Anthropic Raises $30BN at $900BN Price | SpaceX Files S1: How Does it Trade | Cerebras Smashes Day 1

Well, divide up the two. I mean the financing, yes, you know, we talked about it last week, there's nothing more to say. They can pick their price, they can pick their investors, they can tell the amount and they can tell Evan to jump and Evan will say how high, sir. So it's all happening, they're going to raise 30 billion. We discussed obviously the question is, you know, how those folks pencil out the return. And so Rory, I don't mean to be old school here, but I'm feeling old school. Do you think ARR multiples still matter? I mean if Anthropic is, if 900 billion is 18 times June revenue, it still feels like a better deal than any of the ones I did last year.

Yeah, I mean there's no doubt that statement is correct. Agreed. No, I mean just to put it really simply for listeners is that, you know, you're writing checks in the private market for companies of $10 million in revenue. You might be paying 20, 30, 40, 50 times ARR, right? Maybe it's 3, 5x-ing, but it's 5 years away from an IPO. And here's the last three rounds. I mean, for the last three rounds, really from the 150 billion round at Anthropic all the way on, they've been so post-IPO that you can assume there can be an IPO. So, there's no, it doesn't make an IPO risk. There's no, it will go away risk. Typically, when those risks don't exist anymore, the only risk you're taking is valuation risk. And the truth is every time the multiple on this has been significantly lower than the multiple on your median Series A or B or Series C for a higher growth rate. So it's been the best trade out there.

The meta question is, listen, at some point everything's DCF, right? At some point it has to be. I guess I'm not even sure I believe that anymore, but certainly that's public markets EC201. Everything is ultimately the discounted present value of your future cash flows. But every growth, I haven't been a part of any of these Anthropic rounds, unfortunately. But every growth round I've been a part of, it's still ARR multiples at the end of the day. No one's really doing discounts for lower gross margins like we did until say 2021 or 2022. So, is this, I guess the meta question is, is this a fair metric for Anthropic? Its margins are improving, right? And so if 18x really is fair, geez louise, I think all everyone desperate to get in is right because it's the best deal going if an ARR multiple is still fair.

If you ask, I'm sorry it took me a while. The coffee's got, you know, it's first. By the way, we're doing this early at 8:00 this morning. So I've been up since 5, but the coffee is only kicking in. Yeah. No, I mean that's a totally separate, I mean look if ARR multiples are the right metric then you should buy the one that's at 18x ARR growing 10x year that's already so freaking large it will clearly and visibly go public. If ARR multiples are the proxy for value, then this is the best value in the venture universe. Which is why I'm going to say very smart capital allocators whose mandate isn't kind of sector specific, but kind of range anywhere, stuck your money in. You know, people like Greenoaks, people like Altimeter are doing this deal because they're like, you know, yesterday I can do a 20 million ARR deal, today I can do a $50 billion ARR deal and the multiple better when it's so obviously a good deal as we mentioned there given the trade for investors.

Why would Dario and Anthropic do it at that price if it is so obviously a good deal? Because you're giving away 30 over 900, which is like, let me see, 3% of your business to derisk it for another year of monstrous burn where you know you're committing to, I don't know, six, five gigawatts this year and you know the mental rule of thumb is the total cost of a gigawatt of high-end compute is 40 or 50 billion. So now you're not spending 40 or 50 billion, you're persuading hyperscalers to spend on your behalf, but you have to have, I mean this is a big ass balance sheet war. So to me, it's a no-brainer to do it. They're going to raise and they're going to raise again and then they're going to raise again.

I doubt it, just depends on the trajectory now because they're saying they're going public in November. But my point is even after, by the way, the other comments, when you stop having to raise, that's a disaster because it means that you're growing. Why are you raising? You're raising for capex and you're raising for growth. If you, once you become a, once that hyper growth stops and you don't have a capex need, you also don't have a growth story and that'll be a very different place to be. I mean right now, yeah, right now this is the highest ROI on equity dollars. So that's why they're getting it. So they should just keep raising it well in advance of the need because the needs are so great.

I know it sounds silly and maybe it's my actually read is that Sam has been pushing the valuation to the absolute max since he, as long as he could on the thesis he needed infinite capital, right? He's always been clear on that, right? So the last OpenAI round was more expensive than almost the contemporaneous Anthropic round even though Anthropic appeared to be out accelerating them because Sam just pushed it to the max, which you can if you're a great salesman and have demand of one more dollar than supply, right? It seemed to me Dario is the opposite. I mean, he actually does own shares in his company, right, rather than indirectly through a VC fund. But it's pretty diluted. He's giving away 90% to charity. So he just wants to get a deal done in a week that is fair. He does this deal at 380. It seems fair. And all of a sudden, he turns around, Sam's done a deal at twice the price. So he does this at 900. I think when Anthropic's worth two to three billion, he'll do a round at like 16 in 48 hours to get it done. He'll just do it. He won't push it to the max like Sam does and create stress. But I actually think these rounds, ironically, the last two intentionally traded at a discount in order to not rip people off and get it done low drama in days. I actually think that was the trade-off of, and we've all worked with founders like this that enjoy maximizing every penny from the round. And others who want a 70% deal and they truly, it's not just in the email, they truly want it done in a week, right? That's not just a game to get the money. They just like give me a 70% deal in 72 hours.

Yeah, it's a super point, Jason, because I'm remembering now the details. I mean, compare, it's so revealing. Compare the last two rounds. The Anthropic round is we're going to raise 30. It's going to be cash. You're going to send me an email confirming you're in and then we'll collect the money. End of conversation. The OpenAI round is well, Amazon, you're going to give us 50 billion, but 20 billion is going to be up front. The other 30 billion is contingent on us going public, our AGI. And Masayoshi, you're going to give us 40 billion from SoftBank, but you got to borrow 30 billion to get that 40 billion. So we're going to give you a little time to pay that money. So we're closing on 110 billion of which 20 billion is clearing now. 30 billion in 6 months time depending on the lending market. It's like Jesus, give me a break. Right. You're right, Jason. I think philosophically the Anthropic team seems to operate under if I want to raise 30 billion, I should probably get a check for 30 billion and call it a day. Speaking of getting a check for 30 billion, Jason, I really wanted your thoughts on this one. Benioff was on All-In and he said that Salesforce spent 300 million on Anthropic tokens this year, almost entirely coding. The question I have for you is when you look at your usage and how you use it today, is that about right and what you would have thought? Is that way more? Is that way less? And how do you think that will change for Salesforce over time?

It's actually not that much per engineer. This is great. Mark's one of the great classic marketers, probably the greatest marketer in classic B2B of all time, right? He's just a force of nature on all vectors, right? Company physical size, greatness.

But if it's, I think that works out to about 15 to $20,000 per engineer per year.

Yes. It's not, that's, I think that's just table stakes today. What's his fully burdened cost for a developer at Salesforce? Probably 500k for an engineer for all in all costs with their share of the building and snacks. So 20 grand a year is 4% additional. Cheap, man.

Good. First of all, I did the math this one because I actually think this is the most important question of the Anthropic. I skipped the other two. This is the one. And actually I'm going to give you, God, I sound patronizing. I'm going to give you an A, Jason, for math on the fly, which is I think very hard to do. I couldn't have done it on the fly. I did it this morning. Right. The, this is, and it turns out 300 million is, which is astonishing first of all, right? So the numbers are Salesforce spends 5.8 billion a year on engineers, right? So it's roughly 4% of the spend. If you want it per head, they have 20k developers out of their total 83k heads, so it's 15k per head per year, which is 1.2k, 2K per head per month, right? 1,200 per month, right? I actually, we did a survey. I'm not sure if I'm front running it. One of my colleagues is going to publish it, right? We did a survey on, you know, 40 portfolio companies and external companies. What are you spending per year, per month, per developer? And the average was 1.2, 1.3K and the median was lower, right? So obviously you have some token maxing and then, you know, wider dispersion. So first of all, you're exactly right. It's in the strike zone of normal. It's not, I mean it's only the big number because they obviously have so many developers, right? So that's the first thing. So your rough estimate matches exactly right. And then the question is what does all this mean, right? Where is it going, right? And I want to say first question is before that, it is still astonishing. And one of the reasons that Anthropic and OpenAI are just amazing businesses, 90% of the stuff you sell to Salesforce as a vendor, you know, if you were selling them an ERP system, obviously they have the CRM system. My guess is if they bought SAP, god forbid, you know, right, would they spend 5 million, 10 million? This is the only product that a company like this is probably the only vendor line item other than maybe rent that comes anywhere close to this amount. Right? So from nothing two years ago, this is the largest single external spend that every software company's making. That's the first big aha. Right? And it's both nothing and it explains Anthropic's mediocre rise. Explain everything. It's both at the same time, right? And then you got to say to yourself because going, remember I kind of said it when it comes to valuation on Anthropic, is it good or not? The question when you try and figure out how much money these companies can make, what you figure out is trying to come up with some kind of heuristic relative to R&D spend is the key, right? In other words, how much of every knowledge worker wage and how much of every coding wage is going to get translated into tokens, right? And you know, we did a rough and tough estimate and we're refining it more. Is if you start thinking about a trillion dollars worth of token revenue across Anthropic and OpenAI, which is the four-year projections are saying, and they better get it because otherwise that capex is going to look pretty sick, right? If they're going to get a trillion dollars, right? My rough math says it's something roughly like five or 7% of every knowledge worker salary and 20% of every engineering salary. So they're currently, so if that math is correct, that's kind of what it takes to get a trillion, right? So in other words, Salesforce might only be a quarter of the way there. Now, one of two things is going to happen. Either they stay at 300 million, in which case the TAM for some of these kind of token businesses like OpenAI will have been overestimated and there'll be a real correction. Or they keep going, they 4x their token spend from here and in two years time Benioff is on saying we spend a trillion dollars, sorry, a billion dollars on tokens and we'll talk about the people consequences for that in a second. But one of those two things has to happen because even on the macro level, right, worldwide software business across everyone is about $1.2 trillion. R&D spend is roughly 20%, $240 billion. Right? The interesting thing is if you get 20% of that, you only get 50 billion, right? So to justify these Anthropic valuations and these OpenAI valuations, you're really going to have to eat a ton of what is otherwise opex. You've got to replace 20% of R&D salary. So either those valuations are wrong or Benioff is only a quarter of the way on the journey and he's probably ahead of most. The numbers for OpenAI are so large that you really have to start thinking about what percent of total wage bill of engineering in the software development market do you get and if you're not tracking to 20% across most R&D spends then the three and four year projections for some of these companies will be a bit lofty.

At a meta level, you have to be a bull, right? Because the trend has just begun. Mark's 300 million is just the start of what he's going to spend. On the other hand, I do think, I hate to use myself as N equals 1 case study, but at SaaStr itself, a million, I have now, we have 21 agents of which three are autonomous. Okay. And the direct token cost that we spend, the direct AI all together for both of us is about two grand a month. So, and that's going to go up. But there, the bear case, the bear case is the models will get better and they will get more efficient and we will get more efficient. The bear case is to 1k for each of us. And listen, this doesn't include third party apps. It doesn't include tokens we buy inside of Salesforce. So it's higher. But there, if you think about it, there is a bear case there that everybody is using. Every knowledge worker has this attached. But the numbers Mark are throwing out is about right for folks not at the bleeding edge of token maxing. This is the bear case. It's not today when SAP and Uber CIOs are said we're out of tokens for the year. But I do think we're ahead of most right at our little team and we're only spending 2K a month in direct token costs. That's a bear case on the next Anthropic round. I think I'll give you another example. We had SaaStr Annuals last week. Rory, Rory was a celebrity, Harry. We could talk about it. He was literally mobbed. You saw the pictures. But our very last speaker, it was kind of him to come because it was the last one. People are tired. Was Andrew Bleki, who's the co-founder and CEO of Clavio. Very interesting because he's a true engineer and turned B2B founder. He requires every single employee at Clavio if they're anywhere close to product to be committing code. Anyone in product, anyone in design, anyone there, and every single person has to be running AI or agents to do their job. I couldn't believe it was 100%. Right? It is. And they built their own custom framework to require it. He went through it all. It was very cool. And so my point is he knows his stuff, right? And a lot, and we built this AI VP market, AI VP customers, just everyone thinks it costs like $8, $10,000 to run these autonomous humans. I go backstage with Andrew. We're talking about on my phone. He's like, "How much do you think it costs to run an AI VP of marketing?" Because he's done it. He's like maybe $250 for both of them. The answer is $257 just to run the agents. And so, and his point was at the end is this. A lot of this stuff is not as expensive as we think. We do not need to worry about token maxing at Clavio and everything we're doing is agentic. We have our own agentic framework. The most junior product person. Every single person has to be doing this. We have to manage it and they have a harness that manages the model and gets it thoughtful. But he's like if you do this right, it's not as expensive as, and the fact that he guessed it within a couple, I mean he was the only person that got it right because he's doing it. The only one that got this number right because he's doing it. So I'm not bearish, but this is the bear case is just we need a half or a third or a quarter as many tokens as we think we do outside of the folks running massive workflows. 4814, right? At 1% of R&D spend, it's lost in the noise. At 5% it's real. That's a layoff, right? At 20%, which let me repeat is what it takes for these overall models to work, right? For these overall TAM analysis to work. That's huge. It's 1/5 of your payroll costs in engineering.

I am. It's a good question, right? The one thing I've been thinking a lot recently when we kind of bounced off the lowest of SaaS apocalypse, right? You think about Atlassian, Figma, a few others that have seen at the end of the day compared to their highs very, very modest bounces off the hard, but more importantly growth is reaccelerating there. That's the most important. So when you see Figma reaccelerate to almost 50% growth, when you see Atlassian seemingly struggling when Mike was on the show, reaccelerate north of 30, the meta question, and with Atlassian it's definitely from Rovo, their agent. With Figma it's a mix, right? But when you see Twilio come back from the dead to 20% growth, you have to ask yourself, is there a little more time than we thought? A little more time, right? The whole world is not in San Francisco of all the buyers, of all the users. So this is both the question for Andrew and for Marc Benioff and others, these founder-led companies that are iconic with great CEOs. At the end of the day maybe they have enough time, maybe another year if they're just getting going on their agentic journey. And Salesforce is further along than I am not sure that means their stock will reaccelerate until it is proven. I think that's what we learned from last quarter. Monday did sort of beat expectations and bounced. HubSpot said Q2 is going to be tougher and it got hit hard. So you got to show me the growth, right? That's the mantra. But I am somewhat more bullish than 90 days ago that there's just time. Clavio is arguably the single most beaten down public company software stock because of the delta from Shopify. Like it's trading at three something times revenue and Shopify is at what, 12 or 14? I got to look it up. So if we were a long short team, I might propose that one on Monday. But you got to show the growth, man. You got to show, and they're not, and even though he's ahead of the internal agent, they're not way ahead of the game for the external one. And that's the bear case, right? Why, if your competitors are there, why aren't you there today? Why don't you have this? So yes, I'm optimistic, but my flip side is you've had 18 months and you've had since December, since the Claude 4s to destroy your space. Why do you let these dumb little startups out hustle you? You've got 2,000 engineers spending $300 million a year. That's the bull case. Like you've had time. But I'm getting more optimistic that if the leaders build the best agents in the space, 2027 could be good for them. I'm getting more optimistic and I was pretty bearish a couple months ago.

I am in the same place and I made some comment about that and you know positive reinforcement from Datadog and Figma and everyone's like but they'll never get back to 21 prices again and I commented on that because of course they won't, right? You never, I mean, as I said, I can never, I said in my comments, they'll never get back to 21 prices and I'll never be 21 again.

Yeah, I like that.

There's nothing you can do. Every tech cycle has a set of industries that for once in their life get valued on prospects and futures. It's like being 21. It literally is like being 21. And people will believe everything about you. 5 years ago, that was SaaS. Today, it's AI. Once you lose that veneer, you are going to be valued for the rest of your life on some variety of revenue growth and cash flow, right? And what that means is it's almost impossible to ever get back to 50 times ARR again, right? All these companies like, and everyone goes like it's the Figma thing. It's so annoying for them. I feel so bad for like everyone, oh but your stock's down 80%. Yes. From the idiot price that idiot people priced it at, right? In terms of objective performance, which is how you got to measure these companies. You're right, Jason. Somebody's like Figma's reaccelerating, Datadog's doing really well and you know you're going to be in a band from, I mean the outer edge is probably Datadog at 17 or 18 times sales. You know your good performance, Figma six to 10 times sales and your crap is three times. So to me it's, yeah, you have time to become a good normal company. I mean the big comment is the SaaS businesses are amazing but the AI businesses are an order of magnitude or maybe two orders of magnitude larger and are at, you know, earlier in their growth life cycle. So you're never going to get the attention back on you again. That's the deal. That's the deal for thousands, but you can still be worth $10 billion and you know as a company do a billion in revenue and growing nicely.

Yeah, it's the summary. Exactly. And in that context, it's worth trying. I mean the difference between being in the shadow and not getting out and being in the penalty box and then getting out is quite significant. I mean you know you got to like where you are as Jason said. If your team's Atlassian you got to like where you are a lot. If you're Datadog or Figma you got to be pretty depressed about where you are. If you're Wix given you know you did the buyback and it hasn't worked. So there's plenty.

I sold all of mine at the end of last year.

Well, you're still ahead. That was the right time to sell to Rory's point.

I'll tell you what I got wrong on Figma for sure. Like the cap, like dumb dumb lumpkin. Okay, I got to come up with something with the L, right? A limited lumpkin or something like that.

Loser lumpkin.

Loser lumpkin. I like limited. Can we go with limited? Can we be able limited lumpkin?

Limited. Lumpkin.

I was completely right that Make is the worst vibe coding product I've used since I've been on this journey. And I'm right that it was not important to the senior management and I'm right that they left 500 million or more on the table by not building a Replit level competitor. I'm 100% right and I think it's the tragedy of folks being slow. However, limited lumpkin, I missed the captain obvious point. Figma is building software. So everyone that is in the business of really helping, like there is an AI explosion but part of the explosion is a software explosion and you can see it in companies that Harry and I have invested on like WorkOS and RevenueCat that have exploded because there's a software explosion going on. And even though Figma lost the vibe coding race so far, it is a beneficiary of the software explosion. One, right? Two, and it has internal AI tools like Andrew from Clavio was talking about. So one, it's selling credits to make your product a little better. That almost sounds cynical, right? But what it's really rolling out now is the ability to internally vibe improvements to your Figma designs. Like the agent can look at your Figma design. It actually officially rolled out I think today, it's been in beta for a while but it rolled out well to record this. And instead of just designing something it can say hey let's update the workflow in here, let's update the journey. This is not like incredibly difficult but it is difficult at Figma scale. So even if they're not going to help you vibe products, the fact that they are making the building of software more efficient for their audience, you know it's like Atlassian not adding massive new customers because of AI but adding massive more value for their base. So I got, they're a little slow to that. It's in beta today. I mean, it's, you know, it's getting to be summer, but it looks like it's pretty good. And I utterly limited lumpkin anyone like Figma should be modestly accelerating today because we're building more crap. Their new ability to agenticly improve design likely will be a big deal for their customers. They likely can get another 50% or more of revenue out of their base. The question is to the extent that folks who would have been using Figma are now doing mockups for software products using Lovable, which you hear a lot about, you know, which is using it as a way to describe your product rather than doing a Figma. That's actually a work stream that you would want to own if you're Figma because what you don't want to have is people going around your product flow, right? So I do think you're right, Jason. I think it's not just the extra 500 million. It's I'm willing to, they probably have an imperative to make sure that their customer doesn't leak out to a design flow that's do your actual design in something like Lovable where you have a working prototype not just a Figma design I think. So that one for the moment appeared to be more of a Twitter mania overstated the design capabilities in Lovable which is a little bit ahead of Replit but they're pretty limited for anything that's professional grade like for a Figma person. They're still pretty early. What Figma missed is I create this design. It's beautiful. I loop in the product team to approve it and then I click a button which says push into full production prototype and it just works. It works like, and you can, and the irony is Replit and Lovable both have that as a native insertion point for a reason. Like if you use these products today they have up, you know, right in the prompt upload a Figma design because they know like this is their number one ICP wants to take that static design and put it into production. Why, you know, I mean, why Figma doesn't have that natively is a loss of, you know, $500 million and going up. It totally is.

I broadly agree. I mean I think BigCommerce

Commerce, right in the strike zone, or Shopify. I don't know the Wix mix between — think of it as kind of information-only sites versus ecom sites. But you're right, Jason, it really matters. And if it is high on ecom sites, then you have that vector to think about.

And it was all the growth. It was all the growth. Got it.

It was all the growth. Interesting, because you know, the core — I would say this for the core: I mean, a lot of those businesses have to be customer — it's super low-end SMB, especially for the non-ecom sites. It has to — if your core acquisition engine works, you should have been able to — I mean, it is still possible that if you can convert most of your customers to the new product, then over a couple of years you can make the math work, right? If you are a Wix — at least they have a new product, they did do the acquisition, right? It is possible to, you know, you get this weird compounding because when the new product is 100 million and it's doubling, and the existing product is a couple of billion and it's flat for the first kind of year or so, it's really hard to move the overall aggregate revenue growth rate. But if you can compound quickly enough on the new product, it does move it up, right? So that's on the revenue side. I want to come back to — I want to separate the stock buyback from that, right? That's on the revenue side. But separate comment on the stock buyback: that sucks, because it's like you do the classic investor-banker thing of, oh, if you buy back the stock at four times, you know, it's cheaper than it's ever been and that'll be good for the stock. And it sounds like it makes sense, but when shit's going wrong, things can go lower than you ever think. And sometimes it pays to keep the money in your back pocket, because the stock will go even lower, right? And I think that's just a strategy that didn't work right now, right? You took on a bunch of capital, you bought the stock back, and you didn't — you know, by definition, if the stock is 45% down since that moment, that buyback strategy didn't work. And I'm always, frankly — it's better to have bought it back cheap than bought it back at even the crazy high prices that some people are doing stock buybacks in the past. But when your business is in trouble, things that are bad can get worse. And the actual ability to have another billion dollars on your balance sheet to maybe make an even bigger acquisition, in my view, is worth more than trying to juice the stock for the short term. So I think they look back on that stock buyback and go, that wasn't the best move to make. We optimized for the short-term value of the stock, not the long-term destiny of the business. The flip side is Marc Benioff — they did a buyback. What did he borrow, 20 billion or something like that to do it, right? Not even at the lowest interest rates. But he said, I did it to offset Slack and Tableau. I did it to offset the dilution. I got it back, right? My theory.

What does that mean? What does that mean? I actually challenge that. And I hear him saying that, and I hear them saying we're doing it to offset stock-based compensation, and I want to beat my head off the wall. The only reason you buy stock back is because you think it's way cheaper than it should be, right? The whole like — if the stock was trading at a trillion dollars, would you buy it back at a trillion dollars to quote offset Slack dilution? I think it's a bogus answer for people who are just trying to manage some second-order metrics when it just doesn't make sense. I've been on boards where people pitch — bankers pitch to do a buyback to offset stock-based comp, and I literally want to bludgeon them to death.

Right. Well, listen — buying stock at high prices is stupid. Buying stock at low prices is clever. End of analysis. I think a lot of these deals, and maybe even Salesforce, maybe it's really just to hold off shareholder activists, because that's their first play. That's their first play. So when you are down in the dumps, what you got to — you know, and you've, Rory, you've been on boards of this, you've watched it. You want to — to the extent you can, you want to placate the shareholder activists without giving them what they want. And the simplest thing you can do is use all your cash to buy back shares, because that's their play. So if you take them out of the game, you've given them what they've asked for, and they don't really have a play if they buy you. Especially if you're also doing layoffs. So if you're doing layoffs and you're doing the buybacks, maybe you keep Starboard and friends away, because their playbook has already been used up by the management team.

Agreed. That is actually — and look, if there's nowhere better you can put the money and the stock is cheap, then it pays to buy it back. But my — and I do get the comment that you're always afraid, like, of management with big amounts of cash that they'll waste it on a bad acquisition. On the other hand, in these times of change, right, hyper-change, right? You know, you probably have two choices as a SaaS company. You want to decide: I am the old thing, and the old thing is good enough. I'm going to optimize for 30% operating margins and 10% growth, and I'm an economic machine. It is what it is, and if I have excess capital, I should buy the stock back, give it back, do whatever, right? Or you say to yourself, I might have to do something more than that. I don't know what it is, but at least for the next 12 months, I'd like the option value of knowing if I want to do what — was it a Base 44, whatever it is — acquisition, I have the money, right? So — but I agree with Jason's cynical comment. You're right, people do it because it's one of the least disruptive activist moves that you can do, and normally you get brownie points for it. But the odd thing is, if you do a buyback of the stock to appease the beast, and then the stock goes down 40%, they won't remember that they wanted you to do a buyback. They'll just say you're an idiot for doing it. In the end, you're paid to be right. And when you buy and then it goes down 45%, unfortunately, you can't say to yourself, you were right. Today, they're trading at 1x revenue. 1x, literally.

Yeah, that's the terminal — simplifying the terminal state. They also announced two years ago they were shipping a Glean competitor and going all in, but I'm not even sure it exists. In a year's time, will they be higher than they are today or lower than they are today?

I'd say higher, just because — I mean, again, I don't know if they took on — but I just think at 1x revenues, for any — unless you — I would like to look at their churn numbers. I haven't spent enough time — unless the revenue is absolutely evaporating, you can get from 1x revenues, especially if you had the wit and the intelligence, which they did, to buy a kind of Replit competitor. So this is the thing that most mature software companies that aren't growing can easily operate at 20% operating margin. So you're now down to saying you've got your cash, and do you think you can last four or five years before you go to zero? I mean, you can calculate the terminal value here, right? At 1x revenues, you are nearing terminal value, right, for a company — for a product that has high gross margins and is relatively sticky. So yes, I think you can create more value. You will regret deeply buying a whole bunch of shares at three times revenues or two and a half times revenues, thinking it couldn't get any worse. But yeah — fatal, fatal next sentence. Maybe now it can't get any worse. And if it's at 0.5x a year from now, or the revenues have gone down by 50%, then you can call me an idiot then, Harry, which I know you're dying to do.

Remember, can't get worse is not the same thing as it will get a lot better. I mean, you know, the question — a totally separate — I think Jason's right about the upside in these stories. Again, it goes back to the same thing. Your range of outcomes has compressed markedly. It's not clear to me if someone said, 'What would you do to get a comp — let's not pick on Square — to make any of these things get to 30% growth and be worth 5x revenues?' I'm not sure I have a single idea. I think Jason's right. You're dealing with managing — you know, as they used to say about the British Empire, Harry, you're managing decline. It's okay. It's history. You wouldn't understand.

I do think one of the downbeaten — that we think is truly downbeaten public software companies in the next year will become upbeaten. And what I mean is — as slow as they've been to react to AI changes, they have the installed base. And so someone will get their — someone that is still founder-led. It won't be anybody that isn't founder-led. One of these founder guys will put his best 50 folks in a room and say, listen, I don't even need you guys to innovate. I just need you to build a better version of — especially a Perplexity AI app. I just need you to build a better version. Stay out of it and ship it, and we're going to sell the hell out of their base. Arguably that's what Canva is trying to do with 2.0. It's complicated. The startups are moving faster. The models will move. But someone's going to pull this off with their best 50 people because they have 300,000 customers. They have 300 — so for every time I'm pitching these AI SDRs and I'm looking at HubSpot with 300,000, I'm like, hurry up, Breeze, because you got 300,000 HubSpot customers just waiting to buy an AI SDR from you. And if HubSpot could actually make this as good as a startup, they're going to sell 150,000 Breeze AI agents. It just isn't in market today. So I just think there's so many challenges, it's hard to predict, but someone's going to — you're going to turn around and you're going to be like, holy cow, Drew pulled it off. Drew went from 0% growth. He got his last 50 guys — last 50 soldiers holding back the castle, put them together, and holy cow, he built this thing. But I don't know that we can predict who it is. On the flip side of challenge, we have Nebius growing 684%.

You know, it's a mini CoreWeave, and those have been great businesses because you're right — now everyone's compute-starved. And let me make the captain-obvious answer, as Jason would say. If compute continues to be starved, then these will continue to be good businesses. And if they don't — if it's not — if compute becomes plentiful, they will be commodity businesses, and the guys who are over it will go bust. So it's just that simple. Now, I actually think Gavin — is it Gavin Baker — who had a very articulate comment, is that ironically the slowness of permitting and the inability to bring on data centers at near the speed that people want to bring them on might save us all from ourselves. If all the data centers — people like — the disaster scenario is if all the data centers people want to build could be built, and then at the same time we do the Anthropic and OpenAI math that we just discussed, and that trillion dollars of token revenue turns into half a trillion dollars, then you got a trillion dollars of capex and a half a trillion dollars of revenue, and you're fucked, right? But if, on the other hand, the half a trillion dollars of revenue stays, but the just inertia of building data centers means you only get half of them built, then you're saved by the bureaucratic inertia of the great American state, right? And you only build half a billion dollars. Compute remains relatively scarce, and people like Nebius and CoreWeave who have that compute do really well. Does AI spend grow faster or slower than data center capacity? That's it in a nutshell. With OpenAI and Anthropic in the middle collecting the money from the first and giving it to the second, that is the bet. And I don't have a brilliant opinion on that, but that's the action on the table, as they say at the craps game.

You know, I was driving back. We had a little Napa retreat break after disaster a year, and the Tesla took us the long way through the South Bay, which I haven't done in a while, on the bridge. And I'm passing Marvell Semiconductor, SanDisk, all these folks, all these superstars of the '90s. They're on effing fire today. Okay. The only thing that isn't on fire today is traditional software. Every other category — optical connects, everything — the old South Bay, where Harry's probably never been. Like, he probably has never been south of Mountain View or Palo — certainly Palo. He's like, why would you go there? There's like trillions down there, man. Look at the skyscrapers, okay? And I was thinking — I was thinking, you know, that the only thing that isn't inflating today is old-school software. Everything else is on fire. So my point on Nebius is — and Rory made this point — listen, there's an argument to short it. There's an argument that that is just surplus, there's not enough capacity in the market. But how far in the future can you short these things? How far in the — sure, you can short SanDisk in memory, and you know, we fuck Micron on the drive. Like, you can make fun of Micron, right? Micron's had more booms and busts than a California prospector from the 19th century. But you can't short three years into the future effectively. Certainly I don't have the skills to do so. So we could take potshots at Nebius and CoreWeave and friends, but what's the point? We see no signs that there's a short-term crash coming. And it's interesting, but anything but traditional software — it's just on fire, right? Every single — Cisco's back. I should have mentioned Cisco coming up south first, or Zscaler. I mean, geez, every software — every technology company except traditional software is on effing fire.

Again, going back to the big simplistic picture here, all these companies are on fire because the hyperscalers and the model companies have decided to spend, you know, roughly three-quarters to a trillion dollars a year building shit, and 50% of that goes to Nvidia, 10% of that goes to power, 10% of that goes to network. And you're right, everyone just gets pulled along in the bubble.

Everyone, right?

One of two things has to happen. Either corporate America has to digest a trillion dollars' worth of tokens without any intermediate software layer, and I think it can do some, but I don't think it can do all. Or second, software has to start working, because only if software starts working does corporate America get to spend that kind of money. And if they don't — if Sierra doesn't grow — let me put it bluntly — if Sierra doesn't grow, then at some point OpenAI and Anthropic will stop growing, because their customers today are primarily software companies for coding, right, and selling through software companies to corporate America to use tokens for business purposes, right? So in a weird kind of — at some point this all has to level out.

I just think when we start — remember when we started this show, I think CoreWeave had just IPO'd or was about to IPO, and it was easy to mock CoreWeave. It's like, okay, well, this is just roundtrip revenue to create a little supplemental capacity that we won't need in a year, right? Fast forward a year, we need every — everything possible. So I do think at some point SanDisk and Nebius and CoreWeave all have to crash, and Marvell and even Broadcom at some point they have to crash at some level, because they always — I think AI can grow infinite, like we will all approach the singularity, but eventually capacity will catch up, things will catch up. I just don't know it's going to be near enough to the present that it matters — at some level that it matters, right? But this was the first — I don't know if you follow Liang Ashenbrunner, who's the famous —

Yeah. He doesn't have to worry about 10 years out, does he? He'll just trade in and out of it.

But if you saw his latest releases on his latest filings, he put puts across everything.

The guy for the first time added very little and actually showed his first real sign.

He's smarter than me. He's making the opposite point I'm making, that this future is coming much sooner than I think it is. The tough one is, would you invest in a CoreWeave or Nebius at the seed level today? That's the tougher venture. This is still 20VC, right? As a public investor, you can say, hey, SanDisk looks pretty good for the rest of the year, right? As a startup investor, would you do one of these deals?

I'll answer that. I saw a really excellent one with a superb team, a very good seed investor. I'm not going to name it. And I really considered it long and hard. It was still a seed round. We tend to be A investors. He was a really talented team. I didn't do the seed, but when I — I always try and give a good answer to people when I turn them down, especially when I think they're A-class teams, because I say, hey, look, here's my thinking. Because hopefully they'll remember my thinking, and if they — you know, if they prove me wrong and they come back for the A. And I will admit, when I wrote out my thinking on why I'm not doing this, and he responded, I thought he won the argument. So I'm actually sitting here going, Rory, was I an idiot? Because he had a compelling at-the-margin story around capacity that I thought was interesting. So I literally ran — I did, to answer your question, Jason, logically I chickened out. I didn't want to be that model capacity three years into the deal, three years into the capex boom. But there's a little part of me thinking, Rory, that might be a dumb decision. That was a clever story with a clever team. And yeah, you are relying on the capital markets being there for the next three years and being able to access — and the sobering number is half a billion to a billion dollars to build the capacity, right? But maybe it could have worked. So I get the temptation, right? I literally had that — that was last week. Yeah.

Yeah, I think it depends, honestly, because you can't do it to everyone, right? So I think to some extent it depends on how much time you spent with them, right? Depends on two things, right? How much time you spent with them. If you've taken one meeting and you're a no, just give a clear no. I mean, maybe you're minor feedback. You know, you can't write a long email, right? If you've taken two or three meetings and you felt you're almost there, and sometimes I like to do it because I think it's helpful for your own self. Some CEOs don't respond well to detailed feedback and they argue. Some of them are really professional about it and I like them. I'm like, yeah, I see what you're saying. If I'm right and you're wrong, I'll be back in 12 months and I'll say to you, I told you so, and you'll pay three times as much. And I'm like, and I'll be glad to. Right? I think in the end — I think in the end, even if you don't share it all the time, for any deal you spend a lot of time with — this is a separate comment — for any deal you spend a lot of time with, it's actually very helpful to write out your conclusions and keep them internally. I do that, right? Because then you can test your thinking, and you look back — you look back two years later and, oh my god, I turned down that for that reason, I was an idiot, or I nearly did that deal and I was totally wrong on the market. It's a lot of — remember, in a model that only gets trained in eight- or 10-year increments based on the two deals you do a year, you get a lot of additional feedback from the 20 or 30 deals you nearly did that you just don't want to lose. So I do try and write it out for myself, and then sometimes I share it with the team, especially if I think, you know, it might be of interest.

Yeah, I think that is — that's a good point. I did say that to Harry years ago. I stand by it. Like, if you've had between zero and one meetings with a founder, there's no upside in providing feedback. It's just an endless like, wait, Jason, that's wrong, you misunderstand. Like, I just — it's — if you've gone deep on a deal, right? You should share the real reasons why. It's generally appreciated. If nothing else, if they haven't already closed a round, it's helpful to them to see the other side. After two to three deals — but it's got to be at least two meetings. You have to have gone deep enough to actually be able to write that email. It can't be because I just — I don't see it. Just don't like — then it's got to be a one-liner, right? I think I know the deal that Rory's talking about. But we shall move on. I want to talk about Cerebras, the biggest US tech IPO since Snowflake, priced at 185, which was a big expansion from where it started. I believe it was 120 — or 110, 120 in the early days, which went to 150 and then 185. It popped 68% on day one. It was a fantastic IPO, an amazing story. Does this open the window for many more companies of that size? And not the two-trillion-dollar companies, but does this open the window for many more companies that go out and IPO?

I think it's good for SpaceX. I think it's good for anyone above their level. I think it's great. It's great. It just shows anything that is that or better — and better in air quotes — the demand is infinite. I'm not sure if this is really going to help folks that are below that level. We don't know, right? I doubt it. Even you're looking at Figma and you're like — I mean, I don't think anything sub-Figma can IPO and have a decent IPO. This is the new grade, better than Figma. Now, Cerebras arguably is a different category, but if you look at the backlog of 24 billion and you're bullish about it, right, that's more backlog — what's Figma's backlog? I don't think it's 24 billion, right? So I'm oversimplifying it, but I think it's got to be better than Figma. And if you're better than — you know, this is a good time to IPO.

This is very much an N-of-one bet. It's an extraordinarily complex technological product that they've brought to fruition just at the time when demand for that product has exploded. And unlike when they pulled an IPO two years ago, they were able to line up arguably the marquee customer for that product, OpenAI. So it's — semiconductors are hot, they're a semiconductor company. Inference is hot, they're an inference company. OpenAI is hot, they're selling to OpenAI, right? It's an N-of-one positioning. And you know, for Jason, for a market that's starved of ways to bet on OpenAI and Anthropic, this — you know, they really only have things like CoreWeave, and you obviously have Nvidia. This was a chance to play. So, yeah, I'm not surprised it went. If you remember last week, you asked, is it going to go really well? And it was — we recorded before the IPO and we appeared after the IPO, and I was like, of course it's going to go really well. They've already raised the range. They're not idiots. And it went exactly like that. They went beyond even the range. They, you know, went to the max they could do without refiling it. It was an obvious winner category. And worth pointing out how fickle the world is. Two years ago they couldn't get the deal done. So I think you're right, Jason, actually, is at the margin it's a positive tell for SpaceX. People are willing — people are very much risk-on for the kind of things that look like they have the kind of upside.

Probably not. I go back to the base rate. Yeah. The base rate return on IPO is not from the day of the IPO — not from the day of pricing, but from the first day's closing price, which is typically way above it. The base rate return on that is negative. One, six months, 12 months, one year, you know, two years, right? Is that — in other words, across a thousand or so of them, if you buy on the pop, you know, you tend to be a happy camper, right? Is it a company at the right price you believe can be a long-term enduring company? Absolutely. Yes. It's got technological differentiation like no one else, right? So just blindly buying the day every other retail idiot on the planet is buying is probably not the best way to make money, just statistically. And base rates matter.

It will. That's one word for it. And you know, again, back to how does this go? I don't know. I mean, I think it's funny. We're recording this the day they're due to file their S-1, but I haven't seen it. I checked before I came on. The interesting thing about the S-1 is, in one sense you really want to read it. In the other weird sense, there's actually going to be very little in it that actually matters at the margin. What do I mean by that? Is that the S-1 will tell us — and I'm really curious to read it because it got through the SEC really quickly — the S-1 will tell us everything about SpaceX as it existed in December of this year, which was without X.AI, without the Cursor deal, without the Anthropic deal. And because if you think about it, the most recent — I presume their year-end is December. So they'll have last year, which is SpaceX and Starlink standalone. You know, the leaked figures are 15, 18 billion in revenue, 20, 30% growth rate, even a positive. I would like to see the capex before I comment, but pretty much a bounded, understood company, right? In February of this year they closed on X.AI, which, you know, brought them a pitiful amount of revenue and a burn as big as Cerebras, you know what I mean, right? And then — so that's going to be prorated into the S-1 for maybe one quarter, right? So that's all you literally have — half a quarter's information on something that's kind of taken you from a profitable company to a loss-making company. Then the other two big deals — the Anthropic deal won't even be in the financials because it's a signed deal, and then the Cursor acquisition won't even be in the financials because it's not closed yet. So you're literally going to be reading this S-1 going — and no forward projections are allowed in an S-1, right? You're going to read this thing that says, here's the company we used to own on December 31st of last year. Pretty nice company it was too, dude, right? However, we since got X.AI, and now it's totally different. By the way, we can't tell you much about that. You'll have to talk to our bankers, right? It's going to be the funniest S-1 ever in one respect.

Yeah, revenue — you know, 50%, 30, 40% of the revenue isn't in the S-1. All the loss isn't in the S-1 except for half a quarter. Yeah, some of the bankers are going to be having to tell the story via the roadshow. So in one sense I'm looking forward to reading the S-1. In the other sense, there's just a lot to come. And it is — so that's the first comment, is the storytelling around these acquisitions are going to be — are not going to be in the S-1, and it's just going to be interesting how they get that across. There are other markets and other times where people will look back and go, you must have been mad to buy the stock on that little information. So I think it's a — I think it'll — again, the probability is it gets done extraordinarily well, and the excitement is amazing because the market is in the mood for excitement. We're selling the most exciting company on the planet at a time when the market wants excitement. If the market ever wakes up and says it wants cash flow, it's going to be a totally different story. Oh, well, you know, right now we're into excitement.

No.

Yeah. I think there's a reason it's 30% retail. I think some of it is being Robinhood and Democratic, right? He's selling nothing. 30% to retail. But I just think the Robinhooders and the GameStoppers have got to be more excited about rockets than plushy toys at GameStop. To me, it's more exciting.

I agree. I think everyone will be wild. Everyone will want to own some of this, which means retail will buy a lot of these. You're exactly right.

I'm going to put 2,000 bucks on my iPhone into this thing.

And the reason I said no is because remember GameStop — again, I go back to numbers. GameStop, I think, pops 10, 30 — yeah, 20x from low to high just based on retail. When you start at 1.7 trillion and the largest market cap company on the planet is 5.5 trillion, Nvidia, it's going to be hard to 10x from here, right? That's what I meant. But you're right, the excitement on retail will make this a super interesting story. And then the other thing is, as you know —

You know, literally, Rory, I'm completely ignorant. Obviously it's going to be a huge float, right? Mathematically, could the GameStoppers and the Robinhoods — I'm admitting my ignorance — if they could believe it, go 10x? This is — they're not doing any DCF analysis. They're trading. Is it possible for them to trade enough shares to create a 10x pop? Is it mathematically possible to influence the float that way? I just — because sometimes it's a thin float when you're able to manipulate it, right?

The float isn't that small. It's 75 billion. I think the interesting thing is if it's — yeah, it's already healthily priced at 100 times revenues, it will be interesting to see what happens. I mean, when these things — and so, and Harry, you can go no comment at this point — when institutions play shares — sorry, when an IPO gets — when institutions take shares in an IPO, they have a price target, right? And you know, if that price target gets achieved on the first day, you tend to see additional trading. I mean, it would be — you know, the 70% — if BlackRock spends $10 billion on buying in the IPO, as has been rumored, but again, I'm not — I have no clue about the facts, right? They run an internal analysis and they say, we think we should buy 10 billion because we think over the next 12 months we can make 40% on our money. And if at the end of the first day it's up 40%, it'll be solely tempting to have another $10 billion come back to market because you'll be looking at your price target and going, I have a price target, I've achieved it, time to go, right? And you see that phenomenon when IPO pops — the institutions — and I used to think, oh my god, they're disloyal, they'll leave. But in fact, it's just we bought — we wanted to be a holder, but we had a price target. You've achieved it. So it will be interesting to see that price action if it does in fact do a GameStop type of price. You could also have the Facebook effect, where the IPO was frankly a dismal failure. It early on it hung around its price for a day or two and then looked up in 2012 and then it dropped, you know, at one point 40, 50% below its IPO price. It was a horrible IPO, right? And obviously an amazing company, which can also happen. Price matters. I think it's going to be wild. I genuinely hope it succeeds because I think the damper effect of it not succeeding and trading well would be pretty profound. I think it'll trade up to 5 trillion. I'll take this bet. But I think there will be enough sitting in Boca in Miami day traders, yahoos that love the brand, folks hate the —

Brand. That's why he lost the trial in Oakland. I think they hate the brand too. But enough folks love the brand that it can float up 3 to 5x based on partially influencing the float. There's not enough demand. This could be Limited Lumpkin speaking, but I'm going to take this bet that it's going to trade up 3x in 2026 just based on GameStop driving it up.

I don't discount the fact that it goes down.

I didn't say it's likely. I'm just pointing out here. You're paying $100. Where's my Robin Hood account?

I am the [__] boomer.

I think it's going to go down.

I didn't say it will go down. Harry, you got to be able to live in probably.

Did I tell you when I got into Bitcoin?

I've made billions on my Bitcoin. This is going higher than Bitcoin.

You do realize that space is bigger than Bitcoin, right? The entire universe, there's a trillion stars just in our own galaxy and there's a trillion galaxies. That is larger than all the bitcoins out there. You have this completely wrong. Did I tell you when I got into Bitcoin? Did I tell you guys when I got into Bitcoin?