The AI Industry Is Losing

They're saying, honey, I can afford it now. To give you some context, Anthropic only moved organizations to token based billing sometime in Q one, twenty twenty six. This is at most four months of having to pay the true costs of their AI token burn and they're already squealing. They're already begging for mercy. They're already saying, sir, no more tokens. AI has a revenue ceiling and an economic mismatch with its customer base. It's time to accept it.

Every time you've heard somebody say that AI is real, it's here, and it's transformative, you've heard from somebody paying a monthly subscription to a service that allows its customers to burn anywhere from three dollars the thirteen dollars worth of tokens for every dollar of their subscription. Even get hub Copilot, which paid the model providers directly, was letting people burn on a thirty nine dollar a month subscription

thirteen hundred to six thousand dollars in a month. Every effervescent booster and captured business idiot editor crowing about the power of AI has done so without ever really facing its real costs or i think, even using it very much. However, useful lms may seem to them as a facade for a product that costs far too much money for outputs that may or may not actually result in something functional or helpful. When you're not paying for tokens, these mistakes

are easy to ignore. These subscriptions musk the ugly truth of AI that you're paying on a per million token basis, regardless of whether you get what you want, or even if the model makes mistakes or creates more problems that you then have to spend more tokens to fix. It's a scam, it's a con. It never made sense. An uber COO has given everybody permission to talk about the inherent economic mismatch of AI, and also revealed that AI companies like Anthropic and open Ai have a ceiling far

below that which they need to justify their valuations. These companies need to be making two hundred billion dollars a year by twenty thirty or they cannot keep up with their own costs. Now, anthropics rapid revenue growth is the result of companies spending millillions or tens or even hundreds of millions of dollars on its tokens. For its revenue story to make sense, this revenue would have to be stable, replicable,

and sustainable. Instead, it appears that organizations have been burning tokens without any real understanding of why, other than that the need to do AI and LLLM coding is the future, and all of their other dickhead business idiot friends are saying, oh, I got, i'm let and everyone spend ten million dollars a month on this shit because I have a fucking piece of rebar in my skull. For this to make sense, the majority of organizations would have to sustain and grow

a massive spend on AI tokens from anthropic and open AI. Instead, it appears that this token bone was inherently experimental and entirely disconnected from messy things like I don't know return on investment. Uber already noted back in April that it blew through its annual token budget in a few months, and that conversation reported by Laura Bretton of the Information for End of the Show clearly led to an internal back and forth that will end in it cutting its

spend on AI models. I've now spoken to three different large organizations that are all echoing similar anxieties about the RII of AI. Nobody can actually tell why they're spending

this much money. Things aren't getting shipped fast, that software isn't better, and the only people that seem excited about it a business idy it's disconnected from production, and even they are becoming cost conscious when faced with millions of dollars of token bills anthropic and open ai cannot afford for things to slow down, as they've both signed up to over a trillion dollars of compute commitments across Google, Microsoft, Amazon,

Core Weave, Oracle and Cerebrus. Just to be clear as well, open ai has to be making two hundred and eighty four billion dollars by twenty thirty, and they need to be profitable at that point too, otherwise Oracle cannot afford its own bills. This is not hyperbole. This is quoting back open AI's own projected revenues from their investor dex. But in reality, it appears there's a limit to which organizations can be abused and manipulated into believing that the

future is here. And that limit is when they paid millions of dollars a month for something that doesn't appear to have a measurable return on investment. My friends, the business idiots are losing because they never had a plan to begin with. As I've said before, Ai is only as real as its subsidies. Chat GPT is only free to hundreds of billions of people because open ai is able to raise hundreds of billions of dollars have Microsoft

and Google and Amazon and Core. We've built their own infrastructure and basically do everything for them, much like Anthropic is only able to subsidize its subscribers anywhere from eight to thirteen and a half dollars for every dollar of revenue because of the endless venture welfare they receive and

from hyperscalers too. The underlying economics suggests that no subscription based AI service, let alone a free one, makes any kind of financial sense, and the only reason that everybody has had such unrestrained access to AI is because the media and the market's approved it, and the people with the money are deluded and disconnected from the process of

value creation on almost every imaginable level. Any statements around Anthropic actually being profitable on inference of products of fantasy and magical thinking the still copium for people that would rather delude themselves into believing that any of this ever

made sense than face reality or do basic mathematics. Again, the assumption is that companies would never just burn a lot of money, but that too is catering to the grade to myth of executive competence, something that nobody who spends any amount of time around managers or CEOs would ever believe get hub copilot let people burn thousands of dollars on a thirty nine dollars a month subscription as

a means of expressing growth. I absolutely, one hundred percent believe that both open ai and Anthropic are doing exactly the same thing, and that neither of them has some magical way of making inference cheap enough to justify letting people burn thousands of dollars and one hundred or two

hundred dollars a month subscription. The whole profitable on inference thing is a fucking myth, and to give them the benefit of the doubt is to empower them to continue You're raising money by conning their investors and the general public, and to continue perpetuating an era of software that runs

contrary to what makes technology good. Their goal is simple to ram as much of this through to as many people as possible, to get them to spend as much money as possible, until they work out a way to make open AI or Anthropic or these endless data centers into something approaching a real business. One of the greatest mistakes we can make in our lives is to assume that the rich and powerful have any idea what the future holds, or that they have any grand plan or strategy.

It's very likely that Dario Amaday and Sam Mortman's plan is to keep burning money until somebody works out for them how to stop burning money. And in the interim, their plan is to get as many users as they can to keep raising money. That's it. That's the entire plan. There is no secret thing. They're not building AGI. They don't know how to do. Their AGI doesn't exist. They don't have secretly super profitable inference. If they did, they would only sell model access. That's all they would do,

and it would be profitable. Right. They don't have that. They don't have a plan. There is no secret model behind the scenes. Even mythos is a fucking myth. I've been over that before. Put a link in the notes. And similarly, Microsoft, Google, Meta and Amazon's plan is to keep building data centers in the hope they'll have a reason to use them by the time they're actually finished. There is no other plan. They do not have a secret invention coming. They do not have AGI in a

box in their office. They do not have anything. And the reason they're spending so much money and shoving AI into everything you use is because they have no fucking

clue what to do. This is why Warrio Amida makes wild claims about AI replacing fifty percent of all white collar workers, or Microsoft aiceo Mustafa Suliman claims all white collar labor will be automated in eighteen months because the products themselves, the actual products aren't impressive enough to win you over or to justify the hundreds of billions of dollars being sunk into AI. They say these things to make you think that they have a scary or powerful

technology behind the scenes when they do not. And yes, God, yes, does that include fucking mythos. I'm so tired of seeing news stories about how banks are meeting up to talk about the scary monster, the scary Dracula of Mythos. They should have called it Dracula. I pretend to take this shit seriously, and this forceful harassment grade incursion if AI services into our daily lives is not a sign of its power, but a gesture of the lack of confidence

and fear in the hearts of its progenitors. Good shit sells by telling you why it's good. Dodgy shit cells by tricking and scaring you and taking advantage of business idiots who think that using an L and M to type emails and spending twelve hours a day on Twitter constitutes work. I believe that the vast majority of these data centers go unuse and or unfinished, and the most AI startups will die once the venture capital subsidies dry up.

I believe that neither open AI nor anthropic have a future, and that their revenues are only made possible through venture subsidyce for startups using their models, and the experimental revenue of business idiots that don't really know why they're doing AI in the first place. AI demand remains a result of societal psychosis and a weakness in those who are meant to scrutinize the untrustworthy. It's unraveling will be framed as impossible to see coming because nobody in power bothered

to fucking look and look. I've seen some of you on the Reddit. I've had some emails from you. You're scared. I get him. It's easy to feel hopeless. We're at a point where agreed and the shamelessness and the stupidity

is at its fever pitch. We've reached a time too when the maskers started to slip and the c suite imbecile classes unabashed and about its loathing of people, as was the case when the CEO of a UK bank, Bill Winters, talked about how those at risk of losing their jobs to AI are lower value human capital the same event where he said that the company would likely shared nearly eight thousand roles in the coming years due

to AI. Winters would later apologize for his choice of words, although to be clear, he was being absolutely honest when he made the remarks. That's what he believes, that's what gets him up in the morning, that's what gets him hard. Bill Winton's loves him. Now it must be clear for legal reasons that was a joke. I don't know about Bill Winter's erection. I won't guess it at any further anyway, Move it on, though. Everything feels rough because the AI

industry is equal parts desperate and overconfident. AI executives believe that they can cram through enough promises of money into the system that the system would rather cannibalize itself than admit it made a mistake. Sundarbishai, Andy Jase, Larry Ellison, Elon Musk Morg Zuckerberg and Sachinadella will gladly annihilate hundreds of billions of dollars to avoid facing the inevitable, but once they do, it'll be gruesome. At the same time.

The things that they need to happen, actual profitability, actual time and investment, actual tangible proof that this is a real thing rather than something they all have to actively conspire to keep alive. Well, they're not happening. Each week we hear about new AI megaprojects that will dominate our countryside with blinding lights, endless noise, and few belging gas turbines at such a scale that it feels impossible it could ever stop. The system is absolutely going to try

and exhaust itself to keep it going. The government bought nine billion dollars of Blackwell GPUs, which may seem like it's a too big to fail, but what it actually is is just the way to keep in Vidia's plates spinning for another quarter. Nine billion dollars isn't going to be enough. In truth, the amount of money that in Nvidia needs to keep this going is so extreme that it is now a test of how long the debt markets and the hyperscalers can keep sustaining the situation, the hype,

and the industry itself. A trillion dollars in annual revenue is necessary by the end of twenty twenty eight for Invidia, which would require over thirty gigawots of actual operational data center capacity to be built by then at a time when only five gig was It most appears to be under construction, and under construction could mean anything from actual

building happening to a scaffolding yard. Nevertheless, even the sweatiest, least trustworthy boosters have begun to sneak in statements about how we're probably not in a bubble, or yeah, it's a bubble, but it's a good bubble. Jeff Bezos, when asked about the AI bubble, said that you shouldn't worry about it, which, well, well, Jeff, that that doesn't really help anyone. Jeff, I mean, you probably don't need to worry about it. You're rich, twap. Anyway, none of this

is to say that the mood is good. The vibes are disastrous. Everybody's exhausted. Those who love AI vibrate with a strange soullessness, constantly talking about the incredible power of AI without ever showing what it did, or perhaps what all that supposed saved time got them. What are you doing with the spare time? I don't see any chuckle folks providing anything useful to the word. I don't see you living lives of leisure. I just see you posting online.

I can do that without the power of a because I have a working brain. What's your fucking excuse, good lord. But one thing I'll add though, that adds to the malaise is that everyone I talk to to a lot of people at hyperscales, they're all fucking miserable. It's terrible there. The business idiots are running the show, and they're both saying, spend more money on AI, but also don't spend quite as much money on AI because it costs a lot. Nobody really knows why they're doing this other than the

fact it's what everyone else is doing. And basically every person in every job has had somebody intimate that they're going to lose their job to a computer every time they open a newspaper or use a website, and every app has some sort of desperate, vulgar pop up about a feature that will generate some bullshit officscating the features you actually want to use in favor of those that might lose the company money, because the company has to prove to the people that invested in the company that

they're futuristic and have the AI integrations, even though no one likes them and they only seem to lose money. Alternatively, their CEO either has my old or severe AI sside coosis to the point they have decided to violate your user experience because AI is a non consensual technology at its heart, this is what it is. Nobody asked for this, no one wants this. We've had it forced upon us. Even the people excited by it would rather do something else.

And all of that excitement doesn't seem to amount to anything. And they all seem desperate, and they seem anxious and scared and vulgar in the way they attack their detractors. And that's because they're losing. They all know it. They're desperate, they're scared. They're scared that the thing that they mortgage their companies and careers and reputations on is all falling apart.

And it seems that there are nearly as many announcements of new large data center developments as there are cancelations

of said data center projects. While hyperscolars can dismiss that as a simple reallocation of capital and nothing to worry about, it's hard to ignore the growing backlash against these facilities from locals and the success that these locals have had, especially in blocking multiple different developments or setting up actual what county wide and statewide moratoriums depending on where you look.

And it gets worse. Anthropic had to conspire with Elon fucking Musk to conjure up a single profitable quarter with SpaceX deliberately discounting two months of compute costs as a means of swindling the media and its investors. One last time, I swear to God, the object permanence in the valley is not so good, folks. But in response, open Ai either leaked or had leaked that it had a negative one hundred and twenty two percent non gap operating margin in Q one twenty twenty six and chat GPT growth

that's stalled. Anthropic is either the single most successful grifter of all time or speed running a con where it fudget together numbers to raise endless amounts of money to keep its billion or trillion dollar burn going. These are not the actions of honest, sustainable companies that will exist

in the future. I believe that we are on course for a truly horrible crash, the likes of which may rewrite the venture capital industry and mortally wound one or more hyperscalers, as well as fundamentally divide society on so many levels into those that fall for this and those that did not. This will, in the short term be absolutely fucking horrible for our markets in our wider economy is a result of the time bomb of private credit and private equity and their failed investments in software and

their failing investments in data centers. In the long term, I see it as that they live moment for many millions of secret imbeciles and credits in our mist and I don't think it'll be easy to wash the stench off. For those that really pledge themselves to the graveyard smash of AI, we will win long term, what they are doing is not working. The future will not be without pain, nor will it be easy or pleasant or something I

will relish in. But in the long term, I think this is a moment where the greater business idiot incursion faces a reckoning with a reality it believed it could change through sheer force of will. These people don't know how to build things that work anymore, and that's the only thing they can do is spend money in fire people. They believe in nothing other than growth, and one cannot exist on belief in hyperlone, at least not forever. And I can't wait to watch what happens when it collapses.

Thank you for listening to Better Offline.