The AI Revolution: Who Wins, Who Loses & the SaaSpocalypse | The Real Eisman Playbook Ep 70

[MUSIC] >> Hi, this is Steve Eisman, and this is another episode of The Real Eisman Playbook. The biggest debates going on right now are clearly involving AI, how profitable it's going to be, how sustainable it's going to be. The debate also changes almost on a week to week basis. It's really quite extraordinary. So today, I'm going to interview two tech analysts, Dan Eis, who has left Wedbush and has gone on to create his own investment bank. And Gilloria of Davidson, what I like about these two is they cover a broad swath of the tech sector. Most tech analysts cover chips or they cover tech equipment or they cover software. But these two cover pretty much everything. So I think they're going to have a lot to say about the breadth and length of the debate. And I'll be back at the end to talk about lessons learned. So before we start, if you like what we're doing on our interviews and our weekly wrap, the best way to support the Real Eisman Playbook is to subscribe as free subscribers on YouTube and on Substack. [MUSIC] >> Hi, this is Steve Eisman, and welcome to another episode of The Real Eisman Playbook. So there's so much going on in tech literally every single week. And I talk about it on the wrap. I've never seen a group where the pace of change is so big that every single piece of news is not like incremental. It's almost thesis changing. So today we have as two guests, first recurring guest Dan Eis. >> Great to be here as always. >> And new guest Gilloria. >> Thank you. >> Dan is doing a new gig, which we won't talk about. And Gil is at Davidson. >> That's right. And they cover what, one reason why have you guys on is you, you know, most people just cover semi-conductors or they cover software. But you guys cover a very broad swath and what's happening impacts so much. So let me say a couple of things and I'll give it to you guys. If we were here a year ago and we were talking about AI. I know Dan would have been incredibly positive and he would have talked about how Nvidia, the revenue growth is huge and the hyperscalers are growing very rapidly. And you'd be hard pressed to find a negative story, a negative thesis. So year later, you're not so hard pressed to find a negative thesis. So let me hand it up for first to you Gil. One you just summarize, take a couple of minutes, give us from a high level. What are the terms of debate? >> Absolutely. So there's two really big debates happening in technology. One of them is, are we going to get a return on all this investment? Are these data centers going to create their return on investment for the companies building them in the capital that's being deployed that will justify the extreme expenditure that we've had? >> And everybody has to effectively admit it's extreme. >> It's extreme. >> Yes. >> It's unprecedented. That's one really big debate that's being had and back and forth and our views are nuanced on that. Let's frame the other side of the debate, which is how is it going to impact all the other companies, especially software companies? How are software companies going to do in a world of AI? And again, they so-called SaaS Pocalypse. >> Yes. Well, and the SaaS Pocalypse was this perspective that they're all doomed and there's nothing to look here. >> They're all dead. >> Like they're all dead in five years, there's no software. Now we have a more nuanced discussion. We can talk about where we stand on that. But those are the two big debates. So let's bring it together for a company like Microsoft. Microsoft gets the raw end of both of those deals. It's oh, you're building so many data centers. You're not getting a return on investment and since AI is not worthwhile, AI is bad. That means you're wasting capital at the same time. At the same time, it's oh, you're a software company. And AI is so good that it's going to destroy your business. So they get the raw end of both deals and we argue that we'll hold on a second. I could walk you through why I think we are getting a good return on investment and the return on investment will improve from here. So that's probably makes sense for them to invest. And then I could make an argument that five years from now, I'm still going to get up into the morning, turn on my computer and get on outlook. >> Okay. >> And use Teams. >> Okay. >> And then PowerPoint and Excel and work. And by the way, there will be agents using my Excel and Word and Outlook in Teams, but I'm also going to be there. And guess who is going to stand in front of the model when that happens? Microsoft. And so those two debates are what's going on right now. And again, Microsoft's getting the raw end of the deal and that's what makes this interesting right now. >> Dan. >> I mean, such a phenomenal summary. So you have nothing to say. >> So what I would say is that you're in year three of an eight to ten year build out of the AI revolution. I mean, I view it as it's kind of being like building out the Vegas strip in 1955. So inherently in that there's going to be questions about when does catbacks ultimately leave to monetization? Does Anthropic eat everyone else's lunch? is this a.com 99 2000 moment or is this truly a fourth industrial revolution I believe you know obviously the latter So I think you're gonna go through what I'll call like these gut check moments three to four times a year But I just take a step back and be like In our recent Asia trip demand the supplies 15 to one for chips So I'm just someone that I don't get caught up sometimes narratives. If you got caught up in narratives a year ago near Say cab driver's barrage an alphabet a eyes gonna cross surge DOJ is gonna break it up. I just think right now. We're in a narrative shift where if memory is Skyrocketing or if it's come down significantly since the SK deal right away It's like it causes definitely these sort of white knuckle moments, but in my view like This is gonna change society in a good way. I Believe more jobs going to be created from AI than taking away and for the first time in 30 years The US is ahead of China when it comes to tech and for so much of my life I land from some far off place Land in New York Airport. There's some fist fight the Dunkin Donuts and then I go back to I just came away from You know a fab where they're working 18 hours a day in terms of in Taiwan Speaking to the view the disparity that you saw maybe in Asia versus here I think that's narrowed significant. I think now it's the US's game to lose. So let me press you both Okay, I'll press you on three counter arguments. Tell me what you guys think number one It's not just that Dispending a lot of money. It's that you have companies That haven't raised capital Basically since inception. I mean Google went public I came up with a year But it's early 2000s. They never raise any capital since then Microsoft never raised any capital Meta-ray never raised any capital All of a sudden because of the incredible amount of money that's being spent This is now a very capital intensive business which all other things being equal is a negative. Mm-hmm I think that's a fair state. That's fair. Okay Number two from an outsider's perspective it feels like there aren't any moats in this business Every week Somebody's got a press release on some new a-i-l-m That's the new hot toy and everybody switching from one from this one to that one to that the other one Google had a moat around search that was insurmountable You know, maybe they'll get 30% of of this business. I don't but it did I get 100% so feels like There are a lot of moats in this business which is a negative and then third is pricing You know last week there was this news about this new a Chinese AI model. Kimi. I love that name. Kimi K3 How you how they came with the name Kimi K3 of not was Kimi K2. I guess but why Kimi? So the price that they charge for tokens is like a fifth What the other LLM's are charging so feels like I could make an argument again I'm an outsider. This is not my area of expertise. I got a business with no moats Everybody's spending a ton of money Somebody all these Chinese companies are coming in a much lower price that spells to me price war Okay, that's that's my argument you tell me what you say and then you agree or disagree Well first of the moat my view is like the models are gonna get cheaper and cheaper over time They will get more and more commoditized I think the the value continues to be in the data and the install basis So I think what all these companies doing on hyperscores whether it's what meta is doing whether it's for Oracle's doing whether it's a Microsoft doing the date Like the hearts and lungs of this are all gonna be the data centers in compute because every company every individual as they go down the AI path You're basically gonna have the choice you can you're gonna be able to put on one or two hands And there's who you go with so right now the moat maybe doesn't seem as obvious But they're basically building out their own echoes systems where you're either going to go Microsoft, you're going to go alphabet, you're going to go Oracle. There's going to be minimal choices and companies are going to have to go down that path and the enterprises and consumers are also going to have to pay the pipe. I mean, they're going to have to pay these companies. So today it doesn't seem like there is a mood, but the reality is they are actually step by step building their mood in front of us. So whether it's physical AI, whether it's autonomous, whatever may be in the future, it's no different than today. It's like, what are your choices when it comes to content? Netflix was first. They built it. They spent a ton of money. At first, investors didn't recognize it. Now, where do you go? Netflix basically owns content that speaks to their opportunity and their install base. That's like my own way of kind of viewing it in terms of going back to Vegas strip. Let me press you for a second. It's one thing to say that there's only going to be a few hyper-scalers. You're going to use Oracle or you're going to use Microsoft's database center or Amazon's database center. My point is I'm taking this from a position and I agree with you. That's a ton of money. Once those businesses get going, they'll be great businesses. I'm taking this from the point of view of Anthropic and OpenAI, the creators of the models. If I was ahead of Anthropic or OpenAI, that announcement that came out last week from KimmyK3, I'd be petrified because I'm charging five to seven times more than this model. Supposedly, this model is just as good as my model. What am I going to do? You're referred to AI as one business. It's not. We're talking about a whole value chain that's being created. There's the companies that make the stuff that makes chips, primarily ASML and TSMC, but a whole other slew of companies. There's the companies that make the chips and video AMD, Micron, etc. There's the companies that buy those chips to provide compute, primarily the three big hyper-scales, Microsoft, Amazon, and Google. Then there's the model companies. There's a lot of value being created throughout. I'll point you to one important data point to show that, which is the cumulative run rate of OpenAI and Anthropic right now is clearly above $75 billion in revenue. That's together. Together. Together. Actually, we're probably over a hundred billion of revenue. By the time you include Gemini's revenue and maybe a little bit meta in XAI, we're above a hundred billion dollars of revenue from what was zero a couple of years ago? I'll call that value, and I'm focusing on that number for a very specific reason, which is that is people and companies willing to spend money for AI. That is real economic activity. Maybe we've put a trillion dollars into the ground so far, but that's already a hundred billion dollars that consumers and companies are willing to pay. That's not a great return yet, but that was zero two years ago. Now it's a hundred and we keep building more and more. Those first three parts, the companies that make the equipment, the companies that make the chips, the companies that provide the compute, they add just as much value if not more, if the model is open source. Yeah, model is open source is a threat to open AI and Anthropic. It's just defined for the viewers because not everybody. Actually, I think, Gale, this is an extremely important point that goes in terms of the open source, relative to cheap ones. Just a fine open source and who is using open source. Everybody's on the same page. Anthropic and open AI's model, you can really only use it through Anthropic and open AI. Because it's closed, they control all the parameters. They don't tell you what those parameters are. They control all the code. They don't tell you what's in the code. There's two ways to make that more open. One is to share what the weights are, the parameters of the model, and the other is to share what the code is. How does this model work? If you share both of those, it's an open source model because you can now take this model, take it offline and use it. Without changing it. Change it as you wish. Without being connected to the model company, you can own the model, use it, which makes it far less expensive. That's how a lot of the technology stack works right now, by the way. Open source software is a lot of the technology world. Linux software is how much of our operating systems works. That's free and open source, Apache, open telemetry. A lot of our technology stack is built on open source. It's a big part of the picture as it will be with AI models. They will be a big part of the picture. In the future, companies will use Open AI's Anthropic Most Advanced model for their most important mission critical tasks. But they'll use open source models for everything else, either from a data center or even on premise or sometimes it'll just be on our device. There'll be a smaller model that's on our device that runs on our own GPU and our own memory that we use to do really simple AI tasks like summarizing emails and drafting emails. Things like that, you don't need an Anthropic Fable Mythos model. You can just use a small model. That is part of the future. What's been confusing so far is that the only companies that have been willing to do that are Chinese. American companies have avoided so far having open source model. The reason is that you can charge a lot more for closed source model. If you think with Lambo, tried, didn't really go that well. So I think that was good. So did it try and open source model? You essentially tried it. The problem is that in the open source world, there's a view that Anthropic and Open AI, there's so far ahead. It's like trying to chase your same bolt. But we will end up with American open source models. We already see that happen because Nvidia, for instance, who is a key player in the Seeker system is saying, hey, if none of the labs will build open source models, we'll just do it. Because we know open source models use just as much compute as closed source models. We don't want anybody to use the Chinese models. If you want, we'll make a model. We'll call it NemoTron and it's free. Everybody could use that because, by the way, you still need a GPU. You still need memory. You still need to deploy it in a server, whether in a data center on premise. And therefore, it's in our best interest in video for you to have that. Microsoft now coming on board with that. Palantir is coming on board with that and saying, hey, look, beware of Open AI and Anthropic. There's a lot of tricky parts to working with them. What's his name? The head of Palantir. Alex Carr. Alex Carr was on CNBC. Yeah. And I listened to that interview and I have to say, I didn't understand what he was talking about. Full confession. So maybe we'll want to do our big fan so we can help translate. Please translate. Exactly. We needed to play in English. We need to talk to him. And he was so, he was so exorcised about, I figured, this sounds important, but I didn't know what he was talking about. What was he talking about? I mean, look, he is just like, he is, what makes him so unique. Not just in terms of what he built at Palantir, but it's like his view of the world. He's almost a philosopher, historian to some extent. So he's able, he views things through a certain prism that has ultimately sculpted Palantir. But at the reality is, he is a core believer. The models are almost like, you know, you don't want to be closed into the models. The value is ultimately going to be in the data side. I'm saying from a, from a Palantir perspective, because the reason that's so important is, he's saying it could be an eyes model, a Gilmau, it doesn't matter. And he's threatening us that if you allow andthropic to see your business, if you put things directly in an anthropic model, you put your data into athropics model. And they're not, not only do they have the data, they know how your business operates. Right. And if they decide to compete with you, they can compete with you. So that's one very important thing you say. That's one point. The other thing he's alluding to, which I think is even more important, is if you build your model, if you build your business on top of a model from either anthropic or open AI, and something happens to that model, you're screwed. And that happened just a couple of weeks ago when the government told anthropic terrain and fable and they didn't, you're done. If you were a business that built your business directly on top of a fable model, you're on a business. A derafication for that. I mean, that was kind of the first wake up call. And it was just, but it just goes back to like, you're going to have many models. The view of volunteer and many other companies is, you could be model agnostic. It's about the data, the oncology, to some extent, the technology that you're building around it. Let's move on for a little bit. Let's talk about Google. Hi, Steve Eisman here. Hiring help shouldn't be a headache or a drain on your budget. Upwork makes it easy to hire specialized freelancers quickly so you can get the expertise you need now without weeks of recruiting or a full time hire. Upwork is a one stop platform to find hire and pay expert freelancers across web and software development, data and analytics, marketing, business, operations and more. 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I think a year ago when the stock was at 180, everybody considered them VAI loser because search is going to go away. We're not going to use search anymore. The whole thing's going to fall apart. By the end of last year, Google was VAI winner. Yes. It was only one because I called that a flip-the-flip. They were integrated AI company with the model and the chips and the in the cloud and they had everything. And they had a state-of-the-art model and everybody got super excited about them for good reason. Google Cloud accelerated growth into the 60s and it's a very big business. And importantly, the search advertising growth accelerated. So this whole notion that search is dying, instead of it dying, it accelerated why? Because they're using AI to sell us more ads for more money. Exactly. So it's working. What's happened since then is that there's been a little bit of a pullback on the notion that they're an AI winner. Because as we sit here today, Google's model is no longer state-of-the-art. They're actually a little far behind. They're having internal issues because they're a bureaucracy and like OpenAI and Anthropic that are startups. And by the way, the engineers know I'm Shazir, who's one of the inventors of AI. And then where do you go? Open AI. And so then you get to a point where, oh, wait a second. They have a distant second consumer chat. They're distant third on enterprise AI. So maybe they're not the winner. They're a winner. But that's still a lot better than we were a year ago. What do you think? I mean, my view is from an end-to-end perspective, they're the best position hyper-scalar relatives of the crowd right now. I think in the eyes and investors, but for good reason because what Koreans done on cloud has been phenomenal. Unsearch, they've gained share. Gemini is never going to be as good as Anthropic or OpenAI, but it keeps coming down to like where are they going around the corner? Where are they building? They're looking for more and more ways to monetize. And I think one of the things that investors are I think are underestimating is whether it's like meta using part of what they spend catbacks to ultimately like from it's from a hyperscale perspective in terms of monetize it. It's these companies when they build these I won't call them moots when they build out their ecosystem. The monetization capabilities are the street is still way underestimating. And I think Alphabet is a good example of one where they raise capital that was the right move. Investors obviously like you know we're a little frustrated, but I think investors understand like in these arms raise this AI party. Like I said, like the party started 9 p.m. goes to 4 a.m. It's like a 11 p.m. at the party. You don't want to be on the outside looking in at the party saying how do I get in? And I think that's the danger for companies that don't spend. So let's talk about a company that is a little on the outside looking in at least in my view and I own it Apple. In Apple's defense, Apple is not playing in the we're going to spend a trillion dollars. They're not going to spend anything. So in that sense, their balance sheet is better than anybody else's their cash flow is better than anybody else's. And the other hand, it's kind of hard to figure out exactly where they are in this in this whole ecosystem. But I view them like easy pass total side. No, I still don't it's a fast name people don't have easy pass because it's a total separate cut. We could do a separate part on everybody lives in New York, but but but the easy pass. Yeah, but Apple is the easy pass on the consumer AI highway. The reality is like 20% of the world is going to access AI through an Apple device. Did they stumble out of the gates many times sort of you know over promising on the delivering, but now like you actually have an AI strategy that you can monetize the 2.5 billion iOS devices 1.5 billion iPhones. And I just think for app, I think part of why the stocks do what it's doing is investors are finally starting to understand you could be late to the game if you're Apple. But if you monetize the consumer ecosystem. With Apple, you don't have to worry as much. We talked about the rate of change and the news flow and who's winning an AI and who's not winning an AI. Apple standing back and saying we'll let you all worry about that. You guys fight it out. We'll be here and whoever wins will use in our models. That's what new series new series. We're going to call AI new Siri. We're not going to have our own model. We'll use whatever's the best model is. So you the consumer gets a great experience, but you're not going to call it an open AI model. You're not going to call it an anthropic model. You're going to call it a new Siri. And so we win anyway. So you guys fight it out. You spend the money. You deal with the news flow. We're going to take the high ground and we're going to do well either way. Okay. Switch gears again. Let's talk about Oracle. A controversial name. What do you guys think about, first of all, for my viewers, I have never seen a stock that has done what this kind of stock has done. It was like 200. They reported third quarter last year. It went to 330. Then all of a sudden, everybody said, holy, holy macro. Most of the backlog is open AI. It took it apart. And today it's like 140. So A, what do you think about Oracle's dependence on open AI? And what do you think about Oracle in general? I also just want to give credit where credit is. I think Gil, and you correct me where I'm wrong, he was probably one of the only people out there. That basically, like as the bill that was happening, as the data center bill, and all the open AI hype, you were one of the only ones that was like cautious there. And I'll be the first one, mate, like at that point, like I never, you know, I looked at like the deal and the open AI and what they were doing. And Gil, I remember, like, you know, you took the other side of that and he was dead, right? And I was, I was basically dead wrong. So the point is like, I just want to say like on that, he couldn't have been more accurate in terms of predicting maybe what the reaction would be. And I think, you know, to me, it's got over the long term in terms of the reaction. But I think you called that great. I appreciate it. Let me make the meta point here. Okay. This is who we are. Right? Dan has been the flag bearer for the AI revolution. Yes. He has stood there and explained to everybody how important it is and that you need to continue to invest in it. And don't trouble yourself too much with which of these stocks. These are all very good stocks. I'll give you a list. There's even an ETF. And this is happening. Be part of it. Go with it. Since that role was done so well, I have taken a lot of advice from Rol trying to be to try to say yes, but some people are going to win more than others. Okay. And by the way, that changes all the time. Every week. I'm going to keep, I'm going to be as open-minded and as fluid thinking as I can wake up every day, open-minded to what the news tells me today and where the winds are blowing. So I can help investors pick between those options because again, Dan does that role so well. Let me do something else. Can I ask a question? How when the Oracle happened? Remember, Oracle Open AI deal happens. We're talking, this is the third quarter of last year. So I mean, obviously, historic moment for the market, Oracle, stock doubles, what was it that at the time, despite like the, I'm just, like, how is it like that you, it was able to see around the corner in terms of, was it just a concern about like the cat backs build out and just the debt they were going to have to take on? Like, was that, I'm just curious. A couple of things. One is I'm always worried when everybody's on a bandwagon. When I see everybody, every last hedge fund, every last long only on a bandwagon, it makes me uneasy. And then I try not to be on that band. When Oracle on September 10th of 2025, everybody was on the bandwagon. People were going on seeing, we saw from 2.30 to 3.30. That means everybody's on the same bad way. And people were going on seeing, we see them saying again, Oracle is the AI winner. They're the AI winner. Right. And I thought, well, that's probably not true. Because at the time, their backlog went from 150 to 450 and everybody got excited, billion, and every got an three months. Well, no, in a day. And then we wake up in the Wall Street Journal reports, that's one deal with OpenAI. And as we sat there on September 11th of 2025, OpenAI did not have money. They had no capital. They had very little revenue. And we quickly learned that beyond that 300 billion commitment, they made an additional 1.1 trillion dollars of other commitments elsewhere without having any money. Right. So that's where we were on September 11th. And as the market realized, at the stock one from actually 350 intraday, all the way down to 140. Right. At 140, the market had reacted too much to the other side. Because it was saying that OpenAI revenue is worthless. The only thing is, by that point, as we enter this year, OpenAI raised $122 billion. The largest fundraising history, they had the capital. They took that 1.4 trillion and they made it clear that they actually didn't make that money commitments. These are all flexible arrangements. Therefore, the actual commitments they have, they will be able to pay. And they went into code red, which is, they narrow their focus a lot to the only of the things that really matter, which is really compute. At that point, it became clear, wait a second, they are going to pay their Oracle bills. And therefore, Oracle actually has a chance of being worth a lot more because their backlog is really being valued at zero. And as we said here today, their entire backlog, $630 billion worth of backlog of compute revenue is valued by the market at zero. Oracle is valued at zero. You can almost say negative to some extent in terms of, yeah. Because clearly it's at least zero. It was zero. So let me ask a question that you basically raised, which was, he's been the big bull. Great. I mean, people who have followed Dan over the years of my a lot of money. And you're a lot of money. A lot of my hat tip. Okay. Sometimes when you've been on the show, I get comments. And that are incredibly negative. That Dan Ives. He's so dumb. What's going on? He's so foolish. And my response to them is, hey, Dan's really nice guy. And number two, he's basically been right. Now, that doesn't mean he's going to be right forever. But he's, but he's been right so far. But, but, but you said something where you, where you said you try at this point to try and figure out. And clearly this change is almost on a week to week basis. Who are the winners and who are the losers? So, and Gilles very bullish. He just, he and I, and I just, I love that he does is he's able sometimes to just see around corners. Be like, just question like, hey, is the market overacting good or bad? So give me top three winners at this point because, you know, if we were here next week, you could be entirely different three. But also, give me the three. Yeah, I'm not saying that they're the losers, but the ones you have the biggest questions about. Yeah. And then Dan, I'm going to throw that to you. So let's, let's use Microsoft Palantir and Micron. Okay. And let me contract micron, contrast micron with Intel, contrast, Microsoft with Salesforce, and then contrast Palantir with, add anything that we want. But let's start with, with those two contrasts. And I think Micron is the best example of this. Okay. Because we look for dislocations, right? Where is the market being inconsistent? Because the market right now on a daily basis is decided between AI is good and AI is bad. And it depends on what morning it is, right? But sometimes the market is telling us things that are contradictory. For instance, the market is now valuing some stocks in the semi and semi cap hardware space as if this cycle is continuing through 2030. For Intel to be worth what is, for cerebers to be worth what is, for most of the semi cap and optical companies to be worth what they're trading out today, this cycle has to go through 2030. Because they're current valuations are not otherwise justified. Okay. If you look at Micron and Nvidia to a certain extent at their valuation, their valuation implies that the cycle is already over. Right. That next year is down. Right. That is inconsistent. That's why Micron sells like it six times earnings. Six times earnings. AMD 50 times earnings Intel 100 times earnings. And you think about what they do Intel and AMD make CPUs, right? Micron makes memory. And historically the CPU market's been a little better than memory, a little better. As we sit here today, I can make an argument that the memory chip market is much better than the CPU market. And yet, Micron is trading at six times as if the cycle is over. Intel is trading at 100 times as if the cycle is continuing for five more years. Okay. So that's where the opportunities are for us. Okay. Move on to Microsoft versus Salesforce. Who's a good company and who's not a very good company? Well, that's a good question. That's for software. It's the only question. Right. Because there's a crowding out of unimportant software. There's a crowding out of products that didn't make their customers happy because coming to have to spend so much on AI right now that they're looking at their budgets and saying, where can I cut? And if you're in some problems IBM had last week when they pre-enacted, which was stunning. Exactly. Right. Salesforce is in the category of software that they're trying to cut. Really? Yes. Why? Because Salesforce has not been adding value to them in years and it keeps charging them more and more for that less value every year. That's a bad business that's been declining regardless of AI. And then you have Microsoft that has accelerating growth right now because they're actually executing very well where AI is a tailwind not only to the Azure business but to the office business and the infrastructure software business. The companies are buying more and more those businesses are accelerating right now because of AI. And yet they're both trading at these very low multiples. And so that's where we see the dislocations. Not all software is the same. There's really good software comes like Microsoft, especially Palantir and there's not as good companies like Salesforce. Okay. Dan. That's great. I'm going to throw that to you winners and potential losers. So winner, I mean, look, I just think there's one ship in the world, fueling the AI revolution. It's led by Godfather of AI Agents in a video. Like the point is I don't think within there's a debate. A third rate in video chip is a year and a half to two years ahead of Huawei. In fact, I mean, it just speaks to the reality of you could talk to anyone in the supply chain. The reality is that any big Chinese tech company would once in a video chip over Huawei. And I think as that plays out globally, especially when it comes to physical AI and how Jensins building it, it's really like their world, everyone else paying rent when it comes to the chip perspective. And I think for every dollar spent on a video chip, we estimate there's eight to ten dollar multiply across the rest of tech. So it's not just about in videos, every chips, telecom equipment, etc. Hyper scale or build out data center cooling energy. And two, I think I continue to think when I look at Apple on the consumer side, no one is better positioned in terms of monetizing consumer AI revolution than where Apple sits. And finally now you actually have a strategy. I'm not saying it's anthropic or open AI, but you have a good enough strategy. They'll sit there and wait and they'll choose. But in the monetization is something that I think is starting now being appreciated by investors. Third and I think broadly, it's cybersecurity is a sector. You go back to like March when the view like anthropic, they're going to eat cybersecurity is going to come out like a cybersecurity pride. The reality cybersecurity budget is going to double next two or three years. Why? Because the surface area, every agent, if Steve Eisen has three agents, it's not just, they're not just protecting you. They have to protect three agent. It's just more surface areas. So cybersecurity overall, I mean, you have talked about that. That's anything investors are under appreciating in terms of where this goes. So in cybersecurity. What do you like the most? - Look, I mean, I just think the best position companies from a product perspective from CEOs, what they've done, I think Crowdstrike and Powell out there were the ones where like they just, they under, I mean, if you could George or Crowdstrike in the cash power, they're just able to see around corners and obviously they have to continue to execute. In terms of like the companies where, you know, Gill will talk about like sales for us, I would look at like names like Adobe where you had such a mood, you have such an install and they essentially, they miscalculated what AI is gonna do the business model. You could say the same thing for names like Intuit. - How is AI going after Intuit? I just explained that to me. - Because a lot of the technology, they're gonna create models like, could it actually do your taxes? Are there other-- - There's no need into it. - I mean, you'll need, but the point is like, how are enterprises like, what is it ultimately, you know, take out of its market share? And I just think it comes down to like, the one narrative that me and Gill just keep talking about is companies that sit on a treadmill at 2.5 speed. It's no different than like, 1995, like a typewriter company. I remember like, put out press release being like, this internet thing is where, we're sticking to our gun. We're gonna continue to be like a typewriter, we're a pro, and then all of a sudden a year later, they were bankrupt and gone. You just, you have to understand software company, like in terms of, you know, trying to embrace it. - So you both see, there are software companies that are gonna get really badly hurt by this. - Why don't I think there's debate? - Yes, but not every. - I'm just saying, but you could think there are some. - You're looking McDerman's service now. They're not. - I'm sorry. - If you look at Bill McDerman's service now, like I wouldn't put them-- - No, but I have to answer it in a different way, which is, you use the word software, or you just say, you didn't say public software company. There's a lot of software companies that are small or private. - That are owned by private equity. - That are owned by private equity that's gutted them, that are not renewing their products, not refreshing their products, because the private equity assume that the stream goes long forever. - Right. - Those companies are gonna be gone. This is less like gone. And there already, it's already happened. It happened in Medallia last week. - Right. - And this is why there's distress around private equity. - Because that's a function. - Well, a little bit of a personal opinion. - It's a personal point. - Why are those companies more at risk than some of the public companies? - Two reasons. One is, they've stopped investing in their products. That's the whole premise of private equity. - Yes, that's why they're going to make it. - I got it. The revenue will continue. That's the premise. Well, now the revenue's not continuing. And the second is, they tend to be smaller. So if I'm a CIO, and I have to, I have 100 software packages I'm managing, and I have to now move all this spend to AI, I need to go to 30 software packages. Get, well, guess what I'm cutting. I'm cutting all the small ones. Because you know what? Microsoft and ServiceNow and Adobe, and even Salesforce can do this for me. And I don't need these smaller companies. I'm just going to ask those companies to do it. And by the way, they'll probably bundled because they're increasing my price anyway. So there'll be a lot of failure in software. It doesn't necessarily happen to happen in the public sector, in the publicly traded software sector. And that's what one of the misunderstandings. When there was distress over software debt, what people didn't understand that the software comes down and I cover are in a net cash position. They don't borrow money. There is no software debt for them. Software debt is private equity, bought the software company, and took it up. Yeah. But it was a private equity. I mean, there's such like, you know, amazing and as like Tom Bravo and others, like, yeah, there's changes in the market, but they're also going to figure out where he is to monetize on the other side. Well, let's just work on an analogy that you gave me earlier about, you know, where we are in this story. Compared to Las Vegas. Where do you look? Just tell us what you think about that. So just think about like, let's say you're, I were building out the strip 55 was fake. And I'm telling you like, this is where it's illegal. And I'm like, Sinatra, Martin, and then eventually, you know, whatever, 70, 80 years, something that's gonna be a severe and going through, you'd be like, what? They don't have something like, there's an issue with the building in 1956. You know, God, this thing is done. There's no way these Vegas strips can happen. The reality is like, these companies recognize there's only one strip. That being basically the data center, the enterprise, the global build out. If you don't build on the strip now, two, three years from now, that's gonna be taken from something. You're gonna have to build, you know, somewhere, you know, in Reno, okay? The written, Reno is pretty cool, but it's side note. The reality is that these companies recognize now is the time to build it out and us get our mood. Maybe like you're saying like, there might not be a perceived mood, but as you build out the data centers, and you build out the compute, and you build out the capacity, you're gonna have a choice to stay at, you know, the Oracle Hotel, the Alpha Bat One, the Microsoft One. And the reality is, NeoClouds and others are gonna play there as well. Like, you get one by the Apple. Here's why I love that analogy, because the Las Vegas strip is an inherently American phenomena. Nobody else would have had the imagination-- - Or insanity. - Encourage, and insanity to build the Las Vegas strip. This couldn't have happened anywhere else. And now it's an incredibly profitable phenomena that's the only man-made thing visible from space. And AI is the same thing. We have this inherent optimism that if we build it, if we build it, they will come. And that's what's happening right now. And I know that there's this big fear that we're building in and it's not coming. And that's why I really focus on that number I started off with. There is more than $100 billion of revenue this year from actual AI consumption that was zero two years ago. It's starting to happen. We are optimistic for a reason, because we build great things in this country. And I would just add to his point, it's something I'm very impassioned about. And go to DC once or a few months, met with many centers, Congress, every time it gets politicized data centers or political grandstanding not to get-- It's explained like, we for the first time, from data centers to chips to the models, you say I'm gonna question where US is relative to China. You don't build those data centers. You put these moratoriums on, guess who wins? China. And I get very frustrated a lot of times with politics because I get the politicals. I understand there's issues around data centers and some of the other stuff. But the reality is that this is the hearts and lungs of building it out. And I think that's just something where AI does have a PR problem because these companies themselves have created. If you keep telling everyone, we're gonna wipe out white collar jobs in 18 months. We're gonna do that. And then all of a sudden, you're like, "Trizzy bills are gonna go higher." The average Americans, like, "What's in it for me?" So I do think some of that is a self-create PR problem, but to me, that right now is a huge sort of issue. How do you think this is gonna one fold in terms of the politics? Look, there's the politics versus the reality of it. And in every midterm election, it's gonna be there because it's something that like, clearly is a huge debate, whether it's on the local level or on state level or obviously the national level. The problem is that anytime these data centers get turned down, turn down. Okay, in terms of voted down, more atoriums, like you've just saw a hook on New York, it's dangerous because the reality is that the only way that the US doesn't dominate AI is this. Like, it's not even a question. It's not about chips, data center, cappag. The only way that we don't dominate is this. And for me, as in my Gionai, as technologists have done this whatever, 60 years combined, I've done so many years, so much time in Asia being like, just in awe of what they've built in terms of supply chain. And then you come back here and you realize the disparity. Now for the first time, that's happening. And I think it's just a very important time that could be innovation boom for this country. There is a degrowth movement in the United States. No question. It's a very scary movement. This whole notion that you create a quality by ruining the engine that creates wealth is very misguided. Dario-Murray and Sam Altman have some of the blame on this and I can explain why. By-- And this is important. Explain that after. No, I mean, why don't you go with the important-- But my point is that we've built this country over 250 years by letting technology increase productivity, which raises wages, which raises productivity, which raises wages, which makes us happy, which is why we have children, which means we have more capital and we have more GDP per capital. And that's why we win. And he made a great point. He talks about Altman, Dario, and what they've done. See, part of the whole issue is like, I speak at so many colleges around the country. And every time it's like, there's a fear, are they taking away my jobs? Like, are there going to be entry-level jobs? Is there, you know, like, is AI going to be ultimately like, you know, the kill? Part of that is created by these companies themselves. And I think you're seeing changes from a PR perspective. But the reality is, no technology in the last 100 years has ever been a net job detractor. And the Fed talks about this all the time. Like, AI will create more jobs than it takes away. And it's an innovation revolution that's going to happen in this country. And I think it's just a very important point that like, we can't let the sort of politics and PR of it Cut us out. off at the knees when it comes to what's happened here. This is basic microeconomics. If AI means that Dan and I produce twice as much research, that means our companies make twice as much money. They're not going to cut our jobs. They're going to add more jobs. When employees are more productive, the capital gets better returns, more capital gets invested in those productive employees. That's how it's worked forever, and that's how it's going to work with AI. Now why are Sam and Dario scaring us? Because they're pulling the ladder. What they want is friendly regulation. They want to shut out open source. They want to shut out Chinese companies. They want to shut out everybody else. They've developed this narrative. Narrative. The jobs are going to get lost, and this is so dangerous that you have to be careful. They've developed this narrative because they want the government to put in regulation that stops everybody else from doing AI, so those two are the only winners. We have to tell them to knock it off. I was going to use another word, but then you would have had it out. We have to tell them to knock it off, and I think they have been told about that. You've seen devine narrative changes from I think both of them. Guys, thank you. That was really great. This is so great. This is so great. We'll do it again in some time in the fall. That's great. Because the world will have changed 15 different ways between now and then at least. We'll have changed our opinions many times. I'm sure. That's the point. It's such a great conversation. Thank you. Thank you. We're back. I thought that was an incredibly informative debate discussion. I would say that these two are still very, very positive on AI, but even they would admit that the terms of debate have gotten a lot more complicated. I thought some of the more interesting aspects of the discussion were number one. Other motes, I have doubts, but they seem to think that as Microsoft, Google, Meta, Amazon, build out their data centers, that will be motes. Uncleared still to me how much of a moat and thropic or open AI have, but that may or may not be the most important issue, because there's a lot of wealth being created throughout the supply chain. But part of the discussion that I thought was very interesting was Gil talking about winners and losers. He talked about how he thought Microsoft was a winner because they had the data center business and their Microsoft Outlook software is insurmountable. Sales force, he thinks, is a loser because they have not invested in their software in years and all they do is charge more. I just thought there was a fantastic conversation. I would recommend everybody watching at least once, maybe twice, because it's tremendous information involved and we'll see you soon. His podcast is for informational purposes only and does not constitute investment advice. A host and guests may hold positions in stocks discussed, opinions expressed on their own and not recommendations. Please do your own due diligence to consult a licensed financial advisor before making any investment decisions.