Why SaaS Firms Are Misreading AI Margins

Gavin argues SaaS must accept much lower AI gross margins to deploy agents or risk being disrupted.

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Episode notes

My guest this week is Gavin Baker. Gavin is the managing partner and CIO of Atreides Management, and he has been on the show many times before.

I will never forget when I first met Gavin in 2017. I find his interest in markets, his curiosity about the world to be as infectious as any investor that I've ever come across. He's encyclopedic on what is going on in the world of technology today, and I've had the good fortune to host him every year or two on this podcast.

Gavin began covering Nvidia as an investor more than two decades ago, giving him a rare perspective on how the company – and the entire semiconductor ecosystem – has evolved. A lot has changed since our last conversation a year ago, making this the perfect time to revisit the topic.

In this conversation, we talk about everything that interests Gavin – Nvidia’s GPUs, Google’s TPUs, the changing AI landscape, the math and business models around AI companies and everything in between. We also discussed the idea of data centers in space, which he communicates with his usual passion and logic.

In closing, at the end of this conversation, because I've asked him my traditional closing question before, I asked him a different question, which led to a discussion of his entire investing origin story that I had never heard before.

Because Gavin is one of the most passionate thinkers and investors that I know, these conversations are always amongst my most favorite. I hope you enjoy this latest in the series of discussions with Gavin Baker.

For the full show notes, transcript, and links to mentioned content, check out the episode page ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠here⁠⁠⁠⁠⁠⁠⁠⁠.⁠⁠⁠⁠⁠⁠⁠⁠

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Show Notes:

(00:00:00) Welcome to Invest Like The Best

(00:04:00) Meet Gavin Baker

(00:06:00) Understanding Gemini 3

(00:09:05) Scaling Laws for Pre-Training

(00:12:12) Google v. Nvidia

(00:14:53) Google as Lowest Cost Producer of Tokens

(00:25:18) AI Can Automate Anything that can be Verified

(00:30:23) The AI Bear Case: Edge AI

(00:33:43) Going from Intelligence to Usefulness