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AI has lost the Mandate of Heaven I’m afraid. WSJ saying it’s a “when” the ai bubble bursts. SNL dabbing on their biggest names for being weird. FT says 50% of chips sold in 2026 and 2027 have nowhere to go. Hundreds of billions short on revenue for even 10% ROIC. A disaster.

It’s just a matter of time now, and mostly a matter of when the money runs out. There is no future for Anthropic or OpenAI at their current scale. Hyperscalers need $308bn of annual ai revenue - around the revenue of Microsoft - for 10% return on 2026 and 2027 capex. Could be more with cost of debt.

The level of financial misalignment is as bad as I’ve been warning, and you’re going to see headline after headline of stuff I’ve said in the newsletter for years. I say this with both pride and sadness because being right is going to be many layers of horrible.

Everyone keeps reaching for the “too big to fail” button because it is fundamentally harder for them to imagine what happens if it’s too big to succeed. The unique conditions in play make a bailout impossible. This is also an ideological bubble to the point I think it creates a schism in society.

These data centers are financial poison even if you bought them cheap. The returns are awful, the debt is toxic, the ongoing opex is nasty because of the cost of cooling and the power demands, and 30% gross margins requires near-perfect conditions and constant revenue for 5+ years.

@edzitron.com Can the LLM data centers, and the chips they use, be repurposed for the defense industry (not counting mass surveillance as "defense")?

Not really

There is limited repurposing potential, as far as I've been able to learn. Apparently the chips aren't really usable for consumer graphics cards for one thing. It's doubtful there will be enough use cases to repurpose the majority of them. Expensive e-waste.

Serious question as an idiot. I agree with you and have believed you forever. Is there anything a normal dork can do to shield themselves from the collapse?

Make sure you're comfortable with your risk level. If not, buy some BND to derisk (somewhat). Make sure you have enough savings in SGOV or a HYSA. Stock is riskier of course but consider buying into international stock and maybe picking up some small cap exposure.

I super appreciate this response and am also waaaay too stupid to have any idea what it means. Prolly gonna float and hope for the best.

I do not give financial advice I’m afraid!

Hey. Tickled to get a response anyway. It. Is. Good.

My question too. I guess it’s good that we at least know that it’s what we should be asking.

If the percentage of (whatever metric) which is being spent on AI were spent on Hyperloop instead, I wonder how long a network of that particular boondoggle would have been built.