Baker argues the ultimate AI winner must be the lowest cost compute provider, which requires owning rather than renting compute.
“the ultimate AI winner will be the one with the lowest cost of infrastructure cost, the lowest cost of compute.”
Baker says AI is the first time in his career that being the low-cost producer matters in tech.
“And this is really important because AI is the first time in my career as a tech investor that being the low cost producers ever matter.”
Baker says AI is the first time in tech where being the low-cost producer matters economically.
“AI is the first time in my career as a tech investor that being the low cost producers ever matter. Apple is not worth trillions because they're a low cost producer of phones.”
Baker notes AI companies generate cash earlier than SaaS despite lower margins due to fewer employees.
“The crazy thing is because of those efficiency gains, they're generating cash way earlier than SaaS companies did historically, but they're generating cash earlier, not because they have high gross margins, but because they have very few human employees.”
Baker says AI companies generate cash earlier than SaaS despite lower margins because they have very few human employees.
“And it's just tragic to watch all of these companies. Like you want to have an agent, It's never going to succeed.”
Baker asks where Anthropic's and OpenAI's combined 150b ARR came from, disputes that leveraging up is only funding path
“@dampedspring Where has Anthropic’s and OpenAI’s combined 150b of ARR come from? I don’t think the idea that leveraging up is the only way to fund this is at all correct.”
“A series of fairly wild thoughts from Dwarkesh. I thought I was bullish but even I am not assuming that the price to rent compute continues to go up! I will say that I am in SV this week and Dwarkesh is capturing the zeitgeist. Net, net public markets would probably be trading https://t.co/PzIxxnzbiS”