[
  {
    "speaker": "Speaker 1",
    "text": "Gavin Baker is one of the most prolific AI investors that almost no one [music] has heard of. He spent the last 20 years investing in some of the biggest AI companies before they became [music]"
  },
  {
    "speaker": "Speaker 1",
    "text": "household names. He was an early backer of Nvidia, as well as Cerebras, which IPO'd very recently. And he has a very concrete thesis, which [music] is AI isn't in a bubble. It's quite the"
  },
  {
    "speaker": "Speaker 1",
    "text": "contrary. It's in a super cycle. He says [music] that by looking at the watts, wafers, and tokens, the infrastructure of AI, he's identified some of the key bottlenecks and constraints. And he has"
  },
  {
    "speaker": "Speaker 1",
    "text": "one simple thesis. The biggest returns that you can get in AI is in electricity, power, and silicon fabrication. It's got nothing to do with SaaS software as a service. It's got nothing to do with chatbots such as"
  },
  {
    "speaker": "Speaker 1",
    "text": "Anthropic or OpenAI. It all filters downstream from semiconductors, the picks and shovels that build the entire AI industry. And he's been expressing that interest to the tune of $4.1"
  },
  {
    "speaker": "Speaker 1",
    "text": "billion. While most people are calling the AI industry a complete bubble, he thinks that it is a generational buying opportunity specifically for AI infrastructure. And he makes the thesis"
  },
  {
    "speaker": "Speaker 2",
    "text": "very clearly in his fund."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> And if you hear these constraints that he's talking about, this AI infrastructure, you realize that this kind of sounds pretty familiar. We've heard this thesis before, and that's"
  },
  {
    "speaker": "Speaker 2",
    "text": "because on the show many times we've covered a investor by the name of Leopold Aschenbrenner. He has been around for 3 years. He just published his most recent 13F, and he has a lot of"
  },
  {
    "speaker": "Speaker 2",
    "text": "the same core philosophies. Now, here's the difference. Leopold's been around for what, 3 years? Gavin's been doing this for 20 plus years. And when we're comparing these two, Leopold actually"
  },
  {
    "speaker": "Speaker 2",
    "text": "has almost three times the assets under management, but there's this great quote that I was reminded of from our producer Luke before the show. It's like, okay, you can beat Warren Buffett over a year,"
  },
  {
    "speaker": "Speaker 2",
    "text": "but can you beat him over multiple decades? And Gavin Baker has a track record that proves that he might have a slightly different outlook on this investment thesis. For those who don't"
  },
  {
    "speaker": "Speaker 2",
    "text": "know, Gavin Baker, he is the basically founder of this company named a Trade Desk Management. They are an investing fund, and he has spent 20 years investing in Nvidia. Now, he does if"
  },
  {
    "speaker": "Speaker 2",
    "text": "you've invested in Nvidia for 20 years, it's a miracle he's still working because those are some pretty incredible returns. Some of the early wins that we've recently seen include companies"
  },
  {
    "speaker": "Speaker 2",
    "text": "like Cerebras, which he was a very early investor in."
  },
  {
    "speaker": "Speaker 2",
    "text": "Cerebras, if you'll remember, just IPO'd for an ungodly amount of money. Same with this company Astera Labs. And there's a lot of other companies that I don't think you've probably heard of"
  },
  {
    "speaker": "Speaker 2",
    "text": "before that we're going to cover in this episode as you walk through his portfolio and his guidance on where he sees the AI industry going in terms of investment and where all the opportunity"
  },
  {
    "speaker": "Speaker 1",
    "text": "lies. So, then the question becomes, what is he investing in and why is he investing in it? Well, if we look at his recent 13F for a Tradehill Management, which is the name of his fund, they have"
  },
  {
    "speaker": "Speaker 1",
    "text": "about $4 billion worth of AUM. We look at some of his biggest positions and unpack what some of these companies actually solve. It kind of points towards the bottleneck that Gavin references in a bunch of his different"
  },
  {
    "speaker": "Speaker 1",
    "text": "interviews as to where AI is going. So, he has some pretty sizable positions in some companies that a lot of people may not have heard of purely because they're quite unsexy. So, he has an almost 9%"
  },
  {
    "speaker": "Speaker 1",
    "text": "position, so a 10% position of the fund in this thing called Astera Labs. Now, Astera Labs can be described as kind of like the connectivity layer between GPUs. So, if you imagine a data center,"
  },
  {
    "speaker": "Speaker 1",
    "text": "you have GPUs. They're kind of like the engine that can like pre-train, post-train your model, and also like inference your model. But, in order for these GPUs to work, they need to"
  },
  {
    "speaker": "Speaker 1",
    "text": "traverse a bunch of different data. They need to send data between themselves."
  },
  {
    "speaker": "Speaker 1",
    "text": "They also need to access data from all these memory chips that they store this data on. Now, in order to access this, you need some kind of a plumbing system."
  },
  {
    "speaker": "Speaker 1",
    "text": "And I'm being very high-level [snorts] on this because I'm I'm not going to pretend that I I know the intricacies of all of this. Astera Labs is a company that essentially fixes that. The problem"
  },
  {
    "speaker": "Speaker 1",
    "text": "it solves is as AI clusters scale to hundreds of thousands of chips, the bottleneck stop stops becoming GPUs specifically, but it starts becoming that transfer window and sending the"
  },
  {
    "speaker": "Speaker 1",
    "text": "right data at the right time, accessing the right data at the right time, is what the plumbing system that Astera Labs built. Now, I haven't heard of Astera Labs until we started researching"
  },
  {
    "speaker": "Speaker 1",
    "text": "for this episode, but I remember another company being the exact same case called Cerebras Labs, which is what Gavin was talking about almost like I think like six months ago, which is is quite long"
  },
  {
    "speaker": "Speaker 1",
    "text": "given the relative scale or timeline of AI. And then the next thing I know is that they IPO'd for like what was it?"
  },
  {
    "speaker": "Speaker 1",
    "text": "Like $60 billion, and it's just been like it's up 40% since the IPO. So, just kind of point towards these different trends, Astera Labs might be something significant on that horizon."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> Yeah, Cerebras is one of his earliest investments. I mean, he was in Cerebras very early in the company's lifetime, which means he's bet on this thesis for years. There's also a few other ones"
  },
  {
    "speaker": "Speaker 2",
    "text": "that he's been betting on for a long time. I mean, Nvidia being that flagship one. Being involved in Nvidia for 20-plus years is pretty incredible, and still having conviction all the way"
  },
  {
    "speaker": "Speaker 2",
    "text": "through is impressive. He would Gavin was recently on two podcasts where I was listening to him speak about his Nvidia position, and it's very clear that he believes that they're going to be able"
  },
  {
    "speaker": "Speaker 2",
    "text": "to maintain these profit margins, and maintain the demand as well, which means he's putting Nvidia on a clear path to getting close to $10 trillion in market cap. It's only halfway there right now."
  },
  {
    "speaker": "Speaker 2",
    "text": "A few other noteworthy mentions are Micron, which we discussed on the previous episode, which I would highly recommend going to watch in terms of the AI investment stack, and where all these"
  },
  {
    "speaker": "Speaker 2",
    "text": "companies lie. Micron is one of the largest memory makers, and a crazy statistic about Micron, a year ago it was sub $100 billion, and as of recording this, it just eclipsed a trillion dollars in market"
  },
  {
    "speaker": "Speaker 2",
    "text": "cap. It got a 10x in a single year, and it's a testament to how important that memory problem is. Now, perhaps some of the less noteworthy companies that are interesting, E.J. So, there's one I want"
  },
  {
    "speaker": "Speaker 2",
    "text": "to highlight for you in particular, cuz I feel like you're going to like this one, is Unity Software. And for those that don't know Unity, I mean, I know this very well but as a gamer, Unity is"
  },
  {
    "speaker": "Speaker 2",
    "text": "a game engine. There's a lot of popular games that are built using this 3D rendering software. So, why would someone who's investing in AI be investing in Unity software, the thing"
  },
  {
    "speaker": "Speaker 2",
    "text": "that makes my video games? And the answer is the 3D game engine. Unity is a world model builder, and it has a really deep understanding of physics and the way the world works, and the"
  },
  {
    "speaker": "Speaker 2",
    "text": "understanding of textures and lighting."
  },
  {
    "speaker": "Speaker 2",
    "text": "And when these AI companies are trying to build AGI, they're trying to build humanoid robots, a big part of that is simulating virtual environments and virtual data sets that allow these"
  },
  {
    "speaker": "Speaker 2",
    "text": "robots to be trained in. And Unity just so happens to be one of the best ones."
  },
  {
    "speaker": "Speaker 2",
    "text": "So, I feel like that one I wanted to highlight specifically for you, Josh. As the world model maxi, there is a clear path in which a gaming company that is known for its gaming engine becomes a"
  },
  {
    "speaker": "Speaker 2",
    "text": "pretty serious player in the world of AI."
  },
  {
    "speaker": "Speaker 1",
    "text": ">> Yeah, the the whole thesis behind world models is pretty simple. It's uh AI models or LLMs currently understand the world through text, through books. It's kind of like a student sitting in a"
  },
  {
    "speaker": "Speaker 1",
    "text": "library, but it doesn't actually have experience of the real world. World models basically unlock that. It's like putting a game character into a simulated environment and understanding"
  },
  {
    "speaker": "Speaker 1",
    "text": "the physical reality of how the world works. If I if it works. If I drop this phone, if I kick a ball, like what happens? What are the next consequential steps? What do you do? Um world models"
  },
  {
    "speaker": "Speaker 1",
    "text": "effectively fix that. And there are very few players that have like built this out at scale. I think currently the leader is probably Google with Genie 3."
  },
  {
    "speaker": "Speaker 1",
    "text": "They actually released a a new model called Gemini Omni recently, which kind of like does this at scale, but it's not quite like uh where it's meant to be. It hasn't quite had its ChatGPT moment. Um"
  },
  {
    "speaker": "Speaker 1",
    "text": "what I like about Gavin in particular is he kind of has this barbell. I don't know if you noticed this, Josh, where he's kind of old school and he's like, \"People are going to need GPUs. People"
  },
  {
    "speaker": "Speaker 1",
    "text": "are going to need memory. I'm going to invest in the biggest players, Micron and Nvidia.\" But then he has this kind of forward-looking thing where he's like, \"I think that's where the puck is"
  },
  {
    "speaker": "Speaker 1",
    "text": "going to go.\" And so, I think let me in uh invest in Cerebras because I think inference is going to be super important. And then let me invest in Unity because I think world models are"
  },
  {
    "speaker": "Speaker 1",
    "text": "going to be the future of how we train robots and future LLMs. So, he has this kind of like bubble approach. Now, one thing that I see in his portfolio over here as well is this Well, there's two"
  },
  {
    "speaker": "Speaker 1",
    "text": "companies actually. It's this company called Positron, which kind of creates inference chips. Now, if that sounds similar, it's very similar to Cerebras."
  },
  {
    "speaker": "Speaker 1",
    "text": "That's exactly what they do. And it's around this entire thesis which Gavin has spoken about on his recent interviews, which is the infrastructure stack, specifically the training stack"
  },
  {
    "speaker": "Speaker 1",
    "text": "for AI models is moving from pre-training to something more focused on post-training. Now, if you've been involved in the AI sphere generally, you kind of had an idea that this shift was"
  },
  {
    "speaker": "Speaker 1",
    "text": "happening. But Gavin is all in on this thesis, and if you have a model, it still needs to understand new information that comes in, new data. It needs to update it. Just cuz you pre-train it on a on a specific data set"
  },
  {
    "speaker": "Speaker 1",
    "text": "doesn't mean it's going to be a genius for the rest of its life. It still needs to learn new information. That happens in the post-training layer, and it requires a lot of inference."
  },
  {
    "speaker": "Speaker 1",
    "text": "Secondly, if you need the AI model to actually think about the problem more, you know, in the same way that like we take in new information, we're like, \"Hmm, I wonder if this angle makes sense"
  },
  {
    "speaker": "Speaker 1",
    "text": "or if another thesis maybe applies.\""
  },
  {
    "speaker": "Speaker 1",
    "text": "That's known as reasoning. You need a lot of inference. Now, the estimates are the cost or the revenue opportunity from inference alone is worth around 5 to 10x more than the amount of compute that is"
  },
  {
    "speaker": "Speaker 1",
    "text": "being put into pre-training. So, AI labs and chip makers are suddenly making this big shift. You've seen Nvidia create a bunch of different GPUs that are aligned to inference to allow"
  },
  {
    "speaker": "Speaker 1",
    "text": "agentic kind of exposure. And so, we're seeing Gavin express this to his different investments on inference alone. And the final point that I'll make is Gavin made a really cool point,"
  },
  {
    "speaker": "Speaker 1",
    "text": "and we're talking about this before we started recording, Josh, on China specifically. Very It's been very much like China versus the US when it comes to the AI race. China has a very unique"
  },
  {
    "speaker": "Speaker 1",
    "text": "kind of setup where they have an abundance of energy and the ability to scale chip manufacturers. That's something that the US currently struggles with. That's why they outsourced a ton of stuff to the likes"
  },
  {
    "speaker": "Speaker 1",
    "text": "of TSMC on Taiwan. And what he basically explains is that China has a unique opportunity to create infrastructure or chips specifically that are going to look very different to what the US is"
  },
  {
    "speaker": "Speaker 1",
    "text": "creating because they're focused so much on inference. So, Gavin you could say is leading the charge in the US through his investments on building or taking a bet on the US infrastructure setup for"
  },
  {
    "speaker": "Speaker 1",
    "text": "inference. And I think that could be a huge opportunity in the future."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> And it's worth noting that this bet also isn't only for the upside. There is a large put position here in an ETF named QQQ. Now, for those who are not familiar, it covers the Nasdaq 100. It's"
  },
  {
    "speaker": "Speaker 2",
    "text": "a basket of stocks. It's the second most traded ETF in the United States. And it's been performing incredibly. In 2023, it was up 55%. 2024, 25%. 2025, 20%. And so far in 2026, already up 17%."
  },
  {
    "speaker": "Speaker 2",
    "text": "So, QQQ as an index fund has been doing incredibly well. It's easy. It's a basket of the top 100 stocks. Gavin is saying, \"I'm shorting against that. I don't think that's going to go down. I think"
  },
  {
    "speaker": "Speaker 2",
    "text": "you are wrong.\" And what this tells me is that he believes strongly in the the AI play in the sense that he's going to invest in the key makers who are solving these bottlenecks. But as a market-wide"
  },
  {
    "speaker": "Speaker 2",
    "text": "general sentiment, he doesn't appear to be very bullish. And this is a hedge against that that downside protection where if the market does start to fall apart in ways that are less favorable,"
  },
  {
    "speaker": "Speaker 2",
    "text": "even though AI still wins, he has that hedge with QQQ. Now, we can kind of break this down into a few bottlenecks that he believes are going to be most important when it comes to investing. These key things that he"
  },
  {
    "speaker": "Speaker 2",
    "text": "is looking at in terms of what the world of AI is going to need as we progress forward. What are the actual constraints? What do they look like? And then how do you invest? How do you"
  },
  {
    "speaker": "Speaker 2",
    "text": "convert these into actual dollars that you could put into companies to earn you money? And there's four of them. The first one is verticalized small language models. If you think about LLMs in"
  },
  {
    "speaker": "Speaker 1",
    "text": "general, like the chatbots that you talk to such as Claude and ChatGPT, they're generalized LLMs. So, they have a wide understanding of the world in context and they'll be able to answer like"
  },
  {
    "speaker": "Speaker 1",
    "text": "specific questions, but they it's another thing training a model around a specific vertical or specific problem that you're trying to solve. Where do these specific problems exist? Well, in"
  },
  {
    "speaker": "Speaker 1",
    "text": "enterprises that are deep on solving a particular problem or companies that have made or formed a niche in that particular subsector. Now, verticalized small language models basically address"
  },
  {
    "speaker": "Speaker 1",
    "text": "exactly this. They're frontier models, but highly [snorts] optimized towards running efficiently on specific enterprise data or locally on device."
  },
  {
    "speaker": "Speaker 1",
    "text": "Now, we have spoken about on-device or locally run models before um purely for the case that there's a bunch of data in your phone or the devices that you use that are highly personable to you, but"
  },
  {
    "speaker": "Speaker 1",
    "text": "you don't necessarily want to give up and companies don't necessarily have access to that. For example, medical records, financial details. Um I saw OpenAI release a financial AI agent that can get access"
  },
  {
    "speaker": "Speaker 1",
    "text": "to your bank account, but it can't actually act on it because there's a lot of personally identifiable information that you don't want to share such as your social security number, banking"
  },
  {
    "speaker": "Speaker 1",
    "text": "details, etc. Now, locally run models or these SLMs can solve that kind of a problem and Gavin is making a huge bet that these are going to become huge in the future. One company that I've noted"
  },
  {
    "speaker": "Speaker 1",
    "text": "that Gavin is hugely bullish on uh is Apple. Although he doesn't express an investment interest, he knows or thinks that Apple is going to be the device maker one of the major device makers"
  },
  {
    "speaker": "Speaker 1",
    "text": "that allows for these locally run models to run on their devices. Now, in a world where that is the future, you can stop thinking of a world where maybe Claude doesn't need to be the model that you"
  },
  {
    "speaker": "Speaker 1",
    "text": "need to interface with every day. Maybe you need a personalized AI agent trained on your own data and that's what these SLMs end up eventually becoming. Now, that's the generalized version of it"
  },
  {
    "speaker": "Speaker 1",
    "text": "where, you know, you can run it on your own phone, but a bunch of enterprises will run these highly optimized and specialized models to train on their proprietary data which ends up helping"
  },
  {
    "speaker": "Speaker 1",
    "text": "them sell a product or market a product much better."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> Oh man, Apple's in such a good position there. I can't wait for WWDC. It's coming."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> Yeah. Yes."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> We are just a few weeks away from Apple's developer conference where they're going to unveil all of this new AI software that's coming and what that looks like integrating to the hardware."
  },
  {
    "speaker": "Speaker 2",
    "text": "That's going to be huge. We'll be covering that. I'm so excited to talk about that. In terms of the next pillar of this, it is sovereign infrastructure."
  },
  {
    "speaker": "Speaker 2",
    "text": "We always talk about this that the speed of bits is so much faster than the speed of atoms. I mean, you think about AI infrastructure, the quality of models has gone purely exponential. The amount"
  },
  {
    "speaker": "Speaker 2",
    "text": "of intelligence we can generate per watt, the amount of intelligence per token is up into the right only. What isn't up into the right at nearly the same rate is the speed of physical deployment"
  },
  {
    "speaker": "Speaker 2",
    "text": "because that itself is the moat. It's very difficult to take hardware that is incredibly complicated. We're talking about transistors that are are down to the atomic level of precision and"
  },
  {
    "speaker": "Speaker 2",
    "text": "deploying them at scale in a world in which our infrastructures already suffering. I mean, with the acceleration of electric cars, the grids have already been feeling a little bit more of a"
  },
  {
    "speaker": "Speaker 2",
    "text": "strain. They're kind of at max capacity."
  },
  {
    "speaker": "Speaker 2",
    "text": "Now they have the energy problem. Now they have the chip problem. Gavin is very strongly betting on the fact that infrastructure is hard. It's going to take many, many days to months to years"
  },
  {
    "speaker": "Speaker 2",
    "text": "to do and he's betting on the people that can compress that into weeks. So, the speed of the physical deployment itself is the moat. He's kind of narrowing in on who the companies are"
  },
  {
    "speaker": "Speaker 2",
    "text": "that are able to deploy as fast as possible. When I think about this, my first thought is SpaceX and how quickly they've been able to build Colossus and then rent that out to Anthropic and I'm"
  },
  {
    "speaker": "Speaker 2",
    "text": "sure companies in the future, but that infrastructure pillar is one of the key ones that he's looking at. I think everyone. We look at Leopold's portfolio as well. That was a core component of that. It's just it's"
  },
  {
    "speaker": "Speaker 2",
    "text": "really hard to build things and whoever can build things, they can sell it for a lot of money. SpaceX, their largest line item now in terms of revenue is the data center that they're renting out. It has"
  },
  {
    "speaker": "Speaker 2",
    "text": "nothing to do with rocket ships and I think that's a testament to how important this pillar is."
  },
  {
    "speaker": "Speaker 1",
    "text": ">> So, it's speed that he cares about and he thinks that it's important, but it's also like the cost, right? He keeps referencing this uh, this metric which is, performance per watt."
  },
  {
    "speaker": "Speaker 1",
    "text": "Yeah, perf per watt. And what he's talking about here is, companies are increasingly, companies being AI labs, are increasingly caring about how many tokens can you generate per watt, right? Because if you think"
  },
  {
    "speaker": "Speaker 1",
    "text": "about spending billions and trillions of dollars, which is what like five companies are currently spending this year alone on GPUs and compute to kind of like power these things, or"
  },
  {
    "speaker": "Speaker 1",
    "text": "electricity to power these things, you want to get a lot of bang for buck, especially if you're scaling to the size that the most of these hyperscalers are doing. So, if you think about it, if I,"
  },
  {
    "speaker": "Speaker 1",
    "text": "prompt Claude, and if I prompt ChatGPT, and Claude gives me an answer that cost me 2 cents, and ChatGPT gives me an answer that cost me $1, I'm probably going to end up using Claude, even if"
  },
  {
    "speaker": "Speaker 1",
    "text": "it's like, hypothetically, like say 95% of the, intelligence, hypothetically, that ChatGPT has. Because the point is, you can prompt it even more, and eventually get to the answer for a lot"
  },
  {
    "speaker": "Speaker 1",
    "text": "less of cost. So, cost becomes a huge thing. This week alone, Microsoft and Uber announced that they are effectively reducing their exposure to Claude code, because their annual budgets kind of"
  },
  {
    "speaker": "Speaker 1",
    "text": "like got sequestered hit in about 4 months. So, the point is, like, the cost of getting access to this intelligence matters a lot. And you see this across Gavin's investment portfolio, with Cerebras, with the likes"
  },
  {
    "speaker": "Speaker 1",
    "text": "of Positron, and with Astrolabs, which basically, like, what I've noticed is, he identifies these really niche infrastructure bottlenecks, and he basically makes one simple bet. He's"
  },
  {
    "speaker": "Speaker 1",
    "text": "like, yeah, if this company solves that, the performance per watt gets to this specific level, which means that AI labs are probably going to buy more of these GPUs, or more of these companies, or"
  },
  {
    "speaker": "Speaker 1",
    "text": "more of these things, and you end up with, a bottleneck being resolved by one of these different companies that he's betting on. So, he, his thesis actually is quite simple, although it's quite"
  },
  {
    "speaker": "Speaker 1",
    "text": "complex, which is, I'm just going to focus on the AI bottlenecks at the infrastructure level. And if I can identify a company that can increase performance per watt by this amount,"
  },
  {
    "speaker": "Speaker 1",
    "text": "that can make tokens this amount cheaper, then my bet is those companies are going to be valuable and will I either IPO or get acquired for a lot some of money."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> And the tickers to know for the section for those looking to copy trade Gavin."
  },
  {
    "speaker": "Speaker 2",
    "text": "Astra Labs, we have Cerebras, we have Sci-Five, and we have Positron. Those are the four companies that are really critical in this sector. Now, the fourth and final is a combination of energy and"
  },
  {
    "speaker": "Speaker 2",
    "text": "space because I mean, like we talked about in the previous point, the terrestrial grid very much limits energy. And it's very difficult to earn new energy. I think a statistic like 40%"
  },
  {
    "speaker": "Speaker 2",
    "text": "of new data centers have very strong petitions against them. People are lobbying against them. People protesting they do not want these data centers to happen."
  },
  {
    "speaker": "Speaker 2",
    "text": "There's a lot of kind of resistance to them. And the way that we solve this is twofold. One is creating energy out of the box. It's It's kind of portable energy. You could bring these data"
  },
  {
    "speaker": "Speaker 2",
    "text": "centers, power them with a small phone."
  },
  {
    "speaker": "Speaker 2",
    "text": "That's companies like Blue Marble who Leopold is very bullish on. But then there's also the orbital compute part of this, which is what Gavin has really shifted his focus to. Now, the first"
  },
  {
    "speaker": "Speaker 2",
    "text": "largest company in this sector, of course, is SpaceX. They're the only one who is capable of being the highway to space, to delivering actual payload to orbit, to getting maths and data centers"
  },
  {
    "speaker": "Speaker 2",
    "text": "in lower orbit that can generate enough intelligence and power that can funnel this. I think that SpaceX is a little bit bigger than just SpaceX. I was surprised to see there wasn't more"
  },
  {
    "speaker": "Speaker 2",
    "text": "allocation of space stocks in his portfolio given the fact that he believes this is such a huge industry."
  },
  {
    "speaker": "Speaker 2",
    "text": "Perhaps the reality is that it's just too early and that SpaceX is the linchpin to unlocking this industry and just kind of closely evaluating Starship V3 launches. We had a Starship launch"
  },
  {
    "speaker": "Speaker 2",
    "text": "last week. It performed very well."
  },
  {
    "speaker": "Speaker 2",
    "text": "Without Starship functioning, we don't get energy in space. We don't get racks to orbit. It is required because the amount of payload is so large. So, I'm sure SpaceX is the one to watch. There's"
  },
  {
    "speaker": "Speaker 2",
    "text": "a lot of other second order companies that can be impacted by this, but I think we want to get to the end of this with with the question that a lot of people are going to be asking, which is"
  },
  {
    "speaker": "Speaker 2",
    "text": "why is this not just the dot-com bubble again? And Gavin was asked this question many times. He has some pretty strong answers, and I kind of believe him. It seemed His case that he made was pretty convincing."
  },
  {
    "speaker": "Speaker 1",
    "text": "Okay, so the way I I think of his case is as follows."
  },
  {
    "speaker": "Speaker 1",
    "text": "In the dot-com bubble in the 2000s, it was debt-fueled. You had people borrowing a hell of a lot of money for unproven thesis and products that people didn't actually care about or use. Now, if you compare"
  },
  {
    "speaker": "Speaker 1",
    "text": "this to the current AI supercycle, as he describes it, just from OpenAI and Anthropic alone, they're on track to reach $200 billion of ARR this year. Just two companies."
  },
  {
    "speaker": "Speaker 1",
    "text": "And this isn't made up money. This is money that they've signed through contracts that are already prepaid in large by I think 40 to 60% from a bunch of enterprise and retail customers that"
  },
  {
    "speaker": "Speaker 1",
    "text": "are funding this. So, this is real money exchanging hands. Now, if you look at the GPU compute, so let's like not look at the model labs, let's look at like the infrastructure, the people who are"
  },
  {
    "speaker": "Speaker 1",
    "text": "buying the goods from Nvidia."
  },
  {
    "speaker": "Speaker 1",
    "text": "Google, Microsoft, Amazon, and Meta are all paying from their own cash reserves. So, they also haven't borrowed any money at all. They're just spending free cash flow on this. Amazon just came to the"
  },
  {
    "speaker": "Speaker 1",
    "text": "end of their free cash flow. Now, if they start borrowing money, then we can start to get worried, but the point is they are not levered up either. Also, this is like five of the top companies"
  },
  {
    "speaker": "Speaker 1",
    "text": "in the entire world who are arguably like some of the smartest companies because they are where they are in terms of like market cap value and size. So, the fact is like back to the dot-com bubble, you had a"
  },
  {
    "speaker": "Speaker 1",
    "text": "bunch of like no-name companies that had raised a ton of money that were spending money in ways that didn't really make sense."
  },
  {
    "speaker": "Speaker 1",
    "text": "In this cycle, you have like some of the smartest companies in the world spending money that isn't levered at all, that isn't kind of like compressed into like various different margins. And all the"
  },
  {
    "speaker": "Speaker 1",
    "text": "quarterly reports that we're talking about on previous episodes very recently over the last couple of weeks have proven that profit is optimizing through a bunch of these different movements"
  },
  {
    "speaker": "Speaker 1",
    "text": "that models are progressing. They're getting more intelligent. So, the single argument that Gavin has is this isn't a dot-com bubble because we're not levered on money, but also because the"
  },
  {
    "speaker": "Speaker 1",
    "text": "bottlenecks themselves that we're speaking about is constrained by physical atoms. It's one thing being like, \"Okay, I'm going to buy a bunch of memory chips and I'm going to buy a"
  },
  {
    "speaker": "Speaker 1",
    "text": "bunch of GPU GPUs, but it's not like Nvidia can oversell GPUs. It's not like Micron can oversell AI memory chips because they just don't have the chip production facilities to be able to do that. And"
  },
  {
    "speaker": "Speaker 1",
    "text": "so, his simple argument is it's not a bubble if you can't oversupply the entire market. We are constrained by the fact that we don't have enough picks and shovels to do the thing, and that's what"
  },
  {
    "speaker": "Speaker 2",
    "text": "he's investing in."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> And there's one great point if you scroll down just a hair on this artifact, you can see the two to three trillion-dollar number. This is something that Gavin believes is a reality that Nvidia could sell two to"
  },
  {
    "speaker": "Speaker 2",
    "text": "three trillion dollars of GPUs this year and next year if only TSMC could supply them. So, he's saying that TSMC is actually one of the major linchpins of bubble territory. And I'll explain why"
  },
  {
    "speaker": "Speaker 2",
    "text": "for a second cuz I found this really interesting. If TSMC were able to supply the amount of demand that is required from these companies to actually provide them with that many chips, it will cost"
  },
  {
    "speaker": "Speaker 2",
    "text": "them a tremendous amount of money. And in fact, EJ, if you scroll just a little bit more, you could see the earned income to the CapEx. There's like this kind of bar chart there. Yeah, right"
  },
  {
    "speaker": "Speaker 2",
    "text": "here. Where you could see yeah, CapEx is not much different than the operating cash. And so far, companies are generating enough cash to fund the buildout of these things. In the case"
  },
  {
    "speaker": "Speaker 2",
    "text": "that TSMC came to Nvidia tomorrow and said, \"Actually, we could triple our capacity overnight.\" Nvidia wouldn't say no, and they would start spending an unbelievable amount of money to buy"
  },
  {
    "speaker": "Speaker 2",
    "text": "those chips. Other companies would then have to borrow money to fund the purchase of all these chips, and therefore we would start to see that CapEx bubble really start to grow and"
  },
  {
    "speaker": "Speaker 2",
    "text": "separate from the operating cash of these companies. But because there are these supply constraints across the board, we have them in memory, we have them in chip making. We have them in"
  },
  {
    "speaker": "Speaker 2",
    "text": "energy. Particularly as it relates to TSMC with the chips, we're not actually able to build out that fast. And therefore, TSMC is creating a blocker on the rate of acceleration of this bubble."
  },
  {
    "speaker": "Speaker 2",
    "text": "And so long as TSMC stays limited and constrained to the amount of chips that they could produce, and so long as companies like Samsung and other chip makers don't actually overtake that"
  },
  {
    "speaker": "Speaker 2",
    "text": "market share, which seems improbable because it's going to take an incredibly long time and it's very difficult to do, then we're at a pretty sustainable rate of growth where it feels fast, but"
  },
  {
    "speaker": "Speaker 2",
    "text": "there's still this overwhelming amount of demand that can't be satiated because we just can't build it out fast enough."
  },
  {
    "speaker": "Speaker 2",
    "text": "And so long as that dynamic stays intact, I think we're probably good for now."
  },
  {
    "speaker": "Speaker 1",
    "text": ">> Well, well, there's also this other thing, right? Like cuz like you could assume that like demand stays static, but that also doesn't happen. You have an exponentially increasing demand side"
  },
  {
    "speaker": "Speaker 1",
    "text": "for all this AI stuff, which is outpacing the production supply that we have for all of these different chips."
  },
  {
    "speaker": "Speaker 1",
    "text": "So, like the only way that I see this thesis kind of being unproven is if somehow someone miraculously recreates ASML, and we suddenly have like ASML competitors all round. By the way, if"
  },
  {
    "speaker": "Speaker 1",
    "text": "those of you who don't know, ASML produces these $400 million machines, which basically TSMC and every major chip fab manufacturer needs. And ASML is only one team in, I believe, Norway that"
  },
  {
    "speaker": "Speaker 1",
    "text": "creates these things, and it takes ages, and they are backlogged for like 5 years right now. Or if we recreate a different type of LLM that doesn't require as many GPUs or doesn't require as much memory,"
  },
  {
    "speaker": "Speaker 1",
    "text": "but we're just simply not seeing that. I saw a story break today about SK Hynix, which is the number one memory manufacturer and supplier for Nvidia GPUs. They're basically the top dog when"
  },
  {
    "speaker": "Speaker 1",
    "text": "it comes to AI memory, and they're currently courting, I think it's like $50 billion, 50 to 100 billion dollars worth of offers from the likes of Google and Microsoft. So, two companies alone just"
  },
  {
    "speaker": "Speaker 1",
    "text": "to pay for the equipment that they need to scale up future supply over the next 3 years to lock in supply that they're going to create 3 years from now. This is how desperate some of these big"
  },
  {
    "speaker": "Speaker 1",
    "text": "companies are for memory. Just and this is one subsector of the AI component."
  },
  {
    "speaker": "Speaker 1",
    "text": "And SK Hynix is instead just saying, \"No, I don't want to give you guarantees of our supply. Instead, we'll just hike up the price.\" They have like 70% operating margin, by the way, which is"
  },
  {
    "speaker": "Speaker 1",
    "text": "just unheard of in semiconductor at all."
  },
  {
    "speaker": "Speaker 1",
    "text": "So, it makes complete sense why Gavin is just going all in because it doesn't look like a bubble. It might seem like a bubble. The market might react to it. We opened our stocks portfolio today before"
  },
  {
    "speaker": "Speaker 1",
    "text": "we started recording and everything was like down, but it's just reactionary because the directional goal of all of this is that we're just going to need more GPUs. We're going to need more"
  },
  {
    "speaker": "Speaker 1",
    "text": "semiconductor chips, and we don't have enough supply. We don't have enough manufacturers for this."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> So, in conclusion, watts and wafers."
  },
  {
    "speaker": "Speaker 2",
    "text": "That's it. Those are the two brick walls. Those are the two limiting factors. The limiting constraints that are going to prevent us from accelerating too fast. And so long as those watts and wafers stay valuable,"
  },
  {
    "speaker": "Speaker 2",
    "text": "stay in high demand, and stay limited in their supply, there will be good times ahead. Now, if you are looking for a TLDR on Gavin's portfolio, I will read out some of the largest holdings for"
  },
  {
    "speaker": "Speaker 2",
    "text": "you. That way you can just again, not financial advice. This is what Gavin's in. This is not what we're in. I have no idea if any of these are going to go up, down, or in circles. But, his largest"
  },
  {
    "speaker": "Speaker 2",
    "text": "position ironically is that QQQ pro position. He's generally speaking bearish on the market, which I think is very noteworthy to talk about. Um second to that is Astar Labs, 7.4% A-LAB is the"
  },
  {
    "speaker": "Speaker 2",
    "text": "ticker. Third is Unity, the 3D software."
  },
  {
    "speaker": "Speaker 2",
    "text": "Then there's a whole bunch of others."
  },
  {
    "speaker": "Speaker 2",
    "text": "Ciena, Micron, Nvidia, Amazon, Lumentum, Alphabet, Coherent, Roblox, Echostar, Twilio, Wayfair. Wayfair is a a furniture company. This guy's in everything. Uh there's a lot of investments. I think if you're"
  },
  {
    "speaker": "Speaker 2",
    "text": "interested, you can take a look at his 13F online. We We link to it in the description. But, that is the Gavin thesis. That the bottleneck is Watson wafers. So long as these things stay"
  },
  {
    "speaker": "Speaker 2",
    "text": "intact, we are up only EJS. How are you ingesting this information and what are you doing with it?"
  },
  {
    "speaker": "Speaker 1",
    "text": ">> So the market's been pretty rocky since the Leopold 13F, and I'm starting to realize as we're recording this episode that Gavin's kind of like an older, wiser Leopold. He's been around for a"
  },
  {
    "speaker": "Speaker 1",
    "text": "while. He may not have $13 in AUM, but I have a feeling he's going to be around a decade from now. And so if you're listening to this and you're like, \"Listen, I don't want to keep up to date"
  },
  {
    "speaker": "Speaker 1",
    "text": "with AI every single minute of every single hour every single day, and I want to just kind of park my money and like kind of like see how it grows over the next couple of months or years.\" Gavin's"
  },
  {
    "speaker": "Speaker 1",
    "text": "portfolio probably kind of makes a lot of sense. Again, this is not investment advice, but he takes a more cautious, long-term, futuristic approach to a lot of these things. And if his trends"
  },
  {
    "speaker": "Speaker 1",
    "text": "indeed end up playing out like he early backed Nvidia and Cerebras, you could end up having like exponential gains over the next couple of years. But again, it's all based on his one thesis,"
  },
  {
    "speaker": "Speaker 1",
    "text": "which is we are not in a bubble. I'm curious whether the listeners of this show agree with this. Obviously, most people aren't as technical or in the weeds as Gavin, but just generally"
  },
  {
    "speaker": "Speaker 1",
    "text": "speaking, after you've heard this episode, do you think we're in a bubble?"
  },
  {
    "speaker": "Speaker 1",
    "text": "Do you think we're not? What are the What are the arguments for and against?"
  },
  {
    "speaker": "Speaker 1",
    "text": "Is there anything that we particularly missed?"
  },
  {
    "speaker": "Speaker 1",
    "text": "I don't know, Josh, do you think we're we're in a bubble as we round up?"
  },
  {
    "speaker": "Speaker 2",
    "text": ">> I think we're certainly in a bubble."
  },
  {
    "speaker": "Speaker 2",
    "text": "Where we are in that bubble is to be debated. It seems like it's in the earlier stages. So hopefully it continues to be that way. According to Gavin, so long as TSMC continues to limit their ability to produce chips,"
  },
  {
    "speaker": "Speaker 2",
    "text": "we'll be fine. But that's the outlook."
  },
  {
    "speaker": "Speaker 2",
    "text": "We have Leopold now that we've covered, whose success is measured in quarters."
  },
  {
    "speaker": "Speaker 2",
    "text": "We have Gavin, whose success is in decades. And perhaps somewhere in the middle is where a lot of people themselves. So if you did enjoy, please don't forget to share this with your"
  },
  {
    "speaker": "Speaker 2",
    "text": "friend. Let us know which ones you are most bullish. If it's not a thesis, perhaps there's a ticker that we should be looking at. I think it's it's it's exciting I think because everything's"
  },
  {
    "speaker": "Speaker 2",
    "text": "moving quickly. Whether it be up or down, there is a lot of movement, there's a lot of volatility. It's fun to get involved in. See you guys tomorrow."
  },
  {
    "speaker": "Speaker 2",
    "text": "Good morning."
  },
  {
    "speaker": "Speaker 2",
    "text": ">> [music] [music]"
  }
]