THIS WEEK IN AI: Massive Quarterly Earnings, Anthropic's Project Deal, Cursor SDK

We tackle the strong earnings reports from Google, Amazon, Meta, and Microsoft, propelled by AI and cloud growth. Google sees a 94% earnings per share surge, while Amazon's AWS boasts 28% growth. 

Meta raises revenue by 33% through AI advertising, and Microsoft reports a 40% increase in Azure. We also discuss innovative AI projects like Anthropic’s transaction trial and 11 Labs’ music licensing.

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TIMESTAMPS

0:00 Earnings in Tech History
3:41 Google
6:22 Amazon
10:15 Cash Flow
14:47 Meta
18:16 Microsoft
22:22 Apple
26:07 Anthropic Project Deal
28:06 Cursor's AI Agent Harness
30:06 Eleven Labs
38:16 Closing

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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

Creators and Guests

Host

Ejaaz Ahamadeen

Host

Josh Kale

What is Limitless: An AI Podcast?

Exploring the frontiers of Technology and AI

Ejaaz:
Yesterday, four of the five most valuable companies in the world reported the

Ejaaz:
biggest earnings in tech history within a 90-minute window.

Ejaaz:
And now, we have a pretty good idea of whether we're in an AI bubble or not.

Ejaaz:
Google, Amazon, Meta, and Microsoft reported their Q1 quarterly earnings,

Ejaaz:
and it blew every single Wall Street analyst's expectations out of the water.

Ejaaz:
Seriously, these numbers are pretty insane.

Ejaaz:
Google's earning per share was rated 94% above expectations. That's not a typo.

Ejaaz:
94%. And every single cloud business, AWS and Google Cloud reported revenue

Ejaaz:
increase average of 50%, with Google having back orders of half a trillion dollars

Ejaaz:
worth of compute orders.

Ejaaz:
Even Meta, who's categorically been behind in the AI race, reported massive

Ejaaz:
growth in revenue for their ad business thanks to AI.

Ejaaz:
In fact, it's so good that they're beating Google at their own business of search advertising.

Ejaaz:
For two years, AI critics have constantly been saying that we are in an AI bubble.

Ejaaz:
They're saying the house of cards is going to come down, that we're spending

Ejaaz:
too much. The earnings reports of yesterday proved the exact opposite.

Ejaaz:
All these companies that are spending hundreds of billions of dollars are actually

Ejaaz:
making more money than they ever did before.

Josh:
So are we in a bubble? The answer to that question is probably unequivocally yes.

Josh:
I think we are to some extent, but what is the size of that bubble?

Josh:
Chances are it's much smaller than i think a lot of people think and how

Josh:
much runway is left well i think a lot more than people anticipate and

Josh:
we could start with google because that's what you're mentioning a lot i mean their earnings

Josh:
report showed we got to start with the capex number so for those

Josh:
who aren't familiar with capex capex is the capital expenditure the amount of

Josh:
money that a company is going to spend over the next x period of time now for

Josh:
google they've provided capex for their next calendar year and they guided even

Josh:
higher than they did previously at $180 to $190 billion.

Josh:
This is a tremendous amount of money, like a stupid, crazy amount of money.

Josh:
Their revenue, for reference, $110 billion, is more than Coca-Cola's annual

Josh:
revenue. And this is what they did in a single quarter.

Josh:
One of the most kind of worried about and concerned about categories, Google search.

Josh:
I mean, I remember a few months ago, very vividly, we were on the show

Josh:
talking about Google search and whether or not it's going to be a viable business

Josh:
is the chatbot llm interface going to cannibalize google search the answer now

Josh:
is an unequivocal no google search grew 20 to 60 billion dollars which is again

Josh:
just a huge amount of money and i think that the headline here is that

Josh:
Capital expenditure is going up, meaning the money is going to be spent on building

Josh:
out the infrastructure required to scale AI at the same time that they're actually

Josh:
generating a lot more profits from their services like Google search and Google cloud.

Josh:
I think one of the themes we're going to notice as we cover these earnings reports

Josh:
is that cloud revenue is kind of the bread and butter of a lot of these companies.

Josh:
And it's accelerating very quick.

Josh:
I mean, for their projected guidance on their cloud revenue that they're going

Josh:
to make next year, they doubled it to about $460 billion.

Josh:
And for reference, that's larger than the GDP of Belgium and roughly equivalent

Josh:
to two of Walmart's annual revenues just in cloud search alone.

Josh:
So the Google numbers are incredible.

Josh:
The one thing that really sent me for a loop in terms of how I kind of calculate

Josh:
the guidance of where we are in this AI bubble is a line that Sundar said in the earnings report,

Josh:
CEO of Google, who said their 2027 CapEx will significantly increase Yes.

Josh:
In 2027, next year, compared to this, which is already a record.

Josh:
So they are really guiding towards a very strong 2026, a strong 2027.

Josh:
And that was one of four that really made a pretty big impact on the market.

Ejaaz:
Well, I just want to tell a slightly different story on the Google side,

Ejaaz:
because really, it's that cloud business that absolutely killed it.

Ejaaz:
They made $20 billion in the last three months for guidance here,

Ejaaz:
that's around 63% more than they did this same time last year.

Ejaaz:
So it's a massive jump up. But then you might be wondering, well,

Ejaaz:
how amazing is this? How substantial is this?

Ejaaz:
The projections that you just mentioned, the half a trillion dollars,

Ejaaz:
so it's actually $462 billion, I believe, is already locked in orders.

Ejaaz:
It's not a projection. These are orders that they already have on the backlog.

Ejaaz:
And people are waiting for this to happen. In fact, I have a neat little graphic,

Ejaaz:
which shows this because this caption goes, this is so crazy,

Ejaaz:
it literally looks fake.

Ejaaz:
And it shows you the back orders, $460 billion just for Google Cloud alone.

Ejaaz:
This is one of like eight different major business units that feed into the Google profit funnel.

Ejaaz:
So I just want to emphasize that. Now, Sundar also said on the call,

Ejaaz:
we, and I'm quoting this, we are compute constrained in the near term.

Ejaaz:
Our cloud revenue would have actually been higher if we were able to meet the

Ejaaz:
demand. So the point is, they don't have enough supply TPUs and infrastructure,

Ejaaz:
which is, by the way, Google Cloud is one of the biggest cloud providers in the entire world.

Ejaaz:
I think they're like second to AWS, Amazon, which is the biggest one,

Ejaaz:
which we'll talk about in a second.

Ejaaz:
They can't supply enough. Google is like one of the biggest hyperscalers that

Ejaaz:
are out there, and even they can't meet demand. So the point is...

Ejaaz:
The criticism that we're faced around AI bubbles is we're investing in all this AI capex.

Ejaaz:
Google alone is investing, I think, $150 to $200 billion this year to create

Ejaaz:
more TPUs and AI infrastructure to supply the demand.

Ejaaz:
The skepticism has been that there is no demand for this. No one's willing to pay for this.

Ejaaz:
These quarterly earnings prove that categorically incorrect.

Ejaaz:
And we have a half a trillion dollar backlog.

Josh:
Yeah, there's no way that the spending is going to slow down.

Josh:
And the fact that the only constraint that they had was compute,

Josh:
not demand, given the profit margins that they already have is pretty telling.

Josh:
I found one funny fact about this is that a lot of the revenue actually came

Josh:
from their private investments getting marked up.

Josh:
So of their total net income of $62 billion, 37 of it was unrealized gains on

Josh:
equity securities that includes companies like SpaceX and Anthropic.

Josh:
You mentioned the largest cloud provider, Amazon, who also reported yesterday.

Josh:
They have a similar thing where I think of their net income of $30 billion,

Josh:
16.8 of it was their pre-tax gains on Anthropic shares.

Josh:
So this is very much a circular economy where like they're investing in Anthropic,

Josh:
the Anthropic valuation is rising, a large percent of the net income becomes

Josh:
Anthropic, becomes SpaceX.

Josh:
So earning season when those IPO is going to be pretty crazy,

Josh:
but we have to talk about Amazon.

Josh:
Their AWS services is up 28%, which is their fastest growth they said in 15

Josh:
quarters that's 150 billion dollar run rate to put that in context that's larger

Josh:
than the entire annual revenue of disney netflix and spotify combined

Josh:
And that's AWS alone. It's bigger than the entire global movie industry at a

Josh:
margin of almost 40%. So again, this is the same story we heard with Google.

Josh:
Their cloud is really just constrained by compute. Their margins are high.

Josh:
They have more demand than they ever had before.

Josh:
And now we're seeing them move into building their own chips and working with other companies.

Josh:
And now that OpenAI is not locked in with Microsoft, we're seeing them start

Josh:
to serve OpenAI infrastructure as well through their bedrock.

Josh:
It's a really impressive range report from Amazon as well.

Ejaaz:
There's been a trend shift with Amazon in particular.

Ejaaz:
Now, if you talk to an average person about Amazon a few years ago,

Ejaaz:
they'd be like, oh, yeah, it's that e-commerce company. It's where I order my toilet paper from.

Ejaaz:
Amazon has undergone a very categorical shift into the compute infrastructure

Ejaaz:
and distribution service.

Ejaaz:
Now, that sounds like a lot of buzz terms. Let me explain what that means.

Ejaaz:
AWS is basically the bedrock for any internet company that exists today.

Ejaaz:
If it runs online, it's most likely running off of Amazon's AWS servers.

Ejaaz:
And so what that means is, okay, you can run a website, you can service all

Ejaaz:
the requests that you have from people trying to buy stuff from you.

Ejaaz:
But with this recent AI shift, Amazon looked at it and thought, huh.

Ejaaz:
This looks really similar. We could be the distributor and infrastructure providers for AI.

Ejaaz:
And guess what they already had? A bedrock of customers that already had that.

Ejaaz:
And I use bedrock very specifically, by the way, because their main AI part

Ejaaz:
is literally pun very much intended, was called or is called Amazon Bedrock.

Ejaaz:
And just over the last week, they now officially are going to be the main distributor

Ejaaz:
for OpenAI's chat GPT models.

Ejaaz:
Now, the reason why that's a big thing is because Microsoft was the sole cloud provider for OpenAI.

Ejaaz:
But this week, that contract broke, which meant that OpenAI can now serve their

Ejaaz:
models through whatever distributor they want.

Ejaaz:
And the first door that they were knocking on was Andy Jassy at Amazon saying,

Ejaaz:
hey, we would love to be the main provider. Why?

Ejaaz:
Because Amazon has connections to all the enterprise companies.

Ejaaz:
They service all the government's AI requests and all the Fortune 500 companies' AI requests.

Ejaaz:
They run all the servers. No one wants to pick the model. No one wants to set

Ejaaz:
up the dev environment. AWS has got you and they are creating a crazy business

Ejaaz:
for this. Like you mentioned, 28% growth.

Ejaaz:
That's almost $40 billion they've made over the last three months.

Ejaaz:
The fastest growth in the last four years.

Ejaaz:
That is not an anomaly because in Q4, we were saying the same thing when we

Ejaaz:
were reporting on their earnings as well.

Ejaaz:
And it's good to see that the market is now finally starting to understand that.

Ejaaz:
And they, this week, actually breached their all-time highs.

Ejaaz:
I think it breached over $260 price per share, which is insane.

Ejaaz:
And the final point I want to make about Amazon and Google, actually,

Ejaaz:
is there's a common theme.

Ejaaz:
Now, if you look at total revenue earned by both of these companies, it's increased...

Ejaaz:
By a decent amount, but not like mind-blowing amounts.

Ejaaz:
Where you need to look is the profit margins that both of these companies have

Ejaaz:
made over the last three months.

Ejaaz:
That has expanded on average by around 50%. I wanna reemphasize that point.

Ejaaz:
50% for their cloud businesses, which means that AI chips, which is what both

Ejaaz:
Google and Amazon provide, and their cloud services allows them to eat more

Ejaaz:
profit on the margins, which is very good if you're any kind of a shareholder

Ejaaz:
of either of these companies.

Josh:
Yeah. And the pricing elasticity is very high too. It's not like they are out

Josh:
of customers. They just don't have the compute.

Josh:
So theoretically they could raise these prices, increase those margins quite

Josh:
a bit. And people will still continue to pay.

Josh:
Like I know for a fact, like someone like open AI can double the cost to serve it.

Josh:
And Amazon could forward that onto the customer. People would still pay.

Josh:
And Amazon's CapEx, again, at $200 billion.

Josh:
To put that into perspective, it's larger than the entire annual

Josh:
CapEx of the US oil and gas industry

Josh:
like this is a huge amount of money

Josh:
and then we have one other quote from the earnings report

Josh:
which i thought was was fun it was uh andy jassy

Josh:
talking about the combination of their industry-leading price

Josh:
performance tranium custom silicon market leading

Josh:
gravitons cpus and their core aws he's

Josh:
basically describing as a once-in-a-lifetime opportunity he said amazon and

Josh:
his shareholders will be very well off in the future as amazon

Josh:
crossed a new all-time high so it's very exciting

Josh:
to see all of these numbers go up and we don't even we didn't

Josh:
even talk about their logistics business like the part of

Josh:
amazon that we interact with on a daily basis when you order groceries or order

Josh:
things from amazon it's just an unbelievable business there's like 10 different

Josh:
businesses and i think that's the theme of a lot of these larger mega cap companies

Josh:
is as they take as they have their cash flow coming in they're going to spend

Josh:
it efficiently and they're going to increase their margins elsewhere what an

Josh:
incredible business well well

Ejaaz:
Let's speak about the cash flow for a second because we sound very rosy right

Ejaaz:
now and that it's like the best companies in the world. Now,

Ejaaz:
I want to point out two things.

Ejaaz:
As of the end of Q1, Amazon has now spent around or committed to spending 94% of their free cash flow.

Ejaaz:
We're talking about like money that they have available coming in through operating

Ejaaz:
income and through money that they have on the cash balance sheet.

Ejaaz:
Out of the four companies that we're speaking about today, they are the most

Ejaaz:
aggressive spenders on AI infra.

Ejaaz:
And the bet that Andy Jassy, the CEO, was making was, we're doing this intentionally

Ejaaz:
because we know for a fact that we're going to make money from this.

Ejaaz:
And the projections or the reported earnings from Q1 has proven that exact point,

Ejaaz:
but it's still a very aggressive maneuver, right?

Ejaaz:
Like as of the next three months, you could argue that either if they don't

Ejaaz:
have enough money or they run into some kind of hurdle, they might need to start

Ejaaz:
having debt financing and start borrowing money.

Ejaaz:
Now, as of today that we're speaking about and reported on these earnings,

Ejaaz:
they aren't in a levered position.

Ejaaz:
So for everyone saying that we're in an AI bubble, an AI bubble by definition

Ejaaz:
means that these companies are levered up on their balance sheet.

Ejaaz:
Neither of the companies that we're talking about today, Google,

Ejaaz:
Amazon, and Meta and Microsoft, which we're about to, are levered.

Ejaaz:
So I disagree with your earlier point, Josh, because basically,

Ejaaz:
I don't think we're in a bubble yet. Big, big emphasis on yet.

Josh:
Well, I think we're definitely aligned on being bullish about where we are in

Josh:
this stage of the market, whatever it is, that there's a lot of runway left.

Josh:
But there's an interesting dynamic to that point around free cash flow,

Josh:
which is the money that basically is left over after all their expenses,

Josh:
A lot of that is flowing out.

Josh:
Like you mentioned, about 95% of Amazon's earnings, the free cash is flowing out. And this

Josh:
is kind of inverting what we've traditionally had in the markets.

Josh:
Generally, Amazon, Google, these companies have absorbed all of the cash and

Josh:
they have a tremendous amount of free cash flow.

Josh:
Now they're spending it. You're seeing a lot of money going out the door.

Josh:
The capex is between the four companies we're going to cover is what,

Josh:
600, 700 billion dollars.

Josh:
The question is like, where is that money flowing to? Because the reality is

Josh:
that while cash flow is coming out of Amazon, it is finding its way into other companies as well.

Josh:
And we're starting to see this with companies like Bloom Energy,

Josh:
who we famously mentioned on the show a few months ago and then a few weeks

Josh:
ago and still have not filled large enough bags to see the upside of this,

Josh:
which is very frustrating.

Josh:
But Bloom Energy is up 1400% on

Josh:
the year. And this is one example of where that free cash flow is going.

Josh:
When companies are building, they're spending this capex, they need to create

Josh:
data centers, they need the shell, they need the energy, they need the chips.

Josh:
Bloom Energy is an energy part of that equation. And it's clearly captured a

Josh:
lot because it was just up 24% yesterday on huge earnings.

Josh:
And now Leopold, in the most recent 13F filing, he had a position of 875 million,

Josh:
is now in a position worth $2.7 billion.

Josh:
This is one example of the money. The other, I guess we have SanDisk that we

Josh:
should probably mention briefly.

Josh:
If you invested in SanDisk two years ago, you're up 30 times your money.

Josh:
Like 30X, every $1,000 you put in is $30,000. Why is that?

Josh:
Well, because one of the critical thresholds and something that we heard on

Josh:
all of the four earnings reports that we're gonna mention is that memory is

Josh:
a serious supply constraint.

Josh:
And the costs associated with that are going up and the companies are just absorbing that.

Josh:
I think it was maybe Amazon or Meta who added $25 billion in CapEx just for

Josh:
the increased cost of these goods.

Josh:
And companies like Sandisk are the ones that are absorbing those.

Josh:
So we're seeing for the first time in a while, the money flowing downhill from

Josh:
these like mega cap companies down into the core infrastructure.

Josh:
And I think that's an inversion that hasn't quite been priced in because it

Josh:
hasn't been that way in a really long time.

Ejaaz:
Exactly. And so the theme that we've spoken about for the companies so far,

Ejaaz:
Google and Amazon, has been very much on AI CapEx spending, on Google Cloud,

Ejaaz:
on Amazon Web Services, and whether there is customer demand for the infra.

Ejaaz:
Now, another company that we want to speak about today is Meta.

Ejaaz:
And in fact, they're the company that added an additional $35 or $25 billion

Ejaaz:
for CapEx to their CapEx spend this year.

Ejaaz:
They're playing in a bit of a different field. Like, Meta is,

Ejaaz:
for better or worse, a social media company, but they're really,

Ejaaz:
really good at making money from advertising.

Ejaaz:
And for the longest period of time, it's been Meta versus Google.

Ejaaz:
And Google has, quite frankly, always won. They're the doormat to the internet,

Ejaaz:
right? They have dominated search.

Ejaaz:
And Meta has come close, but never quite as close, right?

Ejaaz:
Except for the last three months where they started integrating AI,

Ejaaz:
specifically their newer models and Manus who they acquired for $2 billion,

Ejaaz:
which just got blocked by China.

Ejaaz:
And that's a whole other thing. You should go check out our episode that we

Ejaaz:
published earlier this week.

Ejaaz:
The point being is Meta started integrating AI and they started having higher AI search conversions.

Ejaaz:
Now, I need to make it very clear. SEO, search engine optimization,

Ejaaz:
is a huge business and companies and advertisers pay billions and billions of

Ejaaz:
dollars per year just to get access and put their product in front of the right profile of person.

Ejaaz:
Meta is pioneering the AI version of that. And we were kind of in the dark.

Ejaaz:
They were kind of behind on the AI race. They don't have a frontier model.

Ejaaz:
So we didn't know whether they could actually pull this off.

Ejaaz:
And the data has shown that they can.

Ejaaz:
They beat earnings per share by 53%, and their revenue is up 33% year over year,

Ejaaz:
which is just categorically very impressive.

Ejaaz:
And I think we're going to start to see more of these things happen with other

Ejaaz:
such companies, Google being the most obvious one, where everyone thought AI

Ejaaz:
was going to eat into their search revenue, and they're up 20% over the quarter.

Ejaaz:
So overall, I think Meta, and it's not just an AI CapEx infra thing.

Ejaaz:
It's also AI bleeding into every single other type of product category and also making them money.

Ejaaz:
So the demand for this thing, for this technology is insatiable.

Ejaaz:
And the lesson that I'm hearing from all these three companies that we've spoken

Ejaaz:
about so far is there's not enough compute to go around.

Josh:
Okay. So Ijoz, I'm hearing you say all these positive things about meta,

Josh:
and then I'm looking at the stock today and it's down 9%. So clearly there's

Josh:
a disconnect between the market and the numbers. And we've seen this before.

Josh:
People sell on the news, even when it's good sometimes.

Josh:
But do you have any ideas as to why this is happening?

Ejaaz:
I think Meta's been getting a lot of hate, justifiably, because they've made

Ejaaz:
a few different blunders.

Ejaaz:
We mentioned on a previous episode that Zuck has.

Josh:
Gone on an

Ejaaz:
Acquisition spree and barely any of them have paid off. And his most recent,

Ejaaz:
most successful one is now getting unwound and blocked by China.

Ejaaz:
So it's not a good streak for him in general. But I think the market reaction

Ejaaz:
is specifically because advertising in itself is more of a variable business

Ejaaz:
versus something as hard to find as compute.

Ejaaz:
You have recurring customers with compute, with AWS, with Google Cloud.

Ejaaz:
You have contracts that you sign, long-term contracts with these enterprises,

Ejaaz:
and you know they're going to keep coming back. With advertising,

Ejaaz:
it's kind of like, do you think Google.

Josh:
Is going to create

Ejaaz:
A better AI search optimization system next quarter? Maybe.

Ejaaz:
And I think the meta FUD is just oversold at this point. I think people are

Ejaaz:
looking at it as a social media company versus an advertising business.

Ejaaz:
And if I were a meta investor right now, I'd probably be adding on to my position.

Josh:
Yeah, it may be helpful for people to reconsider these companies because a lot

Josh:
of the times the way that they interface with these companies is through the consumer layer.

Josh:
It's like on Amazon, you're interfacing with their Amazon mobile app.

Josh:
On Meta, you're interfacing with Instagram or Facebook. But the reality is,

Josh:
is that there's huge businesses built on the backs of these that is far larger

Josh:
than the actual core business that you're interfacing with on a daily basis,

Josh:
which is interesting. Now, Meadow was perhaps the biggest loser today,

Josh:
just in terms of price performance.

Josh:
The second biggest loser was Microsoft.

Josh:
Now, Microsoft should surprise no one. They're having a little bit of a difficult

Josh:
time when it comes to kind of being at the forefront of AI, but not in terms

Josh:
of their cloud or their infrastructure.

Josh:
Because like everyone else, they have more demand than they know what to do with.

Josh:
They have incredibly high margins and they're doing really well,

Josh:
pretty much across the board. They generated great numbers.

Josh:
One of the things that I think surprised investors, perhaps the reason

Josh:
why it's down today is because this capex number it grew

Josh:
to 190 billion for the calendar year

Josh:
of 2026 and that includes 25 percent boost

Josh:
from previous estimates because of this higher component pricing

Josh:
now for reference for framing that's more than the gdp of greece it's more in

Josh:
the annual capex of boeing lockheed martin and general motors combined basically

Josh:
the entire defense industry so it's a tremendous amount of spending on a business

Josh:
that i think a lot of people are a little confused on They had some issues recently

Josh:
with the Microsoft and opening a restructuring.

Josh:
The partnership agreement that happened earlier this week, it sucks down a little

Josh:
bit, but it seems overall, as long as Microsoft is leaning into their cloud

Josh:
infrastructure, they're going to be okay.

Ejaaz:
Yeah, I think I relatively agree. Okay, so the reason why I say relatively,

Ejaaz:
their cloud business, Azure, is a beast. It's up 40%.

Ejaaz:
They're printing money. They're just not printing as much money versus their

Ejaaz:
competitors, which happened to release their same earnings report within the

Ejaaz:
same 90 minutes. window, right? So AWS,

Ejaaz:
blew them out the water. And they are like the biggest car business.

Ejaaz:
So if you're a smaller car business, such as Microsoft Azure,

Ejaaz:
you kind of want to be putting up bigger percentage increases. This wasn't the case.

Ejaaz:
Google Cloud also crushed them as well. So comparatively, if you were looking

Ejaaz:
at all three businesses, even though Microsoft's stat statistical increase is

Ejaaz:
better, you're probably going to want to buy Amazon and Google over this.

Ejaaz:
But that might also be an opportunity for you.

Ejaaz:
The other reason, and I want to put my bear hat on for a second with Microsoft.

Ejaaz:
Josh, what's the name of the AI leader at Microsoft?

Josh:
Copilot?

Ejaaz:
No, I mean the person that leads the AI team. Oh, I have no idea.

Ejaaz:
Exactly. That's my point.

Josh:
Not a clue.

Ejaaz:
So the leader of AI at Microsoft, I believe his name is Mustafa Saleman,

Ejaaz:
just has been sitting at the helm and not really delivering on the products that you would expect.

Ejaaz:
And like Anthropic, OpenAI, and even Google have been absolutely running circles

Ejaaz:
around them, right? So remember, Microsoft CoPilot and the OpenAI partnership

Ejaaz:
were the earliest partnerships that you could make.

Ejaaz:
Microsoft, best investor in the room here, put in $13 billion into OpenAI,

Ejaaz:
and it is currently worth $132 billion, 27% stake in OpenAI.

Ejaaz:
And even with that, what is it, a year and a half lead across any of the competitors,

Ejaaz:
they still couldn't figure out how to make CoPilot a really good AI assistant.

Ejaaz:
And the adoption rate for Copilot across all the enterprise customers,

Ejaaz:
which by the way, they already have in a contract.

Ejaaz:
People just didn't want to use it. They requested Claude.

Ejaaz:
They requested ChatGPT directly. And you know what Microsoft has done in response,

Ejaaz:
what Mustafa Salomon has done in response?

Ejaaz:
He's created Microsoft Features,

Ejaaz:
are backed by Claude and ChatGPT. And now their partnership is broken.

Ejaaz:
Microsoft still has control over the IP, but what happens when that IP runs

Ejaaz:
out in, what is it, three, four years time?

Ejaaz:
What are they going to do then? They won't be a forefront. And I think people

Ejaaz:
are projecting that bear case in the future and they're deciding just to go

Ejaaz:
with a safer option, which is Google or Amazon. That seems right.

Josh:
Yeah, Microsoft, they've really just kind of missed when it comes to adopting AI.

Josh:
There's another earnings report that I'm very excited about that by the time

Josh:
you're listening to this episode is out, which is Apple's.

Josh:
I think that's going to be interesting to see how they're starting to navigate

Josh:
this new paradigm shift where they're slowly moving into AI.

Josh:
I know WWDC is coming in June. Hopefully, we get Apple Intelligence.

Josh:
I mean, of all these companies, they're serving the infrastructure,

Josh:
but in terms of where that infrastructure is actually served,

Josh:
that's all on Apple devices. It's on all the MacBooks. It's on all the iPhones.

Josh:
So that's going to be really interesting to see. I see a hyperscaler cloud growth

Josh:
chart here. Do you want to talk about this for a sec?

Ejaaz:
No, I just wanted to like, as we round up this segment, because I know there's

Ejaaz:
like a lot of numbers here.

Ejaaz:
There's a lot of percentages that we're peddling here. This chart kind of like

Ejaaz:
lays it out pretty clearly what the thesis is and what has been proven in these earnings reports.

Ejaaz:
AI-related profit is up massively.

Ejaaz:
It largely comes out of infrastructure, margin, growth, and that specifically

Ejaaz:
has come out of cloud businesses specifically.

Ejaaz:
And who owns the biggest cloud businesses? It's Google, it's Amazon.

Ejaaz:
And even though it's their littlest brother, It's also Microsoft Azure.

Ejaaz:
And this chart I expect to see

Ejaaz:
go up and to the right over the next couple of years at the very least.

Josh:
And as long as there's free cash flow coming into these businesses,

Josh:
it's fine that they spend it.

Josh:
That money is going to find a home elsewhere and that's going to improve the

Josh:
whole market. So I think as we wrap this up, you look at the PE ratios,

Josh:
the price to earnings ratio.

Josh:
This is basically how expensive a company is.

Josh:
So price to earnings ratio, money comes in, a stock gets value.

Josh:
This is the multiple at which the premium of how expensive it is.

Josh:
So Meta is trading 16 times earnings. That means it's trading 16 times the forward's

Josh:
projected earnings of the company.

Josh:
On a relative basis that's pretty low we

Josh:
have a comp for the dot-com bubble peak the pe ratio has

Josh:
got fairly high microsoft set 73 times earnings

Josh:
relative to 25 where we are now cisco was

Josh:
over 200 times earnings and yahoo is over 800 times earnings now there are some

Josh:
early signs of this spacex being one of them when i think about its pe ratio

Josh:
i don't know what it is it's not public yet that's going to probably be close

Josh:
to the microsoft cisco level but in terms of these core businesses that are running.

Josh:
They're not priced very highly at all. This isn't bubble territory.

Josh:
They're not going into debt. They are not spending what they can't afford.

Josh:
They are just taking the revenue that they're earning from their customers and

Josh:
they're deploying it to grow their businesses even larger.

Josh:
So if you're asking, is there going to be a problem?

Josh:
Are there shortcomings in the market coming soon? The answer is, I mean, maybe not.

Josh:
Things can break. This is subject to change. I know there's a lot of underlying

Josh:
things that may change the narrative here, but as of now, things seem pretty

Josh:
solid and these earnest reports look awesome.

Ejaaz:
My answer to the bubble question is, we're not in a bubble right now.

Ejaaz:
As soon as these companies start taking a lot more debt and these P ratios skyrocket, then we are.

Ejaaz:
Listen, it might happen suddenly once SpaceX IPOs, once OpenAI IPOs and capital

Ejaaz:
gets sucked out of these companies, it remains to be seen.

Ejaaz:
But for now, theoretically, we are not there.

Josh:
But well, there's one thing. One last thing is like, so the thing that I'm looking

Josh:
at is, so long as that incremental dollar spent on compute is still valuable

Josh:
to the customer, then everything works.

Josh:
It's like as long as the end user is finding value from these AI tools and services

Josh:
and they're willing to pay for that, everything continues to work.

Josh:
It's once that train stops, once Claude starts to become dumb,

Josh:
once we run out of use cases for it, that's when we run into problems and we

Josh:
haven't got there yet. So I'm feeling optimistic.

Ejaaz:
It's really funny because you mentioned Claude, you mentioned ChatGBT.

Ejaaz:
Those are the two products.

Ejaaz:
Like if these two companies implode overnight, we are screwed.

Ejaaz:
But the good news is not just regular consumers like you and I,

Ejaaz:
but very high-powered enterprises that generate billions and billions of dollars

Ejaaz:
every single year, find deep value in these products, and they're embedding

Ejaaz:
it in every aspect of their business.

Ejaaz:
So for now, directionally, we're heading in what I would say is a positive direction for all of this.

Ejaaz:
I think that brings us to the end of the earnings. We have more to cover.

Ejaaz:
Let's switch contexts a bit.

Ejaaz:
So Josh, have you heard of something called Project Deal? Yeah.

Ejaaz:
No, never heard of it.

Josh:
Fill me in.

Ejaaz:
Okay, so our girl Olivia Moore does a very good job of summarizing an experiment

Ejaaz:
that the Anthropic team did for one week.

Ejaaz:
They said, we created a classified marketplace for our employees in San Francisco.

Ejaaz:
It's kind of like a Craigslist, but with a twist.

Ejaaz:
All the deals that were conducted by AI models were acting on behalf of employees.

Ejaaz:
So they spun up a bunch of AI agents, and you as a human couldn't list the item

Ejaaz:
that you wanted to sell. You couldn't write the description.

Ejaaz:
You couldn't pitch it. And you as a purchaser couldn't say, oh,

Ejaaz:
I don't like the look of that.

Ejaaz:
It had to be completely run autonomously by clawed AI agents.

Ejaaz:
So they ran this experiment for a week and did the human exchange by the end of it.

Ejaaz:
And it ended up generating $4,000 worth of purchases and sales across the entire platform.

Ejaaz:
And the customer feedback from the employees themselves were,

Ejaaz:
wow, I actually ended up with items that I really wanted.

Ejaaz:
Like if you were a purchaser, you gave your agent a wishlist.

Ejaaz:
And if you were a seller, you just listed an inventory of things that you had

Ejaaz:
in your apartment and the swap was done after a week.

Ejaaz:
I thought this was a pretty cool experiment for autonomously run businesses

Ejaaz:
or e-commerce specifically that could happen in the future.

Josh:
That's very cool. And also here's an answer to why the income will not stop

Josh:
anytime soon, because think about how many tokens this requires in terms of agentic capabilities.

Josh:
It's like, we started with the chatbots, you talk, it spits something out.

Josh:
That was like, okay, but it didn't use that much tokens. Then we had chain of

Josh:
thought where it actually generated tokens in order to create a better answer.

Josh:
And now we have agents that leverage not only chain of thought,

Josh:
but now are going off and performing all of these skill trees,

Josh:
burning tons of tokens. Yes.

Josh:
As this type of workflow becomes more powerful and delivers more value,

Josh:
the amount of tokens that are required to generate go vertical.

Josh:
And I think that's what we're seeing right now is not only is the demand for

Josh:
AI going up, the demand for tokens is going astronomical with it because of

Josh:
these workflows like this one, where I'm sure in order to get this done at this

Josh:
quality, you consumed a tremendous amount of tokens.

Josh:
And I think, again, this is probably another bullish use case.

Josh:
Now, we have more news as it relates to Cursor.

Josh:
Cursor releases their agent harness to the public. What's going on with Cursor?

Ejaaz:
Yeah, okay. So I need to pause for a second and eat some humble pie because

Ejaaz:
exactly a week and a half ago, I was crapping on Cursor.

Ejaaz:
I basically said that they have no moat.

Ejaaz:
They are, and I quote, an AI rapper that sits on top of the smarter models like Claude and Chad GPT.

Ejaaz:
And, you know, Anthropic and OpenAI can basically eat their lunch at any given moment.

Ejaaz:
I was wrong. So Cursor this week released a really cool product,

Ejaaz:
which was their AI Agent Harness.

Ejaaz:
Now, for those of you who don't know what an AI Agent Harness is,

Ejaaz:
you have the main model, but the model in itself is good.

Ejaaz:
But if you can mold it in a very specific way around a very particular use case,

Ejaaz:
so that includes a bunch of very heavily detailed prompts.

Ejaaz:
It includes setting up the right developer environment.

Ejaaz:
It includes plugging in the right APIs and orchestrating all these things in

Ejaaz:
a very meticulous way. That's known as the harness.

Ejaaz:
That has grown to be as valuable as the model itself.

Ejaaz:
In fact, there was an eval board that was put out this week because we had ChatGPT

Ejaaz:
5.5 come out and we had Claude Opus 4.7 come out.

Ejaaz:
They tried adding the harness from Cursor on top of these models and guess what?

Ejaaz:
They performed better than the actual models themselves. So now companies are

Ejaaz:
like, well, I want this harness as well.

Ejaaz:
And in fact, Sam Altman himself said this week that the harness and the model are equivocal.

Ejaaz:
They're the same thing and are as valuable as each other. So Cursor decided

Ejaaz:
to do the insane thing, which is.

Ejaaz:
Release their harness as an API and charge people to sit on top of that.

Ejaaz:
So in an instant, overnight, they created this moat that sits on top of these

Ejaaz:
models, and they can now charge a premium for it. It was just a genius move by Cursor.

Ejaaz:
I'm kind of embarrassed that I didn't see it play out in this way myself,

Ejaaz:
but they basically have a product that they can sell that makes ChatGPT and

Ejaaz:
Claude 10x better than it already is today. And that's pretty cool.

Josh:
Well, you know who saw that is Elon and SpaceX XAI, which sounds like one of his children's names.

Josh:
It's a mouthful, but they acquired the option to purchase cursor

Josh:
what last week two weeks ago and imagine if that

Josh:
model wasn't anthropic it wasn't open ai

Josh:
but it was a grok model and now it can be

Josh:
10 to 20 times better in a harness run by cursor i

Josh:
think that's probably what they're guiding towards so cursor seems now to be

Josh:
a very important company a very important puzzle piece

Josh:
and hopefully grok can take advantage of that when they either

Josh:
work together or come to the acquisition later this

Josh:
year now there is more news on the

Josh:
front of ai generated content this one

Josh:
being 11 labs now 11 labs for those who don't know is the

Josh:
kind of frontier leading edge of audio ai

Josh:
so that's things like ai voices voice cloning

Josh:
and just recently music production so

Josh:
they have a music platform website in which you can

Josh:
actually sign your voice up to be used for music

Josh:
generation and creation and they announced not only that

Josh:
they created this new platform but also that they've paid out 11 million dollars

Josh:
to creators through the 11 lives voice library so the question i asked myself

Josh:
and i asked each other before i recorded is why have we not signed up our voices

Josh:
for this creator program because my god 11 million dollars is a lot of money

Josh:
it seems like a lot of the pushback around music generation

Josh:
When it comes to ai in particular is that it's

Josh:
not real and it takes away from real artists and i

Josh:
think the reality is is that artists who publish on spotify make virtually

Josh:
no money you get almost zero dollars even if you get

Josh:
a billion plays whereas 11 labs they're paying out 11 million

Josh:
dollars to a very small set of creators because they can actually earn and

Josh:
participate in the upside of this ai generated music so in addition to the music

Josh:
being incredibly well produced in some cases it also creates this really interesting

Josh:
incentive economy around submitting your human vocals to be used for this music

Josh:
production we have some samples of music maybe we should take a sec yeah give

Josh:
it a listen go on josh pick

Ejaaz:
A pick a track.

Josh:
Let's see chrome candy sounds like fun okay here we go

Josh:
Okay, I do immediately regret that decision.

Ejaaz:
Okay, so out of all of that, I think we picked the most AI generated one.

Ejaaz:
I do immediately regret that decision. I promise you some of these are actually pretty good.

Ejaaz:
The thumbnail was a bit of a giveaway there. But yeah, to your point,

Ejaaz:
there's a few reasons why I like this product.

Ejaaz:
Number one, the biggest pushback from artists specifically against AI,

Ejaaz:
and rightly so, is this is killing our business. We aren't able to make money.

Ejaaz:
You're stealing our IP and just generating profits for free.

Ejaaz:
This platform not only recognizes your IP, but feeds profits and money back to you.

Ejaaz:
Now, typically in the music industry, it's very complicated.

Ejaaz:
You need to have your IP owner, record label, all this kind of stuff.

Ejaaz:
And it gets very contractually boring and tedious.

Ejaaz:
This is one singular platform that is traceable across the technology itself

Ejaaz:
that can license your voice for content that you haven't even created.

Ejaaz:
It could be someone else, you and I, Josh, that come up with an idea to leverage

Ejaaz:
someone's voice and create a banger tune that goes on to make millions of dollars.

Ejaaz:
And you see money come through that and it's in a transparent way through this platform.

Ejaaz:
So I think although this is a small infrastructure and platform right now,

Ejaaz:
this could grow to be something massive.

Ejaaz:
Imagine if Spotify used this infrastructure, you know, you'd end up with a bunch

Ejaaz:
more happy artists that end up making more money on average.

Josh:
Yeah it's pretty cool i like 11 labs i think they have an incredible

Josh:
platform i like this new take on music generation i hope it

Josh:
changes the sentiment around ai produced music how it can

Josh:
be an actual tool that empowers creator more than it destroys

Josh:
them uh we also have more news as it relates to

Josh:
claude releases now the month of claude is kind

Josh:
of over they slowed down on their daily releases but they did release something

Josh:
just yesterday that we found interesting which is a new

Josh:
series of connectors things like blender things like adobe

Josh:
creative cloud ableton which is a music production software canva

Josh:
sketchup a lot of new applications one of the most noteworthy ones

Josh:
was blender which for those who aren't familiar blender is

Josh:
a 3d modeling and rendering software that actually takes

Josh:
really complicated files for rendering things like if

Josh:
you ever wanted to produce a product it creates the 3d renderings of all the

Josh:
intricacies of something like a keyboard all the keys all the switches the housing

Josh:
for it and now it can work directly with claude i was really interested i wanted

Josh:
to check out the adobe creative cloud because i'm a huge fan of creative cloud

Josh:
and do a lot of work in that world.

Josh:
Unfortunately, it's only just Adobe for creativity. It's a pretty lame app.

Josh:
And then I started playing around with this more. And the reality is,

Josh:
is that it's very slow when it does all of these things.

Josh:
It takes a long time to think and work. And while it is powerful,

Josh:
it's just painstakingly slow to actually get outputs and engage with these tools

Josh:
right now. But it seems pretty interesting.

Josh:
I would hate for it to make a mistake on like a 10,000 part rendering of some

Josh:
complicated object and you don't know what it is. So it's high risk.

Josh:
Use at your own discretion.

Josh:
But I think it is noteworthy news for this week, at least.

Ejaaz:
Okay, so for the final topic, Josh, I have a nomination for the worst AI product ever created.

Ejaaz:
And I'm sad to say that it was created by one of the biggest companies that

Ejaaz:
we just spoke about on the earnings reports. So thank God this isn't the moneymaker.

Ejaaz:
So this is a new feature from Amazon, where when you go on their e-commerce

Ejaaz:
business, the Amazon platform where you order toilet paper, like I mentioned

Ejaaz:
earlier on, you now have a new AI feature which generates a podcast about the products.

Ejaaz:
Two AI hosts discuss the product that you're viewing and takes your questions

Ejaaz:
as if it's in a call-in show.

Ejaaz:
So just to be clear, you press the button, right? This is like a demo here. I'm not going to play it.

Ejaaz:
But like, you know, you're looking at, what is this? Home Care Pro Rapid Relief Rash Cream.

Ejaaz:
And you can generate two AIs that like talk about the product.

Ejaaz:
And if you have a question, you can type in the question and they answer it live.

Ejaaz:
So as you're scrolling through the page i don't know why you would want to use

Ejaaz:
this maybe i'm missing something i we are in the podcast game and even i hate

Ejaaz:
this product with a visceral amount of myself josh can you help me unpack this

Ejaaz:
like why would i want to use this.

Josh:
Is this even real this seems like they're trolling like

Josh:
is this even a real feature i'm like very skeptical but it's funny i mean previously

Josh:
notebook lm which is google's program they did this they allowed you to kind

Josh:
of insert any sort of research or idea into their program and then it would

Josh:
generate you a podcast this seems to be doing a live call in q a based on people's

Josh:
reviews and tough questions it's

Josh:
I guess if anything, it's a testament to the cost of content coming down to

Josh:
a level that is so marginal that Amazon is looking to implement it basically for free.

Josh:
Is this necessary? Probably not. Are people going to use this?

Josh:
Probably not. Is this real? I'm not even sure.

Josh:
If anything, it's a really compelling demo. But yeah, I found it really funny

Josh:
that, I mean, it's just a testament, again, to the cost of everything going

Josh:
down, the accessibility of AI and the AI-ification of everything.

Josh:
Not everything needs to have a podcast. Not everything needs AI.

Josh:
I don't know. Funny story to end on. but i think that is everything this was

Josh:
kind of long if you made it to the end yeah you've really you you've made it

Josh:
you're up to date you know all the things that matter this week we had a few

Josh:
other episodes this week that were pretty interesting if you missed one is on

Josh:
that china deal with meta

Josh:
one thing that wasn't covered in the earnings report is this meta

Josh:
and manis acquisition issue where china actually blocked it

Josh:
meanwhile the ceo of manis is a

Josh:
vice president of meta and working at the offices currently so it's

Josh:
a huge disaster we had an interview earlier this week where we spoke

Josh:
with the guy who is responsible for usvc an easy way that you can invest in

Josh:
anthropic spacex and open ai before it goes public that was pretty interesting

Josh:
and we also covered sam albin and elon musk's trial now we don't have any updates

Josh:
on that today we're going to be covering those in the coming weeks but yeah

Josh:
thank you guys so much for watching you guys any final thoughts before we leave them for the weekend

Ejaaz:
Oh no i think we've we've kept them here for a while but you are officially

Ejaaz:
caught up to date with everything and anything going on with ai from everything

Ejaaz:
from product releases to earnings reports to drama between Elon Musk and Sam

Ejaaz:
Altman. We do grudges. We do everything on this show.

Ejaaz:
So the point is we have extensive coverage. And if you aren't a subscriber,

Ejaaz:
if you haven't rated the show, even if you hate us, leave us a comment, give us a rating.

Ejaaz:
We would love to hear from you. It helps us out massively.

Ejaaz:
And yeah, we will see you next week on the next one.

Josh:
Thanks. Have a great weekend. See you guys.