Quoting BG2Pod with Brad Gerstner and Bill Gurley:

Florida’s Comeback Win

• Bill Gurley attended the NCAA March Madness tournament in San Francisco.
• He witnessed Florida’s comeback win against Texas Tech, despite initially thinking they had no chance.

Transcript: Brad Gerstner I mean, you have to be pretty stoked coming off those wins last weekend in San Francisco.

Bill Gurley Yeah, I’m repping the Gator hat still. I’d say we kind of eek by for those that did watch.

Brad Gerstner That was an incredible final few minutes. Explain it. Take us through the final few minutes.

Bill Gurley Well, I mean, to be honest, like I was afraid, like I didn’t think there was a chance at this point because they were behind by so much as you were heading into the end of the game. And they basically, you know, scored four three-pointers, you know, against zero from the other side. They intentionally fouled and had missed free throws. So I think someone said the Yahoo game predictor had it at like 98% Texas Tech with like very little time left on the clock and they somehow eked it out. Now the bullish people will say, oh, you lived through something like that. Now you have confidence to deal with anything. But the odds makers have put Duke in front of Florida at this point, and that started in the opposite place. So anyway, one game at a time, super exciting. I was out in San Francisco at the Chase Center, got to hang out with the coach a bit and some of the players’ parents, and it was a good trip. And now, since i’m in austin it’s right down the street here to san antonio so a lot of friends coming in and we’ll we’ll see what happens it’s gonna be a heck of a weekend and uh maybe if a

Brad Gerstner Certain couple teams end up in the in the championship game i’ll sneak in there on monday night i guess as long as we’re repping and rolling um you know i i have two degrees one from flor

Bill Gurley And one from Texas. The Texas ladies are playing in the final four in Tampa. So a lot of good stuff happening.

Market Reaction to Tariffs

• Trump’s tariff announcement, dubbed "Liberation Day," caused market uncertainty.
• Initial market reactions were positive, but quickly turned negative as details emerged.

Transcript: Brad Gerstner Speaking of a lot of good stuff happening, I think there are some people in the world that think a lot of not so great stuff is happening based upon market reaction to the president’s announcements Of these tariffs. So why don’t we kick it off talking about Liberation Day?

Bill Gurley Yeah. So we’re recording this right after Trump’s presentation. I think you and I both watched it and then we jumped on the pod. You’ve been talking about this. It’s obviously been choreographed that this was coming. And you’ve been saying for a very long time that Trump and his team are very serious about this rather than the argument that, oh, it’s just a means to an end, you know, and a way to get a negotiation Started. You have made the point that you believe that they believe this is actually where we need to take the economy. And as such, you’ve been conservative and worried about where this would go. You gave a presentation last week on how to think about this. What did you talk about there? I think it was at the JPMorgan Tech Conference.

Brad Gerstner It was pretty clear to me and you, we were talking about it in early Feb. You know, this was doctrinal. There was a philosophical belief around trade that they wanted to create a more fair and level playing field. And the real debate, you know, has been going on is like how big? And there are a couple of different camps. And so J.P. Morgan had this great event in Montana last week, 100 tech CEOs. But, you know, they had Howard Lutnick, Elon Sachs, Doug Berger, I’m all talking about, you know, various aspects of this. And they asked me to do a little bit of a presentation on decoding the Trump economic agenda. And really it boils down to this, Bill. At the top, I think that all the CEOs in the room are pretty excited about the golden age that people have been talking about. A pro-growth administration, pro-business, pro-investment, lower taxes, less regulation, pro-M We’ve seen this M&A flywheel starting to kick up, this AI super cycle. But everybody’s been pretty terrified about these tariffs. And the real question going into today, Liberation Day, was were tariffs going to land closer to the $600 billion trillion tariff level that Peter Navarro had been talking about and Howard Lutnick had been talking about, or maybe at a little bit lower end of the spectrum, which we heard a little bit more from Scott Besant and Kevin Hassett. And I think everybody was holding their breath. Well, we got the answer. We got the answer today. And so I was framing that, you know, at the JP Morgan conference, I showed this slide, you’ll get a kick out of, you know, I ended the you know, with two planes coming in for landing. They both actually land, believe it or not. But it’s like the glide path that we land here with tariffs and budget cuts matter a lot. And so, you know, we got the news tonight. You’re right. We just listened to the president talk, you know, and he came in on the larger end of this. I mean, there’s no other way to slice it. There was a headline that hit right after the market closed from the Wall Street Journal, I believe, that it was 10% across the board. And the markets jumped up like 2.5%. Right. And then as the presentation started unfolding, they started coming in. People saw this chart that they presented on reciprocal tariffs, right, where they say tariffs on China going to 54%. Can you believe that? 34% on top of the 20% that already exists. And he starts going through this list. And the futures, the S&P futures, the Nasdaq futures start sinking. They had a 600 basis point fall between where they initially jumped and where they ended up. So the market is not liking this at all. And depending what index you were looking at, we were already down, you know, 8 to 15% on the year. Now, whatever comes in tomorrow will be on top of that. So that’s the chart. That’s kind of the initial reaction out of the market. We can break them down a little bit if you want, but that was the initial reaction.

Ambiguity of Tariffs

• The slow pace of reacting to tariffs and the ambiguity around them are problematic for markets and CEOs. Companies cannot quickly relocate factories, and there is uncertainty about how much of the tariff announcement is real versus bluster.
• Relocating production to the US may take years and will likely result in higher production costs because of higher labor costs.

Transcript: Bill Gurley I think there’s another issue for the markets and for the CEOs, which has to do with both the slow pace at which they could realistically respond to this, and then the amount of ambiguity That’s been out there. And so let’s say what the administration wants to encourage is for you to relocate a factory that you have or let’s call it production that you have in Thailand and put it on the American Shores. That’s not a quick process. And if you start that process today, it might take three years before you’d have the type of volume to be capable of bringing that back and probably at a higher cost. I mean, one of the things that I’ve said over and over again, I don’t think our labor is globally competitive, nor do I think it wants to be. And so even bringing it back, you’re going to have a higher cost of production because we’re going to have a higher cost of labor. That being said, you know, this ambiguity, you know, there’s a lot of people even going right into this announcement that didn’t know what percentage of it was real

The Importance of Free Trade

• Bill Gurley supports open markets, free trade, and comparative advantage.
• He expresses concern about the ambiguity and slow pace of responding to tariffs, making CapEx allocation difficult.

Transcript: Bill Gurley Well, yeah, I mean, at a high level, I’m a believer in open markets, free trade, and comparative advantage. And that’s been studied for a very long time. There are very solid mathematical arguments why if you pull up the trade walls between multiple countries that you’re going to hurt the efficiency of both of them in the long run. And at least from a theoretical perspective, I’m a believer in that. I think there’s another issue for the markets and for the CEOs, which has to do with both the slow pace at which they could realistically respond to this, and then the amount of ambiguity That’s been out there. And so let’s say what the administration wants to encourage is for you to relocate a factory that you have or let’s call it production that you have in Thailand and put it on the American Shores. That’s not a quick process. And if you start that process today, it might take three years before you’d have the type of volume to be capable of bringing that back and probably at a higher cost. I mean, one of the things that I’ve said over and over again, I don’t think our labor is globally competitive, nor do I think it wants to be. And so even bringing it back, you’re going to have a higher cost of production because we’re going to have a higher cost of labor. That being said, you know, this ambiguity, you know, there’s a lot of people even going right into this announcement that didn’t know what percentage of it was real versus bluster. And there’s, I think at this point, just reading the papers, not making my own assessment, the administration has a reputation of maybe some of this is for negotiation, maybe some of It’s not real. And so you’re left not knowing what’s going to be the policy three months from now, six months from now, 12 months from now, which makes it very hard to allocate CapEx in any meaningful Way whatsoever.

Brad Gerstner I think so well stated. You and I have said markets and business abhors uncertainty. Yeah. It can deal with almost anything, but it has to have predictability. So it can build a forecast, so it can look at an investment and say, is that MPV positive? And I was literally texting with some big CEOs during the president’s announcement, and they are asking questions. Do you see us exempted? Are we in there? And this is just amazing to me, right, that you have this level of uncertainty. I was with those 100 CEOs in Montana last week, and I would say almost to a one, they said, things are slowing down in February and March because nobody knows what to do. And remember, the Fed had just come out last week, had taken down their forecast for GDP growth, had taken up their forecast for inflation, had taken up their forecast for unemployment By the end of the year. So the economy, you know, most major economists are increasing their probability of recession, are slowing the rate of growth. And the question today was, was Liberation Day a clearing event? Does everybody have clarity now? And I think your point you make is a great one. Even though they may have gotten an exemption or they may not have an exemption, the question is, can I count on this? And how long can I count on this? And can I really plan a year out based upon this? Or is this going to change yet again over the course of the year?

Bill Gurley And by the way, there’s cascading effects. So if you’re unsure about things like this, you’re not going to hire a bunch of people, for example. You’re probably going to pause hiring because you don’t know how much earnings you’re going to have. So those kind of things can proliferate downward and affect unemployment and eventually affect consumer spending just by freezing nearly everything in the economy.

China’s Support of Open Source

• China has supported open source for over a decade, viewing it positively.
• Open source protects them from IP theft accusations, a long-standing concern.

Transcript: Brad Gerstner Another thing that we heard a lot about this week, Bill, speaking of China, is some developments in Chinese open source and some developments on the U.S. Open source front, particularly with respect to these frontier models. Have a lot of, I think, understanding about kind of the history in China around open sources, around the history in the United States around open source. So help us unpack, if you will, what do you think strategically is going on in China with respect to these open source models? I’ve seen some people tweet that maybe that Deep DeepSeq was forced into open source by Xi. Do you think that’s going on or is there something else going on here?

Bill Gurley And by the way, I mean, all this culminated in the past week with OpenAI moving, you know, are talking again about open-weighted models, which is, I think, a really important data point. So how do we get from where we were to where we are? So, yeah, I read that same tweet, and I think it was remarkably misplaced. China has been supportive of open source for well over a decade now. If you look on most of the major open source products and look at the management page and who the sponsors are for these, like Linux, you know, you’ll see many of the major Chinese companies Have been there and been supporting it for a while. Why? They’ve been accused of stealing tech IP for years. And so when something like open source comes along, this looks like the best thing possible, right? There’s no one that can accuse us of IP theft because there is no IP ownership in an open source world. And so having dealt with those accusations for probably 40 or 50 years, I think everyone in China, you know, the government and the entrepreneurs writ large view open source as a very Positive movement for their country relative to the West. And so they’ve been in on it for a long time. They’re very adept at it. They’re very big believers in it. When we talked about the interview with the DeepSeek founder, I would say he had as much kind of emotional, like his entire emotional mindset was tied to open source. Like he believes in it and wants to support it. So that’s, I think that’s an important backdrop. So I don’t think China got there in some calculated way, or do I think it was some recent move. I think they embraced open source, you know, over a decade ago because it made a ton of sense for them in a world that had pointed a finger at them from an IP standpoint.

Kubernetes as a Defensive Tool

• Google used Kubernetes as a defensive tool against Amazon’s AWS dominance.
• This open-source technology allowed workload mobility, promoting competition and benefiting consumers.

Transcript: Bill Gurley Another thing that I think people have to remember is that also within the past decade and maybe 15 years, many U.S. Companies have learned to use open source as a defensive tool rather than just an offensive tool. And this is… Say more. Yeah. So this is the biggest companies out there. If they get in a position where they feel like they’re behind the eight balls, so they’re not in a leadership position, they will embrace open source as an attempt to the playing field. And a great example is Kubernetes. So Amazon took this huge lead with AWS in the hosted server business. Everyone was afraid of that. Google had a piece of technology called Kubernetes that was orchestration that would allow you to move a workload if that became a standard from one large server vendor to another, Right? It basically created ease of distribution. So you could run on multiple clouds. They went to the Linux Foundation. They recruited IBM, a whole bunch of other people, got everyone behind it. And it gained so much momentum that Amazon had to embrace Kubernetes. So it worked. And we don’t have a monopolist in that cloud business right now, you know, perhaps because of that deft move made by Google. But they did it with Android against Apple, you know, being notable. And Meta did it with Llama here, right? They came to the table. They weren’t first to the table in the AI space, but they were disruptive with open source. One other thing I would point out about that type of move and attention, in addition to saying it’s defensive, I think it’s great for consumers. If you study economics in business school, you know, there’s this notion of pure competition. Like where do you have the most fluid competition, which leads to the lowest prices for a consumer? And certainly open source does that versus proprietary code. Like it’s just hyper competitive. And that’s why it’s disruptive. And that’s why people use it in this way. So that’s a huge backdrop to where we are today.

OpenAI’s Open Source Model

• Sam Altman announced OpenAI’s plan to release a powerful, open-weight language model.
• It will be open source and free, contrasting with Meta’s approach to licensing Llama.

Transcript: Bill Gurley And that leads us up to OpenAI making an announcement, which I’ll let you describe.

Brad Gerstner Well, you know, listen, we’ve talked here and Sam has been dropping the breadcrumbs on Twitter, right? That, you know, they wanted to launch an open source model. They’ve been GPU constrained. They’ve been bandwidth constrained. But he got the announcement out this week, which I was thrilled with, where he said, we’re excited to release a powerful new open weight language model with reasoning in the coming months. And we want to talk to devs. So he’s inviting all these developers to participate and give feedback. He said, we want to make it a very, very good model. We’re planning to release an open weight language model, one of our first since GPT-2. And he says, we’ve been thinking about this for a long time. And the interesting thing is somebody, you know, in the replies I saw, somebody said, are you going to make people buy licenses if they get a lot of users like Meta is doing with Llama? And he kind of takes a jab at Meta, and he says, no, we’re not going to. He says no.

Bill Gurley Yes, he said no.

Brad Gerstner He says no, which indicates maybe we’re going to out-open Llama. So that’s on the one hand, kind of opening AI.

Bill Gurley And by the way, just hold your thoughts in case people don’t know. Openness is a continuum. Not black or white. And that’s true of all the open source technologies in the open source model world. Against the free use of the model at $700 million. And that’s what you were referring to. And so at least in a tweet, Sam suggested they won’t have that in theirs. So back to you.

OpenAI’s Product Focus

• OpenAI’s focus is shifting towards product development over model creation.
• Open sourcing their model allows wider usage, protects their competitive edge, and benefits consumers.

Transcript: Bill Gurley All these different models from an openness perspective. Because there’s so many different facets by which you could be open or not. Oh, but actually, I had one more thing. And since you’re involved at OpenAI, you can correct me if I’m wrong, but you have been saying for, I would say, a couple quarters now that the real opportunity for OpenAI is on the product Side versus the model side, which hints at being more of a consumer product than, say, enterprise APIs business that they’ve also been in. If, if they think that also, and I, I’m not involved. So this is conjecture my part, being more open with your model is, is a really deaf move because it will put more pressure on other players to try and keep up. And it will allow your model to have more pervasive usage globally. And you talked about running out of compute. You know, the minute you put that model out where other people can download it, they’re doing that on their servers, not on yours. And so I just think it’s a very clever move for the same reason Google would have supported Kubernetes. You’re kind of wiping out the business opportunity for other models to play on the API side if you make yours open, which helps protect the competitive flank. And once again, great for consumers. Yeah,

OpenAI’s Valuation

• OpenAI’s $40 billion investment from SoftBank values the company at $300 billion.
• This valuation is about 20 times their projected $13 billion revenue for the year.

Transcript: Brad Gerstner One of the things you pinged me on this week was the investment round around OpenAI. And, you know, I’m happy to share what I can share, but, you know, you- Tell us what happened. What was announced? Yeah, well, I mean, they announced the long rumored investment that was led by SoftBank, which many people described in the headline as a $40 billion investment round. I think if you read the breakdown of it, it comes in a couple tranches, the first tranche being closer to $10 billion, the second tranche being closer to $30 billion. And it’s an extraordinary amount of money. It’s bigger than I think the largest IPO sans maybe one or two that has ever been done. I’ve often described these as private IPOs. Altimeter participated along with several others who were reported. And the valuation was like 260 pre, which would make it, if all the money were to come in, a 300 post valuation. And so it certainly got a lot of attention this week. And you asked me the question, I think, Bill, just around kind of valuation, right? How did we think about valuation? The first thing I would say is market leaders never look cheap. When I invested in Google in 2005, when I invested in Meta, when the IPO broke and we looked at those late stage private rounds, I certainly remember the Microsoft round in a Meta at $15 Billion that was roundly criticized as being incredibly expensive. None of these things, you’re certainly not going to buy a market leader on the cheap. But if you really look at this, I think that they’ve said publicly they expect their revenues this year to be around $13 billion, right? To do $13 billion in revenue probably means you have to exit the year closer to $15 to $18 billion in run rate revenue. So as I look at this on a forward run rate for this year, you’re paying something like 20 times revenue for the business. Okay. Now, we also had a couple other announcements this week. There’s the Anthropic funding round, and there’s talk that they’re doing a billion to 2 billion in revenue, a $60 billion funding round. So that to me looks like something like 50 times revenue. So again, you got OpenAI at 20 times, Anthropic at 50 times. And then we had the merger of X and X.AI, which are rumored to have around, let’s call it 3 billion in revenue. And the combined market cap there is like 125 billion. So that looks like closer to 80 times revenue. So the market leader here, which usually trades at a premium, not at a discount, to me, again, we can argue about the sustainability and could somebody disrupt them? And is 20 times a good valuation in this environment? And yeah, but aren’t they spending a lot of money on compute? And is it really high value revenue? Apples relative to their peers. It certainly appears to me like, you know, 20 versus 50 versus 80. It’s hard to say that this would be more expensive on a multiple basis than Anthropic or X.ai.

AI Toys

• Brad Gerstner references Chris Dixon’s blog post, noting that the next big thing often appears as a toy.
• He uses the example of people using AI to make anime photos to highlight this point.

Transcript: Brad Gerstner But I would point them to Chris Dixon’s blog that he wrote some time ago where he says, listen, the next big thing will first appear as a toy. And there are a lot of things that we do for entertainment, a lot of things that we know that OpenAI and ChatGPT are being used for a lot of deep research.

Uber’s Profitability

• Uber, initially doubted for profitability, is now projected to have $6 billion in free cash flow.
• This demonstrates how market leaders, like OpenAI, can achieve profitability despite initial losses.

Transcript: Brad Gerstner Right. You know, listen, I think the analogy is a fair one, Bill. And obviously, Masa was involved in the Uber-Lyft battle. So it’s an easy one, particularly with his involvement here, to say you’ve referred to it before as weapons of economic destruction, all of this capital. But I would remind you, there was a moment in time in 2020 where the headlines were that Uber would never be profitable. It was a failed business model. It will never make money. And here’s a business that’s going to do 6 billion in free cashflow this year. No doubt. Right? And so the winner does take all. The winner does take most. I will tell you as a shareholder, I speak with the leadership of the company all the time about unit economics. Obviously, if I’m investing in the business, I feel confident in their leadership around unit economics. One of the things that I think is really important here is just like what’s happening in the business, right? Sam tweeted this week, they added a million ChatGPT users in an hour, in an hour that they crossed 20 million subscribers, paying subscribers for ChatGPT. They crossed 500 million weekly average users of ChatGPT. In fact, they’re going so gangbusters, they’re throttling all their demand. In fact, I don’t know if you saw David Sachs’ tweet where he said, America’s leading AI companies are all reporting that demand is off the charts, so much so that they’re being forced To impose rate limits. And he said, fortunately, we have massive new infrastructure projects coming online, which gets me to the point of why are they raising so much money, right? And you and I are talking about taking the pod down to Abilene, Texas, to see Stargate, to Denton, Texas, to see, you know, the core weave facility that they’re standing up for OpenAI. And the fact of the matter is, I think that they need to bring on a massive amount of compute just to support the demand they currently have. I can tell you when you look at the product pipeline for OpenAI, right, whether it’s, you know, there are two or three models they already have completed on the shelf. There’s a lot of agent stuff that they want to do that’s on the shelf. I think there’s a lot of stuff they want to do around pricing, but they can’t do these things today and open source with their current level of GPU demand. And, you know, Sam went on online, said, if anybody has a cluster of a hundred thousand GPUs, you know, send me a DM. And, you know, you may say it’s promotional and hyperbole, but the round was already raised. It could be both. I actually think, you know, in this case, it’s true. I know they were pulling, you know, a lot of things offline just to support the demand. Now, the irony is, what was this demand coming from, right? And the demand, because we didn’t mention Gemini 2.5 that happened to release in this last week. And part of the reason we didn’t mention it is because literally on the day that they launch it, OpenAI launches this upgrade to Imogen where people are making all these anime photos Of themselves that literally blew up, like demand for a billion anime photos a day from the United States all the way to India, and they can’t support it. And some people may say, oh, well, this is an example of how dumb AI is. People are using it to make anime photos. But I would point them to Chris Dixon’s blog that he wrote some time ago where he says, listen, the next big thing will first appear as a toy. And there are a lot of things that we do for entertainment, a lot of things that we know that OpenAI and ChatGPT are being used for a lot of deep research. But the fact of the matter is at least it’s to this one, and I’m not going to get into the other, you know, valuations for the other models, but I’d say at least as to this one. I was an early investor in Google. I was early investor in Meta. I saw what those early consumer products look like, what those demand curves look like, what that cohort retention looked like. And I would just say to you that, you know, what I see out of chat GPT reminds me a lot of kind of those winner take all consumer applications.

Google’s Vulnerability

• Google’s susceptibility to disruption stems from maximizing revenue per visitor.
• The agent model, like OpenAI’s, offers a disruptive advantage with lower transaction fees.

Transcript: Bill Gurley But by the way, you know, we’ve talked about this in the past, but I’ve often felt that one of the reasons that Google is so susceptible to disruption is how they’ve maximized the revenue Per visitor. And I personally don’t think there’s any way when that world you’re talking about, that agent world evolves, that that partner in a hotel is gonna pay a fee anywhere close to the fee that’s Paid to Google by someone that’s marketing a service that I always say using LTV math versus transactional math. I just don’t think there’s any way you can get there. And so that’s a huge disruptive advantage for, I think it’s a huge disruptive advantage for OpenAI.

Brad Gerstner Well, let’s click on that for a second. You know, we have our friend Glenn Fogle, who Booking.com, an incredible CEO. They’ve built an incredible business. And they’re one of the largest advertisers. Historically, they’ve been one of the largest advertisers on Google. I think it’s been reported that Google generates – it’s one of their largest advertising categories in the world. It’s travel, hotels specifically. Booking is one of their largest global advertisers. So you sell $100 hotel room and you take $20, right? You booking.com, let’s call it take 18 to 20 bucks. And then you pay a portion of that to Google, maybe half of it, maybe more than half of it.

Bill Gurley Well, actually, to be fair, in many circumstances, you know, they’ll be using what I call LTV math and they’ll pay more than a hundred percent. Oh, they’ll pay 50 bucks instead of 20. And then they’ll say, well, if the customer comes back twice in a year, we get to break even in the first year and we’re going to hold them forever. And this is why that won’t work in the agent world, which is no one’s going to think that way. Because if you’re a white label service that’s underneath the agent model, the most you can share is 10 of the 20, right? Or whatever, you know, it’s a strange.

Brad Gerstner So there’s no doubt there’s competition coming to that. You know, Google’s traded down from 200 to 150 and change and, you know, they see that disruption coming their way. The irony here, right, is we still have, you know, this antitrust investigation with Google. I always get a, you know, a laugh out of the fact that finally in 2025, the first time we’ve actually had competition for Google, like very clear that competition is coming to all those Categories. And now we get around to talking about breaking up their search monopoly. I mean, it’s ridiculous. I think that’s the last of our problems. But I do think we’re going to see business model evolution around these different categories.

CoreWeave’s IPO and Deals

• CoreWeave, despite initial market volatility, secured deals with Google and other major AI companies.
• Their IPO, though controversial, was successful, highlighting the fast-moving AI landscape.

Transcript: Bill Gurley Yeah. Before we run out of time, we had an IPO, which we haven’t had very many of. Let’s talk IPOs, both CoreWeave, but after that, let’s just talk about IPOs in general.

Brad Gerstner That’s great. As you know, we’re shareholders in CoreWeave. Since a couple rounds ago, we were one of the largest buyers in the IPO, and we’re happy we did. I have to say, on Friday, I was pretty damn nervous, Bill. It broke the offering price, went down to about 37 bucks a share. I think today they had some announcements of this deal with Google where they’re going to provide NVIDIA, Grace Blackwells through CoreWeave. So Google is going to be buying a bunch of NVIDIA chips through CoreWeave. And one of the big criticisms of this company was they were too dependent upon Microsoft, but now they’ve diversified. They have Microsoft, Meta, now Google, OpenAI, NVIDIA, Cohere, Mistral. And so I think they’ve really emerged as the leading AI kind of cloud. And the stock in the last couple of days, despite the fact they took it public last Friday, I mean, talk about taking a company public into a category five hurricane. I mean, we had like liberation day staring us in the face and they had to fly into that. And as you pointed out, it wasn’t the least controversial of IPOs, but I have to give credit to Mike Intrator and his team. And listen, I’m here in Silicon Valley. They started this company five years ago. It’s worth over $30 billion today. It’s played a really important role in standing up OpenAI and a lot of the leading AI labs. And I just think that’s a good thing for all of us. But it’s also fair to ask the questions that you’ve asked around the durability, if you will, about CoreWeave and the revenue. Yeah.

Bill Gurley And look, absolutely right. It’s so funny. We sit around and complain about the IPO market not being open. And for the entirety of 2024, the markets were up 30%. The sunshine was out and no one was going. So here someone finally gets the guts to go. And the markets of course have turned the other way. And that’s why, man, I like anyone that tells you when you’re ready to go public that you have to wait on the markets to be in a particular place. I would tell them to shut the fuck up and like, like, like take your company out. Like you can’t control that thing. That’s an external factor. And I also believe a lot of people, cause of my stance on direct listing said, was this a good IPO, a bad IPO? I mean, as you said, there’s stuff moving all over the place. Like you have, you have a leader in their field, unquestionably huge revenue growth. Their business model isn’t fully unpacked because the CapEx is invested so far ahead of the product. So you can’t look at the income statement and say, oh, the right unit economics are perfect. And there’s questions about what is the appropriate depreciation schedule and all these things. But I am glad that they got out and I’m glad that it’s done fine. They’ve had basically two customer announcements since they went out, which shows how fast this AI world moves. And I think that’s why the stock went from 40 to 36 and way back up above that now. Let’s hope that it brings more IPOs to the table. This company needed capital because it’s a capital intensive business. And those are the that tend to, you know, come to the markets eventually, no matter what. We have this offsetting reality, you know, that the stripes of the world and Databricks and others are choosing to delay being public and have massive access to private capital. And maybe that’s a discussion for another day, but there are a few others, Klarna’s in the pipeline. We’ve talked about Cerebris being in the pipeline. And so I’m always hopeful. I’m always kind of just wanting for there to be more companies that are willing to move into the public markets. But the offset of what we talked about at the beginning is going to be there.

GPU Depreciation

• GPU depreciation isn’t binary; earning power decreases over time.
• An accelerated depreciation schedule might better reflect this reality than a straight-line approach.

Transcript: Bill Gurley Big new deal today. But look, the pushback on that is obviously that it’s not a zero or one. You make it sound like it’s binary. You either throw it away or it’s super valuable. And what inevitably happens is the earning power of that product drops over time. And so there is, I think, a reasonable question, you know, should it be more of like an accelerated depreciation schedule? The idea with depreciation is to kind of, you know, they say the useful life. So you’d kind of want it to mirror the earnability of the asset over time. And so six years straight probably isn’t the best fit for that, but we’ll see. We’ll see what happens over time. You know, their peers, the incumbents in this world were at four years ago and pushed it to six, which wasn’t…

Brad Gerstner And the answer may lie somewhere in between. And, you know, like I said, I don’t think they need it to be more than four in order to achieve the, the, the, the margins that they have, but they’re also to your point, it’s a highly levered Business. They got to de-lever the business. So there’s a lot of things in play here with core weave. That’s why, again, if you look at the, the multiples it’s trading at, well, I don’t know what they are today, but the multiples it came public at were not overly taxing from our perspective. But there’s a lot of headwind for all these AI companies. I mean, you have NVIDIA trading at 19 times fully taxed earnings. And so, you know, there’s a lot of skepticism in the world, notwithstanding all the stuff we hear about demand, a lot of skepticism in the world about AI demand.

TikTok Deal Rumors

• Rumors suggest a new TikTok US entity, partially owned by ByteDance and new investors.
• This deal aims to address data and algorithm concerns, potentially at a low valuation.

Transcript: Brad Gerstner Well, I mean, listen, there’s a lot of rumors swirling, which not surprisingly, this deal is set to expire and need to be extended by April 5th under the terms of the first congressional Extension that was made by Trump. They’ve made very clear that there are a lot of buyers for the TikTok asset bill and that the president wants to put together a deal. And of course, we have all these tariffs going on on China. And so I’m sure this will end up as part of a big trade negotiation as it pertains to China. But as you know, just for everybody, we’re shareholders. I’ve been a shareholder in this company since 2015, one of the earliest venture capital rounds in ByteDance, the parent company, which owns TikTok. And for the last two years, I’ve agreed largely with Elon and Sachs and others that we should engage with China. We shouldn’t just shut down TikTok. We should make TikTok abide by the rules and regulations that we have in this country. And that’s what this whole legislative unwind was about, the forced sale of spin out TikTok US. So here’s what I’m hearing. I’m hearing that there will be a new company stood up, and I’m not privy to any information. I’m not party to these negotiations, but let’s call it TikTok US. And that TikTok US will be partly owned by ByteDance, but I think they have to keep that ownership threshold under 20%. So let’s call it 19.5% owned by ByteDance. That it will be owned partially by just the existing shareholders. Remember, the shareholders in ByteDance, 60% of those are US investors like Altimeter. So that we’ll get our shares in ByteDance or in TikTok US. And then 50% of it or thereabouts will be new investors. So think folks like some of the rumors I’ve seen, Amazon, Andreessen, Oracle, et cetera. And these are investors who are not currently in the cap table of ByteDance. So Altimeter or KOTU, we’re currently in the cap table of ByteDance. So we’re not going to be part of the new investor syndicate, or at least that’s my understanding. So imagine they stand that up.

Bill Gurley And then the question- Where would that money go, Brad?

Brad Gerstner So the money would go into this NUCO, right? So the NUCO would be capitalized with this new money.

Bill Gurley It would have a new board. So it would be new, fresh capital for NUCO. It wouldn’t go to ByteDance.

Brad Gerstner No, that’s my understanding, that it would go into NUCO, that NUCO would get a license to the algorithm. And it would be up to NUCO audit that, to audit the data. Because remember, that’s the whole point here, Bill. We want to have some control over the algorithm and the data, so it makes sense that Oracle would be involved in that, because remember, TikTok runs on the Oracle cloud down in Texas. I think a logical question is, what’s the what here? And I’m hearing that the valuation for TikTok US could be pretty low, which I would expect, right? Because remember, Trump has said, maybe we’ll put this in the US sovereign wealth fund. So he’s negotiating the deal. I expect that he wants to get a pretty damn good deal.

Bill Gurley You didn’t mention what percentage was for that, is that part of the cap table too? No, no, no idea.

Brad Gerstner No idea.

Bill Gurley Yeah. One particular question. If you go back six months, maybe three or six months, there was a lot of discussion that I would suggest that the parent company, ByteDance, had no interest in this deal. They’d rather shut it down than do this. Have they changed their mind for some reason? Is there a new perspective from their side?

Brad Gerstner Well, I think, remember, if we go back six months, there was a camp that said shut it down. And there’s a camp saying, or we’ll just take it, right? Right. And I think that the company’s perspective, Yaming, the founder of the company, he basically said there’s no way to separate the algorithm between TikTok US and TikTok rest of world Because creators in the US create content that go to the rest of the world and vice versa. And so like, if you took away all the US, it does so much damage, he would, you would be better to shut down Tik TOK U S and just have invite the U S creators onto the French platform or the, The, the United Kingdom version of this, or the Australian version of this via VPN or something. So I think the big change here, Bill, is this idea that U.S. TikTok and global TikTok will continue to use the same algorithm. And it’s just a license to the U.S. TikTok would be my guess was part of that bridge or breakthrough. I think a key thing here is like, how does Altimeter or Sequoia or other U.S. Investors? Remember, 60% of the investors in ByteDance are U.S. Investors. And the investors in places like Altimeter, they’re pension funds, they’re teachers, they’re firefighters. And if you think about the fair value for ByteDance, I think most people, although it only trades at, let’s call it $300 billion, most people think the fair value of this is closer to a Trillion dollars or certainly to 800 billion. So if you take 60% of a trillion dollars, that’s 600 billion in locked up venture capital value for all of the endowments and pension funds, etc. For U.S. Investors. That’s more than almost every other unrealized venture gain put together, Bill. Right? And so if you’re able to take this company public, that turns into DPI. Like hundreds of billions of dollars of DPI that goes out to the investors in these venture funds.

Bill Gurley This company being TikTok or ByteDance?

Brad Gerstner This company being ByteDance. But we had to get the TikTok deal done as a condition required to get ByteDance public or ByteDance out the door. And so remember, ByteDance, about 90% of ByteDance’s business is not TikTok US. 90% of the value of the company is things like Doyan, which is the Chinese version of TikTok, and Daobao, which is the Chinese version of ChatGPT, and TikTok around the world. And so there’s a huge and profitable business inside of China and in rest of world. And we’re just debating this piece in the United States. And so as a shareholder, I will tell you that whatever the dilution is caused by this, it’s nominal relative to the value of the total. And what I really want to see get done is just certainty, right? Certainty for the company. I think it’s good for the US that TikTok will remain. My kids love it. And I don’t, you know, I’m glad we’re going to make them abide by the rules of regulation. I think it’s a win, you know, for Team Trump.