Zone Media. Hello and welcome to this week's Better Offline Monologue. I'm your host ed Zitron. A lot of people have emailed, messaged and plugged me that the natural end of the AI bubble is some kind of government bailouts, something resembling the TARP program that bailed out financial institutions overleveraged during the Great Financial Crisis. And I want to be clear about something. This is different, and a bailout is very very very unlikely. As a reminder, TOP stood for Troubled
Asset Relief Program. It existed, unsurprisingly, to buy the distressed assets that banks had invested in during the Great Financial Crisis, primarily the ridiculous bets made on the housing market made up of people who had got mortgages they could not pay for. Now, these bailouts existed to stabilize banks that were going out of business, along with consumers' money being set on fire if they did so, as well as auto manufacturer like GM and Chrysler that the contagion had
spread to. And while I'm not going to go into massive amounts of detail, haven't got all day, I can make it pretty simple. These bailouts existed to stabilize systemically necessary companies that had they died, would have tanked the US economy and markets at the same time and also lost people's money. Unlike the Great Financial Crisis, very few of the major players in AI are either systemically necessary or in danger of dying as the result of the
AI bubble bursting. Furthermore, there really isn't anything too bailout. So let's start with Nvidia, the largest company on the stock market. While GPU sales make up woods of eighty eight percent of its revenue and Video will not die if the AI bubble bursts, though it will see a massive contraction as a result of its biggest business line collapsing. It's also important to know that in Nvidia's massive stock
price is a direct result of its credible growth. It isn't enough for in Vidia to continue selling lots of GPUs. It must continue to increase revenues by at least sixty percent year of a year, every single quarter, which means that for in Video to continue being the most beloved boy and stock in the in history of the stock market, it needs to make ninety one billion dollars in revenue in a year's time, and that's just in one quarter. By the way, this isn't something a bailout can fix.
Even in the most crony capitalist fantasy you can think of. A bailout would have to continually sink tens of billions of dollars directly into Invidia, buying GPUs and increasing amounts every three months in perpetuity to continue its valuation. And while some of you may say, booh, troub will do themon you'd live in a boring, dumerous fancy based on nothing. And I'm sick of hearing about it. Good lord, listen
to me. Top was a seven hundred billion dollar program that only ended up investing around four hundred and forty three point five billion dollars or so, or put another way, less than than the five hundred billion dollars of orders that Invidia CEO Jensen Je claims are on Invidia's books through the end of twenty twenty six. Are we meant to do this forever? Is that the plan? Are you saying that Trump is just going to go.
There, We're going to buy gps or everyone, We're going to bury them every year every year? Obey so many of the most of you, No, it's not gonna happen. Though I guess he has kind of done that with the Department of Energy. You've probably heard of this deal. By the way, it's one hundred thousand GPUs. That isn't going to do shit.
Jensen Wong needs all your money and eats it now every quarter forever. Okay, Okay, it's not going to happen now, Okay. Another annoying talking point you've probably heard is that open ai is somehow too big to fail, when in fact it's too small to pull apart into enough parts to eat. Open Ai has promised one point four trillion dollars in compute deals, convincing Oracle and others to build massive data
centers in its honor. Yet the reality is that this company isn't even going to hit its thirteen billion dollars in projected revenue this year, and we'll burn billions of dollars in inference loan and doesn't really have a path to profitability.
Two big to.
Fail means that something may kill our economy or markets if it dies, And as loud and annoying as Clammy sam Utman might be, open AI's death wouldn't kill either of those. Let's break it down. Open Ai dying would be symbolically lethal to the large language model era and create an immediate and permanent chill in AI investments. Don't get me wrong. Its death would also likely be an existential threat to Crusoe, the company building its data center
in Abilene, Texas for Oracle. I spoke to someone on the ground there and they say, if the money runs out, everyone just stops and goes home.
That'll be fine.
I don't know the extent of Cruser's revenues, however, but I do know that Oracle is on the hook for a billion dollars a year for Abilene for fifteen goddamn years. An Oracle has also taken on massive amounts of debt to build Abilene and other data centers in Shackleford, Texas, and I think somewhere in Wisconsin is in New Mexico one now and started this with an eighteen billion dollar bond sale and in the works eighty eight billion dollar
debt package to build data centers for Open AI. Well, Oracle does run the risk of default and credit default swaps, which is people betting again well betting that they might default on their obligations. That's going up. The risk is there, but there's still a real company that makes real things. Microsoft owns open Ai IP and research, which would mean that Microsoft pretty much absorbed those eight one hundred million
weekly active users directly into Copilot. And that's if it even chose to retain them and just shut down chat GBT directed it to a very flimsy version of Copilot and didn't let people do half the.
Shit they did with them.
Bailing out open Ai would not do anything, in part because open ai burns billions of dollars and doesn't really do much in the large economy itself. It's revenues, which I estimate to be most four point five billion dollars through the end of September.
By the way, if you're listening to this and you.
Think that my revenue numbers for open Ai, my inference numbers were delayed somehow, it's a cruel accounting. Stop fucking with me. I know what I'm doing. Anyway, those revenues are inconsequential, and the eight point six to seven billion dollars it spent on inference in that period is while a large chunk of Vizio revenue from Microsoft only really accounting for three point eight eight percent or so, the two hundred and twenty three billion dollars Microsoft has made
in that period. Losing open AI would hurt but hardly threaten the health of anyone in Redmond. The same ghost for Anthropic or any other generative AI company. These companies aren't really spending that much, nor are they fueling much of any actual real economic activity. There's only around sixty billion dollars of actual AI revenue in twenty twenty five. In a tech industry where Amazon made one hundred and eighty billion dollars and Google one hundred and two billion
dollars in their last quarters. The disappearance of llm's writ large would have a miniscule effect on actual real dollars entering the economy, other than investments in data centers, which is where I think there's, if any, some kind of bailout. As I've mentioned recently, there's been about fifty billion dollars or more even every quarter for the last three quarters going into building data centers, and I think that many
of these projects end up defaulting. There's a chance a chance that these are somehow bailed out, if an only if they provide an actual existential risk to a major asset firm, A Blackstone or areas of what have you. I don't know if Areas is in them and just naming them at this point. Nevertheless, there is one that I the one company I could see if any bailout happens. And I'm really hesitant to say I think there's any chance.
Oracle Oracle I think is the one chance. Oracle is currently massively leveraged and going into debt to the point it's eating into its free cash flow, and it's a close ally of the Trump administration. I could see them getting a lifeline to escape these ridiculous loans. And while you may say there's some sort of grand plan or the administration will agree to pay these companies to keep
them alive, I don't see it happening. Is doing so won't support the economy, the markets really do anything other than prolongedly inevitable, It's not going to happen, and I I don't know. I'm I want to phrase this in a nice way because I don't want it seem like an attack. Every time you say something like this, you're doing marketing for the AI industry.
Dumerism is marketing.
At this point, I'm so scared of what they'll they'll create, they are gonna get bail out open Aye is too big to fail.
All these are extrapolations of your fear. I get it.
They're also marketing. You are helping them. You are helping them market their services by making them seem systemically relevant when they are not, by making them seem like they're innovative when they're not. Honestly, I need you to just live in reality and look at what's actually happening, which is sweet fuck all. In many cases, every one of these wanky studies you hear come out so on, it's like ten percent of jobs can already be automated by AI.
CNBC should be fucking ashamed of themselves for running a story about it.
It's a PhD.
Congrats to the Better Offline Reddit user resource. It's a PhD paper. And also it's referring to random skills rather than jobs, and skills and jobs are two different fucking things. I'm so goddamn tired of this era, good Lord, But nevertheless, the next two weeks are going to be really interesting.
I'm working on a three or four part or about my worries around in video, and I'm going to tell you all about in Video, and how not similar they are to Enron and Video is nothing like Enron or Loosen or Welcome or WinStar or all these other companies.
And we're going to go into as well. And tomorrow I've.
Got a fun interview with Nathan Grayson of Aftermath Your Love. I might next week take a knee and just run the better offline in studio thing I just did with Lisa from CNN, or I might do the three or four bar. It really comes down to how I'm feeling. It's been a rough few weeks. Health wise. I'm doing fine. I've just been sick and I've just been quite stressed. I must again say thank you for all the lovely emails and messages you've been sending.
You're all so lovely. I love you all.
Couldn't be lucky with the listeners I've got. Tell your friends about the show, tell them about the newsletter, tell them about me, tell them about my strange proclivities, but also keep listening. I really do appreciate all of you enjoyed tomorrow's episode and whatever I put out next week, and there will be a monologue regard Godless, unless I do the three or four par in which case, that's
going to be a monologue for the week. And yes, by the way, I realize me just talking is always a monologue.
I get it. You're so smart. You are though, really thank you for listening.