Anthropic Unleashes Its Most Powerful AI Model, CPI Comes In Hot

**Zaid Admani** (0:00)
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Wednesday, June 10th. In today's episode, we'll break down the latest inflation report and what it means for the Fed. We'll also tell you about the latest AI model that Anthropic just released, and why Nvidia and Google are co-signing leases for OpenAI and Anthropic. Then stick around to the end of the show to find out how much money the Knicks are making for every home game during the NBA Finals. We got a great show for you today.
Let's go.
Well guys, the chip stock bounced back from Monday, didn't last long. The stock market pulled back on Tuesday with the S&P 500 down 0.3%, while the NASDAQ fell 1%.
Yesterday was a really weird trading session. At its lows, the NASDAQ was down 3.7%, but then bounced back midday and recovered most of its losses by the close. And here's the thing, there was no major news or economic report driving any of it. The big swings were likely driven by quant funds and algo traders. So yeah, the bots might have taken over the stock market yesterday. Now the other interesting note from yesterday was that despite the overall index finishing lower, nine of the 11 S&P 500 sectors finished in the green with more than 70% of stocks in the index finishing higher. So we're continuing to see money rotate out of chip and tech stocks, and into the rest of the market, like transportation stocks, which are up 29% this year. Not to mention the equal weight S&P 500, which is where every company gets the same weight, is now outperforming the regular S&P this year. So that tells you that the rally is now broadening out beyond tech and AI names. And honestly, I think that's healthy for the stock market, because you never want to have too much concentration. Now this morning, we did get some major economic news. The May CPI report just came out, inflation was measured at 4.2% last month, which is the hottest reading in more than three years. And the culprit here is no surprise. It's the higher energy prices driven by the Iran War. Energy made up over 60% of the monthly increase, with gas prices alone jumping 7% in May. And speaking of the Iran War, things seem to be escalating. The US military launched strikes on Iranian military targets overnight, after Iran shot down an American Apache helicopter near the Strait of Hormuz. So if oil prices stay elevated, inflation might not ease up for a while. Now look, there was a silver linings in the CPI report, which was at core CPI, which strips out food and energy, came in at 2.9%, which was cooler than expected. So yeah, that's going to put the Federal Reserve in a tough spot when it comes to interest rates. As of right now, the market is pricing at a 42% chance that the Fed will hike interest rates by the end of the year. We'll talk more about that over the next week as we get closer to the June 17th Fed meeting. So make sure you guys are subscribed to the podcast, and tuning in every day to stay in the loop. Let's run through some headlines. Starting with Anthropic. Anthropic just released its most powerful AI model to the public yesterday. This is the same model two months ago the company said it was too dangerous to release. Remember back in April, Anthropic previewed a model called Mythos to a select group of companies, and it was so good at finding security flaws that it freaked out cybersecurity experts and people in Washington DC. Well, Mythos is now out to the public, kind of. Anthropic released a model called Fable 5, which is basically Mythos with guardrails. It's the same underlying Mythos model, but if you ask it about high risk stuff like cyber attacks or bio weapons, they're going to block the response. Now the full Mythos model is still locked down, only about 200 trusted organizations have access to it, so they can security test their own systems. But look, I've been messing around with the Fable 5 model for the last few hours, and it's definitely a step up from the Opus model in my opinion. Although I have seen some complaints online that the guardrails are too strict and that Anthropic is blocking answers to basic questions. So we'll see if Anthropic eases up on that. But you know what really stood out to me about this release was the pricing. Anthropic is including the Fable 5 model in paid plans for just two weeks until June 22nd. After that, Anthropic will remove the model and users will have to pay usage credits to keep using it. And that cost can add up fast. See, what you have to keep in mind is that these paid plans for Claude and ChatGPT are subsidized, meaning when you pay 20 bucks a month or even 100 bucks a month, it costs Anthropic and OpenAI more in compute costs for that usage, especially for heavy users. So this move by Anthropic to move to a usage-based model could be a sign that the era of subsidized AI plans is coming to an end. And the timing of it makes sense because remember, Anthropic filed for its IPO last week, so they need to start boosting revenues and more importantly, profitability. Now, Anthropic did say that Fable 5 could return to the subscription tier down the line, but I think we might be headed for a world where the cutting edge AI models will be pay-per-use only and only the older AI models will be part of your monthly subscription. Look, I hope I'm wrong about this, but with the IPO coming up and the pressure to improve profitability, it does make sense. Let's stick with the AI theme and talk about a couple of interesting deals when it comes to AI infrastructure. The Information reported that OpenAI is an advanced talks to lease a 10 gigawatt data center campus in southern Ohio. The data center would cost at least $500 billion to fully build out and OpenAI's lease would be its largest infrastructure commitment to date. In fact, this deal is so big that as part of it, Nvidia would act as a financial guarantor for OpenAI's lease. Basically, Nvidia is co-signing the lease like your parents co-signing your first apartment lease after college. And by the way, Anthropic is also running the same playbook with Google. According to Bloomberg, Anthropic is leasing advanced chips at five US data centers and a $35 billion financing deal. And Google has agreed to backstop the lease payments, meaning if things go sideways, Google will step in to make the payments. So it's kind of funny that despite these AI companies like Anthropic and OpenAI being worth nearly a trillion dollars and having tens of billions of dollars in revenue, they still need another multi-trillion dollar company with a strong balance sheet to co-sign for them. And keep in mind, Nvidia also sells OpenAI billions of dollars worth of their chips, not to mention Google makes the TPU chips that Anthropic is using now. So the suppliers like Google and Nvidia are guaranteeing their own customers' debt, so these customers can keep buying their stuff. These kinds of deals feed into the worry of circular financing and how all these AI companies are now tied together. And if something goes wrong or belly up, I mean, it could have a devastating cascading effect across the entire AI ecosystem, and not to mention the entire economy for that matter. So yeah, I think it's these worries that are playing into why chip and AI stocks might be selling off over the last few days.