Better Offline - The Enshittifinancial Crisis: Part Three

Episode Date: January 22, 2026

In part three of this week’s four-part Better Offline Enshittifinancial Crisis special, Ed Zitron walks you through how the imaginary demand for AI compute is setting up every single data center developer for disaster - and how many major banks will be caught in the contagion.This series was a ton of work, so please support me by subscribing to my premium newsletter - here’s $10 off your first year of annual https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/84rt762qen Read along with the newsletter version for links! https://www.wheresyoured.at/the-enshittifinancial-crisis/ 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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Learn how podcasting can help your business. Call 844-844-I-Hart. 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,

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Apple Podcasts, or wherever you get your podcasts. Your husband is not who you think he is. Your body is not what you thought it was. Your identity is formed by a secret history. I'm Danny Shapiro. And these are just a few of the stunning stories I'll be exploring on the 14th season of Family Secrets. He kind of shoved me out of the way and said, move. And he went out the front door and he jumped in a car and drove off.

And that was the last time I saw him. Listen to Season 14 of Family Secrets on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Your 20s can be so exciting, but they can also be really overwhelming, confusing, and honestly, just kind of lonely. May is Mental Health Awareness Month and the psychology of your 20s is breaking down the science behind the biggest roadblocks we face. I was six years into my career,

the 80-hour weeks and just the first one in, the last one out, and I ended up burning out. There was a large chunk of my 20s that I was just so wanting to be out of that phase out of my skin and I just like really regret not living in the present more. You don't need to have everything figured out right now. You just need to understand yourself a little bit better.

Listen to the psychology of your 20s on the IHeartRadio app, Apple Podcasts, or wherever you get your podcasts. AllZone Media. Hi, I'm Ed Zittron and welcome to Better Offline. That's right, folks. We're back for the third part of our four-part series about the terminal stage of the inshittification process, the inshittification of the financial markets. So far, we've talked about the inshittification of the stock market, the complicity of

the analysts and the media, and how venture capital will be the canary in the coal mine for any eventual collapse. If venture capital is both the perpetrator and the victim of the air bubble, and it's worth exploring how it came to this point. Now, hang on on, these general voice. Folks, we haven't seen values this big in a long time. It's the biggest numbers we've ever seen. They're simply tremendous.

Open eyes maybe worth $830 billion. Can you believe that? They lose so much money, but folks, we don't mind. Clammy Sam, when they call him clammy or says everybody he's going to give them $1 billion in more we love him, that dissenters are going to have the biggest deals we've ever seen, even even if we have to work with Dario. Sorry to those of you who don't like that voice. It was only about 30 seconds.

You see, right now, AI startups are big, exciting news for the limited partners funding large language model companies. Things feel exciting because the value of the assets under management, AUM, are going up, which is nothing dodgy per se, but it's just how VCs value things. And if they're valuing AI stocks, well, that's how their fees are getting paid because the thingies they've invested in are worth more money

and now limited partners are paying them a percentage so that you can sit in an apartment that costs too much, not see friends because they just sit online posting for 11 hours a day. Yeah, and then they can lose on the money in the future, I guess. Investing early in Open AI allows a venture capitalists or even an asset manager like Blackstone, which invested in 2024, to say it has a big holding and a big increase in its AUM. AI stocks make venture capitalists who bet on them two years ago

look like geniuses on paper. You got in early on Open AI, Anthropic, cursing, the cognition, perplexity, or any other company that loves to burn several dollars per dollar of revenue, you have a big, beautiful number, the biggest you've ever seen, and your limited partners need to pay you a fee just to manage it. Venture capital has not seen valuations like this in a long time, and on paper it feels a lot like a lot of VCs got in on companies worth billions of dollars, right? On paper, that is. On paper, cognition is worth 10.2 billion, perplexity, 18 billion, cursor 29.3 billion, lovable 6.6.7. billion, cohere's 6.8 billion, replete 3 billion, glean 7.2 billion. Massive valuations to companies

that all basically do products that OpenAI or Anthropic or Amazon or Google or any number of Chinese companies are already working to clone. They're all losing lots of money too and have no path to profitability of any kind. But right now the numbers are simply tremendous, folks. I've heard venture capitalists tell me that there are times when they have to agree to invest with little to know information or know that they'll lose the opportunity to another sucker, I mean investor. I've heard venture capitalists say they don't have any insight into finances, but we love the numbers, folks. They're simply tremendous. We love it. Let me tell you how not tremendous they are. I had a source recently suggests that nobody who invested past OpenAI's $100 billion valuation have any information rates. And what that means is they literally

do not know anything about the company. They don't know anything other than what the company will tell them and the company doesn't have to tell him shit, which means they don't know the revenues, they don't know the costs. They only know what new stuff, new ridiculous stat, Sarah Fryer CFO of OpenAI has farted out. They posted recently that $20 billion annualized revenue.

Yeah, I think that's complete nonsense, but they want to do that so that you go, Open AI made $20 billion in 2025. Fuck that. I don't even think they made 10. Now venture capitalists would argue, of course, that they'd say, I'm insane. They would say,

they would think be mad. And they would say that the growth is obviously there while pointing to whatever startup has made $100 million in annualized recurring revenue, which is $8.3 million a month, by the way, all while not discussing the underlying operating expenses. The idea, I believe, is that the current spate of AI spending is only set to increase the next year, and that will somehow lead to fixing the margins, I think. Venture capitalists staunchly refuse to learn anything other than investing growth and then profit from growth, even if profiting from growth doesn't appear to be happening anymore. In reality, venture capital shouldn't have touched LLMs with a shitty stick, because the margins were obviously blatantly bad from the very beginning.

We knew Open AI would lose $5 billion in the middle of 2024. The same venture capital climate would have fucking panicked, but instead chose to double, triple and quadruple down. I believe that massive valuation drawdowns are a certainty for AI companies, and by that I mean these companies will end up being revalued and the number will be smaller than the big number everybody fell in love with. Look, venture capitalists, I got to ask you a question. What happens if Open AI dies? Do you think this will make investors interested in funding or acquiring other AI startups? How much longer are we going to do this when will venture capital realize it's setting itself up for a disaster? And what exactly is the plan? Open AI and Anthropic will suck the lakes dry

like an Nvidia GPU named after Nancy Reagan. How is this meant to continue and what will be left when it does? The answer is simple. There won't be any money for venture capital for a while. Those AI holdings are going to be worth at best 50% if they retain any value at all. Once one of these startups die, once there's a major casualty, a panic will ensue,

sending venture capital is scrambling to get their holdings acquired, by which I mean sold to someone else, until there's little or no investor interest left. Why would limited partners ever, trust venture capital after this. Why would anybody? Because based on the past four years, it doesn't appear that venture capital is actually good at investing money. It just got lucky here after a year, until there were a few ideas that they could sell for hundreds of millions or billions of dollars. And now we're out of them. We're out. I think we're out. I think there's probably still some,

but I think the era of the unicorn might be dead for a while. Venture capital believed it knew better as it turned its back on basic business fundamentals, starting with Clubhouse, crypto, the Metaverse and now Generative AI. Yet they're far from the only fuckwits on the Dickhead Express. Because yes, I am going to talk about data centers. Per Bloomberg, there were at least $178.5 billion in data center credit deals in the US in 2025, rivaling the $215 billion invested in US venture capital in 2024 and the $197.2 billion invested in US venture capital through August 7, 2025, and over $100 billion, more than the $60.69 billion of data center deals done in 2024. That's, that's really worrying. It's like more than more than 100% more. I'm very worried and I'm going to tell you why, using a

company called CoreWeave, Corwave, that I've been actively warning about, warning people about since March. And I get a little crazy around Corweave because I have had the core weave conversation a lot. And I've seen people straight up to steal the title of my articles as they come to this realization six to seven months later. But call weave is a mess. And Corweb was obviously always a mess. And everyone has been saying Corwee is fine because they went public. Corwave is not fine. All right? Let's talk about Corwave. Corwave is something called a NeoCloud. It's a company that builds data centers by renting out and they build data centers, they fill them full of GPUs and they rent them to people. They rent something called AI compute. And as I explained a few months ago, they do so by

building data centers backed by endless debt. And I quote myself, saying up a neocloud is expensive. Even if the company in question already has data centers, as core we've did with its cryptocurrency mining operation, AI requires completely new data center infrastructure to house and cool the GPUs, and those GPUs also need paying for. And then there's the other stuff, like power. water and the other bits of the computer, the CPU, the motherboard, the memory, the storage, and the housing and the power supply and all that good stuff. As a result, these neoclouts are forced to raise billions of dollars in debt, which they collateralize using the GPUs they already have, along with contracts from customers which they

use to buy more GPUs. Corwe, for example, has $25 billion in debt on an estimated $5.35 billion in revenue, losing hundreds of billions of dollars in a quarter. You know who also invests in these neoclouts? Invidia, the people who make the GPUs. Invidia is also one of Corwee's largest customers, accounting for 50% of its revenue in 2024, and just signed a deal to buy $6.3 billion of any capacity that Corweave can't otherwise sell to someone else through 2032, an extension of a $1.3 billion deal from 2023 billion, reported by the information. Oh, and Invidia was the anchor investor of Corweave's IPO, putting in $250 million. Corweave is also one of the largest providers of AI compute in the world. and its business model is indicative of how most data center companies make money.

In fact, I'd argue that they are probably doing better because they have the backing of everyone. Now, you may think that's a too big to fail thing. Not really. It just means that they're kind of a village bicycle of AI compute. Grossness aside, let me explain how this works. First, the core we've signed contracts, such as its $14 billion deal with META or its $22.5 billion deal with Open AI, before it has the physical infrastructure to actually service them. It then raises debt using this contract as collateral. Or does GPUs from Nvidia? Those take three months to arrive, and then another three months to install at which point monthly payments begin. And I should also add that that's kind of taken out of deferred revenue that the customer has already put down. To really simplify this, data center developers are raising money months up to a year before they ever expect to make a penny of revenue, not profit. In fact, I can find no consistent answer to how long a data center takes

build and the answer here is pretty important because that's how the money is going to get made from the data centers from building fucking everywhere. You may also notice that monthly payments in the chart that I linked, which I should have mentioned, begin at six to 30 months, a curious and broad blob of time. You see, data centers are extremely difficult to build and the concept of an AI data center is barely a few years old. With the concepts of hundreds of megawatts in one data center campus entirely made up of AI GPUs, barely two years old, JPUs, which means basically everybody building one is doing so for the first time and even experienced developers are running into problems. For example, core scientific, Corweave's weird partner organization it tried and failed to buy

that is truly different despite the similar name has been trying to convert its Denton, Texas cryptocurrency mining data center into an AI data center since November 2024, specifically so that Corweave can rent it to Microsoft for OpenAI. This hasn't gone well and this is when things get weird. The Wall Street Journal reported a few weeks ago that Denton had been racked with several months of delays thanks to rainstorms preventing contractors and pouring concrete. Contrite. I'm going with it. It's Contrite now. We're calling it Contrite. Concrete. I originally within this script wrote down that this was a plausible thing. I thought that this was normal. However, I should add something. This may actually be bollocks. So I'm a psycho and I went and I looked up whether I looked up weather in Abilene, Texas. And it turns out that there were like 11 days with rain total. And there was only, I think, on June 3rd and September 22nd, there were rainstorms or thunderstorms of any kind. I think that there are only two days where rain was over 0.1 inches.

The people I've talked to about this deal are saying it wouldn't be weather. It would actually just be money. Nevertheless, those are things that are stopping them building a 260 megawatt data center. And that's fucking nothing compared to the gigawatts that OpenAI claims to want to build. And what this means, by the way, is that CallWeave can't actually get paid by OpenAI because, per its contract, customers don't have to stop paying until the computer is actually available. This is a very important deal to know for literally any data center development you've ever heard of or seen. Another podcast from some SNL late night comedy guide, 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.

This week, my guest, SNL's Mikey Day and head writer Streeter Seidel, help an acapella band with their between songs banter. There's the worst singer in the group. The worst? Yeah. Me. 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 yarn herds, right?

That's the name. The Harvard Yard. They're open. Do you have a name suggestion? We're open. Since you guys are middle-aged, one erection. Listen to humor me with Robert Smigel and Friends on the I-Heart Radio app, Apple Podcasts, or wherever you get your podcast. Humor me.

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Streaming, radio, and podcasting. Call 844-844-I-Hart to get started. That's 844-8-4-I-Hart. There are times when the mind becomes a difficult place to live. This is David Eagleman with the Inner Cosmos podcast, and for Mental Health Awareness Month, we're dedicating a series to understanding the mind when it struggles. I'm joined by doctors, researchers, and those with lived experience.

We'll talk with singer-songwriter Jewel about anxiety. I started living in my car, and then my car got stolen. I was shoplifting. I was having panic attacks. I was agoraphobic. And making it through hardship. To be present is a learned skill, and it's hard to be present.

We'll talk with John Nelson about clinical depression and the brain implant that saved his life. What I learned is that procedure made me happy because I'm disease-free. And we'll talk with leading experts like Judd Brewer about anxiety and John Hirschfield about obsessive-compulsive disorder and the science of how the brain can change. This is a month of deeply personal and honest conversations about what happens when the brain goes off course and what we can do about it. Listen to Inner Cosmos on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts.

Everyone, it's Ryder Strong and Will Ferdell 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, who. Ah, ha, who. Again, we are experts. So make sure to tune in a pod meets twirled for all our Survivor

50 takes. Listen to Podmeets Tworl on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. As of core, we've's Q3 2025 earnings, they're sitting on $1.1 billion in deferred revenue, that's income for services not yet rendered, up from $951,000 million in Q2 and $436 million in Q1, 2025. This means deposits have been made, but the contract is yet to be serviced. Now, I'm also a curious little career, so I went and found the 921 page 2.5.2.5.2 $4.6 billion DDTL's delayed draw term loan, 3.0 loan agreement between Corweave and banks including Morgan Stanley, Mitsubishi UFG and Goldman Sachs, and in doing so, I learned something. Well, first of all, Open AI appears to have net 360 payment terms from Corwave, meaning that it can literally pay a year

from invoice. Second, Corweave is required to maintain something called a contract realization ratio 0.85 times, meaning that Corweave has to make at least 85 cents of every expected dollar, or it is in default of its loan. This is important to note because it means that if, say, Open AI decides not to pay up in a year, Corweave will be up Shit Creek without a paddle. Now, I apologize. That suggests that Corweave isn't already up shit creek, or that it might have a paddle of some sort. Buried inside Nvidia's latest earnings on page 17, there's a little clue. Ahem, and I quote, In the third quarter of fiscal year 2026, we entered into an agreement to guarantee a partner's facility lease obligations in the event of their default.

The agreement allows our partner to secure a limited availability facility lease backed by our credit profile in exchange for issuing us warrants. The maximum gross exposure is 860 million, which is reduced as the partner makes payments to the leaser over five years. The partner has placed $470 million in escrow and executed an agreement to sell the data center cloud capacity, mitigating our default risk. Credit where credit is due. Eglide analyst just Dario caught this in November, but in Corleweb's condensed to consolidate balance sheets, there sits a $477.5 million line item under restricted cash and cash equivalence non-current. Though this might not be Nvidia's escrow, this number shifted from 617 in Q1 to 340 million in Q2, it lines up all too precisely. And who else would Nvidia be guaranteeing? in any case, Corweave is likely to get the best deals in data-centered debt outside of Oracle.

It has top-tier financiers, who I'll get to in a little bit, the full-backing of invidia, who is both an investor, customer, and apparent financial backstop, and also Corweave is a customer of theirs, and the ability to raise debt quickly. Coreweeb's deals are likely indicative of how data-cented financing takes place, and those top-tier financiers, they basically beaded every single deal. It's actually really boring when you when you lay it all out, which is exactly what I'm going to do. So, who's actually paying for this shit? I went and dug through a pile of 26 prominent data center loan deals,

including the proposed $38 billion debt package that Oracle and Vantage data center partners are raising for Stargate, Shackelford and Wisconsin, Stargate Abilene, New Mexico, and of course SoftBanks's $15 billion bridge loan, which I included for a reason that will become obvious shortly. And multiple core we've loans. I've found a few commonalities, and forgive me, I'm about to say a lot of names and numbers seem might want to pull up the newsletter to read along with it like a sing-along. Now, Blue Owl. Blue Al, we love Blue Al, folks. They were present in every single Stargate deal, other than the $38 billion deal that's being raised by vantage that is yet to close.

Blue Al was also involved in a $1.3 billion Australian dataset and a debt package by virtue of owning stack infrastructure. Remember that name. MUFG, Muvg, also Mitsubishi UFJ Financial Group is their full name, but I like saying Mavg. was present in 17 out of 26 of the deals, including three separate Corley financing, Stargate New Mexico and $18 billion deal, the alleged Stargate $38 billion deal, soft banks bridge loan, which they had to raise, by the way, to fund Open AI, and a $5 billion green loan package for Vantage Data Centers, who you might have just heard me say. J.P. Morgan Chase was involved in eight deals, and they were involved in some of the largest two, Corwe's October 2024 financing, their third delayed-dra-term loan,

and November financing as well, the funding behind Stargate Abilene, the $38 billion Oracle deal, and Blue Owls acquisition of IPI partners in 2024. And yes, they were also part of SoftBank's bridge loan. Now, let's not forget Deutsche Bank, who have never done anything dodgy ever, do not Google what Deutsche Bank has done with banks or particular fellas. Deutsche Bank, they're involved in SoftBank's bridge loan and three smaller deals. Data Center in Seoul, Corrie's 2024 debt, Corrie's November financing, and a data center deal in Latin America, as well as a $610 million data center project in Virginia and a billion euro data center project in Germany that was invested in with in VDIA. BMP-Peribus, seven deals.

Cori was delayed draw-tone loan three, Stargate New Mexico, Stargate Wisconsin and Texas, IPI partners of blue owl, that data center deal in Seoul, and another data center in Chile. Morgan Stanley? You remember Morgan Stanley, don't you? Well, they were in eight of these fucking things. Corby's October 2020 loan, loan three, November loan, Stargate New Mexico, Stargate with Vantage, the $38 billion one I just talked about, and one with EQT Edge Connects, well, I don't need to go into detail. It's another fucking data center. Oh, and they were also in soft banks, bridge loan, which they needed to fund Open AI. Now here's another name that you're going to hear in the future, SMBC, Sumitomo Mitsui Banking Corporation, and I must say the Japanese is not on a name of fucking company. Anyway, they're in seven deals, all notable. Correwee's DDTL 3.0 in November financing loans, Stargate New Mexico, Stargate, Texas, Wisconsin, that's that 38 billion dollar one, a data center in Roan, Maryland, also involving Mugg, TD Securities and HSBC, as well as data center deals in Chile and Latin America that you've already heard about. Oh, and guess what? Soft banks, bridge loan, which they use to invest in Open AI. There are a lot more data center deals than these, but I wanted to tell you exactly how sensitive.

centralized they are. I also really need you to know how worrying that is because literally every part of this pie is being funded by like eight to nine banks. If OpenAI is raising money for a date, well, they wouldn't raise it. It would be Oracle or Corleave or have you, raising for a data center. One of these people is in it or companies, they're not people. It's really worrying. It's worrying how centralized this is. And the largest deals, such as the 38 billion Stargate, Texas, Wisconsin deal, or the $18 billion Stargate New Mexico deal, both involved Goldman Sachs, BMP, Peribus, SMBC and FUF, MUFG,

and all four of those companies have at some point funded core weave. In fact, everybody appears to have funded core weave at some point. Citibank, Credit Agricoles, Society General, Wells Fargo, Carlyle, Blackstone, BlackRock, Barquess, Magnetar, and Jeffreys, the name a few. And if you've been watching the news recently, you may have heard that term, well, term, term, word, Jeffries,

to refer to the company that invested in first brands and their exposure. Anyway. Another podcast from some SNL, late-night comedy guide, 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. This week, my guest, SNL's Mikey Day and head writer, Streeter Seidel, help an Acapella band with their between songs banter.

Who's that worst singer in the group? The worst? Yeah. Me. Is there anything to the idea that because you're from Harvard, you only got in because your parents made a huge donation. The yard birds, right? That's the name.

The Harvard Yardt. They're open. Do you have a name suggestion? We're open. Since you guys are middle-aged, one erection. Listen to humor me with Robert Smigel and Friends on the I-Heart radio app, Apple Podcasts, or wherever you get your podcast. Humor me.

I need some jokes to make me seem funny. Run a business and not thinking about podcasting, think again. More Americans listen to podcasts than ads supported streaming music from Spotify and Pandora. And as the number one podcaster, IHeart's 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 to audiences across broadcast radio. Think podcasting can help your business. Think IHeart.

streaming, radio, and podcasting. Let us show you at iHeartadvertising.com. That's iHeartadvertising.com. There are times when the mind becomes a difficult place to live. This is David Eagleman with the Inner Cosmos podcast, and for Mental Health Awareness Month, we're dedicating a series to understanding the mind when it struggles. I'm joined by doctors, researchers, and those with lived experience.

We'll talk with singer-songwriter Jewel about anxiety. I started living in my car and then my car got stolen. I was shoplifting. I was having panic attacks. I was agoraphobic. And making it through hardship. To be present is a learned skill. And it's hard to be present.

We'll talk with John Nelson about clinical depression and the brain implant that saved his life. What I learned is that procedure made me happy because I'm disease-free. And we'll talk with leading experts like Judd Brewer about anxiety and John Hirschfield about obsessive-compulsive disorder and the science of how the brain can change. This is a month of deeply personal and honest conversations about what happens when the brain goes off course and what we can do about it.

Listen to Inner Cosmos on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Hey, everyone, it's Ryder Strong and Will Ferrell 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-hoo! Again, we are experts.

So make sure to tune into PodMeets Twirled for all our Survivor 50 takes. Listen to PodMeets Twirl on the IHeart Radio app, Apple Podcasts, or wherever you get your podcasts. Of the 40 banks and financial institutions I researched, 24 have, at some point, loan to or organized head for Corweave. Of those institutions, Blackstone, Deutsche Bank, J.P. Morgan, Chase, Morgan Stanley, MufG, and Wells Fargo, have done so multiple times. Corweave is a deeply unprofitable company saddled with incredible debt and deteriorating margins with one of the largest clients paying net 360 and as I've said, it is arguably the best financed data center company in the world with the best chances for survival. What I'm getting at is that most data center deals are likely much worse than the terms that Corweave

faces and are likely financed in a similar way, where a client is signed for data center capacity that doesn't exist, such as when Nebius raised $4.3 billion through a share sale and convertible notes, read loans, to handle its $17.4 billion data center contract with Microsoft. And guess what? Gob and Sacks acted as the lead underwriter on the deal with assistance from Bank of America Citigroup Morgan Stanley, all three of which have invested in Corweave. AI data sentence are expensive, required debt due to the massive cost of construction and the cost of GPUs and all take at least a year, if not two, to start generating a single dollar of revenue, at which point they also begin losing money, because it seems that renting out GPUs is really

unprofitable. Didn't think, no one fucking think to check that one. Every single major bank and financial institution has piled hundreds of millions, if not billions of dollars into building data centers that take forever to even start generating money, at which point they only seem to lose it. Worse still, Nvidia sells GPUs in a one-year upgrade cycle. meaning that all of those data centers being built right now are being filled with Blackwell chips, and by the time they turn on, Nvidia will be selling its next generation Vera Rubin chips, making them obsolete. Now, now, now, no, now, no, no, no.

You've probably heard that Vera Rubin, the next GPU from Invidia, will use the same racks called Oberon as Blackwell, which is true to an extent but won't be true for long, as Nvidia intends to shift to their Khyber racks in 2027, hoping to build one megawatt IT racks, which involve entire racks full of power supplies, meaning that all of those data centers you see today, whenever it is they get built, if they get built,

will be full of racks incompatible with the next generation of GPUs. This will also decrease the value of the assets inside the data centers, which will in turn decrease the value of the assets held by the firm's investing. Stargate Abilim, the one invested in by J.P. Morgan, Blue Owl, and Primary Digital Infrastructure and Society General. The one that's been heavily delayed and won't be ready until the end of 2026 at the earliest, full to the brim to the gills with two-year-old GB-200 Blackwell racks. Hell yeah, baby.

Woo! By the beginning of 2027, when this shithole eventually opens, I should really say potentially opens, because let's be honest, I'm not confident. Stargate Abilene will be obsolete, as will any and all data centers fill with Blackwell GPUs, as will any and all data centers being built today? Every single one takes one to three years and hundreds of millions or billions of dollars to build, but probably raised in debt. And every single one faces the same kinds of construction delays and better year. Almost all of them will turn on in roughly the same time frame.

All right. Look, folks, I've got to admit, I don't really get our money works. I'm no economist, but I do know that supply and demand has an effect on pricing. What do you believe happens to the price of renting a Blackwell GPU when all of these data centers come on? Do you think that it will mean that the price goes up or down? Also, while we're on this subject, what do you think happens if there isn't sufficient demand? And demand is a real question, by the way. Right now, OpenAI makes up a large chunk of the global sale of compute, at least $8.67 billion of Azure revenue, which is Microsoft's cloud platform through September 2025.

And they're part of, they're about $22.5 billion of Corweaves backlog, $38 billion. of Amazon's backlog and so on and so forth, and made, based on my reporting from last year, just over $4.5 billion through the end of September 2025. Open AI can't afford to pay anyone, and nowhere is that more obvious than when it negotiated year-long payment terms of call wave. Otherwise, when you remove the contracts signed by Hyperscalers and Open AI, which I do not believe has the money to pay anybody, based on my analysis, there was less than a billion dollars of AI compute revenue in 2025, or 0.583% of the money spent on data center credit deals in the US. Is that good?

Hyperscaleor revenue is also immediately questionable, with Microsoft's deal with Nebius, per their 6K filing, set to default in the event that Nebius cannot provide the capacity it's sold of its unfinished Vineland, New Jersey Data Center, which is being built by Data One, a company that's never built an AI data center with a CEO that had his LinkedIn location set to United Arab Emirates as a, like, very recently, and indeed was in Arabic until very recently as well, and they have funding from a concrete firm that is also a vendor on the project. I also believe that Microsoft is setting Nebius up to fail. Based on discussions with sources, with direct knowledge of plans for the Vineland New Jersey Data Center, Nebius has agreed to timelines that

involve having 18,000 Nvidia B-200 and B-300 GPUs up and running by the end of January for a total of 50 megawatts, with another 18,000 B-300s due by the end of May. On speaking with experts in the field about how viable these plans are, two laugh and one told me to fuck off. If Nebius fails to build the capacity, Microsoft can walk away, much like Open AI can walk away from Stargate in the event that Oracle fails to build it on time, as reported by Anisa Gardesi of the information in April 2025. And I believe that this is the case for literally any data center provider that's building a data center for any signed-up tenant. This is another layer of risk to data center developers that nobody bothers to fucking discuss because everybody loves seeing these big,

beautiful numbers, except the numbers might have become a little too beautiful for some. On December 17th, the Financial Times report that Blue Al Capital had pulled out of the $10 billion Stargate Michigan Data Center project, citing, and I quote, concerns about its rising debt and artificial intelligence spending. To quote the FT again, Blue Al had been discussions with lenders and Oracle about investing in the planned one gigawatt data center being built to serve open AI in Saline Township, Michigan. What debt, you may ask? Well, Blue Al, formerly the loosest legs in data center financing, was in Corweave's $600 million deal, the $750 million deal as well for its Planned Virginia data center with Teresa Technology Parks, a $4 billion core weave data center

project in Pennsylvania, Stargate Abilene, Stock at Mexico, met a $30 billion high period data center deal, and a $1.3 billion data center deal in Australia through stack infrastructure. You Remember, I mentioned those like 10 minutes ago if you email me for a fish biscuit. I haven't got any. I'm sorry. Anyway, they own that company and I mentioned it earlier. Anyway, let's keep going. To be clear, Blue Owl pulling out is not the same as a regular deal. It's a BDC, a business development company. And invest both this money and rallies together various banks, in this case, SMBC, BMP-Peribus, MUFG, and Goldman Sachs, all part of Stargate, New Mexico,

which makes me wonder why it didn't happen. In fact, it makes me very much worry about that. Per the Financial Times, and I quote, the private capital group has been the primary backer for Oracle's largest data center projects in the US, investing its own money and raising billions more in debt to build the facilities. Blue Owl typically sets up a special purpose vehicle,

which owns the data center and leases it to Oracle. Blue Owl is incredibly well connected and experienced in putting together these kinds of deals, and very likely went to many banks. Many banks it's worked with, banks that have been basically giving them blank checks, who apparently had, and I quote, concerns about Blue Owls Rising Debt, much of which it had issued them. While rumours suggest that Blackstone may step in, I need to be clear, and I've spoken to numerous people in private equity about this, this is not a consumer mortgage. This is not a young couple buying a starter home. this is a giant deal.

If it's $10 billion, Blue Owl probably would put in $2 billion themselves, so there'd be like, I don't know, maybe $8 billion of credit. I mean, stepping in would require billions of dollars in legal logistics and likely Blackstone talking to the very same banks it already said no. Why are they not doing this? And indeed, why are things looking shaky? Well, remember that thing about how this data said it would be leased to Oracle? Well, Oracle had a free cash flow of negative $13 billion on revenues of $16 billion, with its most recent earnings only beating analyst estimates, thanks to the sale of its $2.68 billion stake in Ampair.

And you remember that SoftBank, bridge loan I mentioned, that $15 billion one? Yeah, half of that went to Open AI, half of that went to buying Ampair. So that's a one-off of them. Oracle's debt is exploding with over a billion dollars in interest payments in its last quarter alone. its GPU gross margins of 14%, which does not mean profitable. Its latest Nvidia GB200 GPUs have a negative 100% gross margin, and it has $248 billion in upcoming Data Center leases is yet to begin and thus pay for. All for the most part to handle compute for one customer,

OpenAI, which needs to raise $100 billion, and then probably much more to survive. Is that good? Anyway, that's a good point to jump off from. Next episode, we're going to wrap all this up. It's been a great time reading this for you. And we're going to talk about how the data center of apocalypse will start and what might come next. 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. M-A-T-T-O-S-K-I.com. You can email me at E-Z at Better Offline. or visit betteroffline.com to find more podcast links and of course my newsletter. I also really recommend you go to chat. Where's Your Ed dot at to visit the Discord and go to our slash better offline to check out our Reddit. Thank you so much for listening.

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