CZM Rewind: The Case Against Generative AI (Part 4)

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0:38And you know we don't hold back, so come be reasonable or shady with us each and every Monday. Listen to Reasonably Shady from the Black Effect Podcast Network on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Welcome to Decoding Women's Health. I'm Dr. Elizabeth Pointer, chair of Women's Health and Gynecology at the Adria Health Institute in New York City. I'll be talking to top researchers and clinicians and bringing vital information about midlife women's health directly to you. 100 % of women go through menopause. Even if it's natural, why should we suffer through it?

1:15Listen to Decoding Women's Health with Dr. Elizabeth Pointer on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Hi, I'm Dani Shapiro. We were in the car, like a rolling stone came on, and he said, there's a line in there about your mother. And I said, what? What I would do if I didn't feel like I was being accepted is choose an identity that other people can't have. I knew something had happened to me in the middle of the night, but I couldn't hold on to what had happened. These are just a few of the moving and important stories on my 13th season of Family Secrets. Listen to Family Secrets on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

1:58CallZone Media. All right, we're back. I'm Ed Zitron, and this is Better Offline.

2:12Better Offline. This is the fourth and final episode of this four-part series where I dissect in excruciating, comprehensive detail the AI bubble and tell you why I think its implosion is inevitable. We're at the end, which is fitting, because in this episode we're going to talk about why and how this entire sham dies. Again, if you're jumping in now, start from the beginning. We talk about a lot of things and it all kind of threads together. I know, I know, you want to hear my explanation of how OpenAI is fucked with a capital fuck, but we've got to lay the groundwork to get there. Okay, caught up?

2:43Good? Good? We're good? We're good? You ready? We're good? You're good? Meep? Yep. Okay, we'll begin. One of the comfortable lies that people tell themselves is that the AI bubble is similar to the fiber boom or the dot-com boom or Uber or that we're in the growth stage or that this is what software companies do. They spend a bunch of money, then pull the profit lever. The thing is, this is nothing like anything you've ever seen before because this is the dumbest shit the tech industry has ever, ever done. AI data centers are nothing like fiber because there are very few actual use cases for these GPUs outside of AI, and none of them are remotely hyperscale revenue drivers.

3:17As I discussed a month or so ago, data center development accounted for more of America's GDP growth than all consumer spending combined in the first half of 2025, and there really isn't any demand for AI in general, let alone at the scale that these hundreds of billions of dollars are being sunk into. The conservative estimate of capital expenditures related to data centers is around$400 billion, but given the$50 billion in a quarter in private equity invested, I'm going to guess it breaks half a trillion, all to build capacity for an industry yet to prove itself. And this whole NVIDIA OpenAI$100 billion funding news should only fill you full of dread.

3:51But also, it isn't fucking finalized. Stop reporting as if it's done. I swear to fucking... Anyway, good. According to CNBC, and I quote, the initial$10 billion tranche is locked in at a$500 billion valuation and expected to close within a month or so once the transaction has been finalized, with successive$10 billion rounds planned, each to be priced at the company's then-current valuation as new capacity comes online. What a horrible deal. They can just raise whatever. Let me just go back to NVIDIA. But let me just be clear. OpenAI has written a lot of checks that neither it nor anyone else can cash.

4:24And for it to survive, it needs to raise more than, honestly, about$500 billion and maybe another$400 billion in other people paying for stuff. It's astonishing, really. At no point is anyone asking how exactly OpenAI builds the data centers to fill full of the GPUs to get the rest of NVIDIA's funding. In fact, I'm genuinely shocked and a little disgusted by how poorly this story has been told. Let's go point by point. $10 billion is not enough for OpenAI to build a data center. The 1.1, 1.2 gigawatt Gabiline Texas data center being built by Oracle and Cruiser for OpenAI required$15 billion in debt.

4:59And that's not including the$40 billion of chips needed to power it. Though I question whether all of those are going into Abilene or somewhere else, which we'll get to later. OpenAI can also not afford to pay for everything it's promised. OpenAI will burn, they say,$150 billion in the next four years, according to the information. But I believe the company intentionally leaked those numbers before the announcement of their$300 billion deal with Oracle. And so when you take into account the numbers shared by the information, which involved them burning$47 billion in 2028, a year when OpenAI is meant to make$70 billion in payments to compute to Oracle, another$28 billion to Microsoft for any other cost, there's no space for the$300 billion to go.

5:38And there's actually another$100 billion they're promising for backup compute as well. On top of all of this, OpenAI is still yet to convert to a for-profit entity and must do so by the end of 2025 or they'll lose$20 billion in funding from SoftBank. A few weeks ago, Microsoft and OpenAI co-published an announcement that said they'd signed a non-binding memorandum of understanding for the next phase of their partnership, which the media quickly took to mean a deal was done. No deal has been done. This is an announcement of nothing. On top of all of this, venture capital might run out of the current rate of investment in around six quarters, and OpenAI needs more investment than ever.

6:15The information recently published some worrying data from venture capitalist John Sikoda that at today's clip, the industry would run out of money in six quarters, adding that the money wouldn't run out until the end of 2028 if it wasn't for OpenAI and Anthropic. In a very real sense, OpenAI threatens the future of available capital for the tech industry. Well, the good news is that they're going to make lots of money, right? I mean, OpenAI leaked that they'll make$200 billion in four years' time. I mean, if you're concussed, I can see how you believe that. I'm going to read you a bunch of numbers.

6:47I know it's kind of going to be annoying to hear this. For the next 30 seconds, I'm going to just throw figures at you. But pay attention because it's important to realize how insane this is. So in 2025, OpenAI projects to make$13 billion and have free cash flow of negative$9 billion. In 2026, OpenAI will make$29 billion or$30 billion, but have free cash flow of negative$17 billion. In 2027, OpenAI will make$60 billion but have negative cash flow of negative$35 billion. And in 2028, OpenAI will make$100 billion but have free cash flow of negative$47 billion. In 2029, OpenAI will make$145 billion but have free cash flow of negative$8 billion somehow.

7:31I just want to reiterate there. OpenAI's projections see it reduce its negative cash flow by$39 billion, or one and a half times 3M's revenue from the last financial year in a single year, while also increasing their revenue by a similar amount. Give or take a few billion. Who's counting? Certainly not Sarah Fryer, the CFO of OpenAI. It's also fucking stupid, but don't worry. I know. I know some of you have been worried. You see big strongmen with tears in their eyes saying, Sir, Sir, OpenAI, they're not going to have enough money. They're going to die. But don't worry. In 2030, OpenAI will make$200 billion and somehow have positive free cash flow of$38 billion.

8:08It's just that easy. I don't teach you this in business school. It's just that easy. How are they going to make it? They're going to make it. They'll be fine. OpenAI's current reported burn is$115 billion through 2030, which means there's no way that these projections that were leaked included$300 billion in compute costs, even when you factor in the revenue. There's no space in the projections to absorb the Oracle money. From what I can tell, by 2029, open ai will burned up have burned upwards of 290 billion dollars assuming it survives that long which i do not believe it will don't worry though open ai is about to make some crazy money i say in no way being totally sarcastic i'm gonna now read you some of the projections that cfo sarah fryer signed off on this is a professional chief financial officer again more numbers but pay attention pay attention this is i want to give you because these are numbers you just heard but I want to give you some comparison points.

9:02So in 2026, OpenAI will make, according to their projections, or these are the projections,$30 billion in revenue, or just under the$34 billion that Salesforce made in 2024. In 2027, OpenAI will allegedly make$60 billion, or$2.6 billion more than the$57.4 billion that Oracle made in its fiscal year 2025, or$8.4 billion more than Broadcom made in 2024. In 2028, this is crazy, OpenAI will make$100 billion,$2.3 billion more than Tesla made in 2024, or$11.66 billion more than TSMC, the single largest chip manufacturer in the world, made in 2024. In 2029, things get crazier, because OpenAI will then make$154 billion, or$14.5 billion more than the$130.5 billion that NVIDIA made in its fiscal year 2025.

9:54but in 2030 this is when they really blow the doors off they will make 200 billion dollars or 35.5 billion dollars than the 164.5 billion that meta made in 2024 just so we are clear open ai intends to 10x its revenue in the space of four years selling software and access to its models in an industry with about 60 billion dollars of revenue in 2025 how will it do this open ai does not say. I don't know OpenAI CFO Sarah Fryer, but I do know that signing off on these numbers is, at the very least, ethically questionable. But putting aside the ridiculousness of OpenAI's deals or its funding requirements, Fryer has willfully allowed Sam Holtman and OpenAI to state goals that defy reality or good sense, all to take advantage of investors and public markets that have completely lost the plot.

10:42I'm actually, you know what, I'm actually going to be blunter. OpenAI has signed multiple different deals and contracts for amounts it cannot afford to pay, that it cannot hope to raise the money to pay for, that defy the amounts of venture capital and private capital available, all to sustain a company that will burn half a trillion dollars in the next four years based on their own expenditures, and they have no path to profitability of any kind. But what about that Nvidia deal, Ed? $100 billion is a lot of money, right? It is, but the announcement is bullshit. I know you may have read otherwise, but NVIDIA didn't give Open AI$100 billion.

11:18In fact,$90 billion of that is contingent on Open AI building roughly$125 billion worth of data centers with$200 billion worth of GPUs inside them. And those data centers will have to be built faster than anyone could possibly build something at that scale. And there's no evidence that Open AI knows where or when these facilities will be built or who will build them. Important detail as well, NVIDIA's data centers have nothing to do with Stargate. So when you read that OpenAI has seven gigawatts of Stargate, whatever, it doesn't exist, who cares? That's nothing to do with NVIDIA. Oracle is not building these data centers.

11:51The 10 gigawatts that they need to build with NVIDIA are something completely separate.

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12:43And I said, what? What I would do if I didn't feel like I was being accepted is choose an identity that other people can't have. I knew something had happened to me in the middle of the night, but I couldn't hold on to what had happened. These are just a few of the moving and important stories I'll be holding space for on my upcoming 13th season of Family Secrets. Whether you've been on this journey with me from season one or just joining the Family Secrets family, we're so happy to have you with us. I'll dive deep into the incredible power of secrets, the ones that shape our identities, test our relationships, and ultimately reveal who we truly are.

13:26Listen to Family Secrets on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. You know the shade is always shadiest right here. Season six of the podcast Reasonably Shady with Giselle Bryan and Robin Dixon is here dropping every Monday. As two of the founding members of The Real Housewives of Potomac, we're giving you all the laughs, drama, and reality news you can handle. And you know we don't hold back. So come be reasonable or shady with us each and every Monday. I was going through a walk in my neighborhood. Out of the blue, I see this huge sign next to somebody's house.

14:07Okay. The sign says, my neighbor is a Karen. What? No way. I died laughing. What? Like, I have to know. You are lying. Humongous, y 'all. They had some time on their hands. Listen to Reasonably Shady from the Black Effect Podcast Network on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Welcome to Decoding Women's Health. I'm Dr. Elizabeth Pointer, Chair of Women's Health and Gynecology at the Adria Health Institute in New York City. On this show, I'll be talking to top researchers and top clinicians, asking them your burning questions and bringing that information about women's health and midlife directly to you.

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15:40But you know what? Let's take a step back with something really simple. data centers take forever to build as i've said previously based on current reports it's taking oracle and crusoe around 2.5 years per gigawatt of data set capacity and nowhere in these reports does one report take a fucking second to say hey what data centers are you talking about hey didn't sam altman say back in july he was building 10 gigawatts of data center capacity with oracle but wait now oracle and open ai have done another announcement that says they're only doing seven gigawatts, but they already had a schedule on 10 gigawatts.

16:11Like I said, totally different 10 gigawatts to the one with NVIDIA. But you know what? You've got a few hundred billion dollars of data centers, now you're making real money. Anyway, I cannot be clear enough how unlikely it is that the first gigawatt of NVIDIA systems will be deployed in the second half of 2026, as NVIDIA has stated with their deal with OpenAI. And that's as if the land has been bought and got permits and the construction has started, none of this has happened. But, you know, let's get really specific on costs. Crusoe's 1.2 gigawatts of compute for OpenAI is a$15 billion joint venture, which means a gigawatt of compute runs about$12.5 billion worth of construction.

16:50Abilene's eight buildings are meant to hold 50 ,000 NVIDIA GB200 GPUs and their associated networking infrastructure. So let's say a gigawatt is around 333 ,000 Blackwell GPUs, even though the GB200s are technically two of them put together. Though this math is a little funky due to NVIDIA promising to install its new Rubin GPUs in these theoretical data centers, that means these data centers will require a little under$200 billion worth of GPUs. By my maths, that's about$325 billion, but NVIDIA is saying it could be half a trillion. But you know who gives a shit, right? Numbers don't matter. You've got Jensen Huang telling CNBC that 1 gigawatt costs$50-60 billion.

17:27You've got Altman claiming the same thing to Bloomberg. well my math says something completely fucking different but no one seems to want to bother you know it's only like the places i'm quoting are leading business outlets with teams of thousands of people with incredible infrastructure where they could sit down and say well you know it costs this much to build stargate abilene why don't we work out actually what this costs no no no just eat the info slop yum yum yum you know it doesn't exhaust me it doesn't make me cynical and frustrated with people who could do a good job. Indeed, I've seen them do a good job, but they just seem to not want to do one with this.

18:05And it genuinely bothers me on a day-to-day basis. Okay, I realize I'm just ranting at this point, but I'm going to be honest, I'm just, I'm so tired of this. As a reminder as well, OpenAI has agreed to spend$300 billion on Compute with Oracle, But at this point, as you can tell, numbers basically don't have meaning. Numbers stop meaning anything. If you believe these numbers, you're a fantasist or a liar. Or you just don't want to think about them too much. Because when you think about them, you start to realize how unrealistic it is. And even if you remain steadfast in your belief of the transformative potential of large language models, eventually there comes a point where reality must prevail and you accept that we're in a bubble whether you like it or not.

18:49What we're witnessing is one of the most egregious wastes of capital in history, sold by career charlatans with their reputations laundered by a tech and business media afraid to criticize the powerful, and analysts that don't seem to want to tell their investors the truth. There are no historic comparisons here. Even Britain's abominable 1800s railway bubble, which absorbed half of the country's national income, created valuable infrastructure for trains, a vehicle that can move people to and from places. The train doesn't randomly just go backwards when you make it go forwards. It doesn't become a bus or a dog at random.

19:21It doesn't hallucinate doors that open and close at random. Trains work. And GPUs are not trains, nor are they cars or even CPUs. They are not adaptable to many other kinds of work, nor are they the infrastructure of the future of tech, because they're already quite old, and with everybody focused on buying them, you'd absolutely see one other use case by now that actually mattered. GPUs are expensive, power-hungry, environmentally destructive, and require their own kinds of cooling and server infrastructure, making every GPU data center an environmental and fiscal bubble onto themselves. And whereas the Victorian train infrastructure still exists in the UK, though it has been upgraded over the years, a GPU has a limited useful lifespan.

19:59These are cards that can and will break after a period of extended usage, whether that period is five years or later, though I hear it's one to three, and they'll inevitably be superseded by something better and more powerful, meaning that the resale value of that GPU will only go down with a price depreciation that's akin to a new car, and then a used car, and then a car that you kick the door of every so often. I am telling you, as I have been telling you for years, again and again and again, that the demand is not there for generative AI and that demand is never ever arriving. The only reason anyone humors any of this crap is the endless hoarding of GPUs to build capacity for a revolution that will never arrive.

20:38Well, that and OpenAI, a company that's built and sold on lies about ChatGPT's capabilities. ChatGPT's popularity and OpenAI's hunger for endless amounts of compute have created the illusion of demand due to the sheer amount of capacity required to keep their services operational, all so they can burn around$8 billion or more in 2025, and hundreds of billions of dollars more by 2030, if they make it, which they won't. The NVIDIA deal is a farce, an obvious attempt by the largest company on the American stock market to prop up the one significant revenue generator in the entire industry, knowing that time is running out for it to create new avenues for eternal growth.

21:13I'd argue that NVIDIA's deal also shows the complete contempt that these companies have for the media. There are no details about how this deal works beyond the initial$10 billion, there's no land purchase, no data center construction started, yet the media slurps it down without a second thought. I am but one man, and I am fucking peculiar. I did not learn financial analysis in school, but I appear to be one of the few people doing even the most basic analysis of these deals, And while I'm having a great time doing so, I'm also extremely frustrated about how little effort is being put into prying apart these deals by the people.

21:46I realize how ridiculous all of this sounds. I get it. There's so much money being promised to so many people. Market rallies built off the back of these massive deals, and I get that the assumption is that this much money can't be wrong. That this many people wouldn't just say stuff without intending to follow through, or without considering whether their company could afford it. I know it's hard to conceive that these hundreds of billions of dollars could be invested in something for no apparent reason, but it's happening. Write goddamn now in front of your eyes, and I am going to be merciless on anyone who attempts to write, how could we possibly have seen this coming?

22:18Generative AI has never been reliable, has always been unprofitable, and has always been unsustainable, and I've been saying so since at least February 2024. These economics have never made sense, something I've said repeatedly since April 2024, and when I wrote How Does Open AI Survive in July 2024, I had multiple people suggest I was being an alarmist. Here's some alarmism for you. The longer it takes for Open AI to die, the more damage it will cause once it does. As I talked about earlier in the series, venture capital could run out in six quarters, with investor and researcher John Sakoda estimating that there will be only around$164 billion of dry powder, which is available capital by the way, in US VC firms by the end of 2025.

22:59In July, the French tech journal reported, using pitchbook data, the global venture capital deal activity reached its lowest first half total since 2018, with$139.4 billion in deal value in the first half of 2025, down from$183.4 billion in the first half of 2024, meaning that any further expansion or demands for venture capital from OpenAI will likely sap the dwindling funds available for other startups. Things get worse when you narrow things to the U.S. venture capital. In a piece from April, Ernst & Young reported the VC-backed investment in U.S. companies hit$80 billion in Q1 2025, but one$40 billion deal accounted for half of the investment.

23:36OpenAI's$40 billion deal, of which only$10 billion has actually closed, and that didn't happen until fucking June. Without the imaginary money from OpenAI, U.S. venture capital would have declined by 36%. I should also add another$8.3 billion was added on the top of that, but still, that's less than$40, folks. The longer the OpenAI survives, the longer it will sap the remaining billions from the tech ecosystem, and I expect its tendrils to extend to private credit soon, too. The$325 billion it needs just to fulfill its NVIDIA contract, albeit over four years, is an egregious sum that I believe exceeds the available private capital in the world.

24:12And I went and actually looked. Assuming that all of this capital is currently available, the top 10 private equity firms in the world have around$477 billion of available capital. A reminder,$477 billion is a lot less than OpenAI's total commitments over the next few years. In fact, I put a premium newsletter out just before recording this, so I didn't totally update the script, but OpenAI needs a trillion dollars. They need about$500 billion for operations and about$450 billion for all the data centers they promised and the GPUs in them. It's not really good. It's not good at all. But if we include the cash at hand at the biggest investment banks.