Speaker 1: Zoe Media.
Speaker 2: All Right, we're back.
Speaker 3: I'm ed Zetron and this is better offline. This is
Speaker 3: the fourth and final episode of this four part series
Speaker 3: where I dissect in excruciating comprehensive detail the AI bubble
Speaker 3: and tell you why I think its implosion is inevitable.
Speaker 3: We're at the end, which is fitting because in this
Speaker 3: episode we're going to talk about why and how this
Speaker 3: entire sham dies again. If you jumping in now, start
Speaker 3: from the beginning. We talk about a lot of things
Speaker 3: and it all kind of threads together. I know, I
Speaker 3: know you want to hear my explanation of how open
Speaker 3: ai is fucked with a capital fuck. But we've got
Speaker 3: to lay the groundwork to get there. Okay, got up, good, Good,
Speaker 3: We're good. We're god, You're ready, We're good, You're got yep, yep.
Speaker 2: Okay, we'll begin.
Speaker 3: One of the comfortable lies that people tell themselves is
Speaker 3: that the AI bubble is similar to the fiber boom
Speaker 3: or the dot com boom or uber, or that we're
Speaker 3: in the growth stay, that this is what software companies do.
Speaker 3: They spend a bunch of money, then pull the profit lever.
Speaker 3: The thing is, this is nothing like anything you've ever
Speaker 3: seen before, because this is the dumbest shit the tech
Speaker 3: industry has ever ever done. AI data centers are nothing
Speaker 3: like fiber because there are very few actual use cases
Speaker 3: for these GPUs outside of AI, and none of them
Speaker 3: are remotely hyper scale revenue drivers. As I discussed a
Speaker 3: month or so ago, data center development accounted for more
Speaker 3: of America's GDP growth than all consumers spending combined in
Speaker 3: the first half of.
Speaker 2: Twenty twenty five.
Speaker 3: And there really isn't any demand for AI in general,
Speaker 3: let alone at the scale that these hundreds of billions
Speaker 3: of dollars are being sunk into. The conservative estimate of
Speaker 3: capital expenditures related to data centers is around four hundred
Speaker 3: billion dollars, but given the fifty billion dollar in a
Speaker 3: quarter in private equity invested, I'm going to guess it
Speaker 3: breaks half a trillion, all to build capacity for an
Speaker 3: industry yet to prove itself. And this whole in video
Speaker 3: OpenAI one hundred billion dollar funding news should only fill
Speaker 3: you full of dread. But also it isn't fucking finalized.
Speaker 3: Stop reporting as if it's done, it's fucking anyway good.
Speaker 3: According to CNBC and I quote the initial ten billion
Speaker 3: dollar tranch is locked in at a five hundred billion
Speaker 3: dollar valuation and expected to close within a month or
Speaker 3: so once the transaction has been finalized, with successive ten
Speaker 3: billion dollar rounds planned, each to be priced at the
Speaker 3: company's then current valuation. Is new capacity comes online, what
Speaker 3: a horrible deal. They can just raise whatever they can,
Speaker 3: just go back to video. But let me just be clear.
Speaker 3: Open Ai has written a lot of checks that neither
Speaker 3: it nor anyone else can cash, and for it to
Speaker 3: survive it needs to raise more than, honestly about five
Speaker 3: hundred billion dollars and maybe another four hundred billion dollars
Speaker 3: and other people paying for stuff. It's astonishing, really, and
Speaker 3: no point is anyone asking how exactly open ai builds
Speaker 3: the data centers to fill for of the GPUs to
Speaker 3: get the rest of Nvidia's funding. In fact, I'm genuinely
Speaker 3: shocked and a little disgusted by how poorly this story
Speaker 3: has been told.
Speaker 2: Let's go point by point.
Speaker 3: Ten billion dollars is not enough for open ai to
Speaker 3: build a data center. The one point one to one
Speaker 3: point two Gigawa Gabiline Texas data center being built by
Speaker 3: Oracle and Cruiser for open Ai required fifteen billion dollars
Speaker 3: in debt, and that's not including the forty billion dollars
Speaker 3: of chips needed to power it. Though a question whether
Speaker 3: all of those are going into Abilene or somewhere else,
Speaker 3: which you get to later. Open Ai can also not
Speaker 3: afford to pay for everything it's promised. Open Ai will
Speaker 3: burn they say one hundred and fifteen billion dollars in
Speaker 3: the next four years ago into the information, but I
Speaker 3: believe the company intentionally leaked those numbers before the announcement
Speaker 3: of their three hundred billion dollar deal with Oracle, as
Speaker 3: when you take into account the numbers share but the
Speaker 3: information which involved them burning forty seven billion dollars in
Speaker 3: twenty twenty eight a year when it open ai is
Speaker 3: meant to make seventy billion dollars in payments to compute
Speaker 3: to Oracle, not for twenty eight billion dollars to Microsoft
Speaker 3: or any other cost. There's no space for the three
Speaker 3: hundred billion dollars to go, and there's actually another one
Speaker 3: hundred billion dollars they're promising for backup compute as well.
Speaker 3: On top of all of this, open ai is still
Speaker 3: yet to convert to a for profit entity, and must
Speaker 3: do so by the end of twenty twenty five, or
Speaker 3: they'll lose twenty billion dollars in funding from SoftBank. A
Speaker 3: few weeks ago, Microsoft and open Ai co published an
Speaker 3: announcement that said they'd signed a non binding memorandum of
Speaker 3: understanding for the next phase of their partnership, which the
Speaker 3: media quickly took to mean the deal was done. No
Speaker 3: deal has been done. This is an announcement of nothing.
Speaker 3: On top of all of this, venture capital might run
Speaker 3: out at the current rate of investment in around six quarters,
Speaker 3: and open ai needs more investment than ever. The Information
Speaker 3: recently published some worrying data from venture capitalist John Sokoda
Speaker 3: that a Today's clip the industry would run out of
Speaker 3: money in six quarters, adding that the money wouldn't run
Speaker 3: out until the end of twenty twenty eight if it
Speaker 3: wasn't for open.
Speaker 2: Ai and Anthropic.
Speaker 3: In a very real sense, open ai threatens the future
Speaker 3: of available capital for the tech industry. Well, the good
Speaker 3: news is that they're going to make lots of money, right.
Speaker 3: I mean, open Ai leaked that they'll make two hundred
Speaker 3: billion dollars in four years time. I mean, if you're concussed,
Speaker 3: I can see how you believe that. Let's go, I'm
Speaker 3: going to read you a bunch of numbers. I know
Speaker 3: it's kind of going to be annoying to hear this.
Speaker 3: For the next thirty second, I'm going to just throw
Speaker 3: figures at you, but pay attention because it's important to
Speaker 3: really us how insane this is. So. In twenty twenty five,
Speaker 3: open ai projects to make thirteen billion dollars and have
Speaker 3: free cash flow of negative nine billion dollars. In twenty
Speaker 3: twenty six, open ai will make twenty nine billion dollars
Speaker 3: or thirty billion dollars, but have free cash flow of
Speaker 3: negative seventeen billion. In twenty twenty seven, open ai will
Speaker 3: make sixty billion dollars but have negative cash flow of
Speaker 3: negative thirty five billion dollars. And in twenty twenty eight,
Speaker 3: open ai will make one hundred billion dollars but have
Speaker 3: free cash flow of negative forty seven billion dollars. In
Speaker 3: twenty twenty nine, open ai will make one hundred and
Speaker 3: forty five billion dollars but a free cash flow of
Speaker 3: negative eight billion dollars. Somehow, I just want to reiterate
Speaker 3: there open AI's projection. See it reduce its negative cash
Speaker 3: flow by thirty nine billion dollars or one and a
Speaker 3: half times three m's revenue from the last financial year
Speaker 3: in a single year, while also increasing their revenue by
Speaker 3: a similar amount, give or take a few billion. Who's counting,
Speaker 3: certainly not Sarah Fryer, the CFO of open Ai.
Speaker 2: It's also fucking stupid.
Speaker 3: But don't worry. I know, I know some of you
Speaker 3: have been worried. You see big strong men with tears.
Speaker 3: Now is going to be saying cirsa open Ai. They're
Speaker 3: not gonna They're going to have enough money.
Speaker 2: They're gonna die. But don't worry.
Speaker 3: In twenty thirty, open ai will make two hundred billion
Speaker 3: dollars and somehow have positive free cash flow of thirty
Speaker 3: eight billion dollars. It's just that easy. I teach you
Speaker 3: this in business school. It's just that easy.
Speaker 2: How they're gonna make it. They're gonna make it. They'll
Speaker 2: be fine.
Speaker 3: Open ai is current reported burn is one hundred and
Speaker 3: fifteen billion dollars through twenty thirty, which means there's no
Speaker 3: way that these projections that were leaked included three hundred
Speaker 3: billion dollars in compute costs. Even when you factor in
Speaker 3: the revenue, there's no space in the projections to absorb
Speaker 3: the Oracle money, and from what I can tell, by
Speaker 3: twenty twenty nine, open AI will burned up have burned
Speaker 3: upwards of two hundred ninety billion dollars, assuming it suffves
Speaker 3: that long, which I do not believe it will. Don't
Speaker 3: worry though, open ai is about to make some crazy money.
Speaker 3: I say in no way being totally sarcastic. I'm gonna
Speaker 3: now read you some of the projections that CFO Sarah
Speaker 3: Fryer signed off on. This is a professional chief financial officer. Again,
Speaker 3: more numbers, but pay attention, Pay attention. This is I
Speaker 3: want to give you, because these are numbers you just heard,
Speaker 3: but I want to give you some comparison points. So
Speaker 3: in twenty twenty six, open AI will make, according to
Speaker 3: the projections, or these are the projections, thirty billion dollars
Speaker 3: in revenue, or just under thirty the thirty four billion
Speaker 3: dollars that Salesforce made in twenty twenty four. In twenty
Speaker 3: twenty seven, open AI will allegedly make sixty billion dollars
Speaker 3: or two point six billion, more than the fifty seven
Speaker 3: point four billion dollars the Oracle made in its fiscal
Speaker 3: year twenty twenty five, or eight point four billion dollars
Speaker 3: more than Broadcom made in twenty twenty four. In twenty
Speaker 3: twenty eight, this is crazy. Open ai will make one
Speaker 3: hundred billion dollars two point three billion dollars more than
Speaker 3: Tesla made in twenty twenty four, or eleven point eleven
Speaker 3: point sixty six billion dollars more than TSMC, the single
Speaker 3: largest chip manufacturer in the world.
Speaker 2: Made in twenty twenty four.
Speaker 3: In twenty twenty nine, things get crazier because open ai
Speaker 3: will then make one hundred and fifty four billion dollars
Speaker 3: or fourteen point five billion dollars more than the one
Speaker 3: hundred and thirty point five billion dollars that in Video
Speaker 3: made and its fiscal year twenty twenty five. But in
Speaker 3: twenty thirty, this is when they really blow the doors off.
Speaker 3: They will make two hundred billion dollars or thirty five
Speaker 3: point five billion dollars in the one hundred and sixty
Speaker 3: four point five billion that Meta made in twenty twenty four.
Speaker 3: Just so we are clear, open ai intends to ten
Speaker 3: exits revenue in the space of four years, selling software
Speaker 3: and access to its models in an industry with about
Speaker 3: sixty billion dollars of revenue. In twenty twenty five, How
Speaker 3: will it do this? Open ai does not say. I
Speaker 3: don't know open ai CFO Sarah Fryer, but I do
Speaker 3: know that signing off on these numbers is at the
Speaker 3: very least ethically questionable. But putting aside the ridiculousness of
Speaker 3: open AI's deals or its funding requirements, Fryar has wilfully
Speaker 3: allowed Samulman and open ai to state goals that defy
Speaker 3: reality or good sense, all to take advantage of investors
Speaker 3: and public markets that have completely lost the plot. I'm
Speaker 3: actually you know what, I'm actually going to be blunter.
Speaker 3: Open ai has signed multiple different deals and contracts for
Speaker 3: amounts it cannot afford to pay that it cannot hope
Speaker 3: to raise the money to pay for that defy the
Speaker 3: amounts of venture capital and private capital available, or to
Speaker 3: sustain a company that will burn half a trillion dollars
Speaker 3: in the next four years based on their own expenditures,
Speaker 3: and they have no path of the profitability of any kind.
Speaker 3: But what about that Invidia deal? And one hundred billion
Speaker 3: dollars is a lot of money, right, it is? But
Speaker 3: the announcement is bullshit. I know you may have read otherwise,
Speaker 3: but in Vidia didn't give open Ai a hundred billion dollars.
Speaker 3: In fact, ninety billion dollars of that is contingent on
Speaker 3: open Ai building roughly one hundred and twenty five billion
Speaker 3: dollars worth of data centers with two hundred billion dollars
Speaker 3: worth of GPUs inside them. And those data centers will
Speaker 3: have to be built faster than anyone could possibly build
Speaker 3: something of that scale. And there's no evidence that open
Speaker 3: ai knows where or when these facilities will.
Speaker 2: Be built or who will build them.
Speaker 3: Important detail as well, in Vidia's data centers have nothing
Speaker 3: to do with stargate. So when you read that open
Speaker 3: ai has seven gigawatts of stargate whatever, it doesn't exist.
Speaker 3: Who cares? That's nothing to do with Nvidia. Oracle is
Speaker 3: not building these data centers. The ten gigawatts that they
Speaker 3: need to build with video are something completely separate. But
Speaker 3: you know what, let's take a step back with something
Speaker 3: really simple. Data centers take forever to build. As I've
Speaker 3: said previously, based on current reports, it's taking Oracle and
Speaker 3: Cruiser around two point five.
Speaker 2: Years per giga.
Speaker 3: What of data circumpans city and nowhere in these reports
Speaker 3: there's one reporter take a fucking second to say, hey,
Speaker 3: what data centers are you talking about?
Speaker 2: Hey, didn't Sam alm.
Speaker 3: And say back in July he was building ten gigawats
Speaker 3: of data center capacity with Oracle. But wait now Oracle
Speaker 3: and open Ai have done another announcement that says they're
Speaker 3: only doing seven gigawats, but they already had a schedule
Speaker 3: on ten gigawatts. Like I said, totally different ten gigawats
Speaker 3: to the one within video. But you know what, got
Speaker 3: a few hundred billion dollars of data centers. Now you're
Speaker 3: breaking real money anyway. I cannot be clear enough how
Speaker 3: unlikely it is that the first giga what of in
Speaker 3: video systems will be deployed in the second half of
Speaker 3: twenty twenty six, as in Video has stated with their
Speaker 3: deal with open Ai. And that's as if the land
Speaker 3: has been bought and got permits and the construction has started.
Speaker 3: None of this has happened.
Speaker 2: But you know, let's get really specific on costs.
Speaker 3: Kruso's one point two gigawatts of compute for open Ai
Speaker 3: is a fifteen billion dollar joint venture, which means a
Speaker 3: gigawat of compute runs about twelve point five billion dollars
Speaker 3: worth of construction, Abilene's eight buildings are meant to hold
Speaker 3: fifty thousand in video GB two hundred GPUs and their
Speaker 3: associated networking infrastructure. So let's say a Gigawa is around
Speaker 3: three hundred and thirty three thousand Blackwell GPUs, even though
Speaker 3: the GB two hundreds are technically two of them put together.
Speaker 3: Though this math is a little funky due to in
Speaker 3: video promising to install its new Reuben GPUs in these
Speaker 3: theoretical data centers. That means these data centers will require
Speaker 3: a little under two hundred billion.
Speaker 2: Dollars worth of GPUs.
Speaker 3: By my maths, that's about three hundred and twenty five
Speaker 3: billion dollars, but in videos saying it could be half
Speaker 3: a trillion. But you know, who gives a shit, right,
Speaker 3: numbers don't matter. You've got Jensen Wong telling CNBC that
Speaker 3: one giga what costs fifty sixty billion dollars. You've got
Speaker 3: Altman claiming the same thing to Bloomberg. But my mass
Speaker 3: is something completely fucking different, But no one seems.
Speaker 2: To want to bother.
Speaker 3: You know. It's only like the places I'm quoting are
Speaker 3: leading business outlets with teams of thousands of people, with
Speaker 3: incredible infrastructure where they could sit down and say, well,
Speaker 3: you know it costs this much to build stargate ABERI,
Speaker 3: and why don't we work out actually what this costs? No, no, no,
Speaker 3: just eat the info slop yum yum yum. You know
Speaker 3: it doesn't exhaust me. It doesn't make me cynical and
Speaker 3: frustrated with people who could do a good job. Indeed,
Speaker 3: I've seen them do a good job, but they just
Speaker 3: seem to not want to do one with this, and
Speaker 3: it genuinely bothers me on a day to day basis. Okay,
Speaker 3: I realize I'm just ranting at this point, but I'm
Speaker 3: gonna be honest. I'm just I'm so tired of this.
Speaker 3: As a reminder as well, Open Eyes agreed to spend
Speaker 3: three hundred billion dollars on compute with Oracle. But at
Speaker 3: this point, as you can tell, numbers basically don't have meaning.
Speaker 3: Numbers have stopped meaning anything. If you believe these numbers,
Speaker 3: you're a fantasist or a liar, or you just don't
Speaker 3: want to think about them too much, because when you
Speaker 3: think about them, you start to realize how unrealistic it is.
Speaker 3: And even if you remain steadfast in your belief of
Speaker 3: the transformative potential of large language models. Eventually, there comes
Speaker 3: a point where reality must prevail and you accept that
Speaker 3: we're in a bubble, whether you like it or not.
Speaker 3: What we're witnessing is one of the most egregious wastes
Speaker 3: of capital in history, sold by career charlatans, with their
Speaker 3: reputations laundered by a tech and business media afraid to
Speaker 3: criticize the powerful an analyst that don't seem to want
Speaker 3: to tell their investors the truth. There are no historic
Speaker 3: comparisons here. Even Britain's abominable eighteen hundreds railway bubble, which
Speaker 3: absorbed half of the country's national income, created valuable infrastructure
Speaker 3: for trains, a vehicle that can move people to and
Speaker 3: from places. So the train doesn't randomly just go backwards
Speaker 3: when you make it go forwards. It doesn't become a
Speaker 3: bus or a dog at random. It doesn't hallucinate doors
Speaker 3: that open and close at random. Trains work and GPUs
Speaker 3: are not trains, nor are they cars or even CPUs,
Speaker 3: not adaptable to many other kinds of work, nor are
Speaker 3: they the infrastructure of the future of tech, because they're
Speaker 3: already quite old and with everybody focused on buying them,
Speaker 3: you'd absolutely see one other use case by now that
Speaker 3: actually mattered. GPUs are expensive, power hungry, environmentally destructive, and
Speaker 3: require their own kinds of cooling and server infrastructure, making
Speaker 3: every GPU data center an environmental and fiscal bubble onto themselves.
Speaker 3: And whereas the Victorian train and infrastructure still exists in
Speaker 3: the UK, though it has been upgraded over the years,
Speaker 3: a GPU has a limited useful lifespan. These are cards
Speaker 3: that can and will break after a period of extended usage,
Speaker 3: whether that period is five years or later, though I
Speaker 3: hear it's one to three, and they'll inevitably be superseded
Speaker 3: by something better and more powerful, meaning that the resale
Speaker 3: value of that GPU will only go down with a
Speaker 3: price depreciation. That's the kin to a new car, and
Speaker 3: then a used car, and then a car that you
Speaker 3: kick the door over every so often. I am telling you,
Speaker 3: as I have been telling you for years, again and
Speaker 3: again and again, that the demand is not there for
Speaker 3: generative AI, and the demand is never ever arriving. The
Speaker 3: only reason anyone humors any of this crap is the
Speaker 3: endless hoarding of GPUs to build capacity for a revolution.
Speaker 2: That will never arrive.
Speaker 3: Well, that and open Ai, a company that's built and
Speaker 3: sold on lies about chat GPT's capabilities. Chat GPT's popularity
Speaker 3: in open hunger for endless amounts of compute have created
Speaker 3: the illusion of demand due to the sheer amount of
Speaker 3: capacity required to keep their services operational. Also that they
Speaker 3: can burn around eight billion dollars or more in twenty
Speaker 3: twenty five and hundreds of billions of dollars more by
Speaker 3: twenty thirty if they make him, which they won't. The
Speaker 3: Nvidia dealers are fast an obvious attempt by the largest
Speaker 3: company on the American stock market to prop up the
Speaker 3: one significant revenue generator in the entire industry, knowing that
Speaker 3: time is running out for it to create new avenues
Speaker 3: for eternal growth. I'd argue that Nvidia's deal also shows
Speaker 3: the complete content that these companies have for the media.
Speaker 3: There are no details about how this deal works beyond
Speaker 3: the initial ten billion dollars. There's no land purchase, no
Speaker 3: data center construction started, yet the media slurps it down
Speaker 3: without a second thought. I am but one man, and
Speaker 3: I'm fucking peculiar. I did not learn financial analysis in school,
Speaker 3: but I appear to be one of the few people
Speaker 3: doing even the most basic analysis of these deals. And
Speaker 3: while I'm having a great time doing so, I'm are
Speaker 3: so extremely frustrated about how little effort is being put
Speaker 3: into praying apart these deals by other people.
Speaker 2: I realize how ridiculous all that this sounds. I get it.
Speaker 3: There's so much money being promised, that so many people
Speaker 3: market rallies built off the back of these massive deals,
Speaker 3: and I get that the assumption that this is that
Speaker 3: this much money can't be wrong, that this many people
Speaker 3: wouldn't just say stuff without intending to follow through, or
Speaker 3: without considering whether their company could afford it. I know
Speaker 3: it's hard to conceive that these hundreds of billions of
Speaker 3: dollars could be invested in something for no apparent reason,
Speaker 3: but it's happening, right goddamn now, in front of your eyes.
Speaker 3: And I am going to be merciless on anyone who
Speaker 3: attempts to write, how could we possibly have seen this coming?
Speaker 3: Generator AI has never been reliable, has always been unprofitable,
Speaker 3: and has always been unsustainable. And I've been saying so
Speaker 3: since at least February twenty twenty four. These economics have
Speaker 3: never made sense. Something I've said repeatedly since April twenty
Speaker 3: twenty four, and when I wrote how does open Ai
Speaker 3: Survive in July twenty twenty four, I had multiple people
Speaker 3: suggest I was being an alarmist. Here's some alarmism for you.
Speaker 3: The longer it takes for open ai to die, the
Speaker 3: more damage it will cause once it does. As I
Speaker 3: talked about earlier in this series, venture capital could run
Speaker 3: out in six quarters, with investor and research of John
Speaker 3: Socoda estimating that there will be only around one hundred
Speaker 3: and sixty four billion dollars of dry powder, which is
Speaker 3: available capital, by the way, in USVC firms, by the
Speaker 3: end of twenty twenty five. In July, the French Tech
Speaker 3: journal reported using Pitchbook DAYA, the global venture capital deal
Speaker 3: activity reached its lowest first half total since twenty eighteen,
Speaker 3: with one hundred and thirty nine point four billion dollars
Speaker 3: in deal value in the first half of twenty twenty five,
Speaker 3: down from one hundred and eighty three point four billion
Speaker 3: in the first half of twenty twenty four, meaning that
Speaker 3: any further expansion or demands for venge capital from open
Speaker 3: ai will likely sap dwindling.
Speaker 2: Funds available for other startups.
Speaker 3: Things get worse when you narrow things to the US
Speaker 3: venture capital In a piece from April Erstin Young report,
Speaker 3: the VC backed in in US companies say eighty billion
Speaker 3: dollars in Q one twenty twenty five, but one forty
Speaker 3: billion dollar deal account for half of the investment.
Speaker 2: Open Ai is forty billion.
Speaker 3: Dollar deal, of which only ten billion dollar has actually closed,
Speaker 3: and that didn't happen until fucking June. Without the imaginary
Speaker 3: money from open Ai, US venture capital would have declined
Speaker 3: by thirty six percent. I should also add another eight
Speaker 3: point three billion dollars was added on the top of that,
Speaker 3: but still that's less than forty dollars, folks. The longer
Speaker 3: the open Ai survives, the longer it will sap the
Speaker 3: remaining billions from the tech ecosystem, and I expect its
Speaker 3: tendrils to extend to private credit soon too. The three
Speaker 3: hundred and twenty five billion dollars it needs just to
Speaker 3: fulfill its Nvidia contract, albeit over four years, is an
Speaker 3: egregious sum that I believe exceeds the available private capital
Speaker 3: in the world. And I went and actually looked, assuming
Speaker 3: that all of this capital is currently available, the top
Speaker 3: ten private equity films in the world have around four
Speaker 3: hundred and seventy seven billion dollars of available capital. A reminder,
Speaker 3: four hundred and seventy seven billion dollars is a lot
Speaker 3: less than open AI's total commitments over the next few years.
Speaker 3: In fact, I put a premium newsletter out just before
Speaker 3: recording this, so I didn't totally update the script. But
Speaker 3: open ai needs a trillion dollars. They need about five
Speaker 3: hundred billion for operations and about four hundred and fifty
Speaker 3: billion for all the data centers they promised and the
Speaker 3: GPUs in them.
Speaker 2: It's not really good, it's not good at all.
Speaker 3: But if we include the cash at hand at the
Speaker 3: biggest investment banks, this brings us up to By the way,
Speaker 3: if we as seen that all of these funds are
Speaker 3: available about five hundred and sixty two billion dollars in
Speaker 3: capital and one hundred and sixty four billion dollars a
Speaker 3: venture capital in the US to spend, and that's all
Speaker 3: meant to go in more places than just open AI,
Speaker 3: that's not enough. If we combind all the available private
Speaker 3: equity firms in the top ten and all of the
Speaker 3: available USVC, that's not enough to pay for all the
Speaker 3: bills that the open aiy has said, it's we're in
Speaker 3: a fucking bubble man. Come on, sure, I also get
Speaker 3: that there's more than ten private equity firms and there's
Speaker 3: more venture money in that they could raise more money
Speaker 3: from lpiece, but what's the left exactly in our one
Speaker 3: hundred and fifty two hundred and three hundred billion. They
Speaker 3: need that, they need all of that. Hand that over
Speaker 3: to Clammy Sami right now. Clammy needs to give that
Speaker 3: money to Jensen. Jensen need money. Number go up, you asshole,
Speaker 3: give money to Jensen Wong. Now you see open ai
Speaker 3: needs to buy those GPUs, and it needs to build
Speaker 3: those data centers, and it needs to pay it's thousands
Speaker 3: of staff and marketing and sales costs too well. Open
Speaker 3: Ai likely wouldn't be the ones raising the money for
Speaker 3: the data centers, and honestly, I'm not sure who would.
Speaker 3: At this point, somebody is going to need to build
Speaker 3: twenty fucking gigawatts of data centers if we're going to
Speaker 3: believe Oracle and Nvidia. You may argue that venture funds
Speaker 3: and private equity funds can raise more, and you're right,
Speaker 3: but at this point, there have been few meaningful acquisitions
Speaker 3: of AI companies and zero exits from the billions of
Speaker 3: dollars put into data centers. How are they meant to
Speaker 3: justify doing this other than me need money?
Speaker 2: Please?
Speaker 3: Even open aims it's in its own announcement about new
Speaker 3: stargate sites that this will be a four hundred billion
Speaker 3: dollar investment over three years. Where the fuck's the money
Speaker 3: coming from? Is open ai really going to absorb massive
Speaker 3: junks of all available private credit and venture capital and
Speaker 3: capex from major tech companies.
Speaker 2: For the next few years?
Speaker 3: And oh my fucking god, Oh my god, stop saying
Speaker 3: the US government will bail this out. I'm tired of
Speaker 3: hearing it. I get the things as scary right now.
Speaker 3: I'm scared too, We're all fucking scared. But I get
Speaker 3: jumping to doomerism.
Speaker 2: But stop. The US government actually really can't afford to
Speaker 2: do this. Open AI needs about.
Speaker 3: A trillion dollars in the next four years. And while
Speaker 3: the US government has spent equivalent sums in the past
Speaker 3: to support private businesses, there's about four hundred and forty
Speaker 3: billion dollars dispersed during the Great Recessions tart program, and
Speaker 3: that was when the Treasury brought toxic assets from investment
Speaker 3: banks to stop them from imploding.
Speaker 2: Like Layman Brothers that one.
Speaker 3: It's hard to imagine any case where open ai is
Speaker 3: seen as vital to the global financial system and the
Speaker 3: economic health of the US as the actual banking system.
Speaker 3: And even if they were, that's more money than they
Speaker 3: can easily mobilize, even for the US government. And sure,
Speaker 3: we spent around a trillion dollars if we're being specific,
Speaker 3: nine hundred and fifty three billion dollars on the paycheck
Speaker 3: Protection program during the COVID era. That was to keep
Speaker 3: people employed at a time when the economy outside of
Speaker 3: Zoom and Walmart had, for all intents and purposes, ceased
Speaker 3: to exist. There was an urgency that doesn't apply here.
Speaker 3: If open ai goes tits up, soft Bank, Dragonnaer and
Speaker 3: a few others lose a bit of money. Nothing new there,
Speaker 3: and Sacha Nadella has to explain why he spent tens
Speaker 3: of billions, actually hundreds of billions of dollars on data
Speaker 3: centers fills with GPUs. But otherwise there's you can't really
Speaker 3: bail this out. Are we going to nationalize in video?
Speaker 3: Are we going to create a top fund just for
Speaker 3: open ai? If you really believe that will happen. I
Speaker 3: really must put a smile on your face.
Speaker 2: It can't.
Speaker 3: Even under the most crony capitalism scenario. This is more
Speaker 3: money than actually really exists in the world. And yes,
Speaker 3: while there will be and have been already disastrous economic consequences,
Speaker 3: they won't be as systematically catastrophic as that of a
Speaker 3: pandemic or a global financial crisis. To be clear, It'll
Speaker 3: be bad, but not as bad. And there's also the
Speaker 3: problem of a moral hazard. If the government steps in,
Speaker 3: what's the stop big tech chasing its next frootless rainbow,
Speaker 3: and of course the optics. If people resented bailing out
Speaker 3: the banks after they acted like Gambler's and lost, how
Speaker 3: will they feel bailing out fucking Sam Altman and Jensen Huang. Seriously,
Speaker 3: no matter when you've got a conservative or Democrat government,
Speaker 3: this is not going to be an easy thing to sell.
Speaker 3: It's going to be hard to get the consensus, and
Speaker 3: indeed every tech company will be kind of pissed. I
Speaker 3: think that you miss you underestimate how upset companies that
Speaker 3: have died would be, and indeed companies outside of tech
Speaker 3: two this would be more than a scandal it would
Speaker 3: be genuinely bad to do, even for the silliest government
Speaker 3: in the world. I don't think it's happening, and even
Speaker 3: if they try, there's not enough money.
Speaker 2: Breathe, they can't get you. You're doing a podcast.
Speaker 3: Look, this has been a slog and I appreciate you
Speaker 3: sticking with me this long, but the significance of the
Speaker 3: bubble requires this depth. There's little demand, little real money,
Speaker 3: and little reason to continue, and the sheer lack of responsibility,
Speaker 3: along with the willingness to kneel before the powerful, feels
Speaker 3: me full of angry bio. I understand many journalists are
Speaker 3: not in a position where they can just write this
Speaker 3: shit sounds stupid, but we've entered a deeply stupid era,
Speaker 3: and by continuing to perpetuate the myth of AI, the
Speaker 3: media guarantees that retail investors and regular people's four O
Speaker 3: one case will suffer. It is now inevitable that this
Speaker 3: bubble bursts. Deutsche Bank has said that the AI boom
Speaker 3: is unsustainable outside of tech spending remaining parabolic, which it
Speaker 3: says is highly unlikely, and Bain Capital has said that
Speaker 3: two trillion in new revenue is needed to fund AI scaling,
Speaker 3: and even that math is completely fucked as it talks
Speaker 3: about AI related savings, and I quote even if companies
Speaker 3: in the US shifted all of their on premises, it
Speaker 3: budgets the cloud and reinvested the savings from applying AI
Speaker 3: in sales, marketing, customs support, and r D into capital
Speaker 3: spending on new AI data centers, the amount would still
Speaker 3: fall short of revenue, the revenue needed to fund the
Speaker 3: full investment as AI's compute demands grow more than twice
Speaker 3: the rate of Moore's law.
Speaker 2: Ban notes.
Speaker 3: Even when stared in the face by a ridiculous idea
Speaker 3: two trillion dollars of new revenue in a global software
Speaker 3: market and this is all software that's expected to be
Speaker 3: around eight hundred and seventeen billion dollars in twenty twenty five,
Speaker 3: Bain still ininks out some nonsense about the savings from
Speaker 3: applying AI. Yet another myth perpetuated. I seem to plicate
Speaker 3: the fucking moron sinking billions into this Every single vibe
Speaker 3: Coding is the future, the power of AI and AI
Speaker 3: job lot story written perpetuates a myth that will only
Speaker 3: lead to more regular people getting hurt.
Speaker 2: When the bubble bursts.
Speaker 3: Every article written about open AI or in video or
Speaker 3: oracle that does not explicitly state that the money doesn't exist,
Speaker 3: that the revenues that are impossible, that one of the
Speaker 3: companies involved burns billions of dollars and has no path
Speaker 3: to profitability is an act of irresponsibility, and irresponsible make
Speaker 3: belief and mythos. Look, I'm nobody, I'm not a financier,
Speaker 3: I'm not anybody special. I write a lot, I read
Speaker 3: a lot, and can do the most basic maths in
Speaker 3: the world. I'm not trying to be anything other than myself,
Speaker 3: nor do I have an agenda other than the fact
Speaker 3: that I like doing this and I hate how.
Speaker 2: This story is being told.
Speaker 3: I never expected my newsletter to get big, nor did
Speaker 3: I expect this podcast, nor did I expect to be
Speaker 3: in the Financial Times. But here I am, and I'm
Speaker 3: working my ass off, and I am pissed off at
Speaker 3: where this has got to. I'm tired that things remain
Speaker 3: honestly mythical, that we still see as things get more
Speaker 3: and more ridiculous, that the headlines get more ridiculous too,
Speaker 3: that there's questioning and people are saying, oh, the narrative
Speaker 3: is shifting, sure, but they're still repeating increasingly dumb shit.
Speaker 3: And I also believe that the way to stop this
Speaker 3: happening again is to have a thorough and well sourced
Speaker 3: explanation of everything that happens, ripping down the narratives as
Speaker 3: they're spun, and making it clear who benefits from them
Speaker 3: and how on why they're choosing to do so. When
Speaker 3: things collapse, we need to be clear about how many
Speaker 3: times people chose to look the other way or to
Speaker 3: find good faith ways to interpret bad faith announcements and leaks.
Speaker 2: So how could we have seen this coming? I don't know,
Speaker 2: did anybody.
Speaker 3: Try to fucking look?
Speaker 2: Thank you for listening to Better Offline.
Speaker 4: The editor and composer of the Better Offline theme song
Speaker 4: is Matasowski. You can check out more of his music
Speaker 4: and audio projects at Mattasowski dot com, m A T
Speaker 4: T O.
Speaker 2: S O W s ki dot com.
Speaker 4: You can email me at easy at Better offline dot com,
Speaker 4: or visit Better Offline dot com to find more podcast
Speaker 4: links and of course my newsletter. I also really recommend
Speaker 4: you go to chat dot Where's youreaed dot at to
Speaker 4: visit the discord and go to our slash Better off
Speaker 4: Line to check out our reddit thank you so much
Speaker 4: for listening.
Speaker 1: Better Offline is a production of Calls on Me. For
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