Jensen Huang's Moat Is Dead. But He Has A Plan

So I want to, because we're kind of talking about SpaceX a little bit, another good company that probably has a little more bozos than Nvidia, but doesn't have a lot of bozos would be Nvidia, right? And so Nvidia is the most valuable company in the world, but Jensen has maintained this amazing culture throughout his career, right? So I wanted to bring something up. This is from Peter Diamandis over here. So do you see my screen?

No. Yeah, now I do.

Okay, great. So, Right now, Nvidia's greatest moat is CUDA, right? CUDA is their— it's one of their programming layers, right? Basically what it does is it translates the code into instructions that Nvidia's chips can run at blazing speed. But the problem with that moat now, Neil, is it's being eroded because now you can just go to an AI and say, hey, take my AI code and compile it to run fast on this AMD chip. Hence you see AMD is rising up, Intel's rising up, you see Cerebras coming out of nowhere, right? And then there's like Jalapeños coming out from OpenAI. You have the tensor processing chips, tensor processing units from Google. Freaking training is coming out from Amazon. So all these things, right? So chips are becoming, have always been competitive, but CUDA was really Nvidia's moat. What am I saying right now? The most valuable moat on earth is leaking, right? So it's like, okay, well, CUDA as this inference time moat is dead. Okay. So here's the thing, and Nvidia, Jensen already knew this, right? So that's why he bought this company Mellanox for $7 billion in 2019 to own high-speed interconnect. So if you want to run 100,000 or 1 million GPUs as one coherent machine, you still have to buy Nvidia at the end of the day, right? So the quote here is, your moat is only good until the next moat, and Jensen is moving Nvidia's moat very intelligently, right? So here's my point with all this. The durable advantage is the metabolic rate of the organization, and AI is the fastest rate fastest way to raise it. So this is from Peter Diamandis, and he says there's only 3 moats left. Okay, so the 3 moats left today, Neil, would be, um, it is your— it's your rate of, of being able to change. That's one of them. Uh, brand, he's arguing, is another one. And then capital velocity is another one. Okay, I'm gonna repeat that. So, um, really number one is speed of reinvention, right? So the question is no longer who has the best moat, it's really how fast you can reinvent yourself. Number 2 is capital velocity, so which shows up on the balance sheet. So the hyperscalers, the way they're spending right now. And then number 3, he's saying to a lesser extent actually would be brand, right? So we can agree or disagree with this. We can actually react to this.

I think brand is definitely in there. Capital velocity, like how much money can you spend and how much money do you have? I don't know how much of a moat that is because there's so much money out there. I listened to Harry Stebbings, you know, the 20VC, and he's telling me how crazy the venture world is. He's like, let's see if I can actually play the clip. I saw it this morning, or was it yesterday? It was actually, it was really crazy. And I don't know Harry personally. I messaged him a few times and he's messaged me, but I don't think he's full of crap. Just being honest. Watch, listen to this.

Put it closer to the mic.

Time to call BS on what is happening in venture right now. Every venture investor knows the truth, which is this game has completely been ruined by 3 rounds in 3 weeks. One company I met this morning raised at $150 million price, then a week later it raised at a $500 million price, then a week later it raised at a $1.5 billion price. It is still 3 people with an idea. By the way, there's another company that I met today. First round was at $3.5 billion. Then because of the oversubscriptions, too many people wanting to invest in it at that ridiculous first price, it's now raising at a $5.5 billion price. This is very standard. I sat down with my team yesterday, and you know what they say? They say, hey, trouble is, we just can't find a company that is raising under $100 million. That is not the price. That is the round. This is absolutely ludicrous. That's not a new normal. That's not healthy. That's not cool. That's just froth. It's hype, and it's bad for the ecosystem. Now the question is, what do you do in this time? You have to play the game on the field.

So, but, um, but yeah, dude, you just— I think there's access to tons of capital. I do think it's brand. I do think it's speed to adaption. And if I had to pick a third one, and it's kind of related to speed to adoption, it is actually talent. Like how good of a talent pool you have, because your talent pool affects if you have capital, what you do with your products, do they learn from the mistakes? Do they leverage the latest technology? And I was listening to one of the guys who created some sort of semiconductor company. He's retired. He was on CNBC the other day and he was talking about the Fortune 10. Do you know how many companies from the Fortune 10 are from San Francisco, Eric? If you had a guess.

Almost all of them.

Let's see if I can pull it up. Can you see my screen?

Yep. There you go. So, okay. Nvidia, Apple's up on Valley.

Google's number 3.

Microsoft, Amazon are Seattle.

Uh-huh. Uh, I don't know, Taiwan Semiconductor. I'm assuming that's Taiwan. Meta is 4. Broadcom is, uh, 5. Tesla's number 6, right? Did I count it right? 3, 4, 5, 6.

Yep.

Yeah. 6 out of 10 come from the Bay. I'm not talking about the United States. I'm talking— well, technically it's Fortune 10, so they're all from the United States, but I'm not talking about California. I'm talking about the Bay Area, right? Like, you know, everyone's just like, oh, Tesla's moving out of California, they're going to Texas. Did you know since Tesla has moved out of California into Texas as their headquarters, they actually employ more people in California now than they did prior to them leaving California as a state, quote unquote, right? And a lot of this headquarters stuff is just more tax and political stuff. And I'm not saying they're right or wrong. This is not the conversation for that. It's just more so the talent pool in Northern California is amazing, and a lot of it has to do with that's where a lot of tech was originally set up. They have a lot of amazing universities, and people there have a massive risk, massive appetite for risk. And you also have a very high concentration of amazing engineers, product people. And yeah, the ecosystem has just built. Like, I just don't see the Bay going anywhere no matter what happens to the state of California, just look at Chamath. I'm moving to Nevada all the way to, hey, I'm staying in San Francisco and not going to Texas or Nevada. I'm staying in San Francisco and I just raised some money from Salesforce.

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Yeah. One, speed of reinvention. Is that what you're highlighting?

So the 3 moats that survive. Okay, so speed of reinvention, right? So I just want to read this part. So the question is no longer who has the best moat. It's those who are reinventing themselves faster than anybody else. Jensen is moving from CUDA to interconnect, which is what we just talked about. Elon is shifting Tesla from manufacturing cars to offering robotaxi services and robots as well, while SpaceX goes from rockets to Starlink to orbital compute. The durable advantage is the organization's metabolic rate, and AI is the fastest way to raise it. So again, the durable advantage is metabolic rate of an organization, and AI is the fastest way to raise it. So what I would say here is I kind of— the speed of reinvention is one piece, and I think that does tie in with the talent density piece that you're talking about because You can find great talent in North Cal, but the type of culture that you build, the talent density within your own company, that's something that you can drive on your own, right? Because Tesla and SpaceX are very much driven from Elon's intensity at the top, right? Same thing with Jensen's intensity at the top as well. So I think those 2 in my mind kind of go hand in hand. Now, to your point, capital velocity over here. So we're not talking about access to compute. Anyone can rent an H100, which is an NVIDIA chip. Not scaling ability. The moat is that Microsoft, Google, Amazon, and Meta can pay for hundreds of billions of dollars of GPUs immediately out of cash flow, and already have customers to fill them. So they have distribution and they have the capital velocity from their cash flows. And the hyperscaler is just a financing system. It's a real estate game. The oil analogy is exact. A liquid global oil market didn't hurt OPEC because the moat was having the oil in the first place, right? And so I think a little different than the ecosystem that we were just talking about. And then He thinks that brand is a third smaller moat, right? So brand still holds up. Like if you're buying an Hermès bag, like Louis Vuitton, Dior, or whatever, those things stand out certainly. But the future of AI, and maybe we should talk about this, is automatically transacting your purchases of toothpaste or paper towels. And it doesn't care about your brand. It cares about the cost, the ingredients, and the thousands of online reviews that it consumes. I don't know if I completely agree with that because if you're so smart as an AI machine, You should be able to infer what people see as status and brand just by seeing what people talk about on like Reddit, for example, or even through the reviews.

Yeah. So the reason I disagree with his part on the brand side is consumers actually care for brand names. We work with a lot of the luxury brands out there, like we work with LVMH and we work with a lot of other popular like handbag companies that, you know, everyone dreams to have. And what I'll tell you is If AI just goes and purchases purses for people, I'm just going to use that as an example. I know he did carve out luxury handbags there. You're going to have people being like, I don't want to wear this Coach bag. I prefer a Chanel bag. It makes me look better. The same goes with toothpaste. I know he gave an example of it's just toothpaste is just toothpaste. It meets the requirements. Some people like me have sensitive teeth. I know I'm a small example, but I use Sensodyne and I've been using Sensodyne for ages. If it's not Sensodyne, I would just be pissed off. What I believe is going to happen with AI and agentic commerce, it's going to understand the patterns that you as an individual make and learn from it, and then from there adapt and do more of the things it knows you like because then you would just be pissed off. But on the flip side, when you're looking at agentic commerce, it's It's about how much data can these guys gather from you before they go and start transacting. And this is why I believe Amazon cut off Muse. I don't know if you saw that, but this is a perfect example. Facebook paid, what, $13, $14 billion for that MIT kid? Scale. There you go. I forgot his name.

Alexander Wang.

Alexander Wang. And then people were making fun of them being like they overpaid. I'll be honest, I was like, how the heck would you spend that much money paying this kid for a company and you're not really generating the revenue or anything like that? But look at what they did with Muse. I would— I'll be the first to say I was wrong. If they actually can keep going with Muse, I think that's going to change Facebook's business. And I think that's a bigger business than what they're doing with the social network. I don't think Muse would be as successful if they didn't have that distribution channel, but Now, because Alexander Wang, I don't know if you knew, he's the one who's in charge of it all. And they're making fun of him that he was wearing a deer t-shirt with deer Crocs. Who the heck cares what he's wearing? The stock price went up.

He can wear whatever he wants.

Yes. The stock price went up by a market cap of $200 billion. Would you pay $13, $14 billion for a $200 billion gain? I'm pretty sure everyone would. And that is what happened.

I always thought it was going to work because he's one of my people. So I actually genuinely thought it would work. Now, I thought it was like, it was going to be tough, but it worked, right? Because They actually have a very strong model now. You look at the products that they're releasing now because they're in physical game. To Neil's point with Muse, the one thing that they have is distribution. I'm going to show you something on my screen right now. I don't know if I showed you this last week, Neil, but to your point, they have the data, right? And so if I pull up my screen over here, so Neil, did I show you this the other day? It's coming up right here. So, okay, so here's what I did with MetaMuse, right? And I'm doing this inside of WhatsApp. So this is my bot called Doodoo. Okay. Right? You can see up here. So anyway, I asked— Is that you? Yeah, I don't have cats, but like, it basically was like, hey, I was like, hey, I want you to look at my Instagram. I want you to understand my style, and I want you to understand how we can— what other pieces we can add to the wardrobe right now. Am I dressed like this? No. But I'm glad it looks like this guy's pretty good looking, you know what I'm saying? So like this, right?

The coloring actually works for you. But if you go to the first picture, that one— no, no, go back to the first one. That reminds me of the Twitch founder. Do you know who I'm talking about? Just, uh, what is it?

Justin, Justin Kan.

Justin Kan, the very first picture. You should wear all black, it looks good.

Yeah, so like, this actually looks good on me, right? And I'm like, this is actually a pretty good look. And you know, it mostly resembles me, you know. And like, this is not bad either, right?

I don't like the blue. I like the all-black look. You should do all the black look. And either green's not bad, the gray's not bad.

These aren't bad. Like, this is good style, right? I'm just saying, if you have it, it's connected to your Instagram. And you know what I did yesterday, Neil? And this is why Muse plus Jev is insane, right? I was like, hey, you know what? I want you to look at all 116,000 of my followers. Tell me all the influential and powerful people that follow me, right? I was like, tell me all the people that are in travel service, luxury service. Tell me all the people that own an agency at these employee sizes over here and use Jeb to classify, right? And it's literally classifying right now. I was like, hey, how much is it going to cost to classify 116,000 of these? $3.30, right? How long is it going to take? 20 minutes, right? I'm like, sounds good. And then, you know, I tried to take it one step further because remember there's like these other These people that have paid like Marriott and like United for these employee plans and all, I'm like, hey, can you email all the people that work at United and Marriott? And can you classify only the people that are at this level? Can I reach out to see if I can buy like a plan, right? You can't do that, but it won't let you do that. So I just want to see how far I can push it, but I'm just saying that it has all the data. I was like, by the way, one more deal. I'll say, hey, look at all these people over here that we follow on from a marketing standpoint. I want to see all their offers. I want to see all their hooks. and then you use Jev to classify it, $2.15, right? That is the power of having something like Meta and then combining it with something like a Jev, which we can talk about. But to Neil's point again, like, I do care about the brand because I did ask Muse to buy me a bunch of tennis stuff from on.com. So I do care about the brand because other people talk about it. So

dude, so my team had, they did something similar for my followers, okay? They were just like, you know, you have quite a few influential business people that follow you. I'm like, I don't think so. They're like, dude, They're like, how often do you actually log on to social media? I was like, yeah, good point. I don't log on that often. So my team ended up using AI. They spun out a report. I don't have it in front of me, but they're telling me like people like Mr. Wonderful, you know, from like Shark Tank follow me. And I'm like, I didn't know. And they were giving on and on. There's a lot of successful rich people and quite a few billionaires who are following. I'm like, ah, I would've never guessed. Yeah. But you know, you could do so much with AI. And because Meta is connected to their own ecosystem, it's much easier because you have access to the data. But I had a question for you, actually 2 things. Well, first one is you should actually buy some of those clothes. They actually look good. I like them. I will. And then the second one is going back to their purchase of the $13 billion, right? Or $14, whatever it was, of that Alexander Wang's company, SKALE. You know me, all right? You already know I wouldn't do it, right? Why don't you think I would place big bets like that on my business?

My opinion here is your personality, the way it is, is once you see it working, you're all in. That's how I've always seen you. Like, for example, there's a microcosm. I'll share some stories here, right? In an unsure environment, right? When I go to the blackjack table and Neil was sitting, he was only watching me play. He didn't want to play because there's nothing sure there. It was pure gambling, right? And here's the thing, but once he saw something working from like a marketing standpoint, right, instantly he takes the bet from, let's say, you know, $5,000 a month to hundreds of thousands of dollars a month, right? Once he's in and he sees the pattern working, he's all in and he bets hard.

Eric's right on that. The other thing about my personality that's a little bit different than Eric's personality, and neither is right or wrong, because if you look at Mark Zuckerberg, I don't think he has my personality by any means. And he's way more successful. And look at what he did with Scale and turned that into Muse. I am a very— would you agree with the statement, Eric? I'm a very value buyer, a value spender. I look at— I'm very financially motivated. If I was born again and put in a different role, I think I would fit in really well with private equity, the hedge fund space, anything financials with numbers like that, because that's just how my brain works. I can't get out of this rat trap of I put in a dollar, I need to know economically how I'm going to make more money right away on the arbitrage. With scale, Mark may have had the vision for Muse, but to me, and Eric knows me well, I would look at that as too uncertain. I like testing the water, like he said, or seeing someone else test it. And then when I know it works, I will go all in, but I'm not the one who's willing to test it with a $13 billion sum. Now, granted, $13 billion for Mark isn't as much money, but it is still a significant portion of Facebook's market cap. And it's just a lot amount of cash and stock, right, for anyone to make that size of a bet.

Well, let me give you a thought on that, and then I'll talk about kind of the microcosm of this podcast that AI spotted, right, which actually relates to your demeanor overall. But, you know, at the time when he did this transaction, it was a year ago. I mean, Facebook was a, you know, let's say $1.5, I don't know, even $2 trillion company. So still, the argument that I read from a writer, like a tech writer, was like, look, if this works out, like they need to go into AI. And if this bet works out, like it's a drop in the bucket. But if they don't make this bet and they're behind on AI right now, because remember, keep in mind, he sacked like a bunch of people where it wasn't working on the AI side, right? Like it was like an existential thing. And, you know, good for him that it worked out. But let me bring us back to this podcast real quick. So a while back, I had asked one of the agents to identify what the patterns were from this podcast. And I was looking at you, Neil, and I was looking at me, and it's like, there's 2 reasons why this podcast really works. One is Neil's personality. One is because Neil talks about what will persist, right? I talk about what will change. So those are 2 fundamentally different things. And then also, when Neil took that personality test, I still remember, Neil, when it comes to internally motivated, meaning that I'm like intrinsically motivated, right, to just grow, I'm 99%. Neil's is 1%, right? Which means he's money motivated, right? Which is not a bad thing. I'm not saying it's a good or bad thing. Like, there's no— by the way, guys, there's no right or wrong Wait, wait,

wait, repeat, repeat, go back. I was curious because I didn't look at either of our test results. I think I just sent you my link and didn't even read mine.

Let me tell you why yours was so perfect, okay? And I still remember this, okay? So let's start first. I'm going to slow down my pace a little bit here, okay? So on my personality test, there's this trait known as internally motivated, okay? So this is someone that just wants to get better, right? And isn't motivated by outside forces such as money. I'm 99% on that. Okay. When you look at Neil's, which his test doesn't exist anymore, so it's just only in my head now, but his is 1%, right? And I actually, we actually have a mutual friend that's also 1% as well, which means that he's actually money-driven, right?

And there's no— 1% means money-driven?

Yeah. 1% is like, you're not internally— like if you talk about like personal growth and all these things, like you'll just like glaze over, right? But if I talk to you about money, you're like, oh, tell me more, right? So yeah, but here's the thing, Neil, on toughness, 99%. Okay. And I know Neil to be a very tough person with like just the way he works with people in general. And not, he's not trying to be tough just to be tough. It's just, he's just trying to get things done, right? Neil's also very detail-oriented. I think it's gotta be like 90, 99% plus. And so those are, and also Neil and I get along really well because our practicality is both 95% plus. Yeah. Now, when it comes to things like nurturing and empathy, neither of us are high on that. But I'll say this one thing, Neil, the good thing about both of us is we're both very helpful people. So, if you start crying, I'll give you a box of tissues. That's about it though.

Yeah, it's tough. I do think we do have some sympathy and empathy if there's really Bad things that happen, like people getting sick or whatnot. But outside of that, in work, I don't think I, at least, I can't say it for you, but I don't have too much empathy, sadly.

Well, some— someone, I mean, mine is not that high, but someone— here's what I'll say, right? Like, just because you score low on empathy, and we can move on to the next topic after this, but someone died recently, right? For, let's say, a loved one. And like, you know, I just found myself naturally like doing all these things, right? And I think you're the same way too. So, it's not to say that, you know, I think in work, if you have too much empathy, I think that's probably for a different role. I think as an executive, you probably can't have too much because you're moving so quickly and you're just trying to get things done, right? And so, I think some people can disagree with that, but that's what I think at least. All right. Well, anyway, guys, that's it for today and we will see you tomorrow.