Big Technology Podcast - Leopold Blows Up, OpenAI Drastically Cuts Prices, Microsoft’s Best Day

Episode Date: July 31, 2026

Reed Albergotti from Semafor is back for our weekly discussion of the latest tech news. We cover: 1) Why Leopold Aschenbrenner’s Situational Awareness Hedge Fund 2) Leopold's connections to effective altriusm and how they played into the picture 3) Does EA lead to unacceptable risk taking? 4) What Leopold actually traded 5) What's left of Situational Awareness 6) OpenAI cuts prices as much as 80% 7) Does an AI price war drive everything to zero? 8) Nvidia invests $5 billion in Ilya Sutskever's SSI 8) Microsoft crushes earnings and has the biggest market cap gain ever 9) Amazon crushes earnings too 10) Google rebounds 11) Apple's memory fears and long term risks --- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. Want a discount for Big Technology on Substack + Discord? Here’s 25% off for the first year: https://www.bigtechnology.com/subscribe?coupon=0843016b Learn more about your ad choices. Visit megaphone.fm/adchoices

Leopold Aschenbrenner's situational awareness hedge fund blows up and sells off its stock portfolio. OpenAI has cut prices on its latest models by as much as 80%. And big tech earnings leave Satya Nadella a very happy man. That's coming up with Reid Albergotti from Semaphore right after this. In the face of ongoing disruption and opportunity, TMT leaders need to deliver tangible results, not just ideas. When pace and performance matter most, PWC combines market insight, and deep sector experience with AI, cloud, and emerging tech to accelerate your transformation and drive measurable ROI from strategy to execution.

PWC can help you anticipate what's next, outpace disruption, and compete. For more information, visit pwc.com. Welcome to Big Technology Podcast, a show for cool-headed and nuanced conversation of the tech world and beyond. We have a great show for you today. We're going to talk all about the implosion, but it's still kicking of Leopold Ashenbrenner's situational awareness hedge. Too much fund, too little hedge. Seems like to be the problem there. We'll also talk about open AI cutting prices on its latest models.

Some of them by as much as 80%. What does it say about the AI price war? And of course, it's Big Tech earnings week. So we'll just go through the big takeaways from what we saw from Big Tech, especially as it relates to the AI trade. So joining us today is Reid Albergotti. returning champion from semaphore uh reid great to see you welcome back it's awesome to be here glad to be uh introduced as returning champion but i i didn't know this was a contest so it is it is you know what are the kp i win how do i stay on top i think uh just have a good time do what you do

there's no worries uh on this one so uh read i don't know if you've been following the blow up of situational awareness which has been this this headphone this headphone this head phone this head fund from Leopold Aschenbrenner, who's a former Open AI employee, a former FTX employee. It was sort of the highest performing hedge fund in the world, I think. I mean, it went from millions of dollars in funds to $20 billion in assets under management. And then it effectively, you know, I think blow up is maybe a little too strong, but it effectively blew up this week and it had to sell. It's a large part of its stock portfolio or all of its stock portfolio,

to Citadel run by Ken Griffin. I was thinking, is this too niche to start the show? But it's just one of those stories that I'm just too fascinated by to wait until the second half. So curious what your perspective is on what's happened here. Obviously, he'll still continue with the percentage of his assets that he's kept, including a large stake in Anthropic. But I'm sure there's some big lessons to draw here.

And I'm curious which ones you've drawn. Yeah, in a way, like if you just look at what happened on its face, it is just not a technology story at all, right? It's a guy who got over levered, you know, with his, with his, you know, market bets and had to sell his position because, you know, he couldn't, he couldn't cover the short term losses, right? He's probably, actually, the fund was actually doing well if you look like his bets, right? Like, but, you know, you can't, you can't handle these short term dips if you're if you're over levered. So it's like, oh, who cares? Like, why is this important for? technology. But what I think is so fascinating about it is that it's it you watch the reaction to this. And like, of course, there's a lot of Schaden Freud. You know, this guy was like the golden boy, you know, the Wall Street Journal was profiling him. And, you know, he's this like, you know, EA, effective altruist person. And I think like people sort of, I think there's some joy in him going down. But what it, but what it, like from some people, but what it gets at is like, there's, There's such a divide in the tech industry right now between, I think there are the sort of more

traditional tech people who, you know, some might call themselves accelerationists. They just want to see, you know, this new technology being built. And then this kind of like, I don't even call it EA because I, first of all, like since FTX blew up, like, I don't even hear EA. Like people don't describe themselves that way anymore. But there is this sort of remnants of the culture of EA, of these people who, are just not like your traditional tech people. And if you even if you just step back and think about it, like no one in tech would would brag like no one in Silicon Valley. I don't know about you.

I've never had anyone brag to me about their public market stock trading. Like that is like not what people value in Silicon Valley. They value building. And so in a way it's like this, to me, it just highlights this this sort of new cultural divide, which I'm fascinated by it. I just, I don't know where it's going to go. It could disappear or. or it could turn into an even bigger rift, and there's like two, there's two tech industries, essentially. Okay. Maybe I'm taking that too far.

You know, I don't think you are. And this is a very interesting thread to pull. And I think we should like talk about it for a moment and then talk a little bit about what Leopold was actually holding because that's pretty interesting in and of its own right. But the EA thing is interesting because there's a couple of things that sort of characterize effective altruism. And I'm not going to do it justice here. but one of the things that characterizes the movement is sort of you try to make as much money as you can

and then do as much good as you can. And so whereas like previous altruists might have just been like, I'm going to go, you know, volunteer for people in need. Effective altruists might say, I'll take the most capitalist job I could find and then eventually donate. And that's associated with like movements like give directly where like they give no, basically no strings attached donations to and I think that's a great program by the way you know it's places all over the world so the other side of it I'll just say this other one other thing because it's very interesting how it combines is there's a big belief in this sort of formula that's called expected

value and I don't think it's unique to them but it's effectively like you know you you want just to give one example this is kind of like the canonical example right if you could flip a coin and you know 49% is you blow up the world and 51% is, you know, you create utopia. They would flip the coin every time because the expected value of utopia is higher than the expected value of annihilation, right? It's like, oh, if you add 51 and 49 up and divide by two or whatever, that's still 50-50. You know what I'm, the math makes sense, that the better value is going to be on the utopia bet. And so this is the second time in, in, in, in, in, in, the math makes sense. You know, in recent history where someone who comes from that sort of background and the other one being

Sam Bankman-Fried seems to have made, you know, big enough bets that make you think is this, is this a pretty disastrous way to think if you're running a business. Now, no fraud here, as far as we know, he's not even negative, but, you know, not a parallel blow up, but it rhymes in a way. Yeah. Sam Bank of Fried wasn't negative either in the long run. He was the best investor of all time. I mean, if they didn't make him sell. This is that this is like the other part of this is like a lot of these people go work at like Jane Street Capital and they look at the world in the markets as this like,

oh, it's like child's play. Like it's just algorithm that you can just crack and like, you know, it's sort of like this unemotional view of. And it's like a simplistic view of the world. And then it blows up in their faces because if you look at this stuff and this, very simplistic way. It's like, well, you know, the, it's like you're sitting in your college dorm room talking about philosophy, you know, well, I mean, everyone wants AI. And of course, like, you know, these things that these products will have to be purchased to build these AI data centers. Therefore,

you could just put all your money in those stocks and you're going to be fine without like, you know, really paying attention to how, like there's fluctuations in the market that have nothing to do with like the actual, you know, long-term value of these of these things. And, you know, I mean, this is sort of what happened to FDX. And yeah, I just think I think that's like, it's almost like this hubris. And I think that's like a real turnoff to people, right? And it's not, and the other thing is like a lot of these people went into AI because they were like, well, this is where I can do the most good because this is a dangerous technology. And so I have to go into this to kind of help steer it and make sure that it's, you know, that it's properly stewarded,

which is also like a kind of hubristic way of looking at it. And it's not a Silicon Valley way of looking at it, right? That's not like the traditional way of thinking about technology, right? Technology is this good thing. Of course, there's always downsides, but, you know, it's exciting and you go and you build it because it's fascinating and you're part of the future. And it's just this to me the mindset divide there is what this story is really about because if it wasn't for that Alex would we be talking about we would not be talking about this right like there's there's been bigger blowups recently you know on wall street of people who've done crazier things and lost more money right and we don't talk about that on tech shows right so to me that's why it's important yeah

okay i'm going to disagree with you slightly on that i do think we would still be talking about it although I think this adds, I think the reason why the story is irresistible are the undertones that you bring up. But, but, but you, I think it's impossible to disassociate it with the tech story because, and this is going back to that Ubris example, situational awareness was or is TBD, like the most pure bet on AI taking off and taking off very soon. And effectively, like, if you could give a one sentence description of, of like what he's doing, it would basically, or what he was attempting to do is basically, you know, profit off the singularity.

Effectively, like the belief was, we're in the singularity now, nothing's going back to the way it was. And if you make the right bets now, you can, you know, go exponential. And he really did. But this is why I think it's important to talk about, you know, what his biggest holdings were.

So its biggest holdings were nebius group, right? A neocloud, sandisk, and micro. which is like the RAM and the memory and core weave another neocloud so basically like his his long holdings were effectively the bottleneck bro type of long holdings which is like demand for AI is going to increase so substantially that these companies are going to be you know worth multiples of what they were and for a long time this year it actually seemed like that was right so he was that that on the long side. The short side to take his thesis even further was software. Reportedly, some of the shorts were software companies like Adobe, right? So this is basically like if you were to ask,

how do you put like AGI in one hedge fund? It would be this. But like I said at the top, the job of the hedge fund is you got a hedge a little bit and this was an unhedged hedge fund. It was unhedged, right. I mean, it's just dumb, find it. This is why this is why tech companies don't, they wait so long to go public because they don't, because the public markets are insane. Like, I don't even, and first of all, like, it, a lot of times aren't even humans trading, you know, in these stocks, right? It's just algorithmic trading. And second, like, I don't actually, I've written about this a lot. Like, I don't actually think Wall Street understands technology or AI. Like, I don't, I think they're just, you know, it's like meme, it's like memes are driving

this, you know, these trades up and down, right? But he's, I mean, look, you know, you have to give him credit. He was one of the first people to really, like, put his money down on memory and see that there was this memory shortage, right? And long term, again, he's right. Like, this stuff is, you know, these are good bets. Like, what smart people are doing now is they're just buying these stocks at a discount, right? They're on sale right now. And so you buy them. And it's like, you know, that's what, and they're in all of our 401ks, et cetera. Like, I don't trade individual stocks just to be just to be clear. But like, you know, it's a long term, like, people are going to be buying this stuff. It's valuable technology. And, you know, you, like,

hedge funds, of course, if you're doing short-term trading, like, yeah, you have to hedge. Like, you can't, you know, you can't put yourself in this position. But, you know, he had no experience in this space, right? It's like 101. We're here with Reid al-Brigotti, the technology editor at Semaphore. We did hear from Leopold, at least in a note to his counterparts or his investors. So, so what he basically tells investors is, the investors in his fund is he sold only to the point where effectively he covered his shorts. So, so he said this is his direct words. The fund was not shut down, liquidated or transformed into a private only fund. We are continuing to operate as a hybrid public private fund as before. However, we will manage our public book only as a paid on a paid

for basis while we draw the lessons from these developments. Most importantly, we took steps that were necessary to fight another day. Okay, this is important. So not only did he make this bet, you know, like we said, an unhedged bet on AGI, he did it with leverage, right? So there was, you know, at some point the reporting is that he was like 4x leveraged on this bet, which means, like, you know, if memory continues to go up, then his number goes up a lot more. But if it doesn't, which it didn't, then that sort of leads to the cascading effect here. I mean, I learned about this in like grade school, right? I mean, this is like not a new concept.

I mean, this is like the 1929 stock market crash. It's like it's very basic stuff. I don't know. All right. Leopold continues. He says, as an interim update, our current unaudited estimate of net month to date performance is 67% and of net year to date performance is plus 80%. So negative 66.

on the month plus 80 on the year, I guess. And he says final figures will follow through our normal reporting process. I guess you'll take it if you're plus 80 on the year. I don't know. Sounds pretty good to me. It's better than my 401k this year. So basically this guy might still, like, it's not the end of Leopold. He still has billions of dollars that he's managing, but certainly a humbling moment for him.

It's definitely humbling, yeah. And he'll go on, he'll be fine. That's why it's like, I'm like, this is not like that it's this cultural significance that to me is interesting, not the not the actual trade, you know, it's life, life goes on. I mean, I don't know about you, but like I don't see these stocks having issues in the long run. Like, you know, there's a whole meme right now about this stuff being expensive. I know we'll, we'll talk about that later, but, you know, it's like ultimately, I just don't see this, this thing reversing. or slowing down. Like it's moving forward. How do you, do I mean, do you agree? No, I think there will

still be a large demand for compute, at least for the next important number of years, I think. So it's like, this was sort of the, the whole thing, by the way, and this is going to be a theme on this show for the next couple weeks is duration mismatch, right? You can be right on the general thesis. You could be wrong on the timing. And when you're wrong on the timing, that could be devastating. It goes for Leopold. but it also goes for all these investors in, you know, the big data centers, right? Like the idea is I build the big computer for you and then you within, you know, X number of years turn that into profit. We know that the big computer money is being laid out. We don't know if that's going to be turned into profit.

Eventually are these AI companies going to make money by developing their, you know, these AI models? Probably, although it's sort of debate about how that happens now. but the pressure will be to do it on a timeline that lines up with when the money comes due. Yeah, I mean, I think the difference, though, here is, like, you can look at past, like, tech buildouts and there have been these boom and bus cycles. You had the dark fiber back in the day. I'm sure you've talked about that a lot on the show. I mean, this is, like, getting used today.

Like, there's high demand for it. So when you see people, like, make these bets on compute, like, meta or SpaceX, AI, and they're off on the timing, right? Or maybe off totally, if depending on your opinion, they can then turn around and sell that compute because there's so much demand. So I think these bottlenecks that he's invested, Leopold invested in and others,

like there are other bottlenecks too. I think those actually, they're like, I mean, other people have made this point too. I'm not the first person to say this, but like those actually, you know, kind of prevent this thing from going off the rails. It's like a, it's like a bubble, you know, prevention mechanism, the bottlenecks. Yeah, well, that is, that is, so let's actually, so let's run that idea next to a headline from

this week and see if, and see, you know, if it's totally locktight. Because, you know, we've been talking a lot on the show recently about how models are, are starting to reach not necessarily parody, but maybe close to it, right? The Kimi K3 situation that we just saw was another model that sort of, you know, it's not equivalent to like, let's say, the fables and the GPT 5.6 souls, but close to the latest series of models. And when you have not one or two leaders, but a bunch of leaders, the prices will inevitably come down because how else do you compete? CNBC has a story for us on this. Opening eye cuts prices for two of its GPT5.6. AI models as companies grow sensitive to costs.

Here's the story. Open AI on Thursday announced it is slashing the price of two of its latest artificial intelligence models, GPT 5.6 Terra and GPT 5.6 Luna, roughly three weeks after the public release. The company is facing pressure to cater to a more cost-sensitive to a more cost-sensitive customer base, where enterprises have been less inclined to deploy expensive models without a clear picture on the return on their investments. So Terra gets cut 20% and Luna, which I believe is the lightmost lightweight model that they have, is cut by 80% on the price. Now OpenAI says they've found some efficiencies in these models and I don't doubt it.

But read, going back to your point earlier, when you see these price cuts, right, the demand has always been basically that the companies that want to snatch up these data centers believe that they can sort of take the GPU. use it, you know, run a model through it and then mark up the tokens that they get out on the other end. But if the markup is lower and lower, do we see that sort of unlimited demand can, you know, persist? Well, I think there's two or three, there's actually two or three sort of different things going on there, right? One is who's actually selling the equipment for the data centers, right? The GPU providers. Then you've also, you've got the, the model. providers, right, who are creating the software, the application layer, the frontier models that run on these things. And then you're actually talking about the data center services providers, right?

You know, just having a data center and being a dumb, you know, essentially like RAC provider is not actually like a great long-term business. It's pretty good now. But that's why like these companies like CoreWeave, they want to offer services on top of the data center. right there's actually like three things going on one the the chip makers and the people who make the memory and all the stuff like they're selling this no matter what because like someone's just going to use it so they're okay right and then i think the model providers it's a different question right which you're asking which is like can you actually spend billions of dollars training these models and then you know and then you know charge a premium for them while some chinese

company can essentially like distill from that model and offer it for free. Of course, you know, those Chinese models still have to run on really expensive GPU. So like doesn't change the game for for Nvidia. But the model providers also like there, yeah, some companies aren't going to use them. They're going to try to fine tune. They're going to build on premise data centers. They're going to do all sorts of stuff, right? But this is like the total addressable market is so large that I think there will always be companies and businesses that are going to, you know, they're going to use Anthropic and Open AI models, which by the way, you know, these companies offer like a whole suite of models from like really cheap, efficient ones to the frontier. And those models run more

efficiently and better on the harnesses, like essentially the software that Open AI and Anthropic build. And there's a data flywheel there, right? So the more people use them, the better they get, the more efficient they get. So I think we saw the same thing with cloud adoption, right? Like, you know, people, it was cloud was more expensive. Like, why would I do that? I'll just build my own data. Eventually they went to the cloud because it was just, it was just more predictable.

In the long run, it's cheaper. You know, it's something you don't have to worry about. So I think you can kind of, you can make these arguments. I think there are definitely risks to these frontier companies. I don't really think the Chinese open. the free models are the most important risk. I think that means like I don't think these companies by any means the frontier model companies are going to like take over the world and become these huge companies that control like 90% of the global economy. Like that is not going to happen.

But there's still good businesses. That's sort of how I look at it. Like we tend to have the zero sum thinking around this stuff, which is like what I try to get away from. Yeah, no, by the way, We love talking through nuance on this show. In fact, I think that, like, you know, it depends on the week. You know, there'll be one week where folks will say, hey, this show is in the can for AI. And then there'll be a next week when we cover something else where it'll be like the show is a doomer show. And it's like we're trying to just consider the full range of potential outcomes and pressure test them. And so on this note, I think you're right.

It might not be China, right? But it seems like, first of all, the labs are lowing prices on their models. And it's not just them. You know, this is from that CNBC story. Microsoft CEO, Sotianadella, repeatedly highlighted his company's cost-effective models during its quarterly earnings call with investors on Wednesday. Google also debuted three new models this month that aimed to undercut competitors on cost. So just to go back to this point, right?

Because I'm not saying it's, well, you know what, I'm going to, I won't necessarily rule out that it's a zero potential zero situation here and just going to throw it to you and hear your perspective on it. Basically the point is like what's driving this build out of the data centers? Yes, it's, of course, demand to use AI. So maybe it is just like the hyperscalers that end up winning in the end. But a lot of the push is coming from OpenAI and Anthropic who believe that if they, that they will compete on compute. And looking at it, if the prices come down for Open AI, the prices come down for Anthropic, the prices come down for Google, the prices come down for Microsoft, are those investments in all those data centers then worthwhile?

You see what I'm saying? Yeah, I see what you're saying. I mean, and also, like, let's like also differentiate the hyperscalers from like the chip makers, right? And the people who make all the equipment. Like, you know, I think Nvidia is just sitting pretty, like, they're just selling this stuff no matter what. happens, right? I think the hypers, you know, yeah, I think they'll make money, but they also

have to sell services. They can't just, they can't just be like GPU providers. Like they have to, but there are a lot of services to be sold. Like this stuff doesn't really work that well unless you, this has been the story of the year, right? Like these models were super powerful. We had the reasoning models, but they weren't really doing all that much until people figured out how to put them into these harnesses, connect them to tools, run them in loops, you know, all this stuff. And all that stuff just requires more GPU, just requires more tokens, right? So I think like, yeah, I mean, in the end, sure, like these things come down in price. But then, you know, you have Javon's paradox.

People just use more of it, right? And it's so, I don't know about you. When you use this stuff, I use it personally because I want to try to understand the technology. I find it very fun and actually useful. Like I've, you know, but then I'm also talking to people about it all the time and I see how people, you know, there's a lot of people who are using it in obviously way more advanced ways than I am. And you're like, this is useful technology. Like this isn't the kind of thing.

It's not a fad, right? This isn't like, I don't know, those, you know, pedal counting watches or something that people like are like, oh, this is cool. I should put all my money into step counting watches. This is actually really useful technology for individuals and for businesses. So the market is so large that I just don't see, I can't see this being a zero-sum game only because the world will not tolerate one winner in a product that everyone in the world in the world has to use. That would, that company, that winner would be way too powerful.

It just doesn't, it just does not work that way. Does that make sense? Yeah, yeah, totally. Yeah, I guess like, you know, I shouldn't say that they're going to zero. But to me, it's like you need to have companies that are going to make money on top of those GPUs for that buildup to continue. And so, so I'm looking at these prices coming down and I'm like, well, where, where's that going to happen? But, but I think you've, you've answered the question in terms of where you think it will happen. And I don't think I disagree with you. They're willing to pay for it.

And the usage is just going to increase as these things become more useful. Yeah, I mean, this is the other thing that's crazy to me. Like, people are paying like $20 a month for chatbot, like consumers, you know, or pay. Like, it's crazy. Like, I can't, I'm surprised how much people are actually willing to pay. Because the adage when I got out here covering tech was like,

no one will ever pay for this stuff. You could not charge for Google. You could not charge for Facebook. That's insane. How many blue check marks do you see on X now? That's crazy. Those are people paying money. If you put like people will pay $10 or whatever, $20 a month for Twitter on my bingo

card in like, you know, 2013, I would have been like, you are insane. Like no one will pay for Twitter. And they are now. And I think that's a whole change that is like underappreciated. Like people actually pay for this stuff. Yeah, I did this experiment in a couple of events that I was at where I was like, all right, if let's say you're using chat chip PT and OpenAI doubled the price for you, would you pay double?

And like all the hands went up, triple, more hands went up. And I don't know. I feel like I shouldn't say this out loud, but it's become so useful to me that if it became $100 a month at the base in terms of what I'm getting now, I'm on the $20 plan, I would do it. Yeah. And I think they know that, but they're also like, these companies are in growth mode, right? They're willing to lose a ton of money to gain market share. Like, that's the game.

So just because somebody lowers prices, this is not like, oh, okay, now it's like in the discount bin and who can't, you know, this isn't fashion products, right? This is like they're trying to go out and take over the market. And that's- Right, but price wars are a real thing, right? Like you could eventually, right, your opportunity is my margin, just kind of compete a all the profit in a commodity. You could. I mean, but that's not typically how it works in like growth tech businesses, right? Like you, you go out and you and you win the market and then you worry about the money later. Of course, these companies are trying to go public. I don't know. Like, this is the thing. Like, do you really, I mean, maybe the market, maybe these IPOs get delayed. Like, I don't know.

But that is, that is actually beyond my, like, I haven't thought that much about it. But like, there is an argument, I think, to be made, like, they should wait a little bit to IPO. I mean, what would your argument be for that? Well, it's just if you have, like, if you're still in this, like, insane growth mode, like, is that going to make sense to investors? Like, you said investors do look at this, like, well, you should, if you're selling a product, like, you should be charging more than it costs you to, you know, for that product, right? And, like, ultimately, but, you know, on the other hand, I don't know, Amazon lost tons of money

in the public markets for years. before they finally, you know, turn to profit. So maybe it's fine. But like, you have to be a certain type of company, a certain type of CEO to like gain the trust of retail investors, right? Like, you know, Elon Musk is that type of person. Is Dario, is Sam? I don't know. And even that it can be tough. Tough. It can be tough. They have up, they have ups and downs. Yeah. All right. So, so let's, let's continue on this theme of it's going to be all right. when we talk about vendor financing. So you had a story this week about Safe Super Intelligence,

which is run by AILIA Sutskevra, the former chief scientist of Open AI, where I kind of added nowhere, Ely is like, all right, we have a breakthrough. Now it's time to put a lot of compute behind it. I think he was like time to build the bigger computer, which is one of his favorite lines.

Yeah. And Nvidia decided to make a big strategic investment in them $5 billion. For a company that doesn't have a product, I think before, I think before a year and a half ago, that would have been the largest venture raise in history by some margin. And now it's kind of like whatever. But your perspective on it when you wrote in seven before was basically like, it's all good. So talk through what happened and why you feel that way. Yeah, it's all good. No, I mean, I think, I think there's this like, it's like this circular investing, right? That's the big concern. It's like, well, if you're a company,

you're, you know, if you're in Vida, you're essentially buying a customer. That's not a good thing. Like, you know, that's not a real customer if I'm just paying you to buy my product. But in the end, it's like, I guess you're, it's a bet on safe super intelligence. Ilya Sutskivers are proven commodity. Like, I personally think there's reasons to be skeptical because they've, they're so secretive. And I just, I just, you, you haven't seen in the history of AI development, big breakthroughs happen in secret. These usually, you know, these papers come out. They ping pong around. Everybody, you know, it cross-pollinates and then people come up with ideas around the same time. So, but maybe there is, maybe they've figured something out like working in secret, right?

So, Nvidia sees that and they go, we want to bet on that. Like, you know, they've got the next big thing. Okay, that's one thing. But let's say they fail. Let's say safe super intelligence, like, doesn't get it done. they've built this big computer now and everybody wants big computers right so they're going to be able they'll either sell it or they'll rent out their their big computer to other people like like SpaceX AI did or meta did so if you're in video you're like there's not actually like that much risk here like it's not it's not in the end that much risk and like one thing these people are all good at like Iliad which is really underappreciated is making these big computers work really well. That is actually like probably the most valuable skill of an AI researcher at this

point, right? It's like figuring out how to efficiently string these GPUs together, make them work all at the same time. It's really hard to do. So like you're basically, if you're in video, you're like, well, if Ilya doesn't have this major breakthrough in AI algorithms, he's probably one of the best like hyperscaler providers around. So it's really, really, really, you're not. It's really, really just not like a, to me, it's not a crazy bet if you're, if you're Jensen. There's a lot of hedging in that one, I would say. Yeah. No, I was going to say basically like if you're, if that's the case, why even sell your GPUs and why not just give GPUs away for a stake of anybody, uh, of a company of anybody who wants them. And in fact, that is what Nvidia is doing, right? They have this new

approach with startups where they're like, all right, if you want GPUs, we'll take a chunk of your company and we'll deliver the hardware. Yeah. But there's still enough. But they're not like, we're going to just be that we're just going to do everything, right? That's not, you know, they're not like, we're going to just going to build a data center. I mean, they do more of it because now they're selling it in entire racks as opposed to, like, I don't think you can really just buy one of these GPUs now. You've got to buy the whole rack, which is probably a smart, a smart move. But, yeah, I mean, to me, like, I have not heard an argument.

Maybe you can, maybe you can steal man it. But, like, I haven't heard an argument that against that really. It's just like, it's more like, well, this thing could all be a bubble and then Nvidia's left holding the bag or, you know, something like that. But like they're the, like my colleague Liz Hoffman compared them to AIG, right, in the financial crisis, which I think it's a cool headline. Like that's, that's like exciting. It's like kind of scary, you know, like horror movies are scary. But I also think it's like I don't, I don't, I think there's so, there's so many. differences between that situation and this one. Okay, I actually want you to, if you're willing to or

you want to, to steal man. Because you're, you know, yes, yes, there's an argument, a good argument to be made for why this continues. But where could you see it unraveling if it does? Look, it's a great question. I think, I think that probably the biggest risk is that there's some algorithmic breakthrough that actually means you don't need powerful computers anymore, right? Like someone figures out, oh, actually, I don't know, the human brain is a very efficient computer, right? It runs on whatever, 20 watts or something. It doesn't require a big data center. There are actually companies to come to think of it that are growing human brains and want to use them as computers, like actual brain tissue. So, you know, this isn't total sci-fi.

they're like, well, you know, we've, we actually can do AGI on a, you know, on a thumb drive or something, right? It's like, we don't need these big data centers anymore. Then maybe the whole thing collapses, right? It's like all of a sudden, you just, you can, you know, there's, there's this, the data centers become dark fiber because, you know, all of a sudden, like, you could, you can run everything you need on one tiny sliver of the, you know, the massive data center that opening eyes building in Texas. I don't know. That's one. Like I think that's a real possibility. But like, of course, I don't know. Like who's developing that? Like I think, you know, maybe it's the mini brain tissue computer people. I don't know. Right. And if that happens,

then civilization definitely changes. Yeah. I mean, it won't be bad for civilization. I, like, that would be a good thing for civilization. It would be a bad thing. It'd be a bad thing if you're Nvidia. The bad thing if you're building these data centers, right? Bad thing for open AI and anthropic. They get totally superseded. But humanity has this like access to cheap intelligence. We don't have to build all these new power plants. Like, you know, that sounds like. Yeah. Like and some of these investors, you know, some of these investors in the Gulf lose some money and, you know, we all move on. Yeah. All right. Before we go to break, I want to talk to you a little bit about what Sam Altman has been up to this week. He's actually been in Washington, D.C., talking government

officials about what's to come for Open AI. Let me read to you a little bit from the Washington Post, and you can share with me whether you think this is actually new or it's the stuff they've been doing already for a while. So the story says, in the briefings, Altman described an upcoming product that would enable multiple AI assistants, known as agents, to work simultaneously in the background, dividing tasks and collaborating with each other. He also described how the system could answer math problems that have never been solved before. He described how the new agents could transform the American economy, allowing workers to do tasks that typically would have been outsourced to other professionals.

He described how a software engineer could use the agents to help with human resources or a writer could use them to enable graphic design, one of the people said. What do you think? Same stuff for new stuff. Sounds like the same stuff to me. Right. That's how I was my reaction when I read that, yeah. Are you, I mean, when I use,

codex, you know, their desktop, I guess now it's just chat GPT, the desktop app on Mac. I'm always asking these agents to spawn subagents. Like, it's like, I don't think I'm really that great at it, but like, that is what they're doing, right? They're coordinating. I'm like, you be the, you be the product manager, and then I want you to spawn subagents to do the tasks, and then I can talk to you so you're not busy like that's crazy i don't i've been just i've been being a silly human and asking to the agents to do everything that i want them directly well i think probably they're going to automatically do that now right that's right i think that's the new thing that he's talking about like just but it's just i think that's just better orchestration of these things like it's it's

how do you make them how do you get them to do their job with less human involvement. Like, I do a lot of checking in. I don't know about you, but like, I'm, you know, you get the blue dot on if you're using the chat. GBT, you get the blue dot and then you got to check in. Like, it would be great if you could just be like, look, here's, here's my goal. Figure out how to, the best way to get to that goal and I'll check back with you in a week or something, you know? Like, I'd be fine. What sort of projects do you use it for? I mean, I just use it for everything. But I mean, last, like the most recent one last week was, it was not a work project. It was just personal. Like we were in my neighborhood, we have like

flooding and we needed to collect data for, um, for the county so that they can get data on flooding. They have no, there's no county, like California doesn't have like a data collection project for flooding. So I made the data collection projects, but it took me two days. And I, you know, I just checked in every once in a while. But now our neighborhood has a data collection portal and, you know, a database and a back end and we can send data to the county with photos and videos. It's basically a web app. But that's just the most recent one that I did last week. And, you know, it's just isn't that much work.

And people are like, wow, how did you do this? I'm like, I didn't do it. Codex did. Yeah. Right. I mean, but it would be great if you could just one shot that. Like, there's a lot of checking in. There's a lot of trial and error.

It could be great if you, like, after two days, you just get a product and it's done. I mean, that would be new. I think it'll happen. Yep. All right. I think it would definitely happen. Okay. Let's go to break and come back and talk a little bit about why Microsoft might have had

its best week ever and then a little bit more on big tech earnings. That's coming up right after this. This episode is brought to you by Deepel. When I sat down with Deepel's founder, Yarrukutliovsky on YouTube recently, we got into the case for specialized AI. Deepel voice is what it looks like when the stakes are real-time conversation. And honestly, it's something I wish I'd had. for my own cross-border interviews, turning a language barrier into a non-issue.

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Stop online threats before they become real-world attacks. And we're back here on Big Technology Podcast Friday edition with Reid al-Bergati, the technology editor at Semaphore. Go to Semaphore.com in the technology section. You drop your email address there or right on the left-hand side, and you can get Reed's terrific newsletter. And it's free. And it's free. Right.

So, well, anyway, I won't, I won't, I won't, Dick discouraged. Do you think that there's a semifour bubble? Is there a bubble? Is that what you're going to say? In semifor. We're slashing prices and offering our products for free. I think, yeah, your GPU providers are going to start to sweat a little bit. You might get, you might get Leopold margin called, man.

He's going to short us. Darn. By the way, now you said it in public. It will go on the YouTube and the LLMs will train on it and the LLMs will start to believe this stuff and then people will believe it. That's how information works these days. Oh, man. Well, in that case, I am an amazing athlete and my children are geniuses.

Okay. Go on. All right. You better mind to LMs. All right. Let's talk about Microsoft. They had the biggest one-day market cap gain for any U.S. company in history. That's according to the Wall Street Journal.

The company's stock surge 16% after its earnings, quote concerns that investments on data centers, chips, and more would outpace the company's ability to generate cash. It's kind of going exactly to the conversation that we've had. It's a $450 billion one-day gain, and that's the largest market cap gain by any company in history ever. The core parts of this earnings report was that Azure Microsoft's cloud grew 43% in the quarter they report on. And they promised that it would, that they would not go negative free cash flow next year.

They also have a lot less debt than their peers. Reed, let me just give you my big question on Microsoft. I don't fully understand what they're doing. I'll admit it. Their approach to AI has been kind of weird, back open AI. criticize OpenAI, be all about like, you know, sort of your solution to the problems of the foundational labs, even as Open AI has made this $250 billion commitment to buy compute from them, which I think is largely what's propelling their cloud growth. And the market loved it. So

help me understand what's going on with Microsoft. But you're, you said it yourself. I mean, the market wants an efficiency story right now, right? That's, that's what, you know, That's what they're buying. And Microsoft's been selling that. I mean, you've interviewed Mustafa. I interviewed Mustafa. I went down to Microsoft AI not too long ago and talked to him about their models. And they're building these frontier.

Well, eventually they want to build these frontier models, but they're focusing on efficiency and building them from scratch. You know, and they have a massive install base, right? I think the big question, though, is like, can they, to getting their strategies, like, can they actually transition through this AI phase and turn all of their products into, you know, intelligent, you know, basically hold on to that enterprise business. And the market clearly thinks right now, they've got a great path to, you know, in that direction, right? They're super efficient models.

They have all these businesses, which are the meme right now is like they all want to save money. spending too much on tokens. And so if Microsoft is positioning themselves to be the answer to that question, like, they're going to do fine. They're going to keep, they're going to hold on to it. That's how I read it. Unless I'm missing something, like that, that's kind of, it's a simple. I mean, it's crazy that it's, that it's the record one day game.

Like, I actually didn't even realize that until you, until you said it. That's, the, the market's just, it's just mind-blowing to me because I'm like, this is not, there's nothing new. Like, this has been their strategy for a while. now and they've been telegraphing it. But I guess the market's just got the memo. Yeah, the market has really been, I mean, Microsoft was like the worst performing hyperscaler or big tech company this year, I guess up until yesterday or yesterday, right? And the market has sort of been of two opinions about it. It's like if you're against Microsoft,

you're just like the open AI bet is going to spiral out of control while that technology disrupts your enterprise business. To thread the needle, it has to be the opposite. It has to be open AI is going to crush it. And, you know, AI will continue to go apace. And all, all, you know, along the way, you will continue to be able to grow your enterprise business. And it's interesting to see the market, you know,

vacillate one to the other. And it sort of goes back to our Leopold discussion is that the way the market has seen AI shifts seemingly weak to week, one week you're the king and one week you're you're you're the joke and yeah this volatility is just going to be the nature of the beast for a while until this settles out I totally I agree with that assessment completely it's volatile because it's based the the market is not there's no like fundamentals that they can really look at it's based a lot on vibes like week to week

vibes like who's up who's down if you're Saty is a great CEO you I think he's done a great job of like seeing AI making this opening I bet really like pulling themselves right into this into the thick of this race and then like not getting over his skis like not over investing so now they have this better this better debt to you know the debt ratio essentially and like I just think but he's got to be sitting there going like this is great like I love this one day gain my record one day gain but like this two shall pass, right? Like, they all know, like, they're up now, they'll be down later. And when they're down, they'll, you know, they know they'll be back up. And, you know, Google, I think has is a bit,

they're a bit down now. But, like, you know, I think they're all, like, Sundar's threading that same needle. They're all, they're all threading that needle of, like, disruption on one side, you know, big, big, like, hasty bet mistakes on the other side, holding on to that old business while understanding that it's not forever and they have to be, you know, they're all, like, what was it, Satya said, I'm going to make, making Google dance. Like, they're all dancing, right? And I think that's great that they're all dancing. Yeah. I think that's great that they're all dancing. Like, I love that. They're taking these cash pals that they were sitting on forever. And they're spending that money. And I think that's awesome. They should.

should be spending that money. It was like the saddest thing that like the biggest tech companies in the world, the most valuable companies, the world couldn't figure out what to do with all that cash. You know, and now they're spending it on dancing. Right, but they're also going negative now, right, that their free cash flow is evaporating. You're like, spend it, take the debt, take the risk. It's great. We should all be celebrating it, right? Like, this is awesome. This is what you want. Like, this is how innovation happens. Like, you know, we shouldn't be like, oh, know, like these companies are, you know, they're spending a much of money on this new innovative technology. It's like, no, we're all going to win. Like, just everybody needs to just chill out.

Like move, you know, they're, their startups again. They have to reinvent themselves. They have to move forward. They're facing competitive pressure, pressure from startups and innovators. We at, which we haven't even really seen yet, right? Like, the AI stuff is so new that like there, there isn't really even like this, this like creative destruction application layer yet. So like it's, it's fine. Like just it's all going to work itself out. All right. Someone else who might think it's fine today is Andy Jassy. Amazon turned in 37% growth at AWS. They were like hovering around 17, 18% for years. Now they're double that and more. They're up 15% today. Same story. Yeah, I mean, I think, look, we were talking about this earlier.

Like, they, they are building these massive data centers that are going to be incredibly valuable in this, in this AI era. And, like, it's not just the data set. Like, they're also building all these services. Like, so much of this is going to run on these, on whatever AWS is building on top of those GPUs. So they're, you know, they're also, it's a lot, these are long-term things. They will be up.

They will be down. But, like, in the end, unless, you know, somebody builds that tiny little 20-watt brain computer thing that we were talking about earlier. Right. Or something else comes out of left fields. Like, it's all kind of, they're all kind of winning in my mind. Yep. All right.

Google, interesting story here. Last week, they grew cloud revenue by 82%, but said they were going to spend a little bit more. To which I was like, if you're growing your cloud revenue at 82%, and you're saying the spending is fundamental to growing that cloud revenue and you say you're going to spend more and you now have not only search but a chance to be in league with Amazon and Microsoft on web services, why not do it? The market punished them right afterwards. And the notion was that they had grown, the market had grown wary of all this AI spending. However, today I can report that Google's made up all of that loss and more. They're now above where they were before the stock got hit post earnings. Why is that?

I think the market saw Microsoft. They saw Amazon and they just sort of put a heuristic on and they said, well, if they can do it, Google can do it too. And we're going to, it's almost up in lockstep with the other two. Or there's a bunch of algorithmic trading happening and it's all just, you know, computers just making random bets. But no, you could be right. Yeah. I mean, you could be right. Like, when Google took that hit for all those investments, I thought my thinking was that there's,

this is like also meme based, right? It's like it's disconnected from the actual fundamentals of their cloud revenue. And it's really about the fact that like there's this sort of view out there that Google, you know, they were behind the chat GPG moment happened. They caught up. They were on top. And now, you know, the harness thing happened. and everybody's loving Claude,

and Google's kind of like not as much in that conversation. And so they're viewed as being a little behind, which I mean, on coding, they admittedly are. They're like six months behind on coding. So I think the market's like, yeah, like, you know, if you were on top with the models, then we would be cool with this spending, but you're not really on top with the models,

so we're not. It's like, which is just to me, like, it's none of it makes any sense. It's like totally illogical. It's like, who cares? Like, these are cloud services. Actually, more and more people are using Google Cloud. Like, it's actually pretty good in the AI era.

Like, they off, I don't know, for whatever reason, people seem to like it. Like, I just hear, I don't have like a, this isn't a statistic, but just more like a Zite guys thing. Like, people are using Google Cloud in a way that they weren't before. Like, I didn't hear it. It was all AWS before. So, but that's like they, they're serving other. models. That's not like their models that's doing that. It's just actually like a, it's a pretty

good product for what people are building in the AI agentic era. It's a good place to host all your apps and et cetera. And it's like, and they're starting to sell chips. TPU. Right. Right. The TPU business is great. Like, you know, that's also another fascinating one, right? Like they're, they're like making these, these partnership deals with people because they don't want to spend, they want to offload some of the capital it takes to build these data centers so they're, you know, they're doing that. I don't know. It's, but it's like none of that matter. Like that's so disconnected from like who has the best models. So why is it? In that sense, it's, it's just like AWS, but AWS doesn't have the best models. So why is the market cool with AWS, but they're not cool with Google? Like,

it's all so irrational is my point. Yeah. All right. Maybe this one is more irrational. Meta drops 10% as the AI costs increase. Now, I know, okay, you're going to tell us, build big computer. It's going to be fine in the end. But, the Wall Street. I'm not that you're not, no, you haven't predicted me on meta. I don't get the meta thing. I'm not going to get in your way here.

Go, go. I haven't figured out the meta thing. I'm like, you guys want to be a hyperscaler or something? Like, I see, meta is the thing where I think, like, I don't know what's going to happen with social media in this in this whole era like i just like they haven't to me meta hasn't really shown a way through like how do they like their business is sort of getting disrupted or at least like they don't have like big new ideas they're just like we're building the big computer too and we don't really have a use for it so we're going to rent it out too like like space x a i um

but like mark starkerbridge is not elon musk right and they don't have rockets, and they aren't building humanoid robots. They aren't, they don't have the biggest fleet of autonomous vehicles on the road. Like, they're not, so it's like, what are they? Like, I just don't, to me, I, the meta one is the big, that's like the biggest question mark of all the ones that we've talked about. I don't know how you feel about that. Yeah, I mean, you know, basically on the call, the analysts,

I don't want to say they were begging Mark Zuckerberg, but they were basically begging him to turn that excess compute into like a hyperscaler. And Zuckerberg goes, I think it would be foolish to basically just sell all the compute and take a short-term profit. And the market is just like, sell. But with meta, I don't know if this is right. I have nothing to sort of say that this is the thinking inside there. But I can't help but wonder if they're just waiting to see if it's possible to build an AI companion. And to date it hasn't been possible yet, but to build an AI companion that like won't like destroy.

people's lives if it gets an update or and won't tell people to like break up with their partners or potentially harm themselves right that has been the issue with that's kind of why i think we're not seeing the proliferation of uh the love bots you know opening i was supposed to do dirty mode but never released that um it's because it's too dangerous right now but if a company can figure out how to like build an AI companion which i think is going to be even stickier than reels or ticot because come on. It's just like you've built a digital friend that's always there for you. I'm not saying this is a good thing. I'm just saying that like potentially meta is waiting for that opening and then is just going to go hard on that on that route. Maybe, but I don't think that's a very good

business though. Like that is where I'm like, I'll tell you why it is. Like how much you will, like ask your audience like when you ask them to raise their hands, whether they would pay triple the chat GPD You got us, like, ask them how much they would pay for an AI companion. Like, I don't think it's that much. Well, the meta business will be ads and referrals. Now, it won't be like your lover is going to be like, you know, why don't we pause this deep central conversation for to hear from our sponsor kayak. Exactly.

But, like, maybe you'll tell it one day. I really do need a flight to, you know, somewhere. And it will be like, all right, I bought it for you. And then, you know, the Madagascar Air, you know, gives a kickback or something like. Okay, fine. There's a market for someone could build an AI companion. There are other companies doing that, by the way, and they can make some money off of it. It's nothing. It's a drop in the bucket, I think, compared to what Facebook is and Instagram. Their core businesses and whatever WhatsApp fits into that. But I just think it's not like, yeah, they could do it. But it's like not that hard of a problem. It's like not that interesting of a problem. And I don't think it really makes that much money in the end, like enough money to really matter. I agree to disagree on this one. This is good, Reed.

You and I, we typically agree on so much. That's true. Actually, the whole show today. You're never going to have me on. I'm not the champion anymore. You're going to be like, I'm done with this guy. No, no. Actually, contrasting beliefs is great.

I feel like that's the way I learn. So it's nice. Let's do one more. Let's do Apple. So Apple, like you would imagine, just delivers like crazy earnings. But the overhang is the bottleneck bros. Basically Apple next, Apple saying, look, we are a supply constraint. We need memory for our stuff to work.

And the guys building the big computer are taking all the memory. And they've already raised prices on, you know, MacBooks and, you know, big, big computers, and soon as soon it's going to be your phone. And that will impact sales. And so Apple, you know, fest up to the market about that this week. And, and they're getting hit. Yeah. Well, you know, PSA, like, you can just buy a super cheap phone instead of an expensive iPhone, download chat GPT, you know, and talk to your, talk to your codex agent and have it recreate all of your iPhone apps and, you know, just have it do stuff for you. Like, you don't really need, you know if you want to save some cash you don't want to buy the really expensive uh you know

iphone that's how you do it i still use an iphone just just for the record i know i just i mean this is i i don't look take this for what it's worth because it's not based on anything but folks if you if you're thinking about upgrading to a new iphone this might be the window to do it where the 17 which is a great phone i've got it is sitting there it's going to be the cheapest new model that you'll probably ever see. This would be the window, I would say. The last iPhone. Get a screen protector for it. Get a case. Don't break it. Do not drop that shit. This is your last phone. No, it's a tough. I think Apple's just in a tough position. I'm not a big believer in the long term, in Apple long term, because I, you know, as much as they make great hardware,

They make great products. I buy them. I use them. All this stuff. I just think that because I see it in my own life already as a bit of like an early adopter on all this stuff. Like your phone becomes less and less important. It just becomes a device that you look at and talk to.

And that's not how Apple makes its money. It makes its money because you have customer lock-in. You have I photo sharing with your family. You don't want to be a green bubble and blow up the group chats that you're in and all that stuff. And like ultimately that becomes less important. I think walled gardens or like customer lock-in is not as important unless like, you know, maybe I get locked in. Maybe you end up getting locked into open AI or something, right? But it's like an app, I think Apple has a long way to go before they have the AI lock-in.

So that's their finish line for them. Like they need to get that like they need to build the most powerful AI assistant that works across platform. And they need to do it like now. And I don't think Siri is that. I don't think the new Siri is going to be that. So I'm I'm just like not a believer in Apple long term for that reason. The website is semifor.com. Reid Al-Varagati is the technology editor there, sign up for his newsletter.

Reid, it's really always a pleasure to speak with you. Thanks again for coming on the show. Super fun to be here. Thanks, Alex. All right. Thanks, everybody for watching and listening. On Wednesday, Dave Khan, partner at Sequoia, will come on to talk about what AI needs to do to make the bet pay off. And then we're going to go company by company and talk about the strategy in terms of resource allocation that each is pursuing. It's one of my favorite conversations of the year. and M.G. Seagler will be with us next Friday to break down the week's news.

Thanks again, and we'll see you next time on Big Technology Podcast. Ready to take your investing knowledge to pro-level? This is Fidelity Connects, your daily edge in the markets. Get deep insights on real-time market topics that may impact your investment portfolio. Listen to Fidelity Connects on Spotify today and power your next move tomorrow. Hey, y'all. It's Kelly Clarkson with Wayfair. Ever order furniture online and wonder what if, like what if it doesn't hold up. That sofa was four days old.

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