¶ Google and Apple: A Tale of Two Giants
Ejaaz: There are two companies currently worth trillions of dollars that I think are Ejaaz: the most undervalued companies in the world right now. Ejaaz: Google and Apple are a tale of two tech giants that have taken a very different approach to AI. Ejaaz: Google, on one hand, has poured billions of dollars to create some of the world's Ejaaz: leading AI models, going from a corporate has-been to one of the titans of AI.
Ejaaz: They have their own custom GPUs rivaling NVIDIA. They have one of the largest Ejaaz: user bases in the world with Gmail, Android, YouTube. I could go on. Ejaaz: Apple, on the other hand, has taken the opposite approach. They haven't invested Ejaaz: in AI at all. They've been late to update their AI assistant Siri. Ejaaz: They haven't spent any money to hire AI geniuses like Zuckerberg at Meta.
Ejaaz: But despite this, I think these two companies are poised to be the biggest companies in the world.
¶ The Bull Case for Google
Ejaaz: So in this episode, we're going to give you the bull case for Google and Apple Ejaaz: revealing not just why you should buy their stocks, but also why these two companies Ejaaz: in particular are very unlikely allies. Josh: Yeah, I think this episode is going to surprise a lot of people because there's Josh: this gross disconnect between public market sentiment and public sentiment where Josh: stocks are trading very high and people don't quite agree with that.
Josh: So I think in this episode, we have a lot of what most would have perceived Josh: to be contrarian takes about where these companies have come from and where Josh: they are headed to and how we are actually much more optimistic than I think Josh: a lot of people think on these companies. Josh: So Ejaz, maybe you could help us start with the bull case for Google, Josh: which is one of the first companies we're going to be talking about here.
Ejaaz: What if I told you that Google currently worth $3.4 trillion is an absolute bargain buy right now? Josh: That's a crazy take. Ejaaz: You call me crazy. But here's why I think Google is actually worth $10 trillion Ejaaz: as an AI giant currently masquerading as a simple, humble search engine. Ejaaz: I've got four reasons for you. Ejaaz: Number one, Google has the best AI models.
Ejaaz: You have Google Gemini, which is currently crushing across all benchmarks and Ejaaz: beating ChatGPT on so many different fronts. Ejaaz: You have VO3, which is their text-to-video model, which is creating cinematic Ejaaz: masterpieces in a matter of seconds. Ejaaz: You have Nano Banana, their image generation model, which not just creates really Ejaaz: good images, but also allows you to edit them.
Ejaaz: And finally, who can forget about Google's Alpha Gemini series, Ejaaz: their science AI models, which have won not one, but two Nobel Prizes. Ejaaz: Number two, they're the only real competitor that NVIDIA has. Ejaaz: They've created TPUs, which is their version of GPUs built to make their own Ejaaz: custom AI models specifically for Google's software stack and hardware stack.
Ejaaz: They also have some of the craziest distribution of users. They have the number Ejaaz: one mailing app in Gmail. Ejaaz: They have the number one entertainment app with YouTube. They dominate search Ejaaz: engines and advertising. Ejaaz: And they also have the number one mobile operating system with Android. Ejaaz: And number four, a little lesser known fact, is they're some of the biggest Ejaaz: and best investors in the world.
Ejaaz: They currently own 14% of competitor Anthropic and 6% of SpaceX. Ejaaz: So no matter how way you want to look at it, it's hard to argue why Google isn't Ejaaz: going to become the most valuable company in the world. Ejaaz: They have all these strengths, they have the best models, they have the best Ejaaz: data to train these models, and they have all the compute to build this in-house.
Ejaaz: So I'm struggling to find an argument to see why Google isn't going to be the Ejaaz: most valuable company within a decade. Josh: I like looking at history. Google is very much a large player in this Game of Josh: Thrones that we talk about in the search for AGI. Josh: And it's helpful to have a little bit of context and pretext to how we got here Josh: today, where you're saying $10 trillion is a reasonable market cap.
Josh: It's a little outrageous. But there's this funny story associated with the history of Google. Josh: And it kind of starts in 2019, I believe the year is, where they released a Josh: paper that was basically the inception of the Transformer. Josh: And for those who aren't familiar, the Transformer is the piece of technology, Josh: this little piece of code that has generated and created every single large Josh: language model that exists today.
Josh: So by all means, Google kind of invented the technology that is running everybody's AI today. Josh: Naturally, as a result, you would expect them to be the front runner. Josh: But what they did is they kind of sat on this technology for a very long time. Josh: So in 2022, when ChatGPT came out, Google actually didn't really have a publicly facing AI product. Josh: They just had the technology because they were very much a research lab.
Josh: So while OpenAI acquired a million users in the first week, Google is just kind Josh: of sitting there on, at this time, three to four year old technology that they Josh: just haven't actually implemented in the product. Josh: So what they did is they rushed to implement this product. and they created a lot of Josh: AI systems that started with Bard and then recently is what we know today as Josh: Gemini that just weren't really quite good.
Josh: And you get the idea that the reason they weren't quite good is because the culture was pretty bad. Josh: In Google, there was a lot of problems with the workforce and of course a lot Josh: of disconnect where if you asked Bard at the time to generate the founding fathers, Josh: it would generate a series of minority women, which was just objectively incorrect and wrong. Josh: And a lot of people took that as, okay, Google actually doesn't have a chance at succeeding in AI.
Josh: And the reality is that wasn't true because that changed when Sergey Brin comes into the picture. Josh: So we have a post here, Sergey Brin spotted IRL again, and apparently he's working Josh: on Gemini at Google. And this is true. Josh: Sergey Brin, for those who don't know, co-founder of Google. Josh: He was the guy who started from the beginning and he recognized a wave that Josh: was too important to miss.
Josh: He came back to Google and he started implementing what they did at early stage Google today.
Josh: And now we have Gemini, which is the most powerful AI model in the world, Josh: they're at least very much at the frontier with everybody else and they're implementing Josh: a lot of new services they incepted this amazing technology lost the lead and Josh: now are each as you're telling me they're probably going to get back into the Josh: lead because that would be the implication with 10 trillion dollar market cap
Ejaaz: Yep and i think there are four key reasons why uh they hold such a a powerful Ejaaz: moat and why they're super undervalued i want to start off with, Ejaaz: Talking about their model, and it's not just like an LLM, it is everything else, right? Ejaaz: They've tackled and are leading every other medium in terms of AI-generated Ejaaz: content on the video side with VO, on the image side with Nano Banana, Ejaaz: and on the scientific discovery side with the Alpha Gemini series.
Ejaaz: Just taking a look at this benchmark setup that I have here, Ejaaz: this is something that we've started to see with every Gemini model release, Ejaaz: which is they're frequently and consistently at the top, Josh. Ejaaz: They're the number one LLM, they're the number one coding assistant, Ejaaz: and they're the number one agent provider as well.
Ejaaz: And I think that this isn't by coincidence. They've worked very hard to kind Ejaaz: of like restructure Google from this corporate kind of bloat, Ejaaz: which they typically had up until AI became a running thing, Ejaaz: into this like frontier AI tech lab that is constantly innovating, Ejaaz: changing, and adapting their strategies, given whatever the environment they're faced with.
Ejaaz: So they consistently have the best AI models, but it's also worth explaining Ejaaz: how they've translated this into user dominance. Ejaaz: So typically how OpenAI and ChatGPT has done this is they've created a model Ejaaz: and then they've pioneered basically the chat interface, right? Ejaaz: They then did the same for text to video into Sora. So they've done a really Ejaaz: good job of surfacing this to new users.
Ejaaz: Now, Google already has these users and they've done a great job of doing the same thing. Ejaaz: They've integrated AI into their search. So whenever you search anything on Ejaaz: Google now, you have something called an AI overview, Josh. Ejaaz: And something that I learned just this morning, which they released from their Ejaaz: quarterly report last week, is the monetization rate of this AI search, Ejaaz: which comes up at the top of their.
Ejaaz: Infamous Google search page is monetizing at the same rate as their search links Ejaaz: themselves, which is just a crazy undertaking, right? Ejaaz: Because you would think that Google is killing their own monopoly in search Ejaaz: by doing something like this, but it turns out that it's actually aiding and Ejaaz: probably going to offer them more profits going forwards.
Ejaaz: The other thing is they have this whole AI productivity suite, Ejaaz: which they surface all these different models and features.
Ejaaz: So I guess the point that I'm trying to make is Google isn't just a model creator, Ejaaz: are a product creator they understand their audience both Ejaaz: from the enterprise side and the consumer side and i Ejaaz: think it's highly undervalued and very misunderstood Ejaaz: that at how good google is at doing that job but what's probably surprising Ejaaz: to most is one of their products comes in the form of hardware uh their equivalent
Ejaaz: of the gpu called the tpu which has added unlikely the most value to Google's market cap? Josh: Yeah, TPUs are amazing. And I'm going to do my best to try to explain TPU versus Josh: GPUs because on the surface, it seems a little confusing, but I think we can simplify it quite a bit. Josh: Ijus, I want you to imagine a GPU being a chef, a chef who is a master chef, Josh: who can cook anything and can make anything that you imagine.
Josh: But the reality is that you and myself and the rest of the world, Josh: we only really want sandwiches. Josh: So while a chef can make a sandwich, it will take a little bit longer to make a sandwich. Josh: That is what a GPU does. It can cook you anything you like, But the reality Josh: is most of the world wants sandwiches. Josh: A TPU, you can imagine, instead of being a general purpose chef, Josh: is a production line for sandwiches.
Josh: It is a singular line that has all of the ingredients on top of it to hyper-efficiently Josh: make sandwiches for the whole world. Josh: And because the world doesn't want salmon, they don't want steak, Josh: they just want sandwiches, this production line is much more efficient at making sandwiches. Josh: So while the GPU can do everything, and a lot of people want a GPU, Josh: people who are training hardcore AI, they just want a TPU.
Josh: It's called a tensor processing unit, and it is this hyper-focused piece of Josh: hardware built to perform this thing called matrix math, which a lot of AI hardware is built upon. Josh: So what is so effective about these TPUs? Well, there's two ways of measuring Josh: GPU, CPU, compute in general. Josh: It's performance per watt, and it is cost per token. Josh: So performance per watt is two times that of the NVIDIA A100s, Josh: which is one of their leading flagships of chips.
Josh: That means that for every watt of energy you apply, you get double the amount of performance back. Josh: The other one is cost per token. So for every dollar you spend, Josh: this is how many tokens you can yield. Josh: And it's about one and a half to two times better performance per token than Josh: NVIDIA GPUs. So these TPUs are remarkable.
Josh: They work really, really well. And the question I asked myself when I was going Josh: through this is, well, why does the whole world not use TPUs? Josh: Well, the first answer is they actually don't sell them. Google just owns the Josh: TPU. It is a Google invention. Josh: They own them, they use them for their own stack, and they vertically integrate Josh: it through the software. so it's hyper-performance. Josh: And it's kind of like what we see with Apple chips with the M-Series.
Josh: I always reference the M-Series because it's amazing, is that they've built Josh: this chip hyper-optimized for their exact production workflow. Josh: And as a result, the cost efficiencies, performance efficiencies, Josh: every proficiency is through the roof. Josh: So that's kind of how I would describe the TPU to a layman. That's kind of how Josh: I learned it myself. And hopefully that description makes sense.
Ejaaz: That makes a lot of sense. Although I have one slight pushback for you, Josh, Ejaaz: which is as of last week, they have Ejaaz: started to sell their tpus to a Ejaaz: little known ai company uh known as anthropic um Ejaaz: supposedly the deal is marked at 50 billion dollars Ejaaz: which doubles their compute offering uh Ejaaz: from revenue earnings on the year uh so if this deal actually goes through this Ejaaz: will be the first major gpu sale that has sat outside of nvidia's remit so i
Ejaaz: already know jensen's fuming uh at the head but we will see whether Google takes this seriously. Ejaaz: I mean, to your point, I don't know if Google has the... Ejaaz: Manufacturing capability or even the ambition to scale TPUs in the way that Ejaaz: NVIDIA is done with GPUs. Ejaaz: I see kind of two major constraints. Number one, Google's just focused on so Ejaaz: many other things and NVIDIA is like hyper-focused on doing this one thing really well.
Ejaaz: And number two, TPUs, as you said, are highly specific and custom. Ejaaz: So I'm guessing that the TPUs that they're selling to Anthropic in this deal are very specific. Ejaaz: Maybe that's a niche that they can kind of take forward, but I don't think it Ejaaz: could grow as large as NVIDIA. Ejaaz: Do you think I'm wrong or do you think they're knocking trillions of dollars Ejaaz: of market cap off of NVIDIA soon?
Josh: Yeah, well, there's two cases. There's one in which you believe TPUs are the next form of GPU. Josh: It's like a natural extension where everyone's going to want to buy these. Josh: In that case, if they could do these production at scale, well, Josh: they will, yeah, they can knock off a trillion or two off of NVIDIA's market cap, sure. Josh: The reality is, is that I don't believe they are direct Apple to Apple's comparison.
Josh: There's a lot of different types of training that NVIDIA GPUs are good for. the per Josh: per watt of gpus from nvidia are still higher nvidia Josh: is still innovating faster they have access to the most cutting edge lithography which Josh: happens only in a few places in taiwan they really Josh: have this monopoly on the supply chain that google just can't really compete Josh: with but google can supplement a lot more compute so to the point of jevin's
Josh: paradox where compute will just expand to the emptiness that there is around Josh: it um there's no supply demand shortage for these processing units, Josh: whether they be tensor or graphical. Josh: And if Google can start selling them, that just opens up another pillar for Google. Josh: I'm not sure it necessarily hurts NVIDIA, but it allows Google to just make Josh: more money and print more cash.
Josh: And I think that's a big win for a company that really hasn't made money off Josh: of the infrastructure play yet, but now has a very clear opportunity to do so. Ejaaz: Yeah, I mean, I'm just looking at this tweet here. Morgan Stanley kind of like Ejaaz: up their price and prediction for Google stock in 2026. Ejaaz: But one thing that really caught my eye is the $158 billion backlog that they Ejaaz: currently have for their cloud offering.
Ejaaz: And it got me thinking that like, Google has always been a powerhouse when it Ejaaz: has come to like infrastructure provision and they've done so really well with Ejaaz: GCP, their cloud product. Ejaaz: You could also argue the same of Microsoft, Azure. Ejaaz: Both of these companies have signed major deals, Microsoft and Google, Ejaaz: in the last two weeks for AI-specific stuff, not just training, Ejaaz: but also inference costs.
Ejaaz: So I see this like growing trend, Josh, of like infrastructure, Ejaaz: whether it's chips or just kind of like cloud services, getting really in demand Ejaaz: as we kind of like scale these AI models up. Ejaaz: So I don't know, I'm super excited to see where this goes. The final thing is Ejaaz: Google is just everywhere. Ejaaz: They are the doorstep to the internet and actually the entire house.
Ejaaz: You know, they run Gemini, they're models, they have the TPU chips, Ejaaz: which we just mentioned, but they also handle 90% of search. Ejaaz: They run YouTube, the number one entertainment in the world. Ejaaz: They have Google Maps, they have Android, they power all Android devices. Ejaaz: It is just a very gluttonous monopoly that Google has that extends way beyond
Ejaaz: just a simple search engine. And the point I wanna make around here is that Ejaaz: is a crazy positive feedback loop to when you're creating AI models. Ejaaz: They have all the data, they have all the compute in-house, so they don't have Ejaaz: to rely on that tiny island in Taiwan and on Nvidia's dominance here. Ejaaz: And then they have all the apps to surface that through a very monetizable audience. Ejaaz: We're talking about billions of users here.
Ejaaz: So whereas OpenAI has to kind of build their audience from scratch and they've Ejaaz: done so very impressively to 800 million weekly active users, Ejaaz: Google kind of already had that waiting and ready to go. And they've proven Ejaaz: that, right? In their quarterly earnings, they have 650 million weekly active users. Ejaaz: I'm guessing the next quarter, that's going to, you know, increase by at least a third.
Ejaaz: So the point is, Google's dominance extends way beyond a search engine. Ejaaz: I don't think people are very aware of that. And I think that is one of the Ejaaz: biggest bull cases for their stock going forwards. Ejaaz: A counter argument that I've heard to this, Josh, is that they just simply won't execute as well. Ejaaz: I would agree with you, except that the data tells us otherwise.
Ejaaz: If you look at this chart over here, the retention rate, the three-month retention Ejaaz: rate, specifically for Google Gemini AI models, has been up and to the right. Ejaaz: It is pretty insane. We're talking about 90% the three-month retention rate Ejaaz: and six-month retention rate of 85%. That is staggering for any kind of consumer internet product.
¶ The Disconnect with Apple
Josh: So you just you've laid out a pretty bullish case Josh: for google and i'm not sure that mismatches the public perception as Josh: of late i think that's changed a lot people really hated google but Josh: they're starting to come around see the light it's trading just beneath all-time highs Josh: and it very vividly reminds me of another company of about the same size a little Josh: bit bigger that has it's sitting at all-time highs but there is a very like
Josh: gross disconnect between public sentiment and the company and that's apple um Josh: there's this post on the screen here that says what the hell is apple doing. Josh: They failed to make a car. They have no AI investments. Josh: Siri still sucks. Just releasing the same phone over and over again. How can you miss AI? Josh: How is that even possible? And Sean, to your point, I agree. Josh: They've actually, they've swung and missed on just about everything they've
Josh: tried recently. And it's been a big disappointment, but the stock is trading at all time highs. Josh: So where is this disconnect coming from? How can one group of the internet be Josh: so polarized against the other group? Josh: And where all the money is going is clearly into Apple because Apple is trading Josh: like 4 point something trillion dollar market caps. It's a gigantic company. Josh: There's a few ways to think about this. And one that I really like is around local inference.
Josh: So the way AI works, and granted, this is kind of funny because Josh: I think Apple accidentally stumbled upon this conclusion, but I'm going to purvey Josh: it as if this was all by design. Josh: There's two kind of ways that companies handle compute. There's cloud-based Josh: compute, and then there's edge inference that happens. Josh: So one happens in a data center in a remote place. That's what we see all the Josh: pictures of, these gigantic factories that have a bunch of GPUs.
Josh: And the other happens locally on your device, whether it be your smartphone Josh: or your laptop or your desktop, whatever device it may be, Josh: compute happens locally on that device compute on a local device Josh: is free compute in a cloud costs money so what Josh: is apple doing well apple just released a new mac Josh: mini um which we have a post about here the m3 mac ultra studio or i guess that's
Josh: what it's called is the only device which you can run open source state-of-the-art Josh: models outside of a data center and that seems strange because there's a lot Josh: of really powerful gpus there's a lot of really powerful computers but the only Josh: ones that actually allow you to run these are these Macs. Josh: Why is that? Well, it's because Apple owns the chips, and they've optimized these chips for AI.
Josh: So even though there is an absence of AI currently running on Apple devices, Josh: they are fully compute capable of running these very impressive models from Josh: anything on a Mac Studio down to your iPhone, Josh: which leads us to the bull case of Apple being they are not subject to a lot Josh: of the swings that we see in public markets, because they're not investing all of the CapEx. Josh: Now, EJS, if you'll remember, there was a deal struck between Google and Apple in the past.
Josh: This is not the first time they've worked together. And that was for Google search. Josh: Back in the day, I think we have a post somewhere about this. Josh: Yeah, here's a post from EJS. You dug this up from 2018, I think. Josh: How much is your data worth? So much that Google just paid Apple $9 billion Josh: to be the default search engine in the iPhone. $9 billion to get people...
Josh: To use a free search. Well, that number has actually jumped to 20 billion as Josh: of as late as 2022 was the most confirmed number. Josh: And it's just an outrageous amount of money to spend. But I don't think this Josh: is the last time they're going to work with each other. Josh: So Ejas, this week we got some news that there is a new deal on the table. Josh: And this isn't a search related deal. Josh: This is instead an AI related deal.
Ejaaz: Yeah, this is like Google and Apple deal 2.0. And it's so much bigger. Ejaaz: And it's back better than ever, right? So this week, we had news break that Ejaaz: Apple has asked Google to create their own Gemini model just for Apple users Ejaaz: that will run on their private cloud. Ejaaz: Josh, can you break this down for me? What's going on here? Josh: This is amazingly important. So everybody and their mother is spending trillions Josh: of dollars of capital building AI data centers.
Josh: OpenAI is spending trillions, Google, Microsoft, name anybody they're spending Josh: trillions of dollars. There's a question that we frequently ask ourselves on Josh: the show and public markets are asking, is there a bubble? When is this bubble going to burst? Josh: How much CapEx is appropriate before you just can't justify the returns on your investment?
Josh: Apple, in a way, in a funny messed up roundabout way, is completely immune to Josh: these swings, to this capital expenditure, and to this bubble exposure because Josh: they have not invested much money into building out the resources needed to Josh: train their own supermodels. Josh: What they're doing now is a very clear and obvious answer. is they're actually Josh: offloading that responsibility, offloading the financial risk to Google.
Josh: And they're going to pay them X amount of dollars in order for Google Gemini Josh: to create a custom model for the Apple ecosystem. Josh: And I think this is a really powerful thing because we mentioned a little bit Josh: earlier, there's cloud and then there's local compute. Josh: And the local compute is actually sufficient enough to create a custom model.
Josh: Don't suffice for a lot of requests that people have. I think a lot of prompts, Josh: and we talked about this a lot where with cutting edge models, Josh: I'm not even sure how to really test them because just my requests, Josh: my needs from an AI model aren't cutting edge. Josh: They don't need massive amounts of compute or tokens or resources to solve my problems. Josh: A lot of the times I'm just like, I need help navigating my day.
Josh: I have a lot going on. I need to know like what, what times am I able to do things? Josh: And the thing with Apple is it actually has all this intelligence.
Josh: And this was the promise with apple intelligence we just never got um but by Josh: all floating into gemini we start to see these unlocks where apple's the only Josh: one that has more context than open ai and it does we think about memory a lot Josh: and context and how powerful it is for a system and what device what system Josh: have you been using longer than chat gpt that has more info about you what's your smartphone
Josh: and a lot of people will be reluctant to give up that data but in the case that Josh: it is private and it runs locally and it's able to take all the context from Josh: your device that creates this really powerful edge compute. Josh: And that's kind of part one of the bull case for Apple. So I'll stop there to Josh: see if you disagree, agree. This is like, we're getting into the weeds here a little bit.
Ejaaz: I mean, as you know, I've been one of the biggest bears against Apple for almost a year now. Josh: And rightfully so. Ejaaz: Yeah, yeah. I think they've done a terrible job. But as you pointed out, this works both ways. Ejaaz: They've effectively shielded themselves from the crazy fluctuations that you Ejaaz: can see in AI, specifically in CapEx, right? So they're not investing trillions of dollars.
Ejaaz: But also when that rollercoaster ride starts going down, they're shielded, Ejaaz: they're affected from it and they can pick and choose the winners. Ejaaz: There's also the argument that like all this AI CapEx investment is kind of Ejaaz: a race to the bottom because whoever gets to AGI first is gonna absolutely disrupt Ejaaz: and destroy any other competitor.
Ejaaz: An argument that you could potentially give. The other side of it is, Ejaaz: Josh, I really like your point around the personalization and localization and Ejaaz: the importance of privacy of having your model on your own device. Ejaaz: Who cares if there's a general query that can be answered by some research professor versus an AI model? Ejaaz: I want it to be able to read my text and understand the next thing I'm going to text.
Ejaaz: I want it to be able to download the apps ahead of me even knowing about the Ejaaz: apps and do the things for me. That's only going to work on personalized devices. Ejaaz: And as you said, Apple has the distribution. Josh: Yeah, the use cases for local inference are kind of remarkable when you think Josh: about having access to all of your texts or emails. Josh: There's a second thing to this also, which is cost.
Josh: If you remember in a previous episode, we covered Grok Nano, Josh: which was this very lightweight, very easy to use, very low cost model, Josh: and how within days of it being released, it went to the very top of all the Josh: charts in terms of usage. Josh: Every developer in the world wanted to use it because it was fast and it was cheap. Josh: And one of the trends that we see as AI develops over time is this race to the bottom.
Josh: The cost per token, the race to zero is fairly aggressive. Josh: And what Apple's done is they've kind of cheated and they've gone from the starting Josh: line directly to the finish line without doing the work in between because inference Josh: on a local device that has an M-series chip or an A-series chip that Apple has is completely free. Josh: It costs $0 to run a query on these local devices. Josh: And there's billions of them that are capable of doing this.
Josh: So if you're a developer who wants to build a great experience for a customer, Josh: there is absolutely no reason why you shouldn't be building for Apple devices Josh: because the inference costs are free. Josh: And a lot of these developers who are building applications for the world of Josh: AI, they're bringing these servers. They're constantly looking for the next Josh: cheapest one because they want to keep the cost down.
Josh: But if you just throw an app in the App Store that runs on these local models Josh: that Apple will hopefully produce in partnership with Google, Josh: You suddenly tap into this gigantic context window, this gigantic bay of memory, Josh: and it costs you absolutely zero dollars to do.
Josh: And I think market forces will kind of come into play at some point here where Josh: just the natural tendency to trend towards lower prices will allow a lot more Josh: developer adoption and to create the experiences on top. Josh: So while Apple completely and utterly failed at AI version one with Siri, Josh: it is an abomination. It is the worst AI product of any major company by far.
¶ Apple's Strategic AI Partnerships
Josh: And I don't want to get that twisted. they may have accidentally Josh: just by the fact of vertically integrating these chips stumbled into the best Josh: case scenario where everybody's spending a bunch of money everyone is trying Josh: to build the ai first get the user second apple has all the users and they have Josh: all the data they just need the ai to plug into it and google could be that person to do so yeah
Ejaaz: It's super smart i think the market is finally recognizing that if i were to Ejaaz: boil all of this down to its core i would say that Apple is actually doing what Ejaaz: they've always done the best, Ejaaz: which is create the best consumer experience and products. Ejaaz: And so rather than jump into the infrastructure wars and the infrastructure Ejaaz: race in AI with GPUs, they let everyone else do it.
Ejaaz: They cherry pick the best, and then they integrate it in the best, Ejaaz: most artful way for their own products and services. Ejaaz: And that's why they have the addicted audience that they have, right? Ejaaz: I buy iPhones practically every single well, you're having MacBooks at this point. Ejaaz: I'm addicted to the Apple brand. And there's a reason behind that because it Ejaaz: has the best all-in consumer experience.
Ejaaz: And that's what Apple knows that they have. And they can afford to basically Ejaaz: sign these deals and partnerships with the Googles of the world. Ejaaz: Another thing that I find interesting about this, Josh, is in this case, Ejaaz: they're paying Google to create their own AI model for them, Ejaaz: which seems like an L on the balance sheet for Apple.
Ejaaz: But if you play this out, Gemini and Google are definitely going to build their Ejaaz: own agent, right, which is going to use a bunch of apps and they need to get Ejaaz: access to billions of consumers. Who has that? Ejaaz: Apple. I know Google already has it across an array of their different products Ejaaz: and apps that we explained earlier on. Ejaaz: But Apple has that addictive user experience that only operates at the hardware Ejaaz: level through the cellular device.
Ejaaz: And if they maintain that lead, that could be a case for Google actually paying Ejaaz: Apple a hell of a lot more money to get access to this. Ejaaz: Is that fair? Is that crazy? Or have I got this wrong?
Josh: Yeah, at the edge, it makes sense that the search thing happens Josh: again where okay apple owns the user experience Josh: google owns the software stack google winds up paying Josh: apple for the exposure um like i said before Josh: a lot of these companies they they have the intelligence they don't have the Josh: products they don't have the interface they don't have the trust or the users Josh: apple has that and by licensing technology from gemini they exclude themselves
Josh: from all the capex fluctuations and the crazy amount of spending without a promised Josh: return in exchange for creating a a Josh: AI experience that is frankly the only one that I really want. Josh: The one that has all of my context. It can read all of my texts, all of my emails. Josh: It could be the personal assistant that no one else can be yet. Josh: And that's remarkably powerful. Josh: And if I want to outsource my thinking to an impressive AI, I could do that.
Josh: And sure, Apple could probably ping some sort of API through Google or whoever Josh: they're partnered with, like OpenAI. Josh: But for most of my tasks, most of my AI needs, I just want a really helpful assistant. Josh: And no one can provide that better than an AI on my iPhone.
Josh: And I think that's kind of the bull case in summary is as AI is able to remove Josh: themselves from CapEx, as they're able to implement local inference on all these Josh: devices for zero dollars, there's a lot of network effects that will probably Josh: come swinging their way. Josh: And maybe it was accidental, maybe it was by design, but the long tail effects Josh: of Apple's position right now seem fairly optimistic.
Josh: And I think that's probably why it's priced sitting right at an all-time high Josh: right now, because we're not the only ones that think that.
¶ Conclusion: Value Amidst Market Sentiment
Josh: And that just about wraps it up. Josh: Why we think Google and Apple are both undervalued while at all-time high. Josh: And while perception might not always match public market sentiment and i think Josh: it's just it's important to continue to evaluate these companies like we said Josh: on yesterday's episode um these things matter a lot and how ai is implemented Josh: really matters a lot and it's changing
Josh: Architecture of the world around us. So it's this exciting conversation we're Josh: going to continue having as we go. Josh: I just, as always, thank you so much for watching the episode. Josh: We really appreciate all the support. Josh: Things have been going well. In fact, so well that 85% of the people who watch Josh: this episode on YouTube are not subscribed, which is a problem.
Josh: So if you are watching this and you are not subscribed, please go ahead, Josh: click that subscribe button and also listen to us wherever you find your podcast.
Josh: One place we're struggling to grow is on the RSS feed on Spotify because it's Josh: kind of tough to get people to go there so if you listen and you want to support Josh: the show please go there subscribe on spotify subscribe on your rss feed wherever Josh: your player may be apple podcast even if Ejaaz: You don't want to listen if you're taking a shower just put it on play put it Ejaaz: in the other room it helps us out a lot.
Josh: That's what my dad does it's great so yeah we just appreciate the support of Josh: whatever you can give all the comments it's been amazing we're coming off our Josh: best month ever and we continue to keep our foot on the gas thanks to all the Josh: support so thank you for watching as always we will see you in the next episode and peace