¶ AI Market Shock
Ejaaz: Google might have just popped the AI bubble. They released a new algorithm yesterday, Ejaaz: which shrinks the requirement of memory needed to run an AI model, Ejaaz: which isn't great news for the top memory stocks, which had billions of dollars Ejaaz: of their market cap wiped out over the last 24 hours. Ejaaz: We're looking at SanDisk is down almost 7% today. Ejaaz: Micron is down 18% over the past five days, the majority of that yesterday.
Ejaaz: And SK Hynix, another major memory provider is down 6% today. Ejaaz: It's absolutely decimated the market. We're going to get into this story and Ejaaz: so much more on this episode. Josh: Yeah. And some important context to know before we get into this is the reason Josh: why these memory stocks are so high is because memory has been the single largest Josh: constraint in the world of AI. Josh: If you have ever tried to build a PC or buy a PC in the last 12 to 18 months,
Josh: chances are it's almost doubly as expensive as it was the previous 18 months. That's because AI. Josh: It's what happened when crypto stole all the GPUs. AI is taking all of the memory Josh: and memory is the limiting factor memory is what serves inference whenever you Josh: ask chat gpt or anthropica question, Josh: When it serves you the answer, that uses inference, that uses memory.
Josh: So memory has been the single crux. It's the reason why companies haven't been Josh: able to scale as fast as they want, because the costs have been out of control.
¶ Google's TurboQuant Breakthrough
Josh: This algorithm changes things a little bit. This changes the math here just Josh: a smidge, but enough to make it scare the market entirely, right? Ejaaz: Yeah, it changes it in a huge way. And the wildest part is the Google research Ejaaz: team made this public and available for everyone to read the blueprint of.
Ejaaz: So it's called TurboQuant, and they're describing it as a new compression algorithm Ejaaz: that reduces LLM key value cache memory by six times and delivers up to 8x speedup. Ejaaz: So let me translate what that means. Ejaaz: When you type or speak to an AI model, it has a short-term memory. Ejaaz: Think about like humans, they kind of hold things in their head for a bit, Ejaaz: and then they go to bed, and then they commit some of those memories for long-term
Ejaaz: memory, and some of those they kind of discard. But LLMs work in a similar way, Ejaaz: and it's called the cache memory. Ejaaz: Now, the issue with LLMs are that cache memory, as you talk to an AI more and Ejaaz: more, gets really quite big and bloated, which means that AIs are very expensive to run. Ejaaz: That's why we spend so much money on GPUs. That's why these data centers cost Ejaaz: billions of dollars to build out. Ejaaz: It is part of the reason when you inference a model.
Ejaaz: Now, what Google did was they released an algorithm which said, Ejaaz: hey, yeah, you know that thing that bloated up your AI model? Ejaaz: We can cut that down pretty massively by six times, actually, Ejaaz: and save you a ton of money. Ejaaz: So the world is going crazy with this new research, because if you could scale Ejaaz: this up to Claude or ChatGPT, you may not need as many GPUs as we originally Ejaaz: thought to serve Frontier AI models to anyone.
Josh: Yeah, it's a really big deal. Like you mentioned, every time you message a chatbot, Josh: the model stores your entire conversation in that KV cache. Josh: And on a large model, like the 70 billion parameter model, if you run a long Josh: conversation, that cache will eat up to like 40 gigabytes of space on your GPU, Josh: which is more than the actual model itself.
Josh: So that's why this is such a huge issue. And the big breakthrough here is that Josh: Google can do so without any loss functions. Josh: If anyone's a Silicon Valley fan, the TV show, the crown jewel of the entire Josh: show was this middle out compression algorithm that didn't have any loss function. Josh: You can just compress the data without losing any of the quality. Josh: And Google's announcing that they've actually done this.
Josh: They've actually solved this problem. And that's why the memory market is freaking out. Josh: It's like, oh my God, wait, if we can get six times the compression, Josh: eight times faster on the same GPUs, surely there will be less demand for memory. Ejaaz: Well, despite these stocks being down massively, I think the market is kind of overreacting. Ejaaz: This is a good thing for AI in general, and it will lead to more consumption of AI.
Ejaaz: It's great that the AI models become cheaper to inference and that it frees Ejaaz: up space for us to compute other AI prompts and queries. Ejaaz: Jevon's paradox is going to occur here in the same way that people were kind Ejaaz: of crapping on GPUs and saying these things are too expensive and aren't going to get cheaper. Ejaaz: The same thing is going to happen with memory here. It's not going to result in less demand.
Ejaaz: It's going to result in even more demand. The demand for AI products right now Ejaaz: is insatiable, and I don't think this changes anytime soon. Ejaaz: The other part is, I think that what Google has created here Ejaaz: is something that's going to take time to scale out. This is not going to happen tomorrow. Ejaaz: This is a research paper, which you and I were actually joking about before Ejaaz: we started recording, was released 11 months ago.
Ejaaz: But because the paper was so complex and had so many algorithms and mathematical Ejaaz: formulas, it didn't actually surface to the public until yesterday. Ejaaz: And everyone was like, wow. So it takes time. Ejaaz: Since those 11 months, we haven't scaled it out to major models just yet. Ejaaz: This only applies to small to medium models.
¶ Memory Market Reactions
Ejaaz: But I can imagine the scaling to frontier models at some point, Ejaaz: which will be a win-win for both sides.
Josh: I mean yeah there's there's no reason why you wouldn't be focused solely Josh: on this right it's like if you can serve six times the inference on the Josh: same amount of gpus or tpus or whatever gpu accelerator you're Josh: using that's a huge breakthrough for any company and it also Josh: extends past the cloud it moves to local inference as Josh: well it's like if you're running a mac mini or you're even Josh: on your iphone the amount of intelligence you
Josh: can run on a model that is six times more efficient Josh: eight times faster and has zero Josh: loss function is a really big deal and i think google Josh: may be moving towards this what i see this trend happening with Josh: google is i mean they have the tpu they're building their own stack Josh: they have the partnership with apple to get into all of the iphones they have Josh: their like kind of android division they're they're publishing their research
Josh: publicly to disrupt the market as they go it's a really noteworthy strategy Josh: from google and it seems like as always they're leading on the thought leader Josh: front right they've always been the top tier of research we'll see how they Josh: can implement this into actual products Josh: But it seems like the market's wrong. I can't imagine a world in which there Josh: is less memory demand as a result of this.
Josh: Like, as you said, there will only be more. If we get six times more intelligence, Josh: we will gobble that up so quickly. So market seems like it's wrong. Josh: Maybe it's just an excuse to dump because the stocks have gone up so much over the last 12 months. Josh: But I wouldn't be too worried about this if you are a owner of any sort of memory.
Ejaaz: It's actually very bullish Google stock, in my opinion. I actually bought a Ejaaz: bunch more when this came out because I was like, oh, this is going to result Ejaaz: in massive efficiencies for AI. Ejaaz: Another thing is like, lest we forget, Google has been like the pioneer of a Ejaaz: lot of these different AI trends. Ejaaz: Like one of the earliest LLM formations was from a bunch of Google or ex-Google researchers.
Ejaaz: TPUs they've been working on for over a decade now. So they saw the GPU trend Ejaaz: like way, way, way in advance. And now they're doing the same here. Ejaaz: My question to you is, why do you think they publicize this for everyone to see?
¶ OpenAI's Sora Shutdown
Ejaaz: Surely this, like i saw a few comments about this as well like surely they should Ejaaz: have patented this because this is a pretty sick algorithm that now like any company can use Josh: Yeah i don't think the patenting thing really works anywhere Josh: at all because a lot of this stuff is just a couple lines of Josh: code it's like andre wrote auto research and it's Josh: 600 lines of code it's like someone will take it Josh: someone will use it the the race is far too powerful
Josh: far too there's far too much of a monetary incentive to Josh: do this and you could think of it almost like google's deep Josh: seek moment where deep seek created this unbelievable Josh: research dropped the bomb they got all the publicity but Josh: then the rest of the market kind of rushed to tackle that this is google dropping Josh: their their deep seek moments and i think it's it's noteworthy it's really impressive
Josh: for google google has been kind of at the forefront of all this stuff and they're Josh: proving that their research team really are super impressive and have the ability Josh: to continue to lead the frontier forward. Ejaaz: So speaking of companies that are at the frontier, one of those companies are Ejaaz: falling behind this week, Josh. Josh: We got to do a little victory lap, slam dunk. I'm not really sure how to frame this.
Ejaaz: But this is about Sora. Yeah, let's start with the victory lap, I guess. Ejaaz: So Sora, for those of you who don't know, is one of OpenAI's winning consumer apps. Ejaaz: It is their AI video generation app that functions very similarly to TikTok. Ejaaz: You kind of scroll through Reels, but all the videos are air-generated. Ejaaz: But the coolest part is you can feature yourself in them. Ejaaz: You can feature your friends or any kind of IP or characters.
Ejaaz: This week, they announced that they were sunsetting the entire project. Ejaaz: Sora, which six months ago wasn't a thing, is now dead. Ejaaz: Some fun stats from Sora's very short but mighty reign. Ejaaz: Within the first day, they achieved over 5 million downloads, which is just insane.
Ejaaz: I don't think any other app has done that before. they also hit Ejaaz: number one and stayed at number one of the apple app store and i Ejaaz: think the android play app store as well for a number of different Ejaaz: weeks but it wasn't without any kind of Ejaaz: grimace the public was split hollywood is basically uh how do i say um dancing Ejaaz: on their graves uh open ai is shutting down its ai video slot making platform
Ejaaz: sora and if you look at the comments from different people it's just like did Ejaaz: we just win uh people are like saying like this is such a big W. Ejaaz: So people are generally happy outside of their AI sphere. But I don't know, Ejaaz: Josh, how do you feel about this? Are you happy? Josh: Yeah, well, this was just a failed experiment in the way that Meta did. Josh: I forget. I don't even remember Meta's. What was it? Ejaaz: Vibes?
Josh: Vibes perhaps vibes where they tried to do the same thing it Josh: was tiktok but for ai and open ai tried tiktok but Josh: for ai again but through the sora platform and i Josh: am i mean we said this was stupid i haven't opened the Josh: app since the week of i think there's there's a Josh: harsh reality that open ai is learning that they perhaps don't understand Josh: just due to the nature of them being a new company sam really
Josh: this is his first large company that he's run but i mean Josh: it seems like a very predictable outcome when you just look Josh: at what standard consumer behavior is and you kind of compare to other platforms Josh: because when you think about a platform like Josh: meta right it has two billion users or something like that and particularly Josh: on instagram how many people of those 10 billion actually want to create content
Josh: maybe 10 million maybe 0.5 percent of the people would actually be serious creators Josh: and the reality is is that almost every single human just wants to scroll and Josh: zone out instead of spending energy like conceptualizing and editing these complicated things, Josh: The novelty factor of it was very fun, but people don't want this and it's not that good.
Josh: And I think that novelty wears off. It's like we created those videos that show Josh: us and you in them, and it was really cool for like two hours, Josh: but creating a dedicated application where you have to go and download it and Josh: you have to use it outside of the ChatGPT OpenAI universe is very annoying.
Josh: Had they rolled this up into the same app that everyone's using every day with Josh: ChatGPT, maybe that's a different story, but it's, I don't know, Josh: it's tough to kind of reason why they would have gone through with this in the Josh: first place the way they did. Ejaaz: Let me try and argue the other side. I think what Sora did really well was they Ejaaz: made it really easy if you were super lazy, but you kind of had an idea for Ejaaz: a piece of content to make that content.
Ejaaz: Just write it in words, takes a couple seconds, maybe max a minute. Ejaaz: And then a couple of minutes later, you have a fully fledged video. Ejaaz: Now, obviously, Sora v1 wasn't that great. Ejaaz: Sora v2 started to improve and become much better. Sora v3 was way better, Ejaaz: but there was still some AI cringiness around this. I do think this improves Ejaaz: with a bunch of now other AI models that still exist to do this.
Ejaaz: CapCut actually yesterday released their own version just as Sora was sunsetted Ejaaz: that uses Seed Dance 2, which is a Chinese AI model. Ejaaz: And my God, the content that creators can now create just through words looks insane there. Ejaaz: And then you have Grok Imagine on the ex-AI side under Elon Musk, Ejaaz: and they're piling so many millions and millions of dollars to try and improve that model.
Ejaaz: So there is something there. I just think that a lot of this reason behind OpenAI doing this is Ejaaz: One, they're constrained on cash. They've spent a lot of money on GPUs, Ejaaz: Stargate. They had to sunset that. Ejaaz: And now they're figuring out that they need to focus all their cash and resources Ejaaz: on building the best LLM to beat Anthropic and the best coding AI to beat Anthropic, Ejaaz: who is, quite frankly, eating their lunch right now.
Ejaaz: But there is another bit of news, which I didn't realize immediately. Ejaaz: But then I noticed Disney. Ejaaz: OpenAI had signed a $1 billion deal with Disney through Sora. Ejaaz: And the idea here was Disney would invest $1 billion in OpenAI, Ejaaz: and OpenAI would also get access to Disney's IP and characters and make them Ejaaz: super famous on Sora via the AI-generated type of video medium. Ejaaz: It sounds like Disney didn't even know.
Ejaaz: I've seen multiple tweets like this, where on Friday, they were signing a deal Ejaaz: with OpenAI, and then on Wednesday of this week, when they decided to announce Ejaaz: the news that they were shutting down Sora, the Disney team had no idea. Josh: It's tough. I think this is a good lesson. there is this quote from Johnny Ive Josh: that I love that I think would be nice for Sam Altman to hear when he was asked Josh: about what Steve Jobs taught him about focus.
Josh: And he says, this sounds really simplistic, but it shocks me how few people Josh: actually practice this. Josh: One of the things that Steve would say to me was because he was worried that Josh: I wouldn't focus. He would say, how many things have you said no to? Josh: And I would tell him, I said no to this and I said no to that. Josh: And he would create these sacrificial things that he was saying no to.
Josh: But focus means saying no to something with every bone in your body you think is a phenomenal idea. Josh: And you wake up thinking about it, But because you are focusing on something Josh: else, you can't work on that one thing. Josh: And OpenAI does not have that focus. Josh: OpenAI is creating these sacrificial things. They are not deeply focused on Josh: one thing. And that's why there's Josh: four different apps you have to download to use all of their tools.
Josh: There's just all of these spread attempts at creating virality, Josh: at manufacturing virality through TikTokification of it, through this like image Josh: generation of the Studio Ghibli stuff. Josh: None of it is just building their core thing. And I think when you look at Anthropica, Josh: when you look at OpenAI, and the difference between the two is that one has Josh: focus and one does not. When you look at OpenAI...
Josh: You see five different product SKUs. They're all kind of all over the place Josh: with different intentions. Josh: When you look at Anthropic, they're the best coding model in the world. And that's it. Josh: Everyone can converge on that one point. And therefore their velocity is so Josh: fast. That's why we just filmed an episode yesterday. Josh: Everyone should go watch about the eight updates they published in eight weeks Josh: that basically entirely replaced OpenClaw.
¶ OpenAI's Focus Shift
Josh: They have the focus. And I'm hoping that OpenAI can now kind of shift this focus Josh: into this singular place and start to move towards this new organization that Josh: they are calling AGI Deployment. Josh: This is crazy. They're preparing for AGI already. Ejaaz: Yeah, so the team is basically getting reshuffled under a product organization Ejaaz: within OpenAI called AGI Deployment.
Ejaaz: And this kind of harkens to a wider strategy that OpenAI has assumed for the Ejaaz: last couple of months now, which is to build the best LLM, build the best coding Ejaaz: AI model, and also the best world model, which is actually where the Sora team Ejaaz: researchers are moving to. Ejaaz: They're going to focus on building a world model, which basically helps AI models
Ejaaz: see the world and understand the physics of the world. the advantage of this Ejaaz: is you get to better understand how humans perceive and interact with the world, Ejaaz: which is something that LLMs can't do. Ejaaz: Think of LLMs as an AI model that sits in the library and reads all the books, Ejaaz: but doesn't actually experience the world for himself. Ejaaz: World models actually help you understand the world. That's what the Sora team
Ejaaz: is going to focus on right now. And that's super exciting for one major reason, which is robotics. Ejaaz: Robotics is going to be a huge thing. Ejaaz: OpenAI teased robotics in one of their major announcements a couple of weeks Ejaaz: ago. So we know that they're going to focus heavily on that.
¶ SpaceX IPO Rumors
Ejaaz: And I do think that's a smart move. Ejaaz: I'm bullish OpenAI after all of this. But just to recount, this isn't the only Ejaaz: major pivot they've made over the last week. Ejaaz: Over the last couple of weeks, they've done quite a few things. Ejaaz: So they've sunsetted Sora. Ejaaz: They've announced that their Stargate project, which was like their major project Ejaaz: to scale GPUs across the globe, is now canceled one year later due to funding issues.
Ejaaz: And Altman said that like, you know, Ejaaz: I'm never going to release ads on the platform. He ended up doing that. Ejaaz: In-app shopping completely failed and flopped. And now they've got to redesign Ejaaz: that entire thing but it's been put on pause for now until they focus on all Ejaaz: this other stuff all of this to say Ejaaz: I think OpenAI is going to IPO soon, Josh. And I don't know what you think the Ejaaz: odds are for this, but we should probably like bet on that.
Josh: Well, if only we had a marketplace for it. And thanks to our friends at Polymarket, when will OpenAI IPO by? Josh: And the answer is kind of surprising where there's only a 36% chance that they'll even IPO this year. Josh: And I think earlier in the year, this would have been a little bit different, Josh: but it appears as if there's been some trouble in paradise for Anthropic. Josh: Maybe that is moving over to OpenAI.
Josh: The reality that we're starting to see now is SpaceX might be the big one, and that might be it.
Josh: Um which is a little disappointing because i was hoping this would be Josh: the year of all of the ipos but according to polymarket 36 chance Josh: and if you think it's happening this june there's four percent chance so that's Josh: absolutely not happening spacex is going to be the one that will be taking that Josh: crown uh polymarket thank you very much for sponsoring this part of the episode Josh: and maybe we should just go right
Josh: into spacex and their ipo which now is rumored to be filing next week, Josh: confidentially this will not be public but they will do their confidential s1 Josh: filing later this week, early next week, which would point them to a public listing, Josh: around the first couple of weeks of June. This is a really big deal for the Josh: world because, I mean, this is likely to be now over a $2 trillion IPO.
Josh: That's the biggest IPO by far. This is going to be the largest thing to enter the market. Josh: It's going to be larger than the GDP of some countries, and it will just go Josh: live on the New York Stock Exchange or the NASDAQ sometime in a few months from Josh: now. We're getting close. Ejaaz: What a sequence of events to get us to this point. we had the rumors of SpaceX Ejaaz: and XAI emerging and then it happened.
Ejaaz: Now we have rumors of SpaceX and Tesla merging. But first, I think we're going to get the SpaceX IPO. Ejaaz: Rumors also say that they're going to be raising $75 billion in this listing, Ejaaz: which is just absolutely insane and probably the largest raise that's ever been Ejaaz: done on an American public stock market. Ejaaz: The other thing is this comes off the back of Elon announcing some pretty ambitious Ejaaz: projects for SpaceX itself.
Ejaaz: They're going to be launching a TerraFab. We made an episode about this. Ejaaz: Definitely go check that out, which is a gigantic AI chip factory. Ejaaz: They're going to be launching 80% of those chips into space via SpaceX. Ejaaz: So it's going to become this whole monopoly of like AI in space, Ejaaz: which I can't wait to see. Mass drivers on the moon. Ejaaz: Definitely go check out that episode earlier this week. But yeah,
Ejaaz: it's going to be one of the biggest IPOs, Josh. Are you buying it? Absolutely. Josh: I cannot miss it. I currently own SpaceX. It's the only private company I own. I'm ready to buy more.
¶ Apple vs AI Vibe Coding
Josh: I think it's going to be the most valuable company in the world. rolled in with tesla and Josh: i could not be more bullish more optimistic more excited for the future with Josh: these companies if elon's predictions are right we'll be seeing nvidia at 10 Josh: trillion and spacex and tesla will be right there with them um the companies Josh: are going to grow quick i think the spacex ipo is very much the starting gun
Josh: now there is another gun that's been fired and it's been a not not a good one Josh: from apple not a good because they have been, Josh: banging out all the applications of everyone who Josh: wants to get in the app store now there's been a recent issue with the app store Josh: is now the fact that anybody can make apps means that a lot more people are Josh: submitting apps so for the larger companies and the smaller companies like if
Josh: you have an app in the app store it's taken a lot longer to get your app approved Josh: whether it be for just a normal update or to release an actual app and now it Josh: appears that apple has stopped, Josh: allowing updates for popular Vibe-coded applications? Ejaaz: Yeah, they've basically put a Ejaaz: not official, but unofficial halt on anyone launching AI Vibe-coded apps. Ejaaz: And I'm confused about this for a few different reasons.
Ejaaz: Number one, if you look at a chart of app launches on the App Store over the Ejaaz: last year, before Vibe-coding became a thing, it had completely plateaued. Ejaaz: No one was making apps anymore. And that was becoming an issue for the Apple Ejaaz: app developer ecosystem. They're Ejaaz: actually kind of trying to encourage developers to build more things. Ejaaz: Then AI vibe coding came along and suddenly they had a flourish of different
Ejaaz: vibe coded apps. Now granted, 90% of them were crap, Ejaaz: 10% of them were pretty good. We got the replets of the world, Ejaaz: which helped other people kind of build apps just by typing words or talking to an AI on your phone. Ejaaz: And replet as a company is worth, I think, $9 billion. As of last week, Ejaaz: they did another massive raise. Ejaaz: So we aren't talking about small fish here. These are pretty big fish.
Ejaaz: Apple just cut them at the head this week or last week over the last seven days Ejaaz: by saying that they are not going to encourage AI vibe coding anymore. Ejaaz: And it just signals that monopolies like Apple, which have a chokehold on the Ejaaz: app ecosystem like this, that take a massive 30% cut off of fees. Ejaaz: We saw this happen in the crypto world as well, where people wanted to allow Ejaaz: transactions. Apple said, we'll allow it for a bit and then we don't want this.
Ejaaz: They're now doing it with Vibe coding. I don't get the issue for them unless Ejaaz: there's like major security exploits. I just don't think this is a good move in general. Josh: This topic actually makes me pretty sad as an Apple fanboy, not because of what Josh: they're doing to the developers, which is messed up.
Josh: And i don't like but the idea that apple is going Josh: to exist as the king as it stands now Josh: is just an impossibility in this new world when you Josh: think about how easy it is to generate one of these apps and how easy it is Josh: just to sideload them onto your phone like anyone with a Josh: test flight account can vibe code an app of whatever you've ever wanted an iphone Josh: app to look like you can send it direct to your iphone you can't put on the
Josh: app store but you can send it directly to your iphone and you could have your Josh: own version of your dream app and it can do whatever functionality you want Josh: and you're one prompt away from updating it and editing it and changing it to do whatever you want. Josh: And the fact that it's so accessible now, and Apple is... Josh: Clearly not leaning into adopting this new paradigm shift, there's this clash Josh: that's happening. And we're seeing it here with this vibe coded apps.
Josh: They're not the good guy anymore. Josh: They're not the person who is helping developers do what they want, Josh: empowering them for this new paradigm of engineering. Josh: They are the bottleneck. They are the like hammer who is stopping people from innovating. Josh: And that to me makes me really sad. And that has always throughout history been Josh: a losing formula. So I hope they turn it around. Josh: We just got a WWDC announcement, which is happening in the next month,
Josh: I think. I forgot the dates. Josh: But that's going to be their time where they're going to showcase all of the new AI stuff. Josh: That's when they initially announced Apple Intelligence. It was the biggest Josh: flop of all time. They're going to try to do it again. Josh: Hopefully, they'll come out with some new policies to address this. Josh: And hopefully, they'll have a chance to turn the ship around. Josh: But that is their last chance.
Ejaaz: So something tells me, Josh, correct me if you think I'm wrong, Ejaaz: that this may not be an outlandish move by Apple.
Ejaaz: It might be a strategic one because we also got some other news that broke this Ejaaz: week, that their deal with Google, Ejaaz: the deal with Google, where they pay Google $1 billion and get access to Google's Ejaaz: Gemini AI models, what we originally thought was going to be some kind of licensing, right, Ejaaz: actually is Apple getting full access to Google's Gemini model weights, Ejaaz: which means that they can fine tune and build the model in any way that they
Ejaaz: want, they get full access to a model that Google spent hundreds of millions Ejaaz: of dollars training years training just for a billion dollars a year. Ejaaz: I don't know what's going on here. And it just means that Apple's got an absolute Ejaaz: steal of a model, a Frontier LLM from Google, and they can now run with it and Ejaaz: build their own AI apps, which is presumably what I think they're going to do. Josh: This is a huge win for Apple. And we have to ask the question,
Josh: why is Google doing this? And I Josh: I think it kind of pairs to that first topic that we spoke about, Josh: which was that research paper where they're kind of democratizing intelligence Josh: as best they can with TurboQuant, right? Josh: It's like they're increasing the efficiency, they have their own custom TPUs Josh: to make the price per token down.
Josh: And when we consider what the most existential threat in the world of AI is, Josh: it's that edge inference and local inference gets really good so that you don't Josh: need to generate tokens from these megacloud providers. Josh: And I think the reality is that it's becoming more and more true because we Josh: have now these turbo quant models that are going to be six times more efficient.
Josh: We have Apple who is taking Gemini models which are leading edge and distilling Josh: them down into something that runs on your iPhone and the majority of the people Josh: don't need world-class intelligence. Josh: They don't need the bleeding edge stuff that is solving new physics and math.
Josh: They just want it to solve the day-to-day stuff and this Josh: is possibly a hedge against that for Google is they're Josh: creating the problem by throwing out papers like turbo quant Josh: but then they also have access to the solution which is apple i Josh: mean when we think about where the most local inference is held it's just Josh: on the entire apple network on your laptops on your iphones you can run these
Josh: unbelievable models and now apple has the ability to do that with gemini and Josh: i think it's strategic it makes sense they're collecting a paycheck they have Josh: a great relationship with apple they've been doing it with the browser forever Josh: and this is just a natural extension of that apple. Ejaaz: Has all the distribution. Ejaaz: They have 2.5 to 3 billion live Apple devices active in the world right now.
Josh: The Mag 7 stocks too. When you look at the Mag 7 stocks who've been like suffering Josh: the most, Apple suffered the least. Josh: It's just out of the race. It's right there unaffected by all of it. Ejaaz: Yeah, they stayed number two market cap in the entire world for a company without Ejaaz: touching a single GPU expenditure, without a single AI CapEx expenditure. Ejaaz: Just insane strategy from them.
Ejaaz: They hold a very rich and important moat. But looking at Google as well, Ejaaz: they're smart because they know that Apple won't win any of this AI stuff unless Ejaaz: they get access to a major frontier LLM. Ejaaz: Google's bet here is compute plus data equals the best model in the world. Ejaaz: Apple does not have the compute. They do not have the model.
Ejaaz: Google can supply that for them. And something tells me that whereas Google Ejaaz: might not be getting paid as much by Apple, they're going to exchange or broker Ejaaz: a deal where they you get access to some of Apple's user data, Ejaaz: which they can then use to train a better model, and it becomes this synonymous thing.
¶ Google and Apple's Strategic Moves
Ejaaz: But now, if the future is actually locally run edge compute models that run Ejaaz: on your laptop that are frontier, then Google's shot themselves in the foot, Ejaaz: maybe shot themselves in both feet at this point. But it's a bet they're making. Ejaaz: And I think, I don't know, I think Google might have this one, if I'm being honest. Josh: Yeah, I'm rooting for them. I'm also rooting for Meta now, who has this like Josh: unbelievable pay package that I just saw.
Josh: $9 trillion is the valuation they need to exercise all these pay packages. Josh: Like, okay, Elon, okay, Tesla board. I've seen this before. Josh: What's the deal with this milestone package here? Josh: Because a $9 trillion valuation for Meta, that seems like a lot of money. Ejaaz: Okay. So two things have happened over the last week, which are at extreme odds at each other in Meta. Ejaaz: Number one, they are closing down their metaverse division and rumored to be
Ejaaz: laying off up to 20% of the company. Now, these employees range from low-level Ejaaz: product employees, engineering employees, all the way up to senior director roles. Ejaaz: But this week, news also broke that they are going to be rewarding or they've Ejaaz: offered very attractive comp packages to their top executives to the tune of Ejaaz: $800 million for one person, their CFO.
Ejaaz: But it's under one premise and condition, which is over the next five years, Ejaaz: Meta needs to hit a $9 trillion. Ejaaz: That's with a T, dollar market cap. Just for context, no company in the history Ejaaz: of the world has ever hit that market cap. Ejaaz: In fact, the biggest and largest and most important company in the world right Ejaaz: now, NVIDIA, is currently sitting at $4.5 trillion.
Ejaaz: So we're talking about a 2x for that. And for Meta, who is currently sitting Ejaaz: in, I don't know where, are they still in the Mag 7 at this point? Ejaaz: If so, I think they're like six or seven. They've got a long way to go, Ejaaz: but it's interesting seeing the incentive design that Zuck is setting up. He spent Ejaaz: I think upwards of $30 billion hiring 200 people this year and hasn't released a single AI model.
Ejaaz: Llama, their open source model is dead in the water. All the apps that they've Ejaaz: released have been crap. Ejaaz: So Meta is kind of making a big bet here. And I don't know if they're incentivizing Ejaaz: the right people, if I'm being honest.
¶ Meta's Ambitious Goals
Josh: I'm rooting for them. I hope it works. I mean, in five years, Josh: there will be a $9 trillion company, possibly multiple of them. Josh: So there is a world in which Meta can achieve this. The problem is that they Josh: haven't actually done anything to make progress towards that recently. Josh: Like they've spent all this money, they've hired all this talent, Josh: they haven't released anything compelling.
Josh: They haven't actually proven that the money that they're spending is working. Josh: In fact, the counter argument to that is true, where Meta, the company, Josh: just crushed the division that was responsible for renaming the company Meta. Josh: So clearly there has been a series of big swings that haven't worked, Josh: and we've yet to actually see a big swing that has worked, everything's failed.
Josh: Like you said, the open source models have failed. The pivot to the metaverse has failed. Josh: Everything besides the core product of Facebook, which is their, Josh: algorithm and their home feed and their social media platforms hasn't worked Josh: out. Even the hardware sucks. Josh: So they have a lot to figure out if they want to make this work. Josh: But I'm rooting for them. Josh: Zuck's an amazing CEO. I am like very hopeful that he can figure this out.
Josh: And this incentive structure is the right way to do it. You want to incentivize Josh: people to bring the value. I hope they can bring the value.
¶ Unveiling Josh's Music Secret
Ejaaz: Now, for the last story of this episode, I want to introduce the listeners and Ejaaz: watchers of this show to a secret, a secret within Limitless that none of you Ejaaz: have ever known or has been publicized before. Ejaaz: And this secret is about our co-host, Josh. Josh is a part-time music producer, Ejaaz: and he releases absolutely banging tunes for the world to hear. Josh: Yes. And this part-time skill actually originated about two weeks ago with the Josh: advent of Google Lear A3.
Josh: And the fact that now I can make music with a single prompt, Josh: maybe a sentence or two. So that's what I did today. Josh: I said, generate me a three minute song about the Limitless podcast and how Josh: it's the absolute best number one podcast in the world. There's nobody better. Josh: The AI is scared of our show because it's so good. This just sounded like an Josh: R&B hip hop type vibe. And we've spoken about Lyria 3 before of the show.
Josh: Lyria 3 is the music generation software from Google where you can prompt it, Josh: you say what you want the song to be about, you say if you want lyrics or not, Josh: what type of lyrics you want to sound, or you just let it run wild and choose everything for you.
Josh: So that was all the instruction i gave and it generated me Josh: a song named no logic for the soul Josh: which is very elegant i love i love the artwork it has like this cloud and these Josh: roots and it's it's very good but the song is good so i want to play you a little Josh: clip here of this song i'm not sure if you've had a chance to really enjoy the Josh: full thing neither of us have so we're going to experience it for the first
Josh: time together but this is our new original no logic for the soul enjoy okay. Ejaaz: That has to be a new outro song, Josh: Josh. That is a banger. It's unbelievable how good this music is. So good. Josh: The lyrics, not only do they make sense, but they rhyme. They have the right timing and cadence. Josh: The chorus is great. They had a full horn section in there. Josh: I mean, it's amazing, right? Because you think about the previous generation Josh: and how they enjoyed music.
Josh: We had the Rolling Stones, the Beatles, the Grateful Dead. Josh: These were generation-defining artists and musicians.
Josh: And the reason they were so powerful is because there was convergence around Josh: them you go on the radio it's playing their music you talk Josh: to your friends they have their cds and their vinyl records you go Josh: on the street this is what's being played because this is what's available and Josh: it was great but it was really the best that was available and everyone could Josh: kind of converge on that fact the idea that you can now generate good music
Josh: not great music but good music and good enough for people who don't really care Josh: to seek out great music implies the fact that we might never have anything like that again. Josh: There might never be another Grateful Dead, another Rolling Stones, Josh: another generational defining artist because it's so accessible. Josh: If you look at the top charts on Spotify, it's the top trending tracks on TikTok. Josh: And there's this direct correlation between the two. And it's stripped out a
Josh: lot of the humanness of artistry. It creates a whole different paradigm. Josh: And listening to this really hits hard. I'm like, okay, yeah, it's actually over. Josh: The fact that I can do this with a two-sentence prompt. I did this in 30 seconds. Ejaaz: How long is the track, Josh, as well? Josh: And the track is three minutes long. It's two minutes and 57 seconds. Ejaaz: That's a regular song. That's a song that could go viral and like take over the Spotify charts.
Josh: And like if we did some prompt engineering, if we really refined the prompt Josh: from more than two sentences to like a proper setup where there's many, Josh: many paragraphs, many, many details, you kind of outline the lyrics and you Josh: outline the cadence and what you want. Josh: You can get unbelievably detailed with this and it sounds good. That's a good song.
Josh: So it's tough. I mean, this is one of those bittersweet moments where you're Josh: like, holy shit, this is amazing, but holy shit, this is pretty powerful stuff. Ejaaz: Now, I know there are a bunch of audiophiles listening to this thinking, Ejaaz: God, Josh and Ijaz have no taste. Ejaaz: May I just remind you, this is the worst this model will ever be.
Ejaaz: It's the worst. It's only going to get better. And there's already been a bunch Ejaaz: of AI soundtracks that have gone completely viral. Ejaaz: In fact, last week, Spotify had to shut down an AI music band, Ejaaz: which they didn't realize was an AI music band, because they just didn't like that it was AI. Ejaaz: But it was absolutely plugging through a bunch of streams. I think it gathered Ejaaz: like 300,000 streams over the last month.
Ejaaz: Just insane. So these things aren't going away. Another thing I wanna point out is Ejaaz: OpenAI just sunsetted Sora, which was the video generation of AI video generation version of TikTok. Ejaaz: And now we have Google Liria, which is kind of doing a similar thing for music. Ejaaz: So I don't think artistry and that type of medium is going away. Ejaaz: There is an insatiable amount of demand. Ejaaz: It helps music producers themselves kind of express the type of sound or song
Ejaaz: that they have in their head. So I think as a medium of translation, Ejaaz: these AI tools are really valuable. Ejaaz: But to your point, Josh, we are going to end up in a world where maybe everything Ejaaz: sounds kind of beige and consistent. Ejaaz: But I'm going to take the optimistic side of that, which is I think it's going Ejaaz: to force humans and AI alike to be even more creative and come up with better Ejaaz: soundtracks. I'm excited.
Ejaaz: And to your point around the Grateful Dead, you can now, I don't know, Ejaaz: technically license their IP and create a never-ending album of their music. Ejaaz: So maybe that's an angle as well. Josh: Deadheads are not liking this at all. Oh man, this is going to disturb a lot of people. Ejaaz: But it's here. Josh: And like you said, it's the worst it will ever be. It's up only from here. Josh: The quality will get better.
Josh: Of all of these tools, as Meta goes to $9 trillion, as Google disrupts entire Josh: industries, it's all happening so fast.
¶ Future of AI Music
Josh: That is another week fully covered in the books. If you've made it this far Josh: in this episode and you've listened to the three previous episodes from this Josh: week, you are now fully caught up.
Josh: There's nothing you need to know that you don't already know you can Josh: go enjoy your weekend go touch some grass go hang out with a friend with um Josh: do some analog stuff maybe that's kind of cool because i'm sure Josh: everyone's just been in the trenches on um on their Josh: devices watching the war zone all week but Josh: yeah thank you guys so much for watching as always if you enjoy this episode
Josh: don't forget to share it with your friends who might also enjoy it uh subscribe Josh: to our newsletter which is awesome it comes out twice a week we publish on x Josh: all the time pretty prolifically now we're getting lots of action here's our Josh: handles that you can find on screen right now Each has any final party thoughts Josh: before we head off for the weekend?
Ejaaz: Um yeah i want a few of you to generate uh both josh and i individually and Ejaaz: together our own songs and jingle let's see if you can come up with the best Ejaaz: limitless intro outro song and maybe we'll feature it on a Josh: Future that would actually be cool and send it to us on on x Josh: because you can embed it in the post and we could just save it Josh: from there so if you generate something tag you guys and
Josh: i on x and we will listen to it and maybe find a new intro outro track that Josh: would be kind of that would be or a theme song i love a theme song we'd be like Josh: superheroes we could have a theme song before we get on on camera that'd be Josh: sick well anyways i know this was a long one so if you made it through i mean Josh: 40 minutes of this show thank you you're a real one much appreciated as always Josh: have an amazing weekend and we'll see you guys soon.