Episode summary
"Is there an AI bubble?” Gavin Baker and David George
The a16z Show
· · Hosts: Erik Torenberg · Guests: Gavin Baker, David George
Summary
The conversation argues that AI is not in a bubble today, even with the trillion-dollar data center buildout and the huge commitments around GPUs and new chips. The guest contrasts this moment with the year 2000 telecom boom, saying the key difference is that then there was “dark fiber,” while today there are no dark GPUs and usage is already showing up in token growth and public-company returns on capital.
The guest also argues that the biggest AI winners are likely to be the incumbents with data, distribution, compute, cash, and talent, especially Google, Meta, Microsoft, and other members of the Mag 7. He sees the frontier model race as early and believes reasoning models have improved the economics by creating a user-data flywheel, but he expects gross margins to stay structurally lower than classic SaaS because AI is more compute-intensive.
On chips and infrastructure, the guest says the main contest is Nvidia versus Google’s TPU ecosystem, with Broadcom and AMD playing supporting roles. He is skeptical that most custom ASIC efforts will matter long term, and he expects AI business models to keep shifting toward outcomes, consumption, and task-based pricing rather than pure seat-based software.
Key takeaways
- The guest says AI is not a bubble today because GPUs are in use and public AI spenders have seen roughly a 10-point increase in ROIC.
- He compares today to 2000 and says the crucial difference is that there are no dark GPUs, unlike the 97% dark fiber peak then.
- He thinks Google is Nvidia’s most serious competitor because TPU, DeepMind, and Gemini create a vertically integrated AI stack.
- He expects frontier-model gross margins to stay lower than SaaS margins because scaling laws make AI fundamentally more compute-intensive.
- He argues AI pricing will increasingly move toward outcomes and consumption, not just seats or subscriptions.
Notable quotes
“I do not believe we're in an AI bubble today”
“At the peak of the bubble, 97% of the fiber that had been laid in America was dark. Contrast that with today”
“There are no dark GPUs. All you have to do is read any technical paper”
How the episode opens
Are we in an AI bubble? Uh, I do not believe we're in an AI bubble today. I was, depending on how you look at it, the privilege and the misfortune of being a tech investor during the year 2000 bubble, which was really a telecom bubble.
And I think it's really helpful to compare and contrast today to the year 2000. The year 2000 internet bubble or telecom bubble was defined by something called dark fiber. At the peak, 97% of the fiber that had been laid was dark.
Contrast that with today. There are no dark GPUs. And that brings us to our opening fireside chat.
We're going to start with a taboo question right out of the gate. Are you ready for it? If AI love it.
If AI is the biggest trend in the world right now, where is the evidence for it? Why is it only just beginning to show up in the economy? And as Andre Carpathy asked, are agents really just ghosts?
To kick this off and to help us answer this question, please join us in welcoming Gavin Baker, managing partner and CIO of Atrades. Now, some of you may know Gavin as that really thoughtful guy on Twitter. Anytime some big piece of AI news comes out, I know more than a few people who count on Gavin to explain what the f is really going on.
So, a huge thank you to Gavin for being with us today. Joining him is our very own David George, general partner at A16Z. Who knows what that music was from?
Glad they got our pump up music right. Yes. Battlestar Galactica, the original 1977 one.
in case we have to all fight Sylons in a few years. It's it's uh yeah, good good segue into the topic, I guess.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai bubble
- data center buildout
- gpu economics
- google tpu advantage
- robotics humanoids
Companies and tickers mentioned
- NVDA
- GOOGL
- GOOG
- AVGO
- TSLA
- Atreides Management
- Nvidia
- Broadcom
- Tesla
Watch the episode
Watch “"Is there an AI bubble?” Gavin Baker and David George” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The a16z Show, this episode and its artwork belong to Andreessen Horowitz. Octagon is not affiliated with the show; this page is an independent summary.
