Monologue: OpenAI and NVIDIA's Deal Is BS

This is an iHeart podcast.

With Chewy, get the food your pet loves delivered with AutoShip and never run out.

Save 35% off your first AutoShip order and get an extra side of savings every order after that.

Cancel whenever.

For low prices, for life with pets, there's Chewy.

Live in the Bay Area long enough, and you know that this region is made up of many communities, each with its own people, stories, and local realities.

I'm Erica Cruz-Guevara, host of KQED's podcast, The Bay.

I sit down with reporters and the people who know this place best to connect the dots on why these stories matter to all of us.

Listen to The Bay, new episodes every Monday, Wednesday, and Friday, wherever you get your podcasts.

Every business has an ambition.

PayPal Open is the platform designed to help you grow into yours with business loans so you can expand and access to hundreds of millions of PayPal customers worldwide.

And your customers can pay all the ways they want with PayPal, Venmo, Pay Later, and all major cards so you can focus on scaling up.

When it's time to get growing, there's one platform for all business, PayPal Open.

Grow today at PayPalOpen.com.

Loan subject to approval in available locations.

Tired of spills and stains on your sofa?

WashableSofas.com has your back, featuring the Anibay collection, the only designer sofa that's machine washable inside and out, where designer quality meets budget-friendly prices.

That's right, sofas started just $699.

Enjoy a no-risk experience with pet-friendly, stain-resistant, and changeable slip covers made with performance fabrics.

Experience cloud-like comfort with high-resilience foam that's hypoallergenic and never needs fluffing.

The sturdy steel frame ensures longevity, and the modular pieces can be rearranged anytime.

Check out washable sofas.com and get up to 60% off your Anibay sofa, backed by a 30-day satisfaction guarantee.

If you're not absolutely in love, send it back for a full refund.

No return shipping or restocking fees.

Every penny back.

Upgrade now at washablesofas.com.

Offers are subject to change and certain restrictions may apply.

Cool Zone Media.

Hello and welcome to this week's Better Offline monologue.

I'm your host, Edzitron, as I wrote while drafting this I'm I'm Yaus House, a line I'm leaving in as I'm being accountable to you, the customer.

Anyway, you've heard about the NVIDIA OpenAI deal by now, that NVIDIA will, and I put this in air quotes, invest $100 billion in OpenAI.

And I want to start out by being explicit that NVIDIA has not wired OpenAI a single goddamn dollar.

Alright, so the deal is that NVIDIA is investing $10 billion upfront, according to CNBC, despite the fact that the day before it said that they would be investing $10 billion with the first giga, but anyway, they're investing $10 billion in a month, allegedly, and I quote here, once the deal is finalized, which means in simpler terms that nothing has actually been signed, NVIDIA will then invest $10 billion in tranches for each gigawatt of capacity that OpenAI builds.

That's right.

That's right, everyone.

Most of this funding is gated behind OpenAI, OpenAI, a company that burns billions of dollars building huge amounts of data centers, something they have never done.

And that also costs billions of dollars.

And just as an aside, OpenAI really has built nothing themselves.

Everyone else is building it for them.

These fucking Silicon Valley libertarians, they love themselves and welfare, don't they?

Anyway, how does OpenAI afford to build these data centers?

I don't know.

Nobody else seems to know.

Where are they being built?

Who knows?

It's unclear.

Has the land been purchased?

Also unclear.

There's some sort of crap announcement about, oh, Stargate, we've got a list of different fucking new places.

And I had someone on the Reddit suggest I was wrong.

I just want to be clear, of the list of the five new Stargate locations, one of them is in Shackleford, Texas, which was already chosen to be one of Oracle's data centers.

This was already announced.

They're re-announcing stuff.

As a PR professional, when you're re-announcing shit, it's because you run out of stuff to announce that's real.

But look,

let's be explicit about one thing.

Data centers take a long, long time to build.

Right now, Crusoe is building a data center in Abilene, Texas, made up of eight buildings, which will amount to about 1.2 gigawatts of compute capacity.

This is the one for Oracle and OpenAI.

And at the current rate of development, it's taken about two and a half years per gigawatt.

Look, I realize it's easy to get drowned in big numbers and ridiculous promises and media headlines where the writers don't seem to bother to learn even the simplest fucking things.

But data centers are expensive and take forever And this entire plan hinges upon OpenAI building data centers.

In fact,

look,

I've seen lots of people suggest that the $10 billion that OpenAI is getting from Nvidia will let them build data centers.

And again, can somebody please actually learn the basics here?

The Abilene data center venture required Crusoe, Blue Owl, and Primary Digital Infrastructure to raise $15 billion in debt just for the data center itself, the construction, the people, the water, the power, and all that good stuff.

With Oracle footing the bill for the hundreds of thousands of GPUs to go inside at a price of, I think, about $24 billion, it works out too.

By my calculations, OpenAI will need $125 billion just to build the data centers to get the funding from NVIDIA, which will require another $200 billion in GPUs, by the way.

The information also reports that NVIDIA is going to be potentially leasing GPUs to OpenAI, setting up a special purpose entity to buy the GPUs from themselves that they would then lease to open AI.

I've really hesitated to bring up any Enron comparisons.

I've kind of flirted with one with Corweave and them.

That's that's straight Enron shit.

Like, man, they haven't confirmed they're going to do it.

It's an information report.

I'll put a link in there.

You'll complain that you have to pay for it.

I recommend the information.

I just,

every day.

Every day, these new pieces of news where everyone kind of like trumpets them like Jesus just woke up from behind that big fucking rock.

When in fact, I think something far worse is happening.

But I really want to break something down for you.

And you'll likely hear this again in the future episode.

I want to get into the actual economics here.

Crusoe's 1.2 gigawatts of compute for OpenAI is a $15 billion joint venture, which means a gigawatt of compute runs about $12.5 billion.

Abilene's eight buildings are meant to hold about 50,000 NVIDIA GB200 GPUs and their associated networking infrastructure.

So let's say a gigawatt gigawatt is about 303,333 Blackwell GPUs.

Yeah.

This math is a little bit funky due to NVIDIA promising to install their new Rubin GPUs in these theoretical data centers.

But I really do think that they'll require about just a little under $200 billion worth of GPUs.

And this is on top of the $400 billion that OpenAI has promised to spend with Oracle over the next five years, when OpenAI had already leaked that they'd be burning $115 billion over the next four years.

This math does not make any sense.

It's complete nonsense.

For OpenAI to survive, they're going to need around $600 billion in the next five years.

It's ridiculous, astonishing, and insulting to the general public that the media keeps acting as if these deals are signed or promoted in good faith.

And I'm shocked that more people aren't doing the very simple maths.

That, and I've seen a disgraceful amount of people talking about OpenAI's revenue projections, which involve them making $100 billion in 2028 and $145 billion in 2029 and that's revenue not profit they're losing tens of billions of dollars both those years and they're acting as if these are serious meaningful statements rather than egregious lies from a gaggle of charlatans it's a fucking joke it's sickening oh by the way open ai is projected to make 13 billion this year i from my calculations they made about 6.26 billion it's it's wank and that's the technical term they use it the financial analysts put it when you pay jp morgan to see their private shit it's all like, yes, it's all wank.

This is wank.

Okay, I'll keep going.

Now, for the next three-part episode, I'm gonna put out next week.

I've done a lot of digging into how much actual money exists to invest in general, and we're genuinely running up against the limits of private and public capital.

By my calculations, there's only about $477 billion of available capital across the top 10 private equity funds.

And I'm deadly serious, I will be publishing the links.

And maybe $164 billion of US venture capital left.

and maybe let's call it another 150 billion in other funds sloshing around

are we really going to carve out half to two-thirds of available global capital for one fucking company that burns a billion fucking dollars every two fucking seconds i know it's slower than that shut up

i'm just

I'm a little bit ornery.

I'm not going to lie.

You can hear it in my voice, and I'm even more ornery than ever.

More ornery than ornery, as Rob Zombie once sung.

I'm just pissed off because when you look at these numbers, they do not make sense.

There's no parallel in history for any company or any industry that's ever spent this much money.

There's never been one company that has been the focus like this.

And honestly, I've never seen a company less deserving of any investment than OpenAI.

They've burned billions of dollars.

Their product is questionably useful.

It's incredibly commoditized.

They have yet to create anything really exciting or new since, and if I'm being kind reasoning, but let's be honest GPT-4.0

They are washed and yet everybody's sitting around them clapping like they're a gifted child an insult to children and startup founders and that really is something that pisses me off as well because AI took 33% of US venture capital last year and I think they're probably taking more this year and what's insane is nothing has been proven None of these companies are profit generating.

None of these products are popular every single day.

It feels like a study comes out saying, yeah, no one really likes this stuff.

No one wants to pay for it.

And by my calculations, I think the whole industry's revenue includes Core Weave and all those shits.

Maybe $55 billion in 2025.

That's on 400 billion plus capex.

Is anyone having fun?

Does this feel like the future?

Or does this feel like the future of how we're going to blow hundreds of billions of dollars on nothing?

And the longer it takes for people to walk away from OpenAI, and the longer it takes for this company to die, the more damage that's going to be caused.

Because right now, NVIDIA is putting everything on OpenAI.

If we had functioning regulatory boards, we'd actually have something done about this.

But instead, what's going to happen is they're going to inflate this bubble just a little further.

And then when it bursts, it's going to fuck retail investors and a ton of venture capitalists too, a ton of private equity people as well, which will be kind of funny.

But the financial apocalypse will hit everyone.

and it will be grisly.

But I'll be here to talk about it.

I'm having the time of my life doing this show.

Next week's three-part is completely insane.

I wrote it in kind of a two-day 15,000-word

kind of like ejection.

I was going to say, I was going to say another word which wouldn't have sounded quite as good, but nevertheless, that's the fun ranty part of these monologues.

But I'm really excited for you to hear it because I've pulled together a lot of numbers that show how farcical this industry has become.

And I think as the bubble approaches its eventual burst, a lot of you are going to feel really good about how right you are.

Maybe some of you still disagree with me, and I will work to compel you.

And even if I don't, I hope you have a good time listening.

I've got great episodes coming up in the future as well.

Gonna be going to see Stephen Burke of Gamers Nexus do a long interview with him, some fun Radio Better Offline.

And then I'm already working on some big guests.

It's gonna be a really fun few months.

I don't know if anyone else, but I'm definitely enjoying doing this podcast.

Thank you as ever for listening.

Live in the Bay Area long enough and you know that this region is made up of many communities, each with its own people, stories, and local realities.

I'm Erica Cruz-Guevara, host of KQED's podcast, The Bay.

I sit down with reporters and the people who know this place best to connect the dots on why these stories matter to all of us.

listen to The Bay, new episodes every Monday, Wednesday, and Friday, wherever you get your podcasts.

Let's be real.

Life happens.

Kids spill.

Pets shed.

And accidents are inevitable.

Find a sofa that can keep up at washable sofas.com.

Starting at just $699, our sofas are fully machine washable inside and out.

So you can say goodbye to stains and hello to worry-free living.

Made with liquid and stain-resistant fabrics, they're kid-proof, pet-friendly, and built for everyday life.

Plus, changeable fabric covers let you refresh your sofa whenever you want.

Neat flexibility?

Our modular design lets you rearrange your sofa anytime to fit your space, whether it's a growing family room or a cozy apartment.

Plus, they're earth-friendly and trusted by over 200,000 happy customers.

It's time to upgrade to a stress-free, mess-proof sofa.

Visit washable sofas.com today and save.

That's washablesofas.com.

Offers are subject to change and certain restrictions may apply.

Tired of flipping through apps to find something good?

Meet TiVo Plus, your one-stop, free streaming network, no credit card required.

With over 300 free channels, you get binge-worthy movies from action and comedy to Indian award winners.

Plus, top TV shows, live news, sports highlights, and family programming all in one place.

Watch live or on demand right from your home screen.

Free, no signups, no fees, just press play.

That's TiVo Plus.

Free, binge-worthy, and always on.

Check us out at TiVo.com.

Chances are you've been to the doctor recently and you probably handed over your insurance, your ID, and even your social security number.

Your doctor is just one of many places that has your personal info.

And if any of them accidentally expose your details, you could be at risk for identity theft.

LifeLock monitors millions of data points a second.

If you become a victim, they'll fix it, guaranteed, or your money back.

Save up to 40% your first year.

Call 1-800-Lifelock and use promo code iHeart or go to lifelock.com/slash iHeart for 40% off.

Terms apply.

This is an iHeart podcast.