Modal sees software as its advantage over neoclouds

Transcript

Transcribed by machine (Whisper) from the episode’s audio, so a word may be off here and there.

1. 18:38

   crumbling a little bit here? What do you think? Because, by the way, I mean, it doesn't seem like you're too far from it in some ways, right? You're renting compute as well. I think the NeoClouds have had a good run over the last few years. I mean, at the end of the day, they're relatively undifferentiated software undifferentiated businesses. I think software is really where you can make a massive differentiation.

2. 18:59

   We have a very rich software layer. We provide a number of building blocks. Like we really think about modal as like, sure, you can get the capacity. You can go out and rent capacity from NeoClouds, but there's a number of problems. Like most developers, like the way you think about it, it's like you want these higher level building blocks, you know, inference, sandboxes, training, reinforcement learning, agentic applications.

3. 19:19

   In the future, it's going to be way more. And that's at the level where you want to operate. And so enabling developers to move fast and ship these incredible applications in a way where they don't have to think about infrastructure, there's so much alpha to capture in that layer. And that's an asset-like layer where you can move very fast and have very good margins, not quite software-like margins because we have significant cogs, but certainly way better than the sort of the neoclots we're getting squeezed between NVIDIA and the rising borrowing costs.

4. 19:48

   So I think it's a very different part of the stack. And, you know, it's a stack where software actually makes a very massive difference. And that software is quite unique and it's quite hard to copy. Tell me, in a billion dollars of this annualized revenue for you, is customer concentration a concern for you at all? No. The diversification keeps getting better every month. We see, you know, some very large customer, but also a long tail of smaller customers across like a very wide range of different verticals and use cases.

5. 20:22

   I mentioned inference and training and sandboxes and many other things, but it's also different spaces. So you see a fair amount of stuff in biotech actually growing very fast and life sciences, materials, physics. You see stuff in robotics growing very fast. Big companies, small companies, enterprise, startups. It's all over the place. So what do you think inevitably happens to the neoclouds here?

6. 20:47

   I mean, do you see there being consolidation? Do you see yourself maybe moving, not becoming a neocloud, but you're renting the chips right now? Could you buy chips? Have you bought chips? How do you think the story goes? It's possible. I mean, I think the Neocloud businesses are fine. I think there's been a correction because, you know, it's a tough business. I mean, at the end of the day, it's a financing business.

7. 21:10

   You know, you're borrowing a lot of money up front and then collecting the payment from your customers. You know, you're in the financing space. As it pertains to us, like we may go down in the space, like we might go and look at ownership or quite interested in looking at, you know, Colo or doing joint ventures with Neoclouds or other things. we think we can go down in the stack relatively easy it's harder for the new class to go up in the stack into software uh into the software space um what's going to happen with the neoclouds i'm not sure i think they're actually going to be quite fine i think you know there's been a little bit just a correction people have been like very excited now you know turns out these businesses