All-In PodcastSocialists Sweep NYC, China Catches Up in Coding, AI Memory Crunch, Micron's Blowout Quarter
EVERY SPOKEN WORD
90 min read · 18,447 words- 0:00 – 1:05
Gavin Baker and Travis Kalanick join the show!
- JCJason Calacanis
All right, everybody, welcome back. Welcome back to the number one podcast in the world, the All-In podcast, episode 278. And, uh, Friedberg, he took a mental health day today after the socialist sweep in New York City, so we invited two guests. They both said yes. Travis Kalanick is here from Adams. How you doing, brother?
- CPChamath Palihapitiya
I'm good. I'm good. Good to see you.
- JCJason Calacanis
Good to see you. Good to see you. And after a triumphant week at Starbase, the one, the only, everybody's favorite, Gavin Baker of Atreaties Management. How are you doing, Gavin?
- GBGavin Baker
Great, man. Thanks for having me.
- JCJason Calacanis
You still floating on cloud nine after the SpaceX IPO? Yeah?
- GBGavin Baker
That was a very special moment, and it was the culmination of, you know-
- JCJason Calacanis
Decades
- GBGavin Baker
... decades of hard work. But man, to quote, uh, Bill Belichick, onto Cincinnati.
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
Yeah. Exactly right.
- JCJason Calacanis
Yeah. Zero zero is, uh, the, how the Knicks talked about the next game in every series. They're like, "It's zero-zero." We come into this as if it's, like, the first game of the series, even if we're up two games or three games.
- 1:05 – 22:51
Mamdani-endorsed socialists sweep congressional primaries in NYC
- JCJason Calacanis
The socialists have swept New York in the congressional Democratic primaries. On Tuesday, New York City Mayor Mamdani went three for three in the candidates which he endorsed, and they all won their primaries. 10th District Leader Brad Lander defeated two-term incumbent Dan Goldman. 10th is one of New York's richest districts, includes the West Village, all those townhouses, uh, Wall Street, Dumbo, Cobble Hill, Carroll Gardens, Park Slope. That's some weird geography put together there. In New York's 13th, Chevalier beat a five-term incumbent who was backed by House Speaker Hakeem Jeffries, and apparently the socialists are coming for him. 13 is one of the poorest districts, Harlem and the West Bronx, the Boogie Down Bronx. She's a 32-year-old Democrat socialist with a history of spicy remarks. New York's 7th District, Claire Valdez, won the open seat over the handpicked successor, the incumbent. 7 is a DSA stronghold, Bushwick, Williamsburg, Long Island City, Green Point, known as the Commie Corridor. A lot of hipsters and baristas with suspenders in that neighborhood. According to our partners, Poly Market, this was a pretty big upset. The Mamdani sweep chances were just 26 before election day. Yeah, that would be, like, the, uh, trifecta there if you were gambling. These candidates, just like Mamdani, did a lot better with younger, college-educated, and high-income folks, the folks who can afford to be socialists. And these are all safe Democratic seats the DSA will very likely win. So the DSA caucus-
- CPChamath Palihapitiya
That's the best way you just said, "People who can afford to be socialists."
- JCJason Calacanis
[laughs] I mean-
- CPChamath Palihapitiya
It's always, it's always the, the rich poors. You know? They're rich, but they pretend to be poor. It's perfect.
- JCJason Calacanis
I mean, this is the history of our country from the '30s to the '50s, Red Scare, Black Panthers. I mean, we'll get into it, Chamath. But basically, if you're intelligent and you get into business, you become a capitalist. If you're super intelligent and you go into academia, eventually you have the luxury belief that socialism is awesome. What's your take here, Chamath? And then I'll go to you, Saxo Pill, because I know I can see you're chomping on something over there. You're just ready to go.
- CPChamath Palihapitiya
Honestly, I think that we are losing the script, and part of it is because we've been our own worst enemy. I'll just keep saying this, that I think AI is a very good prism into this problem. I think AI is the greatest economic leveler we'll ever find in our lifetime. I think it's the thing that can create the greatest amount of equality. I think that it can even the starting line for every single person on Earth. But we've done such a poor job in representing it, in bringing it to market, in talking about it. We've let all of our own personal trials and tribulations and insecurities and fights spill out into the open. As a result, Silicon Valley has lost even more credibility with the people at large. And in that vacuum, what other people can paint is a picture of how anything other than what capitalism looks like today is a better version of what they see. And this is why you're seeing, I think, a lot of these people get a lot of momentum. I think if you look at some of the key congressional races, they were a referendum on AI. And the good news is we were able to hold the line in some of these key places, but just barely. In Utah and in New York, there was a couple of very important races where it was essentially Anthropic-funded anti-AI groups, which is, again, insane, against, in some ways, OpenAI-funded pro-AI groups, and the pro-AI groups won.
- JCJason Calacanis
You just explained that it's a, a great leveler. Can you give a couple of examples and just expand on that briefly? How is it a great leveler? I mean, I know, but, uh, uh, for the audience's sake, you've said this a couple of weeks now, so I think unpack it a bit.
- CPChamath Palihapitiya
Um, the best way to explain it is I think that the first real major unlock of economic productivity was when the internet, and specifically Google, went and harvested and collected all the world's knowledge and all the world's information, and they made it available via search. What we figure out, though, 25 years later, despite the fact that they built a great business, is what was missing was then being able to take that knowledge and information and transform it into expertise and intelligence, and that's effectively what AI does. It takes that world's knowledge, and it allows you to act upon it so that every single man, woman, and child has an equivalent Travis Kalanick in, you know, as his co-founder, a super founder, this brilliant person that can think through all your problems, can out-engineer people, can outthink people, and they sit beside you, and you have that, and there is no gatekeeping that can prevent you from having that. And so now you're only as good as your ability to direct that energy into something productive that you value. That is an incredibly powerful thing, and instead we've gotten caught up in doomerism and jobs being lost and, you know, water being consumed, all of which are lies, all of which are complete fabrications and misinformation, and these have been created in order to specifically help one small set of actors inside the AI race, and it's been fed and funded by those folks. So in, in this vacuum, Jason, we've allowed all these other people to paint the other version, and right now the other version looks way more compelling than the current version because the current version has very poor brand ambassadors. Sacks, what's your take on this? I guess some people are looking at this as the left's version of the populist takeover that Trump did over the last 10-plus years. What's your take on what we're seeing here with socialism and its amazing appeal and its winning at the, uh, election box?
- DSDavid Sacks
I think there is some truth to that. I mean, I think the choices of the future are gonna be communism, or if you wanna call it socialism of the Democrat Party, or nationalism in the Republican Party. I mean, that is where we're headed. Those are the two populist directions. But let's look at what these DSA candidates stand for. So let's look at what their platform is. They actually say they want to abolish the Senate. They want to abolish the carceral state. That means basically police forces and prisons. They want to abolish ICE and grant amnesty for all. They do not support any deportations whatsoever. They want to replace the president and Supreme Court with an executive and judiciary that is chosen by and subordinate to Congress, which basically now I guess just means this House. And with respect to House elections, they want to abolish the Electoral College. They want to replace the two-party system with a multi-party democracy, and they want to expand the House of Representatives, implement proportionate representation, and rank choice voting in all elections. So this would be a total makeover of our constitutional system. They want to free Palestine. They want public ownership of major corporations. They want to defund the Department of War.
- CPChamath Palihapitiya
[laughs]
- DSDavid Sacks
This is a very radical organization, and you would laugh at a lot of these types of proposals, but you can't really laugh at it anymore because these guys are taking over the Democratic Party, and y- you can see the Democratic establishment is in complete panic right now because they have lost control of the party, uh, to Zohram Mamdani and his, his allies. So Jason, like you said, I mean, let's take this one race here, New York 13. You've got this ally of Hakeem Jeffries, longtime incumbent congressman, Espaillat, I guess is, is his name. He is the chair of the Congressional Hispanic Caucus, and he was defeated by an unemployed 32-year-old PhD candidate. She's never had a job. She's been in college for 10 years, I guess writing this PhD thesis.
- CPChamath Palihapitiya
Wow.
- DSDavid Sacks
And I think even by DSA standards, she might be kind of a lunatic, so she has declared that she wants to end Western civilization. She wants to eradicate Western civilization.
- CPChamath Palihapitiya
Wait a second. What? [laughs]
- DSDavid Sacks
Um, she-
- CPChamath Palihapitiya
We're soaking in it. [laughs]
- DSDavid Sacks
Yeah. She actually said she used the American flag as a napkin to clean her hands.
- CPChamath Palihapitiya
Oh.
- DSDavid Sacks
She attended a rally one day after October 7 celebrating the slaughter of Israeli civilians. I mean, she's very, um, pro-Palestine, but even to the point of celebrating Israeli civilian deaths. She calls white women ugly colonizers. She's called for the complete defunding of the police and abolishing all prisons and borders. Doesn't want a single deportation. Hates the police, openly calls them pigs, or has on social media before, calls US service members war criminals, and says the US is a disgrace of a country. She's written favorably about communism and seizing the means of production, and on and on and on. So this is basically the new Democratic Party. It's gonna be, even if the Democrats do take the House in November and Hakeem Jeffries becomes speaker, this is gonna prove to be a huge headache for him managing all these new DSA members.
- CPChamath Palihapitiya
Hmm.
- DSDavid Sacks
Because they do not actually see the traditional establishment wing of the Democratic Party as an ally. They see it as an obstacle. This is the DSA co-chair Josh Block said, "We're using the Democratic Party as a ballot access vehicle-
- CPChamath Palihapitiya
Oh, my God
- DSDavid Sacks
... not because we share its goals. We build our own-
- CPChamath Palihapitiya
Oh, my God
- DSDavid Sacks
... organization, get elected under the Democratic label, caucus with Democrats when it's useful, and push our own agenda from the inside. We see the Democratic establishment as an obstacle, not a home." So the DSA is coming for the Democratic Party. It controls the base now. It's where all the energy is. I think this takeover will continue. I think the DSA will gradually take over more and more of the Democratic Party, and all I can say to these establishment Democrats is play stupid games, win stupid prizes. You supported this open border policy that brought in this wave of mass migration. That is a huge part of the base of this new DSA wing. Mamdani would not have won the mayoral election in New York if it had just been native-born New Yorkers voting. It was the mass migrant vote in New York that swung it to Mamdani. It's not exclusively the DSA base. It's the migrants plus these overeducated white progressives who, I say overeducated because they're more downwardly mobile. They end up going to work in academia or NGOs, that kind of thing.
- CPChamath Palihapitiya
Yeah.
- DSDavid Sacks
They're hard left wing. They're kind of the vanguard, and it's this combination of these, you know, recent college graduates who are kind of the organizers and this migrant movement who are really taking over the Democratic Party. But again, this all goes back to Democratic Party policies. They may not have intended for this to happen, they may not have intended for them to lose control, but it was their open border policy. It was also the fact that they have cracked the melting pot and the policy we had for many years in America of assimilating migrants, right? Immigrants.
- JCJason Calacanis
Yep.
- DSDavid Sacks
That all got cracked by multiculturalism and wokeism. We don't really do that anymore. So now you've got these candidates like Chevalier openly declaring they're not just anti-American, they're post-American. They don't have any respect for the American system, our constitutional order, our free enterprise system. They want to introduce something in much different, and it's gonna look a lot like the countries where these migrants are coming from.
- JCJason Calacanis
Yeah.
- 22:51 – 45:12
Future of the Democratic Party, the Israel issue, social media bans
- JCJason Calacanis
and if you combine his charisma and ability to communicate with generations, like we're now, like, at two of these lost generations that feel like they're gonna do worse than their parents. And if you look at housing and college debt, healthcare, they don't believe that they can participate in the system. They feel the system's rigged. And if somebody comes along who speaks to them, and they ha- have no conception of socialism and what happened, you know, in Germany or during the Red Scare. They have no idea of what socialism or communism is. They have this incredible wrapper they've put around this, which is, you know, they're democratic socialists. It's like s- it's, it's the Coke Light. It's, it's a Coke Zero of socialism. It's actually just communism. They want to literally seize people's assets. They wanna seize half of, you know, these companies' stock, they wanna seize their wealth. They, they just want to take from the people who have made stuff, as we talked about last week, and we've done nothing to change their mind. We haven't made more houses, [laughs] we haven't made college more affordable. Uh, healthcare is a disaster, inflation's a disaster. A- and starting pointless wars. Obviously, the support of Israel is somewhere in here as part of all this.
- CPChamath Palihapitiya
Can I say something?
- GBGavin Baker
Yeah, sure. Of course.
- CPChamath Palihapitiya
Can I say something?
- GBGavin Baker
Yeah.
- CPChamath Palihapitiya
I was on Megyn Kelly yesterday, and I had this theory that I've been kind of working through, and I'll just share it with you guys, 'cause I'd love your reaction. If you look at the scourge of socialism- If you take the rhetoric away and you actually look at the outcomes, there are three countries that I think have veered far towards socialism well before the United States. Canada, the UK, and Australia. And I think when you look at any sort of reasonable measure of their progress, it's been an unmitigated disaster. So all of the virtue signaling on social issues, all of the virtue signaling on immigration and open borders, all of the virtue signaling on climate change has left th- each of those three countries in some state of disrepair with enormous amounts of infighting, tremendous political instability. They are all sort of powder kegs. And there's an interesting thing that happened in each of those three countries that I think has the potential to turn the tide, and it speaks to what Gavin said. Each of those three countries now have banned social media when you're 16 and under. And I think it's sort of like making sure the kid doesn't get addicted to the drug too early. And when you look at somebody like Zoran Mamdani, I think Gavin is right. I'll go even further. He, AOC, the lady that just won-
- TKTravis Kalanick
Chevalier
- CPChamath Palihapitiya
... Chevalier. Let's just break it down. They're all good-looking. They're all charismatic. They have their pulse on the, the gestalt of the moment. They know how to use social media, and they are essentially curating an army. Now, if you cut the legs off by saying young people should actually age into social media, I suspect that the most important channel of information consumption being taken away from them actually starts to give them the opportunity, and the rest of us quite honestly 'cause we have to deal with kids who are just really [beep] stupid constantly asking for this stuff, um, the chance to actually show you how a balanced diet actually allows you to be much healthier in your later life. And I think as re- relates to information consumption, I think you are going to see, I suspect, a far less radicalized youth aging into the voting roles in those three countries. And I suspect if you start to see political stability and predictability in Canada, the UK, and Australia, you can put your finger right on this ban as the reason why, and Florida's already done it in the United States and I think we need to deeply consider it across the rest of the United States.
- TKTravis Kalanick
Can I-
- CPChamath Palihapitiya
Social media ban is now starting at 16 and, uh-
- TKTravis Kalanick
Guys
- CPChamath Palihapitiya
... Canada has it. It may come to the US. Go ahead, Travis.
- TKTravis Kalanick
I'm a full counter to Chamath on this one. The... I, I think we all agree social media is bad for the kids and for the adults. Like, too much of that stuff is very bad. It's brain rot for real, and it's gonna be worse than cigarettes. It's all the things. But the real point of banning under 16 is so that you can force adults to identify themselves and de-anonymize themselves so you can set up a full-scale censorship regime, which they're sort of contemplating in the UK. And what censorship is really about is not about harmful content. It's about content that the people in power don't want you to see that disagrees with them. If it agreed with them, it's not harmful. It's the stuff that doesn't agree with them. And so what they're doing is they're criminalizing disagreeing with them. And so th- there's a derivative of this age-based stuff-
- CPChamath Palihapitiya
A- age gating
- TKTravis Kalanick
... that, which is really about the adults, not the kids.
- CPChamath Palihapitiya
That is the downside to it. Gavin, you wanted to add.
- GBGavin Baker
No, I super agree that, uh, I think that a social media ban under 16 would be great, but I think it comes at a really high cost outlined by Travis, and that's what's really going on, is they want to restrict anonymous accounts on X who say things that particularly the powers that be in the EU do not like. And if there's a way to do that while preserving anonymity and free speech, I'm all for it. But I think if, if it were not for free speech and, and X, like, I think we'd be living in a very different world today that would be a lot worse. And just to riff on a few things that, that, that all of you have said, you know, on communism, it is communism, and the great tragedy of human experiences we can't learn from the experiences of others. And it may not matter that communism has failed utterly and ended in death and misery wherever it has been tried in a variety of different cultures with a variety of different mechanisms, and every generation may need to experiment with it. I think the, the saving grace and the importance of preserving free speech is that the DSA's policies, and I would say in particular super progressive democratic policies, are measurably bad. They lead to bad outcomes. If you care about Black lives, there's a study that is uncontested that when you elect a Republican DA, all-cause mortality for young Black men in that city drops by 7%. That's all it takes.
- CPChamath Palihapitiya
Yeah.
- GBGavin Baker
You care about the environment? Well, progressives, there's so many regulations that you can't build solar, which is really the only thing that matters and, like, the world is gonna run on sunlight. You care about education? Their approach to education of getting rid of these elite schools that allows low-income people to have a real chance, you know, getting rid of math in California-
- CPChamath Palihapitiya
Awful
- GBGavin Baker
... it is profoundly disadvantageous to people. It leads to terrible outcomes, and we all know what happens with crime. It turns out that there's a certain percentage of people who, you know, are... Well, I think it's, like, 60, over 60% of the violence or 75% of the violence- ... comes from people who have, like, 10 or more convictions
- CPChamath Palihapitiya
Yeah, I, I think the specific stat is, like, .1% commits 70% of the crimes. And if you just dealt with the .1%, you'd have-
- GBGavin Baker
Yeah
- CPChamath Palihapitiya
... effectively no crime.
- GBGavin Baker
And so I just think the scary thing is, and I do worry for the first time, like, as a student of history, the United States has been, like, a very stable political, economic entity, geographically stable for a long time. And that's to its credit, 'cause we could have literally taken over the world after World War II. But man, if they get total control of some of these cities and drive out everyone who is productive, I don't know how you come back. And so that's, that is a little worrisome to me in terms of the future of, of the United States.
- CPChamath Palihapitiya
Sure.
- DSDavid Sacks
Well, and by the way, I, I, I don't think it's just New York. I mean, that race for mayor in LA, where, was it Raman somehow beat Spencer Pratt, thanks to ballot harvesting after voting day? Or I should say votes that were found and counted after election day. I mean, that will be a test to the DSA because they are highly organized, and they have learned how to take advantage of all these rules, these ballot harvesting rules, and all these types of things. The DSA, I think they've got something like half the city council seats now in LA, and they're growing. So especially in these low-turnout elections, and look, this was a Democratic primary in New York, which is a strongly blue state, so I think maybe 17% turned out, so I mean, it was very low, but this is where the DSA really thrives and excels because they care passionately, and they're highly organized, and they know how to take advantage. This is why they want all these, like, rank choice voting and all these types of things. They know how to manipulate and take advantage of those kinds of systems. So I think that you're gonna see this in lots of other jurisdictions, wherever they're organized. I think LA will be a really interesting test. So I don't think we can just chalk this up to Zoran's popularity, you know. This is a national movement, and we're gonna see it in a lot of places. But there's no question that Mamdani is now kind of the spiritual leader. I mean, a lot of these people don't... They think AOC is a sellout, you know, or Bernie is a sellout. You know, they are way more radical than even, even those types.
- CPChamath Palihapitiya
To add to that, Sacks-
- DSDavid Sacks
Yeah
- CPChamath Palihapitiya
... they did learn something from Trump, which is build a big tent. So you're seeing Bernie, Mamdani, Ro Khanna. They're all kinda like-
- 45:12 – 1:01:46
China's open-source AI catch up, distillation, OpenAI's new chip
- JCJason Calacanis
to speak. Topic two, Chinese open source models appear to be catching up with the US frontier models. Let's start with a GLM 5.2 released by China, Z.AI. This is a frontier class, open source, free to download anywhere model. 744 billion parameters, one million token context window, and it's under the MIT license. If you don't know what that is, open source, uh, licenses have very spec-
- GBGavin Baker
Super open source, you know?
- JCJason Calacanis
It's super open source. Thank you.
- GBGavin Baker
The most open source.
- JCJason Calacanis
The most open source of all open source. If you open it up, you can use it however you like. Uh, you can fork it. You can build your own company based on that. No regional restrictions, no API, fully self-hostable. No, uh, no Darien-
- GBGavin Baker
It's just yours. It's just yours
- JCJason Calacanis
... yanking your chain. It's yours. Do what you want with it.
- GBGavin Baker
It's just yours.
- JCJason Calacanis
That's it.
- GBGavin Baker
And you just gotta, you just gotta reference the, you just gotta reference the license. That's it.
- JCJason Calacanis
Yeah. You shout out the license, and you're good. Scored 51 points on the Artificial Analysis Intelligence index. That's the highest score of any open weight model ever. Stacks up nicely next to the frontier models, beat GPT 5.5 on the frontier SWE coding benchmark. That's a software one. Trails Claude Opus 4.8 by less than one percentage point. API usage cost obviously much cheaper. 85% cheaper, in fact, than GPT 5.5 for comparable performance. Z.AI founder told Elon Musk open weight fable capabilities will be here sooner than Q1 2027. Gavin, in other words, all this hand-wringing, all of these legal restrictions, self-imposed restrictions, are now completely or close to completely moot if they're going to have a model in Q1. Does this six months even matter? Does six months in the grand arc of AI matter or not? And what does this mean for frontier models?
- GBGavin Baker
I do think how good GLM 5.2 is has challenged some of my beliefs. And there was a great p- post from a TPU engineer that for sure distillation has happened. There's been a, been an immense amount of distillation, no question. You know-
- JCJason Calacanis
Please explain to the audience what that means
- GBGavin Baker
... distillation is when you have, you know, a, a... Like, you know, we all have seen videos of these Chinese iPhone farms. Just picture a farm like that, tens of thousands of phones, iPads, and computers that are asking the Claude API through masked accounts very specific questions, and then these, what's called reasoning traces, are being harvested. 'Cause if you're on the API, you know, you get to see every token. And those reasoning traces are then fed back into the model during the reinforcement learning process and probably during the pre-training process, and that is a way that you can get really, really close to the frontier at a fraction of the cost. And this is for sure going on, and has gone on for a long time. I do think-
- JCJason Calacanis
It's a cheat sheet. It's a cheat sheet for other models to catch up
- GBGavin Baker
... it, it would be like, it would be like, it, it would be like asking Google every question you could ever imagine, every search imaginable, getting all the results, and then putting your own search engine together.
- JCJason Calacanis
All together.
- GBGavin Baker
To make it very simple. Yeah. Exactly. But now that this model is so good, it is good enough to do its own RL And, you know, the kind of cat may be out of the bag. Now, I don't think we really know how good Mythos is. We don't really know how good the no- next OpenAI model is. We haven't seen the next SpaceX model. So maybe that gap opens up again. But either way, I profoundly believe the future is composable models, and you're going to every enterprise. You're gonna have a- what Andrej Karpathy called a council of LLMs. You're gonna have, you know, you're gonna have Grok, you're gonna have Anthropic, you're gonna have OpenAI, Google. You're gonna have at least two of those. I would argue Grok should always be one of the two 'cause of its dedication to the truth, and it will tell you as a business owner a politically inconvenient truth that you need to know for your data. But you're also going to have your own open-weights model that you RL'd on your data, and you're gonna put those two together, the frontier models and your own model, and you are going to get, you know, real Pareto-dominant outcomes. And, you know, half the queries are gonna be go to the open-source model, maybe 85%, and only the hardest ones are then... Maybe they all go to open source first, and only the hardest ones are then checked by the frontier models. So I think this is the future. It's coming. And a misconception that a lot of people have is that open-source models are, you know, somehow bad for AI. They're awesome for the AI infrastructure providers. They just shift economic value from the margins of the frontier labs to the infrastructure, and that's not bad for AI.
- DSDavid Sacks
That's great for them.
- GBGavin Baker
It's great for them. It's-
- DSDavid Sacks
It's great for them
- GBGavin Baker
... but I do think there's still a role for these frontier models, and it may be true. To date, frontier tokens are capturing 90% of the economic value, and open-source tokens are probably 80%-plus of tokens processed, and those ratios may be here to stay, but I just think composable models are the future.
- DSDavid Sacks
What does that mean, composable model?
- GBGavin Baker
Well, a composable model where you have, if you're a corporation, if you're, um... Do, is there, is there a new name for your super-secret, um, startup, Travis? What's the new name?
- DSDavid Sacks
No, no, the, the, the name is called Adams. It's not super secret. It's super awesome. [laughs]
- GBGavin Baker
Su- It's super awesome. Super awesome. Um, for your super awesome startup, Adams, which man, lo- loads of people have been calling me to say how, like, they've been in the, you know, they've, they've spoken to you and-
- DSDavid Sacks
Yeah
- GBGavin Baker
... investor, the, the, uh, your, your dog is hunting with investors, Travis.
- DSDavid Sacks
All right. Fair enough. Fair enough.
- JCJason Calacanis
Hmm. Okay.
- 1:01:46 – 1:10:17
Micron smashes earnings, AI's memory crunch hitting Apple and consumer hardware
- JCJason Calacanis
Micron smashed their earnings. If you don't know Micron, they are one of only three companies on Earth that make high bandwidth memory. These are specialized chips. They sit on top of the NVIDIA GPU, and their entire twenty twenty-six supply is sold out and has been for some time. SK Hynix and Samsung also make HBM. Micron smashed earnings, revenue up four X, four X year over year, nine billion to forty-two billion, beat expectations by sixteen percent. Big jump in guidance for Q4, fifty billion versus forty-three billion. Their stock is up 10X. Shout out to Gavin. In our twenty twenty-five prediction show, he gave, uh, a call on HBM makers like Micron as the best performing asset. Since that time, Micron up fourteen X.
- GBGavin Baker
I'm not crying in my soup.
- JCJason Calacanis
You're not crying in your soup. I got a ton of information here. I think this-- Well, I'll just end on the Apple price increases. Everybody knows Apple has been really, uh, been a beneficiary of the Run Local models movement that I'm part of, and, and people are buying hundred and twenty-eight gig, two hundred and fifty-six gig MacBook Pros, Mac Studios. But the gig is up apparently because now Apple, which had not passed on those costs to customers, is having to pass those increases on. So everything from, you know, the new MacBook Neo, which is their six ninety-nine laptop, you know, kinda competing with Chromebooks, is now seven ninety-nine, up fifty-- fourteen percent, and Mac Studio up twenty-five percent. The costs are just gonna be very significant. Inflation has come to the desktop. Your thoughts, Gavin, on Micron and the impact on the industry, and is this a temporary bottleneck, or does this mean everybody has to get into this business quickly?
- GBGavin Baker
No. Well, one, DRAM is the most important bottleneck. There's a whole segment of people on X who are very focused on bottleneck. I ca-bottlenecks, they call them the bottleneck bros. You know, they'll, they'll do some work with Claude, find some esoteric Japanese company. The bottleneck that matters is DRAM. And DRAM and HBM DRAM, this is the most important bottleneck simply because memory capacity and bandwidth are foundational to the performance of every AI model. So this is the most important bottleneck. Elon is focusing the Terafab on memory 'cause he sees it as the most important bottleneck. You know, not lasers, not capacitors, not power, power supplies, semiconductors, not NAND flash, not HDDs, DRAM. Uh, and I think this bottleneck is gonna be with us for a while. And it is kind of astonishing. So I think-- So a few thoughts. Like, what was important about the quarter? They announced that they have these SDAs, these supply chain agreements, that have a floor and a ceiling for prices with in- increasingly large group of large customers. And this covers essentially fifty percent of their revenue, I think with just four customers. And the floor pricing in these new contracts is ahead of prior cycle peaks from a gross margin perspective. And so this is really, I think, pretty maybe end up being very transformational for the industry. Most other parts of the semiconductor supply chain have rerated. You know, Lam Research, you know, the s- the wafer fab equipment suppliers, you know, they all trade at huge premiums to DRAM relative to prior cycles, and their business models have improved. But, you know, so has the industry structure and business models of DRAM because HBM DRAM is increasingly a customized chip. But as far as other people being able to do this, look, CXMT is going public in China. They're going to-- They may be the cure for Apple's ills. They will flood the market with, to some degree, cheap consumer-grade DRAM. But for the DRAM you need in these AI servers, there are three companies that can make it. It's really hard to do. This is as close to magic as science can get. And, you know, I think Terafab, Terafab, you know, is gonna be an important part of this solution. But, um, you know, these, these stocks still trade or cross-sectionally cheap relative to the rest of AI. Something I've been thinking about, memory is DRAM is probably gonna be thirty to forty percent of all hyperscaler CapEx next year. Every do- hundreds of billions of dollars that are spent, you know, [laughs] going straight to DRAM. It's wild. But this may actually be very valuable for society because it is probably, you know, going to, you know, inflate the cost of building a gigawatt data center to the point where, like, you know, even for the hyperscalers, um- Economics matter. We're caught in this prisoner's dilemma, and this may give us, as a society, time to adapt, to adapt, you know, what our friend Brad Gershner calls the social contract. So the high iPhone prices, you know, one, CXMT is coming for consumer-grade DRAM. But two, this may be good for AI. It may be good for us as a society.
- JCJason Calacanis
And making it is just really pure silicon, right? Like, making memory-
- GBGavin Baker
Yes
- JCJason Calacanis
... is just this incredibly refined silicon, and that might be the pre-bottleneck?
- GBGavin Baker
Yeah, yeah, making the HBM DRAM, making what NVIDIA calls Socam, making LPDDR. These are the k- types of DRAM that are really hard to make, not consumer-grade DRAM, and they are increasingly what you need in these AI data centers.
- JCJason Calacanis
Yeah. Semiconductor-grade. Yeah.
- DSDavid Sacks
Yeah, so my understanding of HBM, stands for high bandwidth memory, again, this is part of the, you know, the GPUs that go in the data center to run AI, is that you take the, the DRAM wafer or die, and you actually stack them. And so I think HBM3 is, like, eight- it's stacked eight dies high, but now they're increasing to 12 and even 16. And to basically stack them and then package them all together is- that's an advanced technology in and of itself. So you're seeing now, like Gavin's saying, there's only three companies that can do it, but also this is creating significant price pressure for all the consumer electronics businesses. Apple had huge news today where they announced massive price increases. And again, it's because DRAM now is less available because it's just being hoovered up by all the data centers. And if you're a data center and you need to buy GPUs, again, those chips, they're using immense amounts of DRAM because, again, one HBM chip is using multiple, like, stacks of DRAM. So it's just getting slurped up, and then it takes a couple of years to ramp up new capacity. So these companies are gonna do that, but that could take a while. We saw that in New York, remember? That was that Micron plant that was- had just broken ground and then got shut down-
- JCJason Calacanis
Mm-hmm
- DSDavid Sacks
... the same day because of some crazy environmental issue. So it's not easy to ramp this stuff in the US, although Micron is the one provider that's in the US. SK Hynix in South Korea. Samsung's in South Korea, too. But anyway, we're gonna see, again, more of this AI-flation they're calling it. You know, it's just another reason I hate AI, is it is in this narrow area of consumer electronics where there's competition for DRAM. It is leading to price inflation now.
- GBGavin Baker
Microsoft raised the price of the Xbox. You know, it's coming for the Switch. It's coming for the PlayStation. You know, there's demand destruction 'cause the price is in consumer, whereas AI demand is relatively price insensitive. David, I would modify one statement.
- DSDavid Sacks
Okay.
- GBGavin Baker
It's hard to build a Micron... It's hard to build a new fab in a deep blue state. You can build fabs-
- DSDavid Sacks
Yeah. Why were they trying in New York? It's kind of crazy.
- GBGavin Baker
You know, New York gave them all these incentives, and... But it do- none of those incentives matter. It's a little bit like solar power. You can be as pro-environmental as you want, but if you can't build and install solar 'cause of regulations, it doesn't matter. So, you know, maybe that Micron plant ends up getting, you know, built in my home state of Texas.
- JCJason Calacanis
The incentive game has kind of flip-flopped. It's like it used to be the states were courting [laughs] the factories and the fabs. Now, it's the fabs are like, "Which state can actually build this? We'll pay you whatever you want. [laughs] Just tell us where to send the envelope. We'll, we'll, we'll drop a couple of envelopes off. It's not a problem."
- DSDavid Sacks
Gavin, can you say how long it's
- 1:10:17 – 1:27:22
The math behind distributed compute and datacenters in space
- DSDavid Sacks
gonna take to stand up the fab at TeraFab?
- GBGavin Baker
Well, I mean, [laughs] if it was a normal fab, it would be a two, three, three and a half year process. But, you know, we, we, we've seen what Elon has done to other construction processes and, you know, he's starting with some, some advantages with the Intel partnership. So I don't think anyone knows, but based on past history, he's probably gonna stand up TeraFab faster than other fabs have been stood up. But it... What... This is really hard. It's really hard. It's the intersection of magic and science. You can't believe how complicated this is, so it's gonna be hard but, you know, he has a, he has a track record of doing, you know, what Jensen called impossible, superhuman. And so we'll see. We'll see how long it takes.
- DSDavid Sacks
Okay. You know, one other, uh, point here that I guess is r- uh, might be relevant to SpaceX AI, although it's, don't have to limit it to this, is, um, I think there's an assumption that over time it would get cheaper and easier to stand up new data centers, right? But what you're saying is actually it might be getting harder. It might be getting more expensive, right? Because there's competition for these components. The memory's getting more expensive. I'm not sure that the GPUs are getting any cheaper. I guess some of these-
- JCJason Calacanis
The transformers, the switchgear
- GBGavin Baker
It's impossible
- DSDavid Sacks
... and the energy might be getting cheaper-
- JCJason Calacanis
It's impossible
- DSDavid Sacks
... and then the entitlements are getting harder, and the political situation is getting harder. There's very few places you can even stand up new data centers. So is it the case that actually it's gonna get more and more expensive to-
- GBGavin Baker
100%. So to stand up a one-gigawatt data center, it's $35 billion in semiconductors, NVIDIA semiconductors, and then it's $25 billion of power and cooling equipment. And that is clearly inflationary because a lot of that $25 billion is the human labor required to install it. So the calculation that needs to be done for orbital compute is it's 35 billion of silicon in each space and y- you know, in, in literally outer space, in orbit, and on ground, but if you can get the cost of launch significantly below that $25 billion, then the math starts to really math. And when Starship is reusable, it's gonna cost $5 billion to put a gigawatt of compute into space. It's something that drives me crazy is people Picture these Pentagon-sized da- data centers. No, it's racks in space linked with lasers. It's a, it's kind of a virtual data center in space.
- JCJason Calacanis
Wait, 5 billion, is that 5 billion of launch cost, or what it-
- GBGavin Baker
5 billion of launch cost. Now you're at 40 billion to put the gig into space. You're at 60 billion terrestrially, and the 25 billion that is power and compute is clearly inflationary. And so it may be that in three or four years it's 70 billion versus 40 billion, and that 5, as Starship becomes rapidly reusable, is likely deflationary. So this is the economics that underpin orbital compute from first principles. And then on an ongoing basis, you are, y- you're maybe paying a billion dollars a year for the power to run those chips and cool them.
- CPChamath Palihapitiya
If I had to make a guess, I think what's gonna happen is that since 2021, about 40% of all data centers get contested, right? I think that number's gonna go up. So, Sacs, I suspect that whatever forecasted energy consumption that we are looking at in AI is grossly imbalanced. There is very, very meager supply, and there's effectively infinite demand. So that probably pulls forward the economic equation to wanna go to space. But then again, that's gonna prefer SpaceX and their compute stack and their compute decisions over the hyperscalers and over anybody else. And so you're gonna have a cost of an output token, I think terrestrially, particularly from the hyperscalers, be a little economically lopsided versus SpaceX once they get it to scale. Now, that's the key statement. Whatever's left on the ground, though, will be incredibly, incredibly valuable. It'll be a diamond. These are diamonds. And the thing is, you have to find reasonable size, right? You can't have a 10-kilowatt diamond. That's like a little pebble of [beep] . Nobody cares. But if you're in the reasonable hundreds of megawatts to gigawatts, man, those are like hope diamonds.
- JCJason Calacanis
Yeah.
- CPChamath Palihapitiya
Those are just lock 'em down.
- JCJason Calacanis
Which I own. [laughs]
- CPChamath Palihapitiya
[laughs]
- JCJason Calacanis
Uh, Travis, uh, there was a, uh, interesting trademark filed this week, so more in the investigator, uh, investor, uh, [laughs] investigator, uh, of the Tesla plus SpaceX marriage that, uh, everyone seems to believe is gonna happen, uh, shortly.
- CPChamath Palihapitiya
No, you can, you can, you can say it, that s- You can give me credit for it.
- JCJason Calacanis
Of course, yes. Uh, a- as, as Chamath has architected in his, [laughs] uh, in his high perch. Uh, but this trademark came out from-
- GBGavin Baker
By the way, how cool would that be? How cool would it be for those two to come together?
- CPChamath Palihapitiya
It's gonna happen.
- JCJason Calacanis
Oh.
- CPChamath Palihapitiya
It's gonna happen.
- JCJason Calacanis
Be amazing.
- CPChamath Palihapitiya
And, uh, it'll be incredible, and, uh, if you're lucky enough to be an owner of both, oh my-
- JCJason Calacanis
Who's the top and who's the bottom?
- GBGavin Baker
Everybody can be an owner of both.
- JCJason Calacanis
Chamath is top. Who's the bottom?
- GBGavin Baker
Everybody, everybody can decide to be an owner of both.
- CPChamath Palihapitiya
Jason, Jason, I'll be, I'll, I'll be making love to myself when this happens.
- 1:27:22 – 1:41:39
IPO update: Anthropic at $3T, SpaceX float, Cerebras drops after breaking deal price
- JCJason Calacanis
IPO. Give us an update on where these IPOs are happening. Obviously, SpaceX had an incredible IPO, but has retreated from this, you know, otherworldly $200 share price. So, so to the extent you can talk about these two, as well as the two IPOs to come, $4 trillion in backlog. We've obviously got OpenAI and Claude, I'm sorry, Anthropic, which makes Claude. Both of those will be worth a billy plus. You put all this together, $4 trillion of new offerings plus Cerebras in there in the mix. How does the market manage this much new inventory being put on the market? Obviously, the flow to SpaceX is notably small, but over time, people like yourselves and, and other insiders, uh, Founders Fund, et cetera, will be unlocked, uh, and have the ability to distribute to their LPs. So this is gonna be a moving target, I think, on terms of share price, and can the market absorb this? Where does the money come from? Retail, or does it come from people selling their Bitcoin and moving it over to something more exciting? What's the dynamic here in the market? I know we're in uncharted territory, Gavin.
- GBGavin Baker
Well, well, for sure. There's no precedent for any of this. But a few things I would say, like, just in no particular order. I think Anthropic is worth $3 trillion today, and it's very important-
- JCJason Calacanis
I'm sorry. Did you say Anthropic is worth $3 trillion?
- GBGavin Baker
Yeah, I think that is roughly where it would probably trade as a public company. And-
- CPChamath Palihapitiya
[whistles] Wow.
- GBGavin Baker
Yeah, Anthropic-
- JCJason Calacanis
What?
- CPChamath Palihapitiya
Whoa.
- GBGavin Baker
I mean, look, they're gonna do... They're gonna end this year well-
- CPChamath Palihapitiya
Oh, man
- GBGavin Baker
... they're gonna end this year well over $100 billion. So what-
- CPChamath Palihapitiya
Holy [beep] . [laughs]
- GBGavin Baker
What, what's the '28 number?
- JCJason Calacanis
$3 trillion. [laughs]
- GBGavin Baker
What's the '28 number? Is it 200? Is it $300 billion? It's probably not gonna trade at 10 times that number, and it will be very profitable at that scale because it'll be inference dominated and people are reporting they have 85% gross margins on inference. B- but in terms of the market absorbing this, like, the market's already absorbed it. You know? It's, it's just shifting from private to public. And so in the scale of global capital markets, these seem like really big numbers, but you're just moving from the private markets to the public markets, which are even bigger. As far as SpaceX specifically, I think one of the more important things, um, is everybody who's a SpaceX investor or employee has had a chance to sell every six months for the last 10 years, so they not, may not be the wall of liquidity that some people are thinking about. I read this New York hedge fund short, short report that you could just short SpaceX on the lockup 'cause so many people are gonna sell. Really? Well, everybody who's on the cap table, they had an opportunity to sell, and mo- almost half the employees at SpaceX bought on the IPO. Now, I do think Cerebras-
- CPChamath Palihapitiya
But, uh, Gavin, one thing, though, I gotta say, so I, I, I've had SpaceX since 2018. What, what. But-
- GBGavin Baker
Yes
- CPChamath Palihapitiya
... their little, their little liquidity thing every year, like last year it was like 350, $350 billion last year. So you got an 8X in one year. You could have a lot of people selling, right?
- GBGavin Baker
For sure.
- CPChamath Palihapitiya
They were doing little 20% up, 30% up clips for many years, and then an 8Xer could create that liquidity.
- GBGavin Baker
Maybe, but we'll see. That's possible. But the employees are buying at the new price, and they're probably the, you know, at some level, one of the biggest pools of, you know, ownership that's gonna unlock.
- CPChamath Palihapitiya
Yeah
- GBGavin Baker
And then, you know, I do think a lot of people probably own SpaceX through SPVs, and those probably don't unlock or get distributed anytime soon. So I'd just, you know, I would be careful with assuming. I don't think Elon's a seller of his-
- TKTravis Kalanick
Yeah
- GBGavin Baker
... fifty-
- TKTravis Kalanick
No, he's definitely not, obviously. Yeah.
- GBGavin Baker
So-
- TKTravis Kalanick
And a lot of us, and a lot of us aren't sellers, you know-
- GBGavin Baker
Absolutely
- TKTravis Kalanick
... and that's great. Yeah.
Episode duration: 1:41:42
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