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Ed Zitron Profile picture
@edzitron
May 15 • 15 tweets • 11 min read • Read on X
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Today’s premium newsletter is part 1 of my What If...We're In An AI Bubble? series, covering scenarios that could burst the bubble starting with token-based billing's destruction of most AI products, and the slow collapse of data center construction.
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I’ve spent hundreds of thousands of words in the last year talking about the very and scary signs that we are an AI bubble, and the exuberance fueling it. Today is the first time in a long time where I’ve discussed the potential consequences in depth.

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I feel like people are very cavalier when discussing the AI bubble, saying stuff like "we're in an OpenAI bubble," not realizing that the collapse of OpenAI would destroy AI investment, AI startups, and kill debt issuance for AI data centers.
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GitHub Copilot moves to token based billing on June 1, and its users got a calculator showing their actual monthly token burn - some $39-a-month users have spent $1500 to $5800 in tokens a month.

I believe it's indicative of every AI startup.
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AI companies currently subsidize their users $3 to $25 for every dollar of subscription. As a result, users are very sensitive to *any* price or rate limit changes, and have no idea of the actual costs of AI. Token-based billing will be lethal at scale.
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The current API revenues of Anthropic and OpenAI are driven predominantly by AI companies subsidizing their users' compute by 300% to 1000%, obfuscating the actual costs. Once the industry moves away from that, API revenues could face a brutal collapse.

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Meanwhile, those currently paying token rates - big enterprises - are blowing through their annual AI budgets in weeks. CFOs are already saying that they need to reduce budgets, as this token spend is experimental - and finance executives are worried.

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Enterprise AI token spend is out of control, driven by do-nothing CEOs with AI psychosis. Sources say Stripe is spending $2.8m+ a month, and a major real estate platform $300k-$700k a month, killing margins.
It's experimental and deeply unsustainable.

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One scenario that could burst the bubble is if data center construction doesn't keep pace with Anthropic or OpenAI's capacity demands. If the capacity crunch doesn't clear quickly, both Claude and ChatGPT will begin having serious stability issues.
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If data center construction slows or stalls, neoclouds and hyperscalers will suffer. $748bn of Microsoft, Google and Amazon's backlog is entirely dependent on them building gigawatts of capacity they don't have and that isn't getting built with urgency.
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Another question: What happens if hyperscalers have hundreds of thousands of GPUs sitting in warehouses, yet to be installed in data centers?

This isn't a hypothetical question. Google has nearly $100bn in yet-to-be-deployed capex, and Meta over $50bn.

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I think that if data center construction doesn't speed up dramatically in the next 6 months, hyperscalers will see massive write-downs on aging Blackwell GPUs as Vera Rubin ships. Either way, depreciation charges are likely to skyrocket in the next year.
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So what if data centers aren't getting built? On the supplier front, customers can (and do!) cancel orders, and if this happens, we’ll witness a repeat of the kind of beatdown that Cisco and other telecoms firms suffered during the dot com bubble.
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The thing you should know is that small events can have outsized impacts in a bubble. Something as simple as a slowdown in demand caused by a shift to token-based billing will have massive repercussions throughout the supply chain.

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This was the first of a two-part (or possibly three-part) "What If...We're In An AI Bubble" series. Here's what's up next.
My premium newsletter is $7 a month/$70 a year, and weighing in at 10k+ words a week, making it the best value in tech analysis.

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More from @edzitron

Ed Zitron Profile picture
Apr 28
Free newsletter: The economics of AI don't make sense. Monthly subscriptions to AI services are scams that represent a product that is impossible for OpenAI and Anthropic to provide long term, and AI data centers are an economic disaster at scale.
wheresyoured.at/ais-economics-…
Github Copilot, as I reported last week, is moving towards token-based billing, charging the actual cost of token burn — a move that alienated many of its users who built entire workflows around a request-based product that no longer exists.
wheresyoured.at/ais-economics-…Yesterday morning, GitHub Copilot users got confirmation of something I’d reported a week ago — that all GitHub Copilot plans would move to usage-based pricing on June 1, 2026. Instead of offering users a certain number of “requests,” Microsoft will now charge users based on the actual cost of the models they’re using, which it calls “...an important step toward a sustainable, reliable Copilot business and experience for all users.” Users instead get however much they spend on their GitHub Copilot subscription (EG: $19 of tokens a month on a $19-a-month plan). Translation: "we canno...
While Copilot might not be “...the same product it was a year ago,” very little has changed about the underlying economic mismatch: that Microsoft was allowing users to burn more than their subscription costs in tokens every single month for three years. Per the Wall Street Journal in October 2023: Individuals pay $10 a month for the AI assistant. In the first few months of this year, the company was losing on average more than $20 a month per user, according to a person familiar with the figures, who said some users were costing the company as much as $80 a month. Naturally, GitHub Copil...
This is the subprime AI crisis — and a crisis of deception. AI products tricked users by offering unsustainable monthly subscriptions built to separate the process of using AI from its real cost. Eventually everybody will go token-based.
wheresyoured.at/ais-economics-… And I called it two years ago in the Subprime AI Crisis: I hypothesize a kind of subprime AI crisis is brewing, where almost the entire tech industry has bought in on a technology sold at a vastly-discounted rate, heavily-centralized and subsidized by big tech. At some point, the incredible, toxic burn-rate of generative AI is going to catch up with them, which in turn will lead to price increases, or companies releasing new products and features with wildly onerous rates — like the egregious $2-a-conversation rate for Salesforce’s “Agentforce” product — that will make even stalwart enter...
And that day has finally arrived, because every single AI service you use subsidized compute, and every single service is losing money as a result: When you pay for access to an AI startup’s service — which, of course, includes OpenAI and Anthropic — you do so for a monthly fee, such as $20, $100 or $200-a-month in the case of Anthropic’s Claude, Perplexity’s $20 or $200-a-month plan, or OpenAI’s $8, $20, or $200-a-month subscriptions. In some enterprise use cases, you’re given “credits” for certain units of work, such as how Lovable allows users “100 monthly credits” in its $25-a-month su...
Read 13 tweets
Ed Zitron Profile picture
Apr 24
Premium Newsletter: OpenAI needs to raise or make $852 billion through 2030 to pay for its compute costs, and must pay $75bn a year for Oracle's 7.1GW of Stargate data centers, or Oracle will collapse, destroying its share price and Ellison's empire.
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It’s been little over a year since Sam Altman, Masayoshi Son, and Larry Ellison stood shoulder-to-shoulder with Donald Trump to announce the "$500 billion" Stargate data center project. In truth, no entity was ever formed, and no money was invested.
wheresyoured.at/how-openai-kil…It was January 21, 2025. Per The Information, Larry Ellison, CEO of Oracle, had just flown to Washington DC from Florida, and had to borrow a coat “...so he wouldn’t freeze during an interview he did on the White House lawn, according to two people who were involved in the event.” He was there to announce a very big — some might even say huge — new project standing next to SoftBank CEO Masayoshi Son and OpenAI CEO Sam Altman. “Together, these world-leading technology giants are announcing the formation of Stargate, so put that name down in your books, because I think you’re gonna hear a lo...
After he was done, Ellison stepped to the podium. “The data centers are actually under construction, the first of them are under construction in Texas. Each building’s a half a million square feet, there are ten buildings currently being built, but that will expand to 20.” Following Ellison, SoftBank’s Masayoshi Son added that Stargate would “...immediately start deploying $100 billion dollars, with the goal of making $500 billion dollars within [the] next four years, within your town!” turning to Donald Trump with his hands extended. It was unclear what town he was referring to. Altman a...
The "$500 Billion" Stargate data center project is really a $340 billion, 7.1GW Oracle-and-debt-funded construction nightmare. Outside of Abilene - which existed before the announcement - these data centers are mostly scaffolding and steel beams.
wheresyoured.at/how-openai-kil… It’s been 15 months, and Stargate LLC has never been formed. SoftBank and OpenAI have contributed no capital to the project, other than SoftBank’s own acquisition of a former electric vehicle manufacturing plant in Lordstown, Ohio that it intends to turn into a data center parts manufacturing plant with Foxconn, which is best known for effectively abandoning a $10 billion factory in Wisconsin back in 2021. Oh, and Project Freebird, a SoftBank-built project that exists to funnel money to its subsidiary SB Energy, though I can’t imagine how SoftBank actually funds it. No government money wa...
Read 15 tweets
Ed Zitron Profile picture
Mar 9
$5 billion TO DATE? This heavily suggests that Anthropic? Over $10 billion in inference and training costs? This heavily suggests that almost every story about Anthropic’s revenue and costs they’ve leaked is wrong and that it’s been misleading the media.
Remember: reports said Anthropic made $4.5bn for all of 2025, and all of this guff about “$19bn in annualized revenue” no longer make sense, especially as that “exceeds $5 billion” line is from a lawsuit filed in *march*. This is a scandal! Image
The only thing that makes sense here is that Anthropic’s 2025 revenues were much lower than $4.5 billion. $5bn ALL TIME? Through march? Remember this is filed with a court. Suggests Anthropic is a much much smaller business than we believed
Read 5 tweets
Ed Zitron Profile picture
Jan 23
Premium: The AI Bubble is a time bomb, burdening hyperscalers with billions of new depreciation a quarter that will soon eat away profits, VCs with dead equity in fallen AI startups, and Oracle with hundreds of billions of unpayable leases.
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A year ago, I wrote that Coreweave was a timebomb — a rickety tower of debt and bad deals that was primed to blow.
I could have made that argument about hyperscalers, NVIDIA and OpenAI. Everybody is waiting for somebody else to make AI a success.

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The AI bubble is slowly turning cash-rich, margin-heavy hyperscalers into something far worse. Now these asset-light, high-margin software companies are becoming bloated, filled with tens of billions of dollars in GPUs and data centers.
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Read 15 tweets
Ed Zitron Profile picture
Dec 29, 2025
Final 2025 Newsetter: We're in The Enshittifinancial Crisis, the fourth stage of enshittification, where companies turn on their shareholders. Unprofitable, unsustainable AI threatens future of venture capital, private equity and the markets themselves.
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Enshittification's first 3 stages - from a platform people love to a platform businesses profit off of to a platform that hurts consumers and businesses alike - are well-known. I argue we're in a fourth stage where stocks have become enshittified too.
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We’re bearing witness to the enshittification of the stock market, where toxic companies appreciate in value despite their toxicity, recklessness and waste, aided and abetted by analysts who not only ignore the toxicity but actively celebrate it.

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Read 17 tweets
Ed Zitron Profile picture
Dec 22, 2025
Premium: How The AI Bubble bursts in 2026 - The largest funder of AI data centers is pulling out, OpenAI and Anthropic need more money than ever during a massive VC liquidity crisis - and NVIDIA's debt-powered customer base is quietly shrinking.
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The AI bubble is reaching its peak, with the largest data center funder (Blue Owl) walking away from a $10bn deal with Oracle, just as Broadcom gets pummeled post-earnings for showing no revenue from OpenAI, and CoreWeave fails to build capacity in time.
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The real OpenAI scandal is what's *not* happening - Broadcom said it expects "no revenue" in 2026 from its supposed 10GW chips deal, and AMD, Samsung and SK Hynix, despite signing massive deals, haven't changed earnings. These announcements were a sham.
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Read 14 tweets

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