Monologue: AI's Compute Demand Story Is A Lie

Summary

Better Offline – Monologue: "AI's Compute Demand Story Is A Lie"

Host: Ed Zitron
Podcast: Better Offline (Cool Zone Media & iHeartPodcasts)
Date: May 1, 2026
Episode Type: Solo monologue

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Episode Overview

In this fiery, data-driven monologue, host Ed Zitron dissects what he calls the “myth” of overwhelming demand for artificial intelligence (AI) compute and investment. Challenging tech industry narratives, Zitron argues that the staggering spending on AI infrastructure—nearly a trillion dollars—serves more as a self-sustaining hype machine among Big Tech firms, hyperscalers, and a handful of AI startups, rather than reflecting organic market demand. He contends that industry leaders and financial analysts perpetuate this bubble, while profits remain elusive, and AI’s real-world impact fails to justify the ballooning expenditures.

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Key Discussion Points & Insights

1. The Illusion of AI-Driven Growth

• Dissecting Financial Hype:
  Zitron calls out Big Tech’s “earnings season” for AI, noting that companies tout growth, but rarely attribute bottom-line improvements specifically to AI.

  • “Spending now over $750 billion…on CapEx for, well, no real return on investment. In fact, all of them seem to be losing money.” (00:54)

• Lack of Transparency:
  Meta and Google refuse to share specific AI returns, while Microsoft and Amazon’s figures reveal weak performance when scrutinized.

  • “Do not be fooled, these are bad numbers.” (02:11)

2. Where Is the Compute Demand Really Coming From?

• A Closed System:
  The vast majority of cloud computing resources for AI are consumed by two startups—OpenAI (Microsoft-backed) and Anthropic (Amazon- and Google-backed).

  • "I really think you need to think very deeply about…how much AI demand there really is outside of two very large fail sons." (03:34)

• Capacity Constraints Are Artificial:
  Zitron asserts there are capacity shortages not because demand is so high everywhere, but because hyperscaler resources are monopolized by these two companies, leaving little for the rest.

  • “Think of it like seeing a very, very large man on the bus taking up four seats. There are absolutely capacity issues on this bus, but they're not a result of everybody wanting to ride it.” (05:22)

3. Following the Money: By the Numbers

• OpenAI:
  Annualized spend estimated at $18.5–24 billion on Microsoft Azure; accounts for the majority of Microsoft’s AI revenue.

  • “OpenAI represents around 70% of [Microsoft’s] AI revenue, if not more, while taking up the majority of its AI infrastructure.” (04:28)

• Microsoft:
  AI revenue run rate: $37 billion a year (~$3.08 billion/month), but Copilot 365 subscriptions likely only account for $7 billion/year — a fraction of spending.

• Amazon & Anthropic:
  Amazon’s claimed $15 billion annualized AI cloud revenue; bulk of which likely comes from Anthropic, with annualized spending rising to possibly $12 billion/year.

  • “Amazon's $298.3 billion in capex has successfully created an AI business…that…has…managed to make $1.25 billion a month. That's fucking pathetic.” (09:36)

• Google:
  Estimated to double compute capacity in 2025, but remains secretive about revenue; large swathes dedicated to Gemini and Anthropic.

4. Self-Dealing and the Circular AI Economy

• Hype Feeding Hype:
  Venture capitalists and hyperscalers invest in OpenAI/Anthropic, which in turn lease GPU compute from those same hyperscalers, creating circular revenue and inflated signals of “demand.”

  • "Venture capitalists and hyperscalers feed money to OpenAI and Anthropic so that venture capitalists can feed money to startups, to feed money back to OpenAI and Anthropic to feed back into hyperscalers for GPU compute." (08:00)

• Kayfabe and Facade:
  Zitron likens the market dynamic to wrestling “kayfabe” — an industry-wide agreement to pretend something is real.

  • “…to keep up with this kayfabe of doing AI to substantiate the build out means that they've had to massively over commit…” (08:19)

5. Unsustainable Subsidies and Coming Reckoning

• Eternal Losses:
  None of the current AI businesses (OpenAI, Anthropic, Microsoft Copilot, etc.) are profitable; they rely on enormous, ongoing subsidies.

  • "You realize that OpenAI doesn't make any sense, right? It can't survive without eternal subsidies. None of these businesses can." (21:46)

• Product Changes as Warning Signs:
  Microsoft's move to "token-based billing" for GitHub Copilot (meaning users pay full compute costs) signals a looming end for heavy subsidies—and a reckoning for unprofitable “growth.”

  • “This is effectively killing the product as people know it and invalidates every single story about its growth, revenue or otherwise ever written.” (17:57)

• Potential Collapse:
  Zitron predicts a cascading failure—the AI bubble bursts when subsidies end or one major player blinks.

  • “This entire industry is only made possible by the global Kayfabe circular economy…taking every single sign as good for AI and ignoring every single possible glaring warning sign.” (16:34)

6. Rants, Analogies, and Notable Asides

• Sharp Critique of Tech Leaders:
  He spares little in his exasperated critique—dismissing Andy Jassy, Satya Nadella, and other CEOs for their roles in sustaining the AI meme.

  • "If we had investors with IQs above room temperature, they'd run Andy Jassy out of Arlington like fucking Shrek." (10:19)
  • "Wow, Satya, you managed to get up to 20 million paying Microsoft 365 copilot subscriptions... Whoopty fucking shit man. You should be ashamed of yourself." (10:59)

• Meta and the Metaverse:
  Meta “burning another $170 billion” with little evidence of valuable output; only “the Metaverse and pervert glasses” to show.

  • “There should be a legitimate criminal inquiry into where this money is going.” (15:19)

• OpenAI’s Industry Impact:
  OpenAI is described as “a kind of psychosis generator” and “the panacea for the entire tech industry, creating a new way for business idiots to spend money on infrastructure.” (14:47)

• SpaceX and Musk:
  Side note ridiculing the convoluted Cursor acquisition drama involving Elon Musk and SpaceX, comparing it to “an alien vs. predator situation.” (16:01)

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Notable Quotes & Moments

• On Artificial Shortages:
  “There are absolutely capacity issues on this bus, but they're not a result of everybody wanting to ride it.” (05:22)
• On Investor Delusion:
  “If we had investors with IQs above room temperature, they'd run Andy Jassy out of Arlington like fucking Shrek.” (10:19)
• On the AI Circular Economy:
  “Venture capitalists and hyperscalers feed money to OpenAI and Anthropic so that venture capitalists can feed money to startups, to feed money back to OpenAI and Anthropic…” (08:00)
• On the Tech Bubble:
  “None of these businesses can [be profitable]. Every single AI business you see is unprofitable, and none of them have a path to break even, let alone sustainability.” (21:46)
• On Future Reckoning:
  “At some point these fuck nuts are going to be forced to reckon with what they're doing. Until then, we'll have increasingly more frenzied and ejaculatory statements about AI demand that fail to match with reality.” (20:02)

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Timestamps for Major Segments

• 00:52 – 06:00: Setting up the case for inflated AI demand, breaking down actual revenue and spending at major companies
• 06:01 – 10:59: Exploring capacity constraints and their true origins; OpenAI and Anthropic’s outsized influence
• 11:00 – 15:19: Critique of Big Tech leaders, the AI circular economy, and Meta’s mysterious spending
• 15:20 – 19:30: Industry-wide denial, product changes (GitHub Copilot), and signs of the bubble’s fragility
• 19:31 – 22:00: Future scenarios for collapse, the impossibility of profitability, and Zitron’s closing assessment

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Conclusion

Ed Zitron delivers an unfiltered, deeply skeptical take on the real state of AI investment and demand in 2026. He argues that, beneath the buzzwords and sky-high spending, the AI boom is a closed feedback loop dependent on eternal subsidies and coordinated self-dealing—one with little organic market validation or path to profitability. Unless fundamental changes occur, Zitron predicts a dramatic correction looms, one that could recalibrate expectations and investments across the entire tech sector.

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Transcript

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Callzone Media hello and welcome to this week's Better Offline Monologue. I'm your host Ed Zitron. Better Offline it's earnings season and the quarterly jaunt through the psychosis of financial analysts that have worked for years to prop up an AI industry with questionable returns. Spending now over $750 billion in this year, I believe on CapEx4 for, well, no real return on investment. In fact, all of them seem to be losing money. I know, I know, though some of you are going to say but these businesses had great quarters. But you'll notice that said quarterly growth does not actually seem to be coming from AI when you read their results where they actually share the AI ROIC return on invested capital. So while Meta and Google refused to actually explain their AI returns because that would require admitting how bad they were marketing, Microsoft revealed that it had $37 billion in AI revenue run rate about $3.08 billion a month or so, and Amazon had $15 billion annualized or around $1.25 billion a month. Do not be fooled, these are bad numbers. Based on my own reporting, OpenAI spent $3.648 billion on inference in the third quarter of 2025 on Microsoft Azure, or around $14.4 billion on an annualized basis. While I only add half of the fourth quarter numbers, I estimate based on them that OpenAI's annualized spend hit over $18.5 billion, around $4.6 billion a quarter by the end of 2025. And that's not accounting for things like Sora 2 or the launch of its Codex coding platform. In total, this puts OpenAI at an estimated $13 billion of spend on Azure just on inference in 2025, with billions of dollars more on training models now. Microsoft also accounted for 67% of Core Weave's $5.15 billion in 2025 revenue, or around $3.45 billion. And as all of that is used by OpenAI, I really think you need to think very deeply about, well, how much AI demand there really is outside of two very large fail sums. I'm also confident that CoreWeave's compute is used for training OpenAI's models, as Core Wave's announcement related to its direct deal with OpenAI specifically said it was contracted and I quote to power of OpenAI's most advanced next generation models and said capacity per semaphore was only available because Microsoft declined to extend its current agreement with Coreweave to use that compute for OpenAI altogether. That puts OpenAI's spend on Microsoft services at over $18 billion in 2025, and it's easy to see how that could grow to over $24 billion on an annualized basis in the last quarter, or around $2 billion a month. Microsoft is OpenAI's primary cloud provider, and I estimate that OpenAI represents around 70% of its AI revenue, if not more, while taking up the majority of its AI infrastructure. Otherwise, Microsoft's 20 million Copilot365 subscribers likely pay no more than $7 billion a year. I'll get to my feelings about that in a bit. Now, as far as Amazon goes, things get a lot grimmer in early April, per Reuters. Andy Jassy, their CEO, admitted that its cloud business's AI revenue run rate was more than 15 billion DOL dollars in the first quarter of 2026, which translates to about $1.25 billion in monthly revenue, or roughly 0.419% of the $298.3 billion in capex Amazon spent so far on the AI bubble, or around 25% of the $5 billion Amazon just invested in Anthropic last week. I think it's also reasonable to assume that a large part, if not a majority of that revenue comes from Anthropic. Per my reporting last year, Anthropic spent $518.9 million on Amazon Web Services in September 2025, at a time when it had around $7 billion in annualized revenue, a figure that increased by 500% if you believe Anthropic, which I don't know If I do, to $30 billion in annualized revenue since as of April, $518.9 million is about $6.2 billion in annualized spend. And I think it's fair to assume that its spend will have at least doubled to $12 billion in annualized AI revenue for Amazon, or around 80% of the AI revenue. I also want to address this continual claim that capacity constraints in AI are proof of some incredible demand. In reality, the reason that there's so little available compute is that the majority of it is taken up by either OpenAI, Anthropic, or Hyperscalers running their own services with the dregs of what's left behind. Think of it like seeing a very, very large man on the bus taking up four seats. There are absolutely capacity issues on this bus, but they're not a result of everybody wanting to ride it. Now, Epoch AI, who I have had my differences with estimate and I'm using these numbers because there's fuck all out there as far as compute capacity goes. They estimate that Microsoft had around 2.02 gigawatts of compute capacity available at the end of 2025, a time when OpenAI said it had access to around 1.9 gigawatts of computer. As Microsoft is OpenAI's primary cloud provider and Oracle had yet to stand up more than 100 megawatts of Stargate Abilene, I think it's safe to assume that OpenAI takes up 80 to 90% of Microsoft's available capacity. Similarly, Epoch estimates that by end of 2025, Amazon had access to an estimated 1.67 gigawatts of capacity, and I estimate over 75% is taken up by anthropic. Amazon's anthropic dedicated Project Rainier data Center accounted for 500 megawatts by the end of that year, around a third of that capacity. And considering anthropic spend, I think it's reasonable to believe it's taking up the vast majority of what's available. Of course there are capacity issues. You're selling all the capacity to one fucking company. Epoch also estimates that Google had around 2.95 gigawatts, a remarkable figure that also relies on literally doubling its capacity since the beginning of 2025. Nevertheless, it likely uses a lot of its GPUs for anthropic 2, but it's hard to estimate how much as we have very little insight into anthropic spend on Google Cloud outside of its promise to use and I quote up to 1 million TPU's with over a gigawatt of capacity coming online in 2026 from the end of last year and a month ago when it said it would use, and I quote, Multiple gigawatts of next generation TPU capacity starting in 2027. I also think it's fair to assume that large swathes of Google's compute infrastructure is taken up by Google Gemini being shoved into literally every single part of Google's products. It's everywhere. It's like a fucking weed. It's horrible. Google also refuses to break out its AI revenues, but considering it owns around 13% of Anthropic, I also think it's fair to assume a large capacity amount goes to them. All right, you know what? I tried to be nice, I tried to keep my cool, but this whole situation is beginning to piss me off. I'm tired of hearing people online do this victory lap thing about how AI demand is there when it isn't. And when I started these monologues I was told I'd be allowed to rant, and I haven't really let myself off the chain, so I think it's time to do so. The story of massive AI demand is a lie. Nearly a trillion dollars, if not more, annihilated to create the largest circle jerk of all time, venture capitalists and hyperscalers feed money to OpenAI and anthropic so that venture capitalists can feed money to startups, to feed money back to OpenAI and anthropic to feed back into hyperscalers for GPU compute, at which point they turn to Jensen Huang of Nvidia and buy more GPUs. While it might seem tempting to credit these men as geniuses for creating companies specifically to feed themselves revenue well. But to keep up with this kayfabe of doing AI to substantiate the build out means that they've had to massively over commit to the bit, even though the only two meaningful businesses in AI appear to be Anthropic and OpenAI. And that's only because they're effectively intellectual honeypots for the entire industry. Outside of those two, the only other competitive AI businesses are those of Amazon, Microsoft and Google, two of which have an annualized revenue of around 6% of their capital expenditures so far, Google's AI business is so booming that it refuses to break it out. And while it nebulously claims that AI is creating growth, it's not really clear how. And they're vague about it because analysts and the media are ready to swallow the narrative as long as number Go up. That's why Google doesn't break out their AI revenues, by the fucking way. Amazon and Microsoft had their hands forced by the markets after their stocks tumbled and fucked up. By sharing their AI revenues, Amazon's $298.3 billion in capex has successfully created an AI business that more than a quarter of a way to a trillion dollars has successfully managed to make $1.25 billion a month. That's fucking pathetic. If we had investors with IQs above room temperature, they'd run Andy Jassy out of Arlington like fucking Shrek. But this is the AI bubble where everybody is wrong. Because once everybody admits what's actually happening, they're going to have to admit they all sounded insane for years. $1.25 billion a month after nearly $300 billion of capex. Unbelievable. What a joke. And like I said, more than 75%, if not 80% or more of that revenue is from fucking anthropic who Amazon just agreed to fund up to another $25 billion. At some point it's just Microsoft, Google and Amazon handing themselves money or handing it to Nvidia to justify why they've burned over 800 billion fucking dollars creating some of the most wretched businesses of all time. I'm sorry. Wow, Satya, you managed to get up to 20 million paying Microsoft 365 copilot subscriptions, $600 million a month in revenue, not profit. 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[C]

OpenAI is in and of itself a a kind of psychosis generator. It was the first thing in a long time that felt like a new thing since the iPhone. For the people that entirely obsess over growth. It was the panacea for the entire tech industry, creating a new way for business idiots to spend money on infrastructure, a new thing for consultants to scam people with, a new series of things to be an expert in as a journalist, a blogger, or just a scam artist all wrapped up in something that could also be a consumer product, an enterprise software product, a and a new kind of API to attach to other enterprise software products and then charge more money. In theory, OpenAI's success would lift everything at once hardware, software and even adjacent fields. It promised to both democratize access to creating software while also heavily reinforcing existing power structures to the point that every dollar inevitably ended up in the Magnificent seven's pocket or asshole. The problem is that the system needed to actually work one day. It needed to eventually make more money than it cost. Every single one of these companies is talking about AI non stop and not one of them can show you a profit. The only thing they can do is tell lies of omission by saying AI helped boost everything. And when you ask for specifics, well, the results are either tepid or so secretive you'd think they were hiding a dead body. The only reason Google, Amazon and Microsoft are being tolerated at their current excess is because their non AI segments continue to grow through endless price increases and inshittification. And its other business units, by which I mean OpenAI and Anthrop are yet to run out of money to feed them. Sorry, by the way, I just, I don't know what Meta's doing. I haven't talked about them very much because I don't think Meta knows what Meta is doing. Every so often they bury a fact in one of their blogs about they saw a 3% increase in something related to AI. Then they promised to burn another $170 billion in a year and again, we can't really tell why. They also lost another $4 billion on Reality Labs in the quarter. By the way, there should be a legitimate criminal inquiry into where this money is going. This is very strange. I think they're at like 80, $86 billion and all we have to show for it is the Metaverse and pervert glasses. Meanwhile SpaceX and Mr. Musk is rushing to have the strangest and largest IPO of all time. All as daily stories leak about billions of dollars of losses. And whatever the fuck that deal with cursor is, apparently SpaceX will buy it for $60 billion or pay it $10 billion to fuck off. I think what actually happens is a secret third thing. SpaceX funds it for a bit, then there's a falling out between Musk and Michael Truell of Cursor, and then the company either rushes another acquisition or just dies. Remember Elon Musk killed Cursor's funding round that was in place by doing this acquisition and he can't buy this company before SpaceX goes public. Elon Musk took fucking OpenAI to court. Do you think he'll care about killing Cursor? Who's gonna sue them? The remains? It's just a fucking rapper company. I'm so fucking tired of it. Anyway, that lawsuit with OpenAI, it's a real alien versus predator situation. And if I'm honest, I found the whole thing a little boring. A duo of dullards shoulder barging each other to see who can run a company that neither of them can really describe because neither of them do anything other than pontificate and take credit for other people's work. Two dumb bitches going, exactly. If this breaks OpenAI, I'll be surprised. But if it does, it would be extremely fitting that fucking Elon Musk would accidentally destroy the AI industry like Mr. Bean sitting down on a button that launches a nuke. If I'm wrong here, it'd be very funny. I'm just not giving it much hope. Nevertheless, this entire industry is only made possible by the global Kayfabe circular economy of taking every single sign is good for AI and ignoring every single possible glaring warning sign in the hopes they'll go away. That is the entire strategy. That's all it is. It's just people being like, well, the bad things don't matter. They do matter. Last week Microsoft said it's shifting GitHub copilot to token based billing, meaning that people will have to pay the actual cost of their models. This is effectively killing the product as people know it and invalidates every single story about its growth, revenue or otherwise ever written. I don't see anyone on writing this, by the way. No one gives a fuck. And to give you some context about the scale of how big GitHub copilot was or is until they stop subsidizing people's compute. Because right now when you use GitHub Copilot, Microsoft's just paying the models for you Anyway, GitHub Copilot is the second largest customer of Anthropic's models and was only that large because it was subsidizing the compute spend of its customers. A lot of that money spent on Anthropic. This is bad and really that's the only way to build any kind of AI business. Google and Amazon realize that AI revenues are contingent on the continuity renewed survival of Anthropic and Amazon and Microsoft's revenues are contingent on OpenAI and Anthropic. They know that if these companies die they're going to lose billions of dollars in revenue, but also they have to compete with them for fear that they'll be seen as falling behind their horrible progeny. And thus they're incinerating their brands and endlessly pontificating about the power of AI while spending nearly a trillion dollars on CapEx almost entirely to make sure their competition, which is also their customer, which is also their welfare recipient, doesn't die. Because if they die they lose a bunch of revenue. But they need to spend way more money than they'll ever make to justify that. Yeah, it's a mess and a mistake and eventually one of these companies is going to grow tired of it. Microsoft was already billions under the analyst estimates for capex. They're moving to token based billing on GitHub Copilot. They claimed to invest in Anthropic in February but didn't mention it in their 10Q. Their earnings in any way, shape or form, which means no money was sent. At some point these fuck nuts are going to be forced to reckon with what they're doing. Until then we'll have increasingly more frenzied and ejaculatory statements about AI demand that fail to match with reality. I truly think that it's going to be like this, if not crazier, until one day when the music suddenly stops, somebody's going to blink. Somebody is going to take a step back and give everybody else permission to stop too. Maybe Perplexity, Lovable Ripple or Cognition Dice. Maybe Microsoft shifting GitHub copilot to token based billing on June 1st inspires others like anthropic to follow suit. Maybe AI token austerity begins at Microsoft, Meta or any other large company burning 10% of their headcount on AI tokens. Maybe Nvidia fails to inspire the markets in just the right way. Or the fact that the data centers are not opening fast enough to a fully digested 2025's GPUs finally catches up with the economic mismatch that Jensen Huang always beats and raises expectations. And that really is the strangest thing. At the current rate of sales, it's taking more than six months to install a single quarter's worth of GPU sales. At this point, it's obvious that there are warehouses of these fucking things. It just isn't obvious whether they're in one zone by hyperscalers or or the Taiwanese ODMs, original design manufacturers like Quantum Computing and Foxconn that build their servers. And last last quarter, it looked like Quantum Computing's inventories were growing by billions of dollars. Is that good? Anyway, none of this makes sense. It hasn't from the beginning. It's the largest bubble in history and has reached such an intellectual and financial scale that many have taken sides on it in a way that will be completely impossible to walk back if they're wrong. As things deteriorate, expect them to cling to their mythologies tighter and become more and more agitated and make vulgar threats and weird comments that don't really make sense but are nevertheless quite verbose. And really, we've never seen anything like this in our lives. You realize that OpenAI doesn't make any sense, right? It can't survive without eternal subsidies. None of these businesses can. Every single AI business you see is unprofitable, and none of them have a path to break even, let alone sustainability. And to make matters worse, it appears the only way to create demand was to literally fund it yourself. These men believe they've created perpetual energy. What they've actually done is shit their pants and set their houses on fire. Anyway, catch you next week.

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