Speaker 1Hello, everyone. Welcome to another episode of Circuit. I am Ben Beharin.
Speaker 2Greetings, programs. I am Jay Goldberg. Ben, I'm a little nervous about this episode.
Speaker 3Man, this is like head shakers, scratchers, sighs, all of the emotions and feelings as all of our listeners, I'm sure, know exactly what we are going to talk about on this early recorded and then early published because of popular demand episode of the Circuit.
Speaker 2Yeah. I'm nervous because we're going to be delving into territory that is not immediately adjacent to semiconductor technology. And I'm worried if we do too good a job, we're going to end up like getting invited to go on Joe Rogan and talk about conspiracy theories.
Speaker 3Okay. Well, before we do that, you are participating in an event. Yes, go ahead.
Speaker 2Yesterday, so we're recording this Thursday, November 12th. Wednesday, I was at the Silicon Catalyst event. And I just wanted to give them a shout out because I think they're doing good work. Silicon Catalyst is a venture incubator for silicon semiconductor deep tech startups. They've been around for a while, and I hadn't caught up with them in a few years, and I was very impressed by their event. It was at the Computer History Museum in Santa Clara, and it was standing room only. I didn't get a chair the whole time. It was so crowded. The room was full of people. I think they had 20-something, 30 companies in their current class. I think their portfolio is worth $8 billion now. They have branches all over the world. This is serious stuff. They've come so far, and I just wanted to give them credit. If anybody listening is at a startup that touches on things that we talk about in this space, you should go look them up. They are doing good work.
Speaker 3Very cool. I've been to, not in recent years, but a couple of their events way back. I think I spoke at one, like 2014, 2015. Yeah, they've been around a while. Back in the day. Cool. Good stuff. I think we have multiple listeners from them, too. Hit me up on LinkedIn. All right. So the news of the week, the shocker heard around the world. I'm not going to say what was heard around the world for politically correct reasons, but the news that I don't even know how to name is that Jensen, admitted to being unfaithful to his wife. This was speculated, I think sometime last week, some news broke, which might have been leaked by the government that they were concerned he was having an improper relationship with a woman who was tied to perhaps the smuggling of Chinese chips or any number of things. Anyway, we get fast forward. That was, I mean, a whole slew of things happened Sunday. Fast forward to today, Thursday, November 12th. And. Um, he has been, uh, he has resigned. We, we assume this was voluntary. We don't know, but we, we don't, we don't know, but he's no longer CEO. Uh, it broke, I believe yesterday that he had a affair with a direct report, which didn't look good. More of news has come out recently that there was more NVIDIA employees, at least one other one. Anyway, all things bad. But at the end of the day, in what is just an unbelievable self-inflicted wound, uh, the silicon industry leader at the moment, uh, spokesperson, Jensen Huang is no longer CEO of NVIDIA.
Speaker 2Your thoughts. Yeah, I just, it's, it is, it is very hard to grapple with it, which is surprising because both you. And I have been probably talking about it nonstop for the last 48, 72 hours. Um, it's pretty stunning. Even still, like, I, I feel like the world is smaller now without him in it. It's like just suddenly semiconductors are just semiconductors. We've, we've lost our, our little bit of glamor that he, that he provided. Exactly right. Um, I'm, I'm not going to excuse his behavior. I'm just, but like. I think the reality is like, this is less than it was yesterday. I think I, and I, I actually think that there is a fairly, this is a fairly common sentiment. Like, uh, you know, I think there are a lot of investors who were not particularly happy with the way this all played out. Um, and not just like lots of people, not just investors, but they're the whole thing's a mess. That's very sad.
Speaker 3Yeah. Yeah. So, uh, so let's just like a couple of things, right. To level set. So, um, the only comparable I have to this is Steve jobs and, you know, these are different situations. Steve jobs, uh, unfortunately came down with cancer. Uh, I, to be honest with you, I don't entirely think, um, you know, Steve jobs had a set, uh, uh, succession plan, but I think he was able to come up with one on the fly and appoint Tim cook. And that kind of studied, right. A lot of the, the, the storm, both in between as he was dealing with the sickness. And then obviously, you know, when, when he passed, um, you know, cause people bring this up, like, well, why didn't he have a succession plan? I was like, well, what would he have needed one for? Like, I get you want to have one as a backup plan, but he, he had no assumptions. He was not going to be the CEO for a very long time. Who is the, he, in this case, Jensen, Jensen. Yeah. And so it was kind of like, you know, again, I'm not faulting him for not having one. Obviously. You should have one in a worst case scenario, but he fully expected to run this company for a very long time. And so, so there's there, there's that part of it, but, but very similar in my opinion to Steve jobs. He was the North star of the company and the industry at the moment, right? We have looked to him to be the tone setter. He does these extra long keynotes all over the place, talking up AI. I mean, people, he had that gravitas around him very much. Like, like Steve jobs. So it's that type of a personality, that type of a, who did this person mean to the culture and the vision and the leadership of the company in, in, in, in that sense is, is what has been lost here. Now, obviously Jensen hasn't, isn't, isn't dying like, like Steve jobs was, but we don't have any indication that he'll even be within the periphery of this company. And so my point is the comp we have is the magnitude of this moment, in my opinion, is very, very similar to who was a North star of their company. And, and the industry at the time.
Speaker 2Yeah. I, I, I mean, you think about it, like, let's not forget Jensen founded NVIDIA. He had some co-founders, but he's, he's, he's the founder and has been there all along. The only CEO they've ever had, I, you know, it was arguably the most successful entrepreneur ever. Right. It is, it is very difficult to think of NVIDIA without thinking of him. That, that being said, I, I think corporate governance 101 is every company has to have a succession plan. Man's flying all over the place. Private jets are dangerous. They needed, they have always needed a succession plan and it really looks like they didn't have one. And that is a failure of the board. Now, now maybe, maybe they didn't have one because he resisted them. They didn't want to put it in place, but like, it's just basic, basic, you know, this is how boards are supposed to be run is you're supposed to have, boards don't have a lot of things to do, but like, this is like one of them, like one of them is like have a succession plan just in case.
Speaker 3Yeah. Yeah. I mean, I, I think too, like, I mean, again, right. I think there's just the, the gravitas of, of the situation in that. He, he did sort of, I mean, I think orient this company kind of around him, right. I mean, I think you look at the way he managed it and it was really built around his kind of management style flat meant flat, but it meant that he oversaw, right. His number of, of direct reports that then went and, and ran the company. So, you know, I, again, it's one of those things where Nvidia would not have got to where they were today without world-class. Engineers without people that Jensen trusted to run and execute his plan and vision. It's that, that part, I think continues, right. The, the technical merits of what they're doing. But I, again, I come back to all these same conversations we had when Steve jobs was absent from Apple, which is, can the culture proceed? Can the employees work the same, be motivated the same under the same central vision for the leader, right. Who they work for. I think these are reasonable questions. That now, like now become issues we didn't have to deal with before, right. In terms of the future. future fate of nvidia and that that's why i say like yeah yes right governance wise etc but again like i think i don't want to downplay how important he was as a icon if you will amongst other things to to nvidia and to this industry moment we're in yeah i think
Speaker 2there's there's two pieces to it one is he was he's central to the company and then he's central to the industry as well right and a lot most of the questions i've been getting today from people have been what happens to ai now and on that part i'm you know i don't think things change exactly like people are still gonna anthropic still gonna go public next week people are gonna buy a lot of gpus this year spend a lot on capex but i definitely have to think like we we lose a little you know we lose a little bit of that but i think that's the the the the the the the the we ai loses a little bit of momentum here a little bit of energy yeah i agree
Speaker 3um yeah that we we don't have a replacement for that person that personality that kind of again north star for the way we don't we don't have a replacement for that um it's certainly not going to be sam altman or dario it's uh you know it's not lisa's style to do this google really doesn't have anybody again they're a hyperscaler i i think the question i keep coming back to is two things is okay we we could agree that nvidia's strategy isn't necessarily going to change they're right they're going to keep the product rather the roadmap that they're doing but i guess i would have a question as to like for example would the next ceo or even in this moment with uh colette crest being interim you know was everybody on board with the way that jensen was using his balance sheet and does that now have impacts where they might be able to do that and i think that's a good question i think that's a good question may or may not be back rolling or being the capital to customers, neoclouds, right, etc., the way that they needed to, at which point you could be, I guess, a little bit concerned, you know, about the build-out is sort of what I'm saying.
Speaker 2So I think, I'm going to start from a place that I think AI demand is real and growing. And that's driven by the frontier labs more than anything, nothing else. The frontier labs keep getting better. Demand will keep going. And in that, if that continues, then somebody is going to build the infrastructure. And whether that's, you know, whether that's Amazon or, you know, 200 neoclouds, that's going to change now. I think you're right. I think the ability of NVIDIA to play the role of central bank to AI, that goes away, right? This $500 billion platform, they're talking about, like, it has six of the, you know, the biggest, most powerful private equity funds slash banks in the country or the world, you know, signed onto that press release. I don't think anyone else, there are very few other CEOs who get all six of them in the room together to agree on that. And without Jensen, I don't think the deal goes forward. To add, you know, plus there's internal resistance at NVIDIA. Plus, let's not forget that that deal has not been finalized yet, right? All they had was a press release. I don't think they had a term sheet. So that's not going to happen. So that means there's, you know, a whole bunch of companies out there who are thinking they're going to get some funding from Jensen to start their neoclouds and all over the world. I don't think that's coming to fruition, right? But Amazon and Google and Microsoft are still going to build data centers and Anthropic and OpenAI are still going to build data centers. Yeah. Right. So we see it's a share shift. I think for NVIDIA, I think there is a real problem there. The neoclouds exist because Jensen willed them into existence. He wants to have 300 small customers rather than three large ones. And I think they will continue to provide backstops and some form of credit to neoclouds, but on a much smaller scale. And that probably ends up meaning that the hyperscalers, get more powerful. And then not for nothing, like hyperscalers are very, very good at negotiating prices. And I'm sure if I'm the, you know, the purchasing manager at one of them right now, I smell blood. And the next time I have to go put in a purchase order for NVIDIA GPUs, I'm going to turn the screws a little bit. I'm going to push back on a lot of things because, you know, what happens, like that's a really, that's a tough look, right? Because right now they're sort of, it's, it's interim CEO at NVIDIA. They're in turmoil. They don't want to lose business. The new CEO is going to come on board. The last thing he's going to want to, he or she is going to want to deal with is, Oh, you just lost Amazon. Right? So hyperscalers get a lot more power now. And right. And then on top of that, like, I'm sure the hyperscalers are also sitting there thinking, you know, we've always wanted to have two sources of GPUs. We really need to accelerate now. This just proves that point more. Let's go see what Lisa's doing.
Speaker 3Yeah. Yeah. Or, or, or can we get more TPUs? Now that Google has picked a great time to be wanting to sell TPUs, right? Publicly. But I think my, my bigger kind of point is, and this is a point for the investment capital to build out. Cause I obviously agree with you. You know, we think demand continues to go up and to the right, but, but I think a lot of the reason the balance sheet stuff that Nvidia was doing was important was because they were helping people get the capital that they needed to secure the parts of the supply chain that they needed. Whether that was again, engineering talent, construction talent, people to go and do, you know, building and construction. Cause again, you got to buy wood in advance. Like there's just a lot of down cycle financing that needs to happen. And so barring that, barring your, you know, Nvidia or somebody with you in that you are now just left to take all this risk yourself, which, which again, maybe they're convinced the same way, right. That, that we are and it's fine, but I just worry a little bit that kind of they're, they slow their role again, not necessarily because they don't think that this demand profile is there the same way, but they're not getting the investment capital, right. They need to help hedge some of those risks just in case, but yet they need to, they need to pop down a bunch of cash to go and secure everything they need, to build those data centers.
Speaker 2But
Speaker 4I think, so I think Nvidia's
Speaker 2role in that is a little different. What Nvidia has basically done has, has provided some form of credit support, a backstop investment, whatever. And what that's done has, that's allowed the, that hasn't sort of made the, they haven't funded all of it, but what they have done is given enough support to the Neo clouds that, it lowers their cost of capital to the point that the project is viable. And so absent Nvidia providing that support, um, interest rates that they have to pay get too expensive to support, or they can't raise enough equity for their portion of the deal. The, the mechanics of raising that money become much harder to the point that they're not, they're no longer able to raise that money. Right. And so it's not entirely clear to me who, who, who could step in there and AMD can't, they don't have the balance sheet or the interest. Um, the sort of typical wall street sources, like what we're really solving for is this, this, this gap between what the capital markets is willing to pay and what Jensen thinks the technology is worth. Sure. And he bridged that gap so the two could meet. And if Nvidia is not there, I don't think the capital markets, anyone in the capital markets is in a rush to step up to that
Speaker 3point. That's agreed. That's kind of my point is, is if we needed something like this in order to secure, you know, the trunk, the trenches of the supply chain to build out two years from now, which is kind of where you got to start doing these plans. Like what's the threat to that? If, if again, right. That's that Colette or someone else who steps in decides to not use balance sheet the same way. Cause I, I think, I think someone needs to do it and sure. Maybe Google, maybe the hyperscalers can, cause they need it too. But I just, I keep coming back to someone needs to help play that catalyst because again, these are very big and expensive checks you're building for something that's going to exist in two years.
Speaker 2Yeah. I think, I don't think Nvidia stops providing support, um, but just nowhere near as much. They, they scale it back.
Speaker 3Yeah. Which again, then opens the opportunity for other players, right. I think the Neo clouds, there's been sort of the rumor that they've wanted other sources than just Nvidia. Right. So there's that part too. Right. But again, I sort of keep coming back to like the conversation I was having, you know, in, in the backend of this with people's like, what does this impact to, um, Nvidia demand? Right. Cause right now every wafer is accounted for, for the next, at least two years. Nvidia is a huge chunk of that. So the question is, is there anything that threatens that demand model? At which point somebody else gets some of those wafers. And if so, who of those people
Speaker 2yeah i i think i think it is in in nvidia is hobbled here but knocked out not knocked out i think their their numbers like you said is everything sold out for the foreseeable future um but it gets harder right you know who's right who who's going to go negotiate with tsmc tsmc's you know they're they're pretty good at signing deals too they're they're going to be a little wary here about whoever comes next and how much capacity they want to assign to nvidia um you know there's you know i think jensen through his relationship and he's obviously very very popular in taiwan was able to get a pretty good deal for for nvidia at tsmc but he was bumping up against the limits of that this year they weren't going to give him any more and you know i i think it definitely i puts tsmc very much in the kingmaker position um they're the ones who were deciding this year and next who gets the extra allocation and i think you know now i think about it i think if they see nvidia really threatened they'll throw them a bone and give them extra capacity next year um um yeah but it's it's uh
Speaker 3well i say that to say if if i had to pick right foot to the fire who would get some of that if demand goes down it's it's uh it's broadcom which would i think then benefit google and tpus and amd i mean they're your two second largest customers after nvidia um i mean well apple's there but but different different wafer needs for monolithic versus hpc um so that's that's again right it just comes down to a choose your assumptions on your wafer model and who you think gets uh gets that share if any anything happens to nvidia's demand profile which again i'm not saying it's going to happen i don't i'm not thinking that's the case right now but it's certainly the question to watch long term um which again just comes back to kind of the strategy side of this execution as you rightly pointed out the negotiation side of this like jensen played a big role right in securing those deals in doing those negotiations and negotiating pricing right like a lot of times you were up against him it wasn't a random salesperson right so it's
Speaker 2like right i mean that's right i mean a lot of these deals are sort of ceo to ceo they're they're big these some of these sales are massive right i so i can easily see that like the real negotiation with amazon is jensen and andy jensen and saya right it's at that level and you know it's that's it's harder now i'm i mean i imagine that colette is a perfectly capable fierce negotiator um but she's you know kind of fighting with a arm tied behind her back
Speaker 3yeah so so let's talk a little bit about you know where this sort of goes from here so colette is interim which i think is a good choice um the street noise her right it's not like you have an unknown candidate you know i'd originally thought it would be ian buck but i'm not sure it makes sense in the interim because ian's never been on a earnings call like never been on an earnings call not something he's had to do not something i don't even know if he's comfortable with right even though i do think he should be a candidate for this job given how long he's been there and he does know these customers and whatnot um but this is basically a a process right they're going to explore this board is now going to explore all new uh third-party candidates to which i'm gonna let you throw whoever your dream it is like we've been talking about this like there's not there's not a lot it's a very short list of people who who can run a company like this when again there's a lot riding on nvidia um or an internal candidate who again i would think would be you know ian buck would would make the most sense um so yeah so how do we see this process playing up and then as you've had to do some of these things before with boards and whatnot like how long could this take like is this could this take a really long time or is this the kind of thing they might want to do quickly i
Speaker 2think it can happen fairly quickly but not days it's going to take a couple months okay right because the board has to figure out what they're looking for they have to i'm sure they've already reached out to recruiters but that takes you know take some time to get them set up they have to figure out the candidate list so you know give give the board a week or two to just figure out who they want to talk to they'll bring in outside experts to consult with them but some of those outside experts will themselves be potential candidates um so you know oh we have the holidays coming up i mean i think they i think they get somebody q1 like march is my guess i'm gonna make up a number march let's say they get somebody by march of next year that's you know maybe they can squeeze it a little bit faster than that but i think march is sometime around there maybe maybe for gtc they get the new ceo that's that's probably as fast as they can go i
Speaker 3mean something like like having a goal for gtc would make sense because right now i'm thinking through like their event strategy and i don't know what they do right they've got gtc dc which was coming up in a few months i don't know who does that you usually ces was prime jensen stage for ces do you even send someone to ces at this point if so who i mean it's certainly not going to be the draw it was so that's an issue and then yeah and then gtc is the big one right all the news all the announcements the roadmap everything and so like that's going to be tough right without somebody at the helm let alone jensen but just somebody who can come out and represent the company
Speaker 2yeah but it's it's tricky because the board can only move so fast sure i get that i get right no no but i mean it's like it's like there's we get into some pretty serious legal territory here because the board has to be shown to exercise thorough due diligence and consider all the candidates right this board is now under immense immense scrutiny um and they're going to have to demonstrate that they conducted a deliberate and thorough process which is going to slow things down and i don't think you know the lawyers are in charge now the lawyers don't care about ces or gtc for that matter they're going to dictate the pace right it's true right and and then let's also not forget the board has other things on their plate as well such as what are we at four five ongoing federal investigations congressional hearings coming up right um those are serious serious matters uh i don't think we have a good sense of how what the board is doing about them but they have to do something yeah um
Speaker 3well yeah and lord knows what's going to happen next what other information comes out are there more shoes to drop who knew what like the geopolitical ness of this is gonna get messy you've seen senators and whatnot come out and tweet like we better make sure we never sell chips to china like yada yada yada which which fine um
Speaker 2let's come back to that because i got theories on that okay right but like but i think i think what's interesting here like one of the things the board has to be extra double super careful of is especially with internal candidates let's say they go through this process they get somebody in march from an internal candidate and i'm not gonna name names i'm just gonna say generic internal candidate then in april the congressional hearings begin or the investigation comes out maybe and then it turns out that that person knew about something that yeah of course they exactly they
Speaker 3have to know who knew what absolutely
Speaker 2right and it's gonna take them a while to figure it all out it's just the
Speaker 1more we talk about this whole thing i just i can't believe it i just
Speaker 5oh it's it's it's really it's the self-inflicted wounds of all of this that just you know we yeah
Speaker 3there was nothing we could do about steve jobs cancer you know like that was a tragedy in and of itself this was yeah that was a whole slew
Speaker 1go ahead so so
Speaker 4yeah i i so this
Speaker 2is this is where my conspiracy theory starts which is jensen has obviously made a long series of very poor decisions about his personal life um but i am i have been very suspicious of this since the so it all started with that new york times story just about a week ago that that claimed he had an affair with an alleged chinese spy and if you look at that story it was reported in washington dc that wasn't some reporter in beijing who got a source in china's mss this was a story coming from washington dc and that smells a lot to me like a political motivation for embarrassing jensen and then the way in which it sort of rolled out from there was in my mind almost certainly a orchestrated campaign to remove jensen from office from his position right it just it it really really smells like a washington political operative maneuvering using the press leaking to the press selectively um you i i mean i was like i've been saying to people all all week long like like there's going to be another shooter drop because that's how these things always go you create a sense of urgency a sense of panic oh we have to do something you have right and then just as they're formulating their defense the other shoe drops and then boom everyone's so all wound up we got to do something and then right and like i i had that conversation with with a reporter i was talking to a reporter about it yesterday and like we we got to the end of the interview and just as the interview was ending you the other the the next new york times story about the other affair with the internal direct report came out and like i looked like i was like i could see the future like because there was the other shoe right there and i i think it's a shame and i there are you know there i i you know look i i don't know anything more about what goes on in dc than anyone else who reads the newspaper every day but there's lots of clearly jensen has made a lot of enemies in in dc um there are a lot of people who didn't like the way that he was uh lobbying congress to uh loosen restrictions like not the idea of loosening restrictions but the way in which he went about lobbying people rub people the wrong way there's this you know there's an element of him being very close to the president which i'm sure made other people just jealous they didn't really care about the policy they just didn't like they were jealous of that closeness and then there's another element which is he could just be collateral damage in a fight between two politicians right he's a little closer to one so that guy's enemy undercuts jensen to undercut his political there's all of these things playing out um right and so you know like it's it's just it is it is is super frustrating that that that's that's how it played out and i don't know what he could have done differently because it certainly looks a lot like i don't know if they they caused it but certainly the people who in dc who who feel like they've benefited from his removal are the people who are most hawkish i've seen a lot of these restricting chip sales to china all these conspiracy
Speaker 3things again i think you see what some of the senators have put out today you could see them being like very very angry about uh about we should not be giving any chips right to china and now you heard them saying we need to cut off china's access to even get access to our chips via clouds any cloud regardless of where they are like there is a lot of that there's the as somebody was telling me there's the there's the china hawks and then there's the china hawks like really big ox and there's that's differencing opinions so i i guess i just keep coming back to the like i mean again i i guess i don't i shouldn't give any intelligent credit to politicians broadly but like you you have to realize how important this company is also to your national security not just your competitors trying to get access like your national security like why why would you do something that jeopardizes this like it's i don't know yeah yeah and there are
Speaker 2all kinds of reasons why like i understand very well personally how much china is a rival to the united states a significant adversary and competitor but maybe this isn't the right way to to go about confronting them right it's it's not clear to me that restricting chip sales to china is gonna ever gonna work right there aren't enough inspectors in the bis inspectors in the world to do that right there aren't enough inspectors in the world to do that right so even if we have super strict rules Chinese companies are still going to get chips right as they if they can't get them in Malaysia and Singapore and Korea and Japan they'll get them somewhere else right they've like they're just right there there's you know there's so much interest there's so much demand there and there's what 2,000 BIS inspectors total in the world or no that's a whole agency like it's just there's a mismatch there all right so if if that's right there aren't enough inspectors in the world to do that right there aren't enough chips is not a it's not effective and it's not going to actually it's it's probably not the best way to do it right there are all these bills that are going through congress now varying degrees of harshness varying degrees of of direction and it's clear to me that some of them are better than others and yeah just cutting off china from chips is no it's not it's probably not the right way to do it there's not gonna work anyway
Speaker 3like there's the other part of this like to the degree that china i mean again retaliates or could retaliate like there are a lot of components in the supply chain that we need that come from china to even make the boards that those chips go on and if they felt like it right they could impose a lot of other pain um but all all that would do is prove that they were getting stuff illegally which you know like hey we're mad that you cut off our illegal uh attachment so now we're gonna cut off our illegal uh attachment so now we're going to uh now we're going to figure out how you can not get materials you need for pcbs and substrates and late trailing edge components etc so i don't know i guess i'm a bit i'm a bit worried about how this plays out from a government standpoint as well just the variables that are in play yeah it's
Speaker 2i i think i don't know we we could we could get very tinfoil hat over this i i don't i don't think anything is clear yet and i think i don't i don't think all of the most hawkish people's uh plans are going to come to fruition but i i think it is safe to say that we will see more restrictions uh but let me ask you this like what
Speaker 3okay so if this is the line not great for nvidia um what why aren't we cutting off cpu sales from amd and intel because those play important roles in ai inference and uh you know why are we drawing the line just with gpus like i'm not even going to respond to that because i'm just
Speaker 4making the point
Speaker 2right have to say something insulting about politicians and let me i would i will i will say
Speaker 4i think it's safe for us to
Speaker 2assume that there is not a high degree of but again at the
Speaker 3same time like a crowd let's just exclude china from this right people were like why does singapore and why does malaysia and all these other places have a bunch of chips and like okay that's a fair point but at the same time every nation not just china in the united states is going to be building data centers for compute the hyperscalers want to serve businesses and people there in their regions they need the data centers to compute the data centers something's got to fill those like sure it's in close proximity to china okay but at the same time like the nations are going to be building these things and inevitably we're going to put nvidia gpus in them so you can't just say hey you can sell to nobody but you're but our friendlies europe and the united states like that's just like these companies need to be able to sell their chips to other places you know yeah it's it's
Speaker 2even worse that because you just you said japan like there are serious chinese affiliated data centers in japan right that's a like i don't know that it's larger than what's going on in malaysia but it might be right there are japanese cloud there are japanese sort of neo-cloud equivalents which have sprung up very quickly right right exactly they're serving chinese customers right and so we just can't export chips anywhere
Speaker 3like that's what this week has been like so here we are okay all right you you you had a a name you you said you were going to talk about for nvidia ceo that you're floating to me so
Speaker 4well because that's the that's right do that
Speaker 2like you know my crazy dream would be that lisa lisa sue takes over yeah i had said she's not gonna do that no um no but
Speaker 3like that galsinger said that'd be pretty cool but i know i know people i know he's not really an option um you know and then anyway all right all right
Speaker 1let's talk so so i've actually
Speaker 4spent time lately they're like okay for the first
Speaker 2time ever on on polymarket tracking tracking the odds of right yeah oh yeah yeah there was there was this was up a few days ago so the leading candidate right now is is Ian Buckley. yeah
Speaker 3because he was there forever colette
Speaker 2is number two the renee haas from arm is number three i have no idea where that came from that's right that's right okay like i guess coming back and they don't come back number four is jensen huang wait
Speaker 3wait what's the poll sorry what's so what what's the percent though for jensen like what's
Speaker 4that yeah i mean it is it is yeah okay six percent that's uh oh man right it's
Speaker 2higher than tim cook tim cook is five percent and the president wants right so so i mean here here's here's the crazy plan here's how that would take place is if you find that there are enough shareholders that are upset again as long as you could run a proxy campaign like
Speaker 3to bring him back some you could ask the board like something illegal as long as that's the case sure i mean you yeah yeah anyway it's possible though yeah i guess like i saw somebody post something that he owns like completely nuts as long as one person owns more than three percent or a group of set number of people they could appoint or make recommendations to appoint board members who could then increase voting share oust current board members get yourself like anyway i don't know dude i'm just like this is a popcorn situation this is nowhere near from over all sorts of other news and drama is going to happen all at the time where like one of the things i wanted to talk about on this show prior to this whole situation was like you basically have increasing degrees of market slash investor sentiment that none of this is going to last beyond like 2029 like like that was what was going into this situation already and now you have this and so you're just like well goodbye everybody like this is like this is uh just an absolute cluster on so many levels at a time where everybody was already reaching the conclusion that compute was a solved issue ai compute is a solved issue and after 2029 nobody's gonna need this degree of compute anymore at all and now this and now this which you know
Speaker 5before we talk about that you know and now this every week we always say at the end of our show we'll see what next week brings and here we go just all right all right let's talk about yeah sure did not i
Speaker 4did not have i did not have jensen sleeps with a
Speaker 2light chinese spy on my list of risk
Speaker 3factors late lay the uh the framework on that and then uh yeah core we've and nebby is both
Speaker 2reported today or no this week and uh the market's verdict seems to be core we've good nebby is bad core we was up 20 nebby is down close to 20 percent um i think i think the the the issue
Speaker 4with nebby is very
Speaker 2straightforward they they had uh they had to delay start of a data center it's in it's in construction the the completion date and the powering on date is got pushed into next year so they had to lower guidance and people didn't like that that's pretty straightforward the reason core we've was up so strongly is is less clear to me and i think i think what people saw there was the numbers were good all around and core even particularly had been so beaten up in the last three weeks so many concerns about its credit quality all that stuff and its ability to raise capital and and they came out with a set of very strong numbers and i think that i guess to some degree assuaged concerns um but i think in both both cases what it shows me is that what really matters most to these to these what matters most in these companies is their ability to bring on large projects for large customers it's less about the day-to-day of their business it's just their sort of construction schedules and power cycles i mean core we've had a whole bunch of other things but like i i it's hard to tell how much of their their commentary is about the core business and how much of it is just around sort of very anecdotal things like they're raising prices on things but that's like that's not really the core business so neoclouds are very confusing i i guess without nvidia funding 200 other neoclouds maybe maybe things get a little bit more complicated but i get a little bit easier for core even nebius because people still want their compute and they don't have you know hundreds of competitors anymore but it's it's still you know it's it's it's these
Speaker 3businesses are yeah so on very much live or die by by the large contracts they have it was like 130 000 gpus sorry they have 130 000 hopper gpus
Speaker 2hopper yeah okay they have 130
Speaker 3000 hoppers that
Speaker 2are uh right so the assumption
Speaker 3was they might be able to charge more for those than they did at the time
Speaker 2and i think q1 of next year
Speaker 3and is that a fair thesis yes yes so
Speaker 2uh the pricing bears that out right the the contract price for the spot price for hopper is has is up uh this year i don't know when the contracts were started but it's it's safe to say that the contract prices for hopper are up and so in theory so actually let me let me take it back contracted prices are almost always lower than spot prices and so hopper prices since the time of the contract signing have come up a little bit but then you factor in the discount you're actually they're actually going to have 130 000 gpus come on stream and they're actually going to have 130 000 gpus come on stream and they're actually going to have 130 000 gpus come on stream and q1 of next year that they can put on the spot market and they can raise prices by what is effectively a pretty hefty amount that certainly if if if they came off contract today and they had to sign up people that would be true um i don't know what hopper prices are going to be like in six months that's the real risk there um and that's kind of what i was getting at which is they have lots of little examples of like oh we're raising prices we're raising prices do you think the contracted stuff is still like when i'm very different yes but you know
Speaker 3there had been sort of this discussion we talked about it too where parts of their fleet they were leaving open to spot because it's becoming kind of like an auction because of demand does core we've give any indication that they're kind of maybe going to favor like one of these or the other leaving some first spot so they can get higher revenue versus long-term contracts which again are never not going to be at the same the same rates
Speaker 2okay loosely speaking yes they they kind of frame it a little differently but that's the basic idea which is prices for all these things have gone up let's just let's let's stop having such so many contracts says our owners contracts let's let's have more flexible shorter term contracts higher prices the other the other key thing that they they they claimed was that they're moving a way from this form of structured contract with fixed pricing and and and more importantly moving away from these long-term contracts they have with the hyperscalers where the hyperscalers fund the capex and instead they're moving to something that's much more like prepayment right so you don't necessarily sign up for three years but you pay you you sign up for a year and you pay all of that up front and you don't necessarily sign up for three years but you pay you you sign up for a year and you pay that that's seen as as a positive right i i would worry though that um yeah they're able to do that right now i don't know how how sustainable that will be going forward right they don't they don't need what they're effectively losing they're losing the credit support right now if they if they borrow money they they use their customers credit to guarantee the loan right that's how they're able to fund it and they're saying they're moving away from that and instead they're going to sign up people for prepayment sure you pay a pay a year up front and that's they'll they'll raise the money that way to be able to get the loan they need which again is possible i don't know i don't know how long that like i don't know if they'll be able to do that do that forever forever
Speaker 3i mean the thing is too is like look you look at how both these companies position themselves as hyperscaler alternatives which you know i don't want to necessarily say either of them fall in a hyperscaler camp but they put themselves in this conversation as an alternative to be an alternative to be an alternative means that enterprises or business customers come to you directly for these things and if you're a business a sauce company or whatever right you're not coming to them and going to pay gpu auctions to serve inference you'll do this for training right it makes sense training or short worst lows you just need to suck it up put those costs and you got to do it if you're inferencing something i mean you're providing a software as a service or an ai whatever as a service which is what they're trying to say if you're an ai native company come to us those companies are not going to have variables in their margins for spot pricing and gpus they are going to want long-term contracts and predictable pricing and so my point here is that this that that point is is doing spot pricing is fine for training but if you want to be an inference cloud that's not going to work and i just those those tensions sit in my mind about what they say they want to be versus how we know customers use them which is either a hyperscaler proxy or for training not for long-term enterprise viability of inference and those are the kind of long-term things i would rather see them prove that they're getting the long tail of the enterprise or again have some form of economics that makes them attractive as a hyperscaler alternative for a lab or a saw a i saw startup or whatever right that needs to come and pay for compute and do so with predictable pricing
Speaker 2i i think they would maintain that they are in fact doing that um the the problem is that piece of the business where they're going after the long tail enterprise is very very small relative to these massive contracts they've gotten from the hyperscalers of course and and we've talked about this before and like you get a whole bunch of money how do you decide who gets which capacity and like how do you right it's it's so it's so easy to get distracted by the large amounts and then you have to still build the business and so there's a there's a sort of time incentive timing problem there i i still like but they're both i think it's i think it's safe to say they're
Speaker 3both position themselves prove that they can get the type of customers who are long-term durable in these contracts that they're not just a training cloud that they're not just a cloud for the hyperscalers and these are the little you know nuggets that i'm looking for either on calls or whatnot where you know we can do that and i think that's a really good point and i think you can judge that um that they're getting businesses that fit the positioning that they have which is hyperscaler alternative for enterprise software yeah and and i will say this like i said they're
Speaker 4both they're all
Speaker 2working they're both working towards that and core core has now gotten their customer concentration down to the two biggest customers are down to sixty percent of revenue which is it was seventy percent last year and seventy five percent of the ipo so regardless
Speaker 3they're heading in the right direction it's just it's gonna take a while today the market's still just doing all sorts of uh markety things but uh like i said at the end of the day there's still just doubt that any of this is going to be around and uh in in in two or three years so that's the world we live in until you believe until you believe the market believes we are we are stuck in this cycle you know the world's still going
Speaker 2to need semiconductors in two years the ai boom goes away and we don't have jensen and everything is less exciting we'll just go back to being the normal semiconductor industry that you and i have covered for a very long time and so you know like look if all the excitement goes away
Speaker 5everybody in any
Speaker 2way capacity
Speaker 3eats the world
Speaker 4everywhere and we'll
Speaker 3sit right okay well yes quite the week uh hopefully next week doesn't bring anywhere near this amount just to also say jay and i will be no no no we're gonna so jay and i will be at the tomorrow x summit in austin just you
Speaker 2just jinxed us you just jinxed
Speaker 3us putting on if anybody's going to be there do reach out we are hosting a after party on monday evening uh uh my company is with funda and uh which will be fun so we have an event if anybody wants to come just reach out uh let us know uh and yeah we will talk to you then have a good one thank you everybody tell your
Speaker 2friends and tell your agents
PodcastTranscript AI