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Don't Look Up

Ed Zitron<br>Aug 11, 2026<br>32 min read

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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 the SaaSpocalypse, 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, as well as the Hater’s Guide To Oracle (Part 2).<br>Subscribing to premium is both great value and makes it possible to write these large, deeply-researched free pieces every week. On Friday, I'm going to pull together exactly how much money is needed to keep the AI bubble inflated in the next three years. It's gonna be a laugh-riot. Or very scary, one of the two.<br>If you want to get in touch — and especially if you have any juicy information about Anthropic, OpenAI, or any other companies in the AI bubble — hit me up on Signal at ezitron.76. I’m also on IB on The Terminal.<br>Last week I put out one of the most consequential newsletters I’ve written yet, pulling together multiple distinct financial analyst notes from Wells Fargo, Barclays, and UBS that directly estimated that 70% or more of the AI revenues of Microsoft, Google, and Amazon were from either OpenAI or Anthropic. To be clear, UBS estimated that next year, Anthropic and OpenAI’s compute spend would be 48% of all Google Cloud revenues — which means that they likely account for even more than 70% of its AI revenues, but I wanted to be fair.<br>This was both a colossal pain in the arse and a story that I knew would piss off a lot of people, because of its huge ramifications. Some outright dismissed it as “doomerism,” while others insisted it was a good thing, because OpenAI and Anthropic are growing so fast.<br>24 hours later, Bloomberg ran a story estimating, based on OpenAI’s $24.1 dollar contribution to Microsoft’s Fiscal Year 2026 revenues and previous statements, that OpenAI alone contributed to 70% or more of Microsoft’s AI revenues for the year.<br>For some context, Microsoft has spent $261.3 billion dollars in capital expenditures since the beginning of 2022.<br>Meanwhile, Apollo chief economist Torsten Slok said Friday that profit margins in AI are “...higher the further you get from the end user,” and then said something I think I’ve said maybe four times in the last three months:<br>The bottom line is that the most profitable part of the AI value chain depends on the least profitable part continuing to grow revenue or raise capital . Capital can bridge the gap for a while, but not indefinitely. And therein lies the risk: will the ROI show up for AI's end customers fast enough to sustain the spending that is generating those upstream margins?<br>Good bloody question Torsten! The answer is “probably not.”<br>Let’s get real simple about this because everybody wants to make AI so complex.<br>The Future Growth of Google, Microsoft, and Amazon Is Contingent On Anthropic and OpenAI Spending $200bn+ in 2027, Which Requires $250bn to $300bn in Funding<br>Sidenote: before we go any further, I need to be clear that AI is not the reason that these companies are growing, outside of the compute spend from Anthropic and OpenAI. AI is not “boosting other product categories” or “helping other categories grow,” because if it was, they’d tell you specifically. I get so many emails from people sending me the overall revenues of these companies, mostly from people that don’t appear able to read, but nevertheless, I want to add this note on the off chance they learn.<br>If we assume, on the low end, that Jensen Huang is right and he’s going to sell $1 trillion or so of GPUs (roughly 30GW of billable IT capacity), that’s somewhere between $360 billion and $435 billion of annual compute revenue demand.<br>Right now, there are (outside of hyperscalers buying compute for them, and whatever it is Meta is up to) two companies that spend more than $500 million a year on AI compute, namely Anthropic and OpenAI. Both are unprofitable, and both lose tens of billions of dollars a year.<br>If we take OpenAI’s testimony from the Musk-Altman trial as gospel, it’ll spend around $50 billion on compute this year, and if we (kindly) assume Anthropic will spend $50 billion itself, that brings us to $100 billion. To get to that level of spend, Anthropic and OpenAI have raised a combined $217 billion in the first half of 2026. Every neocloud is effectively an outgrowth of this spend, either through direct contracts or by proxy via Microsoft or Google. Outside of hedge fund and investor Jane Street and NVIDIA, neoclouds do not have significant customers at the level that would warrant all this capex.<br>So, the world is building AI compute capacity with the expectation...