The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Sequoia's David Cahn on AI's $600BN Question | Why the Data Centre is the Most Important Asset | Servers, Steel and Power: The Core Pillars Powering the Future of AI

Aug 5, 2024

David Cahn, a Partner at Sequoia Capital and former COO at Coatue, discusses game-changing topics around AI and data centers. He dives into the $600BN question impacting AI's future, examining the capital investments required from tech giants. Cahn argues that data centers are crucial assets, highlighting the interplay of servers, steel, and power as foundational pillars for AI's growth. He also shares that the biggest opportunities lie in building out infrastructure, emphasizing the strategic dynamics amid supply chain challenges and competitive threats.

01:13:13

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David Cahn

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Quick takeaways

Data centers are essential in AI, becoming the industry’s backbone due to the complexities of training advanced models efficiently.

Investors must balance optimism and caution regarding AI's promising future, particularly concerning substantial capital expenditures amid financial risks.

Kahn's journey as a twin has uniquely influenced his approach in venture capital, instilling adaptability and a competitive spirit vital for success.

Deep dives

The Imperative of Data Centers

Data centers are becoming the most critical asset in the AI industry as models increase in size and complexity. The discussion highlights that training advanced frontier models becomes impractical on existing data centers due to rapidly evolving technology and hardware. By the time a data center is built and utilized, the GPUs become outdated, illustrating the necessity for constant innovation in data center design and operation. This emphasis on data centers underscores a shift towards viewing AI not just as a software solution but as part of an industrial infrastructure that requires substantial physical and technological investment.

Pricing Power: A Dance of Barriers and Commoditization

02:22

What look for in founders

02:05

The Industrial Revolution of AI: Servers, Steel, and Power

01:46

The Influence of Psychology on Adam Smith's Invisible Hand

00:56

Intro

4min

The Twin Dynamic: Growth Through Connection

3min

AI Investment Dynamics

13min

Navigating AI Integration and Competition

13min

Navigating the Complexities of the Supply Chain and AI

14min

Learning from Customer Behavior in VC

20min

Rapid Insights on Transformation and Values in Tech

2min

Navigating the Future of AI: Successes and Investment Challenges

2min

The Strategic Advantage of Early Information in Startups

3min

David Cahn is a Partner @ Sequoia Capital, one of the great venture firms of the last 5 decades. Before joining the Sequoia partnership, David led Coatue's venture business as a General Partner and COO where he led investments in Hugging Face, Runway and Supabase. David also joined the boards of Weights & Biases and Replit.

In Today's Episode with David Cahn We Discuss:

1. AI's $600BN Question:

What is the $600BN question in AI today?
Is it possible to believe "AI will change the world" and "Capex levels are too high" at the same time?
Why do the cloud players have to act now? When does the Capex reduce for them?
How does Meta not having a core cash cow in cloud change the way they can respond?
Why is all the risk today being borne by the large incumbents? Why is that good for startups?
How will we see Satya and Zuckerberg change their narrative towards their Capex spend to the public markets?

2. The Data Centre is the Most Important Asset:

Why does David believe that data centre is the most important asset?
What does he mean when he says "servers, steel and power" are the pillars of AI?
What happens when the development of models outpaces the construction of data centres?
Why does David believe no one will ever train a frontier model on the same data centre twice?

3. The Biggest Opportunities in AI:

Why does David believe the biggest opportunity right now is in the build-out of data centres?
What does the supply chain look like for the build-out of data centres? Who are the winners?
Why does David believe the biggest opportunity in finance is in creating new debt instruments that will allow the largest incumbents in the world to move this data centre spend off balance sheet?
Why does David believe that AI will drive more energy innovation than any policy has done?

4. The Secrets of Sequoia: Inside the Walls of the Greatest Firm in Venture:

What does David and Sequoia believe is the one definition of success in venture?
Who is the best at find companies in Sequoia? Who is the best at picking?
Why does David believe conviction, not picking is the hardest part in venture?
How do Sequoia want to shape and mould every investor in the firm?

20VC: Sequoia's David Cahn on AI's $600BN Question | Why the Data Centre is the Most Important Asset | Servers, Steel and Power: The Core Pillars Powering the Future of AI

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The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Sequoia's David Cahn on AI's $600BN Question | Why the Data Centre is the Most Important Asset | Servers, Steel and Power: The Core Pillars Powering the Future of AI

Episode guests