Nvidia’s board stated today that it has found “no reason to believe that either national security or Nvidia secrets were compromised” as a result of Jensen’s actions. They are initiating an independent investigation overseen by a committee of independent directors, assisted by outside independent counsel, that will examine all available information. This will be an unbiased, exhaustive and thorough investigation given the fiduciary responsibilities of these independent directors. Jensen said that “I support the investigation and will cooperate fully. I love our country and our company. I am committed to protecting NVIDIA and supporting America’s national security. I am proud and grateful to be an American.” I have known Jensen for almost 30 years. I simply do not believe he would ever knowingly do anything to disadvantage either America or Nvidia. The only thing he has ever said to me about China is the absolute importance of keeping the American hardware ecosystem, led by Nvidia, ahead of China. That’s it. More detailed thoughts follow below:

The governor-elect of Texas, Gina Hinojosa, has explicitly said that all currently permitted datacenters in Texas will be allowed to finish construction. This essentially covers all of the 2027 and likely well into 2028. She is going to pass laws that ensure that all *newly* permitted datacenters going forward for delivery in 2028/2029 will pay taxes, commit to no increase in power prices for consumers, don’t impact water availability for people, be constructed with union labor and give “Texans a seat at the table.” Sounds reasonable. She doesn’t want to lose a lot of good blue collar jobs and property taxes for small towns in rural Texas. Datacenter commentary starts at 6:30 in this interview. Also attaching her official campaign position from her website in the next post. Sidenote: After watching a bunch of her speeches and interviews, I do think she is a political talent and probably has a future in national politics.

Hard for me to look at these charts from the FT, especially the first one, and not see some evidence of “ROI on AI.” Seems like a productivity surge post-Covid era overhiring that began to reverse before ChatGPT came out and then resumed its upward trend after ChatGPT. Especially given the @a16z data on revenue per employee at their portfolio companies and the @EPBResearch data showing that the 3 industries that have most heavily adopted AI have gone from 2.2% productivity growth to 5% productivity growth. And makes sense that it is showing up in the US first - America is 72% of Anthropic revenue vs. 50%ish at most application software companies. Great stuff from @jburnmurdoch even if I disagree with his conclusion.

Come to @TomorrowXSummit in Austin November 17-18. We have Jensen Huang, Lisa Su, Lip-Bu Tan, Marc Rowan, David Solomon, Jon Grey and so many more great speakers - I think we are approaching 100 CEOs across three stages at this point. I get emails every day asking for an invitation - this is your invitation! Anyone can sign up but note there will be a security screening and super-tight security at the stadium.

Revenue per GPU can increase as token prices decline if per GPU token throughput increases enough. So both Anthropic revenue *and* margins can go up as token prices go down *if* GPU prices go up less than the product of (token price decline * per GPU throughput increase). But I have super enjoyed all the commentary to the contrary!

I am shocked, absolutely shocked, that Anthropic ARR has likely gone vertical in October after they cut token prices. Except the exact same thing happened for the entire AI market, which is why GPU rental prices have surged while token prices declined. $100b plus in year-end ARR looks possible again.

Don, there is a missing term in your equation. The crunch spread is not: Token Price - GPU rental price. Rather it is: (Token Price * Token Volume) - GPU rental price. More simply: Revenue per GPU - GPU rental price. Continuous throughput improvements for the same exact token mean that volume growth can more than offset token price declines for the exact same model/token i.e. Kimi K3 token throughput per GPU has recently been improving at a 37% annualized rate driven by inference engine optimizations. GPU prices are vertical because: 1) Mix is shifting from higher margin frontier tokens to lower margin open-weight tokens. $10 in Claude revenue requires $1 of inference compute. $10 of of open-weight revenue requires $3 to $7 of inference compute given competition between inference providers leads to lower margins. Open-weight tokens taking share is positive for AI infrastructure demand given lower margins at the model layer. The reverse is also true in that frontier tokens taking share is negative for AI infrastructure demand. Open-weight models have been taking share since early summer. 2) Throughput is steadily improving for each individual token type such that GPU compute becomes more valuable even as true like for like token prices decline.

TLDR; we will probably never get another ARR number from Anthropic, which is healthy. Should force the market to move away from extreme focus on Anthropic/OpenAI ARR numbers to hyperscale growth rates, which are a much better metric for AI at this point given they capture Muse, Grok, Gemini and Open-Source. Anthropic FCF positive in Q3 and reaccelerating in October on Opus 5.5 per third party data. Roadshow in several weeks will happen after this has been widely confirmed. Unit economics much better than expected given positive FCF with 75% of their compute going to training. All per public reporting.   OpenAI continuing to grow at the same pace per Sarah Friar interview after they took share vs. Anthropic in Q3. Means the sum of Anthropic/OpenAI growth is accelerating from the Q3 pace. OpenAI probably hits FCF positive in the next few months.   Open-source growing much faster than either Anthropic or OpenAI. Modal tripled since May and is 15x YoY per yesterday’s announcement. Open-source tokens generate more revenue and profit for the hyperscalers/neoclouds than frontier tokens. *Every* open source inference cloud I am aware of is growing faster both sequentially and YoY than either Anthropic or OpenAI. And their combined compute spend is becoming material.   Third party data pointing to hyperscalers continuing to accelerate in Q3. All report in the next two weeks. Acceleration should continue in Q4 and Q1 as installed base of compute slowly reprices higher closer to spot and new capacity comes online at higher prices. Continued acceleration in hyperscalers should help address external funding concerns.   10 year yield down in a straight line over the last 24 hours.   Some risk of escalation in Iran next few days, but earnings and mid-terms probably outweigh taking an ultra long-term view and looking out 30 days.   Biggest risk imo remains cyber and OpenAI/Anthropic dominating the model layer. Fragmentation, competition and lower margins at the model layer are good for everyone else in the ecosystem and for America. Slower for longer is much better than an overbuild and an actual bubble.

@masayoshisson @3F_Research 6 years seems conservative tbh. I think with disaggregated inference you will see Blackwells have useful lives over 10 years. Will be able to put the latest and greatest SRAM accelerator in front of a B200 in 5 years and make it sing.

1) Trying again. 
TLDR: Everyone can win. Open-source, frontier labs, infrastructure, applications and most importantly the American people.   I understand all of the jitters about Anthropic losing share, real rates, spreads and second derivatives. Still think the most likely future outcome is a hybrid, multi-model future where almost everyone wins, open-weight tokens are likely the overwhelming majority of tokens, the dominant frontier model companies still do well albeit perhaps not the outcome that seemed possible in May and AI infrastructure/applications benefit immensely from the increased fragmentation, competition and lower margins at the model layer.   Lower margins at the model layer mechanically drive higher compute demand as long as someone is willing to pay for the training. And Jensen is obviously willing to be the “trainer of last resort.” As below-market compute contracts signed in 24/25 roll-off and reprice higher, cloud and neocloud revenue should continue to accelerate which will help address financing fears; I think we may be near peak external financing for this buildout. Noteworthy that using data from 3Fourteen Research, B200 clusters will generate a 37% IRR *if* their rental price declines 40% per year. Prices are still going up, but that IRR math is too ridiculous to print. 37% IRRs available at scale should get funded. Re: this weekends controversy about MOUs, Anthropic’s $413 billion of real contractual commitments sounds scary. Reality is that it works out to roughly $31 billion of annual cloud spend, which is easily internally financed given their reported ARR, and $161 billion of spend at Broadcom which will be financed by Broadcom and private credit. Continue to believe fragmentation at the model layer is the best outcome for ordinary Americans and humans everywhere. As I have said before, do not trust any 5-20 individuals to make the best possible decisions about the direction of this technology. I want as many AIs as possible to maximize the odds that they encompass the diversity of human values across the world and richness of human variation. And I want an AI that shares my own personal values. Safety, freedom and the maximization of human agency through democratization, distribution and diffusion vs. centralization. History has spoken on the dangers of the latter path. Finally, from my perspective anything that slows this buildout down is net positive over the long-term as the biggest risk and worst outcome is an *actual* overbuild. We are structurally short watts, wafers and increasingly capital. That is all good. God forbid we were still in ZIRP, TSM ramped capex to 3x their current plan and we weren’t short turbine blades: there would almost certainly be an overbuild and a bubble. That would be terrible. Slower and smoother for longer is better both for investors and for the world. A terrible cyber event is the most plausible near term bear case IMHO, but AI cyberdefense ramping quickly and I was happy to hear Sholto say that cyber probably becomes defense dominant in the near future.   Longer, threaded version follows:

On another note. Sunsets over the Aegean. And I have always wanted to see the “Temple of Poseidon.” Also congratulations to SB and JP on their nuptials. Did not know the Swarthmore crowd could be so fun.

Hmm. Let’s think for a second. Why are the frontier models cutting price? Might it possibly, just possibly, be a result of the fact that they are losing share to open-weight models? Given positive elasticity, their price cuts are clearly good for AI infra demand. Open weight models are positive for AI infra demand, exhibit 1002. And obviously the semiconductor companies and cloud companies would fund open-weight training if necessary. Jensen already is! OpenAI and Anthropic have locked in years of compute at below market prices. Other companies would happily assume these commitments at *higher* prices. Also I’ve always wondered if “missing the forest for the trees” is an idiom, a proverb or an aphorism. Do you have a nuanced view on this? I am going to ask everyone this question from now on when appropriate.

Why open-weight models that compress margins at the model layer are net positive for AI infra demand, exhibit 1001. An open-weight token consumes *roughly* the same amount of compute as a frontier token for a similar size model.

The White House Accord on Super Intelligence will have a positive impact on safety. Committing to hire third party auditors who will report to an independent committee of board members has more practical near term significance than almost any conceivable regulatory action. These board members will have a fiduciary duty. If they ignore a report from the third party auditors then a bad faith finding from a court is a real possibility. A D&O carrier could use this to deny coverage. Really good outcome for ordinary Americans. More effective and elegant than some ridiculous new regulatory body that would take months to do anything, then almost certainly done the wrong thing and along the way probably created a regulated oligopoly at the frontier which is the scariest potential outcome* As I read the articles about the accord, it did occur to me that they were mostly written by political reporters who may have not understood the significance of the accord given their reporting beats are generally focused on public policy instead of corporate governance. *Scariest because I do not trust any 5-20 individuals to make the best possible decisions about the direction of this technology. I want as many AIs as possible to maximize the odds that they encompass the diversity of human values across the world and richness of human variation. And I want an AI that shares my own personal values. Safety, freedom and the maximization of human agency through democratization, distribution and diffusion vs. centralization. History has spoken on the dangers of the latter path. **Also SI not AI still adapting to the change but I do think better branding. Who wants artificial ingredients in their food?