Decoder with Nilay Patel
00:23:12 · Nilay Patel
[00:23:12] S2: And and the time horizon in each of those categories is going to be different and I think that's just one of the one of the bigger questions I have is on how quickly do they get to where they think they can go. I want to dig in on some of the the numbers here. The the one that jumped out in all of the comment sections on all of the forums and all of ours articles yesterday was $80,000,000,000, Anthropic lost $80,000,000,000 that is related to a technical charge. Can you just explain the $80,000,000,000 Cause it doesn't seem it doesn't seem particularly relevant to the revenue and profits they're they're talking about.
00:23:42 · Joey Brookhart
[00:23:42] S4: Yeah. It's a it's a non cash charge because their valuation has gone up so much and they've issued, you know, warrants or convertible notes. You have to account for that in your balance sheet. So it's just a non cash charge because their valuation has gone up so much since they issued, you know, these warrants and notes. So yeah, that's something you would always back out. You know, you can argue on stuff like stock based compensation, you know, should we really be thinking about that on a non GAAP versus, you know, a cash, you know, versus because it's a non cash, if I just hand employees shares, you know, I have to account for that on my income statement, but I'm not actually handing them pure cash out of my, you know, bank balance. So it's not an area like that. It's, you know, it gets the accounting, you know, the high level if you don't know accounting, it looks bad, but it's because they've grown so much and their valuation has gone up so much.
00:24:24 · Nilay Patel
[00:24:24] S2: Some of the argument here about that charge is obviously, you know, that's Amazon was the other party there. Obviously, Amazon's very happy because Anthropic is buying a ton of AWS, and sure they're happy the valuation has gone up. But over time, Amazon is going get diluted this way. Right? That's that's part of the dynamic there. They're going to obviously IPO, they're going to put a bunch of shares in the market. It's very clear that over time they will issue more shares to raise more money. It doesn't seem like they're going to stop wanting to raise money anytime soon. How would how are you thinking about that in terms of just investment into a company like Anthropic that your valuation might be going up, but your actual ownership stake might be getting diluted over time?
00:25:01 · Joey Brookhart
[00:25:01] S4: Yeah. Mean, I think the deals have always been very creatively structured, and I think the numbers, they've actually only burned 10,000,000,000 of cash. You know, they have a 120,000,000,000 plus of cash and marketable securities on the balance sheet today. You know, post IPO, probably another 100,000,000,000. You know, it's a great deal for both parties. They only really rent to compute. It's not like they have these massive capital outlays or even rent to own. So yeah, and you can make some arguments about like certain accounting and okay, there are these massive commute commitment obligations that's technically, you know, future debt. From a dilution perspective, all tech companies dilute, you know, do they are they going to need to raise another 100,000,000 of debt or equity at some point, you know, possibly? Can they continue to creatively structure and finance, you know, future compute build outs? You know, probably as well. I know there's been a lot of in the last few weeks, a lot of angst about the future of compute financing and data center financing. But if you're Anthropic, if you're a major lab, a hyperscaler, or Broadcom and Nvidia that are backstopping a lot of these deals, that's probably not going to change anytime soon. As an equity investor, would I be worried about getting super diluted? I don't think so. If you believe in this long term AGI bull case and that Anthropic is going to be a leader in this, you're probably looking at a multi 10,000,000,000,000 plus dollar business. You know, I I I think they can outrun dilution at that point.
00:26:17 · Nilay Patel
[00:26:17] S2: Let's talk about the commute... Compute commitments. I saw at least one analysis saying over the next ten years, it... It's 800,000,000,000 plus in commitments to the various hyperscalers and neo clouds. That's a lot. You're saying that they don't have that much money, they haven't even spent that much money yet. Do you see them generating the revenues to pay off those commitments?
00:26:36 · Joey Brookhart
[00:26:36] S4: Yeah. I think when when when people look at the headline commitments, know, the $5,600,000,000,000, you know, number over seven to ten years, let's call it. You have it actually at what they're paying for compute today actually isn't that many gigawatts, you know. If you think about them spending, you know, right now, you know, think on average they're close to 11,000,000 per megawatt in spend, or 11,000,000,000 per gigawatt. You know, if you kind of take that back to the annual level and say, okay, you know, the five twenty numbers over, you know, seven years, for example, that's really not that many gigawatts and they're going be well beyond, you know, when they get to something like 20 gigawatts, that future compute commitments that they're running essentially is going to be well over, you know, well into the trillions. So yes, they are going to have the revenue to do so. I think it's more of how much revenue are they going to have relative to how much compute, and then two, the compute efficiency equation. If they keep getting you know, a lot more revenue out of every inference megawatt, you know, how much do you really want to invest in training and take margins to zero from like a rental perspective? Because you can get to something where they get to even 80, 85% of their fleet is just on training and research. The revenue, yes, it's going to scale pretty well. They're not in any dire, you know, unless, you know, unless we realize like all this revenue disappears or people churn, you know, we're really not in a huge like, it's like they have to hit, you know, a trillion dollars of revenue extremely, extremely quickly, you know, to achieve all this and pay for this.