20VC: OpenAI's Multi $BN Deal with AMD | Polymarket, Vercel and Supabase Raise Mega Rounds | Does King Making Really Work in Venture Capital: Harvey vs Legora | Chamath is Back: The SPAC is Back
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🎯 Summary
Comprehensive Summary of 20VC Episode: OpenAI’s Power Plays, Chip Wars, and the Future of App Integration
This episode of 20VC, hosted by Harry Stebnings, provides a deep dive into the strategic maneuvers of OpenAI, particularly following its recent DevDay announcements, and analyzes the shifting power dynamics in the AI hardware and software ecosystem.
1. Main Narrative Arc and Key Discussion Points
The episode centers on OpenAI’s demonstration of immense leverage in the market, exemplified by its highly favorable partnership deal with AMD. The discussion then pivots to analyzing the implications of OpenAI’s DevDay announcements, specifically the integration of third-party apps (GPTs/Actions) into ChatGPT, and concludes with a critique of current venture capital valuation trends in the AI space.
2. Major Topics, Themes, and Subject Areas Covered
- OpenAI/AMD Partnership: Analyzing the terms of the deal where OpenAI secured warrants for 10% of AMD in exchange for committing to purchase significant chip volume (up to six gigawatts).
- AI Hardware Ecosystem Dynamics: Contrasting the OpenAI/Nvidia relationship (where Nvidia took equity) with the OpenAI/AMD relationship (where OpenAI took equity), highlighting the power asymmetry.
- The “Windows-Intel Game” Analogy: Drawing historical parallels between the current AI duopoly (OpenAI/Nvidia) and the original PC monopoly (Microsoft/Intel), and the role of the second source (AMD/IBM).
- OpenAI DevDay Analysis: Evaluating the new features, particularly the integration of external applications (like Canva, Spotify) into ChatGPT.
- The Future of Agent Orchestration: Discussing whether OpenAI’s new Agent Kit capabilities threaten existing automation and integration companies (like N8N).
- Venture Capital Math and Delusion: Questioning the sanity of recent massive valuations for early-stage AI companies, such as a $1 billion raise at a $5 billion pre-money valuation.
3. Technical Concepts, Methodologies, or Frameworks Discussed
- Warrants vs. Equity Purchase: Clarifying that OpenAI received warrants (the right to purchase stock at a low price, contingent on future chip purchases and stock appreciation), which is a powerful, leveraged financial instrument.
- Architectural Lock-in: Discussing how monopoly status (like Nvidia’s in high-end AI chips) defeats the normal component-vendor dynamic where buyers dictate “cost plus 20%” pricing.
- Agent Kit/GPTs: The framework allowing users to build custom AI agents that integrate external APIs and services directly within the ChatGPT interface.
4. Business Implications and Strategic Insights
- OpenAI’s Power: Sam Altman is recognized for understanding and executing on power dynamics. He extracted significant equity from the weaker supplier (AMD) while accepting equity from the dominant supplier (Nvidia).
- Nvidia’s Position: Despite being the primary beneficiary of the AI boom (with 50% operating margins), Nvidia must strategically manage its relationship with OpenAI to avoid market share erosion, knowing that OpenAI’s user base grants it leverage.
- The User Asset: The key insight is that having the users grants OpenAI leverage, even while burning massive amounts of cash, allowing them to dictate terms to hardware suppliers.
- Microsoft’s Parallel Dilemma: The historical parallel suggests Microsoft, like IBM before it, may have enabled a new monopoly (OpenAI) that could eventually challenge its own platform dominance, though Microsoft secured a better initial deal by taking ownership stakes.
5. Key Personalities, Experts, or Thought Leaders Mentioned
- Sam Altman (OpenAI CEO): Central figure whose strategic deal-making is being analyzed.
- Paul Graham: Referenced for his early understanding of power dynamics, which Altman seems to embody.
- Jensen Huang (Nvidia CEO): Mentioned in the context of managing the complex relationship with OpenAI and maintaining market share dominance.
- Mark Benioff (Salesforce CEO): Mentioned in relation to the concept of integrating enterprise apps directly into LLMs, a concept he initially dismissed but is now being pursued by OpenAI.
6. Predictions, Trends, or Future-Looking Statements
- The speaker predicts an “elaborate dance” where Nvidia must concede some market share and price control to maintain its overall dominance against competitors like AMD.
- The success of OpenAI’s app integration strategy is uncertain; the speaker was underwhelmed by the initial DevDay demos, suggesting the “aha moment” for mass adoption might still be missing, similar to the limited utility of many Slack integrations.
- The trend of massive, early-stage AI valuations is seen as potentially breaking traditional venture math, requiring companies to hit multi-hundred-billion dollar outcomes just to justify current entry prices.
7. Practical Applications and Real-World Examples
- AMD Deal: OpenAI committing to buy chips equivalent to six gigawatts of power consumption.
- DevDay Apps: Examples cited include integrating Figma, Canva, and Spotify directly into ChatGPT workflows.
- Salesforce Integration: The desire for users to query their Salesforce data directly within ChatGPT rather than logging into the CRM.
8. Controversies, Challenges, or Problems Highlighted
- Nvidia’s Margin Pressure: The extreme 50% operating margins of Nvidia are highlighted as an unsustainable anomaly that buyers (like OpenAI and Microsoft) will naturally seek to attack through diversification.
- The Component Business Trap: Historically, component businesses (like semiconductors) are
🏢 Companies Mentioned
Lovable
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tech
Wix
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Base44
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Grow
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tech
Guillermo
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Mike Cannon-Brooks
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tech
Drew Houstons
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tech
Aaron Lovies
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tech
FiveTran
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tech
dbt
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tech
Northwest
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finance
Brown
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finance
Illia
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tech
Safe Superintelligence
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Thinking Machines
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tech
💬 Key Insights
"I'm not sure that's true in the age of AI. I'm not sure that you lose the capital. I think it's often inverted, where that capital is more helpful, right?"
"But then they consume a lot of capital. And if the question is, if you could be a new entrance to the market in number three, and I'm before I'm choosing to be capital-light, that's great. But if the space requires capital to win, or the founders believe it, then kingmaking becomes a prophecy because you you just bow out."
"the cash enables that as huge, and as huge when it happens without cash. And then two, what you've seen is kingmaking pre-revenue, which is companies that are at three, four, five million dollars in revenue... getting 50 to 200 million dollars successive rounds on the back of a tier one with an iconic or you name your multi-stage fund coming in very quickly afterwards."
"I think to some extent, everything OpenAI has done has been bought brilliant technical and financial kingmaking."
"What you're effectively saying is normally you figure you start with high revenue multiples because by definition, you revenue multiple is infinity on the seed round... But what you're seeing in some of these AI companies is people are effectively saying, you know, when they were doing a hundred million, I paid 20 times or 50 times. When they're doing a billion, I'm going to pay 20 or 50 times because the growth is still the same, right?"
"you just need to do big, exciting deals in trends that are absolutely obvious. And every time you try and make it harder than that, you just lose money, right?"
📊 Topics
#artificialintelligence
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#startup
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#investment
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#generativeai
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#aiinfrastructure
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🧠 Key Takeaways
add that Naveen has successfully built two companies
pay for a deal, I want to bludgeon them to death because the problem with comps is they tell you what and ask what company A is worth relative to what company B and C is worth today in public markets and private to exactly if Scale AI is worth 14, and then you're like, that, you're worth 15, so you can pay 15