$200 Billion for Data Centers... In This Economy?

[00:00:00] Hi, I'm Eric Newcomer. And I am Madeline Rynbarger. And this is the Newcomer Podcast. Each week, Eric and I discuss the VC deals and the drama that went down. Let's do it. Here we go. Ooh, a loyal supporter of the Newcomer Podcast. I think our first advertiser and Christina, the CEO, has been on the show.

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[00:01:23] Join over 9,000 companies, including many Y Combinator and Techstar startups, who trust Vanta. Simplify compliance and get $1,000 off at vanta.com slash newcomer. That's V-A-N-T-A dot com slash newcomer for $1,000 off. Microsoft scared the shit out of everybody in AI world when some analysts said, oh, they're abandoning their data center efforts.

[00:01:49] Madeline, I sent you on a wild goose chase tracking that down. What happened? Is the sky falling? We both kind of jumped on that in the editorial meeting early this week, I know. So yeah, I dug into that over the last couple of days and the sky is not falling. Now is not the time to call the market peak. Microsoft basically reiterated in a follow-up story to CNBC that they're still planning on spending $80 billion investing in AI infrastructure.

[00:02:14] I know, there was that iconic Satya clip where there was scrutiny around how much people were going to spend and Satya's like, we're good for our $80 billion. You know, it's like, it would have been sad if he was like, cool, like we're doing it. Yeah, his gangster move. Yeah, exactly. No, so that is still their line. And the analyst note mentioned just a couple data centers that are not fulfilling on leases. Part of it is also, you know, they're really pivoting more into the US investment in AI

[00:02:42] infrastructure here rather than abroad. So it seems to be more of just a shuffling of resources. But the AI skeptics kind of had a field day with this. So I was kind of patrolling around talking to VCs and tech people like, this isn't a signal, is it? And basically everyone says. And we had the big fortune story being like, you know, open AI can't deliver. You know, there is some FUD, fear, uncertainty and doubt this week, I think in AI world.

[00:03:09] Honestly, I think it has to do with the overall macro situation. It is like if the economy comes off the rails, then the thing everybody's most bullish about could be being in trouble. You know, it's like growth, growth doesn't do well and panic. So I'm definitely getting more scared about the economy. Semaphore had a piece that the business world is already souring on Trump.

[00:03:36] The schizophrenia around tariffs is not good for business. Kind of proves your argument you've had for a while now, Eric. Stability is good. Yeah, I don't know. I'm not going to take too much credit on that. I didn't, not the only one to say that. But anyway, back to AI. I mean, the funny thing is like, we don't quite know is Microsoft sort of saying we were early, so we already made the bet. Now we can sort of chill out while everybody overhypes it.

[00:04:04] Is the situation that open AI is sort of like, ah, we don't love Microsoft as much. We're going to spend some time with Oracle. I don't know. Yeah. Right. A follow up analyst note from the same group, T.D. Cowan said that a big part of this, you know, could be related to Oracle's new partnership with open AI around Stargate. Of course, SoftBank is backing these data center investments in the US. So it's really just seems like there's more competition now.

[00:04:30] Like Microsoft's, you know, lock on open AI is no longer, you know, just one to one. I wouldn't panic. It seems much more tied to Microsoft's individual situation than it does to an overall call on AI investment. Everyone's ramping up. Medic is committing billions more in their latest, you know, announcements. So data center investment is on the rise overall. NVIDIA had its earnings. I don't know. We don't go crazy over public earnings here, but the market, I mean, NVIDIA seemed to deliver, right? Yeah.

[00:05:00] They beat. And net income increased 78%, 80%. But the market sort of shrugged. Right. It's kind of, I think to your point, it's another point to add to the argument that overall sentiment around the economy is what's driving this rather than actual anything coming from the performance because they beat projected earnings. But there's all this fear on tariffs in China and like their chip business in China. So it again comes down to sort of the macro environment fears around tariffs and the Trump

[00:05:29] administration's policy being not good for business. NVIDIA has been driving the whole market. So it sort of does make sense if any stock is subject to macro concerns, the ultimate market carrying stock would be. We, oh my God, in the worrying signs of the times, perplexity raising a $50 million venture fund, not necessarily the most optimistic fact for perplexity. What do you think? Are we bearish?

[00:05:58] Are we calling bear on perplexity? I mean, they've raised so much capital that they're now throwing it into a venture fund. Are they not building right now? They certainly are. I'm being a little harsh, but it seems like it's a partnership with some F7 ventures, GPs, and who will kind of plan and allocate the capital and lead deals. So it's not like they're, you know, fully pivoting to just becoming a VC fund. Fully. They're not pivoting, but it is when, you know, it's the classic, you seem distracted sort of sign.

[00:06:26] Tyler Cowen had an interesting piece just sort of rounding up sort of the AI news this week, basically explaining why he thought AI wasn't going to have as huge of an impact near term on GDP growth as some might hope. With, I think, his core point being that human beings, we remain the problem. And that the sectors that need the most improvement, like healthcare and education, are the ones that are often most resistant to AI. Yeah.

[00:06:55] And beyond that, you know, construction and services, a lot of industries where it's clear that there are AI tools getting built that can really benefit these industries, but they're heavily regulated and getting that tech integrated into the workflows just takes a lot of time. And business leaders in this sectors are just really slow to adopt new technology, almost famously. So a bunch of the government being another key player here, you know, like government adoption is a huge part of our economy, but it's going to take a while for AI to get there. I think it was honestly a fair take.

[00:07:25] It's definitely not a bearish take. He's still very bullish on the technology. Oh, yeah. Yeah. I mean, I think it sort of describes where we sit. I mean, it's like, yeah, important technology, but it's not at the moment the stuff of sci-fi. Speaking of, as we're recording this, I think there is a live stream right now that OpenAI, it's Thursday at like 3.30 Eastern.

[00:07:48] And I think OpenAI is sharing GPT 4.5, which is, I guess, notably not five. It is still their largest and most knowledgeable model yet, they've said, you know, but it's not a frontier model and they've kind of hedged it. It is its largest LLM and it's improving on GPT 4's computational efficiency by more than 10x, the company sent a statement. So it certainly is a step up.

[00:08:14] It's just not quite what maybe we were predicting GPT 5 to be in this. Where's my PhD? I need, you know. You need your PhD assistant. I need my PhD at my fingertips and I will accept nothing less. That's our roundup of all of the AI news of the week. Seems like there were just gobs of it. But moving on, there's also media news of the week that Eric, you got involved in as per usual. What's the point of having a podcast where you can talk about whatever you want and to

[00:08:42] talk endlessly about media, self-referentialist industries? Two big things happened that I was opining about on Twitter and that I will talk about here. One, Jeff Bezos said that the Washington Post opinion page would now be oriented around free markets and personal liberty, which it sounded very like we're trying to copy the Wall Street Journal. Exactly. There already is a paper that does.

[00:09:08] I also joked, you know, I wrote honestly before Trump was elected, I was tweeting that newcomer is pro-capitalist, blah, blah, blah. Yeah, we've been on this before. It was cool. Yeah, exactly. Which whenever the other people join you to the party, then I'm naturally by disposition like, oh, not a party I want to be in anymore. Like overcrowded. I'm like, so I guess markets are getting overhyped. I don't know. What did you what was your reaction to the Washington Post news?

[00:09:33] I found it, frankly, just pandering to the presidential administration. I took it as just like, oh, we're not going to hit you too hard on this. We're going to focus on markets and stay out of politics and have kind of this free market idea. But also it just felt so like it just it felt like a statement that came from the same place that his non endorsement in the presidential race came from. And the more worrying thing to me over any of this, it's like, obviously, this is the editorial board.

[00:10:01] It's not like taking control of the newsroom and what they're publishing in straight news. But it did just feel more like, oh, well, of course, if you're a billionaire and you buy a newspaper, you're going to influence what's in the paper. That's what this is a vehicle for. Well, I sort of, you know, I'm we're very small publication, but, you know, owner, publisher, author. And it's like, I certainly, you know, no matter how big newcomer gets, you know, it's my name. I wouldn't want to really having opinions that were so far from my own.

[00:10:31] So I'm sympathetic. Like, why buy a media organization if you can't shape the perspective? But I mean, it's a half half joking sort of take. I mean, I do think, you know, you're a CEO. You hire people to do things better than you. And I think, you know, David Shipley, who is running the opinion section and a lot of people over there, they're paying more attention to like the great debates. They're thinking about these things more. Jeff Bezos is, you know, chairing Amazon, thinking about Blue Origin and spending a lot

[00:11:00] of time seemingly partying in Miami. So like, is he is he dialed into the debates of our time? I don't know. Should he be micromanaging them? You know, I think, you know, there are lots of conflicting impulses on the Jeff Bezos, this Washington Post situation. But I do agree with you that the conflicts are really unappealing.

[00:11:25] I mean, Ben Smith said on this podcast a year plus ago, like, we're all in sort of the courts of billionaires. And like, you can really feel it with this, where it's just like, Jeff Bezos is personal, you know, interactions with Trump matter a lot. And we don't really get a lot of visibility into it. And that's impacting what was once, you know, the second most important newspaper in the country. And that that's just like, it's, it's an sad statement for journalism, obviously.

[00:11:54] And that that's really sad. And I do think, like, not to talk my own book, but like newcomer, when we put stuff out, it's like, yes, it reflects my sensibility. But then you can interrogate all of me and I respond and I engage with Jeff Bezos. It's still like, he's not going to take culpability for every opinion piece in the Washington Post. And he's not going to be answerable to them. So it's sort of like, I'm going to put my thumb on the scale in a somewhat hard to

[00:12:23] assess way, in a way that you could never really fully hold me accountable for what's published. And so then it's sort of, it's tainted. It's not a publication that's like, we're trying to represent the legitimate debate in the United States right now. It's like, oh, it's sort of relevant to what Bezos thinks, but not enough that he'll actually take ownership, answer questions, like do the hard work of having a coherent ideology represented in the pages. So I just think it's a solution.

[00:12:51] Uh, that's not going to leave anybody happy. Another piece this week too, that you got involved in Eric, um, you know, Brian Johnson of longevity fame was front running when he claimed to be a New York times hit piece coming out about him. Everything has become tactical. I was most upset that like journalists get tagged with like, oh, they have their, he's like, they have an obligation to be like fair and accurate and objective objective.

[00:13:18] I don't, I don't agree, but, but it's like the journalists get like this sort of, oh, you've taken on moral obligations. Whereas I'm just like a wild person who just flings shit at the wall and like nobody cares, you know? So I hate that sort of idea that because journalists have taken on certain ethical expectations that somehow they should be viewed more harshly than sort of the influencer class who just like

[00:13:42] says whatever they want and acts with pure sort of self-interested strategic opportunism. And so, you know, I keep hammering this point that I'd rather be an influencer slash creator that exceeds expectations than a journalist who disappoints them. You know, we live in this world where if winning means winning the battle on social media, like better to just like have better results than the person you're arguing with, than to have the person you're arguing with be saying, well, you hold yourself out to be

[00:14:11] some beacon of morality. And I'm just a mere billionaire in some cases, you know, it's like the media, they know they, I'm a billionaire on Twitter. Just Elon literally is saying, you know, next to the president, like, oh yeah, we're going to get some stuff wrong. You know, but it's like if there are a reporter ever gets something wrong. And so, you know, in the very minutia of journalism, I think the idea that Brian Johnson's taking

[00:14:37] advantage of a fact check to wield it against the reporter, it just sort of disincentivizes good fact checking with highly hostile sources, you know. And now moving on to our deal of the week, UK based Lovable, a developer tools company, Lovable, a developer tool platform based in the UK, raised an additional 15 million in fresh VC funding led by Creandum and angels, including Lenny Rachitsky. They had raised a 7.5 million pre-seed back in October.

[00:15:07] But the biggest, most impressive part of this raise, which is why we're talking about it here, is they did zero to 17 million ARR in three months, and they're still growing exponentially. That is, of course, per their disclosure. But that's... Lovable is an idea to app in seconds, according to the website. It looks like a use chat, build an app. Yeah, coding and app building, clearly one of the hottest use cases out there. And it's gaining huge traction.

[00:15:36] I mean, that's just an incredible run rate just with such a small team. I feel like it's also notable that it's, you know, coming out of London, which, you know, a lot of people have not pegged London as the hub of this AI revolution. The UK is in the game still. I don't know. There's promising developers there. We're bullish. Off this lovable deal, you know, Stripe did their... They really promote their investor letter, but it is interesting.

[00:16:03] And they chart sort of the growth rate of companies on Stripe broken down by AI versus SaaS. And it shows that the AI companies took 24 months to get to 5 million in annualized revenue, whereas SaaS companies took 37 months. So, well, you know, there are lots of questions, you know, what are the modes, blah, blah, blah.

[00:16:28] The reality is many of these AI companies are growing much faster than we saw with SaaS. And so that's got investors really excited. Before we go, we have an important announcement here on Team Newcomer. We're doing another reader mailbag next week. Important. We are asking for questions. What a big announcement we have. We are doing a mailbag. Groundbreaking. Just send us your questions. You can comment. You can email us. We're both firstname at newcomer.co.

[00:16:57] We have a Google form on the newsletter if you look at the mailbag post. If you want to be anonymous, just say so. We'll honor it. We're also inviting screeds. You're welcome to opine. I won't necessarily run into it, but you can try. This is one of those rare times where a comment as a question is actually very welcome. Also, while we have the form out, just send us your scoop ideas or give us tips.

[00:17:24] But yeah, we'll answer your questions next week. So send them along. That's our show. Thanks for listening.