AI Is Worse Than The Dot Com Bubble: Part Three

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0:35That's right. Each week we break down what's happening with your money, the most important issues to focus on, and the small moves that make a big difference. Kick off the year with confidence. Listen to How to Money on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. What if mind control is real? If you could control the behavior of anybody around you, what kind of life would you have? Can you hypnotically persuade someone to buy a car? When you look at your car, you're going to become overwhelmed with such good feelings. Can you hypnotize someone into sleeping with you?

1:05I gave her some suggestions to be sexually aroused. Can you get someone to join your cult? NLP was used on me to access my subconscious. Mind Games, a new podcast exploring NLP, a.k.a. neurolinguistic programming. Is it a self-help miracle, a shady hypnosis scam, or both? Listen to Mind Games on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

1:54Our two-part conversation is available now. Listen to The Mailroom on the iHeartRadio app, Apple Podcasts, or wherever you get your favorite shows.

2:07Hello and welcome back to Better Offline. I'm your host, Ed Zitron.

2:20Better Offline. And this is the third part of our series on why the AI bubble is worse than the dot-com bubble. And today we're going to focus on a question. What actually burst the dot-com bubble? I should also be clear, there is no clear answer to any question like this. It's kind of a difficult thing to pull apart. But to start, we're going to need a comparison. And really, the NVIDIA of the dot-com bubble would be the companies making and selling the fiber optic cables themselves and the associated hardware. in july 2000 corning which made and still makes far more than just optical cables became the largest supplier of fiber optic wires and ended 2000 with 7.1 billion in revenue on a net income of 422 million that's profit baby i know we're not used to that because we talk about ai all the time by april 2001 corning had revised its earnings estimates down three times estimating revenue for the year to be between 7.8 billion and 8 billion corning would eventually reveal net sales of 6.27 billion dollars with a loss of 5.498 billion dollars for the year they tried to grow a little too fast they took out loans they did the thing that everyone does in this kind of era fiber optic cable from firm jds uniphase a conglomerate of different optical companies merged in 1999 would go on an acquisition spree to dramatically expand its fiber optic offerings eventually crowning itself, and this is from their own press release, the number one supplier of fiber optic components and revealing net earnings of$208 million in January 2001.

3:52In July 2001, it would announce a 35 % decrease in sales quarter over quarter and a$44.8 billion decrease in the value of companies it had acquired on top of a net loss of$477 million in the quarter. The stock would lose 99 % of its value before an eventual rebrand and collapse. okay so now you know all that crap let's get more specific nvidia currently represents seven percent of the s &p 500 with a market capitalization of somewhere in the region of four trillion dollars in september 2000 jde uniface made up 0.7 percent and corning 0.692 percent of the s &p 500 when it totaled and it is surprisingly difficult to find the exact number around 11.7 trillion dollars in total, with the highest-weighted tech stocks being Cisco at 3.1%, Microsoft at 2.5%, Intel at 2.2%, Oracle at 1.75%, and EMC at 1.7%.

4:47Now, I've had some bright sparks when I've made this point online saying, Ed, Ed, what about Nortel? Nortel was at 1.4%, Lucent was at 0.88%. Wasn't the same thing. In simpler terms, the dot-com bubble didn't burst because of the market's obsession with one company, but an evenly distributed and incredibly vague sense that the future was going to be online and we all need to be involved. The world didn't wait with bated breath for every single earnings announcement from Corning or JD Uniface, nor did the health of the market depend on the continued ability to beat and raise revenues that were echelons higher than any other company in the market.

5:21Now the problem with trying to find an exact comparison is that fiber optic cabling and GPUs are fundamentally different things, requiring, amongst other things, massive optical network terminals to actually turn big looms of cable into actual internet connections and well i guess that you could compare that to a data center but all of that stuff as big as it sounds uh nowhere near as big as an ai data center nor was it as power intensive nor did they require to build an entire fucking gas power station in the middle of texas for it the massive costs associated with the fiber build-out could make nortel or lucent who each boasted record revenues in 2000 and then got the kicked out of them in 2001 the invidia's of the dot-com bubble if you if you really want though i must insist that i think that we're we're going through our own thing we're at the beginning of history not the end of it in any case they're the only real revenue comparison invidia's last quarterly revenue was 57 billion dollars with around 88 of that coming from its data center vertical where it sells gpus and the associated networking gear in lucent's case the service provider network segment where it bundled all its telecoms infrastructure like optical networking and switching per its 2000 annual report accounted for 78 percent of its 33.8 billion dollars in revenue a slight improvement from 1999 when it was 81 percent and 1998 when it was 83 percent for nortel the comp was its service provider and carrier segment which made 82 percent of its 30 billion dollars in revenue in 2000 it gets a little confusing at this point when you try and work out whether either of their net income as Lucent had to restate revenues in 2000 and Nortel had to do so for 2001, 2002 and 2003 thanks to creative accounting principles that, in Nortel's case, overstated revenue by nearly$2 billion.

7:06Poverty's no effect, I guess. Nevertheless, for 2000, Lucent booked$1.219 billion in net income and Nortel, well, okay, whoopsie doodle, they lost$2 billion. Yes, things are materially different in the AI bubble. NVIDIA posted$31.19 billion in net income in its last quarter, and if we are to believe take in Barron's marketing arm for NVIDIA, who acts like a fucking cheerleader, its largest customers are printing money to the point that there's simply no reason to worry. And in some ways, they're right. NVIDIA prints money, it's incredibly profitable, has a virtual monopoly over the GPUs behind the AI bubble, and it can effectively set prices at whatever it wants to.

7:46Similarly, the companies that are buying the most GPUs, Microsoft, Meta, Google, and Amazon are all incredibly profitable themselves, which is really easy, if you don't think about it for more than a minute, to take to mean that NVIDIA won't end up like Lucent, Nortel, or any other dot-com casualty. Now, I need to be very clear about something. Just because NVIDIA isn't like Nortel or Lucent doesn't mean that things aren't bad, and just because some of the companies that are buying these GPUs are profitable doesn't mean that all of them are or won't die on their arses the moment the debt train stops showing up.

8:19Okay, so to really simplify the comparison here, the debt part of the dot-com bubble was about customers of telecommunications companies taking on debt and the telecommunications companies themselves taking on debt to service these contracts. These companies also did a number of aggressive acquisitions, many of which had to be marked down as I've mentioned. Lucent, Nortel, and many of the other telecoms companies building out internet infrastructure would also loan money to their customers in a thing called vendor financing, leading them to have to write off hundreds of millions of dollars of debts when these customers collapsed and in fact winstar a company that did a massive deal with you may remember this from the enron series they ended up their bankruptcy people ended up suing lucent getting hundreds of millions of dollars in fact that's a great place to start to make the comparison nortel's largest deals included a multi-billion dollar contract to sell stuff to now world famous fraudsters worldcom A bizarre$3 billion managed services deal with global IT firm computer scientists that involved 2 ,000 Nortel employees moving into the company and a$1.4 billion 10-year-long deal with England's cable and wireless group to build and operate the cable and wireless internet backbone throughout Europe and North America that was quickly underwater.

9:30Lucent's deals included a$5 billion deal with Verizon and a$1.4 billion deal with other carriers to supply tech to China Unicorn. Money was flowing, but it was all in these weird directions with people that couldn't necessarily afford it or that would lose everybody involved money.

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10:48Listen to How to Money on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. What if mind control is real? If you could control the behavior of anybody around you, what kind of life would you have? Can you hypnotically persuade someone to buy a car? When you look at your car, you're going to become overwhelmed with such good feelings. Can you hypnotize someone into sleeping with you? I gave her some suggestions to be sexually aroused. Can you get someone to join your cult? NLP was used on me to access my subconscious. NLP, aka Neuro Linguistic Programming, is a blend of hypnosis, linguistics, and psychology.

11:25Fans say it's like finally getting a user manual for your brain. It's about engineering consciousness. Mind Games is the story of NLP, its crazy cast of disciples, and the fake doctor who invented it at a New Age commune and sold it to guys in suits. He stood trial for murder and got acquitted. The biggest mind game of all? NLP might actually work. This is wild. Listen to Mind Games on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. A new year doesn't mean erasing who you were. It means honoring what you've survived and choosing how you want to grow. It means giving ourselves permission to feel what we've been holding and knowing that it's okay to ask for help.

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12:59The comparison starts to drift when you talk about revenue centralization. Lucent, Nortel, and other dot-com bubble telecoms companies had a variety of deals in the$100 million to$300 million range, and many more that were in the$20 million to$50 million range. In 2000, AT &T accounted for 10 % of Lucent's revenue and Verizon 13%. Nortel sadly didn't disclose its revenue breakdown by customer. customer nortel was however calling's largest customer for optical cable and fun fact lucent also made optical cable and was the second largest provider in the business despite what jd uniface said jd uniface you fucking lied to me that one's just for phil phil brought on you're listening to this you're going to hear that you're going to go i fucking hated jd uniface or jds uniface i learned about this company a month ago i hate them but that revenue centralization is very important Nvidia's revenue is extremely centralized.

13:54In its last earnings, Nvidia noted that 61 % of its revenue came from four unnamed companies and for years somewhere between 18 % and 40 % of its revenue has come from anywhere from between two and four companies, none of which it names. This is critically important because Nvidia represents, as I said, 7 % of the value of the S &P 500 and the markets have an unhealthy relationship with its stock, freaking out in August 2025, when year-over-year growth was only, I am not fucking with you, expected to be around 50 % year-over-year. People were freaking out. They dumped the stock for over a month.

14:30It was crazy. As a result, any stock panic caused by NVIDIA will naturally drag down the entire market with it. The dot-com bubble was, as I've discussed, two things. The bullshit dot-com bubble from websites and the telecommunications bubble caused by massive overbuilds of fiber optic and internet services. When the bubble burst, it was caused by rising interest rates, increasing the cost of borrowing, and the markets realizing that these unprofitable companies wouldn't survive long term, and then venture capital being depleted. And I realize it's tempting to claim we're in the same situation, but I must insist, it's really quite different.

15:03At the time, venture capital was much, much smaller. For the following numbers, I'm going to give you the numbers adjusted for inflation, otherwise I'm going to be here all fucking day. u.s venture capital invested 23 billion dollars in 1997 28.21 billion dollars in 1998 95.5 billion dollars in 1999 and 197.71 billion dollars in 2000 for a grand total of 344.5 billion dollars a mere 6.2 billion dollars more than the 338.3 billion dollars raised in 2025 alone in venture capital with somewhere between 40 and 50 percent of that around 168 billion dollars going into ai investments and in 2024 north american ai startups only raised around 106 billion dollars it's growing it's happening more the dot-com bubble burst when the bullshit dot-com stocks died on their ass and the world realized that the magic of the internet was not a panacea that would fix every business model and there was no magic moment where a company like webvan or pets.com would turn into this magical profitable beast from a horribly unprofitable business.

16:06Similarly, companies like Lucent Technologies stopped being rewarded for doing dodgy circular deals with companies like Winstar, leading to the collapse of the telecommunications bubble that led to millions of miles of dark fiber being sold dirt cheap in 2002. The oversupply of dark fiber was eventually seen as a positive, leading to an eventual surge in demand as billions of people came online toward the end of the 2000s. Now I know what you're thinking. Ed, isn't this exactly what's happening here in the AI bubble? Isn't this the same thing? We've got overvalued startups. We've got multiple, unprofitable, unsustainable AI companies promising to IPO.

16:40We've got overvalued tech stocks, and we've got one of the largest infrastructure build-outs of all time. Tech companies are trading at ridiculous multiples of their earnings per share, but the multiples aren't as high. That's good, right? No, it isn't. It isn't. AI boosters and well-wishers are obsessed with making this comparison because saying things worked out after the dot-com bubble allows them to rationalize doing stupid, destructive, and shitty things. Even if this was just like the dot-com bubble, things would be absolutely fucking catastrophic. The Nasdaq dropped 78 % from its peak in March 2000.

17:14This time, due to the incredible ignorance of both the private and public power brokers of the tech industry, I expect consequences that will range from horrifying to calamitous, depending almost entirely on how long the bubble takes to burst and how willing the SEC is to greenlight and IPO of OpenAI or Anthropic. I'm very worried, and tomorrow I'm going to finish up this series with a somewhat dark note, that we need to stop pretending that this will be a smooth landing, or that anything will be left in its wake worth keeping.

17:51Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matosowski. You can check out more of his music and audio projects at matosowski.com. M-A-T-T-O-S-O-W-S-K-I.com. You can email me at ez at betteroffline.com or visit betteroffline.com to find more podcast links and of course my newsletter. I also really recommend you go to chat.wheresyoured.at to visit the discord and go to r slash better offline to check out our reddit. Thank you so much for listening.

18:56Hey, it's Joel and Matt from HowToMoney. If your New Year's resolution is to finally get your finances in shape, we've got your back. Prices, they're still high, and the economy is all over the place. But 2026 is the year for you to get intentional and make real progress. That's right. Each week, we break down what's happening with your money, the most important issues to focus on, and the small moves that make a big difference. Kick off the year with confidence. Listen to How to Money on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. What if mind control is real? If you could control the behavior of anybody around you, what kind of life would you have?

19:32Can you hypnotically persuade someone to buy a car? When you look at your car, you're going to become overwhelmed with such good feelings. Can you hypnotize someone into sleeping with you? I gave her some suggestions to be sexually aroused. Can you get someone to join your cult? NLP was used on me to access my subconscious. Mind Games, a new podcast exploring NLP, a.k.a. neurolinguistic programming. Is it a self-help miracle, a shady hypnosis scam, or both? Listen to Mind Games on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. This is Dr. Jesse Mills, host of the Mailroom Podcast.

20:11Each January, men promise to get stronger, work harder, and fix what's broken. But what if the real work isn't physical at all? I sat down with psychologist Dr. Steve Poulter to unpack shame, anxiety, and the emotional pain men were never taught how to name. Part of the way through the valley of despair is realizing this has happened, and you have to make a choice whether you're going to stay in it or move forward. Our two-part conversation is available now. Listen to The Mailroom on the iHeartRadio app, Apple Podcasts, or wherever you get your favorite shows. A new year doesn't ask us to become someone new.

20:43It invites us back home to ourselves. I'm Mike De La Rocha, host of Sacred Lessons, a space for men to pause, reflect, and heal. This year, we're talking honestly about mental health, relationships, and the patterns we're ready to release. If you're looking for clarity, connection, and healthier ways to show up in your life, Sacred Lessons is here for you. Listen to Sacred Lessons with Mike De La Rocha on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. This is an iHeart Podcast. Guaranteed human.