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The AI industry is losing
Ed Zitron, Where's Your Ed At: "In April of last year, I outlined how the failure of one model lab, OpenAI, would have seismic effects down its supply chain, delivering body blow after body blow to NVIDIA, Oracle, Microsoft, and the various Neoclouds that serve its compute. And Oracle, as I’ve noted previously, is a company that, even before the AI bubble, was massively indebted. It just so happens that, as a result of its tryst with OpenAI, Larry Ellison saw fit to twist the debt knob to eleven. Oracle’s spending has already pushed its free cash flow into negative territory — minus $23.7 billion, as of the end of FY 2026 — and at the end of May, it had $129.5 billion in outstanding debt. This doesn’t include its various lease commitments, which add up to nearly $38 billion , nor the additional $260 billion in lease commitments that have been signed, but haven’t actually started yet.
All of this is to say that Oracle has massively leveraged itself for the benefit of one company, OpenAI, and if that company can’t pay its bills, it’s fucked. Oracle’s existence — and Larry Ellison’s personal wealth — hinges on whether OpenAI can make good on its promise to spend $300bn in compute.
This is both the most-obvious and under-discussed part of the AI bubble — that the trillion-plus dollars of hyperscaler capex [capital expenditure] is feeding a massive semiconductor boom based on, at best, the very small likelihood that large language models will turn into something completely different. I need to state how fucking silly it is that anybody considered said semiconductor boom anything other than a brief chance to fill their boots before a global equity catastrophe so severe that the Futurum Group will be on suicide watch.
There is no cogent or rational argument in favor of continued capital expenditures, at least not one without a tacit acceptance that much of the current spend has been a waste outside of pumping equities and incubating two different large, unprofitable AI labs. Those millions of H100 and B200 and B300 GPUs are not going to usher in a digital God, they are not going to create recursive self-improvement, they are not going to be the fulcrum to adding $600 billion or more in brand new revenue to current services, and the only revenue they’re generating is compute spend from Anthropic and OpenAI, which I estimate makes up 20% or more of cloud revenues for Google, Amazon, and Microsoft. Anyone investing in data centers is building speculative capacity for demand that does not exist outside of Anthropic and OpenAI.
Let me put it even simpler: those hundreds of billions of dollars of data centers are being built for no-one, and the only companies that can “afford” to pay for even a fraction of the compute are unprofitable AI companies propped up by hyperscalers."
Ed Zitron's Where's Your Ed At
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