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Ed Zitron
@edzitron.com

Free newsletter: In July, Apollo Economist Torsten Slok said that "AI better work out, or we have a problem." Facing ever-growing high-interest debt, negative-EBITDA AI labs and $200bn+ in warehoused GPUs, that's exactly what the AI industry has. www.wheresyoured.at/ai-had-bette...

wheresyoured.athttps://www.wheresyoured.at/ai-had-better-work-out/If you liked this piece, you should subscribe to my premium newsletter, and you can subscribe on the following links: $70 a year, $18 a quarter, or $7 a month. In return, you get a weekly premium…
Ed Zitron
@edzitron.com

As I've written extensively in the past, the AI bubble is nothing like the dot com bubble. The scale and concentration is different, and a simple 20% correction across the main AI stocks would be worse than the worst day of the Dot Com crash. www.wheresyoured.at/ai-had-bette...

Ed Zitron
@edzitron.com

The AI bubble is sustained by vibes and hype, and both have started to sour, with Gartner saying that we have more compute capacity than demand, and that 80% of neoclouds will go out of business by 2030, adding there's not enough revenue to justify them. www.wheresyoured.at/ai-had-bette...

Ed Zitron
@edzitron.com

AI is also concentrated around a handful of companies, most notably NVIDIA, which is forecasting over $670bn in revenue next year, at a time when the debt its customers need to buy its chips is increasingly unaffordable as lenders sour on AI debt. www.wheresyoured.at/ai-had-bette...

Ed Zitron
@edzitron.com

It's now confirmed that Amazon has warehouses of GPUs that can’t be installed, with in some cases "no clear path to doing so" despite taking billions in deliveries monthly. The RAM crisis was created by NVIDIA to boost its revenues through early delivery. www.wheresyoured.at/ai-had-bette...

Ed Zitron
@edzitron.com

The GPU trade is the irrational core of the bubble, and the argument that hyperscalers are hoarding scarce commodities falls over when you see that *everyone* has billions in dark GPUs. NVIDIA seems to be channel stuffing, and we all suffer as a result. www.wheresyoured.at/ai-had-bette...

Ed Zitron
@edzitron.com

In fairness, the whole "abandoning reason" has seemingly already happened. This late in the bubble, there is no consensus on how much a gigawatt of capacity should cost, and many of the projections thrown around exceed the limits of profitability. www.wheresyoured.at/ai-had-bette...

Ed Zitron
@edzitron.com

Profitability, of course, assumes that the customer for the compute exists, and they have customers. Unfortunately, OpenAI and Anthropic are overwhelmingly dependent on VC-backed startups, at a time when VC's underperforming and running out of cash. www.wheresyoured.at/ai-had-bette...

Ed Zitron
@edzitron.com

This piece distills something I've said repeatedly: that AI "working out" requires too many improbable things to happen, and that when the bubble bursts, it'll cause a supernova of pain across markets, economies, and (increasingly retail) investors. www.wheresyoured.at/ai-had-bette...

3 reposts61 likes

Ed Zitron
@edzitron.com

How perfect? How improbable? Well, if Anthropic is forced to IPO at the lower price of $1.5tn, it'll disappoint investors, reduce the amount of cash it can raise from the market, and it'll increase the amount of debt it takes on. Oh, and it'll screw OpenAI, too. www.wheresyoured.at/ai-had-bette...

Ed Zitron
@edzitron.com

Allow me to finish with a question: Does any of this feel like the future? Are you witnessing the next industrial revolution? Or are you watching the spark that ignites the next financial crisis? And are you sufficiently angry at the people responsible? www.wheresyoured.at/ai-had-bette...

frankwilhoit.bsky.social
@frankwilhoit.bsky.social

The short answers to your questions, taken in order, are yes, no, yes, and no. The long answers are very long indeed and I will not set myself up in competition with you, except to point out that "crisis" implies something that ends, whereas the next crisis will never end.

Toroid
@toroidal.bsky.social

The ultra wealthy treat every downturn as an opportunity. The people who created and fed this disaster will profit from it personally. Correspondingly, there’s an opportunity for everyone else to unify around the mission of breaking up all of their monopolies and taxing them out of existence.

Æðelwułf
@iamdarkink.bsky.social

Want to know what’s f-ing hard? To have a position cleanly decoupled from the AI trade. Everything is linked through passive instruments. You can get hit less, but you still get hit.

Echo Fields
@e-ellen-sociology.bsky.social

Both, simultaneously. The class struggles between winners & losers will define the 21st century. Proletarianization combined with intense conflict between/within capitalist class factions==>efforts to control nation/states for advantage. Climate/environment crises up-ending it all.