Better Offline - Monologue: The Pale Horsemen Arrive

Episode Date: August 7, 2026

In this week's Better Offline monologue, Ed Zitron runs through how 70% of Microsoft, Google and Amazon’s AI revenues are from Anthropic and OpenAI, with 7% of Microsoft’s FY26 revenue coming from OpenAI alone, and how this is cast-iron proof that demand for AI doesn’t exist at a scale that warrants any of the trillion dollars in capex they’ve spent. Save $10 off a year of my premium newsletter: https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/gzqwkv54e1 - I’d be so grateful!  YOU CAN NOW BUY BETTER OFFLINE MERCH! Go to https://cottonbureau.com/people/better-offline and use code FREE99 for free shipping on orders of $99 or more. --- LINKS: https://www.tinyurl.com/betterofflinelinks Newsletter: https://www.wheresyoured.at/ Reddit: https://www.reddit.com/r/BetterOffline/  Discord: chat.wheresyoured.at Ed's Socials: https://twitter.com/edzitron https://www.instagram.com/edzitron https://bsky.app/profile/edzitron.com https://www.threads.net/@edzitron Email Me: [e-mail] omnystudio.com/listener for privacy information.

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AEO rewatch on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. What's up, fam? I'm sports journalist Ari Chambers. Hey, what's up, y'all? It's your girl, Sam J. And we're the host of Everyone Watches Women's Sports, a new podcast from Together and Iheart Women's Sports.

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Listen to everyone watches women's sports. On the IHeart Radio app, Apple Podcast, or wherever you get your podcast. And I looked and behold a pale horse, and the writer's name was the smiling man. This is your weekly BetRofline monologue, and I'm your host, Ed Zittron. This week I put out one of my most consequential newsletters of all time called the AI demand bubble, pulling together multiple distinct financial analyst notes from Wells Fargo, Barclays and UBS that directly estimated that 70% or more of the AI revenues of Microsoft, Google and Amazon were from either OpenAI or Anthropic.

To be clear, UBS estimated the next year Anthropic and Open AI's compute spend will be 48% of all Google Cloud revenues, which means that they will likely account for even more than 70%, but I wanted to be fair. This was both the colossal pain in the arse and the story that I knew would piss off a lot of people because of its huge ramifications. As a result, I've had a ton of pushback from people that either outright deny that this is the case or say, actually, it's good the two unsustainable companies are the majority of AI revenues for companies that spent over a trillion dollars. Actually, that's great. Anyway, 24 hours later, Bloomberg ran a story estimating based on OpenAI's

$24.1 billion contribution to Microsoft's fiscal year 2026 revenues and previous statements, the OpenAI alone contributed to 70% or more of Microsoft's AI revenues for the year. For some context, Microsoft has spent $26.13 billion in capital expenditures since the beginning of 2022. And other than getting to have the swagger of someone who just laid out a 7,000-worth thesis founded in deep research and hard numbers, only to get their work validating less than a day, this story also confirms my greatest fears about the state of the AI industry and the actual demand for AI compute. Microsoft has spent over $200 billion, and that's not including the $13 billion invested in OpenAI or the losses it's incurred running their services at cost, at least in 2024, but potentially beyond, to create a customer that is now worth 7% of its annual revenue that cannot sustain its existence without near constant flows of venture capital funding. Microsoft's year-over-year growth for fiscal year 2026 was about 17.7%. But when you remove OpenAI's $24.1 billion in revenue, which comes from OpenAI's compute spend and revenue share,

Microsoft's year-over-year growth was more like 9.24%, the lowest it would be since fiscal year 2020-3 when it only grew by 7%. But there is one big difference, and that, well, capital expenditures in the entire fiscal year 20203 were $31.8 billion, and Microsoft spent $35.8 billion in the fourth quarter of the fiscal year of 26, a year when it spent $115 billion goddamn dollars, and he wants to spend another $175 billion in CAPEX in fiscal year 2027, which begins July 1st, 2026.

It's annoying, but we're moving on. Oh, an OpenAI, arguably Microsoft's largest customer and responsible for nearly half of its growth in the last fiscal year, is going to run out of money. And by nature of it being 70% of Microsoft's AI revenues, it's very obvious that there are no other large customers that exist that could possibly take up all of this infrastructure. other than of course weird Wario Amadez Anthropic, who is in exactly the same position as OpenAI,

but with a slightly more annoying voice because we're near the exponential. This also means that any future revenue guidance and analyst expectations are now set under the explicit assumption that Anthropic and Open AI will both have the need for and be able to pay for increasingly larger levels of compute at increasingly higher prices. Based on the analyst notes I reported on, which are in the newsletter, or at least quotes, UBS, Wells Fargo and Barclays all have the expectation that much of Google, Amazon, and Microsoft's revenues are going to come from OpenAI and Anthropic for the next few years. And they don't seem to be diverging from that point in any way. Everyone just thinks that this is where it's going to come from. Any failure for these revenues to appear out of insolvency, lack of demand, or unbuilt data center capacity, meaning they can't get paid,

will piss off a Wall Street that's been brainwashed into believing that these three companies are growing because of diverse demand for AI service. rather than having pissed a trillion dollars up the wall to mostly to just feed themselves money. I am not confident that the market will actually understand what Bloomberg has said, as I'm looking now Microsoft is up 2%, Jesus fucking Christ, so let me spell it out for you. 70% of Microsoft's AI revenues are from either its revenue share of OpenAI's money or OpenAI spending money to rent out-compute from Azure. This means that Microsoft is now dependent on OpenAI for future revenue growth, as the company now represents more than 7% of its annual revenues, and there does not appear to be significant contribution from anything outside of single-digit billions of annual revenue from Microsoft 365 copilot, a product mostly sold by tricking people into signing contracts like Dr. Facilier in the beginning of Princess and the Frog.

Microsoft believed it would create an independent ultra-growth engine from its investments in OpenAI. Instead, it has created a parasite. At 70% of AI revenues, Open AI represents the failure of Satchin-Ael Empire. Microsoft has spent $260 billion on infrastructure for demand that does not exist outside of two different companies that burn tens of billions of dollars a year. And to make matters worse,

Open AI and Anthropic must grow their compute spend aggressively every single year to keep up with the expectations of analysts, which will mean it will need more and more money, which means anyone investing in Microsoft is effectively gambling on how long OpenAI and Anthropic can continue to raise money

before they simply exhaust every available form of capital. This also means that there's not really real demand for AI, at least not remotely commensurate with the capital expenditures, or all of the endless blathering on about how much the world is changing because of AI. Microsoft has tens of thousands of Azure and software salespeople, the single most expertise in building large-scale infrastructure outside of AWS, and the single most ruthless CFO outside of Oracle. If there were actual demand, actual margins, actual customers, They would sell to literally anybody else. They would sell that compute to literally anyone else other than OpenAI.

They would sell it to Gargamel. Microsoft would happily help Gargamel kill every single smurf, rather than talk to Sam fucking Altman or Daria Amaday ever again. If there were meaningful demand for AI compute or AI software, Microsoft would be representative of it as the largest vendor in the world of both. 70% of its AI revenues and 7% of its entire annual revenue, news come from a company that just had to raise $122 billion in March and then delay its IPO because its advisors didn't think it would get a trillion dollar valuation. The demand is not there

for the over 300 gigawatts of data center capacity in planning, outside of course of OpenAI and Anthropic, who still to this day have yet to prove any possible way of becoming profitable and have had to raise over a combined $200 billion in the last seven months just to keep the lights on. To be clear, Sam Maltman has also signed up for over $750 billion worth of commitments, which means that Google, Amazon, Microsoft, Corweave, Cerebrus, Ira, and Nebius, Lambda, and any other associated counterparty's future revenue growth is dependent on clammy Sam Maltman's ability to raise more than the combined sum of global venture capital in the last year in the next three years. On top of that, Dari Amadeh's Anthropic has made over $300 billion worth of commitments

on top of a $35 billion Apollo-backed private credit deal where Google will sell its TPUs to an SPV that would then install them in Google data centers for Anthropic to then rent from Google. It's so stupid. It's an insane monument to the desperate, manic, capitalistic innovations that crown this wretched era of dog shit. Eating well shouldn't be complicated,

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Run a business and not thinking about podcasting, think again. More Americans listen to podcasts than add support. streaming music from Spotify and Pandora. And as the number one podcaster, IHearts twice as large as the next two combined. So whatever your customers listen to, they'll hear your message. Plus, only IHeart can extend your message

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It's your girl, Sam J. And we're the host of everyone watches women's sports, a new podcast from Together and I Heart Women's Sports. Because let's be real. Women's sports is giving us way too much to talk about these days. So Kelsey Finler, she became the first female solo rower to go from California to Hawaii. My first thought is like, what's up with the snacks? Like, what are we eating? The highlights, the rivalries, the breakout stars, the moments that take over your entire timeline. And the conversations that start during the game and somehow keep going all week. Every week, we're breaking down the biggest stories across women's sports.

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Listen to everyone watches women's sports. On the IHeart Radio app. Apple Podcasts or wherever you get your podcast. The demand isn't there. And some of you might, I know I'm going to get an email saying, well, demand is real from Anthropic and Open AI. Yeah, they're selling $20 or $40 for a dollar. I imagine there's some demand.

Everyone's screaming at you to use AI everywhere. Wow. That's demand that comes from social pressure, not actual value or utility. And really, that demand isn't there. If Microsoft isn't seeing it, nobody is seeing it. The only reason that any neoclout is still alive

is Nvidia's circular financing rituals, a failure of ratings agencies, open AI and anthropic, and whatever weirdo bullshit it is that Mark Zuckerberg is up to. There's a reason that the first and only story about a customer for Metis Compute Capacity was Anthropic. There's nobody else. Nobody else other than Anthropic, of course, Open AI, or the hyperscalers that are siphoning off what remains of the AI Labs venture capital funding to sustain their own growth rates,

every time raising a little bit more and a little bit higher at high valuation, each time demanding more and more money, hoping to be able to dump it onto the public markets and the hope that they perpetually con investors into backing their deals. The reason that Microsoft and Google and Amazon have been so scurrilly about their AI revenues is that they know that they're pathetic compared to their CAPEX and near entirely dependent on two companies that hypers must keep alive so that they can pay them. They can get paid by them with the money that the hyperscalers handed to them.

It's not good, and in 2026 alone, Google and Amazon have invested a combined $15 billion in Anthropic, and Amazon's invested a combined $50 billion in OpenAI. What's crazy about that was $35 billion of that was contingent on the IPO or AGI. Neither of those happened, which heavily suggests that Amazon kind of knew that they needed to pay Open AI so that Open AI could pay them. And by the way, this is what you do when you have no other options, no other viable customers, and your core business is not growing at the rate necessary to appease Wall Street. It's been sitting in plain sight for years. Hypers overbuilt capacity, funded their largest customers, including,

incubating them actually, and believe that both the opportunity of owning their models and the underlying compute capacity would be some sort of infinite money glitch, with each hyperscaler owning the equivalent of both the next big cloud infrastructure and cloud software plays, while also owning controlling stakes and creating dependency from the two largest players in both. Pretty easy, right? Anyone else building AI data centers believe that Microsoft, Google and Amazon would never be as foolish as to do all of this without a cast iron guarantee that it would turn into everything they promised, and that the capital expenditures would be for certain worth it and have the demand to back them, and that they would not continue spending without that certainty. The reality is that hyperscalers

made a huge mistake, both in what AI could do, how fast open AI and Anthropic could grow, and in underestimating how bad these businesses would get as they grew. It was also obvious in retrospect. From day one, hypers, and most companies, in fact, refused to share their AI revenues, and when they did so, they used deceptive run rates based on non-specific periods. I've said this for years. If these companies had diverse and meaningful AI revenues, they would be screaming about them from the rooftops with clarity and vigor. They would tell you segment by segment AI-specific contribution to revenue.

They'd break out the costs. They would have them in big font on investor presentations. Instead, Google is telling us it processed 3.2 quadrillion tokens a month. Who gives a fuck, Sundar? You're planning to spend $180 billion this year, and we both know that if you had the revenues that would remotely justify spending that much, you'd include them. Did you make a big mistake, Sundar?

You can tell me, buddy. I won't be mad at you. Investors will be, though. They're going to be furious. But look at the bright side. At least you won't have to hear from that boring oath Demis Hissaubis and hearing him prattle on and on about, oh, what if the computer had the most brilliant mind?

What if we had AGI in 21 minutes? Now he's going to go off and I assume spend more time with his money. Anyway, one day everybody is going to act super surprised and say there was no way to see this coming. Know that the signs were there for years. They've stayed the same. The only thing that's changed is the inflated value of open AI and Anthropic and the ever-escalating capex fueling a semiconductor bubble that erupted because nobody thought hyperscalers would ever waste $1 trillion.

dollars. At some point the money runs out to fund these two companies, at which point hyperscalers will have no way to further feed themselves money. As I've said before, the AI bubble is a sci-op, a melodrama, a financial crisis, and a mask-off moment for the business idiots that run the vast majority of the economy. It is one of the strangest moments in history, and it will only get stranger as things get more desperate. We are seeing what happens when the rot economy demands that we push the world's resources to their very limits, both physically and fiscally, in pursuit of eternal growth, and what happens when we discover what those limits actually are. None of this was ever about technology, or good business, or anything other than creating the

next growth engine for capital. Instead, AI has become a parasitic presence, culturally, financially, and ecologically, and it will exhaust as much as it can in its collapse. Nothing about this can be bailed out, because the problem isn't that the money doesn't exist, just that it doesn't exist naturally. A bailout cannot make growth restart for Google, Microsoft, Meta, Amazon or Oracle once it fully slows. And based on the fact they've sunk more than a trillion dollars of capex into AI, I think they must clearly see that growth is already or will die very soon without, and I quote, doing AI, which mostly means hoping, anthropic and open AI pay them ever-increasing amounts of money every quarter forever.

The US government cannot prop up a stock market that accepts that AI's growth is finite, and outside of semiconductor companies and two subsidized AI labs, is tens of billions of dollars of demand in the best case scenario. I realize how easy it is to fall into the mindset that everything gets bailed out, that the evil people always win, because we're so used to seeing these evil corrupt people escape accountability. In this case, while I don't think anyone's going to prison, I think these companies simply exhaust their resources at some point and drop off.

I think the era of hyperscale growth is ending, and the only reason they're so desperately joining the no IT loads refused AI compute come dump is because they know that the only way to keep growth going is to hope they can drain the venture capital and debt markets infinitely by proxy. I don't know if people are going to like that I just said that. I'll keep going though. Anyway, there are no other hypergrowth markets left. That's all this is about. So many numbers are going up, so much higher in the next few months. Then at some point they'll stop going higher and then they'll start going higher. going lower and then some of them will go to zero or even become negative numbers, because the only

thing that grows forever is cancer. This all may seem unthinkable right now because Microsoft, Google and Amazon numbers are going up, but that's really only happening because of open AI and Anthropic. Most didn't see this coming because it has involved pushing back against one of the most gratuitous and excessive marketing campaigns in history involving actual reporters that are at real outlets, attacking and harassing people for daring to question. question the powerful. And those people will be held accountable, mark my words. But let's talk about who actually matters, and that's you. And a lot of you have been here with me for years, hearing me, build these arguments, and I appreciate the amount of support I hear

from you via signal, the terminal, and on the subreddit, and email, of course. You're all awesome, and you keep me going when things are hard, when people are pressing back, when people are genuinely horrible to me. I don't want to complain. I get to do the best job in the world. It fucking rocks to record this podcast and write the newsletter. It's the greatest job I've ever done. I couldn't be happy at doing it. It's stressful, but I keep going because of all of you, because I really truly enjoy it. I'll be back next week, and to quote drill, I'll be calling out all the bullshit of society the smart way, and against all odds, I'll do it for free. Thank you for listening. Hey, Portlandia fans. Carrie Brownstein and Fred Armisen here. The Dream of the 90s is

alive in podcast form. We're launching Podlandia, A.O. rewatch, our brand-new podcast. where we revisit every episode of Portlandia together, breaking down sketches, going deep on our iconic characters, and pulling back the curtain on how it all got made. And we'll also be joined by the people who helped bring it all to life. Guest stars, collaborators, and friends, including director Jonathan Chrysler, the mayor himself, Kyle McLaughlin,

legendary musician Amy Mann, and many more. Kyle is going for it here. You fully improvised, not just words, but a song. Well, I thought you were all going to write a song. I remember you thinking that. Listen to Podlandia AEO rewatch on the IHeart Radio app, Apple Podcasts, or

wherever you get your podcasts. What's up, fam? I'm sports journalist Ari Chambers. Hey, what's up, y'all? It's your girl, Sam J. And we're the host of Everyone Watches Women's Sports, a new podcast from Together in I Heart Women's Sports. We're breaking down the biggest headlines. Naomi Osaka, show it out.

Shoutouts to you, Naomi. The viral moments. I've been obsessed with Kashan Rock's boxing journey. She looks good. Her combos are swift. And the stories everyone's talking about across women's sports. Because everyone watches women's sports. Listen to everyone watches women's sports on the IHeart radio app, Apple Podcasts, or wherever you get your podcast.

Hey, this is Hayes Davenport. And Sean Clements. We host the podcast Hollywood Handbook. Every episode we're trying to help our guests improve their careers by mainly focusing on how they can help us improve our careers. The show's famously super accessible so you can easily jump into any of our 650 episodes and understand what's going on. We recommend some of our recent episodes with Ben Stiller, Danny McBride, Riz Amet,

and Mary Steenburgeon. Listen to Hollywood Handbook on the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. This is Chelsea Handler from Dear Chelsea. Every week, the news gets worse. The world gets crazier, and Yamanika is here to tell whoever's responsible, you're the problem.

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