Big Technology Podcast
00:39:47 · Alex Kantrowitz, Ranjan Roy
[00:39:47] S0: I just wanna say, I don't mean six months is a year. I just wanna say that when people say six months is a... When people say that happened last year, they really mean it happened in April. They've lost the ability to keep track of time. [00:39:59] S1: Well, the only reason this was actually related to, I think it was like summer twenty twenty five convertible note issuance. But remember, we were to... Actually, this was back in late twenty four. Amazon's putting in 4,000,000,000. They openly are saying part of this is heavily discounted compute. A lot of the deals with Broadcom, with all these other people that are both investing into Anthropic, they're receiving significantly discounted compute. And it was just a reminder, I think what we're seeing here is not reflective of what this is actually gonna cost and we're still not getting a good representation of, like, what are the unit economics. That's my only frustration. I think, like... Which also is gonna be really important because when we talk about these 500 bill... What is 325 or 5... Whatever the future committed spend is. [00:40:52] S0: It's in the neighborhood of 500,000,000,000. Yeah.
00:40:52 · Alex Kantrowitz, Ranjan Roy
[00:40:52] S0: It's in the neighborhood of 500,000,000,000. Yeah. [00:40:54] S1: Yeah. We still don't know what what does Anthropic's business look like. Like, if they were paying market rates for compute relative to their revenue, we know they aren't, but we don't know how much that discount is. So my my ask for investors is to demand that they disclose and provide a better understanding of actually what they were paying over the last number of quarters and year and what kind of discounts they received. Otherwise, we still don't know what is the actual kind of, like, picture of this business. [00:41:29] S0: But wouldn't you agree, by the way, that if you think about the amount of money that Anthropic has raised, they still have $100 plus billion in cash. So it couldn't have been that much. Right? [00:41:43] S1: No. No. That that that... That's exactly what I'm saying. It's actually, like, insanely efficient. It's so... Feel... For everything we've talked about for the last two years, suddenly you look at this and you're like, wait. This is the most cash efficient, compute efficient thing imaginable. Like, the the number that they've only burned $9,500,000,000 in this entire last few years is actually... Like, we know it's not exactly correct because they receive below market rates as part of these investments, but we don't know how much less. And we know they're not going to continue.
00:41:43 · Ranjan Roy, Alex Kantrowitz
[00:41:43] S1: No. No. That that that... That's exactly what I'm saying. It's actually, like, insanely efficient. It's so... Feel... For everything we've talked about for the last two years, suddenly you look at this and you're like, wait. This is the most cash efficient, compute efficient thing imaginable. Like, the the number that they've only burned $9,500,000,000 in this entire last few years is actually... Like, we know it's not exactly correct because they receive below market rates as part of these investments, but we don't know how much less. And we know they're not going to continue. [00:42:22] S0: Let me press you on this. Google said it was gonna invest up to 40,000,000,000 in Anthropic. We don't know if they've invested all 40,000,000,000. Amazon said they agreed to invest 25,000,000,000. So let's say that was all Amazon and Google giving Anthropic compute for free. You know, that's just $65,000,000,000. They have a 100 plus billion in the bank. [00:42:46] S1: No. No. But but they spent 5,500,000,000 in compute last quarter, 3,500,000,000 in q one, 8,000,000,000 total in the first half of the year. So like if they're investing, if Google and Amazon are discounting by in that order of magnitude of billions, that fundamentally changes the margins of what Anthropic's business is. So the cash on hand I think is separate. This is what should they have paid and what would their actual expenses ratios look like relative to what they are able to charge.
00:42:46 · Ranjan Roy, Alex Kantrowitz
[00:42:46] S1: No. No. But but they spent 5,500,000,000 in compute last quarter, 3,500,000,000 in q one, 8,000,000,000 total in the first half of the year. So like if they're investing, if Google and Amazon are discounting by in that order of magnitude of billions, that fundamentally changes the margins of what Anthropic's business is. So the cash on hand I think is separate. This is what should they have paid and what would their actual expenses ratios look like relative to what they are able to charge. [00:43:19] S0: So your suggestion is that Amazon and Google both invested in the company and not dollar for dollar, but just said, we want you to grow. And so outside of our investment, we're also going to provide you with discounted compute. [00:43:31] S1: Amazon, that was explicit in their convertible note. They said it. And we talked about this way back. And it was kind of a joke. Like we're like... And back then I remember we were like, is it cash or is it credits? Is it like... But now you're actually seeing the result of that is we still don't know of what is Amazon business going to look like going forward. And I think to me that's the only... Otherwise, everything looks so good. It's almost like unbelievable. And that's why to me, they should disclose around here is actually like our average... What this discounting looked like in the past so people can understand what it will look like in the future.
00:43:31 · Ranjan Roy, Alex Kantrowitz
[00:43:31] S1: Amazon, that was explicit in their convertible note. They said it. And we talked about this way back. And it was kind of a joke. Like we're like... And back then I remember we were like, is it cash or is it credits? Is it like... But now you're actually seeing the result of that is we still don't know of what is Amazon business going to look like going forward. And I think to me that's the only... Otherwise, everything looks so good. It's almost like unbelievable. And that's why to me, they should disclose around here is actually like our average... What this discounting looked like in the past so people can understand what it will look like in the future. [00:44:14] S0: I know it would be like kind of criminal to do this, I guess. I I don't know if we've seen weirder things, but is there a chance that Amazon is giving Anthropic this discounted compute, booking it as full revenue, and that's why you see the 39% growth? Is that like a totally out to lunch conspiracy theory? Probably.
00:44:14 · Alex Kantrowitz, Ranjan Roy
[00:44:14] S0: I know it would be like kind of criminal to do this, I guess. I I don't know if we've seen weirder things, but is there a chance that Amazon is giving Anthropic this discounted compute, booking it as full revenue, and that's why you see the 39% growth? Is that like a totally out to lunch conspiracy theory? Probably. [00:44:32] S1: I I mean, actually, I I don't know. Like, I'm sure could have... I feel that that would probably be pretty aggressive on the accounting side. I think... I I wouldn't worry about that as much. Again, to me, this is not... Like, the numbers were great. It's it's... But to invest and at what rich valuation are you investing? That's the question. I think they have not given enough information. Also, I have to say whoever is planning those revenue leaks is a communications genius because again, there was no surprises in them. Everything was out there. When we get 16 to 17,000,000,000 for q q three revenue, it's already out there. And we know growth is decelerating and all that's out there. So there'll be a little hubbub, but like they're they're leaking financials, like, in a pretty incredible way.