Invest Like the Best with Patrick O'Shaughnessy
· Patrick O'Shaughnessy, Gavin Baker
[00:00:00] S0: Jousting. [00:00:00] S1: A little bit of jousting. Well, Anthropic just signed the $5 billion deal with Nvidia. That is because Dario is a smart man and he understands these dynamics about Blackwell and Rubin relative to TPU. So Nvidia now goes from having two fighters, xAI and OpenAI, to three fighters. That helps in this Nvidia versus Google battle. And then if Meta can catch up, that's really important. I am sure Nvidia is doing whatever they can to help Meta. "You're running those GPUs this way, maybe we should twist the screw this way or turn the dial that way." And then it will be also, if Blackwell comes back to China, which it seems like it'll probably happen, that will also be very good because then Chinese open source will be back. [00:00:00] S0: I'm always so curious about the pulls of things. One pull would be the other breakthroughs that you have your mind on, things in the data center that aren't chips that we've talked about before as one example. [00:00:00] S1: I think the most important thing that's going to happen in the world, in this world, in the next three to four years is data centers in space. And this has really profound implications for everyone building a power plant or a data center on planet earth. And there is a giant gold rush into this. [00:00:00] S0: I haven't heard anything about this, so please educate.
· Patrick O'Shaughnessy, Gavin Baker
[00:00:00] S0: I haven't heard anything about this, so please educate. [00:00:00] S1: Yeah. It's like everybody thinks like, "Hey, AI is risky, but you know what? I'm going to build a data center. I'm going to build a power plant that's going to do a data center." We will need that, but if you think about it from first principles, data centers should be in space. What are the fundamental inputs to running a data center? They're power and they're cooling, and then there are the chips. [00:00:00] S0: If you think about it from a total cost perspective. [00:00:00] S1: Yeah. And just the inputs to making the tokens come out of the magic machines. In space, you can keep a satellite in the sun 24 hours a day, and the sun is 30% more intense. You can have the satellite always kind of catching the light. The sun is 30% more intense, and this results in six times more irradiance in outer space than on planet earth. So you're getting a lot of solar energy. Point number two, because you're in the sun 24 hours a day, you don't need a battery. And this is a giant percentage of the cost. So the lowest cost energy available in our solar system is solar energy and space. Second, for cooling. In one of these racks, a majority of the mass and the weight is cooling. The cooling in these data centers is incredibly complicated. The HVAC, the CDUs, the liquid cooling- [00:00:00] S0: It's very cool to see. Yeah, very cool to see. [00:00:00] S1: It's amazing to see. In space, cooling is free. You just put a radiator on the dark side of the satellite. [00:00:00] S0: It's fucking cold.
· Patrick O'Shaughnessy, Gavin Baker
[00:00:00] S0: It's fucking cold. [00:00:00] S1: And it's as close to absolute zero as you can get. So all that goes away, and that is a vast amount of cost. Okay? Let's think about how these, maybe each satellite is kind of a rack. It's one way to think of it. Maybe some people make bigger satellites that are three racks. Well, how are you going to connect those racks? Well, it's funny in the data center, the racks are over a certain distance connected with fiber optics, and that just means a laser going through a cable. The only thing faster than a laser going through a fiber optic cable is a laser going through absolute vacuum. So if you can link these satellites in space together using lasers, you actually have a faster and more coherent network than in a data center on earth. For training, that's going to take a long time- [00:00:00] S0: Because it's so big.
· Patrick O'Shaughnessy, Gavin Baker
[00:00:00] S0: Because it's so big. [00:00:00] S1: Yeah, just because it's so big, training will eventually happen. But then for inference, let's think about the user experience. When I asked Grok about you and it gave the nice answer, here's what happened, a radio wave traveled from my cell phone to a cell tower. Then it hit the base station, went into a fiber optic cable, went to some sort of metro aggregation facility in New York, probably within 10 blocks of here. There's a small little metro router that's routed those packets to a big xAI data center somewhere. The computation was done and it came back over the same path. If the satellites can communicate directly with the phone and Starlink has demonstrated direct to cell capability, you just go, boom, boom. It's a much better, lower cost user experience. So in every way, data centers in space from a first principles perspective are superior to data centers on earth. [00:00:00] S0: If we could teleport that into existence, I understand that portion. Why will that not happen? Is it launch costs? Is it launch availability? Is it capacity? [00:00:00] S1: We need a lot of the- [00:00:00] S0: A lot of engineering. [00:00:00] S1: Starships. The starships are the only ones that can economically make that happen. We need a lot of those starships. Maybe China or Russia will be able to land a rocket. Blue Origin just landed a booster. This is a big idea. And I do think it's an entirely new and different way to think about SpaceX. And it is interesting that Elon posted or said in an interview that Tesla, SpaceX and xAI-
· Gavin Baker, Patrick O'Shaughnessy
[00:00:00] S1: Starships. The starships are the only ones that can economically make that happen. We need a lot of those starships. Maybe China or Russia will be able to land a rocket. Blue Origin just landed a booster. This is a big idea. And I do think it's an entirely new and different way to think about SpaceX. And it is interesting that Elon posted or said in an interview that Tesla, SpaceX and xAI- [00:00:00] S0: All kind of converging. [00:00:00] S1: Were converging and they really are. So xAI will be the intelligence module for Optimus made by Tesla with Tesla Vision as its perception system. And then SpaceX will have the data centers in space that will power a lot of the AI, presumably for xAI and Tesla and the Optimuses and a lot of other companies. And it's just interesting the way that they're converging. And each one is kind of creating competitive advantage for the other. If you're xAI, it's really nice, then you have this built-in relationship with Optimus. Tesla's a public company, so there's going to be, I cannot imagine the level of vetting that will go into that intercompany agreement. And then you have a big advantage with these data centers in space. And then it's also nice if you are xAI that you have two companies with a lot of customers who you can use to help build your customer support agents, your customer sales agents with, kind of built-in customers. So they really are all kind of converging in a neat way. And I do think it's going to be a big moment when that first Blackwell model comes out from xAI next year.
· Patrick O'Shaughnessy, Gavin Baker
[00:00:00] S0: If I go to the other end of the spectrum and I think about something that seems to have been historically endemic to the human economic experience, that shortages are always followed by gluts in capital cycles. What if, in this case, the shortage is compute, like Mark Chen now is on the record as saying they would consume 10X as much compute if you gave it to them in a couple weeks. So there seems to still be a massive shortage of compute, which is all the stuff we've talked about today, but there also just seems to be this iron law of history that gluts follow shortages. What do you think about that concept as it relates to this? [00:00:00] S1: There will eventually be a glut. AI is fundamentally different than the software, just in that every time you use AI, it takes compute in a way that traditional software just did not. I mean, it is true. I think every one of these companies could consume 10X more compute. What would happen is just the $200 tier would get a lot better. The free tier would get like the $200 tier. Google has started to monetize AI mode with ads, and I think that will give everyone else permission to introduce ads into the free mode, and then that is going to be an important source of ROI. [00:00:00] S0: OpenAI is tailor-made to serve you ads. [00:00:00] S1: Absolutely. No, all of them. And actions like, "Hey, here are your three vacations. Would you like me to book one?" And then they're for sure going to collect a commission. [00:00:00] S0: Yeah.