Don Wilson on the GPU Market's Trillion Dollar Question

SPEAKER_1 (0:02)

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Joe Weisenthal (0:17)

Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.

Tracy Alloway (0:22)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, we're here in Chicago, second year in a row that we've done a live show here in a great city for us.

Tracy Alloway (0:30)

That's right. And we're going to be talking to someone who we spoke with last year, but a lot has changed in 12 months. So this is someone who is trying to build a market for compute, right?

Joe Weisenthal (0:40)

Right. So we're going to be speaking with Don Wilson. He is the founder and CEO of DRW. He is really at the forefront of this effort to build futures markets for things like GPUs and so forth. So check out the conversation. We talked to you, Don, basically exactly a year ago, last time we were here, we talked about things like GPU futures. But in like AI time, it might as well have been 10 years ago because so much has changed.

Before, we want to talk GPU market structure, all that stuff. The last couple of days have actually been kind of interesting in the AI trade world. Everyone's watching CoreWeave, everyone's watching CoreWeave bonds. There was an anthropic investor meeting before the IPO, a little jitters, maybe their, you know, maybe their revenue only grew of whatever, 50% versus 51%.

I don't know the exact numbers. Give us your read right now. Like, is there a little slowdown happening in AI? Like, is there, are we shifting into a lower gear? Is there anything in the trajectory that's changed?

Don Wilson (1:37)

Any new thing that's growing this fast is not going to grow at a constant rate. It's not going to grow at a, you know, the first derivative isn't going to be constant, the second derivative isn't going to be constant. So, to me, this is just kind of expected volatility. I don't know, maybe people went on vacation in August and they didn't consume as many anthropic tokens.

Joe Weisenthal (2:03)

But you're not reading anything more into it than that.

Don Wilson (2:06)

I'm not.

Joe Weisenthal (2:07)

Okay.

Tracy Alloway (2:07)

Wait, so, with something like CoreWeave, a big part of what you're doing with compute exchange and silicon data is this idea that if you create a market for compute, then cloud companies can hedge their future revenue streams and the cost of capital can come down. In a week like this, when you see the yield on a CoreWeave bond at 15 percent, what does that tell you? Is the suggestion that, well, if compute futures were up and running, all of CoreWeave's problems will be solved?

Don Wilson (2:36)

Here, I mean, I do think that it's highlighting the massive need for risk management products. And so, think about if you're a neocloud and you sign contracts with the most credit worthy companies in the world, then you're fine, right? But there are a lot of other consumers of GPUs that are not the most credit worthy companies in the world. And if you're a neocloud, you want to be able to sell to them. And so, I think what the market's saying is, if you're selling on-demand compute, or you're selling to less credit worthy entities, then your cost of capital is just going to be higher. Now, imagine once GPU futures exist, you can, as a neocloud, buy the GPUs, deploy them in your data center, sell a strip of GPU futures, and then just sell on-demand compute if you want. Or sell six month contracts to less credit worthy companies that can post a big percentage of the contract value upfront. And the market is going to reward companies that do that, that basically just have on a giant basis trade, heavily their cost of capital is going to be much lower.

Joe Weisenthal (3:59)

Terry mentioned, okay, the GPU futures don't exist yet, and there's some message from the White House, like national security, et cetera. And he's like, I don't get it. Do you get it? Can you tell us something about why these products don't exist yet? Maybe what the regulatory hesitancy is about the listing?

Tracy Alloway (4:19)

Yeah, and just remind us what the state is of regulatory. Yeah, yeah, yeah.

Don Wilson (4:22)

So right now, there's a comment period that's open. The CFTC extended it. If they don't do anything, then the futures can get listed November 9th. Now, conveniently, November 9th is after November 3rd. And so maybe some people in Washington will be more comfortable with the compute futures launching. I don't know. I can't explain what the concern is. I've heard all sorts of different theories.