The MAD Podcast: How AI Gets Built — with Matt Turck
00:26:02 · Nathan Benaich
[00:26:02] S0: Okay. Nimbism is not restricted to The United States. They had this also in Korea and South Korea where, you know, it's a country that has, you know, seen like a massive explosion of, like, share price and, like, wealth basically for employees of SK Hynix and and Samsung, you know, create the high bandwidth memory that GPUs need for these, mega scale data centers. And, you know, the the people who participated in this, you know, very happy. Right? Like, your stock price went up and your options are... You know, went up and you got a cash bonus and that's driving increase in real estate prices in Seoul. You know, they wanna create more data centers, but also people are not so happy with that for similar reasons than in The US. In in Europe, there's... I guess, like, I don't really see that problem as much because there's just, no compute capacity to speak of. Like, we have some some data in the in the report where, like, the total, like, number or the estimated number of, like, h 100 equivalents in all, like, 27 European countries is, like, 80,000 cards, which is less than like every single one of the top five GPU clusters in The US. And, you know, while US hyperscalers are spending like 730,000,000,000 in 2026, like Europe committed like single digit billions pretty much. And then energy costs are really bad. If you're not Finland or Norway, where the parrot... Where you're kind of at parity with The US and with China, which has, like, the best the best energy price, Other European countries are just significantly more expensive. Like, The UK is one of the most expensive energy prices out of those, like, developing economies. And there's no, like, good capacity. Yeah. You had some
00:27:46 · Matt Turck, Nathan Benaich
[00:27:46] S1: good good good stats where it costs per kilowatt hour in Finland is $0.085, in The US 0.086, but the most expensive costs is actually in The UK at $0.373 per kilowatt hour and China is at 0.109. [00:28:11] S0: Yeah. And then most recently, think there's you know, a big deal with Microsoft and Nscale that got pulled or at least Microsoft pulled out of it because the data center provider couldn't get the energy connection in time. [00:28:23] S1: Great, so that's nimbyism and data centers. So just following your thread while we are at it talking about Europe versus The US and China. Any reason for Europe to be optimistic? You're based in The UK for for anybody that doesn't know and invest globally, but in particular in Europe. So what's your current take?
00:28:50 · Nathan Benaich
[00:28:50] S0: I mean, it's tough. Like, I think the fastest growing companies in Europe are ones that have US customers. I think it is really encouraging that in several modalities, you know, whether it's like image with Black Forest or audio with eleven Labs or video with Synthesia or like, you know, code app generation with Lovable, like they're all market leaders and they're all like born out of Europe. It's not impossible, but I think those companies wouldn't be as big as they are if they didn't have US customers. And increasingly they have Asian customers also because like for example Korea and Japan are really leaning into AI. The challenge is like just the gap between Frontier and Knot is just so big and just keeps getting bigger and bigger. I don't know if these estimates are really like important or not, but like even if you conceptualize like starting a new lab from scratch to try to catch up with OpenAI Anthropic, you'd probably be spending like a trillion dollars. I think it's kind of telling that even Mistral is like moving more towards being an inference provider and a cloud company than it is really like pushing frontier models. Although, course, it has released new models and like they're kind of good, but they're still behind China. So, you know, whether it's them or other model companies that have built up GPU capacity to try to build frontier models or kind of going out of the race and serving inference, that sort of figured out you can approximate this move of what's happening, which is to say you either like die trying to get to the frontier or you just live long enough to eventually serve inference. And you can see this with NeoLabs, NeoClouds, with InferenceClouds, etcetera. It's like everybody wants to get into token flow because absent you having the model that is the best, like, might as well serve other people's models.
00:30:39 · Nathan Benaich, Matt Turck
But I think to get back to the Europe topic, like, that's probably the angle that would be most competitive because countries are gonna need to ensure accession or access to US frontier systems, and they're gonna need to have some kind of strategic leverage to bring to the table to prevent situations like what happened in June with the, like, basic export control blocking of Fable and Mythos models from Anthropic to, you know, non US nationals or non US entities, which, you know, having been in London at the time, like people did like voice a lot of issues about. And, and so you're like, okay, don't want that to happen again, what can I do to maintain strategic leverage? So The UK believes we should be investing and procuring inference chips because if we come up with like the best inference chip, it'll be a strategic advantage for labs to use it for cost reasons and and other things. And with that, I can barter for access to Frontier US technology. [00:31:35] S1: So Europe would become an inference center and because of access to cheaper electricity in certain parts, not The UK, but as we discussed, then just to play back what you said, the US frontier labs would be... Would wanna run-in France in Europe. [00:31:53] S0: Yeah. Yeah. You can enforce data residency requirements. [00:31:56] S1: Yeah. And the The UK chips thing, what is that exactly? Like, I heard that several times. Is that something people are thinking about or is that an actual policy? And if so, how does that manifest?
00:32:06 · Nathan Benaich
[00:32:06] S0: Yeah. Yeah. It a policy insofar as like The UK's AI minister who's who's generally, I think, a really good individual to be leading this because he's clearly, like, plugged into plugged into the mix and understands the raw ingredients that go into making AI successful, which is, like, compute talent and data. And so he has a he has a mandate to be a buyer of first resort for new inference chips and has committed, I think, a 100 or a £150,000,000, something around that that angle to to procure inference chips when they are available from new UK companies that are designing these systems. You can see this also in South Korea where they have a similar ish mandate, but it's actually much more ambitious where every year they're spending about $7,000,000,000 on AI. And a large part of that is going towards building modular inference data centers because generally Korean companies want to have Korean data residency. So I think it's actually a pretty interesting quid pro quo where it's a captive market and a small country, but it's a wealthy country. It's very technologically savvy and has an important role in the overall AI supply chain and memory. And so international companies want to, at some point in their life, like, be in the Korean market, same with Japan, but getting in there is difficult. Korean data residency, Korean language. So it's like, okay, cool. Like, you want data residency, but now we offer you the data center to go run your technology in. And we can profit from that because it's our local companies that provide that service.
00:33:34 · Matt Turck, Nathan Benaich
[00:33:34] S1: So you're not a huge fan or you don't have a lot of hope for the whole concept of sovereign AI, which is, you know, I'm asking the question at the time when Jensen just, did a charm offensive and investing offensive across Europe. He was in Paris. He was in London. He was in Berlin for GTC just yesterday or a couple of days ago. But from your perspective, that's that's that doesn't have teeth. [00:34:02] S0: I just, it's a bit like national airlines. The countries will buy planes from Airbus and Boeing and then slap their logo on it, that doesn't make it like yours. It's still someone else's airplane. [00:34:14] S1: You know? So... But open source could be... If you believe that open source is gonna remain, you know, within reasonable earshot of closed source models. Maybe there's hope there? [00:34:26] S0: Yeah, but then they're Chinese. So you have another, you have another... [00:34:30] S1: It could be American as a reflection. [00:34:33] S0: But they're not frontier. Like none of The US like open ones as far as I can tell are frontier. And the ones that have all tried ended up working for Jensen. Okay. So I think his strategy is great. Like I think different things like, do I believe that like buying NVIDIA GPUs gets you sovereignty? Like, no. Do I think it's a good commercial strategy for NVIDIA? Absolutely. [00:34:55] S1: Yeah. They sold 30 plus billion on that.