OpenAI buys TBPN, SpaceX’s $2 Trillion IPO?, Iran Disables Amazon Infrastructure

OpenAI buys TBPN. Will it pay off? SpaceX files for an IPO, and it's a big one. And Iran has hit Amazon targets in the Gulf, rendering at least a few inoperable. That's coming up on a big technology podcast Friday edition right after this. I've interviewed a lot of great tech founders on this show, and one surprisingly universal challenge comes up again and again, finding the right domain name. It's something I ran into myself when launching big technology. The names you want are often taken, and it's tempting just to settle and move on. But the founders I respect most don't settle on fundamentals, and your name is one of them. It should immediately signal what you actually build. That's what I appreciate about .tech domain names. It just makes sense. It tells the world, your customers, your investors, anyone Googling you, that you're building in technology. Clean, direct, no qualifiers. And I'm seeing more serious startups lean into it. 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And taking the test at home was so easy. If you're serious about optimizing your health and longevity, this is a really powerful tool. Right now, Big Technology Podcast listeners can get 20% off at truediagnostic.com. Use code BIGTECH at checkout. That's truediagnostic.com and use BIGTECH for 20% off today. Choose TrueAge, TrueHealth, or the combo kit as a one-time purchase or a subscription. Welcome to Big Technology Podcast Friday edition, where we break down the news in our traditional cool-headed and nuanced format. We have a great show for you today. We're going to talk all about OpenAI's controversial buy of TBPN and whether it will pay off. Also, SpaceX has an IPO in the works. Finally, they're looking to raise maybe $40 to $80 billion at a $2 trillion valuation. We're also going to talk about some issues in the private credit world, and Iran has hit some Amazon infrastructure. We'll talk about what that means. Joining us is Liz Hoffman. She's Semaphore's business and finance editor and a special guest here with us today. Liz, welcome to the show. Hey, Alex. Thanks for having me. Thanks for being here. Let's start with the big news of the week. Definitely had to check the headline twice on this to make sure that it was actually April 2nd and not April 1st. This is from The Wall Street Journal. OpenAI buys tech industry talk show TBPN. OpenAI is getting into the business of daily news. The maker of ChatGPT said it has acquired TBPN, an online talk show that aims to compete with Bloomberg and CNBC in by-the-minute analysis of technology news and executive interviews. While TBPN's audience remains modest, averaging around 70,000 viewers per episode across various online platforms, the show has become popular among Silicon Valley power players who consider it more supportive of their industry than traditional news outlets. Chief executives who've appeared as guests include Meta Platforms, Mark Zuckerberg, Microsoft Satya Nadella, and OpenAI's Sam Altman. All right, I have some thoughts about whether this is a good purchase or not. But Liz, I'm curious to hear your perspective. Can you explain what TBPN is? Because there are some people that still don't know. And whether you think OpenAI is making the right move in buying them. Yeah, it's a really popular tech talk show. I mean, it's on air live for like a lot of hours every day and has actually a real following in Silicon Valley, has real executives come on. I don't know whether, you know, they would call themselves journalists. That would be an interesting question to ask them. They are clearly, there's no doubt about what side they're on. They want the people on their show to succeed and it's generally a fairly light interview. But they've captured a real portion of the sort of tech media brand space. Do I think it's a good move? I don't know. I mean, Sam Altman said he bought it because he likes it. And, you know, one way to look at it is that, you know, billionaires buy media companies because they're influential and they like having a megaphone. You know, Rupert Murdoch owns a lot of media. Mark Benioff bought Time Magazine. Obviously, Jeff Bezos bought the Post. Jamie Dimon gave an interview recently where he was saying maybe what he'll do after he retires is start a media company. You know, it is a sexy, fun thing to own. You know, but also I think tech, and particularly AI, is sort of looking around and realizes that the country is not with them. And that they have some questions that they need to answer and some real pushback is starting to emerge. I don't know that buying a real industry inside media company that is mostly talking to people who already agree with you is going to be the way to do that. But, you know, controlling the narrative is not a new idea. All right, so first of all, I'll point out there was a difference. There's a difference here, which is that these examples that you gave of Bezos, Benioff, they're almost like personal side projects for these billionaires. This is OpenAI acquiring TBPN as a direct content marketing vehicle. So that's very different. So they expect that it will not just be a vanity project, but contribute to the company's bottom line. And interestingly, they're stopping all advertising. So then the question is, why do the deal? I'm going to read the best argument that I've heard for the deal. And then I'm going to explain, I'll give it away. I don't like the deal, but I'll explain why after I read this and then we can talk through it. So this is someone who talked about OpenAI did $3.7 billion in revenue last year. By the way, the latest numbers are they're doing like $2 billion a month now. They spent just a fraction of that to own the living room of every founder deciding what to build on. Most people are treating TBPN acquisition as a media story. It's actually a distribution story. So here's the thinking. If OpenAI has, you know, it's going to spend what? $1.3 something trillion dollars in the neighborhood, maybe a little bit less, maybe a little bit more over the coming years to, you know, make this bet that its AI is going to work. It's getting into the enterprise world. All of the companies that are going to be spending money with it, they are watching TBPN because it is this industry publication. And like you mentioned, the clips go viral on X. They have all these executives coming in on important moments, sharing their perspective on the world, probably again, because they think they'll get a friendly interview and often they do. Well, they do ask some good questions sometimes. And if you are OpenAI and you own that network, you could reach all the people who are making decisions. Do I want to go with OpenAI? Do I want to go with Anthropic traditional content marketing? You know, maybe that makes sense, but this is a big swing and in a big industry, you need big swings. Is that logical? I don't know that that, I think that there's better, like if you really want distribution and enterprises, go buy Salesforce, right? Like find whatever that last mile is into these big companies. And I think, you know, a lot of the spending that's going to determine whether any AI really pays for itself, but you know, who wins this race, isn't going to come from the companies whose executives are on TBPN. It's going to come from like Goldman Sachs and Walmart. I mean, it's gotta, it's gotta escape the tech economy to have real enterprise customers that are just like out in other industries. And like those people are not watching TBPN. I don't know. I actually just sort of thought it visited a vanity play. And you were saying that those, those other executives, those other billionaires bought those things personally. But like Sam, this, I assume this is an OpenAI stock. Actually, I'm not a hundred percent sure, but that is Sam Altman's, that is his vehicle, right? He, he is so intertwined personally, financially with OpenAI. I assume, you know, that, that that's what's going on there. I, I'm skeptical of it, I guess, for like a slightly different reason, which is, you know, I remember, um, go back like 10 years when WeWork and Adam Neumann were on top of the world and Adam got really into surfing. And so then he bought that wave pool company. Like in general, you know, you, you give tech, tech founders enough VC money and they do, they do start to indulge their personal sort of pet projects. Um, and that, I guess at least in that case, was sort of like absolute peak WeWork. Perhaps, uh, top tech that one a bit. I'll make the bear case with you, um, No, and there's also that big online glossy, I think it's called Colossus, that's always doing these big, glowy profiles. They have the feel of like a Vanity Fair, but are not there to poke holes in any of these tech giants. You know, but you're seeing a lot more like the all-in pod. I think Jason was tweeting about this, saying, go direct, go direct, go direct. You know, the media ecosystem has changed a lot and places like X and, you know, the sort of long tail of fragmented media make it a lot easier to go direct. So, we'll see. I think you're right. I guess if they really cared a lot about their credibility, they wouldn't have sold to a company that they cover. That's sort of basic media. Right. So that's number one. And, you know, I think there's an argument to be made against me on that front, which is just like, you know, you're like you said, you're salty and one of the people who believes in values that are long gone, and people just want to be informed without these people who are salty about things, and the two hosts of TBPN are friendly and they're going to still have purchase in the AI world. And I'll accept that as a counterargument, although I sort of I think I was just a little too harsh on myself. I do have optimism about a lot of technology, but there are certainly a lot of like, we can both agree that there have been a lot of cranks out there who've just sort of like, you know, journalism has done one way. TBPN was never journalism, and they're going to suck at OpenAI too. And I sort of disagree with that notion. But I think, to me, the bigger note, the bigger problem here is this might be a solution, the wrong solution to the right problem. And by that, I mean, you're right, Liz, and you brought this up, AI has a very big perception problem right now. And this is something that AI, you know, they are mindful. And even the reporting that you're seeing in come out in The Information and The Wall Street Journal tells us that this was, you know, part of the aim of bringing them on. This is Fijimo, OpenAI's head of AGI deployment. She wrote in an internal memo, as I've been thinking about the future of how we communicate at OpenAI, one thing that's become clear is that the standard communication playbook just doesn't apply to us. We're not a typical company. We drive a really big technological shift. Cimo wanted to explore new ways to communicate OpenAI's mission and the impact and applications of its technology to the public. In response to questions from OpenAI staffers about the acquisition on Thursday, Cimo said in internal message she believes OpenAI can do better at communicating publicly about the benefits of its products. OK, so aside from the fact that the people inside OpenAI thought that this was an April Fool's joke after Cimo explicitly told them, no side quests, this rationale, I don't, and listen, I get wanting to change the narrative. I just think it's the wrong solution because if you look at the YouGov polling, and we've talked about it on this show, who are the people that do not like AI? The most negative group about AI are people who have not used it or seen anyone else use it. They're only positive about AI, it looks like, 22% of the time and negative 60% of the time. People that have seen it used but haven't used it for themselves are the most, they have some positive views, but in terms of pure negative, they're the most, 62% of them are there. But the people who regularly use AI compared to that 62%, only 26% of them are entirely negative or more negative than positive on AI. And that is TBPN's audience, the people that regularly use AI. When you think about the cross-section of the public that needs to hear this message, it's not them. It's the other people. And TBPN doesn't cater to them. And that's why I think this acquisition is the wrong one. Yeah. No, which is why I actually just think this is a, this is just a thing Sam wanted to do. It seems to me that the simplest solution is the easiest one. And, you know, they are going to have to, you know, follow a much broader public discourse strategy to convince the huge swaths of the public that really just increasingly by the day hates this technology and is terrified of it and doesn't like the people founding it and, you know, is afraid of losing their jobs. I don't think, I don't think this is gonna change the narrative. And I guess I'd be surprised if really smart people inside OpenAI thought it would. This just seems to me like this is a thing Sam likes, so his company bought it. But I'm going on TBPN next week, I think, so I will ask them what they make of all of this, see if we could flip the interview a little. That's that's the way to do it. Why do you think people are so negative on AI? Well, they're afraid of it. I mean, just literally afraid that it will take their jobs, which is a very normal fear and not inaccurate in directionally, at least here. But I also think it's just dystopian. Like it is. Look, I like AI. Like I, I mean, this is obviously a magical technology. It has huge economic potential benefits. It, you know, you talk to people in, for example, healthcare and biotech about what it could do on the drug discovery side. And this is like magic stuff. Um, but it feels like it doesn't have anyone in the driver's seat. And I don't think that Silicon Valley in general has done a good job showing that they can be trusted with much of anything. And even they say they don't really understand it. You're talking about a really powerful technology being developed by people who like charitably do not look like the average American, do not behave like them, are unimaginably wealthy, like have weird habits. Like, you know, they're all like, they're all slightly cartoonish. And then you see it showing up in your communities in these big faceless data centers that are to varying degrees. We can argue about how true this is taking your energy, taking your water, like, you know, putting, they're faceless and they are really scary. And this, like, this is not a huge mystery to me why people hate this stuff. And, and you're right, like the people who use it seem to like it. You see the benefits of it. Um, but yeah, I mean, this has a huge, huge image problem and you're starting to see real backlash in local communities. And I don't think that's something that these big companies have thought a lot about, or they're starting to now and realizing that they are woefully ill-equipped to tell that story. Yeah, they're noticing it. I mean, they notice that they have a narrative issue, but it does not seem like TBPN will be the answer to that. Interestingly, just as we started to head to the recording booth, so to speak, some news. This is from the Wall Street Journal. OpenAI top executive Fijimo to take medical leave from the company. OpenAI's product and business chief Fijimo, who by the way, is now the head of AGI deployment. She's taking medical leave from the company for several weeks. An absence that sorry, an absence that comes as the startup revamps its leadership ranks and prepares to make its public market debut. In an internal note to staff, Seamo said a neuroimmune condition had worsened and that she had postponed medical tests and new therapies to stay focused at work. Since starting her job last August, it's now clear that I pushed a little too far and that I really need to try new interventions to stabilize my health. There's more shakeups happening within OpenAI. OpenAI is making other changes to executive team. To its executive team, handing former Slack executive and revenue chief Denise Dresser commercial responsibilities that were previously the purview of operating chief Brad Lightcap. Lightcap will now focus on special projects. OpenAI said it doesn't have any immediate plans to appoint any new COO, which is the role that Lightcap held previously. Constant change within OpenAI, and it continues. Yeah, I mean, these companies, arguably setting aside the people working on the technology, I think the key role at these companies is chief commercial officer. How do you commercialize this stuff and monetize it? And, you know, getting back to where we started on like, where's the enterprise business? How do you get those subscriptions? You know, I use OpenAI a lot, but I don't think I've ever given them a dollar. So like, how do you take this from the lab, you know, into the real economy? I have one last point on this, then we can move on. OpenAI, especially under Fiji's leadership, has been in recent weeks, much more focused, no more side quests, shutting down Sora. And so there's been, I think, a lazy argument that, yeah, a lazy argument that buying TBPN is a side quest, which it invariably is, but I think it misunderstands this no side quests directive, which was all about compute. You don't want to waste compute on side quests. You want to focus on the core thing. Yes, it will take some attention, but I don't think TBPN is exactly going back on the command about side quests here. Yeah, I don't think that show is sucking up a ton of compute. No. Definitely was to make these human generated videos than the AI generated videos, which is kind of an interesting moment in time for those, again, going back to the job loss thing, for those who think AI will immediately take over. Well, It's a lot easier to see the jobs that AI will kill than the jobs that it will create. And particularly in the knowledge economy, these are, you know, I've spent the last 15 years covering Wall Street, and these are big pyramid businesses where a lot of, you know, they hoover up these kind of young graduates from, you know, from the Ivies and from business schools. And they spend a bunch of years doing like kind of drudge work, like this consulting, investment banking, that kind of thing. A lot of PowerPoint presentations, a lot of spreadsheets. AI can actually today do almost all of that. And so, you know, the other thing Larry said in the interview was that, you know, you're going to see this cohort. He was basically saying like, oof, like class of 2026, right? Like there's going to be a couple of years where the skills gaps are just really, really wide. And we're going to see, and I think we're going to see massive youth unemployment. You know, that, you know, 25 to 22 to 25 year old cohort for the next couple of years, it's already, you know, elevated beyond the national unemployment. And I think you are just going to see that skyrocket. And that's really bad. We don't have a solution for it. Yeah, I mean, you all, like, I could see the firm saying we have AI to do that entry level work. On the other hand, I might be scrambling to university campuses to try to get these 22 year olds who understand AI into my organization and working with it for my company. I think you're actually worried about that gap like a couple of years. Like I think, you know, I'm, I was sort of internet native, right? And maybe, but was the probably not mobile native. Like I got my first job in 2000 and I think I had my first job before I had my first iPhone, if that helps you. And then, so you had, then you had a mobile native employee base. I'm not sure how helpful that was. Mobile is obviously a big platform for our lives, but it's fairly intuitive. But I, I think you may end up with a generation of workers that just gets skipped. Like I, you know, what's what's, what are people saying? Like, I'm not going to lose my job to AI. I'm going to lose it to someone who knows how to use AI. And so I am endeavoring to learn how to use AI, but I'm like afraid of high schoolers. I'm not, I'm not afraid of 25 year olds right now, because I don't, I don't think they are in a much better boat than, than slightly older people who kind of understand the internet, but are not AI native. And there's the same argument, I think, I've been thinking a lot about this actually, like with the SaaSpocalypse and the tech companies and the shakeout there that I wonder how much of an advantage it is going to be to be an AI native company, right? There's a lot of questions of, well, can Salesforce just do enough with agents and build enough of its own AI to remain relevant and sticky? But the real question to me is the AI native companies that are being built directly on top of these models. Like, is there something in the DNA there that makes, that makes them win in the way that, you know, really with the exception of Microsoft, that pre-mobile generation of tech companies just got, got totally overshadowed and overtaken by the ones that were built right on top of the internet. And what's your best guess as the answer to that one? I don't know. I don't know, but I think, I, I, I suspect that this was, this is a bigger technological leap than anything we've seen, certainly since the internet. It is bigger than mobile. And I think there's probably something in the DNA of AI native companies that will, will help them succeed. Like I was just been on a tour some, I talked to a bunch of lawyers recently and like, you know, they're using Harvey, they're using Legoda, you know, Thomson Reuters has spent a lot of money on, on AI and, and they have something called co-counsel. And that's like a perfect case study. Like, can Thompson Reuters, you know, a hundred and something year old, you know, big professional services and media organization build enough AI to remain relevant, or does Harvey just come and say, like we just, we just built this all in Anthropic. And by the way, we have like 50 employees and we're not hiring anymore. I mean, that is, that is where the economics start to go sideways for legacy companies. Definitely. I mean, this was the argument that Sam Altman made to me at the end of the year last year, where I asked him about the competition with Google, and he goes, basically, there are going to be two types of companies, ones that try to bolt AI on and one that build ones that build AI from the ground up. He goes, we are building AI from the ground up. They are bolting it on. That's why I think we have the chance to win. He might be right, but that's obviously, that is the right question to ask about, about big tech right now. We just got new jobs numbers in. Are you seeing anything in terms of AI job loss in the new, in the new numbers? Not really. The jobs numbers came out today for March. Pretty good, actually. And on the, on the heels of some, a couple of months of like very, very bad ones. I think there was, there was a report yesterday from a private data tracker called Challenger Gray that, you know, it does track sort of what it counts as AI related job losses that are obviously growing quickly. My theory on this is that AI is an excuse for companies to do layoffs. Just like the tech isn't good enough. It isn't embedded in enough workflows to like maybe outside of tech companies, you know, Mark Zuckerberg has talked a lot about kind of what, what a meta engineer is and isn't doing right now. And so maybe there, like they will hire more slowly. I think it's air cover. These are companies that massively overhired, you know, in the late 2010s through the pandemic, didn't want to fire people in the middle of a, of a pandemic because it makes you look bad. And then couldn't, then were kind of frozen for a couple of years and couldn't quite figure out what to do. I think AI is just air cover. Yeah. I saw unbelievable data from Indeed this week, actually, at a conference down in Dallas where you looked at software developers and I'm just going to describe the contours of the chart because I was asking about whether we've seen an increase in developer hires or developer listings on Indeed, and we have, but it's this small tick up and then you scroll back to about 2020, 2021, right mid COVID, and there's a mountain of new listings. So clearly there was just a massive hiring phase and, you know, people are trying to figure out what it means for their companies in 2026 still. And when they realize they've overhired, they say AI because it's a lot more convenient and forward-looking to say that than to say, oh shit, we mismanaged our company. Totally. And Jack Dorsey can, you know, lay off a bunch of people and say it's AI and maybe people believe him. But I, I think it's, it's totally an excuse. And like the software developer is an interesting one. We, I was talking the other day to the chief commercial officer at Anthropic and, you know, he was sort of saying that you have all of these developers, but they are basically managers of a bunch of, of bots that are writing the code. I think like 99% of the code for, for Claude is, is written by Claude. And like, that's fine. That person has a job that's a slightly different job, but it's the, it's the people who aren't hired to be those junior developers. I mean, this is a, this is a, like an exponential trend, not a, not a linear one to me because of the con, the industries that are being so hit by this are these knowledge economy jobs and they have the widest pyramids of, of any big companies. Just you think about kind of the, the junior associates, the, the baby investment bankers, the baby lawyers, the baby consultants, that pyramid is going to go from this to like this, to this, to this. And I think, you know, it's going to end up being like a diamond. Explain to those who are listening, explain to those who are listening what you're doing with your hands. Oh, sorry. I was, I was making the pyramid get, get narrower at the base until it eventually turns into a chimney and then maybe even a diamond where like the actual, the biggest chunk of, of the workers are, you know, people your age, my age who are like pretty competent at managing a bunch of agents. And then you have some senior people at the top, like generating a bunch of business. That is crazy. All right. I definitely want to talk about the SpaceX IPO because Elon Musk and co have filed for that IPO. And we also have some news about Amazon data centers in the Gulf. And potentially we can talk about what's going on with private credit and AI. So we're gonna do that after the break. But first, Liz, I'd love for you to shout out, you have a new podcast and people should go and find it and listen to it. I do. Thank you. Yeah. You looked like you were having so much fun in podcast land. We decided to, to join your ranks. Yeah. We launched a show about six weeks ago of where you expected it to land? I mean it looks like they're going to, this is according to Bloomberg, at more than $2 trillion. SpaceX's valuation would increase by nearly two-thirds in a matter of months. The company's acquisitions of Musk's XAI company valued SpaceX at $1.25 trillion in February. On the one hand, I find it kind of comforting as a finance reporter. I've had this theory for a long time that these companies were eventually going to have to go public that it stayed private for so long that that was really the story of kind of the late 2010s and early 2020s that there was just so much private money out there that who needs the public markets. But actually with this generation of of big startups is doing as we've been talking about is super capital intensive. You know, it's really expensive to build rockets. I think SpaceX actually is profitable. So in a bunch of ways, it looks really different than that generation of companies, software companies that went public in the 2010s. I mean, what I'm watching for is like, that's a lot of money. It's got to come from somewhere. I mean, it's it's weird. Like we don't usually think of IPOs as like market rotational events that require a bunch of money to move out of one set of investments and into another. But like $80 billion, that would be three times larger than the largest IPO ever, which was itself 10 times larger, 20 times larger than the average IPO. I mean, that was that would have been the Saudi Aramco IPO in 2019 that raised $25 or $30 billion. But the average IPO over the last 25 years raises about $200 million. So that is an easy job for investment bankers. But I wrote the other day that that giant sucking sound you're going to hear in the markets you know, this May and June is bankers running around asking for $80 billion, which by the way, I think they'll get. This is a profitable company that like seems to do an important thing really well. And Elon Musk is an incredibly good salesman. People want to invest in his companies, but that's got to come out of somewhere actually. And I think if you've got stocks, you know, still beaten down by the war by then, investors are going to be pretty reluctant to crystallize those losses by selling. Like I don't know, I think you'd actually, this is a big enough movement of money that you might see some weird knock-on effects in kind of more liquid markets. You know, I'd have my eye on treasuries if I were a betting woman. So yeah, I mean it's, it's giant, but I think it's, I think it is good. I think that, you know, Anthropic, just to take an example, is as valuable at, what is it, four or five years old now, as Google was when it was 15, as Amazon was when it was 25. And all of its wealth has been created in the private market in the hands of a relatively small number of people. Whereas 99%, I think Google was worth $20 billion when it went public. So 99% of its $4 trillion of value has accrued in public hands. And I think that is generally good to go back to what we were talking about earlier. There is like a, the wealth gap that AI is threatening to just massively explode. I think it's like a really dangerous political force to keep an eye on. And so like I would encourage these, these companies to go public. Yeah, so this would put SpaceX at bigger than, this is a good according to Bloomberg, all but five of the companies in the S&P 500. So only Nvidia, Apple, Alphabet, Microsoft, and Amazon would be bigger than it. It would be bigger than Meta and Tesla. And by the way, I think speaking of places that we could see people move money from and to, I think a lot of Tesla's shareholders might say, Oh, if I'm doing this to bet on Musk, if I could get a hold of SpaceX, which has like a clearer, I think a clearer trajectory, like Tesla right now is a bet on Optimus and SpaceX is like a bet on space and AI. I might just sell some shares from Tesla and buy in SpaceX and that could be very interesting. I think that's right. Though I would also say, I think one of the underappreciated reasons that that they are taking SpaceX public is to merge it with Tesla. Ultimately, right? Like Elon Musk has been collapsing his, his empire. And just as a practical matter, it's pretty hard for a private company, even a big one, to buy a big public company. It just doesn't work that well. You got to come up with a lot of cash. You can't use your stock. And so I, I would assume that Tesla gets merged in at some point. And so then it's just a question of like, you can do the math and what's the sort of cheapest way to get yourself a share in the combined Tesla SpaceX. I don't know. That's very interesting. Yeah. Maybe that will happen. That will be crazy. One super Musk company. I think that's where it's headed. Yeah. And he's done this before, you know, he bought SolarCity with Tesla, sort of famously complicated deal and had some theory of the case that they were going to put solar panels on the cars and they never really did. But, but yeah, it's clearly what he's been up to with XAI and X and SpaceX and all that. Okay. I want to talk quickly about this story that I just published today in big technology. And that is that we have some reporting that Iran has hit enough sites in Bahrain and Dubai that belong to Amazon, that there are a couple of availability zones in those regions that are hard down, according to some internal communication that I was able to see and that they're going to be unavailable for an extended period of time. So this is from the internal memo that I was able to get a hold of the two regions continue to be impaired and services should not expect to be operating with normal levels of redundancy and resiliency. We are actively working to free and reserve as much capacity as possible in the region for customers and services should be scaled to the minimal footprint required to support customer migration. So not only have these sites been hit, but the company is asking employees within AWS to deprioritize them. And I think this is interesting. I mean, we're about to enter week six of the war. And now the IRGC is threatening multiple other U.S. tech giants, including Microsoft, Google, Apple, Intel, and a bunch of others. So if this war continues to keep going, we could actually see a lot of big tech infrastructure in the Gulf, which was obviously built because there's access to money, access to energy there. And, and big investments have been made there. We could see it targeted. Yeah. Do you think, I mean, I'll ask you a question. Like you, you cover these companies. Do you think this war has made them, I'll give you my thoughts on from the Wall Street side, but do you think this has made them rethink this massive rush into a region that like has just been volatile and violent forever in the last five or 10 years, like built a lot of fancy hotels and had a lot of money and sort of tricked people into thinking it was safer than maybe it is. I will say this. I think there's a lot of optimists out there in the business community. And so my read on their perspective is they are hoping that this is going to be the last war for a while and it's not something that will continue to go on. Basically they've they're viewing it as a war to finish wars. And you almost have to view it through this optimistic lens because, you know, think about what we're hearing now from the AI labs, right? Like they have gone through basically all the funding they can get in the Western world. And now they're like sort of at the final boss before the IPO, which is the Gulf states and then they're going to go to the public markets. So it's like one of the last remaining sources of capital for them. And I think like, we talked a little bit earlier about how Silicon Valley can sort of have this rose-colored glasses on situations. And this might be one of them. So that would be my perspective on it. I mean, this is what happens. VCs are all like up and to the right dreamers. I don't know, you said war to end wars, and I just like, that is what everyone said about World War I too, right? So I don't know, that gives me bad vibes. It's, it's interesting because you know Wall Street has kind of made the same rush into the Gulf that, that big tech has for similar reasons. And I don't know. I mean, I think it is a people business. fundamentally, you're talking about hard assets. And actually I was talking the other day to the guy who runs a big business at Aon, the insurance brokerage. I was like, I wonder what's happened to the cost of, literally you can buy war insurance, which you know insures these assets against war and terrorism and damage. And he said prices have gone up 1,900% and the available coverage for any single asset has gone from $3 billion to $100 million in the matter of a couple of weeks. Yeah, you used to be able to get it for like 50 basis or 25 basis points. And now it's costing 5% in premiums upfront. So, you know, the people who underwrite risk for a living think there's a lot of risk of bad stuff happening to these assets. But then on the people side, you know, for a while, like being in the Gulf was, I say this in air quotes, like it was a hardship posting Definitely. Have you been out there? Have you spent time out there before? You know, it's funny. I have. I was in Saudi Arabia last year. I was in Abu Dhabi the end of in December. And I remember flying in. And I don't know why it hadn't occurred to me, but you're flying into Abu Dhabi and out the right side of the plane is the Arabian Peninsula and the Emirates. And then the left side, right across the Gulf, is Iran. I mean, it is... When you go, it's easy to forget because you're in Abu Dhabi and there's a Galleria and there's a Four Seasons. And like, it feels very Western and there's a lot of rich people in suits walking around. But it's like, I wrote about this a couple weeks ago, it is a nice house in a bad neighborhood. Yeah, I was in Qatar over the summer. And I think I've said this on the show, so it might not be new ground. But just a little too hot for me. I mean, maybe it was the season that I was there for, but... It's not a good summer place. But it was, I think, above 100 degrees Fahrenheit at night. And I'd never seen this before, and I don't think I'll ever see this again unless I go back to Doha. In downtown Doha, the sidewalks are air conditioned, which means that as you walk down the sidewalks, you feel a cold breeze coming up. And that is because there are vents underneath the sidewalk blowing cold air and turning what is a 100-degree night into something that feels more like an 80-degree night. That is impressive technology. But I think that's a little bit of a metaphor for the whole place, right? Like, this is a structurally problematic region of the world that they have engineered into feeling a little more comfortable than it probably ought to. That is a good metaphor. Okay, so last thing that I want to talk about before we go. You talked about private credit. You talked about how Meta used Blue Owl effectively to build some of its data centers. And things have, we've talked about this on the show a bit, but we can talk about it a little bit more. Things are getting a little hairy for these private credit companies. This is your story this week. Blue Owl faces withdrawal flood as private credit jitters persist. Investors rushed out of Blue Owl's flagship and technology-focused credit funds as jitters continue to sharpen in private credit. Its largest fund, a $36 billion pot of corporate loans, received redemption requests for 22% of its assets at a smaller $6 billion fund, saw 41% withdrawal rates. And Blue Owl capped both of those at 5% withdrawals. So basically, this means a lot more people want to go and get their money out of these private credit companies than it's willing to distribute. And is this the beginning? I mean, everyone's wondering, is this the beginning of a crash that's going to take down the whole economy because they made these investments that might not pay off in AI infrastructure? What's the truth here? Yeah. All right. I think you have to unpack that a little bit. So what we are actually seeing, and those redemption numbers, we are seeing a slow-moving run on a bank. So to go back a couple of years, remember when Silicon Valley Bank, like, failed over a weekend because everyone took their deposits out? That is basically what is happening in the private credit industry. Because of the way these funds are set up, you noted that they gated at 5%. And that is true, but that's what they're supposed to do. These funds are required to make quarterly offers to buy back. These are non-traded funds. So you own a share in it, but it's not like you can trade it on an exchange. But every quarter, you can go to Blue Owl and say, I'd like my money back for the share. And they'll give it to you as long as, in aggregate, not more than 5% of people want to do that. So that's what they're designed to do because, remember, they're holding loans that they can't buy and sell very easily. So they keep some cash on hand to fund those withdrawal requests. And when everything's working fine, it's working fine. But obviously, this is designed to malfunction when there's panic, which is where we are now. So for the moment, it's a bank run, which is a liquidity problem. They have illiquid assets. People want their money back. That is not a fixable problem. So that's where we are on that side. The other question which you're getting at is, is there a credit quality problem? Are the loans themselves bad? Yeah, why are people making this run? Is it just behavior? Talk about that. It is partly behavior. It's partly, look, for the first six years it was around, Blue Owl just raised money from sophisticated institutional investors. And it's not just Blue Owl. It's Blackstone and KKR and Apollo and all of these HBS big firms. And then they said, well, we're kind of tapped out there, but there's a whole bunch of individual people. What if we sold it to them too? And because people live their lives differently than institutions, you have to give them this quarterly liquidity. So this is sort of like, they were, this is a consequence of their own actions and their own desire to keep growing and to find new places to raise money. The question of whether the loans themselves suck, that is a fair question. We don't actually know. A lot of them are, certainly there's this vintage of lending from call it 2021 and 2022, probably some real bad loans there. Did they raise too much money? This was the sort of peak software. They were making these loans. I don't know if you've talked about them on the show yet, called ARR loans. Usually banks underwrite a company's ability to borrow based on its profits. But tech companies, especially fast growing ones, don't have profits. They have revenue. And so they based it on annual recurring revenue. So they'd say, well, this company's making a lot of top line money. Let's lend them. Let's make that the metric. Let's change, you know, 10,000 years of lending economics. Make that the metrics. And then like three years when they've got a profit, then we'll kind of flip, we'll flip a switch and the loan will start behaving like a traditional loan. And then they got to three years and none of those companies had profits. And they're like, oops. So obviously the credit underwriting was pretty bad on a bunch of that stuff. But, you know, Blue Owl was able to sell a couple of weeks ago. They had this problem in another fund and they were able to sell, I think, like a billion and a half of loans at 99.7 cents on the dollar. So I don't know. I think, like, most of the loans are probably fine. And by the way, not to like, I'm sure your listeners understand a capital stack. Like the credit, this is senior secured credit, which is the safest place to be in any kind of corporate financial structure. If you think there's a problem there, the equity underneath it, whether that's, this is mostly private equity, is like a zero. So it is weird, you know, if you imagine this is like a floodwater is coming in. It's weird to have the people on the top floor panicking first before the people on the ground floor. And yet that's what's happening. And so that makes me think that this is sort of more emotional and technical and less about the, and the loans themselves might be bad, but I don't actually think that that is what is informing what's happening now. Okay. Andrew Ross Sorkin was recently on talking about the similar thing that private equity would have the problem before private credit. So let me just see if I can understand where the issue would be. And you tell me how off I am, because I'm gonna be off here. Is it that private equity has invested a lot of money in software companies? And now there's this thing that's called AI that sort of throws the value of those software companies and those companies ARR into question. And so therefore the private equity companies that have bet on these software companies begin to fail. And then when they fail, private credit starts to fail. And that's how you get this cascading economic disaster. Is that the worry here? I mean, sort of, that is how finance works, right? Which is that if a company gets in trouble, the first losses are borne by the shareholders, right? And then the creditors get whatever is left. So as a practical matter, that's true. These companies, their revenue would go away. Their profits would go away. They would be unable to repay their loans. Their lenders would force them into bankruptcy. The equity is zeroed out. And so that's where you would look at firms like Toma Bravo, Vista, right? These like really, these are big PE firms that only own enterprise software companies, basically. They own tech businesses. So that's where you're actually looking for the problem. And then the creditors will get what's left. And some of those loans will be what we call impaired and they might lose some money. Maybe they only get 90 cents back on the dollar that they lent. But that equity, which is hundreds of billions of dollars of equity sitting underneath, sitting junior to this credit, is worthless. The reason that people aren't talking about this as much. I will say, I started writing about this like three months ago. And I was like, where is the panic there? And the answer is that it's actually, they just haven't marketed those funds to individual investors the same way that private credit has. So the twitchiest people. Why does the equity become worthless? Because it's, I'm trying to figure out how to explain this in a way that isn't going to be super boring. It is, in finance speak, Revenue basis. I would never ask you your profits. Big technology, for those who are wondering, we're not for sale. We're not going to OpenAI. We're not going to Anthropic. We're not going to xai. We're not going to Salesforce. We're not doing that. This show, this newsletter that I write is staying independent. We're not selling. And I'm going to just keep doing this for the next 20 or 30 years and then retire. So stick with us. Hold on to your integrity. That's right. I mean, also, I'll just say it. I enjoy doing this. I don't want to work for somebody else. Like I said at the beginning, you know, the second you come inside a company, you're now that company's content marketing arm. You're not doing what you did. You're doing something completely different. And that's not what I'm interested in doing. If you want to advertise on the show, that's a different story. You can advertise for, you can advertise here. We're happy to hear from you. Check out the email address in the show notes, but no, not for sale. All right. Good to know. The podcast is called Compound Interest. Liz Hoffman has been our guest. Liz, welcome. First time having you on the show. This was really fun. Thank you for coming on. It was a pleasure. Anytime. Thanks for having me, Alex. All right, everybody. Thank you so much for listening and watching. We'll see you next time on Big Technology Podcast. How many discounts does USAA auto insurance offer? Too many to say here. Multi-vehicle discount. Safe driver discount. New vehicle discount. Storage discount. Legacy discount. How many discounts will you stack up? Tap the banner or visit usaa.com slash auto discounts. Restrictions apply. Ryan Reynolds here from Mint Mobile. 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