Screaming in the Cloud - Betting on AI: The Delusion Driving Big Tech

Episode Date: July 24, 2025

In this deep-dive episode, Corey Quinn and Ed Zitron break down the complex and often murky world of AI and the tech giants fueling today’s rapid innovation. From Nvidia’s soaring valuations to OpenAI’s shaky finances and Microsoft’s high-stakes gambles, they reveal the cracks hidden beneath all the hype.They navigate the tangled web of corporate finance, big investments, and what could happen if the AI boom falters whether it reshapes the economy or crashes spectacularly.With sharp takes on the crossroads of AI, crypto hype, SaaS economics, and enterprise software, Cory and Ed cut through the noise to separate myth from reality. They ask: Is today’s tech gold rush truly transformative, or just another bubble pumped up by money, media, and wishful thinking?If you’re into tech or investing, this episode challenges you to look past the buzzwords and understand the real forces shaping the future of technology.Highlights (00:00) Introduction and Initial Thoughts on AI(00:53) AI Skepticism and Financial Realities(03:01) Economic Analysis of AI Companies(07:44) Microsoft and OpenAI: A Complex Relationship(11:23) The Broader AI Market and Its Challenges(16:49) Comparing AI to Other Technological Innovations(34:45) The Salesforce AI Buzzword Craze(35:09) The Disconnect Between Business Press and Valuations(36:37) Google's AI Economics and TPU Insights(39:34) Meta's Midlife Crisis and AI Investments(47:11) The Nvidia GPU Dependency(58:40) OpenAI's Financial StrugglesAbout Ed ZitronEd Zitron is the CEO of EZPR, a national public relations agency focused on technology and business. He writes the popular tech and culture newsletter Where’s Your Ed At and is the author of two books: This Is How You Pitch: How To Kick Ass In Your First Years of PR and Fire Your Publicist. Ed has been named one of Insider’s Top 50 Best Public Relations People in Tech four times.Links: Where's your ed at https://www.ezpr.com/about-usBetter off Line Snark bot https://bsky.app/profile/aws-snarkbot.lastweekinaws.com

These people are doing it because they're too stupid to realize that what they're in is kind of a scam. I think that they're scamming in the sense that they're selling something they don't really understand, but they're not like, I think this will die. I think that they think this will go forever, kind of like crypto. And when I, this is the other thing, people with more work, they're like, oh, you started like a year ago. I was writing in 2020. I was on crypto before everyone. I was on crypto before everyone. Welcome to Screaming in the Cloud, I'm Cory Quinn and I've been looking forward to this episode for a while. Ed Zitron is the host of Better Offline, the writer of Where's Your Ed At?

newsletter, and has often been referred to as an AI skeptic. I tend to view him as much more of an AI realist, but we'll get into that. Ed, thank you for joining me. Thank you for having me. This episode is brought to you by Augment Code. You're a professional software engineer. Vibes won't cut it.

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Don't hire an AI for vibes. Get the agent that knows you and your codebase best. Start your 14-day free trial at AugmentCode.com. So you have been very vocal about AI and I want to say your skepticism of it but that feels like it's an unfair characterization. I think you're approaching this from the perspective of you're trying to sell me something. I'm not going to buy it without examination and the rest sort of flows from there. Yes. And that's the thing right now.

And I've said this a few times in a few interviews. I am being and have been characterized as a radical because I'm like, hey, this company loses billions of dollars and has no path profitability or hey, none of these companies appear to be making much revenue, let alone profit, but they're spending so much money on this. Is that sustainable? And people are like, Ed, you are crazy. You are crazy. I, a rational person, believe that these companies will simply work it out in some way that I

cannot describe. I have blind faith. You are the radical for not. Right. Strangely, when I try and pitch people on things with blind faith in them, they tend to ask a whole bunch of uncomfortable questions that I'm not prepared to answer. But nowadays with AI when you ask those questions, you're treated like you're the problem. Exactly. It's like a gifted child that you have to call.

It's what is that Twilight Zone episode with the child that can dream dream things or something. It's just everyone wants to coddle AI in case it hurts them or in case it breaks the narrative. It's just, it's very frustrating because disagreeing with me is one thing. I do not have trouble with that unless the person is just like, their argument is, nah-uh. Because that is most of the response to my work is just, nah-uh.

No, it's not. Well, I'm trying to sell something and if what you're saying is true, that impedes my ability to do that, so shut up please. Yeah, could you... But even then it's like, it goes beyond that because you've got tons of journalists as well who are just like, nah, it's not true, they're going to work it out. This is all part of the plan. What's the plan? Can you tell me the rest of it? Because it doesn't seem like a good plan unless the plan is raise as much money and get as much awareness as possible, which they've succeeded at. They've not made any money.

In fact, they're not making much money at all. No one is making any money. I think there's like two profitable companies within this space. Maybe, maybe three. If we go back in time and we look at the standard generative AI chat bot or coding assistance and you offer it to someone in a vacuum, they would spend thousands of dollars a month for this based upon the perceived utility. Not everyone, but enough people would. Now though, that has been anchored at about $20 a month per user is the perception. So I don't see a path to

suddenly multiplying each price by a hundred to wind up generating some sort of economic return. They have anchored their pricing at a point where I don't see a path to significant widespread industry defining profitability. I'm going to be honest, I don't think they would have paid thousands of dollars. You had code auto complete things. I talked to a client about this before COVID. I was remember was in a we work and they'll be telling me yeah it's kind of like autocomplete for coding. I'm like oh seems useful I bet people would like that. They I think they sold part of it to Microsoft or something I forget but also if they would have paid thousands

for it wouldn't they have paid thousands of dollars for it already because GitHub Copiler basically got out there before everyone. Would people not have paid thousands for that? That's the thing. Microsoft launching this product, they are the pricing gods. If they thought they could get $1,000 a month per head, they would do it. They would do it today.

They would have done it yesterday or several years ago, but they didn't. And there was a story that came out in like 2023, I think, that said that Microsoft was losing like 20 bucks a customer with GitHub Copilot as well. But putting that aside, I think that people overestimate, or sorry, underestimate how much software engineers love automating shit. Like there was the whole platform as a service era.

I mean, when that with containerization, when it came in, I remember talking to a client at the time, a PR firm, who was just like, yeah, there are people who just do containerization because their boss said they'd heard it at a conference. Nick Suresh, Ludicity, he did a great piece about Monte Carlo. I don't even know what Monte Carlo does, but he has a great piece about how a bunch of people were trying to get Monte Carlo. They were like, why am I talking about Monte Carlo? No one knew what it was. This is the modern software era. And

we can't even make real money off of AI in this kind of specious software era. It's crazy to me, man. The whole thing feels insane. Well, as you said, it's automation. And this is on some level from a coding assistant perspective, the purest form of automation of the workflow, which is copying and pasting out of Stack Overflow. Mason Friar-Knowland IDEs aren't new. I mean, it's just, I'm not saying that this is... One common mischaracterization of our work, and frankly, I've done myself no favors in my earlier stuff, I was a little unilateral.

But one common mischaracterization is that I believe there's no value. No, I think this is a $50 billion total addressable market. I think that we are nowhere near the top, but the top is much smaller. And I don't think there is going to be some magical breakthrough. Every breakthrough that's happened is just kind of an incremental one. Since about 2023, even with the launch of Reasoning, remember what everyone was beating off about Strawberry? And it comes out and nothing happens? Yes, the number of Rs in Strawberry, which then all the models special case, that'll solve it,

will just play whack-a-mole a hundred million times every time someone finds something embarrassing. It's so cool. Well, the Strawberry one was there for a while. I know because every single time a new model would come out, be like, how do you have any hours and just the first thing I did? Or it'd be like, give me 50 stay. Give me all the states with are in them. That's it. They're like, who they did it again. And then you easy post. The one I love is trying to cyber bully it into ranking the U.S.

presidents by absorbency that that can go surprisingly well. It's so funny that we're like boiling lakes. But it's just, it's very frustrating because I don't feel genuine, I genuinely nothing you hear is really anger. I'm frustrated because what I am saying is true and it will eventually, gravity exists and everyone's going to feel like me eventually, I think.

And it's just like, how long do you want to do this to yourself? How long do you want to debase yourself pretending that these children are gifted? Yes, we're still trying to summon God via Jason and we're hoping for the best, but it's not going super well. You've been tracking this longer than I have. I didn't want to be tracking this, but AWS had a corporate inability to shut up about anything touching AI, and it was all that they were willing to talk about. So I was brought in kicking and screaming relatively late because I resisted for a while. What have you seen economically? Let's talk about the numbers. So recently came out as in like a day before we spoke,

so Microsoft, fun story about Microsoft and numbers. Two quarters ago, Microsoft said they had $10 billion of annualized recurring revenue from AI. Now Microsoft does not have an AI section of their earnings. They have intelligent cloud, productivity and software. And I think like something, like it's something and more. Intelligent cloud, which also speaks to the existence of moron cloud somewhere,

but they don't like to talk about it. Yeah. Yeah. That's actually what large language models are. So they have these, they don't have these sections, but AI is basically all combined AI revenue. So last quarter, then quarterly earnings in 2024 2024 they said $10 billion ARR so month times 12. Hey January rolls around proud as can be Microsoft's at $13 billion of ARR in AI exciting right? Next quarter earnings come round they do not update the number.

Doesn't update. Why would they do that? Then the information came out a few weeks ago with a story that said Microsoft's projected revenue in AI was $13 billion. And then another story came out yesterday that said that $10 billion, well, first of all, $10 billion of that was OpenAI spend, but OpenAI is Azure's biggest customer. And it's very bad that that's the case because they pay a discounted rate on Azure, and there's a decent chance that a lot of that money isn't real because Microsoft invested $10 billion-ish in 2023 with a large portion of that that we don't know how large in cloud credits,

Semaphore reported. And so we have one of the largest cloud providers feeding itself cardboard. Like it's what it that is what's happening. I've spoken to multiple reporters. It's like Azure's old biggest customer, my understanding was Xbox. Like, okay, great. Congratulations. The snake eats itself. But that makes it set. That makes sense. If you're providing her, I imagine 365 is probably a very, very large Azure customer. Just because, but it isn't amortized as revenue because it is cost, which probably has tax preferential, blah, blah, blah, blah, blah. They've also stuffed AI into it. So how much do you want to bet that that is now being considered

AI revenue, despite the fact that just people who want to do, want to write documents for work? It is, but Microsoft's only making $3 billion of annualized revenue from all of their AI bullshit other than OpenAI's $10 billion. But what's crazy about the story is that apparently Microsoft invested in OpenAI with top executives believing that they would sh- I've talked to multiple reporters today, I'm trying to be like, hey, this is weird. Have you looked? And everyone's like, yeah, these things happen, you know, what people do.

No one does this. I have never heard in my entire history in Silicon Valley ever of someone investing in a company and thinking they would die. There's only one reason. These Cs throw money at it in early stage ideas, but they throw a million here, two million there out of a hundred million dollar fund. But that's a slight difference. They are believing it might die, but kind of hedging their bets. Microsoft executives believe they would eventually fail is a vastly different

situation. And the reason, in my opinion, is that Microsoft has access to all of OpenAI's research, IP, and they host all of their cloud infrastructure. Kind of feels like they can let OpenAI die and then take everything OpenAI has, because they already own it. But nevertheless, putting all that aside, Microsoft's biggest as your customer is a company that loses the money. That is bad. And Microsoft is the company making the most from AI. By handing money to a company

to hand it back to them. Google is doing a deal to serve compute to open AI. By which I mean they are hiring CoreWeave to provide the compute to Google to provide the compute to OpenAI. This is f**king wash trading! It's wash trading in the cloud! This should terrify people because when you remove OpenAI's compute, Microsoft's making $3 billion a year from AI off of what? $80 billion of pledged capex?

What the f** fuck are we doing? Like this is this is not even radical stuff. I am speaking objective fact Like this is stuff that is real but people are IE's just it's just a pessimist He's just a cynic. You just have to believe harder at I don't even know what I'm believing in at this point No one can express what it is that I am not believing in beyond, they will work it out and model get better. How does model get better? Oh, I'm sorry, I can't answer that. What? Oh, millions of people, a hundred million. It's actually really good. We're on a cloud podcast.

Sure. Here's a fun fact. Do you ever notice the open ai never announces monthly active users they only do weekly i did yeah do you do you do you know why they're not doing that i have a theory i'm i don't have anything concrete i'm curious to hear your theory so the information reported earlier in the year that I think it was they have 15.5 million paying subscribers on chatGPT, right? I reckon their monthly active users are much higher than 500 million, which would seem good, right?

It would seem good to have, except, okay, so say they're 600, 700 million, and then you divide that by 15.5 million. That's a dogshit conversion rate. That's absolute doo-doo. That is some of the worst conversion rates in SaaS. And you have to treat OpenAI like a SaaS business. You cannot treat it like a consumer subscription. They lose money on every customer, but they want to be given SaaS-style valuations.

Okay, so you have a 2% conversion rate. The information came out yesterday, or day before yesterday, I think, with a whole thing about retention rates. OpenAI has got like a 73, 72% retention rate after six months, which is in line with like Spotify, which has 72%. That's not very good for a company that wants SaaS-style valuations. That's more consumer product valuation than anything else. Exactly. And a consumer product that only loses money?

That's not great. It's not brilliant. It's not… I juggle my consumer stuff all the time. The business stuff that I use, that tends to stay put for years. That's why you see relatively small churn rates. That's why you see renewal rates being very sticky. There's not these big drop off at one year cliffs at most of these companies. Will Barron And the thing is, it's because they're effectively consumer subscription. No one really, you can't really express. I realize that a lot of SaaS is sold in this kind of specious way, where you sell to a CTO or a CEO or a CIO that doesn't really touch the rest of the stack.

You can't really do that with AI quite as good because there's not really an outcome that you can even look at. It's just kind of a thing you offer. And it's so heavily commoditized. Sure, you could get Cursor. Sure, you could get ChatGPT. But at the same time, OK, I've now got it.

How are you making more money out of these companies? Because that's how SaaS companies really cook. You can't really upsell someone with chat GPT because, oh, my model will be better. How? One company goes out with a good model, the other one winds up matching or exceeding it within the next two weeks. If you suddenly say you're not allowed to use this one, I can switch to the other one for anything that I'm doing in less than an hour's worth of work and we're right back where we started.

There's no moat. They're fungible. Exactly. And on top of that, if you were trying to sell into the enterprise, I guess if you're doing enterprise chat, GPT subscriptions, fine, but they're not getting the kind of revenue they want. They're not getting the kind of revenue that like a Salesforce would have out of that. They're not, they are right now. They are, let's see. Let's see Salesforce earnings. that a Salesforce would have out of that.

Right now, they are, let's see, Salesforce earnings, bring them up live. Because I think that they want to, for ChatGPT and OpenAI to make sense, they need the combined value of the consumer, sorry, the consumer, I think it's the smartphone market, it's like half a trillion dollars, and the enterprise SaaS market, which is about a quarter of a trillion. They need both.

That's the only way any of this makes sense. And they are not even at the total revenue. They may be just a little bit above the total revenue if you combine OpenAI, Anthropic, Microsoft, Amazon, all of the projected revenues. They're like 38 billion. The global smartwatch revenue for this year is projected to be about 32 billion. So congratulations, everyone. All the King's Horses, all the King's Men came together and we've barely beaten the

smartwatch industry. The Register had an article come out this morning that says that was a quarter of all all Gen. AI proof of concepts don't are turned off by the end of the year. People are it's people are experimenting with it and I work on cloud bills. I see what the spend looks like. People are experimenting with these things but I'm not seeing anyone saying well we're spending 150 million dollars a year with AWS but we'd better make it 200 million on our commitment because of all the Gen. AI. They're doing $50,000 a month here and there but on that basis of a spend what's it matter it's if it succeeds maybe they'll start

to roll it out more wildly and then care about optimizing it but it's getting turned off if it doesn't hit certain certain metrics and I'm not seeing the stories that show that this stuff is actually being transformative in any way and if it were even slightly they wouldn't shut up about it. Exactly. These motherfuckers love going to conferences and talking about how important stuff is. But I guess, now the Nick Suresh piece I'll have to link you to, but talking about why people talk about Snowflake, like it's a database company, it's like it's the most boring thing. But guys like buying Snowflake so they can go and talk about using Snowflake. But with AI, it's like it's the most boring thing but guys like buying snowflakes so they can go and talk about using snowflake but with AI it's like it's all experimental I

don't think people realize how bad that is because it would be one thing saying this a year ago I was right then and I'm right now but a year ago fine it's experimental fine these experimentations are taking an awfully long time by enterprise standards exactly like they would say this is, this is a good thing. Like this is moving well. Also, I want to correct myself. I brought it up. Salesforce's revenue was $9.83 billion in the last quarter.

So only Forex to go for OpenAI. Also, they made $1.5 billion in profit. OpenAI is yet to make $1 in profit. I spent top dollar for Slack, and I sort of work my way between all the AI stuff that they're shoehorning into it against my will. Oh, I am paying for Slack with a gun to my head. Like I do not want to pay. The idea of paying Mark Benioff sickens me.

But Salesforce, as I mentioned earlier, they say there's not going to be any revenue growth from this. It's just so weird because all of these things have been said publicly. All of these things kept keep being said publicly. But when you put them all together and you say, hey, this doesn't look good, everyone goes, you brute bastard. How dare you? How dare you insult my beautiful child AI?

It's like, I don't know, because it sucks. Like, even if it worked, even if it was flawless, if these were the revenues and the losses, it would still kind of suck. Like it's not, it's not good business. And frankly, I don't think it's great software either. And every, see it keep getting cat hair on my face because my cat's in front of me, this for the video. It's, it's just so bizarre because sure, there are people who really like it. And I think there's a philosophical angle here where there are people who are really attached

to being attached to the future. Well, they wanna be the guy that said it first, I think you see in journalism, I think you see it in software engineering and founders in particular. They wanna be the person that said, I was on this trend before everyone, look how smart I am. I think that that's what Andy Jassy's doing.

Management consultant, MBA mother. He OK, I don't think he was a management consultant is an MBA, though. He does have an MBA, but he was a marketing manager at a W at Amazon before he started at AWS. He was one of the 21 people that take credit for founding AWS. It's like there's like a bunch of people. You ever notice it's you can tell on LinkedIn whether a project successful or not by how many people

claim credit for the thing versus distance the hell out of themselves. But I think the Jassy, I think it's an AWS, it's kind of a hard situation for AWS as well, because of course they have to jump on this. Like they couldn't not, the stock would get pummeled, but they are, they're doing this. Jesse is staking his future on this. He wants this to be, here's everything store. He wants this to be the thing that defines the future of Amazon, except it's dogshit. Amazon may be one of the most embarrassing AI companies. I think Apple

truly is. I think Apple's doing the smartest thing in that they are kind of slow walking back but Apple intelligence, it was like the most radicalizing thing. They shot their mouth off too early. I love it. I love it. So I love that they were like, what if, Hey, you know, auto correct. What if it sucked? And okay, I don't like that idea. What if we randomly added buttons that loaded things you didn't want? No, I don't want that. Cool. This update will apply automatically. I think they radicalized millions of people against AI. And on the keynote too, it's what if your Siri had this magic knowledge of everything

you did on your iPhone and could tie it together? Wow, that'd be kind of cool. Like when do we get that? No, no, no. We just said what if. What if? Wouldn't it be neat? We know how to do it, but wouldn't it be neat? We're riffing. We are riffing right now. Well, uh, google did the same thing at the last. Uh, i.o in 2024 They were like imagine if you needed to return a shoe you hit one button an agent takes the shoe data It does this it does that and then this happens then this happens All of that is entirely theoretical, but wouldn't it be cool? I swear to god, it's illegal for public companies to lie. I thought there was something that stopped them from just making shit up, but there isn't.

They can just do what they fucking want. And then when you look behind the curtain, there's no money. There was an analyst that said Amazon is estimated to make $5 billion in generative AI this year. That's, these are not just rookie numbers. These are alarming. One of their, one of their job ads a while back listed S3 as an AI service, is one of the list of them. So, Gray, where does that start and stop? The broad buckets that no one will ever

break down further for you. So here's the thing, S3 is storage, right? Forgive me, I'm- It is. I have heard that Anthropic is the biggest customer there. I have been told by someone. There are multiple exabyte scale customers on S3. I don't have the details at this point. I would not be surprised. Oh and this is just doing the Joe Rogan Yoke. a guy told me that once. But it's still, $5 billion is not a lot of money on $100 billion of CapEx this year. Microsoft last year, I think, only made $5 billion in AI, and that included OpenAI's spend.

This is not an in, this isn't an industry. Like if you really look at the cost benefit analysis, this isn't real. Like that's, it's a fugazi. If all this growth is there, then why haven't we seen massive posted growth numbers from all of these companies rather than what looks a lot like typical organic, more of the same style growth? I mean, Microsoft has been amortizing $2.5 billion of revenue from OpenAI's cloud spend across Intelligent Cloud. Any growth within Intelligent Cloud is now suspicious.

Yes, yes. And they're the biggest investor in OpenAI. So they're effectively putting their own money back into their own pocket by laundering it through OpenAI. And if it's cloud credits, is it even money? I've never trusted Azure growth numbers and Azure usage numbers just because they're so inextricably linked to Office 365, to enterprise agreements that big companies have for Windows.

Well, well, well, well, well, do you think that they're charging that they're amortizing revenue from their own spend on Azure? That can't be. I would not be entirely surprised. I'm sure it's by, I'm sure it's above board. I would not want to accuse them of doing anything other than that. But Amy Hood, their CFO, has been an absolute master of financial engineering for over a decade.

It's impossible to get much signal from the things that they say based upon the way that they very intentionally have structured and laid them out. Can I run my favorite? This is Tim foil hat. Like this probably won't happen, but I want to put my flag in the ground. I think, I think Amy Hood takes over Microsoft. I think when whatever happens with open AI shits the bed, I think they put a, put like Boxer at Animal Farm, they send Sacher off. Bye bye Sacher. Because he is so I'm reading between the lines here, but the information story that came out over this tense negotiation between OpenAI and Microsoft, there was a thing where top executives thought OpenAI would fail. Wall Street Journal, Burba Jinn,

there were like four different bylines on the information, but Burba Jinn wrote the journal one, that one had a thing about how top executives didn't like the clause about AGI, basically, when AGI is called open AI, doesn't have to share IP with Microsoft. But Sachin Adela apparently pushed it through. What I think happened was Amy Hood went, this company is going to fucking die. This company is going to die. This is stupid, but they're gonna die. Let's buy them effectively. And then when they die, we take all this stuff. And then such as Nadella said, well, the AGI thing and everyone went no such as that's

fucking stupid. Don't do that. So he agreed to it anyway. It's now a major sticking point. I think I think when it all falls down and it will, this is… as your thing is a f**king scandal, I think the tech press is doing a terrible job with this, the fact that your largest customer is a company that burns money and has incredibly shaky finances, that is a counterparty risk. That is a huge thing. So when this breaks, I wouldn't be surprised if Satcher is the one that gets blamed. And Amy Hood in a responsible leadership role comes in and just starts savaging the company. Sort of an interim CEO story where they conduct a search, but the search drags on and they remove

interim from her title. Or whoever she picks, it's another like, another elder god. She goes back and finds a Cthulhu adjacent creature to take over Microsoft because I have friends who think that this Microsoft thing is a plan. It was always the plan. Kind of because non because the nonprofit situation, I've kind of like poorly explained the situation. Do you want me to? It's entirely up to you. I feel like there's a lot of information around this floating around out there.

But basically, OpenAI needs to become a for-profit entity by the end of the year, or they lose $20 billion from their funding. Microsoft is the stopping block, because OpenAI wants a bunch of concessions, and Microsoft doesn't want to give them. And no one knows what's going to happen, and no one wants to say what I'm saying, which is,

what if Microsoft just lets them die? Because if Microsoft says, no, we won't let you convert, OpenAI dies. They can't go public. And Microsoft owns all their IP and research anyway and handles all their infrastructure. Well, what about all the capex they did explicitly for OpenAI?

Yeah, because those things can't ever be repurposed for other customers doing the different things. They also didn't, they never said it was just for OpenAI. They just said for AI. Amazon has been saying that Project Renier, all these specific data centers are for Anthropic. And there was a New York Times story about it, yeah. Indeed. And I'm very curious as to how that plays out because they're talking a lot about how,

oh, Anthropic says that they've trained, that they're running Claude Opus, or Claude IV, on Tranium, which is interesting because I have looked far and wide and I can't find any Tranium or Inferentia customers. The two that I'm aware of from Keynote were Apple and Anthropic. Anthropic they've invested $4 billion in and Apple has been known to be a large AWS customer for quite some time. When we see contracts being negotiated between these things, who says what on stage at whose conference is always negotiated into that?

Apple never says shit about other companies' products, but they did at reInvent last year. Gee, I'm sure there was no contractual stipulation there. Also, no one has said that they're running their Claude Four models exclusively on Tranium. So what did they do? Did they try running a quick like, and here's the thing that ties the last bow on it and just this one side bit we can run on Tranium and the rest we use in video like grownups? I don't know, but they're being cagey and I don't trust them. Well they also, one of the reasons they wouldn't have said they exclusively run on Tranium

is that both Amazon and Google have separately claimed they're the exclusive cloud provider of Anthropic. It rocks. I love that the just lying just lies. It's an amazing competition, though, between Amazon and Google over who can hit Anthropic harder with the money stick. I want to be the centerpiece in that competition. I would love to get like one hundred million dollars. That sounds so sick. Four billion each.

Then Amazon made it eight. And I'm sure it's all AWS credit. So out of one pocket into the other. Oh, no, no, no, no. It did. Amazon then converted whatever it was into some sort of new vehicle. So they were actually able to book that as profit, like their stock in anthropic as profit corporate bullshit. They're Anthropic as profit. Corporate bulls, they're better at this than Microsoft. Microsoft made such a bag, they really thought

OpenAI would die faster. But looking at the original $4 billion investment from November 22nd, 2024, Amazon and Anthropic deepen strategic collaboration. Amazon names AWS its primary trading partner and will use AWS Training to train and deploy its largest foundation models. Use them too. Great. That does an awful lot of heavy lifting. Use them how? How many of them? Is Amazon still buying GPUs from Nvidia? I didn't hear them cancel their order. I am no expert in this space. I want to be very clear on that. For a long time, it sounded

like Amazon execs would get on stage and recite Star Trek techno babble when it came to machine learning. And now, like I tend to recognize patterns. I know that when people are telling me to get in on something now while it's on the ground floor, they're trying to sell me something every time. And I also know that when someone is selling something this hard, it doesn't necessarily live up to a lot of those things. My four-year-old daughter loves ice cream, and I don't find myself having to shove it down her throat. It's a pull rather than a push. Everyone's pushing this so hard,

I don't see the outcome that they're talking about. What if, just what if, the power of AI is more useful to folks on an individual level than it is an enterprise corporate one? I think your idea that this is a 50 billion dollar TAM is directionally correct Yeah, I'll spend 20 30 bucks a month for this stuff. No problem. Would I spend five grant? No, so There is a inherent limit to all of this until they cover some massively awesome use case But they've been looking for that for three years now and haven't much to show for it

beyond it's really good at writing code badly, just like our engineers. And the thing is, I like to talk about the iPhone. And I picked up the iPhone singular wireless visiting Penn State, went to college. And I remember getting it and I remember handing it to was dating. Dating ago was like a social studies, like her dad worked as a local accountant in Central PA, so really good representation of just like normal folk. Every single person who touched it got it.

They were like, holy shit, there's like a little computer and you can just touch it? Wow, like I can take photos on there. My music is on here too. Wow, your email as well? Do you even like they kind of immediately like the channels started forming in their head. With AWS people loved oh my fucking god I want to strangle every person. AWS lost money at first. Oh

AWS did that. Big fucking deal. There was a path to profitability. There was an obvious way in which this would become profitable. On top of that, you didn't have to explain to people why AWS was important. It made sense. It made sense immediately. Suddenly, you could provision stuff instantly. Overnight, you could run an experiment in your dorm room and realize, oh, this is stupid. No one's going to buy it. And you're out 27 cents, as opposed to having to buy and rack servers and wait 16 weeks because Dell can't get its act together and sign leases and data centers. That was transformative. And it was obviously transformative. It was obviously like you didn't have to like you

had to sell people. Amazon loves to sell it, but you didn't have to like con people. There were no people going around it. If you don't get by, I imagine there was someone saying if you don't get in on the cloud early, there's always someone, but it's there was an obvious point. You didn't have to like talk like a wizard. I got seriously into cloud in 2015, 2016 era very late by a lot of standards. I seem to have done okay with it. I got into enterprise tech in like 2013. That was when I started doing PR clients in that. And it's like, guess what? It's like it was still cooking because there were obvious things. You have the mixture of on-prem and off-prem.

You have all sorts of solutions within it. There were obvious things, obvious ways it could proliferate. I am a gizmos and gadgets guy. I run a PR firm. I have to find reasons things are interesting all the time. I know what to look for. I genuinely can't here. I have tried, even the coding, on the show

I had Carl Brown from Internet of Bugs, who I adore, and he really explained it where it's like, yeah, it can do some code, but mediocre code can be dangerous. If you know what you're looking for, it's great, but do you always know what you're looking for? How much of this are you handing off? And it's like, yeah, it sounds like pretty much every cloud automation solution I've ever heard of. This is really useful. It can speed up your workflow. Something that would take you 10 minutes might take you two. You need to watch it.

You can't trust it on its own, but this can automate and turn a 10 minute job into a two minute job, which compounds over time. Awesome. 50 billion dollar tan market. Absolutely. Rock and roll requires stealing from everyone. It's horribly horrible from the environment. But I even think that once this bubble pops all that shit still exists but you're not going to see the scale and you're probably going to see more money invested ever in finding ways to make inference as like nothing. I don't think they are even close and I think because if they were my evidence here is real simple if they were close if they were there They would say we've made influence a inference nothing influence doesn't cut. They would just say it

They would say we have made this profitable. It would be the easiest thing in the world You would just say you would just say like it's profitable. It's good It's good when they have these when with the growth of Azure, the classic growth of Azure, the growth of AWS, the growth of any software as a service solution, you, they trumpeted in very simple terms. They say, Mark Benioff saunters out slimily and is like, ah, number has gone up so many times. And he says the word agentic and the industry shits itself for the next 18 months trying to fall over themselves to get in on that buzzword now.

So last year I sat down and I went through a bunch of Salesforce Dreamforce conference things, the transcripts. He said they were in AI like five times since 2014, I think. He has said Einstein AI was happening so many times. It is remarkable how bad the business press is. And it's remarkable how disconnected the valuations are because this is foolhardy stuff. These people are not smart. But when you look at these numbers as well, this is just, this is the hubris point that's

always been coming for them. When you have just had businesses that, it's kind of incredible how much they've grown, how big these businesses have got it's kind of impressive Good or bad people that they are they've been able to make remarkable businesses. I just think that they got it by accident I don't think that they were super intentional with everything because if they were Well, they would be doing it again. They would have someone would have found And Microsoft was the one that seemed to have worked it out they had more even if it it out. They had more

revenue, even if it wasn't profit, they had more revenue than everyone else. And then you see, oh, it's them eating cardboard. They fed themselves their own money. And there should be shareholder lawsuit. I'm just... it's unbelievable. This episode is sponsored by my own company, the Duck Bill Group. Having trouble with your AWS bill? Perhaps it's time to renegotiate a contract with them. Maybe you're just wondering how to predict what's going on in the wide world of AWS. Well, that's where the Duck Bill Group comes in to help. Remember, you can't duck the Duck Bill Bill, which I am reliably informed by my business partner is absolutely not our motto.

One question I do have for you on the inference economics, though, I hear what you're saying, but one of the arguments I would make against that would be the fact that Google has been shoving their dumb AI nonsense into every search result for a while now. And I have a hard time believing that they are losing money on every search by shoving that in. That would, well on some level that would show from orbit at the scale that they tend to operate at and their engineers who I, some of them whom I trust have said that they are not, but I have a hard time seeing how that gets there except for the fact that TPUs sound like what Tranium and Inferentia wish they were as far as actually supporting things. I don't have any insight into the economics of it. I just can go by what I see and they have a

stupendous amount of inference running all the time now for these things that no one wants. And it's fast inference too because people aren't going to wait five minutes for a page to load. A few things. One, they're not just using TPUs. They're absolutely using One, they're not just using TPUs, they're absolutely using Nvidia chips. They buy absolute shit. They did a recent thing. Wow, we can run one model and one H100. Well done! Doesn't mean they're not losing money.

And that engineer, they may have some insight, but how much financial insight do they have if Google was an also real simple if Google was not losing money. They would say they weren't losing money. How would we see that they're losing money? Where would that be on their earnings? We wouldn't because they bury every these companies Amy Hood is not the only finance wizard out there I forget what the CFO at Google is probably intentional there but Sundar is a McKinsey guy these people are evil McKinsey flesh-eating bacteria of business they're not going to say it but also they would just say inference is free and would they burn billions of dollars are you asking whether just want to be clear a hyperscaler would burn billions of dollars chasing AI.

Because they already have. They already are. They would burn billions. Maybe they're even wrapping some of that loss into their capital expenditures. Who knows? They don't tell us. But there is plenty of evidence that these companies are willing to lose billions. Google hired… they bought Character.ai, kind of of for $2.7 billion just to get Noam

Shazir back who's one of the original attention is all you need paper writers, the transformer paper that kicked off this generation. Google does dumb shit all the time. Everyone hates their integrations. Yeah, I think they are losing money. I think they're willingly doing so and I think they'll do it again. I think that they have their nasty growth pig search and all of their monopolies allow them to finance many money losing operations. Do you think I will? I actually really need to look into the economics of crime because I can't imagine that that has direct revenue. But it's kind of like Metta. Metta is absolutely losing billions, 100%. And do you not think that Metta is very clearly thrashing and desperately trying to find the next thing.

I love, I love what they're doing. I love it. I think it's the funniest shit in the world I've ever seen. It's like watching Zuckerberg's midlife crisis play out before us. It really is. He is having like hell of a midlife crisis. I thought Elon Musk was having any, uh, like a midlife crisis, but someone said something to me on blue sky about this earlier. Yeah, the meta is being the live golf of AI research I think that that is one of the funniest ways to put it because it really is just like this giant evil company that everyone hates being like do you want more money than Realistically a person can conceptualize to come and work with me on large language models becoming super intelligence. By the way, here's my chief AI scientist. His name is Yan LeCun. He disagrees

with me. He does not think this is possible. This is your boss. Oh, and Altman was saying that Meta was offering hundred million dollar signing bonuses that people were not taking for bullshit. That is generational wealth money to come work with some douchebag for a couple of years. Who were they offered to? Sam Altman? Two things. One, they have hired some people, including a guy with like one of the most insane names I've ever said. I've been looking forward to saying this out loud all day. Let me just get to this. Oh god, this name is so good too. His name is a Trapet Banzai. That is quite the name.

That's an incredible name. I'm called Ed Zitron. I have a phenomenal name, but Trapet Banzai might have to marry him. But is it Trapet Banzai Zitron is actually pretty anyway, girlfriend's gonna hate that. But there we are, she'll understand, it's for the content. But where was it? Yeah, these hundred million dollar offers, I reckon Mr. Banzai probably took one. Well, as Altman said, they offer it to their best employees, so definitionally anyone who takes it is not one of their best. Oh, and of course he's gonna say that.

But I think it's great because like I said, Yan Lukun, chief AI scientist says that large language models will not become superintelligence. It's like, this is your boss. I've hired you to do a job that your boss doesn't like, but I am also your boss and his boss. Have fun. Oh good, mommy and daddy are fighting again. And constantly.

Like it's like being born into a divorce. Like insane stuff. But on top of that, what are you fucking doing there? The head of your team is Alexander Wang of Scale AI. Not for nothing. If they offer me a hundred million dollar signing bonus, I'm doing whatever the hell they asked me to do until that earn out is done and then you'll never hear from me again. You want me to hit myself in the nuts every morning? It'll happen. I can buy new ones. That's right. I would learn. You're right. Hit myself in the nuts every morning, it'll happen. I can buy new ones. That's right. I would look, you're right. Hit myself in the nuts every morning. I would learn node for that. Yeah. I mean, I will a hundred million dollars. Sure. But on top of that,

the other thing, there's two other things that I think have pushed people back. The information had some good reporting on this as well, where it was first of all, people were like the Yan LeCun thing. They were like, Hey, what are you doing here? I don't think you really understand. Because Mark Zuckerberg, it's actually a compelling offer. He was saying, I will give you a shit ton of money, and also you won't have to worry about compute resources. Because OpenAI classically would,

Sam Altman is very vengeful, and he will restrict access on compute and resources at OpenAI if he doesn't like you. Been reported repeatedly. I think it was in Karen Howe's Empires of AI as well and Washington Post and Natasha Tiku had some stuff, I think. Pardon me if I got that wrong. No one has ever offered me all the compute resources I can use because they know my kind of horseshit. I mean, I would be working out ways to burn it. I would just go in there and be like, $100 million? This is time to be the most annoying gentleman. But the other

thing is, I wonder if that's not $100 million upfront. Maybe it's more like, still $5 million. I would probably still do the nuts thing. Yeah, 20-year earn out. Yeah, but it's probably structured in a weird way. Oh, there's no way they're cutting checks for that. There's just no way. It's probably got weird cliffs to it, probably milestones, and on top of it, even if you are, and on top of that, the actual job sounds like it would be miserable because do you think Mark Zuckerberg is going to put more or less pressure on you?

No, you are the person that he is going to blame when this doesn't work. That is what you... I would take a hundred million dollars to do that. Oh, sure. I'll do it and I'll just expect that I'm going to need to cry to my therapist after every meeting. Fine. Oh, I wouldn't be crying at all.

I'd have a hundred million dollars. I would go into work every day dressing however Mark Zuckerberg last dressed and then just claim I'm copying him. I would just create chaos. Like I would joke-ify the entirety of Metta's AI department. It would be amazing. Well, you don't need a hundred million dollars to do that. No, but if I got that money, I would really,

I would have someone, my joker makeup guy every morning, just the guy who comes in. Yeah, he makes $250,000 a year. He's also my driver and he also dresses like the joker. Just Mark Zuckerberg hates me by the end of it. Just like he's doing the Joker. Yeah, I try to be just like Mark, proving that I too can hire a clown. He does look like a clown without his makeup on.

He really does. It's the frizzy hair and the weird tan. We saw a few years of business, Mark, where he honestly, I will give him credit where due. He has managed to reinvent himself in a way that few people necessarily can. He went from the hoodie dude to wearing a suit all the time dude, to people confused him for a robot dude. And now he's just weird because I have to imagine at that tier,

you don't have to have anyone around you who doesn't empower you to do whatever the hell you wanna do. You surround yourself by nature with yes men and that is not good psychologically for anyone. You realize though that like Mug Zuckerberg can't be fired. Yeah, like he can't be. He he owns more board seats than anyone.

There's nothing they can do. They couldn't even sue him out. So he will drive this bad boy into the into the ground. But top of all of that, his last rebrand worked only for a minute and because it worked on the media, which he thought would be enough, no, he needed it to work on Donald Trump, except Donald Trump doesn't like new money. The actual trick for Mark Zuckerberg would have been to align with some sort of Elder

God creature. Some sort of aged finance freak, like if Sheldon Adelson was still alive. Our rest in piss. Oh yes. My personal favorite Zuckerberg trivia on this is apparently he's five foot eight or so and hates it to the point where he has people stage his Instagram photos so he looks taller. In Congress, someone took a picture. There was a cushion on the chair so he didn't look like he was drowning in it. Now, I don't give a shit. People are going to be over tall. They're going to be. But the fact that he is so wildly sensitive about it for all his money,

he can't buy himself four inches of height is nothing short of hilarious to me. I'm I'm five nine, neither short nor tall. And now that I know I'm tall in the Moxhuck bug, I feel so powerful. Also, who cares if anyone insulted by height? Sorry, it's five foot seven and a half, apparently, which whenever people start saying a half, that's how you know they're sensitive about it. Eugh, I hear Sam Altman's the same.

I've heard, I don't know his true height. If Sam Altman's like five foot one, that's what I'm gonna start saying. I realize we've kind of got off of topic, but the fact is, this does tie back, which is we're discussing people just spending billions of dollars for no reason. It's vanity projects. But it's vanity projects that have absorbed the entirety of the

economy. The thing that I scare people with, no one likes hearing this so enjoy, so the magnificent seven stocks they are 35% of the economy, right? The US economy. 19% of those stocks is Nvidia. Nvidia's continued growth is the only thing continuing Nvidia's valuations. How does Nvidia grow? By the rest of the magnificent seven buying GPUs from them. What happens if that changes? Well, think about this.

I think that the same people, you ever notice how a lot of the AI folks who are the most bullish folks you'll meet were also deep in the wool crypto bros? It's like what, what, why did these people all pivot? Because they're Nvidia's street team. As long as they're using the GPUs, that's what it is. And if this falls through, we'll go back to using them for gaming. I, it's not the same. Like that, I will push back on that one. You're 50 to 80 percent right. And yeah, a ton of people who are like, I'm in crypto, I'm an AI just because they were never in anything.

They're just hype chasing. Yeah. Turns out that by being an influencer with no actual expertise in a thing means you can retool and pivot super quickly because you don't have to spend that time gathering this pesky thing called expertise. It's also sold in the same way. It's I have a specious idea. I've connected nascent tech to you don't understand to it. Wow. And getting quick before it's too late. Exactly. Same kind of pressure. The only thing is, is that the GPU side is just wholly different.

And I mean, the rack mounted insanity of a oh, God, was it a GB 200 or whatever the black well things are there all these rack mounted three thousand pound monstrosities, they're all these rack-mounted 3,000 pound monstrosities. They're horrifying. They are the rack. They really, and they have cooling issues because science exists.

But these people are doing it because they're too stupid to realize that what they're in is kind of a scam. I think that they're scamming in the sense that they're selling something they don't really understand, but they're not like, I think this will die. I think that they think this will go forever. Kind of like crypto. And when I, this is the other thing, people with my work, they're like, oh, you started like a year

ago. I was writing in 2020. I was on crypto before everyone. Yeah. I find the crypto has been looking for a business model that is not fraud or fraud adjacent. Yeah. For 15 years at this point, it doesn't seem to have one. It's liquidity, venture capital. That's what it actually is. At least A.I. I could point out that I can make a robot say something funny very quickly. OK, is there value to that? I don't know. Not a trillion dollars worth, but yeah, OK.

It amuses me for 10 minutes. And I have the grand business idiot theory, which is that the people in power who have the money and the power and the hands of the media, they don't understand much of what's going on. They never did before. And AI is this kind of mystical thing where it kind of has value, it kind of has something you can point to and said outcomes you can point to and go, well, to extrapolate from what this does now, it will do this next year.

Why? I don't know, but these people have a lot of money, and this much money can't be wrong, this much money ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha ha damn can it be f**king wrong. Yeah but that tower is big enough that when it falls it takes a lot of other people out. And I mean if what happens when people don't buy GPUs, cause here's the other thing, whether or not you agree with me on AI, maybe you want to think about something, which is

Nvidia's data center revenue in the last quarter. So the one where GPUs live was $39.1 billion, pretty big, right? Except they missed estimates by a couple hundred million, which, you know, that's one. It happened to me yesterday. I knew a guy. Here's the problem. couple hundred million. Which you know, it happened to me yesterday. I knew a guy. Here's the problem. That number is the single most important economic indicator right now.

That number is I think 80 something percent of Nvidia's revenue. It is the reason that Nvidia grows every quarter. If that number does not continue growing, because for me to be wrong, for this to keep going, everyone needs to keep buying Nvidia GPUs. Nvidia will need to like in a year or so, they'll need to sell $60-100 billion of GPUs a quarter. And then after that they will need to sell $80-150 billion a quarter. And then they will need to sell $100-180 billion.

They will need to keep growing exponentially. The rate that the market is requiring Nvidia to grow is too high. At some point that growth has to run out because we don't have the physical space for all of these GPUs. And at some point, if we don't have the returns coming out of them – in fact we're losing money, maybe it's time to not buy them. What if Google's TPUs help? What if Google actually can move to TPUs? What would happen then? What if we find out that the training paradigm we're under does not work, which we're already

finding out? Okay, that means we don't need to buy all of the GPUs because the GPUs are really most useful for having a lot of them allows you to train. If training isn't helpful, why would you need that? Because inference is not as demanding on a GPU. So it's like, what do we do here? What are we doing? There's not much money, there's a lot of expenses.

And I think the... It's funny that I'm on this podcast because I think it's probably the most germane to my heart. The actual way for AI to be sticky, the actual way for AI to have made it was the enterprise. It was never consumer. It was going to be API access. That's where the money is. It is, but it was gonna be selling big seat SaaS contracts,

basically combining the way it should have worked if OpenAI would have been a functional business, it would have looked a little like Microsoft 365 plus Azure. It would have been, we make a shit ton of money from selling enterprise subscriptions, not consumer, but enterprise, and we will make a shit ton of money on API. They make a decent amount of money on both because everyone talks about AI and everyone mentions open AI every time they won the branding marketing war exactly and on top of that though They're having there's multiple stories journal and the information this week that say they're having trouble They're having to hit actually you'll know this one. No one else would agree with me on this

They're like, yeah, they're changing from a subscription based model to a usage based model and I'm like, that's a bad sign That's a bit if you know anything about sass. That's a bad sign. That means that they're they do not have product market fit Open AI the biggest name in the friend game does not have enterprise product market fit They don't have it. That is doom. That is certain doom. If you do it, you think a usage based model is going to know it will probably bring down. It will hopefully allow you to sell to scale more. But it's not like it's going to increase the amount that people are spending because if people wanted to increase the amount of the spend, they use the subscription. They'd use the subscription.

Right. And the problem too is you have a psychological issue, especially in the consumer land when you do that, where people feel that when everything you do is metered, then every time you use it for anything, it feels like an investment decision. Well, they're not doing it for consumers. They're just doing it for the enterprise.

And they're also having to already deep discount to compete with Microsoft. And they're having to that also having to already deep discount to compete with Microsoft It's like these are on a SAS and enterprise sales level these are terrifying stories, but most people it's just really bad I built a dumb blue sky bot the AWS snarkbot where it effectively just tracks the the news that it comes out of their What's New feed, summarizes it with inference, and then puts it out there. And that's it.

I haven't yet made it do anything funny on it, but that cost me something like a dollar a month to run that thing for the many hundreds of things that come across that RSS feed. And it's, okay, that's an interesting toy, but it cost me nothing. And if it started costing me something, I probably wouldn't do it. And that is...

It fuels a bunch of fun, interesting toys like that. But this does... I don't see that I could build a business around that, and I wouldn't be bold enough to try. And even then, right now we're at the height of the mania. If this was going to be the world's stickiest business, there would be metrics that showed that. It is very simple. However anyone feels about AI, where is the actual business?

Because perplexity, for example, Rag Search, their whole thing is they, I think they gave away $35 million last year, like discounts and refunds. They're a massively lossy business. It's just- Instead of a three hour keynote, where Andy Jassy gets up there and talks about how great AI is, he would basically get on the earnings call and like, okay, this past quarter we've posted 300% annual growth. I will now be taking no questions. Have a nice day. Like that's what success story looks like.

And they would be kissing his ass. They would be saying, Jass, any of these ones, they would be like, Sachin Adela has changed the world. If this, this is the greatest investment ever, because he would say AI revenue, blah, blah, profit, blah, blah. He'd be like, it would be, I don't need like, it's like Jensen Wong. Jensen Wong goes up there and just like, sounds like he has a stroke. He just goes, he's like, yeah, they will have a computer looking to control AI with a computer that goes like this. He will scream at someone that works for him and then he leaves and everyone's like,

yeah, I love you, Denson. Sign my baby. Well, for a year, he was the one he was a doled out who got the GPU allocations. He just made an entire year's study out of just I'm going to go and speak at other people's keynotes. Why? Because I choose to do so. What are you going to talk about?

Whatever I damn well please, because what are they going to do? Risk upsetting me? And that's because he had a good business. I think he sounds like a huge arsehole. Oh, but you see a gold rush. So a pickaxe, my God. But it was but also he he performed scoreboard. Like, that's the thing.

Scoreboard really, like whether or not you like Nvidia, they got the f***ing numbers. Yeah. Why doesn't anyone else? In fact, here's a real weird question. Why is it that everyone who buys GPUs from Nvidia installs them and then immediately starts losing money? Is that not a little... This is another thing that worries me. It's like, not only is our economy built on buying GPUs, when you install them, you start losing money. Like, immediately. Because the costs are too high.

This feels like a corollary of something that I said the client might have observed years ago and they're right, which is your AWS bill is not a function of how many customers you have, but rather how many engineers you've hired. Okay. They're not entirely wrong. Like, once you have a very expensive hammer, every problem starts to look like your thumb. And that's the thing, the automation thing.

Software engineers are always gonna try and automate stuff. Like it's just, that's what software, they love that shit. Like the containerization fest where everyone's like, we got containers now, why? And someone screamed Docker at me on the street and I'm just freaking out. I need to install Docker What does it do you work that out? I need Docker now

But even that did not work out so great for Docker because it turns out that when people don't really know why they're buying your shit Eventually, they go. Why am I buying this? They sold their enterprise business off my comment of the Morantis and my comment was to congratulate them on Getting rid of that pesky part of their business that made money. Yes, good work everyone. It's just, it's such a fantastical time. And what I am finding is the conversations I have are more like this one where people are just like, yeah, that is pretty weird.

What are we going to do? I don't know. We'll watch and learn. Oh, there's no next step for me. I keep poking at the bear. But it turns out no one asked my opinion before investing 100 billion dollars into bullshit. Well, that's my favorite thing here, though, is no one.

I mean, people will mention it, but no one really wants to talk about the open I revenues. No one wants to talk about the costs. They will glance at them and be like, oh, they lost $5 billion in a larger paragraph about some stuff. I don't believe they have any form of reporting requirements, do they? No, they're private company. I'm just saying that... I'm trying to remember what the nonprofit reporting rules were around them.

Oh, no, they don't have to because the for-profit entity is a separate wing. That's right. But I mean journalists. I mean analysts. They don't want to touch this. There are other people that have talked about these numbers in passing, but no one else has sat down and gone, hey, like I'm writing something probably later today that's called, why did Microsoft invest in OpenAI? I've written, OpenAI is a systemic risk to the tech industry. OpenAI is a bad business. And how does open AI survive? That headline feels like something Satya Nadella is saying to himself with his head in his hand at his desk.

Like, why did Microsoft invest in this? I'm asking it because the deal suggests many different things could be the reason, such as maybe they invested hoping they'd die. But no one wants to talk about this stuff. And if I'm right, and I believe I am, I very much, very much do. I think this is one of the greatest failings of financial journalism of all time. I think it's only beaten by the great financial crisis. I think the great financial crisis would be much worse than what's going to happen here.

But it is, and even then, I think had the great financial crisis happened today, people would have noticed, because you would, you had people with the internet who could go and look at these things, like Michael Burrow. And it's like, they had privileged information. The proliferation of available internet services was large, but not as large. And you didn't have the proliferation of social media

at the scale that you didn't have Twitter. Twitter was out, but it wasn't. Point I'm making is, you have the biggest company in the AI, OpenAI, the most well-known one, funded by the next biggest company in AI, Microsoft. Microsoft's biggest customer is OpenAI. The core finances of OpenAI are bad, bad. They are so bad. They are so awful.

This company burned. I think they spent $9 billion to lose five billion dollars last year And this is something that modern journalists do not want to talk about they don't want to write about it They don't want to read about it. Don't want to hear about it in passing conversations They all say the same thing which is yeah, I just don't want to think about it Yeah, that's not that's uncomfortable if I have to actually deal with any of it, but it's the problem is is The and I understand why they don't want to do it because it starts jocifying you in real time.

You start thinking, okay, well, this is the biggest company in the industry and they're burning billions of dollars and Microsoft needs them to live, but Microsoft owns all their IP and this company can't go public unless they become a for-profit, which is in Microsoft's hands. Even if they do though, SoftBank has to keep funding them forever. This company says they're going to burn $40-50 billion by 2030 I think, it's going to be more. Where are they getting that money?

Because they lose money. They lose money all the time. They're constantly losing money. And then when you think all those things you go, f***. Is the entire AI industry built on sand? And the answer is no. The actual AI industry is built on dreams. It's on unicorn farts.

It is the only way for you to rationally look at this and believe that it will keep going is fantasy. I was gonna say fantastical, it's fantastical thinking, magical thinking, there we go. Could have delivered that point better, but nevertheless, you have to start engaging in fantasy. You do. It is an irrational approach to this, to approach this from the perspective that open AI will

survive. Because SoftBank had to borrow $15 billion in a one-year loan, a bridge loan, and they took 21 banks, 21, to get that $15 billion in a one year loan, a bridge loan, and they took 21 banks, 21, to get that $15 billion. Note that Softbank has also promised $19 billion to the Stargate project. The Stargate project is yet to incorporate but Oracle is already agreeing to put $40 billion of chips inside it. They are being built by a company called Crusoe that has never built a data center before. How hard could it possibly be?

But that's the thing. It's like, it reminds me of the, one of the best threats of all time. The IRA sent, uh, to Margaret Thatcher and they said, you have to be lucky every time we only have to be lucky once. It's for open AI to survive. They will have to raise more money than anyone has ever raised before Then raise it again then likely raise it again. They need to raise another 17 billion dollars in 2027. They can set it They will then need to build a massive data center that is moving along decently well

But I've heard reports that it's having some issues. They will also have to Keep being able to broker deals with various companies to pay them because open AI is a banana Republic They don't make enough money to run them all of their money has to come from outside Soft bank also has to keep getting that money and soft bank does not have it they had to sell four and a half billion of T-mobile stock and money and SoftBank does not have it. They had to sell $4.5 billion of T-Mobile stock. And this is just to get a little bit… they need to give OpenAI, unless they don't convert, another $30 billion. Now they could syndicate $10 billion of that, but still that's another $20 billion they do not have. They don't have the cash. The 15 that they just borrowed,

uh, 6-7 of that went to Ampere, another company they're buying. The numbers are crazy man. When you sit and look at the numbers, they are crazy. And I don't know what's wrong with the tech media, but they are missing this. And when this blows up, I'm gonna look cool. I'm gonna look cool as f**king s**t. This is gonna be very fun for me. And everyone else is like, well how could we have possibly known? Oh, and I am not going to let anyone say that moment.

Anyone says that I will have link. I have links ready to go. I'm going to be like quick showing. But oh, oh, you how could you have known you follow me? You follow me Cupcake talk to me, baby. You have myself. I am going to be annoying. I'm going to be trotting around.

I'm going to find the exact level of annoying I can get before I start losing credit. And what I think you're going to see is you're going to see a major outlet. You're kind of already seeing it. Deidre Boeser of CNBC even did a video today talking about how the AI trade is in trouble because of the lack of revenue.

CNN's Alison Morrow has been on this ship for years now, just saying like, hey, this is rotten. Like this, this is a marketing scheme. But if I am wrong, something insane is going to have to happen. Something just completely unprecedented. I'll admit I'm wrong. I'm not though. It feels like Cassandra has never appreciated in her own time. And I really want to thank you for taking the time to speak with me. My pleasure. Thank you for having me. People want to learn more about what you espouse,

and I argue that they should. Where's the best place for them to find you? Go to betteroffline.com. Just B-E-T-T-E-R-O-F-F-L-I-N-E. I nearly didn't spell it. .com. It has everything. It has links to everything. Newsletter, podcast, PR firm, socials, all

the good stuff. And we will of course put a link to that in the show notes as well. And your snack bar, I want to see this. I will include a link to that in the show notes as well. Because the funny thing is, is like, I'm like a PR person. I'm a writer. People don't know me like I'm a sass freak, baby. I know these companies. I know these economics. And I feel like maybe I'm just the only monster that could look at this stuff and make sense of it because of the hours of SaaS related content I've consumed.

Oh, the way like Rutger Hauer at the end of Blade Runner talking about webinars. I've seen things you people wouldn't believe. It's just a three hour long reinvent. Keen hoods burning me in Las Vegas, Nevada. Ed, thank you again for your time. I deeply appreciate it. Ed Zitron, host of Better Offline, writer of Where's Your Ed At? Newsletter, and I'm cloud economist Corey Quinn.

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