Shrinking tokens into dollars
Welcome to Cautious Optimism, a newsletter on tech, business, and power.
Tuesday! Despite it being a short week, notable tech companies are dropping earnings. Zscaler (cybersecurity) and NIO (Chinese EVs) today, Salesforce (CRM and AI), Figma (design), HPE (enterprise tech), Credo (datacenter connectivity), GitLab (devtools), C3.AI (enterprise AI), Sprinklr (social AaaS), Pagerduty (devtools), Couchbase (databases), and Yext (brand viz) on Wednesday, and so many more on Thursday and Friday.
Today, we’re looking at the latest from Klarna’s IPO, the value of AI demand, and tax revenue, oddly. To work! — Alex
📈 Trending Up: OpenAI in India … criticism of POTUS from financial leaders … inflation in Europe … EU manufacturing … early-stage investing … US-India trade relations? … generalists in ML? …
📉 Trending Down: Farm labor … support gigs … trying to make conservative AI … the Fed … civilization … media prices …
Things That Matter
Bonds worry about lower US tax revenue: News that a large portion of recently enacted tariffs could have been put into place illegally is causing US debt to sell off. Why? Because tariffs are a tax, and taxes bring in revenue. The market is reacting negatively to the possibility that American government revenue might fall. Tariffs are a stupid tax, but the overall picture here is interesting. And a wakeup call of sorts for Congress.
Revolut details AI jobs impact: Revolut’s valuation is rising to $75 billion from $45 billion thanks to an employee tender. That begs the question: Does that valuation make sense? Prepping to answer that question for TWiST today, I went back through Revolut’s 2024 report and found a tasty nugget regarding how AI is impacting its human spend:
In 2024, generative AI had a significant positive impact on our cost structure, particularly in traditionally labour-intensive areas like customer support. Despite a substantial 38% growth in our customer base, we managed to limit the increase in customer support costs to only 5%.
Salesforce details AI jobs impact: Sourcing from a podcast (The Logal Bartlett Show), the SFChronicle noted the following data point from Salesforce head Marc Benioff again discussing how AI is impacting corporate outlays on we flesh and blood:
Salesforce has cut 4,000 customer support roles this year after deploying artificial intelligence agents to handle a growing share of the company’s work.
G42 wants Western AI workloads: G42 in the UAE and HUMAIN in Saudi Arabia are building big datacenters to host global AI compute. G42, Semafor reports, wants AI companies (think Amazon, Microosft, xAI, etc) to use its servers to power their products and services. The two MENA projects are building a combined seven gigawatts of datacenter power. That’s a lot. And it implies optimism for AI demand growth is still sharp. Despite what we might call a post-GPT-5 market worry that AI progress is slowing. (My neighbors are asking about a potential slowdown in AI performance gains, notably.)
Klarna’s IPO takes shape: Swedish BNPL (consumer credit) giant Klarna’s IPO is racing ahead, with the unicorn dropping a new filing today indicating that it expects to price at $35 to $37 per share. That values the company at $13 billion to $14 billion, depending on how you want to count shares and which edge of is IPO price range you think most likely.
I’ll wager you a fancy coffee that Klarna wants to raise its range at least once. As of today, we lack an estimated flotation date. But for a bunch of American and European investors, a decacorn offering long in the making is this close to taking flight.
What do you get if you win AI?
A new AI model from xAI called Grok Code Fast 1 is taking share from its rivals. According to usage data from OpenRouter, the quick and cheap model has shot to the top of the charts, racking up hundreds of billions of tokens’ worth of usage in the last week. Today, it’s in second place on the AI routing service, accumulating the second-most token throughput (138 billion), beating Anthropic’s Claude Sonnet 4 (75 billion) and losing to Google’s Gemini 2.5 Flash (165 billion) amongst OpenRouter customers.
I intend to bring this bit of math up on the show today. Tune in around 1 ET if that’s your jam!
So, what’s 100 billion tokens worth? I get lost in the numbers after a few dozen billion of anything, so let’s convert usage into revenue.