Rising Costs and Hardware Pivots

Alphabet, the owner of Google is trying to raise eighty billion dollars in a stock sale. ten billion dollars of that is going to come from Berkshire, which is pretty crazy. And all of this is to fund their AI buildout. At the same time, Trump is signing a narrower AI executive order. He got a lot of pushback from the AI industry and has adjusted. I'll talk about the pros and cons of that. GitHub's co pilots new usage based pricing is burning through people's entire monthly budgets in a single day. Opal is pivoting to AI hardware. They received forty million dollars from OpenI. They're now valued at two hundred seventy five million dollars. And Uber is capping their employees AI spending at fifteen hundred dollars per tool after they burnt through the entire annual budget in under four months. 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The first story is that alphabet is rais ing eighty billion dollars through stock sales. This the big anchor on this whole sale is that they're getting ten billion dollars from Berkshire, Hathaway. More on that in a second. What's going on right now is that the AI infrastructure spending of Google Alphabet, the owner of Google has absolutely exploded to eighty to one hundred ninety billion dollars this year. And the problem is that that's actually outpacing their operating cash flow. So it's basically forcing them to tap into equity and debt markets as the entire hyperscaler cohort, all the other competitors like Amazon and Microsoft and everyone else are all collectively moving towards one trillion dollars in AI spending by twenty twenty seven, which is wild . This raise in particular includes about thirty billion dollars in underwritten offerings, fifteen billion dollars in mandatory convertible preferred stock, and a forty billion dollars at the market program launching in Q three. So Berkshire Hathaway's position has you know, they're putting in ten billion dollars now, but their position has been growing. This isn't like a new thing for them. They only had about four point three billion dollars in November and they're up to almost twenty billion dollars now. This is one of Berkshire's largest tech holdings after Apple, Alphabet, Microsoft, Meta, Amazon, combined. They're all tracking towards this seven hundred billion dollars in CapEx this year. And I think Wall Street is saying that there's going to be about a trillion dollars like I mentioned by twenty twenty seven. Alphaven just admitted basically that Wall Street already knows something. The hyperscalers can't self fund all of these, you know, all of these AI buildouts that they're trying to do. So Berkshire ten' bsillion doll ar vote of confidence, I think is a pretty important thing. If it's just if nothing other than like a signal they're like, look, like they make smart investments, they believe Google's going to be able to pay it back. I think you can expect Microsoft, Meta and Amazon to follow in their own kind of mega raises. It's interesting. We're all used to seeing Anthropic and Open Eye do these huge raises, but it's like Google's having to go out and get more money too because it's just so expensive, but it's incredibly valuable to build these out, right? We see even XAI and SpaceX , right, with their massive data center buildout that they used for training Grock, they could go and turn around, even if the Grock usage wasn't insane, they turn around and they can sell that back to Anthropic for one point five billion dollars a month. So there's a lot of money to be made in these data centers and in buying all of these chips. Okay , Trump is signing an executive order today where he's asking AI companies to voluntarily submit their frontier models thirty days before they release them. Originally it was ninety days, which I'm going to be honest, three months ahead of time, I think is too much if you're trying to be competitive. We're trying to be competitive with China and a lot of other countries. If all of our models were going to get held back, you know, ninety days for the government, which I don't even think is that great at monitoring everything, but I guess you have to have some sort of regulatory body perhaps, right? Like the Federal Aviation Administration for airplanes. Maybe we need that for AI. I don't really like regulation, but perhaps it's needed. Anyways, I'm happy to move it down from ninety to thirty days and it's also voluntary, right? So it's not like they're being forced. Now the reason why they've made a bunch of these adjustments, Silicon Valley push back, which I think some people will say this is a pro, some people say there a's calm'.re They like, oh look, Silicon Valley's pushing around the government telling them what to do, or you could say, maybe the government is listening to the people who have expertise in this area. There's two sides of the coin. I think right now this is showing that the federal oversight is basically voluntary . So there's no mandatory licensing regime , but we do have some sort of framework in place. And I think they're just right now trying to prioritize speed . They're doing some safety checks, but we're really trying to compete with China at this point. A couple other interesting things in this executive order, it explicitly forbids creating a mandatory federal licensing or preclearance for AI models. So it is locking in this kind of voluntary compliance only for now, which I think is great. Trump also delayed signing a much stricter version in May . Venture capitalist David Sachs and a bunch of other figures inside of the industry were lobbying against this kind of longer review window, the ninety days, like I mentioned , the order directs the Department of Justice to treat AI assisted hacking as a high priority enforcement area. And it also gives prosecutors a lot clearer mandates to pursue model insedist assisted int rusion. So there's a lot going on in here. I'm happy that the government is looking at this and I'm happy they're not being too heavy handed on the regulation like we've seen with the EU and how that stifled a lot of AI innovation coming out of the EU. All right, GitHub Co pilot is getting a massive backlash . So they switched their pricing yesterday and they started to charge zero point zero one per credit like so basically one penny per c redit. And users have reported that they are using their entire monthly allotment in a single hour or a single day. If you're on the ten dollar month pro plan, that now includes only fifteen hundred credits. One user burned eight hundred forty and credits in one day. Another user said they use eight thousand monthly credits in twenty four hours. The thing that I'm going to be honest here is we have anthropic and a lot of other players heavily subsidizing their token usage. I think Google and Open AI are also subsidizing it, but Anthropic most definitely is on the Claude Max plan if you're going to pay two hundred dollars a month. They are subsidizing those credits. And what's interesting is we have GitHub is kind of the first shoe to drop in my opinion. Microsoft owns GitHub, so they should have, you know, technically unlimited money and they should really just be trying to get everyone to use their product . But instead they're saying, look, guys, you got to pay for it and you're going to burn through your tokens super quick. If you want to upgrade, you just got to pay for it all. So I think right now we're going to see probably a future when OpenA and Anthropic have IPO and they're public companies and they're under a little bit more scrutiny. They're not going to be able to just give away all of these free handouts. Now maybe we can make models cheaper in the future, right? Like maybe we can optimize them and maybe data centers we have more of them. We can make things cheaper, but data centers take years to build. So I don't think that's going to be our instant solution model optimization. I have a lot of hope there. But if I'm being honest, my prediction for the future is that we are going to see in the next year , a lot of these subsidized programs end. So what is my recommendation to everyone? And by the way, I could be completely wrong about this. My recommendation is to get a Claudmax subscription for two hundred dollars a month if you want to build something and build it today. Build stuff as soon as you can, well, you can take advantage of a lot of these subsidized programs. I'm putting my money where my mouth is personally. I yesterday just purchased my second Claud Max Subscription. So I actually have two that I'm running now. I know a lot of people they like to roast me on LinkedIn for having two CloudMax subscriptions. I am getting so much stuff done. Today I push two different apps to the app store for review. I'll let you know when they are live. I'm really proud of them. Some of them are businesses that have been making me money for years and I've been able to completely upgrade them in a way that I never was able to before. So there's a lot of exciting stuff that I'm doing. I've been able to build websites and SaaS if you go to AI chat daily. com, which kind of the news websites that's associated with this. I vibe coded that entire thing using Claudcode. Really impressed with it. And so and by the way, the metrics on I'll it probably. cover them in the next episode, but they're exploding as far as users and all sorts of cool stuff there. So I'm seeing so much value, but I think that we're going to come to a point in the near future where all of this stuff actually gets more expensive for a while as these subsidized programs are ending just like GitHub has ended theirs. Okay , Opal is pivoting. It's a webcast webcam startup, by the way, if you didn't know them, they're rebranding as Opal Electronics and they're pivoting to AI hardware. They just raised forty million dollars from OpenAI in Q one last year, which basically valued them at two hundred seventy five million dollars. Open AI, I think is betting that there's going to be some physical AI devices. Now we've seen a lot of flops with the Humane pin, with the Rabbit R one, with I think even the friend. com pendant. We've seen a lot of flops that don't seem like they've really made it. And is that kind of the future of AI hardware? Absolutely not, in my opinion. Because we've also seen some big wins. The Meta Raybands are incredibly popular. I see so many people using those. And so I think we're going to come to a place where some tools are not some hardware isn't a good fit for AI while other hardware is. And we know that OpenAI is working on a lot of hardware that is unnowned with Johnny Ive, the former designer of Apple , the iPhone. And so there's going to be some interesting things. Now, I think OpenAI is Ople's largest shareholder, but they hold zero rights to the company's intellectual property or product design . And Opal has also stopped any sort of product shipments for three years after they had a twenty twenty two meeting with Sam Altman's team about integrating Chat GPBT into hardware. I think this is a smart play from OpenAI, basically. It's a hedge in my opinion on their hardware goals that they're that they're doing with Johnny Ive . Between Opel and Johnny Ive they can see which of these kind of hardware devices stick. It's also interesting because it's not a straight up buyout, but I mean, basically it feels like a buyout, right? They put forty million dollars in. They're the biggest, you know, stakeholder in this company. But what's interesting is if this product flops from Opel like we 've seen with friend. com , Humane and Rabbit, it's not going to tarnish Open Eye's brand. It's not like it was a loss for them. They're just like, oh yeah, this is just someone we partnered with and they were going to roll us out. But if it does work, it's proof for them that look AI hardware can be sticky and this new product we're coming out with Johnny Ibe could be a success. So an interesting play from opening eye. Uber is currently capping their AI employee spending at five hundred dollars per tool because they burnt through their entire annual budget in four months. I mean, this is kind of the same problem that I was talking about with GitHub. There is an issue where if you just give all of your employees at a company API access to Claude, for example, and not the Claud Max subscription that's two hundred dollars a month , it's very easy to burn through an insane amount of money. You know, I run out of my Claude Max subscription which happened to me like a week ago. I was like, okay fine, I'll just buy some extra tokens because you can buy over likeage tokens. So I was like, I'll just spend two hundred bucks see how long it lasts me. I've spent two hundred dollars in one day. So I spent I'm happy to spend two hundred dollars a month because the token cost for me would be that much every single day times thirty days which, is six thousand dollars. And that was also this was actually, maybe this was a few weeks ago. This was before they said they doubled the usage and the token limits because they made the space deal. So somewhere between six and twelve thousand dollars , I am really happy for the two hundred dollars a month. I think that's insanely subsidized and I recommend like I already mentioned, everybody get access to that. That's it for the podcast. Thank you so much for tuning in guys. If you want to try my startup and get access to over eighty different AI models in one place for eight nine nine cents a month. Go check out AIBox. AI. You can chat with eighty different AI models, video, audio, image, and you get access to everything in one platform. You don't have to log into a bunch of different places, share your credit cards with a bunch of different