Startups & Venture · August 2026
Murdock had just compared the AI buildout to the dot-com fiber boom, where the cable stayed valuable but the companies that laid it went bankrupt. He argues the hyperscalers survive any dislocation and pick up the assets cheaply, and that it is the debt-funded neoclouds who do not. The host immediately asks what separates the neoclouds that die from the ones that do not; Murdock says it comes down to who is running them.
Transcript
think you just saw that the free cash flow is the lowest it's ever been in the history of the company, number one. Number two, back in the dot-com bubble, there was a lot of fiber that got laid in the ground and that fiber was always valuable. But the companies that laid the fiber and stuff, they all went bankrupt. So when you're really... heavily dependent on debt and there's a dislocation, the underlying value of the asset declines. It may not decline forever, but it declines pretty sharply in a very short period of time. And that's when you have margin calls. That's the way it goes.
What should they do from here? They should not take out such levels of debt. Like, how do you expect this to be a problem? Well, I mean, look,
people are making decisions on the risk that they see to their business. If there is a dislocation, no one is better prepared to survive it than hyperscalers. I mean, all the hyperscalers have enough ongoing business and they've been very consistent. That's why they're worth what they're worth. The Magnificent Seven is there because they've been doing this for a long time. And so they know that they could absorb this. And if it happens, it'll be good for them because everybody else gets wiped out and then assets become cheaper for them to acquire and they're still in good shape. The demand for AI compute is not going to change. That's not going to go away. The issue is the ability to fund it in the short term. Let's take NeoClouds. NeoClouds right now, there's a whole bunch of them. I think at least half of them go away within 36 months. And if there's an economic disruption, a lot of them will go away right away.
Can you help me understand that? I can't pass that over. What will separate the neo clouds that go away and become valueless versus those that retain value and become even more valuable? That
stage of question around which head funds are going to go away and which ones aren't. If you looked at Leopold's returns, you think he's never going to go ahead. And he's probably going to survive this because he still has a good return for the year, but people are going to be a little wary about his risk-taking capabilities. And so it's underlying it's the people running the company. What's going to separate one neo-cloud from another is who is running it. How are they organizing it? We don't see it. You and I and everybody else, we can't see under the covers how that company is being run. I can tell you, if look at inference providers, I think fireworks is making a lot more money than base 10. And you look at the efficiency there and you think, oh, well, base 10 is raising money at the same valuation. Well, it's not the same business. I'd bet on fireworks over base 10, 10 times better business, in my opinion, because they're more capital efficient.
That's purely based on a capital efficiency.
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