The Llama Tragedy

TLDR;

This week, we take a closer look at tariffs and AI based on recent announcements, new details on the insane costs of o3 and DeepSeek’s latest proposal to push AI’s frontier. We then discuss an AI that barks, and Amazon’s genius agent move.

Finally, we examine Meta’s disastrous release of Llama 4 and what it means for them and for the US’ AI strategy.

TARIFFS

Tariffs Are Coming for AI’s Lunch

Just as we predicted on Sunday, tariffs are already generating a lot of nerves in the AI industry, this time echoed by the Wall Street Journal. The article discusses the growing concerns, and the journalist makes the case for the most likely outcome being a drawdown on AI investment.

While no plans to cut AI spending have been announced, some of the big spenders, like Meta or Google, are surely discussing this, given their exposure to a potential recession, and others like Amazon or Microsoft, which appear much more resilient to ‘bad times’ are also allegedly increasing caution around their investments in AI.

TheWhiteBox’s takeaway:

Hyperscaler CaPex is seen as the thermometer of the AI industry. If spending goes up, the party continues. But if they cut spending…

Such an event would mean an enormous cut in NVIDIA’s AI revenues, representing a sizable portion of the total AI market revenues. Real revenues from AI workloads are still much smaller in comparison.

If NVIDIA reduces its guidance for the rest of the year (it reduces its revenue or growth expectations for future quarters), we could see a complete collapse, which would seriously impact not only public markets but also Venture Capital, forcing it to cut its investments into billion-dollar rounds.

In fact, some VCs, like Eric Bahn from the Hustle Fund, are already telling their invested companies to assume their last round will be the last one in a while.

The question is, will Hyperscalers actually cut spending?

To me, the crucial point will be if they all decide to do so. Concerningly for NVIDIA, it’s not return on investments that fuels current AI spending; many of them continue to invest heavily into AI out of pure FOMO (Fear Of Missing Out), so most of them will gladly ease off the spending pedal if that’s the overwhelming decision (this also applies to VC).

A less catastrophic outcome is that the narrative swirls entirely in favor of efficiency, putting a lot of effort into decreasing model sizes, thereby reducing costs and latency, and more effort is put into enterprise applicability (higher robustness, more specificity) to the detriment of ‘the pursuit of Artificial General Intelligence (AGI).’

TARIFFS

China & the US Escalate Tariff Tensions

As Trump rallied markets by announcing that most “reciprocal tariffs” were halted except for Chinese ones (which were ramped up to 145% at the time of writing), tensions between the two superpowers have never been higher.

AI is at the center of these pains, despite Trump’s efforts to exempt semiconductors. China is calling the play and placing…

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