Anthropic’s IPO is major clearing event for AI trade: Melius’ Ben Reitzes

THE SUPPLY SHOCK OF, OF HIGH OIL AND DIESEL PRICES BECAUSE OF THE WAR IS WHAT'S DRIVING THE INFLATION. >> YEAH, WE'LL LEARN A LOT MORE WITH PCE AND GDP LATER IN THE WEEK. SHIFTING TO TECH THIS MORNING BROADCOM PARTNERING WITH BLACKSTONE AND A HANDFUL OF BANKS ON A $63 BILLION DEAL TO FINANCE AI CHIPS FOR ANTHROPIC COMES AS ANTHROPIC'S S-1 FILING SHEDS SOME LIGHT ON THE COMPANY'S FINANCIAL PERFORMANCE. OUR NEXT GUEST JUST PUBLISHED A NOTE ON ANTHROPIC, SAYING ITS FINANCIALS ARE ROCK SOLID AND THE PUBLIC OFFERING WILL BE A MAJOR CLEARING EVENT FOR THE AI TRADE. BEN REITZES IS HERE, HEAD OF TECH RESEARCH OVER AT MELIUS. BEEN DYING TO KNOW WHAT YOU THOUGHT OF THE OF THE PROSPECTUS YESTERDAY. >> YEAH. WELL I, I LIKED WHAT I HEARD. OBVIOUSLY YOU GOT TO LOOK THROUGH SOME OF THE RISKS THAT MAKE YOU FEEL LIKE WE'RE IN A SCI FI MOVIE. AND ONCE YOU MOVE PAST THAT, THE 85% GROSS MARGINS FOR INFERENCE WERE REALLY GOOD. AND, YOU KNOW, I'LL BRING OUT MY HANDY DUO, BUT WE PUBLISHED A CHART ABOUT HOW THE COST OF COMPUTE IS GOING DOWN FOR THEM. FOR EVERY DOLLAR THEY SPEND, THE COST IS GOING DOWN AND DOWN. IT'S GOING TO COST THEM, YOU KNOW, FOR A DOLLAR OF REVENUE, $0.25 GOING INTO NEXT YEAR. AND THAT TREND IS REALLY GOOD. SO WHAT I THINK WAS GOOD FOR THE MARKET WAS THEY GOT TO SEE A HEALTHY GROSS MARGIN AND A LOWERING COST TO SERVE, WHICH THEN PROMOTES THE ECONOMICS OF THE AI BUSINESS. >> DO YOU THINK THAT AS WE GET CLARITY ON THE CURRENT QUARTER, REVENUE GROWTH WILL BE SATISFACTORY? >> I DO I THINK THAT THEY'RE IN THE PROCESS OF KIND OF LAYING EXPECTATIONS FOR INVESTORS THAT ARE THEY CAN BEAT I MEAN, HOPEFULLY THEIR BANKS ARE GIVING THEM SOMEWHAT DECENT ADVICE TO SANDBAG THE NUMBERS SO THEY CAN OUTPERFORM THEM. BUT I DO THINK THERE'S THIS ISSUE THAT'S AGAINST REVENUE OF COMBATING DISTILLATION FROM THE CHINESE MODELS AND THE FOLKS THAT ARE, AS IN THEIR WORDS, STEALING FROM THEM. AND THEY HAVE TO CUT THAT OUT. THAT WILL BE A HEADWIND FOR A FEW QUARTERS. AND THEN WHEN THEY GET TO THE OTHER END OF THAT, THERE'S PROBABLY MORE ACCELERATION. >> TO COME. YEAH. I MEAN, THEY SAY AS MUCH AS 5 TO 7% IN REVENUE HIT FROM DISTILLATION, ALTHOUGH THERE SEEMS TO BE BELIEF THAT MAYBE A LOT OF THAT ALREADY TOOK PLACE. HOW DO YOU SEE MARGINS? YOU KNOW, AGAIN, IN TERMS OF GROSS MARGIN, YOU MENTIONED IT, BUT AS WE LEARNED, I MEAN, THEY'RE SPENDING ENORMOUSLY ON COMPUTE. IT MAY BECOME MORE PROFITABLE. BUT AND LEASES AND EVERYTHING ELSE, THEY'RE ONLY RAMPING THAT UP. BUT YOU CONTINUE TO THINK GROSS MARGINS WILL ACTUALLY INCREASE. >> NO. I MEAN IT'S HARD TO SAY THEY INCREASE FROM THE 85 ON INFERENCE THAT WE'RE SEEING. >> WELL THAT'S ON INFERENCE NOT TRAINING OBVIOUSLY. >> RIGHT. BUT LOOK, THE THE THE BOTTOM LINE IS IF THAT'S THERE'S GOING TO BE A LOT MORE. ONE OF THE THINGS I LIKED WAS THAT THERE'S GOING TO BE A LOT MORE TRAINING. THEY'RE GOING TO HAVE TO PUSH SCALING LAWS AND WHATNOT TO THEN SELL THE RAZORS KIND OF TRAINING. AND THE BLADE IS THE INFERENCE. AND SO THAT. >> TRAINING IS NOT CHEAP. >> NO, NO. AND I THOUGHT IT WAS GOOD. YOU KNOW, THE NVIDIA COMMITMENTS ACTUALLY LOOKED A LITTLE BIGGER THAN I WAS THINKING. OBVIOUSLY THE BROADCOM AND GOOGLE STUFF WAS IN LINE WITH WHAT WE WERE THINKING. LOOK I THINK THAT AS LONG AS THERE'S MARGINS COMING OUT THE OTHER SIDE LIKE THAT, THERE'S GOING TO BE FINANCING LINING UP. AND I KNOW RIGHT NOW YOU GUYS ARE LOOKING AT ME LIKE I'M CRAZY BECAUSE THE MARKET'S BLOWING UP A FEW WEEKS AGO. BUT AS LONG AS THE MARGINS ARE COMING OUT LIKE THAT, I DO FEEL LIKE THE PRIVATE EQUITY FIRMS BE LINING UP TO HELP THEM WITH FINANCING. AND LOOK, HOCK E. TAN LAST NIGHT