Gavin Baker - Watts and Wafers - [Invest Like the Best, EP.473]
In this episode, Gavin Baker discusses the significant impacts of AI on the economy, emphasizing the importance of energy (watts) and semiconductor capacity (wafers) in shaping the future of AI technology. He shares unique insights on the valuations of AI companies, the dynamics of competition, and geopolitical implications.
Summary
Gavin Baker, founding partner and CIO of Atreides Management, joins Patrick O'Shaughnessy for their sixth conversation, focusing on the future of AI through the lens of 'watts and wafers.' Baker explains that while energy constraints in the short term are expected to ease around 2027-28, enhancing AI's growth, semiconductor availability — particularly through companies like TSMC — will be a crucial factor. He highlights the unprecedented rapid value creation in AI, comparing it to past tech booms and their ebbs, while expressing concern about cross-sector valuations signaling potential market inefficiencies.
The discussion also touches on how various tech giants leverage AI differently, with Baker praising Meta's pivot to an AI-first approach and emphasizing the strategic risks Microsoft faces with its partnership with OpenAI. Furthermore, he warns about the potential for increased political violence directed at AI leaders amid growing tensions surrounding AI technology. Baker concludes that while there are significant advancements and prospects in AI, careful navigation through societal impacts and concerns is vital. This environment stresses the importance of R&D investments and talent recruitment among companies to maintain competitive advantages in the evolving landscape of AI.
About this episode
My guest today is Gavin Baker, founding partner and CIO of Atreides Management, and this is our sixth conversation. The central theme is watts and wafers, the two physical constraints that in Gavin's view will dictate the next phase of AI. On power, he thinks the near-term shortage starts to ease in 2027 and 2028 as new sources of energy come online, and that orbital compute solves it in the long term. On wafers, he explains what is different this time from the dotcom bubble and why TSMC’s capacity decisions may be the single most important variable to watch. We also discuss Elon’s Terrafab, the disaggregation of GPUs, the role of new chip companies, and whether the economic value of AI will keep accruing to frontier models. For the full show notes, transcript, and links to mentioned content, check out the episode page here. ----- Become a Colossus member to get our quarterly print magazine and private audio experience, including exclusive profiles and early access to select episodes. Subscribe at colossus.com/subscribe. ----- Ramp’s mission is to help companies manage their spend in a way that reduces expenses and frees up time for teams to work on more valuable projects. Go to ramp.com/invest to sign up for free and get a $250 welcome bonus. ----- Trusted by thousands of businesses, Vanta continuously monitors your security posture and streamlines audits so you can win enterprise deals and build customer trust without the traditional overhead. Invest Like the Best listeners get a special offer of $1,000 off Vanta when you go to vanta.com/invest. ----- WorkOS is the infrastructure B2B and AI-native companies use to sell to enterprise. It covers everything enterprise security requires: SSO, SCIM, RBAC, Audit Logs, AI governance, and more. Trusted by 2,000+ fast-growing companies, including OpenAI, Anthropic, Cursor, and Vercel. ----- Rogo is the AI platform for finance. They're building agents for Wall Street that are trained to understand how bankers and investors actually do work: from diligence and modeling, to turning analysis into deliverables. To learn more, visit rogo.ai/invest. ----- Ridgeline has built a complete, real-time, modern operating system for investment managers. It handles trading, portfolio management, compliance, customer reporting, and much more through an all-in-one real-time cloud platform. Visit ridgelineapps.com. ----- Editing and post-production work for this episode was provided by The Podcast Consultant (https://thepodcastconsultant.com). Timestamps: (00:00:00) Welcome to Invest Like The Best (00:02:29) Gavin Baker Intro (00:03:32) Anthropic's Record ARR Growth (00:11:49) Should OpenAI and Anthropic Raise at a Much Higher Valuation? (00:13:23) How Elon Preserves Investor Trust (00:14:00) Watts & Wafers (00:15:45) Data Centers in Space Explained (00:20:51) Orbital Compute’s Impact on Terrestrial Data Centers (00:26:24) TSMC Supply Discipline & Bubble Risk (00:30:50) Demand for Frontier Tokens & The Bitter Lesson (00:35:33) Continual Learning & Memory (00:40:01) New Chip Companies & Startups (00:42:49) Prefill vs. Decode Disaggregation (00:48:40) AI-Native Founders: Different & Hard (00:51:27) Token Path & Application Layer (00:56:13) How Gavin Uses AI in Atreides (01:00:06) Signs of a Diversity Breakdown (01:05:42) Google, Meta, Amazon, Microsoft (01:11:42) Broader Knock-On Effects of AI
Key Insights
- Baker argues that the near-term energy shortage for AI will begin to ease by 2027-28, which could facilitate AI growth.
- He highlights TSMC's capacity decisions as the most critical variable determining the future wafer shortage and AI scalability.
- Baker compares the rapid value creation in AI during the last year to historic tech booms, asserting it's unprecedented in capitalism.
- He reflects on the strong competitive positioning of companies like Meta and Amazon, noting their aggressive R&D investments in AI.
- Baker points out that valuation disparities between AI infrastructure companies and memory companies indicate market inefficiencies.
- He expresses concern about the production challenge AI presents, referencing geopolitical tensions that could destabilize advancements.
- Baker indicates that personal safety concerns are rising for public figures in the AI sector, driven by political violence inclinations.
- He emphasizes the significance of installed compute bases as a strategic advantage for companies like Google and Amazon.
- The disaggregation of computation tasks is noted as a trend allowing for longer GPU life spans, offering financial benefits in AI build-outs.
- Baker believes the quality of AI will remain a competitive edge for major firms despite broader market pressures.
- The speaker suggests that firms recruiting top engineering talent will be at an advantage in AI development moving forward.
- Baker conveys optimism about AI’s potential societal benefits while stressing the need for responsible navigation of its impacts.
Topics
Transcript
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