Speaker 1: Zone Media. Hello and welcome to this week's Better Offline Monologue.
Speaker 1: I'm your host ed Zitron. A lot of people have emailed,
Speaker 1: messaged and plugged me that the natural end of the
Speaker 1: AI bubble is some kind of government bailouts, something resembling
Speaker 1: the TARP program that bailed out financial institutions overleveraged during
Speaker 1: the Great Financial Crisis. And I want to be clear
Speaker 1: about something. This is different, and a bailout is very
Speaker 1: very very unlikely. As a reminder, TOP stood for Troubled
Speaker 1: Asset Relief Program. It existed, unsurprisingly, to buy the distressed
Speaker 1: assets that banks had invested in during the Great Financial Crisis,
Speaker 1: primarily the ridiculous bets made on the housing market made
Speaker 1: up of people who had got mortgages they could not
Speaker 1: pay for. Now, these bailouts existed to stabilize banks that
Speaker 1: were going out of business, along with consumers' money being
Speaker 1: set on fire if they did so, as well as
Speaker 1: auto manufacturer like GM and Chrysler that the contagion had
Speaker 1: spread to. And while I'm not going to go into
Speaker 1: massive amounts of detail, haven't got all day, I can
Speaker 1: make it pretty simple. These bailouts existed to stabilize systemically
Speaker 1: necessary companies that had they died, would have tanked the
Speaker 1: US economy and markets at the same time and also
Speaker 1: lost people's money. Unlike the Great Financial Crisis, very few
Speaker 1: of the major players in AI are either systemically necessary
Speaker 1: or in danger of dying as the result of the
Speaker 1: AI bubble bursting. Furthermore, there really isn't anything too bailout.
Speaker 1: So let's start with Nvidia, the largest company on the
Speaker 1: stock market. While GPU sales make up woods of eighty
Speaker 1: eight percent of its revenue and Video will not die
Speaker 1: if the AI bubble bursts, though it will see a
Speaker 1: massive contraction as a result of its biggest business line collapsing.
Speaker 1: It's also important to know that in Nvidia's massive stock
Speaker 1: price is a direct result of its credible growth. It
Speaker 1: isn't enough for in Vidia to continue selling lots of GPUs.
Speaker 1: It must continue to increase revenues by at least sixty
Speaker 1: percent year of a year, every single quarter, which means
Speaker 1: that for in Video to continue being the most beloved
Speaker 1: boy and stock in the in history of the stock market,
Speaker 1: it needs to make ninety one billion dollars in revenue
Speaker 1: in a year's time, and that's just in one quarter.
Speaker 1: By the way, this isn't something a bailout can fix.
Speaker 1: Even in the most crony capitalist fantasy you can think of.
Speaker 1: A bailout would have to continually sink tens of billions
Speaker 1: of dollars directly into Invidia, buying GPUs and increasing amounts
Speaker 1: every three months in perpetuity to continue its valuation. And
Speaker 1: while some of you may say, booh, troub will do
Speaker 1: themon you'd live in a boring, dumerous fancy based on nothing.
Speaker 1: And I'm sick of hearing about it. Good lord, listen
Speaker 1: to me. Top was a seven hundred billion dollar program
Speaker 1: that only ended up investing around four hundred and forty
Speaker 1: three point five billion dollars or so, or put another way,
Speaker 1: less than than the five hundred billion dollars of orders
Speaker 1: that Invidia CEO Jensen Je claims are on Invidia's books
Speaker 1: through the end of twenty twenty six. Are we meant
Speaker 1: to do this forever? Is that the plan? Are you
Speaker 1: saying that Trump is just going to go.
Speaker 2: There, We're going to buy gps or everyone, We're going
Speaker 2: to bury them every year every year? Obey so many
Speaker 2: of the most of you, No, it's not gonna happen.
Speaker 2: Though I guess he has kind of done that with
Speaker 2: the Department of Energy. You've probably heard of this deal.
Speaker 2: By the way, it's one hundred thousand GPUs. That isn't
Speaker 2: going to do shit.
Speaker 1: Jensen Wong needs all your money and eats it now
Speaker 1: every quarter forever. Okay, Okay, it's not going to happen now, Okay.
Speaker 1: Another annoying talking point you've probably heard is that open
Speaker 1: ai is somehow too big to fail, when in fact
Speaker 1: it's too small to pull apart into enough parts to eat.
Speaker 1: Open Ai has promised one point four trillion dollars in
Speaker 1: compute deals, convincing Oracle and others to build massive data
Speaker 1: centers in its honor. Yet the reality is that this
Speaker 1: company isn't even going to hit its thirteen billion dollars
Speaker 1: in projected revenue this year, and we'll burn billions of
Speaker 1: dollars in inference loan and doesn't really have a path
Speaker 1: to profitability.
Speaker 3: Two big to.
Speaker 1: Fail means that something may kill our economy or markets
Speaker 1: if it dies, And as loud and annoying as Clammy
Speaker 1: sam Utman might be, open AI's death wouldn't kill either
Speaker 1: of those. Let's break it down. Open Ai dying would
Speaker 1: be symbolically lethal to the large language model era and
Speaker 1: create an immediate and permanent chill in AI investments. Don't
Speaker 1: get me wrong. Its death would also likely be an
Speaker 1: existential threat to Crusoe, the company building its data center
Speaker 1: in Abilene, Texas for Oracle. I spoke to someone on
Speaker 1: the ground there and they say, if the money runs out,
Speaker 1: everyone just stops and goes home.
Speaker 3: That'll be fine.
Speaker 1: I don't know the extent of Cruser's revenues, however, but
Speaker 1: I do know that Oracle is on the hook for
Speaker 1: a billion dollars a year for Abilene for fifteen goddamn years.
Speaker 1: An Oracle has also taken on massive amounts of debt
Speaker 1: to build Abilene and other data centers in Shackleford, Texas,
Speaker 1: and I think somewhere in Wisconsin is in New Mexico
Speaker 1: one now and started this with an eighteen billion dollar
Speaker 1: bond sale and in the works eighty eight billion dollar
Speaker 1: debt package to build data centers for Open AI. Well,
Speaker 1: Oracle does run the risk of default and credit default swaps,
Speaker 1: which is people betting again well betting that they might
Speaker 1: default on their obligations. That's going up. The risk is there,
Speaker 1: but there's still a real company that makes real things.
Speaker 1: Microsoft owns open Ai IP and research, which would mean
Speaker 1: that Microsoft pretty much absorbed those eight one hundred million
Speaker 1: weekly active users directly into Copilot. And that's if it
Speaker 1: even chose to retain them and just shut down chat
Speaker 1: GBT directed it to a very flimsy version of Copilot
Speaker 1: and didn't let people do half the.
Speaker 3: Shit they did with them.
Speaker 1: Bailing out open Ai would not do anything, in part
Speaker 1: because open ai burns billions of dollars and doesn't really
Speaker 1: do much in the large economy itself. It's revenues, which
Speaker 1: I estimate to be most four point five billion dollars
Speaker 1: through the end of September.
Speaker 3: By the way, if you're listening to this and you.
Speaker 1: Think that my revenue numbers for open Ai, my inference
Speaker 1: numbers were delayed somehow, it's a cruel accounting. Stop fucking
Speaker 1: with me. I know what I'm doing. Anyway, those revenues
Speaker 1: are inconsequential, and the eight point six to seven billion
Speaker 1: dollars it spent on inference in that period is while
Speaker 1: a large chunk of Vizio revenue from Microsoft only really
Speaker 1: accounting for three point eight eight percent or so, the
Speaker 1: two hundred and twenty three billion dollars Microsoft has made
Speaker 1: in that period. Losing open AI would hurt but hardly
Speaker 1: threaten the health of anyone in Redmond. The same ghost
Speaker 1: for Anthropic or any other generative AI company. These companies
Speaker 1: aren't really spending that much, nor are they fueling much
Speaker 1: of any actual real economic activity. There's only around sixty
Speaker 1: billion dollars of actual AI revenue in twenty twenty five.
Speaker 1: In a tech industry where Amazon made one hundred and
Speaker 1: eighty billion dollars and Google one hundred and two billion
Speaker 1: dollars in their last quarters. The disappearance of llm's writ
Speaker 1: large would have a miniscule effect on actual real dollars
Speaker 1: entering the economy, other than investments in data centers, which
Speaker 1: is where I think there's, if any, some kind of bailout.
Speaker 1: As I've mentioned recently, there's been about fifty billion dollars
Speaker 1: or more even every quarter for the last three quarters
Speaker 1: going into building data centers, and I think that many
Speaker 1: of these projects end up defaulting. There's a chance a
Speaker 1: chance that these are somehow bailed out, if an only
Speaker 1: if they provide an actual existential risk to a major
Speaker 1: asset firm, A Blackstone or areas of what have you.
Speaker 1: I don't know if Areas is in them and just
Speaker 1: naming them at this point. Nevertheless, there is one that
Speaker 1: I the one company I could see if any bailout happens.
Speaker 1: And I'm really hesitant to say I think there's any chance.
Speaker 1: Oracle Oracle I think is the one chance. Oracle is
Speaker 1: currently massively leveraged and going into debt to the point
Speaker 1: it's eating into its free cash flow, and it's a
Speaker 1: close ally of the Trump administration. I could see them
Speaker 1: getting a lifeline to escape these ridiculous loans. And while
Speaker 1: you may say there's some sort of grand plan or
Speaker 1: the administration will agree to pay these companies to keep
Speaker 1: them alive, I don't see it happening. Is doing so
Speaker 1: won't support the economy, the markets really do anything other
Speaker 1: than prolongedly inevitable, It's not going to happen, and I
Speaker 1: I don't know. I'm I want to phrase this in
Speaker 1: a nice way because I don't want it seem like
Speaker 1: an attack. Every time you say something like this, you're
Speaker 1: doing marketing for the AI industry.
Speaker 3: Dumerism is marketing.
Speaker 1: At this point, I'm so scared of what they'll they'll create,
Speaker 1: they are gonna get bail out open Aye is too
Speaker 1: big to fail.
Speaker 3: All these are extrapolations of your fear. I get it.
Speaker 1: They're also marketing. You are helping them. You are helping
Speaker 1: them market their services by making them seem systemically relevant
Speaker 1: when they are not, by making them seem like they're
Speaker 1: innovative when they're not. Honestly, I need you to just
Speaker 1: live in reality and look at what's actually happening, which
Speaker 1: is sweet fuck all. In many cases, every one of
Speaker 1: these wanky studies you hear come out so on, it's
Speaker 1: like ten percent of jobs can already be automated by AI.
Speaker 1: CNBC should be fucking ashamed of themselves for running a
Speaker 1: story about it.
Speaker 3: It's a PhD.
Speaker 1: Congrats to the Better Offline Reddit user resource. It's a
Speaker 1: PhD paper. And also it's referring to random skills rather
Speaker 1: than jobs, and skills and jobs are two different fucking things.
Speaker 1: I'm so goddamn tired of this era, good Lord, But nevertheless,
Speaker 1: the next two weeks are going to be really interesting.
Speaker 1: I'm working on a three or four part or about
Speaker 1: my worries around in video, and I'm going to tell
Speaker 1: you all about in Video, and how not similar they
Speaker 1: are to Enron and Video is nothing like Enron or
Speaker 1: Loosen or Welcome or WinStar or all these other companies.
Speaker 3: And we're going to go into as well. And tomorrow I've.
Speaker 1: Got a fun interview with Nathan Grayson of Aftermath Your Love.
Speaker 1: I might next week take a knee and just run
Speaker 1: the better offline in studio thing I just did with
Speaker 1: Lisa from CNN, or I might do the three or
Speaker 1: four bar. It really comes down to how I'm feeling.
Speaker 1: It's been a rough few weeks. Health wise. I'm doing fine.
Speaker 1: I've just been sick and I've just been quite stressed.
Speaker 1: I must again say thank you for all the lovely
Speaker 1: emails and messages you've been sending.
Speaker 3: You're all so lovely. I love you all.
Speaker 1: Couldn't be lucky with the listeners I've got. Tell your
Speaker 1: friends about the show, tell them about the newsletter, tell
Speaker 1: them about me, tell them about my strange proclivities, but
Speaker 1: also keep listening. I really do appreciate all of you
Speaker 1: enjoyed tomorrow's episode and whatever I put out next week,
Speaker 1: and there will be a monologue regard Godless, unless I
Speaker 1: do the three or four par in which case, that's
Speaker 1: going to be a monologue for the week. And yes,
Speaker 1: by the way, I realize me just talking is always
Speaker 1: a monologue.
Speaker 3: I get it. You're so smart. You are though, really
Speaker 3: thank you for listening.