Speaker 1: Z Media. Hell, welcome to this week's Better Offline Monologue.
Speaker 1: I'm your host ed Zeitrono. As I wrote while drafting this,
Speaker 1: I'm the house house, a line I'm leaving in as
Speaker 1: I'm being accountable to you, the customer. Anyway, you've heard
Speaker 1: about the in Video Open Ai deal. By now that
Speaker 1: InVideo will and I put this in air quotes invest
Speaker 1: one hundred billion dollars in open Ai. And I want
Speaker 1: to start out by being explicit that Invidia is not
Speaker 1: wired open Ai as single goddamn dollar. All right, So
Speaker 1: the deal is that in VideA is investing ten billion
Speaker 1: dollars up front, according to CNBC, despite the fact that
Speaker 1: the date before it said that they would be investing
Speaker 1: ten billion dollars with the first gig. But anyway, they're
Speaker 1: investing ten billion dollars in a month, allegedly, and I
Speaker 1: quote here once the deal is finalized, which means in
Speaker 1: simpler terms, that nothing has actually been and Video will
Speaker 1: then invest ten billion dollars in tranches for each Gigawa
Speaker 1: have capacity to that open Ai built. That's right, That's right. Everyone.
Speaker 1: Most of this funding is gated behind open Ai, a
Speaker 1: company that burns billions of dollars building huge amounts of
Speaker 1: data centers, something they have never done, and that also
Speaker 1: costs billions of dollars. And just as an aside, open
Speaker 1: ai really has built nothing themselves. Everyone else is building
Speaker 1: it for them. These fucking silicon value libertarians. They love
Speaker 1: themselves and welfare, don't they? Anyway? How does open ai
Speaker 1: afford to build these data centers? I don't know. Nobody
Speaker 1: else seems to know. Where are they being built? Who knows?
Speaker 1: It's unclear. Has the land been purchased? Also unclear. There's
Speaker 1: some sort of crap announcement about oh stargate, We've got
Speaker 1: a list of different fucking new places, and I had
Speaker 1: someone on the reddit suggests I was wrong. I just
Speaker 1: want to be clear. Of the list of the five
Speaker 1: new stargate locations, one of them is in Shackleford, Texas,
Speaker 1: which was already chosen to be one of Oracle's data centers.
Speaker 1: This was already an announced. They're re announcing stuff as
Speaker 1: a pr professional, When you're re announcing shit, it's because
Speaker 1: you run out of stuff to announce this real. But look,
Speaker 1: let's let's be explicit about one thing. Data centers take
Speaker 1: a long long time to build, right, now, Crusoe is
Speaker 1: building a data center in Abilene, Texas, made up of
Speaker 1: eight buildings, which will amount to about one point two
Speaker 1: gigawats of compute capacity. This is the one for Oracle
Speaker 1: and open AI, and at the current rate of development,
Speaker 1: it's taken about two and a half years per giga one. Look,
Speaker 1: I realize it's easy to get drowned in big numbers
Speaker 1: and ridiculous promises and media headlines where the writers don't
Speaker 1: seem to bother to learn even the simplest fucking thinks.
Speaker 1: But data centers are expensive and take forever, and this
Speaker 1: entire plan hinges upon open AI building data centers. In fact, look,
Speaker 1: I've seen lots of people suggest that the ten billion
Speaker 1: dollars the open AI is getting from Nvideo will let
Speaker 1: them build data centers. And again, can somebody please actually
Speaker 1: learn the basics here? The Abilene data center venture requires Crusoe,
Speaker 1: Blue Oul and Primary Digital Infrastructure to raise fifteen billion
Speaker 1: dollars in debt just for the data center itself, the construction,
Speaker 1: the people, the water, the power, and all that good stuff,
Speaker 1: with Oracle footing the bill for the hundreds of thousands
Speaker 1: of GPUs to go inside. At a price of I
Speaker 1: think about twenty four billion dollars. It works out to
Speaker 1: by my calculations, open ai will need one hundred and
Speaker 1: twenty five billion dollars just to build the data centers
Speaker 1: to get the funding from in Video, which will require
Speaker 1: another two hundred billion dollars in GPUs. By the way,
Speaker 1: the information also reports that in Video is going to
Speaker 1: be potentially leasing GPUs to open ai, setting up a
Speaker 1: special purpose entity to buy the GPUs from themselves that
Speaker 1: they would then lease to open AI. I've really hesitated
Speaker 1: to bring up any Enron comparisons. I've kind of flirted
Speaker 1: with one with core We even then that's that's straight
Speaker 1: Enron shit. Like, man, they haven't conferred they're going to
Speaker 1: do it. It's an information report or put a link
Speaker 1: in there. You'll complain that you have to pay for it.
Speaker 1: I recommend the information. I just every day, every day,
Speaker 1: these new pieces of news where everyone kind of like
Speaker 1: trumpets them like Jesus just woke up from behind that
Speaker 1: big fucking rock, when in fact, I think something far
Speaker 1: worse is happening. But I really want to break something
Speaker 1: down for you, and you'll likely hear this again in
Speaker 1: a future episode. I want to get into the actual
Speaker 1: economics here, Cruso's one point two gigawatts of compute for
Speaker 1: open Ai is a fifteen billion dollar joint venture, which
Speaker 1: means a gigawa of compute runs about twelve point five
Speaker 1: billion dollars. Abilene's eight buildings are meant to hold about
Speaker 1: fifty thousand in video GB two hundred GPUs in their
Speaker 1: associated networking infrastructure. So let's say a giga what is
Speaker 1: about three hundred and three thousand, three hundred and thirty
Speaker 1: three Blackwell GPUs. Yeah, this math is a little bit
Speaker 1: funky due to in Video promising to install theirny Reubin
Speaker 1: GPUs in these theoretical data centers. But I really do
Speaker 1: think that they'll require about just a little under two
Speaker 1: hundred billion dollars worth of GPUs. And this is on
Speaker 1: top of the four hundred billion dollars the open Ai
Speaker 1: has promised to spend with Oracle over the next five years,
Speaker 1: when open ai had already leaked that they'd be burning
Speaker 1: one hundred and fifteen billion dollars over the next four years.
Speaker 1: This math does not make any sense. It's complete nonsense.
Speaker 1: For open ai to survive, they're going to need around
Speaker 1: six hundred billion dollars in the next five years. It's ridiculous, astonishing,
Speaker 1: and insulting to the general public that the media keeps
Speaker 1: acting as if these deals are signed or promoted in
Speaker 1: good faith. And I'm shocked that more people aren't doing
Speaker 1: the very simple maths that And I've seen a disgraceful
Speaker 1: amount of people talking about Open Aiy's revenue projections, which
Speaker 1: involve them making one hundred billion dollars in twenty twenty
Speaker 1: eight and one hundred and forty five billion dollars in
Speaker 1: twenty twenty nine, and that's revenue, not profit. They're losing
Speaker 1: tens of billions of dollars both those years, and they're
Speaker 1: acting as if these are serious, meaningful statements rather than
Speaker 1: egregious lies from a gaggle of Charlatan's. It's a fucking joke.
Speaker 1: It's sickening. Oh, by the way, Open Eyes projected to
Speaker 1: make thirteen billion this year. From Mike calculs, they made
Speaker 1: about six point twenty six billion. Is it's wank And
Speaker 1: that's the technical term they use it. The financial analysts
Speaker 1: put it. When you pay JP Morgan to see their
Speaker 1: private shit, it's or yeah, this is all wank. This
Speaker 1: is wink. Okay, I'll keep going now for the next
Speaker 1: three part episode I'm gonna put out next week. I've
Speaker 1: done a lot of digging into how much actual money
Speaker 1: exists to invest in general, and we're genuinely running up
Speaker 1: against the limits of private and public capital. By my calculations,
Speaker 1: there's only about four hundred and seventy seven billion dollars
Speaker 1: of available capital across the top ten private equity funds,
Speaker 1: and I'm deadly serious. I will be publishing the links
Speaker 1: and maybe one hundred and sixty four billion dollars of
Speaker 1: US venture capital left, and maybe let's call that another
Speaker 1: one hundred and fifty BILLI in other funds sloshing around.
Speaker 1: Are we really going to carve out half to two
Speaker 1: thirds of available global capital for one fucking company that
Speaker 1: burns a billion fucking dollars every two fucking seconds. I
Speaker 1: know it's slower than that. Shut up. I'm just I'm
Speaker 1: a little bit ornery. I'm not going to lie. You
Speaker 1: can hear it in my voice. And I am even
Speaker 1: more ornery than ever, more ornery than ornery, as Rob
Speaker 1: Zombie once sung. I'm just pissed off because when you
Speaker 1: look at these numbers, they do not make sense. There's
Speaker 1: no parallel in history for any company or any industry
Speaker 1: that's ever spent this much money. There's never been one
Speaker 1: company that has been the focus like this. And honestly,
Speaker 1: I've never seen a company less deserving of any investment
Speaker 1: than open AI. They've burned billions of dollars. Their product
Speaker 1: is questionably useful, it's incredibly commoditized. They have yet to
Speaker 1: create anything really exciting or new since And if I'm
Speaker 1: being kind reasoning, but let's be honest. GPT four, Oh
Speaker 1: they are washed. And yet everybody's sitting around them clapping
Speaker 1: like they're a gifted child and insult to children and
Speaker 1: startup founders. And that really is something that pisses me
Speaker 1: off as well, because AI took thirty three percent of
Speaker 1: US venture capital last year and I think they're probably
Speaker 1: taking more this year. And what's insane is nothing has
Speaker 1: been proven. None of these companies are profit generating, none
Speaker 1: of these products are popular. Every single day, it feels
Speaker 1: like a study comes out saying, yeah, no one really
Speaker 1: likes this stuff, no one wants to pay for it.
Speaker 1: And by my calculations, I think the whole industry's revenue
Speaker 1: have include core we even all those shits, maybe fifty
Speaker 1: five billion dollars in twenty twenty five. That's on four
Speaker 1: hundred billion plus capex. Is anyone having fun? Does this
Speaker 1: feel like the future or does this feel like the
Speaker 1: future of how we're going to blow hundreds of billions
Speaker 1: of dollars on nothing? And the longer it takes for
Speaker 1: people to walk away from open Ai, and the longer
Speaker 1: it takes for this company to die, the more damage
Speaker 1: that's going to be caused. Because right now in video
Speaker 1: is putting everything on open Ai. If we had functioning
Speaker 1: regulatory boards, we'd actually have something done about this. But instead,
Speaker 1: what's going to happen is they're going to inflate this
Speaker 1: bubble just a little further, and then when it bursts,
Speaker 1: it's going to fuck retail investors and a ton of
Speaker 1: venture capitalists too, ton of private equity people as well,
Speaker 1: which will be kind of funny, but the financial apocalypse
Speaker 1: will hit everyone and it will be grizzly. But I'll
Speaker 1: be here to talk about it. I'm having the time
Speaker 1: of my life doing this show. Next week's three part
Speaker 1: Who is Completely Insane? I wrote it in kind of
Speaker 1: a two day, fifteen thousand word kind of like ejection.
Speaker 1: I was going to say, I was going to say
Speaker 1: another word, which wouldn't have sounded quite as good, But nevertheless,
Speaker 1: that's the fun brandy part of these monologues. But I'm
Speaker 1: really excited for you to hear it because I pulled
Speaker 1: together a lot of numbers that show how fascical this
Speaker 1: industry has become. And I think as the bubble approaches
Speaker 1: its eventual burst, a lot of you are going to
Speaker 1: feel really good about how right you are. Maybe some
Speaker 1: of you still disagree with me, and I will work
Speaker 1: to compel you, and even if I don't, I hope
Speaker 1: you have a good time listening. Got great episodes coming
Speaker 1: up in the future as well. Going to be going
Speaker 1: to see Stephen Burke of Gamers next is, do a
Speaker 1: long interview with him, some fun you a better offline,
Speaker 1: and then I'm already working on some big guests. It's
Speaker 1: going to be a really fun few months. I don't
Speaker 1: know if anyone else, but I'm definitely enjoying doing this podcast.
Speaker 1: Thank you, zever for listening.