President Trump’s AI Czar David Sacks joined Hugh to walk through 45-47’s new EO on AI

As far as I know, yes, I guess that's right. Hugh, good to see you again.

Well, Hugh, I'm personally not that worried that AI is going to be this catastrophic technology. I understand that a lot of people are afraid of it. And in fact, for the last couple of years, you've heard this analogy that AI is like nuclear weapons. I think that analogy is highly overstretched. And the reason I say that is because first and foremost, AI is a consumer technology. The best AI models are the ones that you can get as a consumer. Whether it's ChatGPT or Grok or the new Gemini model which is available on Google search, the best AI models are ones that you can use for yourself. And so every consumer is going to have a powerful AI model in their pocket on their phone. Every business is going to use this technology. And I do think that makes it quite different than nuclear weapons. Although certainly there is a potential dual use there that AI is a technology that can be used for military purposes and I certainly acknowledge that, but I think it's also like I said a very powerful consumer technology and that does make it quite different than something like nukes.

Yes, I think it is. I mean, I think we completely agree on this, Hugh. We are in an AI race. It's a global competition and at the national level, our main competitor is China. They're really the only other country that has the talent, the technology, the expertise to potentially beat us. I don't think they will. If we do the right things or keep doing the right things under the president's leadership, we are ahead in the AI race, but it is definitely a competition. It's going to have major ramifications for our economy and for our national security and it's definitely a competition we want to win and that's where you and I are completely aligned on this.

Well, that's possible. But I think we just don't want to fall behind because once you do, it's hard to catch up. I mean, there are moats that get established and whether they're business moats or they're research and development breakthroughs, it's definitely the kind of thing where you don't want to fall behind. Another reason why you don't want to fall behind is that in technology races, what we see is that the companies or the technologies that build the biggest ecosystems are the ones that win. And this is why our leading technology companies want to do things like have app stores or build platforms, because if you get the most apps in your app store or you get the most developers riding on top of your platform, then that creates powerful lock-in. And we don't want to get in the situation where we're behind China in those areas and they build the biggest ecosystem and then the whole world would be using Chinese technology instead of American technology and then it'll be Chinese values that are spreading across the world instead of American values and that's definitely a situation we don't want.

I think that's a fair question, Hugh. I mean, here's the way that we see it is that the American policy, and this is bipartisan, it goes back into the Biden administration, is that China is not allowed to buy our leading edge chips, but they are allowed to buy our lagging chips. The H200 chip that you're talking about, and before that, the H20 chip, it is not a leading edge chip. It may have once been a leading edge chip, but it is now a lagging chip. And the reason why you're willing to sell them lagging chips is because it takes market share away from their national champion, Huawei. And that's important because it deprives Huawei of revenue that they can use to then scale up. And also, there's a very important developer network effect built on top of these chips. So it's not just about the chips, it's about the software that's running on top of the chips. Nvidia has this operating system called CUDA. There's a bunch of developer toolkits, tool chains, and libraries that run on top of CUDA. And if you allow China to use the old generation of Nvidia chips, then at least you keep them dependent on that software ecosystem. China has several hundred thousand AI developers and they would rather use the Nvidia ecosystem and stay on Nvidia. But if you force them onto the Huawei ecosystem, then they will start writing software for the Huawei stack and that would be something that's undesirable. So we think there's some value in maintaining a Chinese dependency on the previous generation of chips. Now, for that very reason, the Chinese government according to an article in the Financial Times is saying they're not going to allow the Nvidia chips in there. So I think the Chinese government sees the same thing that we do, which is they want to be semiconductor independent the same way, Hugh, that we want to be energy independent as a nation. They want to be semiconductor independent. And they're saying they're not going to allow those Nvidia chips in because they want to prop up and boost up Huawei, their national champion. So this is a case where I think that there's always going to be room for disagreement because where exactly we draw that line between leading and lagging chips is always going to be up for debate. But it looks to me like right now the Chinese government's not going to allow in our chips because they want to be independent.

Yes. There's no question they want to indigenize their chip sector. There's no question about it. And just one last thought on this is that China is the second largest market in the world for chips. So if China is able to indigenize and they give that market exclusively to Huawei, Huawei will use that to then scale up, achieve critical mass, and then they will then export chips at low cost all over the world. So that is basically their strategy and again if we can take share away from Huawei and slow them down from doing that then that's a worthwhile pursuit. So that is the thinking, but I think that the Chinese government sees the same thing we do and that's why they are essentially giving this huge market subsidy to Huawei. That makes perfect sense to me.

I don't think there's a bubble, Hugh. I would say that there's a lot of volatility because anytime you're underwriting to a very big outcome in the future and we're talking about investments that are being made on a 5 to 10 year time frame, there's going to be a lot of volatility in that. But one important indicator here is that all of the GPUs that are being bought and run in data centers are being used. I mean there is tremendous demand for this type of computing processing power. That makes it a little different than the dotcom bubble. If you go back to the late 90s and we had this big fiber buildout, there was a lot of what was called dark fiber back then where again there were these huge investments that were being made that weren't being used yet. Now eventually all that fiber got used but people realized in the year 2000 that the fiber wasn't being used and we had a big crash. In this case all the GPUs are being used. So there's tremendous end-user demand for these services.

Well, it's a big culture clash. I mean, these are two very different cultures. Silicon Valley obviously moves very quickly. There's tremendous competition there. Companies perceive that they're in a race for survival a lot of the time and they just move very quickly. And there's also a mentality that again like I mentioned before, you want to build the biggest tech ecosystem. So there is a partner mentality. You want to encourage other people developing software on top of your applications. DC is a little different. It's a different mindset. It's a little bit more of a command and control mindset. It's a little bit more bureaucratic obviously. So things move more slowly and people update their assumptions a little bit more slowly about what's happening. So, two very different cultures.

Well, I've seen those movies, too, and I understand the concern, but I think it's pretty much in the realm of science fiction. We don't really see that happening right now. If you, I mean what I would recommend that everyone do is just try these new tools. You go to ChatGPT or you go to Grok or use Google and what you'll see is that these AI chatbots are good at giving you answers but it's really like a better web search. It doesn't have a mind of its own. It can't provide its own objective. It doesn't try to figure out what it's supposed to be doing other than what you tell it to do. And there's really no evidence that that is not the case. So we're building these, they're called large language models, and that's quite different than what's portrayed in a lot of the science fiction.

I don't think so and we don't see any evidence of that. In fact it's quite the opposite. We're seeing a job boom right now. So you look at the buildout right now of data centers and infrastructure. Construction workers are seeing their wages increase 30% because of the demand. In fact we're seeing many categories of labor. We have unfilled jobs. It's everything from plumbers to electricians, electricians to carpenters, people who pour concrete or hang drywall, drivers, even architects, engineering, there's a tremendous demand being created right now. And so wages are going up because we can't hire enough laborers. So it's just not the case that we're seeing a lot of job loss. And in fact, there was just a study by Yale by the Yale Budget Lab saying that in the 33 months since the launch of ChatGPT, there's been no discernible disruption to the labor market. They're seeing no major job loss. So again, you're hearing a lot of these doomer forecasts, but we're not seeing any of it in the data so far.