Monologue: AI's Desperation Era

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Speaker 5 Hello and welcome to this week's Better Offline monologue. I'm your host, Ed Zitron.

Speaker 5 It's been a peculiar week.

Speaker 5 Two days ago, Sarah Fryer, chief financial officer of OpenAI, said in a stage at a Wall Street General conference that an IPO isn't on the cards and foolishly said that OpenAI was, and I quote, looking for an ecosystem of banks, private equity, maybe even governmental, and that the way governments can come to bear can really drop the cost of financing, but also increase the loan to value.

Speaker 5 So the amount of debt you can take on top of an equity portion. Now, she also, according to Bloomberg, hinted at some sort of federal backstop, literal government backing for loans for data centers.

Speaker 5 Very strange. Now, I will add this has been completely misreported as OpenAI demanding government funds.
I had someone ring me the other night saying, did you hear about this? It's not what happened.

Speaker 5 To be clear, I believe absolutely that Sarah Fryer was throwing out the idea to see if governments might buy it, only to find the entirety of social media and most of the mainstream media reacting like Fryer had kicked the family dog.

Speaker 5 Nevertheless, I want to be clear that OpenAI has not requested a federal backstop and that as ever, it appears that even the big media outlets do not seem to go and listen to the things that people say or check.

Speaker 5 It's ridiculous. This is a huge story if you misreport it, which is what's happened.

Speaker 5 Nevertheless, as I said on Blue Sky, this is an absolute diva moment for OpenAI. Oh, I'm so messy.
I can't even afford my data centers.

Speaker 5 Please, Uncle Sam, I promise to spend $1.5 trillion in the next five years. Oh, I'm so weak and powerless in the face of all the promises I made.
Grow up, wipe your own ass.

Speaker 5 If regular people promised a bunch of people a ton of money that they couldn't afford, they'd be sued, put in prison, or have their assets reduced to zero.

Speaker 5 Why do we have to do something different for OpenAI? Anyway, this is not going to happen.

Speaker 5 I've never seen a a more aggressive, bipartisan dissent for an idea, decried by everyone from better offline listeners in the middle of prying hubcaps off of cars to the powerful dunce coalition led by Matty Iglesias.

Speaker 5 Everybody fucking hates this idea. And if I'm honest, I think everybody is sick and tired of AI.

Speaker 5 What was once a market-wide consensus that AI was the future has now become a cacophony of hand-wringing in just about every major media outlet.

Speaker 5 What hasn't helped was a very, very weird poster in Nvidia's social media account, a single image that said, statement from NVIDIA CEO Jensen Huang.

Speaker 5 As I have long said, China is nanoseconds behind America in AI. It's vital that America wins by racing ahead and winning developers worldwide.

Speaker 5 Not really sure what that meant, but this was, I found after the fact, tied to a statement Huang made to the Financial Times that mostly said the same thing.

Speaker 5 But I gotta say, this is the weirdest statement I've seen. It's so weird.
What do you want, Jensen? More developers? Do developers buy GPUs? Also, wait a second.

Speaker 5 China doesn't have the latest NVIDIA GPUs. How are they nanoseconds behind America? Surely America should be,

Speaker 5 I don't know, hours, days ahead.

Speaker 5 Jensen, I don't know why you're using words that relate to time as measures of distance, but nevertheless, why aren't American companies further ahead when they have easy access to Blackwell and Soon Vera Rubin GPUs?

Speaker 5 What exactly do you want us to do, Jensen? What is the thing? It's like vague posting being like, I really shouldn't be alone right now. You know, I just, I've had such a bad night.

Speaker 5 I wish someone would text me and tell me they're buying a GPU.

Speaker 5 I don't know, man. You're the CEO of the largest company on the stock market.
Do you not have a little more bizaz, a little more Riz?

Speaker 5 Rizless. Jensen, you're Rizless, even with those beautiful leather jackets.

Speaker 5 And it's almost as if there isn't a coherent reason to buy GPUs or any real progress coming out of American AI labs or really any of them.

Speaker 5 Worse still, though, and this was the one that really I think was underreported, during Microsoft's last earnings, the company reported a $4.1 billion loss loss on their 32.5% stake in OpenAI, meaning that due to the company using the equity method for accounting, OpenAI lost $12 billion in the third quarter of this calendar year.

Speaker 5 Now, OpenAI CFO Sarah Fryer said that this was way overestimated, and I want to be clear about something.

Speaker 5 Microsoft's earnings are public filings, as they are a public company, meaning that these are looked over by accountants and lawyers.

Speaker 5 Why is the chief financial officer of OpenAI disputing these these numbers? That's extremely goddamn weird.

Speaker 5 And this isn't the first time Sarah Fryer has said some weird shit, even in this conference appearance, but in general, the other time I saw her say that it was $35 a token in the past for OpenAI's models.

Speaker 5 $35 per million tokens doesn't even make sense, but I think $35 per token would mean they spend like trillions of dollars a year. Regardless, you're the CFO of OpenAI.

Speaker 5 Shouldn't you know this shit a little bit better?

Speaker 5 Now, before you email me something about gap earnings or accounting, I'm going to include links in the show notes because I assure you this loss is directly reflective of OpenAI's actual losses.

Speaker 5 And that's really weird, by the way. It's really weird indeed.
And now that we know that, we have to ask, how bad are OpenAI's actual losses? How much worse are things than we know?

Speaker 5 I assure you, this loss is real.

Speaker 5 I trust it. It's been well reported, looked over by actual accountants.
I'm going to link to a Wall Street Journal piece where an actual accountant looked at this and made this statement.

Speaker 5 And I've got to ask, what is it that Sarah Fryer and Clammy Sammy don't want us to know? What is going on?

Speaker 5 The information reported that in the first half of this year, OpenAI made $4.3 billion of revenue, but had a net loss of $13.5 billion, but that's in six months.

Speaker 5 Are those indicative of the real numbers? Has someone been fibbing? I trust the information's reporting, by the way. I fully believe them.

Speaker 5 And I, at this point am just concerned that we're not getting the full picture. I don't know what OpenAI is sharing to people.
I don't know how these reporters have got these numbers.

Speaker 5 But that $12 billion loss in a quarter, that feels quite dramatic. And it feels a lot more than OpenAI has been hinting they're losing.
What else don't we know?

Speaker 5 What else is going on in OpenAI that we're not party to?

Speaker 5 Hopefully we find out soon. In any case, it feels like something came unbuckled this week.
Glamuel, the smiling man is watching. A spectre haunts Silicon Valley.

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