Tariff Turmoil & Tomorrow's Tech Titans with Ann Bordetsky
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All right. Welcome to the Risk Reversal Podcast. I'm Dan Nathan, joined by Guy Adami. Guy, how are you? What's up? We've got a lot to do today here. This is Wednesday, shortly after the opening. A lot going on. We had the president speak to a joint session of Congress last night, the economic agenda. Firmly, Dan,

part of the discussion here. So we're going to kind of go through that a little bit, how the market's reacting. I have a great conversation with my friend Ann Bordetsky. She is a partner over at NEA. That is a fabulous VC firm. We're going to kind of run through a bunch of stuff going on in generative AI, some of the investments they're making, how she's thinking about valuation and the like. So stick around for that. Also, a little housekeeping. I don't know if you've recognized this guy. You and I are turning on the mics and the cameras at 11 a.m.

a.m. Monday through Thursday for the market call. We like the new time, don't we like the new time here? I do, and I think it gives people the opportunity to have more of the trading day ahead of them, whether it's 8 a.m. on the West Coast, 11 a.m. on the East Coast, instead of a couple hours to trade, you have

you know, four or five or six, depending on where you are. So, yeah, we like the time change and hopefully you folks like it as well. Yeah. All right. Let's hit two things really before we get to my conversation with Ann. We just mentioned, obviously, the president spoke last night. I think the futures, at least the S&P futures, liked what had to be said there a little bit. I think that while it sounded like there was a lot of tough talk, Commerce Secretary Howard Lutnick maybe walked back the worst parts of these tariffs as it relates to Canada and

and Mexico. I don't think there was much mention about China. But Guy, one of the things that I think I'm taking away here, and I think this has been made evident over the last week or so, is that Canada and China are getting a little bit emboldened. And so I guess my question to you is if we keep making these threats, we don't make clear ask for concessions and then we keep kicking the can down the road. Do these tariffs or at least the negotiations, do they lack teeth?

Right. Are we likely to see a more protracted sort of discussion or trade war if we really can't stick to, you know, the things that this is meant to accomplish?

I think that's a tightrope this administration is walking because I think they want to implement these tariffs. I mean, they ran on this as one of the sort of the pillars of their platform. And on the flip side, they obviously don't want to see the stock market under the pressure that we've seen. So I think what you're going to see going forward, you know, is strong talk,

depending on what happens with the market, a little bit of a maybe walk back to try to assuage some of the concerns of market participants, followed by strong talk again. Now, to your point about losing teeth,

Yeah, I think at a certain point, you know, it's the boy that cried wolf for those types of things. And I think it may embolden China, Mexico, Canada to varying different degrees. But with that said, you know, I think the overriding condition is they want to implement these tariffs in some way, shape or form. And the hope is...

it doesn't cause the market disruption that we've maybe seen over the last couple of weeks. Yeah, and I guess it's not just the market. You know, last night we had David Zervos of Jefferies on Fast Money, and, you know, he was making the case that he just doesn't think the tariffs are going to be that big a deal in the grand scheme of things. You're talking about the markets, but the way I'm thinking about it is I think the administration is playing a game of chicken with the U.S. economy, but possibly the global economy for political reasons, right? And so I just think...

it doesn't make a whole heck of a lot of sense. It makes sense to be a bit more thoughtful and kind of plan this thing out because the on again off again is the sort of thing that's causing uncertainty, which kind of brings us to this ADP report two days in front of the February jobs report. I mean, the ADP report came in half of what was expected.

or less than that. So if the C-level suite has all this uncertainty, of course, they're going to pull back on hiring. Of course, they're going to pull back on CapEx and R&D and those sorts of things until they have some clarity with some of our biggest trading partners. We haven't even mentioned the EU yet, which he's talking very tough on. So again, the jobs report on Friday, does this have the potential to be a real market mover?

Well, I, you know, I think so. But, you know, I'll say this as well. You know, I don't think it's regardless of administration. It's not. And I know you know this and I know people listening know, but it's not like when you change administrations, you start from ground zero again. There's obviously a carryover effect. So to a certain extent.

you know, what we saw during the Biden administration carries over to this, and this will carry over to the next. So I think there's part of that going on. But your point about uncertainty, first of all, I think we all agree there's never any certainty about pretty much anything, but it's just the levels of uncertainty that agree that

that are manifesting themselves. And I think that's where we find ourselves at this juncture. Your point is well taken. If you're an executive making decisions about hiring, my sense is you're going to be somewhat reticent until you know what sort of the landscape is and what the playing field looks like. And I do think the job market will deteriorate

Whether this administration blames the last one or they take it on their own shoulders, I think is immaterial. I think the die was cast a long time ago. And I start I'm thinking we're starting to see sort of the effects of whatever we've seen over the last few years, if not longer. Yeah, I mean, the blame game is what it is. It's very political. Let's be clear. Right. And I agree with you completely.

100%. But I think it's also important to remember that some of the things that they're looking to cut, whether it be Doge, whether it be to roll back some prior legislation,

I mean, this is clearly hurting Trump voters. It's clearly targeting, you know, some of these red states. If you look at Trump last night called the CHIPS Act of 2022, a horrible, horrible thing. They want to pull that back. That had $280 billion earmarked for new fabs here, you know, R&D, a whole host of things really. And you've been making this point for years since the pandemic that reshoring, you know, production of semiconductors is a point of

national security and now with generative AI and the importance of that and then becoming like a sovereign arms race not just on the private side of things.

You know, it seems very odd that that's that's the act that you'd want to pull back bipartisan. Twenty four Republicans in the Senate voted for it. And more than half of the money that was earmarked for the construction of fabs is in red state. So sooner or later, I think some of the folks in his own party, that would be Trump's own party, are going to probably have to start pushing back, especially if you start to see the economy deteriorating.

No, that's fair as well. I think you would agree, though, is, you know, this is a president that is not going to be enamored by anything that took place in that prior administration. So regardless of whether or not it was bipartisan, regardless of whether or not it favors red states.

If this is something that the Biden administration put into place, he's going to rail against it almost by definition, whether that's justified or not. But I think the better point is or the stronger point is at some point there's going to be blowback. And then you wonder how that manifests itself in some of the rhetoric or more importantly, some of the things that we watch.

in terms of the market. And that's really sort of, I think, when the rubber hits the road, it's going to play out in bond yields. It's going to play out in commodities. It's going to play out almost more importantly, probably for people listening to this in the equity market. Yeah. So just to be clear, some of the things that got hit really hard over the last couple of days in the stock market are bouncing. GM, for instance, is up 4.5%. Ford's up 3%. So stuff in the industrial market

sort of space. So might we see some carve outs, right, for some different industries that are important here? And obviously, I mean, some of them that are, you know, manufacturing and the like are important parts to the Republican caucus. What were a couple of things that stuck out to me yesterday, Guy, was just the devastation in the banks. And to me, that obviously wasn't exactly the thing you could put your finger on that would be affected by tariffs.

other than the fact that the tariffs and a trade war were likely to put pressure on the U.S. economy. Therefore, the banks, which have outperformed a good bit because of the hope of deregulation and tax cuts and all that sort of stuff, you know, are basically seeing a lot of air come out of them in a very, very quick way. So I look at today on Wednesday, if the market's bouncing and just a little bit,

on the potential for a rollback of some of the worst parts of the tariffs, banks to me would kind of demonstrate investor appetite for, let's say, what the economic downside could be for, you know, a short trade war, I guess.

Well, I mean, for me, the banks comes down to this. And I think you would agree with me that banks are highly cyclical in nature. And, you know, they are not impervious to downturns in the economy. And, you know, we led this by talking about that ADP report. We'll obviously learn a lot more at the end of the week. You know, we've talked about

a potential for a negative GDP print. Banks don't win to those types of things. So regardless of what you think about deregulation, regardless of what you think about the yield curve, the M&A environment, the IPO environment, if things were to slow down in a meaningful way, banks won't win to that. And with some of the valuations that these banks have enjoyed and some of the runs that these stocks have had,

I mean, they're not set up for that type of situation, I think. So yesterday's bank action made sense to me. All right. Last one. Oil weakness is down nearly 3% today. It's down about 18% just from its recent highs a couple months ago. Guy, at 66.5, it is at the bottom end of the range that you and I have been talking about since

Late 2022, a breakdown of this kind of 65 level, which I think is the multi-year low. Is it signaling some sort of deal as it relates to OPEC and, you know, getting more oil flowing? Or is it signaling global growth weakness? You know, I think it's the latter. I think it's definitely signaling. I mean, I don't think at this point there's going to be any any

binding or important deal with OPEC. I think it's more the fact that there's this slowdown globally, but more importantly, potentially what's going on here in the United States in terms of that negative GDP print. So, you know, crude oil is one of the most economically sensitive commodities that's out there and it's trading in kind. And when you hear, you know, drill, baby, drill,

I mean, as much as people want to say that's bullish, it's actually if you think about it by definition, if you create more supply, that's actually bearish, which is maybe what this administration wants. I'm not quite sure. I think there's a level of concern on a crude oil price if it gets below a certain point that actually hurts.

some of the producers here in the United States, but we might be in the sweet spot right now. But again, at a certain point, like an options trade, if it gets too low, then everybody starts to lose. Yeah, no doubt. Um, so the other ones that I'm watching, uh, are Nvidia. I think that remains an important one. I think it was down maybe 27, 28% of, uh,

at its lows yesterday from those recent highs. There's obviously a whole host of things that are wrapped up with the CHIPS Act and with China tariffs and all that sort of stuff. But also from a sentiment standpoint, the thing has barely seen an uptick since they reported. Is there any other sentiment sort of situations on a risk asset front? You know,

Bitcoin has bounced back. It's back towards that 90 sort of thing. We've talked a lot about these Trump trades that have round-tripped the entire move since the election. Is there one other thing other than financials, which I know you're focused on that you want to keep an eye on on a day like today where we're seeing...

A very, very slight bounce on the heels of that speech last night. Yeah, well, I'll throw you a bit of a curveball. For me, it comes in the form of dollar-yen, which as we're sitting here is trading 148.60 or so, probably one of the lowest levels we've seen in quite some time. And if you folks want to go back to August of last year, you will recall that it was the move in the yen that sort of triggered that day on August 5th. And since then, we've had significant dollar strength, dollar-yen from about 139.00,

back to about 160 or so but we've been rolling over ever since the middle of January and I don't think enough people are focused on this specifically uh forgetting what happened in the summer of last year so everything you said I'm watching I'll throw dollar yet in the mix as well I'm so glad you brought that up the Dixie the U.S dollar index in three trading days has gone from

107.60 to where it is right now, 104.5. That is a massive, massive move. And so dollar weakness is something you got to keep your eye on because as you've said, careful what you wish for. This has come down commensurate with the 10-year yield and it might be saying something very, very different than

You know what I mean? A lot of folks might expect as they say, oh, this is good for U.S. multinationals and the like. Well, it's not going to be good for U.S. multinationals if we're embedded in a big trade war. All right, Guy, we covered a lot of ground in a short amount of time. You know, check us out, 11 a.m. on The Market Call. Also, we have a newsletter, Guy. Where do you go to get that newsletter? Where do you go to sign up for that newsletter? Well, I would go to the Risk Reversal website. I'm sure you can do it there, but I'm sure you can go to your favorite website.

podcast store and those types of things. I see what you just did there. No, go to riskreversal.com. The newsletter drops every afternoon after the close. Our market matrix is embedded in there. Our main man, CeCe, does a great recap of what happened in the day, the content that we did in the day, and what we're looking at going forward. So check that out. Stick around for my conversation with Ann Bordetsky, a partner at NEA, where we cover all things generative AI.

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Performance not guaranteed. iConnections is the world's largest capital introduction platform in the alternative investment industry. They bring the asset management community together through a membership platform that lets allocators and managers meet and connect both physically and virtually. Over 3,000 allocators and 600 managers are part of the iConnections community, overseeing nearly $48 trillion and $16 trillion in assets, respectively.

They are also the people behind the alternative investment industry's largest and most exciting in-person events. To find out more about iConnections events and members-only platform, visit iConnections.io. All right, welcome to the Risk Reversal Podcast. I'm Dan Nathan. I'm joined by my friend Anne Bordetsky. She's a partner at NEA. Anne, welcome back to the pod.

Thank you. It's great to be back. We have so much to talk about. I think you were last here in May, which is crazy, but we've had a lot happen in your space. And just to remind our listeners, you were making some very early investments in generative AI, and that's one of the reasons why we got to know each other and some really, really interesting companies. You and some of your colleagues just wrote a report, I want to say a few weeks ago, Tomorrow's Titans Vertical Inputs.

You wrote that with Tiffany Luck and James Kaplan. I want to go through some of that, some really interesting stuff in there. We also want to talk about, and you sent this article over to me from The Verge. I don't have the title, but it was Answer Engines and Platforms.

how they're taking a chunk out of traditional Google search. So we'll talk a little bit about that. Meta, Amazon, and Apple, they're duking it out. They're trying to find their way in consumer AI applications. We'll talk a little bit about that. And then I want to know, how much would you pay for the domain AI.com? So we'll get a beat on that. So there you go. All right, let's talk a little bit about your post. Really in-depth here, you use some kind of historical...

comparisons about just emerging technologies and kind of how they came about and kind of what some of the outcomes were. And it wasn't always the easiest sort of guess in the beginning that you would have expected to be the winners of a new technological change. Let's talk a little bit about how you came about to write this piece about vertical AI. What were some of the major findings? Yeah.

Well, you know, as investors, we're always thinking about how can value be created with AI, right? We're sort of in our third year of AI innovation at this point. It's been amazing to see horizontal winners like Chad GPT, like Perplexity and other companies emerge.

But now sort of the game has changed, right? Models are getting commoditized. That makes machine intelligence much more affordable, much more accessible. The market for developer tooling and AI foundation models has matured. So it's possible for developers to build more purpose-built specific applications. So the question is like, how do we take all of these tools? How do we create value, right? We're excited about vertical AI because we think industry-specific applications is where you can build some of the most

fast-growing defensible companies in this new era. And what is vertical AI? Vertical AI means using artificial intelligence, the foundation models, the LLM layer, the developer tooling to go solve actual customer problems in industries like architecture, construction, healthcare, you name it, defense, public safety. And so what's really exciting in these spaces is, you

there's a lot of opportunity to automate different workflows, to access proprietary data sets, to use AI to make people's jobs easier and better every single day, and build around that a really interesting data network effect and a data moat that allows you to really make the product for that particular industry defensible over time. And, you know, I think...

In the last sort of generation of big software winners, we saw a lot of companies that were systems of record, right? They were horizontal winners. Salesforce for CRM, Workday for employee tooling, ADP for payroll, et cetera. I think in this era, we're going to see some really large winners that are taking services

and labor and turning that into AI native software and tooling. And so, you know, we can go deeper into it, but I think historically vertical SaaS kind of got overlooked

by the venture community because there was an assumption that maybe some of these companies wouldn't scale to the likes of Salesforce or Workday, et cetera. But now I think it's a very different attitude because investors are seeking areas of durability, defensibility, and where there are large kind of labor markets up for grabs that can be turned into software with AI.

Yeah. And so there's a really interesting point in the in the note here that just sticks out to me because when I think, you know, of Salesforce and I listen to Mark Benioff and, you know, he's kind of clearly moving towards this kind of agent model. Right. And he's very critical of, let's say, Microsoft, how they use

open AI and the idea of co-pilot. So you have a point here. You say perfect storm of opportunity for vertical AI while agentic AI capabilities are still in their infancy. We think there's confluence of factors that make it the right time right now to build a vertical AI disruptor. So you just mentioned some end markets, some verticals there. What do you guys, like as you kind of broaden out a little bit in your search for the next company to kind of

adopt, let's say, this agentic approach and really tackle different industries. How are you thinking about that? Where do you think you're most gonna be drawn to? - I think that in order to succeed in building a vertical AI company, an industry-specific company, a lot of things have to go right.

But the key mix of ingredients that we look for is one, a founding team that really understands the customer in the industry. And it's such a great place for entrepreneurs. If you know a non-tech industry incredibly well, that is an advantage. You have to know the customer workflow. You have to know how these customers like to buy products.

what it takes to establish trust and credibility with that particular customer. So domain knowledge, industry expertise is super important, and we look for that in the founding teams. The other is the ability to essentially ride the wave of AI innovation, build model agnostic applications where you know how to use the best of what

OpenAI or Anthropic or Google or Microsoft, any of these companies are bringing to market and use that to deliver a really phenomenal user experience, solving the customer's problem. And the third I would say is, you know, I think this is an area where you don't need to be a research lab, but it is incredibly important to have customers.

a really great go-to-market playbook, right? That commercial acumen of how do we go become a category leader, become a recognized brand to these customers and know how to sell into pretty complex environments and complex customers. So

I think it's kind of a different mode. The last two years of investing in AI have been about finding the very best AI research teams, the very best AI engineering teams, and letting them build kind of the tools of this era. And that is still happening. But the shift to vertical AI means finding founders that can truly...

kind of sell into the particular industry that they're going after. And the difference between selling into healthcare and construction is obviously massive. A hundred percent. And it just seems like a lot of those verticals industries, you know, like healthcare, like you just mentioned, but it could be financial services, insurance. These are probably some of the first to be tackled. You know, this was just coming out over the wires as you and I were speaking that CoreWeave, which is a large

NVIDIA customer and some of their customers are some of the large hyperscalers. They're a huge buyer of GPUs. They're actually backed by NVIDIA. Also, they filed to go public possibly with a $35 billion market value, raising $3 billion. And the timing of this is really fascinating to me. We're in the throes of a pretty interesting sell-off in the public markets. NVIDIA is down 25%.

from its recent highs microsoft google amazon um they're all down more than 10 percent many uh are down 15 percent or so so we're seeing this kind of distribution among investors of some of these um early gains and when you think about uh you know the the

concentration of market cap gains in the public markets is basically been within 10 stocks. So that's kind of coming undone. You have a company like CoreWeave that just filed. It'd be interesting if they do make it to market, if we are in the, you know, in the midst of a proper kind of, you know, sell off in this space that is protracted. And I'm just curious because what you're, you're an early stage investor.

and you're betting on you just mentioned it you're betting on teams you're betting on domain expertise you're looking at the tam right all this stuff and you detail all of that um in your report how important are some of these public market dynamics to the way you're thinking about investing at such an early stage and and then we can also talk about some of the valuations because

I think Anthropic is in the process of raising it like $61 billion or something like that. I mean, some of these numbers are getting really big at a time where I think a lot of investor sentiment, at least in the public markets, might be waning after two and a half, like, you know, bang up years. Well, you know, my relationship with the public markets is that I...

personally get paid to be a very patient long-term investor. So I don't live and die by what happens in the public markets every single day, but I do watch the long-term trends.

And the way that it impacts early stage investing in the AI kind of ecosystem that's coming into existence right now, it's actually great to see so much confidence in publicly traded technology companies investing in AI R&D, right? The fact that Google and Meta and Microsoft continue to commit larger and larger R&D budgets

both into AI foundation models, as well as the data centers, the GPU centers, right? All of that is an investment that will lower the overall cost of AI intelligence and machine intelligence for all other companies that are building in the ecosystem. So I think less than the day-to-day variability, looking for kind of multi-year trends in

R&D and CapEx commitments that these companies are making, and that continues to stay on trend. And I think there's a lot of confidence around that continuing to grow in the foreseeable future. But the other thing is the publicly traded companies today are so much bigger than the companies of the mobile era and the internet era. So I think as an investor, we do think about that a lot. We try to take that into account, even in the early stage investments of when NVIDIA and Apple

you know, our two, $3 trillion companies, the speed and the scale that technology companies today can achieve is so much greater than what, you know, we had assumed before. And now we're seeing companies like

cursor, for example, scale from zero to 100 million in ARR in three years, right? Question we have to ask ourselves is how big can those companies become over time? Is it going to be a $10 billion company, $100 billion company? And so the size and growth of those kind of AI winners in the public markets definitely colors our expectations and perspectives for how quickly

you know, how big some of these vertical AI winners can get. Yeah, and I just worry a little bit about, you know, just what you just mentioned about how big some of these massive incumbents are and their capex budgets. And it's been to the tune of hundreds of billions of dollars. They just...

kind of reiterated for the next year or so. It's going to be $300 billion if you just look at Amazon and Google and Microsoft and XAI and OpenAI. And now there's obviously Apple's jumping into the game. Who knows what they're going to do there? And I just wonder if that, you know,

the idea that these companies are overspending, they're telling you that they're overspending, they'd rather ask for forgiveness than permission. I just wonder if that is really going to create a bottleneck at some point in the private markets because, you know, they have that leeway with their investors, but the public markets are also a daily voting machine. And we're seeing that right now that investors are at least getting a bit more cautious about

about that spend. And I just wonder with some of the valuations that we're seeing, this is going back to a bunch of those names that you just mentioned, we just went through a period from 2020 to just recently where there were just all of these down rounds again and again. If the IPO calendar opens back up, there's going to be public down rounds. But the speed in which valuations skipped up

you know in this sort of wave it just makes me a little nervous but maybe i'm always a little nervous when it comes to markets i have a prediction around this um

And I think we're in a little bit of like a trust gap right now or a trap of disillusionment. And the reason it exists is there's all this R&D, CapEx spend, high valuations on the expectation of what AI companies will be able to do in terms of generating productivity, economic growth, reducing labor spend, etc.

But we haven't seen that really pull through to the revenue numbers for enterprise companies, maybe to significantly reduce labor spend. I think so far, layoffs have been largely things that were already in motion pre-AI wave. They're not driven by automation that's coming from AI or AI agents. And so I think we're in this interim period right now where there's a lot of investment going in.

but companies haven't yet seen the impact on their top line and their bottom line due to AI. But I think it's going to happen because we're still so early in adopting both AI models, as well as the agentic layer, AI agents that can augment human work and human labor. And I think five years from now, it's going to be a very different picture. It's just kind of

there's a little bit of a time gap between investment and ROI at the moment. Which, by the way, was the same exact thing with the internet build in the late 90s into 2000. The stocks, valuations, they got way ahead of themselves. And ironically, we went into this very large bear market, though, from 2001 to the lows in, I want to say, late 22. And obviously, the market started turning over in 2000. But a lot of it had to do with the fact that once this kind of cap-back's

and the excitement in and around the possibility of the internet kind of working its way through to all these different industries, you know, it really kind of laid bare this whole idea that you can spend, spend, spend, and not have the ROI on the other side of it. So to me, I think there's going to be a lot of similarities. I'm not suggesting that on the other side of the spend is a big, you know, market crash or recession, but

You know, history is rhyming just a little bit, and we'll see over the next few months just how much it Nvidia, which is down 25% from its recent highs, how much it goes down. A lot of folks forget from the highs in 2021 to the lows in 22 Tesla, Nvidia, Netflix, Meta, they sold off 70% in the public market. Just think of that, right? And that was excitement in around Meta and some of this other goofy stuff going on. There is one thing that I think is different in this wave.

or at least different in the way that I remember the internet and mobile eras, which is AI is also a strategic asset for this country. So, you know, it's not just about ROI for enterprises adopting AI. We have to consider the fact that we're in an arms race, a global arms race when it comes to artificial intelligence that we can't afford to lose. And so I think some of this has a geopolitical element and a national kind of strategic importance that will continue to kind of

command greater R&D investment and localizing AI infrastructure in the United States because being the global leader in AI also means economic power and soft power to influence the world. And I think that's sort of mixed in with the level of confidence in AI investments right now. But over time, I agree with you, the ROI has to be there in terms of either consumer spending or enterprise spending for this to hold up. No,

- That is actually a fantastic point. And so the idea of sovereign AI, and when you think about just deep seek, and again, this is more of a consumer application for all intents and purposes, but it really was a shot across the bow for US development, if you think about it, because we're sitting here thinking,

all of these hundreds of billions of dollars in investment, the build out of these data centers and these amazing models and all the things that it's going to do here that we were really in the capboard seat. And it also speaks to the fact that on the dais at the inauguration in Washington on January 20th was Jeff Bezos, Tim Cook, Mark Zuckerberg, Elon Musk. I mean, you know, like Sundar Pichai, Satya Nadella. I mean, like, think of that. I mean, that is a truly amazing thing. And it speaks to exactly why

what you are suggesting. Let's hit something here because I think given your proximity to companies like Perplexity, this was an interesting one that you kind of hit me on here. And it was this idea of platform wariness. And so dig into this a little bit. This was an article in The Verge and it was basically saying that these answer engines and then these

they use the term relevant platforms, but you use the example of a TikTok. These are something that folks are using every day and kind of addicted to. These really do have the potential to kind of display some meaningful share as it relates to Google search. Yeah, and kudos to the Verge team for putting out this great kind of consumer internet research study recently. There's a ton of great data there. I encourage people to read through it. But one of the things that showed up, they documented very well this trend

friend that we've been seeing for some time, even before the AI wave, essentially the unbundling of Google. That's how I think of it. There was a time when Google represented the entire open web and all of our interaction with the internet and digital communities was sort of funneled through Google. But even before

AI kind of hit us, a number of things were starting to fall into place. One, you know, Amazon was very successful in pulling away product search from Google, then came along TikTok and essentially both video, but also Gen Z started searching on TikTok, right? That's their preferred platform. And now with the advent of

AI answer engines, which include Perplexity, ChatGPT, and others, we're actually starting to see a very statistically significant trend of Gen Z and millennials beginning search, not on Google, but in AI answer engines and other platforms. And if you look at the Verge data, 40% to 50% of Gen Z and millennials

right? And they're the ones who are really establishing the future of consumer internet, because these are the younger generations, are starting search on AI assistance and TikTok, not Google. And the confidence in Google being the arbiter of sort of internet information and a trusted source of information is plummeting as well. And so...

Google's doing a lot to try to catch up. They're still an amazing company, can't discount them. But the reality is we have to follow user behavior, consumer behavior, and consumers right now are voting with their feet and their clicks. And those clicks are starting increasingly within AI answer engines. And the implications of that are pretty massive, right? Because it's

it's also starting to show up in what brands and companies are seeing in terms of their traffic, their top of funnel. They're starting to see declines in top of funnel coming from Google. And again, the new AI assistance and answer engine sort of driving more and more awareness for these brands.

By the way, and I know this is attached to SEO and some sites that I know without naming names, their traffic's down 50%. Even if you go to Google and you get an overlay and it kind of gives you this answer that doesn't look like 10 blue links, and if you trust...

the information enough and what it's telling you, you're not going to click through, right, to the website that it's citing. So that's obviously Google's, you know, that's their huge problem when you think about going to perplexity. I mean, I usually start at perplexity. I don't even know when I go to Google, you know what I mean, to do stuff unless I'm looking for something on a Google map or something like that. So

I can see how they have a real problem, but you know, this stock just a few weeks ago was trading at an all time high. It's down now about 20%. What did they do? They raised their CapEx and they saw their revenue decelerate. And that's just not on, that was their overall business, but you know, Google cloud also. And so investors are just not going to sit around and wait for more spend, you know, decelerating revenue. And you know, this is something that obviously like we just talked about is playing out in the public markets here.

I want to also hit this kind of, we haven't heard much about Amazon other than AWS and other about their investments and Anthropic, but this Alexa Plus, this is a new AI-enabled Alexa, we all know what it is, is getting really good reviews. And then in Bloomberg today, it caused Mark Gurman, who's like the Axe

on Apple just to compare what's going on at Amazon with this one device and this obviously this platform versus Apple intelligence over there that was also going to be using another model that they didn't create. And, you know, Apple initially last summer when they introduced Apple intelligence, you know, investors bought the crap out of it. They were saying this is going to cause an up

upgrade super cycle for the hardware. It didn't materialize. Now they're pushing out some of the major rollouts of product for intelligence to maybe June to their next developers conference. I just think it's really interesting that this is playing out this way. I wouldn't be betting on Amazon, to be honest with you right now. And you don't have to bet on Apple.

But the other one, and maybe I'll give it a three-pronged sort of thing here, is Meta and AI. We know that they have that little circle thing that goes in all their search boxes, whether it's WhatsApp or Instagram or Reels or the Blue Page or whatever. But they're talking about now spinning out a separate app for Meta AI. So when you think about those three names, do you have any thoughts? Who's winners, losers, this and that or whatever? I think I know where you're going to go here, but I'm just curious your take right now. It's just the most...

fascinating race to watch right now. It's truly a heated race for who's going to own the AI assistant market, which is massive, right? And recently, you've seen Meta, Google, ChatGPT all proclaim race to a billion users. Who's going to get there first? But let's break it down a little bit. I think Amazon finally catching up

and shipping a new version of Alexa, it was inevitable. Good on them for finally making it happen. There's so much at stake for Amazon here. They have been behind because they want to continue to own product search. They want to continue to own the home. And, you know, Alexa is just like,

kind of been really dysfunctional for a long time. I remember when perplexity first sort of came on the scene, we started using it. My own kids would ask me at home because we have the Alexa Echo in our kitchen. It's like a fifth member of the family. Oh, how come Alexa can't like communicate with perplexity? Like they couldn't understand why it was so bad.

But they are catching up with their anthropic partnership. And so, but I think for Amazon, it'll be more around bundling this with Amazon Prime, making sure that that Prime membership continues to add value to consumers so they can maintain loyalty and, you know, subscription revenue from Prime. I think...

Apple has really been behind and they're kind of a victim of their own success, right? They're trying to, they haven't been as willing to partner outside of maybe this open AI partnership. They're not really relying on third-party models. They're trying to build their own. And so, you know, the fact that Siri is this far behind this late in the game is pretty embarrassing. And now it looks like it's getting pushed out to 2027. So I think even internally, you know,

If you chat to people at Apple, they kind of know that they're behind. They're a little bit embarrassed by it, to be honest. I'm sure there's a strategy at play, but it's interesting how far behind Apple has fallen. And that leaves room for companies like Perplexity and others to come in and partner with telco providers, with exciting new hardware companies to launch AI-native phones. AI-native, very affordable phones. And Perplexity just announced

Today with Deutsche Telekom, essentially, you know, I do phone that will have AI native assistant and probably selling for less than $1,000. That's pretty good.

Meta AI, I think, is not to be underestimated here. You know, Zach doesn't want to lose to Sam Altman. He's made that very, very clear. So I think they're going to be making big moves with this Meta AI app. But, you know, in the context of having 3.3 billion users around the world, you know, for Meta to put out any AI assistant that doesn't sort of exceed the scale of ChatGPT or get to a billion users pretty quickly is actually failure.

So they're playing defense. I think we're looking at a more fragmented chessboard of defense

big tech players all trying to see like who is going to be the winner among AI assistants. And I think that makes it possible for startups to stay in the game. Yeah. All three of these are good examples though, where they have massive distribution, right? To the point you think about meta and you know, if people start getting used to using meta AI as an app, because right now I don't think people are using it within these other apps that we're talking about, like Instagram, um,

and the like here. And then if you think about Apple, I mean, it would not take much for them to catch up when you think of an install base of one and a half billion iOS devices around the world, right? And so if consumers are just starting to kind of figure this stuff out, and we know a lot of them are not

paying for this sort of stuff they're not paying for um the pro versions you know you can be a google and you can be an app or you can be an amazon and play some catch up at some point especially if all these models are pretty much going to be commoditized so it really depends how it's integrated right into your product that you're selling to the customer

The other one, and this was in The Verge, and we'll put this in the show notes too, is that Google brings Gemini widgets to iPhone. And it kind of makes the point that you were just suggesting is that the device might not be that important, right? If you were able on a smartphone that is either working on

5G network or Wi-Fi and you have these widgets on top of your iPhone and you just hit the Gemini button, like what's the difference? You don't need a Google Pixel or you don't, you know what I mean? Like you can do it anywhere. And I think that's one of the areas where, you know, Google Gemini, it might not be the best model or the best interface,

but a lot of folks use Gmail, a lot of folks use YouTube. You know what I mean? There's some platforms where multi-billion people are on it and they're using... It's captured the attention of a lot of these users. I mean...

Just big picture, there's 6 billion people on this planet today that have a mobile phone. That number keeps growing. I guarantee you all of them are going to want an amazing AI assistant on their phone. And they're not all going to pay iPhone prices to get it. And so I think there's a lot of opportunity out there for the Android ecosystem.

and everybody who's building on Android to introduce low-cost AI native phones that essentially centralize the value in the AI intelligence versus the hardware, as you mentioned. - Which is also why I think DeepSeq was so important, and it was important it came out of China, and even if it cost $100 million to train, whatever, not the six, when you think about the,

- You know, the smartphone model in China, it really is based on low priced Android phones with super apps like WeChat, right? And so you layer in a deep seek open source capability that app developers can build on top of

And you don't need to pay $1,300 for an iPhone, right? And especially in a country like China where their economy is really weak and they are taking more nativist sort of views towards consumer products where five years ago, they all wanted a Tesla and an iPhone. And if you look at market share, both those companies are losing share right now to those, you know, the U.S. sort of exports. I was going to say, you mentioned WeChat, and I'm so glad that you did because I think that same –

paradigm of a super app. WeChat was a super app for messaging and for commerce, right? It was essentially the mobile internet bundled into an app. I think we're going to see something analogous with AI assistance, but focused on productivity. So I do think one of the big trends is super apps focused on productivity. Again, these knowledge assistance, answer engines that are going to connect to all of your workplace apps.

They're going to become increasingly kind of personalized and customized to you. And they'll be the place where you can write and search for information or analyze data versus having to go into, you know, different applications. You're going to be able to do so much inside of a personal AI assistant that I think these are going to be the new super apps of

of the ai era all right you want to hear about a super podcast these are two of your portfolio companies so we started market matrix that's mrkt matrix our team we take about 10 of the most important business and market stories are ready for this throughout the day we have them summarized in perplexity we take the text our main uh

gal here, Amanda, like kind of threads them together a little bit. Then we put it into your other portfolio company, Eleven Labs, and it reads it all out. And we have this 10 minute podcast. You don't have to listen to me speak anymore because we call our voice bot Brunson. And it's just a great little rap that comes out at the end of the day. How do you what do you think of that? I mean, that's pretty cool, right? I love that. This is the future of podcast

and media and content creation. And by the way, at the center of all assistance and digital experiences is voice. Voice is such a natural way for us to communicate for human expression and communication. And now having voice as honestly a default modality for how we interact with computers

and the internet and applications. It's such a game changer. I'm glad you guys are using Eleven Labs. It's an amazing company. Yeah, it's pretty cool. We enjoy it. All right, last thing. How much would you pay or how much would you suggest one of your portfolio companies that just needed to have the domain AI.com? What do you think that goes for in this day and age? Well, I would pay exactly zero. I'm going to be super controversial here. Here's my pitch.

I wouldn't pay anything for AI.com because AI is going to be part of everything in the very, very near future. It'll be so ubiquitous and available and being just AI won't mean anything anymore. I think it has a very short...

Shelf life. I love that. I would bid. I bid one dollar. I bid one dollar. OK, so the market is one dollar at one hundred million dollars because the information is reporting that the guy who owns the domain is trying to get open to pay one hundred million dollars for it. So, yeah, I'll take the under closer to yours. Well, that's a great little half an hour that we just did there. I got a lot smarter and I really appreciate you being here. I hope we won't wait months for you to come back to the pod.

I know so much changes every single time. Thanks, Dan. Thanks so much, Anne. Always fun to talk to you.