Gerstner contextualizes AI investment by noting Meta alone spends $20B yearly on AR/VR for comparison.
“Meta's gonna spend 20,000,000,000 in one year alone on ARVR, and this is on an entire platform. So I I don't know.”
Gerstner says courage has gained momentum in Silicon Valley over the last six months.
“And so to me, what's more significant is over the last six months, we've seen courage gain momentum in Silicon Valley, right?”
Gerstner details ByteDance financials: $120B revenue, $25B profit similar to Meta, US TikTok only $3-4B.
“So a 120,000,000,000 top line. It's also been leaked that in that TikTok is about 14,000,000,000 of that and that US TikTok is 3 to 4,000,000,000.”
Gerstner references his letter to Zuckerberg urging AI investment and predicts Meta will be a major AI winner.
“I said on your program, you know, six or nine months ago, and in my letter to Mark Zuckerberg, I said double down on AI.”
Gerstner notes Zuckerberg's March 'year of efficiency' followed his own 'time to get fit' letter.
“I wrote a letter last year about time to get fit. Right. You know, Andrew, Mark Zuckerberg in March wrote the year of efficiency.”
Gerstner cites Zuckerberg announcing Meta will have 600,000 H100 GPUs by year end.
“You saw that, tweet or thread out of Zuckerberg this week, where he said by the end of the year, they're gonna have the equivalent or this year, 600,000 h 100 GPUs,”
Gerstner reveals Meta was trading at 6x fully taxed earnings at the start of 2023.
“Meta was trading at six times fully taxed earnings, right? And so unless you were doing the work”
Gerstner notes Meta reduced headcount from 87,000 to 67,000 since his letter in Q3 2022.
“When we wrote that letter in q three of twenty two, the head count at this company was 87,000 people. As of this quarter, it was 67,000 people.”
Gerstner calculates the market assigns negative $120 per share valuation to Reality Labs.
“The market's assigning a 20 times multiple to the company. So that's effectively an implied valuation of negative $120 per share for Reality Labs.”
Gerstner contrasts Meta's 87,000 to 67,000 headcount reduction with Google staying flat at 187,000 to 183,000.
“You know? And like I said, they've tripled their earnings per per employee while going from 87,000 to 67,000 employees.”
Gerstner claims Meta is the largest AI profit beneficiary in public markets outside NVIDIA.
“They are the single largest beneficiary of AI from a profit perspective in the public markets today outside of NVIDIA.”
Gerstner declares Meta the single largest AI profit beneficiary in public markets outside NVIDIA.
“They are the single largest beneficiary of AI from a profit perspective in the public markets today outside of NVIDIA. And so I really think it's about that.”
Gerstner says Meta went from 87,000 to 67,000 employees and nearly tripled earnings per person in fifteen months.
“As of this quarter, it was 67,000 people. They've nearly tripled their earnings per person working at the company in in over that fifteen month period of time.”
Gerstner says Meta nearly tripled earnings per employee in fifteen months.
“They've nearly tripled their earnings per person working at the company in in over that fifteen month period of time.”
Gerstner contrasts Meta's headcount reduction and earnings explosion with Google's minimal changes and weaker stock performance.
“Facebook is actually reduced headcount significantly and their earnings per employee has exploded and Google kind of, you know, they're fine, but they really just haven't made many changes.”
Gerstner confirms data clouds pay revenue share to open AI models, though amount is unknown.
“I can definitely confirm that the data clouds are paying a revenue share to the open models. I don't know what the revenue share is, but there will be some compensation.”
Gerstner says only a few companies can afford 100,000 GPU clusters that Microsoft, Elon, and Meta are building.
“I think the latest discussions, whether it's Stargate out of Microsoft, a 100,000 GPU cluster, Elon's talking about a 100,000 GPU cluster, Mark is talking about that.”
Gerstner says Meta grew net income from $22B to $55B while cutting headcount from 85,000 to 69,000 in two years.
“In two years, that company has gone from $22,000,000,000 in net income to $55,000,000,000 in net income. They've reduced their headcount from 85,000 people to 69,000 people.”
Gerstner says COVID and zero interest rates led to gross excesses and misallocation.
“You know, we had these negative interest rates, this zerp period that just led to gross excesses across the economy, misallocation of resources.”
Gerstner states Meta cut from 87,000 to 62,000 employees and reorganized around AI in February 2023.
“They went from 87,000 employees to 62,000 employees in October of 'twenty two. They reorganized the company around AI starting in February of 'twenty three.”
Gerstner says Meta is not a market leader in AI today but remains a huge AI beneficiary.
“But the fact of the matter is they're not market leaders today in AI. They're huge beneficiaries from AI. We think the company is going to continue to do well.”
Gerstner says Anthropic and OpenAI revenue scaling is 10x faster than Google and Meta at comparable scale
“@patrick_oshag Yes! Size of TAM only explanation for Anthropic & OAI revenue scaling - we have never seen anything like it. 10x faster than Google & Meta at comparable scale. 🎯”
Gerstner calls $450B Anthropic 2027 exit run rate too aggressive, sees $250B as achievable base case
“Too aggressive re Anthropic. Base case of $250 B ‘27 exit run rate (same size as MSFT & Meta) seems wild but achievable. $450 B (size of Apple & Google) seems too aggressive given compute & regulatory constraints. Margins also likely lumpy as big compute comes online. 🧐📈 https://t.co/UVbtDz2CSl”