AI Is Too Expensive

Log In<br>Subscribe

Sign up

Sign in

Log in

Subscribe

AI Is Too Expensive

Ed Zitron<br>May 19, 2026<br>33 min read

Table of Contents

If you liked this piece, you should subscribe to my premium newsletter. It’s $70 a year, or $7 a month, and in return you get a weekly newsletter that’s usually anywhere from 5,000 to 18,000 words, including vast, detailed analyses of NVIDIA, Anthropic and OpenAI’s finances, and the AI bubble writ large. My Hater's Guides To Private Credit and Private Equity are essential to understanding our current financial system, and my guide to how OpenAI Kills Oracle pairs nicely with my Hater's Guide To Oracle.<br>This week, I’ll publish the second part to my ongoing series (“What If…We’re In An AI Bubble?”) about the factors and events that will cause the AI bubble to finally pop.<br>Subscribing to premium is both great value and makes it possible to write these large, deeply-researched free pieces every week.<br>AI is, as it stands, not economically viable for anybody involved other than the construction firms, NVIDIA, and the surrounding hardware companies benefitting from the irrational exuberance of a data center buildout that doesn’t appear to be happening at the speed we believed.<br>Every AI startup loses millions or billions of dollars a year, and nobody appears to have worked out a way to stop hemorrhaging cash. Hyperscalers have invested over $800 billion in the last three years, with plans to add another $700 billion or so in 2026 and another $1 trillion in 2027, meaning that they need to make at least three trillion dollars in AI specific revenue just to break even, and $6 trillion or more for AI to be anything other than a wash. I went into detail about this (albeit at a lower, pre-2026/2027 capex number) in a premium piece last year.<br>To give you some context, Microsoft made $281 billion, Meta $200 billion, Amazon $716 billion, and Google $402.8 billion in revenue in their most-recent fiscal years for every single product combined, for a total of $1.599 trillion. None of them will talk about their actual AI revenues. Yes, yes, I know Microsoft said that it had $37 billion in AI revenue run rate ($3.08 billion a month or so) and Amazon had $15 billion, or around $1.25 billion a month, but both of these are snapshots of single months that are meant to make it sound like they’re going to make that much in a year but in the end, you don’t actually know anything about how much money they’ve made from AI.<br>AI Is Too Expensive To Ever Pay Off Hyperscalers’ Capex Investments<br>We do, however, now know that Microsoft has spent an approximate $100 billion on its OpenAI partnership after testimony from an executive during the otherwise-dull Musk-OpenAI trial, per Bloomberg:<br>That figure includes Microsoft’s original investments in OpenAI, as well as the costs of building infrastructure and hosting OpenAI’s computing, Microsoft deals executive Michael Wetter testified on Monday. It is cumulative through the current fiscal year which ends in June, he said.<br>This is a fascinating insight for a few reasons:<br>Microsoft has spent a total of $293.8 billion in capex since the beginning of Fiscal Year 2023 (which began in the back half of 2022).<br>This means that around 30% of Microsoft’s capex ($87 billion) went to building OpenAI’s infrastructure.<br>Based on discussions with sources familiar with Azure architecture, this is the vast majority of Microsoft’s operational capacity.<br>At the end of 2025, OpenAI claimed that it had 1.9GW of capacity (likely referring to total power draw rather than the actual critical IT of the infrastructure at its disposal), which, per analyst estimates, ($42 to $44 million per megawatt) works out to around $79.8 billion. This claim was made around six months before the release of Microsoft’s most recent quarterly results.<br>In other words, Microsoft has spent 4 years sinking (either through spending or allocating the capex in advance) nearly $300 billion into…building OpenAI?<br>Okay, fine. Microsoft also has 20 million Microsoft 365 Copilot subscribers for an absolute maximum revenue of $7.2 billion…if every single one were paying $30 a month, which they are most assuredly not as Microsoft has been offering discounts on it for years.<br>Based on my reporting from last year, Microsoft made around $7.5 billion from OpenAI’s inference spend and $761 million from its revenue share in Fiscal Year 2025, a year when it invested (either spent or allocated) around $88.2 billion in capital expenditures.<br>I didn’t report it at the time, but I also had the numbers for all of Microsoft’s revenues for the first three quarters of Fiscal Year 2025 — a total of $8.9 billion of total AI revenue, with around $4.35 billion in revenues when you removed OpenAI’s inference. If we assume that Microsoft’s other AI services grew 10% quarter-over-quarter, I estimate that Microsoft likely made around $17.9 billion in AI revenue in FY2025, or a little under a fifth of its capex.<br>And let’s be clear:...