I’d estimate Ant was generating something like $5b of ARR directly from Chinese distillation efforts going into its September crackdown. I’d guess the entirety of that spend almost immediately shifted to OAI as the next best available model. Normally one would expect Sam to leave that ARR unchecked until they IPO as the recent angst around Ant coming in below the bogey demonstrates that investors shoot first and ask questions later. However the variable that you have to consider is that the state department likely had a lot to do with encouraging a crackdown behind the scenes as evidenced by rhetoric from Bessent and Lutnik prior to the Ant distillation blog post. So normally I’d expect for that distillation ARR to move from Ant to OAI to eventually MSL and then xAI as the Chinese desperately scramble for the most capable model they can freely ride on. But again that assumes there is no unifying force that upsets the game theory of distillation crackdown. One other component to consider is that we are only now moving from frontier model capabilities being as capable as the median knowledge worker to now starting to eclipse that baseline. One could argue that commoditizing the human baseline forces enterprises to adapt to an AI world far more quickly vs if you were to price tokens at human capacity and closer to human derived intelligence. What that does is prime enterprises by forcing them to disrupt existing workflows anyways simply due to cheap cost of human level intelligence which opens up budget for them to spend on frontier intelligence that far surpasses human intellect. As a maxi I believe that fast takeoff implies we are far closer to those classes of model vs what consensus believes and I also believe that in the next week or so we will get the early glimpse of it via Ant’s new model and OAIs likely fast-follow. At that point while bears will point to OAI NNARR slowing again even as Ant accelerates into November due to OAI crackdown on distillation I suspect the first glimmers of “knowledge worker in a box” will completely shift the narrative for EOY 2027 ARR which imho will end up closer to $1T vs current cons $400b As always, long compute 🫡

The truth is there are far fewer AI-maxis within the investing class than you might otherwise think. Plenty of bottleneck bros. Lots of hyperscale truthers. Abundant semiconductor enjoyers. Infinite momo lovers. But people who have actually glimpsed the future because they can think non-linearly and instantly understood Leo’s message back in mid-2024… an incredibly small handful. The most fascinating part has been that neither Claude Code or Astra changed this. The same people who can think abstractly before the proofpoint continue to be able to after. And everyone else still needs to be spoon fed. I’d estimate within the TMT L/S community sub-5% are true maxis. And no Coatue isn’t maxi. Neither is Gavin who I respect the fuck out of. But he’s rationally optimistic but cautious. Maxi’s start with the assumption that models can be scaled up well past human intellect at a pace that the human mind can’t project and the economic value of that scale up is exponentially larger than existing gdp. Human bottlenecks are irrelevant as models get smarter. And with that north star we work backwards because path function matters and we have to pay rent until the robots are made. It’s a very different headspace vs starting with the premise that hyperscalers are likely to milk a couple hundred billion in cloud revs if this all goes to shit.

Demand for intelligence is unlimited. Demand for Opus level intelligence is very limited. Luckily the labs have much smarter models on tap. If they want more compute they are going to have to find a way to monetize said models. Rev share and whitelisting comes next. Monetization isn’t linear. Claude Code made that abundantly apparent. Side note: the ARR lab disclosure by both labs is a clusterfuck and both CFOs should do better. Regardless of the incompetence of the finance function at the labs the reality is we are ahead of schedule on scaling laws and model progress and distillation is being addressed. Lab ARR matters but is a lagging indicator vs model capabilities. That said bears are right to view that as cope near term. The truth is Ant got mogged temporarily by OAI and then by the double whammy of China distillation crackdown and META shifting away. Shit happens. You move on. That said on a forward 12-18 month basis models get much better, enterprise adoption accelerates as higher IQ agents ameliorate human bottlenecks and as labs drive race conditions that force adoption by vertical. So ARR will ofc once again accelerate. And anyone looking at neocloud unsecureds as a proofpoint re the ability to finance capex is a moron and either genuinely has done zero work on the compute capital stack or is purposefully driving fud. Which is fine. No crying in the casino. Long compute 🫡

You guys don’t fully appreciate how insidious the gender wars are about to get. The whole construct of men and women being able to harmoniously co-exist in today’s society is about to fall apart. And the most normal and well adjusted of both sexes are going to be caught completely by surprise since they are the ones who have generally paired up early on in their lives and haven’t been exposed to the rapid degradation of the traditional dance between the sexes. It starts with resentment and it ends with rage and destructive behavior. I keep trying to warn you guys. Clancy, Cornell, Clav - this is mild vs what is coming. Both sides are in for a rude awakening. Gen-z men trying to adjust by “locking-in” are going to eventually realize that the imbalance between women they deem worth wifing up and men pursuing those women is going to only worsen with time….more than offsetting any resource accrual. Women meanwhile are going to start drowning in testimonials about hitting the wall and the realities of hypergamy. Resentment will build. We will probably see Me Too 2.0 with 10x the force and it’s going to be met by a “kill woke” type response from the male side that will end in “believe no women without evidence” and “repeal the 19th” Pay attention.

Am I the only one who nuked their sellside research consumption by like -90%? Between ASKB, X, groupchats, substack and podcasts the marginal utility for me has gone to near zero. Still skim spec sales for positioning but even that is down by a lot since I start with TMTB.

Polymarket currently has 88% odds on Dems taking the House. I would put the odds at almost inverse at 20% with an 80% prob of Republican sweep. If following the election the Dems have 218+ seats I will do the following to give this some teeth: 1) I’ll publicly Mea Culpa and QT this post 2) I won’t post for the next thirty days as punishment So you know I’m invested (figuratively, since I’m not allowed to bet on elections) 🫡

Message to people in Washington: You have less time than you think. You need to assemble a group that includes the lab leaders and the brightest minds in economics & finance and pencil out how you are going to incentivize American corporations to adopt AI quickly while simultaneously diffusing the benefits of the ensuing automation to impacted workers. You cannot be reactionary here. The narrative will get away from you. You need to be game theorying out how you can maximize benefit to American workers while pushing as much pain as possible to foreign workers within American and multi-nationals. You need to be talking seriously about gatekeeping frontier access by industry and geography. Ditto for energy and compute access. There is a delicate balance of finance, tech and geopol and you have one shot to get it right. Look around the room and ask “who amongst us was skeptical about AI timelines and who was earliest in identifying its trajectory” … if you don’t have at least a couple maxis in the room you’ve already failed. You. Don’t. Have. Much. Time.

Digital is solved. Brockman said they have multiple models in reserve. Brown said scaling laws are holding. Focus on robotics, sensors, wet lab automation and rapid admin automation plays. Everything that needs to be funded will be funded. Long compute. Long compute. Long more compute. Most of you were born into a four or five decade stretch where society lacked imagination. Something went wrong in the 70s. We lost our mojo for a bit. We are about to get it back. Be optimistic. The future is here. We’ve done this before you just weren’t alive for it. Los alamos. Freedoms forge. Apollo. Accelerate, anon 🚀

It occurs to me that META is going to have a very hard time keeping up with the frontier…not because their team isn’t cracked or because they lack compute….its because when they get to the frontier their safety burden will be a lot higher than Ants or OAIs Could you imagine if their rouge AI fucks something up Zuck being the villain for two consecutive eras is not an option

There’s going to be very interesting shifts in gender-ratios at high-performing companies as the number of humans needed nukes down thanks to AI eliminating the traditional corporate sprawl and fake email job dynamic that has proliferated over the last two decades. If you want an interesting test case look at the male:female ratio of risk-takers and employees in general at small hedge funds and how that changes after they pass the ten person tipping point.

The first stage was boomer PMs pattern-recognizing CHGG being disrupted across other sectors post Claude Code The second stage is CEOs pattern-recognizing AI-adoption within their employee-base vs prior cycles of cloud eating on-prem or excel eating graph paper The third stage is CFOs pattern-recognizing AI agents as analogous to outsourcing labor to China or India The fourth stage is exec boards watching a new vertical like accounting get torched overnight and running the pattern-rec on to their own sector and panicking. Claude Code was easy to dismiss. Verifiable rewards. Domain expertise of the labs. Fully digital. When the model capability broadens you get tipping points and the second tipping point marks a pattern. Human psychology isnt rocket science.

Six months later and my view on this hasn’t changed at all. Fast forward another 18 months from now and I think the median public SaaS co will be down -60% or more from current levels with a handful that have tripled because they managed to ride the AI wave and a larger number that are in an absolute death spiral. Whats fascinating is the non-maxis who seemingly hold two contradicting thoughts in their heads simultaneously…. They say hey AI is going to be focused on solving cancer and isn’t incentivized to burn tokens on replicating existing software rails…they also say hey we have way too much compute being built relative to future demand. Will be interesting to see how they reconcile these two views when they get their hands on upcoming models which clearly will demonstrate the capability that bears have been warning about while also having a directive to be as cost-effective as possible on increasingly longer-duration objectives. Like I’ve said before “the easy money in shorting SaaS is behind us”. The first selloff was on EV concern. The next selloff will be on budget crowd out. Tread carefully. Avoid the space if you can. If you’re a software analyst whose PM is forcing you to pair trades in the space find ways to long the compute factor and start sending out your resume 🫡