successful next two years. That's what it comes down to.
All right, we dipped our toe into data centers. Let's go do a double click here and dive right in. Stocks got killed earlier this week. Nvidia, SpaceX, Tesla, AMD, Micron, everything across the board took a massive haircut. Close to $4 trillion in market cap wiped out. Now again, Trump has overseen the top ticking of the market for the last two years. So overall, I think the market is still up during a second term. But this was the worst single day in the history of the stock market by total dollars, not percentage obviously, and it's the worst day for a little while. This puts a bit of a dark cloud over Anthropic's IPO and of course after that OpenAI's. Polymarket, our great partner at Polymarket, thanks for Shane for coming on on Tuesday, says that they're going to have a 71% chance of going public this year. It was 95% before the midterms. And the Wall Street Journal reported today that the haircut could be baked in now instead of 1.5 to 2 trillion and then going to 3 or 4 trillion. As Gavin Baker said on this podcast, we could be looking at a 1 trillion, 1.0 low-x trillion. Today markets have rebounded a bit and all of this is based upon Chamath. Are these data centers going to go forward or not? Are they going to be stopped? And then what is going on with governors? Specifically, Sachs evoked what happened here with Abbott losing to Gina Raimondo, who took the time to do a little presser last night and give her position, went on all the top shows. She's being pretty clear she wants a great deal and it doesn't seem like she's against them. She's going to let people build them out until 2028. But it's unclear what happens after that point. You're obviously connected, I think, Chamath, to a lot of the major players in the AI space. What's going to happen with data centers? Can the Democrats afford to pop the AI bubble by then putting cold water and slowing down data centers because that will tank the economy? I think we all understand that. So, is that in their best interest? And is this posturing and positioning to get better deals for their local communities, as is their job? There's an incredible video where the SpaceX team went to Cochise County in Arizona to present their plans for this new 6 gigawatt data center. And if I had to characterize that video, it's on X if you want to find it. But it's these two very bright, earnest people from SpaceX trying to explain how they're going to reduce electricity costs by 40%, they don't use water, they'll reduce property taxes by 20%, they will be able to fund enough revenues to pay off a bond in the county, and it's just a litany of things. Yeah. Meanwhile, the audience is just screaming. And what you see, the two people were very poised. Riley and Katie, those are their names. Good SpaceX employees. They should be proud of how they conducted themselves. But they were getting run over if you listen to this video. And my takeaway is, Jason, that this is an emotional issue that is not tethered to the facts, as Friedberg says. It represents a totem around the oligarchy and the economic fissure that exists in the US economy. But it also represents that the deals that have happened are a little gratuitous. Meaning, should it really be the case that the most powerful seven or eight companies need a tax break to invest 30, 50, $80 billion to then generate 345, $500 billion? Probably not. Now, they're doing smart deals because that's what made sense. But I think what the incoming governors are going to say is these things are off the table and instead we want to have directly measurable economic impacts before we even entertain this. I think what it means is we're going to see a slowdown. And I think what that does is it benefits the hyperscalers because they have existing capacity. I think it's very bad for the neoclouds because they're renters, and it's pretty bad for the foundational models because they are so short this capacity and they need it to grow. So to the extent that these frontier models are so much better than everybody else's product, they are the ones that need this capacity. It sets the hyperscalers to be a kingmaker, and they have this interesting game theory now.
Can you just say who the hyperscalers are, just so people understand the difference between them?
Yeah. Amazon, Meta, Microsoft, Google, SpaceX.
And what they'll be able to do is make a decision. Path number one is continue to rent in the way that you're doing it today. So the status quo, rent to some customers, large corporates, right? Rent to the neoclouds, rent to the foundational models. That's what they're doing today. Everybody does that. But then there's the path less traveled, which all of a sudden becomes really interesting. You could decide to take all of the incremental compute and advantage your own products. So Google has a ton of capacity coming online. They could say, I'm going to give it to Gemini. What does that do? It actually allows Gemini to catch up in quality relative to the foundational models. Why? Because if you constrain the amount of assets that can actually generate compute and a smaller surface area of it is available to the leading companies, those leading companies will have to pay more. The user experience will decay and then other products can have time to catch up. And now that is important because Anthropic and OpenAI are in a very fast recursive loop. They're on a 60 to 90-day loop in improving their models. So now all of a sudden without an infinite amount of supply coming online, you can slow these folks down. That's the path less traveled. Then there is the crazy path.
You should look for this one very narrow thing. You and I talked about this before on the pod, but SpaceX and Anthropic's compute deal has a mutual 90-day out. Anthropic can term in 90 days. SpaceX can term in 90 days. Terminate. If SpaceX says, 'I'm going to terminate this compute in 90 days,' that is the king-making move. Why? It's a disproportionate amount of the compute that Anthropic needs. It allows SpaceX to reprice that compute at the spot rate, which is probably double the market rate, right? The market rate, and it's probably not just double, it could probably triple. So whatever revenue you see on SpaceX's balance sheet from Anth could two to 3x, and Anth would have no choice except to immediately capitulate and take the higher price. It would also show all of the other hyperscalers that they are very far away from having economic yield that is optimized. And so then it forces them to consider, should I be giving it to myself? Should I be selling it to the other people? It then forces the neoclouds to take all of this money that they've raised, whether it's debt or equity, and say, 'I have two choices, which is to buy as much compute today as I can at whatever price it's available, because the other path is assured destruction and bankruptcy for me because I am just out of the game.' And so what do they do? They will take the last gasp and do whatever they have. So I think all the game theory, Jason, literally comes down to this one deal and whether Elon decides to rip it. Because if he rips it, watch out.
Yeah. And the other two factors here, Friedberg, and just some predictions right now, we have the tokens here in the United States. If the governors decide they want to put the screws tight on big tech hyperscalers and neoclouds and they want to slow this down, they will need to understand that these data centers could be put in Canada, in Mexico, in Singapore, in Malaysia and many other locations. The Middle East is a little bit off the table because of the war. War ends, you start putting these data centers in the Middle East. Then the job of doing the next large model will not occur, Friedberg, on US soil. It might occur in Saudi Arabia, UAE, Qatar, Malaysia, Singapore. We're going to be a net importer of tokens and this will be the biggest sell-off ever because all those 300, 400,000 jobs building these data centers are going to go away. All of that tax will be collected locally in Malaysia where Google is putting a huge data center, and the data can make it around the world quite quickly. It doesn't need to be in the United States, which these governors are going to learn a very hard lesson in globalization. What are your thoughts here on the data centers being banned, or if it is just posturing? And then Friedberg, could we see the United States become a net importer of tokens as opposed to a net exporter?
Well, they might ban the use of AI, too.
Okay. Well, now we're going to...
Yeah, a very far-out prediction that's being floated. I mean, that's the conversation right now.
Okay. Unpack that. Who's having the conversation? What exactly is the proposal? Because that seems to me to be a little far out there.
The farther left you go, the more vocal politicians get on this point, which is no one sees the quote benefit of AI and they don't want to see AI being developed, being deployed, or being used. That's the general statements that are being made. So they want to ban both its development, its deployment. They want to ban data centers. They want to ban technology companies from making models. And they want to ban companies from using the models. And I think this sort of rhetoric leads to somewhere that's obviously more constrained than we are today.
What are the chances something crazy like that happens? But handicap it for us here. 10%?
California passed legislation and Gavin Newsom vetoed it. I think it's much higher than 10%. We're seeing state-based legislation. I mean, Sachs spent quite a lot of time on this, but there's a patchwork of hundreds of laws that are passing all over the country trying to regulate model development, model deployment, model utilization, what they're allowed to do, whether the local state government gets to audit and inspect how the models operate, how people are using the models, what they're saying. Sachs, answer his...
And fundamentally, remember, a model is just a bunch of software. It's code. It's a point about free speech. Can I actually run code on a computer? That is a restriction on, you know, someone basically reading a book is a way to think about it, because at the end of the day you're inputting and outputting digits, ones and zeros.
And remember, we have laws and we have regulations about what do those ones and zeros do. So if those ones and zeros go and take money out of your bank account and put them in mine, I broke a law. I'm a felon. I'm going to get convicted of that felony. If that is used to create a weapon that is illegal, I broke the law. That is a felony, and you can go down the long list of things that people should be concerned about. So you have to ask yourself the question: if we already have laws that protect ourselves from the consequence of people using this sort of speech, this sort of software, then what are we actually doing? And I do think, once again, that the primal, call it unconscious political state is that there is something that threatens the state, that threatens government itself. And I think that that's a big part of the motivation here. And I've said for a long time, there's a power play. The question is, and this is me waxing philosophical for a second, is does an organization like Anthropic or whomever end up in a place where they're regulatory aligned with the state such that the state has unlimited access to that model's capabilities to development and deployment, and individual citizens and companies do not? And this is almost like, if you go back, the modern issue, the Second Amendment issue, is no longer about who has the bullets and the guns. It's about who has this technology. Because if the state has the technology, but the citizens and the businesses don't, then the state has supreme power. And remember, there's no such thing as a state that doesn't have central planning and command, which means you are giving a small group of people an extraordinary amount of power. And the whole point of the United States and the whole point of the Second Amendment was to always have a check on that power.
So if the state ends up getting all of the AI and no one else gets the AI, then you no longer have a check on the power.
I think this is like you're getting into Dr. Doom scenarios. I think you're completely wrong. I think there's like a 1% chance something crazy like this happens. But I like that you exist in the world, Friedberg, to present it, because you are the backstop to this level of lunacy.
By the way, JCal, call me Dr. Doom all you want, but this is a fundamental question about what's the intention of this country. The intention of the country was individual liberty, the rights of the citizen, the rights of the individual. It is not about state power, and it is not about us. And we have a lot of laws that protect citizens from each other. What we're doing now is creating a different system that extends well beyond the founding principle of the United States to give a small group of actors an incredible amount of power that they're going to centrally command. And I think that that's something that we need to pay attention to. And I'm not saying this is happening and the world's over, blah blah blah.
Well, that's why I'm trying to... it's not binary. As the policies develop, we have to keep in mind what we're doing.
Slippery slope. You're saying very slippery slope. Yes. Okay. Sachs. But I do think, you know, just like the P-doom where people say 10% of people are going to die, I like to put a percentage on it. What are the chances of this happening? Chamath or Sachs, you're the closest to this, you know, having been the Czar. Do you think that this is in the realm of possibility, what Friedberg's describing? If so, maybe you could put a percentage likelihood of it happening. And then what is your take on data centers and the net exporter, net importer of tokens potentiality here?
Okay, so it's 100% that Democrats are going to make a major push for AI legislation in the next Congress. The question is what that looks like. And I don't think you have to speculate too much to understand where it's going. I believe that Democrats want to create a surveillance and censorship state that's turbocharged by superintelligence. I mean, that's ultimately the end state. How do you get there? You create a department, a federal department of AI. You require that all the so-called frontier models have to be reviewed and approved by that. The regulators give their notes on it. You can't get a model released unless you address their concerns. And their harms will include all the things that the government is telling us that social media companies should be concerned about, like disinformation and misinformation and dissident thought. All the things that the government was pressuring the social media companies to crack down on and censor during COVID. I mean, how quickly we forget all of this. They're going to basically reenact that whole regime again using AI, and it's going to be infinitely more powerful because we're talking about superintelligence here. So I do believe that that is the regime that we're headed towards. So it may not be exactly the version that Friedberg's talking about, where Friedberg's saying that only the government can use the tools. I don't think that'll be the case.
No, not that binary, Sachs. Sorry. I meant like obviously they're going to get access to models and capabilities that the public doesn't. At the end of the day, any amount of distinction between what a central state actor gets and what the general public gets is really where that distinction of power arises, and it's really what makes it difficult for the founding principles to persist.
Which would be a quasi de facto nationalization of the technology here, Chamath. So what's your take on this? I'm going to force everybody to and try to pin you guys down a little bit. You think that this nationalization of the technology, the government having the best version, everybody else in the United States, corporations, individuals having 60, 70, 80% of that version, do you think that's a possibility here?
No, I don't think this is the priority. Again, I think people will get animated about this issue, but I don't think this matters. And I think that to the extent that people legislate an oligopoly, it'll further entrench economic power. And I think that that's counter to what these people want. So I think when they connect the dots, I don't think that that's what's going to get legislated. I don't think they have the energy for that. And I think at the end of...
