Speaker 1: Zo Media. Hello and welcome to this week's Better Offline Monologue.
Speaker 1: I'm your host ed Zetron. It's been a weird week.
Speaker 1: I'm recording this on Thursday to thirtieth of July. So
Speaker 1: we've only had Microsoft and Meta report earning so far.
Speaker 1: So let's start with Meta, who saw it stock get
Speaker 1: hammered to day after missing on earnings for share narrowing
Speaker 1: by which I mean increasing by another word, it's cattle
Speaker 1: expenditures guidance for the year to Arrange of about one
Speaker 1: hundred and thirty five billion to one hundred and forty
Speaker 1: five billion dollars and guiding as in projecting sixty one
Speaker 1: billion dollars to sixty four billion dollars of revenue in
Speaker 1: Q three, which was below estimates. Cash Flow also deteriorated
Speaker 1: to a little under eight hundred million dollars, and I
Speaker 1: must be clear how strange it is watching these companies
Speaker 1: do this. Meta used to just print money. They used
Speaker 1: to have ton free cash flow. But this dedication to
Speaker 1: AI is questionable and wasteful, and the market is pissed,
Speaker 1: mostly because Meta is yet to show any proof that's
Speaker 1: spending over two hundred billion dollars in Capex did anything
Speaker 1: for the company. Conversely, Microsoft's stock is ripping because it
Speaker 1: beat on analyst estimates across the board, with its as
Speaker 1: Your Cloud platform hitting one hundred billion dollars in revenue
Speaker 1: for the fiscal year that just ended, and to be clear,
Speaker 1: Microsoft's fiscal year twenty twenty six started on July first,
Speaker 1: twenty twenty five. Annoying, so annoying, I hate it, but
Speaker 1: that's the ballgame. What's funny is that neither company actually
Speaker 1: proved that AI is paying off outside of brainless analysts
Speaker 1: and a captured business and tech media reading between the
Speaker 1: lines and saying, ooh, AI's paying off big time. Last quarter,
Speaker 1: Microsoft disclosed its AI run rate month times twelve, which
Speaker 1: was thirty seven billion dollars about three billion dollars a month,
Speaker 1: and then simply chose not to report the figure at
Speaker 1: all in this quarter. I assume because the number was lower,
Speaker 1: but that doesn't matter to anyone covering earnings. Put the
Speaker 1: AI hype in the bag. No thinking only number go up, please,
Speaker 1: no thinking at all. We cannot think here. It's not
Speaker 1: like people are gonna buy Microsoft's stock because of this.
Speaker 1: I'll also add that nobody seems to want to discuss
Speaker 1: that Microsoft Azure's largest customer and likely the vast majority
Speaker 1: of its growth, is open Ai, an unprofitable, unsustainable company
Speaker 1: that accounted for, per my own reporting, sixty nine percent
Speaker 1: of all year over year growth of Microsoft's cloud in
Speaker 1: calendar year twenty twenty five. Microsoft's cloud revenue mysteriously seems
Speaker 1: to grow every quarter with open AI's increasing spent on
Speaker 1: AI compute, a fact mentioned in exactly zero of the
Speaker 1: stories I read about earnings, and god damn did I look.
Speaker 1: The inflation of the AI bubble was only made possible
Speaker 1: by the continued unwillingness of the media to actually explain
Speaker 1: or even try to understand what's going on. Microsoft's growth
Speaker 1: was immediately credited to its AI bets paying off, ignoring
Speaker 1: both open AI's compute spend and the massive Microsoft three
Speaker 1: sixty five price increases that hit onto first, because it's
Speaker 1: convenient and rewarding to coddle the powerful and celebrate their
Speaker 1: supposed victories rather than actually seeking the truth. And what's
Speaker 1: funny is people are going to say, well, open ai
Speaker 1: is their bet paying off? Is it? Is it? When
Speaker 1: it's a venture capital backed company? When Microsoft has had
Speaker 1: to sink over thirteen billion dollars into the company when
Speaker 1: there are reports in twenty twenty five that that compute
Speaker 1: was served at cost. How much is their investments to
Speaker 1: zero credits? Who knows? Nobody bothers to look, no one
Speaker 1: bothers to ask. The analysts on these calls should not
Speaker 1: have jobs. They do not exist to protect investors. They
Speaker 1: exist to perpetuate hype cycles. And what's actually happening to
Speaker 1: this company is pretty simple. As open AI's largest provider
Speaker 1: of AI compute AZ, your revenue growth will continue to
Speaker 1: spike as long as venture capital continues to funnel cash
Speaker 1: to Clammy Sam Altman. Microsoft has not found some magic
Speaker 1: AI money chie it is not unlocked incredible value for
Speaker 1: its Microsoft three sixty five copilot subscribers, and it's not
Speaker 1: got some secret saw. While three sixty five co pilot
Speaker 1: subscriptions increase by ten million in this quarter, keep in
Speaker 1: mind that Microsoft regularly discounts l simpathly adds it for
Speaker 1: free to pump these numbers up. We're far past the
Speaker 1: point in the AI bubble when naked deception is necessary,
Speaker 1: because the media is more than willing to keep filling
Speaker 1: in the blanks at the preference of the company's Keep
Speaker 1: in mind that a mere twenty four hours before Meta's
Speaker 1: horror show earnings that The Wall Street Journal in New
Speaker 1: York Times both ran separate stories about Mark zuckerbog wanting
Speaker 1: superintelligence for all evacuous statement that exists only to get
Speaker 1: an irrelevant company attention and to paper over its meaningless
Speaker 1: and wasteful AI play. What super intelligence, Mark, You're building
Speaker 1: fucking large language models? Who cares? Who fucking cares? None
Speaker 1: of this actually connects to what the models do. I
Speaker 1: feel like I'm going insane, And just just look at
Speaker 1: the coverage around in Nvidia's potential backstop of two hundred
Speaker 1: and fifty billion dollars in compute spend on the still
Speaker 1: theoretical ten giga. What data center in Ohio that a
Speaker 1: soft bank subsidiary want to build for open Ai? Not
Speaker 1: once in any of the stories did I read a
Speaker 1: single thing about how open ai can't afford that spend,
Speaker 1: that debt markets are becoming exhausted with AI loans, that
Speaker 1: sp Energy has never built a data center before, and
Speaker 1: that none of this makes any financial sense. No need
Speaker 1: put the AI hype in the bag. No thinking only
Speaker 1: growth number go up, No need to think at all,
Speaker 1: Just run story. Numbers are big. We love number Again
Speaker 1: and again and again. The media foils investors in the
Speaker 1: general public through either a misplaced attachment to fictional objectivity
Speaker 1: or a desperation to appeal to the powerful. It doesn't
Speaker 1: really matter which one is true, because they both have
Speaker 1: the same effect, creating the appearance that any of this
Speaker 1: is possible in a way that only benefits the rich
Speaker 1: and powerful. And what's incredibly frustrating is it's now, for
Speaker 1: the most part, commonly held consensus we're in a bubble.
Speaker 1: Yet the media continues to write about this stuff as
Speaker 1: if that isn't the case, glazing every single impossible deal
Speaker 1: or blatant active circular financing, salivating over every bizarre new
Speaker 1: model drop or suppose an achievement without ever really explaining
Speaker 1: why it matters, and gooning over every obtuse statement that
Speaker 1: Sam Altman makes. We're not in the singularity, a fucking asshole.
Speaker 1: And this is because we live, on some level in
Speaker 1: an entirely imaginary and manufactured reality, at least when the
Speaker 1: media is concerned. Hyperscalas have spent over a trillion dollars
Speaker 1: in ai Capex and have across the board refuse to
Speaker 1: give us hard numbers about its return on investment. Open
Speaker 1: AI and Anthropic are unprofitable, unsustainable, and we'll need over
Speaker 1: a trillion dollars of funding in the next four years
Speaker 1: because they've made over a trillion dollars of commitments than
Speaker 1: neither of them can afford without a nearest infinite sum
Speaker 1: of venture capital. AI data centers are getting built at
Speaker 1: a snail's pace, and debt to build them is becoming
Speaker 1: more and more expensive. With core Weave hitting goat sea level.
Speaker 1: Credit spreads trading from eight point three percent to nine
Speaker 1: point three percent above US treasuries, which is way higher
Speaker 1: than the average JUG pond, meaning that investors are valuing
Speaker 1: them like the company is a very real chance of death.
Speaker 1: And you'll notice that this isn't really something. You'll notice
Speaker 1: that the spreads are being covered, people thinking, Oh, that's strange.
Speaker 1: Oh that doesn't look good. Ah, wonder what that's about.
Speaker 1: What it's about is that the bond market is screaming
Speaker 1: Core We've might die. Core We've might die. And if
Speaker 1: Core We've dies, every Neocloud dies, Iron dies, Nebuis dies,
Speaker 1: and Scale dies, Lambda dies, all of them die. And
Speaker 1: even if I might be wrong, which I'm not. I
Speaker 1: really am quite confident on this. The fact that this
Speaker 1: is not even a discuss point across the media is
Speaker 1: a sign that no one really gives a fuck about
Speaker 1: any investors, the public, anyone who might get tied up
Speaker 1: in this. It's a sign that no one's thinking about
Speaker 1: this too hard, either through a dramatic ignorance or just
Speaker 1: a lack of given a shit about anything. Yet, the
Speaker 1: irony of all these blaring warning signs is that it's
Speaker 1: possible for most of the media to take them to
Speaker 1: their logical endpoint, as doing so would mean accepting that
Speaker 1: we live in an era of outright insanity. To acknowledge
Speaker 1: open AI's financial condition is to acknowledge that the largest
Speaker 1: customer of Azure might die and that a large chunk
Speaker 1: of Microsoft revenue growth is a fiction created by venture capital.
Speaker 1: To acknowledge Corweve's condition is to acknowledge that a company
Speaker 1: pumped up by most of the media is going to explode.
Speaker 1: To acknowledge that Anthropic is basically the same company and
Speaker 1: in the same financial position as open Ai is to
Speaker 1: accept that Google Cloud and Amazon Web Services are as
Speaker 1: inflated as Microsoft, as your and to acknowledge these things
Speaker 1: would require the media to acknowledge that they ignored basically
Speaker 1: every warning sign right up until the end. I can
Speaker 1: imagine that the bubble will burst and they'll be out
Speaker 1: let's the world attempt to pretend that they were ahead
Speaker 1: of it. But those people don't realize how detailed my
Speaker 1: notes are and how unflinching I'll be in publishing them.
Speaker 1: I will, I will be doing so. I will be
Speaker 1: publishing everything. I know everyone who pumped this up. I
Speaker 1: know what everyone did, I know how many times they
Speaker 1: ignored the warning science and I can see the articles
Speaker 1: where they helped pump this bubble up. And I'm not
Speaker 1: going to get too personal. I'm just going to publish
Speaker 1: the fucking articles and I'm going to point. I'm going
Speaker 1: to say it was obvious, then why didn't you do something?
Speaker 1: And the answer is they didn't give a shit. Either
Speaker 1: they didn't give a shit enough to learn, or maybe
Speaker 1: they and it's much worse if they understood and they
Speaker 1: just chose to ignore it. If the answer is, well,
Speaker 1: the largest companies in the world wouldn't make such a mistake,
Speaker 1: You're just very, very gullible. I guess I'll know. I
Speaker 1: hope that someone learns after this. I don't think they
Speaker 1: will really gonna try. I'm really gonna try and explain
Speaker 1: how people got this wrong. I feel like I've been trying,
Speaker 1: and the bile you can hear, the poison in my
Speaker 1: voice comes from a place of It's funny. People say, oh,
Speaker 1: he's just a form of pr person. He doesn't know
Speaker 1: anything about finance. The only thing that it takes to
Speaker 1: become a financial expert is to become an expert in finance,
Speaker 1: to sit down and learn. Everyone else you can fuck it.
Speaker 1: I'm using the same shit as everyone else. You just
Speaker 1: learned to read. And I don't know why more people
Speaker 1: don't do it. For the answer is it's a lot
Speaker 1: of work, and you don't really have to do it
Speaker 1: when your editors pro ai and you can just do
Speaker 1: whatever you want. I know some journalists listen, and hopefully
Speaker 1: I'm not talking about you. Hopefully you made the effort.
Speaker 1: I really hope you did. And I must be clear
Speaker 1: on I'll probably mostly be coming after outlets rather than
Speaker 1: people directly. That would be mean. But at the same time,
Speaker 1: please God, when this explodes, journalists listening to this, please
Speaker 1: fucking try harder or I don't know, try trying harder beforehand.
Speaker 1: And if you think you are pushing back, if you
Speaker 1: truly think you are pushing back by all means, reach
Speaker 1: out and find out if you actually are, by all means,
Speaker 1: email me, signal me you have my information? Is it
Speaker 1: froet seventy six and ask me directly, because pretty much
Speaker 1: if you have to ask, you probably not. And if
Speaker 1: you think you are already, I don't know. Have you
Speaker 1: talked about core weave. Have you talked about open ai
Speaker 1: running out of money? Or when you did so, did
Speaker 1: you talk about it saying yeah, open Ai isn't profitable. Yeah,
Speaker 1: but you know, companies take a while to get comfortable,
Speaker 1: and Uber lost a lot of money, in Aws lost
Speaker 1: a lot of money. If that's what you're thinking, you
Speaker 1: are wrong. You are wrong. You are misleading your readers,
Speaker 1: you're misleading the general public, and you should be kind
Speaker 1: of fucking ashamed of yourself. I'm I am sorry to
Speaker 1: be so merciless right now, but I am sick and
Speaker 1: tired of watching these cycles, and I know how many
Speaker 1: people are going to get washed out. For a real
Speaker 1: preview of that, go and look at the Korean stock
Speaker 1: market right now, and the many stories of people talking
Speaker 1: about fucking killing themselves. That is the real consequence of bubbles,
Speaker 1: That is the real thing that happens, and everyone trying
Speaker 1: to downplay this is responsible for people like that suffering
Speaker 1: and eventually American and British and other investors too. It's sickening,
Speaker 1: and until something changes, we're all going to live in
Speaker 1: a paradoxical media environment that simultaneously publishes proof point after
Speaker 1: proof point after proof point that this is financially unstable,
Speaker 1: all while saying that AI is going to be the biggest,
Speaker 1: most hugest thing in history, right up until the bottom
Speaker 1: falls out. Hope a AI collapses, data centers get canceled,
Speaker 1: core we've shits its pants and everything falls apart, at
Speaker 1: which point they'll throw up their hands and say, Wow,
Speaker 1: how'd that all happen? It happened because we live in
Speaker 1: an era where responsibility often correlates with cowardice. Those who
Speaker 1: have the most power to critique the powerful choose instead
Speaker 1: to jerk their shit from first principles, helping them create
Speaker 1: fantastical mediated realities that enrich the already rich and fuck
Speaker 1: over retail investors at scale. It darkens my heart. When
Speaker 1: I think about it, it really pisses me off because
Speaker 1: you can already see what's gonna happen. You can already
Speaker 1: see that the people invested in the markets are going
Speaker 1: to get washed out. And then there's the widespread problems
Speaker 1: caused by all of these private credit funds sinking money
Speaker 1: into data centers that will never get built, will never
Speaker 1: provide the yield, and will fuck over anyone who is
Speaker 1: unfortunate to have insurance annuities or pension funds involved in
Speaker 1: this bullshit. Next week, i'll've ed Elson back on to
Speaker 1: talk about tech earnings and continue to fight to give
Speaker 1: you as clear a picture of reality as possible, even
Speaker 1: as we battled the lead one created by and for
Speaker 1: the powerful. Thank you for listening.