Commander of the Strait of Hormuz
Strait of Hormuz
Joined January 2023
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I'm starting to be a real believer in AI. Will be a megatrend like no one is really imagining right now. I'm sure lots of ramps and drops along the way though.
I actually think he will be right about AI. Just don't listen to the stuff about trash and bowling and Carvana.
Cliff Sosin (@CliffordSosin) is one of my favorite people to call, ask some big questions, and then shut up and listen.
This conversation is a version of one of those calls.
We discuss:
- The limits of intelligence
- Owning the complements to it
- Meta, the frontier labs, and the AI build-out
- Capital markets
- Why he's comfortable with 80% of his portfolio in Carvana.
TIMESTAMPS
0:00 Intro
10:41 The Limits of Intelligence
18:03 Investing Beyond Cheap Intelligence
24:03 Will AI Become Commoditized?
35:10 Who Profits From AI?
43:00 AI Agents Reshape Competition
52:06 America's Capital Markets
58:04 Transforming Companies With AI
68:19 AI and Portfolio Concentration
73:16 Education in the AI Era
Bullish Brazil.
Breaking news: Brazil’s leading right-wing politician, Flávio Bolsonaro, effectively conceded defeat to the incumbent left-wing president, after President Trump indicated he wouldn't intervene despite saying that the vote “looked like another rigged election.” wapo.st/3W7JIuP
Waterworld Capital retweeted
LLMs selling tokens...kind of like wireless companies selling minutes.
Equipment sold into the the telcos was consistently deflationary, constantly improving.
Once penetrated, it lead to deflationary businesses on both sides, benefitting mainly the consumer.
The LLM business increasingly reminds me of a telco business. That makes the semis companies telco equipment businesses. While many will disagree with this analogy I don't think many bulls will like being in either business if said analogy is true at all.
Guess all the neoclouds going to zero.
Waterworld Capital retweeted
Pretty much.
As of the past few weeks, debt markets have almost entirely shut off access to money for any company that doesn’t have substantial revenue independent of AI data centers.
SpaceX closed $40B of debt for GPUs, but we’re investment grade and have Starlink & launch revenue.
That means the 200+ neoclouds are going to see guppy-level death and consolidation. Some will make it through, but not many.
The bulls and bears on AI are just talking past each other at this point. The positioning is still on the side of the bears though. Seems harder to convert bears to bulls than bulls to bears.
Waterworld Capital retweeted
The most advanced AI adopters are now spending *less* on AI as they advance along the adoption curve.
We can't see the scales on these charts but based on Ramp data among top 1% firms, it's possible Notion has engineered an outright decline in total AI spend.
This is a fundamental reversal of how we previously forecasted adoption: More adoption >> more usage >> more spend. Past a certain point, the most advanced businesses also figure out how to *control* that spend, and with simultaneous price cuts, costs come down again.
Waterworld Capital retweeted
Dario Amodei was so worried about Y2K that his high school teacher still remembers it decades later.
He’s been a doomer for much longer than I thought!
Long before they were soon-to-be billionaires, Dario and Daniela Amodei were students at San Francisco’s most elite public high school. sfchronicle.com/tech/article…
Will be interesting as the AI bubble collapses if that leads to a collapse in other areas of the economy or if compensating factors like a decline in interest rates cause an improvement in areas. Since the spending won't slow till 2028 my guess is we can sort of muddle through?
$SPCX is like if a 6th or 7th grade boy decided capital allocation for a company..."let's deploy 10 GW and build out a scaled mobile network while we wait for rocket ships to build space data centers..."
Today was honestly one of the dumbest days in market history. I'm ok with the AI names getting hit and such. But the shorts going up are some of the dumbest short term moves imaginable. Just flat out stupid shit.
The market is clearly and resoundingly saying the AI cap-x cycle is over. It won't show up in numbers for some time since it's a long lead time biz. So my guess is it will have violent rallies periodically where people try to believe again.