Who's Actually Winning the AI Race? (ft. Alex Heath)

**SPEAKER_1** (0:00)
Welcome back to The Rundown, interview edition. Today, we are talking to Alex Heath, author of the sources newsletter, and one of the most plugged in reporters in Silicon Valley. This is Alex's second time on the show, and he's joining at a wild time for AI. We covered a lot in this conversation, including why Wall Street is confused about Meta's AI plans, the approach that Apple is taking to AI, the impact that Apple's lawsuit could have on OpenAI's hardware ambitions, and whether OpenAI and Anthropic will IPO soon. This was a really great conversation. I think you guys are going to really enjoy it. So let's get into it.
All right, guys, today we are joined by Alex Heath. He is the author of The Sources newsletter. He's one of the most plugged in people in Silicon Valley. Alex, welcome back to The Rundown.

**Alex Heath** (0:48)
Good to be back.

**SPEAKER_1** (0:49)
Yeah, thank you so much for coming back. The last time you were on was almost a year ago. It was October of 2025, and I gotta say a lot has changed in the world of AI. And also with you, you just launched Sources back then, and now you're almost a year into this. How is it like going independent? What's been the biggest surprise to you?

**Alex Heath** (1:09)
It's been great. It's wildly exceeded my expectations.
Yeah, it's been really fun. I've got Sources, been doing it for about a year, like you said, having a lot of fun covering the AI race.

**SPEAKER_1** (1:20)
I wanna start today's conversation talking about Meta first, because they reported earnings last night. Their stock is getting crushed right now.
And I think a lot of it has to do with, Meta just continued to spend a lot of money on CapEx, their free cash flow has pretty much disappeared. And I listened to the earnings call last night, and I feel like Zuck is just not doing a great job explaining what their AI strategy is. What is Zuck's master plan? How are they planning to make up for all this money they're spending on AI? You recently talked to Alexander Wong, who is their head of AI. What is the vibe inside Meta right now?

**Alex Heath** (1:57)
I think they obviously want the street to understand the strategy. I think the challenge for everyone trying to understand the strategy is, you know, they have a lot of different products, and there's a narrative to be told about how they're using AI to do things like replace how the algorithms work in Facebook and Instagram, or how ads are targeted across Meta's properties, right? That's one application of AI. It's less sexy, and I'm not sure investors look at that and think it's worth all the capex spend. And then you've got the things like the glasses, which have AI components, but really, I would say, are behind in terms of, I think, where Meta wants it to be on the AI stuff. And then the Meta AI assistant still has not gained meaningful consumer market share relative to Gemini, Chachi PT., Claude. So they have a challenging story, I would say, on the consumer assistant agent front. I noticed in the call Zuckerberg was talking about, he has this vision for everyone having their own personal assistants and agents that do things for them for days at a time, autonomously. I think we're pretty long way off from that, working at scale, is my read of where the technology is and talking to the people who build it. But Meta's made some interesting acquisitions. Aqua Hires, they certainly have talent in-house and they do have compute, as was also a theme on the earnings call, maybe too much compute. So I think they have to build a product that people love that isn't just something like MetaAI that is being put in places across their apps and that juices usage because you see it and you run into it by accident on Instagram or WhatsApp or whatever.
So I think MetaAI, it's still kind of unclear its value, its long-term value as an AI product relative to all the other things, and they have to figure that out.

**SPEAKER_1** (3:54)
Yeah, I think obviously like AI is probably helping Meta improve their ad platform. Their revenue growth is pretty phenomenal. But yeah, it's just not enough. If you're dropping $140, $150 billion on CapEx, I think the street wants to see something else that's going to pay off for that investment. Now, it could be this cloud initiative that they've talked about, where it has been reported on, and Zuck kind of hinted at, but there's no details on it. There's no customers, there's no timeline to sell all this excess compute. Is there any traction there right now? We didn't really hear much in the earnings call.