Are AI's Economics Unsustainable? — With Ed Zitron - Big Technology Podcast

Transcript

Big Technology Podcast Host (0:00)

Does the AI business have what it takes to survive? Our guest today says no. That's coming up right after this. Welcome to Big Technology Podcast, a show for cool headed and nuanced conversation of the tech world and beyond. We're joined today by Ed Zitron. He's the owner of ezpr, the host of Better Offline, and the author of the where's your Ed at? Newsletter. He's here to speak with us about his criticism of the AI business and why it may all soon collapse. Ed, great to see you. Welcome to the show.

Ed Zitron (0:30)

Great to see you. Thank you for having me.

Big Technology Podcast Host (0:31)

Okay, so we, we've had some very different varieties of critics on the show. We've had people who've said it's poisoning society. We've had people like Gary Marcus who've said that the progress is gone. We've had in various iterations, folks who've talked about how it can be used by bad actors to do things like enhance viruses. Soon we'll have someone who's gonna come on to talk about escape risk. But you are in a different category. You really think that the business of OpenAI and, and the AI industry is unsustainable? Yeah, this is something we talk about a lot on the show. I'm very familiar with your work and it's great to have you here to discuss it.

Ed Zitron (1:10)

Yeah, it's just all very silly when you look at it. Right now we are sitting there. The most important company in AI is OpenAI. They will burn probably 12, $13 billion after revenue this year. That's based on projections. They also have no path to profitability. They don't have one. They claim 20. The information's reported a few times, like 20, 29, 20, 30. They're going to magically become profitable due to Stargate. Now how will that happen? Nobody actually knows. And Open AI will not tell us because OpenAI doesn't really discuss their revenues other than in really vague ways that go like, we have 3 billion business users. What's that about? When you look at the underlying finances, it's genuinely insane. And it's more insane outside of open AI. The information also reported the Microsoft will only make about $13 billion. Not profit, just revenue on AI this year. 10 billion of that is OpenAI's Azure Cloud spend. 3 billion is them selling Coppola. That's an insanely small amount, man. 3 billion is not a lot of money in the grand scheme of things. They do like 11, 19 billion dollars in profit a quarter and this is on 50, 70 billion dollars of capital expenditures. These numbers are terrible. There's an analyst, it's quoted by Laura Bratton at Yahoo Finance, who said that he only thinks that Amazon is going to make $5 billion in revenue again, not profit this year on AI, they are spending $105 billion in capital expenditures. This is an insane situation. And the fact that I am ever framed as radical or like a pessimist when I'm just doing very basic mathematics, it's kind of strange. I think it says something a lot about media in general, but also the tech industry in general. And people will say, oh, well, Uber lost a bunch of money. Give it the fuck up on that one. Uber lost a ton of money in 2020. They lost like $6.2 billion. I think their worst year on record was like an $8 billion loss. But they had a product and then they used it to fuck over labor forces like they used it to. They just dragged those numbers down. But nevertheless, fundamentally different business and also not a big company. Not. Uber is not the face of the savior of the tech industry because that's what generative AI needs to be now. It needs to be bigger than the smartphone market. It's about 450, 500 billion a year, bigger than the enterprise software market, about 250 billion. What the. The current combined revenue of all the generative AI companies is like, and that's including the big tech companies, is about 35, 40 billion dollars. It's insane, man. It's insane. And eventually this has to stop. It has. The growth is not there.

Summary

Big Technology Podcast Summary: "Are AI's Economics Unsustainable? — With Ed Zitron"

Released on July 23, 2025

Introduction

In the latest episode of the Big Technology Podcast, host Alex Kantrowitz engages in a critical discussion with Ed Zitron, a prominent tech critic, about the financial viability of the artificial intelligence (AI) industry. Ed Zitron, known for his ownership of ezpr, hosting Better Offline, and authoring the Where's Your Ed At? newsletter, presents a sobering analysis of the economic underpinnings of major AI players, particularly OpenAI.

Financial Sustainability of AI Companies

Ed Zitron opens the conversation by highlighting the staggering financial losses incurred by OpenAI. He states, “[...] OpenAI will burn probably $12, $13 billion after revenue this year” (01:10). Zitron emphasizes that OpenAI lacks a clear path to profitability, questioning the feasibility of their projections to achieve profitability through Stargate, an enigmatic project he describes as “magical” (02:00). He contrasts this with other tech giants, pointing out that even Microsoft's AI revenue is modest compared to the industry's projected needs.

Zitron draws parallels to companies like Uber, which, despite significant losses, continue to operate based on their unique business models. However, he contends that the AI industry's financial model is fundamentally different and more precarious, citing massive capital expenditures and minimal revenue growth.

AI vs Traditional Search Engines

A significant portion of the discussion revolves around the potential of AI to replace traditional search engines like Google. Zitron argues that while ChatGPT and similar large language models (LLMs) demonstrate superior capabilities in understanding and inferring user intent, they struggle to scale into profitable search businesses. He notes, “[...] What you actually have to do is build a very different company because selling advertisements is fundamentally different from selling consumer ChatGPT subscriptions or enterprise services” (09:27). Zitron criticizes the inefficiency and high costs associated with transforming AI into a robust search platform, highlighting the lack of infrastructure ownership by OpenAI.

Funding and Investment Concerns

The conversation shifts to the complex funding landscape of AI companies. Zitron discusses the precarious relationship between OpenAI and major investors like Microsoft and SoftBank, revealing that OpenAI is heavily reliant on continuous capital infusion to sustain operations. He warns of a potential financial bubble, comparing the situation to the subprime mortgage crisis, where the lack of tangible assets and unsustainable financial practices could lead to widespread economic repercussions.

Zitron raises concerns about OpenAI's inability to generate substantial revenue despite aggressive marketing and high valuations. He states, “[...] That's their conversion rate. That's bad, man. It means that they can't work out and no one else can work out what the hell to sell this on” (58:16). This skepticism extends to the broader AI investment environment, where massive capital is poured into projects with dubious economic returns.

Alternative AI Use Cases

While critiquing the core business models, Zitron acknowledges some value in AI applications like coding assistants. He concedes, “[...] They are valuable in the sense that software engineering loves automating, they love shortcuts” (22:02). However, he remains doubtful about their scalability and reliability, citing issues like hallucinations in code generation that undermine trust and utility.

Furthermore, the episode touches on the controversial use case of AI companionship. Zitron expresses concern over individuals forming emotional attachments to AI, describing it as a symptomatic issue of a “decentralized society” lacking shared physical spaces for human interaction (43:33).

Media and Marketing Criticism

Zitron is openly critical of how media and tech leaders portray AI advancements. He accuses figures like Sam Altman and journalists like Kevin Roose of fostering unrealistic expectations without substantiating the actual technological progress. “[...] The idea that Tech Meme had Sam Altman's gentle singularity. We should be calling 911 and doing a welfare check on that man” (89:55). This, he argues, perpetuates public fear and misunderstanding, akin to previous tech bubbles like the Metaverse and crypto.

Conclusions and Outlook

Ed Zitron concludes with a bleak outlook on the AI industry's financial trajectory. He warns of unsustainable growth models, potential investor losses, and the broader economic impact of an AI bubble bursting. “[...] These numbers are alarming and I am shocked and actually kind of disgusted at some people in the media for not being more alarmed” (63:13). Zitron calls for greater transparency and critical analysis from both the media and tech companies to mitigate the risks posed by current AI economic practices.

Notable Quotes

“OpenAI will burn probably $12, $13 billion after revenue this year. They also have no path to profitability.” — Ed Zitron (01:10)
“The current combined revenue of all the generative AI companies is like, and that's including the big tech companies, is about $35, $40 billion dollars. It's insane, man. It's insane. And eventually this has to stop. It has. The growth is not there.” — Ed Zitron (03:45)
“They've got all the king's horses and all the king's men. You have Google, you have Apple, you have Salesforce, you have ServiceNow. You have all these companies who could not talk about AI more if they tried. Where is the agent?” — Ed Zitron (15:10)
“No one’s bloody done it. You have all the king's horses and all the king's men. You have Google, you have Apple, you have Salesforce, you have ServiceNow. You have all these companies who could not talk about AI more if they tried. Where is the agent?” — Ed Zitron (37:48)
“These numbers are alarming and I am shocked and actually kind of disgusted at some people in the media for not being more alarmed.” — Ed Zitron (63:13)

Conclusion

This episode of the Big Technology Podcast provides a critical examination of the AI industry's financial health, highlighting significant concerns about sustainability, profitability, and the broader economic implications of current business models. Ed Zitron's insights serve as a counterbalance to the often unbridled optimism surrounding AI, urging stakeholders to adopt a more measured and financially prudent approach.