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Exploring the frontiers of Technology and AI
Ejaaz:
There are two companies currently worth trillions of dollars that I think are
Ejaaz:
the most undervalued companies in the world right now.
Ejaaz:
Google and Apple are a tale of two tech giants that have taken a very different approach to AI.
Ejaaz:
Google, on one hand, has poured billions of dollars to create some of the world's
Ejaaz:
leading AI models, going from a corporate has-been to one of the titans of AI.
Ejaaz:
They have their own custom GPUs rivaling NVIDIA. They have one of the largest
Ejaaz:
user bases in the world with Gmail, Android, YouTube. I could go on.
Ejaaz:
Apple, on the other hand, has taken the opposite approach. They haven't invested
Ejaaz:
in AI at all. They've been late to update their AI assistant Siri.
Ejaaz:
They haven't spent any money to hire AI geniuses like Zuckerberg at Meta.
Ejaaz:
But despite this, I think these two companies are poised to be the biggest companies in the world.
Ejaaz:
So in this episode, we're going to give you the bull case for Google and Apple
Ejaaz:
revealing not just why you should buy their stocks, but also why these two companies
Ejaaz:
in particular are very unlikely allies.
Josh:
Yeah, I think this episode is going to surprise a lot of people because there's
Josh:
this gross disconnect between public market sentiment and public sentiment where
Josh:
stocks are trading very high and people don't quite agree with that.
Josh:
So I think in this episode, we have a lot of what most would have perceived
Josh:
to be contrarian takes about where these companies have come from and where
Josh:
they are headed to and how we are actually much more optimistic than I think
Josh:
a lot of people think on these companies.
Josh:
So Ejaz, maybe you could help us start with the bull case for Google,
Josh:
which is one of the first companies we're going to be talking about here.
Ejaaz:
What if I told you that Google currently worth $3.4 trillion is an absolute bargain buy right now?
Josh:
That's a crazy take.
Ejaaz:
You call me crazy. But here's why I think Google is actually worth $10 trillion
Ejaaz:
as an AI giant currently masquerading as a simple, humble search engine.
Ejaaz:
I've got four reasons for you.
Ejaaz:
Number one, Google has the best AI models.
Ejaaz:
You have Google Gemini, which is currently crushing across all benchmarks and
Ejaaz:
beating ChatGPT on so many different fronts.
Ejaaz:
You have VO3, which is their text-to-video model, which is creating cinematic
Ejaaz:
masterpieces in a matter of seconds.
Ejaaz:
You have Nano Banana, their image generation model, which not just creates really
Ejaaz:
good images, but also allows you to edit them.
Ejaaz:
And finally, who can forget about Google's Alpha Gemini series,
Ejaaz:
their science AI models, which have won not one, but two Nobel Prizes.
Ejaaz:
Number two, they're the only real competitor that NVIDIA has.
Ejaaz:
They've created TPUs, which is their version of GPUs built to make their own
Ejaaz:
custom AI models specifically for Google's software stack and hardware stack.
Ejaaz:
They also have some of the craziest distribution of users. They have the number
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one mailing app in Gmail.
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They have the number one entertainment app with YouTube. They dominate search
Ejaaz:
engines and advertising.
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And they also have the number one mobile operating system with Android.
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And number four, a little lesser known fact, is they're some of the biggest
Ejaaz:
and best investors in the world.
Ejaaz:
They currently own 14% of competitor Anthropic and 6% of SpaceX.
Ejaaz:
So no matter how way you want to look at it, it's hard to argue why Google isn't
Ejaaz:
going to become the most valuable company in the world.
Ejaaz:
They have all these strengths, they have the best models, they have the best
Ejaaz:
data to train these models, and they have all the compute to build this in-house.
Ejaaz:
So I'm struggling to find an argument to see why Google isn't going to be the
Ejaaz:
most valuable company within a decade.
Josh:
I like looking at history. Google is very much a large player in this Game of
Josh:
Thrones that we talk about in the search for AGI.
Josh:
And it's helpful to have a little bit of context and pretext to how we got here
Josh:
today, where you're saying $10 trillion is a reasonable market cap.
Josh:
It's a little outrageous. But there's this funny story associated with the history of Google.
Josh:
And it kind of starts in 2019, I believe the year is, where they released a
Josh:
paper that was basically the inception of the Transformer.
Josh:
And for those who aren't familiar, the Transformer is the piece of technology,
Josh:
this little piece of code that has generated and created every single large
Josh:
language model that exists today.
Josh:
So by all means, Google kind of invented the technology that is running everybody's AI today.
Josh:
Naturally, as a result, you would expect them to be the front runner.
Josh:
But what they did is they kind of sat on this technology for a very long time.
Josh:
So in 2022, when ChatGPT came out, Google actually didn't really have a publicly facing AI product.
Josh:
They just had the technology because they were very much a research lab.
Josh:
So while OpenAI acquired a million users in the first week, Google is just kind
Josh:
of sitting there on, at this time, three to four year old technology that they
Josh:
just haven't actually implemented in the product.
Josh:
So what they did is they rushed to implement this product. and they created a lot of
Josh:
AI systems that started with Bard and then recently is what we know today as
Josh:
Gemini that just weren't really quite good.
Josh:
And you get the idea that the reason they weren't quite good is because the culture was pretty bad.
Josh:
In Google, there was a lot of problems with the workforce and of course a lot
Josh:
of disconnect where if you asked Bard at the time to generate the founding fathers,
Josh:
it would generate a series of minority women, which was just objectively incorrect and wrong.
Josh:
And a lot of people took that as, okay, Google actually doesn't have a chance at succeeding in AI.
Josh:
And the reality is that wasn't true because that changed when Sergey Brin comes into the picture.
Josh:
So we have a post here, Sergey Brin spotted IRL again, and apparently he's working
Josh:
on Gemini at Google. And this is true.
Josh:
Sergey Brin, for those who don't know, co-founder of Google.
Josh:
He was the guy who started from the beginning and he recognized a wave that
Josh:
was too important to miss.
Josh:
He came back to Google and he started implementing what they did at early stage Google today.
Josh:
And now we have Gemini, which is the most powerful AI model in the world,
Josh:
they're at least very much at the frontier with everybody else and they're implementing
Josh:
a lot of new services they incepted this amazing technology lost the lead and
Josh:
now are each as you're telling me they're probably going to get back into the
Josh:
lead because that would be the implication with 10 trillion dollar market cap
Ejaaz:
Yep and i think there are four key reasons why uh they hold such a a powerful
Ejaaz:
moat and why they're super undervalued i want to start off with,
Ejaaz:
Talking about their model, and it's not just like an LLM, it is everything else, right?
Ejaaz:
They've tackled and are leading every other medium in terms of AI-generated
Ejaaz:
content on the video side with VO, on the image side with Nano Banana,
Ejaaz:
and on the scientific discovery side with the Alpha Gemini series.
Ejaaz:
Just taking a look at this benchmark setup that I have here,
Ejaaz:
this is something that we've started to see with every Gemini model release,
Ejaaz:
which is they're frequently and consistently at the top, Josh.
Ejaaz:
They're the number one LLM, they're the number one coding assistant,
Ejaaz:
and they're the number one agent provider as well.
Ejaaz:
And I think that this isn't by coincidence. They've worked very hard to kind
Ejaaz:
of like restructure Google from this corporate kind of bloat,
Ejaaz:
which they typically had up until AI became a running thing,
Ejaaz:
into this like frontier AI tech lab that is constantly innovating,
Ejaaz:
changing, and adapting their strategies, given whatever the environment they're faced with.
Ejaaz:
So they consistently have the best AI models, but it's also worth explaining
Ejaaz:
how they've translated this into user dominance.
Ejaaz:
So typically how OpenAI and ChatGPT has done this is they've created a model
Ejaaz:
and then they've pioneered basically the chat interface, right?
Ejaaz:
They then did the same for text to video into Sora. So they've done a really
Ejaaz:
good job of surfacing this to new users.
Ejaaz:
Now, Google already has these users and they've done a great job of doing the same thing.
Ejaaz:
They've integrated AI into their search. So whenever you search anything on
Ejaaz:
Google now, you have something called an AI overview, Josh.
Ejaaz:
And something that I learned just this morning, which they released from their
Ejaaz:
quarterly report last week, is the monetization rate of this AI search,
Ejaaz:
which comes up at the top of their.
Ejaaz:
Infamous Google search page is monetizing at the same rate as their search links
Ejaaz:
themselves, which is just a crazy undertaking, right?
Ejaaz:
Because you would think that Google is killing their own monopoly in search
Ejaaz:
by doing something like this, but it turns out that it's actually aiding and
Ejaaz:
probably going to offer them more profits going forwards.
Ejaaz:
The other thing is they have this whole AI productivity suite,
Ejaaz:
which they surface all these different models and features.
Ejaaz:
So I guess the point that I'm trying to make is Google isn't just a model creator,
Ejaaz:
are a product creator they understand their audience both
Ejaaz:
from the enterprise side and the consumer side and i
Ejaaz:
think it's highly undervalued and very misunderstood
Ejaaz:
that at how good google is at doing that job but what's probably surprising
Ejaaz:
to most is one of their products comes in the form of hardware uh their equivalent
Ejaaz:
of the gpu called the tpu which has added unlikely the most value to Google's market cap?
Josh:
Yeah, TPUs are amazing. And I'm going to do my best to try to explain TPU versus
Josh:
GPUs because on the surface, it seems a little confusing, but I think we can simplify it quite a bit.
Josh:
Ijus, I want you to imagine a GPU being a chef, a chef who is a master chef,
Josh:
who can cook anything and can make anything that you imagine.
Josh:
But the reality is that you and myself and the rest of the world,
Josh:
we only really want sandwiches.
Josh:
So while a chef can make a sandwich, it will take a little bit longer to make a sandwich.
Josh:
That is what a GPU does. It can cook you anything you like, But the reality
Josh:
is most of the world wants sandwiches.
Josh:
A TPU, you can imagine, instead of being a general purpose chef,
Josh:
is a production line for sandwiches.
Josh:
It is a singular line that has all of the ingredients on top of it to hyper-efficiently
Josh:
make sandwiches for the whole world.
Josh:
And because the world doesn't want salmon, they don't want steak,
Josh:
they just want sandwiches, this production line is much more efficient at making sandwiches.
Josh:
So while the GPU can do everything, and a lot of people want a GPU,
Josh:
people who are training hardcore AI, they just want a TPU.
Josh:
It's called a tensor processing unit, and it is this hyper-focused piece of
Josh:
hardware built to perform this thing called matrix math, which a lot of AI hardware is built upon.
Josh:
So what is so effective about these TPUs? Well, there's two ways of measuring
Josh:
GPU, CPU, compute in general.
Josh:
It's performance per watt, and it is cost per token.
Josh:
So performance per watt is two times that of the NVIDIA A100s,
Josh:
which is one of their leading flagships of chips.
Josh:
That means that for every watt of energy you apply, you get double the amount of performance back.
Josh:
The other one is cost per token. So for every dollar you spend,
Josh:
this is how many tokens you can yield.
Josh:
And it's about one and a half to two times better performance per token than
Josh:
NVIDIA GPUs. So these TPUs are remarkable.
Josh:
They work really, really well. And the question I asked myself when I was going
Josh:
through this is, well, why does the whole world not use TPUs?
Josh:
Well, the first answer is they actually don't sell them. Google just owns the
Josh:
TPU. It is a Google invention.
Josh:
They own them, they use them for their own stack, and they vertically integrate
Josh:
it through the software. so it's hyper-performance.
Josh:
And it's kind of like what we see with Apple chips with the M-Series.
Josh:
I always reference the M-Series because it's amazing, is that they've built
Josh:
this chip hyper-optimized for their exact production workflow.
Josh:
And as a result, the cost efficiencies, performance efficiencies,
Josh:
every proficiency is through the roof.
Josh:
So that's kind of how I would describe the TPU to a layman. That's kind of how
Josh:
I learned it myself. And hopefully that description makes sense.
Ejaaz:
That makes a lot of sense. Although I have one slight pushback for you, Josh,
Ejaaz:
which is as of last week, they have
Ejaaz:
started to sell their tpus to a
Ejaaz:
little known ai company uh known as anthropic um
Ejaaz:
supposedly the deal is marked at 50 billion dollars
Ejaaz:
which doubles their compute offering uh
Ejaaz:
from revenue earnings on the year uh so if this deal actually goes through this
Ejaaz:
will be the first major gpu sale that has sat outside of nvidia's remit so i
Ejaaz:
already know jensen's fuming uh at the head but we will see whether Google takes this seriously.
Ejaaz:
I mean, to your point, I don't know if Google has the...
Ejaaz:
Manufacturing capability or even the ambition to scale TPUs in the way that
Ejaaz:
NVIDIA is done with GPUs.
Ejaaz:
I see kind of two major constraints. Number one, Google's just focused on so
Ejaaz:
many other things and NVIDIA is like hyper-focused on doing this one thing really well.
Ejaaz:
And number two, TPUs, as you said, are highly specific and custom.
Ejaaz:
So I'm guessing that the TPUs that they're selling to Anthropic in this deal are very specific.
Ejaaz:
Maybe that's a niche that they can kind of take forward, but I don't think it
Ejaaz:
could grow as large as NVIDIA.
Ejaaz:
Do you think I'm wrong or do you think they're knocking trillions of dollars
Ejaaz:
of market cap off of NVIDIA soon?
Josh:
Yeah, well, there's two cases. There's one in which you believe TPUs are the next form of GPU.
Josh:
It's like a natural extension where everyone's going to want to buy these.
Josh:
In that case, if they could do these production at scale, well,
Josh:
they will, yeah, they can knock off a trillion or two off of NVIDIA's market cap, sure.
Josh:
The reality is, is that I don't believe they are direct Apple to Apple's comparison.
Josh:
There's a lot of different types of training that NVIDIA GPUs are good for. the per
Josh:
per watt of gpus from nvidia are still higher nvidia
Josh:
is still innovating faster they have access to the most cutting edge lithography which
Josh:
happens only in a few places in taiwan they really
Josh:
have this monopoly on the supply chain that google just can't really compete
Josh:
with but google can supplement a lot more compute so to the point of jevin's
Josh:
paradox where compute will just expand to the emptiness that there is around
Josh:
it um there's no supply demand shortage for these processing units,
Josh:
whether they be tensor or graphical.
Josh:
And if Google can start selling them, that just opens up another pillar for Google.
Josh:
I'm not sure it necessarily hurts NVIDIA, but it allows Google to just make
Josh:
more money and print more cash.
Josh:
And I think that's a big win for a company that really hasn't made money off
Josh:
of the infrastructure play yet, but now has a very clear opportunity to do so.
Ejaaz:
Yeah, I mean, I'm just looking at this tweet here. Morgan Stanley kind of like
Ejaaz:
up their price and prediction for Google stock in 2026.
Ejaaz:
But one thing that really caught my eye is the $158 billion backlog that they
Ejaaz:
currently have for their cloud offering.
Ejaaz:
And it got me thinking that like, Google has always been a powerhouse when it
Ejaaz:
has come to like infrastructure provision and they've done so really well with
Ejaaz:
GCP, their cloud product.
Ejaaz:
You could also argue the same of Microsoft, Azure.
Ejaaz:
Both of these companies have signed major deals, Microsoft and Google,
Ejaaz:
in the last two weeks for AI-specific stuff, not just training,
Ejaaz:
but also inference costs.
Ejaaz:
So I see this like growing trend, Josh, of like infrastructure,
Ejaaz:
whether it's chips or just kind of like cloud services, getting really in demand
Ejaaz:
as we kind of like scale these AI models up.
Ejaaz:
So I don't know, I'm super excited to see where this goes. The final thing is
Ejaaz:
Google is just everywhere.
Ejaaz:
They are the doorstep to the internet and actually the entire house.
Ejaaz:
You know, they run Gemini, they're models, they have the TPU chips,
Ejaaz:
which we just mentioned, but they also handle 90% of search.
Ejaaz:
They run YouTube, the number one entertainment in the world.
Ejaaz:
They have Google Maps, they have Android, they power all Android devices.
Ejaaz:
It is just a very gluttonous monopoly that Google has that extends way beyond
Ejaaz:
just a simple search engine. And the point I wanna make around here is that
Ejaaz:
is a crazy positive feedback loop to when you're creating AI models.
Ejaaz:
They have all the data, they have all the compute in-house, so they don't have
Ejaaz:
to rely on that tiny island in Taiwan and on Nvidia's dominance here.
Ejaaz:
And then they have all the apps to surface that through a very monetizable audience.
Ejaaz:
We're talking about billions of users here.
Ejaaz:
So whereas OpenAI has to kind of build their audience from scratch and they've
Ejaaz:
done so very impressively to 800 million weekly active users,
Ejaaz:
Google kind of already had that waiting and ready to go. And they've proven
Ejaaz:
that, right? In their quarterly earnings, they have 650 million weekly active users.
Ejaaz:
I'm guessing the next quarter, that's going to, you know, increase by at least a third.
Ejaaz:
So the point is, Google's dominance extends way beyond a search engine.
Ejaaz:
I don't think people are very aware of that. And I think that is one of the
Ejaaz:
biggest bull cases for their stock going forwards.
Ejaaz:
A counter argument that I've heard to this, Josh, is that they just simply won't execute as well.
Ejaaz:
I would agree with you, except that the data tells us otherwise.
Ejaaz:
If you look at this chart over here, the retention rate, the three-month retention
Ejaaz:
rate, specifically for Google Gemini AI models, has been up and to the right.
Ejaaz:
It is pretty insane. We're talking about 90% the three-month retention rate
Ejaaz:
and six-month retention rate of 85%. That is staggering for any kind of consumer internet product.
Josh:
So you just you've laid out a pretty bullish case
Josh:
for google and i'm not sure that mismatches the public perception as
Josh:
of late i think that's changed a lot people really hated google but
Josh:
they're starting to come around see the light it's trading just beneath all-time highs
Josh:
and it very vividly reminds me of another company of about the same size a little
Josh:
bit bigger that has it's sitting at all-time highs but there is a very like
Josh:
gross disconnect between public sentiment and the company and that's apple um
Josh:
there's this post on the screen here that says what the hell is apple doing.
Josh:
They failed to make a car. They have no AI investments.
Josh:
Siri still sucks. Just releasing the same phone over and over again. How can you miss AI?
Josh:
How is that even possible? And Sean, to your point, I agree.
Josh:
They've actually, they've swung and missed on just about everything they've
Josh:
tried recently. And it's been a big disappointment, but the stock is trading at all time highs.
Josh:
So where is this disconnect coming from? How can one group of the internet be
Josh:
so polarized against the other group?
Josh:
And where all the money is going is clearly into Apple because Apple is trading
Josh:
like 4 point something trillion dollar market caps. It's a gigantic company.
Josh:
There's a few ways to think about this. And one that I really like is around local inference.
Josh:
So the way AI works, and granted, this is kind of funny because
Josh:
I think Apple accidentally stumbled upon this conclusion, but I'm going to purvey
Josh:
it as if this was all by design.
Josh:
There's two kind of ways that companies handle compute. There's cloud-based
Josh:
compute, and then there's edge inference that happens.
Josh:
So one happens in a data center in a remote place. That's what we see all the
Josh:
pictures of, these gigantic factories that have a bunch of GPUs.
Josh:
And the other happens locally on your device, whether it be your smartphone
Josh:
or your laptop or your desktop, whatever device it may be,
Josh:
compute happens locally on that device compute on a local device
Josh:
is free compute in a cloud costs money so what
Josh:
is apple doing well apple just released a new mac
Josh:
mini um which we have a post about here the m3 mac ultra studio or i guess that's
Josh:
what it's called is the only device which you can run open source state-of-the-art
Josh:
models outside of a data center and that seems strange because there's a lot
Josh:
of really powerful gpus there's a lot of really powerful computers but the only
Josh:
ones that actually allow you to run these are these Macs.
Josh:
Why is that? Well, it's because Apple owns the chips, and they've optimized these chips for AI.
Josh:
So even though there is an absence of AI currently running on Apple devices,
Josh:
they are fully compute capable of running these very impressive models from
Josh:
anything on a Mac Studio down to your iPhone,
Josh:
which leads us to the bull case of Apple being they are not subject to a lot
Josh:
of the swings that we see in public markets, because they're not investing all of the CapEx.
Josh:
Now, EJS, if you'll remember, there was a deal struck between Google and Apple in the past.
Josh:
This is not the first time they've worked together. And that was for Google search.
Josh:
Back in the day, I think we have a post somewhere about this.
Josh:
Yeah, here's a post from EJS. You dug this up from 2018, I think.
Josh:
How much is your data worth? So much that Google just paid Apple $9 billion
Josh:
to be the default search engine in the iPhone. $9 billion to get people...
Josh:
To use a free search. Well, that number has actually jumped to 20 billion as
Josh:
of as late as 2022 was the most confirmed number.
Josh:
And it's just an outrageous amount of money to spend. But I don't think this
Josh:
is the last time they're going to work with each other.
Josh:
So Ejas, this week we got some news that there is a new deal on the table.
Josh:
And this isn't a search related deal.
Josh:
This is instead an AI related deal.
Ejaaz:
Yeah, this is like Google and Apple deal 2.0. And it's so much bigger.
Ejaaz:
And it's back better than ever, right? So this week, we had news break that
Ejaaz:
Apple has asked Google to create their own Gemini model just for Apple users
Ejaaz:
that will run on their private cloud.
Ejaaz:
Josh, can you break this down for me? What's going on here?
Josh:
This is amazingly important. So everybody and their mother is spending trillions
Josh:
of dollars of capital building AI data centers.
Josh:
OpenAI is spending trillions, Google, Microsoft, name anybody they're spending
Josh:
trillions of dollars. There's a question that we frequently ask ourselves on
Josh:
the show and public markets are asking, is there a bubble? When is this bubble going to burst?
Josh:
How much CapEx is appropriate before you just can't justify the returns on your investment?
Josh:
Apple, in a way, in a funny messed up roundabout way, is completely immune to
Josh:
these swings, to this capital expenditure, and to this bubble exposure because
Josh:
they have not invested much money into building out the resources needed to
Josh:
train their own supermodels.
Josh:
What they're doing now is a very clear and obvious answer. is they're actually
Josh:
offloading that responsibility, offloading the financial risk to Google.
Josh:
And they're going to pay them X amount of dollars in order for Google Gemini
Josh:
to create a custom model for the Apple ecosystem.
Josh:
And I think this is a really powerful thing because we mentioned a little bit
Josh:
earlier, there's cloud and then there's local compute.
Josh:
And the local compute is actually sufficient enough to create a custom model.
Josh:
Don't suffice for a lot of requests that people have. I think a lot of prompts,
Josh:
and we talked about this a lot where with cutting edge models,
Josh:
I'm not even sure how to really test them because just my requests,
Josh:
my needs from an AI model aren't cutting edge.
Josh:
They don't need massive amounts of compute or tokens or resources to solve my problems.
Josh:
A lot of the times I'm just like, I need help navigating my day.
Josh:
I have a lot going on. I need to know like what, what times am I able to do things?
Josh:
And the thing with Apple is it actually has all this intelligence.
Josh:
And this was the promise with apple intelligence we just never got um but by
Josh:
all floating into gemini we start to see these unlocks where apple's the only
Josh:
one that has more context than open ai and it does we think about memory a lot
Josh:
and context and how powerful it is for a system and what device what system
Josh:
have you been using longer than chat gpt that has more info about you what's your smartphone
Josh:
and a lot of people will be reluctant to give up that data but in the case that
Josh:
it is private and it runs locally and it's able to take all the context from
Josh:
your device that creates this really powerful edge compute.
Josh:
And that's kind of part one of the bull case for Apple. So I'll stop there to
Josh:
see if you disagree, agree. This is like, we're getting into the weeds here a little bit.
Ejaaz:
I mean, as you know, I've been one of the biggest bears against Apple for almost a year now.
Josh:
And rightfully so.
Ejaaz:
Yeah, yeah. I think they've done a terrible job. But as you pointed out, this works both ways.
Ejaaz:
They've effectively shielded themselves from the crazy fluctuations that you
Ejaaz:
can see in AI, specifically in CapEx, right? So they're not investing trillions of dollars.
Ejaaz:
But also when that rollercoaster ride starts going down, they're shielded,
Ejaaz:
they're affected from it and they can pick and choose the winners.
Ejaaz:
There's also the argument that like all this AI CapEx investment is kind of
Ejaaz:
a race to the bottom because whoever gets to AGI first is gonna absolutely disrupt
Ejaaz:
and destroy any other competitor.
Ejaaz:
An argument that you could potentially give. The other side of it is,
Ejaaz:
Josh, I really like your point around the personalization and localization and
Ejaaz:
the importance of privacy of having your model on your own device.
Ejaaz:
Who cares if there's a general query that can be answered by some research professor versus an AI model?
Ejaaz:
I want it to be able to read my text and understand the next thing I'm going to text.
Ejaaz:
I want it to be able to download the apps ahead of me even knowing about the
Ejaaz:
apps and do the things for me. That's only going to work on personalized devices.
Ejaaz:
And as you said, Apple has the distribution.
Josh:
Yeah, the use cases for local inference are kind of remarkable when you think
Josh:
about having access to all of your texts or emails.
Josh:
There's a second thing to this also, which is cost.
Josh:
If you remember in a previous episode, we covered Grok Nano,
Josh:
which was this very lightweight, very easy to use, very low cost model,
Josh:
and how within days of it being released, it went to the very top of all the
Josh:
charts in terms of usage.
Josh:
Every developer in the world wanted to use it because it was fast and it was cheap.
Josh:
And one of the trends that we see as AI develops over time is this race to the bottom.
Josh:
The cost per token, the race to zero is fairly aggressive.
Josh:
And what Apple's done is they've kind of cheated and they've gone from the starting
Josh:
line directly to the finish line without doing the work in between because inference
Josh:
on a local device that has an M-series chip or an A-series chip that Apple has is completely free.
Josh:
It costs $0 to run a query on these local devices.
Josh:
And there's billions of them that are capable of doing this.
Josh:
So if you're a developer who wants to build a great experience for a customer,
Josh:
there is absolutely no reason why you shouldn't be building for Apple devices
Josh:
because the inference costs are free.
Josh:
And a lot of these developers who are building applications for the world of
Josh:
AI, they're bringing these servers. They're constantly looking for the next
Josh:
cheapest one because they want to keep the cost down.
Josh:
But if you just throw an app in the App Store that runs on these local models
Josh:
that Apple will hopefully produce in partnership with Google,
Josh:
You suddenly tap into this gigantic context window, this gigantic bay of memory,
Josh:
and it costs you absolutely zero dollars to do.
Josh:
And I think market forces will kind of come into play at some point here where
Josh:
just the natural tendency to trend towards lower prices will allow a lot more
Josh:
developer adoption and to create the experiences on top.
Josh:
So while Apple completely and utterly failed at AI version one with Siri,
Josh:
it is an abomination. It is the worst AI product of any major company by far.
Josh:
And I don't want to get that twisted. they may have accidentally
Josh:
just by the fact of vertically integrating these chips stumbled into the best
Josh:
case scenario where everybody's spending a bunch of money everyone is trying
Josh:
to build the ai first get the user second apple has all the users and they have
Josh:
all the data they just need the ai to plug into it and google could be that person to do so yeah
Ejaaz:
It's super smart i think the market is finally recognizing that if i were to
Ejaaz:
boil all of this down to its core i would say that Apple is actually doing what
Ejaaz:
they've always done the best,
Ejaaz:
which is create the best consumer experience and products.
Ejaaz:
And so rather than jump into the infrastructure wars and the infrastructure
Ejaaz:
race in AI with GPUs, they let everyone else do it.
Ejaaz:
They cherry pick the best, and then they integrate it in the best,
Ejaaz:
most artful way for their own products and services.
Ejaaz:
And that's why they have the addicted audience that they have, right?
Ejaaz:
I buy iPhones practically every single well, you're having MacBooks at this point.
Ejaaz:
I'm addicted to the Apple brand. And there's a reason behind that because it
Ejaaz:
has the best all-in consumer experience.
Ejaaz:
And that's what Apple knows that they have. And they can afford to basically
Ejaaz:
sign these deals and partnerships with the Googles of the world.
Ejaaz:
Another thing that I find interesting about this, Josh, is in this case,
Ejaaz:
they're paying Google to create their own AI model for them,
Ejaaz:
which seems like an L on the balance sheet for Apple.
Ejaaz:
But if you play this out, Gemini and Google are definitely going to build their
Ejaaz:
own agent, right, which is going to use a bunch of apps and they need to get
Ejaaz:
access to billions of consumers. Who has that?
Ejaaz:
Apple. I know Google already has it across an array of their different products
Ejaaz:
and apps that we explained earlier on.
Ejaaz:
But Apple has that addictive user experience that only operates at the hardware
Ejaaz:
level through the cellular device.
Ejaaz:
And if they maintain that lead, that could be a case for Google actually paying
Ejaaz:
Apple a hell of a lot more money to get access to this.
Ejaaz:
Is that fair? Is that crazy? Or have I got this wrong?
Josh:
Yeah, at the edge, it makes sense that the search thing happens
Josh:
again where okay apple owns the user experience
Josh:
google owns the software stack google winds up paying
Josh:
apple for the exposure um like i said before
Josh:
a lot of these companies they they have the intelligence they don't have the
Josh:
products they don't have the interface they don't have the trust or the users
Josh:
apple has that and by licensing technology from gemini they exclude themselves
Josh:
from all the capex fluctuations and the crazy amount of spending without a promised
Josh:
return in exchange for creating a a
Josh:
AI experience that is frankly the only one that I really want.
Josh:
The one that has all of my context. It can read all of my texts, all of my emails.
Josh:
It could be the personal assistant that no one else can be yet.
Josh:
And that's remarkably powerful.
Josh:
And if I want to outsource my thinking to an impressive AI, I could do that.
Josh:
And sure, Apple could probably ping some sort of API through Google or whoever
Josh:
they're partnered with, like OpenAI.
Josh:
But for most of my tasks, most of my AI needs, I just want a really helpful assistant.
Josh:
And no one can provide that better than an AI on my iPhone.
Josh:
And I think that's kind of the bull case in summary is as AI is able to remove
Josh:
themselves from CapEx, as they're able to implement local inference on all these
Josh:
devices for zero dollars, there's a lot of network effects that will probably
Josh:
come swinging their way.
Josh:
And maybe it was accidental, maybe it was by design, but the long tail effects
Josh:
of Apple's position right now seem fairly optimistic.
Josh:
And I think that's probably why it's priced sitting right at an all-time high
Josh:
right now, because we're not the only ones that think that.
Josh:
And that just about wraps it up.
Josh:
Why we think Google and Apple are both undervalued while at all-time high.
Josh:
And while perception might not always match public market sentiment and i think
Josh:
it's just it's important to continue to evaluate these companies like we said
Josh:
on yesterday's episode um these things matter a lot and how ai is implemented
Josh:
really matters a lot and it's changing
Josh:
Architecture of the world around us. So it's this exciting conversation we're
Josh:
going to continue having as we go.
Josh:
I just, as always, thank you so much for watching the episode.
Josh:
We really appreciate all the support.
Josh:
Things have been going well. In fact, so well that 85% of the people who watch
Josh:
this episode on YouTube are not subscribed, which is a problem.
Josh:
So if you are watching this and you are not subscribed, please go ahead,
Josh:
click that subscribe button and also listen to us wherever you find your podcast.
Josh:
One place we're struggling to grow is on the RSS feed on Spotify because it's
Josh:
kind of tough to get people to go there so if you listen and you want to support
Josh:
the show please go there subscribe on spotify subscribe on your rss feed wherever
Josh:
your player may be apple podcast even if
Ejaaz:
You don't want to listen if you're taking a shower just put it on play put it
Ejaaz:
in the other room it helps us out a lot.
Josh:
That's what my dad does it's great so yeah we just appreciate the support of
Josh:
whatever you can give all the comments it's been amazing we're coming off our
Josh:
best month ever and we continue to keep our foot on the gas thanks to all the
Josh:
support so thank you for watching as always we will see you in the next episode and peace