AI provides a very large and vibrant opportunity for investors, says Redpoint Ventures' Geoff Yang

Let’s talk more about investing in tech and AI. Joining us for that is Jeff Yang, Founder, founding partner at Red Point Ventures. Jeff, great to have you with us. I’m Melissa, there’s a lot of enthusiasm in the space, particularly on the hardware side. And I’m wondering, you know, can we call that side of the AI picture a bubble and where are we on the other side in terms of software? Well, I mean, you know, every decade or so there’s a platform that comes around that unlocks enormous value and everyone builds on the last and and everyone historically has been bigger and this one I think could be the biggest. So there’s a lot of momentum behind it. You see it in the market today in the private market, the AI companies are getting a substantial increase in valuation, maybe about 3X what other companies and they’re raising about 70% more capital, but they’re also growing faster. You know by our numbers, these companies are growing about 2 1/2 X faster, about 400 and a little over 450% year over year versus about 200% for the other companies we look at. And so we know this is, this is a very large and vibrant opportunity. Do you think, I mean, if if we are in a situation where companies start looking at their budgets carefully and we could very well be in that situation at some point in time, is, is AI spending bulletproof effectively? I mean, is this an area that companies have to spend on so that deployment will continue even if they’re cutbacks elsewhere? Well, I mean nothing’s bulletproof. Everything goes through phases and goes through highs and lows. But I really think this is something that is going to affect pretty much every company and and how and how they think about their business and and and how they go about doing it. I think you know they’re first you start with the models and then you look at the infrastructure that helps implement these models. Then you look at the application that builds on top of these models and then finally companies that will benefit from the productivity gains or build new business models are all opportunities. I think people using enterprises and end users using AI will will it’ll be foundational and and everything they do is almost like the Internet became foundational and and how you think about business or mobile became foundational. I think that’s how that that’s how it’ll be with AI and and like I said earlier, every trend builds on the other one. So I think this one could be bigger in terms of where we’re going to show viewers. The NASDAQ Redpoint Cloud Infrastructure index which you put together and it has a lot of you know it has publicly traded cloud companies, a lot of them have high valuations relative to the S&P 500. Jeff in an environment where interest rates are higher and it looks like they will be higher for longer higher interest, you know higher valuation companies typically come under pressure. This is group is no you know no exception. I’m wondering how you start thinking about that in terms of imputing the value of of the private companies you are putting new money into if the public valuations are under pressure. So let’s just talk about the index just for a second. We did this in partnership with NASDAQ and Redpoint launched the first infrastructure index in June of last year. And we’re tracking the top public companies in the cloud infrastructure space. And very much, you know, you can think about cloud infrastructure as the picks and shovels to the modern economy and which powers virtually every industry and everything we do including ordering food, booking travel. And it’s industry agnostic and and truly a horizontal opportunity. And in the category it span, it spans 3 major vertical, you know, operations and developers tools, cybersecurity and data and AI. So in many respects, the discussion we’re having about AI, it would it should be incorporated in this. And we did it because we realized that the market was missing a pureplay index in building cloud native infrastructure. And so a lot of the companies that you’re going to end up seeing in this are going to be pure AI companies in addition to the other companies that use cloud infrastructure as part of their business. And today they have about a $600 billion market cap and they’re very high growth with a median of about 20% revenue growth in the area. And you know you look at these companies and certainly they’re going to be you know the valuation because of all the technology companies in the space are very going to are going to be tied to what happens with interest rate and interest rate expectations. And you see that certainly in the private market as the private market flows into what public valuations can be. But we think over the long term the revenue gains and revenue opportunities are are substantial for these companies. And as I said you know the market opportunity is is enormous for for AI and and and you’re seeing it in the public markets with how the Magnificent 7 you know is doing and all of them have a profound AI story. Hey, Jeff, maybe a bit of a curveball before we let you go. You’re a board member of a whole bunch of companies, Franklin Templeton, Warner Brothers, Discovery and so many others. So you’ve dealt with governance issues. We’ve been batting around this issue of Elon Musk’s compensation this morning. That plan put in place in 2018 that the judge overturned. Now the shareholders being asked effectively to reinstate the plan for work that was done prior. We just had a guest on that said that they thought it would be considered wasteful to pay them retrospectively like that. What do you think of this? Well, it’s a tough one because you know, you never seen packages like this before and and they’re definitely, the proposal is definitely carving new ground. But Elon Musk is also somebody that is doesn’t come along very often and it is, you know a lot of the things that they’re doing, a lot of the things that he does is is really practically only something that that Elon Musk can do. So it’s a tough one. I don’t really, it’s hard to fathom a Tesla without Elon Musk, but it but they’re also going in a in a space that’s never been done. I think the original package was very much tied to performance and what happened to the stock price and I think some of what they’re trying to do is reinstate something that they decided to do before that that the court said they couldn’t do. I don’t know what the right answer is. I I would I I think it would be a very hard comp committee to be on but because it’s it’s hard to imagine a Tesla without Elon Musk at its helm.