AI competition and the direction of the market overall. Joining us here at Pace Nine, Post Nine, early space investor and Atreides Management managing partner and CIO Gavin Baker is back. Welcome back, G. Welcome.
I'm thinking of that day, the SpaceX IPO day and then a nice shot up to 220. How are you thinking about this drawdown? Is it sort of how IPOs go in the early days.
How IPOs go.
I mean the simple answer is I'm not really thinking about it. Just we'll see where we are in a year, two years, three years, my friend. Well done off once came on CNBC and he said, you know, he was on the show Fast Money. And he said he tried to be slow money, I think, long term. And I think there's a lot of wisdom in that.
Yes, there is still a process, though, to witness the street getting familiar with the story, getting its arms around the possibility. And now we're starting to see some pretty thick reports, analyst reports. And I mean, I think every underwriter has a buy on the stock.
I will admit I do not know what where what the Wall Street ratings are, but that doesn't surprise me. And I think the big variable that maybe markets are missing with respect to SpaceX is they monetize a gigawatt of installed power at a meaningful premium to anyone else. They bring on those gigawatts of power faster and cheaper than anyone else. So they make the most profit per gig. And like, let's just say they bring on three gigs next year at their kind of announced monetization rates. That's $150 billion of revenue. That's not in the model. And you know bring on gigawatts of power. It's really hard. They've proven they're good at it. We'll see what they can do. But like I looked at the consensus, it was 73 billion. And that embeds very little for incremental terrestrial gigawatts that they bring on and monetize.
People are a little bit concerned, I guess, about the delay in the launch, right, of Starship. I mean, part of the bull thesis here is that they are able to do this much more frequently at lower costs. So any hiccup in that causes some concern.
Starship is a really hard engineering problem. And you know, I think they've made incremental progress each launch. But if you're a long term investor, it doesn't really matter whether we get to reusability for Starship in three months, six months, nine months, 12 months. And I would focus respectfully people more on terrestrial compute in the next 2 to 3 years, how quickly they can bring that on and energize those GPUs and rent them out.
You mean what they're doing with Anthropic, for instance?
Absolutely. I think you will. I think you're likely to see a lot more of that.
There are questions about the sort of value of that as the technology changes very quickly and as these new models come out and leapfrog the old models, and especially if they're coming from China, where they're open source and they're a lot cheaper about the entire economics of the system.
You know, I mean, I guess there are questions I don't.
You don't know why. Why, what's your thesis here?
So open source models fundamentally just shift margin percentage and margin dollars from the kind of model layer to the infrastructure layer. If you have cheaper tokens of an equivalent intelligence, we're going to consume more of those. And if you believe like I do, that we are structurally short compute, then you don't worry so much about margins at the model layer.
And that's why that feeds you to a bullish thesis on NIO clouds and other elements of the actual infrastructure build. Yes.
I mean, I don't know if I would use the word bullish, but I do think it leads you to an interesting risk reward. You know, cloud Cerebrus, Nvidia, providers of compute, whether it be to frontier models or open source models.
But talk a little bit more about, you know, we were teasing out what you were just saying about. So we get these Chinese open source models like the Kimmy one, and everyone freaks out that they're better and they're cheaper and they're open source. You don't necessarily think it's bad for OpenAI and Anthropic. Why?
Well, it may end up being bad for them, but I just think the fundamental principle, I think open source software like Red Hat, you know, back in the day and now part of IBM. That is much cheaper than software. It's free, but a token AI, when you consume it, it costs the same amount of compute of watts, of energy, of capex, of opex to generate an open source token as it does to generate an Anthropic token.
So then why do they why do corporates have to pay so much more for Anthropic?
Well, because it turns out that there is. And this has been very surprising to me over the last year, that there is an enormous return to being at the frontier of intelligence. And I think the future is likely to be one in which maybe a majority of economic returns continue to accrue to these frontier tokens. But the majority of tokens processed are these very cheap open source tokens. And you can think of it, you use, you know, if you know every enterprise, they're going to have a symphony of AI models that they use. And you're going to have the, you know, the conductor, maybe that's Anthropic, maybe that's Grok. And then you're going to have a lot of people playing instruments. And those are these cheaper choices, these open source models that maybe have been fine tuned on an enterprise's own data. If they're worried about their data leaking to a closed source frontier model provider. And I think that is a likely future.
Where the US frontier models remain sort of in charge when it comes to the corporate customers.
I think so, and there is also a lot of. Eric Fisher, a partner at Benchmark, posted something maybe 18 months ago that I thought was fascinating. Just there may be as much lock in at the product layer, at the harness layer as there is at the model layer and the products that Anthropic and some of the other frontier model companies have created cloud code Grok build around their models are, I think, an increasing source of competitive advantage in switching costs.
So I'm just trying to think ahead, like, will a corporate have a lot of vendor diversity in this symphony that you describe? Can it be one player delivering a suite?
