Gavin Baker - AI Market Jitters

**Patrick O'Shaughnessy** (0:01)
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**SPEAKER_2** (1:35)
Patrick O'Shaughnessy is the CEO of PositiveSum. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of PositiveSum. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of PositiveSum may maintain positions in the securities discussed in this podcast. To learn more, visit PSUMVC.

**Patrick O'Shaughnessy** (2:02)
Gavin, it's only been two months. Like the model release cycles, the gap between our podcasts are shortening.
You and I are basically on a model release cadence at this point.

**Gavin Baker** (2:13)
Well, I was sensitive to criticism that I think somebody pointed out that our podcasts were coincident with like local market peaks. And nobody could say that after this.

**Patrick O'Shaughnessy** (2:26)
What's on your mind? It's been a crazy...

**Gavin Baker** (2:28)
Yeah, I would describe July as 2022 in a month. There are some fundamental negatives which we should talk. But on the whole, the balance of fundamentals, I think is improving significantly.
Loads of AI names are down 50, 60% from their highs.
We'll cut 40 to 60% in a month in a straight line. And I asked you before we started, you've been out here for the summer. Have you heard a single negative quantitative metric about AI? A single instance of deceleration?

**Patrick O'Shaughnessy** (3:07)
Nothing.

**Gavin Baker** (3:07)
Nothing. In fact, every metric is accelerating.

**Patrick O'Shaughnessy** (3:11)
And to your point, not just blind optimism from people excited about AI, but like here's some data that they can show you from their different vantage points.

**Gavin Baker** (3:19)
Absolutely. I mean, however you cut it, whether you cut GPU availability, whether you cut GPU rental pricing, I mean, whether you cut like the spot price of DRAM this month, token growth, everything is actually accelerated. And I do think a big part of the problem is, one, the market does not have visibility into Anthropic, OpenAI, and then I would say these open source inference clouds that monetize inference here in America, Fireworks, Base 10, Modal together. And the picture looks very different when you see that, because open source is accelerated massively because of GLM 5.2, Kimi K3.
And then Nematron continues to kind of chug along. We had a great, very small American open source model release.
OpenAI has accelerated.
And Anthropic continues to grow really strongly, and is almost certainly pumping out significant amounts of free cash flow. And I just think if, you know, there's this chart that everybody looks at of semiconductor cash flow going like this, and hyperscale free cash flow going like that, and you're missing these private companies.
But I also think that that chart misses something very important, which is just that you have everyone in 24 and 25
Even if you were really bullish, you thought that GPU prices, if you're really bullish, you thought they would decline slowly. If you're bearish, you thought it would decline precipitously.
I don't think anyone in 24 or 25 thought that the prices of old GPUs would be going vertical.