Even Secretary Hegseth and Secretary Rubio know this is a giant steaming pile of [__] and are nowhere to be found. And they've said, "JD, you go on The View. You go talk about this deal. This is, in a word, disastrous."
I think in addition to that, I agree with everything you said. I think there are so many reasons to believe that whatever quote-unquote deal we have isn't actually a deal.
Today's number is 16. That's the total number of goals Lionel Messi has scored in all his World Cup appearances, now tied for the competition's record. So I'm going to say, who gives a [__]? The Tartan Army is coming for all you [__], including you, Lionel Messi. Now, haggis, that's a real meal. Watch out, Morocco. Here we come after a resounding defeat of that world-class Haitian team. We're top of the table right now. We're literally leading our group.
That's right. I'm just now learning you are a massive Scotland fan. I have a question for you. Can you name one player?
Oh, I don't know. McTominay.
Well, I don't know. He's the only one who really matters. That's a great... I'm so glad to hear that. No, the other guy, the midfielder, is incredibly, incredibly good. What's his name? McInnes? Oh, [__].
John McGinn. That's right. Yeah, he's supposed to be... Yeah, he's a great player. He's supposed to be absolutely outstanding. Unfortunately, my favorite Scottish player, Billy Gilmour, who was previously a Chelsea legend, is injured at the moment, but it's great to see you're doing well.
You know who else is doing well? Oh, you saw Team England, right? That's right. 14.
Yeah. No, that was resounding. That was... And against a good team, too, right?
That's right. Exactly. Croatia is a very good team, very strong. Luka Modric still in good form, in good shape.
I heard his great-grandson is going to be in the next World Cup.
No, no, no, no. Don't do Luka like that. By the way, it's Lionel Messi, not Lionol Messi.
Lionel. He's always been Lionel to me. What's your favorite player on Team England?
Reece James. You know, I'm a lifelong Chelsea fan, so I got to support all the Chelsea boys. It's very sad to see Cole Palmer is not included. He's been posting some Instagram photos of him in like Marbella or Ibiza or something. So he's living his best life and we wish him well.
God, that guy's going to need a Botox or whatever they call it to get laid. He's not an attractive man. He is not an attractive man. That [__] better splash the cash and beef up. He's looking to have a little World Cupping of his own, so to speak. You left out Andrew Robertson, the captain of Team Scotland. I'm so embarrassed. I got John McGinn's name wrong.
Yeah, Scotland has a decent squad.
A decent squad. They have one of the best left-backs of his generation in Andrew Robertson. Uh, they're...
Are you reading off of AI right now?
No, I'm not. I've been totally... I got this in my notes actually because I'm so excited about him, but I'm not reading off of AI. But I think I'm curious. I don't know if I'm hoping this is McTominay's cup. We'll see. I don't know. I'm putting the cart before the horse. But tomorrow night, I'm joining the Tartan Army here in London and we're marching to a pub and I bought my kids all these awesome jerseys and we all have kilts, but they're refusing to wear their kilts. So I'm going to shut off their phone and tell them I'm not turning it on until they put on their kilts.
That's the only leverage I have. But if they make it, I'm definitely... Have you heard what's going on in Boston, that they're out of beer?
Out of beer. How unbelievable is that?
How awesome is that? It's amazing. It really is. I'm seriously excited. So I am all in on Scotland until they're out, and then I'm going for Team England.
Going for Team England over Team USA, because I got to say, USA looked pretty good, too. I was impressed.
USA was outstanding. They say this is the best team they've ever assembled. Incredible athleticism. I don't know. There's just something... I hate to say it, but I feel like the rest of the world needs it more than the US.
It's just so strange, though. It's so much about team vibe. I used to go... So we're a house divided. I think I told you this. I like Arsenal. My youngest likes Chelsea, my oldest likes Tottenham. And we go to a lot of Tottenham games. And Harry Kane and Son were the strikers, the forwards, two of the greatest of the game. And the team never gelled. It just never gelled. It's so much. And they say that's the difference between the American club and the European ones is that I guess the Americans don't have a lot of opportunities to play together and they just never quite gel at an elite level.
Yeah. And that's always been the problem for England, too, that we've always been so... we went to the... they're outstanding.
No, I mean, it's such a thing to say if they don't win, they have problems.
Well, we came close in the last one, so credit to that. But I mean, it's... last time we won was 1966 and we've always had many of the best players in the world, talent in the world. The story of Team England has not been a very good one, at least over the last few decades.
But apparently what really got everyone going was Thomas Tuchel, the manager's speech at halftime. Thomas Tuchel basically said to them, he said, if we lose, we lose and that's fine, but we're going to do it our way and that's what we're going to be happy about. We'll lose our way. So that is my message to you as we begin this podcast. If we have a shitty podcast, we're doing it our way.
What we're talking about, it'll be our way.
Dick jokes and planning. That's what you're saying.
That's what you're asking for. Let's bust right into it, my man.
The United States and Iran have signed a memorandum of understanding that pauses the conflict and reopens the Strait of Hormuz to commercial shipping for the next 60 days. In exchange, the US will lift its naval blockade of Iranian ports. But the agreement leaves some of the toughest issues unresolved. Key negotiations, including the future of Iran's nuclear program, have been deferred to a second round of talks scheduled over the next two months. Oil prices fell on the news, but Brent crude remains up roughly 30% this year, and energy traders warned that it could take months before shipping volumes through the strait return to normal. Scott, let me just go through quickly what this memorandum of understanding actually says, and then we can get into what it means. It's a 14-point plan. I've collected some of the most important takeaways here, which I'm just going to go through right now. So, first off, both sides declare an immediate end to military operations on all fronts, including Lebanon. US lifts its naval blockade on the strait immediately. Okay. Iran will reopen the strait free of charge within 30 days. That's good. But importantly, that no-charge clause ends after the 60 days. Meaning, we can go back to normal for 60 days and then Iran has the right to basically jack up costs and charge a fee for any ship that goes through it. So, that's not great. Okay. Iran reaffirms it won't develop nuclear weapons. Both parties agreed to discuss the issue of enrichment, but Iran will, quote, maintain the current status quo of its nuclear program. So what I take away from that is nothing has changed there. The US will undertake with regional partners a $300 billion reconstruction fund to rebuild Iran. The US will also undertake — that's the word they use, undertake — to unfreeze all of the currently frozen Iranian assets. And the US will terminate all sanctions on Iran. So that's basically the deal. If I could summarize what it gets us, it basically gets us nothing because the nuclear program will basically continue as is and lots more to negotiate there. And the strait, which was open before the war, will be reopened. And then in exchange, we paid in 14 American lives, a hundred billion in taxpayer funds to fund this war. Also a full percentage point of inflation, which will amount to billions of dollars in household expenses. And then potentially we're going to pay another $300 billion for this reconstruction fund. Although there isn't agreement on that. I mean, this to me, if it's even a deal, and that's questionable, might be the worst deal ever. And I don't think I'm being hyperbolic when I say that. What are your reactions?
So, I don't know if you heard, but this morning Mexico presented the US with a memo of understanding where we're going to give them Phoenix back. I told my kids that if they kept misbehaving, I was going to bomb them, and they presented me with a memo of understanding where I've agreed to buy them a new iPhone. This is... Okay, so to be serious for a moment, the perfect reflection here was the signing at Versailles, where nobody in the Trump administration clearly took a history course and realized that Versailles is known for elaborate signings that don't mean a [__] thing. It just shocks me. No one said, "Uh-oh, that's a bad look to sign this at Versailles." So, let's go through this in more detail. In terms of documentation and seriousness, I've said for a while a memo of understanding is meaningless. It outlines that you're interested in getting to a deal. I've never even heard memo of understanding in the context of geopolitics. The JCPOA was a 159-page agreement. This MOU is less than two pages. This is not a serious document. The core issue that everyone around the world and Trump agree on is that nuclear constraints were the core problem. The JCPOA required Iran to reduce its enriched uranium stockpile by 98%, which they complied with, and dismantle two-thirds of its centrifuges and cap enrichment at 3.7% and accept unannounced IAEA monitoring. The memo contains no nuclear constraints at all, just a pledge. Oh, okay. The IRGC is pledging never to build a weapon, which, by the way, Iran made the same pledge in 1970 when it signed the Non-Proliferation Treaty. Verification and inspections, which is kind of the meat and potatoes of this. The JCPOA had IAEA inspectors, continuous monitoring, 24-hour-a-day access provisions. The memo defers all of this to a 60-day negotiating window with no guarantees. This is paying more for a worse product. The memo comes with a $25 billion price tag and another $300 billion in quote-unquote reconstruction framework, exceeding the JCPOA's cost while delivering fewer nuclear concessions. They're at 60% enriched uranium, which is way above what it was when they tore up the JCPOA at 3.7. So Iran enters these talks in a much stronger position than it was when Trump decided to tear up the agreement. We're giving away military leverage. The memo commits the US to not increasing its regional forces, with Washington withdrawing extra forces within 30 days of the final agreement. And the reason we spend $1.5 trillion on a military is so we can have one of our 11 aircraft carriers anywhere to tell people when they get out of line to sit the [__] down. And we're taking that away. In addition, something that hasn't gotten any coverage and is really important in my view is the JCPOA was a multilateral agreement. Its signatories included the US, Iran, the EU, UK, France, Germany, and get this, China and Russia. Meaning that if Iran went back on its word and started enriching uranium, China and Russia had an incentive to economically punish Iran. And at this point, their incentives are probably to see a stronger Iran if it keeps sticking its finger in the eye of the Western world and US geopolitical power abroad. So there's no enforcement mechanisms, no monitoring mechanisms. We have reduced our credibility globally. We have given up leverage of our military. We have alienated European allies. We have sent the world into economic disarray. We have shown the Gulf states and every other nation around the world that when you put a US military base on your territory, it's not protection. It's a bullseye. And basically the political fallout from this, amongst an incredible neutering and weakening of the United States for the next several decades, is Trump knows what a shitty deal this is and is already throwing his vice president under the bus. The political equivalent of sending a mob with a noose after JD Vance, saying, "Oh, well, the parts I negotiated are strong, but this is JD's thing." And by the way, even Secretary Hegseth and Secretary Rubio know this is a giant steaming pile of [__] and are nowhere to be found. And they've said, "JD, you go on The View. You go talk about this deal. This is, in a word, disastrous." Your thoughts?
I think in addition to that, I agree with everything you said. I think there are so many reasons to believe that whatever quote-unquote deal we have isn't actually a deal. And that doesn't seem to be what the markets are believing right now. At least when you look at oil prices, which have come down, and the stock market, which has gone up because there's a lot more optimism about this. But I just want to go over all of the reasons why you shouldn't think that this is actually a deal. So number one, since the MOU was signed, Iran has already fired multiple drones at commercial ships and those drones were intercepted by the US military. So already it doesn't seem real because Iran is still firing missiles. And of course the US doesn't want to talk about that because if they talk about that and recognize that we don't seem to have an actual ceasefire agreement or a peace deal here, then suddenly Trump looks bad. So that's a big problem. There's also this $300 billion reconstruction fund thing that everyone's bickering about and arguing over, which again is to signal to me that we don't actually have a deal. It is in the MOU, it is one of the 14 points in that agreement that the US is going to, quote, undertake to construct this $300 billion reconstruction fund. The question is, what does "undertake" actually mean? Does that mean that they're in charge of getting other quote-unquote regional partners to pay for this thing? Does it mean that the US is going to pay for this thing? I don't know. But what I do know is that Iran is expecting $300 billion. And if they don't get it, then the deal is off. Well, Trump has gone out and said, quote, that the story that the US is paying Iran $300 billion is fake news put out by the Democrats. He also reiterated in an interview that we're not investing and that we don't have a fund. So, clearly, there is disagreement over what are we going to do about that. That's a huge deal. Also, it's only a 60-day agreement. So, by definition, it isn't really a deal because it's going to expire. So, it's really more of a pause. But then finally, and this is the most important in my view, based on what Trump has said, I don't think even he takes this seriously. And this goes back to what you said about how he's blaming it on JD. And we will get to that in a moment. I have an interesting clip to play for you. But I just want to read you some of the quotes that he said about this deal that signal to me that he himself doesn't think that it's a real deal. So he said, quote, "It's a memorandum of understanding, and if I don't like it, we'll go back to shooting at them, dropping bombs on their head," end quote. He also said, quote, "We have an understanding of certain things without writing it, and if they don't honor that, we'll probably go back to bombing them," end quote. So, he's already talking about how this isn't that real, this isn't that strong, and we can just always go back and shoot them again. Then he was asked how long the military will stay in the Gulf. He said, quote, "Probably a while. That's not good." And then when he was asked if he saw this deadline of 60 days as a hard deadline, he said, quote, "No, I don't. Just as long as they're behaving, I really don't care that much." So, everyone seems to be collecting around this idea that this one's real. This one means something. I think it probably means something more than the previous fake frameworks of deals, but I don't think that we can take this that seriously if the president himself isn't seeming to take it that seriously. I have a clip of this JD Vance situation which I think is interesting, but I just want to get your views on whether you think that this deal is actually a deal or if it's like [__], like the rest of them.
Well, let's play the clip and I'll comment. Okay, so this is the clip of when Trump was asked about how JD Vance is handling it. Let's see what you think of this.
There's some element to this where you send the vice president. If it works out, great. You look like a genius for sending him. And if it doesn't work out, it's the vice president.
I like that idea. Sure. What? This way. If it works out, I'm going to take the credit. If it doesn't work out, I'm blaming JD. You better be careful, JD.
So, he's basically just said it. You've got to appreciate its authenticity.
Yeah.
Yeah. Look, to be clear, this isn't an agreement. It's a memo of understanding. It's a business document, and memos of understanding less than half the time advance to an agreement. I think this agreement or this understanding never gets to an agreement. First off, they talk about the cessation of all hostilities in Lebanon. Yet, Hezbollah nor Israel are signatories to this thing. There's no incentive for Iran to actually come to any sort of agreement. All they have accomplished what they needed. They have basically given the president his symbolic out so he can try and declare victory and leave. He's left. He's gone. And the notion that they're going to go back if they misbehave in 30, 60, or 90 days with military action is just not realistic given the absolute lack of support in the upcoming midterms. What you're going to see here is Iran will operate within two goalposts, and that is they are still going to try and exert enough pressure to show the world they have their boot on the carotid artery of the global economy and they control the Strait of Hormuz and will leverage that for political and financial advantage. That to me is clear. At the same time they won't be so aggressive that we have no choice but to go in again, which gives them a huge berth. But this is... Iran emerges from this much stronger than we went in. We have given them a nuclear weapon in the form of their ability to now control and influence the Strait of Hormuz. And the political takeaway domestically is the following. JD Vance will not be president. There is going to be no way he can escape this. The president is hanging this anchor around him. It's as if he sent a mob and a noose for him politically. And I've said all along that neither Vance nor Rubio are going to be the nominees from the Republican Party because what history tells us about Donald Trump is that he is the equivalent of political Chernobyl and that anyone close to him dies of leukemia. He doesn't give a [__] about JD Vance. He gives a [__] about having a fall guy when he knows this is a disastrous agreement. And I think JD Vance shows a total lack of political savvy. Anyone hear from Secretary Hegseth? He's like, "Oh, no, no, no. JD, you take it. You take it. I don't want anywhere near this." I mean, it's just comical that they're even calling this some sort of agreement. No one already appears to be living up to it. Also, just the $300 billion reconstruction fund. The way I read that, and I'm curious to get your take, is that essentially Kushner and Witkoff have said they see everything as a transactional business opportunity. They've said, you know what, Iran's a huge economy, 80 million people. We want to build the next St. Regis there. We'll go in, we'll raise money. This is a huge opportunity to go in and invest alongside of Halliburton or Exxon or Chevron. This is an opportunity to make money.
My frame of thinking is like hotels and resorts. How do we make money?
So, I would imagine at some point they said, you know, we're going to raise money out of the Gulf and investors, and Jared and Witkoff are going to raise a fund to invest in Iran. And guys, wink, wink, let's get along. Let's make money together, guys. You're reasonable people. Have you said what he said about the IRGC, that some of them are rational people? I mean, this is... he sees everything. It's like he's the buyer and the seller and he thinks if he wills the car dealership into selling him a Ferrari for the price of a Camry that somehow they'll decide to do that. We, i.e. the president, have been so played here by the IRGC and unfortunately European allies, China and Russia are kind of all saying, "You know what? I don't mind if this guy gets his eyebrows singed really badly and if he loses a couple fingers and maybe even a couple hands because he's been such an [__]." I mean, it's just weird to think that the IRGC now has potentially more support. And then the wild card here is Israel. Netanyahu is on record for decades saying if given the opportunity, he is going to eliminate what he perceives as Israel's enemies and their proxies. They are the wild card here because I'm not sure Trump has as much authority or power over Netanyahu as he would like to believe. And notice Netanyahu was not shown the quote-unquote memo because I thought he was worried he was going to front-run it and say, no, this isn't going to happen. We're not going to cooperate.
Yeah, exactly. So many wild cards in here, including Israel, including also if this deal is branded as a disaster, which I believe it already is, then you could probably see Trump just going back on it because all he really wants at this point is to just save his skin and probably to save himself for the midterms. Because that's really... I think it's likely that this is what this is all about. His approval ratings are tanking. Inflation's going up. Everyone knows that this is a disaster. So he needs to save face in some way, shape, or form. And if everyone believes that this wasn't a success, then he hasn't really accomplished his objective. So maybe he'll just blow it up again, as he's done multiple times in the past. In terms of the economic takeaways, why should investors care about this? Again, this all goes back to inflation and as a result, interest rates and the probability of rate hikes. I mean, if your belief is that we have a deal and therefore inflation's going to come down, I would just encourage you to just reconsider that belief. I just don't think that you can really say with any level of confidence or certainty or optimism that we have a deal here and that we're going to see oil prices coming down significantly and materially and that ultimately that is going to mean that inflation is going to come down and therefore that we won't have to raise rates. I mean, the Federal Reserve meeting was literally unanimous for the first time ever. It was the first time that we didn't see anyone advocating for a cut, and now the probability of a rate hike in 2026 has gone up to more than 50%. So the likelihood is, yes, we will have rate hikes. And I think if we learned anything from the Federal Reserve, it's that we know now that they are very worried about inflation. And I just think maybe this can slightly reduce your concerns about inflation, but I don't think it can eliminate them. And I certainly don't think that this changes the path forward for the Fed in any significant way. So those are the economic takeaways in my view. We'll see, but I think we should expect rate hikes in 2026.
We'll be right back after the break. And if you're enjoying the show so far, send it to a friend and please follow us on YouTube, Spotify, or wherever you get your podcasts.
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We're back with Prof G Markets. As the two biggest AI companies prepare to go public, investors are getting a look at the numbers behind the hype. Last week, leaked financial statements revealed that OpenAI lost $39 billion in 2025, raising questions about how long the company can sustain its current level of spending. Anthropic, meanwhile, appears to be on a different trajectory. According to reporting from the Wall Street Journal, the company expects revenue to surge 130% year-over-year to $10.9 billion in the second quarter. And supposedly, it is on track to generate its first operating profit. But because both companies remain private, we still have only a partial picture of their finances. So we wanted to fill in some of the blanks in this section. So Scott, there's a lot of nuance to these numbers, especially the numbers that I just mentioned in this intro. And I think it's really essential for two of the most important and significant IPOs in history, OpenAI and Anthropic, which are coming down the pipeline this year. I think it's essential for us to have an understanding of how profitable or unprofitable these companies actually are. And in a lot of the discourse, what I'm getting a sense of is that people have a lot of opinions about OpenAI or Anthropic, but no one really seems to have an actual understanding of their profitability and how much money they are making and how much money they are losing and spending. So I wanted to just start here with a demystification of what's really going on. And I'm going to start with OpenAI's financials. So those financials were leaked and we had a conversation with Ed Zitron who leaked them earlier in the week and it gave us a picture into OpenAI's financials in 2025 and it was independently verified by multiple sources including the Financial Times. So let's just go through them. So $13 billion in revenue in 2025, up 240%. That is significant. That's a big deal. They lost $38.5 billion. That was the net loss. That's a big number, very scary, very bad. But there is some nuance in there because that was reflective of multiple things like stock-based compensation and then also supposedly this one-off charge that they had to pay during their reorg from nonprofit to for-profit. There's some debate on this, so it's a little bit unclear. We'll return to that in a moment, but let's just focus on what we know about their operating profitability because we actually do have clarity on that now. And that is meaningful. So just as a reminder for our listeners on what operating profitability actually is, this is basically the amount of money that you're either making or losing from your day-to-day operations. So it doesn't include your capital expenditures. In the case of OpenAI, it wouldn't include how much they're spending on building like the Stargate data center. So this is like what the business looks like day-to-day. Let's just break down what the line items are in the operating profits. So how much are they spending on general and administrative? That's the first line item. This is mostly how much they're paying their employees. It was $1.6 billion in 2025. Sales and marketing expenses, $5.7 billion. Staggering number. I'm sure you have some thoughts. Costs of revenue. This is basically the cost of delivering the product. I see this as inference costs. How much are you paying for compute when your users are asking ChatGPT questions? $7.5 billion. Staggering number. Finally, research and development. This is training cost. This is how much you're paying to compute providers when your engineers are basically training your models. The number was $19 billion. So their total operating costs and expenses in 2025 was $34 billion. That's on $13 billion in revenue. Which means their total operating loss, this is the most important number, was $21 billion in 2025. That's how much they lost on day-to-day operations. There's a lot of debate on this, but that I can tell you with a high degree of certainty. I want to get your reactions and then we can maybe keep going and digging into these numbers.
The weird thing is I don't think it matters anymore. I think that what matters more is... well, one, the SpaceX IPO has been such a... I don't know what the term is. It's been such a spectacle. It's been so incredible in terms of the valuation and the fact that it, I think it's up 30 or 40% since then. And it's come back a little bit, but it's still just remarkable that every person at OpenAI and Anthropic is calling whoever was the lead banker at SpaceX and saying, "Can you manufacture the same scarcity and cadence of lockups?" And they're all trying to take a note out of SpaceX's book, right? And I think operating losses to a certain extent have become moot. It's manufactured scarcity. It's growth, which SpaceX doesn't have, but more than anything it's an ability to articulate an infinite TAM or total addressable market. Also, I think it's a race to see who gets there first because the valuation of Anthropic and OpenAI, whatever their valuations would have been if they'd gone after SpaceX, are up 20 to 50% because the most exciting thing from an investor relations standpoint or from the bankers who are going to market this is that, well, if you thought SpaceX was a great deal and it popped 40%, what if I told you I had a company that was growing 10 times as fast and is only 40 times revenues? Welcome to OpenAI or Anthropic. The bigger problem right now for OpenAI versus Anthropic is that what you're seeing... I've had some dialogue with different CEOs of companies talking about AI and their investments in AI. And what you're seeing is what I call a blame-the-model narrative right now. And that is a lot of companies are waking up and saying, "Jesus Christ, I'm spending all this money on AI." And they're putting pressure on their CFOs and some of their managers to show a return. And so what a lot of them are doing is swapping out OpenAI for Anthropic because they think, "Oh, it's a model problem." It's not. I mean, I think Anthropic is great, but you have a lot of blame-the-model which is disadvantaging OpenAI and Anthropic. And I think what you're going to see as the numbers come out is not only is Anthropic operating at greater fiscal discipline, it's still a money furnace, but it's, you know, it's an oven as opposed to the volcano that the incinerator OpenAI is. But I don't even think that that's what the market's going to be focused on. I think the market's going to be focused on, to Anthropic's advantage, that Anthropic will reflect more momentum upwards. But the fact that these companies are a money furnace, I don't know. Oh, I think they're going to be able to position it as if you have a company like SpaceX out there with a $2.5 trillion market cap and they need... at some point it's basically got one great business, right? It's got the Starlink business. That's a great business, but it's, you know, a relatively smallish business. It's got a sexy business, the rocket business, which is an even smaller business. And then it's got a money furnace. They're smart. They just bought Cursor, which is a real business. But if I were marketing OpenAI or Anthropic, I'd say, you know, at the end of the day, there's a floor on this of say three or $400 billion because why wouldn't Musk come in and buy this thing if things got rough and overnight be the... you know, at some point he's going to have to backfill these expectations. So it's almost as if cash flows, at least for the next couple years, don't appear to have much importance. Growth shockingly had less impact on the SpaceX IPO. It's total addressable market, which I think both OpenAI and Anthropic are going to be able to have all sorts of pictures of every person in the world losing their job to AI and everything being run by AI. And then what they'll also, I think, be able to say is, Jesus Christ, these are value stocks at these valuations. We're going out at 40 or 50 times revenues, which is a value stock compared to what else, compared to the thing you just bought shares in. So I think the money furnace that is OpenAI is...
less important than we might think.
Yeah, I think it's definitely possible that that could be true when these companies go out and that'll be really interesting to see to test the markets. Do investors care about the thing that honestly only matters, the only thing that really matters in investing, which is profitability? Um, I mean, maybe I'm like a boomer at heart for thinking that, but that's basically what the whole game is all about. But the question is, can they paper over that giant wound in the business with something else? And I think to your point, SpaceX has been a success story and they've employed very interesting and very honestly smart tactics to do that. One thing that you mentioned was this tiny float, the fact that 4% of the shares are publicly traded, which basically means that the stock can be pumped by its super fans, by the retail investors to a big degree. And that is exactly what we're seeing right now. To be clear, as the lockups expire, I still think that this stock is going to get crushed over the long term. I think in 6 to 12 months, you're going to see huge amounts of selling of the stock because people are going to realize they need to take their winnings and use it to buy something like a house or a cool apartment, whatever it may be. You also mentioned the total addressable market, the fact that SpaceX said that the TAM is $28 trillion, which is more than the GDP of every nation on Earth except for America. And by the way, 26 trillion of that was attributable to AI, which means that technically OpenAI and Anthropic could play the same game. They could say, "Oh, our TAM is the GDP of America because we're an AI. There's all this excitement and such a huge opportunity here." But and so they could recreate that. The thing they can't recreate is the cult of personality. There's Elon Musk. And I think that is a big reason why SpaceX has been as successful as it has been going out in this IPO. And that is there is a huge cult following around Elon Musk, around his track record of making people rich in the form of Tesla, his 240 million followers on Twitter, the fact that he is this, you know, Jamie Dimon is calling him the Edison of our time. Whether or not you agree with him, that's what people are saying about him. And that's not something that Sam Altman and Dario Amodei can really do. They don't have that level of cultic following or nor do they have the storytelling ability that Elon Musk has and has demonstrated to have had in his long tenure of being a public company CEO of both Tesla and now SpaceX. So, I think that eventually the profitability problem is going to have to matter. And I just want to dispel some myths that are going on about OpenAI right now because when those financials came out, as I said, there was this net loss of 38.5 billion. But in the Financial Times reporting, they talked to someone who was quote familiar with the matter. And that person said that that number doesn't make sense or that it isn't real because $30 billion of that net loss was attributable to this one-off charge from when they went to a for-profit. And so supposedly the more accurate net loss that is going to be recurring for OpenAI was $8 billion. And that is the number that all of the AI boosters are clinging to right now. They're saying it's not that bad. It was only $8 billion. The Ed Zitron financials are fake. Like this is not that big of a deal. But I just want to bring us back to again what happened, what we know about the operating profitability and that is we know that the operating losses were $21 billion negative. Those losses are not massagable. You can't [__] out of those. Those are the actual losses. And so my takeaway here is that someone is lying. Either it's the Financial Times who is lying about what we saw on the income statement or Ed Zitron who's lying about those financials which were independently verified by those journalists or someone who is familiar with the matter is lying about what the profitability actually looks like. Either way, this stuff is getting very shady. Very weird. There's a lot of murkiness and I think eventually investors are going to have to care because eventually the entire business model of AI is going to be called into question and more and more people are asking themselves does this business actually make sense. OpenAI is reducing their prices because they need to compete with those Chinese models that we've talked about which means that their margins, negative margins are only going to get even wider. So, I do think that eventually it becomes a problem. But to your point, maybe in the first few weeks of trading, it doesn't matter to people, but if you're a long-term investor, I don't know. I think eventually you have to care about this.
Well, here's your flaw. You're speaking rationally. And yeah, I mean, let's forget what companies are supposed to do. Companies are supposed to gather inputs and use culture, IP, plant property and equipment to produce an output that they can sell more for the cost of the inputs. That's called profitability and cash flow. And when you buy a share of stock, you're buying an ownership in that cash flow. And growth companies which have dominated the market have done so because they've been able to say if you give us enough capital, we can use that cheap capital to pull the future forward or make acquisitions. And ultimately we end up with especially in a digital economy these just cash volcanoes of high margin revenues and basically that you know are essentially monopolies in the form of toll booths on you know the global citizens or west's daily life. These companies, everyone's looking for the next one. At some point, you know, you find out that, okay, if this company can't produce profits, at some point it's either an acquisition target or it has IP value or it's a trophy asset or something like that. But I genuinely believe we have made the jump to hyperspace right now and it feels like 1999 where as long as it's a hot area, either space or AI, I think you could price these things at a ridiculous number and I'm predicting a pop on day one. I just think retail investors have thrown in the towel and institutional investors have said, "Yeah, it's not an investment, it's a trade, but why wouldn't we get in on the trade?" As long as the getting is good,
but that never ends well,
right? Unless you get out before it ends,
And that is I don't think people, I would bet a lot of institutional, I mean, maybe there's some institutional players looking to hold these things for 10 years, but at a minimum, I don't care what the price is. If I get allocation in OpenAI or Anthropic, I'm going to take everything I can and after the end of the first day, I'm going to look at it. The end of the second day, the end of the fifth day, I'm going to look at it. I think it would be very difficult for any of these companies to sustain their current valuations. Unless it ends up that, you know, 40% of American jobs go away and it's all replaced by tokens and AI and data centers in space. It ends up I'm wrong and that every person I know that knows [__] all about physics who's told me this is literally impossible what they're explaining in their S1 or in their prospectus. Until then this is a trade but it's a trade that's working out for everybody so it keeps attracting more capital but you're talking about long-term rational valuations and cash flow. We are in a different era right now and I'm officially saying this is '99. In '99 you could sell $30 worth of dog food or $70 that cost $60 to ship, but if you sold it for $19.95, the internet, the total addressable market of internet commerce was so huge that you would bid up Pets.com. You would bid up these ridiculously stupid companies that made no sense that were losing more money as they grew that had negative margins. At least these companies in most instances have positive margins. These are great companies that won't collapse the way they did in the dot era, but they could easily, easily, I mean like Barry Ritholtz said, if SpaceX declines by 80% in absence of knowing where it was, you wouldn't look at it at 500 billion and think that it's cheap. You'd think that it was expensive. So I think look, if you get out, I've had a bunch of people calling me saying, should I get allocation or should I sell? And the people who call me and say, "Should I sell?" I'm like, "Yeah, wait till the first couple trades and then sell as much as you can." And the people who think they said, "I've been offered allocation." I'm like, "Take it." And I think it's a trade. I think you trade out of this thing sooner rather than later. As an investment, I'm a boomer. I cannot in any way see how these companies sustain the growth and profitability they're going to need to justify these valuations over the medium and the long term.
Yeah, it's a really big statement which I agree with. I want to return to Anthropic because Anthropic is possibly the only company in this space, the only hot company that is potentially defying this narrative specifically because of that Wall Street Journal report that we got last month which said that they are on track to achieve operating profitability in the June quarter. And if that is true, that is a big deal because here we have the one AI company that is supposedly profitable on an OPEX basis if it's true. And personally, my view, I don't think that it is true. I think that this is an extreme example of the numbers being massaged because if you dig into the numbers, you learn that they are extrapolating based on a quarter in which they are receiving a huge discount on their compute deal with SpaceX. A discount which will literally end at the end of the June quarter at which point they will be spending $15 billion a year on their contract with SpaceX. In other words, their compute costs are about to explode. So for them to say we're about to reach operating profitability is sort of it's like the profitability equivalent of bullshitting your ARR. I think it's like if we would have signed some massive one-off contract with an advertiser and then we just multiplied it by 12 and we were like, "Look, we have this incredible ARR. We're going to keep making money like this, but of course we won't." So I, when people say Anthropic is profitable, one, they're not. They said that they're trending to be in a single quarter and two, we should treat that statement with a lot of skepticism. Having said that, from a spending perspective, Anthropic, we don't know much, but what little we do know, it appears that Anthropic has its [__] together in a much bigger way than OpenAI. And we did a little bit of analysis on this. According to a Wall Street Journal report, Anthropic's compute costs last year was $7 billion. However, the Wall Street Journal had also gotten that wrong in that same report about OpenAI. They were off by about 60%. Now that we know what OpenAI's real financials are. So let's assume the same thing was true of Anthropic. That means their compute costs were about 11 billion last year. That is an estimate. Then you add in some of the sales and marketing costs, which would be a lot smaller than OpenAI's. Also the employee compensation. Big point here. Anthropic has about half the number of employees as OpenAI does. Our estimate is that Anthropic's costs came out last year to just under $16 billion, which would mean given their revenues that they lost 11 billion in 2025. That's a lot, but it's half as much as OpenAI. So I think if Anthropic, they say they've got $47 billion ARR right now, if they actually hit that number, if they actually generate that much revenue and if they can not let their costs grow by 200%, they have a path to profitability, I think. But that's a lot of ifs, a lot of stuff up in the air. That's where I land on this. I think that it's possible for this business model to work, but I think that you have to be crazy strict about your spending and about managing your cost. Something that I think Anthropic has somewhat of an interest in doing, but OpenAI doesn't at all. So, OpenAI to me, trade. Anthropic potentially a real investment.
Yeah. And also, I do believe that if these companies wanted they could be profitable right away if they priced it. There are a lot of users who would pay a lot more money for these models and I think they could cut a lot of cost and investments and I do think that costs with scale will come down dramatically. The problem is that business is a great business worth 30 or 50 billion, not worth 500 billion or a trillion. So they have to kind of spend against a future that they're predicting to justify these valuations. But these are businesses I do believe that could be profitable sooner rather than later. They just wouldn't be able to sustain, you know, what is it, Anthropic is growing 5x a year. So again, the market, not even the market valuations are the tail that wags the dog. What is wagging the dog right now? Getting JP Morgan and Goldman Sachs through soft and hard lockups and a low float to create manufactured scarcity. A vision of a total addressable market that is just so enormous that it's impossible for anyone to calculate what your potential market size is and then, you know, a spokesperson who is just commanding a ton of attention. And I think these companies should all send a thank you note, you know, wine and roses to Elon Musk because these companies are going to look cheap by comparison and it's going to create, I think, I used to think well, every company was going to run out of money to invest in these guys 'cause Musk is soaking up all the capital and Alphabet preempting and cutting line. I've now gone, now everyone is drunk on this and is going to pile into these things and they're going to pull back. I wouldn't be surprised if they pull back the numbers of shares they're offering, that they try and implement some of those tactics, the soft lockups with retail investors or what have you. But you can bet, you know, the CFOs of OpenAI and Anthropic are saying, "Can we speak to the bankers at JP Morgan and Goldman and how they managed to float here and how they marketed this?" And they'll say, "Come on in because this is hundreds of millions of dollars of fees." And I worked with SpaceX and we said that revenues would grow 100x by 2030. None of us knew what we were talking about, but it didn't matter because we cashed out. So 100% agreed on that.
