Gavin Baker - AI Market Jitters - [Invest Like the Best, EP.485]
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What is the main topic discussed in this episode?
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Visit WorkOS.com to skip the unglamorous infrastructure work and focus on your product. Hello and welcome, everyone. I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. If you enjoy these conversations and want to go deeper, check out Colossus, our quarterly publication with in-depth profiles of the people shaping business and investing. You can find Colossus along with all of our podcasts at colossus.com.
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Gavin, it's only been two months. Like the model release cycles, the gap between our podcast episodes are shortening. We're basically, you and I are basically on a model release cadence at this point.
Well, I was sensitive to criticism that I think somebody pointed out that our podcasts were coincident with like local market peaks. And nobody can say that after this. What's on your mind? It's been a crazy... Yeah, I would describe July as 2022 in a month. Yeah. There are some fundamental negatives, which we should talk. But on the whole, the balance of fundamentals, I think, is improving significantly. Loads of AI names are down 50%, 60% from their highs. we'll call it 40 to 60% in a month in a straight line. And I asked you before we started, you've been out here for the summer. Have you heard a single negative message quantitative metric about AI, a single instance of deceleration.
Nothing.
Nothing.
In fact, every metric is accelerating. And to your point, not just blind optimism from people excited about AI, but like, here's some data that they can show you from their different vantage points.
Absolutely. I mean, however you cut it, whether you cut GPU availability, whether you cut GPU rental pricing, I mean, whether you cut like the spot price of DRAM this month, token growth, everything is actually accelerated. And I do think a big part of the problem is, one, the market does not have visibility into anthropic open AI. And then I would say these open source inference clouds that monetize inference here in America, Fireworks-based and Modal together. And the picture looks very different when you see that. Because open source is accelerated massively because of GLM 5.2, KBK3. And then Nematron continues to kind of chug along. We had a great, very small American open source model release.
OpenAI has accelerated. And Anthropic continues to grow really strongly and is almost certainly pumping out significant amounts of free cash flow. And I just think if, you know, there's this chart that everybody looks at of semiconductor cash flow going like this and hyperscale free cash flow going like that, and you're missing these private companies. But I also think that that chart misses something very important, which is just that you have everyone in 24 and 25. Even if you were really bullish, you thought that GPU prices, if you're really bullish, you thought they would decline slowly. If you're bearish, you thought it would decline precipitously. I don't think anyone in 24 or 25 thought that the prices of old GPUs would be going vertical.
Everybody thought, hey, we're going to be smart. We're going to sign these long-term contracts. And to some degree, like a lot of the Neo clouds had to do that because they needed an offtake agreement to finance the GPUs.
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Chapters
6 chapters
1
What is the main topic discussed in this episode?
0:01–10:09
2
Why did July feel like '2022 in a month' for AI stocks?
10:09–15:22
3
What private AI signals are public markets missing?
15:22–22:27
4
Why are old GPUs repricing higher and how does that affect cloud margins?
22:27–37:14
5
How did the mix of open source models and GLM 5.2 trigger the market sell-off?
37:14–47:08
6
How do credit, real yields, and CDS moves change financing for the AI build-out?
47:08–1:06:02
Speakers
2 identifiedMore from Invest Like the Best with Patrick O'Shaughnessy
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