This episode unpacks a seismic shift in US AI policy, detailing new international partnerships and domestic fiscal strategies that directly impact Crypto AI investment and research by reshaping global compute access and economic incentives.
A New Era of US AI Policy: Partnership Over Control in the Middle East
- Brad Gerstner recounts his recent 10-day trip to the Middle East, highlighting a significant "180-shift" in US policy towards AI and technology diffusion. Previously, the US approach, characterized by regulations like the "Biden diffusion rule" (a framework restricting advanced chip and model sales to numerous countries), emphasized control. Now, the focus has shifted to a Silicon Valley-esque model of partnership and openness.
- This change was palpable in Riyadh, Doha, and Abu Dhabi, with a spirit of collaboration leading to major investment announcements and AI data center deals.
- Brad notes, "it it it just was incredibly well received... And there was a spirit of partnership in every one of those places."
- David Sacks, leading AI initiatives for the administration, played a key role in these discussions.
Strategic Implication for Crypto AI: This policy shift could unlock significant capital and resources for AI development, potentially increasing demand for decentralized AI infrastructure and compute, a core interest for crypto AI investors.
Massive AI Investments and the Repeal of Restrictive Policies
- Brad details the scale of recent developments, including the repeal of the "Biden diffusion rule" in May 2025, which he describes as "fresh."
- Trillion-dollar investment commitments into the US from Saudi Arabia, Qatar, and the UAE were announced.
- A landmark deal in Abu Dhabi involves a 5-gigawatt UAE-US AI campus, a collaboration with Nvidia, OpenAI, and Oracle. This campus represents approximately 2.5 million GPUs worth of compute power. GPUs (Graphics Processing Units) are specialized electronic circuits essential for the parallel processing required in AI model training and cryptocurrency mining.
- Brad emphasizes the speed of these developments, stating, "if you would have told me that that would have come together in this short a period of time, I wouldn't have believed it."
- Key figures like Howard Lutnick, Scott Bessant, and numerous tech CEOs, including Jensen Huang (Nvidia), were instrumental in these deals.
Strategic Implication for Crypto AI: The massive build-out of AI compute capacity, backed by sovereign wealth, could influence GPU markets and the economics of AI model training. Crypto AI researchers should monitor how this new capacity is allocated and its impact on decentralized compute networks.
Averting a Chinese AI Dominated Future
- Brad argues that the previous US policy of restricting AI technology access was pushing allies like Saudi Arabia towards Chinese AI stacks. Huawei's market share in Saudi Arabia had been increasing.
- He highlights that these Middle Eastern nations, long-term US allies, felt betrayed by being denied access to technology deemed existential for their development.
- Saudi Arabia has its own significant AI project, "Humane," in partnership with Nvidia and Groq.
- Brad believes that without this policy shift, "one year from now, this would have been largely they would have made commitments to build on Chinese AI stacks because they couldn't afford to do nothing."
Competitive Advantages of Middle Eastern National Data Centers
- Bill Gurley questions the competitive advantages of these new data centers. Brad points to:
- Cheap Power: The Middle East has abundant and inexpensive energy (solar, nuclear, natural gas), crucial for AI which converts "electrons...into intelligence." This is a key primitive for AI, as the cost of producing tokens (here referring to units of AI-generated output or value) is heavily tied to energy costs.
- Latency: Local data centers are needed for Europe, the Middle East, and India to reduce data transmission delays.
- Cost of Labor and Futuristic Designs: Investment in robotic futures and advanced data center construction.
- Brad notes the technological ambition of leaders like Sheikh Tahnoon of the UAE, comparing their vision to Silicon Valley.
- Bill Gurley probes the power cost advantage, estimating that power might be 15-20% of COGS (Cost of Goods Sold) for hosting, meaning a significant power cost advantage could translate to a 5% operating margin improvement or lower pricing.
Strategic Implication for Crypto AI: Access to cheap power is a major driver for both AI and crypto mining. Investors should assess how these large-scale, power-advantaged AI data centers might compete with or complement decentralized crypto-based compute solutions.
A New Framework for American AI Advancement
- Brad quotes David Sacks: "this AI acceleration partnership is not just a single deal. It's a new framework for advancing American AI both at home and abroad...positioning the US tech stack to be the partner of choice in this region for decades to come."
- Brad draws a parallel: "Can you imagine if in the year 2000 Washington DC had said, 'Oh my god, Google is so powerful that we're not going to allow any other country in the world to have access to this Google machine...?' That's what we were doing in AI."
- He argues this new openness will allow US companies to compete and win globally, similar to Google's trajectory.
The Danger of an "America AI" Silo
- Bill Gurley references a Wall Street Journal article on Europe's lagging tech innovation due to complex regulations. He fears the US was heading down a similar path, creating an "America AI" walled off from the world, with "China AI" potentially dominating elsewhere – the opposite of the internet era where the US led globally.
- Brad agrees, stating it would be a "disaster" if the US copied Europe's restrictive approach.
- He acknowledges ongoing resistance from "China hawks" and effective altruist types (a philosophical and social movement that advocates using evidence and reason to determine the most effective ways to benefit others) who are decelerationists (those who advocate for slowing down AI development due to perceived risks) in Silicon Valley.
Strategic Implication for Crypto AI: A more open US AI policy fosters global collaboration, potentially benefiting decentralized AI platforms that thrive on cross-border participation. However, ongoing internal US policy debates mean this openness is not guaranteed.
Diplomatic and Economic Benefits Beyond Business
- Brad suggests these AI partnerships also strengthen US diplomatic ties in a historically unstable region, potentially aiding initiatives like Saudi Arabia signing the Abraham Accords.
- He views this as a boon for US companies like Nvidia and AMD, and for AI firms like OpenAI looking to expand.
- Bill Gurley notes the positive market reaction, particularly to the China tariff negotiations led by Scott Bessant, which he sees as a larger catalyst than the Middle East deals alone.
Navigating China Tariffs: The Bessant Approach
- Brad discusses the shift in the administration's approach to China tariffs.
- The "nuclear Navarro path" (high structural tariffs globally) was feared by markets.
- The "Bessant or Hassett approach" (fair trade, reshoring critical industries, modest tariffs) seems to have prevailed. Scott Bessant stated the goal is "not to decouple from China especially in nonstrategic goods but to open markets and restore balance."
- Current tariffs on China are a blend: 30% on strategic goods, 15% on non-strategic, with an overall estimated annual tariff revenue of $300 billion (up from $77 billion last year, but less than the feared $800 billion).
- Bill Gurley notes a 90-day suspension on drastic tariffs, with a 30% import tariff on Chinese steel (10% tariff + 20% "fentanyl tariff" which could drop if China cooperates on fentanyl precursors).
Strategic Implication for Crypto AI: Reduced trade tensions and clearer tariff policies can lower uncertainty for hardware supply chains (e.g., GPUs, ASICs) crucial for both AI and crypto. Investors should monitor the 90-day review period.
The Nvidia Dilemma: Selling AI Chips to China
- Despite the broader policy shifts, a ban on exporting advanced AI chips like Nvidia's H20 to China remains.
- Jensen Huang (Nvidia CEO) expressed dismay, estimating $15 billion in lost sales next year and $3 billion in lost US tax revenue. Brad suggests this could be a $50 billion business for Nvidia in China within a few years.
- Brad speculates Nvidia might be allowed to sell deprecated chips to China in the future. He argues China already has frontier AI (e.g., Huawei), so "there's no keeping China from Frontier AI."
- His stance: "I would sell chips into China because I think it's a net benefit to the United States," keeping Chinese companies in the CUDA ecosystem rather than pushing them to develop their own. Bill Gurley concurs, noting that restricting technology incentivizes China to accelerate its own development.
Strategic Implication for Crypto AI: The debate over AI chip sales to China has direct parallels to crypto hardware. Restrictions can spur domestic innovation in targeted countries but may also fragment the global tech ecosystem. This impacts supply chains and competitive dynamics for AI and crypto infrastructure.
The Reconciliation Bill: Tax Cuts and Economic Stimulus
- Brad explains the Reconciliation Bill, a legislative tool to expedite budget-related laws in the US Congress, requiring only 50 Senate votes by suspending the filibuster, provided it adheres to Bird Rules (requiring provisions to be budget-related).
- Key components:
- Extension of the 2017 Trump tax cuts.
- Additional tax cuts: no tax on tips (with a likely cap to prevent abuse), overtime, or social security.
- Immediate expensing of capital investment (significant for businesses buying equipment/software).
- This package could represent a $400-500 billion annual economic stimulus.
- The Council of Economic Advisors argues these tax cuts will lead to higher economic growth, offsetting costs. Brad, while supporting lower taxes for growth, expresses concern over the $2.2 trillion deficit and $38 trillion national debt.
Strategic Implication for Crypto AI: Tax cuts, especially immediate capital expensing, could incentivize investment in AI and crypto infrastructure. However, increased national debt could have longer-term macroeconomic consequences.
Invest America: A Bipartisan Initiative for Wealth Generation
- Brad proudly announces that Invest America, his non-profit initiative, was included in the House version of the Reconciliation Bill.
- The concept: Every child born in America (3.7 million annually) receives $1,000 in a seed investment account (S&P 500), acting like a 401k from birth. The goal is to combat the wealth gap and give everyone a stake in the economy.
- Brad describes its high "product market fit" across the political spectrum.
- The House version renamed it the "MAGA account" (Money Account for Growth and Advancement), a name Brad finds polarizing and hopes will be changed in the Senate.
- Brad: "Whatever you call this...if we do this and we launch this in 2026...we get every kid...into the game...I think it's a game changer for the country."
Strategic Implication for Crypto AI: While not directly crypto/AI-related, Invest America signifies innovative approaches to wealth distribution. Crypto AI proponents might see parallels with DAOs or token-based universal basic income (UBI) concepts aimed at broader economic participation.
Delaware's Waning Appeal for Corporate Incorporation
- Bill Gurley discusses research by Stanford Professor Joe Grunfest (former SEC commissioner, founder of Stanford Director's College) on legal award multiples in Delaware.
- Grunfest's study (May 14, 2024) found that Delaware courts are significantly more likely to grant high award multiples to lawyers in business litigation compared to federal courts (e.g., 7x+ awards are 23 times more likely, 10x+ awards are 57 times more likely).
- This trend is recent (cases from 2009-2024).
- A significant portion (55%) of these high-multiplier cases involve just two judges, one of whom is the Chancellor (Kathaleen McCormick, who handled the Elon Musk pay package case), who also assigns cases.
- Bill Gurley: "any company that I'm involved with, I'm going to encourage to leave [Delaware]...this is radically different than why I was told we were supposed to go to Delaware."
- The concern is that Delaware, once known for predictable business law, now exhibits "chaos" and an "activist mentality."
Texas Steps Up: New Corporate Law Legislation
- In response to Delaware's issues, Texas passed Senate Bill 29 to attract incorporations. Key provisions:
- Codified the Business Judgment Rule (a legal presumption that corporate directors acted on an informed basis, in good faith, and in the honest belief that the action taken was in the best interests of the company).
- Limits on opportunistic legal claims.
- Allows corporations to set a minimum shareholder threshold (up to 3%) to bring a derivative action (a lawsuit brought by a shareholder on behalf of the corporation, often against its directors or officers). This aims to prevent lawsuits based on minimal shareholdings, like the Tesla case plaintiff with nine shares.
- Other provisions: new Texas business courts as exclusive venues, ability to waive jury trials, limits on book and record requests.
Strategic Implication for Crypto AI: For crypto AI startups and DAOs considering incorporation, this shift is critical. The legal environment impacts governance, liability, and investor confidence. Texas and Nevada are emerging as more business-friendly alternatives to Delaware.
SEC Commissioner Hester Peirce on Crypto and Blockchain for Securities
- Bill Gurley highlights a May 8th paper by SEC Commissioner Hester Peirce, "A Creative and Cooperative Balancing Act."
- Peirce argues crypto and blockchain could be superior mechanisms for tracking securities and company securitization.
- She suggests regulatory capture can lead to market fragility and proposes a regulatory sandbox for crypto innovation.
- Bill, while not a "big crypto bull," finds this interesting, especially given the decline in public companies, which he attributes partly to market inefficiencies.
The Genius Act: A Path Forward for Stablecoins and Crypto Regulation
- Brad discusses the Genius Act (a piece of legislation aimed at providing a regulatory framework for digital assets, particularly stablecoins), which recently cleared a hurdle in the Senate.
- Led by Senator Bill Hagerty, it aims to bring crypto under federal regulatory oversight, providing clarity and fostering innovation in the US.
- For stablecoins (cryptocurrencies designed to maintain a stable value, typically pegged to a fiat currency like the US dollar):
- Requires specific reserve backing (1:1).
- Provides regulatory oversight and consumer protections.
- Brad credits Mark Andreessen, Ben Horowitz, and Chris Dixon for their advocacy. He sees this as fundamental for innovating money transfer.
- He mentions a prediction: "in 5 to 10 years, stable coin issuers will become the biggest holders of US debt on the planet."
Strategic Implication for Crypto AI: The Genius Act and a clearer regulatory framework for stablecoins could significantly de-risk crypto investments and facilitate broader adoption of blockchain technology for financial applications, including those supporting AI ecosystems (e.g., payments for decentralized compute, data, or model access).
China's Open-Source AI Surge
- Bill Gurley points to an article about Baidu (misidentified as BYU in the transcript) releasing its latest model as open-source on June 30th.
- Baidu's founder, Robin Li, previously favored closed models but shifted due to competitive dynamics.
- DeepSeek, Quinn, and Zhipu AI (Xiaohai in transcript likely refers to Zhipu AI's model series) have also gone open-source in China, creating a vibrant ecosystem.
- Bill: "Having four simultaneous models out there all open source I think is pretty damn interesting and will be tough to keep up with."
- Brad expects OpenAI to release an open-source model soon, and Elon Musk's xAI has also committed to open-sourcing.
Strategic Implication for Crypto AI: A surge in powerful open-source AI models, particularly from China, accelerates global AI development. This can benefit decentralized AI platforms by providing foundational models for further innovation, but also intensifies competition. Crypto AI researchers should leverage these resources.
Benchmark's Investment in Manis and the "China Hawk" Debate
- Bill Gurley addresses criticism he faced regarding Benchmark's investment in Manis, an AI company with Chinese founders.
- He clarifies he's no longer a GP (General Partner) on new Benchmark funds and wasn't involved in the Manis investment decision, though he supports the firm as an LP (Limited Partner).
- Facts about Manis:
- Operates only on US models (rapper company, no foundational model).
- Offices in Singapore, Japan, US.
- Hosts all workloads on US hosting services; no customer data in China.
- Bill believes critics "rush to judgment" due to a "China hawk tilt."
- Brad adds that 50% of AI researchers in the US are Chinese, warning against xenophobia. He supports skilled immigration from China and allowing US companies to compete in China.
Strategic Implication for Crypto AI: The debate around investing in AI companies with Chinese links reflects broader geopolitical tensions. Crypto AI investors must navigate these complexities, balancing innovation with potential regulatory and reputational risks. Openness to global talent is crucial for the field.
Conclusion
This episode reveals a pivotal US pivot towards global AI partnerships and a more defined fiscal path, creating fresh avenues for Crypto AI. Investors and researchers must now navigate evolving chip access, tariff landscapes, and burgeoning open-source ecosystems to capitalize on these strategic shifts.
