constraints on China because they can't import the top level chips. And they were able to be creative and work around it. So it's just a fascinating wrinkle in the story to me. Yeah, I think it's definitely going to change. It definitely factors into the overall U.S. China dynamic in a big way, especially kind of of showing the world and the companies and the executives who are and we're going to get into Stargate in just a moment, that is the symbol of what the U.S.'s leadership on AI looks like. So to kind of just go out and show, oh, we can do it completely differently and everything you're putting up front like that is actually wrong. It's a big deal. I think that

the scale of how cheap the actual development and training side of this model, there's definitely a lot of debate around what was built over existing things that America had already developed, whether it was Lama or other models, and, you know, what kind of leg up an advantage from a cost perspective did that give deep seek in developing in this? There's certainly plenty of conspiracy theories around, like, is this a sci-op or a front for the Chinese government just to kind of shake up in the entire industry that American companies have a great deal of leadership on. But I think overall, it's a reminder that let's say they did build on Lama and kind of like use existing work that had been heavily expensive and done by other companies

in a way that's kind of a good sign for innovation overall. It's like thank you, META and others for really putting in the CAPEX to get the entire industry to a place where smaller organizations can actually do something big. That's right. And this is from Beyond the Coon, the chief AI scientists at Meta, who's the one that's going to be on the show in a couple weeks. Everything goes according to plan. He says to the people who see the performance of DeepSeek and think China is surpassing the U.S. in AI. You're reading this wrong. The correct response is open source models are surpassing proprietary ones. DeepSeek profited from open source research. They came up with new ideas and built them on top of other people's work because their work is published in open source. Everyone can profit from it. That is the power of open source research and open source. So, On one hand, you have this huge victory for open-sourced and cheap models. And the other hand, you got Stargate. And Stargate, so this is from the AP. Trump highlights partnership investing $500 billion in AI.

On Tuesday, Trump talked up a joint venture, investing up to $500 billion for infrastructure tied to artificial intelligence via a new partnership formed by OpenAI, Oracle, and SoftBank. The new entity, Stargate, will start building out data centers and the electricity generation needed for the further development. of fast-evolving AI in Texas. The initial investment is expected to be $100 billion and could reach five times that sum. So basically, to me, there's two sides of this equation, right? Two sides of this story. The first side is open source, cheaper models

are starting to really hold their own with the bigger models. And the other side is we still don't know what the limits are of the scaling properties in open AI. And you have to spend a lot of money to get to the outer limit. Ron John, I'm curious what you make of this. Is this going to be a big like watershed week because we have both of these things? Or do you think that this is more PR than anything else? I think we said there's real news and fake news this week.

And I think this is going to fall into the latter. One thing, this kind of like triggered in me. So I went back and looked for people might remember in 2016, almost like identical. Like I almost felt like I was having deja vu. So in 2016, Masayoshi-san went to the White House, pledged $50 billion to create 50,000 jobs, said the words, I couldn't have decided such a thing before this new president. And at the time, that's when, you know, the first Vision Fund of $100 billion was being kind of finished up. And my favorite part of that whole saga was that they actually invested over $50 billion into the United States to create jobs.

majority of that was in we work a bunch of it was in uber which you know did did all right but but overall he took something that already existed was already under like the works for a number of years and then went to the white house and said i'm doing this because trump is president so this one it really felt like that because we talked about there was a time i think how much did sam altman say they wanted to raise $7 trillion? Seven trillion. Yeah.

So now $500 billion, actually. That was the rumors. I think he joked why not $8. But there must have been some truth to that. So basically the FT is reported that this has been under the works. Actually, there's a Washington Post White House reporter as well saying that this idea of $100 billion was already being pitched for a number of months. And then the money is not there. And this is obviously one of the best, juiciest parts of this, is that Elon Musk came out

and basically called out this announcement and said that they max have like $10 billion. And then there was plenty of back and forth between Sam Altman and Elon Musk on this. But even the FT reported that Stargate has not yet secured the funding it requires. It will receive no government financing and will only serve OpenAI once completed. The intent is not to become a data center provider for the world. they have not secured the funding no one a lot of people have been throwing out like what are the potential you know compositions of what a hundred billion can look like but the numbers don't even add up anyways so i'm not it this was such an egregious PR thing that i'm glad it has given us

musk versus altman on this because at least we got something out of it absolutely amazing comments from President Trump on this also. They asked him if they have the money. He says, well, I don't know if they do, but you know they're putting up the money. The government's not putting up anything. They're putting up the money. They're very rich people.

So I hope they do. Which is like, okay, so they don't have the money. So Elon is right on that. And even if, I mean, let's say they do get there, right? The question here is going to be, is this the right way to train, given what we just learned about. Deepseek, bring you back to Deepseek.

This is from venture capitalist Jeremy Liu. If training costs for the new Deep Seek model are even close to correct, it feels like Stargate might be getting ready to fight the last war, like bringing an M1 Abrams MBT to a drone fight. No, I loved that. Yeah. The timing was almost comical, but still impeccable. This is the moment.

And obviously in the Trump context, you don't want to say we have a faster, cheaper, kind of like more low-key way of doing things. It has to be big and audacious. And that number 500 billion, it really falls into the tell me a big number. What's the big number, biggest number you want to think of? 500, let's call it that. But here's the thing. Like we are going to see much more capital put toward a new model, right? Or a new model development. Maybe it's not a hundred billion from opening eye, but it's going to be billions, billions of dollars. Like even 10 billion is double their most recent fundraising round. Then you have Elon Musk, who's going to build this million GPU supercluster.

And by the way, hot breaking news right off the press here, Mark Zuckerberg posted this morning. Meta is going to build a 2 gigawatt plus data center that is so large it would cover a significant part of Manhattan. We'll bring along about one gigawatt of compute in 2025 and we'll end the year with 1.3 million GPUs. We're planning to invest 60 billion to 65 billion in CAPEX this year. we'll also growing our AI team significantly and will have the capital to continue to invest in years ahead. This is a massive effort

and over the coming years it will drive our core products and business, unlock historic innovation and extend American technology leadership. Let's go build. I do love how everybody has a note to Trump in their press releases right now. Look, here's the bottom line for me. You have these three research houses at least

that are building these massive, massive data centers to train the biggest models known to man. And we're going to find out the truth about this scaling hypothesis, whether you can build an AGI just by scaling up. And I don't know, you might be saying, like, let's go build the products. To me, it's exciting that this is actually something that they're testing. For me, the exciting part is the shade that's being thrown left and right, just as an observer. So you have my favorite part of the post was, and we have the capital to continue investing in the years ahead. And we have the capital. Definitely, you know, a nice little nudge to the Stargate

project. Sachi Nadella in an amazing interview this week was talking about how Microsoft is going to, you know, and he's like, okay, that's all nice. We're investing $80 billion in CAPEX in infrastructure built this year, and I'm good for my 80 billion. So, I mean, Sotia and Mark going on strong. Why does everybody hate Sam? Even Dario Amode. Ammoday from Anthropic was taking shots at him this week, you know, kind of in a veiled way calling him a hype man. I mean, because I think the secret of Open AI success over the last few years has been delivering very good consumer products and moving fast,

but also very, very, they are more heavily invested in the marketing and hype side of this and that's how they raise money. And it's been, you know, a critical part of them maintaining. some level of leadership in this, but the hype and the marketing are a core part of the open AI story. And in reality, like the Anthropics of the world get to ride the coattails of that a bit. So maybe they should be more thankful to Sam on this. But I mean, you figure the Zuckerbergs and Nadellas of the world are like, okay, I'm running my trillion dollar company here that's actually, you know, delivering scaled revenue at unimaginable lengths and profits. And

they just look at it and they're like, all right, buddy, come on. I'm telling you, man, Anthropic is the one I'm most worried about this year. It has, it seems like, the least amount of money on hand of the big ones. It's not developing, as far as we know, one of these massive data centers. Claude is like you mentioned number 18 in Chaputterina getting surpassed by Deep Seek in a crazy way. And it doesn't even connect to the Internet right now. But Claude is good. The product is good.

It's my favorite of all the products. So they can't discount it. Yeah, Claude is good. Other than their rate limits that sometimes, like, I'll be deep into some kind of coding or other analytical project on Claude. And then I hit the rate limit and have to wait a number of hours, even as a paying customer. But fix that one, Claude. Come on.

But other than that, Claude's a good product. So I think it's obviously their marketing has actually been pretty bad. They had these kind of comically ridiculous billboards that they tried to push around. And actually, I guess it's a great product for people who know about it. But I would agree that in terms of being in trouble, chat GPT is obviously the kind of household Kleenex Xerox brand name in the space. I'm sure most of my normie friends don't even know what Claude is. And are they going to be able to overcome that? I don't know.

Yeah. All right. One more wrinkle in this Stargate project. And then we'll move on to Open AI's operator. And that is, and, you know, if you're calling this fake. news, maybe I'll take that, take the bone that you're throwing there and say, if it's fake news, why would it be fake news? Like, what would it be in service of? And maybe it is some marketing spin on OpenAI and Microsoft divorcing a little bit on the compute side. So the one thing

that happened after this was that we found out that Microsoft and Open AI, which have been linked together from the very beginning, well, maybe not the very beginning, but linked together very, very strongly for the past few years and something that's benefited both of them, they're changing the way that their compute arrangement is. So Microsoft and OpenAI announced Tuesday. They've adjusted their partnership so that OpenAI can access competitors compute. This is from the verge. The new agreement includes changes to the exclusivity on new capacity, moving to a model

where Microsoft has the right of first refusal, and then to further support Open AI, Microsoft has approved Open AI's ability to build additional capacity, primarily for research and training of models. So Microsoft still has this proprietary ability to sell Open AIs models through Azure, but Open AI no longer has to go through Microsoft for compute, and that's what this new project is going to do. And this has been something that's been bothering Open AI for a long time. It's part of the tension between them and Microsoft, and maybe you sort of dress it up as Project Stargate, and then all of a sudden everybody's happy, and you hope that people don't notice. What do you think about that hypothesis?

Yeah, I think that's actually everything about Stargate were things that were already in the work. Even Oracle was building a massive data center, and I think it's like Abilene, Texas, that now Open AI is going to have an exclusive relationship with as part of Stargate, but they were already working on that. Apparently, the information had reported that Elon Musk was offered access to it, but had turned it down. So now it was open. So Larry Ellison saw the opportunity to move in this. direction. And then even there's reporting that within Microsoft, there's increasing skepticism around generative AI in general and specifically OpenAI based on the negative reactions and rollouts for co-pilot. So suddenly within Microsoft, they still see the long-term value. But the idea that

open AI is so magical that that's going to be a critical part of the success. And maybe they realize the product's more important than the model that they start to, I'm going to get a T-shirt with that, that they start to realize like, okay, we don't need open AI, in fact, at all that we've already been moving away from them. And financially, the potential of any kind of great return from them is dwindling. So why not let it go? Yeah. Okay, product more important than the model. Well, here we go. We've been talking about agents and assistance and computer use for forever. And Open AI just released what is probably the best computer use model. that exists today.

So this is, again, from The Verge. OpenAI unveils AI agent that can use website on its own. On Thursday, OpenAI unveiled a tool called operator that can go out onto the internet and perform tasks autonomously, like shopping for groceries or booking a restaurant reservation. It can navigate websites and take actions on websites,

much like you and I do, said OpenAI product and engineering lead, Yash Kumar. Artificial intelligence researchers call this kind of technology the AI agents. And this is some examples that Kumar showed, booking a San Francisco restaurant reservation using open table and then also buying a list of groceries through Instacart in the debut video they showed. They showed the thing going through basically looking at a paper grocery list and then going out and buying the groceries. And then I also found this really fun one from this guy, Peter Willinder, who is from Sweden. And he says he likes

saunas and he has an operator go through TripAdvisor and then basically search through all the hotels in Stockholm and try to find the best hotel sauna and you just see the thing going through the websites and you know searching the dates and searching the hotels and then searching for the sauna and the reviews and then coming to a conclusion and this is usually something that would take a human a lot of time to do and maybe AI can do it for us Real product news, Ranjan, your reaction. Real product news, and I'm actually genuinely excited because when Claude or Anthropic had released their take over your computer product, I think it was very limited in terms of ability to use and very buggy. People found Open AI from at least the demos I've seen looks pretty slick, looks pretty interesting.

But I actually think the problem with this rollout, they need to do, say, agents. They need to say agentic. That's just part of 2025. If you want to compete, you've got to say agents. But the use cases in this, I just don't see what is going to actually achieve any consumer level scale with kind of computer takeover workflows and processes. Because, again, everyone is showing, okay, I can find and maybe make an open table reservation or buy. I saw one demo where someone, you know, find me a leather. jacket in my size that can arrive in two days. And it technically worked. I don't see anyone

changing their behavior to actually allow an agent to do this for your own personal life. And I think like the companies that are actually what they need to be focusing on, again, this is something where I think agentic wins in the enterprise, not in consumer. Well, to further that point, first of all, I thought you'd be more excited. But true to your intellectual honesty. You're calling it as it is. And to further that point, Casey Newton of Platformer paid the 200 bucks to upgrade to pro and played around with operator. And he did two things. He tried to get it to create a list of walking tours in London for him, which had canvassed the web and found. And then also a curriculum teaching the Great Gatsby, which had been something that

the professor Ethan Mollick from Warren, who's been on the show before, because both of those folks are friends of the show. He's, he's done that before and used that as a benchmark. And it was able to do it sufficiently well. But then here's the crazy thing. Casey just asked chat GPT the same questions that it had the operator do. And without having to do the fancy, like, go through the whole internet. It produced better answers faster. So is this a farce? Yeah, I think the interesting part of this should be that last mile of actually booking the walking tour. Like the research side of an agent is not that interesting. It's the can you actually enter my credit card data and actually click buy, which is pretty amazing and it should be able to do that.

But again, from a consumer standpoint, the average person is so far away from letting an autonomous agent to actually spend your money or do things or make decisions around your time. So I think that's one of the most important parts. I think like when Apple intelligence were going to be discussing, like their view of agentic, at least as they presented it, is more real for regular people around find my flight time, book me an Uber to get me to the airport and time and make that all one action. If it actually worked, that would be amazing. But I think, like, computer takeover agentic AI for the average person is just so far, like thinking about what would I use it for, trusting it to use it for that, and having,

it more necessary than, as you said, just a traditional LLM search or query? I think we're just so far away from that. But I do like, I'm glad. Open AI makes great products that actually work pretty well. So I'm glad they're still pushing this forward. Yeah, I thought should I pay, because right now it's only available to these pro users. You pay $200 a month. You get OpenAI's chat GPT unlimited. And you could also get this operator. And I said, should I pay this $200? And maybe I should, you know, for the love of the game, since I am a reporter covering this stuff. But I just thought, nah, not right now. I mean, I do think I will recognize it is a big deal.

Like, if you start rolling out this ability, maybe we'll start to get the genuinely creative, potentially repeatable actions that really, and again, not research, where you actually take action on different websites and define those actions. I think it's going to start to get pretty interesting. But a lot of this, again, you could do with a script. Like, you could do it with a script. And it's basically creating that script-like behavior for you, which is cool, and which empowers people who cannot code scripts. And that's a good thing. And the people will ideally start coming up with creative use cases.

But it's, I think they should actually put it as part of chat GPT Plus guys. And I'll play with it. Maybe I'll be impressed. From the demos, it did not look that exciting. Maybe DeepSeek comes up with their own operator model, then Open Aliens Force to give us access. Would you let DeepSeek take over your computer? No, of course not.

That's actually one thing, I mean, just on that, because there were some very, on deep, going back to Deepseek, like very egregious demonstrations of censorship around sensitive topics in China that were very clearly baked into the model. And it is interesting because, like, on one hand, we are talking about how this could be completely revolutionary, but on the other, there's a lot of, I think on the trust side, on the security side, there's still going to be some questions. No doubt. And again, letting even Open AI take over your computer, I feel behaviorally, the average person is so far away from trusting this stuff.

Yeah, I totally agree. And it's something that I've been talking about on the show with everybody who's come on, whether it's Demis this past week or Eugenia from. the week before, there's going to be a real reticence to let computers take over. And even to try, I mean, still to trust AI. 60% of people don't really trust AI. You know, we're in a little bubble where we're like, okay, yeah, we trust this to a certain extent. But most people are like, screw that.

I'm not touching that stuff. I guess you just did mention the CEO of Replica. And you know what? Maybe people won't trust a computer to actually browse the web for them. But they will trust in AI to be their lifelong companion and love interest. and romantic partner. So that's where people are right now. It's all fun and game until your AI lover asks for your credit card.

Yeah. I'll have an AI lover, but I will not give them my credit card info. Yeah, that's what you say is right now. But just wait until that relationship progresses. And next thing you know, you're buying it digital clothing and you're broke. That will happen. And the New York Times will do like a 6,000 word reflective deep piece with large photographs of someone walking along and looking forlorn.

He fell in love with an AI. She took his money. But she spent his money on a shopping spree in a Gentics shopping spree. Oh my God. It's great business if you could run it. Okay, so, so you know, you hinted at Apple earlier. And the current state of Apple intelligence is that like, I don't know, I saw Gen Moji ship, which is kind of interesting, where you can like, prom.

and get your own emoji or maybe it shipped just in the test version that I'm using. But by and large Apple intelligence, you know, speaking of AI product and AI product for consumer, it's not working. It's not working now. And who knows if it will work in the future. And it's nothing close to the presentation that the company showed at WWDC last year. And as a result, analysts are starting to say, hmm, we don't want to own the stock. So this is from Yahoo Finance. Apple stock hit with downgrades, two downgrades on weak iPhone sales and AI Outlook. So Jeffrey's analyst Edison Lee downgraded the investment bank's rating on Apple stock to underperform and decreased his price target by 13% to 275.

On Monday, Loop Capital also downgraded Apple stock from buy to hold and revised its price target, 2-230, down from 275. They believe that iPhone sales in China are going to fall between 50. 15 and 20% year over year in the fourth quarter. By the way, Apple earnings coming up next week. There's also been other downgrades. Moffat Nathanson downgraded a couple weeks ago. And then everybody believes that Apple intelligence is so underwhelming and has not driven a super cycle or any sort of cycle, really,

around the iPhone 16. And are doubtful we'll do it over the next devices. And this is something we kind of previewed when we said, hey, we think Apple intelligence kind of sucks. And it's going to lead to some bad sales. numbers and here it is. So is it victory lap time, Ron John? I'm going to I'm going to take a moment here as I as I have to try to start to explain how bad Apple intelligence is. And for newer listeners, I've had a long time a long time hate hate relationship with Siri. And I say

this is someone who has home pods across their house, AirPods in my ears, an iPhone, a Mac, book, so I'm still heavily locked into the ecosystem. But all I want is Apple to just deliver basic level generative AI in their products. Apple intelligence now I've been using it. I mean, it's been on my phone for a number of weeks now. And it misses at every single level. And the more I've been thinking about it, the notification summaries are so useless. Like they, the way they will group in different notifications if you get multiple ones from the same app and it will try to summarize it it makes it more difficult than reading for notifications because there's the in terms of how they present the information even i was thinking about a gen moji i played with it was

kind of fun the ui side of it is very nice like actually probably the only thing that's cool is now when you ask for syri your phone lights up around the borders of the the entire screen in kind of a pretty way. But I was thinking about it, it's the most tone-deaf thing because the whole value of emojis are that it's kind of like a shared language. It's kind of a common thing where the emoji connotes something specific and we all have that shared understanding. So from a language standpoint, no one wants to create new emoji.

I'm very curious about the utilization of it, but that misses the point. Siri working and with chat GPT is okay, but it's so much worse than chat GPT voice or Gemini voice or any actual other voice mode assistant for any generative AI product. So it's genuinely shocking to me. Like a friend of mine was trying to pitch, you know, Apple should buy perplexity. And I genuinely don't, I hope they don't because I think they would ruin it in integrating it into the overall product and ecosystem. I don't what do you think is happening over there I've always said it's a cultural thing and they just aren't set up for to culturally build AI they're too secretive their product groups don't work with each other you need that and you need to be risk taking a little bit and Apple is none of those and therefore I don't think it's going to realize this

AI vision until it really is kicked in the face and been and made to and so we've seen these stock downgrades and obviously Apple cares a lot about its share price and Now, NVIDIA is the most valuable company in the world again, and Apple is not, and maybe something will spark within the company, but I don't think Apple today is going to be able to build an AI product that people are going to believe in. But do you really think it's cultural how bad it is? And I say that, that we are both very early adopters of, and test out every generative AI offering. like Gemini voice is really good.

ChatsyPT voice mode is pretty good. I was actually like a Gemini voice. I've been incredibly impressed. I almost want to get an Android just so I can interact with it rather than Siri. I still am so locked into Apple that I have not yet. But the fact that I'm thinking about that is something that is very different than anything over the last decade. Like do you think they can actually even let's say we see a bunch of downgrades, stock drops 15%.

Do you think they shake things up and are able to actually deliver something just on par with what's already out there? No. I think they're more likely to just give up on AI. That's my perspective. Just no more. I mean, maybe that's...

You can use chat GPT on an iPhone. So it's not, it's going to be a problem for them. They're going to need... The thing, here's the real issue is that so many iPhones are just kind of the same. Like, I have the iPhone 15. You could tell me today, Alex, you actually have the iPhone 14 or you have the iPhone 16, and I would believe you. Or you got the iPhone 13.

I would be like, all right, yeah, that sounds about right, because there's not much difference. And the phones you can hold on to for three, four years. So, like, those upgrade cycles are going to get more spaced out. And there's no real draw to bring people in. So I think that, like, it's less of a, like, people are going to switch to Android thing and more of a, like, the upgrades are going to. to come in much slower. Now people are still going to be using iPhone, so they're going to be able to buy their services, and they'll come in and they'll get the MacBooks every now and again. But ultimately, I don't think that they have what it takes to deliver AI. And I could be wrong.

And I'll admit it if I'm wrong. But so far, I've been right. You can read it. It's in my book. I've always wanted to say that. But really, in the Apple chapter, I specify why they're going to have a hard time with AI, and it's all playing out. Okay. I think, I guess, I almost would bet that they will, win smart glasses as a category if they launch a product or like that's the area I could actually see them having more success in building or like launching like a genuinely revolutionary new product but yeah I think I agree you don't leave the Apple ecosystem you just don't buy the new iPhone I actually think that would be a power move though if they just said you know what no more Apple intelligence we're not baking in any AI like at the device level use all the other apps

That's great, but we're over it. Yeah, they're going to net the money for that, too. And we're going to launch some good new devices. Yeah, Siri will suck and you will like it. I mean, that's going to be their new motto. Hey, everyone, let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending.

More than 2 million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines in 15 minutes or less and explain why you should care about them. So search for The Hustled Daily Show and your favorite podcast app, like the one you're using right now. Okay, before we go, we should really talk just for a couple minutes about what happened with TikTok because last week's episode, I said I would be stunned if we got to this week's episode and

TikTok was gone and TikTok is indeed still standing. However, I don't think you can find it in the app store. And every company that has TikTok is supporting TikTok, the oracles and the Akamize of the world, they risk fines, daily fines, and can potentially really go into lots of money in millions or billions of dollars over time for keeping this thing running,

despite the fact that Trump has, quote, unquote, saved the app with an executive order. Just very quickly, what's your perspective on what happens to TikTok from here? You know what? It's Friday, January 24th. This has been such a heavy week of news that I almost forgot that whole TikTok ban thing happened on Sunday, I believe, late Saturday night, where everyone got a message saying TikTok is shut down and President Trump hopefully will save us. And then you got a message, I think, eight hours later, President Trump says, saved the app, which was just the wildest thing. I like I like that happened that happens some girl lit a congressperson allegedly lit a congressperson's

office on fire in that 12 12 hours because she was mad about TikTok I like it was interesting I was asking a bunch of younger folks who are deep into TikTok and it was interesting because a lot of people's reactions was genuinely like do they really think were this stupid and I'm like yes Yes, I do think the executive leadership team at TikTok does. But, yeah, in terms of what's going to happen going forward, this one is going to remain one of the most wildly unpredictable things and very excited to watch what happens. Because, again, finding an American buyer and divesting TikTok was all from bite dance was always the necessary request.

Now we still have to find one. It's always been questionable about who is going to buy at what valuation, because let's say we find people willing to buy still negotiating, because it's still at a very, very high lofty valuation. People, that negotiation is going to be interesting. And then, obviously, the twist that somehow 50% of it has to go to the U.S. government, I don't think makes any sense, or I just don't quite understand exactly what that part of it. means, but this one, I have no idea what's going to happen, but I'm very excited to watch. Ronjan, can I just say that this week, I expected us to be talking about TikTok ban and all the big tech leaders standing behind or sitting behind Trump during the inauguration. Oh, wait, that was Monday, wasn't it?

That was Monday. Whole script has flipped. There's been so much news. Even Stargate, which I thought was going to be the lead story, ended up being pushed down, down the list of stuff to talk about because of deep seek. And then, of course, we got operators. So, and the Apple downgrades. Fascinating week of news.

Appreciate you all for sticking with us and coming back week after week. We break down the news here on Fridays. And Ron John, thanks so much for coming on the show. Who knows where we'll be in seven days. I'll see you next week. I can deal with a little bit less unpredictability. But anyway, we will be here next Friday. By any means necessary, we will be here.

All right, everybody, thanks for listening. And we'll see you next time on Big Technology Podcast.