Transcript of THE AI SLOWDOWN SHOCK: Why Tech Giants Just Agreed to Hit the Brakes!
Wall Street Truthbombs
0:00The three most powerful people in0:01artificial intelligence all agreed on0:04something over this past weekend. The0:06market lost about a trillion dollars of0:07enthusiasm before breakfast on Monday.0:11By the end of this video, you're going0:12to understand what exactly what the0:14market sold on Monday morning, why it0:17was not what the headlines say it was,0:20and the one number in this entire story0:22that nobody put on television. Surprise,0:24surprise. There's a building at 600:28Hudson Street in Tribeca that most New0:30Yorkers walk past without even looking0:33up. Well, it used to be the Western0:36Union building, you know, telegrams.0:39Now, it's one of the most important0:41carrier hotels on the planet. You're0:43thinking, "What is a carrier hotel?"0:45It's a brick tower stuffed with the0:48fiber that moves a huge share of the0:50internet in and out of New York City. I0:53walked past it just the other morning,0:56and you could hear it. The cooling0:58equipment on that building runs all day1:00and all night. That's the thing that1:03people forget about artificial1:04intelligence. It's not a concept, it's a1:07building with a huge power bill. Hold1:11that thought for a second, because it1:12turns into the whole story in about 61:15minutes from now. Start your clocks as1:17we speak. Here's what happened. On1:20Saturday, Dario Amodei, that's the the1:23chief executive officer of Anthropic,1:27published an essay on his own website1:30called "We Must Pace the Frontier." No1:33newspaper, no interview, just a post.1:36And the central line reads like this,1:39"We must slow the pace at which we1:41improve the capabilities of AI models."1:44I am secretly wondering, as you probably1:46are, did he use AI to write that essay?1:51Interesting thought, right? Anyway,1:53progress will still seem fast, and we1:55must make wise use of the time we gain.1:58Sam Altman, the other head of the other2:01company, the competing AI company at2:04OpenAI, posted within hours that he2:07agrees we need to pace the frontier and2:10that OpenAI would also give independent2:12evaluators employee level access. Well,2:16what is a weekend of hot shots without2:20Elon Musk? Elon Musk posted three words,2:24Dario is right. That is the entire Musk2:28statement, three words, and then the2:31market opened in Asia, SoftBank fell2:33about 11%, Kioxia fell about 6%, SK2:37Hynix fell 5.3%, Samsung fell 2.8%, the2:41KOSPI dropped 2.5%,2:43Europe picked up the baton, Infineon2:46down 5.8%, ASML down 4.4% in Amsterdam.2:50By midday in New York, Nvidia was down2:52about 2.9% on Monday and AMD AMD got2:55smacked. It was down about 4.8%,2:59Marvell of course down 5.9%, Micron,3:02well, you won't be surprised to hear3:03this, up down about 5.3% and Lam3:06Research was down 7.1%.3:09The big semiconductor ETF was off nearly3:125% and the Nasdaq was down over 1% in in3:16over one blog post, no regulation, no3:20law, no earnings, a guy posted an essay3:22for God's sake and three continents3:26silicon completely. Guys, that's a lot3:28of stuff to take in, isn't it? I was3:30going to try not to talk about this, but3:32we actually have to cover this. It's3:34that important at this point because it3:37became a thing. Okay, let's dig in3:39further, but before we do, please click3:41like and don't forget to subscribe. It's3:43really important to be in the know about3:44this stuff and this is how you do it.3:46Now, here's the first thing the coverage3:48got completely wrong. This warning is3:50not new, not even a little bit. Emoti3:52walked out of an OpenAI3:55OpenAI in December of 2020, if you3:58recall, with a group of researchers over4:01exactly this disagreement. He testified4:04to the Senate Judiciary Committee in4:052023 that the industry can't adequately4:08regulate itself. He published an essay4:11in October of 2024 that ran about 14,0004:15words. Again, wondering if he actually4:17wrote it. Uh and he warned again in4:20November of last year. He warned again4:22in January. The market ignored every4:25single one of those. Not one moved a4:28chip stock. So, what changed? Well, not4:31the warning. What changed is the two men4:34he competes with agreed with him in4:36public within 24 hours. One executive4:39worrying about a safety uh4:42about safety is a conscience. Well,4:44three of them are agreeing on the same4:46Saturday is a statement about industry4:49structure. The market didn't reprice the4:52risk of AI. It repriced the probability4:54that the people buying the chips slow4:57down their buying. And that brings me to4:59the second thing that nobody said5:01properly the other day. The market5:03didn't sell artificial intelligence that5:05morning. It rotated within it. While5:08Marvell and Lam were getting taken5:10apart, CrowdStrike was up about 15%.5:14Palo Alto Networks was up about 12% at5:17the same moment on the exact same clock,5:20to be honest with you. That is a5:2220-point spread inside one sector on one5:24morning. In the pre-market, the same bid5:26showed up in ServiceNow, Adobe, and5:29Workday. Think about why that makes5:31sense a little bit. A slower frontier5:33means fewer new models, which means less5:35capital spending, which means fewer5:37chips, but it doesn't mean less5:40software. It means more time spent5:42securing, auditing, and deploying the5:44models that already exist. Pacing the5:46frontier is bearish for the picks and5:48the shovels. It's bullish for the people5:51who guard the mine. I owe you one honest5:54caveat on that. CrowdStrike had its own5:57catalyst the other day. Its chief5:59executive publicly pushed back on6:01emotions and argued that industry should6:03secure AI progress rather than slow it.6:07And that got amplified on cable TV as it6:10typically does. So, don't read the whole6:13move as pure rotation. But, Palo Alto6:16had no such catalyst and moved almost as6:19much. The pattern is real even if one6:21name is noisier than the other. Now, let6:24me come back to that building on Hudson6:26Street for a second. the loud one, the6:28old Western Union building. Okay,6:30because this is where it pays off. Every6:32conversation about slowing down6:34artificial intelligence gets argued as6:37if it was about software. It's not. It's6:40about steel and copper and electricity6:43that somebody signed a contract for6:45years before the model needed to exist.6:49And when you build that way, the thing6:51that kills you is never the technology.6:53It's the timing mismatch between what6:56you promised to pay for and when the6:58revenue actually shows up. We've been7:01having that conversation a lot lately.7:03Now, here is the number I promised you,7:06the one that nobody put on television.7:08Bernstein ran the screen today, uh7:10excuse me, the other day on who actually7:12gets hurt if AI development really slows7:15down. And the name that came back was7:17exposed that it was most exposed was not7:20actually a chip maker. The analyst7:23estimated that about 25% of CoreWeave's7:26existing active US power sits in tier7:30three and tier four markets. This Those7:32are the smaller rural ones and roughly7:3574% of its contracting power does. 74%7:40my friends, that is the building with7:42the power bill. The real exposure in7:44this whole story, not a chip that could7:47sit in a warehouse, is electricity that7:49somebody has already contracted for in7:52places that nobody else wants it against7:55demand that has not been sold yet.7:58That's an obligation with no buyer on8:00the other end. Chips have a resale8:02market. A 20-year power contract in a8:04tier 4 county8:06doesn't. And while all of that is8:08happening, here is the part that makes8:10you laugh or wince, depending on the8:13day. Anthropic is reportedly going8:16public. Reports over the weekend say it8:18has selected the NASDAQ for a listing as8:20soon as October. An evaluation reported8:24at two two trillion dollars or more. I8:27want to be careful with that. Every8:28piece of it comes from unnamed sources8:31at this point. The company hasn't8:33confirmed it. The one number in that8:35story that is company confirmed is the8:37private round in May, and that was a 658:40billion-dollar raise at a post-money8:42valuation of 9658:45billion. Still, nothing to sneeze at.8:48So, run the arithmetic with me. 9658:51billion dollars in late May to a8:53reported two trillion dollars in October8:55is a 107%8:57markup, just over double, about one9:00trillion dollars of added value in9:02roughly9:03just five months by a company whose9:05chief executive spent Saturday9:07explaining why the industry needs to9:10slow down. And before anybody says that9:13valuation is obviously fake, it isn't.9:16The money underneath it is real, and9:18that's what makes this very, very9:20interesting. Bloomberg reported from9:22internal documents that Anthropic did9:24about 11.5 billion dollars of revenue in9:27the second quarter of this year against9:29roughly 787 million in the same quarter9:32just last year. That's more than 149:35times bigger in just 12 months. It was9:38reportedly the first quarter the company9:39posted positive adjusted operating9:42income. So, it's making money. The9:44company declined to comment on any of9:46it. So, treat it as reporting and not as9:49a filing just yet. But, understand what9:51it actually means. This isn't 1999. The9:54revenue actually showed up this time.9:56Profits are starting to. The question is9:58not whether the demand is real. Question10:01is what it costs to keep feeding it. And10:04that's the big question right now. And10:05now, I have to be fair to the man10:08because the cheap version of the story10:10is the hypocrisy version and the cheap10:12version, well, it's not really accurate.10:15His essay doesn't say stop. It says10:18pace. He writes that they have sought a10:20middle way to show that it's possible to10:23build carefully and succeed10:25commercially. He argues a coordinated10:28pacing strategy would buy time without10:30sacrificing commercial advantage. And10:33the only thing he commits to10:35unilaterally is the transparency piece,10:38letting outside evaluators in. The10:40actual slowdown requires everybody else.10:42He says so. You can think that is10:45convenient. It's not inconsistent. And10:48one more honest thing before the close10:50because this is where most of the other10:52day's coverage is going to age pretty10:55badly. This was not one cause a one10:58cause morning. You know, Brent crude11:00traded above 108 bucks a barrel on11:02Monday morning. The 10-year Treasury11:04went through 5% at one point for the11:06first time since October 2023. And the11:09futures market was pricing nearly a 90%11:12chance that the Federal Reserve was11:14going to raise rates the other day. That11:17essay landed on a sector that was11:18already bleeding from an oil shock and11:20rate shock. And you can see it in the11:22tape. The Dow was only down about a11:24quarter of a percent and the Russell11:262000 was11:28actually up. A pure panic about11:30artificial intelligence doesn't look11:32just like that. A duration sell-off11:34actually does. So, what are you actually11:37watching this confusing situation that I11:40have just laid out for you? Well, watch11:42whether the rotation survives throughout11:45the week. If security and enterprise11:47software keep the bid after the Fed is11:49out of the way, once the Fed is out of11:50the way, this was a real re-rating of11:53where AI money gets spent. If everything11:56snaps back by the end of the week, then11:59the other day wasn't oil and rates day12:01wearing an artificial intelligence12:02costume, and we've seen that happen12:04before. And watch the power contracts.12:06That's where slowdown shows up first,12:08and it's the last place anybody right12:10now, except for maybe that one analyst12:13at Bernstein, is looking. So, your truth12:15bomb for today is this: The market12:17didn't sell artificial intelligence the12:19other day. It sold the part of12:21artificial intelligence that requires12:22buying something, and the most exposed12:25thing in the entire chain.12:27It's not a chip. It's electricity12:29somebody already promised to pay for in12:31a place that nobody else wants it.12:35Join me every day for Wall Street Truth12:36Bombs where I drop them right here for12:38the market.
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