AI Bubble About to Collapse? Exposé on MAGA Ally David Ellison's debt bomb

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0:35That's why I teamed up with scientists and veterinarians to create Pretty Litter. Its innovative crystal formula has superior odor control and weighs up to 80 % less than clay litter. Just one bag lasts up to a month, meaning fewer refills and less scooping. Pretty Litter even monitors health by changing colors to help detect early signs of potential illness. It's the world's smartest kitty litter. Go to PrettyLitter.com and use code PANDORA for 20 % off your first order. Welcome to The Beat, everyone. I'm Ari Melber. And our top story tonight is a deep dive, and it starts here. In Americans' daily lives, most people are actually struggling more right now because of this Trump economy.

1:13Employment falling in that new jobs report. Gas prices up amid the war. Inflation still cutting into people's wages and their family budgets, as so many people know, from going through this summer already. But meanwhile, the stock market hitting an all-time high this week, powered by energy, tech, and AI, and mostly benefiting the very wealthy. The gap between these two economies is actually more extreme under Trump. He's deregulating Wall Street and crypto, which he uses for self-enrichment, and technology and AI more than most presidents. even gutting the gold standard federal enforcement against criminal corruption, tax evasion, and corporate malfeasance.

1:58Deregulating banks, this is all happening, whether you track it or not. He and his family embrace these kind of conflicts to enrich themselves, a grift which obviously undercuts the administration's credibility. But tonight, right now in this special report, we're also going to look at how it risks an even wider impact. We know that gutting rules and standards contributed to the 2008 financial crash. Markets need rules to function well. Otherwise, greed and fraud grow. And if you do have a bubble that pops, it is costly. Everyone ends up being forced to pay for it. So before I go any further in our special report that we've prepared for you right now, and you're going to see how it affects Trump and the world you're living in and everything.

2:48Before I go further, I want to remind us all of where we were when Republicans were in charge of the White House and the Treasury and they engineered that taxpayer bailout of Wall Street amid the panic of that crash. History in the making, the Dow plummets more than 777 points, its biggest one-day point drop. He has no idea how bad it is out there. He has no idea. He has no idea. Bear Stearns today leading the tumble on Wall Street. The stock plunging 45 percent. Lehman Brothers is going bankrupt. Meltdown. The American financial system is rocked to its foundation. That crash upended Americans' lives more than any other development since then.

3:33Indeed, in politics and life, we discuss a lot of issues that don't actually matter as much as this and, as our report will explore, being ready to try to combat the risk of another crash. The anger against that bailout spanned from left to right. Many politicians solemnly claimed never again and lessons learned. And yet tonight I'm here to tell you here we are again. Huge signs of a bubble. Risky debt, market concentration in tech, Republicans deregulating these market rules, as I just showed you, more under Trump than they'd ever tried before. An overheated stock market has many warnings of a bubble, including financial experts.

4:21You can see all kinds of headlines, including from the Financial Bible, the Wall Street Journal. And this bubble could dwarf that last crash I just showed you. It could rock the banks and the backbone of the markets to the point that it could impact everyone, not just people who have a lot of money in the markets or are in tech. Last time, the banks saw those lax rules and exploited them. They pushed the unaffordable housing debt into the bubble. After that crash, billionaire Larry Ellison said that when you have that kind of debt, it does cast a long shadow. The problem is the American consumer is so deeply in debt.

5:02This is not going to come back. Yeah. certainly for five years. The United States is not going to be the engine for growth around the world. That was then. And Ellison knows debt. He is the seventh richest person in the world with about$190 billion. And depending on the day, because a lot of that's in stock, he can at times surpass Musk as the richest. Ellison also uses more debt than most billionaires. His company, Oracle, has a whopping debt level that is hard to even put into words or understand. They have over$150 billion in debt right now. Ellison's also backing the deal with$40 billion to get Warner Brothers, Discovery, Paramount, and CNN all under one roof.

5:49You've heard a lot about his son, David Ellison. It's Larry Ellison's billions, though, backing that in debt. Oracle is reportedly looking at new layoffs amidst this debt bomb. and it already cut some jobs last year. The Times reporting Ellison's AI bet has an astronomical amount of debt. Now, the logic has been the more you spend building this new AI infrastructure, the more you would earn. The Times reporting, though, that there may be limits to that. And Ellison's effective maneuvering with Trump also makes him now a face of this very risky experiment in politically connected capitalism. just as mega-billionaire Elon Musk's sort of rich governing gambit.

6:34Remember those cabinet meetings in the first few months last year? That really tested who owns our democracy and whether handing the keys to a billionaire would be good for the public. That was one version of this test. But the version I'm telling you about tonight, while perhaps less loud, certainly less cabinet meeting crashes, is actually more far-reaching. And so we're going to show you exactly what's going on here. Ellison's wealth and his tech debt puts him at the center of those fears I mentioned about an AI bubble. And that media debt puts him at the center of the MAGA mission to buy CNN and reshape what Americans see from movies to news.

7:17And while Elon Musk is certainly the louder Trump-connected billionaire, I don't think anyone would dispute that title for him. Ellison, who you might have heard a bit less about Is the key insider on so many parts of this tech boom And this MAGA agenda Now whether he personally shares MAGA politics or not Or just sees this as the cost of doing business At this very Trumpy transactional moment In American history Is a question going inside his mind or heart But if you look at the actions As Trump was inaugurated Those first hectic hours Issuing the January 6th pardons march, a march by Musk into Washington, acting like a co-president, giving big speeches.

7:59I mean, you follow politics, you follow the news. You probably remember it was a lot going on in that opening couple hours. But it's worth recalling who was doing the actual business with the brand new president on his first full day in office, January 21st of last year. It was then 80-year-old Ellison deploying his power to bring, let's take this in full, I want you to see this footage to bring AI mogul Sam Altman to the White House for an event that was billed as the president's remarks regarding U.S. infrastructure investment, but not old school or old fashioned infrastructure. We're talking about the same AI debt that I just told you about.

8:41And even Trump then mused about how unusual it was for Ellison to even be in that role. We wouldn't be able to do this without you, Mr. President. And I'm thrilled that we get to. This is the, as you said yesterday, this is the beginning of golden age of America. He's so respected and the group, and it's really an honor. But for Larry to be here and do this is very unusual because he doesn't do this stuff. He doesn't need it. Thank you, Mr. President. We certainly couldn't do this without you. It would simply be impossible. Now, you don't need to be a tech guru to know that praise works on Trump.

9:23Ellison also using that appearance to tie his tech business plan to Trump, to the government. We're talking about huge investments that might need government help, or as I reminded everyone, maybe a bailout someday, depending on how this goes. Also, I'm going to show you more from that event. If you don't remember it, remember, there was a lot of other stuff going on. But it was comically false to claim that project would be, quote, impossible without Trump. Donald Trump had been on the job one day while those investments, the building had been going on for a while, including actually 10 constructed buildings that were already in progress.

9:59Ellison even mentioned that in the same presentation. Thank you, Mr. President. We certainly couldn't do this without you. It would simply be impossible. AI holds incredible promise for all of us, for every American. We've actually been working with OpenAI for a while and with MASA for a while. The data centers are actually under construction. The first of them are under construction in Texas. Each building is a half a million square feet. There are 10 buildings currently being built, but that will expand to 20 and other locations. Yeah, so not exactly impossible without you, sir, but more like we've already been doing it.

10:42The work was going on for a while. It would have continued no matter who won that election. But what you saw there was Altman and Ellison pitching why this would be good going forward. Public benefits of AI. And those may prove true. But this rush, and now this astronomical debt, is still about money, not just benefits for the little guy. For example, we don't hear a push from the medical community to rush this tech through a debt bomb when you could just adapt this tech over a more normal timeline and test how it works in hospitals, in research, in looking at materials, right? It's the business folks who are selling public benefit, but actually in a rush on their own fast debt timeline.

11:31As this technology progresses, we will see diseases get cured at an unprecedented rate. We will be amazed at how quickly we're curing this cancer and that one and heart disease. Imagine early cancer detection, the development of a cancer vaccine for your particular cancer aimed at you, and have that vaccine available in 48 hours. This is the promise of AI and the promise of the future. A promise of a future that they wanted to bring to us faster. And Ellison had been working with Musk even before the election for Ellison's company, Oracle, to build those data centers you just heard mentioned. The plan was actually codenamed Project Ludicrous, as the New York Times reports, a nerdy reference to the ludicrous speed that was used by actually the bad guys in that lovable Star Wars nerdy satire, Spaceballs.

12:25Find them, catch them! Yes, sir. Prepare ship for light speed. No, no, no, light speed is too slow. Light speed too slow? Yes, we're gonna have to go right to ludicrous speed. No. Ludicrous speed? Sir, we've never gone that fast before. I don't know if the ship can take us. What's the matter, Colonel Sanders? Chicken? What have I done? My brains are going into my... That's the movie, Ludacris Speed, the satirical reference to just how fast these made-up spaceships could go. Allison and Musk wanted to go ludicrously fast. And the name of their plan indicates they liked at least playing with the idea or maybe mocking the accusation that they are some sort of villains here, at least according to some.

13:17But being early and being first matters in business. This tech industry is concentrated among a small group, most of whom were already the early big winners. Now they're making these decisions that could shape technology, the labor market, or even our entire economy. Because remember, there's no rules from the government here. You've probably heard people say this AI thing could get out of control, could have risks, could even have existential risks, and yet we have a deregulated government that is just sitting by, to use an old phrase, Trump leading from behind, letting the others call the shots.

13:55And now we do know Ellison cares about AI and tech. He has been fixated on this holy grail of achieving a breakthrough of what they call generative artificial intelligence. Generative AI Is it the most important new computer technology ever? Probably One thing's for certain, we're about to find out Because Countless billions of dollars are being invested in generative AI That is true We are about to find out how this goes but the reasoning he shared that it will be revealed to us because these billions and billions are being rushed into the system is not automatic. Indeed, in all the history of technology, there are different ways to do it.

14:50This rush and this debt is a choice and as I'm telling you, a choice being made by the very few. Those current bubble fears are the downside risk. Just this week, a chip company announced a new plan with top banks to backstop the demand for this stuff, not at the tune of 10 or 50 billion more dollars, and you just heard how they've spent so many billions. No, they want to get another 500 billion dollars to backstop this, which means more of the financial system could be on the hook if this all fails. Now, AI is new and complex. The systems are being built and redesigned as we go. And so when and how this evolves or gets better or pays off is really hard to say, even among the experts.

15:43But here's what I can tell you, and we've been looking into this. The business side is not that complex. It's pretty simple because business always eventually has to come back to profits. And none of this AI is making profits that covers these investments yet. Now the bulls who defend this say, well, remember Amazon Transformative product also did not cover its costs for many years But then it scaled Many, many people use Amazon in ways to get things that they couldn't years past Especially if you're in a rural area Or you have mobility issues, or you're disabled Amazon works There are many valid critiques of it But the fact that it initially didn't make money doesn't mean it doesn't work today It's now, as you probably know, one of the top companies in world history.

16:32But the bears and the skeptics are warning, this may not be Amazon, let alone five Amazons. This may not scale. The trillions being pumped into this ecosystem of data centers may not return the promised profits, the New York Times reports, if it does not scale. And these trillions in debt matter to you, even if you're not in the stock market or you don't even care about AI. Maybe you're watching going, okay, Ari, I'm not interested in AI. That's fine. But we are all interested in making sure that we protect ourselves and certainly that we're not marched into another bailout where regular taxpayers have to pay for other people's bets.

17:12And yet the Trump administration is letting their buddies do just about whatever they want, gambling with stakes that we all are affected by. Now, you might say, okay, that's hot. Take a breath. but Larry Ellison, Musk, billionaires, hundreds of billions, the half a trillion I just mentioned, what are we really talking about here? Well, if you remember one thing from tonight, make it this. The current estimate of this AI investment is four times as large as the 2008 housing bubble was, according to a firm quoted in that same Times article, which is why this Detailed Times report notes Ellison is a part of what could be the biggest bet yet.

17:57The financial structure of the build-out makes it especially vulnerable to a crash because what they call these tech hyperscalers, those companies that are trying to get money out of this, they're investing heavily in the same companies they're counting on to buy the AI computing power. Ellison's company's annual report actually says they can't guarantee they'll be able to manage outstanding debt customers might not be able to pay for this if things shift. And more Wall Street experts are saying, before it's too late, it's time to, quote, call BS on this AI industry. So this man, who clearly matters so much, what does he want?

18:39Well, the Times reports he's infamous for his need to win, something he's discussed in his own words. You want to be the number one software company in the world. You want to prove what? Well, again, it's like the Sydney Hobart race. I'm curious about myself, whether I can lead Oracle to be number one. That's a personal issue. Where do you go from here? Well, we want to make sure we beat Amazon and Cloud Database. It's funny to hear you say that. I mean, that's it. It's very simple. It's very simple. It's just like playing basketball. If you're playing basketball, you want to beat the Warriors.

19:19You want to beat him. But if you can't beat him, in business sometimes you join him. And like plenty of other business leaders, Ellison is pretty ready to play ball with any president. You can see him here toasting with Obama there on the right and a bunch of other tech titans in 2011. Just as he's played ball with Trump. He is willing to do what he needs to stay on top. There's an echo here of a fictional mogul, HBO's succession character, Logan Roy, who was very involved, including with his children's business ideas. He's a good kid. And I love him.

20:03There'll be a big number. We'll pay. He'll mew and cry. And I'll get it. It'll all be okay. And maybe it'll be him one day. It's in his blood. He learned it all from me. And maybe, maybe he's the best one of all of them. A mega-billionaire willing to put his legacy and the career fortunes he'd built on the line as he dangled the idea of his son taking over or having future power. That's a fictional story, right? And yet that is exactly where we go next because it's the Ellison money that wants to buy CNN and have even more media power. We turn to our conclusion of this special report. Stay with me.

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22:34Welcome back to our special report. We've been looking at influential tech billionaire Larry Ellison, deep in the game, going strong at 81. And as I just mentioned, he's also doing more business with his son. Whether that inspires or echoes the themes of shows like Succession, this currently controversial and delayed merger of Paramount, Warner Brothers, CNN is only happening because of Larry Ellison's money. He backed the deal and has taken on even more debt to get it done. Now, proponents say some big company was going to buy Warner as Hollywood evolves. Critics argue it's monopolistic, and this rewards the Trump administration's, quote, shakedown to try to reshape an independent press.

23:16We've actually heard from both of those views recently on this program. You look at those guests there, they both made that case. As for Trump, he admitted that when it came to this government-approved merger, he had his own agenda. He wanted to get CNN in different hands. You have some good companies bidding on it. I think the people that have run CNN for the last long period of time are a disgrace. I think it's imperative that CNN be so. That's how he put it. That gives you the president's view. From the media to the money to a tech boom that's increasingly crucial to our entire stock market, all of this comes back to this one man with$190 billion and the tens of billions in debt I mentioned and the ultimate leverage test of this version of crony capitalism that we're being offered.

24:17Let me put it as fairly as I can. If this all works, the rich will get richer. The tech would succeed enough to both avoid a crash and provide value to a lot of people, not just the rich. And Trump's use of government power would effectively be rewarded. If this fails, the massive debt will come due. The rich will take their little hit, but everyone else we know will suffer more. And you can bet the billionaires and banks will be demanding help and bailouts to stave off, what they will then warn, as we've heard before, would be an even worse disaster if they don't get their money from the Treasury, aka the tax dollars of the American people in the Congress, ASAP.

25:04We know this because, while no one can predict the future, history is a decent guide of trends. On Wall Street, they say past performance is not indicative of future results. Which is fair enough. But when past greed and mistakes are rewarded, when the rules, as I showed you tonight, are gutted and deregulated, when you get what they call moral hazard because banks think they'll always eventually get bailed out, you do tend to see people running the same play. And there's a lot of evidence some of them are doing that right now. Now, that doesn't mean it's too late to change course. This is new stuff.

25:47These AI deals are new. The press conference I showed you was just from last year. And we are a nation eyeing two critical upcoming elections. So it is a time worth paying attention to what seems to be these bigger problems. To the real facts. That's also why independent journalism still matters. For this report tonight, we drew extensively on that investigative account in the New York Times by Jim Rutenberg and his colleagues. I'm thrilled to tell you that Jim has agreed to join us tonight along with Professor Jason Johnson. Welcome to both of you. And Jim, I got to say to you and your colleagues in the Times, congratulations on your reporting, which I mentioned repeatedly we drew on.

26:35You really have quite a story here. Thanks for being here. Thank you so much for having me. What do you think is important here based on the extensive reporting you've done? I mean, you know, you really captured how big a story this is and how much it's a story of our times. To me, what's really fascinating is we're living, if you believe what all the big AI moguls say, is we're living in the era of the start of the railroads. and we're watching this great rush to build this giant infrastructure for something that we really don't understand how it's gonna affect the economy, how it's gonna affect society with an administration that said, Katie, bar the door, go for it and we're all sort of along for the ride and we'll see where it lands.

27:21But I think he really captured that it's a small number of people who are really gonna decide our fate here, which maybe it all works out there, betting it will, but there's a lot riding on it and a lot of debt riding on it. The rush, Jim, did you get a better understanding of why it has to be so fast in their view? I think so. And I think they all sort of tell the story. I want to I want to note, by the way, that what's really interesting about Ellison is he's rushing to catch up with the real trailblazers. Right. And he's managed to get into the game as one of the few big ones. But the idea is they believe, the people in this industry, that they have to build out the data capacity, the compute, as they call it.

28:04That's the word they use, compute capacity, to build the brains, really. And these are these giant data centers that they can't build fast enough. They can't get the chips in fast enough. And so the race is build these data centers, get these things up online, takes a lot of money, and then hope that the profits follow and justify the whole thing. Jason, your view on all this. Well, it's interesting because this push for AI and the way they're selling it, it's fascinating that the speed they talk about, we have to do this ludicrous speed, like, you know, from Spaceballs. But I'm thinking of another call from Spaceballs when they're talking about yogurt and they say yogurt the wise, yogurt the brilliant, yogurt all these things.

28:45And he tells everybody, calm down, I'm just plain yogurt, right? In a lot of ways, AI might just be plain yogurt. They're selling us on this idea that it's going to be this absolute miracle that's going to transform everyone's lives. And right now, there's a lot of debt, a lot of danger, and a lot of environmental damage being done. And we have no proof. And a matter of fact, history suggests otherwise that this AI bubble will ever turn into something that benefits everybody else. But the consequences of a bubble bursting and failure could be devastating for an entire generation's economy and environment.