Tech’s Shift from Idealism to Greed and the Changing GPU Market | TSG Ep. 968

Hey, everyone. Remember when tech used to fight the good fight? They were the good guys.

You're watching Techron Gang. Hi everyone. Happy Monday.

It's Alan Shimel. Guys, I am glad to be home if only for a day. Uh, it was, it was cold in Atlanta and I, you know, it was also really bad wifi at that conference.

It was, it was hard. It was hard maneuvering and working, but it was a great goon. I've written about it.

We spoke about it all last week on our gangs. You could check it out. Um, but we're back here in studio and we've got a great lineup of our gang members to talk about some good stuff.

Let me introduce you. We have a, a DevOps dozen finalist, Garima Boal, a security analyst, Jack Poller, an analyst who's finding her next career, or her next joy in life, our friend Kimberly Bates. Would that make you like a recovering analyst, Kimberly?

Yeah, yeah, yeah. A recovering analyst. There's hope.

That's good to know. Yeah, there's hope. And then, um, and then two more analysts.

Were always with us, the ones and only Mitch Ashley and Guy Coer. Guys, how are you? Um, good.

Good. So, I don't know, maybe it was the kumbaya of the open source movement and the idea of doing things for the common good that got me, or maybe I'm just tired of seeing the pig's feet at the T trial, but I, I, I did a, a shimmy says, uh, an I it article and a LinkedIn article last week on this idea of, you know, tech used to be the good guys, even in the movies, right? You go to the Avengers, I'm Iron Man, right?

He was a good guy. He was fighting crime, fighting the good fight. He, to me, that's what Elon Musk should be aspiring to be, right?

Or, or any of these tech mogul, tech bro billionaires that we have kind of in, in place today. But that's not the tech we get today, right? Increasingly, you know, it's a, it's a selfish kind of egotistical egomaniac or egomaniacal, if you will, kind of driven industry.

We don't have any numbers because the government's not releasing any numbers, but stories, you know, garnered for from like employer records. And, you know, some of the big PEOs and stuff say that we might have lost maybe 35,000 more tech jobs last month. Last month alone.

Things aren't so great in tech, in spite of the fact that we're spending record money building data centers in this AI thing. And I, you know, increasingly people are recognizing, and we'll talk about it later, you know, we might be in an AI bubble, who knows, but Mitch, guy, Kimberly, Jack Garima, we've all been in tech collectively. There's a hundred years, maybe 200 years worth of tech experience here.

Have we, have we, are we not the good guys anymore, or were we ever, maybe we were never the good guys. What first came to mind? Um, you know, we've all had people that we've admired over the years, whether you're like Steve Jobs or whoever it might be, right?

Alan Kay as a researcher. Um, I think we're, we're in the Gordon Gecko phase of tech leaders. Like, where's my fricking trillion dollars?

Greed Is good. Yeah, exactly. For my bonus.

And, you know, I, I think for a while, Elon Musk was held up as, you know, someone that's admirable because of cool things that he was doing with space and, and, uh, you know, Tesla, things like that. Now he's just kind of another one of the greedy people on, on the block and, uh, doing, doing side deals with everybody and, you know, forcing what he wants out of his board, just to pick on one. But I, I don't know if we were ever really, truly, you know, tech were the good guys necessarily.

I'm not saying we're the bad guys, but I think we had people that we admired and we held up as whether role models or not, I don't know, but people that we just admired a great deal because of what, what they did for the industry and their leadership in the industry. That's what I think we're missing. So I'm, I'm gonna be the contrary here a little bit, because the first thing that came to mind is that when I joined IBM way back when, and I represented at least a quarter of the years that you talked about here, No, you don't.

We're all your age stuff close To it. Close to a quarter. The three of us make up three.

We Were on our antitrust investigation and we're about to get slid up into three. And there was a reason why they were doing that is because IBM was not playing nice. We were wrapping up the things, the big, you know, the burrows, the Honeywells, that kind of stuff.

We were screaming over them. I mean, and then I started thinking about, you know, Tom Watson, he had his entire desk dropped in the front yard, uh, NCR when he worked for them. That was not exactly very mice either.

And then you add the, okay, okay, 1998, I was looking this up, Microsoft versus a Mosaic. Netscape, you had 20 states going after Bill Gates. Bill Gates is saying crush him.

Just crush him, you know, he was really nice back there. Now he's like a really good, nice little woke guy and was like, well, baloney. Sorry, I almost went the other way.

And then, then I'm gonna add one more to my favorites, is Uncle Larry take no prisoner, Mr. Larry Ellison kind of guy. I mean, he's been dropping off people every quarter.

He gets Grandpa Larry, by now, He's grandpa, sorry, grandpa, Larry, whatever. No, that it's media mogul, Larry, Media mogul, Larry, Larry, whatever. I mean, every quarter you wipe, he wipes out a, you know, a percentage of his people there.

And that's been going on forever. And he, he just never has to publish it because he does it every quarter the same way that, you know, uh, the guy at GE did it. You know, it's the same kind of principle.

So, and like, you know, I think what happened is that we went, and I'll shut up after this. We went through this period where everybody was like, let's be nice. Let's be sweet, let's be okay.

And now we're back into let's go compete. And, um, that's, that's where we're at. And you know, I embrace it.

I embrace the competition. And, um, that's, Yeah. I, I don't, you know, I, I've only let, let's let everyone else talk before I jump back in, but thoughts from the rest of the team?

Well, I'll, I, I, I will say that I'm on Kimberly's side and, and having been both at IBM around the same times, and then at, uh, Netscape during that time and, uh, new employee orientation at Netscape was a speech by, uh, our now venerable vc, mark Andreessen, who said, uh, Netscape earns $70 million a year because from ads sales on our homepage, because nobody ever changes the homepage. And so we're suing Microsoft outta the browser to protect that revenue. That was all it was about, right?

Is protecting that revenue. It had nothing else to do with anything else. And they knew they sued Microsoft just because they could.

And when we, I did an IETF meeting where we were discussing, uh, um, uh, TLS, the TLS specs, and we had two coalitions, the pro Microsoft Coalition and the anti Microsoft Coalition. And we spent most of the time figuring out what Microsoft wanted and trying to design the protocol to make it more difficult for Microsoft. Well, and that was done low Level engineering level.

I'm sorry, windows ain't done till, notes don't run. Right? That was the old thing of Microsoft back then with notes, because the 1, 2, 3 was killing Excel.

But, but guys, you, you're missing, I, I think you're missing my point with all due respect, you know, to quote the infamous Don Barini from Godfather, after all, we are not communists, right? There's nothing of matter with making a profit. There's nothing of matter with competing.

Good old American competition may the best person and company and product win. There's nothing of matter with using the law to your advantage. This is how the rules of the game or played.

This is, and there's, and that's great. That's America, that's capitalism. That's market forces at work.

Don't fool yourselves into thinking that's what's going on here. What we have here is what we call collusion. What we have here is Uncle Larry is in bed with Young Sam and Young Sam, as soon as he gets outta bed with Uncle Larry runs over to, to, whether it's the Microsoft or Google guy, and does his little jig there, and they pass money around this virtuous circle of the eight or nine of them creating barriers to entry for the two guys for the next was, and jobs sitting in a garage working on something or, or, or anyone else who wants to come in here.

Right? So how is that so much different than what was going on in Sand Hill with the VCs? I mean, that the VCs are just rolling doors of your, you know, it's, it kind of goes back to New York when you had the Morgans Morgans and the, you all the, the people back in whatever years it was.

And those were the people that socialize with each other. And that's the same way it is right now. There, There The detectives, But not at this level.

And then I'll tell you what else is the big difference. They've got a new partner in the circle who's taken a piece of the action, right? The federal government, the federal government used to, and the court system used to be the, the arbitrary, the, the, the, you know, the guys who made sure at least, even if it wasn't real, at least the facade was Horatio Alga work hard and you'll get ahead.

Now. They got their thumb on the scale too. I, I feel like the, the, the discussion here has shifted because my take on your take, Alan, My take on your take and Your take.

Go ahead. Yeah. Well, and, and how you summarize it here and, and your shimmy says, and how you summarize it here was you were talking about, um, tech to benefit the world.

Tech used to be the good guys to benefit the world. Now it's the bad guys to benefit these nine people. That's what I thought you were talking About.

Yeah, no, and, and, and you are right, guy. We, I I, shame on me for not mentioning that too. I think there was sort of this altruistic of we're changing the world with tech, right?

Tech is the great kind of equalizer. We're going to get women and other underrepresented in groups, you know, working in it. And, you know, and, and Kimberly look, I mean, no, I'm not saying anything bad or I don't hold it against me, but you came up in a time when it was really hard for a woman too.

No, you don't think it was hard for you. I, I am, I'm one of those contrary people on it. I, I didn't hit the walls like I felt like, you know, other people talk about just either did that or I just ignored it.

It was Completely, well, God bless you and good for you, Clueless. I was probably just clueless to it. It just kind of blinked, Oblivious, dude, that all, they just do your job.

Garima, what about you? Do you feel like, Yeah, I think, uh, you made the point very clear in the beginning that, you know, tech for good, tech for communities, and I represent community and community leadership here. So I would say that, you know, with all this, what you wrote, what are the repercussions happening?

It's fear, it's disengagement, it's normalizing corruption, uh, stifled creativity. And what happens when it goes to the peak communities, uh, you know, strike back and this is what will happen. And I will give you an optimistic view on this because I think you mentioned about open source movement.

I come from that open source. I am, um, I'm the child for, from the open source movement, the communities. And I feel that, you know, um, it's time for us to kind of ensure that something what happened in the 1980s with, you know, uh, Linux, uh, taking the power back, right?

With community and open source, uh, trying to kind of, uh, uh, steer the needle in the right direction. I, I, I am more optimistic with leadership and the communities and history reminds us what happens, happened with DevOps, you know, all those tools, capabilities, this, uh, Kubernetes movement. How did it got started?

You know, it's massive right now. So I'm more optimistic. It's just a matter of time.

I mean, you cannot stifle innovation and adaptability on the name of egg diplomacy. And this, I mean, it's just, you know, how we see it today and what can happen when community comes back and try tries, tries to take charge of it. Amen.

I I think I'm quite optimistic about this development that I think you pretty accurately describe Alan. Um, I kind of agree with everybody here, which is really weird. Um, the, so I think the fundamental issue here, I think is that there's tech and there's science, and they are, they are very well linked together.

The science brings the discoveries, like the original invention of the semiconductor that enables the tech, namely, you know, information technology scientists are pursuing knowledge, truth, betterment as a general rule. Yes, they have, you know, businesses as well, and they, they, they do commercial things. But that's the general culture there.

Um, we're, we're gonna see that this week. I'm attending Super Compute, which is one of the great fusions in the world of science and technology. Technology or tech.

That's a business like you described. And I think that we are reverting to the mean of understanding that the business is in the business of its own business and profit and science remains the pursuit of knowledge fundamentally. And all that happened was probably led by jobs, was this idea.

I mean, Steve Jobs was this idea that, that, um, there's an altruism. I mean, that's one of the things I despise about the whole Silicon Valley culture is how this new platform, uh, and and Gizmo that I've invented is what's gonna bring peace to the Middle East and extend lifespans by 10 years and all this other kind of garbage that helps the VCs get all excited and the money flow, but it's really just garbage. And so if we're gonna finally start recognizing them for what they're trying to do, which is to make themselves rich and get their trillion, then, you know, great.

'cause that's what they've been doing all along. They've just been papering it over with this idea that tech is also in the business of the common good, and it's the science that's in the business of the common good more than the tech. But, but they, they, but as you start it off with, they're intrinsically linked, right?

That's the tension. That's the tension. So it's always been there, but you know, it's kind of like adopting this idea that this innovation, which is the word usually used, this new widget is, uh, like the, a scientific pursuit for the good of all.

And it's not, it's not, it's the new widget that benefits from the science. We're seeing that in AI right now. You, you've hit it right on, which is that we in the Silicon Valley and the Silicon Valley tech leaders have put a fig leaf of altruistic respectability on top of what they do, because you, and there's a lot of reasons for that.

But it's, this is history repeating itself over and over and over again. If you just look at the printing press, when the printing press was invented, it was of, I don't know if it was created for altruistic ideals, but it had a very, um, you know, it ushered in the age of enlightenment where, you know, in the education and the explosion of knowledge throughout the world. But then if you look many years later, we had a closing down of information availability and our knowledge and media was controlled by three corporations in the United States for a very long time.

And before that was controlled by William Randolph Hurst and the newspaper barons. And the explosion of the internet was wet, freed information out. And now we can get news from a gazillion different channels.

Look How off we are. Yeah. But, but it's a cycle that repeats itself, right?

So, you know, I I, I understand your frustration, Alan, but I think it's a little bit naive to think, oh my God, That this is different. That's maybe it's naive. Let me ask you a question.

Do you think Hurst was a good guy for what he did? None of these people are Good guys. Think points bad.

They had none of Them. They had good No, no, but One of our Features forever. I mean, what, what are your opinion of the, let's beside the point, let me just tell you, hear me out their name by itself.

Don't let it prejudice your thought, but the robber barons, they're called Rob, but do think was a good guy. Do you think Getty was a good guy? How about Mellon?

Yeah, melon was one of the Rob barons mean We have a reason why we have antitrust laws. Exactly. How about, it's the reason we used to have antitrust laws.

But, but, but then, And then they make all this money, then they do this thing, this, you know, foundation and start giving away zillions of money Or, or build universities. My alma mater was Carnegie Mell, excuse me, there you go. Carnegie Mellon University, right?

It was funded by the robber barons or, or, Or fund that building at the, at the university, university or whatever, put my name on it, right? It's like, Yeah, we've shifted from, we don't call him. I've seen it's the same thing.

Robert Baron. We call him Titans now, right? No, I still call him Robert Barons.

Mitch. No, we, yeah, some of, I mean, I, I mean, be off and Mark Benioff, who's the billionaire who, uh, does Salesforce, right? Uh, he is single-handedly funded a huge amount of the, the UCSF child children's hospitals.

And, um, uh, Ken Langone who did, uh, home Depot, his, the Langone Cancer Center in New York, which is very good at treating cancer patients. I mean, the, those billions of dollars that they've created have not gone entirely to gold toilets and lavish dinners. And you know, Larry Ellison's yachts, yeah, he does have a yacht, but he also employed a couple thousand people Built that yacht.

Those after the gold toilets and the lavish dinners and all that other sort of stuff, there's some money left over for cancer. That's great. I'm not, I'm a capitalist.

I'm not, I'm not trying to critique the entire system. I, I just, I'm more focused on this idea that tech and the tech industry does do good. It should be, we, we benefit from it.

But, um, expecting brands and companies, what, what I, what I like, what makes me optimistic is that I feel this cultural shift that you're detecting, Alan, where we stop believing when the next Google has their version of don't do evil, that we just stop believing that it's beside the point, it's marketing. And if the marketing stops working, we don't have to put up with it anymore. Well, I think we could learn from mothers not in tech.

Um, I'm gonna represent my home state. I admire Oracle, not Larry Ellison, Oracle, but the oracle of Omaha. Was he from western Nebraska?

Western Omaha. Okay. Yes.

It was a little more Nebraska western of Western Oma. That was a joke that we had. No, we weren't talking about that in Cucu.

It says he's from western Nebraska. Warren, Warren Buffet. You know, you talk about somebody who's made people a lot of money, including himself and and his investors.

But you know, that's someone who, he, he had, he had a, a an attitude of not only philosophy investing, but about, because it's America, we are gonna do it this way, right? We're gonna invest in the things that, that Americans want are gonna need, whether it's the railroads here or candy that's sold in the, in the, in the airports here, or utilities, or, I mean, he was looking at, you know, it, it didn't matter if it was tech or not, he wasn't a big tech investor, but he was looking out as what really, what does the, the economy need? Where is it heading?

And how can you position yourself to be at that place when you know, kinda when the puck is, is sent that direction? And you don't have to be, you don't have to be the greedy bastard, I'll use the word word, who only cares about having the most money compared to all the other greedy bastards. And that's kind of the, that's the, that's the environment.

Whether you're talking about tech titans or you're talking about robber barons or what, that was all competition amongst each other of trying to either take the other person out or having the most stuff. Right. You know, you don't have to do that.

I mean, what he certainly, look, he's on a pedestal above these other folks in terms of this. Here's my point on it. It's okay.

It's okay if that's what you want to be, right? But I, I think we all have to recognize that unfettered market economics, unfettered capitalism without some restraint is not good for the every man is not good for the gen pop, right? However, neither is some sort of socialistic, communistic thing where, you know, we cut all the corn at the same height, so no one has more than anyone else.

Our country has thrived historically as a mix, right? We, we do have market forces that shape our economy and shape our, our daily lives. But the idea is that through lessons we've learned from the, the Gilded Age, again, they call the Robert Baron age, the Gilded Age, right?

Through lessons we've learned through the depression from the Taft Hartley Act, and, and what that wrought through all of these, you know, historical things, we've come to say, Hey, we need a balance. There has to be a balance. There has to be a, it can't just be, I buy my way in, I settle my a hundred million dollars lawsuit by giving you 25 million and you wink wink, and let me do whatever I want it.

It can't, in order for our system to work, right? We all, or most of us, have to believe that there's some sort of level, level pa playing field that we have a shot at the brass ring, that hard work ingenuity and smarts are rewarded. It's not, it's not stacked up by some old boys game, you know, sitting back in the parlor.

And all I'm saying is that we had it, it seemed like that's where we were for a while, right? Kimberly, to your point, IBM was on the verge of getting broken up. Ma be did get broken up, right?

Microsoft got hit hard, some might say, uh, for what, what they did with the browsers and windows and everything else. I don't think that's America today. I, I don't think, you know, and because the other thing I think about it, and, and we will talk about it in, in another segment, is because we have made tech a strategic national imperative, and we've weaponized it.

We're weaponizing it against our perceived enemies. But we can talk about that on another segment of the gang. We gotta take a break.

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Uh, we, it's almost a continuation of this though. But you know, maybe, maybe our friends down on Wall Street are feeling a little of this, you know, we used to fight the good fight too, and they're getting a little shaky and nervous. Mitch, what do you think?

Well, uh, you know, Everybody is talking about the AI bubble doesn't know whether, you know, what, anything about AI or not, right? It's common. Like, are we on the cusp of having a big correction, right?

Over 2%, uh, two to 3% correction. And everybody's anticipating that. And I think almost that looking for it causes it to happen.

I mean, we're recording this on Friday, and I opened the, the markets down four to 500 points. Um, and there's lots of reason for it. But, uh, n uh, Nvidia got hit yesterday, um, dropped in its value.

And, you know, thing as if we keep on this kind of rollercoaster, things will be pushed back up and then something will draw it down. I think it's, it, it's, we're at a place of saying, is AI real? And how much is, have we overt, rotated if we've over rotated in investment in data centers and chips and stocks, um, in anticipation of ai?

Or is it real? You know, is it, is it gonna deliver the value and it's gonna, it's, those investments are, were worth it? And if history does repeat itself, you know, we've over, uh, invested in data centers before in the cloud, early, early in the cloud era, and we've overinvested in other things too.

So it's not unheard of it. I think that concern is real, but what's, what's also bolstering it is the job layoffs that don't get reported by the government now, but, and especially in the tech industry. And so I think people are concerned.

It's, it's a time of uncertainty about where this is headed in our, as the financial stability of the country or ourselves, frankly, you could argue that's what some of the results of the election, midyear election showed, showed. So midterm election. So Mitch, you, you know, you said, when that we sort of look for it and that's causing it, and I think that, you know, I looked, I, I did a Kimberly thing, and I actually looked this up, uh, uh, December 5th, 1996, Alan Greenspan gave a speech to the American Enterprise Institute and coined the term irrational exuberance.

And I think what we're doing is not looking for it, but recognizing it now before it becomes really irrational and saying, you know, something doesn't smell right here. So, and I don't remember the exact numbers, but I believe I heard that, uh, open AI has made commitments for a trillion dollars in capital expenditure spend with something like, uh, $30 million in revenue, right? Or 30 billion billion, 20 billion.

We're expecting 20 billion hundred billion in revenue, right? So that's just, I mean, that's just such an jack. I think It was only 800 billion, not a trillion.

That's amongst friends. I mean, come on. But it's, it's just so unbalanced.

It's like these are unreal numbers that how does anybody make a commitment to spend that much when they have the capacity to pay it back, is just absolutely non-existent. Yeah. And that's where, that's the irrational and supers we're recognizing.

I, Jack, I just got a quibble with you saying that it's not irrational, uh, uh, maybe I mean, too technical, irrational meaning divorce from rationality, um, the, what people are spending is based on what the market's at right now, but it's not a rational amount. It's based on what they, it's based on their, their vibe that this is super important. And so in this capitalist, you know, system that we have, that we were talking about on the last segment, um, uh, people pay what they think they should pay, but they, they don't have a clear idea of what the return is going to be.

And I, I don't have the numbers in front of me. There have been recent studies, um, uh, or recent looks at this sort of thing from, from analysts, far more qualified for that than, than I am. Um, say something like, you know, the best return we can expect is something like 20% on the, the, the level of investment in AI right now.

And that's just a fact of the people paying the market rate for stuff without having a clear idea of what, what the return is gonna be. So that's irrational. I think the irrational Alluded No, I, I did, I I'm sorry I did real quickly, Mitch.

I believe it's irrational. I'm just saying we're recognizing it very early in the cycle rather than when everything has already collapsed because of it. Yeah, I think I, what I would take exception to what you're saying is the rational part of it is, is continuing to doing what we're doing, knowing that some of this is doesn't make sense.

com go go to in an IPO in the ni late nineties for some ridiculous, absurd amount, right? That's irrational, even though it happened, even though people made decisions that could, that, uh, helped that happen. And that's the question, are we in that place now?

Is the overextension of commitments around? Is the buying a buying, buying of business that's happening by co-investing across companies, you know, is that causing, you know, an, an overextension in, in the market and what actually what things are really worth? And the answer's probably yes.

And there'll be a correction, and that's what happens. And, you know, so, You know, the thing I've learned about bubbles over the years, I'm gonna, I'm gonna quote the great sage, Bobby Bakala. Tony Soprano's, right hand man.

Tony, what's the Godfather, man? Okay, go ahead. Tony.

Tony once says, Bobby, to do you think, do you think you, you feel it when, when they come and hit you? When, when you get shot and Bobby says, you probably don't even see it coming. You probably don't even see it coming.

Most bubbles. Last week we were touting here how great this was, and the let the good times roll baby. And then before you know it, that's, that's how quick these bubbles burst.

You don't even feel it. You don't even see it coming. You don't feel it.

And then it's, here is this, that moment I wish I knew I would be out with Warren Buffet somewhere taking it easy, but I'm not, I'm here working. Um, but, but I, I think what we're all saying is we do realize there's a little irrational exuberance here. There might be a payoff down the road, but the way our market, you know, back in the day, wall Street was ruled by institutional money.

It was big, rich people or big companies, institutions that moved stock. Today's Wall Street, 40% of your, of your equity business is retail. It's people like us, not that we're Warren Buffet or anything, but it's small time people like us.

And, and generally, you know, the law of the herd plays into these things, and that, and that might be what we're seeing here, right? Where, you know what they always say, follow the smart money. Who the hell, if I knew where the smart money was, I wouldn't be here still too.

But you know, that's what they say. Follow the smart money. Um, Kimberly, I, I know you had, you had written some, some.

No, no. I only comment is I'm welcoming a correction right now. I I think it's, to my personal opinion is not that I'm a super, I'm not a really good investor or whatever.

I, I hand it over to some other people to take care of that stuff, but I believe that we are over, we, we we're over our heel, you know, over our skis right now. And, um, when you look at the valuations, and I think we need a correction, and I'd like to see the heat coming outta the market, and hopefully that's what's happening right now. So it's like, let's, let's get at some of the heat out and, um, maybe it won't explode if, if we do that.

Absolutely. I mean, and the other thing is, you know, hindsight is always 2020, right? com era.

Hey man, I helped take a public, a company public in that time. We went public in early 2000, or maybe it was late. Yeah, early 2000, January, February, you know, uh, our Merrill Merrill Merrill Lynch was our lead, uh, you know, broker take banker, taking us out.

We had the wonderful man, Henry Blot. Henry was our lead banker. Of course, Henry got in a little trouble because he was out touting stocks that he was then selling stocks.

And we were, we got wrapped up into that, right? I'm not, we're not supposed to talk about it. I was told never to talk about it, but, um, but, um, I think the statute of limitations is run by now.

It's 25 years. com and some of these, you know, there, there was some, some abuses built into the system. We may find out 10 years from now, five years from now, that there are some irregularities.

There are some, you know, things that we needed to correct that would prevent these kinds of things. But I don't know if we ever prevent them. Totally.

I I think it's, it's the herd. It's the law of the herd, Right? I, I wanted to add something here because I mean, we have been talking about valuation fatigue for quite some time now.

You know, that is, again, that's its real story and that that is happening, and the market correction is due to kind of, uh, in due, in due course of time, we will see that. But I think there are two technical repercussions of this. One is that, uh, the AI data center movement and the underperformance of the revenue, which is kind of coming through, and this is, uh, again, uh, showing up with, uh, what you see as a correction in the market.

So there is no substantiate revenue as such, uh, to date for these AI data centers and how it'll play around. That's the first, uh, uh, fact technical factor. The second technical factor, I would say that, uh, a multimillion dollar revenue wiped out, uh, due to the geopolitical restrictions.

So what will happen as a correction is probably, and I think, uh, there is some announcement today that there will be some corrections coming from a regulatory perspective, how this chip market would be normalized or harmonized. Because if the market is reacting strongly to this, this is in making. So these are two points I would also like to make here.

I I think the geopolitical thing, Kareem, is huge. Kimberly, you had said something else out about, uh, some recent bill passed by the Senate. Yeah, well, that's having to do with where, who's selling where and, and holding Back.

Well, it's, it's geopolitical, right? They're saying, Hey, we are going to prioritize domestic customers over international customers. You know, you see that during war time.

When I read though, you said Kimberly, I'm saying, yeah, you know, during wars, we've seen that sort of strategic kind of thing. You know, in, in another time, in another place, would an Intel or an A MD or a uh, Nvidia say, Hey, you, you can't tell if they're willing to pay more money, right? I'm not owned lock, stock and barrel by the US government here, right?

And, and stuff like that. So there is, anytime you get a bubble burst and people lose money and get hurt, there's an outcry for regulation. It's just like a knee jerk reaction, right?

And, and I think we're, we're gonna see it here, assuming that this trend does, does, uh, stay the same anyway. Hey, yeah. Substantiating this point, like 95% of the revenue for Nvidia from China is now zero.

Well, you know, we, we've discussed this and we will discuss it again, but I really gotta take us on a break here, guys, 'cause we're running late and we've got a third segment coming up. You're watching Textron Gang, Discover Textron Group, the epicenter of tech innovation. We are your go-to for reaching IT, leaders and practitioners worldwide.

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Thanks for staying with us. Our next, uh, segment is parsing processors. It seems no matter what we're talking about inference and, and all of the things that could come up to displace GPUs, they are the ones present and future kings of the block of the pile.

Uh, this is coming outta some futurum research. Uh, Kimberly, you want to lead us off? Sure.

Um, futurum just put out a, um, research report on the market shares of the different, um, chips or C GPUs out there, and of course, NVIDIA's at top. Um, but what is really great about the report that came out is seeing the other guys come out and, you know, why we think, see Nvidia as the big cahun here. Um, a MD is coming up.

You've got a whole bunch of other people. Um, one of the ones that I picked up on that's up there is Rock. And I think that's because I just listened to a, you know, a discussion about Humane, who is a, a big, um, investment over there in Saudi Arabia.

And their first data center is going to be based on rock and then followed by a MD. So it's kind of like they started out with the other guys as opposed to the one that we see. But I think the other piece that you had brought up on this, um, is, are these, you know, how, how we're going at it, how this is going, you know, it's gaining ground in the data centers, um, but where is this going in terms of investment and depreciation schedules, et cetera.

You know, are we doing the right things in terms of reporting, um, expenses, et cetera, that are out there, um, in terms of the, um, company. So anyway, I will turn it over to you guys to talk about this. You know, where, and ne next week is, um, super computing.

So you, you guys are gonna be right front and center where all this stuff is at. So let's talk about it. Yeah.

This, this week as, as this airs, it's just started week, sorry, this afternoon, this evening. Yeah. We're airing on Monday Through the magic of quantum time dilation here at Tech Drunk Studios.

Go, go ahead, guy. Um, so it's, it's not just competition with, uh, the kingpin of the GPU nvidia. It's competition of the, the G against the GPU generally with other processing units, so-called xus, npu, neuro processing units, tpu, tensor processing units, PQP, like whatever it is.

Um, this has been happening for a while. I think the market is just taking time to sort of catch up to this idea. So it starts with saying, which began in graphics, which is where the name comes from.

It starts with saying that a central processing unit, a single processing unit is, may not be enough for certain special applications. Even A GPU is, is, is, uh, you could even call it, call it a generalized processing unit. It has a, a, a limited instruction set and a certain capability to it, which has been adapted very well to, uh, to, to ai.

Now, naturally, these other ones are even more specialized. What is not often talked about, um, in general, even in really technical discussions, and this is where I'm saying like the market is still catching up to this, is how many advances in chip design there have been over the last 10 years, it to be able to, it, uh, you know, more or less custom code, uh, a, a, a processor to do very specific things and then manufacture those ma manufacture them very quickly, potentially at scale inexpensively. It has to do with innovations in, in what's called packaging, meaning, you know, used to just be one chip.

Now that we have these giant chips, but we also have so-called chip lets, where you can collect a bunch of chips. It still looks like one chip. I don't wanna bore everybody with all the examples of this, but it allows for something like a software development approach to what is a physical thing that gets plugged into a board, which also has, you know, had innovations.

But the market remains highly focused. And the, the, you know, I mean, talking about technical buyers successfully being highly focused on GPUs and what the future and research report shows is not just is NVIDIA's dominance breaking, but the GPU's dominance may be starting to break as well. And, um, this is, this is really great.

That's where efficiencies come from. That's where people, of course now the software needs to be developed in parallel to take advantage of these things. That's the next wave.

I would also like to add something here. I mean, these are a couple of things I wanted to highlight. Two things.

The first problem with the report, which, uh, Kimberly had mentioned was that the valuation of, uh, these, uh, GPU investments or chipped investments is, uh, skewed up. Because, you know, if you actually, um, have a life cycle of two to three years practically, but you are showing it in the books to five to six years, that means it's an in inflated valuation. And, uh, there, there are, uh, certain bodies like IFRS and GAP who are regulating this.

I think, uh, there is a substantial amount of speculation that how these assets would live that longer life. And of course, uh, uh, what it means to innovation, right? I mean, there is a lot of like, traction in, you know, how these chips are being developed.

And to your point, ga, that what happens is that we are seeing a surge of ps, right? And PS are like cost, uh, cost efficient and also energy efficient. So, you know, substitution towards G GPUs, but the market has speculations about it.

It's not substantiated what value it creates and all that, right? So, and how it'll be adopted. So there, there is a twofold kind of, you know, movement going on, and we need to kind of watch out how this turns around and how, how it comes across.

Because the bigger problem is that this infl inflated valuation of the assets which we have in the data center, uh, which will have repercussions that, uh, you know, these innovations, which we are talking about p and all this kind of, you know, open, open standards and, you know, software like approach to chips would be stifled. So this is, uh, the, the, the crux of, you know, how, uh, this would play around. So I I, I have a theory.

Let me do this one, Mitch. I have a theory. This is the first generation, kind of the first wave we've seen of, of the, of the AI GPU craze, and I call it the American Cadillac era.

We, we are, we, we use GPUs for everything. Anything you, you want to do something with ai, you need A GPU, right? Because we, we have, we're overbuilding 'cause we really haven't turned the dial enough to understand what we could get away with.

And we're optimum is, we're still dialing in, is the word, right? I, I think as we go on, we're going to get better and say, Hey, instead of the GPUs, the XP, all these other things are probably more efficient give for the job that I needed to do. Not every job needs the GPU and especially as we move more from training and more to inference, which is what everyone is saying, right?

Our reliance on these Cadillacs, people are gonna say, no, I could use a Chevy for this, or a Ford or, or a Toyota or whatever you want to call it. And I, I do think that's gonna bring some rationality to the chip market. Some good data in the report, Alan, that backs up what you're saying, um, which is the, the primary driver around GPUs is the time to train models.

Yeah. The huge investment that goes, that's what drives the biggest purchase of those. But interestingly enough, the workload is, is starting to change of what people are using GPUs and other XPS variations.

So the, the kind of farther down in the report, if kind of tuck, untuck, some of the data, uh, it talked about, uh, both training and inferencing was about 33% of the use cases followed by mostly inferencing, which is also at 33% in the same 30 range. Training dominant was really only 19. And, uh, data prep, you, the data that we use is kind of a small 10%.

But the point being is, you know, it's not just a, a linear curve or a, or a hockey stick all built around training. Yes, that's happening. And we, they wanna drive the cost per token around down for training and make it faster, but they also need to drive the cost per token down for infantry in, in other use cases.

And that's happening. So I, it's, I think we're turning that curve that you're talking about. It's hybrid infrastructure in making, right?

I mean, if you see, uh, the XPU growth is 23%, uh, in 2026, that's the projected, uh, you know, val value of the growth. And then you see how the hybrid infrastructure would also open up new opportunities for smaller players, right? So that's another thing which we should watch out for.

If I could make, and It's worth mentioning also because, because yeah, Jack, it's just worth mentioning. 'cause Q Comms last week that DRA, which is, uh, one of these, uh, uh, Kubernetes related projects just went general availability in August. DRA, uh, dynamic resource allocation name doesn't tell you so much what it does.

It is a prime way for applications to get delivered these diverse compute resources, whether G-P-U-X-P-U or whatever. So the, the software is, is, Is the platform. I think we, it's the next wave.

But guys, we've gotta run. Alright. You know, we try to keep these within a timeframe.

Give, give Jack two seconds. Oh, I, I, if I can just leave our audience with three thoughts, which is, I hate to be the historian here, but we've been through this before. I went through this with co-processor with, uh, you know, uh, co-processor and with, um, the, uh, risk versus SIS scores.

Second thought is we do have a change in US finance laws about how you can capitalize equipment. So we won't be seeing depreciation this year in the us which will change how all of this reports at the end of the year. And the final thought is, despite having this wonderful list of processors that are available now, GPUs, xus, CPUs, et cetera, there are two fabs in the world that make these things.

There's Intel and TSMC and that's it. And that's going to be a very big issue next year And years to come because they don't come on that quick. But speaking of quick, we've gotta quickly end the show.

Mitch Guy, Kimberly Garima. Jack, thank you. Thank you for watching.

We've got tech drunk TV following this. Check it out. But this is Alan Shimel.

We're out.