The Enshittifinancial Crisis: Part Three

Summary

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Better Offline – "The Enshittifinancial Crisis: Part Three"

Host: Ed Zitron (Cool Zone Media and iHeartPodcasts)
Date: January 22, 2026
Length: ~40 minutes

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Episode Overview

This third installment of the "Enshittifinancial Crisis" series dives deep into the financialization and looming instability in the current tech economy—especially focusing on the AI startup bubble, the unsustainable data center boom, and the dangerously centralized and debt-fueled nature of tech infrastructure. Host Ed Zitron weaves an engaging, heavily opinionated analysis, critically examining how venture capitalists, institutional investors, and major banks have become complicit in fueling a potentially catastrophic financial setup centered around artificial intelligence startups and the massive, debt-driven expansion of data center infrastructure.

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Key Discussion Points & Insights

1. The AI Startup Valuation Bubble

[02:19 – 08:20]

• AI company valuations are at historic highs, but these numbers are often "on paper" with little substance behind them.
• Venture capitalists (VCs) are investing in AI startups—like OpenAI, Anthropic, Perplexity, Cognition, Cursor—at valuations ranging from $3B up to $29B, even as these companies hemorrhage cash and lack a clear path to profitability.
• Startups’ value is driven by VCs' ability to mark up their assets under management (AUM), which lets them charge higher fees to their limited partners.
• Zitron highlights how some VCs are investing with "little to no information" about companies' finances, referencing sources who claim investors past OpenAI's $100B valuation round have no "information rights" and thus receive only the numbers companies want to publicize.
  • Quote [07:30]: "They only know what new ridiculous stat Sarah Friar, CFO of OpenAI, has farted out..." – Ed Zitron.

2. The Delusion of Perpetual Growth

[08:20 – 10:30]

• VCs cling to the narrative that pouring money into growth, regardless of profitability, will yield returns—a belief increasingly detached from business fundamentals.
• Ed doubts OpenAI's revenue claims ("$20 billion annualized"), suspecting major exaggeration to prop up the myth of explosive AI growth.
  • Quote [07:58]: "They want you to think OpenAI made $20 billion in 2025—fuck that, I don't even think they made 10." – Ed Zitron.
• Predicts a wave of revaluations for AI startups: their next funding rounds (or exits) will slash valuations by at least half, possibly collapsing confidence in VC as an asset class.

3. Data Center Mania and the CoreWeave Case Study

[10:30 – 19:00]

• Focus shifts to the parallel, debt-fueled explosion in data center construction, primarily to support AI compute.
• Cites Bloomberg stats: 2025 saw $178.5B in US data center credit deals, more than double 2024.
• CoreWeave—an "AI Neo-Cloud" company—is presented as the poster child for risky, leveraged infrastructure:

  • Its business model: pre-sign massive contracts (sometimes before the infrastructure exists), use these as collateral to raise billions in debt, install Nvidia GPUs, then (eventually) start fulfilling contracts and getting paid.

  • CoreWeave's Debt Situation:

    • As of Q3 2025, $25B in debt on $5.35B revenue; deeply unprofitable.
    • Sits on $1.1B in deferred revenue (deposits for services not yet rendered).
    • Major investors/partners include Nvidia, which also serves as a backstop for certain debts.

  • Construction of these data centers routinely faces major delays. Zitron questions the official excuses (blaming weather, etc.), digging up evidence suggesting underlying financial issues.

  • Quote [14:09]: "This is a very important deal to know for literally any data center development you've ever heard of or seen." – Ed Zitron (on CoreWeave's unusual contract structures).

4. Debt Structures and Financial Meltdown Risk

[19:00 – 24:40]

• Outlines the web of financial institutions underwriting these data center loans (Blue Owl, JP Morgan, Goldman Sachs, MUFG, BNP Paribas, Morgan Stanley, Deutche Bank, etc.).
• This centralization is a major risk: if one institution falters or pulls out, the entire stack of deals could be destabilized.
  • Quote [22:27]: "It’s worrying how centralized this is. And the largest deals... All four of those companies have at some point funded CoreWeave. In fact, everybody appears to have funded CoreWeave at some point." – Ed Zitron

5. The Absurd Economics of Modern Data Centers

[28:59 – 34:00]

• Reveals the core flaws in the data center "gold rush":
  • Construction is slow, expensive, and prone to delay.
  • All the new AI-specific facilities will fill up with GPUs that become obsolete before they're even operational, thanks to Nvidia’s rapid upgrade cycles.
    • Example: as new facilities finish installing Blackwell chips, Nvidia will already be shipping the Vera Rubin generation, with incompatible rack formats once Kyber launches in 2027—instantly devaluing "new" assets.
  • Most demand is artificially concentrated in a handful of hyperscale deals with OpenAI and similar giants, who themselves are on shaky financial footing, often negotiating year-long or longer payment terms.
    • Quote [29:30]: "Every single major bank and financial institution has piled hundreds of millions, if not billions of dollars into building data centers that… only seem to lose money. Didn't think—no one, no one fucking think to check that one." – Ed Zitron.

6. Cascading Risks, Shaky Tenants, and Pullouts

[34:00 – 39:00]

• Many of the largest data center deals hinge on tenants (like OpenAI, Microsoft, Oracle) that may struggle to pay—or may be incentivized to walk away from contracts if service is delayed.

• Highlights damning examples, such as:

  • Microsoft's deal with Nebius—which may collapse if Nebius can’t deliver (with suspiciously unrealistic construction timelines).

  • Blue Owl Capital, a key financier, abruptly pulling out of a $10B Oracle data center project in Michigan, citing mounting debt risk and AI spending. Despite industry rumors, Zitron is skeptical that a new institutional player will simply "fill the gap" this time.

  • Quote [37:42]: "This is not a consumer mortgage... Stepping in would require billions of dollars in legal logistics and likely Blackstone talking to the very same banks who already said no. Why are they not doing this? And indeed, why are things looking shaky?" – Ed Zitron

• Warnings about the fragile financial state of supposedly bulletproof firms, e.g., Oracle has negative cash flow, low margins on GPUs, and $248B in data center leases pending—almost all to serve one major (questionable) customer: OpenAI.

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Notable Quotes & Memorable Moments

• On AI Startup Bubble:
  • “A big beautiful number, the biggest you’ve ever seen, and your limited partners need to pay you a fee just to manage it.” [05:11]
• On Information Rights:
  • “Nobody who invested past OpenAI’s $100 billion valuation have any information rights…they literally do not know anything about the company.” [06:49]
• On Deferred Revenue:
  • “Coreweave’s sitting on $1.1B in deferred revenue. That’s income for services not yet rendered.” [18:26]
• On Data Center Construction:
  • “Data center developers are raising money months up to a year before they ever expect to make a penny of revenue, not profit.” [13:16]
• On Obsolescence:
  • “All of those data centers being built right now are being filled with Blackwell chips and by the time they turn on Nvidia will be selling its next generation Vera Rubin chips, making them obsolete.” [30:45]
• On Centralized Financial Risk:
  • “It’s worrying how centralized this is…literally every part of this piece is being funded by like 8 to 9 banks.” [22:15]
• On Blue Owl Pullout:
  • “Blue Owl pulling out is not the same as a regular deal…If it’s $10 billion, Blue Owl probably would put in 2 billion themselves. There’d be, like, maybe $8 billion of credit…” [37:58]

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Key Timestamps

• 02:19 – Ed Zitron opens main episode content; lays out the AI/VC valuation bubble.
• 06:49 – Information rights (or lack thereof) for AI company investors.
• 07:30 – Critique of OpenAI’s public revenue numbers.
• 10:30 – Shift to data center bubble, introduction to CoreWeave.
• 13:16 – Explanation of how debt is used to finance data centers.
• 18:26 – Ed dives into CoreWeave’s deferred revenue and loan documents.
• 22:00 – 24:00 – Rundown of major banks funding these deals and the associated risks of concentration.
• 28:59 – Economic flaws in data center “gold rush”; hardware obsolescence.
• 32:40 – Questioning future rental demand and payment flows.
• 34:00 – Real-world hazards: Microsoft, Nebius, contractual collapse risk.
• 37:42 – Blue Owl pulls out; implications for financial confidence.
• 40:00 – Episode closes, tee-up for next week: the “data center apocalypse.”

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Tone and Style

Ed Zitron infuses the episode with energetic skepticism, biting sarcasm, and frequent profanity—critically dismantling industry hype and calling out systemic financial recklessness. His commentary is direct, conversational, richly informed, and at times bleakly humorous.

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Conclusion

Part Three of "The Enshittifinancial Crisis" lays bare how the modern tech and AI economy is underpinned by risky debt, opaque valuations, and speculative infrastructure investment. With major institutions shoulder to shoulder in a house of cards and core tenants (like OpenAI, Microsoft, Oracle) as much at risk as the companies serving them, Zitron warns of a looming collapse when reality inevitably catches up. Part Four, previewed at the end of the episode, promises to explore how this domino effect might actually unfold.

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Transcript

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Media hi, I'm Ed Zitron and welcome to Better Offline. Better Offline. That's right folks, we're back for the third Part of our four part series about the terminal stage of the initiatification process, the initiatification of the financial markets. So far we've talked about the initiatification of the stock market, the complicity of the analysts and the media, and how venture capital will be the canary in the coal mine for any eventual collapse. Venture capital is both the perpetrator and the victim of the air bubble. And it's worth exploring how it came to this point. Now hang on, I need a channel voice. Folks, we haven't seen values this big in a long time. Is the biggest numbers we've ever seen. They're simply tremendous. Open airs maybe with 830 billion. Can you believe that they lose so much money? But folks, we don't mind Clammy Sam open, they call him Clamio says everybody is going to give them $1 billion or more. We love him. And data centers are going to have the biggest deals we've ever seen. Even. Even if we have to work with Dario. Sorry to those of you who don't like that voice. It was only about 30 seconds. You see right now, AI startups are big, exciting news for the limited partners funding large language model companies. Things feel exciting because the value of the assets under management AUM are going up, which is nothing dodgy per se, but it's just how VCs value things. And if they're valuing AI stocks, well, that's how their fees are getting paid because the thingies they've invested in are worth more money. And now limited partners are paying them a percentage so they can sit in an apartment that costs too much, not see friends because they just sit online posting for 11 hours a day. Yeah, and then they can lose all the money in the future. I guess Investing early in OpenAI allows a venture capitalist or even an asset manager like Blackstone, which invested in 2024, to say it as a big holding. And a big increase in its AUM AI stocks make venture capitalists who bet on them two years ago look like geniuses. On paper, you got in early on OpenAI, anthropic, cursor, cognition, perplexity, or any other company that loves to burn several dollars per dollar of revenue. You have a big beautiful number, the biggest you've ever seen. And your limited partners need to pay you a fee just to manage it. Venture capital has not seen valuations like this in a long time. And on paper it feels a lot like a lot of VCs got in on companies worth billions of dollars, right? On paper that Is on paper, cognition is worth 10.2 billion. Perplexity 18 billion cursor 29.3 billion lovable 6.6 billion cohere 6.8 billion replit 3 billion glean 7.2 billion massive valuations to companies that all basically do products that OpenAI or Anthropic or Amazon or Google or any number of Chinese companies are already working to clone. They're all losing lots of money too, and have no path to profitability of any kind. But right now, the numbers are simply tremendous, folks. I've heard venture capitalists tell me that there are times when they have to agree to invest with little to no information, or know that they'll lose the opportunity to another sucker. I mean, investor. I've heard venture capitalists say they don't have any insight into finances, but we love the numbers, folks. They're simply tremendous. We love it. Let me tell you how not tremendous they are. I had a source recently suggest that nobody who invested past OpenAI's $100 billion valuation have any information rights. And what that means is they literally do not know anything about the company. They don't know anything other than what the company will tell them. And the company doesn't have to tell him shit. Which means they don't know the revenues, they don't know the costs. They only know what new start, new ridiculous stat. Sarah Fryer, CFO of OpenAI, has farted out. They posted recently that $20 billion annualized revenue. Yeah, I think that's complete nonsense. But they want to do that so that you go, OpenAI made $20 billion in 2025. Fuck that. I don't even think they made 10. Now, venture capitalists would argue, of course. They'd say I'm insane. They would say. They would think me mad. And they would say that the growth is obviously there, while pointing to whatever Startup has made $100 million in annualized recurring revenue, which is $8.3 million a month, by the way, all while not discussing the underlying operating expenses. The idea, I believe, is that the current spate of AI spending is only set to increase the next year, and that will somehow lead to fixing the margins. I think venture capitalists staunchly refuse to learn anything other than invest in growth and then profit from growth, even if profiting doesn't appear to be happening anymore. In reality, venture capital shouldn't have touched LLMs with a shitty stick because the margins were obviously blatantly bad from the very beginning. We knew OpenAI would lose $5 billion in the middle of 2024, the same venture capital climate would have fucking panicked, but instead chose to double, triple and quadruple down. I believe that massive valuation drawdowns are a certainty for AI companies. And by that I mean these companies will end up being revalued and the number will be smaller than the big number everybody fell in love with. Look, venture capitalists, I got to ask you a question. What happens if OpenAI dies? Do you think this will make investors interested in funding or acquiring other AI startups? How much longer are we going to do this? When will venture capital realize it's setting itself up for a disaster? And what exactly is the plan? OpenAI and Anthropic will suck the lakes dry like an Nvidia GPU named after Nancy Reagan. How is this meant to continue? And what will be left when it does? The answer is simple. There won't be any money for venture capital for a while. Those AI holdings are going to be worth, at best, 50% if they retain any value at all. Once one of these startups die, once there's a major casualty, a panic will ensue, sending venture capitalists scrambling to get their holdings acquired, while by which I mean sold to someone else until there's little or no investor interest left. Why would limited partners ever trust venture capital after this? Why would anybody? Because based on the past four years, it doesn't appear that venture capital is actually good at investing money. It just got lucky year after year until there were a few ideas that they could sell for hundreds of millions or billions of dollars. And now we're out of them. We're out. I think we're out. I think there's probably still some. But I think the era of the unicorn might be dead. For a while, venture capital believed it knew better as it turned its back on basic business fundamentals, starting with Clubhouse Crypto, the Metaverse, and now Generative AI. Yet they're far from the only fuckwits on the dickhead express. Because yes, I am going to talk about data centers. Per Bloomberg, there were at least $178.5 billion in data center credit deals in the US in 2025, rivaling the $215.4 billion invested in US venture capital in 2100 and $97.2 billion invested in US venture capital through August 7, 2025, and over a hundred billion dollars more than the $60.69 billion of data center deals done in 2024. That's. That's really worrying. It's like more than more than more than 100% more. I'm very worried and I'm going to tell you why. Using a company called coreweave Corwe that I've been actively warning about, warning people about since March. And I. I get a little crazy around Core Weave because I have had the Core Weave conversation a lot and I've seen people straight up just steal the title of my articles as they come to this realization six to seven months later. But Core Weave is a mess, and Core Weave was obviously always a mess. And everyone has been saying Core Weave's fine because they went public. Core Weave is not fine. All right, let's talk about coreweave. Coreweave is something called a Neo Cloud. It's a company that builds data centers by renting out. And they build data centers, they fill them full of GPUs and they rent them to people. They rent something called AI Compute. And as I explained a few months ago, they do so by building data centers backed by endless debt. And I quote myself, setting up a Neo Cloud is expensive, even if the company in question already has data centers, as Core we've did with its cryptocurrency mining operation. AI requires completely new data center infrastructure to house and cool the GPUs. And those GPUs also need paying for. And then there's the other stuff like power, water, and the other bits of the computer, the cpu, the motherboard, the memory, the storage and the housing and the power supply and all that good stuff. As a result, these Neo Clouds are forced to raise billions of dollars in debt, which they collateralize using the GPUs they already have, along with contracts from customers which they use to buy more GPUs. Core we, for example, has $25 billion in debt on an estimated $5.35 billion in revenue, losing hundreds of billions of doll quarter. You know who also invests in these neo clouds? Nvidia. The people who make the GPUs. Nvidia is also one of Coolweave's largest customers, accounting for 50% of its revenue in 2024, and just signed a deal to buy $6.3 billion of any capacity that Core we've can't otherwise sell to someone else through 2032, an extension of a $1.3 billion deal from 2023 reported by the Information. Oh, and Nvidia was the anchor investor of Core Weave's IPO, putting in $250 million. CoreWeave is also one of the largest providers of AI compute in the world, and its business model is Indicative of how most data center companies make money. In fact, I'd argue that they are probably doing better because they have the backing of everyone. Now, you may think that's a too big to fail thing. Not really. It just means that they're kind of the village bicycle of AI. Compute grossness aside, let me explain how this works. First, CoreWeave signs contracts such as its $14 billion deal with Meta or its $22.5 billion deal with OpenAI before it has the infrastructure to actually service them. It then raises debt using this contract as collateral, orders GPUs from Nvidia. Those take three months to arrive and then another three months to install, at which point monthly client payments begin. And I should also add that that's kind of taken out of deferred revenue that the customer has already put down. To really simplify this, datacenter developers are raising money months up to a year before they ever expect to make a penny of revenue, not profit. In fact, I can find no consistent answer to how long a data center takes to build. And the answer here is pretty important, because that's how the money is going to get made from the data centers building fucking everywhere. You may also notice that monthly payments in the chart that I linked, which I should have mentioned, begin at 6 to 30 months. A curious and broad blob of time. You see, data centers are extremely difficult to build. And the concept of an AI data center is barely a few years old, with the concept of hundreds of megawatts in one data center campus entirely made up of AI JPUs, barely two years old. JPUs, which means basically everybody building one is doing so for the first time. And even experienced developers are running into problems. For example, Core Scientific, Core Weave's weird partner organization it tried and failed to buy. That is truly different. Despite the similar name, has been trying to convert its Denton, Texas cryptocurrency mining data center into an AI data center since November 2024, specifically so that Core Weave can rent it to Microsoft for OpenAI. This hasn't gone well. And this is when things get weird. The Wall Street Journal reported a few weeks ago that Denton had been wrecked with several months of delays thanks to rainstorms preventing contractors and pouring concrete. I'm going with it. It's concrete now. We're calling it concrete. I originally, within this script, wrote down that this was a plausible thing. I thought that this was normal. However, I should add something. This is. This may actually be bollocks. So I'm a. I'm a psycho and I went and I, I looked up weather. I looked up weather in Abilene, Texas and it turns out that there were like 11 days with rain total and there was only, I think on June 3 and September 22 there were rainstorms or thunderstorms of any kind. I think There are only two days where rain was over 0.11 inches. The people I've talked to about this deal are saying it wouldn't be weather, it would actually just be money. Nevertheless, those are things that are stopping them building a 260 megawatt data center. And that's fucking nothing compared to the gigawatts that OpenAI claims to want to build. And what this means by the way, is that Coreweave can't actually get paid by OpenAI because per its contract, customers don't have to stop paying until the compute is actually available. This is a very important deal to know for literally any data center development you've ever heard of or seen.

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As of Core Weaves Q3 2025 earnings, they're sitting on $1.1 billion in deferred revenue. That's income for services not yet rendered, up from 951 million in Q2 and 436 million in Q1 2025. This means deposits have been made, but the contract is yet to be serviced. Now I'm also a curious little critter. So I went and found the 921 page $2.6 billion DDTL delayed draw term loan 3.0 loan agreement between Coreweave and banks including Morgan Stanley, Mitsubishi, UFG and Goldman Sachs. And in doing so, I learned something. Well, first of all, OpenAI appears to have net360 payment terms from Coreweave, meaning that it can literally pay a year from invoice. Second, corweave is required to to maintain something called a contract realization ratio, 0.85 times, meaning that Core Weave has to make at least 85 cents of every expected dollar or it is in default of its loan. This is important to note because it means that if, say, OpenAI decides not to pay up in a year, Core Weave will be up shit creek without a paddle. Now, I apologize. That suggests that Core Weave isn't already up shit creek or that it might have a paddle of some sort buried inside Nvidia's latest earnings. On page 17 there's a little clue. Ahem, and I quote. In the third quarter of fiscal year 2026, we entered into an agreement to guarantee a partner's facility lease obligations in the event of their default. The agreement allows our partner to secure a limited availability facility lease backed by our credit profile in exchange for issuing US warrants. The maximum gross exposure is 860 million, which is reduced as the partner makes payments to the leaser. Over five years, the partner has placed $470 million in escrow and executed an agreement to sell the data center cloud capacity, mitigating our default risk. Credit where credit is due. Eagle eyed analyst just Dario caught this in November. But in Core Weave's condensed consolidated balance sheets, There sits a $477.5 million line item under restricted cash and cash equivalents. Non current. Though this might not be Nvidia's escrow, this number shifted from 617 in Q1 to 340 million in Q2. It lines up all too precisely. And who else would Nvidia be guaranteeing? In any case, coreweave is likely to get the best deals in data center debt outside of Oracle. It has top tier financiers who I'll get to in a little bit. The fallbacking Nvidia, who is both an investor customer, an apparent financial backstop, and also coreweave is a customer of theirs and the ability to raise debt quickly. Core Weave's deals are likely indicative of how data center financing takes place. And those top tier financiers, it's. They basically beat in every single deal. It's actually really worrying when you, when you lay it all out, which is exactly what I'm gonna do. So who's actually paying for this? I went and dug through a pile of 26 prominent data center loan deals including the proposed 38 billion dollar debt package that Oracle and Vantage Data center partners are raising for Stargate, Shackelford and Wisconsin, Stargate Abilene, New Mexico and of course SoftBank's $15 billion bridge loan which I included for a reason that will become obvious shortly, and multiple core Weave loans. I found a few commonalities and forgive me, I'm about to say a lot of names and numbers so you might want to pull up the newsletter to read along with it. Like a sing along now Blue Owl Blue Owl we love Blue Owl folks. They were present in every single Stargate deal other than the 38 billion dollar deal that's being raised by Vantage that has yet to close. Blue I was also involved in the 1.3 billion dollar Australian data set and a debt package by virtue of owning Stack infrastructure. Remember that name? Mufg, muv Also Mitsubishi UFJ Financial Group is their full name. But I like saying MUF was present in 17 out of 26 of the deals including three separate core refinancing Stargate New Mexico, an 18 billion dollar deal, the alleged Stargate 38 billion dollar deal, SoftBank's bridge loan which they had to raise by the way to fund OpenAI and a $5 billion green loan package for Vantage data Centers who you might have just heard me say JPMorgan Chase was involved in eight deals and they were involved in some of the largest too. Coreweave's October 2024 financing, their third delayed draw term loan and November financing as well the funding behind Stargate Abilene, the $38 billion Oracle deal and Blue Owl's acquisition of IPI Partners in 2024. And yes, they were also part of Softbank's Bridgeline. Now let's not forget Deut bank who have never done anything dodgy ever. Do not Google what Deutsche bank has done with banks or particular fellas. Deutsche bank they're involved in Softbank's bridge loan and three smaller deals data center in Seoul, Corey's 2024 debt, Corey's November financing and a data center deal in Latin America as well as a 610 million dollar data center project in Virginia and a billion euro data center project in Germany that was invested in with Nvidia BMP Paribus 7 deals Corey was delayed draw tone loan 3 Stargate New Mexico, Stargate Wisconsin and Texas IPI partners of blue Owl, that data center deal in Seoul and another data center in Chile, Morgan Stanley. You remember Morgan Stanley, don't you? Well they were in eight of these things, core we've October 2024 loan loan three, November loan, Stargate New Mexico, Stargate with Vantage, the 38 billion dollar one I just talked about and one with EQT Edge connects. Well, I don't need to go into detail. It's another fucking data center. Oh, and they were also in SoftBank's bridge loan which they needed to find OpenAI. Now here's another name that you're going to hear in the future. Smbc Sumitomo Mitsui Banking Corporation. And I must say the Japanese know how to name a fucking company. Anyway, they're in seven deals, all notable core weaves, DDTL 3.0 and November financing loans. Stargate, New Mexico, Stargate Texas, Wisconsin, that's that 38 billion dollar one. A data center in Rowan, Maryland, also involving MUVK, TD securities and HSBC as well as data center deals in Chile and Latin America you've already heard about. Oh, and guess what? SoftBank's bridge loan, which they use to invest in OpenAI. There are a lot more data center deals than these, but I wanted to tell you exactly how centralized they are. I also really need you to know how worrying that is because literally every part of this piece is being funded by like 8 to 9 banks. If OpenAI is raising money for a date, well they wouldn't raise it. It would be Oracle or Core Weave or have you raising for a data center. One of these people is in it or companies, they're not people. It's really worrying. It's worrying how centralized this is. And the largest deals such as the 38 billion Stargate Texas Wisconsin deal or the $18 billion Stargate New Mexico deal, both involved Goldman Sachs, BNP, Paribus, SMBC and MUFG. And all four of those companies have some point funded CoreWeave. In fact, everybody appears to have funded CoreWeave at some point. Citibank, Credit Agricole, Societe General, Wells Fargo, Carlisle, Blackstone, Blackrock, Barclays, Magnetar and Jeffries, to name a few. And if you've been watching the news recently, you may have heard that term or term word Jefferies to refer to the company that invested in First Brands and their exposure. Anyway, foreign.

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[G]

Of the 40 banks and financial institutions I research, 24 have at some point loaned own two or organized debt for core weave. Of those institutions, Blackstone, Deutsche Bank, JP Morgan Chase, Morgan Stanley, MUFG and Wells Fargo has done have done so multiple times. Coreweave is a deeply unprofitable company saddled with incredible debt and deteriorating margins with one of the largest clients paying net360. And as I've said, it is arguably the best finance data center company in the world with the best chances of survival. What I'm getting at is that most data center deals are likely much worse than the terms that Corey faces and are likely financed in a similar way, whereas a client is signed for data center capacity that doesn't exist, such as when Nebius raised $4.3 billion through a share sale and convertible notes read loans to handle its 17.4 billion dollar data center contract with Microsoft. And guess what? Goldman Sachs acted as the lead underwriter on the deal with assistance from bank of America, Citigroup, Morgan Stanley, all three of which have invested in core weave AI. Data centers are expensive, require debt due to the massive cost of construction and the cost of GPUs and all take at least a year, if not two, to start generating a single dollar of revenue, at which point they also begin losing money because it seems that renting out GPUs is really unprofitable. Didn't think no one, no one fucking think to check that one. Every single major bank and financial institution has piled hundreds of millions, if not billions of dollars into building data centers that take two forever to even start generating money, at which point they only seem to lose it. Worse still, Nvidia sells GPUs in a one year upgrade cycle, meaning that all of those data centers being built right now are being filled with Blackwell chips and by the time they turn on Nvidia will be selling its next generation Vera Rubin chips, making them obsolete. Now, now now now now now now. You've probably heard that Vera Rubin, the next GPU from Nvidia, will use the same racks called Oberon as Blackwell, which is true to an extent, but won' as Nvidia intends to shift to their kyber racks in 2027, hoping to build 1 megawatt IT racks which involve entire racks full of power supplies, meaning that all of those data centers you see today, whenever it is they get built, if they get built, will be full of racks incompatible with the next generation of GPU'S this will also decrease the value of the assets inside the data centers, which will in turn decrease the value of the assets held by the firm's investing Stargate Avalanche, the one invested in by JP Morgan, Blue Owl and Primary Digital Infrastructure and Society General. The one that's been heavily delayed and won't be ready until the end of 2026 at the earliest. Fall to the brim to the gills with 2 year old GB200 Blackwell racks. Hell yeah baby. Woo. By the beginning of 2027, when this shithole eventually opens, I should really say potentially opens, because let's be honest, I'm not confident Stargate Abilene will be obsolete, as will any and all data centers filled with Blackwell GPUs, as will any and all data centers being built today. Every single one takes one to three years and hundreds of millions or billions of dollars to build, but probably raised in debt. And every single one faces the same kinds of construction delays. And better yet, almost all of them will turn on in roughly the same time frame. All right, look folks, I got a man. I don't really get how money works. I'm no economist, but I do know that supply and demand has an effect on pricing. What do you believe happens to the price of renting a Blackwell GPU when all of these data centers come on? Do you think that it will it will mean that the price goes up or down? Also, while we're on the subject, what do you think happens if there isn't sufficient demand? And demand is a real question. By the way, right now OpenAI makes up a large chunk of the global sale of compute at least $8.67 billion of Azure revenue, which is Microsoft's cloud platform, through September 2025. And they're part of they're about $22.5 billion of Corweave's backlog, $38 billion of Amazon's backlog, and so on and so forth. And made based on my reporting from last year, just over $4.5 billion through the end of September 2025. OpenAI can't afford to pay anyone and nowhere is that more obvious than when it negotiated year long payment terms of core weave. Otherwise, when you remove the contract signed by hyperscalers and OpenAI, which I do not believe has the money to pay anybody. Based on my analysis, there was less than a billion dollars of AI compute revenue in 2025 or 0.583% of the money spent on data center credit deals in the US Is that good hyperscaler revenue is also immediately questionable with Microsoft's deal with Nebius, per their 6K filing set to default in the event that Nebius cannot provide the capacity it sold of its unfinished Vineland, New Jersey data center, which is being built by Data1, a company that's never built an AI data center with a CEO that had his LinkedIn location set to United Arab Emirates as a like very recently and indeed was in Arabic until very recently as well, and they have funding from a concrete firm that is also a vendor on the project. I also believe that Microsoft is setting Nebius up to fail based on discussions with sources with direct knowledge of plans for the Vineland, New Jersey data center, Nebius has agreed to timelines that involve having 18,000 Nvidia B200 and B300 GPUs up and running by the end of January for a total of 50 megawatts, with another 18,000 B3 hundreds due by the end of May. On speaking with experts in the field about how viable these plans are, two laugh and one told me to fuck off. If Nebius fails to build the capacity, Microsoft can walk away, much like OpenAI can walk away from Stargate in the event that Oracle fails to build it on time, as reported by Anissa Gardizzi of the information in April 2025. And I believe that this is the case for literally any data center provider that's building a data center for any signed up tenant. This is another layer of risk to data center developers that nobody bothers to fucking discuss because everybody loves seeing these big beautiful numbers. Except the numbers might have become a little too beautiful for some. On December 17, the Financial Times reported that Blue Owl Capital had pulled out of the $10 billion Stargate Michigan data center project, citing and I quote, concerns about its rising debt and artificial intelligence spending. To quote the ft Again, Blue Owl had been in discussions with lenders and Oracle about investing in the planned 1 gigawatt data center being built to serve OpenAI in Saline Township, Michigan. What debt, you may ask? Well, Blue Owl, formerly the loosest legs in data center financing, was in CoreWeave's $600 million deal, the 750 million dollar deal as well for its plan Virginia Data center in with Teresa Technology Parks a 4 billion dollar Core Weave data center project in Pennsylvania. Stargate Abilene Stargate Mexico met a state billion dollar hyperior data center deal and a 1.3 billion dollar data center deal in Australia through Stack Infrastructure. You remember I mentioned those like 10 minutes ago. If you, if you email me for a fish biscuit I haven't got any. I'm sorry. Anyway, they own that company and I mentioned it earlier. Anyway, let's, let's keep going. To be clear, Blue Owl pulling out is not the same as a regular deal. It's a bdc, a business development company that invests both this money and rallies together various banks, in this case smbc, bnp, Paribus, mufg, and Goldman Sachs, all part of Stargate New Mexico, which makes me wonder why it didn't happen. In fact, it makes me very much worry about that. Per the Financial Times, and I quote, the private capital group has been the primary backer for Oracle's largest data center projects in the US Investing its own money and raising billions more in debt to build the facilities. Blue Owl typically sets up a special purpose vehicle which owns the data center and leases it to Oracle. Blue Owl is incredibly well connected and experienced in putting together these kinds of deals and very likely went to many banks. Banks, Many banks. It's worked with banks that have been basically giving them blank checks who apparently had, and I quote, concerns about Blue Owl's rising debt, much of which it had issued them. While rumors suggest that Blackstone may step in, I need to be clear. And I've spoken to numerous people in private equity about this. This is not a consumer mortgage. This is not a young couple buying a starter home. This is a giant deal. If it's $10 billion, Blue Owl probably would put in 2 billion themselves. There'd be like, I don't know, maybe $8 billion of credit. I mean, stepping in would require billions of dollars in legal logistics and likely Blackstone talking to the very same banks who already said no. Why are they not doing this? And indeed, why are things looking shaky? Well, remember that thing about how this data center would be leased to Oracle? Well, Oracle had a free cash flow of negative 13 billion DOL revenues of $16 billion with its most recent earnings only beating analyst estimates thanks to the sale of its $2.68 billion stake in Ampere. And you remember that SoftBank Bridge loan I mentioned? That $15 billion one? Yeah. Half of that went to OpenAI, half of that went to buying Ampere. So that's a one off event. Oracle's debt is exploding with over a billion dollars in interest payments in its last quarter alone. Its GPU gross margins are 14%, which does not mean profitable. Its latest Nvidia GB200 GPUs have a neg gross margin and it has $248 billion in upcoming data center leases. Is yet to begin and thus pay for all for the most part to handle compute for one customer OpenAI which needs to raise a hundred billion dollars and then probably much more to survive. Is that good? Anyway, that's a good point to jump off from next episode. We're going to wrap all this up up. It's been a great time reading this for you and we're going to talk about how the data center apocalypse will start and what might come next. Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matt Osawski. You can check out more of his music and audio [e-mail] matt o s o w s k-I.com you can email me at ezetteroffline.com or visit betteroffline.com to find more podcast links and of course my newsletter. I also really recommend you go to chat. Where's your ed at? To visit the Discord and go to R betteroffline to check out our Reddit. Thank you so much for listening.

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Better Offline is a production of Cool Zone Media. For more from Cool Zone Media, Visit our website coolzonemedia.com or check us out on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. This is Chelsea Handler from Dear Chelsea, I have some very exciting news about an ethical phone carrier. I just switched to Forget about all these other phone companies. Forget about Verizon, forget about AT&T. Forget about T Mobile. There's this new carrier called Noble Mobile and they actually pay you to stay off your phone. You can earn real money, up to 20 bucks back every month just for putting your phone away. If you're like me and you're tired of feeling controlled by your phone, social media or just disgusted by those screen time alerts, this is the answer. Go to noblemobile.com Chelsea and try it for $10. That's noblemobile.com Chelsea Financial Planning used to.

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