Midterm Blood Bath, $4T AI Sell Off, Data Center Freeze, What’s Next for Trump

Wow.

DEI is back is what you're saying.

I have an announcement.

I'm transitioning from a douchebag to an [ __ ].

Love you.

I think there's some really important news around SaaS out there. I mean, maybe Salesforce launched a couple of new features. Definitely top of docket type material.

I'm ready to go. You guys want to talk about exponential time hypothesis?

Not true. It was 500,000. And just to put it in perspective, the far right streamers got about 87,000. The far-left streamers got 250,000. We got 500,000, which was bigger than most cable as well. So, we were the biggest and bigger than, I think, most if not all cable as well. Apparently, America wants hot takes from Tech Bros. I don't — who would have thought?

Yeah, I was busy that night. I was — I think I was passed out in the bar.

This was a shacking. This was a blowout. It was, I believe, the biggest midterm loss since the Watergate midterm loss. So, this was obviously a big defeat for the Republicans. There's no sugarcoating it. What's the reason for that? I believe the vice president, JD Vance, explained it very well. It was this war. And the only thing I would add to that is it was this war and the economic consequences that follow from the war. So, what am I talking about? Price of gas, it was around three bucks before the war, went over four and higher. Price of diesel even higher. And then that factors into the cost of food, all the goods that have to be transported. Also, fertilizer costs went up. And so you saw the inflation rate at the beginning of the year back in January before the war, it was down to 2.4%. We finally had that problem licked just about. Remember, it was 9% under Biden. And in the first year of the Trump administration, we brought it down to 2.4. The market was expecting multiple rate cuts this year. And we were forecasting 5% GDP growth, which I don't think was too overly bullish based on what we were seeing at that time combined with the expectation of rate cuts.

Not unrealistic. Yes. Okay. And by the way, the prediction markets back in January were showing a 70% chance of Republicans holding the Senate and then the House was perceived to be a tossup. I think that if this election had happened back in January, it would have been a pretty successful one for the Republicans. What happened since then? Well, you got inflation going from 2.4 to 3.7%, again mostly driven by the cost of gas and diesel and all these other products where you have to pay a higher cost of transportation and you end up not having any rate cuts. You end up getting a rate hike that brought the cost of mortgages to roughly 7 1/2%. And that overall fed this narrative around affordability. So, it's the war plus the perception of the lack of affordability is what really created this tidal wave. Now, you know, I have to admit I thought that — I mean, look, I didn't think this would be a great election for Republicans, but I thought that it wouldn't be this bad. I was wrong.

I thought it could be a spritz. That was based on a couple of things. Number one is that the last few elections the pollsters have all been wrong and Trump has always managed to defy the odds and I thought that this polling data must fall into that pattern. And then the second thing is that the economy is not that bad. I mean, in fact it's quite good. So just today we had a new jobs report. It was a very robust jobs report. The number of new jobs created is being revised up. You've got unemployment tick down to almost record low 4.1%. You've got still pretty healthy GDP growth. In the first half of the year was around 2.1 to 2.5% and then third quarter the tracking by GDP now is 3.7%. So I thought given the fact that you got great employment, you got solid GDP growth, I thought the fact that inflation was too high would not result in this type of tidal wave. I thought it'd be more like the Biden midterms where he had extremely high inflation, but the economy itself was still pretty decent and it ended up being more of a red spritz as opposed to a red wave. So that was my pattern recognition. It was wrong. And I think one of the reasons why it was wrong here is because I think the public is in a pretty ornery mood. They're very concerned about affordability. It doesn't matter how good the economy actually is. It matters how good people perceive it to be for them. And in the first year of the Trump administration, we made enormous progress in delivering real post-tax household income. It rose by like 3.1%. But because of the inflation numbers over the last 6 months, you're starting to chip away at that, right? Because again, as long as inflation is growing faster than your wages, you're losing purchasing power in real terms. I think the electorate was getting ornery about that. And just one other thing I want to say about it, which is there's one other piece of why the war I think was so bad, which is it fractured the Republican coalition and the Republican base. Jake, you've pointed this out. We lost all the podcast bros. I mean, obviously it was Tucker Carlson and Joe Rogan and Theo Von and that whole set, Megyn Kelly. So, you know, a house divided against itself cannot stand. I mean, we lost a huge part of our base. And I would say that the Republicans in particular are dependent on the podcast circuit. Let's call it alternative media. Why? Because the mainstream media hates us. Legacy media hates us. They will never get —

So, it is — yeah. And I think one of the reasons why Trump produced such a resounding victory in 2024 is he appealed to that whole podcasting circuit. And frankly, we should have done a better job giving them all front row seats in the White House press room. We should have stayed connected to all of them because they are our media. By the way, they don't, you know, they don't work for us. They're willing to defect. Obviously, they have their own opinions. But we have to pay attention. I think our side has to pay a lot of attention to them because without them we don't have any media that supports us. So I think that losing them was a big deal. It fueled the sense and I think that a lot of those people showed up and then did a protest vote because they wanted to send the message that they want out of this war.

I don't know if it's as much of a positioning and marketing issue as it was sort of fundamental. I'll go back to the clip from the prediction show right after Trump was elected.

Can we pull that up, Nick?

I think that the party line is that socialism was defeated in this election cycle and that there was a resounding kind of vote from the American populace against socialism. And I actually think my contrarian belief is that we'll see a rise, a dramatic rise in socialist movements in 2025 in the United States.

And I think that we are going to see, as Gavin pointed out, an acceleration of progress. We're going to see an unleashing of economic growth because of deregulation and AI. But I do think that some industries and some companies are going to be huge winners and some companies are going to be huge losers. There's going to be some parts of the economy that are going to be big winners and some parts of the economy that are going to be big losers. So, I just wanted to nail it there, Friedberg. I was very accurate for the first year of the presidency.

And so, if you just zoom out a little bit, the macro condition was there was a moment after the election when there was this idea of DOGE, this idea that government spending would be reduced, which I believe fundamentally would have affected the cost of living. And we can argue about that. People disagree, they wash that point away. I do think it is the fundamental driver on the cost of living is government spending. The more the government spends, the more expensive things get. I believe that and we can go through the analysis on what happened in France. You know, government spending as a percent of GDP is one metric. How many people are employed or depend on government checks is another metric. But as the government's involved in more of the economy, things get more expensive. So when DOGE was coming around, the idea of DOGE, the idea of government efficiency, the idea of making sure that every dollar spent by the government has a positive ROI for the people was a great idea. We visited DC in March of 2025 and we visited Elon and we talked about DOGE and he was struggling. It was pretty clear he was struggling not just internally but with Congress and with the public perception of what was being done there. And I came away from that visit in March of 2025 where I also met with multiple members of Congress on that visit, Republicans and Democrats who did not give a [ __ ] about improving government spending efficiency, did not care about the total government spending as a percent of GDP. It was not a priority. And on June 5th of 2025, Elon left and it was the end of DOGE. The idea that DOGE was going to continue was over. And I said China just won because to me at that moment, the day that this ended, that this administration ended that effort, is the day that it was clear that we were going to have a runaway cost of living and a challenge for progress for the majority of Americans. And the end result of that is voting in more of these kind of socialist principles, socialist policies, socialist politicians. So for me, my tweet on June 5th was 'China has just won' was the day that it was announced that DOGE was basically coming to an end. And then the one big beautiful bill passed in July of 2025, which had some entitlement cost reductions, but all of the fundamental spending in the government had not been reduced. And we're still running a $7 trillion a year government budget with a $2 trillion year deficit. So I don't think Congress was ever on board. It is a structural fundamental problem and no one's on board with it. And I think that was key to what happened here. For the majority of Americans, they don't feel like they're getting ahead. They don't feel like they can afford things. They don't feel like healthcare is accessible and they are struggling. And it wasn't addressed. My view was it wasn't addressed in the way it should be. And we can all disagree on policy matters. But that's my view. And as a result, people still felt that way. And that's what drove the vote. But I do think on AI, it's this idea of this oligarchy. If I'm not getting ahead, someone else is because, quote, 'the economy is growing,' quote, 'the stock market is growing. Who is getting all of that growth?' Because I'm not getting it. The AI guys are, the tech oligarchs are, and so on. And I think that that's why AI was poised for this. But I do think that there was some external influence that happened on AI. And I'll pull up this chart here real quick, which I shared around on the group chat yesterday, which is an incredible Gallup study that shows AI optimism and pessimism in countries around the world. The most optimistic country for AI is China. 93% of Chinese citizens think AI will mostly help people in the country. And 93% of people think AI will make their daily lives better in China. And we can believe or not believe how Gallup does their surveys in China. The US is fourth last. We are worse than Afghanistan and we're just slightly better than Malawi and Bangladesh. We're fourth on the list of countries at 36% of Americans believing that. And so I think that in addition to the priming of the pump, which is if I'm not getting ahead, someone's getting ahead and the AI guys because we create the AI in this country are getting ahead, made it really easy to attack with this oligarch narrative that there is a group of people that are benefiting and making a lot of money and then there's a large percentage of people that aren't. And so I think it's pretty clear that this vector was a really effective one. Whether it persists or not is TBD and I think we should talk a little bit about what's next later in the show because I do think AI is going to play a major role in how the politics are going to play out over the next year.

Did you sit barefoot in his backyard with him, Chamath, or —

Yeah. I mean, by the way, when you go to Rick Rubin's recording studio, he walks you around and he's like, 'Oh, Chamath, here's Bob Dylan's old touring van. That's where we recorded Adele's album.' And then he's like, 'This is where Kanye and I laid down this album. And then here's where Jay-Z and I.' I mean, it is the craziest place, but it puts you in a totally centered state of mind, I got to say. Yeah. And we sat around in his studio barefoot sitting across each other just talking and then they put it out telling people this is where I in some polyat —

I got it totally, totally, totally wrong. I got it totally wrong.

I'll go through all the ways in which I got it wrong, but I just want to first acknowledge what my blind spot is. Like most people's blind spots, but I can just speak for myself, is through the lens of my own lived experience and very narrowly what is in my best interests. And I think what we had was a move away from the culture wars. That was very much in my best interest, but I think it was in everybody else's best interests as well. I don't think that was on the ballot. But what I don't think I understood clearly enough, and I think that this election has made extremely clear, is that since COVID we have moved past political ideology. And I want to say this again. I do not think Democrats or Republicans matter. That is my real takeaway after this election. There is a central block of people that vote the prescient issues of our time. It was a gargantuan win for Biden. Then it was a gargantuan win for Trump. And then it was a gargantuan win for the Democrats in these midterms. What are these people voting for? I think what they are shouting now and they were trying to signal and now they are shouting is a broad-based belief that the economy has completely decoupled from reality and is broken. The economic reality in America is broken. There is a small percentage of people, the four of us on this pod and all of our friends, who are the asset owners of America. And we have benefited in every weather condition. When rates were zero, we benefited because we were able to build our businesses with very cheap capital. When rates were high, we benefited because we had pricing power. And in every condition in between, whether there was tariffs, whether there were not tariffs, whether there were subsidies, whether there were not subsidies, we've all managed to continue to accumulate and grow assets, but we are few and far between. And then there's everybody else who are wage earners, and the structural capacity of the American economy to support and grow wage earners is broken. It's clear. Why do I say that? I do not think, and I disagree with Friedberg, I don't think this has anything to do with socialism. I don't think the far-left won particularly more than they were expected. I don't think the far-right won particularly more than was expected. This is a complete and total repudiation about the state of the economy. The economy is broken. I have a few charts to support my point of view. Number one, if this was ideological and if ideology mattered, money in politics would have had a more direct impact on the election. But when you look at the amount of money that was spent, all of this money was wasted. All the money that went into Texas was wasted. All the money that went into Senate races in Ohio was wasted. The better bet was to look who was being spent money on. If you had taken the opposite candidate who had no money, you would have been overwhelmingly more right. So money follows ideology. Money did not work in this election. Ergo, in my opinion, ideology did not matter that much. Next chart. Redistricting and gerrymandering also follows ideology. You try to set up the geographies in a way so that you could gain more seats. Look what happened. Of the 15 Republican seats that were redrawn so that they could capture all of them, Democrats won 11 of them. Republicans only won one. So again, ideological gerrymandering also totally failed. So we have ideological spending in politics failure, ideological gerrymandering failure. Next chart. And what you had were centrists, normal people. These were not people running around talking about communism. These were people that very narrowly focused on one thing and one thing only, which was affordability and the functioning of the United States economy. And they spoke to a large block of people that were both Democrats and Republicans. Initially supported Biden, overwhelmingly supported Trump, and then overwhelmingly went to the Democrats largely to vote the displeasure with the economy. That's it. I don't believe Iran really had much to do with it. I don't believe Israel had much to do with it. I don't believe AI had much to do with it. This is the American society asking for a reset on the economic principles on which we operate. And I think the obvious thing to do for the ambitious candidate on the left or the right is to take these three charts together and have one very precise takeaway, which is the economic populist platform will be the one that you can take to the presidency in '28. And the path is really straightforward because if you look at what happened to Harris and then you look at how aggressively all of these states moved towards what I think is economic centrism, what you have is for either side to not worry about whether you're a Democrat or whether you're a Republican. But if you embrace reasonable standards of economic fairness, you will win. So, I got this wrong. I thought top-down economics can still work. I thought that when you had asset owners building assets and investing in the economy, these things can get to everybody else. It's clearly not happening. It's not true. I have to update my priors. And my new framework is we need to figure out how to stop all the loopholes. We need to figure out how to do some of the things we've talked about before. Stop the federal underwriting of loans. Combine that with getting rid of student debt. Take all federal taxes beneath a certain band, probably 150k, to zero. There's all kinds of things that can be done now to allow the wage-earning class to feel more ownership of the United States economy. And until it happens, my prediction is not that Democrats or Republicans win, but they will violently keep going back and forth away from the status quo. Because if you are in power and you do nothing, they will vote against you. So now the Democrats have a really interesting challenge. What will you do with the majority in both houses? Are you actually going to try to legislate economic fairness or are you going to spend your time distracted with impeaching Trump? Because then you will find yourself, if the Republican candidate embraces the economic populist platform, you'll find yourself losing the way the Republicans lost in the midterms.

Well, a stopped clock is right twice a day. Jay Cal —

My take on that is that you were not right until the war began. That last clip that you did, you were vindicated, right? Because it's the war and inflation. I mean, those are the two things. Specifically, the affordability problem that results when you have this inflation. Look, price of gas. Everyone goes to the pump to fill up every week or two and the average household is paying 200 bucks a month more in gas cost. Then they go to their grocery store and everything is much more expensive because the cost of agricultural products has gone way up and so on down the line. And at the end of the day, that's what matters to people is their pocketbook. It's like, do you have more purchasing power in real post-tax post-inflation terms? That's how you measure if you're doing better off. And the Trump administration delivered that in the first year. We did 3.1% increase in real household income. It was negative during the Biden years and it was positive during Trump 45. What happens? The war begins. Price of gas and diesel and all the rest goes up and purchasing power starts to go in reverse. And then on top of it, you lose the young males who are again the fans of all these podcasts. That's where they get their news from. Young males flipped their vote by 36 points in this midterm relative to the 2024 election. So again, in my view, it's very simple. It comes back to the war and its economic consequences. Now, here's the good news is if we get out of the war, we can make rapid progress on this. All the other economic numbers are still good. Again, job growth, the job report today was great. Economic growth is still good. There are lots of very positive economic numbers. The issue is fundamentally the price of oil, the price of gas, price of diesel, and the way these things flow through the economy. If the war has ended quickly, those prices will drop very quickly. Inflation will come back down. That will give the Fed permission to cut rates so mortgage costs come back down and we can get back on track.

Well, first of all, let me put up some charts here since you guys are doing the chart game and I didn't know we were going to play the chart game today. So, Nick, can you —

Yeah, Nick, can you throw up these charts? Okay. So, look, JC, there's all sorts of issues out there that people are going to point to and I know you've got yours and I'm not saying that every single issue has been executed perfectly. I do think that President Trump deserves enormous credit for completely sealing the border and solving that immigration issue.

Just as an example. But look again, the question is why was this not a normal midterm result? Look at the Trump approval rating versus the price of gas. It maps perfectly. Okay, Trump net approval maps to the price of gas. Okay, next chart. This was the prediction market for which party will win the Senate in 2026. And what you see is that the Republicans were expected to win by a very large margin throughout the entire first year of the Trump presidency. All through the things you were talking about, JC. Okay. So, the tariff rollout did not affect this whatsoever. That was the Liberation Day in April. Not even a blip here. Okay. April of 2025 wasn't a blip.

Yes. But I'm using this approval rating I showed, right?

Okay. Where does it start to change? March. March of 2026. What happened? When did the war begin? February 28th of 2026. Very clear. That's where everything starts to change here in terms of losing the Senate. Next chart. Okay. Now just ask voters what did you vote for? Why'd you vote? Question. Thinking about your vote for Congress, how important to you was the war in Iran? Crucial, 34%. A major factor, 40%. So basically 74% of the electorate said that it was either crucial or a major factor. And then of those they broke massively for blue. And this doesn't just include Democrats obviously. It includes a lot of independents and it even includes I would say younger Republican voters. There's a huge divide in the party I think between you kind of got the Fox News group. It's kind of the over 50 or even over 60. They're I think still supportive of the war. But you look at the younger voters, young males, highly against this. Again, it ties back to the podcast bros. So again, there's abundant data to show what I've been saying. Now, your question was, can Trump fix this? I think absolutely. Because the reason — top three things he can do to fix it —

Okay. End the war.

Because what will happen? The price of Brent crude will drop precipitously. On the day of the election, the price of Brent crude dropped 10%. Is that because something changed in the Strait of Hormuz? No. It's because the market started to price in the mere possibility that the war would end sooner and we got a 10% cut in the price of Brent crude. It will go from, you know, it's been as high as 117. It'll go from 110 to 70 if this war ends. Gas prices will drop, diesel will drop, the price of food will drop, and then the underlying strong economic growth, the GDP growth and the employment picture, which are still robust, will come into focus. And I think that Trump's popularity will rebound maybe back in the 40s.

So that's the thing we need to do. And if we don't do that — look, if this war continues — hold on, let me finish this one point. If the war continues, the Republicans will continue to bleed popularity.

I don't think this is the war in Iran, meaning it is in as much as it adds to a broken economy. Since COVID the economy has been structurally broken and I just think that there's a huge voting block that keeps swinging back and forth to either side asking them to solve the problems and giving people mandates to solve a problem. That's why I think somebody needs to understand economic populism. Do you buy that argument or do you think that it's more narrowly just the war in Iran?

I don't want to make it like so overly abstract. Like to me the issue is affordability. Okay. And I think the electorate really cares about that. It's like the central pocketbook issue.

I agree.

And I think that both economic data and the prediction markets showed that in January of 2026, we were in pretty good shape on that issue. And since then we went backwards and I believe that we can get in good shape again without turning to socialism or completely restructuring the economy.

You remember the '24 election. I agree with you that economic affordability can be an abstract term but I think that the voting electorate is smart enough to use a message as a vessel. And I remember in '24 the vessel which again I didn't hear it loud enough but if I look back and maybe I'm just imposing my narrative bias on it was — do you remember the whole controversy around the price of eggs and Trump hammered Biden and Harris on the price of eggs?

Yes. Over and over. Yeah.

It wasn't the price of eggs. I mean yes it was but it was a window into a broad problem and an idea. And I think gas is a problem, but I also think it is a window into a broad class of problems. And I think people focus their energy on a thing because it's easier to message around a thing repeatedly.

— was going to win.

The oligarchs are getting tax breaks and you're getting higher utility —

I kind of agree with the notion that the AI data center hysteria and the hatred for the Iran war are both rooted in this idea that you haven't solved my economic problems first. So, I don't think that they're the primary. I think that they're a reflection of the consequence of not focusing on my issues first, my economic cost problem first. So, I think that's still the biggest issue. I think two things are about to happen in '27. One is I think it's going to be very hard with this Congress and the sitting president to come to a resolution on a clean budget. And as a result, I think things are going to continue as is. And I worry about the cost of things continuing to climb. And by the way, I'll just reflect on Chamath's point. COVID was an accelerating moment for this unaffordability problem for people that don't own assets in the US. And the reason is we doubled government spending. That's what happened. And by doubling government spending, everything inflates, including assets, which is why people who are asset owners benefit. And people who are earners for their labor lose because the cost of everything goes up. And if you're making money from a paycheck every week, you can't afford your healthcare, your education, your housing bill, your food, your gas. I do think that the Iran war was acutely off target because it was declarative at the beginning. We're not going to do any new wars and then there was a big war that was started. So, it was an easy target. So, I do think that this budget question is a big one. What's going to happen with spending in '27, '28? And as we talked about a couple weeks ago, I think the bond market will tell you where they think that's headed because if we continue this $2 trillion a year deficit spending, things are going to remain expensive. They're going to get worse. And it's not about people choosing socialism as an ideology. To counter Chamath's comment earlier, I'm not saying people are choosing socialism as an ideology or as a set of principles. Socialist outcomes arise from the policies that people think are going to solve their cost issues. That's what ends up happening here. That people think the best way to solve the cost of things is to have the government do more and then you have more socialist policies. It's not that people are saying I want to be a socialist and that's where you end up in this slippery slope spiraling problem and I worry about how we're going to resolve to a budget going into '27 and '28. I do think AI is going to continue to be this really big political hot point. I think the — like AI is almost like the ring of Sauron. Okay. And like both sides want the ring of Sauron. It's this ultimate kind of tool, this ultimate power. It is a risk to the state. It is fundamentally something that takes power out of the government's hands and distributes it. Let's just assume that there isn't a company making AI and there isn't a company that owns all the data centers. Assume that there's a million data centers and a million variants of open source AI. In a world like that, there is no oligarchy that's making money off AI. So just assume that that's the case for a moment and that we can get to that end state. In that end state, the tools of AI pull a lot of power, a lot of influence away from government, from the state. And as that happens, I think the actors that want the state to be central, central command, central planning, central authority and ultimately central power structure are going to react violently against that and they are going to want to have the AI. So I actually think the calls to stop the development of AI are actually calls for them to have absolute control over AI because it is way too powerful for them to not have the control over the AI. They want the AI. And I think a lot of the policy stuff that we're going to end up seeing here, and this is where if you play the game theory out — I still think I could be wrong, but I still think we end up in a place where the government says we want to regulate compute. They're not going to regulate the chips or the models because those are too hard to kind of catch up on and you're never going to be able to regulate development of software. It's very hard to regulate deployment of software, but the utilization of that software is fundamentally constrained by how much access you get to compute. I think the data centers end up being treated like utilities in the future and I do think that the government are going to try and move down this path. They're going to realize it's the best path to get what I just described which is the ability to control and manage who gets access to this technology.

All right. Well, look, let me just give you three examples of previous midterm elections. Okay. So, we've had big midterm elections before. 1994, Bill Clinton lost the House. It was a huge defeat. That's when N. Gingrich became speaker. Clinton still went on to win re-election in 1996. So, he made course corrections. Obama lost seven Senate seats and 63 House seats in 2010. That was the schlacking, made adjustments, still won re-election in 2012. So, presidents can definitely come back from midterm defeats. It's pretty obvious. You just have to make corrections. What's the one that didn't work out so well? In 2006, George W. Bush lost a pretty bad midterm because the Iraq war. People were very unhappy with it. This was 3 years after the start of the Iraq war and then he wasn't up for re-election, but the Republicans then lost again in 2008. Why? Because Bush basically, what did he do after the midterms there? The surge. So, you know, he could have adjusted course. Instead, he doubled down. So, I think this is really what it comes down to. There are a lot of people, neocons basically, who are encouraging the president to do some version of the surge, some version of doubling down, some strike, pickaxe mountain, car island, what have you. I think if you do that, you're basically going to reenact the whole 2006 2008 playbook. If you course correct and get out now, I think you'll have a very successful next two years. That's what it comes down to.

There was an incredible video where the SpaceX team went to Coochis 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 cost 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 Freeberg 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 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.

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 terminate in 90 days. SpaceX can terminate in 90 days. If SpaceX says, 'I'm going to terminate this compute in 90 days.' That is the kingmaking 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? And it's probably not just double, it could probably triple.

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, Freeberg 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 neo clouds 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, Freeberg, 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.