The Enshittifinancial Crisis: Part Two

In part two of this week’s four-part Better Offline Enshittifinancial Crisis special, Ed Zitron walks you through how companies like AMD, Broadcom and NVIDIA are swindling stockholders with the help of analysts and the media, and how decades of easy returns for venture capital are an existential risk to the future of startup fundraising. This series was a ton of work, so please support me by subscribing to my premium newsletter - here’s $10 off your first year of annual https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/84rt762qen Read along with the newsletter version for links! https://www.wheresyoured.at/the-enshittifinancial-crisis/ YOU CAN NOW BUY BETTER OFFLINE MERCH! Go to https://cottonbureau.com/people/better-offline and use code FREE99 for free shipping on orders of $99 or more. --- LINKS: https://www.tinyurl.com/betterofflinelinks Newsletter: https://www.wheresyoured.at/ Reddit: https://www.reddit.com/r/BetterOffline/ Discord: chat.wheresyoured.at https://discord.com/invite/QUUQUP9szv Ed's Socials: https://twitter.com/edzitron https://www.instagram.com/edzitron https://bsky.app/profile/edzitron.com https://www.threads.net/@edzitron Email Me: [email protected] mailto:[email protected] See omnystudio.com/listener https://omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 0:04Speaker 01

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• 0:34Speaker 02

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• 0:50Speaker 03

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• 1:09Ed Zitron?

  I'm Better Offline, and this is Ed Zitron. Wait, shit!

• 1:25Ed Zitron?

  That's right, folks. We're here for part two of our multi-part series about the final casualty of the insidification process, the financial markets. You see, we're in a world where, because companies can no longer stimulate growth by just script-mining their individual and business users, they've now resorted to just lying. And lying's an interesting word, because they will claim, "We're not lying. We used words to vaguely avoid telling you the truth." Or, "We were technically true in what we say." There are various kinds of lies that don't have to just be, "I told you something that was not categorically yes or no..." False. I mean, you've spoken to other people, but they will say this for legal purposes. So, fine. It's not technically lying.

• 2:09Ed Zitron?

  It's just bullshit. But I think it's important to give you some examples and to talk about how analysts and the media simply allowed these lies to propagate unchecked. Let me set the scene. Our story begins on September 10th, 2025. I was for some reason in Los Angeles that I can't remember. Maybe a concert, maybe an interview, truly don't know. Oracle announced its unfillable, unpayable $300 billion deal with OpenAI, which they didn't have the capacity to serve and OpenAI didn't have the cash to pay them. And this led to a 30% or more bump in stock price. Analysts who should ostensibly be able to count called it

• 2:47Ed Zitron?

  momentous and said they were in shock. On September 22nd, 2025, CEO Safra Catz stepped down. She stepped down from Oracle. Nobody seemed to think that was weird or suspicious or worrying. This was, this was meant to be the beginning of the AI like boom too. I mean, we kind of already are in the AI boom, but this was meant to be the even more bigger one, right? That, why would you step down? Why would you step down? Why, why would you step down and then have two guys like two different, they have co-CEOs. Very sorry to my friend Jim, but co-CEOs don't usually do well. Look at BlackBerry. But anyway, two months after that, Oracle's

• 3:29Ed Zitron?

  stock was down 40%, with investors worried about Oracle's growing CapEx, which is surprising, I suppose, if you didn't think about how Oracle would build the data centers to serve the $300 billion deal. Makes me feel insane when I say these things out loud, but just to be clear, anybody who traded on that got burned. Now, another thing happened on September 22nd, 2025. Nvidia announced what they called a strategic partnership to invest up to $100 billion and build 10 gigawatts of data centers with OpenAI with the first gigawatt to be deployed in the second half of 2026. Just a few questions from me personally. Where would the data centers go?

• 4:12Ed Zitron?

  How would OpenAI afford to build them? How would OpenAI build a gigawatt in data centers in less than a year? Don't ask questions, pig. Back in your cage. Now Nvidia's stock bumped from 175.3 to 181 dollars in the space of a day, said they're very normally moving on. And the media wrote about the story as if the deal was done, with CNBC claiming that, and I quote, "The initial $10 billion tranche was expected to close within a month or so once the transaction had been finalized." I read at least 10 stories that said Nvidia had invested $100 billion in OpenAI. Analysts would go on to say that Nvidia was locking in OpenAI, and I quote again, "to

• 4:54Ed Zitron?

  remain the backbone of the next-gen AI infrastructure," and that "demand for Nvidia GPUs is effectively baked into the development of frontier AI models," and that "the deal strengthened the partnership between the two companies and validated Nvidia's long-term growth numbers with so much volume and compute capacity." Others would say that Nvidia was enabling OpenAI to meet surging demand. Three analysts, Razgon at Bernstein, Luria at DA Davidson, and Wagner at Aptus Capital, all raised circular deal concerns, but they were in the minority, and those concerns were still often buried under buoyant optimism around the prospects of the company. And nobody just fucking saying the words, "Hey, no one can afford..." Any of the Oracle can't afford to build it, they don't have the capacity, they thus couldn't

• 5:36Ed Zitron?

  get paid by OpenAI, OpenAI doesn't have the money, but Nvidia, this deal also doesn't make sense, you know, it feels like OpenAI is just promising everyone stuff they can't afford. All of these things seemed like very obvious questions, but people just kind of clap their hands and went, "Fuck yeah, we're doing AI even more now." But then there was this other thing about the Nvidia deal, and it's this wincey, teeny weeny, wincey little problem. One little problem, everyone, about the Nvidia deal, the deal that everyone said was done, it was a letter of intent. It said so in the announcement, and on Nvidia's November earnings, it said that it had entered into a letter of intent with an opportunity to invest in OpenAI.

• 6:21Ed Zitron?

  It turns out the deal didn't exist and everybody fell for it. Nvidia hasn't sent a dime and likely won't. A letter of intent is also known as a concept of a plan. A little over two weeks later, on October 1st, 2025, Reuters reported that Samsung and SK Hynix had signed letters of intent to supply memory chips for OpenAI's data centers, with South Korea's presidential office saying that said chip demand was expected to reach 900,000 wafers a month, with, and I quote, "much of that from Samsung and SK Hynix", which was quickly extrapolated to meet around 40% of global DRAM output. Stocks in both companies, to quote Reuters, soared, with Samsung climbing 4% and SK Hynix

• 7:04Ed Zitron?

  more than 12% to an all-time high. Analyst Jeff Kim of KB Securities said that, and I quote, "There have been worries about high-bandwidth memory prices falling next year on intensifying competition, but such worries will now be easily resolved by the strategic partnership", adding that "since Stargate is a key project led by President Trump" - wrong lie - "there also is a possibility the partnership will have a positive impact on South Korea's trade negotiations with the US", which is, just to be clear, total and utter bollocks. It's wank, it's crap, it's nonsense, poop from above, all the technical terms. Donald Trump is not leading Stargate. Stargate is a name used to refer to data centers built

• 7:46Ed Zitron?

  by OpenAI, by which I mean other people building them for OpenAI. KB Securities has around $43 billion of assets under management. This is the level of analysis you get from these analysts. This is how much they know. There are people that study JoJo's Bizarre Adventure that have more economic analysis than any of these fucking people. Most Star Wars fans who have just memorized all the names of the glup shittos of the world have better analysis than this. But nevertheless, you'd think, right, that these companies have made all this noise and they've talked about this stuff, the presidential office all involved, you'd think we'd be able to get a whiff of that on their earnings course, right?

• 8:26Ed Zitron?

  Well, on SK Hynix's October 29th, 2025 earnings call, weeks after the announcement, its CEO, Kim Woo Hyun, was asked a question about high bandwidth memory growth by SK Kim from Daiwa Securities. And I quote, so this is this is SK Kim asking the question. Thank you very much for taking my question. It is on demand. Now, there have been a series of announcements of GPU and ASIC supply cooperation between big techs and AI companies, fueling expectations of further AI market growth. Then against this backdrop, what is the company's outlook on high bandwidth memory demand, as well as a broadening of the customer base? SK Hynix, thank you for the question. Now, with upward adjustment in big tech's capex

• 9:09Ed Zitron?

  and increasing investment by AI companies, the high bandwidth memory market, even by a conservative estimate, will keep growing at an average of 30% over 30% for the next five years. I will point to our recent letter of intent with OpenAI for large-scale DRAM supply as an example of the very strong demand for AI, as well as the need to secure AI memory based on HBM more than anything else when developing AI technology. That is it. That is the only mention of OpenAI. That's it. No other mentions. Otherwise, SK Hynix has not added any guidance that would suggest that its DRAM sales will spike beyond overall growth, where it's already grown because everyone's running out of RAM thanks to fucking

• 9:50Ed Zitron?

  AI, other than mentioning that it had, and I quote, "completed year 2026 supply discussions with key customers." There is no mention of OpenAI in any earnings presentation. Now, you may think, Ed, there were two companies. You said two company names. There was Samsung as well, right? Well, on Samsung's October 30th, 2025 earnings call, Samsung mentioned the term DRAM 18 times, and neither mentioned OpenAI nor any letters of intent of any kind. In its Q3 2025 earnings presentation, Samsung mentions it will, and I quote, "prioritize the expansion of high bandwidth memory for business with differentiated performance to address increasing AI demand." Great place to mention OpenAI, right? Yeah, that would be if the money existed and they were gonna do anything.

• 10:33Ed Zitron?

  Now analysts do not appear to have noticed a lack of revenue from an apparent deal for forty percent of the world's RAM. Oh, well, Pobody's perfect, right? My frustration you hear in my voice is that I'm a guy with a Google Doc. I'm not, I'm not a financial analyst, but I appear to be able to do what they're doing because I'm able to fucking read. Both Samsung and SK Hynix's stocks have continued to rise since, and you'd be forgiven for thinking this deal was something to do with it, even though it was not. But silly season was not yet over, however, and on October 5th, 2025, AMD announced that it'd enter the multi-year, multi-generation agreement with OpenAI to build six goddamn gigawatts of data centers, with the first one gigawatt deployment set to begin in the

• 11:14Ed Zitron?

  second half of 2026, calling the agreement definitive with terms that allowed OpenAI to buy up to ten percent of AMD's stock. Fisting over specific milestones that started with the first gigawatt of data center development, said data centers would use AMD's yet-to-be-released MI450 GPUs. The deal would, per Reuters, bring in tens of billions of dollars of revenue. Now, I know, hate to be an asshole, right? I know, I'm always on this shit, right? Yeah. Where would those data centers go? How much, how much would they cost? How would OpenAI pay for them? Would the chips be ready in time? Silence, worm! How dare you ask questions? How dare you? Why are you asking questions? Number go up! Number go up! Look, look at number go up!

• 11:57Ed Zitron?

  AMD's shares surged by thirty-four percent, with analyst Dan Ives of Wedbush, who appears to dress like the San Diego Padres' City Connect jerseys, saying that this was a major valuation moment for AMD. As an aside, I've said that Nvidia would benefit from the metaverse in 2021, and told CBS News on November 22nd, 2021, that, and I quote, "The metaverse was real, and that Wall Street was looking for winners."

• 12:23Speaker 05

  Were they, Dan?

• 12:26Ed Zitron?

  Now, one more thing that AMD's November earnings, a month after that announcement, might be a barn burner full of remaining performance obligations from OpenAI, things that OpenAI will be paying them, those tens of billions of dollars of revenues, right? In fact, CEO Lisa Su said that AMD expected this partnership will significantly accelerate its data center AI business and with the potential to generate well over a hundred billion dollars in revenue over the next few years in the announcement. And here's how AMD's 10-Q filing referred to it, and I quote, "As of September 27th, 2025, the aggregate transaction price allocated to remaining performance obligations under contracts with an original expected duration of more than one year was $279 million, of which $139 million is expected to be recognized in the next 12 months.

• 13:10Ed Zitron?

  The revenue allocated to remaining performance obligations does not include amounts which have an original expected duration of one year or less."

• 13:18Ed Zitron?

  Now, I don't know about you, I did not, I didn't do economics in school, didn't do anything like that, didn't do well at maths in school, but $279 million seems lower than over a hundred billion dollars. So I guess just, just no revenue from OpenAI, no revenue of any kind, I guess. Now AMD did raise guidance by 35% over the next five years, and their trailing 12-month revenue is $32 billion. Tens of billions of dollars would surely lead to more than a 35% boost, because that would be like 11 billion. That's just 11 billion dollars, that's a lot less, that's a lot less than 100 billion dollars. I don't

• 14:03Ed Zitron?

  know. Guess all that was for nothing. No follow-up from the media, no questions from analysts, just a shrug and we all move on. They were at CES, Greg Brockman came on, AMD's Lisa Su said something about yotta flops, which really just pissed me off to think about. Still nothing. Anyway, AMD's stock is now down from a high of 259 bucks at the end of October to around, let's see, AMD's stock, type this in, about 231 bucks right now. Everybody who traded in based on analyst and media comments got fucked.

• 14:43Speaker 06

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• 15:10Ed Zitron?

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• 15:54Ed Zitron?

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• 17:50Ed Zitron?

  Now, let's go to my favorite. And that's a little company named Broadcom. So back on September 5th, Broadcom said in its earnings call that it had a $10 billion order from a mysterious customer, which analysts quickly assumed was OpenAI, leading to Broadcom's stock popping 9% and gradually increasing to a high of $369 on September 10th, before declining a little until October 13th, when Broadcom announced a ridiculous 10-gigawatt deal with OpenAI, claiming that it would deploy 10 gigawatts of OpenAI-designed chips with the first racks to deploy the second half of 2026 and the entire deployment completed by the end of 2029. So three fucking years for 10 fucking gigawatts. Just to give you an idea, it's about two and a half years a gigawatt right now.

• 18:34Ed Zitron?

  And that's for OpenAI slush fund projects, the ones that have all the money and none of the oversight. Now, the same day, President of Semiconductor Solutions Charlie Kavas added that said mystery customer is actually not OpenAI. And I quote, "I would love to take a $10 billion purchase order from my good friend Greg Brockman, CEO of OpenAI," Cowas said. "He has not given me that purchase order yet." Nevertheless, Broadcom's stock popped 9% on the news about the 10-gigawatt deal, with CNBC adding that the companies have been working together for 18 months. And because it's OpenAI, nobody sat and thought about whether somebody at Broadcom was saying, "Well, OpenAI has yet to order these chips yet," and whether that was a problem. In fact, the answer to how does OpenAI afford this appeared to be, "They'd afford it," when it came to analysts.

• 19:20Ed Zitron?

  Now, I'm about to read you a quote that is so funny, when you realize that this is someone who makes like a shit ton of money.

• 19:29Ed Zitron?

  "The 2026 timeline set out by OpenAI for the buildout is aggressive, but the startup is also best positioned to raise funds required for the project, given the heights of investor confidence," said Gudjo Sevillar, an analyst at eMarketer. "Financing such a large chip deal will likely require a combination of funding rounds, pre-orders, strategic investments, and support from Microsoft, as well as leveraging future revenue streams and potential credit facilities." Hogwash. Just complete, complete bollocks. Insane that people pay these analysts. Bullshit. Okay, so let's just break this down. Financing such a large chip deal, so 10 gigawatts, you're going to be looking at, so $50 billion a gigawatts, you're looking at half a trillion dollars.

• 20:12Ed Zitron?

  So to do this, for this aggressive buildout, which was 10 gigawatts in three years, just not possible. They would fund this by pre-orders. Pre-orders for what, exactly? Because pre-orders would be them pre-ordering something from Broadcom. Not really sure how that fixed the problem. Strategic investments, from whom? Just funding, I guess? Support from Microsoft, funding, again, I guess, and I don't know why Microsoft be paying for that, as well as leveraging future revenue streams?

• 20:44Ed Zitron?

  And potential credit for that. What? What does that mean? Saving money?

• 20:51Ed Zitron?

  Doing like a revenue trade deal? Like, what are you talking about? Anyway, you don't need to worry because OpenAI's solution to this was far simpler. It didn't order anything. During Broadcom's November earnings call, where Broadcom revealed that the $10 billion order was actually from Anthropic, another LLM startup that earns billions of dollars, which was actually buying Google's TPUs from Broadcom. And he also added that Anthropic had made a second $11 billion deal. Analysts somehow believe that Anthropic is positioned to spend heavily, despite being yet another venture-backed welfare recipient in the same flavor as OpenAI. All right, right, sorry. Okay, Broadcom, you may be wondering about that 10 gigawatt deal though, because those earnings, right?

• 21:33Ed Zitron?

  Well, Broadcom CEO Hock Tan said that he did not expect much in 2026 from the deal, and guidance did not change to reflect it. Now, what was great about this as well, I linked to this in the newsletter. I really need you to go and look up how Hock Tan had the conversation, because someone asked him for more detail, and he just straight up said like, "I don't want to talk about it." It rocks. I honestly fucking love that. Anyway, Broadcom climbed to a higher $412 a share, leading up to its earnings. And I imagine it did so based on people trading on the belief that OpenAI and Broadcom were doing a deal of some sort together, which does not appear to be happening. While there is an alleged $73 billion backlog for Broadcom, every dollar from Anthropic is utterly questionable.

• 22:16Ed Zitron?

  Now, some of you might say, "Ed, we can't just automatically distrust public companies." Actually, yes, we can. I'm doing it right now. Whenever a company says a letter of intent, as Nvidia and SK Hynix and Samsung did, it's important to immediately stop taking the deal seriously until you get to a specific word: "contract." Not agreement, or deal, or announcement, but contract, because contracts are the only thing that actually matters. A great example of this is in Nvidia's last earnings. They said they would be investing up to $10 billion in Anthropic, right? You'll notice that that was in the middle of November. It's now January, and we haven't heard boo about it. It's probably because nothing's fucking happening.

• 22:58Ed Zitron?

  And also, that phrase "up to" as well means that it will be however much Nvidia wants to invest, if at all. They only just did their Intel investment. Anyway. Whenever they say these terms, you need to just get suspicious. It's time, it's time to stop trusting them. Because they've played enough hide the sausage for one epoch, I think. It's time for everybody, analysts, the media, members of Congress, the fucking Pope, I don't care, to start treating these companies with actual suspicion and to start demanding timelines. Like I said, Nvidia and Microsoft announced that $15 billion investment in Anthropic. Where's the money? Why does the agreement say up to $10 billion for Nvidia and up to $5 billion for Microsoft? Where's the money?

• 23:44Ed Zitron?

  Where is it? We haven't heard shit about it since. What we have heard is that Anthropic is raising either $10 billion or $25 billion at a $350 billion valuation. Where'd the money go? Where'd the money go from those fucknuts? Where'd they go? Sorry, Jensen Huang for calling you a fucknut, alright? You're acting like one though, mate. Anyway. These deals are announced with the intention of suggesting there is more revenue and money in generative AI that actually exists. Furthermore, it is irresponsible and actively harmful for analysts and the media to continually act as if these deals will actually get paid when you consider the financial conditions of these companies. As part of its alleged funding announcement with Nvidia and Microsoft, Anthropic also

• 24:27Ed Zitron?

  agreed to purchase $30 billion of Azure Compute, which is, for those of you who don't know, the compute cloud platform, the competitor to Amazon Web Services and Google Cloud that Microsoft runs. It also agreed to, Anthropic, agreed to spend tens of billions of dollars with Google Cloud. They'd ordered $10 billion of chips from Broadcom earlier in 2025 and apparently another $11 billion of them in the last fiscal quarter. How does Anthropic pay for them? How? Anthropic allegedly burned $2.8 billion last year, 2025, though I think they burned much more, and raised $16.5 billion in funding before Microsoft and Nvidia's imaginary money. How are investors tolerating Broadcom not directly stating the future financial

• 25:11Ed Zitron?

  condition of this company is questionable? Has Broadcom created a reserve for this deal? If not, why not? Anthropic will make no more than $5 billion in 2025, I'm sure of it, and raised about $17.5 billion with another $2.5 billion coming in debt. How can it foreseeably afford to pay $10 billion, $11 billion, or $21 billion, considering its already massive losses and all those other obligations I mentioned? Will Jensen Huang hand over $10 billion so that Anthropic can hand it straight to Broadcom? I don't think so. I realise the counter-argument is that the companies aren't responsible for the counterparties' financial health, but my argument is that it's the responsibility of any public company to give a realistic view of its financial health and revenue sources, which includes

• 25:53Ed Zitron?

  noting if a chunk of its revenues from a startup that can't afford to pay for its orders. There's no counter for that. Anthropic cannot afford to pay Broadcom $10 billion right now or $11 billion in a few months. Where is the money coming from? They're allegedly raising $25 billion. Great, so that should leave them with $4 billion to pay for, what, like $30, $40, $50 billion of compute costs? I don't know. Again, I ain't no mathematician, but I can put those numbers together and I can say that's a pretty big minus again. I'm not even trying to be sarcastic here. The things I'm saying are actually very rational. They're very reasonable.

• 26:35Ed Zitron?

  Anthropic, even if they raised $25 billion, cannot pay even like a quarter of the things they've agreed to. Their existing revenue sources, even if they made $20 billion in 2026, which they will not, by the way, they are absolutely... I just don't believe them about their revenues at all or any of the estimates. But the problem is that in any bubble, being really stupid and ignorant works right up until it doesn't. And however harsh the dot-com bubble might have been, it wasn't harsh enough and those who were responsible were left unpunished and unashamed. And that guaranteed that the cycle would happen again and that it would be worse. I want to be really abundantly clear about what's happening.

• 27:20Ed Zitron?

  Every single stock you see growing because of AI outside of those selling RAM and GPUs is actually growing because of something else. Microsoft, Amazon, Google and Meta all have other products that are making the money and are still growing. AI is not growing them and because analysts and investors in the media do not think about things for two seconds, they have allowed themselves to be beaten down and turned into supplicants for future public stock growth. Investors have allowed themselves to be played and the results will be worse than the dot com bubble bursting by several echelons. And perhaps the biggest victims will be venture capital, which is existentially threatened

• 28:01Ed Zitron?

  by the AI bubble, but the actual victims will be regular people who made the mistake of trusting analysts or anyone who told them to invest in the markets. But I'm going to be really simplistic for a second. I am skeptical of AI because everybody loses money. I believe every AI company is unprofitable with margins that are getting increasingly worse as they scale and as a result, none of them will be able to get acquired or go public. This means that venture capitalists that have sunk money into AI stocks and private AI stocks, I should be clear, are going to be sitting on a bunch of assets under management, AUM, the same assets they collect fees on because that's how venture capitalists make money, that will eventually crater or go to zero because there will be no way for any

• 28:45Ed Zitron?

  liquidity event, so taken in public or selling to someone to occur. This is at a time of historically low liquidity for venture capitalists with PitchBook estimating that there would be only $100.8 billion in venture capital funds available at the end of last year. Venture capitalists raise money from limited partners who invest in venture capital with the hope of returns that outpace investing in the public markets. Venture capital vastly over invested in 2021 and 2022 as well, and this was also a problem with private equity. In simple terms, this means that these funds are sitting on tons of stock that they cannot shift and the longer it takes for a company to either go public or acquired, the more likely it is the VC or the PE firm will have to mark down its value to something more realistic.

• 29:31Ed Zitron?

  This is so bad that according to CARTA, as of August 2024, and that's C-A-R-T-A, some of you can't understand how I talk, as of August 2024, less than 10% of VC funds raised in 2021 have made any distributions to their investors. That's handing any kind of cash out. In a piece from September 2025, CARTA also revealed that about 15% of funds from 2023 have generated any disbursements as of Q2 2025, and the median net internal rate of return was a median 0.1%, meaning that at best, most investors got their money back and absolutely nothing else. And just to be clear, you don't invest so you can

• 30:13Ed Zitron?

  get an exact amount. You don't give someone a dollar, wait four years, and then get a dollar back. That's not investing, that's just putting money in a box. And in fact, investing in venture capital has kind of fucking sucked for a while. According to CARTA, as of the end of Q2, most VC funds across all recent vintages, that's after 2018, had a TVPI somewhere between 0.8x and 2x. TVPI, I'll get to in a second. But there are some areas where standout TVPIs are surfacing. TVPI means total value to paid in capital, or the amount of money you made for each dollar invested. So if you invested a dollar, 0.8x would mean you got 80 cents back, and if you invested a dollar, you'd get 2 bucks on 2x. Hope that makes sense. Now, there's a chart in the newsletter version of this

• 30:58Ed Zitron?

  episode, which I encourage you to check out, but it tells you that for the most part, VCs have struggled to provide even money returns since 2017. A decent TVPI is 2.5x, and as you'll see from the chart, things basically collapsed since 2021. Companies are not going public or being acquired at the same rate, meaning that investor capital is increasingly locked up, meaning that limited partners are still waiting for a payoff from the last bubbles, let alone this one. Now, CARTA would update the chart in December 2025, and things would somehow get worse. TVPI soured further, suggesting a further lack of exits across the board. The only slight improvement was the median IRR, which

• 31:38Ed Zitron?

  rose from 0.5% from funds from 2021, and 0.1% for funds from 2022. Those are, those are still... Real fucking terrible. Those are absolutely astonishing. I mean, a good IRR is ideally like fifteen to twenty percent, not, not point five percent. I don't know. But in simpler terms, we are looking at years of locked up capital, even venture capital, cash starved and a little desperate.

• 32:21Speaker 00

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• 32:50Ed Zitron?

  All right, everyone, I'm back talking about Quince, one of my favorite clothing brands. And as we speak, I'm currently wearing one of their excellent cotton knit overshirts. I wear like a jacket, nice prefall piece to wear as things cool off a bit. I've also been eyeballing one of their heritage water-resistant Harrington jackets too for later in the year to pair with their Mongolian cashmere sweaters I bought. And I have several of them and I really can't recommend Quince's stuff enough. I love Quince because they focus on high-quality wardrobe staples made with premium materials, jackets, pants, fitted tees and polos, activewear, and even travel gear. Everything at Quince is priced fifty to eighty percent less than similar brands, and because they work directly with ethical factories and cut out the middlemen, you're getting more for less. Find the fall pieces you'll reach for most at Quince. Download

• 33:34Ed Zitron?

  the Quince app for app-exclusive offers or go to quince.com. Get free shipping on your order and 365 day returns. Now available in Canada and the UK too. And when Quince asks where you heard about them, let him know it was on Better Offline. It's the best way to support the show.

• 33:50Speaker 07

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• 35:31Ed Zitron?

  The worst part is that all of this is happening during a generational increase in the amounts that startups need to raise, thanks to the ruinous costs of generative AI and the negative margins of AI-powered services. Now, I'm going to quote myself from a December 5 newsletter called "The Ways the AI Bubble Might Burst." Cursor, Anthropic's largest customer and now its biggest competitor in the AI coding sphere, raised $2.3 billion in November after raising $900 million in June. Now, these are for 2025, and I should add, these are on revenues of $83 million in the month of, I think, November or October, because they said annualized revenues of $1 billion is dogshit. Perplexity, one of the most, and I say this presidentally, popular AI companies, raised

• 36:13Ed Zitron?

  $200 million in September after raising $100 million in July, after seeming to fail to raise $500 million in May, after raising $500 million in December 2024 for a fucking search engine. Cognition raised $400 million in September after raising $300 million in March. Coherent raised $100 million in September, a month after it raised $500 million. That's a lot of money, and that's a lot of money in a very small amount of time, and that's taking money away from everyone else, because they need that money. You need the money to invest in the startups, but none of these companies are profitable, nor do they have a path to an acquisition or IPO. And why do you say? Why? Why do you ask? Ed, you're being so horrible.

• 36:58Ed Zitron?

  Well, it's because even the most advanced AI software companies ultimately prompting OpenAI or Anthropic's models, meaning that their only real intellectual property is those prompts and their staff, and whatever they can build around the models they don't control, which has been obvious from the meager acquisitions we've seen so far. Another fun fact, Anthropic ended up cutting off people that worked at XAI that were using Cursor from using their models. So just to be clear, Cursor, completely different company. Anthropic, if you work at a company Anthropic doesn't like, and I know we don't like Elon Musk, I get that, but if Anthropic can arbitrarily cut off their models from somebody's completely independent product, just because they're deciding to cut off a competitor, they're

• 37:42Ed Zitron?

  just going to broaden the term competitor to mean anyone they don't like, anyone that gets in the way.

• 37:49Ed Zitron?

  Now, Windsurf, which was allegedly being sold to OpenAI last year, ended up selling its assets to Cognition in July 2025, with Google paying $2.4 billion just to hire its co-founders and this nebulous licensing agreement, similar to the thing it did with Character.ai, where it paid $2.7 billion to rehire Noam Shazer, who, he was one of the authors of the "Attention is All You Need" paper at the start of this farce, license its tech and pay off the stock of its remaining staff. This is also exactly what Microsoft did with Inflection AI and its co-founder, Mr. Suliman, who, and I quote someone who messaged me recently, is a huge fucking asshole. Now, Mr. Suliman, if you hear this, I'm just quoting someone that works for you. If they're saying that about you, perhaps it's worth asking, why

• 38:33Ed Zitron?

  are people calling me a big fucking asshole? I don't know, Mustafa, come on the show and ask me yourself. Now, OpenAI's acquisitions of Statsig, $1.1 billion, I/O products, $6.5 billion, and Neptune, $400 million, were all in stock. Every other major acquisition of this era, Wiz, Confluence, Confluent even, Informatica and so on, is either someone trying to pretend that something is related to AI, like Wiz, or trying to say that a data streaming platform is heavily AI-related because AI needs data, which, which may be true, but it doesn't mean that AI companies are selling. And they're not, by the way, which is a problem. As 41% of US venture dollars in 2025 went to AI as of August,

• 39:16Ed Zitron?

  and according to Axios, the global number was around 51%. A crisis is brewing. NerdLawyer, back in October, wrote about the explosive growth of secondary markets, and I quote, "Enter the secondary market, a once niche corner of venture capital that has transformed into a primary liquidity mechanism. What's remarkable is how quickly this market has matured. At least five major venture funds have hired full-time staff dedicated to manufacturing non-traditional exits." As Hans Swilden, CEO of Industry Ventures, explained, "All the brand-name funds are all staffing and thinking through liquidity structures, and professional buyers have flooded in. Megafunds specializing in secondaries have raised unprecedented

• 39:56Ed Zitron?

  amounts. Lexington raised a record $23 billion, while Harborvest, Ardeon and Collar Capital have raised funds in the $10 to $20 billion range."

• 40:07Ed Zitron?

  In simpler terms, there are now hot potato funds where either another limited partner buys another's allocation, the companies themselves buy back their stock, or the stock is resold to other private investors who are building venture capital firms out of shit the venture capitalists can't sell. You see where the problem might be, eventually someone's gonna be, it's like Bomberman. It's not good. Now, from the same nerd lawyer piece, and I quote again, "And they're not alone. The secondary market is projected to handle $122 billion in assets in 2025, yet that still represents just 1.9% of the total unicorn value, as an aside, a unicorn is a company worth a billion dollars. There's six-plus trillion dollars in untapped liquidity potential."

• 40:52Ed Zitron?

  As an aside here, that's a really nice way of looking at this.

• 40:57Ed Zitron?

  "The transformation of the secondary market from emergency tool to standard operating procedure represents the most significant structural shift in venture capital since the rise of unicorns. It's not a temporary fix. It's a permanent evolution driven by misaligned timeframes between fund life cycles, 10 years, and company maturation, 11-plus years." I read that it's not just a temporary fix thing, I'm like, is this AI? Anyway, back to quoting, "For better or worse, this is the new reality of startup funding. VCs can no longer afford to simply spray and pray and wait for exits. They need active liquidity management strategies, and that fundamentally changes what kind of companies are getting funded and how." I'm just gonna be honest, that last part's bullshit. I wrote this in the newsletter, that last part is wank.

• 41:42Ed Zitron?

  This is not changing anything about what companies get funded or how. They're still funding these unprofitable monstrosities. Nothing has changed. And I would argue this piece frames that as a positive, when the reality is far grimmer. Venture capitalists are sitting on piles of immovable equity in companies worth far less than they invested in, and the answer, it appears, is to find somebody else who is able to buy the dead weight. I assume because they're stupid?

• 42:08Ed Zitron?

  I mean, I realize someone is gonna say, "Well, actually, it means that maybe they see, maybe they can afford to hold it for longer." No, no, if you're buying anything since 2021, you're probably getting swindled. And according to Newcomer, only 1,117 venture funds closed in 2025, down from 2,124. And 43% of dollars raised went to the largest venture funds, per the New York Times and PitchBook, suggesting limited partners are becoming less interested in pumping cash into the system at a time when AI startups are demanding more capital than has ever been raised. How long can the venture capital industry keep handing out 100 million to 500 million dollars to multiple startups a year? Because all the signs suggest that the current pace of funding must continue in perpetuity,

• 42:52Ed Zitron?

  as nobody appears to have worked out that generative AI is inherently unprofitable, and thus every single company is on the Silicon Valley welfare system until somebody or everybody gives up, or the system itself cannot sustain the pressure. I've read too many people make offhanded comments about this being like the dot com boom and saying that lots of startups might die, but what's left over will be good. And I hate them. I hate them so much. I hate them both for their flippancy and for their ignorance. None of the current stack of AI companies can survive on their own, meaning that the venture capital industry is holding them up. If even one of these companies falters and dies, the entire narrative dies with it. If that happens, it will be harder for other AI companies to raise,

• 43:35Ed Zitron?

  and even harder to sell an AI company to somebody else. And if you can, you'll be selling it for less. This is a punishment for a decade-plus of hubris, where companies were invested in without ever considering a path to profitability. Venture capitalists made the same mistake again and again and again, believing that because Uber or Facebook or Airbnb or any number of other companies founded nearly 20 years ago were unprofitable at some point, with paths to profitability, I might add, it was totally okay to keep pumping, pumping, pumping, I'm just saying it, pumping up companies that have had no path to profitability, which eventually became, had no apparent business model, see the metaverse or Web3, which eventually became, have negative margins so severe and valuation so high

• 44:19Ed Zitron?

  that we will need an IPO at the market, a market cap higher than Netflix at minimum. This is Silicon Valley's rot economy. The desperate growth at all costs attachment to startups where you, and I quote, really like the founder, where, and I quote again, the market could be huge, who knows if it is, and where you just don't need to worry about profitability because IPOs and exits were easy. Yeah, you see, venture capital used to be real easy because we were still in an era of hypergrowth. You could be a stupid asshole who doesn't know anything, but there were so many good deals and the more well-known you were, the more likely you'd be brought them first, guaranteeing a bigger payout, guaranteeing more LP capital, guaranteeing more opportunities that were of a higher quality because you were a big name. It wasn't about being smart or knowing the fundamentals, it was about being handed things.

• 45:04Ed Zitron?

  It was easier to make a valuable company too. Easier to get funded and easier to sell because the goal was always get funded, grow as large as possible, or, well, go public. And here's the thing about that as well, there were just more ideas, there were more ideas to do. Like I said with the Rockcom bubble, there were just, there were more things that people could create. That's the thing. That ideas are a finite source. And when you incentivize this kind of thinking, you eventually stop incentivizing good ideas, you incentivize growth. And as a result, venture capital encouraged growth at all costs thinking above everything else. In 2010, Ben Horowitz said, and I quote, "That the only thing worse for an entrepreneur than startup hell," which was bankruptcy, "is startup purgatory."

• 45:50Ed Zitron?

  And I quote, "When you don't go bankrupt, but you fail to build the number one product in the space, that's purgatory. You have enough money with your conservative burn rate to last for many years. You may even be cash flow positive. However, you have zero chance of becoming a high-growth company. You have zero chance of being anything but a very small technology business." From the entrepreneur's point of view, this can be worse than startup hell since you're stuck with a small company. What a fucking noxious, ugly, horrifying thing to say. Let me put it like this: if you want a good business that people like and it's profitable and you have good employees like it, your customers like it, that's a good company, that isn't hell. And if you think that way, you're a fucking psychopath. You're an actual nutter.

• 46:33Ed Zitron?

  And this poisonous theory sadly paid off for him in that startups got used to building high-growth, low-margin companies that would easily sell to other companies of the markets themselves. Right up until it didn't, of course. Per Nerd Lawyer, IPOs have collapsed as an exit route, along with easy to raise capital. Per PitchBook, since 2022, 70% of VC-backed exits were valued at less than the capital put in, with more than a third of them being startups buying other startups in 2024. The money is drying up as the value of VC's assets is decreasing, at a time when VCs need more money than ever because everybody is heavily leveraged in the single most expensive funding climate in history. And as we hit this historic liquidity crisis, the two largest companies, OpenAI and Anthropic,

• 47:15Ed Zitron?

  are becoming drains on the system that, in a very real sense, are participating in a massive redistribution of capital reserved for startups to one of a few public companies. No, really, hear me out. OpenAI is trying to raise as much as $100 billion in funding so it can continue to pass money to one of a few public companies: $38 billion to Amazon Web Services over seven years, $22.4 billion to CoreWeave over five years, and $250 billion over an indeterminate period on Microsoft Azure. If successful, OpenAI's Venture Telethon will raise more money than has ever been raised in a single round, draining funds that actual startups need. Anthropic has agreed, as I mentioned, to over $70 billion in compute and chips deal

• 47:56Ed Zitron?

  across Google, Amazon, and Broadcom. And that's not including this Hut8 compute deal that Google is backing that I don't even really want to think about.

• 48:06Ed Zitron?

  Think about it just real simple for a second. Instead of venture capital going to startups, you know, early-stage companies taking a risk, that money is going to OpenAI and Anthropic so they can hand it to big tech. This is big tech stealing from Silicon Valley and to see it as anything else is naive. And this money will come from what remains of venture capital, private equity, and whatever hyperscalers will hand over. Yet elsewhere, even the money that goes to regular startups is ultimately being sent to those hyperscalers. That AI startup that needs to keep raising $100 billion in a single round isn't sending that cash to other startups. It's mostly going to OpenAI, who sends it to Microsoft, Amazon, Callweave or Google,

• 48:48Ed Zitron?

  Anthropic, who sends it to Google, Microsoft or Amazon, or one of the large hyperscalers such as Amazon, Microsoft or Google. Silicon Valley didn't birth the next big tech firm. It incubated yet another hyperscaler-level parasite, except instead of just spending money on hyperscaler services and raising money to do so, both Anthropic and OpenAI actively drained the venture capital system as well, as they both burn billions of dollars and need those billions of dollars to keep running the model so that the AI startups can pay them. By creating something that's incredibly expensive to run, so destructively expensive to run, they can naturally create startups more dependent on the venture capital system. And the venture capital system has no idea what to do other than say, "Just grow, baby."

• 49:32Ed Zitron?

  Both OpenAI and Anthropic's models might be getting cheaper on a per-million token basis, but they use more tokens, which increases the cost of inference, which in turn increases the costs of startups doing business, which in turn means OpenAI, Anthropic and all-connected startups lose more money, which increases the burn on venture capital. This is a doom spiral, one that can only be reversed through the most magical and aggressive turnaround we will see in history, and it will have to happen in the next year without fail. And it won't. It's not going to happen. And to find out why, you just have to join me tomorrow for part three of the Inshit of Financial Crisis. I'm better offline. This is Ed Zitron. Fuck.

• 50:21Ed Zitron?

  Thank you for listening to Better Offline. The editor and composer of the Better Offline theme song is Matt Osowski. You can check out more of his music and audio projects at mattosowski.com. M A T T O S O W S K I dot com. You can email me at [email protected] or visit betteroffline.com to find more podcast links and of course my newsletter. I also really recommend you go to chat dot where's your ed dot at to visit the Discord and go to r/betteroffline to check out our Reddit. Thank you so much for listening.

• 50:54Speaker 05

  Better Offline is a production of Cool Zone Media. For more from Cool Zone Media, visit our website, coolzonemedia.com, or check us out on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.

• 51:26Speaker 07

  Empower is all about helping you invest well so you can go out and live a little. And their Free Empower Personal Dashboard shows you your full financial life in one place. You'll be able to see your net worth, monitor budgets, analyze your portfolio, set retirement goals, and more. Whether you're saving for something big, want to treat yourself, friends, or family, or meet long-term goals, Empower helps you see where you stand. You've worked hard for your money, and Empower can help you make the most of it. Download the Empower Personal Dashboard or visit empower.com. Not an Empower client paid or sponsored.

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• 52:25Speaker 00

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