Big Technology Podcast
00:00:00 · Alex Kantrowitz
[00:00:00] S0: It's a big tech bloodbath as Wall Street turns on the AI build out. Anthropic s one finally drops, and a lot of people at that company are about to get rich. And meanwhile, Anthropic and OpenAI are dropping prices dramatically. What's behind it? We'll cover it all on a Big Technology Podcast Friday edition right after this. This episode is brought to you by Cribl. Quick question. Is your IT budget growing 30% a year? Because your data is. And now AI agents are piling on, running investigations around the clock, and running up three meters at once, storage, queries, and tokens. Cribl, the AI platform for telemetry, was built for exactly this. Own all your data, query it wherever it lives, and let Cribl route every AI request to the right model at the right price. The best part, AI inference for workloads on Cribl is included. Models will change. Agents will change. Your data is the asset that lasts. Own it with Cribl. Visit cribl.io. It's never been more challenging to get Frontier compute. How do you know where to look, who to trust, or how much to pay? Akash is an open cloud that provides easy access, flexibility, and peace of mind. That's how companies like Razor were able to cut their inference cost by 15 times. Visit akash.network/alex for a free consultation. That's akash.network/alex for a free consultation. Welcome to Big Technology Podcast Friday edition where we break down the news in our traditional cool headed and nuanced format. We have a great show for you today. It has been an interesting week to say the least in big tech land as companies like Google and Microsoft have reported their earnings along with Amazon, and the market is punishing some of them, especially Google, mercilessly. We'll also talk about that Anthropic s one document and how rich people within that company are about to get. It's pretty wild. And finally, we're gonna talk about the actual numbers on the AI price drop. It's pretty dramatic when you look at it. We'll try to figure out what's going on and what it means. Joining us as always on Friday to do it is Ranjan Roy of Margins. Ranjan, good to see you.
00:02:06 · Ranjan Roy
[00:02:06] S1: Big tech bloodbath on the Big Technology Podcast. What could be better for a Friday?
00:02:11 · Alex Kantrowitz
[00:02:11] S0: Certainly an interesting week to be called Big Technology Podcast when the big technology companies lost nearly a trillion dollars in market cap. This is from the Financial Times. Big tech sheds nearly $900,000,000,000 en route over soaring AI spending. Big tech companies lost about a trillion dollars in market value after another sharp rise in their spending in the third quarter, which has turned some of the most profitable businesses in history into cash incinerators as they stake their futures on AI. Shares in the big four hyperscalers Amazon Meta, Microsoft and Google all fell after revealing their third quarter results in which capital expenditures almost doubled, and alarm bells sounded about slowing revenue growth in the core business. Ranjan, here's my hot take here. You know, a lot of this has been borne by Google, which reported still strong but not as strong as expected search results. Search results. That's funny. Search earnings. Right? They were supposed to grow 15%. They grew 12%. I don't really think this is a spending issue. I think Wall Street has basically given these companies the green light to spend and spend with abandon. But we're getting to the point where free cash flow is going from positive to negative, as we saw again with Google two quarters in a row of negative free cash flow. And when that happens, the questions about the core business emerge. And so this isn't a question about AI spending, it's really a question about is your core business going to stay around long enough? And that goes for Google with advertising and Amazon you could call it the retail as their core business. Know those are the companies we've had the questions with. If the core business goes away or shrinks then Wall Street seems to have some issues with all this infrastructure spending. Your thoughts?
00:03:59 · Ranjan Roy, Alex Kantrowitz
[00:03:59] S1: No. I completely agree. Think there are those two elements of it. And I I do think there is an element of the AI spending, and I'll get into it fundamentally changes what business all these companies are. And going back to that's why it's so important that their core businesses at least seem reasonably promising because the moment Google and Meta created some of the greatest cash machines of all time, literally the greatest business models to, like, ever exist in humanity. Like, the profit margins, the monopolized efforts in terms of no one else being able to enter these markets. And anything that shows that those are under threat makes us question, what is Google? Is it an AI compute business? Is it a enterprise services business? Or is it a search business? And Google themselves, I mean It's [00:04:53] S0: a golden goose, man. It's not a golden egg. [00:04:55] S1: Okay. Okay. Fine. Golden goose [00:04:58] S0: lays a golden egg. But, yes, continue. [00:05:01] S1: Does the golden goose lay a golden egg? Is that the whole thing? [00:05:04] S0: Or You would imagine. At least it's egg with the golden chicken side. I mean I'm gonna brush
00:05:04 · Alex Kantrowitz, Ranjan Roy
[00:05:04] S0: Or You would imagine. At least it's egg with the golden chicken side. I mean I'm gonna brush [00:05:09] S1: up on my childhood fables after we're done with this call. But Okay. Let's get back to Google's learning. So it is still the numbers are, I mean, insane. Again, in one quarter, revenue is still up 25%. Operating profit is still up 30%. Operating margin is still holding strong around 30%. So this is still an incredibly profitable, incredibly fast growing business. But again, core search and this is one thing that I found really interesting is Google has been touting, especially in like SEO, GEO land where I spend a lot of time. Overall queries are actually increasing in Google search. So Google's like, search isn't dead. Everyone's still going in and searching things. But they finally themselves said AI mode is going to actually... It went 2% of all searches ending in AI mode to 8.9% of all searches. So it's dramatically increasing. I'm sure every listener starts to feel that, and they don't know how to monetize that yet. They might figure out the right business model to monetize that, but it will be a different business. So to me, I think the core search business, this was the earnings report that reminded everyone. I don't wanna say it's done. It's still giant, but it's never gonna be what it was before.
00:06:31 · Alex Kantrowitz, Ranjan Roy
[00:06:31] S0: Okay. So this is interesting. So cite the statistics again in terms of the amount of searches that have gone from AI overviews. Was it 2% to 8%? Yeah. 2% to eight And that's percent important. Yeah. Okay. So think about this. Let's play this out. Google is seeing an increase in searches, all time increases in queries. Is it possible that these AI overviews make up most of those or even responses back and forth? Because I imagine every time you ping AI mode, you get a response. So is it possible that we're just seeing instead of Google not being able to monetize AI mode and this is an interesting point that Kevin Indig made on X what if people are just searching less? So all the growth comes from AI mode potentially. And you end up seeing far fewer searches because people are starting to search within ChatGPT, maybe Claude, maybe Grok. ChatGPT has 1,200,000,000 users. That has to play into this. [00:07:30] S1: They're still saying search query... Overall aggregate search queries are growing on Google. Sundar had said that before. They reported it again. So they're still saying that that is not declining. Of people actually directly asking the question to Google in google.com, not in Gemini. So it it hasn't yet. I agree. I don't Wait. [00:07:52] S0: Hold on. What counts as a search, though? Like, if you're in AI mode on google.com, is that a Gemini? Or is that [00:07:58] S1: See, I don't know. That's a good question. [00:08:00] S0: They are counting that. No. Because if they're [00:08:02] S1: I'm sure they are in