The Hater's Guide To The AI Bubble, Pt. 1

also got some good news. You've got another three part episode, the second of the year, and this week we're going to be talking about how the cracks and the generative AI market are becoming harder to ignore, and how recent events are making a collapse seem all the more inevitable.

What that means for the wider economy, really the markets and you and I want to make that case because as a journalist, I believe I have the duty to give you the information you need to make sense of a world increasingly feeling incomprehensible and of course detachment reality, and where everything is consequent to everyone, where it's impossible for ordinary people to shroud themselves from the consequences of

decisions made by the executive and shareholder class. Good journalism is making sure that history is actively captured and appropriately described in the cest, and it's the accurate to describe things as they currently are as alarming, and boy howdy am I alarmed?

Nvidia and consultancies lose money. And I also dislike the fact that I and others like me are held to a remarkably different standard to those that paint themselves as optimists,

which typically means people that agree with what the market wishes were true. Critics are continually badgered, prodded, poked, mocked, and jeered out for not all the metrically aligning with the idea that generative AI will be this massive industry, constantly having to prove themselves as if somehow there's something malevolent or craving about criticism. The critics do this for clicks, or to be contrarian. I don't do anything for clicks or downloads or prestige. I don't have any stocks or

short positions. My gender is simple. I like talking about this crap and it comes to me naturally. I have a podcast and it is on some level my job to try and understand what the tech industry is doing day to day.

jumping to the next trend. No. I've been roiling against bullshit bubble since twenty twenty one, the anti remote work push and the people behind it, the clubhouse and audio social networks bubble, the NFT bubble that made up quiet, quitting panic, and even even and this one I got no credit for.

And while I have said some of these things separately, based on recent developments, I think it's necessary to say why. In short, I believe the AI bubble is deeply unstable, built on vibes and blind faith. And when I say the AI bubble, I mean the entirety of the AI trade. And it's alarmingly simple too, he says, before doing three episodes on it. But this isn't going to be some saccerin, whiny or simply worrisome podcast. I think at this point it's become a little ridiculous to not see we're in

a bubble. We are in a goddamn bubble. By the way, it's so obvious we're in a bubble. It's been so obvious we're in a bubble. It's been obvious for months, if not years, A bubble that seems so strong, but it's very weak with a central point of failure. I may not be a contrarian, but I am a hater. I hate the waste, the loss, the destruction, the theft,

the damage to our planet, and the sheer excitement. And some executives and yes, some writers have that workers may be replaced by AI and the bold faced fucking lie that it's actually happening. And what Generative AI is doing is somehow proof that it will. And so I present to you the Hater's Guide to the AI Bubble, a comprehensive rundown of the arguments I have against the current AI booms existence. Send this podcast to your friends you love ones or I don't know, blare it in their

ears like you're torturing them. But no, this isn't going to be a traditional guy but something you can listen to and say, oh, that's why the AI bubble is so bad. And at this point, I know, I'm tired of being gas lit by guys in Gingham shirts who desperately want to curry favor with other guys in Gingham shirts but who also have PhDs. I'm tired of hearing people talk about how we're in the era of agents

that don't fucking work and will never fucking work. I'm tired of hearing about powerful AI that's actually crap, and I'm tired of being told the future is here while having the world's least useful, most expensive cloud software shoved down my throat and up my asshole. Look, the general FAI boom is a mirage. It hasn't got the revenue or the returns of the product efficacy for it to matter. Everything you're seeing is ridiculous and wasteful when it all

goes tits up. And want you to remember that I said this. I tried to say something. I've been trying

to say something for a while. But let's start with something real obvious. Let's start by talking about the so called Magnificent Seven's week point and it's not the one you think because it's in video. As I write the script for this podcast, in Vidia's sitting around one hundred and seventy bucks a share, a dramatic reversal of faith after the pummeling it took from the deep Seek situation in January, which sent it tumbling to a brief late

April trip below one hundred dollars. Four things turned around the mag seven stocks and Video, Microsoft, Alphabet, which is Google, Apple, Meta, Tesla, and Amazon make up around thirty five percent of the value of the US stock market, and of that and Video's market value takes up about nineteen percent of the Magnificent seven, eight to nine percent of the entire US stock market. It's not brilliant. This dominance is also why ordinary people ought to be deeply concerned about the AI bubble.

The Magnificent seven is almost certainly a big part of their retirement plans, even if they're not directly invested. Back in May, the Wonderful Laura Branton from Yahoo Finance reported the Microsoft, Amazon, Meta, Alphabet, and Tesla alone make up forty two point four percent of Invidia's revenue. The breakdown

doesn't make things better. Meta spends twenty five percent, and Microsoft on alarming forty seven percent of their capital expenditures and on Nvidia chips and as Branton notes, Microsoft also spends money renting service from core Weave, which analyst Guild Luria of DA Davidson estimates accounted for eight billion dollars more than six percent of Invidia's revenue in twenty twenty four.

Laurier also estimates that neo cloud companies like Coreweav and Crusoe that exist only to provide AI compute services account for as much as ten percent of Nvidia's revenue, or at least did so in twenty twenty four. In vidious climbing stock value comes from one thing. It's continued revenue growth in the past four quarters. And video has seen year of a year growth of one hundred and one percent, ninety four percent, seventy eight percent, and sixty nine percent.

And in the last quarter a little statistic was carefully brushed under the rug in Video missed though narrowly, on data center revenue. And data center revenue is, by the way,

where the GPUs go, and all the associated hardware and so kind of server architecture switches and the like, and yeah, this is exactly what it sounds like. GPUs that are used in servers rather than gaming consoles and PCs. I get a lot of emails saying, oh, will it be easier for me to buy consumer graphics cards? I don't fucking know, mate, I'm just did to talk about enterprise bullshit. Okay, not really enterprise, but enterprise scale GPUs were getting off track.

Analyst estimated it would make. It would make thirty nine point four billion dollars from the data center category, and then video only only. I no pathetic amount brought in thirty nine point one billion dollars. Then again, this could be attributed to their problems in China, especially as the H twenty ban they were banned from selling uspace chip in China has only just been lifted. In any case, this was a miss, and I'm not sure why no one wanted to talk about them.

not take stock advice from me. I don't know about stocks. I don't know what will go up and down, but I'll tell you, I'll tell you something's not right here. But I'm going to keep this simple in Video relies on not only selling lots of GPUs each quarter, but it must always sell more of them the following quarter. More than forty two percent of revenue, and Video's revenue comes from Microsoft, Amazon, Meta Alphabet, and Tesla continuing to

buy more GPUs. Remember, it's not about buying the same amount. Number must go up. In Vidia's continued value and continued growth is heavily reliant on hyperscalar purchases and continued interest in generative AI. But really just the buying part the GPUs are what matter. And the US stock markets continued health relies on some level of five or six companies, and it's unclear how many GPUs Apple buys, spending billions of dollars on GPUs from Nvidia and more every quarter.

In fact, I found an analysis from portfolio manager Don ke Wang from January twenty twenty five. The found that the Magnificent seven stocks accounted for forty seven point eighty seven percent of the Russell one thousand indexes returns in twenty twenty four. And that's an index fund of the thousand highest ranked stocks on the foot Sea Russell's Index, which in simpler terms means thirty five percent of the US stock market is held up by five or six

companies buying GPUs. If a video's growth story stumbles, it will reverberate through the rest of the mag seven to two, making them rely on their own AI trade stories. And you know it when you know it, when you look at the stories. There is no AI trade because Generative AI is not making anybody any goddamn money. But I have to make money, which is why you need to listen to the following advertisement. It's the only one of these bloody things you're gonna get. Here's an ad and

we're back. And I am so tired of people telling me that companies are making tons of money on AI. They are not. Anyone saying this to you is lying or ignorant or both. The Magnificent Seven spent an insane five hundred and sixty billion dollars between twenty twenty four and twenty twenty five on Capex, with the overwhelming majority going towards Generative AI and their effort for this wonderful effort.

For that more than half a trillion dollars, these companies have made about thirty five billion dollars in revenue and no profit. And I must say, and this is a technical term, this is egregiously fucking stud But let's break it down. Start with starting out in Redmond with our friends at Microsoft, and they plan to spend eighty billion

dollars on CAPEX in twenty twenty five. Now, mustn't. January twenty twenty five, Microsoft's annualized revenue meaning best month times twelve from our official intelligence, was thirteen billion dollars, a number that it's chosen, not what they since slightly because said number is either flat or not growing, though it could in its upcoming I think at the end of this week or next one, it's got cut earnings coming up.

not good. It's not good that seventy six point nine percent of Microsoft's AI revenue comes from open AI, and that revenue is made at cost or just above it, which makes Microsoft's real AI revenue about three billion dollars or about three point seven five percent of this year's capital expenditures, or sixteen point two five percent if you count open AIS revenue, which costs Microsoft likely more money

than it earns. The information also reports that Microsoft made four point seven billion dollars in AI revenue in twenty twenty four, of which open AI accounted for two billion dollars, meaning that for the one hundred and thirty five point seven billion dollars that Microsoft are spent in two years in AI infrastructure, it's made seventeen point seven billion dollars, of which open AI was twelve point seven billion dollars.

It's kind of crap, isn't it. It's not very good at all, and things do not improve when we get

to Amazon. An analyst estimates that Amazon, which plans to spend one hundred and five billion dollars in capital expenditures this year, will make five billion dollars in AI in twenty twenty five, rising and I quote as much as eighty percent, suggesting that Amazon might have made a measly two point seven seven billion dollars in twenty twenty four on AI in a year when it's spent eighty three billion dollars in capital expenditures, and last year, Amazon CEO

Andy Jesse said that and I quote, AI represents for sure the biggest opportunity since cloud and probably the biggest technologies shift an opportunity in business since the Internet. I personally think he is full of shit. And it's a similar story over with Google, which plans to spend seventy

five billion dollars in capex twenty twenty five. Bank of America analysts justin Post estimated a few weeks ago that Google's AI revenue would be in the region of seven point seven billion dollars, though his math, if I'm honest, is a little generous because it includes subscribers to packages that include a lot of non AI staff.

to Google's various AI models. Google's claim that the premium AI tier accounts some millions of the one hundred and fifty million subscribers to Google one, though how many millions is impossible to estimate That one would stop me trying, though, Assuming the three point one billion dollars in twenty twenty five revenue would work out to two hundred and fifty eight million dollars a month, that would mean there were twelve point nine million Google one subscribers also paying for

the premium Ai tier. This isn't out of the realm of possibility, after all, Open ai has like fifteen point five million paying subscribers, but post is making in a kind of a generous assumption here. Nevertheless, well accept the numbers as they are, because they fucking stink. Google's one point one billion dollar in workspace revenue came from a forced price hike on those who use Google services to

run their businesses. My ass included meaning that it's not likely a number that they can significantly increase in the future because it was just raising the rent on everyone. And that's seven point seven billion dollars of revenue, not profit on seventy five billion dollars of capital expenditures. Very nasty. But let's move on to one of my faves, Meta, which plans to spend seventy two billion dollars in twenty

twenty five. Someone's going to get mad at me for saying this, But I believe that Meta is simply burning cash on generative. There is no product the Meta sells that monetizes large language buddles that I can tell at least, But every Meta product now has them kind of shoved in there. Year Instagram dms oinking at you to generate

artwork based in your conversation. Nevertheless, they do make some money, allegedly, and we do have some sort of knowledge of what Meta is saying they make due to a copyright infringement case cardre versus Meta on sealed judgment briefs revealed in April that Meta is claiming that Jenai driven revenue will be more than two billion dollars in this year, with

estimates as high as three billion dollars. The same document also claims that Meta expects to make four hundred and sixty billion to one point four trillion dollars in total revenue through twenty thirty five. And this is from Ai,

by the way, And this is the kind of thing that should have you wrenched out of them. But you should your key God should stop working when the words leave your mouth because Meta makes ninety nine percent of its revenue from advertising, and the unsealed documents state that it generates from its Larmer models and will continue earning revenue from each iteration and share percentage of the revenue it generates from users of the Lama models hosted by

those companies. But the companies in question redacted. Mister Max Zeph of tech runchads that metaalist host partners like Amazon Web Services and Video Data Breaks, Grock Dell, Microsoft, as Yure, Google Cloud, and Snowflake, so it's possible that Meta makes money licensing to those companies. Sadly, the exhibits further discussing these numbers are filed on the seal and also their large language model is open source. What service is Meta providing?

Are these companies so goddamn lazy that they need Meta to come in and set up the fruit? And Jesus Christ, Jesus Christ, when I read these numbers, I just when I read about these people who drive me a little insane. Either way, we are now at three hundred and thirty two billion dollars of capital expenditures in twenty twenty five. For twenty eight point seven billion dollars of revenue, off which ten billion dollars of it is open AI is

at cost or just above cost. Revenue not great. Then there's Tesla, which doesn't appear to make money from generative AI and plans to spend eleven billion dollars on capex in twenty twenty five. Despite its media prominence in the Magnificent seven. At least, Tesla is one of the least exposed companies of mag seven to the AI trade, as Elon Musk has turned it into a memestock company where what they do doesn't really matter. That doesn't mean, of course,

that Musk isn't touching AI. The XAI, the company that develops racist large language model grok and owns what remains of Twitter, apparently burns a billion dollars a month, and The Information reports that it makes a whopping hundred million dollars of annualized revenue, so about eight point three three

million dollars a month. Now there's a shareholder vote for Tesla to potentially invest in Xai, which will probably happen, allowing Musk to continue to pull leverage from his Tesla stock until the company's decaying sales and brand eventually swallow him whole. But we're not talking about Elon Musk today. We are not. We have to talk about Apple now, and honestly, they're the least interesting part of this story.

Their capital expensures in twenty twenty five are expected to also be around eleven billion dollars, and they arguably have the weirdest AI story in the mag of Since seven, Apple intelligence radicalized millions of people against AI, mostly because

it fucking sucks. Apple clearly got into AI reluctantly and now faces stories about how they feel left behind in the AI race, which mostly means that Apple aggressively introduce people to the actual features of generative AI by force, and it turns out that people don't really want to summarize documents, or write emails or make custom emoji, and

anyone who thinks they would is a fucking alien. In any case, Apple hasn't bet the farm on AI in so much sit It hasn't spent two hundred billion dollars in infrastructure for a product of the limited market that only loses money. And again, if you want to give me some money, I'm gonna put an ad break here. So after this, whatever comes next buy it or don't

if you don't want to, but really you should. If I'm speaking, if you hear my voice in the ad, then you should buy it unless you don't want it. And we're back now. I'm going to use a new term I came up with that's really really bad. But the fragile five I call them Amazon, Google, Microsoft, Meta, and Tesla, the ones investing all the money in the GPUs, are holding up the US stock market by funding in

Vidia's future growth story. And this is really the first big takeaway I want you to take from this three parter. To be clear, I'm not saying that any of the mag seven are going to die, just that five companies spend on in Vidio GPUs largely dictate our state of the US stock market will be If any of these companies, but especially in Vidia, sneeze, you four O one K and your kid's college fund will probably catch a cold.

I realized this sounds a little simplistic, but by my calculations, in Vidia's value underpins about eight percent of the value of the US stock market. At the time of writing, it accounts for roughly seven point five percent of the S and P five hundred an index of the five hundred largest US publicly traded companies are disturbing eighty eight percent.

As I mentioned, of in Vidia's revenue comes from enterprise scale GPUs, primarily US for Generative AI, of which five companies spend, makes up over forty two percent of its revenue. In the event that any one of these companies makes significant changes to their investments and in video chips, it will likely have a direct and meaningful negative impact on the wider economy and markets. In Vidia's earnings are effectively the US stock market's confidence and everything rides on five companies.

And if we're honest, here really four companies. This tesla is point nine percent of the investment in GPUs of those five companies buying GPUs for Generative AI to train at generative AI models were still these services while losing. These companies' massive amounts of money don't really produce much revenue, meaning that the AI trade is not driven by any real meaningful revenue growth.

were rolling in. And they're not because they're not rolling in cash and are in fact blowing nearly one hundred billion dollars each to build massive, power hungry, costly data centers for no real reason. Don't watch the mouth, watch the hands. These companies are going to say they're seeing growth from AI, but unless they actually show you the growth and enumerate it, they are kind of lying. They're lying in the way that you're allowed to.

They claim that because people in the past doubted Amazon because are in addition to the burn rate of the AWS systems as the company built out its infrastructure, that I too, am wrong because the analysts were wrong about that. This isn't Camelot, You're a rube. You are not King Arthur.

And now I will address both the argument itself and the day part of it too, because if the argument is that the people who got Amazon Web Services wrong should not be trusted and we should no longer trust them, the people who actively propagate and dies something wrong, we shouldn't trust them, right right, Well, you'll never guess who's now saying AI is good. Oh, I'm going to get there,

don't you flip and worry? Well, if I'm honest, I'm not sure where this argument came from, because there is, to my knowledge, no story about Amazon Web Services where somebody suggests its burn rate would kill Amazon. But I'm a curious little creator, so let's start with an obvious one, the obvious point. I want to give a shout out to Harry mccrack and a fast company for bringing this

one up to me. It May May thirty first, ninety ninety nine, there was a piece that everybody is thinking of called Amazon dot bom and the writer Jacqueline Doherty was mocked soundly for being wrong about Amazon, which has now become quite profitable. The article, along with the other sources that form the basis of this episode, are going to be linked in the spreadsheet, and as a as

a surprise, I'll actually up later. I also want to be clear that Amazon Web Services did not launch until two thousand and six, and Amazon itself would become reliably profitable in two thousand and three. Technically, Amazon had opened up Amazon dot COM's web services for developers to incorporate Amazon content into their applications in two thousand and two, but what we consider Amazon web Services today, cloud storage and compute, launched in two thousand and six. But okay,

fancy pans, what did she actually say? We quote Doherty. Unfortunately for Bezos, Amazon is now entering a stage in which investors will be less willing to rely on its charisma and more demand advances to tough questions like when will this company actually turn a profit? And how will Amazon triumph over a slew of new competitors who have deep pockets and new technologies. Who tried to ask Bezerz, but he declined to make himself for any other executives

of the company available. He could ignore barons, but he

can't ignore the questions. Bang a line, by the way, Amazon last year posted a loss of one hundred and twenty five million dollars, which is about two hundred and forty two point six million today's money on revenues of six hundred and ten millions to about one point one eight three billion dollars in today's money, and then this year's first quarter referring of course, to nineteen ninety nine, as the company posted a loss of sixty one point

seven million, which is one hundred and nineteen point seventy five million today's money on revenues of two hundred and ninety three point six million, five hundred and sixty nine point eight two million dollars in today's money. I realized that was a real motherfucker of a quote, but it's necessary. Her argument, for the most part is that Amazon was burning cash and had a ton of competition from other people doing similar things, and that analysts backed her up,

and they really did. By the way, again, I quote the first mover does not always win the importance of being first as a mantra in the internet world, but it's wrong. The ones that the most efficient will be successful, says one retail analyst. In retailing, anyone can build a great looking store. The hard part is building a great looking store that makes money, which is a good point fair arguments for the time, though perhaps a little narrow minded.

The assumption wasn't what Amazon was building, and we are, by the way, are referring to Amazon dot com. The store was a bad idea, but the Amazon wouldn't be the ones to build it. And again we quote. Once Walmart decides to go after Amazon, there's no contest. The Barnard President Bernard's Retail Trend report. Walmart has the resources that Amazon can't even dream about, which is true at the time, but in simpler terms, Amazon's business model was

not in question. People were buying shit online. In fact, this was just before the dot com bubble burst, when people had insane optimism about the future of the web. Yet the comparison stops there. People obviously like buying shit online. It was the business models of many of these web pioneers that sucked at Year WEBVAM. But we're going to talk about Amazon Web Services and the less technical of you. I want to explain something. AWS is a really important company.

I'll kind of get into those details. But people like to argue about it and say, well, it lost a bunch of money, so you know that means that generative a I should lose a bunch of money to and that's how it works. I'm going to substantively and repeatedly explain why that is so goddamn stupid. I'm sick of the argument. I'm sick of it. Breathe Edward, breathe. They

can't get you behind the microphone, okay. Amazon Web Services was an outgrowth of Amazon's own infrastructure, which had to expand rapidly to deal with the influx of web traffic from Amazon Dot Com, which had become one of the world's most popular websites and was becoming increasingly more complex as it sold things other than books to multiple international locations as well. Other companies had created their own infrastructure, but if a smaller company wanted to scale, they basically

needed to build their own thing. It was a massive barrier between companies and building web services. And it's actually kind of cool what Amazon did. I hate to look Rosie I bind rose colored lenses. I don't know the phrase that Jeff Bezos, but oh no, I remember this was early two thousands, before Facebook, Twitter, and a lot of modern internet we know that runs on services like Amazon Web Services or Microsoft Zero or Google Cloud. They basically invented the modern concept of cloud compume.

post dot com pinata. Fuck, they were so good, but

where is this pisson vinegar? By the way, this is fun. Nevertheless, this article, which again is linked in the spreadsheet for the episode notes, has what I think my hater's crave hmm and I quote. But if techies are wowed by Bezoz's grand plan, it's not likely to win many converts on Wall Street. To many observers, it conjures up the

ghost of Amazon past. During the dot com boom, Bezez spent hundreds of millions of dollars to build distribution centers and computer systems in the promise that they would eventually pay off with outsize returns. That helps set the stage of the world's biggest web retail operation, with expected sales at ten point five billion dollars this year. All that has investors, wrestlers, and many analysts throwing up their hands wondering if Bezos is merely flailing around from an alternative

to his retail operation. Eleven of twenty seven analysts who followed the company of under perform or sell ratings on the stock a stunning vote of no confidence. That number of cell recommendations is matched among large companies only by Quest Communications International, Inc. According to investment consultants Starmind Corp. It's more than even the eight cell options on the

struggling Ford Motor Company. Pretty bad, right, pretty bad. My goose is cooked, all those analysts seem pretty bad, except it's not. My goose is raw. Yours, however, has been in the oven for over a year. As one on as Scott W. Duvitt noted at the time, the direct costs of providing Amazon Web services at first were miniscule because much of the startup infrastructure already existed. It was sur plus capacity, Amazon already owned, software Amazon already used,

and Amazon was in it for the long haul. It knew that this would take some time before it became a profitable business unit, as the company was basically scaling up the infrastructure of the Internet. And by the way, let's just go back to that quote here. The quote says the costs were miniscule. The costs weren't the problem. Hey wait a second, that's a name, Scott W. Duvit. I can look him up. I wonder what he's up to right now? Oh oh, looks like he's working at

web Bush as it's managing director of equity. Researcher has said that AI companies would enter a new stage and early twenty five he said, Oh oh God, just listen to this. The second stage is the application phase of the cycle, which would benefit software companies as well as the cloud of I. And then phase three of this will ultimately be the consumer facing companies figuring out how to use the technology in ways that can actually drive

increased interactions with customers. The analyst says the market will enter phase two in twenty twenty five, with software companies and collaborvider stocks expected to see gains. He adds that cybersecurity companies could also benefits the technology evolves. I know

I'm meant to be more mature, but it also calls out Palenteer, Snowflake, and salesforces those who would gain. In none of these cases am I able to see any actual revenue from AI. Salesforce themselves cerid according to the information that they'd see no revenue growth from AI in twenty twenty five. Palenteer also has discovered by the Autonomy Institute's recent study recently added the following to its public disclosures.

There are significant risks involved in deploying AI, and there could be no assurance that using AI in our platforms and products will enhance be beneficial to our business, including our profitability. What I'm trying to say here is that analysts can be wrong, and they could be wrong at scale. There is no analyst consensus that agrees with me. In fact, most analysts to be bullish and AI despite the significantly worse costs and lack total lack of growth, but ed

ed Amazon Web Services cost money ahead. Now you should meet your awn nice S tried chuckles. In twenty fifteen, the year that Amazon Web Services became profitable, Morgan Stanley analyst Catty Huberty believed that it was running and a material loss, suggesting that the five point five billion dollars of Amazon's technology and content expenses was actually AWS expenses with a negative contribution of one point three billion dollars. And by the way, want to know what she's up

to nowadays? I wanted to know because six months ago she declared that twenty twenty five would be the year of AGENTICAI robust they enterprise adoption and broadening AI winners. So yes, analysts really got AWS wrong. But putting that aside, there might actually be a comparison here. Amazon Web Services absolutely created the capital expenditures drain on Amazon from Forbes's

Chuck Jones. In twenty fourteen, Amazon at four point nine billion dollars in capital expenditures, up forty two percent from twenty thirteen to three point four billion dollars. The company is a wide range of items that it buys the support and grow its businesses, ranging from warehouses, robots, and computer systems for its core retail business and AAWS. Well, I don't expect Amazon to detail how much goes to AWS.

I suspect it is a decent percentage, which means Amazon needs to generate appropriate returns on the capitol deployed from AWS. In today's money, this means that Amazon spent six point seven billion dollars in capital expenditures in twenty fourteen, likely on AWS, assuming it was this much every year. It wasn't, but I want to make an example of every person

claiming that this is a gotcha. It took sixty seven point six billion dollars, and that's in today's money, and about nine or ten years of pure capital expenditures, even though all that capex wasn't just AWS to turn Amazon Web Services into a business that now makes billions of dollars a quarter in profit. And that's fifteen point four billion dollars less than Amazon's capex for twenty twenty four, and even less than one hundred and five billion dollars

they spent this year. It's a fucking joke. And to be clear, the actual capital expension numbers are like the AWS cost in totality, we're likely much lower. I just want to make it clear that even when factoring in inflation, AWS was a a bargain and b a fraction of the cost of what Amazon is spent in twenty twenty four or twenty twenty five. Here's a funny little thing.

On March thirtieth, twenty fifteen, New York Magazine published a piece from none other than mister Kevin Ruse about the cloud compute wars, in which he claimed that, and I quote, there's no reason to suspect that Amazon would ever need to raise prices in AWS or turn the fabled profits which the pundits have been speculating about for years less than a month later, Amazon revealed that Amazon Web Services was profitable. They don't call him the most right man

in tech journalism for nothing. I think it's so funny when you go back and read all of Kevin Rus's stuff, how many just like rates he steps on, and how quickly they whammy him in the face, and how no body says anything. I'm saying something. But here's the good news. We're at the end of this first part. Next episode, we're going to continue exploring the comparison in AWS and general of AI and talk about why that comparison fundamentally

doesn't work and why everything's cry the bripple. I'll catch you on the flip side.