The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:13:37 · Rory O'Driscoll, Harry Stebbings
[00:13:37] S1: Yes. Core Weave had a tough week last week. I think down 15, 20%. Kind of bond prices went up, implying, you know, lowest could default. But zooming out, when you think of the whole AI trade, these kind of neo clouds, they're always gonna be more risky than anything else in the system because they have... You know, they're underwriting high growth with large CapEx and lots of debt. So you try to thread the needle. If you grow too slowly, you don't meet your customers happy. If you grow too quickly and demand slows even slightly, then you're screwed because I... I'm doing it from memory here. I think, you know, CoreWheets, I think it's like $7,000,000,000 run rate or whatever, 10 or 20,000,000,000 of CapEx, $3,540,000,000,000 of debt. Right? I mean, that's the way you have to do it because you got to build these data centers and fill them full of compute. So it's just very tight. It's not like a software company where you can hunker down and cover your nut, right? There's just no way out here. So they're always going be risky. So anytime someone wakes up and says, Oh, AI is growing a little less quickly, all these things are going to go down. And anytime anyone says AI is growing amazing, they're all going to go up. And last week was an AI go down week, because probably because a little bit because of the anthropic numbers, which in retrospect is a bit silly. But there's no doubt last week was that things are slowing down weak, and when that happens, Core Weave jumps down. [00:14:50] S2: Was this a gross overreaction then?
00:14:50 · Harry Stebbings, Rory O'Driscoll
[00:14:50] S2: Was this a gross overreaction then? [00:14:52] S1: If the end user demand is there, then everything is going to work out, including CoreWeave. Because look, I think their biggest customers are people like Microsoft, OpenAI. Like, provided the demand is there, they want the data centers. It will all true up. [00:15:05] S2: Is that not like a generational buying opportunity? That's, like, down 25%. Of course, demand is not cracking. We will see that every single day. [00:15:13] S1: More precisely. But the problem... Yeah. Well, if it was that easy, we'd all be doing it, Harry. But, I mean, the real question is how does the demand compare relative to what these guys are spending? Can they fill everything they have now? Of course they can fairly quickly. But if you're continually investing for next, like I said, if your CapEx budget is 20,000,000,000, it's not enough that demand go up. It's that demand go up by a lot every year. The beating heart of the whole thing, and we're seeing people share it, is you add up OpenAI and Anthropix numbers together. So that kind of gets rid of the shift in market share. And the growth rate of that overall is what's going on in the AI economy. And that's the growth rate you have to look at. You know, the question is, how does CoreWeave's CapEx plans look at relative to that?
00:15:53 · Jason Lemkin, Rory O'Driscoll
[00:15:53] S0: The simple learning is that markets are gonna be very sensitive, right, as as as Rory said. Any bump with Anthropic, any bump with OpenAI, any bump anywhere, Of course, CoreWeave at all and Oracle should be hypersensitive because they have massive debt loads and massive risk. But they're also the B tier players. CoreWeave is B tier compared to NVIDIA and friends. Oracle is B tier, right? So I don't know, you can make money in the B tier, but why would you want to hold the B tier? CoreWeave exists because Nvidia and Friends need it to exist for now. It has no inherent reason to exist. It is not producing a singular set of silicon and GPU and software today that no one else can do. Oracle just can't sell enough enterprise software. People don't want to install enough of this crap on their servers. So they're stuck renting out their excess capacity and buying GPUs and doing Stargate. These are B tier assets and B tier assets should trade at a premium. And I think more importantly, they should be more sensitive to shocks in the system. The b tier assets. The a tier assets should be, in theory, less sensitive. [00:16:55] S1: The only comment I'd make is I think b tier, a tier, CoreV versus NVIDIA. I understand what you're saying, but it's almost like you're comparing apples and oranges. I mean, you know, NVIDIA's core IP. Yeah. It's the dominant provider of the whole eco... Look. Compared to Nvidia, we're all fucking B tier assets. How about that?
00:16:55 · Rory O'Driscoll, Jason Lemkin, Harry Stebbings
[00:16:55] S1: The only comment I'd make is I think b tier, a tier, CoreV versus NVIDIA. I understand what you're saying, but it's almost like you're comparing apples and oranges. I mean, you know, NVIDIA's core IP. Yeah. It's the dominant provider of the whole eco... Look. Compared to Nvidia, we're all fucking B tier assets. How about that? [00:17:10] S0: Yeah. But why buy the... Harry just asked, listen, why buy the B tier? If you just look... It's like IPOs. Why buy... Braze is getting acquired for for whatever 5,800,000,000. It's down 40% from its IPO. Like, buy any IPOs that aren't A tier? There's just nothing in the public... You can make money as a... If get your nice seed entry at $8,000,000 post, you can make money on the B tier, right? The It's start of this conversation. It's A tier bus. There's just the discount's too high. What the hell am gonna do with my core weaves? [00:17:37] S2: Yeah, Rory. [00:17:38] S0: It's five or six. I'm not going long on... I want to hold... Want... I'm not passing core weave to my great grandchildren. I'm not putting it in their five 29s that I'm giving to to my great grandchildren. You know, there's no way.
00:17:38 · Jason Lemkin, Rory O'Driscoll, Harry Stebbings
[00:17:38] S0: It's five or six. I'm not going long on... I want to hold... Want... I'm not passing core weave to my great grandchildren. I'm not putting it in their five 29s that I'm giving to to my great grandchildren. You know, there's no way. [00:17:50] S1: This is the Jason stock picking is dead. This is the public equivalent of the private comment that only the biggest companies matter. And again, the great thing about this is I I can prove you wrong more easily in the public markets because what... You know, when you go back over a year, I mean, Nvidia is up 18%, Nevis is up 50%, SOX, I mean, Micron's up 350%. I mean, the truth is you buy the second tier assets because you think they're going to pop. So, you know, I hear you, but no. [00:18:16] S0: Well, let's see if you put 20% of your personal portfolio into those, into the microns and schmicrons. There's a lot of risk there, right? [00:18:23] S1: Agreed. I wouldn't I wouldn't dare. [00:18:24] S2: So, Rory, you know, we have Jason's IC. We're going to have Rory recommends. [00:18:29] S1: No, we're not. No, we're not gonna do it. Genuinely, we're not gonna do it because I'm not gonna sit here. One other thing I've learned about doing this now is pulling stuff out of your ass because you've done a little bit of work is just not right. No, I'm it. It's not an adventure. [00:18:44] S2: That's all Yeah. General [00:18:45] S1: Yeah. So... No.
00:18:45 · Rory O'Driscoll, Harry Stebbings
[00:18:45] S1: Yeah. So... No. [00:18:47] S2: Okay. Okay. I'll I'll I'll leave it there. I'll leave it there. It's okay. And we can talk about what maybe caused a slight crack in that, which is Anthropic's numbers. Anthropic announced that they had turned profitable on an adjusted basis. Growth slows. IPO price potentially rumored to be going down from 2,000,000,000,000 to 1,500,000,000,000. Q three revenue was 16,800,000,000, up 45% on q two. 85% gross margin, which we'll talk separately about. What should we take from these numbers? [00:19:18] S1: I think that was good. I mean, I think that... Look. Again You [00:19:21] S2: should tell your voice that, Rory.