Monologue: Concentration Risk

In this week's Better Offline monologue, Ed Zitron runs through how 80% of Anthropic and OpenAI’s enterprise revenues come from the top 1% of its customers, and how the entire AI bubble is a series of different concentration risks supported by venture capital and debt. Newsletter: https://www.wheresyoured.at/hyperscale-normalization/ Ramp Data: https://www.reddit.com/r/BetterOffline/comments/1w5i9t4/ramp_80_of_openai_and_anthropics_enterprise/ Terrible Groundbreaker piece: https://www.groundbrkr.com/p/the-teaser-period-why-the-ai-boom - please note that many of the numbers in this piece are wrong and it’s written by Claude, but the overall thesis is useful. Save $10 off a year of my premium newsletter: https://edzitronswheresyouredatghostio.outpost.pub/public/promo-subscription/gzqwkv54e1 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.

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  Today in sentences that are not in the Bible. Youtuber Mark Pliar bought a major stake in camera maker GoPro and then GoPro turned into an AI data center NeoCloud. I'm sick and tired of the goddamn AI bubble, I swear to Christ.

• 4:13Speaker 07

  Bird up, this is Better Offline and I'm your host, Ed Zitron. So today, we're going to talk through a term you may or may not have heard before: concentration risk. It's a term that refers to having all your eggs in one or a few baskets, becoming overly reliant on a few investments, customers, or particular business lines to the point that without them, your business or portfolio would suffer massive harms or just explode. In banking specifically, to quote the National Credit Union Administration, it refers to "any single exposure or group of exposures with the potential to produce losses large enough relative to capital, total assets, or overall risk level to threaten a financial institution's health or ability to maintain its core operations." I bring this all up because you're going to hear this term or variations of this term

• 4:58Speaker 07

  a lot in the next few months and years as the AI bubble unravels, because just about every part of the industry involves its own flavor of concentration risk. Let's start at the top. Per data from fintech firm Ramp, 80% of OpenAI and Anthropic's enterprise revenues come from 1% of their customers, a number that hasn't improved over the last three years. Ramp's lead economist, Ara Karazian, notes that the top 1% skews heavily towards the tech sector and AI products and services, and that this was a level of concentration risk unseen in any other software category they tracked. The dataset, which includes big companies like Visa and Cursor, as well as a great deal of startups and regular-sized companies, is very indicative of the overall spend

• 5:42Speaker 07

  of the AI industry, with the caveat that it doesn't include massive players like Microsoft or major banks. To be clear, I'm guessing about Visa and Cursor, any customer on Ramp can opt out of research, I have no idea, but I'm going to assume that there are big companies in there. I also want to be specific that when Ramp says "AI products and services," that includes AI startups that sell subscriptions with subsidized token spend, meaning that users can burn far more than their subscription price in tokens, so on a $20 a month subscription, you can burn $30, $40, $100. This means that the money made by Anthropic or OpenAI from an AI startup in that 1% spend is contingent on their continued ability to raise venture capital dollars. To simmer all this down, it means that the vast majority of enterprises, which is where

• 6:26Speaker 07

  the real money is in software and the real growth is, just don't spend that much money on AI. Those that do spend the most on it are heavily concentrated in either AI companies that either use a lot of tokens internally because they're bankrolled by venture capital, AI companies that allow their users to blow unsustainable amounts of money on tokens, bankrolled by venture capital, tech companies that are currently under heavy pressure to spend money on AI tokens, and I assume a few whale customers of some sort. This means that 80% of OpenAI and Anthropic's enterprise revenues, which make up the vast majority of their total revenues, are dependent on what are likely hundreds of customers spending outsized amounts of money on AI tokens, with an indeterminately large chunk of them being AI startups that can only do so as long as venture capital allows them to.

• 7:10Speaker 07

  I also, and this is a gut feeling, wouldn't be surprised if the AI startups spend way more on tokens for writing LLM code internally, considering how every time I see somebody going nuts on AI Twitter, it's usually a VC-backed startup. It also means, as I've hinted, that outside of the tech and AI world, very few companies are willing to pay very much for AI, which is catastrophic on just about every level, with no clear sign as to how you reverse that trend. AI has been in every media outlet and discussed in every boardroom and company for the last three years. Every single company has on some level dabbled in using AI. Most businesses have been given the green light to spend a bunch of money on AI, and in the end, it seems that the only people the tech industry can get to spend money on AI is the tech industry itself.

• 7:55Speaker 07

  This is OpenAI and Anthropic's underlying exposure, because these customers are also prime targets to move to either cheaper models that they train themselves, because they're open source, or eventually on-device models. Even if these customers choose to stay with Anthropic and OpenAI, a chunk of this spend is contingent on venture capital funding, like I've said, and the rest is contingent on whether tech firms continue to be willing to spend money at scale. 80% of the revenue concentration depends on spending and capital that varies from unreliable to actively unstable. Meanwhile, these two AI labs represent a massive concentration risk for Microsoft, Google, Amazon, Oracle, Core Wave, and anyone else that sells compute to them, with Anthropic and OpenAI signing over $1.1 trillion worth of compute commitments based on demand that's

• 8:39Speaker 07

  mostly coming from a very small subset of customers. These are, from what I can tell, take-or-pay agreements where they agree to buy that compute capacity regardless of how much capacity they actually end up using and how much revenue they actually bring in. As a reminder, both Anthropic and OpenAI are woefully unprofitable and lose tens of billions of dollars a year. To give you an idea of the concentration risk, OpenAI's compute spend and revenue share represent about 70% of Microsoft's AI revenues in fiscal year 26, which just ended in June, or a little over 7% of Microsoft's entire fiscal year revenue that year. And UBS estimates that OpenAI and Anthropic's compute spend will account for 48% of Google

• 9:19Speaker 07

  Cloud's entire revenues next year, or somewhere between $84 billion and $100 billion in 2027. That's on top of, per Barclays, OpenAI and Anthropic's estimated $40 billion spend on Amazon Web Services and at least $50 billion that both of them will spend on Microsoft Azure in calendar year 2027, which I note because of Microsoft's old fiscal year system. On the low end, that means that Anthropic and OpenAI account for over $174 billion worth of expected revenues from Microsoft, Google, and Amazon in 2027, which is contingent on their ability to raise venture capital or debt, which is contingent on the continued growth of their businesses, which is contingent on growing AI spend from a small subset of

• 10:01Speaker 07

  customers, many of whom are funded by venture capital. The reason this hasn't been a problem yet is that when you sign these contracts, you tend to pay a little upfront fee and the capacity in question is yet to come online. That's going to start happening next year and get dramatically worse month after month as capacity starts powering up and they start actually having to pay for it. A really shittily-written piece from an outlet called Groundbreaker that people keep emailing me did make a good point about this, comparing it to when the rates on millions of mortgages exploded as they hit a reset wall in 2027, where the low teaser interest rates ended, so when you signed a mortgage, you would get like 1%, 2%, 3% very low, exploding the monthly mortgage payments to unsustainable highs, with customers assuming, when they

• 10:44Speaker 07

  signed it incorrectly, that their houses would keep appreciating, they'd be able to refinance, or they could simply sell the bloody thing, which they obviously could not do when everyone was trying to do the same thing. In other words, OpenAI and Anthropic's massive compute commitments are the subprime mortgages of the AI bubble. They signed big, beautiful deals that helped hyperscalers and NeoClouds post massive revenue backlogs, under the belief that nothing bad would ever happen. That growth would happen unbated, and of course, the money would always, always be available for everyone involved. Finally, at the top of the pile sits Nvidia, whose concentration risk lies with the hyperscalers and Neo clouds themselves, who justify buying further GPUs based on demand, and I put that in air quotes, from OpenAI and Anthropic with said demand for services contingent on whether they can

• 11:29Speaker 07

  continue to raise money. Even those buying GPUs to build AI data centers for other customers are doing so because they believe there's some sort of crazy demand for AI compute, with their reference point being the massive revenue backlogs for CoreWeave, Iren, Nebius and other Neo clouds, who primarily sell compute to either OpenAI, Anthropic, or one of the hyperscalers backing them. Oh, and Nvidia's customers are no longer able to buy its GPUs through cash flow alone, so all of those purchases are contingent on their constantly available availability of debt. None of this is very good at all. I should also add that Broadcom added on their latest earnings that Anthropic and OpenAI are going to be their top two customers.

• 12:11Speaker 07

  It's all very good, it's all very normal, very good, everything's fine here, okay? Nobody freak out. Even when you put it all in a line, it all sounds really fucking bad. I'm sorry, I'm not trying to be alarmist, but even at the end of my own monologue, I'm kind of like, anyone else fucking think about this? Anyone else worried? No, the answer is no. If you ask most sell-side analysts or financial journalists, they'll tell you that all of this is totally fine, it's nothing to worry about. They will assure you that these are the smartest people in the world, the most powerful companies, that they wouldn't spend all this money for no reason, that the demand for both AI compute and AI itself is real, and that the AI skeptics are cherry picking data. Well, we're going to fucking find out, aren't we? And when we find out, I think it's going to be the thing I've been warning about.

• 12:56Speaker 07

  And when that happens, I've been keeping really detailed notes about all the people that tried to hand-wave this away. Because I think this is a catastrophic misallocation of capital. But also just the largest miss in journalism history. Just unbelievable to me that when this eventually falls apart, and I am literally looking at my fucking Bloomberg terminal, and what just popped up says Crusoe signs roughly $13 billion Jane Street deal for cloud computing. Now, you may think, wow, that's a different customer, Jane Street, a hedge fund. How could they possibly be involved in this? Well, you never guess what? Jane Street's a major customer of CoreWeave and an investor in CoreWeave.

• 13:39Speaker 07

  I bet they fucking invest in Anthropic at some point. Jesus fucking, did they invest in Anthropic? All right, no, I gotta, I gotta end this, I gotta end this goddamn monologue. Look, I'll be back next week. I still have yet to come up with what I'm gonna do, but it's gonna be great. My cat just knocked over an empty Diet Coke can, and that's very annoying. But nevertheless, I will be back. I love you all, I appreciate your listening. I'm Ed Zitron, and this has been Better Offline.

• 14:13Speaker 08

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  Don't share needles or pins, or reuse needles. Don't take if allergic to it, or if you or someone in your family had medullary thyroid cancer, or if you've had multiple endocrine neoplasia syndrome type 2. Tell your doctor if you get a lump or swelling in your neck. Stop Zepbound and call your doctor if you have severe stomach pain or a serious allergic reaction. Severe side effects may include inflamed pancreas or gallbladder problems. Tell your doctor if you experience vision changes before scheduled procedures with anesthesia, if you're nursing, pregnant, plan to be, or taking birth control pills. Taking Zepbound with a sulphonal urea or insulin may cause low blood sugar. Side effects include nausea, diarrhea, and vomiting, which can cause dehydration and worsen kidney problems. Talk to your doctor. Call 1-800-545-5979, or visit zepbound.lily.com.

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  Small businesses are the pulse of every community. They bring people together, create opportunities, and drive growth. That's why Chase for Business helps small business owners like you by offering personalized guidance and digital tools that can help your business grow. With our guidance and your determination, you can take your business farther and help build a brighter future for your community. Learn more at chase.com/business. Chase for Business, make more of what's yours. The Chase mobile app is available for select mobile devices. Message and data rates may apply. JP Morgan Chase Bank, N.A., member FDIC. Copyright 2026 JP Morgan Chase & Company. This is an iHeart Podcast. Guaranteed human.