Work AGI is the Only AGI that Matters

**Nathaniel Whittemore** (0:00)
Today on the AI Daily Brief, Why Work AGI is the only AGI that the big labs care about now. And before that in the headlines, IPO fever starts to take hold. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI.
All right, friends, quick announcements before we dive in. First of all, thank you to today's sponsors, KPMG, Blitzy, Assembly and Mercury. To get an ad-free version of the show, go to patreon.com/aidailybrief, or you can subscribe to Apple Podcasts. To learn about sponsoring the show, send us a note at sponsors at aidailybrief.ai. While you are at aidailybrief.ai, you can find out all about the ecosystem of projects surrounding the podcast, with a big fun one this week being Agent Madness. Our round of 64 is live, people have contributed some really awesome agents to the bracket, but you're going to want to get your voting in by Thursday before we move on to the round of 32 Again, you can find that at agentmadness.ai. We kick off today with some fairly significant IPO fever. CNBC recently got a hold of documents that they describe as resembling an OpenAI IPO prospectus, with the documents warning of numerous risks to OpenAI like their close ties to Microsoft. Potential investors were told that Microsoft is responsible for a substantial portion of our financing and compute, and OpenAI also disclosed concentration risks, saying, If Microsoft modifies or terminates its commercial partnership with us, or if we are unable to successfully diversify our business partners, our business prospect's operating results and financial condition could be adversely affected. Now, this is particularly relevant given reports that Microsoft is considering a lawsuit to block certain parts of OpenAI's partnership with Amazon. Additional risk disclosures include OpenAI's significant capital expenditure, reliance on compute resources, ongoing litigation with Elon Musk, and their unusual structure as a public benefit corporation. They even mentioned geopolitical risk related to Taiwan. Now, while CNBC kind of sold this at first as a pre-IPO prospectus, it appears that this document was shared with potential investors in OpenAI's recent fundraising round, meaning that it doesn't actually seem to be prepared for the IPO, and yet the list of risks will likely closely mirror disclosures once they actually go public. Sources additionally said that OpenAI is seeking a further $10 billion from investors to add to the $110 billion already raised from SoftBank, Nvidia, and Amazon. And, as we'll hear in the main episode, it sounds like Sam Altman is changing his focus to be able to concentrate more closely on things like fundraising. Now, an OpenAI spokesperson basically said that this is just legal nothing burger, commenting, This is a standard legal risk factor disclosure unrelated to any potential IPO prospectus. Similar language has been in place for years. Microsoft is and will remain a critical long-term partner. Now, much more tangibly in IPO news, SpaceX is aiming to file their IPO paperwork as soon as this week. Sources speaking with the information said that SpaceX and by extension XAI are finalizing the details of their prospectus and could file documents with the SEC this week. The stock is expected to begin trading in June if all goes to plan. That would make XAI the first out of the gate as the three large AI startups head towards IPO. SpaceX is said to be aiming to raise $75 billion in the public offering, which would make it the largest IPO in history by a wide margin. They were originally aiming for $50 billion, so this would be a substantial upsize. In fact, if it works, that single IPO would surpass all the money raised in IPOs last year combined. SpaceX last raised money at $1.25 trillion, suggesting that it would debut as around the 12th largest company in the world. When the prospectus does come out, we'll get our first look at XAI's books. Analysts expect that SpaceX as a whole is losing money and XAI is deep in the red. This IPO is also expected to have a few unconventional features. Elon Musk has said that he wants to make IPO shares available to retail investors in larger quantities than usual. Typically, companies offer around 10% of IPO shares available to retail prior to the listing, but SpaceX is expected to bump that number to 20%. In addition, the SpaceX IPO won't feature the standard six-month lockup for existing shareholders. The safeguard is usually put in place to stop insiders dumping their stock and crashing the price right out of the gate. Sources said that a custom arrangement is still being sorted out, although it's unclear if this means a shorter lockup or it actually means a longer lockup. The information finally reports that Goldman Sachs, Morgan Stanley, Bank of America, JP Morgan and Citi have all been preparing IPO plans even though none of them has officially been hired. Continuing the theme of bucking convention, SpaceX is said to be considering an approach where each investment bank has assigned a different task as part of this largest IPO in history. Now, when it comes to XAI's role in all of this, there is plenty of skepticism to go around. Contrarian Curse on Twitter writes, The obvious reason to merge XAI and SpaceX is because XAI is a fourth-rate lab that Elon knows is screwed unless they get oodles of compute for free. So, they will raise the 75 to 100 and jam it into GPUs. SpaceX barely needs the money. And yet, I don't think that there is going to be any shortage of retail excitement. A new ETF is sending pre-IPO AI stocks to the moon, although that's not necessarily a good thing. Last week, Fundrise listed their Innovation Fund, which holds shares in SpaceX, Anthropic, and OpenAI. While some have praised these pre-IPO wrappers for giving retail investors early access to startup equity, this isn't necessarily what most had in mind. Shares in the ETF are up 1500% since launch, most recently seeing a 64% jump on Tuesday while being halted twice for volatility. By the end of the day, the Fund was valued at more than 16 times the value of the shares it holds. There's obviously some wiggle room on how Anthropic stock is valued, but the current ETF's price implies almost a $5 trillion valuation, and since they last raised in February at a $380 billion valuation, it is unlikely that in that subsequent time, no matter how good we think Claude Cote is, that they have jumped to become worth more than Microsoft. Now of course, this is actually just a market structure issue. It's not possible to create more shares to satisfy the demand, so the ETF can completely detach from its underlying value. To some, it's an early indication that AI startups will have screaming hot IPOs with a ton of retail demand, while others think it's just a sign that meme stock trading never went away. Jack Shannon of Morningstar said, With the implied valuations when you have this premium, your upside is gone. Clearly it's going to attract some meme crowd and get some high-octane trading, but if someone is in this for the long term, frankly, it's a horrible investment at the current price. Matt Malone of Opto Investments also pointed out how this demonstrates why staying private for a really long time is really rough on retail investors. Malone said that these numbers are great for investors who want to get out, but if you're coming in, you're paying a huge, huge premium. This shows the dynamic from private markets to public markets when public markets are often held out as the preferred pricing mechanism, but in this case, the public market price doesn't really make sense. Staying in market themes, SoftBank is apparently pushing the limits as they scrounge up funding for their OpenAI bet. The Financial Times reports that SoftBank is testing their self-imposed borrowing limits after committing another $30 billion to OpenAI. SoftBank had previously held themselves to a 25% loan-to-value ratio, meaning they won't borrow against more than 25% of their stock holdings. Last year's $22.5 billion in funding already stretched them pretty thin, with SoftBank selling all of their NVIDIA holdings and taking out billions of dollars in margin loans against their arm stock. Responding to the FT's reporting, SoftBank CEO Yoshimitsu Goto said, I don't deny the possibility in the future that we may temporarily go beyond 25%. Still, apparently SoftBank won't permanently change their policy, just temporarily work around it as they hit a cash crunch. Basically, more than ever, Masayoshi Sun is betting the company on OpenAI. Speaking of OpenAI, a big new deal between that company and Helion Energy has Sam Altman stepping down as chairman and board member of the Fusion Energy company. Sam Altman personally led Helion's $500 million Series E in 2021 at a $3 billion valuation. At the time, it was the largest ever venture investment in a nuclear fusion startup. Axios reported that the new deal with OpenAI would guarantee the company 12.5% of the energy initially produced. The goal would be to scale that to 5 gigawatts by 2030 and 50 gigawatts by 2035 Lastly today, the Pentagon's battle with Anthropic has now officially landed in the courts, with a federal judge dragging the Pentagon for their conduct against Anthropic in the latest court hearing. On Tuesday, Anthropic's application for an injunction was heard in Northern California, and Judge Rita Lynn was very unimpressed. She said the Pentagon's actions were troubling, her word, as it appeared to be punishing Anthropic for speaking out. Now the genesis of all this is that Anthropic sued the Pentagon two weeks ago, claiming that their designation as a supply chain risk was on lawful retaliation. Anthropic is seeking for that designation to be overturned. The case is currently in its earliest stages, with Anthropic seeking an injunction to suspend the designation until there is a full trial. Now, the Pentagon's lawyer suggested the impact of the designation could be narrower than previously stated. He said that his understanding was that the designation would not prevent a military contractor from using Claude Coe to write software for the military. Instead, he told the court the designation only stopped Anthropic's technology from being used within Pentagon systems. For those following the story, that is obviously a complete 180 from Secretary of War Pete Hegseth's tweet, where he said, Effective immediately, no contractor, supplier, or partner that does business with the United States military may conduct any commercial activity with Anthropic. The Pentagon is now arguing that this comment was so obviously beyond the scope of the law that Anthropic shouldn't be allowed to raise it in court. The judge was unconvinced, stating, It looks like the Pentagon is punishing Anthropic for trying to bring public scrutiny to this contract dispute, which of course would be a violation of the First Amendment. What's more, in this case, the chilling effect of Hegseth's words are just as much of an issue as the actual designation. Anthropic said this has already caused harm among their customers. The judge acknowledged that point, commenting, Everyone, including Anthropic, agrees that the Department of War is free to stop using Claude and look for a more permissive AI vendor. I don't see that as being what this case is about. I see the question in this case as being a very different one, which is whether the government violated the law. Now even little old superintelligent recently got our first letters from customers, asking us to send them plans on how we will stop using Anthropic because of their relationships with the US government. That, it should be clear, is not something that we are going to do. Ultimately, the case comes down to this. The Pentagon lawyer argued, What happens if Anthropic installs a kill switch or functionality that changes how it functions? That is an unacceptable risk. The judge retorted, though, What I'm hearing from you, though, is that it's enough if an IT vendor is stubborn and insists on certain terms and it asks annoying questions, then it can be designated as a supply chain risk because they might not be trustworthy. That seems a pretty low bar. Anyways, guys, there will be more on this, I'm sure. For now, however, that is going to do it for today's headlines. Next up, the main episode.