Better Offline - OpenAI Is A Systemic Risk To The Tech Industry

Episode Date: April 18, 2025

In the second part of this week’s two-part episode, Ed Zitron walks you through how OpenAI has become a systemic risk, one that may destroy CoreWeave, cost NVIDIA and Oracle billions, and break the back of an ailing tech industry. --- 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/@edzitronSee omnystudio.com/listener for privacy information.

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Orzone Media. Try spinning. That's a good trick. I'm Ed Zittron. This is better offline. And this is the second episode of my podcast. two-part series where I explain how Open AI has become a systemic risk to the tech industry, even with its massive $40 billion funding round, a bird-brain benefactor in the form of SoftBank, the world's foremost authority in losing money. Now, before I continue, shameless request, better off-line has been nominated for a Webby and I want to win this thing. I've linked to it in my Twitter and my Blue Sky, and if you could vote for me, well, it'll be in the episode

notes too. Moving on, back at it. Okay, all right, Open AI now has $40 billion. somehow. Right? Great, right? Well, old your horses. As part of its deal with SoftBank, OpenAI must also convert its bizarre non-profit structure into a for-profit entity by December 2025, or it'll lose $10 billion from that $40 billion round of funding. And just to be clear, by the way, they've only really got $10 billion of that so far. The rest is at the end of the year. Furthermore, in the event that OpenAI fails to convert into a for-profit company by October 2026, investors in its previous $6.6 billion Rao can claw back their investment, with it converting into a loan with an attached interest rate. Naturally, this represents a nightmare scenario for the company, as it will increase both its costs

and its outgoings. This is a complex situation that almost warrants its own podcast, but the long and short of it is that Open AI would have to effectively dissolve itself, start in the process of reforming an entirely new entity, and distribute its assets to other non-profits or sell or license them to a for-profit company at fair market rates, which they would not set. It would also require valuing open AI's assets, which in and of itself would be a difficult task, as well as getting past the necessary state regulators, the IRS, state revenue agencies, and the upcoming trial with Elon Musk.

Well, that only adds further problems. I've simplified things here, and that's because, as I've said, this stuff is a little complex and pretty boring. Suffice to say, this isn't as simple as liquidating a company and starting a fresh or submitting a couple of legal filings. It's a long-fraught process and one that will be, as has been subject to legal challenges, both from Open AI's business rivals, as well as from civil society organizations in California. You may have heard the lost monologue. Based on discussions with experts in the field of my own research, I simply do not know how Open AI pulls off this by October 26, and honestly, I'm not sure how they do it by the end of

this year. It's insane. It's really... I just, every time I read this stuff and I write out, I'm like, how is nobody else reading this and going, what the fuck is going on? You see, this is a big problem, this nonprofit thing, because Open AI really has become a systemic risk to the tech industry, and anything that increases that risk is bad news for everybody. Open AI, they've become a kind of load-bearing company for this industry, both as a narrative, as I've discussed multiple times, as ChatGPT is the only large language model company with any meaningful use-based, and also as a financial entity. Its ability to meet its obligations and its future expansion plans are critical to the future health or in some cases survival of multiple.

multiple large companies, and that's before the after-effects that will affect its customers as a result of any kind of financial collapse. The parallels to the 2007 and 2008 financial crisis are starting to become a little worrying. Lehman Brothers wasn't the largest investment bank in the world, although it was pretty big, just like OpenAI isn't the largest tech company, though again, it's certainly large in terms of alleged valuation and expenditures. Lehman Brothers collapsed sparked a contagion that would later spread throughout the entire global financial services industry, and consequently the global economy. Now, I can see OpenAI's failure not having as big in effect, but I can imagine a systemic effect still.

You have to realize that the whole AI trade, the narrative, the bubble, it's holding up the economy. I think like 30, 35% of the US stock market is in the Magnificent 7, and all of their bullshit numbers right now are held up by this nonsense. And like the financial crisis, the impact in this case won't be limited to just bankers and insurers. it will bleed into everything else. This episode is going to be a bit grim.

I'm not going to lie. I want to lay out the direct result of any kind of financial crisis at OpenAI because I don't think anybody is taking this seriously. Let's start with Oracle, who will lose at least a billion dollars if Open AI doesn't fulfill its obligations. Per the information, Oracle, which has taken responsibility for organizing the construction of the Stargate data centers with Unproven Data Center Builder Crusoe, and I quote the information here, may need to raise more capital to fund its data.

Center ambitions. Oracle has signed a 15-year lease with Crusoe, and to quote the information is on the hook for $1 billion in payments to that firm. To further quote the information, while that's the standard deal length, the unprecedented size of the facility Oracle is building for just one customer who makes it riskier than a standard cloud data center used by lots of interchangeable customers, with much more predictable needs, according to half a dozen people familiar with these types of deals. In simpler terms, Oracle is building a giant data center for one customer, OpenAI, and has taken on the financial burden associated with him. If OpenAI fails to expand or lacks the capital to actually pay for its share of the Stargate

Datacenter project, Oracle is on the hook for at least a billion dollars, and based on the information's reporting, it's also on the hooked by the GPUs for the site. This is me quoting them again. Even before the Stargate announcement, Oracle and Open AI had agreed to expand their Abilene deal from two to eight data center buildings, which can hold 400,000 Nvidia Blackwell GPUs, adding tens of billions of dollars to the cost of the facility. In reality, this development will likely cost tens of billions of dollars, $19 billion of which is due from Open AI, which does not have the money until it receives its second tranche of funding

in December 2025 from SoftBank, and this is contingent partially on their ability to convert into a for-profit entity, which, as mentioned, is extremely difficult and extremely unlikely. It's unclear how many of the Blackwell GPUs that Oracle has had to purchase in advance, But in the event of any kind of financial collapse at Open AI, Oracle would likely have to toss at least a billion dollars, if not several billion dollars. And then we get the core of a company who's expansion is likely driven entirely by OpenAI now and cannot survive without Open AI fulfilling its obligations if it doesn't die or anyway.

Now, I've written and spoken a lot about publicly traded AI compute firm Call Weave, and it would give me the greatest pleasure in my life to never think or talk about them ever again. never less I have to. This is my curse. This is my curse. Corweave has become my curse every time I think about this. Fuck. Okay. The financial times revealed a few weeks ago that Corweave's debt payments could balloon to over $2.4 billion a year by the end of 2025, far out stripping its cash reserves. And the information reported that its cash burn would increase to $15 billion in 2025. As per its IPO filing 62% of Corweave's 2024 revenue, little under $2 billion with losses, a mounting to $863 million was Microsoft compute. Based on the conversations I've had with sources, a good amount of this was Microsoft running compute for OpenAI. Starting October 2025, OpenAI will start paying CoreWeave as part of its five-year-long $12 billion contract picking up the option that Microsoft declined. This is not great timing, or maybe it's perfect timing, because this is also when CallWeave will have to start making payments on their massive,

stupid multi-billion dollar DDTL 2.0 loan mentioned in previous episodes, but really there's a newsletter. If you want to, you hear me go madge, you want to read me go madge, you read my core weave piece because it really drove me insane. Nevertheless, these core weave payments, the ones from OpenAI to Corweeve, that October, they're pretty much critical to Corwee's future. The deal also suggests that OpenAI will become Corweave's largest customer. Microsoft had previously committed to spending $10 billion dollars on Corweave's services by the end of the decade. But CEO Satchi Nadela added a few months later on a podcast that its relationship with Corweave was a one-time thing.

Man, man, I really like, really fucking around there. Sacha, Satchit don't love Corweave. Assuming Microsoft keeps spending at its previous rate, so about 1.66% of $2 billion, whatever that is. Something that isn't guaranteed, by the way, it would still only be half of Open AI's potential revenue to Corveve. Corweave's expansion at this point is entirely driven by Open AI. 77% of its 2024 revenue came from two customers, Microsoft being the largest, and yes, I just fucked up a number, at 62%, and using CoreWeavers' auxiliary compute for OpenAI. As a result, the future expansion efforts, the theoretical 1.3 gigawatts have contracted, and by the way, that means it doesn't exist, compute at CoreWeaver, largely, if not entirely,

for the benefit of Open AI. In the event that OpenAI cannot fulfill its obligations, core weave will collapse. It's that fucking simple. And then the shock waves will ripple further. Nvidia relies on CoreWeve for more than 6% of its revenue, and Corweave's future creditworthiness to continue receiving said revenue, well, much of that is dependent on OpenAI continuing to buy services from Corwave. Now, I'm basing this on the comment I received from the legendary GILURI, a managing director and head of technology researcher analyst DA Davison and co. I quote him. Since Corweave bought 200,000 GPUs last year and those systems are around $40,000, we believe Corweeve spent $8 billion on Nvidia last year. That represents more than 6,000.

percent of Nvidia's revenue in 2024. He said last year, but I just wanted to make it sound better. Corleave receives preferential access to Nvidia's GPUs, though Nvidia kind of denies that. It makes up billions of dollars of Nvidia's revenue. Corleave then takes those GPUs and then they raise debt using the GPUs as collateral as well as customer contracts. Then they use the money they've raised to buy more GPUs from Nvidia. You may think that doesn't sound right. I am being complete, like this is factual information at this point. Invidia was the anchor for Corweave's IPO, and CEO Michael in Trader said that the IPO would not have closed without Nvidia buying $250 million worth of their shares.

Invidio also invested $100 million in the early days of Corweaves, and for reasons I cannot understand, also agreed to spend $1.3 billion over four years two when I quote the information rent its own chips from Corweave. Fun fact, I can't find a single fucking mention of Corweave in any of InVieve. video's filings. Now, buried in Corweaves's S1, the document every company publishes before going public, was a warning about counterparty credit risk, which is when one party provides services or goods to another with specific repayment terms, and the other party doesn't meet their side of the deal. While this was written as a theoretical as it could, theoretically speaking,

come from any company to which Corweave acts as a creditor, it only named one, OpenAI. Now, as discussed previously, CallWeaver is saying that should a customer, any customer, but really they mean OpenAI, fail to pay its bills for infrastructure built on their behalf or services rendered, it can have a material risk to the company. Now, as an aside, the information report at Google, and someone's going to email me there, so I just want to get ahead of it. The CoreWeave is apparently in advance talks with Google to rent GPUs. It also added another thing in this story, just like I don't have to hear from any of you. that Google's potential deal with Corweave is significantly smaller than their commitments with Microsoft, as according to one of the people briefed on it, but could potentially expand in future years. Do not come to me and claim that Google is going to save Corwave. I'll be so mad.

Anyway, even with Google and Open AI's money, Corweaves continued its ability to do business hinges heavily on its ability to raise further debt, which I have previously called into question in a newsletter that gave me madness, and its ability to raise future debt is, to quote the Financial Times, secured against its more than 250,000 MVs and its contracts with customers such as Microsoft. Now, any

future debt that CallWeave raises will be based off of its contract with OpenAI. You know the counterparty credit risk threat that represents a disproportionate share of its revenue that I just mentioned, and also whatever GPUs they still have left that they can get debt on. As a result, a chunk of Nvidia's future revenue is dependent on OpenAI's

ability to fulfill its obligations to CallWeave, both in its ability to pay them and their timeliness in doing so. If OpenAI fails, then Corweave fails, then that hurts Invidia. Jensen's going to have to go, he's going to have to go to a cheaper leather jacketarium. And it gets worse. OpenAI's expansion is dependent on two unproven startups, one of them I just mentioned, who are also dependent on Open AI to live. With Microsoft's data center pullback and OpenAI's intent to become independent from Redmond, future data center expansion is based on two partners supporting Corweave, I know, will get there, and Oracle. referring, of course, to CoreScientific, which is the data center developer for Corweave,

and of course, Crusoe, who's the data center developer for Oracle. Now, if you were wondering, I kind of hinted about this earlier, how many data center, how many AI dentists do you think Crusoe's ever built? And the answer is none. And Core Scientific, how many do you think they've built? And the answer is also none. These are the fucking companies underpending the AI boom. I also really must explain how difficult it is to build a data center and how said difficulty increases when you're building an AI-focused one. For example, Nvidia had to delay the launch of its Blackwell GPUs because of how finicky the associated infrastructure, so the servers and the cooling and such, is. For customers, this was for customers

that had already been using GPUs and therefore likely knew how to manage the temperatures created by them. Also, as another reminder, Open AI is on the hook for $19 billion of funding behind Stargate. And neither of them have that money. I just want to remind you of that because it costs so much money to build a fucking data center. And imagine if you didn't have any experience and effectively had to learn from scratch, how do you think it would be building these data centers? Let's find out.

So let's start in Abilene, Texas, with Crusoe and the Stargate Data Center project. Now, Crusoe is a former cryptocurrency mining company that has now raised hundreds of millions of dollars to build data centers for AI companies, starting with a $3.4 billion data center financing deal with asset manager Blue Al Capital. This yet-to-pe completed data center has now been leased by Oracle, which will allegedly fill it full of GPUs for OpenAI.

Despite calling itself, and I quote, the industry's first vertically integrated AI infrastructure provider, with the company using fared gas as a waste byproduct of oil production to power IT infrastructure, Crusoe does not appear to have built a single AI data center, and is now being tasked with building 1.2 gigawatts at a data center capacity for open AI. It's just so fucking... Crusoe is the sole developer and operator of the Abilene site, meaning according to the information that it is in charge of contracting with construction contractors and data center customers, as well as running the data center after it is built.

Oracle, it seems, will be responsible for filling said Data Center with GPUs, as mentioned. Nevertheless, the project also appears to be behind schedule. The information reported in October 2024 that Abilene was meant to have 50,000 of Nvidia's Blackwell AI chips in the first quarter of 2025 and also suggested that the site was projected to have a whopping 100,000 of them by the end of 2025. Now, you can join me back here in reality, because a report from Bloomberg in March 2025 said the Open AI and Oracle were expected to have 16,000 available by the summer of 2025, with and I quote, Open AI and Oracle expecting to deploy 64,000 in video GBM 200s at the Stargate

Data Center by the end of 2026. That's very delayed. That's really delayed. Again, how I run a PR firm in the I record a podcast? I write a newsletter. I have a book I'm writing. I got all this shit on and I'm the asshole who notices this. Anyway, as discussed previously, OpenAI needs this capacity very badly.

According to the information, Open AI expects Stargate to handle three quarters of its compute by 2030, and these delays call into question at the very least whether this schedule is reasonable or logical or even possible. And I actually really question whether Stargate itself is possible at this point. it can get dumber because we're about to talk about core scientific and they are core weave's friends they're the people building data centers for core weave in denton texas another podcast from some s nil late-night comedy guide not quite on humor me with robert smigle and friends me and hilarious guests from jim gaffigan to bob odenkirk to davidt to david letermen help make you funnier this week my guest s nL's mikey day and head writer streeter sidel

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The yard birds, right? That's the name. The Harvard yard, but they're open. Do you have a name suggestion? We're open. Since you guys are middle aged. One erection. Listen to you.

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ha, who. Ha, ha, who. Again, we are experts. So make sure to tune into PodMeets Twirled for all our Survivor 50 takes. Listen to PodMeets Twirled on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Now, as you can probably tell, I've written a great deal about CoreWave in the past. They've got a monologue, got a newsleto, and I got a therapy bill for it. And specifically, I've written about their build-out partner core scientific.

A cryptocurrency mining company, yes, another one, that has exactly one customer for its AI data centers. And you'll never guess who it is. It's CoreWave. Now, here's a few fun facts about Core Scientific. Core Scientific was bankrupt last year. Core Scientific has never built an AI data center, and its cryptocurrency mining operations were built around A6, specialist computers for mining Bitcoin,

which led to an analyst to tell CNBC that said data centers would, and I quote, need to be bulldozed and built from the ground up to accommodate AI compute. That's the stuff. Core Scientific also does not appear to have any meaningful AI compute of any kind. It's AI slash HPC, which is high-performance computing, revenue represents a teeny tiny, teeny little percentage of overall revenue, which mostly comes from mining crypto both for itself and other parties.

Now, hearing all of this, would you give this company your compute? Would you think these are the people that I am going to call to build my data centers? If you said no, you are smarter than Corweave, who has given their entire 1.3 gigawatt build out to Core Scientific. Core Scientific also, it seems, they seem to be taking on like $1.14 billion of capital expenditures to build these data centers, which, by the way, is not enough money. But nevertheless, Call Weaver has promised to reimburse them at $89.9.3 million of these costs. This is all from public filings, by the way. It's also one clear how Core Scientific actually intends to do any of this shit.

While they've taken on a good amount of debt in the past, $550 million in the convertible note towards the end of last year, this would be more debt than they've ever taken. It also, as with Crusoe, does not appear to have any experience building AI data centers. I keep repeating because it's very important these are the companies behind the growth for OpenAI, except unlike Crusoe, Core Scientific is a barely functioning, recently bankrupted Bitcoin miner, pretending to be a data center company. Crusoe, on the other hand, is possibly also doing the same thing, but they're less egregious about it. Now, how important do you think CoreWeave is to Open AI exactly? Well, that's our semaphore.

Coreweave has been one of our earliest and largest communications. Compute partners, OpenAI Chief Sam Alman said in Corweave's Roadshow video, adding that CoreWeev's compute power led to the creation of some of the models that were best known for. CoreWeve figured out how to innovate on hardware, to innovate on data center construction, and to deliver results very, very quickly. Did it? But even if it did, will it survive long term?

Going back to the point of the contagion, if OpenAI fails and CoreWeve fails, so too does Core scientific and I don't really fancy Crusoe's chances either. But let's take a step back for a moment. We've been going so hard, haven't we? I've got a genuine question, just for the fact finders out there. Does Microsoft book OpenAI's computer's revenue? Now, up until fairly recently, Microsoft has been the entire infrastructure backing OpenAI, but recently, to free OpenAI up to work with Oracle and see other people, released it from its exclusive cloud compute deal. Nevertheless, per the information, OpenAI still intends to spend $13 billion on compute on Microsoft's year. What's confusing, however, is whether any of this is booked as revenue for Microsoft. Microsoft claimed earlier in the year that it surpassed $13 billion in annual recurring revenue, by which it means it's last month, multiplied by 12, by the way, and they said it was from AI.

Open AI's compute costs in 2024 were $5 billion, and that's at a discounted as your rate, which on an annualized basis would be about $416 million in revenue a month for Microsoft. It isn't, however, clear whether Microsoft counts Open AI's compute as money, which is Really fucking weird. You'd think with all this money they're making from this company, they'd be saying there was money coming in. It's peculiar. I've yet to find a real answer. Now, Microsoft's earnings do not include an artificial intelligence section.

No, they're made up of three separate segments. Productivity and business processes, which includes things like LinkedIn, Microsoft 365, and so on. More personal computing, which includes Windows and gaming products. And then intelligent cloud, including server products and cloud services like Azure, which is likely where OpenAI's computer is included and where Microsoft would book the revenue

from selling access to Open AI's models, but not OpenAI's compute, question mark. As a result, it's hard to say specifically where OpenAI's revenue might sit, even guessing intelligent cloud might not be right,

but based on an analysis of Microsoft's Intelligent Cloud segment from financial year 23Q1 through its most recent earnings and there was a spike in revenue from 23Q1 to 24Q1. In financial year Q1, which ended on September 30th, 2020, a month before CHETGPT's launch,

the segment made $20.3 billion. The following year, in FY24Q1, it made $24.3 billion, a 19.7% year-over-year growth, or roughly $4 billion. This could represent the massive increase in training and inference costs associated with hosting CHETGPT, and they peaked at $28.5 billion in revenue in the financial year 24, Q4, before dropping dramatically to $24.1 billion in financial year 25Q1 and raising a little $25.5 billion in financial year 25Q2. I'm so sorry, none of this is easy to read. This is a plausible explanation.

OpenAI spent 2023 training its GPT40 model before transitioning to its massive Orion model, which would eventually become GPT4.5, as well as its video-generating model, SORA. According to the Wall Street Journal, training GPT 4.5 involved at least one training run costing around half a billion dollars in compute costs alone. These are huge sums, but it's worth noting a couple things. First, Microsoft licenses OpenAI models the third parties. Some of this revenue could be from other companies using GPT on Azure. We've seen lots of companies launch AI products, and not all of them are based on LLMs.

Muddying things further, Microsoft provides open AI access to Azure Cloud Services at a discounted rate, as I've mentioned in the past. And so there's a giant question mark over OpenAI's actual contribution to the various spikes in revenue for Microsoft's intelligent cloud segment or whether other third parties played a significant role. Furthermore, Microsoft's investment in Open AI isn't entirely in cold hard cash. Rather, it's provided the company with credits to be redeemed on and see your services, kind of like chucky cheese tokens. I'm not entirely sure how this would be represented in accounting terms, and if anyone can shed any light on this, please get in touch. Would it be noted as revenue or some of the money? Or some of the money?

Something else, Open AI isn't paying Microsoft, or are they? Are they doing the tech equivalent of redeeming Air Miles or if they spent a gift card of Azure? It really isn't obvious, and Microsoft is doing some accounting bullshit here. I'm not suggesting impropriety, not suggesting anything illegal. I'm just saying, it's insane that they have this company spending billions of dollars theoretically on their services. And it's just nowhere. Additionally, while equity is often treated as income for tax purposes, as is the case when an employee receives RSUs as part of their compensation package, under the existing OpenAI structure, Microsoft isn't actually a shareholder, but rather the owner of profit sharing units. This is a distinction worth noting. These profit sharing units are treated as analogous to equity, or at least in terms of OpenAI's ability to raise capital, but in practice they aren't the same thing. They don't represent ownership in a company as directly as, for example, a normal share word. They lack the liquidity of a share in the upside they provide, namely dividends, is purely theoretical. Another key difference. When a company goes bankrupt and enters liquidation, shareholders can

potentially receive a share of the proceeds after creditors, employees, and so on are paid. While that often doesn't happen, as is, as in the liabilities, generally they can exceed the assets of the company in many cases, it's at least theoretically possible. Given that profit-sharing units aren't actual salaries or shares, where does that leave Microsoft? This stuff is confusing, and I'm not ashamed to say that I just fucked up a word, and that complicated accounting questions like these are far beyond my understanding. If anyone can shed some light, drop me an email, buzz me on Twitter or blue sky, hit me up on Plurk or Gorp or post on the better offline sub-rater. Someone might take your wallet, though. Anyway, back on track, I think it's worth understanding

the scale of the Open AI vortex and how it's distorting the tech investment market and why, even without having failed, it represents a systemic risk. Without Open AI and American startup investment is flat, and even with it, less startups are receiving investment. Crunch-based news reported in early April that North American startup investment spiked in Q1 due to OpenAI, hitting $82 billion. Great, right? Sounds great. This statement, sadly, has a darker undertone.

American startup investment was actually like $42 billion in Q1, 2025, when you removed the deal, which is appropriate because none of the money is actually received by OpenAI yet, and at best, only $10 billion of it will be received before December 2025. This quarter also included a $3.5 billion investment in worm-like competitor-anthropic run by Wario Amaday, making the appropriate number of poultry $39.5 billion. Now, this is still an improvement, though a marginal one, over the $37.5 billion raised in Q1, 2024. Nevertheless, crunch-based news also has a far, far darker story. Deal volume in American startups has begun to collapse, trending downward almost every quarter. While deal volume isn't a direct result of OpenAI's financial condition, the so-called revolution created by OpenAI and other generative AI company's technology appears to be peering out, and the contagion is starting to impact the wider tech sector.

It's important to understand how bleak things are. The future of Generative AI rests on Open AI, and Open AI's future rests on near impossible financial requirements. I've done my best to make this argument in as objective atone as possible, regardless of my feelings about the bubble, and its associated boosters. Open AI, as I've said before and argued countless times in interviews and podcasts and newsletters, it's effectively the entire generative AI industry, with its nearest competitor being less than 5% of its 500 million weekly active users. Anthropic, Google, Microsoft, XAI, they're all rounding errors in the grand scheme of things. But Open AI's future is dependent, and this is not an opinion, this is an objective fact, on effectively infinite resources in many forms. Let's start with the financial resources.

If OpenAI required $40 billion to continue operations this year, it's reasonable to believe it will need at least another $40 billion next year. And based on its internal projections, will need at least $40 billion every single year until 2030, when it claims somehow it will be profitable, and I quote the information with the completion of the Stargate Data Center project. You may be wondering, how's that possible, Ed?

How? You think the information wrote that down? Fuck no. Jessica Lesson's too busy humiliating people she let go by name on Twitter. Jessica Lesson, I like the information. I think you're a fucking asshole for how you treated your people. Say it on my podcast or say it on Twitter. Anyway, let's keep talking about some of these resources that OpenAI is dealing with. Specifically the compute resources and expansion.

Open AI requires more compute resources than anyone has ever needed and will continue to do so in perpetuity. Building these resources is now dependent on two partners. as core scientific and cruis, though I've never built a data center, as Microsoft has materially pulled back on data center development and has, as aforementioned, pulled back on two gigawatts of data centers. Slowed or paused, of course, some of its early stage data center projects too, with T.D. Cohen's recent analysis report saying that data center pullbacks were,

and I quote them, March 26th, 2025 data center channel checks letter because it's so good, driven by the decision to not support incremental open AI training workloads. That's the stuff. In simpler terms, OpenAI needs more computer at a time when it's leadbacker, which has the most GPUs in the world, as specifically walked away from building it. Even in my most optimistic frame of mind, it isn't realistic to believe that Crusoe or Core Scientific can build the data centers necessary for OpenAI's expansion. Even if SoftBank and OpenAI had the money to invest in Stargate today, which they do not, dollars do not change the fabric of reality.

Data centers take time to build requiring concrete, wood, steel and other materials to be manufactured. manufactured and placed, and that's after the permitting required to get these deals done. Even if that succeeds getting the power necessary is a challenge unto itself, to the point that even Oracle, an established and storied cloud compute company run by a very evil man at one point, to quote the information, has less experienced than its larger arrivals in dealing with the utilities to secure power and working with powerful and demanding cloud customers whose plans change frequently. A partner like Crusoe or core scientific simply doesn't have the muscle memory or domain expertise that Microsoft has when it comes to building and operating data

centers. As a result, it's hard to imagine even in the best case scenario that they're able to match the hunger for compute that OpenAI has. Now, I want to be clear, I believe OpenAI will still continue to use Microsoft's compute and even expand further into whatever remaining compute Microsoft may have. However, there is now a hard limit on how much of that there's going to be, both literally in what's physically available and in what Microsoft itself will actually allow Open AI to use, especially given how unprofitable GPU compute seems to be based on how every single

company that isn't Invidia loses money running them. Another podcast from some SNL late-night comedy guy, not quite. Unhumor me with Robert Smygel and friends. Me and hilarious guests from Jim Gaffigan to Bob Odenkirk to David Letterman help make you funnier.

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Is there anything to the idea that because you're from Harvard, you only got in because your parents made a huge donation. The group. The yard birds, right? That's the name. The Harvard yard, but they're open. Do you have a name suggestion? We're open.

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That's iHeartadvertising.com. Why is everyone obsessed with romance right now? Like everyone? Your co-worker who, quote-unquote, doesn't read, is reading romance. Your mom, book talk, the entire internet. I'm Sajana Basker. I'm Tyler McCall.

And this is Radio 831, a romance podcast. The books, the tropes, the adaptations, the drama, the discourse. And what all of it says about how we actually love, yearn, and obsess. We're going to Weathering Heights, which, for the record, is not a romance novel. And yet it has haunted the romance genre for 200 years. We're getting into dark romance, age gaps, certain Russian hockey players. And sentient objects, in love, which is a thing.

That's the kind of conversation we're having every episode. Listen to the Radio 831 podcast on the Iheart radio app, Apple Podcasts, or wherever you get your podcasts. Hey, everyone, it's Ryder Strong and Wilfredel from PodMeets World. And now the PodMeets Twirled podcast. We're two men who were completely clueless to reality TV, who now have covered Dancing with the Stars, traitors, and we're gearing up for the season finale of Survivor.

So yeah, now we're experts. I know we annoyed a lot of our listeners by our severe lack of survivor knowledge. That is the point of the show. I'm just going to remind you. I have watched some Survivor. I obviously haven't watched enough. Did people not like it? Like what was just because we?

Yeah. We'll be recapping the big conclusion in the 50th season from the final attempts at gameplay to the desperate pleas of finalists to a bunch of ha, hoo. Ha, ha, ooh.

Again, we are experts. So make sure to tune into PodMeets Twirled for all our Survivor 50 takes. Listen to PodMeets Twirled on the IHeard Radio app, Apple Podcast, or wherever you get your podcasts.

But really, and we're coming to the end of this, which leads to a question. How does all of this end? Last week, a truly offensive piece of fan fiction framed as a report called AI 2027 went viral, garnering press with the Duquesh podcast and Gormless Childlike Wonder from dope New York Times reporter Kevin Rose, and reporter, I think, is a fucking stretch.

Its predictions vaguely suggest the theory theoretical company called Open Brain will invent a self-teaching agent of some sort. It's total bullshit, but it captured the hearts and minds of AI boosters and other people without object permanence because it vaguely suggests that somehow large language models and their associated technology will become something entirely different. I don't like making predictions like these, because the future, especially in our current political climate, is utter chaos. But I will say that I do not see, and I say this with complete objectivity, how any of this bullshit continues. I want to be extremely. I want to be

extremely blunt with the following points as I feel like both members of the media and tech analysts have categorically failed to express how ridiculous things have become. I will be repeating myself, but it's fucking necessary, as I need you to understand how untenable things are. SoftBank is putting itself in dire straits simply to fund Open AI once. This deal threatens its credit rating, with SoftBank having to take on what will be multiple loans to fund this $40 billion round, and Open AI will need at least another $40 billion a year later. This is before you consider the other $19 billion that SoftBank has agreed to contribute to the Data Center project with Stargate. Money it does not currently have available.

Now OpenAI has promised $19 billion to the Stargate Data Center to Project 2. And again, they do not have it and they need SoftBank to give it to them. And again, I've said it and I'll say it again, neither of these companies have the money. The money is not there. and OpenAI needs Stargate to get built to grow much further. I see no way in which OpenAI can continue to raise money at this rate, even if Open AI somehow actually receives the $40 billion it's been promised, which will require it to become a for-profit entity,

which I don't think it can fucking do. While it could theoretically stretch that $40 billion to last multiple years, projections say it will burn $320 billion in the next five years. Or more likely, I can't see a realistic way in which Open AI gets the resources it needs to survive. It will need this insane streak of good fortune, the kind of which you only really hear about in Greek epic poems or Jojo's Bizarre Adventure, you know, the more cultured choice. But let's go through them. Somehow, SoftBank gets the resources and loses the constraints required to bankroll this company forever. The world's wealthiest entities,

those sovereign wealth funds mentioned in the last episode, Souts and so on, they pick up the slack until Open AI reach profitability, which is a huge assumption. It's also assuming that OpenAI will have enough of these mega wealthy benefactors to provide it with the $320 billion they need to reach profitability, which it won. They'll also need Crusoe and Core Scientific to turn out to be really good at building AI infrastructure, which they've never done before. Which is, that's very possible, I'm sure. And then Microsoft will then walk back its walk back on building new AI infrastructure and recommit to tens of billions of dollars of CAPEX specifically on AI data centers and also will give it to, Open AI. And then, of course, Stargate's construction happens faster than expected, and there are no supply chain issues in terms of labour, building materials, GPUs, and so on. Now, I don't

know, I haven't checked the news in the last three weeks, but is there anything going on that might increase the costs of materials? Probably not. Anyway, if those things happen, I'll eat crow. I'm not particularly worried. In the present conditions, Open AI is on course to run out of money, or run out of compute capacity. And it's unclear. which will happen first. But what is clear is it's time to wake up. Even in a hysterical bubble where everybody is agreeing that this is the future, Open AI is currently requiring more money and more compute than it is reasonable to acquire. Nobody, nowhere, ever, anywhere has ever raised as much money as Open AI needs to. And based on the sheer amount of difficulty that SoftBank

is having, raising the funds to meet the lower tranche, the $10 billion one of its commitment, it may not actually be possible for this company to continue. Even with the extremely preferential payment terms, months-long deferred payments, for example, that Open AI probably has, at some point someone will need a dollar. I'll give Sam Orman some fucking credit. He's found many partners to shoulder the burden of the rotten economics of Open AI,

with Microsoft, Oracle, Crusoe and CoreWeve handling the upfront costs of building the infrastructure, and SoftBank finding the investors for its monstrous, stupid round, and the tech media mostly handling marketing, for him, which is really nice. Great job, everybody. He is, however, over-leveraged. Open AI has never been forced to stand on its own two feet or focus on efficiency, and I believe the constant enabling of this ugly, nonsensical burn rate has doomed this company. Open AI has acted like it'll always have more money in Compu. And that's kind of because everyone's acted as that would be the case.

No one's really called Sam Altman out on his bullshit. There are some people, but really no one in the mainstream media is bothered. Really, Sam Altman has been enabled. Open AI, by the way, cannot just make things cheaper at this point, because the money has always been there to make things more expensive, as has the compute to make larger and larger language models that burn billions of dollars a year. This company is not built to reduce its footprint in any way, nor is it built for a future in which it wouldn't have access to infinite resources. Worse still, investors in the media have run cover for the fact that these models don't really do much more than they did a year ago, and for the overall diminishing returns of large language models writ large.

Now, I've had many people attack my work about Open AI, but none of them, not one of them. Nobody has provided me any real counterpoint to the underlying economic argument I've made since July of last year, that Open AI is unsustainable. Now, this is likely because there really isn't one, other than Open AI will continue to raise more money than anybody has ever raised in history in perpetuity

and will somehow turn the least profitable company of all time into a profitable company. This is not a rational argument. It's a religious one. It's a call for faith, and it's disgusting to see well-paid reporters with, I don't know, 150,000 subscribers to the newsletters and a really shitty podcast with a major news outlet constantly just ignore this shit. And I see no greater pale horse of the apocalypse than Microsoft's material pullback on data centers.

While the argument might be that Microsoft wants open AI to have an indebted, independent future, that's fucking laughable when you consider Microsoft's deeply monopolistic tendencies. And for that matter, it owns a massive proportion of OpenAI pseudo-equity. At one point, Microsoft's portion was valued at 49%. And while additional fundraising has likely diluted Microsoft's stake, he still owns a massive portion of what is, at the very least, if you believe any of this nonsense, the most valuable private startup of all time. And we're supposed to believe that Microsoft's pullback, which limits OpenAI's access to

infrastructure it needs to train and run its models and thus, as mentioned, represents an existential threat to the company. You meant to believe that this is because of some sort of paternal desire to see Open AI leave childhood behind, to spread its wings and enter the real world. Are you fucking stupid? Sorry, I shouldn't be calling people stupid. I shouldn't. I shouldn't. I really shouldn't. But I am. More likely, Microsoft got what it needed out of Open AI, which has reached the limit of the models it can develop, which Microsoft, by the way, already owns the IP of due to their 2019 funding round. There's probably no reason for Microsoft to make any further significant investments

other than just kind of throwing a little cash in there and then I imagine some sort of tax dodge. I'm just guessing. It's also important to note that absolutely nobody other than Nvidia is making any money from generative AI. Call Weave loses billions of dollars. Open AI loses billions of dollars. Anthropic loses billions of dollars.

And I can't find a single fucking company providing generative AI powered software that's actually making a profit. The only company is even close to doing so are consultancies providing services to train and create data for models like Turing and Scale AI and Scale isn't even fucking profitable. Now the knock-on effects of OpenAI's collapse will be wide-ranging.

Neither Corweave nor Crusoe will have tenants for their massive unsustainable operations, an Oracle will have nobody to sell compute to because they've leased that thing for 15 fucking years for one customer. Who else is going to take that? Anyway, Corweave will likely collapse under the weight of its abominable debt anyway,

which will lead to a 6, 7% or more revenue drop for Invidio at a time when revenue growth has already begun to slow. On a philosophical level two, Open AI's health is what keeps this industry alive. Open AI has truly the only meaningful user base in generative AI, and this entire hype cycle has been driven by its success, meaning any deterioration or collapse of Open AI will tell the market what I've been saying for over a year. The generative AI is not the next hypergrowth market, and its underlying economics do not make sense. But look, I'm not saying this to be a hater.

I'm not saying this to be right. This stuff has driven me insane, but I'm not doing it to be a pundit, to be a skeptic, to be a cynic, to be someone that hates because I want to hate. And I hate them, not because I think people will like me because I hate them. I hate them because I have brain worms. I have something wrong with me inside my brain that tells me I have to be like this and they have to look at these things. they have to try and find what's going on, otherwise I will be driven mad. Which is why I'll say if something changes, if I'm wrong somehow, I promise you, I will tell you exactly how, exactly why, and what mistakes I made to come to the conclusions

I have in this episode, and the episodes before. But I don't believe that my peers in the media will do the same when this collapses. But I promise you that they will be held accountable because all of this abominable waste could have been avoided. Large language models are not, on their own, the problem. Their tools, capable of some outcomes, doing some things, but the problem ultimately are the extrapolations made about their abilities and the unnecessary drive to make them larger,

even if said largeness never really amounted to much. Everything that I'm describing is the result of a tech industry, including media and analysts, that refuses to do business with reality, trafficking in ideas and ideology, celebrating victories that have yet to take place, applauding those who have yet to create the things that they're talking about, cheering on men, lying about what's possible, so that they can continue to earn billions of dollars and increase their wealth and influence for barely any fucking reason. I understand why others might not have said what I've said.

What I am describing is a systemic failure, one at a scale here to unseen, one that has involved so many rich and powerful and influential people agreeing to ignore reality. and that'll have crushing impacts for the wider tech ecosystem when it happens. Don't say I didn't warn you. Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Mattersowski. You can check out more of his music and audio projects at Mattisowski.com. You can email me at E-Z at Better Offline.com or visit Better Offline.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 our slash Better Offline to check out our Reddit. Thank you so much for listening. Better Offline is a production of Cool Zone Media. For more from Cool Zone Media, visit our website, coolzonemedia.com, or check us out on the IHeartRadio app,

Apple Podcasts, or wherever you get your podcasts. Another podcast from some SNL, late-night comedy guy, not quite. Unhumor me with Robert Smygel and friends. me and hilarious guests from Bob Odenkirk to David Letterman help make you funnier. This week, my guest, SNL's Mikey Day and head writer Streeter Seidel, help an a cappella band with their between songs banter. Where does your group perform?

We do some retirement homes. Those people are starving for banter. Listen to humor me with Robert Smigel and friends on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. This is Saigon, the story of my family and of the country that shaped us. From IHeart podcast, Saigon. You don't think I'm serious about a free Vietnam? One city, a divided country, and the war that tore America apart.

This is for Vietnam. They're pouring patril all over here. Freedom for Vietnam! There's a fire coming to this country and it's going to burn out everything. Listen to Saigon on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Why are we all so obsessed with romance? On the Radio 831 podcast, join us. and John Abasker and Tyler McCall as we unpack all the trending tropes,

fuzzy adaptations, book talk drama, and celebrity love stories with hot takes and sharp guests. Each episode digs into what these stories reveal about desire, fantasy, identity, and how we love now. Listen to the Radio 831 podcast on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. I'm Joey Dardano, and on my new podcast, Hope from a Hypocrite, I'll be changing lives, helping people in need with thoughtful solutions. Sike, I'm a comedian. I'm not qualified to give good advice. Join me and my comedian friends as we riff, rant,

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