The Hater's Guide To The AI Bubble, Pt. 3

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Welcome to the final part of our three-part haters guide to the AI bubble, where we've been talking about the growing cracks emerging in the industry and the potential contagion to the wider economy that a pullback in generative AI spending will cause.

And I must be clear, things are bad, the vibes are rancid.

I spent the past two episodes and will spend much of this episode explaining why, but I just want to recap something from the first part of this series.

Right now, seven companies, the magnificent seven, account for the value of nearly 35% of all of US stocks, and the biggest of these companies is NVIDIA, which has gotten fat off the back of the AI bubble.

Today, a disproportionate amount of NVIDIA's revenue, 88% of it, is coming from the other members of the Magnificent 7 and their purchases of the Enterprise GPUs designed to power the compute-heavy

applications that you're hearing about all day.

If and when they pull back, NVIDIA will sink.

So too will the other companies, especially when it becomes evident that they've spent nearly half a trillion dollars in two years on bugger all.

It'll be an apocalyptic shedding value.

They won't die, but it'll be the likes of which we haven't seen since the dark days of 2007 and 2008 for those companies.

I don't know about the global banking system imploding, but I also can't say it won't.

I just, I don't know.

But what I do know is tech is going to take such a precipitous haircut that you're going to see scissor gashes in the man's bald head.

Terrible metaphor.

If that sounds like a them problem, though, and not a you problem, ask yourself, what's in your 401k?

Do you own any index funds or ETFs?

Are you close to retirement?

And how much do you enjoy eating ramen?

Are you willing to eat the same whiskers cat food as your American shorthair?

I am, except I feed them a different better food because Babu deserves the best.

But in the last two episodes, I made the case that the generative AI industry is unique in its capital demands and unparalleled in the fact that no company beside NVIDIA or consultancies are making any money from it.

I can easily imagine a chain of events where one big company fails, like either because they ran out of money or because the investors pulled back.

This in turn spooks the rest of the market, causing other companies to start seeing massive revenue drops.

And as the demand for compute drops, hyperscalers like Microsoft, Amazon and Google massively cut their capital expenditures, canceling data center buildouts and, of course, slowing down their GPU orders.

And then Jensen Huang would have to watch as the cash cow that made his company rich and fat is taken for a walk behind the barn

for two shots to ring out.

Though, I must be clear.

Nvidia isn't gonna die.

None of the magnificent seven will.

However, the first big failure, the first domino to fall, could be any number of companies.

And while I don't think OpenAI and Anthropic are necessarily going to be the first, I also believe that there's an air of inevitability about one or both of their demises.

This matters because these companies are, for all intents and purposes, the generative AI industry.

They're deeply unsustainable and unstable, and yet they are also critical to the AI trade continuing.

I haven't really spent much time on my favorite subject, that open AI is a systemic risk to the tech industry.

But let's recap my reporting.

OpenAI and Anthropic both lose billions of dollars a year after revenue, and their stories do not mirror any other startup in history.

Not Uber, not Amazon Web Services, nothing.

I've addressed my Uber point before in how does OpenAI survive.

It'll be in the show notes.

Someone always asks me about this.

Please stop.

Learn to read, learn to listen.

SoftBank also is putting itself in dire straits simply to fund OpenAI.

This deal threatens its credit reign, with SoftBank having to take on what will be multiple loans to fund the remaining $30 billion, OpenAI's $40 billion funding round, which is yet to close and OpenAI is in fact still raising from the Middle East.

This is before you consider the other $19 billion that SoftBank has agreed to contribute to the Stargate data center project, money that it does not have available at this time.

But I must say, while recording this episode, I saw some news come out and I'm just going to read it to you.

It said,

SoftBank and OpenAI's $500 billion AI project struggles to get off ground.

The Stargate venture, introduced at the White House event, is now setting the more modest goal of building a small data center by year-end.

I just want to say, anyone that doubted me can suck one.

I was oinking and squawking around my room just before this when I got this news in.

I just want to say, I just learned this news, and I'm still taking it in.

I'm still taking it in because it makes me so excited inside.

Anyway, neither SoftBank nor OpenAI has the money for Stargate, regardless of what they build.

Also, Clammy Sammy's making some interesting claims about what Stargate is.

He's claiming the Denton Denton site that Core Weaver is building is also Stargate.

This motherfucker loves lying.

Anyway,

OpenAI must also convert to a for-profit by the end of 2025 or lose $20 billion of the remaining $30 billion of funding.

If it does not convert by October 2026, its current funding converts to debt.

It is also demanding remarkable, unreasonable concessions from Microsoft.

Stuff like they want to reduce their rev share.

They want to reduce their their I think their ability to their exclusive rights to sell models.

I did a I really need to do a a monologue about this, and I know this is technically a monologue, but nevertheless, they want these insane things, and Microsoft is refusing to budge and is willing to walk away from negotiations necessary to convert, according to the Financial Times.

And also, OpenAI does not have a path to profitability, and its future, like Anthropic's, is dependent on a continual flow of capital from venture capitalists and big tech, who must also continue to expand infrastructure.

Don't know how that's gonna fucking happen with Stargate going.

God, I feel so good about that.

Ugh, I want to like bottle that up and drink it.

Anyway, Anthropic is in a similar but slightly better position.

It's set to lose $3 billion this year on $4 billion of revenue.

It also has no path of profitability and recently jacked up prices on Cursor, its largest customer, has had to put restraints on clawed code after allowing users to burn 100 to 10,000% of their revenue a month.

These are the actions of a desperate company.

Nevertheless, OpenAI and Anthropic's revenue amount to, by my estimates, more than half of the entire revenue of the generative AI industry, including the hyperscalers.

And to be abundantly clear, the two companies that amount to around half of all generative AI revenue are only losing money.

Now, I said a lot of this before, which is why I'm trying not to harp on it too much, but the most important company in the entire AI industry needs to convert to a for-profit entity from a non-profit entity, which has never happened before in this case, by the end of the year, or it's effectively dead.

And even if it does, Open AI burns billions and billions and billions of dollars a year and will die without continual funding.

They have no path to profitability, and anyone telling you otherwise is a liar or a fantasist.

And on top of this, as part of the thing about SoftBank, by the way, and Stargate, they revealed that they've promised Oracle $30 billion a year for their cloud contract.

I swear to fucking God, does no one read these stories and think, does this not sound just like an egregious lie?

Anyway, as I wrote earlier in the year, there is really no significant adoption of generative AI services or products.

Chat GPT has 500 million weekly users, and otherwise it seems that other services struggle to get 50 million users.

Although you could mention Google, that's not a fair comparison as it cheated by combining Google Gemini with Google Assistant to claim it had 350 million active users.

And while the 500 million weekly users sounds, and it is in fairness, impressive, there's a world of difference between someone using your product as part of their job, which they pay for, and someone dicking around with an image generator or a college student trying to cheat on their homework.

On top of that, now I'm recording this July 21st.

There was an Axio story that came out today with some bullshit vanity metrics for OpenAI.

But that story said that OpenAI themselves had said that they have 500 million weekly active users.

Now, here's the crazy thing.

That 500 million number, that came from March.

That's a March number.

That came from an OpenAI funding announcement.

Have they plateaued?

Stick around.

I'm going to find out.

But this is all worrying on so many levels, chief of which is that everybody has been talking about AI for three goddamn years, and everybody has said AI and every earnings and media appearance and exhausting fucking blog posts.

And we still can't scrape together the bits needed to make a functional industry.

Now, I know some of you will probably read this and point to ChatGPT's users, and I quote myself writing in my newsletter, Make Fun of Them, which also read for this podcast.

Chat GPT is allegedly 500 million weekly active users, and by the last count, only 15.5 million paying subscribers.

An absolutely putrid conversion rate, even before you realize that the actual conversion rate would be monthly active subscribers, which is how any real software company actually defines its metrics by the fucking way.

Why is this impressive?

Because it grew so fast?

It literally had more PR and more marketing and more attention and more opportunities to sell to more people than any company has ever had in the history of anything.

Every single industry has been told to think about AI for three years and they've been told to do so because of a company called Open AI.

There isn't a single goddamn product since Google or Facebook that has had this level of media pressure and both of these companies launched without the massive amount of media and social media that we have today.

ChatGPT is a very successful growth product and an absolutely horrifying business.

They're a banana republic that cannot function on their own.

They do not resemble Uber, Amazon Web Services, or any other business in the past other than WeWork, the other company that SoftBank spent way too much money on.

And outside of ChatGPT, there really isn't anything else.

But before I wrap up this three-parter, and I'm tired, and I imagine you are too, I do want to address something.

I want to address the kind of both sides thing that everyone's doing.

And I think we all need to do way less of this because at this point, it's kind of silly.

Yes, generative AI has functionality.

There are coding products and search products that people like and some even pay for them.

As I have discussed across this series, and I said discuss there, but I'm keeping going, and across countless podcasts and newsletters, none of these companies are profitable until one of them is profitable, really profitable, sustainably so, generative AI-based companies are not real businesses.

In any case, the problem isn't so much that LLMs don't do anything, but that people talk about them doing things they can't.

The use of the word agent is a deliberate attempt to suggest that LLMs are autonomous.

and any and all stories about AI replacing jobs are intentionally manipulative attempts to boost stock valuations and suggest that models are capable of replacing human workers at scale, which they are not.

Allison Morrow of CNN, who's been on the show a few times, also has an excellent piece on this, which I've linked to in the show notes.

As I discussed in my newsletter, Sincerity Wins the War, which I've also linked to, this is one of the most egregious failures of the tech media I've ever seen, willingly pushing Wario Amadez outright, making off of stuff.

No one asked him if that, if the stat, he said 10 to 20% white-collar unemployment.

If I started lying, I just really want to be clear about something.

If I went on this podcast and I just fucking made up stats, if I was just like, yeah, 75% of all generative AI CEOs, literally, they, they love kicking puppies.

They love drop kicking puppies, you'd get mad at me, right?

What's the difference between that and Wario Amade saying 20% white-collar unemployment?

There is none.

They're both lies.

And I don't know why I'm doing the dog-kicking one, but it's just an example.

We move on.

And as a side note, the discussion also of the term AGI, artificial general intelligence, and every acceptance of it is an attempt to suggest that large language models can create conscious intelligence, a fictional concept that even Meta's chief AI scientist says won't come from scaling up LLMs.

Members of the media, listen to me.

Every time you talk about the really smart engineers that say Meta is paying $100 million

to, know that you are doing free marketing for these companies.

When what's really happening is people are giving tens of millions of dollars to guys who will work on teams that are pursuing a totally unproven concept.

It is like saying that they are all going to see if they could, I don't know.

I was about to say the wrong, create the wrong trousers from Rollace and Gromet.

Wallace and Grommet, but you know, those are 100% possible.

I'm sure someone could build them.

How about this?

They all believe they're going to hunt and kill the tooth fairy.

Because the tooth fairy is about as realistic as AGI.

And if you disagree with me, email me.

I might even read it.

I should also add add that the use of the word singularity is similarly manipulative.

These are terms that are used to obfuscate the actual abilities of large language models and indeed what can be built on them.

It's really frustrating because

these should be really obvious tricks,

but the media keeps accepting them.

And I don't want to accuse anyone of being anything.

I just want to say I find it fucking disgusting.

And when this all falls apart, there will be a referendum on this.

I will not be kind or merciful to the people that have continually pushed these narratives.

I also want to add there's another really annoying narrative that we need to get rid of.

And that's these stories about models lying, cheating, and stealing to reach their goals or stop themselves being turned off.

These are intentionally deceptive, as these models can and clearly are being prompted to take these actions.

To be abundantly clear, the manipulative suggestion here is that these models are autonomous or conscious in some way, which they're not.

When I say prompted, I mean we don't have all of the information as to how these models were trained or prompted to get these answers.

They can make them do them.

They could create a model to do it.

And oh, Anthropic wouldn't lie, wouldn't they?

Dario Amiday went on stage and said there'd be 20% unemployment from white-collar labors.

And he'll claim he said it was for the future.

It's a fucking lie.

Absolutely ridiculous.

And I believe that the generative AI market is a $50 billion revenue industry masquerading as a trillion-dollar one.

And the media is helping.

And underneath this troubling fact, there's another one that should give us pause.

The AI trade really is not about AI.

It's not about generative AI.

It's not about autonomous agents.

It's not about AGI.

It's all about GPUs and it's incredibly brittle as a result.

Be honest, how many tabs do you have open right now?

Too many?

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Every week, we scour the internet to bring you deep dives that explain how the digital world connects and divides us all.

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Now, as I've explained at length, the AI trade is not one based on revenue, user growth, the efficacy of tools, or significance of any technological breakthrough.

Stocks are not moving based on whether they're making money on AI because if they were, they'd be moving downward.

However, due to the vibes-based nature of the AI trade, companies are benefiting from the press inexplicably crediting growth to AI with no proof that that's the case.

Open AI is a terrible business, but the only business worse than OpenAI are the companies built on top of it.

Large language models are too expensive to run and have limited abilities beyond the ones I named previously.

And because everybody is running models that all on some level do similar things, it's very hard for people to build really innovative products on top of them.

But ultimately,

this entire trade, all of the AI trade, hinges on GPUs.

Coreweave was initially funded by NVIDIA.

They're a company that does AI data centers.

I don't want to talk about them.

Makes me angry.

But their IPO was funded partially by NVIDIA, who sells the GPUs.

NVIDIA is also one of their customers.

And Coreweave raises debt to buy GPUs.

by using the GPUs they've already bought as collateral.

And so they get those loans and then they use that money to build data centers and buy more GPUs to put in them, which they then use as leverage to

do you see the do you see the problem?

Do you see the issue with that?

This isn't me being polemical or hysterical, by the way.

This is quite literally what's happening and how Coreweave operates.

If you aren't alarmed by that, I'm not sure what to tell you.

Elsewhere, Oracle is buying $40 billion in GPUs for the still unformed Stargate data center project, and Meta is building a Manhattan-sized data center to fill with NVIDIA GPUs, if you believe that Meta will actually do that, which I do not.

OpenAI is also Microsoft's largest Azure client, an insanely risky proposition on multiple levels, not simply in the fact that it's serving the revenue at cost, but that Microsoft executives believed that OpenAI would fail in the long term when they invested in 2023, according to the information.

And Microsoft is NVIDIA's largest client for GPUs, meaning that any changes to Microsoft's future interest in OpenAI, such as reducing its data center expansion, would eventually hit NVIDIA's revenue.

Why do you think DeepSeek shocked the market?

It wasn't because of any clunky story around training techniques or costs.

It was because it said to the market that Nvidia might not sell more GPUs every single quarter in perpetuity.

Microsoft, Meta, Google, Apple, Amazon, and Tesla aren't making much money from AI.

In fact, they're losing billions of dollars on whatever revenues they do make from it.

Their stock growth is not coming from actual revenue or actual products, but the vibes around being an AI company, which means absolute jack shit when you don't have the users, finances, or products to back them up.

So really everything on the AI trade comes down to NVIDIA's ability to sell GPUs and more of them each quarter.

And this industry, if we're really honest, is at a point where it really only exists to do so.

Generative AI products do not provide significant revenue growth.

Its products are not useful in the way that unlocks significant business value.

And the products that have some adoption run at such a grotesque loss.

It's really sad.

But I realize I've thrown a lot at you.

And for the second time this year, I've recorded a three-part podcast series.

And what's great great is you may think maybe I took a break, maybe, no, I recorded these bad boys back to back to back.

That's why I sound so tired and why my voice kind of, I think, smooths out.

I like doing this, but I needed to say all of this.

I really did because I am genuinely, really worried.

We're in a bubble.

If you do not think we're in a bubble, you are not looking outside.

Apollo Global chief economist Torsten Slock, killer name, said it last week in a research note published July 16th.

Okay, what he said was much worse.

The difference between the IT bubble in the 1990s and the AI bubble today is that the top 10 companies in the S P today are more overvalued than they were in the 1990s.

Slock wrote in a recent research note that was widely shared across social media and financial circles.

We're in a bubble.

We're in a bubble.

Generative AI does not do the things that it's being sold as doing.

And the things it can do aren't the kind of things that create business returns, automate labor, or really do much more than one extension of a cloud service platform.

The money isn't there, the users aren't there.

Every company seems to lose money and some companies lose so much money, it's impossible to tell how they'll survive.

Worse still, this bubble is entirely symbolic.

The bailouts, and I know I get a lot of emails about this, and I'm really going to address this issue right now.

The bailouts of the great financial crisis were focused on banks and funds that had failed because they ran out of money.

And the top initiative existed to plug holes with low-interest loans.

There are no

few holes to plug here, because even if OpenAI and Anthropics somehow became eternal money burners, the AI trade exists based on the continued and continually increasing sale and use of GPUs.

There are limited amounts of capital, but also limited amounts of data centers to actually put GPUs.

And on top of that, at some point, growth will slow at one of the magnificent seven, at which cost time costs will have to come down from things that lose them tons of money, such as generative AI.

I really want to be clear, though.

A lot of people say, oh,

it's really kind of lazy doomerism.

I don't appreciate it because, like, if you're going to be worried about something, be worried about something that's real.

You're saying, oh, Trump will just bail them out.

Oh, they'll get bailed out.

Who will get bailed out?

For this fast to continue, NVIDIA was $39.1 billion of data center revenue in the last quarter.

That means the next one needs to be 44.

The one after that needs to be like 50, 60, 80, 100.

This needs to continue forever.

Is the government going to nationalize NVIDIA?

Well, I guess that would take him off the market, wouldn't it?

Is they just going to feed NVIDIA 50, 60, $70 billion?

I guess if one of these AI companies failed, they could give them money, but they're just going to go ahead and fucking lose it.

What do you think they're going to do?

Where does the money go?

In the great financial crisis, banks failed.

You had to give the banks money.

Hedge funds failed.

You had to give money to places and then they took the money and they weren't out of money anymore.

This isn't a case where companies will run out of money, but otherwise be okay.

They don't have a way of being okay.

There is no way of being okay.

If you want to be a doomer, look at the fact that the fucking stock market is built on selling more and more GPUs every quarter.

There is no plugging that hole.

There's nothing for you to do.

Ed, Ed, Ed, Ed.

Oh, God, this guy.

What?

Isn't the cost of inference coming down?

No.

You do not have proof of this statement.

The cost of tokens is going down.

And that is not the cost of inference going down.

Everyone's saying this is they're saying it because a guy once said it to them.

You do not have proof.

I have more proof for what I am saying.

Well, it theoretically might be going down.

All evidence points to larger models costing more money, especially reasoning heavy ones like Claudopus 4.

Inference is not the only thing happening.

This is your one response.

You're a big bozo and a doofus and should go back to making squeaky noises when you see tech executives or hear my name on a podcast.

It's sickening.

Even if the cost of inference is going down, on what model exactly?

Is it coming down on, I don't know, O3, Opus 4, Sonnet 4?

I don't think it is.

The price that the model developers are charging, by the way, is not...

the price of inference.

That's not the same thing.

It's not the same thing at all.

I'm really sick of this goddamn point.

You can hear it in my voice.

But let's move on.

So some people bring up ASICs, and they're these customized chips for specific options to reduce the amount that these companies are spending on compute, right?

I have a few thoughts.

When is this going to happen, for example?

Say OpenAI and Broadcom actually build their ASIC in 2016, 2026.

They won't do this, but that's when they're meant to.

How many will they build?

Do they have

contracts, companies that can actually produce high-performance silicon?

There's only three of those, Samsung, TSMC, and SMIC, which is currently sanctioned and these companies typically have their capacity booked well in advance great example for you nvidia restarted sales of their h20 gpus and told customers it's reported by the information that they're not going to make more because the capacity they had at tsmc got given away because they cancelled it

even starting a production run of a semiconductor product can take weeks do they have the server architecture prepared have they tested it does it work is the performance actually good because the information reported that microsoft has failed to create a workable, reliable ASIC, and the one that they're going to bring out next year is going to be still worse than NVIDIA's.

What makes OpenAI special?

What gives them the industry knowledge that means that they won't run into these problems?

The answer is nothing.

Absolutely bloody nothing.

Anyway, if this happens,

and should be clear, it takes a lot of money to build these chips, and they're yet to prove that these chips will be better than NVIDIA GPUs for AI Compute.

They're going to have to retrofit every data center for them, by the way.

They're not just going to plug into the same thing.

These Black World chips, and actually, generally GPUs, they have specialized server architecture.

And NVIDIA is a big stickler for details.

So we're just going to rip up all the stuff.

So this will, I assume, take two minutes because it needs to.

It's the only way.

By the way, if this actually happens, it still fucks up the AI trade because NVIDIA still needs to sell GPUs.

Jesus Christ.

I'm sorry.

I'm sorry.

And people ask, is this real anger?

Yeah,

I read about these things and I read the inconsistencies in the media and I talk about them.

And I think of the amount of times in my life I have had people make me feel stupid or make me feel crazy.

I'm sure many of you have had this experience too.

People that are allegedly smart, people that have positions of power, people that we look to as responsible figures.

And I think about all the times that I've known I was right, but because there was a consensus, a group ideal, you had to kind of stick by it, even if it was something factually wrong.

What I didn't experience in the past was seeing the media do it like this and the way in which the media has done it.

It's sickening.

It's sickening because the people that will get hurt will be the people whose retirements and who's just in savings are going to get lamped by this crap.

And I'm worried.

I'm worried because despite all these obvious, brutal, and near-unfixable problems, everybody is walking around acting like things are going great with AI.

The New York Times claims everybody is using AI for everything, and I'm talking, of course, about Kevin Roos and Casey Newton.

But baby, I cannot wait for when this explodes, guys.

You have no idea how funny it's going to be.

By the way, this is a blatant lie, one that exists to prop up an industry that has categorically failed to deliver the innovations or returns that it promised, yet still receives this glowing press from a tech and business media that refuses to look outside and see that the sky is red and frogs are landing everywhere.

Other than the frog thing, I'm not being dramatic.

Everywhere you look in the AI trade, things are getting worse.

No revenue, billiums being burned, no moat, no infrastructure play, no comparables in history, other than the dot-com bubble and WeWork, and a series of flagrant lies spouted by the powerful and members of the press that are afraid of moving against market consensus.

Worse still, despite NVIDIA's strength, NVIDIA is the market's weakness.

Through no fault of its own, really.

Jansen Huang sells GPUs, people want to buy GPUs, and now the rest of the market is leading aggressively on one company selling one thing, feeding it billions of dollars in the hopes that the things they're buying start making them a profit.

And that really is the most ridiculous thing.

At the center of the AI trade sits enterprise GPUs that, on installation, immediately start losing the company and question money.

Large language models burn cash for negative returns to build products that all kind of work the same way.

And if you're going to say I'm wrong, sit and think carefully about why.

Is it because you don't want me to be right?

Is it because you think these companies will work it out?

This isn't anything like Uber, AWS, or any other situation.

It's its own monstrosity, a a creature of hubris and ignorance caused by a tech industry that's out of ideas, built on top of one company, really.

You can plead with me all you want about how there are actual people using AI.

You've probably read the My AI Skeptic Friends Are All Nuts blog, and if you're going to send that to me, read the response from Nick Suresh first.

I've linked both in the show notes.

And if you're going to say that I don't actually speak to people who use these products, you are categorically wrong and in denial.

I'm only saying all of this with this aggressive tone because for the best part of of two years, I have been made to repeatedly explain myself in a way that no AI optimist has ever been made.

And I admit I resent it.

I have written hundreds of thousands of words with hundreds of citations and still, to this day, there are some people that claim I'm somehow flawed in my analysis, that I'm missing something, that I am somehow failing to make my case, that I haven't spoken to enough fart sniffers, that I haven't delighted in the ideals and falsities of AGI.

The only people failing to make their case are the AI optimists still claiming that these companies are making powerful AI.

And once this bubble pops, I will be asking for an apology.

Be honest, how many tabs do you have open right now?

Too many?

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But I must be clear, even though a lot of things are coming true that I thought would, and I think more will will come true.

I'll be proven right again and again.

I don't actually like what's happening.

And I like ending these podcasts with personal thoughts about stuff because I'm an emotional and overly honest person.

I enjoy doing this a great deal.

I do not, however, enjoy telling you at length how brittle everything is.

An ideal tech industry would be one built on innovation, revenue, real growth based on actual business returns that helped humans be better, and not outright lies about replacing them.

All that generative AI has done has shown how much lust there is in both the markets and the media in replacing labor.

And I must be clear, it really is the media.

There are some of you who are fucking sickos.

I'm not pointing to anyone specifically, but if you are excited about AI replacing people, I need you to review your biases a little bit.

I need you to think about what it is you're so excited about.

Another aside, by the way, all these AGI artificial general intelligence conversations, they love to talk about why they're scared of them, but they never want to talk about one thing, which is if we make a conscious intelligence,

wouldn't that have personage?

And we'd control and manipulate this conscious being.

That's slavery.

We would have been inventing a new kind of slave.

Because if we are making computers that have consciousness, that's what we are doing.

If you don't believe this, by the way, you just don't want to think about the truth.

But on the jobless thing, I really do believe that there are multiple reporters who feel genuine excitement when they write scary stories about how Dario Amadeus's white-collar workers will be fired in the next few years in favor of agents.

It's gross.

And I know I'm repeating myself, but I really must be clear.

Be more mindful about what you're writing.

Because what you're writing does not prove this thesis at all.

You're just repeating a guy's thingy.

You're repeating what a guy said.

And it's sickening.

But before I move into the end of this, I also want to address one other thing that, and I'm doing this, I'm fully going to admit, because someone just sent me an email about this, and they just sent me this gotcha thing where it's okay, the government just gave, Department of Defense gave $200 million contracts to OpenAI, XAI, Google, Anthropic, I believe, and that somehow government money will plug this hell.

First of all, all the revenue is unprofitable.

Second of all, no, it won't.

Like, it just, it isn't enough money.

They need for OpenAI to somehow become profitable, they just need like $10 billion of free money every year, like just given to them with no, no expenditure.

On top of this, there is this this weird Duma philosophy where it's like, oh, the government will use it for propaganda.

They'll use it as a cheap propaganda machine.

The government already does propaganda.

We've done propaganda for years.

Every government does.

There's nothing efficient or cheap or even useful about it.

The White House is already posting AI-generated stuff.

How is this going to keep the industry going exactly?

Who fucking knows?

But then there's this thing of, oh, the surveillance state, the generative AI, this will prop up Open AI, Anthropic and the likes.

It will plug into all the data sets and go, oh, we can do shit.

Even if it does that, and I don't even want to think of them doing this, it's not a fucking business.

It's not going to make him that much money.

There's nothing specialist about it because all large anguish models are fundamentally trained on the same data and only really tweaked by reinforcement learning and the like.

It's just, they'll just buy whatever model is cheapest or they'll put it on-prem.

It doesn't really.

And I do want to say, if you're scared of this stuff, be scared of the real stuff.

Don't just assume the worst and then don't think about it much more.

If you're going to assume the worst, assume based on facts.

I want you to feel better when you listen to this or at least edified.

And I don't want to ever scare you.

I don't really want to tell you how to feel ever.

It's one of the early feedbacks on the show.

It's never tell people how to feel.

But I want you to contact me if you're ever worried.

I'm happy to help.

But also know that these are not smart men and things have got out of hand.

And everything I'm discussing is the result of the rot economy thesis I wrote in 2023, the underlying thesis of this entire show.

This growth at all costs mindset that has driven every tech company to focus on increasingly large quarterly revenue numbers, even if the products suck, or they're deeply unprofitable, or in the case of generative AI, both.

Nowhere has this ever been more obvious.

Never has there been a more pungent version of the rott economy than in large language models, or more specifically, transformer-based models and their relationships with GPUs.

By making everything about growth, you inevitably reach a point where the only thing you know how to do is spend money, and both LLNs and GPUs allowed big tech to do the thing that worked before, building a bunch of data centers and buying a large bunch of chips and paying a lot of people, without making sure they'd done the critical work of making sure this would create things that were useful or profitable.

And

neither seems to be the case.

As a result, we're now sitting on top of one of the most brittle situations in economic history.

Our market's held up by whether four or five companies will continue to buy chips that start losing the money the second they're installed.

And I'm disgusted by how many people are unwilling or unable to engage with the truth, favoring instead a scornful, contemptuous tone toward anybody who doesn't believe that generative AI is the future.

If you're a writer that writes about AI, smarmily insulting people who don't understand AI, you're a shitty fucking writer because AI is either not that good or you're not good at explaining why it's good.

Perhaps it's both, dickhead.

And if you want to know my true agenda, it's that I see something in generative AI and its boosters that I truly dislike.

Large language models authoritatively state things that are incorrect because they have no concept of right or wrong or really anything.

They don't have concepts of concepts.

They don't think.

I believe that the writers, managers and executives that find it exciting do so because it gives them the ability to pretend to be intelligent without actually learning anything.

They do everything they can to avoid actual work, knowledge or responsibility for themselves or others.

There is this overwhelming condescension that comes from fans of generative AI.

The sense that they know something you don't, something they double down on.

We are being forced to use it by bosses or services we like that now insist it's parts of our documents or our search engines, not because it does something or helps us, but because those pushing it need us to use it to prove that they know what's going on.

To quote my editor Matt Hughes, generative AI is an expression of contempt towards people, one that considers them to be a commodity at best and a rapidly depriving depreciating asset at worst, and Matt would have said that correctly.

I haven't quite cracked why, but generative AI also brings out the worst in people.

By giving the illusion of labor, it excites those who are desperate to replace or commoditize it.

By giving the illusion of education, it excites those who are too idle to actually learn things by convincing them, like Uber CEO Travis Kalanik, that in a few minutes that they can learn quantum physics.

By giving the illusion of activity, it allows the gluttony of business idiots that control everything to pretend that they do something.

By giving the illusion of futurity, which is David Karp's excellent term, it gives reporters that long since disconnected from actual software and hardware the ability to pretend that they know what's happening in the tech industry.

And fundamentally, its biggest illusion is economic activity, because despite being questionably useful in burning billions of dollars, its need to do so creates a justification for spending billions of dollars on GPUs and data center sprawl, which allows big tech to sink money into something and give the illusion of growth.

I really love doing this show.

I love it so much, but I don't enjoy this material.

I mean, I enjoy performing it, I guess, but what I'm talking about is pretty fucking grim.

And every week I am cataloguing how people in power haven't noticed something that's inherently a scam, that's really based on lies, and how the people responsible in the media have just kind of turned away from readers in favor of doing what they think the market wants or confirming their own lazy biases.

It's sad.

And I think I'm right, and I'm not necessarily happy about being right.

And if I'm wrong, and I get asked this a lot, if I'm wrong, I will explain why I'm wrong in great detail.

And I will not shy away from taking accountability.

Because I think that that's what you should expect from me.

I'm serious.

If I'm somehow wrong here, you will hear why.

I'll do entire episodes about it.

I'm serious.

But I really do not think I am.

And that's why I sound kind of downcast and alarmed.

What I'm describing is a bubble and one with an obvious weakness.

One company's ability to sell hardware to four or five other companies or to run services that lose billions of dollars.

At some point, the momentum behind NVIDIA slows.

Maybe it won't even be sales slowing.

Maybe it will just be the suggestion that one of the largest companies won't be buying as many GPUs.

Perception matters just as much as actual numbers and sometimes more, and a shift in sentiment could start a chain of events that knocks down the entire house of cards.

Checkmate.

I don't know when, I don't know how, but I really, really don't know how I'm wrong.

And I hate that so many people will see their retirements wrecked and that so many people intentionally or accidentally helped steer the economy in this reckless, needless and wasteful direction, all because big tech didn't have a new way to show quarterly growth and that there are so many people out there that love the idea of replacing workers and using the computer to do work for them.

And I hate that so many people have lost their jobs because companies are spending the equivalent of the entire GDP of some European country on data centers and GPUs that won't actually deliver any value.

Satchinadella is a fucking monster.

15,000 people laid off this year so you can do more fucking clippy, you asswipe.

If Satchinadella somehow hears this, I'd be so happy.

But my purpose here is to explain to you, no matter your background or interests or creed or whatever way you find my work, why all of this is happening.

As you watch this collapse, I want you to tell your friends about why, the people responsible and the decisions they made, and make sure it's clear that there are people responsible.

Sam Altman, Dario Amadei, Satchinadella, Sundar Peshai, Tim Cook, Elon Musk, Mark Zuckerberg, and Andy Jassy have overseen a needless, wasteful and destructive economic force that will harm our economy, our markets and the tech industry writ large.

And when this is over, they must be held accountable.

And remember that you, as a regular person, can understand all of this.

These people want you to believe that this is black magic, that you're wrong to worry about the billions wasted or question the usefulness of the tools.

They want you to sit there and say, tech got away from me.

I just don't understand how the computer works anymore.

How about that the computer doesn't work anymore?

That the computer regularly does not do the things you want it to?

And generative AI is just the most pornographic example of a tech industry that gave up on user interfaces, user experience, and users altogether.

You are smarter than they reckon and stronger than they know, and a better future is one where you recognize this and realize that power and money doesn't make a man righteous, right, or smart.

These people sicken me, and if I'm going to be honest, I think a lot of this work comes down to them reminding me of people people I grew up with, people I've met throughout my life, specious managers that have got there by glad handling, not through real work or producing anything of value, but by stealing or tricking, by throwing other people under the bus and in some cases, and I'm thinking of one specific fucking person, driving it themselves.

These people are the ones the most excited about AI.

They're the ones that believe that this technology will finally give them the ability to have the abilities of those that work without actually having to get off their fucking asses.

And they sicken me.

They disgust me.

Because there is a different way of looking at how generative AI could have been, that it enhances humans, that it makes them able to do more things rather than replacing them.

That likely would have led us in a different direction and probably wouldn't have led to the billions of dollars of investment in this.

Because when you think about helping people, suddenly the money dries up.

I sound cynical, but I've said this before.

I'm a broken-hearted romantic.

I hate what the tech industry has become.

But people also said that I can do this.

Fucking four years ago, five years ago, I had 300 subscribers on my newsletter.

I'm up to 67,000, thousands of people, an indeterminate amount of you.

I can't say it due to policy.

Listen to this show.

And that's proof enough, I think, that one idiot quirked up white boy from London that a school teacher once said should get used to flipping burgers can do something.

I'm nobody.

I'm just a guy.

But I've spent the time to to read this stuff and to divine meaning from this stuff, just like you can.

I hope I've helped you.

That's what I'm here to do.

I love doing this and I feel ever grateful that I'm able to every day.

And I love all of you for listening.

It takes a lot of effort to put this out, but it also is a choice of yours.

How much time you can have in a day is not your choice, but how you use it is.

And I deeply appreciate you for giving me your time.

Thank you so much.

This has been the Haters Guide to the AI Bubble.

Thank you for listening to Better Offline.

The editor and composer of the Better Offline theme song is Mattasowski.

You can check out more of his music and audio projects at matasowski.com.

M-A-T-T-O-S-O-W-S-K-I dot com.

You can email me at easy at betteroffline.com or visit betteroffline.com to find more podcast links and of course my newsletter.

I also really recommend you go to chat.where's your ed.at to visit the Discord and go to r/slash better offline to check out our Reddit.

Thank you so much for listening.

Better Offline is a production of CoolZone Media.

For more from CoolZone Media, visit our website, coolzonemedia.com or check us out on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

Hi, I'm Morgan Sung, host of Close All Tabs from KQED, where every week we reveal how the online world collides with everyday life.

There was the six-foot cartoon otter who came out from behind a curtain.

It actually really matters that driverless cars are going to mess up in ways that humans wouldn't.

Should I be telling this thing all about my love life?

I think we will see a Twitch stream or president maybe within our lifetimes.

You can find Close All tabs wherever you listen to podcasts.

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