¶ The Elon and OpenAI Drama
Josh: So everyone knows how messy breakups get when there's money involved. Josh: Now imagine that breakup is between two of the most powerful people in tech. Josh: There's $134 billion at stake and someone's personal diary just became court evidence. Josh: This is Elon versus OpenAI, the saga that just keeps continuing to escalate.
Josh: And I guess maybe we'll start with the quick version where Elon co-founded OpenAI Josh: in 2015 with a $38 million donation, thinking they were building a nonprofit Josh: to save humanity from big tech AI monopolies, Josh: Google. Flash forward to today, OpenAI is now worth half a trillion dollars, Josh: partnered with Microsoft, about to go public, and Elon is saying, hey, I got played. Josh: The receipts dropped. We have Greg Brockman, who's OpenAI's president.
Josh: He had journal entries from 2017. Josh: We're going to get into it. It was really fascinating. And Greg posted a rebuttal. Josh: The drama is kind of starting to get out of control. And there's a lot of new Josh: updates this week that we're going to dive into. So grab your popcorn and let's get into this. Ejaaz: Yeah. Okay. So let's start off with the drama between these two. Ejaaz: By the way, I have to acknowledge I'm reporting from the Batcave today, Josh.
Josh: It's a little dark over there. So you're going to have to deal with me being. Ejaaz: A bit of a silhouette. Yeah, yeah. Josh is on the West Coast for listeners here, Ejaaz: and I'm on the East Coast right now. So it's past sunset. Ejaaz: It's past my sunset over here. So let's jump straight into it. Ejaaz: Elon has sued many companies and many founders in his time. Ejaaz: But his favorite and most judicious lawsuit has been to open air. Who have wronged him?
Ejaaz: Josh. He initially invested $38 million or rather donated $38 million to what Ejaaz: was then a non-profit OpenAI committed to building AI for the open source good Ejaaz: so that it wouldn't get into the hands of evil. Ejaaz: Fast forward to today and obviously OpenAI's structure has changed into something Ejaaz: that could kind of loosely definitely be categorized as a for-profit.
Ejaaz: And so the lawsuit's been going kind of back and forth for a while, Ejaaz: but it kind of culminated over the last two months. Ejaaz: To give you the quick headlines, at the end of last year, Ejaaz: the judge refused Sam Altman's request to dismiss the case completely, Ejaaz: saying that Elon had sufficient evidence and that it was going to go to trial, Ejaaz: which is now going to happen in April of this year.
Ejaaz: But Elon stepped up the gas over the last week and said that he's coming for it all. Ejaaz: He's coming for what his original $38 million donation would be in today's OpenAI's Ejaaz: valuation. Do you want to guess what that number is, Josh? Josh: Some astronomical amount. I mean, this has to be big. Ejaaz: It is $137 billion. Ejaaz: He's requesting, he's going for the neck, basically. Oh, rather, $134 billion. My bad.
¶ The Lawsuit Escalation
Ejaaz: So here are the key details. Musk's expert lawyer, he goes by the name of Paul Ejaaz: Wazin, values the damages between $79 to $134 billion based on his original $38 million donation. Ejaaz: So the question that becomes, well, what's really changed? Why has Moss got Ejaaz: like the upper hand now? And it's just something that you alluded to earlier, which is, Ejaaz: Greg Brockman, the acting president of OpenAI, Josh: We got your diary, bro.
Ejaaz: Kept a diary of the entire sequence of events or history of OpenAI up until Ejaaz: this day, which he had to legally give to the court for review. Josh: Oh, that's so vile. And Josh, could you imagine your personal diary? Ejaaz: Dude, also, why? It is like a 16-year-old girl's diary. Ejaaz: And by that, I mean he has documented everything down to the line of whether Ejaaz: he thinks it's morally ethical to do what he was doing back then.
Ejaaz: So to give you an idea, look at this quote, Josh. Ejaaz: Look at this tweet right here. He goes, it'd be wrong to steal the nonprofit from him. Ejaaz: Him he's referring to as Elon. To convert to a B Corp without him. Ejaaz: That'd be pretty morally bankrupt. Ejaaz: And he's not an idiot. Ejaaz: And then he goes on to say, I cannot say that we are committed to the nonprofit.
Ejaaz: Don't want to say that we're committed if three months later we're Ejaaz: doing the b call then it was a lie not feeling Ejaaz: so great about all of this the true answer is that we want Ejaaz: musk out can't see this turning into a for-profit without a very nasty fight Ejaaz: so the long story short is elon is suing very aggressively for what his original Ejaaz: donation is in an equity stake in the open ai is today to the tune of $134 billion.
Ejaaz: And he has pretty much a smoking gun, Josh. Ejaaz: But there was a rebuttal from Greg Brockman himself saying that Elon Musk had Ejaaz: let some important context or left some important context out of his claim. Ejaaz: And I'm showing this on the screen right here where, you Ejaaz: We've got to figure out how we transition from a non-profit to something which Ejaaz: is essentially a philanthropic endeavor.
Ejaaz: So what you're seeing in blue on the screen here is what Elon has claimed and caught. Ejaaz: He's saying, hey, I've always kept my notion that I wanted OpenAI to become Ejaaz: a philanthropic endeavor, but he left out what was in red, which is him saying, Ejaaz: I know that we need to transform this into a B Corp or a C Corp. Ejaaz: So there's a bit of inambiguity and games being played from Elon. Ejaaz: Which side do you take on this?
Josh: I'm trying to look at this and evaluate this as neutral as possible. Josh: And one party, we're seeing the journal entries, which one, I have a lot of Josh: questions how they got that journal or the diary, and they knew that it even existed. Josh: Because that seems like a very personal thing you wouldn't really want to tell Josh: people about. So how the lawyers, one, discovered it existed, Josh: and then two, got access to it.
Josh: I'm sure there's some funny stuff going on behind the scenes of this case, Josh: just to kind of provide more evidence. Josh: But in terms of the evidence that's been provided, so far, you have one party Josh: who is like, hey, we don't actually want this person to be at the company. Josh: I think we just want to remove him. Josh: But I kind of am siding with Elon in this instance for now, because it's very Josh: clear that they wanted out.
Josh: And even though it's clear that Elon observed it was probably necessary to become Josh: a B Corp, he still was ousted. Josh: And in the case that it became a B Corp, he still does rightfully own those shares of equity. Josh: So I guess for now, I'm team Elon. But more than anything, I'm team drama, man. Josh: This is great content. And we're going to continue to follow this as we go through Josh: this court case, because I'm sure this is just the tip of the iceberg.
Ejaaz: Dude, I saw a hilarious tweet earlier this week, which said that, Ejaaz: My thesis for Anthropik winning the AI race is simply because they have zero drama. Josh: No, seriously. Ejaaz: All six co-founders are still there. No one's left. They've had the lowest employee Ejaaz: attrition of any of the major AI labs. Ejaaz: They've just kind of got their crap together. And OpenAIR is the complete opposite.
Ejaaz: It's an absolute wrecking ball, as we're going to find out on other things later this episode. Ejaaz: The final thing I'll make on Ejaaz: this point is the OpenAIR and Microsoft partnership. Josh, if Elon ends up Ejaaz: able, like, if Elon ends up getting $134 billion, that dissolves the Microsoft Ejaaz: OpenAI relationship completely. Ejaaz: Because that is the equivalent of Microsoft's stake in OpenAI as well.
Ejaaz: So Elon's forcing hand basically gets ahead of him. Like Satya doesn't have Ejaaz: the power that he originally thought he had. Josh: And now poor Microsoft is just caught up into this, even though they had nothing Josh: to do with the inception of the company, and they weren't involved until much later.
Josh: And I think the reason why this matters beyond the drama even is because Because Josh: a lot of people believe that if Elon wins, I mean, it could fundamentally challenge Josh: how AI companies are valued. Josh: And some people are kind of whispering about whether this trial could be a catalyst Josh: that could impact the actual AI bubble that we've been building. Josh: If you can remove almost like $150 billion out of that and move it into another Josh: entity, that's a huge swing.
¶ OpenAI's New Ad Model
Josh: I'm not sure if the market's going to be able to handle that because OpenAI Josh: has so many obligations to make money and pay people back. And I guess on that Josh: note, maybe we can get into one of the new things that they rolled out in order Josh: to generate some revenue this week, which is their new ad model.
Josh: And Ijaz, if you remember, just last year, I guess two years technically now Josh: because we're in 2026, but in 2024, Sam was on stage and he said, Josh: ads are kind of the last resort. Josh: We don't really like the ad model. We don't believe in it. We don't need it. Flash forward to today.
Josh: There are ads rolling out in OpenAI. So let's read. We'll start by reading what Josh: they announced, which says, in the coming weeks, we plan to start testing ads Josh: in ChatGPT free and go tiers. Josh: We're sharing our principles early on on how we'll approach ads guided by putting Josh: users in trust transparency first as we work to make AI accessible to everyone. Josh: So they have like these four principles that they outlined.
Josh: What matters most? Responses in ChatGPT will not be influenced by ads. Josh: Ads are always separated and clearly labeled. your conversations are private Josh: from advertisers pro plus business and enterprise tiers will not have ads you Josh: just what do you think about this. Ejaaz: Okay, I have many thoughts. Okay, so let me give you a kind of lay of the land. Ejaaz: OpenAI today has roughly 800 million weekly active users.
Ejaaz: Josh, guess what percentage of those users pay for their subscription? Josh: I know this because we mentioned this in a previous episode. Josh: It is close to single-digit percent. It's very low, surprisingly low. Ejaaz: It is 5%. Yeah, that's not high. So the lesson that we've learned from this Ejaaz: is you could have subscriptions, but it's not enough to keep you afloat. Ejaaz: OpenAI is projected to blow $20 billion this year alone.
Ejaaz: You need something else to pay for it. So you need to somehow monetize the free users. Ejaaz: And the classic model that everyone's used for decades now is ads. Ejaaz: So they're turning it on for two specific tiers. Ejaaz: The free users who are paying nothing to get access to ChatGPT.
¶ Monetizing Free Users
Ejaaz: And this new tier, which launched at the same time that they announced ads, Ejaaz: Josh, called ChatGPT Go. Ejaaz: Where it's a subscription where you pay $8 a month and you get access to not Ejaaz: the best ChatGPT models, but, you know, just below the best. Ejaaz: So let's look at some of the napkin math here. Ejaaz: There's roughly 600 million non-paying weekly users or monthly users for ChatGPT. Right. Ejaaz: Each of them were to pay $2 in ad revenue for the year of 2026.
Ejaaz: OpenAI stands to make around $1.3 to $1.7 billion, which sounds like it's a lot. Ejaaz: But again, their spending budget is $20 billion. Ejaaz: So it doesn't really move the needle that much. And they're projecting by 2030 Ejaaz: to have made $15 per free user, which then pushes them up into the realm of $36 billion. Ejaaz: But you can imagine that their spending budget by then, Josh, Ejaaz: is going to be multiples of what they're spending this year.
Ejaaz: So to kind of put into context, it's not looking great. But my argument against Ejaaz: that is I think AI is going to be the ultimate form of selling ads in the future. Ejaaz: Everyone is going to surface their intents, be it like, I want to buy something, Ejaaz: I want to explore something through some kind of AI chatbot. Ejaaz: And if OpenAI or ChatGPT rather becomes the face or the doormat of the internet, Ejaaz: then they can charge whatever they want per user.
Ejaaz: And to kind of give listeners a context of like how much money you can actually Ejaaz: make, let's look at Meta, right? Ejaaz: In this tweet that I have up here, in 2025, Meta made $58 per user just purely from ads. Ejaaz: And if you want to look at like the behemoth that is Google, Ejaaz: they made $237 billion last year from ad revenue.
Ejaaz: That makes up 77% of their entire profit. So there's a lot of money to make Ejaaz: from ads, but OpenAI needs to figure out a way to go from that $2 projection Ejaaz: to something where Meta's hitting like $60 or even Google at around $80 per user. Josh: Yeah, I think it's an interesting testament to, I guess, the human nature of
Josh: how we think about sponsoring and advertising. I was very optimistic in the early days that, Josh: advertising that the traditional ad model, the freemium model, Josh: was going to go away in the advent of AI. Josh: And that was just some hopeful optimism. Didn't really have any reasoning why, Josh: but I think it's become clear that that will not be the case.
Josh: And this push to monetize free users will continue to be this durable thing Josh: that continues into this next iteration of technology, mostly based on the fact Josh: that people would much prefer to pay with their attention than their dollars. Josh: And particularly when it's good information. Now, the question that I have as Josh: it relates to this story in particular is how much data are they going to be Josh: collecting and using in order to make these ads actually useful?
Josh: Because one of the core principles that they shared is that your data is private, your data is being held. Josh: It's not influencing the ads that you see. But the reality is that ads can be Josh: a good thing if they are hyper-personalized. Josh: So where are they going to draw that line? Where are they going to take that Josh: line in the sand in order to give people higher value? Ejaaz: We actually have some information on that exact question that I'm showing on the screen here.
Ejaaz: They state in their official post ads do Ejaaz: not change chat gpt answers so we know that the answer that you're Ejaaz: going to get isn't going to be influenced in any way specifically by an Ejaaz: advert and then it goes on to say your chats with chat gpt Ejaaz: are not shared with advertisers ads will be clearly labeled Ejaaz: and chats that include sensitive topics such as health mental health or politics
Ejaaz: are not eligible for ads so they're taking a kind of hybrid approach here where Ejaaz: they're not explicitly sharing all the data or rather prompts that you're sharing Ejaaz: within your conversations but it's taking kind of themes from your conversations Ejaaz: and sharing them with advertisers saying, Ejaaz: hey, these are the general vibes that our users are speaking about ChatGPT with. Ejaaz: Maybe your product could be a well-suited fit for this.
Ejaaz: Another interesting point to make here is, well, what do the ads actually look Ejaaz: like? Is it going to be something subtle where it says, Josh: This was shocking to me. Ejaaz: Right? Well, I actually like this. Josh: I like it though. No, well, shocking in not really the most optimal way. Josh: When you look at the amount of screen real estate this takes up for people who are listening. Josh: It's huge. About a third of the screen is an ad.
Josh: That's a large percentage of screen real estate for a single advertising slot to go. Josh: It's probably going to be worth a pretty hefty premium and a very strong inconvenience Josh: to people who don't want to pay for ChatGPT. Josh: So this, in a way, does degrade the experience, but should also make them a good bit of money. Josh: Because man, if you're getting 25 to 30% on the screen for an impression, Josh: that's like a pretty, you're going to see it.
Josh: Like there's no way your ad blockers, like your eyes are going to glaze over Josh: it and not notice because it is such a profound placement on the actual display. Ejaaz: Well, it's also not your average impression, right? Ejaaz: Because this is a kind of like boosted impression where the conversion rate Ejaaz: is or probability of it converting into someone purchasing your product or service Ejaaz: is probably way, way higher.
Ejaaz: Now, to give OpenAI credit, I like that they're excluding things like health, Ejaaz: politics, and also people that are under the age of 18. Ejaaz: Because AI is very, very persuasive, both in a good way, but in a really, really bad way. Ejaaz: The other kind of lens that I apply to this is the competitors are going to eat this up, Josh. Ejaaz: Because, listen, Google is getting plenty of cash flow from all their other Ejaaz: businesses. So they do not need to turn on ads.
Ejaaz: Today, if you are a freemium user of OpenAI and you get tired of this real estate Ejaaz: that you just referenced, the sponsored ads, you don't want to see that crap. Ejaaz: You can just go and use Gemini and there's no ads at all. Ejaaz: And let me tell you, Google will be willing to subsidize no ads for as long Ejaaz: as it takes to kill OpenAI.
Ejaaz: Anthropic, on the other hand, isn't a gigantic monopoly, but they're already Ejaaz: making so much money from the people that want their Claude Code product. Ejaaz: They've already produced something so valuable, Josh, from their subscription Ejaaz: that they're making tons of money. They're projected to make $70 billion by 2028. Ejaaz: So they don't need to pull off the stunt for ads.
¶ The Competition Heats Up
Ejaaz: So OpenAI really seems like they've got their back against the wall There's Ejaaz: no other way for me to describe it, to be honest. Josh: Yeah, they're a small fish in a very, very big pond. I mean, Josh: they're competing with companies like Google that have an infinite balance sheet Josh: relative to theirs, and they have the ability to subsidize and absorb any additional Josh: cost required to win additional market share.
Josh: And that's what we're seeing as we look at these charts of weekly active users, Josh: decline for ChatGPT, and increase for all the others across the board. Josh: While Anthropix sits cozy and soundly with their incredible coding model and Josh: their business-to-business service. Josh: Now, I think it's time to get back into the drama news. This is the gossip part Josh: of the show because we have some more. Ejaaz: Dude, I wish Sam versus Elon was the only catfight going on.
Ejaaz: But do you remember that angel from OpenAI that couldn't do no wrong and actually Ejaaz: called Sam out for being moralistically unethical? Ejaaz: Miro Murati, who left and started her own company, her own AI lab called Thinking Labs. Josh: Thinking Machines. Ejaaz: Thinking Machines, rather. They just lost...
Ejaaz: Total 50% of their founders or their founding team this week, Ejaaz: they lost their CTO, Barrett Zoff, due to, as this tweet says, Ejaaz: unethical conduct, according to two sources familiar with the matter. Ejaaz: Those two things that were unethical was an in-work relationship, Ejaaz: which he didn't disclose. Ejaaz: And also, apparently, he was leaking information to competitors. Josh: Yikes. Ejaaz: Josh, do you want to guess which competitor, if it was true,
Josh: Who he might have been leaking that to? take a guess. Considering where they Josh: all came from, I'm going to guess they were returning back to OpenAI, Josh: which seems very clear to me. Ejaaz: Absolutely. Look at this tweet from Fiji Simo, the CEO of OpenAI Applications, Ejaaz: who at the same time Mira Murati announced that these guys were leaving, Ejaaz: she announced welcome Baratsoff, Luke Metz, and Sam Sheldon.
Ejaaz: So basically, the three exact people that left Thinking Machines this week joined OpenAI. Ejaaz: So I have a feeling that they were already getting tired of their work. Ejaaz: They didn't really feel focused under Miro Moracci's leadership and decided Ejaaz: that the best place to go back was OpenAI and Fiji welcomed them back with open arms. Josh: Hey, I got a question for you, actually. What does the key machines do? Ejaaz: Dude, I have no idea.
Josh: Two billion seed raise. I'm not sure anybody has an answer. Two billion dollar Josh: seed raise. I'm not sure anybody has an answer. Josh: This company, as far as I'm concerned, they have shipped one small product that Josh: I don't think, it was just kind of a research product, wasn't very impressive, and nothing else. Josh: But they've raised two billion dollars in their seed. They're looking to raise even more money.
Josh: And there is clearly a lot of drama going on in-house. There's this funny, Josh: funny post, EJs. I actually dropped it in our agenda, if you don't mind opening it.
Josh: It's titled Jim. and there is a post that Josh: someone saw looking into the offices and it has like these weights Josh: that are custom branded with thinking machines just as a testament Josh: to how kind of outrageous the spending is yeah this Josh: this photo it's so funny if you scroll down a little bit you could see the plates Josh: on the gym are thinking machines plates and ironically there's no 45s in this
Josh: picture because i mean maybe ai researchers don't don't really trust me like Josh: they need to be who knows but i think it's a it's a funny testament to the fact Josh: that um there are bubbly things happening. Josh: And one of which seems like it's thinking machines. They've raised a ton of Josh: money. They haven't really come up with the product. Josh: There's clearly a lot of drama where half of the co-founders now have returned Josh: back to where they're left from.
Josh: So clearly they're not liking it. And it seems like there's this lack of direction. Josh: And you can give them the benefit and the doubt in the case that they are a Josh: research lab and they're hoping to discover some novel algorithmic improvement. Josh: But we've discussed this in previous episodes where an algorithmic improvement Josh: is very difficult to capture value from because it very quickly becomes commoditized Josh: and democratize throughout the stack.
Josh: So even in the best case scenario, it seems difficult to see thinking machines. Josh: Anywhere else besides either being acquired or just kind of fizzling out. Josh: And I mean, at this point, it wouldn't even surprise me to see OpenAI acquire them again. Josh: The mirror will come back to OpenAI. They'll get the remaining three co-founders Josh: and they'll just continue to move on as they were previously. Josh: But that is to be determined.
¶ Tech Developments Beyond Drama
Josh: In other AI news, perhaps we'll go off the drama and get back to the hard tech, Josh: the people who are actually building stuff, not talking about stuff. Josh: And that is XAI, who has just released the first, or has just made it to the Josh: first gigawatt scale coherent training cluster in the world. Josh: And they have not been around. They've been around the least amount of time Josh: out of any other company in the world.
Josh: So it's pretty ironic the fact that the youngest company is now the first to Josh: reach this critical scale of one gigawatt worth of energy. Ejaaz: Yeah, this is a big deal. So Colossus 2 and Colossus 1 are XAI's specific data Ejaaz: centers that they use to gather all their GPUs and train their AI models and Ejaaz: inference their AI models. Ejaaz: And the unique part around Colossus specifically is Elon is an infrastructure scaling genius. Josh: When he started Colossus 1.
Ejaaz: He scaled it to 400 megawatts of compute capacity in 122 days. Ejaaz: Do you know how long it should have taken him, technically? Josh: I mean, this is like a year, years-long project. Ejaaz: Dude, four years. A year to just set up the infrastructure, about four years to get at life. Ejaaz: He did all of that in 122 days. Jensen Huang called him something like short Ejaaz: of an absolute genius that no one can compete with. Josh: That's one-tenth the time.
Ejaaz: Four months, right? Yeah. And so he did that kind of midway last year, Ejaaz: and he thought, you know what? Ejaaz: I'm going to put my foot on the gas even more. And he started with Colossus 2. Ejaaz: And by the start of this year, or rather not by the start of this year, Ejaaz: but January 17th specifically, he got one gigawatt of compute total live across Ejaaz: Colossus 1 and Colossus 2. Ejaaz: He is officially the quickest AI startup to get to one gigawatt's worth of compute,
Ejaaz: beating OpenAI, who started this stuff years ago. This is a two-year startup. Josh: Oh my God, we got to show the chart. Please, go to the chart at the bottom. Ejaaz: Yeah, please, please, please, please. let me go to the let me go to this where Ejaaz: is the wait where is the chart oh it Josh: Was at the bottom of the post.
Ejaaz: Oh yeah there you go sorry right look at this scale it Ejaaz: is just absolutely insane to kind of like put this into context for Ejaaz: people um we're talking about 555 000 gpus that's half a million gpus worth Ejaaz: 18 billion dollars he deployed it that quickly and if you want to understand Ejaaz: why he got the edge over every other lab that's been working on this for multiple Ejaaz: years and somehow elon's just kind of like swept the rug with them
Ejaaz: He thought outside of the box. He played in the gray area. And what I mean by Ejaaz: that is, of course, he flew in gas turbines, Josh. Ejaaz: He flew in gas turbines to power his data centers. Ejaaz: If he couldn't get access to electrical grids, he would set it up himself. Ejaaz: He would literally thread the wires himself. Ejaaz: And if he couldn't get any energy from the national electric grid or the state Ejaaz: electric grid, he would fly in Tesla megapacks to power this.
Ejaaz: He's thinking way outside the box where other AI labs are just kind of waiting Ejaaz: for regulatory burdens to be overcome. which is going to take years, to be honest. Josh: Yeah, and so much so that these two data centers, Colossus 1 and 2, Josh: actually sit in different states, but right on the state line.
Josh: So they could lobby in two states at once. They have access to double the amount Josh: of senators to help get the legislation passed that they need in order to build these things. Josh: They have really, like, if you think about how to build a data center from first Josh: principles, you want to optimize all of these traits that they have actually been doing.
Josh: And they have that unique advantage that you mentioned where they have partnerships Josh: with companies like Tesla to give them access to these mega packs. Josh: And a lot of people don't realize when you do these training runs, Josh: there's a couple hundred thousand GPUs that spin up very quickly and then power down. Josh: And there's a huge variance in energy that comes through the grid in order to
Josh: make this work. And when there's a physical combustion motor that's actually Josh: spinning, it's very difficult to speed it up and slow it down that fast. Josh: So you need something quicker. You need things like Megapack batteries. Josh: And the only company that makes batteries this size at this scale with this Josh: type of software stack ready to go is Tesla, is the Megapack,
Josh: and they have this competitive advantage. And in a world in which Josh: the winner is the person who can deploy resources the fastest and most efficiently, Josh: it very clearly seems that XAI is going to continue to take this lead as they Josh: move forward just because of the sheer rate of improvement. Josh: And if you look at the chart, I mean, it's a vertical line to get to Colossus 2.
Josh: And the next person who's coming after this is OpenAI, but that chart looks Josh: like it's going to beat them sometime in 2027. Josh: So, I mean, granted, there will be variants here, but it seems like XAI finally Josh: has taken the lead, And I don't see any world in which they don't continue to dominate this lead. Ejaaz: Yeah, I agree with you. Elon's taking a very large gamble here, Ejaaz: which is the more compute I have, the better AI model I can build.
Ejaaz: And that was in contention last year, but Google proved it after they spun up Ejaaz: a bunch of TPUs that they produced a leading model. Ejaaz: And I have a feeling that Grok 5, whenever that releases in this quarter or Ejaaz: first half of the year, is going to be an absolute beast. Josh: I can't wait. Ejaaz: I can't wait. To put it to context, by the way, because we throw around a lot Ejaaz: of these numbers, like one gigawatt, what the hell does that mean?
Ejaaz: That is the total power that is needed to power San Francisco City, Ejaaz: but not just during normal hours. Ejaaz: I'm talking about peak hours. If you turn on all the lights, Ejaaz: use up all the energy, the most Ejaaz: energy, that's how much power is coursing through Colossus 2 right now.
Ejaaz: And I've got news for you guys. he set up Colossus 3 already and he has raised Ejaaz: another $20 billion $5 billion oversubscribed to buy even more GPUs and he is Ejaaz: the largest purchaser of NVIDIA's Blackwells and their latest Vero Rubens as Ejaaz: well so again it's a big gamble if it pays off Ejaaz: Grok's going to be the best, dude.
¶ The Rise of XAI
Josh: Man, when these Vera Rubin chips come online and they have clusters this size Josh: at this scale, there is an impossibility we don't reach AGI at that point. Josh: There is so much intelligence, so much energy and compute power solving problems. Josh: And this is happening quickly. I mean, this is by next year. We're done. Josh: So things are moving quickly. But maybe on that note, particularly the Tesla Josh: one, we have updates. It's not that...
Ejaaz: Well, come on. We're talking about XAI. This is one company, Ejaaz: one of six that Elon manages. And you're telling me that he's had a banger week for Tesla as well. Josh: Absolutely incredible. So there's a funny thing. I'm in LA right now, Josh: and I've been taking Waymos around all week. And this obviously is Tesla's largest Josh: competitor. And they're fantastic. Josh: They work very well, but they work in this geofenced area where I wanted to go to Santa Monica Pier.
Josh: And I actually couldn't get there, even though it was only four miles away, Josh: because it wasn't in the geofenced area. I wasn't able to get there. Josh: FSD is solving this problem. FSD is going to be fully autonomous everywhere. Josh: And in fact, just this week, they announced that they are removing the ability Josh: to purchase a license February 14th on Valentine's Day.
Josh: Which is kind of sad because that's a heartbreak thing. And on Valentine's Day Josh: of all days, it's not a cool thing, but it signals a few things to me. Josh: One is since the beginning of time, it was made very clear that the price of Josh: full self-driving would only go in one direction and that's up because the value Josh: of having a license to basically grant you unlimited full self-driving miles Josh: for the remaining value of the car is a very high premium.
Josh: And as they get closer and closer, that premium will get higher. Josh: Now we've gotten so close to the finish line that they've removed it entirely. Josh: And that license no longer exists. Josh: So if you want to buy unlimited lifetime full self-driving chauffeur miles, Josh: you have about a month to do it. Josh: And if you don't do it in that time, that's it, you're done for. Wait, question for you. Ejaaz: So let's say you buy a new Tesla after this deadline, Josh.
Ejaaz: Can you move your lifetime FSD subscription to your new car? Josh: There is a month grace period after the window until sometime in mid-March, Josh: where if you are a current owner, you can transfer the license to the new vehicle Josh: but after that i suspect it's done and it's not coming back but. Ejaaz: Didn't people pay like eight thousand dollars Josh: To yes i owned the license so it's it's disappointing, Josh: But it's been expected for a very long time and the cars last forever.
Josh: But now the car becomes much more valuable because it does have lifetime free Josh: full self-driving miles. Josh: And that amount of inference power is really impressive on the back of this Josh: post that we're sharing right now, which is the hardware plan as they move forward Josh: and as they're actually powering these systems. Josh: So AI4 is currently what's on the cars right now. Josh: That's what is driving full self-driving. that is what is going to get to full
Josh: level five autonomy where the cars will drive themselves. But AI5 is coming next. Josh: And AI5 is a new chip design that they've been working really hard on basically Josh: every week for the last three months.
¶ Tesla's Full Self-Driving Update
Josh: And AI5 is built entirely for full self-driving in a way that AI4 was not. Josh: So traditionally with GPUs, the way they're built is for large, Josh: I think it's floating point matrix math, some like very elaborate data set. Josh: And it's good for general purpose. But basically what Tesla and the AI team Josh: are doing is designing, you could think of it like a TPU, but for full self-driving Josh: vehicles and for autonomy on machines.
Josh: So that includes things like Optimus and things like any of the Tesla vehicles. Josh: And I'm sure it will find its way into the data centers. Josh: In fact, I was listening to an episode with one of the XAI employees who I guess is ex, Josh: XAI now because he's no longer with the company after that podcast.
Josh: But he was mentioning how the plan is actually to take these AI5 chips and all Josh: the chips moving forward and actually place them into data centers because they're Josh: going to be so effective, Josh: so efficient relative to others that Tesla will now soon become not only a large Josh: chip manufacturer, but will do the Google thing and will vertically integrate Josh: the chips into its own technology stack as it trains these models and starts Josh: to build its quest for AGI.
Ejaaz: He's already working on the future iterations of this chip as well. Ejaaz: AI-6, AI-7, and then Dojo 3. He's resuming that project as well. Ejaaz: He mentioned that he's going to be doing these iterations in nine-month cycles. Ejaaz: So what has typically taken two years, he's accelerating chip design to a new Ejaaz: one every nine months, which is just an insane cadence and kind of reminds me Ejaaz: of what Jensen is doing at NVIDIA, which brings me to,
Ejaaz: because Jensen's like doing a new GPU model every year now. That's what he's targeting. Ejaaz: Which leads you to my point. We had a conversation, you and I, Ejaaz: Josh, months ago last year, where I said that I think Elon might be going down Ejaaz: the path where he's not exactly trying to compete with NVIDIA, Ejaaz: but he wants to become independent from them eventually.
Ejaaz: I'm not saying this is a direct hit towards it. I think your comparison to the Ejaaz: AI models, the AI-5 chips, rather, being kind of better compared to Google's TPUs is accurate. Ejaaz: But if he's not just going to put these in cars, but he's going to put these Ejaaz: in humanoid robots and whatever robots Tesla builds in the future, Ejaaz: maybe even his spaceships, if they do a cross-collaboration, Ejaaz: we already know that there's a lot of synergies between SpaceX and Tesla.
Ejaaz: This ends up becoming one of the most valuable GPU providers there could be. Ejaaz: And I wonder if Tesla starts to get valued similarly to an NVIDIA-esque for Ejaaz: maybe custom specialized chips for robots in the future. Josh: Yeah, their plan is to develop a TerraFab factory. Josh: So their plan is to actually make these chips in-house to become someone like Josh: NVIDIA, but do so in a way that's vertically integrated.
Josh: And you can see in that post, he's kind of sharing what each one of those chips Josh: are going to be used for. And we could almost reverse engineer this to create Josh: a timeline of when we'll get to AI7, which he says will be the space-based AI compute. Josh: If you assume about nine months per iteration, that takes us to 27 months, Josh: so two years and change after AI5 releases. Josh: So maybe AI5 comes out sometime later this year.
Josh: After that, we have about two years. So you're looking at like 2028, Josh: 2029, end of the decade for space-based AI compute to become really a superpower. Josh: And you have to assume that by that time, starships will be working very, Josh: very well. They'll get the cost of kilogram down. Josh: And that's probably when we'll start to see this new AI in space-based narrative Josh: actually literally taking off and getting into outer space. So I found that interesting too.
Josh: So now we kind of have this loose estimate for timelines as well. Josh: And one final bonus on the full self-driving part of this show is the real live Josh: implementation of this right now, where we're seeing this post, Josh: this person drove 13,000 miles fully autonomously from the West Coast to the Josh: East Coast and then partially back.
Josh: This was all done using a production Tesla. There was no early access information Josh: and it was actually verified through the software that's on the car, Josh: that 100% of these 13,000 miles were driven autonomously. Josh: That includes parking, that includes charging, that includes driving, Josh: detours, anything that needed to happen, it was done 100% autonomously. Josh: And I think that's why you're seeing this premium for these licenses.
Josh: And the second they go away, you're on a monthly plan, and that monthly plan Josh: is going to change price. Josh: Right now it's $100 a month, but I suspect it will continue to go up as the cost per mile goes down. Josh: And that's basically it for the autopilot section. I mean, it's exciting. Josh: It's happening quickly it's out there in production you could go sit in them Josh: today and it really does work you have your own chauffeur.
Ejaaz: To be honest, the most shocking thing from this news update, Ejaaz: Josh, is that you spent the week driving around in Waymo's, dude. You know what? Josh: Keep your friends close and your enemies closer, man. I got to know what's going on over there. Ejaaz: There's 2,500 of them out there right now, right? Josh: Oh, and it looks like it. It's unbelievable. Just a sidebar on LA. Josh: There are robots everywhere.
Josh: There's robots rolling down the street delivering food. There's Waymo's that Josh: are driving in the streets. It feels like a futuristic place relative to New York City. Ejaaz: Did you make it out to the Tesla diner this time? Josh: Yes, and enjoyed every moment of it. In fact, I was there the week that it opened Josh: up because I'm such a fanboy. Josh: It's a cool experience. I would recommend anyone who is in LA go check it out Josh: because it's really fun.
Josh: It is very good. It's all locally sourced. It's high quality ingredients. Josh: It tastes great. It's a really fun and novel experience. So it's worth making Josh: a pit stop if anyone's around. Ejaaz: Okay, well, if you guys are based in the West Coast or better yet in LA, Ejaaz: definitely go check out the diner or get a ride in a Waymo. Let us know. Is it safe? Ejaaz: Do you get into a car crash? I personally don't know.
¶ A New Partnership with Cerebrus
Josh: And share some pics. It's fun. You get an opportunity to actually sit in the Josh: future and live that before a lot of people do. Josh: So would highly advise. Now, final topic of the week here is a new partnership Josh: between OpenAI and Cerebris. Josh: I know, Ejaz, you're a Cerebris fan. Josh: You're a Cerebris guy. What's going on over here? Ejaaz: I'm more kind of concerned that OpenAI is spending money again, Ejaaz: despite them burning so much money.
Josh: How much money are we talking? Ejaaz: $10 billion over the next three years. Just $10 billion. By the way, Ejaaz: they don't have that $10 billion. Lord knows what it is for. Josh: They don't have any dollars. They haven't made a profit yet. Ejaaz: They haven't made any profit, but with ads, of course. But yes, Ejaaz: this is OpenAI's latest and greatest partnership, or rather investment, Ejaaz: which is to the tune of $10 billion in this company called Cerebrus.
Ejaaz: Now, when I read this headline, Josh, I had a flashback because I'd seen the name Cerebrus before. Ejaaz: And I remember I'd seen their name in the context of them moaning about another Ejaaz: investment, which was NVIDIA's $20 billion investment in a company called Grok, which makes custom, Ejaaz: let's call them custom GPUs, but they're not exactly GPUs. Josh: Grok with a Q. Grok with a Q, yeah. $20 billion acquisition that just happened. Ejaaz: $20 billion acquisition.
Josh: $20 billion acquisition. Ejaaz: Licensing acquisition, exactly. And NVIDIA made this acquisition so that they Ejaaz: would get access to Grok with the queues Ejaaz: LSUs, they're language-specific units or whatever the hell it stands for. Ejaaz: And basically, it allows them to process inference at a much cheaper rate. Ejaaz: And the reason why that's interesting is, okay, trading the model is all well Ejaaz: and done and you need GPUs to do that.
Ejaaz: But afterwards, you have a ton of people like Josh and I just sending prompts every single hour. Ejaaz: And it requires a different type of chip that you can make more performant, Ejaaz: save you more money, and also make you more money, right? Ejaaz: If you can lower the cost of inference, you end up making money on the back Ejaaz: end, right? That's what we all want. Ejaaz: And so opening, I thought, hmm, I don't have a Grok.
Ejaaz: What's the next best company to invest in? And that was Cerebrus. Ejaaz: Cerebrus, at the time of the NVIDIA acquisition, complained, Ejaaz: saying, Grok's not good enough, our chips are better, basically, Ejaaz: because they wanted this kind of salty that they didn't get the investment. Ejaaz: Now they're getting it from OpenAI, Josh.
Ejaaz: And so why would OpenAI do it at this time? Well, they received a big bit of Ejaaz: criticism for one of their products, Josh, and that is their coding model called Codex. Ejaaz: They were told that it was too slow and Cloud Code not only was smarter, but a lot quicker. Ejaaz: Well, Josh, a bit of news dropped in the last week, which actually you and I Ejaaz: didn't even catch. We caught it at the last minute. um Ejaaz: OpenAI dropped Codex Max High.
Ejaaz: God knows why they called it that, but it's their latest coding model, Ejaaz: which is a lot smarter than it was. Ejaaz: It's almost at parity with Cloud Code, but not quite as good. Ejaaz: But most importantly, it's quicker. Ejaaz: And the rumors state that the Ejaaz: reason why it's 15 times quicker is because they're using Cerebrus chips. Ejaaz: So they have this specific custom chip. It's huge. I've seen a picture of this Ejaaz: thing. It's the size of a dinner plate.
Ejaaz: It looks absolutely ridiculous, but it's more performant and will allow OpenAI Ejaaz: to charge more on the backend whilst also delivering enough compute for anyone Ejaaz: and everyone that wants to use it for coding. Josh: Yeah, it's a 10 times faster than GPU-based inference performance boost. Josh: So this is going to be a huge increase in performance. Josh: Now they have the performance. Do they have the actual intelligence?
Josh: That's the next question that remains to be seen. So is it going to be valuable Josh: if it's faster, even though the tokens that it's generating are a bit inferior to Anthropic? Josh: I don't know. But again, this is kind of a testament to the strategy of open Josh: AI, which is being fighting basically every war on all fronts. Josh: They're trying to win consumer. Josh: They're trying to win institutional and business.
Josh: They're trying to compete on coding while also doing image generation, Josh: while also doing video generation. Josh: So they're trying to be the best across the board. And it seems like as a result, Josh: they're becoming kind of... Josh: Not the best at anything. And I'm not sure where that strategy leads, Josh: but it appears as if they're going to continue doing that based on their ad Josh: strategy and now this acquisition of Cerebra.
Josh: So time will tell how this actually pans out. Do you want to hear. Ejaaz: My tinfoil hat Josh: Conspiracy, Josh? Ejaaz: I also read earlier this week, Josh, what is the Neuralink competitor that Sam soldered? Ejaaz: Is it Merge Labs or something like that? It's Merge, right? Josh: I think that's probably right. Yeah, I know he has a competitor. Ejaaz: Guess which AI lab made a massive investment in Merge Labs this week as well? Who? OpenAI.
Josh: No. So he's just buying his own bags across the board. It's kind of annoying. Ejaaz: It's annoying, right? Because he also secretly has equity in this thing. Josh: Is he using investor money as exit liquidity? Yes, that's exactly what he's doing. Ejaaz: Yeah, it's sus, right? Josh: On the back of a $135 billion lawsuit, I think this is probably going to be Josh: a big trend for the year, is just evaluating the...
Josh: Ethics and strategy of OpenAI as they have gone from non-profit to for-profit Josh: and now continue to acquire the same companies that are on the CEO's balance sheet. Josh: It's interesting. There's a lot of good lore here that we still have to unpack.
¶ Closing Thoughts and Future Speculations
Josh: But I think that's enough unpacking for today. We covered quite a bit. Josh: That's going to be the end of the episode. We have another roundup coming later Josh: this week. There's so much stuff to talk about. Josh: But yeah, that was another. Ejaaz: Well, I was going to say, you might have noticed if you're listening to this, Ejaaz: that we didn't mention two of the hottest topics this week.
Ejaaz: Anthropic releasing Claude Cowork and Google taking over the entire AI world Ejaaz: with four product releases, including personal intelligence. Ejaaz: We actually made dedicated episodes to both of those. And if you don't know Ejaaz: what we're talking about, you missed it. And you should definitely go and watch those. Ejaaz: In fact, Josh wrote a banger of a newsletter essay in our newsletter. Ejaaz: So you should sign up for that as well.
Ejaaz: Turn on notifications wherever you listen or watch these things. Ejaaz: I know some of you can't bear to look at our faces, so you just listen to our voices. Ejaaz: That's totally fine. Turn on notifications, subscribe. It helps us out so much. Ejaaz: And yeah, we'll see you on the next episode. We're filming a pretty interesting one.
Josh: Can we link a little bit of alpha here? Yes, please. For anyone who subscribes Josh: to the newsletter, the piece that's coming out this week, EJES, Josh: I believe, is going to be on XAI and about why XAI is undervalued, Josh: how valuable it can get, kind of a continuation of the conversation we had today. Josh: So if that seems interesting, that's going to drop on Wednesday of this week.
Josh: So subscribe in order to get access to that and see a little bit more detail Josh: as to why we suspect XAI is going to have the success that we believe it will Josh: be, which will be very, very high. Josh: But yeah, that concludes the episode. Thank you all so much for watching. We appreciate it. Josh: Appreciate you sharing with your friends, doing all the good things. Josh: And we will see you guys in the next one. Ejaaz: See ya.