Data Centers, Debt & the Risks of AI’s Finances w/ Ed Zitron | The Weekly Show with Jon Stewart

On top of all of these other problems, we have this situation where. hyperscalers are buying way more GPUs. than they need, driving up the price of. memory and thus the price of consumer. electronics for everyone. And on top of. that, they're lying kind of about how. much capacity they have. They are trying. to make everyone believe they're. bringing gigawatts online when a data. center can do many things. The data. centers that people hate are not the. ones that do streaming. These AI data. centers are completely different beasts. to anything that runs anything else.

These things could all disappear. tomorrow and the internet would function. the mostly the same way because they. only exist to do AI. >> Well, the AI thing was always it it. wasn't a necessary development in any. way. You know, I I always felt like AI. is just like. >> Google that Google that's on Coke. Like. when you Google something, you say like, "Hey man, is there a pizza place near. me?" And it tells you. But when you say. it to AI, they're like, "Oh my god, that's such a great question. I love. pizza. Pizza's so good." Did you know it. started in Greece? Like it just tells.

you and you're just like, "Shut. up.". >> And sometimes goes, "Yeah, Demarcos is. the best.". >> Yeah, that's right. Hey man, I I need. all your water. I need all your water. >> Demarcos does not doesn't exist. >> Yeah, it doesn't exist and it makes. up. [music]. Ladies and gentlemen, welcome to the. Weekly Show podcast. My name is [music]. John Stewart. I am the host of the. Weekly Show podcast. It is Tuesday, October 27th, and uh excuse me, I'm. going to stand back from the mic for. just one moment. Can you hear the people.

sing singing the song? It's uh it's the. election. It's this is the last time. that that we will speak uh before the. election. And I just want to urge. everybody out there to please please for. the love of God uh get out there and. vote and express your political opinion. And I'd like to frame it as a however. you'll vote. But I don't mean that. I. mean it as please send a message to this. reckless show in administration.

uh that enough is enough. Uh that we. have had it that it is time for someone. to step up and provide uh I believe the. framers referred to them as checks and. balances on this uh utterly imperious. administration. So that is that is the. spiel for today. We are not talking. about the election today. We will be. talking about other [snorts] doomsday. scenarios uh financial ones in. particular about AI. I know we've talked.

a little bit on the program about cata. catastrophic outcomes of AI in terms of. bad actors or in terms of the AI itself. turning on us. This deals more with uh. the real world implications of AI. economically and financially. and we're. delighted uh to have uh a guest today to. talk about that. So, let's just get to. it. [music]. Ladies and gentlemen, we're delighted to. be joined by Ed Zitron. He is the CEO of.

Easy Primary Research. He's the writer. of Where's Your Edsletter, but more. importantly, he has a great. understanding of, I think, uh the. economics. of AI. And Ed, welcome. >> Thanks for having me. >> Uh it's it's an absolute pleasure. I I. want to ask you this and I apologize in. advance. This is going to be slightly. remedial. in some regard. So I wanted you to talk. about, you know, we've heard a lot about. AI in terms of. >> doomsday scenarios. Uh bad actor gets a.

hold of it, builds their own biohazard. or uh the agents break out and hack into. all of the sensitive data and they or. water systems, things like that. or the. reverse. It all works and we're reduced. to uh NPCs in a world that we have no. agency in. I want to talk to you about. the sort of the more economic. imbalances of the AI world.

Does that make sense? >> Absolutely. >> All right. uh can you give us to to. start with kind of a little bit of the. playing field of what is the AI economic. ecosystem chips software data set what. what are we dealing with when we talk. about the AI economy so at the top of. the stock market company in the stock. market is Nvidia they make something. called a GPU technically means graphics. processing unit this isn't for graphics.

it's because they're really good at. parallel processing so basically doing. one thing a bunch of times. Nevertheless, you need those chips to do. two things. One to train an AI model and. two to run inference which is just. creating the outputs. >> When you say creating outputs, you mean. so uh when you put in a question, the. answer that comes to you is the output. >> Yes, exactly that. >> I see. Okay. >> And then it gets more complex with. bigger models and bigger tasks. But. nevertheless, that's the basics. >> So these chips are the GPUs and they run.

the entire ecosystem. Yes. So, and Nvidia up until the last. few years had basically had an effective. monopoly on doing this because they have. this thing called CUDA, which is just. underlying software libraries and ways. of running software on graphics. processors. That this meant that they. were they are effectively the company. behind the AI boom. Now, they sell these. GPUs which are very expensive. They're. 50,000 60,000 a piece. usually buy them. in racks that are millions of dollars.

each and you need thousands of them, hundreds of thousands in some cases to. do these big data centers. But Nvidia. pretty much the only vendor selling. them. There's technically AMD, technically Broadcom has AI chips too, but Nvidia is the top dog. Their. customers are pretty much the largest. companies in the world. Microsoft, Google, Meta, Amazon, Oracle, SpaceX. now, I guess. and they have a very small. customer base, but that customer base. has so much money that they've been able. to sink 30 to4 to50 billion a quarter.

into these AI chips and into AI data. centers. Now, the problem is is that. these things keep getting more expensive. and also take forever to install. But. for the most part, Nvidia has got large. because everybody has said AI is going. to be the next big thing. You need to. buy as many of these as possible. not really not really much proof yet. that that's actually the case or at. least anything close to a justification. for the trillion plus dollars that have.

been invested in these GPUs and the data. centers for them to go into and I can. kind of stop there are various levels to. fan out from there. >> right but so the the general idea of it. is you have this one company Nvidia now. does Nvidia are they supplying it to. everyone are we including China in that. equation or Were you saying that's. merely the uh the United States and. maybe other sort of uh AI startup areas? So technically, China has a company.

called Huawei which makes their own. chips, but Nvidia GPUs have been making. it over there for years. There's a big. story at the end of last year from. Bloomberg that there's this company. called Mega Speed, which is called a. Neocloud. It just means a company that. buys chips and installs them and rents. them out where they appeared to be. allegedly a front for a Chinese data. center operation. Super micro an AI. server company was also had one of their. co-founders literally uh using a haird.

dryer to get the serial numbers off the. ship. [laughter]. It's so. >> it's like it's like weapons. >> Here's the thing. This era is so grim. and soulless and joyless. It's nice to. have some goofy high techs for once. >> No, I think it is. >> So, Nvidia chips are making over there, but they have far less. And China has. had to be a little more deaf with how. they're building these things. But for. the most part, Nvidia is selling GPUs to. everyone everywhere throughout the. world. So, Nvidia basically controls. everything. This means that Nvidia is.

incredibly rich. They're printing money. It means that Nvidia has now become the. largest supplier to Microsoft, Google, Amazon, Meta, SpaceX. The problem is. because these data centers are not. actually generating enough revenue or. really any revenue. They they don't dis. none of these companies other than. SpaceX disclose their actual AI. revenues. Everyone's had to start take. on debt. They've had to lay people off. Meta's doing a $95 billion share sale. Oracle had to do a $50 billion one. uh.

facing a downgrade potentially all. because despite all of the big promises. of AI, the economic payoff is not there. Torstston Slo head of uh chief economist. at Apollo said the other day that there. has been no payoff from AI. Well, that. that gets to the heart of kind of the. maybe the absurd contradiction in all. this is that so you have this ecosystem. built around these Nvidia chips that. cost millions of dollars and these and. what it does is it creates I guess.

compute. Everybody's looking for. compute, but compute is very expensive. And apparently, and and you tell me if. this is incorrect, but the people that. use compute, the customers, don't pay anywhere near. how much the compute costs to build and. run. In other words, uh you you're. you're buying something and you're. getting it at ridiculous discounts and.

the company is taking on that excess. cost. >> to an extent. So this is actually the. thing is you're both wrong and we don't. know but also right at the same time. >> I will take that I will take that as a. win. >> Let me explain what I mean. We don't. actually know how much it costs to run. these things. >> Oh, we don't we don't know how much it. costs. We have a lot of estimates. A lot. of AI people online have come up with. their guesses, but we truly don't know. We have these company called Silicon. Data does an indices of how much you can.

get per hour for a GPU. And these are. always going up and people say, "Wow, it. must be they must be making the money. back. We actually truly don't know the. operational cost, but also even those. indexes of these prices don't really. reflect what people are paying longterm. because they're mostly based off of spot. prices, which just means what it what it. would cost to rent this right now versus. if I buy it for a year. Let let's step. back a second then and and maybe so we. we've got a little bit of the lay of the. land of who the players are. >> How then does Anthropic or Meta or any.

of those make money on their AI? How. does Open AI generate revenue? >> Okay, so two ways. One, there are. subscriptions. So you pay Glammy Sam and. you say, "I'm going to pay you 20 bucks. a month and I can use OpenAI's models. for and there are rate limits. They're. kind of obiscated. You can use them a. certain amount." They have a $100 and a. $200 a month subscription. Same with. Anthropic. So you pay that and you can.

use a certain amount. Now Anthropic. makes more money on the second one, which is the API, which just means. connecting your thing to Anthropics. models. So your startup, your coding. harness, and you pay at the meter. So. you pay on a per million token basis. >> Go, go, go. Stop. Stop. And I apologize. >> No, it's took No, please, please. What. is a token? Because I hear that a lot. and I'm not quite sure. And a per. million token. How many tokens does it.

take? And what is the name of your cat? And for those of you who are listening. on the radio, why. >> is how. >> big, beautiful, annoying, just like. daddy. Okay. >> Beautiful. All right, go ahead. >> So a token is just threequarters of a. word. It just it is when an when a model. spits out an output. It let's say you. say give me a limmerick and it will spit. out and if and it will be a certain. amount of tokens to generate it. So when. you put in the stuff saying make me a. limmer that's an input token and when it.

generates the output that's the output. token. >> and and is that calculated on the amount. of compute that an input would require. to get a result? >> No, it's calculated based on what it's. doing and what it's putting out. The. compute side, the how much the GPUs cost. to run what this we truly don't know. Like we have estimates from all over the. shop, but when it comes to especially.

like Anthropic and OpenAI who are the. main AI labs who are just the ones that. make the most popular models, >> we don't have any insight into how. expensive their operations are. We have. some documents. I got OpenAI's auditive. financials earlier in the year, but we. don't have, hey, it costs when we run. one Nvidia B200 chip, that's how much. this costs an hour. And the problem is. is that it's bordering on impossible to. actually estimate because we don't have. insight into their infrastructure. We.

don't even really know how much compute. they have. And we can go into this in a. bit I guess but the hyperscalers the. Amazon's Google's metas Microsofts and. so on. >> And those are the ones that are trying. to build all the data centers so that. they can increase their compute. But if. if we don't know how why are they all in. this race then to create more compute? Are they maxed out? Are are the inputs. that are coming in so much greater than.

what they're able to export? >> Okay, so that's actually a very good and. important question. >> Oh god, thank you. >> No, because John, [laughter]. you you're being self aacing about not. knowing this stuff. We actually a lot of. this stuff is very obiscated. So. >> okay. >> Microsoft. >> purposefully so I would imagine there's. on purpose. Okay. >> so it's not so much the largestess of. the outputs it's that there it takes a. long time to build AI data centers way.

longer. Each one of these things is the. single most ambitious infrastructure. project in history. Each data center. >> pretty much. So OpenAI's data center the. Oracle has been building it for 2 and a. half years in Abalene Texas. It is I. think about 998,000 square feet. You're. b and it's gonna and it's going to take. about 1.2 g of power which is basically. the power of a small city but in a. thousandth of a space. So I use the city. of Bristol in England as an example.

It's basically the power of the city of. Bristol in a one in a basically several. large warehouses. >> We we've got we've got Americans right. now scrambling to find out where Bristol. is and what it looks like. >> Yeah. the most exciting thing to happen. to Bristol. Sorry, Bristol listeners. But so the hyperscalers are building. this capacity because they see demand, but really most of that demand is coming. from OpenAI and Anthropic who have this. voracious appetite for AI compute to the.

point that because they have so many. customers and so much attention, they. are basically buying up everything. I. estimate that 80% or more of AI compute. spend is from those two companies. But. hyperscalers have all got deals with. just these two companies. Yes, they have. some other customers, but when you. remove Anthropic and OpenAI, I think. that's like $22 billion, which sounds. like a lot until you realize Microsoft. alone has spent over a quarter of a. trillion. >> Microsoft has spent a quarter of a. trillion on on hyperscaling.

>> on capital expenditures since 2022. So. capital expenditures are just. investments in assets that are something. you will use for the future in the. company to make the company more money. when you say that uh they're spending. money as customers of OpenAI and. Anthropic, isn't Meta uh also in in the. game and aren't they? Or or were there a. minor player in all this? So, that's the. funny thing. I don't know how people. forget about the metaverse, why they're.

called meta, but meta has spent over 160. billion, I think it is at this point, probably more on AI building these data. centers, building out AI compute, >> but they don't really like they have. their own AI models, but Meta doesn't. have an AI strategy. Meta has built. their own AI models. They have this Muse. app, >> right? The little assistant. >> that's recently popped up that is, to. quote Mark Zuckerberg, very. unprofitable. They don't make much. money. I know, right? You look I We love.

this. [laughter]. Um, [clears throat] and this is the. thing. All of these companies are doing. this because they're out of hyperrowth. ideas. They don't have a new Google. search. They don't have a next Facebook. So, they all went because they're all. tired old boring monopolists. They go, "Wait, Microsoft did this chat GPT. thing. We should all buy these chips. More chips now. Big big." And the. problem is they put so much money into. it that they can't really walk it back. Even though most of their customer base.

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All you hear about is this is a. revolution on the scale of I don't know. the cotton gin or the railroad or you. know and some would say you know the. iPhone and and the internet and how that. changed everything. They they certainly. feel as though they have discovered the. future. Whether or not the rest of us. want to live in that future is sort of a. separate question. But. so they're are they they're making a bet.

that this is transformative. Yes. That they think and here's I must. be clear. These people are not super. sophisticated. They may be rich but they. are not sophisticated. November 2022. rolls around, Chat GPT comes out. Literally, we are just out. We We have. gone through what, four rate hikes that. year, maybe more. Everything's really. expensive. The tech industry had this. massive boom era in 2021. >> Inflation is very high. We're coming out.

of the pandemic. Supply chains are. depressed. Yes, >> revenues are down across the board. Nvidia's revenue was flat. And then back. in 2019, uh, Nvidia had bought a company called. Melanox in Israel, which allowed you to. just use high-speed networking to. connect a bunch of servers, inventing. the modern AI cluster. Now, >> okay, >> 2022 comes around, chat GPT, and because. remember these hyperscalers are not. invest in inventive, they steal from. each other. They they copy each other. It's all they can do. They all see chat.

GPT and they go, "That looks like a new. thing. What if we put a bunch of money. into it?" And that's what they've done. since. >> they they weren't. Now to to be fair to. them when chat GPT came out, it was a. sensation. >> Yes, >> it did ripple like the effects of the. introduction of that technology. Uh. people around the world. suddenly started asking their computer. to write breakup letters uh as though.

they were Drake. Like people weren't. necessarily using it for anything. productive. >> Children can't use that though. >> That's right. But it was they were. absolutely. it it was adopted. very quickly without any real sense of. what it might be useful for. So it was. it it wasn't as though it was an. entirely fabricated. product. Yes, I agree. However, yeah, it. did go viral. The media took it the next.

of the next steps. I would say the media. ran away with it, but also the. hyperscalers put all the money into it. And so there was this natural belief. that okay, this is real because there's. a bunch of money behind it. I'm not. doubting that large language models are. interesting and that there was something. there. I've just been saying this whole. time that the actual economic outputs. and actual the technological um things. they are claiming it can do aren't. really matching up with what they've. said. So anyway, >> so the the idea is is is and.

that the user fees are never going to. match the infrastructure. Sort of the. idea of if Netflix came out and uh they. could only charge 50ents and that's the. only thing that people would pay, but. it's going to cost them a trillion. dollar to make every show. And so it's. just not it will never match up that the. money that's coming in will never match. up with how much it's going to cost you.

to create and maintain the technology. necessary. for AI. Is is that somewhat in the. neighborhood? >> Yes. So OpenAI and Anthropic are really. interesting companies economically. speaking because they lose billions of. dollars. Anthropics S1 just came out. They lose less billions than OpenAI. >> S1 is. >> it's the filing you make when you go. public. So you file an S1 with the SEC. >> and they are about to go public so they. have to file an S1 with the SEC. Okay. Exactly.

>> And what is in the S1? >> Well, what's funny is what's isn't in. it. All of the stuff for the latest. quarter is blank. So all of the numbers that you really. need to understand what anthropics like. blank. They've only got up until June. 30th. Now, to be clear, they shared many. of these numbers with investors at an. investor day two weeks ago. So, oh well, screw the retail investor, I guess. Now, what's interesting is the company. scraped by with a light profit in Q2, but that was because Elon Musk.

discounted their compute at SpaceX for. two months. So, whatever. And we don't. >> Their their compute is owned by SpaceX. >> Some of it is all just a circle jerk. What? I don't understand. So everybody's. building data centers. >> Yes. >> And they're all renting space at each. other's data centers and charging each. other different rates. So just to be. clear, the AI labs, the Anthropics and. Open AI, they rent compute.

They rent compute from space. Well, OpenAI doesn't, but Anthropic pays. they're going to be as of December, they're going to be paying $3.1 billion. a month. A month to Elon Musk. a month. It's crazy. >> So, so Elon, when did Elon Musk build. all the compute? I had no idea that he. was even in this. And why wouldn't. Anthropic or Open AI be building their. own compute? Well, that's the problem. These companies lose billions of. dollars, which makes banks really uneasy.

when it comes to lending you money. So, what they do is they have their hypers. scale payix. So, Oracle, Larry Ellison, everyone's favorite. Larry Ellison is. building about $400 billion worth of AI. data centers for one customer, Samman. Clammy Sammy himself is going to. apparently pay him $300 billion over 5. years. Now, does OpenAI have the money? No. Does Oracle have the capacity? No. But don't worry, according to TD Cohen, Nvidia is going to be helping Oracle out.

by leasing space and then subleasasing. it to them. Nvidia, by the way, is the. GE capital of this all. They invest in. all the companies. They invested in. OpenAI, SpaceX, Anthropic, Coreweee, which is a Neocloud. So, a company that. just builds data centers and sells AI. compute. And by the way, takes out debt. using the chips as collateral and then. buys more chips using that. It's. magical. >> So, they they take out with money they.

don't have. They're leveraging. So, they're highly leveraged. >> That's Corewave. Yes. on their own. buildout. and yet they are fighting not to pay. taxes on this value that they are saying. they have but don't have. >> that. [laughter]. >> Yep. >> Is that the magic trick? >> There's so many magic tricks. That's the. thing because the AI labs, it's funny. People are always talking about the Open. AI and Anthropics as in, oh well,

they're building their own stuff. No, they're not. Anthropic has, this is. serious, $430. billion worth of non-cancellable. commitments with Amazon, Google, Microsoft, and Broadcom. Broadcom, the. AI chip company. regardless of how much money. >> uncancable. You cannot cancel these. commitments. And what are these. commitments that they've made? >> So for Amazon, Google, Microsoft, they've made commitments to rent data. center capacity,

>> hundreds of billions of dollars worth. And when I say non-cancellable, it's. something called a take or pay. arrangement, which means you are like. you're going to use this. It's. >> pay or play. >> Yeah. You got to pay regardless. >> Okay. >> So, Anthropic has, it's funny, the way I. would describe the S1 is it's a. description of a company that doesn't. exist anymore because an it was before. all of these commitments begun. And. Anthropic now has these things probably. starting next year that are going to. cost it 75 to$100 billion a year within. the next year or two. And this is.

regardless of whether it's revenue. growth. This is a company that only. loses money. >> How are they justifying. these commitments? Where where are they. seeing then the the growth in all this? How do they justify putting that much. money into a buildout and usage? They. believe that they will grow to hundreds. of billions of dollars of revenue in the. next few years because if they don't, they're not going to be able to pay. this. Their operating expenses will be h. 100red billion plus in short order.

Microsoft so a very profitable $330. billion a year company has operating. expenses of like $150 billion. So. Anthropic just believes it will be the. size of Microsoft soon. You may be. wondering where the proof is. It isn't. there. The S1. >> I am wondering that. That was one thing. I was wondering. >> Yeah, the S1 doesn't explain that. Anthropic just has these crazy. projections. Their entire valuation. comes down to them making $200 billion a. year in revenue in two years.

>> 200 billion. >> Mhm. >> And what is their revenue now? >> Uh probably in the region of 30 to 50. billion a year max. It we don't have the. fourth quarter. >> Oh, this is the this is the worst. episode of Shark Tank ever. >> Yeah. What's crazy is you tell people. this and they will say, "Well, it's. different this time. These are the. smartest people, the smartest guys in. the room, if you will, you know, Enron.". Uh, and these people are so smart. AI is. the next big thing. But here's the. really scary part. So, according to it's.

a payment and credit card company called. RAMP, 80% of OpenAI and Anthropics. revenues come from 1% of their customers. and most of those customers are. venturebacked AI startups that run their. services at a massive loss. >> Okay. Okay. Okay. Let we I want to roll. this one back. Is this one? All right. So, my understanding. of all of this is is probably steeped in.

the television business. Again, Netflix. streaming. I I I'm thinking of it in. terms of customers who pay a fee to. utilize a service that is necessary for. them to run their business. So we're and. so we're talking about the $100, $200 a. month, whatever they might charge a. company to use their compute. You're. saying that's only 20%. of their revenues. 80% of their revenue. are actually other AI startups. And.

those AI startups, what are they are they're not paying a. user fee? What are they paying for? So. remember I mentioned the API earlier. So. connecting your stuff to the models. So. when you. >> Yes. What what is API? Just just. >> I'm going to forget the term, but it. just means the the way that you connect. your service to another service. So. you're running there's a AI legal. service called Harvey. They use the API. so that their software runs using OpenAI.

or anthropics models. >> Jillian just popped into the chat. Application programming interface. >> They're going to have my guts forgot. forgetting that one. >> Oh, she's the best. uh software uh that. that talks to each other. So they have. to connect to. uh the the big brain or their AI startup. does not function. >> Yes. And then there's the other problem. which is on these companies and when you. you when you use say Perplexity which is.

an AI searched company and you pay them. 20 bucks a month you can run up a token. spend of like 60 bucks or 70 bucks or 80. bucks a month. >> So they're running at a loss. >> Exactly. And what's crazy is is that. everyone says wow Anthropic's growth. OpenAI's growth it's so impressive. How. is it so impressive? The answer is is. that they have a bunch of venturebacked. startups that run their services or at a. loss and have users who say, "Hey, I. want to use the latest models, the.

latest, more expensive models." The. latest models as well, the prices may. seem lower or similar, but they burn. more tokens and they actually output. tokens, so they create the thing that it. gives you. Those are more expensive. So. everyone is crediting the growth of. these companies to some sort of diverse. revenue model when a large chunk of that. revenue is based on basically the ninja. borrowers that from the great financial.

crisis of the AI generation. These. people that can only afford to pay for. olive tokens as long as venture capital. holds them up. And this is a genuinely. scary thing because it means their. customer base is inherently. definitionally brittle. So everybody's. burning money on all ends of this. This. is a house of cards held up by other. houses of cards. And is the assumption. here because it's a and we'll deal with.

this in the realm of anthropics. valuation which you people are saying. they're going to have an IPO. They're. going to raise 1.5 trillion or maybe. even two trillion. They're going to be. >> they're going to be valued at that and. raise like a hundred billion. >> They're going to be valued at that and. and and raise all that money. Um but. what that does is. they've exhausted the private venture. money and now what they're saying is, "Oh, you know where you know who we can. get the money from now? People.".

>> Yep. >> Just people. just dupes like. they're going to and what's crazy about. this as well is back in 2012 there's. this thing called the jobs act pushed. through so that it was meant to open up. capital markets to more people but it. had a subtle change that meant that. private companies it used to be that. private companies over a certain size. would have to report their actual. revenues they'd have to file like a. public company so it forced companies to. go public at much lower valuations so.

Google went public I think their. valuation was 23 billion. There are 34. trillion now. I think Microsoft was like. 700 million. They're worth trillions. now. Amazon few hundred million. Anthropic is going out at 1.5 to2. trillion. This is exit liquidity. >> What is exit liquidity? Tell me. Tell me. what that is. >> Oh, I'm getting there. Don't worry. So. we are sold this we are sold this idea. that we are investing in the future with. these companies that we're investing in.

the next Google the next Meta the next. what have you when actually what we are. is. >> the dumping ground for venture. capitalists that have invested in the. company we allow them to exit the. company. >> by selling their shares that they bought. at a much lower valuation for a massive. payoff and in return we get a company. that what is anthropic even if anthropic. was to grow to the size of Nvidia it. would what 3x 4x which is a good return. I guess but compared to what you used to.

get from these startups but also it's. not going to do that this is a company. with negative a bit duh so a negative. basically earnings before tax taxes. depreciation. >> let me let me push on it in a kind of uh. little devil's advocate so sure. >> it's a similar story though I remember. when Google came out and they had these. wild valuations and they were getting. crazy amounts of venture capital and. people were saying, "How do they make. money?" It's you're building out all of. this. They didn't call it compute then, but it was the network. You had to build.

out, you know, fiber optic networks. They were taking over some of the dot. bubble buildout And but how are. they going to make any money? And. over time though it did turn into a. profitable business whether it was. through advertising or the selling of. data or uh other ways that they made. money either by sucking up other. companies or things like that. Are we. missing that same story. with AI? Are we being too too skeptical.

about how they can turn this into a. profitable business? >> So let's take Amazon. Amazon is the one. people like to choose. Amazon Web. Services, which is their cloud platform, one of the most profitable businesses in. history. Incredible stuff. Founded in. 2003, >> okay, >> I think it was available to the public. in 2006, profitable in 2015. Amazon's. combined capital expenditures in that. period. >> to build out cloud capacity. >> for everything actually, all of their. capital expenditures for the logistics.

network, for the cloud, for everything. Okay. >> Was $ 29.7 billion adjusted for. inflation. >> over how long a period? uh 12 years. between 2003 and 2015. >> and that's not per year that's total. >> that's the total capital expenditures. >> $30 billion. >> and Anthropic raised $30 billion in. February they raised $65 billion in May. [laughter]. spent I think $45 billion in capex in. the last quarter. and here's the thing as well Amazon at.

that time was a much smaller company so. if you invested in Amazon at that point. you having an incredible return on. investment if you held on. It paid off. in spades. >> And also the difference is is that. Anthropic and OpenAI do not have assets. >> These companies don't have data centers. They're not buying data centers. They're. leasing data centers. They're leasing. chips. But that's the part that I don't. quite understand. Why wouldn't they want. to own their own infrastructure? How.

would they afford it? But then what are. they? So all the money they're raising. is just on leasing, is just on. agreements that they're making with. other companies. >> Yep. That's exactly it. [music]. >> Hey folks, I know most people look at me. and they think to themselves, well that. that's a fashion plate right there. That. dude, he knows what's up. I'm surprised. he's even got time to do the podcast. knowing that uh he should be in Milan. sitting with Anna Winour.

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the weekly show. It's the best way to. support the show. [music]. Somebody's going to fail. And if one of. them fails, if you're talking about. these hyperscalers spending $60 billion. a quarter or whatever you're talking. about, that's going to create I mean, if. you think about the mortgage crisis in. in 2008, that was I think they said it. was something like 7% of mortgages went.

underwater and that destroyed the entire. derivatives market around it. So, it's. not going to take. that big a hit to ripple through this. industry and create a disastrous. domino effect. >> Yeah. And what sucks is as well is the. American stock market is basically held. up on like a toothpick of AI. >> Oh. Uh I think only it's the max it's.

only those seven companies are driving. the entirety of the gains of the stock. market. >> Yeah. like uh 45% I think of the value. of the NASDAQ 100 is in the Magnificent. 7. And by the way, the valuation of the. Magnificent 7 is largely based on the. idea that AI will be the biggest, most. strongest thing and grow forever. Nvidia's continued valuation, I think. 215 a share as I think about this, is. based on the idea that Nvidia will sell. more and more GPUs, basically selling a.

trillion dollars worth of them in 2. years. And we're at the point now where. outside of Microsoft who has just. offered buyouts to 60 27% of its staff. to keep bankrolling AI. Meta, Google, Amazon cash flow negative. All cash flow. negative having to take on debt. They. can no longer buy these GPUs out of cash. flow. So the NeoClouds never could. afford to. So they've had to take on. ownorous debt. Coreweave, the biggest of. them and the worst of them. They're.

raising. I think that if they were to. raise debt today, it would be 13, 14, 15%, basically a personal loan. So, this. is all based on debt. So, yeah, the. moment anything bad truly happens, that. debt stops getting issued. They stop. buying those GPUs. Do you have a sense, Ed, that these businesses, you know, we. always think of it in terms of leverage? Like, how overleveraged are these. businesses? And you know again going. back to 2008 when they found out that. banks were leveraging themselves at 30. to1 or 35 to1 and and endangering the.

very sort of foundation of their. businesses if hit the fan. Have. they calculated the sort of leveraging. of debt of these companies and these. buildouts and lease agreements? >> So when it comes to the big ones like. Microsoft, Google, Amazon, Meta, they're. not going to go bankrupt. Nvidia isn't. going to go bankrupt. Like Nvidia as the. chip seller is going to probably take a. haircut, but the big hyperscalers are. going to be fine, but in trouble because.

when they stop doing this, everyone's. going to ask why they did it. Corewave. has 30 $40 billion worth of debt. Morgan. Stanley said they're going to need a. hundred billion more. >> What is Callweave? What is What is that? >> Corewave is a Neocloud. It is a company. that raises debt, buys GPUs, builds data. centers. And by the way, you'll be. shocked to hear that their customers are. Microsoft for Open AI, Google for Open. AI, Anthropic, Meta. Yeah. Shocking. >> You know what this reminds me of? I hate. to even bring this up. You probably.

don't. There used to be a show called. Beas and Buttthead. Do you remember the. show? >> Yes, of course. >> So, there's an episode of Beas and Butad. where they're selling uh you know, kids. used to get those. You'd get a tin of. chocolate. You'd have 10 candy bars and. you would sell them to raise money for. like the pep squad or any of that kind. of stuff. And so one of them had a. dollar. I think Beas had a dollar. And. he said to Butad, "Give me one of those. chocolates." And he gave him the dollar. And then he ate the chocolate. And then. Butad said to Beas, "Uh, you give me one. of And they just pass the dollar back.

and forth." And by the end of it, there's no more chocolate. And they. still only have $1. >> Yep. That's basically it. Except Nvidia. gets the real dollars. >> Nvidia gets so many real dollars. But. >> well, and Ellison gets the real dollars. The landlords are still getting No. H. Okay. Talk to me there. Talk to me. My. >> uncle is in a weird position. >> Okay. >> Our f our favorite leathery old man, Larry Ellison, is um. >> How dare you, sir. That's my new daddy. That's my new father. >> I know. I know. All of the Ellison fans.

screaming in the audience. No. So, Oracle is in a peculiar situation. because their public relations is. phenomenal because people say Oracle is. doing great. Oracle's revenue has been. flat for 15 years adjusted for. inflation. The only part of the company. growing is AI compute, which is. destroying their margins because it. costs so much to buy it and takes so. long to install. And then Larry had this. wonderful idea where, hey, this Open AI. company that loses billions of dollars, I should build endless compute for them.

So September last year, they announced. this $300 billion five-year long. contract with OpenAI. And the analysts. goed. They went completely nuts. They. were saying, "Oh my god, this is so. amazing. Now Oracle stock's tanking cuz. everyone went, "Wait, can you afford. this? Wait, can OpenAI afford? What. happens if Open AAI dies? Who pays for. this?" Oh, no one. There's no one else. There's literally no one who can afford. this. Nobody. Oh, that's bad. But even. then, the market hasn't fully ingested.

it. So what this on a very grand scheme. what this is is AI to the greediest of. us represents something and to all of. these big companies they believe based. on what I believe is kind of a a. horribly misread demand signal that. there is insatiable demand for compute. when what's really happening is two very. large companies are buying all of it and. because these companies are run by the. big ones are run by people without. vision they say well these companies are.

growing real fast now which means they. will grow even bigger and faster in the. future. >> It is that simple. It is not an elegant. or it may be complex in the execution. but the logic is extremely childish. So. they're all building an endless compute. for a demand that they're not sure. the public will even be asking for that. there'll be a plateau.

>> like I'm assuming like like everything. else and I hate to keep going back to. streaming but it's kind of the only. business that I mildly understand but. there are plateaus in subscribers and so. what happened with that business is. everything is chasing penetration. So. you want to get into as many homes as. you possibly can, but at a certain point. you run out of homes or certainly run. out of homes that give a. >> So then you have to double back and.

create other methods of revenue within. that plateau. But it sounds like. they're making an assumption on an a. nonplate system. So, they haven't. demonstrated. the demand or the usage or the. profitability, but they're betting that. they will. Yes. And what's funny is it's. not just demand they need. It's it like.

people could want AI, but most people. don't spend that much on AI. Most people. won't spend money on AI. the vast. majority. >> Well, you said mostly it's going to be. other AI startup companies that need to. use their interfaces. So, they're that's. where they that's where they believe. their big money will be. >> And even more worrying, I saw a few. people on Twitter talking about this. There are AI startups now who are. renting their own GPUs and they're. renting them. And this is the scariest. thing they've said. They've said, "Don't.

worry. There's so much demand for. compute that if we don't need this, we'll just sell it to someone else. >> That's right. It'll be excess compute. that we'll be allowed to. But it sounds. like they're just going to be selling it. amongst each other. >> It's kind of like when in the in 2008. when people were saying, "Well, if I. can't refinance my house, I'll just sell. it.". >> When when does this bill. become due? Do you know like how much.

this proflegate spending? You talked. about you said they had spending. commitments. Did you say $60 billion or. am I imagining that? >> Oh, it's much big. Anthropic has in the. next 7 to 10 years $430 billion worth of. non-cancellable commitments. Open AAI. has projected to spend $750 billion by. 2030. >> And how so? And I imagine that they also. have servicing that debt. There there's. probably I I don't know what interest. rates will be in that moment and I guess.

you can't project that but I I imagine. they also have to service that debt on. on the commitments that they've made. >> Well, that's the thing. It isn't even. debt. Well, technically, so Anthropic. technically has $161 billion worth of. leases with with uh Broadcom, which does. carry interest, but these commitments. are otherwise just contracts. So the. debt is being carried by the. hyperscalers, by the people that are. building else this infrastructure. So. they're not their tenants.

and everyone else is a landlord that's. building out and those people will have. to service the debt if AI companies like. OpenAI can't fulfill their service. leases. >> Exactly. And then there is the other. thing of. even if OpenAI and Anthropic had the. demand even if they needed it. There's. the other problem of how slowly these. things are being built. And again we get. back to how little we know about this. capacity. So Microsoft spent $265.

billion on AI on AI GPUs and data. centers since 2022. They have said in. the last three quarters each quarter. like we brought on a gigawatt of data. center capacity. Bloomberg reported and. I reported with the Guardian as well. that actually Microsoft only has 2. gawatts of AI compute capacity. operational with the rest of it sitting. in warehouses. Amazon Business Insider. just reported has billions of dollars of. chips that they either can't plug in or.

well they they either can't plug in. because there's not enough power or they. just haven't built a data center yet. So. on top of all of these other problems, we have this situation where. hyperscalers are buying way more GPUs. than they need, driving up the price of. memory and thus the price of consumer. electronics for everyone. And on top of. that, they're lying kind of about how. [laughter] much capacity they have. They. are trying to make everyone believe. they're bringing gigawatts online when a. data center can do many things. The data. centers that people hate are not the.

ones that do streaming. These AI data. centers are completely different beasts. to anything that runs anything else. These things could all disappear. tomorrow and the internet would function. the mostly the same way because they. only exist to do AI. >> Well, the AI thing was always it it it. wasn't a necessary development in any. way. You know, I I always felt like AI. is just like. >> Google that Google that's on Coke. Like. when you Google something, you say like, "Hey man, is there a pizza place near.

me?" And it tells you. But when you say. it to AI, they're like, "Oh my god, that's such a great question. I love. pizza. Pizza's so good. Did you know it. started in Greece?" Like, it just tells. you and you're just like, "Shut. up.". >> And sometimes goes, "Yeah, Demarcos is. the best.". >> Yeah, that's right. Hey, man. I I need. all your water. I need all your water. >> Demarcos does not doesn't exist. >> Yeah, it doesn't exist. And it makes. up. >> Yeah. So let me so so here I I want to. now like take a step back and give. people a sense of like here are the. vulnerability points of so like you've.

got a bunch of vulnerability points. One. is these AI startups that are using the. APIs will uh fail to the extent that. they lose a you know enough of their 80%. of revenue that their revenue crashes a. little bit. >> Yeah. The anthropic and open AI. Um, I. guess the second part is Nvidia has a. growth problem or the just a chip. surplus because they've got too many. chips and people aren't building them. fast enough. >> Let me correct on on Nvidia cuz Nvidia. is a very peculiar case. So Nvidia.

doesn't care whether you install them. Jensen one gets paid regardless. Indeed, it appears that business insider Eugene. Kim had a great story about this. Amazon. has been doing an early rack receipt. program which means that they have to. take chips before they're ready which is. very clearly Nvidia forcing them so that. Nvidia can bump its revenues. >> but that that that's not sustainable. that that they'll have a revenue growth. slow. >> it isn't and on top of that they have. another problem you're talking about. weak points I think it's Deutsche Bank.

says that 50 to 60% of Nvidia's revenue. comes from hyperscalers so like a. handful of companies most of them. requiring debt so if the debt don't they. not buy chip and chips by the way are. getting more and more expensive. So it's. not just Nvidia needs to sell. >> are getting more and more expensive. >> So really simple this is going to sound. technical but it's pretty simple. So the. reason that every consumer electronics. your phone your laptop everything is. more expensive is because there are. basically three companies that make all.

the world's RAM micron sky and Samsung. >> Now makes all the world's RAM meaning. memory. >> Yes. So random access memory. so that. it's in everything. >> Okay. >> Now, Nvidia's GPUs, which they're. selling millions of regardless of where. they go, use something called high. bandwidth memory. It's a special kind of. RAM, and it takes up more space to build. it on the fabricator, leaving less space. for the useful RAM that everyone else. needs, which the AI servers also need. So, long story short, because they've.

sold so many of these chips, the. triopoly of RAM companies have said, "We're just jacking up the price because. they can." because they can. And so all. of these GPUs being sold in many cases. months if not years in advance being. built for no reason are pushing up the. cost of every single consumer. electronic. So that's just another fun. thing with Nvidia. That's just another. thing that we can blame the AI boom on. >> In in your mind, is there an event. horizon on this? Is there a moment uh a.

singularity of economic uh catastroph. are they racing against the clock or are. we underestimating. their monopolistic. creativity. in this very highstake circle jerk? Like. are we not being. are you looking at it too rationally? >> That was my mistake a few years ago. I I.

really was like that the the the nuance. of my analysis now is that I've given up. on childish things of rationality. >> So you used to have more of a a calendar. on this. You thought this was a ticking. time bomb and it's going off at such and. such a moment. You don't believe that. anymore? >> No. But the things that can destabilize. this, the most obvious one is these. ventureback startups. So they have to. raise money, tens, hundreds of millions. of dollars every three months.

>> So this is an interest rate game. If. interest rates go up anymore, boy, that. could create an enormous issue in the VC. world. >> Well, it's that and also just venture. capital will run out of money. Venture. capital has been on an insane losing. streak. >> since Yeah. since 2017, there have been. thousands of these things called zombie. unicorns. Companies valued at $1. billion. [laughter]. I know it's a great term. $1 billion, but they can't raise another round. because if they raise the round, their. valuation would go down because they're.

not worth as much because they were. overvalued, >> right? >> And um or they can't get acquired. because they're worth they're worth on. paper too much. So, venture capital. since 2017, the average VC fund has. failed to return more than like $1.30. for every dollar invested. So, you. literally would have been better in the. S&P 500. On top of this through between. 2018 and 2022 a bunch of software. startups got vastly overvalued. So. there's a bunch of stuff they can't. sell. >> I mean that exuberance is part of any of.

these technological you know. breakthroughs. >> But there is another layer to that which. was that I think 30% of private equity. take privates in that period were for. software companies. So you have private. equity with thousands of companies they. can't sell either. And now venture. capital has made one really big mistake. which is they're saying AI is going to. be the biggest most hugest thing ever. even though most of these companies are. just rappers around open AI and. anthropics tech but cuz they need so. much money they need to they need to get.

money from VC every few months every. time that happens cuz everyone's excited. the valuation goes up and up and up and. up and up right. >> and up and up and up. There is a. company. The reason I mentioned Harvey. is they've raised like over a billion. dollars in the last year or so. And um. they are worth. >> and they're worth $15.5 billion. >> $15.5 billion for a company with no real. IP. It's mostly just software. Cognition's another one. Another one. I. mean, they're just a business. It's very.

unclear exactly what they do. They have. a coding agent, some other stuff. They've raised billions of dollars and. they're worth $48 billion. There's no. IPO. Is there a scenario where this. works where you know look we were I. remember pets.com you know when we went. through the internet startup and. everybody's like and and everybody. rushed those were all the zombie. unicorns back in that day and VC came in. and all these people and anybody that. had an internet startup suddenly you. know it was everybody was we work and.

they all went in there and a lot of. those collapsed out like everything else. and but there was. a solid infrastructure left standing. that was worth something. >> Yeah, >> it's clearly worth something. It may not be worth. the every company is a $2 trillion, you. know, uh uh behemoth, but it's clearly. worth something. How does this.

get solidified? What's the scenario. where this works out less. catastrophically? So the problem is is. the dot bubble was the actual software. part of that was teenytiny in. comparison. These companies were valued. at hundreds of millions of dollars which. was a lot. >> We've got. >> and now would probably be a billion. dollars given. >> yeah the amount. >> with inflation whoever knows but. nevertheless most of these companies. raised. >> fractions of the amount even adjusted.

for inflation that one of these AI. startups does. Perplexity, an AI search. startup with basically no mo of any kind. and a dying customer base is raising. billions from Nvidia. By the way, from. Nvidia at a $30 billion valuation. Oh my. lord. There is no path for these. companies. Even with a pivot, they're. not going to be worth even a shred of. that. And the venture capitalists are. going to get washed out. Boohoo. They. deserve it. Venture capital needs they. need an apocalypse event because they no. longer invest in valuable companies. They invest in financialization.

>> and private equity the same. It's all the same financialization. >> And here's the thing. Blackstone we can. go into, but Blackstone may actually. face an existential event, too. But. really, I'll get to that in a second cuz. the data center part's really important. I know it's the best part. >> That's the best part. >> AI data centers are useful for one. thing. AI, >> right? >> Now, the comparison that people make. with the with the dot era is the. telecommunications companies, the dark. fiber. There was all this fiber in the. ground. The expensive part was the fiber. in the ground. Once you had the fiber,

most of the work was done for you. Companies die. Use the fiber. Easy. peasy. Not with the AI data centers. If. they're incomplete, then they're going to need just as much. money in three or four or 10 years to. finish as they did back then. And then. there are the opex, the operating. expenses. >> Yes, >> the electricity is going to be just as. expensive, if not more so, in a few. years. This isn't getting cheaper. And. everyone wants to say oh it's like the. dot bubble because you know after that. which included like a massive draw down. the NASDAQ was horrible and.

>> hundreds of thousands of people lost. their jobs and it was very horrible and. I think people were too blas about that. but nevertheless there is no com bubble. recovery here. There is no there are no. alternate uses for GPUs and the demand. for AI GPUs outside of anthropic and. open AAI is minuscule. So while it could. exist after this we have according to. sunshine climate I think sunrise climate. even um it was like 190 gawatt worth of. capacity in planning even if a fraction. of that happens that's still 30 40 50.

gawatt and we're talking hundreds of. billions of dollars worth of demand. just to make the bill to get the bills. paid and these data centers are paid. with debt I don't see how that turns. into something else after this and. people really want it to. And I think. that people choose the.com bubble. because first of all, it allows them to. believe the system functions correctly, that finance and tech can't be wrong, >> right? That it can correct itself. >> Exactly. However, it also allows them to.

say, "Oh, this wasn't a big waste." And. here's the thing. While the hyperscalers. might be able to repurpose this stuff, we are building these data centers. everywhere, and most of them are barely. complete. All of these GPUs sitting in. storage are not useful for other things. >> We can turn those buildings into malls. You know, the country. >> laser tag arenas. It. >> It could always use more malls. I I. don't think that'll ever go away. >> Yeah. I I mean, but even dead malls in. places are another fascinating story of. commerce. >> No, I know. I'm I'm kidding. [music].

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and branch.com/tws. code TWWS to unlock 20% off exclusion. supply. [music]. Do they believe their own Like. does Sam Alman if you pin them down you. know the the Amaday do they believe that. it isn't going to be about customers. that there will be such a productivity. surge in the economy it will replace so. much labor for uh the the the.

corporations that these giant bets will. pay off like what is their and I don't. know if you know this and I don't know. if you may think like well they're. deliluding themselves. What is their version of success in all. this? How does this uh uh carousel stop? So Dario Amade is deeply embedded with. this group called the rationalists. And. rationalist does not mean rational. belief. It's the rational belief that.

super intelligence will kill us all. I. think that so that's just one of the. people influencing him. If you ever hear. about METR or any of these. organizations, they are a religious. cult. It's insane that they are poisoned. It's. everywhere. It's truly It's guy called. um Adam Becker you should talk to about. this. He did a book called More. Everything Forever about it and many. other things. But basically, it's a. billion it's a billionaire cult that. believes that super intelligence will. destroy us all. >> And yet they're they're all building it. out. >> Yes. Because don't you want to get.

killed by American tech? But they're. also to [laughter] be clear that the. promises the promises are so far from. what all of this actually is. But. Amday's argument, and I actually think. he may believe this, but I'd also. believe that he's a cynical grifter, is. that, oh, this will cure diseases. There's no proof of that. None. Oh, it. will autonomous. It will run businesses. No real proof of that. That still. doesn't make it profitable. And by the. way, they keep saying this and it drives. me crazy. They say, "What is the benefit.

of this? It's going to cure climate. It's going to cure cancer." And you're. like, "Oh, well, what are we using it. for now?" uh finding undocumented. people, targeting uh weapons, companies. are using it to use uh uh pricing that's. dynamic, >> blowing up schools in Iran. >> Blowing up schools in Iran, right? So, they keep saying there is this utopian. world that we're going to get to with. this incredible intelligence. You're. like, what are we using it now? And they. go, well, mostly exploitation. It's. mostly exploitation and extraction.

>> and business stuff, coding, >> right? And the thing is the biggest and. I would argue only consistent market is. coding. Like it it's the one thing it's. fairly good at and even then fairly good. at still involves it being being really. great sometimes in the complete. others. And hopefully you can spot. >> but that wouldn't justify the the cost. of it because that whole coding market's. not worth that. >> Here's the thing I'd say that and people. get really mad at the booster types. The. AI fans hate this but wow. Open AAI.

claims to have solved an ancient math. problem. Wow, great. Have you asked the. same machine how to make a profitable. business. because apparently that maths problem is. just too big for you can solve all of. the these historic problems. >> Have you tried to do that? Have you gone. on like Claude and said, "How can I make. AI profitable?" Just like is Claude. bullshitting itself? >> Well, the answer is always they'll just. make it more efficient. >> Here's a nightmare scenario for you. Do.

you remember when Deep Seek came out and. everybody's like, "Wait a So, >> okay, this is another thing and I'm. sorry to keep bouncing around like this. and I appreciate your patience." So, generally these technologies get cheaper. as they get they get more efficient. They get it's like everything, you know, the progress is always like how long. does it take to make a baked potato? Uh, an hour. I can do it in 10 minutes. Like, it's supposed to get cheaper and. faster and smaller. And that's kind of. how these technological progressions are. supposed to go. Uh this doesn't seem to.

be the case with AI. It gets more. expensive. It needs more of our. resources. It needs more uh electricity. and water and space and cooling and. everything else. But is it possible that. what we don't know about what China is. developing as they did with Deepseek is. a model that is pretty much as good. but runs on much less compute and power. and water. I mean in theory but.

>> but not really. >> Well, I mean also Minimax and Zepoo are. two Chinese AI startups that are public. >> Zoo. >> Zoo Zhi Pu. >> All right. Um, but nevertheless, they're. public and uh they are also. unprofitable. So [laughter]. >> they're all going down together. China's. going down, we're going down. Doesn't. matter. >> I mean, going down. I must be clear. I. don't I don't think this is great. financial crisis level bad, but that.

doesn't mean it will be very bad. Well, here's the thing. >> It will be different, which could be. that. How do you measure bad? But no, no. area of the economy though is not at. some level integrated now into this. project. >> and everyone is invested in the market. now. 20% of the stock market's volume is. retail investors, >> right? >> We have everyone has exposure. When I. say not as bad, I'm even hesitant to say. that. I just think it will be a. different kind of bad because great. financial crisis was massive amounts of.

speculation and terribly done CLOS that. had other bits and pieces. Now that and. that fell apart not necessarily because. every asset was broken but because. everyone lost confidence in the system. >> Almost no assets were broken. It was we. literally the world fell apart because. 7% of people's mortgages were underwater. which is. >> that was the entirety of the. crisis. And the thing is with this is it.

will be different because it's one of. the biggest problems could be entirely. symbolic. It is the loss of confidence. in the AI trade and the magnificent 7. and that is a large chunk of people's. S&P 500 and NASDAQ 100 and NASDAQ. composite holder. >> So should we shut up if the whole idea. is none of it's real. It's only a. confidence game. Should we just be like it's gonna be. great? No. In fact, [laughter] I wish. we'd have said this earlier because the.

thing is Microsoft, Google, Amazon, Meta. do not disclose their AI revenues. >> How is that legal? How is that even. possible? >> Because you don't they report their uh. GAP earnings. So, generally accepted. accounting principles. They report. legally, but they don't have to they. don't have to do anything. They don't. have to do So, they don't have to. tell you how much money they are making. And because the media, the finance and. business and tech media goes easy on. them and has for years, no one really.

says boo. And when you tell people, well, they go, well, look, and pe the. way that people justify it is they go, well, look, their revenues are going up. Fun fact, Meta increased the cost of. ads. Google increased the cost of ad. Microsoft increased the cost of. everything. Amazon increased the cost of. I mean things in Amazon web services. They turned the fees up on their. sellers. They increased revenue through. other things. But because people are. saying, "Wow, these are the smartest. guys ever. They wouldn't spend hundreds. of billions of dollars on nothing." So.

that growth must be coming from AI. And. the growth they are seeing from AI, by. the way, >> is from Anthropic. And Open AI spending. money on compute. And you'll never guess. who funds OpenAI and Anthropic. That's. right. Microsoft, Google, and Amazon. [laughter]. >> and also Nvidia and Broadcom. and Micron. >> No more chocolate. and they only have. one dollar. >> It really is. But. >> that is the story of all of it. >> And what sucks is as well is all of this. could have been avoided if we'd been a.

little more sensible and actually had. real financial regulations, but we. don't. And what sucks is Anthropic will. probably go public. Anthropic will go. public and the retail investor, >> no question. >> And they'll get dumped. They'll get this. company at 1.5 trillion, so a little bit. under Meta's market cap. and they will. and Anthropic has intentionally in their. S1 not given us a timetable of when. their big payments kick in. They don't. tell us what their cash position was in.

Q3 2026, even though they have that. information. And they've done it because. in the next 6 months, Anthropic is going. to have tens of billions of dollars of. new compute costs out of nowhere. And. retail investors will have no idea cuz. the media Ooh. Ooh, look at Anthropic. Look, Anthropic had a one profitable. quarter because that they got a discount. from Elon Musk. Oh, that's fine. Don't. worry about it. Except I do worry about. it because there are going to be people. that buy into this stuff and they're. going to be people that think because. they've been lied to, they're buying the.

next Google. But what I don't understand. is where their credibility comes from in. the first place. And you see it like. let's just take Meta as an example, you. know, and social media as an example. For years, they went down to Capitol. Hill and said, "I'm telling you, we're. doing this right. We put in all kinds of. restrictions and things to protect. people and nothing will go wrong." And. yet, every time you turn around, they're. paying $20 billion here for harm that. they caused in uh because they didn't do.

the safeguards that they said they were. going to do or that they didn't. You. know, whistleblowers will come out and. say they knew that these products were. harming people and they didn't give a. they just kept going. And so we're. doing this, we're making the same. mistake we made with the financial. crisis with is don't worry about the. crimes you're committing. If you just. give us a cut of it, we'll be fine. We. won't make you change your behavior. If. you could just throw us 5 billion, we'll.

just call it square. I think that it's, and this is grim to say, I think the. media is a large part of it. Since 2023, the media was saying that AI was doing. stuff it couldn't do. There were stories. in the Times about a task rabbit being. manipulated by an open AI model. That. didn't happen. It was a guy asking an. open AI model for what to say to a task. rabbit to manipulate it. >> What's a task rabbit? Is that an agent? >> Task Rabbit is someone you hire. It's. someone you hire to hang up pictures.

It's not. And it in this example, it was. to solve a web thing. It was just so. stupid. But nevertheless, the. media was saying posting every few weeks. Sam Orman very scared of his own stuff. And then. >> and then when the AI when the. hyperscalers were spending all this. money, I was going to people in media. and saying, "Hey, why aren't they saying. what they're making?" And people would. say, "It's the early days. It's just. like the dot bubble." the same old tired.

tropes instead of scrutinizing the. people who were spending the money. And. and the thing is, I've definitely been. wrong on timing. I thought that this. thing would wrap up in 2025. Couldn't. have been more wrong on that one. Um but. nevertheless, the underlying economic. problems are the same as before. >> And they say then they haven't corrected. themselves. It just hasn't proven fatal. and it just continues to go on. So if. we're looking at because so now I'm just. trying to sort of this new technology. and find a way to categorize where the.

advantages and the threats are in terms. of the threats. You have sort of that as. you were saying you know the Amade who. is so afraid of his own technology and. believes that ultimately it will kill us. but at least it we will be killed by. American technology and not Chinese. technology. There's the area that I find. is the one that is most likely which is. bad actor using really powerful uh. technology to create something uh.

dangerous and that that creates all. kinds of problems. And then there's this. third area which is financial house of. cards. Where does your kind of lie awake. worrying about these things? Where do. you place it? or the fourth category. which is it all works and we live in a. utopia with high universal income and. nobody has to work and we've all lost. agency. So where where where do you. place in that uh continuum? So I think. that there is a real so these models.

going out and hacking they're not going. rogue they don't have an accord they. don't have thoughts nevertheless we have. open AAI anthropic and I think Google. and meta as well running dangerous. automated software at scale using. hundreds of billions of dollars of. infrastructure and we have no legal we. should Sam Alman should be in prison I. think they I think that they [laughter]. here's the thing an open AI model hacked. in Australia Ian government website. If. a regular person did that, they would be.

in jail. That's right. >> Why is Sam Alman not at least at the. police station? Why is Trump not on. television going Sammy is terrible man? He would love that. >> By the way, that was pretty good. impression. >> Oh yeah, I've been work working on it up. for hours practicing. No, >> I like it. >> But I think that that is the most. obvious problem right now. We have this. unrestrained, unregulated tech being run. on massive infrastructure and in the. tests they're doing real damage and now. we have open source. They had no reason.

to train the models to do this stuff. >> Why are they beta testing things in the. public square and when they say it. breaks out of the sandbox? Why? You're. you're absolutely right there and. everybody just kind of shrugs their. shoulders. Yeah. And up until this. explodes, that is going to be an. escalating problem where basically hard. forcing compute to break things by bad. actors using OpenAI's models mostly or. open- source models that have been. distilled, so trained off of OpenAI and. anthropics models. My big thing is the. financial thing because I mentioned. earlier Blackstone. Blackstone has over.

$200 billion of data center. infrastructure. Who funds Blackstone? Kalpus, the California pension system. pension funds, individual investors. >> Wow. Okay. >> And so this data center debt and. Blackstone is in Corewave, they're in. OpenAI, they're in Anthropic, Air, >> they have bits everywhere. They're in. Broadcom's deal with Anthropic. They. have tens of billions of dollars of. deals partially funded by pension funds. >> Everyone is exposed to this. >> Apollo,

>> merged with Athen, a life insurance and. pension fund company uh back in 2022. Athen is backstopping part of one of. Anthropic's loans. I the good news is is. these pension systems are huge. So. billions would be bad, but they'll still. keep paying pensioners. But I don't know. because of the private part of private. credit. I don't know how widespread this. is. That scares me. Here's what. ultimately happens, and I think we've. learned this, is that the Federal. Reserve ends up just attaching a hose to. whatever is bleeding and pumping it full.

of uh quantitative easing. Like, they're. just going to print money and pump it to. bail out because these things. >> are too big to fail that they've made. themselves. We're basically, I think, at. the mercy of an extortionary industry. that tells us you can't tax us. >> I I don't agree. >> You can't What is that? >> I don't agree. >> You don't agree with that? >> You can bail out the insurance.

companies. I think that will happen. >> Yeah. >> But the government has too much debt to. do a 2008 style bailout anyway. But. also, you. >> don't think they would bail out the. pension systems? >> Uh, no. That's what I meant when I said. the insurance and pensions. Yeah, they. would they bail that out. >> That's what I meant. But they ain't. going to bail out Blackstone. And also. they're not going to bail out OpenAI and. Anthropic. And even if they did, how you. going to bail out the $430 billion of. commitments from Anthropic? And on top. of all of that, you can't bail out a. stock market that is you can't bail out.

the value of Nvidia. Unless the. government is going to give Nvidia $1.2. trillion a year. If if they are go. Microsoft, Google, Amazon, their growth. futures are based on anthropic and open. AI spending. Is the government going to. prop that up? No. So maybe they bail out. little pieces of it, but you can't bail. out a stock market that's drunk on. growth. >> It's interesting. It used to be too big. You got to make yourself too big to. fail. They've actually made themselves. too big to not fail. >> because we can't bail them out.

>> And also, Open AI is too small to pull. into component parts because OpenAI is. fascinating in that I think Dar Armade. might believe something. I think he's. got the religious cultist around him. I. think Sam Orman's just the most cynical. guy ever. I think he just goes says. whatever the last whatever he thinks the. last guy would like to hear. >> Well, you see that in his interview. He. says different things in different. places and you just you don't know what. any of it means. >> and and he'll occasionally say something. insane like with Jimmy Fallon where he. said, "I couldn't imagine raising a. child without chat JPT. [laughter].

mate.". But the thing is with Alman is he is. doing what they're also all following. the Silicon Valley playbook which is. sign as many big deals make number go up. so big so huge and then. >> thing happens it gets cheaper right. except as we've established that isn't. happening and the problem that I imagine. they have is with openai and anthropic. is that the demands on them from the. world are you will grow to be the next. Microsoft Google Amazon plus which. requires you to act like it which.

requires ires you to sign all these. contracts. And because we are surrounded. by what I call business idiots, we are. in the era of the business idiot. The. kind of the it's kind of like the the. final bosses of neoliberalism. These. guys who only care about growth, the. Sachadellas, Hawk Tans, and so on. These. guys who everyone claims are the. smartest guys in the room, Enron. >> And what they do is they go, "Well, these people are promising me all this. money. How amazing would it be if I got. paid that money?" Are they thinking can.

they pay? No. Open AAI is the fastest. growing company in the world. Anthropics. fastest growing company. They grow. >> And the thing is. everyone, the media, regular people, investors buys into it because it's such. a it's a powerful confidence game. It's. they all believe the same thing. We. hope. And because they all believe it, no one wants to stop. >> And there's always that tinge of truth. which is this is incredible technology. It's like nothing we've ever seen. before. I'm not quite sure how to use. it, but I'm sure they'll figure it out.

>> But that's the thing though. That's the. crazy thing about this though. Even in. describing this thing, four years, trillion plus dollars in, what's it good. for? Code. Professionalizing your. emails. I don't need that. I have. fingers. [laughter] Like, >> right. And it And by the way, and I've. seen it. I don't really use it much, but. the times I have, I realize like, oh, I'm getting dumber, I think, just during. this session. >> You're you're having concepts serve to. you rather than understanding the. concepts. And you don't even right I. need to be connected to the world that I.

live in. I just have to. That's just the. way it works. >> Uh but Ed, uh uh it's it's absolutely. man, thank you. Thank you for for. helping to uh really give me an. articulation of the shape of what this. uh financial shell game really looks. like and what the component parts are. Uh I found this really really uh. helpful. frightening, I'm not going to. lie, but but really helpful to. understand it. So, I really appreciate. your patience and and taking the time.

Ed Zitron, CEO of Easy Primary Research. Uh he's got the Where's Your Ed at. newsletter and uh man man knows his. Uh thank you, sir. >> Thanks so much. [music]. >> You know when you talk to somebody and. they have recall? [laughter]. >> He knows a lot of stuff. What it my head. I I started to think like do we even. need chat GBT or can I just call. [laughter] can I just call this guy?

>> Yes. A lot of facts and figures. >> The level of detail. on a variety of issues. You know when. you read a book sometimes and you have. to go back and go like what does. vituprative what is wait what is. [laughter]. like and he's well the you know if the. S1 doesn't go through and then you've. got they 39 and it wasn't like when I. know things even then I generalize it. like it's around 40 billion the $39.6. billion in S1 when they filed the thing. but they didn't show you and I was just.

like. >> holy. >> and he's on Pacific Coast time. Oh, twist. >> He's up early and he looked quite fresh. [laughter]. >> I liked how he said dayters. >> I gotta tell you, everything sounds more. authoritative when delivered in just a. hint of that. He didn't have he wasn't. fullon cochney, but we had. >> the London accent. >> Just a hint of that. Did this. go to eaten? [laughter]. >> And even if not, he could have, you.

know, like he was nearby. >> So, let me ask you guys. So I I am in. that data in that AI doom loop a little. bit of not knowing where the threat is. and also not seeing the promise of the. upside of like we're going to cure all. these things for you but all they're. using it for are these exploitative. surveillance uh state issues and and. weapons issues. as we laid out the various threat matrix. that goes along here.

is the benality of just the economics of. it does that move to the front of the. class as far as threats where where you. guys coming out on this. >> that's kind of where I've been. >> oh really okay. >> just because it seems really. unsustainable and we've all seen you. know number go up and to and it won't. it's like you know completely irrational. And it seems like everybody's just. paying each other like the be and butad.

um comparison that you made. Everyone's. just paying each other the same. >> I'm a very sophisticated analyst. [laughter]. >> Round and round. >> So you've been on you've been on bubble. watch for a while cuz I've been on. somebody's going to make a bow. Like. that's where I've been. That's like the. back of your mind that's always there, you know, [laughter] where you're like, well, and then also, you know, we're all. somebody might write. Britney, same with. you. >> Uh, no, I think the economics of this. was a surprise to me. Like, I haven't. been following this so closely. I I know.

that we use the term circle jerk often, but this is [laughter]. circular financing jerk. >> I apologize to all the all of our. parents out there. We do tend to go with. circle jerk quite a bit. We apologize. >> It always applies. It's crazy. It works. Uh, but I was like, "Holy this is. the ultimate one." Like, that was very. surprising to me to hear the level of. which. >> I didn't realize the big surprise to me. either was that. >> Open AI and Anthropic,

>> they're just tenants. I did not know. that their business model and that Larry. Ellison is really and Elon Musk, they're. the landlords, >> but they're all. >> and Amazon and Meta, >> right? But they all live in the same. town. And then at other times it. probably flips and those people are. giving money to the other. It's. >> Yeah. >> Yeah. >> It's a wild little house of cards they. got going there. >> This morning Nvidia announced they were. going to invest like three billion in. Meta and it's like I guess Meta would. just be giving that money back to you at. some point and.

>> way more than that back to you. So. basically I'll give you $3 billion and. you're going to make a $15 billion chip. purchase along with data center leases. and everything else. It's it's a it's a. wild little game, but I I really. appreciate it. Uh Britney, what what are. the people thinking about or are we are. we getting a lot of questions on. midterms? Where where we at? >> We've actually first one. >> Ah, >> John, we've got one week left. >> If the Democrats win big, do you think. Trump and Co will just January 6th it? >> Oh god. I don't You mean like just not.

seat the representatives and senators? It's it's honestly and as we've seen. over the past episodes, I am not a man. known for my light-hearted vision of the. [laughter] future. I mean, I am optimistic at my core about. people, but people exist in systems that. are designed by I guess we'll call them. [laughter]. >> Um, it is it it's hard for me. It may be a.

failure of my imagination as January 6. was too, by the I remember watching it. in utter disbelief, but. >> it is hard for me to imagine. And and I. do believe, and I'm not saying we're. Paris, and I don't mean that in the burn. it all down way, but I mean it in the. I do think there is a point where people. will go to the streets and those. elections. And I don't mean it in a. January 6 way. I mean it in a we are. protesting an authoritative power grab.

kind of a way. I do think these are the. fulcrum points. >> where a society decides. it's enough already. >> and we're no longer going to play this. game. I but I but I I am I I am clinging to. the idea. that. somebody there learned a lesson from. that terrible terrible day and will.

function as a governor on those. impulses. But God knows I could be very. naive. >> Yeah. >> Come on, Jillian. You got something. cooking in there. Come on. >> I I mean I'm not I think you know. everybody says it and it's true. We have. to come out in like overwhelming numbers. because you can fudge the numbers a bit. when it's, you know, 10,000 votes. You. can fudge what what did he ask for in. Georgia? Like 13,000,000 votes. >> You know, those are numbers where you. they can start around, but we.

all have to show up. So I don't I I. think even they are not. >> and it would have to be egregious. I. mean, whatever. It's like when they say, it's why the worst question that I ever. see newscasters ask as it comes to uh. these election cycles is they always. say, you know, does he vow to honor the. results of the election? And you always. want to say like, well, if you don't. know what happened, how can you vow. >> in the future? You you even a. well-intentioned person can't answer.

that. >> Yeah. >> Because you don't know. >> because what if there is Yeah. >> Right. What if it's obvious egregious. And that's the thing that I. think people are going to have to be. And by the way, >> I do think. >> that preparations for have been. underway. And I do think there is. structures in place to be able to combat. that. As much as you know uh they would. like to muddle the picture, I do think.

there are people out there fighting and. I give them the man, the people that run. our elections in this country, the. individual citizens who put themselves. on the line to be the administrators of. our, you know, democratic republic. Like, >> yeah, >> God bless. They are doing the angel's work as far. as I can see. >> Totally. Yeah. Thank your pole workers. And I think the good news is I saw in.

truth somewhere that um if you do see a. and you report it, you get a. million dollars. >> What? >> So. >> where's my phone? [laughter]. I wonder if you'll get a million dollars. if you report Trump's. [laughter]. If the money comes from him, he's like, "You got me.". >> All right. What else? What else? Britney. Uh, John, if you had to, would. you? >> Yes, I would. I would twice. [laughter].

>> Now I'm desperately afraid of what's. coming next. What is What is the would. you? >> That's it. >> Oh, yeah. Twice. >> If you had to, would you? >> Yeah. Twice. [laughter]. >> Uh, next question. >> Wait, was that really the question? >> That was the question. >> If you had to, would you? Oh, god. >> It's like tauntical a little bit. >> No, hold on. I want to change my answer. [laughter]. >> Too late. We've moved on. >> Son of a. >> Uh, John, with everything he has going. for him, why doesn't Trump complain that. he's never been voted people's sexiest.

man alive? >> I think even that is a bridge to I. [laughter] think e I think even he. understands. >> too far. I mean, he has a at. this point in his life, he has a front. butt. So, I don't think. >> Well, he loves asses. He's got one in. the front and one in the back. [laughter] I know. Have you seen that. back butt, though? He loves asses, but. he's not paying attention to the front. butt. And that's that that has been the. one of the strangest twists in in this. election cycle. And it's so interesting. in the previous times where he's been.

kind of the lead campaigner for his own. campaigns and everything else. He's. always done stick. There's always been. within it he'll find like a little bit. and he'll hit it a couple of the enemy. the people or he'll do a little stickick. like they always say to me. I watch these things now and I go it's. really all shtick. >> Yeah. >> Yeah. There's not a lot of there or. there. There's really every now and. again it'll be like even when he's.

talking about what he thinks are policy. wins for his administration. their stick because it's he can't just. say ladies and gentlemen you know oil. and gas companies are making billions. trillions of dollars you've got to. reelect us to keep this gravy train. going for Exxon Mobile so he couches it. in they tell me not to say anything. about it, but I do in the fake news. media. It's.

it's all now really. He is a Vegas. nostalgia act. >> Yeah. All that's left is like the cult. of personality. Like there's nothing on. top of it anymore, >> right? The accomplishments are are nil. And so thetick has to carry the day. because he has nothing. None of. them do. And the Republicans that are. running, what are they running on? We. didn't stop him once. Like we didn't. provide any check or balance. Elect us.

again. >> Yeah. I mean, that's the hope is like. you still love this guy, right? Like you. >> that's all they're that's all they're. running on. >> This is creepy now. Like it's. gotten more forgive me for saying this, but it's more sexual like constantly. Like. >> poor John Houston. Like he doesn't he. didn't ask for this. But let's never. forget when it wasn't shtick, it was always wildly offensive. And.

remember, this is a guy who recovered. from grabbing by the who came down. an escalator and the first thing he said. was, "I want a travel ban on Muslims and. Mexicans are, you know, some of them are. okay, but rapists mostly." Mh. >> So he's never tempered those the. vileeness. of his id, but now he couches it in a. kind of comic persona. that he no longer carries the.

straightforward, to use that word that we thought about. earlier, vetuprative persona. Now it's. all couched in and you know and then. he's like I'm just a harmless old man. who likes to stare at asses and but. still uh am terrifying vulnerable. communities throughout this country and. isn't that wonderful? >> Yeah. >> So what else? >> One week. >> One week. One more day. [laughter].

>> Uh last question, John. For Halloween, do you sit by the door to give out candy. or do you just put out a big bowl of. candy and trust people to do the right. thing? >> So, first of all, there is no right. thing on Halloween. It is basically it's. a free-for-all. So, if there's if. there's candy in a bowl and you want to. dump it in your pillowcase, God bless. Have at it. [laughter] Um, it is uh. >> those are the rules. There are no rules. >> There are the rules are the the only. rules are if someone gives you an apple, you can egg their house. That's really. the only that's the only rule that's.

going. Uh unless obviously it's a. caramel apple or a candied apple, which. by the way, what is the red candy on a. candied apple? Uh it it is not certainly. a flavor known to man. >> No. >> Or a substance really. Is it. microplastics? Is it merely? >> Yeah. The shine on that that's. unnatural. >> Is it Is it just melted water bottles. with a little bit of uh grenadine added. to it for coloring? It is delicious. Um, so in New York, so New York was great. because the kids we could go right out.

on the street and uh, you know, you. could do you could sit on the stoop. That's we did that one year. We sat on. the stoop and just passed out candy as. people went by and that was great. Uh, suburbs are a different deal, man. And. it is definitely like now that the kids. are older, it's it's just not a it's not. even really when your kids aren't doing. it anymore and nobody really comes to. our house because obviously the the. guard turrets and the guns. So. [laughter]. >> that's when you buy the candy just in.

case and then you eat all the candy. yourself. >> That's right. [laughter] That's right. All right. Um well, very very good. And. I want to remind people uh our podcast. uh next week, what do we do? But we come out normally. on Wednesday. I think we're coming out. on Thursday because of the election. We. want to tape it on Wednesday so that we. have some sense of of what happens. So I. think the podcast will come out on on. Thursday there. Uh would that be. correct? >> That's correct. >> I now lean on every It's so funny to me. during like during the interviews like.

Jillian will just pop in with like. you're completely wrong about that. The. answer is that and I'll be like oh thank. you. >> hardly. >> Uh all right kids. Well, by the way, um, how do they stay in touch with us? >> Uh, Twitter, we are Weekly Show Pod, Instagram threads, Tik Tok, Blue Sky. We. are Weekly Show podcast. And you can. like, subscribe, and comment on our. YouTube channel, The Weekly Show with. John Stewart. >> Thank you very much as always, producer. Britney Medic, producer Jillian Spear, video editor and engineer Rob Bullah, audio editor and engineer Nicole Boyce, associate producer Rebecca Roenberg, and.

our executive producers Chris McShane, and Katie Gray. We shall see you next. time. Happy election. The Weekly Show with John Stewart is a. Comedy Central podcast. [music]. It's produced by Paramount Audio and Bus. Boy Productions. [music].