Last week, the big news was that a

Chinese AI company, Moonshot, announced

the release of its new LLM model called

Kimi K3. [music]

Moonshot claimed that Kimi K3 is as good

as any LLM out there, but for a fraction

of the cost. Prior to last week, we were

worried about AI capital intensity and

the lack of moats. Now, the possibility

of a price war looms closer. Google

Cloud revenue reached 24.8 billion, up

an incredible [snorts]

82%. [music]

So so far, not bad. On the bad side,

however, because of the massive AI CapEx

spending, free cash flow turned [music]

negative. It was negative 5.9

billion. [music] Moreover, Google upped

its 2026 AI CapEx spend from 190 billion

to 205 [music] billion. That's a lot of

billion, and the market is beginning to

lose patience with all this crazy

spending. The takeaway from this week's

earnings results is that the terms of

debate on AI [music] have truly shifted.

A year ago, it was all rah-rah for AI.

When companies raised their CapEx

budgets,

>> [music]

>> the market cheered. As the AI story has

somewhat matured, the story has shifted.

It's not all positive. The business has

become capital intensive. Investors

question whether there are any moats.

China AI players have produced great

models that are much cheaper and might

create a price war. Everyone is nervous,

and [music] that nervousness was on full

display this week.