I can't remember when corporate America was so convinced of the ROI of something as it is right now of AI. So, Anthropic has done as much in Q1 as all of last year, and OpenAI has done 30% of what they did last year in Q1. Within a couple of quarters, Anthropic will be visibly and obviously ahead, profitable, growing more quickly and bigger. That tornado dominates all three vectors this week. Starting off, OpenAI confidentially files their S-1. What does this mean for Anthropic's plans to go public? SpaceX then drops theirs, the largest IPO in history. Anthropic then hits $44 billion in ARR and laps OpenAI in revenue, and then Nvidia prints $81.6 billion in revenue, and the market yawns. Then layoffs, ClickUp, and more. It could be the GeoCities deal of the AI era. We could look back on this and — listen, I'm on team Elon, okay? But 100 times trailing sales. We may look back and say these were some good companies, but 100 times, my God.
I love the S-1, but I think it's all madness. I wouldn't buy a share. I just love the optimism.
It's SolarCity on steroids, and we're all here for it because we love AI, but it makes no sense.
The cliché, the pick and shovels of the agentic revolution, is just a good place to be investing.
Ready to go, boys. I am so excited for this. I have to admit I was wondering where we start given the sheer amount of news that came out in the last few days. Jason, you lied to me on email like, 'Oh, not that much this week.' I'm like, 'If this isn't much, I'm glad we do the show today and not three, four years ago, because Jesus, Nvidia, we got to start with Nvidia.' $81.6 billion revenue quarter, $91 billion Q2 guidance, $80 billion buyback. And after all of that, the stock barely moved. How did you guys analyze Nvidia's quarter, the stock not moving? Help me understand.
I mean, let's do the trivial bit. First of all, I think you forgot the most compelling number, right? It's not the $81 billion in revenue, which is pretty damn compelling. It's the $50-some billion in profits, which makes it the most profitable company on the planet, because typically Google clocks in around $100 to $120 billion a year. Right? These guys in a quarter made $50 billion plus, $56 billion of profits. So that's — if that were continued all year, and there was some non-recurring stuff, that's $200 billion of profit a year. That actually, to me, was the big, ass-compelling number, right? So first, just — it's not just a great revenue business growing at 80%, it's a wildly profitable operating margin business, right? And then the second thing, to your point about what do you make — you know, you kind of were whining about the stock on the day, and you know, honestly, don't look at the stock on the day. The big picture is over the last 12 months, I mean, last six, nine months, the stock's up 20%. I mean, it's basically — it had a one-off jump when everyone, you know, from '23 on, when everyone just totally internalized in the space of a year the amount of spend that would take place in AI capex, and it, you know, gapped up and it got to 140, 150 about a year, a year and a half ago. And since then, it's, yeah, it's just grown almost steadily, because even though the news is amazing, it's what you got to ask yourself — the stock moves not on the total news but on the delta news. So they beat slightly, it's gone up slightly over six months, but I wouldn't look at the movement. I look overall — the big picture comment is a year, a year and a half ago, it was a credible question to ask: is this capex thing sustainable? And I remember asking it myself. Even Shakara priced Nvidia puts to say at 140, 150, is this thing done? And I decided that would be a dumb bet, and thank God I did, because here we are a year later. You know, the company continues to grow at 80%. The stock doesn't go at 80% because stock markets anticipate. So about a year and a half ago, the stock grew 3, 4x, and now it's kind of growing at 20%. What it's saying here is: this is great, this is amazing, we trade at a mid-20s PE, we kind of think this is really cool, but we're not sure it's going to 5x in terms of growth from here. So it kind of all makes sense. The market's pretty happy at Nvidia right now.
Well, may I just add two thoughts for sure. That's a good summary. One is I think in today's market, not falling after your quarter is a strong sign, because the markets are expecting insane growth, right? They're expecting — and so this growth was just what we expected. It's just good enough. And I'm not being facetious, especially when Nvidia is 7% of all of our 401ks. It's not just a niche stock. It's not even just us. It's 7% of all Americans' life savings are essentially in Nvidia this morning with concentration. You know, we're all in, you know, S&P 500 and VTI inversions. So everyone's on board with — whether they realize it or not, everyone's on board with Nvidia, right? When Nvidia falls, we all fall with 7% of our life savings. We're all AI investors whether we realize it or not. But it's so hard. Like, you got to beat, raise, and accelerate. Like, that's the mantra today: beat, raise, and beat RA. And so even just trading flat, I'm all for it. Like, that's a good quarter. AI capex is going to be about a hundred billion this year. You look at it and go — most of the time GPUs are 50% of total capex, $400 billion. Nvidia has pretty commanding market share, not alone. But that probably says, you know, that Nvidia business, no surprise, is a $300 billion a year run rate. And there it is at $320 billion. When you look at the announcements of the hyperscalers last week, you kind of know what they're going to do this week. In Nvidia, it's plus or minus 2%. So we're really dealing with small numbers. And at that point, I think market reaction is in the noise.
Jensen Huang said this week — sorry, on AI capex infrastructure spend — that we'd reach 3 to 4 trillion by 2030. Do you think that is an extrapolation, over-exaggeration, or can you feasibly see that happening?
2030. Let's just do the quick math here. And what does it mean for — as Harry always says, what does it mean for — if we just use the same idiot guideline of 50% of 2020 — what do you say, 2 to 3 trillion? That would be $1.5 trillion of total semiconductor capex. That would be — and let's just say at that point there were only 70% market share, because yeah, TPU, all the other stuff — that's roughly a trillion dollars in revenue from $300 now. I don't think the market — I mean, brutal comment — I don't think the market's quite anticipating that, to say the least.
Extrapolating the past gets you there. Extrapolating the growth rate of the last three or four years gets you there. But I think the million — not the million-dollar, the $64 trillion question is: does that growth continue, or do you start to hit — not technical constraints, obviously, but economic constraints? Is the ROI there economically on the next $2 trillion to go from roughly a trillion dollars of capex right now to trillion dollars, which is what he's saying it'll happen in — it's now shockingly only four more years — there has to be an ROI on that next, you know, on that next two trillion. And I think that's the question.
Well, the Uber COO says no, right? The Uber COO says there's — we've reached — we've already — and if they're not talking their own game, even Microsoft allegedly moving off Anthropic to saying it's too expensive to use Opus, which I think is talking your own game. But there, at least to the markets, they're saying the ROI, the incremental ROI isn't there. To Rory's point, it's not there.
Jason, how did you read that? Uber COO saying that they spent four — well, all the whole year's Anthropic credits in four months. But they weren't seeing the gains or the productivity or efficiency gains that they —
Did he say — did he say the second part of that? Just want to be clear.
He said it wasn't measurable. He said he thought it was probably there, but it wasn't measurable. The COO.
Oh, got it. Because what do I think? Well, first of all, a COO is often a bean counter with a different name. Okay. So I'm very — I think, listen, I think we all need COOs to scale, right? But sometimes they're not the most creative person in the organization. Sometimes they think they're product-centric, but they really just sit in meetings. And so I always take a little — with a grain of salt when a COO says, 'We don't need more engineers, we don't need more product, we don't need any of this,' because they're usually not — and I should have looked up this background — they're usually not deep engineering product background. So they often live in a pre-AI world where products are static. And I would argue Uber in many ways is a static product. Uber, Uber Eats, and everything — these are not radically different products than four or five years ago. These are clever marketplaces that scale like nobody's business. So the second point I'll say is I think what actually — what I do think is more interesting from this is — I hate to say that everything's bifurcated, right? But I do think we're going to enter a world where things are more and more bifurcated, and we will see folks who get more and more gains from AI spend. They will token max forever, right? Often folks well north of a million in revenue per employee, $2 million in revenue per employee, will token max until there's no tomorrow. If you're already hyper-efficient, you will find more ways to use AI. The folks that are less efficient, that are larger organizations and more traditional, I think will, as the year goes on, become more skeptical, especially if prices go up. And maybe prices are — if you look at Anthropic raising prices, right? If you look at Nebius raising prices — as prices go up, the area of experimentation is ending, and people will see very different results from that.
I think it is the core question of the — it's going to be the question of the year. I think we said that last week, right? And as I say, one of the reasons I — and it almost sounds like heresy to raise it. It's like, you know, maybe you won't get a return on your marginal dollar of AI. As I say, it feels like, you know, sometimes when I say it in San Francisco, it's literally like, you know, wandering around the Vatican saying, you know, 'Is this Pope guy the right guy?' Right? It's like criticizing the core thing. But I think you got to — when it's the only question that determines the answer to the — you get to three trillion in revenue in capex or not — you got to ask it. I was reading — it's funny, I over the weekend actually, our data scientist sent me an arXiv paper, 'The Price of Progress: Price Performance and the Future of AI.' It's just a recent paper, just basically benchmarking exactly this, you know, right? And the summary, no surprise, is yeah, basically. And the comment they're making is: don't just look at kind of benchmarks in the abstract, look at benchmarks and pricing at the same time, because implicitly it's the — you have to start thinking about ROI. And you know, obviously benchmarks get faster, you know, price per token, price for all those metrics going down amazingly every year, but token consumption going up every year, because as these models do more agentic reasoning, the total compute cost of that goes up. So the net cost of serving the customer goes up on aggregate, right? And it's a super — you know, it's a reasonably clear concept, and they don't actually come to a definitive conclusion, but it at least starts to say, you know, the trend here is exponentially increasing costs as you move from simple chat interaction all the way to full-on agents, right? So even though the cost — all the cost-per-token stories are yay, amazing, going down, the actual cost to do something goes up a lot. So as you look at those SWE benchmarks, right, the thing that's here is not just one-tenth. It might be 100x the thing that's next level out to the right. So you're taking on — so you can consume vast amounts of token dollars. So you're right, Jason, at some point — I mean, and maybe it is what you said, maybe there are businesses that have a lot of white space ahead of them where they can write a lot of software and they can get a lot of value, and maybe there are other businesses where you hit a marginal return much quicker. I don't know. I don't have an answer here. But I do know that it's probably the most important question. I mean, if you — because when you're spending $3 million, you can be blithe and say it's all fine, we're probably getting a return. When you're spending $300 million, someone probably needs to know.
The other thing is I think that, you know, Uber's gross profit margins are 39.75%. Okay, this isn't Nvidia, but it's an awfully good business.
Right. It's an awful — and I think folks like that, you know, they're going to have different perspectives on the ROI of AI. When you're at those 40% margins, it sounds great, but you're very focused on protecting them in most cases, right? We're not all Zuck, right? And so if job number one is protecting the profit margin, you're going to be really skeptical of spending too much on AI, right? And it's a trade-off. And in some ways, folks with margins like this, we just have to take what they say with a grain of salt. Not because it's not important. It is extremely important to understand that we can't all spend like a drunken sailor with $2 million of free credits out of YC, right? We can't spend that way. But it also means there's a backwards-looking bias in here. There's a skepticism in the org where — because, you know, I think what the CEO said — it's there, but we can't measure it yet, right? So if you're Zuck — not literally Zuck, but if you're Zuck — you're going to lean the hell in, right? When the team is telling you it works, you're going to say, 'Let's give it the rest of the year.' If you're a skeptic maintaining those profit margins, you're going to be like, 'Okay, this is performative token maxing. Get me out of here.' Right? And I think the — and maybe there's going to be a case study of DoorDash versus Uber. DoorDash is still founder-led, one of the most aggressive COOs out there, right? I mean, GJFC, I haven't seen DoorDash say, 'Let's use less tokens, guys.' I haven't seen — if I see it from both now, interesting. If I see it from both — from one of the most aggressive founder companies out there, Uber's — you know, one of Uber's biggest competitors — then I'll consider myself chastised, right? If Tony says the same, then I'll be like, okay, we got ahead of ourselves for real companies. We're not all — but I haven't heard it from DoorDash.
Is it not a very simple realization of what is your core business? Uber's core business is moving people — hard logistics, real world — and Facebook's precision of advertising between, you know, consumer and provider or advertiser. And so of course you're willing to spend on one, it is your core business, and then physical world.
No, that sounds credible on some level. But I mean, if you think of it really in terms of both of them have lots of software developers, and the big-picture question is how much leverage does a software developer get, you know, using AI. And I would argue that should be more similar across different entities. It's not obvious to me that, you know, like a software developer working at Uber still has a software problem to work on. If AI gives lift across all industries in terms of software development, then he or she should experience the same lift. So no, I mean, what might be true, Harry, is to Jason's point: if you start with 90% gross margins and you're ideologically committed to the program anyway, then you might close your eyes. And I think it's exactly what Jason said — the burden of proof. You don't impose the burden of proof. There's no one at Facebook yet — so that may change — saying, 'Are we getting value from our billions of dollars in AI?' We just assume we are and keep going. Right? I do think in companies where they have the same idea, same software engineers, but where just the way they run their business because of the overall margin structure is more careful, then you might have people asking the same question.
I mean, because to be clear — just to nail your point for good — if what you're saying is you only get AI software productivity lift in industries that themselves are digital, that would be really bad news, because that's a significant subsegment of the economy.
I'm saying your willingness to spend —
Business versus a normal —
Agree, then we're saying the same thing. You're like, you know, the more you're ideologically committed to belief, right, the more you spend. But just to put it out there now — I can't remember, except maybe for a year in the internet in the mid-'90s, where corporate America was so convinced of the ROI of something as it is right now of AI, right? The spigots are open. The money — you know, the money is being authorized. I mean, the proof that the spigots are open is you just look at Anthropic going from $5 billion in GAAP revenue to $10 billion in GAAP revenue. No one is stopping. There's not a ton of querying going on right now, right? So there is a willingness to spend, and so therefore I do think the next shoe will be: okay, that was fun. We spent $10 billion. What did we get? And it's just the way the narrative has to play out.
Well, Rory, I think that was a very prescient recognition of Anthropic's revenue growth, but you missed the core number there for me. I think you missed it personally. Gross margins expanded from 38% to 70%. And they're going to have a $559 million operating profit in Q2 projected.
This business is getting better. But of —
Yes. And if you remember, we talked about last year's margins, which I think were 34%. Don't quote. Right? The prior year they were negative 60. So the trajectory was really strong, right? In other words, the margin profile went from negative at the gross margin level in '24 to positive 34. Right? That's two points. That's a trend. So no surprise when — on top of that, when your revenue keeps going, so you have more fixed-cost recovery, and you got a little bit of pricing power. Not surprised our margins went up. And as long as your margins continue to improve — if you're doing $5 billion in revenue and losing a little money, and then the next quarter you add another $5 billion in revenue at any kind — let's just say even if it was — it's not seven. Let's say it was even 50%. Right? You have $2.5 billion of cash coming to cover opex, right? It's just hard to spend that much money. High growth and improving margins meant profits were inevitable. So I — yeah. Now, will they keep them? Are they about to spend a whole ton with SpaceX? Yes. But I wasn't surprised. Funny, we run an internal model just to understand the ecosystem. And it's funny this happened because Anthropic had only talked about getting profits in '27. And I kept running this like idiot internal model, which is just growth, gross margins, training costs. And I'm like, it's hard to lose money with this level of growth and any kind of decent margin structure. So I wasn't surprised by it, but obviously damn impressed.
One — just, you know, one from the profit — just to some folks say some of it may be partially due to a discount with SpaceX the first couple months, right? So I just put an asterisk and a dagger. It has nothing to do with Rory's trend. It just may mean that the headline metric is not as impressive as it looks. It is great, there is — but the flip side of it is there's a bit of a bear case on Anthropic out of this, which is that Anthropic has benefited from two things versus OpenAI at a minimum, right? It has become a premium product since the end of last year. It is twice the cost of its competitor, right? Especially after '24, it started to charge enterprises clearly per token, per use case. They charge them directly. Price has doubled. It is a premium product. It is twice the price of its competitor. And it, in a sense, it lucked out by not going into video, which just ended up being the biggest cash sink that OpenAI ever did. Probably Grok abandons it too. But you know, there is an exist — I mean, everything is go-go-go at Anthropic, right? Every single light across the room is green. But if the market — even if DoorDash is — and DoorDash is spend-everything, right? DoorDash compared to Uber said, 'We make so much more money on AI. We just — with engineering savings, we just justify our token savings with our engineering savings.' He views the ROI as very clear. Or Uber says it's not there. Okay, if even half the world says the ROI isn't there for a premium product, Claude's growth is impacted. Either it has to cut its prices, right, to match the competition, or it will maintain — be a premium product like Apple, but won't be able to maintain its market share, right? Just at the end of the day, it's twice as expensive as its competitor. And given the pace of this world, how long can it maintain it? Like, I'm not sure it's clear it can maintain it infinitely. And that's just — it doesn't feel like it today, but that might be a hint of the bear case: is that the premium cannot be maintained. The demand is there, but the premium may not be able to be maintained.
But I think right now, even though they are the premium product, I mean, the proof is the revenue traction. The revenue traction Q1 to Q2 is so strong. What it means is, as I say, it requires a — maybe this way — it requires a change in behavior from where the default switches are now in corporate America for that number to change. Now, you're exactly right, Jay. It could happen, and it will all be about probably two things. One, is the ROI there? We just talked about that. And second, are the competing products in the marketplace competing strongly? And there, obviously, we're talking about OpenAI, and obviously to some extent we're talking about Gemini. And the truth is, right now, Anthropic stole the show in enterprise, and one of the other two was distracted. I think that's OpenAI with consumer, and then Google, despite having amazing raw tech, just didn't do a great job productizing. So right now, the inertia bet is more of the same, and something would actually have to change in terms of competitive dynamics for that to be true. And as I say, I think there can only be one of two things: either kind of the green eyeshades come out and start talking about ROI, or the competitive dynamics change. Absent one of those two things, you know, the trend is your friend, as they say in trading.
Listen, the Uber COO complaining and the Microsoft stuff — like, we can — I can take some potshots at it, but also I just think it's showing you the future. More folks are going to come out and say the same by definition, right? Going to happen. So just the bear case is just as that happens, it might seem like the reaction is, 'No more AI, guys, go back to pulling up your old IDE and coding by hand.' But more likely is we will just get better at token budgets, and as folks struggle to manage it themselves, that may degrade pricing power for Anthropic as folks just — you know, like, 'You know what? I'm just going to use a combination of GPT-4, it's older, and some Sonnet and some DeepSeek, because that's the way I'm going to spend my budget,' right? It just benefits — it's just a bear case, that's all.
I think you're exactly right. And the reason I think this is going to happen — that's why I was reading that paper — is this. At some point, when you go from experimental to 'We spent $300 million on tokens, we don't want to change our guidance. We got some lift in efficiency, so we can touch — we've done $100 million of better operating income. So yay us.' But that means we have $200 million of opex we didn't expect to have, and we have to terminate a whole bunch of people.' At that point, HR comes in, right? And if you think you can do that just on vibes or no ROI, you're fooling yourself, right? So I actually agree with you. I think once AI spend starts to eat big chunks of wages in large companies, you're just going to have to have that discussion, and it's going to become more quantitative. It's going to have to be more provable, right? Yep.
And not just for humane and political reasons, but just because economically it makes sense. I mean, someone should stand there and say, 'Okay, we've never done a layoff in five years. We're about to terminate 10% of our people. Are we sure that we're getting the ROI from this investment?' And if the person leading the investment says, 'I think so, but we haven't really checked,' hopefully a CEO will say, 'Well, before we terminate a thousand people, shouldn't we check? Perhaps take another week here, guys?'
That's the ultimate symbol, though, that the layoffs that we're seeing is ultimately a case of overhiring during COVID. Not AI efficiency.
That's the dumbest thing I've ever seen on Twitter is that this is overhiring during COVID. Dumbest take from the smartest people, including Marc Andreessen, who's got 40 IQ points on me. The dumbest take I've seen since our last show. The dumbest take.
Because every single — Harry, I'm starting to forget COVID even, 2020. I mean, what is — Rory, what is natural attrition across your portfolio? 15% a year, 20% a year, 25% a year, right? This is not overhiring. It might be that your worst employees didn't leave. That's a related but different issue, right? That's that. And actually, I think that's kind of part of it is the unreskilled need to go. But this is not overhiring with 20% attrition. I can't — what's 20% times six? How does that compound?
Yeah. It's the whole — yeah. Exactly. You get to the same place.
So you're saying the 16,000 cut from Intuit, the thousands cut from Coinbase, the 800 cut from LinkedIn — you're saying that is not overhiring. That is AI efficiency.
I'm saying there was already more natural attrition since 2020 than these numbers. So blaming it directly on overhiring is clickbait. It's clickbait because it's not mathematically true.
Well, I saw a really cool tweet that basically said, 'It's five years since COVID, people. Haven't you heard of performance reviews?'
That was my tweet. That was my point. I mean, you have no excuse. Like, you could manage — you had five years to manage your low performers out, and now you're blaming it on overhiring.
Hang on. The only thing that could be — what? Just articulate the case. The only thing that could be true is you hired to this level and you have this kind of human anchoring whereby you perceive you need all these people. So every time they churn, you just rehired because you had myopia and you didn't realize you could get by on, you know, much less. And now suddenly terror has opened your eyes. It is possible in mature organizations with monopoly-type profits you see that behavior. But I'm with you, Jason. It's weird to see it across the board, right?
Yeah. It just can't be true. Like, it's just an excuse. And I don't totally get this — Maya, this ClickUp, Cloudflare, Mayulpa on Twitter. I don't totally get what the vibe is here. And I do think they're 80% honest and direct, but this bloat thing seems like the excuse, like it's —
Jason, can you just explain the ClickUp and the Cloudflare just so people have some context?
Just publicly explaining why we're doing 20% layoffs in thousand-line, thousand-, 2,000-word tweets. And I just actually don't — I'm literally saying I don't understand the PR benefit. And the meta problem I find is even if it's true, they're sort of blaming the employees — or even if they're not, it's perceived to be blaming the employees for not understanding AI, not being able to change, not being able to evolve. So we've got to let you go. Before the Cloudflare, ClickUps, they were always like, 'Our very best people have to — oh, please hire them. Here's a Google sheet. There's no one better than Harry, Rory, and Jason we've ever hired.' It has nothing to do with organizational change or the world or that there are low performers. It's just a flip of the coin. Like, we had to let somebody go. We flipped the three-headed coin, a four-headed coin, and Harry, Rory, and Jason came up, but they're just as good as the folks we kept. That was the vibe, like even through last year. Now it's like it's ruthless. Like, Cloudflare — like Matthew's like, 'Cloudflare is doing great, and we're still walking 20% of the people out the door.' Look, it's some sort of messaging to the markets, existing employees, and others that I don't totally —
I think COOs feel that they should be direct, right? In a way that everyone was uncomfortable to do through 2024. Everyone was uncomfortable being direct. Everyone had to say everyone's great. We're all great. I don't know if it's gone too far, but it's very public. Like, I don't need to know — like, if Cloudflare's laying off 20, 21% — I mean, I know they're a public company, but that's about all I need to know.
It's funny because you're damned if you do, damned if you don't, because the Intuit CEO did — 'It's not about AI' — and also got slammed for that. People saying, 'Well, of course it's about AI because look at these deals you did on Anthropic. You're being competed with.' Yeah.
It's always about AI one way or the other, isn't it?
Well, directly, or our growth is slowed because we don't have an agentic product, or we're not being renewed by CEOs because they need budget for Anthropic tokens. It's — the world isn't static, right? That's the honest message. That would be my tweet, guys. Sorry. The world isn't static. I partially screwed up. This is what I'm doing to try to fix it. Blame me.
There's no easy way to give bad news, right? There's no easy way to lay off a thousand people. So no matter what you say, you know, you're going to get dinged on it, which is, you know, and I think it's, you know, it's been evolving over the last six months how people have approached it.
I liked what Zeb said though from ClickUp, even though he got hazed more than most. One of the things I liked that he said, and it was very transparent. It's like, 'Listen, I'm laying off 22% of my company so I can pay a million dollars to my high performers in the age of AI because one, it's — well, he didn't really say it's market, but that's one reason you have to do it. The other point is if a 10x employee, if a 10x engineer is a 100x engineer, or a $1 million bookings-a-year sales rep is now $2.5 million, I got to pay them. I got to pay them. I got to pay what was a three- or $400,000-, $500,000-a-year employee a million dollars because they're delivering that much value.' And I've lived it. I mean, we've gone — not to be a broken record — we're doing with two and a half people what we did with 20. And everyone's getting paid more on my little team, right? Everyone should make a million bucks because we don't have the 18 other people's salaries to pay, and we're more productive, right? And I don't know if it's going to happen at the Uber scale, but it's going to happen all across startups, right?
And with $2 million or more per employee in startups, you got to pay, man. You got to pay your high performers. And to be fair, you're consistent because when I did my three months ago, I was kind of doing my four different ways, four different reasons for AI layoffs, all of only some of which are AI. You added that fifth, which is I'm terminating people to get different people, which effectively is what this guy's doing. He's saying, I'm terminating people to make room for people that might cost more per head that are just different skills.
Well, that might be what he's doing, but what Zeb really said is I just want to pay my current high performers. Yeah, it's to say I'm making space for people who you can keep more salary dollars to. And the funny thing is guys, this is the counterargument to the last discussion, right? We're actually repeating ourselves in a weird way. We just had a discussion on is does the AI, you know, does 20% of spend, does 20% of R&D spend on tokens make sense? And if it does, that's you know first because the first section of the podcast was is you know does token spend make sense and has it a positive ROI and is it good for and thus it's good for Anthropic and then the second section is I'm shocked to discover there's layoffs and if you zoom out a million miles that's the consequence of the first, right? These are actually the same discussions. If there is efficiency gains from AI across R&D and sales and marketing in particular, and then on top of that, if there's also product impact, which I always like to separate internal impact versus product impact. If those things are true, then everyone's going to be doing 20% layoff just cuz it's 20% more efficient. My aha is this discussion and the last discussion are in fact the same discussion. In one case, we're focusing on the winner, which is Anthropic, and in one case, we're focusing on the loser, which is employees.
Well, I think yeah, but the top employees, I think what ClickUp share, I mean, we read that you see them on social media. Anthropic's hiring a social media manager in King's Cross for $450,000 a year. And you're like, how could that be? Right? But their revenue per employee is so astronomically high that it all ties, right? And I think the new paradigm, when the three of us met, 2 million per employee was what you reached someday, right? That was Apple and others, that was the that you didn't even have to think, startups never got there. I think 2 million per employee is going to become the new normal as you scale and that will mean that your high performers can make two to three times what they used to make just like at Anthropic. Um, because you just don't need as many people and you're going to do what ClickUp did is you're going to funnel your compensation to your high performers instead of the high performers making 40 or 50% more than your midpack. It should be 5x. What you're basically saying is a new set of tools have come to the floor in the last two or three years. And if you know how to use those tools, your productivity relative to someone who doesn't have those tools is so great that we can afford to pay you half a million bucks cuz you're obviating the need for three people.
Being an agentic expert should be like Excel in 12 or 24 months. Everybody should be able to do it because prompting's gotten so much you don't even need to know how to prompt anymore, right? It should be true, but I have some lingering concerns that instead what happens is the agentic experts get another 10x better and everyone else falls further and further and further behind and are unemployable and we go to 4 million revenue per employee and 5 million revenue per employee and it's exhausting. Like I'm the most tired I've ever been in a sense, but my productivity rate is off the charts.
You're right, Jason. What you're saying is if you're on this exponential curve that you know Dario and Sam keep talking about then the knowledge to be frontier keeps growing every year and it's just super hard to keep up right in which case it does get pretty brutal. I mean one of my favorite Max Planck quotes is you know science advances funeral by funeral. In other words, people don't learn and change their views. It's just the people with the wrong views die, right? And it's pretty brutal, but it's true, right? You know, gradually all the people who believe the earth is flat died and the, you know, right? And you know, retraining is hard. I mean, it is which explains the unpopularity. It's uncomfortable to have to learn new stuff beyond a certain age. And, you know, and it must be pretty dystopian to have to do that or die.
Don't worry, Rory. As a podcaster, now you're safe. The venture investors are screwed, but now you're a podcaster.
Look forward to seeing the past true income from your advertising dollars coming into my account.
I've looked and they haven't hit, Harry.
Oh, don't worry. Don't worry. They're coming soon. They're coming soon. Just like productivity gains. Okay.
Listen, S1, let's start with OpenAI. Rory, you teased it out at the end of last episode brilliantly as it kind of came breaking through. Uh, confidentially files S1, um, 852 billion to a trillion dollar valuation for a Q4 listing. The main question that I had I think probably is on the minds of everyone is OpenAI forcing its way out before Anthropic? Let's start with that.
Yes. And they have to and they should and they must and they got to go now because they've been lapped. They've been lapped, right? And it's pretty grim. Last year, Anthropic GAAP revenue 4.5 billion. OpenAI GAAP revenue 13 billion. Q1 Anthropic GAAP revenue 5 billion. Right? So, more than the entire last year. Q1 OpenAI revenue 5.5, 5.4 billion. So, still bigger than Anthropic which is the point they were making by leaking that number. But if you look at it, it's only what is it 35% of last year's revenue. So Anthropic has done as much in Q1 as all of last year and OpenAI has done 30% of what they've done last year in Q1 and they're only slightly bigger than Anthropic. You play that out for a couple more quarters. We know Anthropic, but if they do anything close to 10 and then they flat for the rest of the year, let's say 10 in Q2, Q3, Q4, that's 35 billion in GAAP for the year, right? One company is growing 10x year on year and the other company's growing 2, 3x year on year right and they're pretty close now within a couple of quarters Anthropic on the current trajectory and it could change will be visibly and obviously ahead. I mean it could be something like you know high 20s GAAP revenue for one, high 30s GAAP revenue for Anthropic. That's not a good look right especially when the one with the high 30s is profitable, growing more quickly and bigger, dominant. That's Pareto optimal, Pareto dominant on all three vectors and OpenAI could be smaller, growing less quickly, still unprofitable. That's a horrible strategic place to be, right? If you're...
That's a tough message to come out into market with. Like...
But tell you this, would you prefer? Yes, it is. But you've got two choices. You go first and at least you can say, "Here's a chance to buy the first foundation model. Go now." Right? Which all ChatGPT, everyone knows who you are. Or you wait and are you waiting till the other guys go and then you go right after them as hey we're like Anthropic but smaller and not as good or are you saying you wait 2 years and grow your way out of it cuz nothing's forever. You reaccelerate growth and you go public in 2029. No, that's craziness, right? Unfortunately, the rule of life in all these markets is the number one gets to choose what happens and the number two has to respond. OpenAI was number one, had that degrees of freedom. Now they could be number two. When you're number two, what you do not do is wait till the number one crisis goes public and then you come out as a pale version of that. So I think they're smart to go and they got to go.
And this might be one actually where the risk is you exhaust some of the capital pool available because these IPOs are this is always something people would say but it was never really true, right? But traditionally folks that bought into the IPOs there's a fairly slim segment of the market because you can always buy the next day, right? Um, now we have, you know, you know, Cerebras really was maximally oversubscribed, right? As Rory made the point, it priced to the exact highest thing you could do without refiling, right, without taking the risk of refiling with the SEC. But it's still a relatively thin investor pool, right? Even with Schwab and everyone coming in for SpaceX. So this might be the one time where it really does help to go just to not exhaust the capital pool and tell the story, you know, and you know, look, and given the trajectory of the last 5 years, they're entitled to tell the story. They did build the category, right?
And you know, I would much prefer to go public as the first foundation model in the category than go public. If in fact the numbers that we've had leaked, and I always caveat this because no one sees the numbers, right? If the numbers that have been leaked are correct such that by the middle to latter part of this year you're visibly number two losing money and growing more slowly then you do not want to wait until that becomes painfully obvious. If you're Anthropic, do you change anything on seeing OpenAI now force this out?
And again, I'm going to repeat myself. Because you're number one, you don't have to change on what the other guy does, right? This is totally historical analogy. I remember when Britain ruled the waves. I like to do my little Britain digs here, right? When Britain ruled the waves and the British Navy ruled the world, right? Jackie Fisher, the lord of the admiral, he said, "Why do you have the British Navy?" He said to go anywhere you damn well please with whatever force you want. Right? It was you can do whatever you want. That's the point of being number one. Right? It was that this is what you want. You don't want to be sitting there agonizing about what the other guy does. It doesn't matter for Anthropic could decide, oh my god, OpenAI is going to go public in September. Maybe we go in November. And maybe they do bring it up a little.
Well, to your point on exhausting capital supplies, we've got SpaceX. Less worried about that because look if it's to some extent it's a thing but remember if you're profitable and growing nicely if let's just say that if you are the better company right and you have the more attractive metrics the way this market and the other guys going out three months ahead of you everyone who's investing will think I'm going to put some money in this but I'm going to keep some money for the good one especially if they have telegraphed when they're going out right the truth is this operational excellence gives you a fair amount of strategic independence and it yeah I mean you got way more degrees of freedom.
Or maybe if Anthropic truly is profitable and truly has infinite demand for its shares it doesn't need to IPO at all. Why would I if I'm Dario I've already pledged 90% of my shares to charity right I still have an altruistic mission at my heart if I'm profitable and I have and I can do infinite secondaries maybe ironically they stay like Stripe they're like listen we crushed it. Why would I want to float a small amount of my shares and deal with the headaches? I am going to stay true to my mission.
I'll tell you why. And I actually think that the dynamics of staying private longer are super different for people like Stripe than Anthropic. Because at Stripe, you're in a fair degree of predictability. The business model is understood. The capital needs are light. You're kicking off cash. You're buying back shares. Those guys can actually stay private as long as they want. It's a payment processing company at scale with profits. It's a glorious thing. Who knows how it'll be valued and that's still TBD in the public markets but you can chunk on forever. I just think the capital needs for Anthropic are such that you would be wise to access the public markets when you can right because unlike Stripe where you know your capital needs are light in the case of Anthropic even though you're not bearing those capital needs today because you are lucky enough to have hyperscalers foolish enough to build on your behalf for every dollar of revenue that you add someone has to invest four or five dollars in capex up front. So if one day you want to do a hundred billion in revenue, someone's got to invest 500 billion and you probably want the operational freedom to get one of that money for yourself and there's a dollar sum above which only the public markets can do it cuz even though people again people talk about oh my god the private markets SpaceX as its perspectives points out so wisely was pretty capital efficient $23 billion raised right you know it's not hundred billion right and it's entirely credible it's entirely credible that if Jensen's is correct. Going back to the thing and if capex is shock at 3 trillion a year and you're the leader in that industry, you might need to raise 300 billion cuz maybe two years from now Microsoft doesn't want to or Amazon doesn't want to be your hyperscaler provider. So I think they go public because the capital needs here dwarf anything we've seen.
Or at least it may provide some independence right Nvidia's got 200 billion of cash a year it needs to do something with right and the other thing going back to being conversation that's why I don't think this circular revenue is as negative as you think Nvidia has so much cash it has to recirculate this capital it has no other use for it right just going back to this if before we do SpaceX if OpenAI were to go out what do you think the reception would be do you think it will be overwhelmingly positive?
In today's market. Yes. Because we're risk on and people want to make an AI bet and they're the leader. They are the leader and they built the category. You go outside the valley and you utter the word Claude and people look at you. ChatGPT is the thing, right? So yeah, and they're going to have stellar revenue, albeit and clearly losses aren't a problem at the moment. I mean, when you look at where SpaceX is going to come out. So I think that would be really good. You know, I mean, really good might mean not quite as good as Anthropic, which is all that plus profits, too. But I think right now the public doesn't have any pure play AIs other than, you know, something like CoreWeave, now something like Cerebras. It's obvious that the top of the heap are the foundational model companies. And I think it'll get great reception. That's why they'd be crazy not to do it. You got to remember all this leaked. We're not going to be ready yet from the CFO 2027, 2028. I would imagine we had, you know, a good internal session. We're like, we're doing this, guys. Thank you for your input. But the day after the litigation settled, we are going for this thing. And I think they're right.
I just think two things. One, we're going to get a little preview, which is if this retail demand for SpaceX is super high, then OpenAI can copy it, right? I mean, Elon's putting 30% of the, you know, this massive IPO, the largest in history so far, into retail. Um it sounds like he's being democratic and meritocratic and Robin Hood and maybe he is but um I think it will benefit the stock price because they want to own Elon. Um not the jury in Oakland but a lot of the country wants to own it and it will give if OpenAI clones that for its fan base um and it drives the stock up. Uh they'll get a little preview of how well that strategy works. And the other thing is we it's fun to talk about this two-horse race on the 20VC, but again I don't think there's anything wrong with owning both as a public market equities investor. I think owning both is a good strategy. Why? There's so much change. Even if Anthropic is better, why not buy into the IPOs of both? Put in 50 million into each, 100 million, 250 million to each and see how it plays out over the next years. The overall trends are strong. I don't need not everyone needs to be a savant. One of the ways I think about this is these are three CEOs trying to do something incredibly hard, which is stay on top of the most dynamic evolving industry and tech trend we've ever seen. And no one, none of the three of them, and by that I mean SpaceX, Anthropic and OpenAI, is pitching a perfect game, right? You can look at aspects of what any of the three of them done and go, "Oh, that's not as good." Right? But the truth is all three of them from a standing start have built companies worth plus or minus a trillion dollars and are riding this trend and no one else is even close. I mean so if you look at the report card you know yeah you're right Anthropic did an amazing job of building the model which ironically meant that their capex forecasting was wrong because they underestimated the success of their own model kind of to some extent OpenAI has been the other way around. They really nailed it on capex. They nailed it on compute but maybe should have spent a little more time, you know, on the enterprise features of their model. So they're behind there. And obviously, you know, if you look at the X.AI part of SpaceX, leaving aside the thing just focus on their AI business is they're the world's best builders of, you know, fast data centers. But so they get points for that. But on the other hand, they lose points because they weren't able to fill it with their own stuff. And you're right, it's not quite perhaps as modern or as SOC 2 compliant as some of the stuff OpenAI got. So yeah, you can make knocks on all three, but zooming out from a standing start, they've each created a trillion dollars in AI in the last 5 years. You know, what did you do on your summer vacation?
Well, Elon founded both. Elon founded both of them.
That you have to remember that. I mean, yeah, the entire pivot plus Neuralink plus he's controlling people's bodies with his brains plus the Hyperloop plus Tesla.
Yeah, cuz we can well we can talk about that the entire cuz the SpaceX when we come to talk about SpaceX the proportion of their future value they attribute to AI it's this is Elon you know effectively losing OpenAI and says god damn it I'm going to have one of my own and made it happen realized it from whole plot.
