THIS WEEK IN AI: Fable 5 Returns, OpenAI Might Nationalize, Meta Sells Compute

We are so back. Anthropic announced the return of Fable 5, its safety updates, and related releases like Sonnet 5 and Claude Science. 

In other news this week, we look into Meta’s brain-to-text research, OpenAI reports, new inference hardware, and recent robotics demos.

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TIMESTAMPS

0:00 Fable 5 Returns
3:12 Banned, Safeguarded, Back
7:58 Sonnet 5 And Science
11:33 Meta Reads Your Mind
14:11 Meta's Compute Pivot
17:17 OpenAI's Power Play
23:26 Etched's Chip Breakthrough
27:37 Memory Market Shock
31:02 Robots In The Home
36:54 Industry, Not Housebots
39:01 Episode 200 Milestone

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RESOURCES

Josh: https://x.com/JoshKale

Ejaaz: https://x.com/cryptopunk7213

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Not financial or tax advice. See our investment disclosures here:
https://www.bankless.com/disclosures⁠

Josh works with Anthropic as a contractor. All views expressed are his own and do not represent Anthropic, its leadership, or its affiliates. Nothing in this episode is investment advice.

Creators and Guests

Host

Ejaaz Ahamadeen

Host

Josh Kale

What is Limitless: An AI Podcast?

Exploring the frontiers of Technology and AI

Ejaaz:
The King is officially back. Anthropix flagship model Fable 5 is finally available

Ejaaz:
for everyone after being banned for almost two weeks by the US government.

Ejaaz:
It is still the world's best model. I've been using it in the 12 to 24 hours

Ejaaz:
since it's been launched. I'm super excited about it.

Ejaaz:
There's a bunch of demos that we want to get into almost immediately,

Ejaaz:
starting off with my favorite kinship as a child, Hogwarts and Harry Potter.

Ejaaz:
What you're seeing in front of you is a completely simulated fabrication of

Ejaaz:
the entire Harry Potter universe starting off with Hogwarts and you'll notice

Ejaaz:
that I can click into this universe immediately and start looking around.

Ejaaz:
It's important to mention that this was built from a single prompt.

Ejaaz:
I'm not entirely sure how long it took but Fable 5 did this in one complete

Ejaaz:
shot and if I press B you'll notice something pretty spectacular.

Ejaaz:
I'm on a broom and I'm flying around in probably my favorite childhood universe.

Ejaaz:
Josh, I don't know if you're a Harry Potter fan, but this is pretty freaking awesome.

Josh:
It's unbelievable. And I'm not sure if it was one shot. This is pretty impressive

Josh:
for one shot, but it was absolutely generated with Fable 5.

Josh:
And it's a testament to how impressive the model is and how happy I am that it's back.

Josh:
Thank God. Holy shit. It's been a long couple of weeks without you.

Josh:
I mean, what's most amazing about this, I find, is that not only is it able

Josh:
to generate the map of Hogwarts, but it's able to generate the unique pieces.

Josh:
Like you just went into the dining room. This is the weeping willow tree.

Josh:
It has sound design built into it.

Josh:
It understands the physics and the scaling of the way things should be built.

Josh:
And look, and like, now you're going over to play Quidditch.

Josh:
It's this like unbelievable awareness of the world and this unbelievable ability

Josh:
to generate these visual elements. Like this is so amazing. The fact that you're

Josh:
playing this in your browser

Josh:
just by someone who prompted the Fable a couple of times and then deployed this.

Josh:
And you could see it's like pretty accurate. You have Hogwarts,

Josh:
you have the dining hall. Everyone has Fable until July 7th,

Josh:
I believe the day is. 7th. In which the limits get...

Ejaaz:
Unpaid subscriptions.

Josh:
And then the limits change a little bit. And this is subject to change as always.

Josh:
But currently right now, you have about a four to five day window to really

Josh:
play around with this as freely as it's likely ever going to be.

Josh:
The intention of showing this demo is to showcase that the possibilities of

Josh:
what you can make with this model really are pretty much endless.

Josh:
And I think the challenge to everyone now is now that there is this model that's

Josh:
out that's truly unbelievable in capability relative to anything we've seen,

Josh:
it's to go out and actually try unique and fun things.

Josh:
Like I would have never thought to go off and make a Hogwarts game that I can go and play.

Josh:
I mean, traditionally you buy this game. I have a Hogwarts game that I bought

Josh:
for 75, $80 on Xbox to play around with. So what types of difficult challenges

Josh:
do you have that you'd like to try and that you never thought were possible?

Josh:
And like, those are the things that I would encourage trying out with Paypal 5.

Josh:
Really amazing model very cool you can see here the second demo this is all

Josh:
about physics and the physics understanding and it shows it on a relative basis

Josh:
compared to the other models and it's just so far superior in its understanding

Josh:
of the worlds of physics so

Josh:
a lot of these are visual examples it does really well on basically all other types of work so

Josh:
That's the thing is just try it out, see what you can do. I love this intro

Josh:
post that they shared Fable is back and it's now showing and the whole sign

Josh:
lights up and it's like, man, we are so back. So really exciting day.

Josh:
If you were listening to this, go track Fable, go play around with it.

Josh:
It is an incredible model.

Ejaaz:
I want to talk about what has changed because obviously like we can't ignore

Ejaaz:
the elephant in the room, which is this thing was banned for about two weeks.

Ejaaz:
The US government specifically banned it because it presented itself as a potential

Ejaaz:
cybersecurity threat across all national defense systems, which of course is very important.

Ejaaz:
The TLDR of their blog post is essentially they have added further safeguards

Ejaaz:
and more monitoring as to how people use the specific tool.

Ejaaz:
They'll be looking at every single prompt in terms of whether it could potentially

Ejaaz:
be an attack vector on the US or anyone in general.

Ejaaz:
And they've been working closely with partners from Glasswing,

Ejaaz:
their collective, which they set up once they created Mythos to make sure that

Ejaaz:
their defense systems are hardened appropriately against this model.

Ejaaz:
That being said, there was a lot of fear mongering around the re-release of

Ejaaz:
this model. There was talks of potential KYC verification or potentially only

Ejaaz:
allowing people in the US or American-born people to get access to this.

Ejaaz:
I'm happy to say that all of that has been dismissed.

Ejaaz:
The government and Anthropic, as well as OpenAI and a bunch of other Frontier

Ejaaz:
AI labs, have been working pretty closely together to form some form of a framework

Ejaaz:
for any future model release such that

Ejaaz:
Everyone can be banned against it, but it's released in a more secure way that

Ejaaz:
people can still benefit from the access of it and not be used in a malicious

Ejaaz:
way. So I'm happy about this. This is Fable 5 back in all of its glory.

Ejaaz:
I'm using it across all of my chats right now. Opus 4.8, you have been a pleasure

Ejaaz:
to work with, but sorry, I need to work with your older brother at this point.

Ejaaz:
But I'm excited about it. You have until July 7th, as Josh mentioned.

Ejaaz:
So use it as much as you can.

Ejaaz:
It switches to usage based pricing depending on what task you have.

Ejaaz:
But it's great to have it back um josh what have you been using it for personally i'm

Josh:
Curious i've been using it for all of my hardest challenges and all of the things

Josh:
that i do mostly day to day a lot of um just like research a lot of production,

Josh:
pretty much any challenge that i have i have switched over to fable and i noticed

Josh:
that it does it much better,

Josh:
so in the case that we're researching a topic for a show for example it will

Josh:
go much deeper it's more comprehensive you can kind of read through its reasoning

Josh:
and understand how it comes to conclusions and it's a really good thought partner

Josh:
at least for me in a lot of cases,

Josh:
a big problem that i have again is figuring out where the edges of this thing

Josh:
are and what i actually can use it for to be a little bit more creative it's

Josh:
like okay i shouldn't really be using this as an extension of opus what new use cases can i try

Josh:
and i think that's what i'm going to be spending a lot of time this weekend trying to figure out is

Josh:
what are the harry potter like demos that i could use that i'm actually really

Josh:
interested in building myself.

Ejaaz:
Yeah so one thing i've noticed is um i've never had a personal website before.

Ejaaz:
And I've thought like, hey, why don't I just give it a go and try and figure it out?

Ejaaz:
Now, the one bit of critique that I've always had with any AI model up until Fable 5 is,

Ejaaz:
the taste is just terrible. I'm sure you've tried this before,

Ejaaz:
but you're like, hey, like, build me a website that looks something like the

Ejaaz:
Airbnb website, you can share screenshot demos.

Ejaaz:
And it just kind of does a terrible job or a janky job.

Ejaaz:
Fable 5 is the first model that I've worked with that

Ejaaz:
has this visual intelligence, which is super weird, because I can't currently

Ejaaz:
use Claude right now to generate me an image, I can use ChatGPT to do that,

Ejaaz:
I can use Google Gemini to do that, Nano Banana, but I can't do that with

Ejaaz:
Claude specifically right now as an LLM.

Ejaaz:
But yet it understands what I see so well.

Ejaaz:
So what I've realized is if I'm using it to code up some form of a visual artifact,

Ejaaz:
and we use visual artifacts a lot on our show as props or materials,

Ejaaz:
it does an amazing job and it understands taste.

Ejaaz:
It doesn't look like generic AI slop anymore. So I definitely recommend folks

Ejaaz:
go and check that out. Now, one thing that we have to mention on the show that we noticed pop up was

Ejaaz:
There was a discussion once Fable 5 was re-released because people started coding

Ejaaz:
with this thing and they updated their recent version.

Ejaaz:
And they noticed that there was some form of like, they described it as a spyware-like

Ejaaz:
code in CloudCode that would basically track certain users' kind of activity on what they were using.

Ejaaz:
And obviously there's a big reason for this because a lot of foreign state-based

Ejaaz:
labs, such as in China specifically, were distilling Cloud models to build their

Ejaaz:
own models, which is strictly against Anthropic policy.

Ejaaz:
And what we got was a very quick dismissal from Darek himself at Anthropic saying

Ejaaz:
that this was an experiment that we were launched to basically prevent distillation

Ejaaz:
attacks from foreign adversaries.

Ejaaz:
Now, if you're Anthropic and if you've been following the news,

Ejaaz:
especially on Limitless, you'll know that a bunch of the Chinese open source

Ejaaz:
models have effectively attained their status because they've distilled frontier

Ejaaz:
models from American labs such as OpenAI and Anthropic.

Ejaaz:
There was recent reports, I think this week of Alibaba's Quen doing the exact

Ejaaz:
same thing. There was an official announcement from Anthropic.

Ejaaz:
So it's good to see us taking these steps and measures to prevent such attacks.

Ejaaz:
This is part of the whole safeguard approach, which is new with Fable 5.

Josh:
Yes, big week for Anthropic. In addition to that, they also released Sonnet

Josh:
5 and Cloud Science, two major releases.

Josh:
Sonnet 5, as everyone knows, is the kind of smaller model. It's the follow-up to Sonnet 4.6.

Josh:
In fact, it's priced a little bit lower than 4.6, at least for the intermediary up until August 31st.

Josh:
And it really is just like the entry-level model and the model you'll find that

Josh:
Fable probably best wraps to.

Josh:
So when you're using Fable, sometimes it gets expensive. You're using it for

Josh:
very long-running tasks. Sometimes not everything needs frontier intelligence.

Josh:
Sonnet 5 is a pretty good substitute for it to defer and start to offload tokens and requests to.

Josh:
And it seems like it's just like, you know, a solid upgrade.

Josh:
There's nothing exceptionally incredible about it, but it is there.

Josh:
It is cheaply priced and it is very strong in the parts that it needs to be.

Ejaaz:
I actually really like the look of Sonnet 5 for one particular reason.

Ejaaz:
Over the last week, people have been praising GLM 5.2, which is a Chinese model from the lab Jipu.

Ejaaz:
Way and we did an episode on this and it's a very impressive model um but

Ejaaz:
but my take on this is i think american frontier labs aren't just going to sit

Ejaaz:
around and let chinese ai labs outcompete them on cost specifically

Ejaaz:
so they have the best cards to play which is if you have the frontier ai model

Ejaaz:
such as claude fable 5 or chat gpt 5.6 sol

Ejaaz:
you can just distill your flagship model into a much cheaper model and that's

Ejaaz:
what we're seeing with sonnet 5 it does opus 4.8's capability but at a fraction of the cost.

Ejaaz:
And so I think we're going to see this trend continue until we find that perfect

Ejaaz:
medium in between how cheap GLM 5.2 is and how expensive Fable 5 is,

Ejaaz:
and people will just stay within the Claude ecosystem.

Ejaaz:
And I think it's a smart approach, and I'm happy to see it. But you mentioned

Ejaaz:
Claude Science as well, Josh.

Josh:
Super cool, yeah.

Ejaaz:
As a former bio nerd that did a four-year biology degree and spent a lot of

Ejaaz:
time studying genetics, I wished I had this tool.

Ejaaz:
This is basically the co-pilot for any kind of scientific research that you

Ejaaz:
do. It's a model that basically is fine-tuned and built to evaluate scientific

Ejaaz:
primary research, help you do all your data analysis.

Ejaaz:
And it's been used across a ton of different things. I mean,

Ejaaz:
if you look at this guy called Andre, who has been playing around with cloud science.

Ejaaz:
He installed it with Ligand AI, which is basically an MCP tool,

Ejaaz:
which basically allows him to analyze different molecules.

Ejaaz:
One of the big things when you're kind of figuring out whether an antibody or

Ejaaz:
a molecule is good enough to fight a disease is you need to know whether it

Ejaaz:
can attack a specific active site, which is like basically the vulnerable site of a

Ejaaz:
bacterial virus or whatever that might be.

Ejaaz:
And this system with cloud science

Ejaaz:
basically helps you identify it um de novo which is like super cool

Josh:
Yeah i think this is probably the most interesting and exciting release of the

Josh:
week granted fable 5 already released so we're just doing it again um but cloud

Josh:
science you could think of it kind of like.

Josh:
The way that cloud code is intended to support engineering cloud science is intended

Josh:
to support science and that's all of what this is about it integrates a very

Josh:
specific set of tools it allows you to audit the outputs and anthropic is actually

Josh:
using it they announced that they're using it to pursue their own drug discovery

Josh:
programs for some rare neglected diseases. And people have been using it.

Josh:
The Allen Institute now completes 100 plus page literature reviews that would

Josh:
previously take up to two years.

Josh:
And then some analysis now run in a 10th of the time of what they previously

Josh:
did, thanks to this new software harness that they've introduced for science based purposes.

Josh:
So when you combine a model like Fable into a harness like Claude Science,

Josh:
you get some pretty amazing technological.

Josh:
Innovation or at least the opportunity to do so if you are feeling so inclined

Josh:
to through people who just like are involved in research in general so i think

Josh:
this is super exciting for the science world i think we're going to see a lot

Josh:
of really interesting things coming from this and that moves us on to our next

Josh:
topic which is science related from

Josh:
meta believe it or not the uh the metaverse company that was supposed to make

Josh:
metaverse they were all supposed to make ai well it turns out the thing they're

Josh:
releasing this week is is biological based and it is a brain-to-text decoder.

Josh:
What is a brain-to-text decoder? Well, basically, topologically,

Josh:
they insert some, or they put some electrodes on your head, and correct me if

Josh:
I'm wrong, you guys, but they have actually managed to hit 61% word accuracy

Josh:
versus 8% for previous non-invasive methods.

Josh:
So, they're basically able to go into your brain, detect which neurons are firing,

Josh:
and then derive a series of words that you are meaning to say without actually

Josh:
saying those words. It's essentially reading your mind. Is that right?

Ejaaz:
The best part about this is they only did this with nine volunteers,

Ejaaz:
nine people, no, not even double digits.

Ejaaz:
And they trained this model on basically 22,000 sentences. So comparably,

Ejaaz:
if you look at like an LLM, which is honestly the frontier LLMs like Fable 5

Ejaaz:
are upwards of like 15 trillion parameters, and they use a ton of compute.

Ejaaz:
This is a small model in comparison, but it's equally so, so powerful.

Ejaaz:
They basically are able to interpret different brain signals and convert that into text or words.

Ejaaz:
The reason why this is so important is, well, firstly, there's the medical side

Ejaaz:
of things. We've spoken about Neuralink quite a bit.

Ejaaz:
This is kind of Meta's answer to that, at least in the initial types of research that they're doing.

Ejaaz:
Now, application wise, I am curious what Meta is going to use this model for.

Ejaaz:
Obviously, there's the medical side of things, but we know and we've spoken about this previously.

Ejaaz:
They are working on a series of different brain models, as well as ECG-related

Ejaaz:
devices that you can wear on your wrist and on your heart that can basically

Ejaaz:
interpret everything that you're thinking and figure out what the best type

Ejaaz:
of content is to produce for you.

Ejaaz:
So it's an interesting thing where Facebook is a social media site.

Ejaaz:
And one thing that they've spent a lot of time figuring out is how to get all

Ejaaz:
the wonderful imaginative thoughts in your head out into the open world.

Ejaaz:
They've done that with Instagram through you picking up a phone and taking pictures of stuff.

Ejaaz:
They've done that with Facebook, translating your thoughts into cool ideas that

Ejaaz:
you can share with the world.

Ejaaz:
This seems to be a step in a direction where for those folks who aren't really

Ejaaz:
good at, you know, using those skills to translate your thoughts into some kind

Ejaaz:
of a vivid pitch or whatever that might be, you can now use this potential tool

Ejaaz:
in the future for something like that.

Ejaaz:
And listen, I have a more optimistic take for all these kinds of tools,

Ejaaz:
which is, you know, they're going to use it for the advancement of humanity and good.

Ejaaz:
But I don't know what meta specific purpose for that might be.

Ejaaz:
But it's interesting to see nonetheless. And I like that this kind of research

Ejaaz:
is being focused on despite LLM is being focused on being chatbots or generating

Ejaaz:
images this is like advancing real science and you know between OpenAI's gene

Ejaaz:
benchmark between Claude Science and between this this is great to see

Ejaaz:
uh it's a great week for science in AI for sure

Josh:
Yeah it's been really exciting it's cool to see progress and then I'm also just

Josh:
like very confused at what Meta is doing because we're talking about science

Josh:
now but then there was another big pivot that just happened where Meta is shifting

Josh:
to cloud infra they're they're like pivoting to the SpaceX plan so it seems like

Josh:
Meta over the last decade has just been this series of unfortunate pivots and

Josh:
every time we pivot somewhere new and we try this new hard thing it doesn't

Josh:
quite work out and they pivot again and it feels like a startup kind of trying to find some traction

Josh:
this is the newest iteration of that in addition to the science breakthrough

Josh:
that they're sharing in terms of like the topical neuron receiver stuff they're

Josh:
also just going to start selling compute

Josh:
so i don't know if this is bullish or bearish for their internal ai

Josh:
program i have to imagine it's not that exciting because if it was going so

Josh:
well they wouldn't have extra compute sell

Josh:
but the idea here is at least that they will begin to sell their compute to

Josh:
third-party companies similar to what spacex has been doing with their deals with anthropic and

Josh:
who else did they sign a deal with google and i think it's just another instance

Josh:
of them trying things throwing stuff against the wall and seeing what sticks

Josh:
i don't know you just do you have any takes when you read this news.

Ejaaz:
Yeah, I have an alternative take, which is, I think it's a smart move for Zuck.

Ejaaz:
It is... Market loved it. Yeah, it's a potential massive revenue earner.

Ejaaz:
The stock went up, I believe, like 6% to 8% on the day.

Ejaaz:
And the reason is pretty simple. Meta has aggregated one of the biggest fleets

Ejaaz:
of the most important metals needed for AI right now. And that is the GPUs.

Ejaaz:
We said the same thing about SpaceX. So SpaceX has Colossus 1, 2, and 3 data centers.

Ejaaz:
And that is roughly over, I think it's a million of NVIDIA's top GPUs.

Ejaaz:
And so that fleet can be very attractive for competing labs,

Ejaaz:
such as Anthropic and Cursor, who they are selling their GPUs to.

Ejaaz:
Meta saw this and thought, hmm, that did pretty well for the stock price.

Ejaaz:
Let me do the same over here and bring some money in to justify additional AI

Ejaaz:
capex spend for future years. So I think this is a strategic move from Zuck to do this.

Ejaaz:
And I have another bit of evidence which proves that this isn't necessarily

Ejaaz:
Meta running for the hills, which is Meta signed a compute deal with Google.

Ejaaz:
And Google this week announced that they have to restrict Meta's use of their

Ejaaz:
Google Cloud because they're using too much of it.

Ejaaz:
So my suspicion, and we'll find out in the Q2 earnings report from Meta in a

Ejaaz:
few weeks' time, is Meta's allowing all their old GPUs to be sold for inference.

Ejaaz:
And they're going to make a ton of money in the same way that SpaceX has charged

Ejaaz:
a huge premium to Anthropic and Cursor for selling inference through their GPUs.

Ejaaz:
Meta's going to do the same, make a bunch of money from that,

Ejaaz:
and save all the Vera Rubins and the newer GPUs to train future Meta models.

Ejaaz:
And we reported, I think, two weeks ago that Meta is working on a potential

Ejaaz:
Mythos level model that's going to be available nine months from now.

Ejaaz:
I know that's kind of late, but I still think that in this race,

Ejaaz:
they're just very, very, very far behind.

Josh:
Well, hey, all the power to them. I hope they figure it out.

Josh:
Now we should probably pivot over to someone who has figured it out mostly, which is OpenAI.

Josh:
And we've recorded an entire episode on this. They released 5.6 this week.

Josh:
If you haven't listened, I would highly advise going to check out that episode you recorded.

Josh:
The update now is that it's still not live. And by the time of reading this,

Josh:
that might have changed. By the time you're listening to this,

Josh:
hopefully that's changed. I think everyone's really excited to get their hands on it.

Josh:
But they have not met the same fate that Fable has just yet.

Josh:
So they have Sol, Terra, and Luna, all associated with GPT 5.6. they are

Josh:
probably being used internally you have to imagine they are being used in an

Josh:
internal research project

Josh:
that is with select companies but they are not broadly available so we're still

Josh:
at a standstill in that point but the real news that we got this week was this

Josh:
five percent number that's been floating around and none of this is confirmed

Josh:
by any means but there's a lot of reporting going on

Josh:
in that open ai is proposing to hand the,

Josh:
united states government five percent of the company just for free right they're

Josh:
just gonna give it away yeah.

Ejaaz:
Yeah um i was going to bed last night, and I thought we had our agenda all prepped

Ejaaz:
and ready, Josh, for today's roundup.

Ejaaz:
And then I saw this breaking news from Financial Times, which basically says

Ejaaz:
that Sam Altman is reportedly shopping 5% of OpenAI to the US government to take ownership.

Ejaaz:
And the craziest part about this is, I don't think he's even requesting an investment.

Ejaaz:
He's just kind of like handing this over for the good of the world.

Ejaaz:
And if you want to know some context as to why he might be doing this,

Ejaaz:
I think there's two perspectives of this. Perspective number one is

Ejaaz:
Sam believes deeply that governance and national government should be involved

Ejaaz:
in how these AI models are shaped.

Ejaaz:
And we know this because in an earlier blog post from Sam, I think about a year

Ejaaz:
and a half ago, he said this. He said it might actually make a lot of sense

Ejaaz:
for the government to take stakes in major AI labs.

Ejaaz:
The reason for this is, as we've seen with Claude Mythos and Fable 5 being banned,

Ejaaz:
it is incredibly important that the government gets access to these models pre-release

Ejaaz:
so that they make sure that it's not a cataclysmic threat to government security systems and whatnot.

Ejaaz:
So it seems to be a good perspective from that side of things.

Ejaaz:
But on the other side of things, this could be Sam using a chess piece to basically

Ejaaz:
get a political advantage when it comes to writing policy frameworks.

Ejaaz:
As we know, Sam's been heavily involved in lobbying certain governments and

Ejaaz:
laws in terms of making frameworks more favorable for OpenAI's types of models.

Ejaaz:
We see other AI labs doing the similar types of things. If you were a critical

Ejaaz:
person of Sam, you might think that this is the move that he's making.

Ejaaz:
It's kind of weird. I don't know how I feel about the whole nationalization

Ejaaz:
of the AI movement, but it certainly seems to be the trend that we're moving towards currently.

Josh:
Well, I like the fact that it was at least voluntary. This was presumably not

Josh:
forced. They're offering this up.

Josh:
You have to assume, I mean, again, these are all reports. Nobody knows what's

Josh:
actually going on, but the idea is that they would just make a generous donation

Josh:
to the united states government and this makes sense when you look at it in

Josh:
terms of alignment it's like what is the

Josh:
most pressing issue that a lot of people are very upset about right now it's

Josh:
ai and the downstream effects that they think it's going to cause on their life

Josh:
they're scared they don't understand um they have no vested interest in this

Josh:
and i think giving everyone a

Josh:
even if it's a small amount of vested interest in the success of these companies is probably net good

Josh:
If it could even change the sentiment a little bit, if it can get people aligned,

Josh:
if they could feel good about these companies winning, because it means not

Josh:
only are they winning, but the country is winning and everyone is kind of aligned

Josh:
directionally on the success of these companies.

Josh:
I think it creates a really compelling case for handing some over to the government

Josh:
and giving it back to the people that are allowing you to do this.

Josh:
They might just be feeling exceptionally confident this week because we have

Josh:
another report, another rumor, again, unconfirmed.

Josh:
All of this is unconfirmed. We are waving our hands around. We are putting our tinfoil hats on.

Josh:
But allegedly there has been some sort of optimization achieved internally that

Josh:
allows them to cut inference costs in half for models that was applied to that,

Josh:
that's crazy because half of the costs on hundreds of billions to trillions

Josh:
of dollars is not marginal that is a pretty serious innovation so what what

Josh:
is going on here you just is this even possible.

Ejaaz:
Yeah. So if this report is true, the analogy looks like the following.

Ejaaz:
Right now, if you're a free user, ChatGPT, there's roughly around,

Ejaaz:
I'm going to say 100,000 to 200,000 GPUs that are out there that are processing

Ejaaz:
your prompts, your inference, your requests, giving you answers.

Ejaaz:
Those GPUs, you know, I hate to mention it, are super, super expensive.

Ejaaz:
Now, if this report is true, it's cut down that inference cost that cost to

Ejaaz:
50 percent which means that this is now a couple

Ejaaz:
hundred of gpus and this is not a number that i'm making up this is a number

Ejaaz:
that's in the informations report

Ejaaz:
specifically a couple hundred gpus which means that if you can cut down costs

Ejaaz:
that massively you now have free capital to spend on compute in other ways in

Ejaaz:
open ai's case it's probably to train more models

Ejaaz:
or to use inference for other types of usage such as inference at test time

Ejaaz:
scaling, or whatever that might be.

Ejaaz:
So this is a major jump for a few different reasons.

Ejaaz:
Inference roughly makes up, I think, 60 to 70% of revenue earnings across top

Ejaaz:
frontier labs right now. So

Ejaaz:
if you're a frontier lab, a lot of your cost typically goes into training.

Ejaaz:
A lot of the money that you make comes in from subscriptions.

Ejaaz:
Now it comes in from inference specifically for people using it to service agents

Ejaaz:
that they're running on Autoloop for hours and hours on end.

Ejaaz:
Agents have become basically the new trend. Enterprises are using it 24-7 at this point.

Ejaaz:
So it's become its own type of economy. And inference is basically the bedrock

Ejaaz:
that underpins all of that. Anthropic this quarter is reportedly meant to be

Ejaaz:
the first AI lab that goes profitable in Q2.

Ejaaz:
A large part of this is achieved through the cost or the revenue margins that

Ejaaz:
they earn off of inference specifically. It's roughly around something crazy

Ejaaz:
like 80%. I remember Christian Rao mentioned it on a podcast previously.

Ejaaz:
So the point is inference is very important. And any way that you can cut costs

Ejaaz:
down on that and extend your profit margin is a huge deal.

Ejaaz:
And if OpenAI has found some kind of a breakthrough, and I don't know how they've

Ejaaz:
done this. I'm looking forward to actually an official announcement.

Ejaaz:
This would be a huge leap for them in terms of getting more capital to acquire

Ejaaz:
more compute to build better models.

Josh:
We do have a confirmed breakthrough this week. There is actually something that

Josh:
has been publicly announced and it comes in the form of this company that just

Josh:
exited stealth named Etched.

Josh:
And Etched, I saw the post and I was like, oh, all right, cool.

Josh:
It's like another one of those things. It's like they think they're going to

Josh:
change the world and they're going to solve the GPU problem and tokens and price

Josh:
per watt and they're going to solve all the efficiency gains.

Josh:
And I was like, absolutely not. These guys are like in their early to mid 20s.

Josh:
They have no experience doing this.

Josh:
Surely this is just another one of those things that is a headline and then

Josh:
it devolves into nothing but i started to read about what they were doing and

Josh:
i started to listen to a few of the podcast episodes that these founders were on.

Josh:
And i was shocked at how competent and incredible the product is and how talented

Josh:
the density of this team is and everything about this

Josh:
story turned into this like unbelievable breakthrough i was like wait holy shit

Josh:
this is this is like pretty amazing and pretty magical and i think so much so

Josh:
that we're probably going to record an entire episode about this company and

Josh:
this general state of inference as it really sees breakthroughs probably next week.

Josh:
But just a TLDR on Etch is they've basically figured out how to create...

Josh:
A new chipset from the ground up first principles vertically integrated meaning

Josh:
they're building all these things from scratch they're integrating them all

Josh:
into a single unit their product is the way in which they manufacture

Josh:
this server rack and the server rack is the delivered good but within that requires

Josh:
cooling and chip architecture and all of the plumbing as it connects to everything

Josh:
and they've created this series of breakthroughs using

Josh:
low voltage inference which is one so they're able to squeeze out a lot more

Josh:
performance per watt generally on a gpu like a blackwell chip you are getting

Josh:
maybe 50% of its theoretical peak because if you go to 100%, the chip melts.

Josh:
So being able to squeeze more tokens per watt is a really impressive thing.

Josh:
They figured that out. They figured out a memory problem where normally you're

Josh:
constrained to the memory on a chip.

Josh:
Well, they've constrained it to the memory of the cluster. So the cluster becomes

Josh:
one single coherent piece of memory.

Josh:
And there's a series of these breakthroughs that they've kind of discovered

Josh:
that were really impressive.

Josh:
And then you look at the team and you're like, oh, wow, everyone on this team

Josh:
is like shockingly competent and have been working in the industry for many,

Josh:
many decades. In fact, I think the youngest people are the founders.

Josh:
So Etch seems like a grand slam.

Josh:
Stay tuned. We're going to have a lot more to say about this company.

Josh:
It was shocking. It was really cool to see this week.

Ejaaz:
Well, just to kind of like sing their praises a bit more, these guys have raised,

Ejaaz:
I think, $800 million, but they already have a billion dollars worth of orders

Ejaaz:
for a chip that currently doesn't

Ejaaz:
exist yet and is currently going to go live by the end of the year.

Ejaaz:
The backers for this team are pretty insane. You've got Peter Thiel,

Ejaaz:
you've got Jane Street, but then you've got TSMC themselves.

Ejaaz:
As far as I'm concerned, TSMC is the company that is required for NVIDIA to

Ejaaz:
stay alive at the moment, they do all the manufacturing processes around all their GPUs.

Ejaaz:
And TSMC taking an equity stake in a competitor to NVIDIA in the first instance,

Ejaaz:
as far as I'm aware, is a huge deal.

Ejaaz:
Now, you mentioned what the breakthrough is specifically, I think,

Ejaaz:
When we talk about other companies that have made inference specific chips,

Ejaaz:
because I'm sure you're thinking about this, listening to this,

Ejaaz:
we've spoken about Cerebrus that went public in a huge IPO about a month ago,

Ejaaz:
and they created an inference check.

Ejaaz:
And it was the size of like a couple of plates or something crazy like that.

Ejaaz:
Their breakthrough was effectively designing a chip that would allow your AI

Ejaaz:
models to work incredibly faster, but it would use a lot of power.

Ejaaz:
It was quite expensive to use.

Ejaaz:
The difference with this chip that Etch supposedly is going to create and release

Ejaaz:
at the end of this year is it uses low voltage, which means that it uses 75%

Ejaaz:
less power for the same amount of inference output. That's the breakthrough that they've made.

Ejaaz:
And if this company can pull it off. And like you said, Josh,

Ejaaz:
it's like a bunch of Harvard dropouts.

Ejaaz:
This would be an incredibly competitive threat to NVIDIA. Because as far as

Ejaaz:
I'm concerned, NVIDIA is focused on general purpose GPUs, which are used for

Ejaaz:
training specifically.

Ejaaz:
But the inference market is pretty open to anyone and everyone.

Ejaaz:
That's why you see Cerebrus, Grok, and now Etched come to light.

Ejaaz:
So it's pretty cool to see.

Josh:
It's so exciting. It's rare that a company comes around that's actually new

Josh:
and novel and making real breakthroughs. So I'm stoked about this company.

Josh:
I could not be more excited. I would love to participate. I wish they had the

Josh:
ability to buy some shares because my God, what a monster of a company that's going to be.

Josh:
For the people who do own shares in public markets, chances are they might not

Josh:
have done too hot this week.

Josh:
The memory stocks have been getting hit. People haven't really liked this.

Josh:
And we have this post on screen that's at 2 million views.

Josh:
And there's no way that this post moved memory markets, right?

Ejaaz:
I think it did. That's insane. I was racking my head to try and figure out why

Ejaaz:
memory stocks were down 10% yesterday.

Ejaaz:
It was one of the most aggressive dumps we've seen of recent,

Ejaaz:
especially after a meteoric rise in memory stocks over the last year,

Ejaaz:
pretty much is up on average between three to 500%, depending on which memory provider you pick.

Ejaaz:
Andrew Curran is one of my favorite accounts on X. If you don't follow him,

Ejaaz:
definitely give him a follow.

Ejaaz:
He posts this very cryptic tweet. He goes, I'm posting this prediction now so I can quote it later.

Ejaaz:
There has been a significant breakthrough in architecture, specifically around

Ejaaz:
memory efficiency, not by one of the big labs, but a team that spun out of OpenAI.

Ejaaz:
This will probably be announced soon.

Ejaaz:
And this led on everyone on a spiral in social media.

Ejaaz:
Now, I have a bit of tea because I have some sources which reported a few things to me.

Ejaaz:
Now, apparently the company that he was referencing is this company called Core

Ejaaz:
Automation. What this breakthrough is,

Ejaaz:
He has no idea. We have no idea. So right now, it's just word of mouth.

Ejaaz:
And if core automation wants to make an announcement, they can.

Ejaaz:
But if this announcement is true, it would mean that AI models largely require

Ejaaz:
much less memory. Now, why is that a big deal?

Ejaaz:
The most expensive material that is required to build GPUs and train models

Ejaaz:
and inference models right now is memory. It roughly makes up around 50 to 60% of the cost.

Ejaaz:
And the price per unit of memory has skyrocketed over the last year specifically.

Ejaaz:
Margins on Micron's recent earnings report, for example, has hit 80%.

Ejaaz:
Traditionally, this is around 30%.

Ejaaz:
So the fact that it is over double this is absolutely insane.

Ejaaz:
And the margins keep going up, the prices keep going up. In fact,

Ejaaz:
Apple announced recently that they are lobbying the Trump administration to

Ejaaz:
buy memory from Chinese companies, which is a big no-no in terms of import-export

Ejaaz:
controls that Trump and previous US governments have placed.

Ejaaz:
We don't know if this is going to get passed, but the point is companies like

Ejaaz:
Apple need to now increase the price of their products because they can't get

Ejaaz:
their hands on enough memory.

Ejaaz:
So they need to end up paying more, which means they need to charge you as a

Ejaaz:
consumer more. So memory is in very scarce supply.

Ejaaz:
My take on all of this is it's being blown out of proportion.

Ejaaz:
Memory is an incredibly constrained commodity, and there's no way to scale it.

Ejaaz:
You need a bunch of very complex machinery and chip fabs to be able to do this

Ejaaz:
and we are nowhere near i don't see the supply scarcity being alleviated until

Ejaaz:
at least 2028 by the end of that year

Josh:
Well, yeah, we know this. The markets are very short-sighted always.

Josh:
When there's headline news, they're going to overreact. There's going to be

Josh:
this knee-jerk reaction. That's what we've seen. In fact, there isn't even really

Josh:
headline news. This is just kind of all speculation.

Josh:
It's funny, I'm looking at Core Automation and their URL is coreauto.com.

Josh:
It looks like a freaking car manufacturing company. but it's like okay sure

Josh:
like they have these breakthroughs but how even in the case that they do have

Josh:
a breakthrough open ai or anyone what is the

Josh:
the lag time between breakthrough to actual implementation where it is felt

Josh:
in the market probably fairly long there's probably

Josh:
i mean certainly a tremendous amount of demand for memory in everything that's

Josh:
being built not only on the software side but also on the hardware side if you're

Josh:
building robots if you're building automated hardware manufacturing,

Josh:
all of this requires requires a tremendous amount of memory so is Is there a memory bubble popping?

Josh:
Like, probably not. But again, not financial advice.

Josh:
Who the hell knows? Talking about robots, though, we do have a robot topic because,

Josh:
we're getting some consumer robots like robots are becoming a thing.

Ejaaz:
Look at this cutie pie, Josh. You want this in your apartment?

Ejaaz:
You want this in your home?

Josh:
It's pretty adorable. Like, do I want that in my apartment? Honestly,

Josh:
no. My apartment isn't big enough for the two of us.

Josh:
I feel like we'd probably bump into each other and it probably wouldn't be.

Ejaaz:
This thing is massive.

Josh:
It's massive. And, you know, it's still moving a little slow.

Josh:
It's like not really doing everything that i need for my liking maybe if you

Josh:
live in a big house it's fun to have this guy running around but i do think

Josh:
it's cool and exciting that more companies are trying this in fact this one's

Josh:
actually dare i say kind of cute

Josh:
it looks like this fun little robot that you can have walking around the house

Josh:
you can get it in different colors and you can pre-order it for eight thousand

Josh:
dollars which hey for a humanoid robot that can roll around your.

Ejaaz:
House a month or 500 bucks a month so like you know an expensive new york gym

Ejaaz:
membership you can have uh you know this robot walking around and cleaning your

Ejaaz:
apartment with these freaky looking pincers

Josh:
Did you see the demos did it look compelling was this an interesting product.

Ejaaz:
Honestly no it was too slow for me and i hate the the fact that i'm pointing

Ejaaz:
this with my cursor right now that it's effectively one of those old in high

Ejaaz:
school josh did you have those like projectors where like sometimes it

Josh:
Rolls around the.

Ejaaz:
Cart rolls around the cart this looks exactly like that my number one question

Ejaaz:
is like when you come across like a carpet or something like how are you getting

Ejaaz:
over there what like i don't want to have to like be uh

Ejaaz:
the topple monitor where i have to like pick you up if you fall around like

Ejaaz:
how do you know where to place my clothes i I don't know, there's just a number

Ejaaz:
of different questions that doesn't justify $8,000 in my mind, or even $500.

Ejaaz:
But the good news is, this isn't the only company that's releasing robots like this.

Ejaaz:
We had Nori L2 demoed there. Less attractive robot, I have to say,

Ejaaz:
more bare bones, but this is like a demo.

Ejaaz:
It seems to move a little bit more agile and quicker than the previous Weave product or robot.

Ejaaz:
The fact is, a lot of American robotic startups are releasing their products

Ejaaz:
now. And if you compare that to six months ago, it was all theory.

Ejaaz:
It was all hearsay. It was all demos from the likes of FIGURE.

Ejaaz:
You had their robots in the BMW manufacturing plant, if you remember this,

Ejaaz:
and it was supposedly operating all the controls and building cars.

Ejaaz:
Now we see these robots, one, coming at a more affordable rate,

Ejaaz:
and two, being applied to your home.

Ejaaz:
Now the big question is, do you want to allow any of these robots in your home right now?

Ejaaz:
And can this be scaled, mass-produced can this be in my hands right now the

Ejaaz:
answer is still unfortunately no but the target date is a lot closer you can

Ejaaz:
get these robots in a couple of months or by the end of the year at least so you know uh

Ejaaz:
fingers crossed i hope we're entering our robotics era our chat gpt era for

Ejaaz:
robots but uh right now i'm not utterly convinced uh the pinces still throw

Ejaaz:
me off i need some hands i need something like dude i'll

Josh:
Believe it when i see it man ship the product let me see working demos in real

Josh:
people's houses like give me something to really get me invest.

Ejaaz:
In the company you know a few other things like that but only

Josh:
The good ones it's like a lot of most of these companies are going to fail and

Josh:
they're going to just create fun products and they're going to create these

Josh:
little like flashes in a pan and then they're going to dissolve into nothing

Josh:
because turns out it's really difficult to manufacture these things at scale

Josh:
and now they're competing,

Josh:
with the supply chain that the entire planet is also competing on they need

Josh:
the same memory that these other ai companies need and there's only so much

Josh:
of it to go around and the economies of scale are just not really practical for these companies.

Josh:
So in terms of research and development, I think it's amazing.

Josh:
It's fun to kind of hone in on a form factor of what these robots could look like.

Josh:
It's fun to figure out demos and use cases. But in terms of actual practicality,

Josh:
I don't think I'm going to have a humanoid robot in my house this year.

Josh:
I don't think I'm going to have one in my house next year. Maybe 2028,

Josh:
perhaps Optimus will be around by then. Perhaps Figure will have some cool robots by then.

Josh:
But it's going to take a little while to ramp up these production lines and

Josh:
get something that's actually viable via these economies of scale.

Ejaaz:
But here's a question for you, Josh. What would be the one...

Ejaaz:
Pain in the ass that you would definitely allow a robot to solve that would

Ejaaz:
be that would tell you like you know what i'll pay the money i'll pay 300 bucks

Ejaaz:
a month to get this robot in my house to solve this one problem do you have one

Josh:
You know what's funny is like i don't think there is a problem

Josh:
so large that it requires a robot it's like one of the things that's kind of

Josh:
annoying is groceries i have doordash and uber eats they will go and shop for

Josh:
me and they will deliver it or even with whole foods they have their grocery

Josh:
delivery you can get someone to come and clean in your place once a week.

Josh:
And that's like a very good service. And they're going to do a significantly

Josh:
better job than a robot will.

Josh:
Okay i i do laundry but it takes what like 10 minutes to fold the clothes and

Josh:
it's not that big of a deal uh make my bed in the morning when i wake up i like

Josh:
to cook my own food there's a dishwasher to handle the cleaning of it

Josh:
it's like there isn't really anything very pressing in terms of i mean initially

Josh:
my head goes to chores that i think a human or robot would would require so

Josh:
i think that's kind of why i'm waiting just to see,

Josh:
the unique use cases they could figure out or if they just get it down yeah

Josh:
i think it's really down to use cases if there's a killer use case that I see, I'm like, I need that.

Josh:
Then sure, there's no amount that I wouldn't spend on getting this because it's

Josh:
such a cool piece of technology. But there has not been anything even remotely

Josh:
close to that use case. It turns out we've actually automated a lot of things

Josh:
pretty effectively in our life.

Ejaaz:
You see, I've come to the same conclusion, and that's not necessarily bearish

Ejaaz:
robotics. I just think it's bearish robotics in your home.

Ejaaz:
I think robots apply to more industrial use cases, such as manufacturing,

Ejaaz:
or maybe even food delivery makes a lot more sense.

Ejaaz:
I think like fixing that last mile problem, last mile delivery problem where

Ejaaz:
like, you know, you can deliver everything to another country by getting it

Ejaaz:
to that specific address is the most annoying part is a valid use case for robots.

Ejaaz:
I think the manufacturing side of things makes a lot of sense in terms of like

Ejaaz:
car automation or building whatever in the future, maybe even building robots

Ejaaz:
in themselves in the future, which is what Tesla's focused on.

Ejaaz:
This is what Tesla and this is what Prometheus, which is Jeff Bezos's new robotics companies focus on.

Ejaaz:
This is what Atoms, Travis Kalanick's ex-Uber CEO is also focused on as well, right?

Ejaaz:
They're focused on the manufacturing and industrial applications of robots.

Ejaaz:
And I think if you were an investing type of person that wants to focus and

Ejaaz:
figure out where the robotics trends is heading, I think it's in these particular

Ejaaz:
sectors. And that's what I'm

Ejaaz:
I don't know, a robotics specific episode going forwards. If that's something

Ejaaz:
that you guys are listening to and would like to hear more of,

Ejaaz:
I think Josh and I can whip that out. That would be a pretty fun one to do.

Josh:
Yeah, let us know. Would love some feedback. Oh, I wish there was a way to participate

Josh:
in these companies, man. It's driving me crazy. Of all the cool companies we

Josh:
talk about and every single one of them is private.

Josh:
It's like, oh, Etched is awesome. Can't invest. Adams is the most incredible company. Nothing.

Josh:
So I don't know. Hopefully through all of this, we'll figure out a way to get

Josh:
access to the upside of these amazing companies. But I think that's everything.

Josh:
This is a long episode. If you're still rocking with us here,

Josh:
congratulations and thank you. You are a real one.

Josh:
We appreciate everyone making it to the end. The outreach for sponsors has actually

Josh:
been so nice and so sweet.

Josh:
So thank you for everyone who's reached out in terms of getting us help with

Josh:
sponsors, becoming a sponsor yourself.

Josh:
We are looking for people to help support the show so we can keep the lights

Josh:
on and continue to do this for longer. Yeah. So please, if there's anyone you

Josh:
know, please feel free to reach out. We will be happy to converse either through

Josh:
X or in the email in the description below.

Josh:
If you enjoyed this episode don't forget to share it with your friends and if

Josh:
you've made it this far you're all caught up go enjoy the weekend it's fourth

Josh:
of july baby have a great weekend happy birthday america happy semi-quincentennial

Josh:
yeah semi-quincentennial year 250.

Ejaaz:
Years old let's go that's

Josh:
Huge that's huge for the gang like what a country look how far we've come in

Josh:
a quarter of a century or no two,

Josh:
Two and a half centuries?

Ejaaz:
Two and a half centuries. What do you call a thousand?

Josh:
Quarter of a...

Ejaaz:
I actually don't know.

Josh:
An eon?

Ejaaz:
That's a question for Fable. For Fable 5.

Josh:
So when we end this, use your cutting edge AI model to go ask,

Josh:
oh, what is a thousand years? How do we say that?

Josh:
Oh my God, we're so cooked. Happy birthday to us. We are so cooked.

Josh:
At least our brains that we offload to are getting smarter. So even though we're

Josh:
not thinking for ourselves.

Ejaaz:
I officially got smarter this week and I'll be smarter until July 7th until

Ejaaz:
we get to usage-based credits at least at this point.

Josh:
And then I'll probably still wind up using the usage-based credits. But yeah, that's it.

Josh:
Have an amazing 4th of July weekend. Hope to celebrate an exciting milestone

Josh:
for us, EJAS. I'm not sure if you are aware, but we are very close to episode

Josh:
number 200 in Limitless.

Ejaaz:
Which is unbelievable.

Josh:
This right now, if you're listening to this, and also this is news to EJAS too,

Josh:
this is episode 199 of Limitless.

Josh:
So we are one episode away from 200. We're going to record that probably next Monday.

Josh:
And uh that'll be a celebration so for the people who have been here since the

Josh:
beginning like seriously thank you so much it's been an amazing journey thank

Josh:
you um 200 in a little over a year is crazy we're recording yeah four episodes a week and.

Ejaaz:
It's been what 65 000 subscribers on youtube and yeah many many more listeners

Ejaaz:
all over the world across spotify apple music wherever you are waiting commenting

Ejaaz:
letting us know your thoughts uh to go from scratch to this has been insane

Ejaaz:
josh i don't know if you have any any

Ejaaz:
thoughts or highlights about this maybe we should talk about this on the 200th episode we

Josh:
Might have to reflect on episode 200 so stay tuned for that one and i have a

Josh:
feeling it might be about etched because i have a lot of cool things i want to talk about

Josh:
when it comes to that company and inference so as always stay tuned don't forget

Josh:
to share this with a friend if you enjoyed if you find someone else that might

Josh:
enjoy we have a newsletter dropping at the same time you are listening to this

Josh:
as well and that's everything so happy birthday america

Josh:
thank you all for watching and we'll see you next week.

Ejaaz:
See you guys