The Hater's Guide To The AI Bubble, Pt. 3

Summary

Podcast Summary: Better Offline – "The Hater's Guide To The AI Bubble, Pt. 3"

Release Date: July 25, 2025
Host: Ed Zitron
Produced by: Cool Zone Media and iHeartPodcasts

---

Introduction

In the final installment of the three-part series, "The Hater's Guide To The AI Bubble," host Ed Zitron delves deeper into the precarious state of the generative AI industry. Building on previous discussions, Zitron examines the financial instability, overreliance on key players, and the broader economic implications of the current AI-driven market frenzy.

Understanding the AI Bubble

Zitron begins by expressing his grim outlook on the AI industry's future, emphasizing the significant financial risks involved. He highlights that seven dominant companies, referred to as the "Magnificent Seven," constitute nearly 35% of all U.S. stocks. Central to this group is Nvidia, whose success is deeply entwined with the AI boom.

• Notable Quote:
  [03:12] "Right now, seven companies, the Magnificent Seven, account for the value of nearly 35% of all of U.S. stocks."

Nvidia's Critical Role and Vulnerability

Nvidia stands out as the linchpin of the AI sector, with 88% of its revenue stemming from sales to other Magnificent Seven members. These sales are primarily for Enterprise GPUs essential for running AI applications. Zitron warns that any reduction in AI spending by these companies could dramatically impact Nvidia's financial health, potentially dragging down the entire tech sector.

• Notable Quote:
  [03:12] "If and when they pull back, Nvidia will sink. So too will the other companies, especially when it becomes evident that they've spent nearly half a trillion dollars in two years on bugger all."

Financial Struggles of OpenAI and Anthropic

Zitron scrutinizes OpenAI and Anthropic, two pivotal players in generative AI, highlighting their enormous financial losses. Both companies are burning billions annually without a clear path to profitability, making them unsustainable without continuous capital infusion.

• Notable Quotes:
  [03:12] "OpenAI and Anthropic both lose billions of dollars a year after revenue, and their stories do not mirror any other startup in history."
  [03:12] "By my estimates, more than half of the entire revenue of the generative AI industry... are only losing money."

Impact on the Market and Economy

The potential collapse of these AI giants could trigger a domino effect, unsettling the broader market and economy. Zitron draws parallels to the 2007-2008 financial crisis, suggesting that while a global banking system implosion remains uncertain, the tech sector faces unprecedented risks due to its overextension.

• Notable Quote:
  [03:12] "This is one of the most brittle situations in economic history. Our market's held up by whether four or five companies will continue to buy chips that start losing the money the second they're installed."

Media's Role and Misrepresentation of AI

Zitron criticizes the media for perpetuating unrealistic narratives about AI's capabilities and its economic benefits. He argues that terms like "agents" and "AGI" (Artificial General Intelligence) are misused to create illusions of autonomy and intelligence in AI systems, misleading the public and investors.

• Notable Quotes:
  [02:04] "The use of the word agent is a deliberate attempt to suggest that LLMs are autonomous and any and all stories about AI replacing jobs are intentionally manipulative..."
  [03:12] "These are terms that are used to obfuscate the actual abilities of large language models and indeed what can be built on them."

Dependency on GPUs and Data Centers

The AI industry's dependency on GPUs, particularly those manufactured by Nvidia, is highlighted as a critical vulnerability. Zitron explains how companies like Core Weave rely on Nvidia's GPUs to build data centers, using them as collateral for loans to fund further expansion. This cycle is fragile and heavily dependent on continuous GPU sales.

• Notable Quote:
  [03:12] "Generative AI products do not provide significant revenue growth. Its products are not useful in the way that unlocks significant business value..."

Potential Collapse and Economic Consequences

Zitron warns that the AI bubble's burst could lead to a severe market downturn, disproportionately affecting tech stocks and broader financial markets. He underscores the lack of diversification and the unsustainable business models of AI companies as key factors that could precipitate a market crash.

• Notable Quotes:
  [03:12] "We're sitting on top of one of the most brittle situations in economic history."
  [03:12] "A shift in sentiment could start a chain of events that knocks down the entire house of cards."

Host's Personal Reflections and Conclusions

Throughout the episode, Zitron maintains a passionate and urgent tone, expressing deep concern for the economic fallout that could ensue from the AI sector's vulnerabilities. He emphasizes the importance of recognizing the bubble and understanding its potential impact on individual investments, particularly retirement funds.

• Notable Quotes:
  [03:12] "I really did, because I am genuinely really worried. We're in a bubble..."
  [03:12] "These people... have overseen a needless, wasteful and destructive economic force that will harm our economy, our markets, and the tech industry writ large."

Final Thoughts

Ed Zitron concludes by urging listeners to critically assess the AI industry's sustainability and the narratives propagated by the media and tech elites. He calls for accountability from major tech figures and stresses the need for informed skepticism to protect personal and economic well-being from the anticipated AI market collapse.

---

Key Takeaways:

• The AI industry's financial model is heavily reliant on a few dominant players, particularly Nvidia.
• Generative AI companies like OpenAI and Anthropic are burning billions without a clear path to profitability.
• The media's portrayal of AI often exaggerates its capabilities and economic benefits, contributing to the bubble.
• The dependency on GPUs and data centers presents a significant vulnerability that could trigger a market collapse.
• Investors and the general public should remain cautious and informed about the underlying risks in the AI sector.

For Further Information: Listeners are encouraged to visit betteroffline.com for more podcast links and Ed Zitron's newsletter, as well as engage with the community on Discord and Reddit for ongoing discussions.

Transcript

[Ed Zitron]

This is an iHeart podcast. Say you've always wanted to take a spontaneous trip around the Caribbean. Here's the thing. If you get smart with your money, you can do things like that. With Empower, you can start making the most of your money so you can go out and live a little. Isn't that why we work so hard, right? To have some fun with our money, like treating yourself to something special or spontaneously doing something extra for a loved one. So use Empower and get good at your money so you can be a little bad. Join their 19 million customers [e-mail] not an Empower client, paid or sponsored.

[Annabe Sofa Advertiser]

Life's messy. We're talking spills, stains, pets and kids. But with Anibe, you never have to stress about Messes again. @washablesofas.com Discover Anibe Sofas the only fully machine washable sofas inside and out, starting at just $699. Made with liquid and stain resistant fabrics, that means fewer stains and more peace of mind. Designed for real life, Our sofas feature changeable fabric covers allowing you to refresh your style anytime. Need flexibility? Our modular design lets you rearrange your sofa effortlessly. Perfect for cozy apartments or spacious homes. Plus, they're earth friendly and built to last. That's why over 200,000 happy customers have made the switch. Upgrade your space today. Visit washablesofas.com now and bring home a sofa made for life. That's washablesofas.com offers are subject to change and certain restrictions may apply.

[Lenovo Advertiser]

Lenovo is built for creators who don't wait for inspiration. They chase it with inventive tech, built in AI tools and seamless performance. Lenovo devices, powered by Intel Core Ultra processors are designed to bring your wildest ideas to life faster. That's the power of Lenovo with Intel inside, enjoy flexible financing, rewards on every purchase and free shipping. And students get special offers when you create an [e-mail] lenovo Lenovo.

[Oracle Advertiser]

In business, they say you can have better, cheaper or faster. But you only get to pick two. What if you could have all three at the same time? That's exactly what cohere Thomson Reuters and Specialized bikes have since they upgraded to the next generation of the cloud. Oracle Cloud Infrastructure OCI is the blazing fast platform for your infrastructure, database, application development and AI needs where you can run any workload in a high availability, consistently high performance environment and spend less than you would with other clouds. How is it faster? OCI's block storage gives you more operations per second, cheaper OCI costs up to 50% less for computing, 70% less for storage and and 80% less for networking. Better. In test after test, OCI customers report lower latency and higher bandwidth versus other clouds. This is the cloud built for AI and all your biggest workloads right now with zero commitment. Try OCI for free. Head to oracle.com strategic that's oracle.com strategic.

[Ed Zitron]

Call zone media. Stop your grinning and drop your linen. I'm Ed Zitron and this is Better Offline Better Offline welcome to the final part of our three Part Haters Guide to the AI Bubble, where we've been talking about the growing cracks emerging in the industry and the potential contagion to the wider economy that a pullback in generative AI spending will cause. And I must be clear, things are bad. The vibes are rancid. I spent the past two episodes and will spend much of this episode explaining why, but I just want to recap something from the first part of this series. Right now, seven companies, the Magnificent Seven, account for the value of nearly 35% of all of U.S. stocks. And the biggest of these companies is Nvidia, which has gotten fat off the back of the AI bubble. Today, a disproportionate amount of Nvidia's revenue, 88% of it, is coming from the other members of the Magnificent Seven and their purchases of the Enterprise GPU is designed to power the compute heavy AI applications that you're hearing about all day. If and when they pull back, Nvidia will sink. So too will the other companies, especially when it becomes evident that they've spent nearly half a trillion dollars in two years on bugger all. It'll be an apocalyptic shed thing of value. They won't die, but it'll be the likes of which we haven't seen since the dark days of 2007 and 2008. For those companies. I don't know about the global banking system imploding, but I also can't say it won't. I just. I don't know. But what I do know is tech is going to take such a precipitous haircut that you're going to see scissor gashes in the man's bald head. Terrible metaphor. If that sounds like a them problem though, and not a you problem, ask yourself what's in your 401k? Do you own any index funds or ETFs? Are you close to retirement? And how much do you enjoy eating ramen? Are you willing to eat the same whiskers cat food as your American shorthair I am, except I feed them a different, better food because Babu deserves the best. But in the last two episodes, I made the case that the generative AI industry is unique in its capital demands and unparalleled in the fact that no company beside Nvidia or Consultancies are making any money from it. I can easily imagine a chain of events where one big company fails, like either because they ran out of money or because the investors pulled back. This in turn spooks the rest of the market, causing other companies to start seeing massive revenue drops. And as the demand for compute drops, hyperscalers like Microsoft, Amazon and Google massively cut their capital expenditures, canceling data center build outs and of course, slowing down their GPU orders. And then Jensen Huang would have to watch as the cash cow that made his company rich and fat is taken for a walk behind the barn for two shots to ring out. Though I must be clear, Nvidia isn't going to die. None of the Magnificent Seven will. However, the first big failure, the first domino to fall, could be any number of companies. And while I don't think OpenAI and Anthropic are necessarily going to be the first, I also believe that there's an air of inevitability about one or both of their demises. This matters because these companies are, for all intents and purposes, the generative AI industry. They're deeply unsustainable and unstable, and yet they are also critical to the AI trade continuing I haven't really spent much time on my favorite subject, that OpenAI is a systemic risk to the tech industry. But let's recap my reporting. OpenAI and Anthropic both lose billions of dollars a year after revenue, and their stories do not mirror any other startup in history. Not Uber on Amazon Web Services, Nothing. I've addressed my Uber point before, and how does OpenAI survive? It'll be in the show notes. Someone always asks me about this. Please stop. Learn to read. Learn to listen. SoftBank also is putting itself in dire straits simply to fund OpenAI. This deal threatens its credit rating, with SoftBank having to take on what will be multiple loans to fund the remaining $30 billion, OpenAI's $40 billion funding round, which is yet to close, and OpenAI is in fact still raising from the Middle East. This is before you consider the other $19 billion that SoftBank has agreed to contribute to the Stargate data Center project, money that it does not have available at this time. But I must say, while recording this episode I saw some news come out and I'm just going to read it to you. It said SoftBank and OpenAI's 500 billion AI project struggles to get off ground. The Stargate venture introduced at White House event is now setting the more modest goal of building a small data center by year end. I just want to say anyone that doubted me can suck one. I was oinking and squawking around my room just before this when I got this news in. I just want to say I just learned this news and I'm still taking it in. I'm still taking in because it makes me so excited Inside. Anyway, neither SoftBank nor OpenAI has the money for Stargate, regardless of what they build. Also, Clammy Sammy's making some interesting claims about what Stargate is. He's claimed the Denton site the core weave is building is also Stargate. This motherfucker loves lying. Anyway, OpenAI must also convert to a for profit by the end of 2025 or lose $20 billion of the remaining $30 billion of funding. If it does not convert by October 2026, its current funding converts to debt. It is also demanding remarkable unreasonable concessions from Microsoft. Stuff like they want to reduce their rev share, they want to reduce their, their, I think their ability to their exclusive rights to sell models. I did a I really need to do a monologue about this, and I know this is technically a monologue, but nevertheless they want these insane things and Microsoft is refusing to budge and is willing to walk away from negotiations necessary to convert, according to the Financial times. And also, OpenAI does not have a path to profitability and its future, like Anthropics, is dependent on the continual flow of capital from venture capitalists and big tech, who must also continue to expand infrastructure. Don't know how that's going to fucking happen with Stargate going, God, I feel so good about that. Oh, I want to like bolt that up and drink it anyway. Anthropic is in a similar but slightly better position. It's set to lose $3 billion this year on $4 billion of revenue. It also has no profitability and recently jacked up prices on cursor. Its largest customer has had to put restraints on clawed code after allowing users to burn 100 to 10,000% of their revenue a month. These are the actions of a desperate company. Nevertheless, OpenAI and Anthropic's revenue amount to, by my estimates, more than half of the entire revenue of the generative AI industry, including the hyperscale. And to be abundantly clear, the two companies that amount to around half of all generative AI revenue are only losing money. Now, I said a lot of this before, which is why I'm trying not to harp on it too much. But the most important company in the entire AI industry needs to convert to a for profit entity from a nonprofit entity, which has never happened before. In this case, by the end of the year or it's effectively dead. And even if it does, OpenAI burns billions and billions and billions of dollars a year and will die without continual funding. They have no path to profitability. And anyone telling otherwise is a liar or a fantasist. And on top of this, as part of the thing about SoftBank, by the way, and Stargate, they revealed that they've promised Oracle $30 billion a year for their cloud contract. I swear to fucking God, does no one read these stories and think? Does this not sound just like an egregious lie? Anyway, as I wrote earlier in the year, there is really no significant adoption of generative AI services or products. ChatGPT has 500 million weekly users and otherwise it seems that other services struggle to get 15 million user. Although you could mention Google. That's not a fair comparison, as it cheated by combining Google Gemini with Google Assistant to claim it had 350 million active users. And while the 500 million weekly users sounds and is in fairness impressive, there's a world of difference between someone using your product as part of their job, which they pay for, and someone dicking around with an image generator or a college student trying to cheat on their homework. On top of that, now I'm recording this July 21st. There's an Axio story that came out today with some bullshit vanity metrics for OpenAI. But that story said that OpenAI AI themselves had said that they have 500 million weekly active users. Now here's the crazy thing. That 500 million number that came from March, that's in March number that came from an OpenAI funding announcement. Have they plateaued? Stick around, I'm going to find out. But this is all worrying on so many levels, chief of which is that everybody has been talking about AI for three goddamn years and everybody has said AI in every earnings and media appearance. Exhausting blog post and we still can't scrape together the bits that need to make functional industry. Now, I know some of you will probably read this and point to ChatGPT's users and I quote myself writing in my newsletter, make fun of them, which I also read for this podcast. ChatGPT is allegedly 500 million weekly active users and by the last count, only 15.5 million paying subscribers. An absolutely putrid conversion rate even before you realize that the actual conversion rate would be monthly active subscribers, which is how any real software company actually defines its metrics, by the fucking way. Why is this impressive? Because it grew so fast. It literally had more PR and more marketing and more attention and more opportunities to sell to more people than any company has ever had in the history of anything. Every single industry has been told to think about AI for three years, and they've been told to do so because of a company called OpenAI. There isn't a single goddamn product since Google or Facebook that has had this level of media pressure. And both of these companies launch without the massive amount of media and social media that we have today. Chat GPT is a very successful growth product and an absolutely horrifying business. They're They're a banana republic that cannot function on their own. It's they do not resemble Uber, Amazon web Services, or any other business in the past other than we work the other company that SoftBank spent way too much money on. And outside of ChatGPT, there really isn't anything else. But before I wrap up this three parter and I'm tired and I imagine you are too, I do want to address something. I want to address the kind of both sides thing that everyone's doing. And I think we all need to do way less of this because at this point it's kind of silly. Yes, generative AI has functionality. There are coding products and search products that people like, and some even pay for them. As I've discussed across this series and I said disgraced there. But I'm keeping going. And across countless podcasts and newsletters. None of these companies are profitable until one of them is profitable. Really profitable, sustainably. So generative AI based companies are not real businesses. In any case, the problem isn't so much that LLMs don't do anything, but that people talk about them doing things they can't. The use of the word agent is a deliberate attempt to suggest that LLMs are autonomous and any and all stories about AI replacing jobs are intentionally manipulative attempts to boost stock valuations and suggest that models are capable of replacing human workers at scale, which they are not. Alison Morrow of cnn, who's been on the show a few times, also has an excellent piece on this, which I've linked to in the show Notes. As I discussed in my newsletter, Sincerity Wins the War, which I've also linked to. This is one of the most egregious failures of the tech media I've ever seen. Willingly pushing Wario Amades outright making up of stuff. No one asked him if that if the stat he said 10 to 20% white collar unemployment. If I started lying. I just really want to be clear about something. If I went on this podcast and I just fucking made up stats. If I was just like, yeah, 75% of all generative AI CEOs literally, they, they love kicking puppies, they love drop kicking puppies, you'd get mad at me, right? What's the difference between that and Wario Amade saying 20% white collar unemployment? There is none. They're both lies. And I don't know why I'm doing the dog kicking one, but it's just an example. We move on. And as a side note, the discussion also of the term AGI, artificial general intelligence, and every acceptance of it is an attempt to suggest that large language models can create conscious intelligence, a fictional concept that even Meta's chief AI scientist says won't come from scaling up LLMs. Members of the media. Listen to me. Every time you talk about the really smart engineers that say Meta is paying $100 million to know that you are doing free marketing for these companies, when what's really happening is people are giving tens of millions of dollars to guys who will work on teams that are pursuing a totally unproven concept. It is like saying that they are all going to see if they could. I don't know, I was about to say the wrong create the wrong trousers from Rollis and Gromit, Rollis and Wallace and Gromit. But you know, those are 100% possible. I'm sure someone could build them. How about this? They all believe they're gonna hunt and kill the Tooth Fairy because the tooth Fairy is about as realistic as AGI. And if you disagree with me, email me. I might even read him. I should also add that the use of the word singularity is similarly manipulative. These are terms that are used to obfuscate the actual abilities of large language models and indeed what can be built on them. It's really frustrating because these should be really obvious tricks, but the media keeps accepting them. And I don't want to accuse anyone of being anything. I just want to say I find it fucking disgusting. And when this all falls apart, there will be a referendum on this. I will not be kind or merciful to the people that have continually pushed these narratives. I also want to add there's another really annoying narrative that we need to get rid of. And that's these stories about models lying, cheating and stealing to reach their goals or stop themselves being turned off. These are intentionally deceptive, as these models can and clearly are being prompted to take these actions. To be abundantly clear, the manipulative suggestion here is that these models are autonomous or conscious in some way, which they're not. When I say prompted, I mean we don't have all of the information as to how these models were trained or prompted to get these answers. They can make them do them. They could create a model to do it. And oh, anthropic wouldn't lie, wouldn't they? Dario Ahmed they went on stage and said there'd be 20% unemployment from white collar labors and he'll claim he said it was for the future. It's a fucking lie. Absolutely ridiculous. And I believe that the generative AI market is a $50 billion revenue industry masquerading as a trillion dollar one. And the media is helping. And underneath this troubling fact, there's another one that should give us pause. The AI trade really is not about AI. It's not about generative AI, it's not about autonomous agents, it's not about AGI, it's all about GPUs, and it's incredibly brittle as a result.

[Annabe Sofa Advertiser]

Tired of spills and stains on your sofa? WashablesOfAs.com has your back. Featuring the Annabe Collection, the only designer sofa that's machine washable inside and out. Where designer quality meets budget friendly prices. That's right, sofas start at just $699. Enjoy a no risk experience with pet friendly stain resistant and changeable slipcovers made with performance fabrics. Experience cloud like comfort with high resilience foam that's hypoallergenic and never needs fluffing. The sturdy steel frame ensures longevity and the modular pieces can be rearranged anytime. Check out washablesofas.com and get up to 60% off your Anna Bay sofa backed by a 30 day satisfaction guarantee. If you're not absolutely in love, send it back for a full refund. No return shipping or restocking fees. Every penny back. Upgrade [e-mail] Offers are subject to change and certain restrictions may apply.

[Lenovo Advertiser]

Lenovo is built for creators who don't wait for inspiration. They chase it with inventive tech, built in AI tools and seamless performance. Lenovo devices powered by Intel Core Ultra processors are designed to bring your wildest ideas to life faster. That's the power of Lenovo with Intel inside. Enjoy flexible financing, rewards on every purchase and free shipping. And students get special offers when you create an [e-mail].

[Empower Advertiser]

Say you've always wanted to have a backyard oasis. Here's the thing, if you get smart with your money, you can do things like that. With Empower, you can start making the most out of your money so you can go out and live a little. Isn't that why we work so hard to have some fun with our money? Like treating yourself to something special or spontaneously doing something extra for a loved one. With Empower you can get the help you need with your money and investing questions to feel confident about not only taking care of yourself, but treating yourself too. They can help simplify your money decisions through education, financial tools and guidance that can make saving and investing decisions just a little easier. So use Empower and get good at money so you can be a little bad join their 19 million customers [e-mail] not an empower client, paid or sponsored.

[Vanta Advertiser]

As a founder, you're moving fast toward product market, fit your next round or your first big enterprise deal. But with AI accelerating how quickly startups build and ship, security expectations are higher earlier than ever. Getting security and compliance right can unlock growth or stall it if you wait too long. With deep integrations and automated workflows built for fast moving teams, Vanta gets you audit ready fast and keeps you secure with continuous monitoring as your models infra and customers evolve. Fast growing startups like LangChain, Rider and Cursor trusted Vanta to build a scalable foundation from the start. Go to vanta.com iheart to save $1,000 today through the Vanta for Startups program and join over 10,000ambitious companies already scaling with Vanta. That's vanta.comiheart to save 1,000 for a limited time.

[Ed Zitron]

Now as I've explained at length, the AI trade is not one based on revenue, user growth, the efficacy, tools or significance of any technological breakthrough. Stocks are not moving based on whether they're making money on AI because if they were, they'd be moving downward. However, due to the vibes based nature of the AI trade, companies are benefiting from the press inexplicably crediting growth to AI with no proof that that's the case. OpenAI is a terrible business, but the only business worse than OpenAI are the companies built on top of it. Large language models are too expensive to run and have limited abilities beyond the ones I named previously. And because everybody is running models that all on some level do similar things. It's very hard for people to build really innovative products on top of them. But ultimately this entire trade, all of the AI trade, hinges on GPUs. Core weave was initially funded by Nvidia. They're a company that does AI data centers. I don't want to talk about them, makes me angry. But their IPO was funded partially by. Nvidia sells the GPUs. Nvidia is also one of their customers and Core Weave raises debt to buy GPUs buy by using the GPUs they've already bought as collateral. And so they get those loans and then they use that money to build data centers and buy more GPUs to put in them, which they then use as leverage to. Do you see the. Do you see the problem? Do you see the issue with that? This isn't me being polemic or hysterical by the way. This is quite literally what's happening and how core we've operates. If you aren't alarmed by that, I'm not sure what to tell you. Elsewhere, Oracle is buying $40 billion in GPUs for the still unformed Stargate data center project and Meta is building a Manhattan sized data center to fill with Nvidia GPUs. If you believe that Meta will actually do that, which I do not. OpenAI is also Microsoft's largest Azure client. An insanely risky proposition on multiple levels. Not simply in the fact that it's serving the revenue at cost. But the Microsoft executives believed that OpenAI would fail in the long term when they invested in 2023, according to the Information. And Microsoft is Nvidia's largest client for GPUs. Meaning that any changes to Microsoft's future interest in OpenAI, such as reducing its data center expansion, would eventually hit Nvidia's revenue. Why do you think Deep Seek shocked the market? It wasn't because of any clunky story around training techniques or costs. It was because it said to the market that Nvidia might not sell more GPUs every single quarter in perpetuity. Microsoft, Meta, Google, Apple, Amazon and Tesla aren't making much money from AI. In fact they're losing billions of dollars on whatever revenues they do make from it. Their stock growth is not coming from actual revenue or actual products, but the vibes around being an AI company, which means absolute jack shit when you don't have the users finances or products to back them up. So really everything on the AI trade comes down to Nvidia's ability to sell GPUs and more of them each quarter. And this industry, if we're really honest, is at a point where it really only exists to do so. Generative AI products do not provide significant revenue growth. Its products are not useful in the way that unlocks significant business value, and the products that have been have some adoption run at such a grotesque loss. It's really sad, but I realize I've thrown a lot at you and for the second time this year I've recorded a three part podcast series. And what's great is you may think maybe I took a break, maybe. No, I recorded these bad boys back to back to back. That's why I sound so tired and why my voice kind of, I think, smooths out. I like doing this, but I needed to say all of this. I really did, because I am genuinely really worried. We're in a bubble. If you do not think we're in a bubble, you are not looking outside Apollo Global chief economist Torsten Slog, Killer Name, said it last week in a research note published July 16. Okay, what he said was much worse. The difference between the IT bubble in the 1990s and the AI bubble today is that the top 10 companies in the S P today are more overvalued than they were in the 1990s, Slog wrote in a recent research note that was widely shared across social media and financial circles. We're in a bubble. We're in a bubble. Generative AI does not do the things that it's being sold as doing. And the things it can do aren't the kind of things that create business returns, automate labor, or really do much more than one extension of a cloud service platform. The money isn't there. The users aren't there. Every company seems to lose money, and some companies lose so much money it's impossible to tell how they'll survive. Worse still, this bubble is entirely symbolic. The bailouts and I know I get a lot of emails about this and I'm really going to address this issue right now. The bailouts of the great financial crisis were focused on banks and funds that had failed because they ran out of money. And the TOP initiative existed to plug holes with low interest loans. There are no few holes to plug here because even if OpenAI and Anthropic somehow became eternal money burners, the AI trade exists based on the continued and continually increasing sale and use of GPUs. There are limited amounts of capital but also limited amounts of data centers to actually put GPUs. And on top of that, at some point, growth will slow at one of the magnificent seven, at which cost, time costs will have to come down from things that lose them tons of money, such as generative AI. I really want to be clear though. A lot of people say, oh, it's really kind of lazy doomerism. I don't appreciate it. Because, like, if you're going to be worried about something, be worried about something that's real. You're saying, oh, Trump will just bail them out. Oh, they'll get bailed out. Who will get bailed out? For this Fast to continue, Nvidia's $39.1 billion of data center revenue in the last quarter. That means the next one needs to be 44. The one after that needs to be like 50, 60, 80, 100. This needs to continue forever. Is the government going to nationalize Nvidia? Is the. Well, I guess that would take them off the market, wouldn't it? Is they just going to feed Nvidia 50, 60, $70 billion? I guess if one of these AI companies fail, they could give them money, but they're just going to go ahead and fucking lose it. What do you think they're going to do? Where does the money go? In the great financial crisis, banks failed. You had to give the banks money. Hedge funds failed. You had to give money to places, and then they took the money and they weren't out of money anymore. This isn't a case where companies will run out of money but otherwise be okay. They don't have a way of being okay. There is no way of being okay. If you want to be a doomer, look at the fact that the fucking stock market is built on sailing more and more GPUs every quarter. There is no plugging that hole. There's nothing for you to do. Oh God, this guy. What? Isn't the cost of inference coming down? No, you do not have proof of this statement. The cost of tokens is going down and that is not the cost of inference going down. Everyone's saying this is. They're saying it because a guy once said it to them. You do not have proof. I have more proof for what I am saying. While it theoretically might be going down, all evidence points to larger models costing more money, especially reasoning heavy ones like claudopus4. Inference is not the only thing happening. If this is your one response, you're a big bozo and a doofus and should go back to making squeaky noises when tech executives or hear my name on a podcast. It's sickening. Even if the cost of inference is going down on what model exactly is it coming down on? I don't know. O3, Opus 4, Sonnet 4? I don't think it is. The price that the model developers are charging, by the way, is not the price of inference. That's not the same thing. It's not the same thing at all. I'm really sick of this goddamn point. You can hear it in my voice. But let's move on. So some people bring up asics and they're these customized chips for specific options to reduce the amount that these companies are spending on compute, right? I have a few thoughts. When is this going to happen? For example, say OpenAI and Broadcom actually build their ASIC in 2016, 2026. They won't do this, but that's when they're meant to. How many will they build? Do they have contacts, contracts, companies that can actually produce high performance silicon? Or there's only three of those, Samsung, TSMC and smic, which is currently sanctioned. And these companies typically, typically have their capacity booked well in advance. Great example for you. Nvidia restarted sales of their H20 GPUs and told customers, as reported by the information, that they're not going to make more because the capacity they had at TSMC got given away because they canceled it. Even starting a production run of a semiconductor product can take weeks. Do they have the server architecture prepared? Have they tested it? Does it work? Is the performance actually good? Because the information reported that Microsoft has failed to create a workable, reliable asic, and the one that they're going to bring out next year, year is going to be still worse than Nvidia's. What makes OpenAI special? What gives them the industry knowledge that means that they won't run into these problems? The answer is nothing. Absolutely bloody nothing. Anyway, if this happens, and should be clear, it takes a lot of money to build these chips and they're yet to prove that these chips be better than Nvidia GPUs for AI compute. They're going to have to retrofit every data center for them. By the way, they're not just going to plug into the same thing, these Blackwell chips and actually generally GPUs. They have specialized server architecture and Nvidia is a big stickler for details. So we're just going to rip up all the stuff. So this will, I assume, take two minutes. Because it needs to. It's the only way. By the way, if this actually happens, it still fucks up the AI trade because Nvidia still needs to sell GPUs. Jesus Christ. I'm sorry. I'm sorry. People ask, is this real anger? Yeah, I. I read about these things and I read the inconsistencies in the media and I talk about them. And I think of the amount of times in my life I have had people make me feel stupid or make me feel crazy. I'm sure many of you have had this experience too. People that are allegedly smart, people that have positions of power, people that we look to as responsible figures. And I think about all the times that I've known I was right. But because there was a consensus group ideal, you had to kind of stick by it, even if it was something factually wrong. What I didn't experience in the past was seeing the media do it like this, and the way in which the media has done it, it's sickening. It's sickening because the people that will get hurt will be the people whose retirements and who's just in savings are going to get lamped by this crap. And I'm worried. I'm worried because despite all these obvious, brutal and near unfixable problems, everybody is walking around acting like things are going great with AI. The New York Times claims everybody is using AI for everything. And I'm talking, of course, about Kevin Roose and Casey Newton, but baby cannot wait for when this explodes. Guys, you have no idea how funny it's going to be. By the way, this is a blatant lie. One that exists to prop up an industry that has categorically failed to deliver the innovations or returns that it promised, yet still receives this glowing press from a tech and business media that refuses to look outside and see that the sky is. And frogs are landing everywhere. Other than the frog thing, I'm not being dramatic. Everywhere you look in the AI trade, things are getting worse. No revenue billions being burned, no moat, no infrastructure play, no comparables in history other than the dot com bubble and we work and a series of flagrant lies spouted by the powerful and members of the press that are afraid of moving against market consensus. Worse still, despite Nvidia's strength, Nvidia is the market's weakness through no fault of its own. Really. Jensen Huang sells GPUs. People want to buy GPUs. Now the rest of the market is leading aggressively on one company, selling one thing, feeding it billions of dollars in the hopes that the things they're buying start making them a profit. And that really is the most ridiculous thing at the center of the AI trade sits enterprise GPUs that on installation immediately start losing the company and question money. Large language models burn cash for negative returns to build products that all kind of work the same way. And if you're gonna say I'm wrong, sit and think carefully about why. Is it because you don't want me to be right? Is it because you think these companies will work it out? This isn't anything like Uber, AWS or any other situation. It's its own monstrosity, a creature of hubris and ignorance caused by a tech industry that's out of ideas built on top of one company. Really? You can plead with me all you want about how there are actual people using AI. You've probably read the My AI Skeptic Friends are All Nuts blogging and if you're going to send that to me, read the response from Nick Suresh first. I've linked both in the show notes and if you're going to say that I don't actually speak to people who use these products, you are categorically wrong and in denial. I'm only saying all of this with this aggressive tone because for the best part of two years I've been made to repeatedly explain myself in a way that no AI optimist has ever been made. And I admit I resent it. I have written hundreds of thousands of words with hundreds of citations, and still to this day there are some people that claim I'm somehow flawed in my analysis, that I'm missing something, that I am somehow failing to make my case, that I haven't spoken to enough fart sniffers, that I haven't delighted in the ideals and falsities of AGI. The only people failing to make their case are the AI optimists still claiming that these companies are making powerful AI. And once this bubble pops, I will be asking for an apology.

[Annabe Sofa Advertiser]

There's nothing like sinking into luxury. @washablesofas.com you'll find the Anabe sofa which combines ultimate comfort and design at an affordable price. And get this, it's the only sofa that's fully machine washable from top to bottom. Starting at only $699. The stain resistant performance fabric slipcovers and cloud like frame duvet can go straight into your wash. Perfect for anyone with kids, pets or anyone who loves an easy to clean spotless sofa. With a modular design and changeable slipcovers, you can customize your sofa to fit any space and style. Whether you need a single chair, loveseat or a luxuriously large sectional Annabe has you covered. Visit washablesofas.com to upgrade your home. Right now you can shop up to 60% off store wide with a 30 day money back guarantee. Shop [e-mail] Add a little to your life. Offers are subject to change and certain restrictions may apply.

[Lenovo Advertiser]

Lenovo is built for creators who don't wait for inspiration. They chase it with inventive tech, built in AI tools and seamless performance. Lenovo devices powered by Intel Core Ultra processors are designed to to bring your wildest ideas to life faster. That's the power of Lenovo with Intel inside, enjoy flexible financing, rewards on every purchase and free shipping. And students get special offers when you create an [e-mail].

[Empower Advertiser]

Say you've always wanted to have a backyard oasis. Well, here's the thing. If you get smart with your money, you can do things like that. With Empower you can start making the most out of your money so you can go out and live a little. Isn't that why we work so hard to have some fun with our money? Like treating yourself to something special or spontaneously doing something extra for a loved one? With Empower you can get the help you need with your money and investing questions to feel confident about not only taking care of yourself, but treating yourself too. They can help simplify your money decisions through education, financial tools and guidance that can make saving and investing decisions just a little easier. So use Empower and get good at money so you can be a little bad. Join their 19 million customers [e-mail] not an empower client, paid or sponsored.

[Lenovo Advertiser]

Hey, it's Ryan Reynolds here for Mint Mobile now. I was looking for fun ways to tell you that Mint's offer of unlimited premium wireless for $15 a month is back. So I thought it would be fun if we made $15 bills, but it turns out that's very illegal. So there goes my big idea for the commercial. Give it a [e-mail] switch upfront payment.

[Mint Mobile Advertiser]

Of 45 for 3 month plan equivalent to 15 per month required new customer offer for first 3 months only speed slow after 35 gigabytes of networks busy taxes and fees extra. See mintmobile.com.

[Ed Zitron]

But I must be clear. Even though a lot of things are coming true that I thought would, and I think more will come true, I'll be proven right again and again. I don't actually like what's happening and I like ending these podcasts with personal thoughts about stuff because I'm an emotional and overly honest person. I enjoy Doing this a great deal. I do not, however, enjoy telling you at length how brittle everything is. An ideal tech industry would be one built on innovation, revenue, real growth based on actual business returns that helped humans be better and not outright lies about replacing them. All that generative AI has done is shown how much loss there is in both the markets and the media in replacing labor. And I must be clear, it really is the media. There are some of you who are fucking sickos. I'm not pointing to anyone specifically, but if you are excited about AI replacing people, I need you to review your biases a little bit. I need you to think about what it is you're so excited about. Another aside, by the way, all these AGI artificial General intelligence conversations, they love to talk about why they're scared of them, but they never want to talk about one thing, which is if we make a conscious intelligence, wouldn't that have personage and we control and manipulate this conscious being? That's slavery. We would have been inventing a new kind of slave. Because if we are making computers that have consciousness, that's what we are doing. If you don't believe this, by the way, you just don't want to think about the truth. But on the jobless thing, I really do believe that there are multiple reporters who feel genuine excitement when they write scary stories about how Daria Amadeus's white collar workers will be fired in the next few years in favor of agents. It's gross. And I know I'm repeating myself, but I really must be clear, be more mindful about what you're writing because what you're writing does not prove this thesis at all. You're just repeating a guy's thingy, repeating what a guy said, and it's sickening. But before I move into the end of this, I also want to address one other thing that. And I'm doing this I'm fully going to admit because someone just sent me an email about this and they just sent me this gotcha thing where it's okay the government just gave Department of Defense gave $200 million contracts to OpenAI XAI Google anthropic I believe and that somehow government money will plug this hole. First of all, all the revenue is unprofitable. Second of all, no, it won't like it just it isn't enough money. They need for open AI to somehow become profitable. They just need like $10 billion of free money every year. Like just given to them with no, no expenditure. On top of this, there is this weird doomer philosophy where it's like all the government will use it for propaganda. They will use it as a cheap propaganda machine. The government already does propaganda. We've done propaganda for years. Every government does. They are like, there's nothing efficient or cheap or even useful about it. They already. The White House is already posting AI generated stuff. How is this, how is this going to keep the industry going? Exactly. Who fucking knows? But then there's this thing of, oh, the surveillance state, the generative AI. This will prop up open AI, anthropic and the likes. It will plug into all the data sets and go, oh, we can do shit. Even if it does that, I don't even want to think of them doing this. It's not a fucking business. It's not going to make him that much money. There's nothing specialist about it. Because all large language models are fundamentally trained on the same data, not only really tweaked by reinforcement, learning and the like, it's just. They'll just buy whatever model is cheapest or they'll put it on prem. It doesn't really. And I do want to say, if you're scared of this stuff, be scared of the real stuff. Don't just assume the worst and then don't think about it much more. If you're going to assume the worst, assume based on facts. I want you to feel better when you listen to this, or at least edified. And I don't want to ever scare you. I don't really want to tell you how to feel, ever. It's one of the early feedbacks on the show is never tell people how to feel. But I want you to contact me if you're ever worried. I'm happy to help. But also know that these are not smart men and things have got out of hand. And everything I'm discussing is the result of the rot economy thesis I wrote in 2023. The underlying thesis of this entire show, this growth at all cost mindset that has driven every tech company to focus on increasingly large quarterly revenue numbers. Even if the products suck or they're deeply unprofitable or in the case of generative AI, both. Nowhere has this ever been more obvious. Never has there been a more pungent version of the raw economy than in large language models or more specifically transformer based models and their relationships with GPUs. By making everything about growth, you inevitably reach a point where the only thing you know how to do is spend money. And both LLMs and GPUs allowed big tech to do the thing that worked before building a bunch of data centers and buying a large bunch of chips and paying a lot of people without making sure they'd done the critical work of making sure this would create things that were useful or profitable. And neither seems to be the case. As a result, we're now sitting on top of one of the most brittle situations in economic history. Our market's held up by whether four or five companies will continue to buy chips that start losing the money the second they're installed. And I'm disgusted by how many people are unwilling or unable to engage with the truth, favoring instead a scornful, contemptuous tone toward anybody who doesn't believe that generative AI is the future. If you're a writer that writes about AI, smiling people who don't understand AI, you're a shitty fucking writer. Because AI isn't. Is either not that good or you're not good at explaining what's good. Perhaps it's both, dickhead. And if you want to know my true agenda, it's that I see something in Generative AI and its boosters that I truly dislike. Large language models authoritatively state things that are incorrect because they have no concept of right or wrong or really anything. They don't have concepts of concepts. They don't think. Think. I believe that the writers, managers, and executives that find it exciting do so because it gives them the ability to pretend to be intelligent without actually learning anything, to do everything they can to avoid actual work knowledge or responsibility for themselves or others. There is this overwhelming condescension that comes from fans of Generative AI, the sense that they know something you don't, something they double down on. We are being forced to use it by bosses or services. We like that now insist it's parts of our documents or our search engines, not because it does something or helps us, but because those pushing it need us to use it to prove that they know what's going on. To quote my editor Matt Hughes, generative AI is an expression of contempt towards people, one that considers them to be a commodity at best and a rapidly depreciating asset at worst. And Matt would have said that correctly. I haven't quite cracked why, but generative AI also brings out the worst in people by giving the illusion of labor. It excites those who are desperate to replace or commoditize it by giving the illusion of education. It excites those who are too idle to actually learn things by convincing them, like Uber CEO Travis Kalanick, then a few minutes that they can learn quantum physics by giving the illusion of activity, it allows the gluttony of business idiots that control everything to pretend that they do something. By giving the illusion of futurity, which is David Karp's excellent term. It gives reporters that long since disconnected from actual software and hardware the ability to pretend that they know what's happening in the tech industry. And fundamentally, its biggest illusion is economic activity, because despite being questionably useful and burning billions of dollars, its need to do so creates a justification for spending billions of dollars on GPUs and data center sprawl, which allows big tech to sink money into something and give the illusion of growth. I really love doing this show. I love it so much. But I. I don't enjoy this material. I mean, I enjoy performing it, I guess, but what I'm talking about is pretty fucking grim. And every week I am cataloging how people in power haven't notice something that's inherently a scam, that's really based on lies, and how the people responsible in the media have just kind of turned away from readers in favor of doing what they think the market wants or confirming their own lazy biases. It's sad. And I think I'm right, and I'm not necessarily happy about being right. And if I'm wrong, I get asked this a lot. If I'm wrong, I will explain why I'm wrong in great detail. And I will not shy away from taking accountability because I think that that's what you should expect from me. I'm serious. If I'm somehow wrong here, you will hear why I'll do entire episodes about it. I'm serious, but I really do not think I am. And that's why I sound kind of downcast and alarmed. What I'm describing is a bubble, and one with an obvious weakness. One company's ability to sell hardware to four or five other companies, all to run services that lose billions of dollars. At some point, the momentum behind Nvidia slows. Maybe it won't even be sales slowing. Maybe it will just be the suggestion that one of the largest companies won't be buying as many GPUs. Perception matters just as much as actual numbers, and sometimes more. And a shift in sentiment could start a chain of events that knocks down the entire house of cards. Checkmate. I don't know when, I don't know how, but I really, really don't know how I'm wrong. And I hate that so many people will see their retirements wrecked, and so many people intentionally or accidentally helped steer the economy in this reckless, needless and wasteful direction, all because Big Tech didn't have a new way to show quarterly growth. And there are so many people out there that love the idea of replacing workers and using the computer to do work for them. And I hate that so many people have lost their jobs because companies are spending the equivalent of the entire GDP of some European country on data centers and GPUs that won't actually deliver any value. Satya Nadella is a fucking monster. 15,000 people laid off this year so you can do more fucking Clippy, you ass wipe. If Satya Nadella somehow hears this, I'd be so happy. But my purpose here is to explain to you, no matter your background or interests or creed or whatever way you find my work, why all of this is happening. As you watch this collapse, I want you to tell your friends about why the people responsible and decisions they made, and make sure it's clear that there are people responsible. Sam Altman, Dario Amade, Satya Nadella, Sundar Pichai, Tim Cook, Elon Musk, Mark Zuckerberg and Andy Jassy have overseen a needless, wasteful and destructive economic force that will harm our economy, our markets, and the tech industry writ large. And when this is over, they must be held accountable. And remember that you as a regular person can understand all of this. These people want you to believe that this is black magic, that you're wrong to worry about the billions wasted or question the usefulness of the tools. Tools. They want you to sit there and say, tech got away from me. I just don't understand how the computer works anymore. How about that the computer doesn't work anymore? That the computer regularly does not do the things you want it to. And generative AI is just the most pornographic example of a tech industry that gave up on user interfaces, user experience and users altogether. You are smarter than they reckon and stronger than they know. And a better future is one where you recognize this and realize that power and money doesn't make a man righteous, right, or smart. These people sicken me. And if I'm gonna be honest, I think a lot of this work comes down to them reminding me of people I grew up with, people I've met throughout my life, speechless managers that have got there by glad handling, not through real work or producing anything of value, but by stealing or tricking, by throwing other people under the bus. And in some cases, and I'm thinking of one specific fucking person driving it themselves. These people are the ones the most excited about AI. They're the ones that believe that this technology will finally give them the ability to have the abilities of those that work without actually having to get off their fucking asses. And they sicken me. They disgust me. Because there is a different way of looking at how generative AI could have been. That it enhances humans, that it makes them able to do more things rather than replacing them. That likely would have raised it, led us in a different direction, and probably wouldn't have led to the billions of dollars of investment in this. Because when you think about helping people, suddenly the money dries up. I sound cynical, but I've said this before. I'm a broken hearted romantic. I hate what the tech industry has become. But people also said that I couldn't do this fucking four years ago. Five years ago I had 300 subscribers on my newsletter. I'm up to 67,000 thousands of people. An indeterminate amount of you. I can't say it due to policy. Listen to this show and that's proof enough. I think that one idiot worked up white boy from London that a school teacher once said should get used to flipping burgers can do something. I'm I'm nobody. I'm just a guy. But I've spent the time to read this stuff and to divine meaning from this stuff just like you can. I hope I've helped you. That's what I'm here to do. I love doing this and I feel ever grateful that I'm able to every day. And I love all of you for listening. It takes a lot of effort to put this out, but it also is a choice of yours. How much time you can you have in a day is not your choice, but how you use it is. And I deeply appreciate you for giving me your time. Thank you so much. This has been the Haters guide to the AI Bubble. Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matt Osowski. You can check out more of his music and audio [e-mail] m a t t o s o W-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. 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.

[PayPal Advertiser]

Every business has an ambition. PayPal open is the platform designed to help you grow into yours with business loans so you can expand and access to hundreds of millions of PayPal customers worldwide. And your customers can pay all the ways they want with PayPal, then pay later and all major cards so you can focus on scaling up when it's time to get growing. There's one platform for all business PayPal open grow today at paypalopen.com loans subject to approval in available locations.

[Lenovo Advertiser]

Lenovo is built for creators who don't wait for inspiration. They chase it with inventive tech, built in AI tools and seamless performance. Lenovo devices, powered by Intel Core Ultra processors are designed to bring your wildest ideas to life faster. That's the power of Lenovo. With intel inside, enjoy flexible financing, rewards on every purchase and free shipping. And students get special offers when you create an [e-mail].

[Vanta Advertiser]

Hey, it's me, Earhart. Mind if I pick the next song? Listen Even though we're eating better, people who've had one heart attack are at higher risk of another. But Repatha Evolocumab plus a statin lowers LDL C, our bad cholesterol and our heart attack risk. So let's talk to our doctor about Repatha.

[Mint Mobile Advertiser]

Do not take Repatha if you're allergic to it. Serious allergic reactions can occur. Get medical help right away if you have trouble breathing or swallowing swelling of the face, lips, tongue, throat or arms. Common side effects include runny nose, sore throat, common cold symptoms, flu or flu like symptoms, back pain, high blood sugar and redness pain or bruising at the injection site, view the important safety information in our banner. Listen to your heart. Ask your doctor about Repatha.

[Odoo Advertiser]

This is Jacob Goldstein from what's yous Problem? When you buy business software from lots of vendors, the costs add up and it gets complicated and confusing. Odoo solves this. It's a single company that sells a suite of enterprise apps that handles everything from accounting to inventory to sales. Odoo is all connected on a single platform in a simple and affordable way. You can save money without missing out on the features you need. Check out Odoo at o d o o dot com. That's o d o o dot com.

[Ed Zitron]

This is an iHeart podcast.