Friedberg’s Bull Case: Everyone is Making Money in AI
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Episode Description
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Brief Summary
Friedberg argues that Nvidia, SpaceX, Anthropic, and their customers can all profit as AI expands productivity across the economy.
Key points
- Everyone’s Making Money in AI. The speaker traces spending from Nvidia to SpaceX and Anthropic, arguing that each layer captures substantial margins. The key question is whether customers also earn enough to justify their spending.
- AI’s Productivity Could Reach All of Commerce. If AI creates enough productivity for customers, its total addressable market could extend across commerce. The speaker suggests the technology may dramatically expand the effective workforce.
Transcript
I took a look at the kind of AI value stack to try and identify who's making money where and it turns out everyone's making money. So for every dollar of COGS, every dollar that Nvidia spends, that turns into $4 of revenue for Nvidia, 75% margin. And then that gets sold to SpaceX and then SpaceX turns around and they're making, you know, an 83% margin on that chip spend because they're kind of looking at a 5-year depreciation, but then they're making 1.25 25 billion a month on Colossus and then Anthropic is showing in this S1 that they're making about 85% incremental gross margin on every incremental dollar coming in. So at the end of the day a dollar that Nvidia
spends turns into $18 that Anthropic is making selling to customers and the question is are customers making money? So if the customers are making call it on the order of two to 10 times the money they're spending because otherwise there there would be probably a retention issue and a decline in spend generally speaking if AI is delivering value to the customers. I think this shows that there really is true productivity arising from AI that across the whole value chain there is such margin to be had. There's so much value being created that this really is what I think Eric Schmidt a long time ago in the early days of Google used to say Google's total addressable market is
global commerce. And I think for the first time ever, we're seeing a business actually potentially starting to realize that theory that if you can create enough productivity gain for your customers that your TAM is commerce, we're almost growing the equivalency of the human working population by 100x or a,000x or a millionx with this technology stack.
