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The SpaceX IPO, Fable 5, AI Capex Update & Market Check w/ Gavin Baker, Andrew Fox & Clark Tang

Brad Gerstner sits down with Gavin Baker and Andrew Fox of Atreides Management, alongside Altimeter partner Clark Tang, to break down one of the biggest questions in tech and markets: how should investors think about the SpaceX IPO?

Brad GerstnerhostGavin BakerguestClark Tangguest

Jun 11, 20261h 20mWatch on YouTube

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Transcript

80 min read · 16,102 words

0:00 – 0:40
Intro
1. BGBrad Gerstner
  And I think we're all pretty AI pilled. And if you're AI pilled, that means we gotta build a lot more compute than the world thinks, and that these models are gonna be a lot more valuable than people think. You combine that with their core business, I don't know another entrepreneur or another business that's a better bet on the future, right, than SpaceX. And so I think for most institutional investors, it's a must-buy, a must-own. It's set it and forget it, right, in order to have a, a, a real bet on both the space and the AI future.
0:40 – 3:05
Intro — SpaceX IPO in Two Days, Mythos Launches, Taiwan Takeaways
1. BGBrad Gerstner
  All right. Here we go. Early morning, Silicon Valley. BG2 is back. We're chopping it up on all things tech and markets. To do that, I have none other than GB in the house, Gavin Baker from Atreides. He's brought his main guy, Andrew Fox, and of course, I had to draft Clark Tang into the mix, my partner, um, to ta- to talk about some of the big questions of the day. You know, how should we be thinking about the SpaceX IPO? You know, what are the big levers? There are big numbers out there for what's gonna happen over the course of the next few years. So let's break that down a bit. He- help simplify it for folks. Uh, Mythos launched yesterday. I wanna talk a little bit about, like, who's up, who's down in the race for super intelligence. Where are we? What did we learn with the Mythos launch? And Clark was in, uh, in, in Taiwan last week, um, with Jensen at Computex and GTC. So what was our takeaway there? What's going on with GPUs memory? Where are the bottlenecks, and where do we go from here? To start everything off, um, you know, maybe just kick it over to you, Gavin, talking about the SpaceX IPO. The IPO is in two days. Uh, you're a big shareholder. Congratulations. We're also a shareholder. Uh, you know, we also be- expect to be buying in the IPO. The Wall Street Journal's reporting, um, you know, that Goldman Sachs are both saying 160 billion in revenue in 2028. Um, we know that the IPO is $135 a share, 1.77 trillion. Um, so when we think about kind of what the big levers are, there are so many moving parts in this IPO. Um, nobody's better than you at just breaking it down, simplifying it. What are the key levers that we ought to be thinking about, that you're thinking about over the course of the next few years?
2. GBGavin Baker
  Sure. Um, so great to be here. Thank you for having me. I thought we were gonna call it B- BGGB, but-
3. BGBrad Gerstner
  [laughs]
4. GBGavin Baker
  B- but we can stick with BG2. I'm in your house.
5. BGBrad Gerstner
  Hey, hey, hey.
6. GBGavin Baker
  That's okay.
7. BGBrad Gerstner
  All subject to revision.
8. GBGavin Baker
  That's okay. [laughs] That's okay. So I think there's two big levers or variables that I think people should focus on, and, you know, I'm not gonna comment on where I think, um, those variables go. But one is, um, you guys have this chart. Um, did you, did you post this on X?
9. SPSpeaker
  I did. I did before, and then we also included a new addition with, uh, xAI's new deals as well.
10. GBGavin Baker
  Yeah.
11. SPSpeaker
  Yeah.
12. GBGavin Baker
  So Clark, who I've known for many years-
13. SPSpeaker
  [laughs]
14. GBGavin Baker
  Um, uh, made a, did a great analysis here, and he shows that xAI's deal, um, with Google for
3:05 – 13:28
xAI's Google & Anthropic Deals: Highest Operating Profit Per Gigawatt
1. GBGavin Baker
  cloud computing, uh, generates more operating profit per gigawatt, um, than Anthropic, than Meta, than Google, than OpenAI. Uh, their deal, um, actually with, uh, Anthropic also generates probably more operating profit than anyone but, um, Anthropic. And so, you know, um, the, your, your colleague at Altimeter, Freyja, also she calculated a 55% IRR-
2. BGBrad Gerstner
  Mm-hmm
3. GBGavin Baker
  ... on Colossus-1.
4. BGBrad Gerstner
  Mm-hmm.
5. GBGavin Baker
  You know, if you can borrow money at 6, 7, 8% and invest in something with a 55% IRR, I'm not the most sophisticated thinker, but that math maths.
6. BGBrad Gerstner
  Right.
7. SPSpeaker
  [laughs]
8. GBGavin Baker
  And so I think the most important variable, one of the two most important, is how quickly they bring on terrestrial data centers.
9. BGBrad Gerstner
  Mm-hmm.
10. GBGavin Baker
  We do know from Jensen that, uh, Elon brings data centers up faster than anyone, 122 days. Speed is literally cost.
11. BGBrad Gerstner
  Right.
12. GBGavin Baker
  'Cause every day you're paying electricians and plumbers. That's cost. Um, and they're now monetizing them at arguably the highest rate.
13. BGBrad Gerstner
  Mm.
14. GBGavin Baker
  And so I think, you know, everybody should run their own math on that, but that is a massive variable.
15. BGBrad Gerstner
  Yes.
16. GBGavin Baker
  Um, truly massive variable. The second thing is, you know, we have a chart, um, and it's wildly out of date now.
17. BGBrad Gerstner
  [laughs]
18. GBGavin Baker
  It's kind of freaking amazing. This chart is, I think ... Is this chart from 10 days ago? But, um, in like the 10 or 12 days since this chart, since we made this chart, which shows the Pareto curves for Opus 4.7 for coding, for Codex from OpenAI, um, and now we've had Opus 4.8. It was already out of date.
19. BGBrad Gerstner
  [laughs]
20. GBGavin Baker
  And now we have Fable-
21. BGBrad Gerstner
  Totally
22. GBGavin Baker
  ... and Mythos, which is freaking wild. In 10 days-
23. BGBrad Gerstner
  Yes
24. GBGavin Baker
  ... like, we would've had to update the chart twice.
25. BGBrad Gerstner
  Right.
26. GBGavin Baker
  Um, but what the Pareto curve sh- shows is how much intelligence you can get for a given amount of cost. And I do think being all revenue will accrue to the Pareto curve. All-
27. BGBrad Gerstner
  Right
28. GBGavin Baker
  ... at least kind of frontier model revenue will accrue to the Pareto curve. And this is Pareto curve for co- coding. And what I think is so impressive is that, um, you could see in the chart that Composer 2 was Pareto dominant, um, or, you know, at, at the lowest level of intelligence with very little training.
29. BGBrad Gerstner
  Right.
30. GBGavin Baker
  This just reflects, and I know you know Cursor well, and I think you know Cursor a shitload better than I do. A vast amount better than I do.
13:28 – 19:08
"Elon Web Services" — Nobody Had AI Compute in the SpaceX Model
1. GBGavin Baker
  cheaper.
2. BGBrad Gerstner
  Um, Clark, I would say probably the biggest surprise of the last six, six weeks-
3. SPSpeaker
  Mm
4. BGBrad Gerstner
  ... uh, is that Elon, you know, we talked about it on the All In podcast. We called it EWS, Elon Web Services.
5. SPSpeaker
  [laughs]
6. BGBrad Gerstner
  Right? That, that he struck these huge deals with Anthropic and Google. I don't even think people were thinking about SpaceX in the AI compute game, right? We ... If you looked at the models as of a few months ago, it was connectivity, so Starlink, and then it was x.AI, the model.
7. SPSpeaker
  Mm.
8. BGBrad Gerstner
  But this whole category of taking all of this compute, which he's uniquely good at standing up, right, and then reselling it in a way that's highly profitable was not in a lot of people's forecasts. Now it's a major component of the forecast. You know, you and I did this podcast with Jensen-
9. SPSpeaker
  Mm-hmm
10. BGBrad Gerstner
  ... where Jensen said Elon is an N of one.
11. SPSpeaker
  What they achieved is, is singular.
12. BGBrad Gerstner
  Right.
13. SPSpeaker
  Never been done before. Just to put it in perspective, 100,000 GPUs, that's, you know, easily the fastest supercomputer on the planet. That's one cluster. Um, a supercomputer, uh, that you would build would take normally three years to plan.
14. BGBrad Gerstner
  Right.
15. SPSpeaker
  And then they deliver the equipment, and it takes one year to get it all working.
16. BGBrad Gerstner
  Yes.
17. SPSpeaker
  We're talking about 19 days.
18. BGBrad Gerstner
  Wow. N of one is right. Elon is an N of one. And his ability to secure supply, stand up the supply, you know, deploy it in a way that's, uh, you know, coherent and effective for both himself and I guess now for others. So walk us through kind of that. It looks to me, again, like this is a major component of the revenue story.
19. SPSpeaker
  Totally. I mean, so we, we were all at the MacroHard data center, and it was just very evident the amount of engineering that was, that had gone into building these sites. Um, you know, people always talk about Google and their ability to, to build a TPU and sell the TPU to Anthropic to generate revenues for AI. I think it's a pretty similar dynamic here with Elon able to secure power, uh, build these sites faster than anyone else, and also be able now to monetize it to, um, to the, this massive AI market that's ahead of us. Um, if you look at the, the relationships that he's forged with a lot of his suppliers, you know, be it Jensen, be it, you know, all of these different, um, different sites that actually want xAI as a tenant, um, his a- his ability to finance these deals at, at very attractive, uh, financing rates relative to a lot of the other players in, in the space, you know, these are advantages that compound over time. And when you've built the credibility to stand up these sites and monetize at these levels, um, you know, it's v- it's actually a very attractive, uh, very attractive proposition for, for a lot of folks involved. Um, and actually, you know, the ... If you look at the, these deals in particular, Gavin, you, you pointed out, but, you know, they're, they're actually monetizing, you know, perhaps better than [laughs] other players in the space by selling this infrastructure.
20. BGBrad Gerstner
  A lot higher. Um, Google is obviously paying SpaceX a huge premium for this compute. Fox, you said something that I thought was really important, which is, you know, it may very well be that in order to get, you know, first in line on space compute, which Google certainly wants to do, that they're willing to pay a premium for their terrestrial compute. And so to me, that's how you kind of square the circle as to why the premium. Any thoughts?
21. GBGavin Baker
  Yeah, look, I think there's some of that embedded there. But, um, look, at the end of the day, SpaceX can stand up compute quickly, they can stand it up coherently, and they can stand up a lot of it in one place and have it readily available. So look, I think that's most of the premium. But outside of that, certainly-
22. BGBrad Gerstner
  Yeah
23. GBGavin Baker
  ... people are going to space over time, so.
24. BGBrad Gerstner
  I'm gonna pay a little call option to get first in line for space.
25. GBGavin Baker
  There you go. Good way-
26. BGBrad Gerstner
  We've all been investing-
27. SPSpeaker
  Yeah
28. BGBrad Gerstner
  ... in the neo cloud space.
29. SPSpeaker
  Yes.
30. BGBrad Gerstner
  So, like-
19:08 – 26:01
Data Centers Are Not Commodities: First-Principles Design
1. GBGavin Baker
  What I would say is that I think there is a belief that these data centers are commodities.
2. BGBrad Gerstner
  Mm-hmm.
3. GBGavin Baker
  And I do not share that belief.
4. BGBrad Gerstner
  Mm-hmm.
5. GBGavin Baker
  Um, I don't think anybody-
6. BGBrad Gerstner
  No
7. GBGavin Baker
  ... around this table shares that belief. And in the same way that Elon was able to re-engineer a rocket from first principles and re- make it reusable, he engineered an electric car from first principles. You know, everyone else was trying to, you know, make an electric car like an internal combustion engine car, and he thought about it differently. And, um, I think he looked at data center design from first principles and he designed something fundamentally different. And I did actually ask the team, I said, "Hey guys, maybe, uh, be a little less public about things that are very obvious to you- [laughs]
8. BGBrad Gerstner
  Right
9. GBGavin Baker
  ... about how to design a data center-
10. BGBrad Gerstner
  Yeah
11. GBGavin Baker
  ... but are revelations to other people."
12. BGBrad Gerstner
  Right.
13. GBGavin Baker
  Because I think what you're doing is maybe, um, more differentiated than you perhaps realize, 'cause what you're doing is so logical to you but maybe lo- not logical to everyone else. And that's h- how he was able to do it-
14. BGBrad Gerstner
  Right. Yeah
15. GBGavin Baker
  ... in 122 days.
16. BGBrad Gerstner
  Yeah, to, I mean, to that point, Brad, yesterday we were meeting one of our portfolio companies and we were talking about behind the meter and we're, you know, really thinking about it. There's only maybe two or three, two or three players now that can actually reliably engineer a behind-the-meter, uh, data center. And, you know, there's real engineering work that goes into all of this.
17. GBGavin Baker
  So if you think about this-
18. BGBrad Gerstner
  Yeah
19. GBGavin Baker
  ... i- if you're a gas combustion... If you're Vernova and you say, "We only have a certain number of gas combustion engines. Now we can sell them to x.AI or we can sell them to one of these startup Neoclouds," who are you gonna sell them to? Well, and there's another dynamic. Everyone starts making more money-
20. BGBrad Gerstner
  Right
21. GBGavin Baker
  ... when the GPUs get energized-
22. BGBrad Gerstner
  Faster
23. GBGavin Baker
  ... and sold. Faster.
24. BGBrad Gerstner
  Exactly.
25. GBGavin Baker
  So literally speed is money for all of the suppliers.
26. BGBrad Gerstner
  Right.
27. GBGavin Baker
  And by power, land, turbines. So I think it's... We'll, we'll see.
28. BGBrad Gerstner
  Right.
29. GBGavin Baker
  Hey, Brad, man.
30. BGBrad Gerstner
  And, and, uh, but, but this is just, we're just talking terrestrial.
26:01 – 29:25
Orbital Compute Economics: $5B Per Gigawatt in Space vs. $25B on the Ground
1. CTClark Tang
  AI satellites. You know, Elon did a great, um-
2. BGBrad Gerstner
  Yeah, that pod, that, that pod was incredible, that he laid out the other day, the specs on the satellites.
3. CTClark Tang
  It was really great because I think they are finally showing people here's how you could viably-
4. BGBrad Gerstner
  Mm
5. CTClark Tang
  ... design one of these satellites, and how heavy is the satellite, how many could you fit into a Starship launch. And when you back into the numbers, you get to something like five megawatts of capacity per Starship launch.
6. BGBrad Gerstner
  Right.
7. CTClark Tang
  There's 100 metric tons in one of those Starships. So you can back into the math of how much will it cost-
8. BGBrad Gerstner
  Right
9. CTClark Tang
  ... per gigawatt to launch these satellites into space.
10. BGBrad Gerstner
  Right.
11. CTClark Tang
  Launch this compute into space. Um, and the math that you get to before you account for things like, um, bad GPUs-
12. BGBrad Gerstner
  Mm-hmm
13. CTClark Tang
  ... bad satellites, right? These will all be things that happen. But the math you get to is it's about $5 billion per gigawatt of CapEx to put these in space.
14. BGBrad Gerstner
  Right.
15. CTClark Tang
  For comparison, terrestrially, talk about the switch gears, the generators, the transformers, the shell, getting the power. That today is about 25, 20 to 25 billion per gigawatt. So we're talking about a 5X reduction in cost on half of your bill of materials-
16. BGBrad Gerstner
  Right
17. CTClark Tang
  ... for the data center.
18. BGBrad Gerstner
  Right.
19. CTClark Tang
  Which is a huge number.
20. GBGavin Baker
  Yeah, just, just very simply, I mean, just to say it, put, it costs $60 billion to put a gigawatt-
21. CTClark Tang
  Mm-hmm
22. GBGavin Baker
  ... on the ground today.
23. CTClark Tang
  Yeah.
24. GBGavin Baker
  And we'll call it 35 of that is, are the GPUs and the silicon that's doing the training and the inference. And 25 billion is the land, the shell, the power, and the cooling. I would hypothesize that those elements are probably gonna be inflationary, so that 25 billion-
25. CTClark Tang
  Yes
26. GBGavin Baker
  ... may not go down. And because space, power, cooling are ef- effectively free in space, and when I say space, I mean land.
27. CTClark Tang
  Yes.
28. BGBrad Gerstner
  Yes.
29. GBGavin Baker
  You know? [laughs] There's no land in space, but there is space in space.
30. BGBrad Gerstner
  But there's a lot of space. There's a lot of space in space.
29:25 – 35:05
The Most Underrated Variable: What Cursor Does for xAI's Model
1. BGBrad Gerstner
  the price even further. The one thing we haven't talked about is their model, right? And I find this surprising, right? Six, six months ago, x.AI was competing, they were doing pretty well, but they've done something dramatic over the course of the past couple, uh, couple months, which is they bought Cursor. Right? Cursor is 700, 800 people, was already doing incredibly well from a revenue perspective. Our own, uh, projections were that they could exit this year at up to $10 billion of revenue, so they were growing very fa- fast. Uh, uh, one of the leading coding agents. But they also had this incredible team with the potential, right, to really build a frontier level model, but they were compute constrained. So all of a sudden, they get bought by X. X has massive compute that they can now train on. Um, and when I think about the revenue in AI, the... Like if I look at that line item in the models, having it go from $10 billion to 150 billion, yes, a lot of that will be the Core Weave type business that they have, but the question is, how much of that is going to be the core x.AI business that's really powered by the new team from Cursor? So any thoughts on that, Gavin?
2. GBGavin Baker
  Right now, so Composer 2.5 was Pareto dominant 12 days ago.
3. BGBrad Gerstner
  Right.
4. GBGavin Baker
  It was trained on the Kimi K 2.5 base model.
5. BGBrad Gerstner
  Right
6. GBGavin Baker
  Now what's happening is the Grok 4.3 1.5 trillion parameter model is training. One would hypothesize based on scaling laws that that will, might be a better base model. And then the Cursor data is being injected into the pre-training process, not just reinforcement learning. And we'll see, and I think that is gonna be a very important data point when that comes out.
7. SPSpeaker
  Right.
8. GBGavin Baker
  And I just think everyone should keep in mind that once you are at multiple places on that Pareto c- curve, if you have compute, you can scale really rapidly.
9. SPSpeaker
  Mm.
10. BGBrad Gerstner
  You know, that, that to me is if I had to say what the one piece that's being lost in the story, right? Like, it's easy for everybody to get excited about the deals with Anthropic because you can put your hands around that. You know how much revenue it is. I see debate about, you know, the 90-day termination and how long they'll last and what multiple do you put on those revenues. But I think the thing that's getting lost is I think they dramatically advanced their capability when it comes to building a frontier model. People outside Silicon Valley may not know, you know, Michael and the team at Cursor as well. This is an extraordinary team-
11. GBGavin Baker
  [laughs]
12. BGBrad Gerstner
  ... that he just downloaded-
13. SPSpeaker
  Mm
14. BGBrad Gerstner
  ... right, into SpaceX. SpaceX was already building good models, and what they have is an, they have this way to monetize compute that gives you this call option that you can pull all that compute in-house, right, to train a model and then to run the model. I suspect if there's an upside surprise, if we w- went around the table, I'd say this is the place that's getting the least amount of attention and could have the biggest upside surprise.
15. SPSpeaker
  Yeah.
16. BGBrad Gerstner
  Any, any thoughts, Clark, o- on what you think is being overlooked or areas that you think are misunderstood about the business today?
17. SPSpeaker
  I, I would say, I would say what the last few weeks have proven is that Elon, um, their team can stand up all this compute. Actually, if you just, you know, went back one and a half years, you know, they were behind in the race to stand up compute. They were, you know, they, they didn't have that many H100s.
18. BGBrad Gerstner
  Right.
19. SPSpeaker
  They brought in Colossus. Then they brought in Colossus 2 at a scale much larger than anyone else. And now, you know, as we gear for Vera Rubin, you know, from, you know, a lot of my conversations, it looks like they've, you know, secured maybe up to 20% of Vera Rubin capacity.
20. GBGavin Baker
  It's extraordinary.
21. SPSpeaker
  Especially in the early days of, you know, when, you know, these, these chips are very scarce, that, that they are going to have a, a, a, a, a lead on all of this because, you know, people think that they can stand up this compute better.
22. BGBrad Gerstner
  Mm.
23. SPSpeaker
  So I think they'll al- you know, what, what the last few weeks have actually shown is that Elon, you know, Elon will take, you know, take a shot at hitting the frontier. But if it, you know, if for whatever reason, um, they, they have over-procured some capacity, this is a very scarce asset that they've shown that they can monetize at actually, you know, best in class margins and payback periods.
24. BGBrad Gerstner
  I mean, the irony is-
25. SPSpeaker
  Yeah
26. BGBrad Gerstner
  ... like, you know, r- you and I have been doing this long enough to know, I mean, that's why Bezos built AWS, right? He had to build capacity for Black Friday.
27. SPSpeaker
  Yeah.
28. BGBrad Gerstner
  Right? But then the rest of the year he sat on all this capacity that he had to build, and he figured out a really incredible way to monetize this. And by the way, investors at the time, 2009, 2010, when he was building out the capability around AWS, hated it-
29. GBGavin Baker
  Of course
30. BGBrad Gerstner
  ... because he was consuming all that free cash flow. Mi- meanwhile, he was digging the biggest gold mine in the history of the world, right?
35:05 – 37:00
Bull & Bear Case — Can SpaceX Really 8X Revenue in 4 Years?
1. BGBrad Gerstner
  right, the bears are looking at last year's revenue, say it was $18 billion, and they're looking at the forecast from the banks of $160 billion, you know, three years from now. And they're saying, "Listen, not many companies in the history of the world have basically 8X'd their revenue over three to four years," right? So that's where, you know, I think, and people get nervous about the valuation. When I look at this, again, when you break it down as an analyst, first principles, part by part, which is what I tried to do here, right? When you look at Starlink, it looks totally doable. When I look at what they're building in AI compute terrestrially, looks totally doable over the course of the next three years. When I look at the model itself after the acquisition of Cursor, you know, combining those things around the compute they have, that looks to me like it could be an upside surprise. So I would say that I think that, uh, you know, in the IPO, but I think when you look back three years from now, there's a decent chance that everybody's like, "Oh, my God, that was super obvious," right? Even though today all of these things have risk associated. Back to where we started. I'm not, you know, none of us are here to pump the IPO at $1.77 trillion. It's really to just break it down as we do inside our shop and to say, what is that distribution of future probabilities? What's the probability that it's higher from here? What's the pro- and I think we're all pretty AI pilled, and if you're AI pilled, that means we gotta build a lot more compute than the world thinks, and that these models are gonna be a lot more valuable than people think. You combine that with their core business, I don't know another entrepreneur or another business that's a better bet on the future, right, than SpaceX. And so I think for most institutional investors, it's a must buy, a must own. It's set it and forget it. Right? In order to have a, a, a real bet on both the space and the AI future.
2. GBGavin Baker
  From your lips to God's ears.
3. BGBrad Gerstner
  I mean, listen, I, I, again-
4. GBGavin Baker
  [laughs]
5. BGBrad Gerstner
  ... I think that I, I, I think that you're gonna have to wait. But, you know, we had this chart last week, right, that came out everybody was sending around Twitter
37:00 – 43:56
Post-IPO Drawdowns, Lock-Ups & How to Size the Position
1. BGBrad Gerstner
  conveniently timed. And, you know, it's like shows the average max drawdown post-IPO for, like, 20 companies from Facebook, Twitter, Alibaba, Shopify is, you know, over 50%. And so maybe that, again, we'll, we'll, we'll end this section here. You know, Gavin, you and I have been doing this a long time. We know it's going to be bouncy around the IPO. Um, you know, how do you as a manager try to, try to manage that? Um, do you try to trade ar- a- around the IPO? Do you set it kinda and forget it? I would say from an Altimeter perspective, what we tend to do is we take a base position that we set and forget, right? And then we may size up or size down depending upon how the market reacts in, you know, in, in a particular moment. Um, but any thoughts on, on this chart or y- y- you know, how, how people, you guys are thinking about it in particular. You obviously own a lot going into it.
2. GBGavin Baker
  First, agree with absolutely everything you said, and I actually think about it the same way. Set it and forget it.
3. BGBrad Gerstner
  Yeah.
4. GBGavin Baker
  You've talked about you have ballast, you move around.
5. BGBrad Gerstner
  Right.
6. GBGavin Baker
  And you move the ballast to one side of the ship. When you want a-
7. BGBrad Gerstner
  [laughs] Totally
8. GBGavin Baker
  ... the ship to lean into the wind to go faster-
9. BGBrad Gerstner
  Yeah
10. GBGavin Baker
  ... and you move it to the other side.
11. BGBrad Gerstner
  Exactly.
12. GBGavin Baker
  When you don't want the ship to tip over. I think that's a great analogy.
13. BGBrad Gerstner
  Mm.
14. GBGavin Baker
  Think about all y- important companies in the portfolio the same way, so 100% agree. I mean, this, this chart is a bummer.
15. BGBrad Gerstner
  Yeah.
16. GBGavin Baker
  What I would say is, you know, this data on IPOs, but what I would just say is this is a really unprecedented situation.
17. BGBrad Gerstner
  Yes.
18. GBGavin Baker
  We've never had an IPO this big. We've never had an IPO that's gonna go into an index this quickly.
19. BGBrad Gerstner
  That fast.
20. GBGavin Baker
  We simply do not know how much selling there will be from investors. I would hazard a guess. I mean, I'm... I don't know. But Elon, I don't think he needs liquidity, and I think he owns... What does he own, Foxey?
21. BGBrad Gerstner
  S- 50%-ish.
22. GBGavin Baker
  50% of the company.
23. BGBrad Gerstner
  And by the way, he's locked up for 365 days.
24. GBGavin Baker
  Yeah. [laughs] Yes, exactly.
25. BGBrad Gerstner
  366 days. So we know he's not selling, right?
26. GBGavin Baker
  So I just think it's an unprecedented situation. And the right answer-
27. BGBrad Gerstner
  Yeah
28. GBGavin Baker
  ... is I don't know what's gonna happen in the short term.
29. BGBrad Gerstner
  Yeah.
30. GBGavin Baker
  And the right answer that I would just, you know, encourage every investor making their own decision is to just think exactly the way you articulated it. We have these different levers. We have these different variables. Think about each one of them from first principles. Make your own decision.
43:56 – 51:00
Fable 5, Mythos & Why Snapshot Benchmarks Are Broken
1. BGBrad Gerstner
  us your thoughts.
2. GBGavin Baker
  I mean, um, it's hard to say that Anthropic's not up. [laughs]
3. BGBrad Gerstner
  Yeah.
4. GBGavin Baker
  Like after the revenue numbers they put up, after the Fable 5 release, and Mythos is evidently even better. But I just think that Noam Brown-
5. BGBrad Gerstner
  Yeah
6. GBGavin Baker
  ... post from yesterday-
7. BGBrad Gerstner
  Yeah
8. GBGavin Baker
  ... Polynomial, is so profound.
9. BGBrad Gerstner
  Yeah.
10. GBGavin Baker
  And just the idea that we do not know how smart these models are.
11. BGBrad Gerstner
  Okay.
12. GBGavin Baker
  And we made-
13. BGBrad Gerstner
  So say more about that
14. GBGavin Baker
  ... yeah.
15. BGBrad Gerstner
  Why don't we know how smart they are?
16. GBGavin Baker
  Because nobody has run-
17. BGBrad Gerstner
  Yeah
18. GBGavin Baker
  ... Mythos for a year-
19. BGBrad Gerstner
  Exactly
20. GBGavin Baker
  ... continuously. And we may never know how smart each generation of models actually is or was, but because we don't have time to a- appropriately evaluate their intelligence before the next model comes out. I mean, this is a profound statement. And just, just imagine, okay? So I always say, like when you think about FSD, just imagine a human being who never gets distracted, never gets tired, never talks on the phone in the car, never drinks and drives, never yells at their kids-
21. BGBrad Gerstner
  [laughs]
22. GBGavin Baker
  ... never has to go to the backseat to give their baby a bottle. And like of course you would think that over time that is superior to humans who are distracted. I don't know how long... How long can you think deeply about one topic, Brad?
23. BGBrad Gerstner
  Yeah, yeah.
24. GBGavin Baker
  What, it can be on, it can be on anything. [laughs]
25. BGBrad Gerstner
  [laughs] It's like an hour. It's like an hour.
26. GBGavin Baker
  A bit.
27. BGBrad Gerstner
  Yeah. [laughs]
28. GBGavin Baker
  That makes me feel terrible.
29. BGBrad Gerstner
  [laughs]
30. GBGavin Baker
  'Cause I think I can think deeply about one topic-
51:00 – 1:04:11
Frontier vs. Open Source: 90% of Revenue Accrues at the Frontier
1. BGBrad Gerstner
  in order to get there.
2. GBGavin Baker
  Yeah, I would just say two thing, I... Two things can be true.
3. BGBrad Gerstner
  Mm-hmm.
4. GBGavin Baker
  The majority of economic value may continue to accrue to the frontier.
5. BGBrad Gerstner
  Right.
6. GBGavin Baker
  And man, has it ever accrued to the frontier thus far-
7. BGBrad Gerstner
  Right
8. GBGavin Baker
  ... and for sure the first six months this year. But the majority of tokens consumed in the world may be open source.
9. BGBrad Gerstner
  And they are, today.
10. GBGavin Baker
  Yes. I, and I think that this current state-
11. BGBrad Gerstner
  Mm-hmm
12. GBGavin Baker
  ... is likely to persist.
13. BGBrad Gerstner
  Yeah.
14. GBGavin Baker
  Harvey had a great, um, blog post that they put out on X. And they used, and it's just amazing how everything gets out, out of date, like, in five days, [laughs] you know?
15. BGBrad Gerstner
  [laughs]
16. GBGavin Baker
  But they used their own proprietary legal data to do reinforcement learning and supervised fine-tuning, uh, with Fireworks on an open source model, and then they used a router, and a router being something that picks which model you send which query to-
17. BGBrad Gerstner
  Exactly
18. GBGavin Baker
  ... and which model you use to check which model, and they got better outcomes than an Opus 4, either 4.7 or 4.8, at a lower cost.
19. BGBrad Gerstner
  Yes.
20. GBGavin Baker
  And I think that is the future.
21. BGBrad Gerstner
  Yeah.
22. GBGavin Baker
  And the reality is they were still consuming a lot of Opus-
23. BGBrad Gerstner
  Yeah
24. GBGavin Baker
  ... but a majority of the tokens they were processing-
25. SPSpeaker
  Mm.
26. BGBrad Gerstner
  Yes
27. GBGavin Baker
  ... probably were in their own-
28. SPSpeaker
  Yeah
29. GBGavin Baker
  ... open source RL model.
30. BGBrad Gerstner
  We hear the s- we hear the same thing. We did-
1:04:11 – 1:18:13
$1.5T in CapEx vs. $300B in AI Revenue — Does the Math Math?
1. BGBrad Gerstner
  if we compare this to the total incremental inference revenue, so the thing that the market gets worried about, you know, back to my Sam Altman podcast, you know, in October of last year, can we really afford to spend 1.5 trillion of CapEx a year if we're only generating X amount in inference revenue? The thing I think that lit the fuse this year was Anthropic showed up in a major way with revenue, right? And so we have, you know, the AI lab revenue, everybody combined, at around $300 billion next year, right? So can't, you know, a- a- and go- roll that out to 2027. Uh, or that is 2027, 300 billion. So we're spending 1.5 trillion of CapEx on 300 billion of inference revenue. Does that math math for you? And what would cause you, you know, to, to get more nervous again about our ability to continue to make these investments? Because the second we get nervous about it, the entire semi complex is gonna come down a lot.
2. GBGavin Baker
  Well, what do you think the gross margins are on that 300 billion?
3. BGBrad Gerstner
  Yeah, let's call it 50%.
4. GBGavin Baker
  I, I would guess they're probably a little bit higher than that.
5. BGBrad Gerstner
  Yeah, yeah.
6. GBGavin Baker
  I might say 60 or 70. But I mean, that math starts to math.
7. BGBrad Gerstner
  Right.
8. GBGavin Baker
  And what I would just say is I think that 300 billion is low, man.
9. BGBrad Gerstner
  Yeah, yeah.
10. GBGavin Baker
  I just think it's low. From your mouth to God's ears. Yeah, exactly.
11. BGBrad Gerstner
  [laughs]
12. GBGavin Baker
  I think, I think we end this year well over 200 billion-
13. BGBrad Gerstner
  Mm-hmm
14. GBGavin Baker
  ... in inference revenue, well over. And so I think the math really maths, and I do think we have to give, uh, Jensen- Yeah ... our friend, some credit because he said some things that seemed outlandish. Right. And he was conservative. He was low. Right. He said a trillion two years ago [laughs] , and I mean, he was really low. Right. And so, like, let's give the guy some credit and think about what he is saying right now.
15. BGBrad Gerstner
  For sure. For sure. And, and, and listen, I would say consistently, Elon's been taking the over. Sundar's been taking the over. Sam, Dario. You know, Dario did the podcast with Dwarkesh when he was talking about country geniuses in a data center, and he said, "That will be here by 2028." He said, "Revenues will go into the low hundreds of billions by 2028." So let's call that, you know, three, 400 billion of revenue by 2028. And he said that a while ago now, so he may even be revising up his number. And he said, "It's hard for me to see that there won't be trillions of dollars in revenue before 2030." And if you're on that revenue trajectory, if we're on a trajectory to 200 by the end of this year, let's call it four or 500 by next year, and a, a, a path to trillion plus by 2029, then the math maths.
16. GBGavin Baker
  And we gotta keep in mind that half of the spending-
17. BGBrad Gerstner
  Right
18. GBGavin Baker
  ... is there to-
19. BGBrad Gerstner
  You know, for training, maybe a little less than half. What is it, Foxy?
20. SPSpeaker
  It's probably that. Depends on the lab, but it's, I would say it's increasingly less than half.
21. GBGavin Baker
  Yes.
22. BGBrad Gerstner
  Okay. So we'll call it 35%-
23. GBGavin Baker
  Yeah
24. BGBrad Gerstner
  ... is spending that's not revenue generating that is gonna kind of make the next model. So I think the math maths.
25. GBGavin Baker
  Right.
26. BGBrad Gerstner
  And there's still this prisoner's dilemma where if you opt out, that may be an existential decision.
27. GBGavin Baker
  For, for sure.
28. SPSpeaker
  And I think, like, coming into this year, going back to this kind of what narratives were violated, you know.
29. GBGavin Baker
  Right.
30. SPSpeaker
  I think into this year, everyone expected token pricing, uh, the price of compute, it's all deflationary.
1:18:13 – 1:20:32
The Next $1 Trillion: Three Companies, Half the Time
1. BGBrad Gerstner
  rate. I went back last night. In the last seven years, we've added $1 trillion of revenue to the Mag Seven in the last seven years, okay? To get to a trillion, to get to the first trillion of, you know, took over 20 years.
2. GBGavin Baker
  Mm.
3. BGBrad Gerstner
  In the last seven, we added another tr- trillion, and that added $17 trillion in market cap, that trillion dollars, okay? Uh, the forecast now that we're gonna add another trillion of revenue in just three companies, SpaceX, Anthropic, and OpenAI, over the next four to five years.
4. GBGavin Baker
  Hm.
5. BGBrad Gerstner
  Okay? Like, not seven companies, three companies, and in half the time, right? And so I would say that, you know, we are going to have bumps in the road. I know that it's going to be like this, but we're going to higher highs because the size of the prize, this is going to transform 5, 10, 15% of global GDP, there is no doubt in my mind. And 10% of global GDP is $10 trillion. It's an exciting future to be a part of. It's fun to do it with you guys. I think we're gonna have to do our work to do the things to make sure America wins, and that we evolve the social contract, keep everybody, you know, lift the floor, take everybody with us on this ride. Um, but it's a, uh, it's a, it's a really exciting time to be doing what we're doing, and it's fun to be doing it with you guys.
6. GBGavin Baker
  Yeah.
7. BGBrad Gerstner
  Thanks for having us.
8. GBGavin Baker
  I just want to say, Brad, thanks for having us.
9. BGBrad Gerstner
  Thank you.
10. GBGavin Baker
  And thank you for what you've done with the Trump accounts.
11. BGBrad Gerstner
  Yeah, yeah. Appreciate it.
12. GBGavin Baker
  I actually think it's super important for America, for the world, to give people an equity stake-
13. BGBrad Gerstner
  Yeah
14. GBGavin Baker
  ... at a very young age. They, they will see it compound-
15. BGBrad Gerstner
  Yeah. Yeah
16. GBGavin Baker
  ... over their lifetimes.
17. BGBrad Gerstner
  Yeah.
18. GBGavin Baker
  This is a great thing you've done for the world, so thank you.
19. BGBrad Gerstner
  Yeah.
20. GBGavin Baker
  I'd echo all your comments, like-
21. BGBrad Gerstner
  Yeah
22. GBGavin Baker
  ... deep admiration for you, your team, gratitude for the collegiality-
23. BGBrad Gerstner
  Yeah
24. GBGavin Baker
  ... and friendship between our firms. I know Clark and Foxy, they hang out, like, all the time. [laughs]
25. BGBrad Gerstner
  [laughs] I mean, that's it. People think that, you, you, you know, and there are people in our business who don't want to share anything.
26. GBGavin Baker
  Hm.
27. BGBrad Gerstner
  Our view is, like, we open source it. Um, but there are very few people who we actually call and ask their opinion because there are very few people who do the thousands of hours of work that we do, um, that, you know, that are adding to that. And you do it, and we appreciate that. And you do as well, Gavin, we appreciate that. So with that love fest, let's call it a wrap.
28. GBGavin Baker
  [laughs]
29. BGBrad Gerstner
  Thanks for being here.
30. GBGavin Baker
  Thank you.