The AI Industry Is Losing

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2:28Hello and welcome to Better Offline, I'm your host Ed Zitron and I am not a car.

2:45Yesterday, Business Insider reported that Uber COO Andrew McDonald had said, and I quote, that its AI costs were becoming harder to justify and that the link was not there between spending money on AI tokens and creating more useful features. Yeah, just gonna throw a basketball through a hoop real quick. After three long years of hammering it home, I have finally been proven right. AI's outputs and efficacy do not match up with its ruinous costs. When organizations have to pay the actual token costs of AI versus using subsidized subscriptions, they're forced to measure the actual return on investment from AI and are immediately balking at the results.

3:22They're squealing for mercy, they're saying, Honey, I can't afford it. Now, to give you some context, Anthropic only moved organizations to token-based billing sometime in Q1 2026. 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$3 to$13 worth of tokens for every dollar of their subscription.

4:06Even GitHub Copilot, which paid the model providers directly, was letting people burn on a$39 a month subscription$1 ,300 to$6 ,000 in a month. Every effervescent booster and captured business 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 LLMs may seem to them is 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 mask 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.

4:55It's a scam, it's a con, it never made sense. And Uber's COO has given everybody permission to talk about the inherent economic mismatch of AI and also revealed that AI companies like Anthropic and OpenAI have a ceiling far below that which they need to justify their valuations. These companies need to be making $200 billion a year by 2030 or they cannot keep up with their own costs. Now, Anthropic's rapid revenue growth is the result of companies spending millions 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 they need to do ai and llm coding is the future and all of their other dickhead business idiot friends are saying oh i've got i'm letting everyone spend 10 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 had to sustain and grow a massive spend on AI tokens from Anthropic and OpenAI.

6:01Instead, it appears that this token boom 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 Bratton of The Information, friend 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 ROI of AI. Nobody can actually tell why they're spending this much money.

6:34Things aren't getting shipped fast, that software isn't better, and the only people that seem excited about it are business idiots 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 284 billion dollars by 2030 and they need to be profitable at that point too otherwise oracle cannot afford its own bills this is not hyperbole.

7:12This is quoting back OpenAI's own projected revenues from their Investodex. 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 pay 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 ChatGPT is only free to hundreds of Millions of people because OpenAI is able To raise hundreds of billions of dollars Have Microsoft and Google and Amazon And CoreWeed build their own infrastructure And basically do everything for them Much like Anthropic is only able To subsidize its subscribers anywhere from 8 to 13 and a half dollars For every dollar of revenue because of the Endless venture welfare they receive And from hyperscalers too The underlying economics suggest 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 markets approved it, and the people with the money are deluded and disconnected from the process of value creation on almost every imaginable level.

8:27Any statements around Anthropic actually being profitable on inference are products of fantasy and magical thinking. distilled 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 greater myth of executive competence, something that nobody who spends any amount of time around managers or CEOs would ever believe. GitHub Copilot let people burn thousands of dollars on a$39 a month subscription as a means of expressing growth.

9:01I absolutely 100 % believe that both OpenAI 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 in a hundred or two hundred dollar 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 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 OpenAI or Anthropic or these endless data centers into something approaching a real business.

9:47One 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 Amadei and Sam Altman'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 that. 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?

10:25They 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. I'll 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.

10:58This is why Wario Amadei makes wild claims about AI replacing 50 % of all white-collar workers, or Microsoft AI CEO Mustafa Suleiman claims all white-collar labor will be automated in 18 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 why pretend to take this shit seriously and this forceful harassment grade incursion of 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 sells by tricking and scaring you and taking advantage of business idiots who think that using an lm to type emails and spending 12 hours a day on twitter constitutes work i believe that the vast majority of these data centers go unused and or unfinished, and that most AI startups will die once the venture capital subsidies dry up.

12:17I believe that neither OpenAI nor Anthropic have a future, and that their revenues are only made possible through venture subsidies 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. its unraveling will be framed as impossible to see coming because nobody in power bothered to fucking look all right everybody i'm back talking about quince one of my favorite clothing brands that i bought long before they advertised i love quince i love their clothes and it's getting annoyingly hot here in new york city which is why i'm glad i've got a selection of quince's fine European linen button downs and shorts.

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15:43And look, I've seen some of you on the Reddit, I've had some emails from you. You're scared. I get it, it's easy to feel hopeless. We're at a point where the greed and the shamelessness and the stupidity is at its fever pitch. We've reached a time too when the mask has started to slip, and the C-suite imbecile class is unabashed 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. At the same event where he said that the company would likely have shared nearly 8 ,000 roles in the coming years due to AI.

16:19Winters 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 Wintons loves him. Now I must be clear for legal reasons, that was a joke. I don't know about Bill Winters' erection. and I won't guess it any further. Anyway, moving 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.

16:54Sundar Pichai, Andy Jassy, Larry Ellison, Elon Musk, Mark Zuckerberg, and Satya Nadella 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 returns on 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 fume belching gas turbines at such a scale that it feels impossible it could ever stop.

17:31The system is absolutely going to try and exhaust itself to keep it going. The government bought$9 billion of Blackwell GPUs, which may seem like it's too big to fail, but what it actually is is just a way to keep NVIDIA's plates spinning for another quarter. $9 billion isn't going to be enough. In truth, the amount of money that 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 2028 for NVIDIA, which would require over 30 gigawatts of actual operational data center capacity to be built by then, at a time when only 5 gigawatts at most appears to be under construction.

18:14And 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, Jeff, that... That doesn't really help anyone, Jeff. I mean, you probably don't need to worry about it, you rich twat. Anyway, none of this is to say that the mood is good. The vibes are disastrous. Everybody's exhausted.

18:48Those 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 what are you doing with the spare time i don't see any chuckle fucks 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 ai 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 a lot of people at hyperskills 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, obfuscating the features you actually want to use in favor of those that might lose the company money?

19:57Because the company has to prove to the people that invest in the company that they're futuristic and have their AI integrations, even though no one likes them and they only seem to lose money. Alternatively, their CEO either has mild or severe AI psychosis to the point that 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.

20:41and 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 cancellations of said data center projects while hyperscalers can dismiss that as a simple reallocation of capital and nothing to worry about it's harder 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 county-wide and state-wide moratoriums depending on where you look.

21:24And 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, OpenAI either leaked or had leaked that it had a negative 122 % non-GAAP operating margin in Q1 2026, and chat GPT growth had stalled. Anthropic is either the single most successful grifter of all time, or speedrunning a con where it fudges together numbers to raise endless amounts of money to keep its billion or trillion dollar burn going.

22:05These 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 fell for this and those that did not. This will, in the short term, be absolutely fucking horrible for our markets and our wider economy as 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.

22:40In the long term, I see it as a they-live moment for many millions of secret imbeciles and cretins in our midst, 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 thus the only thing they can do is spend money and fire people.

23:17They believe in nothing other than growth and one cannot exist on belief and hype alone, at least not forever. And I can't wait to watch what happens when it collapses.

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