Why Nvidia Just Paid $12.9 Billion for Hugging Face | The Business of AI

Hello and welcome back to the Market Maker podcast. And on this week's episode, we are talking all things hugging face, which last week was acquired by Nvidia for $12.9 billion, or to be precise, $ 122.93.3 billion, which we're going to go back uh and discuss in a little more time. might be a little Easter egg in there for you. But we're going to go deep into what Hugging Face does because I think if you're in the tech world, you're probably fully familiar, but if not, which is probably the majority of us, um we're going to find out what exactly that firm does, why Nvidia is willing to pay a 86 times multiple for the company and who the winners and losers might be. And and Stephen, I was having a look at this acquisition. I was just saying to you offline um hugging face very much known in the tech world for the the smiley emoji uh with the company's logo and I did see the press release Nvidia put out with Nvidia's logo with a heart emoji the hugging face emoji. I was like have I woken up in some sort of parallel universe or is this seriously a 12 13 billion deal with emojis uh involved or you know what is going on here? Yeah. Yeah. And the other thing that's probably worth noting is that Nvidia, the name Nvidia is based off of the Latin for envy, Nvidia. And that is one of the seven deadly sins. Not only is it one of the seven deadly sins, but I believe according to Thomas Aquinus, and someone can correct me on this, I believe it is the second worst of the seven deadly sins. Maybe even the worst. I need to kind of check my medieval literature. So, a company based off the second worst deadly deadly sin is acquiring hugging face, which has got a nice smiley emoji. If that doesn't says it say all, I mean, I I might as well just stop this episode. I've said what I need to say. [laughter] Well, with with this I saw there was lots of um Bloomberg sources and there was a lot of there's a lot of tech followed websites right where they get the scoops and the download on these deals probably before they become a public domain. So how did this one come about? What were the initial headlines? Yeah, absolutely. So last week, the information the website announced that Nvidia agreed to buy the open model repository platform hugging face for 12.9 billion on $150 million of annualized revenue. So that's the 86 times revenue multiple that you mentioned. The business is close to profitability, but it's not yet profitable. This comes this announcement and we'll talk about the lovein between Jensen Hang and uh Clem Dong, the CEO of Hugging Face in a second. This comes a few days after Hugging Face reported via Business Insider that it's working with a bank to evaluate bidders plural interest. So Nvidia is not the only game in town. But in the grand scheme of things, this isn't Nvidia's first bid. So they first invested in Hugging Face in August 2023, series D raise of $235 million at a $4.5 billion valuation. So by the way, just to put that in context with the conversation that we had last week with Stripe and Open Routter, August 2023, 3 years ago, Hugging Face had a valuation of $4.5 billion. It has just been acquired for close to $13 billion. So that's still, you know, circa 3x return over 3 years, which is great, but it's not quite as parabolic as I don't even think open router existed in August 2023. So this feels a little bit like normal VC. >> I love that normal VC. It's just what a crazy crazy world we're we're living in. >> At what point you look at some of these and go, "Okay, yeah, this is getting a little bit toppy." What what would be flags or signals when you look at yeah the open router the cursors the this is it do you feel like I guess we're going to dive into these numbers and look at how much this makes sense but what are those flags just top level I think the flags are if you are and and and the flags tend to come from case history of the dot uh bubble and then and then bust if you are buying a company that doesn't have a robust business model or route to profitability and pay a lot of money for it, then that's a a warning sign. If you buy a company that may have, you know, slightly more credibility or a route to profitability, but the acquirer is in no way a tech company or able to integrate or benefit or get synergies from that acquisition, then it's just seen as a kind of adjacent hype acquisition. And then thirdly, if you're acquiring a company that is going to that is considered to be what we would call in the world of M&A a transformational acquisition, i.e. you're putting your company on the line because it is such a large amount. You're having to raise debt, you're having to issue new shares, it becomes a massive burden. Those three signals are what would concern me. Those three signals are absolutely not the case for this acquisition. You know, we'll talk about it in a few minutes, but Nvidia chucked off a hundred billion dollars of free cash flow last year. So, this is 13% of their annual free cash flow. So, if this all goes to zero, it doesn't matter. It really doesn't. What what just with Nvidian strategy? I'm not sure if we we'll get to this already, but the with that amount of money is that is that what you would anticipate that they're not why are they not more proactive in doing large scale transactions? Is that cuz there's not the specific targets that they they require or it see because this is their biggest one on record, right? Isn't that is that right with Nvidia? Yeah, it's it's it's all about so if I'm a shareholder of Nvidia, what do what do I want? And remember from a kind of corporate finance 101 perspective, you get profit at the end of the year, net income that is effectively at uh that is effectively the shareholders, but it is at the behest of the company to choose what to do with that net income. They can keep it as cash for a rainy day. They can distribute it as dividends or share repurchases or they can invest it in the form of capital expenditure or acquisitions or joint ventures or whatever it might be. So Nvidia, the board, the CFO, Jensen Huang, that hundred million hundred billion dollars of free cash flow, they're going to be sitting down and thinking to themselves, all right, what combination of things can we do with that 100 billion uh dollars, sorry, what combination of things can we do to maximize shareholder value? And that will be and has been historically a reinvestment, b dividends and share repurchase which is just coming online at the moment and then c building out the AI ecosystem through things like guarantees to open AI and uh you know revenue guarantees for uh for data centers and things like that. Therefore, there hasn't necessarily been the need or the attractiveness of potential AI targets in this space. And timing wise, is there any like kind of cues there that we could take out of this? Cuz normally any M&A transaction has a perfect moment to strike. Yeah. So, it was it's quite interesting because Nvidia has been making overtures to Huggy Face for a while. And late in November, uh 2025, December 2025, Nvidia offered a $500 million investment at a $7 billion valuation, which was rejected by Hugging Face as, and I quote, "It does not want a single dominant investor that could sway decisions." This is 8 months ago. Think about moral integrity here. Get the checkbook out, Stephen. Get that checkbook out. >> And I'm going back and I'm going to reference this bloke Clem Dong and there'll be hopefully there'll be some comments. Maybe I'm a little bit too cynical, but he said back in 2024, I said it and I will say it again, concentration of power is the biggest risk in AI. So Nvidia buying Hugging Face 8 months after the investment was rejected because it doesn't want a single dominant investor suggests that there was a moment or there has been a moment over the last month or so where other potential buyers have come to the table. And remember, and we'll talk about hugging face, what it does in a m in a minute, but remember, hugging face is a is a community for opensource uh AI models, you know, chats, free, you know, a kind of GitHub, if anyone remembers or knows GitHub, a GitHub for AI. So it has this great kind of democratic democratizing open-source openweight thesis and then and then but it also by the way it also has for-profit venture capital investors. So when the likes of maybe Salesforce or when the likes of Nvidia start sniffing around and saying we want to take you guys off the market, we want to buy you guys flat out. early investors like Sequoia, they're not going to be like, "Yeah, but we care more about the community. We care more about the mission. We care more about the thesis." What they care about is the fact that there's $13 billion on the table, and this now sounds like, you know, seems like the right time to strike. I I guess in a way, if you're very confident in the trajectory of your business, isn't this just good gamesmanship to get to the point of getting a $13 billion valuation in the end? This is just a tactics that you play. You don't want to bend over too quickly. You want to play hard to get. Isn't this just the normal tango that companies do as they go through these these relationships? Yes, I I totally agree. I think it's the it's the mission statement and the mission quote unquote alignment of the hugging face team and, you know, concentration of power and saying all of these things. the smiley emoji face, the community aspect, all of that stuff, and then to sell to Nvidia. Now, we'll get on to it. Nvidia may not be the worst acquirer in terms of concentration of power, but again, Latin for envy, $5 trillion company, $und00 billion of free cash flow. There's a little bit of concentration of power there, maybe. >> Yeah. So, what what's Latin for greed then? >> Yeah. [laughter] Yeah. Yeah. Yeah. You're testing me there. >> Yeah. Yeah. So, okay. So this this this transaction was not 12.9 billion. Uh and so I don't know as a lame layman like me and I read a number like 12.93 billion I'm like okay so what is this out of a model they've just created that something's worth the extra little 30,300,000 within the billion figures. So how on earth did that come about as such a specific figure? Yeah, this is where like [laughter] I don't want to disparage the tech community too much, but this is where tech nerds that are about to become billionaires really start to irk me. So, the deal, the value of this deal, the acquisition price tag, 12.930 billion. So 1 2 930 0 0 0 lots of zeros, but a very confusing acquisition price. This was an Easter egg that a load of, you know, that was dangled out there by the CEO um uh and co-founder Thomas Wolf saying, "Look, here's an Easter egg. Try and figure it out." So the hugging face reference was easy. Supposedly the number 129303 is the decimal representation of unic code point U +1 F917. The emoji officially named hugging face. [laughter] And then the color code 1293 is the vibrant shade of green that looks a whole lot like Nvidia's classic color. And then [laughter] so that was why that was the number. and Clem Clem Dong on on Twitter on X said had to do it for the lols that was what he said had to add an extra you know $30.3 million onto the end of a 12.9 billion transaction for the lols ant for the ls I mean you are just love these guys you you are just bossing life if you could be selling your firm for $13 billion and just doing and and making statements like that. I mean, you are the final boss basically. >> Yeah. Again, they're not happy. None of these guys are happy. >> I was just having a quick look actually Tom, you said Thomas Wolf, the co-founder and chief science officer of Hugging Face. I just had a quick look. I'm always interested to know like what's the background of these people you know when we look at all of the >> you know situational awareness or whatever it might be these recent kind of >> uh topics. So this guy Thomas Warf. So Echo Polytenique and Sir Bong University, they're like the top two target sort of quant schools if you like math schools in France. Really highly regarded. Nearly every quant hedge fund will have uh people on the ground, you know, doing that whole uh networking to try and pick up talent. He then got a law degree actually and then worked as a physics researcher and then a patent attorney for six years. So yeah, quite quite an interesting background. Yeah. And again, this is part of the story. So these founders are all French. Um, and this this if you are generous enough to France, this could be considered to be a French success story or even a French missed opportunity because they've sold to a big American company. But this isn't really a French company. It's registered in the US. It's got French founders, but all of the main investors, as we've discussed, are American investors. It's based there. This is an American company to all intents and purposes. Well, I know we'll probably get into that a bit more, but you just mentioned there the investors. Perhaps we can just touch a little bit on that. So, who's, you know, who's been involved to this point? Is it just these the same names as ever, or is there some um more niche ones in the mix? >> Yeah, so there's some typical San Francisco names, the likes of Lux Capital, Sequoia, and we'll reference those guys later on in the episode, and Coo as well. Strategics like Google, Salesforce, Amazon, Intel, AMD all piled in a couple of years ago. And then some slightly strange individual investors. NBA player Kevin Durant. Now, Ant, I'm going to keep you interested in this episode by maybe laying an Easter egg or whatever they call them. I'm probably using that in the wrong term. Uh, and waiting till the end of the episode to go back to the world of NBA and Kevin Durant. So anyway, he invested at the seed stage and also open AAI co-founder Greg Brockman. There's a lot of things to say about Greg Brockman, but as of 2 hours ago, we were recording this on a Friday, he has just declared with the launch of chat GPT 6 Astra, the start of the AGI, artificial general intelligence era. So there you go. We're in it. Well, it's got to do. I mean, someone's got to do something cuz you know, I don't know if how I know you're more of a clawed kind of guy. Uh, but I still use chat for certain things. And it went down for half an hour yesterday. >> Interesting. >> Completely down. And you know where you go to if you're like, is this my internet connection? Is this just me? Where do you go? Who you going to call? Elon on X. You go on X and then you could see just millions of people going, what's going on? like freaking out. It was down for like for me it was like half an hour. >> So So you were mid you were mid therapy session with your mate chat GPT >> and my girlfriend my second wife having a chat and we were like >> Yeah. Yeah. Having a nice coffee. Oh, poor you. Yeah. Taking a relaxing afternoon. >> I mean I it just goes from bad to worse it feels for Open AI. That's interesting you said they've just done that new launch. Maybe it was the transition of the new model coming online. It just something went wrong and But not a good look obviously, so we might as well drop the AGI statement at the same time. Maybe >> cover up the cracks. >> But also the founders, they obviously didn't invest in the company. Also the founders uh each pocketed estimated according to uh Bloomberg $1.8 billion each. Again, just reference that number. Reference I'm so interested in this human story. [laughter] So So hang about they've they've massively outdone the open routter guys then. M yeah bigger yachts, bigger houses. >> So they they they they're on the street that's slightly closer to the the beachfront than the open routed guys is what we're saying. >> Yeah, absolutely. Absolutely. [laughter] >> Uh okay. Okay. Well, look, you you've kind of given me a bit of a clue and I kind of get it. It's top level of what hugging face is, but perhaps just a little bit more of a just dial it down a little bit so we can all get our heads around what makes this such a unique platform. Yeah. So, hugging face for the lay person like me and like you, Ant, is the AI community building the future. I took that directly off their website with the little hugging face emoji. Um, and when you want good analogies, go to a website like pcmag.com. You know, they explain it like the lay person. So, pcmag.com describes hugging face as the neutral public square in the biggest boom town of modern technology. So it is where people come together to collaborate to build models to share models to share um open- source libraries data sets diffusers transformers all of these things that I don't really understand uh and then PC Mag goes further just in case we didn't understand it the hug if hugging face is like the app store about that analogy it's because Nvidia is the iPhone in this analogy building out the hardware ware that made the AI boom possible. So hugging face is like the front end software layer for this opensource or for this kind of non I wouldn't say non-enterprise level but non-closed weight open AI uh clawed type offering and then finally they said that hugging face is the github of AI which is definitely my preferred analogy. So it's got the hub where researchers and companies publish and discover openw weight models. Just as a reminder, we spoke about this a few weeks ago. Open weight models are models where the trained parameters or the weights are released publicly so that anyone can download, trade, uh train and modify as opposed to the closed weight models of GPT and claude. Um so once you have those weights, you can run the model locally. Importantly for Nvidia, they don't care. They don't care whether you they don't really care whether you use an openweight model or closed weight model as long as they're as long as you're using Nvidia chips to power those models. So this in terms of kind of basic strategy 101, this is Nvidia owning a distribution pathway, right? So they've got the relationships, the embedded relationships with the open AIS of this world, with the claws of this world, with the big closed weight models. It wants to open and own the interface between its chips and the openweight models that are being created, shared, collaborated upon on HuggingFace, which has been that forum over 300 million models or three million models, sorry. Is there ever like a regulatory layer to this though? I mean, when you explain what you've just said, to me it makes complete strategic sense from Nvidia. But yeah, is there any kind of regulatory concern that would come about by them just acquiring almost like the vertical? Yeah, it's really hard when it comes to antitrust and regulatory issues relating to mergers and acquisitions. What tends to happen is if it's considered to be a vertical integration. So vert a vertically integrated company owns their entire value creation chain, right? So the best example is always oil and gas. Big oil and gas majors. They own the exploration and production. Uh they own the transportation. They own the refining. They own the selling and the trading. So if you are a company like Nvidia and you buy an element of your value creation chain either downstream or upstream and hugging um uh and this one is downstream as opposed to upstream. It's more clo it's closer to the end consumer or the end buyer then these tend to face less regulatory concern or constraints because it's much more about market share and this is not necessarily increasing market share which is what the antitrust guys get quite concerned about because you are buying a company in a different part of that uh of that market vertical. So to me and you, this does seem a little bit like, hey, you know what the heck is going on? Nvidia powers is the picks and shovels of the world of AI and it's now owning a key gateway to massive volumes of consumers of and purchases and um experimenters of AI. But will it get blocked from a regulatory perspective? No, because GitHub didn't get blocked and this is a kinder regulatory environment than it was back in 2016. Sorry, you got my brain thinking now. So with hedge funds, a recent shift due to regulatory change in the market space was instead of them paying sellside firms for research, they would build out their own internal research function. So to save costs and have more productivity internally for their investment decision processes and so on. At what point does Nvidia go hang about we're paying Morgan Stanley or Goldman Sachs, JP Morgan, whomever hundreds and hundreds of millions of fees to do lots of different things. At what point do you kind of build out your own almost M&A crack squad which are just canvasing the market and modeling and doing everything all of the time where of course on the probably sharp end of the transaction you need the bankers involved but you know what I mean like you should kind of bring it in house some of that talent because you need it. It's almost like a perma acquisition scene when you've got that type of capital to deploy. >> Yeah. So there's probably two answers to that or two responses to that. One, the big acquirers or companies that have an acquisition strategy or even any very very large company that does acquisitions will have their in-house corporate finance team and will do quite a lot of the work that the investment bankers will do and maybe they'll be able to kind of pony up with the investment banks and get a slightly cheaper fee. the investment banks are still very much in the loop. But one of the my my kind of second thing that that sparked was do you remember General Electric? Obviously remember General Electric, but General Electric is a brilliant case study in moving from being a manufacturing and engineering powerhouse, a little bit like what we were talking about with Boeing a few weeks ago to being basically a financial institution. They moved under there's a great book called I was just looking it up just now. They move um a great book called Lights Out, Pride, Delusion, and the Fall of General Electric. And this is under the CEOship of Jack Welsh, who basically turned the company into a into a kind of financial engineering company. Um using its strong balance sheet, using its credit rating to go out and basically become an investment bank or a quai investment bank. So, it didn't end well, by the way, and I wouldn't recommend that Nvidia does that. But, yeah, there are there are um examples in the past where a very very large company with great free cash flow and a very good credit rating goes, "Wait a second, we can be the bank. We don't have to rely on the banks. We can we can be the finance year. We can be the bank." you you're just dropping Easter eggs left, right, and center here because that's the connection to the Boeing episode where Jack Welch's strategy, that profit management style of one pursuit was exactly the downfall of the the Boeing quality scenario we were talking about. >> Yeah, I would say that we had all prepared this in advance, but we definitely haven't. >> All right. Well, look, I know we touched on it briefly, but may maybe just a little bit more cuz the the chap I mentioned, uh, Mr. Wolf was just a co-founder. So, who is who are the other people involved in this business? And I don't think we've even touched on it yet. How old is this business and how did it come to fruition in its first instance? Yeah, so Hugging Face was founded in uh July 2016 by three co-founders, Clement Dong, Julian Shamon, and Thomas Wolf. Uh it was originally founded as an AI chatbot and again if you read the backstories as you as you alluded to with Thomas Wolf these three guys are very very impressive. Um I think uh Julian Shamant had an MSE in computer science from Stanford Thomas Wolf as you mentioned quantum physics PhD etc. So the AI chatbot idea launched in 2016, didn't really work, didn't really click and then by 2019 they had pivoted out and they the big hit came when Google and I remember this from my startup when I was working for uh working as founder of of of util my machine learning startup when Google first released BERT. So Bert's birectional encoder representations from Transformers model um on its TensorFlow platform and any techies will remember that very very well. Hugging face didn't really like the idea thinking that a powerful model like BERT should be more widely accessible. So they recreated BERT but using PyTorch which I remember again very very well and released it on GitHub which achieved more than 5,000 stars likes in under 3 months. And so this is how the initial idea for the current hugging face emerged. They asked themselves what if sharing LLMs would be as easy as sharing code on GitHub. So this is this kind of community opensource these things these powerful models shouldn't all be centralized by the likes of Google. And then what we now know as hugging face today kind of came online in late 2020 and expanded from the proliferation of large language models and the the breakthroughs in technologies that we've seen over the last 5 or 6 years. So the big question in my mind then if this is so contingent on community and being open source, how do you arrive at the 13 billion figure? Like is there how does this business make money? I mean normally you're looking at the balance sheet looking at all the different metrics to calculate some kind of value proposition. How does that work here if it's all open source? >> Yeah, absolutely. So they have a the classic premium subscription model. So a lot of what you can get or a lot of the initial bits that you can get a little bit like Spotify uh premium model a lot of what you can get is free to start out with and then the more powerful models or the more complex things that you can do you have to pay a monthly fee which is exactly like GitHub monetized as well. And by the way, we'll speak about GitHub in a second. That business is now generating well over a billion dollars a year. So it's been a kind of relative success within the framework of Microsoft. But it also does things like renting compute uh not necessarily like uh open router more maybe like a corewave um which has uh an agency again for for Nvidia there. And then they have uh inference endpoints essentially managing the process of actually deploying the machine learning model and keeping it alive so that you uh users can utilize that model that's been uploaded and put out there to the community. So all of that comes together in a $150 million a year revenue amount which is growing not at the light speed that we've seen with previous startups but it's getting there. And it's again, it's this concept of ecosystem control that is why Nvidia has paid $13 billion. There's obviously the fact that Nvidia probably doesn't want other players to be the owner of this gateway to a massive massive total total addressable market of users that want openweight models as opposed to closed weight models. So it's like I got to get my hands on this. And quite frankly, whether it's $13 billion or $8 billion or $20 billion for the founders, obviously life-changing money for Nvidia. [laughter] Oh man. Yeah. Not Jensen Wang's uh territory quite yet, but um you mentioned there [clears throat] Microsoft, excuse me, you mentioned Microsoft and GitHub. Am I right? Microsoft didn't create GitHub, they bought GitHub. So is this a similar sort of scenario? Is there parallels there >> in the ration why Microsoft did that and why video are doing this? >> It's super interesting. So in 2018, June 2018, Microsoft announced the acquisition of GitHub for $7.5 billion. And again, that was when I was in my machine learning phase. I remember this being a massive furore, you know, so this open this collaborative great community of code sharing, code collaboration, uh, repository that basically everyone used was being bought by this kind of stodgy bureaucratic monopolizer in Microsoft. And I remember everyone going, "Oh, this is an absolutely terrible thing." Um, but just looking retrospectively, and I haven't done a great deal of work on this, but it seems like this acquisition has been successful not only from a Microsoft perspective. I mentioned that it now generates over a billion dollars in ARR and it also is the uh it is the go-to point or it is the host for GitHub copilot which is the equivalent of the kind of clawed code or the codeex um for Microsoft but also it seems to have been a kind of net positive for the users as well. So, I've just kind of looked on the Reddit forums um and I can see a couple of negative comments, but you know, it it feels like I'm just going to quote a couple. The GitHub acquisition hasn't really negatively affected me, and some of the additions have been downright useful. Uh I'm not saying they're perfect, but they're actually providing me with lots more a lot more products and a lot more optionality. So, GitHub's kind of remained independent, maintained its use case and its value for the developer community. So if you can do something like that where you've got Nvidia as the owner but Hugging Face remains useful and is just backed by availability and access to Nvidia chips for model training and for running models as a kind of order of priority because they now are owned by Nvidia. Maybe, you know, read the Reddit comments and you wouldn't agree. You wouldn't you wouldn't believe that this could be a good thing. But maybe, yeah, maybe there's some sense here. Yeah, that makes that makes great deal of sense. And what what about the the users of this? I'm assuming there's a lot of like GitHub BTOC users. I'm assuming that Nvidia is what's the concentration do we know of Nvidia's revenue that's B2B? Is it all of it or but in a sense of can they start to open up a new revenue stream here to that community audience? Yeah. And this is where the kind of B2B and BTOC distinction gets a little bit fuzzy. So Nvidia again I've always thought all right who buys from Nvidia? Okay. Well, it's OpenAI and it's it's the big labs that are spending billions and billions of dollars on these frontier models, training them and then running them. Tens and tens of billions of dollars. And there's obviously a B2B concentration risk. If your main clients are buying the m, you know, are buying billions of dollars worth of these chips, you're going to want to, you know, move a little bit away from that. So, you've got the big labs that are buying the chips. Obviously, you've got um you know, the large corporates, you know, the large tech companies that are buying billions of dollars worth of NVIDIA chips. Um, but then you've also got the I wouldn't call it the BTOC community, but certainly the more hacker community, the more um, you know, we're going to collaborate over a model and we're going to use it on a smaller use case that is not maybe enterprise level. It might be a business purpose. It might still be B2B, but it's more of a individual contributor type relationship than it is all right, I've got $30 billion a year, you know, relationship with OpenAI. So, it is just another and quite quickly growing market to sell Nvidia chips. And we know, having covered openweight models a little bit on the podcast before, we know that openweight models are becoming more popular because they're more customizable. You can host them locally, uh, and they're potentially cheaper. So, Huang, you know, he's very good at reading the tea leaves and sensing where the direction of travel is, and he sees it very clearly, and he said as much. he sees it going more into the openweight side and reducing the concentration risk that maybe they've had with the likes of OpenAI who are developing their own chips, right? And are having some quite signific significant success with those chips. So yeah, it's interesting strategically. Yeah. Talk to me a little bit more about that that point you just mentioned there about the u Nvidia's newfound belief in in open weight and reducing this concentration risk. I saw in your notes something about margins from app store fees. Sounds rather Appleesque. So what's that in reference to? Yeah, absolutely. So again, there's lots of different ways that Nvidia makes money and it doesn't want to be reliant upon just selling to the Googles, the anthropics, the open AIs, etc. So this app store analogy where it takes a cut of the revenue that is generated through something like the models created on hugging face using Nvidia chips is that is that very very high margin business that is going to continue to boost the gross profit margins of a company that already has 75 plus percent gross profit margins. So again, when you look at a company like Apple, by far the highest margin part of the business is the app store is is not it's not the hardware. So considering the gross profit margins for the hardware part of Nvidia is 75%. If if it can get 90 plus% on the kind of software layer, that's pretty insane. And then from the hugging face side, I'm just looking at the rationale for them. Is it the normal uh you know the actual specifics aside, the normal sort of tech challenges? Like I always remember when the documentary in Deep Mind got bought by Google for like 400 million was it something ridiculous like that probably the steal of the century but that was to get access purely at the time for the compute power that they needed for the mission of what they wanted to accomplish. So is this is that the kind of basis of the rationale of hugging face in this instance? Yeah, I mean the basis the rationale is the fact that it was $13 billion. [laughter] You can't get beyond that. Yeah. >> I don't care what Clem says. 10 10 years after starting, this is his uh tweet. 10 years after starting Hugging Face, open source AI is at an inflection point. Thanks to the community, we've shown that this can be that it can be a compliment and even a an alternative to closed sourced APIs. But for it to happen at a larger scale, it needs more compute, more support, more collaboration, and more visibility. That's why we went to talk to Jensen. So obviously, that's the party line. I need to get acquired in order to scale up what I'm doing, which is perfectly I I I definitely buy it, but I also buy the fact that they're now billionaires. And ju just quickly on the the risks to this then is it what you said the the template of success seems to be just do what Microsoft did with GitHub let them kind of run their own thing uh keep the integrity of the the community and you've acted as a block then to stop other competing places uh forces get hold of that downstream vertical on the on the supply chain if you like. Is that the risk though if Jensen goes I mean culturally how do you think these firms would be like I' I've looking at Zoom graphics of this it feels a bit bromancy and there's like holding up of emoji signs and like is this all part of the Jensen Wang like um he loves putting a show on but I imagine he's a pretty intense ambitious guy and you're going from a community kind of inspired and quite techy geeky orientated space where Nvidia is a commercial beast. So how is that the risk there of friction? Do you think >> I don't I wouldn't see that to be a particularly big risk and I don't know the internal culture of either of these two companies but they they are both drinking the Kool-Aid of of the unlimited potential of AI and they both believe that they are doing something transformational from a global you know upside perspective you know abundance whatever it might be called uh and obviously at the same time they're getting fantastically fantastically rich off the back of it. So this lovein is a mutually beneficial lovein [laughter] from the both from both end. The biggest risk is that the community that are currently on uh hugging face move to another platform maybe a model scope which is like hugging face but mainly for the Asian market. And if you just look at the again the Reddit comments, it's just a classic, isn't it? You know, so few days ago, big money buying out open source. The people that lose out in this uh in this transaction are only dot dot dot everybody. A tail as old as time. The last nail in the coffin for an AI monopoly. What a shame. Everyone, this is a great one, which I totally agree with. Everyone is committed to open source, collaboration, freedom, etc. until the offer sheet comes in. You say 12.9 with a B. Bleep. Yeah, brother. I'm in. [laughter] So, like, you know, these guys are both drinking the Kool-Aid. They're both getting fantastically rich. They both love, you know, they they both love the concept that they're changing the world and in this ecosystem, an echo chamber where Jensen Huang's leather jackets are actually cool and a hugging face emoji is legitimate and everyone else in the world is just going, "What the hell is going on?" You did also mention someone else who I'm assuming has come out of this in a very positive way was an NBA player called Kevin Durant. So, how on earth is Kevin Durant linked to this deal? >> All right, let's finish with this. Yeah, Kevin Durant, and many people will know Kevin Durant. You certainly will. Ant NBA superstar. Uh, so he has got he's sitting on he was an early seed investor in 2017 at a $60 million valuation for Hugging Face. 24,000% return. 200 240x return. >> Oh my goodness. Me. >> Wow. >> What a ball. What a baller. >> Hall of Famer. That's what that is. >> Okay. Well, look, this is not his only VC investment. He's also got an 80x return on his investment in Whoop, a 30x return on his investment in Coinbase. >> Oh, he got in a good time on Coinbase. >> That's It's unbelievable. Well, he got at $1.6 billion valuation. >> Oh, man. Uh 77x on Robin Hood, 52x on Mercury. I don't know that company, but my gosh, this guy's got a future. Hang about though. Hang about. These are what, six you've just described. How many shots is he taking? What's his shooting percentage here >> to get massive payouts? >> You don't talk about the shots. You only talk about >> No, we go. Here we go. [laughter] The stat sheet here because I don't know what he's shooting. fill gold percentage these days, 45%. [laughter] Honestly, 240x on Hugging Face. My gosh. Again, again, if you if you have capital, I mean, this might be one of the concluding points. If you have capital, you get access to better deals. And if you're in the right place and you've got money and you've alerted the ecosystem that you're up for investing and you're a big name, which you know, Durant certainly is then and you're potentially quite well advised because there's plenty of NBA players that have not been well advised and have lost a lot of money, but uh Durant's not one of them. >> Yeah, there's a famous one. any NBA fans out there, Vin Baker, he's like a regional manager of Starbucks, and he got paid a hund00 million contract, I think, back in the day. Um, God, >> I'm sure he's a superb, >> uh, manager of Starbucks. Little that, but um, all right, good stuff. Look, I would love actually if people have made it to this point in the episode, you're probably quite plugged in to sort of tech and the intersection with finance. And I'd love to know your thoughts about what do you think? Let's bring some of that Reddit vibes to the comment section, particularly on YouTube. I know it tends to fire up if we hit the right spots. So, what do you think about this deal? And where do you stand? Uh, are you a wave the right dollar bill sign in your face and I'll sign kind of guy or are you more of a the community community wall street bets till I die kind of vibes? I'll leave you. >> Yeah, I just, you know, I'll leave you with my final thought. Go read or go go investigate capital as power sasp is what it's known for short. Um, so this is a theory that was posited about 15 20 years ago, but it's it's come into the limelight very recently. The more capital you have, the more power you have, the more ownership you have. Obviously, money is power, but we're seeing it in ever more concentrated ways. And the outcomes aren't always positive. >> Quote that unfamous person on Reddit that you just read out, it's tale of oldest time. >> Exactly. [laughter] Exactly. >> All right. Thanks, Stephen. See you next time.