Chip Stocks Crash, $20B Fund Margin Called, Frontier Labs: SLOW DOWN AI, Mamdani's Grocery Stores

Jason Calacanis: All right, everybody. We got to talk about chip stocks crashing after an alltime runup. And we had a major hedge fund get margin called and some incredible margin calls happening in South Korea. Leopold Ashen Brener is a 25-year-old hedge fund manager. He left OpenAI two years ago to start his own fund and apparently according to reports, this is breaking news on Thursday when we tape, he got margin called and had to sell his entire public portfolio to cover massive losses caused by his leverage. And who bought them? none other than Citadel's Ken Griffin. We don't know if it was Ken Griffin himself, but Citadel bought it according to the early reports. Leopold had insane returns and he rode the wave of AI and chips and Frontier Labs as recently as this month. Uh, and he started the fund with $225 million in 2024. He grew it 100x to 20 billion this year or so. Ran it all the way up to 45 billion. According to our friends at CNBC at the end of the June, he was reportedly up 4x450% this year. Uh some have reported that he's also selling his massive anthropic stake to cover these losses, but the Wall Street Journal is disputing it. Again, uh he we're we're happy to have him here on the program. How did this all blow up? Well, NASDAQ's chip index, this is called the Philadelphia Semiconductor Index, is down over 20% over the last month. That's bare market territory. Obviously, definition of bare market territory for those of you who don't play in the markets is anything over 20%. Uh the index included the top 30 US listed chips. That's people like Nvidia, TSMC, AMD, Micron, you know, all those big names. But the index bounced back a bit today, up 7% when we're taping. So, we may have found a bottom. Unfortunately for Leopold, he had already sold. Samsung and SKH, two South Korean chip companies that are not included in the NASDAQ index, also got smashed, crushed, demolished. Samsung down 38% over last month. SKH Highix down 14% since going public 3 weeks ago. The Cosby, that's South Korea's version of the S&P 500, is down over 40% in the last 40 days. Between last Friday and Wednesday, leading chip companies shed over a trillion dollars in market cap combined. So to put this in context, chip stocks had a legendary run the past couple of years, but uh you know trading on leverage, we'll talk about it. Very dangerous. If there's a downturn, we'll get into the South Korea wrinkle as well. Even with this downturn, the 5-year results are still spectacular. Jimoth Micron up 850% mostly in the last year. Nvidia up 875% in the last 5 years and Broadcom up 663%. Let's discuss it.

Chamath Palihapitiya: Can I can I just frame something up? So if we take the circumstance of there's a good long-term bet in AI that can be made in the markets but in the short term there's an exuberance that arises. The question is what's resetting that exuberance? What's bringing us back down to earth in the short term and I think if you take a zoom out there's a bunch of other statistics and other facts on the ground that I think are big macro drivers at the moment. If you take a look at the 30-year Treasury yield we just crossed 5.2% for the first time in 20 years. So you could buy US treasuries that are paying you 5.2% a year for 30 years, which is on a pre-tax equivalent basis probably 8, 9% from the US government for 30 years. So Nick, if you zoom out, you know, we have not seen this yield on US treasuries since 2007 leading up to the global financial crisis when they cut rates and printed money. At the same time, there was some probability that the Fed Reserve was going to raise rates this week. They didn't, and that obviously would have tampered the inflation risk ahead of us. There's persistent inflation. Kevin Wars in his comments said, 'We still want to see inflation get down to 2%.' There isn't a clear path to doing that. And then there's these inflation drivers. The biggest inflation driver at the moment is government spending. $2 trillion deficit, 7 trillion a year of spending on five trillion a year of revenue. Both Elizabeth Warren and Donald Trump agreed on Twitter this week that they should remove the debt ceiling, which means that we could spend more and continue to borrow more. Federal debt stands at 40 trillion today. Remember the debt ceiling in July of 2025, the debt ceiling was 36 trillion and we now want to raise it above the 41.1 trillion debt ceiling that we have. Elizabeth Warren saying get rid of it. Just have no debt ceiling. So, so when you when you have no debt ceiling and you have no breaks and you spend and the government spending becomes the core of the US economy because that spending is not productive, you end up seeing inflation. You're pumping money into the system. So, everyone's assets inflate and fundamentally people are selling off treasuries around the world because of it. And now we're kind of looking at a situation where there doesn't seem to be an end in sight. There was a rationalization of spending intent coming into this administration. It's proven to be nearly difficult, if not impossible, to get Congress to go that route. The Senate has banded together to keep funds flowing to their states. So, you cannot really radically change spending at the federal level. So if you're running a $2 trillion annual deficit and your economic productivity gain in the near term doesn't make up for all the inflation you're realizing because of that exuberant spending, you're going to see Treasury spike because people don't trust the creditworthiness of the United States over 30 years. And so a treasury spike, I could now buy a US government bond that pays me 10% pre-tax a year. Why the heck would I pay 50 times earnings for a semiconductor stock? So that creates the incentive for markets to move against these big AI conviction bets in the short term and pop these bubbles. And I think we're going to see more of this. As we don't actually course correct the Titanic going into the iceberg, the United States fiscal and monetary situation, we are going to end up seeing more bubbles pop and more of these assets um that we've kind of inflated, if you will, to keep things going. Now look, there may still be great productivity gains from AI. This may end up rationalizing over the long term, but again, short-term markets, I'm better off making 10% by owning federal government bonds. Go to the beach.

David Sacks: Is breathtaking hypocrisy for anthropic to maintain that it is entitled to train on all the world's output for free even if the creator objects. But the one type of output that you're not allowed to train on is their output even if you pay for it. That is their current position. So you know what I'm saying is that you know if you want to train on anthropics output that cannot be considered IP theft under fair use especially given the fact that the courts have ruled that LLM generated output is not copyrightable because it was not created by a human. That is the current position of the courts is that LLM output cannot be copyrighted.

David Friedberg: Well, I mean, the point is I don't think it really matters because over the near term, what the cheap grocery stores do is create an incredible success story for socialism. that will help to support and fuel the socialist wave in urban centers around this country. And I think that there will be media coverage of these grocery stores on how great they are. And it'll be a 60 Minutes piece on everyone said Zoron Mom Donnie was crazy, but let's go in and take a look at this beautiful grocery store. And they're going to walk through the grocery store and there are going to be happy people taking food off the shelves, checking out with happy employees working at the grocery stores. And it is going to be deemed a utopian dream come reality. And everyone's going to want one. And it will help seed the next couple of years. And it will be part of, as I've highlighted in the past, a big part of the um the multi-level marketing scheme of socialism is to create spectacle. And it will create more spectacle that will help to fuel the multi-level marketing scheme of socialism. And remember, the problem with all multi-level marketing schemes at the end of the day is someone has to pay the bill and no one's actually buying the product. No one's paying for the product.