Share this page!

Enter URL or ID to Unroll

You can paste full URL like: https://x.com/threadreaderapp/status/1644127596119195649
or just the ID like: 1644127596119195649

How to get URL link on X (Twitter) App

  1. On the Twitter thread, click on or icon on the bottom
  2. Click again on or Share Via icon
  3. Click on Copy Link to Tweet
  4. Paste it above and click "Unroll Thread"!
  5. More info at Twitter Help
Ed Zitron Profile picture
@edzitron
May 15 • 15 tweets • 11 min read • Read on X
Scrolly
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.
wheresyoured.at/premium-what-i…
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.

wheresyoured.at/premium-what-i…Image
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.
wheresyoured.at/premium-what-i…Image
Image
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.
wheresyoured.at/premium-what-i…Image
Image
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.
wheresyoured.at/premium-what-i…Image
Image
Image
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.

wheresyoured.at/premium-what-i…Image
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.

wheresyoured.at/premium-what-i…Image
Image
Image
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.

wheresyoured.at/premium-what-i…Image
Image
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.
wheresyoured.at/premium-what-i…Image
Image
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.
wheresyoured.at/premium-what-i…Image
Image
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.

wheresyoured.at/premium-what-i…Image
Image
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.
wheresyoured.at/premium-what-i…Image
Image
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.
wheresyoured.at/premium-what-i…Image
Image
Image
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.

wheresyoured.at/premium-what-i…Image
Image
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.

wheresyoured.at/premium-what-i…Image

• • •

Missing some Tweet in this thread? You can try to force a refresh
　

Keep Current with Ed Zitron

Ed Zitron Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!

PDF

Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @edzitron

Ed Zitron Profile picture
Jun 8
Free newsletter: The ROI debate has come at worst time for Anthropic and OpenAI - two companies that can’t afford to slow down thanks to their $1.1 trillion in compute commitments and a data center buildout that needs a trillion in annual revenue by 2030.
wheresyoured.at/ai-is-slowing-…
My appearance on Bloomberg last week ruffled some feathers because I don't have "skin in the game" (IE: money in the market). This is because AI boosters can't imagine somebody with a moral position on an industry run by grifters and sold with lies.
wheresyoured.at/ai-is-slowing-…Image
The AI industry is anxious because it knows it made too many egregious promises. There are 190GW+ in planned AI data centers, and to justify their existence, they'll need $2 trillion+ in AI compute revenue by 2030.

There's currently less than $100bn.

wheresyoured.at/ai-is-slowing-…Image
Image
Read 12 tweets
Ed Zitron Profile picture
Jun 2
Free newsletter: The dawn of token-based billing has shown that generative AI doesn’t have a return on investment. It's too unpredictable, too unreliable, you can't easily measure the cost of tasks, and organizations are already pulling back.
wheresyoured.at/ai-doesnt-have…
Ever since the AI industry started its transition away from subscriptions to token-based billing, users have been hit with sticker shock. Once companies start paying the real cost of AI, they realize there's no measurable ROI to be found.

wheresyoured.at/ai-doesnt-have…Image
GitHub Copilot moved users to token-based billing on June 1 from a request-based system that allowed them to burn thousands of dollars for $39 a month.

Users are currently burning their entire monthly balance in a couple of prompts.

wheresyoured.at/ai-doesnt-have…Image
Image
Read 14 tweets
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.
wheresyoured.at/how-openai-kil…
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.
wheresyoured.at/premium-timebo…
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.

wheresyoured.at/premium-timebo…Image
Image
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.
wheresyoured.at/premium-timebo…Image
Read 15 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Don't want to be a Premium member but still want to support us?

Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal

Or Donate anonymously using crypto!

Ethereum

0xfe58350B80634f60Fa6Dc149a72b4DFbc17D341E copy

Bitcoin

3ATGMxNzCUFzxpMCHL5sWSt4DVtS8UqXpi copy

Thank you for your support!

Follow Us!

Send Email!

:(